e424b5
The
information in this preliminary prospectus supplement is not
complete and may be changed. This preliminary prospectus
supplement and the prospectus are part of an effective
registration statement filed with the Securities and Exchange
Commission. This preliminary prospectus supplement and the
prospectus are not offers to sell nor solicitations of offers to
buy these securities in any jurisdiction where such offer or
sale is not permitted.
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Filed
pursuant to Rule 424(b)(5)
Registration No. 333-155884
SUBJECT TO COMPLETION, DATED
JULY 20, 2010
PRELIMINARY PROSPECTUS
SUPPLEMENT
(To Prospectus Dated December 2, 2008)
22,000,000 Depositary
Shares
Each Representing a 1/20th Interest in a Share of
% Mandatory Convertible Preferred
Stock, Series D
Apache Corporation
Depositary Shares
We are offering 22,000,000 depositary shares, each of which
represents a 1/20th interest in a share of
our % Mandatory Convertible
Preferred Stock, Series D, with an initial liquidation
preference of $1,000 per share (our mandatory convertible
preferred stock). The shares of mandatory convertible
preferred stock will be deposited with Wells Fargo Bank, N.A.,
as depositary, pursuant to a deposit agreement. Holders of the
depositary shares will be entitled to a proportional fractional
interest in the rights and preferences of the mandatory
convertible preferred stock, including conversion, dividend,
liquidation and voting rights, subject to the provisions of such
deposit agreement.
We will pay cumulative dividends on each share of our mandatory
convertible preferred stock at a rate
of % per annum on the initial
liquidation preference of $1,000 per share. Dividends will
accrue and cumulate from the date of issuance and, to the extent
that we have lawfully available funds to pay dividends and our
board of directors declares a dividend payable, we will pay
dividends on February 1, May 1, August 1 and November
1 of each year in cash and on August 1, 2013 or any earlier
conversion date in cash, shares of our common stock, par value
$0.625 per share, or a combination thereof, at our election and
subject to the share cap (as defined herein). The first dividend
payment, if declared, will be made on November 1, 2010, in
the expected amount of $ per share
of our mandatory convertible preferred stock (equivalent to
$ per depositary share), which
will reflect the time period from the expected date of issuance
to November 1, 2010.
Each share of our mandatory convertible preferred stock has a
liquidation preference of $1,000 (and, correspondingly, each
depositary share has a liquidation preference of $50), plus an
amount equal to accrued and unpaid dividends. Subject to the
authorized share condition described in this prospectus
supplement, each share of our mandatory convertible preferred
stock will automatically convert on August 1, 2013 into
between
and shares
of our common stock (respectively, the minimum conversion
rate and maximum conversion rate) (and,
correspondingly, each depositary share will automatically
convert into
between
and shares
of our common stock), each subject to adjustment, depending on
the average VWAP (as defined herein) per share of our common
stock over the 10 trading day period ending on, and including,
the third scheduled trading day prior to such date. At any time
prior to July 15, 2013, a holder of 20 depositary shares
may cause the depositary to convert one share of our mandatory
convertible preferred stock, on such holders behalf, into
a number of shares of our common stock equal to the minimum
conversion rate, subject to adjustment, but such holder will not
be entitled to accrued and unpaid dividends for the current
dividend period. During a specified period in connection with a
fundamental change (as defined herein), a holder of 20
depositary shares may cause the depositary to convert one share
of our mandatory convertible preferred stock, on such
holders behalf, into a number of shares of our common
stock equal to the applicable fundamental change conversion rate.
Our common stock is listed on the New York Stock Exchange, the
NASDAQ Global Select Market and the Chicago Stock Exchange under
the symbol APA. The last reported sale price of our
common stock on the New York Stock Exchange on July 19,
2010 was $85.59 per share. We will apply to list the
depositary shares on the New York Stock Exchange and expect
trading to begin within five days of the initial issuance
of the depositary shares.
Investing in our depositary shares involves risks. See
Risk Factors beginning on
page S-17
of this prospectus supplement.
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Per Share
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Total
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Public offering price
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$
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$
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Underwriting discount
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$
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$
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Proceeds, before expenses, to us
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$
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$
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We have granted the underwriters a
30-day
option to purchase up to 3,300,000 additional depositary
shares on the same terms and conditions as set forth above.
Concurrently with this offering, we are offering, by means of a
separate prospectus supplement, 21,000,000 shares of our
common stock (or 24,150,000 shares if the underwriters of
that offering exercise in full their option to purchase
additional shares thereunder). This offering of depositary
shares is not contingent upon the offering of our common stock,
and the offering of our common stock is not contingent upon this
offering.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus supplement or the accompanying prospectus to which it
relates. Any representation to the contrary is a criminal
offense.
The underwriters expect to deliver the depositary shares on or
about July , 2010.
Joint Book-Running Managers
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Goldman, Sachs & Co.
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BofA Merrill Lynch
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Citi
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J.P. Morgan
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July , 2010
TABLE OF
CONTENTS
Prospectus
Supplement
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Page
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S-ii
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S-ii
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S-iv
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S-1
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S-17
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S-28
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S-29
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S-30
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S-32
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S-33
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S-58
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S-63
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S-71
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S-77
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S-77
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Prospectus
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Page
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About This Prospectus
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Cautionary Statement Regarding Forward-Looking Information
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ii
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Where You Can Find More Information
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Incorporation by Reference
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iii
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Apache Corporation
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1
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Apache Finance Pty Ltd
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1
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Apache Finance Australia Pty Ltd
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1
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Apache Finance Canada Corporation
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1
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Apache Finance Canada II Corporation
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1
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Use of Proceeds
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2
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Description of Apache Corporation Capital Stock
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2
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Description of Depositary Shares
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8
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Description of Apache Corporation Debt Securities
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11
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Description of Common Stock Purchase Contracts and Units
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24
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Description of Apache Finance, Apache Australia, Apache Canada
and Apache Canada II Debt Securities and Apache Guarantee
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25
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Book-Entry Securities
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45
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Plan of Distribution
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47
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Investment in Apache Corporation by Employee Benefit Plans
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48
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Legal Matters
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49
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Experts
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49
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S-i
ABOUT
THIS PROSPECTUS SUPPLEMENT
We have not authorized anyone to provide any information other
than that contained or incorporated by reference in this
prospectus supplement, the accompanying prospectus or any free
writing prospectus prepared by or on behalf of us or to which we
have referred you. We take no responsibility for, and can
provide no assurance as to the reliability of, any other
information that others may give you. We are not, and the
underwriters are not, making an offer to sell the depositary
shares in any jurisdiction where the offer or sale is not
permitted. You should assume that the information contained in
this prospectus supplement and the accompanying prospectus is
accurate only as of the respective dates on the front covers of
those documents. You should assume that the information
incorporated by reference in this prospectus supplement and the
accompanying prospectus is accurate only as of the date the
respective information was filed with the SEC. Our business,
financial condition, results of operations and prospects may
have changed since those dates.
This prospectus supplement is part of a registration statement
that we have filed with the SEC utilizing a shelf
registration process. Under this shelf process, we are offering
to sell our depositary shares, using this prospectus supplement
and the accompanying prospectus. This prospectus supplement
describes the specific terms of this offering. The accompanying
prospectus and the information incorporated by reference therein
describe our business and give more general information, some of
which may not apply to this offering. Generally, when we refer
in this prospectus supplement only to the
prospectus, we are referring to both parts combined.
You should read this prospectus supplement together with the
accompanying prospectus and the documents incorporated by
reference in this prospectus supplement and the accompanying
prospectus before making a decision to invest in our depositary
shares. If the information in this prospectus supplement or the
information incorporated by reference in this prospectus
supplement is inconsistent with the accompanying prospectus, the
information in this prospectus supplement or the information
incorporated by reference in this prospectus supplement will
apply and will supersede that information in the accompanying
prospectus.
We have filed with the SEC a registration statement on
Form S-3
with respect to the securities offered hereby. This prospectus
supplement and the accompanying prospectus do not contain all
the information set forth in the registration statement, parts
of which are omitted in accordance with the rules and
regulations of the SEC. For further information with respect to
us and the securities offered hereby, reference is made to the
registration statement and the exhibits that are a part of the
registration statement.
In this prospectus supplement, unless the context indicates
otherwise, the terms Apache, we,
us, Company and our refer to
Apache Corporation and its subsidiaries.
Our name, logo and other trademarks mentioned in this prospectus
supplement are the property of their respective owners.
DOCUMENTS
INCORPORATED BY REFERENCE
We have incorporated by reference in this prospectus
supplement and the accompanying prospectus certain documents
that we file with the SEC. This means that we can disclose
important information to you by referring you to another
document filed separately with the SEC. This information
incorporated by reference is a part of this prospectus
supplement and the accompanying prospectus, unless we provide
you with different information in this prospectus supplement or
the accompanying prospectus or the information is modified or
superseded by a subsequently filed document. Any information
referred to in this way is considered part of this prospectus
supplement and the accompanying prospectus from the date we file
that document.
Any reports filed by us pursuant to Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended,
or the Exchange Act, on or after the date of this
prospectus supplement and before the completion of this offering
of depositary shares will be deemed to be incorporated by
reference into this prospectus supplement and the accompanying
prospectus and will automatically update, where applicable, and
supersede any information contained in this prospectus
supplement or the accompanying prospectus or incorporated by
reference into this prospectus supplement and the accompanying
prospectus. Some documents or information, such as that
furnished under Items 2.02 or 7.01, or the exhibits related
thereto under Item 9.01, of
Form 8-K,
are deemed furnished and not filed in accordance with SEC rules.
None of those documents and
S-ii
none of that information is incorporated by reference in this
prospectus supplement or the accompanying prospectus.
This prospectus supplement and the accompanying prospectus
incorporate the documents listed below that we have previously
filed with the SEC (other than, in each case, documents or
information deemed to have been furnished and not filed in
accordance with SEC rules). They contain important information
about us, our business and our financial condition.
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Apache SEC Filings
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Period or Date Filed
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Annual Report on
Form 10-K
(including information specifically incorporated by reference
into the Annual Report on
Form 10-K
from our Definitive Proxy Statement on Schedule 14A, filed
on March 31, 2010)
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Year ended December 31, 2009
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Quarterly Report on
Form 10-Q
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Quarter ended March 31, 2010
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Current Reports on
Form 8-K
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Filed on January 14, 2010, January 19, 2010, April 15, 2010,
April 16, 2010, May 11, 2010 and July 20, 2010
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Registration Statements on
Form 8-A
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Filed on January 24, 1996 and February 3, 2006
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The section entitled Additional Information About
Apache in our Registration Statement on
Form S-4
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Filed on May 19, 2010 and amended on June 29, 2010
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You can obtain any of the documents incorporated by reference in
this prospectus supplement and the accompanying prospectus from
us or from the SEC through the SECs web site at
www.sec.gov or by mail from the SECs Public Reference Room
located at 100 F Street, N.E., Room 1580,
Washington, DC 20549, at prescribed rates. Documents
incorporated by reference are available from us without charge,
excluding any exhibits to those documents unless we specifically
incorporated by reference the exhibit in this prospectus
supplement and the accompanying prospectus. You can obtain these
documents from us by requesting them in writing or by telephone
at the following address or number:
Apache Corporation
2000 Post Oak Boulevard
Houston, Texas 77056
Telephone:
(713) 296-6000
S-iii
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This prospectus supplement, the accompanying prospectus and the
documents incorporated by reference in this prospectus
supplement and the accompanying prospectus contain statements
that constitute forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933,
or the Securities Act, and Section 21E of the Exchange Act.
These statements relate to future events or our future financial
performance, which involve known and unknown risks,
uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be
materially different from those expressed or implied by any
forward-looking statements. In some cases, you can identify
forward looking statements by terminology such as
expect, anticipate,
estimate, intend, may,
will, could, would,
should, predict, potential,
plans, believe or the negative of these
terms or similar terminology.
Forward-looking statements are not guarantees of performance.
Actual events or results may differ materially because of market
conditions in our markets or other factors. Moreover, we do not,
nor does any other person, assume responsibility for the
accuracy and completeness of those statements. Unless otherwise
required by applicable securities laws, we disclaim any
intention or obligation to update any of the forward-looking
statements after the date of this prospectus supplement. If we
do update one or more forward-looking statements, no inference
should be drawn that we will make additional updates with
respect to those or other forward-looking statements. All of the
forward-looking statements are qualified in their entirety by
reference to the factors discussed under Risk
Factors in this prospectus supplement and under Risk
Factors and Quantitative and Qualitative Disclosures
About Market Risk Forward-Looking Statements and
Risk in our Annual Report on
Form 10-K
for the year ended December 31, 2009 and our Quarterly
Report on
Form 10-Q
for the quarter ended March 31, 2010 (both of which are
incorporated by reference in this prospectus supplement and the
accompanying prospectus) and similar sections in any subsequent
filings that we incorporate by reference in this prospectus
supplement and the accompanying prospectus, which describe risks
and factors that could cause results to differ materially from
those projected in those forward-looking statements.
Those risk factors may not be exhaustive. We operate in a
continually changing business environment, and new risk factors
emerge from time to time. We cannot predict these new risk
factors, nor can we assess the impact, if any, of these new risk
factors on our businesses or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those described in any forward-looking
statements. Accordingly, forward-looking statements should not
be relied upon as a prediction of actual results.
In addition to the foregoing matters, there are important
factors related to the BP Acquisition described elsewhere in
this prospectus supplement that could cause the actual results
of the BP Acquisition to differ materially from what we
currently expect, including without limitation:
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the timing of the receipt of regulatory approvals and third
party consents required for the consummation of the various
property acquisitions;
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the imposition by regulatory authorities of conditions on the
future operation of the BP Properties in connection with the
receipt of regulatory approvals;
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the exercise of preferential purchase rights with respect to
certain of the BP Properties;
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the integration of the operations of the BP Properties with
ours; and
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the occurrence of a case or proceeding under the bankruptcy or
insolvency laws of any jurisdiction involving BP or its
affiliates who are parties to or have guaranteed obligations
under the agreements related to the BP Acquisition.
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S-iv
SUMMARY
This summary highlights information contained elsewhere in
this prospectus supplement and the accompanying prospectus. It
does not contain all of the information that you should consider
before making an investment decision. We urge you to read the
entire prospectus supplement, the accompanying prospectus and
the documents incorporated by reference in this prospectus
supplement and the accompanying prospectus carefully, including
the historical financial statements and notes to those financial
statements incorporated by reference in this prospectus
supplement and the accompanying prospectus. Please read
Risk Factors and Cautionary Statement
Regarding Forward-Looking Information in this prospectus
supplement and Risk Factors and Quantitative
and Qualitative Disclosures About Market Risk
Forward-Looking Statements and Risk in our Annual Report
on
Form 10-K
for the year ended December 31, 2009 and our subsequently
filed Exchange Act reports for more information about important
risks that you should consider before investing in our
depositary shares.
Apache
Corporation
We are an independent energy company that explores for, develops
and produces natural gas, crude oil and natural gas liquids. In
North America, our exploration and production interests are
focused in the Gulf of Mexico, the Gulf Coast, East Texas, the
Permian Basin, the Anadarko Basin and the Western Sedimentary
Basin of Canada. Outside of North America, we have exploration
and production interests onshore Egypt, offshore Western
Australia, offshore the U.K. in the North Sea and onshore
Argentina. We also have exploration interests on the Chilean
side of the island of Tierra del Fuego.
The address of our principal executive offices is 2000 Post Oak
Boulevard, Houston, Texas 77056, and our telephone number at
this address is
(713) 296-6000.
Recent
Developments
Pending
and Recently Completed Acquisitions
Potential
BP Acquisition
On July 20, 2010, we announced the signing of three
definitive purchase and sale agreements (which we refer to as
the BP Purchase Agreements) to acquire the following
properties (which we refer to as the BP Properties)
from subsidiaries of BP plc (we refer to BP plc and such
subsidiaries collectively as BP) for aggregate
consideration of approximately $7.0 billion, subject to
customary adjustments in accordance with the BP Purchase
Agreements (which we refer to as the BP Acquisition):
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Permian Basin. All of BPs oil and gas
operations, related infrastructure and acreage in the Permian
Basin of West Texas and New Mexico. The assets include interests
in 10 field areas in the Permian Basin, (including
Block 16/Coy Waha, Block 31, Brown Basset,
Empire/Yeso, Pegasus, Southeast Lea, Spraberry, Wilshire, North
Misc and Delaware Penn), approximately 405,000 net mineral and
fee acres, 358,000 leasehold acres, approximately 3,629 active
wells and three gas processing plants, two of which are
currently operated by BP. Based on our investigation and review
of data provided by BP, these assets produced
15,110 barrels of liquids and 81 MMcf of gas per day
in the first six months of 2010. The Permian Basin assets had
estimated net proved reserves of 140.9 MMboe at
June 30, 2010 (65 percent liquids).
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Western Canada Sedimentary
Basin. Substantially all of BPs Western
Canadian upstream gas assets, including 1,278,000 net mineral
and leasehold acres, interests in approximately 1,600 active
wells, eight operated and 14 non-operated gas processing plants.
The position includes many attractive drilling opportunities
ranging from conventional to several unconventional targets,
including shale gas, tight gas and coal bed methane in
historically productive formations including the Montney,
Cadonien and Doig. Based on our investigation and review of data
provided by BP, during the first half of 2010 these properties
accounted for 6,529 barrels of liquids and 240 MMcf of gas per
day and had estimated net
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proved reserves of 223.7 MMboe at June 30, 2010 (94
percent gas). We currently have operations in approximately half
of these 13 field areas.
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Western Desert, Egypt. BPs interests in
four development licenses and one exploration concession (East
Badr El Din), covering 394,000 net acres south of El Alamein in
the Western Desert of Egypt. These properties are operated by
Gulf of Suez Petroleum Company, a joint venture between BP and
the Government of Egypt. The transaction includes BPs
interests in 65 active wells, a
24-inch gas
line to Dashour, a liquefied petroleum gas plant in Dashour, a
gas processing plant and a
12-inch oil
export line to the El Hamra Terminal on the Mediterranean Sea.
Based on our investigation and review of data provided by BP,
during the first six months of 2010 these properties accounted
for 6,016 barrels of oil and 11 MMcf of gas per day of BPs
production, and had estimated net proved reserves of
20.2 MMboe at June 30, 2010 (59 percent liquids). The
BP Properties in Egypt are complementary to the over
11 million gross acres in 21 separate concessions in the
Western Desert we currently hold. The Merged Concession
Agreement related to the development licenses runs through 2024,
subject to a five year extension at the option of the operator.
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Of the $7.0 billion purchase price, $3.1 billion is
applicable to the Permian Basin properties, $3.25 billion
is applicable to the Canadian properties and $650 million
is applicable to the Egyptian properties. The effective date of
the BP Acquisition is July 1, 2010. Apache Corporation has
agreed to guarantee the performance of the obligations of its
subsidiaries under the BP Purchase Agreements.
The BP Acquisition is subject to a number of closing conditions,
including clearance under the competition laws of the United
States and Canada, the foreign investment law of Canada and
approval of the Government of Egypt. Because of the relatively
short time period contemplated between signing the BP Purchase
Agreements and the expected closing of the BP Acquisition,
several significant matters commonly resolved prior to closing
such an acquisition have been reserved for after closing. For
example, title review with respect to most of the BP Properties
will not be completed until after closing. In addition, we will
not have sufficient time before closing to conduct a full
assessment of any environmental and legal liabilities with
respect to the BP Properties. Also, some of the BP Properties
are subject to preferential purchase rights held by third
parties, and those rights may be exercised before or after we
close the BP Acquisition. Most of the preferential purchase
rights have exercise periods of 30 days after delivery of
notice of acquisition. Accordingly, the BP Acquisition is
subject to certain post-closing requirements relating to, among
other things, resolution of title, environmental and legal
issues and any exercise by third parties of preferential
purchase rights with respect to certain of the BP Properties.
Prompt notice of the proposed sale of the BP Properties will be
provided to appropriate governmental agencies and to parties
holding preferential rights to purchase such properties. The
transactions comprising the BP Acquisition are not mutually
conditioned, and we may close any of these transactions without
closing the others.
Each BP Purchase Agreement may be terminated prior to closing
pursuant to termination provisions that are typical of a
transaction of this type. If a BP Purchase Agreement is
terminated other than as a result of our material breach or our
failure or refusal to close, BP is required to return the
applicable portion of the Deposit (as further described below)
plus interest. BP plc has agreed to provide a limited guarantee
with respect to the BP Purchase Agreements, principally as to
return of the Deposit. If a BP Purchase Agreement is terminated
as a result of our material breach or our failure or refusal to
close, BP is required to return the applicable portion of the
Deposit plus interest, less an amount equal to five percent of
the purchase price plus interest in such agreement (which we
refer to as the Reverse Breakup Fee). Each BP
Purchase Agreement provides that BPs retention of the
Reverse Breakup Fee is the sole and exclusive remedy of BP in
the event of a termination of such agreement.
On July 30, 2010, we expect to make a deposit of
$5.0 billion toward the purchase price of the BP Properties
(which we refer to as the Deposit), to be returned
to us or applied to the purchase price, as the case may be. Of
the $5.0 billion Deposit, $1.5 billion is applicable
to the Permian Basin properties, $3.25 billion is
applicable to the Canadian properties and $250 million is
applicable to the Egyptian properties. In Canada, the Deposit
will be implemented in the form of a loan from Apache to the BP
subsidiary that is the seller of the Canadian properties which
has been guaranteed by BP plc. From the date of
S-2
the Deposit until receipt of regulatory approvals, BP will
retain complete operational control of the BP Properties,
subject to customary covenants regarding the conduct of business
in the ordinary course, maintenance of the properties and
similar matters. The Deposit is not required to be segregated
from the operations of BP, but may be made available for use by
BP in its operations. Should the applicable regulatory approvals
not be obtained by a certain date (for the Permian Basin asset
purchase by October 29, 2010; for the Western Canadian
asset purchase by January 31, 2011; and for the Egyptian
asset purchase by July 19, 2011), the affected transaction
will not close and the applicable portion of the Deposit will be
returned. Should preferential purchase rights with respect to
any of the BP Properties be exercised, the purchase price
payable to the affected BP subsidiary will be reduced
accordingly. We estimate that only an immaterial portion of the
BP Properties are subject to preferential purchase rights in
favor of third parties.
To the extent preferential purchase rights are not exercised,
with respect to any portion of the BP Acquisition, we will pay
the balance of the allocated consideration and close the
respective transaction as promptly as practicable after receipt
of the various regulatory approvals and contractual consents
applicable to the individual components of the BP Acquisition.
Upon receipt of regulatory approvals in Canada, the instrument
representing the loan will convert into ownership of the equity
interests of the BP subsidiary holding the Canadian properties.
The Deposit and the balance of the consideration to be paid by
us in respect of the BP Properties will be financed from the
proceeds of this offering and the concurrent offering of our
depositary shares, cash on hand, our existing revolving credit
and commercial paper facilities and the issuance of term debt.
We have also arranged a bridge loan facility to backstop our
financing requirements. See Bridge Financing
Facility below.
We anticipate that required regulatory approvals and resolution
of any preferential purchase rights, and any transfer of
operational control of the BP Properties, will occur in the
third and fourth quarters of 2010. We cannot assure you,
however, that the purchase of the BP Properties will close on
these terms, on a timely basis or at all. This offering is not
conditioned upon closing of the purchase of any of the BP
Properties, and the purchase of the BP Properties is not
conditioned upon this offering, the concurrent offering of our
common stock or any other financing conditions.
The BP Properties had estimated proved reserves as of
June 30, 2010 of approximately:
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116.4 MMbbls of crude oil and natural gas liquids; and
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1,610 Bcf of natural gas.
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Using the conventional equivalence of one barrel of oil to six
Mcf of gas (which is not indicative of the price difference
between these resources), the estimated proved reserves
attributable to the BP Properties totaled approximately
384.8 MMboe at June 30, 2010 and were approximately
30 percent liquids and 70 percent gas. Approximately
64 percent of the estimated proved reserves attributable to
the BP Properties are developed reserves. A majority of the
estimated oil and natural gas liquids reserves are located in
the Permian Basin and the majority of the estimated natural gas
reserves are located in Canada.
Production estimates, provided by BP, for the first six months
of 2010 for the BP Properties were approximately:
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|
|
|
|
27.7 Mbbls per day of crude oil and natural gas
liquids; and
|
|
|
|
331 MMcf per day of natural gas.
|
Production estimates, provided by BP, for the year ended
December 31, 2009 for the BP Properties were approximately:
|
|
|
|
|
28 Mbbls per day of crude oil and natural gas liquids; and
|
|
|
|
348 MMcf per day of natural gas.
|
The reserves and production estimates mentioned in the preceding
paragraphs are based on our analysis of historical production
data, assumptions regarding capital expenditures and anticipated
production declines. The foregoing estimates of reserves and
production are based on estimates of our engineers without
review by
S-3
an independent petroleum engineering firm. Data used to make
these estimates were furnished by BP or obtained from publicly
available sources. We cannot assure you that these estimates of
proved reserves and production are accurate. After such data is
reviewed by an independent petroleum engineering firm and after
we conduct a more thorough review, the BP Acquisition reserves
and production may differ materially from the amounts indicated
above.
Audited historical financial information for the BP Properties
is not currently available. We plan to file separate financial
statements and pro forma financial information, as required by
SEC rules, in a Current Report on
Form 8-K
within the prescribed time period following consummation of the
BP Acquisition. Preliminary leasehold operating statements
provided to us by BP indicate that the BP Properties had
revenues for the six months ended June 30, 2010 of between $520
million and $575 million and for the year ended December 31,
2009 of between $830 million and $920 million, while direct
operating expenses for the same periods were between $155
million and $175 million and between $310 million and $345
million, respectively.
The foregoing preliminary revenue and direct operating expense
estimates were provided by BP, are unaudited, and have not been
reviewed by our independent accountants. We cannot assure you
that these preliminary estimates are accurate.
Unless otherwise specifically stated, the information included
in this prospectus supplement, the accompanying prospectus and
documents incorporated by reference do not include information
related to the BP Properties.
Pending
Mariner Acquisition
On April 15, 2010, we and Mariner Energy, Inc., a Delaware
corporation (which we refer to as Mariner),
announced that we had entered into a definitive agreement and
plan of merger dated April 14, 2010 (which we refer to as
the Mariner Merger Agreement) pursuant to which we
will acquire Mariner in a stock and cash transaction (which we
refer to as the Mariner Acquisition). In connection
with the Mariner Acquisition, we expect to issue approximately
17.5 million shares of common stock (an increase of
approximately five percent in our outstanding common shares
before giving effect to this offering) and pay cash of
approximately $800 million to Mariner stockholders. We
intend to fund the cash portion of the consideration with
existing cash balances and commercial paper. Upon consummation
of the Mariner Acquisition, we will assume Mariners debt,
which was approximately $1.2 billion at the time of the
Mariner Merger Agreement.
The completion of the Mariner Acquisition is subject to certain
conditions, including: (i) the effectiveness of a
registration statement on
Form S-4
that we filed with the SEC on May 19, 2010, and amended on
June 29, 2010, for the issuance of our common stock in the
Mariner Acquisition; and (ii) the adoption of the Mariner
Merger Agreement by the stockholders of Mariner. Completion of
the transaction is projected to occur during the third quarter
of 2010.
The Mariner Merger Agreement also contains certain termination
rights for both us and Mariner, including if the Mariner
Acquisition is not completed by January 31, 2011. In the
event of a termination of the Mariner Merger Agreement under
certain circumstances, Mariner may be required to pay to us a
termination fee of $67 million. In certain circumstances
involving termination of the Mariner Merger Agreement, one of us
or Mariner will be obligated to reimburse the others
expenses incurred in connection with the transactions
contemplated by the Mariner Merger Agreement in an aggregate
amount not to exceed $7.5 million. Any reimbursement of
expenses by Mariner to us will reduce the amount of any
termination fee paid by Mariner to us.
At year-end 2009, Mariner reported estimated proved reserves of
181 MMboe. Mariners oil and gas properties are
primarily located in the Gulf of Mexico deepwater and shelf, the
Permian Basin and onshore in the Gulf Coast, encompassing
541,000 net developed and 623,000 net undeveloped
acres at December 31, 2009. Mariners current
deepwater Gulf of Mexico portfolio included 99 blocks, seven
discoveries in development and more than 50 drilling prospects.
The Permian Basin assets are long-lived and fit well with our
existing Permian Basin properties.
S-4
Unless otherwise specifically stated, the information included
in this prospectus supplement, the accompanying prospectus and
documents incorporated by reference do not include information
related to the Mariner Acquisition.
Gulf
of Mexico Shelf Acquisition
On June 10, 2010, we announced the completion of our
acquisition of oil and gas assets on the Gulf of Mexico shelf
from Devon Energy Corporation for $1.05 billion in cash.
The acquisition is effective as of January 1, 2010. The
acquired assets comprise 477,000 net acres across 150
blocks. The fields have 80 platforms and 211 production caissons
in waters up to 450 feet deep. Approximately half of the
estimated proved reserves of 41 MMboe are oil and natural
gas liquids. The property interests are projected to produce
9,500 barrels of oil per day and 55 MMcf per day
(net). We operate 75 percent of the production. We funded
the acquisition primarily from existing cash balances
supplemented with commercial paper.
Second
Quarter 2010 Results
On July 20, 2010, we announced our preliminary unaudited
results for the second quarter of 2010. Set forth below is
certain financial and operating data for the quarters and six
months ended June 30, 2010 and 2009.
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For The Quarter Ended
|
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For the Six Months Ended
|
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June 30,
|
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June 30,
|
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2010
|
|
2009
|
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2010
|
|
2009
|
|
Financial data:
|
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|
|
|
|
|
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|
|
|
|
|
|
Revenues and other (thousands)
|
|
$
|
2,971,910
|
|
|
$
|
2,093,378
|
|
|
$
|
5,645,161
|
|
|
$
|
3,727,203
|
|
Income attributable to common stock (thousands)
|
|
|
860,223
|
|
|
|
443,300
|
|
|
|
1,565,204
|
|
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|
(1,315,060
|
)
|
Basic net income per common share
|
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2.55
|
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|
|
1.32
|
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4.64
|
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|
(3.92
|
)
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Diluted net income per common share
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2.53
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|
1.31
|
|
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|
4.61
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|
|
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(3.92
|
)
|
Weighted average common shares outstanding (thousands)
|
|
|
337,618
|
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|
|
335,637
|
|
|
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337,273
|
|
|
|
335,372
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Diluted common shares outstanding (thousands)
|
|
|
339,377
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|
|
|
337,365
|
|
|
|
339,282
|
|
|
|
335,372
|
|
Production and pricing data:
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|
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|
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|
|
|
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Oil volume (barrels per day)
|
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331,280
|
|
|
|
281,836
|
|
|
|
310,103
|
|
|
|
274,652
|
|
Average oil price per barrel
|
|
$
|
74.89
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|
|
$
|
58.15
|
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|
$
|
74.74
|
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|
$
|
50.57
|
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Natural gas volume (Mcf per day)
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1,791,555
|
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|
1,769,623
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|
1,751,958
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|
1,697,408
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Average natural gas price per Mcf
|
|
$
|
4.01
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|
$
|
3.48
|
|
|
$
|
4.29
|
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|
$
|
3.65
|
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NGL volume (barrels per day)
|
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|
16,992
|
|
|
|
10,626
|
|
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|
14,444
|
|
|
|
10,394
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Average NGL price per barrel
|
|
$
|
37.21
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|
|
$
|
23.42
|
|
|
$
|
40.58
|
|
|
$
|
22.39
|
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Total production (boe per day)
|
|
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646,866
|
|
|
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587,400
|
|
|
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616,540
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|
|
|
567,947
|
|
Concurrent
Offering of Common Stock
Concurrently with this offering, we are offering, by means of a
separate prospectus supplement, 21,000,000 shares of our
common stock (or 24,150,000 shares if the underwriters of
that offering exercise in full their option to purchase
additional shares thereunder). This offering of depositary
shares is not contingent upon the offering of common stock, and
the offering of common stock is not contingent upon this
offering. The foregoing description and other information
regarding the offering of the common stock is included herein
solely for informational purposes. Nothing in this prospectus
supplement should be construed as an offer to sell, or the
solicitation of an offer to buy, any shares included in the
offering of the common stock.
S-5
Bridge
Financing Facility
In connection with and in contemplation of the BP Acquisition,
we have entered into a term loan agreement with affiliates of
the underwriters of this offering that provides a
$5.0 billion unsecured bridge facility (the Bridge
Facility), the proceeds of which could be used to finance
a portion of the consideration for the BP Acquisition, including
the Deposit, and to pay certain fees and expenses in connection
with the BP Acquisition. The Bridge Facility will be used as a
backstop in the event that alternative forms of financing,
including proceeds from this offering, the concurrent offering
of depositary shares and other debt financing that we
subsequently expect to undertake, are not available in
sufficient amounts at or prior to such times when we are
required to fund the consideration payable for the BP
Acquisition, including the Deposit. We do not currently intend
to draw under the Bridge Facility but instead plan to finance
the BP Acquisition through proceeds of this offering, the
concurrent offering of depositary shares, cash on hand, our
existing revolving credit and commercial paper facilities and
the issuance of term debt.
Funds under the Bridge Facility will be available to us in one
or more drawings until September 28, 2010. Covenants,
events of default and representations and warranties will be
substantially similar to those in our existing revolving credit
facilities. We are required to prepay loans under the Bridge
Facility with 100% of the net cash proceeds of (a) equity
issuances to third parties by us or any of our subsidiaries,
(b) indebtedness for borrowed money by us or any of our
subsidiaries (with certain exceptions, including refinancings
and draws under existing facilities, indebtedness for working
capital, securitizations in the ordinary course of business, and
commercial paper issued under our existing commercial paper
program), and (c) asset dispositions by us or any of our
subsidiaries outside the ordinary course of business. The Bridge
Facility will mature on September 29, 2010 but may be
extended at our option until December 29, 2010.
All borrowings under the Bridge Facility will bear interest at a
rate equal to either:
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a base rate, which is defined as a rate per annum equal to the
greatest of (a) JPMorgan Chase Bank, N.A.s prime
rate, (b) the federal funds rate plus .50% and
(c) one-month LIBOR plus 1%, or
|
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|
LIBOR plus a margin varying from 1.50% to 2.50%.
|
The Bridge Facility will incur a fee after the first funding
under such facility, payable on the average daily undrawn amount
of the Bridge Facility at a per annum rate equal to 0.10% to
0.35%.
SEC
Comments
On June 18 and July 12, 2010, we received comments from the
SEC staff on our registration statement on
Form S-4
filed in connection with the Mariner Acquisition and on our
Annual Report on
Form 10-K
for the year ended December 31, 2009, our Quarterly Report
on
Form 10-Q
for the quarter ended March 31, 2010 and our Definitive
Proxy Statement on Schedule 14A filed on March 31,
2010. We responded to the first comment letter by letter dated
June 29, 2010 and expect to respond to the second comment
letter in the near future. We do not believe that the comments,
or our responses thereto, materially affect the disclosures in
our existing Exchange Act reports and expect to include these
and any other additional or revised disclosure resulting from
the comment process in future filings with the SEC.
The comments on our 2009
Form 10-K
and March 31, 2010
Form 10-Q
included requests that we: provide additional disclosure
regarding our potential liability in the event that one of our
rigs operating in the Gulf of Mexico is involved in an explosion
or event similar to the recent events in the Gulf of Mexico
involving the Deepwater Horizon explosion and subsequent oil
spill; discuss what remediation plans or procedures we have in
place to deal with the environmental impact that would occur in
the event of an oil spill or leak from our offshore operations;
include information about the competitive conditions in our
industry and any material effects that compliance with federal,
state and local provisions which have been enacted or adopted
regulating the discharge of materials into the environment may
have on our capital expenditures, earnings and competitive
position; and provide additional disclosure regarding our
reserves and development costs. The SEC staffs comments on
our Definitive Proxy Statement on Schedule 14A asked us to
comply with the comments in all future filings and requested
that we provide additional disclosure related to the
compensation consulting firms engaged by our Management
Development and Compensation Committee.
