As filed with the Securities and Exchange
Commission on October 9, 2001.
Registration No. 333-69572
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
Mirant Corporation
(Exact name of registrant as specified in its charter)
---------------
Delaware 58-2056305
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
1155 Perimeter Center West, Suite 100
Atlanta, Georgia 30338
(678) 579-5000
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
---------------
Raymond D. Hill
Chief Financial Officer
Mirant Corporation
1155 Perimeter Center West, Suite 100
Atlanta, Georgia 30338
(678) 579-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
With a copy to:
Brian J. Lane, Esq.
Gibson, Dunn & Crutcher LLP
1050 Connecticut Avenue, NW
Washington, D.C. 20036
(202) 955-8500
---------------
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this registration
statement as determined by the selling securityholders.
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 to be 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, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
---------------
================================================================================
PROSPECTUS
$750,000,000
Mirant Corporation
---------------
2.5% Convertible Senior Debentures due 2021
and
Common Stock
---------------
THE OFFERING
This prospectus relates to up to $750,000,000 in aggregate principal amount
of 2.5% Convertible Senior Debentures due 2021, which may be offered and sold
from time to time by certain of the securityholders of Mirant Corporation and
its Subsidiaries ("Mirant," "we" or "us"), all of whom are named in this
prospectus. We issued the debentures in a private placement at an issue price of
$1,000 per debenture (100% of the principal amount at maturity). Selling
securityholders will use this prospectus to resell their debentures and the
shares of common stock issuable upon conversion or redemption of their
debentures at fixed prices, which may be changed, at prevailing market prices at
the time of sale, at varying prices determined at the time of sale or at
negotiated prices.
We will not receive any of the proceeds from the sale of the debentures. The
selling securityholders may offer the debentures and the shares of common stock
issuable upon their conversion through public or private transactions, on or off
the New York Stock Exchange, at prevailing market prices, or at privately
negotiated prices. All costs, expenses and fees in connection with the
registration of the debentures will be borne by us.
THE DEBENTURES
The debentures are senior debt securities. The debentures are our senior
unsecured obligations and rank equally with all of our existing and future
senior unsecured indebtedness. The debentures mature on June 15, 2021. Interest
on the debentures at the rate of 2.5% per year on the principal amount is
payable semiannually in arrears on June 15 and December 15 of each year,
beginning December 15, 2001. We will pay additional interest in the event of an
upward interest adjustment as described below.
We may redeem for cash some or all of the debentures at any time on or after
June 18, 2006 at a price equal to 100% of the principal amount of the debentures
to be redeemed plus accrued and unpaid interest to the redemption date.
Holders may convert their debentures into 14.7167 shares of our common stock
(subject to adjustment) for each $1,000 principal amount of debentures
(equivalent to an initial conversion price of $67.95 per share based on the
issue price of the debentures) under any of the following circumstances: (i)
during any conversion period (as defined in this prospectus) if the closing
sales prices of our common stock for at least 20 trading days in the 30
consecutive trading days ending on the first day of such conversion period is
more than 110% of the accreted conversion price per share of common stock on the
first day of the conversion period; (ii) if the debentures have been called for
redemption; or (iii) upon the occurrence of specified corporate transactions.
The conversion rate may be adjusted as described in this prospectus. The
"accreted conversion price" as of any day will equal 100% of the principal
amount of the debenture plus accrued and unpaid interest (excluding any accrued
and unpaid interest payable as cash interest), if any, divided by the number of
shares of our common stock issuable upon conversion of such debenture on that
day.
The interest rate on the debentures will be 2.5% per year through June 15,
2004. If the average of the closing sales price of our common stock is less than
or equal to 45% of the accreted conversion price of the debentures for any 20
out of the last 30 trading days ending five days prior to each June 15 and
December 15 beginning on June 15, 2004, then the interest rate on the debentures
will be subject to an upward interest adjustment to the reset rate for the
subsequent six-month period. The upward interest adjustment will result in the
interest rate on the debentures being equivalent to the per year reset rate (as
defined in this prospectus). If an upward interest adjustment is in effect for a
particular six-month period, we will pay a portion of the interest adjustment as
cash interest at a rate of 0.25% per year (0.125% per six-month period) of the
principal amount, plus accrued and unpaid interest (excluding interest payable
in cash), and the remaining additional interest will be accrued and payable at
maturity. Following a tax event as defined herein, we may elect to pay interest
entirely in cash. After June 15, 2004, if the average of the closing sales price
of our common stock is not less than or equal to 45% of the accreted conversion
price of the debentures for any 20 out of the last 30 trading days of the
six-month period ending on the fifth day preceding each June 15 and December 15,
then the interest rate on the debentures for the subsequent six-month period
will revert to 2.5% per year. For United States federal income tax purposes,
holders will be required to treat the debentures as contingent payment debt
instruments. You should read the discussion of certain United States federal
income tax consequences relevant to the debentures beginning on page 30.
Holders may require us to purchase all or a portion of their debentures on
June 15, 2004, June 15, 2006, June 15, 2011 and June 15, 2016 at a price equal
to 100% of the principal amount of the debentures to be purchased plus accrued
and unpaid interest to such purchase date. We may choose to pay the purchase
price in cash, shares of our common stock or a combination of cash and shares of
our common stock.
Holders may also require us to purchase debentures for cash upon a
Fundamental Change (as defined in this prospectus) involving Mirant. In the case
of a purchase upon a Fundamental Change, the purchase price will be equal to
100% of the principal amount of the debentures plus accrued and unpaid interest.
We do not intend to list the debentures on any national securities exchange
or automated quotation system. The debentures and the shares of common stock
issuable upon conversion of the debentures issued in the initial private
placement are eligible for trading in the Private Offerings, Resales and Trading
through Automated Linkages Market, commonly referred to as the PORTAL Market.
The debentures and the shares of common stock issuable upon conversion of the
debentures sold using this prospectus, however, will no longer be eligible for
trading in the PORTAL system.
Our common stock is listed on the New York Stock Exchange under the symbol
"MIR." On October 3, 2001, the last reported sale price of our common stock on
the New York Stock Exchange was $25.63 per share.
---------------
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 12 OF THIS
PROSPECTUS BEFORE PURCHASING ANY OF THE SECURITIES BEING OFFERED BY THIS
PROSPECTUS.
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------
The date of this prospectus is October 9, 2001.
You should rely only on the information contained or incorporated by
reference in this prospectus or any supplement. We have not authorized any other
person to provide you with different information. If anyone provides you with
different or inconsistent information, you should not rely on it. You should
assume that the information appearing in this prospectus or any document
incorporated by reference is accurate only as of the date on the front cover of
the applicable document. Our business, financial condition, results of
operations and prospects may have changed since that date. The debentures and
related common stock are being offered and sold only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of the debentures or related common
stock.
TABLE OF CONTENTS
Page
About This Prospectus........................................ 1
Where You Can Find More Information.......................... 1
Incorporation of Certain Documents By Reference.............. 2
Special Note Regarding Forward-Looking Statements............ 3
Summary...................................................... 4
Risk Factors................................................. 12
Ratio of Earnings to Fixed Charges........................... 13
Use of Proceeds.............................................. 13
Price Range of Common Stock and Dividends.................... 14
Capitalization............................................... 14
Description of Debentures.................................... 15
Certain United States Federal Income Tax Consequences........ 30
Selling Securityholders...................................... 36
Underwriters................................................. 37
Plan of Distribution......................................... 37
Legal Matters................................................ 39
Experts...................................................... 39
Information Not Required in the Prospectus................... 40
i
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission (the "SEC") using a "shelf" registration or
continuous offering process. Under this shelf prospectus, the selling
securityholders may, from time to time, sell the securities described in this
prospectus in one or more offerings. This prospectus provides you with a general
description of the securities the selling securityholders may offer. Each time a
selling securityholder sells securities, the selling securityholder is required
to provide you with this prospectus, and, in some cases, a prospectus supplement
containing specific information about the selling securityholder and the terms
of the securities being offered. That prospectus supplement may include a
discussion of any risk factors or other special considerations applicable to
those securities. Any prospectus supplement may also add, update or change
information in this prospectus. If there is any inconsistency between the
information in this prospectus and any prospectus supplement, you should rely on
the information in the prospectus supplement. You should read both this
prospectus and any prospectus supplement together with the additional
information described under the heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we have filed with the
SEC under the Securities Act of 1933, as amended (the "Securities Act"). The
SEC's rules and regulations allow us to omit certain information included in the
registration statement from this prospectus. The registration statement may be
inspected by anyone without charge at the SEC's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549.
In addition, we file reports, proxy statements and other information with
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). You may read and copy this information at the following SEC locations:
Public Reference Room Midwest Regional Office
450 Fifth Street, N.W. Citicorp Center
Room 1024 500 West Madison Street
Washington, D.C. 20549 Suite 1400
Chicago, Illinois 60661-2511
You may also obtain copies of this information by mail from the SEC's
Public Reference Room, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, at rates determined by the SEC. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-732-0330. You
can also inspect reports, proxy statements and other information that we have
filed electronically with the SEC at the SEC's web site at http://www.sec.gov.
These documents can also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information into this
prospectus and any prospectus supplement. This means that we can disclose
important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered
to be a part of this prospectus and any prospectus supplement. Information that
we file later with the SEC and that is incorporated by reference in this
prospectus or any prospectus supplement will automatically update and supercede
information contained in this prospectus and any prospectus supplement.
The following documents contain important information about us and our
financial condition. We have previously filed these documents with the SEC and
incorporate them by reference into this prospectus:
o Our Annual Report on Form 10-K for the fiscal year ended December 31,
2000, filed on March 21, 2001; as amended by Form 10-K/A, filed on
June 29, 2001;
o Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2001, filed on May 10, 2001; our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2001, filed on August 10, 2001; as amended by
Form 10-Q/A, filed on August 22, 2001;
o Our current reports on Form 8-K, filed on April 3, 2001, May 31, 2001,
September 17, 2001 and October 3, 2001;
o Our definitive proxy statement filed on April 3, 2001; and
o The description of our common stock and associated preferred stock
purchase rights contained in Form 8-A, filed on September 7, 2000 and
any amendment or report filed for the purpose of updating this
description.
We also incorporate by reference all documents filed pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
prospectus and prior to the termination of this offering. Nothing in this
prospectus shall be deemed to incorporate information furnished but not filed
with the SEC pursuant to Item 9 of Form 8-K.
Statements made in this prospectus, in any prospectus supplement or in
any document incorporated by reference in this prospectus as to the contents of
any contract or other document are not necessarily complete, and in each
instance we refer you to the copy of the contract or other document filed as an
exhibit to the registration statement of which this prospectus is a part or as
an exhibit to the documents incorporated by reference. Each statement about the
contents of any contract or other document is qualified in all material respects
by reference to such contract or other document.
We will provide to each person, including any beneficial owner, to whom
a prospectus is delivered a copy of any document incorporated by reference in
this prospectus and any exhibits specifically incorporated by reference in those
documents at no cost. You may request copies by contacting us at the following
address or telephone number: Corporate Secretary, Mirant Corporation, 1155
Perimeter Center West, Atlanta, Georgia 30338, (678) 579-5000. Our website is at
www.mirant.com.
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus or incorporated by
reference herein, especially those in sections entitled "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business," "Recent Developments", and elsewhere
included in this prospectus constitute forward-looking statements in addition to
historical information. These statements involve known and unknown risks and
relate to future events, our future financial performance or our projected
business results. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "targets," "potential" or "continue" or the
negative of these terms or other comparable terminology.
Forward-looking statements are only predictions. Actual events or results
may differ materially from any forward-looking statement as a result of various
factors, which include:
o legislative and regulatory initiatives regarding deregulation,
regulation or restructuring of the electric utility industry;
o the extent and timing of the entry of additional competition in the
markets of our subsidiaries and affiliates;
o our pursuit of potential business strategies, including acquisitions
or dispositions of assets or internal restructuring;
o state, federal and other rate regulations in the United States and in
foreign countries in which our subsidiaries and affiliates operate;
o changes in or application of environmental and other laws and
regulations to which we and our subsidiaries and affiliates are
subject;
o political, legal, market, (including, but not limited to, energy and
commodity supply and pricing developments) and economic conditions and
developments in the United States and in foreign countries in which
our subsidiaries and affiliates operate;
o financial market conditions and the results of our financing efforts;
o changes in commodity prices and interest rates;
o weather and other natural phenomena;
o performance of our projects undertaken and the success of our efforts
to invest in and develop new opportunities;
o developments in the California power markets, including, but not
limited to, governmental intervention, deterioration in the financial
condition of our counterparties, default on receivables due, adverse
results in current or future litigation and adverse changes in the
tariffs of the California Power Exchange Corporation or California
Independent System Operator Corporation;
o the direct or indirect effects on our business resulting from the
terrorist incidents on September 11, 2001 or any similar incidents or
responses to such incidents; and
o other factors, including the risks outlined under "Risk Factors" and
discussed elsewhere in this prospectus and in other reports (including
our Form 10-K filed on March 21, 2001, as amended by Form 10-K/A,
filed on June 29, 2001, our Form 10-Q filed on May 10, 2001 and our
Form 10-Q filed on August 10, 2001, as amended by Form 10-Q/A filed on
August 22, 2001) described from time to time in our filings with the
SEC.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, events, levels of
activity, performance or achievements. Except as required by law, we do not
undertake a duty to update any of the forward-looking statements.
3
SUMMARY
This summary highlights information contained elsewhere or incorporated by
reference in this prospectus. This summary is not complete and does not contain
all of the information that you should consider before investing in the
debentures. You should carefully read the entire prospectus, including the risk
factors, the financial statements and the documents incorporated by reference.
Unless the context requires otherwise, all references to 'common stock' are to
Mirant's common stock, par value $0.01 per share, and the associated preferred
stock purchase rights issued under Mirant's stockholder rights plan dated August
22, 2000.
MIRANT CORPORATION
We are a global competitive energy company with leading energy marketing and
risk management expertise. We have extensive operations in North America, Europe
and Asia. With an integrated business model, we develop, construct, own and
operate power plants and sell wholesale electricity, gas and other
energy-related commodity products. We own or control more than 21,600 megawatts
("MW") of electric generating capacity around the world, with approximately
another 9,000 MW under development. In North America, we also control access to
approximately 2.6 billion cubic feet per day of natural gas production, more
than 2.2 billion cubic feet per day of natural gas transportation and
approximately 42 billion cubic feet of natural gas storage. Our principal
executive offices are located at 1155 Perimeter Center West, Suite 100, Atlanta,
Georgia 30338, and our telephone number is (678) 579-5000.
In the Americas we own and control power generation and natural gas assets
and energy marketing operations in North America and generation, transmission
and distribution operations in South America and the Caribbean. We own and lease
power plants in North America with a total generation capacity of over 12,900
MW, and control over 2,500 MW of additional generating capacity through
management contracts. Through Mirant Americas Energy Marketing, L.P. ("Mirant
Americas Energy Marketing"), our wholly owned indirect subsidiary, we market and
trade energy and energy-linked commodities, including electricity, gas, coal,
oil, pulp and paper, weather derivatives and emission allowances. In the
Caribbean and South America, we have ownership interests in electric utilities,
power plants and transmission facilities. These assets are located in the
Bahamas, Jamaica, Trinidad and Tobago, Brazil and Chile.
In Europe, we own a 49% economic interest and a 50% voting interest in WPD
Holdings UK ("WPDH") which distributes electricity to approximately 1.4 million
end-users in southwest England and approximately 1 million end-users in South
Wales. We also own a 44.8% interest in Bewag AG ("Bewag"), an electric utility
serving over 2 million customers in Berlin, Germany. Our European marketing and
risk management business began trading power in the Nordic energy markets in
1999. We began trading power in Germany, The Netherlands and Switzerland in 2000
and have begun gas trading in the UK on the International Petroleum Exchange
("IPE") in 2001. Our other target markets for energy marketing and trading
include Austria, Italy and central Europe.
In the Asia-Pacific region, we have interests in approximately 3,100 MW of
generation capacity in the Philippines and China. Most of our revenues in the
Asia-Pacific region are derived from contracts with government entities or
regional power boards and are predominantly linked to the U.S. dollar to
mitigate foreign currency exchange risks.
SELECTED FINANCIAL INFORMATION
The following table presents our selected consolidated financial
information. The consolidated income statement data for the years ended December
31, 1996 and 2000 and the selected balance sheet data as of December 31, 1996
and 2000 are derived from our audited consolidated financial statements, which
were audited by Arthur Andersen LLP, independent public accountants.
