<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-59391
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED.
Subject to Completion. Dated July 30, 1999.
Prospectus Supplement to Prospectus Dated September 4, 1998.
2,500,000 Preferred Securities
[NEWFIELD LOGO]
NEWFIELD FINANCIAL TRUST I
% Cumulative Quarterly Income Convertible Preferred Securities,
Series A (QUIPS(SM))*
(Liquidation Preference $50 per QUIPS)
Fully and unconditionally guaranteed to the extent described herein by,
and convertible into common stock of,
NEWFIELD EXPLORATION COMPANY
---------------------
A brief description of the % Cumulative Quarterly Income Convertible
Preferred Securities, Series A (QUIPS(SM)) can be found under "Prospectus
Supplement Summary -- The Offering" in this prospectus supplement.
Newfield has applied to list the QUIPS on the New York Stock Exchange.
Newfield expects trading of the QUIPS to begin within 30 days after they are
first issued.
The QUIPS are convertible into Newfield common stock in the manner
described in this prospectus supplement at an initial conversion price of $
per share of Newfield common stock for each QUIPS, which is equivalent to a
conversion rate of shares of Newfield common stock for each QUIPS.
Newfield common stock trades on the New York Stock Exchange under the symbol
"NFX."
See "Risk Factors" beginning on page S-14 to read about certain factors you
should consider before buying the QUIPS.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------
<TABLE>
<CAPTION>
Per
QUIPS Total
-------- --------
<S> <C> <C>
Initial public offering price(1)............................ $ $
Underwriting commissions(2)................................. $ $
Proceeds to Newfield Financial Trust I...................... $ $
</TABLE>
- ---------------
(1) Plus accumulated distributions, if any, from August , 1999.
(2) Underwriting commissions on the QUIPS will be paid by Newfield Exploration
Company.
The underwriters may, under certain circumstances, purchase up to an
additional 375,000 QUIPS from Newfield Financial Trust I at the initial public
offering price. Newfield will pay underwriting commissions of $ per QUIPS on
each additional QUIPS that is purchased by the underwriters.
---------------------
The underwriters expect to deliver the QUIPS in book-entry form only
through the facilities of The Depository Trust Company in New York, New York on
, 1999.
*"QUIPS" is a registered service mark of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
MERRILL LYNCH & CO.
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
---------------------
Prospectus Supplement dated , 1999.
<PAGE> 2
ABOUT THIS PROSPECTUS SUPPLEMENT
You should rely only on the information contained or incorporated by
reference in this prospectus supplement or the accompanying prospectus. We have
not, and the underwriters have not, authorized anyone to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not, and the underwriters are
not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should assume that the information contained
in this prospectus supplement or the accompanying prospectus, as well as the
information we previously filed with the Securities and Exchange Commission that
is incorporated by reference herein, is accurate only as of its respective date.
Our business, financial condition, results of operations and prospects may have
changed since that date. Unless otherwise noted, capitalized terms used in this
prospectus supplement have the same meanings as used in the accompanying
prospectus.
OIL AND GAS TERMS USED IN THIS PROSPECTUS SUPPLEMENT
<TABLE>
<S> <C> <C>
WHEN DESCRIBING NATURAL GAS: Mcf = thousand cubic feet
MMcf = million cubic feet
Bcf = billion cubic feet
WHEN DESCRIBING OIL: Bbl = barrel
MBbls = thousand barrels
MMBbls = million barrels
WHEN DESCRIBING NATURAL GAS AND OIL
TOGETHER: 6 Mcf of gas = 1 barrel of oil equivalent
Mcfe = thousand cubic feet equivalent
MMcfe = million cubic feet equivalent
Bcfe = billion cubic feet equivalent
</TABLE>
OTHER COMMONLY USED OIL AND GAS TERMS:
development well = A well drilled within the proved area of a reservoir to
the depth of a stratigraphic horizon known to be productive.
exploratory well = A well drilled to find and produce reserves not
classified as proved, to find a new reservoir in a field previously found to be
productive of oil or natural gas in another reservoir or to extend a known
reservoir.
gross acres = The total acres in which a working interest is owned.
farm-in = An arrangement under which a party agrees to drill one or more
wells on the property of another party in order to earn an interest in the
property.
infill well = An exploitation well drilled within the boundaries of a known
field.
net acres = The sum of the fractional working interests owned in gross
acres.
present value = The estimated value of future gross revenues (using SEC
requirements) to be generated from the production of proved reserves, net of
estimated production and future development costs, using then current prices and
costs, without giving effect to non-property related expenses such as general
and administrative, interest, income tax and depreciation, depletion and
amortization expenses, discounted at 10% per year.
proved developed reserves = Proved reserves that can be expected to be
recovered from existing wells with existing equipment and operating methods.
proved reserves = The estimated quantities of oil and natural gas that
geological and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing economic and
operating conditions.
proved undeveloped reserves = Proved reserves that are expected to be
recovered from new wells on undrilled acreage or from existing wells where a
relatively major expenditure is required for recompletion.
recompletion = The completion for production of an existing well bore in
another formation from that in which the well has been previously completed.
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PROSPECTUS SUPPLEMENT SUMMARY
The following information should be read together with the information
contained in the other parts of this prospectus supplement, in the accompanying
prospectus and in the documents incorporated by reference in the prospectus. You
should carefully read this prospectus supplement and the accompanying prospectus
to fully understand the terms of the QUIPS, as well as the tax and other
considerations that are important to you in making a decision about whether to
invest in the QUIPS. You should pay special attention to the "Risk Factors"
section beginning on page S-14 of this prospectus supplement to determine
whether an investment in the QUIPS is appropriate for you.
We have assumed for purposes of this prospectus supplement that the
underwriters will not exercise their over-allotment option. Unless the context
requires otherwise or unless otherwise noted, all references in this prospectus
supplement to "we," "Newfield" or "us" are to Newfield Exploration Company and
its subsidiaries.
ABOUT NEWFIELD
Newfield is an independent oil and gas company. We are engaged in the
exploration, development and acquisition of oil and natural gas properties
located primarily in the Gulf of Mexico. We also have operations onshore in the
Gulf Coast and offshore Australia and China. We discovered and acquired our
first oil and gas reserves in 1990 and have grown rapidly since that time. At
December 31, 1998, we had proved reserves of 513 Bcfe with a present value of
estimated future pre-tax cash flows of $550 million. Approximately 82% of our
proved reserves at December 31, 1998 were natural gas and approximately 93% were
proved developed.
We have achieved substantial growth in reserves, production, revenues and
EBITDA since our inception. Our estimated proved reserves have increased from 23
Bcfe at December 31, 1990 to 513 Bcfe at December 31, 1998, representing a
compound annual growth rate of 47% and an average annual reserve replacement
rate of over 247%. Similarly, our annual production has increased from 6 Bcfe in
1991 to 89 Bcfe in 1998, representing a compound annual growth rate of 47%. We
have set a production target for 1999 of 111 Bcfe, a 25% increase from 1998. Our
revenues were $209 million and EBITDA was $159 million for the 12 months ended
June 30, 1999.
We have a significant presence in the Gulf of Mexico. As of June 30, 1999,
we owned interests in approximately 135 lease blocks in the Gulf of Mexico and
operated 115 platforms. As of January 31, 1999, we were ranked as the ninth
largest operator in the Gulf of Mexico based on average operated gross daily
production of 520 MMcfe. At June 30, 1999, we operated gross daily production of
approximately 600 MMcfe. In addition, we were the eighth most active driller in
the Gulf of Mexico in 1998.
We also own interests in approximately 36,000 gross acres in southern
Louisiana and Texas. Internationally, we own interests in properties currently
producing approximately 6 MBbls of oil per day and licenses covering an
additional three million gross acres offshore northern Australia. In addition,
we own a 35% interest in a production sharing license covering approximately
300,000 acres in the Bohai Bay, offshore China.
From our inception through December 31, 1998, we invested $1.1 billion in
capital expenditures, including acquisition costs, to generate 873 Bcfe of
proved reserves at an average reserve replacement cost of $1.23 per Mcfe. Over
that period, our average cash margin per Mcfe of production was $1.86, allowing
internally generated cash flow to be the principal source of our capital
investments in oil and gas properties and drilling activities. We intend to
continue to fund a substantial portion of our ongoing capital requirements
through internally generated cash flow.
We believe that a conservative fiscal policy allows us to remain flexible
in our
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<PAGE> 4
operating activities and to have the ability to take advantage of opportunities
as they arise. Upon consummation of the offering, we will have approximately
$125 million of debt as compared to an aggregate of $465 million of outstanding
QUIPS and stockholders' equity.
OUR STRATEGY
Our strategy is to continue to expand our reserve base and increase our
cash flow through exploration and the acquisition and exploitation of proved
properties. We emphasize the following elements in implementing this strategy:
- reserve growth through exploratory drilling of a balanced portfolio;
- balance between exploration and the acquisition and exploitation of
proved properties;
- geographic focus;
- control of operations and costs;
- use of 3-D seismic and other advanced technology; and
- equity ownership and other incentives to retain and attract employees.
We use a balanced approach of exploration and the acquisition and
exploitation of proved properties to grow our reserves, production and cash
flow. Of the 873 Bcfe of proved reserves we had added from inception through
December 31, 1998, 35% were added through exploration, 40% were added through
the acquisition of proved reserves and 25% were added through the exploitation
of opportunities identified and acquired in connection with the acquisition of
proved properties.
Our exploration, acquisition and exploitation activities are complementary.
Proved properties we acquire typically have exploration or exploitation
potential that we have previously identified. In addition, acquisitions can
increase our presence in an area, creating the infrastructure to provide us with
the ability to capture other opportunities at a competitive advantage. We use
information gathered while evaluating production on acquisition candidates and
adjacent acreage, as appropriate, in our exploration efforts. Similarly, a
successful exploratory well may reveal untested reserve potential on an adjacent
property, making its purchase attractive.
EXPLORATION ACTIVITIES
We maintain an active, technology driven exploration program conducted by
four multi-disciplined teams. Two of these teams are focused in the Gulf of
Mexico, one is focused on the onshore Gulf Coast and one is focused on select
international areas. We have budgeted $54 million for exploration activities for
1999, including acquisition of seismic data, leasehold acquisitions and
exploratory drilling, of which we spent $19 million through June 30, 1999.
During 1998, we invested $65 million in exploration activities. We allocate our
exploration spending between a small number of higher risk, higher potential
prospects that, if successful, may result in significant increases in proved
reserves, and a greater number of lower risk, moderate potential prospects.
Since January 1, 1994, we have drilled 80 exploratory wells, substantially all
of which were based on the evaluation of 3-D seismic data. Of these wells, 54%
were productive and 76% were operated by us.
We acquire exploration prospects through federal and state lease sales, in
connection with proved property acquisitions and through farm-ins. We
continuously evaluate new opportunities and currently have a substantial
inventory of prospects.
ACQUISITION ACTIVITIES
We actively pursue the acquisition of proved oil and gas properties in the
Gulf of Mexico, the onshore Gulf Coast and select international areas. We are
particularly interested in properties with unexploited reserve potential in
order to enhance returns. We look for properties that we can operate in order to
better control operations and costs and in which we can increase our interest.
Acquisition properties that meet these criteria and provide a base for further
evaluation and exploitation adjacent to our existing production are of
particular interest. We pursue a multi-disciplined team approach for evaluating
acquisition opportunities. Potential acquisi-
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<PAGE> 5
tions undergo extensive technical and financial evaluation by a group of
geologists, geophysicists, geological engineers and petroleum engineers. Land,
drilling, operations and marketing staffs support these evaluation efforts. Our
seismic, land and production databases, along with regional geological
interpretations, supplement any information provided by a potential seller in
the acquisition candidate screening process.
DEVELOPMENT ACTIVITIES
We also maintain an active development program. We have budgeted $58
million for development activities for 1999, of which we spent $22 million
through June 30, 1999. During 1998, we invested $156 million for development
costs including recompletions and development drilling. Since January 1, 1994,
we have drilled 102 development wells. Of these wells, 90% were productive and
80% were operated by us.
GEOGRAPHIC FOCUS
We believe that long-term success requires extensive knowledge of geologic
and operating conditions in the areas where we operate. Because of this belief,
we focus our efforts on a limited number of geographic areas where we can use
our core competencies, such as geological and geophysical analyses through the
application of 3-D seismic and other advanced technologies, expertise in marine
operations and significant influence on operations. Our current focus areas
include the Gulf of Mexico, onshore Gulf Coast and offshore Australia and China.
GULF OF MEXICO. We believe that our focus in the Gulf of Mexico is the
foundation for our continued growth. The Gulf of Mexico is a prolific oil and
gas province, accounting for approximately 25% of domestic natural gas
production, and we believe that it has significant remaining undiscovered
reserve potential. Our management and technical personnel have extensive
experience in the Gulf of Mexico, and our geographic focus assists us in
controlling operating and administrative costs. The Gulf of Mexico has a
substantial existing infrastructure, including gathering systems, platforms and
pipelines, and numerous drilling and service companies maintain a substantial
presence there, facilitating cost effective operations and the timely
development of discoveries. In addition, significant amounts of geologic data,
including 3-D seismic data, are available at reasonable cost.
ONSHORE GULF COAST. Building on our core competencies, we established
onshore Gulf Coast operations in 1995 as a natural extension of our offshore
effort. To date, our onshore efforts have been focused in southern Louisiana and
the Texas Gulf Coast. We have acquired 482 square miles of 3-D seismic data and
interests in approximately 8,000 gross acres in southern Louisiana. Since
commencing operations, we have participated in the drilling of six exploratory
wells in southern Louisiana. Of these wells, 33% were productive and 50% were
operated by us. We have also acquired 330 square miles of 3-D seismic data and
interests in approximately 28,000 gross acres in southern Texas.
INTERNATIONAL ACTIVITIES. We continue to evaluate and pursue new
opportunities for international expansion in areas where we can use our core
competencies. We believe these areas include offshore Australia, China, West
Africa and South America. To date, we have expanded our operations to Australia
and China.
Australia. On July 15, 1999, we acquired Gulf Australia Resources Limited.
Please read "--Recent Developments -- Gulf Australia" below for a description of
Gulf Australia's business.
China. In 1997, we acquired a 35% interest in a production sharing license
that now covers approximately 300,000 acres in the Bohai Bay, offshore China.
The property does not have any current production. Our work program for the
Bohai Bay includes seismic evaluation in 1999 and the drilling of one
exploratory well in 2000.
CONTROL OF OPERATIONS AND COST
We prefer to operate our properties in order to manage production
performance and to control operating expenses, the timing and amount of capital
expenditures and the application of technology. Properties operated by
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<PAGE> 6
us accounted for 84% of our total equivalent production for the six months ended
June 30, 1999. Our geographic focus enables us to manage a large asset base with
a relatively small number of employees and to add successful exploratory and
development wells and proved property acquisitions at relatively low incremental
costs. We also use independent contractors for much of our field operations
activities to control costs. As a result of our control of operations and costs,
we had lease operating expense of $0.38 per Mcfe for the 12 months ended June
30, 1999, which we believe to be below the industry average.
TECHNOLOGY
We use advanced technology in our exploration and development activities to
reduce our risks and lower our costs. We currently hold licenses or have access
to 3-D seismic surveys covering approximately 2,200 blocks (approximately 11.3
million acres) in the Gulf of Mexico, 812 square miles in southern Louisiana and
Texas and 5,000 square kilometers offshore Australia, including coverage of
substantially all of the producing fields we operate. In addition, we hold
licenses or have access to more than 380,000 miles of recent vintage
conventional seismic data in the Gulf of Mexico and own a library containing
logs on more than 4,600 wells drilled in our focus area.
MANAGEMENT AND EMPLOYEES
One of our principal management philosophies is to provide incentives to,
and reward, our employees through equity ownership and performance-based
compensation. As of December 31, 1998, our employees owned or had options to
acquire an aggregate of approximately 11% of our outstanding common stock on a
fully diluted basis.
RECENT DEVELOPMENTS
GULF AUSTRALIA. On July 15, 1999, we purchased Gulf Australia. The
acquisition includes interests in two producing oil fields with identified
drilling potential in the Timor Sea, offshore Australia. The acquired Jabiru and
Challis fields are currently producing at a net daily rate of 6 MBbls of oil per
day. The Jabiru field has cumulative gross production of 100 MMBbls of oil and
the Challis field has cumulative gross production of 50 MMBbls of oil. We plan
to drill two or three infill wells in 2000, which should increase the oil
production rate and extend the economic life of the fields.
The Gulf Australia acquisition includes an interest in ten exploration and
production licenses covering three million gross acres in the Timor Sea and
5,000 square kilometers of 3-D seismic data. Current drilling plans on these
licenses include seven exploratory wells over the next two to three years. The
combined net cost of the seven tests is approximately $25 million. Offshore
exploration expenses are deductible against income generated from offshore
production for Australian tax purposes, making the net after-tax cost of this
anticipated exploration drilling approximately $10 million.
We funded the Gulf Australia acquisition with $23 million of borrowings
under our credit facility. Included in the purchase price was a substantial
amount of working capital, including an inventory of 479 MBbls of oil.
OCEAN ENERGY. On July 21, 1999, we entered into an agreement with Ocean
Energy, Inc. to acquire its interest in three Gulf of Mexico oil and gas fields
for approximately $66 million. We expect the transaction to close by mid-August.
Production from these fields, net to the interests to be acquired, is
approximately 25 MMcfe per day and the production is 70% oil. The purchase price
and the interests to be acquired are subject to customary adjustments, including
the possible exercise of preferential purchase rights by third parties.
OTHER PENDING ACQUISITIONS. We are currently in the latter stages of
negotiating additional proved property acquisitions in the Gulf of Mexico from
multiple sellers. If we successfully complete the acquisitions, we expect the
aggregate purchase price for the interests in more than 20 fields to be
approximately $25 million. The purchase price and the interests to be acquired
will be subject to customary adjustments, including the possible
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exercise of preferential purchase rights by third parties.
OUR EXECUTIVE OFFICES
Our company was incorporated in Delaware in 1988. The address of our
principal executive offices is 363 N. Sam Houston Parkway E., Suite 2020,
Houston, Texas 77060, and our telephone number is (281) 847-6000. We maintain a
web site on the Internet at http://www.newfld.com.
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<PAGE> 8
FINANCIAL DATA OF NEWFIELD
The following table presents summary financial data derived from our
consolidated financial statements. This summary is qualified in its entirety by
the detailed information and financial statements of Newfield included in the
documents incorporated in the prospectus by reference.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT RATIO AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Oil and gas revenues................ $149,256 $199,399 $195,685 $ 99,884 $112,986
-------- -------- -------- -------- --------
Operating expenses:
Lease operating................... 16,946 24,308 35,345 16,052 18,767
Depreciation, depletion and
amortization................... 64,026 94,000 123,147 57,749 73,850
Ceiling test writedown............ -- 4,254 104,955 -- --
General and administrative, net... 7,552 11,093 9,848 5,494 6,256
Stock compensation(1)............. 1,943 1,177 2,222 1,108 991
-------- -------- -------- -------- --------
Total operating
expenses................ 90,467 134,832 275,517 80,403 99,864
-------- -------- -------- -------- --------
Income (loss) from operations....... 58,789 64,567 (79,832) 19,481 13,122
Interest income (expense), net...... 497 (2,146) (8,544) (3,265) (6,361)
-------- -------- -------- -------- --------
Income (loss) before income taxes... 59,286 62,421 (88,376) 16,216 6,761
Income tax provision (benefit)...... 20,792 21,818 (30,677) 5,732 2,556
-------- -------- -------- -------- --------
Net income (loss)................... $ 38,494 $ 40,603 $(57,699) $ 10,484 $ 4,205
======== ======== ======== ======== ========
Basic earnings (loss) per common
share............................. $ 1.10 $ 1.14 $ (1.55) $ 0.29 $ 0.10
======== ======== ======== ======== ========
Diluted earnings (loss) per common
share............................. $ 1.03 $ 1.07 $ (1.55) $ 0.27 $ 0.10
======== ======== ======== ======== ========
Weighted average number of shares
outstanding for basic earnings per
share............................. 34,872 35,612 37,312 36,113 40,796
Weighted average number of shares
outstanding for diluted earnings
per share......................... 37,409 38,017 37,312 38,316 41,967
OTHER DATA:
Capital expenditures................ $163,823 $253,159 $310,772 $143,044 $ 48,086
Net cash provided by operating
activities before changes in
operating assets and
liabilities....................... 125,226 161,852 141,948 75,073 81,602
Net cash provided by operating
activities........................ 127,494 160,338 146,575 81,919 74,520
EBITDA(2)........................... 123,732 159,689 149,234 77,842 87,260
Ratio of earnings to fixed
charges(3)........................ 28.4x 9.5x n/m(4) 3.3x 1.8x
</TABLE>
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<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital surplus (deficit)... $ 11,436 $ 372 $ (8,806) $ (4,816) $ 4,335
Oil and gas properties, net......... 328,615 483,954 578,423 569,529 553,000
Total assets........................ 395,938 553,621 629,311 624,321 598,158
Long-term debt...................... 60,000 129,623 208,650 191,636 184,664
Stockholders' equity................ 239,902 292,048 323,948 304,530 340,342
</TABLE>
- ---------------
(1) Stock compensation represents noncash stock compensation charges.
(2) EBITDA represents net income plus income taxes, interest expense,
depreciation, depletion and amortization expense. EBITDA is not presented as
an indicator of our operating performance, an indicator of cash available
for discretionary spending or as a measure of liquidity. EBITDA may not be
comparable to other similarly titled measures of other companies.
(3) For purposes of determining the ratio of earnings to fixed charges, 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.
(4) Earnings for the year ended December 31, 1998 were insufficient to cover
fixed charges by approximately $88.4 million.
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OPERATING DATA
The following table presents information about our oil and gas operations.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Production:
Oil and condensate (MBbls)..... 2,558 3,424 3,643 1,905 1,710
Gas (MMcf)..................... 41,323 53,505 66,634 31,032 43,300
Total production (MMcfe)....... 56,670 74,049 88,494 42,460 53,561
Average realized prices:
Oil and condensate (per Bbl)... $ 20.89 $ 19.08 $ 12.75 $ 13.69 $ 13.03
Gas (per Mcf).................. 2.32 2.51 2.25 2.38 2.10
Average costs (per Mcfe):
Lease operating................ $ 0.30 $ 0.33 $ 0.40 $ 0.38 $ 0.35
Depreciation, depletion and
amortization................ 1.13 1.27 1.39 1.36 1.38
General and administrative,
net......................... 0.13 0.15 0.11 0.13 0.12
</TABLE>
OIL AND GAS RESERVE DATA
The following table presents information regarding our estimated proved oil
and gas reserves and the present value of those reserves. All information in
this prospectus supplement relating to oil and gas reserves and the present
value of those reserves is based upon estimates prepared by us and is net to our
interest.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Proved reserves:
Oil and condensate (MBbls)...................... 13,659 16,307 15,171
Gas (MMcf)...................................... 241,385 337,481 422,277
Gas equivalent (MMcfe).......................... 323,339 435,323 513,304
Present value of proved reserves (in
thousands)(1)................................... $859,817 $654,669 $549,818
</TABLE>
- ---------------
(1) Present values of proved reserves were calculated using prices of $4.07 per
Mcf and $24.15 per Bbl as of December 31, 1996, $2.58 per Mcf and $17.11 per
Bbl as of December 31, 1997 and $2.12 per Mcf and $9.98 per Bbl as of
December 31, 1998.
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<PAGE> 11
THE OFFERING
TITLE...................... % Cumulative Quarterly Income Convertible
Preferred Securities, Series A (QUIPS(SM))
SECURITIES OFFERED......... 2,500,000 QUIPS by Newfield Financial Trust I. In
addition, the trust has granted the underwriters an
option, exercisable for 30 days, to purchase up to
an additional 375,000 QUIPS at the initial public
offering price. The underwriters may exercise this
option solely to cover over-allotments, if any.
Each QUIPS represents a preferred undivided
beneficial interest in the assets of the trust.
ISSUER..................... Newfield Financial Trust I is a Delaware business
trust and a subsidiary of Newfield. The address of
its principal office is c/o Newfield Exploration
Company, 363 N. Sam Houston Parkway E., Suite 2020,
Houston, Texas 77060, and its telephone number is
(281) 847-6000.
DEBENTURES................. The trust will use the proceeds from the sale of
the QUIPS to purchase % Junior Subordinated
Convertible Debentures, Series A due 2029 from us.
The debentures will have the same financial terms
as the QUIPS.
DISTRIBUTIONS.............. If you purchase QUIPS, you will be entitled to
receive cash distributions at the annual rate of
% of the $50 liquidation preference per QUIPS.
Distributions are cumulative and will begin to
accumulate on the date of original issuance of the
QUIPS, which we expect to be ,
1999. Distributions will be payable quarterly, in
arrears, on , , and
of each year beginning ,
1999, unless we defer interest payments on the
debentures.
DISTRIBUTION DEFERRAL...... If we defer interest payments on the debentures,
the trust will defer distribution payments on the
QUIPS. During a deferral period, distributions will
continue to accumulate on the QUIPS. Additional
cash distributions will accumulate on any deferred
distributions. We can, on one or more occasions,
defer interest payments on the debentures for up to
20 consecutive quarterly periods unless an event of
default on the debentures has occurred and is
continuing. We cannot, however, defer interest
payments beyond the earlier of the maturity date of
the debentures, which is ,
2029, or the date the debentures are redeemed. If
we defer payments of interest on the debentures,
you will be required to include accrued interest
income, as original issue discount, for the
deferred stated interest allocable to your QUIPS in
your gross income for United States federal income
tax purposes before you actually receive the
related cash distributions.