S-6
THE
OFFERING
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Securities offered |
|
22,000,000 depositary shares, each of which represents a
1/20th interest in a share of our mandatory convertible
preferred stock and entitles the holder of such depositary
share, through the depositary, to a proportional fractional
interest in the rights and preferences of such share of
mandatory convertible preferred stock, including conversion,
dividend, liquidation and voting rights, subject to the terms of
the deposit agreement. |
|
Option to purchase additional depositary shares |
|
To the extent that the underwriters sell more than depositary
shares, the underwriters have the option to purchase up to an
additional 3,300,000 depositary shares from us at the
public offering price less the underwriting discount, within
30 days from the date of this prospectus supplement. |
|
Initial offering price |
|
$ per depositary share. |
|
Liquidation preference |
|
$1,000 per share of mandatory convertible preferred stock
(equivalent to $50 per depositary share), plus an amount equal
to the sum of all accrued and unpaid dividends. |
|
Dividends |
|
% on the liquidation amount of
$1,000 for each share of our mandatory convertible preferred
stock per year, subject to increase in certain circumstances as
described under Authorized share
condition below. Dividends will accrue and cumulate from
the date of issuance and, to the extent we have lawfully
available funds to pay dividends and we declare a dividend
payable, we will pay dividends in cash on each dividend payment
date except the dividend payment date on August 1, 2013, or
any earlier conversion date, when we may pay dividends in cash,
shares of our common stock or a combination thereof, at our
election and subject to the share cap, as defined below. The
dividend payable on the first dividend payment date, if
declared, is expected to be $ per
share of mandatory convertible preferred stock and on each
subsequent dividend payment date, if declared, is expected to be
$ per share of mandatory
convertible preferred stock (equivalent to
$ and
$ , respectively, per depositary
share). The depositary will distribute all dividend payments on
the mandatory convertible preferred stock to the holders of
outstanding depositary shares, as nearly as practicable, in
proportion to the number of outstanding depositary shares held
by each holder. Accumulated and unpaid dividends for any past
dividend period will not bear interest. See Description of
the Mandatory Convertible Preferred Stock
Dividends and Description of Depositary
Shares Dividends and Other Distributions in
this prospectus supplement. |
|
Dividend payment dates |
|
If declared, February 1, May 1, August 1 and November
1 of each year, commencing on November 1, 2010. |
|
Authorized share condition |
|
As of the date of this prospectus supplement, and after giving
effect to the concurrent common stock offering and consummation
of the Mariner Acquisition, we
have
authorized, unissued and unreserved shares of our common stock,
but we have |
S-7
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|
only
reserved
of those shares for conversions of the mandatory convertible
preferred stock. To provide for the authorization of a
sufficient number of shares of common stock into which the
mandatory convertible preferred stock may be converted in full,
we have agreed in the underwriting agreement relating to this
offering and the certificate of designations relating to the
mandatory convertible preferred stock to use commercially
reasonable efforts to satisfy the authorized share condition (as
defined below) on or prior to our next annual meeting of
stockholders, and if the authorized share condition is not
satisfied by such annual meeting, use our best effort thereafter
to satisfy the authorized share condition as promptly as
practicable. |
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If the authorized share condition is not satisfied by
August 1, 2011, then from such date to, but excluding, the
date on which the authorized share condition is satisfied, the
dividend rate at which the mandatory convertible preferred stock
accrues and accumulates will increase by 2%
to % per annum on the liquidation
amount of $1,000 per share of mandatory convertible preferred
stock. In addition, until the authorized share condition is
satisfied, the dividend rate will increase by an additional 1%
on each six month anniversary of the 365th day after the
issuance of the mandatory convertible preferred stock, to a
maximum rate equal to % plus 6% per
annum. Upon satisfaction of the authorized share condition, the
dividend rate will reset to the original rate
of % per annum. |
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|
|
If the authorized share condition is not satisfied on the
mandatory conversion date and the number of designated
shares (as defined in this prospectus supplement) is
greater than zero, we will convert, as described under
Mandatory conversion below, the maximum
number of shares of mandatory convertible preferred stock, on a
pro rata basis, that will convert into (based on the conversion
rate described below) a number of shares of our common stock not
exceeding the number of designated shares. The number of
designated shares is
initially ,
but we may (though we are not obligated to) increase that number
by any authorized and unissued shares not reserved for other
corporate purposes. We will increase the number of designated
shares by any increases to our authorized and unissued share
count (including any repurchased shares of common stock, which
shall be deemed unissued for the purpose of calculating
designated shares). If there are no designated shares on the
mandatory conversion date, all outstanding shares of mandatory
convertible preferred stock will remain outstanding as described
below. |
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Any mandatory convertible preferred stock not converted on the
mandatory conversion date will remain outstanding. However,
effective as of the mandatory conversion date, the conversion
rate will be fixed as the conversion rate per share (the
final conversion rate) that the outstanding
mandatory convertible preferred stock would have otherwise been
converted into as described under Mandatory
Conversion below. In addition, from and after the
mandatory conversion date, the outstanding mandatory convertible |
S-8
|
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|
preferred stock will (i) accrue and cumulate dividends at
the rate of % plus 6% per annum on
the liquidation amount of $1,000 per share of mandatory
convertible preferred stock payable quarterly, to the extent we
have legally available funds to pay dividends and our board of
directors declares a dividend payable, on each dividend payment
date in the same manner described under
Dividends; (ii) receive and
participate in all dividends or distributions paid or made in
respect of our common stock based upon the final conversion rate
per share of mandatory convertible preferred stock; and
(iii) be entitled to vote a number of votes equal to the
final conversion rate per share of mandatory convertible
preferred stock for the vote or consent on all matters submitted
to a vote of our common stockholders and will vote together with
our common stockholders as one class on such matters (except for
the approval required to satisfy the authorized share
condition). Each depositary share will represent a proportional
fractional interest in the foregoing additional rights. |
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|
|
Authorized share condition means that we have
reserved for issuance, upon conversion of the mandatory
convertible preferred stock, a sufficient number of designated
shares greater than or equal to the product of the share cap (as
defined under Conversion rate below) and the number
of shares of mandatory convertible preferred stock outstanding
to allow for the conversion in full of all outstanding shares of
mandatory convertible preferred stock; provided that on or after
the mandatory conversion date, the authorized share
condition will be deemed to be satisfied if we have a
sufficient number of designated shares to convert all
outstanding shares of the mandatory convertible preferred stock
and fundamental change preferred stock (as defined under
Conversion upon a fundamental change below), as
applicable. |
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Upon satisfaction of the authorized share condition following
the mandatory conversion date, the mandatory convertible
preferred stock will automatically convert into shares of common
stock based on the final conversion rate. In addition, as
described under Mandatory conversion
below, upon any increase of the designated shares announced by
us following the mandatory conversion date, we will
automatically convert a portion of the outstanding shares of
mandatory convertible preferred stock held by each holder into
shares of our common stock at the final conversion rate based on
the number of increased designated shares of common stock we
have available. |
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Redemption |
|
Our mandatory convertible preferred stock is not redeemable. |
|
Mandatory conversion date |
|
August 1, 2013. |
|
Mandatory conversion |
|
On the mandatory conversion date, provided the authorized share
condition has been satisfied, each share of our then-outstanding
mandatory convertible preferred stock will automatically convert
into a number of shares of our common stock equal to the
conversion rate described below, and each depositary share will
automatically convert into a number of shares equal to a
proportionate fractional interest in such shares of common
stock. If |
S-9
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|
the authorized share condition has not been satisfied, then we
will convert only a portion of the outstanding mandatory
convertible preferred stock based on the number of designated
shares of common stock we have available, as described under
Authorized share condition above. If we
do not have any designated shares, no shares of mandatory
convertible preferred stock will be converted. Any shares of
mandatory convertible preferred stock not converted on the
mandatory conversion date will remain outstanding and will be
convertible at the final conversion rate and with the increased
dividend rate and the additional rights as described under
Authorized share condition above. |
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In addition, provided the authorized share condition has been
satisfied, we will pay to holders of mandatory convertible
preferred stock an amount equal to accrued and unpaid dividends
in cash, shares of our common stock or a combination thereof, at
our election and subject to the share cap, whether or not
declared (other than previously declared dividends on the
mandatory convertible preferred stock that were paid to holders
of record as of a prior date), to the extent we have lawfully
available funds to pay such amounts at such time. See
Description of the Mandatory Convertible Preferred
Stock Mandatory Conversion and
Description of Depositary Shares
Conversion in this prospectus supplement. |
|
Conversion rate |
|
The conversion rate for each share of our mandatory convertible
preferred stock will be not more
than shares
of our common stock and not less
than shares
of our common stock (respectively, the maximum conversion
rate and minimum conversion rate) (and,
correspondingly, the conversion rate per depositary share will
be not more
than shares
and not less
than shares
of our common stock), depending on the applicable market value
of our common stock, as described under Description of the
Mandatory Convertible Preferred Stock Mandatory
Conversion in this prospectus supplement, and subject to
adjustment as described under Description of the Mandatory
Convertible Preferred Stock Conversion Rate
Adjustments in this prospectus supplement. |
|
|
|
The number of shares delivered upon conversion of the mandatory
convertible preferred stock (including the number of shares
delivered in connection with any dividend payment), shall in no
event exceed an amount per share equal to the product of
(i) two and (ii) the maximum conversion rate, subject
to adjustment as described under Description of the
Mandatory Convertible Preferred Stock Conversion
Rate Adjustments (the share cap). |
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|
The applicable market value of our common stock is
the average VWAP (as defined under Description of the
Mandatory Convertible Preferred Stock Method of
Payment of Dividends) per share of our common stock for
the 10 consecutive trading day period ending on, and including,
the third scheduled trading day immediately preceding the
mandatory conversion date. See |
S-10
|
|
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|
|
Description of the Mandatory Convertible Preferred
Stock Mandatory Conversion in this prospectus
supplement. |
|
|
|
The following table illustrates the conversion rate per share of
our mandatory convertible preferred stock, subject to adjustment
as described under Description of the Mandatory
Convertible Preferred Stock Conversion Rate
Adjustments in this prospectus supplement, based on the
applicable market value of our common stock on the mandatory
conversion date: |
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|
|
|
|
|
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|
Conversion Rate
|
|
|
Applicable Market Value per Share
|
|
per Share of Mandatory
|
|
|
on the Mandatory Conversion Date
|
|
Convertible Preferred Stock
|
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|
Less than or equal to $ (the
initial price)
|
|
shares
of common stock
|
|
|
Greater than the initial price and less than
$ (the threshold appreciation
price)
|
|
$1,000, divided by the applicable market value
|
|
|
Equal to or greater than the threshold appreciation price
|
|
shares of common stock
|
|
|
|
|
|
|
|
|
|
The following table illustrates the conversion rate per
depositary share, subject to adjustment as described under
Description of the Mandatory Convertible Preferred
Stock Conversion Rate Adjustments in this
prospectus supplement, based on the applicable market value of
our common stock on the mandatory conversion date: |
|
|
|
|
|
|
|
Applicable Market Value Per Share
|
|
Conversion Rate
|
|
|
on the Mandatory Conversion Date
|
|
per Depositary Share
|
|
|
|
Less than or equal to the initial price
|
|
shares of common stock
|
|
|
Greater than the initial price and less than the threshold
appreciation price
|
|
$50, divided by the applicable market value
|
|
|
Equal to or greater than the threshold appreciation price
|
|
shares
of common stock
|
|
|
|
Optional conversion |
|
At any time prior to July 15, 2013, other than during the
fundamental change conversion period (as defined below) and as
long as no shares of fundamental change preferred stock (as
defined under Conversion upon a fundamental change
below) is outstanding, a holder of mandatory convertible
preferred stock may elect to convert such holders shares
of our mandatory convertible preferred stock at the minimum
conversion rate
of shares
of our common stock per share of our mandatory convertible
preferred stock (equivalent
to shares
of our common stock per depositary share), subject to adjustment
as described |
S-11
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under Description of the Mandatory Convertible Preferred
Stock Conversion Rate Adjustments in this
prospectus supplement. Because each depositary share represents
a 1/20th fractional interest in a share of mandatory convertible
preferred stock, a holder of depositary shares may only convert
its depositary shares in lots of 20 depositary shares. |
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In addition, we will pay holders of mandatory convertible
preferred stock who exercise this optional conversion right (at
our election and, subject to the share cap, in cash, shares of
our common stock or a combination thereof) an amount equal to
accrued and unpaid dividends on the mandatory convertible
preferred stock, whether or not declared (other than previously
declared dividends on the mandatory convertible preferred stock
that were paid to holders of record as of a prior date), for all
dividend periods ending on or prior to the payment date
immediately preceding the conversion date, to the extent we have
lawfully available funds to pay such amounts at such time, as
described under Description of the Mandatory Convertible
Preferred Stock Conversion at the Option of the
Holder and Description of Depositary
Shares Conversion in this prospectus
supplement. Such holders will not receive any payment in respect
of the then-current dividend payment. |
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However, notwithstanding the foregoing, if on any early
conversion date for an optional conversion as described above,
the authorized share condition is not satisfied and we do not
have sufficient designated shares to convert all shares of
mandatory convertible preferred stock tendered for conversion on
such date, then for each converting holder, we will only convert
on such date a portion of its shares of mandatory convertible
preferred stock tendered for conversion based on the number of
designated shares of common stock we have available, as
described under Authorized share
condition above. Any shares of mandatory convertible
preferred stock not converted on such date will remain
outstanding and be deemed to have not been converted. In
addition, from and after such date, until we notify the holders
of any increase of the designated shares, no shares of mandatory
convertible preferred stock may be converted at the option of
the holders as described above. |
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Conversion upon a fundamental change |
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Upon the occurrence of a fundamental change (as defined herein)
prior to the mandatory conversion date, under certain
circumstances we will pay to holders who convert their shares of
mandatory convertible preferred stock during the period (the
fundamental change conversion period) beginning on,
and including, the effective date of the fundamental change and
ending on the earlier of (A) the mandatory conversion date
and (B) the date that is 20 days after such effective
date: |
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a number of shares of our common stock or units of
exchange property, as described under Description of the
Mandatory Convertible Preferred Stock
Recapitalizations, Reclassifications and Changes of Our Common
Stock in this
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S-12
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prospectus supplement (if the fundamental change constitutes a
reorganization event (as defined in this prospectus
supplement)), determined using the applicable fundamental change
conversion rate described in this prospectus supplement; and |
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at our election and, subject to the share cap,
shares of our common stock, units of exchange property, cash or
a combination thereof in an amount equal to the sum of any
accrued and unpaid dividends on the shares of our mandatory
convertible preferred stock so converted, to the extent that we
have lawfully available funds to pay such amounts.
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The applicable fundamental change conversion rate will be
determined based on the effective date of the fundamental change
and the price paid (or deemed to be paid) per share of our
common stock in such transaction or the average VWAP of our
common stock over the five trading day period ending on, and
including, the scheduled trading day immediately preceding the
effective date for the fundamental change. See Description
of the Mandatory Convertible Preferred Stock
Conversion Upon Fundamental Change in this prospectus
supplement. Because each depositary share represents a 1/20th
fractional interest in a share of mandatory convertible
preferred stock, a holder of depositary shares may only convert
its depositary shares upon a fundamental change in lots of 20
depositary shares. |
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If the authorized share condition is not satisfied and we do not
have sufficient designated shares to convert all shares of
mandatory convertible preferred stock tendered for conversion
during the fundamental change conversion period, (i) we
will convert a portion of the mandatory convertible preferred
stock tendered for conversion based on the number of designated
shares and (ii) we will exchange, for all shares of
mandatory convertible preferred stock tendered for conversion
but not so converted, shares of a new series of our preferred
stock in proportion to the liquidation preference of mandatory
convertible preferred stock so tendered, which we refer to as
fundamental change preferred stock, with the terms
described under Description of the Mandatory Convertible
Preferred Stock Conversion Upon Fundamental
Change. |
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Conversion rate adjustments |
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Each of the minimum conversion rate, the maximum conversion
rate, the final conversion rate, the initial price, the
threshold appreciation price, the applicable market value, the
fundamental change conversion rate and the stock price for
purposes of a fundamental change, among other terms, will be
adjusted upon the occurrence of the events and transactions
described under Description of the Mandatory Convertible
Preferred Stock Conversion Rate Adjustments in
this prospectus supplement. However, so long as the mandatory
convertible preferred stock or the fundamental change preferred
stock, as applicable, participates in all dividends and
distributions on the common stock as described under
Authorized share condition above, there
will not be any adjustments to the final conversion rate or
fundamental change conversion rate, as applicable, for such
dividends and |
S-13
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distributions occurring at any time after the mandatory
conversion date or fundamental change conversion period, as
applicable, even if the conversion does not occur as a result of
the failure to satisfy the authorized share condition. |
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Voting rights |
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Except as required by law or our Restated Certificate of
Incorporation, which will include the certificate of
designations for the mandatory convertible preferred stock, the
holders of mandatory convertible preferred stock will have no
voting rights. |
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If and whenever an amount equal to six quarterly dividends,
whether or not consecutive, payable on our mandatory convertible
preferred stock, is not paid, then, immediately prior to the
next annual meeting or special meeting of our stockholders, the
authorized number of directors constituting our board will be
automatically increased by two and the holders of our mandatory
convertible preferred stock (voting separately as a class with
all other parity stock upon which like voting rights have been
conferred and are exercisable) will be entitled at such annual
or special meeting to elect two directors. These voting rights
and the terms of the directors so elected will continue until
such time as the dividend arrearage on the mandatory convertible
preferred stock has been fully paid or set aside for payment. |
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The affirmative consent of holders of at least
662/3%
in voting power of the outstanding mandatory convertible
preferred stock and all other preferred stock or securities of
equal ranking having similar voting rights will be required for,
among other things, the authorization or increase in the
authorized amount of any class or series of stock ranking senior
to the mandatory convertible preferred stock with respect to
either or both the payment of dividends and the distribution of
assets upon any liquidation, dissolution or
winding-up
and for the amendment, alteration or repeal of any provision of
our Restated Certificate of Incorporation so as to adversely
affect the rights, preferences, privileges or voting powers of
our mandatory convertible preferred stock. |
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In addition, following the mandatory conversion date any shares
of mandatory convertible preferred stock not converted will have
the voting rights described under Authorized share
condition above. |
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See Description of the Mandatory Convertible Preferred
Stock Voting Rights and Description of
Depositary Shares Voting of the Mandatory
Convertible Preferred Stock in this prospectus supplement. |
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Ranking |
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Our mandatory convertible preferred stock will rank with respect
to dividend rights and rights upon our liquidation,
winding-up
or dissolution: |
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senior to all of our common stock and, if issued,
our authorized Series A Junior Participating Preferred
Stock and to each other class of capital stock or series of
preferred stock issued in the future unless the terms of that
stock expressly provide that it ranks senior to, or on a parity
with, our mandatory convertible preferred stock;
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S-14
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equally with any of our capital stock issued in the
future, the terms of which expressly provide that it will rank
equally with the mandatory convertible preferred stock;
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junior to all of our capital stock issued in the
future, the terms of which expressly provide that such stock
will rank senior to the mandatory convertible preferred stock;
and
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junior to our and our subsidiaries existing
and future indebtedness (including, in the case of our
subsidiaries, trade payables).
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Use of proceeds |
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We estimate that the net proceeds from this offering will be
approximately $ (or approximately
$ if the underwriters option
to purchase additional depositary shares is exercised in full)
after deducting the underwriting discount and estimated expenses
of the offering payable by us. We intend to use the net proceeds
of this offering to finance a portion of the consideration
payable in connection with the BP Acquisition. See Use of
Proceeds. |
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Certain U.S. tax consequences |
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Certain U.S. federal tax consequences of purchasing, owning and
disposing of the mandatory convertible preferred stock and any
common stock received upon its conversion are described in
Certain U.S. Federal Tax Consequences. You should
consult your tax advisor with respect to the U.S. federal tax
consequences of owning our mandatory convertible preferred stock
and common stock in light of your particular situation and with
respect to any tax consequences arising under the laws of any
state, local, foreign or other taxing jurisdiction. |
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If we are or have been a United States real property
holding corporation, a non-U.S. holder (as defined in
Certain U.S. Federal Tax Consequences in this
prospectus supplement) may be subject to U.S. federal income tax
with respect to gain on the disposition of our mandatory
convertible preferred stock if it has held more than 5% of our
mandatory convertible preferred stock at any point during
certain specified periods. We believe we are, or may become, a
United States real property holding corporation. See
Certain U.S. Federal Tax Consequences in this
prospectus supplement. |
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Book-entry, delivery and form |
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Initially, the depositary shares will be represented by one or
more permanent global certificates in definitive, fully
registered form deposited with a custodian for, and registered
in the name of, a nominee of The Depository Trust Company,
which we refer to as DTC. |
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Listing |
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We will apply to list the depositary shares on the NYSE, and we
expect trading on the NYSE to begin within five days of the
initial issuance of the depositary shares. See Description
of Depositary Shares Listing in this
prospectus supplement. |
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Depositary |
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The sole holder of shares of our mandatory convertible preferred
stock will be the depositary, and the holders of depositary
shares will exercise their proportional rights in our mandatory
convertible preferred stock through the depositary, as described
under Description of Depositary Shares in this
prospectus supplement. |
S-15
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The depositary for the depositary shares will be Wells Fargo
Bank, N.A. |
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Registrar and transfer agent |
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Wells Fargo Bank, N.A. |
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Risk factors |
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Investing in the securities offered by this prospectus
supplement involves risks. See Risk Factors. |
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Common stock |
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Our common stock is listed on the New York Stock Exchange, the
Nasdaq Global Select Market and the Chicago Stock Exchange under
the symbol APA. |
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Common stock to be outstanding after this offering(1) |
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358,802,052 shares. |
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(1) |
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Unless otherwise indicated, the number of shares of our common
stock to be outstanding after this offering includes 337,802,052
shares outstanding on July 19, 2010 and
21,000,000 shares of common stock (or
24,150,000 shares of common stock if the underwriters
option to purchase additional shares is exercised in full) to be
offered in the concurrent offering of common stock and excludes: |
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shares
of common stock
(or shares
of common stock if the underwriters option to purchase
additional depositary shares is exercised in full) issuable upon
the conversion of the mandatory convertible preferred stock
underlying the depositary shares to be offered hereby (such
figures (i) assume the maximum conversion rate thereunder
and (ii) exclude any additional shares issuable upon a
fundamental change);
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16,433,123 shares of common stock reserved for issuance
upon exercise of outstanding options or for future issuance
under our stock compensation plans;
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7,479,435 shares of treasury stock held as of June 30,
2010, of which 1,473,354 shares are reserved for future
issuance under our stock compensation plans; and
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our expected issuance of approximately 17.5 million shares
of common stock in connection with the pending consummation of
the Mariner Acquisition.
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In addition, unless otherwise indicated, the information in this
prospectus supplement assumes that the underwriters will not
exercise their option to purchase additional depositary shares
with respect to this offering or their option to purchase
additional shares under the concurrent offering of common stock.
Ratio of
Earnings to Combined Fixed Charges and Preferred Stock
Dividends
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Six Months
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Ended
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June 30,
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Years Ended December 31,
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2010
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2009
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2008
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2007
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2006
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2005
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Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends
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16.21
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1.71
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3.63
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14.36
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16.84
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21.25
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S-16
RISK
FACTORS
An investment in our depositary shares involves risks. You
should carefully consider the risks described below, in addition
to the other information contained or incorporated by reference
in this prospectus supplement or the accompanying prospectus.
Specifically, please see Risk Factors included in
our Annual Report on
Form 10-K
for the year ended December 31, 2009 and our Quarterly
Report on
Form 10-Q
for the quarter ended March 31, 2010 for a discussion of
risk factors that may affect our business. Realization of any of
those or the following risks or adverse results from any matter
listed under Cautionary Statement Regarding
Forward-Looking Information in this prospectus supplement
or under Quantitative and Qualitative Disclosures About
Market Risk Forward-Looking Statements and
Risk in our 2009
Form 10-K
or March 31, 2010
Form 10-Q
could have a material adverse effect on our business, prospects,
financial condition, cash flows and results of operations and
could result in a decline in the trading price of our depositary
shares. As a result, you could lose all or part of your
investment.
Risks
Related to Our Business
A
drilling moratorium in the U.S. Gulf of Mexico, or other
regulatory initiatives in response to the current oil spill in
the Gulf of Mexico, could adversely affect our
business.
As has been widely reported, on April 20, 2010, a fire and
explosion occurred onboard the semisubmersible drilling rig
Deepwater Horizon, leading to the oil spill currently affecting
the Gulf of Mexico. In response to this incident, the Minerals
Management Service (now known as the Bureau of Ocean Energy
Management, Regulation and Enforcement, or BOE) of
the U.S. Department of the Interior issued a notice on
May 30, 2010 implementing a six-month moratorium on certain
drilling activities in the U.S. Gulf of Mexico.
Implementation of the moratorium was blocked by a
U.S. district court, which was subsequently affirmed on
appeal, but on July 12, 2010, the BOE issued a new
moratorium that applies to deep-water drilling operations that
use subsea blowout preventers or surface blowout preventers on
floating facilities. The new moratorium will last until
November 30, 2010, or until such earlier time that the BOE
determines that deep-water drilling operations can proceed
safely. The BOE is also expected to issue new safety and
environmental guidelines or regulations for drilling in the
U.S. Gulf of Mexico, and potentially in other geographic
regions, and may take other steps that could increase the costs
of exploration and production, reduce the area of operations and
result in permitting delays. This incident could also result in
drilling suspensions or other regulatory initiatives in other
areas of the U.S. and abroad. Although it is difficult to
predict the ultimate impact of the moratorium or any new
guidelines, regulations or legislation, a prolonged suspension
of drilling activity in the U.S. Gulf of Mexico and other
areas, new regulations and increased liability for companies
operating in this sector could adversely affect our operations
in the U.S. Gulf of Mexico as well as in other offshore
locations.
The
Devon and Mariner transactions will increase our exposure to
Gulf of Mexico operations.
Our recent acquisition of oil and gas assets on the Gulf of
Mexico shelf from Devon Energy Corporation has increased our
exposure to Gulf of Mexico operations. Following the completion
of the Mariner Acquisition, an even larger percentage of our
exploration and production operations will be related to
offshore Gulf of Mexico properties. Greater offshore
concentration proportionately increases risks from delays or
higher costs common to offshore activity, including severe
weather, availability of specialized equipment and compliance
with environmental and other laws and regulations.
The
Mariner and BP transactions will expose us to additional risks
and uncertainties with respect to the acquired businesses and
their operations.
Although the acquired Mariner and BP businesses will generally
be subject to risks similar to those to which we are subject in
our existing businesses, the Mariner and BP transactions may
increase these risks. For example, the increase in the scale of
our operations may increase our operational risks. Recent
publicity associated with the oil spill in the Gulf of Mexico
resulting from the fire and explosion onboard the Deepwater
Horizon, which was under contract to BP, may cause regulatory
agencies to scrutinize our
S-17
operations more closely, as the acquiror of certain of BPs
operations. This additional scrutiny may adversely affect our
operations.
We may
have difficulty combining the operations of both Mariner and the
BP Properties, and the anticipated benefits of these
transactions may not be achieved.
Achieving the anticipated benefits of the Mariner and BP
transactions will depend in part upon whether we can
successfully integrate the operations of Mariner and the BP
Properties with ours. Our ability to integrate the operations of
Mariner and the BP Properties successfully will depend on our
ability to monitor operations, coordinate exploration and
development activities, control costs, attract, retain and
assimilate qualified personnel and maintain compliance with
regulatory requirements. The difficulties of integrating the
operations of Mariner and the BP Properties may be increased by
the necessity of combining organizations with distinct cultures
and widely dispersed operations. The integration of operations
following these transactions will require the dedication of
management and other personnel, which may distract their
attention from the
day-to-day
business of the combined enterprise and prevent us from
realizing benefits from other opportunities. Completing the
integration process may be more expensive than anticipated, and
we cannot assure you that we will be able to effect the
integration of these operations smoothly or efficiently or that
the anticipated benefits of the transactions will be achieved.
Several
significant matters in the BP Acquisition will not be resolved
before closing.
Because of the relatively short time period between signing the
BP Purchase Agreements and the expected closing of the BP
Acquisition, several significant matters commonly resolved prior
to closing such an acquisition have been reserved for after
closing. For example, title review with respect to most of the
BP Properties will not be completed until after closing. In
addition, we will not have sufficient time before closing to
conduct a full assessment of any environmental and legal
liabilities with respect to the BP Properties. As a result, we
may discover title defects or adverse environmental or other
conditions after we have closed the BP Acquisition and after
expiration of the time periods specified in the BP Purchase
Agreements during which we may be able to seek, in certain
cases, indemnification from or cure of the defect or adverse
conditions by BP for such matters. In addition, not all
environmental or other conditions that may be identified will be
the subject of contractual remedies, and we cannot assure you
that our contractual remedies will be adequate for any
liabilities we incur.
The
reserves, production, revenue and direct operating expense
estimates with respect to the BP Properties may differ
materially from the actual amounts.
The reserves and production estimates with respect to the BP
Properties mentioned in this prospectus supplement are based on
our analysis of historical production data, assumptions
regarding capital expenditures and anticipated production
declines. These estimates of reserves and production are based
on estimates of our engineers without review by an independent
petroleum engineering firm. Data used to make these estimates
were furnished by BP or obtained from publicly available
sources. We cannot assure you that these estimates of proved
reserves and production are accurate. After such data is
reviewed by an independent petroleum engineering firm, the BP
Acquisition reserves and production may differ materially from
the amounts indicated in this prospectus supplement.
In addition, the preliminary revenue and direct operating
expense estimates with respect to the BP Properties were
provided by BP, are unaudited, and have not been reviewed by our
independent accountants. We cannot assure you that these
preliminary estimates are accurate, and when we file separate
financial statements and pro forma financial information
following consummation of the BP Acquisition, such amounts may
differ materially from the amounts indicated in this prospectus
supplement.
The BP
Acquisition and/or our liabilities could be adversely affected
in the event one or more of the BP entities become the subject
of a bankruptcy case.
In light of the extensive costs and liabilities related to the
current oil spill in the Gulf of Mexico, there has been public
speculation as to whether one or more of the BP entities will
become the subject of a case or proceeding under Title 11
of the United States Code or any other relevant insolvency law
or similar law
S-18
(which we collectively refer to as Insolvency Laws).
In the event that one or more of the BP entities were to become
the subject of such a case or proceeding, a court may find that
the BP Purchase Agreements are executory contracts, in which
case such BP entities may, subject to relevant Insolvency Laws,
have the right to reject the agreements and refuse to perform
their future obligations under them. In this event, our ability
to enforce our rights under the BP Purchase Agreements could be
adversely affected. Furthermore, if any of the BP entities were
to become the subject of such a case or proceeding, and we were
unable to consummate the BP Acquisition, we may not be able to
collect all or a portion of the full $5.0 billion we will
deposit with BP pending completion of the acquisition.
Additionally, in a case or proceeding under relevant Insolvency
Laws, a court may find that the sale of the BP Properties
constitutes a constructive fraudulent conveyance that should be
set aside. While the tests for determining whether a transfer of
assets constitutes a constructive fraudulent conveyance vary
among jurisdictions, such a determination generally requires
that the seller received less than a reasonably equivalent value
in exchange for such transfer or obligation and the seller was
insolvent at the time of the transaction, or was rendered
insolvent or left with unreasonably small capital to meet its
anticipated business needs as a result of the transaction. The
applicable time periods for such a finding also vary among
jurisdictions, but generally range from two to six years. If a
court were to make such a determination in a proceeding under
relevant Insolvency Laws, our rights under the BP Purchase
Agreements, and our rights to the BP Properties, could be
adversely affected.
We
will incur significant transaction and BP Acquisition-related
costs in connection with the financing of the BP Acquisition,
and may be unable to complete alternative financing before
closing.
We expect to incur, until the closing of the BP Acquisition,
significant non-recurring costs associated with the financing of
the BP Acquisition, including obtaining and maintaining the
committed Bridge Facility that assures our ability to pay the
consideration for the BP Acquisition. In addition, we will be
subject to numerous market risks in connection with our plan to
raise alternative financing to fund the purchase price of the BP
Acquisition prior to closing, including risks related to general
economic conditions, changes in the costs of capital and of the
demand for securities of the types we will seek to offer to
raise the alternative financing, including the securities being
offered hereunder. In the event less than all of the BP
Acquisition purchase price, or applicable portions thereof, is
available to us when due and payable, we will be required to
draw under the Bridge Facility in order to complete the BP
Acquisition, and the costs to do so may be significant.
The
failure to complete the BP Acquisition could adversely affect
the market price of our depositary shares and otherwise have an
adverse effect on us.
There are a number of conditions to the completion of the BP
Acquisition contained in the BP Purchase Agreements that must be
satisfied for the transactions to close, and there can be no
assurance that the conditions will be satisfied. If we do not
complete the acquisition under one or more of the BP Purchase
Agreements, the market price of our depositary shares will
likely fall to the extent that the market price reflects an
expectation that all of the transactions will be completed.
Further, a failed transaction may result in negative publicity
and/or
negative impression of us in the investment community and may
affect our relationships with creditors and other business
partners.
If the BP Acquisition is not completed, we also must pay costs
related to the BP Acquisition including, among others, legal,
accounting and financial advisory, as well as certain fees and
expenses with respect to the committed Bridge Facility whether
the BP Acquisition is completed or not. We also could be subject
to litigation related to the failure to complete the BP
Acquisition or other factors, which may adversely affect our
business, financial results and stock price. In addition, if the
BP Acquisition is not completed, we intend to use the net
proceeds of this offering, the concurrent offering of depositary
shares and the subsequent debt financing we expect to undertake
for general corporate purposes. However, we would be subject to
significant earnings per share dilution and significantly
increased leverage as a result.
S-19
Risks
Related to the Depositary Shares and the Mandatory Convertible
Preferred Stock
You
are making an investment decision in the depositary shares as
well as in our mandatory convertible preferred
stock.
As described in this prospectus supplement, you are investing in
depositary shares that represent fractional interests in our
mandatory convertible preferred stock. The depositary will rely
solely on the dividend payments and other distributions on the
mandatory convertible preferred stock it receives from us to
fund all dividend payments and other distributions on the
depositary shares.
A
holder of depositary shares will bear the risk of any decline in
the market value of our common stock.
The applicable market value of our common stock on the mandatory
conversion date may be less than the market price of our common
stock corresponding to the maximum conversion rate, which we
call the initial price, in which case holders of our mandatory
convertible preferred stock, and therefore holders of the
depositary shares, will receive shares of our common stock on
the mandatory conversion date with a market price per share that
is less than the initial price. Accordingly, a holder of
depositary shares assumes the entire risk that the market price
of our common stock may decline. Any decline in the market price
of shares of our common stock and related decline in value of
the depositary shares may be substantial and, depending on the
extent of the decline, you could lose all or substantially all
of your investment in the depositary shares.
Holders
of depositary shares may not realize any or all of the benefit
of an increase in the market price of shares of our common
stock.
The market value of our common stock that you will receive upon
mandatory conversion of our mandatory convertible preferred
stock (and the related conversion of the depositary shares) on
the mandatory conversion date will exceed the liquidation amount
of $1,000 per mandatory convertible preferred stock and $50 per
depositary share only if the applicable market value of our
common stock as defined under Description of the Mandatory
Convertible Preferred Stock Mandatory
Conversion in this prospectus supplement equals or exceeds
the threshold appreciation price. The threshold appreciation
price represents an appreciation of
approximately % over the initial
price. This means that the opportunity for equity appreciation
provided by an investment in depositary shares (or mandatory
convertible preferred stock) is less than that provided by a
direct investment in shares of our common stock.
If the applicable market value of our common stock exceeds the
initial price but is less than the threshold appreciation price,
a holder of depositary shares (or mandatory convertible
preferred stock) will realize no equity appreciation on our
common stock. Furthermore, if the applicable market value of our
common stock exceeds the threshold appreciation price, the value
of the common stock received by the holder of a depositary share
(or mandatory convertible preferred stock) upon conversion will
be approximately % of the value of
the common stock that could be purchased with $50 in the
concurrent common stock offering.
In addition, the limitation imposed by the share cap on our
ability to use shares of our common stock to pay dividends on
our mandatory convertible preferred stock may also result in a
reduction in the return that holders may achieve with respect to
their investment in the depositary shares.
Recent
developments in the equity-linked markets may adversely affect
the market value of the depositary shares.
Governmental actions that interfere with the ability of
equity-linked investors to effect short sales of the underlying
shares of our common stock could significantly affect the market
value of our mandatory convertible preferred stock. Such
government actions could make the convertible arbitrage strategy
that many equity-linked investors employ difficult to execute
for outstanding convertible securities of any company whose
shares of common stock are subject to such actions. At an open
meeting on February 24, 2010 the SEC adopted a new short
sale price test, which will take effect through amendment to
Rule 201 of Regulation SHO. The new Rule 201 will
restrict short selling only when a stock price has triggered a
circuit breaker by falling at least 10 percent in one day,
at which point short sale orders can be displayed or executed
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only if the order price is above the current national best bid,
subject to certain limited exceptions. If such new price test
precludes, or is perceived to preclude, equity-linked investors
from executing the convertible arbitrage strategy that they
employ or other limitations are instituted by the SEC or any
other regulatory agencies, the market value of the depositary
shares could be adversely affected.
The
trading price of our common stock will directly affect the
trading price of the depositary shares.
The trading price of the depositary shares will be directly
affected by, among other things, the trading price of our common
stock. It is impossible to predict whether the price of our
common stock will rise or fall. Our operating results, prospects
and economic, financial, political and other factors will affect
trading prices of our common stock and the depositary shares, as
will future issuances of our common stock. See
Risks Related to the Depositary Shares, the
Mandatory Convertible Preferred Stock and our Common
Stock There may be future sales or other dilution of
our equity, which may adversely affect the market price of our
common stock. In addition, market conditions can affect
the capital markets generally, thereby affecting the price of
our common stock. These conditions may include the level of, and
fluctuations in, the trading prices of stocks generally and
sales of substantial amounts of our common stock in the market
after this offering of depositary shares or the perception that
such sales could occur. Fluctuations in interest rates may give
rise to arbitrage opportunities based upon changes in the
relative value of the depositary shares and the common stock
underlying the mandatory convertible preferred stock. In
addition, the issuance of the depositary shares may result in
hedging activity by holders of depositary shares that view such
depositary shares as a more attractive means of equity
participation in us than a direct investment in our common
stock. This arbitrage and hedging could, in turn, negatively
affect the trading prices of the depositary shares and our
common stock.
The
conversion rate of the mandatory convertible preferred stock may
not be adjusted for all dilutive events that may adversely
affect the market price of our common stock.
The number of shares of our common stock issuable upon
conversion of our mandatory convertible preferred stock is
subject to adjustment under certain circumstances as described
under Description of the Mandatory Convertible Preferred
Stock Conversion Rate Adjustments in this
prospectus supplement. The number of shares of our common stock
issuable upon conversion of our mandatory convertible preferred
stock is not subject to adjustment for other events, including
the following:
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the issuance of shares of our common stock for cash or in
connection with acquisitions or other transactions, including in
exchange for other of our outstanding securities;
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the issuance of any shares of our common stock pursuant to any
present or future plan providing for the reinvestment of
dividends or interest payable on our securities and the
investment of additional optional amounts in shares of our
common stock under any plan;
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the issuance of any shares of our common stock or options or
rights to purchase those shares pursuant to any present or
future employee, director or consultant benefit plan or program
of or assumed by us or any of our subsidiaries;
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the issuance of any shares of our common stock pursuant to any
option, warrant, right or exercisable, exchangeable or
convertible security outstanding as of the date the mandatory
convertible preferred stock is first issued;
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payment of regular quarterly dividends on our common stock not
in excess of the dividend threshold amount;
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a change solely in the par value of our common stock; or
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as a result of a tender offer solely to holders of fewer than
100 shares of our common stock.
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The terms of the mandatory convertible preferred stock do not
restrict our ability to offer shares of our common stock in the
future or to engage in other transactions that could dilute our
common stock. We have no obligation to consider the interests of
the holders of mandatory convertible preferred stock or
depositary shares in engaging in any such offering or
transaction. If we issue additional shares of our common stock,
that
S-21
issuance may materially and adversely affect the market price of
our common stock and, because of the relationship of the number
of shares of our common stock you are to receive on the
mandatory conversion date to the price of our common stock, such
other events may adversely affect the trading price of the
depositary shares.
Except
under limited circumstances, a holder of depositary shares will
have no rights as a holder of common stock until it acquires our
common stock and will need to act through the depositary to
exercise voting rights with respect to our mandatory convertible
preferred stock.
Until you acquire shares of our common stock upon conversion,
you will have no rights with respect to our common stock,
including without limitation voting rights (except as required
by law and our Restated Certificate of Incorporation or as
described under Description of the Mandatory Convertible
Preferred Stock Voting Rights), rights to
respond to tender offers and rights to receive any dividends or
other distributions on our common stock. Holders of depositary
shares must act through the depositary to exercise any voting
rights in respect of our mandatory convertible preferred stock.
Upon conversion, you will be entitled to exercise the rights as
a holder of our common stock only as to matters for which the
record date occurs after the close of business on the relevant
conversion date. For example, in the event that an amendment is
proposed to our Restated Certificate of Incorporation requiring
stockholder approval, and the record date for determining the
stockholders of record entitled to vote on the amendment occurs
prior to the applicable conversion date, you will not be
entitled to vote on the amendment unless it would amend, alter
or affect the powers, preferences or rights of our mandatory
convertible preferred stock in a manner that would adversely
affect the rights of such holders, although you will
nevertheless be subject to any changes in the powers,
preferences or special rights of our common stock.
If we have not satisfied the authorized share condition on the
mandatory conversion date, any shares of mandatory convertible
preferred stock not converted will be entitled to receive and
participate in all dividends or distributions paid or made in
respect of our common stock and vote together with our common
stockholders as one class on all matters submitted to a vote of
our common stockholders, as described under Description of
the Mandatory Convertible Preferred Stock Authorized
Share Condition.
The
fundamental change conversion rate may not adequately compensate
you upon the occurrence of a fundamental change.
If a fundamental change occurs, you will be permitted to convert
your depositary shares early, and we will deliver shares of our
common stock calculated at the fundamental change conversion
rate on our mandatory convertible preferred stock, which the
depositary will then distribute to converting holders of
depositary shares. A description of how the fundamental change
conversion rate will be determined is set forth under
Description of the Mandatory Convertible Preferred
Stock Conversion Upon Fundamental Change in
this prospectus supplement. Although these features are designed
to compensate you for the lost option value of our mandatory
convertible preferred stock underlying your depositary shares,
they are only an approximation of this lost option value and may
not adequately compensate you. Furthermore, the term fundamental
change applies only to specific types of transactions, and if we
engage in other transactions you may not receive any adjustment
to the conversion rate even though the value of our mandatory
convertible preferred stock (and therefore the value of the
depositary shares) may be affected.
Our
mandatory convertible preferred stock will rank junior to all of
our and our subsidiaries liabilities in the event of a
bankruptcy, liquidation or
winding-up
of our assets.
In the event of bankruptcy, liquidation or
winding-up,
our assets will be available to pay the liquidation preference
of our mandatory convertible preferred stock only after all of
our liabilities have been paid. In addition, our mandatory
convertible preferred stock will effectively rank junior to all
existing and future liabilities of our subsidiaries and the
capital stock of our subsidiaries held by third parties. The
rights of holders of our mandatory convertible preferred stock
to participate in the assets of our subsidiaries upon any
liquidation or reorganization of any subsidiary will rank junior
to the prior claims of that subsidiarys creditors and
minority equity holders. In the event of bankruptcy, liquidation
or
winding-up,
there may not be sufficient assets remaining, after paying our
and
S-22
our subsidiaries liabilities, to pay amounts due on any or
all of our mandatory convertible preferred stock then
outstanding.
The
holders of our common stock may not approve an increase to our
authorized and unissued shares of common stock, in which case
you may not be able to convert the mandatory convertible
preferred stock into common stock.
As of the date of this prospectus supplement, and after giving
effect to the concurrent common stock offering and the Mariner
Acquisition, we
have
authorized, unissued and unreserved shares of our common stock,
but we have only
reserved
of those shares for conversions of the mandatory convertible
preferred stock. To provide for the authorization of a
sufficient number of shares of common stock into which the
mandatory convertible preferred stock may be converted in full,
we have agreed in the underwriting agreement relating to this
offering and the certificate of designations relating to the
mandatory convertible preferred stock to use commercially
reasonable efforts to satisfy the authorized share condition (as
defined under Description of the Mandatory Convertible
Preferred Stock Authorized Share Condition) on
or prior to our next annual meeting of stockholders, and if the
authorized share condition is not satisfied by such annual
meeting, use our best effort thereafter to satisfy the
authorized share condition as promptly as practicable.
If the authorized share condition is not satisfied on the
mandatory conversion date, any mandatory convertible preferred
stock not converted on such date will remain outstanding.
However, effective as of the mandatory conversion date, the
conversion rate will be the final conversion rate as described
under Mandatory Conversion below. In
addition, from and after the mandatory conversion date, the
outstanding mandatory convertible preferred stock will
(i) accrue and cumulate dividends at the rate
of % plus 6% per annum on the
liquidation amount of $1,000 per share of mandatory convertible
preferred stock payable quarterly, to the extent we have legally
available funds to pay dividends and our board of directors
declares a dividend payable, on each dividend payment date in
the same manner described under Description of the
Mandatory Convertible Preferred Stock
Dividends; (ii) receive and participate in all
dividends or distributions paid or made in respect of our common
stock based upon the final conversion rate per share of
mandatory convertible preferred stock; and (iii) be
entitled to vote a number of votes equal to the final conversion
rate per share of mandatory convertible preferred stock for the
vote or consent on all matters submitted to a vote of our common
stockholders and will vote together with our common stockholders
as one class on such matters (except for the approval required
to satisfy the authorized share condition).
However, the market value of any such shares of mandatory
convertible preferred stock may be significantly less than the
number of shares of common stock into which they would have
otherwise been converted. In addition, there may not be an
active trading market for those shares of mandatory convertible
preferred stock, which may further adversely affect their value.
The increased dividend yield on any such shares of mandatory
convertible preferred stock may not adequately compensate you
for these adverse effects.
Because
we do not currently have enough shares of common stock
authorized and unissued into which to convert the mandatory
convertible preferred stock, we may be required to issue shares
of a new series of preferred stock upon a fundamental change,
instead of common stock.