Years Ended December 31, Compound Annual
Income Data: 1996 2000 Growth Rate
------------ (Audited) (Unaudited)
----------------------- ----------------------
in millions
Operating income.......................... $ 150 $ 664 45%
EBITDA (1)................................ 258 1,177 46%
Net income from continuing operations..... 73 332 46%
4
Balance Sheet Data: As of December 31, As of June 30,
------------------- 1996 2000 2001
(Audited) (Unaudited)
--------------------------- -----------------
in millions
Cash and cash equivalents................. $ 161 $ 1,280 $ 1,453
Property, plant and equipment, net........ 2,627 5,681 6,359
Total assets.............................. 4,564 24,136 21,738
Non-recourse debt (2)..................... 1,753 6,136 6,029
Total long term debt...................... 1,146 5,596 5,493
Total debt................................ 1,753 7,086 7,992
Stockholders' equity...................... 988 4,136 4,523
(1) EBITDA represents our operating income plus depreciation and
amortization and our equity in income of affiliates. EBITDA excludes
the impact of minority interests. EBITDA, as defined, is presented
because it is a widely accepted financial indicator used by some
investors and analysts to analyze and compare companies on the basis
of operating performance. EBITDA, as defined, is not intended to
represent cash flows for the period, nor is it presented as an
alternative to operating income or as an indicator of operating
performance. It should not be considered in isolation or as a
substitute for a measure of performance prepared in accordance with
generally accepted accounting principles ("GAAP") in the United States
and is not indicative of operating income or cash flow from operations
as determined under GAAP. Our method of computation may or may not be
comparable to other similarly titled measures used by other companies.
(2) This debt is non-recourse to us but is recourse to our applicable
subsidiaries and their assets.
The Power and Gas Markets
In the United States, during 2000, the Energy Information Administration
estimates that the power industry had an end-user market of over $228 billion of
electricity sales produced by an aggregate base power generation capacity of
approximately 793,000 MW (North American Electric Reliability Council ("NERC")
2001 Summer Assessment). The NERC anticipates that near term electricity demand
will grow by 60,500 MW in the period from 2000-2004 (Reliability Assessment
2000-2009: The Reliability of Bulk Electric Systems in North America).
Historically, the power generation industry has been characterized by
electric utility monopolies selling to a franchise customer base. In response to
increasing customer demand for access to low-cost electricity and enhanced
services, new regulatory initiatives have been and are continuing to be adopted
to increase competition in the power industry. As a result of the recent energy
crisis in California, some states have either discontinued or delayed
implementation of initiatives involving retail deregulation. In deregulating
markets, industry trends and regulatory initiatives are transforming existing
franchise customer markets, which are characterized by vertically integrated,
price-regulated utilities, into markets in which generators compete with each
other for their principal customers (wholesale power suppliers and major
end-users) on the basis of price, service quality and other factors.
During the late 1980s and early 1990s deregulation of the natural gas
markets created a robust competitive wholesale gas market. Gas demand is
expected to grow from 23 trillion cubic feet per year in 2000 to a 30 trillion
cubic feet per year by 2010. The majority of this growth is being driven by the
electric generation market. The competitive electric generation market favors
low cost generation technologies such as natural gas-fired combustion turbines
or combined cycle plants to serve growing electricity demand and to replace
older, less efficient units. Additionally, natural gas continues to be the most
cost effective fuel source that meets increasingly stringent clean air
requirements. Currently, 16% of US power generation is fueled by natural gas.
Cambridge Energy Research Associates estimates that there are 240,000 MW of
proposed power generation development over the next four years in North America.
Of this total, 90% is expected to use natural gas as its primary energy source.
While the likelihood that all the proposed additions will actually enter
commercial service as scheduled is low, it does appear likely that natural gas
demand driven by power generation will be significant. Consequently, the natural
gas and power commodity markets are converging rapidly. The converging power and
gas markets could create significant arbitrage opportunities for Mirant as a top
five marketer of natural gas and power and an owner and controller of
significant gas and power assets.
We view our gas and power marketing and risk management and power
generation businesses as an integrated unit. As the natural gas and power
markets continue to deregulate, unbundle and converge, we believe that our
marketing experience, risk management capabilities and products and control of
selected assets in both commodities potentially afford us a wide range of value
creation opportunities which could benefit both us and our customers. The
ongoing restructuring of the power industry should continue to transform
traditional vertically integrated, price-regulated markets into more
competitive, more volatile markets. This transformation requires that generators
and their principal customers manage the risks associated with producing and
delivering energy commodities. As such, this transformation of the energy
markets could have the effect of creating opportunities for us to market energy
5
commodities and provide services to manage these risks. We believe the move
towards competitive marketplaces will increase in the U.S. and abroad,
potentially providing additional opportunities for us to grow our risk
management business.
Outside of the United States, we expect many governments in developed
economies to privatize their utilities, having realized that their energy assets
can be sold to raise capital without impairing system reliability. We expect
these countries to develop regulatory structures to encourage competition in the
electricity sector. In developing countries, the demand for electricity is
expected to grow rapidly. In order to satisfy this anticipated increase in
demand, some developing countries have adopted government programs designed to
encourage private investment in power plants. We believe that these market
trends will continue to create opportunities to acquire and develop power
generation plants outside the United States.
Strategy
Our strategy is to expand our business through ownership, leasing or control
of additional natural gas and electricity assets and to continue our rapid
growth by capitalizing on opportunities in markets where our unique combination
of strengths in physical asset management, electricity generation, management of
gas assets and energy marketing and risk management services allows us to be
positioned as a leading provider of energy products and services. We are
implementing our strategy through the development of new power plants
(greenfield projects), the expansion of existing power plants (brownfield
projects), acquisitions of power and gas assets competitively positioned in our
targeted markets, contractual arrangements for the control of generation
capacity and gas management facilities, the expansion of our marketing and risk
management activities and the implementation of information technology and
e-commerce applications. We continually review acquisition opportunities and are
currently in discussions with a number of parties in regard to potential
acquisitions, including potential acquisitions in the U.S. that may be deemed
material to our business. Our willingness to pursue these opportunities may be
dependent on many factors, including, but not limited to, the market price of
our common stock. To secure wholesale supply agreements or to provide additional
opportunities for growth, profitability or revenue stability, we may enter into
agreements to acquire, control or manage distribution and supply businesses or
other energy aggregators in selected markets. We expect to fund our growth
strategy in both the long and short-term through a combination of cash flows
from operations as well as debt financings and equity offerings that are
currently under evaluation.
While we believe that our experience and expertise in assessing and managing
market and credit risk will allow us to remain competitive during volatile or
otherwise adverse market circumstances, we may suffer from some competitive
disadvantages which impede our ability to implement this strategy.
Competition
As a global competitive energy company, we face intense competition in all
phases of the business in which we compete, both in the United States and in
international markets. We encounter competition from companies of all sizes,
having varying levels of experience, financial and human resources and differing
strategies. In the power generation markets, we compete in the development and
operation of energy-producing projects, and our competitors in this business
include various utilities, industrial companies and independent power producers
(including affiliates of utilities). In our energy marketing and risk management
operations, we compete with international, national and regional full service
energy providers, merchants, producers and pipelines in our ability to aggregate
competitively priced supplies from a variety of sources and locations and to
utilize efficient transmission or transportation.
The following summarizes our competitive position in several of our key
markets:
o North America: We were ranked the fifth and the sixth largest
competitive power company in July 2001 and July 2000, respectively,
according to the Platts "Global Power Report." In addition, for the
second quarter of 2001, our marketing and risk management operations
were ranked by Power Markets Weekly as the seventh largest North
American power marketer and by Gas Daily as the third largest North
American gas marketer.
o Europe: In the European market, in general, we were ranked among the top
10 largest private power company based on total dollars invested in
private power assets according to Cambridge Energy Research Associates.
In addition, according to 1999 data, Bewag was the sixth largest
electricity producer in Germany based on total electricity sales
(approximately 13 TWh). These rankings are based on a report by VDEW, a
German electricity association.
o Asia-Pacific: As of July 2001, we ranked sixth in the Asia-Pacific
market among the twenty largest private power companies and we were the
second largest U.S. developer as measured by MW's of equity ownership
according to Cambridge Energy Research Associates. Specifically, we have
an approximate 20% share of the total installed capacity in the
Philippines, and we are the largest private producer of electricity in
that country. In general, our coal-fired plants in the Philippines are
among the lowest operating cost plants in their market and have exceeded
their contractual availability requirements. In addition we also hold
interests in power plants located in the Guangdong and Shandong
provinces of China.
6
During the transition of the energy industry to competitive markets, it is
difficult for us to assess our position versus the position of existing power
providers and new entrants. Due to the fact that each company may employ widely
differing strategies in their fuel supply and power sales contracts with regard
to pricing, terms and conditions. Further difficulties in making competitive
assessments of our company arise from the fact that many states and countries
are considering or implementing different types of regulatory and privatization
initiatives that are aimed at increasing competition in the power industry.
Increased competition that has resulted from some of these initiatives has
already contributed to a reduction in electricity prices and put pressure on
electric utilities to lower their costs, including the cost of purchased
electricity. Additionally, our business is rapidly becoming more competitive due
to technological advances in power generation, e-commerce enabling new ways of
conducting business, the increased role of full service providers and increased
efficiency of energy markets.
In general, however, we believe that our experience and expertise in
assessing and managing market and credit risk will allow us to remain
competitive during volatile or otherwise adverse market circumstances.
Recent Developments
In addition to the recent developments described below, please see our
Annual Report on Form 10-K for the year ended December 31, 2000, as amended by
Form 10-K/A, our Quarterly Report on Form 10-Q for the three months ended June
30, 2001, as amended by Form 10-Q/A, and our Quarterly Report on Form 10-Q for
the three months ended March 31, 2001 and our Forms 8-K filed on September 17,
2001 and on October 3, 2001, which are incorporated by reference in this
prospectus.
In January 2001, the EPA, Region 3 issued a request for information to
Mirant Mid-Atlantic concerning the air permitting implications of past repair
and maintenance activities at the Chalk Point, Dickerson, Morgantown and Potomac
River plants. Mirant Mid-Atlantic has responded fully to this request.
On September 20, 2001, Pacific Gas and Electric Company filed its proposed
plan of reorganization with the bankruptcy court. If the terms of the plan are
confirmed, its large unsecured creditors would receive 60% of their allowed
claims in cash within a few months following confirmation, with the remainder to
be paid in negotiable debt with terms from ten to thirty years.
On September 21, 2001, the defendants in the California rate payer
litigation served upon the plaintiffs in each case a Joint Demurrer, a Joint
Motion to Strike and a Joint Motion to Stay. The Joint Demurrer asserts that the
defendants should be granted judgment as a matter of law on the claims asserted
by the plaintiffs. The Joint Motion to Strike asserts that if the court does not
conclude that plaintiffs' claims are barred entirely, then all claims seeking
monetary recovery should be stricken based on the filed rate doctrine. The Joint
Motion to Stay asserts that any claims not dismissed in response to the Joint
Demurrer or stricken in response to the Motion to Strike should be stayed until
the FERC has entered a final order in the ongoing proceedings before it related
to the investigations of the California wholesale markets. These pleadings have
been served on the plaintiffs in each of the six cases but will not be filed
with the court until a determination is made regarding whether the actions
should be coordinated and, if so, before which court. The plaintiffs seek to
have the cases coordinated before a court in San Francisco, while the defendants
have asked for the cases to be coordinated before a court in San Diego. The
California Judicial Council has sent the coordination motions to the presiding
judge for the Superior Court for the County of San Diego, who has assigned a
judge to hear the coordination petitions. The judge will decide whether the
cases should be coordinated and, if so, before what court. We cannot predict the
outcome of these cases.
On September 26, 2001, we announced that the partnership discussions related
to the possible combination of Bewag, VEAG, Laubag and HEW, the so-called Neue
Kraft, were terminated. We continue to own approximately 45% of the integrated
utility, Bewag, which serves the city of Berlin.
In the July 25 order issued in the California refund proceeding, the FERC
also ordered that a preliminary evidentiary proceeding be held to develop a
factual record on whether there have been unjust and unreasonable charges for
spot market bilateral sales in the Pacific Northwest from December 25, 2000
through June 20, 2001. In the proceeding, the Department of Water Resources
("DWR") filed to recover certain refunds from parties, including a Mirant
subsidiary, for bilateral sales of electricity to the DWR at the
California/Oregon border, claiming that such sales took place in the Pacific
Northwest. A FERC administrative law judge ("ALJ") recently concluded a
preliminary evidentiary hearing related to possible refunds for power sales in
7
the Pacific Northwest. In a preliminary ruling issued September 24, 2001, the
ALJ indicated that he would order no refunds because the complainants had failed
to prove any exercise of market power or that any prices were unjust or
unreasonable. FERC may accept or reject this preliminary ruling and FERC's
decision may itself be appealed. At this time, the Company cannot predict the
outcome of this proceeding. If we are required to refund such amounts, our
subsidiaries would be required to refund amounts previously received pursuant to
sales made on their behalf.
On October 2, 2001, the California Public Utilities Commission refused to
approve a rate agreement with the DWR. The California Treasurer has indicated
that this rate agreement is closely related to the issuance of the proposed $13
billion in revenue bonds by the DWR that would be used by the DWR to finance the
purchase of electric energy.
On October 9, 2001, Mirant Americas Generation, an indirect wholly owned
subsidiary of the Company, issued $750 million in senior unsecured notes under
Rule 144A of the Securities Act. The notes issued included $300 million of 7.2%
senior notes due 2008 and $450 million of 8.5% senior notes due 2021. The net
proceeds from these notes will be used to repay the majority of existing loans.
Interest on the notes is payable semiannually beginning April 1, 2002. The
Company may redeem the notes, in whole or in part, at any time at a redemption
price equal to 100% of the principal amount plus accrued interest, plus a
make-whole premium, as defined in the note agreements. Furthermore, Mirant
Americas Generation is obligated to consummate an exchange offer under an
effective registration statement or cause re-sales of the notes to be registered
under the Securities Act within 270 days of the issuance of these notes or the
annual interest rate will increase by 0.5% per annum.
On October 5, 2001, the Federal District court in Los Angeles approved the
settlement agreement that had been proposed by the California Public Utilities
Commission and Southern California Edison ("SCE"), relating to SCE's pending
filed rate doctrine lawsuit. For a more detailed description of the settlement
agreement, referanc eis made to our Form 8-K filed on October 3, 2001.
8
THE OFFERING
Debentures................ $750,000,000 aggregate principal amount of 2.5%
convertible senior debentures due 2021.
Issue Price............... Each debenture was initially issued at a price of
$1,000 per debenture and a principal amount at
maturity of $1,000. Selling securityholders may
sell the debentures and the associated common
stock from time to time in one or more
transactions at fixed prices, which may be changed
at prevailing market prices at the time of sale,
at varying prices determined at the time of sale
or at negotiated prices.
Maturity of Debentures..... June 15, 2021.
Ranking.................... The debentures are our senior unsecured
obligations and rank equally with all of our
existing and future senior unsecured
indebtedness. However, we are a holding company
and the debentures are effectively subordinated to
all existing and future obligations of our
subsidiaries. As of June 30, 2001, we had
approximately $7,992 million of total
indebtedness outstanding. As of June 30, 2001,
our subsidiaries had approximately $6,054 million
of total indebtedness.
See "Description of Debentures--Ranking."
Interest................... 2.5% per year on the principal amount payable
semiannually in arrears on June 15 and December
15 of each year, beginning on December 15, 2001.
We will pay additional interest in the event of
an upward interest adjustment described below.
See "Description of Debentures-- Interest."
Interest Adjustment........ The interest rate on the debentures is 2.5% per
year through June 15, 2004. If the average of the
closing sales price of our common stock is less
than or equal to 45% of the accreted conversion
price of the debentures for any 20 out of the last
30 trading days ending five days prior to each
June 15 and December 15, as applicable, commencing
June 15, 2004, then the interest rate on the
debentures will be subject to an upward interest
adjustment to the applicable reset rate(as defined
below) for the subsequent six-month period. If an
upward interest adjustment is in effect and the
average of the closing sales price of our common
stock is not less than or equal to 45% of the
accreted conversion price of the debentures for
any 20 out of the last 30 trading days of any
six-month period ending on the fifth day preceding
each June 15 and December 15, as applicable, then
the interest rate on the debentures for the
subsequent six-month period will revert to 2.5%
per year. If an upward interest adjustment is in
effect for a particular six-month period, we will
pay a portion of the interest adjustment as cash
interest at an annualized rate of 0.25% per year
(0.125% per six-month period) of the principal
amount, plus any accrued and unpaid interest
(excluding interest payable in cash), and the
remaining interest will be accrued and payable at
maturity or upon the redemption or repurchase of
the debentures. Following a tax event (as
described below), we may elect to pay interest
entirely in cash.
