AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 2002
REGISTRATION NOS. 333-90034
333-90034-01
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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MARATHON OIL CORPORATION
MARATHON GLOBAL FUNDING CORPORATION
(Exact name of each registrant as specified in its charter)
DELAWARE 5555 SAN FELIPE ROAD 25-0996816
NOVA SCOTIA, CANADA HOUSTON, TEXAS 77056-2723 NOT APPLICABLE
(State or other jurisdiction (713) 629-6600 (I.R.S. Employer
of (Address, including zip code, and telephone number, Identification Nos.)
incorporation or including area code,
organization) of each registrant's principal executive offices)
WILLIAM F. SCHWIND, JR., ESQ.
VICE PRESIDENT, GENERAL COUNSEL & SECRETARY
5555 SAN FELIPE ROAD
HOUSTON, TEXAS 77056-2723
(713) 629-6600
(Name, address, including zip code, and telephone number, including area code,
of agent for service for each registrant)
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COPY TO:
R. JOEL SWANSON, ESQ.
BAKER BOTTS L.L.P.
3000 ONE SHELL PLAZA
910 LOUISIANA
HOUSTON, TEXAS 77002-4995
(713) 229-1330
FAX: (713) 229-1522
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this registration statement.
If the only securities being registered on this Form are 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, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JUNE 13, 2002
PROSPECTUS
[MARATHON OIL CORPORATION LOGO]
$400,000,000
MARATHON GLOBAL FUNDING CORPORATION
DEBT SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED BY
MARATHON OIL CORPORATION
5555 SAN FELIPE ROAD
HOUSTON, TEXAS 77056-2723
(713) 629-6600
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CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 2.
We will provide additional terms of the debt securities in one or more
supplements to this prospectus. You should read this prospectus and the related
prospectus supplement carefully before you invest in our securities. No person
may use this prospectus to offer and sell the debt securities unless a
prospectus supplement accompanies this prospectus.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 2002.
TABLE OF CONTENTS
About This Prospectus....................................... ii
About Marathon Oil Corporation.............................. 1
About Marathon Global Funding Corporation................... 1
Risk Factors................................................ 2
Forward-Looking Statements.................................. 7
The Separation.............................................. 8
Relationship Between Marathon and United States Steel After
the Separation............................................ 11
Use of Proceeds............................................. 14
Ratios of Earnings to Fixed Charges......................... 14
Description of Debt Securities.............................. 15
Plan of Distribution........................................ 24
Legal Matters............................................... 26
Experts..................................................... 26
Where You Can Find More Information......................... 26
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with
the Securities and Exchange Commission under a "shelf" registration process.
Under the shelf process, Marathon Global Funding Corporation ("Marathon Global
Funding") may offer debt securities fully and unconditionally guaranteed by
Marathon as described in this prospectus in one or more offerings with a total
initial offering price of up to $400,000,000.
Under Rule 3-10 of Regulation S-X promulgated by the SEC, we are not
required to include separate financial statements of Marathon Global Funding in
this prospectus because:
- Marathon Global Funding has and will continue to have no assets,
operations, revenues or cash flows other than those related to the
issuance, administration and repayment of the debt securities issued by
Marathon Global Funding and other securities guaranteed by Marathon;
- all of the voting shares of Marathon Global Funding are owned by
Marathon, through a wholly owned subsidiary of Marathon, which files
regular reports with the SEC; and
- Marathon's guarantee of the debt securities issued by Marathon Global
Funding will be full and unconditional and no other subsidiary of
Marathon will guarantee the debt securities.
This prospectus provides you with a general description of the debt
securities Marathon Global Funding may offer and of Marathon's guarantees. Each
time we use this prospectus to offer securities, we will provide a prospectus
supplement and, if applicable, a pricing supplement. The prospectus supplement
and any pricing supplement will describe the specific terms of that offering.
The prospectus supplement and any pricing supplement may also add to, update or
change the information this prospectus contains. Please carefully read this
prospectus, the prospectus supplement and any pricing supplement, in addition to
the information contained in the documents we refer to under the heading "Where
You Can Find More Information."
ii
ABOUT MARATHON OIL CORPORATION
Marathon Oil Corporation, a Delaware corporation ("Marathon"), is a fully
integrated oil and gas company. Marathon is engaged in:
- worldwide exploration and production of crude oil and natural gas;
- domestic refining, marketing and transportation of petroleum products
primarily through its 62% owned subsidiary, Marathon Ashland Petroleum
LLC ("MAP"); and
- other energy related businesses.
On December 31, 2001, in a transaction we refer to as the "Separation," we
separated our businesses into two companies and changed our name from USX
Corporation to Marathon Oil Corporation. As a result of the Separation, United
States Steel Corporation ("United States Steel") now conducts the business of
our former U.S. Steel Group as a separate, publicly owned corporation. Marathon
and its subsidiaries are continuing the business of the Marathon Group. See "The
Separation."
In this prospectus, we refer to Marathon, its wholly owned and majority
owned subsidiaries and its ownership interest in equity affiliates as "we" or
"us," unless we specifically state otherwise or the context indicates otherwise.
Our principal executive offices are located at 5555 San Felipe Road, Houston,
Texas 77056-2723, and our telephone number at that location is (713) 629-6600.
ABOUT MARATHON GLOBAL FUNDING CORPORATION
Marathon Global Funding Corporation is an unlimited liability company
organized in May 2002 under the laws of the Province of Nova Scotia, Canada.
Marathon Global Funding is an indirect wholly owned special purpose finance
subsidiary of Marathon that will engage in financing activities to raise funds
for the business operations of Marathon and its subsidiaries. Marathon Global
Funding's principal executive office is c/o Marathon Oil Corporation, 5555 San
Felipe Road, Houston, Texas 77056-2723, telephone (713) 629-6600.
1
RISK FACTORS
You should carefully consider the following matters, in addition to the
other information we have provided in this prospectus, the accompanying
prospectus supplement and the documents we incorporate by reference, before
reaching a decision regarding an investment in our securities.
RISKS RELATED TO THE SEPARATION
UNITED STATES STEEL HAS VARIOUS FINANCIAL AND OTHER OBLIGATIONS WHICH ITS
FAILURE TO PERFORM COULD MATERIALLY ADVERSELY AFFECT US.
In connection with the Separation, United States Steel agreed to hold us
harmless from and against various liabilities, including (amounts as of March
31, 2002):
- approximately $470 million of industrial revenue bonds related to
environmental improvement projects for current and former United States
Steel facilities, with maturities ranging from 2009 through 2033;
- approximately $84 million of sale-leaseback financing under a lease for
equipment at United States Steel's Fairfield Works, with a term extending
to 2012, subject to extensions;
- approximately $115 million of operating lease obligations, of which $96
million was in turn assumed by purchasers of major equipment used in
plants and operations divested by United States Steel;
- a guarantee of United States Steel's $23 million contingent obligation to
repay certain distributions from its 50% owned joint venture PRO-TEC
Coating Company;
- a guarantee of all obligations of United States Steel as general partner
of Clairton 1314B Partnership, L.P. to the limited partners. United
States Steel currently has no unpaid outstanding obligations to those
limited partners; and
- any federal income tax liabilities that arise from the Separation through
a fault of United States Steel.
See "-- Financial Matters Agreement" and "-- Tax Sharing Agreement" under
"Relationship Between Marathon and United States Steel After the Separation." If
United States Steel fails to perform these agreements, our claims against it
would constitute general unsecured claims subordinate to the claims of secured
creditors and that failure could materially adversely affect us.
In addition, we could be contingently liable for other obligations
associated with the business of United States Steel, as more fully described
under "Relationship Between Marathon and United States Steel After the
Separation -- Financial Matters Agreement."
As a stand-alone company, United States Steel will need to fund any of its
negative operating cash flow from external sources, and adequate sources may be
unavailable or the cost of that funding may adversely impact United States
Steel. United States Steel is more highly leveraged than we are, has a
noninvestment grade credit rating and has granted security interests in some of
its assets, including its accounts receivable and inventory. The steel business
is highly competitive, and a large number of industry participants have sought
protection under bankruptcy laws.
The enforceability of our claims against United States Steel could become
subject to the effect of any bankruptcy, fraudulent conveyance or transfer or
other law affecting creditors' rights generally, or of general principles of
equity, which might become applicable to those claims or other claims arising
from the facts and circumstances in which the Separation was effected. Under
fraudulent conveyance or transfer laws, for example, unsecured obligations of a
debtor which a court finds the debtor to have incurred while insolvent or
undercapitalized could be subordinated in right of payment to other unsecured
claims against the debtor.
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Under applicable law and regulations, we also may be liable for any
defaults by United States Steel in the performance of its obligations to pay
federal income taxes, fund its ERISA pension plans and pay other obligations
respecting periods prior to the effective date of the Separation.
THE TRANSFER BY OUR FORMER PARENT ENTITY TO US OF OWNERSHIP OF THE BUSINESSES
REPRESENTING THE MARATHON GROUP COULD BE ATTACKED UNDER FRAUDULENT CONVEYANCE OR
TRANSFER LAWS BY OR ON BEHALF OF CREDITORS OF UNITED STATES STEEL, AND ANY SUCH
ATTACK, IF SUCCESSFUL, COULD MATERIALLY ADVERSELY AFFECT US AND THE VALUE OF OUR
SECURITIES.
In July 2001, USX Corporation ("Old USX") effected a reorganization of the
ownership of its businesses in which:
- it created Marathon as its publicly owned parent holding company and
transferred ownership of the businesses representing the Marathon Group
to Marathon; and
- it merged into a newly formed subsidiary which survives as United States
Steel.
Prior to this reorganization, the assets of Old USX available to satisfy its
then existing and future creditors included its ownership interest in the
businesses representing the Marathon Group.
If a court in a bankruptcy case respecting United States Steel or a lawsuit
brought by its creditors or their representative were to find that, under the
applicable state fraudulent conveyance or transfer law or corresponding
provisions of the federal bankruptcy code:
- the transfer by Old USX to us of ownership of the businesses representing
the Marathon Group or related transactions were undertaken by Old USX
with the intent of hindering, delaying or defrauding its existing or
future creditors; or
- Old USX received less than reasonably equivalent value or fair
consideration, or no value or consideration, in connection with those
transactions, and either it or United States Steel
- was insolvent or rendered insolvent by reason of those transactions,
- was engaged or about to engage in a business or transaction for which
its assets constituted unreasonably small capital, or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay as they mature,
then that court could determine those transactions entitled one or more classes
of creditors of United States Steel to equitable relief from us. Such a
determination could permit the unpaid creditors to obtain recovery from us or
could result in other actions detrimental to the holders of our debt and equity
securities. The measure of insolvency for purposes of these considerations would
vary depending on the law of the jurisdiction being applied. Generally, however,
an entity would be considered insolvent if either:
- the sum of its debts and liabilities, including contingent liabilities,
was greater than the value of its assets, at a fair valuation; or
- the fair saleable value of its assets was less than the amount required
to pay the probable liability on its total existing debts and
liabilities, including contingent liabilities, as they become absolute
and matured.