As described under Description of the Mandatory
Convertible Preferred Stock Authorized Share
Condition, as of the date of this prospectus supplement,
we do not have a sufficient number of shares of our common stock
authorized and unissued to convert all of the mandatory
convertible preferred stock issued in this offering into shares
of common stock after completion of the concurrent offering of
our common stock.
If we have not converted all shares of mandatory convertible
preferred stock tendered for conversion during the fundamental
change conversion period (as defined under Description of
the Mandatory Convertible Preferred Stock Conversion
Upon Fundamental Change) because the authorized share
condition has not been satisfied, holders who exercise their
fundamental change conversion right will receive, in exchange
for any shares of mandatory convertible preferred stock not
converted, shares of a new series of our preferred
S-23
stock, which we refer to as fundamental change preferred
stock. See Description of the Mandatory Convertible
Preferred Stock Conversion Upon Fundamental
Change.
While each share of fundamental change preferred stock will
correspond to a number of shares of our common stock equal to
the fundamental change conversion rate, the actual market value
of a share of fundamental change preferred stock may be
substantially less than the market value of the corresponding
number of shares of our common stock. In addition, if there is a
decrease in the market value of our common stock, the market
value of our fundamental change preferred stock will also likely
decrease. There currently is not and may never be a trading
market for the fundamental change preferred stock that we may be
required to issue upon exercise of the fundamental change early
conversion right. A market is not expected to be made in the
fundamental change preferred stock after it is issued, if at
all, and no one is obligated to undertake market-making activity
in the fundamental change preferred stock; any market that may
develop could be discontinued at any time without notice. In
addition, any market-making activity will be subject to the
limits imposed by applicable securities laws. As a result, a
market for the fundamental change preferred stock may not
develop or, if one does develop, it may not be maintained and if
maintained, it may not be sufficient to provide adequate
liquidity for the fundamental change preferred stock. If any
active market for the fundamental change preferred stock fails
to develop, be sustained or to have a sufficient float to
provide adequate liquidity to the holders, the value of the
fundamental change preferred stock could be significantly less
than the market value of the corresponding number of shares of
common stock. If shares of the fundamental change preferred
stock are separately traded to a sufficient extent that
applicable exchange listing requirements are met, we may
endeavor, but are not obligated, to list the fundamental change
preferred stock on the same exchange as the mandatory
convertible preferred stock.
You
may have to pay taxes with respect to constructive distributions
that you do not receive.
The conversion rate of our mandatory convertible preferred stock
will be adjusted in certain circumstances. See Description
of the Mandatory Convertible Preferred Stock
Conversion Rate Adjustments in this prospectus supplement.
For U.S. federal income tax purposes, adjustments to a
fixed conversion rate, or failures to make certain adjustments,
that have the effect of increasing your proportionate interest
in our assets or earnings and profits may result in a deemed
distribution to you. For example, an increase in the conversion
ratio to reflect a taxable dividend to holders of common stock
in excess of the dividend threshold amount will generally give
rise to a taxable constructive dividend to the holders of
mandatory convertible preferred stock to the extent made out of
current and accumulated earnings and profits. Such deemed
distribution will be taxable to you, even though you do not
actually receive a distribution. If you are a
non-U.S. holder
(as defined in Certain U.S. Federal Tax
Consequences in this prospectus supplement), such deemed
distribution will generally be subject to U.S. federal
income tax at a 30% or reduced treaty rate, collected by
withholding. We, or an applicable withholding agent, will
withhold the U.S. federal tax on such dividend from any
cash, shares of common stock, or sales proceeds otherwise
payable to you. See Certain U.S. Federal Tax
Consequences in this prospectus supplement.
Non-U.S. holders
may be subject to U.S. federal income tax with respect to
gain on disposition of their mandatory convertible preferred
stock.
If we are or have been a United States real property
holding corporation at any time within the shorter of
(i) the five-year period preceding a disposition of our
mandatory convertible preferred stock by a
non-U.S. holder
(as defined in Certain U.S. Federal Tax
Consequences in this prospectus supplement) or
(ii) such holders holding period for such mandatory
convertible preferred stock, the
non-U.S. holder
may be subject to U.S. federal income tax with respect to
gain on such disposition if it held more than 5% of our
mandatory convertible preferred stock during the shorter of
periods (i) and (ii), above, or under certain other
circumstances. We believe we are, or may become, a United States
real property holding corporation. See Certain
U.S. Federal Tax Consequences in this prospectus
supplement.
S-24
The
secondary market for the depositary shares may be
illiquid.
We will apply to list the depositary shares on the NYSE, and we
expect trading on the NYSE to begin within five days of the
initial issuance of the depositary shares. Upon listing, we have
agreed to use our reasonable best efforts to keep the depositary
shares listed on the NYSE. However, listing the depositary
shares on the NYSE does not guarantee that a trading market will
develop or, if a trading market does develop, the depth or
liquidity of that market or the ability of holders to sell their
depositary shares easily. In addition, the liquidity of the
trading market in the depositary shares, and the market price
quoted therefor, may be adversely affected by changes in the
overall market for this type of security and by changes in our
financial performance or prospects or in the prospects for
companies in our industry generally. As a result, we cannot
assure you that an active trading market will develop for the
depositary shares. If an active trading market does not develop
or is not maintained, the market price and liquidity of the
depositary shares may be adversely affected. In that case, you
may not be able to sell the depositary shares that you hold at a
particular time or at a favorable price. In addition, as shares
of our mandatory convertible preferred stock (and therefore the
depositary shares) are converted, the liquidity of the
depositary shares that remain outstanding may decrease.
Risks
Related to the Depositary Shares, the Mandatory Convertible
Preferred Stock and Our Common Stock
The
trading price of the depositary shares and our common stock may
be subject to significant fluctuations and
volatility.
The market price of the depositary shares and our common stock
could be subject to significant fluctuations due to a change in
sentiment in the market regarding our operations or business
prospects. Such risks may be affected by the factors described
above under the headings Risks Related to Our
Business and Cautionary Statement Regarding
Forward-Looking Information as well as in the documents
incorporated by reference in this prospectus supplement to which
we have referred you.
Stock markets in general and our common stock in particular have
experienced over the past two years, and continue to experience,
significant price and volume volatility. As a result, the market
price of the depositary shares and our common stock may continue
to be subject to similar market fluctuations that may be
unrelated to our operating performance or business prospects.
Increased volatility could result in a decline in the market
price of the depositary shares and our common stock.
Our
ability to declare and pay dividends is subject to
limitations.
The payment of future dividends on our capital stock is subject
to the discretion of our board of directors, which considers,
among other factors, our operating results, overall financial
condition, credit-risk considerations and capital requirements,
as well as general business and market conditions. Our board of
directors is not required to declare dividends on our mandatory
convertible preferred stock and may decide not to declare
dividends. While any unpaid dividends will continue to accrue
and accumulate on our mandatory convertible preferred stock, you
will not receive any interest on such accumulated dividends.
The instrument governing our revolving credit facility limits,
the Bridge Facility will limit, and any indentures and other
financing agreements that we enter into in the future may limit,
our ability to pay cash dividends on our capital stock,
including the mandatory convertible preferred stock. In the
event that any of our indentures or other financing agreements
in the future restrict our ability to pay dividends in cash on
the mandatory convertible preferred stock, we may be unable to
pay dividends in cash on the mandatory convertible preferred
stock unless we can refinance amounts outstanding under those
agreements.
In addition, under Delaware law, dividends on capital stock may
only be paid from surplus, which is defined as the
amount by which our total assets exceeds the sum of our total
liabilities, including contingent liabilities, and the amount of
our capital; if there is no surplus, cash dividends on capital
stock may only be paid from our net profits for the then current
and/or the
preceding fiscal year. Further, even if we are permitted under
our contractual obligations and Delaware law to pay cash
dividends on the mandatory
S-25
convertible preferred stock, we may not have sufficient cash to
pay dividends in cash on the mandatory convertible preferred
stock.
Holders of our mandatory convertible preferred stock and our
common stock are only entitled to receive such dividends as our
board of directors may declare out of funds lawfully available
for such payments, and if dividends are not declared on the
mandatory convertible preferred stock, you will not receive any
dividend payments on the depositary shares. Under the terms of
the mandatory convertible preferred stock, our ability to
declare and pay dividends on or repurchase our common stock will
be subject to restrictions in the event we fail to declare and
pay (or set aside for payment) full dividends on the mandatory
convertible preferred stock.
Offerings
of debt, which would be senior to our mandatory convertible
preferred stock and our common stock upon liquidation, and/or
preferred equity securities, which may be senior to our
mandatory convertible preferred stock and would be senior to our
common stock for purposes of dividend distributions or upon
liquidation, may adversely affect the market price of the
depositary shares and our common stock.
The terms of the mandatory convertible preferred stock do not
prevent us or our subsidiaries from issuing debt or equity
securities or incurring indebtedness, except that we may not
issue senior preferred stock without the consent of at least
662/3%
in voting power of the outstanding shares of the mandatory
convertible preferred stock. Upon liquidation, holders of our
debt securities and lenders with respect to other borrowings
will receive distributions of our available assets prior to the
holders of our mandatory convertible preferred stock (and
therefore holders of depositary shares) and holders of our
common stock.
Our board of directors is authorized to issue one or more
classes or series of preferred stock from time to time without
any action on the part of the stockholders. Our board of
directors also has the power, without stockholder approval, to
set the terms of any such classes or series of preferred stock
that may be issued, including voting rights, dividend rights,
and preferences over our common stock with respect to dividends
or upon our dissolution,
winding-up
and liquidation and other terms. If we issue preferred stock in
the future that has a preference over our common stock with
respect to the payment of dividends or upon our liquidation,
dissolution, or
winding-up,
or if we issue preferred stock with voting rights that dilute
the voting power of the mandatory convertible preferred stock
and our common stock, the rights of holders of the depositary
shares and our common stock or the market price of the
depositary shares and our common stock could be adversely
affected.
In addition, offerings of our common stock or of securities
linked to our common stock may dilute the holdings of our
existing common stockholders or reduce the market prices of the
depositary shares and our common stock, or both. Holders of our
mandatory convertible preferred stock and our common stock are
not entitled to preemptive rights, and no adjustments to the
fixed conversion rates or other terms of our mandatory
convertible preferred stock would be required if such common
stock or equity-linked securities were offered for cash.
There
may be future sales or other dilution of our equity, which may
adversely affect the market price of our common
stock.
In connection with this offering and the concurrent offering of
common stock, we are restricted from issuing additional shares
of common stock or securities convertible into common stock,
subject to specified exceptions, for a period of 90 days
from the date of this prospectus supplement. Additionally, our
directors and executive officers have agreed not to sell or
otherwise dispose of any of their shares, subject to specified
exceptions, for a period of 90 days from the date of this
prospectus supplement. Exceptions to these
lock-up
agreements are described below under Underwriting.
Otherwise, we are not restricted from issuing additional shares
of common stock, including the common shares issuable upon
conversion of the mandatory convertible preferred stock. The
issuance of any additional shares of common or of preferred
stock or convertible securities or the exercise of such
securities could be substantially dilutive to holders of our
common stock. For additional information on shares of our common
stock reserved for awards under our stock compensation plans,
see Description of Apache Corporation
S-26
Capital Stock Common Stock. Holders of our
shares of common stock are not entitled to any preemptive rights
by virtue of their status as stockholders and that status does
not entitle them to purchase their pro rata share of any
offering of shares of any class or series and, therefore, such
sales or offerings could result in increased dilution to our
stockholders.
The price of our common stock and the depositary shares may be
adversely affected by future sales of our common stock or
securities that are convertible into or exchangeable for, or of
securities that represent the right to receive, our common stock
or other dilution of our equity, or by our announcement that
such sales or other dilution may occur.
Contractual
and statutory provisions may delay or make more difficult
acquisitions or changes of control of us.
Provisions of Delaware law and our Restated Certificate of
Incorporation and Bylaws, and contracts to which we are a party
could make it more difficult for a third party to acquire
control of us or have the effect of discouraging a third party
from attempting to acquire control of us. See Description
of Apache Corporation Capital Stock Anti-Takeover
Effect of Provisions of Apache Corporations Charter and
Bylaws and Delaware Law in the accompanying prospectus.
S-27
USE OF
PROCEEDS
We estimate that the net proceeds from this offering will be
approximately $ (or approximately
$ if the underwriters option
to purchase additional depositary shares is exercised in full)
after deducting the underwriting discount and estimated expenses
of the offering payable by us.
In addition, we expect to receive net proceeds from our
concurrent offering of common stock of approximately
$ (or approximately
$ if the underwriters option
to purchase additional shares is exercised in full) after
deducting the underwriting discount and estimated expenses of
such offering payable by us. This offering of depositary shares
is not contingent upon the offering of common stock, and the
offering of common stock is not contingent upon this offering.
We intend to use the net proceeds from this offering and the
offering of common stock to finance a portion of the
$5.0 billion deposit payable toward the purchase price in
connection with the BP Acquisition. The balance of the purchase
price is expected to be funded with cash on hand, our existing
revolving credit and commercial paper facilities and short-term
debt that we expect to issue in the near-term. Neither this
offering nor the offering of common stock is conditioned on the
closing of the BP Acquisition, and there can be no assurance
that we will complete the BP Acquisition. If the BP Acquisition
is not completed, we intend to use the proceeds of this offering
for general corporate purposes, which may include, among other
things, funding our 2010 capital expenditures program.
S-28
RATIO OF
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
The following table sets forth, for each of the periods
indicated, our ratio of earnings to combined fixed charges and
preferred stock dividends. For purposes of computing the ratio
of earnings to combined fixed charges and preferred stock
dividends, earnings consist of income before federal
income taxes plus fixed charges. Fixed charges
consist of interest expense, capitalized interest, amortization
expenses related to debt and an imputed interest component for
rental expense.
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Six Months
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Ended June 30,
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Years Ended December 31,
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2010
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2009
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2008
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2007
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2006
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2005
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Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends
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16.21
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1.71
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3.63
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14.36
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16.84
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21.25
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S-29
CAPITALIZATION
The following table sets forth our unaudited consolidated cash
and cash equivalents and consolidated capitalization as of
June 30, 2010:
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on an actual basis;
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on an as adjusted basis to give effect to issuance and sale of
the depositary shares in this offering and of the shares of
common stock in the concurrent offering of common stock; and
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on an as further adjusted basis to give effect to (i) the
expected subsequent debt financing, and (ii) application of
the net proceeds from this offering, the offering of common
stock and the expected subsequent debt financing in connection
with the BP Acquisition.
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You should read this table in conjunction with the section of
this prospectus supplement entitled Use of Proceeds
and our consolidated financial statements and the related notes
incorporated by reference in this prospectus supplement and the
accompanying prospectus.
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As of June 30, 2010
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As Further
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Actual
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As Adjusted
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Adjusted
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(Unaudited)
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(In thousands, except share data)
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Cash and cash equivalents
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$
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1,805,347
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$
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$
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|
|
|
|
|
|
|
|
|
Total debt (including current portion):
|
|
|
|
|
|
|
|
|
|
|
|
|
Existing notes and debentures
|
|
$
|
4,711,127
|
|
|
$
|
4,711,127
|
|
|
$
|
4,711,127
|
|
Revolving credit facilities and commercial paper(1)
|
|
|
301,205
|
|
|
|
301,205
|
|
|
|
301,205
|
|
Subsequent debt financing(2)
|
|
|
|
|
|
|
|
|
|
|
2,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt (including current portion)
|
|
|
5,012,332
|
|
|
|
5,012,332
|
|
|
|
7,012,332
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
% Mandatory Convertible Preferred Stock,
Series D; shares
authorized; 1,100,000 shares issued and outstanding (as
adjusted and as further adjusted)
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.625 par value; 430,000,000 shares
authorized; 345,278,595 shares issued and outstanding
(actual); shares
issued and outstanding (as adjusted and as further adjusted)(3)
|
|
|
215,799
|
|
|
|
|
|
|
|
|
|
Paid-in capital
|
|
|
4,748,709
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
12,900,582
|
|
|
|
12,900,582
|
|
|
|
12,900,582
|
|
Treasury stock, at cost, 7,479,435 shares
|
|
|
(212,280
|
)
|
|
|
(212,280
|
)
|
|
|
(212,280
|
)
|
Accumulated other comprehensive income
|
|
|
22,950
|
|
|
|
22,950
|
|
|
|
22,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
17,675,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
22,688,092
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As of June 30, 2010, we had unsecured committed revolving
syndicated bank credit facilities totaling $2.3 billion,
which mature in May 2013. These consist of a $1.5 billion
facility and a $450 million facility in the U.S., a
$200 million facility in Australia and a $150 million
facility in Canada. We also have available a $1.95 billion
commercial paper program. The commercial paper program is fully
supported by available borrowing capacity under U.S. committed
credit facilities. There were no outstanding borrowings under
the credit facilities or outstanding commercial paper as of
June 30, 2010, and the full $2.3 billion of unsecured
credit facilities were available. |
|
(2) |
|
Assumes that we issue $2.0 billion of debt having
maturities of one year or less in the expected subsequent debt
financing. The terms of the debt financing will be subject to
market and other conditions, |
S-30
|
|
|
|
|
and there can be no assurance that we will receive the expected
proceeds or complete the debt financing at all. |
|
(3) |
|
As of the date of this prospectus supplement and after giving
effect to the concurrent offering of common stock, we will not
have a sufficient number of authorized and unissued shares of
common stock available into which the Mandatory Convertible
Preferred Stock may be converted in full. To provide for the
authorization of a sufficient number of shares of common stock,
we have agreed in the underwriting agreement relating to this
offering of depositary shares and the certificate of
designations relating to the Mandatory Convertible Preferred
Stock to use commercially reasonable efforts to effect an
increase in the number of authorized shares of common stock
sufficient for such purposes on or prior to our next annual
meeting of stockholders, and if the increase is not effected by
such next annual meeting, to use our best efforts thereafter to
effect such an increase as promptly as practicable. |
The Bridge Facility discussed under Summary
Bridge Financing Facility will be used as a backstop in
the event that the proceeds from this offering, the concurrent
offering of common stock and expected subsequent debt financing,
are not available in sufficient amounts at or prior to the
closing of the BP Acquisition. We do not currently intend to
draw under the Bridge Facility but instead plan to finance the
BP Acquisition through proceeds of this offering, the concurrent
offering of common stock and the expected subsequent debt
financing.
The table set forth above does not give effect to the
consummation of the Mariner Acquisition, which is expected to
decrease our cash and cash equivalents, increase our commercial
paper indebtedness and increase our common stock by
approximately 17.5 million shares as a result of financing
the purchase consideration in connection therewith, and further
increase our indebtedness as a result of assuming the
indebtedness of Mariner.
S-31
PRICE
RANGE OF COMMON STOCK AND DIVIDENDS
Our common stock is traded on the New York Stock Exchange, the
NASDAQ Global Select Market and the Chicago Stock Exchange under
the symbol APA. The following table sets forth, for
the periods indicated, the high and low sale prices per share,
as reported on the New York Stock Exchange, and the amount of
cash dividends per share declared and paid in respect of the
periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price Range
|
|
Dividends
|
|
|
High
|
|
Low
|
|
per Share
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Third quarter (through July 19, 2010)
|
|
$
|
88.27
|
|
|
$
|
81.94
|
|
|
|
|
|
Second quarter
|
|
|
111.00
|
|
|
|
83.55
|
|
|
$
|
0.15
|
(1)
|
First quarter
|
|
|
108.92
|
|
|
|
95.15
|
|
|
|
0.15
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth quarter
|
|
|
106.46
|
|
|
|
88.06
|
|
|
|
0.15
|
|
Third quarter
|
|
|
95.77
|
|
|
|
65.02
|
|
|
|
0.15
|
|
Second quarter
|
|
|
87.04
|
|
|
|
61.60
|
|
|
|
0.15
|
|
First quarter
|
|
|
88.07
|
|
|
|
51.03
|
|
|
|
0.15
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth quarter
|
|
|
103.17
|
|
|
|
57.11
|
|
|
|
0.15
|
|
Third quarter
|
|
|
145.00
|
|
|
|
94.82
|
|
|
|
0.15
|
|
Second quarter
|
|
|
149.23
|
|
|
|
117.65
|
|
|
|
0.15
|
|
First quarter
|
|
|
122.34
|
|
|
|
84.52
|
|
|
|
0.25
|
|
|
|
|
(1) |
|
Declared but not yet paid. |
The last reported sale price of our common stock on the New York
Stock Exchange on July 19, 2010 was $85.59 per share.
We have paid cash dividends on our common stock for 45
consecutive years through December 31, 2009. When, and if,
declared by our Board of Directors, future dividend payments
will depend upon our level of earnings, financial requirements
and other relevant factors.
S-32
DESCRIPTION
OF THE MANDATORY CONVERTIBLE PREFERRED STOCK
The following is a summary of some of the terms of the
mandatory convertible preferred stock. This summary contains a
description of the material terms of the mandatory convertible
preferred stock but is not necessarily complete. The following
summary of the terms and provisions of the mandatory convertible
preferred stock is qualified in its entirety by reference to the
pertinent sections of our Restated Certificate of Incorporation,
including the certificate of designations creating the mandatory
convertible preferred stock. We refer you to the documents
referred to in the following description, copies of which are
available upon request as described under Documents
Incorporated by Reference in this prospectus
supplement.
The depositary will initially be the sole holder of our
mandatory convertible preferred stock. However, the holders of
depositary shares will be entitled, through the depositary, to
exercise the rights and preferences of the holders of our
mandatory convertible preferred stock, subject to the terms of
the deposit agreement and as described under Description
of Depositary Shares below. Each depositary share
represents a 1/20th interest in a share of our mandatory
convertible preferred stock.
General
Under our Restated Certificate of Incorporation, our board of
directors is authorized, without further shareholder action, to
fix by resolution or resolutions the designations, preferences
and relative, participating, optional or other special rights,
and qualifications, limitations or restrictions thereof, of up
to 5,000,000 shares of preferred stock with no par value,
in one or more series. Prior to this offering, we had
25,000 shares of preferred stock designated as
Series A Junior Participating Preferred Stock and
4,975,000 shares of authorized preferred stock that were
undesignated as to series.
When issued, the mandatory convertible preferred stock, and our
common stock issuable upon the conversion of the mandatory
convertible preferred stock, will be fully paid and
nonassessable. When issued, the holders of the mandatory
convertible preferred stock will have no preemptive or
preferential right to purchase or subscribe to stock,
obligations, warrants or other of our securities of any class.
The transfer agent, registrar, conversion and dividend
disbursing agent for shares of both the mandatory convertible
preferred stock and the transfer agent and registrar for shares
of the common stock is Wells Fargo Bank, N.A.
Ranking
The mandatory convertible preferred stock, with respect to
dividend rights or rights upon our liquidation,
winding-up
or dissolution, ranks:
|
|
|
|
|
senior to our common stock, and, if issued, our authorized
Series A Junior Participating Preferred Stock and to each
other class of capital stock or series of preferred stock
established after the original issue date of the mandatory
convertible preferred stock (which we will refer to as the
issue date), the terms of which do not expressly
provide that such class or series ranks senior to or on a parity
with the mandatory convertible preferred stock as to dividend
rights
and/or
rights upon our liquidation, dissolution or
winding-up
(which we will refer to collectively as junior
stock);
|
|
|
|
equally with any class of capital stock or series of preferred
stock established after the issue date, the terms of which
expressly provide that such class or series will rank equally
with the mandatory convertible preferred stock as to dividend
rights
and/or
rights upon our liquidation, dissolution or
winding-up,
without regard to whether dividends accrue cumulatively or
non-cumulatively (which we will refer to collectively as
parity stock);
|
|
|
|
junior to each class of capital stock or series of preferred
stock established after the issue date, the terms of which
expressly provide that such class or series will rank senior to
the mandatory convertible preferred stock as to dividend rights
and/or
rights upon our liquidation, dissolution or
winding-up; and
|
|
|
|
junior to our and our subsidiaries existing and future
indebtedness (including, in the case of our subsidiaries, trade
payables).
|
S-33
Authorized
Share Condition
As of the date of this prospectus, and after giving effect to
the concurrent common stock offering and consummation of the
Mariner Acquisition, we
have
authorized, unissued and unreserved shares of our common stock,
but we have only
reserved
of those shares for conversions of the mandatory convertible
preferred stock. To provide for the authorization of a
sufficient number of shares of common stock into which the
mandatory convertible preferred stock may be converted in full,
we have agreed in the underwriting agreement relating to this
offering and the certificate of designations relating to the
mandatory convertible preferred stock to use commercially
reasonable efforts to satisfy the authorized share condition (as
defined below) on or prior to our next annual meeting of
stockholders, and if the authorized share condition is not
satisfied by such annual meeting, use our best effort thereafter
to satisfy the authorized share condition as promptly as
practicable.
If the authorized share condition is not satisfied by
August 1, 2011, then from such date to, but excluding, the
date on which the authorized share condition is satisfied, the
dividend rate at which the mandatory convertible preferred stock
accrues and accumulates will increase by 2%
to %
per annum on the liquidation amount of $1,000 per share of
mandatory convertible preferred stock. In addition, until the
authorized share condition is satisfied, the dividend rate will
increase by an additional 1% on each six month anniversary of
the 365th day after the issuance of the mandatory
convertible preferred stock, to a maximum rate equal
to % plus 6% per annum. Upon
satisfaction of the authorized share condition, the dividend
rate will reset to the original rate
of % per annum.
If the authorized share condition (as defined below) is not
satisfied on the mandatory conversion date (as defined under
Mandatory Conversion below), and the
number of designated shares (as defined below) at such time is
greater than zero, we will convert, as described under
Mandatory Conversion below, the maximum
number of shares of mandatory convertible preferred stock, on a
pro rata basis, that will convert into (based on the conversion
rate described under Mandatory
Conversion below) a number of shares of our common stock
not exceeding such number of designated shares. If the
authorized share condition is not satisfied and there are no
designated shares on the mandatory conversion date, all
outstanding shares of mandatory convertible preferred stock will
remain outstanding as described below.
Any mandatory convertible preferred stock not converted on the
mandatory conversion date as a result of the foregoing
limitation will remain outstanding. However, effective as of the
mandatory conversion date, the conversion rate for all such
shares will be fixed as the conversion rate per share (the
final conversion rate) that such outstanding
mandatory convertible preferred stock would have otherwise been
converted into as described under Mandatory
Conversion below. In addition, from and after the
mandatory conversion date, the outstanding mandatory convertible
preferred stock will:
|
|
|
|
|
accrue and cumulate dividends at the rate
of % plus 6% per annum on the
liquidation amount of $1,000 per share of mandatory convertible
preferred stock payable quarterly, to the extent we have legally
available funds to pay dividends and our board of directors
declares a dividend payable, on each dividend payment date in
the same manner described under Dividend;
|
|
|
|
receive and participate in all dividends or distributions
(including, but not limited to, regular quarterly dividends)
paid or made in respect of our common stock, whether in the form
of cash or securities or any other form of property or assets,
on a proportional basis, based upon the final conversion rate
per share of mandatory convertible preferred stock; and
|
|
|
|
be entitled to vote a number of votes equal to the final
conversion rate per share of mandatory convertible preferred
stock for the vote or consent on all matters submitted to a vote
of our common stockholders and will vote together with our
common stockholders as one class on such matters (except for the
approval required to satisfy the authorized share condition).
|
Any dividend described in the second bullet point above will be
payable or deliverable on the date fixed for the related payment
or delivery of the dividend or distribution on the shares of
common stock to holders of record of the outstanding mandatory
convertible preferred stock on the record date fixed for the
related
S-34
dividend or distribution to holders of the shares of common
stock. Each depositary share will represent a proportional
fractional interest in the foregoing additional rights.
Authorized share condition means that we have
reserved for issuance, upon conversion of the mandatory
convertible preferred stock, a sufficient number of designated
shares (as defined below) greater than or equal to the product
of the share cap (as defined under Method of
Payment of Dividends) and the number of shares of
mandatory convertible preferred stock outstanding to allow for
the conversion in full of all outstanding shares of mandatory
convertible preferred stock; provided that on or after the
mandatory conversion date, the authorized share
condition will be deemed to be satisfied if we have a
sufficient number of designated shares to convert all
outstanding shares of the mandatory convertible preferred stock
and fundamental change preferred stock, as applicable.
Designated shares mean, at any time, the
aggregate number of authorized and unissued shares of common
stock designated by us for, and reserved for issuance upon,
conversion of the mandatory convertible preferred stock, which
number, as of the date of this prospectus supplement, will
initially
be
and will be:
|
|
|
|
|
increased, in our sole discretion, by any authorized and
unissued shares of common stock not reserved for other corporate
purposes;
|
|
|
|
increased by any increases to our authorized and unissued shares
(including any repurchased shares of common stock, which shall
be deemed unissued for the purpose of calculating designated
shares), whether or not such shares are authorized for the
specific purpose of increasing the designated shares; and
|
|
|
|
decreased by the aggregate number of shares of common stock
delivered by us in connection with any conversion of the
mandatory convertible preferred stock.
|
We will issue a press release and notify holders promptly each
time the number of designated shares is increased until the
authorized share condition is satisfied. We have also agreed
that once the authorized share condition is met, we will use our
best efforts to ensure that the authorized share condition
continues to be met and will not take any action that would
result in the authorized share condition not being met.
Upon satisfaction of the authorized share condition following
the mandatory conversion date, the mandatory convertible
preferred stock will automatically convert into shares of common
stock based on the final conversion rate. In addition, as
described under Mandatory Conversion
below, upon any increase of the designated shares announced by
us following the mandatory conversion date, we will
automatically convert a prorated portion (as defined under
Mandatory Conversion below) of the
outstanding shares of mandatory convertible preferred stock held
by each holder (rounded down to the nearest whole share of
mandatory convertible preferred stock) into shares of our common
stock at the final conversion rate.
Each depositary share will also automatically convert into a
number of shares equal to the proportionate fractional interest
in such shares of common stock.
Dividends
Holders of shares of our mandatory convertible preferred stock
will be entitled to receive, when, as and if declared by our
board of directors out of funds lawfully available for payment,
cumulative dividends at the rate per annum
of % per share on the initial
liquidation preference of $1,000 per share of mandatory
convertible preferred stock (equivalent to
$ per annum per share), payable in
cash or, in the case of dividends payable on August 1,
2013, payable in cash, shares of our common stock or a
combination thereof, at our election and subject to the share
cap, as described under Method of Payment of
Dividends below. The dividend rate may be increased as
described under Authorized Share
Condition above.
Dividends on the mandatory convertible preferred stock will be
payable quarterly on February 1, May 1, August 1
and November 1 of each year, commencing on November 1,
2010 (each, a dividend payment date), at such annual
rate, and shall accumulate from the most recent date as to which
dividends shall have been paid or, if no dividends have been
paid, from the issue date of the mandatory convertible preferred
stock,
S-35
whether or not in any dividend period or periods there have been
funds lawfully available for the payment of such dividends. If
any dividend payment date is not a business day, the dividend
payable on such date shall be paid on the next business day
without any adjustment, interest or other penalty in respect of
such delay. For purposes hereof, a dividend period
shall refer to a period commencing on, and including, a dividend
payment date (or if no dividend payment date has occurred,
commencing on, and including, the issue date), and ending on,
and including, the day immediately preceding the next succeeding
dividend payment date. Dividends will be payable to holders of
record as they appear on our stock register on the
15th calendar day of the month immediately preceding the
month in which such dividend payment date falls or such other
record date fixed by our board of directors or any duly
authorized committee thereof that is not more than 60 nor less
than 10 days prior to such dividend payment date but only
to the extent a dividend has been declared to be payable on such
dividend payment date (each, a regular record date),
except that dividends payable on the mandatory conversion date,
as defined below, will be payable to the holders presenting the
mandatory convertible preferred stock for conversion.
Accumulations of dividends on shares of mandatory convertible
preferred stock do not bear interest. Dividends payable on the
mandatory convertible preferred stock for any period other than
a full dividend period (based upon the number of days elapsed
during the period) will be computed on the basis of a
360-day year
consisting of twelve
30-day
months. The initial dividend on the mandatory convertible
preferred stock for the first dividend period, assuming the
issue date
is ,
2010, is expected to be $ per
share (based on the annual dividend rate
of % and an initial liquidation
preference of $1,000 per share) and will be payable, if
declared, on November 1, 2010. Each subsequent quarterly
dividend on the mandatory convertible preferred stock, when and
if declared, will be $ per share
(based on the annual dividend rate
of % and the initial liquidation
preference of $1,000 per share).
No dividend will be declared or paid upon, or any sum set apart
for the payment of dividends upon, any outstanding share of the
mandatory convertible preferred stock with respect to any
dividend period unless all dividends for all preceding dividend
periods have been declared and paid or declared and a sufficient
sum has been set apart for the payment of such dividends, upon
all outstanding shares of mandatory convertible preferred stock.
No dividend will be paid unless and until our board of
directors, or an authorized committee of our board of directors,
declares a dividend payable with respect to our mandatory
convertible preferred stock. Our ability to declare and pay
dividends and make other distributions with respect to our
capital stock, including the mandatory convertible preferred
stock, may be limited by the terms of any indentures, loan
agreements or other financing arrangements that we enter into in
the future. In addition, our ability to declare and pay
dividends may be limited by applicable Delaware law. See
Risk Factors Risks Relating to the Depositary
Shares, the Mandatory Convertible Preferred Stock and Our Common
Stock Our ability to declare and pay dividends is
subject to limitations.
Method of
Payment of Dividends
All dividends paid prior to the conversion of the mandatory
convertible preferred stock will be in cash. All dividends (or
any portion of any dividend), including accrued and unpaid
dividends, payable upon conversion of the mandatory convertible
preferred stock pursuant to the provisions described under
Mandatory Conversion,
Conversion at the Option of the Holder,
and Conversion Upon Fundamental Change
may, in our sole discretion, be paid:
|
|
|
|
|
in cash;
|
|
|
|
by delivery of shares of our common stock; or
|
|
|
|
through payment or delivery, as the case may be, of any
combination of cash and our common stock;
|
provided that in the case of conversion upon a
fundamental change that is a reorganization event (as defined
below), dividends otherwise payable in shares of our common
stock may be paid by delivery of units of exchange property, as
described under Recapitalizations,
Reclassifications and Changes of Our Common Stock; and
provided further that if our board of directors may not
lawfully authorize payment of all or any
S-36
portion of such accrued and unpaid dividends in cash, it shall
authorize payment of such dividends in shares of our common
stock or units of exchange property, as the case may be, if
lawfully permitted to do so.
So long as any mandatory convertible preferred stock remains
outstanding on and after the mandatory conversion date, then,
with respect to such outstanding mandatory convertible preferred
stock, (i) the quarterly dividend otherwise payable on the
mandatory conversion date will be payable in cash only and
(ii) the quarterly dividends (at the increased dividend
rate as described above under Authorized Share
Condition) following such date will only be payable in
cash. In addition to the common stock issuable upon automatic
conversion of such mandatory convertible preferred stock, we
will pay cash in an amount equal to all accrued and unpaid
dividends on the mandatory convertible preferred stock, whether
or not declared prior to that date, for the then-current
dividend period (or portion thereof) ending on such automatic
conversion date and all prior dividend periods (other than
previously declared dividends on such mandatory convertible
preferred stock that were paid to holders of record as of a
prior date).
If we pay any dividend or portion thereof in shares of our
common stock, such shares shall be valued for such purpose at
97% of the average VWAP per share of our common stock for the 10
trading days of the dividend reference period. If we pay any
dividend or portion thereof in units of exchange property, the
value of such units will be determined as described under
Recapitalizations, Reclassifications and
Changes of Our Common Stock. The dividend reference
period shall be:
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|
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|
|
in the case of a payment of dividends upon a conversion on the
mandatory conversion date, the 10 consecutive trading days
ending on, and including, the second scheduled trading day
immediately preceding the mandatory conversion date;
|
|
|
|
in the case of a payment of dividends upon a conversion pursuant
to the provisions described under Conversion
at the Option of the Holder, the 10 consecutive trading
days commencing on, and including, the third trading day
immediately following the date on which we receive a notice of
conversion from the holder; and
|
|
|
|
in the case of a payment of dividends upon a conversion pursuant
to the provisions described under Conversion
Upon Fundamental Change the 10 consecutive trading days
ending on, and including, the scheduled trading day immediately
preceding the effective date of the fundamental change.
|
If we pay any dividend or portion thereof in shares of our
common stock or units of exchange property:
|
|
|
|
|
in the case of a payment of dividends upon conversion on the
mandatory conversion date, we will give the holders of the
mandatory convertible preferred stock notice of any such
election and the portion of such payment that will be made in
common stock no later than 10 scheduled trading days prior to
the mandatory conversion date, and we will deliver shares of our
common stock and pay cash, if applicable, in respect of such
payment on the mandatory conversion date;
|
|
|
|
in the case of a payment of dividends upon a conversion pursuant
to the provisions described under Conversion
at the Option of the Holder we will give each converting
holder of the mandatory convertible preferred stock notice of
any such election and the portion of such payment that will be
made in common stock no later than two trading days after we
receive notice of conversion from such holder, and we will
deliver shares of our common stock and pay cash, if applicable,
in respect of such payment no later than the ninth trading day
after the applicable early conversion date, subject to the
provisions for accrued dividends as described under
Conversion at the Option of the
Holder; and
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in the case of a payment of dividends upon a conversion pursuant
to the provisions described under Conversion
Upon Fundamental Change we will give each converting
holder of the mandatory convertible preferred stock notice of
any such election and the portion of such payment that will be
made in common stock or units of exchange property, as the case
may be, in our fundamental change company notice (as defined
below) and we will deliver shares of our common stock or units
of exchange property, as the case may be, and pay cash, if
applicable, in respect of such payment on the third business day
following the conversion date in respect of such conversion.
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If you are a
non-U.S. holder
(as defined in Certain U.S. Federal Tax
Considerations), dividends generally will be subject to
U.S. federal income tax at a 30% or reduced treaty rate, as
described more fully under Certain U.S. Federal Tax
Consequences Taxation of
Non-U.S. Holders
Distributions Generally. We, or an applicable withholding
agent, will withhold such U.S. federal income tax from
amounts otherwise payable to you.
If we do not provide notice of our election to pay any dividend,
or a portion thereof, upon the conversion of the mandatory
convertible preferred stock pursuant to the provisions described
under Mandatory Conversion,
Conversion at the Option of the Holder,
or Conversion Upon Fundamental Change
through delivery of shares of our common stock or units of
exchange property, as the case may be, as described above, we
will pay such dividend entirely in cash.
For purposes of this Description of the Mandatory
Convertible Preferred Stock section, the following terms
have the meanings set forth below:
Volume weighted average price or
VWAP per share of our common stock on any
trading day means such price as displayed under the heading
Bloomberg VWAP on Bloomberg (or any successor
service) page APA <Equity> AQR (or its equivalent
successor if such page is not available) in respect of the
period from 9:30 a.m. to 4:00 p.m., New York City
time, on such trading day; or, if such price is not available,
the volume weighted average price means the market value per
share of our common stock on such trading day as determined,
using a volume-weighted average method, by a nationally
recognized independent investment banking firm retained by us
for this purpose. The average VWAP means, for any
period, the average of the volume weighted average price for
each trading day in such period.
A trading day is any day on which (i) there is
no market disruption event (as defined below) and (ii) the
NYSE is open for trading, or, if our common stock (or any other
security into which the mandatory convertible preferred stock
becomes convertible in connection with any reorganization event)
is not listed on the NYSE, any day on which the principal
national securities exchange on which our common stock (or such
other security) is listed is open for trading, or, if the common
stock (or such other security) is not listed on a national
securities exchange, any business day. A trading day
only includes those days that have a scheduled open time of
9:30 a.m. (New York City time) and a scheduled closing time
of 4:00 p.m. (New York City time) or the then standard
closing time for regular trading on the relevant exchange or
trading system.
A market disruption event means any of the following
events that has occurred:
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any suspension of, or limitation imposed on, trading by the NYSE
during any period or periods aggregating one
half-hour or
longer and whether by reason of movements in price exceeding
limits permitted by the NYSE or otherwise relating to our common
stock (or any other security into which the mandatory
convertible preferred stock becomes convertible in connection
with any reorganization event) or in futures or option contracts
relating to our common stock (or such other security) on the
relevant exchange or quotation system;
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any event (other than a failure to open or a closure as
described below) that disrupts or impairs the ability of market
participants during any period or periods aggregating one
half-hour or
longer in general to effect transactions in, or obtain market
values for, our common stock (or any other security into which
the mandatory convertible preferred stock becomes convertible in
connection with any reorganization event) on the NYSE or futures
or options contracts relating to our common stock (or such other
security) on any relevant exchange or quotation system; or
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the failure to open of the exchange or quotation system on which
futures or options contracts relating to our common stock (or
any other security into which the mandatory convertible
preferred stock becomes convertible in connection with any
reorganization event) are traded or the closure of such exchange
or quotation system prior to its respective scheduled closing
time for the regular trading session on such day (without regard
to
after-hours
or other trading outside the regular trading session hours)
unless such earlier closing time is announced by such exchange
or quotation system at least one hour prior to the earlier of
the actual closing time for the regular trading session on such
day and the
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submission deadline for orders to be entered into such exchange
or quotation system for execution at the actual closing time on
such day.