The "applicable reset rate" for any six-month
period in which there is an upward interest
adjustment will be set as of each of June 15,2004,
June 15, 2006, June 15, 2011 and June 15, 2016
(each, a "purchase date") and will be equal to the
rate (the "reference fixed rate") that would, in
the sole and reasonable judgment of the reset rate
agent (as defined in this prospectus) who must
seek indicative reference rates from one other
nationally recognized investment bank, result in a
trading price of par for a hypothetical issue of
our senior, non-convertible, fixed-rate, callable
debt securities with (i) a final maturity equal to
the term from such purchase date until the next
purchase date, (ii) an aggregate principal amount
equal to the then principal amount of the
debentures plus accrued and unpaid interest
(excluding any accrued and unpaid interest
payable as cash interest) and (iii)provisions that
are, insofar as would be practicable for an issue
of senior, non-convertible, fixed-rate, callable
debt securities, substantially identical to those
of the debentures; provided that the reset rate
for the period commencing June 15, 2004 and ending
June 15, 2006 shall not exceed 10% per year. If
the reset rate agent determines in its reasonable
judgment that there is no suitable reference
fixed rate, the applicable rate of accretion for
that period will be the applicable rate of
accretion then in effect, such rate of accretion
to remain in effect until the reset rate agent
determines that there is a suitable reference
fixed rate at which time the reset rate agent
shall determine a new applicable reset rate for
the period ending on the next purchase date. The
applicable reset rate for a debenture that is
subject to an upward interest adjustment shall be
determined as to any period for which such
adjustment is applicable until a new applicable
reset rate is in effect or until the original
interest rate is again in effect. See
"Description of Debentures - Interest Adjustment."
Tax Event.................. We can elect to pay all the interest on the
debentures in cash upon the occurrence of a tax
event from and after the date a tax event occurs
instead of allowing that interest on the
debentures to accrete. If that happens, the
principal amount on which we pay interest will be
restated and will be equal to the principal amount
of the debentures plus accrued and unpaid interest
(excluding interest payable in cash prior to our
election) on the date of restatement. See
"Description of Debentures-- Tax Event."
9
Conversion Rights.......... Holders may convert their debentures into shares
of our common stock prior to stated maturity under
any of the following circumstances:
(i) during any conversion period if the closing
sales price of our common stock for a
period of at least 20 trading days in the
period of 30 consecutive trading days
ending on the first day of such conversion
period is more than 110% of the accreted
conversion price per share of common stock
on the first day of the conversion period.
A conversion period will be the period
from and including the twelfth trading day
in a fiscal quarter to but not including
the twelfth trading day in the immediately
following fiscal quarter; or
(ii) if the debentures have been called for
redemption; or
(iii) upon the occurrence of specified corporate
transactions described under "Description
of Debentures -- Conversion Rights."
For each debenture surrendered for conversion, a
holder will receive 14.7167 shares of our common
stock (subject to adjustment). This represents an
initial conversion price of $67.95 per share of
common stock Based on the issue price of the
debentures. As described in this prospectus, the
conversion rate may be adjusted for certain
reasons, but it will not be adjusted for accrued
interest. Upon conversion, holders will not
receive any cash payment representing accrued and
unpaid interest. Instead, accrued and unpaid
interest will be deemed paid by the common stock
received by holders on conversion. Debentures
called for redemption may be surrendered for
conversion until the close of business two
business days prior to the redemption date.
Optional Redemption........ On or after June 18, 2006, we may redeem for cash
all or part of the debentures at any time, upon
not less than 30 nor more than 60 days notice by
mail to holders of debentures, for a price equal
to 100% of the principal amount of the debentures
to be redeemed plus any accrued and unpaid
interest to the redemption date. See"Description
of Debentures-- Optional Redemption."
Purchase of Debentures by
Mirant at the Option of the
Holder.................. You have the right to require us to purchase all
or a portion of the debentures on June 15, 2004,
June 15, 2006, June 15, 2011 and June 15, 2016.
In each case, the purchase price payable will be
equal to 100% of the principal amount of the
debentures to be purchased plus any accrued and
unpaid interest to the purchase date. We may
choose to pay the purchase price in cash or shares
of our common stock, or a combination of cash and
shares of our common stock, provided that we will
pay accrued and unpaid cash interest in cash.
See "Description of Debentures -- Purchase of
Debentures by Mirant at the Option of the Holder."
Fundamental Change......... If we undergo a Fundamental Change as described in
this prospectus, you may require us to purchase
for cash all or any portion of your debentures not
previously called for redemption for cash. We will
pay a purchase price equal to 100% of the
principal amount of the debentures to be purchased
plus any accrued and unpaid interest to the
purchase date. See "Description of Debentures--
Fundamental Change."
Events of Default.......... If there is an event of default on the debentures,
an amount equal to 100% of the principal amount
plus any accrued and unpaid interest may be
declared immediately due and payable by the
Indenture's Trustee(as defined in this prospectus)
or the holders of at least 25% in principal amount
of the outstanding debentures. These amounts
automatically become due and payable in some
circumstances. See "Description of Debentures--
Events of Default."
The following are events of default with respect
to the debentures:
o our failure for 30 days to pay when due
any interest(including additional interest
payable pursuant to an upward interest
adjustment) on the debentures;
o our failure to pay the principal amount,
plus accrued and unpaid interest on the
debentures, at maturity, upon redemption,
purchase at the option of the holder or
following a Fundamental Change, when the
same becomes due and payable;
10
o our failure to deliver shares of our
common stock upon an appropriate election
by holders of debentures to convert those
debentures and continuance of such
default for 10 days;
o our failure to comply in any material
respect with any of our covenants or
agreements in the debentures or the
Indenture for 90 days after written notice
is given by the Trustee or by the holders
of at least 25% in principal amount of all
outstanding debentures; and
o certain events involving the bankruptcy,
insolvency or reorganization of Mirant.
Tax........................ Each holder has agreed in the Indenture, for U.S.
federal income tax purposes, to treat the
debentures as"contingent payment debt instruments"
and to be bound by our application of the Treasury
regulations that govern contingent payment debt
instruments, including our determination that the
rate at which interest will be deemed to accrue
for federal income tax purposes will be 8.543% per
year, which is the rate comparable to the rate at
which we could borrow on a noncontingent,
nonconvertible borrowing. Based on this agreement,
(i)each holder will be required to accrue interest
on a constant yield to maturity basis at that
rate, with the result that a holder will recognize
taxable income significantly in excess of cash
received while the debentures are outstanding, and
(ii) a holder will recognize ordinary income upon
a conversion of a debenture into our stock equal
to the excess, if any, between the value of the
stock received on the conversion and the sum of
the original purchase price of the holder's
debenture and accrued but unpaid interest.
The proper application of the regulations that
govern contingent payment debt instruments to a
holder of a debenture is uncertain in a number of
respects, and if our treatment were successfully
challenged by the Internal Revenue Service, it
might be determined that, among other
differences, a holder should have accrued
interest income at a lower rate, should not have
recognized income or gain upon the conversion, and
should not have recognized ordinary income upon a
taxable disposition of its debenture.
HOLDERS SHOULD CONSULT THEIR TAX ADVISORS
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN
TAX CONSEQUENCES OF AN INVESTMENT IN THE
DEBENTURES AND WHETHER AN INVESTMENT IN THE
DEBENTURES IS ADVISABLE IN LIGHT OF THE AGREED
UPON TAX TREATMENT AND THE HOLDER'S PARTICULAR TAX
SITUATION.
Use of Proceeds............ We will not receive any of the proceeds from the
sale by the selling securityholders of the
debentures or the shares of common stock issuable
upon conversion or redemption of the debentures.
Book-Entry Form............ The debentures have been issued in book-entry form
and are represented by permanent a global
certificate deposited with, or on behalf of, DTC
and registered in the name of a nominee of DTC.
Beneficial interests in any of the debentures will
be shown on, and transfers will be effected only
through, records maintained by DTC or its nominee
and any such interest may not be exchanged for
certificated securities, except in limited
circumstances. See "Description of Debentures--
Book-Entry System."
Trading.................... We do not intend to list the debentures on any
securities exchange or in any automated quotation
system. The debentures issued in the initial
private placement are eligible for trading in the
PORTAL market; however, no assurance can be given
as to the liquidity of or trading market for the
debentures. The debentures sold using this
prospectus, however, will not be eligible for
trading in the PORTAL system. Our shares of common
stock are traded on the New York Stock Exchange
under the symbol "MIR."
11
RISK FACTORS
Investing in the debentures and the associated common stock involves risk.
In order to better understand the risks involved in an investment in our
securities, please see the risk factors described in our Annual Report on Form
10-K for the year ended December 31, 2000, as amended by Form 10-K/A, our
Quarterly Report on Form 10-Q for the three months ended June 30, 2001, as
amended by Form 10-Q/A, and our Quarterly Report on Form 10-Q for the three
months ended March 31, 2001, which are incorporated by reference in this
prospectus. You should carefully consider these risks as well as other
information contained or incorporated by reference in this prospectus or any
applicable prospectus supplement before making an investment decision. The risks
and uncertainties described below are tailored to the risks prescribed by the
debentures. Additional risks and uncertainties not presently known to us or that
we currently deem immaterial may also impair our business operations.
We expect that the trading value of the debentures will be significantly
affected by the price of our common stock and other factors.
The market price of the debentures is expected to be significantly affected
by the market price of our common stock. This may result in greater volatility
in the trading value of the debentures than would be expected for nonconvertible
debt securities we issue. In addition, the debentures have a number of features,
including conditions to conversion, which, if not met, could result in a holder
receiving less than the value of the common stock into which the debentures are
otherwise convertible. These features could adversely affect the value and the
trading prices for the debentures.
An active trading market for debentures may not develop.
We cannot assure you that an active trading market for the debentures will
develop or as to the liquidity or sustainability of any such market, the ability
of holders to sell their debentures or the price at which holders of the
debentures will be able to sell their debentures. Future trading prices of the
debentures will depend on many factors, including, among other things,
prevailing interest rates, the market for similar securities, the price of our
common stock, our performance and other factors.
We may not have the ability to raise the funds necessary to finance the
Fundamental Change purchase or purchase at the option of the holder.
On June 15, 2004, June 15, 2006, June 15, 2011 and June 15, 2016, and upon
the occurrence of a Fundamental Change of Mirant, holders of the debentures may
require us to purchase their debentures. However, it is possible that we would
not have sufficient funds at that time to make the required purchase of the
debentures. In addition, certain important corporate events, such as leveraged
recapitalizations that would increase the level of our indebtedness, may not
constitute a Fundamental Change under the indenture. See "Description of
Debentures -- Purchase of Debentures by Mirant at the Option of the Holder" and
"-- Fundamental Change."
Our holding company structure results in structural subordination and may affect
our ability to make payments on the debentures.
The debentures are our obligations exclusively. We are a holding company
and, accordingly, substantially all of our operations are conducted through our
subsidiaries. As a result, our cash flow and our ability to service our debt,
including the debentures, depends upon the earnings of our subsidiaries. In
addition, we depend on the distribution of earnings, loans or other payments by
our subsidiaries to us.
Our subsidiaries are separate and distinct legal entities. Our subsidiaries
have no obligation to pay any amounts due on the debentures or to provide us
with funds for our payment obligations, whether by dividends, distributions,
loans or other payments. In addition, any payment of dividends, distributions,
loans or advances by our subsidiaries to us could be subject to statutory or
contractual restrictions. Payments to us by our subsidiaries will also be
contingent upon our subsidiaries' earnings and business considerations.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders of the
debentures to participate in those assets, will be effectively subordinated to
the claims of that subsidiary's creditors, including trade creditors. In
addition, even if we were a creditor of any of our subsidiaries, our rights as a
creditor would be subordinate to any security interest in the assets of our
subsidiaries and any indebtedness of our subsidiaries senior to that held by us.
12
You should consider the United States federal income tax consequences of owning
the debentures.
While the proper tax treatment of a holder of the debentures is uncertain,
we and each holder have agreed in the indenture to treat the debentures as
"contingent payment debt instruments" and to be bound by our application of the
Treasury regulations that govern contingent payment debt instruments. Pursuant
to this agreement, a holder will be required to accrue interest on a constant
yield-to-maturity basis at a rate comparable to the rate at which we would
borrow in a noncontingent, nonconvertible borrowing (8.543%). A holder will
recognize taxable income significantly in excess of cash received while the
debentures are outstanding. In addition, under the indenture, a holder will
recognize ordinary income, if any, upon a sale, exchange, conversion or
redemption of the debentures at a gain. See "Certain United States Federal
Income Tax Consequences."
Terrorist attacks, such as the attacks that occurred in New York, Pennsylvania
and Washington, D.C. on September 11, 2001, and future war or risk of war may
adversely impact our results of operations, our ability to raise capital or our
future growth.
The impact that the terrorist attacks of September 11, 2001 may have on our
industry in general, and on us in particular, is not known at this time.
Uncertainty surrounding retaliatory military strikes or a sustained military
campaign may impact our operations in unpredictable ways, including disruptions
of fuel supplies and markets, particularly oil, and the possibility that
infrastructure facilities, including electric generation, transmission and
distribution facilities, could be direct targets of, or indirect casualties of,
an act of terror. War or risk of war may also have an adverse effect on the
economy. A lower level of economic activity could result in a decline in energy
consumption which could adversely affect our revenues or restrict our future
growth. Instability in the financial markets as a result of terrorism or war
could also affect our ability to raise capital.
RATIO OF EARNINGS TO FIXED CHARGES
The table below sets forth the ratio of earnings to fixed charges of us and
our consolidated subsidiaries on a historical basis for each of the periods
indicated:
Six Months Year Ended December 31,
Ended June 30,
2001 2000 1999 1998 1997 1996
-------------- ------- ------- ------- ------- ------
2.2 1.5 2.0 * 1.4 1.9
----------
* For the year ended December 31, 1998, fixed charges exceeded earnings by
approximately $177 million.
The ratio of earnings to fixed charges is computed by dividing (i) income
from continuing operations before income taxes and minority interest, plus fixed
charges and distributed income of unconsolidated affiliates, less equity income
in unconsolidated affiliates, capitalized interest and minority interest in
losses by (ii) fixed charges. Fixed charges consist of interest expense on all
indebtedness (including amortization of deferred financing costs), capitalized
interest and the portion of operating lease rental expense that is
representative of the interest factor.
USE OF PROCEEDS
The selling securityholders are offering all of the debentures and related
common stock covered by this prospectus. We will not receive any proceeds from
the sale of the debentures or related common stock in this offering.
13
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Our common stock is listed and traded on the New York Stock Exchange under
the symbol "MIR." The following table provides, for the calendar quarters
indicated, the closing high and low sales prices per share on the New York Stock
Exchange for the periods shown below as reported on the New York Stock Exchange
Composite Tape. Our common stock began trading on the New York Stock Exchange on
September 27, 2000
Period High Low
2000
Third Quarter (from September 27, 2000)... $ 31.87 $ 28.00
Fourth Quarter............................ 31.75 20.56
2001
First Quarter............................. $ 36.00 $ 20.94
Second Quarter............................ 47.20 27.70
Third Quarter............................. 39.59 19.25
We currently intend to retain any future earnings to fund the development
and growth of our business. Therefore, we do not anticipate paying any cash
dividends on our common stock in the foreseeable future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" in our Annual Report on Form 10-K for the year
ended December 31, 2000, as amended by Form 10-K/A, our Quarterly Report on Form
10-Q for the three months ended June 30, 2001, as amended by Form 10-Q/A and our
Quarterly Report on Form 10-Q for the three months ended March 31, 2001, which
are incorporated by reference in this prospectus, for a discussion of the
limitations on the ability of our subsidiaries to pay dividends to us.
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2001. Our
capitalization is presented on an actual basis.
