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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 5, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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NEWFIELD EXPLORATION COMPANY
(Exact name of Registrant as specified in its charter)
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DELAWARE 1311 71-1133047
(State of other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
TERRY W. RATHERT
VICE PRESIDENT -- PLANNING
AND ADMINISTRATION
363 N. SAM HOUSTON PARKWAY E. 363 N. SAM HOUSTON PARKWAY E.
SUITE 2020 SUITE 2020
HOUSTON, TEXAS 77060 HOUSTON, TEXAS 77060
(281) 847-6000 (281) 847-6000
(Address, including zip code, and telephone (Name, Address, including zip code, and
number, telephone number,
including area code, of registrant's including area code, of agent for service)
principal executive offices)
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Copy to:
JAMES H. WILSON
VINSON & ELKINS L.L.P.
2300 FIRST CITY TOWER
HOUSTON, TEXAS 77002-6760
(713) 758-2222
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable following the effectiveness of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT TO BE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED REGISTRATION FEE
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7.45% Senior Notes due 2007......................... $125,000,000 $37,879
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN 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 THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS 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.
SUBJECT TO COMPLETION, DATED NOVEMBER 5, 1997
PROSPECTUS
NEWFIELD EXPLORATION COMPANY
OFFER TO EXCHANGE
7.45% SERIES B SENIOR NOTES DUE 2007
FOR ALL OUTSTANDING 7.45% SERIES A SENIOR NOTES DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED
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Newfield Exploration Company, a Delaware corporation (the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal"), and together with this Prospectus, the "Exchange Offer", to
exchange $1,000 principal amount of its 7.45% Series B Senior Notes due 2007
(the "Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement
(as defined herein) of which this Prospectus constitutes a part, for each $1,000
principal amount of its outstanding 7.45% Series A Senior Notes due 2007 (the
"Old Notes"), of which $125,000,000 principal amount is outstanding. The form
and terms of the Exchange Notes are identical in all material respects to the
form and terms of the Old Notes except for certain transfer restrictions and
registration rights relating to the Old Notes. The Exchange Notes will evidence
the same debt as the Old Notes and will be issued under and be entitled to the
benefits of the Indenture (as defined herein). The Exchange Notes and the Old
Notes are collectively referred to herein as the "Notes."
The Notes are senior unsecured obligations of the Company and will rank
pari passu in right of payment with all existing and future senior unsecured
obligations of the Company and will rank senior in right of payment to any
future subordinated obligations of the Company.
The Company will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be , 1997, unless the Exchange Offer is
extended. See "The Exchange Offer -- Expiration Date; Extensions; Amendments."
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the business day prior to the Expiration Date (as defined herein),
unless previously accepted for exchange. The Exchange Offer is not conditioned
upon any minimum principal amount of Old Notes being tendered for exchange.
However, the Exchange Offer is subject to certain conditions which may be waived
by the Company and to the terms and provisions of the Registration Rights
Agreement (as defined herein). Old Notes may be tendered only in denominations
of $1,000 principal amount and integral multiples thereof. The Company has
agreed to pay the expenses of the Exchange Offer. See "The Exchange Offer."
(Cover continued on next page)
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SEE "RISK FACTORS" BEGINNING ON PAGE 14 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE
NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is , 1997
<PAGE> 3
The Exchange Notes will bear interest at the rate of 7.45% per annum,
payable semi-annually on April 15 and October 15 of each year, commencing April
15, 1998, to holders of record on the April 1 and October 1 immediately
preceding such interest payment date. Holders of Exchange Notes of record on
April 1, 1998 will receive interest on April 15, 1998 from the date of issuance
of the Exchange Notes, plus an amount equal to the accrued interest on the Old
Notes from the date of issuance of the Old Notes, October 15, 1997, to the date
of exchange thereof. Interest on the Old Notes accepted for exchange will cease
to accrue upon issuance of the Exchange Notes.
The Old Notes were sold by the Company on October 15, 1997 to the Initial
Purchasers (as defined herein) in a transaction not registered under the
Securities Act in reliance upon Section 4(2) of the Securities Act. The Old
Notes were thereupon offered and sold by the Initial Purchasers only to
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act), or to non-U.S. persons in reliance on Regulation S under the Securities
Act, each of whom agreed to comply with certain transfer restrictions and other
conditions. Accordingly, the Old Notes may not be offered, resold or otherwise
transferred unless registered under the Securities Act or unless an applicable
exemption from the registration requirements of the Securities Act is available.
The Exchange Notes are being offered hereunder in order to satisfy the
obligations of the Company under the Registration Rights Agreement entered into
with the Initial Purchasers in connection with the offering of the Old Notes.
See "The Exchange Offer" and "Description of Notes -- Registration Covenant;
Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission" or "SEC") to third parties, including
Exxon Capital Holdings Corporation, SEC No-Action Letter (available April 13,
1989), Morgan Stanley & Co. Inc., SEC No-Action Letter (available June 5, 1991)
(the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC No-Action Letter
(available June 5, 1991), the Company believes that the Exchange Notes issued
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by the respective holders thereof (other than a "Restricted Holder,"
being (i) a broker-dealer who purchased Old Notes exchanged for such Exchange
Notes directly from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act or (ii) a person that is an
affiliate of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business and such holder is not
participating in, and has no arrangement with any person to participate in, the
distribution (within the meaning of the Securities Act) of such Exchange Notes.
Eligible holders wishing to accept the Exchange Offer must represent to the
Company that such conditions have been met. Holders who tender Old Notes in the
Exchange Offer with the intention to participate in a distribution of the
Exchange Notes may not rely upon the Morgan Stanley Letter or similar no-action
letters. See "The Exchange Offer -- General." Each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. A broker-dealer that delivers such a prospectus to
purchasers in connection with such resales will be subject to certain of the
civil liability provisions under the Securities Act and will be bound by the
provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations). This Prospectus, as it may be amended
or supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has consented to the use of
this Prospectus and any amendment or supplement to this Prospectus by any
broker-dealer for use in connection with any such resale for a period of up to
180 days after consummation of the Exchange Offer. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer.
The Exchange Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to the liquidity of
any markets that may develop for the Exchange Notes or as to the ability of or
price at which the holders of Exchange Notes would be able to sell their
Exchange Notes. Future trading prices of the Exchange Notes will depend on many
factors, including, among
2
<PAGE> 4
others, prevailing interest rates, the Company's operating results and the
market for similar securities. The Company does not intend to apply for listing
of the Exchange Notes on any securities exchange. Goldman, Sachs & Co., Chase
Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation and
Jefferies & Company, Inc. (together, the "Initial Purchasers") have informed the
Company that they currently intend to make a market for the Exchange Notes.
However, they are not so obligated, and any such market making may be
discontinued at any time without notice. Accordingly, no assurance can be given
that an active public or other market will develop for the Exchange Notes or as
to the liquidity of, or the trading market for, the Exchange Notes.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
TABLE OF CONTENTS
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PAGE
NO.
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Available Information....................................... 4
Incorporation of Certain Documents by Reference............. 5
Prospectus Summary.......................................... 6
Risk Factors................................................ 14
Forward-Looking Statements.................................. 20
Private Placement........................................... 20
Use of Proceeds............................................. 20
Capitalization.............................................. 21
Selected Historical Financial Data.......................... 22
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 23
Business.................................................... 30
Management.................................................. 43
The Exchange Offer.......................................... 46
Description of Notes........................................ 53
Certain United States Tax Consequences To Foreign Holders... 64
Plan of Distribution........................................ 66
Legal Matters............................................... 67
Independent Public Accountants.............................. 67
Reserve Engineers........................................... 67
Glossary of Oil and Gas Terms............................... 68
Index to Financial Statements............................... F-1
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3
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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 and other information with the Commission. The
Registration Statement, such reports and other information may 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: Seven World Trade Center, Suite
1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can be
obtained by mail 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, the Commission maintains a site on the World Wide Web that
contains reports, proxy and information statements and other information filed
electronically by the Company with the Commission which can be accessed over the
Internet at http://www.sec.gov. While any Old Notes remain outstanding, the
Company will make available, upon request, to any holder and any prospective
purchaser of Old Notes, the information required pursuant to Rule 144A(d)(4)
under the Securities Act during any period in which the Company is not subject
to Section 13 or 15(d) of the Exchange Act. Any such request should be directed
to the Secretary of the Company, 363 N. Sam Houston Parkway E., Suite 2020,
Houston, Texas 77060.
This Prospectus constitutes part of a registration statement on Form S-4
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus omits certain of the information set forth in
the Registration Statement. Reference is hereby made to the Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company and the securities offered hereby. Statements contained
herein concerning the provisions of contracts or other documents are not
necessarily complete, and each such statement is qualified in its entirety by
reference to the copy of the applicable contract or other document filed with
the Commission. Copies of the Registration Statement and the exhibits thereto
are on file at the offices of the Commission and may be obtained upon payment of
the fee prescribed by the Commission, or may be examined without charge at the
public reference facilities of the Commission described above.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
pursuant to the Exchange Act (File No. 1-12534) and are incorporated herein by
reference:
(1) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(2) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997; and
(3) the Company's Current Reports on Form 8-K filed with the Commission on
May 15, 1997, July 21, 1997, October 1, 1997 and October 20, 1997.
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 made by this Prospectus shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
thereof. Any statement contained 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 other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom 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 that are incorporated by reference
in this Prospectus (not including exhibits to such documents that are
incorporated by reference herein unless such exhibits are specifically
incorporated by reference into such documents). Requests for such copies should
be directed to the Secretary of the Company at 363 N. Sam Houston Parkway E.,
Suite 2020, Houston, Texas 77060. In order to ensure timely delivery of such
documents prior to the Expiration Date, any request should be made by
.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE
ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. NEITHER THIS
PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER,
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY 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.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus. Unless otherwise
indicated, references to "Newfield" or the "Company" shall mean Newfield
Exploration Company and its subsidiaries. Certain terms relating to the oil and
gas business are defined in the "Glossary of Oil and Gas Terms" included in this
Prospectus.
THE COMPANY
OVERVIEW
Newfield is an independent oil and gas company engaged in the exploration,
development and acquisition of oil and natural gas properties located primarily
in the Gulf of Mexico. Newfield discovered and acquired its first oil and gas
reserves in 1990 and has grown rapidly since that time. At June 30, 1997,
Newfield had proved reserves of 379.3 Bcfe with a Present Value of estimated
future pre-tax cash flows of $574 million. Approximately 73% of Newfield's
proved reserves at such date were natural gas and approximately 81% were proved
developed.
Newfield has achieved substantial growth in reserves, production, revenues
and EBITDA since its inception. Newfield's estimated proved reserves have
increased from 23.1 Bcfe as of December 31, 1990 to 379.3 Bcfe as of June 30,
1997, representing a compound annual growth rate of 54%. Similarly, annual
production has increased from 6.0 Bcfe in 1991 to 56.7 Bcfe in 1996,
representing a compound annual growth rate of 57%. Newfield has set a production
target for 1997 of 73.5 Bcfe, a 30% increase from 1996. Newfield's revenues and
EBITDA were $186.6 million and $153.1 million, respectively, for the 12 months
ended September 30, 1997.
Newfield has become a significant operator in the Gulf of Mexico. As of
September 30, 1997, Newfield owned interests in 115 lease blocks in the Gulf of
Mexico and operated over 90 platforms. For the first quarter of 1997, Newfield
was ranked as the fourteenth largest operator in the Gulf of Mexico based on
average operated gross daily production of 414 MMcfe. For September 1997,
Newfield had average operated gross daily production of 494 MMcfe. In addition,
Newfield was the eighth most active driller in the Gulf of Mexico in 1996.
From its inception through June 30, 1997, Newfield has invested $642.5
million in capital expenditures (including acquisition costs) to generate 609.4
Bcfe of proved reserves at an average finding and development cost of $1.05 per
Mcfe. Over that period, Newfield's average cash margin per Mcfe of production
was $1.89, allowing internally generated cash flow to be the principal source
for Newfield's capital investments in oil and gas properties and drilling and
construction activities. Newfield intends to continue to fund a substantial
portion of its capital investments through internally generated cash flow.
STRATEGY
Newfield's strategy is to continue to expand its reserve base and increase
its cash flow through exploration and the acquisition and exploitation of proved
properties. Newfield emphasizes the following elements in implementing this
strategy:
- Reserve growth through exploratory drilling of a balanced portfolio
- Balance between exploration and the acquisition and exploitation of
proved properties
- Geographic focus in the Gulf of Mexico
- Control of operations and costs
- Use of 3-D seismic and other advanced technology
- Equity ownership and other incentives to retain and attract employees
Newfield has utilized a balanced approach of exploration and the
acquisition and exploitation of proved properties to grow its reserves,
production and cash flow. Of the 609.4 Bcfe of proved reserves Newfield has
added through June 30, 1997, 36% were added through exploration, 37% were added
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through the acquisition of proved reserves and 27% were added through the
exploitation of opportunities identified and acquired in connection with the
acquisition of proved properties. Newfield's exploration, acquisition and
exploitation activities are complementary. Proved properties acquired by
Newfield usually have exploration or exploitation potential that Newfield has
previously identified. In addition, acquisitions can increase Newfield's
presence in an area, creating the infrastructure to provide Newfield with the
ability to capture other opportunities at a competitive advantage. Information
gathered while evaluating production on acquisition candidates and adjacent
acreage is used, as appropriate, in Newfield's exploration efforts. Conversely,
a successful exploratory prospect may reveal similar untested reserve potential
on an adjacent property, making its purchase attractive.
EXPLORATION ACTIVITIES. Newfield maintains an active, technologically
driven exploration program. During 1996, Newfield invested $48.5 million for
exploration costs, including seismic data, leasehold acquisitions and
exploratory drilling. Newfield allocates its exploration spending between a
small number of higher risk, higher potential prospects which, if successful,
may result in significant increases in proved reserves, and a greater number of
lower risk, moderate potential prospects. From its inception through June 30,
1997, Newfield participated in 83 exploratory wells at a cost to drill and
evaluate of $127.3 million net to Newfield's interest. These wells have resulted
in the discovery of proved reserves of 219.0 Bcfe net to Newfield's interest. Of
these 83 wells, 83% were operated by Newfield. All of the exploratory prospects
drilled by Newfield in 1996 and to date in 1997 were based on 3-D seismic data.
Newfield has budgeted $68.9 million for exploration activities for 1997.
Newfield acquires exploration prospects through federal and state lease
sales, in connection with proved property acquisitions and through farm-ins.
Newfield is continuously evaluating new opportunities and currently has a
substantial inventory of prospects, including seven that are expected to be
drilled prior to December 31, 1997. Recently, Newfield initiated its first
international activity by acquiring an interest in an exploration project
offshore China.
ACQUISITION ACTIVITIES. Newfield actively pursues the acquisition of proved
oil and gas properties in the Gulf of Mexico and southern Louisiana,
particularly properties with unexploited reserve potential in order to enhance
returns. Newfield targets properties that it can operate to control operations
and costs and in which it can increase its interest. Acquisitions that meet
these criteria and provide a base for further evaluation and exploitation
adjacent to existing Company production are of particular interest to Newfield.
In July 1997, Newfield completed the acquisition of interests in five oil
and gas producing fields comprised of interests in nine offshore blocks in the
East Cameron, West Cameron and High Island areas of the Gulf of Mexico and
offshore Louisiana and Texas for a purchase price of approximately $43 million.
In July 1997, combined production from these fields was approximately 18 MMcfe
per day net to the interests acquired, or approximately 10% of Newfield's net
daily production prior to the acquisition. These nine offshore blocks present
Newfield with several exploratory and development opportunities, which Newfield
is currently pursuing.
DEVELOPMENT ACTIVITIES. Newfield also maintains an active development
program. During 1996, Newfield invested $79.6 million for development costs,
including recompletions and development drilling. From its inception through
June 30, 1997, Newfield participated in 93 development wells at an aggregate
cost, net to Newfield's interest, of $231.3 million. These wells have resulted
in the addition of proved reserves of 158.2 Bcfe. Newfield has budgeted $112.4
million for development activities for 1997.
GEOGRAPHIC FOCUS. Newfield believes that its focus in the federal waters of
the Gulf of Mexico is the foundation for its continued growth. The Gulf of
Mexico is a prolific oil and gas province, accounting for approximately 25% of
domestic natural gas production, and Newfield believes that the Gulf of Mexico
has significant remaining undiscovered reserve potential. Newfield's management
and technical personnel have extensive experience in the Gulf of Mexico, and
Newfield's geographic focus assists it in controlling operating and
administrative costs. The Gulf of Mexico has a substantial existing
infrastructure, including gathering systems, platforms and pipelines, and
numerous drilling and service companies maintain a substantial presence there,
facilitating cost effective operations and the timely development of
discoveries. In addition, significant amounts of geologic data are available at
reasonable cost.
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While Newfield intends to continue to focus on the Gulf of Mexico, it also
intends to pursue selective opportunities to develop "focused diversification"
outside the Gulf of Mexico. Focused diversification efforts will be directed
toward a limited number of areas where Newfield can apply its core competencies,
such as geological and geophysical analyses through the application of 3-D
seismic and other advanced technologies, and control of or significant influence
on operations.
As a natural extension of its operations in the Gulf of Mexico, Newfield
has established onshore Gulf Coast operations in southern Louisiana. The
objective of this onshore effort is to acquire and rejuvenate large producing
fields through the use of 3-D seismic and core competencies that Newfield has
used successfully in the adjacent offshore area.
In May 1997, Newfield acquired the assets and subsidiaries of Huffco
International, L.L.C., which include a 35% working interest in a 415,000 acre
production sharing contract in the Bohai Bay, offshore China, for approximately
$6 million. As part of this acquisition, Newfield also acquired certain rights
and data relating to offshore West Africa and an international database and
added a small international technical staff. The recently drilled initial
exploratory well in the Bohai Bay failed to produce oil or gas and Newfield and
the other participants in the well have agreed to plug and abandon the well.
Newfield anticipates additional exploratory drilling on the property in 1998.
Successful exploratory drilling in the Bohai Bay may result in significant
future investment in this area. Newfield is also actively considering
investments in selected countries in West Africa and Latin America.
CONTROL OF OPERATIONS AND COSTS. Newfield believes that it is one of the
lowest cost producers in the Gulf of Mexico based upon several reports prepared
by analysts that follow the industry. Newfield prefers to operate its properties
in order to manage production performance and to control operating expenses, the
timing and amount of capital expenditures and the application of technology.
Properties operated by Newfield accounted for 89% of its total equivalent
production for 1996.
Newfield's geographic focus enables it to manage a large asset base with a
relatively small number of employees and to add successful exploratory and
development wells and proved property acquisitions at relatively low incremental
costs. Newfield also uses independent contractors for much of its field
operations activities to control costs.
TECHNOLOGY. Newfield uses advanced technology in its exploration and
development activities to reduce its risks and lower its costs. Newfield
currently holds licenses or has access to 3-D seismic surveys covering
approximately 220 blocks in the Gulf of Mexico and 315 square miles in southern
Louisiana, including coverage of 36 producing fields it operates. In addition,
Newfield holds licenses or has access to more than 80,000 miles of recent
vintage 2-D seismic data in the central Gulf of Mexico and to 300,000 miles of
regional 2-D seismic coverage across the Gulf of Mexico, and owns a library
containing logs on more than 4,500 wells drilled in Newfield's focus area.
The availability of 3-D seismic coverage for the Gulf of Mexico at a
reasonable cost makes its use in exploration attractive from a risk management
perspective. The use of 3-D seismic and computer-aided exploration technology
provides Newfield with substantially more accurate and comprehensive geological
data for the evaluation of drilling prospects than use of only 2-D seismic data.
MANAGEMENT AND EMPLOYEES. Newfield's management and 39 technical personnel
have extensive experience in the Gulf of Mexico. Newfield was founded by Joe B.
Foster, former Chairman of Tenneco Oil Company, and 25 former employees of
Tenneco with experience in the Gulf of Mexico. A principal management philosophy
then and today is to incentivize and reward employees through equity ownership
and performance based compensation. As of September 30, 1997, Newfield's
employees owned or had options to acquire an aggregate of approximately 13% of
Newfield's outstanding common stock on a fully diluted basis.
GENERAL
Newfield was incorporated in Delaware in 1988. The address of Newfield's
principal executive offices is 363 North Sam Houston Parkway East, Suite 2020,
Houston, Texas 77060, and its telephone number is (281) 847-6000. Newfield
maintains a web site on the Internet at http://www.newfld.com.
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THE PRIVATE PLACEMENT AND USE OF PROCEEDS
The Old Notes were sold by the Company on October 15, 1997 to the Initial
Purchasers and were thereupon offered and sold by the Initial Purchasers only to
certain qualified buyers. Of the $122.3 million net proceeds received by the
Company in connection with the sale of the Old Notes, $120 million was used to
repay all borrowings outstanding under the Credit Facility. It is anticipated
that the remainder of the net proceeds will be used to provide working capital
to the Company to fund further exploration and development of the Company's oil
and gas properties and the acquisition of oil and gas properties and for other
general corporate purposes. See "Private Placement" and "Capitalization."
THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $125,000,000 principal
amount of Exchange Notes for up to $125,000,000 principal amount of Old Notes.
The form and terms of the Exchange Notes are identical in all material respects
to the form and terms of the Old Notes except that the Exchange Notes have been
registered under the Securities Act and will not contain certain transfer
restrictions and hence are not entitled to the benefits of the Registration
Rights Agreement relating to the contingent increases in the interest rate
provided for pursuant thereto. The Exchange Notes will evidence the same debt as
the Old Notes and will be issued under and be entitled to the benefits of the
Indenture governing the Old Notes. See "Description of Notes."
THE EXCHANGE OFFER......... Each $1,000 principal amount of Exchange Notes will
be issued in exchange for each $1,000 principal
amount of outstanding Old Notes. As of the date
hereof, $125,000,000 principal amount of Old Notes
are issued and outstanding. The Company will issue
the Exchange Notes to tendering holders of Old
Notes on or promptly after the Expiration Date.
RESALE..................... The Company believes that the Exchange Notes issued
pursuant to the Exchange Offer generally will be
freely transferable by the holders thereof without
registration or any prospectus delivery requirement
under the Securities Act, except for certain
Restricted Holders who may be required to deliver
copies of this Prospectus in connection with any
resale of the Exchange Notes issued in exchange for
such Old Notes. See "The Exchange Offer -- General"
and "Plan of Distribution."
EXPIRATION DATE............ 5:00 p.m., New York City time, on ,
1997, unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date to which the Exchange Offer is
extended. See "The Exchange Offer -- Expiration
Date; Extensions; Amendments."
INTEREST ON THE NOTES...... The Exchange Notes will bear interest payable
semi-annually on April 15 and October 15 of each
year, commencing April 15, 1998. Holders of
Exchange Notes of record on April 1, 1998 will
receive interest on April 15, 1998 from the date of
issuance of the Exchange Notes, plus an amount
equal to the accrued interest on the Old Notes from
the date of issuance of the Old Notes, October 15,
1997, to the date of exchange thereof.
Consequently, assuming the Exchange Offer is
consummated prior to the record date in respect of
the April 15, 1998 interest payment for the Old
Notes, holders who exchange their Old Notes for
Exchange Notes will receive the same interest
payment on April 15, 1998 that they would have
received had they not accepted the Exchange Offer.
Interest on the Old Notes
9
<PAGE> 11
accepted for exchange will cease to accrue upon
issuance of the Exchange Notes. See "The Exchange
Offer -- Interest on the Exchange Notes."
PROCEDURES FOR TENDERING
OLD NOTES.................. Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, or an
Agent's Message (as defined herein) together with
the Old Notes to be exchanged and any other
required documentation to the Exchange Agent at the
address set forth herein and therein or effect a
tender of Old Notes pursuant to the procedures for
book-entry transfer as provided for herein. See
"The Exchange Offer -- Procedures for Tendering."
SPECIAL PROCEDURES FOR
BENEFICIAL HOLDERS....... Any beneficial holder whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender in the Exchange Offer should
contact such registered holder promptly and
instruct such registered holder to tender on the
beneficial holder's behalf. If such beneficial
holder wishes to tender directly, such beneficial
holder must, prior to completing and executing the
Letter of Transmittal and delivering the Old Notes,
either make appropriate arrangements to register
ownership of the Old Notes in such holder's name or
obtain a properly completed bond power from the
registered holder. The transfer of record ownership
may take considerable time. See "The Exchange
Offer -- Procedures for Tendering."
GUARANTEED DELIVERY
PROCEDURES............... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes and
a properly completed Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis
and deliver an Agent's Message, may tender their
Old Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer --
Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS.......... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
business day prior to the Expiration Date, unless
previously accepted for exchange. See "The Exchange
Offer -- Withdrawal of Tenders."
TERMINATION OF THE EXCHANGE
OFFER.................... The Company may terminate the Exchange Offer if it
determines that the Exchange Offer violates any
applicable law or interpretation of the staff of
the SEC. Holders of Old Notes will have certain
rights against the Company under the Registration
Rights Agreement should the Company fail to
consummate the Exchange Offer. See "The Exchange
Offer -- Termination" and "Description of
Notes -- Registration Covenant; Exchange Offer."
10
<PAGE> 12
ACCEPTANCE OF OLD NOTES
AND DELIVERY OF EXCHANGE
NOTES.................... Subject to certain conditions (as summarized above
in "Termination of the Exchange Offer" and
described more fully in "The Exchange
Offer -- Termination"), the Company will accept for
exchange any and all Old Notes which are properly
tendered in the Exchange Offer prior to 5:00 p.m.,
New York City time, on the Expiration Date. The
Exchange Notes issued pursuant to the Exchange
Offer will be delivered promptly following the
Expiration Date. See "The Exchange
Offer -- General."
EXCHANGE AGENT............. First Union National Bank is serving as exchange
agent (the "Exchange Agent") in connection with the
Exchange Offer. The mailing address of the Exchange
Agent is: First Union National Bank, Attention:
Reorg Department, 3C3 1525 West W.T. Harris,
Charlotte, North Carolina 28262. Hand deliveries
and deliveries by overnight courier should also be
sent to the address provided above. For information
with respect to the Exchange Offer, the telephone
number for the Exchange Agent is (704) 590-7408 and
the facsimile number for the Exchange Agent is
(704) 590-7628. See "The Exchange Offer -- Exchange
Agent."
USE OF PROCEEDS............ There will be no cash proceeds payable to the
Company from the issuance of the Exchange Notes
pursuant to the Exchange Offer. See "Use of
Proceeds." For a discussion of the use of the net
proceeds received by the Company from the sale of
the Old Notes, see "Private Placement."
TERMS OF NOTES
NOTES OUTSTANDING.......... $125,000,000 principal amount of 7.45% Senior Notes
due 2007.
MATURITY DATE.............. October 15, 2007.
INTEREST PAYMENT DATES..... April 15 and October 15 of each year, beginning on
April 15, 1998.
OPTIONAL REDEMPTION........ The Notes may be redeemed at any time, at the
option of the Company, in whole or in part, at a
price equal to 100% of the principal amount plus
accrued and unpaid interest (if any) to the date of
redemption plus a Make-Whole Premium (if any)
relating to the then prevailing Treasury Yield and
the remaining life of the Notes.
MANDATORY REDEMPTION....... None.
RANKING.................... The Notes are senior unsecured obligations of the
Company and rank pari passu in right of payment
with any existing and future senior unsecured
indebtedness of the Company, including under its
bank credit facility (the "Credit Facility") and
senior in right of payment to all existing and
future subordinated indebtedness of the Company.
CERTAIN COVENANTS.......... The indenture (the "Indenture") relating to the
Notes contains limitations on, among other things,
the Company's ability to (i) incur indebtedness
secured by certain liens, (ii) engage in certain
sale/leaseback transactions, and (iii) engage in
certain merger, consolidation or reorganization
transactions. See "Description of Notes."
11
<PAGE> 13
SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth certain historical consolidated financial
data for the Company as of and for each of the periods indicated derived from
the Company's audited consolidated financial statements for the years ended
December 31, 1994, 1995 and 1996 and unaudited consolidated financial statements
for the nine months ended September 30, 1996 and 1997. The following data should
be read in conjunction with the "Selected Historical Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements and notes
thereto included elsewhere in this Prospectus. The results for the nine months
ended September 30, 1997 are not necessarily indicative of results for the full
year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Oil and gas revenues.......................... $ 69,728 $ 94,598 $149,256 $101,774 $139,135
-------- -------- -------- -------- --------
Operating expenses:
Lease operating (including production
taxes).................................... 9,555 14,227 16,946 12,094 17,782
Depreciation, depletion and amortization.... 34,118 49,904 64,026 45,535 67,415
General and administrative, net............. 3,802 5,549 7,552 5,338 8,251
Stock compensation(1)....................... 1,084 692 1,943 1,444 1,005
-------- -------- -------- -------- --------
Total operating expenses............. $ 48,559 $ 70,372 $ 90,467 $ 64,411 $ 94,453
-------- -------- -------- -------- --------
Income from operations........................ $ 21,169 $ 24,226 $ 58,789 $ 37,363 $ 44,682
Interest income (expense), net................ 1,379 780 497 391 (1,015)
-------- -------- -------- -------- --------
Income before income taxes.................... $ 22,548 $ 25,006 $ 59,286 $ 37,754 $ 43,667
Income tax provision.......................... 8,108 8,742 20,792 13,203 15,292
-------- -------- -------- -------- --------
Net income.................................... $ 14,440 $ 16,264 $ 38,494 $ 24,551 $ 28,375
======== ======== ======== ======== ========
OTHER FINANCIAL DATA AND SELECTED RATIOS:
EBITDA(2)..................................... $ 57,029 $ 75,118 $123,732 $ 83,486 $112,865
Capital expenditures.......................... $116,693 $104,185 $163,823 $120,812 $188,338
Net cash provided by operating activities..... $ 68,121 $ 67,640 $127,494 $108,631 $117,270
Ratio of EBITDA to interest expense(3)........ 98.3x 85.2x 64.2x 69.4x 27.0x
Ratio of earnings to fixed charges(4)......... 31.2x 24.1x 28.3x 28.6x 10.5x
Ratio of total debt to EBITDA(5).............. -- 0.4x 0.5x 0.5x 0.8x
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................... $ 10,987 $ 11,235 $ 11,436 $ 9,368 $ 8,849
Oil and gas properties, net................... 173,924 228,509 328,615 304,079 449,944
Total assets.................................. 215,557 277,406 395,938 379,033 506,926
Long-term debt and capital lease obligations,
less current maturities..................... 555 25,152 60,000 56,000 120,000
Stockholders' equity.......................... 169,491 193,571 239,902 223,541 278,240
</TABLE>
- ---------------
(1) Stock compensation represents noncash stock compensation charges.
(2) EBITDA represents income from continuing operations plus income taxes,
interest expense and depreciation, depletion and amortization expense.
EBITDA is not presented as an indicator of the Company's operating
performance, an indicator of cash available for discretionary spending or as
a measure of liquidity. EBITDA may not be comparable to other similarly
titled measures of other companies.
(3) On a pro forma basis, assuming the sale of the Notes and the application of
net proceeds therefrom, the ratio of EBITDA to interest expense would be
41.2x for the year ended December 31, 1996 and 38.9x for the nine months
ended September 30, 1997.
(4) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income before income taxes plus fixed charges. Fixed charges
consist of interest expense (excluding capitalized interest) and the
estimated interest component of rent expense. On a pro forma basis, assuming
the sale of the Notes and the application of net proceeds therefrom, the
ratio of earnings to fixed charges would be 18.8x for the year ended
December 31, 1996 and 14.9x for the nine months ended September 30, 1997.
(5) For the nine months ended September 30, 1996 and 1997, EBITDA was calculated
using data from the 12 months ended September 30, 1996 and 1997,
respectively. On a pro forma basis, assuming the sale of the Notes and the
application of net proceeds therefrom, the ratio of total debt to EBITDA
would be 1.0x for the twelve months ended December 31, 1996 and 0.8x for the
twelve months ended September 30, 1997.
12
<PAGE> 14
SUMMARY OPERATING DATA
The following table sets forth certain operating information with respect
to the oil and gas operations of the Company.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ -----------------
1994 1995 1996 1996 1997
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Production:
Oil and condensate (MBbls)................... 1,394 2,071 2,558 1,842 2,491
Gas (MMcf)................................... 24,267 33,719 41,323 29,826 39,002
Total production (MMcfe)..................... 32,631 46,145 56,670 40,880 53,950
Average realized prices:
Oil and condensate (per Bbl)................. $15.73 $17.23 $20.89 $19.79 $19.26
Gas (per Mcf)................................ 1.97 1.75 2.32 2.19 2.34
Average costs (per Mcfe):
Lease operating (including production
taxes).................................... $ 0.29 $ 0.31 $ 0.30 $ 0.30 $ 0.33
Depreciation, depletion and amortization..... 1.05 1.08 1.13 1.11 1.25
General and administrative, net.............. 0.12 0.12 0.13 0.13 0.15
</TABLE>
SUMMARY OIL AND GAS RESERVE DATA
The following table sets forth summary information with respect to the
Company's estimated proved oil and gas reserves and the estimated future net
cash flows attributable thereto. Unless otherwise noted, all information in this
Prospectus relating to oil and gas reserves and the estimated future net cash
flows attributable thereto are based upon estimates prepared by the Company and
are net to the Company's interest. The Present Value of estimated future net
cash flows (unless otherwise indicated) was prepared using constant prices as of
the calculation date, discounted at 10% per annum on a pre-tax basis. See "Risk
Factors -- Uncertainty of Estimates of Oil and Gas Reserves" and
"Business -- Oil and Gas Reserves."
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------
1994 1995 1996 AS OF JUNE 30, 1997
-------- -------- -------- -------------------
<S> <C> <C> <C> <C>
Proved Reserves:
Oil and condensate (MBbls)............ 8,610 9,633 13,659 16,886
Gas (MMcf)............................ 153,967 203,580 241,385 277,986
Gas Equivalent (MMcfe)................ 205,627 261,378 323,339 379,305
Present Value of estimated future
pre-tax net cash flows (in
thousands)............................ $230,594 $364,879 $859,817(1)
Present Value of estimated future
pre-tax net cash flows using June 30,
1997 pricing (in thousands)(2)........ $488,646 $574,150
</TABLE>
- ---------------
(1) Calculated using December 31, 1996 prices of $24.15 per Bbl of oil and $4.07
per Mcf of gas.
(2) The Present Value of estimated future pre-tax net cash flows as of the dates
indicated were calculated using June 30, 1997 prices of $17.53 per Bbl of
oil and $2.48 per Mcf of gas.
13
<PAGE> 15
RISK FACTORS
Holders of Old Notes should carefully review the information in this
Prospectus and should particularly consider the following matters in evaluating
the Exchange Offer.
VOLATILITY OF OIL AND GAS PRICES; MARKETABILITY OF PRODUCTION
The Company's revenue, profitability and future rate of growth are
substantially dependent upon the prevailing prices of, and demand for, oil and
natural gas. The Company's ability to maintain or increase its borrowing
capacity and to obtain additional capital on attractive terms is also
substantially dependent upon oil and gas prices. Prices for oil and natural gas
are subject to wide fluctuation in response to relatively minor changes in the
supply of and demand for oil and natural gas, market uncertainty and a variety
of additional factors that are beyond the control of the Company. These factors
include the level of consumer product demand, weather conditions, domestic and
foreign governmental regulations, the price and availability of alternative
fuels, political conditions in the Middle East, the foreign supply of oil and
natural gas, the price of oil and gas imports and overall economic conditions.
From time to time, oil and gas prices have been depressed by excess domestic and
imported supplies. There can be no assurance that current price levels will be
sustained. It is impossible to predict future oil and natural gas price
movements with any certainty. Declines in oil and natural gas prices may
adversely affect the Company's financial condition, liquidity and results of
operations and may reduce the amount of the Company's oil and natural gas that
can be produced economically. Additionally, substantially all of the Company's
sales of oil and natural gas are made in the spot market or pursuant to
contracts based on spot market prices and not pursuant to long-term fixed price
contracts.
From time to time, the Company has utilized and expects to continue to
utilize hedging transactions with respect to a portion of its oil and gas
production to achieve a more predictable cash flow, as well as to reduce its
exposure to price fluctuations. While the use of these hedging arrangements
limits the downside risk of adverse price movements, it may also limit future
revenues from favorable price movements. The use of hedging transactions also
involves the risk that the counterparties will be unable to meet the financial
terms of such transactions. All of the Company's hedging transactions to date
were carried out in the over-the-counter market and the obligations of the
counterparties have been guaranteed by entities with at least an investment
grade credit rating or secured by letters of credit. The Company accounts for
these transactions as hedging activities and, accordingly, gains or losses are
included in oil and gas revenues when the hedged production is delivered.
"Business -- Marketing and Hedging."
In addition, the marketability of the Company's production depends upon the
availability and capacity of gas gathering systems, pipelines and processing
facilities. Federal and state regulation of oil and gas production and
transportation, general economic conditions and changes in supply and demand
could adversely affect the Company's ability to produce and market its oil and
natural gas. If market factors were to change dramatically, the financial impact
on the Company could be substantial. The availability of markets and the
volatility of product prices are beyond the control of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- Marketing and
Hedging."
UNCERTAINTY OF ESTIMATES OF OIL AND GAS RESERVES
This Prospectus contains estimates, most of which were prepared by the
Company, of proved oil and gas reserves and the Present Value of estimated
future net cash flows therefrom. Estimating quantities of reserves and future
net cash flows is not an exact science. There are numerous uncertainties
inherent in the process that require assumptions based upon available geologic,
engineering and economic data, including assumptions required by the Commission
as to oil and gas prices, drilling and operating expenses, capital expenditures,
taxes and availability of funds. As a result, any such estimate is inherently
imprecise. Actual prices, production, development expenditures, operating
expenses and quantities of recoverable oil and gas reserves will vary from those
assumed in the estimates and such variances may be significant. Any significant
variance from the assumptions could result in the actual
14
<PAGE> 16
quantity of the Company's reserves and future net cash flow therefrom being
materially different from the estimates set forth in this Prospectus. In
addition, the Company's estimated reserves may be subject to downward or upward
revision, based upon production history, results of future exploration and
development, prevailing oil and gas prices, operating and development costs and
other factors. The Company's properties may also be susceptible to hydrocarbon
drainage from production by other operators on adjacent properties. See
"Business -- Oil and Gas Reserves."
The Present Value of estimated future net cash flows referred to in this
Prospectus should not be construed as the current market value of the estimated
oil and gas reserves attributable to the Company's properties. In accordance
with applicable requirements of the Commission, the estimated discounted future
net cash flows from proved reserves are generally based on prices and costs as
of the date of the estimate, whereas actual future prices and costs may be
materially higher or lower. Actual future net cash flows also will be affected
by factors such as the amount and timing of actual production, changes in
consumption by oil and gas purchasers and changes in governmental regulations or
taxation. The timing of actual future net cash flows from proved reserves, and
thus their actual present value, will be affected by the timing of both the
production and the incurrence of expenses in connection with development and
production of oil and gas properties. In addition, the 10% discount factor,
which is required by the Commission to be used in calculating the Present Value
of estimated future net cash flows for reporting purposes, is not necessarily
the most appropriate discount factor based on interest rates in effect from time
to time and risks associated with the Company or the oil and gas industry in
general.
NEED FOR RESERVE REPLACEMENT
As is generally the case in the Gulf of Mexico, the Company's producing
properties are characterized by a high initial production rate, followed by a
steep decline in production. While production declines vary from property to
property, and vary for any one property from time to time, recent production
declines experienced by the Company equate to a reserve life index (the number
of years a property would produce at a constant rate using current rates of
production) for the Company's proved reserves of approximately 5.7 years as of
December 31, 1996. As a result, the Company must locate and develop or acquire
new oil and gas reserves to replace those being depleted by production. Without
successful exploration or acquisition activities, the Company's reserves and
revenues will decline rapidly. There can be no assurance that the Company will
be able to find and develop or acquire additional reserves. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DRILLING RISKS; OPERATING DELAYS
Drilling involves numerous risks, including the risk that no commercially
productive natural gas or oil reservoirs will be encountered. The cost of
drilling, completing and operating wells is often uncertain, and drilling
operations may be curtailed, delayed or cancelled as a result of a variety of
factors, including unexpected drilling conditions, pressure or irregularities in
formations, equipment failures or accidents, weather conditions and shortages or
delays in the delivery of equipment. Demand and rates for drilling rigs,
production equipment and related services increased significantly during 1996
and to date in 1997. The Company has experienced delays in obtaining such
equipment and services, and in some instances the costs incurred were higher
than originally budgeted. There can be no assurance as to the success of the
Company's future drilling activities or the availability of equipment and
services.
ACQUISITION RISKS
The successful acquisition of producing properties requires an assessment
of recoverable reserves, future oil and gas prices, operating costs, potential
environmental and other liabilities and other factors. Such assessments are
necessarily inexact and their accuracy is inherently uncertain. In connection
with such an assessment, the Company performs a review of the subject properties
that it believes to be generally consistent with industry practices, which
generally includes on-site inspections and the review of reports filed with the
Minerals Management Service for environmental compliance. Such a review,
15
<PAGE> 17
however, will not reveal all existing or potential problems nor will it permit a
buyer to become sufficiently familiar with the properties to fully assess their
deficiencies and capabilities. Inspections may not always be performed on every
platform or well, and structural environmental problems are not necessarily
observable even when an inspection is undertaken. Even when problems are
identified, the seller may be unwilling or unable to provide effective
contractual protection against all or part of such problems. The Company is
generally not entitled to contractual indemnification for environmental
liabilities and acquires structures on a property on an "as is" basis.
COMPETITION
Competition in the oil and gas industry is intense, particularly with
respect to the acquisition of producing properties and proved undeveloped
acreage. 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 such properties. Many of the Company's competitors have
financial resources and exploration and development budgets that are
substantially greater than those of the Company, which may adversely affect the
Company's ability to compete with these companies.
DEPENDENCE ON KEY PERSONNEL
The Company's operations are dependent upon a relatively small group of
management and technical personnel. The loss of one or more of these individuals
could have a material adverse effect on the Company. See "Management" and
"Business -- Employees."
OPERATING HAZARDS
The Company's operations are subject to the usual hazards incident to the
drilling of oil and gas wells, many of which are beyond the Company's control,
such as cratering, explosions, uncontrollable flows of oil, gas or well fluids,
fires, pollution and other environmental risks. Additional risks include the
risk that no commercially productive oil or natural gas reservoirs will be
encountered and that operations may be curtailed, delayed or cancelled as a
result of numerous factors including title problems, compliance with
governmental requirements and shortages or delays in the delivery of equipment.
In addition, substantially all of the Company's operations currently are
offshore and subject to the additional hazards of marine operations, such as
capsizing, collision and damage or loss from severe weather. These hazards can
cause personal injury and loss of life, severe damage to and destruction of
property and equipment, environmental damage and suspension of operations. In
accordance with industry practice, the Company maintains insurance against some,
but not all, of the risks described above. See "Business -- Operating Hazards
and Insurance."
GOVERNMENTAL REGULATION
Oil and gas operations are subject to various United States federal, state
and local and foreign and international governmental regulations that change
from time to time in response to economic or political conditions. Matters
subject to regulation include discharge permits for drilling operations,
drilling and abandonment bonds, reports concerning operations, the spacing of
wells, and unitization and pooling of properties and taxation. From time to
time, regulatory agencies have imposed price controls and limitations on
production by restricting the rate of flow of oil and gas wells below actual
production capacity in order to conserve supplies of oil and gas. In addition,
the production, handling, storage, transportation and disposal of oil and gas,
by-products thereof and other substances and material produced or used in
connection with oil and gas operations are subject to regulation under federal,
state and local laws and regulations primarily relating to protection of human
health and the environment. The discharge of oil, natural gas or pollutants into
the air, soil or water may give rise to significant liabilities on the part of
the Company and may require the Company to incur substantial remediation costs.
The Company may also be subject to substantial clean-up costs for any toxic or
hazardous substance that may exist under any of its properties. To date,
expenditures related to complying with these laws and for
16
<PAGE> 18
remediation of existing environmental contamination have not been significant in
relation to the results of operations of the Company.
Although the Company believes it is in substantial compliance with all
applicable laws and regulations, the requirements imposed by such laws and
regulations are frequently changed and subject to interpretation. In addition,
the recent trend toward stricter standards in environmental legislation and
regulation is likely to continue. For instance, legislation has been proposed in
Congress from time to time that would reclassify certain crude oil and natural
gas exploration and production wastes as "hazardous wastes," which would make
the reclassified wastes subject to much more stringent handling, disposal and
clean-up requirements. If such legislation were to be enacted, it could have a
significant impact on the operating costs of the Company, as well as the oil and
gas industry in general. The Company could incur substantial costs to comply
with environmental laws and regulations, and the Company is unable to predict
the ultimate cost of compliance with these requirements or their effect on its
production. See "Business -- Regulation."
RISKS OF FOREIGN OPERATIONS; EFFECTIVE SUBORDINATION OF THE NOTES
While the Company intends to continue to focus on the Gulf of Mexico, the
Company also intends to pursue selective opportunities to develop "focused
diversification" outside the Gulf of Mexico. In May 1997, the Company acquired
the assets and subsidiaries of Huffco International, L.L.C., which include a 35%
working interest in a 415,000 acre production sharing contract in the Bohai Bay,
offshore China. The Company also acquired certain rights and data relating to
offshore West Africa, an international database and added a small international
technical staff. The recently drilled initial exploratory well in the Bohai Bay
failed to produce oil or gas and Newfield and the other participants in the well
have agreed to plug and abandon the well. Newfield anticipates additional
exploratory drilling on the property in 1998. Successful exploratory drilling in
the Bohai Bay may result in significant future investment in this area. Newfield
is also actively considering investments in selected countries in West Africa
and Latin America. Ownership of property interests and production operations in
China, and in any other areas outside the United States in which the Company may
choose to do business, are subject to the various risks inherent in foreign
operations. These risks may include, among other things, currency restrictions
and exchange rate fluctuations, loss of revenue, property and equipment as a
result of hazards such as expropriation, nationalization, war, insurrection and
other political risks, risks of increases in taxes and governmental royalties,
renegotiation of contracts with governmental entities and quasi-governmental
agencies, change in laws and policies governing operations of foreign-based
companies and other uncertainties arising out of foreign government sovereignty
over the Company's international operations. The Company's international
operations may also be adversely affected by laws and policies of the United
States affecting foreign trade, taxation and investment. In addition, in the
event of a dispute arising from foreign operations, the Company may be subject
to the exclusive jurisdiction of foreign courts or may not be successful in
subjecting foreign persons to the jurisdiction of the courts of the United
States.
The Company's international operations are owned and operated by
subsidiaries organized in foreign jurisdictions, and the Company intends to
continue this practice with respect to any new international operations. As a
result, the Notes will be effectively subordinated to claims of holders of any
preferred stock and claims of creditors (other than the Company) of the
Company's international subsidiaries, including trade creditors, secured
creditors, taxing authorities, creditors holding guarantees, and tort claimants.
In the event of a liquidation, reorganization, or similar proceeding relating to
an international subsidiary, these persons generally will have priority as to
the assets of such subsidiary over the claims and equity interests of the
Company and, thereby indirectly, holders of the Notes. Huffco International,
L.L.C. retained a preferred stock interest in the subsidiary of the Company that
owns the interest in the Bohai Bay production sharing contract. Such preferred
stock interest is economically similar to a 10% net profits interest in the
Bohai Bay activities of such subsidiary. A director and an executive officer of
Newfield together held in excess of 90% of the outstanding member interests of
Huffco International, L.L.C.
17
<PAGE> 19
SUBSTANTIAL CAPITAL REQUIREMENTS
The Company makes, and will continue to make, substantial expenditures for
the development, exploration, acquisition and production of oil and natural gas
reserves. The Company made capital expenditures, including exploration expense,
of $104.2 million during 1995 and $163.8 million during 1996. The Company plans
to make capital expenditures, including exploration expense but not including
expenditures for acquisitions, of approximately $181.3 million in 1997.
Management believes that the Company will have sufficient cash provided by
operating activities, borrowings under the Credit Facility and the proceeds from
the Offering to fund planned capital expenditures in 1997 and 1998. However, if
revenues or cash flows from operations decrease as a result of lower oil and
natural gas prices or operating difficulties, the Company may be limited in its
ability to expend the capital necessary to undertake or complete its drilling
program, or it may be forced to raise additional debt or equity proceeds to fund
such expenditures. There can be no assurance that additional debt or equity
financing or cash generated by operations will be available to meet these
requirements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Old Notes were issued to, and the Company believes are currently owned
by, a relatively small number of beneficial owners. The Old Notes have not been
registered under the Securities Act and will remain subject to restrictions on
transferability to the extent that they are not exchanged for the Exchange
Notes. Although the Exchange Notes will generally be permitted to be resold or
otherwise transferred by the holders thereof without compliance with the
registration requirements under the Securities Act, they will constitute a new
issue of securities with no established trading market. The Exchange Offer will
not be conditioned upon any minimum or maximum aggregate principal amount of Old
Notes being tendered for exchange. No assurance can be given as to the liquidity
of the trading market for the Exchange Notes, or, in the case of non-tendering
holders of Old Notes, the trading market for the Old Notes following the
Exchange Offer.
The Company does not intend to apply for listing of the Exchange Notes or
the Old Notes on any securities exchange or stock market. The Exchange Notes are
expected to be eligible for trading in the Private Offerings, Resale and Trading
through Automated Linkages ("PORTAL") market. Although the Initial Purchasers
have informed the Company that they currently intend to make a market in the
Exchange Notes or the Old Notes, the Initial Purchasers are not obligated to do
so, and any such market making may be discontinued at any time without notice.
The liquidity of any market for the Exchange Notes or the Old Notes will depend
upon the number of Holders of the Exchange Notes or the Old Notes, the interest
of securities dealers in making a market in the Exchange Notes or the Old Notes
and other factors. Accordingly, there can be no assurance as to the development
or liquidity of any market for the Exchange Notes or the Old Notes.
The liquidity of, and trading market for the Exchange Notes or the Old
Notes also may be adversely affected by general declines in the market for
similar securities. Such a decline may adversely affect such liquidity and
trading markets independent of the financial performance of, and prospects for,
the Company.
The Old Notes have not been registered under the Securities Act or any
state securities laws and therefore may not be offered, sold or otherwise
transferred except in compliance with the registration requirements of the
Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case in
compliance with certain other conditions and restrictions. Old Notes which
remain outstanding after consummation of the Exchange Offer will continue to
bear a legend reflecting such restrictions on transfer. In addition, upon
consummation of the Exchange Offer, holders of Old Notes which remain
outstanding will not be entitled to any rights to have such Old Notes registered
under the Securities Act or to any similar rights under the Registration Rights
Agreement. The Company does not intend to register under the Securities Act any
Old Notes which remain outstanding after consummation of the Exchange Offer.
18
<PAGE> 20
The Registration Rights Agreement provides, under certain circumstances,
for additional interest to become payable in respect of the Old Notes as
liquidated damages. Following consummation of the Exchange Offer, any
outstanding Old Notes will not be entitled to any such increase in the interest
rate thereon.
To the extent that Old Notes are tendered and accepted in the Exchange
Offer, a holder's ability to sell untendered Old Notes could be adversely
affected. In addition, any trading market for Old Notes which remain outstanding
after the Exchange Offer could be adversely affected.
The Exchange Notes and any Old Notes which remain outstanding after
consummation of the Exchange Offer will constitute a single class of Notes under
the Indenture and, accordingly, will vote together for purposes of determining
whether holders of the requisite percentage in outstanding principal amount
thereof have taken certain actions or exercised certain rights under the
Indenture.
Delivery of Exchange Notes in exchange for Old Notes tendered and accepted
for exchange pursuant to the Exchange Offer, will be made only after timely
receipt by the Exchange Agent of (i) certificates for Old Notes or a book-entry
confirmation of a book-entry transfer of Old Notes into the Exchange Agents
account at DTC, including an Agent's Message if the tendering holder does not
deliver a Letter of Transmittal (ii) a completed and signed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees, or,
in the case of a book-entry transfer, an Agent's Message in lieu of the Letter
of Transmittal, and (iii) any other documents required by the Letter of
Transmittal. Therefore, holders of Old Notes desiring to tender such Old Notes
in exchange for Exchange Notes should allow sufficient time to ensure timely
delivery. The Company is not under a duty to give notification of defects or
irregularities with respect to the tenders of Old Notes for exchange.
19
<PAGE> 21
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this
Prospectus, including without limitation statements under "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" regarding planned capital expenditures,
the availability of capital resources to fund capital expenditures, estimates of
proved reserves, the number of anticipated wells to be drilled in 1997 and
thereafter, the Company's financial position, business strategy and other plans
and objectives for future operations, are forward-looking statements. Although
the Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. There are numerous uncertainties inherent in
estimating quantities of proved oil and natural gas reserves and in projecting
future rates of production and timing of development expenditures, including
many factors beyond the control of the Company. Reserve engineering is a
subjective process of estimating underground accumulations of oil and natural
gas that cannot be measured in an exact way, and the accuracy of any reserve
estimate is a function of the quality of available data and of engineering and
geological interpretation and judgment. As a result, estimates made by different
engineers often vary from one another. In addition, results of drilling, testing
and production subsequent to the date of an estimate may justify revisions of
such estimate and such revisions, if significant, would change the schedule of
any further production and development drilling. Accordingly, reserve estimates
are generally different from the quantities of oil and natural gas that are
ultimately recovered. Additional important factors that could cause actual
results to differ materially from the Company's expectations are disclosed under
"Risk Factors" and elsewhere in this Prospectus. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by such factors.
