Filed pursuant to Rule 424(b)(1)
Registration No. 333-81583
PROSPECTUS
2,500,000 SHARES
Newfield Exploration Company
COMMON STOCK
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We intend to enter into a sales agency agreement with UBS Warburg LLC
relating to the shares of common stock offered by this prospectus. In accordance
with the terms of the proposed sales agency agreement, we may offer and sell up
to 2,500,000 shares of our common stock from time to time through UBS Warburg,
as our exclusive sales agent. Sales of the shares, if any, will be made by means
of ordinary brokers' transactions on the New York Stock Exchange. Our common
stock is listed on the New York Stock Exchange under the symbol "NFX." On March
22, 2002, the last reported sales price of our common stock on the New York
Stock Exchange was $37.08 per share. No more than 1,500,000 shares of common
stock will be issued and sold under the sales agency agreement in any
consecutive 12-month period.
UBS Warburg will be entitled to a commission equal to 3.0% of the gross
sales price per share for the first 1,000,000 shares sold under the sales agency
agreement and 2.5% of the gross sales price per share for the next 1,500,000
shares sold under the agreement.
See "Risk Factors" beginning on page 3 for factors you should consider
before buying shares of our common stock.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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UBS Warburg LLC
This prospectus is dated March 25, 2002.
TABLE OF CONTENTS
About This Prospectus 1
Where You Can Find More
Information 1
Forward-Looking Statements 2
Our Company 2
Risk Factors 2
Use Of Proceeds 7
Description Of Capital Stock 7
Plan Of Distribution 11
Legal Matters 12
Experts 12
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf registration process, we may sell the shares of common stock
described in this prospectus from time to time. This prospectus provides you
with a general description of the common stock we may offer. We may also add,
update or change information contained in this prospectus through a supplement
to this prospectus. Any statement that we make in this prospectus will be
modified or superseded by any inconsistent statement made by our company in a
prospectus supplement. You should read both this prospectus and any prospectus
supplement together with the additional information described in the following
section.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You may obtain information on the operation of
the public reference room by calling the SEC at 1-800-SEC-0330.
Our common stock is listed on the New York Stock Exchange under the symbol
"NFX." Our reports, proxy statements and other information may be read and
copied at the New York Stock Exchange at 30 Broad Street, New York, New York
10005.
The SEC allows our company to "incorporate by reference" the information
we file with them, which means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is an important part of this prospectus, and information that we file
later with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 until we sell all of the common stock offered by this prospectus or
until we terminate this offering:
o our Annual Report on Form 10-K for the year ended December 31, 2001;
o our Current Reports on Form 8-K filed on February 8, 2002 and March 14,
2002;
o the description of our common stock contained in our Form 8-A filed on
November 4, 1993; and
o the description of our preferred share purchase rights contained in our
Form 8-A filed on February 18, 1999.
You may request a copy of these filings at no cost, by writing or calling
us at our principal executive offices at the following address or telephone
number:
Newfield Exploration Company
Attention: Stockholder Relations
363 N. Sam Houston Parkway E., Suite 2020
Houston, Texas 77060
(281) 847-6000
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of this common stock in any state where the offer is not permitted. You
should not
assume that the information in this prospectus, any prospectus supplement or any
document incorporated by reference is accurate as of any date other than the
date of those documents.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents we incorporate by reference contain
statements that constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. These statements appear in a number of places in this prospectus and the
documents we incorporate by reference and include statements regarding our
plans, beliefs or current expectations, including those plans, beliefs and
expectations of our officers and directors.
Although we believe that the expectations reflected in such forward-looking
statements are reasonable, any such forward-looking statements are not
assurances of future performance and involve risks and uncertainties. Actual
results may differ materially from anticipated results for a number of reasons,
including:
o drilling results;
o oil and gas prices;
o industry conditions;
o the prices of goods and services;
o the availability of drilling rigs and other support services; and
o the availability of capital resources.
The information contained in this prospectus, and the documents
incorporated by reference into this prospectus, identify additional factors that
could affect our operating results and performance. We urge you to carefully
consider those factors. All forward-looking statements attributable to our
company are expressly qualified in their entirety by this cautionary statement.