CONVERSION INTO COMMON
STOCK.................... Unless the trust has redeemed the QUIPS, you will
have the right to convert your QUIPS into shares of
our common stock at any time prior to ,
2029. QUIPS that have been called for redemption
may only be converted before the close of
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<PAGE> 12
business on the applicable redemption date. The
QUIPS will convert into our common stock at a
conversion rate of shares of common stock for
each QUIPS. The conversion rate will be adjusted
for some dilutive events. The conversion rate is
equivalent to a conversion price of $ per share
of our common stock. The last reported sale price
of our common stock on the New York Stock Exchange
Composite Transaction Reporting System on July 30,
1999 was $28 15/16 per share.
REDEMPTION BY THE TRUST.... The trust will redeem all outstanding QUIPS when
the debentures are paid at maturity on
, 2029. In addition, we can
make the trust redeem all or some of the QUIPS at
any time on or after , 2002 by
redeeming the debentures at the redemption price
described on page S-41, plus any accrued and unpaid
distributions. If that happens, the trust will use
the cash it receives from our redemption of the
debentures to redeem, on a pro rata basis, QUIPS of
an aggregate liquidation amount equal to the
aggregate principal amount of the debentures
redeemed.
SPECIAL EVENT EXCHANGE OR
REDEMPTION............... The trust will exchange all outstanding QUIPS for
debentures upon the occurrence of a tax event
described below or a change in law that could
require the trust to register as an investment
company under the Investment Company Act of 1940.
However, upon the occurrence of a tax event, we may
elect to cause the trust to exchange none or fewer
than all of the outstanding QUIPS if we pay
additional amounts to the trust so that the
distributions to holders of the QUIPS are not
reduced because of the tax event. In addition, if a
tax event occurs, we may elect to redeem all of the
debentures at the tax redemption price described in
"Description of the QUIPS -- Special Event Exchange
or Redemption," plus accrued and unpaid interest.
We may only exercise this right within 90 days of
the tax event.
A tax event generally means specified tax changes
that could result in:
- the trust being subject to United States federal
income taxes or more than a de minimis amount of
other governmental charges, or
- the non-deductibility of interest payments on the
debentures.
CONDITIONAL RIGHT TO
SHORTEN STATED MATURITY OF
THE DEBENTURES........... We can shorten the stated maturity of the
debentures to as early as , 2014, if
there are specified tax changes that could result
in the non-deductibility of interest payments on
the debentures, as more fully described on page
S-42 of this prospectus supplement. If we exercise
this option, the trust will redeem all of the
outstanding QUIPS when the debentures are paid on
their new maturity date.
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<PAGE> 13
LIQUIDATION PREFERENCE..... If the trust is liquidated and the debentures are
not distributed to you, you will generally be
entitled to receive $50 per QUIPS plus accrued and
unpaid distributions on each QUIPS you hold.
THE GUARANTEE.............. We will guarantee the trust's payment obligations
on the QUIPS to the extent described in this
prospectus supplement. Under the guarantee, we will
guarantee the trust's payment obligations, but only
to the extent the trust has sufficient funds to
make payments on the QUIPS. If we do not make
payments on the debentures, the trust will not have
sufficient funds to make payments on the QUIPS in
which case you will be unable to rely on the
guarantee for payment. Our obligations under the
guarantee are junior to our obligations to make
payments on all of our other liabilities, except as
discussed elsewhere in this prospectus supplement
and the prospectus.
DISSOLUTION OF THE TRUST
AND DISTRIBUTION OF THE
DEBENTURES............... We have the right to dissolve the trust at any
time. If we exercise this right, the trust will
redeem the QUIPS by distributing the debentures to
you. If a tax event or a change in law that could
require the trust to register as an investment
company under the Investment Company Act of 1940
occurs, the trust may be required to redeem the
QUIPS by distributing the debentures to you.
USE OF PROCEEDS............ The trust will use the proceeds from the sale of
the QUIPS to purchase debentures from us. We will
use the net proceeds from the sale of the
debentures to the trust to repay outstanding
indebtedness under our revolving credit facility
and money market lines of credit and to fund a
portion of the purchase price for the acquisition
of oil and gas property interests from Ocean Energy
described above under "--Recent Developments--Ocean
Energy."
VOTING RIGHTS.............. Generally, you will not have any voting rights as a
holder of QUIPS.
LISTING.................... We have applied to have the QUIPS listed on the New
York Stock Exchange. We expect trading of the QUIPS
to begin within 30 days after they are first
issued. You should be aware that listing will not
ensure that an active trading market will be
available for the QUIPS.
S-13
<PAGE> 14
RISK FACTORS
Your investment in the QUIPS will involve risks. You should carefully
consider the following discussion of risks and the other information included or
incorporated by reference in this prospectus supplement and the prospectus
before deciding whether an investment in the QUIPS is appropriate for you.
THE TRUST MAY BE UNABLE TO MAKE DISTRIBUTIONS ON THE QUIPS IF WE DEFAULT ON OUR
SENIOR DEBT BECAUSE OUR OBLIGATIONS TO PAY ON THE DEBENTURES AND THE GUARANTEE
ARE JUNIOR TO OUR PAYMENT OBLIGATIONS UNDER OUR SENIOR DEBT.
Because of the subordinated nature of the guarantee and the debentures, we:
- will not be permitted to make any payments of principal, including
redemption payments, or interest on the debentures if we default on our
senior debt, as described under "Description of the
Debentures--Subordination" in the prospectus;
- will not be permitted to make payments on the guarantee if we default on
any of our other liabilities, including senior debt, other than
liabilities that are equal or subordinate to the guarantee by their
terms as described under "Description of the Guarantee" in this
prospectus supplement and in the prospectus; and
- must pay all of our senior debt before we make payments on the guarantee
or the debentures if we become bankrupt, liquidate or dissolve.
The QUIPS, the guarantee and the debentures do not limit our ability to
incur additional indebtedness, including indebtedness that ranks senior to the
debentures and the guarantee. As of July 30, 1999, we had approximately $197
million of senior debt.
THE DEBENTURES WILL BE EFFECTIVELY SUBORDINATED TO OBLIGATIONS OF OUR
SUBSIDIARIES.
The debentures will be effectively subordinated to all indebtedness and
other obligations of our subsidiaries. Our subsidiaries are separate legal
entities and have no obligation to pay, or make funds available to pay, any
amounts due on the debentures, the QUIPS or the guarantee. While none of our
domestic operations are conducted by subsidiaries, all of our international
operations are conducted by subsidiaries. At June 30, 1999, our subsidiaries had
total combined assets of $11.5 million, net of receivables from us, and
liabilities of $0.2 million, exclusive of net payables to us. Since Gulf
Australia is a subsidiary that was acquired after June 30, 1999, its assets and
liabilities are not included in the preceding amounts. If exploratory drilling
on our Gulf Australia acreage is successful, we may make significant future
investments.
THE GUARANTEE ONLY GUARANTEES PAYMENTS ON THE QUIPS IF THE TRUST HAS CASH
AVAILABLE.
If we fail to make payments on the debentures, the trust will be unable to
make the related distribution, redemption or liquidation payments on the QUIPS.
In those circumstances, you cannot rely on the guarantee for payments of those
amounts.
Instead, if we are in default under the debentures, you may:
- rely on the property trustee of the trust to enforce the trust's rights
under the debentures, or
- directly sue us or seek other remedies to collect your pro rata share of
payments owed.
OUR RIGHT TO DEFER INTEREST PAYMENTS ON THE DEBENTURES HAS TAX CONSEQUENCES FOR
YOU.
We can, on one or more occasions, defer interest payments on the debentures
for up to 20 consecutive quarterly periods unless an event of default under the
debentures has occurred and is continuing. We, however, cannot defer interest
payments beyond the earlier of the maturity
S-14
<PAGE> 15
date of the debentures, which is , 2029, or the date the debentures are
redeemed. If we defer interest payments on the debentures, the trust will also
defer distribution payments on the QUIPS. During a deferral period,
distributions will continue to accumulate on the QUIPS. Also, additional
distributions will accumulate on any deferred distributions at an annual rate of
%, compounded quarterly, to the extent permitted by law.
If we defer payments of interest on the debentures, you will be required to
accrue interest income, as original issue discount, for the deferred interest
allocable to your share of QUIPS for United States federal income tax purposes.
As a result, you will include that income in gross income for United States
federal income tax purposes prior to your receipt of any cash distributions. In
addition, you will not receive cash from the trust related to that income if you
sell your QUIPS prior to the record date for those distributions. YOU SHOULD
CONSULT WITH YOUR OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF AN
INVESTMENT IN THE QUIPS. Please read "Federal Income Tax Consequences" for more
information regarding the tax consequences of holding and selling the QUIPS.
OUR RIGHT TO DEFER INTEREST PAYMENTS ON THE DEBENTURES MAY AFFECT THE MARKET
PRICE OF THE QUIPS.
If we defer interest payments on the debentures in the future, the market
price of the QUIPS may not fully reflect the value of accrued but unpaid
interest on the debentures. If you sell QUIPS during a deferral period, you may
not receive the same return on investment as someone who continues to hold
QUIPS. In addition, our right to defer interest payments on the debentures may
mean that the market price for the QUIPS will be more volatile than other
securities that are not subject to these rights.
THE TRUST MAY REDEEM THE QUIPS WITHOUT YOUR CONSENT IF SPECIFIED TAX CHANGES
OCCUR THAT RENDER INTEREST PAYMENTS ON THE DEBENTURES NON-DEDUCTIBLE OR SUBJECT
THE TRUST TO TAXATION.
If specified tax changes occur that render interest payments on the
debentures non-deductible or subject the trust to taxation, as more fully
described under "Description of the QUIPS--Special Event Exchange or Redemption"
on page S-34 of this prospectus supplement, we may redeem all of the debentures
at the tax redemption price, plus accrued and unpaid interest. If that happens,
the trust will use the cash it receives from the redemption of the debentures to
redeem the QUIPS.
WE MAY CAUSE THE QUIPS TO BE REDEEMED ON OR AFTER , 2002
WITHOUT YOUR CONSENT.
We may redeem all or some of the debentures at our option at any time on or
after , 2002 without your consent. The redemption price you would
receive in that event may vary, but will be at least 100% of the principal
amount to be redeemed plus any accrued and unpaid interest. Please read
"Description of the QUIPS--Optional Redemption" on page S-35 of this prospectus
supplement. You should assume that we will exercise our redemption option if we
can refinance the debentures at a lower interest rate or if it is otherwise in
our interest to redeem the debentures. If a redemption occurs, the trust will
use the cash it receives from the redemption of the debentures to redeem an
equivalent amount of QUIPS and common securities on a pro rata basis.
WE MAY SHORTEN THE STATED MATURITY OF THE DEBENTURES WITHOUT YOUR CONSENT.
We may shorten the stated maturity of the debentures to as early as
, 2014 if specified tax changes relating to non-deductibility of
interest payments on the debentures occur, as more fully described under
"Description of the Debentures -- Our Right to Shorten Maturity."
S-15
<PAGE> 16
If that happens, the trust will redeem all of the QUIPS when the debentures are
paid on their new maturity date.
DISTRIBUTION OF THE DEBENTURES TO YOU MAY HAVE ADVERSE TAX AND OTHER
CONSEQUENCES FOR YOU.
We may terminate the trust at any time. If that happens, the trust will
redeem the QUIPS by distributing the debentures to you.
Under current United States federal income tax laws, a distribution of
debentures on the dissolution of the trust would not be a taxable event to you.
Nevertheless, if there is a change in law, a distribution of debentures on the
dissolution of the trust could also be a taxable event to you.
We do not currently intend to terminate the trust and cause the
distribution of the debentures. However, we may do so at any time. We anticipate
that we would consider exercising this right if expenses associated with
maintaining the trust were substantially greater than currently expected.
We cannot predict the market prices for the debentures that may be
distributed. Accordingly, any debentures you receive on a distribution, or the
QUIPS you hold pending that distribution, may trade at a discount to the price
you paid to purchase the QUIPS.
Because you may receive debentures, you should make an investment decision
about the debentures in addition to the QUIPS. You should carefully review all
the information regarding the debentures contained in this prospectus supplement
and the prospectus.
TRADING PRICES OF THE QUIPS MAY NOT REFLECT THE VALUE OF ACCRUED BUT UNPAID
INTEREST ON THE DEBENTURES.
The QUIPS are a new series of securities with no established trading
market. The QUIPS may trade at a price that does not fully reflect the value of
accrued but unpaid interest on the underlying debentures. For tax purposes if
you dispose of your QUIPS between record dates for payments of distributions you
will be required to:
- include accrued but unpaid interest on the debentures through the date
of disposition in your gross ordinary income as original issue discount
and
- add that amount to your adjusted tax basis in your pro rata share of the
underlying debentures that you are deemed to have disposed.
Accordingly, you will recognize a capital loss to the extent the selling price,
which may not fully reflect the value of accrued but unpaid interest, is less
than your adjusted tax basis, which will include accrued but unpaid interest. In
most instances, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET FOR THE QUIPS WILL DEVELOP.
Prior to this offering, there has been no public market for the QUIPS. The
underwriters currently plan to make a market in the QUIPS. However, we cannot
assure you that the underwriters will engage in those activities or that an
active trading market for the QUIPS will develop or be sustained. If a market
were to develop, the QUIPS could trade at prices that may be higher or lower
than their initial public offering price depending upon many factors, including:
- prevailing interest rates,
- our common stock price,
- our operating results and
- the market for similar securities.
S-16
<PAGE> 17
YOU WILL HAVE LIMITED VOTING RIGHTS AS A HOLDER OF QUIPS.
As a holder of QUIPS, you will have limited voting rights relating only to
the modification of the QUIPS and, in specified circumstances, the exercise of
the trust's rights as holder of the debentures and the guarantee. Only we can
replace or remove any of the trustees or increase or decrease the number of
trustees.
WE DO NOT INTEND TO PAY, AND ARE RESTRICTED IN OUR ABILITY TO PAY, DIVIDENDS ON
OUR COMMON STOCK INTO WHICH YOUR QUIPS MAY BE CONVERTED.
We have not paid cash dividends in the past and do not intend to pay
dividends on our common stock in the foreseeable future. We have no obligation
to pay dividends on our common stock into which your QUIPS may be converted. We
currently intend to retain any earnings for the future operation and development
of our business. Our ability to make dividend payments in the future will depend
on our future performance and liquidity. In addition, our credit facility
contains restrictions on our ability to pay cash dividends on our capital stock,
including our common stock.
OIL AND GAS PRICES FLUCTUATE WIDELY, AND LOW PRICES FOR AN EXTENDED PERIOD OF
TIME ARE LIKELY TO HAVE A MATERIAL ADVERSE IMPACT ON OUR BUSINESS.
Our revenues, profitability and future growth depend substantially on
prevailing prices for oil and gas. These prices also affect the amount of cash
flow available for capital expenditures and our ability to borrow and raise
additional capital. The amount we can borrow under our credit facility is
subject to periodic redeterminations based in part on changing expectations of
future prices. Lower prices may also reduce the amount of oil and gas that we
can economically produce.
Prices for oil and gas fluctuate widely. For example, oil and gas prices
declined significantly in 1998 and, for an extended period of time, remained
substantially below prices received in recent years. Among the factors that can
cause fluctuations are:
- the domestic and foreign supply of oil and natural gas,
- the price of foreign imports,
- world-wide economic conditions,
- political conditions in oil and gas producing regions,
- the level of consumer demand,
- weather conditions,
- domestic and foreign governmental regulations and
- the price and availability of alternative fuels.
We use hedging transactions with respect to a portion of our oil and gas
production to achieve more predictable cash flow and to reduce our exposure to
price fluctuations. While the use of hedging transactions limits the downside
risk of price declines, their use may also limit future revenues from price
increases. Please read our most recently filed annual report on Form 10-K and
quarterly report on Form 10-Q for a more detailed discussion of our hedging
program.
OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO REPLACE RESERVES THAT WE PRODUCE.
Our future success depends on our ability to find, develop and acquire oil
and gas reserves that are economically recoverable. As is generally the case in
the Gulf Coast region, our producing properties in that region usually have high
initial production rates, followed by steep declines in production. As of
December 31, 1998, our proved reserves, if produced constantly at the then
current rate of production, would produce for approximately five years. As a
result, we must locate and develop or acquire new oil and gas reserves to
replace those being depleted by
S-17
<PAGE> 18
production. We must do this even during periods of low oil and gas prices when
it is difficult to raise the capital necessary to finance these activities.
Without successful exploration or acquisition activities, our reserves,
production and revenues will decline rapidly. We cannot assure you that we will
be able to find and develop or acquire additional reserves at an acceptable
cost.
SUBSTANTIAL CAPITAL IS REQUIRED TO REPLACE AND GROW RESERVES.
We make, and will continue to make, substantial expenditures for the
development, exploration, acquisition and production of oil and natural gas
reserves. We made capital expenditures, including exploration expense, of $253
million during 1997 and $311 million during 1998. We plan to make capital
expenditures, including the acquisition from Ocean Energy but not other future
acquisitions, of $200 million in 1999, of which we spent $48 million as of June
30, 1999. We believe that we will have sufficient cash provided by operating
activities and borrowings under our credit facility to fund planned capital
expenditures in 1999 and 2000. If, however, lower oil and gas prices or
operating difficulties result in our cash flow from operations being less than
expected or limit our ability to borrow under our credit facility, we may be
unable to expend the capital necessary to undertake or complete our drilling
program unless we raise additional funds through debt or equity financings. We
cannot assure you that debt or equity financing, cash generated by operations or
borrowing capacity will be available to meet these requirements.
IF OIL AND GAS PRICES DECREASE, WE MAY BE REQUIRED TO TAKE ADDITIONAL
WRITEDOWNS.
There is a risk that we will be required to writedown the carrying value of
our oil and gas properties when oil and gas prices are low or if we have
substantial downward adjustments to our estimated proved reserves, increases in
our estimates of development costs or deterioration in our exploration results.
We capitalize the costs to acquire, explore for and develop our oil and gas
properties. Under the full cost accounting method we use, the net capitalized
costs of our oil and gas properties may not exceed the present value of
estimated future net cash flows from proved reserves, using constant oil and gas
prices and a 10% discount factor, plus the lower of cost or fair market value of
unproved properties. If net capitalized costs of our oil and gas properties
exceed this limit, we must charge the amount of this excess to earnings. This
type of charge will not affect our cash flow from operating activities, but it
will reduce the book value of our stockholders' equity. We review the carrying
value of our properties quarterly, based on prices in effect as of the end of
each quarter or as of the time of reporting our results. The carrying value of
oil and gas properties is computed on a country-by-country basis. Therefore,
while our properties in one country may be subject to a writedown, our
properties in other countries could be unaffected. Once incurred, a writedown of
oil and gas properties is not reversible at a later date even if oil or gas
prices increase.
Primarily because of low oil and gas prices, we recorded a writedown of the
carrying value of our properties for the year ended December 31, 1998 in the
amount of $105 million. Although the prices of oil and gas have recently
recovered, we cannot assure you that we will not be required to take additional
writedowns in future periods.
RESERVE ESTIMATES ARE INHERENTLY UNCERTAIN AND DEPEND ON MANY ASSUMPTIONS THAT
MAY TURN OUT TO BE INACCURATE.
Estimating accumulations of oil and gas is complex, but it is not an exact
science because of the numerous uncertainties inherent in the process. The
process relies on interpretations of available geologic, geophysic, engineering
and production data. The extent, quality and reliability of this technical data
can vary. The process also requires certain economic assumptions, some
S-18
<PAGE> 19
of which are mandated by the SEC, such as oil and gas prices, drilling and
operating expenses, capital expenditures, taxes and availability of funds. The
accuracy of a reserve estimate is a function of:
- the quality and quantity of available data;
- the interpretation of that data;
- the accuracy of various mandated economic assumptions; and
- the judgment of the persons preparing the estimate.
Our proved reserve information included in this prospectus supplement and
incorporated by reference in the prospectus is based on estimates we prepared.
Estimates prepared by others might differ materially from our estimates.
Actual future production, oil and gas prices, revenues, taxes, development
expenditures, operating expenses and quantities of recoverable oil and gas
reserves most likely will vary from our estimates. Any significant variance
could materially affect the quantities and present value of our reserves. In
addition, we may adjust estimates of proved reserves to reflect production
history, results of exploration and development and prevailing oil and gas
prices. Our reserves may also be susceptible to drainage by operators on
adjacent properties.
You should not assume that the present value of future net cash flows
included in this prospectus supplement or incorporated by reference in the
prospectus is the current market value of our estimated proved oil and gas
reserves. In accordance with SEC requirements, we generally base the estimated
discounted future net cash flows from proved reserves on prices and costs on the
date of the estimate. Actual future prices and costs may be materially higher or
lower than the prices and costs as of the date of the estimate.
WE MAY BE SUBJECT TO RISKS IN CONNECTION WITH FUTURE ACQUISITIONS.
The successful acquisition of producing properties requires an assessment
of several factors, including:
- recoverable reserves;
- future oil and gas prices;
- operating costs; and
- potential environmental and other liabilities.
The accuracy of these assessments is inherently uncertain. In connection
with these assessments, we perform a review of the subject properties that we
believe to be generally consistent with industry practices, which usually
includes on-site inspections and the review of reports filed with the Minerals
Management Service for environmental compliance. Our review will not reveal all
existing or potential problems nor will it permit us 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 and 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 the problems. We are generally not entitled to contractual
indemnification for environmental liabilities and acquire structures on a
property on an "as is" basis.
COMPETITIVE INDUSTRY CONDITIONS MAY NEGATIVELY AFFECT OUR ABILITY TO CONDUCT
OPERATIONS.
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 these properties. Many of our competitors have financial
S-19
<PAGE> 20
resources and exploration and development budgets that are substantially greater
than ours, which may adversely affect our ability to compete with these
companies.
EXPLORATION AND DEVELOPMENT DRILLING IS A HIGH-RISK ACTIVITY.
Our future success will depend on the success of our exploration and
development drilling programs. In addition to the numerous operating risks
described in more detail below, these activities involve the risk that no
commercially productive oil or gas reservoirs will be discovered. In addition,
we often are uncertain as to the future cost or timing of drilling, completing
and producing wells. Furthermore, our drilling operations may be curtailed,
delayed or canceled as a result of a variety of factors, including:
- unexpected drilling conditions;
- pressure or irregularities in formations;
- equipment failures or accidents;
- adverse weather conditions;
- compliance with governmental requirements; and
- shortages or delays in the availability of drilling rigs and the
delivery of equipment.
THE OIL AND GAS BUSINESS INVOLVES MANY OPERATING RISKS THAT CAN CAUSE
SUBSTANTIAL LOSSES; INSURANCE MAY NOT PROTECT US AGAINST ALL THESE RISKS.
The oil and gas business involves a variety of operating risks, including:
- fires;
- explosions;
- blow-outs;
- uncontrollable flows of oil, gas, formation water or drilling fluids;
- natural disasters;
- pipe or cement failures;
- casing collapses;
- embedded oilfield drilling and service tools;
- abnormally pressured formations; and
- environmental hazards such as oil spills, natural gas leaks, pipeline
ruptures and discharges of toxic gases.
If any of these events occur, we could incur substantial losses as a result
of:
- injury or loss of life;
- severe damage to and destruction of property, natural resources and
equipment;
- pollution and other environmental damage;
- clean-up responsibilities;
- regulatory investigation and penalties;
- suspension of our operations; and
- repairs to resume operations.
If we experience any of these problems, our ability to conduct operations
could be adversely affected.
Offshore operations are subject to a variety of operating risks peculiar to
the marine environment, such as capsizing, collisions and damage or loss from
hurricanes or other adverse weather conditions. These conditions can cause
substantial damage to facilities and interrupt production. As a result, we could
incur substantial liabilities that could reduce or eliminate the funds available
for exploration, development and acquisitions, or result in loss of properties.
S-20
<PAGE> 21
We maintain insurance against some, but not all, of these potential risks
and losses. We may elect not to obtain insurance if we believe that the cost of
available insurance is excessive relative to the risks presented. In addition,
pollution and environmental risks generally are not fully insurable. If a
significant accident or other event occurs and is not fully covered by
insurance, it could adversely affect us.
WE HAVE RISKS ASSOCIATED WITH OUR FOREIGN OPERATIONS.
We continue to evaluate and pursue new opportunities for international
expansion in areas where we can use our core competencies. We believe these
areas include offshore Australia, China, West Africa and South America. To date,
we have expanded our operations to Australia and China. If our exploratory
drilling in Australia and China is successful, we may make significant future
investments in these areas.
Ownership of property interests and production operations in areas outside
the United States are subject to the various risks inherent in foreign
operations. These risks may include:
- currency restrictions and exchange rate fluctuations;
- loss of revenue, property and equipment as a result of expropriation,
nationalization, war or insurrection;
- 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;
- labor problems; and
- other uncertainties arising out of foreign government sovereignty over
our international operations.
Our 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, we 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. Four labor unions represent our non-administrative employees
in Australia.
WE DEPEND ON OUR KEY PERSONNEL.
Our operations depend on 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 us.
THE RECENT DEPRESSED FINANCIAL CONDITIONS IN THE OIL AND GAS INDUSTRY MAY CHANGE
OUR EXPLORATION AND DEVELOPMENT PLANS.
The recent low prices for oil and gas have limited the access of many
independent oil and gas companies to the capital necessary to finance
activities. Most oil and gas companies have substantially reduced their capital
budgets for 1999 and 2000. As a result, some of the other working interest
owners of our wells may be unwilling or unable to pay their share of the costs
of projects as they become due. These problems could cause us to change, suspend
or terminate our exploration and development plans with respect to the affected
project.
WE ARE SUBJECT TO COMPLEX LAWS THAT CAN AFFECT THE COST, MANNER OR FEASIBILITY
OF DOING BUSINESS.
Exploration, development, production and sale of oil and gas are subject to
extensive federal, state, local and international regulation. We may be required
to make large expenditures
S-21
<PAGE> 22
to comply with environmental and other governmental regulations. Matters subject
to regulation include:
- discharge permits for drilling operations;
- drilling bonds;
- reports concerning operations;
- the spacing of wells;
- unitization and pooling of properties; and
- taxation.
