As filed with the Securities and Exchange Commission on April 5, 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
EXXON CORPORATION
(Exact name of Registrant as specified in its charter)
New Jersey 2911 13-5409005
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification Number)
Incorporation or
Organization)
5959 Las Colinas Boulevard
Irving, Texas 75039-2298
(972) 444-1000
(Address, Including Zip Code, and Telephone Number, including Area Code,
of Registrant's Principal Executive Offices)
-----------------------
Charles W. Matthews
Exxon Corporation
5959 Las Colinas Boulevard
Irving, Texas 75039-2298
(972) 444-1000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
-----------------------
copies to:
<TABLE>
<S> <C> <C>
George R. Bason, Jr. Samuel H. Gillespie III Roger S. Aaron
Davis Polk & Wardwell Mobil Corporation Skadden, Arps, Slate, Meagher & Flom LLP
450 Lexington Avenue 3225 Gallows Road 919 Third Avenue
New York, New York 10017 Fairfax, Virginia 22037-0001 New York, NY 10022
(212) 450-4000 (703) 846-3000 (212) 735-3000
</TABLE>
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after the effectiveness of this Registration Statement and the
effective time of the merger of a wholly-owned subsidiary of the Registrant with
and into Mobil Corporation as described in the Agreement and Plan of Merger
dated as of December 1, 1998.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. []
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. []
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
-----------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
Proposed Maximum Proposed Maximum Amount of
Title of each Class of Amount to be Offering Price Per Aggregate Offering Registration
Securities to be Registered Registered Unit Price (2) Fee(3)
- --------------------------- ----------- ------------------ ------------------ ------------
<S> <C> <C> <C> <C>
Common Stock, without par value.......... (1) N/A $72,757,343,750 $20,226,541.56
</TABLE>
- ----------
(1) The maximum number of shares of Exxon common stock issuable in connection
with the merger in exchange for shares of Mobil common stock, based on (i)
the maximum number of shares of Mobil common stock exchangeable in the
merger (833,000,000 shares) and (ii) the exchange ratio applicable in the
merger (1.32015 shares of Exxon common stock for each share of Mobil
common stock).
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c) of the Securities Act, based on
the market value of the Mobil shares to be received by Exxon in the
merger, as established by the average of the high and low sales prices of
Mobil common stock on April 1, 1999 on the consolidated tape, which was
$87.34375.
(3) This fee has been calculated pursuant to Section 6(b) of the Securities
Act, as .0278 of one percent of $72,757,343,750. In accordance with Rule
457 under the Securities Act, the fee of $14,003,550 paid by the
Registrant and Mobil pursuant to Rule 14a-6(i)(1) under the Securities
Exchange Act upon the filing of their preliminary proxy material relating
to the merger has been credited against the registration fee payable in
connection with this filing. The balance of the fee payable with this
filing is therefore $6,222,991.56.
-----------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
EXXON CORPORATION
CROSS REFERENCE SHEET
<TABLE>
ITEM NUMBER LOCATION IN JOINT PROXY
IN FORM S-4 STATEMENT/PROSPECTUS
- -------------------------------------------------------------------------------------------------------------------
A. INFORMATION ABOUT THE
TRANSACTION
<S> <C>
1. Forepart of Registration Statement
and Outside Front Cover Page of Prospectus...... Facing Page of the Registration Statement; Outside Front
Cover Page of Joint Proxy Statement/Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus................................... Where You Can Find More Information; Table of Contents;
Comparative Per Share Data; Where You Can Find More
Information
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information................... Outside Front Cover Page of Prospectus; Summary;
Interests of Certain Persons in the Merger; Selected
Historical Financial Data; Selected Historical and Pro
Forma Financial Data; The Merger Transaction;
Comparative Per Share Market Price and Dividend
Information; Chapter Two - Information About the
Meetings and Voting
4. Terms of the Transaction........................ Outside Front Cover Page of Prospectus; Summary; The
Merger Transaction; Opinions of Financial Advisors; The
Merger Agreement; Chapter Two - Information About the
Meetings and Voting; Chapter Three - Certain Legal
Information.
5. Pro Forma Financial Information................. Unaudited Pro Forma Condensed Combined Financial
Statements; Notes to Unaudited Pro Forma Condensed
Combined Financial Statements.
6. Material Contacts with the Company Being
Acquired........................................ Summary; The Merger Transaction; The Merger
Agreement.
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters.............................. *
8. Interests of Named Experts and Counsel.......... *
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................... *
<PAGE>
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants..... *
11. Incorporation of Certain Information by
Reference....................................... Where You Can Find More Information
12. Information with Respect to S-2 and S-3
Registrants..................................... Summary; The Merger Transaction; Where You Can Find
More Information
13. Incorporation of Certain Information by
Reference....................................... *
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants............... *
C. INFORMATION ABOUT THE COMPANY
BEING ACQUIRED
15. Information with Respect to S-3
Companies....................................... *
16. Information with Respect to S-2 or S-3
Companies........................................ Summary; The Merger Transaction; Where You Can Find
More Information
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies................. *
D. VOTING AND MANAGEMENT
INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited.............. Outside Front Cover Page of Joint Proxy
Statement/Prospectus; Summary; Interests of Certain
Persons in the Merger; The Merger Agreement; The Stock
Option Agreement; Chapter Two - Information About the
Meetings and Voting; Chapter Three - Certain Legal
Information; Where You Can Find More Information
19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer......................... *
</TABLE>
- -------------------
* Omitted because the Item is inapplicable or the answer is negative.
ii
<PAGE>
[PRELIMINARY DRAFT DATED APRIL 5, 1999, SUBJECT TO COMPLETION]
EXXON logo Mobil logo
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Exxon Corporation and Mobil Corporation have
approved a merger agreement which provides for the combination of the two
companies. We believe the combined company will be able to create
substantially more shareholder value than could be achieved by the companies
individually.
Our combined company would be named Exxon Mobil Corporation, with its
headquarters in Irving, Texas. Sometimes in this booklet we will refer to the
combined company as "Exxon Mobil".
If the merger is completed, holders of Mobil common stock will receive, for
each Mobil share, 1.32015 shares of Exxon Mobil common stock, and each share
of Mobil ESOP preferred stock will be converted into an equivalent share of a
newly created class of Exxon Mobil preferred stock. Exxon shareholders will
continue to own their existing shares after the merger. Sometimes in this
booklet we refer to Exxon stock after the closing of the merger as "Exxon
Mobil stock".
Exxon Mobil will issue approximately 1.03 billion shares of Exxon Mobil common
stock to Mobil shareholders in the merger, based on outstanding shares on
March 1, 1999. These shares will represent approximately 30% of the
outstanding Exxon Mobil common stock after the merger. Exxon shares held by
Exxon shareholders before the merger will represent approximately 70% of the
outstanding Exxon Mobil shares after the merger.
We are asking shareholders of Exxon to approve the merger and related matters
and to vote on the election of Exxon directors and other Exxon annual meeting
matters described in this booklet.
We are asking shareholders of Mobil to approve the merger agreement and the
merger and to vote on the election of Mobil directors and other Mobil annual
meeting matters described in this booklet. If the merger is completed, these
Mobil annual meeting matters will, as a result, be superseded.
We cannot complete the merger unless shareholders of both companies approve
it. Approval of the other annual meeting matters is not a condition of the
merger.
The dates, times and places of the meetings are:
For Exxon shareholders:
Thursday, May 27, 1999
10:00 a.m., Central Time
Trinity Conference Center
Wyndham Anatole Hotel
2201 Stemmons Freeway
Dallas, Texas
For Mobil shareholders:
Thursday, May 27, 1999
10:00 a.m., Central Time
Regency Ballroom of the Fairmont Hotel
1717 North Akard Street
Dallas, Texas
/s/ Lee R. Raymond /s/ Lucio A. Noto
Lee R. Raymond Lucio A. Noto
Chairman of the Board Chairman of the Board and Chief Executive Officer
Exxon Corporation Mobil Corporation
- ------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
regulators have approved the Exxon Mobil stock to be issued under this
Joint Proxy Statement/Prospectus or determined if this Joint Proxy
Statement/Prospectus is accurate or adequate. Any representation to the
contrary is a criminal offense.
- ------------------------------------------------------------------------------
Joint Proxy Statement/Prospectus dated _____ __, 1999, and first mailed to
shareholders on April 9, 1999.
<PAGE>
[Note: Page for Exxon Booklet only.]
EXXON logo
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF EXXON CORPORATION
Time:
10:00 a.m., Central Time
Date:
May 27, 1999
Place:
Trinity Conference Center
Wyndham Anatole Hotel
2201 Stemmons Freeway
Dallas, Texas
Purpose:
o Vote on the proposed merger of Exxon and Mobil and related matters
o Elect directors
o Ratify appointment of independent accountants
o Vote on four shareholder proposals
o Conduct other business if properly raised
Only shareholders of record on March 29, 1999 may vote at the
meeting. Only shareholders or their proxy holders and Exxon guests
may attend the meeting.
Your vote is important. Please complete, sign, date and return your
proxy card in the enclosed envelope promptly, or authorize the
individuals named on your proxy card to vote your shares by calling
the toll-free telephone number or using the internet as described in
the instructions included with your proxy card.
/s/ T.P. Townsend
T.P. Townsend
Secretary
April 9, 1999
<PAGE>
[Note: Page for Mobil Booklet only.]
Mobil logo
NOTICE OF ANNUAL MEETING
TO BE HELD ON MAY 27, 1999
To the Shareholders of Mobil Corporation:
The annual meeting of shareholders of Mobil Corporation will be held on
Thursday, May 27, 1999, at 10:00 a.m., at the Regency Ballroom of the Fairmont
Hotel, 1717 North Akard Street, Dallas, Texas, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of December 1, 1998, among Mobil, Exxon
Corporation and a subsidiary of Exxon, and the merger, as described in
the attached joint proxy statement/prospectus;
2. To elect four members to the Board of Directors of Mobil;
3. To approve and ratify the appointment of Ernst & Young LLP as Mobil's
independent auditors for 1999;
4. To vote upon two shareholder proposals; and
5. To transact such other business as may properly come before the meeting
or any adjournment or postponement.
Holders of record of Mobil common stock and of Mobil ESOP preferred stock at
the close of business on March 29, 1999, will be entitled to vote at the Mobil
meeting or any adjournment or postponement. A list of shareholders entitled
to vote will be kept at Mobil Place at 3000 Pegasus Park Drive, Dallas, Texas
75247, for ten days before the meeting.
If you attend the meeting, you must register before entering. We will give
priority seating to shareholders of record, beneficial owners who have
evidence of ownership, or their authorized representatives, and guests of
management. You may bring one guest.
Please do not send any certificates for your stock at this time.
/s/ Carole J. Yaley
Carole J. Yaley
Secretary
April 9, 1999
Your vote is important. Whether or not you plan to attend the Mobil meeting,
please complete, date and return your proxy card in the enclosed envelope
promptly or authorize the individuals named on your proxy card to vote your
shares by calling the toll-free telephone number or using the internet by
following the instructions included with your proxy card.
<PAGE>
TABLE OF CONTENTS
CHAPTER ONE - THE MERGER
QUESTIONS AND ANSWERS ABOUT THE
MERGER.............................................................I-1
SUMMARY..............................................................I-2
The Companies......................................................I-2
Reasons for the Merger.............................................I-2
Merger Recommendations to Shareholders.............................I-2
The Merger.........................................................I-2
Other Exxon Annual Meeting Matters.................................I-6
Other Mobil Annual Meeting Matters.................................I-6
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA.....................I-7
SELECTED HISTORICAL FINANCIAL DATA...................................I-8
Selected Historical Financial Data of Exxon........................I-8
Selected Historical Financial Data of Mobil........................I-9
Selected Unaudited Pro Forma Combined Financial
Data...........................................................I-10
Comparative Per Share Data........................................I-11
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS........................................................I-12
YEAR 2000 ISSUE.....................................................I-13
THE MERGER TRANSACTION..............................................I-14
General...........................................................I-14
Background of the Merger..........................................I-14
Our Reasons for the Merger........................................I-19
Exxon Mobil's Senior Management Team..............................I-22
Factors Considered by, and Recommendation of,
the Exxon Board.................................................I-22
Factors Considered by, and Recommendation of, the Mobil
Board..........................................................I-24
Accounting Treatment..............................................I-26
Material Federal Income Tax Consequences of the
Merger.........................................................I-27
Regulatory Matters................................................I-28
Appraisal Rights..................................................I-29
Federal Securities Laws Consequences; Stock Transfer Restriction
Agreements.....................................................I-29
COMPARATIVE PER SHARE MARKET PRICE
AND DIVIDEND INFORMATION..........................................I-30
Effect of Merger on Mobil Dividend Reinvestment Plan..............I-31
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS........................................................I-32
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS........................................................I-37
OPINIONS OF FINANCIAL ADVISORS.....................................I-39
Opinion of Exxon Financial Advisor...............................I-39
Opinion of Mobil Financial Advisor...............................I-44
INTERESTS OF CERTAIN PERSONS IN THE MERGER..........................I-49
Board of Directors................................................I-49
Indemnification; Directors' and
Officers' Insurance............................................I-49
Employee Severance Plan...........................................I-49
Incentive Compensation and Stock
Ownership Plans................................................I-51
Management Retention Plan.........................................I-52
Rabbi Trust.......................................................I-52
Application of Past Practices.....................................I-52
THE MERGER AGREEMENT................................................I-54
Structure of the Merger...........................................I-54
Timing of Closing.................................................I-54
Merger Consideration..............................................I-54
Treatment of Mobil Stock Options;
Other Mobil Stock-Based Awards..................................I-54
Exchange of Shares................................................I-54
Exxon Mobil Board and Related Matters.............................I-55
Certain Covenants.................................................I-55
Representations and Warranties....................................I-58
Conditions to the Completion of
the Merger......................................................I-58
Termination of the Merger
Agreement.......................................................I-59
Other Expenses....................................................I-60
Amendments; Waivers...............................................I-61
Stock Option Agreement............................................I-61
CHAPTER TWO- INFORMATION ABOUT THE MEETINGS AND VOTING
Matters Relating to the Meetings..................................II-1
Vote Necessary to Approve Exxon and
Mobil Proposals.................................................II-4
Proxies.........................................................II-5
Other Business; Adjournments....................................II-7
<PAGE>
CHAPTER THREE - CERTAIN LEGAL INFORMATION
COMPARISON OF SHAREHOLDER RIGHTS...................................III-1
Summary of Material Differences Between Current
Rights of Mobil Shareholders and Rights Those
Shareholders Will Have as Exxon Mobil Shareholders
Following the Merger...........................................III-1
DESCRIPTION OF EXXON CAPITAL STOCK.................................III-8
Authorized Capital Stock.........................................III-8
Exxon Common Stock...............................................III-8
Exxon Preferred Stock............................................III-8
Amendment of Exxon Charter......................................III-10
Transfer Agent and Registrar....................................III-11
Stock Exchange Listing; Delisting and
Deregistration of Mobil Common Stock..........................III-11
LEGAL MATTERS.....................................................III-11
EXPERTS...........................................................III-11
CHAPTER FOUR - OTHER EXXON ANNUAL MEETING PROPOSALS
CHAPTER FIVE - OTHER MOBIL ANNUAL MEETING PROPOSALS
CHAPTER SIX - ADDITIONAL INFORMATION FOR SHAREHOLDERS
FUTURE SHAREHOLDER PROPOSALS........................................VI-1
WHERE YOU CAN FIND MORE INFORMATION.................................VI-1
ANNEXES
Annex A..................Agreement and Plan of Merger
Annex B..................Stock Option Agreement
Annex C..................Opinion of J.P. Morgan Securities Inc.