OUR COMPANY
We are an independent oil and gas company engaged in the exploration,
development and acquisition of crude oil and natural gas properties. Our
company was founded in 1989 and we acquired our first property in 1990. Our
initial focus area was the Gulf of Mexico. In the mid-1990s, we began to expand
our operations to other select areas. Our areas of operation now also include
the U.S. onshore Gulf Coast, the Anadarko Basin, offshore northwest Australia
and the Bohai Bay, offshore China.
At year-end 2001, we had proved reserves of 936.4 Bcfe. Of those reserves,
o 77% were natural gas;
o 93% were proved developed;
o 58% were located in the Gulf of Mexico;
o 39% were located onshore in the U.S.; and
o 3% were located offshore Australia.
Our growth strategy has remained unchanged and is based on the following
elements.
o growing reserves through the drilling of a balanced portfolio;
o balancing exploration with the acquisition and exploitation of proved
properties;
o focusing on select geographic areas;
o controlling operations and costs;
o using 3-D seismic data and other advanced technologies; and
o attracting and retaining a quality work-force through equity ownership
and other performance-based incentives.
RISK FACTORS
You should carefully consider the following factors as well as other
information contained in this prospectus before deciding to invest in shares of
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
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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. Among the factors that can cause
fluctuations are:
o the domestic and foreign supply of oil and natural gas;
o the price and availability of alternative fuels;
o weather conditions;
o the level of consumer demand;
o the price of foreign imports;
o world-wide economic conditions;
o political conditions in oil and gas producing regions; and
o domestic and foreign governmental regulations.
OUR USE OF OIL AND GAS PRICE HEDGING CONTRACTS INVOLVES CREDIT RISK AND MAY
LIMIT FUTURE REVENUES FROM PRICE INCREASES AND RESULT IN SIGNIFICANT
FLUCTUATIONS IN OUR NET INCOME AND STOCKHOLDERS' EQUITY.
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 down-side
risk of price declines, their use may also limit future revenues from price
increases. Hedging transactions also involve the risk that the counterparty may
be unable to satisfy its obligations.
We adopted Statement of Financial Accounting Standards (SFAS) No. 133 on
January 1, 2001. SFAS No. 133 generally requires us to record each hedging
transaction as an asset or liability measured at its fair value. Each quarter we
must record changes in the value of our hedges, which could result in
significant fluctuations in net income and stockholders' equity from period to
period. Please read our most recently filed annual report on Form 10-K or
quarterly report on Form 10-Q for a more detailed discussion of our hedging
program.
OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO REPLACE THE 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,
our producing properties in the Gulf of Mexico and the onshore Gulf Coast often
have high initial production rates, followed by steep declines. As a result, we
must locate and develop or acquire new oil and gas reserves to replace those
depleted by production. We must do this even during periods of low oil and gas
prices when it may be 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 to find,
develop, acquire and produce oil and gas reserves. We believe that we will have
sufficient cash provided by operating activities and available borrowings under
our credit arrangements to fund planned capital expenditures in 2002. 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.
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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 and is not exact 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 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:
o the quality and quantity of available data;
o the interpretation of that data;
o the accuracy of various mandated economic assumptions; and
o the judgment of the persons preparing the estimate.
The proved reserve information incorporated by reference in this 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
incorporated by reference in this 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.
IF OIL AND GAS PRICES DECREASE, WE MAY BE REQUIRED TO TAKE WRITEDOWNS.
We may 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, find and develop our oil and gas
properties under the full cost accounting method. 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 the excess to earnings. 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.
WE MAY BE SUBJECT TO RISKS IN CONNECTION WITH FUTURE ACQUISITIONS.
The successful acquisition of producing properties requires an assessment
of several factors, including:
o recoverable reserves;
o future oil and gas prices;
o operating costs; and
o potential environmental and other liabilities.
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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. 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 often not entitled to contractual
indemnification for environmental liabilities and acquire properties 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 their properties. Many of our competitors have financial
resources that are substantially greater than ours, which may adversely affect
our ability to compete with these companies.
DRILLING IS A HIGH-RISK ACTIVITY.
Our future success will depend on the success of our 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:
o unexpected drilling conditions;
o pressure or irregularities in formations;
o equipment failures or accidents;
o adverse weather conditions;
o compliance with governmental requirements; and
o 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.