Under these laws, we could be liable for personal injuries, property
damage, oil spills, discharge of hazardous materials, remediation and clean-up
costs and other environmental damages. Failure to comply with these laws also
may result in the suspension or termination of our operations and subject us to
administrative, civil and criminal penalties. Moreover, these laws could change
in ways that substantially increase our costs. Any such liabilities, penalties,
suspensions, terminations or regulatory changes could materially adversely
affect our financial condition and results of operations.
OUR CERTIFICATE OF INCORPORATION, STOCKHOLDERS RIGHTS AGREEMENT AND BYLAWS
CONTAIN PROVISIONS THAT COULD DISCOURAGE AN ACQUISITION OR CHANGE OF CONTROL OF
OUR COMPANY.
Our stockholders rights agreement, together with certain provisions of our
certificate of incorporation and bylaws, may make it more difficult to effect a
change in control of our company, to acquire us or to replace incumbent
management. These provisions could potentially deprive our stockholders of
opportunities to sell shares of our stock at above-market prices.
WE FACE RISKS REGARDING 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 a temporary inability to process transactions, send
invoices or engage in similar normal business. Please read our most recently
filed annual report on Form 10-K and quarterly report on Form 10-Q for a
discussion of our preparedness with respect to year 2000 issues.
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<PAGE> 23
CAPITALIZATION OF NEWFIELD
The following table shows our unaudited historical capitalization at June
30, 1999. The table also reflects adjustments for the issuance of the QUIPS and
our application of the net proceeds from the sale of the debentures to the trust
as described under "Use of Proceeds" assuming the transaction had occurred on
June 30, 1999. You should read it together with our financial statements and
other information included in the documents incorporated by reference in the
prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt:
Credit facility and money market lines(1)................. $ 60,000 $ --
7.45% Senior Notes due 2007............................... 124,664 124,664
-------- --------
Total long-term debt.............................. 184,664 124,664
-------- --------
Company-obligated mandatorily redeemable convertible
preferred securities of a subsidiary trust................ -- 125,000
-------- --------
Stockholders' equity:
Preferred stock ($0.01 par value; 5,000,000 shares
authorized; no shares issued).......................... -- --
Common stock ($0.01 par value; 100,000,000 shares
authorized; 41,389,899 issued and outstanding)......... 414 414
Additional paid-in capital.................................. 261,939 261,939
Unearned compensation....................................... (4,125) (4,125)
Retained earnings........................................... 82,114 82,114
-------- --------
Total stockholders' equity........................ 340,342 340,342
-------- --------
Total capitalization.............................. $525,006 $590,006
======== ========
</TABLE>
- ---------------
(1) See "Use of Proceeds" for information regarding our credit facility and
money market lines.
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<PAGE> 24
ACCOUNTING TREATMENT OF THE QUIPS
The trust will be treated as our subsidiary for financial reporting
purposes. Accordingly, the accounts of the trust will be included in our
consolidated financial statements. We will account for the QUIPS in our
consolidated balance sheets as a separate line item under Minority Interests
entitled "Company-obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust." We will also include appropriate disclosures
about the QUIPS, the debentures and the guarantee in the notes to our
consolidated financial statements. For financial reporting purposes, we will
record distributions payable on the QUIPS as a non-operating expense on our
consolidated statements of income.
USE OF PROCEEDS
The estimated net proceeds from the offering, after deducting underwriting
discounts and estimated offering expenses, will be approximately $121 million.
If the underwriters exercise their over-allotment option in full, the total net
proceeds will be approximately $139 million. All of the proceeds from the sale
of the QUIPS will be invested by the trust in the debentures. We intend to use a
portion of the proceeds from the sale of the debentures to the trust to repay
outstanding debt under our revolving credit facility and money market lines of
credit, $23 million of which we incurred to fund the purchase of Gulf Australia.
We also intend to use a portion of the proceeds to fund a part of the purchase
price of the acquisition of property interests from Ocean Energy as described
under "Prospectus Supplement Summary--Recent Developments--Ocean Energy." As of
July 30, 1999, we had $69 million of borrowings outstanding under our credit
facility and $3 million of borrowings outstanding under our money market lines
of credit.
Our credit facility is a $225 million revolving facility that matures on
October 31, 2002 with a current available borrowing base of $150 million. As of
June 30, 1999, the effective annual interest rate on the outstanding borrowings
under the credit facility was 5.69%. Our money market lines of credit are with
various banks and the aggregate amount available is limited by our credit
facility to $25 million. Amounts currently outstanding under the credit facility
and money market lines of credit were incurred primarily to fund acquisitions
and exploration and development activities. We expect to borrow additional
amounts under our credit facility and money market lines of credit from time to
time to fund capital expenditures, including pending acquisitions, and for other
general corporate purposes. For a discussion of our pending acquisitions, please
read "Prospectus Supplement Summary--Recent Developments."
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<PAGE> 25
PRICE RANGE OF NEWFIELD COMMON STOCK
Our common stock trades on the New York Stock Exchange under the symbol
"NFX." The following table shows the range of high and low sales prices of our
common stock as reported by the New York Stock Exchange during the periods
shown.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
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 17 13/16
Third Quarter............................................. 24 7/8 15 7/16
Fourth Quarter............................................ 26 7/16 16 5/8
1999
First Quarter............................................. $24 3/4 $14 7/8
Second Quarter............................................ 28 1/2 22 1/8
Third Quarter (through July 30, 1999)..................... 31 3/16 27 7/16
</TABLE>
On July 30, 1999, the last sale price of our common stock as reported on
the New York Stock Exchange was $28 15/16 per share. On June 30, 1999, our
outstanding shares of common stock were held by approximately 3,000 holders of
record.
DIVIDEND POLICY
We have not paid any cash dividends in the past and do not intend to pay
cash dividends on our common stock in the foreseeable future. We currently
intend to retain any earnings for the future operation and development of our
business. Any future cash dividends to holders of our common stock would depend
on future earnings, capital requirements, our financial condition and other
factors deemed relevant by our board of directors. The payment of dividends on
our common stock is restricted by the terms of our credit facility. In addition,
in the event we exercise our right under the indenture to defer the payment of
interest on the debentures, during such extension period we may not declare or
pay dividends or other distributions on our common stock.
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<PAGE> 26
DESCRIPTION OF NEWFIELD FINANCIAL TRUST I
The trust is a statutory business trust created under the Delaware Business
Trust Act on August 28, 1998. The trust was created under a trust agreement
among the trust's initial trustees and us by the filing of a certificate of
trust with the Secretary of State of the State of Delaware. The trust agreement
will be amended and restated in its entirety as of the date the trust initially
issues the QUIPS. The trust agreement has been qualified as an indenture under
the Trust Indenture Act of 1939, as amended.
The trust will have five trustees. Three of them, referred to as
administrative trustees, will be officers of Newfield. First Union National Bank
will serve as the trust's property trustee and First Union Trust Company, NA
will serve as the trust's Delaware trustee.
The trust exists for the purposes of:
- issuing the QUIPS,
- issuing the common securities to Newfield,
- investing the gross proceeds from the sale of the QUIPS and the common
securities in the debentures,
- distributing payments received on the debentures to holders of the QUIPS
and the common securities and
- engaging in only such other activities as are necessary, convenient or
incidental or are specifically authorized in the trust agreement.
The holders of the QUIPS sold in this offering will own all of the trust's
issued and outstanding QUIPS. We will own all of the trust's common securities.
The common securities will represent common undivided beneficial interests in
the assets of the trust with an aggregate liquidation amount equal to at least
3% of the total capital of the trust.
We have agreed to pay for all of the trust's debts and obligations, other
than with respect to the QUIPS and the common securities. We have also agreed to
pay for all of the trust's costs and expenses.
The address of the principal office of the trust is c/o Newfield
Exploration Company, 363 N. Sam Houston Parkway E., Suite 2020, Houston, Texas
77060, and its telephone number is (281) 847-6000.
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<PAGE> 27
DESCRIPTION OF THE QUIPS
The trust will issue the QUIPS pursuant to the terms of the trust
agreement. First Union National Bank, as property trustee, will act as the
indenture trustee under the trust agreement for purposes of the Trust Indenture
Act. The terms of the QUIPS include those stated in the trust agreement and
those made part of the trust agreement by the Trust Indenture Act and the
Delaware Business Trust Act. We have summarized selected provisions of the trust
agreement and the QUIPS below. This summary supplements the description of the
general terms and provisions of the QUIPS provided in the "Description of the
Preferred Securities" section of the prospectus that is attached to this
prospectus supplement and is not complete. For a complete description of the
QUIPS, we encourage you to read this prospectus supplement, the prospectus and
the trust agreement. We have filed a form of trust agreement with the SEC.
GENERAL
The trust agreement authorizes the trust to issue the QUIPS and the common
securities. The QUIPS represent preferred undivided beneficial interests in the
assets of the trust. The common securities represent common undivided beneficial
interests in the assets of the trust. We will own all of the common securities.
The QUIPS and the common securities will rank on par with each other and will
generally have equivalent terms. However, the terms of the QUIPS and the common
securities will differ in the following two respects:
- if an event of default under the trust agreement occurs and is
continuing, the rights of the holders of the common securities to
payments in respect of periodic distributions and payments upon
liquidation, redemption or otherwise will be subordinated to the rights
of the holders of the QUIPS and
- the holders of common securities will have the exclusive right to
appoint, remove or replace the trustees and to increase or decrease the
number of trustees.
The trust may not:
- issue any securities other than the QUIPS and the common securities,
- incur any indebtedness, or
- make any investment other than in the debentures.
The property trustee will own and hold the debentures as trust assets for
the benefit of the holders of the QUIPS and the common securities. We will
guarantee the payment of distributions and payments on redemption or liquidation
of the trust on a subordinated basis, but only if, and to the extent, we have
made corresponding payments to the trust on the debentures. Please read the
"Description of the Guarantee" sections in this prospectus supplement and in the
prospectus.
DISTRIBUTIONS
If you purchase QUIPS, you will be entitled to receive cash distributions
at an annual rate of % of the $50 liquidation preference per QUIPS.
Distributions are cumulative and will begin to accumulate on the date of the
original issuance of the QUIPS, which we expect to be , 1999.
Distributions will be payable quarterly in arrears, on , ,
and of each year beginning , unless we defer
interest payments on the debentures.
The amount of distributions payable for any period will be computed on the
basis of a 360-day year of 12 30-day months. The amount of distributions for any
period shorter than a full month will be computed on the basis of the actual
number of elapsed days based on a 360-day year. If a distribution payment date
is not a business day, the trust will make the distributions on the next
succeeding day that is a business day, without any interest or other payment due
to the
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<PAGE> 28
delay. A "business day" is any day other than a Saturday or Sunday, or a day on
which banking institutions in The City of New York are authorized or required by
law or executive order to remain closed or a day on which the corporate trust
office of the property trustee or indenture trustee is closed for business.
Option to Defer Distributions
We can, on one or more occasions, defer interest payments on the debentures
for up to 20 consecutive quarterly periods unless an event of default with
respect to the debentures has occurred and is continuing. Interest payments will
not be due and payable on the debentures during a deferral period. We cannot,
however, defer interest payments beyond the earlier of the maturity date of the
debentures, which is , 2029, or the date the debentures are
redeemed.
If we defer interest payments on the debentures, the trust will defer
distribution payments on the QUIPS and the common securities. Distributions will
continue to accumulate on the QUIPS and the common securities during a deferral
period. Also, additional cash distributions will accumulate on any deferred
distributions at the annual rate of %, compounded quarterly. We will be
subject to restrictions during a deferral period on our ability to pay dividends
on our capital stock or to make payments on other debt securities that are on a
parity with or junior to the debentures. Please read the "Description of the
Debentures--Option to Extend Interest Payment Period" section of this prospectus
supplement. We do not currently intend to defer interest payments on the
debentures.
We may extend a deferral period prior to the period's termination. However,
we may not extend a deferral period, including all previous and further
extensions of the period, beyond 20 consecutive quarterly interest periods or
the maturity date of the debentures. Once a deferral period ends and we make all
payments due on the debentures, we can commence a new deferral period.
Consequently, there could be multiple deferral periods of varying lengths
throughout the term of the debentures. Please read "Our right to defer interest
payments on the debentures has tax consequences for you" and "Our right to defer
interest payments on the debentures may affect the market price of the QUIPS" in
the "Risk Factors" section of this prospectus supplement.
Payment of Distributions
The trust must pay distributions on the QUIPS on the distribution payment
dates to the extent that the property trustee has cash on hand to make
distributions. The property trustee will maintain that cash in a segregated
non-interest bearing bank account referred to as the "property account." The
only funds the property trustee will have to distribute to the holders of the
QUIPS will be from payments received on the debentures. If we do not make
interest payments on the debentures, the property trustee will not have funds
available to make distributions on the QUIPS. If and to the extent we make
interest payments on the debentures, the property trustee will be obligated to
make distributions on the QUIPS and the common securities on a pro rata basis.
We will guarantee the payment of distributions and other payments on the QUIPS
on a subordinated basis, but only if, and to the extent, we have made
corresponding payments to the trust on the debentures and, as a result, the
property trustee has funds available to make distributions on the QUIPS. Please
read the "Description of the Guarantee" sections in this prospectus supplement
and in the prospectus.
Method of Payment of Distributions
The trust will pay distributions to the holders of the QUIPS as they appear
on the books and records of the trust on the relevant record dates, which will
be the 15th day before the relevant distribution date. As long as the QUIPS
remain in book-entry form, subject to any applicable laws
S-28
<PAGE> 29
and regulations and the provisions of the trust agreement, each payment will be
made as described under "--Book-Entry Only Issuance--The Depository Trust
Company."
CONVERSION RIGHTS
General
Holders of the QUIPS may convert them into our common stock at any time
before the earlier of:
- the close of business on the maturity date of the debentures, or
- in the case of QUIPS called for redemption, the close of business on the
redemption date.
Holders of QUIPS may convert them into common stock at an initial
conversion rate of shares of our common stock for each QUIPS. This
conversion rate is equivalent to a conversion price of $ per share of our
common stock. The initial conversion rate is subject to adjustment as described
below under "--Conversion Price Adjustments--General" and "--Conversion Price
Adjustments--Merger, Consolidation or Sale of Assets of Newfield."
Whenever we issue shares of our common stock upon conversion of the QUIPS
and we have in effect at such time a stockholder rights agreement under which
holders of our common stock are issued rights entitling the holders under
specified circumstances to purchase additional shares of our common stock or
other capital stock, we will issue, together with each share of our common
stock, an appropriate number of rights.
Accrued distributions will not be paid on QUIPS that are converted into our
common stock, except that holders of the QUIPS on a record date for a
distribution will receive the distribution on the distribution date even though
the QUIPS are converted on or after such record date but prior to the
distribution date.
If you wish to exercise your conversion right, you must surrender your
QUIPS together with an irrevocable conversion notice to the property trustee, as
conversion agent, or any other agent appointed for that purpose. The conversion
agent will exchange your QUIPS for an equivalent amount of debentures and
immediately convert the debentures into our common stock on your behalf. You may
obtain copies of the required form of conversion notice from the conversion
agent. If a book-entry system for the QUIPS is in effect, however, the
procedures for converting QUIPS into shares of our common stock will differ.
Please read the "--Book-Entry Only Issuance--The Depository Trust Company"
section of this prospectus supplement.
We will not issue any fractional shares of our common stock as a result of
a conversion of QUIPS. We will pay cash in lieu of a fractional share of common
stock.
Conversion Price Adjustments--General
The initial conversion price is subject to adjustment for some events,
including:
- the issuance of our common stock as a dividend or other distribution on
our common stock,
- specified subdivisions, combinations and reclassifications of our common
stock,
- the issuance to all holders of our common stock of rights or warrants to
purchase our common stock at less than the then current market price,
- payment of dividends or distributions to all holders of our common stock
of our indebtedness, capital stock, cash or assets, excluding any rights
or warrants referred to in the prior bullet point and dividends and
distributions paid solely in cash,
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<PAGE> 30
- payment of dividends or distributions on our common stock paid
exclusively in cash, excluding:
- cash dividends that do not exceed the per share amount of the
immediately preceding regular cash dividend, as adjusted to reflect
any of the events described in the preceding bullet points and
- cash dividends, if the annualized per share amount thereof does not
exceed 12.5% of the market price of our common stock on the trading
day immediately prior to the date of declaration of the dividend,
- a redemption of any rights issued under a rights agreement and
- payment in respect of a tender or exchange offer, other than an odd-lot
offer, made by us or any subsidiary of ours for our common stock in
excess of 110% of the market price of our common stock on the trading
day next succeeding the last date tenders or exchanges may be made in
the tender or exchange offer.
If any action would require adjustment of the conversion price under more
than one of the provisions described above, only one adjustment will be made and
that adjustment will be the amount of adjustment that has the highest absolute
value to the holders of the QUIPS. An adjustment in the conversion price will
not be required unless the adjustment would require a change of at least 1% in
the conversion price then in effect. However, any adjustment that would
otherwise be required to be made shall be carried forward and taken into account
in any subsequent adjustment.
There will be no adjustment of the conversion price in case of the issuance
of any of our common stock (or securities convertible into or exchangeable for
our common stock), except as specifically described above. For example, no
adjustment of the conversion price will be made upon the issuance of any shares
of our common stock under any present or future plan providing for the
reinvestment of dividends or interest payable on our securities or upon the
investment of additional optional amounts in shares of our common stock under
any such plan or the issuance of any shares of our common stock or options or
rights to purchase shares of our common stock under any employee benefit plan or
program of ours or pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security that does not constitute an issuance to all
holders of our common stock of rights or warrants entitling holders of those
rights or warrants to subscribe for or purchase our common stock at less than
the current market price.
From time to time we may, to the extent permitted by law, reduce the
conversion price by any amount for any period of at least 20 business days, in
which case we will give at least 15 days' notice of the reduction. In addition,
we have the option to make reductions in the conversion price, in addition to
those described above, as we deem advisable to avoid or diminish any income tax
to holders of our common stock resulting from any dividend or distribution of
stock or issuance of rights or warrants to acquire stock or from any event
treated as such for tax purposes. Please read the "Federal Income Tax
Consequences--Adjustment of Conversion Price" section in this prospectus
supplement.
Conversion Price Adjustments--Merger, Consolidation or Sale of Assets of
Newfield
In the event that we are a party to:
- a merger, other than a merger that does not result in a
reclassification, conversion, exchange or cancellation of our common
stock, consolidation, sale of all or substantially all of our assets,
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<PAGE> 31
- recapitalization or reclassification of our common stock, other than a
change in par value, or from par value to no par value, or from no par
value to par value or as a result of a subdivision or combination of our
common stock, or
- any compulsory share exchange,
in each case, as a result of which shares of our common stock will be converted
into the right to receive, or will be exchanged for:
- in the case of any transaction other than a transaction involving a
Common Stock Fundamental Change (as defined below) (and subject to funds
being legally available for that purpose under applicable law at the
time of conversion), securities, cash or other property, each QUIPS will
thereafter be convertible into the kind and, in the case of a
transaction that does not involve a Fundamental Change (as defined
below), amount of securities, cash and other property receivable upon
the consummation of the transaction by a holder of that number of shares
of common stock into which a QUIPS was convertible immediately prior to
the transaction, or
- in the case of a transaction involving a Common Stock Fundamental
Change, common stock, each QUIPS will thereafter be convertible (in the
manner described herein) into common stock of the kind received by
holders of common stock (but in each case after giving effect to any
adjustment discussed below relating to a Fundamental Change if the
transaction constitutes a Fundamental Change).
The holders of QUIPS will have no voting rights with respect to any transaction
described in this section.
If any Fundamental Change occurs, then the conversion price in effect will
be adjusted immediately after the Fundamental Change as described below. In
addition, in the event of a Common Stock Fundamental Change, each QUIPS will be
convertible solely into common stock of the kind received by holders of common
stock as a result of the Common Stock Fundamental Change.
The conversion price in the case of any transaction involving a Fundamental
Change will be adjusted immediately after the Fundamental Change so that:
- in the case of a Non-Stock Fundamental Change (as defined below), the
conversion price of the QUIPS will thereupon become the lower of:
- the conversion price in effect immediately prior to the Non-Stock
Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to the preceding paragraphs and
- the result obtained by multiplying the greater of the Applicable Price
(as defined below) or the then applicable Reference Market Price (as
defined below) by a fraction, the numerator of which is $50 and the
denominator of which is (x) the amount of the redemption price per
QUIPS if the redemption date were the date of the Non-Stock
Fundamental Change (or, for the period commencing on the first date of
original issuance of the QUIPS and through , 2000 and the
12-month periods commencing , 2000, , 2001 and
, 2002, the product of %, %, % and %,
respectively, multiplied by $50) plus (y) any then accrued and unpaid
distributions on one QUIPS; and
- in the case of a Common Stock Fundamental Change, the conversion price
of the QUIPS in effect immediately prior to the Common Stock Fundamental
Change, but after giving effect to any other prior adjustments effected
pursuant to the preceding paragraphs, will thereupon be adjusted by
multiplying the conversion price by a fraction, the numerator of
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<PAGE> 32
which is the Purchaser Stock Price (as defined below) and the
denominator of which is the Applicable Price; provided, however, that in
the event of a Common Stock Fundamental Change in which (A) 100% of the
value of the consideration received by a holder of our common stock is
common stock of the successor, acquiror, or other third party (and cash,
if any, is paid only with respect to any fractional interests in that
common stock resulting from the Common Stock Fundamental Change) and (B)
all of our common stock will have been exchanged for, converted into, or
acquired for common stock (and cash with respect to fractional
interests) of the successor, acquiror, or other third party, the
conversion price of the QUIPS in effect immediately prior to the Common
Stock Fundamental Change will be adjusted by multiplying the conversion
price by a fraction the numerator of which is one and the denominator of
which is the number of shares of common stock of the successor,
acquiror, or other third party received by a holder of one share of our
common stock as a result of the Common Stock Fundamental Change.
These conversion price adjustments are designed, in some circumstances, to
reduce the conversion price that would be applicable in Fundamental Change
transactions where all or substantially all of our common stock is converted
into securities, cash, or property and not more than 50% of the value received
by the holders of our common stock consists of stock listed or admitted for
listing subject to notice of issuance on the New York Stock Exchange or a
national securities exchange or quoted on the Nasdaq National Market (a
Non-Stock Fundamental Change, as defined below). This reduction would result in
an increase in the amount of the securities, cash, or property into which each
QUIPS is convertible over that which would have been obtained in the absence of
those conversion price adjustments.
In a Non-Stock Fundamental Change transaction where the initial value
received per share of our common stock (measured as described in the definition
of Applicable Price below) is lower than the then applicable conversion price of
a QUIPS but greater than or equal to the Reference Market Price, the conversion
price will be adjusted as described above with the effect that each QUIPS will
be convertible into securities, cash, or property of the same type received by
the holders of our common stock in the transaction but in an amount per QUIPS
that would at the time of the transaction have had a value equal to the then
applicable redemption price per QUIPS described below under "--Optional
Redemption."
In a Non-Stock Fundamental Change transaction where the initial value
received per share of our common stock (measured as described in the definition
of Applicable Price) is lower than both the conversion price of a QUIPS in
effect prior to any adjustment described above and the Reference Market Price,
the conversion price will be adjusted as described above but calculated as
though the initial value had been the Reference Market Price.
In a Fundamental Change transaction where all or substantially all our
common stock was converted into securities, cash, or property and more than 50%
of the value received by the holders of our common stock consists of listed or
Nasdaq National Market traded common stock (a Common Stock Fundamental Change,
as defined below), the adjustments described above are designed to provide in
effect that (a) where our common stock is converted partly into that common
stock and partly into other securities, cash, or property, each QUIPS will be
convertible solely into a number of shares of that common stock determined so
that the initial value of those shares (measured as described in the definition
of "Purchaser Stock Price" below) equals the value of the shares of our common
stock into which the QUIPS was convertible immediately before the transaction
(measured as described above) and (b) where our common stock is converted solely
into that common stock, each QUIPS will be convertible into the same number of
shares of the common stock receivable by a holder of the number of shares of our
common stock into which the QUIPS was convertible immediately before that
transaction.
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<PAGE> 33
The term "Applicable Price" means (a) in the case of a Non-Stock
Fundamental Change in which the holders of our common stock received only cash,
the amount of cash received by the holder of one share of our common stock and
(b) in the event of any other Non-Stock Fundamental Change or any Common Stock
Fundamental Change, the average of the Closing Prices (as defined below) for our
common stock during the ten trading days prior to and including the record date
for the determination of the holders of our common stock entitled to receive
those securities, cash, or other property in connection with that Non-Stock
Fundamental Change or Common Stock Fundamental Change or, if there is no record
date, the date that the holders of our common stock will have the right to
receive those securities, cash, or other property (that record date or
distribution date being hereinafter referred to as the "Entitlement Date"), in
each case as adjusted in good faith by us to appropriately reflect any of the
events referred to under "--Conversion Price Adjustments--General."
The term "Closing Price" means on any day, the last reported sales price on
that day or, if no sales take place on that day, the average of the reported
closing bid and asked prices on that day, in either case as reported on the New
York Stock Exchange Consolidated Transactions Tape, or, if the common stock is
not listed or admitted to trading on the New York Stock Exchange, on the
principal national securities exchange on which the common stock is listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices as
furnished by any New York Stock Exchange member firm, selected by the trustee
under the indenture for that purpose.
The term "Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value, as determined in good faith by our board of
directors, of the consideration received by holders of our common stock consists
of common stock that for each of the ten consecutive trading days prior to the
Entitlement Date had been admitted for listing or admitted for listing subject
to notice of issuance on a national securities exchange or quoted on the Nasdaq
National Market; provided, however, that a Fundamental Change will not be a
Common Stock Fundamental Change unless either:
- we continue to exist after the occurrence of that Fundamental Change and
the outstanding QUIPS continue to exist as outstanding QUIPS, or
- not later than the occurrence of that Fundamental Change, the
outstanding QUIPS are converted into or exchanged for shares of
convertible preferred stock of any entity succeeding to the business of
our company or a subsidiary of our company, which convertible preferred
stock has powers, preferences, and relative participating, optional or
other rights and qualifications, limitations and restrictions
substantially similar to those of the QUIPS.