THE SEPARATION MAY BECOME TAXABLE UNDER SECTION 355(E) OF THE INTERNAL REVENUE
CODE IF CAPITAL STOCK REPRESENTING A 50% OR GREATER INTEREST IN EITHER MARATHON
OR UNITED STATES STEEL IS ACQUIRED AS PART OF A PLAN THAT INCLUDES THE
SEPARATION.
The Separation may become taxable to Marathon under section 355(e) of the
Internal Revenue Code of 1986 if capital stock representing a 50% or greater
interest in either Marathon or United States Steel is acquired, directly or
indirectly, as part of a plan or series of related transactions that include the
Separation. For this purpose, a "50% or greater interest" means capital stock
possessing at least 50% of the total combined voting power of all classes of
stock entitled to vote or at least 50% of the total value of
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shares of all classes of capital stock. If section 355(e) applies, the amount of
the tax could be material. If an acquisition occurs that results in the
Separation being taxable under section 355(e), the tax sharing agreement
described below under "Relationship Between Marathon and United States Steel
After the Separation -- Tax Sharing Agreement" provides that the resulting
corporate tax liability will be borne by the party involved in that acquisition
transaction.
RISKS RELATED TO OUR BUSINESS
A SUBSTANTIAL OR EXTENDED DECLINE IN OIL OR GAS PRICES WOULD HAVE A MATERIAL
ADVERSE EFFECT ON US.
Prices for oil and gas fluctuate widely. Our revenues, operating results
and future rate of growth are highly dependent on the prices we receive for our
oil, gas and refined products. Historically, the markets for oil, gas and
refined products have been volatile and may continue to be volatile in the
future. Many of the factors influencing prices of oil, gas and refined products
are beyond our control. These factors include:
- worldwide and domestic supplies of oil and gas;
- weather conditions;
- the ability of the members of OPEC to agree to and maintain oil price and
production controls;
- political instability or armed conflict in oil-producing regions;
- the price and level of foreign imports;
- the level of consumer demand;
- the price and availability of alternative fuels;
- the availability of pipeline capacity; and
- domestic and foreign governmental regulations and taxes.
The long-term effects of these and other conditions on the prices of oil
and gas are uncertain. For example, oil prices declined significantly in 1998
and, for an extended period of time, remained substantially below prices
obtained in previous years. In late 1999, oil and natural gas prices increased
significantly and remained at higher levels through the first half of 2001. In
the second half of 2001, oil and natural gas prices declined significantly from
the price levels of 2000 and the first half of 2001.
Lower oil and gas prices may reduce the amount of oil and gas that we
produce, which may adversely affect our revenues and operating income.
Significant reductions in oil and gas prices may require us to reduce our
capital expenditures.
The recent terrorists' attacks on the United States may directly and
indirectly negatively affect our operating results. The national and global
responses to those terrorist attacks, including recent military, diplomatic and
financial responses and any possible reprisals as a consequence of unilateral
U.S. actions and/or allied actions, may materially adversely affect us in ways
we cannot predict at this time.
OUR OIL AND GAS RESERVE DATA AND FUTURE NET REVENUE ESTIMATES ARE UNCERTAIN.
Estimates of reserves by necessity are projections based on engineering
data, the projection of future rates of production and the timing of future
expenditures. We base the estimates of our proved oil and gas reserves and
projected future net revenues on reserve reports we prepare. The process of
estimating oil and gas reserves requires substantial judgment on the part of the
petroleum engineers, resulting in imprecise determinations, particularly with
respect to new discoveries. Different reserve engineers may make different
estimates of reserve quantities and revenues attributable to those reserves
based on the same data. Future performance that deviates significantly from the
reserve reports could have a material adverse effect on our business and
prospects.
Fluctuations in the price of oil and natural gas have the effect of
significantly altering reserve estimates, because the economic projections
inherent in the estimates may reduce or increase the
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quantities of commercially recoverable reserves. We may not realize the prices
our reserve estimates reflect or produce the estimated volumes during the
periods those estimates reflect. Actual future production, oil and natural gas
prices, revenues, taxes, development expenditures, operating expenses and
quantities of recoverable oil and natural gas reserves most likely will vary
from our estimates.
Any downward revision in our estimated quantities of reserves or writedown
of the book value of our reserves could have adverse consequences on our
financial results, such as decreasing earnings, which may result in noncash
losses and impairment charges.
IF WE FAIL TO ACQUIRE OR FIND ADDITIONAL RESERVES, OUR RESERVES AND PRODUCTION
WILL DECLINE MATERIALLY FROM THEIR CURRENT LEVELS.
The rate of production from oil and gas properties generally declines as
reserves are depleted. Except to the extent we acquire additional properties
containing proved reserves, conduct successful exploration and development
activities or, through engineering studies, identify additional behind-pipe
zones or secondary recovery reserves, our proved reserves will decline
materially as oil and gas is produced. Future oil and gas production is,
therefore, highly dependent on our level of success in acquiring or finding
additional reserves. Because we are smaller than many of our competitors, we
have fewer reserves and will be at an even greater disadvantage in relation to
our competitors if we fail to acquire or find additional reserves.
INCREASES IN CRUDE OIL PRICES AND ENVIRONMENTAL REGULATIONS MAY ADVERSELY AFFECT
OUR REFINED PRODUCT MARGINS.
We conduct domestic refining, marketing and transportation operations
primarily through MAP. MAP conducts its operations mainly in the Midwest, the
Southeast, the Ohio River Valley and the upper Great Plains. The profitability
of these operations depends largely on the margin between the cost of crude oil
and other feedstocks MAP refines and the selling prices it obtains for refined
products. MAP's overall profitability could be adversely affected by
availability of supply and rising crude oil and other feedstock prices which it
does not recover in the marketplace. Refined product margins have been
historically volatile and vary with the level of economic activity in the
various marketing areas, the regulatory climate, logistical capabilities and the
available supply of refined products.
In addition, environmental regulations, particularly the 1990 Amendments to
the Clean Air Act, have imposed, and are expected to continue to impose,
increasingly stringent and costly requirements on refining and marketing
operations, which may have an adverse effect on margins.
THE OIL AND GAS EXPLORATION AND PRODUCTION INDUSTRY IS VERY COMPETITIVE, AND
MANY OF OUR EXPLORATION AND PRODUCTION COMPETITORS HAVE GREATER FINANCIAL AND
OTHER RESOURCES THAN WE DO.
Strong competition exists in all sectors of the oil and gas exploration and
production industry and, in particular, in the exploration and development of
new reserves. We compete with major integrated and independent oil and gas
companies for the acquisition of oil and gas leases and other properties, for
the equipment and labor required to develop and operate those properties and in
the marketing of oil and natural gas to end-users. Many of our competitors have
financial and other resources substantially greater than those available to us.
As a consequence, we may be at a competitive disadvantage in bidding for
drilling rights. In addition, many of our larger competitors may be better able
to respond to factors that affect the demand for oil and natural gas production,
such as changes in worldwide prices and levels of production, the cost and
availability of alternative fuels and the application of government regulations.
We also compete in attracting and retaining personnel, including geologists,
geophysicists and other specialists. We may not be able to attract or retain
technical personnel in the future.
5
ENVIRONMENTAL COMPLIANCE AND REMEDIATION COULD RESULT IN INCREASED CAPITAL
REQUIREMENTS AND OPERATING COSTS.
Our businesses are subject to numerous laws and regulations relating to the
protection of the environment. We have incurred and will continue to incur
substantial capital, operating and maintenance, and remediation expenditures as
a result of these laws and regulations. Our compliance with amended, new or more
stringent requirements, stricter interpretations of existing requirements or the
future discovery of contamination may require us to make material expenditures
or subject us to liabilities that we currently do not anticipate. In addition,
any failure by us to comply with existing or future laws could result in civil
or criminal fines and other enforcement action against us.
Our operations and those of our predecessors could expose us to civil
claims by third parties for alleged liability resulting from contamination of
the environment or personal injuries caused by releases of hazardous substances.
For example:
- we are investigating or remediating contamination at several formerly and
currently owned sites; and
- we have been identified as a potentially responsible party at several
Superfund sites where we or our predecessors are alleged to have disposed
of wastes in the past.
Environmental laws are subject to frequent change and many of them have
become more stringent. In some cases, they can impose liability for the entire
cost of cleanup on any responsible party without regard to negligence or fault
and impose liability on us for the conduct of others or conditions others have
caused, or for our acts that complied with all applicable requirements when we
performed them.
Of particular significance to MAP are the new Tier II Fuels regulations
issued by the U.S. Environmental Protection Agency. These rules require
substantially reduced sulfur levels in the manufacture of gasoline and diesel
fuel. We estimate that MAP's combined capital cost to achieve compliance with
these rules could amount to approximately $700 million between 2002 and 2006.
This is only a preliminary estimate because of the ongoing evolution of
regulatory requirements. Some factors that could potentially affect MAP's
gasoline and diesel fuel compliance costs include obtaining the necessary
construction and environmental permits, operating considerations and unforeseen
hazards, such as weather conditions. To the extent these expenditures are not
ultimately reflected in the prices of our products and services, our operating
results will be adversely affected.
In connection with government inspections at some of our refineries, we
have received a number of notices of violations of environmental laws from the
Environmental Protection Agency and state environmental agencies. In some cases,
we have entered into consent decrees or orders that require us to pay fines or
install pollution controls to settle our alleged liability. For example, MAP
agreed to settle alleged violations of several environmental laws, including New
Source Review regulations under the Federal Clean Air Act, with a global consent
decree signed on May 11, 2001. The agreement requires MAP to install
environmental control equipment which we expect to require approximately $300
million in capital expenditures over an eight-year period, pay a $3.8 million
fine and perform supplemental environmental projects which we expect to cost
approximately $8 million. These supplemental environmental projects are being
undertaken as part of a settlement of this enforcement action for the alleged
Clean Air Act violations.
OUR RELIANCE ON OUR FOREIGN PRODUCTION OF OIL AND GAS EXPOSES US TO RISKS FROM
ABROAD, WHICH COULD NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS.
Our production of oil and gas outside of the United States accounted for
36%, 39% and 36%, respectively, of our total production volume in the years
2001, 2000 and 1999. Development of new production properties in countries
outside the United States may require protracted negotiations with host
governments, national oil companies and third parties and is frequently subject
to economic and political considerations, such as taxation, nationalization,
inflation, currency fluctuations, increased regulation and approval requirements
and governmental regulation, which could adversely affect the economics of
projects.
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OUR OPERATIONS ARE SUBJECT TO BUSINESS INTERRUPTIONS AND CASUALTY LOSSES, AND WE
DO NOT INSURE AGAINST ALL POTENTIAL LOSSES AND COULD BE SERIOUSLY HARMED BY
UNEXPECTED LIABILITIES.
