<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 20, 1998
REGISTRATION NO. 333-56867
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
USX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
DELAWARE 25-0996816
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION
ORGANIZATION) NO.)
</TABLE>
------------------------
600 GRANT STREET, PITTSBURGH, PENNSYLVANIA 15219-4776 (412) 433-1121
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DAN D. SANDMAN, ESQ.
GENERAL COUNSEL, SECRETARY AND SENIOR VICE PRESIDENT -- HUMAN RESOURCES & PUBLIC
AFFAIRS
600 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15219-4776
(412) 433-1121
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
PROSPECTUS SUPPLEMENT (Subject to Completion)
(To Prospectus Dated , 1998)
Shares
USX-Marathon Group Common Stock
of
USX Corporation
------------------------
The shares of USX-Marathon Group Common Stock ("Marathon Stock") included in
this Prospectus Supplement are to be delivered to Holders of Exchangeable Shares
(see "Glossary" in this Prospectus Supplement) of 761581 Alberta Ltd.
("Albertaco"), an indirect Canadian subsidiary of Marathon Oil Company, an Ohio
Corporation ("Marathon"). The Exchangeable Shares were issued in exchange for
the outstanding shares of common stock of Tarragon Oil and Gas Limited, an
Ontario Corporation ("Tarragon"), in August 1998. The Exchangeable Shares are
exchangeable at any time on a one-for-one basis into shares of Marathon Stock on
the terms and conditions summarized herein. See "Description of Exchangeable
Shares" in this Prospectus Supplement.
The Marathon Stock is common stock of USX Corporation ("USX" or the
"Corporation") and is intended to reflect the performance of USX's energy
business that constitutes the Marathon Group of USX. The Marathon Stock is one
of two classes of common stock of USX outstanding, the other being USX-U. S.
Steel Group Common Stock ("Steel Stock"). The holders of Marathon Stock and
Steel Stock are holders of common stock of USX and continue to be subject to all
of the risks associated with an investment in USX and all of its businesses and
liabilities.
Dividends on the Marathon Stock will be payable when, as and if declared by
the Board of Directors of USX (the "Board") out of all funds of USX legally
available therefor. The Board intends to declare and pay dividends on the
Marathon Stock based on the financial condition and results of operations of the
Marathon Group. The voting power of one share of Steel Stock relative to one
share of Marathon Stock will fluctuate based upon the relative market values
thereof. Upon the liquidation of USX, the rights of the holders of the Marathon
Stock and the Steel Stock will be based on their relative market
capitalizations. Subject to certain conditions, the Marathon Stock may be
exchanged, at USX's option, for shares of the common stock of a wholly owned
subsidiary of USX to which the assets and liabilities of the Marathon Group have
been transferred as described in the accompanying Prospectus (see "Description
of Capital Stock--Marathon Stock--Exchange and Redemption").
The features of the Marathon Stock, as well as other special considerations,
are more fully discussed under "Price Range of Marathon Stock, Dividends and
Dividend Policy" in this Prospectus Supplement and under "Special
Considerations" and "Description of Capital Stock" in the accompanying
Prospectus.
USX will bear the cost of registering the shares of Marathon Stock,
estimated to be $[ ]. Because shares of Marathon Stock will be issued in
exchange for Exchangeable Shares, USX will receive no proceeds on such issuance.
The Marathon Stock is listed on the New York, Chicago and Pacific Stock
Exchanges. On [ ], 1998, the reported last sale price of the Marathon
Stock on the New York Stock Exchange was $[ ] per share.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 3
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE CORPORATION. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING
PROSPECTUS CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY
ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE
SUCH AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
THE ISSUANCE AND RESALE OF THE MARATHON STOCK IN CANADA ARE SUBJECT TO
CERTAIN RESTRICTIONS. SEE "CANADIAN SECURITIES LAW CONSIDERATIONS" HEREIN.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary............................... S-3
Use of Proceeds....................... S-5
Price Range of Marathon Stock,
Dividends and Dividend Policy....... S-5
Description of Exchangeable Shares.... S-6
Exchangeable Share Provisions.... S-6
Exchange Trust Agreement......... S-8
Support Agreement................ S-8
Call Rights...................... S-9
Delivery of Marathon Shares...... S-10
Capital Structure of Albertaco... S-10
Procedures for Delivery of
Certificates........................ S-11
Exchange of Exchangeable
Shares......................... S-11
Retraction of Exchangeable
Shares......................... S-12
Redemption of Exchangeable
Shares......................... S-14
Certain Income Tax Considerations..... S-15
Canadian Federal Income Tax
Considerations................. S-15
United States Federal Income Tax
Considerations................. S-18
Canadian Securities Law
Considerations...................... S-21
Legal Matters......................... S-21
Glossary.............................. S-22
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
USX Corporation....................... 3
Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends........................... 4
Use of Proceeds....................... 4
Pending Transaction................... 4
Special Considerations................ 4
Management and Accounting Policies.... 7
Description of the Debt Securities.... 8
Description of Capital Stock.......... 16
Description of Warrants............... 25
Plan of Distribution.................. 26
Validity of Securities................ 26
Experts............................... 26
Appendix I--Summary of USX Common
Stock............................... A-1
</TABLE>
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S-2
<PAGE> 4
SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus Supplement and in the accompanying Prospectus and is qualified
in its entirety by reference to the Prospectus which includes the documents
incorporated therein under "Incorporation of Certain Documents by Reference."
Readers are encouraged to refer to such incorporated documents for a more
complete description of USX. See "Glossary" for definitions of capitalized terms
not otherwise defined in this Prospectus Supplement.
MARATHON GROUP
The Marathon Group is comprised of Marathon and certain other subsidiaries
of USX, which are engaged in worldwide exploration and production of crude oil
and natural gas; domestic refining, marketing and transportation of petroleum
products; and other energy related businesses. Marathon Group revenues as a
percentage of total USX consolidated revenues were 69% in 1997, 71% in 1996 and
68% in 1995.
Exploration and Production
The Marathon Group believes it is the tenth largest U. S.-based integrated
oil and natural gas concern in terms of total proved barrel of oil equivalent
("BOE") reserves as of December 31, 1997. At December 31, 1997 it had net proved
liquid hydrocarbon and natural gas reserves, including equity affiliates, of 1.4
billion barrels on a BOE basis, of which 68% were located in the United States.
In 1997, Marathon replaced 147% of its 1997 worldwide oil and gas production on
a BOE basis. Significant reserve additions during 1997 included Phase 1
development of the Sakhalin II project in Russia and various Gulf of Mexico
properties. Marathon is currently conducting exploration and development
activities in 12 countries, including the United States. During 1997,
exploration activities resulted in discoveries in the United States (both
onshore and in the Gulf of Mexico), offshore Gabon and in the United Kingdom
sector of the North Sea. At year-end 1997, Marathon was producing crude oil
and/or natural gas in six countries, including the United States. During the
first six months of 1998, Marathon's worldwide liquid hydrocarbon production
averaged approximately 185,000 barrels per day and worldwide natural gas volumes
averaged approximately 1.2 billion cubic feet per day.
Refining, Marketing and Transportation
During 1997, Marathon and Ashland Inc. ("Ashland") agreed to combine the
major elements of their refining, marketing and transportation ("RM&T")
operations. On January 1, 1998, Marathon transferred certain RM&T net assets to
Marathon Ashland Petroleum LLC ("MAP"), a new consolidated subsidiary. Also on
January 1, 1998, Marathon acquired certain RM&T net assets from Ashland in
exchange for a 38% interest in MAP. MAP has seven refineries with a combined
capacity of 935,000 barrels per day, 84 light products and asphalt terminals,
about 5,400 retail marketing outlets in 20 states and significant pipeline
holdings. Marathon believes that MAP ranks sixth among U.S. petroleum
corporations on the basis of both crude oil refining capacity and refined
product sales volumes. Sales of refined products averaged approximately
1,161,000 barrels per day in the first six months of 1998.
USX CORPORATION
USX is a diversified company which is principally engaged in the energy
business through its Marathon Group, and in the steel business through its U. S.
Steel Group. The term "USX" when used herein refers to USX Corporation or USX
Corporation and its subsidiaries, as required by the context. The term "Group"
when used herein refers to the Marathon Group and/or the U. S. Steel Group, as
required by the context.
USX has two classes of common stock outstanding, USX-Marathon Group Common
Stock ("Marathon Stock") and USX-U. S. Steel Group Common Stock ("Steel Stock").
Each class of common stock is intended to provide the stockholders of such class
with a separate security reflecting the performance of the related Group.
Effective October 31, 1997, USX sold Delhi Gas Pipeline Corporation and other
subsidiaries of USX that comprised all of the Delhi Group (the "Delhi
Companies") and, on January 26, 1998, redeemed all the outstanding USX-Delhi
Group Common Stock.
S-3
<PAGE> 5
The U. S. Steel Group includes U. S. Steel, the largest steel producer in
the United States, which is primarily engaged in the production and sale of
steel mill products, coke and taconite pellets. The U. S. Steel Group also
includes the management of mineral resources, domestic coal mining, and
engineering and consulting services. Equity affiliates of the U. S. Steel Group
include Transtar Inc. and joint ventures, such as USS/Kobe Steel Company,
USS-POSCO Industries and PRO-TEC Coating Company. Other businesses that are part
of the U. S. Steel Group include real estate development and management, and
leasing and financing activities. U. S. Steel Group revenues as a percentage of
total USX consolidated revenues were 31% in 1997, 29% in 1996 and 32% in 1995.
USX was incorporated in 1901 and is a Delaware corporation. Its executive
offices are located at 600 Grant St., Pittsburgh, PA 15219-4776 (tel:
412-433-1121).
THE EXCHANGEABLE SHARES
Pursuant to the Arrangement Agreement, Albertaco, an indirect Canadian
subsidiary of Marathon, a wholly owned subsidiary of USX, acquired all of the
issued and outstanding common stock of Tarragon. Upon approval of the Tarragon
Securityholders on August 11, 1998 and the issuance of a Final Order by the
Ontario Court (General Division) on August , 1998 approving the transaction
and the filing of Articles of Arrangement of Tarragon with the relevant
authority in Ontario, the Arrangement was completed and each Tarragon
Securityholder ultimately received in exchange for each Tarragon Share, at their
election, Cdn$14.25 cash or Exchangeable Shares having an equivalent market
value. As a result, as of August , 1998, an aggregate of Exchangeable
Shares were held by former Tarragon Securityholders.
An Exchangeable Share is intended to be the economic equivalent of a share
of Marathon Stock. The holders of Exchangeable Shares will be entitled to
receive declared dividends equivalent to dividends declared from time to time by
USX on Marathon Shares. The Exchangeable Shares are:
- exchangeable at any time;
- retractable at the option of the holder (i.e. redeemable by
Albertaco) at any time; and
- automatically redeemable by Albertaco on August , 2003 (and, in
certain circumstances, as early as August , 2001);
in each case on a one for one basis (subject to adjustment in certain
circumstances) into shares of Marathon Stock. See "Description of Exchangeable
Shares" for a description of these and other important provisions of the
Exchangeable Shares.
The Exchangeable Shares provide certain holders of Tarragon shares an
opportunity to defer Canadian income tax payable on gains from the disposition
of their Tarragon Shares.
The disposition of the Exchangeable Shares for Marathon Shares will be a
taxable event under Canadian law. Such a disposition can occur as a result of
either a redemption (including a retraction) by Albertaco or an acquisition by
USX, Marathon or a Marathon Subsidiary. The Canadian federal income tax
consequences of a redemption differ significantly from those of an acquisition.
See "Certain Income Tax Considerations--Canadian Federal Income Tax
Considerations."
Also, while the matter is not free from doubt, it is anticipated that such
disposition will be a taxable event under U.S. law. See "Certain Income Tax
Considerations--United States Federal Income Tax Considerations--Exchange of
Exchangeable Shares for Marathon Shares."
S-4
<PAGE> 6
USE OF PROCEEDS
Because shares of Marathon Stock will be issued in exchange for
Exchangeable Shares, USX will receive no net proceeds (other than such
Exchangeable Shares received by USX, directly or indirectly) at the time of such
issuance.
PRICE RANGE OF MARATHON STOCK, DIVIDENDS AND DIVIDEND POLICY
The Marathon Stock is listed on the New York Stock Exchange (the "NYSE")
and the Chicago and Pacific Stock Exchanges. The following table sets forth the
range of high and low sales prices of the Marathon Stock on the NYSE Composite
Tape (the "Composite Tape") and dividends paid on the Marathon Stock for the
stated periods.
<TABLE>
<CAPTION>
DIVIDENDS
HIGH LOW PER SHARE
------- -------- ---------
<S> <C> <C> <C> <C> <C>
1996
First Quarter............................................. $20 1/2 $17 1/4 $.17
Second Quarter............................................ 22 7/8 19 1/8 .17
Third Quarter............................................. 22 1/8 20 .17
Fourth Quarter............................................ 25 1/2 21 1/8 .19
1997
First Quarter............................................. $28 1/2 $23 3/4 $.19
Second Quarter............................................ 31 1/8 25 5/8 .19
Third Quarter............................................. 38 3/16 28 15/16 .19
Fourth Quarter............................................ 38 7/8 29 .19
1998
First Quarter............................................. $40 1/2 $31 $.21
Second Quarter............................................ 38 7/8 32 3/16 .21
</TABLE>
On July [ ], 1998, the reported last sale price of the Marathon Stock on
the NYSE was $ per share.
On July , 1998, the USX board of directors (the "Board") declared a
dividend of $ per share on Marathon Stock payable on September , 1998 to
stockholders of record on August , 1998. Shares of Marathon Stock issued
pursuant to the offering will be entitled to declared dividends payable to
holders of record for such record dates following the holder's receipt of such
shares. The Board reserves the right to change the dividend rate at any time and
from time to time.
The Board intends to declare and pay dividends on the Marathon Stock based
on the financial condition and results of operations of the Marathon Group,
although it has no obligation under Delaware law to do so. Dividends on the
Marathon Stock will be payable when, as and if declared by the Board out of
legally available funds of USX (as defined under Delaware law). In making its
dividend decisions, the Board will rely on the financial statements of the
Marathon Group. In determining its dividend policy, the Board will consider,
among other things, the long-term earnings and cash flow capabilities of the
Marathon Group, as well as the dividend policies of publicly traded energy
companies. See "Special Considerations--Dividends and Earnings Per Share" and
"Description of Capital Stock--Marathon Stock--Dividends" in the accompanying
Prospectus.
S-5
<PAGE> 7
DESCRIPTION OF EXCHANGEABLE SHARES
Exchangeable Shares are the economic equivalent of Marathon Shares by
virtue of the terms of the Exchangeable Share Provisions, the Exchange Trust
Agreement and the Support Agreement. The Exchangeable Share Provisions, the
Exchange Trust Agreement, the Support Agreement and the Call Rights are
described in this section. See "Glossary" for capitalized terms used in this
Prospectus Supplement and not otherwise defined herein. For a description of the
Marathon Stock, see "Description of Capital Stock--Marathon Stock" in the
accompanying Prospectus.
EXCHANGEABLE SHARE PROVISIONS
The following is a summary description of the material provisions of the
Exchangeable Share Provisions and is qualified in its entirety by reference to
the full text of the Exchangeable Share Provisions.
Retraction of Exchangeable Shares by Holders
The holders of Exchangeable Shares are entitled at any time to retract
(i.e., require Albertaco to redeem) any or all of the Exchangeable Shares held
by such holder for an equivalent number of Marathon Shares for each Exchangeable
Share, which shall be delivered to the retracting holder on the retraction date
specified by the holder (which shall not be less than three nor more than ten
Business Days after the date on which Albertaco receives the retraction request
from the holder). This retraction right is subject to the Retraction Call Rights
of USX, Marathon and a Marathon Subsidiary. See "Call Rights--Retraction Call
Right."
If, as a result of liquidity or solvency provisions of applicable law,
Albertaco is not permitted to redeem all Exchangeable Shares tendered by a
retracting holder, Albertaco will redeem only those Exchangeable Shares tendered
by the holder (rounded down to a whole number of shares) as would not be
contrary to such provisions of applicable law. The retracting Holder of any
Exchangeable Shares not redeemed by Albertaco will be deemed to have required
USX, Marathon or a Marathon Subsidiary to purchase such unredeemed shares in
exchange for Marathon Shares on the retraction date pursuant to the Exchange
Right. See "Exchange Trust Agreement--Exchange Right."
Redemption of Exchangeable Shares
On the Automatic Redemption Date (which is August , 2003 subject to
extension or acceleration in certain circumstances, provided that in no event
shall it be earlier than August , 2001), Albertaco will redeem all but not
less than all of the then outstanding Exchangeable Shares by delivery of an
equivalent number of Marathon Shares for each Exchangeable Share. Albertaco
shall, at least 120 days prior to the Automatic Redemption Date, provide the
registered holders of the Exchangeable Shares with written notice of the
proposed redemption of the Exchangeable Shares. This redemption right is subject
to the Redemption Call Right of USX, Marathon and a Marathon Subsidiary. See
"Call Rights--Redemption Call Right."
Exchange of Exchangeable Shares by Holders
The holders of Exchangeable Shares are entitled at any time to deliver any
or all of the holder's Exchangeable Shares to Albertaco for delivery thereof by
Albertaco to USX and for exchange thereof directly with USX for Marathon Shares.
Albertaco will immediately give notice thereof to USX, which will be required
under the Support Agreement to acquire, or to cause Marathon or a Marathon
Subsidiary to acquire, each such Exchangeable Share directly from such holder in
consideration of the issuance of an equivalent number of Marathon Shares. See
also "Exchange Trust Agreement."
Ranking
The Exchangeable Shares are entitled to a preference over the Albertaco
Common Shares, the Albertaco Non-Voting Common Shares, the Albertaco Non-Voting
Subordinated Shares and any other classes of shares of Albertaco with respect to
the payment of dividends and the distribution of assets in the event of the
liquidation, dissolution or winding-up of Albertaco. See "Capital Structure of
Albertaco."
S-6
<PAGE> 8
Dividends
The holders of Exchangeable Shares will be entitled to receive declared
dividends equivalent to dividends declared from time to time by the board of
directors of USX on Marathon Shares. The declaration date, record date and
payment date for dividends on the Exchangeable Shares will be the same as that
for the corresponding dividends on the Marathon Shares.
Certain Restrictions
Without the approval of the holders of the Exchangeable Shares, Albertaco
will not:
(a) pay any dividend on the Albertaco Common Shares, the Albertaco
Non-Voting Common Shares, Albertaco Non-Voting Subordinated Shares or
any other shares ranking junior to the Exchangeable Shares, other than
stock dividends payable in Albertaco Common Shares, Albertaco
Non-Voting Common Shares, Albertaco Non-Voting Subordinated Shares or
in any such other shares ranking junior to the Exchangeable Shares;
(b) redeem, purchase or make any capital distribution in respect of
Albertaco Common Shares, Albertaco Non-Voting Common Shares, Albertaco
Non-Voting Subordinated Shares or any other shares ranking junior to
the Exchangeable Shares;
(c) redeem or purchase any other shares of Albertaco ranking equally with
the Exchangeable Shares with respect to the payment of dividends or on
any liquidation distribution; or
(d) issue any Exchangeable Shares or any other shares of Albertaco ranking
equally with, or superior to, the Exchangeable Shares other than by
stock dividends to the holders of the Exchangeable Shares or as
contemplated in the Support Agreement;
unless the dividends on the outstanding Exchangeable Shares corresponding to
dividends declared to date on the Marathon Shares have been declared on the
Exchangeable Shares and Albertaco shall have sufficient assets, funds and other
property available to enable the due and punctual payment of such dividends.
Liquidation
In the event of the liquidation, dissolution or winding-up of Albertaco a
holder of Exchangeable Shares will be entitled to receive for each Exchangeable
Share an amount (the "Liquidation Amount") equal to the amount that a holder of
an equivalent number of Marathon Shares would be entitled to receive on the
liquidation, dissolution or winding-up of USX, which amount shall be satisfied
by the delivery to holders of the Exchangeable Shares of that number of Marathon
Shares equal to the Liquidation Amount. This liquidation right is subject to the
Liquidation Call Rights of USX, Marathon and Marathon Subsidiaries. See "Call
Rights--Liquidation Call Right."
Voting Rights
Except as required by applicable law, the holders of the Exchangeable
Shares shall not be entitled as such to receive notice of or attend any meeting
of the shareholders of Albertaco or to vote at any such meeting.
Amendment and Approval
The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may be changed only with the approval of the holders
thereof. Any such approval or any other approval or consent to be given by the
holders of the Exchangeable Shares will be sufficiently given if given in
accordance with applicable law and subject to a minimum requirement that such
approval or consent be evidenced by a resolution passed by not less than
two-thirds of the votes cast thereon (other than shares beneficially owned by
USX or entities controlled by USX; see "Support Agreement") at a meeting of the
holders of Exchangeable Shares duly called and held at which holders of at least
50% of the then outstanding Exchangeable Shares are present or represented by
proxy. In the event that no such quorum is present at such meeting within
one-half hour after the time appointed therefor, then the meeting will be
adjourned to such place and time not less than 10 days later as may be
S-7
<PAGE> 9
determined at the original meeting and the holders of the Exchangeable Shares
present or represented by proxy at the adjourned meeting may transact the
business for which the meeting was originally called. At the adjourned meeting,
a resolution passed by the affirmative vote of not less than two-thirds of the
votes cast thereon will constitute the approval or consent of the holders of the
Exchangeable Shares.
Actions of Albertaco under Support Agreement
Under the Exchangeable Share Provisions, Albertaco has agreed to take all
such actions and do all such things as are necessary or advisable to perform and
comply with its obligations under, and to ensure the performance and compliance
by USX, Marathon and Holdco with their obligations under, the Support Agreement.
See "Support Agreement."
EXCHANGE TRUST AGREEMENT
The following is a summary of the material provisions of the Exchange Trust
Agreement and is qualified in its entirety by reference to the full text of the
Exchange Trust Agreement.
Grant of Rights in Trust
Pursuant to the Exchange Trust Agreement, USX has granted the Exchange
Right and the Automatic Exchange Right to the Trustee for the benefit of the
Holders.
Exchange Right
A Holder is entitled to instruct the Trustee to exercise the Exchange Right
at any time and from time to time with respect to any or all of the Exchangeable
Shares held by such Holder, thereby requiring USX to purchase from such Holder.
The consideration for each Exchangeable Share to be acquired under the Exchange
Right will be an equivalent number of Marathon Shares. The Holder shall retain
the right to receive all Unpaid Dividends at the time of the exchange.
If, as a result of liquidity or solvency provisions of applicable law,
Albertaco is unable to redeem all of the Exchangeable Shares tendered for
retraction by a Holder in accordance with the Exchangeable Share Provisions, the
Holder will be deemed to have exercised the Exchange Right with respect to the
unredeemed Exchangeable Shares and USX will be required to purchase such shares
from the Holder in the manner set forth above.
Automatic Exchange Right
In the event of a USX Liquidation Event, USX will be required to acquire
each outstanding Exchangeable Share by exchanging an equivalent number of
Marathon Shares for each such Exchangeable Share. Such exchange shall occur
immediately prior to the effective time of such USX Liquidation Event.
SUPPORT AGREEMENT
The following is a summary description of the material provisions of the
Support Agreement and is qualified in its entirety by reference to the full text
of the Support Agreement.
Under the Support Agreement, USX and/or Marathon have agreed that they
will: (i) not declare or pay any dividend on the Marathon Shares unless
Albertaco simultaneously declares and pays an equivalent dividend on the
Exchangeable Shares; (ii) advise Albertaco of the declaration of any dividend on
the Marathon Shares and ensure that the declaration date, record date and
payment date for dividends on the Exchangeable Shares are the same as that for
the Marathon Shares; (iii) ensure that the record date for any dividend declared
on Marathon Shares is not less than 10 calendar days after the declaration date
for such dividend; (iv) take all actions and do all things necessary to provide
to the holders of the Exchangeable Shares the equivalent number of Marathon
Shares in the event of a liquidation, dissolution, or winding-up of Albertaco, a
retraction request by a holder of Exchangeable Shares, a redemption of
Exchangeable Shares of Albertaco, or a delivery by a holder of Exchangeable
Shares to Albertaco for exchange for Marathon Shares; and (v) not vote or
otherwise take any action or omit to take any action causing the liquidation,
dissolution or winding-up of Albertaco.
S-8
<PAGE> 10
The Support Agreement also provides that if USX shall distribute additional
Marathon Shares or rights to subscribe therefor or other property or assets to
all or substantially all holders of Marathon Shares, or change the Marathon
Shares then USX will ensure that the record date for any such event or (if no
record date is applicable for such event) the effective date for any such event,
is not less than 10 calendar days after the date on which such event is declared
or announced by USX. In the event that any tender offer, share exchange offer,
issuer bid, take-over bid or similar transaction affecting the Marathon Shares
is proposed by USX or is proposed to USX or its shareholders and is to be
effected with the consent or approval of the board of directors of USX, USX
shall take all such actions and do all such things as are necessary and
reasonably within its power to enable holders of Exchangeable Shares to
participate in such transaction on an equivalent basis as the holders of
Marathon Shares, without discrimination.
USX has agreed that so long as any Exchangeable Shares not owned by USX or
any entity controlled by USX remain outstanding, USX will remain the beneficial
owner, directly or indirectly, of all outstanding voting securities of
Albertaco.
With the exception of administrative changes for the purpose of adding
covenants for the protection of the holders of the Exchangeable Shares, making
certain necessary amendments or curing ambiguities or clerical errors (in each
case provided that each of USX, Marathon and Albertaco is of the opinion that
such amendments are not prejudicial to the interests of the holders of the
Exchangeable Shares), the Support Agreement may not be amended without the
approval of the holders of the Exchangeable Shares.
Under the Support Agreement, USX has agreed not to exercise any voting
rights attached to the Exchangeable Shares owned by it or any entity controlled
by it on any matter considered at meetings of holders of Exchangeable Shares
(including any approval sought from such holders in respect of matters arising
under the Support Agreement).
CALL RIGHTS
The following description of the Call Rights is qualified in its entirety
by reference to the full text of the Exchangeable Share Provisions.
In the circumstances described below, USX, Marathon and a Marathon
Subsidiary will have certain overriding rights to acquire Exchangeable Shares
from holders thereof for an equivalent number of Marathon Shares for each
Exchangeable Share acquired. Different Canadian federal income tax consequences
to a holder of Exchangeable Shares will arise depending upon whether the Call
Rights are exercised or whether the relevant Exchangeable Shares are redeemed by
Albertaco pursuant to the Exchangeable Share provisions in the absence of the
exercise of the Call Rights. See "Certain Income Tax Considerations--Canadian
Federal Income Tax Considerations."
Retraction Call Right
Pursuant to the Exchangeable Share Provisions, a holder requesting
Albertaco to redeem the Exchangeable Shares will be deemed to offer such shares
to USX, Marathon or a Marathon Subsidiary, and USX, Marathon and a Marathon
Subsidiary will have an overriding Retraction Call Right to acquire all but not
less than all of the Exchangeable Shares that the holder has requested Albertaco
to redeem in exchange for an equivalent number of Marathon Shares for each
Exchangeable Share.
At the time of a Retraction Request by a holder of Exchangeable Shares,
Albertaco will immediately notify USX and Marathon. USX, Marathon or a Marathon
Subsidiary must then advise Albertaco within two Business Days as to whether
USX, Marathon or a Marathon Subsidiary will exercise the Retraction Call Right.
If USX, Marathon or a Marathon Subsidiary does not advise Albertaco within such
two Business Day period, Albertaco will notify the holder as soon as possible
thereafter that USX, Marathon and a Marathon Subsidiary will not exercise the
Retraction Call Right. A holder may revoke his or her Retraction Request, at any
time prior to the close of business on the Business Day preceding the Retraction
Date, in which case the holder's Exchangeable Shares will neither be purchased
by USX, Marathon or a Marathon Subsidiary nor redeemed by Albertaco. If the
holder does not revoke his or her Retraction Request, on the Retraction Date the
Exchangeable Shares that the
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holder has requested Albertaco to redeem will be acquired by USX, Marathon or a
Marathon Subsidiary (assuming USX, Marathon or a Marathon Subsidiary exercises
its Retraction Call Right) or redeemed by Albertaco, as the case may be, in each
case for an equivalent number of Marathon Shares for each Exchangeable Share.
Liquidation Call Right
Pursuant to the Plan of Arrangement and the Exchangeable Share Provisions,
USX, Marathon and a Marathon Subsidiary will be granted an overriding
Liquidation Call Right, in the event of and notwithstanding the proposed
liquidation, dissolution or winding-up of Albertaco, to acquire all but not less
than all of the Exchangeable Shares then outstanding in exchange for Marathon
Shares and, upon the exercise by USX, Marathon or a Marathon Subsidiary of the
Liquidation Call Right, the holders thereof will be obligated to transfer such
shares to USX, Marathon or a Marathon Subsidiary, as the case may be. The
acquisition by USX, Marathon or a Marathon Subsidiary of all of the outstanding
Exchangeable Shares upon the exercise of the Liquidation Call Right will occur
on the effective date of the voluntary or involuntary liquidation, dissolution
or winding-up of Albertaco.
Redemption Call Right
Pursuant to the Plan of Arrangement and the Exchangeable Share Provisions,
USX, Marathon and a Marathon Subsidiary will be granted an overriding Redemption
Call Right, notwithstanding the proposed automatic redemption of the
Exchangeable Shares by Albertaco pursuant to the Exchangeable Share Provisions,
to acquire on the Automatic Redemption Date all but not less than all of the
Exchangeable Shares then outstanding in exchange for Marathon Shares and, upon
the exercise by USX, Marathon or a Marathon Subsidiary of the Redemption Call
Right, the holders thereof will be obligated to transfer such shares to USX,
Marathon or a Marathon Subsidiary, as the case may be.
Effect of Call Right Exercise
If USX, Marathon or a Marathon Subsidiary exercises one or more of their
Call Rights, Marathon Shares will be directly issued to holders of Exchangeable
Shares and USX, Marathon or a Marathon Subsidiary will become the holder of such
Exchangeable Shares. USX, Marathon and a Marathon Subsidiary will not be
entitled to exercise any voting rights attached to the Exchangeable Shares they
acquire. If USX, Marathon and a Marathon Subsidiary decline to exercise their
Call Rights when applicable, USX will be required, pursuant to the Support
Agreement, to issue Marathon Shares to the holders of Exchangeable Shares. The
Canadian tax consequences resulting from the exercise by USX, Marathon or a
Marathon Subsidiary of one or more of the Call Rights are discussed in
"--Canadian Federal Income Tax Considerations."
DELIVERY OF MARATHON SHARES
The following description is qualified in its entirety by reference to the
full text of the Support Agreement.
USX has undertaken in the Support Agreement to see that all Marathon Shares
to be delivered to holders of Exchangeable Shares pursuant to the Exchangeable
Share Provisions or on the exercise of the Exchange Rights or the Automatic
Exchange Rights under the Exchange Trust Agreement are duly registered,
qualified or approved under applicable Canadian and United States securities
laws, if required, so that such shares may be freely traded by the holder
thereof (other than any restriction on transfer by reason of a holder being a
"control person" of USX for purposes of Canadian law or an "affiliate" of USX
for purposes of United States law). In addition, USX has undertaken to cause the
Marathon Shares to be listed or quoted for trading on all stock exchanges or
quotation systems on which outstanding Marathon Shares are then listed or quoted
for trading.
CAPITAL STRUCTURE OF ALBERTACO
Albertaco is authorized to issue an unlimited number of Exchangeable
Shares. In addition to the Exchangeable Shares, Albertaco is authorized to issue
an unlimited number of shares designated as voting common shares (the "Albertaco
Common Shares"), an unlimited number of shares designated as non-voting
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common shares (the "Albertaco Non-Voting Common Shares") and an unlimited number
of shares designated as non-voting subordinated shares (the "Albertaco
Non-Voting Subordinated Shares"). The attributes of such shares other than the
Exchangeable Shares are described below.
Albertaco Common Shares and Albertaco Non-Voting Common Shares
The holders of Albertaco Common Shares are entitled to receive notice of
and to attend all meetings of the shareholders of Albertaco and are entitled to
one vote for each share held of record on all matters considered at meetings of
the shareholders of Albertaco. The holders of Albertaco Non-Voting Common Shares
are not, except as required by applicable law, entitled to receive notice of and
to attend meetings of the shareholders of Albertaco and are not entitled to vote
at such meetings of the shareholders of Albertaco. The holders of Albertaco
Common Shares and the holders of Albertaco Non-Voting Common Shares are, subject
to the preference accorded holders of Exchangeable Shares and Albertaco
Non-Voting Subordinated Shares, entitled to receive such dividends as may be
declared by the Albertaco board of directors out of funds legally available
therefor and dividends may not be declared on either class separately from the
other. The rights of holders of Albertaco Common Shares and the rights of
holders of Albertaco Non-Voting Common Shares to receive such dividends are
equal in all respects, share for share. The holders of Albertaco Common Shares
and holders of Albertaco Non-Voting Common Shares are entitled upon any
liquidation, dissolution or winding-up of Albertaco, subject to the preference
accorded holders of the Exchangeable Shares and Albertaco Non-Voting
Subordinated Shares and to any other shares ranking senior to the Albertaco
Common Shares and the Albertaco Non-Voting Common Shares, to share equally,
share for share, the remaining property and assets of Albertaco. USX has agreed,
pursuant to the Support Agreement, that so long as there remain outstanding any
Exchangeable Shares not owned by USX or any entity controlled by USX, USX will
remain the beneficial owner, directly or indirectly, of all outstanding voting
securities of Albertaco. Immediately after consummation of the Arrangement,
there were no Albertaco Non-Voting Common Shares issued and outstanding.
Albertaco Non-Voting Subordinated Shares
All of the issued and outstanding Albertaco Non-Voting Subordinated Shares
will be held by a service provider who will not transfer any property to
Albertaco. The holders of Albertaco Non-Voting Subordinated Shares, are, subject
to the preference accorded holders of Exchangeable Shares, but in priority to
Albertaco Common Shares and Albertaco Non-Voting Common Shares, entitled (i) to
receive cumulative dividends at a rate of 6.5% per annum subject to declaration
by the board of directors of Albertaco out of funds legally available therefor,
and (ii) upon liquidation, dissolution or winding-up of Albertaco to $100 per
share plus accrued but unpaid dividends. Holders of Albertaco Non-Voting
Subordinated Shares are not, except as required by applicable law, entitled to
notice of, to attend or to vote at any meeting of the shareholders of Albertaco.
Albertaco Non-Voting Subordinated Shares are redeemable at the option of
Albertaco any time after the fifth anniversary of the date of their issuance at
$100 per share plus accrued but unpaid dividends. As of August , 1998,
Albertaco Non-Voting Subordinated Shares have been issued.
PROCEDURES FOR DELIVERY OF CERTIFICATES
The following description is qualified in its entirety by reference to the
full text of the Exchange Trust Agreement and the Exchangeable Share Provisions.
EXCHANGE OF EXCHANGEABLE SHARES
Exercise Instructions
Subject to the terms and conditions set forth in the Exchange Trust
Agreement, a Holder shall be entitled to instruct the Trustee to exercise the
Exchange Right with respect to all or any part of the Exchangeable Shares
registered in the name of such Holder on the books of Albertaco. To cause the
exercise of the Exchange Right by the Trustee, the Holder shall deliver to the
Trustee, in person or by certified or registered mail, at its principal offices
in Calgary, Alberta or Toronto, Ontario or at such other places in Canada as the
Trustee may from time to time designate by written notice to the Holders, the
certificates representing the Exchangeable Shares which such Holder desires USX
to purchase, duly endorsed in blank, and accompanied by such other documents and
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instruments as may be required to effect a transfer of Exchangeable Shares under
applicable law and the by-laws of Albertaco and such additional documents and
instruments as the Trustee may reasonably require together with (a) a duly
completed form of notice of exercise of the Exchange Right, contained on the
reverse of or attached to the Exchangeable Share certificates, stating (i) that
the Holder thereby instructs the Trustee to exercise the Exchange Right so as to
require USX to purchase from the Holder the number of Exchangeable Shares
specified therein, (ii) that such Holder has good title to and owns all such
Exchangeable Shares to be acquired by USX free and clear of all liens, claims
and encumbrances, (iii) the names in which the certificates representing
Marathon Shares issuable in connection with the exercise of the Exchange Right
are to be issued and (iv) the names and addresses of the persons to whom the
Exchangeable Share Consideration should be delivered and (b) payment (or
evidence satisfactory to the Trustee, Albertaco and USX of payment) of the taxes
(if any) payable. If only a portion of the Exchangeable Shares represented by
any certificate or certificates delivered to the Trustee are to be purchased by
USX under the Exchange Right, a new certificate for the balance of such
Exchangeable Shares shall be issued to the Holder at the expense of Albertaco.
Exercise of Exchange Right Subsequent to Retraction
In the event that a Holder has exercised its right under the Exchangeable
Share Provisions to require Albertaco to redeem any or all of the Exchangeable
Shares held by the Holder (the "Retracted Shares") and is notified by Albertaco
that Albertaco will not be permitted as a result of liquidity or solvency
requirements of applicable law to redeem all such Retracted Shares, subject to
receipt by the Trustee of written notice to that effect from Albertaco and
provided that USX shall not have exercised the Retraction Call Right with
respect to the Retracted Shares and that the Holder has not revoked the
retraction request delivered by the Holder to Albertaco, the retraction request
will constitute and will be deemed to constitute notice from the Holder to the
Trustee instructing the Trustee to exercise the Exchange Right with respect to
those Retracted Shares which Albertaco is unable to redeem. In any such event,
Albertaco has agreed with the Trustee and in favor of the Holder immediately to
notify the Trustee of such prohibition against Albertaco redeeming all of the
Retracted Shares and immediately to forward or cause to be forwarded to the
Trustee all relevant materials delivered by the Holder to Albertaco or to the
transfer agent of the Exchangeable Shares (including without limitation a copy
of the retraction request) in connection with such proposed redemption of the
Retracted Shares and the Trustee will thereupon exercise the Exchange Right with
respect to the Retracted Shares that Albertaco is not permitted to redeem and
will require USX to purchase such shares.
RETRACTION OF EXCHANGEABLE SHARES
A holder of Exchangeable Shares shall be entitled at any time, subject to
the exercise by USX or Marathon of the Retraction Call Right and otherwise upon
compliance with the provisions of the Exchangeable Share Provisions to require
Albertaco to redeem any or all of the Exchangeable Shares registered in the name
of such holder by delivery to such holder of the Exchangeable Share
Consideration representing the Exchangeable Share Price in respect of such
Exchangeable Shares. In connection with payment of the Exchangeable Share Price,
Albertaco shall be entitled to liquidate some of the Marathon Shares to which
the particular holder of Exchangeable Shares is entitled and apply the proceeds
on behalf of such holder in order to fund any statutory withholding tax
obligation. To effect such redemption, the holder shall present and surrender at
the registered office of Albertaco or at any office of the Transfer Agent as may
be specified by Albertaco by notice to the holders of Exchangeable Shares the
certificate or certificates representing the Exchangeable Shares which the
holder desires to have Albertaco redeem, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
applicable law and the by-laws of Albertaco and such additional documents and
instruments as the Transfer Agent may reasonably require, and together with a
duly executed statement (the "Retraction Request") in the form of Exhibit A to
the Exchangeable Share Provisions or in such other form as may be acceptable to
Albertaco:
(i) specifying that the holder desires to have all or any number specified
therein of the Exchangeable Shares represented by such certificate or
certificates redeemed by Albertaco;
(ii) stating the Business Day on which the holder desires to have
Albertaco redeem the Retracted Shares (the "Retraction Date"),
provided that the Retraction Date shall be not less than three
Business Days
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nor more than 10 Business Days after the date on which the Retraction
Request is received by Albertaco and further provided that, in the
event that no such Business Day is specified by the holder in the
Retraction Request, the Retraction Date shall be deemed to be the
tenth Business Day after the date on which the Retraction Request is
received by Albertaco; and
(iii) acknowledging the overriding right (the "Retraction Call Right") of
USX and Marathon to acquire all but not less than all the Retracted
Shares directly from the holder in exchange for one Marathon Share
for each Exchangeable Share and that the Retraction Request shall be
deemed to be a revocable offer by the holder to exchange the
Retracted Shares with USX or Marathon in accordance with the
Retraction Call Right on the terms and conditions set out below.
Subject to the exercise by USX or Marathon of the Retraction Call Right,
upon receipt by Albertaco or the Transfer Agent in the manner specified in the
Exchangeable Share Provisions of a certificate or certificates representing the
number of Exchangeable Shares which the holder desires to have Albertaco redeem,
together with a Retraction Request, and provided that the Retraction Request is
not revoked by the holder in the manner specified below, Albertaco shall redeem
the Retracted Shares effective at the close of business on the Retraction Date
and shall cause to be delivered to such holder the total Exchangeable Share
Price with respect to such shares by the delivery of the Exchangeable Share
Consideration. If only a portion of the Exchangeable Shares represented by any
certificate are redeemed (or purchased by USX or Marathon pursuant to the
Retraction Call Right), a new certificate for the balance of such Exchangeable
Shares shall be issued to the holder at the expense of Albertaco.
Upon receipt by Albertaco of a Retraction Request, Albertaco shall
immediately notify USX and Marathon thereof. In order to exercise the Retraction
Call Right, USX or Marathon must notify Albertaco in writing of its
determination to do so (the "USX/Marathon Call Notice") within two Business Days
of notification to USX and Marathon by Albertaco of the receipt by Albertaco of
the Retraction Request. If USX or Marathon does not so notify Albertaco within
such two Business Day period, Albertaco will notify the holder as soon as
possible thereafter that neither USX nor Marathon will exercise the Retraction
Call Right. If USX or Marathon delivers the USX/Marathon Call Notice within such
two Business Day time period, and provided that the Retraction Request is not
revoked by the holder, the Retraction Request shall thereupon be considered only
to be an offer by the holder to exchange the Retracted Shares with USX or
Marathon, as applicable, in accordance with the Retraction Call Right. In such
event, Albertaco shall not redeem the Retracted Shares and USX or Marathon, as
applicable, shall acquire from such holder and such holder shall deliver to USX
or Marathon, as applicable, on the Retraction Date the Retracted Shares in
exchange for delivery to such holder of the Exchangeable Share Consideration
respecting the total Exchangeable Share Price in respect of the Retracted
Shares. For the purposes of completing an exchange pursuant to the Retraction
Call Right, USX or Marathon, as applicable, shall deposit with the Transfer
Agent, on or before the Retraction Date the Exchangeable Share Consideration
representing the total Exchangeable Share Price. Provided that such Exchangeable
Share Consideration has been so deposited with the Transfer Agent, the closing
of the exchange of the Retracted Shares pursuant to the Retraction Call Right
shall be deemed to have occurred as at the close of business on the Retraction
Date and, for greater certainty, no redemption by Albertaco of such Retracted
Shares shall take place on the Retraction Date. In the event that neither USX
nor Marathon delivers a USX/Marathon Call Notice within such two Business Day
period or otherwise complies with these Exchangeable Share provisions in respect
thereto, and provided that the Retraction Request is not revoked by the holder,
Albertaco shall redeem the Retracted Shares on the Retraction Date.
Albertaco, USX or Marathon, as the case may be, shall deliver or cause the
Transfer Agent to deliver to the relevant holder, at the address of the holder
recorded in the securities register of Albertaco, for the Exchangeable Shares or
at the address specified in the holder's Retraction Request or by holding for
pick-up by the holder at the registered office of Albertaco or at any office of
the Transfer Agent as may be specified by Albertaco by notice to the holders of
Exchangeable Shares, the Exchangeable Share Consideration representing the total
Exchangeable Share Price and such delivery of such Exchangeable Share
Consideration to the Transfer Agent shall be deemed to be payment of and shall
satisfy and discharge all liability for the total Exchangeable Share Price.
Albertaco shall not be obligated to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent that such redemption of Retracted
Shares would be contrary to liquidity or solvency requirements or
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other provisions of applicable law. If Albertaco believes that on any Retraction
Date it would not be permitted by any of such provisions to redeem the Retracted
Shares tendered for redemption on such date, and provided that neither USX nor
Marathon shall have exercised the Retraction Call Right with respect to the
Retracted Shares, Albertaco shall only be obligated to redeem Retracted Shares
specified by a holder in a Retraction Request to the extent of the maximum
number that may be so redeemed (rounded down to a whole number of shares) as
would not be contrary to such provisions and shall notify the holder at least
two Business Days prior to the Retraction Date as to the number of Retracted
Shares which will not be redeemed by Albertaco. In any case in which the
redemption by Albertaco of Retracted Shares would be contrary to liquidity or
solvency requirements or other provisions of applicable law, Albertaco shall
redeem Retracted Shares on a pro rata basis and shall issue to each holder of
Retracted Shares a new certificate, at the expense of Albertaco, representing
the Retracted Shares not redeemed by Albertaco.
A holder of Retracted Shares may, by notice in writing given by the holder
to Albertaco before the close of business on the Business Day immediately
preceding the Retraction Date, withdraw its Retraction Request in which event
such Retraction Request shall be null and void and, for greater certainty, the
revocable offer constituted by the Retraction Request to exchange the Retracted
Shares with USX or Marathon shall be deemed to have been revoked.
USX and Marathon may assign their rights under the Retraction Call Right to
Holdco or another Marathon Subsidiary at any time with respect to all or any
portion of the Retracted Shares.
REDEMPTION OF EXCHANGEABLE SHARES
Subject to applicable law and the Redemption Call Right, Albertaco shall on
the Automatic Redemption Date redeem the whole of the then outstanding
Exchangeable Shares by delivery of the Exchangeable Share Consideration
representing the Exchangeable Share Price applicable on the last Business Day
prior to the Automatic Redemption Date (the "Redemption Price"). In connection
with payment of the Redemption Price, Albertaco shall be entitled to liquidate
some of the Marathon Shares to which the particular holder of Exchangeable
Shares is entitled and apply the proceeds on behalf of such holder in order to
fund any statutory withholding tax obligation.
In any case of a redemption of Exchangeable Shares, Albertaco shall, at
least 120 days before the Automatic Redemption Date, send or cause to be sent to
each holder of Exchangeable Shares a notice in writing of the redemption by
Albertaco or the purchase by USX or Marathon under the Redemption Call Right, as
the case may be, of the Exchangeable Shares held by such holder. Such notice
shall set out the Automatic Redemption Date and, if applicable, particulars of
the Redemption Call Right.
On or after the Automatic Redemption Date and subject to the exercise by
USX or Marathon of the Redemption Call Right, Albertaco shall cause to be
delivered to the holders of the Exchangeable Shares the Redemption Price for
each such Exchangeable Share upon presentation and surrender at the registered
office of Albertaco or at any office of the Transfer Agent as may be specified
by Albertaco in such notice of the certificates representing such Exchangeable
Shares, together with such other documents and instruments as may be required to
effect a transfer of Exchangeable Shares under applicable law and the by-laws of
Albertaco and such additional documents and instruments as the Transfer Agent
may reasonably require. Payment of the total Redemption Price for such
Exchangeable Shares shall be made by delivery to each holder, at the address of
the holder recorded in the securities register of Albertaco or by holding for
pick-up by the holder at the registered office of Albertaco at any office of the
Transfer Agent as may be specified by Albertaco in such notice, on behalf of
Albertaco of the Exchangeable Share Consideration representing the total
Redemption Price.
USX shall have the overriding right (the "Redemption Call Right"),
notwithstanding the compulsory redemption of the Exchangeable Shares by
Albertaco, to acquire from all but not less than all of the holders (other than
USX or any Subsidiary thereof) of Exchangeable Shares on the Automatic
Redemption Date all but not less than all of the Exchangeable Shares held by
each such holder upon the payment to each such holder by USX of the Exchangeable
Share Price in effect on the last Business Day prior to the Automatic Redemption
Date (the "Redemption Call Purchase Price"). In the event of the exercise of the
Redemption Call Right by USX, each holder shall be obligated to exchange all the
Exchangeable Shares held by the holder with USX on the Automatic
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Redemption Date on delivery by USX to the holder of the Exchangeable Share
Consideration representing the Redemption Call Purchase Price for each such
share and the obligation of Albertaco to redeem any Exchangeable Shares
(including those held by USX or any Subsidiary thereof) shall terminate.
To exercise the Redemption Call Right, USX must notify the Transfer Agent
in writing, as agent for the holders of Exchangeable Shares, and Albertaco of
USX's intention to exercise such right at least 125 days before the Automatic
Redemption Date. The Transfer Agent will notify the holders of the Exchangeable
Shares as to whether or not USX has exercised the Redemption Call Right
forthwith after the date by which the same may be exercised by USX. If USX
exercises the Redemption Call Right, on the Automatic Redemption Date USX and
the holders will exchange all of the Exchangeable Shares then outstanding for
the Exchangeable Share Consideration in satisfaction of the Redemption Call
Purchase Price.
For the purposes of completing the exchange of the Exchangeable Shares
pursuant to the Redemption Call Right, USX shall deposit with the Transfer
Agent, on or before the Automatic Redemption Date, the Exchangeable Share
Consideration representing the total Redemption Call Purchase Price. Provided
that such Exchangeable Share Consideration has been so deposited with the
Transfer Agent, on and after the Automatic Redemption Date the rights of each
holder of Exchangeable Shares will be limited to receiving such holder's
proportionate part of (i) the Exchangeable Share Consideration issued by USX in
respect of the total Redemption Call Purchase Price upon presentation and
surrender by the holder of certificates representing the Exchangeable Shares
held by such holder and (ii) any Unpaid Dividends on the last Business Day prior
to the Automatic Redemption Date. Upon deposit of such Exchangeable Share
Consideration, the holder shall on and after the Automatic Redemption Date be
considered and deemed for all purposes to be the holder of the Marathon Shares
delivered to such holder. Upon surrender to the Transfer Agent of a certificate
or certificates representing Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under applicable law and such additional documents and
instruments as the Transfer Agent may reasonably require, the holder of such
surrendered certificate or certificates shall be entitled to receive in exchange
therefor, and the Transfer Agent on behalf of USX shall deliver to such holder,
the Exchangeable Share Consideration to which the holder is entitled. If USX
does not exercise the Redemption Call Right in the manner described above, on
the Automatic Redemption Date the holders of the Exchangeable Shares will be
entitled to receive in exchange therefor the Redemption Price otherwise payable
by Albertaco in connection with the redemption of the Exchangeable Shares.
USX may assign its rights to exchange the Exchangeable Share Consideration
for Exchangeable Shares pursuant to the Redemption Call Right to Marathon,
Holdco or another Marathon Subsidiary at any time.
CERTAIN INCOME TAX CONSIDERATIONS
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
HOLDERS OF EXCHANGEABLE SHARES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
TO DETERMINE THE CANADIAN FEDERAL, PROVINCIAL AND TERRITORIAL TAX CONSEQUENCES
OF EXCHANGING EXCHANGEABLE SHARES FOR AND OWNING MARATHON SHARES.
Holders of Exchangeable Shares Resident of Canada
The following description is applicable to holders of Exchangeable Shares
who at all relevant times, for purposes of the Income Tax Act, are resident in
Canada, hold such Exchangeable Shares and any Marathon Shares as capital
property and deal at arm's length with USX.
Redemption or Exchange of Exchangeable Shares. The disposition of an
Exchangeable Share in exchange for a Marathon Share will be a taxable
transaction. Such a disposition can occur as a result of either a redemption
(including a retraction) by Albertaco or an acquisition by USX, Marathon or a
Marathon Subsidiary. The Canadian federal income tax consequences of a
redemption differ significantly from those of an acquisition. An Exchangeable
Shareholder who exercises the right of retraction in respect of an Exchangeable
Share cannot
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control whether the share will be acquired by USX, Marathon or a Marathon
Subsidiary under the Retraction Call Right or will be redeemed by Albertaco if
the Retraction Call Right is not exercised; however, a holder who exercises the
right of retraction is entitled to be notified if the Retraction Call Right will
not be exercised by USX, Marathon or a Marathon Subsidiary in which case the
holder may cancel the Retraction Request and retain the Exchangeable Share.
The following describes generally the tax treatment to a holder of an
Exchangeable Share on a redemption (including a retraction) by Albertaco and an
acquisition by USX, Marathon or a Marathon Subsidiary.
(a) On a redemption of an Exchangeable Share by Albertaco, a portion of the
redemption proceeds may be deemed to be a dividend received by the
holder. The deemed dividend portion is calculated as the amount, if
any, by which the redemption proceeds exceed the "paid-up capital" (for
the purposes of the Income Tax Act) of the Exchangeable Shares at the
time of redemption. The deemed dividend is subject to the tax treatment
accorded to dividends described below. Albertaco is required to
calculate the deemed dividend and report the amount thereof to the
Exchangeable Shareholder. Further, the Exchangeable Shareholder may
also have a capital gain or capital loss as a result of the redemption.
The Exchangeable Shareholder is considered to have disposed of the
Exchangeable Share for proceeds of disposition equal to the redemption
proceeds less the amount of the deemed dividend. The amount of a
holder's capital loss (or a capital gain) will be equal to the amount
by which the adjusted cost base of the holder's Exchangeable Shares and
Ancillary Rights and reasonable costs of disposition exceed (or are
exceeded by) such proceeds of disposition. In the case of an
Exchangeable Shareholder that is a corporation, in some circumstances
the amount of any deemed dividend may be treated pursuant to subsection
55(2) of the Income Tax Act as proceeds of disposition, and not as a
deemed dividend, for purposes of calculating a capital gain.
(b) On the acquisition of an Exchangeable Share by USX, Marathon or a
Marathon Subsidiary, the holder will realize a capital gain (or a
capital loss) equal to the amount, if any, by which the proceeds of
disposition of the Exchangeable Share, less any reasonable cost of
disposition, exceed (or are less than) the adjusted cost base to the
holder of the Exchangeable Share and the Ancillary Rights. A holder
will be required to include in income any such capital gain or capital
loss in the manner and subject to the rules described below. The
acquisition of an Exchangeable Share by USX, Marathon or a Marathon
Subsidiary will not result in a deemed dividend to the holder of the
Exchangeable Share.
The redemption proceeds in the case of a redemption of an Exchangeable
Share by Albertaco and the proceeds of disposition in the case of an acquisition
of an Exchangeable Share by USX, Marathon or a Marathon Subsidiary will be the
fair market value of a Marathon Share at the time of the disposition, and the
holder will also be required to include in computing its income (subject to a
dividend tax credit or deduction in certain cases) the amount of any declared
but unpaid dividends on the Exchangeable Shares that the holder receives from
Albertaco on or after such redemption or acquisition. The cost of a Marathon
Share received on the redemption or acquisition of an Exchangeable Share will be
the fair market value of the Marathon Share at the time of such event.