The term "Fundamental Change" means the occurrence of any transaction or
event in connection with a plan pursuant to which all or substantially all of
our common stock will be exchanged for, converted into, acquired for or
constitute solely the right to receive securities, cash or other property
(whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise), provided that, in the case of a plan involving more than one of
these transactions or events, for purposes of adjustment of the conversion
price, the Fundamental Change will be deemed to have occurred when substantially
all of our common stock will be exchanged for, converted into, or acquired for
or constitute solely the right to receive securities, cash, or other property,
but the adjustment will be based upon the consideration that a holder of our
common stock received in that transaction or event as a result of which more
than 50% of our common stock will have been exchanged for, converted into, or
acquired for or constitute solely the right to receive securities, cash, or
other property.
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<PAGE> 34
The term "Non-Stock Fundamental Change" means any Fundamental Change other
than a Common Stock Fundamental Change.
The term "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the Closing Prices for the common stock
received in that Common Stock Fundamental Change for the ten consecutive trading
days prior to and including the Entitlement Date, as adjusted in good faith by
us to appropriately reflect any of the events referred to in "--Conversion Price
Adjustments--General."
The term "Reference Market Price" initially means $ (which is an
amount equal to 66 2/3% of the reported last sales price for our common stock on
the New York Stock Exchange Consolidated Transactions Tape on August , 1999),
and in the event of any adjustment of the conversion price other than as a
result of a Non-Stock Fundamental Change, the Reference Market Price will also
be adjusted so that the ratio of the Reference Market Price to the conversion
price after giving effect to any adjustment will always be the same as the ratio
of the initial Reference Market Price to the initial conversion price of the
QUIPS.
SPECIAL EVENT EXCHANGE OR REDEMPTION
The trust will exchange all outstanding QUIPS for debentures upon the
occurrence of a tax event described below or a change in law that could require
the trust to register as an investment company under the Investment Company Act
of 1940. The holders of the QUIPS will receive debentures in a principal amount
equal to the aggregate liquidation preference of the QUIPS to be exchanged and
accrued interest in an amount equal to any unpaid distributions on those QUIPS.
However, upon the occurrence of a tax event, we may elect to cause the trust to
exchange none or fewer than all of the outstanding QUIPS if we pay additional
amounts so that the distributions to holders of the QUIPS are not reduced
because of the tax event. In addition, upon the occurrence of a tax event, we
may elect to redeem all of the debentures at the tax redemption price, plus
accrued and unpaid interest. We may only exercise this right within 90 days
following the occurrence of the tax event.
If we elect to redeem the debentures after a tax event, the trust will use
the proceeds to redeem QUIPS and common securities with an aggregate liquidation
preference equal to the aggregate principal amount of the debentures redeemed at
the tax redemption price plus accrued and unpaid distributions to, but
excluding, the redemption date. The common securities will be redeemed on a pro
rata basis with the QUIPS except that if an event of default under the trust
agreement has occurred, the QUIPS will have a priority over the common
securities with respect to the redemption price.
As used in this prospectus supplement,
(1) if the redemption occurs prior to , 2002, the tax redemption
price will equal the greatest of:
- the principal amount of the debenture or the liquidation preference of
the QUIPS,
- the average of the market price of a QUIPS over the five trading days
immediately before the day on which notice of the redemption is given
and
- the market price of a QUIPS on the trading day immediately before the
day on which notice of the redemption is given; or
(2) if the redemption occurs on or after , 2002, the tax redemption
price will equal the principal amount of the debenture or the
liquidation preference of the QUIPS.
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<PAGE> 35
A tax event will occur if the property trustee, on behalf of the trust,
receives an opinion, rendered by a law firm having a national tax and securities
practice, to the effect that on or after the date of this prospectus supplement
as a result of:
- any amendment to, or change, including any announced prospective change,
in, the laws, or any regulations thereunder, of the United States or any
political subdivision or taxing authority thereof or therein, or
- any official administrative pronouncement or judicial decision
interpreting or applying those laws or regulations,
there is more than an insubstantial risk that:
- the trust is, or will be within 90 days of the date thereof, subject to
United States federal income tax with respect to income accrued or
received on the debentures,
- interest payable by us to the trust on the debentures is not, or within
90 days of the date thereof will not be, deductible by us, in whole or
in part, for United States federal income tax purposes, or
- the trust is, or will be within 90 days of the date thereof, subject to
more than a de minimis amount of other taxes, duties or other
governmental charges.
An investment company event will occur if the property trustee, on behalf
of the trust, receives an opinion, rendered by a law firm having a national tax
and securities practice, to the effect that as a result of the occurrence of a
change in law or regulation or a change in interpretation or application of law
or regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that the trust is or will be
considered an investment company that is required to be registered under the
Investment Company Act, which change becomes effective on or after the date of
this prospectus supplement.
DISTRIBUTION OF THE DEBENTURES
We may dissolve the trust at any time. If that happens, after satisfaction
of liabilities to creditors of the trust as provided by applicable law, we will
cause the trust to distribute the debentures to the holders of the QUIPS and the
common securities. The debentures may also be distributed upon the occurrence of
a tax event and must be distributed upon a change in law that could require the
trust to register as an investment company under the Investment Company Act of
1940 as more fully described above in "--Special Event Exchange or Redemption."
On the date the trust dissolves and the debentures are distributed to the
holders of the QUIPS and the common securities:
- the QUIPS, the guarantee and the common securities will no longer be
outstanding and
- any certificates representing QUIPS will represent beneficial interests
in debentures of an amount equal to the aggregate stated liquidation
amount of, and bearing accrued and unpaid interest equal to accumulated
and unpaid distributions on, those QUIPS and common securities, until
those certificates are presented to us or our agent for transfer or
reissuance.
OPTIONAL REDEMPTION
Except as provided under "--Mandatory Redemption" below and under
"--Special Event Exchange or Redemption" above, the QUIPS may not be redeemed by
the trust prior to , 2002.
On and after that date, upon any redemption by us of debentures, the QUIPS
will be subject to redemption, in whole or in part, at the following redemption
prices expressed as percentages
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<PAGE> 36
of their liquidation preference plus accrued and unpaid distributions, if any,
to the date fixed for redemption if redeemed during the 12-month period
commencing in each of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2002.................................................. . %
2003.................................................. . %
2004.................................................. . %
2005.................................................. . %
2006.................................................. . %
2007.................................................. . %
2008.................................................. . %
2009 and thereafter................................... 100.0%
</TABLE>
The aggregate liquidation preference of the QUIPS and common securities
redeemed will equal the aggregate principal amount of debentures redeemed by us.
The trust may not redeem the QUIPS in part unless all accrued and unpaid
distributions have been paid in full on all outstanding QUIPS for all quarterly
distribution periods terminating on or before the redemption date. If fewer than
all the outstanding QUIPS are to be redeemed, the QUIPS to be so redeemed will
be selected as described under "--Book-Entry Only Issuance--The Depository Trust
Company."
In the event we redeem the debentures upon the occurrence of a tax event as
described under "--Special Event Exchange or Redemption," the QUIPS will be
redeemed at the tax redemption price, together with accrued and unpaid
distributions to, but excluding, the redemption date.
MANDATORY REDEMPTION
Upon repayment at maturity or as a result of the acceleration of the
debentures upon the occurrence of an event of default under the indenture as
described in "Description of the Debentures--Indenture Events of Default," the
QUIPS will be subject to mandatory redemption in whole but not in part by us.
The trust will promptly apply the proceeds from any repayment of the debentures
to redeem on a pro rata basis the QUIPS and the common securities with an
aggregate liquidation preference equal to the aggregate principal amount of the
debentures repaid or redeemed. The trust will redeem the common securities on a
pro rata basis with the QUIPS, unless an event of default under the trust
agreement has occurred and is continuing. If an event of default occurs under
the trust agreement, the QUIPS will have a priority over the common securities
with respect to payment of the redemption price. Subject to the foregoing, the
trust will redeem the QUIPS and the common securities on a pro rata basis if
fewer than all of the outstanding QUIPS and common securities are redeemed.
If a tax event or an investment company event occurs and is continuing, the
trust will exchange QUIPS for debentures unless, in the case of a tax event, we
elect to (a) pay additional amounts so that distributions to holders of the
QUIPS are not reduced as a result of the tax event, or (b) redeem the debentures
(and, as a result, the QUIPS) as described in "--Special Event Exchange or
Redemption."
REDEMPTION PROCEDURES
For a description of procedures that are required to be followed for a
redemption of the QUIPS, please see the "Description of the Preferred
Securities--Redemption Procedures" section in the prospectus.
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<PAGE> 37
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution of the trust, each
holder of the QUIPS or common securities at that time will be entitled to
receive, after satisfaction of liabilities to creditors, an aggregate principal
amount of debentures equal to the aggregate liquidation preference of the QUIPS
or common securities held by that holder. If the property trustee determines
that the distribution of debentures is not practicable, holders of the QUIPS or
common securities will be entitled to receive out of the assets of the trust,
after satisfaction of the liabilities to creditors, distributions in an amount
equal to the aggregate of the stated liquidation preference of the QUIPS or the
common securities, plus accrued and unpaid distributions thereon to the date of
payment.
If, upon any dissolution, the liquidation distribution can be paid only in
part because the trust has insufficient assets on hand legally available to pay
in full the aggregate liquidation distribution, then the amounts payable
directly by the trust on the QUIPS shall be paid on a pro rata basis. The holder
of the common securities will be entitled to receive liquidation distributions
upon any such dissolution on a pro rata basis with the holders of the QUIPS,
except that if an event of default under the trust agreement has occurred and is
continuing, the QUIPS will have priority over the common securities.
The trust will dissolve on the earlier of:
- , , the expiration of its term,
- specified events of bankruptcy, dissolution or liquidation of us,
- the redemption, conversion or exchange of all of the QUIPS and common
securities,
- when all of the debentures have been distributed to the holders of the
QUIPS and the common securities in exchange for all of the QUIPS and the
common securities in accordance with the terms of the QUIPS and the
common securities, or
- upon a decree of judicial dissolution.
MERGERS, CONSOLIDATIONS, CONVERSIONS, AMALGAMATION OR REPLACEMENTS OF THE TRUST
The trust may not consolidate with, convert into, amalgamate with, merge
with or into, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to, any corporation or other person, except
on the terms described in the "Description of the Preferred Securities--Mergers,
Consolidations, Conversions, Amalgamation or Replacements of the Issuer" section
of the prospectus.
EVENTS OF DEFAULT UNDER THE TRUST AGREEMENT; NOTICE; ENFORCEMENT OF CERTAIN
RIGHTS BY HOLDERS OF QUIPS
An event of default under the indenture will constitute an event of default
under the trust agreement with respect to the QUIPS and the common securities.
For a discussion of provisions of the trust agreement relating to notice of an
event of default and the rights of holders of QUIPS upon an event of default,
please read the "Description of the Preferred Securities-- Declaration Events of
Default; Notice" and "--Enforcement of Certain Rights by Holders of Preferred
Securities" sections in the prospectus.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
For a discussion of the voting rights of the holders of the QUIPS and the
terms under which the trust agreement may be amended, please see the "Voting
Rights; Amendment of the Trust Agreement" section in the prospectus.
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<PAGE> 38
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company will act as securities depositary for the
QUIPS. The QUIPS will be issued only as fully-registered securities registered
in the name of DTC or its nominee. One or more fully-registered global QUIPS
certificates, representing the total aggregate number of QUIPS, will be issued
and will be deposited with DTC or pursuant to DTC's instructions.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in a global QUIPS
certificate.
For a discussion of the book-entry procedures, DTC and the events upon
which definitive certificates representing the QUIPS may be issued, please read
the "Description of the Preferred Securities--Certain Book-entry Procedures for
Global Certificates" and "--Exchanges of Book-entry Certificates for
Certificated Preferred Securities" sections in the prospectus.
REGISTRAR, TRANSFER AGENT, PAYING AGENT AND CONVERSION AGENT
In the event the QUIPS do not remain in book-entry only form, the following
provisions will apply.
Payment of distributions and payments on redemption of the QUIPS will be
payable, the transfer of the QUIPS will be registrable, and QUIPS will be
exchangeable for QUIPS of other denominations of a like aggregate liquidation
amount at the corporate trust office of the property trustee; provided that
payment of distributions may be made at the option of the administrative
trustees on behalf of the trust by check mailed to the address of the persons
entitled thereto and that the payment on redemption of any QUIPS will be made
only upon surrender of such QUIPS to the property trustee.
The property trustee will act as registrar, transfer agent and conversion,
paying and exchange agent for the QUIPS.
Registration of transfers or exchanges of QUIPS will be effected without
charge by or on behalf of the trust but only upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange.
The trust will not be required to register or cause to be registered the
transfer of QUIPS after such QUIPS have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
We and certain of our subsidiaries maintain deposit accounts and conduct
other banking and corporate securities transactions and relationships with the
property trustee in the ordinary course of our businesses. In addition, the
property trustee serves as trustee under the indenture relating to our 7.45%
Senior Notes due 2007. For a discussion of the duties of the property trustee
under the trust agreement, please read the "Description of the Preferred
Securities--Information Concerning the Property Trustee" section of the
prospectus.
GOVERNING LAW
The trust agreement, the QUIPS and the common securities are governed by,
and construed in accordance with, the laws of the State of Delaware.
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<PAGE> 39
DESCRIPTION OF THE DEBENTURES
We will issue the debentures under an indenture between us and First Union
National Bank, as indenture trustee. The terms of the debentures include those
stated in the indenture and those made part of the indenture by the Trust
Indenture Act. We have summarized selected provisions of the indenture and the
debentures below. This summary supplements the description of the general terms
and provisions of the debentures in the "Description of the Debentures" section
of the prospectus and is not complete. For a complete description of the
debentures, we encourage you to read this prospectus supplement, the prospectus
and the indenture. We have filed a form of the indenture with the SEC.
We may issue any amount of debt securities under the indenture from time to
time in one or more series. The debentures will be issued as a separate series
of debt securities under the indenture.
You may receive debentures if we exercise our right to terminate the trust.
Therefore, you should carefully review all the information regarding the
debentures contained in this prospectus supplement and in the prospectus. Please
read the "Description of the QUIPS--Distribution of the Debentures" section in
this prospectus supplement.
GENERAL
The debentures will be unsecured and rank junior and subordinate in right
of payment to all of our senior debt. The debentures will be limited in
aggregate principal amount to $128,865,980 ($148,195,877 if the underwriters
exercise their over-allotment option in full), which is the sum of:
- the aggregate stated liquidation preference of the QUIPS and
- the capital contributed by us to the trust in exchange for the common
securities.
The indenture will not limit the incurrence or issuance by us of other
secured or unsecured debt, whether under the indenture or any existing or other
indenture that we may enter into in the future or otherwise.
Concurrently with the issuance of the QUIPS, the trust will invest the
proceeds from the issuance of the QUIPS and the consideration paid by us for the
common securities in the debentures. The debentures will be in the principal
amount equal to the aggregate stated liquidation preference of the QUIPS plus
our concurrent investment in the common securities.
The debentures will not be subject to any sinking fund provision. The
entire principal amount of the debentures will mature, and become due and
payable, together with any accrued and unpaid interest on the debentures, on
, 2029.
INTEREST
The debentures will bear interest at the rate of % per annum from
, 1999. Interest will be payable quarterly in arrears on
, , and of each year, commencing on
, 1999. Interest will be payable to the person in whose name the
debenture is registered, subject to some exceptions, at the close of business on
the business day next preceding an interest payment date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of 12 30-day months. If interest is payable on a date that is
not a business day, then interest will be paid on the next succeeding day that
is a business day without any interest or other payment resulting from the
delay.
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<PAGE> 40
Accrued interest that is not paid on the applicable interest payment date
will bear additional interest, to the extent permitted by applicable law, at the
stated annual rate, compounded quarterly.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no event of default under the indenture has occurred and is
continuing, we can, on one or more occasions, defer interest payments on the
debentures for up to 20 consecutive quarterly periods. We do not currently
intend to defer interest payments on the debentures. We will not be obligated to
pay interest on the debentures during a deferral period.
We may extend a deferral period prior to the period's termination. However,
we may not extend a deferral period, including all previous and further
extensions of the period, beyond 20 consecutive quarterly interest periods or
the maturity date of the debentures. On the interest payment date occurring at
the end of each deferral period, we will pay to the holders of debentures all
accrued and unpaid interest on the debentures, together with interest on that
interest at the stated annual rate, compounded quarterly, to the extent
permitted by applicable law. Once we make all interest payments due on the
debentures, we can commence a new deferral period, subject to the same
limitations. Consequently, there could be multiple deferral periods of varying
lengths throughout the term of the debentures. During a deferral period,
interest will continue to accrue and holders of the debentures (or holders of
the QUIPS while the QUIPS are outstanding) will be required to recognize
interest income for United States federal income tax purposes. Please read the
"Federal Income Tax Consequences--Original Issue Discount" section of this
prospectus supplement.
During any deferral period, neither we nor our subsidiaries will:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our
capital stock, or
- make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any of our debt securities (including guarantees
for money borrowed), that rank on par with or junior in interest to the
debentures.
However, we may:
- make dividend, redemption, liquidation, interest, principal or guarantee
payments where the payment is made by way of securities (including
capital stock) that rank on par with or junior to the securities on
which that dividend, redemption, interest, principal or guarantee
payment is being made,
- make redemptions or purchases of any rights pursuant to any rights
agreement and the declaration of a dividend of those rights or the
issuance of preferred stock under those plans in the future,
- make payments under the guarantee,
- make purchases of our common stock related to the issuance of our common
stock under any of our benefit plans for our directors, officers or
employees,
- do any of the foregoing if it is the result of a reclassification of our
capital stock or the exchange or conversion of one series or class of
our capital stock for another series or class of our capital stock and
- purchase fractional interests in shares of our capital stock pursuant to
the conversion or exchange provisions of that capital stock or the
security being converted or exchanged.
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<PAGE> 41
We will give the property trustee, the administrative trustees and the
debenture trustee notice of our election to begin a deferral period at least one
business day prior to the earlier of:
- the record date for distributions that would have otherwise been payable
on the QUIPS (or, if no QUIPS are outstanding, the debentures) but for
the deferral, and
- the date the property trustee is required to give notice to the New York
Stock Exchange or other applicable self-regulatory organization or to
holders of the QUIPS (or, if no QUIPS are outstanding, the debentures)
of that record date.
The property trustee will give notice of our election to begin a deferral
period to the holders of the QUIPS.
MANDATORY REDEMPTION
Upon repayment at maturity or as a result of acceleration upon the
occurrence of an event of default under the indenture, we will redeem the
debentures, in whole but not in part, at a redemption price equal to 100% of the
principal amount of the debentures, together with any accrued and unpaid
interest on the debentures. Any payment pursuant to this provision will be made
prior to 12:00 noon, New York City time, on the date of repayment or
acceleration or at another time on an earlier date as the parties agree. The
debentures are not entitled to the benefit of any sinking fund or, except as
described above or as a result of acceleration, any other provision for
mandatory prepayment.
OPTIONAL REDEMPTION
On and after , 2002, we may, at any time and from time to time,
redeem the debentures, in whole or in part, upon giving notice as provided
below, during the 12-month periods commencing in each of the following
years and at the following redemption prices expressed as percentages of the
principal amount of the debentures being redeemed plus any accrued but unpaid
interest on the portion being redeemed.
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2002.................................................. .%
2003.................................................. .%
2004.................................................. .%
2005.................................................. .%
2006.................................................. .%
2007.................................................. .%
2008.................................................. .%
2009 and thereafter................................... 100.0%
</TABLE>
For so long as the trust is the holder of all the outstanding debentures,
the proceeds of any redemption will be used by the trust to redeem the QUIPS and
the common securities in accordance with their terms. We may not redeem the
debentures in part unless all accrued and unpaid interest has been paid in full
on all outstanding debentures. See "Description of the QUIPS--Optional
Redemption."
We also will have the right to redeem the debentures, at the tax redemption
price plus accrued and unpaid interest, if a tax event occurs and is continuing
as described in "Description of the QUIPS--Special Event Exchange or
Redemption."
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<PAGE> 42
REDEMPTION PROCEDURES
Notices of any redemption of the debentures and the procedures for
redemption will be as provided with respect to the QUIPS under the "Description
of the Preferred Securities--Redemption Procedures" section of the prospectus.
Notice of any redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of debentures to be redeemed at
its registered address. Unless we default in payment of the redemption price, on
and after the redemption date interest will cease to accrue on the debentures or
portions of the debentures called for redemption.
CONVERSION OF THE DEBENTURES INTO OUR COMMON STOCK
The debentures will be convertible at the option of the holders of the
debentures into our common stock, at any time prior to redemption or maturity,
initially at the rate of shares of our common stock for each $50
principal amount of debentures (equivalent to a conversion price of $ per
share of common stock), subject to the conversion price adjustments described
under "Description of the QUIPS--Conversion Rights." The trust will agree not to
convert debentures it holds except pursuant to a notice of conversion delivered
to the conversion agent by a holder of the QUIPS.
Upon surrender of the QUIPS to the conversion agent for conversion, the
trust will deliver a commensurate principal amount of debentures to the
conversion agent on behalf of the holder of the QUIPS so converted. Upon
delivery of those debentures the conversion agent will convert such debentures
into our common stock on behalf of the holder. Our delivery to the holders of
the debentures, through the conversion agent, of the fixed number of shares of
our common stock into which the debentures are convertible, together with the
cash payment, if any, in lieu of fractional shares, will be deemed to satisfy
our obligation to pay the principal amount of the debentures so converted and
any accrued and unpaid interest on those debentures at the time of the
conversion.
OUR RIGHT TO SHORTEN MATURITY
If a tax event occurs, we will have the right to shorten the stated
maturity of the debentures to the minimum extent required, but not to a maturity
of less than 15 years from the date of their original issuance, so that in the
opinion of counsel to us, which counsel shall have a national tax and securities
practice, after shortening the stated maturity, interest paid on the debentures
will be deductible for federal income tax purposes. Please read "Description of
the QUIPS--Special Event Exchange or Redemption" for a description of tax
events.
If we exercise our right and shorten the stated maturity of the debentures,
the trust will redeem all of the outstanding QUIPS when the debentures are paid
on their new maturity date.
INDENTURE EVENTS OF DEFAULT
The indenture will provide that any one or more of the following described
events that has occurred and is continuing constitutes an event of default with
respect to the debentures:
- failure for 30 days to pay any interest on the debentures, when due
(subject to the deferral of any due date in the case of a deferral
period);
- failure to pay any principal or premium, if any, on the debentures when
due whether at maturity, upon redemption by declaration or otherwise;
- failure by us to deliver shares of our common stock upon an appropriate
election by holders of debentures to convert those debentures;
- failure to observe or perform in any material respect some of the other
covenants contained in the indenture for 90 days after written notice to
us from the indenture trustee or to the indenture trustee and us from
the holders of at least 25% in aggregate
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<PAGE> 43
outstanding principal amount of the debentures or from the holders of at
least 25% in aggregate liquidation preference of the QUIPS; or
- certain events of bankruptcy, insolvency or reorganization of us.
For a discussion of remedies for holders of the debentures and the QUIPS
upon an event of default under the indenture, please see the "Description of the
Debentures--Debenture Events of Default" and "-- Enforcement of Certain Rights
by Holders of Preferred Securities" sections of the prospectus.
SUBORDINATION
The debentures are subordinate and junior in right of payment to all of our
senior debt to the extent described in the prospectus under the heading
"Description of the Debentures--Subordination."
MODIFICATION OF INDENTURE
For a discussion of the terms under which the indenture may be amended or
modified, please see the "Description of the Debentures--Modification of
Indenture" section of the prospectus.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
We may not consolidate with or merge with or into any other person or
convey, transfer or lease our properties and assets substantially as an entirety
to any person except on the terms described in the "Description of the
Debentures--Consolidation, Merger, Sale of Assets and Other Transactions"
section of the prospectus.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The indenture trustee is under no obligation to exercise any of the powers
vested in it by the indenture at the request of any holder of debentures, unless
offered reasonable indemnity by that holder against the costs, expenses and
liabilities which might be incurred by the debenture trustee. The indenture
trustee is not required to expend or risk its own funds or otherwise incur
personal financial liability in the performance of its duties if the indenture
trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
If any debentures are distributed to holders of QUIPS, those debentures
will be issued in the same form as the QUIPS being replaced. Any global QUIPS
certificate will be replaced by one or more global debt securities registered in
the name of the depositary or its nominee. The Depository Trust Company will act
as securities depositary for the debentures. For a discussion of the book-entry
procedures, DTC and the events upon which definitive certificates evidencing the
debentures may be issued, please read the "Description of the Debentures--Global
Securities" and "--Payment and Paying Agents" sections in the prospectus.
GOVERNING LAW
The indenture and the debentures will be governed by and construed in
accordance with the laws of the State of New York.
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<PAGE> 44
DESCRIPTION OF THE GUARANTEE
In connection with the issuance of the QUIPS, we will enter into a
guarantee agreement for the benefit of the holders of the QUIPS. We have
summarized selected provisions of the guarantee agreement below. This summary
supplements the description of the guarantee agreement provided in the
"Description of the Guarantee" section of the prospectus and is not complete.
For a complete description of the guarantee, we encourage you to read this
prospectus supplement, the prospectus and the guarantee agreement. We have filed
a form of guarantee agreement with the SEC.
GENERAL
To the extent described below, we irrevocably will agree to pay in full to
the holders of the QUIPS on a subordinated basis the following amounts if they
are not paid by the trust:
- any accrued and unpaid distributions on the QUIPS, to the extent the
trust has funds legally available for those payments,
- the redemption price for any QUIPS called for redemption by the trust,
to the extent the trust has funds legally available for those payments
and
- payments upon the dissolution of the trust equal to the lesser of:
- the liquidation preference plus all accrued and unpaid distributions
on the QUIPS, to the extent the trust has funds legally available for
those payments and
- the amount of assets of the trust remaining legally available for
distribution to the holders of the QUIPS.