Annex D..................Opinion of Goldman, Sachs & Co.
ii
<PAGE>
CHAPTER ONE
THE MERGER
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: When and where are the shareholder meetings?
A: Each company's meeting will take place on May 27, 1999 in Dallas, Texas. The
address of each meeting is on page II-1.
Q: What do I need to do now?
A: Just mail your signed proxy card in the enclosed return envelope or vote by
telephone or the internet, as soon as possible, so that your shares may be
represented at your meeting. In order to assure that your vote is obtained,
please give your proxy as instructed on your proxy card even if you currently
plan to attend a meeting in person. The Board of Directors of each of Exxon and
Mobil recommends that its shareholders vote in favor of the merger.
Q: What do I do if I want to change my vote?
A: Just send in a later-dated, signed proxy card to your company's Secretary or
vote again by telephone or the internet before your meeting. Or, you can attend
your meeting in person and vote. You may also revoke your proxy by sending a
notice of revocation to your company's Secretary at the address under "The
Companies" on page I-2.
Q: If my shares are held in "street name" by my broker, will my broker vote
my shares for me?
A: If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be permitted to vote them on the
merger. You should therefore be sure to provide your broker with instructions on
how to vote your shares. Please check the voting form used by your broker to see
if it offers telephone or internet voting.
If you are an Exxon shareholder and do not give voting instructions to your
broker, you will not be counted as voting for purposes of the merger vote unless
you appear in person at the Exxon meeting.
If you are a Mobil shareholder and do not give voting instructions to your
broker, you will, in effect, be voting against the merger unless you appear in
person at the Mobil meeting and vote in favor of the merger.
Q: Should I send in my stock certificates now?
A: No. If the merger is completed, we will send Mobil shareholders written
instructions for exchanging their share certificates. Exxon shareholders will
keep their existing certificates.
Q: What happens to my future dividends?
A: We expect no changes in Exxon's or Mobil's dividend policies before the
merger. We expect that Exxon Mobil will continue to pay quarterly dividends on
Exxon Mobil common stock after the merger. The payment of dividends by Exxon
Mobil in the future, however, will depend on business conditions, Exxon Mobil's
financial condition and earnings, and other factors. To compare dividends paid
by each of Exxon and Mobil, see page I-30.
Q: When do you expect the merger to be completed?
A: We are working towards completing the merger as quickly as possible. In
addition to shareholder approvals, we must also obtain regulatory approvals. We
hope to complete the merger by mid-year, 1999.
Q: Who do I call if I have questions about the meetings or the merger?
A: Exxon shareholders may call 1-800-628-8536.
Mobil shareholders may call 1-800-300-3610.
I-1
<PAGE>
Chapter One - The Merger
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read this document and
the documents we have referred you to carefully. See "Where You Can Find More
Information" on page VI-1.
The Companies
Exxon Corporation
5959 Las Colinas Boulevard
Irving, Texas 75039-2298
(972) 444-1000
Exxon's principal business is energy, involving exploration for, and production
of, crude oil and natural gas, manufacturing of petroleum products and
transportation and sale of crude oil, natural gas and petroleum products. Exxon
is also a major manufacturer and marketer of petrochemicals, including olefins,
aromatics, polyethylene and polypropylene plastics, and a wide array of
specialty products. Exxon also engages in exploration for, and mining and sale
of, coal, copper and other minerals, and has interests in electric power
generation. Exxon affiliates support our businesses with extensive research
programs.
Mobil Corporation
3225 Gallows Road
Fairfax, Virginia 22307-0001
(703) 846-3000
Mobil's principal business involves crude oil, natural gas and petroleum
products. Mobil is also a manufacturer and marketer of petrochemicals, packaging
films and specialty chemical products. Mobil operates a worldwide oil and gas
exploration and producing business, a global marketing and refining complex, a
network of pipelines and tankers linking these worldwide oil and gas businesses,
a worldwide chemical business and a sophisticated research and engineering
operation.
Reasons for the Merger
We believe the combined Exxon Mobil can be run more efficiently and can use its
capital more profitably than either company on its own. As a result, we believe
the merger will create substantial long-term value for the shareholders of both
companies. Of course, these benefits depend on our ability to obtain the
necessary approvals for the merger, to integrate the businesses of Exxon and
Mobil successfully after the merger, and on other uncertainties described on
page I-12.
To review the reasons for the merger in greater detail, see pages I-19 through
I-26.
Merger Recommendations to Shareholders
To Exxon Shareholders:
The Exxon Board believes that the merger is fair to you and in your best
interest and recommends that you vote FOR the merger, including the related
issuance of common stock and the related amendments to Exxon's charter described
on page III-10.
To Mobil Shareholders:
The Mobil Board believes that the merger is fair to you and in your best
interest and recommends that you vote FOR the approval of the merger agreement
and the merger.
The Merger
The merger agreement is attached as Annex A to this joint proxy
statement/prospectus. We encourage you to read the merger agreement as it is the
legal document that governs the merger.
What Mobil Shareholders Will Receive (see page I-54)
As a result of the merger, Mobil shareholders will receive, for each share of
Mobil common stock, 1.32015 shares of Exxon Mobil common stock.
I-2
<PAGE>
Chapter One - The Merger
Exxon Mobil will not issue any fractional shares. Mobil shareholders will
receive a check in the amount of the proceeds from the sale of their fractional
shares in the market.
Example:
o If you currently own 1,000 shares of
Mobil common stock, then after the
merger you will receive 1,320 shares
of Exxon Mobil common stock and a
check for the sale proceeds for .15 of
one share of Exxon Mobil common
stock, rounded to the nearest one cent.
The value of the stock that you will
receive will fluctuate as the price of
Exxon Mobil common stock changes
after the merger.
o On April 1, 1999 the last per share
price of Exxon common stock on the
Consolidated Tape was $70 1/8.
Applying the 1.32015 exchange ratio
to the Exxon last reported price on
that date, each holder of Mobil
common stock would be entitled to
receive Exxon Mobil common stock
with a market value of approximately
$92.58 for each share of Mobil
common stock. However, the market
prices for Mobil and Exxon common
stock are likely to change between
now and the merger. You are urged
to obtain current price quotes for
Mobil and Exxon common stock.
Comparative Per Share Market Price Information
Exxon and Mobil common stock are both listed on the New York Stock
Exchange. On November 25, 1998, the last full trading day before Exxon and
Mobil issued a joint release confirming that they were in discussions
concerning a possible combination, Exxon common stock closed at $72 11/16
and Mobil common stock closed at $78 3/8. On November 30, 1998, the last
full trading day prior to the public announcement of the proposed merger,
Exxon closed at $75 and Mobil closed at $86. On April 1, 1999, Exxon
closed at $70 1/8 and Mobil closed at $87 3/8.
Listing of Exxon Mobil Common Stock
The shares of Exxon Mobil common stock will be listed on the New York Stock
Exchange under the ticker symbol "XOM".
Ownership of Exxon Mobil After the Merger
Exxon Mobil will issue approximately 1.03 billion shares of Exxon Mobil common
stock to Mobil shareholders in the merger. The shares of Exxon Mobil common
stock to be issued to Mobil shareholders in the merger will represent
approximately 30% of the outstanding Exxon Mobil common stock after the merger.
This information is based on the number of Exxon and Mobil shares outstanding on
March 1, 1999 and does not take into account stock options or other equity-based
awards.
Shareholder Vote Required to Approve the Merger
For Exxon shareholders: Approval of the merger and related matters described on
page I-14 requires a majority of the votes cast by holders of Exxon common stock
and Exxon Class A preferred stock, voting as a single class.
For Mobil shareholders: Approval of the merger requires a majority of the total
votes represented by the outstanding shares of Mobil common stock and Mobil ESOP
preferred stock, voting as a single class.
Appraisal Rights (see page I-29)
The holders of Exxon and Mobil common stock do not have any right to an
appraisal of the value of their shares in connection with the merger. We provide
on page I-29 in the section captioned "The Merger Transaction--Appraisal Rights"
information regarding the appraisal rights available in connection with the
merger to the trustee of the Mobil ESOP, the sole record holder of Mobil ESOP
preferred stock.
Board of Directors of Exxon Mobil and Related Matters After the Merger
Following the merger, the board of directors of Exxon Mobil will have 19
members, including the 13 current Exxon directors plus six directors designated
by Mobil. These designees are named below (see page I-55). Mr. Lucio A. Noto,
Chairman of Mobil, will become the Vice-Chairman of Exxon Mobil. In addition,
one Mobil designee will be appointed to each of Exxon Mobil's Audit Committee
and Compensation Committee. (see page I-55.)
I-3
<PAGE>
Chapter One - The Merger
Interest of Officers and Directors in the Merger
When you consider the Mobil Board's recommendation that Mobil shareholders vote
in favor of the merger, you should be aware that a number of Mobil officers and
directors may have interests in the merger that may be different from, or in
addition to, yours (see page I-49).
Accounting Treatment
We expect the merger to qualify as a pooling of interests, which means that we
will treat our companies as if they had always been combined for accounting and
financial reporting purposes. As described on page I-26, we have each received
letters from our independent accounting firms concurring with our conclusions
that the merger should be accounted for as a pooling of interests.
Material Federal Income Tax Consequences of the Merger (see page I-27)
The merger has been structured as a "tax-free reorganization" for federal income
tax purposes. Accordingly, holders of Mobil common stock or Mobil ESOP preferred
stock generally will not recognize any gain or loss for federal income tax
purposes on the exchange of their Mobil stock for Exxon Mobil stock in the
merger, except for any gain or loss recognized in connection with the receipt of
cash instead of a fractional share of Exxon Mobil common stock. The companies
themselves, as well as holders of Exxon stock, will not recognize gain or loss
as a result of the merger. It is a condition to the obligations of Mobil and
Exxon to complete the merger that each receive a legal opinion from its outside
counsel that the merger will be a tax-free reorganization for federal income tax
purposes.
The federal income tax consequences described above may not apply to some
holders of Mobil stock, including some types of holders specifically referred to
on page I-27. Your tax consequences will depend upon your personal situation.
You should consult your tax advisor for a full understanding of the tax
consequences of the merger to you.
Conditions to the Completion of the Merger (see page I-58)
The completion of the merger depends upon meeting a number of conditions,
including the following:
o approval of the shareholders of Exxon and Mobil;
o expiration or termination of the relevant waiting period under the
Hart-Scott-Rodino Act;
o approval by the European Commission of the merger;
o absence of any law or court order prohibiting the merger;
o receipt of letters from the independent public accountants of Exxon and
Mobil reconfirming their concurrence that "pooling of interests"
accounting treatment for the merger is appropriate;
o receipt of opinions of Exxon's and Mobil's counsel that the merger will
qualify as a tax-free reorganization;
o absence of a material adverse effect on Exxon or Mobil during the period
from December 1, 1998 until the closing of the merger; and
o material accuracy as of closing of the representations and warranties made
by the other party.
In addition, Exxon's obligation to complete the merger is subject to
(1) there being no proceeding seeking to limit Exxon's ownership of Mobil or
to compel divestiture of assets, in either case to an extent that could
reasonably be expected to result in a substantial detriment to Exxon and
Mobil taken as a whole; and
(2) all regulatory approvals for the merger being obtained on terms that are
not reasonably likely to result in such a substantial detriment.
I-4
<PAGE>
Chapter One - The Merger
Regulatory Approvals
Pursuant to the Hart-Scott-Rodino Act, the merger cannot be completed until
after we have given certain information and materials to the Federal Trade
Commission and a required waiting period has expired or been terminated. The
companies submitted pre-merger notification and report forms during the week of
December 14, 1998. On January 15, 1999, the FTC issued a request for additional
information and other materials to Exxon and Mobil. The merger may not be
completed until 20 days after both parties have substantially complied with this
request or unless the waiting period is terminated earlier. The FTC has the
authority to challenge the merger on antitrust grounds by seeking a federal
court order enjoining the transaction pending an administrative hearing.
The merger is also subject to review under the competition laws of the European
Union. We informally notified the European Commission of the merger on December
1, 1998, and expect to make the required formal pre-merger filing by the end of
April 1999.
The merger may also be subject to regulatory review in jurisdictions other than
the U.S. and the EU.
Exxon and Mobil are working to obtain the required regulatory approvals and
consents. However, we can give no assurance as to when or whether any of these
approvals and consents will be obtained or the terms and conditions that may be
imposed.
As described beginning on page I-58, Exxon and Mobil are not required to close
unless the regulatory conditions to completion of the merger are satisfied.
Termination of the Merger Agreement (see page I-59)
Either Exxon or Mobil can terminate the merger agreement if any of the following
occurs:
(1) we do not complete the merger by December 1, 1999 -- however, that date
becomes June 30, 2000 if the reason for not closing by December 1, 1999 is
that the regulatory conditions specified in the merger agreement have not
been satisfied by that date;
(2) Exxon or Mobil shareholders do not give the required approvals;
(3) a law or court order permanently prohibits the merger; or
(4) the Mobil Board changes, in a manner adverse to Exxon, its recommendation
of the merger. An adverse change would include the Mobil Board withdrawing
or qualifying its recommendation or changing the recommendation to support
another transaction. However, Mobil may not terminate for the reasons laid
out in this paragraph (4) unless three conditions are met:
o Mobil has received an offer that is superior to the merger with Exxon
and intends to enter into an agreement with respect to the superior
offer,
o Exxon, within a specified time period, does not make an offer that is
as favorable to Mobil's shareholders as the superior offer, and
o Mobil has, prior to termination, paid to Exxon the termination fee
described below.
In addition, Mobil can terminate the merger agreement if the Exxon Board changes
its recommendation of the merger in a manner adverse to Mobil.
Neither Exxon nor Mobil can terminate the merger agreement for the reasons
described in paragraph (1) above if it is in material breach of its obligations
under the merger agreement.
Finally, Exxon and Mobil can mutually agree to terminate the merger agreement.
Termination Fees (see page I-60)
Mobil must pay Exxon a termination fee of $1.5 billion in cash if:
(1) the merger agreement is terminated as described in paragraph (4) above,
unless Exxon is in material breach of the merger agreement, or
I-5
<PAGE>
Chapter One - The Merger
(2) the merger agreement is terminated in circumstances where
o Mobil's shareholders do not vote
in favor of the merger,
o a third party has made a proposal
for an alternative transaction, and
o within twelve months of the
termination of the merger
agreement Mobil enters into an
agreement for an alternative
transaction with that third party,
or with another third party at a
value per Mobil share higher
than $95.96.