Our exploration and production operations are subject to unplanned
occurrences, including blowouts, explosions, fires, loss of well control,
spills, adverse weather, labor disputes and maritime accidents. In addition, our
refining, marketing and transportation operations are subject to business
interruptions due to scheduled refinery turnarounds and unplanned events such as
explosions, fires, pipeline interruptions, crude oil or refined product spills,
inclement weather or labor disputes. They are also subject to the additional
hazards of marine operations, such as capsizing, collision and damage or loss
from severe weather conditions. We maintain insurance against many, but not all,
potential losses or liabilities arising from these operating hazards in amounts
that we believe to be prudent. Uninsured losses and liabilities arising from
operating hazards could reduce the funds available to us for exploration,
drilling and production and could have a material adverse effect on our
financial position or results of operations.
AS A HOLDING COMPANY WITH NO OPERATIONS OF ITS OWN, MARATHON WILL DEPEND ON
DISTRIBUTIONS FROM ITS SUBSIDIARIES TO MAKE PAYMENTS ON ITS OBLIGATIONS, AND
PROVISIONS OF APPLICABLE LAW OR CONTRACTUAL RESTRICTIONS COULD LIMIT THE AMOUNT
OF THOSE DISTRIBUTIONS.
Marathon derives substantially all its operating income from, and holds
substantially all its assets through, its operating subsidiaries. As a result,
Marathon will depend on distributions of cash flow and earnings of its
subsidiaries in order to meet its payment obligations, including any payments
under Marathon's guarantees of Marathon Global Funding's debt securities.
Marathon's operating subsidiaries are separate and distinct legal entities and
will have no obligation to provide Marathon with funds for its payment
obligations, whether by dividends, distributions, loans or otherwise. In
addition, provisions of applicable law, such as those limiting the legal sources
of dividends, could limit their ability to make payments or other distributions
to Marathon, and they could agree to contractual restrictions on their ability
to make distributions.
Marathon's right to receive any assets of any subsidiary, and therefore the
right of Marathon's creditors to participate in those assets, will be
effectively subordinated to the claims of that subsidiary's creditors, including
trade creditors. In addition, even if Marathon is a creditor of any subsidiary,
Marathon's rights as a creditor would be subordinate to any security interest in
the assets of that subsidiary and any indebtedness of that subsidiary senior to
that held by Marathon.
FORWARD-LOOKING STATEMENTS
This prospectus and the accompanying prospectus supplement, including the
information we incorporate by reference, include forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. You can identify our forward-looking
statements by words such as "estimate," "project," "predict," "believe,"
"expect," "anticipate," "plan," "forecast," "budget," "goal" or other words that
convey the uncertainty of future events or outcomes. When considering these
forward-looking statements, you should keep in mind the risk factors and other
cautionary statements contained in this prospectus, any prospectus supplement
and the documents we have incorporated by reference.
The forward-looking statements are not guarantees of future performance,
and we caution you not to rely unduly on them. We have based many of these
forward-looking statements on expectations and assumptions about future events
that may prove to be inaccurate. While our management considers these
expectations and assumptions to be reasonable, they are inherently subject to
significant business, economic, competitive, regulatory and other risks,
contingencies and uncertainties, most of which are difficult to predict and many
of which are beyond our control. These risks, contingencies and uncertainties
relate to, among other matters, the following:
- our financial exposure for obligations of United States Steel;
- fluctuations in crude oil and natural gas prices and refining and
marketing margins;
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- potential failure or delays in achieving expected reserve or production
levels from existing and future oil and gas development projects due to
operating hazards, drilling risks and the inherent uncertainties in
predicting oil and gas reserves and oil and gas reservoir performance;
- drilling rig availability;
- unexpected geological or other conditions or events encountered in
drilling operations;
- unsuccessful exploratory drilling activities;
- unexpected difficulties in refining, marketing or transporting petroleum
products;
- potential disruption or interruption of our production facilities and our
refining, marketing and transportation operations due to accidents, acts
of terrorism or political events;
- our ability to achieve the benefits we expect to achieve from the
Separation;
- the highly competitive nature of our businesses;
- international monetary conditions and exchange controls;
- changes in, and our ability to comply with government regulations,
including those relating to the environment;
- liability for remedial actions under environmental regulations;
- changes in tax laws applicable to us; and
- general domestic and international economic and political conditions.
We have discussed some of these factors in more detail in the "Risk Factors"
section of this prospectus. These factors are not necessarily all the important
factors that could affect us. We advise you that you should (1) be aware that
important factors we do not refer to above could affect the accuracy of our
forward-looking statements and (2) use caution and common sense when considering
our forward-looking statements. We do not intend to update these statements
unless the securities laws require us to do so.
THE SEPARATION
GENERAL
Marathon was originally organized in 2001 as USX HoldCo, Inc. ("USX
HoldCo") to become a holding company for the two principal businesses of our
former parent company, Old USX:
- the production, sale and transportation of steel mill products, coke,
taconite pellets and coal, and other steel-related businesses comprising
the U.S. Steel Group; and
- the oil and gas exploration and production, domestic refining, marketing
and transportation of petroleum products and other energy businesses
conducted by Marathon Oil Company, an Ohio corporation, and other
subsidiaries comprising the Marathon Group.
In a series of transactions (the "Holding Company Reorganization") Old USX
completed on July 2, 2001:
- USX HoldCo became the holding company for Marathon Oil Company and United
States Steel LLC;
- Old USX was merged with and into United States Steel LLC;
- USX HoldCo assumed a substantial part of the outstanding indebtedness,
obligations under various capital and operating leases and guarantee
obligations and other contingent liabilities of Old USX; and
- USX HoldCo changed its name to USX Corporation.
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On December 31, 2001, pursuant to an Agreement and Plan of Reorganization
dated as of July 31, 2001 (the "Reorganization Agreement") Marathon completed
the Separation transaction, in which:
- United States Steel LLC converted into a Delaware corporation named
United States Steel Corporation and became a separate, publicly traded
company; and
- USX HoldCo, then known as USX Corporation, changed its name to Marathon
Oil Corporation.
Marathon and its subsidiaries are continuing the energy business that comprised
the Marathon Group of Old USX.
ASSUMPTION OF INDEBTEDNESS AND OTHER OBLIGATIONS BY UNITED STATES STEEL
Prior to the Separation, Old USX, and then Marathon, managed most of its
financial activities on a centralized, consolidated basis and, in its financial
statements, attributed amounts that related primarily to the following items to
the Marathon Group and the U.S. Steel Group on the basis of their cash flows for
the applicable periods and the initial capital structure for each group:
- invested cash;
- short-term and long-term debt, including convertible debt, and related
net interest and other financing costs; and
- preferred stock and related dividends.
The following items, however, were specifically attributed to and reflected
in their entirety in the financial statements of the group to which they
related:
- leases;
- collateralized financings;
- indexed debt instruments;
- financial activities of consolidated entities that were not wholly owned
subsidiaries; and
- transactions that related to securities convertible solely into common
stock that tracked the performance of the Marathon Group or the U.S.
Steel Group.
These attributions were for accounting purposes only and did not reflect
the legal ownership of cash or the legal obligations to pay and discharge debt
or other obligations.
In connection with the Separation:
- United States Steel and its subsidiaries incurred indebtedness to third
parties and assumed various obligations from Marathon in an aggregate
amount approximately equal to all the net amounts attributed to the U.S.
Steel Group immediately prior to the Separation, both absolute and
contingent, less the amount of a $900 million value transfer (the "Value
Transfer"); and
- Marathon and its subsidiaries remained responsible for all the
liabilities attributed to the Marathon Group, both absolute and
contingent, plus $900 million.
These arrangements required a post-Separation cash settlement between
Marathon and United States Steel. At December 31, 2001, the net debt and other
financings of United States Steel were $54 million less than the net debt and
other financings attributable to the U.S. Steel Group, adjusted for the Value
Transfer and certain one-time items related to the Separation. On February 6,
2002, United States Steel made a payment to Marathon of $54 million, plus
interest, to settle this difference.
As a result of its assumption of various items of indebtedness and other
obligations from its former parent entity in the Holding Company Reorganization,
Marathon remained obligated after the Separation
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for the following items of indebtedness and other obligations that were
attributed to the U.S. Steel Group in accordance with the provisions of the
Reorganization Agreement (amounts as of March 31, 2002):
- approximately $470 million of industrial revenue bonds related to
environmental improvement projects for current and former United States
Steel facilities, with maturities ranging from 2009 through 2033;
- approximately $84 million of sale-leaseback financing under a lease for
equipment at United States Steel's Fairfield Works facility, with a term
extending to 2012, subject to extensions;
- approximately $115 million of operating lease obligations, of which $96
million was in turn assumed by purchasers of major equipment used in
plants and operations divested by United States Steel;
- a guarantee of United States Steel's $23 million contingent obligation to
repay certain distributions from its 50% owned joint venture PRO-TEC
Coating Company;
- a guarantee of all obligations of United States Steel as general partner
of Clairton 1314B Partnership, L.P. to the limited partners. United
States Steel currently has no unpaid outstanding obligations to those
limited partners; and
- other guarantees referred to under "Relationship Between Marathon and
United States Steel After the Separation -- Financial Matters Agreement."
As contemplated by the Reorganization Agreement, Marathon and United States
Steel entered into a financial matters agreement to reflect United States
Steel's agreement to assume and discharge all Marathon's principal repayment,
interest payment and other payment obligations under the industrial revenue
bonds, the capital lease arrangement and the guarantees associated with the
other lease and similar obligations referred to above. In addition, the
financial matters agreement requires United States Steel to use commercially
reasonable efforts to have Marathon released from its obligations under the
other guarantees referred to above. The financial matters agreement also
provides that on or before the tenth anniversary of the Separation, United
States Steel will provide for Marathon's discharge from any remaining liability
under any of the assumed industrial revenue bonds. United States Steel may
accomplish that discharge by refinancing or, to the extent not refinanced,
paying Marathon an amount equal to the remaining principal amount of, all
accrued and unpaid debt service outstanding on, and any premium required to
immediately retire, the then outstanding industrial revenue bonds. As of May 31,
2002, Marathon has agreed to cause the redemption of $57.4 million of these
bonds on November 1, 2011. Additionally, $1.8 million of the industrial revenue
bonds are scheduled to mature during the period extending through 2012. For
additional information relating to the financial matters agreement, see
"Relationship Between Marathon and United States Steel After the
Separation -- Financial Matters Agreement."
EFFECTS ON HISTORICAL RELATIONSHIP
Historically, the U.S. Steel Group has funded its negative operating cash
flow with cash supplied by us, a portion of which was reflected as a payment
from us under our tax allocation policy and the remainder of which was
represented by increased amounts of debt attributed by us. As a stand-alone
company, United States Steel will need to fund any of its negative operating
cash flow from external sources, and adequate sources may be unavailable or the
cost of such funding may adversely impact United States Steel.
As we discuss below, the financial matters agreement does not contain any
financial covenants, and United States Steel is free to incur additional debt
and grant mortgages on or security interests in its property and sell or
transfer assets without our consent. United States Steel is more highly
leveraged than we are, has a noninvestment grade credit rating and has granted
security interests in some of its assets, including its accounts receivable and
inventory. Additionally, United States Steel's operations are capital intensive.