These risks include:
o fires;
o explosions;
o blow-outs;
o uncontrollable flows of oil, gas, formation water or drilling fluids;
o natural disasters;
o pipe or cement failures;
o casing collapses;
o embedded oilfield drilling and service tools;
o abnormally pressured formations; and
o 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:
o injury or loss of life;
o severe damage to or destruction of property, natural resources and
equipment;
o pollution and other environmental damage;
o clean-up responsibilities;
o regulatory investigation and penalties;
o suspension of our operations; and
o repairs to resume operations.
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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.
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. To date, we have
expanded our operations to Australia and China.
Ownership of property interests and production operations in areas outside
the United States is subject to the various risks inherent in foreign
operations. These risks may include:
o currency restrictions and exchange rate fluctuations;
o loss of revenue, property and equipment as a result of expropriation,
nationalization, war or insurrection;
o increases in taxes and governmental royalties;
o renegotiation of contracts with governmental entities and
quasi-governmental agencies;
o changes in laws and policies governing operations of foreign-based
companies;
o labor problems; and
o 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, if a dispute arises with respect to our 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.
EXPLORATION IN DEEPWATER INVOLVES GREATER OPERATING AND FINANCIAL RISKS THAN
EXPLORATION AT SHALLOWER DEPTHS. THESE RISKS COULD RESULT IN SUBSTANTIAL LOSSES.
We have developed a three phase strategy to enter the deepwater play.
Deepwater drilling and operations require the application of recently developed
technologies and involve a higher risk of mechanical failure. We will likely
experience significantly higher drilling costs for any deepwater wells we may
drill. In addition, much of the deepwater play lacks the physical and oilfield
service infrastructure present in shallower waters. As a result, development of
a deepwater discovery may be a lengthy process and require substantial capital
investment, resulting in significant financial and operating risks.
OTHER INDEPENDENT OIL AND GAS COMPANIES' LIMITED ACCESS TO CAPITAL MAY CHANGE
OUR EXPLORATION AND DEVELOPMENT PLANS.
Many independent oil and gas companies have limited access to the capital
necessary to finance their activities. 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 drilling and development plans with respect to
the affected project.
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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 to comply with environmental and other
governmental regulations. Matters subject to regulation include:
o discharge permits for drilling operations;
o drilling bonds;
o reports concerning operations;
o the spacing of wells;
o unitization and pooling of properties; and
o 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 PLAN 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 DO NOT INTEND TO PAY DIVIDENDS ON OUR COMMON STOCK.
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 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 be dependent on our
future performance and liquidity. In addition, our credit facility contains
restrictions on our ability to pay cash dividends.
USE OF PROCEEDS
Unless otherwise provided in a prospectus supplement, we will use the net
proceeds from the sale of the common stock offered by this prospectus for
general corporate purposes, which may include repayment of indebtedness, the
financing of capital expenditures, future acquisitions and additions to our
working capital.
DESCRIPTION OF CAPITAL STOCK
Pursuant to our certificate of incorporation, our authorized capital stock
consists of 100 million shares of common stock and five million shares of
preferred stock. As of March 5, 2002, we had 44,275,828 shares of common stock
and no shares of preferred stock outstanding.
COMMON STOCK
Our common stockholders are entitled to one vote per share in the election
of directors and on all other matters submitted to a vote of our common
stockholders. Our common stockholders do not have cumulative voting rights.
Our common stockholders are entitled to receive ratably any dividends
declared by our board of directors out of funds legally available for the
payment of dividends. Dividends on our common stock are, however, subject to any
preferential dividend rights of outstanding preferred stock. We do not intend
to pay cash dividends on our common stock in the foreseeable future. Upon our
liquidation, dissolution or winding up, our common stockholders are entitled to
receive
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ratably our net assets available after payment of all of our debts and other
liabilities. Any payment is subject, however, to the prior rights of any
outstanding preferred stock. Our common stockholders do not have any preemptive,
subscription, redemption or conversion rights.
PREFERRED STOCK
Our certificate of incorporation allows our board of directors to issue
preferred stock from time to time in one or more series, without any action
being taken by our stockholders. Subject to the provisions of our certificate of
incorporation and limitations prescribed by law, our board of directors may
adopt resolutions to issue shares of a series of our preferred stock, and
establish their terms. These terms may include:
o voting powers;
o designations;
o preferences;
o dividend rights;
o dividend rates;
o terms of redemption;
o redemption prices; and
o conversion rights.