Exxon must pay Mobil a termination fee of $1.5 billion in cash if the merger
agreement is terminated by Mobil because the Exxon Board changes, in a manner
adverse to Mobil, its recommendation in favor of the merger, unless Mobil is in
material breach of the merger agreement.
Stock Option Agreement
In connection with the merger agreement, Exxon and Mobil entered into a stock
option agreement under which Mobil granted to Exxon an option to purchase
approximately 14.9% of Mobil's outstanding common stock, at a price of $95.96
per share which is adjustable in certain events. The option is exercisable under
the same circumstances in which Mobil is required to pay to Exxon the $1.5
billion termination fee referred to above. The stock option agreement is
attached as Annex B. We encourage you to read this agreement.
Opinions of Financial Advisors (see pages I-39 and I-44)
In deciding to approve the merger, each Board considered the opinion of its
financial advisor. Exxon received an opinion from J.P. Morgan Securities Inc. as
to the fairness from a financial point of view of the consideration to be paid
by Exxon in the merger as of December 1, 1998, and Mobil received an opinion
from Goldman, Sachs & Co. as to the fairness from a financial point of view of
the exchange ratio as of December 1, 1998. These opinions were reaffirmed as of
April 2, 1999 and are attached as Annex C and Annex D. We encourage you to read
these opinions.
Other Exxon Annual Meeting Matters
At the Exxon meeting, Exxon is also asking its shareholders to:
o elect directors to the Exxon Board;
o ratify the appointment of Exxon's independent accountants;
o vote on four Exxon shareholder proposals; and
o conduct other business if properly presented.
Approval by Exxon shareholders of these other annual meeting proposals is not a
condition to completion of the merger. Approval of the merger is not a condition
to approval of these other annual meeting proposals.
The Exxon Board recommends that you vote FOR the election of directors and the
ratification of the appointment of Exxon's independent accountants, and that you
vote AGAINST the Exxon shareholder proposals.
Other Mobil Annual Meeting Matters
At the Mobil meeting, Mobil is also asking its shareholders to:
o elect directors to the Mobil Board;
o ratify the appointment of Mobil's independent auditors;
o vote on two Mobil shareholder proposals; and
o conduct other business if properly presented.
Approval by Mobil shareholders of these other annual meeting proposals is not a
condition to completion of the merger. Approval of the merger is not a condition
to approval of these other annual meeting proposals. If the merger is completed,
these other annual meeting proposals will, as a result, be superseded.
The Mobil Board recommends that you vote FOR the election of directors and the
ratification of the appointment of Mobil's independent auditors, and that you
vote AGAINST the Mobil shareholder proposals.
I-6
<PAGE>
Chapter One - The Merger
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
How We Prepared the Financial Statements
We are providing the following information to aid you in your analysis of
the financial aspects of the merger. We derived this information from the
audited financial statements of Exxon for the years 1994 through 1998 and from
the audited financial statements of Mobil for the years 1994 through 1998. The
information is only a summary and you should read it together with our
historical financial statements and related notes contained in the annual
reports and other information that we have filed with the SEC and incorporated
by reference. See "Where You Can Find More Information" on page VI-1.
Pooling of Interests Accounting Treatment
We expect that the merger will be accounted for as a "pooling of
interests." This means that, for accounting and financial reporting purposes, we
will treat our companies as if they had always been combined. For a more
detailed description of pooling of interests accounting, see "The Merger
Transaction--Accounting Treatment" on page I-26.
We have presented unaudited pro forma condensed combined financial
information that reflects the pooling of interests method of accounting to give
you a better picture of what our businesses might have looked like had they been
combined since January 1, 1996. We prepared the pro forma condensed combined
statements of income and pro forma condensed combined balance sheet by adding or
combining the historical amounts of each company. The accounting policies of
Exxon and Mobil are substantially comparable. Consequently, we did not make
adjustments to the unaudited pro forma condensed combined financial statements
to conform the accounting policies of the combining companies. The companies may
have performed differently had they always been combined. You should not rely on
the unaudited pro forma condensed combined financial information as being
indicative of the historical results that we would have had or the future
results that we will experience after the merger. See "Unaudited Pro Forma
Condensed Combined Financial Statements" on page I-32.
Merger-Related Expenses
We estimate that merger-related fees and expenses, consisting primarily of
SEC filing fees, fees and expenses of investment bankers, attorneys and
accountants, and financial printing and other related charges, will be
approximately $90 million. See note 5 on pages I-37 and I-38.
Integration-Related Expenses
We estimate that costs of approximately $2.0 billion will be incurred for
severance and other integration-related expenses, including the elimination of
duplicate facilities and excess capacity, operational realignment and related
workforce reductions. These expenditures are necessary to reduce costs and
operate efficiently. These costs will be charged to operations in the relevant
period and therefore are not reflected in the unaudited pro forma condensed
combined financial statements. See note 5 on pages I-37 and I-38.
Periods Covered
The unaudited pro forma condensed combined statements of income combine
Exxon's results for the years 1998, 1997 and 1996 with Mobil's results for the
years 1998, 1997 and 1996, giving effect to the merger as if it had occurred on
January 1, 1996. The unaudited pro forma condensed combined balance sheet
combines the balance sheets of Exxon and Mobil as of December 31, 1998, giving
effect to the merger as if it had occurred on December 31, 1998.
I-7
<PAGE>
Chapter One - The Merger
SELECTED HISTORICAL FINANCIAL DATA
Selected Historical Financial Data of Exxon
The following selected historical financial data for each of the years
ended December 31, 1994 through 1998 has been derived from Exxon's audited
consolidated financial statements. This information is only a summary and you
should read it together with Exxon's historical financial statements and related
notes contained in the annual reports and other information that we have filed
with the SEC and incorporated by reference. See "Where You Can Find More
Information" on page VI-1.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(millions of dollars, except per share amounts)
<S> <C> <C> <C> <C> <C>
Sales and operating revenues...... $115,417 $135,142 $131,543 $121,804 $112,128
Net income
Before change in accounting
principle...................... 6,440 8,460 7,510 6,470 5,100
Cumulative effect of
accounting change.............. (70) 0 0 0 0
-------- -------- -------- -------- --------
Net income...................... 6,370 8,460 7,510 6,470 5,100
Net income per common share
Before change in accounting
principle...................... 2.64 3.41 3.01 2.59 2.04
Cumulative effect of
accounting change.............. (0.03) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- --------
Net income...................... 2.61 3.41 3.01 2.59 2.04
Net income per common
share--assuming dilution
Before change in accounting
principle...................... 2.61 3.37 2.99 2.58 2.03
Cumulative effect of
accounting change.............. (0.03) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- --------
Net income...................... 2.58 3.37 2.99 2.58 2.03
Cash dividends per common share... 1.640 1.625 1.560 1.500 1.455
Total assets...................... 92,630 96,064 95,527 91,296 87,862
Long-term debt.................... 4,530 7,050 7,236 7,778 8,831
</TABLE>
I-8
<PAGE>
Chapter One - The Merger
Selected Historical Financial Data of Mobil
The following selected historical financial data for each of the years
ended December 31, 1994 through 1998 has been derived from Mobil's audited
consolidated financial statements. This information is only a summary and you
should read it together with Mobil's historical financial statements and related
notes contained in the annual reports and other information that we have filed
with the SEC and incorporated by reference. See "Where You Can Find More
Information" on page VI-1.
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(millions of dollars, except per share amounts)
<S> <C> <C> <C> <C> <C>
Sales and operating revenues(1)......................... $ 51,893 $ 64,028 $ 79,944 $ 73,047 $ 66,423
Net income
Before change in accounting principle................ 1,704 3,272 2,964 2,376 1,759
Cumulative effect of accounting change............... 0 0 0 0 (680)
---------- ---------- ---------- ---------- ----------
Net income........................................... 1,704 3,272 2,964 2,376 1,079
Net income per common share
Before change in accounting principle................ 2.12 4.10 3.69 2.93 2.14
Cumulative effect of accounting change............... 0.00 0.00 0.00 0.00 (0.86)
---------- ---------- ---------- ---------- ----------
Net income........................................... 2.12 4.10 3.69 2.93 1.28
Net income per common share--assuming dilution
Before change in accounting principle................ 2.10 4.01 3.62 2.88 2.12
Cumulative effect of accounting change............... 0.00 0.00 0.00 0.00 (0.83)
---------- ---------- ---------- ---------- ----------
Net income........................................... 2.10 4.01 3.62 2.88 1.29
Cash dividends per common share......................... 2.280 2.120 1.963 1.813 1.700
Total assets............................................ 42,754 43,559 46,408 42,138 41,542
Long-term debt.......................................... 3,719 3,670 4,450 4,629 4,714
</TABLE>
- -------------------
(1) Certain revenues have been reclassified. See note 2 on page I-37.
I-9
<PAGE>
Chapter One - The Merger
Selected Unaudited Pro Forma Combined Financial Data
The following selected unaudited pro forma combined financial data has been
derived from and should be read with the Unaudited Pro Forma Condensed Combined
Financial Statements and related notes on page I-32 through page I-38. This
information is based on the historical consolidated balance sheets and related
historical consolidated statements of income of Exxon and Mobil giving effect to
the merger using the pooling of interests method of accounting for business
combinations. This information is for illustrative purposes only. The companies
may have performed differently had they always been combined. You should not
rely on the selected unaudited pro forma combined financial data as being
indicative of the historical results that would have been achieved had the
companies always been combined or the future results that the combined company
will experience after the merger.
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1998 1997 1996
-------------- ----------- ----------------
(millions of dollars, except per share amounts)
<S> <C> <C> <C>
Sales and operating revenues.............................. $ 164,640 $ 195,155 $ 207,888
Net income
Before change in accounting principle.................. 8,144 11,732 10,474
Cumulative effect of accounting change................. (70) 0 0
----------- ----------- -----------
Net income............................................. 8,074 11,732 10,474
Net income per common share
Before change in accounting principle.................. 2.33 3.32 2.95
Cumulative effect of accounting change................. (0.02) 0.00 0.00
----------- ----------- -----------
Net income............................................. 2.31 3.32 2.95
Net income per common share--assuming dilution
Before change in accounting principle.................. 2.30 3.28 2.91
Cumulative effect of accounting change................. (0.02) 0.00 0.00
----------- ----------- -----------
Net income............................................. 2.28 3.28 2.91
Cash dividends per common share........................... 1.666 1.619 1.538
Total assets.............................................. 139,544
Long-term debt............................................ 8,532
</TABLE>
I-10
<PAGE>
Chapter One - The Merger
Comparative Per Share Data
Set forth below are the net income, cash dividends and book value per
common share data separately for Exxon and Mobil on a historic basis, for Exxon
Mobil on a pro forma combined basis and on a pro forma combined basis per Mobil
equivalent share. The exchange ratio for the business combination is 1.32015
shares of Exxon Mobil common stock for each share of Mobil common stock.
The Exxon Mobil pro forma data was derived by combining the historic
consolidated financial information of Exxon and Mobil using the pooling of
interests method of accounting for business combinations as described under
"Unaudited Pro Forma Condensed Combined Financial Statements" beginning on page
I-32.
The Mobil equivalent share pro forma information shows the effect of the
merger from the perspective of an owner of Mobil common stock. The information
was computed by multiplying the Exxon Mobil pro forma information by the
exchange ratio of 1.32015.
You should read the information below together with our historical
financial statements and related notes contained in the annual reports and other
information that we have filed with the SEC and incorporated by reference. See
"Where You Can Find More Information" on page VI-1. The unaudited pro forma
combined data below is for illustrative purposes only. The companies may have
performed differently had they always been combined. You should not rely on this
information as being indicative of the historical results that would have been
achieved had the companies always been combined or the future results that the
combined company will experience after the merger.
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1998 1997 1996
------ -------- ---------
<S> <C> <C> <C>
Exxon Historic per Common Share Data:
Net income................................................................. $ 2.61 $ 3.41 $ 3.01
Net income--assuming dilution.............................................. 2.58 3.37 2.99
Cash dividends............................................................. 1.640 1.625 1.560
Book value................................................................. 18.02
Exxon Mobil Pro Forma Combined per Exxon Mobil Common Share Data:
Net income................................................................. $ 2.31 $ 3.32 $ 2.95
Net income--assuming dilution.............................................. 2.28 3.28 2.91
Cash dividends............................................................. 1.666 1.619 1.538
Book value................................................................. 17.91
Mobil Historic per Common Share Data:
Net income................................................................. $ 2.12 $ 4.10 $ 3.69
Net income--assuming dilution.............................................. 2.10 4.01 3.62
Cash dividends............................................................. 2.280 2.120 1.963
Book value................................................................. 23.31
Exxon Mobil Pro Forma Combined per Mobil Equivalent Common Share Data:
Net income................................................................. $ 3.05 $ 4.38 $ 3.89
Net income--assuming dilution.............................................. 3.01 4.33 3.84
Cash dividends............................................................. 2.199 2.137 2.030
Book value................................................................. 23.64
</TABLE>
I-11
<PAGE>
Chapter One - The Merger
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document that are subject
to risks and uncertainties. Forward-looking statements include the information
in this document regarding:
<TABLE>
<S> <C>
synergies capital spending
efficiencies oil and natural gas production
cost savings asset portfolios
revenue enhancements oil and natural gas resource potential of Exxon
capital productivity Mobil after the closing,
returns on capital employed the timetable for closing the merger
</TABLE>
The sections of this document which contain forward-looking statements
include "Questions and Answers About the Merger," * "Summary," *
"Selected Historical and Pro Forma Financial Data--Merger-Related
Expenses," * "Selected Historical and Pro Forma Financial Data--
Integration Related Expenses," * "The Merger Transaction--Background of
the Merger," * "The Merger Transaction--Our Reasons for the Merger," *
"Unaudited Pro Forma Condensed Combined Financial Statements" and *
"Opinions of Financial Advisors". Our forward-looking statements are also
identified by words such as "believes," "expects," "anticipates,"
"intends," "estimates" or similar expressions.
For those statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.