United States Steel's business also requires substantial expenditures for
routine maintenance.
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The steel business is highly competitive and a large number of industry
participants have sought protection under bankruptcy laws in recent periods.
RELATIONSHIP BETWEEN MARATHON
AND UNITED STATES STEEL AFTER THE SEPARATION
As a result of the Separation, Marathon and United States Steel are
separate companies, and neither has any ownership interest in the other. Thomas
J. Usher is chairman of the board of both companies, and four of the remaining
nine members of Marathon's board of directors are also directors of United
States Steel.
In connection with the Separation and pursuant to the Reorganization
Agreement, Marathon and United States Steel have entered into a series of
agreements governing their relationship subsequent to the Separation and
providing for the allocation of tax and certain other liabilities and
obligations arising from periods prior to the Separation. Set forth below is a
summary of some of the provisions of each of those agreements.
TAX SHARING AGREEMENT
Marathon and United States Steel have a tax sharing agreement that applies
to each of their consolidated tax reporting groups. Provisions of this agreement
include the following:
- for any taxable period, or any portion of any taxable period, ended on or
before December 31, 2001, unpaid tax sharing payments will be made
between Marathon and United States Steel generally in accordance with our
general tax sharing principles in effect prior to the Separation;
- no tax sharing payments will be made with respect to taxable periods, or
portions thereof, beginning after December 31, 2001; and
- provisions relating to the tax and related liabilities, if any, that
result from the Separation ceasing to qualify as a tax-free transaction
and limitations on post-Separation activities that might jeopardize the
tax-free status of the Separation.
Under the general tax sharing principles in effect prior to the Separation:
- the taxes payable by each of the Marathon Group and the U.S. Steel Group
were determined as if each of them had filed its own consolidated,
combined or unitary tax return; and
- the U.S. Steel Group would receive the benefit, in the form of tax
sharing payments by the parent corporation, of the tax attributes,
consisting principally of net operating losses and various credits, that
its business generated and the parent used on a consolidated basis to
reduce its taxes otherwise payable.
In accordance with the tax sharing agreement, at the time of the
Separation, we made a preliminary settlement with United States Steel of $440
million as the net tax sharing payments we owed to it for the year ended
December 31, 2001 under the pre-Separation tax sharing principles.
The tax sharing agreement also addresses the handling of tax audits and
contests and other matters respecting taxable periods, or portions of taxable
periods, ended prior to December 31, 2001.
In the tax sharing agreement, each of Marathon and United States Steel
promised the other party that it:
- would not, prior to January 1, 2004, take various actions or enter into
various transactions that might, under section 355 of the Internal
Revenue Code of 1986, jeopardize the tax-free status of the Separation;
and
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- would be responsible for, and indemnify and hold the other party harmless
from and against, any tax and related liability, such as interest and
penalties, that results from the Separation ceasing to qualify as
tax-free because of its taking of any such action or entering into any
such transaction.
The proscribed actions and transactions include:
- the liquidation of Marathon or United States Steel; and
- the sale by Marathon or United States Steel of its assets, except in the
ordinary course of business.
In case a taxing authority seeks to collect a tax liability from one party
which the tax sharing agreement has allocated to the other party, the other
party has agreed in the sharing agreement to indemnify the first party against
that liability.
Even if the Separation otherwise qualifies for tax-free treatment under
section 355 of the Internal Revenue Code, the Separation may become taxable to
Marathon under section 355(e) of the Internal Revenue Code if capital stock
representing a 50% or greater interest in either Marathon or United States Steel
is acquired, directly or indirectly, as part of a plan or series of related
transactions that include the Separation. For this purpose, a "50% or greater
interest" means capital stock possessing at least 50% of the total combined
voting power of all classes of stock entitled to vote or at least 50% of the
total value of shares of all classes of capital stock. To minimize this risk,
both Marathon and United States Steel agreed in the tax sharing agreement that
they would not enter into any transactions or make any change in their equity
structures that could cause the Separation to be treated as part of a plan or
series of related transactions to which those provisions of section 355(e) of
the Internal Revenue Code may apply. If an acquisition occurs that results in
the Separation being taxable under section 355(e) of the Internal Revenue Code,
the agreement provides that the resulting corporate tax liability will be borne
by the party involved in that acquisition transaction.
Although the tax sharing agreement allocates tax liabilities relating to
taxable periods ending on or prior to the Separation, each of Marathon and
United States Steel, as members of the same consolidated tax reporting group
during any portion of a taxable period ended on or prior to the date of the
Separation, is jointly and severally liable under the Internal Revenue Code for
the federal income tax liability of the entire consolidated tax reporting group
for that year. To address the possibility that the taxing authorities may seek
to collect all or part of a tax liability from one party where the tax sharing
agreement allocates that liability to the other party, the agreement includes
indemnification provisions that would entitle the party from whom the taxing
authorities are seeking collection to obtain indemnification from the other
party, to the extent the agreement allocates that liability to that other party.
We can provide no assurance, however, that United States Steel will be able to
meet its indemnification obligations, if any, to Marathon that may arise under
the tax sharing agreement.
TRANSITION SERVICES AGREEMENT
Marathon and United States Steel have a transition services agreement that
will govern the provision of the following services until December 31, 2002:
- common corporate support services; and
- inter-unit computer services.
Common corporate support services include services personnel at our former
Pittsburgh corporate headquarters historically provided prior to the Separation.
These include accounting, finance and financial management, government affairs,
investor relations, public affairs and tax services. Most of these personnel now
work for Marathon or United States Steel. Each company has agreed to provide
these services to the other, to the extent it is able to do so and the other
company cannot satisfy its own needs.
Inter-unit computer services consist of computer and information technology
services either company historically provided to our former Pittsburgh corporate
headquarters or to the other company.
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A company providing common corporate support or inter-unit computer
services under the transition services agreement will be entitled to recover the
costs it incurs in providing those services.
The transition services agreement also includes each company's grant to the
other company and its subsidiaries of a nonexclusive, fully paid, worldwide
license for their internal use only of the granting company's computer programs,
software, source code and know-how that were utilized prior to the Separation or
are utilized under the transition services agreement to provide common corporate
support or inter-unit computer services to the other company and its
subsidiaries.
FINANCIAL MATTERS AGREEMENT
Marathon and United States Steel have a financial matters agreement that
provides for United States Steel's assumption of the obligations under
Marathon's outstanding industrial revenue bonds, the capital lease arrangement
and the guarantees associated with the other lease and similar obligations
referred to above under "The Separation -- Assumption of Indebtedness and Other
Obligations by United States Steel." Under the financial matters agreement,
United States Steel has assumed and agreed to discharge all Marathon's principal
repayment, interest payment and other obligations under those industrial revenue
bonds and lease and guarantee arrangements described above, including any
amounts due on any default or acceleration of any of those obligations, other
than any default caused by Marathon. The financial matters agreement also
requires United States Steel to use commercially reasonable efforts to have
Marathon released from its obligations under a guarantee we have provided with
respect to United States Steel's obligations under a partnership agreement among
General Electric Credit Corporation of Delaware, Southern Energy Clairton,
L.L.C. and United States Steel.
The financial matters agreement also provides that, on or before the tenth
anniversary of the Separation, United States Steel will provide for Marathon's
discharge from any remaining liability under any of the assumed industrial
revenue bonds.
The financial matters agreement requires Marathon to use commercially
reasonable efforts to take all necessary action or refrain from acting so as to
assure compliance with all covenants and other obligations under the documents
relating to the assumed obligations to avoid the occurrence of a default or the
acceleration of the payment obligations under the assumed obligations. The
agreement also obligates Marathon to use commercially reasonable efforts to
obtain and maintain letters of credit and other liquidity arrangements required
under the assumed obligations.
United States Steel's obligations to Marathon under the financial matters
agreement are general unsecured obligations which rank equal to United States
Steel's accounts payable and other general unsecured obligations. The financial
matters agreement does not contain any financial covenants, and United States
Steel is free to incur additional debt, grant mortgages on or security interests
in its property and sell or transfer assets without our consent.
LICENSE AGREEMENT
Marathon and United States Steel have entered into a license agreement
under which Marathon granted to United States Steel a nonexclusive, fully paid,
worldwide license to use the "USX" name and various trade secrets, know-how and
intellectual property rights previously used in connection with the business of
both companies. The license agreement provides that United States Steel may use
these rights solely in the conduct of its internal business. It also provides
United States Steel with the right to sublicense these rights to any of its
subsidiaries. The license agreement provides for a perpetual term, so long as
United States Steel performs its obligations under the agreement.
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INSURANCE ASSISTANCE AGREEMENT
Marathon and United States Steel have an insurance assistance agreement,
which provides for:
- the division of responsibility for joint insurance arrangements; and
- the entitlement to insurance claims and the allocation of deductibles
with respect to claims associated with pre-Separation periods.
Under the insurance assistance agreement:
- Marathon is entitled to all rights in and to all claims and is solely
liable for the payment of uninsured retentions and deductibles arising
out of or relating to pre-Separation events or conditions exclusively
associated with the business of the Marathon Group;
- United States Steel is entitled to all rights in and to all claims and is
solely liable for the payment of uninsured retentions and deductibles
arising out of or relating to pre-Separation events or conditions
exclusively associated with the business of the U.S. Steel Group;
- Marathon is entitled to 65% and United States Steel is entitled to 35% of
all rights in and to all claims, and Marathon and United States Steel are
liable on the same percentage basis for the payment of uninsured
retentions and deductibles, arising out of or relating to pre-Separation
events or conditions and not related exclusively to either the Marathon
Group or the U.S. Steel Group; and
- the cost of extended reporting insurance for pre-Separation periods will
be split between Marathon and United States Steel on a 65%-35% basis,
respectively, if both companies elect to purchase the same extended
reporting insurance.
USE OF PROCEEDS
Unless we inform you otherwise in the prospectus supplement, Marathon
Global Funding will use the net proceeds from the sale of the debt securities to
provide funding, through intercompany loans, to us, and we will use that funding
for general corporate purposes. These purposes may include funding working
capital requirements, acquisitions and other capital expenditures, repayment and
refinancing of indebtedness and repurchases and redemptions of securities.
Pending any specific application, we may initially invest those funds in
short-term marketable securities or apply them to the reduction of short-term
indebtedness.
RATIOS OF EARNINGS TO FIXED CHARGES
Marathon's ratio of earnings to fixed charges for each of the periods
indicated, in each case determined on a total enterprise basis is as follows:
YEARS ENDED DECEMBER 31, THREE MONTHS
-------------------------------- ENDED
1997 1998 1999 2000 2001 MARCH 31, 2002
---- ---- ---- ---- ---- --------------
Ratio of earnings to fixed charges.... 2.55 2.60 4.24 4.06 7.47 2.47
==== ==== ==== ==== ==== ====
The term "earnings" is the amount resulting from adding the following items:
- pre-tax income before adjustment for minority interests in consolidated
subsidiaries or income or loss from equity investees;
- fixed charges;
- amortization of capitalized interest;
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- distributed income of equity investees; and
- share of pre-tax losses of equity investees for which charges arising
from guarantees are included in fixed charges;
and subtracting from the total the following:
- interest capitalized; and
- preference security dividend requirements of consolidated subsidiaries.