June 30, 2001
-------------
(Unaudited)
(In millions)
Cash and cash equivalents................................... $ 1,453
=========
Non-recourse short-term debt(1)............................. $ 1,009
Current portion of non-recourse long-term debt(1)........... 1,002
Current portion of long-term debt........................... 0
Short-term debt............................................. 488
---------
Total short-term debt..................................... 2,499
---------
Non-recourse long-term debt(1).............................. 4,018
Senior notes and other long-term debt....................... 1,475
---------
Total long-term debt...................................... 5,493
---------
Minority Interest
Company obligated mandatorily redeemable securities of a
subsidiary holding solely parent company debentures.... 345
Stockholders' equity
Common stock, $.01 par value(2)........................... 3
Additional paid-in capital................................ 4,122
Accumulated other comprehensive loss...................... (67)
Retained earnings......................................... 465
---------
Total capitalization...................................... $ 12,860
=========
----------
(1) This debt is non-recourse to us but is recourse to the applicable
subsidiaries and their assets.
(2) Does not include approximately 32,000,000 shares of common stock reserved
for issuance pursuant to our Omnibus Incentive Compensation Plan.
14
DESCRIPTION OF DEBENTURES
We issued the debentures under an Indenture dated as of May 31, 2001 between
us and Bankers Trust Company, as trustee.
The debentures are our senior unsecured obligations and are limited to an
aggregate principal amount of $750,000,000. The debentures will mature on June
15, 2021. The debentures rank equally with all of our existing and future senior
unsecured indebtedness.
The debentures were issued at a price to investors of $1,000 per debenture.
The debentures accrue interest at a rate of 2.5% per year from May 31, 2001 or
from the most recent interest payment date to which interest has been paid or
duly provided, payable semiannually in arrears on June 15 and December 15 of
each year, beginning December 15, 2001. In addition, we will pay an upward
interest adjustment (as defined below) if it becomes payable. The maturity value
of each debenture may exceed $1,000 in the event an upward interest adjustment
becomes payable on the debentures. The debentures were issued only in
denominations of $1,000 principal amount and multiples of $1,000 principal
amount.
Interest, including additional amounts in the event of an upward interest
adjustment, will be paid to the person in whose name a debenture is registered
at the close of business on June 1 or December 1, as the case may be,
immediately preceding the relevant interest payment date. Interest on the
debentures will be computed on the basis of a 360-day year composed of twelve
30-day months.
You have the option to convert your debentures into shares of our common
stock at a conversion rate of 14.7167 shares of common stock per debenture. This
is equivalent to an initial conversion price of $67.95 per share of common
stock. The conversion rate is subject to adjustment if certain events occur.
Upon conversion, you will receive only shares of our common stock. You will not
receive any cash payment for interest accrued to the conversion date.
If any interest payment date, maturity date, redemption date or purchase
date of a debenture falls on a day that is not a business day, the required
payment of principal and interest will be made on the next succeeding business
day as if made on the date that the payment was due and no interest will accrue
on that payment for the period from and after the interest payment date,
maturity date, redemption date or purchase date, as the case may be, to the date
of that payment on the next succeeding business day. The term "business day"
means, with respect to any debenture, any day other than a Saturday, a Sunday or
a day on which banking institutions in The City of New York are authorized or
required by law, regulation or executive order to close.
Each holder has agreed in the Indenture, for United States federal income
tax purposes, to treat the debentures as "contingent payment debt instruments"
and to be bound by our application of the Treasury regulations that govern
contingent payment debt instruments, including our determination that the rate
at which interest will be deemed to accrue for United States federal income tax
purposes will be 8.543%, which is the rate comparable to the rate at which we
would have been able to borrow on a noncontingent, nonconvertible borrowing at
the time of issuance. Accordingly, each holder will be required to accrue
interest on a constant yield to maturity basis at that rate, with the result
that a holder will recognize taxable income significantly in excess of cash
received while the debentures are outstanding. In addition, a holder will
recognize ordinary income upon a conversion of a debenture into our common stock
equal to the excess, if any, of the value of the stock received on the
conversion and the sum of the original purchase price of the holder's debenture
and accrued but unpaid interest. However, the proper application of the
regulations that govern contingent payment debt instruments to a holder of a
debenture is uncertain in a number of respects, and if our treatment were
successfully challenged by the Internal Revenue Service, it might be determined
that, among other differences, a holder should have accrued interest income at a
lower rate, should not have recognized income or gain upon the conversion, and
should not have recognized ordinary income upon a taxable disposition of its
debenture.
EACH INVESTOR SHOULD CONSULT ITS TAX ADVISOR REGARDING THE TAX TREATMENT OF
AN INVESTMENT IN THE DEBENTURES AND WHETHER AN INVESTMENT IN THE DEBENTURES IS
ADVISABLE IN LIGHT OF THE AGREED UPON TAX TREATMENT AND THE INVESTOR'S
PARTICULAR TAX SITUATION.
Interest Adjustment
The interest rate on the debentures is 2.5% per year through June 15, 2004.
If the average of the closing sales price of our common stock is less than or
equal to 45% of the accreted conversion price of the debentures for any 20 out
of the last 30 trading days ending five days prior to each June 15 and December
15, as applicable, commencing June 15, 2004, then the interest rate on the
debentures will be subject to an upward interest adjustment to the applicable
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reset rate for the subsequent six-month period. If an upward interest adjustment
is then in effect and the average of the closing sales price of our common stock
is not less than or equal to 45% of the accreted conversion price of the
debentures for any 20 out of the last 30 trading days of any six-month period
ending on the fifth day preceding each June 15 and December 15, as applicable,
then the interest rate on the debentures for the subsequent six-month period
will revert to 2.5% per year. If an upward interest adjustment is in effect for
a particular six-month period, we will pay a portion of the interest adjustment
as cash interest at a rate of 0.25% per annum (0.125% per six-month period) of
the principal amount, plus any accrued and unpaid interest (excluding interest
payable in cash), and the remaining interest will be accrued and payable at
maturity or upon the redemption or repurchase of the debentures. Following a tax
event (as defined below), we may elect to pay interest entirely in cash.
In the event of an upward interest adjustment, the maturity value of the
debentures will exceed their initial maturity value of $1,000.
The "sale price" of our common stock on any date means the closing per share
sale price (or if no closing sale price is reported, the average of the bid and
asked prices or, if more than one in either case, the average of the average bid
and the average asked prices) on that date as reported on the New York Stock
Exchange or, if our common stock is not listed on the New York Stock Exchange,
then as reported by the NASDAQ system.
In the event of any upward interest adjustment, we will disseminate a press
release through Dow Jones & Company, Inc. or Bloomberg Business News containing
this information or publish the information on our Web site or through such
other public medium as we may use at that time.
The "applicable reset rate" for any six-month period in which there is an
upward interest adjustment will be set as of the purchase date on which such
adjustment is required or, if the adjustment is required as of a date that is
not a purchase date, the immediately preceding purchase date, as determined by
the reset rate agent (as defined below). The applicable reset rate will be equal
to the rate (the "reference fixed rate") that would, in the sole and reasonable
judgment of the reset rate agent, result in a trading price of par for a
hypothetical issue of our senior, non-convertible, fixed-rate, callable (after
June 15, 2006) debt securities with:
(i)a final maturity equal to the term from the most recent purchase date
until the next purchase date;
(ii)an aggregate principal amount equal to the then principal amount of the
debentures plus accrued and unpaid interest (other than interest payable
in cash); and
(iii)provisions that are, insofar as would be practicable for an issue of
senior, non-convertible, fixed-rate, callable (after June 15, 2006)
debt securities, substantially identical to those of the debentures.
In no case, however, will the applicable reset rate for the period from June
15, 2004 to June 15, 2006 be greater than 10% per year without our prior written
consent. Also, if the reset rate agent determines in its reasonable judgment
that there is no suitable reference fixed rate, the applicable rate of accretion
for that period will be the applicable rate then in effect such rate of
accretion to remain in effect until the reset rate agent determines that there
is a suitable reference fixed rate at which time the reset rate agent shall
determine a new applicable reset rate for the period ending on the next purchase
date. The applicable reset rate for a debenture that is subject to an upward
interest adjustment shall be determined as to any period for which such
adjustment is applicable until a new applicable reset rate is in effect or until
the original interest rate is again in effect.
Reset Rate Agent; Determinations Conclusive
Salomon Smith Barney Inc. is the reset rate agent. For the determination of
the applicable reset rate, the reset rate agent will seek indicative reference
rates from one other nationally recognized investment bank. The determination of
any applicable reset rate will be made by the reset rate agent by averaging the
indicative reference rates obtained by Salomon Smith Barney Inc. and such other
investment bank. The determination of any applicable reset rate by the reset
rate agent will be conclusive and binding upon the reset rate agent, us, the
Trustee and the holders of the debentures, in the absence of manifest error.
The reset rate agent may be removed at any time with or without cause if we
give at least sixty (60) days' written notice to the reset rate agent. The reset
rate agent may resign at any time upon giving at least thirty (30) days' written
notice to us. A successor reset rate agent will be appointed by us.
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Interest
We will pay interest on the debentures at a rate of 2.5% per year. In
addition, we will pay additional interest in the event of an upward interest
adjustment. Interest will be based on a 360-day year comprised of twelve 30-day
months, and will be payable semiannually on June 15 and December 15. Cash
interest as a result of an upward interest adjustment will be paid at the rate
of 0.25% per year (0.125% per six-month period). The record date for the payment
of interest to holders will be June 1 and December 1 of each year. Following a
tax event, we may elect to pay interest entirely in cash. We will give notice to
the holders of the debentures, no later than 30 days prior to each record date,
of the amount of cash interest to be paid as of the next interest payment date.
We will pay interest on the debentures by wire transfer or by check mailed to
the address of the registered holders of the debentures as of the record date
relating to each interest payment date.
You should be aware that interest that accrues for the period you hold the
debentures must be included in your gross income for United States federal
income tax purposes in accordance with the Treasury regulations that govern debt
instruments providing for contingent payments. For more information, see the
discussion below in the section captioned "Certain United States Federal Income
Tax Consequences."
Tax Event
We can elect to pay the entire interest adjustment on the debentures in cash
from and after the date a tax event (as defined below) occurs instead of
accreting the principal amount of the debentures. If that happens, the principal
amount on which we pay interest will be restated and will be equal to the
principal amount as of the day of restatement plus accrued and unpaid interest
(excluding interest payable in cash prior to our election). This restated
principal amount will be the amount due at maturity. If we elect this option,
interest will be based on a 360-day year comprised of twelve 30-day months. Cash
interest at the higher rate will accrue from our option exercise date and will
be payable semiannually in arrears on June 15 and December 15 (each, an
"Interest Payment Date").
The term "tax event" means the receipt by us of an opinion of a nationally
recognized independent tax counsel experienced in such matters to the effect
that, as a result of:
o any amendment to or change (including any announced prospective change
(which does not include a proposed change)) in the laws (or any
regulations thereunder) of the United States or any political
subdivision or taxing authority of the United States or any political
subdivision, provided that a tax event does not occur more than 90 days
before the effective date of any prospective change in such laws or
regulations; or
o any judicial decision or official administrative pronouncement, ruling,
regulatory procedure, notice or announcement, including any notice or
announcement of intent to adopt such procedures or regulations (an
"administrative action"); or
o any amendment to or change in the administrative position or
interpretation of any administrative action or judicial decision that
differs from the previously generally accepted position, in each case,
by any legislative body, court, governmental agency or regulatory body,
irrespective of the manner in which such amendment or change is made
known, which amendment or change is effective or such administrative
action or decision is announced, in each case, on or after May 31, 2001;
there is more than an insubstantial risk that interest on the debentures,
including interest pursuant to an upward interest adjustment, either:
o would not be deductible on a current accrual basis; or
o would not be deductible under any other method, in whole or in part, by us
for United States federal income tax purposes.
Optional Redemption
No sinking fund is provided for the debentures. Prior to June 18, 2006, the
debentures are not redeemable. On or after June 18, 2006, at our option we may
redeem the debentures for cash at any time in whole, or from time to time in
part, for a cash price equal to 100% of the principal amount of the debentures
to be redeemed, plus any accrued and unpaid interest. We will give not less than
30 days, nor more than 60 days notice, of redemption by mail to debenture
holders.
If we decide to redeem fewer than all of the outstanding debentures, the
Trustee will select the debentures to be redeemed by lot, or on a pro rata basis
or by another method the Trustee considers fair and appropriate.
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If the Trustee selects a portion of your debenture for partial redemption
and you convert a portion of the same debenture, the converted portion will be
deemed to be from the portion selected for redemption.
In the event of any redemption in part, we are not required to:
o issue, register the transfer of or exchange any debenture during a
period beginning at the opening of business 15 days before any selection
of debentures for redemption and ending at the close of business on the
earliest date on which the relevant notice of redemption is deemed to
have been given to all holders of debentures to be so redeemed; and
o register the transfer of or exchange any debenture so selected for
redemption, in whole or in part, except the unredeemed portion of any
debenture being redeemed in part.
Conversion Rights
Subject to the conditions described below, holders may convert each of their
debentures into shares of our common stock at a conversion ratio of 14.7167
shares of common stock per $1,000 principal amount of debentures (equivalent to
an initial conversion price of $67.95 per share of common stock based on the
issue price of the debentures). The conversion rate and the equivalent
conversion price in effect at any given time are referred to in this prospectus
as the applicable conversion rate and the applicable conversion price,
respectively, and will be subject to adjustment as described below. If a
debenture has been called for redemption, holders will be entitled to convert
the debentures from the date of notice of the redemption until the close of
business two business days immediately preceding the date of redemption. A
holder may convert fewer than all of such holder's debentures so long as the
debentures converted are an integral multiple of $1,000 principal amount.
Holders may surrender their debentures for conversion into shares of our
common stock prior to stated maturity if any of the following conditions is
satisfied:
o during any conversion period (as defined below) if the closing sales
price of our common stock for at least 20 trading days in the 30 trading
day period ending on the first day of such conversion period is more
than 110% of the accreted conversion price per share of the common stock
on the first day of the conversion period;
o if we have called the debentures for redemption; or
o upon the occurrence of specified corporate transactions.
Conversion Upon Satisfaction of Market Price Condition
A holder may surrender any of its debentures for conversion into shares of
our common stock during any conversion period if the closing sales price of our
common stock on the principal national securities exchange on which the common
stock is listed, for a period of at least 20 trading days in the period of 30
consecutive trading days ending on the first day of such conversion period is
more than 110% of the accreted conversion price per share of common stock on the
first day of the conversion period. The accreted conversion price per share of
our common stock as of any day will equal 100% of the principal amount of the
debentures, plus accrued and unpaid interest (excluding interest payable in
cash), divided by the number of shares of common stock issuable upon conversion
of such debenture on that day. A conversion period will be the period from and
including the twelfth trading day in a fiscal quarter to but not including the
twelfth trading day in the immediately following fiscal quarter.
Conversion Upon Redemption
A holder may surrender for conversion any of the debentures called for
redemption at any time prior to the close of business two business days prior to
the redemption date, even if it is not otherwise convertible at such time. If a
holder has already delivered a purchase notice or a Fundamental Change purchase
notice with respect to a debenture, however, the holder may not surrender that
debenture for conversion until the holder has withdrawn the notice in accordance
with the Indenture.
Conversion Upon Specified Corporate Transactions
Even if the market price condition described above has not occurred, if we
elect to:
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o distribute to all holders of our common stock certain rights entitling
them to purchase, for a period expiring within 60 days, shares of our
common stock at less than the sale price at the time, or
o distribute to all holders of our common stock any of our assets, debt
securities or certain rights to purchase our securities, which
distribution has a per share value exceeding 12.5% of the closing sales
price of our common stock on the business day preceding the declaration
date for such distribution,
we must notify the holders of the debentures at least 20 days prior to the
ex-dividend date for such distribution. Once we have given such notice, holders
may surrender their debentures for conversion at any time until the earlier of
the close of business on the business day prior to the ex-dividend date or our
announcement that such distribution will not take place. No adjustment to the
ability of a holder to convert will be made if the holder may otherwise
participate in the distribution without conversion.
In addition, if we are party to a consolidation, merger or binding share
exchange pursuant to which our common stock would be converted into cash,
securities or other property, a holder may surrender debentures for conversion
at any time from and after the date which is 15 days prior to the anticipated
effective date of the transaction until 15 days after the actual date of such
transaction. If we are a party to a consolidation, merger or binding share
exchange pursuant to which our common stock is converted into cash, securities
or other property, then at the effective time of the transaction, the right to
convert a debenture into common stock will be changed into a right to convert it
into the kind and amount of cash, securities or other property which the holder
would have received if the holder had converted its debentures immediately prior
to the transaction. If the transaction also constitutes a Fundamental Change, as
defined below, a holder can require us to purchase all or a portion of its
debentures as described below under "-- Fundamental Change."
The conversion agent will on our behalf determine at the end of each quarter
if the debentures are convertible and notify us and the Trustee.
