e424b2
Filed Pursuant to Rule 424(b)(2)
Registration Statement
333-157879
PROSPECTUS
$250,000,000
[SYNTROLEUM LOGO SCRIPT]
Debt Securities
Common Stock
Preferred Stock
Depositary Shares
Warrants
Stock Purchase Contracts
We may offer and sell the securities listed above from time to time in one or more offerings
in one or more classes or series. The aggregate initial offering price of the securities that we
will offer will not exceed $250,000,000. We will offer the securities in amounts, at prices and on
terms to be determined by market conditions at the time of the offerings. The securities may be
offered separately or together in any combination or as a separate series.
This prospectus provides you with a general description of the securities that may be offered. Each
time securities are offered, we will provide a prospectus supplement and attach it to this
prospectus. The prospectus supplement will contain more specific information about the offering and
the terms of the securities being offered. The supplements may also add, update or change
information contained in this prospectus.
We may sell these securities directly or through agents, underwriters or dealers, or through a
combination of these methods. See “Plan of Distribution” on page 32 of this prospectus. The
prospectus supplement will list any agents, underwriters or dealers that may be involved and the
compensation they will receive. The prospectus supplement will also show you the total amount of
money that we will receive from selling the securities being offered, after the expenses of the
offering. You should carefully read this prospectus and any accompanying prospectus supplement, the
documents we incorporate by reference, together with additional information described under the
heading “Where You Can Find More Information” before you invest in any of our securities.
Our common stock is listed for trading on the NASDAQ Capital Market under the symbol “SYNM.” We
will make application to list any shares of common stock sold by us under this prospectus and any
prospectus supplement on the NASDAQ Capital Market. On July 12, 2010, the last reported sales
price of our common stock on the NASDAQ Capital Market was $1.77.
Investing in our securities involves risks. You should carefully read and consider the “Risk
Factors” included in this prospectus, in our periodic reports, in any prospectus supplements
relating to specific offerings of securities and in other documents that we file with the
Securities and Exchange Commission (“SEC”). See “Risk
Factors” beginning on page 3 of this
prospectus.
Neither the SEC 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.
This prospectus may not be used to offer or sell securities without a prospectus supplement
describing the method and terms of the offering.
The date of this prospectus is July 14, 2010
TABLE OF CONTENTS
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You should rely only on the information contained in or incorporated by reference into this
prospectus and any prospectus supplement. We have not authorized any dealer, salesman or other
person to provide you with additional or different information. If anyone provides you with
different or inconsistent information, you should not rely on it. This prospectus and any
prospectus supplement are not an offer to sell or the solicitation of an offer to buy any
securities other than the securities to which they relate and are not an offer to sell or the
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. You should not assume that the information
contained in this prospectus is accurate as of any date other than the date on the front cover of
this prospectus, or that the information contained in any document incorporated by reference is
accurate as of any date other than the date of the document incorporated by reference, regardless
of the time of delivery of this prospectus or any sale of a security.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with the SEC under a “shelf”
registration process. This prospectus provides you with a general description of the offered
securities. Each time we use this prospectus to offer securities, we will provide a prospectus
supplement and, if applicable, a pricing supplement that will describe the specific terms of the
offering. The prospectus supplement and any pricing supplement may also add to, update or change
the information contained in this prospectus. Please carefully read this prospectus, the prospectus
supplement and any pricing supplement, in addition to the information contained in the documents we
refer to under the heading “Where You Can Find More Information.”
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in or incorporated by reference into this prospectus, our filings with
the SEC and our public releases are forward-looking statements within the meaning of Section 27A(i)
of the Securities Act of 1933, or the Securities Act, and Section 21E(i) of the Securities Exchange
Act of 1934, or the Exchange Act. These forward looking statements include, but are not limited
to, statements relating to the Fischer-Tropsch process, the Syntroleum® Process, the Synfining®
Process, the Bio-SynfiningTM Technology and related technologies including, gas-to-liquids,
coal-to-liquids and biomass-to-liquids plants based on such technologies, anticipated costs to
design, construct and operate these plants, the timing of commencement and completion of the design
and construction of these plants, expected production of ultra-clean fuel, obtaining required
financing for these plants and our other activities, the value and markets for plant products,
testing, certification, characteristics and use of plant products, the continued development of
such technologies (alone or with co-venturers) and the anticipated capital expenditures, expenses,
cash outflows, use of proceeds from our equity offerings, revenues, availability of catalyst
materials, availability of finished catalyst, our support of and relationship with our licensees,
and information regarding the status and progress of our operating activities, the plans and
objectives of our management, assumptions regarding our future performance and plans, and any
financial guidance. The words “believe,” “may,” “will,” “estimate,” “continues,” “anticipate,”
“intend,” “forsee,” “expect” and similar expressions identify these forward-looking statements,
although not all forward-looking statements contain these identifying words. These forward-looking
statements
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are made subject to certain risks and uncertainties that could cause actual results to
differ materially from those stated. Risks and uncertainties that could cause or contribute to such
differences include, without limitation, those discussed in the section entitled “Risk Factors”
included in this prospectus and elsewhere in or incorporated by reference into this prospectus,
including our Annual Report
on Form 10-K for the fiscal year ended December 31, 2009 and our subsequent SEC filings.
Syntroleum undertakes no obligation to update or revise forward-looking statements to reflect
changed assumptions, the occurrence of unanticipated events or actual future results.
ABOUT SYNTROLEUM CORPORATION
Syntroleum Corporation and subsidiaries, which we sometimes collectively refer to herein as
“Syntroleum,” the “Company,” “we,” “us,” or “our,” develops and employs innovative technology to
produce synthetic liquid hydrocarbons utilizing our Bio-Synfining™ renewable fuels,
Fischer-Tropsch (“FT”) and product upgrading technologies. To date, our business activities have
consisted of the research and development of the “Syntroleum® Process,” a proprietary process
designed to convert natural gas into synthetic liquid hydrocarbons (“gas-to-liquids” or “GTL”), and
the further processing of the synthetic liquid hydrocarbons into high quality liquid fuels using
product upgrading technologies developed by us. Our Bio-Synfining™ Technology is a renewable fuels
application of our Synfining® product upgrading technology. We are also applying our technology to
convert synthesis gas derived from coal (“coal-to-liquids” or “CTL”) or bio-feedstocks
(“biomass-to-liquids” or “BTL”) into these same high quality liquid fuel products. We refer to all
of our proprietary processes and technologies as the “Syntroleum Technologies.”
Our objective is to become a recognized provider of the Bio-Synfining™ Technology, Syntroleum®
Process and Synfining® product upgrading technology to the energy industry through strategic
relationships and the licensing of our technology. We are currently focused on commercializing our
Bio-Synfining™ Technology. We have formed the Dynamic Fuels joint venture with Tyson Foods, a
leading supplier of bio-feedstock, to construct a facility in the United States using our
Bio-Synfining™ Technology and continue to seek to form other joint venture projects with
opportunities to acquire equity interests. We have also licensed our technologies to others for a
fee.
We have incurred substantial research and development costs and continue to incur operating costs
with respect to commercializing the Syntroleum® Technologies, and do not anticipate recognizing any
significant revenues from licensing our technology or from production from any plant in which we
own an interest in the near future. As a result, we expect to continue to operate at a loss until
sufficient revenues are recognized from commercial operation of plants, licensing activities, or
non-FT projects we are developing. We may obtain funding through joint ventures, license
arrangements and other strategic alliances, as well as various other financing arrangements to meet
our capital and operating needs for various projects. Our longer-term survival will depend on our
ability to generate operating revenues and obtain additional financing.
Our principal executive offices are located at 5416 South Yale Avenue, Suite 400, Tulsa, Oklahoma
74135, and our telephone number at that location is (918) 592-7900.
RISK FACTORS
An investment in our securities involves a high degree of risk. Investors should carefully
consider the risks described below before making an investment decision. Our business, financial
condition or results of operations could be materially and adversely affected by any of these
risks. The trading price or value of our securities could decline due to any of these risks, and
investors may lose all or part of your investment.
Risks Relating to Our Technology
We might not successfully commercialize our technology, and commercial-scale plants based on the
Syntroleum® Technologies may never be successfully constructed or operated by ourselves or our
licensees.
We do not have significant experience managing the financing, design, construction or operation of
commercial-scale plants, and we may not be successful in doing so. No commercial-scale plant based
on a Syntroleum® Technology has been constructed to completion to date. A commercial-scale plant
based on a Syntroleum® Technology may never be successfully built either by us or by
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our licensees.
Success depends on our licensees’ ability to economically design, construct and operate
commercial-scale plants based on the Syntroleum® Technologies which depends on a variety of
factors, many of which are outside our control.
Our licensees will determine whether we issue any plant site licenses to them and, as a result,
whether we receive any license fees under our license agreements. To date, no licensee of the
Syntroleum® Technologies has exercised its right to obtain a site license. Whether licensees are
willing to expend the resources necessary to construct plants based on the Syntroleum® Technologies
will
depend on a variety of factors outside our control, including the prevailing view regarding the
price outlook for crude oil, natural gas, coal, biomass, fats, vegetable oils and refined products.
In addition, our license agreements may be terminated by the licensee, with or without cause and
without penalty, upon 90 days’ notice to us. If we do not receive payments under our license
agreements, we may not have sufficient resources to implement our business strategy. Our licensees
are not restricted from pursuing alternative FT or renewable fuels technologies on their own or in
collaboration with others, including our competitors, with the exception of those restrictions
agreed to by Tyson in the limited liability company agreement relating to Dynamic Fuels.
Commercial-scale plants based on the Syntroleum® Technologies might not produce results necessary
for success, including results demonstrated on a laboratory, pilot plant and demonstration basis.
A variety of results necessary for successful operation of the Syntroleum® Technologies could fail
to occur at a commercial plant, including reactions successfully tested on a laboratory, pilot
plant or demonstration plant basis. Results that could cause commercial-scale plants based on the
Syntroleum® and Synfining® Processes to be unsuccessful include:
• lower reaction activity than demonstrated in the pilot plant and demonstration
plant operations which would decrease the conversion of natural gas into synthesis gas
and increase the amount of catalyst, and/or number of reactors required to produce the
design synthesis gas rate;
• lower reaction activity than that demonstrated in laboratory, pilot plant and
demonstration plant operations, which would increase the amount of catalyst or number of
reactors required to convert synthesis gas into liquid hydrocarbons and increase capital
and operating costs;
• shorter than anticipated catalyst life, which would require more frequent
catalyst regeneration, catalyst purchases, or both, thereby increasing operating costs;
• excessive production of gaseous light hydrocarbons from the FT reaction compared
to design conditions, which would lower the anticipated amount of liquid hydrocarbons
produced and would lower revenues and margins from plant operations;
• lower reaction activity than that demonstrated in laboratory, pilot plant and
demonstration plant operations, which would increase the amount of catalyst or number of
reactors required to convert FT products into finished, marketable fuels;
• inability of third-party gasification and synthesis gas clean-up technology
integrated into the Syntroleum® Process to produce on specification synthesis gas
adequate for economic operation of a GTL, CTL or BTL plant; and
• higher than anticipated capital and operating costs.
Results that could cause commercial-scale plants based on our Bio-Synfining™ Technology to be
unsuccessful include:
• higher than anticipated catalyst or hydrogen consumption;
• inadequate removal of feedstock impurities in pre-treatment;
• lower process yields than that demonstrated in laboratory operations; and
• higher than anticipated capital and operating costs.
In addition, these plants could experience mechanical difficulties related or unrelated to
elements of the Syntroleum® Technologies.
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Many of our competitors have significantly more resources than we do, and technologies developed by
competitors could become more commercially successful than ours or render our technologies
obsolete.
Development and commercialization of FT and renewable fuels technologies is highly competitive, and
other technologies could become more commercially successful than ours. The Syntroleum®
Technologies are based on chemistry that has been used by several companies in synthetic fuel
projects over the past 60 years. Our competitors include major integrated oil companies as well as
independent technology providers that have developed or are developing competing FT or renewable
fuels technologies. These companies typically have significantly more resources than we do.
As our competitors continue to develop FT and renewable fuels technologies, one or more of our
current technologies could become obsolete. Our ability to create and maintain technological
advantages is critical to our future success. As new technologies develop, we may be placed at a
competitive disadvantage forcing us to implement new technologies at a substantial cost. We may not
be able to successfully develop or expend the financial resources necessary to acquire or develop
new technology.
Our ability to protect our intellectual property rights involves complexities and uncertainties and
commercialization of the Syntroleum® Technologies could give rise to claims that our technology
infringes upon the rights of others.
Our success depends on our ability to protect our intellectual property rights, which involves
complex legal, scientific and factual questions and uncertainties. We rely on a combination of
patents, copyrights, trademarks, trade secrets and contractual restrictions to protect our
proprietary rights. Additional patents may not be granted, and our existing patents might not
provide us with commercial benefit or might be infringed upon, invalidated or circumvented by
others. In addition, the availability of patents in foreign markets, and the nature of any
protection against competition that may be afforded by those patents, is often difficult to predict
and vary significantly from country to country. We, our licensors, or our licensees may choose not
to seek, or may be unable to obtain, patent protection in a country that could potentially be an
important market for our GTL, CTL, BTL or Bio-Synfining™ Technologies. The confidentiality
agreements that are designed to protect our trade secrets could be breached, and we might not have
adequate remedies for the breach. Additionally, our trade secrets and proprietary know-how might
otherwise become known or be independently discovered by others.
Commercialization of the Syntroleum® Technologies may give rise to claims that our technologies
infringe upon the patents or proprietary rights of others. We may not become aware of patents or
rights that may have applicability in the GTL, BTL, CTL or renewable fuels industry until after we
have made a substantial investment in the development and commercialization of those technologies.
Third parties may claim that we have infringed upon past, present or future GTL, BTL, and CTL or
renewable fuels technologies. Legal actions could be brought against us, our co-venturers or our
licensees claiming damages and seeking an injunction that would prevent us, our co-venturers or our
licensees from testing, marketing or commercializing the affected technologies. If an infringement
action were successful, in addition to potential liability for damages, our co-venturers, our
licensees or we could be required to obtain a license in order to continue to test, market or
commercialize the affected technologies. Any required license might not be made available or, if
available, might not be available on acceptable terms, and we could be prevented entirely from
testing, marketing or commercializing the affected technology. We may have to expend substantial
resources in litigation, either in enforcing our patents, defending against the infringement claims
of others, or both. Many possible claimants, such as the major energy companies that have or may be
developing proprietary GTL, CTL, BTL or renewable fuels technologies competitive with the
Syntroleum® Technologies, have significantly more resources to spend on litigation.