For this purpose, "fixed charges" consists of:
- interest on all indebtedness and amortization of debt discount and
expense;
- interest capitalized, including discontinued operations;
- an estimate of the portion of annual rental expense on operating leases
that represents the interest factor attributable to rentals;
- pre-tax earnings required to cover preferred stock dividend requirements;
and
- fixed charges, including discontinued operations, from debt of any entity
less than 50% owned, which is guaranteed by us if it is probable that we
will have to satisfy the guarantee.
DESCRIPTION OF DEBT SECURITIES
The debt securities this prospectus covers will be Marathon Global
Funding's general unsecured obligations, and Marathon will fully and
unconditionally guarantee the debt securities on a senior unsecured basis.
Marathon Global Funding will issue debt securities under an indenture to be
entered into among Marathon Global Funding, as issuer, Marathon, as guarantor,
and JPMorgan Chase Bank, as trustee.
We have summarized the provisions of the indenture, the debt securities and
the guarantees below. You should read the indenture for more details regarding
the provisions described below and for other provisions that may be important to
you. We have filed the form of indenture with the SEC as an exhibit to the
registration statement, and we will include the final indenture and any other
instrument establishing the terms of any offered debt securities as exhibits to
a filing we will make with the SEC in connection with that offering. See "Where
You Can Find More Information."
In this summary description of the debt securities, unless we state
otherwise or the context clearly indicates otherwise, all references to
"Marathon," "we" or "us" mean Marathon Oil Corporation only and all references
to Marathon Global Funding mean Marathon Global Funding Corporation only.
GENERAL
The debt securities will constitute senior debt of Marathon Global Funding
and will rank equally with all its unsecured and unsubordinated debt. The
indenture does not limit the amount of debt Marathon Global Funding may issue
under the indenture or the amount of other unsecured debt or securities Marathon
or Marathon Global Funding may incur or issue. Marathon Global Funding may issue
debt securities under the indenture from time to time in one or more series,
each in an amount Marathon and Marathon Global Funding authorize prior to
issuance.
Marathon Global Funding is a special purpose financing subsidiary formed
solely as a financing vehicle for Marathon and its subsidiaries. The ability of
Marathon Global Funding to pay its debt service obligations, including any
payments required to be made under its debt securities, is dependent upon its
receipt of payments from Marathon and its subsidiaries. If Marathon and its
subsidiaries were not to make such payments for any reason, the holders of the
debt securities would have to rely on the enforcement of Marathon's guarantees
described below.
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MARATHON'S GUARANTEES
Marathon will fully and unconditionally guarantee on a senior unsecured
basis the due and punctual payment of the principal of and any premium and
interest on the debt securities issued by Marathon Global Funding. The
guarantees provide that in the event of a default in payment of principal of or
any premium or interest on a debt security issued by Marathon Global Funding,
the holder of the debt security may institute legal proceedings directly against
Marathon to enforce the guarantees without first proceeding against Marathon
Global Funding. The indenture provides that Marathon may under certain
circumstances assume all rights and obligations of Marathon Global Funding under
the indenture with respect to a series of debt securities. The guarantees will
rank equally with all of Marathon's other unsecured and unsubordinated debt.
Marathon derives substantially all its operating income from, and holds
substantially all its assets through, its operating subsidiaries. As a result,
Marathon will depend on distributions of cash flow and earnings of its
subsidiaries in order to meet its payment obligations, including any payments
under the guarantees. Marathon's operating subsidiaries are separate and
distinct legal entities and will have no obligation to provide Marathon with
funds for its payment obligations, whether by dividends, distributions, loans or
otherwise. In addition, provisions of applicable law, such as those limiting the
legal sources of dividends, could limit their ability to make payments or other
distributions to Marathon and they could agree to contractual restrictions on
their ability to make distributions.
Marathon's right to receive any assets of any subsidiary, and therefore the
right of Marathon's creditors to participate in those assets, will be
effectively subordinated to the claims of that subsidiary's creditors, including
trade creditors. In addition, even if Marathon is a creditor of any subsidiary,
Marathon's rights as a creditor would be subordinate to any security interest in
the assets of that subsidiary and any indebtedness of that subsidiary senior to
that held by Marathon.
TERMS
Marathon Global Funding may issue the debt securities of any series in
definitive form or as a book-entry security in the form of a global security
registered in the name of a depositary Marathon Global Funding designates.
Marathon Global Funding may issue the debt securities in one or more series
with various maturities. They may be sold at par, at a premium or with an
original issue discount.
The prospectus supplement relating to any series of debt securities being
offered will include specific terms relating to the offering. These terms will
include some or all of the following:
- the title of the debt securities;
- any limit on the aggregate principal amount of the debt securities;
- the person or entity to whom any interest will be payable, if that person
or entity is not the registered owner of the debt securities;
- the date or dates on which the principal of and any premium on the debt
securities will be payable;
- the rates, which may be fixed or variable, per annum at which the debt
securities will bear interest, if any, and the date or dates from which
any interest will accrue;
- the dates on which the interest, if any, on the debt securities will be
payable, and the regular record dates for the interest payment dates or
the method for determining those dates;
- the place or places where payments on the debt securities will be
payable;
- the terms and conditions on which the debt securities may, under any
optional or mandatory redemption provisions, be redeemed;
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- any mandatory or optional sinking fund or similar provisions or
provisions for mandatory redemption or purchase at the option of the
holder;
- the denominations in which the debt securities will be issuable, if other
than denominations of $1,000 or any multiple of that amount;
- any index, formula or other method used to determine the amount of
payment of principal of or any premium or interest on the debt
securities;
- if other than the currency of the United States of America, the currency
of payment of principal of or any premium or interest on the debt
securities;
- if, at Marathon Global Funding's election or the election of the holder,
the principal of or any premium or interest on any debt securities is to
be payable in one or more currencies or currency units other than those
in which the debt securities are stated to be payable, the terms and
conditions on which that election is to be made and the amount so
payable;
- if other than the full principal amount of the debt securities, the
portion of the principal amount of the debt securities that will be
payable on the declaration of acceleration of the maturity of the debt
securities;
- if the principal amount payable at maturity will not be determinable as
of one or more dates prior to maturity, the amount that will be deemed to
be the principal amount as of any such date;
- any terms on which the debt securities may be convertible into or
exchanged for securities or indebtedness of any kind of Marathon,
Marathon Global Funding or of any other issuer or obligor and the terms
and conditions on which a conversion or exchange will be effected,
including the initial conversion or exchange price or rate, the
conversion period and any other additional provisions;
- the applicability of the defeasance provisions described below under
"-- Satisfaction and Discharge; Defeasance," and any conditions under
which those provisions will apply;
- if the debt securities will be issuable only in the form of a global
security as described below under "-- Book-entry Debt Securities," the
depositary for the debt securities;
- any changes in or additions to the events of default or covenants this
prospectus describes;
- the payment of any additional amounts with respect to the debt
securities; and
- any other terms of the debt securities.
If Marathon Global Funding sells any of the debt securities for any foreign
currency or currency unit or if payments on the debt securities are payable in
any foreign currency or currency unit, we will describe in the prospectus
supplement the restrictions, elections, tax consequences, specific terms and
other information relating to those debt securities and the foreign currency or
currency unit.
RESTRICTIVE COVENANTS
Marathon has agreed to two principal restrictions on its activities for the
benefit of holders of the debt securities issued by Marathon Global Funding. The
restrictive covenants summarized below will apply to a series of debt securities
(unless waived or amended) as long as any of those debt securities are
outstanding, unless the prospectus supplement for the series states otherwise.
CREATION OF CERTAIN LIENS
If Marathon or any subsidiary of Marathon mortgages or encumbers as
security for money borrowed any property capable of producing oil or gas which
(1) is located in the United States and (2) is determined to be a principal
property by Marathon's board of directors in its discretion, Marathon will, or
will cause such subsidiary to, secure the outstanding guarantees of debt
securities issued by Marathon
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Global Funding equally and ratably with all obligations secured by the mortgage
then being given. This covenant will not apply in the case of any mortgage:
- existing on the date of the indenture;
- incurred in connection with the acquisition or construction of any
property;
- previously existing on acquired property or existing on the property of
any entity when it becomes a subsidiary of ours;
- in favor of the United States, any state, or any agency, department,
political subdivision or other instrumentality of either, to secure
payments to us under the provisions of any contract or statute;
- in favor of the United States, any state, or any agency, department,
political subdivision or other instrumentality of either, to secure
borrowings for the purchase or construction of the property mortgaged;
- in connection with a sale or other transfer of (1) oil, gas or other
minerals in place for a period of time until, or in an amount such that,
the purchase will realize a specified amount of money or a specified
amount of minerals or (2) any interest of the character commonly referred
to as an "oil payment" or a "production payment";
- to secure the cost of the repair, construction, improvement, alteration,
exploration, development or drilling of all or part of a principal
property;
- in various facilities and personal property located at or on a principal
property;
- arising in connection with the sale of accounts receivable resulting from
the sale of oil or gas at the wellhead; or
- that is a renewal of or substitution for any mortgage permitted under any
of the provisions described in the preceding clauses.
In addition, Marathon may, and may permit its subsidiaries to, grant mortgages
or incur liens on property covered by the restriction described above as long as
the net book value of the property so encumbered, together with all property
subject to the restriction on sale and leaseback transactions described below,
does not, at the time such mortgage or lien is granted, exceed 10% of our
"Consolidated Net Tangible Assets," which the indenture defines to mean the
aggregate value of all assets of Marathon and its subsidiaries after deducting:
- all current liabilities, excluding all long-term debt due within one
year;
- all investments in unconsolidated subsidiaries and all investments
accounted for on the equity basis; and
- all goodwill, patents and trademarks, unamortized debt discount and other
similar intangibles;
all determined in conformity with generally accepted accounting principles and
calculated on a basis consistent with our most recent audited consolidated
financial statements.
LIMITATIONS ON CERTAIN SALE AND LEASEBACK TRANSACTIONS
Marathon and its subsidiaries are generally prohibited from selling and
leasing back the principal properties described above under "-- Creation of
Certain Liens." However, this covenant will not apply if:
- the lease is an intercompany lease between Marathon and one of its
subsidiaries or between any of its subsidiaries;
- the lease is for a temporary period by the end of which it is intended
that the use of the leased property will be discontinued;
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- Marathon or a subsidiary of Marathon could mortgage the property without
equally and ratably securing the debt securities under the covenant
described above under the caption "-- Creation of Certain Liens";
- the transfer is incident to or necessary to effect any operating,
farm-out, farm-in, unitization, acreage exchange, acreage contribution,
bottom-hole or dry-hole arrangement or pooling agreement or other
agreement of the same general nature relating to the acquisition,
exploration, maintenance, development or operation of oil and gas
properties in the ordinary course of business or as required by any
regulatory agency having jurisdiction over the property; or
- Marathon promptly informs the trustee of the sale, the net proceeds of
the sale are at least equal to the fair value of the property and within
180 days of the sale the net proceeds are applied to the retirement or
in-substance defeasance of our funded debt (subject to reduction, under
circumstances the indenture specifies).