You will not receive any cash payment representing accrued and unpaid
interest upon conversion of a debenture. Instead, upon conversion we will
deliver to you a fixed number of shares of our common stock and any cash payment
to account for fractional shares. The cash payment for fractional shares will be
based on the closing sales price of our common stock on the trading day
immediately prior to the conversion date. Delivery of shares of common stock
will be deemed to satisfy our obligation to pay the principal amount of the
debentures, including accrued interest. Accrued and unpaid interest will be
deemed paid in full rather than canceled, extinguished or forfeited. We will not
adjust the conversion rate to account for the accrued interest.
If you wish to exercise your conversion right, you must deliver an
irrevocable conversion notice, together, if the debentures are in certificated
form, with the certificated security, to the conversion agent who will, on your
behalf, convert the debentures into shares of our common stock. You may obtain
copies of the required form of the conversion notice from the conversion agent.
Based on our treatment of the debentures for United States federal income
tax purposes, as discussed above, a holder would be required to recognize
ordinary income upon a conversion of a debenture into our common stock equal to
the excess, if any, between the value of the stock received on the conversion
and the sum of the original purchase price of the holder's debenture and accrued
but unpaid interest. For a more detailed discussion, see "Certain United States
Federal Income Tax Consequences."
The conversion rate will be subject to adjustment upon the following events:
o the payment of dividends and other distributions payable exclusively in
shares of our common stock on our common stock;
o the issuance to all holders of our common stock of rights or warrants
that allow the holders to purchase shares of our common stock at less
than the then current market price; provided that no adjustment will be
made if holders of the debentures may participate in the transaction on
a basis and with notice that our board of directors determines to be
fair and appropriate or in some other cases;
o subdivisions or combinations of our common stock;
o payment of dividends or distributions to all holders of our common stock
consisting of evidences of our indebtedness, securities or capital
stock, cash or assets, excluding any rights or warrants referred to in
the second bullet point above and dividends and distributions paid
solely in cash;
o payment of dividends or distributions on our common stock paid
exclusively in cash, excluding:
19
o cash dividends that do not exceed the per share amount of the
immediately preceding regular cash dividend, as adjusted to reflect
any of the events described in the preceding bullet points,
o cash dividends, if the annualized per share amount thereof does not
exceed 12.5% of the current market price of our common stock on the
trading day immediately prior to the date of declaration of the
dividend, and
o a redemption of any rights issued under a rights agreement; and
o payment to holders of our common stock in respect of a tender or
exchange offer, other than an odd-lot offer, made by us or any
subsidiary of ours for our common stock in excess of 110% of the current
market price of our common stock as of the trading day next succeeding
the last date tenders or exchanges may be made in the tender or exchange
offer.
In the event we elect to make a distribution described in the second or
fifth bullet above which, in the case of the fifth bullet, has a per share value
equal to more than 12.5% of the closing sales price of our shares of common
stock on the day preceding the declaration date for such distribution, we will
be required to give notice to the holders of the debentures at least 20 days
prior to the ex-dividend date for such distribution and, upon the giving of such
notice, the debentures may be surrendered for conversion at any time until the
close of business on the business day prior to the ex-dividend date or until we
announce that such distribution will not take place. No adjustment to the
conversion rate or the ability of a holder of a debenture to convert will be
made if the holder will otherwise participate in the distribution without
conversion or in certain other cases.
If our stockholder rights plan, dated August 22, 2000, is triggered, holders
of the debentures will be entitled to receive these rights provided that the
debentures are converted into shares of common stock prior to the distribution
of the separate certificate representing those rights. There will not be any
adjustment to the conversion rate as a result of:
o the issuance of the rights;
o the distribution of separate certificates representing the rights;
o the exercise or redemption of the rights in accordance with any rights
agreement; or
o the termination or invalidation of the rights.
The applicable conversion price will not be adjusted:
o upon the issuance of any shares of our common stock pursuant to any
present or future plan providing for the reinvestment of dividends or
interest payable on our securities and the investment of additional
optional amounts in shares of our common stock under any plan;
o upon the issuance of any shares of our common stock or options or rights
to purchase those shares pursuant to any present or future employee,
director or consultant benefit plan or program of Mirant; or
o upon the issuance of any shares of our common stock pursuant to any
option, warrant, right, or exercisable, exchangeable or convertible
security outstanding as of the date the debentures were first issued.
We may increase the conversion rate as permitted by law for at least 20
days, so long as the increase is irrevocable during the period. If any action
would require adjustment of the conversion rate under more than one of the
provisions described above, only one adjustment will be made and that adjustment
will be the amount of adjustment that has the highest absolute value to the
holders of the debentures. No adjustment in the applicable conversion price will
be required unless the adjustment would require an increase or decrease of at
least 1% of the applicable conversion price. If the adjustment is not made
because the adjustment does not change the applicable conversion price by more
than 1%, then the adjustment that is not made will be carried forward and taken
into account in any future adjustment. Except as specifically described above,
the applicable conversion price is not subject to adjustment in the case of the
issuance of any of our common stock, or securities convertible into or
exchangeable for our common stock.
20
Purchase of Debentures by Mirant at the Option of the Holder
Holders have the right to require us to purchase the debentures on June 15,
2004, June 15, 2006, June 15, 2011, and June 15, 2016. We will be required to
purchase any outstanding debentures for which a holder delivers a written
purchase notice to the paying agent. This notice must be delivered during the
period beginning at any time from the opening of business on the date that is 20
business days prior to the relevant purchase date until the close of business on
the last day prior to the purchase date. If the purchase notice is given and
withdrawn during the period, we are not obligated to purchase the related
debentures. Our purchase obligation will be subject to some additional
conditions as described in the Indenture. Also, our ability to satisfy our
purchase obligations may be affected by the factors described in "Risk Factors"
under the caption "We may not have the ability to raise the funds necessary to
finance the Fundamental Change purchase or purchase at the option of the
holder."
The purchase price payable will be equal to 100% of the principal amount of
the debentures to be purchased plus any accrued and unpaid interest to such
purchase date.
We may choose to pay the purchase price in cash or shares of our common
stock or a combination of cash and shares of our common stock, provided that we
will pay any accrued cash interest in cash. For a discussion of the United
States federal income tax treatment of a holder receiving cash, shares of common
stock or any combination thereof, see "Certain United States Federal Income Tax
Consequences."
If we choose to pay the purchase price in whole or in part in shares of our
common stock or a combination of cash and shares of our common stock, we must
give notice on a date not less than 20 business days prior to each purchase date
to all holders at their addresses shown in the register of the registrar, and to
beneficial owners as required by applicable law (if no notice is given, we will
pay the purchase price with cash), stating, among other things:
o whether we will pay the purchase price of the debentures in cash, in
shares of our common stock, or any combination thereof, specifying the
percentages of each;
o if we elect to pay with shares of our common stock, the method of
calculating the price of our common stock; and
o the procedures that holders must follow to require us to purchase their
debentures.
If we pay with shares of our common stock, they will be valued at 100% of
the average closing sales price for the five trading days ending on the third
day prior to purchase.
Simultaneously with such notice of purchase, we will disseminate a press
release through Dow Jones & Company, Inc. or Bloomberg Business News containing
this information or publish the information on our Web site or through such
other public medium as we may use at that time.
A holder's notice electing to require us to purchase your debentures must
state:
o if certificated debentures have been issued, the debentures certificate
numbers, or if not certificated, your notice must comply with
appropriate DTC procedures;
o the portion of the principal amount of debentures to be purchased, in
multiples of $1,000;
o that the debentures are to be purchased by us pursuant to the applicable
provisions of the debentures; and
o in the event we elect, pursuant to the notice that we are required to
give, to pay the purchase price in shares of our common stock, in whole
or in part, but the purchase price is ultimately to be paid to the
holder entirely in cash because any of the conditions to payment of the
purchase price or portion of the purchase price in shares of our common
stock is not satisfied prior to the close of business on the last day
prior to the purchase date, as described below, whether the holder
elects:
(1)to withdraw the purchase notice as to some or all of the debentures
to which it relates, or
(2)to receive cash in respect of the entire purchase price for all
debentures or portions of debentures subject to the purchase notice.
21
If the holder fails to indicate the holder's choice with respect to the
election described in the final bullet point above, the holder will be deemed to
have elected to receive cash in respect of the entire purchase price for all
debentures subject to the purchase notice in these circumstances. For a
discussion of the United States federal income tax treatment of a holder
receiving cash instead of shares of our common stock, see "Certain United States
Federal Income Tax Consequences."
You may withdraw any purchase notice by a written notice of withdrawal
delivered to the paying agent prior to the close of business on the last day
prior to the purchase date. The notice of withdrawal must state:
o the principal amount of the withdrawn debentures;
o if certificated debentures have been issued, the certificate numbers of
the withdrawn debentures, or if not certificated, your notice must
comply with appropriate DTC procedures; and
o the principal amount, if any, which remains subject to the purchase
notice.
If we elect to pay the purchase price, in whole or in part, in shares of our
common stock, the number of shares to be delivered by us will be equal to the
portion of the purchase price to be paid in shares of our common stock divided
by the market price of one share of our common stock as determined by us in our
company notice. We will pay cash based on the market price for all fractional
shares.
The "market price" means the average sales price of our common stock for the
five trading day period ending on the third business day prior to the applicable
purchase date (if the third business day prior to the applicable purchase date
is a trading day, or if not, then on the last trading day prior to the third
business day), appropriately adjusted to take into account the occurrence,
during the period commencing on the first of the trading days during the five
trading day period and ending on the purchase date, of some events that would
result in an adjustment of the conversion rate with respect to our common stock.
The "sale price" of our common stock on any date means the closing per share
sale price (or if no closing sale price is reported, the average of the bid and
asked prices or, if more than one in either case, the average of the average bid
and the average asked prices) on that date as reported in composite transactions
for the principal U.S. securities exchange on which our common stock is traded
or, if our common stock is not listed on a U.S. national or regional securities
exchange, as reported by the NASDAQ system.
Because the market price of our common stock is determined prior to the
applicable purchase date, holders of the debentures bear the market risk with
respect to the value of our common stock to be received from the date the market
price is determined to the purchase date. We may pay the purchase price or any
portion of the purchase price in shares of our common stock only if the
information necessary to calculate the market price is published in a daily
newspaper of national circulation.
Upon determination of the actual number of shares of our common stock to be
paid upon redemption of the debentures, we will disseminate a press release
through Dow Jones & Company, Inc. or Bloomberg Business News containing this
information or publish the information on our Web site or through such other
public medium as we may use at that time.
A holder must either effect book-entry transfer or deliver the debentures,
together with necessary endorsements, to the office of the paying agent after
delivery of the purchase notice to receive payment of the purchase price. You
will receive payment on the purchase date or the time of book-entry transfer or
the delivery of the debentures. If the paying agent holds money or securities
sufficient to pay the purchase price of the debentures on the business day
following the purchase date, then:
o the debentures will cease to be outstanding;
o interest, including any interest payable pursuant to an interest
adjustment will cease to accrue; and
o all other rights of the holder will terminate.
This will be the case whether or not book-entry transfer of the debentures
is made or whether or not the debenture is delivered to the paying agent.
We will comply with the provisions of Rule 13e-4 and any other tender offer
rules under the Exchange Act which may be applicable at the time. We will file
Schedule TO or any other schedule required in connection with any offer by us to
purchase the debentures at your option.
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Ranking
The debentures are our senior unsecured obligations and rank equally with
all of our existing and future senior unsecured indebtedness and senior to our
$345 million junior subordinated convertible debentures due 2030 issued in
connection with our outstanding trust preferred securities. However, we are a
holding company and the debentures are effectively subordinated to all existing
and future obligations of our subsidiaries.
As of June 30, 2001, we had approximately $7,992 million of total
indebtedness outstanding. As of June 30, 2001, our subsidiaries had
approximately $6,054 million of outstanding indebtedness, to which the
debentures would have been structurally subordinated.
Fundamental Change
If a Fundamental Change as defined below occurs, a holder of debentures will
have the right, at its option, to require us to purchase all of its debentures
not previously called for redemption, or any portion of the principal amount
thereof, that is equal to $1,000 or an integral multiple of $1,000. The price we
are required to pay is equal to 100% of the principal amount of the debentures
to be purchased plus accrued and unpaid interest to the purchase date.
Within 30 days after the occurrence of a Fundamental Change, we are
obligated to give to the holders of the debentures written notice of the
Fundamental Change and of the purchase right arising as a result of the
Fundamental Change. We must also deliver a copy of this notice to the Trustee.
To exercise the purchase right, a holder of the debentures must deliver on or
before the 30th day after the date of our notice irrevocable written notice to
the Trustee of the holder's exercise of its purchase right, together with the
debentures with respect to which the right is being exercised. We are required
to purchase the debentures on the date that is 45 days after the date of our
notice.
A Fundamental Change will be deemed to have occurred at the time that any of
the following occurs:
(1) any person acquires beneficial ownership, directly or indirectly,
through a purchase, merger or other acquisition transaction or series of
transactions, of shares of our capital stock entitling the person to
exercise 50% or more of the total voting power of all shares of our
capital stock that is entitled to vote generally in elections of
directors ("voting stock"), other than an acquisition by us, any of our
subsidiaries or any of our employee benefit plans; or
(2) we merge or consolidate with or into any other person, any merger of
another person into us, or we convey, sell, transfer or lease all or
substantially all of our assets to another person, other than any
transaction:
o that does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of our capital stock (such as an
acquisition by a subsidiary), or
o where the holders of our common stock immediately prior to the
transaction have 50% or more of our total voting power of our voting
capital stock or its successor immediately after the transaction, or
o which is effected solely to change our jurisdiction of incorporation
and results in a reclassification, conversion or exchange of shares
of our common stock solely into shares of our common stock of the
surviving entity.
However, a Fundamental Change will not be deemed to have occurred if either:
(A) the closing price per share of our common stock for any five trading
days within the period of 10 consecutive trading days ending immediately
after the later of a Fundamental Change or the public announcement of a
Fundamental Change, in the case of a Fundamental Change relating to an
acquisition of capital stock, or the period of 10 consecutive trading
days ending immediately before the Fundamental Change, in the case of a
Fundamental Change relating to a merger, consolidation or asset sale,
equals or exceeds 105% of the conversion price of the debentures in
effect on each of those trading days, or
(B) all of the consideration (excluding cash payments for fractional shares
and cash payments made pursuant to dissenters' appraisal rights) in a
merger or consolidation otherwise constituting a Fundamental Change
under clause (1) and/or clause (2) above consists of shares of common
stock traded on a national securities exchange or quoted on the NASDAQ
National Market (or will be so traded or quoted immediately following
the merger or consolidation) and as a result of the merger or
consolidation the debentures become convertible into such common stock.
23
For purposes of these provisions:
o the conversion price is equal to $1,000 plus accrued and unpaid interest
(excluding any accrued and unpaid cash interest) divided by the
conversion rate;
o whether a person is a "beneficial owner"will be determined in accordance
with Rule 13d-3 under the Exchange Act; and
o "person" includes any syndicate or group that would be deemed to be a
"person" under Section 13(d)(3) of the Exchange Act.
Rule 13e-4 under the Exchange Act requires the dissemination of prescribed
information to security holders in the event of an issuer tender offer and may
apply in the event that the purchase option becomes available to the holders of
debentures. We will comply with this rule to the extent it applies at that time.
The definition of Fundamental Change includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of "all or substantially all"
of our assets. There is no precise, established definition of the phrase
"substantially all" under applicable law. Accordingly, the ability of a holder
of the debentures to require us to purchase its debentures as a result of the
conveyance, transfer, sale, lease or other disposition of less than all of our
assets may be uncertain.
The foregoing provisions would not necessarily provide the holders of the
debentures with protection if we are involved in a highly leveraged or other
transaction that may adversely affect the holders.
If a Fundamental Change were to occur, we may not have enough funds to pay
the Fundamental Change purchase price. See "Risk Factors" under the caption "We
may not have the ability to raise the funds necessary to finance the Fundamental
Change purchase or purchase at the option of the holder." In addition, we have,
and may in the future incur, other indebtedness with similar change in control
provisions permitting our holders to accelerate or to require us to purchase our
indebtedness upon the occurrence of similar events or on some specified dates.
If we fail to purchase the debentures when required following a Fundamental
Change, we will be in default under the Indenture.
