As filed with the Securities and Exchange Commission on December 3, 2001
Registration No.AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 2003
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
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Form------------------------
FORM S-3
REGISTRATION STATEMENT
UnderUNDER
THE SECURITIES ACT OF 1933
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HALLIBURTON COMPANY
(Exact name of registrant as specified in its charter)
HALLIBURTON COMPANY HALLIBURTON CAPITAL TRUST I
(Exact Name
DELAWARE 1401 MCKINNEY, SUITE 2400 76-2677995
(State or other jurisdiction of Registrant as Specified in its Charter) (Exact Name of Registrant as Specified in its Charter)
75-2677995 Applied ForHOUSTON, TEXAS 77010 (I.R.S. Employer
incorporation or organization) (713) 759-2600 Identification No.) (I.R.S. Employer Identification No.)
Delaware Delaware
(State of incorporation) (State of organization)
c/o Halliburton Company
3600 Lincoln Plaza 3600 Lincoln Plaza
500 North Akard Street 500 North Akard Street
Dallas, Texas 75201 Dallas, Texas 75201
(214) 978-2600 (214) 978-2600
(Address, including zip code, and telephone number,
(Address, including zip code, and
telephone
number, including area code, of
Registrant's including area code, of Registrant'sregistrant's principal executive
office) principal executive office)
With a copy to:
Lester L. Coleman, Esq. William E. Joor III
Executive Vice President and General Counsel Vinson & Elkins L.L.P.
Halliburton Company First City Tower
3600 Lincoln Plaza 1001 Fannin Street
500 North Akard Street Houston, Texas 77002-6760
Dallas, Texas 75201 (713) 758-2582
(214) 978-2600offices)
------------------------
ALBERT O. CORNELISON, JR.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
HALLIBURTON COMPANY
1401 MCKINNEY, SUITE 2400
HOUSTON, TEXAS 77010
(713) 759-2600
(Name, address, including zip code, and
telephone (Name, address, including zip code, and telephone
number, including area code, of agent for service) number, including area code,
of agent for service)
COPY TO:
DARRELL W. TAYLOR ANDREW M. BAKER
BAKER BOTTS L.L.P. BAKER BOTTS L.L.P.
910 LOUISIANA STREET 2001 ROSS AVENUE
HOUSTON, TEXAS 77002-4995 DALLAS, TEXAS 75201-2980
(713) 229-1234 (214) 953-6500
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Approximate date of commencement of proposed sale to the public:APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X][ ]
CALCULATION OF REGISTRATION FEE
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Proposed maximum Amount of
Title of each class of securities to be aggregate offering registration
registered price (1)(2)(3)(4) fee (9)=================================================================================================================================
PROPOSED
PROPOSED MAXIMUM MAXIMUM
AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TITLE OF SHARES TO BE REGISTERED REGISTERED UNIT PRICE REGISTRATION FEE
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Debt Securities...........................................................
3 1/8% Convertible Senior Notes due 2023...... $ 1,200,000,000(1) 100% $1,200,000,000(1) $97,080
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Common Stock, (5)..........................................................
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Stock Purchase Contracts..................................................
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Stock Purchase Units......................................................
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Preferred Stock...........................................................
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Depositary Shares (6).....................................................
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Warrants..................................................................
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Trust Preferred Securities of Halliburton Capital Trust I.................
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Guarantee of Trust Preferred Securities of Halliburton Capital Trust I (7)
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Trust Debentures (8)......................................................
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Total............................................................... $1,000,000,000 $11,727.27(9)
- ------------------------------------------------------------------------------------------------------------par value $2.50 per share(2).... 31,869,960 shares(3) -- (3) -- (3) -- (4)
=================================================================================================================================
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(1)Not specified as Estimated solely to each class of securities to be registered pursuant to
General Instruction II(D) to Form S-3.
(2)This Registration Statement also covers an indeterminatecompute the amount of
securities that may be issued in exchange for, or upon conversion or
exercise of, any securities registered hereunder that provide for
conversion, exercise or exchange. Any securities registered hereunder may be
sold separately or as units with other securities registered hereunder.
(3)Estimated solely for the purpose of calculating the registration fee pursuantunder Rule
457(o) under the Securities Act and exclusive of accrued interest.
(2) Includes the associated rights to Rule 457(o).
(4)The proposed maximum offering price per unit will be determined from timepurchase preferred stock, which initially
are attached to time byand trade with the Registrants in connection with, and at the time of, the issuance
by the Registrants of the securities registered hereunder.
(5)Each shareshares of common stock being registered
hereunder includes an associated
preferred share purchase right, which is not exercisable and is not
separately tradable until specified events occur. No separate consideration
will be received forhereby.
(3) Represents the preferred share purchase rights.
(6)The depositary shares registered hereunder will be evidenced by depositary
receipts issued pursuant to a deposit agreement. If the Registrants elect to
offer to the public fractional interests innumber of shares of preferredcommon stock then
depositary receipts will be distributed to those persons purchasing the
fractional interests and the shares will be issued to the depositary under
the deposit agreement.
(7)Includes the rights of holdersthat are currently issuable
upon conversion of the trust preferred securities under the
guarantee of trust preferred securities and back-up undertakings, consisting
of obligations by Halliburton Company, as described in the declaration of
trust, the applicable indenture and any supplemental indenture thereto, in
each case as further described in the Registration Statement. No separate
consideration will be received for any guarantees or any back-up
undertakings.
(8)Trust debentures may be issued and sold to the Halliburton Capital Trust I,
and the trust debentures may later be distributed to the holders of trust
preferred securities.
(9)Calculated pursuant to Rule 457(o) at the statutory3 1/8% Convertible Senior Notes due 2023, calculated
based on a conversion rate of $23926.5583 shares per $1,000,000 of securities registered and, pursuant to Rule 457(p), minus the
filing fee of $227,272.73 previously paid on July 7, 1997 by Dresser
Industries, Inc., a wholly owned subsidiary of Halliburton Company, in
connection with a Registration Statement on Form S-3 (No. 333-30817) that
was subsequently withdrawn. The aggregate$1,000 principal amount of
debt
securities may be increased if any debt securities are issued at an original
issue discount by an amount such that the offering pricenotes. Pursuant to be received by
the Registrants shall be equal to the amount to be registered.
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) ofRule 416 under the Securities Act of 1933, we are
also registering an indeterminable number of shares of common stock as may
be issued in connection with a stock split, stock dividend, recapitalization
or untilsimilar event.
(4) Pursuant to Rule 457(i), there is no additional filing fee with respect to
the Registration Statement shall become
effective on such date asshares of common stock issuable upon conversion of the Securities and Exchange Commission, acting
pursuant to said Section 8(a)notes because no
additional consideration will be received in connection with the exercise of
the conversion privilege.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
may determine.MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SECURITYHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION DATED DECEMBER 3, 2001OCTOBER 28, 2003
PROSPECTUS
[Logo of Halliburton Company][HALLIBURTON LOGO]
$1,200,000,000
HALLIBURTON COMPANY
$1,000,000,000
Debt3 1/8% CONVERTIBLE SENIOR NOTES DUE JULY 15, 2023
AND
COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
This prospectus relates to $1,200,000,000 aggregate principal amount of our
3 1/8% Convertible Senior Notes due July 15, 2023. We originally issued and sold
the notes to Citigroup Global Markets Inc., Goldman, Sachs & Co., J.P. Morgan
Securities Common Stock,
Stock Purchase Contracts, Stock Purchase Units,
Preferred Stock, Depositary Shares,
Warrants, Trust DebenturesInc., ABN AMRO Incorporated, HSBC and GuaranteeThe Royal Bank of Trust Preferred Securities
HALLIBURTON CAPITAL TRUST I
Trust Preferred Securities
GuaranteedScotland plc
in a private placement in June 2003. This prospectus will be used by Halliburton Company
-----------------selling
securityholders to resell their notes and the common stock issuable upon
conversion of the notes.
We will pay interest on the notes on January 15 and July 15 of each year.
The first interest payment will be made on January 15, 2004. The notes are not
guaranteed by any of our subsidiaries.
The notes will mature on July 15, 2023. Holders may offerconvert the notes into
shares of our common stock (unless earlier redeemed or repurchased by us) under
the following circumstances: (1) if the price of our common stock issuable upon
conversion reaches specified thresholds described in this prospectus, (2) if we
call the notes for redemption, (3) upon the occurrence of specified corporate
transactions described in this prospectus or (4) if the credit ratings assigned
to the notes decline below the levels described in this prospectus. Upon
conversion, we will have the right to deliver, in lieu of common stock, cash or
a combination of cash and sell, from time to time:
. debt securities;
.common stock. The initial conversion rate is 26.5583
shares of common stock;
. sharesstock per each $1,000 principal amount of preferred stock, which may be issued as depositary shares
evidenced by depositary receipts;
. warrantsnotes. This is
equivalent to purchase debt securities, preferred stock, depositary shares
or common stock;
. stock purchase contracts;
. stock purchase units;
. trust debentures to be purchased by the Halliburton Capital Trust I; or
. a guaranteean initial conversion price of trust preferred securities sold by the Halliburton Capital
Trust I.
The Halliburton Capital Trust I may offer and sell, from time to time, trust
preferred securities representing undivided beneficial interests in the assets
of the Halliburton Capital Trust I. The aggregate initial public offering
prices of the securities offered by Halliburton Company and the Halliburton
Capital Trust I will not exceed $1,000,000,000.
You should carefully consider the matters discussed under the caption "Risk
Factors" beginning on page 7.
This prospectus provides you with a general description of the securities
that may be offered. Each time securities are sold, we will provide a
supplement to this prospectus that contains specific information about the
offering and the terms of the securities. The supplement may also add, update
or change information contained in this prospectus. You should carefully read
this prospectus and any supplement before you invest in any of our securities.$37.65 per share. Our common stock
is listed on the New York Stock Exchange and the Swiss Exchange under the symbol
"HAL."
Neither"HAL". On October 27, 2003, the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is accurate or complete. Any representation to the contrary is
a criminal offense.
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This prospectus is dated , 200_
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
TABLE OF CONTENTS
About This Prospectus.................................................................... 1
Where You Can Find More Information...................................................... 2
Information We Incorporate by Reference.................................................. 2
Uncertainty of Forward-Looking Statements................................................ 3
Halliburton Company...................................................................... 5
Halliburton Capital Trust I.............................................................. 6
Risk Factors............................................................................. 7
Use of Proceeds.......................................................................... 10
Ratios of Combined Fixed Charges and Preference Dividends to Earnings.................... 11
Description of Debt Securities........................................................... 11
Description of Trust Securities.......................................................... 25
Depositary Procedures.................................................................... 36
Description of Trust Debentures.......................................................... 39
Description of Guarantee................................................................. 44
Relationship Among the Trust Preferred Securities, the Trust Debentures and the Guarantee 47
Description of Capital Stock............................................................. 49
Description of Depositary Shares......................................................... 52
Description of Warrants.................................................................. 55
Description of Stock Purchase Contracts.................................................. 57
Plan of Distribution..................................................................... 57
Validity of Securities................................................................... 59
Experts.................................................................................. 59
We have not authorized any dealer, salesman or other person to give any
information or to make any representation other than those contained or
incorporated by reference in this prospectus and the accompanying prospectus
supplement. You should only rely upon any information or representation
contained or incorporated by reference in this prospectus or the accompanying
prospectus supplement. This prospectus and the accompanying prospectus
supplement is only an offer to sell or a solicitation of an offer to buy the
registered securities to which they relate. This prospectus and the
accompanying prospectus supplement are not an offer to sell or a solicitation
of an offer to buy securities in any jurisdiction to any person to whom it is
unlawful to make an offer or solicitation in that jurisdiction. The information
contained in this prospectus and the accompanying prospectus supplement is
accurate as of the datesclosing price for our common stock on their covers. When we deliver this prospectus or a
prospectus supplement or make a sale pursuant to this prospectus, we are not
implying that the information is current as of the date of the delivery or sale.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission, which we refer to as the
"SEC," using a "shelf" registration process. Under this shelf process, we may,
over time, sell any combination of the securities described in this prospectus
in one or more offerings up to a total dollar amount of $1 billion or the
equivalent denominated in foreign currencies. 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. This prospectus does not contain
all of the information included in the registration statement. For a complete
understanding of the offering of securities, you should refer to the
registration statement relating to this prospectus, including its exhibits. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described under the heading
"Where You Can Find More Information."
In this prospectus, references to "Halliburton," "the Company," "we," "us"
and "our" refer to Halliburton Company, and not to the Halliburton Capital
Trust I, unless we state otherwise or the context indicates otherwise.
References to the "Trust" refer to the Halliburton Capital Trust I.
1
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934. You may
obtain copies of this information by mail from the Public Reference Room of the
SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You
may obtain information on the operation of the Public Reference Room by calling
the SEC at (800) SEC-0330.
The SEC also maintains an internet web site that contains reports, proxy
statements and other information about issuers, like us, who file reports
electronically with the SEC. The address of that site is http://www.sec.gov.
You may also inspect reports, proxy statements and other information about
us at the offices of the New
York Stock Exchange Inc., 20 Broad Street, New
York, New York 10005.
INFORMATION WE INCORPORATE BY REFERENCE
The SEC allowswas $24.34 per share.
On or after July 15, 2008, we have the option to redeem all or a portion of
the notes that have not been previously converted or repurchased at the
redemption prices set forth in this prospectus. You have the option, subject to
certain conditions, to require us to incorporaterepurchase any notes held by reference the information we file with
them, which means:
. documents so incorporated are considered partyou on July
15, 2008, July 15, 2013 and July 15, 2018 or upon a fundamental change as
described in this prospectus, at a price equal to 100% of the prospectus;
. we can disclose important informationprincipal amount
of the notes plus accrued interest and additional amounts owed, if any, to youthe
date of repurchase.
The notes are our senior unsecured obligations and rank equally with all
our other existing and future senior unsecured indebtedness. The notes are
evidenced by referring you to those
documents;global notes deposited with a custodian for and . information that we file with the SECregistered in the
futurename of a nominee of The Depository Trust Company. Except as described in this
prospectus, beneficial interests in a global note is shown on, and transfers
thereon will automatically
update this prospectus.
We incorporatebe effected only through, records maintained by reference the documents listed below which we have
previously filed with the SEC under the Securities Exchange Act of 1934:
. The description of our common stock contained in our Registration
Statement on Form 8-B, as filed with the SEC on December 12, 1996.
.Depository
Trust Company and its direct and indirect participants.
INVESTING IN THE NOTES AND THE COMMON STOCK ISSUABLE UPON THEIR CONVERSION
INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 12.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The description of our preferred stock purchase rights contained in our
Registration Statement on Form 8-B, as filed with the SEC on December 12,
1996.
. Our Annual Report on Form 10-K for the year ended December 31, 2000.
. Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
. Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.
. Our Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.
. Our Current Reports on Form 8-K or Form 8-K/A, filed with the SEC on
January 2, 2001, January 3, 2001, February 2, 2001, February 2, 2001,
February 20, 2001, March 6, 2001, March 13, 2001, March 23, 2001, April
11, 2001, April 27, 2001, May 1, 2001, May 10, 2001, May 16, 2001, June 7,
2001, June 29, 2001, July 12, 2001, July 20, 2001, July 27, 2001, July 27,
2001, October 19, 2001, October 26, 2001 and October 30, 2001, November 6,
2001, November 7, 2001 and November 27, 2001.
We also incorporate by reference each of the documents that we file with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 after the date of this prospectus until we sell all of the securities
described in this prospectus.
You may request a copy of these filings (other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing)
at no cost, by writing or telephoning us at the following address:
2, 2003.
Halliburton Company
3600 Lincoln Plaza
500 North Akard Street
Dallas, Texas 75201
Attention: Investor Relations
(214) 978-2600
Our web site address is www.halliburton.com. The information on our web site
is not incorporated by reference into this prospectus.
UNCERTAINTYYOU SHOULD RELY ONLY ON THE INFORMATION WE HAVE PROVIDED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT
AUTHORIZED ANY PERSON (INCLUDING ANY SALESMAN OR BROKER) TO PROVIDE YOU WITH
ADDITIONAL OR DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD
ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS
ACCURATE ONLY AS OF THE DATE ON THE FRONT OF THAT DOCUMENT AND THAT ANY
INFORMATION WE HAVE INCORPORATED BY REFERENCE IS ACCURATE ONLY AS OF THE DATE OF
THE DOCUMENT INCORPORATED BY REFERENCE.
TABLE OF CONTENTS
PAGE
----
FORWARD-LOOKING STATEMENTS.................................. i
WHERE YOU CAN FIND MORE INFORMATION......................... ii
SUMMARY..................................................... 1
RISK FACTORS................................................ 12
USE OF PROCEEDS............................................. 37
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY............. 37
DESCRIPTION OF ANTICIPATED INDEBTEDNESS..................... 38
DESCRIPTION OF NOTES........................................ 44
REGISTRATION RIGHTS......................................... 65
DESCRIPTION OF CAPITAL STOCK................................ 67
SELLING SECURITYHOLDERS..................................... 72
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES...... 78
CERTAIN ERISA CONSIDERATIONS................................ 85
PLAN OF DISTRIBUTION........................................ 87
LEGAL MATTERS............................................... 89
EXPERTS..................................................... 89
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FORWARD-LOOKING STATEMENTS
In this document, we make forward-looking statements that include
assumptions as to how we may perform in the future. You will find many of these
statements:
. in the documents incorporated by reference under "Incorporation of Certain
Documents by Reference" in this prospectus; and
. under "Halliburton" and "Use of Proceeds."
Also, when we use words like "may," "may not," "believes," "does not
believe," "expects," "does not expect," "anticipates," "does not anticipate"
and similar expressions, we are making forward-looking statements. These
statements should be viewed with caution.
The Private Securities Litigation Reform Act of 1995 provides safe harbor
provisions for forward-looking information. Forward-looking information is based
on projections and estimates, not historical information. Some statements in
this prospectus and the accompanying prospectus supplementdocuments incorporated by reference herein are
forward-looking.forward-looking and use words like "may," "may not," "believe," "do not
believe," "expect," "do not expect," "plan," "does not plan," "anticipate," "do
not anticipate," and other expressions. We may also provide oral or written
forward-looking information in other materials we release to the public.
Forward-looking information involves risks and uncertainties.
Forward-looking information that we provideuncertainties and reflects our
best judgment based on current information. Our results of operations can be
affected by inaccurate assumptions that we make or by known or unknown risks and
uncertainties. In addition, other factors may affect the accuracy of our
forward-looking information. As a result, no forward-looking information can be
guaranteed. Actual events and the results of operations may vary materially.
While it is not possible to identify all factors, we continue to face many
risks and uncertainties that could cause actual results to differ materially
from the results expressed or implied by our
forward-looking statements, including:
Geopoliticalincluding the risks described in "Risk Factors" and
Legal
. trade restrictionsin our Annual Report on Form 10-K for the year ended December 31, 2002, our
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2003 and economic embargoes imposed by the United StatesJune
30, 2003 and other countries;
. unsettled political conditions, war, the effectsCurrent Report on Form 8-K dated as of terrorism, civil
unrest, currency controls and governmental actions in the numerous
countries in which we operate;
. operations in countries with significant amounts of political risk,
including, for example, Algeria, Angola, Libya, Nigeria, and Russia;
. changes in foreign exchange rates;
. changes in governmental regulations in the numerous countries in which we
operate including, for example, regulations that:
. encourage or mandate hiring local contractors; and
3
. require foreign contractors to employ citizens of, or purchase supplies
from, a particular jurisdiction;
. litigation, including, for example, contract disputes, asbestos
litigation, insurance litigation, and environmental litigation; and
. environmental laws, including, for example, those that require emission
performance standards for facilities;
Weather Related
. the effects of severe weather conditions, including, for example,
hurricanes and tornadoes, on operations and facilities; and
. the impact of prolonged severe or mild weather conditions on the demand
for and price of oil and natural gas;
Customers
. the magnitude of governmental spending and outsourcing for military and
logistical support of the type that we provide;
. changes in capital spending by customers in the oil and gas industry for
exploration, development, production, processing, refining, and pipeline
delivery networks;
. changes in capital spending by governments for infrastructure projects of
the sort that we perform;
. consolidation of customers in the oil and gas industry; and
. claim negotiations with engineering and construction customers on cost
variances and change orders on major projects;
Industry
. technological and structural changes in the industries that we serve;
. sudden changes in energy prices that could undermine the fundamental
strength of the world economy or our customers;
. changes in the price of oil and natural gas, resulting from:
. OPEC's ability to set and maintain production levels and prices for oil;
. the level of oil production by non-OPEC countries;
. the policies of governments regarding exploration for and production and
development of their oil and natural gas reserves; and
. the level of demand for oil and natural gas;
. changes in the price or the availability of commodities that we use;
. risks that result from entering into fixed fee engineering, procurement
and construction projects where failure to meet schedules, cost estimates
or performance targets could result in non-reimbursable costs that cause
the project not to meet expected profit margins;
. risks that result from entering into complex business arrangements for
technically demanding projects where failure by one or more parties could
result in monetary penalties; and
. the risk inherent in the use of derivative instruments of the sort that we
use that could cause a change in value of the derivative instruments as a
result of:
4
. adverse movements in foreign exchange rates, interest rates, or
commodity prices, or
. the value and time period of the derivative being different than the
exposures or cash flows being hedged;
Personnel and Mergers/Reorganizations/Dispositions
. increased competition in the hiring and retention of employees in specific
areas, including, for example, energy services operations, accounting and
finance;
. integration of acquired businesses into us, including:
. standardizing information systems or integrating data from multiple
systems;
. maintaining uniform standards, controls, procedures and policies; and
. combining operations and personnel of acquired businesses with ours;
. effectively reorganizing our operations and personnel;
. replacing discontinued lines of businesses with acquisitions that add
value and complement our core businesses; and
. successful completion of planned dispositions.October 28, 2003.
In addition, future trends for pricing, margins, revenues and profitability
remain difficult to predict in the industries we serve. In lightWe do not assume any
responsibility to publicly update any of these
risks, uncertainties and assumptions, theour forward-looking statements
referred
to in this prospectus might not occur. We undertake no obligation to update
publicly or revise any forward-looking statements,regardless of whether factors change as a result of new information, future
events or otherwise.for any other reason. You should consider carefully the forward-looking statements set forth in:
. "Management's Discussion and Analysis of Financial Condition and Results
of Operations," "Business" and "Legal Proceedings"review any additional disclosures we
make in our press releases and our reports on Forms 10-K, 10-Q and 8-K filed
with or furnished to the SEC. We also suggest that you listen to our quarterly
earnings release conference calls with financial analysts.
i
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), pursuant to which we file annual,
reportquarterly and current reports, proxy statements and other information with the
SEC. You can read and copy any materials we file with the SEC at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You
also can obtain additional information about the operation of the SEC's public
reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a
web site that contains information we file electronically with the SEC, which
you can access over the Internet at www.sec.gov, and our electronic SEC filings
are also available from our web site at www.halliburton.com. Information
contained on Halliburton's web site or any other web site is not incorporated
into this prospectus and does not constitute a part of this prospectus. You can
also obtain information about us at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005.
The following documents are incorporated into this prospectus by this
reference. They disclose important information that each holder should consider
when deciding whether to execute the letter of transmittal and consent.
- Our Annual Report on Form 10-K for the fiscal year ended December 31,
2000, and
. "Management's Discussion and Analysis of Financial Condition and Results
of Operations" in our quarterly report2002;
- Our Quarterly Report on Form 10-Q for the periodquarters ended SeptemberMarch 31, 2003
and June 30, 2001,
which sections2003;
- Our Current Report on Form 8-K dated as of October 28, 2003; and
- The description of our common stock (including the related preferred
share purchase rights) contained in our Form 8-B filed December 12, 1996,
as we may update that description from time to time.
All documents we file with the SEC pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this prospectus and prior to the
termination of the offering are also incorporated by reference in this
prospectus. Information incorporated by reference is considered to be a part of
this prospectus, and later information filed with the SEC prior to the
termination of the offering will automatically update and supersede this
information.
We will provide without charge to each person to whom a copy of this
prospectus has been delivered, upon the written or oral request of such person,
a copy of any and all of the documents that have been or may be incorporated by
reference in this prospectus, except that exhibits to such documents will not be
provided unless they are specifically incorporated by reference into such
documents. Requests for copies of any such document should be directed to:
Halliburton Company
1401 McKinney, Suite 2400
Houston, Texas 77010
Attention: Albert O. Cornelison, Jr.
Executive Vice President and General Counsel
Telephone: (713) 759-2600
ii
SUMMARY
The following summary should be read together with the information
contained in other parts of this prospectus and the documents we incorporate by
reference. You should carefully read this prospectus and the documents we
incorporate by reference to fully understand the terms of the notes as well as
the tax and other considerations that are important to you in making a decision
about whether to invest in the notes and the common stock issuable upon their
conversion. In this prospectus, we refer to Halliburton Company and its
subsidiaries as "we," "us," "our" or "Halliburton," unless we specifically
indicate otherwise or the context clearly indicates otherwise.
HALLIBURTON COMPANY
General.GENERAL DESCRIPTION OF BUSINESS
We were established in 1919. We provide energyare one of the world's largest oilfield services companies and a leading
provider of engineering and construction services for the energy industry. Ourservices. We had total revenues for the
year ended December 31, 2000 were $11.92002 of approximately $12.6 billion, and total revenues
for the six months ended June 30, 2003 of approximately $6.7 billion. At October 31, 2001,We have
five business segments that are organized around how we manage our market capitalization was approximately $10.6 billion. At September 30, 2001,
we employed approximately 88,000 people.
Description ofbusiness:
Drilling and Formation Evaluation, Fluids, Production Optimization, Landmark and
Other Energy Services and Products. We have two business segments:
The Energy Services Group; and
Thethe Engineering and Construction Group. TheWe sometimes
refer to the combination of the Drilling and Formation Evaluation, Fluids,
Production Optimization and Landmark and Other Energy Services segments as the
Energy Services Group. Through our Energy Services Group, provideswe provide a
widecomprehensive range of services,discrete and integrated products and integrated solutions to customers involved inservices for the
exploration, development and production of oil and naturalgas. We serve major national
and independent oil and gas exploration
and production.
5
Thecompanies throughout the world. Our Engineering and
Construction Group (known as KBR) provides a wide range of services to energy
and industrial customers and governmentgovernmental entities worldwide.
DRILLING AND FORMATION EVALUATION
Our Drilling and Formation Evaluation segment is primarily involved in
drilling and evaluating the formations related to bore-hole construction and
initial oil and gas formation evaluation. The products and services in this
segment incorporate integrated technologies, which offer synergies related to
drilling activities and data gathering. The segment consists of drilling
services, including directional drilling and
measurement-while-drilling/logging-while-drilling; logging services; and drill
bits. Included in this business segment are Sperry-Sun, logging and perforating
and Security DBS. Also included is our Mono Pumps business, which we disposed of
in the first quarter of 2003.
FLUIDS
Our Fluids segment focuses on fluid management and technologies to assist
in the drilling and construction of oil and gas wells. Drilling fluids are used
to provide for well control, drilling efficiency, and as a means of removing
wellbore cuttings. Cementing services provide zonal isolation to prevent fluid
movement between formations, ensure a bond to provide support for the casing,
and provide wellbore reliability. Baroid and cementing, along with our equity
method investment in Enventure Global Technology, LLC, an expandable casing
joint venture, are included in this business segment.
PRODUCTION OPTIMIZATION
Our Production Optimization segment primarily tests, measures and provides
means to manage and/or improve well production once a well is drilled and, in
some cases, after it has been producing. This segment consists of:
- production enhancement services (including fracturing, acidizing, coiled
tubing, hydraulic workover, sand control and pipeline and process
services);
1
- completion products and services (including well completing equipment,
slickline and safety systems);
- tools and testing services (including underbalanced applications and
tubular conveyed perforating testing services); and
- subsea operations conducted in our 50% owned company, Subsea 7, Inc.
LANDMARK AND OTHER ENERGY SERVICES
Our Landmark and Other Energy Services segment provides integrated
exploration and production software information systems, consulting services,
real-time operations, smartwells and integrated solutions. Included in this
business segment are Landmark Graphics, Integrated Solutions, Real Time
Operations and our equity method investment in WellDynamics B.V., an intelligent
well completions joint venture. Also included are Wellstream, Bredero-Shaw and
European Marine Contractors Ltd., all of which have been sold.
ENGINEERING AND CONSTRUCTION GROUP
Our Engineering and Construction Group provides engineering, procurement,
construction, project management and facilities operation and maintenance for
oil and gas and other industrial and governmental customers. Our Engineering and
Construction Group offers:
- onshore engineering and construction activities, including engineering
and construction of liquefied natural gas, ammonia and crude oil
refineries and natural gas plants;
- offshore deepwater engineering and marine technology and worldwide
fabrication capabilities;
- government operations, construction, maintenance and logistics activities
for government facilities and installations;
- plant operations, maintenance and start-up services for both upstream and
downstream oil, gas and petrochemical facilities as well as operations,
maintenance and logistics services for the power, commercial and
industrial markets; and
- civil engineering, consulting and project management services.
BUSINESS STRATEGY
Our business strategy is to maintain global leadership in providing energy
services and products and engineering and construction services. We provide
these services and products to our customers as discrete services and products
and, when combined with project management services, as integrated solutions.
Our ability to be a global leader depends on meeting four key goals:
- establishing and maintaining technological leadership;
- achieving and continuing operational excellence;
- creating and continuing innovative business relationships; and
- preserving a dynamic workforce.
MARKETS AND COMPETITION
We are one of the world's largest diversified energy services and
engineering and construction services companies. We believe that our future
success will depend in large part upon our ability to offer a wide array of
services and products on a global scale. The industries we serve are highly
competitive with many substantial competitors for each segment. Competitive
factors impacting sales of our services and products include: price, service
delivery (including the ability to deliver services and products on an "as
needed, where needed" basis), service quality, product quality, warranty and
technical proficiency. While we
2
provide a wide range of discrete services and products, a number of customers
have indicated a preference for integrated services and solutions. In the case
of the Energy Services Group, integrated services and solutions relate to all
phases of exploration, development and production of oil, natural gas and
natural gas liquids. In the case of the Engineering and Construction Group,
integrated services and solutions relate to all phases of design, procurement,
construction, project management and maintenance of facilities primarily for
energy and government customers.
We conduct business worldwide in over 100 countries. In the first six
months of 2003, the United States represented 33% of our total revenue and the
United Kingdom represented 11%. No other country accounted for more than 10% of
our total revenue. Substantially all of our services and products are marketed
through our servicing and sales organizations.
RECENT DEVELOPMENTS
As we reported in our quarterly report on Form 10-Q for the quarter ended
June 30, 2003, we were sued in the District Court of Harris County, Texas by
Anglo Dutch (Tenge) L.L.C. and Anglo Dutch Petroleum International, Inc. for
allegedly breaching a confidentiality agreement related to an investment
opportunity we considered in the late 1990s in an oil field in the former Soviet
Republic of Kazakhstan. The plaintiffs claimed approximately $640.0 million in
damages. On October 24, 2003, a Harris County, Texas civil court jury returned a
verdict against a Halliburton subsidiary. The jury verdict plus attorney's fees
amount to approximately $77.0 million. We intend to file post-trial motions to
seek a reduction or elimination of the award. If the verdict becomes a judgment,
we intend to appeal the case. We will record a charge for the full amount
related to this case in the third quarter of 2003.
In October 2003, we closed an offering of $1.05 billion of floating and
fixed rate unsecured senior notes. The floating rate notes, with an aggregate
principal amount of $300.0 million, will mature on October 17, 2005 with an
interest rate equal to three-month LIBOR (London interbank offered rates) plus
1.5% paid quarterly. The fixed rate notes, with an aggregate principal amount of
$750.0 million, will mature on October 15, 2010 with an interest rate equal to
5 1/2% paid semi-annually. We intend to use a substantial portion of the net
proceeds ($1.041 billion) to fund a portion of the cash required to be
contributed to the trust for the benefit of the asbestos and silica claimants.
PROPOSED SETTLEMENT
In December 2002, we reached an agreement in principle that, if and when
consummated, would result in a settlement of asbestos and silica personal injury
claims against our subsidiaries DII Industries, Kellogg Brown & Root, Inc. and
their current and former subsidiaries with U.S. operations. Subsequently, in
2003, DII Industries and Kellogg Brown & Root entered into definitive written
agreements finalizing the terms of the agreements in principle with attorneys
representing more than 90% of the current asbestos and silica claimants.
The definitive agreements provide that:
- approximately $2.775 billion in cash, 59.5 million Halliburton shares
(valued at $1.4 billion using the stock price at September 30, 2003 of
$24.25 per share) and notes with a net present value of less than $100.0
million will be paid to one or more trusts for the benefit of current and
future asbestos and silica personal injury claimants upon receiving final
and non-appealable court confirmation of a plan of reorganization;
- DII Industries and Kellogg Brown & Root will retain rights to the first
$2.3 billion of any insurance proceeds with any proceeds received between
$2.3 billion and $3.0 billion going to the trusts;
- the agreement is to be implemented through a pre-packaged filing under
Chapter 11 of the United States Bankruptcy Code for DII Industries,
Kellogg Brown & Root and some of their subsidiaries with U.S. operations;
and
3
- the funding of the settlement amounts would occur upon receiving final
and non-appealable court confirmation of a plan of reorganization for DII
Industries and Kellogg Brown & Root and some of their subsidiaries with
U.S. operations in the Chapter 11 proceeding.
Among the prerequisites for concluding the proposed settlement are:
- arrangement of financing, in addition to the proceeds of our recent
offerings of $1.2 billion principal amount of convertible senior notes
and $1.05 billion principal amount of senior debt securities, for the
proposed settlement on terms acceptable to us to fund the cash amounts to
be paid in the settlement;
- obtaining approval of a plan of reorganization from at least the required
75% of known present asbestos claimants and from a majority of known
present silica claimants;
- Halliburton board approval; and
- obtaining final and non-appealable bankruptcy court approval and federal
district court confirmation of the plan of reorganization.
Many of these prerequisites are subject to matters and uncertainties beyond
our control. There can be no assurance that we will be able to satisfy the
prerequisites for completion of the settlement. As a result of an increase in
the estimated number of current asbestos claims, the cash required to fund the
settlement may modestly exceed $2.775 billion. If it does, we would need to
reach an agreement with the claimants' representatives to adjust the settlement
matrices to reduce the overall amounts, or we would need to increase the amounts
we would be willing to pay to resolve the asbestos and silica liabilities,
resulting in an additional condition to the Chapter 11 filing.
Unless and until we reach agreement with the claimants' representatives to
adjust the settlement matrices or we increase the amounts we would be willing to
pay, the attorneys representing the current asbestos claimants may not proceed
with the settlement or may attempt to renegotiate the settlement amount to
increase the aggregate amount of the settlement. Conversely, an increase in the
amount of cash required may make completing the proposed settlement more
difficult.
In the event we elect to adjust the settlement matrices to reduce the
average amounts per claim, a supplemental disclosure statement may be required,
and if so, the claimants potentially adversely affected by the adjustment may
have an opportunity to change their votes. The additional time to make such
supplemental disclosure and opportunity to change votes may result in a delay in
the Chapter 11 filing.
The settlement agreements with attorneys representing current asbestos
claimants grant the attorneys a right to terminate their definitive agreement on
ten days' notice. While no right to terminate any settlement agreement has been
exercised to date, there can be no assurance that claimants' attorneys will not
exercise their right to terminate the settlement agreements.
In July 2003, we also reached agreement with Harbison-Walker and the
asbestos creditors committee in the Harbison-Walker bankruptcy to consensually
extend the period of the stay contained in the bankruptcy court's temporary
restraining order until September 30, 2003. The court's temporary restraining
order, which was originally entered on February 14, 2002, stayed more than
200,000 pending asbestos claims against DII Industries. The stay expired by its
terms on September 30, 2003. Discovery on the claims that had previously been
stayed may begin as early as November 1, 2003, and trials on any of the claims
that had previously been stayed may commence as early as January 1, 2004.
Notwithstanding expiration of the stay, asbestos and silica claims against DII
Industries will automatically be stayed upon a Chapter 11 filing of DII
Industries, Kellogg Brown & Root and some of their subsidiaries with U.S.
operations.
As of September 22, 2003, DII Industries, Kellogg Brown & Root and other
affected Halliburton subsidiaries began the solicitation process in connection
with the planned asbestos and silica settlement. A disclosure statement, which
incorporates and describes the Chapter 11 plan of reorganization and trust
distribution procedures, has been mailed to asbestos and silica claimants for
the purpose of soliciting votes
4
to approve the plan of reorganization prior to filing a Chapter 11 proceeding.
We cannot predict the exact timing of the completion of the prerequisites to
making the Chapter 11 filing, but we expect that they could be completed on a
timeline that would allow the Chapter 11 filing to be made in November 2003. We
furnished a copy of the disclosure statement to the SEC by filing a Current
Report on Form 8-K with the SEC on September 23, 2003. You may obtain a copy of
the disclosure statement from our web site at www.halliburton.com and from the
SEC at www.sec.com.
We continue to track legislative proposals for asbestos reform pending in
the U.S. Congress. We understand that the U.S. Senate is currently working on
draft legislation that would set up a national trust fund as the exclusive means
for recovery for asbestos-related disease. We are not certain as to what
contributions we would be required to make to such a trust, although we
anticipate that they would be substantial and that they would continue for a
number of years. In determining whether to approve the proposed settlement and
proceed with the Chapter 11 filing of DII Industries and Kellogg Brown & Root
and some of their subsidiaries with U.S. operations, the Halliburton Board of
Directors will take into account the then-current status of these legislative
initiatives.
---------------------
We are a Delaware corporation. Our principal executive office isoffices are located
at 3600 Lincoln Plaza, 500 North
Akard Street, Dallas,1401 McKinney, Suite 2400, Houston, Texas 75201,77010, and our telephone number at
that address is (713) 759-2600.
5
THE OFFERING
Issuer........................ Halliburton Company.
Securities Offered............ $1,200,000,000 principal amount of 3 1/8%
Convertible Senior Notes due July 15, 2023.
Maturity Date................. July 15, 2023.
Interest Payment Dates........ January 15 and July 15 of each year, beginning
January 15, 2004.
Conversion Rights............. You may convert your notes into shares of our
common stock (unless earlier redeemed or
repurchased) under any of the following
circumstances:
(1) during any calendar quarter (and only
during such calendar quarter) if the last
reported sale price of our common stock for
at least 20 trading days during the period
of 30 consecutive trading days ending on
the last trading day of the previous
calendar quarter is greater than or equal
to 120% of the conversion price per share
of our common stock on such last trading
day;
(2) if the notes have been called for
redemption;
(3) upon the occurrence of specified corporate
transactions described under "Description
of Notes -- Conversion of
Notes -- Conversion Upon Specified
Corporate Transactions;" or
(4) during any period in which the credit
ratings assigned to the notes by both
Moody's and Standard & Poor's are lower
than Ba1 and BB+, respectively, or the
notes are no longer rated by at least one
of these rating services or their
successors.
For each $1,000 principal amount of notes
surrendered for conversion, you initially will
be entitled to receive 26.5583 shares of our
common stock. This represents an initial
conversion price of $37.65 per share of common
stock. As described in this prospectus, the
conversion rate may be adjusted for certain
reasons. Except as otherwise described in this
prospectus, you will not receive any cash
payment representing accrued and unpaid
interest upon conversion of a note; however, we
will continue to pay additional amounts, if
any, on the notes and the telephonecommon stock issuable
upon conversion thereof to the holder in
accordance with the registration rights
agreement. Notes called for redemption may be
surrendered for conversion prior to the close
of business on the second business day
immediately preceding the redemption date.
Upon conversion, we will have a right to
deliver, in lieu of shares of our common stock,
cash or a combination of cash and common stock.
6
For more information, see "Description of
Notes -- Conversion of Notes."
Optional Redemption........... Prior to July 15, 2008, the notes will not be
redeemable. On or after July 15, 2008, we may
redeem for cash all or part of the notes at any
time, upon not less than 30 nor more than 60
days' notice before the redemption date by mail
to the trustee, the paying agent and each
holder of notes, for a price equal to 100% of
the principal amount of the notes to be
redeemed plus any accrued and unpaid interest
and additional amounts owed, if any, to the
redemption date. See "Description of
Notes -- Optional Redemption."
Purchase of Notes by Us at the
Option of the Holder.......... Holders have the right to require us to
purchase all or any portion of the notes for
cash on July 15, 2008, July 15, 2013 and July
15, 2018. In each case, we will pay a purchase
price equal to 100% of the principal amount of
the notes to be purchased plus any accrued and
unpaid interest and additional amounts owed, if
any, to the purchase date. See "Description of
Notes -- Purchase of Notes by Us at the Option
of the Holder."
Fundamental Change............ If we undergo a Fundamental Change (as defined
under "Description of Notes -- Fundamental
Change Requires Purchase of Notes by Us at the
Option of the Holder") prior to July 15, 2008,
holders will have the right, at their option,
to require us to purchase any or all of their
notes for cash, or any portion of the principal
amount thereof. The cash price we are required
to pay is equal to 100% of the principal amount
of the notes to be purchased plus accrued and
unpaid interest and additional amounts owed, if
any, to the Fundamental Change purchase date.
See "Description of Notes -- Fundamental Change
Requires Purchase of Notes by Us at the Option
of the Holder."
Covenants..................... The notes were issued under an indenture
containing covenants for your benefit. Among
other things, these covenants restrict our
ability to incur indebtedness secured by liens
under specified circumstances.
Ranking....................... The notes are our general, senior unsecured
indebtedness and rank equally with all of our
existing and future senior unsecured
indebtedness. The notes effectively rank junior
to any existing or future secured indebtedness,
unless and to the extent the notes are entitled
to be equally and ratably secured. We had no
outstanding secured indebtedness at June 30,
2003. In addition, the notes are effectively
subordinated to the existing and future
indebtedness and other liabilities of our
subsidiaries. At June 30, 2003, the aggregate
indebtedness of our subsidiaries was
approximately $396.0 million, and other
liabilities of our subsidiaries, including
trade payables, accrued compensation, advanced
billings, income taxes payable and other
liabilities (other than asbestos and
intercompany liabilities) were approximately
$4.4 billion, and accrued asbestos liabilities
were approximately $3.4 billion.
7
We expect to enter into (1) a senior unsecured
credit facility for an amount up to
approximately $1.0 billion, subject to
reduction, (2) an approximately $1.4 billion
senior secured letter of credit facility and
(3) an up to $700.0 million senior secured
revolving credit facility in replacement of our
existing $350.0 million credit facility. See
"Description of Anticipated Indebtedness." The
terms of the notes and the anticipated terms of
the new credit facilities currently contemplate
that the notes offered hereby and certain of
our outstanding debt securities will share in
collateral pledged to secure borrowings under
the new credit facilities if and when the total
of all our secured debt exceeds 5% of the
consolidated net tangible assets of Halliburton
and its subsidiaries. The anticipated terms of
the new credit facilities also currently
contemplate that the collateral pledged to
secure borrowings under the new credit
facilities will be released after (1)
completion of the Chapter 11 plan of
reorganization of DII Industries, Kellogg Brown
& Root and some of their subsidiaries with U.S.
operations, which will be used to implement the
proposed settlement, and (2) satisfaction of
the other conditions described in "Description
of Anticipated Indebtedness -- Conditions to
Release of Collateral."
No Subsidiary Guarantees...... While the notes are not guaranteed by any of
our subsidiaries, borrowings under the letter
of credit facility and revolving credit
facility described under "-- Ranking" above
will be guaranteed by some of our subsidiaries.
Accordingly, the notes are structurally
subordinated to the debt guaranteed by our
subsidiaries for the duration of the guarantee.
The anticipated terms of the new credit
facilities currently contemplate that any of
these subsidiary guarantees will be released
after (1) completion of the Chapter 11 plan of
reorganization of DII Industries, Kellogg Brown
& Root and some of their subsidiaries with U.S.
operations, which will be used to implement the
proposed settlement, and (2) satisfaction of
the other conditions described in "Description
of Anticipated Indebtedness -- Conditions to
Release of Collateral." For more information,
see "Description of Anticipated Indebtedness."
Form and Denomination of
Notes......................... The notes are represented by global notes in
fully registered form, without coupons,
deposited with a custodian for, and registered
in the name of a nominee of, The Depository
Trust Company. Beneficial interests in a global
note are shown on, and transfers of the global
notes will be effected only through, records
maintained by DTC and its participants. See
"Description of Notes -- Book-Entry System."
Use of Proceeds............... We will not receive any proceeds from the sale
by the selling securityholders of the notes or
the common stock issuable upon conversion of
the notes. See "Use of Proceeds."
8
Listing....................... The notes sold to qualified institutional
buyers are eligible for trading in The
Portal(SM)Market, a subsidiary of The Nasdaq
Stock Market, Inc.; however, the notes resold
pursuant to this prospectus will no longer
trade in The Portal(SM) Market. We do not
intend to apply for listing of the notes on any
securities exchange or for inclusion of the
notes in any automated quotation system. Our
common stock is listed on the New York Stock
Exchange under the symbol "HAL".
RISK FACTORS
You should carefully consider all of the information set forth or
incorporated by reference in this prospectus and, in particular, the specific
factors in the section of this prospectus entitled "Risk Factors" for an
explanation of certain risks of investing in the notes.
9
SUMMARY FINANCIAL DATA
The following table sets forth our summary consolidated financial data. We
derived the financial data for the six months ended June 30, 2003 from our
unaudited condensed consolidated financial statements included in our Quarterly
Report on Form 10-Q for the quarter ended June 30, 2003. In the second quarter
of 2003, we restructured our Energy Services Group into four segments and
restated our prior period segment results to reflect this restructuring. We
derived the financial data for the year ended December 31, 2002 from our Current
Report on Form 8-K dated as of October 28, 2003 which restates our 2002 Annual
Report on Form 10-K to reflect the new segment structure retroactively. Both of
these reports are incorporated in this prospectus by reference. You should read
this information in conjunction with our consolidated financial statements and
the related notes.
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2003 2002
---------------- ------------
(IN MILLIONS)
(UNAUDITED)
REVENUES:
Energy Services Group:
Drilling and Formation Evaluation......................... $ 793 $ 1,633
Fluids.................................................... 998 1,815
Production Optimization................................... 1,322 2,554
Landmark and Other Energy Services........................ 278 834
------- -------
Total Energy Services Group............................ 3,391 6,836
Engineering and Construction Group.......................... 3,268 5,736
------- -------
Total....................................................... $ 6,659 $12,572
======= =======
OPERATING INCOME (LOSS):
Energy Services Group:
Drilling and Formation Evaluation......................... $ 115 $ 160
Fluids.................................................... 123 202
Production Optimization................................... 183 384
Landmark and Other Energy Services........................ (6) (108)
------- -------
Total Energy Services Group............................ 415 638
Engineering and Construction Group.......................... (167) (685)
General corporate........................................... (35) (65)
------- -------
Total....................................................... $ 213 $ (112)
======= =======
Income from continuing operations before income taxes and
minority interest......................................... $ 191 $ (228)
Provision for income taxes.................................. (79) (80)
Minority interest in net income of consolidated
subsidiaries.............................................. (11) (38)
Income (loss) from continuing operations.................... 101 (346)
Income (loss) from discontinued operations.................. (24) (652)
Net income (loss)........................................... 69 (998)
OTHER FINANCIAL DATA:
Capital expenditures........................................ $ (229) $ (764)
Long-term borrowings (repayments), net...................... 1,038 (15)
Depreciation and amortization expense....................... 252 505
JUNE 30, DECEMBER 31,
2003 2002
-------- ------------
(IN MILLIONS)
(UNAUDITED)
FINANCIAL POSITION:
Net working capital......................................... $ 3,458 $ 2,288
Total assets................................................ 14,022 12,844
Property, plant and equipment, net.......................... 2,498 2,629
Long-term debt (including current maturities)............... 2,540 1,476
Shareholders' equity........................................ 3,559 3,558
Total capitalization........................................ 6,115 5,083
10
RATIO OF EARNINGS TO FIXED CHARGES
We have presented in the table below our historical consolidated ratio of
earnings to fixed charges for the periods shown.
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, --------------------------------
2003 2002 2001 2000 1999 1998
- ---------- ---- ---- ---- ---- ----
4.1 --(a) 5.2 2.3 2.4 --(a)
- ---------------
(a) For the year ended December 31, 2002, earnings were inadequate to cover
fixed charges by $283.0 million, and for the year ended December 31, 1998,
earnings were inadequate to cover fixed charges by $6.0 million.
For purposes of computing the ratio of earnings to fixed charges: (1) fixed
charges consist of interest on debt, amortization of debt discount and expenses
and a portion of rental expense determined to be representative of interest and
(2) earnings consist of income (loss) from continuing operations before income
taxes, minority interest, cumulative effects of accounting changes plus fixed
charges as described above, adjusted to exclude the excess or deficiency of
dividends over income of 50% or less owned entities accounted for by the equity
method.
11
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. If any of the following risks actually occurs, our
business, financial condition or results of operations could be materially and
adversely affected. In that case, the trading price of the notes and our common
stock could decline, and you could lose all or part of your investment. You
should also carefully consider all information we have included or incorporated
by reference into this prospectus, including, but not limited to, our Annual
Report on Form 10-K for the year ended December 31, 2002, our Quarterly Reports
on Form 10-Q for the quarters ended March 31, 2003 and June 30, 2003 and our
Current Report on Form 8-K dated as of October 28, 2003.
This prospectus and the documents we incorporate by reference also contain
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including the risks faced by us
described below and elsewhere in this prospectus and in the documents we
incorporate by reference.
RISKS RELATING TO ASBESTOS AND SILICA LIABILITY
THERE CAN BE NO ASSURANCE THAT THE PROPOSED SETTLEMENT WILL BE COMPLETED.
In December 2002, we reached an agreement in principle that, if and when
consummated, would result in a settlement of asbestos and silica personal injury
claims against our subsidiaries DII Industries, Kellogg Brown & Root and their
current and former subsidiaries with U.S. operations. Subsequently, in 2003, DII
Industries and Kellogg Brown & Root entered into definitive written agreements
finalizing the terms of the agreements in principle with attorneys representing
more than 90% of the current asbestos and silica claimants.
WE MAY BE UNABLE TO FULFILL THE CONDITIONS NECESSARY TO COMPLETE THE
PROPOSED SETTLEMENT.
Among the prerequisites for concluding the proposed settlement are:
- arrangement of financing, in addition to the proceeds of our recent
offerings of $1.2 billion principal amount of convertible senior
notes and $1.05 billion principal amount of senior debt securities,
for the proposed settlement on terms acceptable to us to fund the
cash amounts to be paid in the settlement;
- obtaining approval of a plan of reorganization from at least the
required 75% of known present asbestos claimants and from a majority
of known present silica claimants;
- Halliburton board approval; and
- obtaining final and non-appealable bankruptcy court approval and
federal district court confirmation of the plan of reorganization.
Many of these prerequisites are subject to matters and uncertainties
beyond our control. There can be no assurance that we will be able to
satisfy the prerequisites for completion of the proposed settlement.
As of September 22, 2003, DII Industries, Kellogg Brown & Root and
other affected Halliburton subsidiaries began the solicitation process in
connection with the planned asbestos and silica settlement. A disclosure
statement, which incorporates and describes the Chapter 11 plan of
reorganization and trust distribution procedure, has been mailed to
asbestos and silica claimants for the purpose of soliciting votes to
approve the plan of reorganization. We cannot predict the exact timing of
the completion of the prerequisites to making the Chapter 11 filing, but we
expect that they could be completed on a timeline that would allow the
Chapter 11 filing to be made in November 2003.
12
THE ATTORNEYS REPRESENTING THE CURRENT ASBESTOS CLAIMANTS MAY
TERMINATE THE SETTLEMENT AGREEMENTS.
The settlement agreements with attorneys representing current asbestos
claimants grants the attorneys a right to terminate their definitive
agreement on ten days' notice. While no right to terminate any settlement
agreement has been exercised to date, there can be no assurance that
claimants' attorneys will not exercise their right to terminate the
settlement agreements.
As a result of an increase in the estimated number of current asbestos
claims, the cash required to fund the settlement may modestly exceed $2.775
billion. If it does, we would need to reach an agreement with the
claimants' representatives to adjust the settlement matrices to reduce the
overall amounts, or we would need to increase the amounts we would be
willing to pay to resolve the asbestos and silica liabilities resulting in
an additional condition to the Chapter 11 filing.
Unless and until we reach agreement with the claimants'
representatives to adjust the settlement matrices or we increase the
amounts we would be willing to pay, the attorneys representing the current
asbestos claimants may not proceed with the settlement or may attempt to
renegotiate the settlement amount to increase the aggregate amount of the
settlement. Conversely, an increase in the amount of cash required may make
completing the proposed settlement more difficult.
In the event we elect to adjust the settlement matrices to reduce the
average amounts per claim, a supplemental disclosure statement may be
required, and if so, the claimants potentially adversely affected by the
adjustment may have an opportunity to change their votes. The additional
time to make such supplemental disclosure and opportunity to change votes
may result in a delay in the Chapter 11 filing.
THE STAY ON PENDING ASBESTOS CLAIMS AGAINST DII INDUSTRIES IN THE
HARBISON-WALKER BANKRUPTCY HAS EXPIRED, AND WE MAY BE MATERIALLY AND
ADVERSELY AFFECTED.
In July 2003, we also reached agreement with Harbison-Walker and the
asbestos creditors committee in the Harbison-Walker bankruptcy to
consensually extend the period of the stay contained in the bankruptcy
court's temporary restraining order until September 30, 2003. The court's
temporary restraining order, which was originally entered on February 14,
2002, stayed more than 200,000 pending asbestos claims against DII
Industries. The stay expired by its terms on September 30, 2003. Discovery
on the claims that officehad previously been stayed may begin November 1, 2003,
and trials on any of the claims that had previously been stayed may
commence after January 1, 2004. Notwithstanding the expiration of the stay,
all asbestos and silica claims against DII Industries will be stayed
automatically upon the Chapter 11 filing of DII Industries, Kellogg Brown &
Root and some of their subsidiaries with U.S. operations.
It is (214) 978-2600.
