-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Oohc731YyILiNQHfNJz/7rnr2jORN/g5O1BhRxe86BBOGHcmyk/YPJjJR+NdNzCA 96G0MoyAI+TuRBzYnbxH0w== 0000950129-01-001880.txt : 20010410 0000950129-01-001880.hdr.sgml : 20010410 ACCESSION NUMBER: 0000950129-01-001880 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20010403 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MITCHELL ENERGY & DEVELOPMENT CORP CENTRAL INDEX KEY: 0000311995 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 741032912 STATE OF INCORPORATION: TX FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-58180 FILM NUMBER: 1592685 BUSINESS ADDRESS: STREET 1: 2001 TIMBERLOCH PL CITY: THE WOODLANDS STATE: TX ZIP: 77380 BUSINESS PHONE: 7133775500 MAIL ADDRESS: STREET 1: P.O. BOX 4000 CITY: THE WOODLANDS STATE: TX ZIP: 77387-4000 S-3 1 h84912s-3.txt MITCHELL ENERGY & DEVELOPMENT CORP. 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 2001 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- MITCHELL ENERGY & DEVELOPMENT CORP. (Exact name of registrant as specified in its charter) TEXAS 74-1032912 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
THOMAS P. BATTLE SENIOR VICE PRESIDENT AND 2001 TIMBERLOCH PLACE GENERAL COUNSEL THE WOODLANDS, TEXAS 77380 2001 TIMBERLOCH PLACE (713) 377-5500 THE WOODLANDS, TEXAS 77380 (Address, including zip code, and telephone (713) 377-5500 number, (Name, address, including zip code, and telephone including area code, of registrant's principal number, executive offices) including area code, of agent for service)
Copies to: C. MICHAEL HARRINGTON STEPHAN J. FEDER EDGAR J. MARSTON III VINSON & ELKINS L.L.P. SIMPSON THACHER & BARTLETT BRACEWELL & PATTERSON, L.L.P. 2300 FIRST CITY TOWER 425 LEXINGTON AVENUE SOUTH TOWER PENNZOIL PLACE 1001 FANNIN STREET NEW YORK, NEW YORK 10017 711 LOUISIANA STREET, SUITE 2900 HOUSTON, TEXAS 77002-6760 (212) 455-2000 HOUSTON, TEXAS 77002-2781 (713) 758-2148 (212) 455-2502 (FAX) (713) 221-1315 (713) 615-5306 (FAX) (713) 221-1188 (FAX)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] --------------------- CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ PROPOSED PROPOSED TITLE OF EACH CLASS OF SECURITIES TO MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF BE REGISTERED AMOUNT TO BE REGISTERED PRICE PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE(1) - ------------------------------------------------------------------------------------------------------------------------------ Class A Common Stock........... 5,175,000 shares(2) $51.95 $268,841,250 $70,975 - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c), based on the average of the high and low prices of the Class A Common Stock reported on the New York Stock Exchange composite transactions reporting system as of March 30, 2001. (2) Includes 675,000 shares which the underwriters have the option to purchase to cover over-allotments, if any. --------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED APRIL 2, 2001. 4,500,000 Shares [MITCHELL ENERGY & DEVELOPMENT CORP. LOGO] MITCHELL ENERGY & DEVELOPMENT CORP. Class A Common Stock ------------------ The shares of Class A Common Stock are being sold by George P. Mitchell, the selling stockholder. We will not receive any of the proceeds from the sale of the shares of Class A Common Stock being offered by this prospectus. Our Class A Common Stock is listed on the New York Stock Exchange under the symbol "MND." The last reported sale price of the Class A Common Stock on April 2, 2001 was $52 per share. The underwriters have an option to purchase a maximum of 675,000 additional shares to cover over-allotments of shares. INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 10.
UNDERWRITING PROCEEDS TO THE PRICE TO DISCOUNTS AND SELLING PUBLIC COMMISSIONS STOCKHOLDER -------- ------------- --------------- Per Share............................................ $ $ $ Total................................................ $ $ $
Delivery of the shares of common stock will be made on or about , 2001. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. CREDIT SUISSE FIRST BOSTON GOLDMAN, SACHS & CO. JPMORGAN JEFFERIES & COMPANY, INC. SANDERS MORRIS HARRIS The date of this prospectus is , 2001. 3 [BLANK INSIDE COVER PAGE] 4 ------------------ TABLE OF CONTENTS
PAGE ---- PROSPECTUS SUMMARY.................... 4 RISK FACTORS.......................... 10 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.......... 12 USE OF PROCEEDS....................... 12 CAPITALIZATION........................ 13 PRICE RANGE OF COMMON STOCK AND CASH DIVIDENDS........................... 14 BUSINESS.............................. 15 MANAGEMENT............................ 20 PRINCIPAL AND SELLING STOCKHOLDER..... 21 DESCRIPTION OF CAPITAL STOCK.......... 22
PAGE ---- CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES TO NON-U.S. HOLDERS.... 25 UNDERWRITING.......................... 28 NOTICE TO CANADIAN RESIDENTS.......... 31 LEGAL MATTERS......................... 32 EXPERTS............................... 32 WHERE YOU CAN FIND MORE INFORMATION... 32 GLOSSARY OF COMMONLY USED OIL AND GAS TERMS............................... A-1
------------------ YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE ON THE DATE OF THIS DOCUMENT. 3 5 PROSPECTUS SUMMARY This summary highlights selected information from this prospectus, but does not contain all of the information that may be important to you. This prospectus includes or incorporates by reference specific terms of this offering and information about our business and our financial and operating data. We encourage you to read the entire prospectus, including the "Risk Factors" section and the financial statements incorporated by reference in this document, before making an investment decision. In this prospectus, we refer to Mitchell Energy & Development Corp. and subsidiaries as "MEDC," "we," "us," or "our company." We also use some abbreviations or other terms that are common in the oil and gas industry and that are defined in the glossary at page A-1. MITCHELL ENERGY & DEVELOPMENT CORP. George P. Mitchell started Mitchell Energy & Development Corp. as a small wildcatting firm in 1946. We are now one of the nation's largest producers of natural gas and NGLs. We find, develop and produce natural gas and oil, primarily in North Texas, East Texas and along the Texas Gulf Coast. We enhance the value of these assets through our gas gathering, processing and marketing operations. Operating only within the United States, we have no exposure to currency fluctuations or other risks of operating abroad. We achieved a 51% return on average stockholders' equity in 2000, one of the highest returns in the independent oil and gas industry, and reduced our long-term debt to the lowest level in decades. Achieving superior shareholder returns will be a priority in 2001 and beyond. EXPLORATION & PRODUCTION At December 31, 2000, we operated over 90% of our net wells and our proved reserve base reached a record 1.5 Tcfe. Ninety-five percent of our reserves are natural gas and are long-lived. For the thirteenth consecutive year, we added more proved natural gas reserves in 2000 than we produced during the year. We grew our natural gas sales by 25% in 2000 and, with our large backlog of undrilled well locations, expect to increase gas volumes at a compounded 20% rate over the next three years. Our production totaled 116 Bcf of natural gas and 2 MMBbls of oil in 2000. Since we did not engage in any hedging activities, we took full advantage of higher commodity prices. GAS SERVICES We own and operate all of our major midstream assets, including six natural gas processing plants and approximately 9,100 miles of natural gas gathering pipelines, all of which are located in Texas. Our natural gas processing plants extract NGLs such as ethane, propane and butanes from streams of natural gas. We increased NGL production by 13% in 2000 to 18.2 MMBbls and, at year-end, our proved plant NGL reserves totaled 175 MMBbls. Our pipelines intersect with both inter- and intrastate pipelines enhancing natural gas marketing flexibility. In North Texas, we benefit from the integration of our pipeline operations with our natural gas production and processing operations. We also own interests in two significant downstream assets located in the Texas Gulf Coast area -- specifically, a one-third interest in a MBTE gasoline additive plant and a 38.75% interest in an NGL fractionator. BUSINESS STRATEGY Our fundamental business strategy is to maximize returns on stockholders' equity by enhancing the value of our well-positioned energy assets through long-term development programs. 4 6 EXPLORATION & PRODUCTION Focus on long-lived gas reserves in Texas. Our primary business strategy involves increasing our natural gas reserves and production by focusing exploration and development activities on domestic onshore geological basins that have relatively low risk and the potential for long-lived reserves and long-term exploitation. We capitalize on our extensive leaseholdings and operating expertise, especially in North Texas where we have operated since the 1950s. As a result, in 2000 we increased proved oil and gas reserves by 36% to 1.5 Tcfe. Utilize technological advancements to exploit existing asset base. We increased our production and reserve base in 2000 primarily from the accelerated exploitation of our largest field, the Newark East Barnett shale in North Texas, where step-out drilling, using light sand fracture completion technology, extended the limits of the original "core" Barnett development area. This development drilling success, coupled with improved reserve recovery from recompletion and refracturing programs for mature Barnett wells, significantly increased our assessment of the Barnett's ultimate potential. To further accelerate the development of our extensive inventory of undrilled locations in core fields, we increased our exploration and development capital budget to $346 million in 2001, a 41% increase over last year's actual spending. Most of the planned drilling involves development of the Barnett shale, where 276 new wells are scheduled with a 12-rig program. We also plan to drill more than 40 wells in the North Personville field area in East Texas and continue aggressive rework programs. We plan to maintain our E&P capital program at the 2001 budget level for at least three years, with the goal of growing our natural gas production over this period by 20% or more compounded annually. We believe that we can accomplish this growth without making major acquisitions or assuming significant exploratory risks. GAS SERVICES Maximize returns from gas properties and leverage our expertise. We seek to maximize returns from our gas properties by providing natural gas gathering and processing services and marketing the resultant residue gas and NGL production. In addition, we leverage our operating expertise by providing these services to other natural gas producers. Higher energy prices sparked greater industry drilling activity during 2000, as 308 wells (including 202 MEDC wells) were connected to our natural gas gathering systems. This contributed to a 13% increase in NGL production volumes, which averaged 49,800 Bbls/d for the year. We set a volume growth target of 15% for 2001, but due to production curtailments during January and February at Exxon's Katy plant, actual production is expected to fall short of this target. New gathering, processing and marketing infrastructure in North Texas should provide additional profit opportunities from handling increasing quantities of other producers' gas. Expand gathering, processing and marketing infrastructure. In response to a favorable demand outlook for NGLs and the success of our development drilling and recompletion programs in the Barnett shale, we recently completed an expansion of our largest processing plant, at Bridgeport in North Texas, increasing its NGL production capacity by 8,000 Bbls/d to 27,000 Bbls/d. Our 2001 capital budget allocates $124 million to gas services, including $64 million for a further expansion of the Bridgeport plant that will bring its production capacity up to 37,000 Bbls/d and the construction of a related 49-mile, 24-inch residue gas sales pipeline. Capital also will be spent on the expansion of gas gathering facilities serving the Bridgeport plant, as well as new well connections to the Bridgeport gathering system and along our other gas gathering systems where third party drilling has been increasing. EXECUTIVE OFFICES Our principal executive offices are located at 2001 Timberloch Place, The Woodlands, Texas 77380, and our telephone number there is (713) 377-5500. Our website is located at www.mitchellenergy.com. Information contained in our website is not part of this prospectus. 5 7 SELLING STOCKHOLDER George P. Mitchell, the Chairman and Chief Executive Officer of MEDC, beneficially owns all of the shares of Class A Common Stock offered by this prospectus. On March 13, 2001, Mr. Mitchell beneficially owned 28,062,011 shares, or approximately 55.8%, of the outstanding Class A Common Stock, our only class of authorized common stock. Upon completion of this offering, Mr. Mitchell will beneficially own 23,562,011 shares of the Class A Common Stock, or approximately 46.9% of all such shares now outstanding, assuming no exercise of the over-allotment option in this offering. Mr. Mitchell has owned a majority of our voting stock since we became a publicly traded company in the early 1970s. He recently decided to sell the shares subject to this offering to meet certain personal estate planning, financial and philanthropic goals. Mr. Mitchell plans to remain active as Chief Executive Officer and Chairman of the Board of Directors of MEDC and intends to continue to work to maximize the value of our company for all shareholders. 6 8 THE OFFERING The share information set out below assumes that the underwriters do not exercise the option granted by the selling stockholder to purchase up to 675,000 additional shares of Class A Common Stock in connection with the offering, as discussed under "Underwriting." Shares offered by George P. Mitchell............................ 4.5 million Approximate number of shares of Class A Common Stock outstanding after this offering............... 49.8 million (excluding 1.8 million additional shares underlying stock options outstanding on December 31, 2000) New York Stock Exchange trading symbol.............................. MND Use of Proceeds..................... We will not receive any proceeds from this offering. 7 9 SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA The following table sets forth selected historical consolidated financial and operating data of MEDC for each of the four years in the period ended December 31, 2000, and for the eleven-month period ended December 31, 1996. During 2000, we changed our year-end to December 31; the fiscal year previously ended on January 31. Previously reported January 31 fiscal years were recast to a calendar-year basis for the years ended December 31, 1999, 1998 and 1997 to provide recent comparable financial reporting information. To make the transition from our prior January 31 fiscal year to a December 31 calendar year, the eleven-month period ended December 31, 1996 was selected as the transition reporting period. The financial data was taken from our consolidated financial statements and should be read in conjunction with the consolidated financial statements and the related notes incorporated by reference in this prospectus as well as "Management's Discussion and Analysis of Financial Position and Results of Operations" contained in the reports incorporated by reference in this prospectus. See "Where You Can Find More Information".