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For the purposes of determining a market disruption
event, if our common stock (or any other security into
which the mandatory convertible preferred stock becomes
convertible in connection with any reorganization event) is not
listed on the NYSE, the term NYSE in the definition
of market disruption event shall be deemed to be
replaced by the principal national securities exchange on which
our common stock (or such other security) is listed for trading.
A scheduled trading day means a day that is
scheduled to be a trading day, except that if our common stock
is not listed on a national securities exchange, scheduled
trading day means a business day.
Notwithstanding the foregoing, in no event will the number of
shares of our common stock delivered upon conversion of the
mandatory convertible preferred stock, including any shares
delivered in connection with any dividend payment as described
above, exceed an amount per share equal to the product of
(i) two and (ii) the maximum conversion rate, subject
to adjustment in the same manner as each fixed conversion rate
as set forth under Conversion Rate
Adjustments. We refer to this limitation as the
share cap. To the extent that we deliver the maximum
number of whole shares of common stock equal to the share cap on
the mandatory convertible preferred stock in accordance with the
provisions set forth above, we will be deemed to have paid in
full all accrued and unpaid dividends on such mandatory
convertible preferred stock. However, in our sole discretion, we
may elect to pay any amount above the share cap that would
otherwise be payable in cash to the extent we have lawfully
available funds to do so.
So long as any share of mandatory convertible preferred stock
remains outstanding (including after the mandatory conversion
date), no dividend or distribution shall be declared or paid on
our common stock or any other shares of junior stock (other than
dividends payable solely in shares of our common stock) or
parity stock, except as provided below in the case of parity
stock, and no common stock, junior stock or parity stock shall
be, directly or indirectly, purchased, redeemed or otherwise
acquired for consideration by us or any of our subsidiaries
(collectively, a restricted payment) unless all
accrued and unpaid dividends for all past quarterly dividend
periods, including the latest completed dividend period, on all
outstanding shares of mandatory convertible preferred stock have
been or are contemporaneously declared and paid in full (or have
been declared and a sum sufficient for the payment thereof has
been set aside for the benefit of the holders of shares of
mandatory convertible preferred stock on the applicable record
date).
In addition, if any shares of mandatory convertible preferred
stock or fundamental change preferred stock are outstanding on
and after the mandatory conversion date, no restricted payment
shall be made even if we have made timely payment of dividends
on all outstanding mandatory convertible preferred stock or
fundamental change preferred stock, as applicable.
The limitations on distributions described in the immediately
preceding paragraph will not apply to:
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any dividends or distributions of rights or junior stock in
connection with a shareholders rights plan or any
redemption or repurchase of rights pursuant to any
shareholders rights plan;
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the acquisition by us or any of our subsidiaries of record
ownership in junior stock or parity stock for the beneficial
ownership of any other persons (other than for the beneficial
ownership by us or any of our subsidiaries), including as
trustees or custodians; and
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the exchange or conversion of junior stock for or into other
junior stock or of parity stock for or into other parity stock
(with the same or lesser aggregate liquidation amount) or junior
stock and, in each case, the payment of cash solely in lieu of
fractional shares.
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When dividends are not paid (or declared and a sum sufficient
for payment thereof set aside for the benefit of the holders
thereof on the applicable record date) on any dividend payment
date (or, in the case of parity stock having dividend payment
dates different from such dividend payment dates, on a dividend
payment date falling within a dividend period related to such
dividend payment date) in full upon the mandatory convertible
preferred stock and any shares of parity stock, all dividends
declared on the mandatory convertible preferred stock and all
such parity stock and payable on such dividend payment date (or,
in the
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case of parity stock having dividend payment dates different
from such dividend payment dates, on a dividend payment date
falling within a dividend period related to such dividend
payment date) shall be declared and paid pro rata so that the
respective amounts of such dividends declared shall bear the
same ratio to each other as all accrued and unpaid dividends per
share on the shares of mandatory convertible preferred stock and
all parity stock payable on such dividend payment date (or, in
the case of parity stock having dividend payment dates different
from such dividend payment dates, on a dividend payment date
falling within a dividend period related to such dividend
payment date) (subject to their having been declared by our
board of directors or a duly authorized committee of our board
of directors out of lawfully available funds and including, in
the case of parity stock that bears cumulative dividends, all
accrued but unpaid dividends) bear to each other. If our board
of directors or a duly authorized committee of our board of
directors determines not to pay any dividend or a full dividend
on a dividend payment date, we will provide written notice to
the holders of mandatory convertible preferred stock prior to
such dividend payment date.
Subject to the foregoing, and not otherwise, such dividends
(payable in cash, securities or other property) as may be
determined by our board of directors or any duly authorized
committee of our board of directors may be declared and paid on
any securities, including common stock and other junior stock,
from time to time out of any funds lawfully available for such
payment, and holders of mandatory convertible preferred stock
shall not be entitled to participate in any such dividends.
Redemption
The mandatory convertible preferred stock will not be redeemable.
Liquidation
Preference
In the event of our liquidation, dissolution or
winding-up,
whether voluntary or involuntary, each holder of mandatory
convertible preferred stock will be entitled to receive out of
our assets available for distribution to our shareholders,
subject to rights of our creditors, before any payment or
distribution is made to holders of junior stock (including our
common stock), payment in full of the amount of $1,000 per share
of the mandatory convertible preferred stock, plus an amount
equal to any accrued and unpaid dividends, whether or not
declared, on the shares to the date fixed for liquidation,
dissolution or
winding-up.
If in any such distribution our assets or proceeds thereof are
not sufficient to pay in full the amounts payable with respect
to all outstanding shares of the mandatory convertible preferred
stock and any other stock ranking equally with the mandatory
convertible preferred stock as to such distribution, the holders
of our mandatory convertible preferred stock and such other
stock will share ratably in any such distribution in proportion
to the full accrued and unpaid respective distributions to which
they are entitled. After payment of the full amount of the
liquidation preference, including an amount equal to any accrued
and unpaid dividends, to which they are entitled, the holders of
the mandatory convertible preferred stock will have no right or
claim to any of our remaining assets. Neither the sale, lease or
exchange (for cash, securities or other property) of all or
substantially all our assets, nor our merger or consolidation
with any other corporation or other entity, will be deemed to be
a liquidation, dissolution or
winding-up
of our company.
The certificate of designations for our mandatory convertible
preferred stock will not contain any provision requiring funds
to be set aside to protect the liquidation preference of the
mandatory convertible preferred stock even though it is
substantially in excess of the par value thereof.
Voting
Rights
The holders of our mandatory convertible preferred stock will
have no voting rights except as set forth below or as otherwise
required by law or our Restated Certificate of Incorporation
from time to time. In matters where holders of mandatory
convertible preferred stock are entitled to vote, each share of
mandatory convertible preferred stock shall be entitled to one
vote.
In addition, following the mandatory conversion date the
outstanding mandatory convertible preferred stock will have the
voting rights described under Authorized Share
Condition above if we have not satisfied the authorized
share condition on such date.
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Preferred
Directors
Whenever, at any time or times, dividends payable on the shares
of our mandatory convertible preferred stock have not been paid
for an aggregate of six quarterly dividend periods or more,
whether or not consecutive (a nonpayment), the
authorized number of directors on our board of directors will
automatically be increased by two and the holders of our
mandatory convertible preferred stock will have the right, with
holders of shares of any one or more other classes or series of
outstanding parity stock upon which like voting rights have been
conferred and are exercisable at the time, voting together as a
class (and with voting rights allocated pro rata based on the
liquidation amount of each such class or series), to elect two
directors (collectively, the preferred directors and
each, a preferred director) to fill such newly
created directorships at our next annual meeting of stockholders
(or at a special meeting called for that purpose prior to such
next annual meeting by the chairman of the board or chief
executive officer or holders of record of at least 10% of
(i) our outstanding mandatory convertible preferred stock
or (ii) any such class or series our capital stock entitled
to vote for such preferred directors) and at each subsequent
annual meeting of our stockholders until all accrued and unpaid
dividends have been paid on our mandatory convertible preferred
stock, at which time such right will terminate, except as
otherwise provided in this prospectus supplement or expressly
provided by law, subject to revesting in the event of each and
every nonpayment; provided that it will be a qualification for
election for any preferred director that the election of such
preferred director will not cause us to violate any corporate
governance requirements of any securities exchange or other
trading facility on which our securities may then be listed or
traded that listed or traded companies must have a majority of
independent directors.
Upon any termination of the right set forth in the immediately
preceding paragraph, the preferred directors will cease to be
qualified as directors, the term of office of all preferred
directors then in office will terminate immediately, and the
authorized number of directors will be reduced by the number of
preferred directors elected as described above. Any preferred
director may be removed at any time, without cause, and any
vacancy created thereby may be filled, only by the affirmative
vote of the holders of a majority in voting power of the shares
of our mandatory convertible preferred stock at the time
outstanding voting separately as a class together with the
holders of shares of parity stock upon which like voting rights
have been conferred and are exercisable at the time (and with
voting rights allocated pro rata based on the liquidation
preference of each such class or series), to the extent the
voting rights of such holders described above are then
exercisable. If the office of any preferred director becomes
vacant for any reason other than removal from office as
aforesaid, the remaining preferred director may choose a
successor who will hold office for the unexpired term in respect
of which such vacancy occurred.
When a
Supermajority Vote is Required
In addition to any other vote or consent of stockholders
required by law or our Restated Certificate of Incorporation,
the affirmative vote or consent of the holders of at least
662/3%
in voting power of the outstanding shares of mandatory
convertible preferred stock and all other parity stock having
similar voting rights that are exercisable, voting as a single
class, given in person or by proxy, either in writing without a
meeting or by vote at any meeting called for such purpose, or by
written consent in lieu of such meeting, will be required to:
(i) reclassify any of our authorized shares into any shares
of any class, or any obligation or security convertible into or
evidencing a right to purchase such shares, ranking senior to
the mandatory convertible preferred stock as to payment of
dividends or distribution of assets upon the dissolution,
liquidation or
winding-up;
(ii) issue, authorize or increase the authorized amount of,
or issue or authorize any obligation or security convertible
into or evidencing a right to purchase any stock of, any class
or series ranking senior to the mandatory convertible preferred
stock as to payment of dividends or distribution of assets upon
our dissolution, liquidation or
winding-up,
provided that we may issue, authorize or increase the authorized
amount of, or issue or authorize any obligation or security
convertible into or evidencing a right to purchase, any shares
of capital stock ranking on a parity with or junior to the
mandatory convertible
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preferred stock as to payment of dividends or distribution of
assets upon our dissolution, liquidation or
winding-up;
(iii) amend, alter or repeal any provision of the
certificate of designations for the mandatory convertible
preferred stock or our Restated Certificate of Incorporation
(including, unless no vote on such merger or consolidation is
required in accordance with clause (iv) below, any
amendment, alteration or repeal by means of a merger,
consolidation or otherwise) so as to adversely affect the
rights, preferences, privileges or voting powers of the
mandatory convertible preferred stock; or
(iv) consummate a binding share exchange or
reclassification involving the mandatory convertible preferred
stock, or of a merger or consolidation of us with another
corporation or other entity, unless in each case (x) the
shares of mandatory convertible preferred stock remain
outstanding or, in the case of any such merger or consolidation
with respect to which we are not the surviving or resulting
entity, are converted into or exchanged for preference
securities of the surviving or resulting entity or its ultimate
parent, and (y) such shares remaining outstanding or such
preference securities, as the case may be, have such rights,
preferences, privileges and voting powers, and limitations and
restrictions thereof, taken as a whole, as are not materially
less favorable to the holders thereof than the rights,
preferences, privileges and voting powers, and limitations and
restrictions thereof, of mandatory convertible preferred stock
immediately prior to such consummation, taken as a whole;
provided, however, that the creation and issuance,
or an increase in the authorized or issued amount, whether
pursuant to preemptive or similar rights or otherwise, of any
other series of preferred stock, or any securities convertible
into or exchangeable or exercisable for any other series of
preferred stock, ranking equally with
and/or
junior to our mandatory convertible preferred stock with respect
to the payment of dividends (whether such dividends are
cumulative or non-cumulative) and the distribution of assets
upon our liquidation, dissolution or
winding-up
will not be deemed to adversely affect the rights, preferences,
privileges or voting powers, and shall not require the
affirmative vote or consent of, the holders of outstanding
shares of the mandatory convertible preferred stock.
Mandatory
Conversion
Provided the authorized share condition has been satisfied on
the mandatory conversion date as described under
Authorized Share Condition above, each
share of our mandatory convertible preferred stock, unless
previously converted, will automatically convert on
August 1, 2013 (the mandatory conversion date)
into a number of shares of common stock equal to the conversion
rate described below. In addition to the common stock issuable
upon conversion of each share of our mandatory convertible
preferred stock on the mandatory conversion date, holders will
have the right to receive an amount equal to all accrued and
unpaid dividends on the mandatory convertible preferred stock
(in cash, common stock, if available, or a combination thereof,
at our election and subject to the share cap, as provided above
under Method of Payment of Dividends),
whether or not declared prior to that date, for the then-current
dividend period ending on the mandatory conversion date and all
prior dividend periods (other than previously declared dividends
on the mandatory convertible preferred stock that were paid to
holders of record as of a prior date), so long as we are
lawfully permitted to pay such dividends at such time.
If we have not satisfied the authorized share condition on the
mandatory conversion date, then,
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the quarterly dividend otherwise payable on the mandatory
conversion date for the dividend period ending on the day
immediately preceding such date will be payable in cash only
(and only to the extent we have legally available funds and our
board of directors declared a dividend to be payable on such
date);
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we will not have any obligation to pay all accumulated and
accrued and unpaid dividends on the mandatory conversion date,
whether or not declared prior to that date, as described above;
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if we have any designated shares on the mandatory conversion
date, we will automatically convert on such date, for each
holder of our mandatory convertible preferred stock, a number of
shares of mandatory convertible preferred stock (rounded down to
the nearest whole share of mandatory
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convertible preferred stock) equal to the prorated portion (as
defined below) multiplied by the total number of shares of
mandatory convertible preferred stock held by such holder;
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any mandatory convertible preferred stock not converted on such
date will remain outstanding and will be convertible at the
final conversion rate and with the increased dividend rate and
the additional rights as described under
Authorized Share Condition above;
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the quarterly dividends (at the increased dividend rate
described above) following such date will only be payable in
cash; and
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in addition to the common stock issuable upon automatic
conversion of such mandatory convertible preferred stock on or
after the mandatory conversion date, we will pay cash in an
amount equal to all accrued and unpaid dividends on the
mandatory convertible preferred stock, whether or not declared
prior to that date, for the then-current dividend period (or
portion thereof) ending on such automatic conversion date and
all prior dividend periods (other than previously declared
dividends on such mandatory convertible preferred stock that
were paid to holders of record as of a prior date).
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Prorated portion means, with respect to any
conversion date, the total number of designated shares divided
by the product of (i) the applicable conversion rate on
such conversion date and (ii) the total number of shares of
mandatory convertible preferred stock submitted for conversion
(or in the case of automatic conversion, the total number of
shares of mandatory convertible preferred stock to be
automatically converted).
Notwithstanding the forgoing and with respect to any conversion
of mandatory convertible preferred stock on a pro rata basis
described under this section, Conversion at
the Option of the Holder or Conversion
Upon Fundamental Change, if such conversion is not
practical or cannot be implemented under DTCs
then-existing procedures, we will select shares of mandatory
convertible preferred stock to be converted (in whole shares) by
lot or by another method our board of directors considers fair
and appropriate so long as such method is not prohibited by the
rules of any stock exchange or quotation system on which shares
of mandatory convertible preferred stock may then be traded or
quoted.
Upon any increase of the designated shares announced by us
following the mandatory conversion date, for each holder of
mandatory convertible preferred stock, we will automatically
convert a prorated portion of the outstanding shares of
mandatory convertible preferred stock held by such holder
(rounded down to the nearest whole share of mandatory
convertible preferred stock) into shares of our common stock at
the final conversion rate. We will continue to convert the
mandatory convertible preferred stock on a pro rata basis until
all outstanding shares of mandatory convertible preferred stock
are converted and each depositary share has been convert into a
number of shares equal to the proportionate fractional interest
in such shares of common stock.
If shares of mandatory convertible preferred stock and
fundamental change preferred stock (as defined under
Conversion Upon Fundamental Change) are
both outstanding on or after the mandatory conversion date, the
designated shares will be used first to satisfy conversion of
the fundamental change preferred stock until all outstanding
shares of fundamental change preferred stock are converted as
described under Conversion Upon Fundamental
Change. If the remaining designated shares are not
sufficient to convert all outstanding shares of mandatory
convertible preferred stock, the outstanding shares of mandatory
convertible preferred stock will be converted on a pro rata
basis as described above.
The conversion rate, which is the number of shares of common
stock issuable upon conversion of each share of mandatory
convertible preferred stock on the mandatory conversion date
(excluding shares of common stock, if any, issued in respect of
accrued and unpaid dividends), will, subject to adjustment as
described under Conversion Rate
Adjustments below, be as follows:
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if the applicable market value (as defined below) of our common
stock is equal to or greater than
$ , which we call the
threshold appreciation price, then the conversion
rate will
be shares
of our common stock per share of mandatory convertible preferred
stock (the minimum conversion rate), which is equal
to $1,000 divided by the threshold appreciation price;
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if the applicable market value of our common stock is less than
the threshold appreciation price but greater than
$ , which we call the initial
price, then the conversion rate will be equal to $1,000
divided by the applicable market value of our common
stock; or
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if the applicable market value of our common stock is less than
or equal to the initial price, then the conversion rate will
be shares
of common stock per share of mandatory convertible preferred
stock (the maximum conversion rate), which is equal
to $1,000 divided by the initial price.
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We refer to the minimum conversion rate, the maximum conversion
rate, the final conversion rate and the fundamental change
conversion rate for fundamental change preferred stock (each
defined under Conversion Upon Fundamental
Change) collectively as the fixed conversion
rates. Each of the fixed conversion rates, the initial
price, the threshold appreciation price and the applicable
market value are subject to adjustment as described under
Conversion Rate Adjustments below.
Based on the foregoing, if the market price of our common stock
on the mandatory conversion date is the same as the applicable
market value, the aggregate market value of the shares of common
stock you receive upon mandatory conversion will be:
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greater than the liquidation preference of the mandatory
convertible preferred stock, if the applicable market value is
greater than the threshold appreciation price,
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equal to the liquidation preference, if the applicable market
value is less than or equal to the threshold appreciation price
and greater than or equal to the initial price, and
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less than the liquidation preference, if the applicable market
value is less than the initial price.
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The applicable market value of our common stock is
the average VWAP per share of our common stock for the 10
consecutive trading day period ending on, and including, the
third scheduled trading day immediately preceding the mandatory
conversion date.
The initial price is $ . The
threshold appreciation price represents approximately
a % appreciation over the initial
price.
Conversion
Conversion into shares of common stock will occur on the
mandatory conversion date, unless you have converted your shares
of mandatory convertible preferred stock prior to the mandatory
conversion date in the manner described in
Conversion at the Option of the Holder
or Conversion Upon Fundamental Change or
the authorized share condition has not been met (see
Authorized Share Condition).
The conversion date of the mandatory convertible
preferred stock means:
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in respect of a conversion on the mandatory conversion date, the
mandatory conversion date (other than for any shares not
converted on such date as a result of a failure of the
authorized share condition to be satisfied as described above);
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in respect of a conversion prior to the mandatory conversion
date at the option of the holder, the early conversion date (as
defined under Conversion of the Option of the
Holder below), unless such conversion is deemed not to
have occurred as described below;
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in respect of a conversion during the fundamental change
conversion period, the date on which the holder converts (or is
deemed to have converted) shares of mandatory convertible
preferred stock at such holders option as described under
Conversion Upon Fundamental Change
below; and
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in respect of an automatic conversion following the mandatory
conversion date as described under Authorized
Share Condition and Mandatory
Conversion above, the date on which such conversion is
effected.
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Because each depositary share represents a 1/20th interest
in a share of our mandatory convertible preferred stock, a
holder of depositary shares may elect to convert depositary
shares only in lots of 20
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depositary shares, either on an early conversion date or during
a fundamental change conversion period as described under
Description of Depositary Shares
Conversion.
On the conversion date, if shares of mandatory convertible
preferred stock are held in certificated form and the holder has
complied with the additional procedures set forth in the
certificate of designations, certificates representing shares of
our common stock will be issued and delivered to the holder upon
presentation and surrender of the certificate evidencing the
mandatory convertible preferred stock.
The person or persons entitled to receive the shares of our
common stock issuable upon conversion of the mandatory
convertible preferred stock will be treated as the record
holder(s) of such shares as of the close of business on the
applicable conversion date. Except as described under
Authorized Share Condition, prior to the
close of business on the applicable conversion date, the shares
of our common stock issuable upon conversion of the mandatory
convertible preferred stock will not be deemed to be outstanding
for any purpose and you will have no rights with respect to such
shares of common stock, including without limitation voting
rights, rights to respond to tender offers and rights to receive
any dividends or other distributions on our common stock, by
virtue of holding the mandatory convertible preferred stock.
Conversion
at the Option of the Holder
Other than during the fundamental change conversion period (as
defined below) and as long as no shares of fundamental change
preferred stock (as defined below) are outstanding, holders of
the mandatory convertible preferred stock have the right to
convert the mandatory convertible preferred stock, in whole or
in part, at any time prior to July 15, 2013, into shares of
our common stock at the minimum conversion rate
of shares
of common stock per share of mandatory convertible preferred
stock, subject to adjustment as described under
Conversion Rate Adjustments below.
In addition to the number of shares of common stock issuable at
the minimum conversion rate upon conversion of each share of
mandatory convertible preferred stock at the option of the
holder on any date on which a holder converts shares of
mandatory convertible preferred stock at such holders
option (the early conversion date), we will pay (in
cash, common stock or a combination thereof, at our election, as
provided above under Method of Payment of
Dividends) an amount equal to all accrued and unpaid
dividends on such converted shares of mandatory convertible
preferred stock, whether or not declared prior to that date, for
all dividend periods ending on or prior to the dividend payment
date immediately preceding the early conversion date (other than
previously declared dividends on the mandatory convertible
preferred stock that were paid to holders of record as of a
prior date), subject to the immediately succeeding paragraph and
the share cap and so long as we are then lawfully permitted to
pay such dividends.
Notwithstanding the foregoing, if the early conversion date for
any optional conversion occurs during the period from
5:00 p.m., New York City time, on a regular record date for
any declared dividend to 9:00 a.m., New York City
time, on the immediately following dividend payment date, then:
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we will pay such dividend on the dividend payment date to the
holder of record of the converted shares of mandatory
convertible preferred stock on such regular record date;
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shares of mandatory convertible preferred stock surrendered for
conversion during such period must be accompanied by cash in an
amount equal to the amount of such dividend for the then-current
dividend period with respect to the shares so converted; and
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the consideration that we deliver to the converting holder on
the early conversion date will not include any consideration for
such dividend.
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However, notwithstanding the foregoing, if on any early
conversion date for an optional conversion as described above,
the authorized share condition has not been satisfied and we do
not have sufficient designated shares to convert all shares of
mandatory convertible preferred stock tendered for conversion on
such date, then for each converting holder, we will only convert
on such date a prorated portion (as defined above) of its shares
of mandatory convertible preferred stock tendered for conversion
(rounded down to the nearest whole share of mandatory
convertible preferred stock). Any shares of mandatory
convertible preferred
S-45
stock not converted on such date will remain outstanding and be
deemed to have not been converted. To the extent holders have
submitted depositary shares to us (and cash in respect of
dividends as described above) or the depositary for conversion,
we will return, or cause the depositary to return, such
depositary shares (and cash, if any) representing the mandatory
convertible preferred stock not converted to the converting
holders. From and after such date, until we notify the holders
of any increase of the designated shares, holders may not submit
any shares of mandatory convertible preferred stock (or
depositary shares in respect thereof) for optional conversion as
described above. We will issue a press release and notify
holders promptly after such date that we do not have sufficient
designated shares to convert early optional conversions and that
holders will not have the right to convert mandatory convertible
preferred stock early at their option until we notify the
holders of any increase of the designated shares.
Conversion
Upon Fundamental Change
If a fundamental change (as defined below) occurs prior to the
mandatory conversion date, we will provide for the conversion of
shares of the mandatory convertible preferred stock by paying or
delivering, as the case may be, to holders who convert their
shares of mandatory convertible preferred stock at any time
during the period (the fundamental change conversion
period) beginning on, and including, the effective date of
such fundamental change (the effective date) and
ending on, but excluding, the earlier of (i) the mandatory
conversion date and (ii) the date that is 20 days
after the effective date:
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a number of shares of our common stock or units of exchange
property, as described under
Recapitalizations, Reclassifications and
Changes of Our Common Stock (if the fundamental change
also constitutes a reorganization event), based on the
conversion rate (the fundamental change conversion
rate) determined using the table below; and
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at our election and subject to the share cap, shares of our
common stock, units of exchange property, cash or a combination
thereof in an amount equal to any accrued and unpaid dividends,
whether or not declared, on their shares of the mandatory
convertible preferred stock (as described above under
Method of Payment of Dividends), to the
extent that we have lawfully available funds to pay such
dividends; provided, however, that if the conversion date for
such conversion occurs during the period from 5:00 p.m.,
New York City time, on a regular record date for any declared
dividend to 9:00 a.m., New York City time, on the
immediately following dividend payment date, then we will pay
such dividend on the dividend payment date to the holder of
record of the converted shares of mandatory convertible
preferred stock on such regular record date and the
consideration that we deliver to the converting holder will not
include any consideration for such dividend.
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We will notify holders, to the extent practicable, at least 20
business days prior to the anticipated effective date of such
fundamental change, but in any event not later than two business
days following our becoming aware of the occurrence of a
fundamental change (the fundamental change company
notice). Such fundamental change company notice will
state, among other things, whether we have elected to pay all or
any portion of accrued and unpaid dividends in shares of our
common stock or units of exchange property, as the case may be,
and, if so, the portion thereof (as a percentage) that will be
paid in shares of our common stock or units of exchange
property. In no event shall the number of shares issued upon
conversion of the mandatory convertible preferred stock upon a
fundamental change, including any shares delivered in connection
with any dividend payment, exceed the share cap.
If the authorized share condition has not been satisfied prior
to the fundamental change conversion period, holders of
mandatory convertible preferred stock who exercise their
fundamental change conversion right will be deemed to have
exercised such right on the last day of the fundamental change
conversion period. If we do not have sufficient designated
shares on such last day to convert all shares of mandatory
convertible preferred stock tendered for conversion during the
fundamental change conversion period, then, for each converting
holder, we will only convert on such last day a prorated portion
of its shares of mandatory convertible preferred stock (rounded
down to the nearest whole share of mandatory convertible
preferred stock) based on the fundamental change conversion
rate. Holders of mandatory convertible preferred stock who
exercise their fundamental change conversion right will receive,
in exchange for such shares of
S-46
mandatory convertible preferred stock that were tendered and not
converted, shares of a new series of our preferred stock in
proportion to the liquidation preference of mandatory
convertible preferred stock so tendered, which we refer to as
fundamental change preferred stock, with identical
terms to those of the mandatory convertible preferred stock,
including the right to receive all accrued and unpaid dividends
on the mandatory convertible preferred stock, whether or not
declared prior to the relevant conversion date, for the
then-current dividend period (or portion thereof) ending on such
conversion date and all prior dividend periods (other than
previously declared dividends on the mandatory convertible
preferred stock that were paid to holders of record as of a
prior date), except that:
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the conversion rate for the fundamental change preferred stock
will be set at the fundamental change conversion rate; and
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holders of the fundamental change preferred stock will be
entitled:
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to receive quarterly dividend payments, when, as, and if
declared by our board of directors or an authorized committee of
our board, at a rate of 9% per annum,
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to receive and to participate in all dividends or distributions
paid or made in respect of our common stock, on a proportional
basis, based upon the number of shares of common stock into
which the number of shares of the fundamental change preferred
stock are convertible at the fundamental change conversion
rate, and
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to a number of votes equal to the fundamental change conversion
rate as of the record date for the vote or consent on all
matters submitted to a vote of our common stockholders and will
vote together with our common stockholders as one class on such
matters (except for the approval required to satisfy the
authorized share condition).
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To the extent holders have submitted depositary shares to us or
the depositary for conversion, we will either deliver to the
converting holders the fundamental change preferred stock in
exchange for the mandatory convertible preferred stock not
converted or cause the depositary to issue to the converting
holders a new series of depositary shares representing such
fundamental change preferred stock. Upon any increase of the
designated shares announced by us following the fundamental
change conversion period, for each holder of fundamental change
preferred stock, we will automatically convert a prorated
portion of the outstanding shares of fundamental change
preferred stock held by such holder (rounded down to the nearest
whole share of mandatory convertible preferred stock) into
shares of our common stock or units of exchange property at the
fundamental change conversion rate. We will continue to convert
the fundamental change preferred stock on a pro rata basis until
all outstanding shares of fundamental change preferred stock are
converted and each depositary share have been convert into a
number of shares equal to the proportionate fractional interest
in such shares of common stock.
We have agreed in the underwriting agreement and the certificate
of designations relating to this offering that, until the
authorized share condition is satisfied, we will reserve a
sufficient number of authorized shares of preferred stock to
permit all holders of the mandatory convertible preferred stock
to receive shares of fundamental change preferred stock as
described in the two preceding paragraphs upon a fundamental
change.
S-47
The following table sets forth the fundamental change conversion
rate per share of mandatory convertible preferred stock based on
the effective date of the fundamental change and the stock price
in the fundamental change (as described below):
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Stock Price on Effective Date
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Effective Date
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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,
2010
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November 1, 2010
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February 1, 2011
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May 1, 2011
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August 1, 2011
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November 1, 2011
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February 1, 2012
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May 1, 2012
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August 1, 2012
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November 1, 2012
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February 1, 2013
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May 1, 2013
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August 1, 2013
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The stock prices set forth in the column headers will be
adjusted as of any date on which the fixed conversion rates of
our mandatory convertible preferred stock are adjusted. The
adjusted stock prices will equal the stock prices applicable
immediately prior to such adjustment multiplied by a fraction,
the numerator of which is the minimum conversion rate
immediately prior to the adjustment giving rise to the stock
price adjustment and the denominator of which is the minimum
conversion rate as so adjusted. Each of the conversion rates in
the table will be subject to adjustment in the same manner as
each fixed conversion rate as set forth under
Conversion Rate Adjustments.
The exact stock price and effective date of the fundamental
change may not be set forth on the table, in which case:
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if the stock price is between two stock price amounts on the
table or the effective date is between two dates on the table,
the fundamental change conversion rate will be determined by
straight-line interpolation between the fundamental change
conversion rates set forth for the higher and lower stock price
amounts and the two dates, as applicable, based on a
365-day year;
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if the stock price is in excess of
$ per share (subject to adjustment
as described above), then the fundamental change conversion rate
will be the minimum conversion rate, subject to adjustment as
set forth under Conversion Rate
Adjustments; and
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if the stock price is less than $
per share (subject to adjustment as described above) (the
minimum stock price), then the fundamental change
conversion rate will be determined (a) as if the stock
price equaled the minimum stock price and (b) if the
effective date is between two dates on the table, using
straight-line interpolation, as described herein, subject to
adjustment.
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Our obligation to deliver shares at the fundamental change
conversion rate could be considered a penalty, in which case the
enforceability thereof would be subject to general principles of
reasonableness of economic remedies.
A fundamental change will be deemed to have occurred
if any of the following occurs:
(1) a person or group within the
meaning of Section 13(d) of the Exchange Act has become the
direct or indirect beneficial owner, as defined in
Rule 13d-3
under the Exchange Act, of our common stock representing more
than 50% of the voting power of our common stock;
S-48
(2) we are involved in a consolidation with or merger into
any other person, or any merger of another person into us, or
any other similar transaction or series of related transactions
pursuant to which our common stock will be converted into cash,
securities or other property or we sell, lease or transfer in
one transaction or a series of related transactions all or
substantially all of the property and assets of us and our
subsidiaries; provided, however, that a fundamental
change will not be deemed to have occurred if at least 90% of
the consideration received by holders of our common stock in the
transaction or transactions under this clause (2) consists
of shares of common stock that are listed on the NYSE, the
NASDAQ Global Select Market or the NASDAQ Global Market and as a
result of this transaction or transactions the mandatory
convertible preferred stock becomes convertible into such
consideration;
(3) our common stock (or any other security into which the
mandatory convertible preferred stock becomes convertible in
connection with a reorganization event) ceases to be listed or
quoted on the NYSE, the NASDAQ Global Select Market or the
NASDAQ Global Market; or
(4) our stockholders approve any plan for our liquidation,
dissolution or termination;
The fundamental change conversion rate will be
determined by reference to the table above, based on the
effective date and the stock price in the
fundamental change, which will be:
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in the case of a fundamental change described in clause (2)
above in which the holders of our common stock receive only cash
in the fundamental change, the cash amount paid per share of our
common stock; and
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otherwise, the average VWAP per share of our common stock over
the five trading day period ending on, and including, the
scheduled trading day immediately preceding the effective date
of the fundamental change (the fundamental change market
value).
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Fractional
Shares
No fractional shares of our common stock will be issued to
holders of our mandatory convertible preferred stock. In lieu of
any fractional shares of common stock otherwise issuable in
respect of any dividend or the aggregate number of shares of our
mandatory convertible preferred stock of any holder that are
converted, that holder will be entitled to receive an amount in
cash (computed to the nearest cent) equal to the same fraction
of the VWAP per share of our common stock on the trading day
immediately preceding (a) the conversion date or
(b) the date on which the dividend is distributed, as
applicable.
If more than one share of our mandatory convertible preferred
stock is surrendered for conversion at one time by or for the
same holder, the number of full shares of our common stock
issuable upon conversion thereof shall be computed on the basis
of the aggregate number of shares of our mandatory convertible
preferred stock so surrendered.
Conversion
Rate Adjustments
Each fixed conversion rate will be adjusted from time to time as
follows, except that so long as the mandatory convertible
preferred stock participates in all dividends and distributions
on the common stock as described under Authorized Share
Condition above, there will not be any adjustments to the
final conversion rate for such dividends and distributions
occurring at any time after the mandatory conversion date, even
if the mandatory conversion does not occur on that date as a
result of the failure to satisfy the authorized share condition.
(i) If we issue common stock as a dividend or distribution
to all or substantially all holders of our common stock, or if
we effect a subdivision or combination (including, without
limitation, a reverse stock split) of our common stock, each
fixed conversion rate will be adjusted based on the following
formula:
CR1 =
CR0
x
(OS1/OS0)
where,
S-49
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CR0
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=
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the fixed conversion rate in effect immediately prior to the
close of business on the record date (as defined below) for such
dividend or distribution or immediately prior to the open of
business on the effective date for such subdivision or
combination, as the case may be;
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CR1
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=
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the fixed conversion rate in effect immediately after the close
of business on such record date or immediately after the open of
business on such effective date, as the case may be;
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OS0
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=
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the number of shares of our common stock outstanding immediately
prior to the close of business on such record date or
immediately prior to the open of business on such effective
date, as the case may be (and prior to giving effect to such
event); and
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OS1
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=
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the number of shares of our common stock that would be
outstanding immediately after, and solely as a result of, such
dividend, distribution, subdivision or combination.
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Any adjustment made under this clause (i) will become
effective immediately after the close of business on the record
date for such dividend or distribution, or immediately after the
open of business on the effective date for such subdivision or
combination, as the case may be. If any dividend, distribution,
subdivision or combination of the type described in this
clause (i) is declared but not so paid or made, each fixed
conversion rate will be immediately readjusted, effective as of
the earlier of (a) the date our board of directors or a
duly authorized committee thereof determines not to pay or make
such dividend, distribution, subdivision or combination and
(b) the date the dividend or distribution was to be paid or
the date the subdivision or combination was to have been
effective, to the fixed conversion rate that would then be in
effect if such dividend, distribution, subdivision or
combination had not been declared.
(ii) If we issue to all or substantially all holders of our
common stock any rights, options or warrants (other than
pursuant to any shareholder rights plan) entitling them for a
period expiring 60 days or less from the date of issuance
of such rights, options or warrants to subscribe for or purchase
shares of our common stock at less than the current market price
(as defined below) per share of common stock as of the
announcement date for such issuance, each fixed conversion rate
will be increased based on the following formula:
CR1 =
CR0
x
(OS0
+
X)/(OS0
+Y)
where,
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CR0
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=
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the fixed conversion rate in effect immediately prior to the
close of business on the record date for such issuance;
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CR1
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=
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the fixed conversion rate in effect immediately after the close
of business on such record date;
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OS0
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=
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the number of shares of our common stock outstanding immediately
prior to the close of business on such record date;
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X
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=
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the total number of shares of our common stock issuable pursuant
to such rights, options or warrants; and
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Y
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=
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the aggregate price payable to exercise such rights, options or
warrants, divided by the average VWAP per share of our common
stock for the 10 consecutive trading day period ending on, and
including, the trading day immediately preceding the date of
announcement for such issuance.
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Any increase in the fixed conversion rates made pursuant to this
clause (ii) will become effective immediately after the
close of business on the record date for such issuance. To the
extent such rights, options or warrants are not exercised prior
to their expiration or termination, each fixed conversion rate
will be decreased, effective as of the date of such expiration
or termination, to the fixed conversion rate that would then be
in effect had the increase with respect to the issuance of such
rights, options or warrants been made on the basis of delivery
of only the number of shares of common stock actually delivered.
If such rights, options or warrants are not so issued, each
fixed conversion rate will be decreased, effective as of the
earlier of (a) the date our board of directors or a duly
authorized committee thereof determines not to issue such
rights, options or warrants and (b) the date such rights,
options or warrants were to have been issued, to the fixed
conversion rate that would then be in effect if such record date
for such issuance had not occurred.
S-50
For purposes of this clause (ii), in determining whether any
rights, options or warrants entitle the holders thereof to
subscribe for or purchase shares of our common stock at less
than the current market price per share of our common stock as
of the announcement date for such issuance, and in determining
the aggregate price payable to exercise such rights, options or
warrants, there will be taken into account any consideration we
receive for such rights, options or warrants and any amount
payable on exercise thereof, with the value of such
consideration, if other than cash, to be determined by our board
of directors or a duly authorized committee thereof.
(iii) If we pay a dividend or other distribution to all or
substantially all holders of our common stock of shares of our
capital stock (other than our common stock), evidences of our
indebtedness, our assets or rights to acquire our capital stock,
our indebtedness or our assets, excluding:
(a) any dividend, distribution or issuance as to which an
adjustment was effected pursuant to clause (i) or
(ii) above;
(b) dividends or distributions paid exclusively in cash as
to which an adjustment was effected pursuant to clause (iv)
below; and
(c) spin-offs as to which the provisions set
forth below in this clause (iii) apply,
then each fixed conversion rate will be increased based on the
following formula:
CR1 =
CR0
x
SP0/(SP0−FMV)
where,
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CR0
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=
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the fixed conversion rate in effect immediately prior to the
close of business on the record date for such dividend or
distribution;
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CR1
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=
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the fixed conversion rate in effect immediately after the close
of business on such record date;
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SP0
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=
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the current market price per share of our common stock as of
such record date; and
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FMV
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=
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the fair market value (as determined in good faith by our board
of directors or a duly authorized committee thereof) on the
record date for such dividend or distribution of shares of our
capital stock (other than our common stock), evidences of our
indebtedness, our assets or rights to acquire our capital stock,
our indebtedness or our assets, expressed as an amount per share
of our common stock.
|
If our board of directors or a duly authorized committee thereof
determines the FMV (as defined above) of any
dividend or other distribution for purposes of this
clause (iii) by referring to the actual or when-issued
trading market for any securities, it will in doing so consider
the prices in such market over the same period in computing the
current market price per share of our common stock as of the
record date for such dividend or other distribution.
Notwithstanding the foregoing, if FMV (as defined
above) is equal to or greater than
SP0
(as defined above), in lieu of the foregoing increase, each
holder of mandatory convertible preferred stock will receive, in
respect of each share thereof, at the same time and upon the
same terms as holders of our common stock receive the shares of
our capital stock (other than our common stock), evidences of
our indebtedness, our assets or rights to acquire our capital
stock, our indebtedness or our assets that such holder would
have received if such holder owned a number of shares of our
common stock equal to the maximum conversion rate in effect
immediately prior to the close of business on the record date
for such dividend or other distribution.
Any increase made under the portion of this clause (iii)
above will become effective immediately after the close of
business on the record date for such dividend or other
distribution. If such dividend or other distribution is not so
paid or made, each fixed conversion rate will be decreased,
effective as of the earlier of (a) the date our board of
directors or a duly authorized committee thereof determines not
to pay the dividend or other distribution and (b) the date
such dividend or distribution was to have been paid, to the
fixed conversion rate that would then be in effect if the
dividend or other distribution had not been declared.