PRIVATE PLACEMENT
On October 15, 1997, the Company completed the private sale to the Initial
Purchasers of $125,000,000 principal amount of the Old Notes in a transaction
not registered under the Securities Act in reliance upon Section 4(2) of the
Securities Act. The Initial Purchasers thereupon offered and resold the Old
Notes only to qualified institutional buyers and non-U.S. persons. Of the $122.3
million net proceeds received by the Company in connection with the sale of the
Old Notes, $120 million was used to repay all borrowings outstanding under the
Credit Facility. It is anticipated that the remainder of the net proceeds will
be used to provide working capital to the Company to fund further exploration
and development of the Company's oil and gas properties and the acquisition of
oil and gas properties and other general corporate purposes.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange a like
principal amount of Old Notes, the terms of which are identical in all material
respects to the Exchange Notes. The Old Notes surrendered in exchange for the
Exchange Notes will be retired and canceled and cannot be reissued. Accordingly,
issuance of the Exchange Notes will not result in any change in the
capitalization of the Company.
20
<PAGE> 22
CAPITALIZATION
The following table sets forth as of September 30, 1997, (i) the unaudited
historical capitalization of the Company and (ii) the capitalization of the
Company as adjusted to give effect to the issuance of the Notes and the
application of the net proceeds of $122.3 million therefrom as described under
"Private Placement." The table should be read in conjunction with the
consolidated financial statements and notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt:
Credit Facility........................................... $120,000 $ --
7.45% Senior Notes due 2007............................... -- 125,000
-------- --------
Total long-term debt.............................. 120,000 125,000
-------- --------
Stockholders' equity
Preferred stock ($0.01 par value; 5,000,000 shares
authorized; no shares issued).......................... -- --
Common Stock ($0.01 par value; 100,000,000 shares
authorized; issued and outstanding).......... 359 359
Additional paid-in capital.................................. 159,265 159,265
Unearned compensation....................................... (4,764) (4,764)
Retained earnings........................................... 123,380 123,380
-------- --------
Total stockholders' equity........................ 278,240 278,240
-------- --------
Total capitalization............................ $398,240 $403,240
======== ========
</TABLE>
21
<PAGE> 23
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth certain historical consolidated financial
data for the Company as of and for each of the periods indicated derived from
the Company's audited consolidated financial statements for the years ended
December 31, 1992, 1993, 1994, 1995 and 1996 and unaudited consolidated
financial statements for the nine months ended September 30, 1996 and 1997. The
following data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements and notes thereto included elsewhere in this
Prospectus. The results for the nine months ended September 30, 1997 are not
necessarily indicative of results for the full year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Oil and gas revenues....................... $41,427 $ 60,178 $ 69,728 $ 94,598 $149,256 $101,774 $139,135
------- -------- -------- -------- -------- -------- --------
Operating expenses:
Lease operating (including production
taxes)................................. 4,151 7,096 9,555 14,227 16,946 12,094 17,782
Depreciation, depletion and
amortization........................... 18,709 25,116 34,118 49,904 64,026 45,535 67,415
General and administrative, net.......... 1,956 3,709 3,802 5,549 7,552 5,338 8,251
Stock compensation(1).................... -- 3,235 1,084 692 1,943 1,444 1,005
------- -------- -------- -------- -------- -------- --------
Total operating expenses........... $24,816 $ 39,156 $ 48,559 $ 70,372 $ 90,467 $ 67,411 $ 94,453
------- -------- -------- -------- -------- -------- --------
Income from operations..................... $16,611 $ 21,022 $ 21,169 $ 24,226 $ 58,789 $ 37,363 $ 44,682
Interest income (expense), net............. 423 759 1,379 780 497 391 (1,015)
------- -------- -------- -------- -------- -------- --------
Income before income taxes................. $17,034 $ 21,781 $ 22,548 $ 25,006 $ 59,286 $ 37,754 $ 43,667
Income tax provision....................... 5,787 7,753 8,108 8,742 20,792 13,203 15,292
------- -------- -------- -------- -------- -------- --------
Net income................................. $11,247 $ 14,028 $ 14,440 $ 16,264 $ 38,494 $ 24,551 $ 28,375
======= ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA AND SELECTED RATIOS:
EBITDA(2).................................. $35,766 $ 46,951 $ 57,029 $ 75,118 $123,732 $ 83,486 $112,865
Capital expenditures....................... $34,896 $ 43,245 $116,693 $104,185 $163,823 $120,812 $188,338
Net cash provided by operating
activities............................... $30,980 $ 38,569 $ 68,121 $ 67,640 $127,494 $108,631 $117,270
Ratio of EBITDA to interest expense(3)..... 251.9x 271.4 98.3x 85.2x 64.2x 69.4x 27.0x
Ratio of earnings to fixed charges(4)...... 81.1x 82.3x 31.2x 24.1x 28.3 28.6x 10.5x
Ratio of total debt to EBITDA(5)........... -- -- -- 0.4x 0.5x 0.5x 0.8x
RESERVE DATA:
Proved reserves (MMcfe).................... 97,033 140,745 205,627 261,378 323,339 N/A N/A
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................ $ 8,196 $ 70,268 $ 10,987 $ 11,235 $ 11,436 $ 9,368 $ 8,849
Oil and gas properties, net................ 74,952 91,136 173,924 228,509 328,615 304,079 449,944
Total assets............................... 95,988 183,683 215,557 277,406 395,938 379,033 506,926
Long-term debt and capital lease
obligations, less current maturities..... 399 446 555 25,152 60,000 56,000 120,000
Stockholders' equity....................... 77,934 152,845 169,491 193,571 239,902 223,541 278,240
</TABLE>
- ---------------
(1) Stock compensation represents noncash stock compensation charges.
(2) EBITDA represents income from continuing operations plus income taxes,
interest expense and depreciation, depletion and amortization expense.
EBITDA is not presented as an indicator of the Company's operating
performance, an indicator of cash available for discretionary spending or as
a measure of liquidity. EBITDA may not be comparable to other similarly
titled measures of other companies.
(3) On a pro forma basis, assuming the sale of the Notes and the application of
net proceeds therefrom, the ratio of EBITDA to interest expense would be
41.2x for the year ended December 31, 1996 and 38.9x for the nine months
ended September 30, 1997.
(4) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income before income taxes plus fixed charges. Fixed charges
consist of interest expense. On a pro forma basis, assuming the sale of the
Notes and the application of net proceeds therefrom, the ratio of earnings
to fixed charges would be 18.8x for the year ended December 31, 1996 and
14.9x for the nine months ended September 30, 1997.
(5) For the nine months ended September 30, 1996 and 1997, EBITDA was calculated
using data from the 12 months ended September 30, 1996 and 1997,
respectively. On a pro forma basis, assuming the sale of the Notes and the
application of net proceeds therefrom, the ratio of total debt to EBITDA
would be 1.0x for the twelve months ended December 31, 1996 and 0.8x for the
twelve months ended September 30, 1997.
22
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is intended to assist in an understanding of the
Company's consolidated financial position and results of operations for each
year of the three-year period ended December 31, 1996 and the nine months ended
September 30, 1996 and 1997. The Company's historical consolidated financial
statements and the notes thereto included elsewhere in this Prospectus contain
detailed information that should be referred to in conjunction with the
following discussion.
GENERAL
As an independent oil and gas producer, the Company's revenue,
profitability and future rate of growth are substantially dependent upon
prevailing prices for natural gas, oil and condensate, which are dependent upon
numerous factors beyond the Company's control, such as economic, political and
regulatory developments and competition from other sources of energy. The energy
markets have historically been very volatile and there can be no assurance that
oil and gas prices will not be subject to wide fluctuations in the future. A
substantial or extended decline in oil and gas prices could have a material
adverse effect on the Company's financial position, results of operations, cash
flows, quantities of oil and gas reserves that may be economically produced and
access to capital.
The Company's results of operations may vary significantly from quarter to
quarter as a result of development operations, commodity prices, the curtailment
of production in association with workover and recompletion activities and the
incurrence of expenses related thereto, the timing and amount of reimbursement
for customary overhead costs received by the Company and other factors, and,
therefore, the results of operations for any one quarter may not be indicative
of results for the full fiscal year.
The Company uses the full cost method of accounting for its oil and gas
properties. Under this method, all acquisition, exploration and development
costs, including certain related employee costs (less any reimbursements for
such costs) incurred for the purpose of acquiring and finding oil and gas
reserves are capitalized in a "full cost pool" as incurred. The Company records
depletion of its full cost pool using the unit of production method and uses its
internal estimates of proved quantities of oil and gas reserves for financial
accounting matters. To the extent that such capitalized costs in the full cost
pool (net of depreciation, depletion and amortization and related deferred
taxes) exceed the present value (using a 10% discount rate) of estimated future
net after-tax cash flows from proved oil and gas reserves, such excess costs are
charged to operations. Once incurred, a write-down of oil and gas properties is
not reversible at a later date even if oil or gas prices increase.
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("Statement No. 128"). The statement specifies the computation, presentation,
and disclosure requirements for earnings per share ("EPS") and is designed to
improve the EPS information provided in the financial statements by simplifying
the existing computation. When adopted, this statement is expected to result in
an insignificant increase in the Company's basic EPS. The Company will adopt the
provisions of the statement in its 1997 year-end financial statements.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information About Capital Structure"
("Statement No. 129"). The statement consolidates the existing requirements to
disclose certain information about an entity's capital structure, for both
public and nonpublic entities. In June 1997, the FASB issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("Statement No. 130"). The statement establishes standards for reporting and
display of comprehensive income and its components. In June 1997, the FASB
issued Statement of Financial Accounting Standards No. 131, "Disclosures About
Segments of an Enterprise and Related Information" ("Statement No. 131"). The
statement specifies revised guidelines for determining an entity's operating and
geographic segments and the type and level of financial information about those
segments to be disclosed. The Company will adopt the provisions of Statements
No. 129, 130 and 131 in its 1998 financial statements. The Company does not
believe that
23
<PAGE> 25
the adoption of Statements No. 129, 130 and 131 will have a material effect on
its results of operations or the calculation of net income.
RESULTS OF OPERATIONS
The following table sets forth certain operating information with respect
to the oil and gas operations of the Company:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------- -------------------
1994 1995 1996 1996 1997
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Production:
Oil and condensate (MBbls)............. 1,394 2,071 2,558 1,842 2,491
Gas (MMcf)............................. 24,267 33,719 41,323 29,826 39,002
Total production (MMcfe)............... 32,631 46,145 56,670 40,880 53,950
Average realized prices:
Oil and condensate (per Bbl)........... $ 15.73 $ 17.23 $ 20.89 $ 19.79 $ 19.26
Gas (per Mcf).......................... 1.97 1.75 2.32 2.19 2.34
Average costs (per Mcfe):
Lease operating (including production
taxes).............................. $ 0.29 $ 0.31 $ 0.30 $ 0.30 $ 0.33
Depreciation, depletion and
amortization........................ 1.05 1.08 1.13 1.11 1.25
General and administrative, net........ 0.12 0.12 0.13 0.13 0.15
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
PRODUCTION. Net production increased 32%, from 40.9 Bcfe for the nine
months ended September 30, 1996, to 54.0 Bcfe for the nine months ended
September 30, 1997. Oil and condensate production for the nine months ended
September 30, 1997 increased 649 MBbls, or 35%, compared to the same period of
1996. Increased oil production for the first nine months of 1997 was due
primarily to production increases from development drilling activities during
1996 at South Timbalier 148 and Ewing Bank 947, the acquisition of Ship Shoal 69
in the third quarter of 1996 and a well drilled and placed on production late in
the fourth quarter of 1996 at Vermilion 398. Gas production increased by 9.2
Bcf, or 31%, from 29.8 Bcf for the nine months ended September 30, 1996 to 39.0
Bcf for the comparable period of 1997. Increased gas production was due to
production increases from development drilling activities during 1996 at Ewing
Bank 947, South Timbalier 148 and West Delta 152 and wells drilled and placed on
production during the fourth quarter of 1996 at Vermilion 308 and 398. These
increases were partially offset by natural production decline on other
properties of the Company.
OIL AND GAS REVENUES. Oil and gas revenues for the nine months ended
September 30, 1997 increased by $37.4 million, or 37%, compared to the same
period of 1996, primarily as a result of increased oil and gas production and
higher realized gas prices. The average realized price of natural gas increased
by 6.8%.
For the nine months ended September 30, 1997, the average realized gas
price was $2.34 per Mcf, which, as a result of hedging activities, was 95% of
the $2.46 per Mcf average gas sales price that would have otherwise been
received. As a result of hedging activities for gas production for the nine
months ended September 30, 1996, the Company realized an average gas price of
$2.19 per Mcf, or 84% of the $2.60 per Mcf average gas sales price that would
have otherwise been received. There were no oil hedging activities for the nine
months ended September 30, 1997. For the nine months ended September 30, 1996,
the average realized oil and condensate price was $19.79, which, as a result of
hedging activities, was 98% of the $20.15 per barrel average oil and condensate
sales price that would have otherwise been received.
LEASE OPERATING EXPENSE. Lease operating expense for the nine months ended
September 30, 1997 increased to $17.8 million from $12.1 million for the
comparable period of 1996. Lease operating
24
<PAGE> 26
expense per Mcfe increased from $0.30 for the nine months ended September 30,
1996 to $0.33 for the comparable period of 1997. These increases are primarily
attributable to a general increase in costs in the oilfield service industry,
increased workover activities, and lease operating costs associated with
properties acquired after September 30, 1996.
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE. During the nine months
ended September 30, 1997, depreciation, depletion, and amortization expense
increased to $67.4 million from $45.5 million for the comparable period of 1996.
The increase was the result of an increased depletion rate per Mcfe and
production increases from acquisitions and exploratory and development drilling
activities during 1996 and 1997. The depletion rate per unit for the nine month
period ended September 30, 1997 increased to $1.25 per Mcfe from $1.11 per Mcfe
for the comparable period of 1996. The increase in the depletion rate per unit
is primarily attributable to increased costs of drilling goods and services,
platform and facilities construction and transportation services in the
industry.
GENERAL AND ADMINISTRATIVE EXPENSE, NET. General and administrative
expense, which is net of overhead reimbursements received by the Company from
other working interest owners, increased to $8.3 million, or $0.15 per Mcfe for
the nine month period ended September 30, 1997, as compared to $5.3 million, or
$0.13 per Mcfe, for the same period of 1996. Performance based compensation, as
a component of general and administrative expense, increased from $3.2 million,
or $0.08 per Mcfe, for the nine month period ended September 30, 1996 to $3.8
million, or $0.07 per Mcfe for the nine month period ended September 30, 1997.
Direct costs associated with staff increases during 1996 were partially offset
by joint interest reimbursements. To the extent that the Company continues to
grow and increase its ownership in certain properties, the Company expects
general and administrative expenses, in the aggregate, to continue to increase.
NET INCOME. As a result of the foregoing, the Company had net income of
$28.4 million or $0.75 per share, for the nine month period ended September 30,
1997 as compared to $24.6 million or $0.66 per share for the comparable period
of 1996.
1996 COMPARED TO 1995
PRODUCTION. Net production increased 10.6 Bcfe, or 23%, from 46.1 Bcfe for
1995, to 56.7 Bcfe for 1996. Gas production increased by 7.6 Bcf, or 23%, from
33.7 Bcf for 1995 to 41.3 Bcf for 1996. Increased gas production was due to
production increases at Eugene Island 251/262 and production from wells drilled
and placed on production at Vermilion 355 and Vermilion 297 during the fourth
quarter of 1995 and the first quarter of 1996, respectively. These increases
were partially offset by natural production decline on other properties of the
Company. Oil and condensate production for 1996 increased 487 MBbls, or 24%,
compared to 1995. Increased oil production for 1996 was due primarily to
production increases at Eugene Island 182, Ship Shoal 157 and the acquisition of
Ship Shoal 69 in the third quarter of 1996.
OIL AND GAS REVENUES. Oil and gas revenues for 1996 increased by $54.7
million, or 58%, compared to 1995, primarily as a result of increased oil and
gas production and increased oil and gas prices. The average realized price of
oil and condensate increased by 21% and the average realized price of natural
gas increased by 33%.
For the year ended December 31, 1996, the average realized gas price was
$2.32 per Mcf, which, as a result of hedging activities, was 86% of the $2.70
per Mcf average gas sales price that would have otherwise been received. For the
year ended December 31, 1995, the average realized gas price was $1.75 per Mcf,
which as a result of hedging activities, was 105% of the $1.67 per Mcf average
gas sales price that would have otherwise been received. For 1996, the average
realized oil and condensate price was $20.89 per barrel, which, as a result of
hedging activities, was 99% of the $21.15 per barrel average oil and condensate
sales price that would have otherwise been received. For 1995, oil hedging
activities had a negligible impact on oil and condensate revenues. During 1996,
approximately 54% of the Company's equivalent production was subject to hedge
positions as compared to 42% in 1995.
25
<PAGE> 27
LEASE OPERATING EXPENSE. Lease operating expense for 1996 increased to
$16.9 million from $14.2 million for 1995. Despite a general increase in costs
in the oil service industry, lease operating expense per Mcfe decreased from
$0.31 for 1995 to $0.30 for 1996. The decrease in lease operating expense per
unit is primarily attributable to higher production volumes.
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE. During 1996,
depreciation, depletion and amortization expense increased to $64.0 million from
$49.9 million for 1995. The increase was the result of an increased depletion
rate per Mcfe and production increases from acquisitions and exploratory and
development drilling activities during 1996. The depletion rate per unit for
1996 increased to $1.13 per Mcfe from $1.08 per Mcfe for 1995. The increase in
the depletion rate per unit is primarily attributable to higher cost reserve
additions associated with proved properties the Company acquired in 1996.
GENERAL AND ADMINISTRATIVE EXPENSE, NET. General and administrative
expense, which is net of overhead reimbursements received by the Company from
other working interest owners, increased to $7.6 million, or $0.13 per Mcfe, for
1996 as compared to $5.5 million, or $0.12 per Mcfe, for 1995. Performance based
compensation, as a component of general and administrative expense, increased
from $2.4 million, or $0.05 per Mcfe, for 1995, to $4.9 million, or $0.09 per
Mcfe, for 1996. Direct costs associated with staff increases during 1996 were
offset to a significant extent by joint interest reimbursements.
STOCK COMPENSATION EXPENSE. Stock compensation expense increased by $1.3
million during 1996 due to the amortization of additional noncash compensation
expense associated with 246,000 shares of restricted stock that were granted in
1996 to employees and 10,000 shares of restricted stock that were granted to
non-employee Directors.
NET INCOME. As a result of the foregoing, the Company had net income of
$38.5 million or $1.03 per share for 1996, as compared to $16.3 million or $0.45
per share for 1995.
1995 COMPARED TO 1994
PRODUCTION. Net production increased 13.5 Bcfe, or 41%, from 32.6 Bcfe for
1994 to 46.1 Bcfe for 1995. During 1995, gas production increased by 9.5 Bcf or
39%, to 33.7 Bcf for 1995 from 24.3 Bcf for 1994. Increased gas production was
due to production increases at Eugene Island 182, the acquisition of South
Timbalier 100 in the second quarter of 1995, and wells drilled and placed on
production during the first quarter of 1995 at Eugene Island 251/262, Main Pass
255/259 and Vermillion 288. These increases were partially offset by natural
production decline on other properties of the Company. Oil and condensate
production for 1995 increased 677 MBbls, or 49%, compared to 1994. Increased oil
and condensate production for 1995 was due primarily to initial production in
1995 following development drilling during 1994 at Eugene Island 182 and Eugene
Island 251/262.
OIL AND GAS REVENUES. Oil and gas revenues for 1995 increased by $24.9
million, or 36%, compared to 1994. The increase was primarily the result of
increased oil and gas production and increased oil and condensate prices,
partially offset by a decrease in gas prices. The average realized price of oil
and condensate increased by 10% and the average realized price of natural gas
decreased by 11%.
As a result of hedging activities for gas production for 1995, the Company
realized an average gas price of $1.75 per Mcf, or 105% of the $1.67 per Mcf
average gas sales price that otherwise would have been received. For 1994, the
average realized gas price was $1.97, which, as a result of hedging activities,
was 102% of the $1.94 per Mcf average gas sales price that would have otherwise
been received. The hedging activities for oil and condensate production for 1995
had a negligible impact on oil and condensate revenues. There were no hedging
activities for oil and condensate production in 1994. During 1995, approximately
42% of the Company's equivalent production was subject to hedge positions as
compared to 16% in 1994.
LEASE OPERATING EXPENSE. Lease operating expense for 1995 increased $4.6
million to $14.2 million from $9.6 million for 1994. Lease operating expense per
Mcfe increased from $0.29 for 1994 to $0.31
26
<PAGE> 28
for 1995. Both increases are primarily attributable to lease operating costs
associated with properties the Company acquired during the first half of 1995,
with the increase per Mcfe partially offset by higher production volumes.
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE. In 1995, depreciation,
depletion and amortization expense increased to $49.9 million from $34.1 million
in 1994. The increase is attributable to an increased depletion rate per Mcfe
and increased production volumes in 1995 as compared to 1994. The depletion rate
for 1995 increased to $1.08 per Mcfe from $1.05 per Mcfe for 1994.
GENERAL AND ADMINISTRATIVE EXPENSE, NET. General and administrative
expense, which is net of overhead reimbursements received by the Company from
other working interest owners, increased to $5.5 million for 1995 as compared to
$3.8 million for 1994. Direct costs associated with staff increases since the
end of 1994 were offset to a significant extent by program and joint interest
reimbursements.
NET INCOME. As a result of the foregoing, the Company had net income of
$16.3 million, or $0.45 per share, for 1995, an increase of $1.8 million
compared to $14.4 million, or $0.40 per share, for 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $8.8 million of working capital at September 30, 1997
compared to $11.4 million at December 31, 1996. The $2.6 million decrease in
working capital is primarily due to increased drilling activity during the first
nine months of 1997 offset by the impact of increased revenues during the
period. In addition, working capital balances may fluctuate from quarter to
quarter to the extent the Company increases or decreases borrowings under the
Credit Facility. Historically, the Company has funded its oil and gas activities
through cash flow from operations, equity capital from private and public
sources and bank borrowings.
From time to time, the Company has utilized and expects to continue to
utilize hedging transactions with respect to a portion of its oil and gas
production to achieve a more predictable cash flow, as well as to reduce its
exposure to price fluctuations. While the use of these hedging arrangements
limits the downside risk of adverse price movements, it may also limit future
revenues from favorable price movements. The use of hedging transactions also
involves the risk that the counterparties will be unable to meet the financial
terms of such transactions. All of the Company's hedging transactions to date
were carried out in the over-the-counter market and the obligations of the
counterparties have been guaranteed by entities with at least an investment
grade credit rating or secured by letters of credit. The Company accounts for
these transactions as hedging activities and, accordingly, gains or losses are
included in oil and gas revenues when the hedged production is delivered.
Unrealized gains and losses on these contracts are deferred and offset against
the related settlement amounts.
As of September 30, 1997, the Company had entered into commodity price
hedging contracts with respect to its gas production as follows:
<TABLE>
<CAPTION>
FIXED PRICE SWAPS COLLARS FLOOR CONTRACTS
-------------------------- ------------------------------- --------------------------
NYMEX
CONTRACT PRICE
NYMEX PER MMBTU NYMEX
VOLUME IN CONTRACT PRICE VOLUME IN ----------------- VOLUME IN CONTRACT PRICE
PERIOD MMMBTU PER MMBTU MMMBTU FLOOR CEILING MMMBTU PER MMBTU
------ --------- -------------- --------- ----- ------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 1997............ 1,500(1) $2.41 -- -- -- 1,500(1) $2.38
November 1997........... 1,500(2) $3.02 750 $2.78 $3.34 250 $2.95
December 1997........... 1,500(2) $3.10 250 $3.03 $3.85 -- --
-- -- 750 $2.87 $3.70 -- --
January 1998............ 1,500(2) $3.09 250 $3.01 $4.30 -- --
-- -- 750 $2.86 $4.13 -- --
February 1998........... 1,500(2) $2.77 250 $2.67 $4.03 -- --
-- -- 750 $2.59 $3.93 -- --
March 1998.............. 1,500(2) $2.48 250 $2.48 $3.25 750 $2.33
April 1998.............. 500(1) $2.25 -- -- -- -- --
</TABLE>
- ---------------
(1) The Company has entered into a basis swap with respect to all of the
indicated volume.
(2) The Company has entered into a basis swap with respect to 50% of the
indicated volume.
27
<PAGE> 29
These hedging transactions are settled based upon the average of the
reported settlement prices on the New York Mercantile Exchange (the "NYMEX") for
the last three trading days of a particular contract month (the "settlement
price"). With respect to any particular swap transaction, the counterparty is
required to make a payment to the Company in the event that the settlement price
for any settlement period is less than the swap price for such transaction, and
the Company is required to make payment to the counterparty in the event that
the settlement price for any settlement period is greater than the swap price
for such transaction. For any particular collar transaction, the counterparty is
required to make a payment to the Company if the settlement price for any
settlement period is below the floor price for such transaction, and the Company
is required to make payment to the counterparty if the settlement price for any
settlement period is above the ceiling price for such transaction. For any
particular floor transaction, the counterparty is required to make a payment to
the Company if the settlement price for any settlement period is below the floor
price for such transaction. The Company is not required to make any payment in
connection with the settlement of a floor transaction.
The Company enters into basis swaps (either as part of a particular hedging
transaction or separately) tied to a particular NYMEX-based transaction to
eliminate basis risk. Because substantially all of the Company's natural gas
production is sold under spot contracts that have historically correlated with
the swap price, the Company believes that it has no material basis risk with
respect to gas swaps that are not coupled with basis swaps.
The Company maintains its reserve-based revolving Credit Facility with The
Chase Manhattan Bank, as agent. The Credit Facility was amended and restated as
of October 9, 1997 in connection with the offering of the Notes. As so amended
and restated, the Credit Facility provides a $125 million revolving credit
maturing on October 31, 2002, improved interest rate pricing grids and
additional flexibility under certain covenants. The amount available under the
Credit Facility is subject to a calculated borrowing base, which base is reduced
by the principal amount of the Notes outstanding at the time of calculation. The
Company has an option, subject to the borrowing base, to increase the facility
to $200 million. As of September 30, 1997, $120 million was outstanding under
the Credit Facility. Subsequent to September 30, 1997, the Company used the net
proceeds from the sale of the Notes to repay all borrowings outstanding under
the Credit Facility. The Company currently has $100 million of borrowing
capacity under the Credit Facility.
The Company's net cash flow from operations for the first nine months of
1997 was $117.3 million compared to $108.6 million for the same period of 1996.
The increase in cash flow was primarily attributable to increases in oil and gas
production and average realized gas prices and changes in operating assets and
liabilities. Net cash flow from operations before changes in operating assets
and liabilities for the first nine months of 1997 was $112.1 million compared to
$85.0 million for the same period of 1996. The increase in net cash flow from
operations before changes in operating assets and liabilities is primarily
attributable to increased oil and gas production. The Company's net cash flow
from operations for 1996 was $127.5 million compared to $67.6 million for 1995.
Net cash flow from operations before changes in operating assets and liabilities
for 1996 was $125.2 million compared to $75.6 million for 1995. The year-to-year
increase in net cash flow from operations before changes in operating assets and
liabilities was primarily attributable to increases in oil and gas production
and higher average realized natural gas and oil prices, partially offset by
higher operating expenses.
Capital expenditures for the nine months ended September 30, 1997 were
$188.3 million, consisting of $53.8 million for exploration, $86.8 million for
development and $47.7 million for proved property acquisitions. Capital
expenditures for 1996 were $163.8 million, consisting of $49.3 million for
exploration, $80.3 million for development and $34.2 million for acquisitions of
properties.
28
<PAGE> 30
The Company's exploration capital expenditure budget for the last quarter
of 1997 is approximately $15.1 million. Development and construction
expenditures for platforms, facilities and pipelines are budgeted to be
approximately $25.5 million for the last quarter of 1997. No significant
abandonment or dismantlement costs are anticipated for the remainder of 1997.
The Company continues to pursue attractive acquisition opportunities. The timing
and size of any acquisition and the associated capital commitments are
unpredictable. Actual levels of capital expenditures may vary significantly due
to many factors, including drilling results, oil and gas prices, industry
conditions, the prices and availability of goods and services and the extent to
which proved properties are acquired. The Company anticipates that these capital
expenditures will be funded principally from cash flow from operations, working
capital, bank borrowings and proceeds from the Offering.
29
<PAGE> 31
BUSINESS
OVERVIEW
Newfield is an independent oil and gas company engaged in the exploration,
development and acquisition of oil and natural gas properties located primarily
in the Gulf of Mexico. Newfield discovered and acquired its first oil and gas
reserves in 1990 and has grown rapidly since that time. At June 30, 1997,
Newfield had proved reserves of 379.3 Bcfe with a Present Value of estimated
future pre-tax cash flows of $574 million. Approximately 73% of Newfield's
proved reserves at such date were natural gas and approximately 81% were proved
developed.
Newfield has achieved substantial growth in reserves, production, revenues
and EBITDA since its inception. Newfield's estimated proved reserves have
increased from 23.1 Bcfe as of December 31, 1990 to 379.3 Bcfe as of June 30,
1997, representing a compound annual growth rate of 54%. Similarly, annual
production has increased from 6.0 Bcfe in 1991 to 56.7 Bcfe in 1996,
representing a compound annual growth rate of 57%. Newfield has set a revised
production target for 1997 of 73.5 Bcfe, a 30% increase from 1996. Newfield's
revenues and EBITDA were $186.6 million and $153.1, respectively, for the 12
months ended September 30, 1997.
Newfield has become a significant operator in the Gulf of Mexico. As of
September 30, 1997, Newfield owned interests in 115 lease blocks in the Gulf of
Mexico and operated over 90 platforms. For the first quarter of 1997, Newfield
was ranked as the fourteenth largest operator in the Gulf of Mexico based on
average operated gross daily production of 414 MMcfe. For September 1997,
Newfield had average operated gross daily production of 494 MMcfe. In addition,
Newfield was the eighth most active driller in the Gulf of Mexico in 1996.
From its inception through June 30, 1997, Newfield has invested $642.5
million in capital expenditures (including acquisition costs) to generate 609.4
Bcfe of proved reserves at an average finding and development cost of $1.05 per
Mcfe. Over that period, Newfield's average cash margin per Mcfe of production
was $1.89, allowing internally generated cash flow to be the principal source
for Newfield's capital investments in oil and gas properties and drilling and
construction activities. Newfield intends to continue to fund a substantial
portion of its capital investments through internally generated cash flow.
STRATEGY
Newfield's strategy is to continue to expand its reserve base and increase
its cash flow through exploration and the acquisition and exploitation of proved
properties. Newfield emphasizes the following elements in implementing this
strategy:
- Reserve growth through exploratory drilling of a balanced portfolio
- Balance between exploration and the acquisition and exploitation of
proved properties
- Geographic focus in the Gulf of Mexico
- Control of operations and costs
- Use of 3-D seismic and other advanced technology
- Equity ownership and other incentives to retain and attract employees
Newfield has utilized a balanced approach of exploration and the
acquisition and exploitation of proved properties to grow its reserves,
production and cash flow. Of the 609.4 Bcfe of proved reserves Newfield has
added through June 30, 1997, 36% were added through exploration, 37% were added
through the acquisition of proved reserves and 27% were added through the
exploitation of opportunities identified and acquired in connection with the
acquisition of proved properties. Newfield's exploration, acquisition and
exploitation activities are complementary. Proved properties acquired by
Newfield usually have exploration or exploitation potential that Newfield has
previously identified. In addition, acquisitions can increase Newfield's
presence in an area, creating the infrastructure to provide Newfield with the
30
<PAGE> 32
ability to capture other opportunities at a competitive advantage. Information
gathered while evaluating production on acquisition candidates and adjacent
acreage is used, as appropriate, in Newfield's exploration efforts. Conversely,
a successful exploratory prospect may reveal similar untested reserve potential
on an adjacent property, making its purchase attractive.
EXPLORATION ACTIVITIES. Newfield maintains an active, technologically
driven exploration program. During 1996, Newfield invested $48.5 million for
exploration costs, including seismic data, leasehold acquisitions and
exploratory drilling. Newfield allocates its exploration spending between a
small number of higher risk, higher potential prospects which, if successful,
may result in significant increases in proved reserves, and a greater number of
lower risk, moderate potential prospects. From its inception through June 30,
1997, Newfield participated in 83 exploratory wells at a cost to drill and
evaluate of $127.3 million net to Newfield's interest. These wells have resulted
in the discovery of proved reserves of 219.0 Bcfe net to Newfield's interest. Of
these 83 wells, 83% were operated by Newfield. All of the exploratory prospects
drilled by Newfield in 1996 and to date in 1997 were based on 3-D seismic data.
Newfield has budgeted $68.9 million for exploration activities for 1997.
Fifty-six of the wells operated by Newfield were drilled under turnkey drilling
contracts, which are fixed rate contracts pursuant to which the drilling
contractor generally bears the risk of loss for unbudgeted contingencies.
Newfield acquires exploration prospects through federal and state lease
sales, in connection with proved property acquisitions and through farm-ins.
Newfield is continuously evaluating new opportunities and currently has a
substantial inventory of prospects, including seven that are expected to be
drilled prior to December 31, 1997. Recently, Newfield initiated its first
international activity by acquiring an interest in an exploration project
offshore China.
ACQUISITION ACTIVITIES. Newfield actively pursues the acquisition of proved
oil and gas properties in the Gulf of Mexico and southern Louisiana,
particularly properties with unexploited reserve potential in order to enhance
returns. Newfield targets properties that it can operate to control operations
and costs and in which it can increase its interest. Acquisitions that meet
these criteria and provide a base for further evaluation and exploitation
adjacent to existing Company production are of particular interest to Newfield.
Newfield pursues a multi-discipline team approach for evaluating acquisition
opportunities. Acquisition candidates undergo extensive technical and financial
evaluation by a group of geologists, geophysicists, geological engineers and
petroleum engineers. Land, drilling, operations and marketing staffs support
these evaluation efforts. Newfield's seismic, land and production databases,
along with regional geological interpretations, supplement any information
provided by a potential seller in the acquisition candidate screening process.
In July 1997, Newfield completed the acquisition of interests in five oil
and gas producing fields comprised of interests in nine offshore blocks in the
East Cameron, West Cameron and High Island areas of the Gulf of Mexico and
offshore Louisiana and Texas for a purchase price of approximately $43 million.
In July 1997, combined production from these fields was approximately 18 MMcfe
per day net to the interests acquired, or approximately 10% of Newfield's net
daily production prior to the acquisition. These nine offshore blocks present
Newfield with several exploratory and development opportunities, which Newfield
is currently pursuing.
DEVELOPMENT ACTIVITIES. Newfield also maintains an active development
program. During 1996, Newfield invested $79.6 million for development costs,
including recompletions and development drilling. From its inception through
June 30, 1997, Newfield participated in 93 development wells at an aggregate
cost, net to Newfield's interest, of $231.3 million. These wells have resulted
in the addition of proved reserves of 158.2 Bcfe. Newfield has budgeted $112.4
million for development activities for 1997.
GEOGRAPHIC FOCUS. Newfield believes that its focus in the federal waters of
the Gulf of Mexico is the foundation for its continued growth. The Gulf of
Mexico is a prolific oil and gas province, accounting for approximately 25% of
domestic natural gas production, and Newfield believes that the Gulf of Mexico
has significant remaining undiscovered reserve potential. Newfield's management
and technical personnel have extensive experience in the Gulf of Mexico, and
Newfield's geographic focus assists it in controlling operating and
administrative costs. The Gulf of Mexico has a substantial existing
infrastructure, including
31
<PAGE> 33
gathering systems, platforms and pipelines, and numerous drilling and service
companies maintain a substantial presence there, facilitating cost effective
operations and the timely development of discoveries. In addition, significant
amounts of geologic data are available at reasonable cost.
While Newfield intends to continue to focus on the Gulf of Mexico, it also
intends to pursue selective opportunities to develop "focused diversification"
outside the Gulf of Mexico. Focused diversification efforts will be directed
toward a limited number of areas where Newfield can apply its core competencies,
such as geological and geophysical analyses through the application of 3-D
seismic and other advanced technologies, and control of or significant influence
on operations.
As a natural extension of its operations in the Gulf of Mexico, Newfield
has established onshore Gulf Coast operations in southern Louisiana. The
objective of this onshore effort is to acquire and rejuvenate large producing
fields through the use of 3-D seismic and core competencies that Newfield has
used successfully in the adjacent offshore area.
In May 1997, Newfield acquired the assets and subsidiaries of Huffco
International, L.L.C., which include a 35% working interest in a 415,000 acre
production sharing contract in the Bohai Bay, offshore China, for approximately
$6 million. As part of this acquisition, Newfield also acquired certain rights
and data relating to offshore West Africa and an international database and
added a small international technical staff. The recently drilled initial
exploratory well in the Bohai Bay failed to produce oil or gas and Newfield and
the other participants in the well have agreed to plug and abandon the well.
Newfield anticipates additional exploratory drilling on the property in 1998.
Successful exploratory drilling in the Bohai Bay may result in significant
future investment in this area. Newfield is also actively considering
investments in selected countries in West Africa and Latin America.
CONTROL OF OPERATIONS AND COSTS. Newfield believes that it is one of the
lowest cost producers in the Gulf of Mexico based upon several reports prepared
by analysts that follow the industry. Newfield prefers to operate its properties
in order to manage production performance and to control operating expenses, the
timing and amount of capital expenditures and the application of technology.
Properties operated by Newfield accounted for 89% of its total equivalent
production for 1996.
Newfield's geographic focus enables it to manage a large asset base with a
relatively small number of employees and to add successful exploratory and
development wells and proved property acquisitions at relatively low incremental
costs. Newfield also uses independent contractors for much of its field
operations activities to control costs.
TECHNOLOGY. Newfield uses advanced technology in its exploration and
development activities to reduce its risks and lower its costs. Newfield
currently holds licenses or has access to 3-D seismic surveys covering
approximately 220 blocks in the Gulf of Mexico and 315 square miles in southern
Louisiana, including coverage of 36 producing fields it operates. In addition,
Newfield holds licenses or has access to more than 80,000 miles of recent
vintage 2-D seismic data in the central Gulf of Mexico and to 300,000 miles of
regional 2-D seismic coverage across the Gulf of Mexico and owns a library
containing logs on more than 4,500 wells drilled in Newfield's focus area.
The availability of 3-D seismic coverage for the Gulf of Mexico at a
reasonable cost makes its use in exploration attractive from a risk management
perspective. The use of 3-D seismic and computer-aided exploration technology
provides Newfield with substantially more accurate and comprehensive geological
data for the evaluation of drilling prospects than use of only 2-D seismic data.
MANAGEMENT AND EMPLOYEES. Newfield's management and 39 technical personnel
have extensive experience in the Gulf of Mexico. Newfield was founded by Joe B.
Foster, former Chairman of Tenneco Oil Company, and 25 former employees of
Tenneco with experience in the Gulf of Mexico. A principal management philosophy
then and today is to incentivize and reward employees through equity ownership
and performance based compensation. As of September 30, 1997, Newfield's
employees owned or had options to acquire an aggregate of approximately 13% of
Newfield's outstanding common stock on a fully diluted basis.
32
<PAGE> 34
PROPERTIES
Substantially all of the Company's proved properties are located in the
federal waters of the Gulf of Mexico. The more significant proved producing
properties stretch from the West Delta area offshore Louisiana, south-southeast
of New Orleans, to the High Island area offshore Texas, south-southeast of
Houston. These properties lie in water depths that range from 45 feet to 480
feet. For the nine month period ended September 30, 1997, no single field
accounted for more than 15% of the Company's net production. As of September 30,
1997, the Company owns interests in 115 leases and 440 wells and operates 96
platforms, 57 of which are considered major platforms. Major platforms are those
that have six or more wells or two pieces of production equipment.
The Company's eight largest properties accounted for approximately 56% of
the Company's equivalent proved reserves at June 30, 1997, but no single
property held more than 12% of the Company's equivalent proved reserves as of
such date, nor did any single property hold more than 15% of the net present
value of the proved reserves as of such date.
The Company owns interests in two proved producing properties onshore south
Louisiana, in Cameron and Acadia parishes. Additionally, the Company owns
unproved acreage in and adjacent to these producing properties and in other
coastal parishes in Louisiana.
OIL AND GAS RESERVES
The following table sets forth estimated net proved oil and gas reserves of
the Company and the present value of estimated future pre-tax net cash flows
related to such reserves as of June 30, 1997. Unless otherwise noted, all
information in this Prospectus relating to oil and gas reserves and the
estimated future net cash flows attributable thereto are based upon estimates
prepared by the Company and are net to the Company's interest. The Present Value
of estimated future net cash flows was prepared using constant prices as of the
calculation date, discounted at 10% per annum on a pre-tax basis.
<TABLE>
<CAPTION>
PROVED RESERVES
------------------------------------
DEVELOPED UNDEVELOPED TOTAL
--------- ----------- --------
<S> <C> <C> <C>
Oil and condensate (MBbls).................... 15,262 1,624 16,886
Gas (MMcf).................................... 215,716 62,270 277,986
Total proved reserves (MMcfe)................. 307,290 72,015 379,305
Present value of estimated future pre-tax net
cash flows (in thousands)................... $492,663 $81,487 $574,150
</TABLE>
Ryder Scott Company, Petroleum Engineers ("Ryder Scott"), has prepared
estimates of the Company's proved reserves and future net cash flows therefrom
as of December 31, 1992, 1993, 1994, 1995 and 1996. Ryder Scott's estimates of
equivalent proved reserves were 100.3%, 97.8%, 106.0%, 100.5% and 96.3%,
respectively, of the Company's estimates of proved reserves for the same
periods. Ryder Scott's estimates of the present value of future pre-tax net cash
flows attributable to the Company's proved reserves were 105.7%, 102.4%, 107.9%,
102.4% and 93.7% respectively, of the Company's estimates for the same periods.
There are numerous uncertainties inherent in estimating quantities of
proved oil and gas reserves and in projecting future rates of production and
timing of development expenditures, including many factors beyond the control of
the producer. The reserve data set forth herein represents estimates only.
Reserve engineering is a subjective process of estimating underground
accumulations of oil and gas that cannot be measured in an exact way, and the
accuracy of any reserve estimate is a function of the quality of available data
and of engineering and geological interpretation and judgment. As a result,
estimates made by different engineers often vary from one another. In addition,
results of drilling, testing, and production subsequent to the date of an
estimate may justify revision of such estimates, and such revisions may be
material. Accordingly, reserve estimates are generally different from the
quantities of oil
33
<PAGE> 35
and gas that are ultimately recovered. Furthermore, the estimated future net
revenues from proved reserves and the present value thereof are based upon
certain assumptions, including future prices, production levels and costs, that
may not prove correct.
As is generally the case in the Gulf of Mexico, the Company's producing
properties are characterized by a high initial production rate, followed by a
steep decline in production. As a result, the Company must locate and develop or
acquire new oil and gas reserves to replace those being depleted by production.
Without successful exploration or acquisition activities, the Company's reserves
and revenues will decline rapidly.
As an operator of domestic oil and gas properties, the Company has filed
Department of Energy Form EIA-23, "Annual Survey of Oil and Gas Reserves," as
required by Public Law 93-275. There are differences between the reserves as
reported on Form EIA-23 and as reported herein. The differences are attributable
to the fact that Form EIA-23 requires that an operator report on the total
reserves attributable to wells that are operated by it, without regard to
ownership (i.e., reserves are reported on a gross operated basis, rather than on
a net interest basis).
FINDING COSTS
The following table sets forth certain information regarding the costs
associated with finding, acquiring and developing the Company's proved oil and
gas reserves:
<TABLE>
<CAPTION>
COST TO FIND
CAPITALIZED RESERVES AND
COSTS(1) ADDED DEVELOP
(IN THOUSANDS) (MMCFE) (PER MCFE)
-------------- -------- ------------
<S> <C> <C> <C>
1992........................................ $ 34,777 39,257 $0.89
1993........................................ 43,126 72,164(2) 0.60(2)
1994........................................ 116,476 97,513 1.19
1995........................................ 103,511 102,580 1.01
1996........................................ 162,315 119,050 1.36
1997 (through June 30)...................... 112,403 94,101 1.19
-------- ------- -----
Five-and-one-half-year period ended June
30, 1997............................... $572,608 524,665 $1.09
======== ======= =====
</TABLE>
- ---------------
(1) Capitalized costs represent all capitalized expenditures of the Company as
shown in the following table under the caption "-- Development, Exploration
and Acquisition Capital Expenditures," excluding interest capitalized.
(2) Reserves added during 1993 include 10,088 MMcfe of reserves attributable to
the Company's reversionary interests in certain properties that had not
previously been included in the reserve estimates. Cost to find and develop
per Mcfe for 1993 is $0.69 without taking into account the addition of
reserves attributable to such reversionary interests. See "-- Oil and Gas
Reserves."
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<PAGE> 36
DEVELOPMENT, EXPLORATION AND ACQUISITION CAPITAL EXPENDITURES
The following table sets forth certain information (in thousands) regarding
the capitalized costs incurred in the purchase of proved and unproved properties
and in development and exploration activities:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Property acquisition:
Unproved properties... $ 749 $ 1,422 $ 2,020 $ 10,154 $ 5,670 $ 5,300 $ 36,221
Proved properties..... 13,844 17,694 32,810 29,393 28,480 22,124 23,168
Exploration............. 5,315 9,197 17,710 32,518 48,525 43,441 40,131
Development............. 14,869 14,813 63,936 31,446 79,640 48,941 86,425
Interest capitalized.... 119 119 217 674 1,508 1,006 2,393
------- ------- -------- -------- -------- -------- --------
Total capitalized
costs............. $34,896 $43,245 $116,693 $104,185 $163,823 $120,812 $188,338
======= ======= ======== ======== ======== ======== ========
</TABLE>
DRILLING ACTIVITY
The following table sets forth the drilling activity of the Company for
each year of the three-year period ended December 31, 1996 and for the nine
months ended September 30, 1997:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------------------------- SEPTEMBER 30,
1994 1995 1996 1997
------------ ----------- ------------ --------------
GROSS NET GROSS NET GROSS NET GROSS NET
----- ---- ----- --- ----- ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Exploratory wells:
Productive................. 6 3.6 10 4.7 8 4.5 6 3.9
Nonproductive.............. 3 1.7 6 3.9 7 3.4 7 4.4
-- ---- -- --- -- ---- -- ---
Total.............. 9 5.3 16 8.6 15 7.9 13 8.3
== ==== == === == ==== == ===
Development wells:
Productive................. 16 8.6 12 4.0 24 10.1 13 7.2
Nonproductive.............. 3 1.9 3 2.0 1 0.3 1 0.5
-- ---- -- --- -- ---- -- ---
Total.............. 19 10.5 15 6.0 25 10.4 14 7.7
== ==== == === == ==== == ===
</TABLE>
35
<PAGE> 37
PRODUCTIVE WELLS
The following table sets forth the number of productive oil and gas wells
in which the Company owned an interest as of September 30, 1997:
<TABLE>
<CAPTION>
COMPANY OUTSIDE TOTAL
OPERATED OPERATED PRODUCTIVE
COMPANY WELLS WELLS WELLS
OPERATED ------------ ----------- ------------
PLATFORMS GROSS NET GROSS NET GROSS NET
--------- ----- ---- ----- --- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Offshore Louisiana
Federal:
Oil.............................. 28 56 32.3 -- -- 56 32.3
Gas.............................. 59 85 41.7 17 1.9 102 43.6
State:
Oil.............................. 1 1 0.7 -- -- 1 0.7
Gas.............................. 1 1 0.7 -- -- 1 0.7
Onshore Louisiana
Oil.............................. -- 3 1.3 -- -- 3 1.3
Gas.............................. -- 2 1.5 -- -- 2 1.5
Offshore Texas
Federal:
Oil.............................. -- 6 2.8 -- -- 6 2.8
Gas.............................. 7 10 5.1 -- -- 10 5.1
-- --- ---- -- --- --- ----
Total....................... 96 164 86.1 17 1.9 181 88.0
== === ==== == === === ====
</TABLE>
ACREAGE DATA
The following table sets forth certain information regarding the Company's
developed and undeveloped lease acreage as of September 30, 1997:
<TABLE>
<CAPTION>
DEVELOPED ACRES UNDEVELOPED ACRES
------------------ ------------------
GROSS NET GROSS NET
------- ------- ------- -------
<S> <C> <C> <C> <C>
Offshore Louisiana:
Federal waters......................... 301,665 142,556 83,944 54,239
State waters........................... 3,153 2,177 2,592 2,592
Onshore Louisiana........................ 24,813 12,899 11,687 5,857
Offshore Texas:
Federal waters......................... 33,930 16,596 46,080 37,008
State waters........................... -- -- -- --
Offshore People's Republic of China...... -- -- 415,000 145,250
------- ------- ------- -------
Total.......................... 363,561 174,228 559,303 244,946
======= ======= ======= =======
</TABLE>
Leases covering approximately 5,000 (875 net to the Company), 9,822 (7,384
net to the Company), 33,938 (21,501 net to the Company), 42,453 (33,317 net to
the Company), and 18,098 (12,338 net to the Company) undeveloped acres are
scheduled to expire in the fourth quarter of 1997, 1998, 1999, 2000 and 2001,
respectively.
MARKETING AND HEDGING
The Company markets substantially all of the oil and gas production from
Company-operated properties for both the account of the Company and the other
working interest owners in these properties. The Company has one
market-sensitive long-term contract (accounting for approximately 5% of gas
sales during recent months) under which the buyer has certain obligations to
take natural gas. The majority of the Company's natural gas production, however,
is sold to a variety of purchasers under short-
36
<PAGE> 38
term (less than 12 months) contracts or 30-day spot gas purchase contracts.
During 1996, Coast Energy Group and Superior Natural Gas Corporation each
purchased in excess of 10% of the gas sold by the Company for its own account.
Oil sales contracts are short-term and are based upon field posted prices plus
negotiated bonuses. During 1996, Gulfmark Energy, Inc. and Northridge Energy
Marketing each purchased in excess of 10% of the oil sold by the Company for its
own account. Based upon the current demand for oil and gas, the Company believes
that the loss of any of these purchasers would not have a material adverse
effect on the Company. See Note 1 to the Company's consolidated financial
statements included elsewhere in this Prospectus.
From time to time, the Company has utilized and expects to continue to
utilize hedging transactions with respect to a portion of its oil and gas
production to achieve a more predictable cash flow, as well as to reduce its
exposure to price fluctuations. While the use of these hedging arrangements
limits the downside risk of adverse price movements, they may also limit future
revenues from favorable price movements. The use of hedging transactions also
involves the risk that the counterparties will be unable to meet the financial
terms of such transactions. All of the Company's hedging transactions to date
were carried out in the over-the-counter market and the obligations of the
counterparties have been guaranteed by entities with at least an investment
grade credit rating or secured by letters of credit.
During 1996, approximately 54% of the Company's equivalent production was
subject to hedge positions. The Company has also entered into hedging
transactions with respect to a portion of its estimated production for 1997. The
Company continues to evaluate whether to enter into additional hedging
transactions for 1997 and future years. In addition, the Company may determine
from time to time to terminate its then existing hedging positions.
As of September 30, 1997, the Company had entered into commodity price
hedging contracts with respect to its gas production as follows:
<TABLE>
<CAPTION>
FIXED PRICE SWAPS COLLARS FLOOR CONTRACTS
-------------------------- ------------------------------- --------------------------
NYMEX
CONTRACT PRICE
NYMEX PER MMBTU NYMEX
VOLUME IN CONTRACT PRICE VOLUME IN ----------------- VOLUME IN CONTRACT PRICE
PERIOD MMMBTU PER MMBTU MMMBTU FLOOR CEILING MMMBTU PER MMBTU
------ --------- -------------- --------- ----- ------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 1997............ 1,500(1) $2.41 -- -- -- 1,500(1) $2.38
November 1997........... 1,500(2) $3.02 750 $2.78 $3.34 250 $2.95
December 1997........... 1,500(2) $3.10 250 $3.03 $3.85 -- --
-- -- 750 $2.87 $3.70 -- --
January 1998............ 1,500(2) $3.09 250 $3.01 $4.30 -- --
-- -- 750 $2.86 $4.13 -- --
February 1998........... 1,500(2) $2.77 250 $2.67 $4.03 -- --
-- -- 750 $2.59 $3.93 -- --
March 1998.............. 1,500(2) $2.48 250 $2.48 $3.25 750 $2.33
April 1998.............. 500(1) $2.25 -- -- -- -- --
</TABLE>
- ---------------
(1) The Company has entered into a basis swap with respect to all of the
indicated volume.
(2) The Company has entered into a basis swap with respect to 50% of the
indicated volume.
These hedging transactions are settled based upon the average of the
reported settlement prices on the NYMEX for the last three trading days of a
particular contract month (the "settlement price"). With respect to any
particular swap transaction, the counterparty is required to make a payment to
the Company in the event that the settlement price for any settlement period is
less than the swap price for such transaction, and the Company is required to
make payment to the counterparty in the event that the settlement price for any
settlement period is greater than the swap price for such transaction. For any
particular collar transaction, the counterparty is required to make a payment to
the Company if the settlement price for any settlement period is below the floor
price for such transaction, and the Company is required to make payment to the
counterparty if the settlement price for any settlement period is above the
ceiling price for such transaction. For any particular floor transaction, the
counterparty is required to make a payment to the Company if the settlement
price for any settlement period is below the floor price
37
<PAGE> 39
for such transaction. The Company is not required to make any payment in
connection with the settlement of a floor transaction.