ELEVEN MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, ------------------------------------------------- 1996 1997 1998 1999 2000 ------------- -------- -------- -------- ---------- (AMOUNTS IN THOUSANDS EXCEPT WHERE OTHERWISE INDICATED) STATEMENT OF EARNINGS DATA Revenues.................................... $806,227 $810,744 $720,260 $894,356 $1,672,134 Segment operating earnings Exploration and production operations..... $ 65,186 $ 77,657 $ 10,376 $ 71,023 $ 290,400 Gas services operations................... 100,454 66,957 36,011 87,063 138,840 Unusual items............................. (621) (30,618) (45,810) 9,875 (4,678) -------- -------- -------- -------- ---------- Total segment operating earnings........ 165,019 113,996 577 167,961 424,562 General and administrative expense.......... 28,198 31,623 30,410 37,626 43,739 -------- -------- -------- -------- ---------- Total operating earnings (loss)............. 136,821 82,373 (29,833) 130,335 380,823 Interest expense............................ 20,801 26,733 34,572 34,499 28,765 Other (income) expense, net................. (2,111) (10,261) (6,281) (6,162) (5,899) -------- -------- -------- -------- ---------- Earnings (loss) from continuing operations before income taxes............ 118,131 65,901 (58,124) 101,998 357,957 Income taxes................................ 41,912 21,610 (25,270) 34,664 100,811 -------- -------- -------- -------- ---------- Earnings (loss) from continuing operations................................ 76,219 44,291 (32,854) 67,334 257,146 Discontinued operations earnings (loss)..... 15,757 (58,515) 3,250 -- -- Extraordinary item.......................... -- (13,250) -- -- -- -------- -------- -------- -------- ---------- Net earnings (loss)......................... $ 91,976 $(27,474) $(29,604) $ 67,334 $ 257,146 ======== ======== ======== ======== ========== Per share earnings (loss) From continuing operations Basic................................... $1.47 $0.87 $(0.67) $1.37 $5.22 Diluted................................. 1.47 0.87 (0.67) 1.37 5.13 Net earnings Basic................................... $1.77 $(0.54) $(0.60) $1.37 $5.22 Diluted................................. 1.77 (0.54) (0.60) 1.37 5.13 Average common shares outstanding Basic................................... 51,882 50,925 49,100 49,117 49,291 Diluted................................. 51,882 50,925 49,100 49,223 50,084
8 10
ELEVEN MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------------------------------------------- 1996 1997 1998 1999 2000 ------------- ---------- ---------- ---------- ---------- (AMOUNTS IN THOUSANDS EXCEPT WHERE OTHERWISE INDICATED) OTHER FINANCIAL DATA Cash provided by operating activities(1).... $ 220,515 $ 200,074 $ 128,041 $ 189,620 $ 466,228 Cash provided by (used for) investing activities(2)............................. (140,646) 244,109 (318,173) (110,478) (288,326) Cash provided by (used for) financing activities................................ (89,943) 441,369 23,942 (118,733) (104,501) EBITDA(3)................................... 220,890 218,796 144,211 245,238 537,175 Capital and exploratory expenditures (accrual basis)........................... 150,647 256,395 305,234 164,031 346,279 Cash dividends per share (dollars)(4) Combined common stock..................... -- -- -- -- 0.2650 Class A common stock...................... 0.4800 0.7200 0.4800 0.4800 0.5025 Class B common stock...................... 0.5300 0.7950 0.5300 0.5300 0.5150 BALANCE SHEET DATA(at period end) Net property, plant and equipment........... $ 764,405 $ 887,026 $1,035,696 $1,050,298 $1,206,005 Total assets................................ 1,691,271 1,273,959 1,163,415 1,163,679 1,519,765 Long-term debt(5)........................... 600,000 414,267 372,767 379,267 300,342 Stockholders' equity........................ 543,812 412,005 341,282 385,174 620,186 OPERATING STATISTICS(6) Average daily volumes Natural gas sales (Mcf)................... 228,700 236,100 247,500 244,700 305,500 Crude oil and condensate sales(Bbls)...... 5,400 6,100 6,800 5,900 5,500 Natural gas liquids produced (Bbls)....... 46,000 45,500 41,800 44,000 49,800 Pipeline throughput (Mcf)................. 414,000 411,000 554,000 555,000 779,000 Average sales prices Natural gas (per Mcf)..................... $ 2.50 $ 2.62 $ 2.15 $ 2.42 $ 4.23 Crude oil and condensate (per Bbl)........ 21.26 19.27 12.60 17.17 28.70 Natural gas liquids produced (per Bbl).... 15.88 13.96 10.48 14.20 21.97
- --------------- (1) Before changes in operating assets and liabilities. (2) Includes $480,994 net proceeds from the sale of The Woodlands Corporation in 1997. (3) As used in this prospectus, EBITDA means earnings before interest, income taxes, depreciation, depletion, amortization, non-cash income or expense items and distributions in excess of (less than) earnings of equity investees. EBITDA is not a calculation based upon generally accepted accounting principles. EBITDA should not be considered as an alternative to net income as an indicator of our operating performance, or as an alternative to cash flow as a better measure of liquidity. EBITDA measures presented in this prospectus may not be comparable to other similarly titled measures reported by other companies. (4) In June 2000, Class A and B shares were combined, and the subsequent dividends were paid on the combined single class of common stock. (5) Excludes current maturities of $130,000 at December 31, 1996 and $100,000 at December 31, 1998. (6) Where applicable, the statistics include our company's proportional interests in equity partnerships. 9 11 RISK FACTORS You should carefully consider the risk factors described below. You should also consider other information contained in this prospectus, including those factors set forth in "Cautionary Statement Regarding Forward-Looking Statements" and the documents incorporated by reference. PRODUCT PRICES ARE VOLATILE, AND LOW PRICES CAN ADVERSELY IMPACT RESULTS. Our results of operations are highly dependent upon the prices of and demand for natural gas, oil and NGLs. Historically, the markets for natural gas, oil and NGLs have been volatile and are likely to continue to be volatile in the future. Accordingly, the prices received by us for our natural gas, oil and NGL production are dependent upon numerous factors beyond our control. These factors include, but are not limited to, the level of ultimate consumer product demand, governmental regulations and taxes, the price and availability of alternative fuels, the level of imports and exports of natural gas, oil and NGLs and the overall economic environment. Any significant decline in prices for natural gas, oil and NGLs could have a material adverse effect on our financial condition, results of operations and quantities of reserves recoverable on an economic basis. Should our industry experience significant price declines or other adverse market conditions, we may not be able to generate sufficient cash flows from operations to meet our obligations and make planned capital expenditures. OUR INDUSTRY IS EXTREMELY COMPETITIVE. The energy industry is extremely competitive, particularly with regard to exploration for and development and production of new sources of natural gas and oil. As an independent producer of natural gas, oil and NGLs, we frequently compete against companies that are larger and financially stronger in acquiring properties suitable for exploration, contracting for drilling equipment and other services and securing trained personnel. WE DO NOT INSURE AGAINST ALL POTENTIAL LOSSES AND COULD BE SERIOUSLY HARMED BY UNEXPECTED LIABILITIES. All of our businesses can be hazardous, involving natural disasters and other unforeseen occurrences such as blowouts, cratering, fires, environmental spills, loss of well control and explosions, all of which can damage or destroy assets, injure or kill people and damage property and the environment. We maintain insurance against many, but not all, potential losses or liabilities arising from our operations in accordance with customary industry practices and in amounts that we believe to be prudent. Losses and liabilities arising from such events, to the extent not covered by insurance, could reduce our operating cash flows by reducing revenues or increasing costs. WE INCUR COSTS TO COMPLY WITH GOVERNMENT REGULATIONS AND COULD INCUR EVEN GREATER COSTS IN THE FUTURE. Our business operations are regulated extensively at the federal, state and local levels. We have made and will continue to make expenditures in our efforts to comply with the requirements of all such regulations. The regulatory environment applicable to our businesses and the requirements, costs or methods of regulatory compliance could change in ways that might substantially increase these costs. REPORTED NATURAL GAS, OIL AND PLANT NGL RESERVE DATA AND FUTURE NET REVENUE ESTIMATES ARE UNCERTAIN. Estimates of reserves are projections based on engineering data, projected future rates of production and the timing of future expenditures. Estimates of our proved natural gas, oil and plant NGL reserves and projected future net revenues are based on reserve reports that we prepare. The process of estimating natural gas, oil and plant NGL reserves requires substantial judgment on the part of the petroleum engineers, resulting in imprecise determinations, particularly for new discoveries. Different reserve engineers may make different estimates of reserve quantities and related revenues based on the same data. Future performance that deviates significantly from the reserve reports could have a material adverse effect on us. The accuracy of any reserve estimate depends on the quality of the available data as well as engineering and geological interpretation and judgment. Results of drilling, testing and production and 10 12 changes in the assumptions regarding decline and production rates, the ability to market natural gas, oil and NGLs that are produced, prices for natural gas, oil and NGLs, revenues, taxes, capital expenditures, operating expenses, geologic success and quantities of recoverable natural gas, oil and NGLs may vary substantially from those assumed in the estimates, may result in revisions to such estimates and could materially affect the estimated quantities and related value of reserves. The estimates of future net revenues reflect natural gas, oil and NGL prices at year-end, without escalation or reduction. Fluctuations in the prices of natural gas, oil and NGLs may significantly affect the economic viability of future reserve production and, therefore, may cause the quantities of recoverable reserves to increase or decrease. There can be no assurance, however, that such prices will be realized or that the estimated production volumes will be achieved. Actual future production, natural gas, oil and NGL prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable natural gas, oil and plant NGL reserves most likely will vary from our estimates. IF WE FAIL TO ACQUIRE OR FIND ADDITIONAL RESERVES, OUR RESERVES AND PRODUCTION WILL DECLINE MATERIALLY FROM THEIR CURRENT LEVELS. Production rates of natural gas and oil properties generally decline as reserves are depleted. Except to the extent that we acquire additional properties containing proved reserves or conduct successful exploration and development activities on existing properties, our proved reserves of natural gas, oil and NGLs will decline materially as reserves are produced. Our future natural gas, oil and NGL production levels therefore are highly dependent upon our success in acquiring, finding and developing additional reserves. WE MAY INCUR SUBSTANTIAL IMPAIRMENT WRITEDOWNS. Unexpected conditions that cause substantial reductions in future cash flows attributable to our oil and gas producing properties and gas services facilities could require us to record asset impairments in the future, which would have a negative impact on our financial position. We make impairment reviews when circumstances suggest there is a need for such reviews. For any property determined to be impaired, we recognize an impairment loss equal to the difference between the property's carrying value and its estimated fair value. Gas services impairment charges of $10.8 million and $7.6 million were recorded in 2000 and 1998, respectively, and a $42.3 million impairment of producing oil and gas properties was recorded in 1998. GEORGE P. MITCHELL OWNS A MAJORITY OF OUR CLASS A COMMON STOCK, GIVING HIM INFLUENCE OR CONTROL IN CORPORATE TRANSACTIONS AND OTHER MATTERS, AND HIS INTERESTS COULD DIFFER FROM THOSE OF OTHER STOCKHOLDERS. On March 13, 2001, George P. Mitchell beneficially owned approximately 55.8% of the outstanding shares of our Class A Common Stock, our only class of common stock. On completion of this offering Mr. Mitchell will beneficially own approximately 46.9% of the outstanding shares of our Class A Common Stock, assuming no exercise of the underwriters' over-allotment option in this offering. As a result, Mr. Mitchell would continue to be in a position to significantly influence or control the outcome of matters requiring a stockholder vote, including the election of directors, the adoption of an amendment to our articles of incorporation or bylaws and the approval of mergers and other significant corporate transactions. Mr. Mitchell's control of MEDC may delay or prevent a change of control of MEDC and may adversely affect the voting and other rights of other stockholders. 11 13 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This prospectus, including the documents that we incorporate by reference, contains statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements, which include all statements other than those of historical fact, appear in a number of places in this prospectus and include statements regarding our plans, beliefs or current expectations with respect to, among other things: - future production levels and operating results; - number and location of undrilled well locations and planned wells; - future reserve replacement; - sources of funds necessary to conduct operations; - future capital expenditures; - sensitivity to energy price changes; and - our business strategy regarding future operations. Any such forward-looking statements are not assurances of future performance and involve risks and uncertainties, many of which are outside our control. Actual results may differ materially from anticipated results for a number of reasons, including: - general economic and business conditions; - fluctuations in the commodity prices for natural gas, oil and NGLs; - unexpected changes in competitive conditions or technology; - acquisitions and other business opportunities that may be presented to and pursued by us; - the availability of capital resources; and - changes in laws and regulations affecting the energy business. The information contained in this prospectus, including the information set forth under the heading "Risk Factors," identifies additional factors that could affect our operating results and performance. We urge you to carefully consider those factors. All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement. USE OF PROCEEDS We will not receive any of the proceeds from the sale of shares being offered by George P. Mitchell pursuant to this prospectus. 12 14 CAPITALIZATION The following table sets forth the consolidated capitalization of MEDC at December 31, 2000. This table should be read in conjunction with our consolidated financial statements and the related notes incorporated by reference in this prospectus.
(IN THOUSANDS) Long-term debt.............................................. $300,342 -------- Stockholders' equity Preferred stock, $.10 par value (10,000,000 shares authorized; none issued)............................... -- Class A Common Stock, $.10 par value (200,000,000 shares authorized; 53,856,140 shares issued).................. 5,386 Additional paid-in capital................................ 148,154 Retained earnings......................................... 565,132 Other comprehensive loss.................................. (8,896) Treasury stock, at cost (4,059,927 shares of Class A Common Stock).......................................... (89,590) -------- Total stockholders' equity........................ 620,186 -------- Total capitalization.............................. $920,528 ========
13 15 PRICE RANGE OF COMMON STOCK AND CASH DIVIDENDS Our Class A Common Stock is traded on the New York and Pacific Stock Exchanges under the trading symbol "MND". Between June 24, 1992 and June 29, 2000, we maintained a dual class common stock structure. To improve market liquidity for our common stock and to eliminate stockholder confusion concerning the dual class common stock structure, we combined the two classes of common stock, effective June 29, 2000, by reclassifying each outstanding share of non-voting Class B Common Stock as one share of voting Class A Common Stock. As a result, the Class A Common Stock is now our only authorized class of common stock. The following table sets forth, for the periods indicated, the high and low sales prices per share for our Class A Common Stock, as reported on the New York Stock Exchange Composite Tape, and the amount of cash dividends paid per share.
PRICE RANGE --------------- CASH HIGH LOW DIVIDENDS ---- --- --------- 1998 First Quarter......................................... $29.25 $26.00 $ .12 Second Quarter........................................ 27.50 20.00 .12 Third Quarter......................................... 21.50 12.25 .12 Fourth Quarter........................................ 14.94 9.63 .12 1999 First Quarter......................................... $14.38 $10.50 $ .12 Second Quarter........................................ 19.31 13.13 .12 Third Quarter......................................... 24.44 17.56 .12 Fourth Quarter........................................ 22.25 21.25 .12 2000 First Quarter......................................... $24.50 $20.25 $ .12 Second Quarter........................................ 32.00 20.50 .12 Third Quarter......................................... 50.50 28.81 .3825 Fourth Quarter........................................ 64.00 43.25 .1325 2001 First Quarter......................................... $62.50 $44.50 $.1325 Second Quarter (through , 2001)............. .1325
On January 31, 2001, there were 1,933 record holders of our Class A Common Stock, including individual participants in security position listings. We estimate that there are 15,000 beneficial owners of our Class A Common Stock, including those whose shares are held in street name. We have paid regular quarterly cash dividends for more than 20 years, and we currently intend to continue to pay quarterly cash dividends on the outstanding shares of our Class A Common Stock. The cash dividend of $.3825 per share paid on July 6, 2000 included a special cash dividend of $.25, and in making that payment we emphasized that the special cash dividend does not signal any future departure in the level of regular quarterly cash dividends. Determination of the amount of future cash dividends to be declared and paid will depend upon, among other things, our results of operations, cash flows, anticipated capital requirements and restrictions contained in our debt instruments. 14 16 BUSINESS OVERVIEW MEDC is one of the nation's largest independent oil and gas companies in terms of revenues, proved reserves and production. Our exploration and production operations are concentrated in North Texas, East Texas and onshore along the Texas Gulf Coast where we have large lease blocks primarily held by production. We also have a significant gas services business, ranking 15th domestically in the production of natural gas liquids during 1999. This business is dedicated both to enhancing the profitability of our own natural gas production and providing gathering, processing and marketing services to other producers. More than half of our operations are concentrated in North Texas. Key daily operating statistics for the year ended December 31, 2000 are as follows:
NORTH TEXAS TOTAL -------------------- COMPANY AMOUNT % OF TOTAL ------- ------- ---------- Natural gas sales (Mcf)............................. 305,500 193,800 63% Crude oil and condensate sales (Bbls)............... 5,500 1,100 20% Natural gas liquids produced (Bbls)................. 49,800 24,700 50% Pipeline throughput (Mcf)........................... 779,000 391,000 50%
PROVED RESERVES The following table sets forth our estimates of our total proved reserves of natural gas, crude oil and condensate and plant NGLs at December 31, 1997, 1998, 1999 and 2000. This table should be read in conjunction with the "Unaudited Supplemental Information" included in our latest Annual Report on Form 10-K, incorporated by reference herein.
