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FILED PURSUANT TO RULE 424(b)(5)
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 4, 1998
4,000,000 SHARES
NEWFIELD EXPLORATION COMPANY
COMMON STOCK
[NEWFIELD LOGO] (PAR VALUE $.01 PER SHARE)
---------------------
All of the shares of Common Stock offered hereby are being sold by Newfield
Exploration Company.
The Common Stock is listed on the New York Stock Exchange under the symbol
"NFX". On September 14, 1998, the last reported sale price of the Common Stock
on the New York Stock Exchange was $23 per share. See "Price Range of Common
Stock".
SEE "RISK FACTORS" BEGINNING ON PAGE S-3 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
---------------------
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.
---------------------
The shares of Common Stock will be purchased from the Company by the
Underwriters at a price of $20.80 per share (resulting in $83,200,000 aggregate
net proceeds (before expenses) to the Company). The Company will pay certain
expenses of the offering estimated at approximately $200,000.
The shares of Common Stock may be offered by the Underwriters from time to
time in one or more transactions in the over-the-counter market, through
negotiated transactions or otherwise at market prices prevailing at the time of
the sale or at negotiated prices, subject to prior sale, when, as and if
delivered to and accepted by the Underwriters. See "Underwriting".
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
---------------------
The shares of Common Stock offered hereby are offered by the Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
shares will be ready for delivery in New York, New York on or about September
18, 1998, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
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The date of this Prospectus Supplement is September 14, 1998.
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
OVER-ALLOTMENT AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE
IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING".
Unless otherwise indicated, references to "Newfield" or the "Company" shall
mean Newfield Exploration Company and its subsidiaries. This Prospectus
Supplement includes "forward-looking statements" that are based upon assumptions
and anticipated results that are subject to numerous uncertainties. See
"Forward-Looking Statements" in the Prospectus. Certain terms relating to the
oil and gas industry are defined in the "Glossary of Oil and Gas Terms" included
in this Prospectus Supplement.
RECENT DEVELOPMENTS
Since June 30, 1998, Newfield has completed acquisitions of Gulf of Mexico
properties for an aggregate purchase price of approximately $77.5 million (the
"Recent Acquisitions"). The acquisitions were funded with borrowings under
Newfield's revolving credit facility (the "Credit Facility"). In connection with
the Central Gulf acquisition discussed below, the Credit Facility was increased
by $100 million to $225 million.
CENTRAL GULF ACQUISITION
In August 1998, Newfield acquired interests in nine natural gas fields,
consisting of interests in 13 offshore blocks, in the South Marsh Island, West
Cameron and High Island areas of the Gulf of Mexico, offshore Louisiana and
Texas, for approximately $60 million. Subsequently, Newfield acquired additional
interests in two blocks in the South Marsh Island area for $7.2 million. These
newly acquired fields are in proximity to Newfield's existing acreage position
and enhance Newfield's presence in this area.
Newfield will operate all of the acquired properties and own working
interests ranging from 45% to 100%. Of the nine fields acquired, six are
developed and producing and three will be placed on line during the second half
of 1998. Because most of these fields are subject to pre-existing volumetric
production payments, their contribution to 1998 production will not be
significant. The average net daily production contribution in 1999 is, however,
expected to be approximately 30 MMcfe, or in excess of 10% of Newfield's current
net daily production. All of the acquired proved reserves are natural gas.
Newfield hedged approximately one-third of estimated natural gas production
from the acquired properties under fixed price contracts at average prices
ranging from $2.30 to $2.35 per MMBtu for calendar years 1999 and 2000.
Newfield has identified several drilling opportunities that include proved,
probable and possible reserve targets and intends to initiate drilling on at
least two of those prospects during 1998. During 1998 and 1999, Newfield expects
to spend $14 million and $21 million, respectively, for the further development
and evaluation of the acquired properties.
SOUTH MARSH ISLAND 160 ACQUISITION
In July 1998, Newfield acquired, for approximately $10 million, a 50%
working interest in and became operator of South Marsh Island Block 160. Current
production net to Newfield's interest resulting from this acquisition is
approximately 500 Bbls/d and 500 Mcf/d. The Company has identified potential
recompletions in the existing wells. Plans for further drilling in the field are
contingent upon reservoir performance and further geologic and engineering
evaluation.
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RISK FACTORS
In addition to the other information set forth elsewhere in this Prospectus
Supplement, the Prospectus and the documents incorporated by reference therein,
the following factors relating to the Company and the Offering should be
carefully considered when evaluating an investment in the Common Stock offered
hereby.
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 oil and gas producing regions worldwide, 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. Prices for oil and gas have
recently declined materially. It is impossible to predict future oil and natural
gas price movements with any certainty. Any continued and extended decline in
the price of oil or gas could have a material adverse effect on 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.
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 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. Neither the hedging contracts
nor the unrealized gains or losses on the contracts are recognized in the
financial statements.
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 for
oil and natural gas all 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.
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
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of years a property would produce at a constant rate using current rates of
production) for the Company's proved reserves of approximately 5.9 years as of
December 31, 1997. 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.
CEILING LIMITATION WRITEDOWNS
The Company reports its operations using the full cost method of accounting
for oil and gas properties. Under the full cost accounting rules, the net
capitalized costs of oil and gas properties may not exceed a "ceiling limit",
calculated at the end of each quarter, which is based upon the present value of
estimated future net cash flows from proved reserves, discounted at 10%, plus
the lower of cost or fair market value of unproved properties, net of related
tax effects. If net capitalized costs of oil and gas properties exceed the
ceiling limit, the Company is subject to a ceiling limitation writedown to the
extent of such excess. A ceiling limitation writedown is a charge to earnings
which does not impact cash flows. However, such writedowns impact the amount of
the Company's stockholders' equity. The risk that the Company will be required
to write down the carrying value of its oil and gas properties increases when
oil and gas prices are depressed or volatile. Application of these rules during
periods of relatively low oil or gas prices, even if temporary, increases the
probability of a ceiling writedown. In addition, writedowns may occur if the
Company makes additional acquisitions or has substantial downward revisions in
its estimated proved reserves. The recent significant declines in both oil and
gas prices may require the Company to record a ceiling limitation writedown in
the third quarter. Any such writedown could be significant. See "-- Volatility
of Oil and Gas Prices; Marketability of Production". No assurance can be given
that the Company will not experience a ceiling limitation writedown in future
periods.
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 $163.8 million during 1996 and $253.2 million during 1997. The Company plans
to make capital expenditures, including exploration expense but not including
expenditures for any future acquisitions, of approximately $310 million in 1998.
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 1998 and 1999. 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.
UNCERTAINTY OF ESTIMATES OF OIL AND GAS RESERVES
The Prospectus incorporates by reference estimates, most of which were
prepared by the Company, of proved oil and gas reserves and the 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 Securities and Exchange Commission
(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
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significant. Any significant variance from the assumptions could result in the
actual quantity of the Company's reserves and future net cash flow therefrom
being materially different from such estimates. 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.
The present value of future net revenues incorporated by reference in the
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 discounted 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.
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 1997
and have fluctuated in 1998. In the past, 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,
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.
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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.
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, 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.
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 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. Failure to
comply with any federal, state or local law or regulation could subject the
Company to varying civil and criminal penalties. 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
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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.
RISKS OF FOREIGN OPERATIONS
While the Company intends to continue to focus on the Gulf of Mexico and
the onshore Gulf Coast, the Company also intends to pursue selective
opportunities to develop "focused diversification" outside of such areas. In
1997, Newfield made its initial international investment by acquiring a 35%
interest in a 415,000 acre production sharing license in the Bohai Bay, offshore
China, from Huffco International, L.L.C. ("Huffco"). Although the first
exploratory well on the block was plugged and abandoned, exploration operations
are continuing on the block. Successful exploratory drilling in the Bohai Bay
may result in significant future investment in the area. The approved 1999 work
program and budget for the Bohai Bay includes a 3-D seismic survey and one
exploratory well. Huffco retained a preferred stock interest in the subsidiary
of the Company that owns the interest in the Bohai Bay production sharing
license. 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 hold in excess of 90% of the
outstanding member interests of Huffco.
Newfield continues to evaluate new opportunities for international
expansion in areas in which it can utilize its core competencies. Newfield
believes such areas include offshore China, offshore West Africa and the
Northwest Shelf, offshore Australia. 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.
RESTRICTIONS UPON ABILITY TO PAY DIVIDENDS
The ability of the Company to make dividend payments on the Common Stock
will be dependent on the Company's future performance and liquidity. In
addition, the Credit Facility contains restrictions on the ability of the
Company to pay cash dividends on its capital stock, including the Common Stock.
The Credit Facility provides that no cash dividends or distributions (including
amounts paid on redemption of capital stock) may be made by the Company to its
stockholders unless (a) the dollar amount of the dividends and redemption in any
four quarters does not exceed 50% of consolidated net income for such four
quarter period, (b) the Company maintains a fixed charge coverage ratio (as
defined in the Credit Facility) of 2.0 to 1.0 in such fiscal quarter that the
dividend is made and (c) no default under the Credit Facility has occurred and
is continuing and such payment does not cause a default under the Credit
Facility.
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YEAR 2000 ISSUES
Year 2000 issues result from the inability of computer programs or
computerized equipment to accurately calculate, store or use a date subsequent
to December 31, 1999. The erroneous date can be interpreted in a number of
different ways; typically the year 2000 is interpreted as the year 1900. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business.
Because the Company was recently formed, it was aware of and considered
Year 2000 issues at the time of purchase or development of its software systems.
In addition, the Company has recently completed an assessment of its core
financial and operational software systems to ensure compliance. The licensor of
the Company's core financial software system has certified that such software is
Year 2000 compliant. Additionally, other less critical software systems and
various types of equipment have been assessed and are believed to be compliant.
The Company believes that the potential impact, if any, of these less critical
systems not being Year 2000 compliant will at most require employees to manually
complete otherwise automated tasks or calculations and it should not impact the
Company's ability to continue exploration, drilling, production or sales
activities.
The Company has initiated and will continue to have formal communications
with its significant suppliers, business partners and customers to determine the
extent to which the Company is vulnerable to those third parties' failure to
correct their own Year 2000 issues. There can be no guarantee, however, that the
systems of other companies on which the Company's systems rely will be timely
converted, or that a failure to convert by another company, or a conversion that
is incompatible with the Company's systems would not have a material adverse
effect on the Company. The Company has determined it has no exposure to
contingencies related to the Year 2000 issue with respect to products sold to
third parties.
The Company has and will utilize both internal and external resources to
complete tasks and perform testing necessary to address the Year 2000 issue. The
Company has substantially completed the Year 2000 project. The Company has not,
and does not anticipate that it will incur any significant costs relating to the
assessment and remediation of Year 2000 issues.
USE OF PROCEEDS
The estimated net proceeds to the Company from the Offering, after
deducting underwriting discounts and estimated offering expenses, will be
approximately $83.0 million. The Company intends to use the proceeds from the
sale of the Common Stock in the Offering to repay a portion of the outstanding
debt under the Credit Facility ($136.5 million at September 14, 1998), thereby
creating additional borrowing capacity that will be available to fund the
Company's exploration and development activities and possible future
acquisitions, as well as other corporate purposes.
The Credit Facility is a $225 million revolving facility that matures on
October 31, 2002 with a current available borrowing base of $175 million. As of
September 14, 1998, the effective interest rate on the outstanding borrowings
under the Credit Facility was 6.85% per annum. Amounts currently outstanding
under the Credit Facility were incurred primarily to fund the Recent
Acquisitions and exploration and development activities.