The guarantee is a guarantee from the time of issuance of the QUIPS. We
will be obligated to make guarantee payments when due, regardless of any
defense, right of set-off or counterclaim that the trust may have or assert. We
may satisfy our obligation to make guarantee payments by either making payments
directly to holders of the QUIPS or by causing the trust to make the payments to
them.
The guarantee only covers distributions and other payments on the QUIPS if
and to the extent we have made corresponding payments on the debentures to the
property trustee. If we do not make those corresponding payments:
- the property trustee will not make distributions on the QUIPS,
- the trust will not have funds available for payments on the QUIPS and
- we will not be obligated to make guarantee payments.
Our obligation to make guarantee payments will be:
- unsecured and
- subordinated and junior in right of payment to all of our other
liabilities and on par with our most senior preferred stock, if any.
S-44
<PAGE> 45
RELATIONSHIP AMONG THE QUIPS, THE DEBENTURES AND THE GUARANTEE
When taken together, the terms of the QUIPS, the debentures and the
guarantee provide a full and unconditional guarantee by us of the payments due
on the QUIPS. The following summary briefly explains the interrelationship
between the QUIPS, the debentures and the guarantee. For a more complete
description of this interrelationship, please read the "Relationship Among the
Preferred Securities, the Debentures and the Guarantee" section of the
prospectus.
THE TRUST WILL BE ABLE TO MAKE PAYMENTS ON THE QUIPS IF WE MAKE PAYMENTS ON THE
DEBENTURES.
As long as we make interest and other payments when due on the debentures,
the trust will have sufficient funds to make distribution and other payments
when due on the QUIPS for the following reasons:
- the trust will hold debentures in an aggregate principal amount equal to
the sum of the aggregate stated liquidation preference of the QUIPS and
the common securities,
- the interest rate and payment dates of the debentures will match the
distribution rate and payment dates of the QUIPS and the common
securities,
- the trustees may not cause or permit the trust to engage in any activity
that is not consistent with its limited purposes of:
- issuing the QUIPS,
- issuing our common securities,
- investing the gross proceeds from the sale of the QUIPS and our common
securities in debentures and
- engaging in only such other activities as are necessary, convenient or
incidental or are specifically authorized in the trust agreement and
- we have agreed to pay for all of the trust's debts and obligations,
other than with respect to the QUIPS and common securities, and costs
and expenses, including the fees and expenses of the trustees, except
for United States withholding taxes.
WE WILL GUARANTEE THAT PAYMENTS WILL BE MADE ON THE QUIPS IF WE MAKE PAYMENTS ON
THE DEBENTURES.
If we make interest or other payments on the debentures, the property
trustee will be obligated to make corresponding distributions or other payments
on the QUIPS. We will guarantee those payments if the trust fails to make them.
The guarantee only covers distributions and other payments on the QUIPS if and
to the extent we have made corresponding payments on the debentures. The
guarantee trustee will have the right to enforce the guarantee on behalf of the
holders of the QUIPS if we fail to make any required guarantee payments. If the
guarantee trustee fails to enforce the guarantee, you may institute a legal
proceeding directly against us to enforce the guarantee trustee's rights under
the guarantee. If we fail to make a guarantee payment, you may also institute a
legal proceeding directly against us to enforce the guarantee. Please read the
"Description of the Guarantee" sections in this prospectus supplement and in the
prospectus.
THE PROPERTY TRUSTEE MAY INSTITUTE LEGAL PROCEEDINGS AGAINST US IF WE FAIL TO
MAKE PAYMENTS ON THE DEBENTURES.
If we do not make interest or other payments on the debentures the trust
will not have funds available to make the corresponding distribution or other
payments on the QUIPS. The property
S-45
<PAGE> 46
trustee, as the holder of the debentures, will have the right to enforce our
obligations on the debentures if an event of default under the debentures
occurs. In addition, the holders of at least a majority in liquidation amount of
the QUIPS will have the right to direct the property trustee with respect to
certain matters under the trust agreement. If the property trustee fails to
enforce its rights, any holder of QUIPS may, after a period of 30 days has
elapsed from such holder's written request to the property trustee to enforce
such rights, institute a legal proceeding against us to enforce such rights.
Please read the "Description of the QUIPS" section in this prospectus supplement
and the "Description of the Preferred Securities" section in the prospectus.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Vinson & Elkins L.L.P., our counsel and counsel to the
trust, the following are the material United States federal income tax
consequences of the ownership and disposition of the QUIPS. Unless otherwise
stated, this summary deals only with the QUIPS held as capital assets by holders
who acquire the QUIPS upon original issuance at the price indicated on the cover
of this prospectus supplement. The tax treatment of a holder may vary depending
on its particular situation. This summary does not deal with special classes of
holders, such as, for example, dealers in securities or currencies, banks,
thrifts, real estate investment trusts, regulated investment companies,
insurance companies, tax exempt organizations, foreign persons, persons holding
QUIPS as part of a straddle or as part of a hedging or conversion transaction or
other integrated investment, or persons whose functional currency is not the
United States dollar. Further, it does not include any description of
alternative minimum tax consequences or the tax laws of any state, local or
foreign government that may be applicable to the QUIPS. This summary is based on
the Internal Revenue Code, Treasury Regulations thereunder and administrative
and judicial interpretations thereof as of the date hereof, all of which are
subject to change (possibly on a retroactive basis). The authorities on which
this summary is based are subject to various interpretations, and it is
therefore possible that the federal income tax treatment of the ownership and
disposition of QUIPS may differ from the treatment described below.
INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE TAX
CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF THE QUIPS, IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES, UNDER FEDERAL INCOME TAX LAWS AND ANY APPLICABLE
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, INCLUDING THE EFFECTS OF POSSIBLE
FUTURE CHANGES IN SUCH LAWS.
CLASSIFICATION OF THE DEBENTURES
We intend to take the position that the debentures will be classified for
federal income tax purposes as indebtedness. No assurance can be given, however,
that such position by us will not be challenged by the IRS or, if so challenged,
that the challenge would not be successful. The remainder of this discussion
assumes that the debentures will be classified for federal income tax purposes
as our indebtedness.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the QUIPS, Vinson & Elkins L.L.P., our
counsel and counsel to the trust, will render its opinion generally to the
effect that, assuming full compliance with the terms of the trust agreement, the
trust will be classified for federal income tax purposes as a grantor trust and
not as a corporation. Accordingly, each holder of QUIPS will be considered the
owner of a pro rata portion of the debentures held by the trust and will be
required to include in gross income its pro rata share of income on the
debentures, whether or not cash is actually distributed to the holder.
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<PAGE> 47
ORIGINAL ISSUE DISCOUNT
As a result of our option to defer the payment of interest on the
debentures, we will treat the debentures as having been issued with original
issue discount ("OID") for federal income tax purposes. Accordingly, each holder
of the QUIPS, including a holder that otherwise uses the cash method of
accounting, generally will be required to include its pro rata share of OID on
the debentures in income as it accrues, in accordance with a constant yield
method based on a compounding of interest, over the entire term of the
subordinated debentures regardless of the receipt of cash distributions on the
QUIPS and regardless of whether we exercise our option to extend any interest
payment period. The amount of OID that will be recognized in any quarter will
approximately equal the amount of interest that accrues on the debentures in the
quarter at the stated interest rate. Actual distributions of stated interest
will not be separately reported as taxable income. Consequently, during a
deferral period, a holder would be required to include OID in gross income even
though we would not make any actual cash payments.
A holder's initial tax basis for its pro rata share of the debentures will
be equal to the holder's pro rata share of their purchase price, and will be
increased by OID includible in the holder's gross income and reduced by the
amount of distributions or other payments received by the holder on the QUIPS.
No portion of the amounts received on the QUIPS will be eligible for the
dividends received deduction.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD ON THE DEBENTURES
Holders of QUIPS will continue to accrue OID with respect to their pro rata
share of the debentures during a deferral period. A holder who disposes of the
QUIPS during a deferral period may suffer a loss because the market will likely
fall if we exercise our option to defer payments of interest on the debentures.
See "--Disposition of the QUIPS" below. Furthermore, the market value of the
QUIPS may not reflect the accumulated distributions that will be paid at the end
of the deferral period, and a holder who sells the QUIPS during the deferral
period will not receive from us any cash related to the interest income the
holder accrued and included in its taxable income under the OID rule (because
that cash will be paid to the holder of record at the end of the deferral
period).
DISTRIBUTION OF DEBENTURES TO HOLDERS OF QUIPS
A distribution by the trust of the debentures as described under the
caption "Description of the QUIPS--Distribution of the Debentures" will be
nontaxable and will result in the holder receiving directly its pro rata share
of the debentures previously held indirectly through the trust, with a holding
period and tax basis equal to the holding period and adjusted tax basis such
holder was considered to have had in its pro rata share of the underlying
debentures prior to such distribution. A holder will include OID income in
respect of debentures received from the trust in the manner described above
under "--Original Issue Discount."
DISPOSITION OF THE QUIPS
Upon a sale, exchange or other disposition of the QUIPS (including a
distribution of cash in redemption of a holder's QUIPS upon redemption or
repayment of the underlying debentures, but excluding a distribution of
debentures), a holder will be considered to have disposed of all or part of its
pro rata share of the debentures, and will recognize gain or loss equal to the
difference between the amount realized and the holder's adjusted tax basis in
its pro rata share of the underlying debentures deemed disposed of. Such gain or
loss will be capital gain or loss and generally will be long-term capital gain
or loss if the QUIPS have been held by the holder for more than one year.
Holders are advised to consult their tax advisors as to the federal income tax
treatment of a capital gain or loss.
S-47
<PAGE> 48
The QUIPS may trade at a price that does not fully reflect the value of
accrued but unpaid interest with respect to the underlying debentures. A holder
who disposes of the QUIPS between record dates for payments of Distributions
thereon will nevertheless be required to include accrued but unpaid interest on
the debentures through the date of disposition in income as OID, and to add such
amount to its adjusted tax basis in its pro rata share of the underlying
debentures deemed disposed of. Accordingly, such a holder will recognize a
capital loss to the extent the selling price (which may not fully reflect the
value of accrued but unpaid interest) is less than the holder's adjusted tax
basis (which will include accrued but unpaid interest). Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for federal income tax purposes.
CONVERSION OF QUIPS INTO OUR COMMON STOCK
A holder of QUIPS generally will not recognize income, gain or loss upon
the conversion, through the conversion agent, of debentures into our common
stock. A holder will, however, recognize gain upon the receipt of cash in lieu
of a fractional share of our common stock equal to the amount of cash so
received less such holder's tax basis in such fractional share. Such holder's
tax basis in the our common stock received upon conversion generally will be
equal to such holder's tax basis in the QUIPS delivered to the conversion agent
for exchange, less the basis allocated to any fractional share for which cash is
received. Such holder's holding period in the our common stock received upon
conversion generally will include the holding period of the QUIPS delivered to
the conversion agent for exchange, except possibly with respect to any of our
common stock received in respect of accrued but unpaid OID.
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Internal Revenue
Code would treat holders of QUIPS as having received a constructive distribution
from us in certain events in which the conversion rate of the debentures was
adjusted. Accordingly, under certain circumstances, a reduction in the
conversion price for the debentures may result in deemed dividend income to
holders of QUIPS to the extent of our current or accumulated earnings and
profits. Holders of QUIPS are advised to consult their tax advisors as to the
federal income tax consequences of adjustments in the conversion rate of QUIPS.
INFORMATION REPORTING TO HOLDERS
The trust will report the OID accrued during the year with respect to the
debentures, and any gross proceeds received by the trust from the retirement or
redemption of the debentures, annually to the holders of record of the QUIPS and
to the IRS. The trust currently intends to deliver such reports to holders of
record not later than January 31 following each calendar year. It is anticipated
that persons who hold QUIPS as nominees for beneficial owners will report the
required tax information to beneficial owners on Form 1099.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, QUIPS, any debentures
distributed by the trust or any of our common stock received on conversion may
be subject to 31% backup withholding unless the holder complies with certain
identification requirements or otherwise qualifies for exemption. Backup
withholding is not an additional tax. Any withheld amounts will generally be
refunded or credited against the holder's federal income tax liability, provided
the required information is timely filed with the IRS.
S-48
<PAGE> 49
UNDERWRITING
We, the trust and the underwriters for this offering named below have
entered into an underwriting agreement with respect to the QUIPS. Subject to
certain conditions, each underwriter has severally agreed to purchase the number
of QUIPS indicated in the following table.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS QUIPS
------------ ---------
<S> <C>
Goldman, Sachs & Co.........................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated..............................................
---------
Total........................................... 2,500,000
=========
</TABLE>
Because the trust will invest the proceeds from the sale of the QUIPS in
the debentures issued by us, the underwriting agreement provides that we will
pay an underwriting commission of $ per QUIPS (or $ for all of the
QUIPS) to the underwriters, as compensation.
QUIPS sold by the underwriters to the public will initially be offered at
the initial public offering price shown on the cover of this prospectus
supplement. Any QUIPS sold by the underwriters to securities dealers may be sold
at a discount of up to $ per QUIPS from the initial public offering price.
Any such securities dealers may resell any QUIPS purchased from the underwriters
to certain other brokers or dealers at a discount of up to $ per QUIPS from
the initial public offering price. If all the QUIPS are not sold at the initial
offering price, the underwriters may change the offering price and the other
selling terms.
If the underwriters sell more QUIPS than the total number shown in the
table above, the underwriters have an option to buy up to an additional 375,000
QUIPS from us to cover those sales. They may exercise that option for 30 days.
If any QUIPS are purchased through this option, the underwriters will severally
purchase the QUIPS in approximately the same proportion shown in the table
above.
We, the trust and our officers and directors have agreed with the
underwriters, during the period 90 days from the date of the underwriting
agreement, not to sell, offer to sell, grant any option for the sale of, or
otherwise dispose of any QUIPS, any security convertible into or exchangeable
into or exercisable for the QUIPS or the debentures or any debt substantially
similar to the debentures or any equity securities substantially similar to the
QUIPS (except for the debentures and the QUIPS issued pursuant to the
underwriting agreement), any of our common stock or any security convertible
into or exchangeable into or exercisable for our common stock or any equity
security substantially similar to the common stock, without the prior written
consent of Goldman, Sachs & Co. However, we may issue common stock on exercise
of outstanding warrants, stock options and convertible securities and grant
options or shares of common stock under existing employee stock option plans.
Prior to this offering, there has been no public market for the QUIPS. We
have applied to list the QUIPS on the New York Stock Exchange. Trading of the
QUIPS on the New York Stock Exchange is expected to commence within a 30-day
period after their initial delivery. In order to meet one of the requirements
for listing the QUIPS on the New York Stock Exchange, the underwriters have
undertaken to sell the QUIPS to a minimum of 400 beneficial owners. The
underwriters have advised us that they intend to make a market in the QUIPS
prior to the commencement of trading on the New York Stock Exchange, but are not
obligated to do so and
S-49
<PAGE> 50
may discontinue market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the QUIPS.
In connection with this offering, the underwriters may purchase and sell
QUIPS and our common stock in the open market. These transactions may include
short sales, stabilizing transactions and purchases to cover positions created
by short sales. Short sales involve the sale by the underwriters of a greater
number of QUIPS than they are required to purchase in the offering and short
sales of our common stock. Stabilizing transactions consist of certain bids or
purchases made for the purpose of preventing or retarding a decline in the
market price of the QUIPS and our common stock while the offering is in
progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the underwriters have repurchased QUIPS sold by
or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the QUIPS and our common stock. As a result, the
price of the QUIPS and our common stock may be higher than the price that
otherwise might exist in the open market. If these activities are commenced,
they may be discontinued by the underwriters at any time. These transactions may
be effected on the New York Stock Exchange, in the over-the-counter market or
otherwise.
We estimate that our total expenses for the offering, excluding
underwriting discounts and commissions, will be approximately $500,000.
We and the trust have agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette Securities Corporation
and Merrill Lynch, Pierce, Fenner & Smith Incorporated have each performed
investment banking and other financial services for us in the past and have
received compensation for these services. The underwriters or their affiliates
may in the future provide investment banking and other financial services to us
or our affiliates for which they will receive compensation.
LEGAL MATTERS
Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware
counsel to the trust and us, will pass upon various matters of Delaware law
relating to the validity of the QUIPS and the trust's common securities, the
enforceability of the trust agreement and the formation of the trust.
Vinson & Elkins L.L.P., Houston, Texas will pass upon the validity of the
guarantee and debentures for us. Baker & Botts, L.L.P., Houston, Texas will pass
upon certain legal matters for the underwriters.
EXPERTS
The audited consolidated financial statements included in our annual report
on Form 10-K for the year ended December 31, 1998 are incorporated by reference
in the prospectus in reliance upon the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
Certain information relating to our proved oil and natural gas reserves and
future net cash flows from those reserves incorporated by reference in the
prospectus is derived from estimates prepared by Ryder Scott Company, L.P. and
is incorporated therein in reliance upon the authority of that firm as experts
with respect to those matters.
S-50
<PAGE> 51
PROSPECTUS
NEWFIELD FINANCIAL TRUST I
NEWFIELD FINANCIAL TRUST II
PREFERRED SECURITIES
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY, AND CONVERTIBLE INTO COMMON STOCK
OF,
NEWFIELD EXPLORATION COMPANY
---------------------
Newfield Financial Trust I and Newfield Financial Trust II, each a
statutory business trust created under the laws of the State of Delaware (each
individually, an "Issuer" and, collectively, the "Issuers"), may each offer and
sell, pursuant to this Prospectus, preferred securities representing undivided
beneficial ownership interests in the assets of such Issuer ("Preferred
Securities"). Newfield Exploration Company ("Newfield" or the "Company") will
directly or indirectly own all of the common securities representing undivided
beneficial ownership interests in the assets of the Issuers ("Common Securities"
and, together with the Preferred Securities, "Trust Securities"). Each Issuer
exists for the sole purpose of issuing the Trust Securities and investing the
proceeds in subordinated debentures ("Debentures") to be issued by the Company
to the applicable Issuer. The Debentures will be convertible into shares of
common stock, par value $.01 per share ("Common Stock"), of the Company. The
Company will guarantee ("Guarantees") to the extent set forth herein or in a
Prospectus Supplement (as defined below) the payment obligations of the Issuers
under their respective Preferred Securities. The aggregate initial offering
price of the Preferred Securities that 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. Preferred Securities, Debentures and Guarantees
are sometimes collectively referred to herein as "Securities." If any Securities
are offered, they will be offered in amounts, at prices and on terms to be
determined in light of market conditions at the time of sale.
The specific terms of any 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) with
respect to Preferred Securities, the specific title, aggregate amount, stated
liquidation preference, number of securities, the rate of payment of periodic
distributions or method of calculating such rate, applicable extension period or
distribution deferral terms, if any, conversion rights, and any terms of
redemption and (ii) with respect to Debentures, the specific designation,
aggregate principal amount, maturity, rate or rates (or method of determining
the same) and time or times for the payment of interest, 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 Debentures. The Prospectus Supplement will also contain information
regarding the public offering price, the net proceeds 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.
Preferred Securities may be sold directly by the applicable Issuer 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 the applicable Issuer, 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." The Prospectus Supplement will state whether the
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 Securities unless
accompanied by a Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 4, 1998.
<PAGE> 52
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 and the Issuers 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 Issuers 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> 53
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, the Issuers or persons acting on their
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."
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<PAGE> 54
THE ISSUERS
Each of the Issuers is a statutory business trust created under Delaware
law pursuant to (i) a separate trust agreement executed by the Company (as
Depositor), the Delaware Trustee and one of the Administrative Trustees (each as
defined herein) and (ii) the filing of a separate certificate of trust with the
Delaware Secretary of State. In connection with an offering of Securities by an
Issuer, such Issuer's trust agreement will be amended and restated in its
entirety (as so amended and restated, a "Trust Agreement"). The Issuers exist
for the sole purposes of (i) issuing and selling Trust Securities, (ii) using
the proceeds from the sale of Trust Securities to acquire Debentures issued by
the Company, (iii) distributing payments received on such Debentures to holders
of Trust Securities in the form of distributions and (iv) engaging in only those
other activities necessary or incidental thereto. Accordingly, Debentures will
be the sole assets of the Issuers and payments under Debentures will be the sole
revenue of the Issuers. The term of the Issuers will be set forth in an
applicable Prospectus Supplement.
All of the Common Securities of each of the Issuers will be owned by the
Company. The Common Securities will rank pari passu, and payments will be made
thereon pro rata, with the Preferred Securities, except that upon the occurrence
and continuance of a Declaration Event of Default (as defined herein) resulting
from an Event of Default under the Indenture (as defined herein), the rights of
the Company as holder of the Common Securities to payment in respect of
distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Preferred Securities. See
"Description of the Preferred Securities -- Subordination of Common Securities."
Upon consummation of an offering of Preferred Securities, the Company will own
Common Securities in an aggregate liquidation amount equal to approximately 3%
of the total capitalization of the applicable Issuer.
The business and affairs of each of the Issuers will be conducted by its
trustees, which will be appointed by the Company as holder of the Common
Securities. Pursuant to the applicable Trust Agreement, the number of trustees
of each of the Issuers initially will be five. Three of the trustees (the
"Administrative Trustees") will be persons who are employees or officers of, or
affiliated with, the Company. A fourth trustee will be a financial institution
unaffiliated with the Company that serves as property trustee (the "Property
Trustee") under such Trust Agreement. See "Description of the Preferred
Securities." The fifth trustee will be a financial institution or an affiliate
thereof that maintains a principal place of business or residence in the State
of Delaware (the "Delaware Trustee".) The Administrative Trustees, the Property
Trustee and the Delaware Trustee are referred to herein as the "Issuer
Trustees."
The Property Trustee with respect to an Issuer will hold the title to any
Debentures held by such Issuer for the benefit of holders of such Issuer's Trust
Securities and will have the power to exercise all of the rights, powers and
privileges as the holder of such Debentures. In addition, the Property Trustee
of an Issuer will maintain exclusive control of a segregated non-interest
bearing bank account (the "Property Account") to hold all payments made in
respect of any Debentures held by such Issuer for the benefit of the holders of
such Issuer's Trust Securities. The Property Trustee will make payments of
distributions and payments on liquidation, redemption and otherwise to the
holders of Trust Securities out of funds from the Property Account. The trustee
under the Company's Guarantee with respect to such Issuer (the "Guarantee
Trustee")will hold such Guarantee for the benefit of the holders of the
associated Preferred Securities. The Company, as the holder of all the Common
Securities of each of the Issuers, will have the right to appoint, remove or
replace any Issuer Trustee and to increase or decrease the number of Issuer
Trustees, provided that the number of Issuer Trustees shall be at least three, a
majority of which will be Administrative Trustees. The duties and obligations of
the Issuer Trustees will be governed by the applicable Trust Agreement. The
rights of the holders of Preferred Securities, including economic rights, right
to information and voting rights, will be as set forth in the applicable Trust
Agreement and the Delaware Business Trust Act, as amended (the "Trust Act").
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<PAGE> 55
The Company will pay, directly or indirectly, all ongoing costs and
expenses of each of the Issuers. See "Description of the Debentures -- Expenses
of Issuer." The principal corporate offices of each of the Issuers are located
at 363 N. Sam Houston Parkway E., Suite 2020, Houston, Texas 77006, and the
telephone number of each of the Issuers is (281) 847-6000.
USE OF PROCEEDS
Except as may otherwise be described in the Prospectus Supplement relating
to an offering of Securities, the net proceeds to the Company from the sale of
Debentures to an Issuer in connection with the investment by such Issuer of all
the proceeds from the sale of Preferred Securities pursuant to this Prospectus
and such Prospectus Supplement ("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.
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<PAGE> 56
DESCRIPTION OF THE PREFERRED SECURITIES
Except as may be set forth in a Prospectus Supplement, the terms of any
Preferred Securities issued by the Issuers will be identical. Accordingly, while
the following discussion refers to a single Issuer, it is equally applicable to
Preferred Securities issued by either of the Issuers. This summary of certain
provisions of the Preferred Securities and the Trust Agreement does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, (i) all the provisions of the Trust Agreement for the applicable Issuer (the
form of which is filed as an exhibit to the Registration Statement and copies of
which will be available for inspection at the corporate trust office of the
Property Trustee in Charlotte, North Carolina) and (ii) the Trust Act. Wherever
particular defined terms of the Trust Agreement are referred to herein, such
defined terms are incorporated herein by reference.
GENERAL
Pursuant to the terms of the Trust Agreement, the Issuer Trustees, on
behalf of the Issuer, will issue the Trust Securities in fully registered form
without interest coupons. The Preferred Securities will represent preferred,
undivided beneficial interests in the assets of the Issuer, and the Common
Securities will represent common, undivided beneficial interests in the assets
of the Issuer. All of the Common Securities will be owned by the Company. The
Preferred Securities will rank pari passu, and payments will be made thereon pro
rata, with the Common Securities except as described under "-- Subordination of
Common Securities." Legal title to the Debentures will be held by the Property
Trustee in trust for the benefit of the holders of the Trust Securities. The
Trust Agreement will not permit the issuance by the Issuer of any securities
other than the Trust Securities or the incurrence of any indebtedness by the
Issuer. The payment of Distributions out of money held by the Issuer, and
payments upon redemption of the Preferred Securities or dissolution of the
Issuer, will be guaranteed by the Company to the extent described under
"Description of the Guarantee." The Guarantee will be held by the Guarantee
Trustee for the benefit of the holders of the Preferred Securities. The
Guarantee will not cover payment of Distributions when the Issuer does not have
sufficient available funds to pay such Distributions. The remedy of a holder of
Preferred Securities in such an event is as described herein in "-- Enforcement
of Certain Rights by Holders of Preferred Securities" and "-- Voting Rights;
Amendment of the Trust Agreement."