As of the date of this prospectus, neither Marathon nor any subsidiary of
Marathon has any property that Marathon's board of directors has determined to
be a principal property.
MERGER, CONSOLIDATION AND SALE OF ASSETS
MARATHON
The indenture provides that Marathon may not merge or consolidate with any
other entity or sell or convey all or substantially all its assets except as
follows:
- Marathon is the continuing corporation or the successor entity (if other
than Marathon) is a corporation or other entity organized under the laws
of the United States or any state thereof that expressly assumes the
obligations of Marathon under the indenture and the guarantees; and
- immediately after the merger, consolidation, sale or conveyance, no event
of default under the indenture shall have occurred and be continuing.
On the assumption by the successor of the obligations under the indenture,
the successor will be substituted for Marathon, and Marathon will be relieved of
any further obligation under the indenture and the guarantees.
MARATHON GLOBAL FUNDING
Marathon Global Funding may assign all its rights and obligations under the
indenture and its debt securities to:
- another entity with which Marathon Global Funding is consolidated or
merged or which acquires by conveyance or transfer any of Marathon Global
Funding's properties or assets;
- Marathon; or
- another subsidiary of Marathon.
In connection with any assignment other than to Marathon, Marathon will
continue to guarantee the debt securities as described above. If Marathon Global
Funding assigns all of its rights and obligations under the indenture and its
debt securities to Marathon, Marathon's guarantees will no longer apply to the
debt securities, but Marathon's other covenants and other obligations will
continue to apply for the benefit of the holders of any debt securities issued
under the indenture.
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EVENTS OF DEFAULT
The indenture defines an event of default with respect to the debt
securities of any series issued by Marathon Global Funding as being:
(1) Marathon Global Funding's failure to pay interest on any debt
security of that series when due, continuing for 30 days;
(2) Marathon Global Funding's failure to pay the principal of or
premium on any debt security of that series when due and payable;
(3) Marathon Global Funding's failure to deposit any sinking fund
payment when due by the terms of the debt securities of that series;
(4) Marathon Global Funding's or Marathon's failure to perform under
any other covenant or warranty applicable to the debt securities of that
series and not specifically dealt with in the definition of "event of
default" for a period of 90 days after written notice to Marathon Global
Funding and Marathon of that failure;
(5) specified events of bankruptcy, insolvency or reorganization of
Marathon or Marathon Global Funding;
(6) Marathon repudiates its obligations under its guarantees of the
debt securities of Marathon Global Funding or the guarantees become
unenforceable or invalid or are no longer in full force and effect; or
(7) any other event of default provided with respect to the debt
securities of that series.
The trustee is required to give holders of the debt securities of any
series written notice of a default with respect to that series as provided by
the Trust Indenture Act. In the case of any default of the character described
above in clause (4) of the immediately preceding paragraph, no such notice to
holders must be given until at least 60 days after the occurrence of that
default.
Each of Marathon and Marathon Global Funding is required annually to
deliver to the trustee an officer's certificate stating whether or not the
signers have any knowledge of any default by Marathon or Marathon Global Funding
in its performance and observance of any terms, provisions and conditions of the
indenture.
In case an event of default (other than an event of default involving an
event of bankruptcy, insolvency or reorganization of Marathon or Marathon Global
Funding) shall occur and be continuing with respect to any series, the trustee
or the holders of not less than 25% in principal amount of the debt securities
of that series then outstanding may declare the principal amount of those debt
securities (or, in the case of any debt securities Marathon Global Funding
issues at an original issue discount, the portion of such principal amount that
we will specify in the applicable prospectus supplement) to be due and payable.
If an event of default relating to any event of bankruptcy, insolvency or
reorganization of Marathon or Marathon Global Funding occurs, the principal of
all the debt securities then outstanding (or, in the case of any debt securities
Marathon Global Funding issues at an original issue discount, the portion of
such principal amount that we will specify in the applicable prospectus
supplement) will become immediately due and payable without any action on the
part of the applicable trustee or any holder. The holders of a majority in
principal amount of the outstanding debt securities of any series affected by
the default may in some cases rescind this accelerated payment requirement.
Depending on the terms of our other indebtedness, an event of default may give
rise to cross defaults on our other indebtedness.
20
Any past default with respect to a series of debt securities may be waived
on behalf of all holders of those debt securities by at least a majority in
principal amount of the holders of the outstanding debt securities of that
series, except a default:
- in the payment of principal of or any premium or interest on any debt
security of that series; or
- respecting a covenant or provision that cannot be modified without the
consent of the holder of each outstanding debt security of that series.
Any default that is so waived will cease to exist and any event of default
arising from that default will be deemed to be cured for every purpose under the
indenture, but no such waiver will extend to any subsequent or other default or
impair any right arising from a subsequent or other default.
A holder of a debt security of any series will be able to pursue any remedy
under the indenture only if:
- the holder has given prior written notice to the trustee of a continuing
event of default with respect to the debt securities of that series;
- the holders of at least 25% in principal amount of the outstanding debt
securities of that series have made a written request to the trustee to
institute proceedings with respect to the event of default;
- the holders making the request have offered the trustee reasonable
indemnity against costs, expenses and liabilities to be incurred in
compliance with the request;
- the trustee for 60 days after its receipt of the notice, request and
offer of indemnity has failed to institute any such proceeding; and
- during that 60-day period, the holders of a majority in principal amount
of the debt securities of that series do not give the trustee a direction
inconsistent with the request.
Holders of debt securities, however, are entitled at any time to bring a lawsuit
for the payment of principal and interest due on their debt securities on or
after its due date.
It is intended that rights provided for holders under the indenture are for
the equal and ratable benefit of all such holders.
MODIFICATION
Marathon, Marathon Global Funding and the trustee may modify the indenture
without the consent of the holders of the debt securities for one or more of the
following purposes:
- to evidence the succession of another person to Marathon or Marathon
Global Funding;
- to add to covenants for the benefit of the holders of debt securities or
to surrender any right or power conferred on Marathon or Marathon Global
Funding by the indenture;
- to add additional events of default for the benefit of holders of all or
any series of debt securities;
- to add or change provisions of the indenture to allow the issuance of
debt securities in other forms;
- to add to, change or eliminate any of the provisions of the indenture
respecting one or more series of debt securities under conditions the
indenture specifies;
- to secure the debt securities under the requirements of the indenture or
otherwise;
- to establish the form or terms of debt securities of any series as
permitted by the indenture;
21
- to evidence the appointment of a successor trustee; or
- to cure any ambiguity or to correct or supplement any provision of the
indenture that may be defective or inconsistent with any other provision
in the indenture, or to make any other provisions with respect to matters
or questions arising under the indenture as shall not adversely affect
the interests of the holders of debt securities of any series in any
material respect.
Marathon, Marathon Global Funding and the trustee may otherwise modify the
indenture or any supplemental indenture with the consent of the holders of not
less than a majority in aggregate principal amount of each series of debt
securities affected. However, without the consent of the holder of each
outstanding debt security affected, no modification may:
- change the fixed maturity or reduce the principal amount, reduce the rate
or extend the time of payment of any premium or interest thereon, or
change the currency in which the debt securities are payable, or
adversely affect any right of the holder of any debt security to require
Marathon or Marathon Global Funding to repurchase that debt security;
- modify or affect Marathon's obligations under the guarantees in any
manner adverse to the holders of any debt security; or
- reduce the percentage of debt securities required for consent to any such
modification or supplemental indenture.
SATISFACTION AND DISCHARGE; DEFEASANCE
The indenture will be satisfied and discharged if:
- Marathon or Marathon Global Funding delivers to the trustee all debt
securities then outstanding for cancellation; or
- all debt securities have become due and payable or are to become due and
payable within one year or are to be called for redemption within one
year and Marathon or Marathon Global Funding deposits an amount of cash
sufficient to pay the principal of and premium, if any, and interest on
those debt securities to the date of maturity or redemption.
In addition to the right of discharge described above, we may deposit with
the trustee funds or government securities sufficient to make payments on the
debt securities of a series on the dates those payments are due and payable,
then, at our option, either of the following will occur:
- Marathon Global Funding and Marathon will be discharged from all
obligations with respect to the debt securities of that series and the
associated guarantees ("legal defeasance"); or
- Marathon and Marathon Global Funding will no longer have any obligation
to comply with the restrictive covenants under the indenture, and the
related events of default will no longer apply to Marathon and Marathon
Global Funding, but some of the other obligations under the indenture and
the debt securities of that series, including the obligations of Marathon
Global Funding to make payments on those debt securities and Marathon's
guarantees of those payment obligations, will survive ("covenant
defeasance").
If we defease a series of debt securities, the holders of the debt
securities of the series affected will not be entitled to the benefits of the
indenture, except for obligations to:
- register the transfer or exchange of debt securities;
- replace mutilated, destroyed, lost or stolen debt securities; and
- maintain paying agencies and hold moneys for payment in trust.
As a condition to either legal defeasance or covenant defeasance, we must
deliver to the trustee an opinion of counsel that the holders of the debt
securities will not recognize gain or loss for federal income tax purposes as a
result of the action.
22
GOVERNING LAW
New York law will govern the indentures and the debt securities.
THE TRUSTEE
JPMorgan Chase Bank will be the trustee under the indenture. JPMorgan Chase
Bank is the trustee under Marathon's senior indenture dated as of February 26,
2002 and Marathon's subordinated indenture dated as of February 26, 2002. As of
May 31, 2002, $1.45 billion aggregate principal amount of Marathon's senior
unsecured notes was outstanding under Marathon's senior indenture.
If an event of default occurs and is continuing, the trustee must use the
degree of care and skill of a prudent person in the conduct of his own affairs.
The trustee will become obligated to exercise any of its powers under the
indentures at the request of any of the holders of any debt securities only
after those holders have offered the trustee indemnity reasonably satisfactory
to it.
The indenture limits the right of the trustee, if it is one of our
creditors, to obtain payment of claims or to realize on certain property
received for any such claim, as security or otherwise. The trustee may engage in
other transactions with Marathon or Marathon Global Funding. If it acquires any
conflicting interest, however, it must eliminate that conflict or resign.
EXCHANGE, REGISTRATION AND TRANSFER
Debt securities of any series will be exchangeable for other debt
securities of the same series with the same total principal amount and the same
terms but in different authorized denominations in accordance with the
applicable indenture. Holders may present registered debt securities for
registration of transfer at the office of the security registrar or any transfer
agent we designate. The security registrar or transfer agent will effect the
transfer or exchange when it is satisfied with the documents of title and
identity of the person making the request.
Unless we inform you otherwise in the prospectus supplement, Marathon
Global Funding will appoint the trustee under the indenture as security
registrar for the debt securities issued in registered form under the indenture.