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CAPITALIZATION
The following table sets forth as of June 30, 1998, (i) the unaudited
historical capitalization of the Company, (ii) the capitalization of the Company
on a pro forma basis giving effect to the incurrence of approximately $77.5
million of debt under the Credit Facility to fund the Recent Acquisitions and
(iii) the pro forma capitalization of the Company as adjusted to give effect to
the Offering and the application of the assumed net proceeds of approximately
$83.0 million therefrom as described under "Use of Proceeds". The table should
be read in conjunction with the consolidated financial statements and notes
thereto of the Company incorporated by reference in the Prospectus and "Recent
Developments".
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
------------------------------------
PRO FORMA
HISTORICAL PRO FORMA AS ADJUSTED
---------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt:
Credit Facility(1)...................................... $ 48,000 $125,500 $ 42,500
7.45% Senior Notes due 2007............................. 124,636 124,636 124,636
Other................................................... 19,000 19,000 19,000
-------- -------- --------
Total long-term debt............................ $191,636 $269,136 $186,136
======== ======== ========
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; 36,189,985 shares issued and outstanding;
40,189,985 shares issued and outstanding, as
adjusted(2))......................................... 362 362 402
Additional paid-in capital................................ 164,245 164,245 247,205
Unearned compensation..................................... (6,169) (6,169) (6,169)
Retained earnings......................................... 146,092 146,092 146,092
-------- -------- --------
Total stockholders' equity...................... 304,530 304,530 387,530
-------- -------- --------
Total capitalization............................ $496,166 $573,666 $573,666
======== ======== ========
</TABLE>
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(1) As of September 14, 1998, the Company had $136.5 million outstanding under
the Credit Facility. The increase of indebtedness under the Credit Facility
from the amounts outstanding as of June 30, 1998 was primarily the result of
the Recent Acquisitions.
(2) Does not include approximately 3.8 million shares that may be issued
(without regard to vesting) upon exercise of stock options outstanding at
June 30, 1998. At September 14, 1998, there were approximately 4.1 million
shares subject to outstanding stock options.
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PRICE RANGE OF COMMON STOCK
The Common Stock is traded on the New York Stock Exchange (the "NYSE")
under the symbol "NFX". The following table sets forth, on a per share basis for
the periods indicated, the range of high and low sales prices of the Common
Stock as reported by the NYSE during the periods shown. Share prices have been
restated to adjust for the two-for-one stock split effected in December 1996.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1996
First Quarter............................................. $15 1/4 $12 1/2
Second Quarter............................................ 20 15 1/8
Third Quarter............................................. 22 3/4 18 1/16
Fourth Quarter............................................ 26 1/2 22 5/16
1997
First Quarter............................................. $28 $18 1/2
Second Quarter............................................ 23 7/8 16 7/8
Third Quarter............................................. 28 1/8 19 15/16
Fourth Quarter............................................ 33 20
1998
First Quarter............................................. $27 11/16 $19 9/16
Second Quarter............................................ 26 3/8 18 1/8
Third Quarter (through September 14, 1998)................ 24 3/8 15 7/16
</TABLE>
On September 14, 1998, the last sale price of the Common Stock as reported
on the NYSE was $23 per share. On August 31, 1998, the outstanding shares of the
Common Stock were held by approximately 295 holders of record.
DIVIDEND POLICY
The Company has not paid any cash dividends in the past and does not intend
to pay cash dividends on its Common Stock in the foreseeable future. The Company
currently intends to retain any earnings for the future operation and
development of its business. Any future cash dividends to holders of Common
Stock would depend on future earnings, capital requirements, the Company's
financial condition and other factors deemed relevant by the Board of Directors.
The payment of dividends on the Common Stock is restricted by the terms of the
Credit Facility. See "Risk Factors -- Restrictions Upon Ability to Pay
Dividends".
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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 from the
Company's audited consolidated financial statements for the years ended December
31, 1993, 1994, 1995, 1996 and 1997 and unaudited consolidated financial
statements for the six months ended June 30, 1997 and 1998. 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, each incorporated by reference in the
Prospectus. The results for the six months ended June 30, 1998 are not
necessarily indicative of results for the full year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Oil and gas revenues....................... $ 60,178 $ 69,728 $ 94,598 $149,256 $199,399 $ 89,272 $ 99,884
-------- -------- -------- -------- -------- -------- --------
Operating expenses:
Lease operating (including production
taxes)................................. 7,096 9,555 14,227 16,946 24,308 10,605 16,052
Depreciation, depletion and
amortization........................... 25,116 34,118 49,904 64,026 94,000 41,973 57,749
China ceiling test write-down............ -- -- -- -- 4,254 -- --
General and administrative, net.......... 3,709 3,802 5,549 7,552 11,093 5,527 5,494
Stock compensation(1).................... 3,235 1,084 692 1,943 1,177 708 1,108
-------- -------- -------- -------- -------- -------- --------
Total operating expenses........... $ 39,156 $ 48,559 $ 70,372 $ 90,467 $134,832 $ 58,813 $ 80,403
-------- -------- -------- -------- -------- -------- --------
Income from operations..................... $ 21,022 $ 21,169 $ 24,226 $ 58,789 $ 64,567 $ 30,459 $ 19,481
Interest income (expense), net............. 759 1,379 780 497 (2,146) (249) (3,265)
-------- -------- -------- -------- -------- -------- --------
Income before income taxes................. $ 21,781 $ 22,548 $ 25,006 $ 59,286 $ 62,421 $ 30,210 $ 16,216
Income tax provision....................... 7,753 8,108 8,742 20,792 21,818 10,550 5,732
-------- -------- -------- -------- -------- -------- --------
Net income................................. $ 14,028 $ 14,440 $ 16,264 $ 38,494 $ 40,603 $ 19,660 $ 10,484
======== ======== ======== ======== ======== ======== ========
Basic earnings per common share............ $ 0.53 $ 0.43 $ 0.48 $ 1.10 $ 1.14 $ 0.56 $ 0.29
======== ======== ======== ======== ======== ======== ========
Diluted earnings per common share.......... $ 0.50 $ 0.40 $ 0.45 $ 1.03 $ 1.07 $ 0.52 $ 0.27
======== ======== ======== ======== ======== ======== ========
Weighted average number of shares
outstanding for basic earnings
per share................................ 26,651 33,197 33,935 34,872 35,612 35,377 36,113
Weighted average number of shares
outstanding for diluted earnings
per share................................ 28,041 35,974 36,454 37,409 38,017 37,783 38,316
CASH FLOWS DATA:
Net cash provided by operating
activities............................... $ 38,569 $ 68,121 $ 67,640 $127,494 $160,338 $ 72,478 $ 81,919
Net cash used in investing activities...... (41,382) (123,619) (99,329) (159,537) (242,962) (105,933) (142,436)
Net cash provided by financing
activities............................... 57,482 865 33,810 32,800 77,551 33,419 62,478
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................ $ 70,268 $ 10,987 $ 11,235 $ 11,436 $ 372 $ 9,541 $ (4,816)
Oil and gas properties, net................ 91,136 173,924 228,509 328,615 483,954 400,634 569,529
Total assets........................... 183,683 215,557 277,406 395,938 553,621 448,583 624,321
Long-term debt and capital lease
obligations, less current maturities..... 446 555 25,152 60,000 129,623 87,500 191,636
Stockholders' equity....................... 152,845 169,491 193,571 239,902 292,048 266,830 304,530
</TABLE>
- ---------------
(1) Stock compensation represents noncash stock compensation charges.
S-11
<PAGE> 12
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to the Underwriters, and the
Underwriters have agreed to purchase from the Company, the 4,000,000 shares of
Common Stock offered hereby. Under the terms and conditions of the Underwriting
Agreement, the Underwriters are committed to take and pay for all of the shares
offered hereby, if any are taken.
The Underwriters propose to offer the shares of Common Stock from time to
time for sale in one or more transactions in the over-the-counter-market,
through negotiated transactions or otherwise at market prices prevailing at the
time of the sale, at prices related to prevailing market prices or at negotiated
prices, subject to prior sale, when, as and if delivered to and accepted by the
Underwriters. In connection with the sale of the shares of Common Stock offered
hereby, the Underwriters may be deemed to have received compensation in the form
of underwriting discounts. The Underwriters may effect such transactions by
selling shares of the Common Stock offered hereby to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the Underwriters and/or purchasers of such shares of Common
Stock for whom they may act as agents or to whom they may sell as principal.
In connection with the Offering, the Company's directors and officers will
agree that for a period of 90 days from the date of this Prospectus Supplement,
such holders will not, without the prior written consent of Goldman, Sachs &
Co., offer, sell, contract to sell, sell any option or contract to purchase any
option or contract to sell, grant any option, right or warrant for the sale of,
pledge, or otherwise dispose of or transfer any shares of Common Stock. In
addition, the Company will not, for a period of 90 days from the date of this
Prospectus Supplement, without the prior written consent of Goldman, Sachs &
Co., directly or indirectly, offer, contract to sell, sell, grant any option
with respect to, pledge, hypothecate or otherwise dispose of any shares of
Common Stock or any securities that are convertible into, exchangeable for or
that represent the right to receive shares of Common Stock except for (i)
issuances pursuant to the exercise of outstanding warrants, stock options and
convertible securities, (ii) grants of options or shares of Common Stock
pursuant to existing employee stock option plans and (iii) issuances of Common
Stock in connection with bona fide acquisitions wherein the holders are
effectively subject to such restrictions with respect to the shares of Common
Stock acquired in such acquisitions.
In connection with the Offering, the Underwriters may purchase and sell
Common Stock in the open market. These transactions may include over-allotment
transactions and purchases to cover short positions created by the Underwriters
in connection with the Offering. Short positions created by the Underwriters
involve the sale by the Underwriters of a greater number of shares of Common
Stock than they are required to purchase from the Company in the Offering. The
Underwriters also may impose a penalty bid, whereby selling concessions allowed
to other broker-dealers in respect of the shares of Common Stock sold in the
Offering for their account may be reclaimed by the Underwriters if such shares
of Common Stock are repurchased by the Underwriters in covering transactions.
These activities may maintain or otherwise affect the market price of the Common
Stock, which may be higher than the price that might otherwise prevail in the
open market; and these activities, if commenced, may be discontinued at any
time. These transactions may be effected on the NYSE, in the over-the-counter
market or otherwise.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Underwriters or their affiliates have provided from time to time, and
expect to provide in the future, investment or commercial banking services to
the Company and its affiliates, for which such Underwriters or their affiliates
have received or will receive customary fees and commissions.
S-12
<PAGE> 13
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Vinson & Elkins L.L.P., Houston, Texas. Certain legal matters in
connection with the offering of the Common Stock will be passed upon for the
Underwriters by Baker & Botts, L.L.P., Houston, Texas.
GLOSSARY OF OIL AND GAS TERMS
The definitions set forth below shall apply to the indicated terms as used
in this Prospectus Supplement. 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.
Barrel. One stock tank barrel, or 42 U.S. gallons liquid volume, used
herein in reference to crude oil or other liquid hydrocarbons.
Bbls/d. Barrels of crude oil or other liquid hydrocarbons per day.
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.
Mcf. One thousand cubic feet.
Mcf/d. One thousand cubic feet per day.
MMbtu. One million Btus.
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.
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%.
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.
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.
S-13
<PAGE> 14
PROSPECTUS
NEWFIELD EXPLORATION COMPANY
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
SECURITIES WARRANTS
---------------------
Newfield Exploration Company ("Newfield" or the "Company") may offer and
sell from time to time pursuant to this Prospectus (i) unsecured debt
securities, in one or more series, consisting of notes, debentures or other
evidences of indebtedness ("Debt Securities"), (ii) shares of preferred stock,
par value $.01 per share, of the Company, in one or more series ("Preferred
Stock"), which may be issued in the form of depositary shares evidenced by
depositary receipts ("Depositary Shares"), (iii) shares of common stock, par
value $.01 per share, of the Company ("Common Stock") or (iv) warrants
("Securities Warrants") to purchase Debt Securities, Preferred Stock, Depositary
Shares, Common Stock or other securities. The aggregate initial offering price
of the Debt Securities, Preferred Stock, Depositary Shares, Common Stock and
Securities Warrants (collectively, the "Securities") which may be sold pursuant
to this Prospectus will not exceed $275,000,000 or, if applicable, the
equivalent thereof in any other currency or currency unit. The Securities will
be offered in amounts, at prices and on terms to be determined in light of
market conditions at the time of sale. Any Securities may be offered separately
or as units with other Securities.