Merger and Sales of Assets by Mirant
We may not (1) consolidate with or merge with or into any other person or
convey, transfer, sell or lease our properties and assets substantially as an
entirety to any person, or (2) permit any person to consolidate with or merge
into us unless:
o we are the continuing corporation, or
o the person formed by the consolidation or into which we are merged or
the person to which our properties and assets are so conveyed,
transferred, sold or leased, is a corporation, limited liability
company, partnership or trust organized and existing under the laws of
the United States, any State within the United States or the District of
Columbia and, if we are not the surviving person, the surviving person
assumes the payment of the principal of and interest on the debentures
and the performance of our other covenants under the Indenture, and
o in all cases, immediately after giving effect to the transaction, no
event of default, and no event that, after notice or lapse of time or
both, would become an event of default, will have occurred and be
continuing.
Events of Default
The following are events of default with respect to the debentures:
o default for 30 days in payment of any cash interest due and payable on
the debentures, including additional interest payable upon an upward
interest adjustment;
o default in payment of the principal amount of the debentures and accrued
and unpaid interest at maturity, upon redemption, purchase at the option
of the holder or following a Fundamental Change when the same becomes
due and payable;
o default in our obligation to deliver shares of our common stock upon an
appropriate election by holders of debentures to convert those
debentures and continuance of such default for 10 days;
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o failure to comply in any material respect with any other covenant or
agreement in respect of the debentures contained in the Indenture or the
debentures for 90 days after written notice to us by the Trustee or to
us and the Trustee by the holders of at least 25% in aggregate principal
amount of the debentures then outstanding; and
o certain events of bankruptcy, insolvency and reorganization of Mirant.
The Indenture requires that we file annually with the Trustee a certificate
describing any material default by us in the performance of any conditions or
covenants that has occurred under the Indenture and its status. We must give the
Trustee written notice within 30 days of any default under the Indenture that
could mature into an event of default described in the fourth or fifth bullet
point above.
The Indenture provides, that if an event of default occurs and is continuing
with respect to the debentures, either the Trustee or the holders of at least
25% in aggregate principal amount of the outstanding debentures may declare the
principal amount plus accrued and unpaid interest, if any, on the debentures to
be due and payable immediately. If an event of default relating to events of
bankruptcy, insolvency or reorganization occurs, principal amount plus accrued
and unpaid interest, if any, on the debentures will become immediately due and
payable without any action on the part of the Trustee or any holder. At any time
after a declaration of acceleration, but before a judgment or decree for payment
of money has been obtained, if all events of default with respect to the
debentures have been cured (other than the nonpayment of principal plus accrued
and unpaid interest on the debentures which has become due solely by reason of
the declaration of acceleration) then the declaration of acceleration will be
automatically annulled and rescinded.
A holder of debentures may pursue any remedy under the Indenture only if:
o the holder gives the Trustee written notice of a continuing event of
default for the debentures;
o the holders of at least 25% in principal amount of the outstanding
debentures make a written request to the Trustee to pursue the remedy;
o the holder offers to the Trustee indemnity reasonably satisfactory to
the Trustee;
o the Trustee fails to comply with the request for a period of 60 days
after receipt of notice and offer of indemnity; and
o during that 60-day period, the holders of a majority in principal amount
of the debentures do not give the Trustee a direction inconsistent with
the request.
This provision does not, however, affect the right of a holder of debentures
to sue for enforcement of payment of the principal of or interest, including
liquidated damages, on the holder's debenture on or after the respective due
dates expressed in its debenture or the holder's right to convert its debenture
in accordance with the Indenture.
The Trustee is entitled under the Indenture, subject to the duty of the
Trustee during a default to act with the required standard of care, to be
indemnified before proceeding to exercise any right or power under the Indenture
at the direction of the registered holders of the debentures or which requires
the Trustee to expend or risk its own funds or otherwise incur any financial
liability. The Indenture also provides that the registered holders of a majority
in principal amount of the outstanding debentures (or of all debt securities
affected, voting as one class) may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee with respect to these debentures.
The Trustee, however, may refuse to follow any such direction that conflicts
with law or the Indenture, is unduly prejudicial to the rights of other
registered holders of the debentures, or would involve the Trustee in personal
liability.
The Indenture provides that while the Trustee generally must mail notice of
a default or event of default to the registered holders of the debentures within
90 days of occurrence, the Trustee may withhold notice of any default or event
of default (except in payment on the debt securities) if the Trustee in good
faith determines that the withholding of such notice is in the interest of the
registered holders of that series of debt securities.
Modification and Waiver
We may amend or supplement the Indenture if the holders of a majority in
principal amount of the debentures consent to it. Without the consent of the
holder of each debenture affected, however, no modification may:
25
o reduce the amount of debentures whose holders must consent to an
amendment, supplement or waiver;
o reduce the rate of accrual of interest or change the time for payment of
interest on the debentures;
o reduce the value of our common stock to which reference is made in
determining whether an interest adjustment will be made on the
debentures, or change the method by which this value is calculated;
o reduce the principal amount of the debentures or change its stated
maturity;
o reduce the redemption or purchase price of the debentures or change the
time at which the debentures may or must be redeemed or purchased;
o make payments on the debentures payable in currency or securities other
than as originally stated in the debentures;
o impair the holder's right to institute suit for the enforcement of any
payment on the debentures;
o make any change in the percentage of principal amount of debentures
necessary to waive compliance with some provisions of the Indenture or
to make any change in this provision for modification;
o waive a continuing default or event of default regarding any payment on
the debentures; or
o adversely affect the conversion or repurchase provisions of the
debentures.
We may amend or supplement the Indenture or waive any provision of it
without the consent of any holders of debentures in some circumstances,
including:
o to cure any ambiguity, omission, defect or inconsistency;
o to provide for the assumption of our obligations under the Indenture by
a successor upon any merger, consolidation or asset transfer permitted
under the Indenture;
o to provide for uncertificated debentures in addition to or in place of
certificated debentures or to provide for bearer debentures;
o to provide any security for or guarantees of the debentures;
o to comply with any requirement to effect or maintain the qualification
of the Indenture under the Trust Indenture Act of 1939;
o to add covenants that would benefit the holders of debentures or to
surrender any rights we have under the Indenture;
o to add events of default with respect to the debentures; or
o to make any change that does not adversely affect any outstanding
debentures in any material respect.
The holders of a majority in principal amount of the outstanding debentures
may waive any existing or past default or event of default. Those holders may
not, however, waive any default or event of default in any payment on any
debenture or compliance with a provision that cannot be amended or supplemented
without the consent of each holder affected.
Calculations in Respect of Debentures
We are responsible for making all calculations called for under the
debentures, except for such calculations made by the reset rate agent. These
calculations include, but are not limited to, determinations of the market
prices of our common stock, accrued interest payable on the debentures and the
accreted conversion price of the debentures. We will make all these calculations
in good faith and, absent manifest error, our calculations will be final and
binding on holders of debentures. We will provide a schedule of our calculations
to the Trustee, and the Trustee is entitled to rely upon the accuracy of our
calculations without independent verification. The Trustee will forward our
calculations to any holder of debentures upon the request of that holder.
26
Governing Law
The Indenture and the debentures are governed by, and construed in
accordance with, the laws of the State of New York.
Trustee
Bankers Trust Company is the Trustee, registrar and paying agent.
If an event of default occurs and is continuing, the Trustee will be
required to use the degree of care and skill of a prudent person in the conduct
of that person's own affairs. The Trustee will become obligated to exercise any
of its powers under the Indenture at the request of any of the holders of any
debentures only after those holders have offered the Trustee indemnity
reasonably satisfactory to it.
If the Trustee becomes one of our creditors, it will be subject to
limitations in the Indenture on its rights to obtain payment of claims or to
realize on some property received for any such claim, as security or otherwise.
The Trustee is permitted to engage in other transactions with us. If, however,
it acquires any conflicting interest, it must eliminate that conflict or resign.
Bankers Trust Company is currently serving as the Trustee under other numerous
indentures governing our debt issuances, including debt which is subordinated to
the debentures.
Form, Exchange, Registration and Transfer
We issued the debentures in registered form, without interest coupons. We
will not charge a service charge for any registration of transfer or exchange of
the debentures. We may, however, require the payment of any tax or other
governmental charge payable for that registration.
The debentures are exchangeable for other debentures, for the same total
principal amount and for the same terms but in different authorized
denominations in accordance with the Indenture. Holders may present debentures
for registration of transfer at the office of the security registrar or any
transfer agent we designate. The security registrar or transfer agent will
effect the transfer or exchange when it is satisfied with the documents of title
and identity of the person making the request.
We have appointed the Trustee as security registrar for the debentures. We
may at any time rescind that designation or approve a change in the location
through which any registrar acts. We are required to maintain an office or
agency for transfers and exchanges in each place of payment. We may at any time
designate additional registrars for the debentures.
In the case of any redemption, the security registrar is not required to
register the transfer or exchange of any debentures either:
o during a period beginning 15 days prior to the mailing of the relevant
notice of redemption and ending on the close of business on the day of
mailing of the notice, or
o if the debentures have been called for redemption in whole or in part,
except the unredeemed portion of any debentures being redeemed in part.
We do not intend to list the debentures on any securities exchange or in any
automated quotation system. The debentures issued in the initial private
placement are eligible for trading in the PORTAL Market; however, no assurance
can be given as to the liquidity of or trading market for the debentures. The
debentures sold using this prospectus, however, will not be eligible for trading
in the PORTAL Market. Our shares of common stock are traded on the New York
Stock Exchange under the symbol "MIR."
Payment and Paying Agents
Payments on the debentures will be made in U.S. dollars at the office of the
Trustee. At our option, however, we may make payments by check mailed to the
holder's registered address or, with respect to global debentures, by wire
transfer. We will make interest payments to the person in whose name the
debentures are registered at the close of business on the record date for the
interest payment.
The Trustee is designated as our paying agent for payments on debentures. We
may at any time designate additional paying agents or rescind the designation of
any paying agent or approve a change in the office through which any paying
agent acts.
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Subject to the requirements of any applicable abandoned property laws, the
Trustee and paying agent will pay to us upon written request any money held by
them for payments on the debentures that remain unclaimed for two years after
the date upon which that payment has become due. After payment to us, holders
entitled to the money must look to us for payment. In that case, all liability
of the Trustee or paying agent with respect to that money will cease.
Notices
Except as otherwise described herein, notice to registered holders of the
debentures will be given by mail to the addresses as they appear in the security
register. Notices will be deemed to have been given on the date of such mailing.
Replacement of Debentures
We will replace any debentures that become mutilated, destroyed, stolen or
lost upon delivery to the Trustee of the mutilated debentures or evidence of the
loss, theft or destruction satisfactory to us and the Trustee. In the case of a
lost, stolen or destroyed debentures, indemnity satisfactory to the Trustee and
us may be required before a replacement debenture will be issued.
Payment of Stamp and Other Taxes
We will pay all stamp and other duties, if any, which may be imposed by the
United States or any political subdivision thereof or taxing authority thereof
or therein with respect to the issuance of the debentures. We are not required
to make any payment with respect to any other tax, assessment or governmental
charge imposed by any government or any political subdivision thereof or taxing
authority thereof or therein.
Book-Entry System
The debentures are represented by a global security. This global security is
on deposit with, or on behalf of, DTC and is registered in the name of a nominee
of DTC. Except under circumstances described below, the debentures will not be
issued in definitive form.
When the global security was issued, DTC credited on its book-entry
registration and transfer system the accounts of persons designated by the
initial purchaser with the respective principal amounts of the debentures
represented by the global security. Ownership of beneficial interests in a
global security is limited to persons that have accounts with DTC or its nominee
("participants") or persons that may hold interests through participants.
Ownership of beneficial interests in a global security is shown on, and the
transfer of that ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of persons other than
participants). The laws of some states require that some purchasers of
securities take physical delivery of the securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a global security.
So long as DTC or its nominee is the registered owner of a global security,
DTC or its nominee, as the case may be, will be considered the sole owner or
holder of the debentures represented by that global security for all purposes
under the Indenture. Except as provided below, owners of beneficial interests in
a global security are not entitled to have debentures represented by that global
security registered in their names, will not receive or be entitled to receive
physical delivery of debentures in definitive form and will not be considered
the owners or holders thereof under the Indenture. Principal and interest
payments, on debentures registered in the name of DTC or its nominee will be
made to DTC or its nominee, as the case may be, as the registered owner of the
relevant global security. Neither we, the Trustee, any paying agent or the
registrar for the debentures will have any responsibility or liability for any
aspect of the records relating to nor payments made on account of beneficial
interests in a global security or for maintaining, supervising or reviewing any
records relating to such beneficial interests.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the relevant global security as shown on the records of DTC or its
nominee. We also expect that payments by participants to owners of beneficial
interests in a global security held through these participants will be governed
by standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of the participants.
If DTC is at any time unwilling or unable to continue as a depositary and a
successor depositary is not appointed by us within 90 days or if an event of
default occurs and is continuing with respect to the debentures, we will issue
debentures in definitive form in exchange for the entire global security for the
debentures. In addition, we may at any time and in our sole discretion determine
28
not to have debentures represented by a global security and, in such event, will
issue debentures in definitive form in exchange for the entire global security
relating to the debentures. In any such instance, an owner of a beneficial
interest in a global security will be entitled to physical delivery in
definitive form of debentures represented by the global security equal in
principal amount to the beneficial interest and to have the debentures
registered in its name. Debentures so issued in definitive form will be issued
as registered debentures in denominations of $1,000 and integral multiples
thereof, unless otherwise specified by us.
29
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income tax
consequences of the purchase, ownership and disposition of the debentures and
the shares of common stock into which the debentures may be converted. This
summary deals only with the debentures and the shares of common stock held as
capital assets for United States federal income tax purposes. As used in this
prospectus, "U.S. Holders" are any beneficial owners of the debentures or the
shares of common stock that are, for United States federal income tax purposes:
(1) citizens or residents of the United States, (2) corporations created or
organized in or under the laws of the United States, any state thereof or the
District of Columbia, (3) estates, the income of which is subject to United
States federal income taxation regardless of its source, and (4) trusts, if a
court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust. As used in this
prospectus, "Non-U.S. Holders" are holders of the debentures or the shares of
common stock that are, for United States federal income tax purposes, (1)
nonresident alien individuals, (2) foreign corporations and (3) foreign estates
or trusts that are not subject to United States federal income taxation on their
worldwide income. If a partnership (including for this purpose any entity
treated as a partnership for United States federal income tax purposes) is a
beneficial owner of the debentures or the shares of common stock, the treatment
of a partner in the partnership will generally depend upon the status of the
partner and upon the activities of the partnership. A holder of the debentures
or the shares of common stock that is a partnership and partners in such
partnership should consult their tax advisors about the United States federal
income tax consequences of holding and disposing of the debentures or the shares
of common stock, as the case may be. Unless otherwise stated, this summary does
not deal with special classes of holders such as banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies, dealers
in securities or currencies, tax-exempt investors, holders that hold the
debentures as part of a hedge, straddle, "synthetic security" or other
integrated transaction for United States federal income tax purposes and holders
whose functional currency is not the U.S. dollar. Further, this summary does not
include any description of any alternative minimum tax consequences, United
States federal estate or gift tax laws or the tax laws of any state, local or
foreign government that may be applicable to the debentures or the shares of
common stock.
This summary is based on the Internal Revenue Code of 1986, as amended, the
Treasury regulations promulgated thereunder and administrative and judicial
interpretations thereof, all as of the date hereof, and all of which are subject
to change and differing interpretations, possibly on a retroactive basis. No
statutory, administrative or judicial authority directly addresses the treatment
of the debentures or instruments similar to the debentures for United States
federal income tax purposes. Therefore, there can be no assurance that the
Internal Revenue Service (the "IRS") will not successfully challenge one or more
of the conclusions described in this prospectus.
We urge prospective investors to consult their tax advisors with respect to
the tax consequences to them of the purchase, ownership and disposition of the
debentures and the shares of common stock in light of their own particular
circumstances, including the tax consequences under state, local, foreign and
other tax laws and the possible effects of changes in United States federal and
other tax laws.
Classification of the Debentures
Pursuant to the terms of the Indenture, each holder of the debentures
agreed, for United States federal income tax purposes, to treat the debentures
as indebtedness for United States federal income tax purposes subject to the
regulations governing contingent payment debt instruments and to be bound by our
application of those regulations to the debentures, including our determination
of the rate at which interest will be deemed to accrue on the debentures for
United States federal income tax purposes. The remainder of this discussion
assumes that the debentures will be treated in accordance with that agreement
and our determinations. However, the proper application of the regulations
governing contingent payment debt instruments to a holder of a debenture is
uncertain in a number of respects, and no assurance can be given that the IRS
will not assert that the debentures should be treated differently or that such
an assertion would not prevail. Such treatment could affect the amount, timing
and character of income, gain or loss in respect of an investment in the
debentures. In particular, it might be determined that a holder should have
accrued interest income at a lower rate, should not have recognized income or
gain upon the conversion, and should have recognized capital gain upon a taxable
disposition of its debentures.