DISTRIBUTIONS
Rates, payment dates and other terms relating to Distributions on Offered
Securities will be set forth in the Prospectus Supplement relating to such
Offered Securities. Distributions on each Preferred Security will be payable at
the same rate of interest payable on the Debentures. Distributions will
accumulate from the date of original issuance, or the most recent Distribution
Date (as defined below) and will be payable, unless deferred, quarterly in
arrears, when, as and if available for payment by the Property Trustee, except
as otherwise described below. The amount of Distributions payable for any period
will be computed on the basis of a 360-day year of twelve 30-day months. In the
event that any date on which Distributions are payable on the Preferred
Securities is not a Business Day (as defined below), then payment of the
Distributions payable on such date will be made on the next succeeding day that
is a Business Day and without any additional Distributions or other payment in
respect of any such delay (each date on which Distributions are payable in
accordance with the foregoing, a "Distribution Date"). A "Business Day" shall
mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to remain closed or a day on which the corporate trust office of
the Property Trustee or the Debenture Trustee is closed for business.
So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture (as hereinafter defined) to defer
the payment of interest on the Debentures at any time or from time to time for a
period not exceeding 20 consecutive quarters with respect to each deferral
period (each an "Extension Period"), provided that no Extension Period may
extend beyond the stated maturity of the Debentures. As a consequence of any
such election,
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<PAGE> 57
quarterly Distributions on the Preferred Securities will be deferred by the
Issuer during any such Extension Period. Distributions to which holders of the
Preferred Securities are entitled will accumulate additional Distributions
thereon at the rate per annum set forth herein, compounded quarterly from the
relevant payment date for such Distributions. The term "Distributions" as used
herein shall include any such additional Distributions. During any such
Extension Period, the Company may not, and may not cause any of its subsidiaries
to, (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Company's
capital stock, or (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities (including guarantees
of indebtedness for money borrowed) of the Company that rank pari passu with or
junior to the Debentures (other than (a) any dividend, redemption, liquidation,
interest, principal or guarantee payment by the Company where the payment is
made by way of securities (including capital stock) that rank pari passu with or
junior to the securities on which such dividend, redemption, interest, principal
or guarantee payment is being made, (b) redemptions or purchases of any Rights
(as defined below) pursuant to any Rights Agreement (as defined below), and the
declaration of a dividend of such Rights or the issuance of preferred stock
under such plans in the future, (c) payments under the Guarantee, (d) purchases
of Common Stock related to the issuance of Common Stock under any of the
Company's benefit plans for its directors, officers or employees, (e) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one series or class of the Company's capital stock for another
series or class of the Company's capital stock, and (f) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged). Prior to the termination of any such Extension Period,
the Company may further extend the interest payment period, provided that no
Extension Period may exceed 20 consecutive quarters or extend beyond the stated
maturity of the Debentures. Upon the termination of any such Extension Period
and the payment of all amounts then due on any Interest Payment Date, the
Company may elect to begin a new Extension Period. See "Description of the
Debenture -- Option to Extend Interest Payment Period."
Distributions with respect to the Preferred Securities must be paid on the
dates payable to the extent that the Issuer has funds available for the payment
of such Distributions in the Property Account. The funds of the Issuer available
for distribution to holders of the Preferred Securities will be limited to
payments under the Debentures. See "Description of the Debentures." If the
Company does not make interest payments on such Debentures, the Property Trustee
will not have funds available to pay Distributions on the Preferred Securities.
The payment of Distributions (if and to the extent the Issuer has funds on hand
available for the payment of such Distributions and cash sufficient to make such
payments) will be guaranteed by the Company on a limited basis as set forth
herein under "Description of the Guarantee."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of the Issuer on the relevant record
dates, which shall be the fifteenth day (whether or not a Business Day) next
preceding the relevant distribution date. As long as the Preferred Securities
remain in book-entry form, subject to any applicable laws and regulations and
the provisions of the Trust Agreement, each such payment will be made as
described under "-- Certain Book-Entry Procedures for Global Certificates."
CONVERSION RIGHTS
The Preferred Securities will be convertible at any time through the close
of business on the maturity date of the Debentures (or, in the case of Preferred
Securities called for redemption, through the close of business on the
Redemption Date), at the option of the holder thereof, into shares of Common
Stock. The conversion rate and other terms of such conversion rights with
respect to particular Offered Securities will be set forth in the Prospectus
Supplement relating to such Offered Securities. Whenever the Company issues
shares of Common Stock upon conversion of Preferred Securities and the Company
has in effect at such time a stock purchase rights
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<PAGE> 58
agreement ("Rights Agreement") under which holders of Common Stock are issued
rights ("Rights") entitling the holders under certain circumstances to purchase
an additional share or shares of Common Stock or other capital stock of the
Company, the Company will issue, together with each such share of Common Stock,
an appropriate number of Rights.
A holder of Preferred Securities wishing to exercise its conversion right
shall surrender such Preferred Securities (if in certificated form), together
with an irrevocable conversion notice, to the Property Trustee, as conversion
agent or to such other agent appointed for such purpose (the "Conversion
Agent"), which shall, on behalf of such holder, exchange the Preferred
Securities for a portion of the Debentures and immediately convert such
Debentures into Common Stock. So long as a book-entry system for the Preferred
Securities is in effect, however, the procedures for converting the Preferred
Securities that are in the form of Global Certificates into shares of Company
Common Stock will be as described under "-- Certain Book-Entry Procedures for
Global Certificates." The Company's delivery, upon conversion, of the fixed
number of shares of Common Stock into which the Debentures are convertible
(together with the cash payment, if any, in lieu of any fractional share) shall
be deemed to satisfy the Company's obligation to pay the principal amount at
maturity of the portion of the Debentures so converted and any unpaid interest
accrued on such Debentures at the time of such conversion.
Accrued Distributions will not be paid on Preferred Securities that are
converted, provided that holders of Preferred Securities at the close of
business on a Distribution payment record date will be entitled to receive the
Distribution payable on such Preferred Securities on the corresponding
Distribution Date notwithstanding the conversion of such Preferred Securities on
or subsequent to such Distribution record date but prior to such Distribution
Date. Except as provided in the immediately preceding sentence, the Issuer will
make no payment or allowance for accumulated and unpaid Distributions, whether
or not in arrears, on converted Preferred Securities. The Company will make no
payment or allowance for dividends on the shares of Common Stock issued upon
such conversion. Each conversion will be deemed to have been effected
immediately prior to the close of business on the day on which proper notice was
received by the Conversion Agent.
Shares of Common Stock issued upon conversion of Preferred Securities will
be validly issued, fully paid and non-assessable. No fractional shares of Common
Stock will be issued as a result of conversion, but in lieu thereof such
fractional interest will be paid in cash.
SPECIAL EVENT EXCHANGE OR REDEMPTION
At any time following the occurrence and the continuation of a Tax Event
(as defined below) or an Investment Company Event (as defined below), the
Property Trustee shall direct the Conversion Agent to exchange all outstanding
Trust Securities for Debentures having a principal amount equal to the aggregate
liquidation preference of the Trust Securities to be exchanged and with accrued
interest in an amount equal to any unpaid Distributions on the Trust Securities,
provided that, in the case of a Tax Event, the Company shall have the right to
(a) direct that less than all, or none, of the Trust Securities be so exchanged
if and for so long as the Company shall have elected to pay any Additional Sums
(as defined below) such that the net amounts received by the holders of Trust
Securities not so exchanged in respect of Distributions and other distributions
are not reduced as a result of such Tax Event, and shall not have revoked any
such election or failed to make such payments or (b) redeem the Trust Securities
in the manner set forth below.
If a Tax Event shall occur or be continuing, the Company shall have the
right, upon not less than 30 nor more than 60 days' notice, to redeem the
Debentures at the principal amount thereof plus accrued and unpaid interest, in
whole or in part, for cash on or after a date to be set forth in a Prospectus
Supplement. Promptly following such redemption, Trust Securities with an
aggregate liquidation preference equal to the aggregate principal amount of the
Debentures so redeemed will be redeemed by the Issuer at the liquidation
preference thereof plus accrued and unpaid Distributions thereon to the
redemption date on a pro rata basis. The Common Securities will be redeemed
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<PAGE> 59
on a pro rata basis with the Preferred Securities, except that if a Declaration
Event of Default has occurred and is continuing, the Preferred Securities will
have a priority over the Common Securities with respect to the Redemption Price.
A "Special Event" means a Tax Event or an Investment Company Event. A "Tax
Event" means the receipt by the Property Trustee, on behalf of the Issuer, of an
opinion of counsel, rendered by a law firm having a national tax and securities
practice (which opinion shall not have been rescinded by such law firm), to the
effect that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein
affecting taxation, or as a result of any official administrative pronouncement
or judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or such pronouncement or decision is announced
on or after the date of issuance of the Preferred Securities under the Trust
Agreement and does not pertain to the use of the proceeds of the issuance of the
Debentures, there is more than an insubstantial risk in each case after the date
hereof that (i) the Issuer is, or will be within 90 days of the date thereof,
subject to United States federal income tax with respect to income received or
accrued on the Debentures; (ii) interest payable by the Company on such
Debentures is not, or within 90 days of the date thereof will not be, deductible
by the Company, in whole or in part, for United States Federal income tax
purposes; or (iii) the Issuer is, or will be within 90 days of the date thereof,
subject to more than a de minimis amount of other taxes, duties or other
governmental charges. "Investment Company Event" means the receipt by the
Property Trustee, on behalf of the Issuer, of an opinion of counsel, rendered by
a law firm having a national tax and securities practice (which opinion shall
not have been rescinded by such law firm), to the effect that, as a result of
the occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), there is more than
an insubstantial risk that the Issuer is or will be considered an "investment
company" that is required to be registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Preferred
Securities.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by the Issuer on the
outstanding Trust Securities of the Issuer shall not be reduced as a result of
any additional taxes, duties and other governmental charges to which the Issuer
has become subject as a result of a Tax Event that has occurred and is
continuing.
Holders of Preferred Securities, by receiving and accepting such Preferred
Securities, will be deemed to have agreed to be bound by these exchange
provisions in regard to the exchange of such Preferred Securities for Debentures
on the terms described above.
DISTRIBUTION OF DEBENTURES
At any time, the Company will have the right to dissolve the Issuer and,
after satisfaction of the liabilities of creditors of the Issuer as provided by
applicable law, cause the Debentures to be distributed to the holders of the
Trust Securities in dissolution of the Issuer.
After the liquidation date is fixed for any distribution of Debentures for
Preferred Securities, (i) such Preferred Securities will no longer be deemed to
be outstanding, (ii) DTC (as defined below) or its nominee, as the record holder
of such Preferred Securities, will receive a registered global certificate or
certificates representing the Debentures to be delivered upon such distribution
and (iii) any certificates representing such Preferred Securities not held by
DTC or its nominee will be deemed to represent the Debentures having a principal
amount equal to the liquidation amount of such Preferred Securities, and bearing
accrued and unpaid interest in an amount equal to the accrued and unpaid
Distributions on such Preferred Securities until such certificates are presented
to the Property Trustee for transfer or reissuance.
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OPTIONAL REDEMPTION
The Prospectus Supplement relating to Offered Securities will describe
whether such Offered Securities will be subject to optional redemption, in whole
or in part, by the Issuer and the terms of any such redemption.
MANDATORY REDEMPTION
Upon repayment at maturity or as a result of the acceleration of the
Debentures upon the occurrence of a Debenture Event of Default described under
"Description of the Debentures -- Debenture Events of Default," the Debentures
shall be subject to mandatory redemption, in whole but not in part, by the
Company, and the proceeds from such repayment will be applied to redeem Trust
Securities having an aggregate liquidation preference equal to the aggregate
principal amount of Debentures so repaid or redeemed at a redemption price equal
to the respective liquidation preference of the Trust Securities or, in the case
of a redemption of the Debentures, at the redemption price paid with respect to
the Debentures, as described below, together with accrued and unpaid
distributions on the Trust Securities to the date of redemption. Upon
acceleration of the Debentures, the Trust Securities will be redeemed only when
repayment of the Debentures has actually been received by the Issuer. In
addition, as described above under "-- Special Event Exchange or Redemption,"
upon the occurrence of a Special Event, Trust Securities will be exchanged for
Debentures unless, in the case of a Tax Event that has occurred and is
continuing, the Company shall have elected to (a) pay any Additional Sums such
that the net amounts of Distributions received by the holders of any Preferred
Securities not so exchanged are not reduced as a result of such Tax Event and
shall not have revoked any such election or failed to make such payments or (b)
redeem the Preferred Securities as further set forth in "-- Special Event
Exchange or Redemption."
REDEMPTION PROCEDURES
Trust Securities redeemed on the date fixed for redemption shall be
redeemed at the redemption price with the applicable proceeds from the
contemporaneous redemption of the Debentures. Redemptions of the Trust
Securities shall be made and the redemption price shall be payable on the
redemption date only to the extent that the Issuer has funds on hand available
for the payment of such redemption price. See also "-- Subordination of Common
Securities."
Notice of any redemption (optional or mandatory) of Preferred Securities
(which notice will be irrevocable) will be given by the Property Trustee to each
record holder of Preferred Securities that are being redeemed not fewer than 30
nor more than 60 days prior to the redemption date. If the Property Trustee
gives a notice of redemption in respect of the Preferred Securities, then, by
12:00 noon, New York City time, on the redemption date, to the extent funds are
available, the Property Trustee will deposit irrevocably with DTC or the
Conversion Agent, as the case may be, funds sufficient to pay the applicable
redemption price and will give DTC or the Conversion Agent, as the case may be,
irrevocable instructions and authority to pay the redemption price to the
holders of such Preferred Securities. See "-- Certain Book-Entry Procedures for
Global Certificates." If such Preferred Securities are no longer in book-entry
form, the Property Trustee, to the extent funds are available, will irrevocably
deposit with the Paying Agent funds sufficient to pay the applicable redemption
price and will give the Paying Agent irrevocable instructions and authority to
pay the redemption price to the holders thereof upon surrender of their
certificates evidencing such Preferred Securities. Notwithstanding the
foregoing, Distributions payable on or prior to the redemption date for any
Trust Securities called for redemption shall be payable to the holders of such
Trust Securities as of the relevant record dates for the related distribution
dates. Subject to the preceding sentence, if notice of redemption shall have
been given and funds deposited as required, then upon the date of such deposit,
all rights of the holders of such Trust Securities so called for redemption will
cease, except (i) the right of the holders of such Trust Securities to receive
the redemption price, but without interest on such redemption price, and (ii)
the right to convert such
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Preferred Securities into Common Stock in the manner described herein through
the close of business on the Redemption Date, and such Trust Securities will
cease to be outstanding. In the event that any date fixed for redemption of
Trust Securities is not a Business Day, then payment of the redemption price on
such date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
redemption price in respect of Preferred Securities called for redemption is
improperly withheld or refused and not paid either by the Issuer or by the
Company pursuant to the Guarantee as described under "Description of the
Guarantee," Distributions on such Preferred Securities will continue to accrue
at the then applicable rate, from the redemption date originally established by
the Issuer to the date such redemption price is actually paid, in which case the
actual payment date will be the date fixed for redemption for purposes of
calculating the redemption price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
Payment of the redemption price on the Preferred Securities and any
distribution or exchange of Debentures to holders of Preferred Securities shall
be made to the applicable record holders thereof as they appear on the register
for such Preferred Securities on the relevant record date, which shall be the
fifteenth day (whether or not a Business Day) prior to the redemption date or
liquidation date, as applicable.
If less than all of the Trust Securities issued by the Issuer are to be
redeemed on a redemption date, then the aggregate liquidation preference of such
Trust Securities to be redeemed shall be allocated pro rata among the Trust
Securities. The particular Preferred Securities to be redeemed shall be selected
not more than 60 days prior to the redemption date by the Property Trustee from
the outstanding Preferred Securities not previously called for redemption, by
lot or by such method as the Property Trustee shall deem fair and appropriate
and which may provide for the selection for redemption of portions of the
liquidation preference of the Preferred Securities. The Property Trustee shall
promptly notify the Conversion Agent in writing of the Preferred Securities
selected for redemption and, in the case of any Preferred Securities selected
for partial redemption, the liquidation preference thereof to be redeemed; it
being understood that, in the case of Preferred Securities held by DTC (or any
successor) or its nominee, the distribution of the proceeds of such redemption
will be made in accordance with the procedures of DTC or its nominee. For all
purposes of the Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Preferred Securities shall relate, in
the case of any Preferred Securities redeemed or to be redeemed only in part, to
the portion of the aggregate liquidation preference of Preferred Securities
which has been or is to be redeemed.
Notice of any redemption of Debentures will be mailed at least 30 days but
not more than 60 days before the redemption date to each holder of Debentures to
be redeemed at its registered address. Unless the Company defaults in payment of
the redemption price, on and after the redemption date interest shall cease to
accrue on such Debentures or portions thereof called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the redemption price of, the Trust
Securities, as applicable, shall be made pro rata based on the liquidation
preference of such Trust Securities; provided, however, that if on any
distribution date or redemption date a Declaration Event of Default shall have
occurred and be continuing, no payment of any Distribution on, or redemption
price of, any of the Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of such Common Securities, shall be
made unless payment in full in cash of all
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accumulated and unpaid Distributions on all of the outstanding Preferred
Securities for all Distribution periods terminating on or prior thereto, or in
the case of payment of the redemption price the full amount of such redemption
price on all of the outstanding Preferred Securities then called for redemption,
shall have been made or provided for, and all funds available to the Property
Trustee shall first be applied to the payment in full in cash of all
Distributions on, or the redemption price of, the Preferred Securities then due
and payable.
In the case of any Declaration Event of Default, the Company as holder of
the Common Securities will be deemed to have waived any right to act with
respect to any such Declaration Event of Default until all such Declaration
Events of Default with respect to the Preferred Securities have been cured,
waived or otherwise eliminated. Until all such Declaration Events of Default
with respect to the Preferred Securities have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the holders of
the Preferred Securities and not on behalf of the Company as holder of the
Common Securities, and only the holders of the Preferred Securities will have
the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution of the Issuer
(each, a "Liquidation"), each holder of the Trust Securities at that time will
be entitled to receive, after satisfaction of liabilities to creditors, an
aggregate principal amount of Debentures equal to the aggregate liquidation
preference of Trust Securities held by such holder. If the Property Trustee
determines that the distribution of the Debentures is not practicable, holders
of the Trust Securities will be entitled to receive out of the assets of the
Issuer, after satisfaction of the liabilities to creditors, distributions in an
amount equal to the aggregate of the stated liquidation preference per Preferred
Security plus accrued and unpaid Distributions thereon to the date of payment
(the "Liquidation Distribution"). See "-- Distribution of Debentures."
If such Liquidation Distribution can be paid only in part because the
Issuer has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Issuer on the
Preferred Securities shall be paid on a pro rata basis. The holder of the Common
Securities will be entitled to receive Liquidation Distributions upon any such
liquidation pro rata with the holders of the Preferred Securities, except that
if a Debenture Event of Default has occurred and is continuing, the Preferred
Securities shall have a priority over the Common Securities.
Pursuant to the Trust Agreement, the Issuer shall automatically dissolve
upon expiration of its term and shall dissolve on the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Company; (ii)
the distribution of Debentures to the holders of the Trust Securities, if the
Company, as Depositor, has given written direction to the Property Trustee to
dissolve the Issuer (which direction is optional and wholly within the
discretion of the Company, as Depositor); (iii) the redemption, conversion, or
exchange of all of the Trust Securities; (iv) the entry by a court of competent
jurisdiction of an order for the dissolution of the Issuer; and (v) the
occurrence of a Special Event, except in the case of a Tax Event that has
occurred and is continuing following which the Company has elected (i) to pay
any Additional Sums such that the net amount received by holders of Preferred
Securities in respect of Distributions is not reduced as a result of such Tax
Event and the Company has not revoked any such election or failed to make such
payment or (ii) to redeem all or some of the Preferred Securities as further set
forth in "-- Special Event Exchange or Redemption."
DECLARATION EVENTS OF DEFAULT; NOTICE
An event of default under the Indenture (a "Debenture Event of Default")
constitutes an event of default under the Trust Agreement with respect to the
Trust Securities (a "Declaration Event of Default"), whatever the reason for
such Debenture Event of Default and whether it shall be
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voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body.
Within ten days after the occurrence of any Declaration Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Declaration Event of Default to the holders of the Preferred
Securities, the Administrative Trustees and the Company, as Depositor, unless
such Declaration Event of Default shall have been cured or waived. Except with
respect to defaults in the payment of principal of (or premium, if any) or
interest on any of the Debentures, the Property Trustee may withhold such notice
if the Property Trustee in good faith determines that the withholding of such
notice is in the interests of the holders of the Preferred Securities. The
Company, as Depositor, and the Administrative Trustees, on behalf of the Issuer,
are required to file annually with the Property Trustee a certificate as to
whether or not they are in compliance with all the conditions and covenants
applicable to them under the Trust Agreement.
The holders of a majority in liquidation preference of Preferred Securities
may, by vote, on behalf of the holders of all Preferred Securities, waive any
past Declaration Event of Default in respect of the Preferred Securities and its
consequences, provided that if (a) the underlying Debenture Event of Default is
not waivable under the Indenture, the Declaration Event of Default will also not
be waivable or (b) requires the consent or vote of greater than a majority in
principal amount of the holders of the Debentures ("Super Majority") to be
waived under the Indenture, the Declaration Event of Default may only be waived
by the vote of the holders of the same proportion in liquidation preference of
the Preferred Securities that the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding.
If a Declaration Event of Default has occurred and is continuing, the
Preferred Securities shall have a preference over the Common Securities upon
dissolution of the Issuer as described above. See "-- Liquidation Distribution
upon Dissolution." The existence of a Declaration Event of Default does not
entitle the holders of Preferred Securities to accelerate the maturity thereof.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default has occurred and is continuing, then the
holders of Preferred Securities will rely on the enforcement by the Property
Trustee of its rights as a holder of the Debentures against the Company. In
addition, the holders of a majority in aggregate liquidation preference of the
Preferred Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee or to
direct the exercise of any trust or power conferred upon the Property Trustee
under the Trust Agreement, including the right to direct the Property Trustee to
exercise the remedies available to it as a holder of the Debentures. If the
Property Trustee fails to enforce its rights as the holder of the Debentures
after a request therefor by a holder of Preferred Securities, such holder may,
to the fullest extent permitted by law, proceed to enforce such rights directly
against the Company. Notwithstanding the foregoing, if a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Debentures on the
date such interest or principal is otherwise payable (or in the case of
redemption, on the redemption date), then a holder of Preferred Securities may
directly institute a Direct Action against the Company for enforcement of
payment to such holder of the principal of or interest on the Debentures having
a principal amount equal to the aggregate liquidation preference of the
Preferred Securities of such holder on or after the respective due date
specified in the Debentures. In connection with such Direct Action, the Company
will be subrogated to the rights of such holder of Preferred Securities under
the Trust Agreement to the extent of any payment made by the Company to such
holder of Preferred Securities in such Direct Action. The holders of Preferred
Securities will not be able to exercise directly against the Company any other
remedy available to the Property Trustee unless the Property Trustee first fails
to do so.
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MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any entity into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any entity resulting from any merger,
conversion or consolidation to which such Issuer Trustee shall be a party, or
any entity succeeding to all or substantially all the corporate trust business
of such Issuer Trustee, shall be the successor of such Issuer Trustee under the
Trust Agreement, provided such entity shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, CONVERSIONS, AMALGAMATION OR REPLACEMENTS OF THE ISSUER
The Issuer may not merge with or into, consolidate, convert into,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any corporation or other Person (as
defined below), except as described below or as described in "-- Liquidation
Distribution upon Dissolution." The Issuer may, at the request of the Company,
with the consent of the Administrative Trustees and without the consent of the
Property Trustee, the Delaware Trustee or the holders of the Preferred
Securities, merge with or into, consolidate, convert into, amalgamate, be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to a trust organized as such under the laws of any State;
provided that (i) such successor entity either (a) expressly assumes all of the
obligations of the Issuer with respect to the Preferred Securities or (b)
substitutes for the Preferred Securities other securities having substantially
the same terms as the Preferred Securities (the "Successor Securities") so long
as the Successor Securities rank the same as the Preferred Securities rank in
priority with respect to Distributions and payments upon liquidation, redemption
and otherwise, (ii) the Company expressly appoints a trustee of such successor
entity possessing the same powers and duties as the Property Trustee as the
holder of the Debentures, (iii) the Successor Securities are listed, or any
Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then listed, if any, (iv) such merger, consolidation, conversion,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Preferred Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, conversion, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Preferred Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), (vi) such successor entity has a purpose
substantially identical to that of the Issuer, (vii) prior to such merger,
consolidation, conversion, amalgamation, replacement, conveyance, transfer or
lease, the Company has received an opinion from independent counsel to the
Issuer experienced in such matters to the effect that (a) such merger,
consolidation, conversion, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Preferred Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity) and (b) following such merger, consolidation,
conversion, amalgamation, replacement, conveyance, transfer or lease, neither
the Issuer nor such successor entity will be required to register as an
investment company under the Investment Company Act, and (c) following such
merger, consolidation, conversion, amalgamation, replacement, conveyance,
transfer or lease, the Issuer or such successor entity will be treated as a
grantor trust for United States Federal income tax purposes, and (viii) the
Company or any permitted successor or assignee owns all of the common securities
of such successor entity and guarantees the obligations of such successor entity
under the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Issuer shall not, except with the consent of
holders of 100% in aggregate liquidation preference of the Preferred Securities,
consolidate, convert into, amalgamate, merge with or into, be replaced by or
convey, transfer or lease its properties and assets substantially as an entirety
to any other entity or permit any other entity to consolidate, convert into,
amalgamate, merge with or into, or replace it if such consolidation, conversion,
amalgamation, merger, replacement, conveyance, transfer or lease would cause
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the Issuer or the successor entity to be classified as other than a grantor
trust for United States Federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of the
Guarantee -- Amendments and Assignment" and as otherwise required by law and the
Trust Agreement, the holders of the Preferred Securities have no voting rights.