Notwithstanding the foregoing, if the transaction that gives
rise to an adjustment pursuant to this clause (iii) is one
pursuant to which the payment of a dividend or other
distribution on our common stock
S-51
consists of shares of capital stock of, or similar equity
interests in, a subsidiary or other business unit of ours (i.e.,
a spin-off) that are, or, when issued, will be, traded on a
U.S. national securities exchange, then each fixed
conversion rate will instead be increased based on the following
formula:
CR1 =
CR0
x
(FMV0
+MP0)/MP0
where,
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CR0
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=
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the fixed conversion rate in effect at the close of business on
the tenth trading day immediately following, and including, the
date on which ex-dividend trading commences for such
dividend or distribution on the relevant exchange;
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CR1
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=
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the fixed conversion rate in effect immediately after the close
of business on the tenth trading day immediately following, and
including, the date on which ex-dividend trading
commences for such dividend or distribution on the relevant
exchange;
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FMV0
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=
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the average VWAP per share of such capital stock or similar
equity interests distributed to holders of our common stock
applicable to one share of our common stock over the 10
consecutive trading day period commencing on, and including, the
date on which ex-dividend trading commences for such
dividend or distribution on the relevant exchange; and
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MP0
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=
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the average VWAP per share of our common stock over the 10
consecutive trading day period commencing on, and including, the
date on which ex-dividend trading commences for such
dividend or distribution on the relevant exchange.
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The adjustment to each fixed conversion rate under the
immediately preceding paragraph will occur at the close of
business on the 10th consecutive trading day immediately
following, and including, the date on which ex-dividend
trading commences for such dividend or distribution on the
relevant exchange, but will be given effect as of the open of
business on the date immediately succeeding the record date for
such dividend or distribution on the relevant exchange. Because
we will make the adjustments to the fixed conversion rates at
the end of the 10 consecutive trading day period with
retroactive effect, we will delay the settlement of any
conversion of mandatory convertible preferred stock if the
conversion date occurs after the record date for such dividend
or other distribution and prior to the end of such 10
consecutive trading day period. In such event, we will deliver
the shares of common stock issuable in respect of such
conversion (based on the adjusted fixed conversion rates as
described above) on the first business day immediately following
the last trading day of such 10 consecutive trading day period.
(iv) If we pay a distribution consisting exclusively of
cash to all or substantially all holders of our common stock,
excluding (a) any regular quarterly cash dividend on our
common stock to the extent that the aggregate cash dividend per
share of common stock does not exceed $0.15 per share in any
fiscal quarter (the dividend threshold amount),
(b) any cash that is distributed as part of a distribution
referred to in clause (iii) above and as to which an
adjustment thereunder was effected and (c) any
consideration payable in connection with a tender or exchange
offer made by us or any of our subsidiaries referred to in
clause (v) below and as to which an adjustment thereunder
was effected, each fixed conversion rate will be increased based
on the following formula:
CR1 =
CR0
x
(SP0−T)/(SP0−C)
where,
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CR0
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=
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the fixed conversion rate in effect immediately prior to the
close of business on the record date for such distribution;
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CR1
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=
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the fixed conversion rate in effect immediately after the close
of business on the record date for such distribution;
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SP0
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=
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|
the current market price per share of our common stock as of the
record date for such distribution;
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T
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=
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the dividend threshold amount; provided that if the
distribution is not a regular quarterly cash dividend, the
dividend threshold amount will be deemed to be zero; and
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S-52
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C
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=
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an amount of cash per share of our common stock we distribute to
holders of our common stock.
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The dividend threshold amount is subject to adjustment on an
inversely proportional basis whenever the fixed conversion rates
are adjusted, but no adjustment will be made to the dividend
threshold amount for any adjustment made to the fixed conversion
rates pursuant to this clause (iv).
The adjustment to the fixed conversion rates pursuant to this
clause (iv) will become effective immediately after the
close of business on the record date for such distribution.
Notwithstanding the foregoing, if C (as defined
above) is equal to or greater than
SP0
(as defined above), in lieu of the foregoing increase, each
holder of mandatory convertible preferred stock will receive, in
respect of each share thereof, at the same time and upon the
same terms as holders of shares of our common stock, the amount
of cash that such holder would have received if such holder
owned a number of shares of our common stock equal to the
maximum conversion rate in effect immediately prior to the close
of business on the record date for such or distribution. If such
distribution is not so paid, the fixed conversion rates will be
decreased, effective as of the earlier of (a) the date our
board of directors or a duly authorized committee thereof
determines not to pay such dividend and (b) the date such
dividend was to have been paid, to the fixed conversion rates
that would then be in effect if such distribution had not been
declared.
(v) If we or one or more of our subsidiaries purchases our
common stock pursuant to a tender offer or exchange offer and
the cash and value of any other consideration included in the
payment per share of our common stock validly tendered or
exchanged exceeds the average VWAP per share of our common stock
over the 10 consecutive trading day period commencing on,
and including, the trading day next succeeding the last date on
which tenders or exchanges may be made pursuant to such tender
or exchange offer (the expiration date), each fixed
conversion rate will be increased based on the following formula:
CR1 =
CR0
x (FMV +
(SP1
xOS1))/(SP1
x
OS0)
where,
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CR0
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=
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the fixed conversion rate in effect immediately prior to the
close of business on the tenth trading day immediately
following, and including, the trading day next succeeding the
expiration date;
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CR1
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=
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|
the fixed conversion rate in effect immediately after the close
of business on the tenth trading day immediately following, and
including, the trading day next succeeding the expiration date;
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FMV
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=
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the fair market value (as determined in good faith by our board
of directors or a duly authorized committee thereof) as of the
expiration date of the aggregate value of all cash and any other
consideration paid or payable for shares of our common stock
validly tendered or exchanged and not withdrawn as of the
expiration date (the purchased shares);
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OS1
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=
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the number of shares of our common stock outstanding as of the
last time tenders or exchanges may be made pursuant to such
tender or exchange offer (the expiration time), less
any purchased shares;
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OS0
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=
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the number of shares of our common stock outstanding at the
expiration time, including any purchased shares; and
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SP1
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=
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|
the average VWAP per share of our common stock over the 10
consecutive trading day period commencing on, and including, the
trading day next succeeding the expiration date.
|
The adjustment to each fixed conversion rate under the
immediately preceding paragraph will occur at the close of
business on the 10th consecutive trading day immediately
following, and including, the trading day next succeeding the
expiration date, but will be given effect as of the open of
business on the expiration date. Because we will make the
adjustments to the fixed conversion rates at the end of the 10
consecutive trading day period with retroactive effect, we will
delay the settlement of any conversion of mandatory convertible
preferred stock if the conversion date occurs during such 10
consecutive trading day period. In such event, we will deliver
the shares of common stock issuable in respect of such
conversion (based on the adjusted fixed
S-53
conversion rates as described above) on the first business day
immediately following the last trading day of such 10
consecutive trading day period.
Record date means, for purpose of a
conversion rate adjustment, with respect to any dividend,
distribution or other transaction or event in which the holders
of our common stock have the right to receive any cash,
securities or other property or in which our common stock (or
other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date
fixed for determination of holders of our common stock entitled
to receive such cash, securities or other property (whether such
date is fixed by our board of directors or by statute, contract
or otherwise).
Current market price of our common stock on
any day means the average VWAP per share of our common stock for
the ten consecutive trading day period ending on the earlier of
the day in question and the day before the ex-date with respect
to the issuance or distribution requiring such computation,
appropriately adjusted to take into account the occurrence
during such period of any event described in clauses (i)
through (v) above. For purposes of the foregoing,
ex-date means the first date on which the shares of
our common stock trade on the applicable exchange or in the
applicable market, regular way, without the right to receive the
issuance or distribution in question from us or, if applicable,
from the seller of our common stock (in the form of due bills or
otherwise) as determined by such exchange or market.
If we have in effect a shareholder rights plan while any shares
of mandatory convertible preferred stock remain outstanding,
holders of mandatory convertible preferred stock will receive,
upon a conversion of mandatory convertible preferred stock, in
addition to common stock, rights under our shareholder rights
agreement unless, prior to such conversion, the rights have
expired, terminated or been redeemed or unless the rights have
separated from our common stock. If the rights provided for in
our rights plan have separated from our common stock in
accordance with the provisions of the applicable shareholder
rights agreement so that holders of mandatory convertible
preferred stock would not be entitled to receive any rights in
respect of our common stock, if any, that we are required to
deliver upon conversion of mandatory convertible preferred
stock, each fixed conversion rate will be adjusted at the time
of separation as if we had distributed to all holders of our
common stock, capital stock (other than our common stock),
evidences of our indebtedness, our assets or rights to acquire
our capital stock, our indebtedness or our assets pursuant to
paragraph (iii) above, subject to readjustment upon the
subsequent expiration, termination or redemption of the rights.
A distribution of rights pursuant to a shareholder rights plan
will not trigger a conversion rate adjustment pursuant to
paragraphs (ii) or (iii) above. We currently have a
shareholder rights plan in effect. See Description of
Apache Corporation Capital Stock Stockholder Rights
Plan in the accompanying prospectus.
No adjustment to the fixed conversion rates need be made if
holders of the mandatory convertible preferred stock participate
in the transaction that would otherwise require an adjustment
(other than in the case of a share split or share combination),
at the same time, upon the same terms and otherwise on the same
basis as holders of our common stock and solely as a result of
holding mandatory convertible preferred stock, as if such
holders held a number of shares of our common stock equal to the
maximum conversion rate as of the record date for such
transaction, multiplied by the number of shares of mandatory
convertible preferred stock held by such holders.
Notwithstanding the foregoing, if a conversion rate adjustment
becomes effective after any ex-dividend trading as
described above, and a holder that has converted its mandatory
convertible preferred stock on or after the effective date of
such conversion rate adjustment and on or prior to the related
record date would be treated as the record holder of shares of
our common stock as of the related conversion date as described
under Conversion based on an adjusted
fixed conversion rate, then, notwithstanding the foregoing
conversion rate adjustment provisions, the adjustment relating
to such effective date will not be made for such converting
holder. Instead, such holder will be treated as if such holder
were the record owner of the shares of our common stock on an
unadjusted basis and participate in the related dividend,
distribution or other event giving rise to such adjustment.
The fixed conversion rates will not be adjusted upon certain
events, including but not limited to:
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the issuance of any shares of our common stock in the Mariner
Acquisition;
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S-54
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the issuance of any shares of our common stock pursuant to any
present or future plan providing for the reinvestment of
dividends or interest payable on our securities and the
investment of additional optional amounts in our common stock
under any plan;
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the issuance of any shares of our common stock or options or
rights to purchase those shares pursuant to any present or
future employee, director or consultant benefit plan, employee
agreement or arrangement or program of ours;
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the issuance of any shares of our common stock pursuant to any
option, warrant, right, or exercisable, exchangeable or
convertible security outstanding as of the issue date (other
than a shareholder rights plan);
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payment of regular quarterly dividends not in excess of the
dividend threshold amount;
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a change solely in the par value of our common stock; and
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as a result of a tender offer solely to holders of fewer than
100 shares of our common stock.
|
No adjustment in the fixed conversion rates will be required
unless the adjustment would require an increase or decrease of
at least 1% of the fixed conversion rates. If the adjustment is
not made because the adjustment does not change the fixed
conversion rates by at least 1%, then the adjustment that is not
made will be carried forward and taken into account in any
future adjustment. All required calculations will be made to the
nearest cent or
1/10,000th of
a share. Notwithstanding the foregoing, all adjustments not
previously made shall be made upon any conversion of mandatory
convertible preferred stock.
Adjustments to the conversion rate, or failure to make certain
adjustments, may result for U.S. federal income tax
purposes in a taxable deemed distribution to the beneficial
owners of mandatory convertible preferred stock. For example, an
increase in the conversion rate to reflect a taxable dividend to
holders of common stock in excess of the dividend threshold
amount will generally give rise to a taxable constructive
dividend to the beneficial owners of mandatory convertible
preferred stock to the extent made out of current and
accumulated earnings and profits. See Certain
U.S. Federal Tax Considerations.
In addition, we may make such increases in each fixed conversion
rate as we deem advisable in order to avoid or diminish any
income tax to holders of our common stock resulting from any
dividend or distribution of our shares (or issuance of rights or
warrants to acquire our shares) or from any event treated as
such for income tax purposes or for any other reason. We may
only make such a discretionary adjustment if we make the same
proportionate adjustment to each fixed conversion rate.
We will be required, as soon as practicable after the conversion
rate is adjusted, to provide or cause to be provided written
notice of the adjustment to the holders of shares of mandatory
convertible preferred stock. We will also be required to deliver
a statement setting forth in reasonable detail the method by
which the adjustment to each fixed conversion rate was
determined and setting forth each revised fixed conversion rate.
If an adjustment is made to the fixed conversion rates, an
inversely proportional adjustment also will be made to the
threshold appreciation price and the initial price solely for
the purposes of determining which clauses of the definition of
the conversion rate will apply on the conversion date. Because
(a) the applicable market value is an average VWAP per
share of our common stock over a 10 consecutive trading day
period, and (b) the fundamental change market value is an
average VWAP per share of our common stock over a five trading
day period, we will make appropriate adjustments to the VWAP per
share prior to the relevant record date, effective date or
expiration date, as the case may be, used to calculate the
applicable market value or the fundamental change market value,
as the case may be, to account for any adjustments to the fixed
conversion rates that become effective during the period in
which the applicable market value or the fundamental change
market value, as the case may be, is being calculated.
S-55
Recapitalizations,
Reclassifications and Changes of Our Common Stock
In the event of:
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any recapitalization, reclassification or change of our common
stock (other than changes only in par value or resulting from a
subdivision or combination);
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any consolidation or merger of us with or into another person;
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any sale, transfer, lease or conveyance to another person of all
or substantially all the property and assets of us and our
subsidiaries; or
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any statutory exchange of our securities with another person
(other than in connection with a merger or acquisition), any
reclassification or any binding share exchange which
reclassifies or changes our outstanding common stock;
|
in each case, as a result of which the shares of our common
stock are exchanged for, or converted into, other securities,
property or assets (including cash or any combination thereof)
(any such event, a reorganization event), then, at
and after the effective time of such reorganization event, each
share of our mandatory convertible preferred stock outstanding
immediately prior to such reorganization event will, without the
consent of the holders of the mandatory convertible preferred
stock, become convertible into the kind and amount of such other
securities, property or assets (including cash or any
combination thereof) that holders of our common stock received
in such reorganization event (the exchange
property), and, prior to or at the effective time of such
reorganization event, we will amend our Restated Certificate of
Incorporation (or other similar organizational document) to
provide for such change in the convertibility of the mandatory
convertible preferred stock; provided that if the kind and
amount of exchange property receivable upon such reorganization
event is not the same for each share of common stock held
immediately prior to such reorganization event by a person, then
the exchange property receivable upon such reorganization event
will be deemed to be the weighted average of the types and
amounts of consideration received by the holders of our common
stock that affirmatively make an election (or of all such
holders if none makes an election). If a conversion date follows
a reorganization event, the conversion rate then in effect will
be applied on the conversion date to the amount of such exchange
property received per share of our common stock in the
reorganization event (a unit of exchange property),
as determined in accordance with this section. For the purpose
of determining which bullet of the definition of conversion rate
will apply on any such conversion date and for the purpose of
calculating the conversion rate if the second bullet in the
definition thereof is applicable, the value of a unit of
exchange property will be determined in good faith by our board
of directors or a duly authorized committee thereof, except that
if a unit of exchange property includes common stock that are
traded on a U.S. national securities exchange, the value of
such common stock will be the average VWAP for a share of such
common stock for the 10 consecutive trading day period ending
on, and including, the third scheduled trading day immediately
preceding the mandatory conversion date. For the purpose of
paying accrued and unpaid dividends in units of exchange
property as contemplated under Method of
Payment of Dividends, the value of a unit of exchange
property will equal 97% of the value determined pursuant to the
immediately preceding sentence.
The above provisions of this section will similarly apply to
successive reorganization events and the
Conversion Rate Adjustments section will
apply to any shares of our capital stock (or any
successors) received by the holders of our common stock in
any such reorganization event.
We (or any successor of us) will, as soon as reasonably
practicable (but in any event within 20 days) after the
occurrence of any reorganization event, provide written notice
to the holders of mandatory convertible preferred stock of such
occurrence of such event and of the kind and amount of the cash,
securities or other property that constitute the exchange
property. Failure to deliver such notice will not affect the
operation of this section.
S-56
In connection with any adjustment to the fixed conversion rates
described above, we will also adjust the dividend threshold
amount (as defined under Conversion Rate
Adjustments) based on the number of shares of common stock
comprising the exchange property and (if applicable) the value
of any non-stock consideration included in a unit of exchange
property. If the exchange property is comprised solely of
non-stock consideration, the dividend threshold amount will be
zero.
Miscellaneous
Upon satisfaction of the authorized share condition, we will at
all times reserve and keep available out of the authorized and
unissued common stock or shares of common stock held in treasury
by us, solely for issuance upon the conversion of the mandatory
convertible preferred stock, that number of shares of common
stock as shall from time to time be issuable upon the conversion
of all the shares of mandatory convertible preferred stock then
outstanding, which number shall not be less than the number of
shares of common stock required to satisfy the authorized share
condition.
S-57
DESCRIPTION
OF DEPOSITARY SHARES
The following is a summary of some of the terms of the
depositary shares. This summary contains a description of the
material terms of the depositary shares but is not necessarily
complete. The following summary of the terms and provisions of
the depositary shares is qualified in its entirety by reference
to the pertinent sections of the deposit agreement between us,
the depositary and holders from time to time of depositary
shares (the deposit agreement), including the
definitions of certain terms used in the deposit agreement. You
may request a copy of the deposit agreement from us as described
under Documents Incorporated by Reference in this
prospectus supplement.
General
Each depositary share represents a 1/20th interest in a
share of our mandatory convertible preferred stock and will
initially be evidenced by a global security, as defined in and
described under Book-entry, Settlement and
Clearance below. Subject to the terms of the deposit
agreement, the depositary shares will be entitled to all rights
and preferences of our mandatory convertible preferred stock in
proportion to the fraction of a share of our mandatory
convertible preferred stock those depositary shares represent.
In this section, references to holders of depositary
shares mean those who have depositary shares registered in their
own names on the books maintained by the depositary and not
indirect holders who will own beneficial interests in depositary
shares registered in the street name of, or issued in book-entry
form through, DTC prior to the conversion of our mandatory
convertible preferred stock. You should review the special
considerations that apply to indirect holders as described under
Book-entry, Settlement and Clearance
below.
Conversion
Because each depositary share represents a 1/20th interest
in a share of our mandatory convertible preferred stock, a
holder of depositary shares may elect to convert depositary
shares only in lots of 20 depositary shares, either on an early
conversion date at the minimum conversion rate
of shares
of our common stock per depositary share, subject to adjustment,
or during a fundamental change conversion period at the
fundamental change conversion rate, as described below. For a
description of the terms and conditions on which our mandatory
convertible preferred stock is convertible at the option of
holders of mandatory convertible preferred stock, see the
sections entitled Description of the Mandatory Convertible
Preferred Stock Conversion at the Option of the
Holder and Conversion Upon Fundamental
Change in this prospectus supplement.
The following table sets forth the fundamental change conversion
rate per depositary share, subject to adjustment as described in
Description of the Mandatory Convertible Preferred
Stock Conversion Upon Fundamental Change,
based on the effective date of the fundamental change and the
stock price in the fundamental change:
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Stock Price on Effective Date
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Effective Date
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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,
2010
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November 1, 2010
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February 1, 2011
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May 1, 2011
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August 1, 2011
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November 1, 2011
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February 1, 2012
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May 1, 2012
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August 1, 2012
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November 1, 2012
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February 1, 2013
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May 1, 2013
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August 1, 2013
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S-58
On any conversion date for our mandatory convertible preferred
stock, each depositary share corresponding to the shares of our
mandatory convertible preferred stock so converted will be
entitled to receive 1/20th of the shares of common stock
and any cash received by the depositary upon conversion of each
share of our mandatory convertible preferred stock. No
fractional shares of our common stock will be delivered to
holders of depositary shares. If more than one depositary share
is surrendered for conversion at one time by or for the same
holders, the number of full shares of our common stock issuable
upon conversion thereof will be calculated based on the
aggregate number of depositary shares so surrendered.
The following table illustrates the conversion rate per
depositary share, subject to adjustment as described under
Description of the Mandatory Convertible Preferred
Stock Conversion Rate Adjustments in this
prospectus supplement, based on the applicable market value of
our common stock on the mandatory conversion date:
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Applicable Market Value Per Share
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on the Mandatory Conversion Date
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Conversion Rate per Depositary Share
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Less than or equal to $
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shares
of common stock
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Greater than $ and less than
$ (the threshold appreciation
price)
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$50, divided by the applicable market value
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Equal to or greater than the threshold appreciation price
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shares
of common stock
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The depositary will deliver the shares of common stock and any
cash it receives upon conversion of our mandatory convertible
preferred stock to the holders of the depositary shares entitled
to receive such distribution in such amounts as are, as nearly
as practicable, in proportion to the number of depositary shares
surrendered by each such holder for conversion (or in the case
of automatic conversion, the number of outstanding depositary
shares held by each such holder), on the date of receipt or as
soon as practicable thereafter.
With respect to any conversion of mandatory convertible
preferred stock on a pro rata basis described under
Description of the Mandatory Convertible Preferred
Stock Mandatory Conversion, Description
of the Mandatory Convertible Preferred Stock
Conversion at the Option of the Holder or
Description of the Mandatory Convertible Preferred
Stock Conversion Upon Fundamental Change, the
depositary will select, for each converting holder, depositary
shares to be converted in such amounts as are, as nearly as
practicable, in proportion to the number of depositary shares
surrendered by each such holder for conversion (or in the case
of automatic conversion, the number of outstanding depositary
shares held by each such holder). If such conversion of
depositary shares on a pro rata basis is not practical or cannot
be implemented under DTCs then-existing procedures, the
depositary will select depositary shares to be converted (in
whole shares) by lot or by another method it considers fair and
appropriate so long as such method is not prohibited by the
rules of any stock exchange or quotation system on which the
depositary shares may then be traded or quoted.
Dividends
and Other Distributions
The depositary will deliver any cash
and/or
common stock it receives in respect of dividends on our
mandatory convertible preferred stock to the holders of the
depositary shares in such amounts as are, as nearly as
practicable, in proportion to the number of outstanding
depositary shares held by such holders, on the date of receipt
or as soon as practicable thereafter.
The dividend payable on the first dividend payment date, if
declared, is expected to be $ per
depositary share and on each subsequent dividend payment date,
if declared, is expected to be $
per depositary share.
If the holders of depositary shares would be entitled to receive
fractional shares of our common stock in connection with any
such distribution, the depositary will sell a sufficient number
of shares of our common stock, in the manner described below, to
enable it to pay such holders cash in lieu of such fractional
shares.
Record dates for the payment of dividends on the depositary
shares will be the same as the corresponding record dates for
the payment of dividends on our mandatory convertible preferred
stock.
S-59
If the depositary determines that any distribution of property
other than cash is subject to tax or other governmental charge
that the depositary is obligated by law to withhold, the
depositary may dispose of all or any portion of such property,
at a public or private sale, as the depositary deems necessary
and practicable to pay such tax or charge, and the depositary
will distribute the net proceeds of such sale or the balance of
any such property, after deduction of such tax or charge, to
holders of the depositary shares in proportion to the number of
outstanding depositary shares that they hold. If the depositary
determines, however, that any distribution of cash or other
property to certain holders (but not all holders) is subject to
withholding tax, the depositary will reduce the amount of such
cash distribution to such holders or use its best efforts to
sell only the non-cash property distributable to such holders,
as the case may be.
Voting
the Mandatory Convertible Preferred Stock
When the depositary receives notice of any meeting at which the
holders of our mandatory convertible preferred stock are
entitled to vote, the depositary will, as soon as practicable
after receiving such notice, mail the information contained in
the notice to the holders of the depositary shares. Each holder
of depositary shares on the record date, which will be the same
date as the record date for the voting of our mandatory
convertible preferred stock, may instruct the depositary to vote
the amount of our mandatory convertible preferred stock
represented by such holders depositary shares. To the
extent practicable, the depositary will vote the amount of our
mandatory convertible preferred stock represented by any
depositary shares in accordance with the voting instructions it
receives (if any) from holders of such depositary shares. If any
holder of depositary shares instructs the depositary to vote a
fractional interest of a share of our mandatory convertible
preferred stock, the depositary will aggregate such interest
with all other fractional interests with the same voting
instruction and will submit the number of whole votes resulting
from such aggregation. We will take all reasonable action that
the depositary determines is necessary to enable the depositary
to vote as instructed. If the depositary does not receive
specific instructions from the holders of any depositary shares
representing the mandatory convertible preferred stock, it will
not vote an amount of mandatory convertible preferred stock
corresponding to such depositary shares.
Withdrawal
Rights
A holder of 20 depositary shares may withdraw the share of our
mandatory convertible preferred stock corresponding to such
depositary shares, and any cash or other property represented by
such depositary shares, as long as such holder pays any tax or
governmental charge in connection with the withdrawal. Holders
of shares of our mandatory convertible preferred stock will not
have the right under the deposit agreement to deposit such
shares with the depositary in exchange for depositary shares.
Listing
We will apply to list the depositary shares on the New York
Stock Exchange, and we expect trading on the New York Stock
Exchange to begin within five days of the initial issuance
of the depositary shares. Upon listing, we have agreed to use
our reasonable best efforts to keep the depositary shares listed
on the New York Stock Exchange. Listing the depositary shares on
the New York Stock Exchange does not guarantee that a trading
market will develop or, if a trading market does develop, the
depth of that market or the ability of holders to sell their
depositary shares easily. We do not expect there will be any
public trading market for the shares of our mandatory
convertible preferred stock, except as represented by the
depositary shares.
Form and
Notices
Our mandatory convertible preferred stock will initially be
issued in registered form to the depositary, and the depositary
shares will be issued in book-entry only form through DTC, as
described under Book-entry, Settlement and
Clearance in this section. The depositary will forward to
the holders of depositary shares all reports, notices, and
communications from us that are delivered to the depositary and
that we are required to furnish to the holders of our mandatory
convertible preferred stock.
S-60
Book-entry,
Settlement and Clearance
The
Global Security
The depositary shares will be initially issued in the form of a
single registered security in global form (the global
security). Upon issuance, the global security will be
deposited with the depositary as custodian for DTC and
registered in the name of Cede & Co., as nominee of
DTC.
Ownership of beneficial interests in the global security will be
limited to persons who have accounts with DTC (DTC
participants) or persons who hold interests through DTC
participants. We expect that under procedures established by DTC:
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upon deposit of the global security with DTCs custodian,
DTC will credit portions of the global security to the accounts
of the DTC participants designated by the underwriters; and
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ownership of beneficial interests in the global security will be
shown on, and transfer of ownership of those interests will be
effected only through, records maintained by DTC (with respect
to interests of DTC participants) and the records of DTC
participants (with respect to other owners of beneficial
interests in the global security).
|
Beneficial interests in the global security may not be exchanged
for securities in physical, certificated form except in the
limited circumstances described below.
Book-entry
Procedures for the Global Security
All interests in the global security will be subject to the
operations and procedures of DTC. We provide the following
summary of those operations and procedures solely for the
convenience of investors. The operations and procedures of DTC
are controlled by that settlement system and may be changed at
any time. Neither we nor the underwriters are responsible for
those operations or procedures.
DTC has advised us that it is:
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a limited purpose trust company organized under the laws of the
State of New York;
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a banking organization within the meaning of the New
York State Banking Law;
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a member of the Federal Reserve System;
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a clearing corporation within the meaning of the
Uniform Commercial Code; and
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a clearing agency registered under Section 17A
of the Exchange Act.
|
DTC was created to hold securities for its participants and to
facilitate the clearance and settlement of securities
transactions between its participants through electronic
book-entry changes to the accounts of its participants.
DTCs participants include securities brokers and dealers,
including the underwriters; banks and trust companies; clearing
corporations and other organizations. Indirect access to
DTCs system is also available to others such as banks,
brokers, dealers and trust companies; these indirect
participants clear through or maintain a custodial relationship
with a DTC participant, either directly or indirectly. Investors
who are not DTC participants may beneficially own securities
held by or on behalf of DTC only through DTC participants or
indirect participants in DTC.
So long as DTCs nominee is the registered owner of the
global security, that nominee will be considered the sole owner
or holder of the depositary shares represented by the global
security for all purposes under the deposit agreement. Except as
provided below, owners of beneficial interests in the global
security:
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will not be entitled to have securities represented by the
global security registered in their names;
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will not receive or be entitled to receive physical,
certificated securities; and
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will not be considered the owners or holders of the securities
under the deposit agreement for any purpose, including with
respect to the giving of any direction, instruction or approval
to the depositary under the deposit agreement.
|
S-61
As a result, each investor who owns a beneficial interest in the
global security must rely on the procedures of DTC to exercise
any rights of a holder of securities under the deposit agreement
(and, if the investor is not a participant or an indirect
participant in DTC, on the procedures of the DTC participant
through which the investor owns its interest).
Payments of dividends with respect to the depositary shares
represented by the global security will be made by the
depositary to DTCs nominee as the registered holder of the
global security. Neither we nor the depositary will have any
responsibility or liability for the payment of amounts to owners
of beneficial interests in the global security, for any aspect
of the records relating to or payments made on account of those
interests by DTC, or for maintaining, supervising or reviewing
any records of DTC relating to those beneficial interests.
Payments by participants and indirect participants in DTC to the
owners of beneficial interests in the global security will be
governed by standing instructions and customary industry
practice and will be the responsibility of those participants or
indirect participants and DTC.
Transfers between participants in DTC will be effected under
DTCs procedures and will be settled in
same-day
funds.
Depositary shares in physical, certificated form will be issued
and delivered to each person that DTC identifies as a beneficial
owner of the depositary shares only if:
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DTC notifies us at any time that it is unwilling or unable to
continue as depositary for the global security and a successor
depositary is not appointed within 90 days; or
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DTC ceases to be registered as a clearing agency under the
Exchange Act and a successor depositary is not appointed within
90 days.
|
S-62
CERTAIN
U.S. FEDERAL TAX CONSEQUENCES
The following is a summary of the material U.S. federal
income tax consequences and, for
non-U.S. holders
(as defined below), certain estate tax consequences of the
ownership and disposition of depositary shares issued pursuant
to this offering and the mandatory convertible preferred stock
represented by such shares and our common stock into which such
stock may be converted. This discussion is not a complete
analysis of all of the potential U.S. federal income and
estate tax consequences relating thereto, nor does it address
any gift tax consequences or any tax consequences arising under
any state, local or foreign tax laws, or any other
U.S. federal tax laws. This discussion is based on the
Internal Revenue Code of 1986, as amended, or the Internal
Revenue Code, Treasury Regulations promulgated thereunder,
judicial decisions, and published rulings and administrative
pronouncements of the Internal Revenue Service, or IRS, all as
in effect as of the date of this offering. These authorities may
change, possibly retroactively, resulting in U.S. federal
income tax consequences different from those discussed below. No
ruling has been or will be sought from the IRS with respect to
the matters discussed below, and there can be no assurance that
the IRS will not take a contrary position regarding the tax
consequences of the ownership or disposition of depositary
shares or our mandatory convertible preferred stock or common
stock, or that any such contrary position would not be sustained
by a court.
This discussion is limited to holders who purchase the
depositary shares and our mandatory convertible preferred stock
issued pursuant to this offering and who hold the depositary
shares, our mandatory convertible preferred stock and common
stock as a capital asset within the meaning of
Section 1221 of the Internal Revenue Code (generally,
property held for investment). This discussion also does not
consider any specific tax consequences that may be relevant to
holders subject to special rules under the U.S. federal
income tax laws, including, without limitation:
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financial institutions, banks and thrifts;
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insurance companies;
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tax-exempt organizations;
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S corporations, entities classified as partnerships
for U.S. federal income tax purposes or other pass-through
entities;
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traders in securities that elect to use a mark to market method
of tax accounting;
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regulated investment companies and real estate investment trusts;
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broker-dealers or dealers in securities or currencies;
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United States expatriates;
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persons subject to the alternative minimum tax;
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persons holding the depositary shares, our mandatory convertible
preferred stock or common stock as part of a hedge, straddle, or
integrated, conversion or constructive sale transaction; or
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U.S. holders (as defined below) whose functional currency
is not the United States dollar.
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PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS
REGARDING THE PARTICULAR UNITED STATES FEDERAL TAX CONSEQUENCES
TO THEM OF ACQUIRING, OWNING AND DISPOSING OF , THE DEPOSITARY
SHARES, OUR MANDATORY CONVERTIBLE PREFERRED STOCK OR COMMON
STOCK, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE,
LOCAL OR FOREIGN TAX LAWS AND ANY OTHER UNITED STATES FEDERAL
TAX LAWS.
S-63
For purposes of this discussion, a U.S. holder
is any beneficial owner of our mandatory convertible preferred
stock or common stock who, for U.S. federal income tax
purposes, is:
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an individual citizen or resident of the United States;
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a corporation (or other entity treated as a corporation for
U.S. federal income tax purposes) created or organized in
or under the laws of the United States or of any state or in the
District of Columbia;
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an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
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a trust, if a United States court can exercise primary
supervision over the administration of the trust and one or more
United States persons have the authority to control all
substantial decisions of the trust, or if the trust has a valid
election in place to be treated as a United States person.
|
A
non-U.S. holder
is any beneficial owner of our mandatory convertible preferred
stock or common stock that is not a
U.S. holder, but does not include an individual
who is present in the United States for 183 days or more in
the calendar year of disposition and is not otherwise a resident
of the United States for U.S. federal income tax purposes.
Such an individual is urged to consult his or her own tax
advisors regarding the U.S. federal income tax consequences
of the sale, exchange or other disposition of depositary shares,
the mandatory convertible preferred stock represented by such
shares or our common stock.
If an entity that is classified as a partnership for
U.S. federal income tax purposes holds depositary shares,
the mandatory convertible preferred stock represented by such
shares or our common stock, the U.S. federal income tax
treatment of a partner of such partnership will generally depend
on the status of the partner and upon the activities of the
partnership. Partnerships holding depositary shares, the
mandatory convertible preferred stock represented by such shares
or our common stock and partners in such partnerships should
consult their own tax advisors as to the particular
U.S. federal income tax consequences of holding and
disposing of depositary shares, the mandatory convertible
preferred stock represented by such shares or our common stock.
Taxation
of U.S. Holders
Depositary Shares. For U.S. federal
income tax purposes, a U.S. holder of the depositary shares
will be treated as if it held an interest in a corresponding
portion of the underlying mandatory convertible preferred stock
and, accordingly, the exchange of depositary shares for such
stock will not be a taxable event. The discussion herein
regarding the mandatory convertible preferred stock applies
equally to holders of the depositary shares representing such
stock.
Distributions Generally. If we make cash or
other property distributions on our mandatory convertible
preferred stock or common stock, such distributions generally
will constitute dividends for U.S. federal income tax
purposes to the extent paid from our current or accumulated
earnings and profits, as determined under U.S. federal
income tax principles. Subject to customary conditions and
limitations, dividends will be eligible for the
dividends-received deduction in the case of U.S. holders
that are corporations. Dividends paid to non-corporate
U.S. holders in taxable years beginning before
January 1, 2011 generally will qualify for taxation at
special rates if such holders meet certain holding period and
other applicable requirements. It is possible that distributions
we make with respect to the mandatory convertible preferred
stock or common stock will exceed our current and accumulated
earnings and profits. Amounts not treated as dividends for
U.S. federal income tax purposes will constitute a return
of capital and will first be applied against and reduce a
U.S. holders tax basis in the mandatory convertible
preferred stock or common stock, but not below zero.
Distributions in excess of our current and accumulated earnings
and profits and in excess of a U.S. holders tax basis
in its shares will be taxable as capital gain realized on the
sale or other disposition of the mandatory convertible preferred
stock or common stock and will be treated as described under
Dispositions of Our Mandatory Convertible Preferred
Stock or Common Stock below.
If we make a distribution on our mandatory convertible preferred
stock in the form of our common stock, such distribution will be
taxable for U.S. federal income tax purposes in the same
manner as distributions described above. The amount of such
distribution and a U.S. holders tax basis in such
common stock will
S-64
equal the fair market value of such common stock on the
distribution date, and a holders holding period for such
common stock will begin on the day following the distribution
date. Because such distribution would not give rise to any cash
from which any applicable withholding tax could be satisfied, if
we pay backup withholding on behalf of a U.S. holder
(because such U.S. holder failed to establish an exemption
from backup withholding), we, or an applicable withholding
agent, may withhold such payments from shares of common stock
payable to such holder or current or subsequent payments of cash.
Extraordinary Dividends. Dividends that exceed
certain thresholds in relation to a U.S. holders tax
basis in the mandatory convertible preferred stock or common
stock could be characterized as extraordinary
dividends under the Internal Revenue Code. Any corporate
U.S. holder that has held our mandatory convertible
preferred stock or common stock for two years or less before the
dividend announcement date and that receives an extraordinary
dividend will generally be required to reduce its tax basis in
the stock with respect to which such dividend was made by the
nontaxed portion of such dividend. If the amount of the
reduction exceeds the U.S. holders tax basis in such
stock, the excess is taxable as capital gain realized on the
sale or other disposition of the mandatory convertible preferred
stock or common stock and will be treated as described under
Dispositions of Our Mandatory Convertible
Preferred Stock or Common Stock below. Any non-corporate
U.S. holder that receives an extraordinary dividend in
taxable years beginning before January 1, 2011 will be
required to treat any losses on the sale of our mandatory
convertible preferred stock or common stock as long-term capital
losses to the extent of the extraordinary dividends such
U.S. holder receives that qualify for taxation at the
special rates discussed above under
Distributions Generally.
U.S. holders should consult their own tax advisors
regarding the availability of the reduced dividend rate or the
dividends-received deduction, and the potential applicability of
the extraordinary dividend rules in light of their particular
circumstances.
Adjustments to Conversion Rate. The conversion
rate of our mandatory convertible preferred stock is subject to
adjustment under specified circumstances. In such circumstances,
a U.S. holder who holds our mandatory convertible preferred
stock may be deemed to have received a distribution if the
adjustment has the effect of increasing the holders
proportionate interest in our assets or earnings and profits. In
addition, the failure to provide for such an adjustment may also
result in a deemed distribution to U.S. holders who hold
our mandatory convertible preferred stock. Adjustments to the
conversion rate made pursuant to a bona fide reasonable
adjustment formula which has the effect of preventing the
dilution of the interest of the holders of the mandatory
convertible preferred stock generally will not be deemed to
result in a constructive distribution. Certain of the possible
adjustments (including, without limitation, adjustments in
respect of taxable dividends to our stockholders) do not qualify
as being made pursuant to a bona fide reasonable adjustment
formula. If such adjustments are made, a holder of mandatory
convertible preferred stock will be deemed to have received
constructive distributions from us, even though such holder has
not received any cash or property as a result of such
adjustments. The tax consequences of the receipt of a
distribution from us are described above under
Distributions Generally. Because
constructive distributions deemed received by a U.S. holder
would not give rise to any cash from which any applicable
withholding could be satisfied, if we pay backup withholding on
behalf of a U.S. holder (because such U.S. holder
failed to establish an exemption from backup withholding), we,
or an applicable withholding agent, may withhold any such
payment from payments of cash or shares of common stock payable
to such U.S. holder.
In addition, the failure to make certain adjustments on the
mandatory convertible preferred stock may cause a holder of our
common stock to be deemed to have received constructive
distributions from us, even though such holder has not received
any cash or property as a result of such adjustments. Such
holder would be subject to the rules discussed in the
immediately preceding paragraph.
Dispositions of Our Mandatory Convertible Preferred Stock or
Common Stock. If a U.S. holder sells or
disposes of shares of mandatory convertible preferred stock
(other than pursuant to a conversion described below) or common
stock, it generally will recognize gain or loss for
U.S. federal income tax purposes in an amount equal to the
difference between the amount of cash and the fair market value
of any property received on the sale or other disposition and
the holders adjusted basis in the shares for
U.S. federal income tax purposes. This gain or loss
generally will be long-term capital gain or loss if the holder
has held the
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mandatory convertible preferred stock or common stock for more
than one year. The deductibility of capital losses is subject to
limitations.
Conversion of Mandatory Convertible Preferred Stock Into
Common Stock. A U.S. holder generally will
not recognize gain or loss upon the conversion of our mandatory
convertible preferred stock into our common stock. However,
although not entirely clear under current law, any cash or
common stock received upon conversion in respect of dividends in
arrears on our mandatory convertible preferred stock should be
treated as described above under Distributions
Generally. For the avoidance of doubt, the term
dividends in arrears does not include accrued but
unpaid dividends paid in respect of the dividend period
containing the date of conversion. Except as provided below and
except with respect to common stock received in respect of
dividends in arrears, a U.S. holders basis and
holding period in the common stock received upon conversion
generally will be the same as those in the converted mandatory
convertible preferred stock (but the basis will be reduced by
the portion of the adjusted tax basis allocated to any
fractional share of common stock exchanged for cash and by the
portion of any dividends in arrears treated as a return of
capital (see Distributions Generally)).
Cash received upon conversion in lieu of a fractional common
share generally will be treated as a payment in a taxable
exchange for such fractional common share, and gain or loss will
be recognized on the receipt of cash in an amount equal to the
difference between the amount of cash received and the adjusted
tax basis allocable to the fractional common share deemed
exchanged. This gain or loss will be long-term capital gain or
loss if the U.S. holder has held the mandatory convertible
preferred stock for more than one year at the time of conversion.