U.S. Holders
Under the rules governing contingent payment debt instruments, a U.S. Holder
will generally be required to accrue interest income on the debentures, in the
amounts described below, regardless of whether the U.S. Holder uses the cash or
accrual method of tax accounting. Accordingly, U.S. Holders will likely be
required to include interest in taxable income in each year in excess of the
accruals on the debentures for non-tax purposes and in excess of any contingent
interest payments actually received in that year.
30
A U.S. Holder must accrue on its debentures an amount of original issue
discount as ordinary income for United States federal income tax purposes, for
each accrual period prior to and including the maturity date of the debentures
that equals:
o the product of (i) the adjusted issue price (as defined below) of the
debentures as of the beginning of the accrual period; and (ii) the
comparable yield to maturity (as defined below) of the debentures,
adjusted for the length of the accrual period;
o divided by the number of days in the accrual period; and
o multiplied by the number of days during the accrual period that the U.S.
Holder held the debentures.
The "issue price" of a debenture is the first price at which a substantial
amount of the debentures is sold to the public, excluding bond houses, brokers
or similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers. The adjusted issue price of a debenture is its
issue price increased by any interest income previously accrued, determined
without regard to any adjustments to interest accruals described below and
decreased by the projected amounts of any payments with respect to the
debentures.
Under the rules governing contingent payment debt instruments, we are
required to establish the "comparable yield" for the debentures. We have
determined that the comparable yield for the debentures is the annual yield we
would incur, as of the initial issue date, on a fixed rate nonconvertible debt
security with no contingent payments, but with terms and conditions otherwise
comparable to those of the debentures including the absence of subordination,
term, timing of payments and general market conditions, but excluding any
adjustments for liquidity or the riskiness of the contingencies with respect to
the debentures. Accordingly, we have determined the comparable yield to be
8.543% compounded semiannually.
We are required to provide to U.S. Holders, solely for United States federal
income tax purposes, a schedule of the projected amounts of payments on the
debentures. This schedule must produce the comparable yield. Our determination
of the projected payment schedule for the debentures includes estimates for
payments of contingent interest and an estimate for a payment at maturity taking
into account the conversion feature. U.S. Holders may obtain the projected
payment schedule by submitting a written request for it to us at the address set
forth in "Where You Can Find More Information."
THE COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE NOT
DETERMINED FOR ANY PURPOSE OTHER THAN FOR THE DETERMINATION OF A U.S.
HOLDER'S INTEREST ACCRUALS AND ADJUSTMENTS THEREOF IN RESPECT OF THE
DEBENTURES FOR UNITED STATES FEDERAL INCOME TAX PURPOSES AND DO NOT
CONSTITUTE A PROJECTION OR REPRESENTATION REGARDING THE ACTUAL AMOUNTS
PAYABLE TO U.S. HOLDERS OF THE DEBENTURES.
Adjustments to Interest Accruals on the Debentures
If a U.S. Holder receives actual payments with respect to the debentures in
a taxable year that in the aggregate exceed the total amount of projected
payments for that taxable year, the U.S. Holder would incur a "net positive
adjustment" equal to the amount of such excess. The U.S. Holder would treat the
"net positive adjustment" as additional interest income for the taxable year.
For this purpose, the payments in a taxable year include the fair market value
of property received in that year.
If a U.S. Holder receives actual payments with respect to the debentures in
a taxable year that in the aggregate are less than the amount of the projected
payments for that taxable year, the U.S. Holder would incur a "net negative
adjustment" equal to the amount of such deficit. This adjustment will (a) reduce
the U.S. Holder's interest income on the debentures for that taxable year, and
(b) to the extent of any excess after the application of (a), give rise to an
ordinary loss to the extent of the U.S. Holder's income on the debentures during
prior taxable years, reduced to the extent such interest was offset by prior net
negative adjustments.
Sale, Exchange, Conversion or Redemption
Generally, the sale or exchange of a debenture, or the redemption of a
debenture for cash, will result in taxable gain or loss to a U.S. Holder. In
addition, as described above, our calculation of the comparable yield and the
schedule of projected payments for the debentures includes the receipt of common
stock upon conversion of a debenture into shares of our common stock as a
contingent payment with respect to the debentures. Accordingly, we intend to
treat the receipt of our common stock by a U.S. Holder upon the conversion of a
debenture, or upon the redemption of a debenture where we elect to pay the
redemption price in shares of our common stock, as a contingent payment. As
described above, holders are generally bound by our determination of the
31
comparable yield and the schedule of projected payments. Under this treatment, a
sale or exchange, or such a conversion or redemption, also will result in
taxable gain or loss to the U.S. Holder. The amount of gain or loss on a taxable
sale, exchange, conversion or redemption will equal the difference between (a)
the amount of cash plus the fair market value of any other property received by
the U.S. Holder, including the fair market value of any common stock received,
and (b) the U.S. Holder's adjusted tax basis in the debentures. A U.S. Holder's
adjusted tax basis in a debenture on any date generally will equal the U.S.
Holder's original purchase price for the debentures, increased by any original
issue discount previously accrued by the U.S. Holder (determined without regard
to any positive or negative adjustments to interest accruals described above),
and decreased by the amount of any projected payments on the debentures
projected to have been made through that date. Gain recognized upon a sale,
exchange, conversion or redemption of a debenture generally will be treated as
ordinary interest income; any loss will be ordinary loss to the extent of
interest previously included in income, and thereafter, capital loss (which will
be long-term if the debenture is held for more than one year). The deductibility
of net capital losses is subject to limitations.
A U.S. Holder's tax basis in shares of our common stock received upon a
conversion of a debenture or upon a holder's exercise of a put right that we
elect to pay in shares of our common stock will equal the then current fair
market value of such common stock. The U.S. Holder's holding period for the
shares of our common stock received will commence on the day after the date of
conversion or redemption.
Purchasers of Debentures at a Price Other Than the Adjusted Issue Price
A U. S. Holder that purchases debentures in the secondary market for an
amount that differs from the adjusted issue price of the debentures at the time
of purchase will be required to accrue interest income on the debentures in the
same manner as a U.S. Holder that purchased debentures in the initial offering.
A U.S. Holder must also reasonably allocate any difference between the adjusted
issue price and the U.S. Holder's basis in the debentures to daily portions of
interest or projected payments over the remaining term of the debentures. If the
purchase price of the debentures is greater than the adjusted issue price, the
amount of the difference allocated to a daily portion of interest or to a
projected payment is treated as a "negative adjustment" on the day the daily
portion accrues or the payment is made, respectively. If the purchase price of
the debentures is less than the adjusted issue price, the amount of the
difference allocated to a daily portion of interest or to a projected payment is
treated as a "positive adjustment" on the day the daily portion accrues or the
payment is made, respectively. Any such negative or positive adjustment will
decrease or increase, respectively, the U.S. Holder's adjusted tax basis in the
debentures.
Certain U.S. Holders will receive Forms 1099-OID reporting interest accruals
on their debentures. Those forms will not reflect the effect of any positive or
negative adjustments resulting from the U.S. Holder's purchase of debentures in
the secondary market at a price different from adjusted issue price of the
debentures on the date of purchase. U.S. Holders are urged to consult their tax
advisors as to whether, and how, such adjustments should be taken into account
in determining their interest accruals with regard to the debentures.
Distributions on Common Stock
If a U.S. Holder converts the debentures into shares of our common stock, in
general, distributions on the shares of our common stock that are paid out of
our current or accumulated earnings and profits, as defined for United States
federal income tax purposes, will constitute dividends and will be includible in
income by a holder and taxable as ordinary income when received or accrued, in
accordance with that holder's method of accounting for United States federal
income tax purposes. If a distribution exceeds our current and accumulated
earnings and profits, the excess will be treated first as a tax-free return of
the U.S. Holder's investment, up to the U.S. Holder's basis in the shares of our
common stock. Any remaining excess will be treated as capital gain.
Constructive Dividends
If at any time we make a distribution of property to our stockholders that
would be taxable to the stockholders as a dividend for United States federal
income tax purposes and, in accordance with the anti-dilution provisions of the
debentures, the conversion rate of the debentures is increased, such increase
may be deemed to be the payment of a taxable dividend to holders of the
debentures.
For example, an increase in the exchange rate in the event of distribution
of our evidences of indebtedness or our assets or an increase in the event of an
extraordinary cash dividend will generally result in deemed dividend treatment
to holders of the debentures, but an increase in the event of stock dividends or
the distribution of rights to subscribe for our common stock generally will not.
32
Treatment of Non-U.S. Holders
The rules governing United States federal income taxation of Non-U.S.
Holders are complex and no attempt will be made in this prospectus to provide
more than a summary of such rules. Non-U.S. Holders should consult with their
tax advisors to determine the effect of United States federal, state, local and
foreign income tax laws, as well as treaties, with regard to an investment in
the debentures and shares of our common stock, including any reporting
requirements.
Payments Made With Respect to the Debentures
The 30% United States federal withholding tax will not apply to any payment
to a Non-U.S. Holder of principal or interest (including amounts taken into
income as interest under the accrual rules described above under "-- U.S.
Holders" and amounts attributable to the shares of our common stock received
upon a conversion of the debentures) on debentures, provided that: (i) the
Non-U.S. Holder does not own, actually or constructively, 10% or more of the
total combined voting power of our common stock, (ii) the Non-U.S. Holder is not
a controlled foreign corporation related, directly or indirectly, to us through
stock ownership; (iii) the Non-U.S. Holder is not a bank which acquired the
debentures in consideration for an extension of credit made pursuant to a loan
agreement entered into in the ordinary course of business; (iv) our common stock
is actively traded within the meaning of Section 871(h)(4)(C)(v)(I) of the
Internal Revenue Code; and (v) either (a) the beneficial owner of debentures
certifies to us or our paying agent on IRS Form W-8BEN, under penalties of
perjury, that it is not a United States person and provides its name, address
and certain other information or (B) the beneficial owner holds its debentures
through certain foreign intermediaries or certain foreign partnerships and such
holder satisfies certain certification requirements.
If the Non-U.S. Holder cannot satisfy the requirements described above,
payments of interest (including amounts taken into income under the accrual
rules described above under "-- U.S. Holder" and amounts attributable to our
common stock received upon a conversion of the debentures) will be subject to
the 30% United States federal withholding tax unless the Non-U.S. Holder
provides us with a properly executed (1) IRS Form W-8BEN (or successor form)
claiming an exemption from or reduction in withholding under an applicable tax
treaty or (2) IRS Form W-8ECI (or successor form) stating that interest paid on
the debentures is not subject to withholding tax because it is effectively
connected with the Non-U.S. Holder's conduct of a trade or business in the
United States.
If a Non-U.S. Holder of the debentures is engaged in a trade or business in
the United States, and if interest on the debentures is effectively connected
with the conduct of such trade or business, the Non-U.S. Holder, although exempt
from the withholding tax discussed in the preceding paragraphs, will generally
be subject to regular United States federal income tax on interest and on any
gain realized on the sale, exchange conversion of the debentures in the same
manner as if it were a U.S. Holder. Such a Non-U.S. Holder will be required to
provide to the withholding agent a properly executed IRS Form W-8ECI (or
successor form) in order to claim an exemption from withholding tax. In
addition, if such a Non-U.S. Holder is a foreign corporation, such Non-U.S.
Holder may be subject to a branch profits tax equal to 30% (or such lower tax
rate provided by an applicable treaty) of its effectively connected earnings and
profits for the taxable year, subject to certain adjustments.
Sale or Exchange of Debentures or Common Stock
A Non-U.S. Holder will not generally be subject to United States federal
income or withholding tax with respect to gain upon the sale, exchange or other
disposition (other than a conversion or a redemption) of the debentures or
shares of our common stock, unless: (1) the income or gain is "U.S. trade or
business income," which means income or gain that is effectively connected with
the conduct by the Non-U.S. Holder of a trade or business, or, in the case of a
treaty resident, attributable to a permanent establishment or a fixed base, in
the United States; (2) such Non-U.S. Holder is an individual who is present in
the United States for 183 days or more in the taxable year of disposition and
certain other conditions are met; (3) such Non-U.S. Holder is subject to tax
pursuant to the provisions of the Internal Revenue Code applicable to certain
United States expatriates; or (4) in the case of an amount which is attributable
to original issue discount, the Non-U.S. Holder does not meet the conditions for
exemption from United States federal withholding tax described above.
U.S. trade or business income of a Non-U.S. Holder will generally be
subject to regular United States federal income tax in the same manner as if it
were realized by a U.S. Holder. A Non-U.S. Holder that realizes U.S. trade or
business income with respect of the debentures or common stock should consult
their tax advisors as to the treatment of such income or gain. In addition, U.S.
trade or business income of a Non-U.S. Holder that is a corporation may be
subject to a branch profits tax at a rate of 30%, or such lower rate provided by
an applicable income tax treaty.
33
Distributions on Common Stock
A Non-U.S. Holder of shares of our common stock will generally be subject to
United States federal income or withholding tax at a 30% rate (or lower rate
provided under any applicable income tax treaty) on distributions by us with
respect to our common stock that are treated as dividends paid (and on dividends
deemed paid on the debentures or common stock, as described above under "U.S.
Holders-Constructive Dividends"). Except to the extent that an applicable tax
treaty otherwise provides, a Non-U.S. Holder generally will be taxed in the same
manner as a U.S. Holder on dividends paid (or deemed paid) that are effectively
connected with the Non-U.S. Holder's conduct of a trade or business in the
United States, and a Non-U.S. Holder that is a corporation may also be subject
to a United States branch profits tax at a 30% rate or such lower rate as may be
specified in an applicable income tax treaty.
Foreign Investment in Real Property Tax Act
Under the Foreign Investment in Real Property Tax Act, any person who
acquires a "United States real property interest" (as described below) from a
foreign person must deduct and withhold a tax equal to 10% of the amount
realized by the foreign transferor. In addition, a foreign person that disposes
of a United States real property interest is generally required to recognize
gain or loss that is subject to United States federal income tax. A "United
States real property interest" generally includes any interest (other than an
interest solely as a creditor) in a United States corporation unless it is
established under specific procedures that the corporation is not (and was not
for the prior five-year period) a "United States real property holding
corporation." We do not believe that we are or have been a United States real
property holding corporation as of the date hereof, nor do we believe that we
have been a United States real property holding corporation at any time during
the past five years. We cannot, however, give any assurance that we will not
become a United States real property holding corporation in the future. Our tax
counsel has rendered no opinion as to whether we are, at any time during the
past five years have been, or will in the future become, a United States real
property holding corporation. If it is determined that we are, have been in the
past five years or in the future become, a United States real property holding
corporation, as long as our stock is regularly traded on an established
securities market, an exemption should apply to the debentures and our common
stock except (i) in the case of debentures, if the debentures are or become
regularly traded, with respect to a Non-U.S. Holder that owns more than 5% of
the debentures, and (ii) otherwise, and in the case of common stock, with
respect to a Non-U.S. Holder whose beneficial and/or constructive ownership of
the debentures or common stock exceeds 5% of the total fair market value of our
common stock.
Any investor that may approach or exceed the 5% ownership threshold
discussed above, either along or in conjunction with related persons, should
consult its own tax advisor concerning the United States federal income tax
consequences that may result. A Non-U.S. Holder that sells or otherwise disposes
of debentures or common stock may be required to inform its transferee whether
such debentures or common stock constitutes a United States real property
interest.
Back-up Withholding and Information Reporting
U.S. Holders
Payments of interest or dividends made by us on, or the proceeds of the sale
or other disposition of, the debentures or shares of our common stock may be
subject to information reporting and United States federal backup withholding
tax at the rate then in effect if the recipient of such payment fails to supply
an accurate taxpayer identification number or otherwise fails to comply with
applicable United States information reporting or certification requirements.
Any amount withheld from a payment to an U.S. Holder under the backup
withholding rules is allowable as a credit against the holder's United States
federal income tax, provided that the required information is furnished to the
IRS.
Non-U.S. Holders
A Non-U.S. Holder may be required to comply with certification procedures to
establish that the holder is not a U.S. person in order to avoid backup
withholding tax requirements with respect to our payments of principal and
interest, including cash payments in respect of original issue discount on the
debentures, or the proceeds of the sale or other disposition of the debentures.