Three-quarters of any resulting capital gain must be included in income as
a taxable capital gain by the holder and three-quarters of any resulting capital
loss may be used to offset taxable capital gains in the year the loss is
sustained, in any of the three previous years or in any subsequent year to the
extent and under the circumstances described in the Income Tax Act. The amount
of any loss otherwise determined may be reduced by the amount of any dividends
received or deemed to have been received by the holder on the Exchangeable
Shares to the extent and under the circumstances described in the Income Tax
Act. A holder of Exchangeable Shares that is a Canadian-controlled private
corporation under the Income Tax Act may be subject to an additional 6 2/3%
refundable tax defined by reference to certain income that generally includes
net taxable capital gains. Individuals may be subject to an alternative minimum
tax in certain cases.
Any resulting deemed dividend arising on the Exchangeable Shares will be
treated in the same manner as ordinary dividends on such shares, subject to
possible recharacterization as proceeds of disposition for certain corporate
shareholders.
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<PAGE> 18
The following example illustrates the different treatment accorded a
redemption by Albertaco and an acquisition by USX, Marathon or a Marathon
Subsidiary, assuming that at the time the fair market value of a Marathon Share
is Cdn $50.00, and the Exchangeable Share has a paid-up capital of Cdn $5.00 and
an adjusted cost base to the holder of Cdn $8.00.
<TABLE>
<CAPTION>
ACQUISITION REDEMPTION
----------- ----------
(CDN $) (CDN $)
------- -------
<S> <C> <C>
Exchange Consideration...................................... $50.00 $50.00
Deemed Dividend(a).......................................... nil(b) 45.00
Proceeds of Disposition for Capital Gains Purposes.......... 50.00 5.00
Adjusted Cost Base.......................................... 8.00 8.00
------ ------
Capital Gain (Capital Loss)(a).............................. $42.00 $(3.00)(c)
====== ======
</TABLE>
- ---------------
Notes:
(a) These line items (being the deemed dividend and the capital gain (or capital
loss)) must be reported by the former holder of the Exchangeable Share.
(b) There is no deemed dividend in the case of an acquisition of the
Exchangeable Shares by a person other than Albertaco.
(c) Subject to the "stop loss" rules contained in section 112 of the Income Tax
Act which may apply to some holders.
Dividends on Marathon Shares. Dividends received on Marathon Shares will
be included in the recipient's income for the purposes of the Income Tax Act.
Such dividends received by an individual shareholder will not be subject to the
gross-up and dividend tax credit rules in the Income Tax Act. A shareholder that
is a corporation will include such dividends in computing its taxable income.
United States non-resident withholding tax on such dividends will be eligible
for foreign tax credit or deduction treatment where applicable under the Income
Tax Act. Special considerations will apply to the receipt of dividends by a
Canadian-resident corporate shareholder at a time when USX is a "foreign
affiliate" of the shareholder within the meaning of the Income Tax Act.
Disposition of Marathon Shares. A disposition or deemed disposition of a
Marathon Share by a holder thereof will generally result in a capital gain (or
capital loss) equal to the amount by which the proceeds of disposition exceed
(or are less than) the adjusted cost base to the holder of the share and
reasonable costs of disposition. Such holders will be required to include in
computing income any such capital gain or capital loss in the manner and subject
to the rules described above.
Tax-exempt Holders
Qualified Investments. Provided the Marathon Shares are listed on a
prescribed stock exchange (which currently includes the NYSE), the Marathon
Shares will be qualified investments under the Income Tax Act for trusts
governed by registered retirement savings plans, registered retirement income
funds and deferred profit sharing plans.
Foreign Property. The Marathon Shares will be foreign property under the
Income Tax Act.
Holders of Exchangeable Shares Not Resident in Canada
The following description is applicable to holders of Exchangeable Shares
who at all relevant times, for purposes of the Income Tax Act, are neither
resident in Canada nor deemed to be resident in Canada, deal at arm's length
with USX, hold their Exchangeable Shares and will hold their Marathon Shares as
capital property and do not use or hold and are not deemed to use or hold such
shares in carrying on a business in Canada and to whom such shares do not
otherwise constitute "taxable Canadian property" within the meaning of the
Income Tax Act (each, a "Non-Resident Holder").
On an exchange of Exchangeable Shares for Marathon Shares, a Non-Resident
Holder may be deemed to have realized a capital gain or sustained a capital loss
and to have received a dividend, each computed generally
S-17
<PAGE> 19
as described above for residents of Canada. The Canadian federal income tax
consequences of an exchange of Exchangeable Shares under a redemption differ
significantly from those of an exchange under an acquisition.
Where a capital gain arises on an exchange of Exchangeable Shares, such
capital gain will not be subject to tax under the Income Tax Act unless the
Exchangeable Shares are taxable Canadian property of the Non-Resident Holder.
Provided the Exchangeable Shares are listed on a prescribed stock exchange
(which, based on proposed regulations, includes the TSE) at the time they are
exchanged for Marathon Shares, they will not be taxable Canadian property of the
Non-Resident Holder unless the Non-Resident Holder uses or holds or is deemed to
use or hold the Exchangeable Shares in connection with carrying on a business in
Canada or the Non-Resident Holder alone, or together with persons with whom the
Non-Resident Holder does not deal at arm's length, owned 25% or more of the
issued shares of any class of Albertaco at any time within five years preceding
the time of the disposition.
A Non-Resident Holder will be subject to Canadian non-resident withholding
tax on dividends received or deemed to be received on the Exchangeable Shares at
the rate of 25% thereof unless reduced pursuant to the provisions of an
applicable tax convention. Under the Tax Treaty, the rate is generally reduced
to 15% if the Non-Resident Holder is resident in the United States for purposes
of such Tax Treaty.
A Non-Resident Holder will not generally be subject to tax under the Income
Tax Act on a disposition of the Marathon Shares unless, at the time of the
disposition, such shares:
(i) are not listed on a prescribed stock exchange and, at any time
within the 12 months preceding the time of disposition, more than 50% of
the value of such shares is derived directly or indirectly from real
property situated in Canada, Canadian resource property or other property
stipulated in the Income Tax Act for such purpose; or
(ii) are listed on a prescribed stock exchange and, at any time within
the 12 months preceding the time of disposition, more than 50% of the value
of such shares is derived directly or indirectly from real property
situated in Canada, Canadian resource property or other property stipulated
in the Income Tax Act for such purpose and the Non-Resident Holder, either
alone or together with persons with whom the holder does not deal at arm's
length, has owned (or had under option) 25% or more of the issued shares of
any class or series of USX, including Marathon Shares and shares of USX-U.
S. Steel Common Stock, at any time within five years preceding the time of
disposition.
Similarly, Non-Resident Holders will not be subject to tax under the Income
Tax Act on dividends paid on the Marathon Shares.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
This section summarizes the principal United States federal income tax
considerations generally applicable to a holder of Exchangeable Shares upon the
receipt and ownership of Marathon Shares but does not purport to be a complete
analysis of all of the potential tax effects thereof. This summary is based upon
U.S. federal income tax law currently in effect. No advance income tax ruling
has been sought or obtained from the U.S. Internal Revenue Service (the "IRS"),
and there can be no assurance that the IRS will not challenge certain of the
conclusions reached in this discussion, particularly those as to which
uncertainty is indicated. For convenience, masculine pronouns will be used to
refer to a single holder unless the discussion specifically refers to a holder
that is not an individual. References to "U.S. tax" unless otherwise indicated
are to U.S. federal income tax.
Except as specifically stated otherwise, this discussion does not address
state, local, or foreign taxes or federal tax aspects other than U.S. federal
income taxation under the Internal Revenue Code of 1986, as amended (the "U.S.
Code"), nor does it address all aspects of such tax that may be applicable in
the specific circumstances of a particular holder. The discussion may not apply
to holders that are subject to special provisions of the U.S. Code, such as
tax-exempt organizations, financial institutions, insurance companies,
broker-dealers, persons having a "functional currency" other than the U.S.
dollar, holders who hold Exchangeable Shares as part of a straddle, wash sale,
hedging, or conversion transaction (other than by virtue of their participation
in the Arrangement), and holders who acquired their Exchangeable Shares through
the exercise of employee stock options or otherwise as compensation for
services.
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<PAGE> 20
EACH HOLDER OF EXCHANGEABLE SHARES IS URGED TO CONSULT WITH A TAX ADVISER
WITH RESPECT TO THE UNITED STATES FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES AND
THE FOREIGN TAX CONSEQUENCES OF THE RECEIPT AND OWNERSHIP OF MARATHON SHARES.
U.S. Holders
General. This subsection is addressed to U.S. Holders who receive Marathon
Shares in exchange for Exchangeable Shares which they acquired in the
Arrangement and who held the Exchangeable Shares as capital assets. For this
purpose, a "U.S. Holder" means (a) a citizen or individual resident of the
United States, (b) a corporation created or organized in or under the laws of
the United States or any state thereof, (c) an estate the income of which is
includible in its gross income for U.S. federal income tax purposes without
regard to its source, or (d) a trust if a court within the United States is able
to exercise primary supervision over the administration of the trust and one or
more U.S. fiduciaries have the authority to control all substantial decisions of
the trust.
Exchange of Exchangeable Shares for Marathon Shares. Subject to the
qualifications in the discussion below, a U.S. Holder who exchanges his
Exchangeable Shares for Marathon Shares will generally recognize gain or loss on
such exchange in an amount equal to the difference between the fair market value
of the Marathon Shares at the time of the exchange and the U.S. Holder's tax
basis in the Exchangeable Shares surrendered. Such gain will be capital gain or
loss, except that ordinary income may be recognized as to declared but unpaid
dividends on the Exchangeable Shares. The U.S. Holder will have a basis in the
Marathon Shares which are received in an amount equal to the fair market value
of those shares at the time of the exchange, and his holding period will begin
on the day after the exchange.
There is a possibility, however, that any loss on the exchange might be
disallowed under the "wash sale" provisions of section 1091 of the U.S. Code. In
this event, the basis of the U.S. Holder in the Marathon Shares which he
received would be the same as the basis of the Exchangeable Shares exchanged
therefor, and the holding period of the Marathon Shares would include the period
during which the Exchangeable Shares were held.
Under the Taxpayer Relief Act of 1997, the maximum capital gains rate for
non-corporate U.S. Holders is 20% for Exchangeable Shares held for more than 18
months. Under pending legislation, such 20% rate would apply to Exchangeable
Shares held for more than one year. For U.S. foreign tax credit purposes, gain
recognized by a U.S. Holder will generally be treated as U.S. source gain except
that if, under the Tax Treaty, any Canadian tax is imposed on the exchange, the
gain may be treated as Canadian source gain at the election of the holder.
USX, Marathon, and Albertaco believe that the Exchangeable Shares are stock
of Albertaco, rather than of USX, for U.S. tax purposes, but this matter is not
free from doubt. If the Exchangeable Shares were treated as Marathon Shares for
U.S. tax purposes, then a U.S. Holder would recognize no gain or loss on the
exchange of Exchangeable Shares for Marathon Shares.
Different and generally less favorable tax consequences from those
described above could apply if, at any time during the U.S. Holder's holding
period for the Exchangeable Shares, Albertaco were a passive foreign investment
company (a "PFIC"), within the meaning of section 1297(a) of the U.S. Code.
Albertaco would be a PFIC for a taxable year only if either (a) 75% or more of
its gross income for the year were passive income (as defined for U.S. tax
purposes) or (b) on average for the year, 50% or more of its assets produced or
were held for the production of passive income. In the absence of future
regulations by the IRS, the calculation of asset values will be made according
to U.S. tax basis (as determined for purposes of computing U.S. earnings and
profits) rather than fair market value. For purposes of applying the foregoing
tests, the assets and gross income of Albertaco's significant subsidiaries will
be attributed to Albertaco.
USX, Marathon, and Albertaco intend to endeavor to cause Albertaco to avoid
PFIC status, although there can be no assurance that they will be able to do so
or that their intent will not change. If Albertaco believes that it is
nevertheless a PFIC for any taxable year, it will endeavor so to notify U.S.
Holders.
S-19
<PAGE> 21
Non-U.S. Holders
General. This subsection is addressed to a Non-U.S. Holder who acquires
Marathon Shares in exchange for Exchangeable Shares. For this purpose, the term
"Non-U.S. Holder" means a nonresident alien individual, a foreign corporation, a
foreign partnership, or a foreign estate or trust. A Non-U.S. Holder seeking
benefits under an applicable tax treaty or an exemption from U.S. withholding
tax for "effectively connected" income, as described below, may be required to
comply with additional certification and other requirements in order to
establish his entitlement to such benefits or exemption. This discussion does
not consider U.S. tax consequences that may be relevant to a Non-U.S. Holder who
is a United States expatriate or who has other special facts and circumstances.
The discussion assumes that, for U.S. tax purposes, the Marathon Shares will be
treated as stock of USX and not as an interest in any other corporation.
Dividends. Dividends received by a Non-U.S. Holder on Marathon Shares that
are not effectively connected with the conduct of a trade or business in the
United States will generally be subject to U.S. withholding tax. The U.S.
withholding tax is 30% unless reduced by treaty. Under the Tax Treaty, the rate
currently is 15%, generally, on dividends paid to residents of Canada.
Gain on Dispositions. A Non-U.S. Holder generally will not be subject to
U.S. tax on any gain recognized on the receipt of Marathon Shares in exchange
for Exchangeable Shares or upon the sale or other disposition of such Marathon
Shares unless (a) such gain is effectively connected with the conduct of a trade
or business in the United States, or, if a tax treaty applies, is attributable
to a permanent establishment maintained by the Non-U.S. Holder in the United
States, or (b) the Non-U.S. Holder is an individual who is present in the United
States for 183 days or more in the taxable year of disposition, and certain
other conditions are satisfied.
Special considerations not herein described would apply to any Non-U.S.
Holder who, actually or constructively, owned more than 5% of the Marathon
Shares or Exchangeable Shares having a fair market value exceeding 5% of the
total fair market value of the outstanding Marathon Shares or who, in unusual
circumstances, actually or constructively owned more than 5% of the Exchangeable
Shares if USX were, during the relevant period of ownership, a U.S. real
property holding corporation (a "USRPHC"), within the meaning of section 897 of
the U.S. Code. USX does not believe that it is presently a USRPHC. If, in the
future, USX should become a USRPHC, it will endeavor so to notify Non-U.S.
Holders of Exchangeable Shares and Marathon Shares.
U.S. Estate Tax. Marathon shares held by an individual Non-U.S. Holder at
the time of death will be deemed to be a U.S. situs asset for purposes of U.S.
estate tax law and therefore will generally be subject to the U.S. estate tax,
except as may otherwise be provided by an applicable tax or estate tax treaty
with the United States.
S-20
<PAGE> 22
CANADIAN SECURITIES LAW CONSIDERATIONS
The issuance of shares of Marathon Stock upon an exchange of Exchangeable
Shares and the resale of such Marathon Stock will be subject to the registration
and prospectus requirements of applicable Canadian securities legislation.
Albertaco has applied for and expects to receive rulings or orders of certain
provincial securities regulatory authorities in Canada to permit such issuance
and resale in such provinces without restriction by a person other than a
"control person," provided that no unusual effort is made to prepare the market
for any such resale or to create a demand for the securities which are the
subject of any such resale and no extraordinary commission or consideration is
paid in respect thereof.
LEGAL MATTERS
The validity of the issuance of the shares of Marathon Stock offered hereby
will be passed upon for USX by D. D. Sandman, Esq., General Counsel, Secretary
and Senior Vice President--Human Resources & Public Affairs of USX or by J.A.
Hammerschmidt, Esq., Assistant General Counsel--Corporate and Assistant
Secretary of USX. Messrs. Sandman and Hammerschmidt, in their respective
capacities as set forth above, are paid salaries by USX, participate in various
employee benefit plans offered by USX and own common stock of USX.
S-21
<PAGE> 23
GLOSSARY
"ALBERTACO" means 761581 Alberta Ltd., a Subsidiary of Holdco.
"ANCILLARY RIGHTS" means any and all rights granted by USX, Marathon and a
Marathon Subsidiary to Tarragon Securityholders in connection with the
Arrangement and the documents related thereto (including, without limitation,
the Exchange Rights, but excluding the Sale Right).
"ARRANGEMENT" means the arrangement under the provisions of Section 182 of
the OBCA as set out in the Plan of Arrangement.
"ARRANGEMENT AGREEMENT" means the amended and restated Arrangement
Agreement dated June 20, 1998 between Tarragon, Marathon, Albertaco and Holdco
pursuant to which Tarragon, Marathon, Albertaco and Holdco have implemented the
Arrangement.
"ARTICLES OF ARRANGEMENT" means the articles of arrangement in respect of
the Arrangement required under Section 183(1) of the OBCA to be filed with the
Director after the Final Order has been made.
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of USX to
effect the automatic exchange of Marathon Shares for Exchangeable Shares
pursuant to the Exchange Trust Agreement.
"AUTOMATIC REDEMPTION DATE" means the date for the automatic redemption by
Albertaco of Exchangeable Shares pursuant to Article 7 of the Exchangeable
Shares Provisions, which date shall be the Business Day next following the fifth
anniversary of the date of the first issuance of Exchangeable Shares unless (a)
such date shall be extended at any time or from time to time to a specified
later date by the board of directors of Albertaco or (b) such date shall be
accelerated at any time to a specified earlier date (but no earlier than the
third anniversary of the first issuance of Exchangeable Shares) by the board of
directors of Albertaco if at such time there are issued and outstanding less
than 5% of the number of Exchangeable Shares initially issued pursuant to the
Plan of Arrangement (including Exchangeable Shares which the recipients elect to
sell for cash pursuant to the Plan of Arrangement, but excluding Exchangeable
Shares held by USX and its Subsidiaries) and as such number of shares may be
adjusted as deemed appropriate by the board of directors of Albertaco to give
effect to any subdivision or consolidation of or stock dividend on the
Exchangeable Shares, any issuance or distribution of rights to acquire
Exchangeable Shares or securities exchangeable for or convertible into
Exchangeable Shares, any issue or distribution of other securities or rights or
evidences of indebtedness or assets, or any other capital reorganization or
other transaction affecting the Exchangeable Shares, in each case upon at least
60 days' prior written notice of any such extension or acceleration, as the case
may be, to the registered holders of the Exchangeable Shares, in which case the
Automatic Redemption Date shall be such later or earlier date; provided,
however, that the accidental failure or omission to give any such notice of
extension or acceleration, as the case may be, to less than 10% of such holders
of Exchangeable Shares shall not affect the validity of such extension or
acceleration.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day when
banks are not open for business in any of Pittsburgh, Pennsylvania, Houston,
Texas or Calgary, Alberta.
"CALL RIGHTS" means the rights of USX, Marathon and a Marathon Subsidiary
under the Exchangeable Share Provisions to acquire Exchangeable Shares from
holders thereof in the circumstances therein set forth.
"COURT" means the Ontario Court (General Division).
"DIRECTOR" means the Director duly appointed under the OBCA.
"EXCHANGE RIGHT" means the right granted by USX and Marathon to the
Trustee, as trustee for and on behalf of, and for the use and benefit of, the
Holders, to require USX to purchase from each or any Holder at any time and from
time to time all or any part of the Exchangeable Shares held by such Holders.
"EXCHANGEABLE SHAREHOLDER" means a holder of Exchangeable Shares.
"EXCHANGE TRUST AGREEMENT" means the Exchange Trust Agreement among
Albertaco, USX, Marathon and the Trustee, made as of , 1998.
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<PAGE> 24
"EXCHANGEABLE SHARES" means shares of Albertaco that are exchangeable on a
one-for-one basis (subject to adjustment in certain circumstances) into Marathon
Shares and having attached thereto the attributes set out in the Exchangeable
Share Provisions.
"EXCHANGEABLE SHARE CONSIDERATION" means, for any exchange of Exchangeable
Shares pursuant to the Exchangeable Share Provisions, the Plan of Arrangement,
the Support Agreement or the Exchange Trust Agreement, certificates representing
the aggregate number of Marathon Shares deliverable in connection with
satisfaction of the relevant Exchangeable Share Price, provided that any such
stock shall be duly issued as fully paid and non-assessable and free and clear
of any lien, claim and encumbrance, security interest or adverse claim and
provided further that such consideration shall be paid less any tax required to
be deducted and withheld therefrom and without interest.
"EXCHANGEABLE SHARE PRICE" means, initially, one Marathon Share for each
Exchangeable Share and is subject to adjustment from time to time as provided in
the Exchangeable Share Provisions.
"EXCHANGEABLE SHARE PROVISIONS" means those provisions contained in the
articles of Albertaco regarding the rights, privileges, restrictions and
conditions of the Exchangeable Shares.
"FINAL ORDER" means the final order of the Court approving the Arrangement
pursuant to Section 182(5)(f) of the OBCA, as such order may be affirmed,
amended or modified by any court of competent jurisdiction.
"HOLDCO" means 787722 Alberta Ltd., a wholly owned Subsidiary of Marathon.
"HOLDER" means the registered holders from time to time of Exchangeable
Shares, other than USX and its Subsidiaries.
"INCOME TAX ACT" means the Income Tax Act (Canada), R.S.C. 1985, c.1 (5th
Supp), as amended, including the regulations promulgated thereunder.
"INVESTEE AGREEMENTS" means agreements dated December 9, 1997 between
Tarragon and each of Triax Resource Limited Partnership and Triax Resource
Limited Partnership II, as the same may be amended from time to time, providing
for the issuance of an aggregate of 1,000,000 Special Warrants.
"LIQUIDATION AMOUNT" means an amount equal to the amount that a holder of
an equivalent number of Marathon Shares on the Liquidation Date would be
entitled to receive on the liquidation, dissolution or winding-up of USX, which
Liquidation Amount shall be satisfied by the delivery to holders of the
Exchangeable Shares such number of Marathon Shares as have a fair market value
on the last Business Day prior to the Liquidation Date equal to the Liquidation
Amount.
"LIQUIDATION CALL RIGHT" means the overriding right of USX, in the event of
and notwithstanding the proposed liquidation, dissolution or winding-up of
Albertaco pursuant to Article 5 of the Exchangeable Share Provisions, to acquire
from all but not less than all of the holders (other than USX and any Subsidiary
thereof) of Exchangeable Shares on the Liquidation Date all but not less than
all of the Exchangeable Shares held by each such holder on payment by USX to the
holder of the Exchangeable Share Price in effect on the last Business Day prior
to the Liquidation Date.
"LIQUIDATION DATE" means in the event of the liquidation, dissolution or
winding-up of Albertaco or any other distribution of the assets of Albertaco
among its shareholders for the purpose of winding-up its affairs, a holder of
Exchangeable Shares shall be entitled, subject to applicable law, to receive
from the assets of Albertaco in respect of each Exchangeable Share held by such
holder on the effective date (the "Liquidation Date") of such liquidation,
dissolution or winding-up, before any distribution of any part of the assets of
Albertaco to the holders of the Albertaco Common Shares, the Albertaco
Non-Voting Common Shares or any other shares ranking junior to the Exchangeable
Shares.
"MARATHON" means Marathon Oil Company, a corporation organized and existing
under the laws of the State of Ohio and any successor corporation.
"MARATHON SHARES" means shares of Marathon Stock.
"MARATHON SUBSIDIARY" means any Subsidiary of Marathon, other than
Albertaco.
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<PAGE> 25
"ME" means The Montreal Exchange.
"NYSE" means the New York Stock Exchange.
"OBCA" means the Business Corporations Act (Ontario), R.S.O. 1990, c. B.16
as amended, including the regulations promulgated thereunder.
"OPTIONHOLDERS" means the holders of Tarragon Options.
"PLAN OF ARRANGEMENT" means the plan of arrangement contemplated in the
Arrangement Agreement.
"REDEMPTION CALL PURCHASE PRICE" means the payment to each holder of
Exchangeable Shares by USX of the Exchangeable Share Price in effect on the last
Business Day prior to the Automatic Redemption Date.
"REDEMPTION CALL RIGHT" means the overriding right of USX, notwithstanding
the compulsory redemption of the Exchangeable Shares by Albertaco pursuant to
Article 7 of the Exchangeable Share Provisions, to acquire from all but not less
than all of the holders (other than USX or any Subsidiary thereof) of
Exchangeable Shares on the Automatic Redemption Date all but not less than all
of the Exchangeable Shares held by each such holder upon the payment to each
such holder by USX of the Exchangeable Share Price in effect on the last
Business Day prior to the Automatic Redemption Date.
"REDEMPTION PRICE" means the Exchangeable Share Consideration, representing
the Exchangeable Share Price applicable on the last Business Day prior to the
Automatic Redemption Date, delivered by Albertaco.
"RETRACTION CALL RIGHT" means the overriding right of USX and Marathon to
acquire all but not less than all the Retracted Shares directly from the holder
in exchange for one Marathon Share for each Exchangeable Share.
"RETRACTION DATE" means the Business Day on which the holder of
Exchangeable Shares desires to have Albertaco redeem the Retracted Shares,
provided that the Retraction Date shall be not less than three Business Days nor
more than 10 Business Days after the date on which the Retraction Request is
received by Albertaco and further provided that, in the event that no such
Business Day is specified by the holder in the Retraction Request, the
Retraction Date shall be deemed to be the tenth Business Day after the date on
which the Retraction Request is received by Albertaco.
"RETRACTION REQUEST" means a duly executed statement or such other form as
may be acceptable to Albertaco pursuant to which a holder of Exchangeable Shares
shall be entitled at any time, subject to the exercise by USX or Marathon of the
Retraction Call Right and otherwise upon compliance with the Exchangeable Share
Provisions, to require Albertaco to redeem any or all of the Exchangeable Shares
registered in the name of such holder by delivery to such holder of the
Exchangeable Share Consideration representing the Exchangeable Share Price in
respect of such Exchangeable Shares.
"RETRACTED SHARES" means those Exchangeable Shares represented by a
certificate or certificates redeemed by Albertaco pursuant to a Retraction
Request.
"SALE RIGHT" means the right of a holder of Exchangeable Shares to sell
Exchangeable Shares to Holdco for cash under the Arrangement.
"SERVICE" means the United States Internal Revenue Service.
"SPECIAL WARRANTS" means the Special Warrants entitling the holders thereof
to acquire one Tarragon Share per Special Warrant without payment of additional
consideration, issued or to be issued by Tarragon pursuant to the Investee
Agreements.
"SUBSIDIARY" of any person means each partnership, joint venture,
corporation, association or other business entity of which more than 50% of the
total voting power of shares of stock or units of ownership or beneficial
interest entitled to vote in the election of directors (or members of a
comparable governing body) is owned or controlled, directly or indirectly, by
such person.
"SUPPORT AGREEMENT" means the Support Agreement between USX, Marathon and
Albertaco, made as of , 1998.
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<PAGE> 26
"TARRAGON OPTION" means the right to purchase one Tarragon Share granted
pursuant to Tarragon's existing share option plan.
"TARRAGON SECURITIES" means any or all of the Tarragon Shares, the Tarragon
Options and the Special Warrants.
"TARRAGON SECURITYHOLDERS" means the Tarragon Shareholders, the
Optionholders and the Warrantholders.
"TARRAGON SHAREHOLDERS" means the holders of Tarragon Shares.
"TARRAGON SHARES" means the common shares of Tarragon.
"TAX TREATY" means Canada-U.S. Income Tax Convention.
"TRANSFER AGENT" means Montreal Trust Company of Canada or such other
person as may from time to time be the registrar and transfer agent for the
Exchangeable Shares.
"TRUSTEE" means Montreal Trust Company of Canada and any successor trustee
appointed under the Exchange Trust Agreement.
"TSE" means The Toronto Stock Exchange.
"UNPAID DIVIDENDS" means the full amount of all cash and non-cash dividends
declared and unpaid in respect of Exchangeable Shares on a specified date.
"U.S." or "UNITED STATES" means the United States of America including the
states thereof, the District of Columbia, territories and possessions.
"USX" means USX Corporation, a corporation organized and existing under the
laws of the State of Delaware and any successor corporation.
"USX LIQUIDATION EVENT" means each of the following events at the time set
forth below:
(i) in the event of any determination by the board of directors of
USX to institute voluntary liquidation, dissolution or winding-up
proceedings with respect to USX or to effect any other
distribution of assets of USX among its stockholders for the
purpose of winding-up its affairs, at least 60 days prior to the
proposed effective date of such liquidation, dissolution,
winding-up or other distribution; and
(ii) immediately, upon the earlier of (A) receipt by USX of notice of
and (B) USX otherwise becoming aware of any threatened or
instituted claim, suit, petition or other proceedings with
respect to the involuntary liquidation, dissolution or winding-up
of USX or to effect any other distribution of assets of USX among
its stockholders for the purpose of winding-up its affairs.
"USX/MARATHON CALL NOTICE" means the written notification by USX or
Marathon to Albertaco of USX's or Marathon's exercise of the Retraction Call
Right.
"WARRANTHOLDERS" means the holders of Special Warrants.
S-25
<PAGE> 27
USX Corporation
Debt Securities
Preferred Stock
USX-Marathon Group Common Stock
USX-U.S. Steel Group Common Stock
Warrants
------------------------
USX Corporation ("USX") proposes to issue and offer from time to time (1)
unsecured debt securities of USX (the "Debt Securities"); (2) USX Corporation
Preferred Stock ("Preferred Stock"); (3) USX-Marathon Group Common Stock of USX
Corporation ("Marathon Stock"); (4) USX-U. S. Steel Group Common Stock of USX
Corporation ("Steel Stock"); (5) Warrants to purchase Debt Securities, Preferred
Stock, Marathon Stock or Steel Stock (the "Warrants"), or a combination of the
foregoing at an aggregate public offering price not exceeding $1,542,569,300 (or
the equivalent thereof in foreign denominated currency (or units based on or
related thereto) in the case of Debt Securities), at prices and on terms to be
determined at or prior to the time or times of sale. The Marathon Stock and
Steel Stock are together referred to as "Common Stock."
Specific terms of the securities in respect to which this Prospectus is
being delivered ("Offered Securities") shall be set forth in an accompanying
Prospectus Supplement, together with the terms of the offering of the Offered
Securities, the initial price thereof and net proceeds from the sale thereof.
All such Prospectus Supplement(s) shall also set forth with regard to the
particular Offered Securities, without limitation, the following: (1) in the
case of Debt Securities, the designation of each separate series and the
aggregate principal amount, maturity, interest rate, if any, whether fixed or
variable (or the manner of calculation thereof), redemption and sinking fund
provisions or other repayment obligations, currency in which denominated,
amounts determined by reference to an index, purchase price and any listing on a
securities exchange, (2) in the case of Preferred Stock, the designation, number
of shares offered, liquidation preference per share, dividend rate, dates on
which dividends are to be payable and dates from which dividends accrue, any
redemption or sinking fund provisions, any conversion features, and any listing
on a securities exchange, (3) in the case of Marathon Stock or Steel Stock, the
number of shares offered, the number of shares to be outstanding after the
offering, the price range and dividend history of the relevant stock and any
listing on a securities exchange, and (4) in the case of Warrants, the number
and terms thereof, the designation and the number of securities issuable upon
their exercise, the exercise price, the exercise time period, the terms of the
offering and sale thereof and any listing on a securities exchange.
USX may sell the Offered Securities to or through underwriters or directly
to other purchasers or through agents or through and to brokers or dealers
acting as underwriters who will be named in the accompanying Prospectus
Supplement(s) along with terms of the public offering, including the offering
price, the principal amounts, if any, to be purchased by underwriters, the
commission or discount to the underwriters and the amount of other expenses
attributable to the issuance and distribution of the Offered Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is July , 1998.
<PAGE> 28
AVAILABLE INFORMATION
USX Corporation ("USX") is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by USX can be inspected and copied at
prescribed rates at the Public Reference Room of the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the public reference
facilities maintained by the Commission at 7 World Trade Center, Suite 1300, New
York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Documents filed by USX can also be inspected at the offices of the New
York Stock Exchange, Inc. (the "NYSE"), The Chicago Stock Exchange and the
Pacific Stock Exchange. The Commission maintains a web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including USX.
USX has filed a Registration Statement on Form S-3 (the "Registration
Statement") with the Commission pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Offered Securities. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits thereto, to which reference is hereby made.
Statements contained herein concerning the provisions of certain documents are
not necessarily complete, and in each instance reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by USX with the Commission (file
no. 1-5153) are incorporated herein by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1997.
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
(c) Current Reports on Form 8-K dated January 1, February 27, March 5,
May 29 and July 13, 1998.
(d) The description of the Marathon Stock included in USX's Form 8
Amendment to a Registration Statement on Form 8-B filed on April 11,
1991.
(e) The description of Steel Stock included in USX's Form 8-A
Registration Statement filed on April 11, 1991.
(f) The Amended and Restated Rights Plan included in USX's Form 8
Amendment to Form 8-A Registration Statement filed on October 5, 1992.
All reports and other documents filed by USX pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering of the Offered Securities shall be
deemed to be incorporated by reference herein. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
USX undertakes to provide without charge to each person to whom a
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the information incorporated by reference in this Prospectus,
other than exhibits to such information (unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be directed to the Office of the
Corporate Secretary, USX Corporation, 600 Grant Street, Pittsburgh, Pennsylvania
15219-4776 (telephone: 412-433-4801).
2
<PAGE> 29
USX CORPORATION
USX is a diversified company which is principally engaged in the energy
business through its Marathon Group, and in the steel business through its U. S.
Steel Group. The term "USX" when used herein refers to USX Corporation or USX
Corporation and its subsidiaries, as required by the context. The term "Group"
when used herein refers to the Marathon Group and/or the U. S. Steel Group, as
required by the context.
USX has two classes of common stock, USX--Marathon Group Common Stock
("Marathon Stock") and USX--U. S. Steel Group Common Stock ("Steel Stock"). Each
class of common stock is intended to provide the stockholders of such class with
a separate security reflecting the performance of the related Group. Effective
October 31, 1997, USX sold Delhi Gas Pipeline Corporation and other subsidiaries
of USX that comprised all of the Delhi Group (the "Delhi Companies") and, on
January 26, 1998, redeemed all the outstanding USX-Delhi Group Common Stock.
The Marathon Group is comprised of Marathon Oil Company ("Marathon")
and certain other consolidated subsidiaries of USX which are engaged in
worldwide exploration and production of crude oil and natural gas; domestic
refining, marketing and transportation of petroleum products; and other
energy related businesses. During 1997, Marathon and Ashland Inc.
("Ashland") agreed to combine the major elements of their refining,
marketing and transportation ("RM&T") operations. On January 1, 1998,
Marathon transferred certain RM&T net assets to Marathon Ashland Petroleum
LLC ("MAP"), a new consolidated subsidiary. Also on January 1, 1998,
Marathon acquired certain RM&T net assets from Ashland in exchange for a
38% interest in MAP. Marathon Group revenues as a percentage of total USX
consolidated revenues were 69% in 1997, 71% in 1996 and 68% in 1995.
The U. S. Steel Group includes U. S. Steel, the largest steel producer
in the United States, which is primarily engaged in the production and sale
of steel mill products, coke and taconite pellets. The U. S. Steel Group
also includes the management of mineral resources, domestic coal mining,
and engineering and consulting services. Equity affiliates of the U. S.
Steel Group include Transtar Inc. and joint ventures, such as USS/Kobe
Steel Company, USS-POSCO Industries and PRO-TEC Coating Company. Other
businesses that are part of the U. S. Steel Group include real estate
development and management, and leasing and financing activities. U. S.
Steel Group revenues as a percentage of total USX consolidated revenues
were 31% in 1997, 29% in 1996 and 32% in 1995.
USX includes consolidated financial information in its periodic reports
required by the Exchange Act, in its annual shareholder reports and in other
financial communications. The consolidated financial statements are supplemented
with separate financial statements of the Marathon Group and the U. S. Steel
Group together with the related Management's Discussion and Analyses,
descriptions of business and other financial and business information to the
extent such information is required to be presented in the report being filed.
The financial information of the Marathon Group and the U. S. Steel Group and
certain financial information relating to the Delhi Group, taken together,
includes all accounts which comprise the corresponding consolidated financial
information of USX.
For consolidated financial reporting purposes, USX's reportable industry
segments correspond with its two Groups. The attribution of assets, liabilities
(including contingent liabilities) and stockholders' equity among the Marathon
Group and the U. S. Steel Group for the purpose of preparing their respective
financial statements does not affect legal title to such assets or
responsibility for such liabilities. Holders of Marathon Stock and Steel Stock
are holders of common stock of USX and continue to be subject to all of the
risks associated with an investment in USX and all of its businesses and
liabilities. Financial impacts arising from either of the Groups which affect
the overall cost of USX's capital could affect the results of operations and
financial condition of both Groups. In addition, net losses of either Group, as
well as dividends and distributions on either class of USX common stock or
series of any preferred stock and repurchases of either class of USX common
stock or any series of preferred stock at prices in excess of par or stated
value, will reduce funds of USX legally available for payment of dividends on
both classes of USX common stock. Accordingly, the USX consolidated financial
information should be read in connection with the Marathon Group and the U. S.
Steel Group financial information.
USX was incorporated in 1901 and is a Delaware corporation. Its executive
offices are located at 600 Grant St., Pittsburgh, PA 15219-4776 (tel:
412-433-1121).
3
<PAGE> 30
RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(UNAUDITED)
CONTINUING OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31 YEAR ENDED DECEMBER 31
------------ ------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges......... 4.95 4.11 3.90 1.62 2.18 (a)
==== === === ==== ==== ====
Ratio of earnings to combined fixed charges
and preferred stock dividends............ 4.77 3.92 3.62 1.49 2.01 (b)
==== === === ==== ==== ====
</TABLE>
- ---------
(a) Earnings did not cover fixed charges by $312 million for 1993.
(b) Earnings did not cover combined fixed charges and preferred stock dividends
by $356 million for 1993.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, USX
intends to use the net proceeds from the sale of the Offered Securities for
general corporate purposes, including, without limitation, the refunding of
outstanding long-term indebtedness and other financial obligations, interest
rate management, leveling of its debt maturity schedule, the financing and
re-financing of acquisitions, purchases of Common Stock, capital expenditures,
investments in subsidiaries and joint ventures, and working capital.
PENDING TRANSACTION
On June 20, 1998, Marathon Oil Company and Tarragon Oil and Gas Limited, an
Ontario Corporation, ("Tarragon") entered into an Arrangement Agreement, as
subsequently amended and restated, pursuant to which all issued and outstanding
common stock of Tarragon would be acquired by an indirect Canadian subsidiary of
Marathon Oil Company and holders thereof would receive, at their election, Cdn
$14.25 ($9.81, assuming an exchange rate of Cdn $'s to U.S. $'s of 0.6886) or
the economic equivalent in Exchangeable Shares to be issued by such Canadian
subsidiary. The Exchangeable Shares, when issued and outstanding, will be
exchangeable at any time into Marathon Stock on a one-for-one basis. The
aggregate cost of the Tarragon securities is estimated to be $750 million. The
transaction is subject to approval by the Ontario Court (General Division),
Ontario, Canada and is expected to be completed on or about August 11, 1998.
Filing of the financial information related to the acquisition of Tarragon by
Marathon is not required under the applicable sections of the Securities
Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended;
however, unaudited pro forma financial statements of the USX-Marathon Group, USX
Corporation and Tarragon were included in Tarragon's Information Circular used
in connection with solicitation of Tarragon's shareholders' approval of the
transaction contemplated in the Arrangement Agreement. Such unaudited pro forma
financial statements were filed on USX Corporation's Current Report on Form 8-K
dated July 13, 1998.
SPECIAL CONSIDERATIONS
CONSIDERATIONS RELATING TO COMMON STOCK
Stockholders of One Company; Financial Impacts from One Group Could Affect the
other Group
Although the financial statements of the Marathon Group and the U. S. Steel
Group separately report the assets, liabilities (including contingent
liabilities) and stockholders' equity of USX attributed to each such Group, such
attribution of assets, liabilities (including contingent liabilities) and
stockholders' equity between the Marathon Group and the U. S. Steel Group for
the purpose of preparing their respective financial
4
<PAGE> 31
statements does not affect legal title to such assets or responsibility for such
liabilities. Holders of Marathon Stock and Steel Stock are holders of common
stock of USX, and continue to be subject to all of the risks associated with an
investment in USX and all of its businesses and liabilities. Financial impacts
arising from one Group that affect the overall cost of USX's capital could
affect the results of operations and financial condition of the other Group. In
addition, net losses of either Group, as well as dividends and distributions on
either class of USX common stock or any series of Preferred Stock and
repurchases of either class of USX common stock or any series of Preferred
Stock, will reduce the funds of USX legally available for payment of dividends
on the Common Stock of both Groups. Accordingly, the USX consolidated financial
information should be read in connection with the Group financial information.
USX prepares and provides consolidated financial statements, as well as
financial statements of each Group, to the holders of the respective classes of
Common Stock. See "Management and Accounting Policies."
No Rights or Additional Duties With Respect to the Groups; Potential Conflicts
Holders of Marathon Stock and Steel Stock have only the rights of
stockholders of USX, and, except as described under "Description of Capital
Stock--Marathon Stock--Exchange and Redemption" and "--Voting" and under
"Description of Capital Stock--Steel Stock--Exchange and Redemption" and
"--Voting," holders of Common Stock are not provided any rights specifically
related to either Group. In addition, principles of Delaware law established in
cases involving differing treatment of classes of capital stock or groups of
holders of the same class of capital stock provide that a board of directors
owes an equal duty to all stockholders regardless of class or series and does
not have separate or additional duties to any group of stockholders.
The existence of separate classes of Common Stock may give rise to
occasions when the interests of holders of Marathon Stock and Steel Stock may
diverge or appear to diverge. Examples include the optional exchange of the
Steel Stock for Marathon Stock at the 10% premium; the determination of the
record date of any such exchange or for the redemption of any Steel Stock; the
establishing of the date for public announcement of the liquidation of USX; and
the commitment of capital between the Marathon Group and the U. S. Steel Group.
USX is not aware of any precedent involving the fiduciary duties of directors of
corporations having classes of common stock or separate classes or series of
capital stock the rights of which are defined by reference to specified
operations of the corporation. However, under the principles of Delaware law
referred to above and the "business judgment rule," absent abuse of discretion,
a good faith determination made by a disinterested and adequately informed USX
Board of Directors (the "Board") with respect to any matter having disparate
impacts upon holders of Marathon Stock and holders of Steel Stock would be a
defense to any challenge to such determination made by or on behalf of the
holders of either class of Common Stock.
Because the Board owes an equal duty to all stockholders regardless of
class, the Board is the appropriate body to deal with these matters. In order to
assist the Board in this regard, USX has formulated policies to serve as
guidelines for the resolution of matters involving a conflict or a potential
conflict, including policies dealing with the payment of dividends, limiting
capital investment in the U. S. Steel Group over the long term to its internally
generated cash flow, and allocation of corporate expenses and other matters. See
"Management and Accounting Policies." The Board has been advised concerning the
applicable law relating to the discharge of its fiduciary duties to the common
stockholders in the context of the separate classes of Common Stock and has
delegated to the Audit Committee of the Board the responsibility to review
matters which relate to this subject and report to the Board.
Limited Separate Voting Rights
Holders of shares of Marathon Stock and Steel Stock vote together as a
single class on all matters as to which all USX common stockholders are entitled
to vote. Holders of Marathon Stock and Steel Stock will have no rights to vote
on matters as a separate Group except as described under "Description of Capital
Stock--Marathon Stock--Voting" and under "Description of Capital Stock--Steel
Stock--Voting" and in certain limited circumstances as currently provided under
Delaware law. Separate meetings for the holders of each class of Common Stock
will not be held. Accordingly, subject to certain exceptions, holders of shares
of
5
<PAGE> 32
Marathon Stock or shares of Steel Stock cannot bring a proposal to a vote of the
holders of Marathon Stock or holders of Steel Stock only, but are required to
bring any proposal to a vote of all holders of capital stock of USX entitled to
vote generally voting together as a single class.
The interests of the holders of the Marathon Stock and Steel Stock may
diverge or appear to diverge with respect to certain matters as to which such
holders are entitled to vote. If, when a stockholder vote is taken on any matter
as to which a separate vote by any class would not be required under the USX
Corporation Restated Certificate of Incorporation, as amended from time to time
(the "Certificate of Incorporation"), or Delaware law, the holders of one class
of Common Stock would have more than the number of votes required to approve any
such matter, the holders of that class would be in a position to control the
outcome of the vote on such matter. The Certificate of Incorporation provides
that neither the increase nor the decrease of the authorized number of shares of
either class of Common Stock requires a separate vote of either such class.
Thus, it is possible that the holders of a majority of either class of Common
Stock could constitute a majority of the voting power of both classes of Common
Stock and approve the increase or decrease of the authorized amount of the other
class of Common Stock without the approval of the holders of such other class of
Common Stock.
On all matters where the holders of Common Stock vote together as a single
class, a share of Marathon Stock will have one vote and each share of Steel
Stock will have a fluctuating vote per share based on time-weighted average
ratios of their Market Values (See "Description of Capital Stock"). Assuming
that the time-weighted averages of the Market Values of Marathon Stock and Steel
Stock were $33 and $32, respectively, the per share voting rights of Marathon
Stock and Steel Stock would be one vote and 0.970 votes per share, respectively.
If the Marathon Stock and the Steel Stock had such per share voting rights as of
June 30, 1998, the holders of Marathon Stock and Steel Stock would have
approximately 77% and 23%, respectively, of the total voting power of USX.
Management and Accounting Policies Subject to Change
Since 1991, USX has applied certain management and accounting policies
adopted by the Board and described herein, which policies may be modified or
rescinded in the sole discretion of the Board without approval of stockholders,
although the Board has no present intention to do so. See "Management and
Accounting Policies." The Board may also adopt additional policies depending
upon the circumstances. Any determination of the Board to modify or rescind such
policies, or to adopt additional policies, including any such decision that
would have disparate impacts upon holders of Marathon Stock or Steel Stock,
would be made by the Board in good faith and in the honest belief that such
decision is in the best interests of all stockholders of USX. In addition,
generally accepted accounting principles require that any change in accounting
policy be preferable (in accordance with such principles) to the policy
previously established.
Limitations on Potential Unsolicited Acquisitions
If the Marathon Group and the U. S. Steel Group were separate companies,
any person interested in acquiring one of them without negotiation with
management could seek to obtain control of it by means of a tender offer or
proxy contest. Because each Group is not a separate company, any person
interested in acquiring only one Group without negotiation with USX management
would be required to seek control of the voting power representing all of the
outstanding capital stock of USX entitled to vote on such acquisition. See
"Limited Separate Voting Rights" above.
Because of fluctuations in the relative Market Values of shares of the
classes of Common Stock, the voting power of a particular stockholder may be
increased or decreased from that held at the time the stockholder acquired the
stock or from that held at the time of the previous vote. The fluctuating voting
powers of the classes of Common Stock may influence a purchaser interested in
acquiring and maintaining control of USX to acquire equivalent holdings in both
classes of Common Stock.
6
<PAGE> 33
Dividends and Earnings Per Share
The Board intends to declare and pay dividends on the Marathon Stock and
Steel Stock based on the financial condition and results of operations of the
respective Group, although it has no obligation under Delaware law to do so.
Subject to any prior rights of the holders of Preferred Stock: (a) dividends on
Marathon Stock will be payable out of legally available funds of USX (as defined
under Delaware law) and (b) dividends on Steel Stock will be payable out of the
lesser of (i) the Available Steel Dividend Amount and (ii) legally available
funds. In making its dividend decisions, the Board will rely on the financial
statements of each Group. In determining its dividend policy, the Board will
consider, among other things, the long-term earnings and cash flow capabilities
of each Group, as well as the dividend policies of similar publicly traded
companies.
The method of calculating earnings per share for the Marathon Stock and the
Steel Stock reflects the Board's intent that the separately reported earnings
and surplus of the Marathon Group and the U. S. Steel Group as determined
consistent with the Certificate of Incorporation, are available for payment of
dividends to the respective classes of stock, although legally available funds
and liquidation preferences of these classes of stock do not necessarily
correspond with these amounts. Dividends on all classes of Preferred Stock and
Common Stock are limited to legally available funds of USX, which are determined
on the basis of the entire Corporation. Distribution on the Marathon Stock and
the Steel Stock would be precluded by a failure to pay dividends on any series
of Preferred Stock. Net losses of either Group as well as dividends and
distributions on either class of Common Stock or any series of Preferred Stock
and repurchases of either class of Common Stock or any series of Preferred
Stock, will reduce the funds of USX legally available for payment of dividends
on both classes of Common Stock.
Under Delaware law, a corporation may declare and pay dividends on its
capital stock either (1) out of its surplus or (2) in case there is no surplus,
out of its net profits for the year in which the dividend is declared and/or the
preceding fiscal year. "Surplus" is the amount by which the total assets of the
corporation exceed total liabilities and capital. Capital for USX is the sum of
(a) the aggregate par value of the outstanding shares of Common Stock (equal to
$1 per share) and (b) the aggregate stated capital of the outstanding shares of
6.50% Convertible Preferred Stock ($1 per share). If the capital of a
corporation is diminished by depreciation in the value of its properties, or by
losses, or otherwise, to an amount less than the aggregate amount of capital
represented by the outstanding stock of all classes having a preference upon the
distribution of assets, dividends may not be paid out of net profits (that is
pursuant to clause (2) above) until the deficiency in capital shall have been
repaired. For purposes of determining surplus, the assets and liabilities of a
corporation are to be valued on the basis of market value.
Potential Effects of Exchange and Redemption of Common Stock
Under various conditions, the Steel Stock may be exchanged, at USX's
option, for shares of Marathon Stock at a 10% premium. Any exchange of Steel
Stock for Marathon Stock would preclude holders of Steel Stock from retaining
their investment in a security reflecting USX's steel and other businesses that
constitute the U. S. Steel Group. See "Description of Capital Stock--Steel
Stock--Exchange and Redemption."
MANAGEMENT AND ACCOUNTING POLICIES
MANAGEMENT POLICIES
The Board has adopted certain policies with respect to the Marathon Group
and the U. S. Steel Group including, without limitation, the intention to: (i)
limit capital expenditures of the U. S. Steel Group over the long term to an
amount equal to the internally generated cash flow of the U. S. Steel Group,
including funds generated by sales of assets of the U. S. Steel Group, (ii) sell
assets and provide services between the groups only on an arm's-length basis and
(iii) treat funds generated by sale of Marathon Stock and Steel Stock and
securities convertible into such stock as assets of the respective Group and
apply such funds to acquire assets or reduce liabilities of the Marathon Group
or the U. S. Steel Group, respectively, as the case may be.
7
<PAGE> 34
The above policies may be modified or rescinded in the sole discretion of
the Board without approval of the stockholders, although the Board has no
present intention to do so. The Board may also adopt additional policies
depending upon the circumstances. Any determination of the Board to modify or
rescind such policies, or to adopt additional policies, including any such
decision that would have disparate impacts upon holders of the separate classes
of Common Stock, would be made by the Board in good faith and in the honest
belief that such decision is in the best interest of all stockholders of USX.
ACCOUNTING MATTERS AND POLICIES
USX prepares the Marathon Group and the U. S. Steel Group financial
statements in accordance with generally accepted accounting principles, and
these financial statements (and certain financial information relating to the
Delhi Group), taken together, comprise all of the accounts included in the
corresponding consolidated financial statements of USX. The financial statements
of the Marathon Group and the U. S. Steel Group principally reflect the
financial position and results of operations of the businesses included therein.
Consistent with the Certificate of Incorporation and related policies, such
group financial statements also include portions of USX's corporate assets and
liabilities (including contingent liabilities). Principal corporate activities
attributed to the groups and reflected in their financial statements include
financial activities, corporate general and administrative costs, common stock
transactions and income taxes.
The above policies may be modified or rescinded in the sole discretion of
the Board without approval of the stockholders, although the Board has no
present intention to do so. The Board may also adopt additional policies
depending upon the circumstances. Any determination of the Board to modify or
rescind such policies, or to adopt additional policies, including any such
decision that would have disparate impacts upon holders of the separate classes
of Common Stock, would be made by the Board in good faith and in the honest
belief that such decision is in the best interest of all stockholders of USX. In
addition, generally accepted accounting principles require that any change in an
accounting policy be preferable (in accordance with such principles) to the
previous policy.
DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities will be general unsecured obligations of USX and will
rank pari passu with the other general unsecured obligations of USX. The Debt
Securities will be issued under an Indenture, dated as of March 15, 1993,
between PNC Bank, National Association (the "Trustee") and USX (the
"Indenture"). A copy of the Indenture is filed as an exhibit to the Registration
Statement. The following summaries of certain provisions of the Indenture do not
purport to be complete and are qualified in their entirety by reference to the
provisions of the Indenture, which are incorporated by reference herein. Certain
capitalized terms used herein are defined in the Indenture. The Section numbers
referred to in the following summaries are references to relevant sections of
the Indenture.
GENERAL
The Indenture does not limit the principal amount of Debt Securities or
other indebtedness which may be issued thereunder from time to time by USX and
USX may in the future issue additional Debt Securities (in addition to those
offered hereby) under the Indenture. As of April 30, 1998, an aggregate
principal amount of $1.4 billion of Debt Securities had been issued, and were
outstanding under, the Indenture.
The Debt Securities of any Series may be issued in definitive form or, if
provided in the Prospectus Supplement relating thereto, may be represented in
whole or in part by a Global Security or Securities, registered in the name of a
Depositary designated by USX. Each Debt Security represented by a Global
Security is referred to herein as a "Book-Entry Security."
Debt Securities may be issued from time to time pursuant to this Prospectus
in an aggregate principal amount or initial public offering price of up to
$1,542,569,300 or the equivalent thereof in foreign denominated currency or
units based on or relating to foreign denominated currencies, including European
Currency Units ("ECU"), and will be offered independently or together on terms
determined by market conditions at the
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time of sale. The Debt Securities may be issued in one or more series with the
same or various maturities and may be sold at par, a premium or an original
issue discount. Debt Securities sold at an original issue discount may bear no
interest or interest at a rate which is below market rates.