HALLIBURTON CAPITAL TRUST Iunclear what effect, if any, the lifting of the stay in the
Harbison-Walker bankruptcy proceedings will have on our financial
condition. There can be no assurance that our stock price, our debt ratings
or the trading price of the notes will not be materially and adversely
affected by the expiration of the stay and the anticipated discovery
requests and trial settings with respect to asbestos claims against DII
Industries that may be filed prior to the Chapter 11 bankruptcy filing of
DII Industries, Kellogg Brown & Root and some of their subsidiaries with
U.S. operations.
IF PROPOSED FEDERAL LEGISLATION TO PROVIDE NATIONAL ASBESTOS
LITIGATION REFORM BECOMES LAW, WE MAY NOT PROCEED WITH THE PROPOSED
SETTLEMENT.
We continue to track legislative proposals for asbestos reform pending
in the U.S. Congress. We understand that the U.S. Senate is currently
working on legislation that would set up a national trust fund as the
exclusive means for recovery for asbestos-related disease. We are not
certain as to what contributions we would be required to make to such a
trust, although we anticipate that they would be substantial and that they
would continue for a significant number of years. There is no assurance
that any such legislative proposals will ultimately become law. In
determining whether to approve the
13
proposed settlement and proceed with the Chapter 11 filing of DII
Industries, Kellogg Brown & Root and some of their subsidiaries with U.S.
operations, the Halliburton Capital Trust I,Board of Directors will take into account the
then-current status of these legislative initiatives.
If we were unable to complete the proposed settlement for any of the
above-described reasons, we would be required to resolve current and future
asbestos and silica claims in the tort system or, in the case of
Harbison-Walker claims, possibly through the Harbison-Walker bankruptcy
proceedings. See "-- In the absence of a completed settlement, we would be
required to resolve current and future asbestos and silica claims in the
tort system, which may adversely affect our financial condition" below.
IN THE ABSENCE OF A COMPLETED SETTLEMENT, WE WOULD BE REQUIRED TO RESOLVE
CURRENT AND FUTURE ASBESTOS AND SILICA CLAIMS IN THE TORT SYSTEM, WHICH MAY
ADVERSELY AFFECT OUR FINANCIAL CONDITION.
If we were unable to complete the proposed settlement, we would be required
to resolve current and future asbestos claims in the tort system or, in the case
of Harbison-Walker claims, possibly through the Harbison-Walker bankruptcy
proceedings. If we were required to resolve asbestos claims in the tort system,
we would be subject to numerous uncertainties, including:
- continuing asbestos and silica litigation against us, which would include
the possibility of substantial adverse judgments, the timing of which
could not be controlled or predicted, and the obligation to provide
appeals bonds pending any appeal of any such judgment, some or all of
which may require us to post cash collateral;
- current and future asbestos claims settlement and defense costs,
including the inability to completely control the timing of such costs
and the possibility of increased costs to resolve personal injury claims;
- the possibility of an increase in the number and type of asbestos and
silica claims against us in the future; and
- any adverse changes to the tort system allowing additional claims or
judgments against us.
In addition, we believe that Harbison-Walker, formerly part of DII
Industries, is no longer financially able to perform its obligations to assume
liability for post spin-off refractory claims and defend DII Industries from
those claims. As such, these claims may be asserted against DII Industries.
There can be no assurance that our financial condition and results of operation
would not be materially and adversely affected by events subsequent to an
unconsummated settlement or subsequent to a lifting of the stay by the
Harbison-Walker bankruptcy court.
Substantial adverse judgments or substantial claims settlement and defense
costs could materially and adversely affect our liquidity, especially if
combined with a lowering of our credit ratings or other events. If an adverse
judgment were entered against us, we would usually be required to post a bond in
order to perfect an appeal of that judgment. If the bonds were not available
because of uncertainties in the bonding market or if, as a result of our
financial condition or credit rating, bonding companies would not provide a bond
on our behalf, we would be required to provide a cash bond in order to perfect
any appeal. As a result, a substantial judgment or judgments could require a
substantial amount of cash to be posted by us in order to appeal, which we refermay
not be able to provide from cash on hand or borrowings, or which we may only be
able to provide by incurring high borrowing costs. In such event, our ability to
pursue our legal rights to appeal may be adversely affected.
There can be no assurance that our stock price, our debt ratings or the
trading price of the notes would not be materially and adversely affected by the
absence of a completed settlement.
14
JUDICIAL RELIEF AGAINST ASBESTOS AND SILICA EXPOSURE MAY NOT BE AS BROAD AS IS
CONTEMPLATED BY THE PROPOSED SETTLEMENT, AND A COMPLETED SETTLEMENT MAY NOT
ADDRESS ALL ASBESTOS AND SILICA EXPOSURE.
Our proposed settlement of asbestos and silica claims would include all
asbestos and silica personal injury claims against DII Industries, Kellogg Brown
& Root and their current and former subsidiaries, as well as Halliburton and its
subsidiaries and the "Trust,"predecessors and successors of all of them. However, the
proposed settlement would be subject to bankruptcy court approval as well as
federal district court confirmation. No assurance can be given that a court
reviewing and approving the plan of reorganization that will be used to
implement the proposed settlement will grant relief as broad as contemplated by
the proposed settlement.
In addition, a Chapter 11 proceeding and an injunction under Section 524(g)
of the United States Bankruptcy Code may not apply to protect against asbestos
claims made outside of the United States. While we have historically not
received a significant number of such claims, any such future claims would be
subject to the applicable legal system of the jurisdiction where the claim was
made. Although we do not believe that we have material exposure to such claims,
there can be no assurance that material claims outside of the United States
would not be made in the future. Further, to our knowledge, the
constitutionality of an injunction under Section 524(g) of the United States
Bankruptcy Code has not been tested in a court of law. We can provide no
assurance that, if the constitutionality is challenged, the injunction would be
upheld.
Moreover, the proposed settlement does not resolve claims for property
damage as a result of materials containing asbestos. Accordingly, although we
have historically received no such claims, claims could still be made as to
damage to property or property value as a result of asbestos containing products
having been used in a particular property or structure.
WE MAY BE UNABLE TO RECOVER, OR BE DELAYED IN RECOVERING, INSURANCE
RECEIVABLES, WHICH WOULD ADVERSELY AFFECT OUR FINANCIAL CONDITION.
We have substantial insurance intended to reimburse us for portions of the
costs incurred in defending asbestos and silica claims and amounts paid to
settle claims and to satisfy court judgments. We had accrued $2.1 billion in
probable insurance recoveries as of June 30, 2003. We may be unable to recover,
or we may be delayed in recovering, insurance reimbursements in the amounts
anticipated to cover a part of the costs incurred in defending asbestos and
silica claims and amounts paid to settle claims or as a result of court
judgments due to:
- the inability or unwillingness of insurers to timely reimburse for claims
in the future;
- disputes as to documentation requirements for DII Industries, Kellogg
Brown & Root or other subsidiaries in order to recover claims paid;
- the inability to access insurance policies shared with, or the
dissipation of shared insurance assets by, Harbison-Walker Refractories
Company or others;
- the possible insolvency or reduced financial viability of our insurers;
- the cost of litigation to obtain insurance reimbursement; and
- possible adverse court decisions as to our rights to obtain insurance
reimbursement.
We may ultimately recover, or may agree in settlement of litigation to
recover, less insurance reimbursement than the insurance receivable recorded in
our financial statements. This could result in an incremental write-off of the
insurance receivable.
In the case of the proposed settlement, we could be required to contribute
approximately $2.775 billion in cash, but may be delayed in receiving our
expected reimbursement from our insurance carriers because of extended
negotiations or litigation with insurance carriers. If we were unable to recover
from one or more of our insurance carriers, or if we were delayed significantly
in our recoveries, it could have a material adverse effect on our financial
condition.
15
We may enter into agreements with all or some of our insurance carriers to
negotiate an overall accelerated payment of anticipated insurance proceeds. If
this were to happen, we would expect to recover less than the recorded amount of
anticipated insurance receivables, which would result in an additional charge to
the statement of operations.
THERE IS NO ASSURANCE THAT THE PLAN OF REORGANIZATION IN THE PROPOSED CHAPTER
11 PROCEEDINGS OF DII INDUSTRIES, KELLOGG BROWN & ROOT AND SOME OF THEIR
SUBSIDIARIES WITH U.S. OPERATIONS WILL BE CONFIRMED.
Under the terms of the proposed settlement, the settlement would be
implemented through a pre-packaged Chapter 11 filing for DII Industries, Kellogg
Brown & Root and some of their subsidiaries with U.S. operations. As part of any
proposed plan of reorganization, the debtors intend to seek approval of the
bankruptcy court for debtor-in-possession financing to provide for operating
needs and to provide additional liquidity during the Chapter 11 proceeding.
Halliburton intends, with the understanding of its lenders, to provide the
debtor-in-possession financing to DII Industries and Kellogg Brown & Root.
Arranging for debtor-in-possession financing is a business
trust created under Delaware law throughcondition precedent to the
filing of a certificateChapter 11 proceeding, and the bankruptcy court must approve any
such financing in order for the proposed settlement to be feasible.
After filing any Chapter 11 proceeding, DII Industries, Kellogg Brown &
Root and some of trusttheir subsidiaries with U.S. operations (referred to
collectively as the debtors) would seek an order of the bankruptcy court
scheduling a hearing to consider confirmation of the plan of reorganization. In
order to be confirmed, the United States Bankruptcy Code requires that impaired
classes of creditors vote to accept the plan of reorganization submitted by the
debtors. In order to carry a class, approval of over one-half in number and at
least two-thirds in amount are required. In addition, to obtain an injunction
under Section 524(g) of the United States Bankruptcy Code, at least 75% of
voting current asbestos claimants must vote to accept the plan of
reorganization. In addition to obtaining the required votes, the requirements
for a bankruptcy court to approve a plan of reorganization include, among other
judicial findings, that:
- the plan of reorganization complies with applicable provisions of the
Bankruptcy Code;
- the debtors have complied with the Delaware Secretaryapplicable provisions of Statethe
Bankruptcy Code;
- the trusts will value and pay similar present and future claims in
substantially the same manner;
- the plan of reorganization has been proposed in good faith and not by any
means forbidden by law; and
- any payment made or promised by the debtors to any person for services,
costs or expenses in or in connection with the Chapter 11 proceeding or
the plan of reorganization has been or is reasonable.
There can be no assurance that we will obtain the required votes or the
required judicial approval to the proposed plan of reorganization. In such
event, a prolonged Chapter 11 proceeding could adversely affect the debtors'
relationships with customers, suppliers and employees, which in turn could
adversely affect the debtors' competitive position, financial condition and
results of operations. A weakening of the debtors' financial condition and
results of operations could adversely affect the debtors' ability to implement
the plan of reorganization.
In addition, if the plan of reorganization is not confirmed by the
bankruptcy court, the debtors may be forced to liquidate their assets. Chapter
11 permits a company to remain in control of its business, protected by a stay
of all creditor action, while the company attempts to negotiate and confirm a
plan of reorganization with its creditors. The debtors may be unsuccessful in
their attempts to confirm a plan of reorganization with their creditors, as many
Chapter 11 cases are unsuccessful and virtually all involve substantial expense
and damage to the business. If the debtors are unsuccessful in obtaining
confirmation of a plan or reorganization, the assets of the debtors will be
liquidated in the bankruptcy proceedings. In the event of a bankruptcy
liquidation of the debtors, Halliburton could lose its controlling interest in
DII Industries and Kellogg Brown & Root. As a result, the value of those
subsidiaries would no longer be
16
reflected in our common stock. Moreover, if the plan of reorganization is not
confirmed and the debtors have insufficient assets to pay the creditors,
Halliburton's assets could be drawn into the liquidation proceedings as a result
of Halliburton's guarantees of certain of the debtors' obligations.
Of the cash amount included as part of the proposed settlement,
approximately $450.0 million primarily relates to claims previously settled but
unpaid by Harbison-Walker, but not previously agreed to by us. As part of the
proposed settlement, we have agreed that, if a Chapter 11 filing by the debtors
were to occur, we would pay this amount within four years if not paid sooner
pursuant to a final bankruptcy court approved plan of reorganization. If the
Chapter 11 proceeding is filed, we would be obligated to pay this amount even if
the proposed settlement is abandoned or the proposed plan of reorganization is
not confirmed.
THERE CAN BE NO ASSURANCE THAT WE WILL BE ABLE TO FINANCE THE PROPOSED
SETTLEMENT ON ACCEPTABLE TERMS, IN WHICH CASE THE SETTLEMENT WOULD NOT BE
COMPLETED.
The plan of reorganization through which the proposed settlement will be
implemented will require us to contribute approximately $2.775 billion in cash
to the trusts established for the benefit of asbestos and silica claimants
pursuant to the United States Bankruptcy Code, which we will need to finance on
November 29,terms acceptable to us. In June 2003, we completed a private offering of $1.2
billion principal amount of 3 1/8% convertible senior notes due 2023 which are
being registered pursuant to the registration statement of which this prospectus
is a part, and in October 2003 we completed another private offering of $1.05
billion aggregate principal amount of floating rate notes due 2005 and fixed
rate notes due 2010. We intend to use a substantial portion of the net proceeds
from those offerings to finance a portion of the cash contribution required by
the proposed settlement. In addition, we are pursuing a number of financing
alternatives for the additional cash amount needed for contribution to the
trusts. The availability of these alternatives depends in large part on market
conditions.
We are currently negotiating with several banks and non-bank lenders over
the terms of multiple credit facilities. The currently anticipated credit
facilities would include:
- a senior unsecured credit facility for an amount up to approximately $1.0
billion, subject to reduction, to be available for cash funding of the
trusts for the benefit of the claimants;
- a senior secured letter of credit facility for approximately $1.4 billion
intended to ensure that existing letters of credit and bank guarantees
supporting the contracts of our company and its affiliates remain in
place during the filing; and
- a senior secured revolving credit facility for an amount up to $700.0
million in replacement of our existing $350.0 million credit facility,
that will be used for general working capital purposes.
For additional information, see "Description of Anticipated Indebtedness."
None of the new credit facilities are currently in place, and there can be
no assurances that we will complete these facilities in the form anticipated. We
are not obligated to enter into these facilities if the terms are not acceptable
to us. Moreover, these facilities would only be available for limited periods of
time. As a result, if the debtors were delayed in filing the Chapter 11
proceeding or delayed in completing the plan of reorganization after a Chapter
11 filing, the anticipated credit facilities may not provide us with the
necessary financing to complete the proposed settlement. Additionally, there may
be other conditions precedent to funding that we may be unable to satisfy. In
such circumstances, we would have to terminate the proposed settlement if
replacement financing were not available on acceptable terms.
In addition, we may experience increased working capital requirements from
time to time associated with our business. An increased demand for working
capital could affect our liquidity needs and could impair our ability to finance
the proposed settlement on acceptable terms, in which case the settlement would
not be completed.
17
A LOWERING OF OUR CREDIT RATINGS WOULD REQUIRE US TO OBTAIN ADDITIONAL CREDIT
FACILITIES TO MEET OUR CASH REQUIREMENTS AND LIQUIDITY NEEDS, WOULD INCREASE
OUR BORROWING COST AND MAY RESULT IN OUR INABILITY TO OBTAIN ADDITIONAL
FINANCING ON REASONABLE TERMS, TERMS ACCEPTABLE TO US OR AT ALL.
Late in 2001 and early in 2002, Moody's Investors Services lowered its
ratings of our long-term senior unsecured debt to Baa2 and our short-term credit
and commercial paper ratings to P-2. In addition, Standard & Poor's rating
service of the McGraw Hill Companies lowered its ratings of our long-term senior
unsecured debt to A- and our short-term credit and commercial paper ratings to
A-2 in late 2001. The Trust's businessIn December 2002, Standard & Poor's lowered these ratings to
BBB and A-3. These ratings were lowered primarily due to our asbestos exposure,
and both agencies have indicated that our credit ratings remain under
consideration for possible downgrade pending the results of the proposed
settlement. Although our long-term ratings continue at investment grade levels,
the cost of new borrowing is definedrelatively higher and our access to the debt
markets is more volatile at these rating levels. Investment grade ratings are
BBB- or higher for Standard & Poor's and Baa3 or higher for Moody's. Our current
ratings are one level above BBB- on Standard & Poor's and one level above Baa3
on Moody's.
We have $350.0 million of committed lines of credit from banks that are
available if we maintain an investment grade rating. This facility expires on
August 16, 2006. As of June 30, 2003, no amounts have been borrowed under these
lines. If our credit ratings were to fall below investment grade, our credit
line would be unavailable absent a successful renegotiation with our banks. We
must enter into good faith negotiations to amend our receivables securitization
facility if our credit ratings were to fall below investment grade and/or after
execution of the new senior secured revolving credit facility described under
"Description of Anticipated Indebtedness." Absent an agreed amendment within 60
days, amounts outstanding thereunder would be declared due and payable. As of
June 30, 2003, the outstanding balance of our accounts receivable facility was
$180.0 million, which was subsequently reduced to zero in July 2003.
If our debt ratings fall below investment grade, we would also be in
technical breach of a bank agreement covering $52.0 million of letters of credit
at June 30, 2003, which might entitle the bank to set-off rights. In addition, a
$151.0 million letter of credit line, of which $141.0 million has been issued,
includes provisions that allow the banks to require cash collateralization for
the full line if debt ratings of either rating agency fall below the rating of
BBB by Standard & Poor's or Baa2 by Moody's, one downgrade from our current
ratings. These letters of credit and bank guarantees generally relate to our
guaranteed performance or retention payments under our long-term contracts and
self-insurance. In addition, our elective deferral plan has a provision which
states that if the Standard & Poor's credit rating falls below BBB the amounts
credited to participants' accounts will be paid to participants in a declarationlump-sum
within 45 days. At June 30, 2003, this amount was approximately $48.0 million.
In the event our debt ratings are lowered by either agency, we may have to
issue additional debt or equity securities or obtain additional credit
facilities in order to meet our liquidity needs and satisfy cash
collateralization requirements for letters of trust, datedcredit and surety bonds. We
anticipate that any such new financing or credit facilities would not be on
terms as attractive as those we have currently and that we would also be subject
to increased borrowing costs and interest rates. We also may be required to
provide cash collateral to obtain surety bonds or letters of credit, which would
reduce our available cash or require additional financing. Further, if we are
unable to obtain financing for our proposed settlement on terms that are
acceptable to us, we may be unable to complete the proposed settlement.
WE HAVE LETTERS OF CREDIT THAT MAY BE DRAWN AT ANY TIME OR AS A RESULT OF THE
CONTEMPLATED CHAPTER 11 PROCEEDINGS OF DII INDUSTRIES AND KELLOGG BROWN & ROOT
AND SOME OF THEIR SUBSIDIARIES WITH U.S. OPERATIONS.
In the normal course of business, we have agreements with banks under which
approximately $1.3 billion of letters of credit or bank guarantees were issued,
including at least $195.0 million which relate to our joint ventures' operations
as of November 29, 2001, executedJune 30, 2003. The agreements with these banks contain terms and
conditions that define when the banks can require cash collateralization of the
entire line. As of
18
June 30, 2003, agreements with banks covering at least $150.0 million of letters
of credit allow the bank to require cash collateralization for any reason, and
agreements covering another at least $890.0 million of letters of credit allow
the bank to require cash collateralization for the entire line in the event of a
bankruptcy or insolvency event involving one of our subsidiaries that will be
party to the proposed Chapter 11 bankruptcy proceedings.
Our letters of credit also contain terms and conditions that define when
they may be drawn. As of June 30, 2003, at least $230.0 million of letters of
credit permit the beneficiary of such letters of credit to draw for any reason,
and at least another $560.0 million of letters of credit permit the beneficiary
of such letters of credit to draw in the event of a bankruptcy or insolvency
event involving one of our subsidiaries that will be party to the proposed
reorganization proceedings.
In addition, agreements with banks under which $266.0 million of letters of
credit as of June 30, 2003 have been issued on the Barracuda-Caratinga project
includes provisions that require us to maintain ratios of debt to total capital
and of total earnings before interest, taxes, depreciation and amortization to
interest expense. The definition of debt includes our asbestos liability. The
definition of total earnings before interest, taxes, depreciation and
amortization excludes any non-cash charges related to the proposed settlement
through December 31, 2003.
As such, requirements for us to cash collateralize letters of credit and
surety bonds by issuers and beneficiaries of these instruments could be caused
by:
- our plans to place DII Industries, Kellogg Brown & Root and some of their
subsidiaries with U.S. operations into a pre-packaged Chapter 11
proceeding as part of the proposed settlement;
- in the absence of the proposed settlement, one or more substantial
adverse judgments;
- not being able to recover on a timely basis insurance reimbursement; or
- a reduction in credit ratings.
Uncertainty may also hinder our ability to access new letters of credit in
the future. This could impede our liquidity and/or our ability to conduct normal
operations.
Credit facilities that we are currently negotiating in connection with the
proposed asbestos and silica settlement would include a master letter of credit
facility intended to replace any cash collateralization rights of issuers of
substantially all our existing letters of credit during the pendency of the
anticipated Chapter 11 proceedings by DII Industries and Kellogg Brown & Root
and some of their subsidiaries with U.S. operations. The master letter of credit
facility would also provide collateral for issuers of our existing letters of
credit if such letters of credit are drawn and the issuing bank provides cash
for reimbursement. If any of such existing letters of credit are drawn, it is
anticipated that the master letter of credit facility would provide the cash
needed for such draws, with any advances being converted into term loans.
However, this master letter of credit facility is not currently in place, and,
if we were required to cash collateralize letters of credit prior to obtaining
the facility, we would be required to use cash on hand or existing credit
facilities. Substantial cash collateralization requirements prior to our being
able to enter into a new master letter of credit facility may have a material
adverse effect on our financial condition. We will not enter into the
pre-packaged Chapter 11 filing without having this or a similar letter of credit
facility in place. There can be no assurance that we will be able to enter into
such a facility on reasonable terms or on terms acceptable to us or at all.
THE ANTICIPATED CHAPTER 11 FILING OF SOME OF OUR SUBSIDIARIES AND THE PROPOSED
SETTLEMENT COULD CAUSE A DEFAULT UNDER OUR DEBT DOCUMENTS AND THE DEBT
DOCUMENTS OF OUR SUBSIDIARIES INVOLVED IN THE BANKRUPTCY PROCEEDING.
Some of the credit agreements and indentures to which we and our
subsidiaries are party, including the letters of credit relating to the
Barracuda-Caratinga project, contain default provisions that may be triggered by
the anticipated Chapter 11 filing of some of our material subsidiaries or the
proposed settlement and the consequences therefrom. We are attempting to obtain
consents or amendments to
19
eliminate possible events of default, but there can be no assurance that we will
obtain any such consents or amendments. If we are unable to obtain these
consents or amendments, a default may occur under some of these debt
instruments, which, unless waived, may trigger an obligation to immediately pay
any amounts due thereunder or cause the facility to terminate. Certain defaults
could, in turn, cause a default under other of our or our subsidiaries' debt
instruments. A default on some of our or our subsidiaries' indebtedness could
adversely affect our credit rating. The acceleration of a substantial amount of
our debt or the reduction in our debt's credit ratings may adversely affect our
financial condition and our ability to finance the proposed settlement.
THE ANTICIPATED CHAPTER 11 FILING OF SOME OF OUR SUBSIDIARIES MAY NEGATIVELY
AFFECT THEIR ABILITY TO OBTAIN NEW BUSINESS IN THE FUTURE AND CONSEQUENTLY MAY
HAVE A NEGATIVE IMPACT ON OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Because Halliburton's financial condition and its results of operations
depend on distributions from its subsidiaries, the anticipated Chapter 11 filing
of some of them, including DII Industries and Kellogg Brown & Root, may have a
negative impact on Halliburton's cash flow and distributions from those
subsidiaries. For example, a Chapter 11 filing may adversely affect the ability
of our subsidiaries in Chapter 11 proceedings to obtain new orders from current
or prospective customers. In addition, as a result of the proposed Chapter 11
proceeding, some current and prospective customers, suppliers and other vendors
may assume that our subsidiaries are financially weak and will be unable to
honor obligations, making those customers, suppliers and other vendors reluctant
to do business with our subsidiaries. In particular, some governments may be
unwilling to conduct business with a subsidiary in Chapter 11 or having recently
filed a Chapter 11 proceeding. The Chapter 11 proceeding also may affect
adversely their ability to negotiate favorable terms with customers, suppliers
and other vendors. DII Industries' and Kellogg Brown & Root's financial
condition and results of operations could be materially and adversely affected
if they cannot attract customers, suppliers and other vendors or obtain
favorable terms from customers, suppliers or other vendors. Consequently, our
financial condition and results of operations could be adversely affected.
Further, a prolonged Chapter 11 proceeding could adversely affect the
relationship that DII Industries, Kellogg Brown & Root and their subsidiaries
involved in the Chapter 11 proceeding have with their customers, suppliers and
employees, which in turn could adversely affect their competitive positions,
financial conditions and results of operations. A weakening of their financial
conditions and results of operations could adversely affect their ability to
implement the plan of reorganization.
FEDERAL BANKRUPTCY LAW AND STATE STATUTES MAY, UNDER SPECIFIC CIRCUMSTANCES,
VOID PAYMENTS MADE BY OUR SUBSIDIARIES TO US AND VOID PRINCIPAL AND INTEREST
PAYMENTS MADE BY US TO YOU ON THE NOTES AND YOU MAY BE FORCED TO RETURN SUCH
PAYMENTS.
Under federal bankruptcy law and various state fraudulent transfer laws,
payments and distributions made by DII Industries to us prior to its Chapter 11
filing could, under specific circumstances, be voided as preferential transfers
if such payments or distributions occur up to one year prior to DII Industries'
Chapter 11 filing. Since we rely primarily on dividends from our subsidiaries
and other intercompany transactions to meet our obligations for payment of
principal and interest on our outstanding debt obligations, any voidance of such
payments by our subsidiaries to us could limit our ability to make principal and
interest payments on the notes. The use of payments made by DII Industries to us
for the purpose of making principal and interest payments to you on the notes
during the period of 90 days prior to DII Industries' Chapter 11 filing can also
be similarly voided. If the principal and interest payments made by us to you on
the notes are voided, a court may require you to return the payments that you
have received from us on the notes. Dividend payments from DII Industries to us
could also, under specific circumstances, be voided as sponsor, and the trustees. We referillegal dividends,
fraudulent transfers or conveyances to the declaration, as amendedextent that a court determines that
DII Industries was insolvent at the time these dividend payments were made.
Furthermore, during the DII Industries Chapter 11 proceeding, DII Industries
likely would be unable to
20
make any dividend or other payments to us. The occurrence of these events may
severely limit our ability to meet our obligations for payment of principal and
restated,interest on the notes.
A COURT COULD DETERMINE THAT THE DISTRIBUTION OF HALLIBURTON ENERGY SERVICES
STOCK TO HALLIBURTON IS A FRAUDULENT TRANSFER UNDER STATE LAW OR FEDERAL
BANKRUPTCY LAW WHICH WOULD IMPAIR OUR ABILITY TO MAKE PAYMENTS ON THE NOTES.
Under the terms of the proposed settlement, we plan to implement a
pre-packaged Chapter 11 plan of reorganization for DII Industries and other of
our subsidiaries with U.S. operations. Currently, Halliburton Energy Services,
Inc. is a wholly owned subsidiary of DII Industries. As part of the plan of
reorganization, prior to its Chapter 11 filing, DII Industries intends to
distribute to Halliburton all of the capital stock of Halliburton Energy
Services, after which DII Industries will be a wholly owned subsidiary of
Halliburton Energy Services.
While we expect that asbestos and silica claimants will approve the plan of
reorganization, which includes the distribution of Halliburton Energy Services
stock by DII Industries to Halliburton, another creditor of DII Industries could
claim that the transfer of Halliburton Energy Services stock to Halliburton by
DII Industries prior to the Chapter 11 filing constitutes a fraudulent transfer.
While we are obtaining legal advice and solvency opinions that would support a
conclusion that the distribution does not constitute a fraudulent transfer, if a
court were to determine that the distribution of Halliburton Energy Services
stock by DII Industries to Halliburton constituted a fraudulent transfer, then
Halliburton Energy Services may be required to remain a subsidiary of DII
Industries or we may be required to pay the creditor the lesser of the relevant
value of (1) the avoided transfer (in this case the value of the Halliburton
Energy Services stock) or obligation and (2) the amount necessary to satisfy the
claims of the creditors. Due to bankruptcy rules which would be applicable to
DII Industries in the event of a Chapter 11 proceeding and that would limit or
prohibit the payment of dividends or other distributions by DII Industries and
its subsidiaries (including Halliburton Energy Services), if Halliburton Energy
Services were to remain a subsidiary of DII Industries, we would effectively be
prohibited from receiving funds from Halliburton Energy Services during any
period of time in which DII Industries is in Chapter 11 proceedings. The
occurrence of this prospectus asevent could severely limit our ability to meet our
obligations for payment of principal and interest on the "Trust Agreement."notes.
The Trust Agreement
has been qualifiedsuccessful prosecution of a claim by or on behalf of a debtor or its
creditor under the Trust Indenture Actapplicable fraudulent transfer laws generally would require a
determination that the debtor effected a transfer of 1939.
The Trust existsan asset or incurred an
obligation to an entity either:
- with an actual intent to hinder, delay or defraud its existing or future
creditors (a case of "actual fraud"); or
- in exchange otherwise than for a "reasonably equivalent" value or a "fair
consideration," and that the exclusive purposes of:
. issuing and selling the trust preferred securities and trust common
securities;
. using the proceeds from the saledebtor:
-- was insolvent or rendered insolvent by reason of the trust preferred securities and
trust common securitiestransfer or
incurrence;
-- was engaged or about to acquireengage in a business or transaction for
which its remaining assets would constitute unreasonably small
capital; or
-- intended to incur, or believed that it would incur, debts beyond
its ability to pay as they mature (a case of "constructive fraud").
In the trust debentures; and
. engaging in only those other activities necessary, advisablecase of either actual fraud or incidental
to these purposes.
The Trust's business and affairs will be conducted by its trustees, as
provided inconstructive fraud, the Trust Agreement. The trustees for the Trust will be initially
JPMorgan Chase Bank, as the property trustee, Chase Manhattan Bank USA,
National Association, as the Delaware trustee, and three of our employees, as
administrative trustees. The property trustee and the Delaware trustee,
together with the administrative trustees, are collectively referred to as the
"Trust Trustees" in this prospectus. The holder of the common securities of the
Trust or, if an event of default under the Trust Agreement has occurred and is
continuing, the holders of not less than a majority in liquidation amount of
the trust preferred securities, willunsecured
creditors affected thereby might be entitled to appoint, removeequitable relief against the
transferee of the assets or replace
the property trusteeobligee of the incurred obligation in the form
of a recovery of the lesser of (1) the relevant value of the avoided transfer or
obligation or (2) the amount necessary to satisfy their claims.
21
The measure of insolvency for purposes of a constructive-fraud action would
depend on the fraudulent transfer law being applied. Generally, an entity would
be considered insolvent if either, at the relevant time:
- the sum of its debts and liabilities, including contingent liabilities,
was greater than the value of its assets, at a fair valuation; or
- the fair salable value of its assets was less than the amount required to
pay the probable liability on its total existing debts and other
liabilities, including contingent liabilities, as they become absolute
and mature.
The transactions of the debtors which could be subject to review and
possible avoidance under the applicable fraudulent transfer law would be limited
to those occurring within the relevant limitations period. In the case of
fraudulent transfer actions under the United States Bankruptcy Code, that period
would be the 12-month period ending on the petition date. In the case of actions
under a state fraudulent transfer law, the limitations period ranges from one
year to six years or more after the questioned transfer or incurrence of an
obligation is effected. Under most state laws, including the laws of
Pennsylvania and Texas, the limitations period generally would be four years.
RISKS RELATING TO OUR PENDING SEC INVESTIGATION
WE ARE SUBJECT TO AN SEC INVESTIGATION, WHICH COULD MATERIALLY AFFECT US.
We are currently the subject of a formal investigation by the SEC, which
has focused on the compliance with generally accepted accounting principles of
our recording of revenues associated with cost overruns and unapproved claims
for long-term engineering and construction projects, and the Delaware trustee.disclosure of our
accrual practices. Although we do not believe that the investigation has
expanded beyond these matters, there can be no assurance that the SEC will not
open additional lines of inquiry. In no eventaddition, although we believe that our
accounting for these matters was and is in accordance with generally accepted
accounting principles, we cannot predict the outcome of the SEC's investigation
or when the investigation will be resolved. An unexpected adverse outcome of
this investigation could have a material adverse effect on us and result in:
- the institution of administrative, civil, injunctive or criminal
proceedings;
- sanctions and the payment of fines and penalties;
- the restatement of our financial results for the years under review;
- additional shareholder lawsuits; and
- increased review and scrutiny of us by regulatory authorities, the media
and others.
From time to time, we enter into registration rights agreements in
connection with securities offerings with the initial purchasers of the offered
securities, including in connection with the private placement of the 3 1/8%
senior convertible notes, whereby we agree to use our reasonable best efforts to
have a registration statement declared effective within specified time periods.
We may not be able to have a registration statement declared effective within
the time period specified due in part to the pending SEC investigation. If we
are unable to have a registration statement declared effective within agreed
time periods, we may be obligated to pay additional interest amounts to the
holders of the preferred securities that would otherwise have the rightbeen registered, which
amounts could be substantial.
RISKS RELATING TO GEOPOLITICAL AND INTERNATIONAL EVENTS
INTERNATIONAL AND POLITICAL EVENTS MAY ADVERSELY AFFECT OUR OPERATIONS.
A significant portion of our revenue is derived from our non-U.S.
operations, which exposes us to vote to appoint, remove or replace
the administrative trustees. The voting rights with respect to the latter will
be vested exclusivelyrisks inherent in us as the holderdoing business in each of the
trust common securities.more than 100 other countries in which we transact business. The Trust willoccurrence of
any of the risks described below could have no assetsan adverse effect on our
consolidated results of operations and consolidated financial condition.
22
Our operations in more than 100 countries other than the trust debentures. The Trust
will have no revenueUnited States
accounted for approximately 67% of our consolidated revenues during the first
six months of 2003 and during 2002, 62% of our consolidated revenues during 2001
and 66% of our consolidated revenues during 2000. Operations in countries other
than the United States are subject to various risks peculiar to each country.
With respect to any particular country, these risks may include:
- expropriation and nationalization of our assets in that country;
- political and economic instability;
- social unrest, acts of terrorism, force majeure, war or other armed
conflict;
- inflation;
- currency fluctuations, devaluations and conversion restrictions;
- confiscatory taxation or other adverse tax policies;
- governmental activities that limit or disrupt markets, restrict payments
underor limit the trust debentures. The Trust
has a termmovement of 35 years, butfunds;
- governmental activities that may dissolve earlier as providedresult in the Trust
Agreement.
We will, directlydeprivation of contract
rights; and
- trade restrictions and economic embargoes imposed by the United States
and other countries, including current restrictions on our ability to
provide products and services to Iran and Libya, both of which are
significant producers of oil and gas.
Due to the unsettled political conditions in many oil producing countries
and countries in which we provide governmental logistical support, our revenues
and profits are subject to the adverse consequences of war, the effects of
terrorism, civil unrest, strikes, currency controls and governmental actions.
Countries where we operate that have significant amounts of political risk
include: Afghanistan, Algeria, Angola, Colombia, Indonesia, Iraq, Libya,
Nigeria, Russia and Venezuela. For example, continued economic unrest and
general strikes in Venezuela, changes in the general economic policies and
regulations in Argentina, as well as seizures of offshore oil rigs by protestors
in Nigeria have disrupted our Energy Services Group's ability to provide
services and products to our customers in these countries. In addition, military
action or indirectly, acquire allcontinued unrest in the Middle East could impact the demand and
pricing for oil and gas, disrupt our operations in the region and elsewhere and
increase our costs for security worldwide.
MILITARY ACTION, WAR, OTHER ARMED CONFLICTS OR TERRORIST ATTACKS COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
Military action in Iraq, increasing military tension involving North Korea,
as well as the terrorist attacks of September 11, 2001 and subsequent terrorist
attacks and unrest, have caused instability in the world's financial and
commercial markets, have significantly increased political and economic
instability in some of the trust common securities,geographic areas in which willwe operate and have
an aggregate liquidation amount equalcontributed to at least 3%high levels of volatility in prices for oil and gas in recent
months. Recent acts of terrorism and threats of armed conflicts in or around
various areas in which we operate, such as the Middle East and Indonesia, could
limit or disrupt our markets and operations, including disruptions resulting
from the evacuation of personnel, cancellation of contracts or the loss of
personnel or assets.
Military action in Iraq, as well as threats of war or other armed conflict
elsewhere, may cause further disruption to financial and commercial markets
generally, may generate greater political and economic instability in some of
the total capitalgeographic areas in which we operate and may contribute to even higher
levels of volatility in prices for oil and gas than those experienced in recent
months. In addition, any possible reprisals as a consequence of the Trust.
For so longwar with and
ongoing military action in Iraq, such as the trust preferred securities remain outstanding, we will:
. maintain directly or indirectly 100% ownershipacts of terrorism in the trust common
securities;
. use our reasonable efforts to maintain the Trust as a statutory business
trust and not to dissolve, wind-up, liquidate or terminate the Trust,
except as permitted by the Trust Agreement;
. use our reasonable efforts to ensure that the Trust will not be an
"investment company" for purposes of the Investment Company Act of 1940;
. use our reasonable efforts to cause the Trust to continue to be treated as
a grantor trust and not an association taxable as a corporation for United States
federal income tax purposes; and
6or elsewhere, may materially adversely affect us in ways we cannot predict at
this time.
23
. use our reasonable efforts to cause each holder of common securities or
preferred securities of the Trust to be treated as owning an undivided
beneficial interest in the trust debentures.
The rights of the holders of the trust preferred securities are described in
the Trust Agreement and the Delaware Business Trust Act. The location of the
principal executive office of the Trust is c/o Halliburton Company, 3600
Lincoln Plaza, 500 North Akard Street, Dallas, Texas 75201, and its telephone
number is 214-978-2600.
RISK FACTORS
Risks Specific to HalliburtonRISKS RELATING TO OUR BUSINESS
OUR BUSINESS DEPENDS ON THE LEVEL OF ACTIVITY IN THE OIL AND NATURAL GAS
INDUSTRY, WHICH IS SIGNIFICANTLY AFFECTED BY VOLATILE OIL AND GAS PRICES.
Demand for our services and products depends on oil and natural gas
industry activity and expenditure levels that are directly affected by trends in
oil and natural gas prices. A prolonged downturn in oil and gas prices could
have a material adverse effect on our consolidated results of operations and
consolidated financial condition.
Demand for our products and services is particularly sensitive to the level
of development, production and exploration activity of, and the corresponding
capital spending by, oil and natural gas companies. Prices for oil and natural
gas are subject to large fluctuations in response to relatively minor changes in
the supply of and demand for oil and natural gas, market uncertainty and a
variety of other factors that are beyond our control. Any prolonged reduction in
oil and natural gas prices will depress the level of exploration, development
and production activity. Lower levels of activity result in a corresponding
decline in the demand for our oil and natural gas well services and products
that could have a material adverse effect on our revenues and profitability.
Factors affecting the prices of oil and natural gas include:
.- governmental regulations;
.- global weather conditions;
.- worldwide political, military and economic conditions, including the
ability of OPEC to set and maintain production levels and prices for oil
and gas;
.oil;
- the level of oil production by non-OPEC countries;
.- the policies of governments regarding the exploration for and production
and development of their oil and natural gas reserves;
- the cost of producing and .delivering oil and gas; and
- the level of demand for oil and natural gas.gas, especially demand for
natural gas in the United States.
Historically, the markets for oil and gas have been volatile and are likely
to continue to be volatile in the future.
Spending on exploration and production activities and capital expenditures
for refining and distribution facilities by large oil and gas companies have a
significant impact on the activity levels withinof our businesses.
THE BARRACUDA-CARATINGA PROJECT IS CURRENTLY BEHIND SCHEDULE, HAS SUBSTANTIAL
COST OVERRUNS AND MAY RESULT EITHER IN DAMAGES PAYABLE BY US OR OUR INABILITY
TO RECOVER OUR COSTS ASSOCIATED WITH THE PROJECT.
In June 2000, Kellogg Brown & Root entered into a fixed-price contract with
the project owner, Barracuda & Caratinga Leasing Company B.V., to develop the
Barracuda and Caratinga crude oil fields, which are located off the coast of
Brazil. The project manager and owner's representative is Petroleo Brasileiro SA
(Petrobras), the Brazilian national oil company. When completed, the project
will consist of two business segments.
Throughconverted supertankers which will be used as floating
production, storage and offloading platforms, or FPSOs, 33 hydrocarbon
production wells, 18 water injection wells, and all sub-sea flow lines and
risers necessary to connect the first nine monthsunderwater wells to the FPSOs.
24
THE LETTERS OF CREDIT RELATED TO THE BARRACUDA-CARATINGA PROJECT MAY
BE DRAWN IF WE DEFAULT UNDER THE CONTRACT OR AS A RESULT OF THE
CONTEMPLATED CHAPTER 11 PROCEEDINGS OF KELLOGG BROWN & ROOT.
Kellogg Brown & Root's performance under the contract is secured by:
- three performance letters of 2001, increased customer spending contributed
to higher levelscredit, which together have an
available credit of worldwide drilling activity, especially gas drilling in the
United States. In the latter partapproximately $266.0 million as of June 30, 2003
and which represent approximately 10% of the third quartercontract amount, as
amended to date by change orders;
- a retainage letter of 2001, drilling
activity levelscredit in the United States beganan amount equal to decline$141.0 million as
prices for oilof June 30, 2003 and natural gas decreased due to decreased economic activity.
Drilling activity increaseswhich will increase in the earlier part of the year in North America
generated much of the growth in demand for our products and services through
the first nine months of 2001. Softening industrial use and reduced power
generation over the summer months resulted in higher gas storage levels which
placed downward pressure on natural gas prices. Gas activity declines followed,
primarily late in the third quarter. Internationally, crude oil prices have
remained at levels satisfactory to provide increasing levels of capital
spending and drilling, primarily
7
by major oil and gas companies, including national oil companies. Generally,
international oil and gas field development projects, particularly deep water
projects in West Africa and Brazil, have longer lead times, economics based on
longer-term commodity prices and are less likely to be delayed due to
fluctuating short-term prices.
In the short-term, we expect gas drilling activity in the United Statesorder to continue to
decline into early 2002. The severityrepresent 10% of the winter monthscumulative cash amounts paid to Kellogg Brown &
Root; and
- a guarantee of Kellogg Brown & Root's performance of the agreement
by Halliburton Company in North
Americafavor of the project owner.
In the event that Kellogg Brown & Root is alleged to be in default
under the contract, the project owner may assert a right to draw upon the
letters of credit. If the letters of credit were to be drawn, Kellogg Brown
& Root would be required to fund the amount of the draw to the issuing
banks. To the extent Kellogg Brown & Root cannot fund the amount of the
draw, Halliburton would be required to do so, which could have a material
adverse effect on Halliburton's financial condition and results of
operations.
In addition, the proposed Chapter 11 pre-packaged bankruptcy filing by
Kellogg Brown & Root in connection with the proposed settlement of its
asbestos claims would constitute an event of default under the contract
that would allow the owner (with the approval of the lenders financing the
project) to assert a right to draw the letters of credit unless we are able
to obtain a waiver. The proposed Chapter 11 filing would also constitute an
event of default under the owner's loan agreements with the lenders that
would allow the lenders to cease funding the project. We believe that it is
unlikely that the owner will make a draw on the letters of credit as a
result of the proposed Chapter 11 filing. We also believe it is unlikely
that the lenders will exercise any right to cease funding the project given
the current status of the project and the fact that a failure to pay
Kellogg Brown & Root may allow Kellogg Brown & Root to cease work on the
project without Petrobras having a readily available substitute contractor.
However, there can be a key factorno assurance that the lenders will continue to fund
the project or that the owner will not require funding of the letters of
credit by Kellogg Brown & Root.
Notwithstanding the foregoing, as described under "Description of
Anticipated Indebtedness -- Master LC Facility," we anticipate that the
letters of credit would be included in the degreeMaster LC Facility. As such, a
draw on such letters of credit prior to the Term-Out Date would become an
LC Advance subject to the terms of the activity declineMaster LC Facility.
KELLOGG BROWN & ROOT MAY HAVE TO PAY DAMAGES AND OTHER AMOUNTS IN
EXCESS OF THE AMOUNTS CURRENTLY RECORDED.
As of June 30, 2003, the project was approximately 75% complete and
Kellogg Brown & Root had recorded a pretax loss of $345.0 million related
to the project, of which $173.0 million was recorded in the second quarter
of 2003. The second quarter 2003 charge was due to higher cost estimates,
schedule extensions, increased project contingencies and other factors
identified during the quarterly review of the project. The probable
unapproved claims included in determining the loss on the project were
$182.0 million as of June 30, 2003. The claims for the project most likely
will not be settled within one year. Accordingly, based upon the contract
being approximately 75% complete, probable unapproved claims of $134.0
million at June 30, 2003 have been recorded to long-term unbilled work on
uncompleted contracts. Kellogg Brown & Root has asserted claims for
compensation substantially in excess of $182.0 million. The project owner,
through its project manager, Petrobras, has denied responsibility for all
such claims. Petrobras has, however, issued formal change orders
25
worth approximately $61.0 million which are not included in the $182.0
million in probable unapproved claims.
In the event that Kellogg Brown & Root was determined after an
arbitration proceeding to have been in default under the contract with
Petrobras, and if the project was not completed by Kellogg Brown & Root as
a result of such default (i.e., Kellogg Brown & Root's services are
terminated as a result of such default), the project owner may seek direct
damages (including completion costs in excess of the contract price and
interest on borrowed funds, but excluding consequential damages) against
Kellogg Brown & Root for up to $500.0 million plus the return of up to
$300.0 million in advance payments previously received by Kellogg Brown &
Root to the extent they have not been repaid. A termination of the contract
by the project owner could have a material adverse effect on our financial
condition and results of operation.
IN ADDITION TO THE AMOUNTS DESCRIBED ABOVE, KELLOGG BROWN & ROOT MAY
HAVE TO PAY LIQUIDATED DAMAGES IF THE PROJECT IS DELAYED BEYOND THE
ORIGINAL CONTRACT COMPLETION DATE.
Kellogg Brown & Root expects that the project will likely be completed
at least 16 months later than the original contract completion date. In the
event that any portion of the delay is determined to be attributable to
Kellogg Brown & Root and any phase of the project is completed after the
milestone dates specified in the contract, Kellogg Brown & Root could be
required to pay liquidated damages. These damages would be calculated on an
escalating basis of approximately $1.0 million per day of delay caused by
Kellogg Brown & Root, subject to a total cap on liquidated damages of 10%
of the final contract amount (yielding a cap of approximately $266.0
million as of June 30, 2003). The amount of liquidated damages could have a
material adverse effect on our financial condition and results of
operations.
IF OUR AGREEMENT TO SETTLE AND/OR ARBITRATE CERTAIN CLAIMS IS NOT
FINALIZED, KELLOGG BROWN & ROOT MAY HAVE TO PAY SUBSTANTIAL ADDITIONAL
AMOUNTS AND MAY NOT RECOVER AMOUNTS IT EXPECTS TO RECOVER.
In June 2003, Halliburton, Kellogg Brown & Root and Petrobras, on
behalf of the project owner, entered into a non-binding heads of agreement
that would resolve some of the disputed issues between the parties, subject
to final agreement and lender approval. The original completion date for
the Barracuda project was December 2003 and the timingoriginal completion date
for the Caratinga project was April 2004. Under the heads of agreement, the
eventual recovery. If pricesproject owner would grant an extension of time to the original completion
dates and other milestone dates, delay any attempt to assess the original
liquidated damages against Kellogg Brown & Root for oil remain stable as comparedproject delays beyond
12 months and up to third quarter prices, we expect large deep water projects18 months, delay any drawing of letters of credit with
respect to continue to
provide opportunities. Oversuch liquidated damages and delay the longer-term, we expect increased global demand
for oil and natural gas, additional spending to replace depleting reserves and
continued technological advances in our products and services to provide growth
opportunities for our products and services.
There are risks to our acquisition strategy. If we are unable to integrate
and manage successfully businesses that we have acquired and any businesses
acquired in the future, our consolidated results of operations and consolidated
financial condition could be affected.
One of our business strategies is to acquire operations and assets that are
complementary to our existing businesses. Acquiring these operations and assets
involves financial, operational and legal risks, including:
. increased levels of goodwill subject to potential impairment;
. increased interest expense;
. increased financial leverage or decreased operating income;
. the difficulty of combining operations and personnel of the acquired
businesses with ours; and
. the difficulty of maintaining uniform standards, controls, procedures and
policies.
In addition, other potential buyers compete with us for acquisitions of
businesses. Competition could cause us to pay a higher price for acquisitions
than we otherwise might have to pay or reduce our acquisition opportunities. We
might be unsuccessful in identifying attractive acquisition candidates,
completing and financing additional acquisitions on favorable terms or
integrating the acquired businesses or assets into our operations.
A significant portion of our revenue is derived from our non-U.S.
operations, which exposes us to risks inherent in doing business in each of the
more than 100 other countries in which we transact business. The occurrencereturn of any of the
$300.0 million in advance payments until after arbitration. The heads of
agreement also provides for a separate liquidated damages calculation of
$450,000 per day for each of the Barracuda and the Caratinga vessels for a
delay from the original schedule beyond 18 months (subject to the total cap
on liquidated damages of 10% of the final contract amount). The heads of
agreement does not delay the drawing of letters of credit for these
liquidated damages. The extension of the original completion dates and
other milestones would significantly reduce the likelihood of Kellogg Brown
& Root incurring liquidated damages on the project. Nevertheless, Kellogg
Brown & Root continues to have exposure for substantial liquidated damages
for delays in the completion of the project.
Under the heads of agreement, the project owner has agreed to pay
$59.0 million of Kellogg Brown & Root's disputed claims (which are included
in the $182.0 million of probable unapproved claims as of June 30, 2003)
and to arbitrate additional claims. The maximum recovery from the claims to
be arbitrated would be capped at $375.0 million. The heads of agreement
also allows the project owner or Petrobras to arbitrate additional claims
against Kellogg Brown & Root, not including liquidated damages, the maximum
recovery from which would be capped at $380.0 million.
26
The finalization of the heads of agreement is subject to project
lender approval. The parties have had discussions with the lenders and
based on these discussions have agreed to certain modifications to the
original terms of the heads of agreement to conform to the lender's
requirements. They have agreed that the $300.0 million in advance payments
would be due on the earliest of December 7, 2004, the completion of any
arbitration or the resolution of all claims between the project owner and
Kellogg Brown & Root. Likewise, the project owner's obligation to defer
drawing letters of credit with respect to liquidated damages for the delays
between 12 and 18 months would extend only until December 7, 2004. The
discussions with the lenders are not yet complete, and no agreement for
their approval has yet been obtained. While we believe the lenders have an
incentive to approve the heads of agreement and complete the financing of
the project, and the parties have agreed to the modifications described
above to the heads of agreement to secure the lenders' approval, there is
no assurance that they will do so. If the lenders do not consent to the
heads of agreement, Petrobras may be forced to secure other funding to
complete the project. We cannot assure you that Petrobras will pursue or
will be able to secure such funding.
Absent finalization of the heads of agreement, Kellogg Brown & Root
could be subject to additional liquidated damages and other claims, be
subject to the letters of credit being drawn and be required to return the
$300.0 million in advance payments in accordance with the original contract
terms. The original contract terms require repayment through $300.0 million
of credits to the last $350.0 million of invoices on the contract.
Negotiation of the documents necessary to finalize the heads of agreement
is on-going with counsel for Petrobras (on behalf of the project owner) and
the lenders. We expect these negotiations to be concluded during the fourth
quarter of this year. Nevertheless, no assurance can be given that the
heads of agreement will be finalized or that the lenders will approve the
heads of agreement or that the lenders will approve the heads of agreement
without revisions that could adversely affect Kellogg Brown & Root. A
failure to complete and finalize the heads of agreement could have a
material adverse effect on our financial condition and results of
operation.
FUNDING OF THE PROJECT MAY BE INSUFFICIENT TO COVER ALL AMOUNTS
CLAIMED BY KELLOGG BROWN & ROOT.
The project owner has procured project finance funding obligations
from various lenders to finance the payments due to Kellogg Brown & Root
under the contract. The project owner currently has no other committed
source of funding on which we can necessarily rely other than the project
finance funding for the project. If the lenders cease to fund the project,
the project owner may not have the ability to continue to pay Kellogg Brown
& Root for its services. The original loan documents provide that the
lenders are not obligated to continue to fund the project if the project
has been delayed for more than 6 months. In November 2002, the lenders
agreed to extend the 6-month period to 12 months. Other provisions in the
loan documents may provide for additional time extensions. However, delays
beyond 12 months may require lender consent in order to obtain additional
funding. While we believe the lenders have an incentive to complete the
financing of the project, there is no assurance that they would do so. If
the lenders did not consent to extensions of time or otherwise ceased
funding the project, we believe that Petrobras would provide for or secure
other funding to complete the project, although there is no assurance that
it would do so. To date, the lenders have made funds available, and the
project owner has continued to disburse funds to Kellogg Brown & Root as
payment for its work on the project even though the project completion has
been delayed.
In addition, although the project financing includes borrowing
capacity in excess of the original contract amount, only $250.0 million of
this additional borrowing capacity is reserved for increases in the
contract amount payable to Kellogg Brown & Root and its subcontractors.
Under the loan documents, the availability date for loan draws expires
December 1, 2003. As a condition to approving the heads of agreement, the
lenders will require the project owner to draw all remaining available
funds prior to December 1, 2003, and to escrow the funds for the exclusive
use of paying project
27
costs. No funds may be paid to Petrobras or its subsidiary (which is
funding the drilling costs of the project) until all amounts due to Kellogg
Brown & Root, including amounts due for the claims, are liquidated and
paid. While this potentially increases the funds available for payment to
Kellogg Brown & Root, Kellogg Brown & Root is not party to the arrangement
between the lenders and the project owner and can give no assurance that
there will be adequate funding to cover current or future Kellogg Brown &
Root claims and change orders.