The Trust Agreement may be amended from time to time by the Company and the
Issuer Trustees, without the consent of the holders of the Preferred Securities
(i) to cure any ambiguity, correct or supplement any provisions in the Trust
Agreement that may be inconsistent with any other provision, or to make any
other provisions with respect to matters or questions arising under the Trust
Agreement that shall not be inconsistent with the other provisions of the Trust
Agreement, (ii) to modify, eliminate or add to any provision of the Trust
Agreement to such extent as shall be necessary to ensure that the Issuer will be
classified for United States federal income tax purposes as a grantor trust at
all times that any Trust Securities are outstanding or to ensure that the Issuer
will not be required to register as an "investment company" under the Investment
Company Act or be classified as other than a grantor trust for United States
federal income tax purposes or (iii) to qualify or maintain the qualification of
the Trust Agreement under the Trust Indenture Act; provided, however, that in
the case of clause (i), such action shall not adversely affect in any material
respect the interests of any holder of Trust Securities, and any such amendments
of the Trust Agreement shall become effective when notice thereof is given to
the holders of Trust Securities. Except as set forth below, the Trust Agreement
may be amended by the Issuer Trustees and the Company with (i) the consent of
holders representing not less than a majority (based upon liquidation
preference) of the outstanding Trust Securities, acting as a single class, and
(ii) receipt by the Issuer Trustees of an opinion of counsel to the effect that
such amendment or the exercise of any power granted to the Issuer Trustees in
accordance with such amendment will not affect the Issuer's status as a grantor
trust for United States federal income tax purposes or the Issuer's exemption
from the status of an "investment company" under the Investment Company Act;
provided, however, if any amendment or proposal that would affect the powers,
preferences or special rights of the Trust Securities would adversely affect the
Preferred Securities or the Common Securities, then only the affected class will
be entitled to vote on such amendment or proposal and such amendment or proposal
will not be effective except with the vote of a majority in liquidation
preference of such class of Trust Securities. In addition to and notwithstanding
the foregoing, without the consent of each holder of Trust Securities, the Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.
If any proposed amendment of the Trust Agreement provides for, or the
Issuer Trustees otherwise propose to effect, the dissolution of the Issuer,
other than pursuant to the terms of the Trust Agreement, then the holders of the
then outstanding Preferred Securities, as a class, will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the holders of the majority in aggregate liquidation
preference of the Preferred Securities.
During the period commencing on the date of occurrence of a Declaration
Event of Default and ending upon the cure of such Declaration Event of Default,
and in other limited circumstances, the holders of a majority in aggregate
liquidation preference of Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Property Trustee or to direct the exercise of any trust or power conferred
upon the Property Trustee under the Trust Agreement, including the right to
direct the Property Trustee to exercise the remedies available to it as the
holder of the Debentures, but excluding the right to direct the Property
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Trustee to consent to an amendment, modification or termination of the
Indenture. So long as any Debentures are held by the Property Trustee, the
Issuer Trustees shall not (i) direct the time, method and place of conducting
any proceeding for any remedy available to the Debenture Trustee or executing
any trust or power conferred on the Debenture Trustee with respect to such
Debentures, (ii) waive any past default that is waivable under Section 5.13 of
the Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable, or (iv) consent to
any amendment, modification or termination of the Indenture or the Debentures
where such consent shall be required, without in each case obtaining the prior
approval of the holders of a majority in aggregate liquidation preference of all
outstanding Preferred Securities (except in the case of clause (iv), which
consent, in the event that no Declaration Event of Default shall occur and be
continuing, shall be of the holders of Trust Securities voting together as a
single class); provided, however, that where a consent under the Indenture would
require the consent of each holder of Debentures affected thereby, no such
consent shall be given by the Property Trustee without the prior written consent
of each holder of the Preferred Securities. The Issuer Trustees shall not revoke
any action previously authorized or approved by a vote of the holders of the
Preferred Securities except by subsequent vote of the holders of the Preferred
Securities. In addition to obtaining the foregoing approvals of the holders of
the Preferred Securities, prior to taking any of the foregoing actions, the
Issuer Trustees shall, at the expense of the Company, obtain an opinion of
counsel to the effect that the Trust will not be taxed as a corporation or
partnership for United States federal income tax purposes on account of such
action. The Property Trustee shall notify each holder of record of the Preferred
Securities of any notice of default with respect to the Debentures.
A waiver of a Debenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of the Trust Securities or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote to be
given to each holder of record of Preferred Securities in the manner set forth
in the Trust Agreement.
No vote or consent of the holders of Preferred Securities is required for
the Issuer to redeem and cancel the Preferred Securities in accordance with the
Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company, the Issuer Trustees or
any affiliate of any Issuer Trustee shall, for purposes of such vote or consent,
be treated as if such Preferred Securities were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "-- Certain Book-Entry Procedures for
Global Certificates."
Holders of the Preferred Securities have no rights to appoint or remove the
Issuer Trustees, who may be appointed, removed or replaced solely by the
Company, as the direct or indirect holder of all the Common Securities.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to The
Depository Trust Company ("DTC"), which shall credit the relevant accounts at
DTC on the applicable distribution dates or, if the Preferred Securities are not
held by DTC, such payments shall be made by check mailed to the address of the
holder entitled thereto as such address shall appear on the Securities Register.
The paying agent (the "Paying Agent") shall initially be the Property Trustee
and any co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Company. The Paying Agent is permitted to resign
as Paying Agent upon 30 days' written notice to
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the Property Trustee and the Company. In the event that the Property Trustee
shall no longer be the Paying Agent, the Administrative Trustees shall appoint a
successor (which shall be a bank or trust company acceptable to the
Administrative Trustees and the Company) to act as Paying Agent.
CERTAIN BOOK-ENTRY PROCEDURES FOR GLOBAL CERTIFICATES
The description of book-entry procedures in this Prospectus includes
summaries of certain rules and operating procedures of DTC that affect transfers
of interests in the global certificate or certificates issued in connection with
sales of Preferred Securities made pursuant to this Prospectus. The Preferred
Securities will be issued as fully registered securities registered in the name
of Cede & Co. (as nominee for DTC). A fully registered global Preferred
Securities certificate (the "Global Certificates") will be issued, representing,
in the aggregate, Preferred Securities sold pursuant to this Prospectus, and
will be deposited with DTC.
The descriptions of the operations and procedures of DTC that follow are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the DTC settlement system and are subject to change
from time to time. The Issuer and the Company take no responsibility for these
operations and procedures and urge investors to contact the system or their
participants directly to discuss these matters.
DTC has advised the Issuer and the Company as follows: DTC is a limited
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "Clearing Agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participants ("participants") and facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system is available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
DTC has advised the Issuer and the Company that its current practice is to
credit, on its internal system, the respective liquidation preference or number
of securities of the individual beneficial interests represented by the Global
Certificate to the accounts with DTC of the participants through which such
interests are to be held. Ownership of beneficial interests in the Global
Certificate will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC or its nominees (with respect
to interests of participants) and the records of participants and indirect
participants (with respect to interests of persons other than participants).
As long as DTC, or its nominee, is the registered holder of the Global
Certificate, DTC or such nominee, as the case may be, will be considered the
sole owner and holder of the Preferred Securities represented by such Global
Certificate for all purposes under the Trust Agreement and the Preferred
Securities.
Except in the limited circumstances described below under " -- Exchanges of
Book-Entry Certificates for Certificated Preferred Securities", owners of
beneficial interests in a Global Certificate will not be entitled to have any
portions of such Global Certificate registered in their names, will not receive
or be entitled to receive physical delivery of Preferred Securities in
definitive form and will not be considered the owners or holders of the Global
Certificate (or any Preferred Securities represented thereby) under the Trust
Agreement or the Preferred Securities.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Certificate to such persons may be
limited to that extent. Because DTC can act only on behalf of its
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participants, which in turn act on behalf of indirect participants and certain
banks, the ability of a person having beneficial interests in a Global
Certificate to pledge such interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing such
interests.
Payments of Distributions on the Global Certificate will be made to DTC or
its nominee as the registered owner thereof. Neither the Issuer, the Company,
the Property Trustee nor any of their respective agents has any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the Global Certificate or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Issuer and the Company expect that DTC or its nominee, upon receipt of
any payment of Distributions in respect of the Global Certificate representing
the Preferred Securities held by it or its nominee, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the liquidation preference or number of
securities represented by the Global Certificate for the Preferred Securities as
shown on the records of DTC or its nominee. The Issuer and the Company also
expect that payments by participants to owners of beneficial interests in the
Global Certificate held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street name." Such payments will be
the responsibility of such participants.
Interests in the Global Certificate will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants. Transfers between participants
in DTC will be effected in accordance with DTC's procedures, and will be settled
in same-day funds.
DTC has advised the Issuer and the Company that it will take any action
permitted to be taken by a holder of certificates for Preferred Securities
(including the presentation of Preferred Securities for exchange as described
below and the conversion of Preferred Securities) only at the direction of one
or more participants to whose account with DTC interests in the Global
Certificate are credited and only in respect of such portion of the aggregate
liquidation preference of the Preferred Securities as to which such participant
or participants has or have given such direction. However, if there is a
Declaration Event of Default, DTC reserves the right to exchange the Global
Certificate for legended Preferred Securities in certificated form, and to
distribute such Preferred Securities to its participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the Global Certificate, they are
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Issuer, the Company, the
Underwriters, the Property Trustee nor any of their respective agents has any
responsibility for the performance by DTC or their participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations, including maintaining, supervising or reviewing the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Certificate.
Redemption notices shall be sent to Cede & Co. as the registered holder of
the Preferred Securities. If less than all of the Preferred Securities are being
redeemed, DTC will determine the amount of interest of each Participant to be
redeemed in accordance with its procedures.
Although voting with respect to the Preferred Securities is limited to the
holders of record of the Preferred Securities, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Preferred Securities. Under its usual procedures, DTC would mail an
omnibus proxy (the "Omnibus Proxy") to the Property Trustee as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those
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direct participants to whose accounts such Preferred Securities are credited on
the record date (identified in a listing attached to the Omnibus Proxy).
Conveyance of notices and other communications by DTC to participants, by
participants to indirect participants, and by participants and indirect
participants to beneficial owners of the Preferred Securities and the voting
rights of participants, indirect participants and beneficial owners of Preferred
Securities will be governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Property Trustee and the Company. In the event that a successor securities
depositary is not obtained, definitive Preferred Securities certificates
representing such Preferred Securities will be required to be printed and
delivered. The Company, at its option, may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor depositary). After a
Debenture Event of Default, the holders of a majority in liquidation preference
of Preferred Securities may determine to discontinue the system of book-entry
transfers through DTC. In any such event, definitive certificates for the
Preferred Securities will be printed and delivered.
EXCHANGES OF BOOK-ENTRY CERTIFICATES FOR CERTIFICATED PREFERRED SECURITIES
A beneficial interest in a Global Certificate may not be exchanged for
certificated Preferred Securities unless (i) DTC (x) notifies the Issuer and the
Company that it is unwilling or unable to continue as depositary for the Global
Certificate or (y) has ceased to be a clearing agency registered under the
Exchange Act and in either case the Issuer and the Company thereupon fail to
appoint a successor depositary, (ii) the Issuer and the Company, at their
option, notify the Property Trustee in writing that they elect to cause the
issuance of the Preferred Securities in certificated form or (iii) there shall
have occurred and be continuing a Declaration Event of Default or any event
which after notice or lapse of time or both would be a Declaration Event of
Default. In all cases, certificated Preferred Securities delivered in exchange
for any Global Certificate or beneficial interests therein will be registered in
the names, and issued in any approved denominations, requested by or on behalf
of DTC (in accordance with its customary procedures). Any such exchange will be
effected through the DWAC system and an appropriate adjustment will be made in
the records of the security registrar to reflect a decrease in the liquidation
preference or number of securities of the Global Certificate.
TRANSFER AGENT, REGISTRAR AND PAYING, CONVERSION AND EXCHANGE AGENT
The Property Trustee will act as transfer agent, registrar and paying,
conversion and exchange agent for the Preferred Securities.
Registration of transfers or exchanges of Preferred Securities will be
effected without charge by or on behalf of the Issuer, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Issuer will not be required to register or cause to be
registered the transfer of the Preferred Securities after such Preferred
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of a
Declaration Event of Default, undertakes to perform only such duties as are
specifically set forth in the Trust Agreement and, after such Declaration Event
of Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no
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Declaration Event of Default has occurred and is continuing and the Property
Trustee is required to decide between alternative causes of action, construe
ambiguous provisions in the Trust Agreement or is unsure of the application of
any provision of the Trust Agreement, and the matter is not one on which holders
of Preferred Securities are entitled under the Trust Agreement to vote, then the
Property Trustee shall take such action as is directed by the Company and, if
not so directed, shall take such action as it deems advisable and in the best
interests of the holders of the Trust Securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Issuer in such a way that the Issuer will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified for United States federal income tax
purposes as a grantor trust and so that the Debentures will be treated as
indebtedness of the Company for United States Federal income tax purposes. In
this connection, the Company and the Administrative Trustees are authorized to
take any action, not inconsistent with applicable law, the certificate of trust
of the Issuer or the Trust Agreement, that the Company and the Administrative
Trustees determine in their discretion to be necessary or desirable for such
purposes, as long as such action does not materially adversely affect the
interests of the holders of the Preferred Securities, except as otherwise
provided in the first sentence of the second paragraph under "-- Voting Rights;
Amendment of the Trust Agreement."
Holders of the Preferred Securities will have no preemptive or similar
rights.
The Issuer may not borrow money or issue debt or mortgage or pledge any of
its assets.
GOVERNING LAW
The Trust Agreement and the Trust Securities will be governed by, and
construed in accordance with, the laws of the State of Delaware.
DESCRIPTION OF THE DEBENTURES
Set forth below is a description of the specific terms of the Debentures in
which the Issuers will invest the proceeds from the issuance and sale of Trust
Securities. The Debentures will be issued under a Junior Convertible
Subordinated Indenture (the "Indenture") between the Company and First Union
National Bank, as trustee (the "Debenture Trustee"), the form of which is filed
as an exhibit to the Registration Statement and copies of which will be
available for inspection at the corporate trust office of the Debenture Trustee
in Charlotte, North Carolina. There will be a separate Indenture for the
Debentures issued to a particular Trust. This summary of certain terms and
provisions of the Debentures and the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Indenture. Whenever particular defined terms of the Indenture are referred to
herein, such defined terms are incorporated herein by reference.
GENERAL
The Debentures will be unsecured and rank junior and subordinate in right
of payment to all Senior Debt of the Company. The Indenture will not limit the
incurrence or issuance of other secured or unsecured debt of the Company,
whether under the Indenture or any existing or other indenture that the Company
may enter into in the future or otherwise. See " -- Subordination."
Concurrently with the issuance of the Preferred Securities, the Issuer will
invest the proceeds thereof and the consideration paid by the Company for the
Common Securities in the Debentures. The Debentures will be in the principal
amount equal to the aggregate stated liquidation preference of the Preferred
Securities plus the Company's concurrent investment in the Common Securities.
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The Debentures will not be subject to any sinking fund provision. The
entire principal amount of the Debentures will mature, and become due and
payable, together with any accrued and unpaid interest thereon, as set forth in
a Prospectus Supplement relating to the Debentures.
INTEREST
The Debentures will bear interest at an annual rate per annum set forth in
a Prospectus Supplement relating to the Debentures, payable quarterly in arrears
on the dates set forth in such Prospectus Supplement (each, an "Interest Payment
Date"), to the person in whose name each Debenture is registered at the close of
business on the Business Day next preceding such Interest Payment Date, subject
to certain exceptions. It is anticipated that, until the dissolution, if any, of
the Issuer, each Debenture will be held in the name of the Property Trustee in
trust for the benefit of the holders of the Trust Securities. The amount of
interest payable for any period will be computed on the basis of a 360-day year
of twelve 30-day months. In the event that any date on which interest is payable
on the Debentures is not a Business Day, then payment of the interest payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay). Accrued
interest that is not paid on the applicable Interest Payment Date will bear
additional interest on the amount thereof (to the extent permitted by law) at
the stated rate per annum, compounded quarterly. The term "interest" as used
herein shall include quarterly interest payments, interest on quarterly interest
payments not paid on the applicable Interest Payment Date and Additional Sums,
as applicable.
GLOBAL SECURITIES
If distributed to holders of the Preferred Securities in connection with
the involuntary or voluntary dissolution of the Issuer, including a dissolution
following the occurrence of a Special Event, the Debentures will be issued in
the same form as the Preferred Securities which such Debentures replace. Any
Global Certificate will be replaced by one or more global certificates (each a
"Global Security") registered in the name of the depositary or its nominee.
Except under the limited circumstances described below, the Debentures
represented by the Global Security will not be exchangeable for, and will not
otherwise be issuable as, Debentures in definitive form. The Global Security
described above may not be transferred except by the depositary to a nominee of
the depositary or by a nominee of the depositary to the depositary or another
nominee of the depositary or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Debentures in
definitive form and will not be considered the holders thereof for any purpose
under the Indenture, and no Global Security representing Debentures shall be
exchangeable, except for another Global Security of like denomination and tenor
to be registered in the name of the depositary or its nominee or to a successor
depositary or its nominee. Accordingly, each beneficial owner of Preferred
Securities must rely on the procedures of DTC or if such person is not a
participant, on the procedures of the participant through which such person owns
its interest to exercise any rights of a holder under the Indenture.
If Debentures are distributed to holders of Preferred Securities in
liquidation of such holders' interests in the Issuer and a Global Security is
issued, DTC will act as securities depositary for the Debentures represented by
such Global Security. For a description of DTC and the specific terms of the
depositary arrangements, see "Description of the Preferred Securities -- Certain
Book-Entry Procedures for Global Certificates." As of the date of this
Prospectus Supplement, the description therein of DTC's book-entry system and
DTC's practices as they relate to purchases, transfers, notices and payments
with respect to the Preferred Securities apply in all material respects to any
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debt obligations represented by one or more Global Securities held by DTC. The
Company may appoint a successor to DTC or any successor depositary in the event
DTC or such depositary is unable or unwilling to continue as a depositary for
the Global Securities.
None of the Company, the Debenture Trustee, any Paying Agent or the
securities registrar will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of the Global Security representing such Debentures or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
A Global Security shall be exchangeable for Debentures registered in the
names of persons other than DTC or its nominee only if (i) DTC notifies the
Company that it is unwilling or unable to continue as a depositary for such
Global Debenture and no successor depositary shall have been appointed by the
Company within 90 days, (ii) if at any time DTC ceases to be a clearing agency
registered under the Exchange Act at a time when DTC is required to be so
registered to act as such depositary and no successor depositary shall have been
appointed by the Company within 90 days, (iii) the Company in its sole
discretion determines that such Global Security shall be so exchangeable, or
(iv) there shall have occurred and be continuing an Event of Default with
respect to such Global Security. Any Global Security that is exchangeable
pursuant to the preceding sentence shall be exchangeable for definitive
certificates registered in such names as DTC shall direct. It is expected that
such instructions will be based upon directions received by DTC from its
Participants with respect to ownership of beneficial interests in such Global
Security.
PAYMENT AND PAYING AGENTS
Payments on Debentures represented by a Global Security will be made to
DTC, as the depositary for the Debentures. In the event Debentures are issued in
definitive form, principal of and premium, if any, and any interest on
Debentures will be payable, the transfer of the Debentures will be registrable,
and the Debentures will be exchangeable for Debentures of other denominations of
a like aggregate principal amount at the corporate office of the Debenture
Trustee in the City of New York or at the office of such Paying Agent or Paying
Agents as the Company may designate, except that at the option of the Company
payment of any interest may be made (i) by check mailed to the address of the
Person entitled thereto as such address shall appear in the securities register
or (ii) by wire transfer to an account maintained by the Person entitled thereto
as specified in the securities register, provided that proper transfer
instructions have been received by the Regular Record Date. Payment of any
interest on Debentures will be made to the Person in whose name such Debentures
are registered at the close of business on the Regular Record Date for such
interest, except in the case of Defaulted Interest. The Regular Record Date for
the interest payable on any Interest Payment Date shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date. The
Company may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent.
Any monies deposited with the Debenture Trustee or any Paying Agent, or
then held by the Company in trust, for the payment of the principal of and
premium, if any, or interest on any Debentures and remaining unclaimed for two
years after such principal and premium, if any, or interest has become due and
payable shall, at the request of the Company, be repaid to the Company and the
holder of such Debentures shall thereafter look, as a general unsecured
creditor, only to the Company for payment thereof.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture to defer the payment of interest
on the Debentures at any time or from time to time for a period not exceeding 20
consecutive quarters with respect to each Extension Period, provided that no
Extension Period may extend beyond the stated maturity of the Debentures. At the
end of such Extension Period, the Company must pay all interest then accrued and
unpaid (together
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with interest thereon at the stated annual rate, compounded quarterly, to the
extent permitted by applicable law). During an Extension Period, interest will
continue to accrue and holders of Debentures (or holders of Preferred Securities
while the Preferred Securities are outstanding) will be required to recognize
interest income for United States Federal income tax purposes.
During any such Extension Period, the Company may not, and may not cause
any subsidiary to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Company's capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees of indebtedness for money borrowed) of the Company that
rank pari passu with or junior to the Debentures (other than (a) any dividend,
redemption, liquidation, interest, principal or guarantee payment by the Company
where the payment is made by way of securities (including capital stock) that
rank pari passu with or junior to the securities on which such dividend,
redemption, interest, principal or guarantee payment is being made, (b)
redemptions or purchases of any Rights pursuant to any Rights Agreement and the
declaration of a dividend of such Rights or the issuance of preferred stock
under such plans in the future, (c) payments under the Guarantee, (d) purchases
of Common Stock related to the issuance of Common Stock under any of the
Company's benefit plans for its directors, officers or employees, (e) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one series or class of the Company's capital stock for another
series or class of the Company's capital stock, and (f) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged). Prior to the termination of any such Extension Period,
the Company may further extend the interest payment period, provided that no
Extension Period may exceed 20 consecutive quarters or extend beyond the stated
maturity of the Debentures. Upon the termination of any such Extension Period
and the payment of all amounts then due on any Interest Payment Date, the
Company may elect to begin a new Extension Period subject to the above
requirements. No interest shall be due and payable during an Extension Period,
except at the end thereof. The Company shall give the Property Trustee, the
Administrative Trustees and the Debenture Trustee notice of its election to
begin any Extension Period at least one Business Day prior to the earlier of (i)
the record date for the date Distributions on the Preferred Securities (or, if
no Preferred Securities are outstanding, for the date interest on the
Debentures) would have been payable except for the election to begin such
Extension Period and (ii) the date the Property Trustee is (or, if no Preferred
Securities are outstanding, the Debenture Trustee is) required to give notice to
the NYSE or other applicable self-regulatory organization or to holders of such
Preferred Securities (or, if no Preferred Securities are outstanding, to the
holders of such Debentures) of such record date. The Debenture Trustee and the
Property Trustee shall give notice of the Company's election to begin an
Extension Period to the holders of the Debentures and the Preferred Securities,
respectively.
MANDATORY REDEMPTION
Upon repayment at maturity or as a result of acceleration upon the
occurrence of a Debenture Event of Default, the Company will redeem the
Debentures, in whole but not in part, at a redemption price equal to 100% of the
principal amount thereof, together with any accrued and unpaid interest thereon.
Any payment pursuant to this provision shall be made prior to 12:00 noon, New
York City time, on the date of such repayment or acceleration or at such other
time on such earlier date as the parties thereto shall agree. The Debentures are
not entitled to the benefit of any sinking fund or, except as set forth above or
as a result of acceleration, any other provision for mandatory prepayment.
OPTIONAL REDEMPTION
The Prospectus Supplement relating to Debentures will describe whether the
Debentures will be subject to optional redemption, in whole or in part, by the
Company and the terms of any such redemption. For so long as the Issuer is the
holder of all the outstanding Debentures, the proceeds
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of any such redemption will be used by the Issuer to redeem Trust Securities in
accordance with their terms.
To the extent set forth in the Prospectus Supplement, the Company also will
have the right to redeem the Debentures, at the principal amount thereof plus
accrued and unpaid interest, if a Tax Event shall occur and be continuing.
REDEMPTION PROCEDURES
Notices of any redemption of the Debentures and the procedures for such
redemption shall be as provided with respect to the Preferred Securities under
"Description of the Preferred Securities -- Redemption Procedures." Notice of
any redemption will be mailed at least 30 days but not more than 60 days before
the redemption date to each holder of Debentures to be redeemed at its
registered address. Unless the Company defaults in payment of the redemption
price, on and after the redemption date interest shall cease to accrue on such
Debentures or portions thereof called for redemption.
DISTRIBUTION OF DEBENTURES
At any time, the Company has the right to dissolve the Issuer and, after
satisfaction of the liabilities of creditors of the Issuer as provided by
applicable law, cause the Debentures to be distributed to the holders of the
Trust Securities in dissolution of the Issuer. If distributed to holders of
Preferred Securities in liquidation, the Debentures will initially be issued in
the form of one or more global securities and DTC, or any successor depositary
for the Preferred Securities, will act as depositary for the Debentures. It is
anticipated that the depositary arrangements for the Debentures would be
substantially identical to those in effect for the Preferred Securities. There
can be no assurance as to the market price of any Debentures that may be
distributed to the holders of Preferred Securities. For a description of DTC and
the terms of the depositary matters, see "-- Global Securities."