1997 1998 1999 2000 ------- ------- ------- ------- Natural Gas (Bcf)(a) Proved Developed............................... 648.6 692.3 667.1 737.0 Proved Undeveloped............................. 137.5 182.9 355.7 699.0 ------- ------- ------- ------- Total.................................. 786.1 875.2 1,022.8 1,436.0 ======= ======= ======= ======= Crude Oil and Condensate (MMBbls) Proved Developed............................... 14.7 15.2 13.5 11.4 Proved Undeveloped............................. 1.2 1.2 0.5 0.6 ------- ------- ------- ------- Total.................................. 15.9 16.4 14.0 12.0 ======= ======= ======= ======= Total Bcfe............................. 881.5 973.6 1,106.5 1,507.7 ======= ======= ======= ======= Plant NGLs (MMBbls)(b) Proved Developed............................... 117.7 92.0 143.7 115.2 Proved Undeveloped............................. 13.1 23.8 35.4 59.8 ------- ------- ------- ------- Total.................................. 130.8 115.8 179.1 175.0 ======= ======= ======= =======
- --------------- (a) Net wet volumes, including volumes that will be converted to NGLs. (b) For applicable periods, amounts include our equity interests in partnership reserves. Historically, we have focused our efforts on the development of natural gas reserves and have more than replaced our gas production for 13 consecutive years. In early 1999, we began accelerating development of our large backlog of undrilled well locations in core fields. As a result of these exploitation programs, especially successful step-out drilling which significantly expanded the limits of the Newark East 15 17 Barnett shale field, our North Texas proved natural gas and plant NGL reserves increased significantly during 1999 and 2000. At December 31, 2000, approximately three-fourths of our proved natural gas and oil reserves and two-thirds of our plant NGL reserves were located in North Texas. Plant NGL reserves declined slightly from 1999 to 2000 on an overall basis due to the temporary exclusion of uneconomic reserves. Even though NGL prices had reached record highs at December 31, 2000, natural gas prices were so high that certain gas streams could not be processed economically under "keep whole" contracts. (Please see the explanation of "keep whole" contracts under "-- Gas Services -- Gas Processing Economics.") As a result, 17 MMBbls had to be removed from proved reserves. These reserves are still dedicated to our processing operations and will be added back to proved reserves when NGL and natural gas prices resume a more normal relationship. EXPLORATION AND PRODUCTION Key Attributes. At December 31, 2000, we had natural gas and oil leaseholdings totaling almost 1.1 million gross acres (805,000 net) and interests in approximately 3,400 gross wells (2,695 net). Most of the leases are held by production, which allows us to rapidly adjust our drilling program to match industry conditions without the risk of losing leases with significant reserve potential. Our leaseholdings are concentrated in three large blocks -- 532,000 net acres in North Texas, 74,000 net acres in the Limestone County area of East Texas and 47,000 net acres in the Pinehurst/Lake Creek fields 30 miles northwest of Houston. These areas are characterized by stacked pay sections, which provide multiple drilling and recompletion opportunities. Currently, the estimated percentages of reserves in place that will be recovered are very low for our Barnett shale and Limestone County properties, offering substantial opportunities for future exploitation. At year-end, we had an estimated backlog of nearly 2,500 undrilled well locations on currently held acreage. North Texas. We have been operating in North Texas since the early 1950s, developing gas and oil from multiple formations at depths from 5,000 to 7,000 feet. Beginning in the early 1990s, we shifted our focus to developing the Barnett shale, which lies between 7,000 and 8,000 feet and is the source rock for the hydrocarbons found in the shallower formations. The Barnett shale is a very dense rock with extremely low porosity and permeability. We estimate that we will recover only approximately 8% of the total gas in place using the current 55-acre well spacing. In 1999, a major breakthrough was realized in the development of the Barnett. After extensive testing, we adopted the use of light sand fracture technology to improve the ultimate recovery of Barnett reserves. This new technology, which cracks open the tombstone-like rock with massive volumes of water and small amounts of sand, reduced total well costs by approximately 20%, making it economic to expand the field limits and add the Upper Barnett interval in existing and future wells, significantly improving our returns from the Barnett. During 2000, we pursued an aggressive four-pronged development program using this technology. As a result, net Barnett gas production rose more than 90% to 179 MMcf/d in just over a year, and 453 Bcf of proved reserves were added. In the first prong of this program, drilling was accelerated with 142 wells completed in 2000 versus 66 wells in 1999. In 2001, 276 new wells are planned with a 12-rig drilling program. The second and third facets of this program involve adding the Upper Barnett zone and refracturing the Lower Barnett in about 400 existing wells. Adding the Upper Barnett increases per well recoverable reserves by 250 MMcf, or 25%. Refracturing the Lower Barnett expands the per well drainage area and ultimate reserve recovery. In most cases, initial production of the reworked wells exceeded their output levels when they were first drilled. We reworked 82 Barnett wells in 2000 and plan to rework another 96 in 2001. As a fourth step, three pilot tests were initiated in 2000 to evaluate the attractiveness of reducing Barnett well spacing to 27 acres to improve reservoir recovery. While the test wells have developed new reserves, it is too early to reach definitive conclusions. Three additional pilots are planned for 2001 to obtain more data and to evaluate reduced spacing in other areas of the field. If these tests indicate that 16 18 additional economic reserves are recoverable without adversely affecting offset wells, our estimated backlog of 2,000 undrilled Barnett locations possibly could double. East Texas. Our second most active development play is in the Limestone County area where we have been drilling since the 1970s. Production in this area is primarily from the Cotton Valley limestone formation in the North Personville Field. Similar to the Barnett shale, this is a dense, gas-bearing formation that must be fracture stimulated to open the rock. In 2000, we initiated an infill drilling program in the North Personville field using light sand fracture technology. Under this program, well spacing is being reduced to 80 acres to increase both current production volumes and ultimate reserve recovery. We estimate that there may be as many as 110 well locations on 80-acre spacing. Twenty-three of these locations were drilled in 2000, and another 36 are planned for 2001. Texas Gulf Coast. We have been active in the Gulf Coast for a number years. Recently, we have selectively pursued new opportunities using 3-D seismic technology. In the Lake Creek Field, we completed a 14,800 foot Lower Wilcox exploratory test in early 2000. Two additional exploratory wells were completed just north of Lake Creek in shallower Frio and Yegua formations at depths ranging from 5,000 to 6,000 feet. These three discoveries lie within a 54-square-mile 3-D seismic survey shot in 1998 that identified a 2,400-acre Lower Wilcox structure underlying our 47,000-acre lease block, as well as a number of shallower prospects. These wells, plus four offset Lower Wilcox development wells, were producing a total of 25 MMcf/d of gas and 150 Bbls/d of condensate early in 2001. In August 2000, we successfully completed our first discovery well within a 77-square-mile 3-D seismic survey located in Fort Bend County southwest of Houston. The well was drilled to a total depth of 9,500 feet on the largest structural feature identified by the seismic survey and encountered two Yegua sandstone pays. Four confirmation wells were subsequently drilled offsetting the initial discovery. Production from this area totaled 16 MMcf/d of gas and 700 Bbls/d of condensate early in 2001. Twelve wells are planned in the Texas Gulf Coast region during 2001, most to continue development of the recent discoveries in Lake Creek and Fort Bend County. GAS SERVICES Key Attributes. Our midstream assets consist primarily of six processing plants and approximately 9,100 miles of gas gathering pipelines. These facilities are concentrated in North Texas, Central Texas, Southeast Texas and West Texas near active drilling areas. We have built a strong competitive position in each of these core areas, resulting in significant expansion opportunities. Equally important, our gathering and processing operations are close to major demand centers -- the Dallas/Fort Worth metroplex in North Texas and the Katy market hub in Southeast Texas -- which improves product pricing and lowers transportation costs. Since 1994, we have taken a number of steps to streamline our gathering and processing operations and to strengthen our position in core areas. Recently, we purchased the remaining 50% interest in the Jameson plant in West Texas and traded non-operated interests in Oklahoma gathering and processing assets for the outstanding interests in similar assets operated by us in Central Texas. As a result, we now own and operate 100% of our major midstream facilities. Currently, we process more NGLs with just six processing plants than we did when we had interests in 31 plants six years ago. Gas Processing Economics. Gas processing economics are affected both by NGL and natural gas prices. Because we are one of the nation's larger NGL producers, we are in a position to take advantage of the operating leverage inherent in this business. Based on average production volumes projected for 2001, a one-cent per gallon ($.42 per barrel) increase in our average NGL sales price results in an annual increase of almost $8 million in segment operating earnings and cash flows. 17 19 Because 15 to 30% of the gas volumes run through a plant are consumed in processing, fuel and shrinkage is the largest cost incurred in extracting NGLs from gas streams. Approximately 52% of our current NGL production comes from gas supplied under "keep whole" contracts and 48% from "percent-of-proceeds" contracts. Under keep whole contracts, gas prices directly impact our processing margins since we must purchase gas to replace the producers' gas consumed in processing. Conversely, our margins under percent-of-proceeds contracts are relatively inelastic to gas prices because the gas producers are paid based on agreed percentages of NGL and gas revenues rather than for the natural gas consumed in the extraction process. Our balanced mix of these two types of contracts mitigates the adverse effect that rising gas prices has on processing margins. Also, the adverse effect of higher gas prices on processing margins is more than offset by increased earnings in exploration and production since we produce and sell three times as much natural gas as we purchase for fuel and shrinkage. Although strong petrochemical demand and low product inventories pushed NGL prices to all-time highs, processing margins were squeezed beginning late in 2000 because natural gas prices rose to even higher levels. As a result, we ceased processing approximately 14,000 Bbls/d of NGL production at Exxon's Katy plant for a three-month period beginning in December and reinjected ethane into the gas stream at certain plants, thus lowering our NGL production volumes. However, our overall earnings benefited from selling NGLs as part of the gas stream and from the higher gas prices realized in exploration and production. North Texas. This area accounts for 50 percent of our gathering and processing volumes. The Bridgeport plant, our largest facility, is located in the heart of the Barnett shale play and produced almost 17,800 Bbls/d of NGLs in 2000, or 36% of total production. A new processing train was completed at the Bridgeport plant in January 2001, expanding inlet capacity from 210 to 310 MMcf/d and production capacity from 19,000 to 27,000 Bbls/d. This train, which employs advanced cryogenic turbo expander technology, uses relatively small amounts of fuel and power and is capable of 90% ethane recovery. We anticipate that the expanded plant will be operating at full capacity by mid-2001. With the 12-rig program projected to rapidly grow Barnett shale volumes, a second expansion is underway at the Bridgeport plant. This will bring capacity to 430 MMcf/d and 37,000 Bbls/d when completed by September 2001. The new capacity will clear the way for achieving our growth targets for 2002 and beyond. In addition to the plant expansion, three other projects were completed in North Texas during 2000 to enable us to keep up with increasing gas production from the Barnett shale. First, 13.5 miles of main gathering line serving the Bridgeport plant was looped, increasing daily gathering capacity along the line by more than 40 MMcf. Second, we increased the capacity of a field sales outlet from 40 to 100 MMcf/d. This outlet allows lean gas production from the southeastern flank of the Barnett shale play to be sold directly into the intrastate market. Both of these expanded facilities were running close to capacity at year-end. The third project involved construction of a 23-mile, 24-inch pipeline to move residue gas south from the Bridgeport plant to intrastate market outlets. This line will be extended another 49 miles in 2001 to connect with two additional major gas transportation systems. It will then be capable of moving 300 MMcf of gas per day and will significantly enhance our flexibility to sell North Texas gas production into major interstate transportation systems as well as intrastate markets from West Texas to the Dallas area. Southeast Texas. We continue to build our gathering, processing and marketing operations at the Katy hub in Southeast Texas. Katy is one of the largest market hubs in the United States, providing access to industrial markets along the Houston Ship Channel and the Texas Gulf Coast and to numerous interstate transportation systems. Much of the growth at Katy comes from our Vanderbilt system, which is capturing new gas supplies from active drilling in the Wilcox and Yegua trends. During 2000, throughput on the Vanderbilt system 18 20 averaged 56 MMcf/d, almost double that of the prior year. Likewise, NGL production from this gas increased to 2,800 Bbls/d, up 85% from 1,500 Bbls/d in 1999. Although extraordinarily high natural gas prices forced the curtailment of NGL production at Katy beginning in December, production resumed there in March 2001 when NGL and gas prices returned to normal relationships. Central/West Texas. After several years of field declines, industry drilling activity in these core areas rebounded during 2000 as oil prices increased significantly. The largest increase in activity occurred near year-end in the Austin Chalk in Central Texas, where drilling is expected to grow further in 2001. Gas in this area is rich in gas liquids, and as a result, NGL production there is projected to increase in 2001. Other Assets. We also own a 38.75 percent interest in an NGL fractionation plant and a one-third interest in a plant that makes MTBE, a gasoline additive. Use of MTBE may decline during the next few years due to regulatory pressures. Demand for MTBE is seasonal, and the MTBE plant was recently shut down as a result of weak demand and prices and to perform annual maintenance. The plant was restarted in February 2001 in anticipation of better margins during the summer driving season. While its long-term fate is currently not known, the MTBE plant can be retrofitted at a relatively modest capital cost to produce other gasoline blend stocks such as alkylates. We and our partners continue to review various alternatives for the plant. 19 21 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS OF MEDC Our directors and executive officers, their ages on February 28, 2001, their principal occupation and business experience during the past five years and their tenure with us are as follows (all positions are with MEDC unless otherwise noted):
OFFICER/ PRINCIPAL OCCUPATION AND BUSINESS DIRECTOR NAME AGE EXPERIENCE DURING PAST FIVE YEARS SINCE - ---- --- --------------------------------- -------- Directors: Robert W. Baldwin..................... 80 Consultant (Energy/Management); 1983 President of Gulf Refining and Marketing Company, a division of Gulf Oil Corp. (1975-1981) Bernard F. Clark...................... 79 Vice Chairman of the Board 1956 William D. Eberle..................... 77 Chairman of the Board of Manchester 1976 Associates, venture capital consulting (since 1977); Of Counsel on trade issues to Kaye, Scholar, Fierman, Hays and Handler, attorneys-at-law (since 1993) Shaker A. Khayatt..................... 65 President and Chief Executive Officer 1972 of Khayatt and Company, Inc., investment banking (since 1979) George P. Mitchell.................... 81 Chairman of the Board and Chief 1946 Executive Officer J. Todd Mitchell...................... 42 President of GPM, Inc., private 1993 investments (since 1998); Chairman of Rock Solid Images, a seismic data analysis software company (since 1998); President of and geologist to Dolomite Resources, Inc., a mineral exploration and investments company (since 1987) M. Kent Mitchell...................... 48 President and Chief Executive Officer 1988 of Bald Head Island Management, Inc., real estate development and sales (since 1983) W. D. Stevens......................... 66 President and Chief Operating Officer 1992 (since 1994); President of Exxon Company, U.S.A. (1988-1992) Other Executive Officers: Philip S. Smith....................... 64 Senior Vice President and Chief 1980 Financial Officer Allen J. Tarbutton, Jr. .............. 62 Senior Vice President, Gas Services 1974 Thomas P. Battle...................... 58 Senior Vice President, Legal and 1982 Governmental Affairs, General Counsel and Secretary
20 22 There are no significant family relationships among our directors and executive officers, either by blood, marriage or adoption, except that J. Todd Mitchell and M. Kent Mitchell are sons of George P. Mitchell. PRINCIPAL AND SELLING STOCKHOLDER The selling stockholder, George P. Mitchell, is the founder, Chairman of the Board and Chief Executive Officer of the Company, and his business address is 2001 Timberloch Place, The Woodlands, Texas 77380, the principal executive offices of the Company. To our knowledge, Mr. Mitchell is the only person owning beneficially more than 5% of the shares of Class A Common Stock outstanding on December 31, 2000. The following table sets forth information, as of March 13, 2001, about Mr. Mitchell's beneficial ownership of our Class A Common Stock before and after this offering. Beneficial ownership is determined in accordance with SEC rules. The information in the table assumes that the underwriters will not exercise their right to purchase additional shares of Class A Common Stock in this offering pursuant to their over-allotment option.