Kellogg Brown & Root has now begun to fund operating cash shortfalls
on the project and would be obligated to fund such shortages over the
remaining project life in an amount we currently estimate to be
approximately $500.0 million (assuming generally that neither we nor the
project owner are successful in recovering claims against the other and
that no liquidated damages are imposed). Under the same assumptions, except
assuming that Kellogg Brown & Root recovers unapproved claims in the
amounts currently recorded on our books, the cash shortfall would be
approximately $320.0 million. There can be no assurance that Kellogg, Brown
& Root will recover amounts in excess of the amount of unapproved claims on
its books.
WE MAY BE REQUIRED TO PAY ADDITIONAL VAT TAXES RELATED TO THE
BARRACUDA-CARATINGA PROJECT.
Value added, or VAT, taxes of up to $293.0 million may be or become due on
the project. The project owner is contesting the reimbursability of up to $227.0
million of these potential VAT taxes. The contract provides that Kellogg Brown &
Root is responsible for taxes in effect on the contract date, but not for
increased costs due to changes in the tax laws that occur after the date of the
contract. The parties agree that certain changes in the tax laws occurred after
the date of the contract, but do not agree on how much of the increase in taxes
was due to that change or which party is responsible for ultimately paying these
taxes. Up to approximately $100.0 million of VAT taxes may be due in stages from
November 2003 through April 2004, with the balance due in stages later in 2004.
Depending on when the VAT taxes are deemed due and when they are paid, penalties
and interest on the taxes of between $50-$100 million may also be due, the
reimbursability of which the project owner may also contest. There can be no
assurance that we will not be required to pay all or a portion of these VAT
taxes and obligations.
WE MAY PURSUE ACQUISITIONS, DISPOSITIONS, INVESTMENTS AND JOINT VENTURES,
WHICH COULD AFFECT OUR RESULTS OF OPERATIONS.
We may actively seek opportunities to maximize efficiency and value through
various transactions, including purchases or sales of assets, investments or
contractual arrangements or joint ventures. These transactions would be intended
to result in the realization of savings, the creation of efficiencies, the
generation of cash or income or the reduction of risk. Acquisition transactions
may be financed by additional borrowings or by the issuance of common stock of
Halliburton. These transactions may also affect our results of operations.
These transactions also involve risks described below couldand we cannot assure you that:
- any acquisitions would result in an increase in income;
- any acquisitions would be successfully integrated into our operations;
- any disposition would not result in decreased revenue or cash flow;
- any dispositions, investments, acquisitions or integrations would not
divert management resources; or
- any dispositions, investments, acquisitions or integrations would not
have an adverse effect on our consolidatedresults of operations or financial
condition.
We conduct some operations through joint ventures, where control may be
shared with unaffiliated third parties. As with any joint venture arrangement,
differences in views among the joint venture participants may result in delayed
decisions or in failures to agree on major issues. This could potentially
adversely affect the business and operations of the joint venture and, in turn,
our business and operations.
28
A SIGNIFICANT PORTION OF OUR ENGINEERING AND CONSTRUCTION PROJECTS IS ON A
FIXED-PRICE BASIS, SUBJECTING US TO THE RISKS ASSOCIATED WITH COST OVER-RUNS
AND OPERATING COST INFLATION.
We contract to provide services either on a time-and-materials basis or on
a fixed-price basis, with fixed-price (or lump sum) contracts accounting for
approximately 20% of our revenues for the six months ended June 30, 2003 and 21%
of our revenues for the year ended December 31, 2002. We bear the risk of cost
over-runs, operating cost inflation, labor availability and productivity and
supplier and subcontractor pricing and performance in connection with projects
covered by fixed-price contracts. Our failure to estimate accurately the
resources and time required for a fixed-price project, or our failure to
complete our contractual obligations within the time frame committed, could have
a material adverse effect on our business, results of operations and consolidated financial
condition.
CHANGES IN GOVERNMENTAL SPENDING AND CAPITAL SPENDING BY OUR CUSTOMERS MAY
ADVERSELY AFFECT US.
Our operationsbusiness is directly affected by changes in more than 100 countries other thangovernmental spending and
capital expenditures by our customers. Some of the United States
accountedchanges that may adversely
affect us include:
- a decrease in the magnitude of governmental spending and outsourcing for
approximately 70%military and logistical support of the type that we provide;
- an increase in the magnitude of governmental spending and outsourcing for
military and logistical support, which can adversely affect our liquidity
needs as a result of additional or continued working capital requirements
to support this work;
- a decrease in capital spending by customers in the oil and gas industry
for exploration, development, production, processing, refining and
pipeline delivery networks;
- a decrease in capital spending by governments for infrastructure projects
of the type that we undertake; and
- the consolidation of our consolidated revenues during 1999customers, which has (1) caused customers to
reduce their capital spending, which has reduced the demand for our
services and 66% of our consolidated revenues during 2000. Operationsproducts, and (2) resulted in countries other
thancustomer personnel changes,
which in turn affects the United States are subject to various risks peculiar to each country.
With respect to any particular country, these risks may include:
. expropriation and nationalization;
. political and economic instability;
. armed conflict and civil disturbance;
. currency fluctuations, devaluations and conversion restrictions;
. confiscatory taxation or other adverse tax policies;
. governmental activities that limit or disrupt markets, restrict payments
or the movement of funds; and
. governmental activities that may result in the deprivationtiming of contract rights.
8
negotiations and settlements
of claims and claim negotiations with engineering and construction
customers on cost variances and change orders on major projects.
WE ARE SUSCEPTIBLE TO ADVERSE WEATHER CONDITIONS IN OUR REGIONS OF OPERATIONS.
Our ability to compete outside of the United Statesbusiness may be adversely affected by severe weather, particularly in
the Gulf of Mexico where we have significant operations. Repercussions of severe
weather conditions may include:
- evacuation of personnel and curtailment of services;
- weather related damage to offshore drilling rigs resulting in suspension
of operations;
- weather related damage to our facilities;
- inability to deliver materials to jobsites in accordance with contract
schedules; and
- loss of productivity.
Because demand for natural gas in the United States drives a
disproportionate amount of our Energy Services Group's U.S. business, warmer
than normal winters in the United States are detrimental to the demand for our
services to gas producers.
29
WE ARE SUBJECT TO VARIOUS OPERATIONAL AND PERFORMANCE RISKS RELATED TO
PROJECTS WE UNDERTAKE AND SERVICES THAT WE PROVIDE.
We are subject to various operational and performance risks related to
projects we undertake and services that we provide. These risks include:
- changes in the price or the availability of commodities that we use;
- non-performance, default or bankruptcy of joint venture partners, key
suppliers or subcontractors;
- risks that result from performing fixed-price projects (see "-- A
significant portion of our engineering and construction projects is on a
fixed-price basis, subjecting us to the risks associated with cost
over-runs and operating cost inflation" above); and
- risks that result from entering into complex business arrangements for
technically demanding projects where failure by one or more parties could
result in monetary penalties.
OUR ABILITY TO COMPETE OUTSIDE OF THE UNITED STATES MAY BE ADVERSELY AFFECTED
BY GOVERNMENTAL REGULATIONS PROMULGATED IN NUMEROUS COUNTRIES IN WHICH WE
TRANSACT BUSINESS.
If the governmental regulations promulgated in the numerous countries in
which we transact business. If these regulationsbusiness apply to us, they may require us to engage in
business practices that may not be to our benefit. Those kinds of regulations
frequently:
.- encourage or mandate the hiring of local contractors;contractors or suppliers; and
.- require foreign contractors to employ citizens of, or purchase supplies
from, a particular jurisdiction.
In addition,As a result, we may be required to engage in business practices that are
uneconomical and that could adversely impact our results of operations.
WE ARE SUBJECT TO TAXATION IN MANY JURISDICTIONS AND THERE ARE INHERENT
UNCERTAINTIES IN THE FINAL DETERMINATION OF OUR TAX LIABILITIES.
We have operations in more than 100 countries other than the United States
and as a result are subject to taxation in many jurisdictions, andjurisdictions. Therefore, the
final determination of our tax liabilities involves the interpretation of the
statutes and requirements of taxing authorities worldwide. Foreign income tax
returns of foreign subsidiaries, unconsolidated affiliates and related entities
are routinely examined by foreign tax authorities. These tax examinations may
result in assessments of additional taxes or penalties or both. Additionally,
new taxes, such as the proposed excise tax in the United States targeted at
heavy equipment of the type we own and use in our operations, could negatively
affect our results of operations.
WE ARE SUBJECT TO SIGNIFICANT FOREIGN EXCHANGE AND CURRENCY RISKS THAT COULD
ADVERSELY AFFECT OUR OPERATIONS AND OUR ABILITY TO REINVEST EARNINGS FROM
OPERATIONS.
A sizable portion of our consolidated revenues and consolidated operating
expenses are in foreign currencies. As a result, we are subject to significant
risks, including:
- foreign exchange risks that could adversely affect our operations,resulting from changes in foreign exchange rates
and the implementation of exchange controls such as well as
limitthose experienced in
Argentina in late 2001 and early 2002; and
- limitations on our ability to reinvest earnings from operations in one
country to fund the capital needs of our operations in other countries.
We do business in countries that have non-traded or "soft" currencies which
have restricted or limited trading markets. We may accumulate cash in soft
currencies and we may be limited in our ability to convert our profits into U.S.
dollars or to repatriate the profits from those countries.
30
OUR ABILITY TO LIMIT OUR FOREIGN EXCHANGE RISK THROUGH HEDGING TRANSACTIONS
MAY BE LIMITED.
We selectively use hedging transactions to limit our exposure to risks from
doing business in foreign currencies. We have developed risk management
policies that establish guidelines for managing foreign exchange risk. As part
of these policies, we have designed a reporting process to monitor the
potential exposure on an ongoing basis. We use this process to determine the
extent of our foreign currency exposure and to determine whether it is
practical or economical to execute financial hedges. For those currencies that are not readily
convertible, our ability to hedge our exposure is limited because financial
hedge instruments for those currencies are nonexistent or limited. Our ability
to hedge is also limited because pricing of hedging instruments, where they
exist, is often volatile and not necessarily efficient.
ToIn addition, the extentrisk inherent in the use of derivative instruments of the
sort that we can matchuse could cause a change in the currencyvalue of the derivative instruments
as a result of:
- adverse movements in which our operating revenues are
denominated to that in which our operating expenses in a country are
denominated, we can reduce our vulnerability toforeign exchange rate fluctuations.rates;
- interest rates;
- commodity prices; or
- the value and time period of the derivative being different than the
exposures or cash flows being hedged.
WE ARE SUBJECT TO A VARIETY OF ENVIRONMENTAL REQUIREMENTS THAT IMPOSE ON US
OBLIGATIONS OR RESULT IN OUR INCURRING LIABILITIES THAT WILL ADVERSELY AFFECT
OUR RESULTS OF OPERATIONS OR FOR WHICH OUR FAILURE TO COMPLY COULD ADVERSELY
AFFECT US.
Our businesses are subject to a variety of environmental laws, rules and
regulations in the United States and other countries, including those covering
hazardous materials. Any failure onmaterials and requiring emission performance standards for facilities.
For example, our
part to comply with applicable environmental laws and regulations could have an
adverse effect on our consolidated financial condition.
Our well service operations routinely involve the handling of
significant amounts of waste materials, some of which are classified as
hazardous substances. Our operations and facilities are subject to numerous environmental
laws, rules and regulations of the United States and other countries, including
lawsEnvironmental requirements include, for example, those
concerning:
.- the containment and disposal of hazardous substances, oilfield waste and
other waste materials;
.- the use of underground storage tanks; and
.- the use of underground injection wells.
Laws protecting the environmentEnvironmental requirements generally are becoming stricter.increasingly strict.
Sanctions for failure to comply with these laws, rules and regulations,requirements, many of which may be
applied retroactively, may include:
.- administrative, civil and criminal penalties;
.- revocation of permits; and
.- corrective action orders.
9
orders, including orders to investigate and/or clean up
contamination.
Failure on our part to comply with applicable environmental requirements
could have an adverse effect on our consolidated financial condition. We are
a partyalso exposed to costs arising from environmental compliance, including
compliance with changes in asbestos litigation claiming that products manufactured
by, or materials usedexpansion of environmental requirements, such as
the potential regulation in various construction and renovation projectsthe United States of our subsidiaries or former divisions contained asbestos, resulting in injury to the
plaintiffs.
At September 30, 2001, there were about 146,000 open asbestos claims
asserted against us. These claims couldEnergy Services Group's
hydraulic fracturing services and products as underground injection, which may
have a material adverse effect on our business, financial condition, if:
. the Highland's litigation is not resolved in our favor;
. the comprehensive insurance coverage litigation with Dresser's insurers is
not resolved in Dresser's favor;
. our estimate of amounts that we will recoveroperating
results or cash flows.
We are exposed to claims under environmental laws and from our insurance carriers
provestime to be incorrect; or
. the cost of defending and resolving thesetime
such claims deviates significantly
from Halliburton's historical experience.
We estimate our net liability for known open asbestos claims at September
30, 2001 to be $125 million. More detailed information related to Halliburton's
insurance, indemnity and asbestos litigation is described in Note 9 to the
financial statements in Halliburton's Form 10-K for the fiscal year ended
December 31, 2000 and in Note 7 to the quarterly financial statements in
Halliburton's Form 10-Q for the quarter ended September 30, 2001.
Harbison-Walker Refractories Company was spun-off by Dresser Industries,
Inc. in 1992. In the agreement related to the spin-off, Harbison-Walker agreed
to assume liability for asbestos claims filed after the spin-off and it agreed
to defend and indemnify Dresser from liability for those claims. In addition to
the open claims described in the preceding paragraph, as of September 30, 2001,
we believe there were approximately 182,000 open and unresolved post spin-off
refractory claims. We believe approximately 120,000 of these post spin-off
claims name Dresser as a defendant. Based on our negotiations with
Harbison-Walker and our investigations, we believe Harbison-Walker is no longer
financially able to perform its obligations to assume liability for post
spin-off refractory claims and defend Dresser from those claims. If so, these
claims could have a material adverse effect on our financial condition. Once we
have verified that Dresser is a named defendant in any claims, we plan to treat
these claims as open claims. More detailed information related to the
Harbison-Walker litigation can be found in Note 7 to the quarterly financial
statements in Halliburton's Form 10-Q for the quarter ended September 30, 2001.been made against us. In the United States, environmental laws
and regulations typically impose strict liability. Strict liability means that
in some situations we could be exposed to liability for cleanup costs, natural
resource damages and other damages as a result of our conduct that was lawful at
the time it occurred or the conduct of prior operators or other third parties.
Cleanup costs, natural resource damages and otherLiability for damages arising as a result of environmental laws and costs associated with changes in
environmental laws and regulations, could be
substantial and could have a material adverse effect on our consolidated results
of operations.
From time to
time, claims have been made against our Company and its subsidiaries under
environmental laws.31
DEMAND FOR OUR SERVICES MAY BE ADVERSELY AFFECTED BY ENVIRONMENTAL
REQUIREMENTS.
Changes in environmental regulationsrequirements may also negatively impact demand for our
services. For example, activity by oil and natural gas exploration and
production companies, whichmay decline as a result of environmental requirements (including land
use policies responsive to environmental concerns). Such a decline, in turn,
could have a material adverse effect on us.
Risks SpecificWE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS.
We rely on a variety of intellectual property rights that we use in our
products and services. We may not be able to Offered Securities
Risks specificsuccessfully preserve these
intellectual property rights in the future and these rights could be
invalidated, circumvented or challenged. In addition, the laws of some foreign
countries in which our products and services may be sold do not protect
intellectual property rights to securities offered from timethe same extent as the laws of the United
States. Our failure to timeprotect our proprietary information and any successful
intellectual property challenges or infringement proceedings against us could
adversely affect our competitive position.
IF WE DO NOT DEVELOP NEW COMPETITIVE TECHNOLOGIES AND PRODUCTS OR IF OUR
PROPRIETARY TECHNOLOGIES, EQUIPMENT, FACILITIES OR WORK PROCESSES BECOME
OBSOLETE, OUR BUSINESS AND REVENUES MAY BE ADVERSELY AFFECTED.
The market for our products and services is characterized by us or the Trust
pursuantcontinual
technological developments to this prospectus as supplemented byprovide better and more reliable performance and
services. If we are not able to design, develop and produce commercially
competitive products and to implement commercially competitive services in a
prospectus supplementtimely manner in response to changes in technology, our business and revenues
will be describedadversely affected and the value of our intellectual property may be
reduced. Likewise, if our proprietary technologies, equipment and facilities or
work processes become obsolete, we may no longer be competitive and our business
and revenues will be adversely affected.
WE MAY BE UNABLE TO EMPLOY A SUFFICIENT NUMBER OF TECHNICAL PERSONNEL.
Many of the services that we provide and the products that we sell are
complex and highly engineered and often must perform or be performed in harsh
conditions. We believe that our success depends upon our ability to employ and
retain technical personnel with the ability to design, utilize and enhance these
products and services. In addition, our ability to expand our operations depends
in part on our ability to increase our skilled labor force. The demand for
skilled workers is high and the supply is limited. A significant increase in the
applicable prospectus supplement.
USE OF PROCEEDS
Unless otherwise providedwages paid by competing employers could result in a reduction of our skilled
labor force, increases in the applicable prospectus supplement,wage rates that we must pay or both. If either of
these events were to occur, our cost structure could increase, our margins could
decrease and our growth potential could be impaired.
RISKS RELATING TO THE NOTES
OUR FINANCIAL CONDITION IS DEPENDENT ON THE EARNINGS OF OUR SUBSIDIARIES.
We are a holding company and our assets consist primarily of direct and
indirect ownership interests in, and our business is conducted substantially
through, our subsidiaries. Consequently, our ability to repay our debt,
including the net
proceedsnotes, depends on the earnings of our subsidiaries, as well as our
ability to receive funds from the sale of the securities offered by this prospectus and the
applicable prospectus supplement will be added to our general funds and used
for general corporate purposes, which may includesubsidiaries through dividends, repayment of
debt,
acquisitions and loans and advances to, and investments in,intercompany notes or other payments. The ability of our subsidiaries to provide funds for working capital, repayment ofpay
dividends, repay intercompany debt or make other advances to us is subject to
restrictions imposed by applicable laws (including bankruptcy laws), tax
considerations and capital expenditures.
Until so utilized, it is expected that the net proceeds will be placed in
interest bearing time deposits or invested in short-term marketable securities.
10
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERENCE DIVIDENDS
The following table sets forth our consolidated ratios of earnings to
combined fixed charges and preference dividends for the periods shown.
For the Nine Months Ended, Years Ended December 31,
-------------------------- ------------------------
Sept. 30, 2001 (unaudited) 2000 1999 1998 1997 1996
-------------------------- ---- ---- ---- ---- ----
5.1x 2.3x 2.4x (a) 7.3x 5.6x
- --------
(a)Earnings were inadequate to cover combined fixed charges and preference
dividends for the year ended December 31, 1998, by approximately $6.0
million.
The ratios of our earnings to our combined fixed charges and preference
dividends are based on continuing operations. For purposes of the ratios,
"earnings" means the sum of:
. our pre-tax income, and
. our fixed charges, net of interest capitalized; and
"combined fixed charges and preference dividends" represent:
. the interest we pay on borrowed funds,
. the amount we amortize for debt discount, premium and issuance expense and
interest previously capitalized,
. that portion of rentals considered to be representative of the interest
factor, and
. the amount of pre-tax earnings that is required to pay the dividend on
outstanding preference securities.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth the general terms and provisions of our
debt securities, consisting of debentures, notes or other evidences of
indebtedness, that we may offer by this prospectus. We will describe the
particular terms of the debt securities, and provisions that vary from those
described below,agreements governing our subsidiaries. Our
foreign subsidiaries in one or more prospectus supplements.
The debt securities will constitute either senior debt, subordinated debt or
junior subordinated debt (which we referparticular may be subject to as "Debt Securities" in this
prospectus.) As required by U.S. federal law, the Debt Securities are governed
by a document called an "indenture." The indenture is a contract betweencurrency controls,
repatriation restrictions, withholding obligations on payments to us, and an entity that serves as trustee. The trustee has two main roles:
. the trustee can enforce your rights, including rights you have against us
ifother
limits. If we default; and
. the trustee performs administrative duties for us,do not receive such as sending you
interest payments, transferring your Debt Securities to a new buyer if you
sell your Debt Securities and sending you notices.
Senior Debt Securities willfunds from our subsidiaries, our financial
condition would be issued under a Second Senior Indenture dated
as of December 1, 1996 between our predecessor and Texas Commerce Bank National
Association (now JPMorgan Chase Bank), as trustee, as supplemented and amended
by the First, Second, Third and Fourth Supplemental Indentures (the "Senior
Indenture"). Subordinated Debt Securities will be issued under a Subordinated
Indenture dated as of January 2, 1991 between our predecessor and the same
trustee, as supplemented and amended by the First
11materially adversely affected.
32
Supplemental Indenture (the "Subordinated Indenture"). Junior Subordinated Debt
Securities will be issued pursuant to a Junior Subordinated Indenture dated
November 29, 2001 between us and JPMorgan Chase Bank, as trustee (the "Junior
Subordinated Indenture"). The Senior Indenture, the Subordinated Indenture and
the Junior Subordinated Indenture are sometimes collectively referred to in
this prospectus as the "Indentures" and the trustee is referred to as the
"Trustee." We have filed forms of the Senior Indenture, the Subordinated
Indenture and the Junior Subordinated Indenture as exhibits to the registration
statement of which this prospectus is a part.
The following description is a summary of selected provisions relating to
the Debt Securities and the Indentures. The summary is not complete. You should
not rely on this summary, because the Indentures define your rights as a holder
of the Debt Securities. In the summary below we have included references to
section numbers of the applicable Indentures so that you can easily locate
these provisions.
Our trust debentures are separately described in this prospectus under the
caption "Description of Trust Debentures."
Provisions Applicable to Senior, Subordinated and Junior Subordinated Debt
Securities
General. The Debt Securities will be unsecured senior or subordinated or
junior subordinated obligations of the Company and may be issued from time to
time in one or more series. None of the Indentures limits the amount of Debt
Securities that may be issued thereunder nor does any of them limit our
aggregate unsecured indebtedness or limit the payment of dividends or the
acquisition of our stock.
Our Company is a holding company, the only significant assets of which are
the stock of its subsidiaries. As a consequence, any indebtedness of our
Company, including Debt Securities issued under any of the Indentures, will be
structurally subordinated to all of the indebtedness of our subsidiaries.YOU WILL HAVE NO RECOURSE AGAINST OUR SUBSIDIARIES IN THE EVENT OF A DEFAULT
ON THE NOTES.
As a holding company, we rely primarily on dividends from our subsidiaries
to meet our obligations for payment of principal and interest on our outstanding
debt obligations and corporate expenses. See "-- Our Companyfinancial condition is
dependent on the earnings of our subsidiaries" above. We are a legal entity
separate and distinct from our subsidiaries. Holderssubsidiaries, and holders of Debt Securities
shouldthe notes will be
able to look only to us for payments on the notes. In addition, our right to
receive assets of any subsidiaries upon their liquidation or reorganization, and
the rights of the holders of the notes to share in those Debt Securities.
Becauseassets, would be
subject to the satisfaction of claims of the subsidiaries' creditors.
Consequently, the notes will be subordinate to all liabilities, including their
guarantees of our other indebtedness and their trade payables, of any of our
subsidiaries and any subsidiaries that we may in the future acquire or
establish. We expect that the credit facilities that we enter into in connection
with our proposed settlement will be guaranteed by some of our subsidiaries. See
"Description of Anticipated Indebtedness."
THE NOTES WILL BE EFFECTIVELY JUNIOR TO ALL SECURED INDEBTEDNESS UNLESS THEY
ARE ENTITLED TO BE EQUALLY AND RATABLY SECURED.
The notes will be our unsecured obligations and will rank equally with all
our other unsecured indebtedness. However, the notes are structurally
subordinated to indebtedness of our subsidiaries and effectively subordinated to
our secured debt to the extent of the value of the assets securing such debt. As
of the date of this prospectus, we have no secured indebtedness outstanding.
However, we currently anticipate entering into (1) a senior unsecured credit
facility for an amount up to approximately $1.0 billion, subject to reduction,
(2) an approximately $1.4 billion senior secured letter of credit facility and
(3) an up to $700.0 million senior secured revolving credit facility in
replacement of our existing $350.0 million credit facility. See "Description of
Anticipated Indebtedness." The indenture governing the notes permits us to incur
an amount of secured indebtedness up to 5% of our consolidated net tangible
assets before the notes will be entitled to equal and ratable security and the
notes are effectively junior to any secured indebtedness until the notes are
entitled to be equally and ratably secured. In addition, certain of our notes,
including our 8.75% notes due 2021, our senior notes due 2005, our 5 1/2% senior
notes due 2010, our medium-term notes and any of our 7.6% debentures due 2096
that we issue (see "Description of Anticipated Indebtedness") will, and certain
new issuances may, be entitled to be secured on the same basis as the notes.
In the event that we are declared bankrupt, become insolvent or are
liquidated or reorganized, any debt that ranks ahead of the notes will be
entitled to be paid in full from our assets before any payment may be made with
respect to the notes. Holders of the notes will participate ratably with all
holders of our unsecured indebtedness that is deemed to be of the same class as
the notes, and potentially with all of our other general creditors, based upon
the respective amounts owed to each holder or creditor, in our remaining assets.
In any of the foregoing events, we cannot assure you that there will be
sufficient assets to pay amounts due on the notes. As a result, holders of the
notes may receive less, ratably, than holders of secured indebtedness.
BECAUSE WE ARE A HOLDING COMPANY, THE NOTES ARE STRUCTURALLY SUBORDINATED TO
ALL OF THE INDEBTEDNESS OF OUR SUBSIDIARIES.
The notes are a general unsecured obligation of Halliburton. We are a
holding company and our assets consist primarily of direct and indirect
ownership interests in, and our business is conducted substantially through, our
subsidiaries. As a consequence, any of our indebtedness, including the notes,
are structurally subordinated to all of the indebtedness of our subsidiaries. In
addition, because we are a holding company, our right to participate in any
distribution of assets of any subsidiary upon its liquidation or reorganization
or otherwise, (and thusand the ability of holders of the Debt Securitiesnotes to benefit indirectly from
such distribution),that kind of distribution, is subject to the prior claims of creditors of that
subsidiary, except to the extent that we are recognized as a creditor of that
subsidiary. All obligations of our subsidiaries will have to be satisfied before
any of the assets of such subsidiaries would be available for distribution, upon
a liquidation or otherwise, to us. At June 30, 2003, the aggregate indebtedness
of our subsidiaries was approximately
33
$396.0 million, other liabilities of our subsidiaries, including trade payables,
accrued compensation, advanced billings, income taxes payable and other
liabilities (other than asbestos and intercompany liabilities) were
approximately $4.4 billion, and accrued asbestos liabilities were approximately
$3.4 billion. In addition, while the notes will not be guaranteed by any of our
subsidiaries, borrowings under the letter of credit facility and revolving
credit facility described under "Description of Anticipated Indebtedness" will
be guaranteed by some of our subsidiaries. We also have joint ventures and
subsidiaries in which we own less than 100% of the equity so that, in addition
to the structurally senior claims of creditors of those entities, the equity
interests of our joint venture partners or other shareholders in any dividend or
other distribution made by these entities would need to be satisfied on a
proportionate basis with us. These joint ventures and less than wholly-owned
subsidiaries may also be subject to restrictions on their ability to distribute
cash to us in their financing or other agreements and, as a result, we may not
be able to access their cash flow to service our debt obligations, including in
respect of the notes. Accordingly, the Debt Securities will benotes are effectively subordinated to all
existing and future liabilities of our subsidiaries and all liabilities of any
of our future subsidiaries.
Unless describedWE MAY INCUR ADDITIONAL INDEBTEDNESS RANKING EQUAL TO THE NOTES.
If we incur any additional debt that ranks equally with the notes,
including trade payables, the holders of that debt will be entitled to share
ratably with you in any proceeds distributed in connection with any insolvency,
liquidation, reorganization, dissolution or other winding-up of us. This may
have the effect of reducing the amount of proceeds paid to you.
WE WILL BE ABLE TO INCUR MORE INDEBTEDNESS AND THE RISKS ASSOCIATED WITH OUR
LEVERAGE, INCLUDING OUR ABILITY TO SERVICE OUR INDEBTEDNESS, WILL INCREASE AS
WE INCUR ADDITIONAL INDEBTEDNESS.
As of June 30, 2003, we had approximately $2.556 billion of indebtedness,
representing a total debt to capitalization ratio of 42%. In October 2003, we
issued additional unsecured indebtedness in an aggregate principal amount of
$1.05 billion, and we anticipate issuing additional indebtedness to finance the
remaining cash portion of our proposed settlement. See "Description of
Anticipated Indebtedness." Further, the indenture that governs the notes does
not restrict us from issuing additional indebtedness. If our level of debt
becomes substantial, the risks associated with our leverage could have important
consequences to you, including the following:
- our ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired;
- we would be obligated to use a substantial portion of our cash flow from
operations to pay interest and principal on the notes and other
indebtedness, which will reduce the funds available to us for other
purposes such as potential acquisitions and capital expenditures;
- we could potentially have a higher level of indebtedness than some of our
competitors, which may put us at a competitive disadvantage and reduce
our flexibility in planning for, or responding to, changing conditions in
our industry, including increased competition; and
- we would be more vulnerable to general economic downturns and adverse
developments in our business.
We expect to obtain money to pay our expenses and to pay the principal and
interest on the notes and other debt from cash flow from distributions from our
subsidiaries. Our ability to meet our expenses depends on our future
performance, which will be affected by financial, business, economic and other
factors. We will not be able to control many of these factors, such as economic
conditions in the prospectus supplementmarkets where we operate and pressure from competitors. The
failure to generate sufficient cash flow could significantly adversely affect
the value of the notes.
34
THERE IS NO TRADING MARKET FOR THE NOTES AND THERE MAY NEVER BE ONE.
The notes are new securities for which currently there are no trading
markets. We do not currently intend to apply for listing of the notes on any
securities exchange. The liquidity of any market for the notes will depend on
the number of holders of those notes, the interest of securities dealers in
making a market in the notes and other factors. Accordingly, we cannot assure
you as to the development of liquidity of any market for the notes. Further, if
markets were to develop, the market price for the notes may be adversely
affected by changes in our financial performance, changes in the overall market
for similar securities and performance or prospects for companies in our
industry.
WE MAY NOT BE ABLE TO PURCHASE THE NOTES UPON AN AGREED PURCHASE DATE OR A
FUNDAMENTAL CHANGE, AND MAY NOT BE OBLIGATED TO PURCHASE THE NOTES UPON
CERTAIN CORPORATE TRANSACTIONS.
On July 15, 2008, July 15, 2013 and July 15, 2018, holders of the notes may
require us to purchase their notes for cash. In addition, before July 15, 2008,
holders of the notes may require us to purchase their notes upon a Fundamental
Change. However, it is possible that we would not have sufficient funds to make
the required purchase of the notes and we may be required to secure third-party
financing to do so. However, we may not be able to obtain such financing on
commercially reasonable terms, on terms acceptable to us or at all. A
Fundamental Change under the indenture may also result in an event of default
under our proposed credit facilities, which may cause the acceleration of our
other indebtedness, in which case, we would be required to repay in full our
secured indebtedness before we repay the notes. Our future indebtedness may also
contain restrictions on our ability to repurchase the notes upon certain events,
including transactions that could constitute a Fundamental Change under the
indenture. Our failure to repurchase the notes upon a Fundamental Change would
constitute an event of default under the indenture and would have a material
adverse effect on our financial condition. Further, certain important corporate
events, such as leveraged recapitalizations that would increase the level of our
indebtedness, may not constitute a Fundamental Change under the indenture and
would not trigger our obligation to repurchase the notes. See "Description of
Notes -- Purchase of Notes by Us at Option of the Holder" and "-- Fundamental
Change Requires Purchase of Notes by Us at the Option of the Holder."
The Fundamental Change and other provisions in the indenture relating to
consolidation, merger, sale or conveyance of all or substantially all assets may
not protect you in the event we consummate a particularhighly leveraged transaction,
reorganization, restructuring, spin-off, merger or other similar transaction,
unless such transaction constitutes a Fundamental Change or a consolidation,
merger, sale or conveyance of all or substantially all assets under the
indenture. Such a transaction may not trigger your right to convert the notes or
our obligation to repurchase the notes. Except as described above, the indenture
does not contain provisions that permit the holders of the notes to convert the
notes or require us to repurchase or redeem the notes in an event of a takeover,
recapitalization, spin-off or similar transaction. There can be no assurance
that the trading price of the notes would not be materially and adversely
affected by such a transaction.
WE EXPECT THAT THE TRADING VALUE OF THE NOTES WILL BE SIGNIFICANTLY AFFECTED
BY THE PRICE OF OUR COMMON STOCK.
The market price of the notes is expected to be significantly affected by
the market price of our common stock. This may result in greater volatility in
the trading value of the notes than would be expected for nonconvertible debt
securities we issue.
THE AVAILABILITY OF SHARES OF OUR COMMON STOCK FOR FUTURE SALE COULD DEPRESS
OUR STOCK PRICE AND ADVERSELY AFFECT THE VALUE OF THE NOTES.
Under the proposed settlement, we would issue 59.5 million shares of our
common stock to one or more trusts for the benefit of asbestos and silica
personal injury claimants. These shares will likely have few or no restrictions
on their transfer. Sales by the trusts and other stockholders of a substantial
number of shares of our common stock in the public markets following this
offering, or the perception that such
35
sales might occur, could have a material adverse effect on the price of our
common stock or could impair our ability to obtain capital through an offering
of equity securities. Because the notes are convertible into our common stock,
any decline in our stock price could adversely affect the value of the notes.
WE MAY ISSUE PREFERRED STOCK WHOSE TERMS COULD ADVERSELY AFFECT THE VOTING
POWER OR VALUE OF OUR COMMON STOCK.
Our certificate of incorporation authorizes us to issue, without the
approval of our stockholders, one or more classes or series of offered Debt Securities,preferred stock
having such preferences, powers and relative, participating, optional and other
rights, including preferences over our common stock respecting dividends and
distributions, as our board of directors may determine. The terms of one or more
classes or series of preferred stock could adversely impact the Debt Securities will not contain any
provisions that mayvoting power or
value of our common stock which the notes are convertible into thereby adversely
affecting the value of the notes. For example, we might afford holders of
preferred stock the Debt Securities protectionright to elect some number of our directors in all events or
on the happening of specified events or the right to veto specified
transactions. Similarly, the repurchase or redemption rights or liquidation
preferences we might assign to holders of preferred stock could affect the
residual value of our common stock which the notes are convertible into, thereby
adversely affecting the value of the notes.
OUR STOCKHOLDER RIGHTS PLAN AND PROVISIONS OF DELAWARE LAW COULD DELAY OR
PREVENT A CHANGE IN CONTROL OF US, EVEN IF THAT CHANGE WOULD BE BENEFICIAL TO
OUR STOCKHOLDERS.
We have adopted a stockholder rights plan that would cause extreme dilution
to any person or group who attempts to acquire a significant interest in us
without advance approval of our board of directors. In addition, the Delaware
General Corporation Law would impose some restrictions on mergers and other
business combinations between us and any holder of 15% or more of our
outstanding common stock. The stockholder rights plan and Delaware law could
delay or prevent a change in control of us, even if that change would be
beneficial to our stockholders. Since the notes are convertible into our common
stock this could adversely affect the value of the notes.
36
USE OF PROCEEDS
We will not receive any proceeds from the sale by the selling
securityholders of the notes or the underlying common stock.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock is traded on the New York Stock Exchange and on the Swiss
Exchange under the symbol "HAL". On October 27, 2003, the last reported sales
price of our common stock on the New York Stock Exchange was $24.34. The
following table presents the range of high and low quarterly sales prices of our
common stock on the New York Stock Exchange since January 1, 2001.
PRICE
---------------
HIGH LOW
------ ------
2001
First Quarter............................................... $45.91 $34.81
Second Quarter.............................................. 49.25 32.20
Third Quarter............................................... 36.79 19.35
Fourth Quarter.............................................. 28.90 10.94
2002
First Quarter............................................... $18.00 $ 8.60
Second Quarter.............................................. 19.63 14.60
Third Quarter............................................... 16.00 8.97
Fourth Quarter.............................................. 21.65 12.45
2003
First Quarter............................................... $22.10 $17.20
Second Quarter.............................................. 25.37 19.98
Third Quarter............................................... 25.90 20.50
Fourth Quarter (through October 22)......................... 26.70 23.20
Cash dividends on common stock in the eventamount of $0.125 per share were paid
in March, June, September and December of 2001 and 2002 and in March, June and
September of 2003 and a changefourth quarter dividend of control$0.125 per share has been
declared and will be paid in December 2003. Our board of directors intends to
consider the payment of quarterly dividends on the outstanding shares of our
common stock in the future. The declaration and payment of future dividends,
however, will be at the discretion of the board of directors and will depend
upon, among other things:
- future earnings;
- general financial condition and liquidity;
- success in business activities;
- capital requirements;
- debt covenants; and
- general business conditions.
At October 22, 2003, there were approximately 24,400 shareholders of
record. In calculating the number of shareholders, we consider clearing agencies
and security position listings as one shareholder for each agency or listing.
37
DESCRIPTION OF ANTICIPATED INDEBTEDNESS
In connection with the plan of reorganization contemplated by the proposed
settlement, we anticipate that prior to the Chapter 11 filing of DII Industries,
Kellogg Brown & Root and some of their subsidiaries with U.S. operations (the
"Chapter 11 Filings") (and subject to the satisfaction of certain conditions
precedent to effectiveness and funding), we will enter into (1) a senior
unsecured credit facility for an amount up to approximately $1.0 billion,
subject to reduction, (2) an approximately $1.4 billion senior secured letter of
credit facility and (3) an up to $700.0 million senior secured revolving credit
facility in replacement of our existing $350.0 million credit facility. The
following discussion describes the currently anticipated descriptions of the
foregoing. Although we have entered into term sheets with the agents on all
facilities and have entered into commitment letters covering the entire senior
unsecured facility and a portion of the other facilities, none of the new credit
facilities is currently in place nor do we have total commitments to enter into
such credit facilities, and there can be no assurance that we will complete
these facilities in the form anticipated. See "Risk Factors -- Risks Relating to
Asbestos and Silica Liability -- There can be no assurance that we will be able
to finance the proposed settlement on acceptable terms, in which case the
settlement would not be completed." We anticipate that the notes will share in
the collateral pledged to secure the new credit facilities at times when the
threshold for secured debt set forth in the notes is exceeded by advances and
letter of credit drawings under the new credit facilities. If we proceed with
the plan of reorganization contemplated by the proposed settlement, we will
issue up to $300.0 million aggregate principal amount of our new 7.6% debentures
due 2096 in exchange for a like amount of outstanding 7.60% debentures due 2096
of DII Industries. If issued, the new 7.6% debentures will be issued under an
indenture that contains similar covenants and events of default as those
described herein under "Description of Notes."
SENIOR UNSECURED CREDIT FACILITY
In connection with the plan of reorganization contemplated by the proposed
settlement, we anticipate that prior to the Chapter 11 Filings (and subject to
the satisfaction of certain conditions precedent) Halliburton will enter into a
senior unsecured delayed, multi-draw term loan facility for up to approximately
$1.0 billion (the "Senior Unsecured Credit Facility") to finance, if needed, the
payments to be made by Halliburton under the plan of reorganization and the
related transaction costs.
The Senior Unsecured Credit Facility would be available in two drawings.
Drawings under the Senior Unsecured Credit Facility are subject to
satisfaction of certain conditions precedent, including confirmation of the
contemplated plan of reorganization.
We may, upon at least five business days' notice, terminate or cancel, in
whole or in part, the unused portion of the Senior Unsecured Credit Facility;
provided that each partial reduction must be in an amount of $10.0 million or an
integral multiple of $1.0 million in excess thereof. We may also, upon at least
five business days' notice and at the end of any applicable interest period,
prepay, in full or in part, the Senior Unsecured Credit Facility without
penalty; provided, however, that each partial prepayment must be in an amount of
$10.0 million or an integral multiple of $1.0 million in excess thereof.
The Senior Unsecured Credit Facility would require us to apply the
following proceeds to prepay amounts outstanding and/or reduce commitments under
the Senior Unsecured Credit Facility:
- 100% of the net proceeds from any capital markets issuance (public or
private) at any time;
- net cash proceeds from the sale of assets of us and our subsidiaries,
subject to exceptions to be agreed upon; and
- all insurance proceeds received by us in respect of asbestos or silica
claims; provided that, to the extent such proceeds are available to us
before the plan of reorganization has been confirmed and the related
court orders have been entered (the "Exit Date"), such proceeds will
ratably reduce the commitments under the Senior Unsecured Credit Facility
and to the extent such insurance proceeds are available to us after the
Exit Date, such proceeds will be used to either reduce the
38
commitments under, or prepay, the Senior Unsecured Credit Facility, in
each case, with respect to any prepayment, without premium or penalty,
but with breakage costs if applicable.
The interest rate per annum (calculated on a 360-day basis) applicable to
the advances will be (1) the London interbank offered rate for deposits in U.S.
dollars at 11:00 a.m. (London time) two business days before the first day of
any interest period for a period equal to such interest period plus a margin
ranging from 0.875% to 1.875% which margin would be based on the lower of our
credit rating by Standard & Poor's and Moody's (the "Applicable Margin") or (2)
at our option, the highest of (a) the base rate of Citibank, N.A., (b) the
Federal Funds rate plus 0.50% and (c) the latest three-week moving average of
secondary market morning offering rates for three-month certificates of deposit,
as determined by Citibank and adjusted for the cost of reserves and FDIC
insurance assessments plus 0.50%, plus, in each case, a margin ranging from 0%
to 0.875% based on the lower of our credit rating by Standard & Poor's and
Moody's (the "Base Rate").
We may select interest periods of one, two, three or six months for LIBOR
rate advances. Interest based on the LIBOR rate would be payable in arrears at
the end of the selected interest period, but no less frequently than quarterly.
Interest based on the Base Rate would be payable monthly in arrears.
During the continuance of any default under the loan documentation, the
applicable margin on all obligations owing under the loan documentation would
increase by 2% per annum.
One half of the amount drawn (as reduced by any prepayments) would be due
and payable on the date which is 120 days from the date of the first draw, and
all other outstanding amounts will be due on the date which is 364 days from the
date of the first draw.
MASTER LC FACILITY
In connection with the plan of reorganization contemplated by the proposed
settlement, we anticipate that subject to the satisfaction of certain conditions
precedent, Halliburton (and to the extent that they are account parties in
respect of specified existing letters of credit, DII Industries and Kellogg
Brown & Root) will enter into an up to $1.4 billion senior secured letter of
credit facility (the "Master LC Facility") with a syndicate of banks made up of
those banks holding at least 90% of the face amount of certain of our then
existing letters of credit. The Master LC Facility would cover at least 90% of
the face amount of certain of our existing letters of credit (including renewals
thereof) to be provided by each lender to the extent of any draw on an existing
letter of credit issued by it. The existing letters of credit issued by the
lenders entering into the Master LC Facility are referred to herein as the
"Facility LCs."
For so long as the Master LC Facility is secured by any collateral, as
defined in the Master LC Facility, each U.S. entity that is required to be a
grantor of collateral or the stock of which is required to be pledged (excluding
Halliburton Affiliates LLC and its flow-through subsidiaries) will also guaranty
the obligations under the Master LC Facility. In any event, we shall remain at
all times during the term of the Master LC Facility a guarantor with respect to
any LC Advance (as defined below) in respect of which we are not the account
party. As used herein, "subsidiaries" of us and Halliburton Energy Services,
Inc. is determined after giving effect to the proposed restructuring and shall
exclude DII Industries and its subsidiaries during the period prior to the Exit
Date.
The purpose of the Master LC Facility is to provide a term-out for any
draws prior to a date to be agreed to, but no later than the Exit Date (the
"Term-Out Date") on Facility LCs, as well as to provide collateral for the
reimbursement obligations in respect thereof. During the term of the Master LC
Facility prior to the Term-Out Date, any draw on a Facility LC would be funded
by the lender that issued such Facility LC (each such funding, an "LC Advance").
Until the Exit Date, the terms of the Master LC Facility would override any
reimbursement, cash collateral or other agreements or arrangements between any
individual lender and the account party or any of its affiliates relating to the
Facility LCs, whether or not drawn, and until a date to be agreed to (unless any
such draw is prepaid prior to such time), the terms of the Master LC Facility
would override any such agreement or arrangement relating to any Facility LC
which is drawn prior to the Term-Out Date. Each lender would permanently waive
any right
39
that it might otherwise have pursuant to any such agreement or arrangement to
demand cash collateral as a result of the filing of Chapter 11 proceedings.
On the occurrence of the Term-Out Date, all LC Advances outstanding under
the Master LC Facility on the Term-Out Date, if any, would become term loans
payable in full on November 1, 2004 (unless prepaid prior to such date) and all
undrawn Facility LCs shall cease to be subject to the terms of the Master LC
Facility.
We may, upon at least five business days' notice and at the end of any
applicable interest period, prepay any portion of the LC Advances as follows:
(1) before the occurrence of the Exit Date, ratably among all lenders, with such
prepayment being used to prepay the outstanding LC Advances at such time and to
cash collateralize obligations at such time, and (2) after the occurrence of the
Exit Date, to prepay outstanding LC Advances ratably among all lenders that have
made LC Advances, in each case, without penalty.
The commitment of any lender would be automatically and permanently reduced
upon the expiration of any Facility LC issued by it by the amount of such
Facility LC if prior to the Term-Out Date no amounts have been drawn under such
Facility LC and such Facility LC is not replaced. The Master LC Facility will
permit the issuance of new letters of credit thereunder prior to the Term-Out
Date at the discretion of the proposed issuing bank, so long as the total
facility does not exceed an amount equal to the amount of the Master LC Facility
at closing plus an amount to be agreed. Prior to the occurrence of the Exit
Date, the Master LC Facility would be required to be cash collateralized with
the net proceeds of any sales of collateral and the net cash proceeds of any
sales of other assets, subject to exceptions to be agreed to. Such cash
collateral will be shared pro rata among the lenders and the lenders under the
Revolving Credit Facility (as defined below). To the extent that the holders of
Halliburton's 8.75% notes due 2021, senior notes due 2005, 5 1/2% senior notes
due 2010, medium term notes, 7.6% debentures due 2096 issued in the exchange
offer described below under "-- Exchange Offer for the DII Industries
Debentures," if it is consummated, and the notes offered hereby and any other
issue of debt of Halliburton that Halliburton may effect prior to the Exit Date
(a "New Issuance" to the extent that such New Issuance includes a requirement
that the holders thereof be equally and ratably secured with Halliburton's other
credits but not to exceed an aggregate of $1.0 billion of such New Issuance)
would be required to be secured as set forth below, such cash collateral would
also be shared with such holders on a pro rata basis. After the Exit Date, if
the conditions to release of collateral have been satisfied, any cash collateral
held pursuant to the preceding sentence, subject to exceptions to be agreed to,
would be applied first to ratably prepay outstanding LC Advances at such time
and second, to the extent required by the terms of the Senior Unsecured Credit
Facility, to ratably prepay and/or reduce commitments under the Senior Unsecured
Credit Facility.
Until the date of satisfaction of the conditions for release of the
collateral identified below, the Master LC Facility would be secured by a
perfected, first-priority lien on (1) 100% of the stock of Halliburton Energy
Services, (2) 100% of the stock or other equity interests owned by us and
Halliburton Energy Services of the first-tier domestic subsidiaries of
Halliburton and Halliburton Energy Services (other than Halliburton Affiliates
LLC), (3) 66% of the equity interests of Halliburton Affiliates LLC and (4) 66%
of the stock or other equity interests owned by us or Halliburton Energy
Services of the first-tier foreign subsidiaries of Halliburton and Halliburton
Energy Services (excluding, in each case, dormant subsidiaries). In addition, if
at any time our long-term senior unsecured debt is rated lower than BBB- by
Standard & Poor's or lower than Baa3 by Moody's, then we shall, within 20 days
in the case of personal property and within 45 days in the case of real
property, take all action necessary to ensure that the Master LC Facility is
also secured by a perfected, first priority lien on (a) the tangible and
intangible assets of Halliburton and Halliburton Energy Services and (b) the
tangible and intangible assets (with customary exceptions to be agreed) of
certain of Halliburton Energy Services' directly or indirectly, wholly-owned
domestic subsidiaries (except Halliburton Affiliates LLC, DII Industries LLC and
each of their respective subsidiaries) (excluding, in each case, dormant
subsidiaries). Such collateral would be shared pro rata with the lenders under
the Revolving Credit Facility and, to the extent that the aggregate principal
amount of all LC Advances under the Master LC Facility and borrowings under the
Revolving
40
Credit Facility exceeds 5% of the consolidated net tangible assets of
Halliburton and its subsidiaries, such collateral would also be shared pro rata
with the holders of Halliburton's 8.75% notes due 2021, senior notes due 2005,
5 1/2% senior notes due 2010, medium term notes, 7.6% debentures due 2096 issued
in the exchange offer described below under "-- Exchange Offer for the DII
Industries Debentures," if it is consummated, the notes offered hereby as well
as any New Issuance to the extent that such New Issuance includes a requirement
that the holders thereof be equally and ratably secured with Halliburton's other
creditors (but not to exceed an aggregate of $1.0 billion of such New Issuance).
Upon the occurrence of the Exit Date and the satisfaction of certain conditions,
the Master LC Facility would be unsecured. The granting and perfection of
collateral (including, without limitation, collateral consisting of foreign
subsidiary stock pledges) would be subject to cost efficiency determinations
reasonably made by the co-lead arrangers in consultation with us, taking into
account, among other things, adverse tax consequences, administrative procedures
required by local law or practice, and other parameters to be agreed.
The interest rate per annum (calculated on a 360-day basis) applicable to
the LC Advances will be the London interbank offered rate for deposits in U.S.
dollars at 11:00 A.M. (London time) for the two business days before the first
day of any interest period for a period equal to such interest period plus the
greater of (x) the sum of the per annum rate used to calculate any fee on
undrawn letters of credit payable pursuant to the original documents governing
the relevant Facility LC plus 0.50% or (y) a margin ranging from 1.00% to 2.00%,
which margin would be based on the lower of our credit rating by Standard &
Poor's and Moody's (the "Applicable LC Facility Margin").
We may select interest periods of one, two, three or six months for LIBOR
rate advances. Interest based on the LIBOR rate would be payable in arrears at
the end of the selected interest period, but no less frequently than quarterly.
During the continuance of any default under the loan documentation, the
interest rate on all obligations owing under the loan documentation would
increase by 2% per annum.
REVOLVING CREDIT FACILITY
In connection with the plan of reorganization contemplated by the proposed
settlement, we anticipate that we will replace our existing credit agreement
dated as of August 16, 2001 (the "Existing Credit Facility") with a new 3-year
revolving credit facility (the "Revolving Credit Facility").
We anticipate that the Revolving Credit Facility will provide a total
commitment of up to $700.0 million. The entire commitment will be available for
standby and trade letters of credit (the "Letters of Credit").
For so long as the Revolving Credit Facility is secured by any collateral
as set forth below, each U.S. subsidiary that is required to be a grantor of
collateral or the stock of which is required to be pledged (excluding
Halliburton Affiliates LLC and its flow through subsidiaries) would guaranty the
obligations under the Revolving Credit Facility. As used herein, "subsidiaries"
of Halliburton and Halliburton Energy Services would be determined after giving
effect to the proposed restructuring and exclude DII Industries and its
subsidiaries during the period prior to the Exit Date.
During the period from the closing date until satisfaction of the
conditions for release of the collateral identified below, the advances and
reimbursement obligations in respect of Letters of Credit would be secured by a
perfected, first priority lien on (1) 100% of the stock of Halliburton Energy
Services, (2) 100% of the stock or other equity interests owned by Halliburton
or Halliburton Energy Services in certain first-tier domestic subsidiaries
(other than Halliburton Affiliates LLC) of Halliburton and Halliburton Energy
Services, (3) 66% of the stock or other equity interests of Halliburton
Affiliates LLC and (4) 66% of the stock or other equity interests owned by
Halliburton or Halliburton Energy Services of the first-tier foreign
subsidiaries of Halliburton and Halliburton Energy Services (excluding, in each
case, dormant subsidiaries). In addition, if at any time our long-term senior
unsecured debt is rated lower than BBB- by Standard & Poor's or lower than Baa3
by Moody's, then we shall, within 20 days in the case of personal property and
within 45 days in the case of real property, take all action necessary to ensure
that
41
the Revolving Credit Facility is also secured by a perfected, first priority
lien on (a) the tangible and intangible assets of Halliburton and Halliburton
Energy Services and (b) the tangible and intangible assets (with customary
exceptions to be agreed) of all of Halliburton Energy Services' directly or
indirectly wholly-owned domestic subsidiaries (except Halliburton Affiliates
LLC, DII Industries and their respective subsidiaries) (excluding, in each case,
dormant subsidiaries). Prior to the occurrence of the Exit Date, the Revolving
Credit Facility would be required to be cash collateralized with the net
proceeds of any sales of collateral, subject to exceptions to be agreed to. All
collateral would be shared pro rata with the lenders under the Master LC
Facility and, to the extent that the aggregate principal amount of all loans
under the Revolving Credit Facility and advances under the Master LC Facility
exceeds 5% of the consolidated net tangible assets of Halliburton and its
subsidiaries such collateral would also be shared pro rata with the holders of
Halliburton's 8.75% notes due 2021, senior notes due 2005, 5 1/2% senior notes
due 2010, medium term notes, 7.6% debentures due 2096 issued in the exchange
offer described below under "-- Exchange Offer for the DII Industries
Debentures," if it is consummated, the notes offered hereby as well as any other
New Issuance to the extent that such New Issuance includes a requirement that
the holders thereof be equally and ratably secured with Halliburton's other
creditors (but not to exceed $1.0 billion of such New Issuance). Upon the
occurrence of the Exit Date and the satisfaction of other conditions, the
Revolving Credit Facility would be unsecured.