Reference is made to the Prospectus Supplement for the specific terms of
the Debt Securities offered hereby, including the following (to the extent
applicable to a particular series of Debt Securities): (i) designation,
aggregate principal amount, purchase price (expressed as a percentage of the
principal amount thereof), and denomination; (ii) date of maturity; (iii) if
other than currency of the United States, the currency or units based on or
relating to currencies for which Debt Securities may be purchased and in which
principal and any premium or interest will or may be payable; (iv) interest rate
or rates (or the manner of calculation thereof), if any; (v) the times at which
any such interest will be payable; (vi) the place or places where principal and
any premium and interest will be payable; (vii) any redemption or sinking fund
provisions or other repayment obligations and any remarketing arrangements
related thereto; (viii) any index used to determine the amount of payment of
principal of and any premium and interest on the Debt Securities; (ix) the
application, if any, of the defeasance provisions to the Debt Securities; (x) if
other than the principal amount thereof, the portion of the principal amount of
the Debt Securities which shall be payable upon declaration of acceleration of
the maturity thereof; (xi) if other than 100% of the principal amount thereof
plus accrued interest, the Change in Control Purchase Price or Prices applicable
to purchases of Debt Securities upon the occurrence of a Change in Control;
(xii) whether the Debt Securities will be issued in whole or in part in the form
of one or more Global Securities and, in such case, the Depositary for such
Global Securities; and (xiii) any other specific terms of the Debt Securities,
including any terms which may be required by or advisable under United States
laws or regulations.
Except with respect to Book-Entry Securities, Debt Securities may be
presented for exchange or registration of transfer, in the manner, at the places
and subject to the restrictions set forth in the Debt Securities and the
Prospectus Supplement. Such services will be provided without charge, other than
any tax or other governmental charge payable in connection therewith, but
subject to the limitations provided in the Indenture. For a description of
payments of principal of and any premium and interest on, and transfer of,
Book-Entry Securities, and exchanges of Global Securities representing
Book-Entry Securities, see "Book-Entry Securities" hereunder.
CERTAIN COVENANTS OF USX
Creation of Certain Liens
If USX or any Subsidiary of USX shall mortgage, pledge, encumber or subject
to a lien (hereinafter to "Mortgage" or a "Mortgage," as the context may
require) as security for any indebtedness for money borrowed (i) any blast
furnace facility or raw steel producing facility, or rolling mills which are a
part of a plant which includes such a facility, or (ii) any property capable of
producing oil or gas; and which, in either case, is located in the United States
and is determined to be a principal property by the Board of Directors of USX in
its discretion, USX will secure or will cause such Subsidiary to secure each
Series of the Debt Securities equally and ratably with all indebtedness or
obligations secured by the Mortgage then being given and with any other
indebtedness of USX or such Subsidiary then entitled thereto; provided, however,
that this covenant shall not apply in the case of: (a) any Mortgage existing on
the date of the Indenture (whether or not such Mortgage includes an
after-acquired property provision); (b) any Mortgage, including a purchase money
Mortgage, incurred in connection with the acquisition of any property (any
Mortgage incurred within 180 days after such acquisition or the completion of
construction shall be deemed to be in connection with such acquisition), the
assumption of any Mortgage previously existing on such acquired property or any
Mortgage existing on the property of any corporation when it becomes a
Subsidiary of USX; (c) any Mortgage on such property in favor of the United
States, or any State, or instrumentality of either, to secure partial, progress
or advance payments to USX or any Subsidiary of USX pursuant to the provisions
of any contract or any statute; (d) any Mortgage on such property in favor of
the United States, any State, or instrumentality of either, to secure borrowings
for the purchase or construction of the property Mortgaged; (e) any Mortgage in
connection with a sale or other transfer of oil or gas in place for a period of
time or in an amount such that the purchaser will realize therefrom a specified
amount of money or specified amount of minerals or any interest in
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property of the character commonly referred to as an "oil payment" or
"production payment"; (f) any Mortgage on any property arising in connection
with or to secure all or any part of the cost of the repair, construction,
improvement, alteration, exploration, development or drilling of such property
or any portion thereof; (g) any Mortgage on any pipeline, gathering system,
pumping or compressor station, pipeline storage facility, other pipeline
facility, drilling equipment, drilling platform, drilling barge, any movable
railway, marine or automotive equipment, gas plant, office building, storage
tank, or warehouse facility, any of which is located on any property included
under clause (ii) above; (h) any Mortgage on any equipment or other personal
property used in connection with any property included under clause (ii) above;
(i) any Mortgage on any property included under clause (ii) above arising in
connection with the sale of accounts receivable resulting from the sale of oil
or gas at the wellhead; or (j) any renewal of or substitution for any Mortgage
permitted under the preceding clauses. Notwithstanding the foregoing, USX may
and may permit its Subsidiaries to grant Mortgages or incur liens on property
covered by the restriction described above so long as the net book value of the
property so encumbered, together with all property subject to the restriction on
certain sale and leasebacks described below, does not at the time such Mortgage
or lien is granted exceed five percent (5%) of Consolidated Net Tangible Assets,
(as such term is defined in the Indenture). (Section 4.03)
"Consolidated Net Tangible Assets" means the aggregate value of all assets
of USX and its subsidiaries after deducting therefrom (a) all current
liabilities (excluding all long-term debt due within one year), (b) all
investments in unconsolidated subsidiaries and all investments accounted for on
the equity basis and (c) all goodwill, patent 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 USX's most recent audited consolidated financial statements). (Section
1.01)
As of the date of this Prospectus, neither USX nor any subsidiary of USX
has any property referred to in either clause (i) or (ii) above and in the
following subsection "Limitations on Certain Sales and Leasebacks" which has
been determined by the Board of Directors of USX to be a principal property.
Limitations on Certain Sale and Leasebacks
USX will not, nor will it permit any Subsidiary to, sell or transfer (i)
any blast furnace facility or raw steel producing facility, or rolling mills
which are a part of a plant which includes such a facility, or (ii) any property
capable of producing oil or gas; and which, in either case, is located in the
United States and is determined to be a principal property by the Board of
Directors of USX in its discretion, with the intention of taking back a lease
thereof, provided, however, this covenant shall not apply if (a) the lease is to
a Subsidiary (or to USX in the case of a Subsidiary); (b) the lease is for a
temporary period by the end of which it is intended that the use of the property
by the lessee will be discontinued; (c) USX or a Subsidiary could, in accordance
with Section 4.03, heretofore described, Mortgage such property without equally
and ratably securing the Debt Securities; (d) the transfer is incident to or
necessary to effect any operating, farm out, farm in, unitization, acreage
exchange, acreage contributions, bottom hole or dry hole arrangements or pooling
agreement or any other agreement of the same general nature relating to the
acquisition, exploration, maintenance, development and operation of oil and gas
properties in the ordinary course of business or as required by regulatory
agencies having jurisdiction over the property; or (e) USX promptly informs the
Trustee of such sale, the net proceeds of such sale are at least equal to the
fair value (as determined by resolution adopted by the Board of Directors of
USX) of such property and USX within 180 days after such sale applies an amount
equal to such net proceeds (subject to reduction by reason of credits to which
USX is entitled, under the conditions specified in the Indenture) to the
retirement or in substance defeasance of funded debt of USX or a Subsidiary.
(Section 4.04)
Merger and Consolidation
USX will not merge or consolidate with any other corporation or sell or
convey all or substantially all of its assets to any person, firm or
corporation, except that USX may merge or consolidate with, or sell or convey
all or substantially all of its assets to, any other corporation, provided that
(i) USX shall be the continuing corporation or the successor corporation (if
other than USX, as the case may be) shall be a corporation organized and
existing under the laws of the United States of America or a State thereof and
such corporation
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shall expressly assume the due and punctual payment of the principal of and any
premium and interest on all the Debt Securities, according to their tenor, and
the due and punctual performance and observance of all of the covenants and
conditions of the Indenture to be performed by USX and (ii) USX or such
successor corporation, as the case may be, shall not, immediately after such
merger, consolidation, sale or conveyance, be in default in the performance of
any such covenant or condition and no event which with the lapse of time, the
giving of notice or both would constitute an Event of Default shall have
occurred and be continuing. (Section 11.01)
If upon any consolidation or merger of USX with or into any other
corporation, or upon any sale or conveyance of substantially all of the
properties of USX, or upon any acquisition by USX of all or any part of the
property of another corporation, any property owned immediately prior thereto
would thereupon become subject to any mortgage, lien, pledge, charge or
encumbrance, USX, prior to such event, will secure the Debt Securities (equally
and ratably with any other indebtedness of USX secured thereby) by a lien on all
of such property of USX, prior to all liens, charges and encumbrances other than
any theretofore existing thereon. (Section 11.03)
PURCHASE OF DEBT SECURITIES UPON A CHANGE IN CONTROL
In the event of any Change in Control (as defined below) of USX, each
holder of Debt Securities will have the right, at that holder's option, subject
to the terms and conditions of the Indenture, to require USX to become obligated
to purchase all of that holder's Debt Securities on the date that is 35 Business
Days after the occurrence of such Change in Control (the "Change in Control
Purchase Date") at a cash price equal to (i) unless otherwise specified in the
terms of such Debt Securities, 100% of the principal amount thereof, together
with accrued interest to such Change in Control Purchase Date (except that
interest installments due prior to such Change in Control Purchase Date will be
payable to the holders of such Debt Securities of record at the close of
business on the relevant record dates according to their terms and the
provisions of the Indenture), or (ii) such other price or prices as may be
specified in the terms of such Debt Securities (the "Change in Control Purchase
Prices"). (Section 4.07)
Within 15 Business Days after a Change in Control, USX is obligated to mail
to the Trustee and to all holders of Debt Securities of any Series at their
addresses shown in the Debt Security register (and to beneficial owners as
required by applicable law) a notice regarding the Change in Control, stating,
among other things: (i) the last date on which the Change in Control purchase
right may be exercised, (ii) the Change in Control Purchase Price, (iii) the
Change in Control Purchase Date, (iv) the name and address of the Paying Agent,
and (v) the procedures that holders must follow to exercise these rights. USX
will cause a copy of such notice to be published in a daily newspaper of
national circulation. (Section 4.07)
To exercise this right, a holder of Debt Securities of any Series must
deliver a Change in Control Purchase Notice to the Paying Agent for that Series
at its address set forth in USX's notice regarding the Change in Control at any
time prior to the close of business on the Change in Control Purchase Date. The
Change in Control Purchase Notice shall state (i) the certificate numbers of the
Debt Securities to be delivered by the holder thereof for purchase by USX and
(ii) that such Debt Securities are to be purchased by USX pursuant to the
applicable provisions of the Debt Securities and USX's notice regarding the
Change in Control. (Section 4.07)
Upon receipt by USX of the Change in Control Purchase Notice, the holder of
the Debt Security in respect of which such notice was given shall (unless such
notice is withdrawn as specified in the Indenture) thereafter be entitled to
receive solely the Change in Control Purchase Price with respect to such Debt
Security. Any Change in Control Purchase Notice may be withdrawn by the holder
of Debt Securities of any Series by a written notice of withdrawal delivered to
the Paying Agent for that Series at any time prior to the close of business on
the Change in Control Purchase Date. The notice of withdrawal shall state the
certificate numbers of the Debt Securities as to which the withdrawal notice
relates. (Section 4.08)
Payment of the Change in Control Purchase Price for a Debt Security of any
Series for which a Change in Control Purchase Notice has been delivered and not
withdrawn is conditioned upon delivery of such Debt Security (together with
necessary endorsements) to the Paying Agent for that Series at its address set
forth in
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USX's notice regarding the Change in Control, at any time (whether prior to, on
or after the Change in Control Purchase Date) after the delivery of such Change
in Control Purchase Notice. (Section 4.07) Payment of the Change in Control
Purchase Price for such Debt Security will be made promptly following the later
of the Change in Control Purchase Date or the time of delivery of such Debt
Security. (Section 4.08)
Under the Indenture, a "Change in Control" of USX is deemed to have
occurred at such time as (i) any "person" or "group" of persons (excluding USX,
any Subsidiary, any employee stock ownership plan or any other employee benefit
plan of USX) shall have acquired "beneficial ownership" (within the meaning of
Section 13(d) or 14(d) of the Exchange Act and the applicable rules and
regulations thereunder) of shares of Voting Stock representing at least 35% of
the outstanding Voting Power of USX, (ii) during any period of twenty-five
consecutive months, commencing before or after the date of the Indenture,
individuals who at the beginning of such twenty-five month period were directors
of USX (together with any replacement or additional directors whose election was
recommended by incumbent management of USX or who were elected by a majority of
directors then in office) cease to constitute a majority of the board of
directors of USX, or (iii) any person or group of related persons shall acquire
all or substantially all of the assets of USX; provided, that a Change in
Control shall not be deemed to have occurred pursuant to clause (iii) above if
USX shall have merged or consolidated with or transferred all or substantially
all of its assets to another corporation in compliance with the provisions of
Section 11.01 of the Indenture (relating to when USX may merge or transfer
assets) and the surviving or successor or transferee corporation is no more
leveraged than was USX immediately prior to such event. For purposes of this
definition, the term "leveraged" when used with respect to any corporation shall
mean the percentage represented by the total assets of that corporation divided
by its stockholders' equity, in each case determined and as would be shown in a
consolidated balance sheet of such corporation prepared in accordance with
generally accepted accounting principles in the United States of America. The
term "substantially all" in clause (iii) above has not been quantified for
purposes of defining Change in Control and, depending upon the factual
circumstances, there may be uncertainty as to when a Change in Control has
occurred for purposes of determining the rights of holders of Debt Securities
pursuant to this provision.
Notwithstanding the foregoing, a Change in Control will not be deemed to
have occurred by virtue of (i) USX, any Subsidiary of USX, any employee stock
ownership plan or any other employee benefit plan of USX or any such Subsidiary,
or any Person holding Voting Stock for or pursuant to the terms of any such
employee benefit plan, acquiring beneficial ownership of shares of Voting Stock,
whether representing 35% or more of the outstanding Voting Power of USX or
otherwise or (ii) any Person whose ownership of shares of Voting Stock
representing 35% or more of the outstanding Voting Power of USX results solely
from USX's calculation from time to time of the relative voting rights of
Marathon Stock and Steel Stock.
"Voting Stock" means stock of USX of any class or classes (however
designated) having ordinary voting power for the election of the directors of
USX, other than stock having such power only by reason of the happening of a
contingency. "Voting Power" means the total voting power represented by all
outstanding shares of all classes of Voting Stock. (Section 4.07)
In the event a Change in Control occurs, USX intends to comply with any
applicable securities laws or regulations, including any applicable requirements
of Rule 14e-1 under the Exchange Act. The Change in Control purchase feature of
the Debt Securities may in certain circumstances make more difficult or
discourage a takeover of USX. The Change in Control purchase feature, however,
is not the result of management's knowledge of any specific effort to accumulate
shares of Common Stock or to obtain control of USX by means of a merger, tender
offer, solicitation or otherwise, or part of a plan by management to adopt a
series of anti-takeover provisions. The Change in Control purchase feature is
similar to that contained in other debt offerings of USX as a result of
negotiations between USX and the underwriters thereof.
Except as described above, the Change in Control purchase feature does not
afford holders of the Debt Securities protection against possible adverse
effects of a reorganization, restructuring, merger or similar transaction
involving USX.
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Although USX's existing indebtedness does not limit USX's ability to
purchase Debt Securities, USX's ability to purchase Debt Securities in the
future may be limited by the terms of any then existing borrowing arrangements
and by its financial resources.
EVENTS OF DEFAULT
An Event of Default with respect to Debt Securities of any Series is
defined in the Indenture as being: (i) default in the payment of the principal
of or premium, if any, on any of the Debt Securities of such Series when due and
payable; (ii) default in the payment of interest on the Debt Securities of such
Series when due, continuing for 30 days; (iii) default in the payment of the
Change in Control Purchase Price of any of the Debt Securities of such Series as
and when the same shall become due and payable; (iv) default in the deposit of
any sinking fund payment with respect to any Debt Security of such Series when
due; (v) failure by USX in the performance of any other covenant or agreement in
the Debt Securities of such Series or in the Indenture continued for a period of
90 days after notice of such failure as provided in the Indenture; (vi) certain
events of bankruptcy, insolvency, or reorganization with respect to USX; or
(vii) any other Event of Default provided with respect to Debt Securities of
that Series. (Section 6.01)
USX is required annually to deliver to the Trustee officers' certificates
stating whether or not the signers have any knowledge of any default in the
performance by USX of certain covenants. (Section 4.06)
In case an Event of Default 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 such Series then outstanding may declare the Debt
Securities of such Series to be due and payable. (Section 6.01) The Trustee is
required to give holders of the Debt Securities of any Series written notice of
a default with respect to such Series as and to the extent provided by the Trust
Indenture Act. (Section 6.07)
If, however, at any time after the Debt Securities of such Series have been
declared due and payable, and before any judgment or decree for the moneys due
has been obtained or entered, USX shall pay or deposit with the Trustee amounts
sufficient to pay all matured installments of interest upon the Debt Securities
of such Series and the principal of all Debt Securities of such Series which
shall have become due, otherwise than by acceleration, together with interest on
such principal and, to the extent legally enforceable, on such overdue
installments of interest and all other amounts due under the Indenture shall
have been paid, and any and all defaults with respect to such Series under the
Indenture shall have been remedied, then the holders of a majority in aggregate
principal amount of the Debt Securities of such Series then outstanding, by
written notice to USX and the Trustee, may waive all defaults with respect to
such Series and rescind and annul the declaration that the Debt Securities of
such Series are due and payable. (Section 6.01) In addition, prior to any such
declaration that the Debt Securities of such Series are due and payable, the
holders of a majority in aggregate principal amount of the Debt Securities of
such Series may waive any past default and its consequences with respect to such
Series, except a default in the payment of the principal of or any premium or
interest on any Debt Securities of such Series. (Section 6.06)
The Trustee is under no obligation to exercise any of the rights or powers
under the Indenture at the request, order or direction of any of the holders of
Debt Securities, unless such holders shall have offered to the Trustee
reasonable security or indemnity. (Section 7.02) Subject to such provisions for
the indemnification of the Trustee and certain limitations contained in the
Indenture, the holders of a majority in aggregate principal amount of the Debt
Securities of each Series at the time outstanding shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of such Series. (Section 6.06)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting USX and the Trustee to modify
the Indenture or enter into or modify any supplemental indenture without the
consent of the holders of the Debt Securities in regard to matters as shall not
adversely affect the interests of the holders of the Debt Securities, including,
without limitation, the following: (a) to evidence the succession of another
corporation to USX; (b) to add to the covenants of USX further covenants,
restrictions, conditions or provisions for the benefit or protection of the
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holders of any or all Series of Debt Securities or to surrender any right or
power conferred upon USX by the Indenture; (c) to cure any ambiguity or to
correct or supplement any provision of the Indenture (or supplements) which may
be defective or inconsistent with any other provision in the Indenture (or
supplements); to convey, transfer, assign, mortgage or pledge any property to or
with the Trustee; or to make such other provisions in regard to matters or
questions arising under the Indenture as shall not adversely affect the
interests of the holders of the Debt Securities then outstanding; (d) to add to,
change or eliminate any of the provisions of the Indenture in respect of one or
more Series of Debt Securities thereunder, under certain conditions specified
therein; (e) to evidence the appointment of a successor trustee and to add to or
change provisions of the Indenture necessary to provide for or facilitate the
administration of the trusts under the Indenture by more than one trustee; (f)
to set forth the form and any terms of any Series of Debt Securities which USX
and the Trustee deem necessary or desirable to include in a supplemental
indenture; and (g) to add to or change any of the provisions of the Indenture to
such extent as shall be necessary or desirable to permit or facilitate the
issuance of Debt Securities in bearer form, registrable or not registrable as to
principal, and with or without interest coupons. USX and the Trustee may
otherwise modify the Indenture or any supplemental indenture with the consent of
the holders of not less than 66 2/3% in aggregate principal amount of each
Series of Debt Securities affected thereby at the time outstanding, except that
no such modifications shall (i) extend the fixed maturity of any Debt
Securities, or reduce the principal amount thereof or 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, without the consent of the holder of
each Debt Security so affected, or (ii) reduce the aforesaid percentage of Debt
Securities of any Series, the consent of the holders of which is required for
any such modifications or supplemental indenture, without the consent of the
holders of all Debt Securities affected thereby then outstanding. (Article Ten)
SATISFACTION AND DISCHARGE; DEFEASANCE AND COVENANT DEFEASANCE
The Indenture shall be satisfied and discharged if (i) USX shall deliver to
the Trustee all Debt Securities then outstanding for cancellation or (ii) all
Debt Securities shall have become due and payable or are to become due and
payable within one year and USX shall deposit an amount sufficient to pay the
principal, premium, if any, and interest to the date of maturity, provided that
in either case USX shall have paid all other sums payable under the Indenture.
(Section 12.01)
The Indenture provides, if such provision is made applicable to the Debt
Securities of a Series, that USX may elect either (A) to defease and be
discharged from any and all obligations with respect to any Debt Security of
such Series (except for the obligations to register the transfer or exchange of
such Debt Security, to replace temporary or mutilated, destroyed, lost or stolen
Debt Securities, to maintain an office or agency in respect of the Debt
Securities and to hold moneys for payment in trust) ("defeasance") or (B) to be
released from its obligations with respect to such Debt Security under Sections
4.03, 4.04, 4.07, 4.09, 11.01 and 11.03 of the Indenture (being the restrictions
described above under "Certain Covenants of USX" and USX's obligations described
under "Purchase of Debt Securities upon a Change in Control") and (ii) that
Sections 6.01(d), 6.01(e) (as to Sections 4.03, 4.04, 4.07, 4.09, 11.01 and
11.03) and 6.01(h), as described in clauses (iv), (v) and (vii) under "Events of
Default" above, shall not be deemed to be Events of Default under the Indenture
with respect to such Series ("covenant defeasance"), upon the deposit with the
Trustee (or other qualifying trustee), in trust for such purpose, of money
and/or Government Obligations (as defined) which through the payment of
principal and interest in accordance with their terms will provide money, in an
amount sufficient to pay the principal of (and premium, if any) and interest on
such Debt Security, on the scheduled due dates therefor. In the case of
defeasance, the holders of such Debt Securities are entitled to receive payments
in respect of such Debt Securities solely from such Trust. Such a trust may only
be established if, among other things, USX has delivered to the Trustee an
Opinion of Counsel (as specified in the Indenture) to the effect that the
holders of the Debt Securities affected thereby will not recognize income, gain
or loss for Federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance or covenant defeasance had not occurred. Such Opinion of
Counsel, in the case of defeasance under clause (A) above, must refer to and be
based upon a ruling of the Internal Revenue Service or a change in applicable
Federal income tax law occurring after the date of the Indenture. (Section
12.02)
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RECORD DATES
The Indenture provides that in certain circumstances USX or the Trustee may
establish a record date for determining the holders of outstanding Debt
Securities of a Series entitled to join in the giving of notice or the taking of
other action under the Indenture by the holders of the Debt Securities of such
Series.
BOOK-ENTRY SECURITIES
The following description of Book-Entry Securities will apply to any Series
of Debt Securities issued in whole or in part in the form of a Global Security
or Securities except as otherwise provided in the Prospectus Supplement relating
thereto.
Upon issuance, all Book-Entry Securities of like tenor and having the same
date of original issue will be represented by a single Global Security. Each
Global Security representing Book-Entry Securities will be deposited with, or on
behalf of, the Depositary, which will be a clearing agent registered under the
Exchange Act. The Global Security will be registered in the name of the
Depositary or a nominee of the Depositary.
Ownership of beneficial interest in a Global Security representing
Book-Entry Securities will be limited to institutions that have accounts with
the Depositary or its nominee ("participants") or persons that may hold
interests through participants. In addition, ownership of beneficial interests
by participants in such a Global Security will only be evidenced by, and the
transfer of that ownership interest will only be effected through, records
maintained by the Depositary or its nominee for such Global Security. Ownership
of beneficial interest in such a Global Security by persons that hold through
participants will only be evidenced by, and the transfer of that ownership
interest within such participant will only be effected through, records
maintained by such participant. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such laws may impair this ability to transfer beneficial
interests in such a Global Security.
Payment of principal of and any premium and interest on Book-Entry
Securities represented by any Global Security registered in the name of or held
by the Depositary or its nominee will be made to the Depositary or its nominee,
as the case may be, as the registered owners and holder of the Global Security
representing such Book-Entry Securities. None of USX, the Trustee or any agent
of USX or the Trustee will have any responsibility or liability for any aspect
of the Depositary's records or any participant's records relating to or payments
made on account of beneficial ownership interests in a Global Security
representing such Book-Entry Securities or for maintaining, supervising or
reviewing any of the Depositary's records or any participant's records relating
to such beneficial ownership interests. Payments by participants to owners of
beneficial interests in a Global Security held through such participants will be
governed by the Depositary's procedures, as is now the case with securities held
for the accounts of customers registered in "street name," and will be the sole
responsibility of such participants.
No Global Security may be transferred except as a whole by the Depositary
for such Global Security to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary.
A Global Security representing Book-Entry Securities of any Series is
exchangeable for definitive Debt Securities of such Series in registered form,
of like tenor and of an equal aggregate principal amount, only if (a) the
Depositary notifies USX that it is unwilling or unable to continue as Depositary
for such Global Security or the Depositary ceases to be a clearing agency
registered under the Exchange Act, (b) USX in its sole discretion determines
that such Global Security shall be exchangeable for definitive Debt Securities
in registered form, or (c) there shall have occurred and be continuing an Event
of Default with respect to the Debt Securities of that Series. Any Global
Security that is exchangeable pursuant to the preceding sentence shall be
exchangeable in whole for definitive Debt Securities in registered form, of like
tenor and of an equal aggregate principal amount, and in the authorized
denominations for that Series. Such definitive Debt Securities shall be
registered in the name or names of such person or persons as the Depositary
shall instruct the Trustee. It is expected that such instructions may be based
upon directions received by the Depositary from its participants with respect to
ownership of beneficial interests in such Global Security.
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Except as provided above, owners of beneficial interests in such Global
Security will not be entitled to receive physical delivery of Debt Securities in
definitive form and will not be considered the holders thereof for any purpose
under the Indenture, and no Global Security representing Book-Entry Securities
shall be exchangeable, except for another Global Security of like denomination
and tenor to be registered in the name of the Depositary or its nominee.
Accordingly, each person owning a beneficial interest in such Global Security
must rely on the procedures of the Depositary and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a holder under the Indenture. USX
understands that under existing industry practices, in the event that USX
requests any action of holders or an owner of a beneficial interest in such
Global Security desires to give or take any action that a holder is entitled to
give or take under the Indenture, the Depositary would authorize the
participants holding the relevant beneficial interests to give or take such
action, and such participants would authorize beneficial owners owning through
such participant to give or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
CONCERNING THE TRUSTEE
PNC Bank, National Association is also trustee for Marathon Oil Company's
7% Monthly Interest Guaranteed Notes Due 2002, which are guaranteed by USX, for
fourteen series of obligations issued by various governmental authorities
relating to environmental projects at various USX facilities, for an aggregate
principal amount of $1.3 billion of debt securities issued by USX under an
Indenture between USX and the Trustee dated July 1, 1991 and for $1.4 billion of
Debt Securities which have heretofore been issued by USX under the Indenture.
USX and its subsidiaries maintain ordinary banking relationships, including
loans and deposit accounts, with PNC Bank, National Association and anticipate
that they will continue to do so.
DESCRIPTION OF CAPITAL STOCK
The following is a description of the terms of the capital stock of USX
included in the Certificate of Incorporation. This description does not purport
to be complete and is qualified in its entirety by reference to the Certificate
of Incorporation, and the Amended and Restated Rights Agreement (the "Restated
Rights Agreement") between USX and Mellon Bank, N.A., as Rights Agent (the
"Rights Agent"), which have been filed as exhibits to the Registration Statement
of which this Prospectus is a part.
GENERAL
The authorized capital stock of USX consists of (i) 40 million shares of
preferred stock, without par value (the "Preferred Stock"), of which three
million shares are designated as 6.50% Cumulative Convertible Preferred Stock
("6.50% Convertible Preferred Stock") and eight million shares are designated as
Series A Junior Preferred Stock, (ii) 550 million shares of a class of common
stock designated as USX-Marathon Group Common Stock, par value $1.00 per share,
(iii) 200 million shares of a class of common stock designated as USX-U. S.
Steel Group Common Stock, par value $1.00 per share and (iv) 50 million shares
of a class of common stock designated as USX-Delhi Group Common Stock, par value
$1.00 per share.
As of June 30, 1998, there were 2,961,887 shares of 6.50% Convertible
Preferred Stock, 290,265,145 shares of Marathon Stock, 87,291,033 shares of
Steel Stock and no shares of USX-Delhi Group Common Stock issued and
outstanding. Effective January 26, 1998, all of the outstanding USX-Delhi Group
Common Stock was redeemed in connection with the sale of the Delhi Companies,
and therefore, such stock is not discussed further in this description of
Capital Stock. No shares of Series A Junior Preferred Stock are outstanding.
Additionally, there were 3,937,163 of the 6.75% Convertible Junior Subordinated
Debentures due 2037 outstanding as of June 30, 1998 convertible into 4,256,073
shares of Steel Stock, subject to adjustment in certain circumstances.
As used herein:
"Disposition" shall mean the sale, transfer, assignment or other
disposition (whether by merger, consolidation, sale or contribution of
assets or stock or otherwise) of properties or assets.
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"Marathon Group" means, at any time, (x) all businesses in which any
of Marathon Oil Company, Texas Oil & Gas Corp., Carnegie Natural Gas
Company and Apollo Gas Company (or any of their predecessors or successors)
is or has been engaged, directly or indirectly, other than the businesses
of the Delhi Group after October 2, 1992 (the date of first issuance of
USX-Delhi Group Common Stock), (y) all assets and liabilities of USX to the
extent attributed to any of such businesses, whether or not such assets or
liabilities are or were assets or liabilities of such companies and (z)
such businesses, assets and liabilities acquired by USX for the Marathon
Group after May 6, 1991, as determined by the Board to be included in the
Marathon Group.
"Market Value" of either class of Common Stock on any Business Day
means the average of the high and low reported sales prices regular way of
a share of such class on such Business Day or, in case no such reported
sale takes place on such Business Day, the average of the reported closing
bid and asked prices regular way of a share on such class on such Business
Day, in either case on the Composite Tape, or if the shares of such class
are not listed or admitted to trading on the NYSE on such Business Day, on
specified alternative markets, or, if not listed or admitted to trading on
such markets, the market value as determined by the Board, subject to
adjustments necessary to reflect any dividends (other than regular cash
dividends) or distributions on, or subdivisions or combinations of,
outstanding shares of such class.
"Business Day" means each weekday other than any day on which any
relevant class of Common Stock is not traded on any national securities
exchange or the National Association of Securities Dealers Automated
Quotations National Market System or in the over-the-counter market.
"Net Proceeds," as of any date, from any Disposition of any of the
properties and assets of the U. S. Steel Group shall mean an amount, if
any, equal to the gross proceeds of such Disposition after payment of, or
reasonable provision for (i) any taxes payable by USX in respect of such
Disposition, (ii) any taxes payable by USX in respect of any dividend or
redemption pursuant to a dividend or redemption paid to holders of Steel
Stock in connection with such Disposition, (iii) any transaction costs,
including, without limitation, any legal, investment banking and accounting
fees and expenses and (iv) any liabilities (contingent or otherwise) of, or
allocated to, the U. S. Steel Group including, without limitation any
indemnity obligations incurred in connection with the Disposition. For
purposes of this definition, any properties and assets of the U. S. Steel
Group remaining after such Disposition shall constitute "reasonable
provision" for such amount of taxes, costs and liabilities (contingent or
otherwise) as can be supported by such properties and assets. To the extent
the proceeds of any Disposition include any securities or other property
other than cash, the Board of Directors shall determine the value of such
securities or property.
"U. S. Steel Group" means, at any time, all of the businesses in which
USX is or has been engaged, directly or indirectly, and all assets and
liabilities of USX, other than any businesses, assets or liabilities of the
Marathon Group if any shares of Marathon Stock are outstanding.
PREFERRED STOCK
The authorized Preferred Stock may be issued without the approval of the
holders of Common Stock in one or more series, from time to time, with each such
series to have such designation, powers, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, as shall be stated in a resolution providing for the
issue of any such series adopted by the Board and as described in the
appropriate Prospectus Supplement (if any). The future issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change in
control of USX.
Holders of the 6.50% Convertible Preferred Stock are entitled to receive
cumulative dividends, to be declared and paid before declaration and payment of
dividend on USX's common stock, at the rate of 6.50% per annum. The 6.50%
Convertible Preferred Stock was not redeemable prior to April 1, 1996, except as
described below. On and after such date, the 6.50% Convertible Preferred Stock
is redeemable at the option of USX under certain circumstances, in whole or in
part, for cash, currently at a price of $51.625 per share, and at prices
declining annually on each April 1 to an amount equal to $50.00 per share on and
after April 1, 2003, plus, in each case, an amount equal to accrued and unpaid
dividends to the redemption date. If USX
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exchanges all of the outstanding Steel Stock for shares of a wholly owned
subsidiary of USX to which all of the assets and liabilities of the U. S. Steel
Group have been transferred, pays a dividend on or redeems shares of Steel Stock
with the Net Proceeds from the Disposition of all or substantially all of the
assets of the U. S. Steel Group, pays a dividend on, or USX or any of its
subsidiaries consummates a tender or exchange offer for, Steel Stock, and the
aggregate amount of such dividend or the consideration paid in such tender or
exchange offer is an amount equal to all or substantially all of the assets, the
6.50% Convertible Preferred Stock is required to be redeemed, in whole, for
$50.00 per share, plus dividends accrued and unpaid to the redemption date. The
6.50% Convertible Preferred Stock is required to be redeemed under certain other
limited circumstances. The 6.50% Convertible Preferred Stock will not be
entitled to the benefit of any sinking fund.
Shares of the 6.50% Convertible Preferred Stock are convertible at any time
at the option of the holder, unless previously redeemed, into shares of Steel
Stock, at a conversion price of $46.125 per share of Steel Stock (equivalent to
a conversion rate of 1.084 shares of Steel Stock for each share of 6.50%
Convertible Preferred Stock), subject to adjustment in certain circumstances.
The holders of the 6.50% Convertible Preferred Stock have no vote except
certain class votes in limited circumstances. Upon the dissolution, liquidation
or winding-up of USX, the holders of the 6.50% Convertible Preferred Stock are
entitled to receive out of the assets of USX available for distribution to
stockholders, before any payment or distribution shall be made on Common Stock
or any other class of stock ranking junior to such series upon liquidation, the
amount of $50 per share plus all accrued and unpaid dividends thereon.
MARATHON STOCK
DIVIDENDS--DIVIDENDS ON THE MARATHON STOCK ARE INTENDED TO BE PAID BASED ON
THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE MARATHON GROUP.
Subject to any prior rights of the holders of the Preferred Stock,
dividends may be paid on the Marathon Stock as determined by the Board out of
funds of USX legally available therefor.
The Board may, in its sole discretion, declare and pay dividends
exclusively on the Marathon Stock, or exclusively on the Steel Stock, or on both
classes in equal or unequal amounts, notwithstanding the respective amount of
funds available for dividends on each class, the respective voting and
liquidation rights of each class, the amount or prior dividends declared on each
class or any other factor.
EXCHANGE AND REDEMPTION--MARATHON STOCK MAY BE EXCHANGED FOR SHARES OF A
SUBSIDIARY OF USX TO WHICH USX WOULD HAVE TRANSFERRED ALL OF THE ASSETS AND
LIABILITIES OF THE MARATHON GROUP.
At any time after the transfer of all the assets and liabilities of the
Marathon Group to a wholly-owned subsidiary of USX (the "Marathon Group
Subsidiary"), the Board may, in its sole discretion and by a majority vote of
the directors then in office, provided that there are funds of USX legally
available therefor, exchange all of the outstanding shares of Marathon Stock for
all of the outstanding shares of the common stock of the Marathon Group
Subsidiary (the "Marathon Group Subsidiary Stock"), on a pro rata basis.
General Redemption Provisions: In the event of any exchange or redemption
of a class of Common Stock, USX shall cause to be given to each holder of such
Common Stock a notice stating (A) that shares of such Common Stock shall be
exchanged or redeemed, as the case may be, (B) the date of the exchange or
redemption, (C) in the event of a partial redemption, the number of shares of
Steel Stock to be redeemed, (D) the kind and amount of shares of capital stock
or cash and/or securities or other property to be received by such holder with
respect to each share of such class of Common Stock held by such holder,
including details as to the calculation thereof, (E) the place or places where
certificates for shares of such class of Common Stock, properly endorsed or
assigned for transfer (unless USX waives such requirement), are to be
surrendered for delivery of certificates for shares of such capital stock or
cash and/or securities or other property and (F) that, except as provided in the
second following paragraph, dividends on such shares of Common Stock will cease
to be paid as of such exchange date or redemption date. Such notice shall be
sent by first-class mail, postage prepaid, not less than 30 nor more than 60
days prior to the exchange date or redemption date, as the case may be, and in
any case to each holder of such class of Common Stock to be
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exchanged or redeemed, at such holder's address as the same appears on the stock
transfer books of USX. Neither the failure to mail such notice to any particular
holder of such class of Common Stock nor any defect therein shall affect the
sufficiency thereof with respect to any other holder of such class of Common
Stock.
If less than all of the outstanding shares of Steel Stock are to be
redeemed, such shares shall be redeemed by USX pro rata among the holders of
such class of Common Stock or by such other method as may be determined by the
Board to be equitable.
No adjustments in respect of dividends shall be made upon the exchange or
redemption of any shares of any class of Common Stock; provided, however, that
if such shares are exchanged or redeemed by USX after the record date for
determining holders of such class of Common Stock entitled to any dividend or
distribution thereon, such dividend or distribution shall be payable to the
holders of such shares at the close of business on such record date
notwithstanding such exchange or redemption.
Before any holder of shares of any class of Common Stock shall be entitled
to receive certificates representing shares of any kind of capital stock or cash
and/or securities or other property to be received by such holder with respect
to any exchange or redemption of such class of Common Stock, such holder shall
surrender at such office as USX shall specify certificates for such shares of
such class of Common Stock, properly endorsed or assigned for transfer (unless
USX shall waive such requirement). As soon as practicable after surrender of
certificates for shares of such class of Common Stock, USX will deliver to the
holder of such shares so surrendered the certificates representing the number of
whole shares of the kind of capital stock or cash and/or securities or other
property to which such holder is entitled, together with any fractional payment
referred to below. If less than all of the shares of such class of Common Stock
represented by any one certificate are to be redeemed, USX will issue and
deliver a new certificate for the shares of such class of Common Stock not
redeemed.
USX shall not be required to issue or deliver fractional shares of any
class of capital stock or any fractional securities to any holder of any class
of Common Stock upon any exchange, redemption, dividend or other distribution.
If more than one share of such class of Common Stock shall be held at the same
time by the same holder, USX may aggregate the number of shares of any class of
capital stock that shall be issuable or the amount of securities that shall be
deliverable to such holder upon any exchange, redemption, dividend or other
distribution (including any fractions of shares or securities). If the number of
shares of any class of capital stock or the amount of securities remaining to be
issued or delivered to any holder of any class of Common Stock is a fraction,
USX shall, if such fraction is not issued or delivered to such holder, pay a
cash adjustment in respect of such fraction in an amount equal to the fair
market value of such fraction on the fifth Business Day prior to the date such
payment is to be made. For purposes of the preceding sentence, "fair market
value" of any fraction shall be (i) in the case of any fraction of a share of
capital stock of USX, the product of such fraction and the Market Value of one
share of such capital stock and (ii) in the case of any other fractional
security, such value as is determined by the Board.
VOTING--SHARES OF MARATHON STOCK SHALL HAVE ONE VOTE PER SHARE. SHARES OF
STEEL STOCK WILL, WHEN VOTING WITH THE OTHER CLASS OF COMMON STOCK (MARATHON
STOCK), HAVE A NUMBER OF VOTES PER SHARE BASED UPON THE TIME WEIGHTED AVERAGE
RATIOS OF THE MARKET VALUE OF A SHARE OF STEEL STOCK TO THE MARKET VALUE OF A
SHARE OF MARATHON STOCK.
Except as set forth below and under "Steel Stock--Voting," holders of both
classes of Common Stock vote together as a single class on all matters as to
which all holders of Common Stock are entitled to vote. On all matters to be
voted on by the holders of both classes of Common Stock together as a single
class, (i) each share of outstanding Marathon Stock has one vote and (ii) each
share of Steel Stock has a number of votes equal to the quotient (calculated to
the nearest three decimal places), as of the fifth Business Day prior to the
applicable record date, of (A) the sum of (1) four times the average ratio of
X/Y for the five-Business Day period ending on such fifth Business Day, (2)
three times the average ratio of X/Y for the next preceding five-Business Day
period, (3) two times the average ratio of X/Y for the next preceding
five-Business Day period and (4) the average ratio of X/Y for the next preceding
five-Business Day period, divided by (B) ten, where X is the Market Value of the
Steel Stock and Y is the Market Value of the Marathon Stock. If shares of only
one class of Common Stock are outstanding, each share of that class shall have
one vote.
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Assuming that the time weighted averages of the Market Values of Marathon
Stock and Steel Stock were $33 and $32, respectively, the per share voting
rights of Marathon Stock and Steel Stock would be one vote and 0.970 votes per
share, respectively. If the Marathon Stock and the Steel Stock had such per
share voting rights as of June 30, 1998, the holders of Marathon Stock and Steel
Stock would have approximately 77% and 23%, respectively, of the total voting
power of USX.
In addition, the approval of the holders of at least 66 2/3% of the
outstanding Marathon Stock, voting as a separate class, shall be necessary for:
(i) the declaration or payment of any dividend, or the making of any
other payment or distribution on or with respect to, any shares of any
other class of Common Stock, if such dividend, payment or distribution is
to be made with (A) proceeds from the sale, transfer, assignment or other
disposition (whether by merger, consolidation, sale or contribution of
assets or stock or otherwise) (a "Disposition") of any of the properties
and assets of the Marathon Group or (B) any portion of an equity interest
in a person, entity or group that owns any of the properties and assets of
the Marathon Group; or
(ii) the use, or reservation for use, of any proceeds from the
Disposition of any of the properties and assets of the Marathon Group, or
any of the properties and assets acquired with such proceeds, in any
business of the Corporation other than the Marathon Group.
Notwithstanding the foregoing, however, such vote shall not be required if such
proceeds are loaned at a rate or rates representative of actual borrowings and
short-term investments by USX.
The vote or consent of the holders of a majority of all of the outstanding
shares of any class of Common Stock, voting as a separate class, is currently
required under Delaware law for any amendment to the Certificate of
Incorporation that would increase or decrease the par value of the shares of
such class or alter or change the powers or special rights of the shares of such
class so as to affect them adversely. The Certificate of Incorporation provides
that neither the increase nor decrease of the authorized number of shares of any
class of Common Stock shall require a separate vote of any class. Thus, it is
possible that the holders of a majority of one class of Common Stock could
constitute a majority of the voting power of both classes and approve the
increase or decrease of the authorized amount of the other class of Common Stock
without the approval of the holders of such other class of Common Stock.
The Certificate of Incorporation also provides that unless the vote or
consent of a greater number of shares shall then be required by law, the
approval of the holders of a majority of the outstanding shares of any class of
Common Stock, voting as a separate class, shall be necessary for authorizing,
effecting or validating the merger or consolidation of USX into or with any
other corporation if such merger or consolidation would adversely affect the
powers or special rights of such class of Common Stock, either directly or
indirectly.
LIQUIDATION--IN THE EVENT OF THE LIQUIDATION OF USX, HOLDERS OF EITHER
CLASS OF COMMON STOCK WILL BE ENTITLED TO RECEIVE A PORTION OF THE FUNDS
DISTRIBUTABLE TO HOLDERS OF BOTH CLASSES OF COMMON STOCK BASED UPON THE
TIME-WEIGHTED AVERAGE AGGREGATE MARKET CAPITALIZATION OF EACH SUCH CLASS OF
COMMON STOCK TO THE AGGREGATE MARKET CAPITALIZATION OF BOTH CLASSES OF COMMON
STOCK.
The Certificate of Incorporation provides that, in the event of a
dissolution, liquidation or winding-up of USX, whether voluntary or involuntary,
after payment of creditors and after the holders of Preferred Stock receive the
full preferential amounts to which they are entitled, the holders of outstanding
shares of each class of Common Stock will share the funds remaining for
distribution to the holders of Common Stock. The holders of the outstanding
Common Stock will each be entitled to receive a fraction of such funds equal to
the quotient of (i) the sum of (A) four times the average ratio of X/Y for the
five-Business Day period ending on the Business Day prior to the date of the
public announcement of (1) a voluntary dissolution, liquidation or winding-up by
USX or (2) the institution of any proceeding for the involuntary dissolution,
liquidation or winding-up of USX, (B) three times the average ratio of X/Y for
the next preceding five-Business Day period, (C) two times the average ratio of
X/Y for the next preceding five-Business Day period and (D) the average ratio of
X/Y for the next preceding five-Business Day period, divided by (ii) ten, where
X is the market capitalization of such class of Common Stock and Y is the
aggregate market capitalization of both classes of Common Stock. For purposes of
the preceding sentence, "Market Capitalization" of any class of
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Common Stock on any day shall mean the product of (i) the Market Value of such
class of Common Stock on such day and (ii) the number of shares of such class of
Common Stock outstanding on such day.
STEEL STOCK
DIVIDENDS--DIVIDENDS ON THE STEEL STOCK ARE INTENDED TO BE PAID BASED UPON
THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE U. S. STEEL GROUP.
Subject to any prior rights of the holders of the Preferred Stock,
dividends on the Steel Stock may be declared and paid only out of the lesser of
(i) funds of USX legally available therefor and (ii) the Available Steel
Dividend Amount.
The "Available Steel Dividend Amount," on any date, means either:
(a) the greater of:
(i) an amount equal to (x) $2.244 billion, increased or decreased,
as appropriate, to reflect: (A) Steel Net Income from the close of
business on December 31, 1990, (B) any dividends or other distributions
declared or paid with respect to, or repurchases or issuances of, any
shares of common stock of USX after December 31, 1990 and prior to the
close of business on May 6, 1991 attributed to the U. S. Steel Group,
(C) any dividends or other distributions declared or paid with respect
to, or repurchases or issuances of, any shares of Steel Stock or any
shares of Preferred Stock attributed to the U. S. Steel Group and (D)
any other adjustments to stockholders' equity of the U. S. Steel Group
made in accordance with generally accepted accounting principles, less
(y) the sum of the aggregate par value of all outstanding Steel Stock
and the aggregate stated capital of all outstanding Preferred Stock
attributed to the U. S. Steel Group; and
(ii) the excess of the fair market value of the net assets of the
U. S. Steel Group over the sum of the aggregate par value of all
outstanding Steel Stock and the aggregate stated capital of all
outstanding Preferred Stock attributed to the U. S. Steel Group,
in the case of each of clauses (i) and (ii) increased by an amount equal
to any effects of the recognition of the transition obligation upon the
adoption of SFAS No. 106 (including any amendments thereto) and any
cumulative effects of the adoption of SFAS No. 109 (including any
amendments thereto) in the year of adoption; or
(b) in case there shall be no such amount, an amount equal to Steel
Net Income (if positive) for the fiscal year in which the dividend is
declared and/or the preceding fiscal year.
The amount of $2.244 billion in clause (a)(i) above represents the amount
of total stockholders' equity of USX as of December 31, 1990 assigned to the U.
S. Steel Group by the Board after giving consideration to the historical debt
and equity structure of USX.
The Available Steel Dividend Amount as of March 31, 1998 was at least
$3.094 billion, as calculated under the preceding clause (a)(i).
Although net income and stockholders' equity of the U. S. Steel Group was
reduced when USX adopted the accounting changes required by SFAS No. 106 and
SFAS No. 109, such changes did not affect cash flows of the U. S. Steel Group.
As a result, in order to preclude dividends on the Steel Stock from being
limited by such noncash accounting changes, the amounts in each of clause (a)(i)
and clause (a)(ii) of the definition of "Available Steel Dividend Amount" were
adjusted to eliminate the effects of such changes, as set forth above.
Clause (b) in the definition of "Available Steel Dividend Amount" will
permit the payment of dividends on the Steel Stock in any fiscal year to the
extent there is positive Steel Net Income (as defined below) in such fiscal year
or in the preceding fiscal year or to the extent of the sum of positive Steel
Net Income, if any, in both such years. Any loss in either such year would not
reduce positive Steel Net Income, if any, in the other year for purposes of
determining the applicable limitation on dividends. Such provision is comparable
to Section 170 of the Delaware General Corporation Law, which allows the payment
of dividends on common
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stock of any Delaware corporation in any fiscal year to the extent of
consolidated net income of the corporation for such fiscal year and/or the
preceding fiscal year.
As used herein, "Steel Net Income" means the net income or loss of the U.
S. Steel Group determined in accordance with generally accepted accounting
principles, including income and expenses of USX attributed to the U. S. Steel
Group, on a substantially consistent basis, including, without limitation,
corporate administrative costs, net interest and other financial costs and
income taxes. For information concerning the policies governing the attribution
of corporate activities to the U. S. Steel Group which are being followed by USX
in determining Steel Net Income, see "Management and Accounting Policies."
The Board may, in its sole discretion, declare and pay dividends
exclusively on the Marathon Stock, or exclusively on the Steel Stock, or on both
classes in equal or unequal amounts, notwithstanding the respective amount of
funds available for dividends on each class, the respective voting and
liquidation rights of each class, the amount of prior dividends declared on each
class or any other factor.
EXCHANGE AND REDEMPTION--IN THE EVENT OF A DISPOSITION OF ALL OR
SUBSTANTIALLY ALL OF THE ASSETS OF THE U. S. STEEL GROUP, USX IS REQUIRED TO (1)
PAY A DIVIDEND, (2) REDEEM STEEL STOCK OR (3) EXCHANGE STEEL STOCK FOR MARATHON
STOCK.
If USX transfers all the assets and liabilities of the U. S. Steel Group to
a wholly owned subsidiary of USX (the "U. S. Steel Group Subsidiary"), Steel
Stock may be exchanged, at the sole discretion of the Board, by a majority vote
of the directors then in office, provided that there are funds of USX legally
available therefor, for all of the outstanding stock of the U. S. Steel Group
Subsidiary, on a pro rata basis on the same terms and conditions as on the
Marathon Stock.
In addition, upon the Disposition, in one transaction or a series of
related transactions, of all or substantially all of the properties and assets
of the U. S. Steel Group (other than in connection with the Disposition by USX
of all of its properties and assets in one transaction) to any person, entity or
group (other than to the holders of all outstanding shares of Steel Stock on a
pro rata basis or to a person, entity or group in which USX, directly or
indirectly, owns a majority equity interest), USX shall, within 60 days
following the consummation of such Disposition, either (i) subject to the
limitations on dividends on Steel Stock set forth above, declare and pay a
dividend in cash and/or in securities or other property received as proceeds of
such Disposition to the holders of the Steel Stock in an amount equal to the Net
Proceeds of such Disposition, (ii) to the extent that there are funds of USX
legally available therefor, redeem the number of whole shares of Steel Stock
having an aggregate average Market Value during the ten-Business Day period
following consummation of such Disposition, closest to the value of the Net
Proceeds of such Disposition, for cash and/or securities or other property
received as proceeds of such Disposition in an amount equal to the Net Proceeds
or (iii) exchange each outstanding share of Steel Stock for a number of shares
of Marathon Stock equal to 110% of the average daily ratio (calculated to the
nearest five decimal places) of the Market Value of one share of Steel Stock to
the Market Value of one share of Marathon Stock during such period.
If, immediately after any event, USX, directly or indirectly, owns less
than a majority equity interest in any person, entity or group in which USX,
directly or indirectly, owned a majority equity interest immediately prior to
the occurrence of such event, a Disposition of all of the properties and assets
of the U. S. Steel Group owned by such person, entity or group shall be deemed
to have occurred. In the case of a Disposition of properties or assets in a
series of related transactions, such Disposition shall not be deemed to have
been consummated until the consummation of the last of such transactions.
"Substantially all of the properties and assets of the U. S. Steel Group,"
as of any date, means a portion of such properties and assets that represents at
least 80% of either of the then-current market value of, or the aggregate
revenues for the immediately preceding twelve fiscal quarterly periods of USX
derived from, the properties and assets of the U. S. Steel Group as of such date
(excluding the assets and properties of any person, entity or group in which
USX, directly or indirectly, owns less than a majority equity interest).
After any such special dividend or redemption pursuant to clause (i) or
(ii) in the third preceding paragraph, the Board may, by a majority vote of the
directors then in office, exchange each outstanding share of Steel Stock for a
number of shares of Marathon Stock equal to 110% of the Market Value Ratio as of
the
22
<PAGE> 49
fifth Business Day prior to the date notice of such exchange is mailed to the
holders of Steel Stock. For purposes of the preceding sentence, "Market Value
Ratio", as of any date, means the highest of the following (calculated to the
nearest five decimal places): (A) the average ratio of S/X for the five-Business
Day period ending on such date. (B) the quotient of (1) the sum of (w) four
times the average ratio of S/X for the five-Business Day period ending on such
date, (x) three times the average ratio of S/X for the next preceding five-
Business Day period, (y) two times the average ratio of S/X for the next
preceding five-Business Day period and (z) the average ratio of S/X for the next
preceding five-Business Day period, divided by (2) ten and (C) if the special
dividend pursuant to clause (i) of the third preceding paragraph was declared
and paid or the redemption pursuant to clause (ii) thereof was made prior to the
commencement of the most recently completed fiscal quarter of USX, the average
ratio of S/X for such fiscal quarter, where S is the Market Value of one share
of the Steel Stock and X is the Market Value of one share of the Marathon Stock.
In determining whether to effect such an exchange, the Board, in addition to
other matters, would likely consider whether the remaining properties and assets
of the U. S. Steel Group constitute a viable business. Other considerations
could include the number of shares of Steel Stock remaining outstanding
following any such redemption, the per share market price of the Steel Stock
following the payment of such a dividend or such a redemption and the cost of
maintaining stockholder accounts.
An exchange or redemption of Steel Stock for Marathon Stock would be made
on the same general terms and conditions as described above under "Marathon
Stock--Exchange and Redemption--General Provisions."
VOTING--SHARES OF STEEL STOCK WILL, WHEN VOTING TOGETHER WITH ALL OTHER
CLASSES OF COMMON STOCK, HAVE A NUMBER OF VOTES PER SHARE BASED UPON
TIME-WEIGHTED AVERAGE RATIOS OF THE MARKET VALUE OF A SHARE OF STEEL STOCK TO
THE MARKET VALUE OF A SHARE OF MARATHON STOCK.
The holders of shares of the Steel Stock have the voting rights described
above under the caption "Marathon Stock--Voting."