The specific terms of the particular Securities to be issued will be set
forth in a supplement to this Prospectus (a "Prospectus Supplement"), which will
be delivered together with this Prospectus, including, where applicable (i) in
the case of Debt Securities, the specific designation, aggregate principal
amount, ranking as senior, senior subordinated or subordinated Debt Securities,
maturity, rate or rates (or method of determining the same) and time or times
for the payment of interest, if any, any exchangeability or conversion terms,
any terms for optional or mandatory redemption or repurchase, or payment of
additional amounts or any sinking fund provisions, the designation of the
trustee acting under the applicable indenture, and any other specific terms of
such Debt Securities, (ii) in the case of Preferred Stock, the specific
designation, number of shares and liquidation value thereof and the dividend,
liquidation, redemption, voting and other rights, including conversion or
exchange rights, if any, and any other special terms, as well as whether
interests in the Preferred Stock will be represented in Depositary Shares, (iii)
in the case of Common Stock, the number of shares, and (iv) in the case of
Securities Warrants, the number and terms thereof, the designation and number or
amount of Securities issuable upon their exercise, the exercise price, the terms
of the offering and sale thereof and, where applicable, the duration and
detachability thereof. The Prospectus Supplement will also contain information
regarding the public offering price, the net proceeds to the Company and, where
applicable, the United States federal income tax considerations relating to the
Securities covered by the Prospectus Supplement and a description of certain
factors that should be considered in connection with an investment in the
Securities covered by the Prospectus Supplement.
The Securities may be sold directly by the Company to investors, through
agents designated from time to time or to or through underwriters or dealers.
See "Plan of Distribution." If any agents of the Company or any underwriters are
involved in the sale of any Securities in respect of which this Prospectus is
being delivered, the names of such agents or underwriters and any applicable
commissions or discounts will be set forth in a Prospectus Supplement.
---------------------
The Common Stock is traded on the New York Stock Exchange (the "NYSE") under
the symbol "NFX." Any Common Stock sold pursuant to a Prospectus Supplement will
be listed on such exchange, subject to official notice of issuance. The
Prospectus Supplement will state whether any other Securities offered thereby
will be listed on a securities exchange.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
This Prospectus may not be used to consummate sales of the Securities unless
accompanied by a Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 4, 1998.
<PAGE> 15
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the following Regional Offices of the Commission: Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and New York Regional Office, Seven World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material may be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a World
Wide Web site on the Internet at http://www.sec.gov that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. The Company's Common Stock is traded on the
NYSE and reports, proxy statements and other information concerning the Company
may be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933, as amended (the "Securities Act"). This Prospectus omits certain of the
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement for further information with respect to the
Company and the securities offered hereby. Any statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission under the Exchange Act (File No. 1-12534), are incorporated herein by
reference:
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1997;
(b) Quarterly Report on Form 10-Q for the quarters ended March 31,
1998 and June 30, 1998;
(c) Current Report on Form 8-K filed with the Commission on August 28,
1998; and
(d) description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on November 4, 1993.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities pursuant hereto shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such document. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein, or in any other subsequently filed document which
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.
2
<PAGE> 16
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the documents that are incorporated by reference in this
Prospectus (other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into such documents). Written or oral
requests for such copies should be directed to James P. Ulm, II, Treasurer,
Newfield Exploration Company, 363 N. Sam Houston Parkway E., Suite 2020,
Houston, Texas 77060; telephone: (281) 847-6000.
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 document,
including statements regarding 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, such statements are based upon assumptions and anticipated results
that are subject to numerous uncertainties. Actual results may vary
significantly from those anticipated due to many factors, including drilling
results, oil and gas prices, industry conditions, the prices of goods and
services, the availability of drilling rigs and other support services, the
availability of capital resources and the other factors set forth in the
Company's filings incorporated by reference herein. In addition, the drilling of
oil and gas wells and the production of hydrocarbons are subject to governmental
regulations and operating risks. 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.
THE COMPANY
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. The Company discovered and acquired its first oil and gas
reserves in 1990 and has grown rapidly since that time. At December 31, 1997,
the Company had proved reserves of 435.3 Bcfe. At such date, approximately 78%
of the Company's proved reserves were natural gas and approximately 80% were
proved developed.
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. The Company emphasizes the following elements in implementing this
strategy:
- Reserve growth through exploratory drilling of a balanced portfolio
- Balance between exploration and acquisition and exploitation of proved
properties
- Geographic focus
- Control of operations and costs
- Use of 3-D seismic and other advanced technology
- Equity ownership and other incentives to retain and attract employees
The principal executive offices of the Company are located at 363 N. Sam
Houston Parkway E., Suite 2020, Houston, Texas 77060; telephone: (281) 847-6000.
Additional information concerning the Company and its subsidiaries is
included in the Company reports and other documents incorporated by reference in
this Prospectus. See "Available Information" and "Incorporation of Certain
Documents by Reference."
3
<PAGE> 17
USE OF PROCEEDS
Except as may otherwise be described in the Prospectus Supplement relating
to an offering of Securities, the net proceeds from the sale of the Securities
offered pursuant to this Prospectus and such Prospectus Supplement (the "Offered
Securities") will be used for general corporate purposes. Any specific
allocation of the net proceeds of an offering of Securities to a specific
purpose will be determined at the time of such offering and will be described in
the related Prospectus Supplement.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratio of earnings
to fixed charges for the periods as shown.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------ --------------
1993 1994 1995 1996 1997 1997 1998
----- ----- ----- ----- ---- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges...................... 82.3x 31.2x 24.1x 28.3x 9.5x 13.6x 3.3x
</TABLE>
The ratio of earnings to fixed charges was computed by dividing earnings by
fixed charges. For this purpose, earnings are defined as income before income
taxes plus fixed charges excluding capitalized interest. Fixed charges consist
of interest expense and the estimated interest component of rent expense.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute either senior or senior subordinated
debt of the Company ("Senior Debt Securities") or subordinated debt of the
Company ("Subordinated Debt Securities"). Debt Securities may be issued from
time to time under one or more indentures, each dated as of a date on or prior
to the issuance of the Debt Securities to which it relates. Senior Debt
Securities (constituting either senior or senior subordinated indebtedness) may
be issued pursuant to one or more Senior Indentures (each a "Senior Debt
Indenture") and Subordinated Debt Securities may be issued pursuant to a
Subordinated Indenture ( the "Subordinated Debt Indenture"), in each case
between the Company and a trustee (a "Trustee"), which may be the same Trustee,
and in the forms that have been filed as exhibits to the Registration Statement
of which this Prospectus is a part, subject to such amendments or supplements as
may be adopted from time to time. The Senior Debt Indentures and the
Subordinated Debt Indenture, as amended or supplemented from time to time, are
sometimes hereinafter referred to individually as an "Indenture" and
collectively as the "Indentures." The following summaries of anticipated
provisions of the Indentures and the Debt Securities do not purport to be
complete and such summaries are subject to the detailed provisions of the
applicable Indenture to which reference is hereby made for a full description of
such provisions, including the definition of certain terms used herein. Article
or section references in parentheses below are to articles or sections in both
Indentures unless otherwise indicated. Wherever particular sections or defined
terms of the applicable Indenture are referred to, such sections or defined
terms are incorporated herein by reference as part of the statement made, and
the statement is qualified in its entirety by such reference. The Indentures are
substantially identical, except for certain covenants of the Company, and
provisions relating to subordination and conversion.
The Debt Securities may be issued from time to time in one or more series.
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities of all series. The particular terms
of each series of Debt Securities offered by any Prospectus Supplement (the
"Offered Debt Securities") will be described therein.
4
<PAGE> 18
PROVISIONS APPLICABLE TO BOTH SENIOR AND SUBORDINATED DEBT SECURITIES
General. The Debt Securities will be unsecured senior, senior subordinated
or subordinated obligations of the Company and may be issued from time to time
in one or more series. The Indentures do not limit the amount of Debt
Securities, debentures, notes or other types of indebtedness that may be issued
by the Company or any of its Subsidiaries nor do they restrict transactions
between the Company and its affiliates or the payment of dividends or other
distributions by the Company to its stockholders. The rights of holders of Debt
Securities will be limited to the assets of the Company and the Debt Securities
will not be obligations of any of the Company's Subsidiaries. In addition, other
than as may be set forth in any Prospectus Supplement, the Indentures do not and
the Debt Securities will not contain any covenants or other provisions that are
intended to afford holders of the Debt Securities special protection in the
event of either a change of control of the Company or a highly leveraged
transaction by the Company.
Reference is made to the Prospectus Supplement for the following terms of
and information relating to the Offered Debt Securities (to the extent such
terms are applicable to such Offered Debt Securities): (i) the title of the
Offered Debt Securities; (ii) the classification as either Senior Debt
Securities or Subordinated Debt Securities (including the further classification
of Senior Debt Securities as either senior debt or senior subordinated debt);
(iii) whether the Offered Debt Securities that constitute Subordinated Debt
Securities are convertible into Common Stock and, if so, the terms and
conditions upon which such conversion will be effected including the initial
conversion price or conversion rate (the "Conversion Price") and any adjustments
thereto in addition to or different from those described herein, the conversion
period and other conversion provisions in addition to or in lieu of those
described herein; (iv) any limit on the aggregate principal amount of the
Offered Debt Securities; (v) whether the Offered Debt Securities are to be
issuable as Registered Securities or Bearer Securities or both, whether any of
the Offered Debt Securities are to be issuable initially in temporary global
form and whether any of the Offered Debt Securities are to be issued in
permanent global form with or without coupons and, if so, whether beneficial
owners of interests in any such permanent global Security may exchange such
interests for Debt Securities of such series and of like tenor of any authorized
form and denomination and the circumstances under which such exchanges may
occur; (vi) the price or prices (expressed as a percentage of the aggregate
principal amount thereof) at which the Offered Debt Securities will be issued;
(vii) the date or dates on which the Offered Debt Securities will mature; (viii)
if other than the principal amount thereof, the portion of the principal amount
of any Debt Securities of the series which shall be payable upon declaration of
acceleration of the Maturity thereof; (ix) the rate or rates per annum (or the
method by which such will be determined) at which the Offered Debt Securities
will bear interest, if any, and the date from which any such interest will
accrue; (x) the Interest Payment Dates on which any such interest on the Offered
Debt Securities will be payable, the Regular Record Date for any interest
payable on any Offered Debt Securities which are Registered Securities on any
Interest Payment Date and the extent to which, or the manner in which, any
interest payable on a temporary global Offered Debt Security on an Interest
Payment Date will be paid; (xi) the person to whom any interest on any
Registered Security shall be payable, if other than the person in whose name
that Security (or one or more predecessor securities) is registered at the close
of business on the record date for such interest, and the manner in which, or
the person to whom, any interest on any Bearer Security of the series shall be
payable, if otherwise than upon presentation and surrender of the coupons
appertaining thereto as they severally mature; (xii) any mandatory redemption,
sinking fund or analogous provisions; (xiii) each office or agency where,
subject to the terms of the Indentures as described below under "Payment and
Paying Agents," the principal of and any premium and interest on the Offered
Debt Securities will be payable and each office or agency where, subject to the
terms of the Indentures as described below under "Form, Exchange, Registration
and Transfer," the Offered Debt Securities may be presented for registration of
transfer or exchange; (xiv) the right of the Company to redeem the Offered Debt
Securities at its option and the period or periods within which and the price or
prices at which the Offered Debt Securities may, pursuant to any optional or
mandatory redemption provisions, be redeemed, in whole or in part, and
5
<PAGE> 19
the other detailed terms and provisions of any such optional or mandatory
redemption; (xv) the denominations in which any Offered Debt Securities that are
Registered Securities will be issuable, if other than denominations of $1,000
and any integral multiple thereof, and the denomination or denominations in
which any Offered Debt Securities that are Bearer Securities will be issuable,
if other than the denomination of $5,000; (xvi) the currency or currencies
(including composite currencies) in which payment of principal of and any
premium and interest on the Offered Debt Securities is payable if other than
U.S. dollars, and, if payable in such currency or currencies at the election of
the Company or a Holder thereof, the periods within which the terms and
conditions upon which such election is to be made; (xvii) any index used to
determine the amount of payments of principal of and any premium and interest on
the Offered Debt Securities; (xviii) information with respect to book-entry
procedures, if any; (xix) any deletions from, modifications of or additions to
the Events of Default or covenants of the Company with respect to such Offered
Debt Securities; and (xx) any other terms of the Offered Debt Securities not
inconsistent with the provisions of the Indentures. (Section 301) Any such
Prospectus Supplement will also describe any special provisions for the payment
of additional amounts with respect to the Offered Debt Securities.