The Company enters into basis swaps (either as part of a particular hedging
transaction or separately) tied to a particular NYMEX-based transaction to
eliminate basis risk. Because substantially all of the Company's natural gas
production is sold under spot contracts that have historically correlated with
the swap price, the Company believes that it has no material basis risk with
respect to gas swaps that are not coupled with basis swaps.
COMPETITION
Competition in the oil and gas industry is intense, particularly with
respect to the acquisition of producing properties and proved undeveloped
acreage. 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 such properties. The Company believes that the locations of
its leasehold acreage, its exploration, drilling, and production capabilities,
and the experience of its management generally enable it to compete effectively.
Many of the Company's competitors, however, have financial resources and
exploration and development budgets that are substantially greater than those of
the Company, which may adversely affect the Company's ability to compete with
these companies.
REGULATION
FEDERAL REGULATION OF SALES AND TRANSPORTATION OF NATURAL
GAS. Historically, the transportation and sale for resale of natural gas in
interstate commerce have been regulated pursuant to the Natural Gas Act of 1938
(the "NGA"), the Natural Gas Policy Act of 1978 (the "NGPA") and the regulations
promulgated thereunder by the Federal Energy Regulatory Commission (the "FERC").
In the past, the federal government has regulated the prices at which gas could
be sold. Deregulation of wellhead natural gas sales began with the enactment of
the NGPA. In 1989, Congress enacted the Natural Gas Wellhead Decontrol Act (the
"Decontrol Act"). The Decontrol Act removed all NGA and NGPA price and non-price
controls affecting wellhead sales of natural gas effective January 1, 1993.
Congress could, however, reenact price controls in the future.
Commencing in April 1992, the FERC issued Order Nos. 636, 636-A, 636-B,
636-C (collectively, "Order No. 636"), which require interstate pipelines to
provide transportation separate, or "unbundled," from the pipelines' sales of
gas. Also, Order No. 636 requires pipelines to provide open-access
transportation on a basis that is equal for all gas supplies. Although Order No.
636 does not directly regulate the Company's activities, the FERC has stated
that it intends for Order No. 636 to foster increased competition within all
phases of the natural gas industry. It is unclear what impact, if any, increased
competition within the natural gas industry under Order No. 636 will have on the
Company's activities. Although Order No. 636 could provide the Company with
additional market access and more fairly applied transportation service rates,
Order No. 636 could also subject the Company to more restrictive pipeline
imbalance tolerances and greater penalties for violation of those tolerances. An
imbalance tolerance is the degree by which a shipper's nominated gas flow and
actual gas flow may differ without the shipper being penalized by the pipeline.
The FERC has issued final orders on all Order No. 636 pipeline restructuring
proceedings. Order No. 636 and subsequent FERC orders issued in individual
pipeline restructuring proceedings have been the subject of appeals, the results
of which have generally supported the FERC's open-access policies. Last year,
the United States Court of Appeals for the District of Columbia Circuit (the
"D.C. Circuit") largely upheld Order No. 636. Because further review of certain
of these orders is still possible and other appeals remain pending, it is
difficult to predict the ultimate impact of the orders on the Company and its
production efforts. However, the Company does not believe that it will be
affected by the restructuring rule and orders any differently than other natural
gas producers and marketers with which it competes.
The FERC has announced several important transportation-related policy
statements and proposed rule changes, including the appropriate manner in which
interstate pipelines release capacity under Order No. 636 and, more recently,
the price that shippers can charge for their released capacity. In addition, in
38
<PAGE> 40
1995, the FERC issued a policy statement on how interstate natural gas pipelines
can recover the costs of new pipeline facilities. In January 1996, the FERC
issued a policy statement and a request for comments concerning alternatives to
its traditional cost-of-service ratemaking methodology. A number of pipelines
have obtained FERC authorization to charge negotiated rates as one such
alternative. In February 1997, the FERC announced a broad inquiry into issues
facing the natural gas industry to assist the FERC in establishing regulatory
goals and priorities in the post-Order No. 636 environment. While these changes
would affect the Company only indirectly, they are intended to further enhance
competition in natural gas markets. The Company cannot predict what action the
FERC will take on these matters, nor can it accurately predict whether the
FERC's actions will achieve the goal of increasing competition in markets in
which the Company's natural gas is sold. However, the Company does not believe
that it will be affected by any action taken materially differently than other
natural gas producers with which it competes.
The Outer Continental Shelf Lands Act (the "OCSLA") requires that all
pipelines operating on or across the Outer Continental Shelf (the "OCS") provide
open-access, non-discriminatory service. Although the FERC has opted not to
impose the regulations of Order No. 509, in which the FERC implemented the
OCSLA, on gatherers and other non-jurisdictional entities, the FERC has retained
the authority to exercise jurisdiction over those entities if necessary to
permit non-discriminatory access to service on the OCS.
Commencing in May 1994, the FERC issued a series of orders in individual
cases that delineate its new gathering policy. Among other matters, the FERC
slightly narrowed its statutory tests for establishing gathering status and
reaffirmed that, except in situations in which the gatherer acts in concert with
an interstate pipeline affiliate to frustrate the FERC's transportation
policies, it does not generally have jurisdiction over natural gas gathering
facilities and services, and that such facilities and services located in state
jurisdictions are properly regulated by state authorities. This FERC action may
further encourage regulatory scrutiny of natural gas gathering by state
agencies. In addition, the FERC has approved several transfers by interstate
pipelines of gathering facilities to unregulated independent or affiliated
gathering companies, subject to the transferee providing service for two years
from the date of transfer to the pipeline's existing customers pursuant to a
default contract or pursuant to mutually agreeable terms. In August 1996, the
D.C. Circuit largely upheld the FERC's new gathering policy, but remanded the
FERC's default contract condition. The Company does not believe that it will be
affected by the FERC's new gathering policy any differently than other
producers, gatherers and marketers with which it competes.
Additional proposals and proceedings that might affect the natural gas
industry are pending before Congress, the FERC and the courts. The natural gas
industry historically has been very heavily regulated; therefore, there is no
assurance that the less stringent regulatory approach recently pursued by the
FERC and Congress will continue.
FEDERAL LEASES. Substantially all of the Company's operations are located
on federal oil and gas leases, which are administered by the United States
Department of the Interior Minerals Management Service (the "MMS"). Such leases
are issued through competitive bidding, contain relatively standardized terms
and require compliance with detailed MMS regulations and orders pursuant to the
OCSLA (which are subject to change by the MMS). For offshore operations, lessees
must obtain MMS approval for exploration plans and development and production
plans prior to the commencement of such operations. In addition to permits
required from other agencies (such as the Coast Guard, the Army Corps of
Engineers and the Environmental Protection Agency), lessees must obtain a permit
from the MMS prior to the commencement of drilling. The MMS has promulgated
regulations requiring offshore production facilities located on the OCS to meet
stringent engineering and construction specifications. The MMS proposed
additional safety-related regulations concerning the design and operating
procedures for OCS production platforms and pipelines. These proposed
regulations were withdrawn pending further discussions among interested federal
agencies. The MMS also has regulations restricting the flaring or venting of
natural gas, and has proposed to amend such regulations to prohibit the flaring
of liquid hydrocarbons and oil without prior authorization. Similarly, the MMS
has promulgated other regulations
39
<PAGE> 41
governing the plugging and abandonment of wells located offshore and the removal
of all production facilities. To cover the various obligations of lessees on the
OCS, the MMS generally requires that lessees have substantial net worth or post
bonds or other acceptable assurances that such obligations will be met. The cost
of such bonds or other surety can be substantial and there is no assurance that
bonds or other surety can be obtained in all cases. The Company is currently
exempt from the supplemental bonding requirements of the MMS. Under certain
circumstances, the MMS may require any Company operations on federal leases to
be suspended or terminated. Any such suspension or termination could materially
and adversely affect the Company's financial condition and operations.
The MMS has recently issued a notice of proposed rulemaking in which it
proposes to amend its regulations governing the calculation of royalties and the
valuation of crude oil produced from federal leases. This proposed rule would
modify the valuation procedures for both arm's-length and non-arm's-length crude
oil transactions, establish a new MMS form for collecting value differential
data, and amend the valuation procedure for the sale of federal royalty oil. The
Company cannot predict what action the MMS will take on this matter. The Company
believes that these rules, if adopted as proposed, will not have a material
impact on its financial condition, liquidity or results of operations. In April
1997, after two years of study, the MMS withdrew proposed changes to the way it
values natural gas for royalty payments. These proposed changes would have
established an alternative market-based method for calculating royalties on
certain natural gas sold to affiliates or pursuant to non-arm's length sales
contracts.
STATE AND LOCAL REGULATION OF DRILLING AND PRODUCTION. The Company owns
interests in properties located in onshore Louisiana and in the state waters of
the Gulf of Mexico offshore Texas and Louisiana and occasionally may conduct
operations in the state waters offshore Mississippi. These states regulate
drilling and operating activities by requiring, among other things, drilling
permits and bonds and reports concerning operations. The laws of these states
also govern a number of environmental and conservation matters, including the
handling and disposing of waste materials, unitization and pooling of oil and
gas properties and establishment of maximum rates of production from oil and gas
wells. Some states prorate production to the market demand for oil and gas.
OIL PRICE CONTROLS AND TRANSPORTATION RATES. Sales of crude oil, condensate
and gas liquids by the Company are not currently regulated and are made at
market prices. Effective as of January 1, 1995, the FERC implemented regulations
establishing an indexing system for transportation rates for oil that could
increase the cost of transporting oil to the purchaser. The Company is not able
to predict what effect, if any, this order will have on it, but other factors
being equal, it may tend to increase transportation costs or reduce wellhead
prices for crude oil.
ENVIRONMENTAL REGULATIONS. The Company's operations are subject to numerous
laws and regulations governing the discharge of materials into the environment
or otherwise relating to environmental protection. Public interest in the
protection of the environment has increased dramatically in recent years.
Offshore drilling in certain areas has been opposed by environmental groups and,
in certain areas, has been restricted. To the extent laws are enacted or other
governmental action is taken that prohibits or restricts offshore drilling or
imposes environmental protection requirements that result in increased costs to
the oil and gas industry in general and the offshore drilling industry in
particular, the business and prospects of the Company could be adversely
affected.
The Oil Pollution Act of 1990 (the "OPA") and regulations thereunder impose
a variety of regulations on "responsible parties" related to the prevention of
oil spills and liability for damages resulting from such spills in United States
waters. A "responsible party" includes the owner or operator of a facility or
vessel, or the lessee or permittee of the area in which an offshore facility is
located. The OPA assigns liability to each responsible party for oil removal
costs and a variety of public and private damages. While liability limits apply
in some circumstances, a party cannot take advantage of liability limits if the
spill was caused by gross negligence or willful misconduct or resulted from
violation of a federal safety, construction or operating regulation. If the
party fails to report a spill or to cooperate fully in the cleanup, liability
limits likewise do not apply. Even if applicable, the liability limits for
offshore facilities
40
<PAGE> 42
require the responsible party to pay all removal costs, plus up to $75 million
in other damages. Few defenses exist to the liability imposed by the OPA.
OPA imposes ongoing requirements on a responsible party, including the
preparation of oil spill response plans and proof of financial responsibility to
cover environmental cleanup and restoration costs that could be incurred in
connection with an oil spill. As amended by the Coast Guard Authorization Act of
1996, OPA requires responsible parties for offshore facilities to provide
financial assurance in the amount of $35 million to cover potential OPA
liabilities. This amount can be increased up to $150 million if a formal risk
assessment indicates that an amount higher than $35 million should be required.
On March 25, 1997, the MMS promulgated a proposed rule implementing these OPA
financial responsibility requirements. The Company does not anticipate that it
will experience any difficulty in satisfying the MMS's requirements for
demonstrating financial responsibility for its offshore facilities under the OPA
amendments or the proposed rule.
The OPA also imposes other requirements, such as the preparation of an oil
spill contingency plan. The Company has such a plan in place. Failure to comply
with ongoing requirements or inadequate cooperation during a spill event may
subject a responsible party to civil or criminal enforcement actions.
In addition, the OCSLA authorizes regulations relating to safety and
environmental protection applicable to lessees and permittees operating on the
OCS. Specific design and operational standards may apply to OCS vessels, rigs,
platforms, vehicles and structures. Violations of lease conditions or
regulations issued pursuant to the OCSLA can result in substantial civil and
criminal penalties, as well as potential court injunctions curtailing operations
and the cancellation of leases. Such enforcement liabilities can result from
either governmental or private prosecution.
The Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"), also known as the "Superfund" law, imposes liability, without regard
to fault or the legality of the original conduct, on certain classes of persons
that are considered to have contributed to the release of a "hazardous
substance" into the environment. These persons include the owner or operator of
the disposal site or sites where the release occurred and companies that
disposed or arranged for the disposal of the hazardous substances found at the
site. Persons who are or were responsible for releases of hazardous substances
under CERCLA may be subject to joint and several liability for the costs of
cleaning up the hazardous substances that have been released into the
environment and for damages to natural resources, and it is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by the hazardous substances released
into the environment.
In addition, legislation has been proposed in Congress from time to time
that would reclassify certain oil and gas exploration and production wastes as
"hazardous wastes," which would make the reclassified wastes subject to much
more stringent handling, disposal and clean-up requirements. If such legislation
were to be enacted, it could increase the operating costs of the Company, as
well as the oil and gas industry in general. Initiatives to further regulate the
disposal of oil and gas wastes are also pending in certain states, and these
various initiatives could have a similar impact on the Company.
Management believes that the Company is in substantial compliance with
current applicable environmental laws and regulations and that continued
compliance with existing requirements will not have a material adverse impact on
the Company.
OPERATING HAZARDS AND INSURANCE
The oil and gas business involves a variety of operating risks, including
the risk of fire, explosions, blow-outs, pipe failure, casing collapse,
abnormally pressured formations and environmental hazards such as oil spills,
gas leaks, ruptures and discharges of toxic gases, the occurrence of any of
which could result in substantial losses to the Company due to injury or loss of
life, severe damage to or destruction of property, natural resources and
equipment, pollution or other environmental damage, clean-up responsibilities,
regulatory investigation and penalties and suspension of operations. In addition
to the foregoing,
41
<PAGE> 43
substantially all of the Company's operations are currently offshore and subject
to the additional hazards of marine operations, such as capsizing of vessels,
collision and adverse weather and sea conditions.
In accordance with customary industry practice, the Company maintains
insurance against some, but not all, of the risks described above. The Company's
insurance does not fully cover business interruption or protect against loss of
revenues. There can be no assurance that any insurance obtained by the Company
will be adequate to cover any losses or liabilities. The Company cannot predict
the continued availability of insurance or the availability of insurance at
premium levels that justify its purchase. The occurrence of a significant event
not fully insured or indemnified against could materially and adversely affect
the Company's financial condition and operations.
EMPLOYEES
At September 30, 1997 the Company had 83 full time employees, primarily
professionals, including geologists, geophysicists, and engineers. The Company
believes that its relationships with its employees are satisfactory. None of the
Company's employees are covered by a collective bargaining agreement. From time
to time, the Company utilizes the services of independent consultants and
contractors to perform various professional services, particularly in the areas
of construction, design, well site surveillance, permitting and environmental
assessment. Field and on-site production operation services, such as pumping,
maintenance, dispatching, inspection and testing, are generally provided by
independent contractors.
LEGAL PROCEEDINGS
The Company has been named as a defendant in certain lawsuits arising in
the ordinary course of business. While the outcome of these lawsuits cannot be
predicted with certainty, management does not expect these matters to have a
material adverse effect on the financial position, results of operations or cash
flows of the Company.
42
<PAGE> 44
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding the names, ages and
positions held by each of the Company's directors and executive officers. The
Company's executive officers serve at the discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Joe B. Foster............................. 63 Chairman of the Board, President and Chief
Executive Officer
Robert W. Waldrup......................... 53 Vice President -- Operations and Director
David A. Trice............................ 49 Vice President -- Finance and International
Terry W. Rathert.......................... 44 Vice President -- Planning and
Administration and Secretary
David F. Schaible......................... 37 Vice President -- Acquisitions &
Development
William D. Schneider...................... 46 Manager -- International/Onshore
Ronald P. Lege............................ 52 Controller and Assistant Secretary
C. William Austin......................... 45 Legal Counsel and Assistant Secretary
James P. Ulm, II.......................... 34 Treasurer
Charles W. Duncan, Jr..................... 71 Director
Jeffrey A. Harris......................... 41 Director
Dennis Hendrix............................ 57 Director
Terry Huffington.......................... 43 Director
Howard H. Newman.......................... 50 Director
Thomas G. Ricks........................... 44 Director
C. E. Shultz.............................. 58 Director
Dale E. Zand.............................. 71 Director
</TABLE>
The following biographies describe the business experience of the directors
and executive officers of the Company.
JOE B. FOSTER has served as President of the Company since its
incorporation in 1988 and as Chairman of the Board and Chief Executive Officer
since 1989. Prior to founding Newfield, Mr. Foster served in various capacities
with Tenneco Inc. and its subsidiaries for 31 years, including Chairman of the
Board of Tenneco Oil Company and Chairman of the Board of Tenneco Gas Pipeline
Group. His last positions with Tenneco Inc. were Executive Vice President and
Director. He presently serves as a director of Baker Hughes Incorporated and New
Jersey Resources. He is chairman of the National Petroleum Council and past
chairman of the Offshore Committee of the Independent Petroleum Association of
America.
ROBERT W. WALDRUP has served as Vice President -- Operations since 1991 and
as a director of the Company since 1992. From 1989 to 1991, he worked in the
Company's drilling and operations areas. Prior to joining the Company, Mr.
Waldrup was Division Production Manager of the Eastern Gulf Division of Tenneco
Oil Exploration and Production Company. Mr. Waldrup received a degree in
petroleum engineering from Mississippi State University and is a member of the
Society of Petroleum Engineers, a member of the executive board of the Offshore
Operators Committee and the Independent Petroleum Association of America.
DAVID A. TRICE has served as Vice President -- Finance and International
since July 1997. Prior to joining the Company, he served as President, Chief
Executive Officer and Director of Huffco Group Inc. since late 1991. From 1989
to 1991, he served as Vice President, Chief Financial Officer and Director of
Newfield. From 1980 to 1989, he had served as an officer of several different
companies owned by Roy M. Huffington, Inc. and from 1973 to 1980 he was an
attorney with an Atlanta law firm. Mr. Trice
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<PAGE> 45
received a J.D. degree from Columbia University's School of Law and a B.A. in
Managerial Science from Duke University.
TERRY W. RATHERT has served as Vice President -- Planning and
Administration and Secretary since July 1997. From 1992 to July 1997, he served
as Vice President, Chief Financial Officer and Secretary of the Company and from
1989 to 1992, he coordinated the Company's planning and marketing activities.
Prior to joining the Company, Mr. Rathert was Director of Economic Planning &
Analysis for Tenneco Oil Exploration and Production Company. Mr. Rathert
received a degree in petroleum engineering from Texas A&M University and has
completed The Management Program at Rice University. Mr. Rathert is a member of
the Society of Petroleum Engineers and the Independent Petroleum Association of
America.
DAVID F. SCHAIBLE has served as Vice President -- Acquisitions &
Development since February 1995. From 1992 to 1995, he served as
Manager -- Acquisitions & Development of the Company. Mr. Schaible was employed
by the Company as Coordinator -- Acquisitions and Marketing from 1991 to 1992
and as a petroleum engineer from 1989 to 1991. Prior to joining the Company, Mr.
Schaible was Senior Production Engineer in the Eastern Gulf Division of Tenneco
Oil Exploration and Production Company in Lafayette, Louisiana. Mr. Schaible
received a degree in petroleum engineering from Marietta College, Marietta,
Ohio. Mr. Schaible is a member of the Society of Petroleum Engineers and the
Independent Petroleum Association of America.
WILLIAM C. SCHNEIDER has served as Manager -- Exploration of the Company
since 1992. From 1989 to 1992, Mr. Schneider was employed by the Company as a
geologist. Prior to joining the Company, Mr. Schneider was Division Geologist in
the Western Gulf Division of Tenneco Oil Exploration and Production Company in
Lafayette, Louisiana. Mr. Schneider received B.S. and M.S. degrees in Geology
from Boston University. Mr. Schneider is a member of the American Association of
Petroleum Geologists and the Independent Petroleum Association of America.
RONALD P. LEGE has served as Controller and Assistant Secretary of the
Company since 1989. Prior to joining the Company, Mr. Lege was Division
Administrative Manager of the Eastern Gulf Division for Tenneco Oil Exploration
and Production Company. Mr. Lege received a B.S. in Accounting and an M.B.A.
degree from the University of Southwestern Louisiana and a Master of Economics
degree from South Dakota State University. Mr. Lege is a member of the American
Institute of Certified Public Accountants and the Louisiana Society of Certified
Public Accountants.
C. WILLIAM AUSTIN has served as Legal Counsel and Assistant Secretary since
March 1994. From 1989 to March 1994, Mr. Austin was employed as a staff attorney
for Energy Service Company, Inc., an international contract drilling and marine
service company headquartered in Dallas, Texas.
JAMES P. ULM, II has served as Treasurer of the Company since June 1995.
From 1989 to June 1995, Mr. Ulm was employed in managerial positions, most
recently as Treasurer, by American Exploration Company, an independent oil and
gas company headquartered in Houston, Texas.
CHARLES W. DUNCAN, JR. is a founding stockholder of the Company and has
served as a director of the Company since 1990. He has been involved in private
investments since 1981. Prior to 1981, Mr. Duncan served as president of Duncan
Foods Company, which later merged with the Coca-Cola Company. After serving as
president of The Coca-Cola Company, he served as Deputy Secretary of the U.S.
Department of Defense from January 1977 to August 1979 and as Secretary of the
Department of Energy from August 1979 until January 1981. Mr. Duncan received a
degree in chemical engineering from Rice University. He currently serves as a
director of American Express Company, The Coca-Cola Company, United Technologies
Corporation and The Welch Foundation. He is a trustee emeritus and
immediate-past chairman of the board of governors of Rice University and a
trustee emeritus of the Brookings Institute.
JEFFREY A. HARRIS has served as a director of the Company since 1995. Since
1988, Mr. Harris has served as a Managing Director of E.M. Warburg, Pincus &
Co., a company that provides specialized financial advisory and investment
counseling services. Mr. Harris received a B.S. in Economics from the Wharton
School and an M.B.A. from the Harvard Business School. He currently serves as a
director of
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Comcast UK Cable Partners Limited, ECsoft Group plc, Knoll, Inc.,
Industri-Matematik International Corp. and several privately held companies.
DENNIS HENDRIX has served as a director of the Company since July 1997. He
is currently a member of the board of directors of Duke Energy Corporation.
Previously, he had served as chairman of the board of PanEnergy Corp. prior to
its merger with Duke Power Company in 1997. Mr. Hendrix is a graduate of the
University of Tennessee and earned his M.B.A. from Georgia State University. He
currently serves as a director of Allied Waste Industries, Texas Commerce Bank
National Association, and he is chairman of the board of TEPPCO Partners, L.P.
TERRY HUFFINGTON was elected to the Board of Directors in May 1997. She is
the founder, owner and Chairman of Huffco Group, Inc. and affiliated companies.
In 1990, she founded Huffco Group, Inc. after the sale of the Indonesian assets
of Roy M. Huffington, Inc. of which she was a Vice President and Director. She
has a B.S. in Geology from Stanford, an M.A. in Geology from the University of
Texas and an M.B.A. from Harvard. Prior to joining Roy M. Huffington, Inc. in
1987, she worked as a geologist for Exxon and Chevron.
HOWARD H. NEWMAN has been a director of the Company since 1990. Currently,
Mr. Newman serves as a Managing Director with E.M. Warburg, Pincus & Co., a
company that provides specialized financial advisory and investment counseling
services. Mr. Newman holds Bachelor of Arts and Master of Arts degrees in
economics from Yale University and a Ph.D. degree in Business Economics from
Harvard University. He also is a director of ADVO, Inc., Comcast UK Cable
Partners Limited, RenaissanceRe Holdings, Ltd., Cox Insurance Holdings, Plc. and
Poseidon Resources Corp.
THOMAS G. RICKS has served as a director of the Company since 1992. Since
March 1, 1996, he has served as President and Chief Executive Officer of the
University of Texas Investment Management Company. Prior to assuming this
position, Mr. Ricks was an employee of The University of Texas System. Beginning
in March 1985, he served as Manager -- Finance and progressively assumed greater
responsibilities culminating with Vice Chancellor for Asset Management and chief
investment officer. Mr. Ricks received a B.A. in Economics from Trinity College,
an M.B.A. degree from the University of Chicago and is a CPA. He also serves as
a director of BDM International, Inc. and DTM Corporation, a subsidiary of The
BF Goodrich Company.
C.E. (CHUCK) SHULTZ has served as a director of the Company since 1994.
After leaving Gulf Canada Resources in 1995, Mr. Shultz started Dauntless
Energy, Inc. and currently serves as its Chairman and Chief Executive Officer.
He earned a degree in Geological Engineering from the Colorado School of Mines.
He currently serves as a director of Archer Resources Ltd., Jannock Limited,
Pacific Forest Product Ltd., and as Chairman of Canadian Oil Sands Trust and 3-D
Reclamation Inc.
DALE E. ZAND has been a director of the Company since 1995. He currently is
a Professor of Management at the Stern Graduate School of Business at New York
University and is also a management consultant to major organizations in the
petroleum, finance and consumer good industries. He held a Ford Foundation
Fellowship at Harvard Business School and received a Ph.D. from New York
University.
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THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Old Notes, the purchasers thereof became
entitled to the benefits of certain registration rights under the Registration
Rights Agreement. The Exchange Notes are being offered hereunder in order to
satisfy the obligations of the Company under the Registration Rights Agreement.
See "Description of Notes -- Registration Covenant; Exchange Offer."
For each $1,000 principal amount of Old Notes surrendered to the Company
pursuant to the Exchange Offer, the holder of such Old Notes will receive $1,000
principal amount of Exchange Notes. Upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal, the
Company will accept all Old Notes properly tendered prior to 5:00 p.m., New York
City time, on the Expiration Date. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer in integral multiples of $1,000 principal
amount.
Under existing interpretations of the staff of the SEC, including Exxon
Capital Holdings Corporation, SEC No-Action Letter (available April 13, 1989),
the Morgan Stanley Letter and Mary Kay Cosmetics, Inc., SEC No-Action Letter
(available June 5, 1991), the Company believes that the Exchange Notes would in
general be freely transferable after the Exchange Offer without further
registration under the Securities Act by the respective holders thereof (other
than a "Restricted Holder," being (i) a broker-dealer who purchased Old Notes
exchanged for such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an affiliate of the Company within the meaning of Rule 405 under
the Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holder's business and such holder is not
participating in, and has no arrangement with any person to participate in, the
distribution (within the meaning of the Securities Act) of such Exchange Notes.
Eligible holders wishing to accept the Exchange Offer must represent to the
Company that such conditions have been met. Any holder of Old Notes who tenders
in the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes could not rely on the interpretation by the staff of the SEC
enunciated in the Morgan Stanley Letter and similar no-action letters, and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange
Notes in the Exchange Offer will be required to make certain representations,
including that (i) it is neither an affiliate of the Company nor a broker-dealer
tendering Old Notes acquired directly from the Company for its own account, (ii)
any Exchange Notes to be received by it are being acquired in the ordinary
course of its business and (iii) it is not participating in, and it has no
arrangement with any person to participate in, the distribution (within the
meaning of the Securities Act) of the Exchange Notes. In addition, in connection
with any resales of Exchange Notes, any broker-dealer (a "Participating
Broker-Dealer") who acquired Old Notes for its own account as a result of
market-making activities or other trading activities must acknowledge that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. The staff of the SEC has
taken the position in no-action letters issued to third parties including
Shearman & Sterling, SEC No-Action Letter (available July 2, 1993), that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to the Exchange Notes (other than a resale of an unsold allotment
from the original sale of Old Notes) with this Prospectus, as it may be amended
or supplemented from time to time. Under the Registration Rights Agreement, the
Company is required to allow Participating Broker-Dealers to use this
Prospectus, as it may be amended or supplemented from time to time, in
connection with the resale of such Exchange Notes. See "Plan of Distribution."
The Exchange Offer shall be deemed to have been consummated upon the
earlier to occur of (i) the Company having exchanged Exchange Notes for all
outstanding Old Notes (other than Old Notes held by a Restricted Holder)
pursuant to the Exchange Offer and (ii) the Company having exchanged, pursuant
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<PAGE> 48
to the Exchange Offer, Exchange Notes for all Old Notes that have been tendered
and not withdrawn on the Expiration Date. Upon consummation of the Exchange
Offer, holders of Old Notes who did not exchange for Exchange Notes seeking
liquidity in their investment would have to rely on exemptions to registration
requirements under the securities laws, including the Securities Act.
As of the date of this Prospectus, $125,000,000 aggregate principal amount
of Old Notes are issued and outstanding. In connection with the issuance of the
Old Notes, the Company arranged for the Old Notes to be eligible for trading in
the Private Offering, Resale and Trading through Automated Linkages (PORTAL)
Market, the National Association of Securities Dealers' screen based, automated
market trading of securities eligible for resale under Rule 144A.
The Company shall be deemed to have accepted for exchange validly tendered
Old Notes when, as and if the Company has given oral or written notice thereof
to the Exchange Agent. See "-- Exchange Agent." The Exchange Agent will act as
agent for the tendering holders of Old Notes for the purpose of receiving
Exchange Notes from the Company and delivering Exchange Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an invalid
tender or the occurrence of certain other events set forth herein, certificates
for any such unaccepted Old Notes will be returned, without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"-- Fees and Expenses."
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of the date of this Prospectus.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean , 1997 unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date to which the Exchange Offer is
extended. In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time. The Company reserves the right
(i) to delay acceptance of any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer and to refuse to accept Old Notes not previously
accepted, if any of the conditions set forth herein under "-- Termination" shall
have occurred and shall not have been waived by the Company (if permitted to be
waived by the Company), by giving oral or written notice of such delay,
extension or termination to the Exchange Agent, and (ii) to amend the terms of
the Exchange Offer in any manner deemed by it to be advantageous to the holders
of the Old Notes. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof. If the Exchange Offer is amended in a manner determined by the Company
to constitute a material change, the Company will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of the Old
Notes of such amendment. Without limiting the manner in which the Company may
choose to make public announcements of any delay in acceptance, extension,
termination or amendment of the Exchange Offer, the Company shall have no
obligation to publish, advertise, or otherwise communicate any such public
announcement, other than by making a timely release to the Dow Jones News
Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest payable semi-annually on April 15 and
October 15 of each year, commencing April 15, 1998. Holders of Exchange Notes of
record on April 1, 1998 will receive interest on April 15, 1998 from the date of
issuance of the Exchange Notes, plus an amount equal to the
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accrued interest on the Old Notes from the date of issuance of the Old Notes,
October 15, 1997, to the date of exchange thereof. Consequently, assuming the
Exchange Offer is consummated prior to the record date in respect of the April
15, 1998 interest payment for the Old Notes, holders who exchange their Old
Notes for Exchange Notes will receive the same interest payment on April 15,
1998 that they would have received had they not accepted the Exchange Offer.
Interest on the Old Notes accepted for exchange will cease to accrue upon
issuance of the Exchange Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, or an Agent's Message,
together with the Old Notes and any other required documents, to the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date. In
addition, either (i) the certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent along with an Agent's Message prior to the Expiration Date or
(iii) the Holder must comply with the guaranteed delivery procedures described
below. The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal. Delivery of all
documents must be made to the Exchange Agent at its address set forth herein.
Holders may also request that their respective brokers, dealers, commercial
banks, trust companies or nominees effect such tender for such holders.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering Old Notes which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Company may enforce such
agreement against such participant.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes should
be sent to the Company. Only a holder of Old Notes may tender such Old Notes in
the Exchange Offer. The term "holder" with respect to the Exchange Offer means
any person in whose name Old Notes are registered on the books of the Company or
any other person who has obtained a properly completed stock power from the
registered holder.
Any beneficial holder whose Old Notes are registered in the name of such
holder's broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on behalf of the registered holder. If such
beneficial holder wishes to tender directly, such beneficial holder must, prior
to completing and executing the Letter of Transmittal and delivering his Old
Notes, either make appropriate arrangements to register ownership of the Old
Notes in such holder's name or obtain a properly completed bond power from the
registered holder. The transfer of record ownership may take considerable time.
If the Letter of Transmittal is signed by the record holder(s) of the Old Notes
tendered thereby, the signature must correspond with the name(s) written on the
face of the Old Notes without alteration, enlargement or any change whatsoever.
If the Letter of Transmittal is signed by a participant in The Depository Trust
Company ("DTC"), the signature must correspond with the name as it appears on
the security position listing as the holder of the Old Notes. Signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, must be
guaranteed by a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office
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or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution") unless the Old Notes tendered pursuant thereto are tendered (i) by
a registered holder (or by a participant in DTC whose name appears on a security
position listing as the owner) who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the Letter of
Transmittal and the Exchange Notes are being issued directly to such registered
holder (or deposited into the participant's account at DTC) or (ii) for the
account of an Eligible Institution. If the Letter of Transmittal is signed by a
person other than the registered holder of any Old Notes listed therein, such
Old Notes must be endorsed or accompanied by appropriate bond powers which
authorize such person to tender the Old Notes on behalf of the registered
holder, in either case signed as the name of the registered holder or holders
appears on the Old Notes. If the Letter of Transmittal or any Old Notes or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with the Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Old Notes
(or a timely confirmation received of a book-entry transfer of Old Notes into
the Exchange Agent's account at DTC with an Agent's Message) or a Notice of
Guaranteed Delivery from an Eligible Institution is received by the Exchange
Agent. Issuances of Exchange Notes in exchange for Old Notes tendered pursuant
to a Notice of Guaranteed Delivery by an Eligible Institution will be made only
against delivery of the Letter of Transmittal (and any other required documents)
and the tendered Old Notes (or a timely confirmation received of a book-entry
transfer of Old Notes into the Exchange Agent's account at DTC with an Agent's
Message) with the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of the Company or its counsel, be unlawful. The Company also
reserves the absolute right to waive any conditions of the Exchange Offer or
defects or irregularities in tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Neither the Company, the Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities with respect to tenders
of Old Notes nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering holder of such Old Notes unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date. In addition, the Company reserves the right in its sole
discretion to (i) purchase or make offers for any Old Notes that remain
outstanding subsequent to the Expiration Date, or, as set forth under
"-- Termination," to terminate the Exchange Offer and (ii) to the extent
permitted by applicable law, purchase Old Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
may differ from the terms of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will establish an account with respect to the Old Notes
at DTC within two business days after the date of this Prospectus, and any
financial institution which is a participant in DTC may make book-entry delivery
of the Old Notes by causing DTC to transfer such Old Notes into the Exchange
Agent's account in accordance with DTC's procedure for such transfer. Although
delivery of
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Old Notes may be effected through book-entry transfer into the Exchange Agent's
account at DTC, an Agent's Message must be transmitted to and received by the
Exchange Agent on or prior to the Expiration Date at one of its addresses set
forth below under "-- Exchange Agent", or the guaranteed delivery procedure
described below must be complied with. DELIVERY OF DOCUMENTS TO DTC DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. All references in this Prospectus to
deposit or delivery of Old Notes shall be deemed to include DTC's book-entry
delivery method.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and whose Old Notes are not
immediately available or who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or who cannot complete the procedure for book-entry transfer on
a timely basis and deliver an Agent's Message, may effect a tender if: (i) the
tender is made by or through an Eligible Institution; (ii) prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder of the Old Notes, the registration number or numbers of such Old Notes
(if applicable), and the total principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
business days after the Expiration Date, the Letter of Transmittal, together
with the Old Notes in proper form for transfer (or a confirmation of a
book-entry transfer into the Exchange Agent's account at DTC with an Agent's
Message) and any other documents required by the Letter of Transmittal, will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) such
properly completed and executed Letter of Transmittal, together with the
certificate(s) representing all tendered Old Notes in proper form for transfer
(or a confirmation of such a book-entry transfer) and all other documents
required by the Letter of Transmittal are received by the Exchange Agent within
five business days after the Expiration Date.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, certain terms and
conditions which are summarized below and are part of the Exchange Offer.
Each holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that such holder is not participating in, and
has no arrangement with any person to participate in, the distribution (within
the meaning of the Securities Act) of the Exchange Notes, and that such holder
is not a Restricted Holder.
Old Notes tendered in exchange for Exchange Notes (or a timely confirmation
of a book-entry transfer of such Old Notes into the Exchange Agent's account at
DTC) must be received by the Exchange Agent, with the Letter of Transmittal or
an Agent's Message and any other required documents, by the Expiration Date or
within the time periods set forth above pursuant to a Notice of Guaranteed
Delivery from an Eligible Institution. Each holder tendering the Old Notes for
exchange sells, assigns and transfers the Old Notes to the Exchange Agent, as
agent of the Company, and irrevocably constitutes and appoints the Exchange
Agent as the holder's agent and attorney-in-fact to cause the Old Notes to be
transferred and exchanged. The holder warrants that it has full power and
authority to tender, exchange, sell, assign and transfer the Old Notes and to
acquire the Exchange Notes issuable upon the exchange of such tendered Old
Notes, that the Exchange Agent, as agent of the Company, will acquire good and
unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances, and that the Old Notes tendered for
exchange are not subject to any adverse claims when accepted by the Exchange
Agent, as agent of the Company. The holder also warrants and agrees that it
will, upon request, execute and deliver any additional documents deemed by the
Company or the Exchange Agent to be necessary or desirable to complete the
exchange, sale, assignment and transfer of the Old Notes. All authority
conferred or agreed to be conferred in the Letter of Transmittal by the holder
will survive the death, incapacity or dissolution of the holder and any
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obligation of the holder shall be binding upon the heirs, personal
representatives, successors and assigns of such holder.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior to
the Expiration Date, unless previously accepted for exchange. To withdraw a
tender of Old Notes in the Exchange Offer, a written or facsimile transmission
notice of withdrawal must be received by the Exchange Agent at its address set
forth herein prior to 5:00 p.m., New York City time, on the business day prior
to the Expiration Date and prior to acceptance for exchange thereof by the
Company. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify
the Old Notes to be withdrawn (including, if applicable, the registration number
or numbers and total principal amount of such Old Notes), (iii) be signed by the
Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
permit the Trustee with respect to the Old Notes to register the transfer of
such Old Notes into the name of the Depositor withdrawing the tender, (iv)
specify the name in which any such Old Notes are to be registered, if different
from that of the Depositor and (v) if applicable because the Old Notes have been
tendered pursuant to the book-entry procedures, specify the name and number of
the participant's account at DTC to be credited, if different than that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn Old
Notes may be retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange any Old Notes not theretofore accepted for
exchange, and may terminate the Exchange Offer if it determines that the
Exchange Offer violates any applicable law or interpretation of the staff of the
SEC.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration of the
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes or (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn. If such waiver constitutes a material change in the
Exchange Offer, the Company will disclose such change by means of a supplement
to this Prospectus that will be distributed to each registered holder of Old
Notes, and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the waiver and the manner
of disclosure to the registered holders of the Old Notes, if the Exchange Offer
would otherwise expire during such period. Holders of Old Notes will have
certain rights against the Company under the Registration Rights Agreement
should the Company fail to consummate the Exchange Offer.
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EXCHANGE AGENT
First Union National Bank has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
By Mail, Hand or Overnight Courier:
230 South Tryon Street, 9th Floor
Charlotte, North Carolina 28288-1179
Attention: Mike Klotz
Facsimile Transmission: (704) 590-7628
Confirm by Telephone: (704) 590-7408
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone. The Company will not make any payments to brokers,
dealers or other persons soliciting acceptances of the Exchange Offer. The
Company, however, will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse the Exchange Agent for its reasonable
out-of-pocket expenses in connection therewith. The Company may also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus,
Letters of Transmittal and related documents to the beneficial owners of the Old
Notes and in handling or forwarding tenders for exchange.
The other expenses incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees, will be paid by the Company. The Company will pay all transfer
taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange
Offer. If, however, Exchange Notes or Old Notes not tendered or accepted for
exchange are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Company
upon the consummation of the Exchange Offer. The expenses of the Exchange Offer
will be amortized by the Company over the term of the Exchange Notes under
generally accepted accounting principles.
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DESCRIPTION OF NOTES
The Exchange Notes will be issued and the Old Notes were issued pursuant to
an Indenture dated as of October 15, 1997 (the "Indenture") between the Company
and First Union National Bank, as trustee (the "Trustee"). The following
summaries of certain provisions of the Notes and the Indenture, a copy of which
is filed as an exhibit to the Registration Statement of which this Prospectus is
a part, do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, the Notes and the Indenture, including the
definitions therein of certain capitalized terms used but not defined herein.
The Old Notes and the Exchange Notes will constitute a single series of
debt securities under the Indenture. If the Exchange Offer is consummated,
Holders of Notes who do not exchange their Old Notes for Exchange Notes will
vote together with Holders of the Exchange Notes for all relevant purposes under
the Indenture. In that regard, the Indenture requires that certain actions by
the Holders thereunder (including acceleration following an Event of Default)
must be taken, and certain rights must be exercised, by specified minimum
percentages of the aggregate principal amount of the outstanding securities
issued under the Indenture. In determining whether Holders of the requisite
percentage in principal amount have given any notice, consent or waiver or taken
any other action permitted under the Indenture, any Old Notes that remain
outstanding after the Exchange Offer will be aggregated with the Exchange Notes,
and the Holders of such Old Notes and the Exchange Notes will vote together as a
single series for all such purposes. Accordingly, all references herein to
specified percentages in aggregate principal amount of the outstanding Notes
shall be deemed to mean, at any time after the Exchange Offer is consummated,
such percentages in aggregate principal amount of the Old Notes and the Exchange
Notes then outstanding.
GENERAL
Each Note will mature on October 15, 2007 and will bear interest at the
rate per annum stated on the cover page hereof from October 15, 1997 payable
semiannually on April 15 and October 15 of each year, commencing April 15, 1998,
to the person in whose name the Note is registered at the close of business on
the April 1 or October 1 preceding such interest payment date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Principal and
interest will be payable at the offices of the Trustee and the Paying Agent. In
addition, in the event the Notes do not remain in book-entry form, at the option
of the Company payment of interest will be made by check mailed to the address
of the person entitled thereto as it appears in the register of the Notes (the
"Note Register") maintained by the Registrar. The aggregate principal amount of
the Notes will be limited to $125,000,000. The Notes will be transferable and
exchangeable at the office of the Registrar and any co-registrar and will be
issued in fully registered form, without coupons, in denominations of $1,000 and
any whole multiple thereof. The Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection with certain
transfers and exchanges.
The Notes are senior unsecured obligations of the Company and rank pari
passu in right of payment with the Company's obligations under all existing and
future senior unsecured indebtedness of the Company (including the Credit
Facility) and senior in right of payment to all existing and future indebtedness
of the Company that is, by its terms, expressly subordinated to the Notes.
OPTIONAL REDEMPTION
The Notes are redeemable, at the option of the Company, at any time in
whole or from time to time in part, upon not less than 30 and not more than 60
days' notice mailed to each holder of Notes to be redeemed at the holder's
address appearing in the Note Register, on any date prior to maturity at a price
equal to 100% of the principal amount thereof plus accrued interest to the
Redemption Date (subject to the right of holders of record on the relevant
record date to receive interest due on an interest payment date that is on or
prior to the Redemption Date) plus a Make-Whole Premium, if any (the "Redemption
Price"). In no event will the Redemption Price ever be less than 100% of the
principal amount of the Notes plus accrued interest to the Redemption Date.
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The amount of the Make-Whole Premium with respect to any Note (or portion
thereof) to be redeemed will be equal to the excess, if any, of:
(i) the sum of the present values, calculated as of the Redemption
Date, of:
A. each interest payment that, but for such redemption, would have
been payable on the Note (or portion thereof) being redeemed on each
Interest Payment Date occurring after the Redemption Date (excluding any
accrued interest for the period prior to the Redemption Date); and
B. the principal amount that, but for such redemption, would have
been payable at the final maturity of the Note (or portion thereof)
being redeemed;
over
(ii) the principal amount of the Note (or portion thereof) being
redeemed.
The present values of interest and principal payments referred to in clause
(i) above will be determined in accordance with generally accepted principles of
financial analysis. Such present values will be calculated by discounting the
amount of each payment of interest or principal from the date that each such
payment would have been payable, but for the redemption, to the Redemption Date
at a discount rate equal to the Treasury Yield (as defined below) plus 25 basis
points.
The Make-Whole Premium will be calculated by an independent investment
banking institution of national standing appointed by the Company; provided,
that if the Company fails to make such appointment at least 45 business days
prior to the Redemption Date, or if the institution so appointed is unwilling or
unable to make such calculation, such calculation will be made by Goldman, Sachs
& Co. or, if such firm is unwilling or unable to make such calculation, by an
independent investment banking institution of national standing appointed by the
Trustee (in any such case, an "Independent Investment Banker").
For purposes of determining the Make-Whole Premium, "Treasury Yield" means
a rate of interest per annum equal to the weekly average yield to maturity of
United States Treasury Notes that have a constant maturity that corresponds to
the remaining term to maturity of the Notes, calculated to the nearest 1/12th of
a year (the "Remaining Term"). The Treasury Yield will be determined as of the
third business day immediately preceding the applicable Redemption Date.
The weekly average yields of United States Treasury Notes will be
determined by reference to the most recent statistical release published by the
Federal Reserve Bank of New York and designated "H.15(519) Selected Interest
Rates" or any successor release (the "H.15 Statistical Release"). If the H.15
Statistical Release sets forth a weekly average yield for United States Treasury
Notes having a constant maturity that is the same as the Remaining Term, then
the Treasury Yield will be equal to such weekly average yield. In all other
cases, the Treasury Yield will be calculated by interpolation, on a
straight-line basis, between the weekly average yields on the United States
Treasury Notes that have a constant maturity closest to and greater than the
Remaining Term and the United States Treasury Notes that have a constant
maturity closest to and less than the Remaining Term (in each case as set forth
in the H.15 Statistical Release). Any weekly average yields so calculated by
interpolation will be rounded to the nearest 1/100th of 1%, with any figure of
1/200% or above being rounded upward. If weekly average yields for United States
Treasury Notes are not available in the H.15 Statistical Release or otherwise,
then the Treasury Yield will be calculated by interpolation of comparable rates
selected by the Independent Investment Banker.
If less than all of the Notes are to be redeemed, the Trustee will select
the Notes to be redeemed by such method as the Trustee shall deem fair and
appropriate. The Trustee may select for redemption Notes and portions of Notes
in amounts of $1,000 or whole multiples of $1,000.
The Notes are not entitled to the benefit of any sinking fund or other
mandatory redemption provisions.
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CERTAIN COVENANTS
LIMITATION ON LIENS. Nothing in the Indenture or the Notes in any way
limits the amount of indebtedness or securities (other than the Notes) that the
Company or any of its Subsidiaries may incur or issue. The Indenture provides
that the Company will not, and will not permit any Restricted Subsidiary to,
issue, assume or guarantee any Indebtedness for borrowed money secured by any
Lien on any property or asset now owned or hereafter acquired by the Company or
such Restricted Subsidiary without making effective provision whereby any and
all Notes then or thereafter outstanding will be secured by a Lien equally and
ratably with any and all other obligations thereby secured for so long as any
such obligations shall be so secured.
The foregoing restriction will not, however, apply to:
(a) Liens existing on the date on which the Notes were originally
issued or provided for under the terms of agreements existing on such date;
(b) Liens on property or properties (including any property or assets,
real or personal, or improvements used or to be used in connection with
such property) securing (i) all or any portion of the cost of exploration,
drilling or development of such property or properties, (ii) all or any
portion of the cost of acquiring, constructing, altering, improving or
repairing any property or assets, real or personal, or improvements used or
to be used in connection with such property or properties or (iii)
Indebtedness incurred by the Company or any Restricted Subsidiary to
provide funds for the activities set forth in clauses (i) and (ii) above
with respect to such property or properties;
(c) Liens securing Indebtedness owed by a Restricted Subsidiary to the
Company or to any other Restricted Subsidiary;
(d) Liens on property existing at the time of acquisition of such
property by the Company or a Subsidiary or Liens on the property of any
corporation or other entity existing at the time such corporation or other
entity becomes a Restricted Subsidiary of the Company or is merged with the
Company in compliance with the Indenture and in either case not incurred as
a result of (or in connection with or in anticipation of) the acquisition
of such property or such corporation or other entity becoming a Restricted
Subsidiary of the Company or being merged with the Company, provided that
such Liens do not extend to or cover any property or assets of the Company
or any of its Restricted Subsidiaries other than the property so acquired;
(e) Liens on any property securing (i) Indebtedness incurred in
connection with the construction, installation or financing of pollution
control or abatement facilities or other forms of industrial revenue bond
financing or (ii) Indebtedness issued or guaranteed by the United States or
any State thereof or any department, agency or instrumentality of either;
(f) any Lien extending, renewing or replacing (or successive
extensions, renewals or replacements of) any Lien of any type permitted
under clauses (a) through (e) above, provided that such Lien extends to or
covers only the property that is subject to the Lien being extended,
renewed or replaced;
(g) certain Liens arising in the ordinary course of business of the
Company and the Restricted Subsidiaries;
(h) any Lien resulting from the deposit of moneys or evidences of
indebtedness in trust for the purpose of defeasing Indebtedness of the
Company or any Subsidiary; or
(i) Liens (exclusive of any Lien of any type otherwise permitted under
clauses (a) through (h) above) securing Indebtedness of the Company or any
Restricted Subsidiary in an aggregate principal amount which, together with
the aggregate amount of Attributable Indebtedness deemed to be outstanding
in respect of all Sale/Leaseback Transactions entered into pursuant to
clause (a) of the covenant described under "Limitation on Sale/Leaseback
Transactions" below (exclusive of any such Sale/Leaseback Transactions
otherwise permitted under clauses (a) through
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(h) above), does not at the time such Indebtedness is incurred exceed 7.5%
of the Consolidated Net Tangible Assets of the Company (as shown in the
most recent published quarterly or year-end consolidated balance sheet of
the Company and its Subsidiaries).
The following types of transactions will not be prohibited or otherwise
limited by the foregoing covenant: (i) the sale, granting of Liens with respect
to, or other transfer of, crude oil, natural gas or other petroleum hydrocarbons
in place for a period of time until, or in an amount such that, the transferee
will realize therefrom a specified amount (however determined) of money or of
such crude oil, natural gas or other petroleum hydrocarbons; (ii) the sale or
other transfer of any other interest in property of the character commonly
referred to as a production payment, overriding royalty, forward sale or similar
interest; (iii) the entering into of Currency Hedge Obligations, Interest Rate
Hedging Agreements or Oil and Gas Hedging Contracts although Liens securing any
Indebtedness for borrowed money that is the subject of any such obligation shall
not be permitted hereby unless permitted under clauses (a) through (i) above;
and (iv) the granting of Liens required by any contract or statute in order to
permit the Company or any Restricted Subsidiary to perform any contract or
subcontract made by it with or at the request of the United States or any State
thereof or any department, agency or instrumentality of either, or to secure
partial, progress, advance or other payments to the Company or any Restricted
Subsidiary by such governmental unit pursuant to the provisions of any contract
or statute.
LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Indenture provides that the
Company will not, and will not permit any Restricted Subsidiary to, enter into
any Sale/Leaseback Transaction with any person (other than the Company or a
Restricted Subsidiary) unless:
(a) the Company or such Restricted Subsidiary would be entitled to
incur Indebtedness, in a principal amount equal to the Attributable
Indebtedness with respect to such Sale/Leaseback Transaction, secured by a
Lien on the property subject to such Sale/Leaseback Transaction pursuant to
the covenant described under "Limitation on Liens" above without equally
and ratably securing the Notes pursuant to such covenant;
(b) after the date on which the Notes were originally issued and
within a period commencing six months prior to the consummation of such
Sale/Leaseback Transaction and ending six months after the consummation
thereof, the Company or such Restricted Subsidiary shall have expended for
property used or to be used in the ordinary course of business of the
Company and the Restricted Subsidiaries (including amounts expended for the
exploration, drilling or development thereof, and for additions,
alterations, repairs and improvements thereto) an amount equal to all or a
portion of the net proceeds of such Sale/Leaseback Transaction and the
Company shall have elected to designate such amount pursuant to this clause
(b) with respect to such Sale/Leaseback Transaction (with any such amount
not being so designated and not permitted under clause (a) to be applied as
set forth in clause (c) below); or
(c) the Company, during the 12-month period after the effective date
of such Sale/Leaseback Transaction, shall have applied to the voluntary
defeasance or retirement of Notes or any Pari Passu Indebtedness an amount
equal to the greater of the net proceeds of the sale or transfer of the
property leased in such Sale/Leaseback Transaction and the fair value, as
determined by the Board of Directors of the Company, of such property at
the time of entering into such Sale/Leaseback Transaction (in either case
adjusted to reflect the remaining term of the lease and any amount
designated by the Company as set forth in clause (b) above), less an amount
equal to the principal amount of Notes and Pari Passu Indebtedness
voluntarily defeased or retired by the Company within such 12-month period
and not designated with respect to any other Sale/Leaseback Transaction
entered into by the Company or any Restricted Subsidiary during such
period.
SUBSIDIARY GUARANTORS. The Notes are not guaranteed by any Subsidiary of
the Company. The Indenture provides that if any Subsidiary of the Company
guarantees any Funded Indebtedness of the Company at any time in the future,
then the Company will cause the Notes to be equally and ratably guaranteed by
such Subsidiary.