You should understand that the following important factors, in addition to
those discussed elsewhere in this document and in the documents which are
incorporated by reference, could affect the future results of Exxon and Mobil,
and of Exxon Mobil after the closing, and could cause those results or other
outcomes to differ materially from those expressed in our forward-looking
statements:
<TABLE>
<S> <C>
Economic and Industry Conditions Political/Governmental Factors
o materially adverse changes in economic or industry o political stability in relevant areas of the world
conditions generally or in the markets served by o political developments and laws and regulations,
our companies such as forced divestiture of assets, restrictions on
o supply and demand for and pricing of crude oil, production, imports or exports, price controls, tax
natural gas and petrochemicals increases and retroactive tax claims, expropriation of
o changes in demographics and consumer property, cancellation of contract rights, and
preferences environmental regulations
Project/Technology Advances Operating Factors
o oil, natural gas and petrochemical project o supply disruptions
advancement o technical difficulties
o the development and use of new technology o changes in operating conditions and costs
o weather
</TABLE>
I-12
<PAGE>
Chapter One - The Merger
<TABLE>
<S> <C>
Transaction or Commercial Factors Competitive Factors
o the outcome of negotiations with partners, o the competitiveness of alternative energy
governments, suppliers, customers or others sources or product substitutes
o our ability to integrate the businesses of Exxon and o the actions of competitors
Mobil successfully after the merger
o the challenges inherent in diverting management's
focus and resources from other strategic
opportunities and from operational matters during
the integration process
o the process of, or conditions imposed in connection
with, obtaining regulatory approvals for the merger
</TABLE>
YEAR 2000 ISSUE
Exxon and Mobil are each engaged in major company-wide efforts to address
the year 2000 issue. This issue relates to the inability of some computer
programs and computer chips embedded in operating equipment to properly
recognize dates in and after the year 2000. This could result in system failures
or miscalculations that could cause disruptions to various business activities
and operations. The efforts to address this issue generally include:
(1) the identification and assessment from a year 2000 standpoint
of all business-critical software systems and operating equipment and
the remediation of those that are not year 2000 compliant;
(2) the assessment of the year 2000 readiness of
business-critical third parties such as suppliers, customers, joint
venture companies and governments; and
(3) the development of contingency plans for mitigating the
impact of failures for year 2000 reasons of business-critical systems,
operating equipment or relationships with third parties.
Exxon and Mobil expect to complete their efforts to address the year 2000
issue in advance of December 31, 1999, and each is planning to take steps to
deal with possible year 2000 issues that may arise around that date. Each
company's effort is designed to address the company's unique systems, embedded
computer chips and third-party relationships, and each effort is well advanced.
Accordingly, irrespective of when the merger is completed, each company's effort
will continue as planned to completion. There will be no major integration of
the companies' computer systems that would delay either company's year 2000
compliance efforts.
I-13
<PAGE>
Chapter One - The Merger
THE MERGER TRANSACTION
General
Exxon's Board is using this joint proxy statement/prospectus to solicit
proxies from the holders of Exxon common stock and Exxon Class A preferred stock
for use at the Exxon meeting. Mobil's Board is also using this document to
solicit proxies from the holders of Mobil common stock and Mobil ESOP preferred
stock for use at the Mobil meeting.
Exxon Proposals
At the Exxon meeting, holders of Exxon common stock and Exxon Class A
preferred stock will be asked to vote upon:
(1) approval of the proposed merger pursuant to an Agreement and
Plan of Merger dated as of December 1, 1998 among Exxon, Mobil and a
wholly owned Exxon subsidiary, including the related issuance of Exxon
Mobil common stock,
(2) approval of the amendment of Exxon's certificate of
incorporation to increase the number of authorized shares of Exxon
common stock to 4.5 billion, to change Exxon's name to "Exxon Mobil
Corporation" and to eliminate Exxon's Class B preferred stock, none of
which is outstanding, and
(3) certain other Exxon annual meeting proposals described under
"Other Exxon Annual Meeting Proposals" in Chapter Four of this
booklet.
The merger will not be completed and the Exxon charter amendments will not
be effected unless each is approved by Exxon shareholders. We sometimes refer to
(1) and (2) collectively as the "Exxon Merger Proposals".
Mobil Proposals
At the Mobil meeting, holders of Mobil common stock and Mobil ESOP
preferred stock will be asked to vote upon:
(1) approval and adoption of the merger agreement and the
merger, and
(2) certain other Mobil annual meeting proposals described under
"Other Mobil Annual Meeting Proposals" in Chapter Five of this
booklet.
Background of the Merger
The management of each of Exxon and Mobil continually review their
company's respective positions in light of the changing competitive environment
of the oil and gas industry with the objective of determining what alternatives
are available to further enhance shareholder value. While both companies believe
they have positive future prospects on a stand-alone basis, in recent years, the
managements of both Exxon and Mobil have had conversations with a number of
other companies regarding a range of options to improve their competitive
positions, including acquisitions or dispositions of assets, possible
partnerships, alliances or other significant transactions.
On June 16, 1998, Mr. Lee R. Raymond, Exxon's Chairman and Chief Executive
Officer, met with Mr. Lucio A. Noto, Mobil's Chairman and Chief Executive
Officer, at Mobil's headquarters in Fairfax, Virginia. At the meeting, among
other things, Mr. Raymond and Mr. Noto had preliminary discussions about the
possibility of a combination of the two companies and touched on what each
company could contribute to the combination in both
I-14
<PAGE>
Chapter One - The Merger
the near- and longer-term, including areas where the companies' businesses
are complementary or redundant, and on the possible allocation of
management responsibilities and Board composition. They agreed that Mr.
Raymond would serve as sole CEO of any combined entity that might result
from the discussions. They agreed to further consider separately the
possibility of such a transaction. On June 23, 1998, Mr. Noto telephoned
Mr. Raymond to continue the discussions from their meeting the previous
week. At the regular meeting of the Mobil Board on June 26, 1998, Mr.
Noto informed the Mobil Board of his meeting with Mr. Raymond.
On July 1, 1998, Mr. Raymond and Mr. Charles W. Matthews, Exxon's general
counsel, met with Mr. Noto and Mr. Samuel H. Gillespie III, senior vice
president and general counsel of Mobil, at Exxon's headquarters in Irving, Texas
to continue the preliminary discussions concerning the possibility of a
transaction. The discussions focused on the need to identify, in the context of
the near- and longer-term benefits, a mutually acceptable range for the possible
relative ownerships by Exxon and Mobil shareholders of the combined company
after the merger, before proceeding to discuss other transaction terms or to
involve a significant number of other employees or outside advisors. Later that
day, Mr. Noto notified the Mobil Board of the discussions between Mobil and
Exxon. During the course of the month of July, Mr. Raymond and Mr. Noto had
several further telephone conversations in which they continued to discuss their
views on the benefits to shareholders of a possible combination transaction and
an acceptable relative ownership range.
At the regular meeting of the Mobil Board on July 24, 1998, Mr. Noto
briefed the Mobil Board on the preliminary discussions with Exxon regarding a
possible combination transaction. Mr. Noto discussed with the Mobil Board recent
developments in the oil industry and the potential benefits of a combination
transaction between Exxon and Mobil. The Mobil Board indicated its support of
initiatives to enhance shareholder value and authorized Mr. Noto to continue to
pursue the possibility of a combination transaction between Mobil and Exxon.
At the regular meeting of the Exxon Board on July 29, 1998, Mr. Raymond
briefed the Exxon Board on the preliminary discussions with Mr. Noto regarding
the possibility of a combination transaction between Exxon and Mobil. Mr.
Raymond reviewed with the Board recent developments in the oil industry and his
preliminary views on the potential near- and longer-term benefits and operating
and capital synergies of such a combination transaction and some of the terms on
which such a transaction might occur. The Exxon Board indicated its support for
the objectives and opportunities to further enhance shareholder value described
by Mr. Raymond and encouraged Mr. Raymond to continue to explore the possibility
of a transaction which would achieve these objectives.
In early August 1998, Mr. Raymond and Mr. Noto continued telephone
discussions on a number of important aspects of a possible merger, including
possible relative ownership ranges. Not having identified a mutually acceptable
range, in a conversation on August 5, Messrs. Raymond and Noto mutually agreed
to discontinue discussions. On August 6, Mr. Noto notified the Mobil Board of
the discontinuation of discussions between Exxon and Mobil.
On August 11, 1998, The British Petroleum Company p.l.c. and Amoco
Corporation announced the terms of their merger agreement. In any negotiation,
price information from recent, comparable deals helps the parties identify a
benchmark price range for their transaction. Before BP/Amoco was announced,
Exxon and Mobil could only compare their proposed transaction with recent deals
involving companies that were much smaller or in different industries. Pricing
in these other deals varied widely and did not help Exxon and Mobil identify an
appropriate range for their discussions. BP/Amoco, however, involved companies
operating on a similar scale to Exxon and Mobil within the same industry. The
transaction therefore provided Exxon and Mobil with a better reference point
from which to discuss price and other key terms.
Shortly thereafter, Mr. Raymond and Mr. Noto resumed their discussions
taking into account this new pricing benchmark. They concluded that for
discussions to progress, the parties would need to develop a better
understanding of the potential near-term synergies and cost savings as well as
longer-term capital efficiencies and strategic benefits that could be
realized from a merger. They agreed to meet again in New Orleans on
September 3, 1998.
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Chapter One - The Merger
In mid-August 1998, the management of Mobil asked Goldman Sachs to
undertake an analysis of strategic alternatives available to Mobil. In late
August and September 1998, Mobil management met with Goldman Sachs to discuss
Goldman Sachs' analyses, which included a preliminary analysis of a possible
merger with Exxon as well as other possible alternatives, including preliminary,
hypothetical analyses of possible combinations and joint venture transactions
with large publicly-traded oil companies other than Exxon. At that time, Mobil
had not advised Goldman Sachs that Mobil was engaged in discussions with Exxon
regarding a potential transaction.
At the September 3 meeting, Messrs. Raymond and Matthews, together with Mr.
Rene Dahan and Mr. Harry J. Longwell, senior vice presidents and directors of
Exxon, met with Messrs. Noto and Gillespie and other senior executives of Mobil,
including Mr. Eugene A. Renna, President, Chief Operating Officer and a director
of Mobil. Discussions focused on Mobil's identification of potential near-term
savings and longer-term benefits achievable from a potential merger. Mobil
presented its preliminary analysis of the synergies which it believed would be
achievable by the third anniversary of the closing. The scope of synergies
discussed at this meeting included savings achievable through elimination of
duplicative overheads at the corporate and operating levels; focusing the
combined company's exploration and capital programs on high quality investments;
and efficiencies resulting from economies of scale and sharing of best practices
in, for example, refining operations, raw material purchasing, product
transportation and handling of inventory. In addition, Mobil and Exxon agreed
that achieving near-term cost reductions was not a sufficient reason to merge,
and that it was essential that they also expect to achieve long-term benefits in
order to justify merging. As examples of long-term benefits Exxon and Mobil
discussed the ability of the combined company to use its capital more profitably
than either company on its own and to compete more effectively with the scale
and cost structure of the largest international firms. Exxon and Mobil
acknowledged that these long-term benefits would be difficult to quantify.
On September 14, 1998, Goldman Sachs presented to the Mobil Board its
analyses regarding the various possible transactions that might be considered by
Mobil, including a possible merger with Exxon. Following its presentation,
Goldman Sachs was requested to consider additional hypothetically possible
transactions with large publicly-traded oil companies. At that time, Mobil had
not advised Goldman Sachs that Mobil was engaged in discussions with Exxon
regarding a potential transaction. After Goldman Sachs was excused from the
meeting, Mr. Noto briefed the Mobil Board on the recent developments in
discussions between Mobil and Exxon.
On September 16, 1998, Mr. Noto called Mr. Raymond to confirm that Mobil
had provided Exxon with sufficient information for Exxon to perform its analysis
regarding potential synergies. They discussed issues raised at the September 3
meeting, including the ability of the combined company to manage assets for a
greater return than each company could achieve individually, and agreed to a
further meeting at Exxon's headquarters on September 24. At this meeting,
Messrs. Raymond and Matthews continued discussions with Messrs. Noto and
Gillespie principally on mutually acceptable relative ownership ranges, and
near- and longer-term benefits of the merger. After this meeting, Mobil advised
Goldman Sachs that Mobil was engaged in discussions with Exxon regarding a
potential transaction.
At a regular meeting of the Mobil Board on September 25, 1998 at which
Mobil's financial and legal advisors were present, Mr. Noto updated the Mobil
Board on the status of the discussions between Exxon and Mobil. The Mobil Board
discussed issues involving a possible merger with Exxon, including the two
companies' differing views on the relative ownership by Mobil and Exxon
shareholders of a combined company. The Mobil Board expressed its support for
Mr. Noto's views in this regard. In addition, Goldman Sachs reviewed additional
possible transactions with large publicly-traded oil companies that might be
considered by Mobil.
On September 30, 1998, at the regular meeting of the Exxon Board, Mr.
Raymond updated the board on his discussions with Mr. Noto, including the
differing views on relative ownership ranges. The Exxon Board expressed
its support for Mr. Raymond's views in this regard and encouraged Mr.
Raymond to continue the discussions. Discussions on possible ownership
ranges continued between Messrs. Raymond and Noto over the next few weeks.
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Chapter One - The Merger
On October 15, 1998, Mr. Noto updated the Mobil Board on Mobil's strategic
alternatives, the advantages of a combination with Exxon and the status of
discussions between Mobil and Exxon regarding a possible merger. Other
alternatives discussed by Mr. Noto included the possibility of Mobil remaining
an independent company, the possibility of seeking an acquisition candidate, the
possibility of pursuing one or more joint ventures, and the possibility of
seeking to engage in a combination with a company other than Exxon. For the
reasons contained in "Factors Considered by, and Recommendation of, the Mobil
Board" beginning on page I-24 of this proxy statement/prospectus, including that
a transaction with Exxon was more feasible and was expected to yield greater
benefits than the potential alternatives reviewed by Mobil, the Mobil Board
viewed a combination with Exxon as sufficiently superior to other alternatives
to make it worthwhile to continue considering such a transaction. The Mobil
Board discussed the issues regarding a possible merger and authorized Mr. Noto
to continue to pursue discussions with Exxon.
At a meeting on October 19, 1998 at Exxon's headquarters attended by
Messrs. Raymond, Matthews, Noto and Gillespie, the parties reviewed the possible
relative ownership ranges and expanded the discussions to include such issues as
the representation of current Mobil directors on the board of the combined
company; Mr. Noto's role in the management of the combined company; staffing and
employee issues; the name and principal office locations of the combined
company; and potential termination fees. Messrs. Raymond and Noto concluded that
discussions should be further expanded to cover other terms of a possible
transaction and should involve other senior employees and outside advisors.
On October 27, 1998, at a regular meeting of the Exxon Board Compensation
Committee to which all non-employee members of the Exxon Board were invited, Mr.
Raymond updated the Exxon Board on the discussions with Mobil. On October 29,
1998, at the regular meeting of the Mobil Board, Mr. Noto updated the Mobil
Board on discussions with Exxon regarding a possible merger.
On October 28, 1998, Skadden, Arps, Slate, Meagher & Flom LLP, counsel to
Mobil, provided a memorandum to Davis Polk & Wardwell, counsel to Exxon,
outlining certain merger agreement terms proposed by Mobil for the transaction.
The Mobil proposal outlined, among other things: a stock for stock merger in
which the parties would account for the transaction as a pooling of interests;
the representation of Mobil directors on the Exxon board after the merger;
matters relating to the benefits of Mobil employees following the merger;
mechanisms designed to address integration issues; provisions limiting the
conditions to the consummation of a possible transaction and providing for the
payment of termination fees if the merger agreement was terminated or the
transaction was not consummated.
On November 4, 1998, Davis Polk provided a memorandum to Skadden
outlining Exxon's responses to the proposal submitted by Mobil. On November 5,
representatives of Exxon, Mobil and their counsel met in New York to discuss the
merger agreement and open issues. Significant issues addressed included
composition of the combined company's board and committees of such board,
location of the combined company's headquarters, use of the Mobil brand name,
the role of the transition committee, employee matters, conditions to closing,
circumstances under which a termination fee would be payable, whether Mobil
would grant a stock option to Exxon, and certain representations and warranties
to be included in the merger agreement.