Debt Securities may be issued as Original Issue Discount Securities. An
Original Issue Discount Security is a Debt Security that is issued at a price
lower than the principal amount payable upon the Stated Maturity thereof and
that provides that upon redemption or acceleration of the maturity thereof an
amount less than the amount payable upon the Stated Maturity thereof and
determined in accordance with the terms of such Debt Security shall become due
and payable. Special United States federal income tax considerations applicable
to Debt Securities issued at an original issue discount, including Original
Issue Discount Securities, and special United States tax considerations and
other terms and restrictions applicable to any Debt Securities that are issued
in bearer form, offered exclusively to United States Aliens or denominated in
other than United States dollars, will be set forth in a Prospectus Supplement
relating thereto.
Form, Exchange, Registration and Transfer. Debt Securities of a series may
be issuable in definitive form solely as Registered Securities, solely as Bearer
Securities or as both Registered Securities and Bearer Securities. Unless
otherwise indicated in an applicable Prospectus Supplement, Bearer Securities
will have interest coupons attached. (Section 201) The Indentures also provide
that Debt Securities of a series may be issuable in temporary or permanent
global form. (Section 201)
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. In addition, if Debt Securities of
any series are issuable as both Registered Securities and Bearer Securities, at
the option of the Holder, and subject to the terms of the applicable Indenture,
Bearer Securities (with all unmatured coupons, except as provided below, and all
matured coupons in default) of such series will be exchangeable for Registered
Securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. Bearer Securities surrendered in exchange
for Registered Securities between a Regular Record Date or a Special Record Date
and the relevant date for payment of interest shall be surrendered without the
coupon relating to such date for payment of interest, and interest accrued as of
such date will not be payable in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to the Holder of
such coupon when due in accordance with the terms of the applicable Indenture.
Bearer Securities will not be issued in exchange for Registered Securities.
(Section 305)
Debt Securities may be presented for exchange as provided above, and
Registered Securities may be presented for registration of transfer (with the
form of transfer endorsed thereon duly executed), at the office of the Security
Registrar or at the office of any transfer agent designated by the Company for
such purpose with respect to any series of Debt Securities and referred to in an
applicable Prospectus Supplement, without service charge and upon payment of any
taxes and other governmental charges as described in the Indentures. Such
transfer or exchange will be effected upon the Security Registrar or such
transfer agent, as the case may be, being satisfied with
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the documents of title and identity of the person making the request. The
Trustee will serve initially as Security Registrar. (Section 305) If a
Prospectus Supplement refers to any transfer agents (in addition to the Security
Registrar) initially designated by the Company with respect to any series of
Debt Securities, the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, except that, if Debt Securities of a series are issuable
solely as Registered Securities, the Company will be required to maintain a
transfer agent in each Place of Payment for such series and, if Debt Securities
of a series are also issuable as Bearer Securities, the Company will be required
to maintain (in addition to the Security Registrar) a transfer agent in a Place
of Payment for such series located outside the United States. The Company may at
any time designate additional transfer agents with respect to any series of Debt
Securities. (Section 1002)
In the event of any redemption in part, the Company shall not be required
to (i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days prior to the
selection of Debt Securities of that series for redemption and ending on the
close of business on (A) if Debt Securities of the series are issuable only as
Registered Securities, the day of mailing of the relevant notice of redemption
and (B) if Debt Securities of the series are issuable as Bearer Securities, the
date of the first publication of the relevant notice of redemption or, if
Securities of the series are also issuable as Registered Securities and there is
no publication, the mailing of the relevant notice of redemption, (ii) register
the transfer of or exchange any Registered Security, or portion thereof, called
for redemption, except the unredeemed portion of any Registered Security being
redeemed in part, or (iii) exchange any Bearer Security called for redemption,
except to exchange such Bearer Security for a Registered Security of that series
and like tenor which is immediately surrendered for redemption. (Section 305)
Payment and Paying Agents. Unless otherwise indicated in an applicable
Prospectus Supplement, payment of principal of and any premium and interest on
Bearer Securities will be payable, subject to any applicable laws and
regulations, at the offices of such Paying Agents outside the United States as
the Company may designate from time to time in the manner indicated in such
Prospectus Supplement. (Section 1002) Unless otherwise indicated in an
applicable Prospectus Supplement, payment of interest on Bearer Securities on
any Interest Payment Date will be made only against surrender to the Paying
Agent of the coupon relating to such Interest Payment Date. (Section 1001) No
payment with respect to any Bearer Security will be made at any office or agency
of the Company in the United States or by check mailed to any address in the
United States or by transfer to any account maintained with a bank located in
the United States. Notwithstanding the foregoing, payments of principal of and
any premium and interest on Bearer Securities denominated and payable in U.S.
dollars will be made at the office of the Company's Paying Agent in the Borough
of Manhattan, City of New York, if (but only if) payment of the full amount
thereof in U.S. dollars at all offices or agencies outside the United States is
illegal or effectively precluded by exchange controls or other similar
restrictions. (Section 1002)
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and any premium and interest on Registered Securities will be
made at the office of such Paying Agent or Paying Agents as the Company may
designate from time to time, except that, at the option of the Company, payment
of any interest may be made by check mailed on or before the due date to the
address of the Person entitled thereto as such address shall appear in the
Security Register. (Sections 307, 1002) Unless otherwise indicated in an
applicable Prospectus Supplement, payment of any installment of interest on
Registered Securities will be made to the Person in whose name such Registered
Security is registered at the close of business on the Regular Record Date for
such interest. (Section 307)
Unless otherwise indicated in an applicable Prospectus Supplement, the
Trustee will act as Paying Agent for payments with respect to Debt Securities
which are issuable solely as Registered Securities and the Company will maintain
a Paying Agent outside the United States for payments with respect to Debt
Securities (subject to limitations described above in the case of Bearer
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<PAGE> 21
Securities) which are issuable solely as Bearer Securities or as both Registered
Securities and Bearer Securities. Any Paying Agents outside the United States
and any other Paying Agents in the United States initially designated by the
Company for the Debt Securities will be named in an applicable Prospectus
Supplement. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent or approve a change in the office
through which any Paying Agent acts, except that, if Debt Securities of a series
are issuable solely as Registered Securities, the Company will be required to
maintain a Paying Agent in each Place of Payment for such series and, if Debt
Securities of a series are issuable as Bearer Securities, the Company will be
required to maintain (i) a Paying Agent in the Borough of Manhattan, City of New
York for principal payments with respect to any Registered Securities of the
series (and for payments with respect to Bearer Securities of the series in the
circumstances described above, but not otherwise), and (ii) a Paying Agent in a
Place of Payment located outside the United States where Debt Securities of such
series and any coupons appertaining thereto may be presented and surrendered for
payment. (Section 1002)
All moneys paid by the Company to a Paying Agent for the payment of
principal of and any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest
shall have become due and payable will (subject to applicable escheat laws) be
repaid to the Company, and the Holder of such Debt Security or any coupon will
thereafter look only to the Company for payment thereof. (Section 1003)
Global Debt Securities. Debt Securities of a series may be issued in whole
or in part in the form of one or more global Debt Securities that will be
deposited with, or on behalf of, a depository identified in the Prospectus
Supplement relating to such series. Global Debt Securities may be issued in
either registered or bearer form and in either temporary or permanent form.
(Section 203) Unless and until it is exchanged in whole or in part for the
individual Debt Securities represented thereby, a global Debt Security may not
be transferred except as a whole by the depository for such global Debt Security
to a nominee of such depository or by a nominee of such depository to such
depository or another nominee of such depository or by the depository or any
nominee to a successor depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a series
of Debt Securities and certain limitations and restrictions relating to a series
of Bearer Securities in the form of one or more global Debt Securities will be
described in the Prospectus Supplement relating to such series.
Events of Default. Any one of the following events constitutes an Event of
Default under each Indenture with respect to Debt Securities of any series: (a)
failure to pay any interest on any Debt Security of that series when due,
continued for 30 days; (b) failure to pay principal of or any premium on any
Debt Security of that series when due; (c) failure to deposit any sinking fund
payment, when due, in respect of any Debt Security of that series; (d) failure
to perform any other covenant of the Company in such Indenture (other than a
covenant included in such Indenture solely for the benefit of a series of any
Debt Securities other than that series), continued for 90 days after written
notice as provided in such Indenture; (e) certain events in bankruptcy,
insolvency or reorganization involving the Company; and (f) any other Event of
Default provided with respect to Debt Securities of that series. (Section 501)
If an Event of Default with respect to Debt Securities of any series at the
time Outstanding occurs and is continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Outstanding Securities of that
series by notice as provided in the applicable Indenture may declare the
principal amount (or, if the Debt Securities of that series are Original Issue
Discount Securities, such portion of the principal amount as may be specified in
the terms of that series) of all the Debt Securities of that series to be due
and payable immediately. At any time after a declaration of acceleration with
respect to Debt Securities of any series has been made, but before a judgment or
decree for payment of money has been obtained by the Trustee, the Holders of a
majority in
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aggregate principal amount of the Outstanding Securities of that series may,
under certain circumstances, rescind and annul such acceleration. (Section 502)
Each Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee is under no
obligation to exercise any of its rights or powers under such Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. (Sections 601, 603) Subject to such
provisions for the indemnification of the Trustee, the Holders of a majority in
aggregate principal amount of the Outstanding Securities of any series have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee, with respect to the Debt Securities of that series; provided,
however, that the Trustee is not obligated to take any action unduly prejudicial
to Holders not joining in such direction or involving the Trustee in personal
liability. (Section 512)
The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of its obligations under each Indenture and as
to any default in such performance. (Section 1006)
Defeasance. If so specified with respect to any particular series of Debt
Securities issued under an Indenture, the Company may discharge its indebtedness
and its obligations or certain of its obligations under such Indenture with
respect to such series by depositing funds or obligations issued or guaranteed
by the United States of America with the Trustee. (Sections 1301-1303)
Defeasance and Discharge. Each Indenture provides that, if so specified
with respect to the Debt Securities of any series issued under such Indenture
(other than convertible Subordinated Debt Securities), the Company will be
discharged from any and all obligations in respect of the Debt Securities of
such series (except for certain obligations relating to temporary Debt
Securities and exchange of Debt Securities, registration of transfer or exchange
of Debt Securities of such series, replacement of stolen, lost or mutilated Debt
Securities of such series, maintenance of paying agencies to hold moneys for
payment in trust and payment of additional amounts, if any, required in
consequence of United States withholding taxes imposed on payments to non-United
States persons) upon the deposit with the Trustee, in trust, of money and/or
U.S. Government Obligations which through the payment of interest and principal
in respect thereof in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any), and each
installment of interest on, the Debt Securities of such series on the Stated
Maturity of such payments in accordance with the terms of such Indenture and the
Debt Securities of such series. (Sections 1302, 1304) Such a trust may only be
established if, among other things, the Company has delivered to the Trustee an
Opinion of Counsel to the effect that (i) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling, or (ii)
since the date of such Indenture there has been a change in applicable federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Holders of such series will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit, defeasance and discharge, and will be subject to federal income
tax on the same amounts and in the same manner and at the same times as would
have been the case if such deposit, defeasance and discharge had not occurred.