We could have potential indemnification liabilities to licensees relating to the operation of
plants based on the Syntroleum® Technologies or intellectual property disputes.
Our indemnification obligations could result in substantial expenses and liabilities to us if
intellectual property rights claims were to be made against us or our licensees, or if plants based
on the Syntroleum® Technologies were to fail to operate as designed. Generally our license
agreements require us to indemnify the licensee, subject to certain limitations against specified
losses relating to, among other things:
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• use of patent rights and technical information relating to the Syntroleum®
Technologies;
• acts or omissions by us in connection with our preparation of process design
packages for plants; and
• performance guarantees that we may provide.
Risks Relating to Products of the Syntroleum® Technologies
The U.S. renewable fuels industry is highly dependent on a mix of federal and state legislation and
regulation and any changes in legislation or regulation could harm our business and financial
condition.
Federal tax incentives make the cost of renewable diesel production significantly more competitive
with the price of diesel. Currently, under the Energy Independence Act and the Energy Policy Act of
2005, or EPAct, the tax credit to producers of diesel/renewable diesel blends of up to a $1.00 tax
credit per gallon expired on December 31, 2009. There can be no assurance that it will be renewed
on similar terms, if at all. Additionally, the tax credit for producers of naphtha and liquid
petroleum gases of $0.50 per gallon expired on December 31, 2009. There can be no assurance of this
credit’s continued existence, and its elimination would be harmful to our business and financial
condition. Finally, these credits and other federal and state programs that benefit renewable
diesel generally are subject to U.S. government obligations under international trade agreements,
including those under the World Trade Organization Agreement on Subsidies and Countervailing
Measures, which might in the future be the subject of challenges. The elimination or significant
reduction in the renewable diesel tax credit or other programs could harm our results of operations
and financial condition.
The Energy Independence Act and EPAct established minimum nationwide levels of renewable fuels,
which include biodiesel, ethanol and any liquid fuel produced from biomass or biogas, to be blended
into the fuel supply. By the year 2022, these standards require that the national volume of
renewable fuels to be blended into the fuel supply equal or exceed 36 billion gallons. While these
renewable fuel standards should stimulate demand for renewable fuels generally, there can be no
assurance of specific demand for renewable diesel. Additionally, the U.S. Department of Energy, in
consultation with the Secretary of Agriculture and the Secretary of Energy, may waive the renewable
fuels mandate with respect to one or more states if the Administrator of the U.S. Environmental
Protection Agency, or EPA, determines that implementing the requirements would severely harm the
economy or the environment of a state, a region or the U.S., or that there is inadequate supply to
meet the requirement. Any waiver of the renewable fuel standards could adversely impact the demand
for renewable diesel and may have a material adverse effect on our financial condition and results
of operations.
Risks Relating to Our Business
We will need to obtain funds from additional financings or other sources for our business
activities. If we do not receive these funds, we would need to reduce, delay or eliminate some of
our expenditures.
In 2009, we generated cash flow from operations from the deployment of our technology and other
engineering services. In the past, we have sustained recurring losses and negative cash flows from
operations. As of December 31, 2009, we had approximately $25.0 million of cash and cash
equivalents and $3.3 million of accounts receivable available to fund operations and investing
activities. We review cash flow forecasts and budgets periodically.
We expect that we will need to raise substantial additional capital to accomplish our business plan
over the next several years. We expect to seek to obtain additional funding through debt or equity
financing in the capital markets, joint ventures, license agreements, sale of assets and other
strategic alliances, as well as various other financing arrangements. If we obtain additional funds
by issuing equity securities, dilution to stockholders may occur. In addition, preferred stock
could be issued in the future without stockholder approval, and the terms of our preferred stock
could include dividend, liquidation, conversion, voting and other rights that are more favorable
than the rights of the holders of our common stock. There can be no assurance as to the
availability or terms upon which such financing and capital might be available.
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Our agreement with Tyson concerning Dynamic Fuels allows the participants to elect not to invest in
a plant or to cease making capital contributions in the construction of a plant under certain
circumstances. Should a participant in a project elect not to invest or to cease investing in the
construction of the plant the other participants in the project will need to raise additional
capital from third parties or to take on additional interest in the project and fund the additional
capital internally. There can be no assurances that we would be able to raise the additional
capital from third parties on terms acceptable to us or to fund the additional capital requirements
internally. The issue of our capital commitments is discussed in our periodic filings with the SEC
at “Management’s Discussion and Analysis of Financial Condition and Results of Operation –
Contractual Obligations”.
If adequate funds are not available, we may be required to reduce, delay or eliminate expenditures
for our plant development and other activities, or seek to enter into a business combination
transaction with or sell assets to another company. We could also be forced to license to third
parties the rights to commercialize additional products or technologies that we would otherwise
seek to develop ourselves. The transactions outlined above may not be available to us when needed
or on terms acceptable or favorable to us.
We need to remain listed on the NASDAQ stock market to be able to access adequate funding from time
to time. We face de-listing issues that would impair the liquidity of our stock and our
availability to access the capital markets.
Our stock price has remained above $1.00 per share since March, 2009. NASDAQ rules call for the
potential de-listing of a company if its stock trades under $1.00 per share for 30 consecutive
days. If our stock price declines below $1.00 per share as it has in the past, we can make no
assurance that we will be able to remain listed on the NASDAQ Capital Market.
Construction and operations of plants based on the Syntroleum® Technologies will be subject to
risks of delay and cost overruns.
The construction and operation of plants based on the Syntroleum® Technologies will be subject to
the risks of delay or cost overruns resulting from numerous factors, including the following:
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shortages of equipment, materials or skilled labor; |
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unscheduled delays in the delivery of ordered materials and equipment; |
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engineering problems, including those relating to the commissioning of newly designed
equipment; |
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work stoppages; |
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weather interference; |
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unanticipated cost increases; and |
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difficulty in obtaining necessary permits or approvals. |
We have in fact experienced some delay and cost overrun on the construction of the first Dynamic
Fuels’ Bio-Synfining plant.
We have incurred losses and anticipate continued losses.
As of December 31, 2009, we had an accumulated deficit of $332.9 million. We achieved profitability
from continuing operations for the first time in 2009. Because we do not have an operating history
upon which an evaluation of our prospects can be based, our prospects must be considered in light
of the risks, expenses and difficulties frequently encountered by small companies seeking to
develop new and rapidly evolving technologies. To address these risks we must, among other things,
continue to attract investment capital, respond to competitive factors, continue to attract, retain
and motivate qualified personnel and commercialize and continue to upgrade the Syntroleum®
Technologies. We may not be successful in addressing these risks, and we may not achieve or sustain
profitability.
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Our anticipated expense levels are based in part on our expectations as to future operating
activities and not on historical financial data. We plan to continue funding project development
activities. Capital expenditures will depend on progress we make in developing various projects on
which we are currently working. Increased revenues or cash flows may not result from these
expenses.
If prices or margins for crude oil, natural gas, coal, vegetable oils and fats and other
commodities are unfavorable, plants based on the Syntroleum® Technologies may not be economical.
Because the synthetic crude oil, liquid fuels and specialty products that plants utilizing the
Syntroleum® Technologies are expected to produce will compete in markets with oil and refined
petroleum products, and because natural gas, coal, biomass, fats or vegetable oils
will be used as the feedstock for these plants, an increase in feedstock prices relative to prices
for oil or refined products, or a decrease in prices for oil or refined products relative to
feedstock prices, could adversely affect the operating results of these plants. Higher than
anticipated costs for the catalysts and other materials used in these plants could also adversely
affect operating results. Prices for oil, natural gas, coal, biomass, fats, greases, vegetable oils
and refined products are subject to wide fluctuation in response to relatively minor changes in
supply and demand, market uncertainty and a variety of additional factors that are beyond our
control. Factors that could cause changes in the prices and availability of oil, natural gas, coal,
biomass, fats, vegetable oils and refined products include:
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level of consumer product demand; |
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weather conditions; |
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domestic and foreign government regulation; |
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actions of the Organization of Petroleum Exporting Countries; |
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political conditions in countries producing feedstocks for fuels plants; |
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supply of crude oil, natural gas, coal, biomass fats, greases and vegetable oils; |
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location of GTL plants relative to natural gas reserves and pipelines; |
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location of CTL plants relative to coal reserves and transportation systems; |
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location of BTL plants relative to biomass reserves and transportation systems; |
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capacities of pipelines; |
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fluctuations in seasonal demand; |
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crop yields; |
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seasonality of prices for feedstocks and refined products; |
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farmer planting decisions; |
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output and proximity of crush facilities that convert the crops to oils; |
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alternative uses for fats; |
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number of animals slaughtered and rendered; |
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price and availability of alternative fuels; and |
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overall economic conditions. |
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We cannot predict the future markets and prices for oil, natural gas, coal or other materials used
in the Syntroleum® Technologies or refined products.
We believe that the Syntroleum® and Synfining® Processes can be economic for GTL, BTL and CTL
plants given the current world crude oil prices. However, the markets for oil and natural gas have
historically been volatile and are likely to continue to be volatile in the future. Crude oil
prices could return to such low levels in the future.
Our success depends on the performance of our executive officers and key personnel, the loss of who
would disrupt our business operations.
We depend to a large extent on the performance of our executive officers, including Edward G. Roth,
our Chief Executive Officer, Karen L. Gallagher, our Senior Vice President of Finance and Principal
Financial Officer. Our ability to implement our business strategy may be constrained and the timing
of implementation may be impacted if we are unable to attract and retain sufficient personnel. At
December 31, 2009, we had 19 full-time employees. We do not maintain “key person” life insurance
policies on any of our employees. We have entered into employment agreements with several key
employees.
We depend on strategic relationships with feedstock suppliers, construction contractors, site
owners, manufacturing and engineering companies, and customers. If we are not successful in
entering into and achieving the benefits of these relationships, this could negatively impact our
business.
Our or our licensee’s ability to identify and enter into commercial arrangements with feedstock
suppliers, construction contractors, engineering service companies, site owners, manufacturing and
engineering companies, and customers will depend on developing and maintaining close working
relationships with industry participants. Our success in this area will also depend on our ability
to select and evaluate suitable projects, as well as to consummate transactions in a highly
competitive environment. These relationships may take the form of joint ventures with other
private parties or local government bodies, contractual arrangements with other companies,
including those that supply feedstock that we will use in our business, or minority investments
from third parties. There can be no assurances that we will be able to establish these strategic
relationships, or, if established, that the relationships will be maintained. In addition, the
dynamics of our relationships with strategic participants may require us to incur expenses or
undertake activities we would not otherwise be inclined to incur or undertake in order to fulfill
our obligations to these partners or maintain these relationships. If we do not successfully
establish or maintain strategic relationships, our business may be negatively affected.
Our operating results may be volatile due to a variety of factors and are not a meaningful
indicator of future performance.
We expect to experience significant fluctuations in future annual and quarterly operating results
because of the unpredictability of many factors that impact our business. These factors include:
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timing of any construction by us or our licensees of plants; |
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demand for licenses or other technology transfer agreements of the Syntroleum® Technologies
and receipt and revenue recognition of license fees; |
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feedstock prices; |
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prices for refined products |
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demand for synthetic fuels and specialty products; |
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introduction or enhancement of FT and renewable fuels technologies by us and our
competitors; |
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market acceptance of new technologies; and |
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general economic conditions. |
As a result, we believe that period-to-period comparisons of our results of operations are not
meaningful and should not be relied upon as any indication of future performance. Due to all of the
foregoing factors, it may be that in some future year or quarter our operating
- 9 -
results will be
below the expectations of public market analysts and investors. In that event, the price of our
common stock would likely be materially adversely affected.
We are subject to extensive laws relating to the protection of the environment, and these laws may
increase the cost of designing, constructing and operating our plants based on the Syntroleum®
Technologies or affect demand for the products of these plants.
If we violate any of the laws and regulations relating to the protection of the environment, we may
be subject to substantial fines, criminal sanctions or third party lawsuits and may be required to
install costly pollution control equipment or, in some extreme cases, curtail operations. Our FT
and renewable fuels plants will generally be required to obtain permits under applicable
environmental laws and various permits for industrial siting and construction. Compliance with
environmental laws and regulations, as well as with any requisite environmental or construction
permits, may increase the costs of designing, constructing and operating our plants. We may also
face exposure to actual or potential claims and lawsuits involving environmental matters with
respect to our previously owned real estate.
Changes in environmental laws and regulations occur frequently, and any changes may have a material
adverse effect on our results of operations, competitive position, or financial condition. For
instance, in response to studies suggesting that emissions of certain gases,
commonly referred to as greenhouse gases and including carbon dioxide and methane, may be
contributing to warming of the Earth’s atmosphere, the U.S. Congress is actively considering
legislation, and more than a dozen states have already taken legal measures to reduce emission of
these gases, primarily through the planned development of greenhouse gas emission inventories
and/or regional greenhouse gas cap and trade programs. New legislation or regulatory programs that
restrict emissions of greenhouse gases could have an adverse affect on our operations.
Terrorist threats and U.S. military actions could result in a material adverse effect on our
business.
Further acts of terrorism in the United States or elsewhere could occur. These developments and
similar future events may cause instability in the world’s financial and insurance markets and
could significantly increase political and economic instability in the geographic areas in which we
may wish to operate. These developments could also lead to increased volatility in prices for crude
oil, natural gas and the feedstocks for our plants and the cost and availability of insurance. In
addition, these developments could adversely affect our ability to access capital and to
successfully implement projects currently under development.
United States government regulations effectively preclude us from actively engaging in business
activities in certain countries. These regulations could be amended to cover countries where we may
wish to operate in the future. These developments could subject the operations of our company to
increased risks and, depending on their magnitude, could have a material adverse effect on our
business.
We may not have enough insurance to cover all of the risks we face.
In accordance with customary industry practices, we maintain insurance coverage against some, but
not all, potential losses in order to protect against the risks we face. We do not carry a
significant amount of business interruption insurance. We may elect not to carry insurance if our
management believes that the cost of available insurance is excessive relative to the risks
presented. In addition, we cannot insure fully against pollution and environmental risks. The
occurrence of an event not fully covered by insurance, such as a leak, fire or explosion could have
a material adverse effect on our financial condition and results of operations.