In addition, as is the case with the use of the proceeds from the
Disposition of any properties or assets of the Marathon Group, unless the vote
or consent of a greater number of shares shall then be required by law, the
approval of the holders of at least 66 2/3% of the outstanding Steel Stock,
voting as a separate class, shall be necessary for:
(i) the declaration or payment of any dividend on, or the making of
any other payment or distribution on or with respect to, any shares of any
other class of common stock, if such dividend, payment or distribution is
to be made with (A) proceeds from the Disposition of any of the properties
and assets of the U. S. Steel Group or (B) any portion of an equity
interest in a person, entity or group that owns any of the properties and
assets of the U. S. Steel Group; or
(ii) the use, or reservation for use, of any proceeds from the
Disposition of any of the properties and assets of the U. S. Steel Group,
or any of the properties and assets acquired with such proceeds, in any
business of USX other than a business of the U. S. Steel Group.
Notwithstanding the foregoing, however, such vote shall not be required if
such proceeds are loaned at a rate or rates representative of actual
borrowings and short-term investments by USX.
LIQUIDATION--IN THE EVENT OF THE LIQUIDATION OF USX, HOLDERS OF STEEL STOCK
WILL BE ENTITLED TO RECEIVE A PORTION OF THE FUNDS DISTRIBUTABLE TO HOLDERS OF
COMMON STOCK BASED ON THE RELATIVE TIME-WEIGHTED AVERAGE AGGREGATE MARKET
CAPITALIZATION OF THE STEEL STOCK TO THE AGGREGATE MARKET CAPITALIZATION OF BOTH
CLASSES OF COMMON STOCK.
In the event of a dissolution, liquidation or winding-up of USX, the
holders of shares of Steel Stock are entitled to receive funds in the amounts
described above under "Marathon Stock--Liquidation."
DETERMINATIONS BY BOARD
Any determinations made by the Board under the foregoing provisions will be
final and binding on all stockholders of USX.
23
<PAGE> 50
OTHER RIGHTS
The holders of Common Stock do not have any preemptive rights or any rights
to convert their shares into any other securities of USX.
STOCK TRANSFER AGENT AND REGISTRAR
USX maintains its own stock transfer department at the following address:
USX Corporation, Shareholders Services Department, 600 Grant Street, Room 611,
Pittsburgh, PA 15219-4776. Certificates representing shares can also be
presented for registration of transfer at ChaseMellon Shareholder Services, 120
Broadway, 13th Floor, New York, NY 10021.
ChaseMellon Shareholder Services L.L.C., 4 Station Square, Pittsburgh, PA
15219 is the Registrar for all the Common Stock.
AMENDED AND RESTATED RIGHTS PLAN
The following is a brief description of the terms of the Stockholders
Rights Plan set forth in the Restated Rights Agreement between USX and Mellon
Bank, N.A., as Rights Agent.
Under the Restated Rights Agreement, the right (each a "Right") to purchase
from USX a unit consisting of one one-hundredth of a share (a "Unit") of Series
A Junior Preferred Stock, no par value (the "Junior Preferred Stock"), at a
purchase price of $120 in cash per Unit, subject to adjustment, is attached to
each share of Marathon Stock and Steel Stock (sometimes hereinafter referred to
together as the "Voting Stock"). A Right attached to a share of Marathon Stock
is hereinafter referred to as a "Marathon Right" and a Right attached to a share
of Steel Stock is hereinafter referred to as a "Steel Right."
The Rights will separate from the Voting Stock and a Rights distribution
date will occur upon the earlier of (i) 15 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired (except pursuant to a Qualifying Offer (defined in the
Restated Rights Agreement as an all-cash tender offer for all outstanding shares
of Voting Stock meeting certain prescribed requirements)), or obtained the right
to acquire, beneficial ownership of Voting Stock representing 15% or more of the
total voting power of all outstanding shares of Voting Stock (the "Stock
Acquisition Date"), or (ii) 15 days (or upon such later date as may be
determined by the Board) following the commencement of a tender offer or
exchange offer (other than a Qualifying Offer) that would result in a person or
a group beneficially owning Voting Stock representing 15% or more of the total
voting power of all outstanding shares of Voting Stock. For purposes of the
Restated Rights Agreement, total voting power of Voting Stock shall be
determined based upon the most recent calculation announced by USX. See
"Marathon Stock--Voting" and "Steel Stock--Voting" above. If a person
inadvertently becomes the beneficial owner of Voting Stock representing 15% or
more of the total voting power of the Voting Stock due to the recalculation by
USX of the relative voting power of Marathon Stock and Steel Stock, such person
will not be an Acquiring Person unless and until such person acquires any
additional shares of Voting Stock.
In the event that a person or group becomes the beneficial owner of Voting
Stock representing 15% or more of the total voting power of all outstanding
shares of Voting Stock (except pursuant to a Qualifying Offer), the Rights
"flip-in" and entitle each holder of a Right (other than the Acquiring Person
and certain related parties) to receive, upon exercise, Marathon Stock or Steel
Stock, as the case may be (or in certain circumstances, cash, property, or other
securities of USX), having a value equal to two times the exercise price of the
Marathon Right or Steel Right, respectively. However, Rights are not exercisable
until such time as the Rights are no longer redeemable by USX as set forth
below.
In the event that, any time following the Stock Acquisition Date, (i) USX
is acquired in a merger or other business combination transaction in which USX
is not the surviving corporation (other than a merger that follows a Qualifying
Offer) or its Voting Stock is changed or exchanged, or (ii) 50% or more of USX's
assets, earning power or cash flow is sold or transferred, the Rights
"flip-over" and entitle each holder of a Right (other than an Acquiring Person
and certain related parties) to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right.
24
<PAGE> 51
At any time until 15 days following the Stock Acquisition Date (subject to
extension), USX may redeem the Rights in whole, but not in part, at a price of
$.01 per whole Right payable in stock or cash or any other form of consideration
deemed appropriate by the Board (the "Redemption Price"). Immediately upon the
action of the Board ordering redemption of the Rights, the Rights will terminate
and the only right of the holders of the Rights will be to receive the
Redemption Price.
The Board may, at its option, at any time after any person becomes an
Acquiring Person, exchange all or part of the outstanding and exercisable
Marathon Rights and Steel Rights (other than Rights held by the Acquiring Person
and certain related parties) for shares of Marathon Stock and Steel Stock,
respectively, at an exchange ratio of one share of Marathon Stock for each
Marathon Right and one share of Steel Stock for each Steel Right (subject to
certain anti-dilution adjustments). However, the Board may not effect such an
exchange at any time any person or group owns Voting Stock representing 50% or
more of the total voting power of the Voting Stock then outstanding.
As long as the Rights are attached to shares of Voting Stock, USX will
issue Marathon Rights on each share of Marathon Stock and Steel Rights on each
share of Steel Stock issued prior to the Rights distribution date so that all
such shares will have attached Rights.
A copy of the Restated Rights Agreement is available free of charge from
the Rights Agent by writing to Mellon Bank, N.A. at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, Attention: Corporate Trust Group.
DESCRIPTION OF WARRANTS
USX may issue Warrants for the purchase of Debt Securities, Preferred
Stock, Marathon Stock or Steel Stock (each a "USX Security," and together the
"USX Securities"). Warrants may be issued independently or together with any USX
Security offered by any Prospectus Supplement and may be attached to or separate
from any such USX Security. Each series of Warrants will be issued under a
separate warrant agreement (a "Warrant Agreement") to be entered into between
USX and a bank or trust company, as warrant agent (the "Warrant Agent"). The
Warrant Agent will act solely as an agent of USX in connection with the Warrants
and will not assume any obligation or relationship of agency or trust for or
with any holders or beneficial owners of Warrants. The following summary of
certain provisions of the Warrants does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the provisions of the
Warrant Agreement that will be filed with the SEC in connection with the
offering of such Warrants.
DEBT WARRANTS
The Prospectus Supplement relating to a particular issue of Warrants to
issue Debt Securities ("Debt Warrants") will describe the terms of such Debt
Warrants, including the following (if applicable): (a) the title of such Debt
Warrants; (b) the offering price for such Debt Warrants; (c) the aggregate
number of such Debt Warrants; (d) the designation and terms of the Debt
Securities purchasable upon exercise of such Debt Warrants; (e) the designation
and terms of the Debt Securities with which such Debt Warrants are issued and
the number of such Debt Warrants issued with each such Debt Security; (f) the
date from and after which such Debt Warrants and any Debt Securities issued
therewith will be separately transferable; (g) the principal amount of Debt
Securities purchasable upon exercise of a Debt Warrant and the price at which
such principal amount of Debt Securities may be purchased upon exercise (which
price may be payable in cash, securities, or other property); (h) the date on
which the right to exercise such Debt Warrants shall commence and the date on
which such right shall expire; (i) the minimum or maximum amount of such Debt
Warrants that may be exercised at any one time; (j) whether the Debt Warrants
represented by the Debt Warrant certificates, or Debt Securities that may be
issued upon exercise of the Debt Warrants, will be issued in registered or
bearer form; (k) information with respect to book-entry procedures; (l) the
currency or currency units in which the offering price and the exercise price
are payable; (m) a discussion of material United States federal income tax
considerations; (n) the redemption or call provisions applicable to such Debt
Warrants; and (o) any additional terms of the Debt Warrants, including terms,
procedures, and limitations relating to the exchange and exercise of such Debt
Warrants.
25
<PAGE> 52
STOCK WARRANTS
The Prospectus Supplement relating to any particular issue of Warrants to
issue Preferred Stock, Marathon Stock or Steel Stock will describe the terms of
such Warrants, including the following (if applicable): (a) the title of such
Warrants; (b) the offering price for such Warrants; (c) the aggregate number of
such Warrants; (d) the designation and terms of the Preferred Stock, Marathon
Stock or Steel Stock purchasable upon exercise of such Warrants; (e) the
designation and terms of the USX Securities with which such Warrants are issued
and the number of such Warrants issued with each such USX Security; (f) the date
from and after which such Warrants and any USX Securities issued therewith will
be separately transferable; (g) the number of shares of Preferred Stock,
Marathon Stock or Steel Stock purchasable upon exercise of a Warrant and the
price at which such shares may be purchased upon exercise; (h) the date on which
the right to exercise such Warrants shall commence and the date on which such
right shall expire; (i) the minimum or maximum amount of such Warrants that may
be exercised at any one time; (j) the currency or currency units in which the
offering price and the exercise price are payable; (k) a discussion of material
United States federal income tax considerations; (l) the antidilution provisions
of such Warrants; (m) the redemption or call provisions applicable to such
Warrants; and (n) any additional terms of the Warrants, including terms,
procedures, and limitations relating to the exchange and exercise of such
Warrants.
PLAN OF DISTRIBUTION
USX may issue the Offered Securities to or through underwriters or directly
to purchasers, agents or dealers or through brokers. Offers to purchase Offered
Securities may be solicited directly by USX or brokers or dealers designated by
USX from time to time. Any such broker or dealer may be deemed to be an
underwriter as that term is defined in the Securities Act, and will be named in
the Prospectus Supplement, together with the compensation payable thereto by USX
in connection with the sale of the Offered Securities.
Underwriters, agents, brokers and dealers may be entitled under agreements
which may be entered into with USX to indemnification by USX against certain
civil liabilities, including liabilities under the Securities Act. Such
underwriters, agents, brokers and dealers may engage in transactions with, or
perform services for, USX in the ordinary course of business.
Also, USX may issue the Offered Securities in connection with acquisitions.
The Prospectus may be used in connection with the re-offering of the Offered
Securities by persons receiving such securities in connection with an
acquisition who may be deemed underwriters under the Securities Act of 1933.
Offered Securities may be issued in connection with the acquisition of
Tarragon. See "Pending Transaction." USX will bear the cost of registering any
such securities.
The place and time of delivery for the Offered Securities in respect of
which this Prospectus is delivered will be set forth in the accompanying
Prospectus Supplement.
VALIDITY OF SECURITIES
The validity of the issuance of the Offered Securities will be passed upon
for USX by D. D. Sandman, Esq., General Counsel, Secretary and Senior Vice
President--Human Resources & Public Affairs of USX or by J.A. Hammerschmidt,
Esq., Assistant General Counsel--Corporate and Assistant Secretary of USX.
Messrs. Sandman and Hammerschmidt, in their respective capacities as set forth
above, are paid salaries by USX, participate in various employee benefit plans
offered by USX and own common stock of USX.
EXPERTS
The consolidated financial statements of USX as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31, 1997
incorporated in this Prospectus by reference to USX's Annual Report on Form 10-K
for the year ended December 31, 1997 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.
26
<PAGE> 53
APPENDIX I
SUMMARY OF USX COMMON STOCK
The following summary is qualified in its entirety by the detailed
information appearing elsewhere in, or incorporated by reference in, this
Prospectus. Capitalized terms used in this summary have the respective meanings
ascribed to them elsewhere in this Prospectus.
<TABLE>
<CAPTION>
USX COMMON STOCK
---------------------------------------------------------------------------
USX-MARATHON GROUP USX-U. S. STEEL GROUP
COMMON STOCK COMMON STOCK
------------------ ---------------------
<S> <C> <C>
BUSINESS: Energy business. Steel and other businesses.
NUMBER OF SHARES
OUTSTANDING AS OF
JUNE 30, 1998: 290,265,145 87,291,033
VOTING RIGHTS: Except as otherwise described Except as otherwise described
herein, the Marathon Stock will vote herein, the Steel Stock will vote as
as a single class with the Steel a single class with the Marathon
Stock. The Marathon Stock will have Stock. Each share of Steel Stock
one vote per share. will have a variable number of votes
based upon the relative Market
Values of one share of Steel Stock
and one share of Marathon Stock, and
may have more than, less than or
exactly one vote per share.
DIVIDENDS: Dividends on the Marathon Stock will Dividends on the Steel Stock will be
be paid at the discretion of the paid at the discretion of the Board
Board based primarily upon the based primarily upon the long-term
long-term earnings and cash flow earnings and cash flow capabilities
capabilities of the Marathon Group, of the U. S. Steel Group, as well as
as well as on the dividend policies on the dividend policies of publicly
of publicly traded energy companies. traded steel companies. Dividends
Dividends will be payable out of all will be payable out of the lesser of
funds of USX legally available (i) all funds of USX legally
therefor. available therefor and (ii) the
Available Steel Dividend Amount.
EXCHANGE AND REDEMPTION: USX may exchange the Marathon Stock USX may exchange the Steel Stock for
for shares of a wholly owned shares of a wholly owned subsidiary
subsidiary that holds all the assets that holds all the assets and
and liabilities of the Marathon liabilities of the U.S. Steel Group.
Group.
If USX sells all or substantially
all of the properties and assets of
the U. S. Steel Group, USX must
either: (i) pay a special dividend
to holders of Steel Stock equal to
the Net Proceeds; or (ii) redeem
shares of Steel Stock having an
aggregate Market Value closest to
the value of the Net Proceeds for an
amount equal to the Net Proceeds; or
(iii) exchange each share of Steel
Stock for a number of shares of
Marathon Stock equal to 110% of the
ratio of the Market Values of one
share of Steel Stock to one share of
Marathon Stock.
LIQUIDATION: In the event of the liquidation of In the event of the liquidation of
USX, holders of Marathon Stock will USX, holders of Steel Stock will
share the funds, if any, remaining share the funds, if any, remaining
for distribution to common for distribution to common
stockholders with holders of Steel stockholders with holders of
Stock based upon the relative market Marathon Stock based upon the
capitalizations of each. relative market capitalizations of
each.
LISTING: NYSE under the symbol "MRO". NYSE under the symbol "X".
</TABLE>
A-1
<PAGE> 54
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee............... $295,000
Costs of printing and engraving............................. 100,000
Accounting fees and expenses................................ 10,000
Miscellaneous expenses...................................... 100,000
--------
Total............................................. $505,000
========
</TABLE>
All of the foregoing expenses are estimated except for the Securities and
Exchange Commission filing fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article V of the Corporation's By-Laws provides that the Corporation shall
indemnify to the fullest extent permitted by law any person who 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 he is or was a director, officer, employee or agent of the Corporation or
is or was serving at the request of the Corporation as an officer, director,
employee or agent of another corporation, partnership, joint venture, trust,
enterprise, or nonprofit entity.
The Corporation is empowered by Section 145 of the Delaware General
Corporation Law, subject to the procedures and limitations stated therein, 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 such person is or was
an officer, employee, agent or director 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
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
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 conduct was unlawful. The Corporation may
indemnify any such person 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 such person is
adjudged to be liable to the Corporation. To the extent a director or officer is
successful on the merits or otherwise in the defense of any action referred to
above, the Corporation must indemnify him against the expenses which he actually
and reasonably incurred in connection therewith.
Policies of insurance are maintained by the Corporation under which
directors and officers of the Corporation 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.
The Corporation's Certificate of Incorporation provides 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 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.
II-1
<PAGE> 55
ITEM 16. LIST OF EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) See Exhibit Index.
(b) All schedules are omitted because they are not applicable or the
required information is contained in the respective financial statements or
notes thereto.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(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
the registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference herein.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) USX hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of USX'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 of 1933 may be permitted to directors, officers and controlling persons of
USX pursuant to the foregoing provisions, or otherwise, USX has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by USX of
expenses incurred or paid by a director, officer or controlling person of USX 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, USX 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 is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final adjudication of
such issue.
II-2
<PAGE> 56
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF PITTSBURGH, COMMONWEALTH OF
PENNSYLVANIA, ON JULY 20, 1998.
USX CORPORATION
(Registrant)
/S/ KENNETH L. MATHENY
By....................................................
Kenneth L. Matheny, Vice President &
Comptroller
Pittsburgh, Pennsylvania
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON JULY 20, 1998.
<TABLE>
<CAPTION>
SIGNATURE
--------- TITLE
<S> <C>
* Chairman Board of Directors,
........................................... Chief Executive Officer and Director
THOMAS J. USHER (Principal Executive Officer)
* Vice Chairman
........................................... & Chief Financial Officer
ROBERT M. HERNANDEZ and Director
(Principal Financial Officer)
/S/ KENNETH L. MATHENY Vice President & Comptroller
........................................... (Principal Accounting Officer)
KENNETH L. MATHENY
* Director
...........................................
NEIL A. ARMSTRONG
* Director
...........................................
VICTOR G. BEGHINI
* Director
...........................................
JEANETTE GRASSELLI BROWN
* Director
...........................................
CHARLES A. CORRY
* Director
...........................................
CHARLES R. LEE
* Director
...........................................
PAUL E. LEGO
* Director
...........................................
RAY MARSHALL
* Director
...........................................
JOHN F. MCGILLICUDDY
* Director
...........................................
JOHN M. RICHMAN
</TABLE>
II-3
<PAGE> 57
<TABLE>
<CAPTION>
SIGNATURE
--------- TITLE
<S> <C>
* Director
...........................................
SETH E. SCHOFIELD
Director
...........................................
JOHN W. SNOW
* Director
...........................................
PAUL J. WILHELM
* Director
...........................................
DOUGLAS C. YEARLEY
/S/ KENNETH L. MATHENY
*By ......................................
KENNETH L. MATHENY, ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE> 58
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ------
<C> <S> <C>
1. Form of Underwriting Agreement. (Incorporated by Reference
to Exhibit 1 to Registration Statement No. 33-52937.)
4.1 Restated Certificate of Incorporation of USX dated September
1, 1996, as amended and currently in effect. (Incorporated
by reference to Exhibit 3(a) to USX's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997.)
4.2 By-laws of USX dated July 30, 1996, as amended and currently
in effect. (Incorporated by reference to Exhibit 3(a) to
USX's Report on Form 10-Q for the quarter ended June 30,
1996.)
4.3 Indenture, dated as of March 15, 1993, for Debt Securities
with Form of Debt Securities. (Incorporated by Reference to
Exhibit 4.1 to Registration Statement No. 33-60142.)
4.4 Amended and Restated Rights Agreement. (Incorporated by
reference to the USX Form 8 Amendment to Form 8-A filed on
October 5, 1992.
File No. 1-5153.)
5. Opinion and consent of J.A. Hammerschmidt, Esq.*
12.1 Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends. (Incorporated by Reference to
the USX Form 10-K for year ended December 31, 1997 and the
USX Form 10-Q for Quarter ended March 31, 1998.)
12.2 Computation of Ratio of Earnings to Fixed Charges.
(Incorporated by Reference to the USX Form 10-K for year
ended December 31, 1997 and the USX Form 10-Q for Quarter
ended March 31, 1998.)
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of J.A. Hammerschmidt, Esq. (Included in Exhibit
5.)*
24. Powers of Attorney.*
25. Statement of eligibility of Trustee. (Incorporated by
Reference to Exhibit 25 to Registration Statement No.
33-60142.)
99.1 Amended and Restated Arrangement Agreement, as amended and
restated the 7th of July, 1998.
99.2 Plan of Arrangement. (See Schedule 1 to Exhibit 99.1 above.)
99.3 Form of Exchangeable Share Provisions. (See Schedule 2 to
Exhibit 99.1 above.)
99.4 Form of Support Agreement. (See Schedule 3 to Exhibit 99.1
above.)
99.5 Form of Exchange Trust Agreement. (See Schedule 4 to Exhibit
99.1 above.)
</TABLE>
* Previously filed.
<PAGE> 1
EXHIBIT 23(1)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our reports
dated February 10, 1998, relating to the consolidated financial statements of
USX Corporation, the financial statements of the Marathon Group, and the
financial statements of the U. S. Steel Group, appearing on pages U-1, M-1, and
S-1, respectively, of the Annual Report on Form 10-K of USX Corporation for the
year ended December 31, 1997. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Pittsburgh, Pennsylvania
July 20, 1998
<PAGE> 1
Exhibit 99.1
AMENDED AND RESTATED
ARRANGEMENT AGREEMENT
TARRAGON OIL AND GAS LIMITED
AND
MARATHON OIL COMPANY
AND
761581 ALBERTA LTD.
AND
787722 ALBERTA LTD.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1 DEFINITIONS.................................................................................. 4
1.1 Definitions.................................................................................. 4
ARTICLE 2 INTERPRETATION............................................................................... 10
2.1 Interpretation Not Affected by Headings...................................................... 10
2.2 Article References........................................................................... 10
2.3 Number and Gender............................................................................ 10
2.4 Date for Any Action.......................................................................... 10
2.5 Statutory References......................................................................... 10
2.6 Currency..................................................................................... 10
2.7 Enforceability Qualifications................................................................ 10
2.8 Disclosure................................................................................... 10
2.9 Schedules.................................................................................... 10
ARTICLE 3 TARRAGON'S CLOSING CONDITIONS................................................................ 10
3.1 Conditions for the Benefit of Tarragon....................................................... 10
ARTICLE 4 MARATHON'S CLOSING CONDITIONS................................................................ 12
4.1 Conditions for the Benefit of Marathon, Holdco and Albertaco................................. 12
ARTICLE 5 MUTUAL CLOSING CONDITIONS.................................................................... 14
5.1 Mutual Closing Conditions.................................................................... 14
ARTICLE 6 TARRAGON'S REPRESENTATIONS AND WARRANTIES.................................................... 14
6.1 Representations and Warranties of Tarragon................................................... 14
6.2 Negation of other Representations by Tarragon................................................ 20
ARTICLE 7 MARATHON'S REPRESENTATIONS AND WARRANTIES.................................................... 21
7.1 Representations and Warranties of Marathon................................................... 21
7.2 Negation of Other Representations by Marathon................................................ 22
ARTICLE 8 TARRAGON'S COVENANTS......................................................................... 22
8.1 Covenants of Tarragon........................................................................ 22
8.2 Superior Transaction......................................................................... 25
ARTICLE 9 MARATHON'S COVENANTS......................................................................... 26
9.1 Covenants of Marathon........................................................................ 26
9.2 Directors' and Officers' Insurance........................................................... 26
9.3 Directors' and Officers' Indemnification..................................................... 27
ARTICLE 10 MANAGEMENT INFORMATION CIRCULAR; REGISTRATION STATEMENT...................................... 27
10.1 Information Circular......................................................................... 27
10.2 Providing Information........................................................................ 28
10.3 Blue Sky Laws................................................................................ 28
ARTICLE 11 TERMINATION AND REMEDIES..................................................................... 28
11.1 Termination.................................................................................. 28
11.2 Effect of Termination........................................................................ 28
11.3 Limitation................................................................................... 28
11.4 Marathon Damages Event....................................................................... 28
11.5 Tarragon Damages Event....................................................................... 29
11.6 Liquidated Damages........................................................................... 29
11.7 Equitable Remedies........................................................................... 29
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 12 AMENDMENT.................................................................. 29
12.1 Amendment.................................................................. 29
ARTICLE 13 COSTS...................................................................... 30
13.1 Costs...................................................................... 30
ARTICLE 14 DISCLOSURE................................................................. 30
14.1 Joint Disclosure........................................................... 30
ARTICLE 15 NOTICES.................................................................... 30
15.1 Notices in Writing......................................................... 30
15.2 Addresses.................................................................. 30
ARTICLE 16 TIME....................................................................... 31
16.1 Time of the Essence........................................................ 31
ARTICLE 17 ENTIRE AGREEMENT AND RESTATEMENT........................................... 31
17.1 Entire Agreement........................................................... 31
17.2 Restatement................................................................ 31
ARTICLE 18 SEVERABILITY............................................................... 31
18.1 Severability............................................................... 31
ARTICLE 19 FURTHER ASSURANCES......................................................... 31
19.1 Further Assurances......................................................... 31
ARTICLE 20 GOVERNING LAW.............................................................. 31
20.1 Alberta Law................................................................ 31
20.2 Alberta Courts............................................................. 31
ARTICLE 21 EXECUTION IN COUNTERPARTS.................................................. 32
21.1 Counterparts............................................................... 32
ARTICLE 22 WAIVER..................................................................... 32
22.1 Limitation on Waiver....................................................... 32
ARTICLE 23 ENUREMENT AND ASSIGNMENT................................................... 32
23.1 Enurement.................................................................. 32
ARTICLE 24 SUBSIDIARY COVENANTS....................................................... 32
24.1 Tarragon................................................................... 32
24.2 Marathon................................................................... 32
</TABLE>
3
<PAGE> 4
AMENDED AND RESTATED ARRANGEMENT AGREEMENT
THIS ARRANGEMENT AGREEMENT made the 20th day of June, 1998, as amended and
restated the 7th day of July, 1998.
BETWEEN:
TARRAGON OIL AND GAS LIMITED, a body corporate incorporated under the
laws of Ontario with its head office in the City of Calgary, in the
Province of Alberta (hereinafter called "Tarragon")
OF THE FIRST PART
AND
MARATHON OIL COMPANY, a body corporate incorporated under the laws of
Ohio with its head office in the City of Houston, in the State of Texas
(hereinafter called "Marathon")
OF THE SECOND PART
AND
761581 ALBERTA LTD., a body corporate incorporated under the laws of
Alberta (hereinafter called "Albertaco")
OF THE THIRD PART
AND
787722 ALBERTA LTD., a body corporate incorporated under the laws of
Alberta (hereinafter called "Holdco")
OF THE FOURTH PART
WHEREAS Albertaco wishes to acquire all the issued and outstanding shares of
Tarragon;
AND WHEREAS Albertaco is a wholly-owned subsidiary of Holdco, and Holdco is
a wholly-owned subsidiary of Marathon;
AND WHEREAS the parties hereto intend to carry out the transactions
contemplated herein pursuant to an arrangement under the OBCA;
NOW THEREFORE IN CONSIDERATION of the covenants and agreements herein
contained and other good and valuable consideration (the receipt and sufficiency
of which are hereby acknowledged), the parties hereto covenant and agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. In this Agreement, unless the context otherwise requires:
(a) "ACQUISITION AGREEMENT" means the letter agreement dated May 29, 1998
between Tarragon, Marathon and Albertaco setting forth certain of the
terms and conditions upon which the parties propose to proceed with the
Arrangement;
(b) "AGREEMENT" means this agreement, including the recitals and all
Schedules to this agreement, as amended or supplemented from time to
time, and "hereby", "hereof", "herein", "hereunder", "herewith" and
similar terms refer to this Agreement and not to any particular
provision of this Agreement;
(c) "ALBERTACO" means 761581 Alberta Ltd., a wholly-owned Subsidiary of
Holdco;
(d) "APPLICABLE LAWS" means applicable corporate and securities laws,
regulations and rules, all policies thereunder and rules of applicable
stock exchanges;
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<PAGE> 5
(e) "ARRANGEMENT" means the arrangement under the provisions of Section 182
of the OBCA as set out in the Plan of Arrangement;
(f) "ARTICLES OF ARRANGEMENT" means the articles of arrangement in respect
of the Arrangement required under Section 183(1) of the OBCA to be filed
with the Director after the Final Order has been made;
(g) "BUSINESS DAY" means a day, other than a Saturday, Sunday or statutory
holiday, when banks are generally open in Calgary and New York for the
transaction of banking business;
(h) "CERTIFICATE OF ARRANGEMENT" means the certificate to be issued by the
Director pursuant to Section 183(2) of the OBCA giving effect to the
Arrangement;
(i) "CLOSING" means the completion of the transactions contemplated herein;
(j) "CONTROL" or "CONTROLLED" means, with respect to control of a body
corporate by a Person, the holding (other than by way of security) by or
for the benefit of that Person of securities of that body corporate to
which are attached more than 50% of the votes that may be cast to elect
directors of the body corporate (whether or not securities of any other
class or classes shall or might be entitled to vote upon the happening
of any event or contingency) provided that such votes, if exercised, are
sufficient to elect a majority of the board of directors of the body
corporate;
(k) "COURT" means the Ontario Court (General Division);
(l) "DEPOSITARY" means a trust company licensed to carry on business in
Alberta and Ontario selected by Marathon and satisfactory to Tarragon
acting reasonably;
(m) "DEPOSITARY AGREEMENT" means the Escrow and Depositary Agreement to be
entered into on or before the Effective Date by the Depositary,
Tarragon, Albertaco and Holdco, which includes the matters referred to
in Section 3.1(d);
(n) "DIRECTOR" means the Director duly appointed under the OBCA;
(o) "EFFECTIVE DATE" means the date shown on the Certificate of Arrangement;
(p) "ENCUMBRANCE" includes, without limitation, any mortgage, pledge,
assignment, charge, lien, security interest, claim, trust, royalty or
carried, participation, net profits or other third party interest and
any agreement, option, right or privilege (whether by law, contract or
otherwise) capable of becoming any of the foregoing;
(q) "ENVIRONMENTAL CLAIM" means, with respect to any Person, any written or
oral notice, claim, demand or other communication (collectively, a
"claim") by any other Person alleging or asserting such Person's
liability for investigatory costs, cleanup costs, governmental response
costs, damages to natural resources or other property, personal
injuries, fines or penalties arising out of, based on or resulting from
(i) the presence, or release into the environment, of any Hazardous
Material at any location, whether or not owned by such Person, or (ii)
circumstances forming the basis of any violation, or alleged violation,
of any Environmental Law. The term "Environmental Claim" shall include
any claim by any Governmental Authority for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and any claim by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence of Hazardous Materials or
arising from alleged injury or threat of injury to health, safety or the
environment;
(r) "ENVIRONMENTAL LAW" includes any principles of equity or common law and
any federal, provincial, municipal or local laws, statutes, ordinances,
regulations, rules, permits, approvals, certificates, registrations,
by-laws, guidelines, orders, directives, judgments, decisions or other
instruments having the force of law which are rendered or issued by any
Governmental Authority having jurisdiction, including but not limited to
any judicial or administrative order, consent, decree, judgment or
directive, that relates in any way to the protection of the environment
or to the health and safety of persons or property or product liability,
handling or transportation, and whether applying to or governing any
actual or threatened presence, release, discharge, escape, manufacture,
processing, distribution, use,
5
<PAGE> 6
treatment, storage, disposal, transport, recycling or handling of any
Hazardous Material or any material or substance capable of becoming a
Hazardous Material when in combination with any other substance;
(s) "EXCHANGE TRUST AGREEMENT" means the agreement to be entered into
between USX, Marathon, Albertaco and the Depositary as trustee,
substantially in the form set out in Schedule 4 annexed hereto;
(t) "EXCHANGEABLE SHARES" means shares of Albertaco that are exchangeable on
a one-for-one basis (subject to adjustment in certain circumstances)
into USX-Marathon Shares and having attached thereto the attributes set
out in Schedule 2 annexed hereto;
(u) "FINANCIAL INSTRUMENT TRANSACTION" means any agreement involving the
purchase, sale or ownership of interest rate or currency swaps, foreign
exchange swaps or forward delivery agreements or commodity or financial
derivatives (other than a contract for purchase or sale of oil or gas at
a fixed price on which delivery is intended to be made not later than 30
days after the agreement);
(v) "FINAL ORDER" means the final order of the Court approving the
Arrangement pursuant to Section 182(5)(f) of the OBCA, as such order may
be affirmed, amended or modified by any court of competent jurisdiction;
(w) "GAAP" means generally accepted accounting principles as in effect in
Canada from time to time, applied on a basis consistent with that of
prior periods;
(x) "GOVERNMENTAL AUTHORITY" includes any federal, provincial, municipal or
other political subdivision, government department, commission, board,
bureau, agency or instrumentality, domestic or foreign;
(y) "HAZARDOUS MATERIAL" means pollutants, contaminants, dangerous goods or
substances, toxic or hazardous chemicals, substances, materials or
waste, petroleum products or any derivatives or by-products thereof,
other hydrocarbons or other substances, and any other substance or
material released into or present in the environment, where such release
or presence is prohibited, controlled, managed or regulated in any
manner under Environmental Law or by any Governmental Authority
thereunder or pursuant thereto, and whether or not any release of such
substance or material was permitted by Environmental Laws applicable at
the relevant time;
(z) "HOLDCO" means 787722 Alberta Ltd., a wholly-owned Subsidiary of
Marathon;
(aa) "HSR ACT" means the HART SCOTT RODINO ANTITRUST IMPROVEMENTS ACT of
1976 of the United States, as amended;
(ab) "INCOME TAX ACT" means the INCOME TAX ACT (Canada), R.S.C. 1985, c.1
(5th Supp), as amended, including the regulations promulgated
thereunder;
(ac) "INFORMATION CIRCULAR" means the information circular to be used in
connection with the holding of the Tarragon Meeting;
(ad) "INTERIM ORDER" means an interim order of the Court concerning the
Arrangement under Section 182(5) of the OBCA, containing declarations
and directions with respect to the Arrangement and the holding of the
Tarragon Meeting, as such order may be affirmed, amended or modified by
any court of competent jurisdiction;
(ae) "INVESTEE AGREEMENTS" means agreements dated December 9, 1997 between
Tarragon and each of Triax Resource Limited Partnership and Triax
Resource Limited Partnership II providing for the issuance of an
aggregate of 1,000,000 Special Warrants;
(af) "MARATHON" means Marathon Oil Company, a corporation incorporated under
the laws of Ohio;
(ag) "MARATHON COUNSEL" means Macleod Dixon, or such other legal counsel as
may be designated by Marathon and satisfactory to Tarragon, acting
reasonably;
(ah) "MARATHON DAMAGES EVENT" has the meaning ascribed thereto in Section
11.4;
6
<PAGE> 7
(ai) "MARATHON PUBLIC DOCUMENTS" means all documents or information filed by
or on behalf of Marathon in compliance with or intended compliance with
Applicable Laws;
(aj) "MARATHON SUBSIDIARIES" means all of the Subsidiaries of Marathon;
(ak) "MATERIAL ADVERSE EFFECT" and "MATERIAL ADVERSE CHANGE" used with
respect to any party means an effect or change, respectively, in each
case which is materially adverse to the business, assets, properties,
condition (financial or otherwise), results of operations or prospects
of such party and its Subsidiaries, taken as a whole, provided that a
Material Adverse Effect or Material Adverse Change shall not include any
adverse effect or change resulting from changes in general economic
conditions or conditions generally affecting the industries in which
Marathon or Tarragon operate including, without limitation, fluctuations
in the prices of Petroleum Substances;
(al) "MATERIAL CONTRACTS" means all contracts to which Tarragon or a
Tarragon Subsidiary is a party of a nature described in Section 6.1(v);
(am) "ME" means The Montreal Exchange;
(an) "MISREPRESENTATION" includes any untrue statement of a material fact,
any omission to state a material fact that is required to be stated and
any omission to state a material fact that is necessary to be stated in
order for a statement not to be misleading in the circumstances in
which it is made;
(ao) "NYSE" means the New York Stock Exchange;
(ap) "OBCA" means the BUSINESS CORPORATIONS ACT (Ontario), R.S.O. 1990, c.
B.16 as amended, including the regulations promulgated thereunder;
(aq) "OPTION" means any option, warrant, or right to subscribe for, convert
to, exchange for or otherwise acquire any unissued Tarragon Shares;
(ar) "PERMITTED ENCUMBRANCES" means:
(i) the terms and conditions of title documents, including, without
limitation, the requirement to pay any rentals or royalties to the
grantor of leases for Petroleum Substances to maintain such leases
in good standing;
(ii) the right reserved to or vested in any grantor, municipality,
government or other public authority by the term of any lease for
Petroleum Substances or by any statute, law, rule, order or
regulation to terminate any such lease or to require annual or
other periodic payments as a condition of the continuance thereof;
(iii) easements, rights of way, servitudes or other similar rights in
land, including without limitation, rights of way and servitudes
for highways, railways, sewers, drains, gas and oil pipelines, gas
and water mains, electric light, power, telephone or cable
television conduits, poles, wires or cables which do not materially
detract from the value of the land concerned or materially impair
its use;
(iv) the right to levy taxes on Petroleum Substances or the income or
revenue therefrom and government requirements pertaining to
production rates from wells or operations being conducted on oil
and gas interests or otherwise affecting the value of any oil and
gas interests;
(v) agreements for the sale of Petroleum Substances;
(vi) statutes, laws, rules, orders and regulations of any public
authority relating to any of the foregoing in any manner;
(vii) undetermined or inchoate liens incurred or created as security in
favour of any Person with respect to the development or operation
of any oil and gas interests, as regards Tarragon's share of the
costs and expenses thereof, which costs and expenses are not due or
delinquent;
(viii) mechanics', builders' or materialmens' liens in respect of services
rendered or goods supplied for which payment is not at the time
due;
7
<PAGE> 8
(ix) the reservations, limitations, provisos and conditions in any
grants or transfers from the Crown of any of the subject lands or
interests therein and statutory exceptions as to title;
(x) agreements and plans relating to pooling or unitization;
(xi) governmental requirements as to production rates on the operations
of any property;
(xii) Crown or other lessor royalties;
(xiii) agreements respecting the processing, treating or transmission of
Petroleum Substances or the operating of wells by contract field
operators;
(xiv) provisions for penalties and forfeitures under agreements as a
consequence of non-participation in operations provided such
penalties or forfeitures are not in effect or currently capable of
being invoked; and
(xv) liens granted in the ordinary course of business to a public
utility, municipality or governmental authority with respect to
operations pertaining to any oil and gas interests;
(as) "PERSON" includes any individual, partnership, firm, trust, body
corporate, government, governmental body, agency or instrumentality,
unincorporated body of Persons or association;
(at) "PETROLEUM SUBSTANCES" means petroleum, natural gas and related
hydrocarbons and any substances associated therewith;
(au) "PLAN OF ARRANGEMENT" means the plan of arrangement set out in Schedule
1 hereto as amended or supplemented from time to time in accordance
with Article 12 hereof;
(av) "PURCHASE FUNDS" means the aggregate cash amount required to purchase
Exchangeable Shares in respect of which the holders elect or are to
receive cash pursuant to the terms of the Arrangement;
(aw) "SHARE CONSIDERATION DETERMINATION PERIOD" means the period of ten
consecutive trading days ending on the fifth calendar day next
preceding the date on which the Tarragon Meeting is held, provided that
if such calendar day is not a trading day, then such ten-day period
will end on the trading day immediately preceding such calendar day;
(ax) "SHAREHOLDER RIGHTS PLAN" means the shareholder rights plan of Tarragon
established pursuant to the Second Amended and Restated Shareholder
Protection Rights Plan Agreement made as of November 19, 1997 between
Tarragon and Montreal Trust Company of Canada;
(ay) "SHAREHOLDER AGREEMENT" means the shareholders' agreement made as of
April 15, 1998 among Tarragon Oil and Gas Limited and Unocal
Corporation, Unocal Canada Resources, Unocal Canada Limited and Unocal
Canada Exploration Limited;
(az) "SPECIAL WARRANTS" means the Special Warrants entitling the holders
thereof to acquire one Tarragon Share per Special Warrant without
payment of additional consideration, issued or to be issued by Tarragon
pursuant to the Investee Agreements;
(ba) "SUBSIDIARY" means, when used to indicate a relationship with another
body corporate,
(i) a body corporate which is Controlled by (A) that other, or (B) that
other and one or more bodies corporate, each of which is Controlled
by that other, or (C) two or more bodies corporate each of which is
Controlled by that other, or
(ii) a subsidiary of a body corporate that is the other's subsidiary;
(bb) "SUPPORT AGREEMENT" means an agreement to be entered into between USX,
Marathon and Albertaco substantially in the form set out in Schedule 3
annexed hereto;
(bc) "TAKE-OVER PROPOSAL" means any take-over bid for 50% or more of the
issued and outstanding Tarragon Shares or any proposal or offer for a
merger, consolidation, amalgamation or other business combination
involving Tarragon or any proposal or offer to acquire in any manner a
50% or greater
8
<PAGE> 9
equity or beneficial interest in, or a material amount of the assets
of, Tarragon, other than pursuant to the Arrangement;
(bd) "TARRAGON" means Tarragon Oil and Gas Limited, a corporation
incorporated under the OBCA;
(be) "TARRAGON COUNSEL" means McCarthy Tetrault, or such other legal counsel
as may be designated by Tarragon and satisfactory to Marathon, acting
reasonably;
(bf) "TARRAGON DAMAGES EVENT" has the meaning ascribed thereto in Section
11.5;
(bg) "TARRAGON FAIRNESS OPINIONS" means, collectively, the opinions of
Nesbitt Burns Inc. and Credit Suisse First Boston Corporation that the
consideration offered to the Tarragon Shareholders pursuant to the
terms of the Arrangement is fair, from a financial point of view, to
the Tarragon Shareholders;
(bh) "TARRAGON FINANCIAL STATEMENTS" means the audited consolidated
financial statements of Tarragon for the years ended December 31, 1997
and 1996 and the unaudited consolidated financial statements of
Tarragon for the three month periods ended March 31, 1998 and 1997;
(bi) "TARRAGON MATERIAL SUBSIDIARIES" means Tarragon Resources (U.S.A.) Inc.
and 1214579 Ontario Limited;
(bj) "TARRAGON MEETING" means the special meeting of the Tarragon
Securityholders to be called to, INTER ALIA, consider and, if thought
fit, authorize, approve and adopt the Arrangement in accordance with
the Interim Order, and any adjournments thereof;
(bk) "TARRAGON OPTIONS" means, collectively, all outstanding options to
purchase Tarragon Shares pursuant to Tarragon's existing share option
plan;
(bl) "TARRAGON OPTIONHOLDERS" means the holders of Tarragon Options;
(bm) "TARRAGON PUBLIC DOCUMENTS" means all documents or information filed by
or on behalf of Tarragon in compliance with or intended compliance with
Applicable Laws prior to May 29, 1998;
(bn) "TARRAGON RESERVE REPORT" means collectively the reports evaluating
certain of Tarragon's oil, natural gas liquids and natural gas reserves
and the estimated future cash flow from such reserves:
(i) prepared by Sproule Associates Limited and dated January 30, 1998,
and
(ii) prepared by Gilbert Laustsen Jung Associates Ltd. and dated
February 18, 1998;
(bo) "TARRAGON SARS" means, collectively, all outstanding stock appreciation
rights issued by Tarragon;
(bp) "TARRAGON SECURITYHOLDERS" means the Tarragon Shareholders, Tarragon
Optionholders, the holders of Special Warrants and the Persons entitled
to acquire Special Warrants pursuant to the Investee Agreements;
(bq) "TARRAGON SHAREHOLDERS" means the holders of Tarragon Shares;
(br) "TARRAGON SHARES" means the common shares of Tarragon as constituted on
the date hereof;
(bs) "TARRAGON SUBSIDIARIES" means all of the Subsidiaries of Tarragon;
(bt) "TSE" means The Toronto Stock Exchange;
(bu) "UNOCAL" means Unocal Canada Limited and its affiliates;
(bv) "U.S. GAAP" means generally accepted accounting principles as in effect
in the United States from time to time, applied on a basis consistent
with that of prior periods;
(bw) "USX" means USX Corporation, a Delaware Corporation;
(bx) "USX-MARATHON SHARES" means the shares of USX-Marathon Group Common
Stock of USX as constituted on the date hereof; and
(by) "WATEROUS PROPERTY OFFERING" means the offering of properties of
Tarragon through Waterous Securities Limited pursuant to an offering
memorandum dated May 25, 1998.
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<PAGE> 10
ARTICLE 2
INTERPRETATION
2.1 INTERPRETATION NOT AFFECTED BY HEADINGS. The division of this Agreement into
Articles, Sections, subsections and paragraphs and the insertion of headings are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
2.2 ARTICLE REFERENCES. Unless the contrary intention appears, references in
this Agreement to an Article, Section, subsection, paragraph, clause, subclause
or schedule by number or letter or both refer to the article, section,
subsection, paragraph, clause, subclause or schedule, respectively, bearing that
designation in this Agreement.
2.3 NUMBER AND GENDER. In this Agreement, unless the contrary intention appears,
words importing the singular include the plural and vice versa; words importing
gender shall include all genders.
2.4 DATE FOR ANY ACTION. In the event that the date on which any action is
required to be taken hereunder by any of the parties is not a Business Day in
the place where the action is required to be taken, such action shall be
required to be taken on the next succeeding day which is a Business Day in such
place.
2.5 STATUTORY REFERENCES. References in this Agreement to any statute or
sections thereof shall include such statute as amended or substituted and any
regulations promulgated thereunder from time to time in effect.
2.6 CURRENCY. Unless otherwise stated, all references in this Agreement to sums
of money are expressed in lawful money of Canada.
2.7 ENFORCEABILITY QUALIFICATIONS. All representations, warranties, covenants
and opinions in or contemplated by this Agreement as to the enforceability of
any covenant, agreement or document are subject to enforceability being limited
by applicable bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally; and the discretionary nature of certain remedies
(including specific performance and injunctive relief).
2.8 DISCLOSURE. Where reference is made herein to disclosure of any fact to
Marathon or Tarragon, such disclosure shall be made in a written document
labelled as disclosure making reference to this agreement, delivered to an
officer of Marathon or Tarragon, as the case may be, prior to the execution
hereof.
2.9 SCHEDULES. The following Schedules form part of this Agreement:
Schedule 1 -- Plan of Arrangement
Schedule 2 -- Exchangeable Share Provisions
Schedule 3 -- Support Agreement
Schedule 4 -- Exchange Trust Agreement.
ARTICLE 3
TARRAGON'S CLOSING CONDITIONS
3.1 CONDITIONS FOR THE BENEFIT OF TARRAGON. The obligations of Tarragon to
complete the transactions contemplated herein, and in particular the
Arrangement, are subject to the fulfilment of the following conditions precedent
on or before the Effective Date or such other time as is specified below:
(a) except as affected by the transactions contemplated by this Agreement
the representations and warranties made by Marathon in Section 7.1 shall
be true as of the Effective Date in all material respects as if made on
and as of such date;
(b) Marathon shall have provided Tarragon with opinions of Marathon Counsel
reasonably satisfactory to Tarragon dated the Effective Date and
addressed to Tarragon Counsel to the effect that:
(i) each of USX Corporation, Marathon, Holdco and Albertaco is duly
incorporated and validly existing under the laws of the jurisdiction
of its incorporation, and each of Marathon, Holdco and
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<PAGE> 11
Albertaco has corporate power and authority to enter into this
Agreement and perform its obligations hereunder;
(ii) all necessary proceedings, corporate, regulatory and otherwise, of
each of Marathon, Holdco and Albertaco have been taken to fully,
validly and effectively authorize this Agreement and the
transactions contemplated herein including the Arrangement, the
performance by each of Marathon, Holdco and Albertaco of its
obligations hereunder, and the execution and delivery by each of
Marathon, Holdco and Albertaco of this Agreement and all documents
delivered pursuant hereto;
(iii) the execution and delivery by each of Marathon, Holdco and
Albertaco of this Agreement and all documents delivered pursuant
hereto, the performance by each of Marathon, Holdco and Albertaco
of its obligations hereunder and thereunder and the consummation of
the transactions contemplated herein and therein will not:
(A) result in the breach of or violate any term or provision of the
articles, by-laws or governing documents of Marathon, Holdco or
Albertaco; or
(B) violate any provision of law or administrative regulation or, in
each case as known to such counsel, without special inquiry, any
judicial or administrative order, award, judgment or decree
applicable to Marathon, Holdco or Albertaco or the business or
properties of Marathon, Holdco or Albertaco contravention of
which could reasonably be expected to prevent or hinder the
completion of the Arrangement;
(iv) this Agreement has been duly executed and delivered by each of
Marathon, Holdco and Albertaco and this Agreement is valid and
binding on each of Marathon, Holdco and Albertaco and is enforceable
in accordance with its terms; and
(v) the authorized and outstanding capital of each of Marathon and
Albertaco immediately prior to the Effective Date is as stated in
Section 7.1(f) hereof.
In giving such opinion, Marathon Counsel may rely, in respect of matters
governed by the laws of any jurisdiction other than the laws of Alberta,
upon the opinion of General Counsel of Marathon or local counsel in such
jurisdiction provided that Marathon Counsel is of the opinion that the
opinion of such local counsel is one upon which Marathon Counsel may
properly rely; and, in respect of matters of fact, upon certificates of
senior officers of Marathon or any other appropriate Persons acceptable
to Tarragon Counsel;
(c) Marathon shall have complied in all material respects with its covenants
in Section 9.1 of this Agreement and Marathon shall have provided to
Tarragon a certificate of an officer of Marathon certifying as to such
compliance and Tarragon shall not have established that it has knowledge
to the contrary;
(d) the Purchase Funds shall have been deposited with the Depositary by
Holdco pursuant to the Depositary Agreement, which shall irrevocably
authorize and direct the Depositary to pay the Purchase Funds to the
holders of the Exchangeable Shares who are entitled to receive such
funds in accordance with the Arrangement;
(e) the Exchangeable Shares issuable upon completion of the Arrangement
shall be listed on the TSE or another stock exchange in Canada, subject
to notice of issuance, provided that the minimum listing requirements
are met, and each shall be freely tradeable (other than as a result of
any control person restrictions which may arise by virtue of the
ownership thereof) under applicable securities laws;
(f) the USX-Marathon Shares reserved for issuance upon exchange of the
Exchangeable Shares issuable upon completion of the Arrangement shall be
listed on the NYSE, subject to notice of issuance, and each shall be
freely tradeable (other than as a result of any control person or
affiliate restrictions which may arise by virtue of the ownership
thereof) under applicable securities laws; and
(g) the Support Agreement and Exchange Trust Agreement shall have been
executed and delivered by USX, Marathon and Albertaco.
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The foregoing conditions precedent are for the benefit of Tarragon and may
be waived, in whole or in part, by Tarragon in writing at any time. If any of
the said conditions precedent shall not be complied with or waived by Tarragon
on or before the date required for the performance thereof, Tarragon may, in
addition to the other remedies it may have at law or equity, rescind and
terminate this Agreement by written notice from Tarragon to Marathon.
ARTICLE 4
MARATHON'S CLOSING CONDITIONS
4.1 CONDITIONS FOR THE BENEFIT OF MARATHON, HOLDCO AND ALBERTACO. The
obligations of Marathon, Holdco and Albertaco to complete the transactions
contemplated herein, and in particular the Arrangement, are subject to
fulfilment of the following conditions precedent on or before the Effective Date
or such other time as is specified below:
(a) except as affected by the transactions contemplated by this Agreement,
the representations and warranties made by Tarragon in Section 6.1 shall
be true in all material respects as of the Effective Date as if made on
and as of such date;
(b) Tarragon shall have provided Marathon with opinions of Tarragon Counsel
reasonably satisfactory to Marathon and Marathon Counsel, dated the
Effective Date and addressed to Marathon and Marathon Counsel, to the
effect that:
(i) each of Tarragon and the Tarragon Material Subsidiaries is duly
incorporated and validly existing under the law of the jurisdiction
of its incorporation and Tarragon has corporate power and authority
to enter into this Agreement and perform its obligations hereunder;
(ii) all necessary proceedings, corporate, regulatory and otherwise, of
Tarragon have been taken to fully, validly and effectively
authorize this Agreement and the transactions contemplated herein
including the Arrangement, the performance by Tarragon of its
obligations hereunder, and the execution and delivery by Tarragon
of this Agreement and all documents delivered pursuant hereto;
(iii) the execution and delivery by Tarragon of this Agreement and all
documents delivered pursuant hereto, the performance by Tarragon of
its obligations hereunder and thereunder and the consummation of
the transactions contemplated herein and therein will not:
(A) result in the breach of or violate any term or provision of the
articles, by-laws or governing documents of any of Tarragon or
the Tarragon Material Subsidiaries; or
(B) violate any provision of law or administrative regulation or,
in each case as known to such counsel, without special inquiry,
any judicial or administrative order, award, judgment or decree
applicable to any of Tarragon or the Tarragon Material
Subsidiaries or the business or properties of Tarragon or the
Tarragon Material Subsidiaries;
(iv) this Agreement has been duly executed and delivered by Tarragon and
this Agreement is valid and binding on Tarragon and is enforceable
in accordance with its terms;
(v) all Tarragon SARs shall have been exercised or cancelled;
(vi) the application of the Shareholder Rights Plan shall have been
validly and effectively terminated on or prior to the Effective
Date; and
(vii) the authorized capital of Tarragon immediately prior to the
Effective Date is as stated herein.