On October 16, 1998, Exxon informed J.P. Morgan that Exxon was interested
in engaging J.P. Morgan as its financial advisor if discussions with Mobil
regarding a possible transaction reached a more advanced stage. On November 9,
1998, Exxon entered into an engagement letter relating to the retention of J.P.
Morgan as Exxon's financial advisor for the proposed transaction with Mobil.
During November 1998, Exxon and Mobil exchanged due diligence request lists
and representatives of both companies and their advisors participated in a video
conference and numerous telephone calls and meetings to conduct reciprocal
legal, business, accounting and financial due diligence. A reciprocal
confidentiality agreement was entered into on November 12.
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Chapter One - The Merger
On November 12, 1998, Davis Polk delivered a first draft of the merger
agreement to Mobil and its counsel. On November 13, Mobil and its counsel
provided written comments on this draft to Exxon and its counsel and in the
following weeks, Exxon and Mobil and their counsel continued to negotiate the
provisions of this agreement. On November 17, a first draft of the stock option
agreement was provided to Mobil and its counsel.
A meeting was held in Washington, D.C. on November 18, 1998, attended by
Messrs. Raymond and Noto and other senior Exxon and Mobil officers, as well as
outside counsel, to discuss regulatory issues as well as key open issues in the
merger agreement, including closing conditions, payment of termination fees,
employee matters, and the proposed grant by Mobil to Exxon of an option to buy
Mobil stock.
On November 19, 1998, Messrs. Longwell and Dahan of Exxon met with Mr.
Renna of Mobil in Washington, D.C. to discuss organizational issues for the
combined company, including a proposal to organize the combined company along
functional business lines rather than on the basis of geography.
Over the weekend of November 21, 1998, drafts of the merger agreement and
the stock option agreement were delivered to the Mobil and Exxon Boards.
On November 22, 1998, Mobil formalized its retention of Goldman Sachs as
its financial advisor for the proposed transaction with Exxon by entering into
an engagement letter with Goldman Sachs.
On November 22, 1998, the Mobil Board held a special meeting at which it
was briefed on the status of discussions between Exxon and Mobil and reviewed
the relevant financial, accounting and legal considerations of the proposed
transaction. At the meeting, Goldman Sachs made a preliminary financial
presentation that was similar to the final presentation made at the December 1,
1998 meeting of the Mobil Board. Skadden reviewed the terms and conditions of
the proposed merger agreement and stock option agreement, as well as remaining
open issues, and reviewed with the Mobil Board its fiduciary duties under
Delaware law. In addition, Hogan & Hartson and Linklaters & Alliance, Mobil's
regulatory counsel, presented their analyses of regulatory matters and discussed
related issues with the Mobil Board. Ernst & Young LLP also reviewed with the
Mobil Board accounting matters relating to the proposed merger and issued a
letter to the Mobil Board from E&Y concurring with Mobil's conclusion that the
merger should be accounted for as a pooling of interests. At the conclusion of
the November 22 meeting, the Mobil Board authorized Mobil management to continue
discussions with Exxon regarding a possible merger.
On November 23, 1998, Mr. Noto telephoned Mr. Raymond to discuss, among
other things, open issues in the merger agreement and the stock option
agreement.
At the regular meeting of the Exxon Board on November 25, 1998, at which
all of Exxon's directors were present, Exxon's directors were briefed on the
objectives and strategic benefits, both near- and longer-term, from a merger
with Mobil and the possibility of further enhancing shareholder value over what
could be achieved on a stand alone basis, as well as on the status of the
discussions with Mobil. J.P. Morgan presented its preliminary financial analysis
of the merger. PricewaterhouseCoopers LLP discussed accounting matters relating
to the merger and submitted to the Exxon Board a letter from PwC concurring with
Exxon's conclusion that the merger should be accounted for as a pooling of
interests. In addition, Covington & Burling, Exxon's regulatory counsel,
presented its analysis of regulatory matters. Davis Polk reviewed the terms and
conditions of the proposed merger agreement and stock option agreement as well
as remaining open issues, and reviewed the Exxon Board's legal duties and
responsibilities. The Exxon Board authorized Exxon management to continue
discussions with Mobil and to move toward finalizing a merger agreement to
achieve the objectives discussed.
On November 26, 1998, Mr. Noto and Mr. Raymond spoke by telephone to
discuss reports that had appeared in the media about a possible transaction
between Exxon and Mobil. On November 27, 1998, prior to the opening of NYSE
trading, Exxon and Mobil issued a joint statement confirming that the two
companies were in discussions concerning a possible business combination.
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Chapter One - The Merger
Over the course of the weekend of November 27, 1998, Exxon and Mobil
representatives and outside counsel continued discussions towards resolving open
issues. On the evening of November 30, Messrs. Raymond and Noto met and reached
agreement in principle, subject to Board approval, on the remaining unresolved
terms of the merger, including the exchange ratio and the resulting exercise
price in the stock option agreement.
At a special meeting of the Exxon Board on December 1, 1998, Mr. Raymond
reviewed the near- and longer-term strategic benefits of a merger with Mobil and
the status of the transaction; J.P. Morgan delivered its fairness opinion to the
Exxon Board; and Davis Polk made a presentation on the terms and conditions of
the merger agreement and the stock option agreement and updated the Board on how
remaining open issues had been resolved. After due consideration, the Exxon
Board unanimously approved the merger agreement and the stock option agreement
and the related merger matters described in this document.
At a special meeting of the Mobil Board held on December 1, 1998 to
consider the merger, the Mobil Board received a financial presentation from and
the fairness opinion of Goldman Sachs. Skadden then reviewed the changes in the
terms of the proposed merger agreement and stock option agreement since the
November 22 meeting. Following these presentations, and a discussion regarding
the strategic benefits of the proposed merger and of the terms and conditions of
the merger agreement and the stock option agreement, the Mobil Board, with one
director voting against, approved the merger agreement and the stock option
agreement and determined to recommend that the Mobil shareholders approve the
merger agreement and the merger.
Following the approval of their Boards, Exxon and Mobil executed the merger
agreement and the stock option agreement, and issued a joint press release
immediately thereafter prior to the opening of NYSE trading.
Our Reasons for the Merger
Exxon and Mobil each have a long history of being managed to enhance
shareholder value. Individually, both companies have positive prospects for the
future. However, we believe that by combining the two companies, we can create
substantially more shareholder value than could be achieved by the companies on
their own. This is the fundamental reason for the merger.
Simply having a bigger company is not a reason for us to merge. To create
shareholder value, the new company must be better. As we explain in more detail
below, we believe that by combining the businesses of Exxon and Mobil we can
save money, increase profits and returns, and reduce risk. We will also have
greater financial, technological, and human resources. This will increase our
ability to handle large, complex, and costly international energy projects.
The scale and cost structure of the combined company will help us compete
more effectively with the largest firms outside the U.S. These include other
multi-national oil companies which have recently combined or formed joint
ventures, as well as the very large state-owned oil companies which have been
rapidly expanding outside their traditional areas.
The benefits of the merger fall broadly in two categories: near-term
operating synergies and capital productivity improvements. We believe these
benefits depend on the merger and are not available to the companies on their
own.
Near-term Operating Synergies. We believe we can run the combined company
more efficiently than either company on its own. Specifically, we expect
the combined company to achieve about $2.8 billion in annual
pre-tax benefits from operating synergies. By operating synergies we mean
increases in production, sales, and efficiency, decreases in unit costs and
overhead expense, and other benefits made possible by combining
complementary operations.
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Chapter One - The Merger
About two-thirds of these benefits should come from:
o Streamlining the combined organization, which we can run with less
administrative and overhead cost than two separate organizations;
and
o Eliminating excess capacity, duplicate facilities, and redundant
operations.
Additional synergy benefits should come from:
o Exploring for oil and gas more efficiently in regions where the
companies operate separately today;
o Applying each company's best business practices across the
worldwide operations of the combined company; and
o Coordinating purchases of raw materials across the two companies'
extensive supply, refining and chemicals networks.
We expect to realize the full $2.8 billion in annual pre-tax synergy
benefits by the third year after the merger. During the first two years,
the benefits should begin to be realized but will be partly offset by
one-time costs we estimate at $2 billion. These are non-recurring costs
that we expect to incur to integrate the businesses. On a net basis, the
earnings impact should be neutral in the first year after the merger and
positive by the second year.
Capital Productivity Improvements. We also believe the combined company can
use its capital more profitably than either company on its own. As
discussed below, Exxon Mobil will, by combining complementary assets, have
a stronger presence in those regions of the world with the best potential
for future oil and gas discoveries and production. We will also have an
improved and more balanced presence in high-growth markets and businesses.
This will provide a broader menu of capital investment opportunities from
which to choose the best projects to advance. As a result, we believe the
combined company will be able to maintain or improve earnings while
spending less on capital projects overall. Additionally, we believe that
many of our existing assets will perform better when combined due to
efficiencies of scale, cost savings, and sharing of best management
practices.
The businesses and assets of Exxon and Mobil are highly complementary in
key areas. As a result, the combined company should be a top competitor among
international energy companies in all three of its main businesses: exploration
and production, refining and marketing, and chemicals. In terms of both
geography and areas of business, the combined company will also have a more
diverse portfolio. Diversification helps us better spread and manage the risks
inherent in our volatile industry. This means that a downturn in a particular
country or business will have less impact on overall performance.
Exploration and Production. The combined company will have an improved
portfolio in key exploration and production areas of the world today.
For example:
o Exxon's leadership position in deepwater exploration in West Africa
will combine with Mobil's existing production and exploration acreage
in Nigeria and Equatorial Guinea;
o In the Caspian, Exxon's strong presence in Azerbaijan will combine
with Mobil's similar position in Kazakhstan, including its
significant interest in the Tengiz field, and its presence in
Turkmenistan;
o Complementary exploration and production operations also exist in
South America, Russia and Eastern Canada;
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Chapter One - The Merger
o In the higher-growth natural gas business, the companies will combine
their own leading technologies and large positions in several of the
world's key markets, including North America, Europe and
Asia-Pacific.
On a worldwide basis, the combined company will have proved oil and
natural gas reserves of 21 billion oil-equivalent barrels.
Refining and Marketing. In refining operations, the combined company will
have access to an expanded network of refineries for manufacturing high
quality fuel products and feedstocks. Both companies have traditionally
focused on maintaining highly efficient, technologically up-to-date
refineries. These facilities have good locations and are integrated with
lubricant or chemical manufacturing facilities, providing additional
opportunities to improve efficiency.
In retail marketing, the combined company will benefit from an
expanded worldwide base of branded service stations, as well as Exxon's and
Mobil's global brand recognition. By sharing expertise, we expect to
enhance the combined company's offering of high-quality products and
services and attractive, efficient store designs.
In lubricants, Exxon's industry leading basestock manufacturing
business will combine with Mobil's expertise in synthetic lubricants and
leading position in worldwide finished product sales.
Chemicals. On a worldwide basis, the combined company will have a greater
olefin, polyolefin and paraxylene capacity. This will provide opportunities
to save money through manufacturing efficiencies. We also believe that a
common focus on efficiency, use of cost-effective raw materials, and
further integration of fuels and chemicals operations at individual sites
will improve overall performance.
Proprietary Technologies. Exxon and Mobil have each invested in extensive
research and development programs over the years. As a result, each company
has its own exclusive patents on valuable technologies. The merger will let
us share these proprietary technologies and apply them across the combined
business. For example, in the exploration and production business, we will
benefit from sharing deepwater, arctic, heavy oil and remote natural gas
technologies. In the refining and marketing and chemicals businesses, we
will benefit from sharing catalysis technologies and proprietary processes
for manufacturing fuels, chemicals, and synthetic lubricants.
Exxon and Mobil share a number of important long-term corporate values,
including:
o A commitment to enhancing shareholder value;
o An emphasis on efficiency, investment discipline and asset
productivity;
o A focus on product quality and customer satisfaction; and
o A commitment to safety, health and environmental care.
Both companies also benefit from talented and dedicated employees with a
long-standing commitment to excellence. We believe these shared values will
facilitate a relatively smooth integration of the two companies.
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Chapter One - The Merger
Exxon Mobil's Senior Management Team
Our senior management team is expected to consist of the six individuals
named below. This team reflects that Exxon Mobil will be organized along
business lines with three major business units: * exploration & production *
refining and marketing and * chemicals. A transition committee consisting of Mr.
Raymond and Mr. Noto is responsible for recommending to the Exxon Mobil Board
the other senior officers.
Lee R. Raymond Chairman and CEO
Lucio A. Noto Vice Chairman
Harry J. Longwell Senior Vice President
Rene Dahan Senior Vice President
Eugene A. Renna Senior Vice President
Robert E. Wilhelm Senior Vice President
Mr. Longwell will be responsible for exploration and production. Mr. Dahan
will be responsible for chemicals. Mr. Renna will be responsible for refining
and marketing. All six individuals will be on the Exxon Mobil Board.
Factors Considered by, and Recommendation of, the Exxon Board
At a meeting of the Exxon Board held on December 1, 1998, after due
consideration, the Exxon Board unanimously:
(i) determined that the merger agreement, the merger, the stock option
agreement, the amendments to Exxon's charter and the related
transactions are fair to and in the best interests of Exxon and its
shareholders,
(ii) approved the merger agreement, the merger, the stock option
agreement, the charter amendments and the related transactions, and
(iii) determined to recommend that the shareholders of Exxon approve the
merger, including the issuance of Exxon common stock in the merger,
and the charter amendments. Accordingly, the Exxon Board recommends
that the Exxon shareholders vote "FOR" the approval of the merger,
including the issuance of Exxon common stock in the merger, and the
charter amendments.