Risks Related to the Offering
The concentrated ownership of our common stock may have the effect of delaying or preventing a
change of control of our company.
- 10 -
As of June 1, 2010, our directors and officers beneficially owned approximately 5% of the
outstanding shares of our common stock. As a result, our directors and officers, to the extent they
act together, will be in a position to significantly influence the outcome of matters requiring a
stockholder vote, including the election of directors, the adoption or amendment of provisions in
our certificate of incorporation or bylaws and the approval of mergers and other significant
corporate transactions. This concentrated ownership of our common stock may have the effect of
delaying or preventing a change of control of our company and may adversely affect the voting and
other rights of stockholders.
Our stock price may continue to be volatile and could decline following this offering.
Historically, the market price of our common stock has been very volatile. The trading price of our
common stock is expected to continue to be subject to substantial volatility in response to
numerous factors, including publicity regarding actual or potential results with respect to
development of the Syntroleum® Technologies and design, construction and commercial operation of
plants using our process, announcements of technological innovations by others with competing FT
processes, developments concerning intellectual property rights, including claims of infringement,
annual and quarterly variances in operating results, changes in energy prices, competition, changes
in financial estimates by securities analysts, any differences in actual results and results
expected by investors and analysts, investor perception of our favorable or unfavorable prospects
and other events or factors. In addition, the stock market has experienced and continues to
experience significant price and volume volatility that has affected the market price of equity
securities of many companies. This volatility has often been unrelated to the operating performance
of those companies. These broad market fluctuations may adversely affect the market price of our
common stock. We are required to maintain standards for listing of
our common stock on the NASDAQ Capital Market, and we cannot assure you that we will be able to do
so. There is no guarantee that an active public market for our common stock will be sustained.
Provisions in our charter documents and Delaware law may delay or prevent an acquisition of
our company, which could decrease the value of our common stock.
Our certificate of incorporation and bylaws and Delaware law contain provisions that could make it
difficult for a third party to acquire our company without the consent of our board of directors,
even if doing so would benefit our stockholders. The provisions of our certificate of
incorporation and bylaws include a classified board of directors with staggered terms. Thus,
control of the board of directors cannot be changed in one year; rather, at least two annual
meetings must be held before a majority of the members of the board of directors could be changed.
The provisions of our certificate of incorporation also require a supermajority voting approval for
business combinations with owners of 10% or more of our common stock and restrictions on the
ability of stockholders to take action by written consent. In addition, our board of directors has
adopted a stockholder rights plan, and is authorized to set the terms of our preferred stock
without stockholder approval. If our board of directors elects to issue preferred stock it could
be more difficult to acquire control of us. Delaware law also imposes some restrictions on mergers
and other business combinations between our company and owners of 15% or more of our common stock.
Provisions of our certificate of incorporation and bylaws may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider in his or her best interest, including
attempts that might result in a premium over the market price for the common stock and could
depress the value of our common stock.
Future sales of our common stock could adversely affect our stock price.
Substantial sales of our common stock in the public market, or the perception by the market that
those sales could occur, could lower our stock price or make it difficult for us to raise
additional equity capital in the future. These sales could include sales of shares of our common
stock by our directors and officers, who beneficially owned approximately 5% of the outstanding
shares of our common stock as of June 1, 2010. We cannot predict if future sales of our common
stock, or the availability of our common stock for sale, will harm the market price for our common
stock or our ability to raise capital by offering equity securities.
USE OF PROCEEDS
Unless we inform you otherwise in the prospectus supplement or any pricing supplement, we will use
the net proceeds from the sale of the offered securities for general corporate purposes. These
purposes may include capital expenditures, working capital, repayment or
- 11 -
refinancing of
indebtedness, acquisitions and repurchases and redemptions of securities. Pending any specific
application, we may initially invest funds in short-term marketable securities or apply them to the
reduction of short-term indebtedness.
DILUTION
Our net tangible book value at March 31, 2010 was $0.40 per share of common stock. Net tangible
book value per share of common stock is determined by dividing our tangible net worth, which is
tangible assets less liabilities, by the total number of shares of our common stock outstanding. If
we offer shares of our common stock, purchasers of our common stock in that offering may experience
immediate dilution in net tangible book value per share. The prospectus supplement relating to an
offering of shares of our common stock will set forth the information regarding any dilutive effect
of that offering.
RATIO OF EARNINGS TO FIXED CHARGES
Our deficiency of earnings to fixed charges for each of the periods shown is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Year Ended December 31, |
|
| |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Earnings
available
(Deficiency of
earnings) to
fixed charges |
|
$ |
5,038 |
|
|
$ |
(5,448 |
) |
|
$ |
(10,550 |
) |
|
$ |
(28,070 |
) |
|
$ |
(21,837 |
) |
We have computed the amount by which earnings available for fixed charges were insufficient to
cover fixed charges. For this purpose, “earnings available for fixed charges” consist of income
(loss) from continuing operations before minority interests and income taxes plus fixed charges and
distributed earnings of unconsolidated subsidiaries, less capitalized interest and undistributed
equity in earnings of subsidiaries. “Fixed charges” consist of interest expense, capitalized
interest, amortized expenses related to indebtedness, and an estimate of the interest within rental
expense.
Our deficiency of earnings to combined fixed charges and preferred stock dividends for the five
years in the period ended December 31, 2009 is the same as those reflected above for the deficiency
of earnings to fixed charges because we had no preferred stock dividend requirements.
SECURITIES WE MAY OFFER
The descriptions of the securities contained in this prospectus, together with the applicable
prospectus supplements, summarize the material terms and provisions of the various types of
securities that we may offer. We will describe in the applicable prospectus supplement relating to
any securities the particular terms of the securities offered by that prospectus supplement. If so
indicated in the applicable prospectus supplement, the terms of the securities may differ from the
terms we have summarized below. We will also include in the prospectus supplement information, when
applicable, about material U.S. federal income tax considerations relating to the securities, and
the securities exchange, if any, on which the securities will be listed.
We may sell from time to time, in one or more offerings, any one or more of the following:
| • |
|
debt securities, either senior or subordinated |
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| • |
|
common stock |
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| • |
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preferred stock |
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| • |
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depositary shares |
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| • |
|
warrants to purchase any of the securities listed above |
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| • |
|
stock purchase contracts or |
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| • |
|
any combination of the foregoing securities. |
In this prospectus, we refer to the common stock, preferred stock, debt securities, depositary
shares, warrants and stock purchase contracts collectively as “securities.” The total dollar amount
of all securities that we may issue under this prospectus will not exceed $250,000,000.
- 12 -
If we issue debt securities at a discount from their original stated principal amount, then, for
purposes of calculating the total dollar amount of all securities issued under this prospectus, we
will treat the initial offering price of the debt securities as the total original principal amount
of the debt securities.
This prospectus may not be used to consummate a sale of securities unless it is accompanied by a
prospectus supplement.
DESCRIPTION OF DEBT SECURITIES
The debt securities covered by this prospectus will be our general unsecured obligations. The debt
securities will be either senior debt securities or subordinated debt securities. We will issue the
debt securities under one or more separate indentures between us and a trustee that we will name in
the prospectus supplement. Senior debt securities will be issued under a senior indenture, and
subordinated debt securities will be issued under a subordinated indenture. In this description, we
sometimes call the senior indenture and the subordinated indenture the “indentures.”
We have summarized anticipated provisions of the indentures and the debt securities below. This
summary is not complete and certain provisions of the indentures and debt securities when issued
may differ, even materially, from the terms described below. Accordingly, you should read the
prospectus supplement, indentures and other instruments establishing the terms of debt securities
for more details regarding the provisions we describe below and for other provisions that may be
important to you. We will include the final indentures and other instruments establishing the terms
of debt securities as exhibits to a filing with the SEC in connection with an offering of debt
securities.
In this summary description of the debt securities, all references to “us” means Syntroleum only,
unless we state otherwise or the context clearly indicates otherwise.
General
Senior debt securities will constitute senior debt and will rank equally with all our unsecured and
unsubordinated debt. Subordinated debt securities will be subordinated to, and thus have a junior
position to, any senior debt securities and all our other senior debt. Unless we inform you
otherwise in the prospectus supplement, the indentures will not limit the amount of debt we may
issue under the indentures or the amount of other unsecured debt or securities we may incur or
issue. We may issue debt securities under either indenture from time to time in one or more series,
each in an amount we authorize prior to issuance.
At the time we issue debt securities or during the period they remain outstanding, we may conduct a
substantial part of our operations through our subsidiaries, and our subsidiaries may generate a
significant part of our cash flow. As a result, distributions or advances from our subsidiaries may
be important sources of funds to meet our debt service obligations. Contractual provisions or laws,
as well as our subsidiaries’ financial condition and operating requirements, may limit our ability
to obtain from our subsidiaries cash that we need to pay our debt service obligations, including
payments on the debt securities. In addition, holders of the debt securities will have a junior
position to the claims of creditors of our subsidiaries on their assets and earnings.
Unless we inform you otherwise in the prospectus supplement, the indentures and the debt securities
will not contain:
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• |
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any covenants or other provisions
designed to protect holders of the debt
securities in the event we participate
in a highly leveraged transaction, or |
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| |
• |
|
provisions that give holders of
the debt securities the right to
require us to repurchase their
securities in the event of a decline in
our credit rating resulting from a
takeover, recapitalization or similar
restructuring or otherwise. |
The prospectus supplement relating to any series of debt securities being offered will include
specific terms relating to the offering. These terms will include some or all of the following:
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• |
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the title of the debt securities, |
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• |
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the total principal amount of the debt securities, |
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• |
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whether the debt securities are senior debt securities or subordinated debt securities, |
- 13 -
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• |
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whether we will issue the debt
securities in individual certificates to
each holder or in the form of temporary
or permanent global securities held by a
depositary on behalf of holders, |
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• |
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whether any underwriter(s) will act as market maker(s) for the securities, |
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• |
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the extent to which a secondary market for the securities is expected to develop, |
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• |
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the date or dates on which the principal of and any premium on the debt securities will be payable, |
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• |
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any interest rate, the date from which interest will accrue, interest payment dates and record dates for interest payments, |
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whether and under what circumstances any additional amounts with respect to the debt securities will be payable, |
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the place or places where payments on the debt securities will be payable, |
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• |
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any provisions for optional redemption or early repayment, |
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• |
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any sinking fund or other provisions
that would obligate us to redeem,
purchase or repay the debt securities
prior to maturity, |
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• |
|
the denominations in which we may issue the debt securities, |
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• |
|
whether payments on the debt
securities will be payable in foreign
currency or currency units or another
form, and whether payments will be
payable by reference to any index or
formula, |
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• |
|
the portion of the principal amount
of the debt securities that will be
payable if the maturity is accelerated,
if other than the entire principal
amount, |
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• |
|
any additional means of defeasance
of the debt securities, any additional
conditions or limitations to defeasance
of the debt securities or any changes to
those conditions or limitations, |
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• |
|
any changes or additions to the events of default or covenants this prospectus describes, |
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any restrictions or other provisions relating to the transfer or exchange of the debt securities, |
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any terms for the conversion or exchange of the debt securities for other securities issued by us or any other entity, and |
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• |
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any other terms of the debt securities. |
We may sell the debt securities at a discount, which may be substantial, below their stated
principal amount. Those debt securities may bear no interest or may bear interest at a rate that at
the time of issuance is below market rates.
United States federal income tax consequences and special considerations, if any, applicable to any
such series will be described in the applicable prospectus supplement.
If we sell any of the debt securities for any foreign currency or currency unit or if payments on
the debt securities are payable in any foreign currency or currency unit, we will describe in the
prospectus supplement the restrictions, elections, tax consequences, specific terms and other
information relating to those debt securities and the foreign currency or currency unit.
Debt securities may be issued where the amount of principal and/or interest payable is determined
by reference to one or more currency exchange rates, commodity prices, equity indices or other
factors. Holders of such securities may receive a principal amount or a payment of interest that is
greater than or less than the amount of principal or interest otherwise payable on such dates,
depending upon the value of the applicable currencies, commodities, equity indices or other
factors. Information as to the methods for determining the amount of principal or interest, if any,
payable on any date, the currencies, commodities, equity indices or other factors to which the
amount payable on such date is linked and certain additional United States federal income tax
considerations will be set forth in the applicable prospectus supplement.
The term “debt securities” includes debt securities denominated in U.S. dollars or, if specified in
the applicable prospectus supplement, in any other freely transferable currency or units based on
or relating to foreign currencies.
- 14 -
Subordination
Under the subordinated indenture, payment of the principal, interest and any premium on the
subordinated debt securities will generally be subordinated and junior in right of payment to the
prior payment in full of all senior debt. Unless we inform you otherwise in the prospectus
supplement, we may not make any payment of principal, interest or any premium on the subordinated
debt securities if:
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• |
|
we fail to pay the principal, interest, premium or any other amounts on any senior debt when due, or |
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• |
|
we default in performing any other
covenant (a “covenant default”) in any
senior debt that we have designated if
the covenant default allows the holders
of that senior debt to accelerate the
maturity of the senior debt they hold. |
Unless we inform you otherwise in the prospectus supplement, a covenant default will prevent us
from making payments on the subordinated debt securities only for up to 179 days after holders of
the senior debt give the trustee for the subordinated debt securities notice of the covenant
default.
The subordination provisions will not affect our obligation, which will be absolute and
unconditional, to pay, when due, principal of, premium, if any, and interest on the subordinated
debt securities. In addition, the subordination provisions will not prevent the occurrence of any
default under the subordinated indenture.
Unless we inform you otherwise in the prospectus supplement, the subordinated indenture will not
limit the amount of Senior Indebtedness (as defined below) that we may incur. As a result of the
subordination of the subordinated debt securities, if we became insolvent, holders of subordinated
debt securities may receive less on a proportionate basis than our other creditors.
Unless we inform you otherwise in the prospectus supplement, “Senior Indebtedness” will mean all
notes or other indebtedness of Syntroleum for money borrowed and similar obligations, unless the
indebtedness states that it is not senior to subordinated debt securities or our other junior debt.