PERCENTAGE OF PERCENTAGE OF SHARES SHARES SHARES SHARES BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY OWNED OWNED OWNED OWNED PRIOR TO THIS PRIOR TO THIS AFTER THIS AFTER THIS OFFERING(1)(2) OFFERING(1)-(3) OFFERING(1)(2) OFFERING(1)-(3) -------------- --------------- --------------- ---------------- 28,062,011 55.8% 23,562,011 46.9%
- --------------- (1) Mr. Mitchell has sole rather than shared voting and investment power respecting all his shares, other than shared rights created under Texas community property laws as between Mr. Mitchell and his wife, Cynthia Woods Mitchell and other than with respect to the shares described in footnote (2) below. (2) Includes 1,022,506 shares held of record by Cynthia Woods Mitchell, as to which Mr. Mitchell disclaims beneficial ownership, and 404,666 shares that Mr. Mitchell has a right to acquire within 60 days following March 13, 2001 by exercising stock options. (3) Based on 49,842,285 total shares outstanding on March 13, 2001. 21 23 DESCRIPTION OF CAPITAL STOCK AUTHORIZED AND OUTSTANDING CAPITAL STOCK Our authorized capital stock consists of 10,000,000 shares of Preferred Stock, par value $.10 per share, none of which are outstanding, and 200,000,000 shares of Class A Common Stock, $.10 par value, of which 49,842,285 shares were outstanding on March 13, 2001. The following description of our capital stock summarizes the material terms and provisions of these securities. For the complete terms of our Class A Common Stock and Preferred Stock, please refer to our articles of incorporation and bylaws that are incorporated by reference into the registration statement that includes this prospectus. PREFERRED STOCK Our board of directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of the shares of Preferred Stock in one or more series from time to time, by filing a certificate pursuant to the applicable laws of the State of Texas to fix the number of shares to be included in each such series and to establish the designations, preferences, limitations and relative rights, including voting rights, of the shares of each such series, all without stockholder approval. Any future issuance of Preferred Stock, while providing desired flexibility in connection with financings or other corporate purposes, could adversely affect the voting power or other rights of holders of Class A Common Stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. CLASS A COMMON STOCK Our Class A Common Stock possesses ordinary voting rights for the election of directors and in respect to all other corporate matters, each share being entitled to one vote. There are no cumulative voting rights, meaning that the holders of a majority of the shares voting for the election of directors can elect all the directors if they choose to do so. Our Class A Common Stock carries no preemptive rights and is not convertible, redeemable or assessable, or entitled to the benefits of any sinking fund. The holders of our Class A Common Stock are entitled to dividends in such amounts and at such times as may be declared by the board of directors out of legally available funds. Upon liquidation or dissolution, holders of Class A Common Stock are entitled to share ratably in all net assets available for distribution to stockholders after payment of any corporate debts and any liquidation preference established for any Preferred Stock. All outstanding shares of Class A Common Stock are duly authorized, validly issued, fully paid and nonassessable. LIMITATION OF LIABILITY OF DIRECTORS Our articles of incorporation provide that no director shall be liable to MEDC or its stockholders for monetary damages for an act or omission in the director's capacity as a director, except for liability for: - any breach of the director's duty of loyalty to MEDC or its stockholders; - an act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; - an act or omission for which the liability of a director is expressly provided for by statute; - any transaction from which the director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director's office; and - an act related to an unlawful stock repurchase or payment of a dividend. The effect of these provisions is to eliminate the rights of MEDC and its stockholders, through derivative suits on behalf of MEDC, to recover monetary damages against a director for a breach of 22 24 fiduciary duty as a director, including breaches resulting from grossly negligent behavior, except in the situations described above. CERTAIN PROVISIONS AFFECTING CONTROL OF THE COMPANY Articles of Incorporation and Bylaws. On March 13, 2001, George P. Mitchell beneficially owned approximately 55.8% of the shares of Class A Common Stock then outstanding. See "Principal and Selling Stockholder." Because Mr. Mitchell has maintained effective voting control of MEDC since our initial public offering in 1972, we have never found it necessary to adopt "anti-takeover" measures. Though not intended for "anti-takeover" effect, our bylaws do establish an advance notice procedure with regard to certain nominees to the board of directors and other matters to be brought before an annual meeting of stockholders. Also, the authorized but unissued shares of Class A Common Stock or Preferred Stock could be used by an incumbent board of directors to discourage or make more difficult an attempt to effect a change in control of MEDC. There are no other provisions of our articles of incorporation or bylaws that might have the effect of delaying, deferring or preventing a change in control. Business Combinations Under Texas Law. We are a Texas corporation, and we are subject to Part Thirteen of the Texas Business Corporation Act, known as the "Business Combination Law." In general, this law will prevent us from engaging in a business combination with an affiliated shareholder, or any affiliate or associate of an affiliated shareholder, for a three-year period after the date such person became an affiliated shareholder, unless: - our board of directors approves the acquisition of shares that causes such person to become an affiliated shareholder before the date such person becomes an affiliated shareholder, - our board of directors approves the business combination before the date such person becomes an affiliated shareholder, or - holders of at least two-thirds of our outstanding voting shares not beneficially owned by the affiliated shareholder or its affiliates or associates approve the business combination within six months after the date such person becomes an affiliated shareholder. However, we would not be prevented by this law from engaging in a business transaction with George P. Mitchell, who is effectively grandfathered under the law. Under this law, any person that beneficially owns or has owned 20% or more of our voting shares during the preceding three-year period is an "affiliated shareholder." The law defines "business combination" generally as including: - mergers, share exchanges or conversions involving an affiliated shareholder, - dispositions of assets involving an affiliated shareholder: - having an aggregate market value equal to 10% or more of the market value of our assets, - having an aggregate market value equal to 10% or more of the market value of our outstanding common stock, or - representing 10% or more of our earning power or net income, - issuances or transfers of securities by us to an affiliated shareholder other than on a pro rata basis, - plans or agreements relating to our liquidation or dissolution involving an affiliated shareholder, - reclassifications, recapitalizations, mergers or other transactions that would have the effect of increasing an affiliated shareholder's percentage ownership of our outstanding voting stock, and - the receipt of a guarantee, pledge, loan or other financial benefits or a tax advantage by an affiliated shareholder other than proportionately as one of our shareholders. 23 25 LISTING Our Class A Common Stock is listed on the New York and Pacific Stock Exchanges. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar of our Class A Common Stock is Mellon Investor Services LLC. 24 26 CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES TO NON-U.S. HOLDERS The following summary describes the material United States federal income and estate tax consequences of the ownership of Class A Common Stock by a Non-U.S. Holder (as defined below) as of the date hereof. This discussion does not address all aspects of United States federal income and estate taxes and does not deal with foreign, state and local consequences that may be relevant to such Non-U.S. Holders in light of their personal circumstances. Special Rules may apply to certain Non-U.S. Holders, such as "controlled foreign corporations," "passive foreign investment companies," "foreign personal holding companies" and corporations that accumulate earnings to avoid United States federal income tax, that are subject to special treatment under the Internal Revenue Code of 1986, as amended (the "Code"). Such entities should consult their own tax advisors to determine the United States federal, state, local and other tax consequences that may be relevant to them. Furthermore, the discussion below is based upon the provisions of the Code, and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in United States federal income tax consequences different from those discussed below. PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF CLASS A COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION. As used herein, a "U.S. Holder" of Class A Common Stock means a holder that is - a citizen or resident of the United States, - a corporation or partnership created or organized in or under the laws of the United States or any political subdivision thereof, - an estate the income of which is subject to United States federal income taxation regardless of its source or - a trust (a) that is subject to the supervision of a court within the United States and the control of one or more United States persons as described in section 7701(a)(30) of the Code or (b) that has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person. A "Non-U.S. Holder" is a holder that is not a U.S. Holder. DIVIDENDS Dividends paid to a Non-U.S. Holder of Class A Common Stock generally will be subject to withholding of United States federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business by the Non-U.S. Holder within the United States and, where a tax treaty applies, are attributable to a United States permanent establishment of the Non-U.S. Holder, are not subject to the withholding tax, but instead are subject to United States federal income tax on a net income basis at applicable graduated individual or corporate rates. Certain certification and disclosure requirements must be complied with in order for effectively connected income to be exempt from withholding. Any such effectively connected dividends received by a foreign corporation may, under certain circumstances, be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. A Non-U.S. Holder of Class A Common Stock who wishes to claim the benefit of an applicable treaty rate (and avoid back-up withholding as discussed below) for dividends, will be required to (a) complete Internal Revenue Service ("IRS") Form W-8BEN (or successor form) and certify under penalty of perjury, that such holder is not a United States person or (b) hold the Class A Common Stock through certain foreign intermediaries, and satisfy the certification requirements of applicable Treasury regulations. Special certification requirements apply to certain Non-U.S. Holders that are entities rather than individuals. 25 27 A Non-U.S. Holder of Class A Common Stock eligible for a reduced rate of United States withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS. GAIN ON DISPOSITION OF CLASS A COMMON STOCK A Non-U.S. Holder generally will not be subject to United States federal income tax with respect to gain recognized on a sale or other disposition of Class A Common Stock unless: - the gain is effectively connected with a trade or business of the Non-U.S. Holder in the United States, and, where a tax treaty applies, is attributable to a United States permanent establishment of the Non-U.S. Holder, - in the case of a Non-U.S. Holder who is an individual and holds the Class A Common Stock as a capital asset, such holder is present in the United States for 183 or more days in the taxable year of the sale or other disposition and certain other conditions are met, or - we have been a "United States real property holding corporation" for United States federal income tax purposes. An individual Non-U.S. Holder described in the first bullet above will be subject to tax on the net gain derived from the sale under regular graduated United States federal income tax rates. An individual Non-U.S. Holder described in the second bullet above will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by United States source capital losses (even though the individual is not considered a resident of the United States). If a Non-U.S. Holder that is a foreign corporation falls under the first bullet above, it will be subject to tax on its gain under regular graduated United States federal income tax rates and, in addition, may be subject to the branch profits tax equal to 30% of its effectively connected earnings and profits or at such lower rate as may be specified by an applicable income tax treaty. We believe that we are currently a "United States real property holding corporation" for United States federal income tax purposes. So long as the Class A Common Stock continues to be regularly traded on an established securities market, you will not be subject to United States federal income tax on the disposition of the Class A Common Stock if you hold or held (at any time during the shorter of the five year period preceding the date of disposition or the holder's holding period) not more than five percent of the Class A Common Stock. If, however, you hold or held more than five percent of the Class A Common Stock, or if the Class A Common Stock ceases to be regularly traded on an established securities market, you will be subject to United States federal income tax on the disposition of Class A Common Stock. FEDERAL ESTATE TAX Class A Common Stock held by an individual Non-U.S. Holder at the time of death will be included in such holder's gross estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. INFORMATION REPORTING AND BACKUP WITHHOLDING We must report annually to the IRS and to each Non-U.S. Holder the amount of dividends paid to such holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the Non-U.S. Holder resides under the provisions of an applicable income tax treaty. A Non-US Holder will be subject to back-up withholding, at the rate of 31%, unless applicable certification requirements are met. 26 28 Payment of the proceeds of a sale of Class A Common Stock within the United States or conducted through certain United States related financial intermediaries is subject to both backup withholding and information reporting unless the beneficial owner certifies under penalties of perjury that it is a Non-U.S. Holder (and the payor does not have actual knowledge that the beneficial owner is a United States person) or the holder otherwise establishes an exemption. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against such holder's United States federal income tax liability provided the required information is furnished to the IRS. 27 29 UNDERWRITING Under the terms and subject to the conditions contained in an underwriting agreement dated , 2001, George P. Mitchell has agreed to sell to the underwriters named below, for whom Credit Suisse First Boston Corporation, Goldman, Sachs & Co. and J.P. Morgan Securities Inc. are acting as representatives, the following respective numbers of shares of Class A Common Stock:
NUMBER OF UNDERWRITER SHARES ----------- --------- Credit Suisse First Boston Corporation...................... Goldman, Sachs & Co. ....................................... J.P. Morgan Securities Inc.................................. Jefferies & Company, Inc. .................................. Sanders Morris Harris....................................... --------- Total.......................................... 4,500,000 =========
The underwriting agreement provides that the underwriters are obligated to purchase all the shares of Class A Common Stock in the offering if any are purchased, other than those shares covered by the over-allotment option described below. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated. George P. Mitchell has granted to the underwriters a 30-day option to purchase on a pro rata basis up to 675,000 additional shares of Class A Common Stock at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of Class A Common Stock. The underwriters propose to offer the shares of Class A Common Stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of $ per share. The underwriters and selling group members may allow a discount of $ per share on sales to other broker/dealers. After the initial public offering the representatives may change the public offering price and concession and discount to broker/dealers. The following table summarizes the compensation and estimated expenses we and George P. Mitchell will pay:
PER SHARE TOTAL ------------------------------- ------------------------------- WITHOUT WITH WITHOUT WITH OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT -------------- -------------- -------------- -------------- Underwriting discounts and commissions paid by George P. Mitchell..... $ $ $ $ Expenses payable by us... $ $ $ $