ANTI-TAKEOVER PROVISIONS
Certain provisions in our certificate of incorporation and bylaws may
encourage persons considering unsolicited tender offers or other unilateral
takeover proposals to negotiate with our board of directors rather than pursue
nonnegotiated takeover attempts.
STOCKHOLDER ACTION BY WRITTEN CONSENT. Under the Delaware General
Corporation Law, 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. Our
certificate of incorporation and bylaws 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 our company or any sale or
transfer of all or substantially all of our assets.
BLANK CHECK PREFERRED STOCK. Our certificate of incorporation authorizes
"blank check" preferred stock. Our board of directors 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 holders will receive
dividend payments and payments upon liquidation and could have the effect of
delaying, deferring or preventing a change in control of our company.
BUSINESS COMBINATIONS UNDER DELAWARE LAW. We are a Delaware corporation and
are subject to Section 203 of the Delaware General Corporation Law. Section 203
prevents an interested stockholder (i.e., a person who owns 15% or more of our
outstanding voting stock) from engaging in certain business combinations with
our company for three years following the date that the person became an
interested stockholder. These restrictions do not apply if:
o before the person became an interested stockholder, our board of
directors approved either the business combination or the transaction
that resulted in the interested stockholder becoming an interested
stockholder;
o upon completion of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of our outstanding voting stock at the time the transaction
commenced; or
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o following the transaction in which the person became an interested
stockholder, the business combination is approved by both our board of
directors and the holders of at least two-thirds of our outstanding
voting stock not owned by the interested stockholder.
These restrictions do not apply to certain business combinations proposed
by an interested stockholder following the announcement of certain extraordinary
transactions involving our company and a person who was not an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of a majority of our directors, if that
extraordinary transaction is approved or goes unopposed by a majority of our
directors who were directors before any person became an interested stockholder
in the previous three years or who were recommended for election or elected to
succeed such directors by a majority of directors then in office.
STOCKHOLDERS RIGHTS AGREEMENT. Our board of directors has adopted a
stockholders rights agreement. Under the agreement, each right entitles the
holder under the circumstances described below to purchase from us one
one-thousandth of a share of our junior participating preferred stock at a price
of $85 per one one-thousandth of a preferred share, subject to adjustment. The
following is a summary of certain terms of the rights agreement. The rights
agreement is filed as an exhibit to the registration statement of which this
prospectus is a part, and this summary is qualified by reference to the specific
terms of the rights agreement.
Until the distribution date, the rights attach to all common stock
certificates representing outstanding shares. No separate rights certificates
will be distributed. A right is issued for each share of common stock issued.
The rights will separate from the common stock and a distribution date will
occur upon the earlier of
o 10 business days following a public announcement that a person or group
of affiliated or associated persons has acquired beneficial ownership of
20% or more of our outstanding voting stock; or
o 10 business days following the commencement or announcement of an
intention to commence a tender offer or exchange offer that would
result in the beneficial ownership by a person or group of 20% or more
of our outstanding voting stock.
Until the distribution date or the earlier of redemption or expiration of
the rights, they are not exercisable and will be evidenced by the certificates
representing our common stock. As soon as practicable following the distribution
date, separate certificates evidencing the rights will be mailed to holders of
record of our common stock as of the close of business on the distribution date
and such separate rights certificates alone will thereafter evidence the
rights.
If a person or group acquires 20% or more of our voting stock, each right
(other than rights beneficially owned by the acquiring persons, which would
become null and void) becomes a right to buy that number of shares of common
stock, or under certain circumstances, the equivalent number of one
one-thousandths of a preferred share, that at the time of such acquisition has
a market value of two times the purchase price of the right.
If we are acquired in a merger or other business combination transaction
or assets constituting more than 50% of our consolidated assets or producing
more than 50% of our earning power or cash flow are sold, proper provision will
be made so that each holder of a right will thereafter have the right to
receive, upon the exercise thereof at the then current purchase price of the
right, that number of shares of common stock of the acquiring company that at
the time of such transaction has a market value of two times the purchase price
of the right.