In the event a U.S. holder converts its mandatory
convertible preferred stock and we pay, in respect of any such
conversion, cash or common stock in respect of accrued but
unpaid dividends for the then-current dividend period containing
the date of conversion, the tax treatment of the receipt of such
cash or common stock is uncertain. In the event we choose to pay
such holder cash in respect of a portion of the then-current
dividend period, although not free from doubt, we believe the
receipt of such cash should be treated as additional
consideration received by such holder upon conversion of the
mandatory convertible preferred stock into common stock and
should be taxable to the extent of any gain realized by the
U.S. holder. For this purpose, gain generally would equal
the excess, if any, of the fair market value of our common stock
received upon conversion (including any fractional common share
for which cash is received) and the cash received attributable
to a portion of the then-current dividend period over the
U.S. holders tax basis in our mandatory convertible
preferred stock immediately prior to conversion. The character
of such gain recognized (which will be the lesser of such gain
and such cash) is uncertain. If the receipt of the cash
attributable to a portion of the then-current dividend period is
considered to have the effect of a dividend (which generally
would be the case if the receipt of such cash did not result in
a meaningful reduction in such holders equity interest in
us, as determined for U.S. federal income tax purposes),
such gain (to the extent recognized) would be taxable as
dividend income, to the extent of our current and accumulated
earnings and profits. Alternatively, such gain could be capital
gain. To the extent the amount of cash received in respect of a
portion of the then-current dividend period exceeded the gain
realized by a U.S. holder, the excess amount would not be
taxable to such U.S. holder but would reduce its adjusted
tax basis in our common stock.
In the event we pay such holder common stock in respect of a
portion of the then-current dividend period, although not free
from doubt, we believe the receipt of such stock should treated
as consideration received upon conversion of the mandatory
convertible preferred stock, and should in such case be taxed as
described in the first paragraph above under the heading
Conversion of Mandatory Convertible Preferred
Stock into Common Stock.
U.S. holders should be aware that the tax treatment
described above for payments of cash or common stock made in
respect of a portion of the then-current dividend period is not
certain and may be challenged by the IRS, including on grounds
that the amount received attributable to a portion of the
then-current dividend period represents a taxable dividend to
the extent we have earnings and profits at the time of
conversion, as described above under
Distributions Generally.
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In the event a U.S. holders mandatory convertible
preferred stock is converted pursuant to certain transactions
(including our consolidation or merger into another person), the
tax treatment of such a conversion will depend upon the facts
underlying the particular transaction triggering such a
conversion. U.S. holders should consult their own tax
advisors to determine the specific tax treatment of a conversion
under such circumstances.
Because payments of common stock in respect of dividends in
arrears will not give rise to any cash from which any applicable
withholding tax could be satisfied, if we pay backup withholding
on behalf of a U.S. holder (because such U.S. holder
failed to establish an exemption from backup withholding), we,
or an applicable withholding agent, may withhold such payments
from shares of common stock payable to such holder or current or
subsequent payments of cash.
Although it is not free from doubt, any additional shares of
common stock received by you in respect of a conversion upon a
fundamental change should be treated as part of the
consideration received in the conversion. You should consult
your own tax advisors to determine the specific tax treatment of
additional shares in your particular circumstances.
Backup Withholding and Information
Reporting. We generally report to our
U.S. holders and the IRS the amount of dividends paid
during each calendar year, and the amount of any tax withheld.
Under the backup withholding rules, a U.S. holder may be
subject to backup withholding with respect to dividends paid or
the proceeds of a disposition of our mandatory convertible
preferred stock or common stock unless the holder is a
corporation or comes within certain other exempt categories and,
when required, demonstrates this fact, or provides a taxpayer
identification number, certifies as to no loss of exemption from
backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. A U.S. holder
that does not provide us with its correct taxpayer
identification number may also be subject to penalties imposed
by the IRS. Backup withholding is not an additional tax. Any
amount paid as backup withholding with respect to a
U.S. holder will be creditable against such holders
U.S. federal income tax liability, provided the required
information is furnished to the IRS.
Taxation
of Non-U.S.
Holders
Distributions Generally. Distributions that
are treated as dividends (see Taxation of
U.S. Holders Distributions Generally,
Adjustments to Conversion Rate, and Conversion
of Mandatory Convertible Preferred Stock into Common
Stock) generally will be subject to U.S. federal
withholding tax at a rate of 30% of the gross amount of the
dividends, or such lower rate specified by an applicable income
tax treaty. For withholding purposes, we expect to treat all
distributions as made out of our current or accumulated earnings
and profits. However, amounts withheld should generally be
refundable if it is subsequently determined that the
distribution was, in fact, in excess of our current and
accumulated earnings and profits. To receive the benefit of a
reduced treaty rate, a
non-U.S. holder
must furnish to us or our paying agent (i) a valid IRS
Form W-8BEN
(or applicable successor form) certifying such holders
qualification for the reduced rate or (ii), in the case of
payments made outside the United States to an offshore account
(generally, an account maintained by you at an office or branch
of a bank or other financial institution at any location outside
the United States), other documentary evidence establishing an
entitlement to the lower treaty rate in accordance with
applicable Treasury Regulations. Such certification must be
provided to us or our paying agent prior to the payment of
dividends and must be updated periodically.
Non-U.S. holders
that do not timely provide us or our paying agent with the
required certification, but that qualify for a reduced treaty
rate, may obtain a refund of any excess amounts withheld by
timely filing an appropriate claim for refund with the IRS.
If a
non-U.S. holder
holds our mandatory convertible preferred stock or common stock
in connection with the conduct of a trade or business in the
United States, and dividends paid on the mandatory convertible
preferred stock or common stock are effectively connected with
such holders United States trade or business (and, if
required by an applicable income tax treaty, are attributable to
a permanent establishment maintained by the
non-U.S. holder
in the United States), the
non-U.S. holder
will be exempt from U.S. federal withholding tax. To claim
the exemption, the
non-U.S. holder
must generally furnish to us or our paying agent a properly
executed IRS
Form W-8ECI
(or applicable successor form).
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Any dividends paid on our mandatory convertible preferred stock
or common stock that are effectively connected with a
non-U.S. holders
United States trade or business (and, if required by an
applicable income tax treaty, are attributable to a permanent
establishment maintained by the
non-U.S. holder
in the United States) generally will be subject to
U.S. federal income tax on a net income basis at the
regular graduated U.S. federal income tax rates in much the
same manner as if such holder were a resident of the United
States. A
non-U.S. holder
that is a foreign corporation also may be subject to an
additional branch profits tax equal to 30% (or such lower rate
specified by an applicable income tax treaty) of its effectively
connected earnings and profits for the taxable year, as adjusted
for certain items.
Non-U.S. holders
should consult any applicable income tax treaties that may
provide for different rules.
In general, the rules applicable to distributions to
non-U.S. holders
discussed above are also applicable to deemed distributions to
non-U.S. holders
resulting from adjustments to the conversion rate of the
mandatory convertible preferred stock or distributions on
mandatory convertible preferred stock made in our common stock.
See Taxation of U.S. Holders
Adjustments to Conversion Rate. Because deemed
distributions or distributions made in common stock would not
give rise to any cash from which any applicable withholding tax
could be satisfied, we, or an applicable withholding agent, will
withhold the U.S. federal tax on such dividend from any
cash, shares of common stock, or sales proceeds otherwise
payable to a
non-U.S. holder.
Dispositions of Our Mandatory Convertible Preferred Stock and
Common Stock. A
non-U.S. holder
generally will not be subject to U.S. federal income tax on
any gain realized upon the sale or other disposition of our
mandatory convertible preferred stock or common stock, unless:
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the gain is effectively connected with the
non-U.S. holders
conduct of a trade or business in the United States, and, if
required by an applicable income tax treaty, is attributable to
a permanent establishment maintained by the
non-U.S. holder
in the United States;
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the
non-U.S. holder
is a nonresident alien individual present in the United States
for 183 days or more during the taxable year of the
disposition, and certain other requirements are met; or
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our common stock or mandatory convertible preferred stock
constitutes a United States real property interest,
or USRPI, by reason of our status as a United States real
property holding corporation, or USRPHC, within the meaning of
the Foreign Investment in Real Property Tax Act, or
FIRPTA, for U.S. federal income tax purposes at any time
within the shorter of the five-year period preceding the
disposition or the
non-U.S. holders
holding period for our common stock or mandatory convertible
preferred stock.
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Gain described in the first bullet point above will be subject
to U.S. federal income tax on a net income basis at the
regular graduated U.S. federal income tax rates in much the
same manner as if such holder were a resident of the United
States. A
non-U.S. holder
that is a foreign corporation also may be subject to an
additional branch profits tax equal to 30% (or such lower rate
specified by an applicable income tax treaty) of its effectively
connected earnings and profits for the taxable year, as adjusted
for certain items.
Non-U.S. holders
should consult any applicable income tax treaties that may
provide for different rules.
An individual
non-U.S. holder
described in the second bullet point above will only be subject
to U.S. federal income tax on the gain from the sale of our
common stock to the extent such gain is deemed to be from
U.S. sources, which will generally only be the case where
the individuals tax home is in the United States. An
individuals tax home is generally considered to be located
at the individuals regular or principal (if more than one
regular) place of business. If the individual has no regular or
principal place of business because of the nature of the
business, or because the individual is not engaged in carrying
on any trade or business, then the individuals tax home is
his regular place of abode. If an individual
non-U.S. holder
is described in the second bullet point above, and the
individual
non-U.S. holders
tax home is in the United States, then the
non-U.S. holder
may be subject to a flat 30% tax on the gain derived from the
disposition, which gain may be offset by
U.S.-source
capital losses.
With respect to the third bullet point above, we believe we are,
or may become, a USRPHC for U.S. federal income tax
purposes. Even if we are or become a USRPHC, gain arising from
the sale or other taxable disposition by a
non-U.S. holder
of our common stock or mandatory convertible preferred stock
will
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not be subject to tax under FIRPTA as a sale of a USRPI if such
class of stock is regularly traded, as defined by
applicable Treasury Regulations, on an established securities
market, and such
non-U.S. holder
owned, actually and constructively, 5% or less of such class of
our stock throughout the shorter of the five-year period ending
on the date of the sale or exchange or the
non-U.S. holders
holding period for such stock. Our common stock currently is
regularly traded on an established securities
market, although we cannot guarantee that it will be so traded
in the future. Although not free from doubt, we anticipate that
our mandatory convertible preferred stock will be
regularly traded on an established securities
market. However, even if our mandatory convertible preferred
stock is not so traded, gain arising from the sale or other
taxable disposition of such stock by a
non-U.S. holder
will not be subject to U.S. federal income taxation as a
sale of a USRPI, if our common stock is part of a class of stock
that is regularly traded on an established
securities market and the
non-U.S. holder
does not acquire mandatory convertible preferred stock that
causes the fair market value of mandatory convertible preferred
stock owned by such
non-U.S. holder
on the date of such acquisition to be greater than the fair
market value of 5% of our common stock. If gain on the sale or
other taxable disposition of our stock by a
non-U.S. holder
were subject to taxation under FIRPTA, such gain would be taken
into account as if the
non-U.S. holder
were engaged in a trade or business within the United States
during the taxable year and as if such gain were effectively
connected with such trade or business, as discussed above.
Conversion of Mandatory Convertible Preferred Stock into
Common Stock. Except as provided below, and
assuming the mandatory convertible preferred stock is not
treated as a USRPI on the date of conversion, a
non-U.S. holder
generally will not recognize gain or loss upon the conversion of
such mandatory convertible preferred stock into our common
stock. If, with respect to a
non-U.S. holder,
the mandatory convertible preferred stock is treated as a USRPI,
then, except as provided below, such holder generally will not
recognize gain or loss upon conversion of such mandatory
convertible preferred stock into our common stock, provided the
common stock constitutes a USRPI and such holder complies with
certain reporting requirements in the Treasury Regulations. Cash
received upon conversion in lieu of a fractional common share
generally will be treated as a payment in a taxable exchange for
such fractional common share. See Dispositions
of Our Mandatory Convertible Preferred Stock and Common
Stock. Cash or common stock received in respect of
dividends in arrears on our mandatory convertible preferred
stock should be treated in the manner described above under
Taxation of U.S. Holders Conversion of
Mandatory Convertible Preferred Stock into Common Stock,
and we intend to withhold tax from such amounts, as described
above under Distributions Generally. A
non-U.S. holder
may recognize capital gain or dividend income when the holder
receives cash attributable to a portion of the then-current
dividend period, as described above under Taxation of
U.S. Holders Conversion of Mandatory
Convertible Preferred Stock into Common Stock. The tax
treatment of such amount is uncertain, and we intend to withhold
30% of such amount as described under
Distributions Generally.
Although it is not free from doubt, any additional shares of
common stock received by you in respect of a conversion upon a
fundamental change should be treated as part of the
consideration received in the conversion. You should consult
your own tax advisors to determine the specific tax treatment of
additional shares in your particular circumstances.
U.S. Federal Estate Taxes. Our mandatory
convertible preferred stock and common stock held by a
non-U.S. holder,
or entity the property of which is potentially includible in
such a holders gross estate for U.S. federal estate
tax purposes (for example, a trust funded by such holder and
with respect to which the holder has retained certain interests
or powers), at the time of death generally will be included in
the holders gross estate for U.S. federal estate tax
purposes, unless an applicable estate tax treaty provides
otherwise.
Backup Withholding and Information
Reporting. We must report annually to the IRS and
to each
non-U.S. holder
the amount of distributions on our mandatory convertible
preferred stock or common stock paid to such holder and the
amount of any tax withheld with respect to those distributions.
These information reporting requirements apply even if no
withholding was required because the distributions were
effectively connected with the
non-U.S. holders
conduct of a United States trade or business, or withholding was
reduced or eliminated by an applicable income tax treaty. This
information also may be made available under a specific treaty
or agreement with the tax authorities in the country in which
the
non-U.S. holder
resides or is
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established. Backup withholding, however, generally will not
apply to distribution payments to a
non-U.S. holder
of our mandatory convertible preferred stock or common stock or
the proceeds of a disposition of our mandatory convertible
preferred stock or common stock, provided the
non-U.S. holder
furnishes to us or our paying agent the required certification
as to its
non-U.S. status,
such as by providing a valid IRS
Form W-8BEN
or IRS
Form W-8ECI,
or certain other requirements are met. Notwithstanding the
foregoing, backup withholding may apply if either we or our
paying agent has actual knowledge, or reason to know, that the
holder is a U.S. person that is not an exempt recipient.
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules may be allowed as a
refund or a credit against a
non-U.S. holders
U.S. federal income tax liability, provided the required
information is timely furnished to the IRS.
Legislation
Affecting Taxation of Common Stock Held By or Through Foreign
Entities.
Legislation was enacted on March 18, 2010 that will,
effective for payments made after December 31, 2012, impose
a 30% U.S. withholding tax on dividends paid by
U.S. issuers and on the gross proceeds from the disposition
of certain stock paid to a foreign financial institution, unless
such institution enters into an agreement with the
U.S. Treasury to collect and provide to the
U.S. Treasury substantial information regarding
U.S. account holders, including certain account holders
that are foreign entities with U.S. owners, with such
institution. The legislation also generally imposes a
withholding tax of 30% on dividends paid by U.S. issuers
and on the gross proceeds from the disposition of certain stock
paid to a non-financial foreign entity unless such entity
provides the withholding agent with a certification that it does
not have any substantial U.S. owners or a certification
identifying the direct and indirect substantial U.S. owners
of the entity. Under certain circumstances, a holder may be
eligible for refunds or credits of such taxes. Investors are
urged to consult with their own tax advisors regarding the
possible implications of this recently enacted legislation on
their investment in the mandatory convertible preferred stock.
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UNDERWRITING
Goldman, Sachs & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Citigroup Global Markets
Inc. and J.P. Morgan Securities Inc. are acting as joint
book-running managers and underwriters, and are each a
representative. Subject to the terms and conditions set forth in
an underwriting agreement among us and the underwriters, we have
agreed to sell to the underwriters, and each of the underwriters
has agreed, severally and not jointly, to purchase from us, the
number of depositary shares set forth opposite its name below.
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Number of
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Underwriter
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Depositary Shares
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Goldman, Sachs & Co.
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated
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Citigroup Global Markets Inc.
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J.P. Morgan Securities Inc.
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Total
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22,000,000
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Subject to the terms and conditions set forth in the
underwriting agreement, the underwriters have agreed, severally
and not jointly, to purchase all of the depositary shares sold
under the underwriting agreement if any of the depositary shares
are purchased. If an underwriter defaults, the underwriting
agreement provides that the purchase commitments of the
nondefaulting underwriters may be increased or the underwriting
agreement may be terminated.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or
to contribute to payments the underwriters may be required to
make in respect of those liabilities.
The underwriters are offering the depositary shares, subject to
prior sale, when, as and if issued to and accepted by them,
subject to approval of legal matters by their counsel, including
the validity of the depositary shares, and other conditions
contained in the underwriting agreement, such as the receipt by
the underwriters of officers certificates and legal
opinions. The underwriters reserve the right to withdraw, cancel
or modify offers to the public and to reject orders in whole or
in part.
Commissions
and Discounts
The representatives have advised us that the underwriters
propose initially to offer the depositary shares to the public
at the public offering price set forth on the cover page of this
prospectus supplement. After the initial offering, the public
offering price, concession or any other term of the offering may
be changed.
The following table shows the public offering price,
underwriting discount and proceeds before expenses to us. The
information assumes either no exercise or full exercise by the
underwriters of their option to purchase additional depositary
shares.
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Per
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Depositary Share
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Without Option
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With Option
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Public offering price
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$
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$
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$
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Underwriting discount
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$
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$
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$
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Proceeds, before expenses, to us
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$
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$
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$
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The expenses of the offering, not including the underwriting
discount, are estimated to be $
and are payable by us.
Option to
Purchase Additional Depositary Shares
We have granted an option to the underwriters to purchase up to
3,300,000 additional depositary shares at the public offering
price, less the underwriting discount. The underwriters may
exercise this option for 30 days from the date of this
prospectus supplement. If the underwriters exercise this option,
each will be obligated,
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subject to conditions contained in the underwriting agreement,
to purchase a number of additional depositary shares
proportionate to that underwriters initial amount
reflected in the above table.
No Sales
of Similar Securities
We, our executive officers and our directors have agreed not to
sell or transfer any common stock or securities convertible
into, exchangeable for, exercisable for, or repayable with
common stock, for 90 days after the date of this prospectus
supplement without first obtaining the written consent of the
representatives. Specifically, we and these other persons have
agreed, with certain limited exceptions, not to directly or
indirectly
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offer, pledge, sell or contract to sell any common stock,
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sell any option or contract to purchase any common stock,
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purchase any option or contract to sell any common stock,
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grant any option, right or warrant for the sale of any common
stock,
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otherwise dispose of or transfer any common stock,
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request or demand that we file a registration statement related
to the common stock, or
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enter into any swap or other agreement that transfers, in whole
or in part, the economic consequence of ownership of any common
stock whether any such swap or transaction is to be settled by
delivery of shares or other securities, in cash or otherwise.
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This lock-up
provision applies to common stock and to securities convertible
into or exchangeable or exercisable for or repayable with common
stock (the
lock-up
securities). It also applies to common stock owned now or
acquired later by the person executing the agreement or for
which the person executing the agreement later acquires the
power of disposition. With respect to us, this
lock-up
provision does not apply to
lock-up
securities
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sold pursuant to this prospectus supplement,
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issued upon the exercise of an option or warrant or the
conversion of a security outstanding on the date of this
prospectus supplement and referred to herein,
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issued or options to purchase common stock granted under our
existing employee benefit plans,
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issued pursuant to our non-employee director stock plans or
dividend reinvestment plans,
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issued in our concurrent offering of common stock described
herein, or
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issuable in connection with the Mariner Acquisition, provided
that the Mariner Acquisition is consummated substantially in
accordance with the terms of the Mariner Merger Agreement and
the disclosure related thereto.
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With respect to our executive officers and directors, this
lock-up
provision does not apply to transactions relating to
lock-up
securities or other securities acquired in open market
transactions after the date of this prospectus supplement, as
long as no filing under Section 16(a) of the Exchange Act
shall be required or voluntarily made in connection with
subsequent sales of
lock-up
securities or other securities acquired in such open market
transactions, other than a filing made after the expiration of
the restricted period. In addition, this
lock-up
provision does not apply to transfers made by an executive
officer or director as a bona fide gift or to certain other
transfers, including transfers to a trust for the direct or
indirect benefit of such executive officer or director or his or
her immediate family, provided that the recipients agree to be
bound by the restrictions described in this paragraph and no
filing under Section 16(a) of the Exchange Act shall be
required or voluntarily made in connection therewith during the
restricted period.
In the event that either (x) during the last 17 days
of the
lock-up
period referred to above, we issue an earnings release or
material news or a material event relating to us occurs or
(y) prior to the expiration of the
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lock-up
period, we announce that we will release earnings results or
become aware that material news or a material event will occur
during the
16-day
period beginning on the last day of the
lock-up
period, the restrictions described above shall continue to apply
until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event, unless the
representatives waive such extension.
Expected
New York Stock Exchange Listing
We expect trading of the depositary shares on the New York Stock
Exchange to commence within five days of the date of
initial issuance of the depositary shares. Prior to this
offering, there has been no public market for the depositary
shares.
Price
Stabilization, Short Positions
Until the distribution of the depositary shares is completed,
SEC rules may limit underwriters and selling group members from
bidding for and purchasing our depositary shares. However, the
representatives may engage in transactions that stabilize the
price of the depositary shares, such as bids or purchases to
peg, fix or maintain that price.
In connection with the offering, the underwriters may purchase
and sell our depositary shares in the open market. These
transactions may include short sales, purchases on the open
market to cover positions created by short sales and stabilizing
transactions. Short sales involve the sale by the underwriters
of a greater number of depositary shares than they are required
to purchase in the offering. Covered short sales are
sales made in an amount not greater than the underwriters
option to purchase additional depositary shares described above.
The underwriters may close out any covered short position by
either exercising their option or purchasing depositary shares
in the open market. In determining the source of depositary
shares to close out the covered short position, the underwriters
will consider, among other things, the price of depositary
shares available for purchase in the open market as compared to
the price at which they may purchase depositary shares through
such option. Naked short sales are sales in excess
of the underwriters option to purchase additional
depositary shares. The underwriters must close out any naked
short position by purchasing depositary shares in the open
market. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of our depositary shares in the open
market after pricing that could adversely affect investors who
purchase in the offering. Stabilizing transactions consist of
various bids for or purchases of depositary shares made by the
underwriters in the open market prior to the completion of the
offering.
Similar to other purchase transactions, the underwriters
purchases to cover the syndicate short sales may have the effect
of raising or maintaining the market price of our depositary
shares or preventing or retarding a decline in the market price
of our depositary shares. As a result, the price of our
depositary shares may be higher than the price that might
otherwise exist in the open market. The underwriters may conduct
these transactions on the New York Stock Exchange, in the
over-the-counter
market or otherwise.
Neither we nor any of the underwriters make any representation
or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of
our depositary shares. In addition, neither we nor any of the
underwriters make any representation that the representatives
will engage in these transactions or that these transactions,
once commenced, will not be discontinued without notice.
Electronic
Offer, Sale and Distribution of Depositary Shares
In connection with the offering, certain of the underwriters or
securities dealers may distribute prospectuses by electronic
means, such as
e-mail. In
addition, the representatives may facilitate Internet
distribution for this offering to certain of their Internet
subscription customers. The representatives may allocate a
limited number of depositary shares for sale to their online
brokerage customers. An electronic prospectus is available on
the Internet web sites maintained by the representatives. Other
than the prospectus in electronic format, the information on the
representatives web sites is not part of this prospectus
or the
S-73
registration statement of which this prospectus is a part, has
not been approved
and/or
endorsed by us or any underwriter or selling group member in its
capacity as underwriter or selling group member and should not
be relied upon by investors.
Other
Relationships
The underwriters and their respective affiliates are full
service financial institutions engaged in various activities,
which may include securities trading, commercial and investment
banking, financial advisory, investment management, investment
research, principal investment, hedging, financing and brokerage
activities. Some of the underwriters and their affiliates have
engaged in, and may in the future engage in, investment banking,
commercial banking services and other commercial dealings in the
ordinary course of business with us or our affiliates.
Furthermore, they have received, or may in the future receive,
customary fees and commissions for these transactions. In
particular, affiliates of each of the representatives are
lenders
and/or
agents under our credit facilities and the Bridge Facility, for
which they received or will receive customary fees and expenses.
Furthermore, each of the representatives and/or their respective
affiliates are providing financial advisory services in
connection with the BP Acquisition. Goldman, Sachs &
Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Citigroup Global Markets Inc. and J.P. Morgan
Securities Inc. will also act as underwriters in our concurrent
offering of common stock described herein.
In the ordinary course of their various business activities, the
underwriters and their respective affiliates may make or hold a
broad array of investments and actively trade debt and equity
securities (or related derivative securities) and financial
instruments (including bank loans) for their own account and for
the accounts of their customers, and such investment and
securities activities may involve securities
and/or
instruments of the issuer. The underwriters and their respective
affiliates may also make investment recommendations
and/or
publish or express independent research views in respect of such
securities or instruments and may at any time hold, or recommend
to clients that they acquire, long
and/or short
positions in such securities and instruments.
Notice to
Prospective Investors in the EEA
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a
Relevant Member State) an offer to the public of any
depositary shares which are the subject of the offering
contemplated by this prospectus supplement may not be made in
that Relevant Member State in accordance with the Prospectus
Directive as implemented in that Relevant Member State except
that an offer to the public in that Relevant Member State of any
depositary shares may be made at any time under the following
exemptions under the Prospectus Directive, if they have been
implemented in that Relevant Member State:
(a) to legal entities which are authorised or regulated to
operate in the financial markets or, if not so authorised or
regulated, whose corporate purpose is solely to invest in
securities;
(b) to any legal entity which has two or more of
(1) an average of at least 250 employees during the
last financial year; (2) a total balance sheet of more than
43,000,000 and (3) an annual net turnover of more
than 50,000,000, as shown in its last annual or
consolidated accounts;
(c) by the underwriters to fewer than 100 natural or legal
persons (other than qualified investors as defined in the
Prospectus Directive) subject to obtaining the prior consent of
the representatives for any such offer; or
(d) in any other circumstances falling within
Article 3(2) of the Prospectus Directive,
provided that no such offer of depositary shares shall result in
a requirement for the publication by Apache or any underwriter
of a prospectus pursuant to Article 3 of the Prospectus
Directive.
Any person making or intending to make any offer of depositary
shares within the EEA should only do so in circumstances in
which no obligation arises for us or any of the underwriters to
produce a prospectus for
S-74
such offer. Neither we nor the underwriters have authorized, nor
do they authorize, the making of any offer of depositary shares
through any financial intermediary, other than offers made by
the underwriters which constitute the final offering of
depositary shares contemplated in this prospectus supplement.
For the purposes of this provision, the expression an
offer to the public in relation to any depositary
shares in any Relevant Member State means the communication in
any form and by any means of sufficient information on the terms
of the offer and any depositary shares to be offered so as to
enable an investor to decide to purchase any depositary shares,
as the same may be varied in that Member State by any measure
implementing the Prospectus Directive in that Member State and
the expression Prospectus Directive means Directive
2003/71/EC and includes any relevant implementing measure in
each Relevant Member State.
Each person in a Relevant Member State who receives any
communication in respect of, or who acquires any depositary
shares under, the offer of depositary shares contemplated by
this prospectus supplement will be deemed to have represented,
warranted and agreed to and with us and each underwriter that:
(A) it is a qualified investor within the
meaning of the law in that Relevant Member State implementing
Article 2(1)(e) of the Prospectus Directive; and
(B) in the case of any depositary shares acquired by it as
a financial intermediary, as that term is used in
Article 3(2) of the Prospectus Directive, (i) the
depositary shares acquired by it in the offering have not been
acquired on behalf of, nor have they been acquired with a view
to their offer or resale to, persons in any Relevant Member
State other than qualified investors (as defined in
the Prospectus Directive), or in circumstances in which the
prior consent of the representatives has been given to the offer
or resale; or (ii) where depositary shares have been
acquired by it on behalf of persons in any Relevant Member State
other than qualified investors, the offer of those depositary
shares to it is not treated under the Prospectus Directive as
having been made to such persons.
In addition, in the United Kingdom, this document is being
distributed only to, and is directed only at, and any offer
subsequently made may only be directed at persons who are
qualified investors (as defined in the Prospectus
Directive) (i) who have professional experience in matters
relating to investments falling within Article 19
(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005, as amended (the
Order)
and/or
(ii) who are high net worth companies (or persons to whom
it may otherwise be lawfully communicated) falling within
Article 49(2)(a) to (d) of the Order (all such persons
together being referred to as relevant persons).
This document must not be acted on or relied on in the United
Kingdom by persons who are not relevant persons. In the United
Kingdom, any investment or investment activity to which this
document relates is only available to, and will be engaged in
with, relevant persons.
Notice to
Prospective Investors in Switzerland
This document as well as any other material relating to the
depositary shares which are the subject of the offering
contemplated by this prospectus supplement does not constitute
an issue prospectus pursuant to Articles 652a
and/or 1156
of the Swiss Code of Obligations. The depositary shares will not
be listed on the SIX Swiss Exchange and, therefore, the
documents relating to the depositary shares, including, but not
limited to, this document, do not claim to comply with the
disclosure standards of the listing rules of the SIX Swiss
Exchange and corresponding prospectus schemes annexed to the
listing rules of the SIX Swiss Exchange. The depositary shares
are being offered in Switzerland by way of a private placement,
i.e. to a small number of selected investors only, without any
public offer and only to investors who do not purchase the
depositary shares with the intention to distribute them to the
public. The investors will be individually approached by the
Issuer from time to time. This document as well as any other
material relating to the depositary shares is personal and
confidential and does not constitute an offer to any other
person. This document may only be used by those investors to
whom it has been handed out in connection with the offering
described herein and may neither directly nor indirectly be
distributed or made available to other persons without express
consent of the Issuer. It may not be used in connection with any
other offer and shall in particular not be copied
and/or
distributed to the public in (or from) Switzerland.
S-75
Notice to
Prospective Investors in the Dubai International Financial
Centre
This prospectus relates to an Exempt Offer in accordance with
the Offered Securities Rules of the Dubai Financial Services
Authority (DFSA). This prospectus is intended for
distribution only to persons of a type specified in the Offered
Securities Rules of the DFSA. It must not be delivered to, or
relied on by, any other person. The DFSA has no responsibility
for reviewing or verifying any documents in connection with
Exempt Offers. The DFSA has not approved this prospectus nor
taken steps to verify the information set forth herein and has
no responsibility for the prospectus. The depositary shares to
which this prospectus relates may be illiquid
and/or
subject to restrictions on their resale. Prospective purchasers
of the depositary shares offered should conduct their own due
diligence on the depositary shares. If you do not understand the
contents of this prospectus you should consult an authorized
financial advisor.
Notice to
Prospective Investors in Hong Kong
This prospectus has not been approved by or registered with the
Securities and Futures Commission of Hong Kong or the
Registrar of Companies of Hong Kong. The depositary shares will
not be offered or sold in Hong Kong other than (a) to
professional investors as defined in the Securities
and Futures Ordinance (Cap. 571) of Hong Kong and any rules
made under that Ordinance; or (b) in other circumstances
which do not result in the document being a
prospectus as defined in the Companies Ordinance
(Cap. 32) of Hong Kong or which do not constitute an offer
to the public within the meaning of that Ordinance. No
advertisement, invitation or document relating to the depositary
shares which is directed at, or the contents of which are likely
to be accessed or read by, the public of Hong Kong (except if
permitted to do so under the securities laws of Hong Kong) has
been issued or will be issued in Hong Kong or elsewhere other
than with respect to depositary shares which are or are intended
to be disposed of only to persons outside Hong Kong or only to
professional investors as defined in the Securities
and Futures Ordinance and any rules made under that Ordinance.
Notice to
Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the
Monetary Authority of Singapore. Accordingly, this prospectus
and any other document or material in connection with the offer
or sale, or invitation for subscription or purchase, of the
depositary shares may not be circulated or distributed, nor may
the depositary shares be offered or sold, or be made the subject
of an invitation for subscription or purchase, whether directly
or indirectly, to persons in Singapore other than (i) to an
institutional investor under Section 274 of the Securities
and Futures Act (Chapter 289) (the SFA),
(ii) to a relevant person, or any person pursuant to
Section 275(1A), and in accordance with the conditions,
specified in Section 275 of the SFA or (iii) otherwise
pursuant to, and in accordance with the conditions of, any other
applicable provision of the SFA. Where the depositary shares are
subscribed or purchased under Section 275 by a relevant
person which is: (a) a corporation (which is not an
accredited investor) the sole business of which is to hold
investments and the entire share capital of which is owned by
one or more individuals, each of whom is an accredited investor;
or (b) a trust (where the trustee is not an accredited
investor) whose sole purpose is to hold investments and each
beneficiary is an accredited investor, then shares, debentures
and units of shares and debentures of that corporation or the
beneficiaries rights and interest in that trust shall not
be transferable for 6 months after that corporation or that
trust has acquired the depositary shares under Section 275
except: (i) to an institutional investor under
Section 274 of the SFA or to a relevant person, or any
person pursuant to Section 275(1A), and in accordance with
the conditions, specified in Section 275 of the SFA;
(ii) where no consideration is given for the transfer; or
(iii) by operation of law.
Notice to
Prospective Investors in Japan
The depositary shares have not been and will not be registered
under the Financial Instruments and Exchange Law of Japan (Law
No. 25 of 1948, as amended) and, accordingly, will not be
offered or sold, directly or indirectly, in Japan, or for the
benefit of any Japanese Person or to others for re-offering or
resale, directly or indirectly, in Japan or to any Japanese
Person, except in compliance with all applicable laws,
regulations and ministerial guidelines promulgated by relevant
Japanese governmental or regulatory authorities
S-76
in effect at the relevant time. For the purposes of this
paragraph, Japanese Person shall mean any person
resident in Japan, including any corporation or other entity
organized under the laws of Japan.
VALIDITY
OF THE SECURITIES
The validity of the securities we are offering will be passed
upon for us by Bracewell & Giuliani LLP, Houston,
Texas. Certain legal matters with respect to the securities
offered hereby will be passed upon for the underwriters by Davis
Polk & Wardwell LLP, New York, New York.
EXPERTS
Our consolidated financial statements appearing in our Annual
Report on
Form 10-K
for the year ended December 31, 2009, and the effectiveness
of our internal control over financial reporting as of
December 31, 2009, have been audited by Ernst &
Young LLP, independent registered public accounting firm, as set
forth in their reports thereon included therein, and
incorporated herein by reference. Such financial statements are,
and audited financial statements to be included in subsequently
filed documents will be, incorporated herein in reliance upon
the reports of Ernst & Young LLP pertaining to such
financial statements and the effectiveness of our internal
control over financial reporting as of the respective dates (to
the extent covered by consents filed with the Securities and
Exchange Commission) given on the authority of such firm as
experts in accounting and auditing.
The information appearing in our Annual Report on
Form 10-K
for the year ended December 31, 2009, regarding our total
proved reserves was prepared by Apache and reviewed by Ryder
Scott Company Petroleum Engineers, as stated in their letter
reports thereon included therein, and is incorporated by
reference into this prospectus supplement in reliance upon the
authority of such firm as experts in such matters.
S-77
PROSPECTUS
APACHE CORPORATION
APACHE FINANCE PTY
LTD
APACHE FINANCE AUSTRALIA PTY
LTD
APACHE FINANCE CANADA
CORPORATION
APACHE FINANCE CANADA II
CORPORATION
The descriptions of the securities contained in this prospectus,
together with the applicable prospectus supplements, summarize
all the material terms and provisions of the various types of
securities that Apache, Apache Finance, Apache Australia, Apache
Canada
and/or
Apache Canada II may offer. The particular terms of the
securities offered by any prospectus supplement will be
described in that prospectus supplement. If indicated in an
applicable prospectus supplement, the terms of the securities
may differ from the terms summarized below. An applicable
prospectus supplement will also contain information, where
applicable, about material U.S. federal income tax
considerations relating to the securities, and the securities
exchange, if any, on which the securities will be listed.
Apache may sell from time to time, in one or more offerings:
common stock and related rights;
preferred stock;
depositary shares;
common stock purchase contracts;
common stock purchase units;
senior debt securities; and/or
subordinated debt securities.
Each of Apache Finance, Apache Australia, Apache Canada and
Apache Canada II may from time to time offer its senior or
subordinated debt securities. Each of these securities may be
guaranteed by us as described below.
In this prospectus, securities collectively refers
to the securities described above.
Apaches common stock is listed for trading on the New York
Stock Exchange, the Nasdaq Global Select Market and the Chicago
Stock Exchange under the symbol APA.
We may sell securities to or through underwriters, dealers or
agents. For additional information on the method of sale, you
should refer to the section entitled Plan of
Distribution. The names of any underwriters, dealers or
agents involved in the sale of any securities and the specific
manner in which they may be offered will be set forth in the
prospectus supplement covering the sale of those securities.
This prospectus may not be used to sell securities unless it is
accompanied by a prospectus supplement.
Investing in these securities involves certain risks. For a
discussion of the factors you should carefully consider before
deciding to purchase these securities, please read Risk
Factors in our most recently-filed Annual Report on
Form 10-K
and our most recently-filed Quarterly Report on
Form 10-Q,
as well as those that may be included in the applicable
prospectus supplement and other information included and
incorporated by reference in this prospectus. Also, please read
Cautionary Statement Regarding Forward-Looking
Statements beginning on page ii of this prospectus.
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.
The date of this prospectus is December 2, 2008
TABLE OF
CONTENTS
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ABOUT
THIS PROSPECTUS
You should rely only on the information provided in or
incorporated by reference in this prospectus, any prospectus
supplement, or documents to which we otherwise refer you. We
have not authorized anyone else to provide you with different
information. We are not making an offer of any securities in any
jurisdiction 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 the document in which such
information is contained or such other date referred to in such
document, regardless of the time of any sale or issuance of a
security.
This prospectus is part of a registration statement that we have
filed with the Securities and Exchange Commission, or SEC,
utilizing a shelf registration process. Under this
shelf process, we may sell different types of securities
described in this prospectus in one or more offerings. This
prospectus provides you with a general description of the
securities we may offer. Each time we sell securities, we will
provide a prospectus supplement that will contain specific
information about the terms of that offering and the securities
offered by us in that offering. The prospectus supplement may
also add, update or change information in this prospectus. You
should read both this prospectus and any prospectus supplement
together with additional information described under the
headings Where You Can Find More Information and
Incorporation by Reference.
This prospectus contains summaries of certain provisions
contained in some of the documents described herein, but
reference is made to the actual documents for complete
information. All of the summaries are qualified in their
entirety by reference to the actual documents. Copies of some of
the documents referred to herein have been filed or will be
filed or incorporated by reference as exhibits to the
registration statement of which this prospectus is a part, and
you may obtain copies of those documents as described below in
the section entitled Where You Can Find More
Information.
i
In this prospectus, references to Apache,
we, us and our mean Apache
Corporation and its consolidated subsidiaries, unless otherwise
noted. References to Apache Finance mean Apache
Finance Pty Ltd. References to Apache Australia mean
Apache Finance Australia Pty Ltd. References to Apache
Canada mean Apache Finance Canada Corporation and
references to Apache Canada II mean Apache
Finance Canada II Corporation.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference in
this prospectus contain statements that constitute forward
looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934.
These statements relate to future events or our future financial
performance, which involve known and unknown risks,
uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be
materially different from those expressed or implied by any
forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as
expect, anticipate,
estimate, intend, may,
will, could, would,
should, predict, potential,
plan, believe or the negative of these
terms or similar terminology.
These statements are only predictions. Actual events or results
may differ materially because of market conditions in our
markets or other factors. Moreover, we do not, nor does any
other person, assume responsibility for the accuracy and
completeness of those statements. Unless otherwise required by
applicable securities laws, we disclaim any intention or
obligation to update any of the forward-looking statements after
the date of this prospectus. All of the forward-looking
statements are qualified in their entirety by reference to the
factors discussed under the captions Risk Factors,
Managements Discussion and Analysis of Results of
Operations and Financial Condition in our annual report on
Form 10-K
for the fiscal year ended December 31, 2007 (incorporated
by reference in this prospectus) and similar sections in our
subsequent filings that we incorporated by reference in this
prospectus, which describe risks and factors that could cause
results to differ materially from those projected in those
forward-looking statements.
Those risk factors may not be exhaustive. We operate in a
continually changing business environment, and new risk factors
emerge from time to time. We cannot predict these new risk
factors, nor can we assess the impact, if any, of these new risk
factors on our businesses or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those projected in any forward-looking
statements. Accordingly, forward-looking statements should not
be relied upon as a prediction of actual results.
Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 are not
applicable to any of the issuers other than Apache.
WHERE YOU
CAN FIND MORE INFORMATION
We have filed a registration statement on
Form S-3
with the SEC under the Securities Act of 1933, as amended, or
the Securities Act, that registers the securities offered by
this prospectus. The registration statement, including the
attached exhibits, contains additional relevant information
about us. The rules and regulations of the SEC allow us to omit
from this prospectus some information included in the
registration statement.