In giving such opinion, Tarragon Counsel may rely, in respect of matters
governed by the laws of any jurisdiction other than the Province of
Alberta or the laws of Canada applicable therein, upon the opinion of
local counsel in such jurisdiction provided that Tarragon Counsel is of
the opinion that the opinion of such local counsel is one upon which
Tarragon Counsel may properly rely; and, in respect of matters of fact,
upon certificates of senior officers of Tarragon or any other
appropriate Persons acceptable to Marathon Counsel;
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(c) Tarragon shall have complied in all material respects with its covenants
in Section 8.1 of this Agreement and all other material covenants in
this Agreement and Tarragon shall have provided to Marathon a
certificate of an officer certifying as to such compliance and Marathon
shall not have established that it has knowledge to the contrary;
(d) before giving effect to the transactions contemplated by this Agreement,
since December 31, 1997 there shall have been no Material Adverse Change
in Tarragon or any occurrences or circumstances which have resulted or
might reasonably be expected to result in a Material Adverse Change in
Tarragon except as disclosed in the Tarragon Public Documents or except
as have been disclosed in writing to Marathon prior to the execution of
this Agreement;
(e) there shall be no action taken by a Governmental Authority under any
existing applicable law or regulation, nor any statute, rule, regulation
or order which is enacted, enforced, promulgated or issued by any court,
department, commission, board, regulatory body, government or
Governmental Authority or similar agency, domestic or foreign, that:
(i) results in a judgment or assessment of material damages against
Tarragon, USX, Marathon, Holdco or any Subsidiary of any of them,
directly or indirectly relating to the transactions contemplated
herein; or
(ii) imposes or confirms material limitations on the ability of Marathon
effectively to exercise full rights of ownership of the Tarragon
Shares, including, without limitation, the right to vote any such
securities;
(f) Tarragon and Marathon shall have obtained all consents, approvals and
authorizations by any Governmental Authority (including, without
limitation, all consents or approvals required under the COMPETITION ACT
(Canada) or the INVESTMENT CANADA ACT (Canada) and all stock exchange
and securities commission approvals) which are required or necessary in
connection with the transactions contemplated herein, (other than any
such consent, approval or authorization the failure of which to obtain
would not have a Material Adverse Effect on Tarragon) on terms and
conditions reasonably satisfactory to Marathon;
(g) such members of the board of directors and officers of Tarragon as
Marathon shall have designated in writing to Tarragon not less than
three days prior to the Effective Date, shall have provided their
written resignations as directors and officers of Tarragon effective as
of the Effective Date together with releases (satisfactory to Marathon
acting reasonably) in favour of Tarragon;
(h) the application of the Shareholder Rights Plan to the Arrangement shall
have been validly and effectively terminated on or prior to the
Effective Date and Marathon shall have received such opinions of
Tarragon Counsel and such other documents and assurances to such effect,
as in its sole discretion it may determine, acting reasonably;
(i) Tarragon shall have obtained any required consent of third party lenders
and other parties to Material Contracts in respect of the transactions
contemplated herein; and
(j) the holders of not more than 10% of the outstanding Tarragon Shares
(other than Unocal) shall have exercised rights of dissent in connection
with the Arrangement.
The foregoing conditions precedent are for the benefit of Marathon and may be
waived, in whole or in part, by Marathon in writing at any time. If any of the
said conditions precedent shall not be complied with or waived by Marathon on or
before the date required for the performance thereof, Marathon may, in addition
to the other remedies it may have at law or equity, rescind and terminate this
Agreement by written notice to Tarragon.
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ARTICLE 5
MUTUAL CLOSING CONDITIONS
5.1 MUTUAL CLOSING CONDITIONS. The obligations of Marathon and Tarragon to
complete the transactions contemplated herein are subject to fulfilment of the
following conditions precedent on or before the Effective Date or such other
time as is specified below:
(a) a special resolution shall have been passed by the Tarragon
Securityholders on or before October 31, 1998, in form and substance
satisfactory to each of Marathon and Tarragon, acting reasonably, duly
approving the Arrangement in accordance with the Interim Order;
(b) the Final Order shall have been granted in form and substance
satisfactory to Marathon and Tarragon, each acting reasonably;
(c) the Arrangement shall have become effective on or before November 30,
1998;
(d) there shall be no action taken by a Governmental Authority under any
existing applicable law or regulation, nor any statute, rule, regulation
or order which is enacted, enforced, promulgated or issued by any court,
department, commission, board, regulatory body, government or
Governmental Authority or similar agency, domestic or foreign, that
makes illegal or otherwise directly or indirectly restrains, enjoins or
prohibits the Arrangement or any other transactions contemplated herein;
and
(e) Tarragon and Marathon shall have obtained all consents, approvals and
authorizations by any Governmental Authority (including, without
limitation, all consents or approvals or expiry of waiting periods
required under HSR, the COMPETITION ACT (Canada) or the INVESTMENT
CANADA ACT (Canada) and all stock exchange and securities commission
approvals) which are required or necessary in connection with the
transactions contemplated herein the failure of which to obtain would
materially adversely affect the ability of Marathon to complete the
Arrangement, all on terms and conditions reasonably satisfactory to
Tarragon and Marathon.
The foregoing conditions are for the mutual benefit of Marathon and Tarragon and
may be waived, in whole or in part, by Marathon and Tarragon together, at any
time. If any of the said conditions precedent shall not be complied with or
waived as aforesaid on or before the date required for the performance thereof,
Marathon or Tarragon may, in addition to the other remedies it may have at law
or in equity, rescind and terminate this Agreement by written notice to the
other party.
ARTICLE 6
TARRAGON'S REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS AND WARRANTIES OF TARRAGON. Tarragon represents and warrants
to Marathon that:
(a) Corporate Standing. Each of Tarragon and the Tarragon Subsidiaries:
(i) is duly organized and validly existing under the laws of the
jurisdiction of its incorporation;
(ii) has the corporate capacity, power and authority to own or lease its
property and assets and to carry on its business as now conducted
by it; and
(iii) is duly qualified to carry on business in each jurisdiction in
which the nature of its business or the property or assets owned or
leased by it makes such qualification necessary, except where the
failure to be so qualified will not have a Material Adverse Effect
on Tarragon;
(b) Compliance with Laws, Licenses. Each of Tarragon and the Tarragon
Subsidiaries:
(i) has complied with and is in compliance with all laws or regulations
applicable to its assets or the operation of its business,
including the Applicable Laws, except where failure to do so would
not have a Material Adverse Effect on Tarragon; and
(ii) has all licenses, permits, orders or approvals of, and has made all
required registrations with any government or regulatory body that
are material to its assets or the conduct of its business.
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(c) Corporate Capacity. Tarragon has all requisite corporate capacity, power
and authority to enter into this Agreement and all documents to be
delivered pursuant hereto and, subject to the terms hereof, including
the approval of the Arrangement at the Tarragon Meeting and by the
Court, to perform its obligations hereunder.
(d) Authorization and Binding Effect. This Agreement has been duly
authorized, executed and delivered by Tarragon and all documents to be
executed and delivered by Tarragon pursuant hereto to Marathon shall be
duly executed and delivered and this Agreement constitutes a legal,
valid and binding obligation of Tarragon enforceable against it in
accordance with its terms.
(e) No Contravention. The execution and delivery of this Agreement and all
documents to be delivered pursuant thereto, the performance of the terms
hereof and thereof and the consummation of the transactions contemplated
herein do not and will not:
(i) result in the breach of or violate any term or provision of the
articles, by-laws or other governing documents of Tarragon or the
Tarragon Subsidiaries; or
(ii) conflict with, result in a breach of, constitute a default under,
or accelerate or permit the acceleration of the performance
required by, any agreement, instrument, licence, permit or
authority to which Tarragon or the Tarragon Subsidiaries is a
party, by which it is bound or to which any of its property or
assets is subject or give to any Person any interest or right,
including any right of purchase, termination, cancellation or
acceleration under any such agreement, instrument, license, permit
or authority; or
(iii) result in the creation of any Encumbrance upon any of the property
or assets of Tarragon or the Tarragon Subsidiaries; or
(iv) violate any provision of law or administrative regulation or any
judicial or administrative order, award, judgment or decree
applicable to Tarragon or the Tarragon Subsidiaries or any of their
property or assets;
except those which in the case of (ii) (iii) or (iv), would not have a
Material Adverse Effect on Tarragon.
(f) Finder's Fees. Other than Nesbitt Burns Inc. and Credit Suisse First
Boston Corporation, in accordance with the terms of their respective
engagement letters, copies of which have been provided to Marathon,
Tarragon has not incurred any obligation or liability, contingent or
otherwise, for brokerage fees, finder's fees, agent's commission,
financial advisory fees or other similar forms of compensation with
respect to the transactions contemplated herein.
(g) Legal Matters. Except as disclosed to Marathon prior to the execution of
this Agreement, there are no actions, suits or other legal,
administrative or arbitration proceedings or government investigations
commenced, or to the knowledge of Tarragon contemplated, at law or in
equity or before or by any court or other Governmental Authority which
involve or affect Tarragon or any Tarragon Subsidiary or any of their
assets, including, without limitation, the title to, or ownership of,
the properties of Tarragon and the Tarragon Subsidiaries and there are
no outstanding judgments, awards, decrees, injunctions, awards or orders
against Tarragon or a Tarragon Subsidiary which, in any of the above
cases, could have a Material Adverse Effect on Tarragon, and, to the
best of Tarragon's knowledge, there are no grounds upon which any such
actions, suits or proceedings may be commenced with reasonable
likelihood of success. As of the date hereof, there are no actions,
suits or other proceedings commenced or which have been threatened which
involve Tarragon or any Tarragon Subsidiary or any of their assets which
have not been disclosed to Marathon.
(h) Authorized and Issued Capital.
(i) The authorized capital of Tarragon consists of an unlimited number
of Tarragon Shares, an unlimited number of Preferred Shares,
issuable in one or more series and 20,000,000 7% Cumulative
Convertible Preferred Shares, Series A, of which as at the date
hereof, only
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72,236,396 Tarragon Shares are issued and outstanding, all of which
are issued as fully paid and non-assessable;
(ii) all of the issued shares of each Tarragon Subsidiary are owned by
Tarragon as the sole beneficial owner of record, free and clear of
any Encumbrances, voting trusts, proxies and other interests,
claims or demands of every kind or nature whatsoever and no Person
has any agreement, option, right or privilege (including, without
limitation, by law, pre-emptive right, contract or otherwise) to
purchase, convert into, exchange for or otherwise acquire, nor any
agreement, option, right or privilege capable of becoming any such
agreement, right, option or privilege, for any of such securities
or any interest therein, in all cases other than as reflected in
the Tarragon Financial Statements; and
(iii) no Person has any agreement, option, right or privilege (including,
without limitation, whether by law, pre-emptive right, contract or
otherwise) to purchase, subscribe for, convert into, exchange for
or otherwise require the issuance of, nor any agreement, option,
right or privilege capable of becoming any such agreement, option,
right or privilege, any of the unissued shares of Tarragon or any
Tarragon Subsidiary, other than (A) Tarragon Options to purchase in
the aggregate not more than 4,471,150 Tarragon Shares, (B) 83,333
Tarragon SARs, (C) Special Warrants for the issuance of 717,374
Tarragon Shares and agreements to issue Special Warrants for the
issuance of an additional 282,626 Tarragon Shares, and (D) in
connection with the Shareholder Rights Plan.
(i) Subsidiaries. Other than the Tarragon Material Subsidiaries Tarragon has
no Subsidiaries which carry on any business or have any material assets
or liabilities, and neither Tarragon nor any Tarragon Subsidiary has any
agreements of any nature to acquire any Subsidiary, or to acquire or
lease any other business operations out of the ordinary course.
(j) Corporate Records. The respective minute books of Tarragon and the
Tarragon Subsidiaries for the past five (5) years are true and correct
in all material respects and contain the minutes of all meetings and all
resolutions of the directors and shareholders thereof.
(k) Financial Matters.
(i) The Tarragon Financial Statements have been prepared in accordance
with GAAP (except as stated therein) and present fairly the
financial position of Tarragon to which they relate as of the date
provided therein and the results of operations and the changes in
financial position for the periods then ended;
(ii) except as disclosed to Marathon prior to the execution of this
Agreement there are no known or anticipated liabilities, whether
contingent or otherwise, of Tarragon of any kind whatsoever,
whether or not determined or determinable other than as set out in
the Tarragon Financial Statements or as described in or
contemplated by this Agreement;
(iii) except as set out in the Tarragon Financial Statements, none of
Tarragon and the Tarragon Subsidiaries is a party to or bound by
any agreement of guarantee, indemnification, assumption or
endorsement or any other like commitment of the obligations,
liabilities (contingent or otherwise) or indebtedness of any other
Person; and
(iv) except as disclosed to Marathon prior to the execution of this
Agreement, none of Tarragon and the Tarragon Material Subsidiaries
is in default under any mortgage, debenture, loan agreement or
other security agreement and no event has occurred which with the
giving of notice or lapse of time would constitute a default,
(except in each case any such default which may occur after the
date hereof as a result of fluctuations in the prices of Petroleum
Substances occurring after December 31, 1997).
(l) Change in Affairs. Since December 31, 1997 except as disclosed in the
Tarragon Public Documents and the Information Circular or otherwise in
writing to Marathon, Tarragon has not amended its articles, by-laws or
other governing documents and each of Tarragon and the Tarragon Material
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Subsidiaries has conducted its business in all material respects in the
usual, ordinary and regular course and consistent with past practice;
and has not:
(i) disposed of any property or assets other than in the ordinary
course of business;
(ii) made any material loans or advances;
(iii) incurred, assumed or become subject to any liability except in the
ordinary course of business;
(iv) suffered any Material Adverse Change, or any occurrences or
circumstances which have resulted or might reasonably be expected
to result in a Material Adverse Change (other than changes
attributable to fluctuations in the prices of Petroleum
Substances);
(v) made any change in its accounting principles and practices as
theretofore applied including, without limitation, the basis upon
which its assets and liabilities are recorded on its books and its
earnings and profits and losses are ascertained;
(vi) made any general change in its salary and other compensation
levels;
(vii) entered into any agreements, whether in writing or verbal,
providing for payments to be made to any employees or officers of
Tarragon or its Subsidiaries in respect of loss of office or loss
of employment in connection with the transactions contemplated
hereby other than as disclosed to Marathon prior to the date
hereof;
(viii) acquired any assets which are material;
(ix) taken any action which would be prohibited by Section 8.1(c) or
failed to take any action which would be required by Section
8.1(c);
(x) made any payment to or entered into any agreement with any Person
not dealing at arms length with Tarragon;
(xi) paid any dividend, in the case of Tarragon, or redeemed or
purchased any Tarragon Shares, in the case of Tarragon and the
Tarragon Subsidiaries;
(xii) issued, sold or agreed to issue or sell any securities except
pursuant to the exercise of outstanding Tarragon Options, the
Tarragon SARs and the Investee Agreements, and except for
borrowings under existing credit facilities; or
(xiii) entered into any agreement or commitment to do any of the
foregoing.
(m) Tax Matters. Each of Tarragon and the Tarragon Subsidiaries has duly and
timely filed, in proper form, returns in respect of taxes under the
INCOME TAX ACT, the CORPORATE TAX ACT (Alberta), the Goods and Services
Tax levied under the EXCISE TAX ACT (Canada), the income tax legislation
of any other province of Canada or any foreign country in which it
carries on business or to the jurisdiction of which it is otherwise
subject, the MINES AND MINERALS TAX ACT (Alberta), the FREEHOLD MINERAL
RIGHTS TAX ACT (Alberta) and similar legislation of other provinces
having jurisdiction over the affairs of Tarragon, for all prior periods
in respect of which such filings have heretofore been required, and all
taxes shown thereon and all taxes owing with respect to periods ending
on or prior to December 31, 1997 have been paid or accrued on the books
of Tarragon and all payments by Tarragon to any non-resident of Canada
have been made in accordance with all applicable legislation in respect
of withholding tax; and Tarragon and each Tarragon Subsidiary has
withheld from each payment made to any of its officers, directors,
former directors and employees the amount of all taxes (including,
without limitation, income tax) and other deductions required to be
withheld therefrom and has paid the same to the proper tax or other
authority within the time required under any applicable tax legislation;
there are no outstanding agreements or waivers material to Tarragon
extending the statutory period of limitations applicable to any federal,
provincial or other income tax return for any period; all remittances of
taxes collected on behalf of any taxing authority owing with respect to
periods ending on or prior to December 31, 1997 have been paid or
accrued on the books of Tarragon and in the Financial Statements; all
such returns are complete and correct in all material respects; there
are no assessments or reassessments respecting Tarragon or any Tarragon
Subsidiaries pursuant to which there are
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amounts owing or discussions in respect thereof with any taxing
authority. Tarragon knows of no basis for the assessment of any material
amount of taxes for any period covered by such returns that is not
reflected on such returns. Tarragon is not a party to any material
action, suit, or other proceeding or claim in progress, pending or
threatened in respect of taxes.
(n) Government Incentives. All filings made by Tarragon or any of the
Tarragon Subsidiaries under which it has received or is entitled to
government incentives, have been made in accordance, in all material
respects, with all applicable legislation and contain no
Misrepresentations of material fact or omit to state any material fact
which could cause any amount previously paid to such corporation or
previously accrued on the accounts thereof to be recovered or
disallowed.
(o) Employment Matters. Except as disclosed to Marathon prior to the
execution of this Agreement, neither Tarragon nor any Tarragon
Subsidiary is a party to any written contracts of employment or
collective bargaining agreements and there are no currently existing
employment benefit plans, arrangements or agreements, other than the
share option plan, contributions to retirement savings plans, vacation
entitlements, health and group insurance plans and customary government
plans such as Canada Pension Plan, Employment Insurance and Workers'
Compensation, to which Tarragon or any Tarragon Material Subsidiary is a
party or by which it is bound except as disclosed to Marathon and
Tarragon is in compliance with all such plans except for defaults which
would not have a Material Adverse Effect on Tarragon.
(p) Engineering Reports. Tarragon has made available to Sproule Associates
Limited and Gilbert Laustsen Jung Associates Ltd. prior to the issuance
of the Tarragon Reserve Report, all information in Tarragon's possession
material to an adequate determination of oil and gas reserves, none of
such information contained a Misrepresentation and (other than as may be
affected by the disposition of Petroleum Substances in ordinary course)
Tarragon has no knowledge of any Material Adverse Change to the oil and
gas reserves of Tarragon since the effective dates of the Tarragon
Reserve Reports.
(q) Reporting Issuer Status. Tarragon is a "reporting issuer" or has
equivalent status in each of the provinces of Canada and the Tarragon
Shares are listed on the TSE and the ME, and Tarragon has not been
notified of any default or alleged default by Tarragon of any
requirement of securities and corporate laws, regulations, orders,
notices and policies.
(r) Environmental Matters. Except to the extent that any violation or other
matter referred to in this paragraph does not have a Material Adverse
Effect on Tarragon,
(i) None of Tarragon or any of the Tarragon Subsidiaries is in
violation of any applicable Environmental Law;
(ii) Each of Tarragon and the Tarragon Subsidiaries has operated its
business at all times and has received, handled, used, stored,
treated, shipped and disposed of all contaminants without violation
of Environmental Law;
(iii) Except as have been disclosed to Marathon prior to the date hereof,
there have been no spills, releases, deposits or discharges of
Hazardous Materials which have not been rectified or are in the
process of being rectified on any of the real property owned or
leased by Tarragon or any of the Tarragon Subsidiaries or under
their respective control and there are not any past or present
conditions or circumstances at or arising out of any current or
former businesses, assets or properties of Tarragon or any of its
Subsidiaries, including but not limited to on-site or off-site
disposal or release of any Hazardous Materials which may give rise
to (A) liabilities or obligations for any clean-up, remediation,
disposal or corrective action under any Environmental Law or (B)
claims arising for personal injury, property damage, or damage to
natural resources;
(iv) There have been no releases, deposits or discharges, in violation
of Environmental Law in effect at the relevant time, of any
Hazardous Materials into the earth, air or into any body of water
or any municipal or other sewer or drain water systems by Tarragon
or any of the Tarragon Subsidiaries;
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(v) No orders, directions or notices have been issued by a Governmental
Authority and remain outstanding pursuant to any Environmental Law
relating to the business or assets of Tarragon or any of the
Tarragon Subsidiaries;
(vi) Except as disclosed to Marathon, Tarragon has not received notice
of any violation of Environmental Law or investigation relating to
any Environmental Claims. Tarragon is not aware of any permits,
licenses or other authorizations which are required under federal,
provincial or local laws with respect to pollution or protection of
the environment relating to the assets, business or operations of
Tarragon which have not been obtained by Tarragon;
(vii) All of the assets of Tarragon and the Tarragon Subsidiaries
operated and maintained by Tarragon or any Tarragon Subsidiary are
in compliance with all terms and conditions of Environmental Laws,
and all related permits, licenses and authorizations, in all
material respects, and are also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in
such laws or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder relating to the assets operated
by Tarragon or any Tarragon Subsidiary, in all material respects;
(viii) Tarragon has provided Marathon with copies of all environmental
investigations, studies, audits, tests, reviews or other analyses
by or that are in the possession of Tarragon;
(ix) None of Tarragon or the Tarragon Subsidiaries has failed to report
to the proper Governmental Authority the occurrence of any event
which is required to be so reported by any Environmental Law where
failure to so report could have a Material Adverse Effect on
Tarragon; and
(x) Each of Tarragon and the Tarragon Subsidiaries holds all licenses,
permits and approvals required under any Environmental Law in
connection with the operation of its business and the ownership and
use of its assets, all such licenses, permits and approvals are in
full force and effect, and except for (A) notifications and
conditions of general application to assets of the type owned by
Tarragon, and (B) notifications relating to reclamation obligations
under the ENVIRONMENTAL PROTECTION AND ENHANCEMENT ACT (Alberta),
copies of which have been provided to Marathon, Tarragon has not
received any notification pursuant to any Environmental Law that
any work, repairs, construction or capital expenditures are
required to be made by it or that any licence, permit or approval
referred to above is about to be reviewed, made subject to
limitation or conditions, revoked, withdrawn or terminated, except
as would not have a Material Adverse Effect on Tarragon.
(s) Delivery Obligations. Except as reflected in the Tarragon Financial
Statements or as otherwise disclosed to Marathon prior to the execution
of this Agreement, Tarragon is not obligated by virtue of a prepayment
arrangement under any gas contract containing a "take or pay" or similar
provision, or gas imbalances, a production payment, prepaid contract or
any other arrangement to deliver a material amount of gas or oil
attributable to its properties at some future time without then or
thereafter receiving full payment therefor.
(t) Expenditure Obligations. Except for the expenditure of funds pursuant to
the Investee Agreements, of which approximately $3.7 million remains to
be expended as at May 31, 1998, Tarragon has no unsatisfied expenditure
obligations relating to flow through shares.
(u) Insurance. Tarragon is insured with reputable insurers against all risks
normally insured against in accordance with generally prevailing
practices in the oil and gas industry. There are no currently
outstanding material losses for which Tarragon has failed to give or
present notice or claim under any policy. Tarragon has no knowledge of
the cancellation or proposed cancellation of any of the insurance.
(v) Material Contracts. Tarragon has delivered to Marathon a true copy of
each of the following to which it is a party:
(i) all agreements or arrangements for the future purchase, sale or
delivery of oil or gas by Tarragon which provide for volumes of
greater than 3,000 barrels per day for liquids or 15 million cubic
feet
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per day for gas, other than those which are terminable by Tarragon
without penalty or payment on not more than 12 month's notice;
(ii) Financial Instrument Transactions;
(iii) credit agreements, indentures, guarantees or other agreements
regarding indebtedness;
(iv) agreements with Unocal, any other shareholder having beneficial
ownership of 5% or more of the Tarragon Shares then issued and
outstanding, or any director or officer of Tarragon;
(v) agreements not made in the ordinary course of business and which
are materially adverse to the business of Tarragon;
(vi) the Investee Agreements; and
(vii) premises leases including, without limitation, the lease dated
September 24, 1997 between 725844 Alberta Inc. and Tarragon
respecting the principal office space of Tarragon, 444 - 7th Avenue
S.W., Calgary, as amended.
Tarragon has made available to Marathon, and has provided Marathon with
accurate summaries of, all agreements for the future purchase, sale or
delivery of oil or gas by Tarragon.
(w) Information Circular. All information relating to Tarragon and the
Tarragon Subsidiaries in the Information Circular shall be, as of the
earlier of the date it purports to be given and the date of the
Information Circular, true and complete in all material respects and
shall not contain any Misrepresentation.
6.2 NEGATION OF OTHER REPRESENTATIONS BY TARRAGON. Tarragon makes no
representations or warranties except as expressly set forth in Section 6.1 and,
in particular, and without limitation, Tarragon hereby expressly negates any
representations or warranties (verbal or written, express or implied) made by
Tarragon or employees, consultants or representatives of Tarragon or the
Tarragon Subsidiaries, whether contained in any information memorandum or
otherwise, (including presentations made by their employees, consultants or
representatives) with respect to:
(a) any data or information supplied to Marathon or its representatives by
Tarragon or a Tarragon Subsidiary or their advisors, agents, employees,
officers or directors;
(b) the quality or quantity of Petroleum Substances within or under
Tarragon's assets or the recoverability of such Petroleum Substances;
(c) the value of Tarragon's assets or the future cash flow therefrom; or
(d) the quality, condition, fitness or merchantability of any tangible
depreciable equipment or property comprised in Tarragon's assets.
Marathon acknowledges and confirms that, except for the representations and
warranties contained in Section 6.1, Marathon is not entitled to rely on any
other representations or warranties of Tarragon, express or implied.
Except for Marathon's rights under this Agreement with respect to the
representations and warranties in Section 6.1, Marathon forever releases and
discharges Tarragon and Tarragon Subsidiaries and their respective directors,
officers, agents and employees from any claims and liabilities (whether in
contract or in tort) (except for actual fraud or wilful misconduct) to Marathon
or Marathon's representatives, assigns and successors, as a result of the use or
reliance upon advice, information, statements, opinions or materials pertaining
to Tarragon which were delivered or made available to Marathon or its
representatives by Tarragon or Tarragon Subsidiaries or their directors,
officers, agents, advisors, representatives or employees.
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ARTICLE 7
MARATHON'S REPRESENTATIONS AND WARRANTIES
7.1 REPRESENTATIONS AND WARRANTIES OF MARATHON. Marathon represents and warrants
to Tarragon that:
(a) Corporate Standing. Each of Marathon and the Marathon Subsidiaries:
(i) is duly organized and validly existing under the laws of the
jurisdiction of its incorporation;
(ii) has the corporate capacity, power and authority to own or lease its
property and assets and to carry on its business as now conducted
by it; and
(iii) is duly qualified to carry on business in each jurisdiction in
which the nature of its business or the property or assets owned or
leased by it makes such qualification necessary, except where the
failure to be so qualified will not materially impede completion of
the Arrangement.
(b) Compliance with Laws, Licenses. Except as publicly disclosed by Marathon
prior to the commencement of the Share Consideration Determination
Period, each of Marathon and the Marathon Subsidiaries:
(i) has complied with and is in compliance with all laws or regulations
applicable to its assets or the operation of its business,
including the Applicable Laws, except where failure to do so would
not materially impede completion of the Arrangement; and
(ii) has all licenses, permits, orders or approvals of, and has made all
required registrations with any government or regulatory body the
failure of which to hold or obtain would materially impede
completion of the Arrangement.
(c) Corporate Capacity. Each of Marathon, Holdco and Albertaco has all
requisite corporate capacity, power and authority to enter into this
Agreement and all documents to be delivered pursuant hereto and, subject
to the terms hereof, to perform its obligations hereunder.
(d) Authorization and Binding Effect. This Agreement has been duly
authorized, executed and delivered by each of Marathon, Holdco and
Albertaco and all documents to be executed and delivered by Marathon,
Holdco and Albertaco or any of them pursuant hereto to Tarragon shall be
duly executed and delivered and this Agreement constitutes a legal,
valid and binding obligation of Marathon, Holdco or Albertaco, as the
case may be, enforceable against it in accordance with its terms.
(e) Authorization, Contravention. The execution and delivery of this
Agreement and all documents to be delivered pursuant thereto, the
performance of the terms hereof and thereof and the consummation of the
transactions contemplated herein do not and will not:
(i) result in the breach of or violate any term or provision of the
articles, by-laws or other governing documents of Marathon, Holdco
or Albertaco; or
(ii) conflict with, result in a breach of, constitute a default under,
or accelerate or permit the acceleration of the performance
required by, any agreement, instrument, licence, permit or
authority to which any of Marathon, Holdco or Albertaco is a party,
by which it is bound or to which any of its property or assets is
subject or give to any Person any interest or right, including any
right of purchase, termination, cancellation or acceleration under
any such agreement, instrument, license, permit or authority; or
(iii) result in the creation of any Encumbrance upon any of the property
or assets of Marathon or Albertaco; or
(iv) violate any provision of law or administrative regulation or any
judicial or administrative order, award, judgment or decree
applicable to Marathon or Albertaco or their respective property or
assets;
except those which in the case of (ii) (iii) or (iv), would not
materially impede completion of the Arrangement.
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(f) Authorized and Issued Capital. The authorized capital stock of USX
includes 550,000,000 USX-Marathon Shares, of which 289,872,808
USX-Marathon Shares were outstanding at May 29, 1998. All issued and
outstanding shares of Holdco are owned by Marathon. All issued and
outstanding voting shares of Albertaco are owned by Holdco.
(g) Trading Status. The USX-Marathon Shares are listed on the NYSE.
(h) Information Circular. All information relating to Marathon and the
Marathon Subsidiaries provided to Tarragon for inclusion in the
Information Circular pursuant to Section 9.1(b) shall be, as of the
earlier of the date it purports to be given and the date of the
Information Circular, true and complete in all material respects and
shall not contain any Misrepresentation.
(i) Exchangeable Shares. The Exchangeable Shares to be issued pursuant to
the Arrangement shall be validly authorized and upon the Effective Date
shall be validly issued, fully paid and non-assessable.
(j) No Shareholders' Meeting. No meeting of securityholders of Marathon or
USX is required in connection with the execution, delivery or
performance by USX and Marathon of their obligations under the terms of
this Agreement, the Exchange Trust Agreement or the Support Agreement.
(k) Public Disclosure. Marathon and USX have disclosed in the Marathon
Public Documents all information concerning Marathon which is required
by Applicable Laws to be so disclosed and contains no Misrepresentation.
7.2 NEGATION OF OTHER REPRESENTATIONS BY MARATHON. Marathon makes no
representations or warranties (verbal or written, express or implied) except as
expressly set forth in Section 7.1 and, in particular, and without limitation,
Marathon hereby expressly negates any representations or warranties made by
Marathon or its employees, consultants or representatives, whether contained in
any information memorandum or otherwise, with respect to:
(a) any data or information supplied to Tarragon or its representatives by
Marathon or Marathon Subsidiaries or their advisors, agents, employees,
officers or directors;
(b) the quality or quantity of Petroleum Substances within or under
Marathon's assets or the recoverability of such Petroleum Substances;
(c) the value of Marathon's assets or the future cash flow therefrom; or
(d) the quality, condition, fitness or merchantability of any tangible
depreciable equipment or property, interests in which are comprised in
Marathon's assets.
Tarragon acknowledges and confirms that except for the representations and
warranties contained in Section 7.1 Tarragon is not entitled to rely on any
other representations of Marathon, express or implied.
Except for Tarragon's rights under this Agreement with respect to the
representations and warranties in Section 7.1, Tarragon forever releases and
discharges Marathon, USX and their respective Subsidiaries, affiliates,
directors, officers, agents and employees from any claims and all liability
(whether in contract or in tort) (except for actual fraud or wilful misconduct)
to Tarragon or Tarragon's representatives, assignees and successors, as a result
of the use or reliance upon advice, information, statements, opinions or
materials pertaining to Marathon or USX which were delivered or made available
to Tarragon or its representatives by Marathon or USX or their directors,
officers, agents, advisors, representatives or employees.
ARTICLE 8
TARRAGON'S COVENANTS
8.1 COVENANTS OF TARRAGON. Tarragon covenants and agrees that, until the issue
of the Certificate of Arrangement or the termination of this Agreement,
whichever is the earlier, Tarragon:
(a) will use its reasonable commercial efforts to fulfil or cause the
fulfilment of the conditions set forth in Sections 4.1 and 5.1 as soon
as reasonably possible to the extent the fulfilment of the same is
within the control of Tarragon;
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(b) will conduct its business only in, not take any action except in, and
maintain its properties and facilities in, the usual, ordinary and
regular course of business and consistent with past practice and will
not take any action which may reasonably be expected to result in a
Material Adverse Change to Tarragon, including, without limiting the
generality of the foregoing, the entering into of employment,
consultancy or severance agreements or other arrangements with any
director or officer of Tarragon, other than in connection with
agreements and other arrangements which have been disclosed to Marathon
prior to the execution hereof;
(c) will not:
(i) as regards the business and properties of Tarragon and the Tarragon
Subsidiaries, except as required in the course of prudent oilfield
operations in connection with the operation and maintenance
thereof, make, commit, or allow commitments to make,
(A) expenditures on any item described in the budget of Tarragon
disclosed to Marathon in excess of the amount so described, or
(B) additional expenditures exceeding $250,000 in each case or
$500,000 in the aggregate;
(ii) other than customary sales of production consistent with past
practice, and other than as contemplated pursuant to the Plan of
Arrangement and other than sales, pledges or dispositions or
Encumbrances in aggregate not exceeding $500,000, sell, transfer,
pledge or otherwise dispose of or create any Encumbrance on, or
agree to or allow the sale, transfer, pledge or other disposition
of or creation of any Encumbrance on any properties or assets of
Tarragon (including the properties described in the Waterous
Property Offering) or the Tarragon Subsidiaries other than chattel
property or other non-real property that is replaced by equivalent
property or consumed in the operation of Tarragon's business and
properties and other than Permitted Encumbrances;
(iii) subject to the provisions of Section 8.2, and other than as
contemplated pursuant to the Plan of Arrangement or the Waterous
Property Offering, directly or indirectly, through officers,
directors, employees, affiliates, representatives, advisors,
agents, investment bankers (including, without limitation, Nesbitt
Burns Inc. and Credit Suisse First Boston Corporation), consultants
or otherwise, take any action to solicit, initiate, encourage, or
participate in any discussions or negotiations with any third party
or otherwise assist or cause or facilitate anyone else to solicit,
initiate, encourage, or participate in any discussions or
negotiations with any third party, or otherwise assist with respect
to any offer (confidential or otherwise) or expression of interest
to acquire any part of the business or properties of Tarragon and
the Tarragon Subsidiaries or any acquisition of Tarragon Shares or
any amalgamation, merger, arrangement, consolidation, business
combination or other similar transaction involving Tarragon outside
the ordinary course of business and immediately cease and cause to
be terminated any existing negotiations with any parties conducted
heretofore with respect to the foregoing;
(iv) issue, sell, pledge, lease, dispose of, encumber or agree to issue,
sell, pledge, lease, dispose of or encumber any additional shares
of, or any options, warrants, calls, conversion privileges or
rights of any kind to acquire any shares or other securities of,
any capital stock or other securities of Tarragon or any of the
Tarragon Subsidiaries (other than pursuant to the exercise of
Tarragon Options, Tarragon SARs and Special Warrants and pursuant
to the Investee Agreements) or amend or propose to amend its
articles or by-laws other than as contemplated by the Arrangement;
(v) other than as contemplated by the Arrangement, reorganize,
amalgamate, arrange or merge Tarragon or any Tarragon Subsidiary
with any other Person, or other business organization whatsoever;
(vi) acquire or agree to acquire (by merger, amalgamation, arrangement,
acquisition of securities or assets or otherwise) any Person or
other business organization or division or any assets or
properties;
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(vii) incur or commit to incur any indebtedness for borrowed money or
issue any debt securities except for borrowing in the ordinary
course of business and consistent with past practice;
(viii) amend the Shareholders' Agreement or waive any provision or consent
to any action thereunder; or
(ix) amend or terminate any Material Contract or enter into any new
agreement of the nature described in Section 6.1(v);
without the prior written consent of Marathon;
(d) will, in all material respects, conduct itself so as to keep Marathon
fully informed as to the decisions required with respect to the most
advantageous methods (in Tarragon's opinion) of exploring, operating and
producing from the Tarragon business and assets;
(e) will maintain insurance on and in respect of all its business and
properties in like kind to, and in an amount not less than the amount
of, insurance in respect thereof in effect on May 29, 1998, to the
extent that such insurance remains available on commercially reasonable
terms;
(f) will not disclose to any Person, other than officers, directors and key
employees and professional advisors of Tarragon, any confidential
information relating to Marathon except information disclosed in the
Information Circular, required to be disclosed by law or otherwise known
to the public or Tarragon;
(g) will forthwith file, proceed with and diligently prosecute an
application to the Court under the OBCA for an Interim Order of the
Court with respect to the matters pertaining to the Arrangement and
acceptable to Marathon acting reasonably;
(h) will:
(i) forthwith carry out the terms of the Interim Order;
(ii) convene the Tarragon Meeting and distribute copies of this
Agreement (or a written summary thereof prepared by Tarragon in
form and substance reasonably satisfactory to Marathon), in each
case as ordered by the Interim Order;
(iii) solicit proxies to be voted at the Tarragon Meeting in favour of
the Arrangement;
(iv) provide notice to Marathon of the Tarragon Meeting and allow
Marathon's representatives to attend the Tarragon Meeting unless
such attendance is prohibited by rules governing such Tarragon
Meeting; and
(v) conduct the Tarragon Meeting in accordance with the Interim Order,
the bylaws of Tarragon and any instrument governing such Tarragon
Meeting, as applicable, and as otherwise required by law;
(i) will prepare (in consultation with Marathon), file and distribute to the
Tarragon Securityholders in a timely and expeditious manner, the
Information Circular, and any amendments or supplements to the
Information Circular, and will include the Fairness Opinions as a
schedule thereto (unless such Fairness Opinions have been withdrawn by
Nesbitt Burns Inc. or Credit Suisse First Boston Corporation), all as
required by the Interim Order or by applicable law, in all jurisdictions
where the same is required complying in all material respects with all
applicable legal requirements on the date of issue thereof;
(j) subject to the provisions of Section 8.2, will include in the
Information Circular a recommendation of the Board of Directors of
Tarragon that the Tarragon Securityholders vote in favour of the
Arrangement;
(k) will not waive any material provision relating to the treatment of
confidential information set forth in any outstanding confidentiality
agreement in favour of the other party thereto;
(l) will, subject to the approval of the Arrangement in accordance with the
provisions of the Interim Order, forthwith file, proceed with and
diligently prosecute an application for the Final Order;
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(m) will forthwith carry out the terms of the Final Order to the extent
applicable to Tarragon and will forthwith file Articles of Arrangement
and the Final Order with the Director;
(n) will prior to the Effective Date cause to be prepared and delivered to
Marathon a list specifying all Persons who, at the time of the Tarragon
Meeting, may be deemed to be "affiliates" of Tarragon, as that term is
used in paragraphs (c) and (d) of Rule 145 under the SECURITIES ACT OF
1933 of the United States (the "Rule 145 Affiliates"); and will cause
each Person who is identified as a Rule 145 Affiliate in such list who
elects to take Exchangeable Shares under the Arrangement to deliver to
Marathon, on or prior to the Effective Date, a written agreement, in the
form to be approved by Marathon and Tarragon, that such Rule 145
Affiliate will not sell, pledge, transfer or otherwise dispose of any
USX-Marathon Shares issued to such Rule 145 Affiliate, except in
compliance with the SECURITIES ACT OF 1933, as amended, or an exemption
therefrom, including compliance with the position of the Division of
Corporation Finance of the Securities Exchange Commission set forth in
Legal Bulletin No. 3 (July 25, 1997);
(o) will promptly inform Marathon of possible breaches of the Shareholder
Agreement of which Tarragon becomes aware and consult with Marathon
regarding any action Tarragon contemplates taking in respect thereof,
and will in a timely manner at the request of Marathon from time to time
take all commercially reasonable steps to enforce and protect Tarragon's
rights under the Shareholder Agreement, it being acknowledged that the
existence and enforcement of such rights are a material inducement to
Marathon to enter into this Arrangement Agreement;
(p) will promptly at the request of Marathon from time to time inform
Marathon of the number of proxies for the Tarragon Meeting received to
the time of such request and the voting instructions on such proxies;
(q) will provide Marathon with all information relating to its assets,
business and affairs, including access to its assets, officers and
employees which Marathon may reasonably require provided that such
access does not unreasonably interfere with the carrying on of
Tarragon's business activities. Marathon shall be entitled to have
representatives attend at the offices and properties of Tarragon during
normal business hours on reasonable notice to observe and consult on
Tarragon business activities in a manner that does not unreasonably
interfere with Tarragon's business activities. Tarragon will conduct
itself so as to keep Marathon fully informed as to its business and
affairs and as to the material decisions required with respect to
operating and producing from its assets;
(r) except for proxies and other non-substantive communications with
security holders, will furnish promptly to Marathon a copy of each
notice, report, schedule or other document delivered, filed or received
by Tarragon in connection with (i) the Arrangement, (ii) the Tarragon
Meeting, (iii) any filings under applicable laws and (iv) any dealings
with regulatory agencies in connection with the transactions
contemplated herein;
(s) will make other necessary filings and applications under applicable
Canadian federal and provincial and U.S. laws and regulations required
on the part of Tarragon in connection with the transactions contemplated
herein and take all reasonable action necessary to be in compliance with
such laws and regulations;
(t) will promptly advise Marathon of the number of Tarragon Shares for which
Tarragon has received notices of dissent or written objections to the
Plan of Arrangement and will provide Marathon with copies of such
notices or written objections; and
(u) will use its reasonable commercial efforts to conduct its affairs so
that all of Tarragon's representations and warranties contained herein,
insofar as the accuracy of such representations and warranties
constitute a condition of closing under subsection 4.1(a), shall be true
and correct on and as of the Effective Date as if made thereon.
8.2 SUPERIOR TRANSACTION. Notwithstanding the covenants of Tarragon in Section
8.1, if prior to the completion of the Arrangement, another unsolicited BONA
FIDE Take-Over Proposal is proposed, offered or made to the holders of Tarragon
Shares or to Tarragon which, in the BONA FIDE opinion of Tarragon's Board of
Directors, after
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consultation with its financial advisors, would result in a superior
transaction, directly or indirectly, for the holders of Tarragon Shares than
that contemplated by the Arrangement:
(a) the board of directors of Tarragon may respond or take any other action
(including, without limitation, furnishing a party with information of
the type furnished to Marathon or making any disclosure to its
shareholders), other than a waiver or amendment described in Section
8.1(c)(viii) or non compliance with a request of Marathon described in
Section 8.1(o), with respect to any BONA FIDE Take-Over Proposal made in
writing which in the judgment of the board of directors of Tarragon,
based on the advice of its legal counsel, is required under applicable
law; and
(b) the board of directors of Tarragon may withdraw, modify or change the
recommendation regarding the Arrangement if, in the opinion of such
board of directors acting reasonably and after consultation with its
outside legal counsel, the failure to do so would be inconsistent with
the directors' fiduciary duties under applicable law.
Tarragon will advise Marathon of any Take-Over Proposal promptly after it is
received by Tarragon and will not withdraw or change the directors'
recommendation regarding the Arrangement prior to the earlier of (i) 48 hours
after Tarragon so advises Marathon, and (ii) 10 calendar days prior to the
Tarragon Meeting, unless Marathon has informed Tarragon prior to the expiry of
such period that Marathon does not intend to amend the terms of the Arrangement.
ARTICLE 9
MARATHON'S COVENANTS
9.1 COVENANTS OF MARATHON. Each of Marathon, Holdco and Albertaco covenants and
agrees that until the issue of the Certificate of Arrangement or the termination
of this Agreement, whichever is the earlier, Marathon, Holdco and Albertaco will
each:
(a) use its reasonable commercial efforts to fulfil or cause the fulfilment
of the conditions set forth in Sections 3.1 and 5.1 as soon as
reasonably possible to the extent the fulfilment of the same is within
the control of Marathon, Holdco and Albertaco;
(b) assist Tarragon in the preparation of the Information Circular and
provide to Tarragon, in a timely and expeditious manner, all information
as may be reasonably requested by Tarragon or is required by the Interim
Order or applicable law, with respect to Marathon and USX for inclusion
in the Information Circular and any amendments or supplements to the
Information Circular, in each case complying in all material respects
with all applicable legal requirements on the date of issue thereof;
(c) forthwith inform Tarragon in writing of the full particulars of any
change in any material fact contained or referred to in the Information
Circular relating to Marathon or USX or their property or assets;
(d) forthwith carry out the terms of the Interim Order and the Final Order
to the extent applicable to Marathon, Holdco or Albertaco provided that
nothing shall require Marathon, Holdco or Albertaco to consent to any
material modification of this Agreement, the Arrangement or the
obligations of Marathon, Holdco or Albertaco hereunder or thereunder;
(e) make all other necessary filings and applications advised by counsel
under applicable federal, provincial and state laws and regulations in
Canada and the United States required on the part of Marathon, Holdco or
Albertaco in connection with the transactions contemplated herein and
take all reasonable commercial action necessary to be in compliance with
such laws and regulations; and
(f) use its reasonable commercial efforts to conduct its affairs so that all
representations and warranties of Marathon, Holdco and Albertaco
contained herein, insofar as the accuracy of such representations and
warranties constitute a condition of closing under subsection 3.1(a),
shall be true and correct on and as of the Effective Date as if made
thereon.
9.2 DIRECTORS' AND OFFICERS' INSURANCE. For six years after the Effective Date,
Marathon shall provide directors' and officers' liability insurance covering the
directors and officers of Tarragon and Tarragon Subsidiaries who are now covered
by directors' and officers' liability insurance or will be so covered at the
Effective Date with respect
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to actions and omissions occurring prior to the Effective Date on terms no less
favourable, to the extent permitted by law and commercially available, to such
persons than such insurance maintained in effect by Tarragon on the date hereof
in terms of coverage and amounts; provided, however, that Marathon shall not be
required to pay annual premiums in excess of the last annual premium paid by
Tarragon prior to the date hereof but in such case shall purchase as much
coverage as reasonably practicable for such amount.
9.3 DIRECTORS' AND OFFICERS' INDEMNIFICATION. From and after the Effective Date,
Marathon shall indemnify, defend and hold harmless, in each case to the full
extent permitted under applicable law and currently permitted in the by-laws of
Marathon, each person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Date, an officer or director of
Tarragon or any Tarragon Subsidiary, their respective heirs, executors,
administrators and other legal representatives (the "Indemnified Individuals")
against all losses, claims, damages, costs, expenses, liabilities or judgments
or amounts that are paid in settlement of or in connection with any claim,
action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director or officer of Tarragon or a Tarragon Subsidiary, pertaining to any
matter existing or occurring at or prior to the Effective Date and whether
asserted or claimed prior to, or at or after, the Effective Date; provided,
however, that:
(a) Marathon shall not be required to pay the fees and disbursements of more
than one counsel for all Indemnified Individuals in any single action
unless there is a conflict of interest between two or more of such
Indemnified Individuals;
(b) Marathon shall not be liable for any settlement effected without its
written consent (which consent will not be unreasonably withheld or
delayed); and
(c) such indemnification shall not be available to an officer or director
unless, in respect of the matter for which indemnification is sought,
(i) he acted honestly and in good faith with a view to the best
interests of Tarragon; and
(ii) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he had reasonable grounds
for believing that his conduct was lawful.
ARTICLE 10
MANAGEMENT INFORMATION CIRCULAR;
REGISTRATION STATEMENT
10.1 INFORMATION CIRCULAR. As promptly as practicable after execution of this
Agreement, Tarragon, in consultation with Marathon and taking into account
Marathon's comments thereon, shall, prepare a management information circular
(the "Information Circular"), with respect to the Tarragon Meeting. If either
Marathon or Tarragon determines on the advice of its counsel that the offer and
sale of the Exchangeable Shares issuable in the Arrangement is required to be
registered under the SECURITIES ACT OF 1933, as amended (the "Securities Act"),
then Marathon shall cause Albertaco to file with the U.S. Securities and
Exchange Commission (the "SEC") a registration statement on Form S-4 (or other
applicable form) (such registration statement, the "Form S-4") and the
Information Circular shall also constitute the prospectus of Albertaco with
respect to such offer and sale and shall be included in the Form S-4. As
promptly as practicable after comments are received from the SEC thereon (if
required to be filed with the SEC as aforesaid) and after the furnishing by
Marathon and Tarragon of all information required to be contained therein,
Tarragon shall cause the Information Circular to be mailed to the Tarragon
Securityholders. Notwithstanding anything in this Agreement to the contrary,
Marathon shall be under no obligation to cause Albertaco to file the Form S-4 if
Marathon shall have determined on the advice of its counsel that the issuance of
the Exchangeable Shares pursuant to the Arrangement is exempt from the
registration requirements of section 5 of the Securities Act by virtue of
section 3(a)(10) thereof. If Marathon determines on the advice of its counsel
that it is necessary to file a registration statement on Form S-3 (the "Form
S-3") in order to register the USX-Marathon Shares to be issued from time to
time after the Effective Date upon exchange of the Exchangeable Shares, then
Marathon shall cause USX to file the Form S-3 with the SEC and use its
reasonable best efforts to maintain the effectiveness of such registration for
such period as such Exchangeable Shares remain outstanding, and Marathon and
Tarragon shall use all reasonable efforts to cause the Form S-3 to become
effective. Notwithstanding anything herein to
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the contrary, Marathon shall be under no obligation to cause USX to file the
Form S-3 if it shall have determined on the advice of its counsel that the
issuance of shares USX-Marathon Shares upon exchange of the Exchangeable Shares
after the Effective Date is exempt from the registration requirements of section
5 of the Securities Act by virtue of section 3(a)(9) thereof.
10.2 PROVIDING INFORMATION. Each party shall promptly furnish to the other party
all information concerning such party and its shareholders as may be reasonably
required in connection with any action contemplated by Section 10.1. The
Information Circular and, if required, the Form S-4 and Form S-3, shall comply
in all material respects with all Applicable Laws. Each of Marathon and Tarragon
will notify the other promptly of the receipt of any comments from Canadian
securities commissions, the SEC or its staff and of any request by Canadian
securities commissions, the SEC or its staff for amendments or supplements to
the Information Circular or the Form S-4 or Form S-3 or for additional
information, and will supply the other with copies of all correspondence with
Canadian securities commissions, the SEC or its staff with respect to the
Information Circular or the Form S-4 or Form S-3. Whenever any event occurs
which should be set forth in an amendment or supplement to the Information
Circular or the Form S-4 or Form S-3, Marathon or Tarragon, as the case may be,
shall promptly inform the other of such occurrence and cooperate in filing with
the SEC or its staff, and/or mailing to Tarragon Securityholders, such amendment
or supplement.
10.3 BLUE SKY LAWS. Marathon and Tarragon shall take all such action as may be
reasonably required to be taken under any applicable provincial or state
securities laws (including "BLUE SKY" laws) in connection with the issuance of
the Exchangeable Shares and the Arrangement; provided, however, that with
respect to the blue sky and Canadian provincial qualifications, neither Marathon
nor Tarragon shall be required to register or qualify as a foreign corporation
or reporting issuer where any such entity is not now so registered or qualified
except as to matters and transactions arising solely from the offer and sale of
the USX-Marathon Shares or the issuance of the Exchangeable Shares.
ARTICLE 11
TERMINATION AND REMEDIES
11.1 TERMINATION. This Agreement may be terminated prior to the completion of
the Arrangement, without prejudice to any rights or causes of action which may
exist at the date of termination:
(a) by mutual written consent of Tarragon and Marathon;
(b) by either Tarragon or Marathon giving notice in writing to the other if
any of the conditions contained in this Agreement for the benefit of the
terminating party are not met or waived on or before the date required
for their performance;
(c) by Marathon upon the occurrence of a Marathon Damages Event, provided
that in the event of a Marathon Damages Event provided for in Subsection
11.4(a), this Agreement may not be terminated by Marathon unless the
Tarragon Securityholders do not approve the Arrangement as required by
applicable law or the Arrangement is not submitted for their approval;
and
(d) by Tarragon upon the occurrence of a Tarragon Damages Event.
11.2 EFFECT OF TERMINATION. In the event of such termination of this Agreement,
this Agreement shall forthwith become void and neither party shall have any
liability or further obligation to the other party hereunder except with respect
to the obligations set forth in Sections 11.4 or 11.5, which shall survive such
termination.
11.3 LIMITATION. Nothing contained in this Article Eleven, including the payment
of any amount under Section 11.4 or 11.5, shall, however, relieve or have the
effect of resulting in relieving any party in any way from liability for damages
incurred or suffered by a party as a result of a breach of this Agreement by a
party acting in bad faith intended and designed to result in the conditions
precedent to this Agreement not being satisfied.
11.4 MARATHON DAMAGES EVENT. If at any time after the execution of the
Acquisition Agreement:
(a) the Board of Directors of Tarragon has failed to make or has withdrawn
or changed any recommendations referred to in Section 8.1(j) in a manner
adverse to Marathon or shall have resolved to do so prior to the
Arrangement becoming effective;
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(b) a bona fide Take-over Proposal is publicly announced, proposed, offered
or made to the Tarragon Shareholders or to Tarragon and the Tarragon
Securityholders do not approve the Arrangement or the Arrangement is not
submitted for their approval, and the transaction contemplated by the
Take-over Proposal is completed within 140 days of the Tarragon Meeting
(or, if such meeting does not occur, within 140 days of October 31,
1998); or
(c) Tarragon breaches any of its representations, warranties or covenants
made in this Agreement which breach individually or in the aggregate
would have a Material Adverse Effect on Tarragon or materially impede
the completion of the Arrangement;
(each of the above being a "Marathon Damages Event"), then Tarragon shall pay to
Marathon Cdn. $30 million as liquidated damages in immediately available funds
to an account designated by Marathon within one Business Day after the first to
occur of the events described above. Tarragon shall only be obligated to make
one payment pursuant to this Section 11.4.
11.5 TARRAGON DAMAGES EVENT. If at any time after the execution of the
Acquisition Agreement, Marathon breaches any of its representations or
warranties in this Agreement (except any such breach, the nature of which is
publicly disclosed by Marathon prior to the commencement of the Share
Consideration Determination Period) or Marathon shall breach any of its
covenants made in this Agreement which breach (in either case) individually or
in the aggregate would materially impede the completion of the Arrangement (such
breach or breaches being a "Tarragon Damages Event"), then Marathon shall pay to
Tarragon Cdn. $30 million as liquidated damages in immediately available funds
to an account designated by Tarragon within one Business Day after the first to
occur of the events described above. Marathon shall only be obligated to make
one payment pursuant to this Section 11.5.
11.6 LIQUIDATED DAMAGES. Each party acknowledges that all of the payment amounts
set out in this Article Eleven are payments of liquidated damages which are a
genuine pre-estimate of the damages which the party entitled to such damages
will suffer or incur as a result of the event giving rise to such damages and
resultant termination of this Agreement and are not penalties. Each party
irrevocably waives any right it may have to raise as a defence that any such
liquidated damages are excessive or punitive. For greater certainty, the parties
agree that, subject to Section 11.3, the payment of the amount pursuant to this
Article Eleven is the sole monetary remedy of the party receiving such payment.