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LIMITATIONS ON MERGERS AND CONSOLIDATIONS
The Indenture provides that the Company will not consolidate or merge with
or into any Person, or sell, lease, convey or otherwise dispose of all or
substantially all of its assets, or assign any of its obligations under the
Indenture or under the Notes, to any Person, unless: (i) the Person formed by or
surviving such consolidation or merger (if other than the Company), or to which
such sale, lease, conveyance or other disposition or assignment shall be made
(collectively, the "Successor"), is a corporation organized and existing under
the laws of the United States or any State thereof or the District of Columbia
and the Successor assumes by supplemental indenture in a form satisfactory to
the Trustee all of the obligations of the Company under the Indenture and under
the Notes; and (ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing.
REGISTRATION COVENANT; EXCHANGE OFFER
The Company has entered into an Exchange and Registration Rights Agreement
(the "Registration Rights Agreement") pursuant to which the Company has agreed,
for the benefit of the holders of the Old Notes, (i) to file with the
Commission, within 90 days following the closing of the issuance and sale of the
Notes (the "Old Notes Closing"), a registration statement (the "Exchange Offer
Registration Statement") under the Securities Act relating to an exchange offer
pursuant to which securities substantially identical to the Old Notes (except
that such securities will not contain terms with respect to the special interest
payments described below or transfer restrictions) would be offered in exchange
for the then outstanding Old Notes tendered at the option of the Holders thereof
and (ii) to use all reasonable efforts to cause the Exchange Offer Registration
Statement to become effective as soon as practicable, but in no case later than
180 days following the Old Notes Closing. The Company has further agreed to use
all reasonable efforts to commence and complete the Exchange Offer promptly, but
no later than 45 days after such registration statement has become effective,
hold the Exchange Offer open for at least 30 days, and issue Exchange Notes for
all Old Notes validly tendered and not withdrawn before the expiration of the
Exchange Offer.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Registration Statement
of which this Prospectus is a part.
Under existing Commission interpretations, the Exchange Notes would in
general be freely transferable after the Exchange Offer without further
registration under the Securities Act, except that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange Offer
will be subject to a prospectus delivery requirement with respect to resale of
those Exchange Notes. The Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to such Exchange Notes (other than a resale of any unsold allotment from the
original sale of the Notes) by delivery of the prospectus contained in the
Exchange Offer Registration Statement. Under the Registration Rights Agreement,
the Company is required to allow Participating Broker-Dealers to use the
prospectus contained in the Exchange Offer Registration Statement in connection
with the resale of such Exchange Notes. The Exchange Offer Registration
Statement will be kept effective for a period of 180 days after the Exchange
Offer has been completed in order to permit resales of Exchange Notes acquired
by broker-dealers in the Exchange Offer for Notes acquired in after-market
transactions. Each holder of the Old Notes (other than certain specified
holders) who wishes to exchange such Old Notes for Exchange Notes in the
Exchange Offer will be required to represent that any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, that at
the time of the commencement of the Exchange Offer it has no arrangement with
any Person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes and that it is not an Affiliate of the
Company.
However, if on or before the date of consummation of the Exchange Offer the
existing Commission interpretations are changed such that the Exchange Notes
would not in general be freely transferable on
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such date, the Company will, in lieu of effecting registration of Exchange
Notes, use all reasonable efforts to file a registration statement under the
Securities Act relating to a shelf registration of the Old Notes for resale by
Holders (such registration, the "Shelf Registration") and such registration
statement, the "Shelf Registration Statement") as soon as practicable, but no
later than the later of 90 days after the time such obligation to file arises
and 180 days after the Old Notes Closing. In addition, in the event that the
Initial Purchasers shall not have resold all of the Old Notes initially
purchased by them from the Company prior to the consummation of the Exchange
Offer, the Company shall file under the Securities Act as soon as practicable a
Shelf Registration Statement. The Company agrees to use all reasonable efforts
to cause the Shelf Registration Statement to become or be declared effective no
later than 90 days after such Shelf Registration Statement is filed and to keep
such Shelf Registration Statement continuously effective until the second
anniversary of the Old Notes Closing. The Company will, in the event of the
Shelf Registration, provide to the Holders of the Old Notes copies of the
prospectus that is a part of the Shelf Registration Statement, notify such
Holders when the Shelf Registration Statement for the Old Notes has become
effective and take certain other actions as are required to permit unrestricted
resales of the Old Notes. A Holder of Old Notes that sells such Old Notes
pursuant to the Shelf Registration Statement generally will be required to be
named as a selling securityholder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement that are applicable
to such a Holder (including certain indemnification obligations).
Although the Company intends to file the registration statement previously
described, there can be no assurance that the registration statement will be
filed or, if filed, that it will become effective. In the event that (i) the
Company has not filed the Exchange Offer Registration Statement or Shelf
Registration Statement on or before the date on which such registration
statement is required to be filed as described above, (ii) such Exchange
Registration Statement or Shelf Registration Statement has not become or been
declared effective by the Commission on or before the date on which such
registration statement is required to become or be declared effective as
described above, (iii) the Exchange Offer has not been completed within 45 days
after the initial effective date of the Exchange Offer Registration Statement
(if the Exchange Offer is then required to be made) or (iv) any Exchange Offer
Registration Statement or Shelf Registration Statement required as described
above is filed and declared or becomes effective but shall thereafter either be
withdrawn by the Company or shall become subject to an effective stop order
issued pursuant to Section 8(d) of the Securities Act suspending the
effectiveness of such registration statement (except as specifically permitted
in the Registration Rights Agreement) without being succeeded immediately by an
additional registration statement filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default" and each
period during which a Registration Default has occurred and is continuing, a
"Registration Default Period"), then, as liquidated damages for such
Registration Default, special cash interest ("Special Interest"), in addition to
any base interest that would otherwise accrue on the Old Notes, shall accrue and
be payable at a per annum rate of .25% for the first 90 days of the Registration
Default Period and at a per annum rate of .50% thereafter for the remaining
portion of the Registration Default Period. The Special Interest will be payable
in cash semiannually in arrears on each April 15 and October 15. Special
Interest, if any, will be computed on the basis of a 365 or 366 day year, as the
case may be, and the number of days actually elapsed.
The Old Notes and the Exchange Notes will be considered collectively to be
a single class and series for all purposes under the Indenture, including
waivers, amendments, redemptions and Offers to Purchase, and for purposes of
this Description of Notes (except under this caption "Registration Covenant;
Exchange Offer"), all references herein to "Notes" shall be deemed to refer
collectively to the Notes and any Exchange Notes, unless the context otherwise
requires.
CERTAIN DEFINITIONS
The following is a summary of certain defined terms used in the Indenture.
Reference is made to the Indenture for the full definition of all such terms and
for the definitions of other capitalized terms used herein and not defined
below.
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"Attributable Indebtedness", when used with respect to any Sale/Leaseback
Transaction, means, as at the time of determination, the present value
(discounted at a rate equivalent to the Company's then current weighted average
cost of funds for borrowed money as at the time of determination, compounded on
a semi-annual basis) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease can be extended).
"Capitalized Lease Obligation" of any Person means any obligation of such
Person to pay rent or other amounts under a lease of property, real or personal,
that is required to be capitalized for financial reporting purposes in
accordance with generally accepted accounting principles; and the amount of such
obligation shall be the capitalized amount thereof determined in accordance with
generally accepted accounting principles.
"Consolidated Net Tangible Assets" means, for the Company and its
Restricted Subsidiaries on a consolidated basis determined in accordance with
generally accepted accounting principles, the aggregate amounts of assets (less
depreciation and valuation reserves and other reserves and items deductible from
gross book value of specific asset accounts under generally accepted accounting
principles) that would be included on a balance sheet after deducting therefrom
(a) all liability items except deferred income taxes, Funded Indebtedness, other
long-term liabilities and shareholders' equity and (b) all goodwill, trade
names, trademarks, patents, unamortized debt discount and expense and other like
intangibles.
"Currency Hedge Obligations" means, at any time as to any Person, the
obligations of such Person at such time that were incurred in the ordinary
course of business pursuant to any foreign currency exchange agreement, option
or futures contract or other similar agreement or arrangement designed to
protect against or manage such Person's or any of its Subsidiaries' exposure to
fluctuations in foreign currency exchange rates.
"Funded Indebtedness" means all Indebtedness (including Indebtedness
incurred under any revolving credit, letter of credit or working capital
facility) that matures by its terms, or that is renewable at the option of any
obligor thereon to a date, more than one year after the date on which such
Indebtedness is originally incurred.
"Indebtedness" of any Person at any date means, without duplication, (i)
all indebtedness of such Person for borrowed money (whether or not the recourse
of the lender is to the whole of the assets of such Person or only to a portion
thereof), (ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) all obligations of such Person in
respect of letters of credit or other similar instruments (or reimbursement
obligations with respect thereto), other than standby letters of credit incurred
by such Person in the ordinary course of business, (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
except trade payables and accrued expenses incurred in the ordinary course of
business, (v) all Capitalized Lease Obligations of such Person, (vi) all
Indebtedness of others secured by a Lien on any asset of such Person, whether or
not such Indebtedness is assumed by such Person, (vii) all Indebtedness of
others guaranteed by such Person to the extent of such guarantee and (viii) all
obligations of such Person in respect of Currency Hedge Obligations, Interest
Rate Hedging Agreements and Oil and Gas Hedging Contracts.
"Interest Rate Hedging Agreements" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset
(including, without limitation, any production payment, advance payment or
similar arrangement with respect to minerals in place), whether or not filed,
recorded or otherwise perfected under applicable law. For the purposes of the
Indenture, the Company or any Restricted Subsidiary shall be deemed to own
subject to a Lien any asset which it has acquired or
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holds subject to the interest of a vendor or lessor under any conditional sale
agreement, Capitalized Lease Obligation (other than any Capitalized Lease
Obligation relating to any building, structure, equipment or other property used
or to be used in the ordinary course of business of the Company and the
Restricted Subsidiaries) or other title retention agreement relating to such
asset.
"Oil and Gas Hedging Contracts" means any oil and gas purchase or hedging
agreement, and other agreement or arrangement, in each case, that is designed to
provide protection against oil and gas price fluctuations.
"Pari Passu Indebtedness" means any Indebtedness of the Company, whether
outstanding on the date on which the Notes were originally issued or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall be
subordinated in right of payment to the Notes.
"Restricted Subsidiary" means any Subsidiary the principal business of
which is carried on in, or the majority of the operating assets of which are
located in, the United States (including areas subject to its jurisdiction).
"Sale/Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary, for a
period of more than three years, of any real or tangible personal property,
which property has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person in contemplation of such leasing.
EVENTS OF DEFAULT
An Event of Default is defined in the Indenture as being: (i) default by
the Company for 30 days in payment when due of any interest on the Notes; (ii)
default by the Company in any payment when due of principal of or premium, if
any, on the Notes; (iii) default by the Company in performance of any other
covenant or agreement in the Notes or the Indenture which shall not have been
remedied within 90 days after written notice by the Trustee or by the holders of
at least 25% in principal amount of the Notes then outstanding; (iv) the
acceleration of the maturity of any Indebtedness of the Company or any
Restricted Subsidiary (other than the Notes) (provided that such acceleration is
not rescinded within a period of 10 days from the occurrence of such
acceleration) having an outstanding principal amount of $10 million or more
individually or in the aggregate, or a default in the payment of any principal
or interest in respect of any Indebtedness of the Company or any Restricted
Subsidiary (other than the Notes) having an outstanding principal amount of $10
million or more individually or in the aggregate and such default shall be
continuing for a period of 30 days without the Company or such Restricted
Subsidiary, as the case may be, effecting a cure of such default; (v) failure by
the Company or any Restricted Subsidiary to pay final, non-appealable judgments
aggregating in excess of $10 million, which judgments are not paid, discharged
or stayed for a period of 60 days; or (vi) certain events involving bankruptcy,
insolvency or reorganization of the Company or any Restricted Subsidiary. The
Indenture provides that the Trustee may withhold notice to the holders of the
Notes of any default (except in payment of principal of, or premium, if any, or
interest on the Notes) if the Trustee considers it in the interest of the
holders of the Notes to do so.
The Indenture provides that if an Event of Default occurs and is continuing
with respect to the Indenture, the Trustee or the holders of not less than 25%
in principal amount of the Notes outstanding may declare the principal of and
premium, if any, and accrued and unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal, premium, if any, and interest
will be due and payable immediately. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Company or any
Restricted Subsidiary occurs and is continuing, the principal of and premium, if
any, and interest on all the Notes will become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holders of the Notes. The amount due and payable on the acceleration of any Note
will be equal to 100% of the principal amount of such Note, plus accrued
interest to the date of payment. Under certain circumstances, the holders of a
majority in
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principal amount of the outstanding Notes may rescind any such acceleration with
respect to the Notes and its consequences.
The Indenture provides that no holder of a Note may pursue any remedy under
the Indenture unless (i) the Trustee shall have received written notice of a
continuing Event of Default, (ii) the Trustee shall have received a request from
holders of at least 25% in principal amount of the Notes to pursue such remedy,
(iii) the Trustee shall have been offered indemnity satisfactory to it and (iv)
the Trustee shall have failed to act for a period of 60 days after receipt of
such notice and offer of indemnity; however, such provision does not affect the
right of a holder of a Note to sue for enforcement of any overdue payment
thereon.
The holders of a majority in principal amount of the Notes then outstanding
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee under the
Indenture, subject to certain limitations specified in the Indenture. The
Indenture requires the annual filing by the Company with the Trustee of a
written statement as to compliance with the covenants contained in the
Indenture.
MODIFICATION AND WAIVER
The Indenture provides that modifications and amendments to the Indenture
or the Notes may be made by the Company and the Trustee with the consent of the
holders of a majority in principal amount of the Notes then outstanding;
provided that no such modification or amendment may, without the consent of the
holder of each Note then outstanding affected thereby, (i) reduce the percentage
in principal amount of Notes whose holders must consent to an amendment,
supplement or waiver; (ii) reduce the rate of or change the time for payment of
interest, including default interest, on any Note; (iii) reduce the principal of
or change the fixed maturity of any Note or alter the premium or other
provisions with respect to redemption; (iv) make any Note payable in money other
than that stated in the Note; (v) impair the right to institute suit for the
enforcement of any payment of principal of, or premium, if any, or interest on,
any Note; (vi) make any change in the percentage of principal amount of Notes
necessary to waive compliance with certain provisions of the Indenture; or (vii)
waive a continuing Default or Event of Default in the payment of principal of,
or premium, if any, or interest on the Notes. The Indenture provides that
modifications and amendments of the Indenture may be made by the Company and the
Trustee without the consent of any holders of Notes in certain limited
circumstances, including (a) to cure any ambiguity, omission, defect or
inconsistency, (b) to provide for guarantees of the Notes or addition of any
Subsidiary of the Company as a guarantor of the Notes, (c) to provide for the
assumption of the obligations of the Company under the Indenture upon the
merger, consolidation or sale or other disposition of all or substantially all
of the assets of the Company, (d) to provide for uncertificated Notes in
addition to or in place of certificated Notes, (e) to comply with any
requirement in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act of 1939 or (f) to make any change that does not
adversely affect the rights of any holder of Notes in any material respect.
The Indenture provides that the holders of a majority in aggregate
principal amount of the Notes then outstanding may waive any past default under
the Indenture, except a default in the payment of principal, or premium, if any,
or interest.
DISCHARGE AND TERMINATION
DEFEASANCE OF CERTAIN OBLIGATIONS. The Indenture provides that the Company
may terminate certain of its obligations under the Indenture, including those
described under the section "Certain Covenants," if (i) the Company irrevocably
deposits in trust with the Trustee money or U.S. Government Obligations
sufficient to pay principal of and interest on the Notes to maturity, and to pay
all other sums payable by it under the Indenture, provided that the Trustee
shall have been irrevocably instructed to apply such money or the proceeds of
such U.S. Government Obligations to the payment of said principal and interest
with respect to the Notes as the same shall become due; (ii) the Company
delivers to the Trustee an Officers' Certificate stating that all conditions
precedent to satisfaction and discharge of the
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Indenture have been complied with, and an Opinion of Counsel to the same effect;
(iii) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit; and (iv) the Company shall have delivered to the
Trustee an Opinion of Counsel from nationally recognized counsel acceptable to
the Trustee or a tax ruling to the effect that the holders of the Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
the Company's exercise of its option under such section and will be subject to
Federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such option had not been exercised. In
order to have money available on a payment date to pay principal of or interest
on the Notes, the U.S. Government Obligations shall be payable as to principal
or interest on or before such payment date in such amounts as will provide the
necessary money. U.S. Government Obligations shall not be callable at the
issuer's option. The Company's payment obligation shall survive until the Notes
are no longer outstanding.
DISCHARGE. The Indenture provides that the Indenture shall cease to be of
further effect (subject to certain exceptions relating to compensation and
indemnity of the Trustee and repayment to the Company of excess money or
securities) when (i) either (A) all outstanding Notes theretofore authenticated
and issued (other than destroyed, lost or stolen Notes that have been replaced
or paid) have been delivered to the Trustee for cancellation; or (B) all
outstanding Notes not theretofore delivered to the Trustee for cancellation: (x)
have become due and payable, or (y) will become due and payable at their stated
maturity within one year or (z) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company, and
the Company, in the case of clause (x), (y) or (z) above, has deposited or
caused to be deposited with the Trustee as funds (immediately available to the
holders in the case of clause (x)) in trust for such purpose an amount which,
together with earnings thereon, will be sufficient to pay and discharge the
entire indebtedness on such Notes for principal, premium, if any, and interest
to the date of such deposit (in the case of Notes which have become due and
payable) or to the stated maturity or Redemption Date, as the case may be; (ii)
the Company has paid or caused to be paid all other sums payable by it under the
Indenture; and (iii) the Company has delivered to the Trustee an Officers'
Certificate stating that all conditions precedent to satisfaction and discharge
of the Indenture have been complied with, together with an Opinion of Counsel to
the same effect.
GOVERNING LAW
The Indenture provides that it will be governed by, and construed in
accordance with, the laws of the State of New York.
THE TRUSTEE
First Union National Bank will be the Trustee under the Indenture. Its
address is 230 South Tryon Street, Ninth Floor, Charlotte, N.C. 28288-1179. The
Company has also appointed the Trustee as the initial Registrar and as the
initial Paying Agent under the Indenture.
The Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. In the event the Trustee acquires any
conflicting interest (as defined in the Trust Indenture Act of 1939), however,
it must eliminate such conflict or resign.
The Indenture provides that in case an Event of Default shall occur (and be
continuing), the Trustee will be required to use the degree of care and skill of
a prudent man in the conduct of his own affairs. The Trustee will be under no
obligation to exercise any of its powers under the Indenture at the request of
any of the holders of the Notes, unless such holders shall have offered the
Trustee indemnity reasonably satisfactory to it.
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BOOK-ENTRY, DELIVERY AND FORM
The Exchange Notes will be issued in the form of a fully registered Global
Certificate (the "Global Exchange Certificate"). The Global Exchange Certificate
will be deposited on the date of the closing of the Exchange Offer (the "Closing
Date") with, or on behalf of DTC and registered in the name of its nominee (such
nominee being referred to herein as the "Global Certificate Holder") or will
remain in the custody of the Trustee pursuant to a FAST Balance Certificate
Agreement or similar agreement between the Depositary and the Trustee.
Except as set forth below, the Global Exchange Certificate may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
DTC has advised the Company as follows: It is a limited-purpose trust
company which was created to hold securities for its participating organizations
(the "Participants") and to facilitate the clearance and settlement of
transactions in such securities between Participants through electronic
book-entry changes in accounts of its Participants. Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Access to DTC's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("indirect participants"). Persons who are not
Participants may beneficially own securities held by DTC only through
Participants or indirect participants.
DTC has also advised that pursuant to procedures established by it (i) upon
the issuance by the Company of the Global Exchange Certificate, DTC will credit
the accounts of Participants designated by the Exchange Agent with portions of
the principal amount of the Global Exchange Certificate, and (ii) ownership of
beneficial interests in the Global Exchange Certificate will be shown on, and
the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to Participants), or by the Participants and the
indirect participants.
All payments on the Global Exchange Certificate registered in the name of
DTC's nominee will be made by the Company through the Paying Agent to DTC's
nominee as the registered owner of the Global Exchange Certificate. Under the
terms of the Indenture, the Company and the Trustee will treat the persons in
whose names the Exchange Notes, including the Global Exchange Certificate, are
registered as the owners of such Exchange Notes for the purpose of receiving
payments of principal and interest on such Exchange Notes and for all other
purposes whatsoever. Therefore, neither the Company, the Trustee nor the Paying
Agent has any direct responsibility or liability for the payment of principal or
interest on the Exchange Notes to owners of beneficial interests in the Global
Exchange Certificate. DTC has advised the Company and the Trustee that its
present practice is, upon receipt of any payment of principal or interest, to
credit immediately the accounts of the Participants with payment in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in the Global Exchange Certificate as shown on the records of DTC.
Payments by Participants and indirect participants to owners of beneficial
interests in the Global Exchange Certificate will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name" and
will be the responsibility of such Participants or indirect participants.
The Company will issue Exchange Notes in definitive form in exchange for
the Global Exchange Certificate if, and only if, either (1) DTC is at any time
unwilling or unable to continue as depositary and a successor depositary is not
appointed by the Company within 90 days, (2) an Event of Default has occurred
and is continuing and the Registrar has received a request from DTC to issue
Exchange Notes in definitive form in lieu of all or a portion of the Global
Exchange Certificate (in which case the Company shall deliver Exchange Notes in
definitive form within 30 days of such request), or (3) the Company determines
not to have the Exchange Notes represented by a Global Exchange Certificate. In
any instance, an owner of a beneficial interest in the Global Exchange
Certificate will be entitled to have Exchange Notes equal in principal amount to
such beneficial interest registered in its name and will be entitled to physical
delivery of such Exchange Notes in definitive form. Exchange Notes so issued in
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definitive form will be issued in denominations of $1,000 and integral whole
multiples thereof and will be issued in registered form only, without coupons.
So long as the Global Exchange Certificate Holder is the registered owner
of the Global Exchange Certificate, the Global Exchange Certificate Holder will
be considered the sole Holder under the Indenture of any Exchange Notes
evidenced by the Global Exchange Certificates. Beneficial owners of Exchange
Notes evidenced by the Global Exchange Certificate will not be considered the
owners or Holders thereof under the Indenture for any purpose, including with
respect to the giving of any directions, instructions or approvals to the
Trustee thereunder. Neither the Company nor the Trustee will have any
responsibility or liability for any aspect of the records of DTC or for
maintaining, supervising or reviewing any records of DTC relating to the
Exchange Notes.
SETTLEMENT AND PAYMENT
If the total outstanding principal amount of the Exchange Notes is
represented by a Global Exchange Certificate, all payments of principal of and
any premium and interest on the Exchange Notes will be made by the Company in
immediately available funds; otherwise, payments on definitive physical
certificates will be made in U.S. Clearing House funds. Secondary market trading
activity in the Exchange Notes will also settle in immediately available funds.
CERTAIN UNITED STATES TAX CONSEQUENCES TO FOREIGN HOLDERS
The following summary describes certain United States federal income and
estate tax consequences of the ownership of Notes held as capital assets by
Non-United States Holders. Except as otherwise specified below, the summary
assumes that the Non-United States Holder is not subject to United States
federal income or estate tax as a result of a present of former direct or
indirect connection to the United States other than its investment in Notes. As
used herein, the term "Non-United States Holder" means any person that is, as to
the United States, a nonresident alien individual, a foreign estate or trust, a
foreign partnership or a foreign corporation.
The discussion set forth below is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations under
the Code and published rulings and judicial decisions in effect as of the date
hereof. Such authorities may be repealed, revoked or modified so as to result in
federal income and estate tax consequences different from those discussed below,
possibly with retroactive effect. Persons considering the purchase of Notes
should consult their own tax advisors concerning the federal income and estate
tax consequences in light of their particular situations as well as any
consequences arising under the laws of any other taxing jurisdiction and the
consequences of any recent or possible future changes in the applicable tax
laws.
INTEREST ON THE NOTES
Subject to the discussion below concerning backup withholding, generally no
withholding of United States federal income tax will be required with respect to
the payment by the Company or any paying agent of principal, premium, if any, or
interest on a Note owned by a Non-United States Holder, provided that in the
case of interest or premium, if any, (i) the beneficial owner does not actually
or constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (ii) the beneficial owner is
not a "controlled foreign corporation" (as defined in Section 957 of the Code)
that is related, actually or constructively, to the Company through stock
ownership and (iii) a certified statement is furnished in accordance with the
requirements described in the next sentence (the "Certification Requirement").
To satisfy the Certification Requirement, the beneficial owner of a Note, or a
financial institution holding the Note on behalf of such owner, must provide, in
accordance with specified procedures, to the Company or its paying agent a
statement to the effect that the beneficial owner is not a United States person.
Pursuant to temporary Treasury regulations currently in effect, these
requirements will be met if (1) the beneficial owner provides the payor its name
and address, and certifies, under penalties of perjury, that it is not a United
States person (which certification may be made
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on an Internal Revenue Service ("IRS") Form W-8 (or successor or substitute
form)) or (2) a financial institution that holds customers' securities in the
ordinary course of its trade or business and holds the Note on behalf of the
beneficial owner certifies, under penalties of perjury, that such a statement
has been received by it (or by another financial institution acting on behalf of
the Non-United States Holder), and furnishes the payor with a copy thereof.
If a Non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exemption from withholding tax described in the preceding
paragraph, payments of premium, if any, and interest made to the Non-United
States Holder will generally be subject to a 30% withholding tax, unless the
beneficial owner of the Note provides the Company or its paying agent with a
properly executed IRS Form 4224 (or successor form) stating that the payment is
not subject to withholding tax because it is effectively connected with the
beneficial owner's conduct of a trade or business in the United States. The
withholding tax that might otherwise be applicable to payments of premium, if
any, and interest made to Non-United States Holders might be reduced or
eliminated under an income tax treaty between the United States and the foreign
country of which the beneficial owner is a resident, provided the beneficial
owner furnishes the Company or its paying agent with a properly executed IRS
Form 1001 (or successor form) claiming such treaty benefit. Prospective
investors in the Notes should consult their own tax advisors regarding the
potential applicability to them of the withholding tax exemptions or reductions
described above as well as the procedures for qualifying for such exemptions or
reductions and possible future changes in those procedures.
If a Non-United States Holder is engaged in a trade or business in the
United States and premium, if any, or interest on the Note is effectively
connected with the conduct of such trade or business, the Non-United States
Holder will generally be subject to United States federal income tax on such
premium or interest on a net income basis at the rates applicable to United
States persons. In addition, if such holder is a foreign corporation, the
after-tax amount of such income may be subject to a branch profits tax at a rate
of 30% or such lower rate as may be specified by an applicable income tax
treaty.
DISPOSITION OF NOTES
Subject to the discussion below concerning backup withholding, withholding
of United States federal income tax will not generally be required with respect
to any gain or income (other than interest) realized by a Non-United States
Holder upon the sale, exchange or retirement of a Note.
Any gain or income (other than interest) realized upon the sale, exchange
or retirement of a Note generally will not be subject to United States federal
income tax unless (i) such gain or income is effectively connected with the
conduct of a trade or business in the United States of the Non-United States
Holder, or (ii), in the case of a Non-United States Holder who is a nonresident
alien individual, such Holder is present in the United States for 183 or more
days in the taxable year of such sale, exchange or retirement and certain other
conditions are met.
ESTATE TAX
A Note beneficially owned by an individual who at the time of death is a
Non-United States Holder generally will not be subject to United States federal
estate tax as a result of such individual's death, provided that such individual
does not at the time of death actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote and provided that the interest payments with respect to such Note would not
have been, if received at the time of such individual's death, effectively
connected with the conduct of a trade or business in the United States by such
individual.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, a 31% backup withholding tax and information reporting
requirements apply to certain payments of principal, premium, if any, and
interest on, or to the proceeds from the sale of, a Note.
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Generally, no backup withholding will be required with respect to payments
made by the Company or its paying agent to a Non-United States Holder if the
Certification Requirement has been satisfied. In such case, however, the Company
will report the interest payments on the Note to the IRS.
In addition, backup withholding and information reporting generally will
not apply if payments of principal, premium, if any, and interest on a Note are
paid or collected by a foreign office of a custodian, nominee or other foreign
agent on behalf of the beneficial owner of such Note, or if the proceeds of the
sale of a Note are paid by or through a foreign office of a broker (as defined
in applicable Treasury regulations). If, however, such nominee, custodian, agent
or broker is, for United States federal income tax purposes, a United States
person, a controlled foreign corporation or a foreign person that derives 50% or
more of its gross income for certain periods from the conduct of a trade or
business in the United States, such payments will not be subject to backup
withholding but will be subject to information reporting unless (1) such
custodian, nominee, agent or broker has documentary evidence in its records that
the beneficial owner is not a United States person and certain other conditions
are met or (2) the beneficial owner otherwise establishes an exemption.
Temporary Treasury regulations provide that the Treasury is considering whether
backup withholding will apply with respect to such payments that are not
currently subject to backup withholding.
Payments of principal and interest received by the beneficial owner through
a United States office of a custodian, nominee or agent, or the payment of a
broker of the proceeds of the sale of a Note by or through a United States
office of a broker, generally will be subject to both backup withholding and
information reporting unless (1) the beneficial owner satisfies the
Certification Requirement and the payor does not have actual knowledge that the
beneficial owner is a United States person or (2) otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against the holder's United States federal income tax
liability provided the required information is furnished to the IRS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
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For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Notes) other than commissions or concessions of any
broker-dealers and will indemnify the Holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed on for the
Company by Vinson & Elkins L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of Newfield Exploration Company as of
December 31, 1995 and 1996 and for each of the three years in the period ended
December 31, 1996, included in this Prospectus, have been audited by Coopers &
Lybrand L.L.P., independent public accountants, as stated in their report
appearing herein and have been included herein in reliance upon such firm as
experts in accounting and auditing.
Certain information relating to the Company's proved oil and natural gas
reserves and future net cash flows therefrom included in this Prospectus is
derived from estimates prepared by Ryder Scott Company Petroleum Engineers and
is included herein in reliance upon such firm as experts with respect to such
matters.
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GLOSSARY OF OIL AND GAS TERMS
The definitions set forth below shall apply to the indicated terms as used
in this Prospectus. All volumes of natural gas referred to herein are stated at
the legal pressure base of the state or area where the reserves exist and at 60
degrees Fahrenheit and in most instances are rounded to the nearest major
multiple.
Basis Risk. The risk associated with the sales point price for oil or gas
production varying from the reference (or settlement) price for a particular
hedging transaction.
Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used herein
in reference to crude oil or other liquid hydrocarbons.
Bcf. Billion cubic feet.
Bcfe. Billion cubic feet equivalent, determined using the ratio of six Mcf
of natural gas to one Bbl of crude oil, condensate or natural gas liquids.
Btu. British thermal unit, which is the heat required to raise the
temperature of a one-pound mass of water from 58.5 to 59.5 degrees Fahrenheit.
Completion. The installation of permanent equipment for the production of
oil or natural gas, or in the case of a dry hole, the reporting of abandonment
to the appropriate agency.
Developed acreage. The number of acres that are allocated or assignable to
producing wells or wells capable of production.
Development well. A well drilled within the proved area of an oil or
natural gas reservoir to the depth of a stratigraphic horizon known to be
productive.
Dry hole or well. A well found to be incapable of producing hydrocarbons in
sufficient quantities such that proceeds from the sale of such production exceed
production expenses and taxes.
Exploratory well. A well drilled to find and produce oil or natural gas
reserves not classified as proved, to find a new reservoir in a field previously
found to be productive of oil or natural gas in another reservoir or to extend a
known reservoir.
Farm-in or farm-out. An agreement whereunder the owner of a working
interest in an oil and gas lease assigns the working interest or a portion
thereof to another party who desires to drill on the leased acreage. Generally,
the assignee is required to drill one or more wells in order to earn its
interest in the acreage. The assignor usually retains a royalty or reversionary
interest in the lease. The interest received by an assignee is a "farm-in" while
the interest transferred by the assignor is a "farm-out."
Field. An area consisting of a single reservoir or multiple reservoirs all
grouped on or related to the same individual geological structural feature
and/or stratigraphic condition.
Finding Costs. Costs associated with acquiring and developing proved oil
and gas reserves which are capitalized by the Company pursuant to generally
accepted accounting principles.
Gross acres or gross wells. The total acres or wells, as the case may be,
in which a working interest is owned.
Liquids. Crude oil, condensate and natural gas liquids.
MBbls. One thousand barrels of crude oil or other liquid hydrocarbons.
MBbls/d. One thousand barrels of crude oil or other liquid hydrocarbons per
day.
Mcf. One thousand cubic feet.
Mcf/d. One thousand cubic feet per day.
Mcfe. One thousand cubic feet equivalent, determined using the ratio of six
Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids.
MMS. Mineral Management Service of the United States Department of the
Interior.
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MMBbls. One million barrels of crude oil or other liquid hydrocarbons.
MMbtu. One million Btus.
MMcf. One million cubic feet.
MMcf/d. One million cubic feet per day.
MMcfe. One million cubic feet equivalent, determined using the ratio of six
Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids.
Net acres or net wells. The sum of the fractional working interests owned
in gross acres or gross wells, as the case may be.
Present Value. When used with respect to oil and natural gas reserves, the
estimated value of future gross revenues (estimated in accordance with the
requirements of the Commission) to be generated from the production of proved
reserves, net of estimated production and future development costs, using prices
and costs in effect as of the date indicated, without giving effect to
non-property related expenses such as general and administrative expenses, debt
service and future income tax expenses or to depreciation, depletion and
amortization, discounted using an annual discount rate of 10%.
Productive well. A well that is found to be capable of producing
hydrocarbons in sufficient quantities such that proceeds from the sale of such
production exceed production expenses and taxes.
Proved developed producing reserves. Proved developed reserves that are
expected to be recovered from completion intervals currently open in existing
wells and capable of production to market.
Proved developed reserves. Proved reserves that can be expected to be
recovered from existing wells with existing equipment and operating methods.
Proved developed nonproducing reserves. Proved developed reserves expected
to be recovered from zones behind casing in existing wells.
Proved reserves. The estimated quantities of crude oil, natural gas and
natural gas liquids that geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.
Proved undeveloped location. A site on which a development well can be
drilled consistent with spacing rules for purposes of recovering proved
undeveloped reserves.
Proved undeveloped reserves. Proved reserves that are expected to be
recovered from new wells on undrilled acreage or from existing wells where a
relatively major expenditure is required for recompletion.
Recompletion. The completion for production of an existing well bore in
another formation from that in which the well has been previously completed.
Reservoir. A porous and permeable underground formation containing a
natural accumulation of producible oil and/or natural gas that is confined by
impermeable rock or water barriers and is individual and separate from other
reservoirs.
Royalty interest. An interest in an oil and natural gas property entitling
the owner to a share of oil or natural gas production free of costs of
production.
Undeveloped acreage. Lease acreage on which wells have not been drilled or
completed to a point that would permit the production of commercial quantities
of oil and natural gas regardless of whether such acreage contains proved
reserves.
Working interest. The operating interest that gives the owner the right to
drill, produce and conduct operating activities on the property and a share of
production.
Workover. Operations on a producing well to restore or increase production.
69
<PAGE> 71
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of September 30, 1997
(unaudited) and at December 31, 1996 and 1995............. F-3
Consolidated Statements of Income for the nine months ended
September 30, 1997 and 1996 (unaudited) and each of the
three years in the period ended December 31, 1996......... F-4
Consolidated Statements of Stockholders' Equity for the nine
months ended September 30, 1997 and 1996 (unaudited) and
each of the three years in the period ended December 31,
1996...................................................... F-5
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1997 and 1996 (unaudited) and each of
the three years in the period ended December 31, 1996..... F-6
Notes to Consolidated Financial Statements.................. F-7
Supplementary Oil and Gas Disclosures....................... F-19
</TABLE>
F-1
<PAGE> 72
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Newfield Exploration Company:
We have audited the accompanying balance sheets of Newfield Exploration
Company as of December 31, 1996 and 1995, and the related statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Newfield Exploration Company
as of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Houston, Texas
February 11, 1997
F-2
<PAGE> 73
NEWFIELD EXPLORATION COMPANY
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1995 1996 1997
--------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 12,533 $ 13,290 $ 15,279
Accounts receivable -- oil and gas.................. 25,332 46,814 37,222
Other............................................... 4,952 1,179 2,711
--------- --------- ---------
Total current assets........................ 42,817 61,283 55,212
--------- --------- ---------
Oil and gas properties (full cost method, of which
$19,517, $55,305 and $66,957 at December 31, 1995
and 1996 and September 30, 1997, respectively, were
excluded from amortization)......................... 362,857 526,680 715,018
Furniture, fixtures and equipment..................... 1,806 2,496 3,028
Less -- accumulated depreciation, depletion and
amortization........................................ (135,148) (199,161) (266,541)
--------- --------- ---------
229,515 330,015 451,505
--------- --------- ---------
Other assets.......................................... 5,074 4,640 209
--------- --------- ---------
Total assets................................ $ 277,406 $ 395,938 $ 506,926
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities............ $ 24,487 $ 46,072 $ 45,448
Advances from joint owners.......................... 1,673 3,612 915
Current maturities of capital lease obligations..... 422 163 --
Current maturities of long-term debt................ 5,000 -- --
--------- --------- ---------
Total current liabilities................... 31,582 49,847 46,363
--------- --------- ---------
Other liabilities..................................... 1,060 2,048 4,703
Long-term capital lease obligations................... 152 -- --
Long-term debt........................................ 25,000 60,000 120,000
Deferred taxes........................................ 26,041 44,141 57,620
--------- --------- ---------
Total long-term liabilities................. 52,253 106,189 182,323
--------- --------- ---------
Commitments and contingencies (Note 5)................ -- -- --
Stockholders' equity:
Preferred stock ($0.01 par value, 5,000,000 shares
authorized; no shares issued).................... -- -- --
Common stock ($0.01 par value, 50,000,000 shares
authorized at December 31, 1995 and 1996;
100,000,000 shares authorized at September 30,
1997; 34,354,844, 35,243,040 and 35,879,058
shares issued and outstanding at December 31,
1995 and 1996 and September 30, 1997,
respectively).................................... 343 352 359
Additional paid-in capital.......................... 137,830 147,291 159,265
Unearned compensation............................... (1,113) (2,746) (4,764)
Retained earnings................................... 56,511 95,005 123,380
--------- --------- ---------
Total stockholders' equity.................. 193,571 239,902 278,240
--------- --------- ---------
Total liabilities and stockholders'
equity.................................... $ 277,406 $ 395,938 $ 506,926
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 74
NEWFIELD EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Oil and gas revenues...... $ 69,728 $ 94,598 $ 149,256 $ 101,774 $ 139,135
----------- ----------- ----------- ----------- -----------
Operating expenses:
Lease operating......... 9,555 14,227 16,946 12,094 17,782
Depreciation, depletion
and amortization..... 34,118 49,904 64,026 45,535 67,415
General and
administrative,
net.................. 3,802 5,549 7,552 5,338 8,251
Stock compensation...... 1,084 692 1,943 1,444 1,005
----------- ----------- ----------- ----------- -----------
Total operating
expenses...... 48,559 70,372 90,467 64,411 94,453
----------- ----------- ----------- ----------- -----------
Income from operations.... 21,169 24,226 58,789 37,363 44,682
Other income (expenses):
Interest income......... 1,742 988 917 588 768
Interest expense, net... (363) (208) (420) (197) (1,783)
----------- ----------- ----------- ----------- -----------
1,379 780 497 391 (1,015)
----------- ----------- ----------- ----------- -----------
Income before income
taxes................... 22,548 25,006 59,286 37,754 43,667
Income tax provision:
Current................. 453 21 29 (308) (23)
Deferred................ 7,655 8,721 20,763 13,511 15,315
----------- ----------- ----------- ----------- -----------
8,108 8,742 20,792 13,203 15,292
----------- ----------- ----------- ----------- -----------
Net income................ $ 14,440 $ 16,264 $ 38,494 $ 24,551 $ 28,375
=========== =========== =========== =========== ===========
Earnings per common
share................... $ 0.40 $ 0.45 $ 1.03 $ 0.66 $ 0.75
=========== =========== =========== =========== ===========
Weighted average number of
shares and common stock
equivalents
outstanding............. 35,910,348 36,193,102 37,202,545 37,131,830 37,771,278
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 75
NEWFIELD EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, 1996 AND NINE MONTHS ENDED
SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
UNREALIZED
GAIN
(LOSS) ON
INVESTMENT
COMMON STOCK ADDITIONAL SECURITIES TOTAL
------------------- PAID-IN UNEARNED RETAINED AVAILABLE FOR STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION EARNINGS SALE EQUITY
---------- ------ ---------- ------------ --------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993........ 33,098,710 $331 $129,579 $(2,872) $ 25,807 $152,845
Issuance of common stock for
cash, net of offering costs... 233,650 2 1,139 1,141
Amortization of stock
compensation.................. 1,084 1,084
Unrealized loss on investment
securities available for sale
($30 loss, net of deferred
income taxes of $11).......... $(19) (19)
Net income...................... 14,440 14,440
---------- ---- -------- ------- -------- ---- --------
Balance, December 31, 1994........ 33,332,360 333 130,718 (1,788) 40,247 (19) 169,491
Issuance of common stock for
cash, net of offering costs... 1,016,484 10 4,333 4,343
Issuance of restricted stock,
less amortization of $33...... 6,000 80 (47) 33
Cancellation of stock options... (63) 17 (46)
Amortization of stock
compensation.................. 705 705
Adjustment to unrealized loss on
investment securities
available for sale............ 19 19
Tax benefit from exercise of
stock options (Note 6)........ 2,762 2,762
Net income...................... 16,264 16,264
---------- ---- -------- ------- -------- ---- --------
Balance, December 31, 1995........ 34,354,844 343 137,830 (1,113) 56,511 -- 193,571
Issuance of common stock for
cash.......................... 632,196 6 3,204 3,210
Issuance of restricted stock,
less amortization of $1,441... 256,000 3 3,601 (2,163) 1,441
Cancellation of stock options... (28) 3 (25)
Amortization of stock
compensation.................. 527 527
Tax benefit from exercise of
stock options (Note 6)........ 2,684 2,684
Net income...................... 38,494 38,494
---------- ---- -------- ------- -------- ---- --------
Balance, December 31, 1996........ 35,243,040 352 147,291 (2,746) 95,005 -- 239,902
Issuance of common stock for
cash.......................... 590,196 6 7,094 7,100
Issuance of restricted stock,
less amortization of $137..... 45,822 1 3,022 (2,886) 137
Amortization of stock
compensation.................. 868 868
Tax benefit from exercise of
stock options (Note 6)........ 1,858 1,858
Net income...................... 28,375 28,375
---------- ---- -------- ------- -------- ---- --------
Balance, September 30, 1997
(unaudited)..................... 35,879,058 $359 $159,265 $(4,764) $123,380 $ -- $278,240
========== ==== ======== ======= ======== ==== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 76
NEWFIELD EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- ---------------------
1994 1995 1996 1996 1997
--------- -------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net Income.................................. $ 14,440 $ 16,264 $ 38,494 $ 24,551 $ 28,375
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization.... 34,118 49,904 64,026 45,535 67,415
Deferred taxes.............................. 7,655 8,721 20,763 13,511 15,315
Stock compensation.......................... 1,084 692 1,943 1,444 1,005
Realized loss on sale of investment
securities............................... 238 32 -- -- --
--------- -------- --------- --------- ---------
57,535 75,613 125,226 85,041 112,110
Changes in assets and liabilities:
(Increase) decrease in accounts receivable,
oil and gas.............................. 5,425 (8,859) (21,418) 744 9,592
(Increase) decrease in other current
assets................................... 1,218 (307) 3,793 2,589 (1,511)
(Increase) decrease in other assets......... (1,226) (24) 443 231 4,431
Increase (decrease) in accounts payable and
accrued liabilities...................... 718 4,275 16,523 9,778 (7,310)
Increase (decrease) in advances from joint
owners................................... 4,357 (3,194) 1,939 9,193 (2,697)
Increase in other liabilities............... 94 136 988 1,055 2,655
--------- -------- --------- --------- ---------
Net cash provided by operating
activities........................ 68,121 67,640 127,494 108,631 117,270
--------- -------- --------- --------- ---------
Cash flows from investing activities:
Additions to oil and gas properties......... (114,892) (106,957) (158,834) (106,627) (181,652)
Additions to furniture, fixtures and
equipment................................ (229) (599) (703) (417) (566)
Purchases of investment securities.......... (40,997) -- -- -- --
Sales of investment securities.............. 32,499 8,227 -- -- --
--------- -------- --------- --------- ---------
Net cash used in investing
activities........................ (123,619) (99,329) (159,537) (107,044) (182,218)
--------- -------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from borrowings.................... -- 96,000 281,000 190,000 315,000
Repayments of borrowings.................... -- (66,000) (251,000) (164,000) (255,000)
Proceeds from issuances of common stock,
net...................................... 1,141 4,343 3,210 2,194 7,100
Payments on capital lease obligations....... (276) (533) (410) (357) (163)
--------- -------- --------- --------- ---------
Net cash provided by financing
activities........................ 865 33,810 32,800 27,837 66,937
--------- -------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents................................. (54,633) 2,121 757 29,424 1,989
Cash and cash equivalents, beginning of
period...................................... 65,045 10,412 12,533 12,533 13,290
--------- -------- --------- --------- ---------
Cash and cash equivalents, end of period...... $ 10,412 $ 12,533 $ 13,290 $ 41,957 $ 15,279
========= ======== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 77
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
These financial statements include the accounts of Newfield Exploration
Company (the "Company"), a Delaware corporation, which was formed on December 5,
1988 to conduct offshore oil and gas exploration and drilling and development
operations in the Gulf of Mexico. As an independent oil and gas producer, the
Company's revenue, profitability and future rate of growth are substantially
dependent upon prevailing prices for natural gas, oil and condensate, which are
dependent upon numerous factors beyond the Company's control, such as economic,
political and regulatory developments and competition from other sources of
energy. The energy markets have historically been very volatile, as evidenced by
the recent volatility of gas prices, and there can be no assurance that oil and
gas prices will not be subject to wide fluctuations in the future. A substantial
or extended decline in oil and gas prices could have a material adverse effect
on the Company's financial position, results of operations, cash flows,
quantities of oil and gas reserves that may be economically produced and access
to capital.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Newfield
Exploration Company and its subsidiaries (collectively, the Company). All
significant intercompany balances and transactions have been eliminated. Certain
reclassification for prior years have been made to conform with the current year
presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date(s) of the financial
statements and the reported amounts of revenues and expenses during the
reporting period(s). The Company's most significant financial estimates are
based on remaining proved oil and gas reserves (see Supplementary Oil and Gas
Disclosures included in Supplementary Financial Information). Actual results
could differ from these estimates.
COMMON STOCK SPLIT
On December 1, 1996 the Company's Board of Directors declared a two-for-one
split of its outstanding common stock to stockholders of record on December 16,
1996. The stated par value per share of common stock was not changed from $0.01.
These financial statements and notes thereto have been restated to retroactively
reflect the stock split.
EARNINGS PER SHARE
Net income per share is calculated by dividing net income by the weighted
average shares of Common Stock and Common Stock equivalents outstanding.
CASH FLOW STATEMENT
Cash equivalents include highly liquid investments with a maturity of
approximately three months or less when acquired. The Company invests cash in
excess of operating requirements in United States Treasury notes, Eurodollar
bonds and investment grade commercial paper. Cash equivalents are stated at
cost, which approximates fair market value. Cash flows resulting from oil and
gas sales hedging contracts are classified in the same category as the items
being hedged.
F-7
<PAGE> 78
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED)
been eliminated. Certain reclassification for prior years have been made to
conform with the current year presentation.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), which encourages, but does not require, all entities
to record compensation expense on all stock-based compensation plans based upon
fair value. The Company continues to account for its stock-based compensation
plans using the accounting prescribed by Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees." In accordance with
FAS 123 the Company has disclosed pro forma net income and earnings per share as
if the fair value-based method of accounting had been applied. See Note 6.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company includes fair value information in the notes to financial
statements when the fair value of its financial instruments is different from
the book value. The book value of those financial instruments that are
classified as current assets or liabilities approximate fair value because of
the short maturity of those instruments.
OIL AND GAS PROPERTIES
The Company uses the full cost method of accounting for exploration and
development costs. Under this method of accounting, all costs incurred in the
acquisition, exploration and development of oil and gas properties are
capitalized. Such capitalized costs and estimated future development and
dismantlement costs are amortized on a unit-of-production method based on proved
reserves. Net capitalized costs of oil and gas properties are limited to the
lower of unamortized cost or the cost center ceiling, defined as the sum of the
present value (10% discount rate) of estimated future net revenues from proved
reserves, based on year-end oil and gas prices; plus the cost of properties not
being amortized, if any; plus the lower of cost or estimated fair value of
unproved properties included in the costs being amortized, if any; less related
income tax effects.
Proceeds from the sale of oil and gas properties are applied to reduce the
costs in the cost center unless the sale involves a significant quantity of
reserves in relation to the cost center, in which case a gain or loss is
recognized. At December 31, 1995, the Company had $3.5 million included in other
current assets which was a receivable from an industry investor relating to its
participation in the acquisition of an overriding royalty interest.
Unevaluated properties and associated costs not currently being amortized
and included in oil and gas properties were $55.3 million and $19.5 million at
December 31, 1996 and 1995, respectively. The properties represented by these
costs were at such dates undergoing exploration or development activities, or
are properties on which the Company intends to commence such activities in the
future. The Company believes that the unevaluated properties at December 31,
1996 will be substantially evaluated and therefore subject to amortization in 12
to 24 months.
Other property and equipment are recorded at cost and are depreciated over
their estimated useful lives of five to seven years using the straight-line
method.
F-8
<PAGE> 79
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED)
ABANDONMENT AND DISMANTLEMENT COSTS
Future abandonment and dismantlement costs include costs to dismantle,
relocate and dispose of the Company's offshore production platforms, gathering
systems, wells and related structures. The Company develops specific estimates
of its future abandonment and dismantlement costs for each of its properties
based upon the type of production structure, depth of water, currently available
abandonment procedures and consultations with construction and engineering
consultants. The Company does not currently anticipate additional abandonment
and dismantlement costs will be incurred beyond such estimates. Such estimates
are re-evaluated by the Company's engineers at least annually.
Total estimated future abandonment and dismantlement costs associated with
the Company's developed and acquired properties were $41.5 million, $35.9
million, and $26.0 million as of December 31, 1996, 1995 and 1994, respectively.
Estimated future abandonment and dismantlement costs are accrued on a
unit-of-production method based on proved reserves. The portion of future
abandonment and dismantlement costs that has been accrued is included in
accumulated depreciation, depletion and amortization and was $18.0 million,
$13.7 million and $8.4 million as of December 31, 1996, 1995 and 1994,
respectively.
PRODUCTION IMBALANCES
Joint interest owners may take more or less than their ownership interest
of natural gas volumes from jointly owned reservoirs. The Company follows the
sales method of accounting for imbalances. Under this method, the Company
records a liability if its sales of gas volumes in excess of its entitlements
from a jointly owned reservoir exceed its interest in the remaining estimated
gas reserves of such reservoir. Imbalances are monitored to minimize significant
imbalances, and such imbalances were not significant at December 31, 1996 and
December 31, 1995.
INCOME TAXES
The Company follows Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("FAS 109"). This statement requires deferred tax
assets and liabilities to be determined by applying tax regulations existing at
the end of a reporting period to the cumulative temporary differences between
the tax bases of assets and liabilities and their reported amounts in the
financial statements.
CONCENTRATION OF CREDIT RISK
The Company maintains cash balances with several banks, which frequently
exceed federally insured limits and invests its cash in investment grade
commercial and U.S. Government backed securities. The Company's joint interest
partners consist primarily of independent oil and gas producers. The Company's
oil and gas production purchasers consist primarily of independent marketers and
major gas pipeline companies. The Company performs credit evaluations of its
customers' financial condition and obtains letter of credit agreements and
parental guarantees from selected oil and gas purchase customers. The Company
has not experienced any significant losses from uncollectible accounts.
MAJOR CUSTOMERS
The Company sold oil and gas production representing more than 10% of its
oil and gas revenues for the year ended December 31, 1996, to Gulfmark Energy,
Inc. (17%), Coast Energy Group (16%), and Superior Natural Gas Corporation
(12%); for the year ended December 31, 1995, to Gulfmark Energy, Inc. (22%),
Coast Energy Group (15%), and Northridge Energy (10%); for the year ended
December 31, 1994, to Coast Energy Group (14%), Gulfmark Energy, Inc. (14%), and
Eagle Natural Gas
F-9
<PAGE> 80
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED)
Company (12%). Based upon the current demand for oil and gas, the Company
believes that the loss of any of these purchasers would not have a material
adverse effect on the Company.
UNAUDITED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of the Company as of September 30, 1997 and the results of
operations and cash flows for the periods presented. All such adjustments are of
a normal recurring nature. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the SEC's rules
and regulations. The results of operations for the periods presented are not
necessarily indicative of the results for the full year.
2. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:
From time to time, the Company has utilized hedging transactions with
respect to a portion of its oil and gas production to achieve a more predictable
cash flow, as well as to reduce its exposure to price fluctuations. While the
use of these hedging arrangements limits the downside risk of adverse price
movements, they may also limit future revenues from favorable price movements.