In approving the transaction and making these recommendations, the Exxon
Board consulted with Exxon's management as well as its outside legal counsel and
financial advisor, and considered the following material factors:
(1) all the reasons described above under "Our Reasons for the
Merger", including the near- and longer-term synergies and productivity
improvements expected to be available to the combined company;
(2) the possibility, as alternatives to the merger, of pursuing an
acquisition of or a business combination or joint venture with an entity
other than Mobil and the Exxon Board's conclusion that a transaction with
Mobil is more feasible, and is expected to yield greater benefits, than the
likely alternatives. The Exxon Board reached this conclusion for reasons
including Mobil's interest in pursuing a transaction with Exxon, Exxon's
view that the transaction could be acceptably completed from a timing and
regulatory standpoint, and Exxon management's assessment of the
alternatives and the expected benefits of the merger and compatibility of
the companies as described under "Our Reasons for the Merger" above;
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Chapter One - The Merger
(3) the fact that Exxon shareholders would hold approximately 70% of
the outstanding stock of the combined company after the merger;
(4) comparisons of historical financial measures for Exxon and Mobil,
including earnings, return on capital employed and cash flow, and
comparisons of historical operational measures for Exxon and Mobil,
including hydrocarbon reserve replacement, hydrocarbon production and
refinery runs;
(5) current industry, economic and market conditions, including
current low prices for crude oil and refined products. The Exxon Board
considered that, when oil prices and refining margins fall, companies must
improve the performance of their internal operations to maintain
profitability. The Exxon Board considered it likely that low prices would
lead to further consolidation in the oil and gas industry because, as
explained under "Our Reasons for the Merger," combining operations can help
companies save money and operate more efficiently;
(6) the intended accounting of the merger as a pooling of interests
which results in combined financial statements prepared on a basis
consistent with the underlying view that shareholder interests in the two
companies have simply been combined, and in the preservation of the
historical cost approach for both Exxon and Mobil. This will facilitate
future comparison and benchmarking of Exxon Mobil against our key
international competitors;
(7) the ability to complete the merger as a tax-free reorganization
for U.S. federal income tax purposes;
(8) the terms and conditions of the merger agreement, including the
conditions to closing and the termination fees payable under certain
circumstances (see "The Merger Agreement--Conditions to the Completion of
the Merger" and "The Merger Agreement--Termination of the Merger
Agreement");
(9) the grant to Exxon of an option to acquire Mobil stock exercisable
under certain circumstances pursuant to the stock option agreement (see
"The Merger Agreement--Stock Option Agreement");
(10) the analyses and presentations of J.P. Morgan, and J.P. Morgan's
written opinion to the effect that, as of December 1, 1998, and based upon
and subject to the various considerations set forth in its opinion, the
consideration proposed to be paid by Exxon in the merger was fair from a
financial point of view to Exxon;
(11) the role that Exxon's current management would play in the
management of the combined company and the composition of the combined
company's Board of Directors;
(12) the challenges of combining the businesses of two major
corporations of this size and the attendant risk of not achieving the
expected cost savings and other benefits, as discussed under "Cautionary
Statement Concerning Forward-Looking Statements", and of diverting
management focus and resources from other strategic opportunities and
operational matters for an extended period of time; and
(13) that while the merger is likely to be completed, there are risks
associated with obtaining necessary approvals, and as a result of certain
conditions to the completion of the merger, it is possible that the merger
may not be completed even if approved by shareholders (see "The Merger
Agreement--Conditions to the Completion of the Merger").
In view of the wide variety of factors considered in connection with its
evaluation of the merger and the complexity of these matters, the Exxon Board
did not find it useful to and did not attempt to quantify, rank or otherwise
assign relative weights to these factors. The Exxon Board relied on the
experience and expertise of J.P. Morgan, its financial advisor, for
quantitative analysis of the financial terms of the merger. See "Opinions of
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Chapter One - The Merger
Financial Advisors--Opinion of Exxon Financial Advisor". In addition, the
Exxon Board did not undertake to make any specific determination as to
whether any particular factor, or any aspect of any particular factor, was
favorable or unfavorable to the Exxon Board's ultimate determination, but
rather the Exxon Board conducted an overall analysis of the factors
described above, including through discussions with and questioning of
Exxon's management and legal, financial and accounting advisors. In
considering the factors described above, individual members of the Exxon
Board may have given different weight to different factors.
The Exxon Board considered all these factors as a whole, and overall
considered the factors to be favorable to and to support its determination.
However, the general view of the Exxon Board was that factors 12 and 13 were
uncertainties or risks relating to the transaction, and that the other reasons
and factors described above were generally considered favorable.
Factors Considered by, and Recommendation of, the Mobil Board
At its December 1, 1998 meeting, the Mobil Board, with one director voting
against, determined that the merger agreement and the related transactions,
including the merger, are fair to and in the best interests of Mobil and Mobil's
shareholders. Accordingly, the Mobil Board has adopted the merger agreement,
with one director voting against such adoption, and the Mobil Board recommends
that Mobil's shareholders vote "FOR" approval of the merger agreement and the
merger.
In the course of reaching its decision to adopt the merger agreement, the
Mobil Board consulted with Mobil's management, as well as its outside legal
counsel and its financial advisor, and considered the following material
factors:
(1) all the reasons described above under "Our Reasons for the
Merger", including the near- and longer-term synergies and productivity
improvements expected to be available to the combined company;
(2) the risks and potential rewards associated with, as an alternative
to the merger, continuing to execute Mobil's strategic plan as an
independent entity. Such risks include, among others, the risks associated
with remaining independent amidst industry-wide consolidation, and such
rewards include, among others, the ability of existing Mobil shareholders
to partake in the potential future growth and profitability of Mobil;
(3) the possibility, as alternatives to the merger, of seeking to
acquire another company, seeking to engage in one or more joint ventures or
seeking to engage in a combination with a company other than Exxon and the
Mobil Board's conclusion that a transaction with Exxon is more feasible,
and is expected to yield greater benefits, than the likely alternatives.
The Mobil Board concluded that a combination with Exxon was more feasible
than the other alternatives it reviewed for reasons including the fact that
Exxon was interested in pursuing a transaction with Mobil, and Mobil's view
that the transaction could be acceptably completed from a timing and
regulatory standpoint, and would yield greater benefits than the
alternatives given Exxon's financial strength, and the ability of a
combined company to fund a greater number of long-term growth projects and
to compete effectively;
(4) the value of the exchange ratio provided for in the merger
agreement relative to the then-current market prices and historical trading
prices of Mobil and Exxon shares over the past year and relative to the
stock price premiums paid in mergers of comparable size as discussed in
Goldman Sachs' selected transaction analysis, that the premium offered in
the merger was within the range of premiums paid in comparable
transactions, and that Mobil's shareholders would hold approximately 30% of
the outstanding stock of the combined company after the merger;
(5) comparisons of historical financial measures for Mobil and Exxon,
including earnings, return on capital employed and cash flow, and
comparisons of historical operational measures for Mobil and Exxon,
including hydrocarbon reserve replacement, hydrocarbon production and
refinery runs;
I-24
<PAGE>
Chapter One - The Merger
(6) the prospects of Mobil to compete effectively in the future, the
prospects of Exxon based on Goldman Sachs' due diligence and its analysis
of publicly available information including earnings estimates compiled by
I/B/E/S and First Call, and Mobil management's view, based on its due
diligence, of Exxon's prospects to compete effectively in the future;
(7) current industry, economic and market conditions, including
current low prices for crude oil and refined products. The Mobil Board
considered that, when oil prices and refining margins fall, companies must
improve the performance of their internal operations to maintain
profitability. The Mobil Board considered it likely that low prices would
lead to further consolidation in the oil and gas industry because, as
explained under "Our Reasons for the Merger," combining operations can help
companies save money and operate more efficiently;
(8) the intended accounting of the merger as a pooling of interests
which results in combined financial statements prepared on a basis
consistent with the underlying view that shareholder interests in the two
companies have simply been combined, and in the preservation of the
historical cost approach for both Exxon and Mobil. This will facilitate
future comparison and benchmarking of Exxon Mobil against our key
international competitors;
(9) the ability to complete the merger as a tax-free reorganization
for U.S. federal income tax purposes;
(10) the terms and conditions of the merger agreement, which include
restrictions on the conduct of Mobil's business pending closing which
permit Mobil generally to conduct its business in the ordinary course
during that period (see "The Merger Agreement");
(11) the potential effect of the terms of the merger agreement with
respect to possible third-party proposals to acquire Mobil after execution
of the merger agreement, including that if any third party made a superior
proposal (as described under "The Merger Agreement--Termination of the
Merger Agreement"), the Mobil Board could provide information to and engage
in negotiations with such third party, subject to the terms and conditions
of the merger agreement;
(12) that while the termination payment provisions of the merger
agreement could have the effect of discouraging alternative proposals for a
business combination with Mobil and that the stock option agreement could
prevent an alternative business combination with Mobil from being accounted
for as a pooling of interests, these provisions would not preclude bona
fide alternative proposals, and that the size of the termination fee was
reasonable in light of the size and benefits of the transaction;
(13) the analyses and presentations prepared by Goldman Sachs, and
Goldman Sachs' written opinion to the effect that, as of December 1, 1998,
and subject to the various considerations set forth in its opinion, the
exchange ratio was fair from a financial point of view to Mobil's
shareholders;
(14) the role that Mobil's current management is expected to play in
the management of the combined company, in particular Mobil management's
participation in the transition and the intention of Exxon and Mobil to
take advantage of the best management resources of both companies in Exxon
Mobil;
(15) that six of the Mobil Board's members would become directors of
Exxon Mobil, as described under "The Merger Agreement--Exxon Mobil Board
and Related Matters";
(16) that while there would be the expected reduction of workforce
affecting both Mobil and Exxon employees, Mobil employees would be given a
fair opportunity to be considered for jobs in the combined company, and
Mobil employees who were not offered positions in the combined company
would be
I-25
<PAGE>
Chapter One - The Merger
entitled to receive severance benefits under the Mobil severance
plan described under "Interests of Certain Persons in the Merger" that the
Mobil Board believed to be fair;
(17) the fact that while Exxon Mobil's corporate headquarters will be
located in Irving, Texas, Exxon Mobil's downstream headquarters will be
located in Fairfax, Virginia;
(18) that while the merger is likely to be completed, there are risks
associated with obtaining necessary approvals, and as a result of certain
conditions to the completion of the merger, it is possible that the merger
may not be completed even if approved by shareholders (see "The Merger
Agreement--Conditions to the Completion of the Merger");
(19) that although, pending completion of the proposed merger, Mobil's
relationships with customers, governments and partners might be negatively
affected because of uncertainty surrounding Mobil's future status and
direction, the Mobil Board believed that any such effect would cease once
the merger was completed; and
(20) the interests that certain executive officers and directors of
Mobil may have with respect to the merger in addition to their interests as
shareholders of Mobil generally (see "Interests of Certain Persons in the
Merger").
In view of the wide variety of factors considered in connection with its
evaluation of the merger and the complexity of these matters, the Mobil Board
did not find it useful to and did not attempt to quantify, rank or otherwise
assign relative weights to these factors. The Mobil Board relied on the
experience and expertise of Goldman Sachs, its financial advisor, for
quantitative analysis of the financial terms of the merger. See "Opinions of
Financial Advisors--Opinion of Mobil Financial Advisor". In addition, the Mobil
Board did not undertake to make any specific determination as to whether any
particular factor, or any aspect of any particular factor, was favorable or
unfavorable to the Mobil Board's ultimate determination, but rather the Mobil
Board conducted an overall analysis of the factors described above, including
through discussions with and questioning of Mobil's management and legal,
financial and accounting advisors. In considering the factors described above,
individual members of the Mobil Board may have given different weight to
different factors.
The Mobil Board considered all these factors as a whole, and overall
considered the factors to be favorable to and to support its determination.
However, the general view of the Mobil Board was that factor 20 was part of the
general mix of available information without being clearly favorable or
unfavorable, that factors 12, 16, 18 and 19 were uncertainties, risks or
drawbacks relating to the transaction, and that the other reasons and factors
described above were generally considered favorable.
Accounting Treatment
Exxon and Mobil intend for the merger to be accounted for under the
"pooling of interests" method under the requirements of Opinion No. 16 (Business
Combinations) of the Accounting Principles Board of the American Institute of
Certified Public Accountants, the Financial Accounting Standards Board, and the
rules and regulations of the SEC.
Exxon has received a letter regarding pooling dated November 25, 1998 from
PwC, its independent accounting firm. The letter states that, as of its date,
based on certain information provided to PwC by Exxon and based on the E&Y
letter described below, PwC concurred with Exxon's conclusion that no conditions
existed which would preclude Exxon from accounting for the merger as a pooling
of interests.
Mobil has received a letter regarding pooling dated November 22, 1998 from
E&Y, its independent auditing firm. The letter states that, as of its date, E&Y
concurred with Mobil's conclusion that no conditions existed relating to Mobil
that would preclude Exxon from accounting for the merger as a pooling of
interests.
I-26
<PAGE>
Chapter One - The Merger
The receipt of letters from PwC and E&Y dated as of the closing date of the
merger reconfirming their concurrence with the conclusions of Exxon's and
Mobil's managements as to the appropriateness of pooling of interests accounting
treatment is a condition to the closing of the merger.
Under the pooling of interests accounting method, the reported balance
sheet amounts and results of operations of the separate companies for prior
periods will be combined, reclassified and conformed, as appropriate, to reflect
the combined financial position and results of operations for Exxon Mobil. See
"Unaudited Pro Forma Condensed Combined Financial Statements".
Material Federal Income Tax Consequences of the Merger
The following discussion summarizes the opinions of Davis Polk & Wardwell
and Skadden, Arps, Slate, Meagher & Flom LLP as to the material federal income
tax consequences of the merger. We have filed these opinions with the SEC as
exhibits to the registration statement related to this joint proxy
statement/prospectus. See "Where You Can Find More Information" on page VI-1.
This discussion is based upon the Internal Revenue Code of 1986, as amended, the
regulations promulgated under the Code, Internal Revenue Service rulings, and
judicial and administrative rulings in effect as of the date hereof, all of
which are subject to change, possibly with retroactive effect. This discussion
does not address all aspects of federal income taxation that may be relevant to
a shareholder in light of the shareholder's particular circumstances or to those
Mobil shareholders subject to special rules, such as shareholders who are not
citizens or residents of the United States, financial institutions, tax-exempt
organizations, insurance companies, dealers in securities, shareholders who
acquired their Mobil stock pursuant to the exercise of options or similar
derivative securities or otherwise as compensation or shareholders who hold
their Mobil stock as part of a straddle or conversion transaction. This
discussion assumes that Mobil shareholders hold their respective shares of Mobil
stock as capital assets within the meaning of Section 1221 of the Code.
It is a condition to the obligations of Mobil and Exxon to complete the
merger that each receive a legal opinion from its counsel that the merger
constitutes a tax-free reorganization, within the meaning of Section 368 of the
Code, for federal income tax purposes. These legal opinions will assume the
absence of certain changes in the existing facts and may rely on assumptions,
representations and covenants made by Mobil, Exxon and others, including those
contained in certificates of officers of Mobil and Exxon. If any of these
factual assumptions is inaccurate, the tax consequences of the merger could
differ from those described here. The opinions regarding the tax-free nature of
the merger neither bind the IRS nor preclude the IRS from adopting a contrary
position. Neither Mobil nor Exxon intends to obtain a ruling from the IRS with
respect to the tax consequences of the merger.
Federal Income Tax Consequences to Exxon Shareholders. Holders of Exxon
stock will not recognize any gain or loss for federal income tax purposes as a
result of the merger.
Federal Income Tax Consequences to Mobil Shareholders. Except as provided
below, holders of shares of Mobil stock will (1) not recognize any gain or loss
for federal income tax purposes as a result of the exchange of their shares of
Mobil stock for Exxon Mobil stock in the merger except with respect to cash
received instead of a fractional share of Exxon Mobil common stock and (2) have
a tax basis in the Exxon Mobil stock received in the merger equal to the tax
basis of the Mobil stock surrendered in the merger less any tax basis of the
Mobil stock surrendered that is allocable to a fractional share of Exxon Mobil
common stock for which cash is received. The Mobil shareholders' holding period
with respect to the Exxon Mobil stock received in the merger will include the
holding period of the Mobil stock surrendered in the merger.