Consolidation, Merger and Sale of Assets
The indentures generally will permit a consolidation or merger between us and another entity. They
also will permit the sale by us of all or substantially all of our assets. The indentures will
provide, however, that we may consolidate with another entity to form a new entity or merge into
any other entity or transfer or dispose of all or substantially all our assets to any other entity
only if:
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• |
|
the resulting or surviving entity
assumes the due and punctual payments on
the debt securities and the performance
of our covenants and obligations under
the applicable indenture and the debt
securities, and |
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• |
|
immediately after giving effect to the transaction, no default or event of default would occur and be continuing. |
Events of Default
Unless we inform you otherwise in the prospectus supplement, the following will be events of
default with respect to a series of debt securities:
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• |
|
our failure to pay interest or any required additional amounts on any debt securities of that series for 30 days, |
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• |
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our failure to pay principal of or any premium on any debt securities of that series when due, |
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our failure to deposit any sinking fund payment when due for that series of debt securities for 30 days, |
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• |
|
our failure to comply with any of
our covenants or agreements in the debt
securities of that series or the
applicable indenture, other than an
agreement or covenant that we have
included in that indenture solely for the
benefit of other series of debt
securities, for 90 days after written
notice by the trustee or by the holders
of at least 25% in principal amount of
all the outstanding debt securities
issued under that indenture that are
affected by that failure, |
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• |
|
specified events involving bankruptcy, insolvency or reorganization of Syntroleum, and |
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• |
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any other event of default provided for that series of debt securities. |
A default under one series of debt securities will not necessarily be a default under another
series. The trustee may withhold notice to the holders of the debt securities of any default or
event of default, except in any payment on the debt securities, if the trustee in good faith
determines that withholding notice is in the interest of the holders of the debt securities.
- 15 -
If an event of default for any series of debt securities occurs and is continuing, the trustee or
the holders of at least 25% in principal amount of the outstanding debt securities of the series
affected by the default, or, in some cases, 25% in principal amount of all senior debt securities
or subordinated debt securities affected, voting as one class, may declare the principal of and all
accrued and all unpaid interest on those debt securities to be due and payable immediately. If an
event of default relating to events of bankruptcy, insolvency or reorganization occurs, the
principal of and all accrued and unpaid interest on all the debt securities will become immediately
due and payable without any action on the part of the applicable trustee or any holder. The holders
of a majority in principal amount of the outstanding debt securities of the series affected by the
default, or, in some cases, a majority in principal amount of all senior debt securities or
subordinated debt securities affected, voting as one class, may rescind this accelerated payment
requirement. Depending on the terms of our other indebtedness, an event of default under either of
the types of indentures may give rise to cross defaults on our other indebtedness.
A holder of a debt security of any series will be able to pursue any remedy under the applicable
indenture only if:
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• |
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the holder gives the trustee written notice of a continuing event of default for that series, |
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• |
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the holders of at least 25% in
principal amount of the outstanding debt
securities of that series make a written
request to the trustee to pursue the
remedy, |
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• |
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the holder or holders offer to the trustee indemnity reasonably satisfactory to it, |
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• |
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the trustee fails to act for a period of 60 days after receipt of notice and offer of indemnity, and |
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• |
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during that 60-day period, the
holders of a majority in principal amount
of the debt securities of that series do
not give the trustee a direction
inconsistent with the request. |
This provision will not, however, affect the right of a holder of a debt security to sue for
enforcement of any overdue payment.
In most cases, holders of a majority in principal amount of the outstanding debt securities of a
series, or of all debt securities affected, voting as one class, will be able to direct the time,
method and place of:
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• |
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conducting any proceeding for any remedy available to the applicable trustee, and |
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• |
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exercising any trust or power conferred on the applicable trustee not relating to or arising under an event of default. |
Each type of indenture will require us to file with the trustee each year a written statement as to
our compliance with the covenants contained in that indenture.
Modification and Waiver
We may amend or supplement either type of indenture if the holders of a majority in principal
amount of the outstanding debt securities of all series issued under the applicable indenture and
affected by the amendment or supplement, acting as one class, consent to it. Without the consent of
each holder of each debt security affected, however, no amendment or supplement may:
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• |
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reduce the amount of debt securities whose holders must consent to an amendment, supplement or waiver, |
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• |
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reduce the rate of or change the time for payment of interest on any debt security, |
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reduce the principal of, premium on
or any mandatory sinking fund payment
with respect to any debt security or
change the stated maturity of any debt
security, |
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• |
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reduce any premium payable on the
redemption of any debt security or change
the time at which any debt security may
or must be redeemed, |
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• |
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change any obligation to pay additional amounts on any debt security, |
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• |
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make the payments on any debt
security payable in any currency or
currency unit other than as the debt
security originally states, |
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impair the holder’s right to institute suit for the enforcement of any payment on any debt security, |
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• |
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make any change in the percentage of
principal amount of debt securities
necessary to waive compliance with
specified provisions of the applicable
indenture or to make any change in the
applicable indenture’s provisions for
modification, |
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waive a continuing default or event of default regarding any payment on any debt security, or |
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with respect to the subordinated
indenture, modify the provisions relating
to the subordination of any subordinated
debt security in a manner adverse to the
holder of that security. |
- 16 -
We and the applicable trustee may agree to amend or supplement either indenture or waive any
provision of either indenture without the consent of any holders of debt securities in some
circumstances, including:
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to cure any ambiguity, omission, defect or inconsistency, |
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to provide for the assumption of our
obligations under the indenture by a
successor upon any merger, consolidation
or asset transfer, |
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• |
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to provide for uncertificated debt
securities in addition to or in place of
certificated debt securities or to
provide for bearer debt securities, |
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to provide any security for or add guarantees of any series of debt securities, |
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to comply with any requirement to effect or maintain the qualification of the
indenture under the Trust Indenture Act of 1939, |
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to add covenants that would benefit
the holders of any debt securities or to
surrender any rights we have under the
indenture, |
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to add events of default with respect to any debt securities, |
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to make any change that does not adversely affect any outstanding debt securities of any series in any material respect, |
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• |
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to facilitate the defeasance or
discharge of any series of debt
securities if that change does not
adversely affect the holders of debt
securities of that series or any other
series under the indenture in any
material respect, and |
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to provide for the acceptance of a successor or another trustee. |
The holders of a majority in principal amount of the outstanding debt securities of any series, or
of all senior debt securities or subordinated debt securities affected, voting as one class, may
waive any existing or past default or event of default with respect to those debt securities. Those
holders may not, however, waive any default or event of default in any payment on any debt security
or compliance with a provision that cannot be amended or supplemented without the consent of each
holder affected.
Discharge
We will be discharged from all obligations under the applicable indenture with respect to any
series of debt securities, except for surviving obligations relating to any conversion rights and
to register the transfer or exchange of the debt securities, if:
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all debt securities of the series
previously authenticated and delivered
under the relevant indenture have been
delivered to the indenture trustee for
cancellation, or |
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all debt securities of that series
have become due and payable or will
become due and payable within one year,
at maturity or by redemption, and we
deposit with the applicable trustee funds
or government securities sufficient to
make payments on the debt securities of a
series on the dates those payments are
due. |
To exercise the right of discharge described above, we must deliver to the applicable trustee an
opinion of counsel and an officers’ certificate stating that all conditions precedent to the
satisfaction and discharge of the applicable indenture have been complied with.
Legal Defeasance and Covenant Defeasance
In addition to our right of discharge described above, Syntroleum may, at its option and at any
time, elect to have all of its obligations discharged with respect to the debt securities
outstanding thereunder and all obligations of any guarantors of such debt securities discharged
with respect to their guarantees (“Legal Defeasance”), except for:
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the rights of holders of outstanding debt securities to receive payments in respect of the
principal of, or interest or premium, if any, on such debt securities when such payments are due from
the trust referred to below, |
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Syntroleum’s obligations with respect to the debt securities concerning issuing temporary debt
securities, registration of debt securities, mutilated, destroyed, lost or stolen debt securities and
the maintenance of an office or agency for payment and money for security payments held in trust, |
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the rights, powers, trusts, duties and immunities of the trustee, and Syntroleum’s and each
guarantor’s obligations in connection therewith, and |
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the Legal Defeasance and Covenant Defeasance (as defined below) provisions of the applicable indenture. |
In addition, Syntroleum may, at its option and at any time, elect to have the obligations of
Syntroleum released with respect to certain provisions of each indenture, including certain
provisions set forth in any supplemental indenture thereto (such release and termination being
referred to as “Covenant Defeasance”), and thereafter any omission to comply with such obligations
or provisions will not constitute a default or event of default. In the event Covenant Defeasance
occurs in accordance with the applicable indenture, the event of default described above as
“failure to comply with any of our covenants or agreements in the debt securities of that series or
the applicable indenture, other than an agreement or covenant that we have included in that
indenture solely for the benefit of other series of debt securities, for 90 days after written
notice by the trustee or by the holders of at least 25% in principal amount of all the outstanding
debt securities issued under that indenture that are affected by that failure”, will no longer
constitute an event of default thereunder.
In order to exercise either Legal Defeasance or Covenant Defeasance:
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Syntroleum must irrevocably deposit
with the trustee, in trust, for the
benefit of the holders of the debt
securities, cash in U.S. dollars,
non-callable government securities, or a
combination of cash in U.S. dollars and
non-callable U.S. government securities,
in amounts as will be sufficient, in the
opinion of a nationally recognized
investment bank, appraisal firm or firm
of independent public accountants to pay
the principal of, or interest and
premium, if any, on the outstanding debt
securities on the stated date for payment
thereof or on the applicable redemption
date, as the case may be, and Syntroleum
must specify whether the debt securities
are being defeased to such stated date
for payment or to a particular redemption
date, |
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in the case of Legal Defeasance,
Syntroleum has delivered to the trustee
an opinion of counsel reasonably
acceptable to the trustee confirming that
(a) Syntroleum has received from, or
there has been published by, the Internal
Revenue Service a ruling or (b) since the
issue date of the debt securities, there
has been a change in the applicable
federal income tax law, in either case to
the effect that, and based thereon such
opinion of counsel will confirm that, the
holders of the outstanding debt
securities will not recognize income,
gain or loss for federal income tax
purposes as a result of such Legal
Defeasance and will be subject to federal
income tax on the same amounts, in the
same manner and at the same time as would
have been the case if such Legal
Defeasance had not occurred, |
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in the case of Covenant Defeasance,
Syntroleum has delivered to the trustee
an opinion of counsel reasonably
acceptable to the trustee confirming that
the holders of the outstanding debt
securities will not recognize income,
gain or loss for federal income tax
purposes as a result of such Covenant
Defeasance and will be subject to federal
income tax on the same amounts, in the
same manner and at the same times as
would have been the case if such Covenant
Defeasance had not occurred, |
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no default or event of default has
occurred and is continuing on the date of
such deposit (other than a default or
event of default resulting from the
borrowing of funds to be applied to such
deposit), |
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the deposit will not result in a breach
or violation of, or constitute a default
under, any other instrument to which
Syntroleum or any guarantor is a party or
by which Syntroleum or any guarantor is
bound, |
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such Legal Defeasance or Covenant
Defeasance will not result in a breach or
violation of, or constitute a default
under, any material agreement or
instrument (other than the applicable
indenture) to which Syntroleum or any of
its subsidiaries is a party or by which
Syntroleum or any of its subsidiaries is
bound, |
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Syntroleum must deliver to the trustee an
officers’ certificate stating that the
deposit was not made by Syntroleum with
the intent of preferring the holders of
debt securities over the other creditors
of Syntroleum with the intent of
defeating, hindering, delaying or
defrauding creditors of Syntroleum or
others, |
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Syntroleum must deliver to the trustee an
officers’ certificate, stating that all
conditions precedent set forth above have
been complied with, and |
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Syntroleum must deliver to the trustee an
opinion of counsel (which opinion of
counsel may be subject to customary
assumptions, qualifications, and
exclusions), stating that all conditions
precedent set forth in bullets 2, 3 and 5
of this paragraph have been complied
with; provided that the opinion of
counsel with respect to bullet 5 of this
paragraph may be to the knowledge of such
counsel. |
Governing Law
New York law will govern the indentures and the debt securities.
Trustee
If an event of default occurs and is continuing, the trustee will be required to use the degree of
care and skill of a prudent person in the conduct of his own affairs. The trustee will become
obligated to exercise any of its powers under the indenture at the request of any of the holders of
any debt securities only after those holders have offered the trustee indemnity reasonably
satisfactory to it.
Each indenture will limit the right of the trustee, if it becomes one of our creditors, to obtain
payment of claims or to realize on certain property received for any such claim, as security or
otherwise. The trustee may engage in other transactions with us. If it acquires any conflicting
interest, however, it must eliminate that conflict or resign.
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Form, Exchange, Registration and Transfer
We will issue the debt securities in registered form, without interest coupons. We will not charge
a service charge for any registration of transfer or exchange of the debt securities. We may,
however, require the payment of any tax or other governmental charge payable for that registration.
Debt securities of any series will be exchangeable for other debt securities of the same series
with the same total principal amount and the same terms but in different authorized denominations
in accordance with the applicable indenture. Holders may present debt securities for registration
of transfer at the office of the security registrar or any transfer agent we designate. The
security registrar or transfer agent will effect the transfer or exchange when it is satisfied with
the documents of title and identity of the person making the request.
Unless we inform you otherwise in the prospectus supplement, we will appoint the trustee under each
indenture as security registrar for the debt securities we issue under that indenture. If the
prospectus supplement refers to any transfer agents initially designated by us, we may at any time
rescind that designation or approve a change in the location through which any transfer agent acts.
We will be required to maintain an office or agency for transfers and exchanges in each place of
payment. We may at any time designate additional transfer agents for any series of debt securities
or rescind the designation of any transfer agent.
In the case of any redemption, neither the security registrar nor the transfer agent will be
required to register the transfer or exchange of any debt security:
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during a period beginning 15
business days before the day of mailing
of the relevant notice of redemption and
ending on the close of business on that
day of mailing, or |
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if we have called the debt security
for redemption in whole or in part,
except the unredeemed portion of any debt
security being redeemed in part. |
Payment and Paying Agents
Unless we inform you otherwise in the prospectus supplement, we will make payments on the debt
securities in U.S. dollars at the office of the applicable trustee or any paying agent we
designate. At our option, we may make payments by check mailed to the holder’s registered address
or, with respect to global debt securities, by wire transfer. Unless we inform you otherwise in the
prospectus supplement, we will make interest payments to the person in whose name the debt security
is registered at the close of business on the record date for the interest payment.
Unless we inform you otherwise in the prospectus supplement, we will designate the trustee under
each indenture as our paying agent for payments on debt securities we issue under that indenture.