(Section 1304) In the event of any such defeasance and discharge of Debt
Securities of such series, Holders of such series would be entitled to look only
to such trust fund for payment of principal of and any premium and any interest
on their Debt Securities until Maturity.
Covenant Defeasance. Each Indenture also provides that, if so specified
with respect to the Debt Securities of any series issued thereunder, the Company
may omit to comply with certain restrictive covenants, but excluding (in the
case of the Subordinated Debt Indenture) any applicable obligation of the
Company respecting the conversion of Debt Securities of such series into Common
Stock, and any such omission shall not be an Event of Default with respect to
the Debt Securities of such series, upon the deposit with the Trustee, in trust,
of money and/or U.S. Government
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Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any), and each installment
of interest on, the Debt Securities of such series on the Stated Maturity of
such payments in accordance with the terms of such Indenture and the Debt
Securities of such series. The obligations of the Company under such Indenture
and the Debt Securities of such series other than with respect to such covenants
shall remain in full force and effect. (Section 1303) Such a trust may be
established only if, among other things, the Company has delivered to the
Trustee an Opinion of Counsel to the effect that the Holders of such series will
not recognize income, gain or loss for federal income tax purposes as a result
of such deposit and covenant defeasance and will be subject to federal income
tax on the same amounts and in the same manner and at the same times as would
have been the case if such deposit and covenant defeasance had not occurred.
(Section 1304)
Although the amount of money and U.S. Government Obligations on deposit
with the Trustee would be intended to be sufficient to pay amounts due on the
Debt Securities of such series at the time of their Stated Maturity, in the
event the Company exercises its option to omit compliance with the covenants
defeased with respect to the Debt Securities of any series as described above,
and the Debt Securities of such series are declared due and payable because of
the occurrence of any Event of Default, such amount may not be sufficient to pay
amounts due on the Debt Securities of such series at the time of the
acceleration resulting from such Event of Default. The Company shall in any
event remain liable for such payments as provided in the applicable Indenture.
Federal Income Tax Consequences. Under current United States federal income
tax law, defeasance and discharge would likely be treated as a taxable exchange
of Debt Securities to be defeased for an interest in the defeasance trust. As a
consequence, a holder would recognize gain or loss equal to the difference
between the holder's cost or other tax basis for such Debt Securities and the
value of the holder's interest in the defeasance trust, and thereafter would be
required to include in income the holder's share of the income, gain or loss of
the defeasance trust. Under current United States federal income tax law,
covenant defeasance would ordinarily not be treated as a taxable exchange of
such Debt Securities.
Meetings, Modification and Waiver. Modifications and amendments of any
Indenture may be made by the Company and the Trustee with the consent of the
Holders of a majority in aggregate principal amount of the Outstanding
Securities of each series affected by such modification or amendment; provided,
however, that no such modification or amendment may, without consent of the
Holder of each Outstanding Security affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of principal of or interest on,
any Debt Security, (b) change the Redemption Date with respect to any Debt
Security, (c) reduce the principal amount of, or premium or interest on, any
Debt Security, (d) change any obligation of the Company to pay additional
amounts, (e) reduce the amount of principal of an Original Issue Discount
Security payable upon acceleration of the Maturity thereof, (f) change the coin
or currency in which any Debt Security or any premium or interest thereon is
payable, (g) change the redemption right of any Holder, (h) impair the right to
institute suit for the enforcement of any payment on or with respect to any Debt
Security or any conversion right with respect thereto, (i) reduce the percentage
in principal amount of Outstanding Securities of any series, the consent of
whose Holders is required for modification or amendment of such Indenture or for
waiver of compliance with certain provisions of such Indenture or for waiver of
certain defaults, (j) reduce the requirements contained in such Indenture for
quorum or voting, (k) change any obligation of the Company to maintain an office
or agency in the places and for the purposes required by such Indenture, (l)
adversely affect the right to convert Subordinated Debt Securities, if
applicable, (m) modify the provisions of the Subordinated Indenture with respect
to subordination of any Subordinated Debt Security in any manner adverse to the
Holder or (n) modify any of the above provisions. (Section 902)
The Subordinated Debt Indenture may not be amended to alter the
subordination of any outstanding Subordinated Debt Securities without the
consent of each holder of Senior Indebted-
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ness (as defined below under "-- Provisions Applicable Solely to Subordinated
Debt Securities") then outstanding that would be adversely affected thereby.
(Section 907 of the Subordinated Debt Indenture)
The Holders of a majority in aggregate principal amount of the Outstanding
Securities of each series may, on behalf of all Holders of that series, waive,
insofar as that series is concerned, compliance by the Company with certain
restrictive provisions of the Indenture under which such series has been issued.
(Section 1007) The Holders of a majority in aggregate principal amount of the
Outstanding Securities of each series may, on behalf of all Holders of that
series, waive any past default under the applicable Indenture with respect to
any Debt Securities of that series, except a default (a) in the payment of
principal of, or premium, if any, or any interest on any Debt Security of such
series or (b) in respect of a covenant or provision of such Indenture which
cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected. (Section 513)
Each Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver thereunder or are
present at a meeting of the Holders for quorum purposes, (i) the principal
amount of an Original Issue Discount Security that is deemed to be Outstanding
will be the amount of the principal that would be due and payable as of the date
of such determination upon acceleration of the Maturity thereof, and (ii) the
principal amount of a Debt Security denominated in a foreign currency or
currencies (including composite currencies) will be the U.S. dollar equivalent,
determined on the date of original issuance of such Debt Security, of the
principal amount of such Debt Security or, in the case of an Original Issue
Discount Security, the U.S. dollar equivalent, determined on the date of
original issuance of such Security, of the amount determined as provided in (i)
above. (Section 101)
Each Indenture contains provisions for convening meetings of the Holders of
a series if Debt Securities of that series are issuable as Bearer Securities.
(Section 1401) A meeting may be called at any time by the Trustee, and also,
upon request, by the Company or the Holders of at least 10% in aggregate
principal amount of the Outstanding Securities of such series, in any such case
upon notice given in accordance with "Notices" below. (Section 1402) Except for
any consent which must be given by the Holder of each Outstanding Security
affected thereby, as described above, any resolution presented at a meeting (or
adjourned meeting at which a quorum is present) may be adopted by the
affirmative vote of the Holders of a majority in aggregate principal amount of
the Outstanding Securities of that series; provided, however, that any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action which may be made, given or taken by the
Holders of a specified percentage, which is less than a majority, in aggregate
principal amount of the Outstanding Securities of a series may be adopted at a
meeting (or adjourned meeting duly reconvened at which a quorum is present) by
the affirmative vote of the Holders of such specified percentage in aggregate
principal amount of the Outstanding Securities of that series. Any resolution
passed or decision taken at any meeting of Holders of any series duly held in
accordance with the applicable Indenture will be binding on all Holders of that
series and related coupons. The quorum at any meeting, and at any reconvened
meeting, will be Persons holding or representing a majority in aggregate
principal amount of the Outstanding Securities of a series. (Section 1404)
Consolidation, Merger and Sale of Assets. The Company, without the consent
of the Holders of any of the outstanding Securities under either Indenture, may
consolidate with or merge into, or convey, transfer or lease its assets
substantially as an entirety to, any Person which is a corporation, partnership
or trust organized and validly existing under the laws of any domestic
jurisdiction, provided that any successor Person assumes the Company's
obligations on the Securities and under such Indenture, that after giving effect
to the transaction no Event of Default, and no event which, after notice or
lapse of time, would become an Event of Default, shall have occurred and be
continuing, and that certain other conditions are met. (Section 801)
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Notices. Except as otherwise provided in the Indentures, notices to Holders
of Bearer Securities will be given by publication at least twice in a daily
newspaper in The City of New York and in such other city or cities as may be
specified in such Bearer Securities. Notices to Holders of Registered Securities
will be given by mail to the addresses of such Holders as they appear in the
Security Register. (Section 106)
Title. Title to any Bearer Securities (including Bearer Securities in
permanent global form) and any coupons appertaining thereto will pass by
delivery. The Company, the Trustee and any agent of the Company or the Trustee
may treat the bearer of any Bearer Security and the bearer of any coupon and the
registered owner of any Registered Security as the owner thereof (whether or not
such Debt Security or coupon shall be overdue and notwithstanding any notice to
the contrary) for the purpose of making payment and for all other purposes.
(Section 308)
Replacement of Securities and Coupons. Any mutilated Debt Security or a
Debt Security with a mutilated coupon appertaining thereto will be replaced by
the Company at the expense of the Holder upon surrender of such Debt Security to
the Trustee. Debt Securities or coupons that became destroyed, stolen or lost
will be replaced by the Company at the expense of the Holder upon delivery to
the Trustee of evidence of destruction, loss or theft thereof satisfactory to
the Company and the Trustee; in the case of any coupon which becomes destroyed,
stolen or lost, such coupon will be replaced by issuance of a new Debt Security
in exchange for the Debt Security to which such coupon appertains. In the case
of a destroyed, lost or stolen Debt Security or coupon, an indemnity
satisfactory to the Trustee and the Company may be required at the expense of
the Holder of such Debt Security or coupon before a replacement Debt Security
will be issued. (Section 306)
Governing Law. The Indentures and the Debt Securities and coupons will be
governed by, and construed in accordance with, the laws of the State of New
York. (Section 113)
Regarding the Trustee. The Trustee for each series of Debt Securities will
be identified in the applicable Prospectus Supplement.
Each 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 for its own account on certain property received in
respect of any such claim as security or otherwise. (Section 613) The Trustee is
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest (as described in the Indentures), it must eliminate such
conflict or resign. (Section 608)
PROVISIONS APPLICABLE SOLELY TO SENIOR DEBT SECURITIES
Senior Debt Securities will be issued under a Senior Debt Indenture, and,
except as contemplated by the immediately following paragraph, each series will
rank pari passu as to the right of payment of principal and any premium and
interest with each other series issued thereunder. (Section 301)
If the Senior Debt Securities are issued on a senior subordinated basis,
the applicable Prospectus Supplement will describe the related subordination
provisions. All Senior Debt Securities, whether issued on a senior or senior
subordinated basis, will be senior in right of payment to each series of
Subordinated Debt Securities.
PROVISIONS APPLICABLE SOLELY TO SUBORDINATED DEBT SECURITIES
Subordination. The Subordinated Debt Securities will be subordinate and
junior in right of payment, to the extent set forth in the Subordinated Debt
Indenture, to all Senior Indebtedness (as defined below) of the Company.