The interest rate per annum (calculated on a 360-day basis) applicable to
the advances will be (1) the London interbank offered rate for deposits in U.S.
dollars at 11:00 A.M. (London time) for the two business days before the first
day of any interest period for a period equal to such interest period plus a
margin ranging from prior to the Exit Date 1.00% to 2.00% and after the Exit
Date 0.875% to 1.875%, which margin would be based on the lower of our credit
rating by Standard & Poor's and Moody's (the "Applicable Revolving Facility
Margin") or (2) at our option, the highest of (a) the base rate of Citibank,
N.A., (b) the Federal Funds rate plus 0.50% and (c) the latest three-week moving
average of secondary market morning offering rates for three-month certificates
of deposit, as determined by Citibank and adjusted for the cost of reserves and
FDIC insurance assessments plus 0.50%, plus, in each case, a margin ranging from
0% to 0.875% based on the lower of our credit rating by Standard & Poor's and
Moody's, (the "Base Rate").
We may select interest periods of one, two, three or six months for LIBOR
rate advances. Interest based on the LIBOR rate would be payable in arrears at
the end of the selected interest period, but no less frequently than quarterly.
Interest based on the Base Rate would be payable monthly in arrears.
During the continuance of any default under the loan documentation, the
Applicable Revolving Facility Margin on all obligations owing under the loan
documentation would increase by 2% per annum.
CONDITIONS TO RELEASE OF COLLATERAL
As described above under "-- Master LC Facility" and "-- Revolving Credit
Facility," we anticipate that the Master LC Facility and the Revolving Credit
Facility will be secured by a perfected, first-priority lien, on certain of our
assets. Any such liens would be released upon satisfaction of all the following
conditions:
- completion of the Chapter 11 plan of reorganization of DII Industries,
Kellogg Brown & Root and some of their subsidiaries with U.S. operations,
which will be used to implement the proposed settlement. For additional
information about the proposed settlement, see "Summary -- Proposed
Settlement;"
- there is no proceeding pending or threatened in any court or before any
arbitrator or governmental instrumentality that (1) could reasonably be
expected to have a material adverse effect on our business, condition
(financial or otherwise), operations, performance, properties or
prospects on a consolidated basis except for litigation that is pending
or threatened prior to the effective date of the Revolving Credit
Facility and Master LC Facility and disclosed to the lenders under the
Revolving Credit Facility and the Master LC Facility or (2) purports to
affect the legality, validity or enforceability of our obligations or the
rights and remedies of any of the lenders under the
42
Revolving Credit Facility and the Master LC Facility, and there shall
have been no material adverse change in the status or financial effect on
us on a consolidated basis of the disclosed litigation;
- our long-term senior unsecured debt is rated BBB or higher (stable
outlook) by Standard & Poor's and Baa2 or higher (stable outlook) by
Moody's and these ratings have been recently confirmed by Standard &
Poor's and Moody's;
- there is no material adverse change (which term shall not be deemed to
refer to the commencement of the Chapter 11 filing) since December 31,
2002 in our business, condition (financial or otherwise), operations,
performance, properties or prospects, except as disclosed in our June 30,
2003 quarterly report on Form 10-Q and except for the accounting charges
to be taken directly in connection with the settlement payments; and
- we are not in default under the Revolving Credit Facility or the Master
LC Facility.
43
DESCRIPTION OF NOTES
We issued the notes under an indenture dated as of June 30, 2003 between us
and JPMorgan Chase Bank, as trustee (the "indenture"). The terms of the notes
include those stated in the indenture and those made part of the indenture by
reference to the Trust Indenture Act of 1939.
The following description is a summary of the material provisions of the
indenture and the registration rights agreement dated as of June 30, 2003
between us and the initial purchasers of the notes. It does not restate the
indenture in its entirety. We urge you to read the indenture, the notes and the
registration rights agreement because they, and not this description, define
your rights as holders of the notes. You may request copies of those documents
in substantially the form in which they are to be executed by writing or
telephoning us at our address and telephone number shown under the caption
"Where You Can Find More Information."
The definitions of capitalized terms used in this section without
definition are set forth below under "-- Definitions." In this description, the
words "Halliburton" and "us" mean only Halliburton Company and not any of its
subsidiaries.
GENERAL
The notes are our senior unsecured obligations and rank equally with all
our other senior unsecured indebtedness. However, the notes are structurally
subordinated to indebtedness of our subsidiaries and effectively subordinated to
our secured debt to the extent of the value of the assets securing such debt.
The notes are convertible into common stock as described under the caption
"-- Conversion of Notes."
We issued $1,200,000,000 aggregate principal amount of notes. The notes
were issued only in denominations of $1,000 and multiples of $1,000. The notes
mature on July 15, 2023 unless earlier converted, redeemed or repurchased by us.
We are not subject to any financial covenants under the indenture. In
addition, we are not restricted under the indenture from paying dividends,
incurring debt or issuing or repurchasing our securities.
You are not afforded protection in the event of a highly leveraged
transaction, or a change in control of us under the indenture except to the
extent described below under the caption "-- Fundamental Change Requires
Purchase of Notes by Us at the Option of the Holder."
The notes bear interest at the annual rate of 3 1/8%. Interest will be
calculated on the basis of a 360-day year of twelve 30-day months. We will pay
interest on January 15 and July 15 of each year, beginning January 15, 2004 to
record holders at the close of business on the preceding January 1 and July 1,
as the case may be.
We will maintain an office in New York, New York, for the payment of
interest, which shall initially be an office or agency of the trustee.
We will pay interest either by check mailed to your address as it appears
in the note register or, at our option, by wire transfer in immediately
available funds. Payments to The Depository Trust Company, New York, New York,
which we refer to as DTC, or its nominee will be made by wire transfer of
immediately available funds to the account of DTC or its nominee.
Holders are not required to pay a service charge for registration or
transfer of their notes. We may, however, require holders to pay any tax or
other governmental charge in connection with the transfer. We are not required
to exchange or register the transfer of:
- any notes or portion surrendered for conversion; or
- any notes or portion surrendered for redemption or repurchase by us but
not withdrawn.
44
CONVERSION OF NOTES
Subject to the conditions and during the periods and under the
circumstances described below, you may convert your notes into shares of our
common stock initially at a conversion rate of 26.5583 shares of common stock
per $1,000 principal amount of notes (equivalent to an initial conversion price
of $37.65 per share of common stock) at any time prior to the close of business
on July 15, 2023. The conversion rate and the equivalent conversion price in
effect at any given time are referred to as the "applicable conversion rate" and
the "applicable conversion price," respectively, and is subject to adjustment as
described below. You may convert fewer than all of your notes so long as the
notes converted are an integral multiple of $1,000 principal amount.
Upon conversion, we may choose to deliver, in lieu of shares of our common
stock, cash or a combination of cash and shares of our common stock, as
described below.
Except as otherwise described herein, you will not receive any cash payment
representing accrued and unpaid interest upon conversion of a note and we will
not adjust the conversion rate to account for the accrued and unpaid interest.
Upon conversion we will deliver to you a fixed number of shares of our common
stock and any cash payment to account for fractional shares. The cash payment
for fractional shares will be based on the last reported sale price of our
common stock on the trading day immediately prior to the conversion date.
Delivery of shares of common stock will be deemed to satisfy our obligation to
pay the principal amount of the notes, including accrued and unpaid interest.
Accrued and unpaid interest will be deemed paid in full rather than canceled,
extinguished or forfeited. The trustee will initially act as the conversion
agent. Notwithstanding conversion of any notes, the holders of the notes and any
common stock issuable upon conversion thereof will continue to be entitled to
receive additional amounts in accordance with the registration rights agreement.
See "Registration Rights."
If you convert notes, we will pay any documentary, stamp or similar issue
or transfer tax due on the issue of shares of our common stock upon the
conversion, unless the tax is due because you request the shares to be issued or
delivered to a person other than yourself, in which case you will be responsible
for that tax.
If you wish to exercise your conversion right, you must deliver a
conversion notice, together, if the notes are in certificated form, with the
certificated security, to the conversion agent along with appropriate
endorsements and transfer documents, if required, and pay any transfer or
similar tax, if required. The conversion agent will, on your behalf, convert the
notes into shares of our common stock. You may obtain copies of the required
form of the conversion notice from the conversion agent. A certificate for the
number of full shares of our common stock into which any notes are converted,
together with any cash payment for fractional shares, will be delivered through
the conversion agent as soon as practicable, but no later than the fifth
business day, following the conversion date.
If you have already delivered a purchase notice as described under either
'-- Purchase of Notes by Us at the Option of the Holder" or "-- Fundamental
Change Requires Purchase of Notes by Us at the Option of the Holder" with
respect to a note, you may not surrender that note for conversion until you have
withdrawn the purchase notice in accordance with the indenture.
Holders of notes at the close of business on a record date will receive
payment of interest on the corresponding interest payment date notwithstanding
the conversion of such notes at any time after the close of business on such
record date. If you surrender notes for conversion during the period from the
close of business on any regular record date to the opening of business on the
immediately following interest payment date, the surrendered notes must be
accompanied by payment of an amount equal to the interest that you are to
receive on the notes on the next following interest payment date.
Notwithstanding the foregoing, no such payment need be made if (1) we have
specified a redemption date that is after a record date and on or prior to the
immediately following interest payment date, (2) we have specified a purchase
date that is during such period whether following a Fundamental Change or
otherwise or (3) any overdue interest exists at the time of conversion with
respect to such notes to the extent of such overdue
45
interest. The holders of the notes and any common stock issuable upon conversion
thereof will continue to be entitled to receive additional amounts in accordance
with the registration rights agreement.
You may surrender your notes for conversion into shares of our common stock
prior to stated maturity in only the circumstances described below. For a
discussion of the federal income tax consequences of a conversion of the notes
into our common stock, see "Material United States Federal Income Tax
Consequences."
CONVERSION UPON SATISFACTION OF SALE PRICE CONDITION
You may surrender any of your notes for conversion into shares of our
common stock in any calendar quarter (and only during such calendar quarter) if
the last reported sale price of our common stock for at least 20 trading days
during the period of 30 consecutive trading days ending on the last trading day
of the previous calendar quarter is greater than or equal to 120% of the
conversion price.
CONVERSION UPON REDEMPTION
If we redeem the notes, you may convert your notes into our common stock at
any time prior to the close of business on the second business day immediately
preceding the redemption date, even if the notes are not otherwise convertible
at such time.
CONVERSION UPON SPECIFIED CORPORATE TRANSACTIONS
If we elect to:
- distribute to all holders of our common stock certain rights entitling
them to purchase, for a period expiring within 60 days after the date of
the distribution, shares of our common stock at less than the last
reported sale price of a share of our common stock on the trading day
immediately preceding the declaration date of the distribution; or
- distribute to all holders of our common stock our assets, debt securities
or certain rights to purchase our securities, which distribution has a
per share value as determined by our board of directors exceeding 15% of
the last reported sale price of a share of our common stock on the
trading day immediately preceding the declaration date for such
distribution,
we must notify you at least 20 business days prior to the ex-dividend date
for such distribution. Once we have given such notice, you may surrender your
notes for conversion at any time until the earlier of the close of business on
the business day immediately prior to the ex-dividend date or our announcement
that such distribution will not take place, even if the notes are not otherwise
convertible at such time; provided, however, that you may not exercise this
right to convert if you may participate in the distribution without conversion.
The "ex-dividend date" is the first date upon which a sale of the common stock
does not automatically transfer the right to receive the relevant dividend from
the seller of the common stock to its buyer.
In addition, if we are party to a consolidation, merger or binding share
exchange pursuant to which our common stock would be converted into cash or
property other than securities, you may surrender notes for conversion at any
time from and after the date which is 15 days prior to the anticipated effective
date of the transaction until 15 days after the actual effective date of such
transaction. If we engage in certain reclassifications of our common stock or
are a party to a consolidation, merger, binding share exchange or transfer of
all or substantially all of our assets pursuant to which our common stock is
converted into cash, securities or other property, then at the effective time of
the transaction, the right to convert a note into our common stock will be
changed into a right to convert a note into the kind and amount of cash,
securities or other property which you would have received if you had converted
your notes immediately prior to the transaction. If we engage in any transaction
described in the preceding sentence, the conversion rate will not be adjusted.
If the transaction also constitutes a Fundamental Change, as defined below, you
can require us to purchase all or a portion of your notes as described below
under "-- Funda-
mental Change Requires Purchase of Notes by Us at the Option of the Holder."
46
CONVERSION UPON CREDIT RATINGS EVENT
You may convert notes into our common stock during any period in which the
credit ratings assigned to the notes by both Moody's Investors Service, Inc. and
Standard & Poor's Ratings Services are lower than Ba1 and BB+, respectively, or
the notes are no longer rated by at least one of these ratings services or their
successors.
PAYMENT UPON CONVERSION
CONVERSION ON OR PRIOR TO THE FINAL NOTICE DATE
In the event that we receive your notice of conversion on or prior to the
day that is 20 days prior to maturity (the "final notice date"), the following
procedures will apply: if we choose to satisfy all or any portion of our
obligation (the "conversion obligation") in cash, we will notify you through the
trustee of the dollar amount to be satisfied in cash (which must be expressed
either as 100% of the conversion obligation or as a fixed dollar amount) at any
time on or before the date that is two business days following receipt of your
notice of conversion ("cash settlement notice period"). If we timely elect to
pay cash for any portion of the shares otherwise issuable to you, you may
retract the conversion notice at any time during the two business day period
beginning on the day after the final day of the cash settlement notice period
("conversion retraction period"); no such retraction can be made (and a
conversion notice shall be irrevocable) if we do not elect to deliver cash in
lieu of shares (other than cash in lieu of fractional shares). If the conversion
notice has not been retracted, then settlement (in cash and/or shares) will
occur on the business day following the final day of the 10 New York Stock
Exchange trading day period beginning on the day after the final day of the
conversion retraction period (the "cash settlement averaging period").
Settlement amounts will be computed as follows:
- If we elect to satisfy the entire conversion obligation in shares, we
will deliver to you a number of shares equal to (1) the aggregate
principal amount of notes to be converted divided by 1,000, multiplied by
(2) the conversion rate.
- If we elect to satisfy the entire conversion obligation in cash, we will
deliver to you cash in an amount equal to the product of:
-- a number equal to (1) the aggregate principal amount of notes to be
converted divided by 1,000, multiplied by (2) the conversion rate and
-- the average closing price of our common stock during the cash
settlement averaging period.
- If we elect to satisfy a fixed portion (other than 100%) of the
conversion obligation in cash, we will deliver to you such cash amount
("cash amount") and a number of shares equal to the greater of (1) zero
and (2) the excess, if any, of the number of shares equal to (i) the
aggregate principal amount of notes to be converted divided by 1,000,
multiplied by (ii) the conversion rate over the number of shares equal to
the sum, for each day of the cash settlement averaging period, of (x) 10%
of the cash amount, divided by (y) the closing price of our common stock.
In addition, we will pay cash for all fractional shares of common stock
as described above under "-- Conversion of Notes."
CONVERSION AFTER THE FINAL NOTICE DATE
In the event that we receive your notice of conversion after the final
notice date and we choose to satisfy all or any portion of the conversion
obligation in cash, we will have notified you through the trustee of the dollar
amount to be satisfied in cash (which must be expressed either as 100% of the
conversion obligation or as a fixed dollar amount) at any time on or before the
final notice date. Settlement amounts will be computed and settlement dates will
be determined in the same manner as set forth above under "-- Conversion on or
Prior to the Final Notice Date" except that the "cash settlement averaging
period" shall be the 10 New York Stock Exchange trading day period beginning on
the day after receipt of your notice of conversion (or in the event we receive
your notice of conversion on the business day prior to the
47
maturity date, the 10 New York Stock Exchange trading day period beginning on
the day after the maturity date). Settlement (in cash and/or shares) will occur
on the business day following the final day of such cash settlement averaging
period.
CONVERSION RATE ADJUSTMENTS
The conversion rate is subject to adjustment, without duplication, upon the
occurrence of any of the following events:
(1) Stock Dividends in Common Stock. If we, at any time or from time to
time after the issue date of the notes, pay a dividend or make a distribution on
our common stock, payable exclusively in shares of our common stock or our other
capital stock.
(2) Issuance of Rights or Warrants. If we, at any time or from time to
time after the issue date of the notes, issue to all holders of our common stock
rights or warrants that allow the holders to purchase shares of our common stock
for a period expiring within 60 days from the date of issuance of the rights or
warrants at less than the market price on the record date for the determination
of shareholders entitled to receive the rights or warrants.
(3) Stock Splits and Combinations. If we, at any time or from time to time
after the issue date of the notes:
- subdivide or split the outstanding shares of our common stock;
- combine or reclassify the outstanding shares of our common stock into a
smaller number of shares; or
- issue by reclassification of the shares of our common stock any shares of
our capital stock.
(4) Distribution of Indebtedness, Securities or Assets. If we distribute
to all holders of our common stock, whether by dividend or in a merger,
amalgamation or consolidation or otherwise, evidences of indebtedness, shares of
capital stock of any class or series, other securities, cash or assets (other
than common stock, rights or warrants referred to in paragraphs (1) and (2)
above, a dividend payable exclusively in cash, shares of capital stock or
similar equity interests in the case of a spin-off, as described in the second
succeeding paragraph, and other than any dividend or distribution paid
exclusively in cash described in paragraph (5) below), and if these
distributions, aggregated on a rolling 12-month basis, have a per share value
exceeding 15% of the market price of our common stock on the trading day
immediately preceding the declaration of the distribution, the conversion rate
in effect immediately before the close of business on the record date fixed for
determination of stockholders entitled to receive that distribution will be
increased by dividing:
- the conversion rate by
- a fraction, the numerator of which is the current market price of our
common stock and the denominator of which is the current market price of
the common stock plus the fair market value, as determined by our board
of directors, whose determination in good faith will be conclusive, of
the portion of those evidences of indebtedness, shares of capital stock,
other securities, cash and assets so distributed applicable to one share
of common stock.
This adjustment will be made successively whenever any such event occurs.
For purposes of this paragraph, current market price of our common stock means
the average of the sale prices of our common stock for the first 10 New York
Stock Exchange trading days from, and including, the first day that the common
stock trades "ex-distribution."
In respect of a dividend or other distribution of shares of capital stock
of any class or series, or similar equity interests, of or relating to a
subsidiary or other business unit, which we refer to as a spin-off, the
48
conversion rate in effect immediately before the close of business on the record
date fixed for determination of stockholders entitled to receive that
distribution will be increased by dividing:
- the conversion rate by
- a fraction, the numerator of which is the current market price of our
common stock and the denominator of which is the current market price of
the common stock plus the fair market value, determined as described
below, of the portion of those shares of capital stock or similar equity
interests so distributed applicable to one share of common stock.
The adjustment to the conversion rate under the preceding paragraph will
occur at the earlier of:
- the 10th New York Stock Exchange trading day from, and including, the
effective date of the spin-off and
- the date of the initial public offering of the securities being
distributed in the spin-off, if that initial public offering is effected
simultaneously with the spin-off.
For purposes of this section, "initial public offering" means the first
time securities of the same class or type as the securities being distributed in
the spin-off are bona fide offered to the public for cash.
In the event of a spin-off that is not effected simultaneously with an
initial public offering of the securities being distributed in the spin-off, the
fair market value of the securities to be distributed to holders of our common
stock means the average of the sale prices of those securities over the first 10
New York Stock Exchange trading days after the effective date of the spin-off.
Also, for purposes of a spin-off, the current market price of our common stock
means the average of the sale prices of our common stock over the first 10 New
York Stock Exchange trading days after the effective date of the spin-off.
If, however, an initial public offering of the securities being distributed
in the spin-off is to be effected simultaneously with the spin-off, the fair
market value of the securities being distributed in the spin-off means the
initial public offering price, while the current market price of our common
stock means the sale price of our common stock on the trading day on which the
initial public offering price of the securities being distributed in the
spin-off is determined.
Notwithstanding the foregoing, in cases where (a) the fair market value per
share of common stock of the assets, debt securities or rights or warrants to
purchase our securities distributed to shareholders equals or exceeds the market
price of our common stock on the record date for the determination of
shareholders entitled to receive such distribution, or (b) the market price of
our common stock on the record date for determining the shareholders entitled to
receive the distribution exceeds the fair market value per share of common stock
of the assets, debt securities or rights or warrants so distributed by less than
$1.00, rather than being entitled to an adjustment in the conversion rate, you
will be entitled to receive upon conversion, in addition to the shares of our
common stock, the kind and amount of assets, debt securities or rights or
warrants comprising the distribution that you would have received if you had
converted your notes immediately prior to the record date for determining the
shareholders entitled to receive the distribution; and
(5) Excess Cash Distributions. If we make a distribution during any of our
quarterly fiscal periods consisting exclusively of cash to all holders of
outstanding shares of common stock in an aggregate amount that, together with
(a) other all-cash distributions made during such quarterly fiscal period, and
(b) any cash and the fair market value, as of the expiration of the tender or
exchange offer (other than consideration payable in respect of any odd-lot
tender offer) by us or any of our subsidiaries for shares of common stock
concluded during such quarterly fiscal period, exceed the product of $0.125
(appropriately adjusted from time to time for any stock dividends on or
subdivisions or combinations of our common
49
stock) multiplied by the number of shares of common stock outstanding on the
record date for such distribution, in which event the conversion rate will be
adjusted by dividing:
- the conversion rate by
- a fraction, the numerator of which will be the current market price of
our common stock and the denominator of which is the current market price
of our common stock plus the amount per share of such dividend or
distribution, to the extent it exceeds $0.125 (appropriately adjusted
from time to time for any stock dividends on or subdivisions or
combinations of our common stock).
This adjustment will be made successively whenever any such event occurs.
For purposes of this paragraph, current market price of our common stock means
the average of the sale prices of our common stock for the first 10 New York
Stock Exchange trading days from, and including, the first day that the common
stock trades "ex-distribution."
Notwithstanding the foregoing, in the event of an adjustment pursuant to
paragraphs (4) and (5) above, the "maximum conversion rate" will equal 43.8212,
subject to adjustment pursuant to paragraphs (1), (2) and (3) above.
In addition to these adjustments, we may increase the conversion rate as
our board of directors considers advisable to avoid or diminish any income tax
to holders of our common stock or rights to purchase our common stock resulting
from any dividend or distribution of stock (or rights to acquire stock) or from
any event treated as such for income tax purposes. We may also, from time to
time, to the extent permitted by applicable law, increase the conversion rate by
any amount for any period of at least 20 days if our board of directors has
determined that such increase would be in our best interests. If our board of
directors makes such a determination, it will be conclusive. We will give you at
least 15 days' notice of such an increase in the conversion rate.
As used in this prospectus, "market price" means the average of the last
reported sale prices per share of our common stock for the 20 trading day period
ending on the applicable date of determination (if the applicable date of
determination is a trading day or, if not, then on the last trading day prior to
the applicable date of determination), appropriately adjusted to take into
account the occurrence, during the period commencing on the first of the trading
days during the 20 trading day period and ending on the applicable date of
determination, of any event that would result in an adjustment of the conversion
rate under the indenture.
No adjustment to the conversion rate or your ability to convert will be
made if you otherwise participate in the distribution without conversion or in
certain other cases.
The applicable conversion rate will not be adjusted:
- upon 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;
- upon 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;
- upon the issuance of any shares of our common stock pursuant to any
option, warrant, right or exercisable, exchangeable or convertible
security not described in the preceding bullet and outstanding as of the
date the notes were first issued;
- for a change in the par value of the common stock; or
- for accrued and unpaid interest and additional amounts owed, if any.
You will receive, upon conversion of your notes, in addition to common
stock, the rights under our stockholder rights plan or under any future rights
plan we may adopt, whether or not the transaction resultsrights have separated from the common
stock at the time of conversion unless, prior to conversion, the rights have
50
expired, terminated or been redeemed or exchanged. See "Description of Capital
Stock -- Stockholder Rights Plan."
No adjustment in the applicable conversion price will be required unless
the adjustment would require an increase or decrease of at least 1% of the
applicable conversion price. If the adjustment is not made because the
adjustment does not change the applicable conversion price by more than 1%, then
the adjustment that is not made will be carried forward and taken into account
in any future adjustment.
PURCHASE OF NOTES BY US AT THE OPTION OF THE HOLDER
You have the right to require us to purchase the notes on July 15, 2008,
July 15, 2013 and July 15, 2018 (each, a change of
control of our Company.
A prospectus supplement and a supplemental indenture relating to any series
of Debt Securities offered"purchase date"). Any note purchased by
us on a purchase date will include specific terms relatingbe paid for in cash. We are required to purchase any
outstanding notes for which you deliver a written purchase notice to the offering. These terms will include some or allpaying
agent. This notice must be delivered during the period beginning at any time
from the opening of business on the following (to the extent
such terms are applicabledate that is 20 business days prior to the
offered Debt Securities):
.relevant purchase date until the titleclose of business on the offered Debt Securities;
. classificationfifth business day
prior to the purchase date. If the purchase notice is given and withdrawn during
such period, we will not be obligated to purchase the related notes. Our
purchase obligation is subject to some additional conditions as Senior Debt Securities, Subordinated Debt Securitiesdescribed in the
indenture. Also, as described in the "Risk Factors" section of this prospectus
under the caption "Risk Factors -- Risks Relating to the Notes -- We may not be
able to purchase the notes upon an agreed purchase date or Junior Subordinated Debt Securities, aggregate principal amount,a Fundamental Change,
and denomination;
12
. whethermay not be obligated to purchase the offered Debt Securitiesnotes upon certain corporate
transactions," we may not have funds sufficient to purchase the notes when we
are convertible into our common stock
and, ifrequired to do so. Our failure to purchase the notes when we are required to
do so will constitute an event of default under the terms and conditions upon which such conversionindenture with respect to
the notes.
The purchase price payable will be effected includingequal to 100% of the initial conversion price or conversion rate, the
conversion period and other conversion provisions in addition to or in
lieu of those described in this prospectus;
. the date or dates on which the offered Debt Securities will mature and on
which other payments of principal will be payable or how to determine
those dates;
. any limit on the total principal amount of
the Debt Securities;
.notes to be purchased plus any accrued and unpaid interest to such purchase
date.
On or before the price or prices, expressed as a percentage20th business day prior to each purchase date, we will
provide to the trustee, the paying agent and to all holders of the principal amount,notes at
whichtheir addresses shown in the Debt Securities will be issued;
. whether anyregister of the Debt Securities areregistrar, and to be issuable initially in
temporary global form or permanent global form;
. any mandatory or optional sinking fund or analogous provisions;
. any optional redemption periodsbeneficial owners
as required by applicable law, a notice stating, among other things:
- the purchase price;
- the name and prices;
.address of the interest rate or rates (or the method by which the rates will be
determined),paying agent and the dates from which interest,conversion agent; and
- the procedures that holders must follow to require us to purchase their
notes.
A notice electing to require us to purchase your notes must state:
- if any, will accrue;
.certificated notes have been issued, the date or dates on which any interest will be payable;
. the place or places where and the manner in which the principal of,
premium, if any, and interest, if any, on the offered Debt Securities will
be payable and the place or places where the offered Debt Securities may
be presented for transfer and, if applicable, conversion;
. our obligation, if any, to redeem, repay or purchase the offered Debt
Securities pursuant to any sinking fund or analogous provisions or at the
option of a holder of Debt Securities and the period or periods within
which, the price or prices at which and the terms and conditions upon
which the offered Debt Securities will be redeemed, repaid or purchased
pursuant to that obligation;
. any applicable United States Federal income tax consequences; and
. any other specific termscertificate numbers of the
offered Debt Securities, including any
additional or different events of default, remedies or covenants provided
with respect to such offered Debt Securities, and any terms that may be
required by or advisable under applicable laws or regulations.
In addition to the terms described above, if applicable, the following terms
will be described in the applicable prospectus supplement:
. the issue price of offered Debt Securities that are original issue
discount securities;
. the amount of the original issue discount;
. the manner and rate or rates per annum, which may be fixed or variable, at
which original issue discount will accrue;
. the yield to maturity represented by the original issue discount
securities;
. the date or dates from or to which or period or periods during which
original issue discount will accrue;
.notes;
- the portion of the principal amount of such offered Debt Securitiesnotes to be purchased, in integral
multiples of $1,000; and
- that willthe notes are to be payable upon accelerationpurchased by us pursuant to the applicable
provisions of maturity or upon the optional or
mandatory redemption, purchase or exchange or original issue discount
securities;notes and . any other specific terms thereof.
Unless otherwise specifiedthe indenture.
If the notes are not in any prospectus supplement, the Debt Securities
willcertificated form, your notice must comply with
appropriate DTC procedures.
No notes may be issued only in fully registered form and in denominations of $1,000 and
any integral multiple of $1,000 (Section 2.7). No service
13
charge will be made for any transfer or exchange of any Debt Securities, but we
may require that you pay a sum sufficient to cover any applicable tax or other
governmental charge (Section 2.8).
Debt Securities may bear interest at a fixed rate or a floating rate. Debt
Securities bearing no interest or interest at a rate thatpurchased at the timeoption of issuanceholders if there has occurred
and is belowcontinuing an event of default other than an event of default that is
cured by the prevailing market ratepayment of the purchase price of the notes.
You may be sold at a discount below
their stated principal amount. Special United States Federal income tax
considerations applicable towithdraw any discounted Debt Securities or to Debt
Securities issued at par that are treated as having been issued at a discount
for United States Federal income tax purposes will be described in the
prospectus supplement in which we offer those debt securities.
Global Securities. The Debt Securities of a series may be issuedpurchase notice in whole or in part by a written
notice of withdrawal delivered to the paying agent prior to the close of
business on the business day prior to the purchase date. The notice of
withdrawal must state:
- the principal amount of the withdrawn notes;
- if certificated notes have been issued, the certificate numbers of the
withdrawn notes; and
- the principal amount, if any, which remains subject to the purchase
notice.
If the notes are not in certificated form, your notice must comply with
appropriate DTC procedures.
You must either effect book-entry transfer or deliver the notes, together
with necessary endorsements, to the office of the paying agent after delivery of
the purchase notice to receive payment of the purchase
51
price. You will receive payment promptly following the later of the purchase
date or the time of book-entry transfer or the delivery of the notes. If the
paying agent holds money or securities sufficient to pay the purchase price of
the notes on the business day following the purchase date, then:
- the notes will cease to be outstanding and interest will cease to accrue
(whether or not book-entry transfer of the notes is made or whether or
not the note is delivered to the paying agent); and
- all other rights of the holder will terminate (other than the right to
receive the purchase price upon delivery or transfer of the notes).
FUNDAMENTAL CHANGE REQUIRES PURCHASE OF NOTES BY US AT THE OPTION OF THE HOLDER
If a Fundamental Change (as defined below in this section) occurs at any
time prior to July 15, 2008, you will have the right, at your option, to require
us to purchase any or all of your notes for cash, or any portion of the
principal amount thereof, that is equal to $1,000 or an integral multiple of
$1,000. The cash price we are required to pay is equal to 100% of the principal
amount of the notes to be purchased plus accrued and unpaid interest and
additional amounts owed, if any, to the Fundamental Change purchase date. If a
Fundamental Change occurs on or after July 15, 2008 no holder will have a right
to require us to purchase any notes, except as described above under "--
Purchase of Notes by Us at the Option of the Holder."
A "Fundamental Change" will be deemed to have occurred after the notes are
originally issued at the time any of the following occurs:
(1) our common stock or other common stock into which the notes are
convertible is neither listed for trading on a United States national securities
exchange nor approved for trading on the Nasdaq National Market or another
established automated over-the-counter trading market in the United States;
(2) a "person" or "group" within the meaning of Section 13(d) of the
Securities Exchange Act of 1934 other than us, our subsidiaries or our or their
employee benefit plans, files a Schedule TO or any schedule, form or report
under the Securities Exchange Act of 1934 disclosing that such person or group
has become the direct or indirect ultimate "beneficial owner," as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, of our common equity
representing more than 50% of the voting power of our common equity entitled to
vote generally in the election of directors;
(3) consummation of any share exchange, consolidation or merger of us
pursuant to which our common stock will be converted into cash, securities or
other property or any sale, lease or other transfer in one transaction or a
series of transactions of all or substantially all of the consolidated assets of
us and our subsidiaries, taken as a whole, to any person other than us or one or
more globalof our subsidiaries; provided, however, that a transaction where the
holders of our common equity immediately prior to such transaction have directly
or indirectly, more than 50% of the aggregate voting power of all classes of
common equity of the continuing or surviving corporation or transferee entitled
to vote generally in the election of directors immediately after such event
shall not be a Fundamental Change; or
(4) continuing directors (as defined below in this section) cease to
constitute at least a majority of our board of directors.
A Fundamental Change will not be deemed to have occurred in respect of any
of the foregoing, however, if either:
(1) the last reported sale price of our common stock for any five trading
days within the 10 consecutive trading days ending immediately before the later
of the Fundamental Change or the public announcement thereof, equals or exceeds
105% of the conversion price of the notes in effect immediately before the
Fundamental Change or the public announcement thereof; or
(2) at least 90% of the consideration, excluding cash payments for
fractional shares, in the transaction or transactions constituting the
Fundamental Change consists of shares of capital stock traded on a national
securities thatexchange or quoted on the Nasdaq National Market or which will be depositedso
traded or
52
quoted when issued or exchanged in connection with a Fundamental Change (these
securities being referred to as "publicly traded securities") and as a result of
this transaction or transactions the notes become convertible into such publicly
traded securities, excluding cash payments for fractional shares.
For purposes of the above paragraph the term capital stock of any person
means any and all shares (including ordinary shares or American Depositary
Shares), interests, participations or other equivalents however designated of
corporate stock or other equity participations, including partnership interests,
whether general or limited, of such person and any rights (other than debt
securities convertible or exchangeable into an equity interest), warrants or
options to acquire an equity interest in such person.
"Continuing director" means a director who either was a member of our board
of directors on the date of this prospectus or who becomes a member of our board
of directors subsequent to that date and whose appointment, election or
nomination for election by our stockholders is duly approved by a majority of
the continuing directors on our board of directors at the time of such approval,
either by a specific vote or by approval of the proxy statement issued by us on
behalf of the board of directors in which such individual is named as nominee
for director.
On or before the 30th day after the occurrence of a depositary identifiedFundamental Change, we
will provide to all holders of the notes and the trustee and paying agent a
notice of the occurrence of the Fundamental Change and of the resulting purchase
right. Such notice shall state, among other things:
- the events causing a Fundamental Change;
- the date of the Fundamental Change;
- the last date on which a holder may exercise the purchase right;
- the Fundamental Change purchase price;
- the Fundamental Change purchase date;
- the name and address of the paying agent and the conversion agent;
- the conversion rate and any adjustments to the conversion rate;
- the notes with respect to which a Fundamental Change purchase notice has
been given by the holder may be converted only if the holder withdraws
the Fundamental Change purchase notice in accordance with the terms of
the indenture; and
- the procedures that holders must follow to require us to purchase their
notes.
To exercise the purchase right, you must deliver, on or before the 35th day
after the date of our notice of a Fundamental Change, subject to extension to
comply with applicable law, the notes to be purchased, duly endorsed for
transfer, together with a written purchase notice and the form entitled "Form of
Fundamental Change Purchase Notice" duly completed, to the paying agent. Your
purchase notice must state:
- if certificated, the certificate numbers of your notes to be delivered
for purchase;
- the portion of the principal amount of notes to be purchased, which must
be $1,000 or an integral multiple thereof; and
- that the notes are to be purchased by us pursuant to the applicable
provisions of the notes and the indenture.
If the notes are not in certificated form, your notice must comply with
appropriate DTC procedures.
53
You may withdraw any purchase notice (in whole or in part) by a written
notice of withdrawal delivered to the paying agent prior to the close of
business on the business day prior to the Fundamental Change purchase date. The
notice of withdrawal must state:
- the principal amount of the withdrawn notes;
- if certificated notes have been issued, the certificate numbers of the
withdrawn notes; and
- the principal amount, if any, which remains subject to the purchase
notice.
If the notes are not in certificated form, your notice must comply with
appropriate DTC procedures.
We are required to purchase the notes no later than 35 business days after
the date of our notice of the occurrence of the relevant Fundamental Change
subject to extension to comply with applicable law. You will receive payment of
the Fundamental Change purchase price promptly following the later of the
Fundamental Change purchase date or the time of book-entry transfer or the
delivery of the notes. If the paying agent holds money or securities sufficient
to pay the Fundamental Change purchase price of the notes on the business day
following the Fundamental Change purchase date, then:
- the notes will cease to be outstanding and interest and additional
amounts, if any, will cease to accrue (whether or not book-entry transfer
of the notes is made or whether or not the note is delivered to the
paying agent); and
- all other rights of the holder will terminate (other than the right to
receive the Fundamental Change purchase price upon delivery or transfer
of the notes).
The rights of the holders to require us to purchase their notes upon a
Fundamental Change could discourage a potential acquirer of Halliburton. The
Fundamental Change purchase feature, however, is not the result of management's
knowledge of any specific effort to accumulate shares of our common stock, to
obtain control of us by any means or part of a plan by management to adopt a
series of anti-takeover provisions. Instead, the Fundamental Change purchase
feature is a standard term contained in other offerings of debt securities
similar to the notes that have been marketed by certain of the initial
purchasers. The terms of the Fundamental Change purchase feature resulted from
negotiations between the initial purchasers and us.
The term Fundamental Change is limited to specified transactions and may
not include other events that might adversely affect our financial condition. In
addition, the requirement that we offer to purchase the notes upon a Fundamental
Change may not protect holders in the prospectus supplementevent of a highly leveraged transaction,
reorganization, merger or similar transaction involving us.
No notes may be purchased at the option of holders upon a Fundamental
Change if there has occurred and is continuing an event of default other than an
event of default that is cured by the payment of the Fundamental Change purchase
price of the notes.
The definition of Fundamental Change includes a phrase relating to that series. Global securitiesthe
conveyance, transfer, sale, lease or disposition of "all or substantially all"
of our consolidated assets. There is no precise, established definition of the
phrase "substantially all" under applicable law. Accordingly, the ability of a
holder of the notes to require us to purchase its notes as a result of the
conveyance, transfer, sale, lease or other disposition of less than all of our
assets may be issued onlyuncertain.
If a Fundamental Change were to occur, we may not have enough funds to pay
the Fundamental Change purchase price. See "Risk Factors -- Risks Relating to
the Notes -- We may not be able to purchase the notes upon an agreed purchase
date or a Fundamental Change, and may not be obligated to purchase the notes
upon certain corporate transactions." Our failure to purchase the notes when
required following a Fundamental Change will constitute an event of default
under the indenture with respect to the notes. In addition, we have, and may in
fully
registered formthe future incur, other indebtedness with similar change in control provisions
permitting holders to accelerate or to require us to purchase our indebtedness
upon the occurrence of similar events or on some specific dates.
54
OPTIONAL REDEMPTION
No sinking fund is provided for the notes, which means that the indenture
will not require us to redeem or retire the notes periodically. Prior to July
15, 2008, the notes will not be redeemable. On or after July 15, 2008, we may
redeem for cash all or part of the notes at any time, upon not less than 30 nor
more than 60 days' notice before the redemption date by mail to the trustee, the
paying agent and each holder of notes, for a price equal to 100% of the
principal amount of the notes to be redeemed plus any accrued and unpaid
interest and additional amounts owed, if any, to the redemption date.
If we decide to redeem fewer than all of the outstanding notes, the trustee
will select the notes to be redeemed (in principal amounts of $1,000 or integral
multiples thereof) by a method the trustee considers fair and appropriate.
If the trustee selects a portion of your note for partial redemption and
you convert a portion of the same note, the converted portion will be deemed to
be from the portion selected for redemption.
In the event of any redemption in either temporarypart, we will not be required to:
- issue, register the transfer of or permanent form. Unless and until
certificated Debt Securities are exchangedexchange any note during a period of
15 days before the mailing of the redemption notice; or
- register the transfer of or exchange any note so selected for redemption,
in whole or in part, for a global
security, a global security may not be transferredexcept the unredeemed portion of any note being
redeemed in part.
RANKING
The notes are our senior unsecured obligations and rank equally with all of
our existing and future unsecured senior indebtedness. In addition, except as
otherwise provided herein, the notes are effectively subordinated to any secured
indebtedness to the extent of the value of the assets securing such indebtedness
and to any indebtedness of our subsidiaries to the extent of the assets of those
subsidiaries.
As of June 30, 2003, we had outstanding approximately $2.556 billion of
unsecured indebtedness, no secured indebtedness and no subordinated
indebtedness. In October 2003, we issued additional senior indebtedness in an
aggregate principal amount of $1.05 billion. At June 30, 2003, the aggregate
indebtedness of our subsidiaries was approximately $396.0 million and other
liabilities of our subsidiaries, including trade payables, accrued compensation,
advanced billings, income taxes payable, other liabilities (other than asbestos
and intercompany liabilities) were approximately $4.4 billion, and accrued
asbestos liabilities were approximately $3.4 billion. As of June 30, 2003, our
subsidiaries had no secured indebtedness and no subordinated indebtedness
outstanding.
We expect to enter into (1) a whole bysenior unsecured credit facility for an
amount up to approximately $1.0 billion, subject to reduction, (2) an
approximately $1.4 billion senior secured letter of credit facility and (3) an
up to $700.0 million senior secured revolving credit facility in replacement of
our existing $350.0 million credit facility. Borrowings under the depositary, any successor depositary or their nominees (Section 2.8).letter of
credit facility and the revolving credit facility will be secured. The specific terms of
the depositary arrangement with respectnotes and the anticipated terms of the new credit facilities currently
contemplate that the notes offered hereby and certain of our previously issued
debt securities and our new 7.6% debentures due 2096 to a seriesbe issued in the
exchange offer described under "Description of Debt SecuritiesAnticipated Indebtedness," if
consummated, will share in collateral pledged to secure borrowings under the new
credit facilities if and when the total of all the secured debt exceeds 5% of
the consolidated net tangible assets of Halliburton and its subsidiaries. The
anticipated terms of the new credit facilities currently contemplate collateral
pledged to secure borrowings under the new facilities will be released after (1)
completion of the Chapter 11 plan of reorganization of DII Industries, Kellogg
Brown & Root and some of their subsidiaries with U.S. operations, which will be
used to implement the proposed settlement, and (2) satisfaction of other
conditions described in "Description of Anticipated Indebtedness -- Conditions
to Release of Collateral."
The notes will not be guaranteed by any of our subsidiaries. Borrowings
under the prospectus supplementletter of credit facility and revolving credit facility described
under "Description of Anticipated Indebtedness" will be
55
guaranteed by some of our subsidiaries. Accordingly, the notes will be
structurally subordinated to the debt guaranteed by our subsidiaries. The
anticipated terms of the new credit facilities currently contemplate that any of
these subsidiary guarantees will be released after (1) completion of the Chapter
11 plan of reorganization of DII Industries, Kellogg Brown & Root and some of
their subsidiaries with U.S. operations, which will be used to implement the
proposed settlement, and (2) satisfaction of the other conditions described in
"Description of Anticipated Indebtedness -- Conditions to Release of
Collateral."
The notes are our exclusive obligation. Our cash flow and our ability to
service our indebtedness, including the notes, is dependent upon the earnings of
our subsidiaries. In addition, we are dependent on the distribution of earnings,
loans or other payments by our subsidiaries to us. Our subsidiaries are separate
and distinct legal entities. Our subsidiaries will not guarantee the notes or
have any obligation to pay any amounts due on the notes or to provide us with
funds for our payment obligations, whether by dividends, distributions, loans or
other payments. In addition, any payment of dividends, distributions, loans or
advances by our subsidiaries to us could be subject to statutory or contractual
restrictions. Payments to us by our subsidiaries will also be contingent upon
our subsidiaries' earnings and business considerations. Our right to receive any
assets of any subsidiary upon its liquidation or reorganization, and, therefore,
our right to participate in those assets, will be effectively subordinated to
the claims of that subsidiary's creditors, including trade creditors. In
addition, even if we were a creditor of any of our subsidiaries, our right as a
creditor would be subordinate to any security interest in the assets of our
subsidiaries and any indebtedness of our subsidiaries senior to that held by us.
We are obligated to pay reasonable compensation to the trustee and
calculation agent and to indemnify the trustee and calculation agent against
certain losses, liabilities or expenses incurred by the trustee and calculation
agent in connection with its duties relating to the notes. The trustee's claims
for these payments will generally be senior to those of holders of notes in
respect of all funds collected or held by the trustee.
For more information regarding the anticipated indebtedness and subsidiary
guarantees described above, see "Description of Anticipated Indebtedness."
COVENANTS
Under the indenture, there are no covenants restricting our ability to
incur additional debt, issue additional securities, maintain any asset ratios or
create or maintain any reserves. See "Risk Factors -- Risks Relating to the
Notes -- We may able to incur more indebtedness and the risks associated with
our leverage, including our ability to service our indebtedness, will increase
as we incur additional indebtedness." However, the indenture contains the
covenants for your protection that series.
Eventsare described below.
RESTRICTIONS ON SECURED DEBT
We will not, and will not permit any of Default. Unlessour Restricted Subsidiaries to,
create, incur, assume or guarantee any Secured Debt without equally and ratably
securing the notes. In that circumstance, we must also equally and ratably
secure any other indebtedness of, or guaranteed by, us or any such Restricted
Subsidiary then similarly entitled. In any event, the foregoing restrictions
will not apply to:
- specified purchase money mortgages;
- specified mortgages to finance construction on unimproved property;
- mortgages existing on property at the time of its acquisition by us or a
Restricted Subsidiary;
- mortgages existing on the property or on the outstanding shares or
indebtedness of a corporation at the time it becomes a Restricted
Subsidiary;
- mortgages on property of a corporation existing at the time the
corporation is merged or consolidated with Halliburton or a Restricted
Subsidiary;
- mortgages in favor of governmental bodies to secure payments of
indebtedness; or
56
- extensions, renewals or replacement of the foregoing; provided that the
extension, renewal or replacement must secure the same property and does
not create Secured Debt in excess of the principal amount then
outstanding.
We and any Restricted Subsidiaries may create, incur, assume or guarantee
Secured Debt not otherwise specifiedpermitted or excepted without equally and ratably
securing the notes if the sum of (a) the amount of the Secured Debt (not
including Secured Debt permitted under the foregoing exceptions), plus (b) the
aggregate value of Sale and Leaseback Transactions existing at such time (not
including Sale and Leaseback Transactions the proceeds of which are or will be
applied to the retirement of the notes or other funded indebtedness of
Halliburton and our Restricted Subsidiaries as described below), does not at the
time exceed 5% of Consolidated Net Tangible Assets.
LIMITATIONS ON SALE AND LEASEBACK TRANSACTIONS
The indenture also prohibits Sale and Leaseback Transactions unless:
- Halliburton or the Restricted Subsidiary owning the Principal Property
would be entitled to incur Secured Debt equal to the amount realizable
upon the sale or transfer of the property to be so leased secured by a
mortgage on the property without equally and ratably securing the notes;
or
- an amount equal to the value of the property so leased is applied to the
retirement (other than mandatory retirement), within 120 days of the
effective date of such arrangement, of the notes or other indebtedness of
Halliburton and its Restricted Subsidiaries (other than such indebtedness
owned by Halliburton or any Restricted Subsidiary) which was recorded as
funded debt as of the date of its creation and which, in the case of such
indebtedness of Halliburton, is not subordinate and junior in right of
payment to the prior payment of the notes or other indebtedness under the
indenture.
As of the date of this prospectus, supplement,
anour board of directors has not
designated any property of Halliburton or of any Restricted Subsidiary as a
Principal Property because, in the opinion of our management, no single property
or asset is of material importance to the total business of Halliburton and its
Restricted Subsidiaries taken as a whole. As a result, unless a Principal
Property is designated by our board of directors, the limitation on Sale and
Leaseback Transactions would not limit or prohibit any Sale and Leaseback
Transactions by Halliburton or a Restricted Subsidiary.
RESTRICTIONS ON CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Halliburton will not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any person, unless:
(1) the resulting, surviving or transferee person (the "Successor Company")
will be a corporation, partnership, trust or limited liability company organized
and existing under the laws of the United States, any State of the United States
or the District of Columbia and the Successor Company (if not Halliburton) will
expressly assume, by supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of Halliburton
under the notes and the indenture;
(2) immediately after giving effect to such transaction, no default or
event of default is defined under each Indenture with respect(as described below) shall have occurred and be continuing; and
(3) Halliburton shall have delivered to the Debt
Securitiestrustee the certificates and
opinions required by the indenture.
For purposes of any series issuedthis covenant, the sale, lease, conveyance, assignment,
transfer or other disposition of all or substantially all of the properties and
assets of one or more subsidiaries of Halliburton, which properties and assets,
if held by Halliburton instead of such subsidiaries, would constitute all or
substantially all of the properties and assets of Halliburton on a consolidated
basis, shall be deemed to be the transfer of all or substantially all of the
properties and assets of Halliburton.
57
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, Halliburton under that Indenturethe indenture, but, in the
case of a lease of all or substantially all its assets, the predecessor company
will not be released from the obligation to pay the principal of and interest on
the notes.
Although there is a limited body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, in certain circumstances there may be a
degree of uncertainty as being:
.to whether a particular transaction would involve "all
or substantially all" of the property or assets of a person.
EVENTS OF DEFAULT
The following are events of default under the indenture:
- failure to pay any interest with respect to Debt Securities of that seriesor additional amounts, if any, when due,
continued for 30 days;
.- failure to pay principal or premium, if any, with respect to Debt
Securities of that series when due;
.- failure to make any sinking fund payment at maturity on Debt Securitiesany indebtedness in an amount
in excess of $125.0 million in the aggregate for all such indebtedness
and such amount has not been paid or discharged within 30 days after
notice is given in accordance with the indenture governing such
indebtedness;
- a default by us on any indebtedness that seriesresults in the acceleration of
any such indebtedness in an amount in excess of $125.0 million in the
aggregate for all such indebtedness, without this indebtedness being
discharged or the acceleration being rescinded or annulled for 30 days
after notice is given in accordance with the indenture governing such
indebtedness;
- failure to pay the repurchase price when due;
.required to do so in connection
with holders' exercise of their option to require us to repurchase their
notes;
- failure to deliver shares of common stock within 10 days after such
common stock is required to be delivered upon conversion of a note as
provided in the indenture;
- breach of or failure to perform any other covenant or agreement in the
indenture applicable to Debt
Securities of that series,the notes, continued for 60 days after written
notice by the Trusteetrustee or the holders of at least 25% in aggregate
principal amount of the Debt Securities of that seriesnotes then outstanding; and
.- specific events relating to our bankruptcy, insolvency or reorganization
(Section 5.1).reorganization.
If any event of default with respect to a series of Debt Securities occurs and continues for the required amount of
time, the Trusteetrustee or the holders of not less than 25% of the aggregate principal
amount of the Debt Securities of
that seriesnotes then outstanding may declare the Debt Securities of that seriesnotes due and payable,
together with all accrued and unpaid interest, if any, and additional amounts,
if any, immediately by giving notice in writing to us (and to the Trustee,trustee, if
given by the holders). Notwithstanding the preceding, in the case of an event of
default arising from certain events of bankruptcy, insolvency or reorganization
with respect to Halliburton, all outstanding notes will become due and payable
without further action or notice. The holders of a majority of the aggregate
principal amount of the Debt Securities of that seriesnotes then outstanding, may, however, by notice in
writing to us and the Trustee,trustee, rescind the declaration if:
.- we have paid or deposited with the Trusteetrustee all amounts that have become
due, otherwise than through acceleration, for principal, premium, if any,
and interest, if any; and
.- all defaults under that Indenturethe indenture are cured or waived (Section 5.1).
Each Indenture provides that nowaived.
58
No holder of any series of Debt Securitiesnotes then outstanding may institute any suit, action or
proceeding with respect to, or otherwise attempt to enforce, the Indenture,indenture,
unless:
.- the holder has given to the Trusteetrustee written notice of the occurrence and
continuance of a default;
.- the holders of not less than 25% of the aggregate principal amount then
outstanding of that series of Debt Securitiesthe notes have made a written request to the Trusteetrustee to
institute the suit, action or proceeding and have offered to the Trusteetrustee
the reasonable indemnity it may require; and
.- the Trusteetrustee for 60 days after its receipt of the notice, request and
offer of indemnity has neglected or refused to institute the requested
action, suit or proceeding.
14
The foregoing is limited byright of each holder of notes to receive payment of the following rightsprincipal of,
premium, if any, interest or additional amounts, if any, on the notes on or
after the respective due dates and the right to institute suit for enforcement
of any holder of any Debt
Securities whichpayment obligation may not be impaired or affected without the consent of
that holder:
. the right to receive, subject to the subordination provisions applicable
to the Subordinated Debt Securities and the Junior Subordinated Debt
Securities, payment of the principal of, premium, if any, or interest, if
any, on the Debt Securities on or after the respective due dates;
. with respect to any convertible Subordinated Debt Security or Junior
Subordinated Debt Security, the right to convert the Debt Security; and
. in each case, the right to institute suit for the enforcement of any
payment obligation or right to convert (Section 5.4).
For information as to the right of a holder of trust preferred securities to
institute a direct action against us to enforce our payment obligation with
respect to trust debentures issued under a supplement to the Subordinated or
Junior Subordinated Indenture, see "Description of Trust
Debentures--Enforcement of Rights by Holders of Trust Preferred Securities."holder.
The holders of a majority in aggregate principal amount of the Debt
Securities of a seriesnotes then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trusteetrustee or exercising any trust power conferred
on the Trusteetrustee if that direction is not in conflict with applicable law and
would not involve the trustee in personal liability (as determined in good faith
by the trustee's board or the Indenture (Section 5.7)similar governing body).
In determining whether the holders of the requisite aggregate principal
amount of anthe notes outstanding series of original issue discount Debt Securities have given any request, demand, authorization or
consent under the Indenture,indenture, the principal amount of that seriesnotes that will be deemed
to be outstanding will be the amount of the principal of that seriesthe notes that would be
due and payable as of the date of the determination upon a declaration of
acceleration of the maturity of that series.the notes.