We and each of our executive officers and directors (other than Mr. Mitchell) have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 relating to, any shares of our Class A Common Stock or securities convertible into or exchangeable or exercisable for any shares of our Class A Common Stock, or publicly disclose the intention to make any offer, sale, 28 30 pledge, disposition or filing without the prior written consent of Credit Suisse First Boston Corporation, Goldman, Sachs & Co. and J.P. Morgan Securities Inc. for a period of 90 days after the date of this prospectus, except we may issue securities under our employee benefit plans and such executive officers and directors may dispose of up to an aggregate of 250,000 shares of Class A Common Stock. George P. Mitchell has agreed that he will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our Class A Common Stock or securities convertible into or exchangeable or exercisable for any shares of our Class A Common Stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our Class A Common Stock, whether any of these transactions are to be settled by delivery of our Class A Common Stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Credit Suisse First Boston Corporation, Goldman, Sachs & Co. and J.P. Morgan Securities Inc. for a period of 90 days after the date of this prospectus, except Mr. Mitchell may maintain existing pledges of shares of Class A Common Stock. We and George P. Mitchell have agreed to indemnify the underwriters against liabilities under the Securities Act of 1933, or contribute to payments that the underwriters may be required to make in that respect. In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934. - Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. - Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by either exercising their over-allotment option and/or purchasing shares in the open market. - Syndicate covering transactions involve purchases of the Class A Common Stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. - Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the Class A Common Stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our Class A Common Stock or preventing or retarding a decline in the market price of the Class A Common Stock. As a result the price of our Class A Common Stock may be higher than the price that might otherwise exist in the open market. These transactions may be 29 31 effected on the New York Stock Exchange or otherwise and, if commenced, may be discontinued at any time. A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters participating in this offering. The representatives may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters that will make internet distributions on the same basis as other allocations. Credit Suisse First Boston Corporation may effect an on-line distribution through its affiliate, CSFBdirect Inc., an on-line broker dealer, as a selling group member. From time to time, certain of the underwriters and their affiliates have provided advisory and investment or commercial banking services to Mr. Mitchell and us, for which customary compensation has been received. It is expected that such underwriters will continue to provide such services to Mr. Mitchell and us in the future. 30 32 NOTICE TO CANADIAN RESIDENTS RESALE RESTRICTIONS The distribution of the Class A Common Stock in Canada is being made only on a private placement basis exempt from the requirement that we and George P. Mitchell prepare and file a prospectus with the securities regulatory authorities in each province where trades of Class A Common Stock are made. Any resale of the Class A Common Stock in Canada must be made under applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the Class A Common Stock. REPRESENTATIONS OF PURCHASERS By purchasing Class A Common Stock in Canada and accepting a purchase confirmation, a purchaser is representing to us, George P. Mitchell and the dealer from whom the purchase confirmation is received that - the purchaser is entitled under applicable provincial securities laws to purchase the Class A Common Stock without the benefit of a prospectus qualified under those securities laws, - where required by law, that the purchaser is purchasing as principal and not as agent, and - the purchaser has reviewed the text above under Resale Restrictions. RIGHTS OF ACTION (ONTARIO PURCHASERS) The securities being offered are those of a foreign issuer and Ontario purchasers will not receive the contractual right of action prescribed by Ontario securities law. As a result, Ontario purchasers must rely on other remedies that may be available, including common law rights of action for damages or rescission or rights of action under the civil liability provisions of the U.S. federal securities laws. ENFORCEMENT OF LEGAL RIGHTS All of the issuer's directors and officers as well as the experts named herein and George P. Mitchell may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon the issuer or such persons. All or a substantial portion of the assets of the issuer and such persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against the issuer or such persons in Canada or to enforce a judgment obtained in Canadian courts against such issuer or persons outside of Canada. NOTICE TO BRITISH COLUMBIA RESIDENTS A purchaser of Class A Common Stock to whom the Securities Act (British Columbia) applies is advised that the purchaser is required to file with the British Columbia Securities Commission a report within ten days of the sale of any Class A Common Stock acquired by the purchaser in this offering. The report must be in the form attached to British Columbia Securities Commission Blanket Order BOR #95/17, a copy of which may be obtained from us. Only one report must be filed for Class A Common Stock acquired on the same date and under the same prospectus exemption. TAXATION AND ELIGIBILITY FOR INVESTMENT Canadian purchasers of Common Stock should consult their own legal and tax advisors with respect to the tax consequences of an investment in the Class A Common Stock in their particular circumstances and about the eligibility of the Class A Common Stock for investment by the purchaser under relevant Canadian legislation. 31 33 LEGAL MATTERS Certain legal matters with respect to the shares of our Class A Common Stock being offered by this prospectus are being passed upon for us by Vinson & Elkins L.L.P., Houston, Texas, for the selling stockholder by Bracewell & Patterson, L.L.P., Houston, Texas, and for the underwriters by Simpson Thacher & Bartlett, New York, New York. Vinson & Elkins L.L.P. also represents the selling stockholder from time to time in matters unrelated to this offering. EXPERTS The consolidated financial statements as of December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000 incorporated by reference in our Annual Report on Form 10-K for the year ended December 31, 2000, incorporated by reference in this prospectus and elsewhere in the registration statement, have been audited by Arthur Andersen LLP, independent 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 accounting and auditing in giving said reports. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC's web site at http://www.sec.gov. You may also read and copy any document we file at the SEC's public reference room at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the regional offices of the SEC located at Seven World Trade Center, Suite 1300, New York, New York 10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may obtain information on the operation of the SEC's public reference room in Washington, D.C. by calling the SEC at 1-800-SEC-0330. Our Class A Common Stock has been listed and traded on the New York Stock Exchange since 1992. Accordingly, you may inspect the information we file with the SEC at the New York Stock Exchange, 20 Broad Street, New York, New York 10005. 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 an important part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any further filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until the selling stockholder sells all of the Class A Common Stock covered by this prospectus or this offering terminates: - our Annual Report on Form 10-K for the year ended December 31, 2000; and - the description of our Class A Common Stock contained in our Registration Statement on Form 8-A dated June 3, 1992, including any amendment to that form that we may have filed in the past, or may file in the future, for the purpose of updating the description of our Class A Common Stock. 32 34 You may request a copy of these filings, excluding exhibits, at no cost by telephoning David Peck at (713) 377-7116 or by writing him at the following address: Mitchell Energy & Development Corp. P. O. Box 4000 The Woodlands, Texas 77387-4000 You should rely only on the information incorporated by reference or provided in this prospectus. We have not authorized anyone else to provide you with different information. Neither we nor the selling stockholder is making an offer of the securities covered by this prospectus in any state where the offer is not permitted. You should not assume that the information in this prospectus, or in any document incorporated by reference in this prospectus, is accurate as of any date other than the date on the front of those documents. 33 35 GLOSSARY OF COMMONLY USED OIL AND GAS TERMS The following are abbreviations and definitions of terms commonly used in the oil and gas industry and this document. Natural gas volumes are stated in this prospectus at the legal pressure base of the area in which the reserves are located and at 60 degrees Fahrenheit. "Bbl" means a barrel of 42 U.S. gallons. "Bbls/d" means Bbls per day. "Bcf" means billion cubic feet. "Bcfe" means billion cubic feet equivalent, which is determined using the ratio of one barrel of oil to six Mcf of natural gas. "E&P" means exploration and production. "Field" means an area consisting of either a single reservoir or multiple reservoirs, all grouped on or related to the same individual geological structural feature or stratigraphic condition. "Gross acres or wells" means the total acres or number of wells in which a working interest is owned. "Mcf" means thousand cubic feet. "MMBbls" means million barrels. "MMcf" means million cubic feet. "MMcf/d" means MMcf per day. "MTBE" means methyl tertiary butyl ether. "NGLs" means natural gas liquids (ethane, propane, butanes and natural gasoline). "Net acres or net wells" means the sum of the fractional working interests owned in gross acres or gross wells. "Proved developed reserves" are proved reserves that can be expected to be recovered from existing wells with existing equipment and operating methods. "Proved reserves" are the estimated quantities of crude oil, natural gas and natural gas liquids that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based upon future conditions. (1) Reservoirs are considered proved if economic producibility is supported by either actual production or conclusive formation test. The area of a reservoir considered proved includes: (A) that portion delineated by drilling and defined by gas-oil and/or oil-water contacts, if any; and (B) the immediately adjoining portions not yet drilled, but which can be reasonably judged as economically productive on the basis of available geological and engineering data. In the absence of information on fluid contacts, the lowest known structural occurrence of hydrocarbons controls the lower proved limit of the reservoir. (2) Reserves which can be produced economically through application of improved recovery techniques (such as fluid injection) are included in the "proved" classification when successful testing by a pilot project, or the operation of an installed program in the reservoir, provides support for the engineering analysis on which the project or program was based. A-1 36 (3) Estimates of proved reserves do not include the following: (A) oil that may become available from known reservoirs but is classified separately as "indicated additional reserves"; (B) crude oil, natural gas and natural gas liquids, the recovery of which is subject to reasonable doubt because of uncertainty as to geology, reservoir characteristics or economic factors; (C) crude oil, natural gas and natural gas liquids that may occur in undrilled prospects; and (D) crude oil, natural gas and natural gas liquids that may be recovered from oil shales, coal, gilsonite and other such sources. "Proved undeveloped reserves" are proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. "Tcf" means trillion cubic feet. "Tcfe" means trillion cubic feet equivalent, which is determined using the ratio of one barrel of oil to six Mcf of natural gas. "Working interest" means the operating interest in an oil and gas lease that gives the owner the right to drill, produce and conduct operating activities on the property and to receive a share of production. A-2 37 [MITCHELL ENERGY & DEVELOPMENT CORP. LOGO] 38 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth all expenses payable by either the selling stockholder or Mitchell Energy & Development Corp. (sometimes referred to as the "Company" in this Part II of the registration statement) in connection with the issuance and distribution of the securities being registered. All the amounts shown are estimates, except the registration fee and NASD filing fee. Registration fee.......................................... $ 70,795 Fees and expenses of accountants.......................... 50,000 Fees and expenses of the selling stockholder's legal counsel................................................. 50,000 Fees of the transfer agent and registrar.................. 5,000 Printing and engraving expenses........................... 100,000 Fees and expenses of the Company's legal counsel.......... 50,000 NASD filing fee........................................... 27,385 Miscellaneous............................................. 146,820 -------- Total........................................... $500,000 ========
The selling stockholder will bear all of such expenses except for the fees and expenses of the Company's legal counsel. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Article 2.02-1 of the Texas Business Corporation Act gives Texas corporations the power to indemnify officers and directors under certain circumstances. Provisions of the Company's Bylaws provide generally that while serving as a director or officer of the Company such director or officer shall be indemnified and held harmless to the fullest extent permitted by statute. Article 7.06 of the Texas Miscellaneous Corporation Laws Act enables Texas corporations to adopt an amendment to their articles of incorporation limiting the personal liability of their directors to the corporation or its shareholders for monetary damages related to certain breaches of the directors' duties. On June 29, 1988, the Company adopted an amendment to its Restated Articles of Incorporation limiting director liability to the fullest extent permitted by Texas law. The Company provides liability insurance for its directors and officers for certain losses arising from claims or charges which may be made against them while acting in their capacities as directors or officers of the Company. The foregoing summaries are necessarily subject to the complete text of the statute, Restated Articles of Incorporation, Bylaws and contracts referred to above and are qualified in their entirety by reference thereto. For a statement of the Company's undertakings with respect to indemnification of directors and officers, see Item 17 below. II-1 39 ITEM 16. EXHIBITS. The following documents are filed as exhibits to this Registration Statement, including those exhibits incorporated herein by reference to a prior filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934 as indicated in parentheses:
EXHIBIT NO. EXHIBITS ------- -------- *1.1 -- Form of Underwriting Agreement. 4.1 -- Restated Articles of Incorporation of the Company, as amended through June 28, 2000 (incorporated by reference to Exhibit 3(a) to the Company's Transition Report on Form 10-K for the years ended December 31, 1999, 1998 and 1997 and the transition period from February 1, 1996 to December 31, 1996). 4.2 -- Bylaws of the Company (incorporated by reference to Exhibit 3(b) to its Annual Report on Form 10-K for the year ended December 31, 2000). 4.3 -- Revolving Credit Agreement, dated as of July 28, 1998, among the Company, the several banks party thereto and The Chase Manhattan Bank, as administrative agent for such banks (incorporated by reference to Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1998); Amendment No. 1 thereto dated March 15, 1999 (incorporated by reference to Exhibit 4(c) to the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1999); and Amendment No. 2 thereto dated October 30, 2000 (incorporated by reference to Exhibit 4(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 2000). *5.1 -- Opinion of Vinson & Elkins L.L.P. *8.1 -- Opinion of Vinson & Elkins L.L.P. regarding certain tax matters. *23.1 -- Consent of Arthur Andersen LLP. *24.1 -- Powers of Attorney.
- --------------- * Filed herewith. ITEM 17. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) The registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefits plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement II-2 40 relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to any charter provision, by-law, contract, arrangement, statute, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted against the registrant by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. II-3 41 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on April 2, 2001. MITCHELL ENERGY & DEVELOPMENT CORP. By: /s/ PHILIP S. SMITH ---------------------------------- Philip S. Smith Senior Vice President-Administration and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on April 2, 2001.
SIGNATURE TITLE --------- ----- * Chairman of the Board and Chief Executive - ----------------------------------------------------- Officer (Principal Executive Officer) George P. Mitchell * Director - ----------------------------------------------------- Robert W. Baldwin * Director - ----------------------------------------------------- Bernard F. Clark * Director - ----------------------------------------------------- William D. Eberle * Director - ----------------------------------------------------- Shaker A. Khayatt * Director - ----------------------------------------------------- J. Todd Mitchell * Director - ----------------------------------------------------- M. Kent Mitchell * Director - ----------------------------------------------------- W. D. Stevens /s/ PHILIP S. SMITH Senior Vice President -- Administration and - ----------------------------------------------------- Chief Financial Officer (Principal Philip S. Smith Accounting and Financial Officer) *By: /s/ PHILIP S. SMITH - ----------------------------------------------------- (Philip S. Smith, Attorney-in-Fact)
II-4 42 EXHIBIT INDEX
EXHIBIT NO. EXHIBITS ------- -------- *1.1 -- Form of Underwriting Agreement. 4.1 -- Restated Articles of Incorporation of the Company, as amended through June 28, 2000 (incorporated by reference to Exhibit 3(a) to the Company's Transition Report on Form 10-K for the years ended December 31, 1999, 1998 and 1997 and the transition period from February 1, 1996 to December 31, 1996). 4.2 -- Bylaws of the Company (incorporated by reference to Exhibit 3(b) to its Annual Report on Form 10-K for the year ended December 31, 2000). 4.3 -- Revolving Credit Agreement, dated as of July 28, 1998, among the Company, the several banks party thereto and The Chase Manhattan Bank, as administrative agent for such banks (incorporated by reference to Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1998); Amendment No. 1 thereto dated March 15, 1999 (incorporated by reference to Exhibit 4(c) to the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1999); and Amendment No. 2 thereto dated October 30, 2000 (incorporated by reference to Exhibit 4(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 2000). *5.1 -- Opinion of Vinson & Elkins L.L.P. *8.1 -- Opinion of Vinson & Elkins L.L.P. regarding certain tax matters. *23.1 -- Consent of Arthur Andersen LLP. *24.1 -- Powers of Attorney.