We file annual, quarterly, and special reports, proxy statements
and other information with the SEC under the Securities Exchange
Act of 1934, as amended, or the Exchange Act. You may read and
copy any materials we file with the SEC at the SECs Public
Reference Room at 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at
1-800-SEC-0330
for further information on the operation of the Public Reference
Room. The SEC maintains an Internet website at
http://www.sec.gov that contains reports, proxy and
information statements, and other information regarding issuers,
including us, that file electronically with the SEC. General
information about us, including our annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports, is available free of charge
through our website at http://www.apachecorp.com as soon
as reasonably practicable after we electronically file them
with, or
ii
furnish them to, the SEC. Information on our website is not
incorporated into this prospectus or our other securities
filings and is not a part of these filings.
Our common stock has been listed and traded on the New York
Stock Exchange since 1969, the Nasdaq Global Select Market since
2004 and the Chicago Stock Exchange since 1960. Accordingly, you
may inspect the information we file with the Securities and
Exchange Commission at the New York Stock Exchange,
20 Broad Street, New York, New York 10005, the National
Association of Securities Dealers, Inc.,
1735 K Street, N.W., Washington, D.C. 20006, and
at the Chicago Stock Exchange, One Financial Place,
440 S. LaSalle Street, Chicago, Illinois
60605-1070.
For more information on obtaining copies of our public filings
at the New York Stock Exchange, you should call
(212) 656-5060.
INCORPORATION
BY REFERENCE
The SEC allows us to incorporate by reference
information into this document. This means that we can disclose
important information to you by referring you to another
document filed separately with the SEC. The information
incorporated by reference is considered to be part of this
prospectus, and information that we file later with the SEC will
automatically update and supersede the previously filed
information. We incorporate by reference the documents listed
below and any future filings made by us with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act,
other than any portions of the respective filings that were
furnished, pursuant to Item 2.02 or Item 7.01 of
Current Reports on
Form 8-K
(including exhibits related thereto) or other applicable SEC
rules, rather than filed, prior to the termination of the
offerings under this prospectus:
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Registration Statements on
Form 8-A
(File
No. 001-04300)
filed on January 24, 1996, May 12, 1999, May 13,
1999, December 13, 1999 and February 3, 2006;
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Annual Report on
Form 10-K
(File
No. 001-04300)
for the year ended December 31, 2007, filed on
February 29, 2008;
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Quarterly Reports on Form 10-Q (File No. 001-4300)
filed on May 12, 2008, August 11, 2008 and
November 10, 2008; and
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Current Reports on
Form 8-K
(File
No. 001-04300)
filed on September 29, 2008 and October 1, 2008.
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Each of these documents is available from the SECs web
site and public reference rooms described above. Through our
website, http://www.apachecorp.com, you can access
electronic copies of documents we file with the SEC, including
our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K
and any amendments to those reports. Information on our website
is not incorporated by reference in this prospectus. Access to
those electronic filings is available as soon as practical after
filing with the SEC. You may also request a copy of those
filings, excluding exhibits, at no cost by writing or
telephoning Cheri L. Peper, Corporate Secretary, at our
principal executive office, which is:
Apache Corporation
2000 Post Oak Boulevard, Suite 100
Houston, Texas
77056-4400
(713) 296-6000
There are no separate financial statements of Apache Finance,
Apache Australia, Apache Canada or Apache Canada II in this
prospectus. We do not believe these financial statements would
be helpful because:
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Apache Finance, Apache Australia, Apache Canada and Apache
Canada II are wholly-owned subsidiaries of Apache, which
files consolidated financial information under the Securities
Exchange Act of 1934;
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Apache Finance, Apache Australia, Apache Canada and Apache
Canada II will not have any independent operations other
than issuing their debt securities and other necessary or
incidental activities as described in this prospectus;
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Apache guarantees the debt securities of Apache Finance, Apache
Australia, Apache Canada and Apache Canada II.
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iii
You should rely only on the information incorporated by
reference or provided in this prospectus or any prospectus
supplement. The information on our web site is not incorporated
by reference into this prospectus. Neither Apache, Apache
Finance, Apache Australia, Apache Canada nor Apache
Canada II has authorized anyone to provide you with
different information.
Neither Apache nor Apache Finance, Apache Australia, Apache
Canada or Apache Canada II is making an offer of the
securities covered by this prospectus in any state where the
offer is not permitted.
iv
APACHE
CORPORATION
Apache Corporation, a Delaware corporation formed in 1954, is an
independent energy company that explores for, develops and
produces natural gas, crude oil and natural gas liquids. In
North America, our exploration and production interests are
focused in the Gulf of Mexico, the Gulf Coast, East Texas, the
Permian Basin, the Anadarko Basin and the Western Sedimentary
Basin of Canada. Outside of North America we have exploration
and production interests onshore Egypt, offshore Western
Australia, offshore the United Kingdom in the North Sea (North
Sea), and onshore Argentina.
We hold interests in many of our U.S., Canadian, and other
international properties through operating subsidiaries, such as
Apache Canada Ltd., DEK Energy Company (DEKALB), Apache Energy
Limited (AEL), Apache North America, Inc., and Apache Overseas,
Inc. Properties referred to in this prospectus, any prospectus
supplement, or in any document incorporated by reference in this
prospectus may be held by those subsidiaries. We treat all
operations as one line of business.
APACHE
FINANCE PTY LTD
Apache Finance is a proprietary company with limited liability
organized in October 1997 under the laws of the Australian
Capital Territory, Australia. Apache Finance is our indirect
wholly-owned subsidiary, and Apache Finance issues debt
securities guaranteed by us. Apache Finance was established to
facilitate financing of and investment in our Australian
operations and entities.
The principal place of business of Apache Finance is 256 St.
Georges Terrace, Level 3, Perth, Western Australia
6000; telephone
61-8-9422-7222.
APACHE
FINANCE AUSTRALIA PTY LTD
Apache Australia is a proprietary company with limited liability
organized in March 2003 under the laws of the Australian Capital
Territory, Australia. Apache Australia is our indirect
wholly-owned subsidiary, and Apache Australia issues debt
securities guaranteed by us. Apache Australia was established to
facilitate financing of and investment in our Australian
operations and entities.
The principal place of business of Apache Australia is 256 St.
Georges Terrace, Level 3, Perth, Western Australia
6000; telephone
61-8-9422-7222.
APACHE
FINANCE CANADA CORPORATION
Apache Canada is an unlimited liability company organized in
August 1999 under the laws of the Province of Nova Scotia,
Canada. Apache Canada is our indirect wholly-owned subsidiary
and issues debt securities guaranteed by us. Apache Canada was
established to facilitate financing of and investment in our
Canadian operations and entities.
The principal place of business of Apache Canada is
700 9th Ave. SW, Suite 1000, Calgary,
Alberta, Canada T2P 3V4; telephone
403-261-1200.
APACHE
FINANCE CANADA II CORPORATION
Apache Canada II is an unlimited liability company
organized in March 2003 under the laws of the Province of Nova
Scotia, Canada. Apache Canada II is our indirect
wholly-owned subsidiary, and issues debt securities guaranteed
by us. Apache Canada II was established to facilitate
financing of and investment in our Canadian operations and
entities.
The principal place of business of Apache Canada II is
700 9th Ave. SW, Suite 1000, Calgary,
Alberta, Canada T2P 3V4; telephone
403-261-1200.
1
USE OF
PROCEEDS
Unless otherwise indicated in an accompanying prospectus
supplement, we, Apache Finance, Apache Australia, Apache Canada
and Apache Canada II expect to use the net proceeds from
the sale of our securities and Apache Australia, Apache Canada
and Apache Canada II debt securities, as the case may be,
for general corporate purposes, which may include, among other
things:
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the repayment of outstanding indebtedness;
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working capital;
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capital expenditures; and
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acquisitions.
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The precise amount and timing of the application of such
proceeds will depend upon our funding requirements and the
availability and cost of other funds. We currently have no plans
for specific use of the net proceeds. We will specify the
principal purposes for which the net proceeds will be used in a
prospectus supplement at the time of sale.
DESCRIPTION
OF APACHE CORPORATION CAPITAL STOCK
The following descriptions of our common stock and preferred
stock, together with the additional information included in any
applicable prospectus supplement, summarize the material terms
and provisions of these types of securities. For the complete
terms of our common stock and preferred stock, please refer to
our charter, bylaws and stockholder rights plan that are
incorporated by reference into the registration statement that
includes this prospectus. The terms of these securities may also
be affected by the General Corporation Law of the State of
Delaware.
Under our charter, our authorized capital stock currently
consists of 430,000,000 shares of common stock,
$.625 par value per share, and 5,000,000 shares of
preferred stock, no par value. We will describe the specific
terms of any common stock or preferred stock we may offer in a
prospectus supplement. If indicated in a prospectus supplement,
the terms of any common stock or preferred stock offered under
that prospectus supplement may differ from the terms described
below.
Common
Stock
As of October 31, 2008, we had approximately
334,689,127 shares of common stock issued and outstanding
and approximately 22 million shares of common stock
reserved for issuance pursuant to various employee benefit plans
(including treasury shares authorized for issuance under those
plans). Each outstanding share of common stock currently
includes one preferred share purchase right issued under our
stockholder rights plan, which is summarized below. All
outstanding shares of common stock are, and any shares of common
stock sold pursuant to this prospectus will be, duly authorized,
validly issued, fully paid and non-assessable.
Voting
For all matters submitted to a vote of stockholders, each holder
of common stock is entitled to one vote for each share
registered in his or her name on our books. Our common stock
does not have cumulative voting rights. As a result, subject to
the voting rights of Series B preferred stockholders
described below and any future holders of our preferred stock,
persons who hold more than 50 percent of the outstanding
common stock entitled to elect members of the board of directors
can elect all of the directors who are up for election in a
particular year.
Dividends
If our board of directors declares a dividend, holders of common
stock will receive payments from our funds that are legally
available to pay dividends. This dividend right, however, is
subject to any preferential
2
dividend rights we have granted to Series B preferred
stockholders or may grant to future holders of preferred stock.
Liquidation
If we dissolve, the holders of common stock will be entitled to
share ratably in all the assets that remain after we pay our
liabilities and any amounts we may owe to the persons who hold
our preferred stock.
Other
Rights and Restrictions
Holders of common stock do not have preemptive rights, and they
have no right to convert their common stock into any other
securities. Our common stock is not subject to redemption by us.
Our charter and bylaws do not restrict the ability of a holder
of common stock to transfer his or her shares of common stock.
Delaware law provides that, if we make a distribution to our
stockholders other than a distribution of our capital stock
either when we are insolvent or when we would be rendered
insolvent, then our stockholders would be required to pay back
to us the amount of the distribution we made to them, or the
portion of the distribution that causes us to become insolvent,
as the case may be.
Listing
Our common stock is listed on the New York Stock Exchange, the
Nasdaq Global Select Market and the Chicago Stock Exchange under
the symbol APA.
Transfer
Agent and Registrar
The transfer agent and registrar for our common stock is Wells
Fargo Bank, N.A.
Preferred
Stock
General
We have 5,000,000 shares of no par preferred stock
authorized, of which 25,000 shares have been designated as
Series A Junior Participating Preferred Stock and
100,000 shares have been designated as 5.68 %
Series B Cumulative Preferred Stock. The remaining shares
of preferred stock are undesignated.
Our charter authorizes our board of directors to issue preferred
stock in one or more series and to determine the voting rights
and dividend rights, dividend rates, liquidation preferences,
conversion rights, redemption rights, including sinking fund
provisions and redemption prices, and other terms and rights of
each series of preferred stock.
Series A
The shares of Series A preferred stock are authorized for
issuance pursuant to rights that trade with our outstanding
common stock and are reserved for issuance upon the exercise of
the rights discussed below under the caption
Stockholder Rights Plan.
Series B
As of October 31, 2008, we had issued and outstanding
100,000 shares of Series B preferred stock in the form
of one million depositary shares, each representing one-tenth
(1/10th) of a share of Series B preferred stock. The
Series B preferred stock has no stated maturity, is not
subject to a sinking fund and is not convertible into our common
stock or any other securities. Since August 25, 2008, we
have had the option to redeem the Series B preferred stock
at $1,000 per share. Holders of the depositary shares are
entitled to receive cumulative cash dividends at an annual rate
of $5.68 per depositary share (based on $56.80 for each
share of Series B preferred stock) when, as and if declared
by Apaches board of directors.
3
The Series B preferred stock has a liquidation preference
of $1,000 per share, which is equivalent to $100 per
depositary share, plus accrued and unpaid dividends.
The Series B preferred stock ranks prior and superior to
our common stock and Series A preferred stock as to payment
of dividends and distribution of assets upon our dissolution,
liquidation or winding up.
If dividends are not paid on the Series B preferred stock,
cash payments on our common stock and any of our other capital
stock that ranks junior to the Series B preferred stock as
to dividends are prohibited and payments on any of our other
capital stock that ranks equal to the Series B preferred
stock as to dividends are restricted.
Shares of Series B preferred stock generally do not have
voting rights. If, however, we fail to pay the equivalent of six
quarterly dividends payable on the Series B preferred stock
or another class or series of preferred stock that ranks equally
with the Series B preferred stock, then we will increase
the size of our board of directors by two members. The holders
of the Series B preferred stock and any other class or
series of preferred stock ranking equally with the Series B
preferred stock voting as a single class together with any other
class of preferred stock ranking equally will then have the
right to vote for the two additional directors. This voting
right would continue until we have paid all past dividends on
all preferred stock.
Without the vote of at least 80 percent of the outstanding
shares of Series B preferred stock, we may not amend any
provision in our charter so as to adversely affect the powers,
preferences, privileges or rights of the Series B preferred
stock.
Without the approval of the holders, voting together as a single
class, of 80 percent of all the shares of Series B
preferred stock then outstanding and all shares of any other
series of our preferred stock ranking equally as to dividends or
upon liquidation we will not:
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issue, authorize or increase the authorized amount of, or issue
or authorize any obligation or security convertible into or
evidencing a right to purchase, any stock of any class ranking
prior to the Series B preferred stock as to dividends or
upon liquidation; or
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reclassify any of our authorized stock into any stock of any
class, or any obligation or security convertible into or
evidencing a right to purchase such stock, ranking prior to the
Series B preferred stock,
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provided that no such vote will be required for us to take any
of these actions to issue, authorize or increase the authorized
amount of, or issue or authorize any obligation or security
convertible into or evidencing a right to purchase, any stock
ranking equally with or junior to the Series B preferred
stock.
Without the approval of the holders of at least a majority of
the shares of Series B preferred stock then outstanding, we
will not become a party to any merger, conversion, consolidation
or compulsory share exchange unless the terms of that
transaction do not provide for a change in the terms of the
Series B preferred stock and the Series B preferred
stock ranks equally with or prior to any capital stock of the
surviving corporation as to dividends or upon liquidation,
dissolution or winding up other than prior-ranking Apache stock
previously authorized with the consent of holders of the
Series B preferred stock.
Undesignated
Preferred Stock
This summary of the undesignated preferred stock discusses terms
and conditions that may apply to preferred stock offered under
this prospectus. The applicable prospectus supplement will
describe the particular terms of each series of preferred stock
actually offered. If indicated in the prospectus supplement, the
terms of any series may differ from the terms described below.
The following description, together with any applicable
prospectus supplement, summarizes all the material terms and
provisions of any preferred stock being offered by this
prospectus. It does not restate the terms and provisions in
their entirety. We urge you to read our charter and any
applicable certificate of designation that may be on file
because they, and not this description, define the rights of any
holders of preferred stock. We have filed our charter as an
exhibit to the registration statement which includes this
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prospectus. We will incorporate by reference as an exhibit to
the registration statement the form of any certificate of
designation before the issuance of any series of preferred stock.
The prospectus supplement for any preferred stock that we
actually offer pursuant to this prospectus may include some or
all of the following terms:
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the designation of the series of preferred stock;
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the number of shares of preferred stock offered, the liquidation
preference per share and the offering price of the preferred
stock;
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the dividend rate or rates of the shares, the method or methods
of calculating the dividend rate or rates, the dates on which
dividends, if declared, will be payable, and whether or not the
dividends are to be cumulative and, if cumulative, the date or
dates from which dividends will be cumulative;
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the amounts payable on shares of the preferred stock in the
event of our voluntary or involuntary liquidation, dissolution
or winding up;
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the redemption rights and price or prices, if any, for the
shares of preferred stock;
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any terms, and the amount, of any sinking fund or analogous fund
providing for the purchase or redemption of the shares of
preferred stock;
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any restrictions on our ability to make payments on any of our
capital stock if dividend or other payments are not made on the
preferred stock;
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any voting rights granted to the holders of the shares of
preferred stock in addition to those required by Delaware law or
our certificate of incorporation;
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whether the shares of preferred stock will be convertible or
exchangeable into shares of our common stock or any other
security, and, if convertible or exchangeable, the conversion or
exchange price or prices, and any adjustment or other terms and
conditions upon which the conversion or exchange shall be made;
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any other rights, preferences, restrictions, limitations or
conditions relative to the shares of preferred stock permitted
by Delaware law or our certificate of incorporation;
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any listing of the preferred stock on any securities exchange;
and
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the U.S. federal income tax considerations applicable to
the preferred stock.
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Subject to our charter and to any limitations imposed by any
then-outstanding preferred stock, we may issue additional series
of preferred stock, at any time or from time to time, with such
powers, preferences, rights and qualifications, limitations or
restrictions as the board of directors determines, and without
further action of the stockholders, including holders of our
then outstanding preferred stock, if any.
Stockholder
Rights Plan
In 1995, our board of directors adopted a stockholder rights
plan to replace the former plan adopted in 1986. The plan, which
was initially to have expired in January 1996, was amended to
extend the term of the plan to January 2016, to reset the rights
trading with each share of our common stock to one right per
share, and to eliminate adjustments in the number of rights per
share for future capitalization events, such as stock splits.
Under our stockholder rights plan, each of our common
stockholders received a dividend of one preferred stock
purchase right for each outstanding shares of common stock
that the stockholder owned. We refer to these preferred stock
purchase rights as the rights. Unless the rights
have been previously redeemed, all shares of our common stock
are issued with rights. The rights trade automatically with our
shares of common stock and become exercisable only under the
circumstances described below.
Since the purpose of the rights is to encourage potential
acquirors to negotiate with our board of directors before
attempting a takeover bid and to provide our board of directors
with leverage in negotiating on behalf
5
of our stockholders the terms of any proposed takeover, the
rights may have anti-takeover effects. They should not
interfere, however, with any merger or other business
combination approved by our board of directors.
The following description is a summary of all the material terms
of our stockholder rights plan. It does not restate these terms
in their entirety. We urge you to read our stockholder rights
plan because it, and not this description, defines the terms and
provisions of our plan. Our stockholder rights plan is
incorporated by reference as an exhibit to the registration
statement that includes this prospectus. You may obtain a copy
at no charge by writing to us at the address listed under the
caption Where You Can Find More Information.
Exercise
of Rights
Until a right is exercised, the holder of a right will not have
any rights as a stockholder. When the rights become exercisable,
holders of the rights will be able to purchase from us
1/10,000th of a share of our Series A preferred stock,
at a purchase price of $100, subject to adjustment, per
1/10,000th of a share.
In general, the rights will become exercisable upon the earlier
of:
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ten calendar days after a public announcement that a person or
group has acquired beneficial ownership of 20 percent or
more of the outstanding shares of our common stock; or
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ten business days after the beginning of a tender offer or
exchange offer that would result in a person or group
beneficially owning 30 percent or more of our common stock.
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Flip
in Event
If a person or group becomes the beneficial owner of
20 percent or more of our common stock, each right will
then entitle its holder to receive, upon exercise, a number of
shares of our common stock that is equal to the exercise price
of the right divided by one-half of the market price of our
common stock on the date of the occurrence of this event. We
refer to this occurrence as a flip in event. A flip
in event does not occur if there is an offer for all of our
outstanding shares of common stock that our board of directors
determines is fair to our stockholders and in our best interests.
Flip
Over Event
If, at any time after a person or group becomes the beneficial
owner of 20 percent or more of our common stock, we are
acquired in a merger or other transaction in which we do not
survive or in which our common stock is changed or exchanged or
50 percent or more of our assets or earning power is sold
or transferred, then each holder of a right will be entitled to
receive, upon exercise, a number of shares of common stock of
the acquiring company in the transaction equal to the exercise
price of the right divided by one-half of the market price of
the acquiring companys common stock on the date of the
occurrence of this event. This exercise right will not occur if
the merger or other transaction follows an offer for all of our
outstanding shares of common stock that our board of directors
determines is fair to our stockholders and in our best interests.
Exchange
of Rights
At any time after a flip in event but prior to a person or group
becoming a beneficial owner of more than 50 percent of the
shares of outstanding common stock, our board of directors may
exchange the rights by providing to the holder one share of our
common stock or 1/10,000th of a share of our Series A
preferred stock for each of the holders rights.
Redemption
of Rights
At any time before a flip in event, we may redeem the rights at
a price of $.01 per right. The rights will expire on the
close of business on January 31, 2016, subject to earlier
expiration or termination as described in our stockholder rights
plan.
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Unless and until the rights become exercisable, they will be
transferred with and only with the shares of our common stock.
Anti-Takeover
Effect of Provisions of Apaches Charter and Bylaws and
Delaware Law
Our charter and bylaws include provisions, summarized below,
that may have the effect of delaying, deferring or preventing a
takeover of Apache. Please refer to our charter and bylaws that
are incorporated by reference into the registration statement
that includes this prospectus. You may obtain copies at no
charge by writing to us at the address listed under the caption
Where You Can Find More Information.
The provisions of Delaware law described below also may have an
anti-takeover effect.
Apaches
Bylaws
Our board of directors is divided into three classes, with
directors serving staggered three-year terms.
Apaches
Charter
Article Nine provides that our board of directors is
divided into three classes, with directors serving staggered
three-year terms.
Article Twelve stipulates that the affirmative vote of
80 percent of our voting shares is required to adopt any
agreement for the merger or consolidation with or into any other
corporation which is the beneficial owner of more than
5 percent of our voting shares. Article Twelve further
provides that such 80 percent approval is necessary to
authorize any sale or lease of assets between us and any
beneficial holder of 5 percent or more of our voting shares.
Article Fourteen contains a fair price
provision that requires any tender offer made by a beneficial
owner of more than 5 percent of our outstanding voting
stock in connection with any:
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plan of merger, consolidation or reorganization;
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sale or lease of substantially all of our assets; or
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issuance of our equity securities to the 5 percent
stockholder
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must provide at least as favorable terms to each holder of
common stock other than the stockholder making the tender offer.
Article Fifteen contains an anti-greenmail
mechanism which prohibits us from acquiring any voting stock
from the beneficial owner of more than 5 percent of our
outstanding voting stock, except for acquisitions pursuant to a
tender offer to all holders of voting stock on the same price,
terms and conditions, acquisitions in compliance with
Rule 10b-18
under the Securities Exchange Act of 1934 and acquisitions at a
price not exceeding the market value per share.
Article Sixteen prohibits the stockholders from acting by
written consent in lieu of a meeting.
The affirmative vote of 80 percent of the voting shares is
required to amend or adopt any provision inconsistent with
Articles Nine, Twelve, Fourteen and Sixteen.
Business
Combinations with Interested Stockholders Under Delaware
Law
Section 203 of the Delaware General Corporation Law
prevents a publicly held corporation from engaging in a
business combination with an interested
stockholder for a period of three years after the date of
the transaction in which the person became an interested
stockholder, unless:
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before the date on which the person became an interested
stockholder, the board of directors of the corporation approved
either the business combination or the transaction in which the
person became an interested stockholder;
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the interested stockholder owned at least 85 percent of the
outstanding voting stock of the corporation at the beginning of
the transaction in which it became an interested stockholder,
excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide
participants with the rights to determine confidentially whether
shares held subject to the plan will be tendered in a tender or
exchange offer; or
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on or after the date on which the interested stockholder became
an interested stockholder, the business combination is approved
by the board of directors and the holders of two-thirds of the
outstanding voting stock of the corporation voting at a meeting,
excluding the voting stock owned by the interested stockholder.
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As defined in Section 203, an interested
stockholder is generally a person owning 15 percent
or more of the outstanding voting stock of the corporation. As
defined in Section 203, a business combination
includes mergers, consolidations, stock and assets sales and
other transactions with the interested stockholder.
The provisions of Section 203 may have the effect of
delaying, deferring or preventing a change of control of Apache.
DESCRIPTION
OF DEPOSITARY SHARES
The following description, together with any applicable
prospectus supplement, summarizes all the material terms and
provisions of the depositary shares that we may offer under this
prospectus and the related deposit agreements and depositary
receipts. Specific deposit agreements and depositary receipts
will contain additional important terms and provisions. The
forms of the applicable deposit agreement and depositary receipt
will be incorporated by reference as an exhibit to the
registration statement that includes this prospectus before we
issue any depositary shares.
This summary of depositary agreements, depositary shares and
depositary receipts relates to terms and conditions applicable
to these types of securities generally. The particular terms of
any series of depositary shares will be summarized in the
applicable prospectus supplement. If indicated in the applicable
prospectus supplement, the terms of any series may differ from
the terms summarized below.
General
We may elect to offer fractional shares of preferred stock
rather than full shares of preferred stock. If so, we will issue
depositary receipts for these depositary
shares. Each depositary share will represent a fraction of
a share of a particular series of preferred stock. Each holder
of a depositary share will be entitled, in proportion to the
fraction of preferred stock represented by that depositary
share, to all the rights, preferences and privileges of the
preferred stock, including dividend, voting, redemption,
conversion and liquidation rights, if any, and all the
limitations of the preferred stock. We will enter into a deposit
agreement with a depositary, which will be named in the
applicable prospectus supplement.
In order to issue depositary shares, we will issue preferred
stock and immediately deposit these shares with the depositary.
The depositary will then issue and deliver depositary receipts
to the persons who purchase depositary shares. Each whole
depositary share issued by the depositary may represent a
fraction of a share of preferred stock held by the depositary.
The depositary will issue depositary receipts in a form that
reflects whole depositary shares, and each depositary receipt
may evidence any number of whole depositary shares.
Pending the preparation of definitive engraved depositary
receipts, if any, a depositary may, upon our written order,
issue temporary depositary receipts, which will temporarily
entitle the holders to all the rights pertaining to the
definitive depositary receipts. We will bear the costs and
expenses of promptly preparing definitive depositary receipts
and of exchanging the temporary depositary receipts for such
definitive depositary receipts.
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Dividends
and Other Distributions
The depositary will distribute all cash and non-cash
distributions it receives with respect to the underlying
preferred stock to the record holders of depositary shares in
proportion to the number of depositary shares they hold, subject
to any obligations of the record holders to file proofs,
certificates and other information and to pay any taxes or other
governmental charges. In the case of any non-cash distribution,
we may determine that the distribution cannot be made
proportionately or the depositary may determine that it may not
be feasible to make the distribution. If so, the depositary may,
with our approval, adopt a method it deems equitable and
practicable to effect the distribution, including the sale,
public or private, of the securities or other non-cash property
it receives in the distribution at a place and on terms it deems
proper. The amounts distributed by the depositary will be
reduced by any amount required to be withheld by us or the
depositary on account of taxes.
Redemption
of Depositary Shares
If the shares of preferred stock that underlie the depositary
shares are redeemable and we redeem the preferred stock, the
depositary will redeem the depositary shares from the proceeds
it receives from the redemption of the preferred stock it holds.
The depositary will redeem the number of depositary shares that
represent the amount of underlying preferred stock that we have
redeemed. The redemption price for depositary shares will be in
proportion to the redemption price per share that we paid for
the underlying preferred stock. If we redeem less than all of
the depositary shares, the depositary will select which
depositary shares to redeem by lot, or some substantially
equivalent method.
After a redemption date is fixed, the depositary shares to be
redeemed no longer will be considered outstanding. The rights of
the holders of the depositary shares will cease, except for the
rights to receive money or other property upon redemption. In
order to redeem their depositary shares, holders must surrender
their depositary receipts to the depositary.
Voting
the Preferred Stock
When the depositary receives notice about any meeting at which
the holders of preferred stock are entitled to vote, the
depositary will mail the information contained in the notice to
the record holders of depositary shares related to that
preferred stock. Each record holder of depositary shares on the
record date, which will be the same date as the record date for
the preferred stock, will be entitled to instruct the depositary
on how to vote the shares of preferred stock represented by that
holders depositary shares. The depositary will endeavor,
to the extent practicable, to vote the preferred stock
represented by the depositary shares in accordance with these
instructions. If the depositary does not receive instructions
from the holders of the depositary shares, the depositary will
abstain from voting the preferred stock that underlies those
depositary shares.
Withdrawal
of Preferred Stock
If a holder of depositary receipts surrenders those depositary
receipts at the corporate office (as defined in the deposit
agreement) of the depositary, or any other office as the
depositary may designate, and pays any taxes, charges or fees,
that holder is entitled to delivery at the corporate office of
certificates evidencing the number of shares of preferred stock,
but only in whole shares, and any money and other property
represented by those depositary receipts. If the depositary
receipts we deliver evidence a number of depositary shares in
excess of the number of whole shares of preferred stock to be
withdrawn, the depositary will deliver to us at the same time a
new depositary receipt evidencing that excess number of
depositary shares. We do not expect that there will be any
public trading market for the shares of preferred stock except
those represented by the depositary shares.
Amendment
and Termination of the Deposit Agreement
We and the depositary can agree, at any time, to amend the form
of depositary receipt and any provisions of the deposit
agreement. If, however, an amendment has a material adverse
effect on the rights of the holders of related depositary
shares, the holders of at least a majority of the depositary
shares then outstanding must
9
first approve the amendment. Every holder of a depositary
receipt at the time an amendment becomes effective will be bound
by the amended deposit agreement. Subject to any conditions in
the deposit agreement or applicable law, no amendment, however,
can impair the right of any holder of a depositary share to
receive shares of the related preferred stock, or any money or
other property represented by the depositary shares, when they
surrender their depositary receipts.
Unless otherwise specified in the applicable prospectus
supplement, the deposit agreement may be terminated by us or by
the depositary if there has been a final distribution in respect
of the preferred stock in connection with any liquidation,
dissolution or winding up of Apache and that distribution has
been distributed to the holders of depositary receipts.
Charges
of Depositary
We will pay all transfer and other taxes and the government
charges that relate solely to the depositary arrangements. We
will also pay the charges of each depositary, including charges
in connection with the initial deposit of the related series of
preferred stock, the initial issuance of the depositary shares,
and all withdrawals of shares of the related series of preferred
stock. Holders of depositary shares, however, will be required
to pay transfer and other taxes and government charges, as
provided in the deposit agreement.
Resignation
and Removal of Depositary
The depositary may submit notice of resignation at any time or
we may remove the depositary at any time. However, no
resignation or removal will take effect until we appoint a
successor depositary, which must occur within 60 days after
delivery of the notice of resignation or removal. The successor
depositary must be a bank or trust company that has its
principal office in the United States and has a combined capital
and surplus of at least $50,000,000.
Miscellaneous
If we are required to furnish any information to the holders of
the preferred stock underlying any depositary shares, the
depositary, as the holder of the underlying preferred stock,
will forward to the holders of depositary shares any report or
information it receives from us.
Neither the depositary nor we will be liable if its ability to
perform its obligations under the deposit agreement is prevented
or delayed by law or any circumstance beyond its control. Each
of Apache and the depositary will be obligated to use its best
judgment and to act in good faith in performing its duties under
the deposit agreement. Each of Apache and the depositary will be
liable only for gross negligence and willful misconduct in
performing its duties under the deposit agreement. They will not
be obligated to appear in, prosecute or defend any legal
proceeding with respect to any depositary receipts, depositary
shares or preferred stock unless they receive what they, in
their sole discretion, determine to be a satisfactory indemnity
from one or more holders of the depositary shares. We and the
depositary will evaluate any proposed indemnity in order to
determine whether the financial protection afforded by the
indemnity is sufficient to reduce each partys risk to a
satisfactory and customary level. We and the depositary may rely
on the advice of legal counsel or accountants of their choice.
They may also rely on information provided by persons they
believe, in good faith, to be competent, and on documents they
believe, in good faith, to be genuine.
The applicable prospectus supplement will identify the
depositarys corporate trust office. Unless the prospectus
supplement indicates otherwise, the depositary will act as
transfer agent and registrar for depositary receipts, and if we
redeem shares of preferred stock, the depositary will act as
redemption agent for the corresponding depositary receipts.
Title
We, each depositary and any agent of Apache or the applicable
depositary may treat the registered owner of any depositary
share as the absolute owner of the depositary shares for all
purposes, including making
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payment, regardless of whether any payment in respect of the
depositary share is overdue and regardless of any notice to the
contrary. See Book-Entry Securities below.
DESCRIPTION
OF APACHE CORPORATION DEBT SECURITIES
The following description, together with any applicable
prospectus supplement, summarizes all the material terms and
provisions of the debt securities that we may offer under this
prospectus and the related trust indentures. We will issue the
senior debt securities under a senior indenture, dated as of
February 15, 1996, between us and The Bank of New York
Mellon Trust Company, N.A. (formerly known as The Bank of New
York Trust Company, N.A., as
successor-in-interest
to JP Morgan Chase Bank, N.A., formerly known as The Chase
Manhattan Bank), as trustee, as supplemented by the First
Supplemental Indenture, dated November 5, 1996, between us
and the trustee. We will issue the subordinated debt securities
under a subordinated indenture to be executed in the future by
us and The Bank of New York Mellon Trust Company, N.A., as
trustee. The senior indenture and the subordinated indenture are
together referred to in this section as the
indentures. The senior debt securities and the
subordinated debt securities are together referred to in this
section as the debt securities. The Bank of New York
Mellon Trust Company, N.A., or any successor, in its capacity as
trustee under either or both of the indentures, is referred to
as the trustee for purposes of this section. The
indentures contain and the debt securities, when issued, will
contain additional important terms and provisions. The
indentures are, and prior to their issuance the debt securities
will be, filed as exhibits to the registration statement that
includes this prospectus.
This summary of the indentures and the debt securities relates
to terms and conditions applicable to the debt securities
generally. The applicable prospectus supplement will set forth
the particular terms of any series of debt securities that we
may offer. If indicated in the prospectus supplement, the terms
of any series may differ from the terms summarized below.
Neither indenture limits the amount of debt securities we may
issue under it, and each provides that additional debt
securities of any series may be issued up to the aggregate
principal amount that we authorize from time to time. We also
may issue debt securities pursuant to the indentures in
transactions exempt from the registration requirements of the
Securities Act of 1933. Those debt securities will not be
considered in determining the aggregate amount of securities
issued under this prospectus.
Unless otherwise indicated in the applicable prospectus
supplement, we will issue the debt securities in denominations
of $1,000 or integral multiples of $1,000.
Other than as described below under The Senior Indenture
Limits Our Ability to Incur Liens, The Senior
Indenture Limits Our Ability to Engage in Sale/Leaseback
Transactions and We Are Obligated to Purchase Debt
Securities upon a Change in Control, and as may be
described in the applicable prospectus supplement, the
indentures do not limit our ability to incur indebtedness or
afford holders of debt securities protection in the event of a
decline in our credit quality or if we are involved in a
takeover, recapitalization or highly leveraged or similar
transaction. Nothing in the indentures or the debt securities
will in any way limit the amount of indebtedness or securities
that we or our subsidiaries, as defined in the indentures, may
incur or issue.
General
The prospectus supplement relating to the particular series of
debt securities being offered will specify whether they are
senior or subordinated debt securities and the amounts, prices
and terms of those debt securities. These terms may include:
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the designation, aggregate principal amount and authorized
denominations of the debt securities;
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the date or dates on which the debt securities will mature;
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the percentage of the principal amount at which the debt
securities will be issued;
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the date on which the principal of the debt securities will be
payable;
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whether the debt securities will be issued as registered
securities, bearer securities or a combination of the two;
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whether the debt securities will be issued in the form of one or
more global securities and whether such global securities will
be issued in a temporary global form or permanent global form;
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the currency or currencies or currency unit or units of two or
more currencies in which debt securities are denominated, for
which they may be purchased, in which principal and any premium
and interest is payable and any special U.S. federal income
tax or other considerations;
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if the currency or currencies or currency unit or units for
which debt securities may be purchased or in which principal and
any premium and interest may be paid is at our election or at
the election of a purchaser, the manner in which an election may
be made and its terms;
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the annual rate or rates, which may be fixed or variable, or the
method of determining the rate or rates at which the debt
securities will bear any interest, whether by remarketing,
auction, formula or otherwise;
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the date or dates from which any interest will accrue and the
date or dates on which such interest will be payable;
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a description of any provisions providing for redemption,
exchange or conversion of the debt securities at our option, a
holders option or otherwise, and the terms and provisions
of such a redemption, exchange or conversion;
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information with respect to book-entry procedures relating to
global debt securities;
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sinking fund terms;
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whether and under what circumstances we will pay
additional amounts, as defined in the indentures, on
the debt securities to any holder who is a United States
alien, as defined in the indentures, in respect of any
tax, assessment or governmental charge; the term
interest, as used in this prospectus, includes any
additional amounts;
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any modifications or additions to, or deletions of, any of the
events of default or covenants of Apache with respect to the
debt securities that are described in this section;
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if either or both of the sections of the applicable indenture
relating to defeasance and covenant defeasance are not
applicable to the debt securities, or if any covenants in
addition to or other than those specified in the applicable
indenture shall be subject to covenant defeasance;
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any deletions from, or modifications or additions to, the
provisions of the indentures relating to satisfaction and
discharge in respect of the debt securities;
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any index or other method used to determine the amount of
payments of principal of, and any premium and interest on, the
debt securities; and
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any other specific terms of the debt securities.
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We are not obligated to issue all debt securities of any one
series at the same time and, unless we specify otherwise in the
applicable prospectus supplement, a series of debt securities
may be reopened for additional issuances of debt securities of
that series or to establish additional terms of that series. The
debt securities of any one series may not bear interest at the
same rate or mature on the same date.
If any of the debt securities are sold for foreign currencies or
foreign currency units or if the principal of, or any premium or
interest on, any series of debt securities is payable in foreign
currencies or foreign currency units, we will describe the
restrictions, elections, tax consequences, specific terms and
other information with respect to those debt securities and such
foreign currencies or foreign currency units in the applicable
prospectus supplement.
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The terms, if any, on which the debt securities of any series
are convertible into or exchangeable for shares of common stock,
shares of preferred stock or other securities, whether or not
issued by us, property or cash, or a combination of any of the
foregoing, will be set out in the accompanying prospectus
supplement. Such terms may include provisions for conversion or
exchange, either mandatory, at the option of the holder, or at
our option, in which the securities, property or cash to be
received by the holders of the debt securities would be
calculated according to the factors and at such time as
described in the accompanying prospectus supplement.
Ranking
Senior
Debt Securities
Unless otherwise indicated in the applicable prospectus
supplement, our obligation to pay the principal of, and any
premium and interest on, the senior debt securities will be
unsecured and will rank equally with all of our other unsecured
unsubordinated indebtedness.
Subordinated
Debt Securities
Our obligation to pay the principal of, and any premium and
interest on, any subordinated debt securities will be unsecured
and will rank subordinate and junior in right of payment to all
of our senior indebtedness to the extent provided in the
subordinated indenture and the terms of those subordinated debt
securities, as described below and in any applicable prospectus
supplement, which may make deletions from, or modifications or
additions to, the subordination terms described below.
Upon any payment or distribution of our assets or securities to
creditors upon any liquidation, dissolution,
winding-up,
reorganization, or any bankruptcy, insolvency, receivership or
similar proceedings in connection with any insolvency or
bankruptcy proceeding of Apache, the holders of senior
indebtedness will first be entitled to receive payment in full
of the senior indebtedness before the holders of subordinated
debt securities will be entitled to receive any payment or
distribution in respect of the subordinated debt securities.
No payments on account of principal or any premium or interest
in respect of the subordinated debt securities may be made if
there has occurred and is continuing a default in any payment
with respect to senior indebtedness or an event of default with
respect to any senior indebtedness resulting in the acceleration
of its maturity, or if any judicial proceeding is pending with
respect to any default.
Indebtedness, for purposes of the subordinated
indenture, means:
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indebtedness for borrowed money or for the unpaid purchase price
of real or personal property of, or guaranteed by, Apache, other
than accounts payable arising in the ordinary course of business
payable on terms customary in the trade;
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indebtedness secured by any mortgage, lien, pledge, security
interest or encumbrances of any kind or payable out of the
proceeds of production from property;
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indebtedness which is evidenced by mortgages, notes, bonds,
securities, acceptances or other instruments;
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indebtedness which must be capitalized as liabilities under
generally accepted accounting principles;
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liabilities under interest rate swap, exchange, collar or cap
agreements and all other agreements or arrangements designed to
protect against fluctuations in interest rates or currency
exchange rates;
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liabilities under commodity hedge, commodity swap, exchange,
collar or cap agreements, fixed price agreements and all other
agreements or arrangements designed to protect against
fluctuations in oil and gas prices;
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guarantees and endorsements of obligations of others, directly
or indirectly, and all other repurchase agreements and
indebtedness in effect guaranteed through an agreement,
contingent or otherwise, to purchase that indebtedness, or to
purchase or sell property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment
of the indebtedness or to assure the owner of the
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indebtedness against loss, or to supply funds to or in any
manner invest in the debtor, or otherwise to assure a creditor
against loss (but excluding guarantees and endorsements of
notes, bills and checks made in the ordinary course of
business); and
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indebtedness relative to the amount of all letters of credit;
provided, however, that such term shall not include any amounts
included as deferred credits on our financial statements and
computed in accordance with generally accepted accounting
principles.