We are required to furnish to the Trusteetrustee annually a statement as to the
fulfillment of all of our obligations under each Indenture (Section 4.3).
Dischargethe indenture.
DISCHARGE AND DEFEASANCE
The terms of the notes will provide that under specified conditions, we
will be discharged from any and Defeasance. Unless otherwise specifiedall obligations in respect of the applicable
prospectus supplement, we can discharge or defeasenotes (other
than our obligations within respect to each series of Debt Securities as described below (Article 10).
With respect to Debt Securitiesconversion of any series issued under any Indenture
that remain outstanding and:
. have either become duethe notes into common stock and
payable; or
. are by their terms due and payable within one year; or
. are by their terms subject to optional redemption within one year;
we may discharge all ourexcept for obligations to register the transfer or exchange of notes, to replace
stolen, lost or mutilated notes, to maintain paying agencies and to hold moneys
for payment in trust) upon the deposit with the trustee, in trust for the
benefit of the holders of that seriesthe notes, of Debt
Securities by depositing with the Trustee, as trust funds, cash money and/or U.S. Government Obligations (as definedgovernment obligations
that, through the payment of interest and principal in the Indenture) or both. Theaccordance with their
terms, will provide money in an amount so
deposited must be certified to be sufficient to pay when due the principal of,(and premium,
if any,any), interest and interest,additional amounts, if any, on, all outstanding Debt Securitiesthe notes on the stated
maturity of that series and to make any mandatory sinking fundthe payments on those Debt
Securities when due.
With respect to Debt Securities of any other series issued under any
Indenture that remain outstanding, we may, unless otherwise provided in the
applicable prospectus supplement, discharge at any time our obligations to
holders of that series ("defeasance") only if, among other things:
. the Debt Securities are not convertible Subordinated Debt Securities or
convertible Junior Subordinated Debt Securities;
15
. we irrevocably depositaccordance with the Trustee cash or U.S. Government
Obligations, or a combinationterms of both, as trust funds in an amount
certifiedthe notes. If we want
to defease the notes, we will also be sufficientrequired to pay when due the principal of, premium, if
any, and interest, if any, on all outstanding Debt Securities of that
series and to make any mandatory sinking fund payments on those Debt
Securities when due and the funds have been so deposited for 91 days;
. the defeasance will not result in a breach or violation of, or cause a
default under, any agreement or instrument to which we are a party or by
which we are bound; and
. we deliver to the Trusteetrustee an
opinion of counsel with respect to the
effects of the defeasance under the United States federal income tax laws.
The opinion must be to the effect that the holders of the defeased Debt
Securities will not recognize income, gain or loss forbe subject to United
States federal income tax purposeson the same amounts, in the same manner and at the
same times as a result ofwould have been the case if such defeasance and that the defeasance willhad not otherwise alter the United States Federal income tax treatment of the
holders' principal and interest payments on that series of Debt
Securities. The opinion must be based on a ruling of the Internal Revenue
Service or a change in United States Federal income tax law occurring
after the date of this prospectus because that opinion could not be
rendered under current federal income tax law.
Some of the obligations and rights of the holders of any series of Debt
Securities issued under any Indenture will not be affected by any discharge or
defeasance discussed above. These are:
. rights of registration of transfer and exchange of Debt Securities of the
affected series;
. rights of substitution of mutilated, defaced, destroyed, lost or stolen
Debt Securities of that series;
. rights of holders of Debt Securities of that seriesoccurred.
MODIFICATIONS
From time to receive payments of
principal and premium, if any, and interest, if any, when due and to
receive mandatory sinking fund payments on those Debt Securities when due,
if any;
. the rights, obligations, duties and immunities of the Trustee;
. the rights of holders of Debt Securities of that series as beneficiaries
with respect to property deposited with the Trustee payable to all or any
of them;
. our obligations to maintain an office or agency in respect of Debt
Securities of that series; and
. if applicable, our obligations with respect to the conversion of Debt
Securities of a series into common stock.
Modification of the Indenture. Each Indenture provides thattime, we and the Trusteetrustee may enter into supplemental
indentures without the consent of the holders of the Debt Securities:
.notes to, among other
things:
- evidence the assumption by a successor entity of our obligations under
the Indenture;
. toindenture;
- add covenants or new events of default for the protection of the holders
of Debt Securities;
. tothe notes;
- cure any ambiguity or correct any inconsistency in the Indenture;
. to establish the form and terms of Debt Securities;
. toindenture;
- evidence the acceptance of appointment by a successor trustee;
. to59
- amend the Indentureindenture in any other manner that we may deem necessary or
desirable and that will not adversely affect the interests of the holders
of outstanding Debt Securities;notes; or
. in- secure the case of Senior Debt Securities, to secure Debt Securities (Section
8.1).notes.
We and the Trustee,trustee, with the consent of the holders of not less than a
majority of the aggregate principal amount of Debt Securitiesthe outstanding debt securities of
eachall series then outstandingissued under the indenture and affected thereby, may add, change or
eliminate any of the provisions of the applicable Indenture.indenture. Similarly, with the consent of
the holders of at least a majority of the aggregate principal amount of Debt
Securities of each seriesnotes
then outstanding, and affected, we may also modify 16
in any mannersome manners the rights of the holders
of the Debt Securities of that series.notes. These rights are, however, limited. We and the Trusteetrustee may not,
without the consent of the holder of each outstanding Debt Security affected thereby:
.note:
- extend the stated maturity of the principal of any Debt Security;
.note;
- reduce the amount of the principal or premium, if any, of any Debt
Security;
.note;
- reduce the rate change the method of determination or extend the time of payment of interest on any Debt Security;
.note;
- reduce or alter the method of computation of any amount payable on or at
redemption or repayment of any Debt Security;
. reduce the principal amount of any original issue discount security
payable upon acceleration of any Debt Security or provable in bankruptcy;
.note;
- change the coin or currency in which principal, premium, if any, interest
and interest, if any,redemption or repurchase price are payable;
.- change the terms applicable to redemption or repurchase in a manner
adverse to the holder;
- make any change that adversely affects the right to convert the notes, or
decrease the conversion rate with respect to the notes;
- impair or affect the right to institute suit for the enforcement of any
payment or repayment of any Debt Security;
. if applicable, adversely affect the right to convert Debt Securitiesnote; or
any right of prepayment at the option of the holder; or
.- reduce the aforesaid percentage in aggregate principal amount of Debt
Securities of any series issued under such Indenture, the consentstated above of the holders of which is required for any suchnotes who must
consent to a modification (Section 8.2).
Neitherto the Subordinated Indenture nor the Junior Subordinated Indenture may
be amended to alter the subordination of any outstanding Subordinated Debt
Securitiesindenture or the Junior Subordinated Debt Securities without the consent of
each holder of Senior Indebtedness or Superior Indebtedness, as the case may
be, then outstanding that would be adversely affected thereby (Section 8.6 of
the Subordinated Indenture and the Junior Subordinated Indenture).
Paying Agent and Registrar.notes.
GOVERNING LAW
The Trustee or an affiliate of the Trustee
initially will act as paying agent and registrar with respect to any series of
Debt Securities issued under an Indenture (Section 3.2).
Consolidation, Merger and Sale of Assets. Under each Indenture, we may,
without the consent of the holders of any of the outstanding Debt Securities,
consolidate with or merge into, or convey, transfer or lease our properties and
assets substantially as an entirety to, any other corporation organized and
validly existing under the laws of any domestic jurisdiction, provided that:
. any successor corporation assumes our obligations on the Debt Securities
under the Indenture;
. after giving effect to the transaction no event of default has occurred
and is continuing.
Governing Law. The indentures, the Debt Securities and coupons will be
governed by, and construed in accordance with, the laws of the State of New York.
Provisions Applicable Solely to Senior Debt Securities
General. Senior Debt Securities will be issued underYork govern the Senior Indentureindenture and will rank pari passu with all other unsecured and unsubordinated debtthe notes.
DEFINITIONS
"Consolidated Net Tangible Assets" means the aggregate amount of Halliburton.
Definitions. For purposesassets
included on a consolidated balance sheet of the following discussion, the following
definitions are applicable (Article One of the Senior Indenture).
17
"Subsidiary" means any corporation of which our Company, or our Company and
one or more Subsidiaries, or any one or more Subsidiaries, directly or
indirectly own voting securities entitling any one or more of our CompanyHalliburton and its Restricted
Subsidiaries, to elect a majority of the directors of such corporation.less
- applicable reserves and other properly deductible items;
- all current liabilities; and
- all goodwill, trade names, trademarks, patents, unamortized debt discount
and expense and other like intangibles,
all in accordance with generally accepted accounting principles
consistently applied.
"Principal Property" means any real estate, manufacturing plant, warehouse,
office building or other physical facility, or any item of marine,
transportation or construction equipment or other like depreciable assets of
our CompanyHalliburton or of any Restricted Subsidiary, whether owned at or acquired after
the date of the Senior Indenture,indenture, other than any pollution control facility, that in
the opinion of the Boardour board of Directorsdirectors is of material importance to the total
business conducted by our CompanyHalliburton and its Restricted Subsidiaries as a whole. As
of the date of this prospectus, our board of directors has not designated any
property of Halliburton or of any Restricted Subsidiary as a Principal Property
because, in the opinion of our management, no single property or asset is of
material importance to the total business of Halliburton and its Restricted
Subsidiaries taken as a whole.
60
"Restricted Subsidiary" means:
.- any Subsidiary of ours existing at the date of the Senior Indentureindenture, the
principal assets and business of which are located in the United States,
its territories, Canada or Canada,Puerto Rico, except sales financing, real
estate and other Subsidiaries so designated; and
.- any other Subsidiary that is designated by our Company to bewe designate as a Restricted Subsidiary.
"Secured Debt" means indebtedness (other than indebtedness among Halliburton
and Restricted Subsidiaries) for money borrowed by our Company or a Restricted
Subsidiary, or any other indebtedness of our Company or a Restricted Subsidiary
on which interest is paid or payable, which in any case is secured by:
. a lien or other encumbrance on any Principal Property owned by our Company
or a Restricted Subsidiary;
. a pledge, lien or other security interest on any shares of stock or
indebtedness of a Restricted Subsidiary; or
. in the case of indebtedness of our Company, a guaranty by a Restricted
Subsidiary.
"Consolidated Net Tangible Assets" means the aggregate amount of assets
included on a consolidated balance sheet of our Company and its Restricted
Subsidiaries, less
. applicable reserves and other properly deductible items;
. all current liabilities; and
. all goodwill, trade names, trademarks, patents, unamortized debt discount
and expense and other like intangibles;
all in accordance with generally accepted accounting principles consistently
applied.
"Sale and Leaseback Transaction" means the sale or transfer by our CompanyHalliburton
or a Restricted Subsidiary (other than to Halliburton or any one or more of our
Restricted Subsidiaries, or both) of any Principal Property owned by it that has
been in full operation for more than 120 days prior to the sale or transfer with
the intention of taking back a lease on such property, other than a lease not
exceeding 36 months, where the use by our CompanyHalliburton or the Restricted Subsidiary
of the property will be discontinued on or before the expiration of the term of
the lease.
Restrictions on Secured Debt. While any series of Senior Debt Securities is
outstanding, our Company"Secured Debt" means indebtedness (other than indebtedness among
Halliburton and its Restricted Subsidiaries are prohibited from
creating, incurring, assumingSubsidiaries) for money borrowed by Halliburton or guaranteeing any Secured Debt without equally
and ratably securing the Senior Debt Securities of that series. In that
circumstance, we must also equally and ratably securea
Restricted Subsidiary, or any other indebtedness of Halliburton or guaranteed by, our Company or any sucha Restricted
Subsidiary then
similarly entitled. The foregoing restrictions are not applicable to:
. specified purchase money mortgages;
. specified mortgages to finance construction on unimproved property;
. mortgages existingwhich interest is paid or payable, which in any case is secured
by:
- a lien or other encumbrance on property at the time of its acquisitionany Principal Property owned by
our
CompanyHalliburton or a Restricted Subsidiary;
18
. mortgages existing- a pledge, lien or other security interest on the property or on the outstandingany shares of stock or
indebtedness of a corporation at the time it becomes a Restricted Subsidiary; . mortgages on property of a corporation existing at the time the
corporation is merged or
consolidated with our Company or a Restricted
Subsidiary;
. mortgages in favor of governmental bodies to secure payments of
indebtedness; or
. extensions, renewals or replacement of the foregoing (Section 3.6 of the
Senior Indenture).
Our Company and any Restricted Subsidiaries may create, incur, assume or
guarantee Secured Debt not otherwise permitted or excepted without equally and
ratably securing Senior Debt Securities if the sum of:
. the amount of the Secured Debt, plus
. the aggregate value of Sale and Leaseback Transactions (subject to
specific exceptions)
does not exceed 5% of Consolidated Net Tangible Assets (Section 3.6 of the
Senior Indenture).
Limitations on Sale and Leaseback Transactions. While any series of Senior
Debt Securities is outstanding, Sale and Leaseback Transactions are prohibited
unless:
. our Company or the Restricted Subsidiary owning the Principal Property
would be entitled to incur Secured Debt equal to the amount realizable
upon the sale or transfer of the property to be so leased secured by a
mortgage on the property without equally and ratably securing the Senior
Debt Securities of such series; or
. an amount equal to the value of the property so leased is applied to the
retirement (other than mandatory retirement) of the Senior Debt Securities
of that series or other funded indebtedness of our Company and its
Restricted Subsidiaries (Section 3.7 of the Senior Indenture).
Restrictions on Transfer of Principal Property to Unrestricted Subsidiary.
Our Company and its Restricted Subsidiaries are prohibited from transferring
whether by merger, consolidation or otherwise, except for fair value, any
Principal Property to any Subsidiary that is not a Restricted Subsidiary,
without retiring indebtedness as provided in the immediately preceding
paragraph (Section 3.8 of the Senior Indenture).
Consolidation, Merger, Sale or Conveyance. No consolidation or merger of our
Company, and no sale of substantially all of its property, may be effected with
or to another corporation if any Principal Property of our Company or a
Restricted Subsidiary would become subject to any mortgage or lien, unless
. the lien or mortgage is of the nature described above as permitted by
Section 3.6 of the Senior Indenture; or
. prior thereto all Senior Debt Securities then outstanding are secured
(equally and ratably with any other indebtedness of or guaranteed by our
Company or any Restricted Subsidiary then similarly entitled) by a lien on
the Principal Property and specified other properties (Section 9.2 of the
Senior Indenture).
Our board of directors has not designated any property of our Company or of
any Restricted Subsidiary as a Principal Property because, in the opinion of
our management, no single property or asset is of material importance to the
total business of our Company and its Restricted Subsidiaries taken as a whole.
Provisions Applicable Solely to Subordinated Debt Securities
Subordination. The Subordinated Debt Securities will be subordinate and
junior in right of payment, to the extent described in the Subordinated
Indenture, to all Senior Indebtedness (as defined below) of our Company. If we
should default in the payment of any Senior Indebtedness when due and payable,
then, upon written notice of the default to our Company by the holders of, or
any trustee for, the Senior Indebtedness, no direct or indirect
19
payment may be made or agreed to be made on the Subordinated Debt Securities.
This includes any payment in cash, property, securities, by set-off or
otherwise. This includes payment for principal of, premium, if any, or
interest, if any, on the Subordinated Debt Securities. It also includes any
payment in respect of any redemption, retirement, purchase or other acquisition
of the Subordinated Debt Securities. It does not include any payment made in
capital stock of our Company (or cash in lieu of fractional shares) pursuant to
any conversion right of the Subordinated Debt Securities or otherwise made in
capital stock of our Company. These rights of the holders of Senior
Indebtedness are subject to rights of our Company to dispute the default and
subject to proper notification of the Trustee and apply until the default has
been cured or waived or has ceased to exist. (Sections 14.1, 14.4 and 14.5 of
the Subordinated Indenture).
Definitions. "Senior Indebtedness" is defined in the Subordinated Indenture
as Indebtedness of our Company outstanding at any time except:
. any Indebtedness as to which, by the terms of the instrument creating or
evidencing the Indebtedness, it is provided that the Indebtedness is not
senior in right of payment to the Subordinated Debt Securities;
. the Subordinated Debt Securities;
. any Indebtedness of our Company to a wholly-owned Subsidiary;
. interest accruing after the filing of a petition initiating specified
events of bankruptcy or insolvency unless the interest is an allowed claim
enforceable against our Company in a proceeding under Federal or state
bankruptcy laws; and
. trade accounts payable.
"Indebtedness" is defined in the Subordinated Indenture as, with respect to any
Person:
. the principal of and premium and interest on indebtedness for money
borrowed by that Person evidenced by bonds, notes, debentures or similar
obligations, including any guaranty by that Person of any indebtedness for
money borrowed of any other Person, whether the indebtedness or guaranty
is outstanding on the date of the Subordinated Indenture or is later
created, assumed or incurred;
. the principal of and premium and interest on indebtedness for money
borrowed, incurred, assumed or guaranteed by that Person in connection
with the acquisition by it or any of its subsidiaries of any other
businesses, properties or other assets;
. capitalized lease obligations of that Person;
. any other indebtedness of that Person, including:
. any indebtedness representing the balance deferred and unpaid of the
purchase price of any property or interest therein, including any
balance that constitutes a trade account payable; and
. any guaranty, endorsement or other contingent obligation of that Person
in respect of any indebtedness of another Person that is outstanding on
the date of the Subordinated Indenture or is later created, assumed or
incurred by that Person; and
. any amendments, modifications, refunding, renewals or extensions of any of
the foregoing indebtedness or obligations.
Bankruptcy. All Senior Indebtedness (including any interest accruing after
the commencement of any of the proceedings described below) must first be paid
in full before any payment or distribution, whether in cash, securities or
other property, is made on account of the principal of, premium, if any, or
interest, if any, on the Subordinated Debt Securities if:
. without our consent a court shall enter:
. an order for relief with respect to our Company under the United States
Federal bankruptcy laws;
20
. a judgment, order or decree adjudging our Company bankrupt or insolvent;
or
. an order for relief for reorganization, arrangement, adjustment or
composition of or in respect of our Company under the United States
Federal or state bankruptcy or insolvency laws; or
. we shall:
. institute proceedings for the entry of an order for relief with respect
to our Company under the United States Federal bankruptcy laws;
. institute proceedings for an adjudication of our insolvency;
. consent to the institution of bankruptcy or insolvency proceedings
against us;
. file a petition seeking, or seek or consent to, reorganization,
arrangement, composition or similar relief for our Company under any
applicable law;
. consent to the filing of such a petition or to the appointment of a
receiver, custodian, liquidator, assignee, trustee, sequestrator or
similar official in respect of our Company or of substantially all of
our property; or
. cause our Company to make a general assignment for the benefit of
creditors.
In that event, any payment or distribution on account of the Subordinated
Debt Securities, that would otherwise (but for the subordination provisions) be
payable or deliverable in respect of the Subordinated Debt Securities must be
paid or delivered directly to the holders of Senior Indebtedness. Any such
payment or distribution must be made in accordance with the priorities then
existing among those holders until all Senior Indebtedness (including any
interest thereon accruing after the commencement of any such proceedings) has
been paid in full. Any payment or distribution received by any holder of any
Subordinated Debt Securities in contravention of any of the terms of the
Subordinated Indenture and before all the Senior Indebtedness has been paid in
full will be received in trust for the benefit of, and must be paid over or
delivered to, the holders of the Senior Indebtedness then outstanding for
application to the payment of Senior Indebtedness.
These provisions apply to any payment of principal of, premium, if any, or
interest, if any, on the Subordinated Debt Securities. They apply to any
payment or distribution of any character, whether in cash, securities or other
property. They do not, however, apply to securities of our Company or any other
corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinate, at least to the extent provided in the
subordination provisions with respect to the Subordinated Debt Securities, to
the payment of all Senior Indebtedness then outstanding and to any securities
issued to the holders of Senior Indebtedness under any plan of reorganization
or readjustment.
After payment in full of all sums owing with respect to Senior Indebtedness,
the holders of Subordinated Debt Securities will be entitled to be repaid from
the remaining assets of the Company the amounts at that time due and owing on
account of the Subordinated Debt Securities before any payment or other
distribution may be made on account of any capital stock or obligations of our
Company ranking junior to the Subordinated Debt Securities. These provisions
apply to any payment or distribution of any character, whether in cash,
property or otherwise. The holders of any obligations of our Company ranking on
a parity with the Subordinated Debt Securities will be entitled to share pro
rata in any of these payments and distributions. (Section 14.1 of the
Subordinated Indenture).
By reason of this subordination, in the event of the insolvency of our
Company, holders of Senior Indebtedness may receive more, ratably, than holders
of the Subordinated Debt Securities. These subordination provisions will not
prevent the occurrence of an event of default or limit the right of
acceleration in respect of the Subordinated Debt Securities.
21
Provisions Applicable to Both Subordinated Debt Securities and Junior
Subordinated Debt Securities
Conversion. Offered Debt Securities that constitute Subordinated Debt
Securities or Junior Subordinated Debt Securities may provide for a right of
conversion of those Debt Securities into our common stock (or cash in lieu of
fractional interests therein). The following provisions will apply to Debt
Securities that are convertible Subordinated Debt Securities or convertible
Junior Subordinated Debt Securities unless otherwise provided in the applicable
prospectus supplement.
The holder of any convertible Subordinated Debt Securities or convertible
Junior Subordinated Debt Securities will have the right exercisable at any time
prior to maturity to convert the Subordinated Debt Securities or convertible
Junior Subordinated Debt Securities into shares of our common stock at the
conversion price or conversion rate set forth in the applicable prospectus
supplement, subject to adjustment (Sections 13.2 of the Subordinated Debt
Indenture and the Junior Subordinated Indenture). The holder of convertible
Subordinated Debt Securities or convertible Junior Subordinated Debt Securities
may convert any portion of the Debt Securities that is $1,000 in principal
amount or any integral multiple thereof (Sections 13.2 of the Subordinated Debt
Indenture and the Junior Subordinated Indenture). Subordinated Debt Securities
or Junior Subordinated Debt Securities that have been previously redeemed or
otherwise purchased by our Company are not eligible for conversion.
The occurrence of specified events will result in adjustment of the
conversion price or conversion rate as described in the Subordinated Indenture
or the Junior Subordinated Indenture. These events include:
. the issuance of shares of our common stock as a dividend or distribution
on our common stock;
. subdivisions, combinations and reclassifications of our common stock;
. the issuance to all holders of our common stock of rights or warrants
entitling the holders (for a period not exceeding 45 days) to subscribe
for or purchase shares of our common stock at a price per share less than
the then current market price per share of our common stock (as defined in
the Subordinated Indenture and the Junior Subordinated Indenture); or
. the distribution to all holders of our common stock of evidences of
indebtedness, equity securities (including equity interests in our
subsidiaries) other than our common stock or other assets (excluding cash
dividends paid from surplus) or subscription rights or warrants (other
than those referred to above).
No adjustment of the conversion price or conversion rate will be required
unless an adjustment would require a cumulative increase or decrease of at
least 1% in the price or rate (Sections 13.4 of the Subordinated Indenture and
the Junior Subordinated Indenture).
We have been advised by our counsel, Vinson & Elkins L.L.P., that specified
adjustments in the conversion price or conversion rate in accordance with the
foregoing provisions may result in constructive distributions to either holders
of the Subordinated Debt Securities or Junior Subordinated Debt Securities or
holders of our common stock that would be taxable pursuant to Treasury
Regulations issued under Section 305 of the Internal Revenue Code of 1986. The
amount of any taxable constructive distribution will be the fair market value
of the common stock that is treated as having been constructively received,
that value being determined as of the time the adjustment resulting in the
constructive distribution is made.
Fractional shares of common stock will not be issued upon conversion.
Rather, we will pay a cash adjustment based on the then current market price
for the common stock (Sections 13.3 of the Subordinated Indenture and the
Junior Subordinated Indenture). Upon conversion, no adjustments will be made
for accrued interest or dividends. Therefore, convertible Subordinated Debt
Securities or convertible Junior Subordinated Debt Securities surrendered for
conversion between the record date for an interest payment and the interest
payment date (other than those called for redemption on a redemption date
during that period) must be accompanied by payment of an amount equal to the
interest on the Debt Securities that the registered holder is to receive
(Sections 13.2 and 13.4 of the Subordinated Indenture and the Junior
Subordinated Indenture).
22
Any consolidation or merger of our Company with or into any other person
(with specific exceptions) or any sale or transfer of all or substantially all
the assets of our Company will limit the conversion rights of holders of
convertible Subordinated Debt Securities or convertible Junior Subordinated
Debt Securities. Following any of these events, the holder of convertible
Subordinated Debt Securities or convertible Junior Subordinated Debt Securities
will have the right to convert the securities only into the kind and amount of
securities, cash and other property that the holder would have been entitled to
receive upon the occurrence of the event if the holder had held the common
stock issuable upon conversion of the securities immediately prior to the
event. (Sections 13.5 of the Subordinated Indenture and the Junior Subordinated
Indenture).
Consolidation, Merger, Sale or Conveyance. The Subordinated Indenture and
the Junior Subordinated Indenture permits our Company to consolidate with, or
merge into, or transfer substantially all of its property to, another person
provided specified conditions are met. (Sections 9.1 of the Subordinated
Indenture and the Junior Subordinated Indenture).
Provisions Applicable Solely to Junior Subordinated Debt Securities
Subordination. The Junior Subordinated Debt Securities will be subordinate
and junior in right of payment, to the extent set forth in the Junior
Subordinated Indenture, to all Superior Indebtedness (as defined below). If we
default in the payment of any Superior Indebtedness when due and payable, then,
upon written notice of that default to our Company by the holders of, or any
trustee for, the Superior Indebtedness, no direct or indirect payment may be
made or agreed to be made on the Junior Subordinated Debt Securities. This
includes any payment in cash, property, securities, by set-off or otherwise.
This includes payment for principal of, premium, if any, or interest, if any,
on the Junior Subordinated Debt Securities. It also includes any payment in
respect of any redemption, retirement, purchase or other acquisition of the
Junior Subordinated Debt Securities. It does not include any payment made in
capital stock of our Company (or cash in lieu of fractional shares) pursuant to
any conversion right of the Junior Subordinated Debt Securities or otherwise
made in capital stock of our Company. These rights of the holders of Superior
Indebtedness are subject to the rights of our Company to dispute the default
and subject to proper notification of the Trustee and apply until the default
has been cured or waived or has ceased to exist. (Sections 14.1, 14.4 and 14.5
of the Junior Subordinated Indenture).
Definitions. "Superior Indebtedness" is defined in the Junior Subordinated
Indenture as Indebtedness of our Company outstanding at any time except:
. any Indebtedness as to which, by the terms of the instrument creating or
evidencing the Indebtedness, it is provided that the Indebtedness is not
senior in right of payment to the Subordinated Debt Securities;
. the Junior Subordinated Debt Securities;
. any Indebtedness of Halliburton to a wholly-owned Subsidiary; and
. interest accruing after the filing of a petition initiating specified
events of bankruptcy or insolvency unless the interest is an allowed claim
enforceable against Halliburton in a proceeding under Federal or state
bankruptcy laws.
The principal distinction between the definition of Senior Indebtedness, as
used in the Subordinated Indenture, and Superior Indebtedness, as used in the
Junior Subordinated Indenture, is that our trade accounts payable and
Subordinated Debt Securities constitute Superior Indebtedness but do not
constitute Senior Indebtedness. Consequently, the Junior Subordinated Debt
Securities are subordinated not only to Senior Indebtedness (as are the
Subordinated Debt Securities) but also to our trade accounts payable and the
Subordinated Debt Securities.
The definition of the term "Indebtedness," as used in the Junior
Subordinated Indenture, is identical to the definition of the term
"Indebtedness," as used in the Subordinated Indenture. See "--Provisions
Applicable Solely to Subordinated Debt Securities."
23
Bankruptcy. All Superior Indebtedness (including any interest thereon
accruing after the commencement of any of the proceedings described below) must
first be paid in full before any payment or distribution, whether in cash,
securities or other property, is made on account of the principal of, premium,
if any, or interest, if any, on the Junior Subordinated Debt Securities if:
. without our consent a court enters:
. an order for relief with respect to our Company under the United States
Federal bankruptcy laws;
. a judgment, order or decree adjudging our Company bankrupt or insolvent;
or
. an order for relief for reorganization, arrangement, adjustment or
composition of or in respect of our Company under the United States
Federal or state bankruptcy or insolvency laws; or
. we shall:
. institute proceedings for the entry of an order for relief with respect
to our Company under the United States Federal bankruptcy laws;
. institute proceedings for an adjudication of our insolvency;
. consent to the institution of bankruptcy or insolvency proceedings
against us;
. file a petition seeking, or seek or consent to reorganization,
arrangement, composition or similar relief for our Company under any
applicable law;
. consent to the filing of such a petition or to the appointment of a
receiver, custodian, liquidator, assignee, trustee, sequestrator or
similar official in respect of our Company or of substantially all of
our property;
. cause our Company to make a general assignment for the benefit of
creditors.
In any of these events, any payment or distribution on account of the Junior
Subordinated Debt Securities that would otherwise (but for the subordination
provisions) be payable or deliverable in respect of the Junior Subordinated
Debt Securities must be paid or delivered directly to the holders of Superior
Indebtedness. Any of these payments or distributions must be made in accordance
with the priorities then existing among those holders until all Superior
Indebtedness (including any interest accruing after the commencement of any the
proceedings) has been paid in full. Any payment or distribution received by any
holder of any Junior Subordinated Debt Securities in contravention of any of
the terms of the Junior Subordinated Indenture and before all the Superior
Indebtedness has been paid in full will be received in trust for the benefit
of, and must be paid over or delivered to, the holders of the Superior
Indebtedness then outstanding for application to the payment of Superior
Indebtedness to the extent necessary to pay all such Superior Indebtedness in
full.
These provisions apply to any payment of principal of, premium, if any, or
interest, if any, on the Junior Subordinated Debt Securities. They apply to any
payment or distribution of any character, whether in cash, securities or other
property. They do not, however, apply to securities of our Company or any other
corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinate, at least to the extent provided in the
subordination provisions with respect to the Junior Subordinated Debt
Securities, to the payment of all Superior Indebtedness then outstanding and to
any securities issued to holders of Superior Indebtedness under any plan of
reorganization or readjustment.
After payment in full of all sums owing with respect to Superior
Indebtedness, the holders of Junior Subordinated Debt Securities will be
entitled to be repaid from the remaining assets of Halliburton the amounts at
that time due and owing on account of the Junior Subordinated Debt Securities
before any payment or other distribution may be made on account of any capital
stock or obligations of Halliburton ranking junior to the Junior Subordinated
Debt Securities. These provisions apply to any payment or distribution of any
character, whether in cash, property or otherwise. The holders of any
obligations of our Company ranking on a parity with the Junior Subordinated
Debt Securities will be entitled to share pro rata in these payments and
distributions. (Section 14.1 of the Junior Subordinated Indenture).
24
By reason of this subordination, in the event of the insolvency of our
Company, holders of Superior Indebtedness may receive more, ratably, than
holders of the Junior Subordinated Debt Securities. These subordination
provisions will not prevent the occurrence of an event of default or limit the
right of acceleration in respect of the Junior Subordinated Debt Securities.
Concerning the Trustee
Pursuant to the Trust Indenture Act of 1939, if a default should occur with
respect to any Senior Debt Securities issued under the Senior Indenture, any
Subordinated Debt Securities issued under the Subordinated Indenture or any
Junior Subordinated Debt Securities issued under the Junior Subordinated
Indenture, the Trustee would be required to resign as trustee under two of the
Indentures within 90 days of the default unless the default were cured, duly
waived or otherwise eliminated.
The Indentures contain limitations on the right of the Trustee, should it
become our creditor, to obtain payment of claims in specified cases, or to
realize for its own account on property received as security for these claims
or otherwise. The Trustee will be permitted to engage in other transactions
with us; however, if it acquires any conflicting interest, it must eliminate
the conflict or resign.
JPMorgan Chase Bank, the Trustee under the Indentures, is a depositary for
funds of, makes loans to and performs other services for us in the normal
course of business.
DESCRIPTION OF TRUST SECURITIES
The Trust may issue trust preferred securities and trust common securities
under the terms of the Trust Agreement. The trust preferred securities will
represent undivided beneficial interests in the assets of the Trust. We will
own all of the trust common securities.
Selected provisions of the Trust Agreement are summarized below. This
summary is not complete. The form of Trust Agreement has been filed with the
SEC as an exhibit to the registration statement of which this prospectus
constitutes a part. You should read the Trust Agreement for provisions that may
be important to you. The Trust Agreement has been qualified as an indenture
under the Trust Indenture Act. You should also refer to the Trust Indenture Act
for provisions that apply to the trust preferred securities. Wherever we refer
to particular terms that are defined in the Trust Agreement, the definitions of
those terms are incorporated in this prospectus by reference.
General
The trust preferred securities and trust common securities issued by the
Trust will be substantially the same except that, if there is an event of
default under the Trust Agreement, as described below, the rights of the
holders of the trust preferred securities will be entitled to priority in right
of payment over the holders of trust common securities.
The Trust will invest the proceeds from any issuance of the trust preferred
securities, together with the consideration that we pay for the trust common
securities, to purchase trust debentures from us. Legal title to the trust
debentures will be held by the property trustee in trust for the benefit of
holders of the trust securities. For information as to the terms of the trust
debentures, see "Description of Trust Debentures."
In accordance with the Trust Agreement, the Trust may not, among other
things:
. borrow money;
. issue debt or any securities other than the trust securities;
25
. execute mortgages; or
. pledge any of its assets.
We will guarantee distributions on the trust preferred securities on a
limited basis to the extent described under the caption "Description of
Guarantee." We will not, however, guarantee payment of distributions or amounts
payable on redemption of the trust preferred securities or on liquidation of
the Trust when the Trust does not have funds on hand legally available for such
payments. In that event, a holder of trust preferred securities may direct the
property trustee to enforce its rights under the trust debentures. If the
property trustee fails to enforce its rights with respect to the trust
debentures, any record holder of the trust preferred securities may, to the
fullest extent permitted by law, institute legal proceedings directly against
us. The record holder can enforce the property trustee's rights under the trust
debentures without first instituting any legal proceedings against the property
trustee or any other person or entity. In addition, if a payment default has
occurred and is continuing under the trust debentures, a record holder of the
trust preferred securities may institute a legal proceeding directly against
us. The record holder can seek enforcement of payment to the holder of
principal of, premium, if any, or interest on the trust debentures having a
principal amount equal to the aggregate liquidation amount of the trust
preferred securities of the holder on or after the due date specified in the
trust debentures.
Holders of the trust preferred securities shall have no preemptive or
similar rights.
Distributions
Distributions on the trust securities will be payable on the dates and at
the rates described in a prospectus supplement. The distribution rate and the
relevant distribution date for the trust securities will correspond to the
payments and payment dates on the trust debentures. The revenue of the Trust
available for distribution to holders of the trust securities will be limited
to payments under the trust debentures in which the Trust will invest the
proceeds from the issuance and sale of the trust securities. If we fail to make
interest payments on the trust debentures, the property trustee will not have
funds available to pay distributions on the trust securities.
We may, on one or more occasions, defer the payment of interest on the trust
debentures for a period not exceeding the number of consecutive semi-annual
periods specified in the applicable prospectus supplement, unless a debenture
event of default has occurred and is continuing. No deferral period will extend
beyond the stated maturity date of the trust debentures. Distributions on the
trust preferred securities will be deferred by the Trust during any deferral
period. Distributions to which holders of the trust preferred securities are
entitled during any such deferral period will accumulate additional
distributions at the rate per annum described in the applicable prospectus
supplement. All semi-annual distributions accrued during the deferral period,
together with accumulated additional distributions as provided in the
applicable prospectus supplement, will become due and payable at the end of the
deferral period. No interest will be due and payable during any deferral
period, except at the end of the period.
Upon the termination of any deferral period and the payment of all amounts
then due on any interest payment date, we may elect to begin a new deferral
period, subject to the requirements described above. There is no limitation on
the number of times that we may elect to begin a deferral period. Accordingly,
there could be multiple deferral periods of varying lengths throughout the term
of the trust securities.
We must give the property trustee, the debenture trustee and the
administrative trustees notice of our election to defer the payment of interest
on the trust debentures at least one business day prior to the earlier of:
. the date on which the distributions on the trust preferred securities
would have been payable except for our election to begin the deferral
period; or
. the date the administrative trustees are required to give notice to any
securities exchange or to holders of trust preferred securities of the
record date or the date the distributions are payable, but in any event
not less than five business days prior to the record date.
26
We have agreed in the applicable Indenture under which the trust debentures
are to be issued to the Trust that our Company will not, during any deferred
period, pay or make dividends or distributions on its outstanding capital stock
(with specified exceptions) or make payments on its Debt Securities or
guarantees ranking pari passu or junior in right of payment to the trust
debentures held by the Trust. These provisions are described in greater detail
in "Description of Trust Debentures--Covenants of the Company." See, also,
"Description of Trust Debentures--Option to Extend Interest Payment Date."
Payment of Additional Sums
If the Trust is required to pay any taxes, duties, or other governmental
charges imposed by the United States or any other taxing authority, we will be
required to pay any additional sums that are necessary in order that the amount
of distributions then due and payable by the Trust on the outstanding trust
preferred securities and trust common securities will not be reduced.
Redemption
Whenever the trust debentures are repaid, other than following the
distribution of the trust debentures to the holders of the trust securities,
whether at maturity or earlier redemption, the property trustee will apply the
proceeds to redeem a like amount of the trust securities. The circumstances
under which the trust debentures will be redeemed will be set forth in the
applicable prospectus supplement. The prices at which the trust securities will
be redeemed will be equal to:
.- in the case of the paymentindebtedness of Halliburton, a guaranty by a Restricted
Subsidiary.
"Subsidiary" means any corporation of which Halliburton, or Halliburton and
one or more Subsidiaries, or any one or more Subsidiaries, directly or
indirectly own voting securities entitling any one or any one or more of
Halliburton and its Subsidiaries to elect a majority of the trust debentures ondirectors of such
corporation.
INFORMATION CONCERNING THE TRUSTEE
JPMorgan Chase Bank is the stated maturity
date,trustee under the maturity redemption price which will be equal to the principal
amount of, plus accruedindenture, and unpaid interest on, the trust debentures;
. if so provided in the applicable prospectus supplement, in the case of the
optional prepayment of the trust debentures upon the occurrence and
continuation of a Special Event, the Special Event Redemption Price which
will be equal to the Special Event Prepayment Price in respect of the
trust debentures set forth in the applicable prospectus supplement; and
. if so provided in the applicable prospectus supplement, in the case of
optional prepayment of the trust debentures, the optional prepayment price
which will be equal to the optional redemption price in respect of the
trust debentures set forth in the applicable prospectus supplement.
For information as to the Special Event Prepayment Purchase Price and
related terms, see "Description of Trust Debentures--Special Event Prepayment"
and, for information as to the components of the optional redemption price, see
"Description of Trust Debentures--Optional Prepayment."
Payment of the redemption price will be made upon not less than 30 nor more
than 60 days' notice of a date of redemption to the holders of the trust
securities.
If less than all the trust debentures are to be redeemed on a redemption
date, the trust securities to be redeemed will be selected from among the
holders thereof pro rata in accordance with their holdings.
"Like amount" means:
. with respect to a prepayment of the trust securities, trust securities
having a liquidation amount equal to the principal amount of trust
debentures to be redeemed in accordance with their terms; and
. with respect to a distribution of trust debentures upon the dissolution
and liquidation of the Trust, trust debentures having a principal amount
equal to the liquidation amount of the trust securities of the holder to
whom the trust debentures are being distributed.
27
Prepayment Procedures
If applicable, trust securities will be prepaid at the applicable prepayment
price with the proceeds from the contemporaneous redemption of the trust
debentures. Any prepayment of trust securities will be made and the applicable
prepayment price will be payable on the prepayment date only to the extent that
the trust has funds legally available for the payment of the applicable
prepayment price. See also "--Subordination of Trust Common Securities."
If the trust gives a notice of prepayment in respect of the trust preferred
securities, then, by 12:00 noon, New York City time, on the prepayment date, to
the extent funds are legally available, the property trustee will:
. with respect to trust preferred securities held by the DTC or its
nominees, deposit with the DTC funds sufficient to pay the applicable
prepayment price (see also "--Form, Denomination, Book--Entry Procedures
and Transfer"); or
. with respect to trust preferred securities held in certificated form,
deposit with the paying
agent, for the trust preferred securities funds
sufficient to pay the applicable prepayment priceconversion agent, registrar and will give the paying
agent irrevocable instructions and authority to pay the applicable
prepayment pricecustodian with regard to the holders of the trust preferred securities and
trust common securities upon surrender of their certificates evidencing
the trust preferred securities (see also "--Payment and Paying Agency").
Notwithstanding the foregoing, distributions payable onnotes. The
trustee or prior to the
prepayment date will be payable to the holders of trust preferred securities of
record on the relevant record dates for the related distribution dates.
If notice of prepayment has been given and funds are deposited as required,
then on the date of the deposit, all rights of the holders of the trust
preferred securities called for prepayment will cease, except the right of the
holders of the trust preferred securities to receive the applicable prepayment
price, and the trust preferred securities will cease to be outstanding.
If any prepayment date of trust preferred securities is not a business day,
then the prepayment price will be paid on the next business day. If the next
business day falls in the next calendar year, then the required payment will be
made on the immediately preceding business day. If payment of the prepayment
price is improperly withheld or refused and not paid either by the trust or by
us pursuant to the guarantee:
. distributions on trust securities will continue to accumulate at the then
applicable rate from the prepayment date originally established by the
trust to the date the prepayment price is actually paid; and
. the actual payment date will be the prepayment date for purposes of
calculating the applicable prepayment price.
We or our subsidiariesits affiliates may subject to applicable law, from time to time purchase outstanding trust preferred securities by tender, in the open market
or by private agreement.future provide banking
and other services to us in the ordinary course of their business.
BOOK-ENTRY SYSTEM
We originally issued the notes in the form of global notes. The Trust may not prepay fewer than all of the outstanding trust securities
unless all accumulated and unpaid distributionsglobal
notes have been paid on all trust
securities for all distribution periods terminating ondeposited with, or prior to the
prepayment date. The property trustee will select the particular outstanding
trust preferred securities to be prepaid not more than 60 days prior to the
prepayment date. The selection will be made from among the holders thereof pro
rata in accordance with their holdings, except that the property trustee shall
endeavor to avoid individual holdings of securities of less than a round lot
after a partial prepayment. If less than all of the issued trust preferred
securities and trust common securities are to be prepaid on a prepayment date,
then the aggregate amount of trust preferred securities and trust common
securities to be prepaid will be allocated pro rata among the trust preferred
securities and the trust common securities. The property trustee will promptly
notify the trust registrar in writing of the trust preferred securities
selected for prepayment and, in the case of any trust preferred security
selected for partial prepayment, the liquidation amount to be prepaid. Unless
the context
28
otherwise requires, all provisions of the Trust Agreement relating to a portion
of the trust preferred securities to be prepaid in a partial prepayment relate
to the specified portion of the aggregate liquidation amount of the outstanding
trust preferred securities.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the prepayment date to each holder of trust securities at its
registered address. Unless we default in payment of the applicable prepayment
price for the trust debentures, distributions will cease to accrue on the trust
securities called for prepayment on and after the prepayment date.
Exchange
If at any time we or any of our affiliates hold any trust preferred
securities, we may elect to deliver to the property trustee all or any portion
of those trust preferred securities (together with a proportionate amount of
trust common securities) in exchange for the principal amount of debentures
described below. The election will be effective on any distribution date and
may be exercised by us or our affiliate through delivery to the property
trustee of a written notice of this election. The notice must specify the
liquidation amount of trust preferred securities with respect to which the
election is being made and the distribution date on which the exchange will
occur (to be not less than ten business days after the date of receipt by the
property trustee of the election notice.) The election will be conditioned upon
the delivery by us or our affiliate to the property trustee or its designee of
the trust preferred securities (and the proportionate amount of trust common
securities) that are the subject of the election by 10:00 A.M. New York City
time on the appropriate distribution date.
In the exchange, we will deliver trust common securities having an aggregate
liquidation amount bearing the same ratio to the aggregate liquidation amount
of all the outstanding trust common securities as the aggregate liquidation
amount of the trust preferred securities that we propose to exchange bears to
the aggregate liquidation amount of all the trust preferred securities
outstanding immediately prior to the exchange.
In the exchange, the Trust will exchange debentures in an aggregate
principal amount equal to the aggregate liquidation amount of the trust
preferred securities and the trust common securities delivered by us for
exchange. After the exchange, the exchanged trust preferred securities (and
trust common securities) will be canceled and will no longer be deemed to be
outstanding and all our rights as the holder of those trust preferred
securities (and trust common securities) will cease.
Liquidation of the Trust and Distribution of Trust Debentures
The trust will automatically dissolve upon the first to occur of:
. our bankruptcy, dissolution or liquidation or revocation of our charter
without reinstatement for 90 days;
. our direction to the property trustee in writing to dissolve the Trust;
. the expiration of the term of the Trust and its distribution of a like
amount of the trust debentures to the holders of the trust securities;
. redemption of all of the trust securities; or
. the entry of an order for dissolution of the Trust by a court of competent
jurisdiction.
We have the right at any time to dissolve the Trust and, after satisfaction
of liabilities to creditors of the Trust, to cause the trust debentures to be
distributed to the holders of the trust securities in liquidation of the Trust.
This right is subject to the administrative trustees having received an opinion
of counsel to the effect that the distribution will not be a taxable event to
holders of trust preferred securities.
If a dissolution occurs as described in any of the first three bullet points
above, the Trust will be liquidated by the administrative trustees as
expeditiously as possible. After satisfaction of liabilities to the Trust's
creditors,
29
the administrative trustees will distribute to the holders of the trust
securities a like amount of the trust debentures, unless such distribution is
determined by the property trustee not to be practicable. In that case, the
holders will be entitled to receive pro rata out of the assets of the Trust
legally available for distribution to holders an amount equal to the aggregate
of the liquidation amount of the trust securities plus accumulated and unpaid
distributions to the date of payment. If this liquidation distribution can be
paid only in part because the Trust has insufficient assets on hand and legally
available to pay the full liquidation distribution, then the amount payable
directly by the Trust on the trust securities will be paid on a pro rata basis
in accordance with the liquidation amounts of the trust securities, except that
if an event of default has occurred and is continuing, the trust preferred
securities will have priority over the trust common securities. See
"--Subordination of Trust Common Securities."
If we elect not to redeem the trust debentures before maturity in accordance
with their terms and either elect not to or are unable to dissolve and
liquidate the Trust and distribute the trust debentures to holders of the trust
securities, the trust securities will remain outstanding until the payment of
the trust debentures on the stated maturity date.
After any distribution of all the trust debentures to the holders of the
trust securities:
. the trust securities will no longer be deemed to be outstanding;
. DTC or its nominee will receive, in respect of each registered global
certificate, if any, representing trust securities and held by it, a
registered global certificate or certificates representing the trust
debentures to be delivered upon the distribution; and
. any certificates representing trust securities not held by DTC or its
nominee will be deemed to represent trust debentures having a principal
amount equal to the liquidation amount of such trust securities until such
certificates are presented to the administrative trustees or their agent
for cancellation. We will then issue to the holder, and the debenture
trustee will authenticate, a certificate representing the appropriate
principal amount of such trust debentures.
Subordination of Trust Common Securities
Payment of distributions on, and the prepayment price of, the trust
securities will be made pro rata to each holder of trust securities based on
the liquidation amount of the trust securities held by each holder of trust
securities in relation to the aggregate liquidation amount of all trust
securities outstanding. If, however, on any distribution date or prepayment
date, an event of default has occurred and is continuing, no payments in
respect of distributions on, or payments upon liquidation, prepayment or
otherwise with respect to, the common securities may be made until the holders
of the trust preferred securities have been paid in full the distributions,
prepayment price, liquidation distribution and other payments to which they are
entitled at such time.
In the case of any event of default under the Trust Agreement, we, as holder
of the trust common securities, will be deemed to have waived any right to act
with respect to the event of default until the effect of the event of default
with respect to the trust preferred securities is cured, waived or otherwise
eliminated. Until the event of default is so cured, waived or otherwise
eliminated, the property trustee will act solely on behalf of, the holders of
the trust preferred securities and not on behalf of us, as holder of the trust
common securities. Only the holders of the trust preferred securities will have
the right to direct the property trustee to act on their behalf.
Conversion of Trust Securities
If and to the extent indicated in the applicable prospectus supplement, the
trust securities may be exchangeable for our common stock. The specific terms
on which the trust securities may be so converted or exchanged will be set
forth in the applicable prospectus supplement, including the method of
determining the number of shares of our common stock to be received by the
holders of the trust securities upon such exchange.
30
Events of Default; Notice
The occurrence of a debenture event of default constitutes an event of
default under the Trust Agreement. See "Description of Trust
Debentures--Debenture Events of Default."
Within 90 days after the occurrence of any event of default actually known
to the property trustee, the property trustee is required, unless the default
is earlier cured or waived, to notify the holders of the trust securities of
the default. We and the administrative trustees are required to file annually
with the property trustee a certificate as to whether or not we are in
compliance with all the conditions and covenants under the Trust Agreement.
Upon the occurrence of an event of default, the debenture trustee or the
property trustee as the holder of the trust debentures will have the right
under the applicable Indenture to declare the principal of and interest on the
trust debentures to be immediately due and payable.
If an event of default has occurred and is continuing and the default is
attributable to our failure to pay interest, principal or other required
payments on the trust debentures issued to the trust on the date such interest,
principal or other payment is otherwise due, then a record holder of trust
preferred securities may, on or after the respective due dates specified in the
trust indenture, institute a proceeding directly against us. The record holder
can seek enforcement of payment on trust debentures having a principal amount
equal to the aggregate liquidation amount of the trust preferred securities
held by the record holder. To the extent that we make any payment to the record
holder of trust preferred securities as a result of the institution of an
action of this nature, we will be subrogated to the rights of that holder of
trust preferred securities.
If an event of default has occurred and is continuing, the holders of a
majority in liquidation amount of trust preferred securities may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee under the applicable Indenture or executing any trust or power
conferred on that Trustee with respect to the trust debentures.
If an event of default has occurred and is continuing, the trust preferred
securities will have a preference over the trust common securities as described
under "--Liquidation of the Trust and Distribution of Trust Debentures" and
"--Subordination of Trust Common Securities."
Removal of Trustees
Unless an event of default has occurred and is continuing, any of the Trust
Trustees may be removed at any time by the holder of the trust common
securities. Any administrative trustee may be removed at any time by the holder
of trust common securities. If an event of default has occurred and is
continuing, the property trustee and the Delaware trustee may be removed by the
holders of a majority in liquidation amount of the outstanding trust preferred
securities. No removal of the property trustee or the Delaware trustee will be
effective until a successor meeting the requisite qualifications has been
appointed and accepted the appointment.
In no event will the holders of the trust preferred securities have the
right to vote to appoint, remove or replace the administrative trustees, those
voting rights being vested exclusively in the holder of the trust common
securities. The Trust Agreement requires that the Trust Trustees must at all
times include at least one administrative trustee.
Trust Business Combinations
Except as provided below and as otherwise described under "--Liquidation of
the Trust and Distribution of Trust Debentures," the Trust may not merge with
or into, convert into, consolidate with, amalgamate or be replaced by, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to,
31
any corporation or other person. The trust may, at our request and with the
consent of the administrative trustees but without the consent of the holders
of the trust preferred securities, the Delaware trustee or the property trustee
merge with or into, or convert into, consolidate, amalgamate, or be replaced by
or convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to a trust organized as such under the laws of any
state of the United States or the District of Columbia; provided that:
. the successor entity either:
. expressly assumes all of the obligations of the Trust with respect to
the trust securities and the Trust Agreement; or
. substitutes for the trust securities other securities having
substantially the same terms as the trust securities (the "Successor
Securities") so long as the Successor Securities rank the same as the
trust securities rank in priority with respect to distributions and
payments upon liquidation, redemption and otherwise;
. we expressly appoint a trustee of such successor entity possessing the
same powers and duties relating to its holding of the trust debentures as
the property trustee;
. the Successor Securities are listed, or will be listed upon notification
of issuance, on any national securities exchange or other organization on
which the trust securities are then listed or quoted, if any;
. if the trust preferred securities (including any Successor Securities) are
rated by any nationally recognized statistical rating organization prior
to the transaction, such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the trust
preferred securities (including any Successor Securities) or, if the trust
debentures are so rated, the trust debentures to be downgraded by any such
nationally recognized statistical rating organization;
. the merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the trust securities
(including any Successor Securities) in any material respect;
. the successor entity has a purpose substantially identical to that of the
Trust;
. prior to the merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease, we have received an opinion from
independent counsel to the Trust to the effect that:
. the merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease will not adversely affect the rights,
preferences and privileges of the holders of the trust securities
(including any Successor Securities) in any material respect (other than
by reason of dilution); and
. following the merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease:
. neither the Trust nor the successor entity will be required to
register as an investment company under the Investment Company Act of
1940; and
. the Trust or the successor entity will continue to be classified as a
grantor trust for United States federal income tax purposes; and
. we or any permitted successor or assignee own all of the trust common
securities of such successor entity and guarantee the obligations of such
successor entity under the Successor Securities at least to the extent
provided by the guarantee of the trust preferred securities.
Notwithstanding the foregoing, the Trust will not, except with the consent
of holders of 100% in liquidation amount of the trust securities,
. merge with or into, convert into, consolidate with, amalgamate with or be
replaced by or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to, any other entity, or
. permit any other entity to merge with or into, convert into, consolidate
with, amalgamate with or replace it
32
if such consolidation, conversion, amalgamation, merger, replacement,
conveyance, transfer or lease:
. would cause the trust or the successor entity not to be classified as a
grantor trust for the United States federal income tax purposes, or
. would cause the holders of the trust securities not to be treated as
owning an undivided interest in the trust debentures.