If the prospectus supplement refers to any transfer agent initially designated
by Marathon Global Funding, Marathon Global Funding may at any time rescind that
designation or approve a change in the location through which any transfer agent
acts. Marathon Global Funding will be required to maintain an office or agency
for transfers and exchanges in each place of payment. It may at any time
designate additional transfer agents for any series of debt securities or
rescind the designation of any transfer agent. No service charge will be made
for any registration of transfer or exchange of those securities. Marathon
Global Funding or the trustee may, however, require the payment of any tax or
other governmental charge payable for that registration.
In the case of any redemption, neither the security registrar nor the
transfer agent will be required to register the transfer of or exchange of any
debt security:
- during a period beginning 15 business days before the day of mailing of
the relevant notice of redemption and ending on the close of business on
that day of mailing; or
- if Marathon Global Funding has called the debt security for redemption in
whole or in part, except the unredeemed portion of any debt security
being redeemed in part.
PAYMENT AND PAYING AGENTS
Unless we inform you otherwise in the prospectus supplement, Marathon
Global Funding will make payments on the debt securities in U.S. dollars at the
office of the trustee or any paying agent it designates. At its option, Marathon
Global Funding may make payments by check mailed to the holder's registered
address or, with respect to global debt securities, by wire transfer. Unless we
inform you otherwise in the prospectus supplement, interest payments will be
made to the person in whose name the debt security is registered at the close of
business on the record date for the interest payment.
23
Unless we inform you otherwise in the prospectus supplement, Marathon
Global Funding will designate the trustee under the indenture as the paying
agent for payments on debt securities issued under the indenture. Marathon
Global Funding may at any time designate additional paying agents or rescind the
designation of any paying agent or approve a change in the office through which
any paying agent acts.
Subject to the requirements of any applicable abandoned property laws, the
trustee and paying agent will repay to Marathon or Marathon Global Funding on
our written request any funds they hold for payments on the debt securities that
remain unclaimed for two years after the date upon which that payment has become
due. After repayment to Marathon or Marathon Global Funding, holders entitled to
those funds must look only to us for payment.
BOOK-ENTRY DEBT SECURITIES
Marathon Global Funding may issue the debt securities of a series in the
form of one or more global debt securities that would be deposited with a
depositary or its nominee identified in the prospectus supplement. Marathon
Global Funding may issue global debt securities in either temporary or permanent
form. We will describe in the prospectus supplement the terms of any depositary
arrangement and the rights and limitations of owners of beneficial interests in
any global debt security.
PLAN OF DISTRIBUTION
Marathon Global Funding may sell the debt securities in and outside the
United States (1) through underwriters or dealers, (2) directly to purchasers or
(3) through agents. The prospectus supplement will set forth the following
information:
- the terms of the offering;
- the names of any underwriters or agents;
- the name or names of any managing underwriter or underwriters;
- the purchase price of the securities from Marathon Global Funding;
- the net proceeds Marathon Global Funding will receive from the sale of
the securities;
- the place and time of delivery of the securities;
- any delayed delivery arrangements;
- any underwriting discounts, commissions and other items constituting
underwriters' compensation;
- any initial public offering price;
- any discounts or concessions allowed or reallowed or paid to dealers; and
- any commissions paid to agents.
SALE THROUGH UNDERWRITERS OR DEALERS
If Marathon Global Funding uses underwriters in the sale of the offered
securities, the underwriters will acquire the securities for their own account.
The underwriters may resell the securities from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. Underwriters may
offer securities to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. Unless we inform you otherwise in the prospectus
supplement, the obligations of the underwriters to purchase the securities will
be subject to several conditions, and the underwriters will be obligated to
purchase all the offered securities if they purchase any of them. The
underwriters may change from time to time any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers.
24
If Marathon Global Funding uses underwriters in the sale of the offered
securities, rules of the SEC may limit the ability of the underwriters and
certain selling group members to bid for and purchase Marathon Global Funding's
or our securities until the distribution of the offered securities is completed.
As an exception to these rules, the underwriters are permitted to engage in
certain transactions that stabilize, maintain or otherwise affect the price of
the offered securities.
In connection with an underwritten offering, the underwriters may make
short sales of the offered securities and may purchase Marathon Global Funding's
securities on the open market to cover positions created by short sales. Short
sales involve the sale by the underwriters of a greater number of securities
than they are required to purchase in the offering. "Covered" short sales are
made in an amount not greater than the over-allotment option that may be granted
to the underwriters in connection with the offering. The underwriters may close
out any covered short position by either exercising the over-allotment option or
purchasing Marathon Global Funding's securities in the open market. In
determining the source of securities to close out the covered short position,
the underwriters will consider, among other things, the price of securities
available for purchase in the open market as compared to the price at which they
may purchase securities through the over-allotment option. "Naked" short sales
are sales in excess of the over-allotment option. The underwriters must close
out any naked short position by purchasing Marathon Global Funding's securities
in the open market. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the price of
the securities in the open market after pricing that could adversely affect
investors who purchase in the offering.
The underwriters may also impose a penalty bid on certain selling group
members. This means that if the underwriters purchase Marathon Global Funding's
securities in the open market to reduce the selling group members' short
position or to stabilize the price of the securities, they may reclaim the
amount of the selling concession from the selling group members who sold those
securities as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of those purchases or those purchases could prevent
or retard a decline in the price of the security. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
Neither Marathon, Marathon Global Funding nor the underwriters will make
any representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the offered
securities. In addition, neither Marathon, Marathon Global Funding nor the
underwriters will make any representation that the underwriters will engage in
these transactions or that these transactions, once commenced, will not be
discontinued without notice.
If Marathon Global Funding uses dealers in the sale of securities, it will
sell the securities to them as principals. They may then resell those securities
to the public at varying prices determined by the dealers at the time of resale.
We will include in the prospectus supplement the names of the dealers and the
terms of the transaction.
DIRECT SALES AND SALES THROUGH AGENTS
Marathon Global Funding may sell the securities directly. In that event, no
underwriters or agents would be involved. Marathon Global Funding may also sell
the securities through agents it designates from time to time. In the prospectus
supplement, we will name any agent involved in the offer or sale of the offered
securities, and we will describe any commissions payable by Marathon Global
Funding to the agent. Unless we inform you otherwise in the prospectus
supplement, any agent will agree to use its reasonable best efforts to solicit
purchases for the period of its appointment.
Marathon Global Funding may sell the securities directly to institutional
investors or others who may be deemed to be underwriters within the meaning of
the Securities Act of 1933 with respect to any sale of those securities. We will
describe the terms of any such sales in the prospectus supplement.
25
DELAYED DELIVERY CONTRACTS
If we so indicate in the prospectus supplement, Marathon Global Funding may
authorize agents, underwriters or dealers to solicit offers from various types
of institutions to purchase securities from Marathon Global Funding at the
public offering price under delayed delivery contracts. These contracts would
provide for payment and delivery on a specified date in the future. The
contracts would be subject only to those conditions the prospectus supplement
describes. The prospectus supplement will describe the commission payable for
solicitation of those contracts.
GENERAL INFORMATION
Marathon and Marathon Global Funding may have agreements with the agents,
dealers and underwriters to indemnify them against civil liabilities, including
liabilities under the Securities Act of 1933, or to contribute with respect to
payments that the agents, dealers or underwriters may be required to make.
Agents, dealers and underwriters may engage in transactions with or perform
services for Marathon and Marathon Global Funding in the ordinary course of
their businesses.
LEGAL MATTERS
Baker Botts L.L.P., Houston, Texas, our outside counsel, and Stewart
McKelvey Stirling Scales, Halifax, Nova Scotia, Marathon Global Funding's
Canadian counsel, will issue opinions about certain legal matters in connection
with the offering of the debt securities and Marathon's guarantees. Any
underwriters will be advised about issues relating to any offering by their own
legal counsel.
EXPERTS
The financial statements and the financial statement schedule incorporated
in this prospectus by reference to the Annual Report on Form 10-K of Marathon
Oil Corporation for the year ended December 31, 2001 have been so incorporated
in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
Marathon files annual, quarterly and current reports, proxy statements and
other information with the SEC. You can read and copy any materials filed by
Marathon, including materials it filed under its former name, USX Corporation,
with the SEC at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can obtain information about the operation of the
SEC's public reference room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a Web site that contains information Marathon files electronically
with the SEC, which you can access over the Internet at http://www.sec.gov. You
can also obtain information about Marathon at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
Marathon Global Funding is not currently subject to the information
reporting requirements of the Securities Exchange Act of 1934 and will be exempt
from such requirements upon the effectiveness of the registration statement of
which this prospectus is a part in reliance upon Rule 12h-5 of the Exchange Act.
This prospectus is part of a registration statement we have filed with the
SEC relating to the debt securities of Marathon Global Funding and Marathon's
guarantees. This prospectus does not contain all the information the
registration statement sets forth or includes in its exhibits and schedules, in
accordance with the rules and regulations of the SEC, and we refer you to that
omitted information. The statements this prospectus makes pertaining to the
content of any contract, agreement or other document that is an exhibit to the
registration statement necessarily are summaries of their material provisions,
and we qualify them in their entirety by reference to those exhibits for
complete statements of their provisions. The registration statement and its
exhibits and schedules are available at the SEC's public reference room or
through its Web site.
26
The SEC allows us to "incorporate by reference" the information Marathon
files with it, which means we can disclose important information to you by
referring you to those documents. The information we incorporate by reference is
an important part of this prospectus, and later information that Marathon files
with the SEC will automatically update and supersede that information. We
incorporate by reference the documents listed below, and any future filings
Marathon makes with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until all the offered securities are sold or
after the date on which the registration statement that includes this prospectus
was initially filed with the SEC and before the effectiveness of such
registration statement:
- our annual report on Form 10-K for the year ended December 31, 2001;
- our quarterly report on Form 10-Q for the quarter ended March 31, 2002;
and
- our current reports on Form 8-K filed January 3, 2002 (as amended by a
Form 8-K/A filed on January 16, 2002), February 27, 2002, March 4, 2002
and May 29, 2002.
We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus has been delivered, upon written or
oral request, a copy of any or all the documents we incorporate by reference in
this prospectus, other than any exhibit to any of those documents, unless we
have specifically incorporated that exhibit by reference into the information
this prospectus incorporates. You may request copies by writing or telephoning
Marathon at the following address:
Marathon Oil Corporation
5555 San Felipe Road
Houston, Texas 77056-2723
Attention: Corporate Secretary
Telephone: (713) 629-6600
YOU SHOULD RELY ONLY ON THE INFORMATION WE HAVE PROVIDED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT OR PRICING SUPPLEMENT.