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Senior indebtedness, for purposes of the
subordinated indenture, means all indebtedness, whether
outstanding on the date of execution of the subordinated
indenture or thereafter created, assumed or incurred, except our
obligations under the subordinated debt securities, indebtedness
ranking equally with the subordinated debt securities or
indebtedness ranking junior to the subordinated debt securities.
Indebtedness ranking equally with the subordinated debt
securities, for purposes of the subordinated indenture,
means indebtedness, whether outstanding on the date of execution
of the subordinated indenture or thereafter created, assumed or
incurred, to the extent the indebtedness specifically by its
terms ranks equally with and not prior to the subordinated debt
securities in the right of payment upon the happening of the
dissolution,
winding-up,
liquidation or reorganization of Apache. The securing of any
indebtedness otherwise constituting indebtedness ranking equally
with the subordinated debt securities will not prevent the
indebtedness from constituting indebtedness ranking equally with
the subordinated debt securities.
Indebtedness ranking junior to the subordinated debt
securities, for purposes of the subordinated indenture,
means any indebtedness, whether outstanding on the date of
execution of the subordinated indenture or thereafter created,
assumed or incurred, to the extent the indebtedness by its terms
ranks junior to and not equally with or prior to
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the subordinated debt securities, and
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any other indebtedness ranking equally with the subordinated
debt securities, in right of payment upon the happening of the
dissolution,
winding-up,
liquidation or reorganization of Apache. The securing of any
indebtedness otherwise constituting indebtedness ranking junior
to the subordinated debt securities will not prevent the
indebtedness from constituting indebtedness ranking junior to
the subordinated debt securities.
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Dividends and other distributions to us from our various
subsidiaries may be subject to statutory, contractual and other
restrictions (including, without limitation, exchange controls
that may be applicable to foreign subsidiaries). The rights of
our creditors to participate in the assets of any subsidiary
upon that subsidiarys liquidation or recapitalization will
be subject to the prior claims of the subsidiarys
creditors, except to the extent that we may ourselves be a
creditor with recognized claims against the subsidiary.
Interest
Rates and Discounts
The debt securities will earn interest at a fixed or floating
rate or rates for the period or periods of time specified in the
applicable prospectus supplement. Unless we specify otherwise in
the applicable prospectus supplement, the debt securities will
bear interest on the basis of a
360-day year
consisting of twelve
30-day
months.
We may sell debt securities at a substantial discount below
their stated principal amount, bearing no interest or interest
at a rate that at the time of issuance is below market rates. We
will describe the federal income tax consequences and the
special considerations that apply to any series in the
applicable prospectus supplement.
Exchange,
Registration and Transfer
Registered securities of any series that are not global
securities will be exchangeable for other registered securities
of the same series and of like aggregate principal amount and
tenor in different authorized denominations. In addition, if
debt securities of any series are issuable as both registered
securities and bearer securities, the holder may choose, upon
written request, and subject to the terms of the applicable
indenture, to
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exchange bearer securities and the appropriate related coupons
of that series into registered securities of the same series of
any authorized denominations and of like aggregate principal
amount and tenor. Bearer securities with attached coupons
surrendered in exchange for registered securities between a
regular record date or a special record date and the relevant
date for interest payment shall be surrendered without the
coupon relating to the interest payment date. Interest will not
be payable with respect to the registered security issued in
exchange for that bearer security. That interest will be payable
only to the holder of the coupon when due in accordance with the
terms of the indenture. Bearer securities will not be issued in
exchange for registered securities.
You may present registered securities for registration of
transfer, together with a duly executed form of transfer, at the
office of the security registrar or at the office of any
transfer agent designated by us for that purpose with respect to
any series of debt securities and referred to in the applicable
prospectus supplement. This may be done without service charge
but upon payment of any taxes and other governmental charges as
described in the applicable indenture. The security registrar or
the transfer agent will effect the transfer or exchange upon
being satisfied with the documents of title and identity of the
person making the request. We have appointed the trustee as
security registrar for each indenture. If a prospectus
supplement refers to any transfer agents initially designated by
us with respect to any series of debt securities in addition to
the security registrar, we may at any time rescind the
designation of any of those transfer agents or approve a change
in the location through which any of those transfer agents acts.
If, however, debt securities of a series are issuable solely as
registered securities, we will be required to maintain a
transfer agent in each place of payment for that series, and if
debt securities of a series are issuable as bearer securities,
we will be required to maintain a transfer agent in a place of
payment for that series located outside of the United States in
addition to the security registrar. We may at any time designate
additional transfer agents with respect to any series of debt
securities.
In the event of any redemption, we will not be required to:
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issue, register the transfer of or exchange debt securities of
any series during a period beginning at the opening of business
15 days before any selection of debt securities of that
series to be redeemed and ending at the close of business on the
day of mailing of the relevant notice of redemption; or
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register the transfer of or exchange any registered security, or
portion thereof, called for redemption, except the unredeemed
portion of any registered security being redeemed in part.
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Payment
and Paying Agents
Unless we specify otherwise in the applicable prospectus
supplement, payment of principal of, and any premium and
interest on, bearer securities will be payable in accordance
with any applicable laws and regulations, at the offices of
those paying agents outside the United States that we may
designate at various times. We will make interest payments on
bearer securities and the attached coupons on any interest
payment date only against surrender of the coupon relating to
that interest payment date. No payment with respect to any
bearer security will be made at any of our offices or agencies
in the United States or by check mailed to any U.S. address
or by transfer to an account maintained with a bank located in
the United States. If, however, but only if, payment in
U.S. dollars of the full amount of principal of, and any
premium and interest on, bearer securities denominated and
payable in U.S. dollars at all offices or agencies outside
the United States is illegal or effectively precluded by
exchange controls or other similar restrictions, then those
payments will be made at the office of our paying agent in the
Borough of Manhattan, The City of New York.
Unless we specify otherwise in the applicable prospectus
supplement, payment of principal of, and any premium and
interest on, registered securities will be made at the office of
the paying agent or paying agents that we designate at various
times. At our option, however, we may make interest payments by
check mailed to the address, as it appears in the security
register, of the person entitled to the payments. Unless we
specify otherwise in the applicable prospectus supplement, we
will make payment of any installment of interest on registered
securities to the person in whose name that registered security
is registered at the close of business on the regular record
date for such interest.
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Unless we specify otherwise in the applicable prospectus
supplement, the Corporate Trust Office of the trustee in
the Borough of Manhattan, The City of New York, will be
designated:
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as our sole paying agent for payments with respect to debt
securities that are issuable solely as registered
securities; and
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as our paying agent in the Borough of Manhattan, The City of New
York, for payments with respect to debt securities, subject to
the limitation described above in the case of bearer securities,
that are issuable solely as bearer securities or as both
registered securities and bearer securities.
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We will name any paying agents outside the United States and any
other paying agents in the United States initially designated by
us for the debt securities in the applicable prospectus
supplement. We may at any time designate additional paying
agents or rescind the designation of any paying agent or approve
a change in the office through which any paying agent acts. If,
however, debt securities of a series are issuable solely as
registered securities, we will be required to maintain a paying
agent in each place of payment for that series. If debt
securities of a series are issuable as bearer securities, we
will be required to maintain:
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a paying agent in the Borough of Manhattan, The City of New
York, for payments with respect to any registered securities of
the series and for payments with respect to bearer securities of
the series in the circumstance described above, but not
otherwise; and
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a paying agent in a place of payment located outside the United
States where debt securities of that series and any attached
coupons may be presented and surrendered for payment.
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If, however, the debt securities of that series are listed on
the London Stock Exchange, the Luxembourg Stock Exchange or any
other stock exchange located outside the United States, and if
the stock exchange requires it, we will maintain a paying agent
in London or Luxembourg or any other required city located
outside the United States for those debt securities.
All monies we pay to a paying agent for the payment of principal
of, and any premium or interest on, any debt security or coupon
that remains unclaimed at the end of two years after becoming
due and payable will be repaid to us. After that time, the
holder of the debt security or coupon will look only to us for
payments out of those repaid amounts.
Global
Securities
The debt securities of a series may be issued in whole or in
part in the form of one or more global certificates that we will
deposit with a depository identified in the applicable
prospectus supplement. Global securities may be issued in either
registered or bearer form and in either temporary or permanent
form. Unless and until it is exchanged in whole or in part for
the individual debt securities it represents, a global security
may not be transferred except as a whole:
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by the applicable depository to a nominee of the depository;
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by any nominee to the depository itself or another nominee; or
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by the depository or any nominee to a successor depository or
any nominee of the successor.
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To the extent not described below and under the heading
Book-Entry Securities, we will describe the terms of
the depository arrangement with respect to a series of debt
securities in the applicable prospectus supplement. We
anticipate that the following provisions will generally apply to
depository arrangements.
As long as the depository for a global security, or its nominee,
is the registered owner of that global security, the depository
or nominee will be considered the sole owner or holder of the
debt securities represented by the global security for all
purposes under the applicable indenture. Except as provided
under Book-Entry Securities or in any applicable
prospectus supplement, owners of beneficial interests in a
global security:
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will not be entitled to have any of the underlying debt
securities registered in their names;
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will not receive or be entitled to receive physical delivery of
any of the underlying debt securities in definitive
form; and
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will not be considered the owners or holders under the indenture
relating to those debt securities.
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The laws of some states require that some purchasers of
securities take physical delivery of securities in definitive
form. These laws may impair your ability to transfer beneficial
interests in a global security.
Payments of principal of, and any premium and interest on,
individual debt securities represented by a global security
registered in the name of a depository or its nominee will be
made to the depository or its nominee as the registered owner of
the global security representing such debt securities. Neither
we, the trustee, any paying agent nor the registrar for the debt
securities will be responsible for any aspect of the records
relating to or payments made by the depository or any
participants on account of beneficial interests of the global
security.
For a description of the depository arrangements for global
securities held by The Depository Trust Company, see
Book-Entry Securities.
The
Senior Indenture Limits Our Ability to Incur Liens
Unless we specify otherwise in the applicable prospectus
supplement, the senior indenture provides that neither we nor
any of our subsidiaries may issue, assume or guarantee any
notes, bonds, debentures or other similar evidences of
indebtedness for money borrowed that are secured by a mortgage,
lien, pledge, security interest or other encumbrance
defined in the senior indenture as liens
upon any of our property unless we provide that any and all
senior debt securities then outstanding shall be secured by a
lien equally and ratably with any and all other obligations by
the lien. The restrictions on liens will not, however, apply to:
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liens existing on the date of the senior indenture or provided
for under the terms of agreements existing on the date thereof;
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liens securing all or part of the cost of exploring, producing,
gathering, processing, marketing, drilling or developing any of
our or our subsidiaries properties, or securing
indebtedness incurred to provide funds therefor or indebtedness
incurred to finance all or part of the cost of acquiring,
constructing, altering, improving or repairing any such property
or assets, or improvements used in connection with such
property, or securing indebtedness incurred to provide funds
therefor;
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liens securing only indebtedness owed by one of our subsidiaries
to us and/or
to one or more of our other subsidiaries;
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liens on the property of any corporation or other entity
existing at the time it becomes our subsidiary;
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liens on any property to secure indebtedness incurred in
connection with the construction, installation or financing of
pollution control or abatement facilities or other forms of
industrial revenue bond financing or indebtedness issued or
guaranteed by the United States, any state or any department,
agency or instrumentality of either or indebtedness issued to or
guaranteed by a foreign government, any state or any department,
agency or instrumentality of either or an international finance
agency or any division or department thereof, including the
World Bank, the International Finance Corp. and the Multilateral
Investment Guarantee Agency;
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any extension, renewal or replacement or successive extensions,
renewals or replacements of any lien referred to in the
foregoing clauses that existed on the date of the senior
indenture;
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other ordinary course liens, as defined in the
senior indenture, incurred in the ordinary course of our
business; or
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liens which secure limited recourse indebtedness, as
defined in the senior indenture.
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Notwithstanding the limitations on liens described above, we and
any one or more of our subsidiaries may issue, assume or
guarantee the following indebtedness secured by liens on assets
without regard to the limitations described above: indebtedness
in any aggregate principal amount that, together with the
aggregate
17
outstanding principal amount of all our other indebtedness and
indebtedness of any of our subsidiaries so secured (excluding
indebtedness secured by the permitted liens described above),
and the aggregate amount of sale/leaseback transaction
obligations that would otherwise be subject to the limitations
on sale/leaseback transactions described below, does not at the
time such indebtedness is incurred exceed 10 percent of our
consolidated net worth as shown on our most recent audited
consolidated balance sheet.
In addition, the following types of transactions, among others,
shall not be deemed to create indebtedness secured by liens:
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the sale, granting of liens with respect to or other transfer of
crude oil, natural gas or other petroleum hydrocarbons in place
for a period of time until, or in an amount such that, the
transferee will receive as a result of the transfer a specified
amount of money or of such crude oil, natural gas or other
petroleum hydrocarbons;
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the sale or other transfer of any other interest in property of
the character commonly referred to as a production payment,
overriding royalty, forward sale or similar interest; and
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the granting of liens required by any contract or statute in
order to permit us or one of our subsidiaries to perform any
contract or subcontract made with or at the request of the
U.S. government or any foreign government or international
finance agency, any state or any department thereof, or any
agency or instrumentality of either, or to secure partial,
progress, advance or other payments to us or one of our
subsidiaries by any of these entities pursuant to the provisions
of any contract or statute.
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The
Senior Indenture Limits Our Ability to Engage in Sale/Leaseback
Transactions
Unless we specify otherwise in the applicable prospectus
supplement, the senior indenture provides that neither we nor
any of our subsidiaries will enter into any arrangement with any
person, other than us or one of our subsidiaries, to lease any
property to ourselves or a subsidiary of ours for more than
three years. For the restriction to apply, we or one of our
subsidiaries must sell or plan to sell the property to the
person leasing it to us or our subsidiary or to another person
to which funds have been or are to be advanced on the security
of the leased property. The limitation does not apply where:
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either we or our subsidiary would be entitled to create debt
secured by a lien on the property to be leased in a principal
amount equal to or exceeding the value of that sale/leaseback
transaction;
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since the date of the senior indenture and within a period
commencing six months prior to the consummation of that
arrangement and ending six months after the consummation of the
arrangement, we have or our subsidiary has expended for any
property an amount up to the net proceeds of that arrangement,
including amounts expended for the acquisition, exploration,
drilling or development thereof, and for additions, alterations,
improvements and repairs to the property, and we designate such
amount as a credit against that arrangement, with any of that
amount not being so designated to be applied as set forth in the
next item below; or
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during or immediately after the expiration of the 12 months
after the effective date of that transaction, we apply to the
voluntary redemption, defeasance or retirement of the senior
debt securities and other senior indebtedness, as defined in the
senior indenture, an amount equal to the greater of the net
proceeds of the sale or transfer of the property leased in that
transaction and the fair value of such property at the time of
entering into such transaction, in either case adjusted to
reflect the remaining term of the lease and any amount we
utilize as set forth in the prior item; the amount will be
reduced by the principal amount of other senior indebtedness we
voluntarily retire within that
12-month
period.
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18
Each
Indenture Includes Events of Default
Unless otherwise specified in the applicable prospectus
supplement, any one of the following events will constitute an
event of default under each indenture with respect
to the debt securities of any series issued under that indenture:
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if we fail to pay any interest on any debt security of that
series when due, and the failure continues for 30 days;
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if we fail to pay principal of or any premium on the debt
securities of that series when due and payable, either at
maturity or otherwise;
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if we fail to perform or we breach any of our other covenants or
warranties in the applicable indenture or in the debt securities
of that series other than a covenant or warranty
included in the applicable indenture solely for the benefit of a
series of securities other than the debt securities of that
series and that breach of failure continues for
60 days after written notice as provided in the applicable
indenture;
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specified events of voluntary or involuntary bankruptcy,
insolvency or reorganization involving us or any of our
subsidiaries; or
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any other event of default provided with respect to the debt
securities of that series.
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Unless otherwise specified in the applicable prospectus
supplement, either of the following two events will also
constitute an event of default under the senior
indenture with respect to any senior debt securities:
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if any of our or any of our subsidiaries indebtedness, as
defined in the senior indenture, in excess of an aggregate of
$25,000,000 in principal amount is accelerated under any event
of default as defined in any mortgage, indenture or instrument
and the acceleration has not been rescinded or annulled within
30 days after written notice as provided in the senior
indenture has been given specifying such event of default and
requiring us to cause that acceleration to be rescinded or
annulled; or
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if we or any of our subsidiaries fail to pay, bond or otherwise
discharge within 60 days of entry, a judgment, court order
or uninsured monetary damage award against us in excess of an
aggregate of $25,000,000 which is not stayed on appeal or
otherwise being appropriately contested in good faith.
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If an event of default with respect to the debt securities of
any series, other than an event of default described in the item
above pertaining to events of bankruptcy, insolvency or
reorganization, occurs and is continuing, either the trustee or
the holders of at least 25 percent in aggregate principal
amount of the outstanding debt securities of that series may
declare the principal amount of the debt securities of that
series to be due and payable immediately. At any time after a
declaration of acceleration has been made, but before a judgment
or decree for payment of money due has been obtained by the
trustee, and subject to applicable law and other provisions of
the applicable indenture, the holders of a majority in aggregate
principal amount of the debt securities of that series may,
under some circumstances, rescind and annul such acceleration.
If an event of default occurs pertaining to events of
bankruptcy, insolvency or reorganization, the principal amount
and accrued interest or a lesser amount as provided
for in the debt securities of that series shall be
immediately due and payable without any declaration or other act
by the trustee or any holder.
Within 90 days after the occurrence of any default under an
indenture with respect to the debt securities of any series
issued under that indenture, the trustee must transmit notice of
the default to the holders of the debt securities of that series
unless the default has been cured or waived. The trustee may
withhold the notice, however, except in the case of a payment
default, if and so long as the board of directors, the executive
committee or a trust committee of directors or responsible
officers of the trustee has in good faith determined that the
withholding of the notice is in the interest of the holders of
debt securities of that series.
If an event of default occurs and is continuing with respect to
the debt securities of any series, the trustee may in its
discretion proceed to protect and enforce its rights and the
rights of the holders of debt securities of that series by all
appropriate judicial proceedings.
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Subject to the duty of the trustee during any default to act
with the required standard of care, the trustee is under no
obligation to exercise any of its rights or powers under an
indenture at the request or direction of any of the holders of
debt securities issued under that indenture, unless the holders
offer the trustee reasonable indemnity. Subject to indemnifying
the trustee, and subject to applicable law and other provisions
of each indenture, the holders of a majority in aggregate
principal amount of the outstanding debt securities of a series
issued under that indenture may direct the time, method and
place of conducting any proceeding for any remedy available to
the trustee, or exercising any trust or power conferred on the
trustee, with respect to the debt securities of that series.
We Are
Obligated to Purchase Debt Securities Upon a Change in
Control
If a change in control, as defined in each indenture, occurs, we
must mail within 15 days a written notice regarding the
change in control to the trustee and to every holder of the debt
securities of each series issued under that indenture. The
notice must also be published at least once in an authorized
newspaper, as defined in each indenture, and must state:
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the events causing the change in control and the date of the
change in control;
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the date by which notice of the change in control is required by
the applicable indenture to be given;
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the date, 35 business days after the occurrence of the change in
control, by which we must purchase debt securities we are
obligated to purchase pursuant to the selling holders
exercise of rights on change in control;
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the price we must pay for the debt securities we are obligated
to purchase;
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the name and address of the trustee;
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the procedure for surrendering debt securities to the trustee or
other designated office or agency for payment;
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a statement of our obligation to make prompt payment on proper
surrender of the debt securities;
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the procedure for holders exercise of rights of sale of
the debt securities; and
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the procedures by which a holder may withdraw such a notice
after it is given.
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After we give this notice we will be obligated, at the election
of each holder, to purchase the applicable debt securities.
Under each indenture, a change in control is deemed to have
occurred when:
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any event requiring the filing of any report under or in
response to Schedule 13D or 14D-1 pursuant to the
Securities Exchange Act of 1934 disclosing beneficial ownership
of either 50 percent or more of our common stock then
outstanding or 50 percent or more of the voting power of
our voting stock then outstanding;
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the completion of any sale, transfer, lease, or conveyance of
our properties and assets substantially as an entirety to any
person or persons that is not our subsidiary, as those terms are
defined in each indenture; or
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the completion of a consolidation or merger of Apache with or
into any other person or entity in a transaction in which either
we are not the sole surviving corporation or our common stock
existing before the transaction is converted into cash,
securities or other property and in which those exchanging our
common stock do not, as a result of the transaction, receive
either 75 percent or more of the survivors common
stock or 75 percent or more of the voting power of the
survivors voting stock.
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We will not purchase any debt securities if there has occurred
and is continuing an event of default under either indenture,
other than default in payment of the purchase price payable for
the debt securities upon change in control. In connection with
any purchase of debt securities after a change in control, we
will comply with all federal and state securities laws,
including, specifically,
Rule 13e-4,
if applicable, under the Securities Exchange Act of 1934, and
any related
Schedule 13E-4
required to be submitted under that rule.
20
Discharge,
Defeasance and Covenant Defeasance
We may discharge our obligations to holders of any series of
debt securities that have not already been delivered to the
trustee for cancellation and that:
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have become due and payable;
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will become due and payable within one year; or
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are scheduled for redemption within one year.
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To discharge the obligations with respect to a series of debt
securities, we must deposit with the trustee, in trust, an
amount of funds in U.S. dollars or in the foreign currency
in which those debt securities are payable sufficient to pay the
entire amount of principal of, and any premium or interest on,
those debt securities to the date of the deposit if those debt
securities have become due and payable or to the maturity of the
debt securities, as the case may be.
Unless we specify otherwise in the applicable prospectus
supplement, we may elect
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to defease and be discharged from any and all obligations with
respect to those debt securities, which we refer to as
legal defeasance; or
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with respect to any senior debt securities, to be released from
our obligations under the covenants described above in The
Senior Indenture Limits Our Ability to Incur Liens,
The Senior Indenture Limits Our Ability to Engage in Sale/
Leaseback Transactions or, with respect to any debt
securities, any other covenant obligation as may be provided for
under Section 301 of the applicable indenture and specified
in the applicable prospectus supplement, which we refer to as
covenant defeasance.
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In the case of discharge of our obligations or legal defeasance
we will still retain some obligations in respect of the debt
securities, including our obligations:
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to pay additional amounts, if any, upon the occurrence of
specified events of taxation, assessment or governmental charge
with respect to payments on the debt securities;
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to register the transfer or exchange of the debt securities;
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to replace temporary or mutilated, destroyed, lost or stolen
debt securities; and
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to maintain an office or agency with respect to the debt
securities and to hold monies for payment in trust.
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After a covenant defeasance, any omission to comply with the
obligations or covenants that have been defeased shall not
constitute a default or an event of default with respect to the
debt securities.
To elect either legal defeasance or covenant defeasance we must
deposit with the trustee, in trust, an amount, in
U.S. dollars or in the foreign currency in which the
relevant debt securities are payable at stated maturity, or in
government obligations, as defined below, or both, applicable to
such debt securities which through the scheduled payment of
principal and interest in accordance with their terms will
provide money in an amount sufficient to pay the principal of
and any premium and interest on those debt securities on their
scheduled due dates.
In addition, we can only elect legal defeasance or covenant
defeasance if, among other things:
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the applicable defeasance does not result in a breach or
violation of, or constitute a default under, the applicable
indenture or any other material agreement or instrument to which
we are a party or by which we are bound;
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no default or event of default with respect to the debt
securities to be defeased shall have occurred and be continuing
on the date of the establishment of the trust and, with respect
to legal defeasance only, at any time during the period ending
on the 91st day after the date of the establishment of the
trust; and
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we have delivered to the trustee an opinion of counsel to the
effect that the holders of the debt securities will not
recognize income, gain or loss for U.S. federal income tax
purposes as a result of the defeasance and will be subject to
U.S. federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if the
defeasance had not occurred, and the opinion of counsel, in the
case of legal defeasance, must refer to and be based upon a
letter ruling of the Internal Revenue Service received by us, a
Revenue Ruling published by the Internal Revenue Service or a
change in applicable U.S. federal income tax law occurring
after the date of the applicable indenture.
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Each of the indentures deems a foreign currency to be any
currency, currency unit or composite currency issued by the
government of one or more countries other than the United States
or by any recognized confederation or association of governments.
Each of the indentures defines government obligations as
securities which are not callable or redeemable at the option of
the issuer or issuers and are:
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direct obligations of the United States or the government or the
governments in the confederation that issued the foreign
currency in which the debt securities of a particular series are
payable, for the payment of which its full faith and credit is
pledged; or
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obligations of a person or entity controlled or supervised by
and acting as an agency or instrumentality of the United States
or the government or governments that issued the foreign
currency in which the debt securities of a particular series are
payable, the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United
States or that other government or governments.
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Government obligations also include a depositary receipt issued
by a bank or trust company as custodian with respect to any
government obligation described above or a specific payment of
interest on or principal of or any other amount with respect to
any government obligation held by that custodian for the account
of the holder of such depositary receipt, as long as, except as
required by law, that custodian is not authorized to make any
deduction from the amount payable to the holder of the
depositary receipt from any amount received by the custodian
with respect to the government obligation or the specific
payment of interest on or principal of or any other amount with
respect to the government obligation evidenced by the depositary
receipt.
Unless otherwise specified in the applicable prospectus
supplement, if, after we have deposited funds
and/or
government obligations to effect legal defeasance or covenant
defeasance with respect to debt securities of any series, either:
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the holder of a debt security of that series is entitled to, and
does, elect to receive payment in a currency other than that in
which such deposit has been made in respect of that debt
security; or
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a conversion event, as defined below, occurs in respect of the
foreign currency in which the deposit has been made, the
indebtedness represented by that debt security shall be deemed
to have been, and will be, fully discharged and satisfied
through the payment of the principal of, and any premium and
interest on, that debt security as that debt security becomes
due out of the proceeds yielded by converting the amount or
other properties so deposited in respect of that debt security
into the currency in which that debt security becomes payable as
a result of the election or conversion event based on:
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in the case of payments made pursuant to the first of the two
items in the list above, the applicable market exchange rate for
the currency in effect on the second business day prior to the
date of the payment; or
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with respect to a conversion event, the applicable market
exchange rate for such foreign currency in effect, as nearly as
feasible, at the time of the conversion event.
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Each indenture defines a conversion event as the
cessation of use of:
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a foreign currency other than the euro both by the government of
the country or the confederation which issued such foreign
currency and for the settlement of transactions by a central
bank or other public institutions of or within the international
banking community; or
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the euro both by governments within the Euro Zone and for the
settlement of transactions by central banks or other public
institutions of or within the Euro Zone or of or within the
international banking community.
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Unless otherwise provided in the applicable prospectus
supplement, all payments of principal of, and any premium and
interest on, any debt security that are payable in a foreign
currency that ceases to be used by the government or
confederation of issuance shall be made in U.S. dollars.
If we effect a covenant defeasance with respect to any debt
securities and the debt securities are declared due and payable
because of the occurrence of any event of default other than an
event of default with respect to which there has been covenant
defeasance, the amount in the foreign currency in which the debt
securities are payable, and government obligations on deposit
with the trustee, will be sufficient to pay amounts due on the
debt securities at the time of the stated maturity but may not
be sufficient to pay amounts due on the debt securities at the
time of the acceleration resulting from the event of default. We
would remain liable, however, for payment of the amounts due at
the time of acceleration.
The applicable prospectus supplement may further describe the
provisions, if any, permitting defeasance or covenant
defeasance, including any modifications to the provisions
described above, with respect to the debt securities of or
within a particular series.
Under each indenture, we are required to furnish to the trustee
annually a statement as to our performance of our obligations
under the indenture and as to any default in such performance.
We are also required to deliver to the trustee, within five days
after occurrence thereof, written notice of any event of default
or event that after notice or lapse of time or both would
constitute an event of default.
Modification
and Waiver
We and the trustee may, without the consent of holders, modify
provisions of each indenture for specified purposes, including,
among other things, curing ambiguities and maintaining the
qualification of the applicable indenture under the Trust
Indenture Act. We and the trustee may modify other provisions of
each indenture with the consent of the holders of not less than
two-thirds, in the case of the senior indenture, or a majority,
in the case of the subordinate indenture, in aggregate principal
amount of the debt securities of each series issued under that
indenture affected by the modification, except that the
provisions of the indentures, however, may not be modified
without the consent of the holder of each debt security affected
thereby if the modification would:
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change the stated maturity or any installment of the principal
of, or any premium or interest on, or any installment of
principal, or any additional amounts with respect to, any debt
security issued under that indenture;
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reduce the principal amount of, or premium or interest on, or
any additional amounts with respect to, any debt security issued
under that indenture;
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change the coin or currency in which any debt security issued
under that indenture or any premium or any interest on that debt
security or any additional amounts with respect to that debt
security is payable;
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if the debt securities are convertible or exchangeable, modify
the conversion or exchange provision in a manner adverse to
holders of that debt security;
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in the case of a subordinated debt security, modify any of the
subordination provisions in a manner adverse to holders of that
debt security;
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impair the right to institute suit for the enforcement of any
payment on or after the stated maturity of any debt securities
issued under that indenture or, in the case of redemption,
exchange or conversion, if applicable, on or after the
redemption, exchange or conversion date or, in the case of
repayment at the option of any holder, if applicable, on or
after the date for repayment or in the case of a change in
control, after the change in control purchase date;
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reduce the percentage and principal amount of the outstanding
debt securities, the consent of whose holders is required under
that indenture in order to take specified actions;
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change any of our obligations to maintain an office or agency in
the places and for the purposes required by that
indenture; or
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modify any of the above provisions.
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The holders of at least a majority in aggregate principal amount
of debt securities of any series issued under one of the
indentures may, on behalf of the holders of all debt securities
of that series, waive our compliance with specified restrictive
provisions of that indenture. The holders of not less than a
majority in aggregate principal amount of debt securities of any
series issued under one of the indentures may, on behalf of all
holders of debt securities of that series, waive any past
default and its consequences under that indenture with respect
to the debt securities of that series, except:
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a payment default with respect to debt securities of that
series; or
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a default of a covenant or provision of that indenture that
cannot be modified or amended without the consent of the holder
of the debt securities of that series.
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Consolidation,
Merger and Sale of Assets
We may, without the consent of the holders of the debt
securities, consolidate or merge with or into, or convey,
transfer or lease our properties and assets as an entirety, or
substantially as an entirety to, any person that is a
corporation or limited liability company organized and validly
existing under the laws of any domestic jurisdiction. We may
also permit any of those persons to consolidate with or merge
into us or convey, transfer or lease its properties and assets
substantially as an entirety to us, as long as:
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any successor person assumes our obligations on the debt
securities;
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no event of default under the applicable indenture has occurred
and is continuing after giving effect to the transaction;
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no event which, after notice or lapse of time or both, would
become an event of default under the applicable indenture has
occurred and is continuing after giving effect to the
transaction; and
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other conditions are met.
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DESCRIPTION
OF COMMON STOCK PURCHASE CONTRACTS AND UNITS
We may issue stock purchase contracts, representing contracts
entitling or obligating holders to purchase from or sell to us,
and us to sell to or purchase from the holders, a specified
number of shares of common stock at a future date or dates. The
price per share of common stock may be fixed at the time the
contracts are issued or may be determined by reference to a
specific formula set forth in the contracts. The common stock
purchase contracts may be issued separately or as a part of
units, which are referred to in this prospectus as common
stock purchase units, consisting of a common stock
purchase contract and, as security for the holders
obligations to purchase the common stock under the contracts,
the following:
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our senior debt securities or subordinated debt securities;
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our preferred stock;
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debt obligations of third parties, including U.S. Treasury
securities;
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senior or subordinated debt securities of Apache Australia,
Apache Canada
and/or
Apache Canada II;
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any other security described in the applicable prospectus
supplement; or
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any combination of the foregoing.
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The common stock purchase contracts may require us to make
periodic payments to the holders of the common stock purchase
units or vice versa, and such payments may be unsecured or
prefunded on some basis. The common stock purchase contracts may
require holders to secure their obligations thereunder in a
specified manner, and in some circumstances we may deliver newly
issued prepaid common stock purchase contracts, which are
referred to as prepaid securities, upon release to a
holder of any collateral securing such holders obligations
under the original contract.
The applicable prospectus supplement will describe the terms of
any common stock purchase contracts or units and, if applicable,
prepaid securities. The description in the prospectus supplement
will not purport to be complete and will be qualified in its
entirety by reference to the contracts, the collateral
arrangements and depositary arrangements, if applicable,
relating to such contracts or units and, if applicable, the
prepaid securities and the document pursuant to which such
prepaid securities will be issued.
DESCRIPTION
OF APACHE FINANCE, APACHE AUSTRALIA, APACHE CANADA
AND APACHE CANADA II DEBT SECURITIES AND APACHE
GUARANTEE
The following description, together with any applicable
prospectus supplement, summarizes all the material terms and
provisions of the debt securities that Apache Finance, Apache
Australia, Apache Canada
and/or
Apache Canada II, each of which we refer to in this section
as the applicable issuer, and the guarantee we may
offer under this prospectus and the related trust indentures.
The applicable issuer, unless the applicable issuer is Apache
Finance, will issue senior debt securities, and we will issue
our guarantee, under a senior indenture to be executed in the
future by us, as guarantor, the applicable issuer and The Bank
of New York Mellon Trust Company, N.A., as trustee. Apache
Finance will issue senior debt securities, and we will issue our
guarantee, under a senior indenture, dated as of
December 7, 1997, between Apache Finance, us, as guarantor,
and The Bank of New York Mellon Trust Company, N.A.
(formerly known as The Bank of New York Trust Company,
N.A., as
successor-in-interest
to JP Morgan Chase Bank, N.A., formerly known as The Chase
Manhattan Bank), as trustee. The senior indentures are
collectively referred to in this section as the senior
indentures. The senior debt securities of Apache Finance,
Apache Australia, Apache Canada and Apache Canada II are
collectively referred to in this section as the senior
debt securities.
The applicable issuer will issue the subordinated debt
securities, and we will issue our guarantee, under a
subordinated indenture to be executed in the future by us, as
guarantor, the applicable issuer and The Bank of New York Mellon
Trust Company, N.A., as trustee. The subordinated indentures are
collectively referred to in this section as the
subordinated indentures. The subordinated debt
securities of Apache Finance, Apache Australia, Apache Canada
and Apache Canada II are collectively referred to in this
section as the subordinated debt securities.
The senior indentures and the subordinated indentures are
together referred to in this section as the
indentures, and the senior debt securities and the
subordinated debt securities are together referred to in this
section as the debt securities. The indentures
contain and the debt securities, when issued, will contain
additional important terms and provisions. The Bank of New York
Mellon Trust Company, N.A., or any successor, in its capacity as
trustee under any or all of the indentures, is referred to as
the trustee for purposes of this section. A form of
each indenture is, and prior to their issuance, the debt
securities will be, filed as an exhibit to the registration
statement that includes this prospectus.
This summary of the indentures and the debt securities relates
to terms and conditions applicable to the debt securities
generally. The particular terms of any series of debt securities
will be summarized in the applicable prospectus supplement. If
indicated in the prospectus supplement, the terms of any series
may differ from the terms summarized below.
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None of the indentures limits the amount of debt securities the
applicable issuer may issue under it, and each provides that
additional debt securities of any series may be issued up to the
aggregate principal amount that we and the applicable issuer
authorize from time to time. Debt securities may also be issued
pursuant to the indentures in transactions exempt from the
registration requirements of the Securities Act. Those debt
securities will not be considered in determining the aggregate
amount of securities issued under this prospectus.
Unless otherwise indicated in the applicable prospectus
supplement, the debt securities will be issued in denominations
of $1,000 or integral multiples of $1,000.
Other than as described below under The Senior Indentures
Limit Our and the Applicable Issuers Ability to Incur
Liens, The Senior Indentures Limit Our and the
Applicable Issuers Ability to Engage in Sale/Leaseback
Transactions and The Applicable Issuer is Obligated
to Purchase Debt Securities upon a Change in Control, and
as may be described in the applicable prospectus supplement, the
indentures do not limit our ability to incur indebtedness or
afford holders of debt securities protection in the event of a
decline in our credit quality or if we are involved in a
takeover, recapitalization or highly leveraged or similar
transaction. Nothing in the indentures or the debt securities
will in any way limit the amount of indebtedness or securities
that we, the applicable issuer or our other subsidiaries, as
defined in the indentures, may incur or issue.
General
The prospectus supplement relating to the particular series of
debt securities being offered will specify the applicable issuer
and whether they are senior or subordinated debt securities and
the amounts, prices and terms of those debt securities. These
terms may include:
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the designation, aggregate principal amount and authorized
denominations of the debt securities;
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the date or dates on which the debt securities will mature;
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the percentage of the principal amount at which the debt
securities will be issued;
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the date on which the principal of the debt securities will be
payable;
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whether the debt securities will be issued as registered
securities, bearer securities or a combination of the two;
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whether the debt securities will be issued in the form of one or
more global securities and whether such global securities will
be issued in a temporary global form or permanent global form;
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the currency or currencies or currency unit or units of two or
more currencies in which debt securities are denominated, for
which they may be purchased, and in which principal and any
premium and interest is payable;
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if the currency or currencies or currency unit or units for
which debt securities may be purchased or in which principal and
any premium and interest may be paid is at the applicable
issuers election or at the election of a purchaser, the
manner in which an election may be made and its terms;
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the annual rate or rates, which may be fixed or variable, or the
method of determining the rate or rates at which the debt
securities will bear any interest, whether by remarketing,
auction, formula or otherwise;
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the date or dates from which any interest will accrue and the
date or dates on which such interest will be payable;
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a description of any provisions providing for redemption,
exchange or conversion of the debt securities at the applicable
issuers option, a holders option or otherwise, and
the terms and provisions of such a redemption, exchange or
conversion;
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information with respect to book-entry procedures relating to
global debt securities;
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sinking fund terms;
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if the provisions providing that the applicable issuer will pay
additional amounts, as defined in the indentures, on
the debt securities to any holder who is a United States
alien, as defined in the indentures, in respect of any
tax, assessment or governmental charge and that the applicable
issuer will have the option to redeem the debt securities rather
than pay any additional amounts are not applicable to the debt
securities, or any deletions from, or modifications or additions
to, those provisions. The term interest, as used in
this prospectus, includes any additional amounts;
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any modifications or additions to, or deletions of, any of the
events of default or covenants of Apache or the applicable
issuer with respect to the debt securities that are described in
this section;
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if either or both of the sections of the applicable indenture
relating to defeasance and covenant defeasance are not
applicable to the debt securities, or if any covenants in
addition to or other than those specified in the applicable
indenture shall be subject to covenant defeasance;
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any deletions from, or modifications or additions to, the
provisions of the indentures relating to satisfaction and
discharge in respect of the debt securities;
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any index or other method used to determine the amount of
payments of principal of, and any premium and interest on, the
debt securities; and
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any other specific terms of the debt securities.
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The applicable issuer is not obligated to issue all debt
securities of any one series at the same time and, unless the
applicable issuer specifies otherwise in the applicable
prospectus supplement, a series of debt securities may be
reopened for additional issuances of debt securities of that
series or to establish additional terms of that series. The debt
securities of any one series may not bear interest at the same
rate or mature on the same date.
If any of the debt securities are sold for foreign currencies or
foreign currency units or if the principal of, or any premium or
interest on, any series of debt securities is payable in foreign
currencies or foreign currency units, we will describe the
restrictions, elections, tax consequences, specific terms and
other information with respect to those debt securities and such
foreign currencies or foreign currency units in the applicable
prospectus supplement.
Guarantees
We will irrevocably and unconditionally guarantee to each holder
of a debt security issued by the applicable issuer and
authenticated and delivered by the trustee the due and punctual
payment of the principal of, and any premium and interest on,
the debt security, when and as it becomes due and payable,
whether at maturity, upon acceleration, by call for redemption,
repayment or otherwise in accordance with the terms of the debt
securities and of the applicable indenture. We will
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agree that, if an event of default occurs under the debt
securities, our obligations under the guarantees will be as if
we had issued the debt securities, and will be enforceable
irrespective of any invalidity, irregularity or unenforceability
of any series of the debt securities or the indenture or any
supplement thereto; and
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waive our right to require the trustee or the holders to pursue
or exhaust their legal or equitable remedies against the
applicable issuer before exercising their rights under the
guarantees.
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Conversion
and Exchange
The terms, if any, on which the debt securities of any series
are convertible into or exchangeable for shares of common stock,
shares of preferred stock or other securities, whether or not
issued by us or the applicable issuer, property or cash, or a
combination of any of the foregoing, will be set out in the
accompanying prospectus supplement. Such terms may include
provisions for conversion or exchange, either mandatory, at the
option of the holder, or at our option or the option of the
applicable issuer, in which the
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securities, property or cash to be received by the holders of
the debt securities would be calculated according to the factors
and at such time as described in the accompanying prospectus
supplement.
Ranking
Senior
Debt Securities
Unless otherwise indicated in the applicable prospectus
supplement, the applicable issuers obligation to pay the
principal of, and any premium and interest on, its senior debt
securities will be unsecured and will rank equally with all of
the applicable issuers other unsecured unsubordinated
indebtedness.
Subordinated
Debt Securities
The applicable issuers obligation to pay the principal of,
and any premium and interest on any subordinated debt securities
will be u