Voting Rights; Amendment of the Trust Agreement
Except as provided under "--Trust Business Combinations" and "Description of
Guarantee--Amendments and Assignment," as otherwise required by law and as
follows, the holders of the trust preferred securities will have no voting
rights.
The Trust Agreement may be amended from time to time by us and the
administrative trustees, without the consent of the holders of the trust
securities:
. to cure any ambiguity, correct or supplement any provisions in the Trust
Agreement that may be inconsistent with any other provision or to make any
other provisions with respect to matters or questions arising under the
Trust Agreement that are not inconsistent with the other provisions of the
Trust Agreement;
. to modify, eliminate or add to any provisions of the Trust Agreement to
the extent necessary to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust at all times
that any trust securities are outstanding or to ensure that the Trust will
not be required to register as an "investment company" under the
Investment Company Act;
. to provide for a successor trustee; or
. to add to our covenants or obligations as sponsor;
provided, however, that in the case of the first two bullet points, the
interests of the holders of the trust securities shall not be adversely
affected in any material respect. Any amendments of the Trust Agreement
pursuant to the foregoing will become effective once notice of the amendment is
given to the holders of the trust securities.
We and the administrative trustees may otherwise amend the Trust Agreement:
. with the consent of holders representing a majority (based upon
liquidation amount) of the outstanding trust securities; and
. upon receipt by the Trust Trustees of an opinion of experienced counsel to
the effect that the amendment:
. is permitted by, and conforms to, the terms of the Trust Agreement
(including any Annex thereto);
. all conditions precedent, if any, in the Trust Agreement have been
satisfied; and
. will not affect the status of the Trust as a grantor trust for United
States federal income tax purposes or the exemption of the Trust from
status as an "investment company" under the Investment Company Act;
provided, however, that, without the consent of each holder of trust
securities, the Trust Agreement may not be amended to:
. change the amount or timing of any distribution on the trust securities or
otherwise to affect adversely the amount of any distribution required to
be made on the trust securities as of a specified date; or
. restrict the right of a holder of trust securities to institute suit for
the enforcement of that obligation on or after that date.
33
Subject to the requirements discussed below, holders of a majority in
liquidation amount of trust preferred securities may:
. direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee under the applicable Indenture or
executing any trust or power conferred on that Trustee with respect to the
trust debentures;
. waive any past defaults under the applicable Indenture;
. exercise any right to rescind or annul a declaration of acceleration of
the maturity of the principal of the trust debentures; or
. consent, where consent is required, to any amendment, modification or
termination of the applicable Indenture or the trust debentures,
without, in each case, obtaining the prior approval of the holders of a
majority in liquidation amount of all outstanding trust preferred securities.
None of the Trust Trustees may, without the consent of the holders of a
majority in liquidation amount of trust preferred securities, take any of the
actions specified in the bullet points set forth in this paragraph.
Where a consent under the applicable Indenture would require the consent of
each holder of trust debentures affected thereby, no such consent will be given
by the property trustee without the prior consent of each holder of the trust
preferred securities. The Trust Trustees may not revoke any action previously
authorized or approved by a vote of the holders of the trust preferred
securities except pursuant to a subsequent vote of those holders.
The property trustee is obligated to notify each holder of trust preferred
securities regarding any notice of default that it receives with respect to the
trust debentures. In addition to obtaining the foregoing approvals of the
holders of the trust preferred securities, the Trust Trustees are obligated,
prior to taking any of the foregoing actions, to obtain an opinion of
experienced counsel to the effect that the Trust will not fail to be classified
as a grantor trust for United States federal income tax purposes as a result of
any of those actions.
Any required approval of holders of trust preferred securities may be given
at a meeting of holders convened for that purpose or pursuant to written
consent (without prior notice). The property trustee will cause a notice of any
meeting at which holders of trust preferred securities are entitled to vote to
be given to each holder of record of trust preferred securities in the manner
described in the Trust Agreement.
No vote or consent of the holders of trust preferred securities will be
required for the Trust to redeem and cancel the trust preferred securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the trust preferred securities are entitled
to vote or consent under any of the circumstances described above, any of the
trust preferred securities owned by us or any of our affiliates will not be
entitled to vote or consent and will, for purposes of the vote or consent, be
treated as if they were not outstanding.
Payment and Paying Agency
Payments in respect of trust preferred securities held in global form will
be made to the depositary, which shall credit the relevant accounts at the
depositary on the applicable distribution dates, or, in respect of trust
preferred securities that are not held by the depositary, the payments shall be
made by check mailed to the address of each holder entitled thereto as the
address shall appear on the register. The paying agent will initially be the
property trustee or an affiliate of the property trustee, and any co-paying
agent must be chosen by the property trustee and be acceptable to the
administrative trustees and us. The paying agent will be permitted to resign in
that capacity upon 30 days' written notice to the property trustee, the
administrative trustees and us. If the property trustee or an affiliate of the
property trustee is no longer the paying agent, the administrative trustees
will appoint a successor (which will be a bank or trust company acceptable to
the administrative trustees and us) to act as paying agent.
34
Form, Denomination, Book-Entry Procedures and Transfer
Unless otherwise specified in the applicable prospectus supplement, the
trust preferred securities will be in registered, global form, and the global
trust preferred securities will, upon issuance, be deposited with the DTC in
New York, New York, and registered in the
name of its nominee. The notes sold under this prospectus will be represented by
a new unrestricted global security. Notes in definitive certificated form will
be issued only in limited circumstances described below.
Investors may hold their interests in a global note directly through DTC if
they are DTC participants or indirectly through organizations that are DTC
participants. Investors who purchased notes in offshore transactions in reliance
on Regulation S under the DTCSecurities Act may hold their interests in a global
note through Clearstream Banking, Societe Anonyme, Luxembourg ("Clearstream"),
or its nominee,Euroclear Bank S.A./ N.V. (the "Euroclear Operator"), as operator of the
Euroclear System ("Euroclear"), either directly if they are participants in
each case for credit to an accountthese systems, or indirectly through organizations that are participants in
these systems. Clearstream and Euroclear will hold interests in a global note on
behalf of their participants through customers' securities accounts in
Clearstream's and Euroclear's names on the books of their respective U.S.
depositaries, which in turn will hold the interests in a direct or indirect participantglobal note in
customers' securities accounts in the DTCU.S. depositaries' names on the books of
DTC.
Except as described below.
Aset forth below, a global preferred securitynote may not be transferred, as ain whole except by the
DTCor in
part, only to another nominee of the DTC or to a successor of the DTC or its nominee.
Beneficial interests in the global trust preferred securities must be
transferred and exchanged through the facilities of the DTC. Beneficial
interests in the global trust preferred securities may not be exchanged for
trust preferred securities in certificated form except in the limited
circumstances described below. See "--Exchange of Book-Entry Trust Preferred
Securities for Certificated Trust Preferred Securities."
Registrar and Transfer Agent
The property trustee will act as registrar and transfer agent for the trust
preferred securities.
Registration of transfers of the trust preferred securities will be effected
without charge by or on behalf of the Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange. The Trust will not be required to register or cause to be
registered the transfer of the trust preferred securities after they have been
called for redemption.
Information Concerning the Property Trustee
The property trustee, other than during the occurrence and continuance of a
trust agreement event of default, will perform only such duties as are
specifically set forth in the Trust Agreement. During the existence of a trust
agreement event of default, the property trustee must exercise the same degree
of care and skill as a prudent person would exercise or use in the conduct of
his or her own affairs. The property trustee is under no obligation to exercise
any of the powers vested in it by the Trust Agreement at the request of any
holder of trust securities unless it is offered reasonable indemnity against
the costs, expenses and liabilities that might be incurred in connection with
the exercise of those powers.
If the property trustee is:
. required to decide between alternative courses of action;
. required to construe ambiguous provisions in the Trust Agreement; or
. unsure of the application of any provision of the Trust Agreement; and
. no trust agreement event of default has occurred and is continuing; and
. the matter is not one that holders of the trust preferred securities or
the trust common securities are entitled to vote under the Trust Agreement,
then the property trustee is obligated to take action as directed by us and, if
not so directed, to take any action it deems advisable and in the best
interests of the holders of the trust securities. Under those circumstances,
the property trustee will have no liability except for its own bad faith,
negligence or willful misconduct.
JPMorgan Chase Bank will serve as the property trustee, the debenture
trustee and the guarantee trustee. Chase Manhattan Bank USA, National
Association, will serve as the Delaware trustee. We, as well as some of our
subsidiaries, from time to time borrow money from, and maintain deposit
accounts and conduct banking transactions with, JPMorgan Chase Bank in the
ordinary course of our business. JPMorgan Chase Bank also serves as agent and
is a lender under our bank credit facility.
3561
Miscellaneous
The administrative trustees are authorized and directed to conduct the
affairs of and to operate the Trust in a way that the Trust will not be deemed
to be an "investment company" required to be registered under the Investment
Company Act or classified as an association taxable as a corporation for United
States federal income tax purposes and that the trust debentures will be
treated as our indebtedness for United States federal income tax purposes. In
this connection, we and the administrative trustees are authorized to take any
action, not inconsistent with applicable law, the certificate of trust of the
Trust or the Trust Agreement, that we and the administrative trustees determine
in our discretion is necessary or desirable for those purposes, as long as such
action does not materially adversely affect the interests of the holders of the
trust securities.
The Trust Agreement and the trust preferred securities will be governed by
and construed in accordance with the internal laws of the State of Delaware.
DEPOSITARY PROCEDURES
General
Any of the Debt Securities and trust preferred securities may be issued in
global form through the facilities of the Depositary Trust Company ("DTC").
The
DTC has advised the Trust and us that the DTC isis:
- a limited-purpose trust company organized under the New York banking law,Banking Law;
- a "banking organization" within the meaning of the New York banking law,Banking Law;
- a member of the Federal Reserve System, aSystem;
- "clearing corporation" within the meaning of the New York Uniform
Commercial CodeCode; and
- a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934.
The DTC holdswas created to hold securities depositedof institutions that have accounts with
it byDTC and to facilitate the clearance and settlement of securities transactions
among its participants and facilitates the settlement of
transactions in securities among its participants through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securitysecurities certificates. The DTC's participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations.
Indirect accessAccess to the DTC's book-entry system is also available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, whether directly or indirectly. The
rules applicable to DTC and its participants are on file with the SEC.
Clearstream has advised us that it is incorporated under the laws of
Luxembourg as a professional depositary. Clearstream holds securities for its
customers and facilitates the clearance and settlement of securities
transactions between its customers through electronic book-entry changes in
accounts of its customers, thereby eliminating the need for physical movement of
certificates. Clearstream provides to its customers, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Clearstream interfaces with domestic markets in several countries. As a
professional depositary, Clearstream is subject to regulation by the Luxembourg
Commission for the Supervision of the Financial Section. Clearstream customers
are recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and other organizations. Indirect access to Clearstream is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Clearstream customer either directly
or indirectly.
Persons whoEuroclear has advised us that it was created in 1968 to hold securities for
participants of Euroclear and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash. Euroclear
provides various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries. Euroclear is operated by
the Euroclear Operator, under contract with Euroclear Clearance Systems S.C., a
Belgian cooperative corporation (the "Cooperative"). All operations are
conducted by the Euroclear Operator, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear Operator,
not participants may beneficially own securities held by orthe Cooperative. The Cooperative establishes policy for Euroclear on behalf
of Euroclear participants. Euroclear participants include banks (including
central banks), securities brokers and dealers and other professional financial
intermediaries and may include the DTC onlyunderwriters. Indirect access to Euroclear is
also available to other firms that clear through the participants or the indirect participants of
the DTC.maintain a custodial
relationship with a Euroclear participant, either directly or indirectly.
The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of the DTC are recorded
on the records of the participants and indirect participants.
The DTCEuroclear Operator has also advised the Trust and us that it hasis licensed by the Belgian
Banking and Finance Commission to carry out banking activities on a global
basis. As a Belgian bank, it is regulated and examined by the Belgian Banking
Commission.
We have provided the following descriptions of the operations and
procedures of DTC, Clearstream and Euroclear solely as a matter of convenience.
These operations and procedures are solely within the control of those
organizations and are subject to change by them from time to time. Neither
Halliburton
62
nor the trustee takes any responsibility for these operations or procedures, and
you are urged to contact DTC, Clearstream and Euroclear or their participants
directly to discuss these matters.
We expect that pursuant to the procedures established procedures
to provide thatby DTC, ownership of
beneficial interests in thea global securitiesnote will be shown on, and the transfer of
thatthose ownership interests will be effected only through, records maintained by
the DTC (with respect to the participants) or by the participantsparticipants' interests) and indirectthe participants (with respect
to otherthe owners of beneficial interests in the global securities)note other than
participants). Investors in the global securities may hold their interests directly through
the DTC if they are participants in such system, or indirectly through
organizations that are participants in the system. All interests in a global
security will be subject to the procedures and requirementsOwnership of the DTC. The
laws of some states require that specified persons take physical delivery in
certificated form of securities that they own. Consequently, the ability to
transfer beneficial interests in a global securitynote is limited to
participants or persons that may hold interests through participants.
The laws of some jurisdictions may require that purchasers of securities
take physical delivery of those securities in definitive form. Accordingly, the
ability to transfer interests in the notes represented by a global note to those
persons willmay be limited to that extent.
Thelimited. In addition, because DTC can act only on behalf of its
participants, whichwho in turn act on behalf of indirect participants. Consequently,persons who hold interests through
participants, the ability of a person having beneficial interestsan interest in notes represented by
a global securitynote to pledge or transfer those interests to persons or entities that
do not participate in the DTCDTC's system, or otherwise to take actions in respect of
such interest, may be affected by the lack of a physical certificate evidencing those interests. For informationdefinitive security in
respect of such interest.
So long as to other restrictions onDTC or its nominee is the transferabilityregistered holder and owner of a
global securities, see
"--Exchangenote, DTC or its nominee, as the case may be, will be considered the sole
legal owner of Book-Entry Securitiesthe notes represented by the global note for Certificated Securities."
36
all purposes under
the indenture and the notes. Except as describedset forth below, owners of beneficial
interests in thea global securitiesnote will not have securities registered in their name, will notbe entitled to receive physical
delivery of securities in certificated formdefinitive notes and
will not be considered to be the
registered owners or holders of those securitiesany notes under the global
note. We understand that under existing industry practice, in the event an owner
of a beneficial interest in a global note desires to take any action that DTC,
as the holder of the global note, is entitled to take, DTC would authorize the
participants to take the action, and that participants would authorize
beneficial owners owning through the participants to take the action or would
otherwise act upon the instructions of beneficial owners owning through them. No
beneficial owner of an interest in a global note will be able to transfer the
interest except in accordance with DTC's applicable Indentureprocedures, in addition to
those provided for under the indenture and, if applicable, those of Euroclear
and Clearstream Banking.
Neither Halliburton nor the trustee will have any responsibility or
the Trust Agreementliability for any purpose.
Payments in respectaspect of eachthe records relating to or payments made on account
of notes by DTC, Clearstream or Euroclear, or for maintaining, supervising or
reviewing any records of those organizations relating to the notes.
We will make payments of the principal of, and interest on, the notes
represented by a global securitynote registered in the name of theand held by DTC or its
nominee willto DTC or its nominee, as the case may be, payable to the DTC in its capacity as the registered owner and
holder under the applicable Indenture or the Trust Agreement. Under the terms of the applicable Indentureglobal note.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest in respect of a global note, will credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the Trust Agreement, the trustee will treat the
persons in whose names the securities, includingprincipal amount of the global securities, are
registerednote as shown on the records of DTC or its
nominee. We also expect that payments by participants and indirect participants
to owners of thosebeneficial interests in a global note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for accounts of customers registered in
the purposenames of receiving thosenominees for these customers. The payments, however, will be the
responsibility of the participants and for anyindirect participants, and all other purposes. Consequently, neither we,
the trustee nor any paying agent thereof has or will have any responsibility or liability for:
.- any aspect of the DTC's records or any participant's or indirect
participant's records relating to, or payments made on account of,
beneficial ownership interests in thea global securities or fornote;
- maintaining, supervising or reviewing any of the DTC's records or any
participant's or indirect participant's records relating to the
beneficial ownership interests in the global securities; or
.interests;
- any other matter relating to the actions and practicesaspect of the relationship between DTC and its participants; or
any
of its- the relationship between the participants orand indirect participants.
The DTC has advisedparticipants and
the Trust and us that its current practice, upon receipt
of any payment in respect of securities, is to credit the accounts of the
relevant participants with the payment on the payment date. The accounts will
be credited in amounts proportionate to the participant's holdingsowners of beneficial interests in the relevant security as showna global note.
63
Distributions on the recordsnotes held beneficially through Clearstream will be
credited to cash accounts of its customers in accordance with its rules and
procedures, to the extent received by the U.S. depositary for Clearstream.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the DTC. Payments byEuroclear System, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear participants and has no record of or relationship with persons holding
through Euroclear participants.
Distributions on the indirect participantsnotes held beneficially through Euroclear will be
credited to the beneficial owners of securities represented by global securities will be
governed by standing instructions and customary practices. This will be the
responsibility of the participants or the indirect participants and will not be
the responsibility of the DTC, any trustee, the Trust or us. None of the Trust,
our Company or any trustee will be liable for any delay by the DTC or anycash accounts of its participants in identifyingaccordance with the beneficial ownersTerms
and Conditions, to the extent received by the U.S. depositary for Euroclear.
Unless and until it is exchanged in whole or in part for definitive notes,
a global note may not be transferred except as a whole by DTC to a nominee of
DTC or by a nominee of DTC to DTC or another nominee of DTC.
Participants in DTC will effect transfers with other participants in the
securities. The
Trust, our Company and any trustee may conclusively rely onordinary way in accordance with DTC rules and will be
protectedsettle transfers in relying on instructions from the DTC or its nominee for all
purposes.
Interestssame-day
funds. Participants in Euroclear and Clearstream Banking will effect transfers
with other participants in the global securities will tradeordinary way in the DTC's Same-Day Funds
Settlement System and secondary market trading activity in those interests will
therefore settle in immediately available funds, subject in all cases toaccordance with the rules and
operating procedures of Euroclear and Clearstream Banking, as applicable. If a
holder requires physical delivery of a definitive note for any reason, including
to sell notes to persons in jurisdictions which require physical delivery or to
pledge notes, the holder must transfer its interest in a global note in
accordance with the normal procedures of DTC and its participants. Transfers between
participantsthe procedures set forth in the
indenture.
Cross-market transfers between DTC, on the one hand, and directly or
indirectly through Euroclear or Clearstream Banking participants, on the other,
will be effected in DTC in accordance with DTC rules on behalf of Euroclear or
Clearstream Banking, as the DTC'scase may be, by its respective depositary; however,
these cross-market transactions will require delivery of instructions to
Euroclear or Clearstream Banking, as the case may be, by the counterparty in the
system in accordance with its rules and procedures and within its established
deadlines (Brussels time). Euroclear or Clearstream Banking, as the case may be,
will, if the transaction meets its settlement requirements, deliver instructions
to its respective depositary to take action to effect final settlement on its
behalf by delivering or receiving interests in a global note in DTC, and making
or receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Clearstream Banking
participants may not deliver instructions directly to the depositaries for
Euroclear or Clearstream Banking.
Because of time zone differences, the securities account of a Euroclear or
Clearstream Banking participant purchasing an interest in a global note from a
DTC participant will be credited during the securities settlement processing day
(which must be a business day for Euroclear or Clearstream Banking, as the case
may be) immediately following the DTC settlement date, and the credit of any
transactions interests in a global note settled during the processing day will
be reported to the relevant Euroclear or Clearstream Banking participant on that
day. Cash received in same-day funds.
TheEuroclear or Clearstream Banking as a result of sales of
interests in a global note by or through a Euroclear or Clearstream Banking
participant to a DTC has advisedparticipant will be received with value on the Trust and usDTC
settlement date, but will be available in the relevant Euroclear or Clearstream
Banking cash account only as of the business day following settlement in DTC.
We expect that itDTC will take any action permitted to be taken by a holder
of securitiesnotes (including the presentation of notes for exchange as described below)
only at the direction of one or more participants to whose accounts at the DTC account
interests in thea global securitiesnote are credited and only in respect of thatthe portion of
the
securities64
aggregate principal amount of the notes as to which the participant or
participants has or have given direction. If, however, there is
an event of default under any applicable Indenture or the Trust Agreement, theAlthough we expect that DTC, reserves the rightEuroclear
and Clearstream Banking will agree to exchange the global securities for securities in
certificated form and to distribute the certificated securities to its
participants.
The information in this section concerning the DTC and its book-entry system
has been obtained from sources that we and the Trust believe to be reliable,
but neither we nor the Trust take responsibility for the accuracy thereof.
Although the DTC has established the foregoing procedures in order to
facilitate transfers of interestinterests in the global securitiesnotes among participants in theof DTC,
theEuroclear, and Clearstream Banking, DTC, isEuroclear and Clearstream Banking are
under no obligation to perform or to continue to perform thosethese procedures, and
thosethese procedures may be discontinued at any time. None ofNeither we nor the Trust, our Company or any trustee will
have any responsibility for the performance by the DTC, Euroclear or itsClearstream
Banking or their participants or indirect participants of their obligations
under the rules and procedures governing their operations.
37
Exchange of Book-Entry Securities for Certificated Securities
ACERTIFICATED NOTES
The notes represented by the global security issecurities are exchangeable for
securitiescertificated notes in certificateddefinitive form of like tenor as such notes if:
.- the DTCdepositary notifies the Trust or us that it is unwilling or unable to continue to act as
depositary for the global securitysecurities or has ceasedif at any time the depositary
ceases to be a clearing agency registered under the Exchange Act and, we or the Trust
fail to appointin
either case, a successor depositary is not appointed by us within 90 days;days
after the date of such notice; or
.- we determine not to have the notes represented by a global note.
Any notes that are exchangeable pursuant to the preceding sentence are
exchangeable for certificated notes issuable in authorized denominations and
registered in such names as the case of trust preferreddepositary shall direct. Subject to the
foregoing, the global securities the administrative trustees, on
behalfare not exchangeable, except for global
securities of the Trust, at their sole discretion elect to cause the issuance
of certificated trust preferred securities.
In all cases, certificated securities delivered in exchange for beneficial
interests in any global security will be registered in the names, and issued in
any approved denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures).
38
DESCRIPTION OF TRUST DEBENTURES
The trust debentures will be issued under either a supplement to the
Subordinated Indenture as subordinated trust debentures or a supplement to the
Junior Subordinated Indenture as junior subordinated trust debentures. Both the
Subordinated Indenture and the Junior Subordinated Indenture are described
above under "Description of Debt Securities." The following is a summary of the
terms of the supplement to the Subordinated Indenture or the Junior
Subordinated Indenture that will establish the terms of the trust debentures.
This summary does not purportsame aggregate principal amount to be complete and is subject to and is qualified
in its entirety by reference to the supplement to each of those Indentures and
to those terms made a part of the Indentures by the Trust Indenture Act.
General
The Trust will invest the proceeds obtained from any issuance of trust
preferred securities, together with the consideration paid by us for the trust
common securities, in trust debentures issued by us. The trust debentures will
bear interest from the same date and at the same rate as the trust preferred
securities. It is anticipated that, until the liquidation, if any, of the
Trust, each trust debenture will be heldregistered in the name
of the property trusteedepositary or its nominee. In addition, such certificates will bear the
legend referred to under "Notice to Investors" (unless we determine otherwise in
trustaccordance with applicable law) subject, with respect to such notes, to the
provisions of such legend.
REGISTRATION RIGHTS
We entered into a registration rights agreement with the initial
purchasers. In the registration rights agreement we agreed, for the benefit of
the holders of the trust securities.
The trust debenturesnotes and our common stock issuable upon conversion of the
notes (together, the "registrable securities") that we will, be issued in denominations of $1,000 and integral
multiples of $1,000. The trust debentures will mature onat our expense:
- file with the date provided.
Subordinated Trust Debentures
The subordinated trust debentures will be issuedSEC (which occurs pursuant to the Subordinated Indenture and will rank equally with all other Debt Securities
under that Indenture. See "Descriptionfiling of Debt Securities--Provisions
Applicable Solely to Subordinated Debt Securities." The subordinated trust
debentures will be unsecured and will be subordinate and junior in right of
payment to all Senior Indebtedness to the extent and in the manner described in
the Subordinated Indenture. See "Description of Debt Securities--Provisions
Applicable Solely to Subordinated Debt Securities--Subordination."
Junior Subordinated Trust Debentures
The junior subordinated trust debentures will be issued pursuant to the
Junior Subordinated Indenture and will rank equally with all other Debt
Securities under that Indenture. See "Description of Debt
Securities--Provisions Applicable Solely to Junior Subordinated Debt
Securities." The junior subordinated trust debentures will be unsecured and
will be subordinate and junior in right of payment to all Superior Indebtedness
to the extent and in the manner described in the Junior Subordinated Indenture.
See "Description of Debt Securities--Provisions Applicable Solely to Junior
Subordinated Debt Securities--Subordination."
Subordination
In the event of the acceleration of the maturity of the trust debentures:
. in the case of the subordinated trust debentures, the holders of all
Senior Indebtedness, or
. in the case of the junior subordinated trust debentures, the holders of
all Superior Indebtedness
outstanding at the time of such acceleration will first be entitled to receive
payment in full of the Senior Indebtedness or Superior Indebtedness, as the
case may be, before holders of trust debentures will be entitled to receive or
retain any payment in respect of the trust debentures.
As indicated under "Description of Debt Securities--Provisions Applicable
Solely to Junior Subordinated Debt," the principal distinctions between the
definitions of Senior Indebtedness and Superior Indebtedness are that our
Company's trade accounts payable and Subordinated Debt Securities constitute
Superior Indebtedness but dothis shelf
registration statement), not constitute Senior Indebtedness. Consequently,
the junior subordinated debentures are subordinated not
39
only to Senior Indebtedness (as are the Subordinated Debt Securities) but also
to our Company's trade accounts payable and the Subordinated Debt Securities.
Conversion
Unless otherwise provided in the applicable prospectus supplement:
. the subordinated trust debentures will not be convertible into our common
stock or any other security, and
. the junior subordinated trust debentures will be convertible into our
common stock.
Option to Extend Interest Payment Date
So long as no debenture event of default has occurred and is continuing, we
will have the right at any time and from time to time during the term of the
trust debentures to defer the payment of interest for a period not exceeding
the number of consecutive semi-annual periods set forth in the applicable
prospectus supplement and in:
. the supplement to the Subordinated Indenture with respect to any
outstanding subordinated trust debentures; or
. the supplement to the Junior Subordinated Indenture with respect to any
outstanding junior subordinated debentures.
No deferral period may, however, end on a date otherlater than an interest payment
date or extend beyond the stated maturity date of the trust debentures. At the
end of such deferral period, we must pay all interest then accrued and unpaid
including, to the extent permitted by applicable law, interest on the deferred
interest at the rate borne by the trust debentures, compounded semi-annually
for each semi-annual period of the deferral period.
During any deferral period, we have agreed in the applicable Indenture under
which the trust debentures are to be issued to the Trust, that our Company will
not pay or make dividends or distributions on its outstanding capital stock
(with specified exceptions) or make payments on its Debt Securities or
guarantees ranking pari passu or junior in right of payment to the trust
debentures held by the Trust. These provisions are described in greater detail
in "--Covenants of Halliburton."
Prior to the termination of any deferral period, we may extend the deferral
period so long as the extension does not cause the deferral period, as so
extended, to exceed the number of consecutive semi-annual periods set forth in
the applicable prospectus supplement, end on a date other than an interest
payment date or extend beyond the stated maturity date. Upon the termination of
any deferral period and the payment of all amounts then due on any interest
payment date, we may elect to begin a new deferral period, subject to the above
requirements. No interest will be due and payable during a deferral period,
except at the end of the period. We must give the Trust Trustees and the
Trustee under the applicable Indenture notice of our election to defer payment
of interest on the trust debentures at least five business days prior to the
earlier of:
. the date the distributions on the trust securities would have been payable
except for the election to begin or extend the deferral period; or
. the date the administrative trustees are required to give notice to any
securities exchange or to holders of capital securities of the record date
or the date the distributions are payable, but in any event not less than
five business days before the record date.
The property trustee is obligated to give notice of our election to begin or
extend a new deferral period to the holders of the trust preferred securities.
There is no limitation on the number of times that we may elect to begin a
deferral period. Accordingly, there could be multiple deferral periods of
varying lengths throughout the term of the trust debentures.
40
Optional Prepayment
The trust debentures may be prepayable, in whole at any time or in part from
time to time, at our option at a prepayment price to the extent and as
described in the applicable prospectus supplement.
Special Event Prepayment
General. To the extent so provided in the applicable prospectus supplement,
we will have the right, under the supplement to the Subordinated Indenture with
respect to any outstanding subordinated trust debentures or under the
supplement to the Junior Subordinated Indenture with respect to any outstanding
junior subordinated debentures, to redeem, at our option, the trust debentures
in whole (but not in part) at any time within 90120 days after the
occurrence of a
Special Event. Any redemption must be at a redemption price equal to 100% of
the principal amount of the trust debentures to be redeemed plus accrued and
unpaid interest to the date of redemption.
Definitions. To the extent so provided in the applicable prospectus
supplement, a "Special Event" means a Tax Event or an Investment Company Event.
"Investment Company Event" means the receipt by the Trust and us of an
opinion from experienced counsel to the effect that there is more than an
insubstantial risk that the Trust is or will be considered an "investment
company" that is required to be registered under the Investment Company Act.
The cause of the risk must be the occurrence of a change in law or regulation
or a written change (including any announced prospective change) in
interpretation or application of law or regulation by any authoritative
governmental agency or authority. In addition, the amendment or change must
have become effective or the pronouncement or decision must have been announced
on or after theearliest date of original issuance of the trust preferred securities.
A "Tax Event" means the receipt by us and the Trust of an opinion of
experienced counsel to the effect that there is more than an insubstantial risk
that:
. the Trust is, or within 90 days after the dateany of the opinion will be,
subject to United States federal income tax with respect to income
received or accruednotes, a registration
statement (a "shelf registration statement") on the trust debentures;
. interest payablesuch form as we deem
appropriate covering resales by us on the trust debentures is not, or within 90 days
after the dateholders of the opinion will not be, deductible by us, in whole or
in part, for United States federal income tax purposes; or
. the Trust is, or within 90 days after the date of such opinion will be,
subject to more than a de minimis amount of other taxes, duties or other
governmental charges.
The risk must be the result of an amendment to, or change (including any
announced prospective change) in, the laws or regulations of the United States
or any of its political subdivisions or taxing authority or the result of an
amendment or change in an official administrative pronouncement or judicial
decision interpreting or applying those laws or regulations. In addition, the
amendment or change must have become effective or the pronouncement or decision
must have been announced on or after the issue date of the trust preferred
securities.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of trust debentures to be
redeemed at its registered address. Unless we default in payment of the
redemption price, on and after the redemption date interest will cease to
accrue on the trust debentures called for redemption.
Additional Sums
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, we will pay as additional
amounts on the trust debentures any additional amounts that may be necessary in
order that the amount of distributions then due and payable by the Trust on the
outstanding trust securities will not be reduced as a result of any such
additional taxes, duties and other governmental charges.
41
Covenants of Halliburton
We covenant in the applicable supplement to the Subordinated Indenture or
the Junior Subordinated Indenture with respect to the trust debentures that if:
. there shall have occurred any event of which we have actual knowledge that
(a) with the giving of notice or the lapse of time, or both, would
constitute an event of default under the trust debentures and (b) in
respect of which we do not take reasonable steps to cure;
. an event of default under the trust debentures has occurred and is
continuing;
. the trust debentures are held by the property trustee and we are in
default with respect to our payment of any obligations under the
guarantee; or
. we have given notice of our election to defer interest as provided in the
indenture or a deferral period or any extension thereof has commenced and
is continuing;
then we will not:
. declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of our capital
stock, other than:
. dividends or distributions in shares of, or options, warrants or rights
to subscribe for or purchase shares of, our common stock;
. any declaration of a dividend in connection with the implementation of a
shareholders' rights plan, or the issuance of stock under any
shareholders' rights plan in the future, or the redemption or repurchase
of those rights pursuant thereto;
. as a result of a reclassification of our capital stock or the exchange
or conversion of one class or series of our capital stock for another
class or series of our capital stock;
. the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of our capital stock
or the security being converted or exchanged; and
. purchases of our common stock related to the issuance of our common
stock or rights under any of our benefit plans for our directors,
officers or employees or any of our dividend reinvestment plans;
. make any payment of principal, interest or premium, if any, on or repay or
repurchase or redeem any of our Debt Securities (including other
debentures) that rank pari passu with or junior in right of payment to, in
the case of the subordinated trust debentures, the subordinated trust
debentures or, in the case of the junior subordinated trust debentures,
the junior subordinated trust debentures; or
. make any guarantee payments (other than payments under the guarantee) with
respect to any guarantee by us of the debt securities of any of our
subsidiaries (including under other guarantees) if such guarantee ranks
pari passu or junior in right of payment to, in the case of the
subordinated trust debentures, the subordinated trust debentures or, in
the case of the junior subordinated trust debentures, the junior
subordinated trust debentures.
We also covenant in the applicable supplement to the Subordinated Indenture
or the Junior Subordinated Indenture that, so long as the trust securities
remain outstanding, we will:
. maintain 100% direct or indirect ownership of the trust commonall registrable securities;
provided, however, that any successor to us is permitted under the
supplement to the Subordinated Indenture and under the supplement to the
Junior Subordinated Indenture to succeed to our ownership of such trust
common securities;
.- use our reasonable best efforts to cause the Trust:
.shelf registration statement
to remain a business trust, exceptbe declared effective as promptly as is practicable, but in connection with (a)no event
later than 210 days after the distributionearliest date of trust debentures to the holdersoriginal issuance of trust securities in
liquidationany
of the Trust, (b)notes; and
- use our reasonable best efforts to keep the redemptionshelf registration statement
effective until the earliest of:
- two years after the last date of alloriginal issuance of any of the trust
securities and (c) permitted mergers, consolidations or amalgamations,
each as permitted by the Trust Agreement;
42
. otherwise to continue to be treated as a grantor trust for United States
federal income tax purposes; and
. to use its reasonable efforts to cause each holder of trust securities
to be treated as owning an undivided beneficial interest in the trust
debentures.
Finally, we covenant in the supplement to the Subordinated Indenture with
respect to any subordinated trust debentures and in the supplement to the
Junior Subordinated Indenture with respect to any junior subordinated
debentures, that so long as the Trust is the holder of all trust debentures,
we, as borrower, will pay to the Trust:
. all fees and expenses related to the Trust and the offering of the trust
securities; and
. all ongoing costs, expenses and liabilities of the Trust (including any
taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States or any
domestic taxing authority upon the Trust but excluding obligations under
the trust securities).
Enforcement of Rights by Holders of Trust Preferred Securities
In the applicable supplement to the Subordinated Indenture or the Junior
Subordinated Indenture, we have acknowledged that, if an event of default under
the trust debentures has occurred and is continuing and is attributable to our
failure to pay the principal of (or premium, if any), or interest on the trust
debentures onnotes;
- the date the payment is required, a record holder of trust
preferred securities may institute a direct action against us to enforce the
payment obligation. We may not amend the applicable Indenture to remove this
right to bring a direct action without the prior written consent of the holders
of all of the trust preferred securities. Notwithstanding any payments made to
a holder of trust preferred securities by us in connection with a direct
action, we will remain obligated to pay the principal of (or premium, if any)
or interest on the trust debentures, and we will be subrogated to the rights of
the holder of those trust preferred securities with respect to payments on the
trust preferred securities to the extent of any payments made by us to that
holder in any direct action.
If an event of default shall have occurred and is continuing under the
applicable Indenture and the Trust Agreement, thewhen non-affiliate holders of the trust
preferredregistrable securities will not beare
able to exercise directly any remedies, other
than those described in the precedingsell all such securities pursuant to paragraph available to the holders(k) of the trust debentures. See "Description of Trust Preferred Securities--Events of
Default; Notice."
43
DESCRIPTION OF GUARANTEE
Described below is a summary of information concerning the guarantee, which
will be executed and delivered by us for the benefit of the holders from time
to time of trust preferred securities. The guarantee has been qualifiedRule 144
under the Trust Indenture Act of 1939. JPMorgan Chase Bank, guarantee trustee, will
holdSecurities Act;
- the guarantee for the benefitdate when all of the holders of the trust preferred
securities. The following summary is not necessarilyregistrable securities that
complete and reference is
hereby made todeliver in a timely manner the copyselling securityholder
Notice and Questionnaire described below are registered under the shelf
registration statement and all registrable securities have been disposed
of in accordance with the form ofshelf registration statement; and
- the guarantee (including the definitions
therein of certain terms), which isdate when there are no outstanding registrable securities.
65
We have filed as an exhibit to the registration statement of which this prospectus formsis a part
and to the Trust Indenture Act
of 1939.
General
We will irrevocably and unconditionally agree to pay in full on a
subordinated basis (as described below) the following guarantee payments to the
holders of the trust preferred securities, as and when due, regardless of any
defense, right of setoff or counterclaim that the Trust may have or assert
other than the defense of payment. The following guarantee payments with
respect to the trust preferred securities, to the extent not paid by or on
behalf of the Trust, will be provided under the guarantee:
. any accumulated and unpaid distributions required to be paid on the trust
preferred securities to the extent that the Trust has funds on hand
legally available for distributions at that time;
. the applicable redemption price with respect to the trust preferred
securities called for redemption to the extent that the Trust has funds on
hand legally available for distributions at that time; and
. upon a voluntary or involuntary dissolution, winding-up or liquidation of
the Trust (other than in connection with the distribution of the trust
debentures to holders of the trust preferred securities), the lesser of:
. the liquidation distribution to the extent that the Trust has funds on
hand legally available for distributions at that time; and
. the amount of assets of the Trust remaining available for distribution
to holders of trust preferred securities after satisfaction of
liabilities to creditors of the Trust as required by applicable law.
The guarantee will constitute a guarantee of payment and not of collection.
The guarantee will be held for the benefit of the holders of the trust
preferred securities. The guarantee will not be discharged except by payment of
the guarantee payments in full to the extent not paid by the Trust or upon
distribution to the holders of the trust preferred securities of the trust
debentures.
Our obligation to make a guarantee payment may be satisfied by direct
payment of the required amounts by us to the holders of the trust preferred
securities or by causing the Trust to pay those amounts to those holders.
The guarantee will be a guarantee of the guarantee payments with respect to
the trust preferred securities from the time of issuance of the trust preferred
securities. It will not, however, apply to distributions and other payments on
the trust preferred securities when the Trust does not have sufficient funds
legally and immediately available to make distributions or other payments.
Therefore, if we do not make interest payments on the trust debentures held by
the property trustee, the Trust will not make distributions on the trust
preferred securities and we will not be obligated to make the guarantee
payments.
Status of the Guarantee
If the Trust holds subordinated trust debentures issued pursuant to the
Subordinated Indenture, the guarantee will rank subordinate and junior in right
of payment to all Senior Indebtedness (as that term is defined in the
Subordinated Indenture) to the extent provided in that Indenture. If the Trust
holds junior subordinated trust debentures issued pursuant to the Junior
Subordinated Indenture, the guarantee will rank subordinate and junior
44
in right of payment to all Superior Indebtedness (as such term is defined in
the Junior Subordinated Indenture) to the extent provided therein.
If the Trust holds subordinated trust debentures issued pursuant to the
Subordinated Indenture, the guarantee will rank equally with all other
guarantees issued by us after the issue date with respect to trust preferred
securities, if any, issued by other trusts, if any, also holding subordinated
trust debentures. If the Trust holds junior subordinated trust debentures
issued pursuant to the Junior Subordinated Indenture, the guarantee will rank
equally with all other guarantees issued by us after the issue date with
respect to trust preferred securities, if any, issued by other trusts, if any,
also holding junior subordinated trust debentures.
We are a holding company and, therefore, our right to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of that
subsidiary, except to the extent we are recognized as a creditor of that
subsidiary. Accordingly,satisfy our obligations under the guarantee effectivelyregistration rights agreement.
We will be subordinatedprovide to all existingeach holder of registrable securities that has delivered
to us a completed Notice and future liabilitiesQuestionnaire as described below copies of our subsidiariesthe
prospectus that is part of the shelf registration statement, notify each such
holder when the shelf registration statement has become effective and all liabilitiestake
certain other actions required to permit public resales of the registrable
securities of such holders. We may suspend the holder's use of the shelf
registration statement for a period not to exceed 45 days in any 90-day period,
and not to exceed an aggregate of 120 days in any 360-day period under certain
circumstances related to acquisition or divestiture of assets, pending corporate
developments or other similar events (a "suspension period"). Each holder, by
its acceptance of the notes, agrees to hold any communication by us in response
to a notice of a proposed sale in confidence.
If (1) the shelf registration statement has not been filed prior to or on
the 120th day following the earliest date of original issuance of any of our future subsidiaries. Claimants should look onlythe
notes; or (2) the shelf registration statement has not been declared effective
prior to us for payments underor on the guarantee. See "Description210th day following the earliest date of Debt
Securities--Provisions Applicable to Senior, Subordinated and Junior
Subordinated Debt Securities." The guarantee does not limit us ororiginal issuance of
any of our
subsidiaries from incurringthe notes (the "effectiveness target date"); or issuing other secured or unsecured debt,
including Senior Indebtedness(3) at any time after the
effectiveness date of the shelf registration statement and Superior Indebtedness, whether under the
Senior Indenture, the Subordinated Indenture, the Junior Subordinated Indenture
or any other indenture that we may enter into in the future or otherwise.
Events of Default
An event of default under the guarantee will occur upon our failure to
perform any of our payment or other obligations under the guarantee. This is
subjectprior to the condition that, with respect to a default other than a default
in payment of any guarantee payment, we have received noticesecond
anniversary of the default and
we have not cureddate on which any notes are issued, the default within 60 days after receipt of that notice. The
holders of not less than a majority in liquidation amount of the trust
preferred securities will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the guarantee trustee
in respect of the guarantee or to direct the exercise of any trust or power
conferred upon the guarantee trustee under the guarantee.
Any holder of the trust preferred securities may institute a legal
proceeding directly against us to enforce its rights under the guarantee
without first instituting a legal proceeding against the trust, the guarantee
trustee or any other person or entity.
We, as guarantor, will be required to file annually with the guarantee
trustee a certificate as to whether or not we are in compliance with all the
conditions and covenants applicable to us under the guarantee.
Amendments and Assignment
Except with respect to any changes that do not materially adversely affect
the rights of holders of the trust preferred securities (in which case no vote
will be required), the guarantee may be amended only with the prior approval of
the holders of a majority of the liquidation amount of the outstanding trust
preferred securities. The manner of obtaining any necessary approval will be as
described under "Description of Trust Securities--Voting Rights; Amendment of
the Trust Agreement." All guarantees and agreements contained in the guarantee
will bind our successors, assigns, receivers, trustees and representatives and
will inure to the benefit of the holders of the trust preferred securities then
outstanding.
Termination of the Guarantee
The guarantee will terminate and be of no further force and effect upon:
. full payment of the applicable redemption price of the trust preferred
securities; or
45
. upon liquidation of the Trust, the full payment of the liquidation
distribution or the distribution of the trust debentures to the holders of
the trust preferred securities.
The guarantee will continueregistration
statement ceases to be effective or usable other than as a result of a
suspension period and (1) we do not restore the effectiveness of the shelf
registration statement within 10 business days by a post-effective amendment or
report filed pursuant to the Exchange Act or (2) if applicable, we do not
terminate the suspension period by the 45th day in any 90-day period, or if the
suspension periods exceed 120 days in the aggregate in any 360-day period (each,
a "registration default"), additional interest as additional amounts will accrue
on the notes, from and including the day following the registration default to
but excluding the day on which the registration default has been cured.
Additional amounts will be reinstated, as the
case may be, if at any time any holder of the trust preferred securities must
restore payment of any sums paid under the trust preferred securities or the
guarantee.
Information Concerning the Guarantee Trustee
Other than during the occurrence and continuance of a default by us in performance of the guarantee, the guarantee trustee will undertake to perform
only those duties that are specifically describedcash semiannually in the guarantee and, in case
a default with respect to the guarantee has occurred, must exercise the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the guarantee
trustee will be under no obligation to exercise any of the powers vested in it
by the guarantee at the request of any holder of the trust preferred securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby.
Governing Law
The guarantee will be governed by and construed in accordancearrears, with the laws
of the State of New York.
46
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE TRUST DEBENTURES AND THE
GUARANTEE
Full and Unconditional Guarantee
Payments of distributions and other amountsfirst
semiannual payment due on the trust preferred
securities (tofirst interest payment date, as applicable,
following the extentdate on which such additional amounts begin to accrue, and will
accrue at a rate per year equal to (A) 0.25% of the TrustApplicable Amount (as
defined below) to and including the 90th day following such registration
default; and (B) an additional 0.25% of the Applicable Amount from and after the
91st day following such registration default. In no event will additional
amounts at a rate per year exceed 0.50%. If a holder has funds on hand legally available for the
payment of distributions) are irrevocably guaranteed by us to the extent
described under "Description of Guarantee." Taken together, our obligations
under the trust debentures, the applicable Indenture, the Trust Agreement and
the guarantee provide, in the aggregate, a full, irrevocable and unconditional
guarantee by us of payments of distributions and other amounts due on the trust
preferred securities. No single document standing aloneconverted some or operating in
conjunction with fewer than all
of its notes into common stock, the other documents constitutes this
guarantee. It is only the combined operation of these documents that has this
effect. If and to the extent that we do not make the required payments on the
trust debentures, the Trust will not have sufficient funds to make the related
payments, including distributions, on the trust preferred securities. The
guarantee will not cover the obligation to make this payment on the trust
preferred securities if the Trust does not have sufficient funds on hand
legally available for distributions. In that event, the remedy of a holder of
trust preferred securities is to institute a direct action against us to
enforce our obligation to make the required payments on the trust debentures.
Our obligations under the guarantee are subordinate and junior in right of
payment to all Senior Indebtedness (if the Trust holds subordinated trust
debentures) or all Superior Indebtedness (if the Trust holds junior
subordinated debentures).
Sufficiency of Payments
As long as payments of interest and other payments are made when due on the
trust debentures, these payments will be sufficient to cover distributions and
other payments due on the trust securities, primarily because:
. the aggregate principal amount or redemption price of the trust debentures
is equal to the sum of the liquidation amount or prepayment price, as
applicable, of the trust securities;
. the interest rate and interest and other payment dates on the trust
debentures will match the distribution rate and distribution and other
payment dates for the trust securities;
. we will pay for all and any costs, expenses and liabilities of the Trust
except the Trust's obligations to holders of trust securities under the
trust securities; and
. the Trust Agreement will provide that the Trust is not authorized to
engage in any activity that is not consistent with the limited purposes of
the Trust.
Enforcement Rights of Holders of Trust Preferred Securities
A holder of any trust preferred security may institute a legal proceeding
directly against us to enforce its rights under the guarantee without first
instituting a legal proceeding against the guarantee trustee, the Trust or any
other person or entity.
47
Limited Purpose of the Trust
The trust preferred securities represent preferred undivided beneficial
interests in the assets of the Trust, and the Trust exists for the sole purpose
of:
. issuing and selling the trust securities;
. using the proceeds from the sale of the trust securities to acquire the
trust debentures; and
. engaging in only those other activities necessary, advisable or incidental
to those other purposes.
A principal difference between the rights of a holder of a preferred
security and a holder of a trust debenture is that a holder of a trust
debenture will be entitled to receive
from usequivalent amounts based on the principal amount of the notes converted.
"Applicable Amount" means, (a) with respect to the notes, the principal amount
of the notes and premium, if(b) with respect to shares of common stock issued upon
conversion of the notes, the principal amount of notes that would then be
convertible into such shares.
A holder who elects to sell any registrable securities pursuant to the
shelf registration statement:
- will be required to be named as a selling securityholder;
- will be required to deliver a prospectus to purchasers;
- will be subject to the civil liability provisions under the Securities
Act in connection with any sales; and
interest on trust debentures held, while- will be bound by the provisions of the registration rights agreement,
which are applicable, including indemnification and contribution
provisions.
To be named as a selling securityholder in the shelf registration statement
when it first becomes effective, holders must complete and deliver a
questionnaire, the form of which can be obtained from Halliburton upon request,
before the effectiveness of the shelf registration statement. If we receive from
a holder of trust
preferredregistrable securities is entitleda completed questionnaire, together with such
other information as may be reasonably requested by us, after the effectiveness
of the shelf registration statement, we will we will include the registrable
securities covered thereby in the shelf registration statement, subject to
receive distributions fromrestrictions on the Trust (or,timing provided in certain circumstances, from usthe registration rights agreement. Any
holder that does not complete and deliver a questionnaire or provide such other
information will not be named as a selling securityholder in this prospectus and
therefore will not be permitted to sell any registrable securities under the
guarantee) if and to the extent the
Trust has funds on hand legally available for the payment of such distributions.
Rights Upon Dissolution
Unless the trust debentures are distributed to holders of the trust
securities, upon any voluntary or involuntary dissolution and liquidation of
the Trust, after satisfaction of liabilities to creditors of the Trust as
required by applicable law, the holders of the trust securities will be
entitled to receive, out of assets held by the Trust, the liquidation
distribution in cash. See "Description of Trust Securities--Liquidation of the
Trust and Distribution of Trust Debentures." Upon any voluntary or involuntary
liquidation or bankruptcy of our Company, the property trustee, as holder of
the trust debentures, would be a creditor of our Company:
. subordinated in right of payment to all Senior Indebtedness if the Trust
holds subordinated trust debentures issued pursuant to the Subordinated
Indenture, or
. subordinated in right of payment to all Superior Indebtedness if the Trust
holds junior subordinated trust debentures issued pursuant to the Junior
Subordinated Indenture,
but entitled to receive payment in full of principal, and premium, if any, and
interest, before any of our shareholders receive payments or distributions.
Since we will be the guarantor under the guarantee and will agree to pay for
all costs, expenses and liabilities of the Trust (other than the Trust's
obligations to the holders of its trust securities), the positions of a holder
of trust preferred securities and a holder of trust debentures relative to
other creditors and to our shareholders in the event of our liquidation or
bankruptcy are expected to be substantially the same.
48shelf registration statement.
66
DESCRIPTION OF CAPITAL STOCK
General
The following description of our common stock, preferred stock, certificate
of incorporation, by-laws and stockholder rights plan is a general descriptionsummary only and is
subject to the complete text of some of the provisions of our
restated certificate of incorporation and by-laws. The description is qualifiedby-laws and
the rights agreement we have entered into with Mellon Investor Services LLC, as
Rights Agent, which we have previously filed with the SEC. You should read our
certificate of incorporation, by-laws and rights agreement as currently in
effect for more details regarding the provisions we describe below and for other
provisions that may be important to you. You may request copies of these
documents by reference to those documents, which are included as exhibits towriting or telephoning us at our address and telephone number shown
under the registration statement.
Common Stock
We arecaption "Where You Can Find More Information."
Our authorized to issuecapital stock currently consists of 600,000,000 shares of
common stock, par value $2.50 per share.share, and 5,000,000 shares of preferred
stock, without par value. As of November 13, 2001,October 22, 2003, there were 429,649,135438,067,117 shares
of common stock issued and outstanding and approximately 24,935 holders24,400 shareholders of
record of our common stock. No shares of preferred stock are outstanding.
COMMON STOCK
The holders of our common stock are entitled to one vote for
eachper share on all
matters submitted to a vote of stockholders. The holders of
common stock do not have cumulative voting rights inbe voted on by stockholders generally, including the election of
directors. Subject to theThere are no cumulative voting rights, ofmeaning that the holders of our preferred stock,a
majority of the holdersshares voting for the election of directors can elect all of the
directors standing for election.
Our common stock arecarries no preemptive or other subscription rights to
purchase shares of our stock and is not convertible, redeemable or assessable or
entitled to the benefits of any sinking fund. Holders of our common stock will
be entitled to receive ratably thesuch dividends if any, as may from time to time be declared by
our board of directors out of funds legally available funds. Infor the eventpayment of
liquidation, dissolution or winding updividends. If we issue preferred stock in the future, payment of dividends to
holders of our Company, the holders of
outstanding preferredcommon stock if any, are,may be subject to the extent assets are available,
to be paid amounts owed to them. Holders of common stock are then entitled to
share ratably in all our remaining assets.
The holders of common stock have no preemptive, subscription, redemptive or
conversion rights. The outstanding shares are fully paid and nonassessable. The
rights preferences and privileges of holders of common stock are subject to
those of holders of our
preferred stock with respect to payment of preferential dividends, if any.
If we are liquidated, dissolved or wound up, the holders of our common
stock will share pro rata in our assets after satisfaction of all of our
liabilities and the prior rights of any outstanding class of our preferred
stock.
RightsPREFERRED STOCK
Our board of directors has the authority, without stockholder approval, to
Purchase Preferred Stock
We are a partyissue shares of preferred stock in one or more series and to fix the number of
shares and terms of each series. The board may determine the designation and
other terms of each series, including, among others:
- dividend rights;
- voting powers;
- preemptive rights;
- conversion rights;
- redemption rights, including pursuant to a Restatedsinking fund;
- our purchase obligations, including pursuant to a sinking fund; and
- liquidation preferences.
The issuance of preferred stock, while providing desired flexibility in
connection with possible acquisitions and other corporate purposes, could
adversely affect the voting power of holders of our common stock. It also could
affect the likelihood that holders of our common stock will receive dividend
payments and payments upon liquidation.
67
For purposes of the rights plan described below, our board of directors has
designated 3,000,000 shares of preferred stock to constitute the Series A Junior
Participating Preferred Stock. For a description of the rights plan, please read
"-- Stockholder Rights Plan."