We may at any time designate additional paying agents or rescind the designation of any paying
agent or approve a change in the office through which any paying agent acts.
Subject to the requirements of any applicable abandoned property laws, the trustee and paying agent
will repay to us upon written request any funds held by them for payments on the debt securities
that remain unclaimed for two years after the date upon which that payment has become due. After
repayment to us, all liability of the trustee and paying agent with respect to those funds will
cease and holders entitled to those funds must look only to us for payment.
Global Securities
The debt securities of a series may be issued in whole or in part in the form of one or more global
securities that we will deposit with a depositary identified in the applicable prospectus
supplement. We may issue global debt securities in either temporary or permanent form. Unless and
until it is exchanged in whole or in part for the individual debt securities that it represents, a
global security may not be transferred except as a whole:
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by the applicable depositary to a nominee of the depositary, |
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by any nominee to the depositary itself or another nominee, or |
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by the depositary or any nominee to a successor depositary or any nominee of the successor. |
We will describe the specific terms of the depositary arrangement with respect to a series of debt
securities in the applicable prospectus supplement. We anticipate that the following provisions
will generally apply to depositary arrangements.
When we issue a global security in registered form, the depositary for the global security or
its nominee will credit, on its book-entry registration and transfer system, the respective
principal amounts of the individual debt securities represented by that global security to
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the
accounts of persons that have accounts with the depositary (“participants”). Those accounts will be
designated by the dealers, underwriters or agents with respect to the underlying debt securities or
by us if those debt securities are offered and sold directly by us. Ownership of beneficial
interests in a global security will be limited to participants or persons that may hold interests
through participants. For interests of participants, ownership of beneficial interests in the
global security will be shown on records maintained by the applicable depositary or its nominee.
For interests of persons other than participants, that ownership information will be shown on the
records of participants. Transfer of that ownership will be effected only through those records.
The laws of some states require
that certain purchasers of securities take physical delivery of securities in definitive form.
These limits and laws may impair our ability to transfer beneficial interests in a global security.
As long as the depositary for a global security, or its nominee, is the registered owner of that
global security, the depositary or nominee will be considered the sole owner or holder of the debt
securities represented by the global security for all purposes under the applicable indenture.
Except as provided below, owners of beneficial interests in a global security:
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will not be entitled to have any of the underlying debt securities registered in their names, |
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will not receive or be entitled to receive physical delivery of any of the underlying debt securities in definitive form, and |
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will not be considered the owners or holders under the indenture relating to those debt securities. |
Payments of the principal of, any premium on and any interest on individual debt securities
represented by a global security registered in the name of a depositary or its nominee will be made
to the depositary or its nominee as the registered owner of the global security representing such
debt securities. Neither we, the trustee for the debt securities, any paying agent nor the
registrar for the debt securities will be responsible for any aspect of the records relating to or
payments made by the depositary or any participants on account of beneficial interests in the
global security.
We expect that the depositary or its nominee, upon receipt of any payment of principal, any
premium or interest relating to a global security representing any series of debt securities,
immediately will credit participants’ accounts with the payments. Those payments will be credited
in amounts proportional to the respective beneficial interests of the participants in the principal
amount of the global security as shown on the records of the depositary or its nominee. We also
expect that payments by participants to owners of beneficial interests in the global security held
through those participants will be governed by standing instructions and customary practices. This
is now the case with securities held for the accounts of customers registered in “street name.”
Those payments will be the sole responsibility of those participants.
If the depositary for a series of debt securities is at any time unwilling, unable or
ineligible to continue as depositary and we do not appoint a successor depositary within 90 days,
we will issue individual debt securities of that series in exchange for the global security or
securities representing that series. In addition, we may at any time in our sole discretion
determine not to have any debt securities of a series represented by one or more global securities.
In that event, we will issue individual debt securities of that series in exchange for the global
security or securities. Furthermore, if we specify, an owner of a beneficial interest in a global
security may, on terms acceptable to us, the trustee and the applicable depositary, receive
individual debt securities of that series in exchange for those beneficial interests. The foregoing
is subject to any limitations described in the applicable prospectus supplement. In any such
instance, the owner of the beneficial interest will be entitled to physical delivery of individual
debt securities equal in principal amount to the beneficial interest and to have the debt
securities registered in its name. Those individual debt securities will be issued in any
authorized denominations.
DESCRIPTION OF CAPITAL STOCK
This section contains a description of our capital stock. In the discussion that follows, the
terms of our capital stock is not meant to be complete. We have summarized selected provisions of
our certificate of incorporation and our bylaws relating to our capital stock. You should read our
certificate of incorporation and bylaws as currently in effect for more details regarding the
provisions we describe below and for other provisions that may be important to you. We have filed
copies of those documents with the SEC, and they are incorporated by reference as exhibits to the
registration statement. Please read “Where You Can Find More Information.”
Authorized Capital
The total number of shares of all classes of stock that we have authority to issue is 155,000,000,
consisting of 150,000,000 shares of common stock, par value $.01 per share, and 5,000,000 shares of
preferred stock, par value $.01 per share. We had 76,214,577 shares
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of common stock outstanding as
of March 31, 2010. We have authorized and reserved for issuance 250,000 shares of junior
participating preferred stock in connection with the preferred stock purchase rights described
below.
Common Stock
The holders of common stock are entitled to one vote per share on all matters voted on by our
stockholders, including the election of directors. No share of common stock affords any preemptive
rights or is convertible, redeemable, assessable or entitled to benefits of any sinking or
repurchase fund. Except as otherwise required by law or provided in any resolution adopted by our
board of directors
with respect to any series of preferred stock, the holders of shares of common stock exclusively
possess all voting power of our stockholders. Subject to any preferential rights of any outstanding
series of preferred stock, the holders of common stock are entitled to those dividends as may be
declared from time to time by our board of directors from funds available for dividends. Upon
liquidation, dissolution or winding up, holders of common stock are entitled to share equally and
proportionately in any of our assets remaining after the payment of all of our liabilities and
after any preferential distribution with respect to the preferred stock. The outstanding shares of
common stock are validly issued, fully paid and nonassessable.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company,
LLC. The transfer agent’s address is 59 Maiden Lane, Plaza Level, New York, NY 10038 and its
telephone number is (212) 936-5100.
Preferred Stock
As of the date of this prospectus, none of the shares of our preferred stock are outstanding.
Under our certificate of incorporation, our board of directors, without further action by our
stockholders, is authorized to establish one or more series of preferred stock and to determine,
with respect to any series of preferred stock, the powers, designation, preferences and rights of
each series and the qualifications, limitations or restrictions of each series, including:
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the designation of the series, |
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the number of shares of the series,
which number the board of directors may,
except where otherwise provided in the
preferred stock designation, increase or
decrease, but not below the number of
shares of that series then outstanding, |
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whether dividends, if any, will be
cumulative or noncumulative and the
dividend rate and the preferences, if
any, of the series, |
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the dates on which dividends, if any, will be payable, |
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the redemption rights and price or prices, if any, for shares of the series, |
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the terms and amounts of any sinking fund provided for the purchase or redemption of shares of the series, |
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the amounts payable on, and the
preferences, if any, of shares of the
series in the event of any voluntary or
involuntary liquidation, dissolution or
winding up of our affairs, |
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whether the shares of the series
will be convertible into or exchangeable
for shares of any other class or series,
or any other security, of our company or
any other corporation, and, if so, the
specification of that class or series or
that other security, the conversion or
exchange price or prices or rate or
rates, any adjustments to those prices or
rates, the date or dates as of which such
shares will be convertible or
exchangeable and all other terms and
conditions of the conversion or exchange, |
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restrictions on the issuance of shares of the same series, or of any other class or series, and |
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the voting rights, if any, of the holders of shares of any series. |
Upon the issuance and payment for shares of preferred stock, the shares will be fully paid and
nonassessable. Except as otherwise may be specified in the prospectus supplement relating to a
particular series of preferred stock will not have any preemptive or subscription rights to acquire
any class or series of our capital stock and each series of preferred stock will rank on a parity
in all respects with each other series of our preferred stock and prior to our common stock as to
dividends and distribution of our assets. The issuance of shares of preferred stock by our board of
directors may adversely affect the rights of the holders of our common stock. For example,
preferred stock may rank prior to the common stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares of common stock.
The prospectus supplement relating to any series of preferred stock we offer will include specific
terms relating to the offering. The description of the terms of the preferred stock to be set forth
in an applicable prospectus supplement will not be complete and will be subject to and qualified by
the certificate of designation relating to the applicable series of preferred stock. You should
read that
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document for provisions that may be important to you. We will include that document as an
exhibit to a filing with the SEC in connection with an offering of preferred stock.
The authorized shares of preferred stock, as well as shares of common stock, are available for
issuance without further action by our stockholders, unless stockholder action is required by the
rules of any stock exchange or automated quotation system on which our securities are listed or
traded. If the approval of our stockholders is not required for the issuance of shares of preferred
stock or common stock, the board of directors may determine not to seek stockholder approval. The
NASDAQ Capital Market currently requires stockholder approval as a prerequisite to listing shares
in several instances, including sales or issuances of common stock or securities convertible into,
or exercisable for, common stock equal to or in excess of 20% or more of the outstanding stock
determined before the proposed issuance.
Although our board of directors has no intention at the present time of doing so, it could issue a
series of preferred stock that could, depending on the terms of that series, impede the completion
of a merger, tender offer or other takeover attempt. Our board of directors will make any
determination to issue shares based on its judgment as to our best interests and the best interests
of our stockholders. Our board of directors, in so acting, could issue preferred stock having terms
that could discourage an acquisition attempt, including a tender offer or other transaction that
some, or a majority of, our stockholders might believe to be in their best interests or that might
result in stockholders receiving a premium for their stock over the then current market price of
the stock.
Depositary Shares
This section describes the general terms and provisions of the depositary shares. The applicable
prospectus supplement will describe the specific terms of the depositary shares offered by that
prospectus supplement and any general terms outlined in this section that will not apply to those
depositary shares.
If we elect to offer fractional interests in shares of preferred stock, we will provide for the
issuance of receipts for depositary shares to any holder of those fractional interests. Each
depositary share will represent a fractional interest in the underlying share of preferred stock.
We will deposit the shares of preferred stock underlying the depositary shares under a deposit
agreement between us and a bank or trust company selected by us. The bank or trust company must
have its principal office in the United States and a combined capital and surplus of at least
$50,000,000. The depositary receipts will evidence the depositary shares issued under the deposit
agreement.
The deposit agreement will contain terms applicable to the holders of depositary shares in addition
to the terms stated in the depositary receipts. Each owner of depositary shares will be entitled to
all the rights and preferences of the preferred stock underlying the depositary shares in
proportion to the applicable fractional interest in the underlying shares of preferred stock. The
depositary will issue the depositary receipts to individuals purchasing the fractional interests in
shares of the related preferred stock according to the terms of the offering described in a
prospectus supplement.
The following description of the depositary shares we may offer, together with the additional
information included in any prospectus supplements, describes the material terms and provisions of
this type of security but is not complete. For a more complete description of the terms of the
depositary shares, please refer to the deposit agreement relating to the depositary shares and the
depositary receipt relating to the preferred stock that is attached to the deposit agreement. We
will include these documents as exhibits to a filing with the SEC in connection with an offering of
depositary shares.
We will describe in a prospectus supplement the specific terms of any depositary shares we may
offer pursuant to this prospectus. If indicated in a prospectus supplement, the terms of such
depositary shares may differ from the terms described below.
Dividends and Other Distributions. The depositary will distribute all cash dividends or other cash
distributions received for the preferred stock to the entitled record holders of depositary shares
in proportion to the number of depositary shares that the holder owns on the relevant record date,
unless we or the depositary is required by law to withhold an amount on account of taxes. If this
occurs, the amount distributed to the holders of depositary shares will be reduced accordingly. The
depositary will distribute only an amount that can be distributed without attributing to any holder
of depositary shares a fraction of one cent. The depositary will add the undistributed balance to
and treat it as part of the next sum received by the depositary for distribution to holders of
depositary shares.
If there is a non-cash distribution, the depositary will distribute property received by it to the
entitled record holders of depositary shares, in proportion, insofar as possible, to the number of
depositary shares owned by the holders, unless the depositary determines, after consultation with
us, that it is not feasible to make that distribution. If this occurs, the depositary may, with our
approval, sell the property and distribute the net proceeds from the sale to the holders. The
deposit agreement also will contain provisions relating to how any subscription or similar rights
that we may offer to holders of the preferred stock will be available to the holders of the
depositary shares.
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Conversion, Exchange and Redemption. If any series of preferred stock underlying the depositary
shares may be or is required to be converted or exchanged, each record holder of depositary
receipts representing the shares of preferred stock being converted or exchanged will have the
right or obligation to convert or exchange the depositary shares represented by the depositary
receipts.
Whenever we redeem or convert shares of preferred stock held by the depositary, the depositary will
redeem or convert, at the same time, the number of depositary shares representing the preferred
stock to be redeemed or converted. The depositary will redeem the depositary shares from the
proceeds it receives from the corresponding redemption of the applicable series of preferred stock.
The depositary will mail notice of redemption or conversion to the record holders of the depositary
shares which are to be redeemed between 30 and 60 days before the date fixed for redemption or
conversion. The redemption price per depositary share will be equal to the applicable fraction of
the redemption price per share on the applicable series of preferred stock. If less than all the
depositary shares are to be redeemed, the depositary will select which shares are to be redeemed by
lot on a pro rata basis or by any other equitable method as the depositary may decide.
After the redemption or conversion date, the depositary shares called for redemption or conversion
will no longer be outstanding. When the depositary shares are no longer outstanding, all rights of
the holders will end, except the right to receive money, securities or other property payable upon
redemption or conversion.
Voting. When the depositary receives notice of a meeting at which the holders of the preferred
stock are entitled to vote, the depositary will mail the particulars of the meeting to the record
holders of the depositary shares. Each record holder of depositary shares on the record date may
instruct the depositary on how to vote the shares of preferred stock underlying the holder’s
depositary shares. The depositary will try, if practical, to vote the number of shares of preferred
stock underlying the depositary shares according to the instructions and will abstain from voting
the number of shares of preferred stock underlying the depositary shares of holders who do not
provide instructions. We will agree to take all reasonable action requested by the depositary to
enable it to vote as instructed.