WE HAVE NOT AUTHORIZED ANY PERSON (INCLUDING ANY SALESMAN OR BROKER) TO PROVIDE
INFORMATION OTHER THAN THAT WHICH THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT
OR PRICING SUPPLEMENT PROVIDES. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN
ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT
THE INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS
OF ANY DATE OTHER THAN THE DATE ON ITS COVER PAGE OR THAT ANY INFORMATION IN ANY
DOCUMENT WE HAVE INCORPORATED BY REFERENCE IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE OF THE DOCUMENT INCORPORATED BY REFERENCE. ACCORDINGLY, WE URGE YOU TO
REVIEW EACH DOCUMENT WE SUBSEQUENTLY FILE WITH THE SEC AND INCORPORATE BY
REFERENCE AS DESCRIBED ABOVE FOR UPDATED INFORMATION.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth expenses payable by Marathon Global Funding
Corporation ("Marathon Global Funding") and Marathon Oil Corporation
("Marathon") in connection with the issuance and distribution of the securities
being registered. All the amounts shown are estimates, except the SEC
registration fee.
SEC registration fee........................................ $ 36,800
Printing and engraving expenses............................. 50,000
Legal fees and expenses..................................... 40,000
Accounting fees and expenses................................ 40,000
Fees and expenses of trustee and counsel.................... 10,000
Rating agency fees.......................................... 300,000
Miscellaneous expenses...................................... 23,200
--------
Total..................................................... $500,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
MARATHON
DELAWARE GENERAL CORPORATION LAW
Section 145 of the Delaware General Corporation Law (the "DGCL") empowers a
Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he or she is or was a director or officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by that person in connection with such action,
suit or proceeding, provided that such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
A Delaware corporation may indemnify directors, officers, employees and others
against expenses (including attorneys' fees) in an action by or in the right of
the corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the person to be indemnified has been
adjudged to be liable to the corporation. Where a director or an officer is
successful on the merits or otherwise in the defense of any action referred to
above or in defense of any claim, issue or matter therein, the corporation must
indemnify that director or officer against the expenses (including attorneys'
fees) which he or she actually and reasonably incurred in connection therewith.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (1) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (2) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) under Section 174 of the DGCL or (4) for any
transaction from which the director derived an improper personal benefit.
II-1
CERTIFICATE OF INCORPORATION AND BYLAWS
Article Eleventh of Marathon's restated certificate of incorporation states
that:
No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director, except (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit. No amendment to or repeal of this
Article Eleventh shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment or
repeal.
In addition, Article V of Marathon's by-laws provides that Marathon shall
indemnify and hold harmless to the fullest extent permitted by law any person
who was or is made or is threatened to be made a party or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director,
officer, employee or agent of Marathon or is or was serving at the request of
Marathon as an officer, director, employee or agent of another corporation,
partnership, joint venture, trust, enterprise or nonprofit entity, including
service with respect to employee benefit plans, against all expenses, liability
and loss reasonably incurred or suffered by such person.
INDEMNIFICATION AGREEMENTS AND INSURANCE
Agreements Marathon may enter into with underwriters, dealers and agents
who participate in the distribution of securities of Marathon may contain
provisions relating to the indemnification of Marathon's officers and directors.
Marathon also maintains directors' and officers' liability insurance for
its directors and officers that protects them from certain losses arising from
claims or charges made against them in their capacities as directors or officers
of Marathon.
Marathon maintains insurance policies under which Marathon's directors and
officers are insured, within the limits and subject to the limitations of the
policies, against certain expenses in connection with the defense of actions,
suits or proceedings, and certain liabilities which might be imposed as a result
of such actions, suits or proceedings, to which they are parties by reason of
being or having been such directors or officers.
MARATHON GLOBAL FUNDING
Section 135 of the articles of association of Marathon Global Funding
provides that absent dishonesty or intentional violation of the law every
present or former director or officer of Marathon Global Funding or of certain
of its affiliates shall be indemnified by Marathon Global Funding against all
costs, losses and expenses which such person may incur in any civil, criminal or
administrative action or proceeding to which such person is made a party by
reason of being or having been a director or officer of Marathon Global Funding
or its affiliate. The amount for which indemnity is proved shall immediately
attach as a lien on the property of Marathon Global Funding and have a priority
against the members over all other claims. In addition, section 136 of Marathon
Global Funding's articles of association provides that, unless caused by such
person's own dishonesty or intentional violation of the law, no present or
former director or officer of Marathon Global Funding or its affiliates shall be
liable for:
- acts, receipts, neglects or defaults of any other officer or director;
- any loss or expense happening to Marathon Global Funding through the
insufficiency or deficiency of title to any property acquired by order of
the directors for or on behalf of Marathon Global Funding;
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- the insufficiency or deficiency of any security in or upon which any of
the moneys of Marathon Global Funding shall be invested;
- any loss or damage arising from the bankruptcy, insolvency or tortious
act of any person with whom any money, securities or effects shall be
deposited;
- any loss occasioned by error of judgment or oversight by any director or
officer; or
- any other loss, damage or misfortune that occurs in the execution of the
duties of an officer or director's office.
ITEM 16. EXHIBITS*
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
**2.1 Holding Company Reorganization Agreement dated as of July 1,
2001 by and among USX Corporation, USX HoldCo, Inc. and
United States Steel LLC (incorporated by reference to
Exhibit 2.1 to USX Corporation's Current Report on Form 8-K
dated July 2, 2001 (File No. 1-05153)).
**2.2 Agreement and Plan of Reorganization, dated as of July 31,
2001, by and between USX Corporation and United States Steel
LLC (incorporated by reference to Exhibit 2.1 to USX
Corporation's Registration Statement on Form S-4 (Reg. No.
333-69090)).
4.1 Form of Indenture among Marathon Global Funding Corporation,
as issuer, Marathon Oil Corporation, as guarantor, and
JPMorgan Chase Bank, as trustee, relating to the debt
securities of Marathon Global Funding Corporation.
5.1 Opinion of Stewart McKelvey Stirling Scales.
5.2 Opinion of Baker Botts L.L.P.
**12.1 Statement showing computation of ratios of earnings to fixed
charges (incorporated by reference to Exhibit 12.2 to
Marathon Oil Corporation's quarterly report on Form 10-Q for
the quarter ended March 31, 2002 (File No. 1-05153)).
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Stewart McKelvey Stirling Scales (included in
Exhibit 5.1).
23.3 Consent of Baker Botts L.L.P. (included in Exhibit 5.2).
+24.1 Powers of Attorney for Marathon Oil Corporation.
+24.2 Powers of Attorney for Marathon Global Funding Corporation.
25.1 Statement of Eligibility of Trustee under the Indenture.
---------------
* Marathon will file as an exhibit to a current report on Form 8-K (i) any
underwriting agreement relating to securities offered hereby, (ii) the
instruments setting forth the terms of any securities offered hereby and
(iii) any required opinion of counsel as to certain tax matters relative to
securities offered hereby.
** Incorporated by reference to the filing indicated.
+ Previously filed.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrants hereby undertake:
(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 of 1933, as amended (the "Securities Act");
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(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range 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 represent no more than
a 20 percent 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, that paragraphs (a)(1)(i) and (a)(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 by Marathon
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the registration
statement.
(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 that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act, each filing of Marathon's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, each 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 a registrant of expenses
incurred or paid by a director, officer or controlling person of such 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, such 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.
(d) The undersigned registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement
II-4
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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Marathon Oil
Corporation 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 to registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, the State of
Texas, on June 13, 2002.
MARATHON OIL CORPORATION
By: /s/ JOHN T. MILLS
------------------------------------
John T. Mills
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to registration statement has been signed by the following persons in the
capacities indicated on June 13, 2002.
SIGNATURE TITLE
--------- -----
* President, Chief Executive Officer and
-------------------------------------------------- Director (Principal Executive Officer)
Clarence P. Cazalot, Jr.
/s/ JOHN T. MILLS Chief Financial Officer
-------------------------------------------------- (Principal Financial Officer)
John T. Mills
* Vice President-Accounting and Controller
-------------------------------------------------- (Principal Accounting Officer)
Albert G. Adkins
* Director
--------------------------------------------------
Neil A. Armstrong
* Director
--------------------------------------------------
David A. Daberko
* Director
--------------------------------------------------
Dr. Shirley Ann Jackson
* Director
--------------------------------------------------
Charles R. Lee
* Director
--------------------------------------------------
Dennis H. Reilley
* Director
--------------------------------------------------
Seth E. Schofield
* Chairman of the Board
--------------------------------------------------
Thomas J. Usher
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SIGNATURE TITLE
--------- -----
* Director
--------------------------------------------------
Douglas C. Yearley
*By: /s/ JOHN T. MILLS
------------------------------------------
John T. Mills
Attorney in Fact
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Marathon Global
Funding Corporation 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 to registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, the State of
Texas, on June 13, 2002.
MARATHON GLOBAL FUNDING CORPORATION
By: /s/ JOHN T. MILLS
------------------------------------
John T. Mills
President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to registration statement has been signed by the following persons in the
capacities indicated on June 13, 2002.
SIGNATURE TITLE
--------- -----
/s/ JOHN T. MILLS President and Director
--------------------------------------------- (Principal Executive Officer)
John T. Mills
* Treasurer
--------------------------------------------- (Principal Financial Officer)
Mark A. Bliss
* Controller
--------------------------------------------- (Principal Accounting Officer)
Richard D. Rees
* Director
---------------------------------------------
James F. Meara
*By: /s/ JOHN T. MILLS
------------------------------------------
John T. Mills
Attorney in Fact
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EXHIBIT INDEX*
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
**2.1 Holding Company Reorganization Agreement dated as of July 1,
2001 by and among USX Corporation, USX HoldCo, Inc. and
United States Steel LLC (incorporated by reference to
Exhibit 2.1 to USX Corporation's Current Report on Form 8-K
dated July 2, 2001 (File No. 1-05153)).
**2.2 Agreement and Plan of Reorganization, dated as of July 31,
2001, by and between USX Corporation and United States Steel
LLC (incorporated by reference to Exhibit 2.1 to USX
Corporation's Registration Statement on Form S-4 (Reg. No.
333-69090)).
4.1 Form of Indenture among Marathon Global Funding Corporation,
as issuer, Marathon Oil Corporation, as guarantor, and
JPMorgan Chase Bank, as trustee, relating to the debt
securities of Marathon Global Funding Corporation.
5.1 Opinion of Stewart McKelvey Stirling Scales.
5.2 Opinion of Baker Botts L.L.P.
**12.1 Statement showing computation of ratios of earnings to fixed
charges (incorporated by reference to Exhibit 12.2 to
Marathon Oil Corporation's quarterly report on Form 10-Q for
the quarter ended March 31, 2002 (File No. 1-05153)).
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Stewart McKelvey Stirling Scales (included in
Exhibit 5.1).
23.3 Consent of Baker Botts L.L.P. (included in Exhibit 5.2).
+24.1 Powers of Attorney for Marathon Oil Corporation.
+24.2 Powers of Attorney for Marathon Global Funding Corporation.
25.1 Statement of Eligibility of Trustee under the Indenture.
---------------
* Marathon will file as an exhibit to a current report on Form 8-K (i) any
underwriting agreement relating to securities offered hereby, (ii) the
instruments setting forth the terms of any securities offered hereby and
(iii) any required opinion of counsel as to certain tax matters relative to
securities offered hereby.
** Incorporated by reference to the filing indicated.
+ Previously filed.