AUTHORIZED BUT UNISSUED STOCK
We have 600,000,000 authorized shares of common stock and 5,000,000
authorized shares of preferred stock of which 438,067,117 shares of common stock
were outstanding as of October 22, 2003. One of the consequences of our
authorized but unissued common stock and undesignated preferred stock may be to
enable our board of directors to make more difficult or to discourage an attempt
to obtain control of us. If, in the exercise of its fiduciary obligations, our
board of directors determined that a takeover proposal was not in our best
interest, the board could authorize the issuance of those shares without
stockholder approval. The shares could be issued in one or more transactions
that might prevent or make the completion of the change of control transaction
more difficult or costly by:
- diluting the voting or other rights of the proposed acquiror or insurgent
stockholder group;
- creating a substantial voting block in institutional or other hands that
might undertake to support the position of the incumbent board; or
- effecting an acquisition that might complicate or preclude the takeover.
In this regard, our certificate of incorporation grants our board of
directors broad power to establish the rights and preferences of the authorized
and unissued preferred stock. Our board could establish one or more series of
preferred stock that entitle holders to:
- vote separately as a class on any proposed merger or consolidation;
- cast a proportionately larger vote together with our common stock on any
transaction or for all purposes;
- elect directors having terms of office or voting rights greater than
those of other directors;
- convert preferred stock into a greater number of shares of our common
stock or other securities;
- demand redemption at a specified price under prescribed circumstances
related to a change of control of our company; or
- exercise other rights designed to impede a takeover.
STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS OF STOCKHOLDERS
Our certificate of incorporation does not prohibit action by written
consent of stockholders in lieu of a meeting. Special meetings of stockholders
may be called only by the board of directors, the chairman of the board, the
chief executive officer, the president (if a director) or by stockholders owning
a majority of our issued and outstanding stock with voting privileges.
AMENDMENT OF THE BY-LAWS
Under Delaware law, the power to adopt, amend or repeal by-laws is
conferred upon the stockholders entitled to vote. A corporation may, however, in
its certificate of incorporation also confer upon the board of directors the
power to adopt, amend or repeal its by-laws. Our certificate of incorporation
and by-laws grant our board of directors the power to alter and repeal our
by-laws at any regular or special meeting of the board on the affirmative vote
of a majority of the directors then in office. Our stockholders may also alter
or repeal our by-laws by the affirmative vote of a majority of the stockholders
entitled to vote.
REMOVAL OF DIRECTORS
Directors may be removed with or without cause by a vote of a majority of
the voting power of our outstanding voting stock. A vacancy on our board of
directors may be filled by a vote of a majority of the
68
directors in office even if less than a quorum, and a director elected to fill a
vacancy serves until the next annual meeting of stockholders.
ADVANCE NOTICE PROCEDURE FOR DIRECTOR NOMINATIONS AND STOCKHOLDER PROPOSALS
Our by-laws provide the manner in which stockholders may give notice of
business to be brought before an annual meeting. In order for an item to be
properly brought before the meeting by a stockholder, the stockholder must be a
holder of record at the time of the giving of notice and must be entitled to
vote at the annual meeting. The item to be brought before the meeting must be a
proper subject for stockholder action, and the stockholder must have given
timely advance written notice of the item. For notice to be timely, it must be
delivered to, or mailed and received at, our principal executive office not less
than 90 days prior to the first anniversary date of the immediately preceding
annual meeting date.
The notice must set forth, as to each item to be brought before the annual
meeting, a description of the proposal and the reasons for conducting such
business at the annual meeting, the name and address, as they appear on our
books, of the stockholder proposing the item, the number of shares of each class
or series of capital stock beneficially owned by the stockholder as of the date
of the notice, a representation that the stockholder or a qualified
representative of the stockholder intends to appear in person at the meeting to
bring the proposed business before the annual meeting, and any material interest
of the stockholder in the proposal.
These procedures may limit the ability of stockholders to bring business
before a stockholders meeting, including the nomination of directors and the
consideration of any transaction that could result in a change in control and
that may result in a premium to our stockholders.
STOCKHOLDER RIGHTS PLAN
GENERAL
On December 11, 1996, our board of directors issued a dividend of one
preferred share purchase right (a "Right") for each outstanding share of our
common stock held of record on that date and approved the further issuance of
Rights with respect to all shares of our common stock that are subsequently
issued. The Rights were issued subject to a Rights Agreement dated as of
December 1, 1996.
Under the Restated1996 between us and ChaseMellon Shareholder Services, L.L.C., as
Rights Agreement, one preferred share right has been
distributed as a dividend for each share of common stock outstanding or issued
before the distribution date or termination of the restated rights agreement.Agent. Each rightRight now entitles the registered holder to purchase from us
one two-hundredth of a share of seriesSeries A junior participating preferred stock,Junior Participating Preferred Stock,
without par value ("Series A Preferred Stock"), of our Company at a price of $75.00 per one
two-hundredth of a share,in cash (the
"Purchase Price"), subject to further adjustment. Until the occurrence of thecertain events
described below, the rightsRights are not exercisable, will be evidenced by the
certificates for our common stock and will not be transferable apart from theour
common stock.
Detachment of Rights; Exercise.DETACHMENT OF RIGHTS; EXERCISE
The rightsRights are currently attached to all certificates representing
outstanding shares of Halliburtonour common stock and no separate rightRight certificates have
been distributed. The rightsRights will separate from the Halliburtonour common stock and a
distribution date ("Distribution Date") will occur upon the earlier of:
. tenof (1) 10
business days following athe public announcement that a person or group of
affiliated or associated persons (an "acquiring person""Acquiring Person") has acquired beneficial
ownership of 15% or more of our outstanding voting shares, asVoting Shares (as defined in the Restatedour
Rights Agreement; and
. the tenthAgreement) or (2) 10 business daydays following the commencement or
announcement of an intention to commence a tender offer or exchange offer, the
consummation of which would result in the beneficial ownership by a person or
group of 15% or more of oursuch outstanding voting shares.Voting Shares.
The rightsRights are not exercisable until the distribution date.Distribution Date. As soon as
practicable following the distribution date,Distribution Date, separate certificates evidencing
the rightsRights will be mailed to holders of record of our common stock as of the
close of business on the distribution dateDistribution Date and thesuch separate right certificates alone
will thenthereafter evidence the rights.
49Rights.
69
If a person or group were to acquire 15% or more of our voting shares,Voting Shares, each
rightRight then outstanding other(other than rightsRights beneficially owned by the acquiring
personAcquiring
Person which would become null and void,void) would become a right to buy:
.buy that number
of shares of our common stock; or
.stock (or, under somecertain circumstances, the equivalent
number of one two-hundredthstwo-hundredth of a share of Series A Preferred Stock,Stock) that at the time of
thesuch acquisition would have a market value of two times the purchase pricePurchase Price of
the right.
If:
. our Company isRight.
If we were acquired in a merger or other business combination transaction;transaction
or
. more than 50% of theour consolidated assets or earning power of our Company
were sold, proper
provision is required towould be made so that each holder of a right will
thenRight would thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
of the Right, that number of shares of common stock of the acquiring company
thatwhich at the time of thesuch transaction would have a market value of two times the
purchase pricePurchase Price of the right. The shares would be acquired upon
the exercise of the right at the then current purchase price of the right.
Antidilution and Other Adjustments.Right.
ANTIDILUTION AND OTHER ADJUSTMENTS
The number of shares or(or fractions thereof) of a
share of Series A Preferred Stock or other
securities or property issuable upon exercise of the right,Rights, and the purchase pricePurchase
Price payable, are subject to customary adjustments from time to time to prevent
dilution. The number of outstanding rightsRights and the number of shares or(or
fractions thereof) of a share of Series A Preferred Stock issuable upon exercise of each rightRight are
also subject to adjustment if beforein the distribution date there is:
. a stock splitevent of the common stock;
. a stock dividend on theour common stock
payable in our common stock;stock or . subdivisions, consolidationsany subdivision or combinationscombination of our common
stock occurring, in any such case, prior to the common stock.
Exchange Option.Distribution Date.
EXCHANGE OPTION
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of our outstanding
voting sharesVoting Shares and before the acquisition by a person or group of 50% or more of
our outstanding voting shares, weVoting Shares, our board of directors may, redeem the rights. A
redemption of rights under those circumstances would require us toat its option, issue
our common stock in mandatory redemption of, and in exchange for, all or part of
the then outstanding rights, otherand exercisable Rights (other than rightsRights owned by such
person or group thatwhich would become null and void. The
stock issuance will bevoid) at an exchange ratio of one
share of our common stock or(or one two-hundredth of a share of Series A Preferred Stock,Stock)
for each two shares of our common stock for which each rightRight is then
exercisable. The redemption
exchange rate isexercisable, subject to adjustment upon the occurrence of any of the events
causing an adjustment in the number of outstanding rights.
Redemption of Rights.appropriate adjustment.
REDEMPTION OF RIGHTS
At any time beforeprior to the first public announcement that a person or group
has become the beneficial owner of 15% or more of our outstanding voting shares, weVoting Shares,
our board of directors may redeem all but not less than all the then outstanding
rights at a redemption price of $.01 per right. OurRight (the "Redemption Price"). The redemption of
the Rights may be made effective at such time, on such basis and with such
conditions as our board of directors in its sole discretion may establishestablish.
Immediately upon the time, basis and conditionsaction of the redemption for the rights. Afterboard of directors ordering redemption of the
rights,Rights, the right to exercise the Rights will terminate and the only right of
the holders of rightsRights will be to receive the redemption price.
Expiration; Amendment of Rights.Redemption Price.
EXPIRATION; AMENDMENT OF RIGHTS
The rightsRights will expire on December 15, 2005, unless earlier extended,
redeemed or exchanged. The terms of the rightsRights may be amended by our board of
directors without the consent of the holders of the rights,Rights, including an
amendment to extend the expiration date of the rights. IfRights, and, provided a
distribution dateDistribution Date has not occurred, an amendment mayto extend the period during which the rightsRights
may be redeemed. Afterredeemed, except that after the first public announcement that a person
or group has become or intends to become the beneficial owner of 15% or more of
the outstanding voting shares, however,Voting Shares, no such amendment may materially and adversely
affect the interests of the holders of the rights.
50
Rights.
The rightsRights have certain anti-takeover effects. The rightsRights will cause
substantial dilution to a person or group that attempts to acquire our Companyus without
the approval of our board of directors. The rightsRights should not, however,
interfere with any merger or other business combination that is approved by our
board of directors.
This description of the rights is qualified by reference70
LIMITATION OF LIABILITY OF OFFICERS AND DIRECTORS
Our directors will not be personally liable to the restated
rights agreement, a copy of which is filed as an exhibit to the registration
statement.
Preferred Stock
General. We are authorized to issue 5,000,000 shares of preferred stock,
without par value, of which 3,000,000 shares have been designated as Series A
Preferred Stock. No shares of preferred stock were outstanding at September 30,
2001. Our board of directors has authority, without stockholder approval, to
issue shares of preferred stock in oneus or more series and to determine the
number of shares, designations, dividend rights, conversion rights, voting
power, redemption rights, liquidation preferences and other terms of the
series. The issuance of preferred stock, while providing desired flexibility in
connection with possible acquisitions and other corporate purposes, could
adversely affect the voting power of holders of common stock. The issuance of
preferred stock could also reduce the likelihood that holders of common stock
will receive dividend payments and payments upon liquidation. Issuance of
preferred stock could also have the effect of delaying, deferring or preventing
a change in control of our Company.
Series A Preferred Stock. The terms of the Series A Preferred Stock are
designed so that the value of each one-hundredth of a share purchasable upon
exercise of a right will approximate the value of one share of common stock.
The Series A Preferred Stock is nonredeemable and will rank junior to all other
series of preferred stock. Each whole share of Series A Preferred Stock is
entitled to receive a cumulative quarterly preferential dividend in an amount
per share equal to the greater of:
. $1.00 in cash; or
. in the aggregate, 100 times the dividend declared on the Halliburton
common stock.
In the event of liquidation, the holders of the Series A Preferred Stock are
entitled to receive a preferential liquidation payment equal to the greater of:
. $100.00 per share; or
. in the aggregate, 100 times the payment made on the common stock,
plus, in either case, the accrued and unpaid dividends and distributions.
In the event of any merger, consolidation or other transaction in which the
common stock is exchangedstockholders for
or changed into other stock or securities, cash
or property, each whole share of Series A Preferred Stock is entitled to
receive 100 times the amount received per share of common stock. Each whole
share of Series A Preferred Stock is entitled to 100 votes on all matters
submitted to a vote of our stockholders. Holders of Series A Preferred Stock
will generally vote together as one class with the holders of common stock and
any other capital stock on all matters submitted to a vote of our stockholders.
Specific Provisions of Our Charter and By-laws
Our certificate of incorporation contains provisions authorizing the
indemnification of persons who become parties to any threatened, pending or
completed action, suit or proceeding because the person is or was a director,
officer, employee or agent of our Company. This includes any individual who is
or was serving at our request as a director, officer, employee or agent of
another corporation or enterprise. These individuals are indemnified against
expenses andmonetary damages incurred in that litigation. Our certificate of
incorporation also contains provisions
51
that, in accordance with Delaware law, limit the liability of our directors for
breach of fiduciary duty. Under these provisions, our directors may be liable for breach of fiduciary duty only:
. under Section 174as a director, except, if required
by Delaware law, for liability:
- for any breach of the General Corporate Law of the State of Delaware,
relating to the payment of unlawful dividends and unlawful purchases of
stock of the corporation; or
. if, in addition to any and all other requirements for liability, any
director:
. shall have breached the duty of loyalty to us or our Company;
. in actingstockholders;
- for acts or failing to act, shallomissions not have acted in good faith or shall
have acted in a manner involving intentional
misconduct or a knowing violation of law;
- for unlawful payment of a dividend or . shall haveunlawful stock purchases or
redemptions; and
- for any transaction from which the director derived an improper personal
benefit.
The provisionsAs a result, neither we nor our stockholders have the right, through
stockholders' derivative suits on our behalf, to recover monetary damages
against a director for breach of our certificatefiduciary duty as a director, including
breaches resulting from grossly negligent behavior, except in the situations
described above.
DELAWARE ANTI-TAKEOVER LAW
We are a Delaware corporation and are subject to Section 203 of incorporation maythe
Delaware General Corporation Law, which regulates corporate acquisitions.
Section 203 prevents an "interested stockholder," which is defined generally as
a person owning 15% or more of a corporation's voting stock, or any affiliate or
associate of that person, from engaging in a broad range of "business
combinations" with the corporation for three years after becoming an interested
stockholder unless:
- the board of directors of the corporation had previously approved either
the business combination or the transaction that resulted in the
stockholder's becoming an interested stockholder;
- upon completion of the transaction that resulted in the stockholder's
becoming an interested stockholder, that person owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers and shares owned in employee stock plans in which participants
do not have the right to determine confidentially whether shares held
subject to the plan will be amendedtendered; or
repealed- following the transaction in which that person became an interested
stockholder, the business combination is approved by the voteboard of
directors of the corporation and holders of a majorityat least two-thirds of the
outstanding capitalvoting stock of Halliburton entitlednot owned by the interested stockholder.
Under Section 203, the restrictions described above also do not apply to
vote.
Except in the case of nominationsspecific business combinations proposed by or at the direction of our board of
directors, written notice must be given of any nomination of a director:
. with respect to an election to be held at an annual meeting of
stockholders, not later than ninety days before the first anniversary of
the immediately preceding annual meeting; and
. with respect to an election to be held at a special meeting of
stockholders, not later than the close of business on the tenth dayinterested stockholder following
the dayannouncement or notification of notice ofdesignated extraordinary transactions
involving the meeting.
Except incorporation and a person who had not been an interested
stockholder during the case of a national emergency, all actions taken by our board
of directors require the affirmative vote of a majority of the directors
present at a meeting at which a quorum is present. Our by-laws provide that the
number of directors on our board of directors may be increasedprevious three years or decreasedwho became an interested
stockholder with the approval of a majority of the then authorized number of directors.
Also, newly created directorships resulting from any increase in the authorized
number ofcorporation's directors, and any vacant directorships may be filledif
such extraordinary transaction is approved or not opposed by the
affirmative vote of a majority of the
directors then in office.
Our by-laws may be adopted, amendedwho were directors prior to any person becoming an interested
stockholder during the previous three years or rescindedwere recommended for election or
elected to succeed such directors by the vote of a majority of our board of directors orsuch directors.
Section 203 may make it more difficult for a person who would be an
interested stockholder to effect various business combinations with a
corporation for a three-year period.
71
SELLING SECURITYHOLDERS
We originally issued the notes in a private placement. The notes were
resold by the majorityinitial purchasers to qualified institutional buyers within the
meaning of Rule 144A under the Securities Act in transactions exempt from
registration under the Securities Act. The notes that may be offered under the
prospectus will be offered by the selling securityholders, which includes their
transferees, pledgees or donees or their successors. The following table sets
forth certain information concerning the principal amount at maturity of notes
beneficially owned by each selling securityholder that may be offered from time
to time pursuant to the prospectus, as supplemented.
The table below has been prepared based solely upon the information
furnished to us by the selling securityholders named therein. Information
concerning the selling securityholders may change from time to time and, if
necessary, we will supplement the prospectus accordingly.
The selling securityholders listed below may offer and sell, transfer or
otherwise dispose, from time to time, some or all of their notes. No offer or
sale, transfer or other disposition under this prospectus may be made by a
holder of the outstanding shares of
capital stock entitled to vote.
Transfer Agent and Registrar
The transfer agent and registrar fornotes unless that holder is listed in the common stock is Mellon Investor
Services, LLC.
DESCRIPTION OF DEPOSITARY SHARES
At our option we may offer fractional shares of preferred stock, rather than
full shares of preferred stock. If we decide to offer fractional shares of
preferred stock, we will issue to the public receipts for depositary shares.
Each depositary share will represent a fraction of a share of a particular
series of preferred stock, and the applicable prospectus supplement will
indicate the size oftable below or until
that fraction. The shares of any series of preferred stock
represented by depositary shares will be deposited with a depositary pursuant
to a deposit agreement betweenholder has notified us and a depositary. The latter willsupplement to this prospectus has been filed
or an amendment to the related registration statement has become effective.
However, a selling securityholder may offer and sell, transfer or otherwise
dispose of some or all of its notes in transactions exempt from the registration
requirements of the Securities Act without notifying us. As a result, the same
restricted notes may be a bank
or trust company that we select and that has its principal officeincluded in the United
Statestable below as being held by more than
one holder, and a combined capital and surplus of at least $50 million. Subject to
the termstotal amount of the deposit agreement, each ownernotes listed in the column titled
"Principal Amount at Maturity of a depositary share willNotes Beneficially Owned That May be entitled,Sold" may
represent an amount of notes in proportion to the applicable fraction of a share of preferred
stock represented by such depositary share, to all the rights and preferencesexcess of the preferred stock (including dividend, voting, redemption and liquidation
rights).
52
The depositary shares will be evidenced by depositary receipts issued
pursuant to$1,200,000,000 we issued. However,
the deposit agreement. Depositary receipts will be distributed to
those persons purchasing the fractional sharestotal principal amount at maturity of preferred stock in accordance
with the terms of the offering. Copies of the forms of deposit agreement and
depositary receipt are filed as exhibits to the registration statement of which
this prospectus is a part, and the following summary is qualified in its
entirety by reference to those exhibits.
If required by law or applicable securities exchange rules, engraved
depositary receipts will be prepared. Pending the preparation of definitive
engraved depositary receipts, the depositary may, upon our written order, issue
temporary depositary receipts substantially identical to (and entitling the
holders thereof to all the rights pertaining to) the definitive depositary
receipts but not in definitive form. Definitive depositary receipts will be
prepared without unreasonable delay, and temporary depositary receipts will be
exchangeable for definitive depositary receipts at our expense.
Dividends
The depositary will distribute all cash dividends or other cash
distributions received in respect of the preferred stock to the record holders
of depositary shares relating to the preferred stock in proportion to the
number of such depositary shares owned by those holders.
In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary shares,
unless the depositary determinesnotes that it is not feasible to make the
distribution, in which case the depositary may, with our approval, sell the
property and distribute the net proceeds from the sale to the holders.
Redemption of Depositary Shares
If a series of preferred stock represented by depositary shares is subject
to redemption, the depositary shares will be redeemed from the proceeds
received by the depositary resulting from the redemption, in whole or in part,
of the series of preferred stock held by the depositary. The redemption price
per depositary share will be equal to the applicable fraction of the redemption
price per full share payable with respect to the series of the preferred stock.
If we redeem shares of preferred stock held by the depositary, the depositary
will redeem as of the same redemption date the number of depositary shares
representing the shares of preferred stock so redeemed. If fewer than all the
depositary shares are to be redeemed, the depositary shares to be redeemed will
be selected by lot or pro rata as may be determined bysold hereunder will
not exceed the depositary.
Voting of Underlying Shares
Upon receipt of notice of any meeting at which the holders of the preferred
stock are entitled to vote, the depositary will mail the information contained
in the notice of meeting to the record holders of the depositary shares
relating to the preferred stock. Each record holder of depositary shares on the
record date (which will be the same date$1,200,000,000 we issued. Further, we cannot give an estimate as the record date for the preferred
stock) will be entitled to instruct the depositary as to the exercise of the
voting rights pertaining
to the amount of the preferred stock representednotes that will be held by the selling securityholders upon
the termination of this offering because the selling securityholders may offer
some or all of their notes pursuant to the offering contemplated by the
prospectus or otherwise in transactions exempt from the registration
requirements of the Securities Act. See "Plan of Distribution."
PRINCIPAL AMOUNT AT
MATURITY OF NOTES PERCENTAGE OF NUMBER OF SHARES OF PERCENTAGE OF
BENEFICIALLY OWNED NOTES COMMON STOCK THAT COMMON STOCK
NAME THAT MAY BE SOLD OUTSTANDING MAY BE SOLD(1) OUTSTANDING(2)
- ---- ------------------- ------------- ------------------- --------------
1976 Distribution Trust FBO A.R.
Lauder/Zinterhofer............. $ 9,000 * 239.02 *
2000 Revocable Trust FBO A.R.
Lauder/Zinterhofer............. $ 9,000 * 239.02 *
Advisory Convertible Arbitrage
Fund (I) L.P. ................. $ 1,000,000 * 26,558.30 *
Aftra Health Fund................ $ 200,000 * 5,311.66 *
Akela Capital Master Fund,
Ltd. .......................... $ 10,000,000 * 265,583.00 *
Alcon Laboratories............... $ 465,000 * 12,349.61 *
Allentown City Firefighters
Pension Plan................... $ 14,000 * 371.82 *
Allentown City Officers &
Employees Pension Fund......... $ 20,000 * 531.17 *
Allentown City Police Pension
Plan........................... $ 280,000 * 7,436.32 *
Allstate Insurance Company(3).... $ 2,000,000 * 53,116.60 *
Allstate Life Insurance
Company(4)..................... $ 7,500,000 * 199,187.25 *
AM Investment D Fund (QP) LP..... $ 165,000 * 4,382.12 *
AM Investment E Fund Ltd ........ $ 945,000 * 25,097.59 *
Amaranth L.L.C.(5)............... $ 11,000,000 * 292,141.30 *
72
PRINCIPAL AMOUNT AT
MATURITY OF NOTES PERCENTAGE OF NUMBER OF SHARES OF PERCENTAGE OF
BENEFICIALLY OWNED NOTES COMMON STOCK THAT COMMON STOCK
NAME THAT MAY BE SOLD OUTSTANDING MAY BE SOLD(1) OUTSTANDING(2)
- ---- ------------------- ------------- ------------------- --------------
American AAdvantage Funds........ $ 210,000 * 5,577.24 *
American Investors Life Insurance
Co. ........................... $ 300,000 * 7,967.49 *
Amerisures Mutual Insurance
Company........................ $ 435,000 * 11,552.86 *
AmerUs Life Insurance Co. ....... $ 1,000,000 * 26,558.30 *
Arapahoe County Colorado......... $ 58,000 * 1,540.38 *
Arbitex Master Fund, L.P. ....... $ 32,000,000 2.67% 849,865.60 *
Argent Classic Convertible
Arbitrage (Bermuda) Fund
Ltd. .......................... $ 5,200,000 * 138,103.16 *
Argent Classic Convertible
Arbitrage Fund, LP............. $ 3,500,000 * 92,954.05 *
Argent LowLev Convertible
Arbitrage Fund LLC............. $ 3,300,000 * 87,642.39 *
Argent LowLev Convertible
Arbitrage Fund Ltd. ........... $ 11,100,000 * 29,4797.13 *
Arlington County Employees
Retirement System.............. $ 803,000 * 21,326.31 *
Asante Health Systems............ $ 121,000 * 3,213.55 *
Aventis Pension Master Trust..... $ 140,000 * 3,718.16 *
Banc of America Securities LLC... $ 1,000,000 * 26,558.30 *
Bankers Life Insurance Company of
New York....................... $ 100,000 * 26,55.83 *
BBT Fund, L.P. .................. $ 2,800,000 * 74,363.24 *
Bear, Stearns & Co. Inc. ........ $ 7,250,000 * 192,547.68 *
Black Diamond Convertible
Offshore LDC................... $ 3,265,000 * 86,712.85 *
Black Diamond Offshore Ltd. ..... $ 1,823,000 * 48,415.78 *
Boilermaker -- Blacksmith Pension
Trust.......................... $ 750,000 * 19,918.73 *
British Virgin Islands Social
Security Board................. $ 105,000 * 2,788.62 *
BTES -- Convertible ARB.......... $ 1,500,000 * 39,837.45 *
BTOP Growth Vs Value............. $ 6,000,000 * 159,349.80 *
CALAMOS Convertible Portfolio --
CALAMOS Advisors Trust......... $ 90,000 * 2,390.25 *
CALAMOS Convertible Fund --
CALAMOS Investment Trust....... $ 6,300,000 * 167,317.29 *
CEMEX Pension Plan............... $ 70,000 * 1,859.08 *
CGNU Life Fund................... $ 1,600,000 * 42,493.28 *
Cheyne Fund LP................... $ 13,963,000 1.16% 370,833.54 *
Cheyne Leveraged Fund LP......... $ 9,110,000 * 241,946.11 *
CIP Limited Duration Company..... $ 1,550,000 * 41,165.37 *
Citigroup Global Markets......... $ 265,000 * 7,037.95 *
73
PRINCIPAL AMOUNT AT
MATURITY OF NOTES PERCENTAGE OF NUMBER OF SHARES OF PERCENTAGE OF
BENEFICIALLY OWNED NOTES COMMON STOCK THAT COMMON STOCK
NAME THAT MAY BE SOLD OUTSTANDING MAY BE SOLD(1) OUTSTANDING(2)
- ---- ------------------- ------------- ------------------- --------------
City and County of San Francisco
Retirement System.............. $ 1,776,000 * 47,167.54 *
City of Knoxville Pension
System......................... $ 160,000 * 4,249.33 *
City of New Orleans.............. $ 245,000 * 6,506.78 *
City University of New York...... $ 181,000 * 4,807.05 *
Clinton Multistrategy Master
Fund, Ltd. .................... $ 15,195,000 1.27% 403,553.37 *
Clinton Riverside Convertible
Portfolio Limited.............. $ 19,045,000 1.59% 505,802.82 *
Commercial Union Life Fund....... $ 2,000,000 * 53,116.60 *
Concentrated Alpha Partners,
L.P. .......................... $ 700,000 * 18,590.81 *
Convertible Securities Fund...... $ 75,000 * 1,991.87 *
CQS Convertible & Quantitative
Strategies Master Fund
Limited........................ $ 9,000,000 * 239,024.70 *
Davidson Kempner Institutional
Partners....................... $ 3,825,000 * 101,585.50 *
Davidson Kempner International
Limited........................ $ 4,171,000 * 110,774.67 *
Davidson Kempner Partners........ $ 2,004,000 * 53,222.83 *
Delaware Public Employees
Retirement System.............. $ 1,862,000 * 49,451.55 *
Delta Airlines Master Trust...... $ 750,000 * 19,918.73 *
Delta Pilots Disability and
Survivorship Trust............. $ 225,000 * 5,975.62 *
Deutsche Bank Securities Inc. ... $ 2,650,000 * 70,379.50 *
Dodeca Fund, L.P. ............... $ 1,050,000 * 27,886.22 *
Dorinco Reinsurance Company...... $ 420,000 * 11,154.49 *
Double Black Diamond Offshore
LDC............................ $ 9,562,000 * 253,950.46 *
Gaia Offshore Master Fund
Ltd. .......................... $ 7,700,000 * 204,498.91 *
Georgia Municipal................ $ 837,000 * 22,229.30 *
GLG Global Convertible Fund...... $ 8,000,000 * 212,466.40 *
GLG Global Convertible UCITS
Fund........................... $ 3,000,000 * 79,674.90 *
GLG Market Neutral Fund.......... $ 10,000,000 * 265,583.00 *
Grady Hospital Foundation........ $ 159,000 * 4,222.77 *
Guggenheim Portfolio Co. XV,
LLC............................ $ 550,000 * 14,607.07 *
HBK Master Fund L.P. ............ $ 25,500,000 2.13% 677,236.65 *
IL Annuity and Insurance Co. .... $ 12,000,000 1.00% 318,699.60 *
Independence Blue Cross.......... $ 502,000 * 13,332.27 *
Inflective Convertible
Opportunity Fund I, L.P. ...... $ 50,000 * 1,327.92 *
Innovest Finanzdienstle.......... $ 1,000,000 * 26,558.30 *
JMG Capital Partners, LP......... $ 10,000,000 * 265,583.00 *
JMG Triton Offshore Fund,
Ltd. .......................... $ 8,000,000 * 212,466.40 *
74
PRINCIPAL AMOUNT AT
MATURITY OF NOTES PERCENTAGE OF NUMBER OF SHARES OF PERCENTAGE OF
BENEFICIALLY OWNED NOTES COMMON STOCK THAT COMMON STOCK
NAME THAT MAY BE SOLD OUTSTANDING MAY BE SOLD(1) OUTSTANDING(2)
- ---- ------------------- ------------- ------------------- --------------
Knoxville Utilities Board
Retirement System.............. $ 75,000 * 1,991.87 *
Lyxor Master Fund................ $ 2,600,000 * 69,051.58 *
Lyxor/AM Investment Fund Ltd. ... $ 255,000 * 6,772.37 *
Lyxor/Gaia II Fund Ltd. ......... $ 2,400,000 * 63,739.92 *
Macomb County Employees'
Retirement System.............. $ 160,000 * 4,249.33 *
Mainstay Convertible Fund........ $ 2,875,000 * 76,355.11 *
Mainstay VP Convertible Fund..... $ 1,340,000 * 35,588.12 *
Meadow IAM Limited............... $ 1,760,000 * 46,742.61 *
Merril Lynch Insurance Group..... $ 402,000 * 10,676.44 *
MLQA Convertible Securities
Arbitrage LTD.................. $ 5,000,000 * 132,791.50 *
Morgan Stanley Convertible
Securities Trust............... $ 2,500,000 * 66,395.75 *
Municipal Employees.............. $ 286,000 * 7,595.67 *
Nations Convertible Securities
Fund........................... $ 9,925,000 * 263,591.13 *
New Orleans Firefighters Pension/
Relief Fund.................... $ 163,000 * 4,329.00 *
New York Life Insurance Company
(Ordinary Life Post 1982)...... $ 4,730,000 * 125,620.76 *
New York Life Insurance Company
(Ordinary Life Pre 1982)....... $ 2,870,000 * 76,222.32 *
New York Life Separate Account
#7............................. $ 100,000 * 2,655.83 *
Nicholas Applegate Capital
Management Investment
Grade Convertible Mutual Fund.... $ 15,000 * 398.37 *
NMS Services (Cayman) Inc. ...... $ 20,000,000 1.67% 531,166.00 *
Nomura Securities Intl Inc.(6)... $ 40,000,000 3.33% 1,062,332.00 *
Norwich Union Life & Pensions.... $ 3,000,000 * 79,674.90 *
Occidental Petroleum
Corporation.................... $ 323,000 * 8,578.33 *
Ohio Bureau of Workers
Compensation................... $ 217,000 * 5,763.15 *
Oppenheimer Convertible
Securities Fund................ $ 4,000,000 * 106,233.20 *
Pearl -- CS Alternative Strategy
Limited........................ $ 858,000 * 22,787.02 *
Policeman and Firemen Retirement
System of the City of
Detroit........................ $ 675,000 * 17,926.85 *
Port Authority of Allegheny
County Retirement and
Disability Allowance Plan for
the Employees Represented by
Local 85 of the Amalgamated
Transit Union.................. $ 350,000 * 9,295.41 *
Privilege Portfolio SICAV........ $ 5,900,000 * 156,693.97 *
Pro-mutual....................... $ 902,000 * 23,955.59 *
75
PRINCIPAL AMOUNT AT
MATURITY OF NOTES PERCENTAGE OF NUMBER OF SHARES OF PERCENTAGE OF
BENEFICIALLY OWNED NOTES COMMON STOCK THAT COMMON STOCK
NAME THAT MAY BE SOLD OUTSTANDING MAY BE SOLD(1) OUTSTANDING(2)
- ---- ------------------- ------------- ------------------- --------------
Ramius Capital Group............. $ 1,000,000 * 26,558.30 *
Ramius Master Fund, LTD.......... $ 4,950,000 * 131,463.59 *
Ramius Partners II, LP........... $ 250,000 * 6,639.58 *
Ramius, LP....................... $ 100,000 * 2,655.83 *
RCG Baldwin, LP.................. $ 500,000 * 13,279.15 *
RCG Latitude Master Fund, LTD.... $ 6,450,000 * 171,301.04 *
RCG Multi Strategy Master Fund,
LTD............................ $ 1,400,000 * 37,181.62 *
S.A.C. Capital Associates,
LLC(7)......................... $ 8,000,000 * 212,466.40 *
SCI Endowment Care Common Trust
Fund -- First Union............ $ 20,000 * 531.17 *
SCI Endowment Care Common Trust
Fund -- National Fiduciary
Services....................... $ 100,000 * 2,655.83 *
SCI Endowment Care Common Trust
Fund -- Suntrust............... $ 45,000 * 1,195.12 *
Siemens Convertible Global
Markets........................ $ 1,250,000 * 33,197.88 *
Silverback Master, LTD........... $ 36,500,000 3.04% 969,377.95 *
South Dakota Retirement
System(8)...................... $ 2,000,000 * 53,116.60 *
State of Maryland Retirement
Agency......................... $ 3,843,000 * 102,063.55 *
Sunrise Partners Limited
Partnership(9)................. $ 4,500,000 * 119,512.35 *
SuttonBrook Capital Portfolio
LP............................. $ 46,000,000 3.83% 1,221,681.80 *
The California Wellness
Foundation..................... $ 220,000 * 5,842.83 *
The Cockrell Foundation.......... $ 75,000 * 1,991.87 *
The Dow Chemical Company
Employees' Retirement Plan..... $ 1,400,000 * 37,181.62 *
The Fondren Foundation........... $ 80,000 * 2,124.66 *
The Grable Foundation............ $ 97,000 * 2,576.16 *
Thrivent Financial for
Lutherans(10).................. $ 5,250,000 * 139,431.08 *
Topanga XI....................... $ 2,400,000 * 63,739.92 *
Trustmark Insurance.............. $ 409,000 * 10,862.34 *
Union Carbide Retirement
Account........................ $ 650,000 * 17,262.90 *
United Food and Commercial
Workers Local 1262 and
Employers Pension Fund......... $ 330,000 * 8,764.24 *
Univar USA Inc. Retirement
Plan........................... $ 165,000 * 4,382.12 *
Vanguard Convertible Securities
Fund, Inc. .................... $ 4,530,000 * 120,309.10 *
Wachovia Bank National
Association.................... $ 26,000,000 2.17% 690,515.80 *
White River Securities L.L.C..... $ 7,250,000 * 192,547.68 *
Wilmington Trust Co. as Owner and
Trustee for the Forrestal
Funding Master Trust........... $ 33,500,000 2.79% 889,703.05 *
Worldwide Transactions Ltd. ..... $ 350,000 * 9,295.41 *
Xavex Convertible Arbitrage 10
Fund........................... $ 1,000,000 * 26,558.30 *
76
PRINCIPAL AMOUNT AT
MATURITY OF NOTES PERCENTAGE OF NUMBER OF SHARES OF PERCENTAGE OF
BENEFICIALLY OWNED NOTES COMMON STOCK THAT COMMON STOCK
NAME THAT MAY BE SOLD OUTSTANDING MAY BE SOLD(1) OUTSTANDING(2)
- ---- ------------------- ------------- ------------------- --------------
Xavex Convertible Arbitrage 2
Fund........................... $ 1,400,000 * 37,181.62 *
Xavex Convertible Arbitrage 5
Fund........................... $ 800,000 * 21,246.64 *
Zurich Institutional Benchmark
Master Fund LTD................ $ 800,000 * 21,246.64 *
Any other holder of notes or
future transferee from any such
holder(11)(12)................. $571,196,000 47.60% 15,169,994.73 3.35%
- ---------------
* Less than 1%.
(1) Assumes conversion of all of the holder's depositary shares. The depositary will endeavor, insofar as
practicable, to vote thenotes at a conversion rate of
26.5583 shares of common stock per $1,000 principal amount of the preferred stock represented by the
depositary shares in accordance with those instructions, and we will agree to
take all action that may be deemed necessary by the depositary in order to
enable the depositary to do so. The depositary will abstain from voting shares
of the preferred stock to the extent it does not receive specific instructions
from the holders of depositary shares representing the preferred stock.
Amendment and Termination of Deposit Agreement
The form of depositary receipt evidencing the depositary shares and any
provision of the applicable deposit agreement may at any time be amended by
agreement between us and the depositary. We may, with the consent
53
of the depositary, amend the deposit agreement from time to time in any manner
that we desire. If the amendment would materially and adversely alter the
rights of the existing holders of depositary shares, however, the amendment
must be approved by the holders of at least a majority of the depositary shares
then outstanding.
The deposit agreement may be terminated by us or the depositary if:
. all outstanding depositary shares have been redeemed; or
. there has been a final distribution in respect of the shares of preferred
stock of the applicable series in connection with the liquidation,
dissolution or winding up of our Company and the distribution has been
made to the holders of depositary receipts.
Charges of Depositary
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. We will pay charges
of the depositary in connection with the initial deposit of the preferred stock
and any redemption of the preferred stock. Holders of depositary receipts will
pay other transfer and other taxes and governmental charges and such other
charges, including a fee for the withdrawal of shares of preferred stock upon
surrender of depositary receipts, as are expressly provided in the deposit
agreement to be for their accounts.
Withdrawal of Preferred Stock
Upon surrender of depositary receipts at the principal office of the
depositary, subject to the terms of the deposit agreement, the owner of the
depositary shares evidenced by the depositary receiptsnotes. This
conversion rate is entitled to delivery
of the number of whole shares of preferred stock and all money and other
property, if any, represented by those depositary shares. Partial shares of
preferred stock will not be issued. If the depositary receipts delivered by the
holder evidence a number of depositary shares in excess of the number of
depositary shares representing the number of whole shares of preferred stock to
be withdrawn, the depositary will deliver to the holder at the same time a new
depositary receipt evidencing the excess number of depositary shares. Holders
of preferred stock thus withdrawn will not thereafter be entitled to deposit
those shares under the deposit agreement or to receive depositary receipts
evidencing depositary shares in exchange for those preferred shares.
Miscellaneous
The depositary will forward to holders of depository receipts all reports
and communications from us that are delivered to the depositary and that we are
required to furnish to the holders of the preferred stock.
Neither we nor the depositary will be liable if the depositary is prevented
or delayed by law or any circumstance beyond its control in performing its
obligations under the deposit agreement. Our obligations and the obligations of
the depositary under the deposit agreement will be limited to performance in
good faith of our respective duties under that agreement and we will not be
obligated to prosecute or defend any legal proceeding in respect of any
depositary shares or preferred stock unless satisfactory indemnity is
furnished. We may rely upon written advice of counsel or accountants or upon
information provided by persons presenting preferred stock for deposit, holders
of depositary receipts or other persons believed to be competent and on
documents believed to be genuine.
Resignation and Removal of Depositary
The depositary may resign at any time by delivering to us notice of its
election to do so, and we may at any time remove the depositary, any
resignation or removal to take effect upon the appointment of a successor
depositary and its acceptance of the appointment. A successor depositary must
be appointed within 60 days after delivery of the notice of resignation or
removal and must be a bank or trust company having its principal office in the
United States and having a combined capital and surplus of at least $50 million.
54
DESCRIPTION OF WARRANTS
We may issue warrants to purchase our debt securities, preferred stock,
depositary shares or common stock. We may issue warrants independently or
together with any other securities offered by any prospectus supplement and the
warrants may be attached to or separate from those securities. Each series of
warrants will be issued under a separate warrant agreement to be entered into
between us and a bank or trust company, as warrant agent, all as described in
the prospectus supplement relating to the particular issue of warrants. The
warrant agent will act solely as our agent in connection with the warrants and
will not assume any obligation or relationship of agency or trust with any of
the holders of the warrants. We will describe further terms of the warrants and
the applicable warrant agreements in the applicable prospectus supplement
relating to the issuance of any warrants.
Warrants will be issued in registered form only. The exercise price for
warrants will be subject to adjustment, in accordance with the applicable
prospectus supplement.
Debt Warrants
The prospectus supplement relating to a particular issue of warrants to
issue debt securities will describe the terms of those warrants, including the
following:
. the titlehowever, as described under
"Description of the warrants;
. the offering price for the warrants, if any;
. the aggregate numberNotes--Conversion of the warrants;
. the designation and terms of the debt securities purchasable upon exercise
of the warrants;
. if applicable, the designation and terms of the debt securities that the
warrants are issued with and the number of warrants issued with each debt
security;
. if applicable, the date from and after which the warrants and any debt
securities issued with them will be separately transferable;
. the principal amount of debt securities that may be purchased upon
exercise ofNotes." As a warrant and the price at which the debt securities may be
purchased upon exercise;
. the dates on which the right to exercise the warrants will commence and
expire (each, an "Expiration Date");
. if applicable, the minimum or maximum amount of the warrants that may be
exercised at any one time;
. whether the debt securities that may be issued upon exercise of the
warrants will be issued in registered or bearer form;
. information relating to book-entry procedures, if any;
. the currency or currency units in which the offering price, if any, and
the exercise price are payable;
. if applicable, a discussion of material United States federal income tax
considerations;
. anti-dilution provisions of the warrants, if any;
. redemption or call provisions, if any, applicable to the warrants;
. any additional terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants; and
. any other information we think is important about the warrants.
55
Stock or Depositary Share Warrants
The prospectus supplement relating to a particular issue of warrants to
issue common stock, preferred stock or depositary shares will describe the
terms of the common stock warrants, the preferred stock warrants or the
depositary share warrants, including the following:
. the title of the warrants;
. the offering price for the warrants, if any;
. the aggregate number of the warrants;
. the designation and terms of the common stock, preferred stock or
depositary shares that may be purchased upon exercise of the warrants;
. if applicable, the designation and terms of the securities that the
warrants are issued with and the number of warrants issued with each
security;
. if applicable, the date from and after which the warrants and any
securities issued with the warrants will be separately transferable;
.result, the number of
shares of common stock preferred stock or depositary shares
that may be purchasedissuable upon exercise of a warrant and the price at which
the shares may be purchased upon exercise;
. the dates on which the right to exercise the warrants commence and expire;
. if applicable, the minimum or maximum amountconversion of the warrants thatnotes may be
exercised at any one time;
.increase
or decrease in the currency or currency units in which the offering price, if any, and
the exercise price are payable;
. if applicable, a discussion of material United States federal income tax
considerations;
. antidilution provisionsfuture.
(2) Calculated based on Rule 13d-3(d)(1)(i) of the warrants, if any;
. redemption or call provisions, if any, applicable to the warrants;
. any additional terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants; and
. any other information we think is important about the warrants.
Exercise of Warrants
Each warrant will entitle the holder to purchase a principal amount of debt
securities or a number ofExchange Act, using
438,067,117 shares of preferred stock, depositary shares or
common stock at an exercise price inoutstanding as of October 22, 2003. In
calculating this amount for each case set forth in, or calculable
from,holder, we treated as outstanding the prospectus supplement relating to the warrants. This exercise price
may be subject to adjustment upon the occurrence of specified events as
described in the applicable prospectus supplement. After the close of business
on the applicable Expiration Date (or any later date to which the Expiration
Date may be extended by us), unexercised warrants will become void. The place
or places where, and the manner in which, warrants may be exercised will be
specified in the applicable prospectus supplement.
Prior to the exercise of any warrants to purchase debt securities, preferred
stock, depositary shares or common stock, holders of the warrants will not have
any of the rights of holders of debt securities, preferred stock, depositary
shares or common stock, as the case may be, purchasable upon the exercise of
the warrants. These rights, including the right to receive payments of
principal of, premium, if any, or interest, if any, on the debt securities
subject to the warrants, the right to enforce covenants in the applicable
indenture, the right to receive payments of dividends, if any, on the preferred
stock, depositary shares or common stock subject to the warrants and any
applicable right to vote, will accrue to holders only upon exercise of the
warrants.
56
DESCRIPTION OF STOCK PURCHASE CONTRACTS
We may issue stock purchase contracts, including contracts obligating
holders to purchase from us, and obligating us to sell to the holders, a
specified
number of shares of common stock issuable upon conversion of all of that
holder's notes, but we did not assume conversion of any other holder's
notes.
(3) Allstate Corporation is the parent company of Allstate Insurance Company.
Allstate Insurance Company also beneficially owns 148,700 shares of common
stock. In addition, Allstate New Jersey Insurance Company, an indirect
subsidiary of Allstate Insurance Company, beneficially owns 8,100 shares of
common stock. Allstate Retirement Plan and Agents Pension Plan are
qualified ERISA plans maintained for the benefit of certain employees and
agents of Allstate Insurance Company. Allstate Retirement Plan beneficially
owns 47,600 shares of common stock and Agents Pension Plan beneficially
owns 15,100 shares of common stock. BNY Midwest Trust Company, as Trustee
for such plans, holds title to all plan investments. Allstate has informed
us that it disclaims any interest in securities held in such trusts,
although the Investment Committee for such plans consists of Allstate
Insurance Company officers.
(4) Allstate Life Insurance Company is a wholly owned subsidiary of Allstate
Insurance Company. See also footnote (3) above.
(5) Amaranth L.L.C. also beneficially owns 15,200 shares of common stock.
(6) Nomura Securities Intl Inc. also beneficially owns 551,868 shares of common
stock.
(7) S.A.C. Capital Associates, LLC also beneficially owns 40,000 shares of
common stock.
(8) South Dakota Retirement System also beneficially owns 113,000 shares of
common stock.
(9) Sunrise Partners Limited Partnership also beneficially owns 78,300 shares
of common stock.
(10) Thrivent Financial for Lutherans also beneficially owns 3,650 shares of
common stock.
(11) Information concerning other selling securityholders of notes or underlying
common stock will be set forth in prospectus supplements from time to time,
if required.
(12) Assumes that any other securitiesholders of notes, or any future transferees,
pledgees, donees or successors of or from any such other holders of notes
do not beneficially own any common stock other than the common stock
issuable upon conversion of the notes at a future date
or dates, which we refer to in this prospectus as "stock purchase contracts."
The price per sharethe initial conversion rate.
To our knowledge, other than their ownership of the securities and the number of sharesdescribed
above, none of the securities may be fixed atselling securityholders has, or has had within the past three
years, any position, office or other material relationship with us or any of our
predecessors or affiliates, except that Citigroup Global Markets acted as one of
the initial purchasers of the notes and acts as an adviser to us from time to
time with respect to other matters.
77
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the stock purchase contracts are issued or
may be determined by reference to a specific formula describedmaterial U.S. federal income tax
considerations (and, in the stock
purchase contracts. The stock purchase contracts may be issued separately orcase of non-U.S. holders, as part of units consisting of a stock purchase contract and debt securities,
preferred securities, warrants or debt obligations of third parties, includingdefined below, certain
U.S. treasury securities, securing the holders' obligations to purchase the
securities under the stock purchase contracts, which we refer to herein as
"stock purchase units." The stock purchase contracts may require holders to
secure their obligations under the stock purchase contracts in a specified
manner. The stock purchase contracts also may require us to make periodic
payments to the holders of the stock purchase units or vice versa, and those
payments may be unsecured or refunded on some basis.
The applicable prospectus supplement will describe the terms of the stock
purchase contracts or stock purchase units. The description in the prospectus
supplement will not necessarily be complete, and reference will be made to the
stock purchase contracts, and, if applicable, collateral or depositary
arrangements,federal estate tax considerations) relating to the purchase, ownership and
disposition of the notes and common stock purchase contractsinto which the notes may be converted.
This summary does not purport to be a complete analysis of all the potential tax
considerations relating thereto. The summary is based on laws, regulations,
rulings and decisions now in effect, all of which are subject to change or
differing interpretations, possibly with retroactive effect. Except as
specifically discussed below with regard to non-U.S. holders, this summary
applies only to beneficial owners that will hold notes and common stock purchase units,into
which notes may be converted as "capital assets," within the meaning of the
Internal Revenue Code of 1986, as amended (the "Code"), and who, for U.S.
federal income tax purposes, are (1) individual citizens or residents of the
United States, (2) corporations (including any 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 any political subdivision thereof, (3) estates, the
incomes of which are subject to U.S. federal income taxation regardless of the
source of such income or (4) trusts subject to the primary supervision of a U.S.
court and the control of one or more U.S. persons or any trust that has a valid
election in effect under applicable Treasury regulations to be treated as a U.S.
person ("U.S. holders"). In the case of a holder of notes or common stock which
is a partnership, the tax consequences will generally affect the partner rather
than the partnership, but special considerations not set forth herein may apply.
Persons other than U.S. holders ("non-U.S. holders") are subject to special U.S.
federal income tax considerations, some of which are discussed below.
This discussion does not address tax considerations applicable to an
investor's particular circumstances or to investors that may be filedsubject to
special tax rules, such as banks or other financial institutions, holders
subject to the alternative minimum tax, tax-exempt organizations, insurance
companies, regulated investment companies, foreign persons or entities (except
to the extent specifically set forth below), dealers in securities, commodities
or currencies, initial holders whose "functional currency" is not the U.S.
dollar, persons that will hold notes as a position in a hedging transaction,
"straddle" or "conversion transaction" for tax purposes, traders in securities
that elect to use a mark-to-market method of accounting for their securities
holdings, persons deemed to sell notes or common stock under the constructive
sale provisions of the Code, partnerships or other pass-through entities, or
persons who have ceased to be U.S. citizens or to be taxed as resident aliens.
The discussion below deals only with holders who hold the notes (and the shares
of our common stock acquired upon conversion of the notes) as capital assets and
who acquire the notes from a selling securityholder as described under "Selling
Securityholders" pursuant to an offering of such notes under this prospectus in
the first sale of such notes by such selling securityholder after the notes are
first registered with the SEC each time we issue stockSEC. We have not sought any ruling from the Internal
Revenue Service (the "IRS") or an opinion of counsel with respect to the
statements made and the conclusions reached in the following summary, and there
can be no assurance that the IRS will agree with such statements and
conclusions. In addition, the IRS is not precluded from successfully adopting a
contrary position. This summary does not consider the effect of the U.S. federal
estate or gift tax laws (except as set forth below with respect to non-U.S.
holders) or the tax laws of any applicable foreign, state, local or other
jurisdiction.
Investors considering the purchase contracts or
stock purchase units. Materialof notes should consult their own tax
advisors with respect to the application of the United States federal income tax
considerationslaws to their particular situations as well as any tax consequences arising
under the United States federal, estate or gift tax rules or under the laws of
any state, local or foreign taxing jurisdiction or under any applicable tax
treaty.
U.S. HOLDERS
TAXATION OF INTEREST
Interest paid on the notes will be included in the income of a U.S. holder
as ordinary income at the time it is received or accrued, in accordance with
such holder's regular method of accounting for U.S. federal income tax purposes.
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MARKET DISCOUNT
If a U.S. holder purchases a note for an amount that is less than its
stated redemption price at maturity, such U.S. holder will be treated as having
purchased the note at a "market discount," unless such market discount is less
than a specified de minimis amount. Under the market discount rules, a U.S.
holder will be required to treat any partial principal payment on, or any gain
realized on the sale, exchange, redemption or other disposition of a note as
ordinary income to the extent of the lesser of:
- the amount of such payment or realized gain or
- the market discount which has not previously been included in the income
of the holder and is treated as having accrued on the note while held by
the holder through the time of such payment or disposition.
Market discount will be considered to accrue ratably during the period from
the date of acquisition to the maturity date of the note, unless the U.S. holder
elects to accrue market discount on the basis of semiannual compounding.
A U.S. holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a note with market discount until the maturity of the note or
certain earlier dispositions, because a current deduction is only allowed to the
extent the interest expense exceeds an allocable portion of market discount.
A U.S. holder may elect to include market discount in income currently as
it accrues (on either a ratable or semiannual compounding basis), in which case
the rules described above regarding the treatment as ordinary income of gain
realized upon the disposition of the note and upon the receipt of certain cash
payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States federal income tax purposes. Such an election will
apply to all debt instruments acquired by the U.S. holder on or after the first
day of the taxable year to which such election applies and may be revoked only
with the consent of the IRS.
PREMIUM
If a U.S. holder purchases a note for an amount that is greater than the
sum of all amounts payable on the note after the purchase date other than
payments of qualified stated interest, the U.S. holder will be considered to
have purchased the note with "amortizable bond premium" equal in amount to such
excess. Subject to certain limitations, a U.S. holder may elect to amortize such
premium using a constant yield method over the remaining term of the note and
may offset interest otherwise required to be included in respect of the note
during any taxable year by the amortized amount of such excess for the taxable
year. Any election to amortize bond premium applies to all taxable debt
obligations then owned and thereafter acquired by the U.S. holder and may be
revoked only with the consent of the IRS.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange (other than a conversion for stock purchase unitsor a combination
of stock and cash) or redemption of a note, a U.S. holder generally will
recognize capital gain or loss equal to the difference between (1) the amount of
cash proceeds and the stock purchase contractsfair market value of any property received on the sale,
exchange or redemption (except to the extent such amount is attributable to
accrued interest not previously included in income, which will also be discussedtaxable as
ordinary income, or is attributable to accrued interest that was previously
included in income, which amount may be received without generating further
income) and (2) such holder's adjusted tax basis in the applicable prospectus supplement.