The use of hedging transactions also involves the risk that the counterparties
will be unable to meet the financial terms of such transactions. All of the
Company's hedging transactions to date were carried out in the over-the-counter
market and the obligations of the counterparties have been guaranteed by
entities with at least an investment grade rating or secured by letters of
credit. The Company accounts for these transactions as hedging activities and,
accordingly, gains or losses are included in oil and gas revenues when the
hedged production is delivered. Unrealized gains and losses on these contracts
are deferred and offset against the related settlement amounts.
F-10
<PAGE> 81
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED)
During 1996, approximately 54% of the Company's equivalent production was
subject to hedge positions as compared to 42% in 1995. The Company has also
entered into hedging transactions with respect to a portion of its estimated
production for 1997. The Company continues to evaluate whether to enter into
additional hedging transactions for 1997 and future years. In addition, the
Company may determine from time to time to terminate its then existing hedging
positions. The following is a summary of the Company's natural gas hedge
positions as of December 31, 1996.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE SALES POINT
PRICE PER MCF(1)
----------------------------
MONTHLY COLLAR
VOLUME ------------------ FAIR MARKET
PERIOD IN BCF SWAP FLOOR CEILING VALUE(2)
------ ------- ------ ------ -------- -----------------
<S> <C> <C> <C> <C> <C>
January 1997 -- March 1997
Price Swap Contracts................. 1.30 $2.36 -- -- ($3.3 million)(3)
Cashless Collar Contracts............ 1.25 -- $2.22 $2.67 ($2.3 million)(3)
Cashless Collar Contracts............ 1.30 -- $2.76 $3.25 ($1.0 million)(3)
April 1997 -- June 1997
Price Swap Contracts................. 0.80 $2.08 -- -- ($0.2 million)(3)
</TABLE>
- ---------------
(1) Price per Mcf is based upon the average energy content of the Company's gas
production for the twelve months ended December 31, 1996.
(2) The fair market value is calculated using prices derived from NYMEX futures
contract prices existing at December 31, 1996.
(3) This opportunity loss will be substantially offset in the cash market when
the hedged production is delivered in 1997, which has the effect of fixing
the price at which the commodity is sold. The Company does not record the
fair value of these instruments in its financial statements.
These gas swaps are settled based on published sales prices of natural gas
delivered into pipelines at the locations where the Company sells its production
(the "Sales Point Price"). With respect to any particular swap transaction, the
counterparty is required to make a payment to the Company in the event that the
average Sales Point Price for any settlement period is less than the swap price
for such transaction, and the Company is required to make payment to the
counterparty in the event that the average Sales Point Price for any settlement
period is greater than the swap price for such transaction. For any particular
collar transaction, the counterparty is required to make a payment to the
Company if the average Sales Point Price for the reference period is below the
floor price for such transaction and the Company is required to make payment to
the counterparty if the average Sales Point Price for the reference period is
above the ceiling price for such transaction. Because substantially all of the
Company's natural gas production is sold under spot contracts that reference the
Sales Point Price, the Company has no basis risk with respect to these
transactions.
3. DEBT:
The Company has an unsecured revolving credit agreement with a current
commitment of $125 million ("Aggregate Commitment"). As of December 31, 1996 and
September 30, 1997, there was $60 million and $120 million, respectively
outstanding under this credit agreement and the Company's available borrowing
base was $125 million and $160 million, respectively (the "Borrowing Base"). The
Borrowing Base is determined by the majority banks party to the agreement on May
1 and November 1 of each year. Available funds under the agreement are
established quarterly by the Company (the "Designated Borrowing Base"). The
Designated Borrowing Base is an amount greater than or equal to
F-11
<PAGE> 82
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED)
the Designated Borrowing Base Floor Amount of $75 million but less than or equal
to the Borrowing Base. As of December 31, 1996 and September 30, 1997 the
Company's Designated Borrowing Base was $75 million and $125 million,
respectively. The Company retains the ability, subject to notification, to
increase the Designated Borrowing Base to an amount not to exceed the Borrowing
Base.
Borrowings under the credit agreement bear interest, payable quarterly, at
the Company's option at (i) the higher of (a) the federal fund rate (5.25% at
December 31, 1996) plus 50 basis points and (b) the bank's prime rate (8.25% at
December 31, 1996), plus a variable margin, which ranges up to 25 basis points
based upon the loan amount outstanding relative to the borrowing base, or (ii)
LIBOR (30 day LIBOR was 5.50% at December 31, 1996), plus a variable margin,
which ranges from 75 to 125 basis points based upon the loan amount outstanding
relative to the borrowing base. The credit agreement also provides for a
commitment fee, to be paid quarterly, of 37.5 basis points per annum on the
unused Designated Borrowing Base available to the Company. In addition, a
standby fee, to be paid quarterly, of 12.5 basis points per annum will be paid
on the difference between the Designated Borrowing Base and the Aggregate
Commitment. The Company paid commitment fees of approximately $205,000, $179,000
and $100,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
The credit agreement provides for a revolving credit period through June
30, 1999, at which time the aggregate loans outstanding under the credit
agreement convert to a term loan with quarterly maturities through June 30,
2002.
The credit agreement contains positive and negative covenants, which, among
other things, require the Company to maintain a working capital ratio, as
defined, of at least 1.1 to 1.0, a fixed charge coverage ratio, as defined, of
at least 1.5 to 1.0 and a minimum net worth. The credit agreement also limits
the incurrence of additional debt, additional liens on properties, sale of
certain assets and the declaration or payment of dividends.
4. FEDERAL INCOME TAXES:
The components of deferred tax assets and liabilities pursuant to FAS 109
are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Deferred tax liability:
Oil and gas properties................................. $55,993 $35,059
------- -------
Deferred tax asset:
Alternative minimum tax................................ 1,848 1,846
Net operating losses................................... 8,329 5,567
Other, net............................................. 1,675 1,605
------- -------
11,852 9,018
Valuation Allowance...................................... -- --
------- -------
Net deferred tax liability............................. $44,141 $26,041
======= =======
</TABLE>
The Company does not believe a deferred tax asset valuation is required
because all tax carryovers are expected to be fully utilized.
F-12
<PAGE> 83
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED)
As of December 31, 1996, the Company had a net operating loss ("NOL")
carryforward for federal income tax purposes of approximately $23.8 million that
may be used in future years to offset taxable income. Utilization of the
Company's NOL carryforward is subject to annual limitations due to certain stock
ownership changes that have occurred or may occur. To the extent not utilized,
the NOL carryforward will begin to expire in 2005.
5. COMMITMENTS AND CONTINGENCIES:
The Company has entered into a noncancelable operating lease agreement for
office space in Houston, Texas. The lease term expires in November 2002, with
two options to renew the lease for five years each.
Future minimum lease payments required as of December 31, 1996 related to
this operating lease are as follows (in thousands):
<TABLE>
<S> <C>
Year ended December 31,
1997................................................... $ 553
1998................................................... 572
1999................................................... 592
2000................................................... 613
2001 and thereafter.................................... 1,174
------
Total minimum lease payments...................... $3,504
======
</TABLE>
Rent expense for the years ended December 31, 1996, 1995 and 1994 was
$537,000, $490,000 and $464,000, respectively.
The Company has been named as a defendant in certain lawsuits arising in
the ordinary course of business. While the outcome of these lawsuits cannot be
predicted with certainty, management does not expect these matters to have a
material adverse effect on the financial position and results of operations of
the Company.
6. STOCK-BASED COMPENSATION:
The Company has several stock-based compensation plans, which are described
below. The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its stock-based compensation plans. In October 1995, the FASB
issued Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("FAS 123"), which encourages, but does not require,
all entities to record compensation expense on all stock-based compensation
plans based upon fair value. The Company continues to account for its
stock-based compensation plans using the accounting prescribed by APB Opinion
No. 25. However, pro forma disclosures as if the Company adopted the cost
recognition provisions of FAS 123 in 1995 are presented below.
STOCK OPTION PLANS
The Company has granted options pursuant to its 1989, 1990, 1991, 1993 and
1995 stock option plans (collectively, the "Stock Option Plans"). Options that
have been granted and are outstanding generally expire 10 years from the date of
grant and become exercisable at the rate of 20% per year based on the number of
full years the options are held from the date of grant. At December 31, 1996, a
total of 3,482,700 options were outstanding, of which 2,168,770 were
exercisable. At such date, the
F-13
<PAGE> 84
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED)
Company had an additional 1,022,600 options available for grant. If granted,
these additional options will be exercisable at a price not less than the fair
market value per share of the Company's Common Stock on the date of grant. The
following is a summary of all stock option activity for 1994, 1995 and 1996:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED
SHARES OF AVERAGE
UNDERLYING EXERCISE
OPTIONS PRICES
---------- --------
<S> <C> <C>
Outstanding at December 31, 1993............................ 4,450,940 $ 4.01
Granted................................................... 196,000 12.90
Exercised................................................. (199,500) 4.28
Expired................................................... (9,000) 4.00
--------- ------
Outstanding at December 31, 1994............................ 4,438,440 4.39
Granted................................................... 241,600 13.18
Exercised................................................. (981,550) 4.06
Forfeited................................................. (34,750) 9.63
Expired................................................... (96,000) 14.14
--------- ------
Outstanding at December 31, 1995............................ 3,567,740 4.76
Granted................................................... 539,350 15.35
Exercised................................................. (598,590) 4.64
Forfeited................................................. (25,800) 9.09
--------- ------
Outstanding at December 31, 1996............................ 3,482,700 $ 6.39
========= ======
Exercisable at December 31, 1994............................ 2,527,940 $ 3.94
========= ======
Exercisable at December 31, 1995............................ 2,292,790 $ 4.04
========= ======
Exercisable at December 31, 1996............................ 2,168,770 $ 4.18
========= ======
</TABLE>
The weighted average fair value of options granted during 1996 and 1995 was
$6.39 and $5.69, respectively.
The fair value of each stock option granted during 1996 and 1995 was
estimated as of the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions for grants in 1996 and 1995: no
dividend yield; expected volatility of 28.52%; risk-free interest rates ranging
from 5.33% to 6.71%; and an expected option life of 6.50 years.
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------ ----------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ---------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 3.50 to $ 5.62 2,690,930 5 years $ 4.00 2,116,930 $ 3.97
10.94 to 14.78 700,770 9 years 13.50 51,840 12.82
17.47 to 25.50 91,000 10 years 22.28 -- --
- ---------------- --------- -------- ------ --------- ------
$ 3.50 to $25.50 3,482,700 6 years $ 6.39 2,168,770 $ 4.18
</TABLE>
F-14
<PAGE> 85
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED)
Common stock issued through the exercise of stock options results in a tax
deduction for the Company equivalent to the taxable gain recognized by the
optionee. For financial reporting purposes, the tax effect of this deduction is
accounted for as a credit to additional paid-in capital rather than as a
reduction of income tax expense. The exercise of stock options during 1996 and
1995 resulted in a tax benefit to the Company of approximately $2.7 million and
$2.8 million, respectively, which was recorded as an increase in stockholders'
equity.
RESTRICTED STOCK
The Company has adopted two plans pursuant to which restricted shares of
Common Stock may be granted. Under the Newfield Exploration Company 1995 Omnibus
Stock Plan ("the Omnibus Plan"), the Company may grant to employees (including
an officer or a director who is also an employee) as restricted Common Stock all
or a portion of 400,000 shares of Common Stock reserved under the Omnibus Plan.
In 1996 the Company issued 246,000 shares of restricted Common Stock whose
shares vest at the rate of 20% per year on each anniversary of the date of
issuance, commencing on the first anniversary date of issuance subject to the
lapse of certain performance-based forfeiture provisions.
Under the Newfield Exploration Company 1995 Non-Employee Director
Restricted Stock Plan ("the Non-Employee Director Plan"), the Company may grant
to "Non-Employee Directors" up to 50,000 shares of Common Stock as restricted
Common Stock. The Non-Employee Director Plan provides for the automatic,
nondiscretionary issuance of 1,000 shares of restricted Common Stock to each
director when first elected to the Company's board of directors, whose shares
vest at the rate of 33 1/3% per year on the day before the first, second and
third annual shareholder meetings following the date the shares were issued. The
Company issued 10,000 shares to five Non-Employee Directors in 1996 and 6,000
shares to three Non-Employee Directors in 1995.
In accordance with APB Opinion No. 25, upon the issuance of restricted
shares of Common Stock under these two plans, the Company recognized a
compensation cost for the cost of the restricted Common Stock in the amount of
$3.6 million for 1996 and $80,000 for 1995. This cost is charged to
shareholders' equity and recognized as amortization expense over the applicable
vesting period, in the amount of $1.5 million for 1996 and $32,000 for 1995. The
weighted average exercise price for 256,000 shares of restricted Common Stock
issued in 1996 is $14.08. The weighted average exercise price for 6,000 shares
of restricted Common Stock issued in 1995 is $13.28.
EMPLOYEE STOCK PURCHASE PLAN
During 1993, the Company established an Employee Stock Purchase Plan (the
"Stock Purchase Plan") that permits eligible employees to acquire Common Stock.
Under the Stock Purchase Plan, the Company is authorized to issue up to 200,000
shares of Common Stock to its full-time (or part-time for at least 20 hours per
week and at least five months per year) employees at a discount from the stock's
fair market value through payroll deductions.
For each six-month period beginning on January 1 or July 1 during the term
of the Stock Purchase Plan, unless the Board determines otherwise, each eligible
employee has the opportunity to purchase Common Stock through voluntary payroll
deductions. Employees make an election to participate prior to the start of a
period by stating the percentage of their compensation to be withheld. An
employee may have withheld from two to ten percent of the employee's base wages
or salary. The Stock Purchase Plan allows withdrawals, terminations and
reductions on the amounts being deducted. The purchase price for the Common
Stock will be 85% of the lesser of the fair market value of the Common Stock on
(i) the first
F-15
<PAGE> 86
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED)
day of the period, or (ii) the last day of the period. No employee may purchase
Common Stock under the Stock Purchase Plan valued at more than $25,000 for each
calendar year.
Under the Stock Purchase Plan, the Company has sold 23,990 shares and
25,946 shares to employees in 1996 and 1995, respectively, which had weighted
average exercise prices of $13.56 and $9.78, respectively. The weighted average
fair market value of the shares sold during 1996 and 1995 was $1.92 and $1.86,
respectively. In accordance with APB Opinion No. 25, the Company has not
recognized any compensation cost for the Stock Purchase Plan.
The fair value of each stock option granted under the Stock Purchase Plan
is estimated on the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions for grants in 1996 and 1995,
respectively: no dividend yield for both years; expected volatility of 28.52%
for both years; risk-free interest rates ranging from 5.07% to 6.11%; and
expected lives of six months for both years.
PRO FORMA NET INCOME AND NET INCOME PER COMMON SHARE
Pursuant to APB Opinion No. 25, the Company recognized a charge of $1.5
million as compensation expense for equity-based compensation awarded in 1996
and $32,000 as compensation expense for equity-based compensation awarded in
1995. If the fair value based method of accounting in FAS 123 had been applied,
the Company would have recognized $2.3 million in 1996 and $197,000 in 1995 as
compensation expense.
The Company's net income and earnings per common share for 1996 and 1995
would have approximated the pro forma amounts below (in thousands except per
share data):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995
--------- ---------
<S> <C> <C>
Net Income -- as reported................................... $38,494 $16,264
Net Income -- pro forma..................................... $37,956 $16,140
Earnings per common share -- as reported.................... $ 1.03 $ 0.45
Earnings per common share -- pro forma...................... $ 1.02 $ 0.45
</TABLE>
The effects of applying FAS 123 in this pro forma disclosure are not
indicative of future amounts. FAS 123 does not apply to awards prior to 1995,
and the Company anticipates making awards in the future under its stock-based
compensation plans.
7. EMPLOYEE BENEFIT PLANS:
The Company sponsors a 401(k) Profit Sharing Plan (the "401(k) Plan") under
Section 401(k) of the Internal Revenue Code. This plan covers all employees of
the Company. The Company matches $1.00 for each $1.00 of employee deferral, with
the Company's contribution not to exceed 8% of an employee's salary, subject to
limitations imposed by the Internal Revenue Service. The Company's contributions
to the 401(k) Plan totaled $371,000, $301,000 and $112,000 for the years ended
December 31, 1996, 1995 and 1994, respectively.
The Company also sponsors the Newfield Employee 1993 Incentive Compensation
Plan (the "Plan"), which is a non-qualified plan funded by amounts equal to
revenues that would be attributable to a 1% overriding royalty interest on
acquired proved properties and a 2% overriding royalty interest from exploration
properties. Such amounts are attributable to both the Company's interest and the
interest of
F-16
<PAGE> 87
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED)
certain working interest owners in these properties. Amounts available for
distribution under the Plan and attributable to the overriding royalty interests
bearing against the Company are limited to 5% of the Company's adjusted net
income as defined in the Plan. The Plan is administered by the Compensation
Committee of the Board of Directors with award amounts recommended by the Chief
Executive Officer of the Company, based on the performance of the Company and
the eligible employees during the performance period. All employees of the
Company are eligible for awards if employed on both October 1 and December 31 of
the performance period. Awards may have both a current and a deferred component
of compensation. Current awards are distributed to employees by March 1 of the
year following the performance period, with the deferred amounts being
distributed in four equal payments on each following December 1. Eligible
employees may elect for deferred amounts to be paid in Common Stock instead of
cash. If the eligible employee elects for a deferred amount to be paid in Common
Stock, the number of shares of Common Stock to be awarded shall be determined by
using the fair market value of Common Stock on the date of the award. Total
expenses under the Plan for the years ended December 31, 1996 and 1995 were $4.9
million and $2.4 million, respectively.
8. RELATED PARTY TRANSACTIONS:
Warburg, Pincus Counsellors, Inc. (an affiliate of Warburg, Pincus & Co.,
general partner of Warburg, Pincus Investors, L.P., a significant stockholder of
the Company) provided investment management and consulting services for the
Company for a fee. Such services included advice and assistance concerning the
investment and management of the Company's excess funds invested in marketable
securities. Payments for such services were $39,000 for 1994. No such fees were
incurred during 1995 and 1996.
The 401(k) Plan invests in several mutual funds (the "Warburg Funds")
affiliated with Warburg, Pincus & Co. The amount invested in the Warburg Funds
at any time depends upon the elections made by the participants in the 401(k)
Plan. The Company believes that the 401(k) Plan invests on the same basis in
terms of rates and fees as are offered generally to similar employee investment
vehicles. The aggregate amount of the 401(k) Plan's assets invested in Warburg
Funds were approximately $1,314,000 and $1,077,000 as of December 31, 1996 and
1995, respectively.
9. SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest and income taxes for each of the three years in
the period ended December 31, 1996, are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Interest payments (net of interest capitalized of
$1,508, $674 and $217 during 1996, 1995 and 1994,
respectively)......................................... $363 $127 $ 29
Income tax payments..................................... $ -- $550 $200
</TABLE>
The following transactions have been appropriately excluded from the
statement of cash flows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term capital leases.............................. $ (73) $ 9 $ 700
Increase (decrease) in capital accrual................ $5,062 $ (22) $1,800
Changes in working capital amounts related to property
acquisitions........................................ $ -- $(2,750) $ --
</TABLE>
F-17
<PAGE> 88
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED)
10. ACQUISITIONS:
In May 1997, the Company acquired the assets and subsidiaries of Huffco
International, L.L.C., which includes a 35% working interest in a 415,000 acre
production sharing contract in the Bohai Bay, offshore China. The Company also
acquired certain rights and data relating to offshore West Africa, an
international database and increased its technical staff. The purchase price was
$6.3 million.
11. RECENT DEVELOPMENTS:
In July 1997, the Company completed the acquisition of interests in five
oil and gas producing fields, comprised of interests in nine offshore blocks, in
the East Cameron, West Cameron and High Island area of the Gulf of Mexico,
offshore Louisiana and Texas for a purchase price of approximately $43 million.
In July, combined production from these fields is approximately 18 MMcfe of
natural gas per day net to the interests acquired, or approximately 10% of the
Company's net daily production prior to the acquisition.
The Company maintains its reserve-based revolving Credit Facility with The
Chase Manhattan Bank, as agent. As of September 30, 1997, $120 million was
outstanding under the Credit Facility. The Credit Facility was amended and
restated as of October 9, 1997 in connection with the Company's private
placement of $125 million of senior unsecured notes. The net proceeds of the
private placement were used primarily to repay all amounts then outstanding
under the Credit Facility. As so amended and restated, the Credit Facility
provides a $125 million revolving credit maturing on October 31, 2002, improved
interest rate pricing grids and additional flexibility under certain covenants.
The amount available under the Credit Facility is subject to a calculated
borrowing base, which base is reduced by the principal amount of the Notes
outstanding at the time of calculation. The Company has an option, subject to
the borrowing base, to increase the facility to $200 million. The Company
currently has $100 million of borrowing capacity under the Credit Facility.
F-18
<PAGE> 89
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED)
12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
The results of operations by quarter for the periods ended September 30,
1997, December 31, 1996 and 1995 are as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
1997 QUARTER ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30
-------- ------- ------------
<S> <C> <C> <C> <C>
Oil and gas revenues................. $46,927 $42,345 $49,863
Income from operations............... 18,207 12,252 14,223
Net income........................... 11,887 7,773 8,715
Earnings per common share............ $ 0.32 $ 0.21 $ 0.23
</TABLE>
<TABLE>
<CAPTION>
1996 QUARTER ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Oil and gas revenues................. $32,962 $33,013 $35,799 $47,482
Income from operations............... 12,123 12,162 13,078 21,426
Net income........................... 7,929 7,949 8,673 13,943
Earnings per common share............ $ 0.22 $ 0.21 $ 0.23 $ 0.37
</TABLE>
<TABLE>
<CAPTION>
1995 QUARTER ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Oil and gas revenues................. $19,029 $24,811 $24,622 $26,136
Income from operations............... 4,904 6,641 5,615 7,066
Net income........................... 3,403 4,417 3,769 4,675
Earnings per common share............ $ 0.09 $ 0.12 $ 0.10 $ 0.13
</TABLE>
F-19
<PAGE> 90
NEWFIELD EXPLORATION COMPANY
SUPPLEMENTARY FINANCIAL INFORMATION
SUPPLEMENTARY OIL AND GAS DISCLOSURES -- UNAUDITED
Users of this information should be aware that the process of estimating
quantities of "proved" and "proved developed" natural gas and crude oil reserves
is very complex, requiring significant subjective decisions in the evaluation of
all available geological, engineering and economic data for each reservoir. The
data for a given reservoir may also change substantially over time as a result
of numerous factors including, but not limited to, additional development
activity, evolving production history and continual reassessment of the
viability of production under varying economic conditions. Consequently,
material revisions to existing reserve estimates occur from time to time.
Although every reasonable effort is made to ensure that reserve estimates
reported represent the most accurate assessments possible, the significance of
the subjective decisions required and variances in available data for various
reservoirs make these estimates generally less precise than other estimates
presented in connection with financial statement disclosures.
Proved reserves are estimated quantities of natural gas, crude oil and
condensate that geological and engineering data demonstrate, with reasonable
certainty, to be recoverable in future years from known reservoirs under
existing equipment economic and operating conditions.
Proved developed reserves are proved reserves that can be expected to be
recovered through existing wells with existing equipment and operating methods.
No major discovery or other favorable or adverse event subsequent to
December 31, 1996 is believed to have caused a material change in the estimates
of proved or proved developed reserves as of that date.
F-20
<PAGE> 91
NEWFIELD EXPLORATION COMPANY
SUPPLEMENTARY FINANCIAL INFORMATION
SUPPLEMENTARY OIL AND GAS DISCLOSURES -- UNAUDITED -- (CONTINUED)
ESTIMATED NET QUANTITIES OF OIL AND GAS RESERVES
The following table sets forth the Company's net proved reserves (at 15.025
pounds per square inch absolute), including the changes therein, and proved
developed reserves (all within the United States) at the end of each of the
three years in the period ended December 31, 1996, as estimated by the Company's
petroleum engineering staff:
<TABLE>
<CAPTION>
OIL,
CONDENSATE
AND NATURAL NATURAL
GAS LIQUIDS GAS
(MBBLS) (MMCF)
--------------- -------
<S> <C> <C>
Proved developed and undeveloped reserves:
December 31, 1993......................................... 6,414 102,261
Revisions of previous estimates........................ 127 (3,409)
Extensions, discoveries and other additions............ 2,845 53,900
Purchases of properties................................ 618 25,482
Production............................................. (1,394) (24,267)
------ -------
December 31, 1994......................................... 8,610 153,967
Revisions of previous estimates........................ 166 (575)
Extensions, discoveries and other additions............ 926 62,035
Purchases of properties................................ 2,002 22,556
Sales of properties.................................... -- (684)
Production............................................. (2,071) (33,719)
------ -------
December 31, 1995......................................... 9,633 203,580
Revisions of previous estimates........................ 850 (1,829)
Extensions, discoveries and other additions............ 3,479 68,011
Purchases of properties................................ 2,306 13,063
Sales of properties.................................... (51) (117)
Production............................................. (2,558) (41,323)
------ -------
December 31, 1996......................................... 13,659 241,385
====== =======
</TABLE>
<TABLE>
<CAPTION>
CRUDE NATURAL
OIL GAS
(MBBLS) (MMCF)
--------------- -------
<S> <C> <C>
Proved developed reserves:
December 31, 1994......................................... 8,196 140,742
December 31, 1995......................................... 8,292 154,726
December 31, 1996......................................... 11,820 199,452
</TABLE>
F-21
<PAGE> 92
NEWFIELD EXPLORATION COMPANY
SUPPLEMENTARY FINANCIAL INFORMATION
SUPPLEMENTARY OIL AND GAS DISCLOSURES -- UNAUDITED -- (CONTINUED)
Capitalized costs for oil and gas producing activities consist of the
following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
Proved properties............................ $ 501,328 $ 348,226 $254,196
Unproved properties.......................... 25,352 14,631 4,476
--------- --------- --------
526,680 362,857 258,672
Accumulated depreciation, depletion and
amortization............................... (198,065) (134,348) (84,748)
--------- --------- --------
Net capitalized costs...................... $ 328,615 $ 228,509 $173,924
========= ========= ========
</TABLE>
Costs incurred for oil and gas property acquisition, exploration and
development activities are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Property acquisition:
Unproved*.................................... $ 5,670 $ 10,154 $ 2,020
Proved....................................... 28,480 29,393 32,810
Exploration.................................... 49,337 33,192 17,927
Development.................................... 80,336 31,446 63,936
-------- -------- --------
Total costs incurred................. $163,823 $104,185 $116,693
======== ======== ========
</TABLE>
- ---------------
* These amounts represent costs incurred by the Company and excluded from the
amortization base until proved reserves are established or impairment is
determined.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL
AND GAS RESERVES
The following information has been developed utilizing procedures
prescribed by Statement of Financial Accounting Standards No. 69 "Disclosures
about Oil and Gas Producing Activities" ("FAS 69") and based on natural gas and
crude oil reserve and production volumes estimated by the Company's engineering
staff. It may be useful for certain comparative purposes, but should not be
solely relied upon in evaluating the Company or its performance. Further,
information contained in the following table should not be considered as
representative of realistic assessments of future cash flows, nor should the
Standardized Measure of Discounted Future Net Cash Flows be viewed as
representative of the current value of the Company.
The Company believes that the following factors should be taken into
account in reviewing the following information: (1) future costs and selling
prices will probably differ from those required to be used in these
calculations; (2) due to future market conditions and governmental regulations,
actual rates of production achieved in future years may vary significantly from
the rate of production assumed in the calculations; (3) selection of a 10%
discount rate is arbitrary and may not be reasonable as a measure of the
relative risk inherent in realizing future net oil and gas revenues; and (4)
future net revenues may be subject to different rates of income taxation.
Under the Standardized Measure, future cash inflows were estimated by
applying period-end oil and gas prices adjusted for fixed and determinable
escalations to the estimated future production of period-
F-22
<PAGE> 93
NEWFIELD EXPLORATION COMPANY
SUPPLEMENTARY FINANCIAL INFORMATION
SUPPLEMENTARY OIL AND GAS DISCLOSURES -- UNAUDITED -- (CONTINUED)
end proved reserves. Future cash inflows at December 31, 1996 do not reflect the
impact of future production that is subject to open hedge positions (see Note
2). Future cash inflows were reduced by estimated future development,
abandonment and production costs based on period-end costs in order to arrive at
net cash flow before tax. Future income tax expense has been computed by
applying period-end statutory tax rates to aggregate future pre-tax net cash
flows, reduced by the tax basis of the properties involved and tax
carryforwards. Use of a 10% discount rate is required by FAS 69.
Management does not rely solely upon the following information in making
investment and operating decisions. Such decisions are based upon a wide range
of factors, including estimates of probable as well as proved reserves and
varying price and cost assumptions considered more representative of a range of
possible economic conditions that may be anticipated.
The standardized measure of discounted future net cash flows relating to
proved oil and gas reserves is as follows (in thousands):
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Future cash inflows........................ $1,312,815 $ 642,019 $ 400,766
Less related future:
Production costs......................... (113,937) (84,999) (66,221)
Development and abandonment costs........ (107,205) (83,262) (45,704)
---------- ---------- ----------
Future net cash flows before income
taxes.................................... 1,091,673 473,758 288,841
10% annual discount for estimating timing
of cash flows............................ (231,856) (108,879) (58,247)
---------- ---------- ----------
Standardized measure of discounted future
net cash flows before income taxes....... 859,817 364,879 230,594
Future income tax expense, net of 10%
annual discount.......................... (247,889) (88,553) (50,592)
---------- ---------- ----------
Standardized measure of discounted future
net cash flows........................... $ 611,928 $ 276,326 $ 180,002
========== ========== ==========
</TABLE>
F-23
<PAGE> 94
NEWFIELD EXPLORATION COMPANY
SUPPLEMENTARY FINANCIAL INFORMATION
SUPPLEMENTARY OIL AND GAS DISCLOSURES -- UNAUDITED -- (CONTINUED)
A summary of the changes in the standardized measure of discounted future
net cash flows applicable to proved oil and gas reserves is as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Beginning of the period.................... $ 276,326 $ 180,002 $ 116,129
---------- ---------- ----------
Revisions of previous estimates:
Changes in prices and costs.............. 254,227 61,917 (22,877)
Changes in quantities.................... 9,544 691 (3,438)
Changes in future development costs...... -- 1,026 2,097
Development costs incurred during the
period................................... 24,895 2,839 20,313
Additions to proved reserves resulting from
extensions, discoveries and improved
recovery, less related costs............. 229,314 87,760 85,089
Purchases of reserves in place............. 55,910 45,324 27,843
Accretion of discount...................... 36,488 23,059 15,916
Sales of oil and gas, net of production
costs.................................... (132,310) (80,371) (60,173)
Net change in income taxes................. (159,336) (37,961) (7,566)
Production timing and other................ 16,870 (7,960) 6,669
---------- ---------- ----------
Net increase............................... 335,602 96,324 63,873
---------- ---------- ----------
End of the period.......................... $ 611,928 $ 276,326 $ 180,002
========== ========== ==========
</TABLE>
F-24
<PAGE> 95
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL"), a Delaware corporation has the power, under specified
circumstances, to indemnify its directors, officers, employees and agents in
connection with threatened, pending or completed actions, suits or proceedings,
whether civil, criminal, administrative or investigative (other than an action
by or in right of the corporation), brought against them by reason of the fact
that they were or are such directors, officers, employees or agents, against
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred in any such action, suit or proceeding. Article Seventh of
the Company's Second Restated Certificate of Incorporation, as amended (the
"Newfield Charter"), together with Article VI of its Restated Bylaws (the
"Newfield Bylaws") provide for indemnification of each person who is or was made
a party to any actual or threatened civil, criminal, administrative or
investigative action, suit or proceeding because such person is, was or has
agreed to become an officer or director of the Company or is a person who is or
was serving or has agreed to serve at the request of the Company as a director,
officer, partner, venturer, proprietor, trustee, employee, agent or similar
functionary of another corporation or of a partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise to the fullest
extent permitted by the DGCL as it existed at the time the indemnification
provisions of the Newfield Charter and Bylaws were adopted or as may be
thereafter amended. Article VI of the Newfield Bylaws expressly provides that it
is not the exclusive method of indemnification.
Article Seventh of the Newfield Charter and Article VI of the Newfield
Bylaws also provide that the Company may maintain insurance, at its own expense,
to protect itself and any director, officer, employee or agent of the Company or
of another entity against any expense, liability or loss, regardless of whether
the Company would have the power to indemnify such person against such expense,
liability or loss under the DGCL.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL (relating to
liability for unauthorized acquisitions or redemptions of, or dividends on,
capital stock) or (iv) for any transaction from which the director derived an
improper personal benefit. Article Seventh of the Newfield Charter contains such
a provision.
Howard H. Newman and Jeffrey A. Harris, each a director of the Company and
a Managing Director of E.M. Warburg, Pincus & Co., LLC ("Warburg"), are
indemnified by an affiliate of Warburg against certain liabilities that Messrs.
Newman and Harris may incur as a result of their serving as directors of the
Company. Thomas G. Ricks, a director of the Company and President and Chief
Executive Officer of the University of Texas Investment Management Company
("UTIMCO"), is indemnified by UTIMCO against certain liabilities that he may
incur as a result of his serving as a director of the Company.
II-1
<PAGE> 96
ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES
The following instruments and documents are included as Exhibits to this
Registration Statement. Exhibits incorporated by reference are so indicated by
parenthetical information.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
4.1 -- Second Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (File No.
33-69540))
4.1.1 -- Certificate of Amendment to Second Restated Certificate
of Incorporation of the Company dated May 15, 1997
(incorporated by reference to Exhibit 3.1.1 to the
Company's Registration Statement on Form S-3
(Registration No. 333-32582).
4.2 -- Restated Bylaws of the Company (incorporated by reference
to Exhibit 3.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994)
4.3 -- Indenture dated as of October 15, 1997 among the Company,
as issuer, and First Union National Bank, as trustee
4.4 -- Exchange and Registration Rights Agreement dated October
15, 1997 by and among the Company and Goldman, Sachs &
Co., Chase Securities Inc., Donaldson, Lufkin & Jenrette
Securities Corporation and Jefferies and Company, Inc.
5.1 -- Opinion of Vinson & Elkins L.L.P.
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Ryder Scott Company
23.3 -- Consent of Vinson & Elkins L.L.P. (included in Exhibit
5.1)
24.1 -- Power of Attorney (included on the signature pages of
this Registration Statement)
*25.1 -- Statement of Eligibility of First Union National Bank
99.1 -- Form of Letter of Transmittal
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS.
The Company hereby undertakes that:
(1) For purposes of determining any liability under the securities Act
of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling
II-2
<PAGE> 97
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by its is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.
(3) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-3
<PAGE> 98
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, the State of
Texas on November 5, 1997.
NEWFIELD EXPLORATION CO.
By: /s/ JOE B. FOSTER
------------------------------------
Joe B. Foster
Chairman of the Board and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Terry W. Rathert, C. William Austin and Brian L.
Rickmers, or any of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign on his behalf individually and in
each capacity stated below any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitutes, may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ JOE B. FOSTER Chairman of the Board and Chief November 5, 1997
- ------------------------------------------ Executive Officer (Principal
Joe B. Foster Executive Officer)
/s/ ROBERT W. WALDRUP Vice President -- Operations and November 5, 1997
- ------------------------------------------ Director
Robert W. Waldrup
/s/ TERRY W. RATHERT Vice President -- Planning and November 5, 1997
- ------------------------------------------ Administration (Principal Financial
Terry W. Rathert Officer)
/s/ RONALD P. LEGE Controller and Assistant Secretary November 5, 1997
- ------------------------------------------ (Principal Accounting Officer)
Ronald P. Lege
/s/ CHARLES W. DUNCAN, JR. Director November 5, 1997
- ------------------------------------------
Charles W. Duncan, Jr.
/s/ JEFFREY A. HARRIS Director November 5, 1997
- ------------------------------------------
Jeffrey A. Harris
/s/ DENNIS HENDRIX Director November 5, 1997
- ------------------------------------------
Dennis Hendrix
/s/ TERRY HUFFINGTON Director November 5, 1997
- ------------------------------------------
Terry Huffington
</TABLE>
II-4
<PAGE> 99
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ HOWARD H. NEWMAN Director November 5, 1997
- ------------------------------------------
Howard H. Newman
/s/ THOMAS G. RICKS Director November 5, 1997
- ------------------------------------------
Thomas G. Ricks
/s/ C.E. SHULTZ Director November 5, 1997
- ------------------------------------------
C.E. Shultz
/s/ DALE E. ZAND Director November 5, 1997
- ------------------------------------------
Dale E. Zand
</TABLE>
II-5
<PAGE> 100
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
4.1 -- Second Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (File No.
33-69540))
4.1.1 -- Certificate of Amendment to Second Restated Certificate
of Incorporation of the Company dated May 15, 1997
(incorporated by reference to Exhibit 3.1.1 to the
Company's Registration Statement on Form S-3
(Registration No. 333-32587).
4.2 -- Restated Bylaws of the Company (incorporated by reference
to Exhibit 3.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994)
4.3 -- Indenture dated as of October 15, 1997 among the Company,
as issuer, and First Union National Bank, as trustee
4.4 -- Registration Rights Agreement dated October 15, 1997 by
and among the Company and Goldman, Sachs & Co., Chase
Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and Jefferies and Company, Inc.
5.1 -- Opinion of Vinson & Elkins L.L.P.
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Ryder Scott Company
23.3 -- Consent of Vinson & Elkins L.L.P. (included in Exhibit
5.1)
24.1 -- Power of Attorney (included on the signature pages of
this Registration Statement)
*25.1 -- Statement of Eligibility of First Union National Bank
99.1 -- Form of Letter of Transmittal
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 4.3
===============================================================================
NEWFIELD EXPLORATION COMPANY
as Issuer,
AND
FIRST UNION NATIONAL BANK
as Trustee
----------------------------
INDENTURE
DATED AS OF OCTOBER 15, 1997
----------------------------
US$125,000,000
7.45% SENIOR NOTES DUE 2007
----------------------------
===============================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA SECTION INDENTURE SECTION
<S> <C>
310(a)(1).....................................................7.10
(a)(2)........................................................7.10
(a)(3)........................................................N.A.
(a)(4)........................................................N.A.
(b).....................................................7.08; 7.10
(c)...........................................................N.A.
311(a)........................................................7.11
(b)...........................................................7.11
(c)...........................................................N.A.
312(a)..................................................2.06; 2.13
(b)..........................................................10.03
(c)..........................................................10.03
313(a)........................................................7.06
(b)...........................................................7.06
(c)...........................................................7.06
(d)...........................................................7.06
314(a)........................................................4.03
(b)...........................................................N.A.
(c)(1).......................................................10.04
(c)(2).......................................................10.04
(c)(3)........................................................N.A.
(d)...........................................................N.A.
(e)..........................................................10.05
(f)...........................................................N.A.
315(a).....................................................7.01(2)
(b)...........................................................7.05
(c)........................................................7.01(1)
(d)........................................................7.01(3)
(e)...........................................................6.11
316(a)(last sentence).........................................2.09
(a)(1)(A).....................................................6.05
(a)(1)(B).....................................................6.04
(a)(2)........................................................N.A.
(b)...........................................................6.07
(c)...........................................................N.A.
317(a)(1).....................................................6.08
(a)(2)........................................................6.09
(b)...........................................................2.04
318(a).......................................................10.01
</TABLE>
- ------------------------
N.A. means Not Applicable
NOTE: This Cross-Reference table shall not, for any purpose, be deemed part of
this Indenture.
<PAGE> 3
INDENTURE dated as of October 15, 1997 by and between Newfield
Exploration Company, a Delaware corporation (the "Company"), and First Union
National Bank, a national banking association, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's 7.45% Senior
Notes due 2007 (the "Securities"):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions.
"Affiliate" of any specified Person means any Person directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, such specified Person. For purposes of this definition, control
of a Person shall mean the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise. The Trustee may request and may
conclusively rely upon an Officers' Certificate to determine whether any Person
is an Affiliate of any specified Person.
"Agent" means any Registrar or Paying Agent.
"Attributable Indebtedness", when used with respect to any
Sale/Leaseback Transaction, means, as at the time of determination, the present
value (discounted at a rate equivalent to the Company's then current weighted
average cost of funds for borrowed money as at the time of determination,
compounded on a semiannual basis) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease can be
extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or
any authorized committee of the Board of Directors of the Company.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" of any Person means and includes any and all shares,
rights to purchase, warrants or options (whether or not currently exercisable),
participation or other equivalents of or interests in (however designated) the
equity (which includes, but is not limited to, common stock, preferred stock
and partnership and joint venture interests) of such Person (excluding any debt
securities that are convertible into, or exchangeable for, such equity).
"Capitalized Lease Obligation" of any Person means any obligation of
such Person to pay rent or other amounts under a lease of property, real or
personal, that is required to be capitalized for
1
<PAGE> 4
financial reporting purposes in accordance with GAAP; and the amount of such
obligation shall be the capitalized amount thereof determined in accordance
with GAAP.
"Common Equity" of any Person means and includes all Capital Stock of
such Person that is generally entitled to (i) vote in the election of directors
of such Person, or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or
others that will control the management and policies of such Person.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" and "Company Order" means, respectively, a written
request or order signed in the name of the Company by its Chairman of the
Board, its President or a Vice President, and by its Treasurer, an Assistant
Treasurer, its Controller, an Assistant Controller, its Secretary or an
Assistant Secretary, and delivered to the Trustee.
"Consolidated Net Tangible Assets" means, for the Company and its
Restricted Subsidiaries on a consolidated basis determined in accordance with
GAAP, the aggregate amounts of assets (less depreciation and valuation reserves
and other reserves and items deductible from gross book value of specific asset
accounts under GAAP) that would be included on a balance sheet after deducting
therefrom (a) all liability items except deferred income taxes, Funded
Indebtedness, other long-term liabilities and shareholders' equity and (b) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles.
"Corporate Trust Office of the Trustee" means the address of the
Trustee specified in Section 10.02 or such other address as the Trustee may
give notice thereof to the Company.
"Currency Hedge Obligations" means, at any time as to any Person, the
obligations of such Person at such time that were incurred in the ordinary
course of business pursuant to any foreign currency exchange agreement, option
or futures contract or other similar agreement or arrangement designed to
protect against or manage such Person's or any of its Subsidiaries' exposure to
fluctuations in foreign currency exchange rates.
"Default" means any event, act or condition that is, or after notice
or the passage of time or both would be, an Event of Default.
"Depository" means, with respect to the Securities issued in the form
of a Global Certificate, the Person designated as Depository by the Company
until a successor Depository shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Depository" shall mean or include
each Person who is then a Depository hereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor statute.
2
<PAGE> 5
"Funded Indebtedness" means all Indebtedness (including Indebtedness
incurred under any revolving credit, letter of credit or working capital
facility) that matures by its terms, or that is renewable at the option of any
obligor thereon to a date, more than one year after the date on which such
Indebtedness is originally incurred.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect as of the relevant time.
"Holder" means a Person in whose name a Security is registered.
"Indebtedness" of any Person at any date means, without duplication,
(i) all indebtedness of such Person for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to
a portion thereof), (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (or
reimbursement obligations with respect thereto), other than standby letters of
credit incurred by such Person in the ordinary course of business, (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, except trade payables and accrued expenses incurred in
the ordinary course of business, (v) all Capitalized Lease Obligations of such
Person, (vi) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person, (vii) all
Indebtedness of others guaranteed by such Person to the extent of such
guarantee and (viii) all obligations of such Person in respect of Currency
Hedge Obligations, Interest Rate Hedging Agreements and Oil and Gas Hedging
Contracts.
"Indenture" means this Indenture as amended from time to time.
"Independent Investment Banker" means an independent investment
banking institution of national standing appointed by the Company for purposes
of calculating any Make-Whole Premium, provided, that if the Company fails to
make such appointment at least 45 Business Days prior to the Redemption Date
for any Security to be redeemed, or if the institution so appointed is
unwilling or unable to make such calculation, such calculation will be made by
Goldman, Sachs & Co. or, if such firm is unwilling or unable to make such
calculation, by an independent investment banking institution of national
standing appointed by the Trustee.
"Interest Payment Date" shall have the meaning assigned to such term
in the Securities.
"Interest Rate Hedging Agreements" means, with respect to any Person,
the obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates.
3
<PAGE> 6
"Issue Date" means the date on which the Securities are originally
issued under this Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset
(including, without limitation, any production payment, advance payment or
similar arrangement with respect to minerals in place), whether or not filed,
recorded or otherwise perfected under applicable law. For the purposes of this
Indenture, the Company or any Restricted Subsidiary shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement,
Capitalized Lease Obligation (other than any Capitalized Lease Obligation
relating to any building, structure, equipment or other property used or to be
used in the ordinary course of business of the Company and the Restricted
Subsidiaries) or other title retention agreement relating to such asset.
"Make-Whole Premium" means, with respect to any Security (or portion
thereof) to be redeemed, an amount equal to the excess, if any, of:
(i) the sum of the present values, calculated as of the
Redemption Date, of:
(A) each interest payment that, but for such redemption,
would have been payable on the Security (or portion thereof)
being redeemed on each Interest Payment Date occurring after the
Redemption Date (excluding any accrued interest for the period
prior to the Redemption Date); and
(B) the principal amount that, but for such redemption,
would have been payable at the final maturity of the Security
(or portion thereof) being redeemed;
over
(ii) the principal amount of the Security (or portion thereof)
being redeemed.
The present values of interest and principal payments referred to in clause (i)
above will be determined in accordance with generally accepted principles of
financial analysis. Such present values will be calculated by discounting the
amount of each payment of interest or principal from the date that each such
payment would have been payable, but for the redemption, to the Redemption Date
at a discount rate equal to the Treasury Yield plus 25 basis points. The
Make-Whole Premium will be calculated by an Independent Investment Banker.
For purposes of determining the Make-Whole Premium, "Treasury Yield"
means a rate of interest per annum equal to the weekly average yield to
maturity of United States Treasury Notes that have a constant maturity that
corresponds to the remaining term to maturity of the Securities, calculated to
the nearest 1/12 of a year (the "Remaining Term"). The Treasury Yield will be
determined as of the third business day immediately preceding the applicable
Redemption Date. The weekly average yields of United States Treasury Notes will
be determined by reference to the most recent statistical release published by
the Federal Reserve Bank of New York and designated
4
<PAGE> 7
"H.15(519) Selected Interest Rates" or any successor release (the "H.15
Statistical Release"). If the H.15 Statistical Release sets forth a weekly
average yield for United States Treasury Notes having a constant maturity that
is the same as the Remaining Term, then the Treasury Yield will be equal to
such weekly average yield. In all other cases, the Treasury Yield will be
calculated by interpolation, on a straight-line basis, between the weekly
average yields on the United States Treasury Notes that have a constant
maturity closest to and greater than the Remaining Term and the United States
Treasury Notes that have a constant maturity closest to and less than the
Remaining Term (in each case as set forth in the H.15 Statistical Release). Any
weekly average yields so calculated by interpolation will be rounded to the
nearest 1/100 of 1%, with any figure of 1/200% or above being rounded upward.
If weekly average yields for United States Treasury Notes are not available in
the H.15 Statistical Release or otherwise, then the Treasury Yield will be
calculated by interpolation of comparable rates selected by the Independent
Investment Banker.
"Net Proceeds" means, with respect to any Sale/Leaseback Transaction
entered into by the Company or any Restricted Subsidiary, the aggregate net
proceeds received by the Company or such Restricted Subsidiary from such
Sale/Leaseback Transaction after payment of expenses, taxes, commissions and
similar amounts incurred in connection therewith, whether such proceeds are in
cash or in property (valued at the fair market value thereof at the time of
receipt, as determined by the Board of Directors).
"Officer" means the President, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary, any Assistant Secretary or any Vice President or
Assistant Vice President of a Person.
"Officers' Certificate" means a certificate signed by two Officers of
a Person, one of whom must be the Person's chief executive officer, principal
financial officer or principal accounting officer.
"Oil and Gas Hedging Contracts" means any oil and gas purchase or
hedging agreement, and other agreement or arrangement, in each case, that is
designed to provide protection against oil and gas price fluctuations.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Ordinary Course Lien" means:
(a) Liens for taxes, assessments or governmental charges or
levies on the property of the Company or any Restricted
Subsidiary if the same shall not at the time be delinquent
or thereafter can be paid without penalty, or are being
contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have
been recorded on the books of the Company;
(b) Liens imposed by law, such as carriers', warehousemen's,
landlords' and mechanics' liens and other similar liens
arising in the ordinary course of
5
<PAGE> 8
business which secure obligations not more than 60 days
past due or which are being contested in good faith by
appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been recorded on the books
of the Company;
(c) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age
pensions, or other social security or retirement benefits,
or similar legislation;
(d) Easements, restrictions and such other encumbrances or
charges against real property as are of a nature generally
existing with respect to properties of a similar character
and which do not in any material way interfere with the use
thereof in the ordinary course of business of the Company
and the Restricted Subsidiaries;
(e) Liens arising under operating agreements or similar
agreements in respect of obligations which are not yet due
or which are being contested in good faith by appropriate
proceedings;
(f) Liens reserved in oil, gas and/or mineral leases,
production sharing contracts and petroleum concession
agreements and licenses for bonus or rental payments and
for compliance with the terms of such leases, contracts,
agreements and licenses;
(g) Liens pursuant to partnership agreements, oil, gas and/or
mineral leases, production sharing contracts, petroleum
concession agreements and licenses, farm-out agreements,
division orders, contracts for the sale, purchase,
exchange, processing or transportation of oil, gas and/or
other hydrocarbons, unitization and pooling declarations
and agreements, operating agreements, development
agreements, area of mutual interest agreements, and other
agreements which are customary in the oil, gas and other
mineral exploration, development and production business
and in the business of processing of gas and gas condensate
production for the extraction of products therefrom;
(h) Liens imposed by law or order as a result of any proceeding
before any court or regulatory body that is being contested
in good faith, and Liens which secure a judgment or other
court-ordered award or settlement as to which the Company
has not exhausted its appellate rights.
"Pari Passu Indebtedness" means any Indebtedness of the Company,
whether outstanding on the Issue Date or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall be subordinated in right of
payment to the Securities.
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<PAGE> 9
"Person" means any individual, corporation, partnership, joint
venture, incorporated or unincorporated association, limited liability company,
joint-stock company, trust, unincorporated organization or government or other
agency or political subdivision thereof or other entity of any kind.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 2.08 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security, shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"principal" of a Security means the principal thereof plus, when
appropriate, the premium, if any, on such security.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price" shall have the meaning assigned to such term in the
Securities.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities means the immediately preceding date specified as a
Record Date in the Securities for that purpose.
"Restricted Subsidiary" means any Subsidiary the principal business of
which is carried on in, or the majority of the operating assets of which are
located in, the United States (including areas subject to its jurisdiction).
"Sale/Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary, for a
period of more than three years, of any real or tangible personal property,
which property has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person in contemplation of such leasing.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities described above issued under this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and any
successor statute.
"Special Record Date" for the payment of any Defaulted Interest on the
Securities of any series means a date fixed by the Trustee pursuant to Section
2.09.
"Subsidiary" of any Person means any corporation of which at least a
majority of the aggregate voting power of all classes of the Common Equity is
owned by such Person directly or through one or more other Subsidiaries of such
Person, and any entity other than a corporation in
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<PAGE> 10
which such Person, directly or indirectly, owns at least a majority of the
Common Equity of such entity.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C.
ss.ss. 77aaa-77bbbb), as in effect on the relevant date.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"U.S. Government Obligations" means direct obligations of the United
States of America, obligations on which the payment of principal and interest
is fully guaranteed by the United States of America or obligations or
guarantees for the payment of which the full faith and credit of the United
States of America is pledged.
Section 1.02 Other Definitions.
<TABLE>
<CAPTION>
DEFINED IN
TERM SECTION
---- ---------
<S> <C>
"Agent Members"............................................2.07
"Defaulted Interest".......................................2.09
"Custodian"................................................6.01
"Event of Default".........................................6.01
"Global Certificate".......................................2.01
"Legal Holiday"...........................................10.07
"Non-U.S. Person"..........................................2.18
"Paying Agent".............................................2.10
"Physical Certificates"....................................2.01
"Private Placement Legend..................................2.18
"QIB"......................................................2.18
"Registration Rights Agreement"............................2.18
"Regulation S".............................................2.18
"Security Register"........................................2.06
"Security Registrar" or "Registrar"........................2.06
"Stated Maturity"..........................................2.02
"Successor"................................................5.01
</TABLE>
Section 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
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<PAGE> 11
All terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
Section 1.04 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE II
THE SECURITIES
Section 2.01 Forms of Securities Generally.
The definitive Securities shall be printed, lithographed or engraved
on steel-engraved borders or may be produced in any other manner, all as
determined by the Officers executing such Securities, as evidenced by their
execution of such Securities.
The Securities (including the Trustee's certificate of authentication)
shall be issued initially in the form of one or more global Securities
substantially in the form set forth on Exhibit A hereof (each being called a
"Global Certificate") deposited with The Depository Trust Company (the
"Depository"), and registered in the name of its nominee (such nominee being
referred to herein as the "Global Certificate Holder"), or will remain in the
custody of the Trustee pursuant to a FAST Balance Certificate Agreement or
similar agreement between the Depository and the Trustee, and shall be duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. Subject to the limitation set forth in Section 2.02, the principal
amount of the Global Certificates may be increased or decreased from time to
time by adjustments made on the records of the Trustee as custodian for the
Depository, as hereinafter provided.