To the extent that a holder of shares of Mobil common stock receives cash
instead of a fractional share of Exxon Mobil common stock, the holder will be
required to recognize gain or loss for federal income tax purposes,
measured by the difference between the amount of cash received and the portion
of the tax basis of the holder's shares of Mobil common stock allocable to such
fractional share of Exxon Mobil common stock. This gain or loss will be a
capital gain or loss and will be a long-term capital gain or loss if the share
of Mobil common stock exchanged for the fractional share of Exxon Mobil common
stock was held for more than one year at the effective time of the merger.
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<PAGE>
Chapter One - The Merger
Under the merger agreement, Mobil will pay any transfer taxes incurred as a
result of a change in ownership of Mobil, including transfer taxes that under
applicable law may be the primary liability of the holders of Mobil stock.
Although the matter is not free from doubt (because of the absence of
legislative, judicial or other authority directly on point), Mobil's payment of
transfer taxes for which the Mobil shareholders are primarily liable, if any,
may be taxable as a dividend to the Mobil shareholders for federal income tax
purposes.
Federal Income Tax Consequences to Mobil, Exxon and the Merger Subsidiary.
None of Exxon, Mobil, or the merger subsidiary will recognize gain or loss for
federal income tax purposes as a result of the merger.
WE INTEND THIS DISCUSSION TO PROVIDE ONLY A SUMMARY OF THE MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER. WE DO NOT INTEND THAT IT BE A COMPLETE
ANALYSIS OR DESCRIPTION OF ALL POTENTIAL FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER. IN ADDITION, WE DO NOT ADDRESS TAX CONSEQUENCES WHICH MAY VARY WITH, OR
ARE CONTINGENT UPON, INDIVIDUAL CIRCUMSTANCES. MOREOVER, EXCEPT FOR THE
DISCUSSION OF TRANSFER TAXES ABOVE, WE DO NOT ADDRESS ANY NON-INCOME TAX OR ANY
FOREIGN, STATE OR LOCAL TAX CONSEQUENCES OF THE MERGER. ACCORDINGLY, WE STRONGLY
URGE YOU TO CONSULT YOUR TAX ADVISOR TO DETERMINE YOUR PARTICULAR UNITED STATES
FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES RESULTING FROM
THE MERGER, WITH RESPECT TO YOUR INDIVIDUAL CIRCUMSTANCES.
Regulatory Matters
U.S. Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the related rules the merger may not be completed until
notifications have been given, certain information has been furnished to the FTC
and specified waiting period requirements have been satisfied. During the week
of December 14, 1998 Exxon and Mobil each filed the required notification and
report forms under the HSR Act with the FTC and the Antitrust Division of the
United States Department of Justice. On January 15, 1999, the FTC issued a
request for additional information and other documentary materials to Exxon and
Mobil relating to the merger. The merger may not be completed until 20 days
following substantial compliance with this request by both parties, unless the
waiting period is terminated earlier. If it believes that the merger would
violate the federal antitrust law by substantially lessening competition in any
line of commerce affecting U.S. consumers, the FTC has the authority to
challenge the merger on antitrust grounds by seeking a federal court order
temporarily enjoining the transaction pending conclusion of an administrative
hearing. The FTC may also proceed with an administrative proceeding if the
injunction is denied, and if the merger is found to be anticompetitive,
challenge it after the fact. We can give no assurance that a challenge to the
merger will not be made or, if such a challenge is made, that it would be
unsuccessful. In addition, a number of state attorneys general have indicated
their intent to review the proposed merger and to coordinate that review with
the FTC. Expiration or termination of the HSR Act waiting period is a condition
to the merger. See "The Merger Agreement--Conditions to the Completion of the
Merger" on page I-58.
European Union. Under Council Regulation No. 4064/89 of the European
Commission and accompanying regulations, the merger is subject to review by the
European Commission. Exxon and Mobil informally notified the EC of the merger on
December 1, 1998 and expect to file formal notifications with the EC of the
merger agreement by the end of April 1999. Completion of review under the EC
merger regulation is a condition to the merger. See "The Merger
Agreement--Conditions to the Completion of the Merger" on page I-58.
Other Laws. Exxon and Mobil conduct operations in a number of jurisdictions
where other regulatory filings or approvals may be required or advisable in
connection with the completion of the merger. Exxon and Mobil are currently in
the process of reviewing whether other filings or approvals may be required or
desirable in these other jurisdictions. We recognize that some of these
filings may not be completed before the closing, and that some of these
approvals, which are not as a matter of practice required to be obtained
prior to effectiveness of a merger transaction, may not be obtained prior
to the closing.
General. It is possible that governmental entities having jurisdiction over
Exxon and Mobil may seek regulatory concessions as conditions for granting
approval of the merger. If any regulatory body's approval contains terms or
imposes conditions or restrictions relating or applying to, or requiring changes
in or limitations
I-28
<PAGE>
Chapter One - The Merger
on, the operation or ownership of any asset or business of Exxon, Mobil or
any of their subsidiaries, or on Exxon Mobil's ownership of Mobil or
requiring asset divestitures, which could reasonably be expected to result
in a substantial detriment to Exxon, Mobil and their subsidiaries, taken as
a whole, after the closing, Exxon can decline to close under the merger
agreement. We can give no assurance that the required regulatory approvals
will be obtained on terms that satisfy the conditions to closing of the
merger or within the time frame contemplated by Exxon and Mobil. See "The
Merger Agreement--Conditions to the Completion of the Merger" on page I-58.
Appraisal Rights
Holders of Exxon common stock are not entitled to dissenters' appraisal
rights under New Jersey law in connection with the merger. Holders of Mobil
common stock do not have dissenters' appraisal rights under Delaware law in
connection with the merger because the shares of Exxon Mobil common stock that
such holders will be entitled to receive in the merger will be listed on the New
York Stock Exchange at the closing. See "Chapter Three--Comparison of
Shareholder Rights--Appraisal Rights". Dissenters' appraisal rights are
available in connection with the merger to the trustee of the Mobil ESOP, the
sole record holder of Mobil ESOP preferred stock, if the trustee complies with
the procedural requirements of the Delaware dissenters' rights statute.
Federal Securities Laws Consequences; Stock Transfer Restriction Agreements
This joint proxy statement/prospectus does not cover any resales of the
Exxon Mobil common stock to be received by the shareholders of Mobil upon
completion of the merger, and no person is authorized to make any use of this
joint proxy statement/prospectus in connection with any such resale.
All shares of Exxon Mobil common stock received by Mobil shareholders in
the merger will be freely transferable, except that shares of Exxon Mobil common
stock received by persons who are deemed to be "affiliates" of Mobil under the
Securities Act of 1933, as amended, at the time of the Mobil meeting may be
resold by them only in transactions permitted by Rule 145 under the 1933 Act or
as otherwise permitted under the 1933 Act. Persons who may be deemed to be
affiliates of Mobil for such purposes generally include individuals or entities
that control, are controlled by or are under common control with Mobil and
include directors and executive officers of Mobil. The merger agreement requires
Mobil to use its reasonable best efforts to cause each of such affiliates to
execute a written agreement to the effect that such persons will not offer, sell
or otherwise dispose of any of the shares of Exxon Mobil common stock issued to
them in the merger in violation of the 1933 Act or the related SEC rules.
In addition, each of the directors and some of the executive officers of
Exxon and Mobil have executed written agreements prohibiting them from selling,
transferring or otherwise disposing of, or acquiring or selling any options or
other securities relating to, securities of Exxon or Mobil that would be
intended to reduce the individual's risk relative to, any shares of Exxon common
stock or Mobil common stock beneficially owned by him or her during the period
beginning 30 days prior to the closing and ending at such time as financial
results covering at least 30 days of combined operations of Exxon and Mobil have
been publicly released by Exxon Mobil after the merger.
I-29
<PAGE>
Chapter One - The Merger
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Exxon common stock and Mobil common stock are each listed on the NYSE.
Exxon's ticker symbol on the NYSE is "XON" and Mobil's ticker symbol on the NYSE
is "MOB". The following table shows, for the periods indicated, the high and low
of the last reported closing prices per share of Exxon common stock and Mobil
common stock, as reported on the Consolidated Tape, and the dividends per share.
<TABLE>
<CAPTION>
Exxon Common Stock(1) Mobil Common Stock(2)
------------------------------------- -------------------------------------
High Low Dividend High Low Dividend
--------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter............ $ 55.625 $ 48.250 $ 0.395 $ 68.000 $ 60.625 $ 0.530
Second Quarter........... 65.125 49.875 0.410 72.250 60.000 0.530
Third Quarter............ 67.250 58.625 0.410 78.000 69.625 0.530
Fourth Quarter........... 66.875 54.750 0.410 77.500 66.438 0.530
1998
First Quarter............ $ 70.000 $ 56.625 $ 0.410 $ 83.813 $ 63.750 $ 0.570
Second Quarter........... 76.000 65.375 0.410 82.813 73.438 0.570
Third Quarter............ 73.813 62.000 0.410 80.000 62.438 0.570
Fourth Quarter........... 77.313 69.438 0.410 91.250 71.000 0.570
1999
First Quarter............ $ 76.375 $ 64.313 $ 0.410 $ 95.875 $ 80.063 $ 0.570
Second Quarter (through
April 1).............. 70.375 69.438 0.000 88.063 86.625 0.000
</TABLE>
- -------------------
(1) Exxon prior period share prices and dividends restated for a
two-for-one stock split effective March 14, 1997.
(2) Mobil prior period share prices and dividends restated for a
two-for-one stock split effective May 20, 1997.
On November 25, 1998, the last full trading day before Exxon and Mobil
issued a joint press release confirming that they were in discussions concerning
a possible combination, the last reported per share closing price was $72.688
for Exxon common stock and $78.375 for Mobil common stock. On November 30, 1998,
the last full trading day before the public announcement of the proposed merger,
the last reported closing price was $75.000 for Exxon common stock and $86.000
for Mobil common stock. On April 1, 1999, the most recent practicable date prior
to the printing of this joint proxy statement/prospectus, the last reported
closing price was $70.125 for Exxon common stock and $87.375 for Mobil common
stock. We urge you to obtain current market quotations prior to making any
decision with respect to the merger.
Following the merger, Exxon Mobil common stock will be traded on the NYSE
under the ticker symbol "XOM".
The merger agreement permits Exxon and Mobil to pay, prior to the closing,
regular quarterly cash dividends to holders. The parties have agreed in the
merger agreement to coordinate declaring dividends and the related record dates
and payment dates so that Mobil shareholders do not receive two dividends, or
fail to receive one dividend, for any single calendar quarter with respect to
their Mobil shares and the Exxon Mobil shares to be received by them in the
merger.
I-30
<PAGE>
Chapter One - The Merger
Exxon Mobil expects to continue to pay quarterly dividends on Exxon Mobil
common stock after completion of the merger. The payment of dividends by Exxon
Mobil in the future, however, will depend on business conditions, Exxon Mobil's
financial condition and earnings and other factors.
Effect of Merger on Mobil Dividend Reinvestment Plan
Upon completion of the merger, Mobil's Stock Purchase and Dividend
Reinvestment Plan (the "Mobil DRIP") will terminate and participants in the plan
will be automatically enrolled in Exxon Mobil's Shareholder Investment Program
(the "Exxon Mobil SIP"). Exxon Mobil shares issued in exchange for Mobil DRIP
shares will be held in book-entry form by the administrator of the Exxon Mobil
SIP and cash dividends paid by Exxon Mobil on those shares will be reinvested in
additional Exxon Mobil shares. Participants in the Exxon Mobil SIP can obtain
certificates for their plan shares, change dividend reinvestment levels, or
withdraw from the plan by following specified procedures. Mobil DRIP
participants will receive more information on the Exxon Mobil SIP as soon as
practicable after completion of the merger.
I-31
<PAGE>
Chapter One - The Merger
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
combine the historical consolidated balance sheets and statements of income of
Exxon and Mobil giving effect to the merger using the pooling of interests
method of accounting for a business combination.
We are providing the following information to aid you in your analysis of
the financial aspects of the merger. We derived this information from the
audited financial statements of Exxon for the years 1998, 1997 and 1996 and from
the audited financial statements of Mobil for the years 1998, 1997 and 1996. The
information is only a summary and you should read it in conjunction with our
historical financial statements and related notes contained in the annual
reports and other information that we have filed with the SEC and incorporated
by reference. See "Where You Can Find More Information" on page VI-1.
The unaudited pro forma condensed combined statements of income for the
years ended December 31, 1998, 1997 and 1996 assume the merger was effected on
January 1, 1996. The unaudited pro forma condensed combined balance sheet gives
effect to the merger as if it had occurred on December 31, 1998. The accounting
policies of Exxon and Mobil are substantially comparable. Consequently, we did
not make adjustments to the unaudited pro forma condensed combined financial
statements to conform the accounting policies of the combining companies.
The unaudited pro forma combined financial information is for illustrative
purposes only. The companies may have performed differently had they always been
combined. You should not rely on the pro forma combined financial information as
being indicative of the historical results that would have been achieved had the
companies always been combined or the future results that the combined company
will experience after the merger.