PLAN OF DISTRIBUTION
Anynote. A U.S. holder's
adjusted tax basis in a note generally will equal the cost of the securities being offered pursuantnote to this prospectus maysuch
holder. Such capital gain or loss will be sold
in any onelong-term capital gain or more ofloss if the
following ways from time to time:
. through agents;
. to or through underwriters;
. through dealers; and
. directly by us; or
.U.S. holder's holding period in the case of trust preferred securities, by the Trust to purchasers.
The distribution of the securities may be effected from time to time innote is more than one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailingyear at the time of
sale, exchange or redemption. Long-term capital gains of noncorporate taxpayers
are generally taxed at pricesa lower maximum marginal tax rate than the maximum
marginal tax rate applicable to ordinary income. The deductibility of capital
losses is subject to limitations.
79
CONVERSION OF THE NOTES
If a U.S. holder converts its notes and receives solely common stock (plus
cash in lieu of a fractional share of common stock), the U.S. holder generally
will not recognize any income, gain or loss upon conversion of the note except
to the extent such receipt is attributable to accrued interest not previously
included in income (which will be taxable as ordinary income), and except with
respect to cash received in lieu of a fractional share of common stock (which
generally will result in capital gain or loss, measured by the difference
between the cash received for the fractional share and the holder's adjusted tax
basis in the fractional share). A U.S. holder's tax basis in the common stock
received on conversion of a note will be the same as such holder's adjusted tax
basis in the note at the time of conversion (reduced by any basis allocable to a
fractional share interest) except that such holder's tax basis in common stock
received with respect to accrued interest on the notes not previously included
in income will equal the then current fair market value of such common stock.
The holding period for the common stock received on conversion should generally
include the holding period of the note converted, except that the holding period
for common stock received with respect to accrued interest on the notes not
previously included in income will commence on the day immediately following the
date of conversion.
If a U.S. holder converts its notes and receives a combination of cash and
common stock (and such cash is not merely received in lieu of a fractional share
of common stock), the tax treatment to the holder is uncertain. The U.S. holder
may be required to recognize gain in an amount equal to the lesser of (1) the
cash payment (reduced for the portion of the payment which is attributable to
accrued and unpaid interest which will be taxed as ordinary income) or (2) the
excess of the fair market value of the common stock and cash payment (less the
amount attributable to accrued and unpaid interest) received in the conversion
over the U.S. holder's adjusted tax basis in the note at the time of conversion.
No loss would be recognized on the conversion. The U.S. holder's tax basis in
the common stock received would be the same as the U.S. holder's basis in the
note, increased by the amount of gain recognized, if any, and reduced by the
amount of the cash payment (less any amount attributable to accrued and unpaid
interest). Cash received in lieu of a fractional share of common stock would be
treated in the manner described above. Alternatively, the receipt of stock and
cash may be treated as a part conversion/part sale transaction. In such case,
the cash payment would be treated as proceeds from a sale of a portion of the
note, as described above under "-- Sale, Exchange or Redemption of the Notes,"
and stock would be treated as received upon conversion of a portion of the note,
as described above in the preceding paragraph. A U.S. holder's basis in the note
would be allocated pro rata between the common stock received (including any
fractional share treated as received) and the portion of the note that is
treated as sold for cash based upon the relative values of the shares received
and the cash payment. Under either treatment the holding period for the common
stock received on conversion should generally include the holding period of the
note converted, except that the holding period for common stock received with
respect to accrued interest on the notes not previously included in income will
commence on the day immediately following the date of conversion.
Holders should consult their tax advisors regarding the proper treatment to
them of the receipt of a combination of cash and common stock upon a conversion.
ADDITIONAL AMOUNTS
We may be required to make payments of additional amounts if the prospectus
is unavailable for periods in excess of those permitted by the registration
rights agreement, as described under "Registration Rights." We intend to take
the position for United States federal income tax purposes that the possibility
that holders of the notes will be paid such additional amounts is a remote and
incidental contingency as of the issue date of the notes within the meaning of
applicable Treasury regulations. Accordingly, any payments of additional amounts
should be taxable to U.S. holders as additional ordinary income when received or
accrued, in accordance with their method of tax accounting. Our determination
that the payment of additional amounts is a remote and incidental contingency is
binding upon all holders of the notes, unless a holder properly discloses to the
IRS that it is taking a contrary position.
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U.S. holders should consult their tax advisors concerning the appropriate
tax treatment of the payment of any additional amounts with respect to the
notes.
DISTRIBUTIONS ON COMMON STOCK
If, after a U.S. holder converts a note into our common stock, we make
distributions on our common stock, the distributions will constitute dividends
taxable to the holder as ordinary income for United States federal income tax
purposes to the extent of our current or accumulated earnings and profits as
determined under United States federal income tax principles. If a U.S. holder
is an individual and receives a distribution that is treated as a dividend,
recently enacted legislation generally reduces the maximum tax rate to 15%.
However, there are several exceptions and restrictions regarding the
availability of the reduced tax rates, such as restrictions relating to (i) the
U.S. holder's holding period of stock on which the dividends are received, (ii)
such holder's obligation, if any, to make related payments with respect to
positions in substantially similar or related property, and (iii) amounts the
U.S. holder takes into account as investment income under section 163(d)(4)(B)
of the Code. The reduced rates apply only to dividends received on or before
December 31, 2008. Individuals should consult their tax advisors regarding the
extent, if any, to which any exceptions and restrictions may apply to their
particular factual situation.
To the extent that a U.S. holder receives distributions on shares of common
stock that would otherwise constitute dividends for United States federal income
tax purposes but that exceed our current and accumulated earnings and profits,
such distributions will be treated first as a non-taxable return of capital
reducing the holder's tax basis in the shares of common stock. Any such
distributions in excess of the U.S. holder's tax basis in the shares of common
stock will generally be treated as capital gain. Subject to applicable
limitations, distributions on our common stock constituting dividends paid to
holders that are United States corporations will qualify for the dividends
received deduction.
ADJUSTMENT OF CONVERSION PRICE
Holders of convertible debt instruments such as the notes may, in certain
circumstances, be deemed to have received distributions of stock if the
conversion price of such instruments is adjusted. Adjustments to the conversion
price 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 debt
instruments, however, will generally not be considered to result in a
constructive distribution of stock. Certain of the possible adjustments provided
in the notes (including, without limitation, adjustments in respect of taxable
dividends to our stockholders) will not qualify as being pursuant to a bona fide
reasonable adjustment formula. If such adjustments are made, the U.S. holders of
notes will be deemed to have received constructive distributions taxable as
dividends to the extent of our current and accumulated earnings and profits even
though they have not received any cash or property as a result of such
adjustments. In certain circumstances, the failure to provide for such an
adjustment may result in taxable dividend income to the U.S. holders of common
stock. Generally, a U.S. holder's tax basis in a note will be increased to the
extent any such constructive distribution is treated as a dividend. Moreover, if
there is an adjustment (or a failure to make an adjustment) to the conversion
rate of the notes that increases the proportionate interest of the holders of
outstanding common stock in our assets or earnings and profits, then such
increase in the proportionate interest of the holders of the common stock
generally will be treated as a constructive distribution to such holders,
taxable as described above.
SALE OF COMMON STOCK
Upon the sale or exchange of common stock a U.S. holder generally will
recognize capital gain or loss equal to the difference between (1) the amount of
cash and the fair market value of any property received upon the sale or
exchange and (2) such U.S. holder's adjusted tax basis in the common stock. Such
capital gain or loss will be long-term capital gain or loss if the U.S. holder's
holding period in the common stock is more than one year at the time of the sale
or exchange. Long-term capital gains of noncorporate taxpayers are generally
taxed at a lower maximum marginal tax rate than the maximum marginal tax rate
applicable to ordinary income. A U.S. holder's basis and holding period in
common stock received upon
81
conversion of a note are determined as discussed above under "-- Conversion of
the Notes." The deductibility of capital losses is subject to limitations.
If a U.S. holder is an individual, recently enacted legislation generally
reduces the maximum tax rate on such long-term capital gain to 15%. However,
there are exceptions to the reduced rates, including an exception for amounts
the U.S. holder takes into account as investment income under section
163(d)(4)(B) of the Code. The reduced rates apply only to tax years beginning on
or before December 31, 2008. Moreover, if such holder previously received, with
respect to such stock, one or more dividends that were taxed at the reduced rate
described above under "-- Distributions on Common Stock" any capital loss on a
subsequent disposition of the stock will, regardless of such holder's holding
period, be treated as long-term capital loss to the extent that the previous
dividends were extraordinary dividends within the meaning of section 1059(c) of
the Code. Individuals should consult their tax advisors regarding the extent, if
any, to which any exceptions may apply to their particular factual situation.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments of interest or dividends made by us on, or the proceeds of sale or
other disposition of, the notes or our common stock may be subject to
information reporting and U.S. federal backup withholding tax at the applicable
statutory rate if the recipient of those payments fails to supply an accurate
taxpayer identification number or otherwise fails to comply with applicable
United States information reporting or certification requirements. Any amount
withheld from a payment to a U.S. holder under the backup withholding rules is
allowable as a credit against the holder's U.S. federal income tax, provided the
required information is furnished to the IRS.
NON-U.S. HOLDERS
TAXATION OF INTEREST
Interest paid by us to non-U.S. holders will not be subject to United
States federal income or withholding tax provided the interest qualifies as
portfolio interest. Interest on a note will generally qualify as portfolio
interest if:
- interest paid on the note is not effectively connected with the non-U.S.
holder's conduct of a trade or business in the United States;
- such non-U.S. holder does not actually or by attribution own 10% or more
of the total combined voting power of all classes of our stock entitled
to vote;
- such non-U.S. holder is not a controlled foreign corporation for U.S.
federal income tax purposes that is related to us, actually or by
attribution, through stock ownership;
- such non-U.S. holder is not a bank receiving interest described in
section 881(c)(3)(A) of the prevailing market pricesCode; and
- the certification requirements, as described below, are satisfied.
To satisfy the certification requirements referred to above, either (1) the
beneficial owner of a note must certify, under penalties of perjury, to us or
at negotiated prices.
Sales through Agents
Offersour agent, as applicable, that such owner is a non-U.S. person and must provide
such owner's name and address, and TIN, if any, or (2) a securities clearing
organization, bank or other financial institution that holds customer securities
in the ordinary course of its trade or business, referred to purchase securitiesas a "Financial
Institution," and holds the note on behalf of the beneficial owner thereof must
certify, under penalties of perjury, to us or our agent, as applicable, that
such certificate has been received from the beneficial owner and must furnish
the payor with a copy thereof. Such requirement will be fulfilled if the
beneficial owner of a note certifies on IRS Form W-8BEN (or successor form),
under penalties of perjury, that it is a non-U.S. person and provides its name
and address or any Financial Institution holding the note on behalf of the
beneficial owner files a statement with the withholding agent to the effect that
it has received such a statement from the beneficial owner (and furnishes the
withholding agent with a copy thereof). Special certification rules apply for
notes held by
82
foreign partnerships and other intermediaries. The beneficial owner must inform
us or our agent, as applicable, or the financial institution, as applicable,
within 30 days of any change in information on the owner's statement.
If interest on the note is effectively connected with the conduct of a
trade or business in the United States by a non-U.S. holder (and, if certain tax
treaties apply, is attributable to a U.S. permanent establishment maintained by
the non-U.S. holder in the United States), the non-U.S. holder, although exempt
from U.S. federal withholding tax (provided that the certification requirements
discussed in the next sentence are met), will generally be subject to U.S.
federal income tax on such interest on a net income basis in the same manner as
if it were a U.S. holder. In order to claim an exemption from withholding tax,
such a non-U.S. holder will be required to provide us with a properly executed
IRS Form W-8ECI (or successor form) certifying, under penalties of perjury, that
the holder is a non-U.S. person and the interest is effectively connected with
the holder's conduct of a U.S. trade or business and is includable in the
holder's gross income. In addition, if such non-U.S. holder engaged in a U.S.
trade or business is a foreign corporation, it may be solicitedsubject to a branch
profits tax equal to 30% (or such lower rate provided by agents designatedan applicable treaty)
of its effectively connected earnings and profits for the taxable year, subject
to certain adjustments.
Interest on notes not effectively connected with a U.S. trade or business
and not excluded from U.S. federal withholding tax under the "portfolio
interest" exception described above generally will be subject to withholding at
a 30% rate, except where a non-U.S. holder can claim the benefits of an
applicable tax treaty to reduce or eliminate such withholding tax and
demonstrates such eligibility to us and the IRS.
CONVERSION OF THE NOTES
A non-U.S. holder generally will not be subject to U.S. federal withholding
tax on the conversion of a note into common stock. To the extent a non-U.S.
holder receives cash (including cash in lieu of a fractional share of common
stock) upon conversion, such cash may give rise to gain that would be subject to
the rules described below with respect to the sale or exchange of a note or
common stock. See "-- Sale, Exchange or Redemption of the Notes or Common Stock"
below.
ADJUSTMENT OF CONVERSION PRICE
The conversion price of the notes is subject to adjustment in certain
circumstances. Any such adjustment could, in certain circumstances, give rise to
a deemed distribution to non-U.S. holders of the notes. See "-- U.S.
Holders -- Adjustment of Conversion Price" above. In such case, the deemed
distribution would be subject to the rules below regarding withholding of U.S.
federal income tax on dividends in respect of common stock.
DISTRIBUTIONS ON COMMON STOCK
Distributions on common stock will constitute a dividend for U.S. federal
income tax purposes to the extent of our current and accumulated earnings and
profits as determined under U.S. federal income tax principles. Dividends paid
on common stock held by a non-U.S. holder will be subject to U.S. federal
withholding tax at a rate of 30% (or lower treaty rate, if applicable) unless
the dividend is effectively connected with the conduct of a United States trade
or business by the non-U.S. holder and, if required by an applicable treaty, is
attributable to a permanent establishment maintained by the non-U.S. holder in
the United States, in which case the dividend will be subject to U.S. federal
income tax on net income in the manner applied to U.S. persons generally (and
with respect to corporate holders under certain circumstances, the branch
profits tax). A non-U.S. holder may be required to satisfy certain requirements
in order to claim a reduction of or exemption from withholding under the
foregoing rules.
As more fully described under "Registration Rights," upon the occurrence of
certain enumerated events, we may be required to pay additional amounts which
may be subject to U.S. federal income and withholding tax.
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SALE, EXCHANGE OR REDEMPTION OF THE NOTES OR COMMON STOCK
A non-U.S. holder of a note or common stock will generally not be subject
to U.S. federal income tax on gains realized on the sale, exchange or other
disposition of such note or common stock unless (1) such non-U.S. holder is an
individual who is present in the United States for 183 days or more in the
taxable year of sale, exchange or other disposition, and certain conditions are
met, (2) such gain is effectively connected with the conduct by the non-U.S.
holder of a trade or business in the United States (and, if certain tax treaties
apply, is attributable to a permanent establishment maintained by the non-U.S.
holder in the United States), or (3) we are a U.S. real property holding
corporation under the "FIRPTA" rules adopted in 1980.
Generally, a corporation is a U.S. real property holding corporation if the
fair market value of its U.S. real property interests, as defined in the Code
and applicable regulations, equals or exceeds 50% of the aggregate fair market
value of its worldwide real property interests and its other assets used or held
for use in a trade or business. We do not believe that we are currently a U.S.
real property holding corporation or that we will become one in the future. If
we nevertheless did become a U.S. real property holding corporation then, among
other circumstances, an exemption would generally apply (1) to the sale of notes
by a non-U.S. holder if such non-U.S. holder at no time actually or
constructively owned more than 5% of the outstanding notes, or notes having a
fair market value greater than the fair market value of 5% of our outstanding
common stock, assuming our common stock is at all times regularly traded on an
established securities market, as prescribed by regulations, and (2) to the sale
of common stock by a non-U.S. holder if such non-U.S. holder at no time actually
or constructively owned more than 5% of our outstanding common stock, assuming
our common stock is at all times regularly traded on an established securities
market, as prescribed by regulations.
U.S. FEDERAL ESTATE TAX
A note held by an individual who at the time of death is not a citizen or
resident of the United States (as specially defined for U.S. federal estate tax
purposes) will not be subject to U.S. federal estate tax if the individual did
not actually or constructively own 10% or more of the total combined voting
power of all classes of our stock entitled to vote and, at the time of the
individual's death, payments with respect to such note would not have been
effectively connected with the conduct by such individual of a trade or business
in the United States. Common stock held by an individual who at the time of
death is not a citizen or resident of the United States (as specially defined
for U.S. federal estate tax purposes) generally will be included in such
individual's estate for U.S. federal estate tax purposes, unless an applicable
tax treaty provides otherwise.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Generally, we must report annually to the IRS and to each non-U.S. holder
(1) any interest or dividend that is subject to withholding, or that is exempt
from U.S. withholding tax pursuant to a tax treaty and (2) any payments of
portfolio interest. Copies of these information returns may also be made
available under the provisions of a specific treaty or agreement to the tax
authorities of the country in which the non-U.S. holder resides.
Generally, information reporting and backup withholding of United States
federal income tax at the applicable rate may apply to payments made by us or
our agent to a non-U.S. holder if such holder fails to make the appropriate
certification that the holder is a non-U.S. person or if we or our agent has
actual knowledge or reason to know that the payee is a U.S. person.
Payments of the proceeds of the sale of a note or common stock to or
through a foreign office of a U.S. broker or of a foreign broker that is a
"controlled foreign corporation" within the meaning of the Code, a foreign
person, 50% or more of whose gross income from timeall sources for the three-year
period ending with the close of its taxable year preceding the payment was
effectively connected with the conduct of a trade or business within the United
States, or, in certain cases, a foreign partnership will be subject to
time.information reporting requirements, but not backup withholding, unless the payee
is an exempt recipient or
84
such broker has evidence in its records that the payee is a non-U.S. holder.
Both backup withholding and information reporting will apply to the proceeds of
such dispositions if the broker has actual knowledge or reason to know that the
payee is a U.S. holder.
Payments of the proceeds of a sale of a note or common stock to or through
the U.S. office of a broker will be subject to information reporting and
possible backup withholding unless the payee certifies under penalties of
perjury as to his or her status as a non-U.S. holder and satisfies certain other
qualifications (and no agent of the broker who is responsible for receiving or
reviewing such statement has actual knowledge or reason to know that it is
incorrect) and provides his or her name and address or the payee otherwise
establishes an exemption.
Any agentamounts withheld under the backup withholding rules from a payment to a
non-U.S. holder of a note or common stock will be allowed as a credit against
such holder's U.S. federal income tax, if any, or will be otherwise refundable,
provided that the required information is furnished to the IRS in a timely
manner.
The preceding discussion of certain U.S. federal income and estate tax
consequences is for general information only and is not tax advice. Accordingly,
you should consult your own tax adviser as to particular tax consequences to you
of purchasing, holding and disposing of the notes and our common stock,
including the applicability and effect of any state, local or foreign tax laws,
and of any proposed changes in applicable laws.
CERTAIN ERISA CONSIDERATIONS
The following is a summary of certain considerations associated with the
purchase of the notes by employee benefit plans that are subject to Title I of
the United States Employee Retirement Income Security Act of 1974, as amended
("ERISA"), plans, individual retirement accounts and other arrangements that are
subject to Section 4975 of the Code or provisions under any federal, state,
local, non-U.S. or other laws or regulations that are similar to such provisions
of ERISA or the Code (collectively, "Similar Laws"), and entities whose
underlying assets are considered to include "assets" of such plans, accounts and
arrangements (each, a "Plan").
GENERAL FIDUCIARY MATTERS
ERISA and the Code impose certain duties on persons who are fiduciaries of
a Plan subject to Title I of ERISA or Section 4975 of the Code (an "ERISA Plan")
and prohibit certain transactions involving the assets of an ERISA Plan and its
fiduciaries or other interested parties. Under ERISA and the Code, any person
who exercises any discretionary authority or control over the administration of
an ERISA Plan or the management or disposition of the assets of an ERISA Plan,
or who renders investment advice for a fee or other compensation with respect to
the assets of an ERISA Plan, is generally considered to be a fiduciary of the
ERISA Plan.
In considering an investment in the notes with the assets of any Plan, a
fiduciary should determine whether the investment is in accordance with the
documents and instruments governing the Plan and the applicable provisions of
ERISA, the Code or any Similar Law relating to a fiduciary's duties to the Plan
including, without limitation, the prudence, diversification and prohibited
transaction provisions of ERISA, the Code and any other applicable Similar Laws.
PROHIBITED TRANSACTION ISSUES
Section 406 of ERISA and Section 4975 of the Code prohibit ERISA Plans from
engaging in specified transactions involving plan assets with persons or
entities that are "parties in interest," within the meaning of ERISA, or
"disqualified persons," within the meaning of Section 4975 of the Code, unless
an exemption is available. A party in interest or disqualified person who
engages in a non-exempt prohibited transaction may be subject to excise taxes
and other penalties and liabilities under ERISA and the Code. In addition, the
fiduciary of the ERISA Plan that engages in such a non-exempt prohibited
transaction
85
may be subject to penalties and liabilities under ERISA and the Code. The
acquisition, holding and/or conversion of notes by (or with the assets of) an
ERISA Plan with respect to which Halliburton is considered a party in interest
or a disqualified person may constitute or result in a direct or indirect
prohibited transaction under Section 406 of ERISA and/or Section 4975 of the
Code, unless the investment is acquired and is held in accordance with an
applicable statutory, class or individual prohibited transaction exemption. In
this regard, the United States Department of Labor has issued prohibited
transaction class exemptions, or PTCEs, that may apply to the acquisition and
holding of the notes. These class exemptions include, without limitation, PTCE
84-14 respecting transactions determined by independent qualified professional
asset managers, PTCE 90-1 respecting insurance company pooled separate accounts,
PTCE 91-38 respecting bank collective investment funds, PTCE 95-60 respecting
life insurance company general accounts and PTCE 96-23 respecting transactions
determined by in-house asset managers, although there can be no assurance that
all of the conditions of any such exemptions will be satisfied.
Governmental plans and certain church plans and non-U.S. plans, while not
subject to the fiduciary responsibility provisions of ERISA or the provisions of
Section 4975 of the Code, may nevertheless be subject to Similar Laws.
Because of the foregoing, the notes should not be purchased or held by any
person investing assets of any Plan, unless such purchase, holding and/or
conversion will not constitute a non-exempt prohibited transaction under ERISA
and the Code or a violation of any applicable Similar Laws.
REPRESENTATION
Accordingly, by acceptance of a note, each purchaser and subsequent
transferee of a note will be deemed to have represented and warranted that
either (1) no portion of the assets used by such purchaser or transferee to
acquire and hold the notes constitutes assets of any Plan or (2) the purchase,
holding and conversion of the notes by such purchaser or transferee or the
redemption of the notes by Halliburton will not constitute a non-exempt
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or
a violation under any applicable Similar Laws.
The foregoing discussion is general in nature and is not intended to be all
inclusive. Due to the complexity of these rules and the penalties that may be
imposed upon persons involved in non-exempt prohibited transactions, it is
particularly important that fiduciaries, or other persons considering purchasing
the offernotes on behalf of, or with the assets of, any Plan, consult with their
counsel regarding the potential applicability of ERISA, Section 4975 of the Code
and any Similar Laws to such investment and whether an exemption would be
applicable to the purchase, holding and/or conversion of the notes.
86
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the securities in
respectnotes and the
common stock issuable upon conversion of whichthe notes offered by this prospectus is delivered will be named, and any
commissions payable by us or the Trustprospectus.
The aggregate proceeds to the agent will be set forth, in the
applicable prospectus supplement. The applicable prospectus supplement will
also describe the specific terms of the offering including (1) the purchase
price or initial offering price of the securities being offered, (2) the net
proceeds we will receiveselling securityholders from the sale of the securities, (3)notes
or common stock issuable upon conversion of the notes will be the purchase price
of the notes or common stock issuable upon conversion of the notes less any
over-allotment options underdiscounts and commissions. A selling securityholder reserves the right to accept
and, together with their agents, to reject, any proposed purchases of notes or
common stock to be made directly or through agents.
The notes and the common stock issuable upon conversion of the notes may be
sold from time to time to purchasers:
- directly by the selling securityholders and their successors, which
includes their transferees, pledgees or donees or their successor; or
- through underwriters, broker-dealers or agents, who may purchase additional
securitiesreceive
compensation in the form of discounts, concessions or commissions from
usthe selling securityholders or the Trust, (4)purchasers of the notes and the common
stock issuable upon conversion of the notes. These discounts, concessions
or commissions may be in excess of those customary in the types of
transactions involved.
The selling securityholders and any agency feesunderwriters, broker-dealers or underwriting discountsagents
who participate in the distribution of the notes and other items constituting agents' or underwriters' compensation and (5) any
discounts or concessions allowed or reallowed or paid to dealers. Unless
otherwise indicated in such prospectus supplement, the agent will be acting on
a reasonable best efforts basis forcommon stock issuable
upon conversion of the period of its appointment. The agentnotes may be deemed to be an underwriter, as that term is defined in the Securities
Act of 1933, of the securities so offered and sold.
57
Sales through Underwriters or Dealers
If securities are sold by means of an underwritten offering, we and, in the
case of an offering of trust preferred securities, the Trust will execute an
underwriting agreement with an underwriter or underwriters at the time an
agreement for such sale is reached. The names of the specific managing
underwriter or underwriters, as well as any other underwriters, the respective
amounts underwritten and the terms of the transaction, including commissions,
discounts and any other compensation of the underwriters and dealers, if any,
will be described in the applicable prospectus supplement. The applicable
prospectus supplement will be used by the underwriters to make resales of the
securities in respect of which this prospectus is being delivered to the
public. If underwriters are utilized in the sale of any securities in respect
of which this prospectus is being delivered, the securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at fixed public
offering prices or at varying prices determined by the underwriters at the time
of sale. Securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or directly by one or more
underwriters. If any underwriter or underwriters are utilized in the sale of
securities, unless otherwise indicated in the applicable prospectus supplement,
the underwriting agreement will provide that the obligations of the
underwriters are subject to specified conditions precedent and that the
underwriters with respect to a sale of the securities will be obligated to
purchase all the securities if any are purchased.
We or the Trust, as applicable, may grant to the underwriters options to
purchase additional securities, to cover over-allotments, if any, at the
initial public offering price (with additional underwriting commissions or
discounts), as may be described in the applicable prospectus supplement. If we
or the Trust, as applicable, grant any over-allotment options, the terms of the
over-allotment options will be described in the prospectus supplement for those
securities.
If a dealer is utilized in the sale of the securities in respect of which
this prospectus is delivered, we or the Trust, as applicable, will sell the
securities to the dealer as principal. The dealer may then resell the
securities to the public at varying prices to be determined by the dealer at
the time of resale. The dealer may be deemed to be an underwriter, as that term
is defined in the Securities Act of 1933, of the securities so offered and
sold. The name of the dealer and the terms of the transaction will be described
in the applicable prospectus supplement.
Direct Sales
Offers to purchase securities may be solicited directly by us or the Trust,
as applicable, and the sale of those securities may be made by us or the Trust
directly to institutional investors or others, who may be deemed to be
underwriters"underwriters" within the
meaning of the Securities Act of 1933 with respect to1933. As a result, any resaleprofits on the sale of
the securities. The terms of any sales of this nature will be
described innotes and the applicable prospectus supplement.
Remarketing Agreements
Securities may also be offered and sold, if indicated in the applicable
prospectus supplement, pursuant to a remarketing arrangement following the
redemption or repurchasecommon stock issuable upon conversion of the securities in accordance with their terms,notes by oneselling
securityholders and any discounts, commissions or more firms ("remarketing firms"), acting as principals for their own
accountsconcessions received by any
such broker-dealers or as agents for us or the Trust, as applicable. Any remarketing firm
will be identified and the terms of its agreement, if any, with us or the Trust
and its compensation will be described in the applicable prospectus supplement.
Remarketing firms may be deemed to be underwriters, as that term is defined inunderwriting discounts and
commissions under the Securities ActAct. Selling securityholders who are
"underwriters" within the meaning of 1933, in connection with the securities remarketed.
Delayed Delivery Contracts
If so indicated in the applicable prospectus supplement, we or the Trust, as
applicable, may authorize agents and underwriters to solicit offers by
institutions to purchase securities from us or the Trust at the public offering
price described in the applicable prospectus supplement pursuant to delayed
delivery contracts providing for
58
payment and delivery on the date or dates stated in the applicable prospectus
supplement. These delayed delivery contractsSecurities Act will be subject to
only those
conditionsprospectus delivery requirements of the Securities Act. If the selling
securityholders were deemed to be underwriters, the selling securityholders may
be subject to certain statutory liabilities of the Securities Act and the
Securities Exchange Act of 1934. If the notes and the common stock issuable upon
conversion of the notes are sold through underwriters, broker-dealers or agents,
the selling securityholders will be responsible for underwriting discounts or
commissions or agent's commissions.
The notes and the common stock issuable upon conversion of the notes may be
sold in one or more transactions at:
- fixed prices;
- prevailing market prices at the time of sale;
- prices related to such prevailing market prices;
- varying prices determined at the time of sale; or
- negotiated prices.
These sales may be effected in transactions:
- on any national securities exchange or quotation service on which the
notes and common stock issuable upon conversion of the notes may be
listed or quoted at the time of the sale;
- in the over-the-counter market;
- in transactions otherwise than on such exchanges or services or in the
over-the-counter market;
- through the writing and exercise of options, whether such options are
listed on an options exchange or otherwise; or
- through the settlement of short sales.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
87
In connection with the sales of the notes and the common stock issuable
upon conversion of the notes or otherwise, the selling securityholders may enter
into hedging transactions with broker-dealers or other financial institutions.
These broker-dealers or other financial institutions may in turn engage in short
sales of the notes or the common stock issuable upon conversion of the notes in
the course of hedging their positions. The selling securityholders may also sell
the notes and common stock issuable upon conversion of the notes short and
deliver notes and the common stock issuable upon conversion of the notes to
close out short positions, or loan or pledge notes or the common stock issuable
upon conversion of the notes to broker-dealers that in turn may sell the notes
and the common stock issuable upon conversion of the notes.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any underwriter,
broker-dealer or agent regarding the sale of the notes and the common stock
issuable upon conversion of the notes by the selling securityholders.
Our common stock trades on the New York Stock Exchange under the symbol
"HAL." We do not intend to apply for listing of the notes on any securities
exchange or for inclusion of the notes in any automated quotation system.
Accordingly, no assurances can be given as to the development of liquidity or
any trading market for the notes. See "Risk Factors -- Risks Relating to the
Notes -- There is no trading market for the notes and there may never be one."
There can be no assurance that any selling securityholder will sell any or
all of the notes or the common stock issuable upon conversion of the notes
pursuant to this prospectus. Further, we cannot assure you that any such selling
securityholder will not transfer, devise or gift the notes and the common stock
issuable upon conversion of the notes by other means not described in this
prospectus. In addition, any notes or common stock issuable upon conversion of
the applicablenotes covered by this prospectus supplement. A commission
indicatedthat qualify for sale pursuant to Rule 144
or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A
rather than under this prospectus. The notes and the common stock issuable upon
conversion of the notes may be sold in some states only through registered or
licensed brokers or dealers. In addition, in some states the notes and common
stock issuable upon conversion of the notes may not be sold unless they have
been registered or qualified for sale or an exemption from registration or
qualification is available and complied with.
The selling securityholders and any other person participating in the applicable prospectus supplementsale
of notes or the common stock issuable upon conversion of the notes will be
paidsubject to underwritersthe Exchange Act. The Exchange Act rules include, without limitation,
Regulation M, which may limit the timing of purchases and agents soliciting purchasessales of securities pursuantany of the
notes and the common stock issuable upon conversion of the notes by the selling
securityholders and any other such person. In addition, Regulation M may
restrict the ability of any person engaged in the distribution of the notes and
the common stock issuable upon conversion of the notes to delayed delivery
contracts accepted by usengage in market-
making activities with respect to the particular notes and the common stock
issuable upon conversion of the notes being distributed. This may affect the
marketability of the notes and the common stock issuable upon conversion of the
notes and the ability of any person or entity to engage in market-making
activities with respect to the Trust, as applicable.
General Information
Agents, underwriters, dealersnotes and remarketing firms may be entitled under
relevant agreements with us or the Trust, as applicable,common stock issuable upon
conversion of the notes.
We have agreed to indemnification by
us orindemnify the Trustselling securityholders against specifiedcertain
liabilities, including liabilities under the Securities ActAct.
We have agreed to pay substantially all of 1933, orthe expenses incidental to contribution with respectthe
registration, offering and sale of the notes and common stock issuable upon
conversion of the notes to payments that such
agents,the public other than commissions, fees and discounts
of underwriters, brokers, dealers and remarketing firms may be required to makeagents.
88
LEGAL MATTERS
Baker Botts L.L.P., Houston, Texas, our outside counsel, will issue
opinions about certain legal matters in those capacities.
Each seriesconnection with the offering of securities will be a new issuethe
notes and other than the common stock which is listed on The New York Stock Exchange, Inc., will have no
established trading market. We may elect to list any series of securities on an
exchange, and in the case of common stock, on any additional exchange, but,
unless otherwise specified in the applicable prospectus supplement, we shall
not be obligated to do so. No assurance can be given as to the liquidityissuable upon conversion of the trading marketnotes for any of the securities.
Agents, underwriters, dealers and remarketing firms may be customers of,
engage in transactions with, or perform services for, us and our subsidiaries
in the ordinary course of business.
VALIDITY OF SECURITIESus.
EXPERTS
The validity of the securities (other than the preferred securities of the
trust) will be passed upon for us by Vinson & Elkins L.L.P., Houston, Texas,
and will be passed upon for any agents, dealers or underwriters by counsel
named in the applicable prospectus supplement. The validity of the trust
preferred securities of the trust under Delaware law will be passed upon for
our Company and the Trust by Morris, Nichols, Arsht & Tunnell, special Delaware
counsel to our Company and the Trust.
EXPERTS
Our audited consolidated financial statements of Halliburton Company as of December
31, 2002, and schedules,for the year then ended, have been incorporated by reference in
this registration statement,prospectus in reliance on the report of KPMG LLP, independent accountants,
included in our Current Report on Form 8-K dated October 28, 2003, incorporated
by reference herein, and upon the authority of such firm as experts in
accounting and auditing.
The audit report covering the December 31, 2002 financial statements refers
to a change in the composition of the Company's reportable segments in 2003. The
amounts in the 2002, 2001 and 2000 consolidated financial statements related to
reportable segments have been restated to conform to the 2003 composition of
reportable segments.
CHANGE IN INDEPENDENT AUDITORS
The consolidated financial statements for December 31, 2001 and 2000
incorporated by reference in this prospectus were audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reportreports with respect
thereto.
On April 17, 2002, we dismissed Arthur Andersen LLP as our independent
auditors and engaged KPMG LLP to thoseserve as our independent auditors for the year
ended December 31, 2002. The Arthur Andersen dismissal and the KPMG LLP
engagement were approved by our board of directors upon the recommendation of
our audit committee.
Arthur Andersen's reports on our consolidated financial statements for the
year ended December 31, 2001 did not contain an adverse opinion or disclaimer of
opinion, nor were such reports qualified or modified as to uncertainty, audit
scope or accounting principles.
During the fiscal year ended December 31, 2001 and schedules, and are incorporatedthrough April 17, 2002,
there were no disagreements with Arthur Andersen on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which if not resolved to Arthur Andersen's satisfaction would have
caused Arthur Andersen to make a reference to the subject matter in this
prospectusconnection
with Arthur Andersen's report.
Arthur Andersen ceased to practice before the SEC effective August 31,
2002. Because of Arthur Andersen's current financial position, you may not be
able to recover against Arthur Andersen for any claims you may have under
securities or other laws as a result of Arthur Andersen's activities during the
period in reliance upon the authority of said firmwhich it acted as experts in accounting
and auditing in giving said report.
59our independent public accountants.
89
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTIONDISTRIBUTION.
The following table sets forth the estimated expenses payable by
Halliburton Company, a Delaware corporation ("Halliburton"), in connection with
the issuance and distribution of the
securities being registered are estimated as follows:offering described in this Registration Statement.
Registration Fee............... $239,000SEC registration fee........................................ $ 97,080
Printing expenses........................................... 50,000
Accounting fees and expenses................................ 100,000
Legal fees and expenses........ 125,000
Accounting fees and expenses... 30,000
Printing and engraving expenses 75,000
Trustee's fees and expenses.... 20,000
Depositary's fees and expenses. 10,000
Rating Agency Fees............. 75,000
Miscellaneous expenses......... 10,000expenses..................................... 100,000
Miscellaneous............................................... 2,920
--------
Total................... $584,000Total....................................................... $350,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERSOFFICERS.
Section 145 of the General Corporation Law of the State of Delaware or
DGCL, provides that a Delaware corporation has the power, under specified
circumstances, to indemnify its directors, officers, employees, and agents.
Indemnification is allowed in connection with threatened, pending, or completed
actions, suits, or proceedings, whether civil, criminal, administrative, or
investigative, other than an action by or in right of the corporation, brought
against them by reason of the fact that they were or are directors, officers,
employees, or agents, for:
.- expenses, judgments, and fines; and
.- amounts paid in settlement actually and reasonably incurred in any
action, suit, or proceeding.
Article X of Halliburton's restated certificate of incorporation together
with Section 47 of its by-laws provide for mandatory indemnification of each
person who is or was made a party to any actual or threatened civil, criminal,
administrative, or investigative action, suit, or proceeding because:
.- the person is or was an officer or director of the registrant; or
.- is a person who is or was serving at the request of Halliburton as a
director, officer, employee, or agent of another corporation or of a
partnership, joint venture, trust, or other enterprise,
to the fullest extent permitted by the DGCL as it existed at the time the
indemnification provisions of Halliburton's restated certificate of
incorporation and the by-laws were adopted or as each may be amended. Section 47
of Halliburton's by-laws and Article X of its restated certificate of
incorporation expressly provide that they are not the exclusive methods of
indemnification.
Section 47 of the by-laws provides that Halliburton may maintain insurance,
at its own expense, to protect itself and any director or officer of Halliburton
or of another entity against any expense, liability, or loss. This insurance
coverage may be maintained regardless of whether Halliburton would have the
power to indemnify the person against the expense, liability, or loss under the
DGCL.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary II-1
damages for breach
of fiduciary duty as a director. However, that provision shall not eliminate or
limit the liability of a director:
.- for any breach of the director's duty of loyalty to the corporation or
its stockholders;
.- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
.II-1
- under Section 174 of the DGCL, relating to liability for unauthorized
acquisitions or redemptions of, or dividends on, capital stock; or
.- for any transaction from which the director derived an improper personal
benefit.
Article XV of Halliburton's restated certificate of incorporation contains
this type of provision.
The Trust Agreement provides that Halliburton shall indemnify, to the
fullest extent permitted by law, any administrative trustee or affiliate
thereof and any officers, directors, stockholders, members, partners,
employees, representatives or agents of any administrative trustee and any
officer, employee or agent of the Trust or its affiliates (each a "Company
Indemnified Person") who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding by reason of
the fact that he is or was a Company Indemnified Person against expenses
(including attorneys' fees and expenses), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding except that no Company Indemnified Person shall be
indemnified for his own gross negligence or willful misconduct.
The Trust Agreement provides that if a Company Indemnified Person is
adjudged liable in an action that is brought by or in the right of the Trust,
no such indemnification shall be made in respect of any such claim, issue or
matter unless and only to the extent that the Court of Chancery of Delaware or
the court in which such action or suit was brought shall determine that such
Company Indemnified Person, in view of all the circumstances of the case, is
fairly and reasonably entitled to indemnity for such expenses which such Court
of Chancery or such other court shall deem proper. To the extent that a Company
Indemnified Person shall be successful on the merits or otherwise (including
dismissal of an action without prejudice or the settlement of an action without
admission of liability) in defense of any action, suit or proceeding, or in the
defense of any claim, issue or matter therein, he shall be indemnified, to the
full extent permitted by law, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
Expenses (including attorneys' fees and expenses) incurred by a Company
Indemnified Person in defending a civil, criminal, administrative or
investigative action, suit or proceeding shall be advanced by Halliburton in
certain circumstances.
The Trust Agreement also provides that Halliburton will indemnify the (i)
property trustee, (ii) the Delaware trustee, (iii) any affiliate of the
property trustee or the Delaware trustee, and (iv) any officers, directors,
shareholders, members, partners, employees, representatives, custodians,
nominees or agents of the property trustee or the Delaware trustee (each a
"Fiduciary Indemnified Person") for, and to hold each Fiduciary Indemnified
Person harmless against, any and all loss, liability, damage, claim or expense
including taxes (other than taxes based on the income of such Fiduciary
Indemnified Person) incurred without gross negligence (or, in the case of the
property trustee, negligence) or willful misconduct on its part, arising out of
or in connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees
and expenses) of defending itself against or investigating any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder.
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ITEM 16. EXHIBITSEXHIBITS.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
**1.1 -- Proposed Form of Underwriting Agreement.
4.1 --3.1* Restated Certificate of Incorporation of Halliburton Company
filed with the Secretary of State of Delaware on July 23,
1998 (incorporated by reference to Exhibit 3(a) to
Halliburton's Form 10-Q for the quarter ended June 30, 1998)1998,
File No. 1-3492).
4.2 -- Bylaws3.2* By-laws of Halliburton Company revised effective May 16, 2000February 12, 2003
(incorporated by reference to Exhibit 33.2 to Halliburton's
Form 10-K for the year ended December 31, 2002, File No.
1-3292).
4.1* Senior Indenture dated as of June 30, 2003 between
Halliburton and JPMorgan Chase Bank, as Trustee
(incorporated by reference to Exhibit 3.2 to Halliburton's
Form 10-Q for the quarter ended June 30, 2000)2003, File No.
1-3292).
**4.3 --4.2* Form of Debt Securities.
4.4 -- Secondnote of 3.125% Convertible Senior IndentureNotes due July 15,
2023 (included as Exhibit A to Exhibit 4.1 above).
4.3 Registration Rights Agreement dated as of June 30, 2003
between Halliburton and Citigroup Global Markets, Inc.,
Goldman, Sachs & Co. and J.P. Morgan Securities Inc., as
representatives of the several Purchasers named in Schedule
I of the Purchase Agreement dated as of June 24, 2003.
4.4* Restated Rights Agreement dated as of December 1, 1996
between the predecessor of Halliburton Company (the "Predecessor") and Texas Commerce Bank National Association, as trustee, as
supplemented and amended by the First Supplemental Indenture dated as of December 5, 1996
between the Predecessor and the trustee and the Second Supplemental Indenture dated as of
December 12, 1996 among the Predecessor, Halliburton Company and the trusteeMellon Investor Services LLC
(formerly ChaseMellon Shareholder Services, L.L.C.)
(incorporated by reference to Exhibit 4.24.4 of Halliburton's
Registration Statement on Form 8-B dated December 12, 1996,
File No. 1-03492)1-3492).
4.5 -- Third Supplemental Indenture dated as of August 1, 1997 between Halliburton Company and
Texas Commerce Bank National Association, as trustee, to the Second Senior Indenture dated as of
December 1, 1996 (incorporated by reference to Exhibit 4.7 to Halliburton's Form 10-K for the
year ended December 31, 1998).
4.6 -- Fourth Supplemental Indenture dated as of September 29, 1998 between Halliburton Company and
Chase Bank of Texas, National Association (formerly Texas Commerce Bank National
Association), as trustee, to the Second Senior Indenture dated as of December 1, 1996
(incorporated by reference to Exhibit 4.8 to Halliburton's Form 10-K for the year ended
December 31, 1998).
4.7 -- Subordinated Indenture dated as of January 2, 1991 between the Predecessor and Texas Commerce
Bank National Association, as trustee (incorporated by reference to Exhibit 4(c) to the
Predecessor's Registration Statement on Form S-3 (File No. 33-38394) originally filed with the
Securities and Exchange Commission on December 21, 1990), as supplemented and amended by
the First Supplemental Indenture dated as of December 12, 1996 among the Predecessor,
Halliburton Company and the trustee (incorporated by reference to Exhibit 4.3 of Halliburton's
Registration Statement on Form 8-B dated December 12, 1996, File No. 1-03492).
*4.8 -- Junior Subordinated Indenture dated November 29, 2001 between Halliburton Company and
JPMorgan Chase Bank, as trustee.
*4.9 -- Certificate of Trust of Halliburton Capital Trust I.
*4.10 -- Declaration of Trust of Halliburton Capital Trust I.
*4.11 -- Form of Amended and Restated Declaration of Trust of Halliburton Capital Trust I.
4.12 -- Form of Trust Preferred Security Certificate for Halliburton Capital Trust I (included in
Exhibit 4.11).
**4.13 -- Form of Trust Debentures of Halliburton Company.
*4.14 -- Form of Preferred Securities Guarantee in respect of Halliburton Capital Trust I, with respect to the
Trust Preferred Securities.
**4.15 -- Form of Warrants.
**4.16 -- Form of Depositary Agreement.
**4.17 -- Form of Depositary Receipt.
**4.18 -- Form of Stock Purchase Contracts.
II-3
**4.19 -- Form of Stock Purchase Units.
*4.20 --- Form of [First] [Second] Supplemental Indenture between Halliburton and JPMorgan Chase Bank,
as trustee, supplementing and amending the [Subordinated Indenture] [Junior Subordinated
Indenture].
*5.1 --+5.1 Opinion of Vinson & ElkinsBaker Botts L.L.P. (as to the validity of the securities (other than the trust
preferred securities)).
*5.2 -- Opinion of Morris, Nichols, Arsht & Tunnell, special counsel to Halliburton Company and
Halliburton Capital Trust I, as to the validitylegality of the
trust preferred securities.
*12.1 -- Computation12.1 Statement of ratioscomputation of Combined Fixed Charges and Preference Dividendsratio of earnings to Earnings.
*23.1 --fixed
charges.
23.1 Consent of Arthur Andersen LLP (included in the Registration Statement).
23.2 --KPMG LLP.
+23.3 Consent of Vinson & ElkinsBaker Botts L.L.P. (included in Exhibit 5.1).
23.3 -- Consent of Morris, Nichols, Arsht & Tunnell, special counsel to Halliburton Company and
Halliburton Capital Trust I (included in Exhibit 5.2).
24.1 -- Powers of Attorney (included in signature page).
*25.1 -- Form T-1Attorney.
25.1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of the Trustee under the Junior Subordinated Indenture and under the Guarantee with respect to the Trust
Preferred Securities.
*25.2 --on Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of the
Property Trustee under the Declaration of Trust of the Trust.T-1.
- --------
*Filed herewith
**---------------
* Incorporated by reference as indicated.
+ To be filed by amendment or in a Current Report on Form 8-K.with an amendment.
ITEM 17. UNDERTAKING
EachUNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post effectivepost-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range
II-2
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) underof the Securities Act of 1933 if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed onin the Registration Statement
or any material change to such information in the Registration
Statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
do not apply if the registration statement is on Form S-3 or Form S-8
and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
II-4
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statementregistration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
That,(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to sectionSection 13(a) or sectionSection 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to sectionSection 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statementregistration statement shall be deemed to be a new Registration
Statementregistration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, set forth in response to Item 15, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. IfIn the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
That, for purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the securities
offered herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The registrants hereby undertake to file an application for the purpose of
determining the eligibility of the trustee to act under subsection (a) of
Section 310 of the Trust Indenture Act ("Act") in accordance with the rules and
regulations prescribed by the Securities and Exchange Commission under Section
305(b)(2) of the Act.
II-5II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the RegistrantsCompany
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas,Houston, State of Texas, on December 3, 2001.October 28, 2003.
HALLIBURTON COMPANY
By: /s/ SUSAN S. KEITH
By: _________________________________
Susan S. Keith
Name: _______________________________
ViceDAVID J. LESAR
------------------------------------
David J. Lesar
Chairman of the Board, President and
Secretary
Title: ______________________________
HALLIBURTON CAPITAL TRUST I
By: Halliburton Company, as Sponsor
/s/ SUSAN S. KEITH
By: _________________________________
Susan S. Keith
Name: _______________________________
Vice President and Secretary
Title: ______________________________
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Lester L. Coleman,
Susan S. Keith and John M. Allen as his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
and any Registration Statement for the same offering filed pursuant to Rule 462
under the Securities Act of 1933, and to file the same, with all exhibits
thereto and all other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and thing appropriate
or necessary to be done, as fully and for all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on behalf of Halliburton Company by the following persons in the
capacities indicated and on December 3, 2001.
Signatures Titles
---------- ------
/s/ DAVID J. LESAR Chairman of the Board,
--------------------- President, Chief Executive Officer and Director
David J. Lesar
/s/ DOUGLAS L. FOSHEE Executive Vice President
--------------------- and Chief Financial Officer
Douglas L. Foshee
II-6October 28, 2003.
/s/ DAVID J. LESAR Chairman of the Board, President, Chief Executive
- -------------------------------------- Officer and Director (Principal Executive Officer)
David J. Lesar
/s/ C. CHRISTOPHER GAUT Executive Vice President and Chief Financial
- -------------------------------------- Officer (Principal Financial Officer)
C. Christopher Gaut
/s/ MARK A. MCCOLLUM Senior Vice President and Chief Accounting Officer
- -------------------------------------- (Principal Accounting Officer)
Mark A. McCollum
* ROBERT L. CRANDALL Director
- --------------------------------------
Robert L. Crandall
* KENNETH T. DERR Director
- --------------------------------------
Kenneth T. Derr
* CHARLES J. DIBONA Director
- --------------------------------------
Charles J. DiBona
* W. R. HOWELL Director
- --------------------------------------
W. R. Howell
* RAY L. HUNT Director
- --------------------------------------
Ray L. Hunt
* AYLWIN B. LEWIS Director
- --------------------------------------
Aylwin B. Lewis
* J. LANDIS MARTIN Director
- --------------------------------------
J. Landis Martin
* JAY A. PRECOURT Director
- --------------------------------------
Jay A. Precourt
* DEBRA L. REED Director
- --------------------------------------
Debra L. Reed
* C. J. SILAS Director
- --------------------------------------
C. J. Silas
*/s/ MARGARET E. CARRIERE
- --------------------------------------
Margaret E. Carriere,
Attorney-in-fact
II-4
Signatures Titles
---------- ------
/s/ R. CHARLES MUCHMORE, JR.// Vice President, Controller
------------------------------ and Chief Accounting Officer
R. Charles Muchmore, Jr.
/s/ LORD CLITHEROE Director
------------------------------
Lord Clitheroe
/s/ ROBERT L. CRANDALL Director
------------------------------
Robert L. Crandall
/s/ KENNETH T. DERR Director
------------------------------
Kenneth T. Derr
/s/ CHARLES J. DIBONA Director
------------------------------
Charles J. DiBona
/s/ LAWRENCE S. EAGLEBURGER Director
------------------------------
Lawrence S. Eagleburger
/s/ W.R. HOWELL Director
------------------------------
W.R. Howell
/s/ RAY L. HUNT Director
------------------------------
Ray L. Hunt
/s/ AYLWIN B. LEWIS Director
------------------------------
Aylwin B. Lewis
/s/ J. LANDIS MARTIN Director
------------------------------
J. Landis Martin
/s/ JAY A. PRECOURT Director
------------------------------
Jay A. Precourt
/s/ DEBRA L. REED Director
------------------------------
Debra L. Reed
/s/ C. J. SILAS Director
------------------------------
C. J. Silas
II-7
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on behalf of Halliburton Capital Trust I
by the following persons in the capacities indicated, on December 3, 2001.
Signature Title
--------- -----
/s/ SUSAN S. KEITH Administrative Trustee
----------------------
Susan S. Keith
/s/ JOHN M. ALLEN Administrative Trustee
----------------------
John M. Allen
/s/ BRUCE A. METZINGER Administrative Trustee
----------------------
Bruce A. Metzinger
II-8
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporationINDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
3.1* Restated Certificate of Incorporation of Halliburton Company
filed with the Secretary of State of Delaware on July 23,
1998 (incorporated by reference to Exhibit 3(a) to
Halliburton's Form 10-Q for the quarter ended June 30, 1998,
File No. 1-3492).
3.2* By-laws of Halliburton revised effective February 12, 2003
(incorporated by reference to Exhibit 3.2 to Halliburton's
Form 10-K for the year ended December 31, 2002, File No.
1-3292).
4.1* Senior Indenture dated as of June 30, 2003 between
Halliburton and JPMorgan Chase Bank, as Trustee
(incorporated by reference to Exhibit 3.2 to Halliburton's
Form 10-Q for the quarter ended June 30, 2003, File No.
1-3292).
4.2* Form of note of 3.125% Convertible Senior Notes due July 15,
2023 (included as Exhibit A to Exhibit 4.1 above).
4.3 Registration Rights Agreement dated as of June 30, 2003
between Halliburton and Citigroup Global Markets, Inc.,
Goldman, Sachs & Co. and J.P. Morgan Securities Inc., as
representatives of the several Purchasers named in Schedule
I of the Purchase Agreement dated as of June 24, 2003.
4.4* Restated Rights Agreement dated as of December 1, 1996
between Halliburton and Mellon Investor Services LLC
(formerly ChaseMellon Shareholder Services, L.L.C.)
(incorporated by reference to Exhibit 4.4 of Halliburton's
Registration Statement on Form 8-B dated December 12, 1996,
File No. 1-3492).
+5.1 Opinion of Baker Botts L.L.P. as to the legality of the
securities.
12.1 Statement of computation of ratio of earnings to fixed
charges.
23.1 Consent of KPMG LLP.
+23.3 Consent of Baker Botts L.L.P. (included in Exhibit 5.1).
24.1 Powers of Attorney.
25.1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of the Trustee on Form T-1.
- ---------------
* Incorporated by reference in this registration statement on Form S-3 of our report dated
January 30, 2001 (exceptas indicated.
+ To be filed with respect to the matters discussed in Notes 9 and
19, as to which the date is March 23, 2001) included in Halliburton Company's
Form 10-K for the year ended December 31, 2000 and to all references to our
Firm included in this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Dallas, Texas,
November 30, 2001
II-9an amendment.