The dividend and liquidation rights, and the non-redemption feature, of the
preferred shares are designed so that the value of one one-thousandth
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of a preferred share purchasable upon exercise of each right will approximate
the value of one share of our common stock. The preferred shares issuable upon
exercise of the rights will be non-redeemable and rank junior to all other
series of our preferred stock. Each whole preferred share will be entitled to
receive a quarterly preferential dividend in an amount per share equal to the
greater of $1.00 or 1,000 times the aggregate per share dividend declared on our
common stock. If our company is liquidated, the holders of preferred shares
will be entitled to receive a preferential liquidation payment per whole share
equal to the greater of $1,000 per share or 1,000 times the aggregate amount to
be distributed per share of our common stock. If our common stock is exchanged
for or changed into other stock or securities, cash or other property as the
result of a merger, consolidation or other transaction, each whole preferred
share will be entitled to 1,000 times the amount received per share of our
common stock. Each whole preferred share will be entitled to 1,000 votes on all
matters submitted to a vote of our stockholders, and preferred shares will
generally vote together as one class with our common stock and any other capital
stock on all matters submitted to a vote of our stockholders.
The purchase price and the number of one one-thousandths of a preferred
share or other securities or property issuable upon exercise of the rights may
be adjusted from time to time to prevent dilution.
At any time after a person or group of affiliated or associated persons
acquires beneficial ownership of 20% or more of our outstanding voting stock
and before a person or group acquires beneficial ownership of 50% or more of our
outstanding voting stock, our board of directors may, at its option, issue
common stock in mandatory redemption of, and in exchange for, all or part of
the then outstanding exercisable rights, other than rights owned by such person
or group, which would become null and void, at an exchange ratio of one share of
common stock, or one one-thousandth of a preferred share, for each two shares of
common stock for which each right is then exercisable, subject to adjustment.
At any time prior to the first public announcement that a person or group
has become the beneficial owner of 20% or more of our outstanding voting stock,
our board of directors may redeem all, but not less than all, of the then
outstanding rights at a price of $0.01 per right. The redemption of the rights
may be made effective at such time, on such basis and with such conditions as
our board of directors in its sole discretion may establish. Immediately upon
our board of directors ordering redemption of the rights, the rights will
terminate other than the right to receive the redemption price.
The rights will expire on February 22, 2009, unless the expiration date is
extended or the rights are earlier redeemed or exchanged.
LIMITATION OF LIABILITY OF OFFICERS AND DIRECTORS
Delaware law authorizes corporations to limit or eliminate the personal
liability of officers and directors to corporations and their stockholders for
monetary damages for breach of officers' and directors' fiduciary duty of care.
The duty of care requires that, when acting on behalf of the corporation,
officers and directors must exercise an informed business judgment based on all
material information reasonably available to them. Absent the limitations
authorized by Delaware law, officers and directors are accountable to
corporations and their stockholders for monetary damages for conduct
constituting gross negligence in the exercise of their duty of care. Delaware
law enables corporations to limit available relief to equitable remedies such as
injunction or rescission.
Our certificate of incorporation limits the liability of our officers and
directors to our company and our stockholders to the fullest extent permitted
by Delaware law. Specifically, our officers and directors will not be personally
liable for monetary damages for breach of an officer's or director's fiduciary
duty in such capacity, except for liability:
o for any breach of the officer's or director's duty of loyalty to our
company or our stockholders;
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o for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
o for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation law; or
o for any transaction from which the officer or director derived an
improper personal benefit.
The inclusion of this provision in our certificate of incorporation may
reduce the likelihood of derivative litigation against our officers and
directors, and may discourage or deter stockholders or management from bringing
a lawsuit against our officers and directors for breach of their duty of care,
even though such an action, if successful, might have otherwise benefited our
company and our stockholders. Both our certificate of incorporation and bylaws
provide indemnification to our officers and directors and certain other
persons with respect to certain matters to the maximum extent allowed by
Delaware law as it exists now or may hereafter be amended. These provisions do
not alter the liability of officers and directors under federal securities laws
and do not affect the right to sue, nor to recover monetary damages, under
federal securities laws for violations thereof.
TRANSFER AGENT AND REGISTRAR
Our transfer agent and registrar is Mellon Shareholder Services L.L.C.