Amendments. We and the depositary may agree at any time to amend the deposit agreement and the
depositary receipt evidencing the depositary shares. Approval by the holders of at least a majority
of the depositary shares then outstanding will be required for any amendment that materially
adversely affects the rights of holders of depositary shares. Any holder of depositary shares that
continues to hold its shares after any amendment has become effective will be deemed to have agreed
to the amendment.
Termination. We or the depositary may terminate the deposit agreement only after:
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the depositary has redeemed all related outstanding depositary shares, |
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all outstanding shares of preferred stock have been converted into or exchanged for common stock, or |
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we have liquidated, terminated or
wound up our business and the depositary
has distributed the preferred stock of
the relevant series to the holders of the
related depositary shares. |
Payment of Fees and Expenses. We will pay all fees, charges and expenses of the depositary,
including the initial deposit of the preferred stock and any redemption of the preferred stock.
Holders of depositary shares will pay taxes and governmental charges and any other charges as are
stated in the deposit agreement for their accounts.
Resignation and Removal of Depositary. The depositary may resign at any time by delivering notice
to us, and we may remove the depositary at any time. Resignations or removals will take effect upon
the appointment of a successor depositary and its acceptance of the appointment. We are required to
appoint a successor depositary within 60 days after delivery of the notice of resignation or
removal and must be a bank or trust company having its principal office in the United States and
having a combined capital and surplus of at least $50,000,000.
Withdrawal. Upon our surrender of depositary receipts to the depositary, we are entitled to receive
certificates evidencing the number of whole shares of preferred stock and any money and other
property represented by those depositary receipts. If the depositary receipts we deliver evidence a
number of depositary shares greater than the number of whole shares of preferred stock to be
withdrawn, the depositary will deliver to us at the same time a new depositary receipt evidencing
that excess number of depositary shares.
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Reports and Obligations. The depositary will forward to the holders of depositary shares all
reports and communications from us that are delivered to the depositary and that we are required by
law, the rules of an applicable securities exchange or our certificate of incorporation 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 circumstances beyond its control in performing its
obligations under the deposit agreement. Both we and the depositary will be obligated to act in
good faith in performing our duties under the deposit agreement. We and the depositary will be
liable only for gross negligence and willful misconduct in performing our duties under the deposit
agreement. Neither we nor the depositary will be obligated to prosecute or defend any legal
proceeding connected with any depositary shares or preferred stock unless the holders of depositary
shares requesting that action furnish satisfactory indemnity. In performing our obligations, we and
the depositary may rely and act upon the advice of our counsel or accountants, on any information
provided to us by a person presenting shares for deposit, any holder of a receipt, or any other
document believed by us or the depositary to be genuine and to have been signed or presented by the
proper party or parties.
Preferred Stock Purchase Rights
Our predecessor’s board of directors declared a dividend of one preferred share purchase right
(“Right”) to the holder of record of each share of its common stock as of the close of business on
March 3, 1997. In connection with our reincorporation in 1999, we assumed these Rights and the
related Rights Agreement dated January 31, 1997 between our predecessor and American Stock Transfer
& Trust Company, as agent for holders of Rights. We have entered into the Second Amended and
Restated Rights Agreement
as of October 24, 2004, as amended by the Amendment to Second Amended and Restated Rights Agreement
dated as of November 18, 2007. Each Right entitles the registered holder to purchase from
Syntroleum a unit consisting of one one-hundredth of a share (a “Fractional Share”) of Series A
Junior Participating Preferred Stock, par value $.01 per share (the “Preferred Stock”), at a
purchase price of $20.83 1/3 per Fractional Share, subject to
adjustment (the “Purchase Price”).
The Rights will have certain anti-takeover effects. The Rights could cause substantial dilution to
a person or group that attempts to acquire us and effect a change in the composition of our board
of directors on terms not approved by the board of directors, including by means of a tender offer
at a premium to the market price. The Rights should not interfere with any merger or business
combination approved by the board of directors because we may redeem the rights at the redemption
price prior to the time that a person has become an Acquiring Person, as defined below.
Initially, the Rights will be attached to all certificates representing outstanding shares of
common stock, and no separate certificates for the Rights (“Rights Certificates”) will be
distributed. The Rights will separate from the common stock and a “Distribution Date” will occur,
with certain exceptions, upon the earlier of (i) ten days following a public announcement that a
person or group of affiliated or associated persons (an “Acquiring Person”) has acquired, or
obtained the right to acquire, beneficial ownership of 20% or more of the outstanding shares of
common stock (the date of the announcement being the “Stock Acquisition Date”), or (ii) ten
business days following the commencement of a tender offer or exchange offer that would result in a
person’s becoming an Acquiring Person. Robert Day, members of his immediate family and his
affiliates and associates will not be deemed to be an Acquiring Person unless such parties obtain
beneficial ownership of 35% or more shares of the outstanding shares of common stock. In certain
circumstances, the Distribution Date may be deferred by the board of directors. Certain inadvertent
acquisitions will not result in a person’s becoming an Acquiring Person if the person promptly
divests itself of sufficient common stock. Until the Distribution Date, (a) the Rights will be
evidenced by the common stock certificates and will be transferred with and only with such common
stock certificates, (b) new common stock certificates issued after February 24, 1997 will contain a
notation incorporating the Second Amended and Restated Rights Agreement, as amended, by reference
and (c) the surrender for transfer of any certificate for common stock will also constitute the
transfer of the Rights associated with the common stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will expire at the close of business
on October 24, 2014, unless earlier redeemed or exchanged by us as described below.
As soon as practicable after the Distribution Date, Rights Certificates will be mailed to holders
of record of common stock as of the close of business on the Distribution Date and, from and after
the Distribution Date, the separate Rights Certificates alone will represent the Rights. All shares
of common stock issued prior to the Distribution Date will be issued with Rights. Shares of common
stock issued after the Distribution Date in connection with certain employee benefit plans or upon
conversion of certain securities will be issued with Rights. Except as otherwise determined by the
board of directors, no other shares of common stock issued after the Distribution Date will be
issued with Rights.
In the event (a “Flip-In Event”) that a person becomes an Acquiring Person (except pursuant to a
tender or exchange offer for all outstanding shares of common stock at a price and on terms that a
majority of the independent directors of Syntroleum determines to be fair to and otherwise in the
best interests of Syntroleum and its stockholders (a “Permitted Offer”)), each holder of a Right
will thereafter have the right to receive, upon exercise of such Right, a number of shares of
common stock (or, in certain circumstances,
- 25 -
cash, property or other of our securities) having a
Current Market Price (as defined in the Second Amended and Restated Rights Agreement, as amended)
equal to two times the exercise price of the Right. Notwithstanding the foregoing, following the
occurrence of any Triggering Event (as defined below), all Rights that are, or (under certain
circumstances specified in the Second Amended and Restated Rights Agreement, as amended) were,
beneficially owned by or transferred to an Acquiring Person (or by certain related parties) will be
null and void in the circumstances set forth in the Second Amended and Restated Rights Agreement,
as amended. However, Rights are not exercisable following the occurrence of any Flip-In Event until
such time as the Rights are no longer redeemable by us as set forth below.
In the event (a “Flip-Over Event”) that, at any time from and after the time an Acquiring Person
becomes such, (i) Syntroleum is acquired in a merger or other business combination transaction
(other than certain mergers that follow a Permitted Offer), or (ii) 50% or more of our assets, cash
flow or earning power is sold or transferred, each holder of a Right (except Rights that are voided
as set forth above) shall thereafter have the right to receive, upon exercise, a number of shares
of common stock of the acquiring company having a Current Market Price equal to two times the
exercise price of the Right. Flip-In Events and Flip-Over Events are collectively referred to as
“Triggering Events.”
The number of outstanding Rights associated with a share of common stock, or the number of
Fractional Shares of Preferred Stock issuable upon exercise of a Right and the Purchase Price, are
subject to adjustment in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the common stock occurring prior to the Distribution Date. The Purchase Price
payable, and the number of Fractional Shares of Preferred Stock or other securities or property
issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent
dilution in the event of certain transactions affecting the Preferred Stock.
With certain exceptions, no adjustment in the Purchase Price will be required until cumulative
adjustments amount to at least 1% of the Purchase Price. No fractional shares of Preferred Stock
that are not integral multiples of a Fractional Share are required to be issued upon exercise of
Rights and, in lieu thereof, an adjustment in cash may be made based on the market price of the
Preferred Stock on the last trading date prior to the date of exercise. Pursuant to the Second
Amended and Restated Rights Agreement, as amended, we reserve the right to require prior to the
occurrence of a Triggering Event that, upon any exercise of Rights, a number of Rights be exercised
so that only whole shares of Preferred Stock will be issued.
At any time until ten days following the first date of public announcement of the occurrence of a
Flip-In Event, we may redeem the Rights in whole, but not in part, at a price of $.01 per Right,
payable, at our option, in cash, shares of common stock or such other consideration as the board of
directors may determine. Immediately upon the effectiveness of the action of the board of directors
ordering redemption of the Rights, the Rights will terminate and the only right of the holders of
Rights will be to receive the $.01 redemption price.
At any time after the occurrence of a Flip-In Event and prior to a person’s becoming the beneficial
owner of 50% or more of the shares of common stock then outstanding or the occurrence of a
Flip-Over Event, we may exchange the Rights (other than Rights owned by an Acquiring Person or an
affiliate or an associate of an Acquiring Person, which will have become void), in whole or in
part, at an exchange ratio of one share of common stock, and/or other equity securities deemed to
have the same value as one share of common stock, per Right, subject to adjustment.
Until a Right is exercised, the holder thereof, as such, will have no rights as one of our
stockholders, including, without limitation, the right to vote or to receive dividends.
Other than the redemption price, any of the provisions of the Second Amended and Restated Rights
Agreement, as amended may be amended by the board of directors as long as the Rights are
redeemable. Thereafter, the provisions of the Second Amended and Restated Rights Agreement, as
amended, other than the redemption price may be amended by the board of directors in order to cure
any ambiguity, defect or inconsistency, to make changes that do not materially adversely affect the
interests of holders of Rights (excluding the interests of any Acquiring Person), or to shorten or
lengthen any time period under the Second Amended and Restated Rights Agreement, as amended;
provided, however, that no amendment to lengthen the time period governing redemption may be made
at such time as the Rights are not redeemable.
A copy of the Second Amended and Restated Rights Agreement, as amended, is available free of charge
from us. This summary description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Second Amended and Restated Rights Agreement, as amended, which is
incorporated herein by reference.
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Restrictions on Business Combinations
Our charter provides that “business combinations” involving an “interested stockholder” must be
approved by the holders of at least 66 2/3% of the voting power of the shares not owned by the
interested stockholder, unless the business combination is either approved by a majority of
“continuing directors” or meets specified requirements regarding price and procedure.
“Continuing directors” is generally defined in our charter as follows:
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directors who are unaffiliated with
the interested stockholder and joined the
board before the party to the transaction
became an interested stockholder, or |
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directors who are unaffiliated with
the interested stockholder and are
elected to fill a vacancy and whose
election is recommended by a majority of
continuing directors then on the board. |
Our charter also provides that the initial directors named in our charter who are unaffiliated with
the interested stockholder are “continuing directors.”
A “business combination” is generally defined in our charter as follows:
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any merger or consolidation of our company or one of our subsidiaries with any interested stockholder, |
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any disposition, in one transaction or a series of transactions, to or with any interested
stockholder of any assets of our company or any of our subsidiaries having an aggregate fair market value
of $10,000,000 or more, |
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the issuance or transfer by us or
any of our subsidiaries of any securities
of our company or any of our subsidiaries
to any interested stockholder, in
exchange for property having an aggregate
fair market value of $10,000,000 or more, |
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the adoption of any plan or proposal
for our liquidation or dissolution
proposed by or on behalf of an interested
stockholder, or |
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any reclassification of securities,
or recapitalization of our company, or
any merger or consolidation of our
company with any of our subsidiaries or
any other transaction that has the
effect, directly or indirectly, of
increasing the proportionate share of the
outstanding shares of any class of our
equity or convertible securities of our
company or any of our subsidiaries that
are directly or indirectly owned by any
interested stockholder. |
An “interested stockholder” is generally defined in our charter as any person who or which:
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itself, or along with its
affiliates, is the beneficial owner,
directly or indirectly, of more than 10%
of our then outstanding voting stock, |
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is one of our affiliates and at any
time within the two-year period
immediately before the date in question
was itself, or along with its affiliates,
the beneficial owner, directly or
indirectly, of 10% or more of our then
outstanding voting stock, or |
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is an assignee of or has otherwise
succeeded to any of our voting stock that
was at any time within the two-year
period immediately before the date in
question beneficially owned by an
interested stockholder, if that
assignment or succession occurred in the
course of a transaction or series of
transactions not involving a public
offering within the meaning of the
Securities Act of 1933. |
The provisions in our charter restricting business combinations with interested stockholders also
generally apply to an interested stockholder’s affiliates.