11.7 EQUITABLE REMEDIES. Notwithstanding Section 11.6, Tarragon hereby
acknowledges that, in the event of a breach by Tarragon of Section 8.1(c)(viii)
or 8.1(o), Marathon may be without an adequate remedy at law. Tarragon therefore
agrees that in the event of a breach of any such provision Marathon may elect to
institute and prosecute proceedings in any court of competent jurisdiction to
enforce specific performance or to enjoin the continuing breach of such
provision by Tarragon.
ARTICLE 12
AMENDMENT
12.1 AMENDMENT. This Agreement may, at any time and from time to time before or
after the holding of the Tarragon Meeting, be amended by written agreement of
the parties hereto without further notice to or authorization on the part of the
Tarragon Securityholders, and any such amendment may, without limitation:
(a) change the time for performance of any of the obligations or acts of the
parties hereto;
(b) waive any inaccuracies or modify any representation, term or provision
contained herein or in any document delivered pursuant hereto;
(c) waive compliance with or modify any of the covenants or conditions
herein contained and waive or modify performance of any of the
obligations of the parties hereto;
provided that any such amendment may not reduce or materially adversely affect
the consideration to be received by a Tarragon Securityholder for each Tarragon
Share, Option or Special Warrant.
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ARTICLE 13
COSTS
13.1 COSTS. Except as contemplated in the Arrangement, each party hereto
covenants and agrees to bear its own costs and expenses in connection with the
transactions contemplated hereby.
ARTICLE 14
DISCLOSURE
14.1 JOINT DISCLOSURE. No party hereto shall disclose, by press release, any
aspect of the transactions contemplated hereby, without prior written consent of
the other party. Notwithstanding the foregoing, if either party is required by
law or administrative regulation to make any disclosure relating to the
transactions contemplated herein, such disclosure may be made, but that party
will inform, to the extent reasonably feasible, the other party as to the
wording of such disclosure prior to its being made.
ARTICLE 15
NOTICES
15.1 NOTICES IN WRITING. Any notice, consent, waiver, direction or other
communication required or permitted to be given under this Agreement by a party
to any other party shall be in writing and may be given by delivering same or
sending same by facsimile transmission or by hand delivery addressed to the
party to whom the notice is to be given at its address for service herein. Any
notice, consent, waiver, direction or other communication aforesaid shall, if
delivered, be deemed to have been given and received on the date on which it was
delivered to the address provided herein (if a Business Day and, if not, the
next succeeding Business Day) and if sent by facsimile transmission be deemed to
have been given and received at the time of receipt unless actually received
after 4:00 p.m. at the point of delivery in which case it shall be deemed to
have been given and received on the next Business Day.
15.2 ADDRESSES. The address for service of each of the parties hereto shall be
as follows:
if to Tarragon:
Tarragon Oil and Gas Limited
Suite 2500, 500 - 4th Avenue S.W.
Calgary, Alberta T2P 2V6
Fax No.: (403) 262-5324
Attention: Edward Chwyl
with a copy to:
McCarthy Tetrault
Suite 3200, 421 - 7th Avenue S.W.
Calgary, Alberta T2P 4K9
Fax No.: (403) 260-3501
Attention: Richard A. Shaw, Q.C.
if to Marathon, Holdco or Albertaco:
Marathon Oil Company
5555 San Felipe
Houston, Texas 77056-2725
Fax No.: (713) 296-4171
Attention: William F. Schwind
with a copy to:
Macleod Dixon
3700, 400 - 3rd Avenue S.W.
Calgary, Alberta T2P 4H2
Fax No.: (403) 264-5973
Attention: Dan L. Baxter
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ARTICLE 16
TIME
16.1 TIME OF THE ESSENCE. Time shall be of the essence in this Agreement.
ARTICLE 17
ENTIRE AGREEMENT AND RESTATEMENT
17.1 ENTIRE AGREEMENT. This Agreement together with the Confidentiality
Agreement dated May 11, 1998 between the parties:
(a) from the date hereof constitutes the entire agreement and supersedes all
other prior agreements and undertakings, both written and oral, among
the parties with respect to the subject matter hereof, including the
Acquisition Agreement; and
(b) is not intended to confer upon any Person other than the parties hereto
any rights or remedies hereunder.
To the extent of any inconsistency between this Agreement and the
Confidentiality Agreement, this Agreement shall govern.
17.2 RESTATEMENT. This Agreement has been amended and restated effective July 7,
1998. Notwithstanding such restatement, this Agreement shall be dated as of June
20, 1998 and references to time herein shall be considered to speak as of June
20, 1998 except where the context otherwise requires.
ARTICLE 18
SEVERABILITY
18.1 SEVERABILITY. If any one or more of the provisions or parts thereof
contained in this Agreement should be or become invalid, illegal or
unenforceable in any respect in any jurisdiction, the remaining provisions or
parts thereof contained herein shall be and shall be conclusively deemed to be,
as to such jurisdiction, severable therefrom and:
(a) the validity, legality or enforceability of such remaining provisions or
parts thereof shall not in any way be affected or impaired by the
severance of the provisions or parts thereof severed; and
(b) the invalidity, illegality or unenforceability of any provision or part
thereof contained in this Agreement in any jurisdiction shall not affect
or impair such provision or part thereof or any other provisions of this
Agreement in any other jurisdiction.
ARTICLE 19
FURTHER ASSURANCES
19.1 FURTHER ASSURANCES. Each party hereto shall, from time to time, and at all
times hereafter, at the request of the other party hereto, but without further
consideration, do all such further acts and execute and deliver all such further
documents and instruments as shall be reasonably required in order to fully
perform and carry out the terms and intent hereof.
ARTICLE 20
GOVERNING LAW
20.1 ALBERTA LAW. This Agreement shall be governed by, and be construed in
accordance with, the laws of the Province of Alberta and applicable laws of
Canada but the reference to such laws shall not, by conflict of laws rules or
otherwise, require the application of the law of any jurisdiction other than the
Province of Alberta.
20.2 ALBERTA COURTS. Each party hereto hereby irrevocably attorns to the
jurisdiction of the Courts of the Province of Alberta in respect of all matters
arising under or in relation to this Agreement and Marathon hereby
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appoints Albertaco at its registered office in the Province of Alberta as
Marathon's attorney for service of process in connection with any such matter.
ARTICLE 21
EXECUTION IN COUNTERPARTS
21.1 COUNTERPARTS. This Agreement may be executed in identical counterparts,
each of which is and is hereby conclusively deemed to be an original and
counterparts collectively are to be conclusively deemed one instrument.
ARTICLE 22
WAIVER
22.1 LIMITATION ON WAIVER. No waiver by any party hereto shall be effective
unless in writing and any waiver shall affect only the matter, and the
occurrence thereof, specifically identified and shall not extend to any other
matter or occurrence.
ARTICLE 23
ENUREMENT AND ASSIGNMENT
23.1 ENUREMENT. This Agreement shall enure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns. This Agreement
may not be assigned by any party hereto without the prior consent of the other
party hereto except that Marathon may assign all or a portion of its rights
under this Agreement to any Subsidiary of Marathon, but no assignment shall
relieve Marathon of its obligations hereunder.
ARTICLE 24
SUBSIDIARY COVENANTS
24.1 TARRAGON. To the extent any representations, warranties, covenants or
agreements contained herein relate, directly or indirectly, to a Tarragon
Subsidiary, each such provision shall be construed as a covenant by Tarragon to
cause (to the fullest extent to which it is legally capable) such entity to
perform the required action.
24.2 MARATHON. To the extent any representations, warranties, covenants or
agreements contained herein relate, directly or indirectly, to a Marathon
Subsidiary, each such provision shall be construed as a covenant by Marathon to
cause (to the fullest extent which it is legally capable) such entity to perform
the required action.
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IN WITNESS WHEREOF the parties hereto have executed this Agreement.
TARRAGON OIL AND GAS LIMITED
Per: /s/ EDWARD CHWYL
---------------------------------
Edward Chwyl
Per: /s/ R. CHAN
---------------------------------
R. Chan
MARATHON OIL COMPANY
Per: /s/ V.G. BEGHINI
---------------------------------
V.G. Beghini
Per:
---------------------------------
761581 ALBERTA LTD.
Per: /s/ V.G. BEGHINI
---------------------------------
V.G. Beghini
Per:
---------------------------------
787722 ALBERTA LTD.
Per: /s/ JOHN P. SURMA
---------------------------------
John P. Surma
Per:
---------------------------------
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Schedule 1 to that Arrangement Agreement
made the 20th day of June, 1998 between
Tarragon Oil and Gas Limited, Marathon Oil Company,
761581 Alberta Ltd. and 787722 Alberta Ltd.
as amended and restated the 7th day of July, 1998
PLAN OF ARRANGEMENT
MADE PURSUANT TO
SECTION 182 OF THE BUSINESS CORPORATIONS ACT (ONTARIO)
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PLAN OF ARRANGEMENT
MADE PURSUANT TO
SECTION 182 OF THE BUSINESS CORPORATIONS ACT (ONTARIO)
ARTICLE 1
INTERPRETATION
1.1 Definitions.
In this Plan of Arrangement unless there is something in the subject matter
or context inconsistent therewith, the following terms shall have the respective
meanings set out below and grammatical variations of such terms shall have
corresponding meanings:
"Albertaco" means 761581 Alberta Ltd., a wholly-owned subsidiary of Holdco,
organized and existing under the laws of Alberta and any successor
corporation;
"Arrangement" means the arrangement under section 182 of the OBCA on the
terms and subject to the conditions set out in this Plan of Arrangement,
subject to any amendments thereto made in accordance with Section 6.1 hereof
or made at the direction of the Court in the Final Order;
"Arrangement Agreement" means the agreement by and among Marathon, Holdco,
Albertaco and Tarragon, dated as of June 20, 1998, as amended and restated
July 7, 1998, and as may be further amended and restated, providing for,
among other things, the Arrangement;
"Arrangement Resolution" means the special resolution to be passed by the
Securityholders at the Meeting approving the Arrangement;
"Automatic Redemption Date" has the meaning attributed thereto in the
Exchangeable Share Provisions;
"Average Closing Price" means the average of the closing sales prices, as
published in the Wall Street Journal, of the USX-Marathon Common Stock on
the NYSE in United States dollars as reported in the Wall Street Journal on
each day (converted on each such day to Canadian dollars using the Currency
Exchange Rate) over the ten (10) consecutive trading days ending on the
fifth calendar day next preceding the date on which the Meeting is held;
provided that if such calendar day is not a trading day, then such ten (10)
day period shall end on the trading day immediately preceding such calendar
day;
"Business Day" has the meaning attributed thereto in the Exchangeable Share
Provisions;
"Cash Payment" means the cash payment, if any, which a holder of
Exchangeable Shares is entitled to receive in accordance with Sections
2.1(e) and 2.1(f);
"Certificates" means the certificates representing the Exchangeable Shares
which a holder of Tarragon Common Shares is entitled to receive pursuant to
Section 4.1, other than those Exchangeable Shares represented by the Global
Certificate;
"Common Share Letter of Transmittal and Election Form" has the meaning
attributed thereto in Section 2.1(g);
"Court" means the Ontario Court (General Division);
"Currency Exchange Rate" means the noon spot rate of exchange of United
States dollars to Canadian dollars announced by the Bank of Canada on the
date of calculation;
"Depositary" means Montreal Trust Company of Canada at its principal office
in Calgary, Alberta;
"Dissent Procedures" has the meaning attributed thereto in Section 3.1;
"Effective Date" means the date shown on the certificate of arrangement
issued by the Director under the OBCA giving effect to the Arrangement;
"Election Deadline" means 5:00 p.m. (Toronto time) on that date which is the
day prior to the date of the Meeting;
"Exchange Trust Agreement" has the meaning attributed thereto in the
Exchangeable Share Provisions;
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"Exchangeable Share Consideration" has the meaning attributed thereto in the
Exchangeable Share Provisions;
"Exchangeable Share Price" has the meaning attributed thereto in the
Exchangeable Share Provisions;
"Exchangeable Share Provisions" means the rights, privileges, restrictions
and conditions attaching to the Exchangeable Shares as amended from time to
time;
"Exchangeable Shares" means the exchangeable shares in the capital of
Albertaco;
"Exercise Price" with respect to any Tarragon Option means the price per
share at which the holder is entitled to acquire a Tarragon Common Share;
"Final Order" means the final order of the Court approving the Arrangement
as such order may be affirmed, amended or modified by the Court or by an
appeal court on any appeal therefrom;
"Global Certificate" has the meaning attributed thereto in Section 4.1(b);
"Holdco" means 787722 Alberta Ltd., a wholly-owned subsidiary of Marathon,
organized and existing under the laws of Alberta and any successor
corporation;
"Interim Order" means the order of the Court dated July 2, 1998 with respect
to the Arrangement and the Meeting;
"ITA" means the INCOME TAX ACT (Canada);
"Information Circular" means the Management Information Circular of Tarragon
dated July 7, 1998 prepared in connection with the Meeting;
"Investee Agreements" means agreements dated December 9, 1997 between
Tarragon and each of Triax Resource Limited Partnership and Triax Resource
Limited Partnership II providing for the issuance of an aggregate of
1,000,000 Special Warrants;
"Issued Exchangeable Shares" has the meaning attributed thereto in Section
2.1(f);
"Letter of Transmittal and Election Form" means all or any of the Common
Share Letter of Transmittal and Election Form, the Option Letter of
Transmittal and Election Form and the Special Warrant Letter of Transmittal
and Election Form;
"Marathon" means Marathon Oil Company, a corporation organized and existing
under the laws of Ohio and any successor corporation;
"Meeting" means the special meeting of the Securityholders to be held to
consider the Arrangement;
"NYSE" means the New York Stock Exchange;
"OBCA" means the BUSINESS CORPORATIONS ACT (Ontario), as amended;
"Option Letter of Transmittal and Election Form" has the meaning attributed
thereto in Section 2.1(h);
"Option Payment" has the meaning attributed thereto in Section 2.1(a);
"Optionholder" means a holder of Tarragon Options;
"Purchased Shares" has the meaning attributed thereto in Section 2.1(f);
"Securityholders" means, collectively, the Shareholders, Optionholders and
Warrantholders;
"Shareholders" means holders of issued and outstanding Tarragon Common
Shares;
"Special Warrant Letter of Transmittal and Election Form" has the meaning
attributed thereto in Section 2.1(i);
"Special Warrants" means the Special Warrants entitling the holders thereof
to acquire one Tarragon Share per Special Warrant without payment of
additional consideration, issued or to be issued by Tarragon pursuant to the
Investee Agreements;
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"Subsidiary" has the meaning attributed thereto in the Exchangeable Share
Provisions;
"Tarragon" means Tarragon Oil and Gas Limited, a corporation organized and
existing under the OBCA and any successor corporation;
"Tarragon Common Shares" means the common shares in the capital of Tarragon;
"Tarragon Option" means an option to acquire a Tarragon Common Share granted
pursuant to Tarragon's stock option plan dated March 19, 1992, as amended
May 24, 1995;
"Tarragon Securities" means the Tarragon Common Shares, the Tarragon Options
and the Special Warrants;
"USX" means USX Corporation, a corporation organized and existing under the
laws of the State of Delaware and any successor corporation;
"USX Certificate" means the Restated Certificate of Incorporation of USX
Corporation dated September 1, 1996;
"USX-Marathon Common Stock" has the meaning attributed thereto in the
Exchangeable Share Provisions; and
"Warrantholder" means a holder of Special Warrants.
1.2 Sections and Headings.
The division of this Plan of Arrangement into sections and the insertion of
headings are for reference purposes only and shall not affect the interpretation
of this Plan of Arrangement. Unless otherwise indicated, any reference in this
Plan of Arrangement to a section or an Appendix refers to the specified section
of or Appendix to this Plan of Arrangement.
1.3 Number, Gender and Persons.
In this Plan of Arrangement, unless the context otherwise requires, words
importing the singular number include the plural and vice versa, words importing
any gender include all genders and words importing persons include individuals,
corporations, partnerships, associations, trusts, unincorporated organizations,
governmental bodies and other legal or business entities of any kind.
1.4 Currency.
Unless otherwise specified, all references herein to "dollars" or "$" shall
mean Canadian dollars.
ARTICLE 2
ARRANGEMENT
2.1 Arrangement.
On the Effective Date, the following transactions shall occur and shall be
deemed to occur in the following order without any further act or formality:
(a) Each issued and unexercised Tarragon Option that is not held by an
Optionholder who has validly exercised its right of dissent in
accordance with Article 3 hereof and is ultimately entitled to be paid
the fair value of its Tarragon Options will vest, if not already vested,
and will be transferred to Albertaco in consideration for a number of
Exchangeable Shares, being equal to the quotient (rounded to four
decimal places, subject to Section 4.3) of $14.25 divided by the Average
Closing Price, and the Optionholder shall make a payment to Albertaco of
an amount (the "Option Payment") equal to the Exercise Price of such
Tarragon Option; provided, however, that at the election of the
Optionholder or deemed election of the Optionholder under Section
2.1(h), such Option Payment may be omitted in which event the number of
Exchangeable Shares to be received in consideration for such Tarragon
Option shall be reduced by the number obtained by dividing the Option
Payment by the Average Closing Price.
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(b) Each outstanding Special Warrant that is not held by a Warrantholder who
has validly exercised its right of dissent in accordance with Article 3
hereof and is ultimately entitled to be paid the fair value of its
Special Warrants will be transferred to Albertaco in consideration for a
number of Exchangeable Shares, being equal to the quotient (rounded to
four decimal places, subject to Section 4.3) of $14.25 divided by the
Average Closing Price.
(c) Each outstanding Tarragon Common Share that is not held by a Shareholder
who has validly exercised its right of dissent in accordance with
Article 3 hereof and is ultimately entitled to be paid the fair value of
its Tarragon Common Shares will be transferred to Albertaco in
consideration for a number of Exchangeable Shares, being equal to the
quotient (rounded to four decimal places, subject to Section 4.3) of
$14.25 divided by the Average Closing Price.
(d) Upon the transfers of Tarragon Securities referred to in Sections
2.1(a), (b) and (c) above: (i) each holder of a Tarragon Security shall
cease to be such a holder, shall have its name removed from the relevant
register of holders of Tarragon Securities and shall become a holder of
the number of fully paid Exchangeable Shares to which it is entitled as
a result of the transfers of Tarragon Securities referred to in Sections
2.1(a), (b) and (c) and such holder's name shall be added to the
register of holders of Exchangeable Shares accordingly; and (ii)
Albertaco shall become the legal and beneficial owner of all of the
Tarragon Securities so transferred.
(e) Holdco shall purchase Exchangeable Shares from the holders of
Exchangeable Shares who have elected, or have been deemed to have
elected, pursuant to Section 2.1(g), (h) or (i) to sell all or a portion
of their Exchangeable Shares to Holdco for cash at a purchase price per
Exchangeable Share equal to the Average Closing Price and such holders
shall sell such Exchangeable Shares to Holdco pursuant to such
elections.
(f) If the number of Exchangeable Shares purchased by Holdco pursuant to
Section 2.1(e) (the "Purchased Shares") is not equal to at least ten
percent (10%) of the total number of Exchangeable Shares issued pursuant
to Sections 2.1(a), (b) and (c) (the "Issued Exchangeable Shares"), then
(unless the provision of this Section 2.1(f) is waived by Marathon by
notice to Tarragon on or prior to the Effective Date) each holder of
Exchangeable Shares who elected to sell less than all of its
Exchangeable Shares shall be deemed to have elected to sell an
additional number of their Exchangeable Shares, such number to be equal
to the product of the number of Exchangeable Shares held by each such
holder after the purchase made pursuant to Section 2.1(e) multiplied by
a fractional amount ("A") which shall be determined according to the
following formula:
(.10 X no. of Issued Exchangeable Shares) - no. of Purchased Shares
A = --------------------------------------------------------------------
no. of Issued Exchangeable Shares - no. of Purchased Shares
and each such holder shall sell and Holdco shall purchase such
additional Exchangeable Shares on the same terms as set forth in Section
2.1(e).
(g) A Shareholder must have given notice of its election whether or not to
sell all or a portion of such holder's Exchangeable Shares for cash
pursuant to Section 2.1(e) above by depositing with the Depositary,
prior to the Election Deadline, a duly completed letter of transmittal
and election form (the "Common Share Letter of Transmittal and Election
Form") in the form provided by Tarragon along with the Information
Circular indicating such holder's election either to sell or not to sell
all or a portion of such holder's Exchangeable Shares. In the event that
a Shareholder has failed to validly make such an election in a Common
Share Letter of Transmittal and Election Form pursuant to this
paragraph, such holder shall be deemed to have elected to sell to Holdco
all of the Exchangeable Shares issued to it under Section 2.1(c) as
though such holder had made a valid election to sell all of such
Exchangeable Shares to Holdco for cash.
(h) An Optionholder must have given notice of its election whether or not
to: (i) make the Option Payment and (ii) sell all or a portion of such
holder's Exchangeable Shares for cash pursuant to Section 2.1(e) above
by depositing with the Depositary, prior to the Election Deadline, a
duly completed letter of transmittal and election form (the "Option
Letter of Transmittal and Election
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Form") in the form provided by Tarragon with the Information Circular
indicating such holder's election in each respect. If the Optionholder
has elected to make the Option Payment, then the Optionholder shall
include with its Option Letter of Transmittal and Election Form a
certified cheque payable to "MONTREAL TRUST COMPANY OF CANADA" in
respect of the total Option Payment in respect of all Tarragon Options
to which the election relates. If an Optionholder who has elected to
make the Option Payment fails to deliver such payment in accordance with
the terms hereof on or before the Effective Date, such Optionholder
shall be deemed to have elected the option to receive a reduced number
of Exchangeable Shares pursuant to Section 2.1(a) above by not making
such Option Payment. In the event that an Optionholder has failed to
validly make an election in an Option Letter of Transmittal and Election
Form pursuant to this paragraph, with respect to the making of the
Option Payment, such Optionholder shall be deemed to have elected to
receive the reduced number of Exchangeable Shares by not making the
Option Payment as though such holder had made a valid election to
receive such reduced number of Exchangeable Shares. In the event that an
Optionholder has failed to validly make an election in an Option Letter
of Transmittal and Election Form pursuant to this paragraph, with
respect to whether or not to sell its Exchangeable Shares for cash, such
holder shall be deemed to have elected to sell all of the Exchangeable
Shares issued to it under Section 2.1(a) as though such holder had made
a valid election to sell all of such Exchangeable Shares to Holdco for
cash.
(i) A Warrantholder must have given notice of its election whether or not to
sell all or a portion of such holder's Exchangeable Shares for cash
pursuant to Section 2.1(e) above by depositing with the Depositary,
prior to the Election Deadline, a duly completed letter of transmittal
and election form (the "Special Warrant Letter of Transmittal and
Election Form") in the form provided by Tarragon along with the
Information Circular indicating such holder's election either to sell or
not to sell all or a portion of such holder's Exchangeable Shares. In
the event that a Warrantholder has failed to validly make such an
election in a Special Warrant Letter of Transmittal and Election Form
pursuant to this paragraph, such holder shall be deemed to have elected
to sell to Holdco all of the Exchangeable Shares issued to it under
Section 2.1(b) as though such holder had made a valid election to sell
all of such Exchangeable Shares to Holdco for cash.
(j) Shareholders and Warrantholders who are residents of Canada for the
purposes of the ITA shall be entitled to make an income tax election
pursuant to subsection 85(1) or subsection 85(2), as applicable, of the
ITA, or under the corresponding provisions of any provincial
legislation, with respect to the transfer of all, but not less than all,
their Tarragon Shares and Special Warrants to Albertaco by providing two
signed copies of the necessary election forms to Albertaco, care of
Tarragon, within 90 days following the Effective Date, duly completed
with, among all other required information, the details of the number of
shares transferred and the applicable agreed amounts for the purposes of
such elections. Thereafter, subject to the election forms complying with
the provisions of the ITA or other applicable legislation, the forms
will be signed by Albertaco and returned to such Securityholders for
filing with Revenue Canada. Albertaco will not be liable for any late
filing penalties or other loss resulting from the late filing of any
election form received by Albertaco or from the invalidation of any
election form unless such invalidation is solely attributable to any
negligent act or omission of Albertaco.
ARTICLE 3
RIGHTS OF DISSENT
3.1 Rights of Dissent.
Tarragon Securityholders may exercise rights of dissent with respect to
their Tarragon Securities pursuant to and in the manner set forth in section 185
of the OBCA and this Section 3.1, as modified by the Interim Order, (the
"Dissent Procedures") in connection with the Arrangement and holders who duly
exercise such rights of dissent and who:
(a) are ultimately entitled to be paid the fair value for their Tarragon
Securities shall be deemed to have transferred such Tarragon Securities
to Tarragon for cancellation on the Effective Date; or
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(b) are ultimately not entitled, for any reason, to be paid the fair value
for their Tarragon Securities shall be deemed to have participated in
the Arrangement on the same basis as any non-dissenting Securityholder
and to have elected to sell to Holdco all of the Exchangeable Shares
issued to them under Section 2.1(a), (b) or (c),
but, except for the circumstances provided in subsection 185(29) of the OBCA,
Tarragon shall not be required to recognize such holders as Tarragon
Securityholders on and after the Effective Date, and the names of such Tarragon
Securityholders shall, on the Effective Date, be deleted from the register of
holders of Tarragon Common Shares, Tarragon Options and Special Warrants, as the
case may be.
ARTICLE 4
CERTIFICATES, CASH PAYMENT AND FRACTIONAL SHARES
4.1 Delivery of Certificates and Cash Payment.
(a) On or before the Effective Date, Albertaco shall deposit with the
Depositary, for the benefit of the holders of Tarragon Securities
transferred pursuant to the Arrangement, the Certificates and the Global
Certificate (as defined in Section 4.1(b)) and Holdco shall deposit the
Cash Payments with the Depositary, for the benefit of the
Securityholders entitled thereto pursuant to the Arrangement.
(b) The Exchangeable Shares which Tarragon Securityholders have elected or
have been deemed to have elected to sell to Holdco pursuant to Sections
2.1(g), (h) or (i) and, if applicable, Section 2.1(f) shall be
represented by a global certificate registered in the name of the
Depositary, as trustee for such holders (the "Global Certificate"). An
election or deemed election to sell Exchangeable Shares to Holdco shall
constitute: (i) an irrevocable acceptance of the offer by Holdco to
purchase such Exchangeable Shares immediately upon issuance to the
Tarragon Securityholders pursuant to Section 2.1(a), (b) and (c); and
(ii) an irrevocable direction to the Depositary, as trustee, to endorse
the Global Certificate for transfer to Holdco.
(c) Upon surrender to the Depositary for transfer to Albertaco of (i) a
certificate or certificates representing outstanding Tarragon Common
Shares or Special Warrants, if applicable, (ii) the Option Payment, if
applicable, (iii) duly completed Letter of Transmittal and Election
Forms relating to the relevant type of securities, and (iv) such
additional documents and instruments as the Depositary may reasonably
require, each such holder shall be entitled to receive, and the
Depositary shall forthwith deliver to each such holder, the Certificates
and the Cash Payment which such holder has the right to receive pursuant
to the Arrangement (together with any dividends or distributions with
respect to the Exchangeable Shares which such holder is entitled to
receive pursuant to Section 4.2 and any cash in lieu of fractional
shares which such holder is entitled to receive pursuant to Section
4.3), and any certificates so surrendered shall forthwith be cancelled.
In the event of a transfer of ownership of Tarragon Common Shares which
is not registered in the transfer records of Tarragon, the Certificates
may be issued and the Cash Payment, if any, may be paid and delivered to
a transferee if the certificate representing such Tarragon Common Shares
is presented to the Depositary, accompanied by all documents required to
evidence and effect such transfer.
(d) Until surrendered as contemplated by this Section 4.1, each certificate
which immediately prior to the Effective Date represented outstanding
Tarragon Common Shares or Special Warrants that were transferred
pursuant to the Arrangement shall be deemed at any time on or after the
Effective Date to represent only the right to receive upon such
surrender (i) the Certificates and the Cash Payment, if any, which the
holder has the right to receive pursuant to the Arrangement, (ii) a cash
payment in lieu of any fractional shares as contemplated by Section 4.3
and (iii) any dividends or distributions with a record date on or after
the Effective Date theretofore paid or payable with respect to the
Exchangeable Shares (other than any such Exchangeable Shares purchased
by Holdco pursuant to Section 2.1(e) and Section 2.1(f)) as contemplated
by Section 4.2. No interest will be paid from or after the Effective
Date in respect of the Cash Payment.
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4.2 Distributions Limited.
No dividends or other distributions declared or made on or after the
Effective Date with respect to the Exchangeable Shares with a record date on or
after the Effective Date shall be paid to the holder of any unsurrendered
certificate which, immediately prior to the Effective Date, represented
outstanding Tarragon Common Shares or Special Warrants, and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to Section
4.3 (and no interest will be earned or payable on these proceeds), unless and
until (a) such certificate or any applicable Option Payments and (b) the
applicable Letter of Transmittal and Election Form or Forms shall be received by
the Depositary in accordance with Section 4.1 and such holder has not elected
nor been deemed to have elected to sell all such Exchangeable Shares to Holdco
pursuant to Section 2.1(g), (h) or (i). Subject to applicable law and to Section
4.5, at the time of such surrender of any such applicable certificates, Option
Payments and Letter of Transmittal and Election Forms, (or, in the case of
clause (c) below, at the appropriate payment date), there shall be paid to the
record holder of such certificate without interest, (a) the amount of any cash
payable in lieu of fractional shares to which such holder is entitled pursuant
to Section 4.3, (b) the amount of dividends or other distributions with a record
date on or after the Effective Date theretofore paid with respect to the
Exchangeable Shares and (c) the amount of dividends or other distributions with
a record date on or after the Effective Date but prior to surrender and a
payment date subsequent to surrender payable with respect to the Exchangeable
Shares.
4.3 Fractional Shares.
Certificates for fractional Exchangeable Shares shall not be delivered to
Securityholders. Interests in fractional Exchangeable Shares which arise
pursuant to Section 2.1 shall be disposed of pursuant to the following rules:
(a) With respect to Securityholders who elect or are deemed to elect to sell
to Holdco all Exchangeable Shares received in consideration for Tarragon
Securities of any class held by them, the quotient of $14.25 divided by
the Average Closing Price shall be calculated for the purpose of Section
2.1(a), (b) or (c) as applicable, to a number of decimal places
sufficient to result in such holder receiving pursuant to such sale, an
aggregate price for the Exchangeable Shares so sold to Holdco equal to
$14.25 multiplied by the number of Tarragon Securities of that class
held by the Securityholder (less, if applicable, any reduction in the
case of an Optionholder not making an Option Payment); and
(b) Holdco shall purchase fractional Exchangeable Shares, other than those
referred to in Section 4.3(a), from each person entitled to a fractional
Exchangeable Share for an amount of cash (rounded to the nearest whole
cent), without interest, equal to the product of (i) such fraction
multiplied by (ii) the Average Closing Price, such amount to be provided
to the Depositary by Holdco upon request.
4.4 Lost Certificates.
If any certificate which immediately prior to the Effective Date represented
outstanding Tarragon Common Shares or Special Warrants that were transferred
pursuant to Section 2.1 has been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such certificate to be lost,
stolen or destroyed, the Depositary will issue and deliver in exchange for such
lost, stolen or destroyed certificate, the Certificates and Cash Payment, if
any, to which the holder of such certificate is entitled pursuant to the
Arrangement (and any dividends or distributions with respect thereto and any
cash pursuant to Section 4.3) deliverable to the holder in respect thereof as
determined in accordance with Section 2.1. The person who is entitled to receive
such Certificates and Cash Payment, if any, and other payments shall, as a
condition precedent to the receipt thereof, give a bond satisfactory to
Albertaco and Albertaco's transfer agent (the "Transfer Agent"), as the case may
be, in such form as Albertaco may direct or otherwise indemnify Albertaco and
the Transfer Agent in a manner satisfactory to Albertaco and the Transfer Agent
against any claim that may be made against Albertaco or the Transfer Agent with
respect to the certificate alleged to have been lost, stolen or destroyed.
4.5 Extinguishment of Rights.
Any certificate which immediately prior to the Effective Date represented
outstanding Tarragon Common Shares or Special Warrants that were transferred
pursuant to Section 2.1 and has not been deposited, with all
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other instruments required by Section 4.1, on or prior to the tenth anniversary
of the Effective Date shall cease to represent a claim or interest of any kind
or nature as a Securityholder of Tarragon. On such date, the consideration and
other payments to which the former registered holder of the certificate referred
to in the preceding sentence was ultimately entitled shall be deemed to have
been surrendered to Albertaco together with all entitlements to dividends,
distributions and interest thereon held for such former registered holder for no
consideration.
ARTICLE 5
CERTAIN RIGHTS OF USX AND MARATHON
TO ACQUIRE EXCHANGEABLE SHARES
5.1 Rights to Acquire Exchangeable Shares.
USX and Marathon shall have the rights to acquire Exchangeable Shares from
the holders thereof described in the Liquidation Call Right, the Retraction Call
Right and the Redemption Call Right, as such terms are defined in the
Exchangeable Share Provisions and such rights shall be exercisable in accordance
with the terms and conditions set forth in the Exchangeable Share Provisions.
ARTICLE 6
AMENDMENT
6.1 Plan of Arrangement Amendment.
Tarragon reserves the right to amend, modify or supplement this Plan of
Arrangement at any time and from time to time provided that any such amendment,
modification, or supplement must be contained in a written document that is (a)
agreed to by Marathon, Holdco and Albertaco, (b) if made prior to or at the
Meeting, approved by the persons voting at the Meeting, subject to the Interim
Order; and (c) if made following the Meeting, but prior to the Final Order,
approved by the Court.
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Schedule 2 to that Arrangement Agreement
made the 20th day of June, 1998 between
Tarragon Oil and Gas Limited, Marathon Oil Company,
761581 Alberta Ltd. and 787722 Alberta Ltd.
as amended and restated the 7th day of July, 1998
EXCHANGEABLE SHARE PROVISIONS
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EXCHANGEABLE SHARE PROVISIONS*
The Exchangeable Shares in the capital of the Corporation shall have the
following rights, privileges, restrictions and conditions:
ARTICLE 1
INTERPRETATION
1.1 For the purposes of these share provisions:
"AUTOMATIC REDEMPTION DATE" means the date for the automatic redemption by
the Corporation of Exchangeable Shares pursuant to Article 7 of these share
provisions, which date shall be the Business Day next following the fifth
anniversary of the date of the first issuance of Exchangeable Shares unless
(a) such date shall be extended at any time or from time to time to a
specified later date by the Board of Directors or (b) such date shall be
accelerated at any time to a specified earlier date (but no earlier than the
third anniversary of the first issuance of Exchangeable Shares) by the Board
of Directors if at such time there are issued and outstanding less than 5%
of the number of Exchangeable Shares initially issued pursuant to the Plan
of Arrangement (including Exchangeable Shares which the recipients elect to
sell for cash pursuant to the Plan of Arrangement, but excluding
Exchangeable Shares held by USX and its Subsidiaries) and as such number of
shares may be adjusted as deemed appropriate by the Board of Directors to
give effect to any subdivision or consolidation of or stock dividend on the
Exchangeable Shares, any issuance or distribution of rights to acquire
Exchangeable Shares or securities exchangeable for or convertible into
Exchangeable Shares, any issue or distribution of other securities or rights
or evidences of indebtedness or assets, or any other capital reorganization
or other transaction affecting the Exchangeable Shares, in each case upon at
least 60 days' prior written notice of any such extension or acceleration,
as the case may be, to the registered holders of the Exchangeable Shares, in
which case the Automatic Redemption Date shall be such later or earlier
date; provided, however, that the accidental failure or omission to give any
such notice of extension or acceleration, as the case may be, to less than
10% of such holders of Exchangeable Shares shall not affect the validity of
such extension or acceleration.
"BOARD OF DIRECTORS" means the Board of Directors of the Corporation.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day when
banks are not open for business in any of Pittsburgh, Pennsylvania, Houston,
Texas or Calgary, Alberta.
"CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed in a
currency other than Canadian dollars (the "Foreign Currency Amount") at any
date, the product obtained by multiplying (a) the Foreign Currency Amount by
(b) the noon spot rate of exchange on such date for such currency expressed
in Canadian dollars as reported by the Bank of Canada or, in the event such
spot rate of exchange is not available, such exchange rate on such date for
such foreign currency expressed in Canadian dollars as may be deemed by the
Board of Directors to be appropriate for such purpose.
"EQUIVALENT NUMBER", when used in reference to USX-Marathon Common Stock,
means that number of shares of USX-Marathon Common Stock equal to the
Exchangeable Share Price on a specified date;
"EXCHANGE TRUST AGREEMENT" means the Exchange Trust Agreement among the
Corporation, USX, Marathon and the Trustee, made as of - , 1998.
"EXCHANGEABLE SHARE CONSIDERATION" means, for any exchange of Exchangeable
Shares pursuant to these share provisions, the Plan of Arrangement, the
Support Agreement or the Exchange Trust Agreement, certificates representing
the aggregate number of shares of USX-Marathon Common Stock deliverable in
connection with satisfaction of the relevant Exchangeable Share Price,
provided that any such stock shall be duly issued as fully paid and
non-assessable and free and clear of any lien, claim and encumbrance,
security interest or adverse claim and provided further that such
consideration shall be paid less any tax required to be deducted and
withheld therefrom and without interest.
* As used in this Appendix, the term "Corporation" refers to 761581 Alberta
Ltd. and the terms "Common Shares" and "Non-Voting Common Shares" refer to
the Common Shares and Non-Voting Common Shares of the Corporation.
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"EXCHANGEABLE SHARE PRICE" means, initially, one share of USX-Marathon
Common Stock for each Exchangeable Share and is subject to adjustment from
time to time as provided in Article 10 of these share provisions.
"EXCHANGEABLE SHARES" mean the Exchangeable Shares of the Corporation having
the rights, privileges, restrictions and conditions set forth herein.
"HOLDCO" means 787722 Alberta Ltd., a wholly-owned subsidiary of Marathon.
"LIQUIDATION AMOUNT" has the meaning attributed thereto in Section 5.1 of
these share provisions.
"LIQUIDATION CALL PURCHASE PRICE" has the meaning attributed thereto in
Section 5.4 of these share provisions.
"LIQUIDATION CALL RIGHT" has the meaning attributed thereto in Section 5.4
of these share provisions.
"LIQUIDATION DATE" has the meaning attributed thereto in Section 5.1 of
these share provisions.
"MARATHON" means Marathon Oil Company, a corporation organized and existing
under the laws of the State of Ohio and any successor corporation.
"MARATHON GROUP EXCHANGE" has the meaning attributed thereto in Section 10.3
of these share provisions.
"MARATHON GROUP SUBSIDIARY" has the meaning attributed thereto in Section
10.3 of these share provisions.
"MARATHON SUBSIDIARY" means any Subsidiary of Marathon, other than the
Corporation.
"PLAN OF ARRANGEMENT" means the plan of arrangement contemplated in that
Arrangement Agreement dated June 20, 1998 between Marathon, the Corporation,
Holdco and Tarragon Oil and Gas Limited, as amended and restated July 7,
1998.
"REDEMPTION CALL PURCHASE PRICE" has the meaning attributed thereto in
Section 7.4 of these share provisions.
"REDEMPTION CALL RIGHT" has the meaning attributed thereto in Section 7.4 of
these share provisions.
"REDEMPTION PRICE" has the meaning attributed thereto in Section 7.1 of
these share provisions.
"RETRACTED SHARES" has the meaning attributed thereto in Subsection 6.1(i)
of these share provisions.
"RETRACTION CALL RIGHT" has the meaning attributed thereto in Subsection
6.1(iii) of these share provisions.
"RETRACTION DATE" has the meaning attributed thereto in Subsection 6.1(ii)
of these share provisions.
"RETRACTION REQUEST" has the meaning attributed thereto in Section 6.1 of
these share provisions.
"SUBSIDIARY" of any person means each partnership, joint venture,
corporation, association or other business entity of which more than 50% of
the total voting power of shares of stock or units of ownership or
beneficial interest entitled to vote in the election of directors (or
members of a comparable governing body) is owned or controlled, directly or
indirectly, by such person.
"SUPPORT AGREEMENT" means the Support Agreement between USX, Marathon and
the Corporation, made as of - , 1998.
"TRANSFER AGENT" means Montreal Trust Company of Canada or such other person
as may from time to time be the registrar and transfer agent for the
Exchangeable Shares.
"TRUSTEE" means Montreal Trust Company of Canada and any successor trustee
appointed under the Exchange Trust Agreement.
"UNPAID DIVIDENDS" means the full amount of all cash and non-cash dividends
declared and unpaid in respect of Exchangeable Shares on a specified date.
"USX" means USX Corporation, a corporation organized and existing under the
laws of the State of Delaware and any successor corporation.
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"USX CERTIFICATE" means the Restated Certificate of Incorporation of USX
Corporation dated September 1, 1996.
"USX DIVIDEND DECLARATION DATE" means the date on which the board of
directors of USX declares any dividend on the USX-Marathon Common Stock.
"USX/MARATHON CALL NOTICE" has the meaning attributed thereto in Section 6.3
of these share provisions.
"USX-MARATHON COMMON STOCK" means the shares of USX-Marathon Group Common
Stock of USX, with a par value of U.S. $1.00 per share, and any other
securities into which such shares may be changed.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall be entitled to a preference over the Common
Shares, the Non-Voting Common Shares and any other shares of the Corporation,
with respect to the payment of dividends and the distribution of assets in the
event of the liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary, or any other distribution of the assets of the
Corporation among its shareholders for the purpose of winding-up its affairs.
ARTICLE 3
DIVIDENDS
3.1 A holder of an Exchangeable Share shall be entitled to receive and the Board
of Directors shall, subject to applicable law, on each USX Dividend Declaration
Date, declare a dividend (a) in the case of a cash dividend declared on the
USX-Marathon Common Stock, in an amount in cash for each Exchangeable Share
equal to the Canadian Dollar Equivalent (calculated on the USX Dividend
Declaration Date) of the cash dividend declared on each share of USX-Marathon
Common Stock or (b) in the case of a stock dividend declared on the USX-Marathon
Common Stock to be paid in USX-Marathon Common Stock, in such number of
Exchangeable Shares for each Exchangeable Share as is equal to the number of
shares of USX-Marathon Common Stock to be issued in satisfaction of the stock
dividend on each share of USX-Marathon Common Stock or (c) in the case of a
dividend declared on the USX-Marathon Common Stock in property other than cash
or securities of USX, in such type and amount or value of property for each
Exchangeable Share as is the same as or economically equivalent to (to be
determined by the Board of Directors as contemplated by the Support Agreement)
the type and amount or value of property declared as a dividend on each share of
USX-Marathon Common Stock or (d) in the case of a dividend declared on the
USX-Marathon Common Stock to be paid in securities of USX other than
USX-Marathon Common Stock, in such number of either such securities or
economically equivalent securities of the Corporation, as the Board of Directors
determines, for each Exchangeable Share as is equal to the number of securities
of USX to be paid on each share of USX-Marathon Common Stock. Such dividends
shall be paid out of money, assets or property of the Corporation properly
applicable to the payment of dividends, or out of authorized but unissued shares
of the Corporation.
3.2 Cheques of the Corporation payable at par at any branch of the bankers of
the Corporation shall be issued in respect of any cash dividends contemplated by
Subsection 3.1 (a) hereof and the sending of such a cheque to each holder of an
Exchangeable Share (less any tax required to be deducted and withheld from such
dividends paid or credited by the Corporation) shall satisfy the cash dividend
represented thereby unless the cheque is not paid on presentation. Certificates
registered in the name of the registered holder of Exchangeable Shares shall be
issued or transferred in respect of any stock dividends or dividends payable in
other securities contemplated by Subsections 3.1 (b) or (d) hereof and the
sending of such a certificate to each holder of an Exchangeable Share shall
satisfy the stock dividend or dividend payable in other securities represented
thereby. Such other type and amount of property in respect of any dividends
contemplated by Subsection 3.1 (c) hereof shall be issued, distributed or
transferred by the Corporation in such manner as it shall determine and the
issuance, distribution or transfer thereof by the Corporation to each holder of
an Exchangeable Share shall satisfy the dividend represented thereby (subject to
any adjustment for the tax required to be deducted and withheld from such
dividends paid or credited by the Corporation). No holder of an Exchangeable
Share shall be entitled to recover by action or other legal process against the
Corporation any dividend that is represented by a cheque
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that has not been duly presented to the Corporation's bankers for payment or
that otherwise remains unclaimed for a period of six years from the date on
which such dividend was payable.
3.3 The record date for the determination of the holders of Exchangeable Shares
entitled to receive payment of, and the payment date for, any dividend declared
on the Exchangeable Shares under Section 3.1 hereof shall be the same dates as
the record date and payment date, respectively, for the corresponding dividend
declared on the USX-Marathon Common Stock.
3.4 If on any payment date for any dividends declared on the Exchangeable Shares
under Section 3.1 hereof the dividends are not paid in full on all of the
Exchangeable Shares then outstanding, any such dividends that remain unpaid
shall be paid on a subsequent date or dates determined by the Board of Directors
on which the Corporation shall have sufficient moneys, assets or property
properly applicable to the payment of such dividends (subject to any adjustment
for the tax required to be deducted and withheld from such dividends paid or
credited by the Corporation).
3.5 Except as provided in this Article 3, the holders of Exchangeable Shares
shall not be entitled to receive dividends in respect thereof.
ARTICLE 4
CERTAIN RESTRICTIONS
4.1 So long as any of the Exchangeable Shares are outstanding, the Corporation
shall not at any time without, but may at any time with, the approval of the
holders of the Exchangeable Shares given as specified in Section 9.2 of these
share provisions:
(a) pay any dividends on the Common Shares, the Non-Voting Common Shares or
any other shares ranking junior to the Exchangeable Shares, other than
stock dividends payable in Common Shares or Non-Voting Common Shares or
in any such other shares ranking junior to the Exchangeable Shares;
(b) redeem or purchase or make any capital distribution in respect of Common
Shares or Non-Voting Common Shares or any other shares ranking junior to
the Exchangeable Shares;
(c) redeem or purchase any other shares of the Corporation ranking equally
with the Exchangeable Shares with respect to the payment of dividends or
on any liquidation distribution; or
(d) issue any Exchangeable Shares or any other shares of the Corporation
ranking equally with, or superior to, the Exchangeable Shares other than
by way of stock dividends (including rights to acquire Exchangeable
Shares) to the holders of such Exchangeable Shares or distributions of
securities as contemplated by the Support Agreement;
unless all dividends on the outstanding Exchangeable Shares corresponding to
dividends declared to date on the USX-Marathon Common Stock shall have been
declared on the Exchangeable Shares and the Corporation shall have sufficient
assets, funds and other property available to enable the due and punctual
payment in accordance with applicable law of such dividends in accordance with
these share provisions.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding-up its affairs, a holder of Exchangeable
Shares shall be entitled, subject to applicable law, to receive from the assets
of the Corporation in respect of each Exchangeable Share held by such holder on
the effective date (the "LIQUIDATION DATE") of such liquidation, dissolution or
winding-up, before any distribution of any part of the assets of the Corporation
to the holders of the Common Shares, the Non-Voting Common Shares or any other
shares ranking junior to the Exchangeable Shares, an amount (the "LIQUIDATION
AMOUNT") equal to the amount that a holder of an Equivalent Number of shares of
USX-Marathon Common Stock on the Liquidation Date would be entitled to receive
on the liquidation, dissolution or winding-up of USX, which Liquidation Amount
shall be satisfied by the delivery to holders of the Exchangeable Shares such
number of shares of USX-Marathon Common Stock as
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have a fair market value on the last Business Day prior to the Liquidation Date
equal to the Liquidation Amount. In connection with payment of the Liquidation
Amount, the Corporation shall be entitled to liquidate some of the USX-Marathon
Common Stock to which the particular holder of Exchangeable Shares is entitled
and apply the proceeds on behalf of such holder in order to fund any statutory
withholding tax obligation.
5.2 On or promptly after the Liquidation Date, and subject to the exercise by
USX or Marathon of the Liquidation Call Right, the Corporation shall cause to be
delivered to the holders of the Exchangeable Shares the Liquidation Amount for
each such Exchangeable Share upon presentation and surrender of the certificates
representing such Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
applicable law and the by-laws of the Corporation and such additional documents
and instruments as the Transfer Agent may reasonably require, at the registered
office of the Corporation or at any office of the Transfer Agent as may be
specified by the Corporation by notice to the holders of the Exchangeable
Shares. Payment of the total Liquidation Amount for such Exchangeable Shares
shall be made by delivery to each holder, at the address of the holder recorded
in the securities register of the Corporation for the Exchangeable Shares or by
holding for pick up by the holder at the registered office of the Corporation or
at any office of the Transfer Agent as may be specified by the Corporation by
notice to the holders of Exchangeable Shares, on behalf of the Corporation of
the Exchangeable Share Consideration representing the total Liquidation Amount.
On and after the Liquidation Date, the holders of the Exchangeable Shares shall
cease to be holders of such Exchangeable Shares and shall not be entitled to
exercise any of the rights of holders in respect thereof, other than the right
to receive their proportionate part of the total Liquidation Amount and any
Unpaid Dividends on the last Business Day prior to the Liquidation Date, unless
payment of the total Liquidation Amount for such Exchangeable Shares and any
Unpaid Dividends shall not be made upon presentation and surrender of share
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected until the total Liquidation Amount
and any Unpaid Dividends have been paid in the manner hereinbefore provided. The
Corporation shall have the right at any time on or after the Liquidation Date to
deposit or cause to be deposited the Exchangeable Share Consideration together
with any Unpaid Dividends in respect of the Exchangeable Shares represented by
certificates that have not at the Liquidation Date been surrendered by the
holders thereof in a custodial account or for safe keeping, in the case of
non-cash items, with any chartered bank or trust company in Canada. Upon such
deposit being made, the rights of the holders of Exchangeable Shares after such
deposit shall be limited to receiving their proportionate part of the total
Liquidation Amount for such Exchangeable Shares and Unpaid Dividends so
deposited, against presentation and surrender of the said certificates held by
them, respectively, in accordance with the foregoing provisions. Upon such
payment or deposit of such Exchangeable Share Consideration and Unpaid
Dividends, the holders of the Exchangeable Shares shall thereafter be considered
and deemed for all purposes to be the holders of the USX-Marathon Common Stock
delivered to them.
5.3 After the Corporation has satisfied its obligations to pay the holders of
the Exchangeable Shares (a) the Liquidation Amount per Exchangeable Share
pursuant to Section 5.1 of these share provisions and (b) the Unpaid Dividends
on the last Business Day prior to the Liquidation Date, such holders shall not
be entitled to share in any further distribution of the assets of the
Corporation.
5.4 USX shall have the overriding right (the "LIQUIDATION CALL RIGHT"), in the
event of and notwithstanding the proposed liquidation, dissolution or winding-up
of the Corporation pursuant to this Article 5, to acquire from all but not less
than all of the holders (other than USX and any Subsidiary thereof) of
Exchangeable Shares on the Liquidation Date all but not less than all of the
Exchangeable Shares held by each such holder on payment by USX to the holder of
the Exchangeable Share Price in effect on the last Business Day prior to the
Liquidation Date (the "LIQUIDATION CALL PURCHASE PRICE"). In the event of the
exercise of the Liquidation Call Right by USX, each holder shall be obligated to
sell all the Exchangeable Shares held by the holder to USX on the Liquidation
Date on payment by USX to the holder of the Liquidation Call Purchase Price for
each such share; provided that such sale shall be without prejudice to the right
of a holder to receive from the Corporation any Unpaid Dividends.
5.5 To exercise the Liquidation Call Right, USX must notify the Transfer Agent
in writing, as agent for the holders of Exchangeable Shares, and the Corporation
of USX's intention to exercise such right at least 55 days before the
Liquidation Date in the case of a voluntary liquidation, dissolution or
winding-up of the Corporation and at least five Business Days before the
Liquidation Date in the case of an involuntary liquidation, dissolution
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or winding-up of the Corporation. The Transfer Agent will notify the holders of
Exchangeable Shares as to whether or not USX has exercised the Liquidation Call
Right forthwith after the expiry of the date by which the same may be exercised
by USX. If USX exercises the Liquidation Call Right, on the Liquidation Date USX
will purchase and the holders will sell all of the Exchangeable Shares then
outstanding for a price per share equal to the Liquidation Call Purchase Price.
5.6 For the purposes of completing the purchase of the Exchangeable Shares
pursuant to the Liquidation Call Right, USX shall deposit with the Transfer
Agent, on or before the Liquidation Date, the Exchangeable Share Consideration
representing the total Liquidation Call Purchase Price. Provided that such
Exchangeable Share Consideration has been so deposited with the Transfer Agent,
on and after the Liquidation Date the rights of each holder of Exchangeable
Shares will be limited to receiving such holder's proportionate part of the
total Liquidation Call Purchase Price payable by USX without interest upon
presentation and surrender by the holder of certificates representing the
Exchangeable Shares held by such holder and the holder shall on and after the
Liquidation Date be considered and deemed for all purposes to be the holder of
the USX-Marathon Common Stock delivered to such holder. Upon surrender to the
Transfer Agent of a certificate or certificates representing Exchangeable
Shares, together with such other documents and instruments as may be required to
effect a transfer of Exchangeable Shares under applicable law and such
additional documents and instruments as the Transfer Agent may reasonably
require, the holder of such surrendered certificate or certificates shall be
entitled to receive in exchange therefor, and the Transfer Agent on behalf of
USX shall deliver to such holder, the Exchangeable Share Consideration to which
the holder is entitled. If USX does not exercise the Liquidation Call Right in
the manner described above, on the Liquidation Date the holders of the
Exchangeable Shares will be entitled to receive in exchange therefor the
Exchangeable Share Price otherwise payable by the Corporation in connection with
the liquidation, dissolution or winding-up of the Corporation pursuant to this
Article 5 of the Exchangeable Share Provisions.
5.7 USX may assign its rights to exchange the Exchangeable Share Consideration
for Exchangeable Shares pursuant to the Liquidation Call Right to Marathon,
Holdco or any Marathon Subsidiary at any time with respect to all or any portion
of the Exchangeable Shares relating to such right and in such circumstance, all
provisions of this Article 5 relating to the Liquidation Call Right which refer
to USX shall, to the extent applicable, apply to Marathon, Holdco or such
Marathon Subsidiary, MUTATIS MUTANDIS, and in such case delivery of the
Exchangeable Share Consideration by or on behalf of Marathon, Holdco or such
Marathon Subsidiary shall satisfy all of USX's obligations with respect to the
Liquidation Call Right.
ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
6.1 A holder of Exchangeable Shares shall be entitled at any time, subject to
the exercise by USX or Marathon of the Retraction Call Right and otherwise upon
compliance with the provisions of this Article 6, to require the Corporation to
redeem any or all of the Exchangeable Shares registered in the name of such
holder by delivery to such holder of the Exchangeable Share Consideration
representing the Exchangeable Share Price in respect of such Exchangeable
Shares. In connection with payment of the Exchangeable Share Price, the
Corporation shall be entitled to liquidate some of the USX-Marathon Common Stock
to which the particular holder of Exchangeable Shares is entitled and apply the
proceeds on behalf of such holder in order to fund any statutory withholding tax
obligation. To effect such redemption, the holder shall present and surrender at
the registered office of the Corporation or at any office of the Transfer Agent
as may be specified by the Corporation by notice to the holders of Exchangeable
Shares the certificate or certificates representing the Exchangeable Shares
which the holder desires to have the Corporation redeem, together with such
other documents and instruments as may be required to effect a transfer of
Exchangeable Shares under applicable law and the by-laws of the Corporation and
such additional documents and instruments as the Transfer Agent may reasonably
require, and together with a duly executed statement (the "RETRACTION REQUEST")
in the form of Exhibit A hereto or in such other form as may be acceptable to
the Corporation:
(i) specifying that the holder desires to have all or any number specified
therein of the Exchangeable Shares represented by such certificate or
certificates (the "RETRACTED SHARES") redeemed by the Corporation;
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(ii) stating the Business Day on which the holder desires to have the
Corporation redeem the Retracted Shares (the "RETRACTION DATE"),
provided that the Retraction Date shall be not less than three Business
Days nor more than 10 Business Days after the date on which the
Retraction Request is received by the Corporation and further provided
that, in the event that no such Business Day is specified by the holder
in the Retraction Request, the Retraction Date shall be deemed to be
the tenth Business Day after the date on which the Retraction Request
is received by the Corporation; and
(iii) acknowledging the overriding right (the "RETRACTION CALL RIGHT") of USX
and Marathon to acquire all but not less than all the Retracted Shares
directly from the holder in exchange for one share of USX-Marathon
Common Stock for each Exchangeable Share and that the Retraction
Request shall be deemed to be a revocable offer by the holder to
exchange the Retracted Shares with USX or Marathon in accordance with
the Retraction Call Right on the terms and conditions set out in
Section 6.3 below.
6.2 Subject to the exercise by USX or Marathon of the Retraction Call Right,
upon receipt by the Corporation or the Transfer Agent in the manner specified in
Section 6.1 hereof of a certificate or certificates representing the number of
Exchangeable Shares which the holder desires to have the Corporation redeem,
together with a Retraction Request, and provided that the Retraction Request is
not revoked by the holder in the manner specified in Section 6.7, the
Corporation shall redeem the Retracted Shares effective at the close of business
on the Retraction Date and shall cause to be delivered to such holder the total
Exchangeable Share Price with respect to such shares by the delivery of the
Exchangeable Share Consideration. If only a part of the Exchangeable Shares
represented by any certificate are redeemed (or purchased by USX or Marathon
pursuant to the Retraction Call Right), a new certificate for the balance of
such Exchangeable Shares shall be issued to the holder at the expense of the
Corporation.
6.3 Upon receipt by the Corporation of a Retraction Request, the Corporation
shall immediately notify USX and Marathon thereof. In order to exercise the
Retraction Call Right, USX or Marathon must notify the Corporation in writing of
its determination to do so (the "USX/MARATHON CALL NOTICE") within two Business
Days of notification to USX and Marathon by the Corporation of the receipt by
the Corporation of the Retraction Request. If USX or Marathon does not so notify
the Corporation within such two Business Day period, the Corporation will notify
the holder as soon as possible thereafter that neither USX nor Marathon will
exercise the Retraction Call Right. If USX or Marathon delivers the USX/Marathon
Call Notice within such two Business Day time period, and provided that the
Retraction Request is not revoked by the holder in the manner specified in
Section 6.7, the Retraction Request shall thereupon be considered only to be an
offer by the holder to exchange the Retracted Shares with USX or Marathon, as
applicable, in accordance with the Retraction Call Right. In such event, the
Corporation shall not redeem the Retracted Shares and USX or Marathon, as
applicable, shall acquire from such holder and such holder shall deliver to USX
or Marathon, as applicable, on the Retraction Date the Retracted Shares in
exchange for delivery to such holder of the Exchangeable Share Consideration
respecting the total Exchangeable Share Price in respect of the Retracted
Shares. For the purposes of completing an exchange pursuant to the Retraction
Call Right, USX or Marathon, as applicable, shall deposit with the Transfer
Agent, on or before the Retraction Date the Exchangeable Share Consideration
representing the total Exchangeable Share Price. Provided that such Exchangeable
Share Consideration has been so deposited with the Transfer Agent, the closing
of the exchange of the Retracted Shares pursuant to the Retraction Call Right
shall be deemed to have occurred as at the close of business on the Retraction
Date and, for greater certainty, no redemption by the Corporation of such
Retracted Shares shall take place on the Retraction Date. In the event that
neither USX nor Marathon delivers a USX/Marathon Call Notice within such two
Business Day period or otherwise complies with these Exchangeable Share
provisions in respect thereto, and provided that the Retraction Request is not
revoked by the holder in the manner specified in Section 6.7, the Corporation
shall redeem the Retracted Shares on the Retraction Date and in the manner
otherwise contemplated in this Article 6.
6.4 The Corporation, USX or Marathon, as the case may be, shall deliver or cause
the Transfer Agent to deliver to the relevant holder, at the address of the
holder recorded in the securities register of the Corporation for the
Exchangeable Shares or at the address specified in the holder's Retraction
Request or by holding for pick up by the holder at the registered office of the
Corporation or at any office of the Transfer Agent as may be specified by the
Corporation by notice to the holders of Exchangeable Shares, the Exchangeable
Share Consideration representing the total Exchangeable Share Price and such
delivery of such Exchangeable Share Consideration to
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the Transfer Agent shall be deemed to be payment of and shall satisfy and
discharge all liability for the total Exchangeable Share Price.
6.5 On and after the close of business on the Retraction Date, the holder of the
Retracted Shares shall cease to be a holder of such Retracted Shares and shall
not be entitled to exercise any of the rights of a holder in respect thereof,
other than the right to receive his proportionate part of the total Exchangeable
Share Price and any Unpaid Dividends on the last Business Day prior to the
Retraction Date, unless upon presentation and surrender of certificates in
accordance with the foregoing provisions, payment of the total Exchangeable
Share Price and any Unpaid Dividends shall not be made, in which case the rights
of such holder shall remain unaffected until the total Exchangeable Share Price
and any Unpaid Dividends have been paid in the manner hereinbefore provided. On
and after the close of business on the Retraction Date, provided that
presentation and surrender of certificates and payment of the total Exchangeable
Share Price and any Unpaid Dividends has been made in accordance with the
foregoing provisions, the holder of the Retracted Shares so redeemed by the
Corporation or purchased by USX or Marathon shall thereafter be considered and
deemed for all purposes to be a holder of the USX-Marathon Common Stock
delivered to it.
6.6 Notwithstanding any other provision of this Article 6, the Corporation shall
not be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption of Retracted Shares would
be contrary to liquidity or solvency requirements or other provisions of
applicable law. If the Corporation believes that on any Retraction Date it would
not be permitted by any of such provisions to redeem the Retracted Shares
tendered for redemption on such date, and provided that neither USX nor Marathon
shall have exercised the Retraction Call Right with respect to the Retracted
Shares, the Corporation shall only be obligated to redeem Retracted Shares
specified by a holder in a Retraction Request to the extent of the maximum
number that may be so redeemed (rounded down to a whole number of shares) as
would not be contrary to such provisions and shall notify the holder at least
two Business Days prior to the Retraction Date as to the number of Retracted
Shares which will not be redeemed by the Corporation. In any case in which the
redemption by the Corporation of Retracted Shares would be contrary to liquidity
or solvency requirements or other provisions of applicable law, the Corporation
shall redeem Retracted Shares in accordance with Section 6.2 of these share
provisions on a PRO RATA basis and shall issue to each holder of Retracted
Shares a new certificate, at the expense of the Corporation, representing the
Retracted Shares not redeemed by the Corporation pursuant to Section 6.2 hereof.
6.7 A holder of Retracted Shares may, by notice in writing given by the holder
to the Corporation before the close of business on the Business Day immediately
preceding the Retraction Date, withdraw its Retraction Request in which event
such Retraction Request shall be null and void and, for greater certainty, the
revocable offer constituted by the Retraction Request to exchange the Retracted
Shares with USX or Marathon shall be deemed to have been revoked.
6.8 USX and Marathon may assign their rights under the Retraction Call Right to
Holdco or a Marathon Subsidiary at any time with respect to all or any portion
of the Retracted Shares and in such circumstance, all provisions of this Article
6 relating to the Retraction Call Right which refer to USX and Marathon or to
USX or Marathon shall, to the extent applicable, apply to Holdco, or such
Marathon Subsidiary, MUTATIS MUTANDIS, and in such case delivery of the
Exchangeable Share Consideration by or on behalf of Holdco or such Marathon
Subsidiary, shall satisfy the corresponding obligations of USX and Marathon
under the Retraction Call Right.
ARTICLE 7
REDEMPTION OF EXCHANGEABLE SHARES BY THE CORPORATION
7.1 Subject to applicable law and the Redemption Call Right, the Corporation
shall on the Automatic Redemption Date redeem the whole of the then outstanding
Exchangeable Shares by delivery of the Exchangeable Share Consideration
representing the Exchangeable Share Price applicable on the last Business Day
prior to the Automatic Redemption Date (the "REDEMPTION PRICE"). In connection
with payment of the Redemption Price, the Corporation shall be entitled to
liquidate some of the USX-Marathon Common Stock to which the particular holder
of Exchangeable Shares is entitled and apply the proceeds on behalf of such
holder in order to fund any statutory withholding tax obligation.
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7.2 In any case of a redemption of Exchangeable Shares under this Article 7, the
Corporation shall, at least 120 days before the Automatic Redemption Date, send
or cause to be sent to each holder of Exchangeable Shares a notice in writing of
the redemption by the Corporation or the purchase by USX or Marathon under the
Redemption Call Right, as the case may be, of the Exchangeable Shares held by
such holder. Such notice shall set out the Automatic Redemption Date and, if
applicable, particulars of the Redemption Call Right.
7.3 On or after the Automatic Redemption Date and subject to the exercise by USX
or Marathon of the Redemption Call Right, the Corporation shall cause to be
delivered to the holders of the Exchangeable Shares the Redemption Price for
each such Exchangeable Share upon presentation and surrender at the registered
office of the Corporation or at any office of the Transfer Agent as may be
specified by the Corporation in such notice of the certificates representing
such Exchangeable Shares, together with such other documents and instruments as
may be required to effect a transfer of Exchangeable Shares under applicable law
and the by-laws of the Corporation and such additional documents and instruments
as the Transfer Agent may reasonably require. Payment of the total Redemption
Price for such Exchangeable Shares shall be made by delivery to each holder, at
the address of the holder recorded in the securities register of the Corporation
or by holding for pick up by the holder at the registered office of the
Corporation or at any office of the Transfer Agent as may be specified by the
Corporation in such notice, on behalf of the Corporation of the Exchangeable
Share Consideration representing the total Redemption Price. On and after the
Automatic Redemption Date, the holders of the Exchangeable Shares called for
redemption shall cease to be holders of such Exchangeable Shares and shall not
be entitled to exercise any of the rights of holders in respect thereof, other
than the right to receive their proportionate part of the total Redemption Price
and any Unpaid Dividends on the last Business Day prior to the Redemption Date,
unless payment of the total Redemption Price for such Exchangeable Shares and
any Unpaid Dividends shall not be made upon presentation and surrender of
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected until the total Redemption Price
and any Unpaid Dividends have been paid in the manner hereinbefore provided. The
Corporation shall have the right at any time after the sending of notice of its
intention to redeem the Exchangeable Shares as aforesaid to deposit or cause to
be deposited the Exchangeable Share Consideration with respect to the
Exchangeable Shares so called for redemption, or of such of the said
Exchangeable Shares represented by certificates that have not at the date of
such deposit been surrendered by the holders thereof in connection with such
redemption, together with any Unpaid Dividends, in a custodial account or for
safe keeping with any chartered bank or trust company in Canada named in such
notice. Upon the later of such deposit being made and the Automatic Redemption
Date, the Exchangeable Shares in respect whereof such deposit shall have been
made shall be redeemed and the rights of the holders thereof after such deposit
or Automatic Redemption Date, as the case may be, shall be limited to receiving
their proportionate part of (a) the total Exchangeable Share Price for such
Exchangeable Shares so deposited, against presentation and surrender of the said
certificates held by them, respectively, in accordance with the foregoing
provisions and (b) the Unpaid Dividends on the last Business Day prior to the
Redemption Date. Upon deposit of such Exchangeable Share Consideration and
Unpaid Dividends, the holders of the Exchangeable Shares shall thereafter be
considered and deemed for all purposes to be holders of the USX-Marathon Common
Stock delivered to them.
7.4 USX shall have the overriding right (the "REDEMPTION CALL RIGHT"),
notwithstanding the compulsory redemption of the Exchangeable Shares by the
Corporation pursuant to this Article 7, to acquire from all but not less than
all of the holders (other than USX or any Subsidiary thereof) of Exchangeable
Shares on the Automatic Redemption Date all but not less than all of the
Exchangeable Shares held by each such holder upon the payment to each such
holder by USX of the Exchangeable Share Price in effect on the last Business Day
prior to the Automatic Redemption Date (the "REDEMPTION CALL PURCHASE PRICE").
In the event of the exercise of the Redemption Call Right by USX, each holder
shall be obligated to exchange all the Exchangeable Shares held by the holder
with USX on the Automatic Redemption Date on delivery by USX to the holder of
the Exchangeable Share Consideration representing the Redemption Call Purchase
Price for each such share and the obligation of the Corporation to redeem any
Exchangeable Shares (including those held by USX or any Subsidiary thereof)
shall terminate.
7.5 To exercise the Redemption Call Right, USX must notify the Transfer Agent in
writing, as agent for the holders of Exchangeable Shares, and Albertaco of USX's
intention to exercise such right at least 125 days before the Automatic
Redemption Date. The Transfer Agent will notify the holders of the Exchangeable
Shares as to
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whether or not USX has exercised the Redemption Call Right forthwith after the
date by which the same may be exercised by USX. If USX exercises the Redemption
Call Right, on the Automatic Redemption Date USX and the holders will exchange
all of the Exchangeable Shares then outstanding for the Exchangeable Share
Consideration in satisfaction of the Redemption Call Purchase Price.
7.6 For the purposes of completing the exchange of the Exchangeable Shares
pursuant to the Redemption Call Right, USX shall deposit with the Transfer
Agent, on or before the Automatic Redemption Date, the Exchangeable Share
Consideration representing the total Redemption Call Purchase Price. Provided
that such Exchangeable Share Consideration has been so deposited with the
Transfer Agent, on and after the Automatic Redemption Date the rights of each
holder of Exchangeable Shares will be limited to receiving such holder's
proportionate part of (i) the Exchangeable Share Consideration issued by USX in
respect of the total Redemption Call Purchase Price upon presentation and
surrender by the holder of certificates representing the Exchangeable Shares
held by such holder and (ii) any Unpaid Dividends on the last Business Day prior
to the Automatic Redemption Date. Upon deposit of such Exchangeable Share
Consideration, the holder shall on and after the Automatic Redemption Date be
considered and deemed for all purposes to be the holder of the USX-Marathon
Common Stock delivered to such holder. Upon surrender to the Transfer Agent of a
certificate or certificates representing Exchangeable Shares, together with such
other documents and instruments as may be required to effect a transfer of
Exchangeable Shares under applicable law and such additional documents and
instruments as the Transfer Agent may reasonably require, the holder of such
surrendered certificate or certificates shall be entitled to receive in exchange
therefor, and the Transfer Agent on behalf of USX shall deliver to such holder,
the Exchangeable Share Consideration to which the holder is entitled. If USX
does not exercise the Redemption Call Right in the manner described above, on
the Automatic Redemption Date the holders of the Exchangeable Shares will be
entitled to receive in exchange therefor the redemption price otherwise payable
by the Corporation in connection with the redemption of the Exchangeable Shares
pursuant to this Article 7.
7.7 USX may assign its rights to exchange the Exchangeable Share Consideration
for Exchangeable Shares pursuant to the Redemption Call Right to Marathon,
Holdco or a Marathon Subsidiary at any time with respect to all or any portion
of the Exchangeable Shares relating to such right and in such circumstance, all
provisions of this Article 7 relating to the Redemption Call Right which refer
to USX shall, to the extent applicable, apply to Marathon, Holdco or such
Marathon Subsidiary, MUTATIS MUTANDIS, and in such case delivery of the
Exchangeable Share Consideration by or on behalf of Marathon, Holdco or such
Marathon Subsidiary shall satisfy all of USX's obligations under the Redemption
Call Right.
ARTICLE 8
VOTING RIGHTS
8.1 Except as required by applicable law and the provisions hereof, the holders
of the Exchangeable Shares shall not be entitled as such to receive notice of or
to attend any meeting of the shareholders of the Corporation or to vote at any
such meeting.
ARTICLE 9
AMENDMENT AND APPROVAL
9.1 The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may be added to, changed or removed but, except as
hereinafter provided, only with the approval of the holders of the Exchangeable
Shares given as hereinafter specified.
9.2 Any approval given by the holders of the Exchangeable Shares to add to,
change or remove any right, privilege, restriction or condition attaching to the
Exchangeable Shares or any other matter requiring the approval or consent of the
holders of the Exchangeable Shares shall be deemed to have been sufficiently
given if it shall have been given in accordance with applicable law subject to a
minimum requirement that such approval be evidenced by resolution passed by not
less than two-thirds of the votes cast on such resolution by persons represented
in person or by proxy at a meeting of holders of Exchangeable Shares duly called
and held at which the holders of at least 50% of the outstanding Exchangeable
Shares at that time are present or represented by
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proxy. If at any such meeting the holders of at least 50% of the outstanding
Exchangeable Shares at that time are not present or represented by proxy within
one-half hour after the time appointed for such meeting then the meeting shall
be adjourned to such date not less than 10 days thereafter and to such time and
place as may be designated by the Chairman of such meeting. At such adjourned
meeting the holders of Exchangeable Shares present or represented by proxy
thereat may transact the business for which the meeting was originally called
and a resolution passed thereat by the affirmative vote of not less than
two-thirds of the votes cast on such resolution by holders of Exchangeable
Shares represented in person or by proxy at such meeting shall constitute the
approval or consent of the holders of the Exchangeable Shares.
ARTICLE 10
RECIPROCAL CHANGES, ETC. IN RESPECT OF USX-MARATHON COMMON STOCK
10.1 If USX causes any of the following events to occur:
(a) issue or distribute USX-Marathon Common Stock (or securities
exchangeable for or convertible into or carrying rights to acquire
USX-Marathon Common Stock) to the holders of all or substantially all of
the then outstanding USX-Marathon Common Stock by way of stock dividend
or other distribution other than an issue of USX-Marathon Common Stock
(or securities exchangeable for or convertible into or carrying rights
to acquire USX-Marathon Common Stock) to holders of USX-Marathon Common
Stock who exercise an option to receive dividends in USX-Marathon Common
Stock (or securities exchangeable for or convertible into or carrying
rights to acquire USX-Marathon Common Stock) in lieu of receiving cash
dividends; or
(b) issue or distribute rights, options or warrants to the holders of all or
substantially all of the then outstanding USX-Marathon Common Stock
entitling them to subscribe for or to purchase shares of USX-Marathon
Common Stock (or securities exchangeable for or convertible into or
carrying rights to acquire shares of USX-Marathon Common Stock); or
(c) issue or distribute to the holders of all or substantially all of the
then outstanding shares of USX-Marathon Common Stock (i) shares or
securities of USX of any class other than USX-Marathon Common Stock
(other than shares convertible into or exchangeable for or carrying
rights to acquire USX-Marathon Common Stock), (ii) rights, options or
warrants other than those referred to in Section 10.l(b) above, (iii)
evidences of indebtedness of USX or (iv) assets of USX (except as
provided in Section 10.3 of these share provisions);
then, if the Corporation is permitted under applicable law, the Corporation
shall issue or distribute the economic equivalent on a per share basis of such
rights, options, securities, shares, evidences of indebtedness or other assets
simultaneously to holders of the Exchangeable Shares. In the event that the
Corporation is not so permitted under applicable law, then the dividend
entitlement described in Section 3.1 of these share provisions and the
Exchangeable Share Price shall be subject to adjustment from time to time upon
the occurrence of any such event in the manner determined by the Board of
Directors in their sole discretion to not be prejudicial to the interests of the
holders of Exchangeable Shares. Such adjustment shall increase or decrease the
dividend entitlement and the Exchangeable Share Price, as the case may be, so as
to maintain the equivalent entitlement as was available to holders of
Exchangeable Shares prior to occurrence of such event.
10.2 If USX shall cause any of the following events to occur:
(a) subdivide, redivide or change the then outstanding shares of
USX-Marathon Common Stock into a greater number of shares of
USX-Marathon Common Stock; or
(b) reduce, combine or consolidate or change the then outstanding shares of
USX-Marathon Common Stock into a lesser number of shares of USX-Marathon
Common Stock; or
(c) reclassify or otherwise change the shares of USX-Marathon Common Stock
or effect an amalgamation, merger, reorganization or other transaction
affecting the shares of USX-Marathon Common Stock;
then the dividend entitlement described in Section 3.1 of these share provisions
and the Exchangeable Share Price shall be subject to adjustment from time to
time upon the occurrence of any such event in the manner as
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determined by the Board of Directors in their sole discretion to not be
prejudicial to the interests of the holders of Exchangeable Shares. Such
adjustment shall increase or decrease the dividend entitlement and the
Exchangeable Share Price so as to maintain the equivalent entitlement as was
available to holders of Exchangeable Shares prior to occurrence of such event.
10.3 In the event that the board of directors of USX declares that all of the
outstanding shares of USX-Marathon Common Stock shall be exchanged for all of
the outstanding shares of common stock of a wholly-owned subsidiary of USX (the
"Marathon Group Subsidiary"), as provided in Section 2(a) of Division I of the
USX Certificate (the "Marathon Group Exchange"), then upon the completion of the
Marathon Group Exchange all references to USX and Marathon in these share
provisions shall be deemed to be references to the Marathon Group Subsidiary and
all references to USX-Marathon Common Stock in these share provisions shall be
deemed to be references to common stock of the Marathon Group Subsidiary. Each
holder of an Exchangeable Share acknowledges that the Plan of Arrangement, the
Support Agreement and the Exchange Trust Agreement each contain provisions
acknowledging the effect of the Marathon Group Exchange and that the Support
Agreement and the Exchange Trust Agreement each contain covenants of USX that in
the event of the Marathon Group Exchange being consummated, the Marathon Group
Subsidiary shall agree to become a party to the Support Agreement and the
Exchange Trust Agreement on substantially the same terms as such agreements
shall contain at the time of the Marathon Group Exchange. For greater certainty,
the Marathon Group Exchange shall not require any adjustments as described in
Sections 10.1 or 10.2 of these share provisions.
10.4 Each holder of an Exchangeable Share acknowledges that the Support
Agreement and the Exchange Trust Agreement each provide, in part, that the
provisions of the Support Agreement and the Exchange Trust Agreement shall not
be changed without the approval of the holders of the Exchangeable Shares given
in accordance with Section 9.2 of these share provisions.
ARTICLE 11
ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
11.1 The Corporation will take all such actions and do all such things as shall
be necessary or advisable to perform and comply with and to ensure performance
and compliance by USX and Marathon with all provisions of the Support Agreement
and the Exchange Trust Agreement in accordance with the terms thereof including,
without limitation, taking all such actions and doing all such things as shall
be necessary or advisable to enforce to the fullest extent possible all rights
and benefits in favour of the Corporation under or pursuant thereto.
11.2 The Corporation shall not propose, agree to or otherwise give effect to any
amendment to, or waiver or forgiveness of its rights or obligations under, the
Support Agreement or the Exchange Trust Agreement without the approval of the
holders of the Exchangeable Shares given in accordance with Section 9.2 of these
share provisions other than such amendments, waivers and/or forgiveness as may
be necessary or advisable for the purposes of:
(a) adding to the covenants of the other party or parties to such agreement
for the protection of the Corporation or the holders of Exchangeable
Shares; or
(b) making such provisions or modifications not inconsistent with such
agreement as may be necessary or desirable with respect to matters or
questions arising thereunder, including, without limitation, any changes
required for the purposes of Sections 10.1 or 10.2 of these share
provisions or Sections 2.6 or 2.7 of the Support Agreement, which, in
the opinion of the Board of Directors, it may be expedient to make,
provided that the Board of Directors shall be of the opinion, after
consultation with counsel, that such provisions and modifications will
not be prejudicial to the interests of the holders of the Exchangeable
Shares; or
(c) making such changes in or corrections to such agreement which, on the
advice of counsel to the Corporation, are required for the purpose of
curing or correcting any ambiguity or defect or inconsistent provision
or clerical omission or mistake or manifest error contained therein,
provided that the Board of Directors shall be of the opinion, after
consultation with counsel, that such changes or corrections will not be
prejudicial to the interests of the holders of the Exchangeable Shares.
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ARTICLE 12
EXCHANGE RIGHT
12.1 Each holder of Exchangeable Shares shall have the right at any time or from
time to time to require USX to purchase from such holder at any time all or any
part of the Exchangeable Shares held by such holder in consideration for
Exchangeable Share Consideration representing the Exchangeable Share Price
applicable on the last Business Day prior to the exercise of this right of
exchange. This right of exchange shall be exercisable by the holder delivering
the certificates for any Exchangeable Shares to be exchanged to the Corporation
together with a request to effect such purchase by USX. In such event, the
Corporation will immediately give notice of such request to USX.
12.2 USX may assign its obligation to purchase Exchangeable Shares from holders
pursuant to the exercise of the rights of such holders set out in Section 12.1
to Marathon, Holdco or any Marathon Subsidiary.
ARTICLE 13
LEGEND
13.1 The certificates evidencing the Exchangeable Shares shall contain or have
affixed thereto a legend, in form and on terms approved by the Board of
Directors, with respect to the Support Agreement, the provisions of the Plan of
Arrangement relating to the Liquidation Call Right, the Retraction Call Right
and the Redemption Call Right, and the Exchange Trust Agreement (including the
provisions with respect to the exchange right and automatic exchange rights
thereunder).
ARTICLE 14
MISCELLANEOUS
14.1 Any notice, request or other communication to be given to the Corporation
by a holder of Exchangeable Shares shall be in writing and shall be valid and
effective if given by mail (postage prepaid) or by telecopy or by delivery to
the registered office of the Corporation and addressed to the attention of the
President. Any such notice, request or other communication, if given by mail,
telecopy or delivery, shall only be deemed to have been given and received upon
actual receipt thereof by the Corporation.
14.2 Any presentation and surrender by a holder of Exchangeable Shares to the
Corporation or the Transfer Agent of certificates representing Exchangeable
Shares in connection with the liquidation, dissolution or winding-up of the
Corporation or the retraction or redemption of Exchangeable Shares shall be made
by mail (postage prepaid) or by delivery to the registered office of the
Corporation or to such office of the Transfer Agent as may be specified by the
Corporation, in each case addressed to the attention of the President of the
Corporation. Any such presentation and surrender of certificates shall only be
deemed to have been made and to be effective upon actual receipt thereof by the
Corporation or the Transfer Agent, as the case may be. Any such presentation and
surrender of certificates made by mail shall be at the sole risk of the holder
mailing the same.
14.3 Any notice, request or other communication to be given to a holder of
Exchangeable Shares by or on behalf of the Corporation shall be in writing and
shall be valid and effective if given by mail (postage prepaid) or by delivery
to the address of the holder recorded in the securities register of the
Corporation or, in the event of the address of any such holder not being so
recorded, then at the last known address of such holder. Any such notice,
request or other communication, if given by mail, shall be deemed to have been
given and received on the fifth Business Day following the date of mailing and,
if given by delivery, shall be deemed to have been given and received on the
date of delivery. Accidental failure or omission to give any notice, request or
other communication to one or more holders of Exchangeable Shares shall not
invalidate or otherwise alter or affect any action or proceeding to be taken by
the Corporation pursuant thereto.
14.4 All Exchangeable Shares acquired by the Corporation upon the redemption or
retraction thereof shall be cancelled.
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EXHIBIT A
RETRACTION REQUEST
To 761581 Alberta Ltd. (the "Corporation") and USX Corporation ("USX") and
Marathon Oil Company ("Marathon")
This request is given pursuant to Article 6 of the provisions (the "SHARE
PROVISIONS") attaching to the share(s) represented by this certificate and all
capitalized words and expressions used in this request which are defined in the
Share Provisions have the meanings attributed to such words and expressions in
such Share Provisions.
The undersigned hereby requests that the Corporation, subject to the
Retraction Call Right referred to below, redeem in accordance with Article 6 of
the Share Provisions:
/ / all share(s) represented by this certificate; or
/ / ______ share(s) only.
The undersigned hereby notifies the Corporation that the Retraction Date
shall be ____________.
NOTE: The Retraction Date must be a Business Day and must not be less than
three Business Days nor more than 10 Business Days after the date upon
which this request is received by the Corporation. In the event that no
such Business Day is specified above, the Retraction Date shall be deemed
to be the tenth Business Day after the date on which this request is
received by the Corporation.
The undersigned acknowledges the Retraction Call Right of USX and Marathon
to purchase all but not less than all the Retracted Shares from the undersigned
and that this request shall be deemed to be a revocable offer by the undersigned
to exchange the Retracted Shares with USX or Marathon in accordance with the
Retraction Call Right on the Retraction Date for the Exchangeable Share
Consideration and on the other terms and conditions set out in Section 6.3 of
the Share Provisions. If neither USX nor Marathon exercise the Retraction Call
Right, the Corporation will notify the undersigned of such fact as soon as
possible. This retraction request, and offer to exchange the Retracted Shares
with USX or Marathon may be revoked and withdrawn by the undersigned by notice
in writing given to the Corporation at any time before the close of business on
the Business Day immediately preceding the Retraction Date. The undersigned
acknowledges that USX and Marathon are entitled to assign to certain other
parties in whole or in part their rights under the Retraction Call Right in
accordance with and subject to the terms thereof.
The undersigned acknowledges that if, as a result of liquidity or solvency
provisions of applicable law, the Corporation is unable to redeem all Retracted
Shares, the undersigned will be deemed to have exercised the Exchange Right (as
defined in the Exchange Trust Agreement) so as to require USX or Marathon or
their permitted assignee to exchange the Exchangeable Share Consideration for
the unredeemed Retracted Shares.
The undersigned hereby represents and warrants to the Corporation, USX and
Marathon that the undersigned has good title to, and owns, the share(s)
represented by this certificate to be acquired under this request or the
Retraction Call Right as the case may be, free and clear of all liens, claims
and encumbrances.
- ------------------- ---------------------------- ----------------------------
(Date) (Signature of Shareholder) (Guarantee of Signature)
/ / Please check box if the legal or beneficial owner of the Retracted Shares
is a non-resident of Canada.
/ / Please check box if the securities and any cheque(s) to be delivered in
connection with the retraction or exchange of the Retracted Shares are to
be held for pick-up by the shareholder at the principal transfer office of
Montreal Trust Company of Canada (the "Transfer Agent") in Calgary,
Alberta, failing which the securities will be delivered to the last address
of the shareholder as it appears on the register by such means as the
Corporation deems appropriate.
NOTE: This panel must be completed and this certificate, together with such
additional documents as the Transfer Agent may require, must be deposited
with the Transfer Agent at its principal transfer office
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in Calgary, Alberta. The securities to be delivered in connection with
the retraction or exchange of the Retracted Shares will be issued and
registered in, or transferred into, respectively, the name of the
shareholder as it appears on the register of the Corporation and the
securities to be delivered in connection with such retraction or exchange
will be delivered to such shareholder as indicated above, unless the form
appearing immediately below is duly completed.
<TABLE>
<S> <C>
Date
- ------------------------------------------------- ------------------------------------------
Name of Person in Whose Name Securities Are To Be
Registered, Issued or Delivered (please print)
- ------------------------------------------------- ----------------------------------------------
Street Address or P.O. Box Signature of Shareholder
- ------------------------------------------------- ----------------------------------------------
City, -- Province Signature Guaranteed by
</TABLE>
NOTE: If the retraction request is for less than all of the share(s)
represented by this certificate, a certificate representing the remaining
shares of the Corporation will be issued and registered in the name of
the shareholder as it appears on the register of the Corporation, unless
the Share Transfer Power on the share certificate is duly completed in
respect of such shares.
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Schedule 3 to that Arrangement Agreement
made the 20th day of June, 1998 between
Tarragon Oil and Gas Limited, Marathon Oil Company,
761581 Alberta Ltd. and 787722 Alberta Ltd.
as amended and restated the 7th day of July, 1998
SUPPORT AGREEMENT
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SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT made as of the _______ day of ______________, 1998,
BETWEEN:
USX CORPORATION, a corporation incorporated under the laws of the
State of Delaware and having its head and principal office at
Pittsburgh, Pennsylvania (hereinafter referred to as "USX")
-and -
MARATHON OIL COMPANY, a corporation incorporated under the laws of
the State of Ohio and having its head and principal office at
Houston, Texas (hereinafter referred to as "Marathon")
-and -
761581 ALBERTA LTD., a corporation incorporated under the laws of the
Province of Alberta and having its head and principal office at
Calgary, Alberta (hereinafter referred to as "Albertaco")
WHEREAS pursuant to an arrangement agreement dated as of June - , 1998, by
and among Marathon, Albertaco, 787722 Alberta Ltd. ("Holdco") and Tarragon Oil
and Gas Limited ("Tarragon") (such agreement as it may be amended or restated is
hereinafter referred to as the "Arrangement Agreement"), Marathon, Albertaco,
Holdco and Tarragon agreed that on the Effective Date (as defined in the
Arrangement Agreement), USX, Marathon and Albertaco would execute and deliver a
Support Agreement containing the terms and conditions set forth in Schedule 3 to
the Arrangement Agreement together with such other terms and conditions as may
be agreed to by the parties to the Arrangement Agreement acting reasonably;
AND WHEREAS pursuant to an arrangement (the "Arrangement") effected by
Articles of Arrangement dated - , 1998 filed pursuant to the BUSINESS
CORPORATIONS ACT (Ontario) all of the issued and outstanding common shares of
Tarragon ("Tarragon Common Shares") were exchanged for Exchangeable Shares of
Albertaco (the "Exchangeable Shares");
AND WHEREAS the Articles of Albertaco set forth the rights, privileges,
restrictions and conditions (collectively, the "Exchangeable Share Provisions")
attaching to the Exchangeable Shares;
AND WHEREAS the parties hereto desire to make appropriate provision and to
establish a procedure whereby USX or Marathon will take certain actions and make
certain deliveries necessary to ensure that Albertaco will be able to deliver or
cause to be delivered shares of USX-Marathon Common Stock in satisfaction of the
obligations of Albertaco under the Exchangeable Share Provisions with respect to
the payment and satisfaction of Liquidation Amounts and Exchangeable Share
Prices payable upon Retraction and Redemption, all in accordance with the
Exchangeable Share Provisions;
NOW THEREFORE in consideration of the covenants and agreements herein
contained and other good and valuable consideration (the receipt and sufficiency
of which are hereby acknowledged), the parties hereto covenant and agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS. Each term denoted herein by initial capital letters and not
otherwise defined herein shall have the meaning attributed thereto in the
Exchangeable Share Provisions, unless the context requires otherwise.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this Agreement
into articles, sections and paragraphs and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
1.3 NUMBER, GENDER, ETC. Words importing the singular number only shall include
the plural and vice versa. Words importing the use of any gender shall include
all genders.
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1.4 DATE FOR ANY ACTION. If any date on which any action is required to be taken
under this Agreement is not a Business Day, such action shall be required to be
taken on the next succeeding Business Day.
ARTICLE 2
COVENANTS OF USX, MARATHON AND ALBERTACO
2.1 COVENANTS OF USX AND MARATHON REGARDING EXCHANGEABLE SHARES. So long as any
Exchangeable Shares are outstanding, USX and Marathon, as applicable, will:
(a) not declare or pay any dividend on USX-Marathon Common Stock unless
Albertaco shall simultaneously declare or pay, as the case may be, an
equivalent dividend on the Exchangeable Shares, in each case in
accordance with the Exchangeable Share Provisions;
(b) advise Albertaco of any dividend on USX-Marathon Common Stock and take
all such other actions as are necessary, in cooperation with Albertaco,
to ensure that the respective declaration date, record date and payment
date for a dividend on the Exchangeable Shares shall be the same as the
record date, declaration date and payment date for the corresponding
dividend on USX-Marathon Common Stock and such dividend on the
Exchangeable Shares shall correspond with any requirement of the
principal stock exchange on which the Exchangeable Shares are listed;
(c) ensure that the record date for any dividend declared on USX-Marathon
Common Stock is not less than 10 calendar days after the declaration
date for such dividend;
(d) take all such actions and do all such things as are necessary or
desirable, in accordance with applicable law, to perform its obligations
with respect to the satisfaction of the Liquidation Amount in respect of
each issued and outstanding Exchangeable Share upon the liquidation,
dissolution or winding-up of Albertaco, by causing to be delivered
shares of USX-Marathon Common Stock to the holders of Exchangeable
Shares in accordance with the provisions of Article 5 of the
Exchangeable Share Provisions;
(e) take all such actions and do all such things as are necessary or
desirable, in accordance with applicable law, to perform its obligations
with respect to the satisfaction of the Exchangeable Share Price payable
on any Retraction Date and on the Automatic Redemption Date, by causing
to be delivered to holders of Exchangeable Shares, shares of
USX-Marathon Common Stock, upon the retraction or redemption of the
Exchangeable Shares in accordance with the provisions of Article 6 or
Article 7 of the Exchangeable Share Provisions, as the case may be;
(f) not exercise its vote as a direct or indirect shareholder to initiate
the voluntary liquidation, dissolution or winding-up of Albertaco nor
take any action or omit to take any action that is designed to result in
the liquidation, dissolution or winding-up of Albertaco; and
(g) provide public notification in a newspaper of general circulation in
Canada (if such notification does not otherwise occur) of the occurrence
of an event which would, with the lapse of time, result in the
separation of the rights under the USX Restated Rights Agreement from
the Marathon Shares.
2.2 RESERVATION OF SHARES OF USX-MARATHON COMMON STOCK. USX hereby represents,
warrants and covenants that it has irrevocably reserved for issuance and will at
all times keep available, free from preemptive and other rights, out of its
authorized and unissued capital stock such number of shares of USX-Marathon
Common Stock (including, upon their creation, other shares or securities into
which USX-Marathon Common Stock may be reclassified or changed as contemplated
by Section 2.6 hereof) as are now and may hereafter be required to meet the
obligations of USX and Marathon, and to enable and permit Albertaco to meet its
obligations, under this Agreement, under the Exchange Trust Agreement, under the
Exchangeable Share Provisions and under any other security or commitment
pursuant to the Arrangement with respect to which USX may now or hereafter be
required to issue, or Albertaco may be required to deliver or cause to be
delivered, shares of USX-Marathon Common Stock.
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<PAGE> 62
2.3 NOTIFICATION OF CERTAIN EVENTS. In order to assist USX and Marathon to
comply with their obligations hereunder, Albertaco will give USX and Marathon
notice of each of the following events at the time set forth below:
(a) immediately, upon receipt by Albertaco of a Retraction Request (as
defined in the Exchangeable Share Provisions);
(b) at least 130 days prior to any accelerated Automatic Redemption Date
determined by the Board of Directors of Albertaco in accordance with the
Exchangeable Share Provisions; and
(c) as soon as practicable upon the issuance by Albertaco of any
Exchangeable Shares or rights to acquire Exchangeable Shares.
2.4 DELIVERY OF SHARES OF USX-MARATHON COMMON STOCK. In furtherance of their
obligations hereunder, upon notice of (i) any event which requires Albertaco to
cause to be delivered shares of USX-Marathon Common Stock to any holder of
Exchangeable Shares, or (ii) the exercise by a holder of its rights pursuant to
the Exchangeable Share Provisions to require USX to purchase directly from such
holder all or any part of the Exchangeable Shares held by such holder, USX shall
forthwith issue and deliver the requisite shares of USX-Marathon Common Stock to
or to the order of the former holder of the surrendered Exchangeable Shares, and
Albertaco shall supply to USX all information in Albertaco's possession
necessary to facilitate such issuance and delivery. All such shares of
USX-Marathon Common Stock shall be duly issued as fully paid and non-assessable
and shall be free and clear of any lien, claim, encumbrance, security interest
or adverse claim.
2.5 QUALIFICATION OF SHARES OF USX-MARATHON COMMON STOCK. USX and Marathon
covenant that if any shares of USX-Marathon Common Stock (or other shares or
securities into which USX-Marathon Common Stock may be reclassified or changed
as contemplated by Section 2.6 hereof) to be issued and delivered hereunder,
including for greater certainty, pursuant to the Exchangeable Share Provisions,
or pursuant to the Exchange Right (as defined in the Exchange Trust Agreement)
require registration or qualification with or approval of or the filing of any
document including any prospectus or similar document or the taking of any
proceeding with or the obtaining of any order, ruling or consent from any
governmental or regulatory authority under any Canadian or United States
federal, provincial or state law or regulation or pursuant to the rules and
regulations of any regulatory authority or the fulfilment of any other legal
requirement (collectively, the "Applicable Laws") before such shares (or other
shares or securities into which USX-Marathon Common Stock may be reclassified or
changed as contemplated by Section 2.6 hereof) may be issued and delivered by
USX to the initial holder thereof (other than Albertaco) or in order that such
shares may be freely traded thereafter (other than any restrictions on transfer
by reason of a holder being a "control person" of USX for purposes of Canadian
federal or provincial securities law or an "affiliate" of USX or, prior to the
Effective Date, of Tarragon for purposes of United States federal or state
securities law), USX or Marathon will in good faith expeditiously take all such
reasonable actions and do all such reasonable things as are necessary to cause
such shares of USX-Marathon Common Stock (or other shares or securities into
which USX-Marathon Common Stock may be reclassified or changed as contemplated
by Section 2.6 hereof) to be and remain duly registered, qualified or approved.
USX and Marathon each represent and warrant that it has in good faith taken all
actions and done all things as are necessary under Applicable Laws as they exist
on the date hereof to cause the shares of USX-Marathon Common Stock (or other
shares or securities into which USX-Marathon Common Stock may be reclassified or
changed as contemplated by Section 2.6 hereof) to be issued and delivered
hereunder, including for greater certainty, pursuant to the Exchangeable Share
Provisions, or pursuant to the Exchange Right to be freely tradeable thereafter
(other than restrictions on transfer by reason of a holder being a "control
person" of USX for the purposes of Canadian federal and provincial securities
law or an "affiliate" of USX or, prior to the Effective Date, of Tarragon for
the purposes of United States federal or state securities law). USX and Marathon
will in good faith expeditiously take all such reasonable actions and do all
such reasonable things as are necessary to cause all shares of USX-Marathon
Common Stock (or other shares or other securities into which USX-Marathon Common
Stock may be reclassified or changed as contemplated by Section 2.6 hereof) to
be delivered hereunder, including for greater certainty, pursuant to the
Exchangeable Share Provisions, or pursuant to the Exchange Right to be listed,
quoted or posted for trading on all stock exchanges and quotation systems on
which such shares are listed, quoted or posted for trading at such time. USX and
Marathon will in good faith expeditiously take all such reasonable action and do
all such reasonable things as are necessary to
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cause all Exchangeable Shares to be and to continue to be listed and posted for
trading on The Toronto Stock Exchange or another stock exchange in Canada.
2.6 NOTICE OF CERTAIN EVENTS. If USX shall:
(a) issue or distribute shares of USX-Marathon Common Stock (or securities
exchangeable for or convertible into or carrying rights to acquire
shares of USX-Marathon Common Stock) to the holders of all or
substantially all of the then outstanding USX-Marathon Common Stock by
way of stock dividend or other distribution; or
(b) issue or distribute rights, options or warrants to the holders of all or
substantially all of the then outstanding shares of USX-Marathon Common
Stock entitling them to subscribe for or to purchase shares of
USX-Marathon Common Stock (or securities exchangeable for or convertible
into or carrying rights to acquire shares of USX-Marathon Common Stock);
or
(c) issue or distribute to the holders of all or substantially all of the
then outstanding shares of USX-Marathon Common Stock (i) shares or
securities of USX of any class other than USX-Marathon Common Stock
(other than shares convertible into or exchangeable for or carrying
rights to acquire shares of USX-Marathon Common Stock), (ii) rights,
options or warrants other than those referred to in subsection
2.7(a)(ii) above, (iii) evidences of indebtedness of USX or (iv) assets
of USX; or
(d) subdivide, divide or change the then outstanding shares of USX-Marathon
Common Stock into a greater number of shares of USX-Marathon Common
Stock; or
(e) reduce, combine or consolidate or change the then outstanding shares of
USX-Marathon Common Stock into a lesser number of shares of USX-Marathon
Common Stock; or
(f) reclassify or otherwise change the shares of USX-Marathon Common Stock
or effect an amalgamation, merger, reorganization or other transaction
affecting the shares of USX-Marathon Common Stock;
then USX will ensure that the record date for any such event or (if no record
date is applicable for such event) the effective date for any such event, is not
less than 10 calendar days after the date on which such event is declared or
announced by USX (with simultaneous notice thereof to be given by USX to
Albertaco).
2.7 TENDER OFFERS, ETC. In the event that a tender offer, share exchange offer,
issuer bid, take-over bid or similar transaction with respect to USX-Marathon
Common Stock (an "Offer"), is proposed by USX or is proposed to USX or its
shareholders and is recommended by the Board of Directors of USX, or is
otherwise effected or to be effected with the consent or approval of the Board
of Directors of USX, USX shall take all such actions and do all such things as
are necessary and reasonably within its power to enable and permit holders of
Exchangeable Shares to participate in such Offer to the same extent and on an
equivalent basis as the holders of shares of USX-Marathon Common Stock, without
discrimination. USX may discharge this obligation by ensuring that holders of
Exchangeable Shares may participate in all such Offers by means of retraction of
Exchangeable Shares as against Albertaco which shall be effective only upon, and
shall be conditional upon, the closing of the Offer and only to the extent
necessary to tender or deposit to the Offer.
2.8 OWNERSHIP OF OUTSTANDING SHARES. USX covenants and agrees in favour of
Albertaco that, as long as any outstanding Exchangeable Shares are owned by any
person or entity other than USX or any of its Subsidiaries, USX, or any
successor entity to USX contemplated by Section 2.6(f) hereof, will be and
remain the direct or indirect beneficial owner of all outstanding voting
securities of Albertaco.
2.9 USX NOT TO VOTE EXCHANGEABLE SHARES. USX covenants and agrees that it will
appoint and cause to be appointed proxyholders with respect to all Exchangeable
Shares held by USX and its Subsidiaries for the sole purpose of attending each
meeting of holders of Exchangeable Shares in order to be counted as part of the
quorum for each such meeting. USX further covenants and agrees that it will not,
and will cause its Subsidiaries not to, exercise any voting rights which may be
exercisable by holders of Exchangeable Shares from time to time pursuant to the
Exchangeable Share Provisions or pursuant to the provisions of any corporate
statute by which Albertaco may be governed with respect to any Exchangeable
Shares held by it or by its Subsidiaries in respect of any matter considered at
any meeting of holders of Exchangeable Shares.
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2.10 DUE PERFORMANCE. On and after the Effective Date, USX and Marathon shall
duly and timely perform all of their obligations provided for in connection with
the Plan of Arrangement including any obligations that may arise upon the
exercise of USX's or Marathon's rights under the Exchangeable Share Provisions.
ARTICLE 3
GENERAL
3.1 TERM. This Agreement shall come into force and be effective as of the date
hereof and shall terminate and be of no further force and effect at such time as
the rights as shareholders of all holders of Exchangeable Shares (other than USX
and any of its subsidiaries) have been terminated in accordance with the terms
of the Exchangeable Share Provisions and no Exchangeable Shares (or securities
or rights convertible into or exchangeable for or carrying rights to acquire
Exchangeable Shares) are held by any party other than USX and any of its
Subsidiaries.
3.2 CHANGES IN CAPITAL OF USX.
(a) GENERAL. Notwithstanding the provisions of Section 3.4 hereof, at all
times after the occurrence of any event effected pursuant to Section 2.6
or 2.7 hereof, as a result of which either USX-Marathon Common Stock or
the Exchangeable Shares or both are in any way changed, or after the
occurrence of any event requiring an adjustment to the dividend
entitlement or the Exchangeable Share Price pursuant to Section 10.1 or
10.2 of the Exchangeable Share provisions, this Agreement shall
forthwith be amended and modified as necessary in order that it shall
apply with full force and effect, MUTATIS MUTANDIS, to all new
securities into which USX-Marathon Common Stock or the Exchangeable
Shares or both are so changed and the parties hereto shall execute and
deliver an agreement in writing giving effect to and evidencing such
necessary amendments and modifications.
(b) MARATHON GROUP EXCHANGE. The Parties hereto acknowledge that the USX
Certificate provides for the ability of the board of directors of USX to
declare that all of the outstanding shares of USX-Marathon Common Stock
shall be exchanged for all of the outstanding shares of common stock of
a wholly-owned subsidiary of USX (the "Marathon Group Subsidiary") in
circumstances where USX has transferred all of the assets and
liabilities of the Marathon Group to the Marathon Group Subsidiary (the
"Marathon Group Exchange"). If USX shall complete the Marathon Group
Exchange, then the Marathon Group Subsidiary shall execute,
contemporaneously with the consummation of the Marathon Group Exchange,
an amending agreement supplemental to this Agreement and such other
instruments and agreements as are necessary or advisable to evidence (i)
the assumption by the Marathon Group Subsidiary of liability for all the
obligations of USX and Marathon in this Agreement and the Exchange Trust
Agreement and (ii) the Marathon Group Subsidiary's agreement to observe
and perform all the covenants and obligations of USX and Marathon under
this Agreement and the Exchange Trust Agreement.
(c) MARATHON GROUP ASSUMPTION AGREEMENT. Whenever the conditions of Section
3.2(b) hereof have been duly observed and performed, Albertaco and the
Marathon Group Subsidiary shall execute and deliver the supplemental
agreement provided for in Section 3.2(b) and thereupon (i) the Marathon
Group Subsidiary shall possess and from time to time may exercise each
and every right and power of USX and Marathon under this Agreement, the
Exchangeable Share Provisions, the Plan of Arrangement and the Exchange
Trust Agreement in the place of USX and Marathon and (ii) in this
Agreement, the Exchangeable Share Provisions and the Plan of
Arrangement, all references to USX and Marathon shall be deemed to be
references to the Marathon Group Subsidiary and all references to shares
of USX-Marathon Common Stock shall be deemed to be references to common
stock of the Marathon Group Subsidiary.
(d) NO SHAREHOLDER APPROVAL. Provided that the provisions of Section 3.2(b)
and 3.2(c) are complied with, the approval of the holders of
Exchangeable Shares shall not be required in order for USX to consummate
the Marathon Group Exchange.
3.3 SEVERABILITY. If any provision of this Agreement is held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of the
remainder of this Agreement shall not in any way be affected or impaired
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thereby and this Agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
3.4 AMENDMENTS, MODIFICATIONS, ETC. Except as provided in Section 3.2, this
Agreement may not be amended or modified except by an agreement in writing
executed by Albertaco, Marathon and USX and approved by the holders of the
Exchangeable Shares in accordance with Section 9.2 of the Exchangeable Share
Provisions.
3.5 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of Section 3.4, the
parties to this Agreement may in writing, at any time and from time to time,
without the approval of the holders of the Exchangeable Shares, amend or modify
this Agreement for the purposes of:
(a) adding to the covenants of any party for the protection of the holders
of the Exchangeable Shares;
(b) making such amendments or modifications not inconsistent with this
Agreement as may be necessary or desirable with respect to matters or
questions which it may be expedient to make, provided that such
amendments or modifications will not be prejudicial to the interests of
the holders of the Exchangeable Shares; or
(c) making such changes or corrections which, on the advice of counsel to
Albertaco, Marathon and USX, are required for the purpose of curing or
correcting any ambiguity or defect or inconsistent provision or clerical
omission or mistake or manifest error, provided that the parties shall
be of the opinion that such changes or corrections will not be
prejudicial to the interests of the holders of the Exchangeable Shares.
3.6 MEETING TO CONSIDER AMENDMENTS. Albertaco, at the request of USX or
Marathon, shall call a meeting or meetings of the holders of the Exchangeable
Shares for the purpose of considering any proposed amendment or modification
requiring approval of such shareholders. Any such meeting or meetings shall be
called and held in accordance with the by-laws of Albertaco, the Exchangeable
Share Provisions and all applicable laws.
3.7 INUREMENT. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and the holders, from time to time, of Exchangeable Shares
and each of their respective heirs, successors and assigns.
3.8 NOTICES TO PARTIES. All notices and other communications between the parties
shall be in writing and shall be deemed to have been given if delivered
personally or by confirmed telecopy to the parties at the following addresses
(or at such other address for either such party as shall be specified in like
notice):
(a) if to USX or Marathon at:
USX Corporation
600 Grant Street
Pittsburgh, Pennsylvania 15219
Attention: General Counsel
Telecopier No.: (412) 433-2811
with a copy to:
Marathon Oil Company
5555 San Felipe
Houston, Texas 77056
Attention: President
Telecopier No.: (713) 296-4171
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(b) if to Albertaco at:
c/o Tarragon Oil and Gas Limited
Suite 2500, 500 - 4th Avenue S.W.
Calgary, Alberta T2P 2V6
Attention: President
Telecopier No.: (403) 262-5324
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof
unless such day is not a Business Day in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
3.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed an original, and all of which taken together shall constitute
one and the same instrument.