(Article Sixteen of the Subordinated Debt Indenture)
"Senior Indebtedness" is defined in Section 101 of the Subordinated Debt
Indenture as Indebtedness (as defined below) of the Company, whether outstanding
on the date of the
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Subordinated Debt Indenture or thereafter created, incurred, assumed, guaranteed
or in effect guaranteed by the Company, unless the instrument creating or
evidencing such Indebtedness provides that such Indebtedness is not senior or
superior, in right of payment, to the Subordinated Debt Securities or to other
Indebtedness which is pari passu with, or subordinated to, the Subordinated Debt
Securities; provided, however, that in no event shall Senior Indebtedness
include (a) Indebtedness of the Company owed or owing to any Subsidiary of the
Company or any officer, director or employee of the Company or any Subsidiary of
the Company except in respect of deferred compensation in an aggregate amount
not to exceed $10,000,000 at any one time, (b) Indebtedness to trade creditors,
(c) any liability for taxes owed or owing by the Company, and (d) the
Subordinated Debt Securities. "Indebtedness" is defined in Section 101 of the
Subordinated Debt Indenture as, with respect to any Person, without duplication,
(a) all liabilities and obligations, contingent or otherwise, of any such
Person, (i) in respect of 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) evidenced by bonds, notes, debentures or similar instruments,
(iii) representing the balance deferred and unpaid of the purchase price of any
property or services, except such as would constitute trade payables to trade
creditors in the ordinary course of business, (iv) evidenced by bankers'
acceptances or similar instruments issued or accepted by banks, (v) for the
payment of money relating to a Capitalized Lease Obligation, or (vi) evidenced
by a letter of credit or a reimbursement obligation of such Person with respect
to any letter of credit; (b) all net obligations of such Person under Interest
Swap and Hedging Obligations; (c) all liabilities of others of the kind
described in the preceding clause (a) or (b) that such Person has guaranteed or
that is otherwise its legal liability and all obligations to purchase, redeem or
acquire any Capital Stock; and (d) any and all deferrals, renewals, extensions,
refinancings, refundings (whether direct or indirect) of any liability of the
kind described in any of the preceding clause (a), (b) or (c), or this clause
(d), whether or not between or among the same parties.
The Subordinated Debt Indenture provides that no payment may be made by the
Company on account of the principal of or any premium or interest on the
Subordinated Debt Securities, or to acquire any of the Subordinated Debt
Securities (including repurchases of Subordinated Debt Securities at the option
of the Holders) for cash or property (other than Junior Securities), or on
account of any redemption provisions of the Subordinated Debt Securities, (i)
upon the maturity of any Senior Indebtedness of the Company by lapse of time,
acceleration (unless waived) or otherwise, unless and until all principal of and
any premium and interest on such Senior Indebtedness are first paid in full (or
such payment is duly provided for), or (ii) in the event of default in the
payment of any principal of or any premium or interest on any Senior
Indebtedness when it becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise (a "Payment Default"),
unless and until such Payment Default has been cured or waived or otherwise has
ceased to exist. (Section 1601 of the Subordinated Debt Indenture)
Upon (i) the happening of an event of default (other than a Payment
Default) that permits the holders of Senior Indebtedness or their representative
to accelerate its maturity and (ii) written notice of such event of default
given to the Company and the Trustee by the holders of at least 25% in aggregate
principal amount outstanding of such Senior Indebtedness or their representative
(a "Payment Notice"), then, unless and until such event of default has been
cured or waived or otherwise has ceased to exist, no payment (by set off or
otherwise) may be made by or on behalf of the Company on account of the
principal of or any premium or interest on the Subordinated Debt Securities, or
to acquire or repurchase any of the Subordinated Debt Securities for cash or
property, or on account of any redemption provisions of the Subordinated Debt
Securities, in any such case other than payments made with Junior Securities of
the Company. Notwithstanding the foregoing, unless (i) the Senior Indebtedness
in respect of which such event of default exists has been declared due and
payable in its entirety within 179 days after the Payment Notice is delivered as
set forth above (the "Payment Blockage Period"), and (ii) such declaration has
not been rescinded or waived, at the end of the Payment Blockage Period, the
Company shall be required to pay all sums not paid to the Holders of the
Subordinated Debt Securities during the Payment Blockage Period
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due to the foregoing prohibitions and to resume all other payments as and when
due on the Subordinated Debt Securities. Any number of Payment Notices may be
given; provided, however, that (i) not more than one Payment Notice shall be
given within a period of any 360 consecutive days and (ii) no event of default
that existed upon the date of such Payment Notice or the commencement of such
Payment Blockage Period (whether or not such event of default is on the same
issue of Senior Indebtedness) shall be made the basis for the commencement of
any other Payment Blockage Period. (Section 1601 of the Subordinated Debt
Indenture)
Upon any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization of the Company, whether voluntary or
involuntary, in bankruptcy, insolvency, receivership or a similar proceeding or
upon assignment for the benefit of creditors or any marshaling of assets or
liabilities, (i) the holders of all Senior Indebtedness will first be entitled
to receive payment in full (or have such payment duly provided for) before the
Holders are entitled to receive any payment on account of the principal of or
any premium or interest on the Subordinated Debt Securities (other than Junior
Securities) and (ii) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities (other than Junior
Securities) to which the Holders or the Trustee on behalf of the Holders would
be entitled (by set off or otherwise), except for the subordination provisions
contained in the Subordinated Debt Indenture, will be paid by the liquidating
trustee or agent or other Person making such a payment or distribution directly
to the holders of Senior Indebtedness or their representative to the extent
necessary to make payment in full of all such Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness. (Section 1601 of the Subordinated Debt
Indenture)
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company (other than Junior Securities) is received
by the Trustee or the Holders at a time when such payment or distribution is
prohibited by the foregoing provisions, such payment or distribution shall be
held in trust for the benefit of the holders of Senior Indebtedness, and shall
be paid or delivered by the Trustee or such Holders, as the case may be, to the
holders of the Senior Indebtedness remaining unpaid or unprovided for or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness held or represented by
each, for application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay or to provide for the payment of all such
Senior Indebtedness in full after giving effect to any concurrent payment and
distribution to the holders of such Senior Indebtedness. (Section 1601 of the
Subordinated Debt Indenture)
No provisions contained in the Subordinated Debt Indenture or the
Subordinated Debt Securities will affect the obligation of the Company, which is
absolute and unconditional, to pay principal of and any premium and interest on
the Subordinated Debt Securities as and when the same shall become due and
payable. The subordination provisions of the Subordinated Debt Indenture and the
Subordinated Debt Securities will not prevent the occurrence of any Event of
Default under the Subordinated Debt Indenture or limit the rights of the Trustee
or any Holder, subject to the three preceding paragraphs, to pursue any other
rights or remedies with respect to the Subordinated Debt Securities. (Sections
501 and 1601 of the Subordinated Debt Indenture)
The Prospectus Supplement respecting any series of Subordinated Debt
Securities will set forth any subordination provisions applicable to such series
in addition to or different from those described above.
By reason of such subordination, in the event of the liquidation,
bankruptcy, reorganization, insolvency, receivership or similar proceeding
involving the Company or an assignment for the benefit of creditors of the
Company or any of its subsidiaries or a marshaling of assets or liabilities of
the Company or its subsidiaries, holders of Senior Indebtedness and holders of
other obligations
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of the Company that are not subordinated to Senior Indebtedness may receive
more, ratably, than holders of the Subordinated Debt Securities.
Conversion. The Subordinated Debt Indenture may provide for a right of
conversion of Subordinated Debt Securities into Common Stock (or cash in lieu
thereof). (Sections 301 and 1501 of the Subordinated Debt Indenture) The
following provisions will apply to Debt Securities that are convertible
Subordinated Debt Securities unless otherwise provided in the Prospectus
Supplement for such Debt Securities.
The Holder of any convertible Subordinated Debt Securities will have the
right exercisable at any time prior to the close of business on the second
Business Day prior to their Stated Maturity, unless previously redeemed or
otherwise purchased by the Company, to convert such Subordinated Debt Securities
into shares of Common Stock at the Conversion Price set forth in the Prospectus
Supplement, subject to adjustment. (Section 1502 of the Subordinated Debt
Indenture) The Holder of convertible Subordinated Debt Securities may convert
any portion thereof which is $1,000 in principal amount or any integral multiple
thereof. (Section 1502 of the Subordinated Debt Indenture)
In certain events, the Conversion Price will be subject to adjustment as
set forth in the Subordinated Debt Indenture. Such events include: (a) any
payment of a dividend (or other distribution) payable in Common Stock on any
class of Capital Stock of the Company, (b) any subdivision, combination or
reclassification of Common Stock, (c) any issuance to all holders of Common
Stock of rights, options or warrants entitling them to subscribe for or purchase
Common Stock at less than the then current market price (as determined in
accordance with the Subordinated Debt Indenture) of Common Stock; provided,
however, that if such options or warrants are only exercisable upon the
occurrence of certain triggering events, then the Conversion Price will not be
adjusted until such triggering events occur, (d) any distribution to all holders
of Common Stock of evidences of indebtedness, shares of Capital Stock other than
Common Stock, cash or other assets (including securities, but excluding those
dividends, rights, options, warrants and distributions referred to above and
excluding regular dividends and distributions paid exclusively in cash), (e) any
distribution consisting exclusively of cash (excluding any cash portion of
distributions referred to in (d) above, or cash distributed upon a merger or
consolidation to which the third succeeding paragraph applies) to all holders of
Common Stock in an aggregate amount that, combined together with (i) all other
such all-cash distributions made within the then preceding 12 months in respect
of which no adjustment has been made and (ii) any cash and the fair market value
of other consideration paid or payable in respect of any tender offer by the
Company or any of its Subsidiaries for Common Stock concluded within the
preceding 12 months in respect of which no adjustment has been made, exceeds 15%
of the Company's market capitalization (defined as being the product of the then
current market price of the Common Stock times the number of shares of Common
Stock then outstanding) on the record date of such distribution, and (f) the
completion of a tender or exchange offer made by the Company or any of its
Subsidiaries for Common Stock that involves an aggregate consideration that,
together with (i) any cash and the fair market value of other consideration
payable in a tender or exchange offer by the Company or any of its Subsidiaries
for Common Stock expiring within the 12 months preceding the expiration of such
tender or exchange offer in respect of which no adjustment has been made and
(ii) the aggregate amount of any such all-cash distributions referred to in (e)
above to all holders of Common Stock within the 12 months preceding the
expiration of such tender or exchange offer in respect of which no adjustments
have been made, exceeds 15% of the Company's market capitalization on the
expiration of such tender offer. No adjustment of the Conversion Price will be
required to be made until the cumulative adjustments amount to 1.0% or more of
the Conversion Price as last adjusted. The Company reserves the right to make
such reductions in the Conversion Price in addition to those required in the
foregoing provisions as it considers to be advisable in order that any event
treated for federal income tax purposes as a dividend of stock or stock rights
will not be taxable to the recipients. In the event the Company elects to make
such a reduction in the Conversion Price, the Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other
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securities laws and regulations thereunder if and to the extent that such laws
and regulations are applicable in connection with the reduction of the
Conversion Price. (Section 1504 of the Subordinated Debt Indenture)
In the event that the Company distributes rights or warrants (other than
those referred to in (c) in the preceding paragraph) pro rata to holders of
Common Stock, so long as any such rights or warrants have not expired or been
redeemed by the Company, the Holder of any convertible Subordinated Debt
Security surrendered for conversion will be entitled to receive upon such
conversion, in addition to the shares of Common Stock issuable upon such
conversion (the "Conversion Shares"), a number of rights or warrants to be
determined as follows: (i) if such conversion occurs on or prior to the date for
the distribution to the holders of rights or warrants of separate certificates
evidencing such rights or warrants (the "Distribution Date"), the same number of
rights or warrants to which a holder of a number of shares of Common Stock equal
to the number of Conversion Shares is entitled at the time of such conversion in
accordance with the terms and provisions of and applicable to the rights or
warrants, and (ii) if such conversion occurs after such Distribution Date, the
same number of rights or warrants to which a holder of the number of shares of
Common Stock into which such Subordinated Debt Security was convertible
immediately prior to such Distribution Date would have been entitled on such
Distribution Date in accordance with the terms and provisions of and applicable
to the rights or warrants. The Conversion Price will not be subject to
adjustment on account of any declaration, distribution or exercise of such
rights or warrants. (Section 1504 of the Subordinated Debt Indenture)
Fractional shares of Common Stock will not be issued upon conversion, but,
in lieu thereof, the Company will pay a cash adjustment based on the then
current market price for the Common Stock. (Section 1503 of the Subordinated
Debt Indenture) Upon conversion, no adjustments will be made for accrued
interest or dividends, and therefore convertible Subordinated Debt Securities
surrendered for conversion between the record date for an interest payment and
the Interest Payment Date (except convertible Subordinated Debt Securities
called for redemption on a redemption date during such period) must be
accompanied by payment of an amount equal to the interest thereon which the
Holder is to receive. (Sections 1504 and 1502 of the Subordinated Debt
Indenture)
In the case of any reclassification, consolidation or merger of the Company
with or into another Person or any merger of another Person with or into the
Company (with certain exceptions), or in case of any conveyance, transfer or
lease of the assets of the Company substantially as an entirety, each
convertible Subordinated Debt Security then outstanding will, without the
consent of any Holder thereof, become convertible only into the kind and amount
of securities, cash and other property receivable upon such reclassification,
consolidation, merger, conveyance, transfer or lease by a holder of the number
of shares of Common Stock into which such Subordinated Debt Security was
convertible immediately prior thereto, after giving effect to any adjustment
event, who failed to exercise any rights of election and received per share the
kind and amount received per share by a plurality of non-electing shares.