In addition, we must report annually to the IRS and to each Non-U.S. Holder the
amount of any dividends paid to, and the tax withhold with respect to, such
holder, regardless of whether any tax was actually withheld. Copies of these
information returns may also be made available under the provisions of a
specific treaty or agreement to the tax authorities of the country in which the
Non-U.S. Holder resides.
34
Tax Event
The modification of the terms of the debentures by us upon a Tax Event could
possibly alter the amount and timing of income recognition by the holders with
respect to the payments of interest due after the option exercise date.
THE PROPER TAX TREATMENT OF A HOLDER OF THE DEBENTURES IS HIGHLY UNCERTAIN IN A
NUMBER OF RESPECTS. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE
UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF AN
INVESTMENT IN THE DEBENTURES AND WHETHER AN INVESTMENT IN THE DEBENTURES IS
ADVISABLE IN LIGHT OF THE AGREED UPON TAX TREATMENT AND THE HOLDER'S PARTICULAR
TAX SITUATION.
35
SELLING SECURITYHOLDERS
The debentures were originally issued by us and sold by Salomon Smith Barney
Inc. in a transaction exempt from the registration requirements of the
Securities Act to persons reasonably believed by Salomon Smith Barney Inc. to be
"qualified institutional buyers" (as defined by Rule 144A under the Securities
Act).
Set forth below are the names of each selling securityholder, the principal
amount of debentures that may be offered by each selling securityholder under
this prospectus, each selling securityholder's percentage of outstanding
debentures, and the number of shares of common stock into which the debentures
are convertible, and the percentage of total common stock outstanding for each
selling stockholder, received by us as of October 5, 2001. None of the selling
securityholders have held any principal position, office or had any other
material relationship within the past three years with us or our predecessors or
affiliates.
The following table sets forth certain information received by us in
response to questionnaires received from the selling securityholders named in
the table on or prior to October 5, 2001. However, any or all of the debentures
or common stock listed below may be offered for sale under this prospectus by
the selling securityholders from time to time and the number of shares of common
stock into which the debentures are convertible is subject to adjustment and
therefore could change. Accordingly, we cannot estimate the amounts of
debentures or common stock that will be held by the selling securityholders upon
consummation of any sales.
The inclusion in the table of the individuals named therein shall not be
deemed to be an admission that any such individuals are our "affiliates."
Aggregate
Principal Amount Number of Shares
of Debentures At Total Percentage of Associated Total Percentage
Name of Selling Maturity of Debentures Common Stock that of Common Stock
Securityholder that May be Sold Outstanding May be Sold(1) Outstanding(2)
-------------- ---------------- ----------- -------------- --------------
Circlet (IMA) Limited $3,000,000 * 44,150 *
General Motors Welfare $4,000,000 * 58,866 *
Benefit Trust (VEBA)
UBS AG London Branch $17,500,000 2.33% 257,542 *
Peoples Benefit Life $8,000,000 * 117,733 *
Insurance Company
TEAMSTERS
First Union National Bank $17,500,000 2.33% 257,542 *
St. Albans Partners Ltd. $6,000,000 * 88,300 *
Yield Strategies Fund I, $5,000,000 * 73,583 *
LP
Yield Strategies Fund II, $4,000,000 * 58,866 *
LP
Retail Clerks Pension $2,000,000 * 29,433 *
Trust
TIERS(R)Fixed Rate $400,000,000 53.33% 5,886,680 1.7%
Certificates Trust Series
2001-14 (3)
Salomon Smith Barney Inc. $144,000,000 19.20% 2,119,204 *
All other holders (4) $139,000,000 18.53% 2,045,621 *
Total $750,000,000 100.00% 11,037,525 3.14%
* Indicates ownership of less than 1%.
36
(1) Assumes conversion of all of the holder's debentures at a conversion rate
of 14.7167 shares of common stock per $1,000 principal amount at maturity
of the debentures, rounded down to the nearest whole number of shares.
However, this conversion rate is subject to adjustment as described under
"Description of Debentures - Conversion Rights." As a result, the amount of
common stock issuable upon conversion of the debentures may increase or
decrease in the future.
(2) Calculated based on Rule 13d-3(d)(i) of the Exchange Act using 340,351,333
shares of common stock outstanding as of October 3, 2001. Pursuant to that
rule, in calculating this amount for each holder, we treated as outstanding
the number of shares of common stock issuable upon conversion of all of
that holder's debentures but did not assume conversion of any other
holder's debentures.
(3) The TIERS(R) Fixed Rate Certificates Trust Series 2001-14 (the "TIERS(R)
Trust") holds these debentures in trust as part of its TIERS(R) program.
(4) Information about other selling securityholders will be set forth in
prospectus supplements or in other documents that we file from time to time
with the SEC that are incorporated by reference in this prospectus (see
"Where You Can Find More Information" above), if required.
This prospectus also covers any additional shares of common stock that
become issuable in connection with the debentures and underlying common stock
being registered by reason of any stock dividend, stock split, recapitalization
or other similar transaction effected without the receipt of consideration which
results in an increase in the number of our outstanding shares of common stock.
UNDERWRITERS
The SEC staff is of a view that selling securityholders who are
registered broker-dealers or affiliates of registered broker-dealers may be
underwriters under the Securities Act. Salomon Smith Barney Inc. is a registered
broker-dealer. UBS AG is an affiliate of a registered broker-dealer. No
compensation will be paid and no discounts or commissions will be given to any
underwriter in connection with the securities being registered in this
registration statement.
PLAN OF DISTRIBUTION
We are registering the debentures and associated common stock on behalf of
the selling securityholders. As used in this prospectus, the term "selling
securityholders" includes pledgees, transferees or other successors-in-interest
selling debentures or the associated common stock received from the selling
securityholders as pledgors, borrowers or in connection with other
non-sale-related transfers after the date of this prospectus. This prospectus
may also be used by transferees of the selling securityholders, including
broker-dealers or other transferees who borrow or purchase the debentures or the
associated common stock to settle or close out short sales of shares of common
stock. The selling securityholders will act independently of us in making
decisions with respect to the timing, manner, and size of each sale or non-sale
related transfer. We will not receive any of the proceeds of this offering.
The selling securityholders may sell debentures or associated common stock
directly to purchasers from time to time. Alternatively, they may from time to
time offer the debentures or associated common stock to or through underwriters,
broker-dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the selling
securityholders or the purchasers of such securities for whom they may act as
agents. The selling securityholders and any underwriters, broker-dealers or
agents that participate in the distribution of the debentures or associated
common stock may be deemed to be "underwriters" within the meaning of the
Securities Act and any profit on the sale of such securities and any discounts,
commissions, concessions or other compensation received by any such underwriter,
broker-dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act. We know of no existing arrangements
between any selling securityholder and any other selling securityholder,
underwriter, broker-dealer or other agent relating to the sale or distribution
of the debentures or associated common stock. No underwriter, broker-dealer or
agent has been engaged by us in connection with the distribution of the
debentures or associated common stock.
Because the selling securityholders may be deemed to be "underwriters"
within the meaning of the Securities Act, the selling securityholders will be
subject to the prospectus delivery requirements of the Securities Act.
37
The debentures and the associated common stock may be sold from time to
time in one or more transactions at fixed prices, which may be changed, at
prevailing market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices. The sale of the debentures and
associated common stock may be effected by means of one or more of the following
transactions (which may involve crosses or block transactions):
o on any national securities exchange, such as the New York Stock
Exchange, or quotation service on which the debentures or common stock
may be listed or quoted at the time of sale,
o in the over-the-counter market,
o in transactions otherwise than on such exchanges or services or in the
over-the-counter market,
o through the purchase and sale of over-the-counter options, or
o through at-the-market offerings as defined by Rule 415(a)(4) of the
Securities Act.
In connection with sales of the debentures and the associated common stock
or otherwise, the selling securityholders may enter into hedging transactions
with broker-dealers, which may in turn engage in short sales of the debentures
and the associated common stock in the course of hedging the positions they
assume. The selling securityholders may also sell debentures and the associated
common stock short and deliver debentures and the associated common stock to
close out such short positions, or loan or pledge debentures to broker-dealers
that in turn may sell such securities.
At the time a particular offering of the debentures and the associated
common stock is made, a prospectus supplement, if required, will be distributed
which will set forth the aggregate amount of debentures or associated common
stock being offered and the terms of the offering, including the name or names
of any underwriters, broker-dealers or agents, any discounts, commissions and
other terms constituting compensation from the selling securityholders and any
discounts, commissions or concessions allowed or reallowed or paid to
broker-dealers.
To comply with the securities laws of certain jurisdictions, if
applicable, the debentures and the associated common stock will be offered or
sold in such jurisdictions only through registered or licensed brokers or
dealers.
The selling securityholders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the debentures by the selling
securityholders. The foregoing may affect the marketability of such securities.
All expenses of the registration of the debentures and the associated
common stock will be paid by us; provided, however, that the selling
securityholders will pay all underwriting discounts and selling commissions, if
any. The selling securityholders will be indemnified by us against certain civil
liabilities, including certain liabilities under the Securities Act or will be
entitled to contribution in connection therewith. We will be indemnified by the
selling securityholders severally against certain civil liabilities, including
certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith.
We cannot assure you that the selling securityholders will sell all or any
of the debentures or associated common stock offered by this prospectus.
38
LEGAL MATTERS
The valid issuance of the debentures and the associated common stock
offered hereby will be passed on for us by Gibson, Dunn & Crutcher, LLP,
Washington, D.C. Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York,
which acted as special counsel in the initial private placement of the
debentures and provided additional advice regarding the debentures and legal
opinions on the validity of the debentures and the associated common stock and
certain tax matters, will pass upon certain tax matters regarding the
debentures.
EXPERTS
The consolidated financial statements of Mirant Corporation 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 this prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports, and are incorporated by reference in this prospectus in reliance upon
the authority of Arthur Andersen LLP as experts in giving said reports.
The financial statements of Berliner Kraft-und Licht (Bewag)
Aktiengesellschaft (currently Bewag AG) as of June 30, 1998 and for the year
ended June 30, 1998 incorporated by reference in this prospectus have been
audited by KPMG Deutsche Treuhand-Gesellschaft, independent accountants, as
indicated in their report, with respect thereto, and are incorporated by
reference in this prospectus in reliance upon the authority of said firm as
experts in accounting and auditing.
39
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth the expenses in connection with the issuance and
distribution of the securities being registered, other than underwriting
discounts and commissions. All such expenses will be borne by us. All amounts
set forth below are estimates, other than the SEC registration fee.
Securities and Exchange Commission registration fee $ 171,693.73
Printing expenses 70,000.00
Legal fees and expenses 210,000.00
Accounting fees and expenses 150,000.00
Rating Agency fees 15,000.00
Trustee fees and expenses 7,000.00
----------------
Total $ 623,963.75
================
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our restated certificate of incorporation provides that no director shall
be liable to us or our stockholders for monetary damages for breach of fiduciary
duty as a director, except as required by law, as in effect from time to time.
Currently, Delaware law requires that liability be imposed for the following:
o any breach of the director's duty of loyalty to our company or our
stockholders;
o any act or omission not in good faith or which involved intentional
misconduct or a knowing violation of law;
o unlawful payments of dividends or unlawful stock repurchases or redemptions
as provided in Section 174 of the Delaware General Corporate Law; and
o any transaction from which the director derived an improper personal benefit.
Our bylaws provide that, to the fullest extent permitted by law, we will
indemnify any person made or threatened to be made a party to any action by
reason of the fact that the person is or was our director or officer, or served
any other enterprise at our request as a director or officer. We will reimburse
the expenses, including attorneys' fees, incurred by a person indemnified by
this provision when we receive an undertaking to repay such amounts if it is
ultimately determined that the person is not entitled to be indemnified by us.
Amending this provision will not reduce our indemnification obligations relating
to actions taken before an amendment.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provision, the registrant
has been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
40
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated by reference:
-------- -----------------------------------------------------------------
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
-------- -----------------------------------------------------------------
4.1* Indenture, dated as of May 31, 2001, between the Company and
Bankers Trust Company
-------- -----------------------------------------------------------------
4.2* Form of 2.5% Convertible Senior Debenture, due 2021 (included in
Exhibit 4.1)
-------- -----------------------------------------------------------------
4.3* Registration Rights Agreement, dated as of May 31, 2001, between
the Company and Salomon Smith Barney Inc.
-------- -----------------------------------------------------------------
4.4 Rights Agreement between Mirant Corporation and Chase Mellon
Shareholder Services, LLC, dated August 22, 2000 (incorporated
by reference to Exhibit 4.13 to Mirant Corporation's Registration
Statement on Form S-1, as amended, File No. 333-35390)
-------- -----------------------------------------------------------------
5.1 Opinion of Gibson, Dunn & Crutcher LLP
-------- -----------------------------------------------------------------
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to tax
matters
-------- -----------------------------------------------------------------
12.1* Computation of Ratio of Earnings to Fixed Charges
-------- -----------------------------------------------------------------
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1)
-------- -----------------------------------------------------------------
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 8.1)
-------- -----------------------------------------------------------------
23.3 Consent of Arthur Andersen LLP
-------- -----------------------------------------------------------------
23.4 Consent of KPMG Deutsche Treuhand-Gesellschaft
-------- -----------------------------------------------------------------
24.1* Power of Attorney (included on the signature page of this
registration statement)
-------- -----------------------------------------------------------------
25.1* Form of T-1 Statement of Eligibility of the Trustee under the
Indenture
-------- -----------------------------------------------------------------
* Previously filed
ITEM 17. UNDERTAKINGS
A. Rule 415 Offering. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii) To reflect in the prospectus any facts of events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) under the Securities Act if,
in the aggregate, the changes in volume and price present no more than a
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
Provided, however, the paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the Registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
41
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering;
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this registration statement 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;
(5) To file an application for the purpose of determining the eligibility
of the trustee to act under subsection (a) of Section 310 of the Trust
Indenture Act of 1939 in accordance with the rules and regulations
prescribed by the Commission under Section 305(b)(2) of the Trust
Indenture Act of 1939;
(6) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall
be deemed to be part of this registration statement as of the time it
was declared effective; and
(7) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to in Item 15 of
this registration statement, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the
Securities Act 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 by such director
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
42
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 Amendment No. 1 to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Atlanta, State of Georgia, on this 9
day of October, 2001.
MIRANT CORPORATION
By: /s/Raymond D. Hill By: /s/James A. Ward
--------------------------------------- ----------------------------------
Raymond D. Hill James A. Ward
Executive Vice President, and Senior Vice President,
Chief Financial Officer and Controller
(Principal Financial Officer) (Principal Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities
indicated below on the 9 day of October, 2001.
Signatures Title
---------- -----
/s/A. W. Dahlberg* Chairman of the Board
-------------------
A. W. Dahlberg
/s/S. Marce Fuller* President, Chief Executive Officer
-------------------
S. Marce Fuller And Director (Principal Executive Officer)
/s/A. D. Correll* Director
------------------
A. D. Correll
/s/Stuart E. Eizenstat* Director
------------------------
Stuart E. Eizenstat
/s/Carlos Ghosn* Director
Carlos Ghosn
/s/William M. Hjerpe* Director
----------------------
William M. Hjerpe
/s/David J. Lesar* Director
------------------
David J. Lesar
/s/James F. McDonald* Director
----------------------
James F. McDonald
/s/Ray M. Robinson * Director
--------------------
Ray M. Robinson
-------------------------------------------------
* By: /s/ James A. Ward
---------------------
James A. Ward
Attorney-in-fact
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBITS
4.1* Indenture, dated as of May 31, 2001, between the Company and
Bankers Trust Company
4.2* Form of 2.5% Convertible Senior Debenture, due 2021(included
in Exhibit 4.1)
4.3* Registration Rights Agreement, dated as of May 31, 2001, between
the Company and Salomon Smith Barney Inc.
4.4 Rights Agreement between Mirant Corporation and Chase Mellon
Shareholder Services,LLC, dated August 22, 2000 (incorporated by
reference to Exhibit 4.13 to Mirant Corporation's Registration
Statement on Form S-1, as amended, File No. 333-35390)
5.1 Opinion of Gibson, Dunn & Crutcher LLP
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to tax
matters
12.1* Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
5.1)
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 8.1)
23.3 Consent of Arthur Andersen LLP
23.4 Consent of KPMG Deutsche Treuhand-Gesellschaft
24.1* Power of Attorney (included on the signature page of this
registration statement)
25.1* Form of T-1 Statement of Eligibility of the Trustee under the
Indenture
* Previously filed