The Securities exchanged for beneficial interests in a Global
Certificate as described in Section 2.07 shall be issued in the form of
permanent certificated Securities in registered form in substantially the form
set forth in Exhibit A hereto ("Physical Certificates").
The Securities, and the Trustee's certificate of authentication shall
be in substantially the form set forth in Exhibit A hereto, with such
appropriate insertions, omissions, substitutions and
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<PAGE> 12
other variations as are required or permitted by this Indenture, and may have
such letters, CUSIP or other numbers or other marks of identification and such
legends or endorsements placed thereon as may be required to comply with the
Securities Act or the rules of any securities exchange or as may, consistently
herewith, be determined by the Officers executing such Securities as evidenced
by their execution of the Securities. Any portion of the text of any Security
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Security. In addition to the requirements of Exhibit A, the
Securities may also have set forth on the reverse side thereof a form of
assignment.
Section 2.02 Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture for original issue is limited
to $125,000,000, and the amount of Securities outstanding at any one time may
not exceed $125,000,000 except as provided in Section 2.08 hereof.
The Securities shall be known and designated as the "7.45% Senior
Notes due 2007" of the Company. Their Stated Maturity shall be October 15,
2007, and they shall bear interest at the rate of 7.45% per annum from October
15, 1997, or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, payable semiannually on April 15 and October 15
in each year, commencing April 15, 1998, and at said Stated Maturity, until the
principal thereof is paid or duly provided for.
The principal of (and premium, if any, on) and interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose in The City of New York, or at such other office or agency of
the Company as may be maintained for such purpose; provided, however, that, at
the option of the Company, interest will be paid on Physical Securities by
check mailed to addresses of the Persons entitled thereto as such addresses
shall appear on the Security Register.
The Securities shall be redeemable as provided in Article 3 hereof.
The Securities shall be subject to defeasance at the option of the
Company as provided in Article 8 hereof.
Section 2.03 Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
Section 2.04 Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President or a Vice President of the Company, under
its corporate seal affixed thereto or reproduced thereon and attested by its
Secretary or an Assistant Secretary of the Company. The signature of any
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<PAGE> 13
of these Officers on the Securities may be manual or facsimile signatures of
such Officer and may be imprinted or otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper Officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as
provided in this Indenture.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for in Exhibit
A hereto, duly executed by the Trustee by manual signature of an authorized
signatory, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to and in compliance with Section 5.01
hereof, shall be consolidated or merged with or into any other Person or shall
convey, transfer, lease or otherwise dispose of its properties or assets
substantially as an entirety to any Person, and the successor Person resulting
from such consolidation, or surviving such merger, or into which the Company
shall have been merged, or the Person which shall have received a conveyance,
transfer, lease or other disposition as aforesaid, shall have executed an
indenture supplemental hereto with the Trustee pursuant to Section 5.01 hereof,
any of the Securities authenticated or delivered prior to such consolidation,
merger, conveyance, transfer, lease or other disposition may, from time to
time, at the request of the successor Person, be exchanged for other Securities
executed in the name of the successor Person with such changes in phraseology
and form as may be appropriate, but otherwise in substance of like tenor as the
Securities surrendered for such exchange and of like principal amount; and the
Trustee, upon Company Request of the successor Person, shall authenticate and
deliver Securities as specified in such request for the purpose of such
exchange. If Securities shall at any time be authenticated and delivered in any
new name of a successor Person pursuant to this Section in exchange or
substitution for or upon registration of transfer of any Securities, such
successor Person, at the option of the Holders but without expense to them,
shall provide for the exchange of all Securities at the time outstanding for
Securities authenticated and delivered in such new name.
Section 2.05 Temporary Securities.
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<PAGE> 14
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the Officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 4.02
hereof, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
Section 2.06 Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept a register (the register maintained
in such office and in any other office or agency designated pursuant to Section
4.02 hereof being herein sometimes referred to as the "Security Register") in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Securities and of transfers of
Securities. The Security Register shall be in written form or any other form
capable of being converted into written form within a reasonable time. At all
reasonable times and during normal business hours, the Security Register shall
be open to inspection by the Trustee. The Trustee is hereby initially appointed
as security registrar (the "Security Registrar" or the "Registrar") for the
purpose of registering Securities and transfers of Securities as herein
provided.
Subject to the provisions of this Section, Section 2.07 and Section
2.18, upon surrender for registration of transfer of any Security at the office
or agency of the Company designated pursuant to Section 4.02 hereof, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
any authorized denomination or denominations of a like aggregate principal
amount.
Furthermore, any Holder of a Global Certificate shall, by acceptance
of such Global Certificate, agree that transfers of beneficial interest in such
Global Certificate shall be subject to Section 2.18 and may be effected only
through a book-entry system maintained by the Holder of such Global Certificate
(or its agent), and that ownership of a beneficial interest in the Security
shall be required to be reflected in a book entry.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange,
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<PAGE> 15
the Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Security Registrar)
be duly endorsed, or be accompanied by a written instrument of transfer, in
form satisfactory to the Company and the Security Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 2.05, 2.07, 3.06 or 9.05
hereof not involving any transfer.
Neither the Trustee, the Security Registrar nor the Company shall be
required (i) to issue, register the transfer of or exchange any Security during
a period beginning at the opening of business 15 days before the mailing of a
notice of redemption of Securities selected for redemption under Section 3.02
hereof and ending at the close of business on the day of such mailing of the
relevant notice of redemption, or (ii) to register the transfer of or exchange
any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
Section 2.07 Book-Entry Provisions for Global Certificates.
Each Global Certificate shall be registered in the name of the
Depository for such Global Certificate or the nominee of such Depository and
may be delivered to the Trustee as custodian for such Depository. Each Global
Certificate shall represent such of the outstanding Securities as shall be
specified therein and may provide that it shall represent the aggregate amount
of outstanding Securities from time to time endorsed thereon and that the
aggregate amount of outstanding Securities represented thereby may from time to
time be reduced to reflect exchanges. Any endorsement of a Global Certificate
to reflect the amount, or any increase or decrease in the amount, of
outstanding Securities represented thereby shall be made by the Trustee in the
manner provided for herein.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Certificate held
on their behalf by the Depository, or the Trustee as its custodian, or under
such Global Certificate, and the Depository may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Certificate for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent
of the Company or the Trustee, from giving effect to any written certification,
proxy or other authorization furnished by the Depository or shall impair,
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<PAGE> 16
as between the Depository and its Agent Members, the operation of customary
practices governing the exercise of the rights of a beneficial owner of any
Security.
Transfers of a Global Certificate shall be limited to transfers of
such Global Certificate in whole, but not in part, to the Depository, its
successors or their respective nominees. Interests of beneficial owners in a
Global Certificate may be transferred in accordance with the rules and
procedures of the Depository. Physical Certificates shall be transferred to all
beneficial owners in exchange for their beneficial interests in a Global
Certificate if, and only if, either (1) the Depository notifies the Company
that it is unwilling or unable to continue as Depository for the Global
Certificate and a successor Depository is not appointed by the Company within
90 days of such notice, (2) an Event of Default has occurred and is continuing
and the Security Registrar has received a request from the Depository to issue
Physical Certificates in lieu of all or a portion of the Global Certificate (in
which case the Company shall deliver Physical Certificates within 30 days of
such request) or (3) the Company determines not to have the Securities
represented by a Global Certificate.
In connection with any transfer of a portion of the beneficial
interest in a Global Certificate to beneficial owners pursuant to this Section,
the Registrar shall reflect on its books and records the date and a decrease in
the principal amount of the Global Certificate in an amount equal to the
principal amount of the beneficial interest in the Global Certificate to be
transferred, and the Company shall execute, and the Trustee upon receipt of a
Company Order for the authentication and delivery of Physical Certificates
shall authenticate and deliver, one or more Physical Certificates of like tenor
and amount.
In connection with the transfer of an entire Global Certificate to
beneficial owners pursuant to this Section, the Global Certificate shall be
deemed to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depository in exchange for its beneficial interest in
the Global Certificate, an equal aggregate principal amount of Physical
Certificates of authorized denominations.
The registered holder of a Global Certificate may grant proxies and
otherwise authorize any person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
Section 2.08 Mutilated, Destroyed, Lost and Stolen Securities.
If (i) any mutilated Security is surrendered to the Trustee or (ii)
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them
to save each of them harmless, then, in the absence of notice to the Company or
the Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute, and upon Company Order the Trustee shall authenticate
and deliver, in exchange for any such mutilated Security or in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and principal
amount, bearing a number not contemporaneously outstanding.
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<PAGE> 17
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 2.09 Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name such Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest at the
office or agency of the Company maintained for such purpose pursuant to Section
4.02 hereof.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith cease
to be payable to the Holder on the Regular Record Date by virtue of having been
such Holder, and such defaulted interest and (to the extent lawful) interest on
such defaulted interest at the rate borne by the Securities (such defaulted
interest and interest thereon herein collectively called "Defaulted Interest")
may be paid by the Company, at its election in each case, as provided in clause
(a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close
of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited shall be held
in trust for
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<PAGE> 18
the benefit of the Persons entitled to such Defaulted Interest
as in this clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10
days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company
of such Special Record Date, and in the name and at the expense
of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to
be given in the manner provided for in Section 10.02 hereof, not
less than 10 days prior to such Special Record Date. Notice of
the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so given, such Defaulted
Interest shall be paid to the Persons in whose names the
Securities (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date
and shall no longer be payable pursuant to the following clause
(b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 2.10 Paying Agent.
The Company shall also maintain an office or agency where Securities
may be presented for payment ("Paying Agent"). The Company may appoint one or
more additional paying agents. The term "Paying Agent" includes any additional
paying agent. The Company may change any Paying Agent without notice to any
Holder. The Company shall notify the Trustee in writing of the name and address
of any Paying Agent not a party to this Indenture. If the Company fails to
appoint or maintain another entity as Paying Agent, the Trustee shall act as
such. The Company or any of its Subsidiaries may act as Paying Agent.
The Company initially appoints the Trustee to act as the Paying Agent
with respect to the Securities.
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Section 2.11 Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent (other than the Trustee)
to agree in writing that the Paying Agent shall hold in trust for the benefit
of Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest, on the Securities, and shall notify
the Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent
to pay all money held by it to the Trustee. Upon payment over to the Trustee,
the Paying Agent (if other than the Company or a Subsidiary) shall have no
further liability for the money. If the Company or a Subsidiary acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Holders all money held by it as Paying Agent. Upon any bankruptcy or
reorganization proceedings relating to the Company, the Trustee shall serve as
sole Paying Agent for the Securities.
Section 2.12 Persons Deemed Owners.
Prior to the due presentment of a Security for registration of
transfer, the Company, the Security Registrar, the Trustee and any agent of the
Company, or the Trustee may treat the Person in whose name such Security is
registered as the owner of such Security for the purpose of receiving payment
of principal of (and premium, if any, on) and (subject to Section 2.09 hereof)
interest on such Security and for all other purposes whatsoever, whether or not
such Security be overdue, and none of the Company, the Security Registrar, the
Trustee or any agent of the Company, or the Trustee shall be affected by notice
to the contrary.
Section 2.13 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each Interest Payment Date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Securities and the Company shall otherwise comply with TIA Section 312(a).
Section 2.14 Outstanding Securities.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global
Certificate effected by the Trustee in accordance with the provisions hereof,
and those described in this Section as not outstanding. Except as set forth in
Section 2.15 hereof, a Security does not cease to be outstanding because the
Company, a Subsidiary or an Affiliate of the Company holds the Security.
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If a Security is replaced pursuant to Section 2.08 hereof, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Securities payable on that date, then on and after that date
such Securities shall be deemed to be no longer outstanding and shall cease to
accrue interest.
Section 2.15 Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, a Subsidiary or by any Affiliate of the Company shall be
considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities that the Trustee actually knows
are so owned shall be so disregarded.
Section 2.16 Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The
Company may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Securities held
by the Trustee shall be destroyed and a certificate of their destruction
delivered to the Company unless by a Company Order the Company shall direct
that cancelled Securities be returned to it.
Section 2.17 Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
Section 2.18 Transfer Restrictions.
Unless and until, pursuant to the Exchange and Registration Rights
Agreement dated as of October 15, 1997 among the Company and the Purchasers
named therein (the "Registration Rights Agreement"), (i) a Security is sold
under an effective Registration Statement (as defined in the Registration
Rights Agreement) or (ii) a Security is exchanged for an Exchange Security (as
defined in the Registration Rights Agreement) in connection with an effective
Registration Statement, each
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Security shall bear the third legend (the "Private Placement Legend") set forth
on the face of the form set forth in Exhibit A hereto, and the following
provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect
to the registration of any proposed transfer of a Security to (1) any
institutional "accredited investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Securities Act) that is not
a qualified institutional buyer as defined in Rule 144 (a "QIB") or
(2) any person who is not a United States person (a "Non-U.S.
Person"), as defined in Regulation S under the Securities Act
("Regulation S"):
(i) The Registrar shall register the transfer of any
Security, whether or not such Security bears the Private
Placement Legend, if (x) the requested transfer is at least two
years after the later of original issue date of the Security and
the last date on which the Company or any Affiliate of the
Company was the owner of such Security or (y) a certificate
substantially in the form of Exhibit A to the Security has been
delivered to the Registrar and a letter substantially in the
form of Exhibit B or C, as applicable, to the Security, has been
delivered to the Registrar.
(ii) If the proposed transferor is an Agent Member holding
a beneficial interest in a Global Certificate, upon receipt by
the Registrar of (x) the documents, if any, required by
paragraph (i) above and (y) instructions given in accordance
with the Depositary's and the Registrar's procedures therefor,
the Registrar shall reflect on its books and records the date
and a decrease in the principal amount of the Global Certificate
in an amount equal to the principal amount of the beneficial
interest in the Global Certificate to be transferred, and the
Company shall execute, and the Trustee shall authenticate and
deliver, one or more Securities not represented by a Global
Certificate of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Security to
a QIB (excluding a Non-U.S. Person who elects not to hold a
beneficial interest in a Global Certificate):
(i) If the Security to be transferred is not represented by
a Global Certificate, the Registrar shall register the transfer
if such transfer is being made by a proposed transferor who has
checked the box provided for on a certificate substantially in
the form of Exhibit A to the Security stating, or has otherwise
advised the Company and the Registrar in writing, that the sale
has been made in compliance with the provisions of Rule 144A to
a transferee who has signed the certification provided for on
such certificate stating, or has otherwise advised the Company
and the Registrar in writing, that it is purchasing the Security
for its own account or an account with respect to which it
exercises sole investment discretion and that it, or the person
on whose behalf it is acting with respect to any such account,
is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such
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information regarding the Company as it has requested pursuant
to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member and the
Security to be transferred is not represented by a Global
Certificate, upon receipt by the Registrar of instructions given
in accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books
and records the date and an increase in the principal amount of
the Global Certificate in an amount equal to the principal
amount of such Security to be transferred, and the Trustee shall
cancel the Security so transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
replacement of a Security not bearing the Private Placement Legend,
the Registrar shall deliver Securities that do not bear the Private
Placement Legend unless the transferor is the Company or an Affiliate
of the Company. Upon the transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Registrar shall
deliver only Securities that bear the Private Placement Legend unless
either (i) the circumstances contemplated by (a) (i) (x) of this
section have been satisfied or (ii) there is delivered to the
Registrar an Opinion of Counsel reasonably satisfactory to the
Company and the Trustee to the effect that neither such legend nor
the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(d) General. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such a Security acknowledges
the restrictions on transfer of such Security set forth herein and in
the Private Placement Legend and agrees that it will transfer such
Security only as provided herein and in the Indenture.
ARTICLE III
REDEMPTION
Section 3.01 Notices to Trustee.
If the Company elects to redeem Securities pursuant to the redemption
provisions of Section 3.07, it shall furnish to the Trustee, at least 45 days
but not more than 60 days before a Redemption Date, an Officers' Certificate
setting forth the Redemption Date, the principal amount of Securities to be
redeemed and the Redemption Price.
Section 3.02 Selection of Securities to be Redeemed.
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed by such method as the Trustee in its
sole discretion shall deem fair and appropriate. The particular Securities to
be redeemed shall be selected, unless otherwise provided herein, not less
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than 30 days nor more than 60 days prior to the Redemption Date by the Trustee
from the outstanding Securities not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Security selected
for partial redemption, the principal amount thereof to be redeemed. Securities
and portions of them selected shall be in amounts of $1,000 or whole multiples
of $1,000. Except as provided in the preceding sentence, provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption.
Section 3.03 Notices to Holders.
(a) At least 30 days but not more than 60 days before a
Redemption Date, the Company shall mail in conformity with
Section 10.02 a notice of redemption to each Holder whose
Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after
the Redemption Date, upon surrender of such Security, a new
Security or Securities in principal amount equal to the
unredeemed portion will be issued;
(iv) the name and address of the Paying Agent;
(v) that Securities called for redemption must be surrendered to the
Paying Agent at the address specified in such notice to collect
the Redemption Price;
(vi) that unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to
accrue on and after the Redemption Date and the only remaining
right of the Holders is to receive payment of the Redemption
Price upon surrender to the Paying Agent of the Securities; and
(vii) the aggregate principal amount of Securities being redeemed.
(b) At the Company's request, the Trustee shall give the notice
required in Section 3.03(a) in the Company's name;
provided, however, that the Company shall deliver to the
Trustee, at least 45 days prior to the Redemption Date, an
Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in
such notice as provided in Section 3.03(a).
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Section 3.04 Effect of Notice of Redemption.
Once notice of redemption is mailed pursuant to Section 3.03,
Securities called for redemption become due and payable on the Redemption Date
at the Redemption Price. Upon surrender to the Paying Agent, such Securities
shall be paid out at the Redemption Price.
Section 3.05 Deposit of Redemption Price.
One Business Day prior to the Redemption Date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
Redemption Price of all Securities to be redeemed on that date. The Trustee or
the Paying Agent shall return to the Company any money not required for that
purpose less the expenses of the Trustee as provided herein.
If the Company complies with the preceding paragraph, interest on the
Securities or portions thereof to be redeemed (whether or not such Securities
are presented for payment) will cease to accrue on the applicable Redemption
Date. If any Security called for redemption shall not be so paid upon surrender
because of the failure of the Company to comply with the preceding paragraph,
then interest will be paid on the unpaid principal and premium, if any, from
the Redemption Date until such principal and premium are paid and, to the
extent lawful, on any interest not paid on such unpaid principal, in each case
at the rate provided in the Securities and in Section 4.01.
Section 3.06 Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder, at the expense
of the Company, a new Security equal in principal amount to the unredeemed
portion of the Security surrendered.
Section 3.07 Optional Redemption.
The Securities may be redeemed at any time, at the option of the
Company, in whole or from time to time in part, at the Redemption Price
specified in the Securities.
Any redemption pursuant to this Section 3.07 shall be made, to the
extent applicable, pursuant to the provisions of Sections 3.01 through 3.06.
ARTICLE IV
COVENANTS
Section 4.01 Payment of Securities.
The Company shall pay the principal of, and premium, if any, and
interest on the Securities on the dates and in the manner provided in the
Securities. Principal, premium and interest shall be considered paid on the
date due if the Paying Agent, other than the Company or a Subsidiary of the
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Company, holds on that date money deposited by the Company designated for and
sufficient to pay all principal, premium and interest then due.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal, and premium, if
any, at a rate equal to the then applicable interest rate on the Securities to
the extent lawful; and it shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
Section 4.02 Maintenance of Office or Agency.
The Company will maintain, in the Borough of Manhattan, The City of
New York, an office or agency (which may be an office of the Trustee, the
Registrar or the Paying Agent), initially such office will be located at 40
Broad Street, 5th Floor, Suite 550, New York, New York 10004, where Securities
may be presented for registration of transfer or exchange and where Securities
may be presented for payment. Unless otherwise designated by the Company by
written notice to the Trustee, such office or agency shall be the Corporate
Trust Office of the Trustee. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations may be made at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency. The
Company hereby designates the Corporate Trust Office of the Trustee as one such
office or agency of the Company in accordance with Section 2.02.
Section 4.03 SEC Reports; Financial Statements.
(a) The Company shall file with the Trustee, within 15 days
after it files the same with the SEC, copies of the annual
reports and the information, documents and other reports
(or copies of such portions of any of the foregoing as the
SEC may by rules and regulations prescribe) that the
Company is required to file with the SEC pursuant to
Section 13 or 15 (d) of the Exchange Act. If the Company is
not subject to the requirements of such Section 13 or
15(d), the Company shall file with the Trustee, within 15
days after it would have been required to file the same
with the SEC, financial statements, including any notes
thereto (and with respect to annual reports, an auditors'
report by a firm of established national reputation), and a
"Management's Discussion and Analysis of Financial
Condition and Results of Operations," both comparable to
that which the Company would have been required to include
in such annual reports, information, documents or other
reports if the
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Company had been subject to the requirements of such
Section 13 or 15 (d). The Company shall also comply with
the provisions of TIA ss. 314 (a).
(b) If the Company is required to furnish annual or quarterly
reports to its stockholders pursuant to the Exchange Act,
the Company shall cause any annual report furnished to its
stockholders generally and any quarterly or other financial
reports furnished by it to its stockholders generally to be
filed with the Trustee and mailed to the Holders at their
addresses appearing in the Security Register. If the
Company is not required to furnish annual or quarterly
reports to its stockholders pursuant to the Exchange Act,
the Company shall cause its financial statements referred
to in Section 4.03 (a), including any notes thereto (and
with respect to annual reports, an auditors' report by a
firm of established national reputation), and a
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" to be so mailed to the
Holders within 90 days after the end of each of the
Company's fiscal years and within 60 days after the end of
each of the Company's first three fiscal quarters.
(c) If the Company is not subject to the requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall
furnish to all Holders of Securities and prospective
purchasers of Securities designated by the Holders of
Securities, promptly upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4)
promulgated under the Securities Act.
(d) The Company shall provide the Trustee with a sufficient
number of copies of all reports and other documents and
information that the Trustee may be required to deliver to
Holders under this Section.
Section 4.04 Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year of the Company, an
Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision
of the signing Officers of the Company with a view to
determining whether the Company has kept, observed,
performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his knowledge
the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is
not in default in the performance or observance of any of
the terms, provisions and conditions hereof, without regard
to any grace period or requirement of notice required by
this Indenture (or, if a Default or Event of Default shall
have occurred, describing all such Defaults or Events of
Default of which such Officer may have knowledge and what
action the Company is taking or proposes to take with
respect thereto) and that to the best of his knowledge no
event has
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occurred and remains in existence by reason of which
payments on account of the principal of, or premium, if any,
or interest, if any, on the Securities are prohibited or,
if such event has occurred, a description of the event and
what action the Company is taking or proposes to take with
respect thereto.
(b) So long as not contrary to the then current recommendations
of the American Institute of Certified Public Accountants,
the year-end financial statements delivered pursuant to
Section 4.03 shall be accompanied by a written statement of
the Company's independent public accountants (who shall be
a firm of established national reputation) that in making
the examination necessary for certification of such
financial statements nothing has come to their attention
that would lead them to believe that the Company has
violated any provisions of Articles 4 or 5 of this
Indenture (to the extent such provisions relate to
accounting matters) or, if any such violation has occurred,
specifying the nature and period of existence thereof, it
being understood that such accountants shall not be liable
directly or indirectly to any Person for any failure to
obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, forthwith upon any
Officer of the Company becoming aware of any Default or
Event of Default under this Indenture, an Officers'
Certificate specifying such Default or Event of Default and
what action the Company is taking or proposes to take with
respect thereto.
Section 4.05 Corporate Existence.
Except as permitted by Section 5.01, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect its
corporate existence and the corporate, partnership and other existence of each
of its Subsidiaries and all rights (charter and statutory) and franchises of
the Company and its Subsidiaries, provided that the Company shall not be
required to preserve the corporate existence of any Subsidiary of the Company
or any such right or franchise if the Board of Directors shall determine that
the preservation thereof is no longer desirable in the conduct of the business
of the Company and the Subsidiaries and that the loss thereof would not have a
material adverse effect on the business, prospects, assets or financial
condition of the Company and its Subsidiaries taken as a whole and would not
have any material adverse effect on the payment and performance of the
obligations of the Company under the Securities and this Indenture.
Section 4.06 Maintenance of Properties.
The Company shall cause all properties owned by the Company or any of
its Subsidiaries or used or held for use in the conduct of its business or the
business of any such Subsidiary to be maintained and kept in good condition,
repair and working order (reasonable wear and tear excepted) and supplied with
all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may
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be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided that nothing in
this Section shall prevent the Company from discontinuing the operation or
maintenance of any of such properties if such discontinuance is, in the
judgment of the Company, desirable in the conduct of its business or the
business of any such Subsidiary and not disadvantageous in any material respect
to the Holders.
Section 4.07 Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all taxes, assessments and
governmental charges levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any of
its Subsidiaries, and (ii) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon the property of the Company
or any of its Subsidiaries; provided that the Company shall not be required to
pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings.
Section 4.08 Limitation on Sale/Leaseback Transactions.
The Company will not, and will not permit any Restricted Subsidiary
to, enter into any Sale/Leaseback Transaction with any Person (other than the
Company or a Restricted Subsidiary) unless:
(a) the Company or such Restricted Subsidiary would be entitled
to incur Indebtedness, in a principal amount equal to the
Attributable Indebtedness with respect to such
Sale/Leaseback Transaction, secured by a Lien on the
property subject to such Sale/Leaseback Transaction
pursuant to Section 4.09 without equally and ratably
securing the Securities pursuant to such Section;
(b) after the Issue Date and within a period commencing six
months prior to the consummation of such Sale/Leaseback
Transaction and ending six months after the consummation
thereof, the Company or such Restricted Subsidiary shall
have expended for property used or to be used in the
ordinary course of business of the Company and the
Restricted Subsidiaries (including amounts expended for the
exploration, drilling or development thereof, and for
additions, alterations, repairs and improvements thereto)
an amount equal to all or a portion of the Net Proceeds of
such Sale/Leaseback Transaction and the Company shall have
elected to designate such amount pursuant to this clause
(b) with respect to such Sale/Leaseback Transaction (with
any such amount not being so designated and not permitted
under clause (a) to be applied as set forth in clause (c)
below); or
(c) the Company, during the 12-month period after the effective
date of such Sale/Leaseback Transaction, shall have applied
to the voluntary defeasance or retirement of Securities or
any Pari Passu Indebtedness an amount equal
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to the greater of the Net Proceeds of the sale or transfer
of the property leased in such Sale/Leaseback Transaction
and the fair value, as determined by the Board of
Directors, of such property at the time of entering into
such Sale/Leaseback Transaction (in either case adjusted to
reflect the remaining term of the lease and any amount
designated by the Company as set forth in clause (b)
above), less an amount equal to the principal amount of
Securities and Pari Passu Indebtedness voluntarily defeased
or retired by the Company within such 12-month period and
not designated with respect to any other Sale/Leaseback
Transaction entered into by the Company or any Restricted
Subsidiary during such period.
Section 4.09 Limitation on Liens.
No provision of this Indenture or the Securities shall in any way
restrict or prevent the Company or any Subsidiary from issuing, assuming,
guaranteeing or otherwise incurring any Indebtedness; provided, however, that
the Company shall not, and shall not permit any Restricted Subsidiary to,
issue, assume or guarantee any Indebtedness for borrowed money secured by any
Lien on any property or asset now owned or hereafter acquired by the Company or
such Restricted Subsidiary without making effective provision whereby any and
all Securities then or thereafter outstanding will be secured by a Lien equally
and ratably with any and all other obligations thereby secured for so long as
any such obligations shall be so secured. Notwithstanding the foregoing, the
Company or any Restricted Subsidiary may, without so securing the Securities,
issue, assume or guarantee Indebtedness secured by the following Liens:
(a) Liens existing on the Issue Date or provided for under the
terms of agreements existing on the Issue Date (including,
without limitation, the Lien provided for pursuant to
Section 7.07);
(b) Liens on property or properties (including any properties
or assets, real or personal, or improvements used or to be
used in connection with such property) securing (i) all or
any portion of the cost of exploration, drilling or
development of such property or properties, (ii) all or any
portion of the cost of acquiring, constructing, altering,
improving or repairing any property or assets, real or
personal, or improvements used or to be used in connection
with such property or properties or (iii) Indebtedness
incurred by the Company or any Restricted Subsidiary to
provide funds for the activities set forth in clauses (i)
and (ii) above with respect to such property or properties;
(c) Liens securing Indebtedness owed by a Restricted Subsidiary
to the Company or to any other Restricted Subsidiary;
(d) Liens on property existing at the time of acquisition of
such property by the Company or a Subsidiary or Liens on
the property of any Person existing at the time such Person
becomes a Restricted Subsidiary of the Company or is merged
with the Company in compliance with Article V hereof and in
either
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case not incurred as a result of (or in connection with or
in anticipation of) the acquisition of such property or
such Person becoming a Restricted Subsidiary of the Company
or being merged with the Company, provided that such Liens
do not extend to or cover any property or assets of the
Company or any of its Restricted Subsidiaries other than
the property so acquired;
(e) Liens on any property securing (i) Indebtedness incurred in
connection with the construction, installation or financing
of pollution control or abatement facilities or other forms
of industrial revenue bond financing or (ii) Indebtedness
issued or guaranteed by the United States or any State
thereof or any department, agency or instrumentality of
either;
(f) any Lien extending, renewing or replacing (or successive
extensions, renewals or replacements of) any Lien of any
type permitted under clauses (a) through (e) above,
provided that such Lien extends to or covers only the
property that is subject to the Lien being extended,
renewed or replaced;
(g) any Ordinary Course Lien arising, but only so long as
continuing, in the ordinary course of business of the
Company and the Restricted Subsidiaries;
(h) any Lien resulting from the deposit of moneys or evidences
of Indebtedness in trust for the purpose of defeasing
Indebtedness of the Company or any Subsidiary; or
(i) Liens (exclusive of any Lien of any type otherwise
permitted under clauses (a) through (h) above) securing
Indebtedness of the Company or any Restricted Subsidiary in
an aggregate principal amount which, together with the
aggregate amount of Attributable Indebtedness deemed to be
outstanding in respect of all Sale/Leaseback Transactions
entered into pursuant to clause (a) of Section 4.08
(exclusive of any such Sale/Leaseback Transactions
otherwise permitted under clauses (a) through (h) above),
does not at the time such Indebtedness is incurred exceed
7.5% of the Consolidated Net Tangible Assets of the Company
(as shown in the most recent published quarterly or
year-end consolidated balance sheet of the Company and its
Subsidiaries).
Notwithstanding the foregoing, nothing in this Section 4.09 shall be
deemed to prohibit or otherwise limit the following types of transactions:
(1) the sale, granting of Liens with respect to, or other
transfer of, crude oil, natural gas or other petroleum hydrocarbons
in place for a period of time until, or in an amount such that, the
transferee will realize therefrom a specified amount (however
determined) of money or of such crude oil, natural gas or other
petroleum hydrocarbons;
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(2) the sale or other transfer of any other interest in
property of the character commonly referred to as a production
payment, overriding royalty, forward sale or similar interest;
(3) the entering into of Currency Hedge Obligations, Interest
Rate Hedging Agreements or Oil and Gas Hedging Contracts although
Liens securing any Indebtedness for borrowed money that is the subject
of any such obligations shall not be permitted hereby unless permitted
under clauses (a) through (i) above; and
(4) the granting of Liens required by any contract or statute
in order to permit the Company or any Restricted Subsidiary to perform
any contract or subcontract made by it with or at the request of the
United States or any State thereof or any department, agency or
instrumentality of either, or to secure partial, progress, advance or
other payments to the Company or any Restricted Subsidiary by such
governmental unit pursuant to the provisions of any contract or
statute.
Section 4.10 Addition of Guarantors.
(a) If any Subsidiary of the Company guarantees any Funded
Indebtedness of the Company at any time subsequent to the
Issue Date, then the Company shall (i) cause the Securities
to be equally and ratably guaranteed by such Subsidiary,
but only to the extent that the Securities are not already
guaranteed by such Subsidiary on reasonably comparable
terms and (ii) cause such Subsidiary to execute and deliver
a supplemental indenture evidencing its provision of a
guarantee in accordance with clause (b) below.
(b) Any Person may become a guarantor of the Securities by
executing and delivering to the Trustee (i) a supplemental
indenture in form and substance satisfactory to the Trustee
which subjects such Person to the provisions (including the
representations and warranties) of this Indenture as a
guarantor and (ii) an Opinion of Counsel and Officers'
Certificate to the effect that such supplemental indenture
has been duly authorized and executed by such Person and
constitutes the legal, valid, binding and enforceable
obligation of such Person (subject to such customary
exceptions concerning creditors' rights and equitable
principles as may be acceptable to the Trustee in its
discretion and provided that no opinion need be rendered
concerning the enforceability of such guarantee) and that
the issuance of the guarantee is in compliance with
applicable federal and state securities laws.
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ARTICLE V
SUCCESSORS
Section 5.01 Limitations on Mergers and Consolidations.
The Company will not consolidate or merge with or into any Person, or
sell, lease, convey or otherwise dispose of all or substantially all of its
assets, or assign any of its obligations hereunder or under the Securities, to
any Person, unless:
(a) the Person formed by or surviving such consolidation or
merger (if other than the Company), or to which such sale,
lease, conveyance or other disposition or assignment shall
be made (collectively, the "Successor"), is a corporation
organized and existing under the laws of the United States
or any State thereof or the District of Columbia, and the
Successor assumes by supplemental indenture in a form
satisfactory to the Trustee all of the obligations of the
Company, under this Indenture and the Securities;
(b) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be
continuing; and
(c) the Company shall have delivered to the Trustee prior to
the consummation of the proposed transaction an Officers'
Certificate and an Opinion of Counsel, each stating that
the proposed transaction and such supplemental indenture
comply with this Indenture.
Section 5.02 Successor Corporation Substituted.
Upon any consolidation or merger of the Company with or into any
Person, or any sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company or any assignment of the
obligations of the Company under this Indenture or the Securities in accordance
with Section 5.01, the Successor formed by such consolidation or into or with
which the Company is merged or to which such sale, lease, conveyance or other
disposition or assignment is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Company, under this Indenture and
the Securities with the same effect as if such Successor had been named as the
Company herein and the predecessor Company in the case of a sale, lease,
conveyance or other disposition or assignment, shall be released from all
obligations under this Indenture and the Securities.
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any
Security when the same becomes due and payable and the Default
continues for a period of 30 days;
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(2) the Company defaults in the payment of the principal of or
premium, if any, on any Security when the same becomes due and
payable at Stated Maturity, upon acceleration or otherwise;
(3) the Company fails to comply with any of its other agreements
or covenants in, or provisions of, the Securities, or this Indenture
and such failure continues for the period and after the notice
specified in the last paragraph of this Section 6.01;
(4) any default shall occur which results in the acceleration of
the maturity of any Indebtedness of the Company or any Restricted
Subsidiary (other than the Securities) (provided that such
acceleration is not rescinded within a period of 10 days from the
occurrence of such acceleration) having an outstanding principal
amount of $10 million or more individually or, taken together with
all other such Indebtedness that has been so accelerated, in the
aggregate; or any default shall occur in the payment of any principal
or interest in respect of any Indebtedness of the Company or any
Restricted Subsidiary (other than the Securities) having an
outstanding principal amount of $10 million or more individually or,
taken together with all other such Indebtedness with respect to which
any such payment has not been made, in the aggregate and such default
shall be continuing for a period of 30 days without the Company or
such Restricted Subsidiary, as the case may be, effecting a cure of
such default;
(5) failure by the Company or any Restricted Subsidiary to pay
final, non-appealable judgments aggregating in excess of $10 million,
which judgments are not paid, discharged or stayed for a period of 60
days;
(6) the Company or any Restricted Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in
an involuntary case,
(c) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
(d) makes a general assignment for the benefit of its creditors;
or
(7) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that remains unstayed and in effect for 60
days and that:
(a) is for relief against the Company or any Restricted
Subsidiary as debtor in an involuntary case,
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(b) appoints a Custodian of the Company or any Restricted
Subsidiary or a Custodian for all or substantially all of
the property of the Company or any Restricted Subsidiary,
or
(c) orders the liquidation of the Company or any Restricted
Subsidiary.
The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
A Default under clause (3) is not an Event of Default until the
Trustee notifies the Company or the Holders of at least 25% in principal amount
of the then outstanding Securities notify the Company, and the Trustee, of the
Default, and the Company does not cure the Default within 90 days after receipt
of the notice. The notice must specify the Default, demand that it be remedied
and state that the notice is a "Notice of Default."
Section 6.02 Acceleration.
If an Event of Default (other than an Event of Default specified in
clauses (6) or (7) of Section 6.01) occurs and is continuing, the Trustee by
notice to the Company, or the Holders of at least 25% in principal amount of
the then outstanding Securities by notice to the Company and the Trustee, may
declare the principal of and premium, if any, and accrued and unpaid interest
on all then outstanding Securities to be due and payable immediately. Upon any
such declaration the amounts due and payable on the Securities, as determined
in accordance with the next succeeding paragraph, shall be due and payable
immediately. If an Event of Default specified in clause (6) or (7) of Section
6.01 occurs, such amounts shall ipso facto become and be immediately due and
payable without any declaration, notice or other act on the part of the Trustee
or any Holder. The Holders of a majority in principal amount of the then
outstanding Securities by written notice to the Trustee may rescind an
acceleration and its consequences (other than nonpayment of principal of, or
premium, if any, or interest on the Securities) if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived.
In the event that the maturity of the Securities is accelerated
pursuant to this Section 6.02, 100% of the principal amount thereof shall
become due and payable plus accrued interest to the date of payment.
Section 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal of, or premium,
if any, or interest on the Securities or to enforce the performance of any
provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or
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remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
Section 6.04 Waiver of Past Defaults.
Subject to Sections 6.07 and 9.02, the Holders of a majority in
principal amount of the then outstanding Securities by notice to the Trustee
may waive an existing Default or Event of Default and its consequences
(including waivers obtained in connection with a tender offer or exchange offer
for Securities or a solicitation of consents in respect of Securities, provided
that in each case such offer or solicitation is made to all Holders of then
outstanding Securities on equal terms), except a continuing Default or Event of
Default in the payment of the principal of, or premium, if any, or interest on
any Security. Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 6.05 Control by Majority.
The Holders of a majority in principal amount of the then outstanding
Securities may 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 it hereunder. However, the Trustee may refuse to follow any
direction that conflicts with applicable law or this Indenture, that the
Trustee determines may be unduly prejudicial to the rights of other Holders, or
that may involve the Trustee in personal liability.
Section 6.06 Limitations on Suits.
Subject to Section 6.07, a Holder may pursue a remedy with respect to
this Indenture or the Securities only if:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in principal amount of the then
outstanding Securities make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and
(5) during such 60 day period the Holders of a majority in
principal amount of the then outstanding Securities do not give the
Trustee a direction inconsistent with the request.
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A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
Section 6.07 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to receive payment of principal of, and premium, if
any, and interest on the Security, on or after the respective due dates
expressed in the Security, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of the Holder.
Section 6.08 Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(1) or (2) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the amount of
principal, premium, if any, and interest remaining unpaid on the Securities,
and interest on overdue principal and premium, if any, and, to the extent
lawful, interest on overdue interest, and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.09 Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents and to take such actions, including participating as a
member, voting or otherwise, of any committee of creditors, as may be necessary
or advisable in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and the Holders allowed in any judicial
proceedings relative to the Company or its creditors or properties and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any Custodian in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 out of
the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties which the
Holders of the Securities may be entitled to receive in such proceeding whether
in liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
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Section 6.10 Priorities.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Securities for
principal, premium, if any, and interest ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal, premium, if any, and interest, respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Article.
Section 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in
principal amount of the then outstanding Securities.
ARTICLE VII
TRUSTEE
Section 7.01 Duties of Trustee.
(1) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture,
and use the same degree of care and skill in such exercise, as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs.
(2) Except during the continuance of an Event of Default:
(a) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
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(b) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine such
certificates and opinions to determine whether or not they appear to
conform to the requirements of this Indenture.
(3) The Trustee may not be relieved from liabilities for its own
grossly negligent action, its own grossly negligent failure to act, or its own
willful misconduct, except that:
(a) this paragraph does not limit the effect of paragraph (2) of
this Section;
(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was grossly negligent in ascertaining the pertinent facts;
and
(c) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
(4) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(1), (2) and (3) of this Section.
(5) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee may refuse to perform
any duty or exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense.
(6) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held
in trust by the Trustee need not be segregated from other funds except to the
extent required by law. All money received by the Trustee shall, until applied
as herein provided, be held in trust for the payment of the principal of, and
premium, if any, and interest on the Securities.
Section 7.02 Rights of Trustee.
(1) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel of its choice and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
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(3) The Trustee may act through agents and attorneys and shall not be
responsible for the misconduct or negligence of any agent or attorney appointed
with due care.
(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights
or powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(6) The permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty, and the Trustee shall not be
answerable for other than its grossly negligent action, grossly negligent
omission or its willful misconduct.
(7) The Trustee shall not be charged with knowledge of any Event of
Default under Section 6.01 (other than an Event of Default under Section
6.01(a) or (b) if the Trustee is also the Paying Agent with respect to the
Securities) hereof or the existence of any Subsidiary of the Company unless the
Trustee shall have received notice thereof in accordance with Section 10.02
hereof from the Company or a Holder.
Section 7.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, or any
of its Affiliates with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights. However, the Trustee is subject to
Sections 7.10 and 7.11.
Section 7.04 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities or any money paid to the Company or
upon the Company's direction under any provision hereof, it shall not be
responsible for the use or application of any money received by any Paying
Agent other than the Trustee and it shall not be responsible for any statement
or recital herein or any statement in the Securities other than its certificate
of authentication.
Section 7.05 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and it is
known to the Trustee, the Trustee shall mail to Holders a notice of the Default
or Event of Default within 90 days after it occurs. Except in the case of a
Default or Event of Default in payment of principal of, or premium, if any, or
interest on any Security, the Trustee may withhold the notice if and so long as
the board of directors, the executive committee or a trust committee of
directors and/or Trust Officers of the Trustee in good faith determines that
withholding the notice is in the interests of Holders.
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Section 7.06 Reports by Trustee to Holders.
Within 60 days after each January 31, beginning with January 31, 1998,
and in any event on or before April 1 in each year, the Trustee shall mail to
Holders a brief report dated as of such January 31 that complies with TIA
Section 313(a); provided, however, that if no event described in TIA Section
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted. The Trustee also shall comply with TIA Section
313(b). The Trustee shall also transmit by mail all reports as required by TIA
Section 313(c).
A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each securities exchange, if any, on which the
Securities are listed. The Company shall notify the Trustee when the Securities
are listed on any stock exchange.
Section 7.07 Compensation and Indemnity.
The Company agrees to pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company agrees to reimburse the Trustee upon
request for all reasonable disbursements, advances and expenses incurred or
made by it in accordance with any provision of this Indenture. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
Except as set forth in the next paragraph, the Company agrees to
indemnify the Trustee against any loss, liability or expense incurred by it
arising out of or in connection with the acceptance or administration of its
duties under this Indenture, including the costs and expenses of defending
itself against any claim of liability in connection with the exercise or
performance of any of its duties hereunder. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The Company shall not be obligated to reimburse any expense or
indemnify against any loss or liability incurred by the Trustee through gross
negligence or bad faith, as determined by a court of competent jurisdiction.
To secure the payment obligations of the Company in this Section, the
Trustee shall have a Lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal of and
premium, if any, and interest on particular Securities. Such Lien shall survive
the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
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Section 7.08 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign and be discharged from the trust hereby created
by so notifying the Company. The Holders of a majority in principal amount of
the then outstanding Securities may remove the Trustee by so notifying the
Trustee and the Company. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(iii) a Custodian or public officer takes charge of the Trustee or
its property; or
(iv) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the then outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the Lien
provided for in Section 7.07. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the obligations of the Company under Section
7.07 shall continue for the benefit of the retiring Trustee.
Section 7.09 Successor Trustee by Merger, etc.
Subject to Section 7.10, if the Trustee consolidates, merges or
converts into, or transfers all or substantially all of its corporate trust
business to, another corporation, the successor corporation without any further
act shall be the successor Trustee; provided, however, that in the case of a
transfer of all or substantially all of its corporate trust business to another
corporation, the transferee corporation expressly assumes all of the Trustee's
liabilities, duties and responsibilities hereunder.
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In case any Securities shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion
or consolidation to such authenticating Trustee may adopt such authentication
and deliver the Securities so authenticated, with the same effect as if such
successor Trustee had itself authenticated such Securities.
Section 7.10 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia and authorized under
such laws to exercise corporate trust powers, shall be subject to supervision
or examination by Federal or State (or the District of Columbia) authority and
shall have a combined capital and surplus of at least $50 million as set forth
in its most recent published report of condition.
The Indenture shall always have a Trustee who satisfies the
requirements of TIA Sections 310(a) (1), 310 (a) (2) and 310 (a) (5). The
Trustee is subject to and shall comply with the provisions of TIA Section 310(b)
during the period of time required by this Indenture. Nothing in this Indenture
shall prevent the Trustee from filing with the SEC the application referred to
in the penultimate paragraph of TIA Section 310(b).
Section 7.11 Preferential Collection of Claims Against Company.
The Trustee is subject to and shall comply with the provisions of TIA
Section 311 (a), excluding any creditor relationship listed in TIA Section
311(b). A Trustee who has resigned or been removed shall be subject to TIA
Section 311(a) to the extent indicated therein.
ARTICLE VIII
DISCHARGE OF INDENTURE
Section 8.01 Termination of Company's Obligations.
(1) This Indenture shall cease to be of further effect (except that
the Company's obligations under Section 7.07 and the Trustee's and Paying
Agent's obligations under Section 8.03 shall survive), and the Trustee, on
demand and expense of the Company, shall execute proper instruments
acknowledging the satisfaction and discharge of this Indenture, when:
(a) either
(i) all outstanding Securities theretofore authenticated
and issued (other than destroyed, lost or stolen Securities that
have been replaced or paid) have been delivered to the Trustee
for cancellation; or
(ii) all outstanding Securities not theretofore delivered
to the Trustee for cancellation:
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(A) have become due and payable, or
(B) will become due and payable at their Stated
Maturity within one year, or
(C) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company,
and the Company, in the case of clause (A), (B) or (C) above,
has deposited or caused to be deposited with the Trustee as
funds (immediately available to the Holders in the case of
clause (A)) in trust for the purpose an amount which,
together with earnings thereon, will be sufficient to pay and
discharge the entire indebtedness on such Securities for
principal, premium, if any, and interest to the date of such
deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(b) the Company has paid of caused to be paid all other sums
payable by it hereunder; and
(c) the Company has delivered to the Trustee an Officers'
Certificate stating that all conditions precedent to satisfaction and
discharge of this Indenture have been complied with, together with an
Opinion of Counsel to the same effect.
(2) The Company may terminate all of its obligations under this
Indenture, except as provided below, if:
(a) the Company irrevocably deposits in trust with the
Trustee money or U.S. Government Obligations sufficient to pay
principal of and interest on the Securities to maturity, and to pay
all other sums payable by it hereunder, provided that the Trustee
shall have been irrevocably instructed to apply such money or the
proceeds of such U.S. Government Obligations to the payment of said
principal and interest with respect to the Securities as the same
shall become due;
(b) the Company delivers to the Trustee an Officers'
Certificate stating that all conditions precedent to satisfaction and
discharge of this Indenture have been complied with, and an Opinion of
Counsel to the same effect;
(c) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit; and
(d) the Company shall have delivered to the Trustee an
Opinion of Counsel from nationally recognized counsel acceptable to
the Trustee or a tax ruling to the effect that the Holders of the
Securities will not recognize income, gain or loss for federal income
tax purposes as a result of the Company's exercise of its option under
this Section 8.01(2) and
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<PAGE> 44
will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such
option had not been exercised.
In such event, this Indenture shall cease to be of further effect (except as
provided in the next succeeding paragraph), and the Trustee, on demand and
expense of the Company, shall execute proper instruments acknowledging
confirmation of and discharge under this Indenture.
However, the Company's obligations in Sections 2.05, 2.06, 2.07, 2.08,
2.10, 2.11, 4.01, 7.07, 7.08 and 8.04, and the Company's, the Trustee's and
Paying Agent's obligations in Section 8.03 shall survive until the Securities
are no longer outstanding.
Thereafter, only the Company's obligations in Section 7.07 and the
Trustee's and Paying Agent's obligations in Section 8.03 shall survive.
After such irrevocable deposit made pursuant to this Section 8.01(2)
and satisfaction of the other conditions set forth herein, the Trustee upon
request and expense of the Company shall acknowledge in writing the discharge
of the Company's obligations under this Indenture except for those surviving
obligations specified above.
In order to have money available on a payment date to pay principal of
or interest on the Securities, the U.S. Government Obligations shall be payable
as to principal or interest on or before such payment date in such amounts as
will provide the necessary money. U.S. Government Obligations shall not be
callable at the issuer's option.
Section 8.02 Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01. It shall apply the deposited money
and the money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal of and premium, if
any, and interest on the Securities.
Section 8.03 Repayment to Company.
The Trustee and the Paying Agent shall promptly pay to the Company
upon written request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon written
request any money held by them for the payment of principal, premium, if any,
or interest that remains unclaimed for two years after the date upon which such
payment shall have become due; provided, however, that the Company shall have
either caused notice of such payment to be mailed to each Holder entitled
thereto no less than 30 days prior to such repayment or within such period
shall have published such notice in a financial newspaper of widespread
circulation published in The City of New York. After payment to the Company,
Holders entitled to the money must look to the Company for payment as general
creditors unless an applicable abandoned property law designates another
Person, and all liability of the Trustee and the Paying Agent with respect to
such money shall cease.
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Section 8.04 Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 8.01 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the obligations of the Company under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.01 until such time as the Trustee or the Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with Section 8.01; provided, however, that if the Company has made any payment
of principal of or premium, if any, or interest on any Securities because of
the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Securities to receive such payment from the money
or U.S. Government Obligations held by the Trustee or the Paying Agent.
ARTICLE IX
AMENDMENTS
Section 9.01 Without Consent of Holders.
The Company, and the Trustee may amend this Indenture or the
Securities or waive any provision hereof or thereof without the consent of any
Holder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Sections 4.10 and 5.01;
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities;
(4) to comply with any requirement in order to effect or
maintain the qualification of this Indenture under the TIA; or
(5) to make any change that does not adversely affect the rights
hereunder of any Holder in any material respect.
Upon the request of the Company, accompanied by a resolution of the
Board of Directors (certified by the Secretary or an Assistant Secretary of the
Company) authorizing the execution of any such supplemental indenture, and upon
receipt by the Trustee of the documents described in Section 9.06, the Trustee
shall join with the Company in the execution of any supplemental indenture
authorized or permitted by the terms of this Indenture and make any further
appropriate agreements and stipulations that may be therein contained. After an
amendment or waiver under this Section becomes effective, the Company shall
mail to the Holders of each Security affected thereby a notice briefly
describing the amendment or waiver. Any failure of the Company to mail such
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<PAGE> 46
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
Section 9.02 With Consent of Holders.
Except as provided below in this Section 9.02, the Company, and the
Trustee may amend this Indenture or the Securities with the written consent
(including consents obtained in connection with a tender offer or exchange
offer for Securities or a solicitation of consents in respect of Securities,
provided that in each case such offer or solicitation is made to all Holders of
then outstanding Securities on equal terms) of the Holders of at least a
majority in principal amount of the then outstanding Securities.
Upon the request of the Company accompanied by a resolution of the
Board of Directors (certified by the Secretary or an Assistant Secretary of the
Company) authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of the Holders as
aforesaid, and upon receipt by the Trustee of the documents described in
Section 9.06, the Trustee shall join with the Company in the execution of such
supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
The Holders of a majority in principal amount of the then outstanding
Securities may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Securities (including waivers obtained
in connection with a tender offer or exchange offer for Securities or a
solicitation of consents in respect of Securities, provided that in each case
such offer or solicitation is made to all Holders of then outstanding
Securities on equal terms). However, without the consent of each Holder
affected, an amendment or waiver under this Section may not:
(1) reduce the percentage in principal amount of outstanding
Securities whose Holders must consent to an amendment, supplement or
waiver;
(2) reduce the rate of or change the time for payment of
interest, including default interest, on any Security;
(3) reduce the principal of or change the fixed maturity of any
Security or alter the premium or other provisions with respect to
redemption under Section 3.07 or specified in the Securities;
(4) make any Security payable in money other than that stated in
the Security;
(5) impair the right to institute suit for the enforcement of
any payment of principal of, or premium, if any, or interest on any
Security pursuant to Sections 6.06 and 6.07, except as limited by
Section 6.06;
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<PAGE> 47
(6) make any change in the percentage of principal amount of
Securities necessary to waive compliance with certain provisions of
this Indenture pursuant to Section 6.04 or 6.07 or this sentence of
this Section 9.02; or
(7) waive a continuing Default or Event of Default in the
payment of principal of, or premium, if any, or interest on the
Securities.
The right of any Holder to participate in any consent required or
sought pursuant to any provision of this Indenture (and the obligation of the
Company to obtain any such consent otherwise required from such Holder) may be
subject to the requirement that such Holder shall have been the Holder of
record of any Securities with respect to which such consent is required or
sought as of a date identified by the Trustee in a notice furnished to Holders
in accordance with the terms of this Indenture.