- --------------- * Filed herewith. II-5 EX-1.1 2 h84912ex1-1.txt FORM OF UNDERWRITING AGREEMENT 1 EXHIBIT 1.1 4,500,000 SHARES MITCHELL ENERGY & DEVELOPMENT CORP. CLASS A COMMON STOCK ($.10 PAR VALUE) UNDERWRITING AGREEMENT ____ __, 2001 CREDIT SUISSE FIRST BOSTON CORPORATION As Representative of the Several Underwriters, Referred to on Schedule A Eleven Madison Avenue, New York, NY 10010-3629 Ladies and Gentlemen: 1. Introductory. George P. Mitchell (the "SELLING STOCKHOLDER") proposes to sell an aggregate of 4,500,000 outstanding shares (the "FIRM SECURITIES") of the Class A Common Stock, par value $.10 per share (the "SECURITIES") of Mitchell Energy & Development Corp., a Texas corporation (the "COMPANY"), and also proposes to sell to the Underwriters, at the option of the Underwriters, an aggregate of not more than 675,000 additional outstanding shares (the "OPTIONAL SECURITIES") of the Company's Securities as set forth below. The Firm Securities and the Optional Securities are herein collectively called the "OFFERED SECURITIES". The Selling Stockholder hereby agrees with the Company and with the several Underwriters named in Schedule A hereto (the "UNDERWRITERS") as follows: 2. Representations and Warranties of the Company and the Selling Stockholder. (a) The Company represents and warrants to, and agrees with, the several Underwriters that: (i) A registration statement (No. 333- ) relating to the Offered Securities, including a form of prospectus, has been filed with the Securities and Exchange Commission (the "COMMISSION") and either (A) has been declared effective under the Securities Act of 1933 (the "ACT") and is not proposed to be amended or (B) is proposed to be amended by amendment or post-effective amendment. If such registration statement (the "INITIAL REGISTRATION STATEMENT") has been declared effective, either (A) an additional registration statement (the "ADDITIONAL REGISTRATION STATEMENT") relating to the Offered Securities may have been filed with the Commission pursuant to Rule 462(b) ("RULE 462(b)") under the Act and, if so filed, has become effective upon filing pursuant to such Rule and the Offered Securities all have been duly registered under the Act pursuant to the initial registration statement and, if applicable, the additional registration statement or (B) such an additional registration statement is proposed to be filed with the Commission pursuant to Rule 462(b) and will become effective upon filing pursuant to such Rule and upon such filing the Offered Securities will all have been duly registered under the Act pursuant to the initial registration statement and such additional registration statement. If the Company does not propose to amend the initial registration statement or if an additional registration statement has been filed and the Company does not propose to amend it, and if any post-effective amendment to either such registration statement has been filed 1 2 with the Commission prior to the execution and delivery of this Agreement, the most recent amendment (if any) to each such registration statement has been declared effective by the Commission or has become effective upon filing pursuant to Rule 462(c) ("RULE 462(c)") under the Act or, in the case of the additional registration statement, Rule 462(b). For purposes of this Agreement, "EFFECTIVE TIME" with respect to the initial registration statement or, if filed prior to the execution and delivery of this Agreement, the additional registration statement means (A) if the Company has advised the Representative that it does not propose to amend such registration statement, the date and time as of which such registration statement, or the most recent post-effective amendment thereto (if any) filed prior to the execution and delivery of this Agreement, was declared effective by the Commission or has become effective upon filing pursuant to Rule 462(c), or (B) if the Company has advised the Representative that it proposes to file an amendment or post-effective amendment to such registration statement, the date and time as of which such registration statement, as amended by such amendment or post-effective amendment, as the case may be, is declared effective by the Commission. If an additional registration statement has not been filed prior to the execution and delivery of this Agreement but the Company has advised the Representative that it proposes to file one, "EFFECTIVE TIME" with respect to such additional registration statement means the date and time as of which such registration statement is filed and become effective pursuant to Rule 462(b). "EFFECTIVE DATE" with respect to the initial registration statement or the additional registration statement (if any) means the date of the Effective Time thereof. The initial registration statement, as amended at its Effective Time, including all material incorporated by reference therein, including all information contained in the additional registration statement (if any) and deemed to be a part of the initial registration statement as of the Effective Time of the additional registration statement pursuant to the General Instructions of the Form on which it is filed and including all information (if any) deemed to be a part of the initial registration statement as of its Effective Time pursuant to Rule 430A(b) ("RULE 430A(b)") under the Act, is hereinafter referred to as the "INITIAL REGISTRATION STATEMENT". The additional registration statement, as amended at its Effective Time, including the contents of the initial registration statement incorporated by reference therein and including all information (if any) deemed to be a part of the additional registration statement as of its Effective Time pursuant to Rule 430A(b), is hereinafter referred to as the "ADDITIONAL REGISTRATION STATEMENT". The Initial Registration Statement and the Additional Registration Statement are hereinafter referred to collectively as the "REGISTRATION STATEMENTS" and individually as a "REGISTRATION Statement". The form of prospectus relating to the Offered Securities, as first filed with the Commission pursuant to and in accordance with Rule 424(b) ("RULE 424(b)") under the Act or (if no such filing is required) as included in a Registration Statement, including all material incorporated by reference in such prospectus, is hereinafter referred to as the "PROSPECTUS". No document has been or will be prepared or distributed in reliance on Rule 434 under the Act. (ii) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement: (A) on the Effective Date of the Initial Registration Statement, the Initial Registration Statement conformed in all respects to the requirements of the Act and the rules and regulations of the Commission (the "RULES AND REGULATIONS") and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (B) on the Effective Date of the Additional Registration Statement (if any), each Registration Statement conformed, or will conform, in all respects to the requirements of the Act and the Rules and Regulations and did not include, or will not include, any untrue statement of a material fact and did not omit, or will not omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (C) on the date of this Agreement, the Initial Registration Statement and, if the Effective Time of the Additional Registration Statement is prior to the execution and delivery of this Agreement, the Additional Registration Statement each conforms, and at the time of filing of the Prospectus pursuant 2 3 to Rule 424(b) or (if no such filing is required) at the Effective Date of the Additional Registration Statement in which the Prospectus is included, each Registration Statement and the Prospectus will conform, in all respects to the requirements of the Act and the Rules and Regulations, and neither of such documents includes, or will include, any untrue statement of a material fact or omits, or will omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading. If the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement: on the Effective Date of the Initial Registration Statement, the Initial Registration Statement and the Prospectus will conform in all respects to the requirements of the Act and the Rules and Regulations, neither of such documents will include any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and no Additional Registration Statement has been or will be filed. The two preceding sentences do not apply to statements in or omissions from a Registration Statement or the Prospectus based upon written information furnished to the Company by any Underwriter through the Representative specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 7(c) hereof. (iii) The Company has been duly incorporated and is a validly existing corporation in good standing under the laws of the State of Texas, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus; and the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification. (iv) Each subsidiary of the Company identified on Schedule I (each, a "PRINCIPAL SUBSIDIARY") has been duly incorporated and is a validly existing corporation in good standing under the laws of the jurisdiction of its incorporation, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus; and each Principal Subsidiary of the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification; all of the issued and outstanding capital stock of each subsidiary of the Company has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of each subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and defects. (v) The Offered Securities and all other outstanding shares of capital stock of the Company have been duly authorized and validly issued, fully paid and nonassessable and conform to the description thereof contained in the Prospectus; and the stockholders of the Company have no preemptive rights with respect to the Securities. (vi) Except as disclosed in the Prospectus, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Underwriter for a brokerage commission, finder's fee or other like payment. (vii) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to a Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act. (viii) The Offered Securities have been approved for listing subject to notice of issuance on The New York Stock Exchange. 3 4 (ix) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by the Company for the consummation of the transactions contemplated by this Agreement in connection with the sale of the Offered Securities, except such as have been obtained and made under the Act and such as may be required under state securities laws. (x) Neither the Company nor any of its subsidiaries is, or, with the giving of notice or lapse of time or both, will be, in violation of or in default under (i) its corporate charter or by-laws, (ii) any agreement, lease, contract, indenture or other instrument or obligation to which it is a party or by which it, or any of its properties, is bound or (iii) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, which default or violation (in the case of (ii) and (iii) only) would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole ("MATERIAL ADVERSE EFFECT"). (xi) The execution, delivery and performance of this Agreement, and the consummation of the transactions herein contemplated will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any subsidiary of the Company or any of their properties, or any agreement or instrument to which the Company or any such subsidiary is a party or by which the Company or any such subsidiary is bound or to which any of the properties of the Company or any such subsidiary is subject, or the charter or by-laws of the Company or any such subsidiary. (xii) This Agreement has been duly authorized, executed and delivered by the Company. (xiii) Except as disclosed in the Prospectus, the Company and its subsidiaries have good and marketable title to all real properties and all other properties and assets owned by them, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by them; and except as disclosed in the Prospectus, the Company and its subsidiaries hold any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or to be made thereof by them. (xiv) The Company and its Principal Subsidiaries possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect. (xv) No labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of the Company, is imminent that might have a Material Adverse Effect. (xvi) The Company and its subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, "INTELLECTUAL PROPERTY RIGHTS") necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any 4 5 intellectual property rights that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect. (xvii) Except as disclosed in the Prospectus, neither the Company nor any of its subsidiaries is in violation of any statute, any rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "ENVIRONMENTAL LAWS"), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any claim relating to any environmental laws, which violation, contamination, liability or claim would individually or in the aggregate have a Material Adverse Effect; and the Company is not aware of any pending investigation which might lead to such a claim. (xviii) Except as disclosed in the Prospectus, there are no pending actions, suits or proceedings against or affecting the Company, any of its subsidiaries or any of their respective properties that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect, or would materially and adversely affect the ability of the Company to perform its obligations under this Agreement, or which are otherwise material in the context of the sale of the Offered Securities; and no such actions, suits or proceedings are threatened or, to the Company's knowledge, contemplated. (xix) The financial statements included in each Registration Statement and the Prospectus present fairly the financial position of the Company and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis. (xx) Arthur Andersen LLP, who have certified certain of the financial statements filed with the Commission as part of, or incorporate by reference in, the Registration Statements and the Prospectus, are independent public accountants as required by the Act and the Rules and Regulations. (xxi) The Company and its subsidiaries have timely filed all material federal, state, local and foreign income tax returns which have been required to be filed and have paid all taxes indicated by said returns and all assessments received by them or any of them to the extent that such taxes have become due and are not being contested in good faith in appropriate proceedings. All material tax liabilities have been adequately provided for in the financial statements of the Company. (xxii) Except as disclosed in the Prospectus, since the date of the latest audited financial statements included in the Prospectus there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole, and, except as disclosed in or contemplated by the Prospectus, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (xxiii) The Company is not and, after giving effect to the offering and sale of the Offered Securities, will not be an "investment company" as defined in the Investment Company Act of 1940. 5 6 (b) The Selling Stockholder represents and warrants to, and agrees with, the several Underwriters that: (i) The Selling Stockholder has and on each Closing Date hereinafter mentioned will have valid and unencumbered title to the Offered Securities to be delivered by the such Selling Stockholder on such Closing Date and full right, power and authority to enter into this Agreement and to sell, assign, transfer and deliver the Offered Securities to be delivered by the Selling Stockholder on such Closing Date hereunder; and upon the delivery of and payment for the Offered Securities on each Closing Date hereunder the several Underwriters will acquire valid and unencumbered title to the Offered Securities to be delivered by the Selling Stockholder on such Closing Date. (ii) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement: (A) on the Effective Date of the Initial Registration Statement, the Initial Registration Statement conformed in all respects to the requirements of the Act and the Rules and Regulations and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (B) on the Effective Date of the Additional Registration Statement (if any), each Registration Statement conformed, or will conform, in all respects to the requirements of the Act and the Rules and Regulations and did not include, or will not include, any untrue statement of a material fact and did not omit, or will not omit, to state any material fact required to be stated therein or necessary to make the statement therein not misleading, and (C) on the date of this Agreement, the Initial Registration Statement and, if the Effective Time of the Additional Registration Statement is prior to the execution and delivery of this Agreement, the Additional Registration Statement each conforms, and at the time of filing of the Prospectus pursuant to Rule 424(b) or (if no such filing is required) at the Effective Date of the Additional Registration Statement in which the Prospectus is included, each Registration Statement and the Prospectus will conform, in all respects to the requirements of the Act and the Rules and Regulations, and neither of such documents includes, or will include, any untrue statement of a material fact or omits, or will omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading. If the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement: on the Effective Date of the Initial Registration Statement, the Initial Registration Statement and the Prospectus will conform in all respects to the requirements of the Act and the Rules and Regulations, neither of such documents will include any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. The two preceding sentences apply only to the extent that any statements in or omissions from a Registration Statement or the Prospectus are based on written information furnished to the Company by the Selling Stockholder specifically for use therein. (iii) Except as disclosed in the Prospectus, there are no contracts, agreements or understandings between the Selling Stockholder and any person that would give rise to a valid claim against the Company or any Underwriter for a brokerage commission, finder's fee or other like payment. 3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Selling Stockholder agrees to sell to the Underwriters, and the Underwriters agree, severally and not jointly, to purchase from the Selling Stockholder, at a purchase price of $ per share, the respective numbers of Firm Securities set forth opposite the names of the Underwriters in Schedule A hereto. The Selling Stockholder will deliver the Firm Securities to the Representative for the accounts of the Underwriters, against payment of the purchase price in Federal (same day) funds by official bank check or checks or wire transfer to an account at a bank acceptable to Credit Suisse First Boston Corporation 6 7 ("CSFBC") drawn to the order of the Selling Stockholder at the office of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017, at A.M., New York time, on , or at such other time not later than seven full business days thereafter as CSFBC and the Selling Stockholder determine, such time being herein referred to as the "FIRST CLOSING DATE". For purposes of Rule 15c6-1 under the Securities Exchange Act of 1934, the First Closing Date (if later than the otherwise applicable settlement date) shall be the settlement date for payment of funds and delivery of securities for all the Offered Securities sold pursuant to the offering. The certificates for the Firm Securities so to be delivered will be in definitive form, in such denominations and registered in such names as CSFBC requests and will be made available for checking and packaging at the above office at least 24 hours prior to the First Closing Date. In addition, upon written notice from CSFBC given to the Company and the Selling Stockholder from time to time not more than 30 days subsequent to the date of the Prospectus, the Underwriters may purchase all or less than all of the Optional Securities at the purchase price per Security to be paid for the Firm Securities. The Selling Stockholder agrees to sell to the Underwriters the number of shares of Optional Securities specified in such notice and the Underwriters agree, severally and not jointly, to purchase such Optional Securities. Such Optional Securities shall be purchased for the account of each Underwriter in the same proportion as the number of Firm Securities set forth opposite such Underwriter's name bears to the total number of Firm Securities (subject to adjustment by CSFBC to eliminate fractions) and may be purchased by the Underwriters only for the purpose of covering over-allotments made in connection with the sale of the Firm Securities. No Optional Securities shall be sold or delivered unless the Firm Securities previously have been, or simultaneously are, sold and delivered. The right to purchase the Optional Securities or any portion thereof may be exercised from time to time and to the extent not previously exercised may be surrendered and terminated at any time upon notice by CSFBC to the Selling Stockholder. Each time for the delivery of and payment for the Optional Securities, being herein referred to as an "OPTIONAL CLOSING DATE", which may be the First Closing Date (the First Closing Date and each Optional Closing Date, if any, being sometimes referred to as a "CLOSING DATE"), shall be determined by CSFBC but shall be not later than five full business days after written notice of election to purchase Optional Securities is given. The Selling Stockholder will deliver the Optional Securities being purchased on each Optional Closing Date to the Representative for the accounts of the several Underwriters, against payment of the purchase price in Federal (same day) funds by official bank check or checks or wire transfer to an account at a bank acceptable to CSFBC drawn to the order of the Selling Stockholder, at the office of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017. The certificates for the Optional Securities being purchased on each Optional Closing Date will be in definitive form, in such denominations and registered in such names as CSFBC requests upon reasonable notice prior to such Optional Closing Date and will be made available for checking and packaging at the above office at a reasonable time in advance of such Optional Closing Date. 4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Offered Securities for sale to the public as set forth in the Prospectus. 