To satisfy the price and procedure requirements of these provisions, the following criteria must be
satisfied:
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the total amount of the cash and the
fair market value of consideration other
than cash to be received per share by
holders of our capital stock is at least
equal to the highest of: |
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(1) the highest price per share paid by the interested stockholder in transactions during
the two-year period before the announcement of the transaction or in the transaction in which
it became an interested stockholder, |
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(2) the fair market value of the stock on the date of announcement of the transaction or the
date of the transaction in which it became an interested stockholder, whichever is higher, |
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(3) the amount determined under clause (2) above multiplied by the ratio of (A) the highest
price per share paid by the interested stockholder for any shares during the two-year period
before the date of announcement of the transaction to (B) the fair market value of the stock on
the first day in that two-year period on which the interested stockholder acquired any shares
of stock, and |
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(4) in the case of preferred stock, the highest preferential amount per share to which
stockholders are entitled in the event of any voluntary or involuntary liquidation, dissolution
or winding up of our company, |
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generally, the consideration to be
received by holders of a particular class
of outstanding voting stock is in cash or
in the same form as the interested
stockholder has previously paid for
shares of that class of voting stock, |
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after the interested stockholder has
become an interested stockholder and
before the completion of the business
combination, specified actions or
omissions have not occurred with respect
to dividends and the interested
stockholder has not become the beneficial
owner of any additional voting stock
except as part of the transaction which
results in the interested stockholder
becoming an interested stockholder, |
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after the interested stockholder has
become an interested stockholder, the
interested stockholder has not received,
except proportionately as a shareholder,
any financial assistance or tax
advantages provided by the corporation,
whether in anticipation of or in
connection with the business combination
or otherwise, and |
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a proxy or information statement
describing the proposed business
combination and complying with the
requirements of the Securities Exchange
Act of 1934 is mailed to stockholders at
least 30 days before the completion of
the business combination. |
Section 203 of the Delaware General Corporation Law (“DGCL”) provides that, subject to specified
exceptions, a corporation may not engage in a broad range of business combinations with any
“interested stockholder” for a three-year period following the time that the stockholder becomes an
interested stockholder unless:
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prior to that time, the board of
directors of the corporation approved
either the business combination or the
transaction which resulted in the
stockholder becoming an interested
stockholder, |
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upon consummation of the transaction
which resulted in the stockholder
becoming an interested stockholder, the
interested stockholder owned at least 85%
of the voting stock of the corporation
outstanding at the time the transaction
commenced, excluding for purposes of
determining the number of shares
outstanding, shares owned by persons who
are both officers and directors of the
corporation and shares held by specified
employee stock ownership plans, or |
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on or after that time, the business
combination is approved by the board of
directors of the corporation and approved
at an annual meeting or special meeting
of stockholders by the affirmative vote
of at least 66 2/3% of the outstanding
voting stock which is not owned by the
interested stockholder. |
In general, an “interested stockholder” is defined for purposes of Section 203 to include any
person that is
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the owner of 15% or more of the outstanding voting stock of the corporation, or |
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an affiliate or associate of the
corporation that was the owner of 15% or
more of the outstanding voting stock of
the corporation at any time within the
previous three years. |
Section 203 permits a corporation to opt out of these provisions, although we have not done so.
Amendments to Charter
Amendments of our charter generally require the approval of the holders of a majority of the
outstanding stock entitled to vote on the amendment, and if the amendment would increase or
decrease the number of authorized shares of any class or series or the par value of shares of that
class or series or would adversely affect the rights, powers or preferences of that class or
series, a majority of the outstanding stock of that class or series also would be required to
approve the amendment. However, the approval of the board of directors and the affirmative vote of
80% of the stock entitled to vote in the election of directors is required for the amendment or
repeal of, or the adoption of provisions that are inconsistent with, the provisions of our charter
regarding:
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powers of the board of directors with respect to the bylaws and our accounts and books, and |
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the number, election and classification of our directors. |
In addition, the amendment or repeal of, or the adoption of provisions that are inconsistent with,
the provisions of our charter regarding votes required for business combinations with interested
stockholders described above requires the approval of our board of directors and the affirmative
vote of 66 2/3% of the holders of stock entitled to vote in the election of directors and not owned
directly or indirectly by interested stockholders or their affiliates.
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Amendments to Bylaws
Our board of directors may adopt, alter or amend the bylaws. In addition to meeting notice
requirements, our bylaws provide that the affirmative vote of the holders of at least 80% of the
voting power of the then outstanding voting stock, voting together as a single class, is required
for stockholders to alter, amend or repeal any provision of the bylaws or to adopt any additional
bylaws.
Special Meetings of Stockholders
Subject to the rights of holders of any series of preferred stock or any other series or class of
stock as set forth in our charter, our bylaws provide that a special meeting may be called only by
the chairman of the board of directors or by the board of directors pursuant to a resolution
adopted by a majority of the total number of our directors, including vacancies. The business
permitted to be conducted at any special meeting of stockholders is limited to the business brought
before the meeting pursuant to the notice of meeting.
Stockholder Action by Written Consent
Our charter provides that corporate action may not be taken by written consent of stockholders.
Advance Notice Provisions for Stockholder Director Nominations and Stockholder Proposals
Our bylaws establish an advance notice procedure for stockholders to make nominations of candidates
for election as directors or to bring other business before an annual meeting of our stockholders.
Our bylaws provide that only individuals who are nominated pursuant to the notice of meeting or by,
or at the direction of, our chairman of the board of directors or our board of directors, or by a
stockholder who has given timely written notice to our secretary before the meeting at which
directors are to be elected, will be eligible for election as one of our directors. The bylaws also
provide that at an annual meeting only business may be conducted as has been brought before the
meeting by, or at the direction of, the chairman of the board or our board of directors, or by a
stockholder who has given timely written notice to our secretary of the stockholder’s intention to
bring that business before the meeting.
Under these provisions, for notice of stockholder director nominations or proposals to be made at
an annual meeting to be timely, the notice must generally be received by us:
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not less than 70 days nor more than 90 days before the first anniversary of the previous year’s annual meeting, or |
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if the date of the annual meeting is
advanced by more than 20 days, or delayed
by more than 70 days, from the
anniversary date, not earlier than 90
days before the meeting and not later
than the later of (1) 70 days before the
meeting and (2) 10 days after public
announcement of the date of the meeting
is first made. |
However, if the number of directors to be elected is increased and there is no public announcement
naming all of the nominees for director or specifying the size of the increased board of directors
at least 80 days before the first anniversary of the preceding year’s annual meeting, a
stockholder’s notice will be timely, but only with respect to nominees for any new positions
created by that increase, if it is received by us not later than 10 days after the public
announcement is first made by us. If directors are to be elected at a special meeting, the notice
must be received by us not earlier than 90 days before the meeting and not later than the later of
(1) 70 days before the meeting and (2) 10 days after public announcement of the date of the
meeting. Stockholders may not bring business before a special meeting of stockholders under the
bylaws.
Under the bylaws, a stockholder’s notice to us proposing to nominate an individual for election as
a director must contain specified information, including the identity and address of the nominating
stockholder and the beneficial owner, if any, the class and number of shares of stock that are
owned beneficially and of record by the stockholder and the beneficial owner, and all information
regarding the proposed nominee that would be required to be included in a proxy statement
soliciting proxies for the proposed nominee. Under the bylaws, a stockholder’s notice relating to
the conduct of business other than the nomination of directors must contain specified information
about the proposed business and about the proposing stockholders, including a brief description of
the business the stockholder proposes to bring before the meeting, the reasons for conducting the
business at the meeting, the name and address of the stockholder and the beneficial owner, if any,
the class and number of shares of stock owned beneficially and of record by the stockholder and the
beneficial owner, and any material interest of the stockholder and the beneficial owner, if any, in
the business so
- 29 -
proposed. If the chairman of the board or other officer presiding at a meeting
determines that a person was not nominated, or other business was not brought before the meeting,
in accordance with the bylaws, that person will not be eligible for election as a director, or that
business will not be conducted at the meeting, as the case may be.
Classification of Directors
Our charter provides that directors will be divided into three classes serving staggered three-year
terms so that approximately one-third of the board of directors is elected each year. Our charter
also provides that, subject to the rights of the holders of any series of preferred stock or any
other series or class of stock as set forth in the charter to elect additional directors under
specified circumstances, the number of directors is fixed in accordance with the bylaws. Our bylaws
provide that the number of directors is to be fixed from time to time pursuant to a resolution
adopted by a majority of the board of directors, including vacancies, but will not consist of more
than 11 nor less than three directors. As of June 1, 2010, the board of directors consisted of six
persons.
The classification of directors makes it more difficult for stockholders to change the composition
of the board of directors. At least two annual meetings of stockholders, instead of one, will be
required to effect a change in a majority of the board of directors.
Removal of Directors; Filling Vacancies on the Board of Directors
Our charter provides that a director may be removed only for cause and only by the affirmative vote
of the holders of at least 80% of the voting power of the then outstanding voting stock, voting
together as a single class.
Under our bylaws, newly created directorships resulting from any increase in the number of
directors or any vacancies on the board of directors may be filled by the affirmative vote of a
majority of the directors then in office, subject to the rights, if any, of holders of our
preferred stock. In addition, our bylaws provide that the directors elected to fill vacancies on
the board of directors will hold office until the annual meeting of stockholders at which the term
of office of the class to which they have been elected expires.
DESCRIPTION OF WARRANTS
The following is a general description of the anticipated terms of the warrants we may issue from
time to time. This summary is not complete and certain provisions of the warrants when issued may
differ, even materially, from the terms described below. Particular terms of any warrants we offer
will be described in the prospectus supplement relating to such warrants.
We may issue warrants to purchase debt securities, common stock, preferred stock, depositary shares
or other securities. We may issue warrants independently or together with other securities.
Warrants sold with other securities may be attached to or separate from the other securities. If we
issue warrants, we will do so under one or more warrant agreements between us and a warrant agent
that we will name in the prospectus supplement.
We have summarized selected provisions of the warrants below. If we offer any warrants, we will
file the forms of warrant certificate and warrant agreement with the SEC, and you should read those
documents for provisions that may be important to you.
The prospectus supplement relating to any warrants being offered will include specific terms
relating to the offering. These terms will include some or all of the following:
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the title of the warrants, |
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the aggregate number of warrants offered, |
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the designation, number and terms of
the debt securities, common stock,
preferred stock, depositary shares or
other securities purchasable on exercise
of the warrants, and procedures that may
result in the adjustment of those
numbers, |
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the exercise price of the warrants, |
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the dates or periods during which the warrants are exercisable, |
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the designation and terms of any securities with which the warrants are issued, |
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if the warrants are issued as a unit
with another security, the date on and
after which the warrants and the other
security will be separately transferable, |
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if the exercise price is not payable
in U.S. dollars, the foreign currency,
currency unit or composite currency in
which the exercise price is denominated, |
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any minimum or maximum amount of warrants that may be exercised at any one time, |
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any terms, procedures and limitations relating to the transferability, exchange or exercise of the warrants, |
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information with respect to book-entry procedures, if any, |
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if applicable, a discussion of material United States federal income tax considerations, |
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the identity of the warrant agent, if any, and |
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any other terms of the warrants. |
Warrant certificates will be exchangeable for new warrant certificates of different denominations
at the office indicated in the prospectus supplement. Prior to the exercise of their warrants,
holders of warrants will not have any of the rights of holders of the securities subject to the
warrants.
Modifications
We may amend the warrant agreements and the warrants without the consent of the holders of the
warrants to cure any ambiguity, to cure, correct or supplement any defective or inconsistent
provision, or in any other manner that will not materially and adversely affect the interests of
holders of outstanding warrants.
We may also modify or amend various other terms of the warrant agreements and the warrants with the
consent of the holders of not less than a majority in number of the then outstanding unexercised
warrants affected. Without the consent of the holders affected, however, no modification or
amendment may:
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shorten the period of time during which the warrants may be exercised, or |
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otherwise materially and adversely affect the exercise rights of the holders of the warrants. |
Each warrant will entitle the holder to purchase the securities that we specify in the applicable
prospectus supplement at the exercise price that we describe in the applicable prospectus
supplement. Unless we otherwise specify in the applicable prospectus supplement, holders of the
warrants may exercise the warrants at any time up to the expiration date we set forth in the
applicable prospectus supplement. After the close of business on the expiration date, unexercised
warrants will become void.
Holders of the warrants may exercise the warrants by delivering the warrant or other applicable
certificate representing the warrants to be exercised together with specified information, and
paying the required amount to us or the warrant agent, as applicable, in immediately available
funds, as provided in the applicable prospectus supplement. We will set forth on the reverse side
of the applicable warrant certificate and in the applicable prospectus supplement the information
that the holder of the warrant will be required to deliver upon exercise.
Upon receipt of the required payment and the warrant or other applicable certificate properly
completed and duly executed at the corporate trust office of the warrant agent or any other office
indicated in the applicable prospectus supplement, we will issue and deliver the securities
purchasable upon such exercise. If fewer than all of the warrants represented by the warrant
certificate are exercised, then we will issue a new warrant certificate for the remaining amount of
warrants. If we so indicate in the applicable prospectus supplement, holders of the warrants may
surrender securities as all or part of the exercise price for warrants.
Enforceability of Rights
Each warrant agent will act solely as our agent under the applicable warrant agreement and will not
assume any obligation or relationship of agency or trust with any holder of any warrant. A single
bank or trust company may act as warrant agent for more than one issue of warrants. A warrant agent
will have no duty or responsibility in case of any default by us under the applicable warrant
agreement or warrant, including any duty or responsibility to initiate any proceedings at law or
otherwise, or to make any demand upon us. Any holder of a warrant may, without the consent of the
related warrant agent or the holder of any other warrant, enforce by appropriate legal action its
right to exercise, and receive the securities purchasable upon exercise of, its warrants.
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DESCRIPTION OF STOCK PURCHASE CONTRACTS
The following is a general description of the anticipated terms of the stock purchase contracts we
may issue from time to time. This summary is not complete and certain provisions of the stock
purchase contracts when issued may differ, even materially, from the terms described below.
Particular terms of any stock purchase contracts we offer will be described in the prospectus
supplement relating to such stock purchase contracts. See “Plan of Distribution — Equity Line of
Credit” for a description of stock purchase contracts in effect as of the date of this prospectus.
Material U.S. federal income tax considerations applicable to the stock purchase contracts will
also be discussed in the applicable prospectus supplement.
We may issue stock purchase contracts, including contracts obligating holders to purchase from us,
and obligating us to sell to holders, a specified number of shares of common stock, preferred stock
or depositary shares at a future date. We may, however, satisfy our obligations, if any, with
respect to any stock purchase contract by delivering the cash value of such stock purchase contract
or the cash value of the property otherwise deliverable or, in the case of stock purchase contracts
on underlying currencies, by delivering the underlying currencies, as set forth in the applicable
prospectus supplement. The consideration per share of common stock, preferred stock or depositary
shares may be fixed at the time that the stock purchase contracts are issued or may be determined
by reference to a specific formula set forth in the stock purchase contracts. Any stock purchase
contract may include anti-dilution provisions to adjust the number of shares issuable pursuant to
such stock purchase contract upon the occurrence of certain events.
The applicable prospectus supplement will describe the terms of any stock purchase contracts in
respect of which this prospectus is being delivered, including, to the extent applicable, the
following:
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whether the stock purchase contracts obligate the holder or us to
purchase or sell, or both purchase and sell, the securities subject to purchase under
the stock purchase contract, and the nature and amount of each of those securities, or
the method of determining those amounts, |
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the duration of the contract and pricing and payment terms, |
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settlement of the stock purchase contracts, and |
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whether the stock purchase contracts will be issued in full
registered or global form. |
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC
(SEC File No. 001-34490). You can read and copy any document we file at the SEC’s public reference
room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. Our SEC filings also are available to the public
at the SEC’s web site at http://www.sec.gov.