PLAN OF DISTRIBUTION
We intend to enter into a sales agency agreement with UBS Warburg LLC under
which we may issue and sell up to 2,500,000 shares of our common stock from time
to time through UBS Warburg, as our exclusive sales agent. No more than
1,500,000 shares of common stock will be issued and sold under the sales agency
agreement in any consecutive 12-month period. The form of the sales agency
agreement is an exhibit to the registration statement of which this prospectus
is a part and is incorporated by reference into this prospectus. The sales, if
any, of common stock made under the sales agency agreement will be made only by
means of ordinary brokers' transactions on the New York Stock Exchange.
UBS Warburg will sell the shares of common stock subject to the sales
agency agreement on a daily basis or as we and UBS Warburg otherwise agree. We
will designate the maximum amount of shares of common stock to be sold by UBS
Warburg daily as reasonably agreed to by UBS Warburg. Subject to the terms and
conditions of the sales agency agreement, UBS Warburg will use its reasonable
efforts to sell all of the designated shares of common stock. We may instruct
UBS Warburg not to sell shares of common stock if the sales cannot be effected
at or above a designated price. UBS Warburg will not be obligated to use
reasonable efforts to sell shares at any price below the designated price. We or
UBS Warburg may suspend the offering of shares of common stock upon proper
notice and subject to other conditions.
UBS Warburg will provide written confirmation to us following the close of
trading on the New York Stock Exchange each day in which shares of common stock
are sold under the sales agency agreement. Each confirmation will include the
number of shares sold on that day, the net proceeds to us and the compensation
payable by us to UBS Warburg in connection with the sales.
The compensation to UBS Warburg for sales of common stock will equal a
fixed commission rate on the gross sales price of any shares sold of 3.0% for
the first 1,000,000 shares sold and 2.5% for the next 1,500,000 shares sold. The
remaining sales proceeds, after deducting any applicable transaction fees
imposed by the exchange or government, will equal our net proceeds for the
sale of the shares.
Settlement for sales of common stock will occur on the third business day
following the date on which any sales are made in return for payment of the net
proceeds to us. There is no arrangement for funds to be received in an escrow,
trust or similar arrangement.
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On or prior to the second business day following any date on which sales of
common stock were made by UBS Warburg, we will file a prospectus supplement with
the SEC under the applicable paragraph of Rule 424(b) of the Securities Act. We
will also deliver to the New York Stock Exchange the number of copies of the
prospectus supplement that are required by the exchange. The prospectus
supplement will include the dates covered, the number of shares of common stock
sold through UBS Warburg, the net proceeds to our company and the compensation
payable by our company to UBS Warburg in connection with the sales of the common
stock. Unless otherwise indicated in a prospectus supplement, UBS Warburg will
act as sales agent on a reasonable efforts basis.
In connection with the sale of common stock on our behalf, UBS Warburg may
be deemed to be an "underwriter" within the meaning of the Securities Act, and
the compensation of UBS Warburg may be deemed to be underwriting commissions or
discounts. We have agreed to provide indemnification and contribution to UBS
Warburg against certain civil liabilities, including liabilities under the
Securities Act. UBS Warburg may engage in transactions with, or perform services
for, our company in the ordinary course of business.
If either our company or UBS Warburg has reason to believe that the
exemptive provisions set forth in Rule 101(c)(1) of Regulation M under the
Exchange Act are not satisfied, that party will promptly notify the other and
sales of common stock under the sales agency agreement will be suspended until
that or other exemptive provisions have been satisfied in the judgment of our
company and UBS Warburg.
The offering of common stock pursuant to the sales agency agreement will
terminate upon the earlier of the sale of all shares of common stock subject to
the agreement and termination of the sales agency agreement. The sales agency
agreement may be terminated by at any time by either party in their sole
discretion.
LEGAL MATTERS
Our legal counsel, Vinson & Elkins L.L.P., Houston, Texas, will pass upon
certain legal matters in connection with the offered common stock. Certain legal
matters in connection with the offered common stock will be passed upon for UBS
Warburg by its counsel, Cahill Gordon & Reindel, New York, New York.
EXPERTS
The financial statements incorporated in this prospectus by reference to
our annual report on Form 10-K for the year ended December 31, 2001 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
auditing and accounting.
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