(Section 1505 of the Subordinated Debt Indenture)
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DESCRIPTION OF CAPITAL STOCK
Pursuant to the Company's Second Restated Certificate of Incorporation, as
amended ("Certificate of Incorporation"), the Company's authorized capital stock
consists of 100,000,000 shares of Common Stock and 5,000,000 shares of Preferred
Stock. As of July 31, 1998, the Company had 36,191,985 shares of Common Stock
issued and outstanding and no shares of Preferred Stock issued and outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share in the election
of directors and on all other matters submitted to a vote of common stockholders
and do not have cumulative voting rights.
Holders of Common Stock are entitled to receive ratably such dividends, if
any, as may be declared by the Company's Board of Directors out of funds legally
available therefore, subject to any preferential dividend rights of outstanding
preferred stock. The Company does not intend to pay cash dividends on the Common
Stock in the foreseeable future. Upon the liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to receive ratably the
net assets of the Company available after payment of all debts and other
liabilities, subject to the prior rights of any outstanding preferred stock.
Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights.
PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. Certain terms of a series of the Preferred
Stock offered by any Prospectus Supplement will be described in the Prospectus
Supplement relating to such series of the Preferred Stock. If so indicated in
the Prospectus Supplement, the terms of any such series may differ from the
terms set forth below. The following description of the Preferred Stock
summarizes certain provisions of the Company's Certificate of Incorporation
filed as an exhibit to the Registration Statement to which this Prospectus
relates and is subject to and qualified in its entirety by reference to the
statements of designations that will be filed with the Commission promptly after
the offering of such series of Preferred Stock.
General. Under the Company's Certificate of Incorporation, the Board of
Directors is authorized, without further stockholder action, to provide for the
issuance of up to 5,000,000 shares of Preferred Stock in one or more series,
with such voting powers, or without voting powers, and with such designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be set forth in
resolutions providing for the issuance thereof adopted by the Board of
Directors. As of the date of this Prospectus, no shares of Preferred Stock are
outstanding or designated as to series. It is not possible to state the actual
effect of the authorization and issuance of a new series of Preferred Stock upon
the rights of holders of the Common Stock and other series of Preferred Stock
unless and until the Board of Directors determines the attributes of such new
series of Preferred Stock and the specific rights of its holders. Such effects
might include, however, (i) restrictions on dividends on Common Stock and other
series of Preferred Stock if dividends on such new series of Preferred Stock
have not been paid; (ii) dilution of the voting power of Common Stock and other
series of Preferred Stock to the extent that such new series of Preferred Stock
has voting rights, or to the extent that any such new series of Preferred Stock
is convertible into Common Stock; (iii) dilution of the equity interest of
Common Stock and other series of Preferred Stock; and (iv) limitation on the
right of holders of Common Stock and other series of Preferred Stock to share in
the Company's assets upon liquidation until satisfaction of any liquidation
preference attributable to such new series of Preferred Stock. While the ability
of the Company to issue Preferred Stock provides flexibility in connection
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with possible acquisitions and other corporate purposes, its issuance could be
used to impede an attempt by a third party to acquire a majority of the
outstanding voting stock of the Company.
The Preferred Stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the Prospectus Supplement relating to a particular
series of the Preferred Stock, each series of the Preferred Stock will rank on a
parity as to dividends and distributions in the event of a liquidation with each
other series of the Preferred Stock, if any. Holders of Preferred Stock will
have no preemptive rights to subscribe for or purchase shares of capital stock.
The Preferred Stock will have the dividend, liquidation and voting rights
set forth below unless otherwise provided in the Prospectus Supplement relating
to a particular series of the Preferred Stock. Reference is made to the
Prospectus Supplement relating to the particular series of the Preferred Stock
offered thereby for specific terms, including: (i) the designation of such
Preferred Stock, the number of shares offered and the liquidation value thereof;
(ii) the price at which such Preferred Stock will be issued; (iii) the dividend
rate (or method of calculation), the dates on which dividends shall be payable,
whether such dividends shall be cumulative or noncumulative and, if cumulative,
the dates from which dividends shall commence to accumulate; (iv) the
liquidation preference thereof; (v) any redemption or sinking fund provisions;
(vi) any conversion or exchange provisions of such Preferred Stock; and (vii)
any additional rights, preferences, qualifications, limitations and restrictions
of such Preferred Stock.
Dividend Rights. The holders of Preferred Stock of each series will be
entitled to receive, in preference to the holders of Common Stock, when and as
declared by the Board of Directors of the Company out of assets legally
available therefor, cash dividends, which may be cumulative for each series or
non-cumulative, at the annual rate for such series fixed by the Board of
Directors in creating such series, payable quarterly on such dates as may be so
fixed by the Board of Directors. No dividends may be paid upon the Common Stock
if the Company is in arrears in paying dividends on any series of Preferred
Stock for which dividends are cumulative. Accumulations of dividends on the
Preferred Stock will not bear interest.
Liquidation Rights. In the event of a liquidation, dissolution or winding
up of the Company, the holders of each series of Preferred Stock will be
entitled to share equally and ratably in the assets available for distribution
after payment of all liabilities, prior to any distribution to the holders of
Common Stock, in each case up to the liquidation amount fixed by the Board of
Directors in creating such series, plus an amount equal to all dividends accrued
and unpaid thereon up to the distribution date.
Voting Rights. The holders of the Preferred Stock will be entitled to one
vote per share, and the holders of all series of Preferred Stock shall vote
together with the holders of Common Stock as one class, except as expressly
required by applicable law.
DEPOSITARY SHARES
General. The Company may, at its option, elect to offer fractional shares
of Preferred Stock, rather than full shares of Preferred Stock. In the event
such option is exercised, the Company will issue to the public receipts for
Depositary Shares, each of which will represent a fraction (to be set forth in
the Prospectus Supplement relating to a particular series of Preferred Stock) of
a share of a particular series of Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Company and a bank or trust company selected by the Company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000 (the "Depositary"). Subject to the terms of the
Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Preferred Stock represented
by such Depositary Share, to all the
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rights and preferences of the Preferred Stock represented thereby (including
dividend, voting, redemption and liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of the offering. Copies of the
forms of Deposit Agreement and Depositary Receipt are filed as exhibits to the
Registration Statement of which this Prospectus is a part, and the following
summary is qualified in its entirety by reference to such exhibits.
If required by law or applicable securities exchange rules, engraved
Depositary Receipts will be prepared. Pending the preparation of definitive
engraved Depositary Receipts, the Depositary may, upon the written order of the
Company, issue temporary Depositary Receipts substantially identical to (and
entitling the holders thereof to all the rights pertaining to) the definitive
Depositary Receipts but not in definitive form. Definitive Depositary Receipts
will be prepared thereafter without unreasonable delay, and temporary Depositary
Receipts will be exchangeable for definitive Depositary Receipts at the
Company's expense.
Dividends and Other Distributions. The Depositary will distribute all cash
dividends or other cash distributions received in respect of the Preferred Stock
to the record holders of Depositary Shares relating to such Preferred Stock in
proportion to the number of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, sell such property and distribute the net proceeds from such sale
to such holders.
Redemption of Depositary Shares. If a series of Preferred Stock represented
by Depositary Shares is subject to redemption, the Depositary Shares will be
redeemed from the proceeds received by the Depositary resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary. The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price per share payable with respect to
such series of the Preferred stock. Whenever the Company redeems shares of
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares representing the shares of
Preferred Stock so redeemed. If fewer than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by lot or pro
rata as may be determined by the Depositary.
Voting the Preferred Stock. Upon receipt of notice of any meeting at which
the holders of the Preferred Stock are entitled to vote, the Depositary will
mail the information contained in such notice of meeting to the record holders
of the Depositary Shares relating to such Preferred Stock. Each record holder of
such Depositary Shares on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the Depositary
as to the exercise of the voting rights pertaining to the amount of the
Preferred Stock represented by such holder's Depositary Shares. The Depositary
will endeavor, insofar as practicable, to vote the amount of the Preferred Stock
represented by such Depositary Shares in accordance with such instructions, and
the Company will agree to take all action that may be deemed necessary by the
Depositary in order to enable the Depositary to do so. The Depositary will
abstain from voting shares of the Preferred Stock to the extent it does not
receive specific instructions from the holders of Depositary Shares representing
such Preferred Stock.
Amendment and Termination of the Depositary Agreement. The form of
Depositary Receipt evidencing the Depositary Shares and any provision of the
Deposit Agreement may at any time be amended by agreement between the Company
and the Depositary. However, any amendment that materially and adversely alters
the rights of the holders of Depositary Shares will not be effective
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unless such amendment has been approved by the holders of at least a majority of
the Depositary Shares then outstanding. The Deposit Agreement may be terminated
by the Company or the Depositary only if (i) all outstanding Depositary Shares
have been redeemed or (ii) there has been a final distribution in respect of the
Preferred Stock in connection with any liquidation, dissolution or winding up of
the Company and such distribution has been distributed to the holders of
Depositary Receipts.
Charges of Depositary. The Company will pay all transfer and other taxes
and governmental charges arising solely from the existence of the depositary
arrangements. The Company will pay charges of the Depositary in connection with
the initial deposit of the Preferred Stock and any redemption of the Preferred
Stock. Holders of Depositary Receipts will pay other transfer and other taxes
and governmental charges and such other charges, including a fee for the
withdrawal of shares of Preferred Stock upon surrender of Depositary Receipts,
as are expressly provided in the Deposit Agreement to be for their accounts.
Withdrawal of Preferred Stock. Upon surrender of Depositary Receipts at the
principal office of the Depositary, subject to the terms of the Deposit
Agreement, the owner of the Depositary Shares evidenced thereby is entitled to
delivery of the number of whole shares of Preferred Stock and all money and
other property, if any, represented by such Depositary Shares. Partial shares of
Preferred Stock will not be issued. If the Depositary Receipts delivered by the
holder evidence a number of Depositary Shares in excess of the number of
Depositary Shares representing the number of whole shares of Preferred Stock to
be withdrawn, the Depositary will deliver to such holder at the same time a new
Depositary Receipt evidencing such excess number of Depositary Shares. Holders
of Preferred Stock thus withdrawn will not thereafter be entitled to deposit
such shares under the Deposit Agreement or to receive Depositary Receipts
evidencing Depositary Shares therefor.