This prospectus is part of a registration statement we have filed with the SEC relating to the
securities. As permitted by SEC rules, this prospectus does not contain all of the information we
have included in the registration statement and the accompanying exhibits and schedules. You may
refer to the registration statement, exhibits and schedules for more information about us and our
securities. The registration statement, exhibits and schedules are available at the SEC’s public
reference room or through its web site.
The SEC allows us to “incorporate by reference” the information we file with them, which means that
we can disclose important information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, and later information that
we file with the SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings we make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. The documents we incorporate by
reference are:
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our Annual Report on Form 10-K for the year ended December 31, 2009 filed on
February 26, 2010; |
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our Quarterly Report on Form l0-Q for the quarter ended March 31, 2010 filed on
May 6, 2010; |
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our Current Reports on Form 8-K filed on March 2, 2010, April 20, 2010, May 11,
2010, May 12, 2010 and July 14, 2010; |
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our definitive Proxy Statement on Schedule 14A for our 2010 Annual Meeting of
Shareholders, filed on March 26, 2010; and |
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the description of our common stock and associated preferred stock purchase
rights contained in Amendment No. 2 to our Current Report on Form 8-K filed on October
29, 2004. |
In addition, we incorporate by reference any filings we will make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of the registration
statement of which this prospectus forms a part and prior to the effectiveness of the registration
statement.
You may obtain a free copy of these filings (without exhibits, which can be obtained for a nominal
charge) by writing or telephoning:
Karen L. Gallagher
Corporate Secretary
Syntroleum Corporation
5416 South Yale, Suite 400
Tulsa, Oklahoma 74135
(918) 592-7900
You should rely only on the information contained or incorporated by reference in this prospectus,
the prospectus supplement and any pricing supplement. We have not authorized any person, including
any salesman or broker, to provide information other than that provided in this prospectus, the
prospectus supplement or any pricing supplement. We have not authorized anyone to provide you with
different information. We are not making an offer of the securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus, the prospectus
supplement or any pricing supplement is accurate as of any date other than the date on its cover
page.
PLAN OF DISTRIBUTION
We may sell the offered securities in and outside the United States through underwriters or
dealers, directly to purchasers, through agents or through any combination of these methods. The
prospectus supplement will set forth the following information:
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the terms of the offering, |
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the names of any underwriters or agents, |
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the purchase price, |
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the net proceeds to us, |
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any delayed delivery arrangements, |
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any underwriting discounts and other items constituting underwriters’ compensation, |
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the initial public offering price, |
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any discounts or concessions allowed or reallowed or paid to dealers, and |
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any commissions paid to agents. |
Any public offering price and any discounts, commissions, concessions or other items constituting
compensation allowed or reallowed or paid to underwriters, dealers, agents or remarketing firms may
be changed from time to time. Underwriters, dealers, agents and remarketing firms that participate
in the distribution of the offered securities may be “underwriters” as defined in the Securities
Act. Any discounts or commissions they receive from us and any profits they receive on the resale
of the offered securities may be treated as underwriting discounts and commissions under the
Securities Act. We will identify any underwriters, agents or dealers and describe their
commissions, fees or discounts in the applicable prospectus supplement or pricing supplement, as
the case may be.
Sale Through Underwriters or Dealers
If we use underwriters in the sale of the offered securities, the underwriters will acquire the
securities for their own account. The underwriters may resell the securities from time to time in
one or more transactions, including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. Underwriters may offer securities to the public
either through underwriting syndicates represented by one or more managing underwriters or directly
by one or more firms acting as underwriters. Unless we inform you otherwise in the prospectus
supplement, the obligations of the underwriters to purchase the securities will be subject to
conditions, and the underwriters will be obligated to purchase all the securities if they purchase
any of them. The
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underwriters may change from time to time any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers.
During and after an offering through underwriters, the underwriters may purchase and sell the
securities in the open market. These transactions may include overallotment and stabilizing
transactions and purchases to cover syndicate short positions created in connection with the
offering. The underwriters may also impose a penalty bid, in which selling concessions allowed to
syndicate members or other broker-dealers for the offered securities sold for their account may be
reclaimed by the syndicate if the offered securities are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain or otherwise affect
the market price of the offered securities, which may be higher than the price that might otherwise
prevail in the open market. If commenced, these activities may be discontinued at any time.
If we use dealers in the sale of securities, we will sell the securities to them as principals.
They may then resell those securities to the public at varying prices determined by the dealers at
the time of resale. The dealers participating in any sale of our securities may be
deemed to be underwriters within the meaning of the Securities Act of 1933 with respect to any sale
of those securities. We will include in the prospectus supplement the names of the dealers and the
terms of the transaction.
Direct Sales and Sales Through Agents
We may sell the securities directly. In that event, no underwriters or agents would be involved. We
may also sell the securities through agents we designate from time to time. In the prospectus
supplement, we will name any agent involved in the offer or sale of the offered securities, and we
will describe any commissions payable by us to the agent. Unless we inform you otherwise in the
prospectus supplement, any agent will agree to use its reasonable best efforts to solicit purchases
for the period of its appointment.
We may sell the securities directly to institutional investors or others who may be deemed to be
underwriters within the meaning of the Securities Act of 1933 with respect to any sale of those
securities. We will describe the terms of any of these sales in the prospectus supplement.
Delayed Delivery Contracts
If we so indicate in the prospectus supplement, we may authorize agents, underwriters or dealers to
solicit offers from selected types of institutions to purchase securities from us at the public
offering price under delayed delivery contracts. These contracts would provide for payment and
delivery on a specified date in the future. The contracts would be subject only to those conditions
described in the prospectus supplement. The prospectus supplement will describe the commission
payable for solicitation of those contracts.
General Information
We may have agreements with the agents, dealers and underwriters to indemnify them against civil
liabilities, including liabilities under the Securities Act of 1933, or to contribute with respect
to payments that the agents, dealers or underwriters may be required to make. Agents, dealers and
underwriters may engage in transactions with us or may perform services for us in the ordinary
course of their businesses.
Equity Line of Credit
Energy Equity Line of Credit
On July 14, 2010, Syntroleum Corporation (“we” or “us”) entered into a Common Stock Purchase
Agreement with Energy Opportunity Ltd., a business company incorporated under the laws of the
British Virgin Islands (“Energy”), that provides that, upon the terms and subject to the conditions
and limitations set forth therein, Energy is committed at our option to purchase up to $10,000,000
of our common stock over the 24-month term of the Purchase Agreement.
From time to time during the term of the Purchase Agreement, and at our sole discretion, we may
present Energy with draw down notices requiring Energy to purchase our common stock over ten
consecutive trading days or such other period mutually agreed upon by us and Energy (each, a
“pricing period”), with the closing of the sale of such shares taking place on the second trading
day following the last trading day of the pricing period. The maximum amount the Company may
request for each such draw down notice will be determined by the Company’s market capitalization.
No single draw down notice may exceed the lesser of (a) 2.5% of our
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market capitalization or (b) a
designated dollar amount (not exceeding $6,400,000) which varies with the stated minimum price or
“threshold” price of such draw.
We are able to present Energy with up to 24 draw down notices during the term of the Purchase
Agreement, with a minimum of five trading days required between each pricing period. Only one draw
down is allowed in each pricing period. Once presented with a draw down notice, Energy is required
to purchase a pro rata portion of the shares on each trading day during the pricing period on which
the daily volume weighted average price for our common stock exceeds the threshold price determined
solely by us for such draw down. The per share purchase price for these shares equals the daily
volume weighted average price of our common stock on each date during the pricing period on which
shares are purchased, less a discount ranging from 4% to 6%, based on the threshold price set by
the Company. If the daily volume weighted average price of our common stock falls below the
threshold price on any trading day during a pricing period, the Purchase Agreement provides that
Energy will not be required to purchase the pro-rata portion of shares of common stock allocated to
that day. However, at its election, Energy could buy the pro-rata portion of shares allocated to
that day at the threshold price less the discount described above.
The terms of the Purchase Agreement limit the total common stock issuable under the Purchase
Agreement to Energy to up to $10,000,000 of our common stock, subject to a maximum share cap
limitation set forth in the Purchase Agreement. Additionally, Energy is subject to a beneficial
ownership limitation of 4.9% of the outstanding shares of our common stock (“Ownership
Limitation”), under which the parties are prohibited from consummating any subsequent draw down
where such draw down would cause Energy to exceed the Ownership Limitation, or from otherwise
exceeding the Ownership Limitation through other means, including the purchase of shares in the
public market.
The Purchase Agreement also provides that from time to time and at our sole discretion we may grant
Energy the right to exercise one or more options to purchase additional shares of our common stock
during each pricing period for an amount that we specify in advance of the first trading day of
such pricing period. Upon Energy’s exercise of the option, we would sell to Energy the shares of
our common stock subject to the option at a price equal to the daily volume weighted average price
of our common stock on each date during the pricing period on which such option shares are
purchased, subject to a threshold price for such option determined solely by us, less a discount
ranging from 4% to 6%, based on the threshold price.
In addition to our issuance of shares of common stock to Energy pursuant to the Purchase Agreement,
our Registration Statement also covers the sale of those shares from time to time by Energy to the
public. Energy is an “underwriter” within the meaning of Section 2(a)(11) of the Securities act of
1933, as amended (the “Securities Act”).
Energy has agreed that the broker-dealers it uses from time to time to effectuate sales of common
stock that it may purchase from us under the Purchase Agreement will neither be affiliated with
Energy nor engaged or used by us at the time of such sales. Such sales will be made on the NASDAQ
Capital Market at prices and at terms then prevailing or at prices related to the then current
market price. Each such unaffiliated broker-dealer will be an underwriter within the meaning of
Section 2(a)(11) of the Securities Act.
Energy shall be solely responsible for the fees and commissions (not to exceed customary fees and
commissions) payable to each such broker-dealer.
The shares of common stock may be sold in one or more of the following manners:
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ordinary brokerage transactions and transactions in which the broker solicits
purchasers; or |
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a block trade in which the broker or dealer so engaged will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to
facilitate the transaction. |
Energy has agreed that during the term of and for a period of ninety (90) days after the
termination of the Purchase Agreement, neither Energy nor any of its affiliates will, directly or
indirectly, sell any of our securities except the shares that it owns or has the right to purchase
pursuant to the provisions of a draw down notice. Energy has agreed that during the periods listed
above it will not enter into a short position with respect to shares of our common stock except
that Energy may sell shares that it is obligated to purchase under a pending draw down notice but
has not yet taken possession of so long as Energy covers any such sales with the shares purchased
pursuant to such draw down notice. Energy has further agreed that during the periods listed above
it will not grant any option to purchase or acquire any right to dispose of or otherwise dispose
for value of any shares of our common stock or any securities convertible into, or exchangeable
for, shares of our common stock, or enter into any swap, hedge or other agreement that
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transfers,
in whole or in part, the economic risk of ownership of our common stock, except for the sales
permitted by the prior sentence and certain other limited exceptions.
In addition, Energy and any unaffiliated broker-dealer will be subject to liability under the
federal securities laws and must comply with the requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), including without limitation,
Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the
timing of purchases and sales of shares of common stock by Energy or any unaffiliated
broker-dealer. Under these rules and regulations, Energy and any unaffiliated broker-dealer:
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may not engage in any stabilization activity in connection with our securities; |
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must furnish each broker which offers shares of our common stock covered by the
prospectus that is a part of our Registration Statement with the number of copies of
such prospectus and any prospectus supplement which are required by each broker; and |
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may not bid or purchase any of our securities or attempt to induce any person to
purchase any of our securities other than as permitted under the Exchange Act. |
These restrictions may affect the marketability of the shares of common stock by Energy and any
unaffiliated broker-dealer.
We have agreed to indemnify and hold harmless Energy, its affiliates, employees, representatives
and advisors, and each person who controls Energy against certain liabilities, including
liabilities under the Securities Act, which may be based upon, among other things, any untrue
statement or alleged untrue statement of a material fact contained, or incorporated by reference,
in our Registration Statement, or any omission or alleged omission to state in the Registration
Statement or any document incorporated by reference in the Registration Statement, a material fact
required to be stated therein or necessary to make the statements therein not misleading unless the
untrue statement made or omitted is furnished to us in writing by the person to be indemnified. We
have also agreed to reimburse Energy and each controlling person for legal fees and expenses
incurred in defending any legal action for which they are entitled to indemnification, provided
that such fees and expenses do not exceed $500,000.
Energy has agreed to indemnify and hold harmless us and each of our directors, officers and persons
who control us against certain liabilities, including liabilities under the Securities Act, which
may be based upon written information furnished by Energy to us for inclusion in a prospectus or
prospectus supplement related to this transaction. Energy has also agreed to reimburse the Company
for legal fees and expenses incurred in defending any legal action for which it is entitled to
indemnification, provided that such fees and expenses do not exceed $500,000.
We have agreed to pay $35,000 of Energy’s legal fees and expenses incurred in connection with the
transaction contemplated by the Purchase Agreement. Further, we have agreed that if we issue a
draw down notice and fail to deliver the shares to Energy on the
applicable settlement date, and such failure continues for ten trading days, we will pay Energy
liquidated damages equal to 2.0% per day for up to 360 days for failure to deliver the shares.
Upon each sale of our common stock to Energy under the Purchase Agreement, we have also agreed to
pay Reedland Capital Partners, an Institutional Division of the Financial West Group, member
FINRA/SIPC, a placement fee equal to 1.0% of the aggregate dollar amount of common stock purchased
by Energy. We have agreed to indemnify and hold harmless Reedland Capital Partners against certain
liabilities, including liabilities under the Securities Act.
LEGAL OPINIONS
Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., our outside legal counsel, will issue an
opinion about the legality of the offered securities for us. Any underwriters will be advised about
issues relating to any offering by their own legal counsel.
EXPERTS
The consolidated financial statements of Syntroleum Corporation as of December 31, 2009 and 2008,
and for each of the three years in the period ended December 31, 2009, and management’s assessment
of the effectiveness of internal control over financial reporting
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as of December 31, 2009,
incorporated by reference in this prospectus and elsewhere in the registration statement of which
this prospectus is a part, have been audited by Hogan Taylor, LLP, independent registered public
accountants, as indicated in their reports with respect thereto, and are incorporated by reference
herein in reliance upon the authority of said firm as experts in giving such reports.
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