3.10 JURISDICTION AND ATTORNMENT. This Agreement shall be construed and enforced
in accordance with the laws of the Province of Alberta and the laws of Canada
applicable therein. USX and Marathon agree that any action or proceeding arising
out of or relating to this Agreement may be instituted in the courts of Alberta,
waive any objection which they may have now or hereafter to the venue of any
such action or proceeding, irrevocably submit to the jurisdiction of the said
courts in any such action or proceeding and agree to be bound by any judgment of
the said courts and hereby appoint Albertaco at its registered office in the
Province of Alberta as USX's and Marathon's attorney for service of process in
connection with any such action or proceeding.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
USX CORPORATION
Per: _________________________________
Per: _________________________________
MARATHON OIL COMPANY
Per: _________________________________
Per: _________________________________
761581 ALBERTA LTD.
Per: _________________________________
Per: _________________________________
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Schedule 4 to that Arrangement Agreement
made the 20th day of June, 1998 between
Tarragon Oil and Gas Limited, Marathon Oil Company,
761581 Alberta Ltd. and 787722 Alberta Ltd.
as amended and restated the 7th day of July, 1998
EXCHANGE TRUST AGREEMENT
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EXCHANGE TRUST AGREEMENT
THIS EXCHANGE TRUST AGREEMENT made as of the - day of - , 1998,
AMONG:
USX CORPORATION, a corporation incorporated under the laws of the
State of Delaware and having its head and principal office at
Pittsburgh, Pennsylvania (hereinafter referred to as "USX")
-- and --
MARATHON OIL COMPANY, a corporation incorporated under the laws of
the State of Ohio and having its head and principal office at
Houston, Texas (hereinafter referred to as "Marathon")
-- and --
761581 ALBERTA LTD., a corporation incorporated under the laws of the
Province of Alberta and having its head and principal office at
Calgary, Alberta (hereinafter referred to as "Albertaco")
-- and --
MONTREAL TRUST COMPANY OF CANADA, a trust company existing under the
laws of Canada (hereinafter referred to as the "Trustee")
WHEREAS pursuant to an arrangement agreement dated as of June 20, 1998, by
and among Marathon, Albertaco, 787722 Alberta Ltd. ("Holdco") and Tarragon Oil
and Gas Limited ("Tarragon") (such agreement as it may be amended or restated is
hereinafter referred to as the "Arrangement Agreement"), Marathon, Albertaco,
Holdco and Tarragon agreed that on the Effective Date (as defined in the
Arrangement Agreement), USX, Marathon and Albertaco would execute and deliver an
Exchange Trust Agreement containing the terms and conditions set forth in
Schedule 4 to the Arrangement Agreement together with such other terms and
conditions as may be agreed to by the parties to the Arrangement Agreement
acting reasonably;
AND WHEREAS pursuant to an arrangement (the "Arrangement") effected by
Articles of Arrangement dated - , 1998 filed pursuant to the BUSINESS
CORPORATIONS ACT (Ontario) all of the issued and outstanding common shares of
Tarragon ("Tarragon Common Shares") were exchanged for Exchangeable Shares of
Albertaco (the "Exchangeable Shares");
AND WHEREAS the Articles of Albertaco set forth the rights, privileges,
restrictions and conditions (collectively, the "Exchangeable Share Provisions")
attaching to the Exchangeable Shares;
AND WHEREAS USX is to grant to and in favour of the holders (other than USX
and its Subsidiaries) from time to time of Exchangeable Shares the right, in the
circumstances set forth herein, to require USX to purchase from each such holder
all or any part of the Exchangeable Shares held by the holder;
AND WHEREAS these recitals and any statements of fact in this Agreement are
made by USX, Marathon and Albertaco and not by the Trustee;
NOW THEREFORE in consideration of the respective covenants and agreements
provided in this Agreement and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. In this Agreement, the following terms shall have the following
meanings:
(a) "ARRANGEMENT" has the meaning attributed thereto in the recitals hereto.
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(b) "AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of USX
to effect the automatic exchange of shares of USX-Marathon Common Stock
for Exchangeable Shares pursuant to Section 3.11 hereof.
(c) "BOARD OF DIRECTORS" means the Board of Directors of Albertaco.
(d) "BUSINESS DAY" has the meaning attributed thereto in the Exchangeable
Share Provisions.
(e) "EXCHANGE RIGHT" has the meaning attributed thereto in Article 3 hereof.
(f) "EXCHANGEABLE SHARE CONSIDERATION" has the meaning attributed thereto in
the Exchangeable Share Provisions.
(g) "EXCHANGEABLE SHARE PRICE" has the meaning attributed thereto in the
Exchangeable Share Provisions.
(h) "EXCHANGEABLE SHARE PROVISIONS" has the meaning attributed thereto in
the recitals hereto.
(i) "EXCHANGEABLE SHARES" has the meaning attributed thereto in the recitals
hereto.
(j) "HOLDCO" means 787722 Alberta Ltd., a wholly-owned subsidiary of
Marathon.
(k) "HOLDERS" means the registered holders from time to time of Exchangeable
Shares, other than USX and its Subsidiaries.
(l) "LIQUIDATION CALL RIGHT" has the meaning attributed thereto in the
Exchangeable Share Provisions.
(m) "LIQUIDATION EVENT" has the meaning attributed thereto in subsection
3.11(b) hereto.
(n) "LIQUIDATION EVENT EFFECTIVE DATE" has the meaning attributed thereto in
subsection 3.11(c) hereof.
(o) "MARATHON GROUP SUBSIDIARY" has the meaning attributed thereto in the
Exchangeable Share Provisions.
(p) "MARATHON SUBSIDIARY" means a subsidiary of Marathon, other than
Albertaco.
(q) "OFFICER'S CERTIFICATE" means, with respect to USX, Marathon or
Albertaco, as the case may be, a certificate signed by any one of the
Chairman of the Board, the Vice-Chairman of the Board, the President,
any Vice-President or any other senior officer of USX, Marathon or
Albertaco, as the case may be.
(r) "PERSON" includes an individual, partnership, corporation, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
(s) "PLAN OF ARRANGEMENT" has the meaning attributed thereto in the
Exchangeable Share Provisions.
(t) "REDEMPTION CALL RIGHT" has the meaning attributed thereto in the
Exchangeable Share Provisions.
(u) "RETRACTED SHARES" has the meaning attributed thereto in Section 3.7
hereof.
(v) "RETRACTION CALL RIGHT" has the meaning attributed thereto in the
Exchangeable Share Provisions.
(w) "SUBSIDIARY" has the meaning attributed thereto in the Exchangeable
Share Provisions.
(x) "SUPPORT AGREEMENT" means that certain support agreement made as of even
date hereof between Albertaco, Marathon and USX.
(y) "TRUST" means the trust created by this Agreement.
(z) "TRUST ESTATE" means the Exchange Right, the Automatic Exchange Rights
and any money or other property which may be held by the Trustee from
time to time pursuant to this Agreement.
(aa) "TRUSTEE" means Montreal Trust Company of Canada and, subject to the
provisions of Article 7 hereof, includes any successor trustee or
permitted assigns.
(bb) "USX CERTIFICATE" has the meaning attributed thereto in the
Exchangeable Share Provisions.
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(cc) "USX-MARATHON COMMON STOCK" has the meaning attributed thereto in the
Exchangeable Share Provisions.
(dd) "USX SUCCESSOR" has the meaning attributed thereto in subsection 8.1(a)
hereof.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this Agreement
into articles, sections and paragraphs and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
1.3 NUMBER, GENDER, ETC. Words importing the singular number only shall include
the plural and vice versa. Words importing the use of any gender shall include
all genders.
1.4 DATE FOR ANY ACTION. If any date on which any action is required to be taken
under this Agreement is not a Business Day, such action shall be required to be
taken on the next succeeding Business Day.
ARTICLE 2
PURPOSE OF AGREEMENT
The purpose of this Agreement is to create the Trust for the benefit of the
Holders, as herein provided. The Trustee will hold the Exchange Right and the
Automatic Exchange Rights in order to enable the Trustee to exercise such
rights, in each case as Trustee for and on behalf of the Holders as provided in
this Agreement.
ARTICLE 3
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
3.1 GRANT AND OWNERSHIP OF THE EXCHANGE RIGHTS. USX and Marathon hereby grant to
the Trustee as trustee for and on behalf of, and for the use and benefit of, the
Holders (i) the right (the "EXCHANGE RIGHT") to require USX to purchase from
each or any Holder at any time and from time to time all or any part of the
Exchangeable Shares held by such Holders, and (ii) the Automatic Exchange
Rights, all in accordance with the provisions of this Agreement.
USX hereby acknowledges receipt from the Trustee as trustee for and on
behalf of the Holders of good and valuable consideration (and the adequacy
thereof) for the grant of the Exchange Right and the Automatic Exchange Rights
by USX to the Trustee. During the term of the Trust and subject to the terms and
conditions of this Agreement, the Trustee shall possess and be vested with full
legal ownership of the Exchange Right and the Automatic Exchange Rights and
shall be entitled to exercise all of the rights and powers of an owner with
respect to the Exchange Right and the Automatic Exchange Rights, provided that
the Trustee shall:
(a) hold the Exchange Right and the Automatic Exchange Rights and the legal
title thereto as trustee solely for the use and benefit of the Holders
in accordance with the provisions of this Agreement; and
(b) except as specifically authorized by this Agreement, have no power or
authority to exercise or otherwise deal in or with the Exchange Right or
the Automatic Exchange Rights, and the Trustee shall not exercise any
such rights for any purpose other than the purposes for which this Trust
is created pursuant to this Agreement.
3.2 LEGENDED SHARE CERTIFICATES. Albertaco will cause each certificate
representing Exchangeable Shares to bear an appropriate legend notifying the
Holders of:
(a) their right to instruct the Trustee with respect to the exercise of the
Exchange Right in respect of the Exchangeable Shares held by a Holder,
and
(b) the Automatic Exchange Rights.
3.3 GENERAL EXERCISE OF EXCHANGE RIGHT. The Exchange Right shall be and remain
vested in and exercisable by the Trustee. Subject to Section 4.15 hereof, the
Trustee shall exercise the Exchange Right only on the basis of instructions
received pursuant to this Article 3 from Holders entitled to instruct the
Trustee as to the exercise thereof to the extent that no instructions are
received from a Holder with respect to the Exchange Right, the Trustee shall not
exercise or permit the exercise of the Exchange Right.
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3.4 PURCHASE PRICE. The purchase price payable by USX for each Exchangeable
Share to be purchased by USX under the Exchange Right shall be an amount equal
to the Exchangeable Share Price on the last Business Day prior to the day of
closing of the exchange of such Exchangeable Share under the Exchange Right. In
connection with each exercise of the Exchange Right, USX will provide to the
Trustee an Officer's Certificate setting forth the calculation of the
Exchangeable Share Price for each Exchangeable Share. The Exchangeable Share
Price for each such Exchangeable Share so purchased may be satisfied only by USX
issuing and delivering or causing to be delivered to the Trustee, on behalf of
the relevant Holder, the Exchangeable Share Consideration representing the total
Exchangeable Share Price.
3.5 EXERCISE INSTRUCTIONS. Subject to the terms and conditions herein set forth,
a Holder shall be entitled to instruct the Trustee to exercise the Exchange
Right with respect to all or any part of the Exchangeable Shares registered in
the name of such Holder on the books of Albertaco. To cause the exercise of the
Exchange Right by the Trustee, the Holder shall deliver to the Trustee, in
person or by certified or registered mail, at its principal offices in Calgary,
Alberta or Toronto, Ontario or at such other places in Canada as the Trustee may
from time to time designate by written notice to the Holders, the certificates
representing the Exchangeable Shares which such Holder desires USX to purchase,
duly endorsed in blank, and accompanied by such other documents and instruments
as may be required to effect a transfer of Exchangeable Shares under applicable
law and the by-laws of Albertaco and such additional documents and instruments
as the Trustee may reasonably require together with (a) a duly completed form of
notice of exercise of the Exchange Right, contained on the reverse of or
attached to the Exchangeable Share certificates, stating (i) that the Holder
thereby instructs the Trustee to exercise the Exchange Right so as to require
USX to purchase from the Holder the number of Exchangeable Shares specified
therein, (ii) that such Holder has good title to and owns all such Exchangeable
Shares to be acquired by USX free and clear of all liens, claims and
encumbrances, (iii) the names in which the certificates representing
USX-Marathon Common Stock issuable in connection with the exercise of the
Exchange Right are to be issued and (iv) the names and addresses of the persons
to whom the Exchangeable Share Consideration should be delivered and (b) payment
(or evidence satisfactory to the Trustee, Albertaco and USX of payment) of the
taxes (if any) payable as contemplated by Section 3.8 of this Agreement. If only
a part of the Exchangeable Shares represented by any certificate or certificates
delivered to the Trustee are to be purchased by USX under the Exchange Right, a
new certificate for the balance of such Exchangeable Shares shall be issued to
the Holder at the expense of Albertaco.
3.6 DELIVERY OF EXCHANGEABLE SHARE CONSIDERATION; EFFECT OF EXERCISE.
Immediately after receipt of the certificates representing the Exchangeable
Shares which the Holder desires USX to purchase under the Exchange Right
(together with such documents and instruments of transfer and a duly completed
form of notice of exercise of the Exchange Right), duly endorsed for transfer to
USX the Trustee shall notify USX and Albertaco of its receipt of the same, which
notice to USX and Albertaco shall constitute exercise of the Exchange Right by
the Trustee on behalf of the Holder of such Exchangeable Shares, and USX shall
immediately thereafter deliver or cause to be delivered to the Trustee, for
delivery to the Holder of such Exchangeable Shares (or to such other persons, if
any, properly designated by such Holder), the Exchangeable Share Consideration
deliverable in connection with the exercise of the Exchange Right; provided,
however, that no such delivery shall be made unless and until the Holder
requesting the same shall have paid (or provided evidence satisfactory to the
Trustee, Albertaco and USX of the payment of) the taxes (if any) payable as
contemplated by Section 3.8 of this Agreement. Immediately upon the giving of
notice by the Trustee to USX and Albertaco of the exercise of the Exchange
Right, as provided in this Section 3.6, the closing of the transaction
contemplated by the Exchange Right shall be deemed to have occurred, and the
Holder of such Exchangeable Shares shall be deemed to have transferred to USX
all of its right, title and interest in and to such Exchangeable Shares and in
the related interest in the Trust Estate and shall cease to be a holder of such
Exchangeable Shares and shall not be entitled to exercise any of the rights of a
holder in respect thereof, other than the right to receive his proportionate
part of the total purchase price therefor, unless such Exchangeable Share
Consideration is not delivered by USX to the Trustee, for delivery to such
Holder (or to such other persons, if any, properly designated by such Holder),
within three Business Days of the date of the giving of such notice by the
Trustee, in which case the rights of the Holder shall remain unaffected until
such Exchangeable Share Consideration is delivered by USX. Concurrently with
such Holder ceasing to be a holder of Exchangeable Shares, the Holder shall be
considered and deemed for all purposes to be the holder of the shares of
USX-Marathon Common Stock delivered to it pursuant to the Exchange Right.
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3.7 EXERCISE OF EXCHANGE RIGHT SUBSEQUENT TO RETRACTION. In the event that a
Holder has exercised its right under Article 6 of the Exchangeable Share
Provisions to require Albertaco to redeem any or all of the Exchangeable Shares
held by the Holder (the "RETRACTED SHARES") and is notified by Albertaco
pursuant to Section 6.6 of the Exchangeable Share Provisions that Albertaco will
not be permitted as a result of liquidity or solvency requirements of applicable
law to redeem all such Retracted Shares, subject to receipt by the Trustee of
written notice to that effect from Albertaco and provided that USX shall not
have exercised the Retraction Call Right with respect to the Retracted Shares
and that the Holder has not revoked the retraction request delivered by the
Holder to Albertaco pursuant to Section 6.1 of the Exchangeable Share
Provisions, the retraction request will constitute and will be deemed to
constitute notice from the Holder to the Trustee instructing the Trustee to
exercise the Exchange Right with respect to those Retracted Shares which
Albertaco is unable to redeem. In any such event, Albertaco hereby agrees with
the Trustee and in favour of the Holder immediately to notify the Trustee of
such prohibition against Albertaco redeeming all of the Retracted Shares and
immediately to forward or cause to be forwarded to the Trustee all relevant
materials delivered by the Holder to Albertaco or to the transfer agent of the
Exchangeable Shares (including without limitation a copy of the retraction
request delivered pursuant to Section 6.1 of the Exchangeable Share Provisions)
in connection with such proposed redemption of the Retracted Shares and the
Trustee will thereupon exercise the Exchange Right with respect to the Retracted
Shares that Albertaco is not permitted to redeem and will require USX to
purchase such shares in accordance with the provisions of this Article 3.
3.8 STAMP OR OTHER TRANSFER TAXES. Upon any sale of Exchangeable Shares to USX
pursuant to the Exchange Right or the Automatic Exchange Rights, the share
certificate or certificates representing USX-Marathon Common Stock to be
delivered in connection with the payment of the total purchase price therefor
shall be issued in the name of the Holder of the Exchangeable Shares so sold or
in such names as such Holder may otherwise direct in writing without charge to
the holder of the Exchangeable Shares so sold, provided, however, that such
Holder (a) shall pay (and none of USX, Marathon, Albertaco nor the Trustee shall
be required to pay) any documentary, stamp, transfer or other similar taxes that
may be payable, or income taxes that may be required to be withheld, in respect
of any transfer involved in the issuance or delivery of such shares to a person
other than such Holder or (b) shall have established to the satisfaction of the
Trustee, USX, Marathon and Albertaco that such taxes, if any, have been paid.
3.9 QUALIFICATION OF USX-MARATHON COMMON STOCK. USX covenants that if any shares
of USX-Marathon Common Stock to be issued and delivered pursuant to the Exchange
Right or the Automatic Exchange Rights require registration or qualification
with or approval of or the filing of any document including any prospectus or
similar document or the taking of any proceeding with or the obtaining of any
order, ruling or consent from any governmental or regulatory authority under any
Canadian or United States federal, provincial or state law or regulation or
pursuant to the rules and regulations of any regulatory authority or the
fulfilment of any other legal requirement (collectively, the "APPLICABLE LAWS")
before such shares may be issued and delivered by USX to the initial holder
thereof (other than Albertaco) or in order that such shares may be freely traded
thereafter (other than any restrictions on transfer by reason of a holder being
a "control person" of USX for purposes of Canadian federal or provincial
securities law or an "affiliate" of USX or, prior to the date hereof, of
Tarragon for purposes of United States federal or state securities law), USX
will in good faith expeditiously take all such reasonable actions and do all
such reasonable things as are necessary to cause such shares of USX-Marathon
Common Stock to be and remain duly registered, qualified or approved. USX
represents and warrants that it has in good faith taken all actions and done all
things as are necessary under Applicable Laws as they exist on the date hereof
to cause the shares of USX-Marathon Common Stock to be issued and delivered
pursuant to the Exchange Right and the Automatic Exchange Rights and to be
freely tradeable thereafter (other than restrictions on transfer by reason of a
holder being a "control person" of USX for the purposes of Canadian federal and
provincial securities law or an "affiliate" of USX or, prior to the date hereof,
of Tarragon for the purposes of United States federal or state securities law).
USX will in good faith expeditiously take all such reasonable actions and do all
such reasonable things as are necessary to cause all shares of USX-Marathon
Common Stock to be delivered pursuant to the Exchange Right or the Automatic
Exchange Rights to be listed, quoted or posted for trading on all stock
exchanges and quotation systems on which such shares are listed, quoted or
posted for trading at such time.
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3.10 RESERVATION OF SHARES OF USX-MARATHON COMMON STOCK. USX hereby represents,
warrants and covenants that it has irrevocably reserved for issuance and will at
all times keep available, free from pre-emptive and other rights, out of its
authorized and unissued capital stock such number of shares of USX-Marathon
Common Stock as are now and may hereafter be required to enable and permit
Albertaco, Marathon and USX to meet their respective obligations hereunder,
under the Support Agreement, under the Exchangeable Share Provisions and under
any other security or commitment pursuant to the Arrangement with respect to
which USX may now or hereafter be required to issue shares of USX-Marathon
Common Stock.
3.11 AUTOMATIC EXCHANGE ON LIQUIDATION OF USX.
(a) USX will give the Trustee written notice of each of the following events
at the time set forth below:
(i) in the event of any determination by the board of directors of USX
to institute voluntary liquidation, dissolution or winding-up
proceedings with respect to USX or to effect any other distribution
of assets of USX among its stockholders for the purpose of
winding-up its affairs, at least 60 days prior to the proposed
effective date of such liquidation, dissolution, winding-up or
other distribution; and
(ii) immediately, upon the earlier of (A) receipt by USX of notice of
and (B) USX otherwise becoming aware of any threatened or
instituted claim, suit, petition or other proceedings with respect
to the involuntary liquidation, dissolution or winding-up of USX or
to effect any other distribution of assets of USX among its
stockholders for the purpose of winding-up its affairs.
(b) Immediately following receipt by the Trustee from USX of notice of any
event (a "LIQUIDATION EVENT") contemplated by Section 3.11(a) above, the
Trustee will give notice thereof to the Holders. Such notice will be
provided by USX to the Trustee and shall include a brief description of
the automatic exchange of Exchangeable Shares for shares of USX-Marathon
Common Stock provided for in Section 3.11(c) below.
(c) In order that the Holders will be able to participate on a PRO RATA
basis with the holders of USX-Marathon Common Stock in the distribution
of assets of USX in connection with a Liquidation Event, immediately
prior to the effective time (the "LIQUIDATION EVENT EFFECTIVE TIME") of
a Liquidation Event all of the then outstanding Exchangeable Shares
shall be automatically exchanged for shares of USX-Marathon Common
Stock. To effect such automatic exchange, USX shall be deemed to have
purchased each Exchangeable Share outstanding and held by Holders
immediately prior to the Liquidation Event Effective Time, and each
Holder shall be deemed to have sold the Exchangeable Shares held by it
at such time, for a purchase price per share equal to the Exchangeable
Share Price applicable at such time. In connection with such automatic
exchange, USX will provide to the Trustee an Officers' Certificate
setting forth the calculation of the purchase price for each
Exchangeable Share.
(d) The closing of the transaction of purchase and sale contemplated by
Section 3.11(c) above shall be deemed to have occurred immediately prior
to the Liquidation Event Effective Time, and each Holder of Exchangeable
Shares shall be deemed to have transferred to USX all of the Holder's
right, title and interest in and to such Exchangeable Shares and the
related interest in the Trust Estate and shall cease to be a holder of
such Exchangeable Shares and USX shall deliver to the Holder the
Exchangeable Share Consideration deliverable upon the automatic exchange
of Exchangeable Shares. Concurrently with such Holder ceasing to be a
holder of Exchangeable Shares, the Holder shall be considered and deemed
for all purposes to be the holder of the shares of USX-Marathon Common
Stock issued to it pursuant to the automatic exchange of Exchangeable
Shares for USX-Marathon Common Stock and the certificates held by the
Holder previously representing the Exchangeable Shares exchanged by the
Holder with USX pursuant to such automatic exchange shall thereafter be
deemed to represent the shares of USX-Marathon Common Stock issued to
the Holder by USX pursuant to such automatic exchange. Upon the request
of a Holder and the surrender by the Holder of Exchangeable Share
certificates deemed to represent shares of USX-Marathon Common Stock,
duly endorsed in blank and accompanied by such instruments of transfer
as USX may reasonably require, USX shall deliver or
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cause to be delivered to the Holder certificates representing the shares
of USX-Marathon Common Stock of which the Holder is the holder.
3.12 PERFORMANCE BY MARATHON. Any provision in Article 3 of this Agreement
providing for the delivery by USX of USX-Marathon Common Stock, any Officer's
Certificate or any other documents or instruments may, at the option of USX, be
satisfied by delivery of such stock certificates or other documents or
instruments by or on behalf of Marathon or Holdco or a Marathon Subsidiary
(provided that all other provisions of Article 3 with respect to qualification
of such stock and other matters shall have been complied with), and in such case
such delivery by or on behalf of Marathon or Holdco or a Marathon Subsidiary
shall satisfy USX's obligations hereunder and the rights of USX to acquire the
corresponding Exchangeable Shares shall be deemed to have been transferred to
Marathon, Holdco or the Marathon Subsidiary, as the case may be.
ARTICLE 4
CONCERNING THE TRUSTEE
4.1 POWERS AND DUTIES OF THE TRUSTEE. The rights, powers and authorities of the
Trustee under this Agreement, in its capacity as trustee of the Trust, shall
include:
(a) receiving the grant of the Exchange Right and the Automatic Exchange
Rights from USX as trustee for and on behalf of the Holders in
accordance with the provisions of this Agreement;
(b) exercising the Exchange Right and enforcing the benefit of the Automatic
Exchange Rights, in each case in accordance with the provisions of this
Agreement, and in connection therewith receiving from Holders
Exchangeable Shares and other requisite documents and distributing to
such Holders the shares of USX-Marathon Common Stock and cheques, if
any, to which such Holders are entitled upon the exercise of the
Exchange Right or pursuant to the Automatic Exchange Rights, as the case
may be;
(c) holding title to the Trust Estate;
(d) investing any monies forming, from time to time, a part of the Trust
Estate as provided in this Agreement;
(e) taking action at the direction of a Holder or Holders to enforce the
obligations of USX under this Agreement; and
(f) taking such other actions and doing such other things as are
specifically provided in this Agreement.
In the exercise of such rights, powers and authorities the Trustee shall
have (and is granted) such incidental and additional rights, powers and
authority not in conflict with any of the provisions of this Agreement as the
Trustee, acting in good faith and in the reasonable exercise of its discretion,
may deem necessary, appropriate or desirable to effect the purpose of the Trust.
Any exercise of such discretionary rights, powers and authorities by the Trustee
shall be final, conclusive and binding upon all persons. For greater certainty,
the Trustee shall have only those duties as are set out specifically in this
Agreement.
The Trustee in exercising its rights, powers, duties and authorities
hereunder shall act honestly and in good faith with a view to the best interests
of the Holders and shall exercise the care, diligence and skill that a
reasonably prudent trustee would exercise in comparable circumstances.
The Trustee shall not be bound to give any notice or do or take any act,
action or proceeding by virtue of the powers conferred on it hereby unless and
until it shall be specifically required to do so under the terms hereof; nor
shall the Trustee be required to take any notice of, or to do or to take any
act, action or proceeding as a result of any default or breach of any provision
hereunder, unless and until notified in writing of such default or breach, which
notices shall distinctly specify the default or breach desired to be brought to
the attention of the Trustee and in the absence of such notice the Trustee may
for all purposes of this Agreement conclusively assume that no default or breach
has been made in the observance or performance of any of the representations,
warranties, covenants, agreements or conditions contained herein.
4.2 NO CONFLICT OF INTEREST. The Trustee represents to Albertaco, Marathon and
USX that at the date of execution and delivery of this Agreement there exists no
material conflict of interest in the role of the Trustee as
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a fiduciary hereunder and the role of the Trustee in any other capacity. The
Trustee shall, within 90 days after it becomes aware that such a material
conflict of interest exists, either eliminate such material conflict of interest
or resign in the manner and with the effect specified in Article 7 hereof. If,
notwithstanding the foregoing provisions of this Section 4.2, the Trustee has
such a material conflict of interest, the validity and enforceability of this
Agreement shall not be affected in any manner whatsoever by reason only of the
existence of such material conflict of interest. If the Trustee contravenes the
foregoing provisions of this Section 4.2, any interested party may apply to the
Alberta Court of Queen's Bench for an order that the Trustee be replaced as
trustee hereunder.
4.3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC. Albertaco, Marathon and USX
irrevocably authorize the Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with the respective registrars
and transfer agents, and with any such subsequent registrar or transfer
agent, of the Exchangeable Shares and USX-Marathon Common Stock; and
(b) requisition, from time to time, (i) from any such registrar or transfer
agent any information readily available from the records maintained by
it which the Trustee may reasonably require for the discharge of its
duties and responsibilities under this Agreement and (ii) from the
transfer agent of USX-Marathon Common Stock, and any subsequent transfer
agent of such shares, the share certificates issuable upon the exercise
from time to time of the Exchange Right and pursuant to the Automatic
Exchange Rights in the manner specified in Article 3 hereof.
Albertaco and USX irrevocably authorize their respective registrars and
transfer agents to comply with all such requests. USX covenants that it will
supply its transfer agent with duly executed share certificates for the purpose
of completing the exercise from time to time of the Exchange Right and the
Automatic Exchange Rights, in each case pursuant to Article 3 hereof.
4.4 BOOKS AND RECORDS. The Trustee shall keep available for inspection by USX,
Marathon and Albertaco, at the Trustee's principal office in Calgary, Alberta,
correct and complete books and records of account relating to the Trustee's
actions under this Agreement, including without limitation all information
relating to mailings and instructions to and from Holders and all transactions
pursuant to the Exchange Right and the Automatic Exchange Rights for the term of
this Agreement. On or before March 31, 1999, and on or before March 31 in every
year thereafter, the Trustee shall transmit to USX, Marathon and Albertaco a
brief report, dated as of the preceding December 31, with respect to:
(a) the property and funds comprising the Trust Estate as of that date;
(b) the number of exercises of the Exchange Right, if any, and the aggregate
number of Exchangeable Shares received by the Trustee on behalf of
Holders in consideration of the issue and delivery by USX of shares of
USX-Marathon Common Stock in connection with the Exchange Right, during
the calendar year ended on such date; and
(c) all other actions taken by the Trustee in the performance of its duties
under this Agreement which it had not previously reported.
4.5 INCOME TAX RETURNS AND REPORTS. The Trustee shall, to the extent necessary,
prepare and file on behalf of the Trust appropriate United States and Canadian
income tax returns and any other returns or reports as may be required by
applicable law or pursuant to the rules and regulations of any securities
exchange or other trading system through which the Exchangeable Shares are
traded and, in connection therewith, may obtain the advice and assistance of
such experts as the Trustee may consider necessary or advisable. If requested by
the Trustee, USX and Marathon shall retain such experts for purposes of
providing such advice and assistance.
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4.6 INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE. The Trustee shall
exercise any or all of the rights, duties, powers or authorities vested in it by
this Agreement at the request, order or direction of any Holder upon such Holder
furnishing to the Trustee reasonable funding, security and indemnity against the
costs, expenses and liabilities which may be incurred by the Trustee therein or
thereby, provided that no Holder shall be obligated to furnish to the Trustee
any such funding, security or indemnity in connection with the exercise by the
Trustee of any of its rights, duties, powers and authorities with respect to the
Exchange Right pursuant to Article 3 hereof, subject to Section 4.15 hereof, and
with respect to the Automatic Exchange Rights pursuant to Article 3 hereof.
None of the provisions contained in this Agreement shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
exercise of any of its rights, powers, duties or authorities unless funded,
given funds, security and indemnified as aforesaid.
4.7 ACTIONS BY HOLDERS. No Holder shall have the right to institute any action,
suit or proceeding or to exercise any other remedy authorized by this Agreement
for the purpose of enforcing any of its rights or for the execution of any trust
or power hereunder unless the Holder has requested the Trustee to take or
institute such action, suit or proceeding and furnished the Trustee with the
funding, security and indemnity referred to in Section 4.6 hereof and the
Trustee shall have failed to act within a reasonable time thereafter. In such
case, but not otherwise, the Holder shall be entitled to take proceedings in any
court of competent jurisdiction such as the Trustee might have taken; it being
understood and intended that no one or more Holders shall have any right in any
manner whatsoever to affect, disturb or prejudice the rights hereby created by
any such action, or to enforce any right hereunder or under the Exchange Right
or the Automatic Exchange Rights, except subject to the conditions and in the
manner herein provided, and that all powers and trusts hereunder shall be
exercised and all proceedings at law shall be instituted, had and maintained by
the Trustee, except only as herein provided, and in any event for the equal
benefit of all Holders.
4.8 RELIANCE UPON DECLARATIONS. The Trustee shall not be considered to be in
contravention of any of its rights, powers, duties and authorities hereunder if,
when required, it acts and relies in good faith upon lists, mailing labels,
notices, statutory declarations, certificates, opinions, reports or other papers
or documents furnished pursuant to the provisions hereof or required by the
Trustee to be furnished to it in the exercise of its rights, powers, duties and
authorities hereunder and such lists, mailing labels, notices, statutory
declarations, certificates, opinions, reports or other papers or documents
comply with the provisions of Section 4.9 hereof, if applicable, and with any
other applicable provisions of this Agreement.
4.9 EVIDENCE AND AUTHORITY TO TRUSTEE. Albertaco, Marathon or USX shall furnish
to the Trustee evidence reasonably requested by the Trustee of compliance with
the conditions provided for in this Agreement relating to any action or step
required or permitted to be taken by Albertaco, Marathon or USX or the Trustee
under this Agreement or as a result of any obligation imposed under this
Agreement, including, without limitation, in respect of the Exchange Right or
the Automatic Exchange Rights and the taking of any other action to be taken by
the Trustee at the request of or on the application of Albertaco, Marathon or
USX forthwith if and when:
(a) such evidence is required by any other section of this Agreement to be
furnished to the Trustee in accordance with the terms of this Section
4.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this Agreement, gives Albertaco, Marathon or USX
written notice requiring it to furnish such evidence in relation to any
particular action or obligation specified in such notice.
Such evidence shall consist of an Officer's Certificate of Albertaco,
Marathon or USX or a statutory declaration or a certificate made by persons
entitled to sign an Officer's Certificate stating that any such condition has
been complied with in accordance with the terms of this Agreement.
Whenever such evidence relates to a matter other than the Exchange Right or
the Automatic Exchange Rights, and except as otherwise specifically provided
herein, such evidence may consist of a report or opinion of any solicitor,
auditor, accountant, appraiser, valuer, engineer or other expert or any other
person whose qualifications give authority to a statement made by him provided
that if such report or opinion is furnished by a director, officer or employee
of Albertaco, Marathon or USX it shall be in the form of an Officer's
Certificate or a statutory declaration.
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Each statutory declaration, certificate, opinion or report furnished to the
Trustee as evidence of compliance with a condition provided for in this
Agreement shall include a statement by the person giving the evidence:
(c) declaring that he has read and understands the provisions of this
Agreement relating to the condition in question;
(d) describing the nature and scope of the examination or investigation upon
which he based the statutory declaration, certificate, statement or
opinion; and
(e) declaring that he has made such examination or investigation as he
believes is necessary to enable him to make the statements or give the
opinions contained or expressed therein.
4.10 EXPERTS, ADVISORS AND AGENTS. The Trustee may:
(a) in relation to these presents act and rely on the opinion or advice of
or information obtained from or prepared by any solicitor, auditor,
accountant, appraiser, valuer, engineer or other expert, whether
retained by the Trustee or by Albertaco, Marathon or USX or otherwise,
and may employ such assistants as may be necessary to the proper
determination and discharge of its powers and duties and determination
of its rights hereunder and may pay proper and reasonable compensation
for all such legal and other advice or assistance as aforesaid; and
(b) employ such agents and other assistants as it may reasonably require for
the proper determination and discharge of its powers and duties
hereunder, and may pay reasonable remuneration for all services
performed for it (and shall be entitled to receive reasonable
remuneration for all services performed by it) in the discharge of the
trusts hereof and compensation for all disbursements, costs and expenses
made or incurred by it in the determination and discharge of its duties
hereunder and in the management of the Trust.
4.11 INVESTMENT OF MONIES HELD BY TRUSTEE. Unless otherwise provided in this
Agreement, any monies held by or on behalf of the Trustee which under the terms
of this Agreement may or ought to be invested or which may be on deposit with
the Trustee or which may be in the hands of the Trustee may be invested and
reinvested in the name or under the control of the Trustee in securities in
which, under the laws of the Province of Alberta trustees are authorized to
invest trust unit monies, provided that such securities are stated to mature
within two years after their purchase by the Trustee, and the Trustee shall so
invest such monies on the written direction of Albertaco. Pending the investment
of any monies as hereinbefore provided, such monies may be deposited in the name
of the Trustee in any chartered bank in Canada or, with the consent of
Albertaco, in the deposit department of the Trustee or any other loan or company
authorized to accept deposits under the laws of Canada or any province thereof
at the rate of interest then current on similar deposits.
4.12 TRUSTEE NOT REQUIRED TO GIVE SECURITY. The Trustee shall not be required to
give any bond or security in respect of the execution of the trusts, rights,
duties, powers and authorities of this Agreement or otherwise in respect of the
premises.
4.13 TRUSTEE NOT BOUND TO ACT ON REQUEST. Except as in this Agreement otherwise
specifically provided, the Trustee shall not be bound to act in accordance with
any direction or request of Albertaco, Marathon or USX or of the directors
thereof until a duly authenticated copy of the instrument or resolution
containing such direction or request shall have been delivered to the Trustee,
and the Trustee shall be empowered to act and rely upon any such copy purporting
to be authenticated and believed by the Trustee to be genuine.
4.14 AUTHORITY TO CARRY ON BUSINESS. The Trustee represents to Albertaco,
Marathon and USX that at the date of execution and delivery by it of this
Agreement it is authorized to carry on the business of a trust company in the
Province of Alberta but if, notwithstanding the provisions of this Section 4.14,
it ceases to be so authorized to carry on business, the validity and
enforceability of this Agreement and the Exchange Right and the Automatic
Exchange Rights shall not be affected in any manner whatsoever by reason only of
such event but the Trustee shall, within 90 days after ceasing to be authorized
to carry on the business of a trust company in the Province of Alberta, either
become so authorized or resign in the manner and with the effect specified in
Article 7 hereof.
4.15 CONFLICTING CLAIMS. If conflicting claims or demands are made or asserted
with respect to any interest of any Holder in any Exchangeable Shares, including
any disagreement between the heirs, representatives,
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successors or assigns succeeding to all or any part of the interest of any
Holder in any Exchangeable Shares resulting in conflicting claims or demands
being made in connection with such interest, then the Trustee shall be entitled,
at its sole discretion, to refuse to recognize or to comply with any such claim
or demand. In so refusing, the Trustee may elect not to exercise any Exchange
Right or Automatic Exchange Rights subject to such conflicting claims or demands
and, in so doing, the Trustee shall not be or become liable to any person on
account of such election or its failure or refusal to comply with any such
conflicting claims or demands. The Trustee shall be entitled to continue to
refrain from acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the Exchange Right
or Automatic Exchange Rights subject to such conflicting claims or
demands have been adjudicated by a final judgment of a court of
competent jurisdiction; or
(b) all differences with respect to the Exchange Right or Automatic Exchange
Right subject to such conflicting claims or demands have been
conclusively settled by a valid written agreement binding on all such
adverse claimants, and the Trustee shall have been furnished with an
executed copy of such agreement.
If the Trustee elects to recognize any claim or comply with any demand made by
any such adverse claimant, it may in its discretion require such claimant to
furnish such surety bond or other security satisfactory to the Trustee as it
shall deem appropriate fully to indemnify it as between all conflicting claims
or demands.
4.16 ACCEPTANCE OF TRUST. The Trustee hereby accepts the Trust created and
provided for by and in this Agreement and agrees to perform the same upon the
terms and conditions herein set forth and to hold all rights, privileges and
benefits conferred hereby and by law in trust for the various persons who shall
from time to time be Holders, subject to all the terms and conditions herein set
forth.
ARTICLE 5
COMPENSATION
USX, Marathon and Albertaco jointly and severally agree to pay to the
Trustee reasonable compensation for all of the services rendered by it under
this Agreement and will reimburse the Trustee for all reasonable expenses
(including but not limited to taxes, compensation paid to experts, agents and
advisors and travel expenses) and disbursements, including the cost and expense
of any suit or litigation of any character and any proceedings before any
governmental agency reasonably incurred by the Trustee in connection with its
rights and duties under this Agreement; provided that USX, Marathon and
Albertaco shall have no obligation to reimburse the Trustee for any expenses or
disbursements paid, incurred or suffered by the Trustee in any suit or
litigation in which the Trustee is determined to have acted in bad faith or with
negligence or willful misconduct.
ARTICLE 6
INDEMNIFICATION AND LIMITATION OF LIABILITY
6.1 INDEMNIFICATION OF THE TRUSTEE. USX, Marathon and Albertaco jointly and
severally agree to indemnify and hold harmless the Trustee and each of its
directors, officers, employees and agents appointed and acting in accordance
with this Agreement (collectively, the "Indemnified Parties") against all
claims, losses, damages, costs, penalties, fines and reasonable expenses
(including reasonable expenses of the Trustee's legal counsel on a solicitor and
his own client basis) which, without fraud, negligence, willful misconduct or
bad faith on the part of such Indemnified Party, may be paid, incurred or
suffered by the Indemnified Party by reason of or as a result of the Trustee's
acceptance or administration of the Trust, its compliance with its duties set
forth in this Agreement, or any written or oral instructions delivered to the
Trustee by USX, Marathon or Albertaco pursuant hereto. In no case shall USX,
Marathon or Albertaco be liable under this indemnity for any claim against any
of the Indemnified Parties unless USX, Marathon and Albertaco shall be notified
by the Trustee of the written assertion of a claim or of any action commenced
against the Indemnified Parties, promptly after any of the Indemnified Parties
shall have received any such written assertion of a claim or shall have been
served with a summons or other first legal process giving information as to the
nature and basis of the claim. Subject to (b), below, USX, Marathon and
Albertaco shall be entitled to participate at their own expense in the defense
and, if USX, Marathon or Albertaco so elect at any time after receipt of such
notice, any of them may assume the
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defense of any suit brought to enforce any such claim. The Trustee shall have
the right to employ separate counsel in any such suit and participate in the
defense thereof but the fees and expenses of such counsel shall be at the
expense of the Trustee unless: (a) the employment of such counsel has been
authorized by USX, Marathon or Albertaco, such authorization not to be
unreasonably withheld; or (b) the named parties to any such suit include both
the Trustee and USX, Marathon or Albertaco and the Trustee shall have been
advised by counsel acceptable to USX, Marathon or Albertaco that there may be
one or more legal defenses available to the Trustee that are different from or
in addition to those available to USX, Marathon or Albertaco and that an actual
or potential conflict exists (in which case USX, Marathon and Albertaco shall
not have the right to assume the defense of such suit on behalf of the Trustee
but shall be liable to pay the reasonable fees and expenses of counsel for the
Trustee).
6.2 LIMITATION OF LIABILITY. The Trustee shall not be held liable for any loss
which may occur by reason of depreciation of the value of any part of the Trust
Estate or any loss incurred on any investment of funds pursuant to this
Agreement except to the extent that such loss is attributable to the fraud,
negligence, willful misconduct or bad faith on the part of the Trustee.
ARTICLE 7
CHANGE OF TRUSTEE
7.1 RESIGNATION. The Trustee, or any trustee hereafter appointed, may at any
time resign by giving written notice of such resignation to USX, Marathon and
Albertaco specifying the date on which it desires to resign, provided that such
notice shall never be given less than 60 days before such desired resignation
date unless USX, Marathon and Albertaco otherwise agree and provided further
that such resignation shall not take effect until the date of the appointment of
a successor trustee and the acceptance of such appointment by the successor
trustee. Upon receiving such notice of resignation, USX, Marathon and Albertaco
shall promptly appoint a successor trustee by written instrument in duplicate,
one copy of which shall be delivered to the resigning trustee and one copy to
the successor trustee. Failing acceptance by a successor trustee, a successor
trustee may be appointed by an order of the Alberta Court of Queen's Bench upon
application of one or more of the parties hereto.
7.2 REMOVAL. The Trustee, or any Trustee hereafter appointed, may be removed
with or without cause at any time on 60 days' prior notice by written instrument
executed by USX, Marathon and Albertaco, in duplicate, one copy of which shall
be delivered to the trustee so removed and one copy to the successor trustee,
provided that, in connection with such removal, provision is made for a
replacement trustee similar to that contemplated in Section 7.1.
7.3 SUCCESSOR TRUSTEE. Any successor trustee appointed as provided under this
Agreement shall execute, acknowledge and deliver to USX, Marathon and Albertaco
and to its predecessor trustee an instrument accepting such appointment.
Thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor under this Agreement, with like effect as if
originally named as trustee in this Agreement. However, on the written request
of USX, Marathon and Albertaco or of the successor trustee, the trustee ceasing
to act shall, upon payment of any amounts then due it pursuant to the provisions
of this Agreement, execute and deliver an instrument transferring to such
successor Trustee all the rights and powers of the trustee so ceasing to act.
Upon the request of any such successor trustee, USX, Marathon, Albertaco and
such predecessor trustee shall execute any and all instruments in writing for
more fully and certainly vesting in and confirming to such successor trustee all
such rights and powers.
7.4 NOTICE OF SUCCESSOR TRUSTEE. Upon acceptance of appointment by a successor
trustee as provided herein, USX, Marathon and Albertaco shall cause to be mailed
notice of the succession of such trustee hereunder to each Holder. If USX,
Marathon or Albertaco shall fail to cause such notice to be mailed within 10
days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of USX, Marathon and
Albertaco.
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ARTICLE 8
USX SUCCESSORS
8.1 CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION, ETC. If USX or Marathon
shall enter into any transaction (whether by way of reconstruction,
reorganization, consolidation, merger, transfer, sale, lease or otherwise)
whereby all or substantially all of its undertaking, property and assets would
become the property of any other Person or, in the case of a merger, of the
continuing corporation resulting therefrom then:
(a) such other Person or continuing corporation (a successor to USX or
Marathon, herein the "USX SUCCESSOR"), by operation of law, shall
become, without further action, bound by the terms and provisions of
this Agreement or, if not so bound, shall execute, prior to or
contemporaneously with the consummation of such transaction an agreement
supplemental hereto and such other instruments (if any) as are necessary
or advisable to evidence the assumption by the USX Successor of
liability for all monies payable and property deliverable hereunder and
the covenant of such USX Successor to pay and deliver or cause to be
delivered the same and its agreement to observe and perform all the
covenants and obligations of USX or Marathon, as applicable, under this
Agreement; and
(b) such transaction shall be upon such terms as substantially to preserve
and not to impair in any material respect any of the rights, duties,
powers and authorities of the Trustee or of the Holders hereunder; and
for the purposes hereof, the Trustee acknowledges that in substance, an
exchange of USX-Marathon Common Stock for common stock of the Marathon
Group Subsidiary on the terms described in the USX Certificate would
comply with this section 8.1(b), subject to compliance with section
8.1(a) by the Marathon Group Subsidiary.
8.2 VESTING OF POWERS IN SUCCESSOR. Whenever the conditions of Section 8.1
hereof have been duly observed and performed, the Trustee, if required, by
Section 8.1 hereof, the USX Successor and Albertaco shall execute and deliver
the supplemental agreement provided for in Article 9 hereof and thereupon the
USX Successor shall possess and from time to time may exercise each and every
right and power of USX or Marathon under this Agreement in the name of USX or
Marathon or otherwise and any act or proceeding by any provision of this
Agreement required to be done or performed by the board of directors of USX or
Marathon or any officers of USX or Marathon may be done and performed with like
force and effect by the directors or officers of such USX Successor.
8.3 WHOLLY-OWNED SUBSIDIARIES. Nothing herein shall be construed as preventing
the amalgamation or merger of any wholly-owned subsidiary of USX with or into
USX or the winding-up, liquidation or dissolution of any wholly-owned subsidiary
of USX provided that all of the assets of such subsidiary are transferred to USX
or another wholly-owned subsidiary of USX, and any such transactions are
expressly permitted by this Article 8.
ARTICLE 9
AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
9.1 AMENDMENTS, MODIFICATIONS, ETC. This Agreement may not be amended or
modified except by an agreement in writing executed by Albertaco, Marathon, USX
and the Trustee and approved by the Holders in accordance with Section 9.2 of
the Exchangeable Share Provisions.
9.2 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of Section 9.1
hereof, the parties to this Agreement may in writing, at any time and from time
to time, without the approval of the Holders, amend or modify this Agreement for
the purposes of;
(a) adding to the covenants of any or all of the parties hereto for the
protection of the Holders hereunder,
(b) making such amendments or modifications not inconsistent with this
Agreement as may be necessary or desirable with respect to matters or
questions which, in the opinion of each of USX, Marathon and Albertaco
and in the opinion of the Trustee having in mind the best interests of
the Holders as a whole, it may be expedient to make, provided that the
parties and the Trustee shall be of the opinion that such amendments and
modifications will not be prejudicial to the interests of the Holders as
a whole; or
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(c) making such changes or corrections which, on the advice of counsel to
Albertaco, Marathon, USX and the Trustee, are required for the purpose
of curing or correcting any ambiguity or defect or inconsistent
provision or clerical omission or mistake or manifest error, provided
that the Trustee and each of Albertaco, Marathon and USX shall be of the
opinion that such changes or corrections will not be prejudicial to the
interests of the Holders as a whole in light of the purpose of this
Agreement.
9.3 MEETING TO CONSIDER AMENDMENTS. Albertaco, at the request of USX or
Marathon, shall call a meeting or meetings of the Holders for the purpose of
considering any proposed amendment or modification of this Agreement requiring
approval pursuant hereto. Any such meeting or meetings shall be called and held
in accordance with the bylaws of Albertaco, the Exchangeable Share Provisions
and all applicable laws.
9.4 CHANGES IN CAPITAL OF USX AND ALBERTACO. At all times after the occurrence
of any event effected pursuant to Section 2.6 or Section 2.7 of the Support
Agreement, as a result of which either USX-Marathon Common Stock or the
Exchangeable Shares or both are in any way changed, this Agreement shall
forthwith be automatically amended and modified, notwithstanding the provisions
of Section 9.1 hereof, as necessary in order that it shall apply with full force
and effect, MUTATIS MUTANDIS, to all new securities into which USX-Marathon
Common Stock or the Exchangeable Shares or both are so changed and the parties
hereto shall execute and deliver a supplemental agreement giving effect to and
evidencing such necessary amendments and modifications.
9.5 EXECUTION OF SUPPLEMENTAL AGREEMENTS. No amendment to or modification or
waiver of any of the provisions of this Agreement otherwise permitted hereunder
shall be effective unless made in writing and signed by all of the parties
hereto. From time to time Albertaco, Marathon, USX and the Trustee may, subject
to the provisions of these presents, and they shall, when so directed by these
presents, execute and deliver by their proper officers, agreements or other
instruments supplemental hereto, which thereafter shall form part hereof, for
any one or more of the following purposes:
(a) evidencing the succession of any USX Successors to USX or Marathon and
the covenants of and obligations assumed by each such USX Successors in
accordance with the provisions of Article 8, and the successor of any
successor trustee in accordance with the provisions of Article 7;
(b) making any additions to, deletions from or alterations of the provisions
of this Agreement or the Exchange Right or the Automatic Exchange Rights
which will not be prejudicial to the interests of the Holders as a whole
or are necessary or advisable in order to incorporate, reflect or comply
with any legislation the provisions of which apply to USX, Marathon,
Albertaco, the Trustee or this Agreement; and
(c) for any other purposes not inconsistent with the provisions of this
Agreement, including without limitation to make or evidence any
amendment or modification to this Agreement as contemplated hereby,
provided that the rights of the Trustee and the Holders as a whole will
not be prejudiced thereby.
ARTICLE 10
TERMINATION
10.1 TERM. The Trust created by this Agreement shall continue until the earliest
to occur of the following events:
(a) no outstanding Exchangeable Shares are held by a Holder,
(b) each of Albertaco, Marathon and USX elects in writing to terminate the
Trust and such termination is approved by the Holders of the
Exchangeable Shares in accordance with Section 9.2 of the Exchangeable
Share Provisions; and
(c) twenty-one (21) years after the death of the last survivor of the
descendants of His Majesty King George VI of the United Kingdom of Great
Britain and Northern Ireland living on the date of the creation of the
Trust.
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10.2 SURVIVAL OF AGREEMENT. This Agreement shall survive any termination of the
Trust and shall continue until there are no Exchangeable Shares outstanding held
by a Holder, provided, however, that the provisions of Articles 5 and 6 hereof
shall survive any such termination of this Agreement.
ARTICLE 11
GENERAL
11.1 SEVERABILITY. If any provision of this Agreement is held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of the
remainder of this Agreement shall not in any way be affected or impaired thereby
and the agreement shall be carried out as nearly as possible in accordance with
its original terms and conditions.
11.2 INUREMENT. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns and to
the benefit of the Holders.
11.3 NOTICES TO PARTIES. All notices and other communications between the
parties hereunder shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for such party as shall be specified in like
notice):
(a) if to USX at:
USX Corporation
600 Grant Street
Pittsburgh, Pennsylvania 15219
Attention: General Counsel
Telecopier No.: (412) 433-2811
(b) if to Marathon at:
Marathon Oil Company
5555 San Felipe
Houston, Texas 77056
Attention: President
Telecopier No.: (713) 296-4171
(c) if to Albertaco at:
c/o Tarragon Oil and Gas Limited
Suite 2500, 500 - 4th Avenue S.W.
Calgary, Alberta T2P 2V6
Attention: President
Telecopier No.: (403) 262-5324
(d) if to the Trustee at:
Montreal Trust Company of Canada
710, 530 - 8th Avenue S.W.
Calgary, Alberta
T2P 3S8
Attention: -
Telecopier No.: (403) 267-6598
Any notice or other communication given personally shall be deemed to have
been given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of receipt thereof unless
such day is not a Business Day in which case it shall be deemed to have been
given and received upon the immediately following Business Day.
11.4 NOTICE OF HOLDERS. Any and all notices to be given and any documents to be
sent to any Holders may be given or sent to the address of such Holder shown on
the register of Holders of Exchangeable Shares in any manner permitted by the
Exchangeable Share Provisions and shall be deemed to be received (if given or
sent in
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such manner) at the time specified in such Exchangeable Share Provisions, the
provisions of which the Exchangeable Share Provisions shall apply MUTATIS
MUTANDIS to notices or documents as aforesaid sent to such Holders.
11.5 RISK OF PAYMENTS BY POST. Whenever payments are to be made or documents are
to be sent to any Holder by the Trustee, by Albertaco, by Marathon or by USX or
by such Holder to the Trustee or to USX or to Marathon or Albertaco, the making
of such payment or sending of such document sent through the post shall be at
the risk of Albertaco, Marathon or USX, in the case of payments made or
documents sent by the Trustee or Albertaco or Marathon or USX, and the Holder,
in the case of payments made or documents sent by the Holder.
11.6 COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
one and the same instrument.
11.7 JURISDICTION AND ATTORNMENT. This Agreement shall be construed and enforced
in accordance with the laws of the Province of Alberta and the laws of Canada
applicable therein. USX and Marathon agree that any action or proceeding arising
out of or relating to this Agreement may be instituted in the courts of Alberta,
waive any objection which they may have now or hereafter to the venue of any
such action or proceeding, irrevocably submit to the jurisdiction of the said
courts in any such action or proceeding and agree to be bound by any judgment of
the said courts and hereby appoint Albertaco at its registered office in the
Province of Alberta as USX's and Marathon's attorney for service of process.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be duly
executed as of the date first above written.
USX CORPORATION
Per: _________________________________
Per: _________________________________
MARATHON OIL COMPANY
Per: _________________________________
Per: _________________________________
7761581 ALBERTA LTD.
Per: _________________________________
Per: _________________________________
MONTREAL TRUST COMPANY OF CANADA
Per: _________________________________
Per: _________________________________
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