Miscellaneous. The Depositary will forward to holders of Depository
Receipts all reports and communications from the Company that are delivered to
the Depositary and that the Company is required to furnish to the holders of the
Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and the
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder and they will not be obligated to prosecute or
defend any legal proceeding in respect of any Depositary Shares or Preferred
Stock unless satisfactory indemnity is furnished. They may rely upon written
advice of counsel or accountants, or upon information provided by persons
presenting Preferred Stock for deposit, holders of Depositary Receipts or other
persons believed to be competent and on documents believed to be genuine.
Resignation and Removal of Depositary. The Depositary may resign at any
time by delivering to the Company notice of its election to do so, and the
Company may at any time remove the Depositary, any such resignation or removal
to take effect upon the appointment of a successor Depositary and its acceptance
of such appointment. Such successor Depositary must be appointed within 60 days
after delivery of the notice of resignation or removal and must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services L.L.C.
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ANTI-TAKEOVER PROVISIONS
The Certificate of Incorporation and the Company's Restated Bylaws (the
"Bylaws") of the Company and the Delaware General Corporation Law (the "DGCL")
include a number of provisions which may have the effect of encouraging persons
considering unsolicited tender offers or other unilateral takeover proposals to
negotiate with the Company's Board of Directors rather than pursue
non-negotiated takeover attempts.
Stockholder Action by Written Consent. Under the DGCL, unless the
certificate of incorporation of a corporation specifies otherwise, any action
that could be taken by stockholders at an annual or special meeting may be taken
without a meeting and without notice to or a vote of other stockholders if a
consent in writing is signed by the holders of outstanding stock having voting
power that would be sufficient to take such action at a meeting at which all
outstanding shares were present and voted. The Certificate of Incorporation and
the Bylaws of the Company provide that stockholder action may be taken in
writing by the consent of holders of not less than 66 2/3% of the outstanding
shares entitled to vote at a meeting of stockholders. As a result, stockholders
may not act upon any matter except at a duly called meeting or by the written
consent of holders of 66 2/3% or more of the outstanding shares entitled to
vote.
Supermajority Vote Required for Certain Transactions. The affirmative vote
of the holders of at least 66 2/3% of the outstanding shares of Common Stock is
required to approve any merger or consolidation of the Company or any sale or
transfer of all or substantially all of the assets of the Company.
Blank Check Preferred Stock. The Certificate of Incorporation of the
Company authorizes blank check Preferred Stock. The Board of Directors of the
Company can set the voting, redemption, conversion and other rights relating to
such Preferred Stock and can issue such stock in either a private or public
transaction. The issuance of Preferred Stock, while providing desired
flexibility in connection with possible acquisitions and other corporate
purposes, could adversely affect the voting power of holders of Common Stock and
the likelihood that such holders will receive dividend payments and payments
upon liquidation and could have the effect of delaying, deferring or preventing
a change in control of the Company.
Delaware Takeover Statute. The Company is subject to Section 203 of the
DGCL. In general, Section 203 prevents an interested stockholder (i.e., any
person owning 15% or more of the Company's outstanding voting stock) from
engaging in a business combination (as defined below) with a Delaware
corporation for a period of three years from the time such person becomes an
interested stockholder of such corporation, unless (i) before such person became
an interested stockholder, the board of directors of the corporation approved
the business combination or the transaction in which the interested stockholder
became an interested stockholder; (ii) upon consummation of the transaction that
resulted in the interested stockholder's becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding stock held by
directors who are also officers of the corporation and stock held by certain
employee stock plans; or (iii) on or subsequent to the time of the transaction
in which such person became an interested stockholder, the business combination
is approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of at least
two-thirds of the outstanding voting stock of the corporation not owned by the
interested stockholder.
Section 203 defines a "business combination" to include (i) any merger or
consolidation involving a corporation and an interested stockholder, (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving an interested stockholder, (iii) subject to certain
exceptions, any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to an interested stockholder, (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder or (v) the
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receipt by an interested stockholder of any loans, guarantees, pledges or other
financial benefits provided by or through the corporation. In general, Section
203 defines an "interested stockholder" as any entity or person beneficially
owning 15% or more of the outstanding voting stock of the corporation and any
entity or person affiliated with or controlling or controlled by such entity or
person.
DESCRIPTION OF SECURITIES WARRANTS
The Company may issue Securities Warrants for the purchase of Debt
Securities, Preferred Stock, Depositary Shares, Common Stock or other
securities. Securities Warrants may be issued independently or together with
Debt Securities, Preferred Stock, Depositary Shares or Common Stock offered by
any Prospectus Supplement and may be attached to or separate from any such
Offered Securities. Each series of Securities Warrants will be issued under a
separate warrant agreement (a "Securities Warrant Agreement") to be entered into
between the Company and a bank or trust company, as warrant agent (the
"Securities Warrant Agent"), all as set forth in the Prospectus Supplement
relating to the particular issue of Securities Warrants. The Securities Warrant
Agent will act solely as an agent of the Company in connection with the
Securities Warrants and will not assume any obligation or relationship of agency
or trust for or with any holders of Securities Warrants or beneficial owners of
Securities Warrants. The following summary of certain provisions of the
Securities Warrants does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all provisions of the Securities
Warrant Agreements.
Reference is made to the Prospectus Supplement relating to the particular
issue of Securities Warrants offered thereby for the terms of and information
relating to such Securities Warrants, including, where applicable: (i) the
designation, aggregate principal amount, currencies, denominations, and terms of
the series of Debt Securities purchasable upon exercise of Securities Warrants
to purchase Debt Securities and the price at which such Debt Securities may be
purchased upon such exercise; (ii) the number of shares of Common Stock
purchasable upon the exercise of Securities Warrants to purchase Common Stock
and the price at which such number of shares of Common Stock may be purchased
upon such exercise; (iii) the number of shares and series of Preferred Stock
and/or Depositary Shares purchasable upon the exercise of Securities Warrants to
purchase Preferred Stock and the price at which such number of shares of such
series of Preferred Stock and/or Depositary Shares may be purchased upon such
exercise; (iv) the designation and number of units of other securities
purchasable upon the exercise of Securities Warrants to purchase other
securities and the price at which such number of units of such other securities
may be purchased upon such exercise; (v) the date on which the right to exercise
such Securities Warrants shall commence and the date on which such right shall
expire (the "Expiration Date"); (vi) United States Federal income tax
consequences applicable to such Securities Warrants; (vii) the amount of
Securities Warrants outstanding as of the most recent practicable date; and
(viii) any other terms of such Securities Warrants. Securities Warrants will be
issued in registered form only. The exercise price for Securities Warrants will
be subject to adjustment in accordance with the applicable Prospectus
Supplement.
Each Securities Warrant will entitle the holder thereof to purchase such
principal amount of Debt Securities or such number of shares of Preferred Stock,
Depositary Shares, Common Stock or other securities at such exercise price as
shall in each case be set forth in, or calculable from, the Prospectus
Supplement relating to the Securities Warrants, which exercise price may be
subject to adjustment upon the occurrence of certain events as set forth in such
Prospectus Supplement. After the close of business on the Expiration Date (or
such later date to which such Expiration Date may be extended by the Company),
unexercised Securities Warrants will become void. The place or places where, and
the manner in which, Securities Warrants may be exercised shall be specified in
the Prospectus Supplement relating to such Securities Warrants.
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<PAGE> 36
Prior to the exercise of any Securities Warrants to purchase Debt
Securities, Preferred Stock, Depositary Shares, Common Stock or other
securities, holders of such Securities Warrants will not have any of the rights
of holders of Debt Securities, Preferred Stock, Depositary Shares, Common Stock
or other securities, as the case may be, purchasable upon such exercise,
including the right to receive payments of principal of, premium, if any, or
interest, if any, on the Debt Securities purchasable upon such exercise or to
enforce covenants in the applicable Indenture, or to receive payments of
dividends, if any, on the Preferred Stock, Depositary Shares or Common Stock
purchasable upon such exercise, or to exercise any applicable right to vote.
PLAN OF DISTRIBUTION
GENERAL
Any of the Securities offered hereby may be sold in any one or more of the
following ways from time to time: (i) to or through underwriters; (ii) through
dealers; (iii) directly to other purchasers or (iv) through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters may receive
compensation from the Company or purchasers of Securities for whom they may act
as agents, in the form of discounts, concessions or commissions. Underwriters,
dealers and agents that participate in the distribution of Securities may be
deemed to be underwriters, and any discounts or commissions received by them
from the Company and any profit on the resale of Securities by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
Any such person who may be deemed to be an underwriter will be identified, and
any such compensation received from the Company will be described, in the
Prospectus Supplement.
During and after an offering through underwriters, such underwriters may
purchase and sell the Securities in the open market. These transactions may
include overallotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the offering. The
underwriters may also impose a penalty bid, whereby selling concessions allowed
to syndicate members or other broker-dealers for the Securities sold for their
account may be reclaimed by the syndicate if such Securities are repurchased by
the syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Securities,
which may be higher than the price that might otherwise prevail in the open
market, and, if commenced, may be discontinued at any time.
Except for Common Stock, all Securities, when first issued, will have no
established trading market. Any underwriters or agents to or through whom such
Securities are sold by the Company for public offering and sale may make a
market in such Securities, but such underwriters or agents will not be obligated
to do so and may discontinue any market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for any such
Securities.
Under agreements which may be entered into by the Company, underwriters,
dealers and agents who participate in the distribution of Securities may be
entitled to indemnification by the Company against or contribution toward
certain liabilities, including liabilities under the Securities Act.
DELAYED DELIVERY ARRANGEMENT
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as the Company's agents to solicit offers
by certain institutions to purchase Debt Securities from the Company pursuant to
contracts providing for payment and delivery on a future
23
<PAGE> 37
date. Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases will be
subject to the approval of the Company. The obligations of any purchaser under
any such contract will be subject to the condition that the purchase of the Debt
Securities shall not at the time of delivery be prohibited under the laws of any
jurisdiction to which such purchaser is subject. The underwriters and such
agents will not have any responsibility in respect of the validity or
performance of such contracts.
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for the Company by
Vinson & Elkins L.L.P., Houston, Texas, and will be passed upon for any agents,
dealers or underwriters by Baker & Botts, L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of Newfield Exploration Company
appearing in Newfield
Exploration Company's Annual Report (Form 10-K) for the year ended December 31,
1997, which is incorporated in this Prospectus and Registration Statement by
reference, have been audited by PricewaterhouseCoopers LLP, independent public
accountants, as set forth in their report thereon included therein and
incorporated by reference herein. Such consolidated financial statements have
been incorporated by reference herein in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
Certain information included or incorporated by reference in this
Prospectus relating to the Company's proved oil and gas reserves and future net
cash flows therefrom is derived from estimates prepared by Ryder Scott Company,
Petroleum Engineers, and is incorporated by reference herein in reliance upon
such firm as experts with respect to such matters.
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<PAGE> 38
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Recent Developments................... S-2
Risk Factors.......................... S-3
Use of Proceeds....................... S-8
Capitalization........................ S-9
Price Range of Common Stock........... S-10
Dividend Policy....................... S-10
Selected Historical Financial Data.... S-11
Underwriting.......................... S-12
Legal Matters......................... S-13
Glossary of Oil and Gas Terms......... S-13
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Forward-Looking Statements............ 3
The Company........................... 3
Use of Proceeds....................... 4
Ratio of Earnings to Fixed Charges.... 4
Description of Debt Securities........ 4
Description of Capital Stock.......... 17
Description of Securities Warrants.... 22
Plan of Distribution.................. 23
Validity of Securities................ 24
Experts............................... 24
</TABLE>
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4,000,000 SHARES
NEWFIELD EXPLORATION COMPANY
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
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[NEWFIELD LOGO]
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GOLDMAN, SACHS & CO.
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