Section 9.03 Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities shall comply in
form and substance with the TIA as then in effect.
Section 9.04 Revocation and Effect of Consents.
Until an amendment (which includes any supplement) or waiver becomes
effective, a consent to it by a Holder of a Security is a continuing consent by
the Holder and every subsequent Holder of a Security or portion of a Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent is not made on any Security. However, any such Holder
or subsequent Holder may revoke the consent as to his or her Security or
portion of a Security if the Trustee receives written notice of revocation
before the date the amendment or waiver becomes effective. An amendment or
waiver becomes effective in accordance with its terms and thereafter binds
every Holder.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment or
waiver. If the Company elects to fix a record date for such purpose, the record
date shall be fixed at (i) the later of 30 days prior to the first solicitation
of such consent or the date of the most recent list of Holders furnished to the
Trustee prior to such solicitation pursuant to Section 2.13, or (ii) such other
date as the Company shall designate. If a record date is fixed, then
notwithstanding the provisions of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to consent to such
amendment or waiver or to revoke any consent previously given, whether or not
such Persons continue to be Holders after such record date. No consent shall be
valid or effective for more than 90 days after such record date unless consents
from Holders of the principal amount of Securities required hereunder for such
amendment or waiver to be effective shall have also been given and not revoked
within such 90-day period.
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<PAGE> 48
After an amendment or waiver becomes effective, it shall bind every
Holder, unless it is of the type described in any of clauses (1) through (7) of
Section 9.02. In such case, the amendment or waiver shall bind each Holder of a
Security who has consented to it and every subsequent Holder of a Security that
evidences the same debt as the consenting Holder's Security.
Section 9.05 Notation on or Exchange of Securities.
The Trustee may place an appropriate notation about an amendment or
waiver on any Security thereafter authenticated. The Company in exchange for
all Securities may issue and the Trustee shall authenticate new Securities that
reflect the amendment or waiver.
Section 9.06 Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article if the amendment does not adversely affect
the rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment or supplemental indenture, the Trustee shall be entitled to receive
and, subject to Section 7.01, shall be fully protected in relying upon, an
Officers' Certificate and Opinion of Counsel as conclusive evidence that such
amendment or supplemental indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will be valid and
binding upon the Company in accordance with its terms.
ARTICLE X
MISCELLANEOUS
Section 10.01 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c) the imposed duties shall control.
Section 10.02 Notices.
Any notice or communication by the Company, or the Trustee to the
others is duly given if in writing and delivered in Person or mailed by
registered or certified mail (return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the other's address:
If to the Company:
Newfield Exploration Company
363 North Sam Houston Parkway East, Suite 2020
Houston, TX 77060
Attention: Secretary
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<PAGE> 49
If to the Trustee:
First Union National Bank
230 South Tryon Street, Ninth Floor
Charlotte, North Carolina 28288-1179
Attention: Corporate Trust Administration
The Company, or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight
air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first-class
mail, postage prepaid, to the Holder's address shown on the register kept by
the Registrar. Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 10.03 Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
Section 10.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the
statements set forth in Section 10.05) stating that, in the opinion of
the signers, all conditions precedent and covenants, if any, provided
for in this Indenture relating to the proposed action have been
complied with; and
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<PAGE> 50
(2) an Opinion of Counsel (which shall include the statements
set forth in Section 10.05) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been
complied with.
Section 10.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
Section 10.06 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or the Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 10.07 Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in The City of New York or the State of North Carolina, or at a
place of payment are authorized or obligated by law, regulation or executive
order to remain closed. If a payment date is a Legal Holiday at a place of
payment, payment may be made at that place on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the intervening period.
Section 10.08 No Recourse Against Others.
A director, officer, employee or stockholder of the Company, as such,
shall not have any liability for any obligations of the Company under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability.
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Section 10.09 Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 10.10 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company, or any Subsidiary of the Company. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
Section 10.11 Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its Successor. All agreements of the Trustee in this Indenture shall
bind its successor.
Section 10.12 Severability.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 10.13 Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 10.14 Trustee as Paying Agent and Registrar.
The Company initially appoints the Trustee as Paying Agent and
Registrar.
Section 10.15 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
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<PAGE> 52
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
NEWFIELD EXPLORATION COMPANY
By: /s/ Terry W. Rathert
----------------------------------
Title: Vice President - Planning
and Administration
FIRST UNION NATIONAL BANK, as Trustee
By: /s/ Shawn Banasek
----------------------------------
Title: Assistant Vice President
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<PAGE> 53
EXHIBIT A
[FACE OF SECURITY]
NEWFIELD EXPLORATION COMPANY
7.45% SENIOR NOTE DUE 2007
CUSIP No. 651290 AA 6 $____________
Newfield Exploration Company, a Delaware corporation (the "Company"),
for value received promises to pay to ___________________ or registered
assigns, the principal sum of ________________________ Dollars [if the Security
is to be a Global Certificate, insert the following -- or such lesser amounts
as indicated on the schedule of exchanges of definitive Securities] on October
15, 2007.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers and its corporate seal
to be affixed hereto or imprinted hereon.
Dated: October 15, 1997
[SEAL] NEWFIELD EXPLORATION COMPANY
By:
-----------------------------------
By:
-----------------------------------
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<PAGE> 54
Certificate of Authentication:
First Union National Bank, as Trustee, certifies that this is one of
the Securities referred to in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK
By:
-----------------------------------
Authorized Signature
[IF THE SECURITY IS TO BE A GLOBAL CERTIFICATE, INSERT THE FOLLOWING
- -- THIS SECURITY IS A BOOK-ENTRY SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE
ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT
IN SUCH LIMITED CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS
A-2
<PAGE> 55
SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NONU.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT AND OTHERWISE IN COMPLIANCE
WITH REGULATION S, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY
OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY
TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
A-3
<PAGE> 56
[REVERSE OF SECURITY]
NEWFIELD EXPLORATION COMPANY
7.45% SENIOR NOTE DUE 2007
1. INTEREST. Newfield Exploration Company, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security
at 7.45% per annum from October 15, 1997 until maturity. The Company will pay
interest semiannually on April 15 and October 15 of each year (each an
"Interest Payment Date"), or if any such day is not a Business Day, on the next
succeeding Business Day. Interest on the Securities will accrue from the most
recent Interest Payment Date on which interest has been paid or, if no interest
has been paid, from October 15, 1997; provided, that if there is no existing
Default in the payment of interest, and if this Security is authenticated
between a record date referred to on the face hereof and the next succeeding
Interest Payment Date, interest shall accrue from such next succeeding Interest
Payment Date; provided, further, that the first Interest Payment Date shall be
April 15, 1998. The Company shall pay interest on overdue principal and
premium, if any, from time to time on demand at a rate equal to the interest
rate then in effect; it shall pay interest on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Securities
(except defaulted interest) to the Persons who are registered Holders of
Securities at the close of business on the record date next preceding the
Interest Payment Date, even if such Securities are canceled after such record
date and on or before such Interest Payment Date. The Holder must surrender
this Security to a Paying Agent to collect principal payments. The Company will
pay the principal of, premium, if any, and interest on the Securities in money
of the United States of America that at the time of payment is legal tender for
payment of public and private debts. The Company, however, may pay such amounts
by check payable in such money. Payments in respect of the Securities evidenced
by a Global Certificate (including principal, premium, if any, and interest)
shall be made by wire transfer of immediately available funds to the accounts
specified by the Holder of the Global Certificate. In all other cases, payment
of interest may be made at the option of the Company by check to a Holder's
registered address.
3. RANKING. The Securities will be senior unsecured obligations of the
Company.
4. PAYING AGENT AND REGISTRAR. Initially, First Union National Bank,
the Trustee under the Indenture, will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-registrar without notice
to any Holder. The Company may act in any such capacity.
5. INDENTURE. The Company issued the Securities under an Indenture
dated as of October 15, 1997 (the "Indenture") between the Company and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code Sections 77aaa-77bbbb), as in effect on the date
of execution of the Indenture. The Securities are subject to all such terms,
and Holders are referred to the Indenture and such Act for a statement of such
terms. The Securities are unsecured general obligations of the Company limited
to $125,000,000 in aggregate principal amount.
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<PAGE> 57
6. OPTIONAL REDEMPTION. The Securities may be redeemed at any time, at
the option of the Company, in whole or from time to time in part, at a price
equal to 100% of their principal amount plus accrued and unpaid interest, if
any, to the Redemption Date plus the Make-Whole Premium, if any (the
"Redemption Price"). The amount of the Make-Whole Premium with respect to any
Security (or portion thereof) to be redeemed will be equal to the excess, if
any, of:
(i) the sum of the present values, calculated as of the
Redemption Date, of:
(A) each interest payment that, but for such redemption,
would have been payable on the Security (or portion
thereof) being redeemed on each Interest Payment Date
occurring after the Redemption Date (excluding any accrued
interest for the period prior to the Redemption Date); and
(B) the principal amount that, but for such redemption,
would have been payable at the final maturity of the Security
(or portion thereof) being redeemed;
over
(ii) the principal amount of the Security (or portion thereof)
being redeemed.
The present values of interest and principal payments referred to in clause (a)
above will be determined in accordance with generally accepted principles of
financial analysis. Such present values will be calculated by discounting the
amount of each payment of interest or principal from the date that each such
payment would have been payable, but for the redemption, to the Redemption Date
at a discount rate equal to the Treasury Yield plus 25 basis points. The
Make-Whole Premium will be calculated by an Independent Investment Banker (as
defined in the Indenture).
For purposes of determining the Make-Whole Premium, "Treasury Yield"
means a rate of interest per annum equal to the weekly average yield to
maturity of United States Treasury Notes that have a constant maturity that
corresponds to the remaining term to maturity of the Securities, calculated to
the nearest 1/12th of a year (the "Remaining Term"). The Treasury Yield will be
determined as of the third Business Day immediately preceding the applicable
Redemption Date. The weekly average yields of United States Treasury Notes will
be determined by reference to the most recent statistical release published by
the Federal Reserve Bank of New York and designated "H.15 (519) Selected
Interest Rates" or any successor release (the "H. I 5 Statistical Release"). If
the H.15 Statistical Release sets forth a weekly average yield for United
States Treasury Notes having a constant maturity that is the same as the
Remaining Term, then the Treasury Yield will be equal to such weekly average
yield. In all other cases, the Treasury Yield will be calculated by
interpolation, on a straight-line basis, between the weekly average yields on
the United States Treasury Notes that have a constant maturity closest to and
greater than the Remaining Term and the United States Treasury Notes that have
a constant maturity closest to and less than the Remaining Term (in each case
as set forth in the H.15 Statistical Release). Any weekly average yields so
calculated by interpolation will be rounded to the nearest 1/100th of 1%, with
any figure of 1/200% or Notes are not available in the H.15 Statistical Release
or otherwise, then the Treasury Yield will be calculated by interpolation of
comparable rates selected by the Independent Investment Banker.
A-5
<PAGE> 58
Periodic interest installments with respect to which the Interest
Payment Date is on or prior to any Redemption Date will be payable to the
Holders of record at the close of business on the relevant record dates
referred to herein, all as provided in the Indenture.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at his registered address. Securities in denominations larger than $ 1,000 may
be redeemed in part but only in whole multiples of $1,000. On and after the
Redemption Date interest will cease to accrue on Securities or on the portions
thereof called for redemption, as the case may be.
7. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities originally issued
are in the form of a permanent Global Certificate. Under certain circumstances
described in the Indenture, the Securities may also be issued in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Securities may be registered and Securities may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not exchange or register the transfer of
any Security or portion of a Security selected for redemption. Also, it need
not exchange or register the transfer of any Securities for a period of 15 days
before a selection of Securities to be redeemed.
8. PERSONS DEEMED OWNERS. The registered Holder of a Security shall be
treated as its owner for all purposes.
9. AMENDMENTS AND WAIVERS. Subject to certain exceptions and
limitations, the Indenture or the Securities may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Securities, and any existing Default under, or compliance
with any provision of, the Indenture may be waived (other than any continuing
Default or Event of Default in the payment of the principal of or premium, if
any, or interest on the Securities) by the Holders of at least a majority in
principal amount of the Securities then outstanding in accordance with the
terms of the Indenture. Without the consent of any Holder, the Company, and the
Trustee may amend or supplement the Indenture or the Securities to cure any
ambiguity, omission, defect or inconsistency; to provide for uncertificated
Securities in addition to or in place of certificated Securities; to provide
for the assumption of the obligations of the Company under the Indenture to
Holders in the case of the merger, consolidation or sale or other disposition
of all or substantially all of the assets of the Company; to make any change
that does not materially adversely affect the rights of any Holder; or to
comply with the qualification of the Indenture under the Trust Indenture Act of
1939, as amended (15 U.S. Code Sections 77aaa-77bbbb).
The right of any Holder to participate in any consent required or
sought pursuant to any provision of the Indenture (and the obligation of the
Company to obtain any such consent otherwise required from such Holder) may be
subject to the requirement that such Holder shall have been the Holder of
record of any Securities with respect to which such consent is required or
sought as of a date identified by the Trustee in a notice furnished to Holders
in accordance with the terms of the Indenture.
A-6
<PAGE> 59
Without the consent of each Holder affected, the Company may not (i)
reduce the amount of Securities whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the rate of or change the time for payment of
interest, including default interest, on any Security, (iii) reduce the
principal of or change the fixed maturity of any Security or alter the premium
or other provisions with respect to redemption, (iv) make any Security payable
in money other than that stated in the Security, (v) impair the right to
institute suit for the enforcement of any payment of principal of, or premium,
if any, or interest on, any Security (except as provided in the Indenture),
(vi) make any change in the percentage of principal amount of Securities
necessary to waive compliance with certain provisions of the Indenture or (vii)
waive a continuing Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Securities.
10. DEFAULTS AND REMEDIES. Events of Default include: default in
payment of interest on the Securities for 30 days; default in payment of
principal of or premium, if any, on the Securities; failure by the Company for
90 days after written notice by the Trustee or by the Holders of at least 25%
of the aggregate principal amount of the Securities then outstanding to it to
comply with any of its other covenants or agreements in the Indenture or the
Securities; the acceleration of the maturity of any Indebtedness of the Company
or any Restricted Subsidiary (other than the Securities) (provided that such
acceleration is not rescinded within a period of 10 days from the occurrence of
such acceleration) that has an outstanding principal amount of $10 million or
more individually or in the aggregate; a default in the payment of principal or
interest in respect of any Indebtedness of the Company or any Restricted
Subsidiary (other than the Securities) having an outstanding principal amount
of $10 million or more individually or in the aggregate, and such default shall
be continuing for a period of 30 days without the Company or such Restricted
Subsidiary, as the case may be, effecting a cure of such default; failure by
the Company or any Restricted Subsidiary to pay final, non-appealable judgments
aggregating in excess of $10 million, which judgments are not paid, discharged
or stayed for a period of 60 days; or certain events involving bankruptcy,
insolvency or reorganization of the Company or any Restricted Subsidiary. If an
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Securities may declare
the principal of, and premium, if any, and interest on all the Securities to be
immediately due and payable, except that in the case of an Event of Default
arising from certain events of bankruptcy, insolvency or reorganization of the
Company or any Restricted Subsidiary, all outstanding Securities become due and
payable immediately without further action or notice. The amount due and
payable upon the acceleration of any Security is equal to 100% of the principal
amount thereof plus accrued interest to the date of payment. Holders may not
enforce the Indenture or the Securities except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain The Trustee may withhold from
Holders notice of any continuing default (except a default in payment of
principal or interest) if it determines that withholding notice is in their
interests. The Company must furnish an annual compliance certificate to the
Trustee.
11. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
A-7
<PAGE> 60
12. NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Securities.
13. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee.
14. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with right of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to
Minors Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Request may be made to:
Newfield Exploration Company
363 North Sam Houston Parkway East, Suite 2020
Houston, Texas 77060
Attention: Secretary
15. RESTRICTIONS ON TRANSFER. By its acceptance of any Security
bearing a legend restricting transfer, each Holder of such a Security
acknowledges the restrictions on transfer of such Security set forth in the
Indenture in respect of the Securities and such legend and agrees that it will
transfer such Security only as provided in the Indenture.
Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to them in the Indenture.
A-8
<PAGE> 61
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITY
The following exchanges of a part of this Global Certificate for Definitive
Securities have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of of this Global Signature of
decrease in increase in Certificate following authorized officer
Principal Amount Principal Amount such decrease of Trustee or
Date of Exchange of this Global Certificate of this Global Certificate (or increase) Security Custodian
---------------- -------------------------- -------------------------- --------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
A-9
<PAGE> 62
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
(Insert assignee's social security or tax I.D. number)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably
appoint------------------------------------------------------------ as agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Date:
- --------------------------------------------------------------------------
Your Signature:
(Sign exactly as your name appears on the face of this Security)
- -------------------------------------------------------------------------------
Signature Guarantee:
(Participant in a Recognized Signature or Medallion Program)
<PAGE> 63
EXHIBIT A
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 7.45% Senior Notes Due 2007 of Newfield Exploration Company
This Certificate relates to $_____ principal amount of Securities held
in *______ book-entry or *______ definitive form by _____________________ (the
"Transferor").
The Transferor*:
[ ] has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Certificate held by the Depositary a
Security or Securities in definitive, registered form equal to its beneficial
interest in such Global Certificate (or the portion thereof indicated above);
or
[ ] has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with such request and in respect of each such Security,
the Transferor does hereby certify that the Transferor is familiar with the
Indenture relative to the above captioned Securities and the terms thereof and
that the transfer of this Security does not require registration under the
Securities Act (as defined below) because:*
[ ] Such Security is being transferred to Newfield Exploration Company.
[ ] Such Security is being acquired for the Transferor's own account
without transfer.
[ ] Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act")), in compliance with Rule 144A under the Securities Act.
[ ] Such Security is being transferred pursuant to an exemption from
registration in accordance with Rule 904 under the Securities Act (and based on
an opinion of counsel if the Company so requests).
[ ] Such Security is being transferred in accordance with Rule 144 under
the Securities Act (and based on an opinion of counsel if the Company so
requests).
[ ] Such Security is being transferred pursuant to an effective
registration statement under the Securities Act.
- --------------------
* Check applicable box.
AA-1
<PAGE> 64
[ ] Such Security is being transferred to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is acquiring such Security for its own account or for the
account of such an institutional accredited investor for investment purposes
and not with a view to, or for offer or sale in connection with, any
distribution thereof in violation of the Securities Act.
[ ] Such Security is being transferred in reliance on and in compliance
with another exemption from the registration requirements of the Securities Act
(and based on an opinion of counsel if the Company so requests).
The undersigned confirms that it has not used any general solicitation
or general advertising in connection with the transfer.
-----------------------------------
[INSERT NAME OF TRANSFEROR]
By:
--------------------------------
Name:
Title:
Address:
Date:
----------------------
QUALIFIED INSTITUTIONAL BUYER CERTIFICATION
TO BE COMPLETED BY PURCHASER IF TRANSFER IS TO A "QUALIFIED INSTITUTIONAL
BUYER"
The undersigned represents and warrants that it is purchasing this Security for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, as amended, and is aware that the sale to it is being made in reliance
on Rule 144A and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
-----------------------------------
[INSERT NAME OF TRANSFEROR]
Date:
----------------------
AA-2
<PAGE> 65
EXHIBIT B
FORM OF TRANSFEREE LETTER OF REPRESENTATION
TO BE DELIVERED BY INSTITUTIONAL ACCREDITED INVESTORS
Newfield Exploration Company
c/o First Union National Bank, as Trustee
230 South Tryon Street, Ninth Floor
Charlotte, N.C. 28288-1179
Ladies and Gentlemen:
In connection with the proposed transfer to us of $___________
aggregate principal amount of the 7.45% Senior Notes Due 2007 (the "Notes") of
NEWFIELD EXPLORATION COMPANY, a Delaware corporation (the "Company"), we
confirm that:
1. We understand that the Notes of the Company have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or any state securities laws, and may not be offered or sold except as
permitted in the following sentence. We agree on our own behalf and on behalf
of any investor account for which we are purchasing the Notes that, if, prior
to the date which is two years after the later of the date of original issue of
the Notes and the last date on which the Company or any affiliate of the
Company was the owner of such Notes (the "Resale Restriction Termination
Date"), we decide to offer, sell or otherwise transfer any such Notes, such
offer, sale or transfer will be made only (a) to the Company, (b) pursuant to
an effective registration statement under the Securities Act, (c) so long as
the Notes are eligible for resale pursuant to Rule 144A under the Securities
Act, to a person we reasonably believe is a qualified institutional buyer under
Rule 144A (a "QIB") that purchases for its own account or for the account of a
QIB and to whom notice is given that the transfer is being made in reliance on
Rule 144A, (d) to an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that
is acquiring Notes for its own account or for the account of such an
institutional accredited investor for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution thereof in
violation of the Securities Act, (e) pursuant to offers and sales to non-U.S.
persons that occur outside the United States within the meaning of Regulation S
under the Securities Act and otherwise comply with Regulation S under the
Securities Act or (f) pursuant to another available exemption from the
registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirements of law that the disposition of our property
or the property of such investor account or accounts be at all times within our
or their control and to compliance with any applicable state securities laws.
The foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the Notes is
proposed to be made pursuant to clause (d) above prior to the Resale
Restriction Termination Date, the transferor shall deliver a letter from the
transferee substantially in the form of this letter to the Trustee, which shall
provide as applicable, among other things, that the transferee is an
institutional "accredited investor" within the meaning of subparagraph (a)(1),
(2), (3) or (7) of Rule 501 under the Securities Act that is acquiring such
Notes for investment purposes and not for distribution in
BB-1
<PAGE> 66
violation of the Securities Act. We acknowledge on our behalf and on behalf of
any investor account for which we are purchasing Notes that the Company and the
Trustee reserve the right prior to any offer, sale or other transfer pursuant
to clause (d), (e) or (f) prior to the Resale Restriction Termination Date of
the Notes to require the delivery of any opinion of counsel, certifications
and/or other information satisfactory to the Company and the Trustee. We
understand that the certificates for any Notes that we receive will bear a
legend substantially to the effect of the foregoing.
2. We are an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act
purchasing for our own account or for the account of such an institutional
"accredited investor," and we are acquiring the Notes for investment purposes
and not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act and we have such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Notes, and we and any account for
which we are acting are each able to bear the economic risks of our or its
investment.
3. We are acquiring the Notes purchased by us for our own account (or
for one or more accounts as to each of which we exercise sole investment
discretion and have authority to make, and do make, the statements contained in
this letter) and not with a view to any distribution of the Notes, subject,
nevertheless, to the understanding that the disposition of our property will at
all times be and remain within our control.
4. We acknowledge that the Company, the Trustee and others will rely
upon the truth and accuracy of the foregoing acknowledgments, representations,
warranties and agreements.
Very truly yours,
-----------------------------------
(Name of Purchaser)
By:
--------------------------------
Date:
---------------------------
Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Taxpayer ID Number:
-------------------------------------------------------------
BB-2
<PAGE> 67
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS PURSUANT TO REGULATION S
Newfield Exploration Company
c/o First Union National Bank, as Trustee
230 South Tryon Street, Ninth Floor
Charlotte, N.C. 28288-1179
Ladies and Gentlemen:
In connection with the proposed transfer by us of $_______________
aggregate principal amount of the 7.45% Senior Notes Due 2007 (the "Notes") of
NEWFIELD EXPLORATION COMPANY, a Delaware corporation (the "Company"), we
confirm that such sale has been effected pursuant to and in accordance with
Regulation S under the Securities Act of 1933, as amended, and, accordingly, we
represent that:
(i) the offer of the Notes was not made to a person in the United
States;
(ii) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(iii) no directed selling efforts have been made by us, any affiliate
of ours, or any Person acting on our behalf, in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S under the U.S. Securities Act of 1933, as applicable; and
(iv) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933, as amended.
You and the Company are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S under the U.S. Securities Act of 1933,
as amended.
CC-1
<PAGE> 68
Very truly yours,
-----------------------------
(Name of Transferor)
By:
--------------------------
Name:
Title:
Address:
Date:
---------------------
CC-2
<PAGE> 1
EXHIBIT 4.4
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
This Exchange and Registration Rights Agreement, dated as of
October 15, 1997, is among Newfield Exploration Company, a Delaware corporation
(the "Company"), Goldman, Sachs & Co., Chase Securities Inc., Donaldson, Lufkin
& Jenrette Securities Corporation and Jefferies & Company, Inc., (the
"Purchasers") of the 7.45% Senior Notes due 2007, of the Company.
The Company proposes to issue and sell the Securities (as
defined herein) to the Purchasers upon the terms set forth in the Note Purchase
Agreement. As an inducement to the Purchasers to enter into the Note Purchase
Agreement and in satisfaction of a condition to the obligations of the
Purchasers thereunder, the Company agrees with the Purchasers for the benefit
of holders (as defined herein) from time to time of the Registrable Securities
(as defined herein) as follows:
1. Certain Definitions.
For purposes of this Exchange and Registration Rights
Agreement, the following terms shall have the following respective meanings:
"Base Interest" shall mean the interest that would otherwise
accrue on the Securities under the terms thereof and the Indenture,
without giving effect to the provisions of this Agreement.
The term "broker-dealer" shall mean any broker or dealer
registered with the Commission under the Exchange Act.
"Commission" shall mean the United States Securities and
Exchange Commission, or any other federal agency at the time
administering the Exchange Act or the Securities Act, whichever is the
relevant statute for the particular purpose.
"Effective Time," in the case of (i) an Exchange Registration,
shall mean the time and date as of which the Commission declares the
Exchange Registration Statement effective or as of which the Exchange
Registration Statement otherwise becomes effective and (ii) a Shelf
Registration, shall mean the time and date as of which the Commission
declares the Shelf Registration Statement effective or as of which the
Shelf Registration Statement otherwise becomes effective.
"Electing Holder" shall mean any holder of Registrable
Securities that has returned a completed and signed Notice and
Questionnaire to the Company in accordance with Section 3(d)(ii) or
3(d)(iii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
or any successor thereto, as the same shall be amended from time to
time.
<PAGE> 2
"Exchange Offer" shall have the meaning assigned thereto in
Section 2(a) hereof.
"Exchange Registration" shall have the meaning assigned
thereto in Section 3(c) hereof.
"Exchange Registration Statement" shall have the meaning
assigned thereto in Section 2(a) hereof.
"Exchange Securities" shall have the meaning assigned thereto
in Section 2(a) hereof.
The term "holder" shall mean each of the Purchasers and other
persons who acquire Registrable Securities from time to time
(including any successors or assigns), in each case for so long as
such person owns any Registrable Securities.
"Indenture" shall mean the Indenture, dated as of October 15,
1997, among the Company and First Union National Bank as Trustee, as
the same shall be amended from time to time.
"Purchase Agreement" shall mean the Purchase Agreement, dated
as of October 9, 1997, between the Purchasers and the Company relating
to the Securities.
"Notice and Questionnaire" means a Notice of Registration
Statement and Selling Securityholder Questionnaire substantially in
the form of Exhibit A hereto.
The term "person" shall mean a corporation, association,
partnership, trust, organization, business, individual, limited
liability company or other entity, government or political subdivision
thereof or governmental agency.
"Registrable Securities" shall mean the Securities; provided,
however, that a Security shall cease to be a Registrable Security when
(i) in the circumstances contemplated by Section 2(a) hereof, the
Security has been exchanged for an Exchange Security in an Exchange
Offer as contemplated in Section 2(a) hereof (provided that any
Exchange Security received by a broker-dealer in an Exchange Offer in
exchange for a Registrable Security that was not acquired by the
broker-dealer directly from the Company will also be a Registrable
Security through and including the earlier of the 90th day after the
Exchange Offer is completed and such time as such broker-dealer no
longer owns such Security); (ii) in the circumstances contemplated by
Section 2(b) hereof, a Shelf Registration Statement registering such
Security under the Securities Act has been declared or becomes
effective and such Security has been sold or otherwise transferred by
the holder thereof pursuant to and in a manner contemplated by such
effective Shelf Registration Statement; (iii) such Security is sold
pursuant to Rule 144 under circumstances in which any legend borne by
such Security relating to restrictions on transferability thereof,
under the Securities Act or otherwise, is
-2-
<PAGE> 3
removed by the Company or pursuant to the Indenture; (iv) such
Security is eligible to be sold pursuant to paragraph (k) of Rule 144;
or (v) such Security shall cease to be outstanding.
"Registration Default" shall have the meaning assigned thereto
in Section 2(c) hereof.
"Registration Expenses" shall have the meaning assigned
thereto in Section 4 hereof.
"Registration Statement" shall mean the Exchange Registration
Statement and/or the Shelf Registration Statement.
"Resale Period" shall have the meaning assigned thereto in
Section 2(a) hereof.
"Restricted Holder" shall mean (i) a holder that is an
affiliate of the Company within the meaning of Rule 405, (ii) a holder
who acquires Exchange Securities outside the ordinary course of such
holder's business, (iii) a holder who has arrangements or
understandings with any person to participate in the Exchange Offer
for the purpose of distributing Exchange Securities and (iv) a holder
that is a broker-dealer, but only with respect to Exchange Securities
received by such broker-dealer pursuant to an Exchange Offer in
exchange for Registrable Securities acquired by the broker-dealer
directly from the Company.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each
case, such rule promulgated under the Securities Act (or any successor
provision), as the same shall be amended from time to time.
"Securities" shall mean, collectively, the 7.45% Senior Notes
due 2007 of the Company to be issued and sold to the Purchasers, and
securities issued in exchange therefor or in lieu thereof pursuant to
the Indenture.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"Shelf Registration" shall have the meaning assigned thereto
in Section 2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned
thereto in Section 2(b) hereof.
"Special Interest" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Time of Delivery" shall have the meaning assigned thereto in
the Purchase Agreement.
-3-
<PAGE> 4
"Trust Indenture Act" shall mean the Trust Indenture Act of
1939, or any successor thereto, and the rules, regulations and forms
promulgated thereunder, all as the same shall be amended from time to
time.
Unless the context otherwise requires, any reference herein to
a "Section" or "clause" refers to a Section or clause, as the case may be, of
this Exchange and Registration Rights Agreement, and the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Exchange and Registration Rights Agreement as a whole and not to any particular
Section or other subdivision.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the
Company agrees to file under the Securities Act within 90 days following the
Time of Delivery, a registration statement relating to an offer to exchange
(such registration statement, the "Exchange Registration Statement," and such
offer, the "Exchange Offer") any and all of the Securities for a like aggregate
principal amount of debt securities issued by the Company, which debt
securities are substantially identical to the Securities (and are entitled to
the benefits of a trust indenture which is substantially identical to the
Indenture or is the Indenture and which has been qualified under the Trust
Indenture Act), except that they have been registered pursuant to an effective
registration statement under the Securities Act and do not contain provisions
for the additional interest contemplated in Section 2(c) below (such new debt
securities hereinafter called "Exchange Securities"). The Company agrees to
use all reasonable efforts to cause the Exchange Registration Statement to
become effective under the Securities Act as soon as practicable, but no later
than 180 days after the Time of Delivery. The Exchange Offer will be
registered under the Securities Act on the appropriate form and will comply
with all applicable tender offer rules and regulations under the Exchange Act.
The Company further agrees to use all reasonable efforts to commence and
complete the Exchange Offer promptly, but no later than 45 days after such
registration statement has become effective, hold the Exchange Offer open for
at least 30 days and issue Exchange Securities for all Registrable Securities
that have been properly tendered and not withdrawn on or prior to the
expiration of the Exchange Offer. The Exchange Offer will be deemed to have
been "completed" only if the debt securities received by holders other than
Restricted Holders in the Exchange Offer for Registrable Securities are, upon
receipt, transferable by each such holder without need for further compliance
with Section 5 of the Securities Act (except for the requirement to deliver a
prospectus included in the Exchange Registration Statement applicable to
resales by broker-dealers of Exchange Securities received by such
broker-dealer pursuant to an Exchange Offer in exchange for Registrable
Securities other than those acquired by the broker-dealer directly from the
Company), and, subject to the proviso to Section 3(c)(vi) below, without
material restrictions under the blue sky or securities laws of a substantial
majority of the States of the United States of America. The Exchange Offer
shall be deemed to have been completed upon the earlier to occur of (i) the
Company having exchanged the Exchange Securities for all outstanding
Registrable Securities pursuant to the Exchange Offer and (ii) the Company
having exchanged, pursuant to the Exchange Offer, Exchange Securities for all
Registrable Securities that have been properly tendered and not withdrawn
before the expiration of the Exchange Offer, which shall be on a date that is
at least 30 days following the commencement
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<PAGE> 5
of the Exchange Offer. The Company agrees (x) to include in the Exchange
Registration Statement a prospectus for use in connection with any resales of
Exchange Securities by a broker-dealer, other than resales of Exchange
Securities received by a broker-dealer pursuant to an Exchange Offer in
exchange for Registrable Securities acquired by the broker-dealer directly
from the Company, and (y) to keep such Exchange Registration Statement
effective for a period (the "Resale Period") beginning when Exchange Securities
are first issued in the Exchange Offer and ending upon the earlier of the
expiration of the 180th day after the Exchange Offer has been completed and
such time as such broker-dealers no longer own any Registrable Securities. With
respect to such Exchange Registration Statement, each broker-dealer that holds
Exchange Securities received in an Exchange Offer in exchange for Registerable
Securities not acquired by it directly from the Company shall have the benefit
of the rights of indemnification and contribution set forth in Sections 6(a),
(c), (d) and (e) hereof.
(b) If prior to the time the Exchange Offer is completed
existing Commission interpretations are changed such that the Securities
received by holders other than Restricted Holders in the Exchange Offer for
Registrable Securities are not or would not be, upon receipt, transferable by
each such holder without need for further compliance with Section 5 of the
Securities Act (except for the requirement to deliver a prospectus included in
the Exchange Registration Statement applicable to resales by broker-dealers of
Exchange Securities received by such broker-dealer pursuant to an Exchange
Offer in exchange for Registrable Securities other than those acquired by the
broker-dealer directly from the Company), in lieu of conducting the Exchange
Offer contemplated by Section 2(a) the Company shall file under the Securities
Act as soon as practicable, but no later than the later of 90 days after the
time such obligation to file arises and 180 days after the Time of Delivery, a
"shelf" registration statement providing for the registration of, and the sale
on a continuous or delayed basis by the holders of, all of the Registrable
Securities, pursuant to Rule 415 or any similar rule that may be adopted by the
Commission (such filing, the "Shelf Registration" and such registration
statement, the "Shelf Registration Statement"). In addition, in the event that
the Purchasers shall not have resold all of the Securities initially purchased
by them from the Company pursuant to the Purchase Agreement prior to the
consummation of the Exchange Offer, the Company shall file under the Securities
Act as soon as practicable a Shelf Registration Statement. The Company agrees
to use all reasonable efforts (i) to cause the Shelf Registration Statement to
become or be declared effective no later than 90 days after such Shelf
Registration Statement is filed and to keep such Shelf Registration Statement
continuously effective in order to permit the prospectus forming a part thereof
to be usable by holders for resales of Registrable Securities for a period
ending on the earlier of the second anniversary of the Effective Time and such
time as there are no longer any Registrable Securities outstanding, provided,
however, that no holder shall be entitled to be named as a selling
securityholder in the Shelf Registration Statement or to use the prospectus
forming a part thereof for resales of Registrable Securities unless such holder
is an Electing Holder, and (ii) after the Effective Time of the Shelf
Registration Statement, promptly upon the request of any holder of Registrable
Securities that is not then an Electing Holder, to enable such holder to use
the prospectus forming a part thereof for resales of Registrable Securities,
including, without limitation, any action necessary to identify such holder as
a selling securityholder in the Shelf Registration Statement, provided,
however, that nothing in this clause (ii) shall relieve any such holder of the
obligation to return a completed and signed Notice and Questionnaire to the
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<PAGE> 6
Company in accordance with Section 3(d)(iii) hereof. The Company further agrees
to supplement or make amendments to the Shelf Registration Statement, as and
when required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration Statement or
by the Securities Act or rules and regulations thereunder for shelf
registration, and the Company agrees to furnish to each Electing Holder copies
of any such supplement or amendment prior to its being used or promptly
following its filing with the Commission.
(c) In the event that (i) the Company has not filed the
Exchange Registration Statement or Shelf Registration Statement on or before
the date on which such registration statement is required to be filed pursuant
to Section 2(a) or 2(b), respectively, or (ii) such Exchange Registration
Statement or Shelf Registration Statement has not become effective or been
declared effective by the Commission on or before the date on which such
registration statement is required to become or be declared effective pursuant
to Section 2(a) or 2(b), respectively, or (iii) the Exchange Offer has not been
completed within 45 days after the initial effective date of the Exchange
Registration Statement relating to the Exchange Offer (if the Exchange Offer is
then required to be made) or (iv) any Exchange Registration Statement or Shelf
Registration Statement required by Section 2(a) or 2(b) hereof is filed and
declared or becomes effective but shall thereafter either be withdrawn by the
Company or shall become subject to an effective stop order issued pursuant to
Section 8(d) of the Securities Act suspending the effectiveness of such
registration statement (except as specifically permitted herein) without being
succeeded immediately by an additional registration statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default" and each period beginning on the date on which a
Registration Default occurred and continuing until cured, a "Registration
Default Period"), then, as liquidated damages for such Registration Default,
subject to the provisions of Section 9(b), special interest ("Special
Interest"), in addition to the Base Interest, shall accrue at a per annum rate
of 0.25% for the first 90 days of any Registration Default Period and at a per
annum rate of 0.50% thereafter for the remaining portion of such Registration
Default Period.
(d) The Company shall take all reasonable actions
necessary or advisable to be taken by it to ensure that the transactions
contemplated herein are effected as so contemplated.
(e) Any reference herein to a registration statement as
of any time shall be deemed to include any document incorporated, or deemed to
be incorporated, therein by reference as of such time and any reference herein
to any post-effective amendment to a registration statement as of any time
shall be deemed to include any document incorporated, or deemed to be
incorporated, therein by reference as of such time.
3. Registration Procedures.
If the Company files a registration statement pursuant to
Section 2(a) or Section 2(b), the following provisions shall apply:
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<PAGE> 7
(a) At or before the Effective Time of the Exchange
Registration or the Shelf Registration, as the case may be, the Company shall
qualify the trust indenture described in Section 2(a) or the Indenture, as the
case may be, under the Trust Indenture Act.
(b) In the event that such qualification would require
the appointment of a new trustee under the Indenture, the Company shall appoint
a new trustee thereunder pursuant to the applicable provisions of the
Indenture.
(c) In connection with the Company's obligations with
respect to the registration of the Exchange Offer as contemplated by Section
2(a) (the "Exchange Registration"), if applicable, the Company shall:
(i) prepare and file with the Commission within
the time period specified in Section 2(a), an Exchange Registration
Statement on any form which may be utilized by the Company and which
shall permit the Exchange Offer and resales of Exchange Securities by
broker-dealers during the Resale Period to be effected as contemplated
by Section 2(a), and use all reasonable efforts to cause such Exchange
Registration Statement to become effective as soon as practicable
thereafter, but in any case within the time period specified in
Section 2(a);
(ii) as soon as practicable prepare and file with
the Commission such amendments and supplements to such Exchange
Registration Statement and the prospectus included therein as may be
necessary to effect and maintain the effectiveness of such Exchange
Registration Statement for the periods and purposes contemplated in
Section 2(a) hereof and as may be required by the applicable rules and
regulations of the Commission and the instructions applicable to the
form of such Exchange Registration Statement, and promptly provide
each broker-dealer holding Exchange Securities with such number of
copies of the prospectus included therein (as then amended or
supplemented), in conformity in all material respects with the
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder, as such
broker-dealer reasonably may request prior to the expiration of the
Resale Period, for use in connection with resales of Exchange
Securities;
(iii) promptly notify each broker-dealer that has
requested or received from the Company copies of the prospectus
included in such registration statement, and confirm such advice in
writing, (A) when such Exchange Registration Statement or the
prospectus included therein or any prospectus amendment or supplement
or post-effective amendment has been filed, and, with respect to such
Exchange Registration Statement or any post-effective amendment, when
the same has become effective, (B) of any comments by the Commission
and by the blue sky or securities commissioner or regulator of any
state with respect thereto or any request by the Commission for
amendments or supplements to such Exchange Registration Statement or
prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of such
Exchange Registration Statement or the initiation or threatening of
any proceedings for that
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<PAGE> 8
purpose, (D) if at any time the representations and warranties of the
Company contemplated by Section 5 cease to be true and correct in all
material respects, (E) of the receipt by the Company of any
notification with respect to (1) the suspension of the qualification
of the Exchange Securities for sale in any jurisdiction or (2) the
initiation or threatening of any proceeding for such purpose, or (F)
if at any time during the Resale Period when a prospectus is required
to be delivered under the Securities Act, such Exchange Registration
Statement, prospectus, prospectus amendment or supplement or
post-effective amendment does not conform in all material respects to
the applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission
thereunder or contains an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing;
(iv) if the Company would be required, pursuant to
Section 3(c)(iii)(F) above, to notify any broker-dealers holding
Exchange Securities, without unreasonable delay prepare and furnish to
each such holder a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to purchasers
of such Exchange Securities during the Resale Period, such prospectus
shall conform in all material respects to the applicable requirements
of the Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and shall not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(v) use all reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of such Exchange
Registration Statement or any post-effective amendment thereto at the
earliest practicable date;
(vi) use all reasonable efforts to (A) register or
qualify the Exchange Securities under the securities laws or blue sky
laws of such jurisdictions as are contemplated by Section 2(a) no
later than the commencement of the Exchange Offer, (B) keep such
registrations or qualifications in effect and comply with such laws so
as to permit the continuance of offers, sales and dealings therein in
such jurisdictions until the expiration of the Resale Period and (C)
take any and all other actions as may be reasonably necessary or
advisable to enable each broker-dealer holding Exchange Securities to
consummate the disposition thereof in such jurisdictions; provided,
however, that the Company shall not be required for any such purpose
to (1) qualify as a foreign corporation in any jurisdiction wherein it
would not otherwise be required to qualify but for the requirements of
this Section 3(c)(vi), (2) consent to general service of process in
any such jurisdiction or (3) take any action that would subject the
Company to taxation as doing business in any jurisdiction in which it
is not now so subject.
(vii) use all reasonable efforts to obtain the
consent or approval, other than those required under nonfederal
securities laws or blue sky laws (which are subject to the provisions
of Section 3(c)(vi)), of each governmental agency or authority,
whether federal,
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<PAGE> 9
state or local, that may be required to effect the Exchange
Registration, the Exchange Offer and the offering and sale of Exchange
Securities by broker-dealers during the Resale Period;
(viii) provide a CUSIP number for all Exchange
Securities, not later than the applicable Effective Time;
(ix) comply with all applicable rules and
regulations of the Commission, and make generally available to its
securityholders as soon as practicable but in any event not later than
18 months after the effective date of such Exchange Registration
Statement, an earning statement of the Company and its subsidiaries
complying with Section 11(a) of the Securities Act (including, at the
option of the Company, Rule 158 thereunder).
(d) In connection with the Company's obligations with
respect to the Shelf Registration, if applicable, the Company shall:
(i) prepare and file with the Commission, as soon
as practicable but in any case within the time periods specified in
Section 2(b), a Shelf Registration Statement on any form that may be
utilized by the Company and that shall register the offer and resale
of all of the Registrable Securities for resale by the holders thereof
in accordance with such method or methods of disposition as may be
specified by such of the holders as, from time to time, may be
Electing Holders and use all reasonable efforts to cause such Shelf
Registration Statement to become effective within the time periods
specified in Section 2(b);
(ii) not less than 30 calendar days prior to the
Effective Time of the Shelf Registration Statement, mail the Notice
and Questionnaire to the holders of Registrable Securities; no holder
shall be entitled to be named as a selling securityholder in the Shelf
Registration Statement as of the Effective Time, and no holder shall
be entitled to use the prospectus forming a part thereof for resales
of Registrable Securities at any time, unless such holder has returned
a completed and signed Notice and Questionnaire to the Company by the
deadline for response set forth therein; provided, however, holders of
Registrable Securities shall have at least 28 calendar days from the
date on which the Notice and Questionnaire is first mailed to such
holders to return a completed and signed Notice and Questionnaire to
the Company;
(iii) after the Effective Time of the Shelf
Registration Statement, upon the request of any holder of Registrable
Securities that is not then an Electing Holder, promptly send a Notice
and Questionnaire to such holder; provided that the Company shall not
be required to take any action to name such holder as a selling
securityholder in the Shelf Registration Statement or to enable such
holder to use the prospectus forming a part thereof for resales of
Registrable Securities until such holder has returned a completed and
signed Notice and Questionnaire to the Company;
(iv) as soon as practicable prepare and file with
the Commission such amendments and supplements to such Shelf
Registration Statement and the prospectus
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<PAGE> 10
included therein as may be necessary to effect and maintain the
effectiveness of such Shelf Registration Statement for the period
specified in Section 2(b) hereof and as may be required by the
applicable rules and regulations of the Commission and the
instructions applicable to the form of such Shelf Registration
Statement, and furnish to the Electing Holders copies of any such
supplement or amendment prior to its being used or promptly following
its filing with the Commission;
(v) comply with the provisions of the Securities
Act applicable to the Company with respect to the disposition of all
of the Registrable Securities covered by such Shelf Registration
Statement in accordance with the intended methods of disposition by
the Electing Holders provided for in such Shelf Registration
Statement;
(vi) provide (A) the Electing Holders, (B) the
underwriters (which term, for purposes of this Exchange and
Registration Rights Agreement, shall include a person deemed to be an
underwriter within the meaning of Section 2(11) of the Securities
Act), if any, thereof, (C) any sales or placement agent therefor, (D)
counsel for any such underwriter or agent and (E) not more than one
counsel for all the Electing Holders the opportunity to participate in
the preparation of such Shelf Registration Statement, each prospectus
included therein or filed with the Commission and each amendment or
supplement thereto;
(vii) for a reasonable period prior to the filing
of such Shelf Registration Statement, and throughout the period
specified in Section 2(b), make available at reasonable times at the
Company's principal place of business or such other reasonable place
for inspection by the persons referred to in Section 3(d)(vi) who
shall certify to the Company that they have a current intention to
sell the Registrable Securities pursuant to the Shelf Registration
such financial and other information and books and records of the
Company, and cause the officers, employees, counsel and independent
certified public accountants of the Company to respond to such
inquiries, as shall be reasonably necessary, in the judgment of the
respective counsel referred to in such Section, to conduct a
reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that each such party shall be
required to maintain in confidence and not to disclose to any other
person any information or records reasonably designated by the Company
as being confidential, until such time as (A) such information becomes
a matter of public record (whether by virtue of its inclusion in such
registration statement or otherwise), or (B) such person shall be
required so to disclose such information pursuant to a subpoena or
order of any court or other governmental agency or body having
jurisdiction over the matter (subject to the requirements of such
order, and only after such person shall have given the Company prompt
prior written notice of such requirement), or (C) such information is
required to be set forth in such Shelf Registration Statement or the
prospectus included therein or in an amendment to such Shelf
Registration Statement or an amendment or supplement to such
prospectus in order that such Shelf Registration Statement,
prospectus, amendment or supplement, as the case may be, complies with
applicable requirements of the federal securities laws and the rules
and regulations of the Commission and does not contain an untrue
statement of a material fact
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<PAGE> 11
or omit to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of
the circumstances then existing;
(viii) promptly notify each of the Electing Holders,
any sales or placement agent therefor and any underwriter thereof
(which notification may be made through any managing underwriter that
is a representative of such underwriter for such purpose), and confirm
such advice in writing, (A) when such Shelf Registration Statement or
the prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed, and, with
respect to such Shelf Registration Statement or any post-effective
amendment, when the same has become effective, (B) of any comments by
the Commission and by the blue sky or securities commissioner or
regulator of any state with respect thereto or any request by the
Commission for amendments or supplements to such Shelf Registration
Statement or prospectus or for additional information, (C) of the
issuance by the Commission of any stop order suspending the
effectiveness of such Shelf Registration Statement or the initiation
or threatening of any proceedings for that purpose, (D) if at any time
the representations and warranties of the Company contemplated by
Section 3(d)(xvii) or Section 5 cease to be true and correct in all
material respects, (E) of the receipt by the Company of any
notification with respect to (1) the suspension of the qualification
of the Registrable Securities for sale in any jurisdiction or (2) the
initiation or threatening of any proceeding for such purpose, or (F)
if at any time when a prospectus is required to be delivered under the
Securities Act, such Shelf Registration Statement, prospectus,
prospectus amendment or supplement or post-effective amendment does
not conform in all material respects to the applicable requirements of
the Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder or contains an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(ix) use all reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of such
registration statement or any post-effective amendment thereto at the
earliest practicable date;
(x) if requested by any managing underwriter or
underwriters, any placement or sales agent or any Electing Holder,
promptly incorporate in a prospectus supplement or post-effective
amendment such information as is required by the applicable rules and
regulations of the Commission and as such managing underwriter or
underwriters, such agent or such Electing Holder specifies should be
included therein relating to the terms of the sale of such Registrable
Securities, including information with respect to the principal amount
of Registrable Securities being sold by such Electing Holder or agent
or to any underwriters, the name and description of such Electing
Holder, agent or underwriter, the offering price of such Registrable
Securities and any discount, commission or other compensation payable
in respect thereof, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the offering of
the Registrable Securities to be sold by such Electing Holder or agent
or to such underwriters; and make all required filings of such
prospectus supplement or post-effective amendment promptly after
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<PAGE> 12
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(xi) furnish to each Electing Holder, each
placement or sales agent, if any, therefor, each underwriter, if any,
thereof and the respective counsel referred to in Section 3(d)(vi) an
executed copy (or, in the case of an Electing Holder, a conformed
copy) of such Shelf Registration Statement, each such amendment and
supplement thereto (in each case including all exhibits thereto (in
the case of an Electing Holder of Registrable Securities, upon
request) and documents incorporated by reference therein) and such
number of copies of such Shelf Registration Statement (excluding
exhibits thereto and documents incorporated by reference therein
unless specifically so requested by such Electing Holder, agent or
underwriter, as the case may be) and of the prospectus included in
such Shelf Registration Statement (including each preliminary
prospectus and any summary prospectus), in conformity in all material
respects with the applicable requirements of the Securities Act and
the Trust Indenture Act and the rules and regulations of the
Commission thereunder, and such other documents, as such Electing
Holder, agent, if any, and underwriter, if any, may reasonably request
in order to facilitate the offering and disposition of the Registrable
Securities owned by such Electing Holder, offered or sold by such
agent or underwritten by such underwriter and to permit such Electing
Holder, agent and underwriter to satisfy the prospectus delivery
requirements of the Securities Act; and the Company hereby consents
(subject to notification pursuant to Sections 3(d)(viii)(C), (E) or
(F)) to the use of such prospectus (including such preliminary and
summary prospectus) and any amendment or supplement thereto by each
such Electing Holder and by any such agent and underwriter, in each
case in the form most recently provided to such person by the Company,
in connection with the offering and sale of the Registrable Securities
covered by the prospectus (including such preliminary and summary
prospectus) or any supplement or amendment thereto;
(xii) use all reasonable efforts to (A) register or
qualify the Registrable Securities to be included in such Shelf
Registration Statement under such securities laws or blue sky laws of
such jurisdictions as any Electing Holder and each placement or sales
agent, if any, therefor and underwriter, if any, thereof shall
reasonably request, (B) keep such registrations or qualifications in
effect and comply with such laws so as to permit the continuance of
offers, sales and dealings therein in such jurisdictions during the
period the Shelf Registration is required to remain effective under
Section 2(b) above and for so long as may be necessary to enable any
such Electing Holder, agent or underwriter to complete its
distribution of Securities pursuant to such Shelf Registration
Statement and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each such Electing Holder, agent, if
any, and underwriter, if any, to consummate the disposition in such
jurisdictions of such Registrable Securities; provided, however, that
the Company shall not be required for any such purpose to (1) qualify
as a foreign corporation in any jurisdiction wherein it would not
otherwise be required to qualify but for the requirements of this
Section 3(d)(xii), (2) consent to general service of process in any
such jurisdiction or (3) take any action that would subject the
Company to taxation as doing business in any jurisdiction in which it
is not now so subject;
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<PAGE> 13
(xiii) use all reasonable efforts to obtain the
consent or approval, other than those required under nonfederal
securities laws or blue sky laws (which are subject to the provisions
of Section 3(c)(vi)), of each governmental agency or authority,
whether federal, state or local, that may be required to effect the
Shelf Registration or the offering or sale in connection therewith or
to enable the selling holder or holders to offer, or to consummate the
disposition of, their Registrable Securities;
(xiv) cooperate with the Electing Holders and the
managing underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be
sold, which certificates shall be printed, lithographed or engraved,
or produced by any combination of such methods, and which shall not
bear any restrictive legends; and, in the case of an underwritten
offering, enable such Registrable Securities, subject to the terms of
the Indenture, to be in such denominations and registered in such
names as the managing underwriters may request at least two business
days prior to any sale of the Registrable Securities;
(xv) provide a CUSIP number for all Registrable
Securities, not later than the applicable Effective Time;
(xvi) enter into one or more underwriting
agreements, engagement letters, agency agreements, "best efforts"
underwriting agreements or similar agreements, as appropriate,
including customary provisions relating to indemnification and
contribution, and take such other actions in connection therewith as
any Electing Holder shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(xvii) whether or not an agreement of the type
referred to in Section 3(d)(xvi) hereof is entered into and whether or
not any portion of the offering contemplated by the Shelf Registration
is an underwritten offering or is made through a placement or sales
agent or any other entity, (A) make such representations and
warranties to the Electing Holders and the placement or sales agent,
if any, therefor and the underwriters, if any, thereof in form,
substance and scope as are customarily made in connection with an
offering of debt securities pursuant to any appropriate agreement or
to a registration statement filed on the form applicable to the Shelf
Registration; (B) obtain an opinion of counsel to the Company in
customary form and covering such matters, of the type customarily
covered by such an opinion, as the managing underwriters, if any, or
as any Electing Holders may reasonably request, addressed to such
Electing Holder or Electing Holders and the placement or sales agent,
if any, therefor and the underwriters, if any, thereof and dated the
effective date of such Shelf Registration Statement (and if such Shelf
Registration Statement contemplates an underwritten offering of a part
or all of the Registrable Securities, dated the date of the closing
under the underwriting agreement relating thereto) (it being agreed
that the matters to be covered by such opinion shall include the due
incorporation and good standing of the Company; the due authorization,
execution and delivery of the relevant agreement of the type referred
to in Section 3(d)(xvi) hereof; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of
the Securities; the absence of material legal
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<PAGE> 14
or governmental proceedings involving the Company; the absence of
governmental approvals required to be obtained in connection with the
Shelf Registration, the offering and sale of the Registrable
Securities, this Exchange and Registration Rights Agreement or any
agreement of the type referred to in Section 3(d)(xvi) hereof, except
such approvals as may be required under state securities or blue sky
laws; the material compliance as to form of such Shelf Registration
Statement and any documents incorporated by reference therein and of
the Indenture with the requirements of the Securities Act and the
Trust Indenture Act and the rules and regulations of the Commission
thereunder, respectively; and, as of the date of the opinion and of
the Shelf Registration Statement or most recent post-effective
amendment thereto, as the case may be, the absence from such Shelf
Registration Statement and the prospectus included therein, as then
amended or supplemented, and from the documents incorporated by
reference therein (in each case other than the financial statements
and other financial or reserve information contained therein) of an
untrue statement of a material fact or the omission to state therein a
material fact necessary to make the statements therein not misleading
(in the case of such documents, in the light of the circumstances
existing at the time that such documents were filed with the
Commission under the Exchange Act)); (C) obtain a "cold comfort"
letter or letters from the independent certified public accountants of
the Company addressed to the selling Electing Holders, the placement
or sales agent, if any, therefor or the underwriters, if any, thereof,
dated (1) the effective date of such Shelf Registration Statement and
(2) the effective date of any prospectus supplement to the prospectus
included in such Shelf Registration Statement or post-effective
amendment to such Shelf Registration Statement which includes
unaudited or audited financial statements as of a date or for a period
subsequent to that of the latest such statements included in such
prospectus (and, if such Shelf Registration Statement contemplates an
underwritten offering pursuant to any prospectus supplement to the
prospectus included in such Shelf Registration Statement or
post-effective amendment to such Shelf Registration Statement which
includes unaudited or audited financial statements as of a date or for
a period subsequent to that of the latest such statements included in
such prospectus, dated the date of the closing under the underwriting
agreement relating thereto), such letter or letters to be in customary
form and covering such matters of the type customarily covered by
letters of such type; (D) deliver such documents and certificates,
including officers' certificates, as may be reasonably requested by
any Electing Holder or the placement or sales agent, if any, therefor
and the managing underwriters, if any, thereof to evidence the
accuracy of the representations and warranties made pursuant to clause
(A) above or those contained in Section 5(a) hereof and the compliance
with or satisfaction of any agreements or conditions contained in the
underwriting agreement or other agreement entered into by the Company;
and (E) undertake such obligations relating to expense reimbursement,
indemnification and contribution as are provided in Section 6 hereof;
(xviii) notify in writing each holder of Registrable
Securities of any proposal by the Company to amend or waive any
provision of this Exchange and Registration Rights Agreement pursuant
to Section 9(h) hereof and of any amendment or waiver effected
pursuant thereto, each of which notices shall contain the text of the
amendment or waiver proposed or effected, as the case may be;
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<PAGE> 15
(xix) in the event that any broker-dealer
registered under the Exchange Act shall underwrite any Registrable
Securities or participate as a member of an underwriting syndicate or
selling group or "assist in the distribution" (within the meaning of
the Rules of Fair Practice and the By-Laws of the National Association
of Securities Dealers, Inc. (the "NASD") or any successor thereto, as
amended from time to time) thereof, whether as a holder of such
Registrable Securities or as an underwriter, a placement or sales
agent or a broker or dealer in respect thereof, or otherwise, assist
such broker-dealer in complying with the requirements of such Rules
and By-Laws, including by (A) if such Rules or By-Laws shall so
require, engaging a "qualified independent underwriter" (as defined in
such Schedule (or any successor thereto)) to participate in the
preparation of the Shelf Registration Statement relating to such
Registrable Securities, to exercise usual standards of due diligence
in respect thereto and, if any portion of the offering contemplated by
such Shelf Registration Statement is an underwritten offering or is
made through a placement or sales agent, to recommend the yield of
such Registrable Securities, (B) indemnifying any such qualified
independent underwriter to the extent of the indemnification of
underwriters provided in Section 6 hereof (or to such other customary
extent as may be requested by such underwriter), and (C) providing
such information to such broker-dealer as may be required in order for
such broker-dealer to comply with the requirements of the Rules of
Fair Practice of the NASD; and
(xx) comply with all applicable rules and
regulations of the Commission, and make generally available to its
securityholders as soon as practicable but in any event not later than
18 months after the effective date of such Shelf Registration
Statement, an earning statement of the Company and its subsidiaries
complying with Section 11(a) of the Securities Act (including, at the
option of the Company, Rule 158 thereunder).