CONVERSION OF THE DEBENTURES
The Debentures will be convertible at the option of the holders of the
Debentures into Common Stock, at any time prior to redemption or maturity, at a
rate equivalent to the conversion rate from time to time in effect with respect
to the Preferred Securities. The Issuer will covenant for so long as the
Preferred Securities are outstanding not to convert Debentures, except pursuant
to a notice of conversion delivered to the Conversion Agent by a holder of
Preferred Securities. Upon surrender of such Preferred Securities to the
Conversion Agent for conversion, the Issuer will distribute the commensurate
principal amount of the Debentures to the Conversion Agent on behalf of the
holder of every Preferred Security so converted, whereupon the Conversion Agent
will convert such Debentures into Common Stock on behalf of such holder. The
Company's delivery to the holders of the Debentures (through the Conversion
Agent) of the fixed number of shares of Common Stock into which the Debentures
are convertible (together with the cash payment, if any, in lieu of fractional
shares) will be deemed to satisfy the Company's obligation to pay the principal
amount of the Debentures, and the accrued and unpaid interest attributable to
the period from the last date to which interest has been paid or duly provided
for.
MODIFICATION OF INDENTURE
From time to time, the Company and the Debenture Trustee may, without the
consent of the holders of Debentures, amend, waive or supplement the Indenture
for specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies (provided that any such action does not materially
adversely affect the interest of the holders of the Debentures, or the holders
of the Preferred Securities so long as they remain outstanding) and qualifying,
or maintaining the qualification of, the Indenture under the Trust Indenture
Act. The Indenture will contain provisions
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permitting the Company and the Debenture Trustee, with the consent of the
holders of not less than a majority in principal amount of the outstanding
Debentures, to modify the Indenture in a manner affecting the rights of the
holders of the Debentures; provided that no such modification may, without the
consent of the holder of each outstanding Debenture so affected, (i) change the
stated maturity of the Debentures, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon (other than
deferrals of the payments of interest as described under "-- Option to Extend
Interest Payment Period") or reduce the premium payable upon the redemption
thereof, or impair any right to institute suit for the enforcement of any such
payment, or adversely affect the subordination provisions of the Indenture or
any right to convert any Debentures or (ii) reduce the percentage of principal
amount of Debentures, the holders of which are required to consent to any such
modification of the Indenture, provided that, so long as any of the Preferred
Securities remain outstanding, (a) no such modification may be made that
adversely affects the holders of such Preferred Securities in any material
respect, and no termination of the Indenture may occur, and no waiver of any
Debenture Event of Default or compliance with any covenant under the Indenture
may be effective, without the prior consent of the holders of at least a
majority in aggregate liquidation preference of the Preferred Securities then
outstanding unless and until the principal of and any premium on the Debentures
and all accrued and unpaid interest thereon has been paid in full and (b) where
a consent under the Indenture would require the consent of each holder of
Debentures, no such consent will be given by the Property Trustee without the
prior consent of each holder of the Preferred Securities.
DEBENTURE EVENTS OF DEFAULT
The Indenture will provide that any one or more of the following described
events that has occurred and is continuing constitutes a "Debenture Event of
Default" with respect to such Debentures:
(i) failure for 30 days to pay any interest on the Debentures, when
due (subject to the deferral of any due date in the case of an Extension
Period);
(ii) failure to pay any principal or premium, if any, on the
Debentures when due whether at maturity, upon redemption by declaration or
otherwise;
(iii) failure by the Company to deliver shares of Common Stock upon an
appropriate election by holders of Debentures to convert such Debentures;
(iv) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 90 days after written notice
to the Company from the Debenture Trustee or to the Debenture Trustee and
the Company from the holders of at least 25% in aggregate outstanding
principal amount of such Debentures or from the holders of at least 25% in
aggregate liquidation preference of the Preferred Securities; or
(v) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of the
Debentures will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee or
exercising any trust or power conferred on the Debenture Trustee consistent with
the Indenture. The Debenture Trustee or the holders of not less than 25% in
aggregate principal amount of the Debentures then outstanding may declare the
principal and accrued interest due and payable immediately upon a Debenture
Event of Default, and, should the Debenture Trustee or the holders of the
Debentures fail to make such declaration, the holders of at least 25% in
aggregate liquidation preference of the Preferred Securities then outstanding
shall have such right. The holders of a majority in aggregate outstanding
principal amount of the Debentures may annul and rescind such declaration if the
default (other than the non-payment of the principal of the Debentures which has
become due solely by such acceleration) has been cured or waived and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by
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acceleration has been deposited with the Debenture Trustee and, should the
holders of the Debentures fail to annul and rescind such declaration, the
holders of a majority in aggregate liquidation preference of the Preferred
Securities then outstanding shall have such right.
The holders of a majority in aggregate outstanding principal amount of the
Debentures affected thereby may, on behalf of the holders of all the Debentures,
waive any past default, except a default in the payment of principal or interest
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee) or a default in respect of a covenant
or provision which under the Indenture cannot be modified or amended without the
consent of the holder of each outstanding Debenture, provided, however, that if
the Debentures are held by the Trust, such waiver will not be effective until
the holders of a majority in liquidation preference of Trust Securities have
consented to such waiver, provided, further, that if the consent of the holder
of each outstanding Debenture is required, such waiver will not be effective
until each holder of the Trust Securities has consented to such waiver. Should
the holders of the Debentures fail to annul such declaration and waive such
default, the holders of a majority in aggregate liquidation preference of the
Preferred Securities shall have such right. The Company is required to file
annually with the Debenture Trustee a certificate as to whether or not the
Company is in compliance with all the conditions and covenants applicable to it
under the Indenture.
In case a Debenture Event of Default shall occur and be continuing as to
the Debentures, the Property Trustee will have the right to declare the
principal of and the interest on the Debentures and any other amounts payable
under the Indenture to be forthwith due and payable and to enforce its other
rights as a creditor with respect to the Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest or principal
on the Debentures on the date such interest or principal is otherwise payable, a
holder of Preferred Securities may institute a Direct Action for payment after
the respective due date specified in the Debentures. The Company may not amend
the Indenture to remove the foregoing right to bring a Direct Action without the
prior written consent of the holders of all of the Preferred Securities.
Notwithstanding any payment made to such holder of Preferred Securities by the
Company in connection with a Direct Action, the Company shall remain obligated
to pay the principal of or interest on the Debentures held by the Issuer or the
Property Trustee, and the Company shall be subrogated to the rights of the
holder of such Preferred Securities with respect to payments on the Preferred
Securities to the extent of any payments made by the Company to such holder in
any Direct Action.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, and no Person shall consolidate with
or merge into the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company, unless (i) in case the Company
consolidates with or merges into another Person or conveys, transfers or leases
its properties and assets substantially as an entirety to any Person, the
successor Person is organized under the laws of the United States or any state
or the District of Columbia, and such successor Person expressly assumes the
Company's obligations on the Debentures and under the Indenture; (ii)
immediately after giving effect thereto, no Debenture Event of Default, and no
event which, after notice or lapse of time or both, would become a Debenture
Event of Default, shall have happened and be continuing; (iii) such transaction
is permitted under the Trust Agreement and the Guarantee and does not give rise
to any breach or violation of the Trust Agreement or the Guarantee; and (iv)
certain other conditions as prescribed in the Indenture are met.
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The general provisions of the Indenture do not afford holders of the
Debentures protection in the event of a highly leveraged or other transaction
involving the Company that may adversely affect holders of the Debentures.
EXPENSES OF ISSUER
Pursuant to the Indenture, the Company will pay all of the costs, expenses
or liabilities of the Issuer, other than obligations of the Issuer to pay to the
holders of any Preferred Securities or Common Securities the amounts due such
holders pursuant to the terms of the Preferred Securities or Common Securities.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Debentures not
previously delivered to the Debenture Trustee for cancellation (i) have become
due and payable or (ii) will become due and payable at their stated maturity
within one year or are to be properly called for redemption within one year, and
the Company deposits or causes to be deposited with the Debenture Trustee trust
funds, in trust, for the purpose and in an amount in the currency or currencies
in which the Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Debentures not previously delivered to the Debenture Trustee
for cancellation, for the principal and premium, if any, and interest to the
date of the deposit or to the stated maturity, as the case may be, then the
Indenture will cease to be of further effect (except as to the Company's
obligations to pay all other sums due pursuant to the Indenture and to provide
the officers' certificates and opinions of counsel described therein), and the
Company will be deemed to have satisfied and discharged the Indenture.
SUBORDINATION
In the Indenture, the Company will covenant and agrees that any Debentures
issued thereunder will be subordinate and junior in right of payment to all
Senior Debt (as defined below) of the Company whether now existing or
hereinafter incurred. Upon any payment or distribution of assets of the Company
to creditors upon any liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors, marshaling of assets or any bankruptcy,
insolvency, debt restructuring or similar proceedings in connection with any
insolvency or bankruptcy proceeding of the Company, the holders of Senior Debt
will first be entitled to receive payment in full of principal of and premium,
if any, and interest, if any, on such Senior Debt before the Property Trustee,
on behalf of the holders of the Debentures, will be entitled to receive or
retain any payment in respect of the principal of and premium, if any, or
interest, if any, on the Debentures.
In the event of the acceleration of the maturity of any Debentures, the
holders of all Senior Debt outstanding at the time of such acceleration will
first be entitled to receive payment in full of all amounts due thereon
(including any amounts due upon acceleration) before the holders of Debentures
will be entitled to receive or retain any payment in respect of the principal of
or premium, if any, or interest, if any, on the Debentures.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Debentures may be made if there shall have occurred and
be continuing a default in any payment with respect to Senior Debt, or an event
of default with respect to any Senior Debt resulting in the acceleration of the
maturity thereof, or if any judicial proceeding shall be pending with respect to
any such default.
"Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of
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credit, bankers' acceptances or similar facilities issued for the account of
such Person; (iv) every obligation of such Person issued or assumed as the
deferred purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business); (v)
every capital lease obligation of such Person; and (vi) every obligation of the
type referred to in clauses (i) through (v) of another Person and all dividends
of another person the payment of which, in either case, such Person has
guaranteed or for which such Person is responsible or liable, directly or
indirectly, as obligor or otherwise.
"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt of the
Company, whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Debentures, provided, however, that Senior
Debt does not include:
(i) any Debt of the Company which, when incurred and without respect
to any election under Section 1111(b) of the Bankruptcy Code, was without
recourse to the Company;
(ii) any Debt of the Company to any of its subsidiaries;
(iii) Debt to any employee of the Company;
(iv) any liability for taxes;
(v) Debt or other monetary obligations to trade creditors created or
assumed by the Company or any of its subsidiaries in the ordinary course of
business in connection with the obtaining of goods, materials or services;
and
(vi) the Debentures.
The Indenture places no limitation on the amount of additional Senior Debt
that may be incurred by the Company.
GOVERNING LAW
The Indenture and the Debentures will be governed by and construed in
accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee is under no obligation to exercise any of the powers
vested in it by the Indenture at the request of any holder of Debentures, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The Debenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Debenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
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DESCRIPTION OF THE GUARANTEE
A Guarantee will be executed and delivered by the Company, concurrently
with the issuance by an Issuer of the Preferred Securities, for the benefit of
the holders from time to time of such Preferred Securities. First Union National
Bank will act as the Guarantee Trustee under such Guarantee. This summary of
certain provisions of the Guarantee does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all of the provisions
of the applicable Guarantee (the form of which is filed as an exhibit to the
Registration Statement and copies of which is available at the corporate trust
offices of the Guarantee Trustee in Charlotte, North Carolina). The Guarantee
Trustee will hold the Guarantee for the benefit of the holders of the applicable
Preferred Securities.
GENERAL
Pursuant to and to the extent set forth in the Guarantee, the Company
irrevocably will agree to pay in full on a subordinated basis, the Guarantee
Payments (as defined below) to the holders of the Preferred Securities, as and
when due, regardless of any defense, right of set off or counterclaim that the
Issuer may have or assert other than the defense of payment. The following
payments with respect to the Preferred Securities, to the extent not paid by or
on behalf of the Issuer (the "Guarantee Payments"), will be subject to the
Guarantee: (i) any accumulated and unpaid Distributions required to be paid on
the Preferred Securities, to the extent that the Issuer has funds on hand
available therefor at such time, (ii) the redemption price with respect to any
Preferred Securities called for redemption to the extent that the Issuer has
funds on hand available therefor at such time, or (iii) upon a voluntary or
involuntary dissolution of the Issuer (unless the Debentures are distributed to
holders of the Preferred Securities), the lesser of (a) the Liquidation
Distribution, to the extent that the Issuer has funds on hand available therefor
at such time, and (b) the amount of assets of the Issuer remaining available for
distribution to holders of Preferred Securities. The Company's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Company to the holders of the Preferred Securities or by causing
the Issuer to pay such amounts to such holders.
The Guarantee will be an irrevocable guarantee on a subordinated basis of
the Issuer's obligations under the Preferred Securities, but it will apply only
to the extent that the Issuer has funds sufficient to make such payments, and is
not a guarantee of collection. If the Company does not make interest payments on
the Debentures held by the Issuer, the Issuer will not be able to pay
Distributions on the Preferred Securities and will not have funds legally
available therefor.
The Company will, through the Guarantee, the Trust Agreement, the
Debentures and the Indenture, taken together, fully, irrevocably and
unconditionally guarantee all of the Issuer's obligations under the Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Issuer's obligations under the
Preferred Securities. See "Relationship Among the Preferred Securities, the
Debentures and the Guarantee."
The Company also will agree separately to irrevocably and unconditionally
guarantee the obligations of the Issuer with respect to the Common Securities to
the same extent as the Guarantee, except that upon the occurrence and during the
continuation of a Declaration Event of Default, holders of Preferred Securities
shall have priority over holders of Common Securities with respect to
distributions and payments on liquidation, redemption or otherwise.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all other liabilities of
the Company and ranks pari passu with the most senior preferred stock, if any,
now or hereafter issued by the Company and with any
29
<PAGE> 80
guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock of any affiliate of the Company.
The Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Company to enforce its rights under the Guarantee without first instituting
a legal proceeding against any other person or entity). The Guarantee will be
held for the benefit of the holders of the Preferred Securities. The Guarantee
will not be discharged except by payment of the Guarantee Payments in full to
the extent not paid by the Issuer or upon distribution of the Debentures to the
holders of the Preferred Securities. The Guarantee will not place a limitation
on the amount of additional indebtedness that may be incurred by the Company or
any of its subsidiaries.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Preferred Securities (in which case no vote will be
required), the Guarantee may not be amended without the prior approval of the
holders of not less than a majority in aggregate liquidation preference of such
outstanding Preferred Securities. The manner of obtaining any such approval will
be as set forth under "Description of the Preferred Securities-Voting Rights;
Amendment of the Trust Agreement". All guarantees and agreements contained in
the Guarantee bind the successors, assigns, receivers, trustees and
representatives of the Company and inure to the benefit of the holders of the
Preferred Securities then outstanding.
CERTAIN COVENANTS OF THE COMPANY
The Company will covenant in the Guarantee that if and so long as (i) the
Issuer is the holder of all the Debentures, (ii) a Tax Event in respect of the
Issuer has occurred and is continuing and (iii) the Company has elected, and has
not revoked such election, to pay Additional Sums in respect of the Trust
Securities, the Company will pay to the Issuer such Additional Sums. The Company
also will covenant that it will not, and it will not cause any of its
subsidiaries to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Company's capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay or repurchase or redeem any debt securities
(including guarantees of indebtedness for money borrowed) of the Company that
rank pari passu with or junior to the Debentures (other than (a) any dividend,
redemption, liquidation, interest, principal or guarantee payment by the Company
where the payment is made by way of securities (including capital stock) that
rank pari passu with or junior to the securities on which such dividend,
redemption, interest, principal or guarantee payment is being made, (b)
redemptions or purchases of any Rights pursuant to any Rights Agreement and the
declaration of a dividend of such Rights or the issuance of preferred stock
under such plans in the future, (c) payments under the Guarantee, (d) purchases
of Common Stock related to the issuance of Common Stock under any of the
Company's benefit plans for its directors, officers or employees, (e) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one series or class of the Company's capital stock for another
series or class of the Company's capital stock and (f) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged) if at such time (i) there shall have occurred any event
of which the Company has actual knowledge that (a) with the giving of notice or
the lapse of time, or both, would constitute a Debenture Event of Default and
(b) in respect of which the Company shall not have taken reasonable steps to
cure, (ii) the Company shall be in default with respect to its payment of any
obligations under the Guarantee or (iii) the Company shall have given notice of
its selection of an Extension Period as provided in the Indenture with respect
to the Debentures and shall not have rescinded such notice, or such Extension
Period, or any extension thereof, shall be continuing. The Company also
covenanted (i) for so long as Preferred Securities are outstanding, not to
convert Debentures
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<PAGE> 81
except pursuant to a notice of conversion delivered to the Conversion Agent by a
holder of Preferred Securities, (ii) to maintain directly or indirectly 100%
ownership of the Common Securities, provided that certain successors that are
permitted pursuant to the Indenture may succeed to the Company's ownership of
the Common Securities, (iii) not to voluntarily dissolve the Issuer, except (a)
in connection with a distribution of the Debentures to the holders of the
Preferred Securities in dissolution of the Issuer or (b) in connection with
certain mergers, consolidations or amalgamations permitted by the Trust
Agreement, (iv) to maintain the reservation for issuance of the number of shares
of Common Stock that would be required from time to time upon the conversion of
all the Debentures then outstanding, (v) to use its reasonable efforts,
consistent with the terms and provisions of the Trust Agreement, to cause the
Issuer to remain classified as a grantor trust and not as an association taxable
as a corporation for United States Federal income tax purposes and (vi) to
deliver shares of Common Stock upon an election by the holders of the Preferred
Securities to convert such Preferred Securities into Common Stock.
As part of the Guarantee, the Company will agree to honor all obligations
described therein relating to the conversion or exchange of the Preferred
Securities into or for Common Stock or Debentures.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of a majority in aggregate liquidation preference of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee.
If the Guarantee Trustee fails to enforce the Guarantee, any holder of the
Preferred Securities may institute a legal proceeding directly against the
Company to enforce its rights under the Guarantee without first instituting a
legal proceeding against the Issuer, the Guarantee Trustee or any other person
or entity. In addition, any record holder of Preferred Securities shall have the
right, which is absolute and unconditional, to proceed directly against the
Company to obtain Guarantee Payments, without first waiting to determine if the
Guarantee Trustee has enforced the Guarantee or instituting a legal proceeding
against the Issuer, the Guarantee Trustee or any other person or entity. The
Company has waived any right or remedy to require that any action be brought
just against the Issuer, or any other person or entity, before proceeding
directly against the Company.
The Company, as guarantor, will be required to file annually with the
Guarantee Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee and, after
default with respect to the Guarantee, must exercise the same degree of care and
skill as a prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of Preferred Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the redemption price of the Preferred Securities, upon full
payment of the amounts payable upon
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<PAGE> 82
dissolution of the Issuer, upon the distribution, if any, of Common Stock to the
holders of Preferred Securities in respect of the conversion of all such
holders' Preferred Securities into Common Stock or upon distribution of
Debentures to the holders of the Preferred Securities in exchange for all of the
Preferred Securities. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Preferred
Securities must restore payment of any sums paid under such Preferred Securities
or the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on any Preferred Securities
(to the extent the applicable Issuer has funds available for the payment of such
Distributions) will be irrevocably guaranteed by the Company as and to the
extent set forth under "Description of the Guarantee." Taken together, the
Company's obligations under the applicable Debentures, the applicable Indenture,
the applicable Trust Agreement and the applicable Guarantee provide, in the
aggregate, a full, irrevocable and unconditional guarantee of payments of
Distributions and other amounts due on such Preferred Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Issuer's obligations under the Preferred
Securities. If and to the extent that the Company does not make payments on the
Debentures, the Issuer will not pay Distributions or other amounts due on the
Preferred Securities. The Guarantee does not cover payment of Distributions when
the Issuer does not have sufficient funds to pay such Distributions. In such
event, a holder of Preferred Securities may institute a Direct Action directly
against the Company to enforce payment of such Distributions to such holder
after the respective due dates. The obligations of the Company under the
Guarantee will be subordinate and junior in right of payment to all other
liabilities of the Company and rank pari passu with the most senior preferred
stock, if any, now or hereafter issued by the Company and with any guarantee now
or hereafter entered into by the Company in respect of any preferred or
preference stock of any affiliate of the Company.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Debentures, such payments will be sufficient to cover Distributions and other
payments due on the Preferred Securities, primarily because (i) the aggregate
principal amount of the Debentures is equal to the sum of the aggregate stated
liquidation preference of the Trust Securities; (ii) the interest rate and
interest and other payment dates on the Debentures match the Distribution rate
and Distribution and other payment dates for the Preferred Securities; (iii) the
Company pays for all and any costs, expenses and liabilities of the Issuer
except the Issuer's obligations to holders of the Preferred Securities under
such Preferred Securities; and (iv) the Trust Agreement further provides that
the Issuer will not engage in any activity that is not consistent with the
limited purposes of the Issuer.
Notwithstanding anything to the contrary in the Indenture, the Company has
the right to set off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a payment under the Guarantee.
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<PAGE> 83
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, the Issuer
or any other person or entity.
A default or event of default under any Senior Debt of the Company will not
constitute a default under the Indenture or a Debenture Event of Default.
However, in the event of payment defaults under, or acceleration of, Senior Debt
of the Company, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Debentures until such Senior Debt has
been paid in full or any payment default thereunder has been cured or waived.
Failure to make required payments on the Debentures would constitute a Debenture
Event of Default.
LIMITED PURPOSE OF ISSUERS
The Preferred Securities evidence a beneficial interest in the applicable
Issuer, and the Issuers exist for the sole purpose of issuing the Trust
Securities and investing the proceeds thereof in the Debentures. A principal
difference between the rights of a holder of Preferred Securities and a holder
of Debentures is that a holder of Debentures is entitled to receive from the
Company the principal amount of and interest accrued on Debentures held, while a
holder of Preferred Securities is entitled to receive Distributions from the
Issuer (or from the Company under the applicable Guarantee) if and to the extent
the Issuer has funds available for the payment of such Distributions.
RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary dissolution of the Issuer involving the
liquidation of the Debentures, after satisfaction of the liabilities of
creditors of the Issuer as provided by applicable law, the holders of the
Preferred Securities will be entitled to receive, out of assets held by the
Issuer, the Liquidation Distribution in cash. See "Description of the Preferred
Securities -- Liquidation Distribution upon Dissolution." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Property Trustee, as
holder of the Debentures, would be a subordinated creditor of the Company,
subordinated in right of payment to all Senior Debt, but entitled to receive
payment in full of principal and interest before any stockholders of the Company
receive payments or distributions. Since the Company is the guarantor under the
Guarantee and has agreed to pay for all costs, expenses and liabilities of the
Issuer (other than the Issuer's obligations to the holders of the Preferred
Securities), the positions of a holder of such Preferred Securities and a holder
of such Debentures relative to other creditors and to stockholders of the
Company in the event of liquidation or bankruptcy of the Company would be
substantially the same.
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<PAGE> 84
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
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 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.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services L.L.C.
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
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<PAGE> 85
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 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
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<PAGE> 86
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
PLAN OF DISTRIBUTION
GENERAL
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 the applicable Issuer, or from 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 or the applicable
Issuer, as the case may be, 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.
The Securities, when first issued, will have no established trading market.
Any underwriters or agents to or through whom such Securities are sold 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 or the applicable Issuer against or
contribution toward certain liabilities, including liabilities under the
Securities Act.
VALIDITY OF SECURITIES
The validity of the Securities (other than the Preferred Securities) will
be passed on for the Company and the Issuers by Vinson & Elkins L.L.P., Houston,
Texas. Certain legal matters in connection with the offering of the Preferred
Securities will be passed upon for any agents, dealers or underwriters by Baker
& Botts, L.L.P., Houston, Texas. The validity of the Preferred Securities will
be passed upon for the Company and the Issuers by Richards, Layton & Finger,
P.A., special Delaware counsel to the Company and the Issuers.
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<PAGE> 87
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> 88
================================================================================
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the QUIPS offered hereby, but only under circumstances in
which it is lawful to do so. The information contained in this prospectus is
current only as of its date.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
Prospectus Supplement
<S> <C>
About This Prospectus Supplement........ S-2
Oil and Gas Terms Used in this
Prospectus Supplement................. S-2
Prospectus Supplement Summary........... S-3
Risk Factors............................ S-14
Capitalization of Newfield.............. S-23
Accounting Treatment of the QUIPS....... S-24
Use of Proceeds......................... S-24
Price Range of Newfield Common Stock.... S-25
Dividend Policy......................... S-25
Description of Newfield Financial Trust
I..................................... S-26
Description of the QUIPS................ S-27
Description of the Debentures........... S-39
Description of the Guarantee............ S-44
Relationship Among the QUIPS, the
Debentures and the Guarantee.......... S-45
Federal Income Tax Consequences......... S-46
Underwriting............................ S-49
Legal Matters........................... S-50
Experts................................. S-50
Prospectus
Available Information................... 2
Incorporation of Certain Documents by
Reference............................. 2
Forward-Looking Statements.............. 3
The Company............................. 3
The Issuers............................. 4
Use of Proceeds......................... 5
Ratio of Earnings to Fixed Charges...... 5
Description of the Preferred
Securities............................ 6
Description of the Debentures........... 20
Description of the Guarantee............ 29
Relationship Among the Preferred
Securities, the Debentures and the
Guarantee............................. 32
Description of Capital Stock............ 34
Plan of Distribution.................... 36
Validity of Securities.................. 36
Experts................................. 37
</TABLE>
================================================================================
================================================================================
2,500,000 Preferred Securities
NEWFIELD FINANCIAL
TRUST I
% Cumulative Quarterly Income
Convertible Preferred Securities,
Series A (QUIPS(SM))
(Liquidation Preference $50 per QUIPS)
Fully and unconditionally guaranteed
to the extent described herein by,
and convertible into common stock of,
NEWFIELD EXPLORATION
COMPANY
------------------------------
[NEWFIELD LOGO]
------------------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
MERRILL LYNCH & CO.
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
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