5. Certain Agreements of the Company and the Selling Stockholder. (a) The Company agrees with the several Underwriters and the Selling Stockholder that: (i) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, the Company will file the Prospectus with the Commission pursuant to and in accordance with subparagraph (1) (or, if applicable and if consented to by CSFBC, subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the second business day following the execution and delivery of this Agreement or (B) the fifteenth business day after the Effective Date of the Initial Registration Statement. The Company will advise CSFBC promptly of any such filing pursuant to Rule 424(b). If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement and an additional registration statement is necessary to 7 8 register a portion of the Offered Securities under the Act but the Effective Time thereof has not occurred as of such execution and delivery, the Company will file the additional registration statement or, if filed, will file a post-effective amendment thereto with the Commission pursuant to and in accordance with Rule 462(b) on or prior to 10:00 P.M., New York time, on the date of this Agreement or, if earlier, on or prior to the time the Prospectus is printed and distributed to any Underwriter, or will make such filing at such later date as shall have been consented to by CSFBC. (ii) The Company will advise CSFBC promptly of any proposal to amend or supplement the initial or any additional registration statement as filed or the related prospectus or the Initial Registration Statement, the Additional Registration Statement (if any) or the Prospectus and will not effect such amendment or supplementation without CSFBC's consent; and the Company will also advise CSFBC promptly of the effectiveness of each Registration Statement (if its Effective Time is subsequent to the execution and delivery of this Agreement) and of any amendment or supplementation of a Registration Statement or the Prospectus and of the institution by the Commission of any stop order proceedings in respect of a Registration Statement and will use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued. (iii) If, at any time when a prospectus relating to the Offered Securities is required to be delivered under the Act in connection with sales by any Underwriter or dealer, any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Act, the Company will promptly notify CSFBC of such event and will promptly prepare and file with the Commission, at its own expense, an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance. Neither CSFBC's consent to, nor the Underwriters' delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6. (iv) As soon as practicable, but not later than the Availability Date (as defined below), the Company will make generally available to its securityholders an earnings statement covering a period of at least 12 months beginning after the Effective Date of the Initial Registration Statement (or, if later, the Effective Date of the Additional Registration Statement) which will satisfy the provisions of Section 11(a) of the Act. For the purpose of the preceding sentence, "AVAILABILITY DATE" means the 45th day after the end of the fourth fiscal quarter following the fiscal quarter that includes such Effective Date, except that, if such fourth fiscal quarter is the last quarter of the Company's fiscal year, "AVAILABILITY DATE" means the 90th day after the end of such fourth fiscal quarter. (v) The Company will furnish to the Representative copies of each Registration Statement (four of which will be signed and will include all exhibits), each related preliminary prospectus, and, so long as a prospectus relating to the Offered Securities is required to be delivered under the Act in connection with sales by any Underwriter or dealer, the Prospectus and all amendments and supplements to such documents, in each case in such quantities as CSFBC requests. The Prospectus shall be so furnished on or prior to 3:00 P.M., New York time, on the business day following the later of the execution and delivery of this Agreement or the Effective Time of the Initial Registration Statement. All other such documents shall be so furnished as soon as available. The Selling Stockholder will pay the expenses of printing and distributing to the Underwriters all such documents. (vi) The Company will arrange for the qualification of the Offered Securities for sale under the laws of such jurisdictions as CSFBC designates and will continue such qualifications in effect so long as required for the distribution. 8 9 (vii) During the period of three years hereafter, the Company will furnish to the Representative and, upon request, to each of the other Underwriters, as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year; and the Company will furnish to the Representative (i) as soon as available, a copy of each report and any definitive proxy statement of the Company filed with the Commission under the Securities Exchange Act of 1934 or mailed to stockholders, and (ii) from time to time, such other information concerning the Company as CSFBC may reasonably request. (viii) For a period of [90] days after the date of the initial public offering of the Offered Securities, the Company will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Commission a registration statement under the Act relating to, any additional shares of its Securities or securities convertible into or exchangeable or exercisable for any shares of its Securities, or publicly disclose the intention to make any such offer, sale, pledge, disposition or filing, without the prior written consent of CSFBC. [add exceptions]. (ix) In connection with the offering of the Offered Securities, neither the Company nor any of its subsidiaries will take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any securities of the Company. (b) The Selling Stockholder agrees with the several Underwriters and the Company that: (i) The Selling Stockholder will pay all expenses incident to the performance of the obligations of the Selling Stockholder and the obligations of the Company under this Agreement, for any filing fees and other expenses (including fees and disbursements of counsel) incurred in connection with qualification of the Offered Securities for sale under the laws of such jurisdictions as CSFBC designates and the printing of memoranda relating thereto, for any travel expenses of the Company's officers and employees and any other expenses of the Company in connection with attending or hosting meetings with prospective purchasers of the Offered Securities, for any transfer taxes on the sale of the Offered Securities to the Underwriters and for expenses incurred in distributing preliminary prospectuses and the Prospectus (including any amendments and supplements thereto) to the Underwriters. [If Selling Stockholder delivering shares through custodian: (iii) The Custodian will agree to deliver to CSFBC, attention: Transactions Advisory Group on the Closing Date a letter stating that they will deliver to each Selling Stockholder a United States Treasury Department Form 1099 (or other applicable form or statement specified by the United States Treasury Department regulations in lieu thereof) on or before January 31 of the year following the date of this Agreement. Language w/o custodian (iii) The Selling Stockholder agrees to deliver to CSFBC, attention: Transactions Advisory Group on or prior to the First Closing Date a properly completed and executed United States Treasury Department Form W-9 (or other applicable form or statement specified by Treasury Department regulations in lieu thereof).] (iv) The Selling Stockholder agrees, for a period of [90] days after the date of the initial public offering of the Offered Securities, not to offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any additional shares of the Securities of the Company or securities convertible into or exchangeable or exercisable for any shares of Securities, or publicly disclose the intention to make any such offer, sale, pledge or disposition, without the prior written consent of CSFBC [add exceptions]. 9 10 (v) In connection with the offering of the Offered Securities, neither the Selling Stockholder nor any of its affiliates (other than the Company and its subsidiaries, as to which the Selling Stockholder makes no covenant) will take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any securities of the Company. 6. Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Firm Securities on the First Closing Date and the Optional Securities to be purchased on each Optional Closing Date will be subject to the accuracy of the representations and warranties on the part of the Company and the Selling Stockholder herein, to the accuracy of the statements of Company officers made pursuant to the provisions hereof, to the performance by the Company and the Selling Stockholder of their obligations hereunder and to the following additional conditions precedent: (a) The Representative shall have received a letter, dated the date of delivery thereof (which, if the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, shall be on or prior to the date of this Agreement or, if the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement, shall be prior to the filing of the amendment or post-effective amendment to the registration statement to be filed shortly prior to such Effective Time), of Arthur Andersen LLP confirming that they are independent public accountants within the meaning of the Act and the applicable published Rules and Regulations thereunder and stating to the effect that: (i) in their opinion the financial statements examined by them and included or incorporated by reference in the Registration Statements comply as to form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations; (ii) on the basis of a reading of the latest available interim financial statements of the Company, inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that: (A) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than three business days prior to the date of such letter, there was any change in the capital stock or any increase in short-term indebtedness or long-term debt of the Company and its consolidated subsidiaries or, at the date of the latest available balance sheet read by such accountants, there was any decrease in consolidated net current assets or net assets, as compared with amounts shown on the latest balance sheet included in the Prospectus; or (B) for the period from the closing date of the latest income statement included in the Prospectus to the closing date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year and with the period of corresponding length ended the date of the latest income statement included in the Prospectus, in consolidated net sales or net operating income in the total or per share amounts of consolidated net income; 10 11 except in all cases set forth in clauses (A) and (B) above for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (iii) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Registration Statements (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter. For purposes of this subsection, (i) if the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement, "REGISTRATION STATEMENTS" shall mean the initial registration statement as proposed to be amended by the amendment or post-effective amendment to be filed shortly prior to its Effective Time, (ii) if the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement but the Effective Time of the Additional Registration Statement is subsequent to such execution and delivery, "REGISTRATION STATEMENTS" shall mean the Initial Registration Statement and the additional registration statement as proposed to be filed or as proposed to be amended by the post-effective amendment to be filed shortly prior to its Effective Time, and (iii) "PROSPECTUS" shall mean the prospectus included in the Registration Statements. All financial statements included in material incorporated by reference into the Prospectus shall be deemed included in the Registration Statements for purposes of this subsection. (b) If the Effective Time of the Initial Registration Statement is not prior to the execution and delivery of this Agreement, such Effective Time shall have occurred not later than 10:00 P.M., New York time, on the date of this Agreement or such later date as shall have been consented to by CSFBC. If the Effective Time of the Additional Registration Statement (if any) is not prior to the execution and delivery of this Agreement, such Effective Time shall have occurred not later that 10:00 P.M., New York time, on the date of this Agreement or, if earlier, the time the Prospectus is printed and distributed to any Underwriter, or shall have occurred at such later date as shall have been consented to by CSFBC. If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, the Prospectus shall have been filed with the Commission in accordance with the Rules and Regulations and Section 5(a) of this Agreement. Prior to such Closing Date, no stop order suspending the effectiveness of a Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Selling Stockholder, the Company or the Representative, shall be contemplated by the Commission. (c) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of the Company or its subsidiaries which, in the judgment of a majority in interest of the Underwriters including the Representative, is material and adverse and makes it impractical or inadvisable to proceed with completion of the public offering or the sale of and payment for the Offered Securities; (ii) any downgrading in the rating of any debt securities of the Company by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Company (other than an announcement with positive implications of a 11 12 possible upgrading, and no implication of a possible downgrading, of such rating); (iii) any suspension or limitation of trading in securities generally on The New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (iv) any banking moratorium declared by U.S. Federal or New York authorities; or (v) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of a majority in interest of the Underwriters including the Representative, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the public offering or the sale of and payment for the Offered Securities. (d)(i) The Representative shall have received an opinion, dated such Closing Date, of Vinson & Elkins L.L.P., counsel for the Company, to the effect that: (i) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of Texas, with corporate power and authority to own its properties and conduct its business as described in the Prospectus; (ii) The Offered Securities delivered on such Closing Date and all other outstanding shares of the Common Stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and conform to the description thereof contained in the Prospectus; the stockholders of the Company have no preemptive rights with respect to the Securities; and form of the certificates for the Offered Securities conforms to the corporate law of the jurisdiction of the Company's incorporation. (iii) No consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by the Company for the consummation of the transactions contemplated by this Agreement in connection with the sale of the Offered Securities, except such as have been obtained and made under the Act and such as may be required under state securities laws; (v) The execution, delivery and performance of this Agreement and the consummation of the transactions herein contemplated will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, (i) any statute (other than state securities or Blue Sky laws as to which counsel need express no opinion) , any rule, regulation or order of any governmental agency or body or any court having jurisdiction over the Company or any subsidiary of the Company or any of their properties, or (ii) any agreement or instrument to which the Company or any such subsidiary is a party or by which the Company or any such subsidiary is bound or to which any of the properties of the Company or any such subsidiary is subject referred to in the Prospectus or required to be filed as an exhibit to the Registration Statement, including any such agreement or instrument required to be filed as an exhibit to any document incorporated by reference n the Registration Statement, or (iii) the charter or by-laws of the Company or any such subsidiary; (vi) The Initial Registration Statement was declared effective under the Act as of the date and time specified in such opinion, the Additional Registration Statement (if any) was filed and became effective under the Act as of the date and time (if determinable) specified in such opinion, the Prospectus either was filed with the Commission pursuant to the subparagraph of Rule 424(b) specified in such opinion on the date specified therein or was included in the Initial Registration Statement or the Additional Registration Statement 12 13 (as the case may be), and, to the best of the knowledge of such counsel, no stop order suspending the effectiveness of a Registration Statement or any part thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Act, and each Registration Statement and the Prospectus, and each amendment or supplement thereto, as of their respective effective or issue dates, complied as to form in all material respects with the requirements of the Act and the Rules and Regulations; such counsel have no reason to believe that any part of a Registration Statement or any amendment thereto, as of its effective date or as of such Closing Date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus or any amendment or supplement thereto, as of its issue date or as of such Closing Date, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; the descriptions in the Registration Statements and Prospectus of statutes, legal and governmental proceedings and contracts and other documents are accurate and fairly present the information required to be shown; and such counsel do not know of any legal or governmental proceedings required to be described in a Registration Statement or the Prospectus which are not described as required or of any contracts or documents of a character required to be described in a Registration Statement or the Prospectus or to be filed as exhibits to a Registration Statement which are not described and filed as required; it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Registration Statements or the Prospectus; (vii) Neither the Company nor any "subsidiary" is a "holding company" or a "subsidiary company" of a "holding company," or an "affiliate" or a "holding company" or of a "subsidiary company" or a "holding company," or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended; (viii) The discussion and legal conclusions set forth in the Prospectus under the heading "Certain United States Tax Consequences to Non-United States Holders" are accurate and complete in all material respects; and (ix) This Agreement has been duly authorized, executed and delivered by the Company. (ii) The Representative shall have received an opinion, dated such Closing Date, of Thomas P. Battle, General Counsel to the Company, to the effect that: (i) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of Texas, with corporate power and authority to own its properties and conduct its business as described in the Prospectus; and the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification; (ii) Each subsidiary of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus; and each subsidiary of the Company is duly qualified to do business as a foreign corporation in good standing in all other 13 14 jurisdictions in which its ownership of lease of property or the conduct of its business requires such qualification; (iii) The Offered Securities delivered on such Closing Date and all other outstanding shares of the Common Stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and conform to the description thereof contained in the Prospectus; the stockholders of the Company have no preemptive rights with respect to the Securities; and form of the certificates for the Offered Securities conforms to the corporate law of the jurisdiction of the Company's incorporation. (iii) There are no contracts, agreements or understandings known to such counsel between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act; (iv) No consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by the Company for the consummation of the transactions contemplated by this Agreement in connection with the sale of the Offered Securities, except such as have been obtained and made under the Act and such as may be required under state