(e) In the event that the Company would be required,
pursuant to Section 3(d)(viii)(F) above, to notify the Electing Holders, the
placement or sales agent, if any, therefor and the managing underwriters, if
any, thereof, as soon as practicable the Company shall prepare and furnish to
each of the Electing Holders, to each placement or sales agent, if any, and to
each such underwriter, if any, a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to purchasers of
Registrable Securities, such prospectus shall conform in all material respects
to the applicable requirements of the Securities Act and the Trust Indenture
Act and the rules and regulations of the Commission thereunder and shall not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing. Each Electing Holder
agrees that upon receipt of any notice from the Company pursuant to Section
3(d)(viii)(F) hereof, such Electing Holder shall forthwith discontinue the
disposition of Registrable Securities pursuant to the Shelf Registration
Statement applicable to such Registrable Securities until such Electing Holder
shall have received copies of such amended or supplemented prospectus, and if
so directed by the Company, such Electing Holder shall deliver to the Company
(at the Company's expense) all copies, other than permanent file copies, then
in such Electing Holder's possession of the prospectus covering such
Registrable Securities at the time of receipt of such notice.
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<PAGE> 16
(f) In the event of a Shelf Registration, in
addition to the information required to be provided by each Electing Holder in
its Notice Questionnaire, the Company may require such Electing Holder to
furnish to the Company such additional information regarding such Electing
Holder and such Electing Holder's intended method of distribution of
Registrable Securities as may be required in order to comply with the
Securities Act. Each such Electing Holder agrees to notify the Company as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Electing Holder to the Company or of the occurrence of any
event in either case as a result of which any prospectus relating to such Shelf
Registration contains or would contain an untrue statement of a material fact
regarding such Electing Holder or such Electing Holder's intended method of
disposition of such Registrable Securities or omits to state any material fact
regarding such Electing Holder or such Electing Holder's intended method of
disposition of such Registrable Securities required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and promptly to furnish to the Company any
additional information required to correct and update any previously furnished
information or required so that such prospectus shall not contain, with respect
to such Electing Holder or the disposition of such Registrable Securities, an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing.
(g) Until the expiration of one year after the Time of
Delivery, the Company will not, and will not permit any of its "affiliates" (as
defined in Rule 144) to, resell any of the Securities that have been reacquired
by any of them except pursuant to an effective registration statement under the
Securities Act.
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid
promptly all expenses incident to the Company's performance of or compliance
with this Exchange and Registration Rights Agreement, including (a) all
Commission and any NASD registration, filing and review fees and expenses
including fees and disbursements of counsel for the placement or sales agent or
underwriters in connection with such registration, filing and review, (b) all
fees and expenses in connection with the qualification of the Securities for
offering and sale under the State securities and blue sky laws referred to in
Section 3(d)(xii) hereof and determination of their eligibility for investment
under the laws of such jurisdictions as any managing underwriters or the
Electing Holders may designate, including any fees and disbursements of counsel
for the Electing Holders or underwriters in connection with such qualification
and determination, (c) all expenses relating to the preparation, printing,
production, distribution and reproduction of each registration statement
required to be filed hereunder, each prospectus included therein or prepared
for distribution pursuant hereto, each amendment or supplement to the
foregoing, the expenses of preparing the Securities for delivery and the
expenses of printing or producing any underwriting agreements, agreements among
underwriters, selling agreements and blue sky or legal investment memoranda and
all other documents in connection with the offering, sale or delivery of
Securities to be disposed of (including certificates representing the
Securities), (d) messenger, telephone and delivery expenses relating to the
offering, sale or delivery of Securities and the preparation of documents
referred in clause (c)
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<PAGE> 17
above, (e) fees and expenses of the Trustee under the Indenture, any agent of
the Trustee and any counsel for the Trustee and of any collateral agent or
custodian, (f) internal expenses (including all salaries and expenses of the
Company's officers and employees performing legal or accounting duties), (g)
fees, disbursements and expenses of counsel and independent certified public
accountants of the Company (including the expenses of any opinions or "cold
comfort" letters required by or incident to such performance and compliance),
(h) fees, disbursements and expenses of any "qualified independent underwriter"
engaged pursuant to Section 3(d)(xix) hereof, (i) fees, disbursements and
expenses of one counsel for the Electing Holders retained in connection with a
Shelf Registration, as selected by the Electing Holders of at least a majority
in aggregate principal amount of the Registrable Securities held by Electing
Holders (which counsel shall be reasonably satisfactory to the Company), (j)
any fees charged by securities rating services for rating the Securities, and
(k) fees, expenses and disbursements of any other persons, including special
experts, retained by the Company in connection with such registration
(collectively, the "Registration Expenses"). To the extent that any
Registration Expenses are reasonably incurred, assumed or paid by any holder of
Registrable Securities or any placement or sales agent therefor or underwriter
thereof, the Company shall reimburse such person for the full amount of the
Registration Expenses so incurred, assumed or paid promptly after receipt of a
request therefor. Notwithstanding the foregoing, the holders of the Registrable
Securities being registered shall pay all agency fees and commissions and
underwriting discounts and commissions attributable to the sale of such
Registrable Securities and the fees and disbursements of any counsel or other
advisors or experts retained by such holders (severally or jointly), other than
the counsel and experts specifically referred to above.
5. Representations and Warranties.
The Company represents and warrants to, and agrees with, each
Purchaser and each of the holders from time to time of Registrable Securities
that:
(a) Each registration statement covering Registrable
Securities and each prospectus (including any preliminary or summary
prospectus) contained therein or furnished pursuant to Section 3(d) or Section
3(c) hereof and any further amendments or supplements to any such registration
statement or prospectus, when it becomes effective or is filed with the
Commission, as the case may be, and, in the case of an underwritten offering of
Registrable Securities, at the time of the closing under the underwriting
agreement relating thereto, will conform in all material respects to the
applicable requirements of the Securities Act and the Trust Indenture Act and
the rules and regulations of the Commission thereunder and will not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and at all times subsequent to the Effective Time when a prospectus
would be required to be delivered under the Securities Act, other than from (i)
such time as a notice has been given to holders of Registrable Securities
pursuant to Section 3(d)(viii)(F) or Section 3(c)(iii)(F) hereof until (ii)
such time as the Company furnishes an amended or supplemented prospectus
pursuant to Section 3(e) or Section 3(c)(iv) hereof, each such registration
statement, and each prospectus (including any summary prospectus) contained
therein or furnished pursuant to Section 3(d) or Section 3(c) hereof, as then
amended or supplemented, will conform in
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<PAGE> 18
all material respects to the applicable requirements of the Securities Act and
the Trust Indenture Act and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by a holder of
Registrable Securities expressly for use therein.
(b) Any documents incorporated by reference in any
prospectus referred to in Section 5(a) hereof, when they become or became
effective or are or were filed with the Commission, as the case may be, will
conform or conformed in all material respects to the requirements of the
Securities Act or the Exchange Act, as applicable, and none of such documents
will contain or contained an untrue statement of a material fact or will omit
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing to the
Company by a holder of Registrable Securities expressly for use therein.
(c) The compliance by the Company with all of the
provisions of this Exchange and Registration Rights Agreement and the
consummation of the transactions herein contemplated will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any subsidiary of the Company
is a party or by which the Company or any subsidiary of the Company is bound or
to which any of the property or assets of the Company or any subsidiary of the
Company is subject, nor will such action result in any violation of the
provisions of the certificate of incorporation, as amended, or the by-laws of
the Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
subsidiary of the Company or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such court
or governmental agency or body is required for the consummation by the Company
of the transactions contemplated by this Exchange and Registration Rights
Agreement, except the registration under the Securities Act of the Securities,
qualification of the Indenture under the Trust Indenture Act and such consents,
approvals, authorizations, registrations or qualifications as may be required
under state securities or blue sky laws in connection with the offering and
distribution of the Securities.
(d) This Exchange and Registration Rights Agreement has
been duly authorized, executed and delivered by the Company.
6. Indemnification.
(a) Indemnification by the Company. The Company shall
indemnify and hold harmless each of the holders of Registrable Securities
included in an Exchange Registration Statement, each of the Electing Holders of
Registrable Securities included in a Shelf Registration Statement and each
person who participates as a placement or sales agent or as an underwriter in
any
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<PAGE> 19
offering or sale of such Registrable Securities against any losses, claims,
damages or liabilities, joint or several, to which such holder, agent or
underwriter may become subject under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Exchange Registration Statement or Shelf
Registration Statement, as the case may be, under which the offer and sale of
such Registrable Securities were registered under the Securities Act, or any
preliminary, final or summary prospectus contained therein or furnished by the
Company to any such holder, Electing Holder, agent or underwriter, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company shall, and it hereby agrees to, reimburse such holder, such Electing
Holder, such agent and such underwriter for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that the
Company shall not be liable to any such person in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, or preliminary, final or summary
prospectus, or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by such person
expressly for use therein;
(b) Indemnification by the Holders and any Agents and
Underwriters. The Company may require, as a condition to including any
Registrable Securities in any registration statement filed pursuant to Section
2(b) hereof and to entering into any underwriting agreement with respect
thereto, that the Company shall have received an undertaking reasonably
satisfactory to it from the Electing Holder of such Registrable Securities and
from each underwriter named in any such underwriting agreement, severally and
not jointly, to (i) indemnify and hold harmless the Company, and all other
holders of Registrable Securities, against any losses, claims, damages or
liabilities to which the Company or such other holders of Registrable
Securities may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in such registration statement, or any
preliminary, final or summary prospectus contained therein or furnished by the
Company to any such Electing Holder, agent or underwriter, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such Electing
Holder or underwriter expressly for use therein, and (ii) reimburse the Company
for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that no such Electing Holder shall be
required to undertake liability to any person under this Section 6(b) for any
amounts in excess of the dollar amount of the proceeds to be received by such
Electing Holder from the sale of such Electing Holder's Registrable Securities
pursuant to such registration.
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<PAGE> 20
(c) Notices of Claims, Etc. Promptly after receipt by an
indemnified party under subsection (a) or (b) above of written notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party pursuant to the
indemnification provisions of or contemplated by this Section 6, promptly
notify such indemnifying party in writing of the commencement of such action;
but the omission so to notify the indemnifying party shall not relieve it from
any liability that it may have to any indemnified party other than under the
indemnification provisions of or contemplated by Section 6(a) or 6(b) hereof.
In case any such action shall be brought against any indemnified party and it
shall notify an indemnifying party of the commencement thereof, such
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory
to such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and, after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, such indemnifying party shall not be liable to such
indemnified party for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of
any indemnified party.
(d) Contribution. If for any reason the indemnification
provisions contemplated by Section 6(a) or Section 6(b) are unavailable to or
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and the
indemnified party in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or by such indemnified
party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties
hereto agree that it would not be just and equitable if contributions pursuant
to this Section 6(d) were determined by pro rata allocation (even if the
holders or any agents or underwriters or all of them were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in this Section 6(d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, or liabilities (or actions in respect thereof) referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action
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<PAGE> 21
or claim. Notwithstanding the provisions of this Section 6(d), no holder shall
be required to contribute any amount in excess of the amount by which the
dollar amount of the proceeds received by such holder from the sale of any
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) exceeds the amount of any damages which such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, and no underwriter shall be required
to contribute any amount in excess of the amount by which the total price at
which the Registrable Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The holders' and any underwriters'
obligations in this Section 6(d) to contribute shall be several in proportion
to the principal amount of Registrable Securities registered or underwritten,
as the case may be, by them and not joint.
(e) The obligations of the Company under this Section 6
shall be in addition to any liability that the Company may otherwise have and
shall extend, upon the same terms and conditions, to each officer, director and
partner of each holder, agent and underwriter and each person, if any, who
controls any holder, agent or underwriter within the meaning of the Securities
Act; and the obligations of the holders and any agents or underwriters
contemplated by this Section 6 shall be in addition to any liability that the
respective holder, agent or underwriter may otherwise have and shall extend,
upon the same terms and conditions, to each officer and director of the Company
(including any person who, with his consent, is named in any registration
statement as about to become a director of the Company) and to each person, if
any, who controls the Company within the meaning of the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable
Securities covered by the Shelf Registration are to be sold pursuant to an
underwritten offering, the managing underwriter or underwriters thereof shall
be designated by Electing Holders holding at least a majority in aggregate
principal amount of the Registrable Securities to be included in such offering,
provided that such designated managing underwriter or underwriters is or are
reasonably acceptable to the Company.
(b) Participation by Holders. Each holder of Registrable
Securities hereby agrees with each other such holder that no such holder may
participate in any underwritten offering hereunder unless such holder (i)
agrees to sell such holder's Registrable Securities on the basis provided in
any underwriting arrangements approved by the persons entitled hereunder to
approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
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8. Rule 144.
The Company covenants to the holders of Registrable Securities
that to the extent it shall be required to do so under the Exchange Act, the
Company shall timely file the reports required to be filed by it under the
Exchange Act or the Securities Act (including the reports under Section 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144
adopted by the Commission under the Securities Act) and the rules and
regulations adopted by the Commission thereunder, and shall take such further
action as any holder of Registrable Securities may reasonably request, all to
the extent required from time to time to enable such holder to sell Registrable
Securities without registration under the Securities Act within the limitations
of the exemption provided by Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or any similar or successor rule or
regulation hereafter adopted by the Commission. Upon the request of any holder
of Registrable Securities in connection with that holder's sale pursuant to
Rule 144, the Company shall deliver to such holder a written statement as to
whether it has complied with such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents,
warrants, covenants and agrees that it has not granted, and shall not grant,
registration rights with respect to Registrable Securities or any other
securities that would be inconsistent with the terms contained in this Exchange
and Registration Rights Agreement.
(b) Specific Performance. The parties hereto acknowledge
that there would be no adequate remedy at law if the Company fails to perform
any of its obligations hereunder and that the Purchasers and the holders from
time to time of the Registrable Securities may be irreparably harmed by any
such failure, and accordingly agree that the Purchasers and such holders, in
addition to any other remedy to which they may be entitled at law or in equity,
shall be entitled to compel specific performance of the respective obligations
of the Company under this Exchange and Registration Rights Agreement in
accordance with the terms and conditions of this Exchange and Registration
Rights Agreement, in any court of the United States or any State thereof having
jurisdiction. Other than Special Interest provided for herein, the Purchaser
shall have no other recourse for money damages for a Registration Default.
(c) Notices. All notices, requests, claims, demands,
waivers and other communications hereunder shall be in writing and shall be
deemed to have been duly given when delivered by hand, if delivered personally
or by courier, or three days after being deposited in the mail (registered or
certified mail, postage prepaid, return receipt requested) as follows: If to
the Company, to it at 363 North Sam Houston Parkway East, Suite 2020, Houston,
Texas 77060, Attention: Secretary, with a copy to Vinson & Elkins L.L.P., 1001
Fannin Street, 2300 First City Tower, Houston, Texas 77002-6760, Attention:
James H. Wilson, and if to a holder, to the address of such holder set forth in
the security register or other records of the Company, or to such other address
as the Company or any such holder may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be
effective only upon receipt.
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<PAGE> 23
(d) Parties in Interest. All the terms and provisions of
this Exchange and Registration Rights Agreement shall be binding upon, shall
inure to the benefit of and shall be enforceable by the parties hereto and the
holders from time to time of the Registrable Securities and the respective
successors and assigns of the parties hereto and such holders. In the event
that any transferee of any holder of Registrable Securities shall acquire
Registrable Securities, in any manner, whether by gift, bequest, purchase,
operation of law or otherwise, such transferee shall, without any further
writing or action of any kind, be deemed a beneficiary hereof for all purposes
and such Registrable Securities shall be held subject to all of the terms of
this Exchange and Registration Rights Agreement, and by taking and holding such
Registrable Securities such transferee shall be entitled to receive the
benefits of, and be conclusively deemed to have agreed to be bound by, all of
the applicable terms and provisions of this Exchange and Registration Rights
Agreement. If the Company shall so request, any such successor, assign or
transferee shall agree in writing to acquire and hold the Registrable
Securities subject to all of the applicable terms hereof.
(e) Survival. The respective indemnities, agreements,
representations, warranties and each other provision set forth in this Exchange
and Registration Rights Agreement or made pursuant hereto shall remain in full
force and effect regardless of any investigation (or statement as to the
results thereof) made by or on behalf of any holder of Registrable Securities,
any director, officer or partner of such holder, any agent or underwriter or
any director, officer or partner thereof, or any controlling person of any of
the foregoing, and shall survive delivery of and payment for the Registrable
Securities pursuant to the Purchase Agreement and the transfer and registration
of Registrable Securities by such holder and the consummation of the Exchange
Offer.
(f) LAW GOVERNING. THIS EXCHANGE AND REGISTRATION RIGHTS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK.
(g) Headings. The descriptive headings of the several
Sections and paragraphs of this Exchange and Registration Rights Agreement are
inserted for convenience only, do not constitute a part of this Exchange and
Registration Rights Agreement and shall not affect in any way the meaning or
interpretation of this Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and
Registration Rights Agreement and the other writings referred to herein
(including the Purchase Agreement, the Indenture and the Securities) or
delivered pursuant hereto, which form a part hereof, contain the entire
understanding of the parties with respect to its subject matter and supersede
all prior agreements and understandings between the parties with respect to the
subject matter hereof. This Exchange and Registration Rights Agreement may be
amended and the observance of any term of this Exchange and Registration Rights
Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) only by a written instrument duly
executed by the Company and the holders of at least a majority in aggregate
principal amount of the Registrable Securities at the time outstanding. Each
holder of any Registrable Securities at the time or thereafter outstanding
shall be bound by any amendment or waiver effected pursuant to this Section
9(h),
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<PAGE> 24
whether or not any notice, writing or marking indicating such amendment or
waiver appears on such Registrable Securities or is delivered to such holder.
(i) Inspection. For so long as this Exchange and
Registration Rights Agreement shall be in effect, this Exchange and
Registration Rights Agreement and a complete list of the names and addresses of
all the holders of Registrable Securities shall be made available for
inspection and copying on any business day by any holder of Registrable
Securities for proper purposes only (which shall include any purpose related to
the rights of the holders of Registrable Securities under the Securities, the
Indenture and this Agreement) at the offices of the Company at the address
thereof set forth in Section 9(c) above and at the office of the Trustee under
the Indenture.
(j) Counterparts. This agreement may be executed by the
parties in counterparts, each of which shall be deemed to be an original, but
all such respective counterparts shall together constitute one and the same
instrument.
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Agreed to and accepted as of the date referred to above.
NEWFIELD EXPLORATION COMPANY
By: /s/ David A. Trice
------------------------
Name: David A. Trice
Title: Vice President -
Finance and International
GOLDMAN, SACHS & CO.
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
JEFFERIES & COMPANY, INC.
As Representatives of the
several Purchasers
By: /s/ Goldman, Sachs & Co.
------------------------
(Goldman, Sachs & Co.)
On behalf of each of
the Purchasers
-25-
<PAGE> 26
Exhibit A
NEWFIELD EXPLORATION COMPANY
INSTRUCTION TO DTC PARTICIPANTS
(Date of Mailing)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE]*
The Depository Trust Company ("DTC") has identified you as a
DTC Participant through which beneficial interests in the Newfield Exploration
Company (the "Company") 7.45% Senior Notes due 2007 (the "Securities") are
held.
The Company is in the process of registering the Securities
under the Securities Act of 1933 for resale by the beneficial owners thereof.
In order to have their Securities included in the registration statement,
beneficial owners must complete and return the enclosed Notice of Registration
Statement and Selling Securityholder Questionnaire.
It is important that beneficial owners of the Securities
receive a copy of the enclosed materials as soon as possible as their rights to
have the Securities included in the registration statement depend upon their
returning the Notice and Questionnaire by [DEADLINE FOR RESPONSE]. Please
forward a copy of the enclosed documents to each beneficial owner that holds
interests in the Securities through you. If you require more copies of the
enclosed materials or have any questions pertaining to this matter, please
contact Newfield Exploration Company, 363 North Sam Houston Parkway East, Suite
2020, Houston, Texas 77060, Attention: Secretary, (281) 847-6000.
__________________________________
* Not less than 28 calendar days from date of mailing.
A-1
<PAGE> 27
Newfield Exploration Company
Notice of Registration Statement
and
Selling Securityholder Questionnaire
(Date)
Reference is hereby made to the Exchange and Registration
Rights Agreement (the "Exchange and Registration Rights Agreement") between
Newfield Exploration Company (the "Company") and the Purchasers named therein.
Pursuant to the Exchange and Registration Rights Agreement, the Company has
filed with the United States Securities and Exchange Commission (the
"Commission") a registration statement on Form ___ (the "Shelf Registration
Statement") for the registration of the offer and resale under Rule 415 of the
Securities Act of 1933, as amended (the "Securities Act"), of the Company's
7.45% Senior Notes due 2007 (the "Securities"). A copy of the Exchange and
Registration Rights Agreement is attached hereto. All capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto in the
Exchange and Registration Rights Agreement.
Each beneficial owner of Registrable Securities (as defined
below) is entitled to have the Registrable Securities beneficially owned by it
included in the Shelf Registration Statement. In order to have Registrable
Securities included in the Shelf Registration Statement, this Notice of
Registration Statement and Selling Securityholder Questionnaire ("Notice and
Questionnaire") must be completed, executed and delivered to the Company's
counsel at the address set forth herein for receipt ON OR BEFORE [DEADLINE FOR
RESPONSE]. Beneficial owners of Registrable Securities who do not complete,
execute and return this Notice and Questionnaire by such date (i) will not be
named as selling securityholders in the Shelf Registration Statement and (ii)
may not use the Prospectus forming a part thereof for resales of Registrable
Securities.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are
advised to consult their own securities law counsel regarding the consequences
of being named or not being named as a selling securityholder in the Shelf
Registration Statement and related Prospectus.
The term "Registrable Securities" is defined in the Exchange
and Registration Rights Agreement.
A-2
<PAGE> 28
ELECTION
The undersigned holder (the "Selling Securityholder") of
Registrable Securities hereby elects to include in the Shelf Registration
Statement the Registrable Securities beneficially owned by it and listed below
in Item (3). The undersigned, by signing and returning this Notice and
Questionnaire, agrees to be bound with respect to such Registrable Securities
by the terms and conditions of this Notice and Questionnaire and the Exchange
and Registration Rights Agreement, including, without limitation, Section 6 of
the Registration Rights Agreement, as if the undersigned Selling Securityholder
were an original party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf
Registration Statement, the Selling Securityholder will be required to deliver
to the Company and Trustee the Notice of Transfer set forth in Appendix A to
the Prospectus and as Exhibit B to the Exchange and Registration Rights
Agreement.
The Selling Securityholder hereby provides the following
information to the Company and represents and warrants that such information is
accurate and complete:
A-3
<PAGE> 29
QUESTIONNAIRE
(1) (a) Full Legal Name of Selling Securityholder:
---------------------------------------------------------------
(b) Full Legal Name of Registered Holder (if not the same as in
(a) above) of Registrable Securities Listed in Item (3) below:
---------------------------------------------------------------
(c) Full Legal Name of DTC Participant (if applicable and if not
the same as (b) above) Through Which Registrable Securities
Listed in Item (3) below are Held:
---------------------------------------------------------------
(2) Address for Notices to Selling Securityholder:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Telephone:
-------------------------
Fax:
-------------------------
Contact Person:
-------------------------
(3) Beneficial Ownership of Securities:
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Securities.
(a) Principal amount of Registrable Securities beneficially owned:
---------------------------------------------------------------
CUSIP No(s). of such Registrable Securities:
-------------------
(b) Principal amount of Securities other than Registrable
Securities beneficially owned:
---------------------------------
CUSIP No(s). of such other Securities:
-------------------------
(c) Principal amount of Registrable Securities which the
undersigned wishes to be included in the Shelf Registration
Statement:
-----------------------------------------------------
CUSIP No(s). of such Registrable Securities to be included in
the Shelf Registration Statement:
------------------------------
A-4
<PAGE> 30
(4) Beneficial Ownership of Other Securities of the Company:
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any other
securities of the Company, other than the Securities listed above in Item (3).
State any exceptions here:
(5) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any
of its affiliates, officers, directors or principal equity holders (5% or more)
has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Registrable Securities listed above in Item (3) only
as follows (if at all): Such Registrable Securities may be sold from time to
time directly by the undersigned Selling Securityholder or, alternatively,
through underwriters, broker-dealers or agents. Such Registrable Securities
may be sold in one or more transactions at fixed prices, at prevailing market
prices at the time of sale, at varying prices determined at the time of sale,
or at negotiated prices. Such sales may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Registered Securities may be listed or quoted
at the time of sale, (ii) in the over-the-counter market, (iii) in
transactions otherwise than on such exchanges or services or in the
over-the-counter market, or (iv) through the writing of options. In connection
with sales of the Registrable Securities or otherwise, the Selling
Securityholder may enter into hedging transactions with broker-dealers, which
may in turn engage in short sales of the Registrable Securities in the course
of hedging the positions they assume. The Selling Securityholder may also sell
Registrable Securities short and deliver Registrable Securities to close out
such short positions, or loan or pledge Registrable Securities to
broker-dealers that in turn may sell such securities.
State any exceptions here:
A-5
<PAGE> 31
By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
provisions of the Exchange Act and the rules and regulations thereunder,
particularly Regulation M.
In the event that the Selling Securityholder transfers all or any
portion of the Registrable Securities listed in Item (3) above after the date
on which such information is provided to the Company, the Selling
Securityholder agrees to notify the transferee(s) at the time of the transfer
of its rights and obligations under this Notice and Questionnaire and the
Exchange and Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the
disclosure of the information contained herein in its answers to Items (1)
through (6) above and the inclusion of such information in the Shelf
Registration Statement and related Prospectus. The Selling Securityholder
understands that such information will be relied upon by the Company in
connection with the preparation of the Shelf Registration Statement and related
Prospectus.
In accordance with the Selling Securityholder's obligation under
Section 3(d) of the Exchange and Registration Rights Agreement to provide such
information as may be required by law for inclusion in the Shelf Registration
Statement, the Selling Securityholder agrees to promptly notify the Company of
any inaccuracies or changes in the information provided herein that may occur
subsequent to the date hereof at any time while the Shelf Registration
Statement remains in effect. All notices hereunder and pursuant to the
Exchange and Registration Rights Agreement shall be made in writing, by
hand-delivery, first-class mail, or air courier guaranteeing overnight delivery
as follows:
(i) To the Company:
Newfield Exploration Company
363 North Sam Houston Parkway East
Suite 2020
Houston, Texas 77060
Attention: Secretary
(281) 847-6000
(ii) With a copy to:
Vinson & Elkins L.L.P.
1001 Fannin Street
2300 First City Tower
Houston, Texas 77002-6760
Attention: James H. Wilson
(713) 758-2222
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company's counsel, the terms of this Notice
and Questionnaire, and the representations and warranties contained herein,
shall be binding on, shall inure to the benefit of and shall be enforceable by
the respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder (with respect to the Registrable
Securities beneficially owned by such Selling Securityholder and listed in Item
(3) above. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE
STATE OF NEW YORK.
A-6
<PAGE> 32
IN WITNESS WHEREOF, the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and delivered either in
person or by its duly authorized agent.
Dated:
---------------------------------
------------------------------------------------------
Selling Securityholder
(Print/type full legal name of beneficial
owner of Registrable Securities)
By:
---------------------------------------------------
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT
ON OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT:
Vinson & Elkins L.L.P.
1001 Fannin Street
2300 First City Tower
Houston, Texas 77002-6760
Attention: James H. Wilson
(713) 758-2222
A-7
<PAGE> 33
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
First Union National Bank
Newfield Exploration Company
230 South Tryon Street, Ninth Floor
Charlotte, NC 28288-1179
Attention: Trust Officer
Re: Newfield Exploration Company (the "Company")
7.45% Senior Notes due 2007
Dear Sirs:
Please be advised that _____________________ has transferred
$___________ aggregate principal amount of the above-referenced Notes pursuant
to an effective Registration Statement on Form __ (File No. 333-____) filed by
the Company.
We hereby certify that the prospectus delivery requirements,
if any, of the Securities Act of 1933, as amended, have been satisfied and that
the above-named beneficial owner of the Notes is named as a "Selling Holder" in
the Prospectus dated ___________, 199_ or in supplements thereto, and that the
aggregate principal amount of the Notes transferred are the Notes listed in
such Prospectus opposite such owner's name.
Dated:
Very truly yours,
----------------------------------------
(Name)
By:
-------------------------------------
(Authorized Signature)
B-1
<PAGE> 1
EXHIBIT 5.1
(713) 758-2222 (713) 758-2346
November 5, 1997
Newfield Exploration Company
363 North Sam Houston Parkway East
Suite 2020
Houston, Texas 77060
Ladies and Gentlemen:
We have acted as counsel to Newfield Exploration Company, a Delaware
corporation (the "Company"), in connection with the preparation of the
Registration Statement on Form S-4 (the "Registration Statement") filed on the
date hereof with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Company's 7.45% Series B Senior Notes due 2007 (the "Notes").
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of (i) the Restated Certificate of
Incorporation, as amended, and Bylaws of the Company, (ii) the Indenture dated
as of October 15, 1997 (the "Indenture") by and among the Company and First
Union National Bank, as Trustee (the "Trustee") and (iii) such other
certificates, statutes and other instruments and documents as we considered
appropriate for purposes of the opinions hereafter expressed.
In connection with this opinion, we have assumed that the Registration
Statement, and any amendments thereto (including post-effective amendments),
will have become effective and the Notes will be issued and sold in compliance
with applicable federal and state securities laws and in the manner described
in the Registration Statement and the applicable Prospectus.
Based on the foregoing, we are of the opinion that when the Indenture
has been duly qualified under the Trust Indenture Act of 1939, as amended, and
the Notes have been duly executed, authenticated, issued and delivered in
accordance with the provisions of the Indenture, such Notes will be legally
issued and will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as such
enforcement is subject to any applicable bankruptcy, insolvency, reorganization
or other law relating to or affecting creditors' rights generally and general
principles of equity, and will be entitled to the benefits of the Indenture.
<PAGE> 2
Newfield Exploration Company
Page 2
November 5, 1997
The foregoing opinion is limited in all respects to the laws of the
State of New York and federal laws.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. By giving such consent, we do not admit that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations of the Commission issued
thereunder.
Very truly yours,
/s/ VINSON & ELKINS L.L.P.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
report dated February 11, 1997, on our audit of the financial statements and
the financial statement schedules of Newfield Exploration Company. We also
consent to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Houston, Texas
November 5, 1997
<PAGE> 1
EXHIBIT 23.2
[RYDER SCOTT COMPANY PETROLEUM ENGINEERS]
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the use in the Prospectus constituting part of
this Registration Statement on Form S-4 of Newfield Exploration Company (the
"Company") of our name, which is set forth under the caption "Business -- Oil
and Gas Reserves". We also hereby consent to the reference to our firm under
the caption "Experts" in this Registration Statement on Form S-4.
/s/ RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
----------------------------
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
November 4, 1997
<PAGE> 1
EXHIBIT 99.1
NEWFIELD EXPLORATION COMPANY
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
7.45% SENIOR NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
7.45% SENIOR NOTES DUE 2007, SERIES B
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ___________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE")
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE
DELIVER TO THE EXCHANGE AGENT:
FIRST UNION NATIONAL BANK
By Hand/Overnight Courier: By Mail:
By Facsimile Transmission:
(for Eligible Institutions Only)
Confirm by Telephone:
--------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the Prospectus
dated _________, 1997 (the "Prospectus") of Newfield Exploration Company, a
Delaware corporation (the "Company") and this Letter of Transmittal (the
"Letter of Transmittal"), which together describe the Company's offer (the
"Exchange Offer") to exchange its 7.45% Senior Notes due 2007, Series B (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement of
which the Prospectus is a part, for a like principal amount of its issued and
outstanding 7.45% Senior Notes due 2007, Series A (the "Old Notes").
Capitalized terms used but not defined herein have the respective meaning given
to them in the Prospectus.
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest date to which the Exchange Offer is extended. The
Company shall notify the holders of the Old Notes of any extension by oral or
written notice and will mail to the record holders of Old Notes an announcement
thereof, each prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. The term "business day" shall
mean any day which is not a Saturday, Sunday or day on which banks are
authorized by law to close in the State of New York.
This Letter of Transmittal is to be used by a holder of Old Notes if
original Old Notes, if available, are to be forwarded herewith or an Agent's
Message is to be used if delivery of Old Notes is to be made by book-entry
transfer to the account maintained by the Exchange Agent at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offer -- Procedures
for Tendering" and "Book-Entry Transfer." Holders of Old Notes whose Old Notes
are not immediately available, or who are unable to deliver their Old Notes and
all other documents required by this Letter of Transmittal to the Exchange
Agent on or prior to the Expiration Date, or who
<PAGE> 2
are unable to complete the procedure for book-entry transfer on a timely basis,
must tender their Old Notes according to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures." See Instruction 1. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
The term "holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must
complete this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE
AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space below is inadequate, list the registered numbers and principal
amounts on a separate signed schedule and affix the list to this Letter of
Transmittal.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Name(s) and Address(es) of
Registered Holder(s) Exactly
as Name(s) Appear(s) on
Old Notes
(Please Fill In, If Blank) Old Note(s) Tendered
- --------------------------------------------------------------------------------
Aggregate Principal Principal
Registered Amount Represented by Amount
Number(s)* Note(s) Tendered**
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, any tendering holder of Old Notes will be
deemed to have tendered the entire aggregate principal amount represented
by such Old Notes. All tenders must be in integral multiples of $1,000.
- --------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE
INSTITUTIONS ONLY):
Name of Tendering Institution:
--------------------------------------------------
Account Number:
-----------------------------------------------------------------
Transaction Code Number:
--------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered holder(s) of Old Notes:
-----------------------------------
<PAGE> 3
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------
Window Ticket Number (if available):
--------------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
--------------------------
Account Number (if delivered by book-entry transfer):
--------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name:
--------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company for exchange the principal amount of Old Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned hereby exchanges, assigns and transfers to the
Company all right, title and interest in and to the Old Notes tendered for
exchange hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent, the agent and attorney-in-fact of the undersigned (with
full knowledge that the Exchange Agent also acts as the agent of the Company in
connection with the Exchange Offer) with respect to the tendered Old Notes with
full power of substitution to (i) deliver such Old Notes, or transfer ownership
of such Old Notes on the account books maintained by the Book-Entry Transfer
Facility, to the Company and deliver all accompanying evidences of transfer and
authenticity, and (ii) present such Old Notes for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms of the
Exchange Offer. The power of attorney granted in this paragraph shall be
deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the Exchange Notes issuable upon the exchange of
such tendered Old Notes, and that the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim, when the same are
accepted for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC"),
including Exxon Capital Holdings Corporation, SEC No-Action Letter (available
April 13, 1989), Morgan Stanley & Co. Inc., SEC No-Action Letter (available
June 5, 1991) (the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC
No-Action Letter (available June 5, 1991), that the Exchange Notes issued in
exchange for the Old Notes pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than a
broker-dealer who purchased Old Notes exchanged for such Exchange Notes
directly from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders are not participating in, and have no arrangement
with any person to participate in, the distribution of such Exchange Notes.
The undersigned specifically represent(s) to the Company that (i) any Exchange
Notes acquired in exchange for Old Notes tendered hereby are being acquired in
the ordinary course of business of the person receiving such Exchange Notes,
whether or not the undersigned, (ii) the undersigned is not participating in,
and has no arrangement with any person to participate in, the distribution of
Exchange Notes, and (iii) neither the undersigned nor any such other person is
an "affiliate" (as defined in Rule 405 under the Securities Act) of the Company
or a broker-dealer tendering Old Notes acquired directly from the Company.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive
Exchange Securities for its own account in exchange for Securities that were
acquired as a result of market-making activities or other trading activities,
it acknowledges that it will deliver a prospectus in connection with any resale
of such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. The undersigned
acknowledges that if the undersigned is participating in the Exchange Offer for
the purpose of distributing the Exchange Notes (i) the undersigned cannot rely
on the position of the staff of the SEC in the Morgan Stanley Letter and
similar SEC no-action letters, and, in the absence of an exemption therefrom,
must comply with the
<PAGE> 4
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction of the Exchange Notes, in which
case the registration statement must contain the selling security holder
information required by Item 507 or Item 508, as applicable, of Regulation S-K
of the SEC, and (ii) a broker-dealer that delivers such a prospectus to
purchasers in connection with such resales will be subject to certain of the
civil liability provisions under the Securities Act and will be bound by the
provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations).
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Old Notes
tendered hereby, including the transfer of such Old Notes on the account books
maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Old Notes when, as and if the Company
gives oral or written notice thereof to the Exchange Agent. Any tendered Old
Notes that are not accepted for exchange pursuant to the Exchange Offer for any
reason will be returned, without expense, to the undersigned at the address
shown below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of properly
tendered Old Notes pursuant to the procedures described under the caption "The
Exchange Offer -- Procedures for Tendering" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the Exchange Notes issued in exchange for the Old Notes accepted for
exchange and return any Old Notes not tendered or not exchanged, in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail or deliver the Exchange Notes issued in
exchange for the Old Notes accepted for exchange and any Old Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature(s). In the
event that both "Special Issuance Instructions" and "Special Delivery
Instructions" are completed, please issue the Exchange Notes issued in exchange
for the Old Notes accepted for exchange in the name(s) of, and return any Old
Notes not tendered or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Old Notes from the name of the registered holder(s) thereof if the Company
does not accept for exchange any of the Old Notes so tendered for exchange.
<PAGE> 5
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6) (SEE INSTRUCTIONS 5 AND 6)
<S> <C>
To be completed ONLY (i) if Old Notes in a To be completed ONLY if Old Notes in a principal
principal amount not tendered, or Exchange Notes amount not tendered, or Exchange Notes issued in
issued in exchange for Old Notes accepted for exchange for Old Notes accepted for exchange, are to be
exchange, are to be issued in the name of someone mailed or delivered to someone other than the
other than the undersigned, or (ii) if Old Notes undersigned, or to the undersigned at an address other
tendered by book-entry transfer which are not than that shown below the undersigned's signature.
exchanged are to be returned by credit to an account
maintained at the Book-Entry Transfer Facility other Mail or deliver Exchange Notes and/or Old Notes to:
than the account indicated above.
Issue Exchange Notes and/or Old Notes to: Name:
--------------------------------------------------
(Please Type or Print)
Name:
-------------------------------------------------- -------------------------------------------------------
(Please Type or Print)
Address:
- ------------------------------------------------------- -----------------------------------------------
Address:
----------------------------------------------- -------------------------------------------------------
(include Zip Code)
- -------------------------------------------------------
(include Zip Code)
-------------------------------------------------------
(Tax Identification or Social Security Number)
- -------------------------------------------------------
(Tax Identification or Social Security Number)
[ ] Credit unexchanged Old Notes delivered by
book-entry transfer to the Book-Entry Transfer
Facility set forth below:
Book-Entry Transfer Facility Account Number:
(Complete Substitute Form W-9)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
- --------------------------------------------------------------------------------
IMPORTANT
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 on Reverse Side)
X
---------------------------------------------------------------------------
X
---------------------------------------------------------------------------
(Signature(s) of Registered Holders or Old Notes)
Dated , 1997
--------------------------------------------
(The above lines must be signed by the registered holder(s) of Old Notes as
name(s) appear(s) on the Old Notes or on a security position listing, or by
person(s) authorized to become registered holder(s) by a properly completed bond
power from the registered holder(s), a copy of which must be transmitted with
this Letter of Transmittal. If Old Notes to which this Letter of Transmittal
relate are held of record by two or more joint holders, then all such holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, then such person must
(i) set forth his or her full title below and (ii) unless waived by the Company,
submit evidence satisfactory to the Company of such person's authority so to
act. See Instruction 5 regarding the completion of this Letter of Transmittal,
printed below.)
Name(s):
----------------------------------------------------------------------
(Please Type or Print)
Capacity:
---------------------------------------------------------------------
Address:
----------------------------------------------------------------------
-----------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
-----------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE GUARANTEE
(If Required by Instruction 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an Eligible Institution:
----------------------------
(Authorized Signature)
------------------------------------------------------------------------------
(Title)
------------------------------------------------------------------------------
(Name of Firm)
------------------------------------------------------------------------------
(Address, Include Zip Code)
------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: , 1997
------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Notes or Book-Entry
Confirmations. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or Agent's Message or facsimile hereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. The method of delivery of the tendered Old
Notes, this Letter of Transmittal and all other required documents to the
Exchange Agent is at the election and risk of the holder and, except as
otherwise provided below, the delivery will be deemed made only when actually
received or confirmed by the Exchange Agent. Instead of delivery by mail, it
is recommended that the holder use an overnight or hand delivery service. In
all cases, sufficient time should be allowed to assure delivery to the Exchange
Agent before the Expiration Date. No Letter of Transmittal or Old Notes should
be sent to the Company.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Old
Notes and whose Old Notes are not immediately available or who cannot deliver
their Old Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date or who cannot
complete the procedure for book-entry transfer on a timely basis and deliver an
Agent's Message, must tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such procedures:
(1) such tender must be made by or through a firm which is a member of a
registered national securities exchange or of the National Association of
Securities Dealers Inc., a commercial bank or a trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution"); (ii) prior to the Expiration Date, the Exchange Agent must have
received from the Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the holder of the Old Notes,
the registration number(s) of such Old Notes and the total principal amount of
Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five business days after the Expiration Date, this
Letter of Transmittal (or facsimile hereof) together with the Old Notes in
proper form for transfer (or a Book-Entry Confirmation) and any other documents
required hereby, must be deposited by the Eligible Institution with the
Exchange Agent within five business days after the Expiration Date; and (iii)
the certificates for all physically tendered shares of Old Notes, in proper
form for transfer (or Book-Entry Confirmation, as the case may be) and all
other documents required hereby are received by the Exchange Agent within five
business days after the Expiration Date.
Any holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a
Notice of Guaranteed Delivery will be sent to holders who wish to tender their
Old Notes according to the guaranteed delivery procedures set forth above.
See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.
3. Tender by Holder. Only a holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial holder of Old Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and deliver this Letter of Transmittal on his behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
Old Notes, either make appropriate arrangements to register ownership of the
Old Notes in such holder's name or obtain a properly completed bond power from
the registered holder.
4. Partial Tenders. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering holder should fill in the principal amount
tendered in the third column of the box entitled "Description of Old Notes
Tendered" above. The entire principal amount of Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If the entire principal amount of all Old Notes is not tendered, then Old Notes
for the principal amount of Old Notes not tendered and Exchange Notes issued in
exchange for any Old Notes accepted will be sent to the holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, promptly after the Old Notes are accepted
for exchange.
5. Signatures on this Letter of Transmittal; Bond Powers and
Endorsements; Guarantee of Signatures. If this Letter of Transmittal (or
facsimile hereof) is signed by the record holder(s) of the Old Notes tendered
hereby, the signature must correspond with the name(s) as written on the face
of the Old Notes without alteration, enlargement or any change whatsoever. If
this Letter of Transmittal (or facsimile hereof) is signed by a participant in
the Book-Entry Transfer Facility, the signature must correspond with the name
as it appears on the security position listing as the holder of the Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Notes listed and tendered hereby and the
Exchange Notes issued in exchange therefor are to be issued (or any untendered
principal amount of Old Notes
<PAGE> 8
is to be reissued) to the registered holder, the said holder need not and
should not endorse any tendered Old Notes, nor provide a separate bond power.
In any other case, such holder must either properly endorse the Old Notes
tendered or transmit a properly completed separate bond power with this Letter
of Transmittal, with the signatures on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered holder or holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers, in each case
signed as the name of the registered holder or holders appears on the Old
Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, evidence satisfactory to the Company of their
authority to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal (or
facsimile hereof) is signed by the registered holder(s) of the Old Notes
tendered herein (or by a participant in the Book-Entry Transfer Facility whose
name appears on a security position listing as the owner of the tendered Old
Notes) and the Exchange Notes are to be issued directly to such registered
holder(s) (or, if signed by a participant in the Book-Entry Transfer Facility,
deposited to such participant's account at such Book-Entry Transfer Facility)
and neither the box entitled "Special Delivery Instructions" nor the box
entitled "Special Registration Instructions" has been completed, or (ii) such
Old Notes are tendered for the account of an Eligible Institution. In all
other cases, all signatures on this Letter of Transmittal (or facsimile hereof)
must be guaranteed by an Eligible Institution.
6. Special Registration and Delivery Instructions. Tendering holders
should indicate, in the applicable box or boxes, the name and address (or
account at the Book-Entry Transfer Facility) to which Exchange Notes or
substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of
the person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, Exchange notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered hereby, or if tendered Old Notes are registered in the name of any
person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with this Letter of Transmittal, the
amount of such transfer taxes will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. Tax Identification Number. Federal income tax law requires that a
holder of any Old Notes which are accepted for exchange must provide the
Company (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual is his or her social
security number. If the Company is not provided with the correct TIN, the
holder may be subject to a $50 penalty imposed by Internal Revenue Service.
(If withholding results in an over-payment of taxes, a refund may be obtained).
Certain holders (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to backup
withholding. If the Old Notes are registered in more than one name or are not
in the name of the actual owner, see the enclosed "Guidelines for Certification
of Taxpayer Identification Number of Substitute Form W-9" for information on
which TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligations regarding backup
withholding.
<PAGE> 9
9. Validity of Tenders. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Old Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes
the Company's acceptance of which would, in the opinion of the Company or its
counsel, be unlawful. The Company also reserves the absolute right to waive
any conditions of the Exchange Offer or defects or irregularities in tenders as
to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (which includes this Letter of Transmittal and
the instructions hereto) shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
must be cured within such time as the Company shall determine. Neither the
Company, the Exchange Agent nor any other person shall be under any duty to
give notification of defects or irregularities with regard to tenders of Old
Notes nor shall any of them incur any liability for failure to give such
notification.
10. Waiver of Conditions. The Company reserves the absolute right to
waive, in whole or part, any of the conditions to the Exchange Offer set forth
in the Prospectus.
11. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Old Notes on transmittal of this Letter of Transmittal
will be accepted.
12. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
13. Requests for Assistance or Additional Copies. Requests for assistance
or for additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
14. Withdrawal. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE OLD NOTES DELIVERED BY BOOK-ENTRY TRANSFER OR IN ORIGINAL
HARD COPY FORM) MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE
EXPIRATION DATE.
<PAGE> 10
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE Social Security Number
BOX AT RIGHT AND CERTIFY BY SIGNING AND OR Employer Identification Number
FORM W-9 DATING BELOW
----------------------------
DEPARTMENT OF THE TREASURY --------------------------------------------------------------------------------
INTERNAL REVENUE SERVICE
PART 2 -- Certification -- Under penalties of PART 3 --
perjury, I certify that:
(1) The number shown on this form is my correct Awaiting TIN [ ]
Taxpayer Identification Number (or I am waiting
for a number to be issued to me) and
(2) I am not subject to backup withholding either Please complete the
PAYER'S REQUEST FOR TAXPAYER because I have not been notified by the Certificate of Awaiting
IDENTIFICATION NUMBER (TIN) Internal Revenue Service ("IRS") that I am Taxpayer Identification
subject to backup withholding as a result of Number below.
failure to report all interest or dividends, or
the IRS has notified me that I am no longer
subject to backup withholding.
--------------------------------------------------------------------------------
Certificate Instructions -- You must cross out item (2) in Part 2 above if you
have been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS stating that you are no longer
subject to backup withholding, do not cross out item (2).
SIGNATURE DATE , 1997
--------------------------------------------------- -------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered
an application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number to the
payor within 60 days, 31% of all reportable payments made to me thereafter
will be withheld until I provide a number.
--------------------------------- -----------------------, 1997
Signature Date
- --------------------------------------------------------------------------------
<PAGE> 11
- --------------------------------------------------------------------------------
CERTIFICATE FOR FOREIGN RECORD HOLDERS
Under penalties of perjury, I certify that I am not a United States
citizen or resident (or I am signing for a foreign corporation, partnership,
estate or trust).
--------------------------------- -----------------------, 1997
Signature Date
- --------------------------------------------------------------------------------