securities laws; (v) The execution, delivery and performance of this Agreement and the consummation of the transactions herein contemplated will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court having jurisdiction over the Company or any subsidiary of the Company or any of their properties, or any agreement or instrument to which the Company or any such subsidiary is a party or by which the Company or any such subsidiary is bound or to which any of the properties of the Company or any such subsidiary is subject, or the charter or by-laws of the Company or any such subsidiary; and (vi) The Initial Registration Statement was declared effective under the Act as of the date and time specified in such opinion, the Additional Registration Statement (if any) was filed and became effective under the Act as of the date and time (if determinable) specified in such opinion, the Prospectus either was filed with the Commission pursuant to the subparagraph of Rule 424(b) specified in such opinion on the date specified therein or was included in the Initial Registration Statement or the Additional Registration Statement (as the case may be), and, to the best of the knowledge of such counsel, no stop order suspending the effectiveness of a Registration Statement or any part thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Act, and each Registration Statement and the Prospectus, and each amendment or supplement thereto, as of their respective effective or issue dates, complied as to form in all material respects with the requirements of the Act and the Rules and Regulations; such counsel have no reason to believe that any part of a Registration Statement or any amendment thereto, as of its effective date or as of such Closing Date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus or any amendment or supplement thereto, as of its issue date or as of such Closing Date, contained any untrue statement of a material fact or omitted to state any material fact necessary in 14 15 order to make the statements therein, in the light of the circumstances under which they were made, not misleading; the descriptions in the Registration Statements and Prospectus of statutes, legal and governmental proceedings and contracts and other documents are accurate and fairly present the information required to be shown; and such counsel do not know of any legal or governmental proceedings required to be described in a Registration Statement or the Prospectus which are not described as required or of any contracts or documents of a character required to be described in a Registration Statement or the Prospectus or to be filed as exhibits to a Registration Statement which are not described and filed as required; it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Registration Statements or the Prospectus. (e) The Representative shall have received an opinion, dated such Closing Date, of Bracewell & Patterson, L.L.P., counsel for the Selling Stockholder, to the effect that: (i) The Selling Stockholder had valid and unencumbered title to the Offered Securities delivered by the Selling Stockholder on such Closing Date and had full right, power and authority to sell, assign, transfer and deliver the Offered Securities delivered by the Selling Stockholder on such Closing Date hereunder; and the several Underwriters have acquired valid and unencumbered title to the Offered Securities purchased by them on such Closing Date hereunder; (ii) No consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by the Selling Stockholder for the consummation of the transactions contemplated by [the Custody Agreement and or] this Agreement in connection with the sale of the Offered Securities, except such as have been obtained and made under the Act and such as may be required under state securities laws; (iii) The execution, delivery and performance of [Custody Agreement and] this Agreement and the consummation of the transactions [therein and] herein contemplated will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court having jurisdiction over the Selling Stockholder or any of his properties or any agreement or instrument to which the Selling Stockholder is a party or by which the Selling Stockholder is bound or to which any of the properties of the Selling Stockholder is subject; [and] [(iv) The Power of Attorney and related Custody Agreement with respect to the Selling Stockholder has been duly authorized, executed and delivered by the Selling Stockholder and constitute valid and legally binding obligations of the Selling Stockholder enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; and] (v) This Agreement has been duly authorized, executed and delivered by the Selling Stockholder. (f) The Representative shall have received from Simpson Thacher & Bartlett, counsel for the Underwriters, such opinion or opinions, dated such Closing Date, with respect to the incorporation of the Company, the validity of the Offered Securities delivered on such Closing Date, the Registration Statements, the Prospectus and other related matters as the Representative may require, 15 16 and the Selling Stockholder and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. In rendering such opinion, Simpson Thacher & Bartlett may rely as to the incorporation of the Company and all other matters governed by Texas law upon the opinions of Vinson & Elkins L.L.P. and Bracewell & Patterson, L.L.P. referred to above. (g) The Representative shall have received a certificate, dated such Closing Date, of the President or any Vice President and a principal financial or accounting officer of the Company in which such officers, to the best of their knowledge after reasonable investigation, shall state that: the representations and warranties of the Company in this Agreement are true and correct; the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date; no stop order suspending the effectiveness of any Registration Statement has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission; the Additional Registration Statement (if any) satisfying the requirements of subparagraphs (1) and (3) or Rule 462(b) was filed pursuant to Rule 462(b), including payment of the applicable filing fee in accordance with Rule 111(a) or (b) under the Act, prior to the time the Prospectus was printed and distributed to any underwriter; and, subsequent to the dates of the most recent financial statements in the Prospectus, there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole except as set forth in or contemplated by the Prospectus or as described in such certificate. (h) The Representative shall have received a letter, dated such Closing Date, of Arthur Andersen LLP which meets the requirements of subsection (a) of this Section, except that the specified date referred to in such subsection will be a date not more than three days prior to such Closing Date for the purposes of this subsection. The Selling Stockholder and the Company will furnish the Representative[s] with such conformed copies of such opinions, certificates, letters and documents as the Representative reasonably request. CSFBC may in its sole discretion waive on behalf of the Underwriters compliance with any conditions to the obligations of the Underwriters hereunder, whether in respect of an Optional Closing Date or otherwise. 7. Indemnification and Contribution. (a) The Company will indemnify and hold harmless each Underwriter, its partners, directors and officers and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Act, against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representative specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in subsection (c) below. 16 17 (b) The Selling Stockholder will indemnify and hold harmless each Underwriter, its partners, directors and officers and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Act, against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Selling Stockholder will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by an Underwriter through the Representative specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in subsection (c) below. (c) Each Underwriter will severally and not jointly indemnify and hold harmless the Company, its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the Act, and the Selling Stockholder against any losses, claims, damages or liabilities to which the Company or the Selling Stockholder may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Underwriter through the Representative specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company and the Selling Stockholder in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only such information furnished by any Underwriter consists of the following information in the Prospectus furnished on behalf of each Underwriter: the concession and reallowance figures appearing in the fifth paragraph under the caption "Underwriting". (d) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under subsection (a), (b) or (c) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a), (b) or (c) above. In case any such action is brought against any indemnified party and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party 17 18 from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party. (e) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a), (b) or (c) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a), (b) or (c) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Stockholder on the one hand and the Underwriters on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Selling Stockholder on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Stockholder on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Selling Stockholder bear to the total underwriting discounts and commissions received by the Underwriters. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the Selling Stockholder or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (e). Notwithstanding the provisions of this subsection (e), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this subsection (e) to contribute are several in proportion to their respective underwriting obligations and not joint. (f) The obligations of the Company and the Selling Stockholder under this Section shall be in addition to any liability which the Company and the Selling Stockholder may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each director of the Company, to each officer of the Company who has signed a Registration Statement and to each person, if any, who controls the Company within the meaning of the Act. 8. Default of Underwriters. If any Underwriter or Underwriters default in their obligations to purchase Offered Securities hereunder on either the First or any Optional Closing Date and the aggregate number of shares of Offered Securities that such defaulting Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of the total number of shares of Offered Securities that the Underwriters are obligated to purchase on such Closing Date, CSFBC may make arrangements satisfactory to the Selling Stockholder for the purchase of such Offered Securities by other persons, including any of the Underwriters, but if no such arrangements are made by such Closing Date, the non-defaulting Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Offered Securities that such defaulting Underwriters agreed but failed to purchase on such Closing Date. If any Underwriter or Underwriters so default and the aggregate number of shares of Offered Securities with respect to which such default or defaults occur exceeds 10% of the total number of shares of Offered Securities that the Underwriters 18 19 are obligated to purchase on such Closing Date and arrangements satisfactory to CSFBC and the Selling Stockholder for the purchase of such Offered Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter, the Company or the Selling Stockholder, except as provided in Section 9, (provided that if such default occurs with respect to Optional Securities after the First Closing Date, this Agreement will not terminate as to the Firm Securities or any Optional Securities purchased prior to such termination). As used in this Agreement, the term "Underwriter" includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting Underwriter from liability for its default. 9. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Selling Stockholder, of the Company or its officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter, the selling Stockholder, the Company or any of their respective Representative, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If this Agreement is terminated pursuant to Section 8 or if for any reason the purchase of the Offered Securities by the Underwriters is not consummated, the Selling Stockholder shall remain responsible for the expenses to be paid or reimbursed by him pursuant to Section 5 and the respective obligations of the Company, the Selling Stockholder, and the Underwriters pursuant to Section 7 shall remain in effect, and if any Offered Securities have been purchased hereunder the representations and warranties in Section 2 and all obligations under Section 5 shall also remain in effect. If the purchase of the Offered Securities by the Underwriters is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 8 or the occurrence of any event specified in clause (iii), (iv) or (v) of Section 6(c), the Selling Stockholder will reimburse the Underwriters for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities. 10. Notices. All communications hereunder will be in writing and, if sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed to the Representative, c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, NY 10010-3629, Attention: Transactions Advisory Group, or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at Mitchell Energy & Development Corp., P.O. Box 4000, The Woodlands, Texas 77387-4000, Attention: [Chief Financial Officer], or, if sent to the Selling Stockholder, will be mailed, delivered or telegraphed and confirmed to at ; provided, however, that any notice to an Underwriter pursuant to Section 7 will be mailed, delivered or telegraphed and confirmed to such Underwriter. 11. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective personal Representative and successors and the officers and directors and controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder. 12. Representation. The Representative will act for the several Underwriters in connection with the transactions contemplated by this Agreement, and any action under this Agreement taken by the Representative jointly or by CSFBC will be binding upon all the Underwriters. [Power of Attorney or other agency arrangement: will act for the Selling Stockholder in connection with such transactions, and any action under or in respect of this Agreement taken by will be binding upon the Selling Stockholder.] 13. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 19 20 14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. 20 21 If the foregoing is in accordance with the Representative' understanding of our agreement, kindly sign and return to the Company one of the counterparts hereof, whereupon it will become a binding agreement among the Selling Stockholder, the Company and the several Underwriters in accordance with its terms. Very truly yours, ------------------------------------ GEORGE P. MITCHELL MITCHELL ENERGY & DEVELOPMENT CORP. By ------------------------------ Name: Title: The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON CORPORATION Acting on behalf of itself and as the Representative of the several Underwriters. By CREDIT SUISSE FIRST BOSTON CORPORATION By --------------------------------------- [Insert title] 21 22 SCHEDULE A
UNDERWRITER NUMBER OF FIRM SECURITIES ----------- ------------------------- Credit Suisse First Boston Corporation............ [ ] Goldman, Sachs & Co. ............................. [ ] J.P. Morgan Securities, Inc. ..................... [ ] [Name of other Underwriting Syndicate Members] ... [ ] --------- Total.................................... 4,500,000 =========
22 EX-5.1 3 h84912ex5-1.txt OPINION OF VINSON & ELKINS L.L.P. 1 EXHIBIT 5.1 VINSON & ELKINS L.L.P. 2300 FIRST CITY TOWER 1001 FANNIN STREET HOUSTON, TEXAS 77002-6760 April 2, 2001 Mitchell Energy & Development Corp. P. O. Box 4000 The Woodlands, Texas 77387-4000 Ladies and Gentlemen: We have acted as counsel for Mitchell Energy & Development Corp., a Texas corporation (the "Company"), with respect to certain legal matters in connection with the registration by the Company under the Securities Act of 1933, as amended (the "Securities Act"), of the offer and sale by George P. Mitchell of up to 5,175,000 shares of Class A Common Stock, par value $.10 per share, of the Company (the "Common Stock"). Before rendering our opinions hereinafter set forth, we examined such certificates, instruments and documents, and we reviewed such questions of law, as we considered appropriate. Based upon the foregoing, we are of the opinion that such 5,175,000 shares of Common Stock are validly issued, fully paid and nonassessable. The foregoing opinions are limited to the laws of the United States of America and the State of Texas. We hereby consent to the filing of this opinion as an exhibit to the Company's Registration Statement on Form S-3 relating to such 5,175,000 shares of Common Stock and to the use of our name in the prospectus forming a part of such Registration Statement under the caption "Legal Matters." In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act and the rules and regulations thereunder. Very truly yours, Vinson & Elkins L.L.P. EX-8.1 4 h84912ex8-1.txt OPINION OF VINSON & ELKINS L.L.P. - TAX MATTERS 1 EXHIBIT 8.1 VINSON & ELKINS L.L.P. 2300 FIRST CITY TOWER 1001 FANNIN STREET HOUSTON, TEXAS 77002-6760 April 2, 2001 Mitchell Energy & Development Corp. P. O. Box 4000 The Woodlands, Texas 77387-4000 Ladies and Gentlemen: You have requested our opinion with respect to the disclosures relating to all the material United States federal income and estate tax consequences generally applicable to the ownership by non-U.S. holders of outstanding shares of Class A Common Stock of Mitchell Energy & Development Corp. (the "Common Stock") to be offered and sold by George P. Mitchell as described in the prospectus forming a part of the Company's Registration Statement on Form S-3 relating to such shares (the "Prospectus"). It is our opinion that the discussion and the legal conclusions set forth in the Prospectus under the heading "Certain United States Federal Tax Consequences to Non-U.S. Holders" are accurate and complete in all material respects and constitute our opinion as to the material United States federal income and estate tax consequences to Non-U.S. Holders (as defined in such section of the Prospectus) of Common Stock. Our opinion is based and conditioned upon the initial and continuing accuracy of the facts and the factual matters assumed as contained in the Prospectus. Our opinion is also based upon existing provisions of the Internal Revenue Code of 1986, as amended, regulations promulgated or proposed thereunder and interpretations thereof by the Internal Revenue Service and the courts, all of which are subject to change with prospective or retroactive effect, and our opinion could be adversely affected or rendered obsolete by any such change. Very truly yours, VINSON & ELKINS L.L.P. EX-23.1 5 h84912ex23-1.txt CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated March 5, 2001 incorporated by reference in Mitchell Energy & Development Corp.'s Annual Report on Form 10-K for the year ended December 31, 2000 and to all references to our Firm included in this registration statement. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP Houston, Texas April 2, 2001 EX-24.1 6 h84912ex24-1.txt POWERS OF ATTORNEY 1 EXHIBIT 24.1 LIMITED POWER OF ATTORNEY MITCHELL ENERGY & DEVELOPMENT CORP. KNOW ALL MEN BY THESE PRESENTS that the undersigned director or officer of Mitchell Energy & Development Corp., a Texas corporation, does hereby make, constitute and appoint W. D. STEVENS and PHILIP S. SMITH, and each of them acting individually, his true and lawful attorney with power to act without the other and with full power of substitution, to execute, deliver and file, for and on his behalf, and in his name and in his capacity or capacities as aforesaid, one or more Registration Statements on Form S-3 for filing with the Securities and Exchange Commission under the Securities Act of 1933, as amended, with respect to a secondary offering by George P. Mitchell of certain of his shares of Class A Common Stock of Mitchell Energy & Development Corp. and any and all amendments thereto or other documents in support thereof or supplemental thereto, hereby granting to said attorneys and each of them full power and authority to do and perform each and every act and thing whatsoever as said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, the undersigned have hereunder set their hands this 30th day of March, 2001. /s/ GEORGE P. MITCHELL /s/ ROBERT W. BALDWIN - -------------------------------- ----------------------------------------- GEORGE P. MITCHELL ROBERT W. BALDWIN /s/ BERNARD F. CLARK /s/ WILLIAM D. EBERLE - -------------------------------- ----------------------------------------- BERNARD F. CLARK WILLIAM D. EBERLE /s/ SHAKER A. KHAYATT /s/ J. TODD MITCHELL - -------------------------------- ----------------------------------------- SHAKER A. KHAYATT J. TODD MITCHELL /s/ M. KENT MITCHELL /s/ W. D. STEVENS - -------------------------------- ----------------------------------------- M. KENT MITCHELL W. D. STEVENS /s/ PHILIP S. SMITH - -------------------------------- PHILIP S. SMITH -----END PRIVACY-ENHANCED MESSAGE-----