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<PAGE>
Chapter One - The Merger
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Historic
----------------------- Pro Forma Pro Forma
Exxon(2) Mobil(2) Adjustments Combined
----------- -------- ----------- --------
(millions of dollars)
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents.............................. $ 1,441 $ 714 $ 63 (6A) $ 2,218
Other marketable securities............................ 20 17 182 (6A) 219
Notes and accounts receivable, less estimated doubtful
accounts............................................. 9,512 5,518 (1,000) (4)
2,229 (6A) 16,259
Inventories
Crude oil, products and merchandise.................. 4,896 1,545 1,096 (6A) 7,537
Materials and supplies............................... 709 366 81 (6A) 1,156
Prepaid taxes and expenses............................. 1,015 571 50 (6A) 1,636
--------- -------- -------- ----------
Total current assets................................ 17,593 8,731 2,701 29,025
Investments and advances..................................... 6,434 8,490 (1,203) (6A) 13,721
Property, plant and equipment, at cost, less accumulated
depreciation and depletion.................................. 65,199 24,727 2,656 (6A) 92,582
Other assets, including intangibles, net..................... 3,404 806 6 (6A) 4,216
--------- -------- -------- ----------
Total assets........................................ $ 92,630 $ 42,754 $ 4,160 $ 139,544
--------- -------- -------- ----------
Liabilities
Current liabilities
Notes and loans payable................................ $ 4,248 $ 3,982 $ 377 (6A) $ 8,607
Accounts payable and accrued liabilities............... 13,825 8,167 (1,000) (4)
90 (5)
2,269 (6A) 23,351
Income taxes payable................................... 1,339 797 7 (6A) 2,143
--------- -------- -------- ----------
Total current liabilities........................... 19,412 12,946 1,743 34,101
Long-term debt............................................... 4,530 3,719 283 (6A) 8,532
Annuity reserves and accrued liabilities..................... 9,514 3,071 402 (6A) 12,987
Deferred income tax liabilities.............................. 13,142 3,254 354 (6A) 16,750
Deferred credits............................................. 475 1,021 22 (6A) 1,518
Equity of minority and preferred shareholders in affiliated
companies................................................... 1,807 373 1,446 (6A) 3,626
--------- -------- -------- ----------
Total liabilities................................... 48,880 24,384 4,250 77,514
--------- -------- -------- ----------
Shareholders' Equity
Preferred stock.............................................. 105 641 746
Benefit plan related balances................................ (125) (668) (793)
Common stock................................................. 2,323 898 (117) (6B) 3,104
Capital surplus.............................................. 1,649 (1,649) (6B)
Earnings reinvested.......................................... 54,575 20,534 (90) (5)
(1,860) (6B) 73,159
Accumulated other nonowner changes in equity
Cumulative foreign exchange translation adjustment.......... (641) (932) (1,573)
Minimum pension liability adjustment........................ (282) (126) (408)
Common stock held in treasury................................ (12,205) (3,626) 3,626 (6B) (12,205)
--------- -------- -------- ----------
Total shareholders' equity.......................... 43,750 18,370 (90) 62,030
--------- -------- -------- ----------
Total liabilities and shareholders' equity.......... $ 92,630 $ 42,754 $ 4,160 $ 139,544
========= ======== ======== ==========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma
Condensed Combined Financial Statements
I-33
<PAGE>
Chapter One - The Merger
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Historic
----------------------- Pro Forma Pro Forma
Exxon Mobil(2) Adjustments Combined
----------- -------- --------------- --------------
(millions of dollars)
<S> <C> <C> <C> <C>
Revenue
Sales and other operating revenue, including
excise taxes....................................... $ 115,417 $ 51,893 $ (10,300) (4)
7,630 (6A) $ 164,640
Earnings from equity interests and other revenue...... 2,355 1,638 (18) (6A) 3,975
---------- ---------- ---------- ---------
Total revenue.................................... 117,772 53,531 (2,688) 168,615
========== ========== ========== =========
Costs and other deductions
Crude oil and product purchases....................... 45,020 27,687 (10,300) (4)
5,947 (6A) 68,354
Operating expenses.................................... 11,540 5,222 852 (6A) 17,614
Selling, general and administrative expenses.......... 8,372 3,708 285 (6A) 12,365
Depreciation and depletion............................ 5,340 2,831 170 (6A) 8,341
Exploration expenses, including dry holes............. 863 643 1,506
Interest expense...................................... 100 451 14 (6A) 565
Excise taxes.......................................... 14,720 5,853 20,573
Other taxes and duties................................ 22,576 4,029 342 (6A) 26,947
Income applicable to minority and preferred interests. 185 47 34 (6A) 266
---------- ---------- ---------- ---------
Total costs and other deductions................. 108,716 50,471 (2,656) 156,531
========== ========== ========== =========
Income before income taxes.............................. 9,056 3,060 (32) 12,084
Income taxes.......................................... 2,616 1,356 (32) (6A) 3,940
---------- ---------- ---------- ---------
Income before cumulative effect of accounting change.... 6,440 1,704 0 8,144
Cumulative effect of accounting change................ (70) 0 (70)
---------- ---------- ---------- ---------
Net income.............................................. $ 6,370 $ 1,704 $ 0 $ 8,074
========== ========== ========== =========
Net income per common share (dollars)
Before cumulative effect of accounting change......... $ 2.64 $ 2.12 $ 2.33 (3)
Cumulative effect of accounting change................ (0.03) 0.00 (0.02) (3)
---------- ---------- ---------
Net income............................................ $ 2.61 $ 2.12 $ 2.31 (3)
========== ========== =========
Net income per common share--assuming dilution (dollars)
Before cumulative effect of accounting change......... $ 2.61 $ 2.10 $ 2.30 (3)
Cumulative effect of accounting change................ (0.03) 0.00 (0.02) (3)
---------- ---------- ---------
Net income............................................ $2.58 $ 2.10 $ 2.28 (3)
========== ========== =========
Average number common shares outstanding
(millions)............................................ 2,440 779 3,468 (3)
Average number common shares
outstanding--assuming dilution (millions)............. 2,468 807 3,533 (3)
Dividends per common share (dollars).................... $ 1.640 $ 2.280 $ 1.666 (3)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma
Condensed Combined Financial Statements
I-34
<PAGE>
Chapter One - The Merger
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Historic
----------------------- Pro Forma Pro Forma
Exxon Mobil(2) Adjustments Combined
----------- -------- --------------- --------------
(millions of dollars)
<S> <C> <C> <C> <C> <C>
Revenue
Sales and other operating revenue, including
excise taxes................................... $ 135,142 $ 64,028 $ (13,600)(4)
9,585 (6A) $ 195,155
Earnings from equity interests and other
revenue........................................ 2,100 1,878 (81)(6A) 3,897
----------- ----------- ------------ ------------
Total revenue................................ 137,242 65,906 (4,096) 199,052
=========== =========== ============ ============
Costs and other deductions
Crude oil and product purchases................... 57,971 35,784 (13,600)(4)
7,308 (6A) 87,463
Operating expenses................................ 13,045 5,413 1,046 (6A) 19,504
Selling, general and administrative expenses...... 8,406 4,334 319 (6A) 13,059
Depreciation and depletion........................ 5,474 2,554 178 (6A) 8,206
Exploration expenses, including dry holes......... 753 499 1,252
Interest expense.................................. 415 428 4 (6A) 847
Excise taxes...................................... 14,863 5,928 20,791
Other taxes and duties............................ 23,111 4,578 390 (6A) 28,079
Income applicable to minority and preferred
interests...................................... 406 23 84 (6A) 513
----------- ----------- ------------ ------------
Total costs and other deductions............. 124,444 59,541 (4,271) 179,714
=========== =========== ============ ============
Income before income taxes........................... 12,798 6,365 175 19,338
Income taxes...................................... 4,338 3,093 175 (6A) 7,606
----------- ----------- ------------ ------------
Net income........................................... $ 8,460 $ 3,272 $ 0 $ 11,732
=========== =========== ============ ============
Net income per common share (dollars)................ $ 3.41 $ 4.10 $ 3.32 (3)
Net income per common share--assuming
dilution (dollars)................................ $ 3.37 $ 4.01 $ 3.28 (3)
Average number common shares outstanding
(millions)........................................ 2,473 786 3,511 (3)
Average number common shares
outstanding--assuming dilution (millions)......... 2,505 815 3,581 (3)
Dividends per common share (dollars)................. $ 1.625 $ 2.120 $ 1.619 (3)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma
Condensed Combined Financial Statements
I-35
<PAGE>
Chapter One - The Merger
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Historic
----------------------- Pro Forma Pro Forma
Exxon Mobil(2) Adjustments Combined
----------- -------- --------------- --------------
(millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Sales and other operating revenue, including
excise taxes................................... $ 131,543 $ 79,944 $ (14,000)(4)
10,401 (6A) $ 207,888
Earnings from equity interests and other
revenue........................................ 2,706 1,559 (42)(6A) 4,223
----------- ----------- ----------- -----------
Total revenue................................ 134,249 81,503 (3,641) 212,111
=========== =========== =========== ===========
Costs and other deductions
Crude oil and product purchases................... 56,406 41,831 (14,000)(4)
8,022 (6A) 92,259
Operating expenses................................ 13,255 5,659 1,048 (6A) 19,962
Selling, general and administrative expenses...... 7,961 5,157 465 (6A) 13,583
Depreciation and depletion........................ 5,329 2,725 187 (6A) 8,241
Exploration expenses, including dry holes......... 763 512 1,275
Interest expense.................................. 464 455 6 (6A) 925
Excise taxes...................................... 14,815 9,236 24,051
Other taxes and duties............................ 22,956 9,787 470 (6A) 33,213
Income applicable to minority and preferred
interests...................................... 384 30 46 (6A) 460
----------- ----------- ----------- -----------
Total costs and other deductions............. 122,333 75,392 (3,756) 193,969
=========== =========== =========== ===========
Income before income taxes........................... 11,916 6,111 115 18,142
Income taxes...................................... 4,406 3,147 115 (6A) 7,668
----------- ----------- ----------- -----------
Net income........................................... $ 7,510 $ 2,964 $ 0 $ 10,474
=========== =========== =========== ===========
Net income per common share (dollars)................ $ 3.01 $ 3.69 $ 2.95 (3)
Net income per common share--assuming
dilution (dollars)................................ $ 2.99 $ 3.62 $ 2.91 (3)
Average number common shares outstanding
(millions)........................................ 2,484 788 3,525 (3)
Average number common shares
outstanding--assuming dilution (millions)......... 2,512 816 3,588 (3)
Dividends per common share (dollars)................. $ 1.560 $ 1.963 $ 1.538 (3)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma
Condensed Combined Financial Statements
I-36
<PAGE>
Chapter One - The Merger
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The unaudited pro forma condensed combined statements of income are based
on the consolidated financial statements of Exxon and Mobil for the years ended
December 31, 1998, 1997 and 1996. The unaudited pro forma condensed combined
balance sheet is based on the consolidated financial statements of Exxon and
Mobil at December 31, 1998.
Exxon and Mobil consolidated financial statements are prepared in
conformity with generally accepted accounting principles and require Exxon and
Mobil management to make estimates that affect the reported amounts of assets,
liabilities, revenues and expenses and the disclosure of contingent assets and
liabilities. In the opinion of Exxon and Mobil, the unaudited pro forma
condensed combined financial statements include all adjustments necessary to
present fairly the results of the periods presented. Actual results are not
expected to differ materially from these estimates.
Note 2. Accounting Policies and Financial Statement Classifications
The accounting policies of Exxon and Mobil are substantially comparable.
Consequently, we did not make adjustments to the unaudited pro forma condensed
combined financial statements to conform the accounting policies of the
combining companies.
Certain revenues, costs and other deductions in the consolidated statements
of income for Mobil have been reclassified to conform to the line item
presentation in the pro forma condensed combined statements of income. Certain
assets and liabilities in the consolidated balance sheets for Exxon and Mobil
have been reclassified to conform to the line item presentation in the pro forma
condensed combined balance sheet.
Note 3. Pro Forma Earnings Per Share and Dividends Per Share
The pro forma combined net income per common share is based on net income
less preferred stock dividends and the weighted average number of outstanding
common shares. Net income per common share--assuming dilution includes the
dilutive effect of incentive program stock options and convertible preferred
stock. The weighted average number of outstanding common shares has been
adjusted to reflect the exchange ratio of 1.32015 shares of Exxon Mobil common
stock for each share of Mobil common stock.
The pro forma combined dividends per share reflect the sum of the dividends
paid by Exxon and Mobil divided by the number of shares that would have been
outstanding for the periods, after adjusting the Mobil shares for the exchange
ratio of 1.32015 shares of Exxon Mobil common stock.
Note 4. Intercompany Transactions
Intercompany sales and purchase transactions have been eliminated in the
unaudited pro forma condensed combined statements of income. Intercompany
amounts receivable and payable have been eliminated in the unaudited pro forma
condensed combined balance sheet.
Note 5. Merger-Related and Integration-Related Expenses
Merger-related fees and expenses, consisting primarily of SEC filing fees,
fees and expenses of investment bankers, attorneys and accountants, and
financial printing and other related charges, are estimated to be approximately
$90 million. These fees and expenses have been reflected in the unaudited pro
forma condensed combined balance sheet as of December 31, 1998. These charges
are not reflected in the unaudited pro forma condensed combined statements of
income or the pro forma combined per share data.
I-37
<PAGE>
Chapter One - The Merger
We estimate that costs of approximately $2.0 billion ($1.3 billion
after-tax) will be incurred for severance and other integration-related
expenses, including the elimination of duplicate facilities and excess capacity,
operational realignment and related workforce reductions. These expenditures are
necessary to reduce costs and operate efficiently. The unaudited pro forma
condensed combined financial statements reflect neither the impact of these
charges nor the benefits from the expected synergies. The costs for severance
and other integration-related expenses will be charged to operations in the
periods the obligations occur.
Note 6. Other Pro Forma Adjustments
(A) A pro forma adjustment has been made to consolidate the accounts of
certain refining, marketing and chemicals operations that are jointly
controlled by the combining companies and which were accounted for by Exxon
and Mobil as separate companies using the equity method.
(B) A pro forma adjustment has been made to reflect the cancellation of
Mobil common stock accounted for as treasury stock and the assumed issuance
of approximately 1.0 billion shares of Exxon Mobil common stock in exchange
for all of the outstanding Mobil common stock (based on the exchange ratio
of 1.32015). The actual number of shares of Exxon Mobil common stock to be
issued in connection with the merger will be based on the number of shares
of Mobil common stock issued and outstanding at the effective time.
I-38
<PAGE>
Chapter One - The Merger
OPINIONS OF FINANCIAL ADVISORS
We each retained our own financial advisor to assist us and our Boards in
our consideration of valuation, financial and other matters relating to the
merger. Exxon retained J.P. Morgan Securities Inc. as its financial advisor and
Mobil retained Goldman, Sachs & Co. as its financial advisor.
Opinion of Exxon Financial Advisor
At the December 1, 1998 meeting of the Exxon Board, J.P. Morgan gave its
opinion to the Exxon Board that, as of such date and based upon and subject to
the various considerations set forth in its opinion, the consideration to be
paid by Exxon in connection with the proposed merger was fair from a financial
point of view to Exxon. J.P. Morgan has reaffirmed its December 1, 1998 opinion
in its written opinion to the Exxon Board dated as of April 2, 1999.
The full text of the updated opinion of J.P. Morgan, which sets forth among
other things the assumptions made, procedures followed, matters considered and
limitations on the scope of the review undertaken by J.P. Morgan in rendering
its opinion, is attached as Annex C and is incorporated by reference with the
consent of J.P. Morgan. This opinion should be read carefully and in its
entirety. J.P. Morgan's opinion is addressed to the Exxon Board, is directed
only to the fairness of the consideration to be paid in the merger, does not
address any other aspect of the merger and does not constitute a recommendation
to any Exxon shareholder as to how to vote with respect to the merger. The
summary of the opinion of J.P. Morgan set forth in this joint proxy
statement/prospectus is qualified in its entirety by reference to the full text
of such opinion.
In rendering its opinions, J.P. Morgan reviewed:
o the merger agreement;
o in the case of its updated opinion, this document;
o certain publicly available information concerning the business of
Mobil and of certain other companies engaged in businesses that J.P.
Morgan deemed comparable to those of Mobil, and the reported market
prices for the securities of certain other companies that J.P. Morgan
deemed comparable;
o publicly available terms of certain transactions involving companies
comparable to Mobil and the consideration received for such
companies;
o current and historical market prices of the Exxon common stock and
the Mobil common stock;
o the audited financial statements of Exxon and Mobil for the fiscal
year ended December 31, 1997, and the unaudited condensed financial
statements of Exxon and Mobil for the period ended September 30,
1998;
o in the case of its updated opinion, the audited financial statements
of Exxon and Mobil for the fiscal year ended December 31, 1998;
o certain presentations made by Exxon and Mobil in 1998 to equity
analysts regarding the performance of their respective businesses;
o certain internal financial analyses of potential synergies that may
be realized from the merger prepared by Exxon and Mobil and their
respective managements; and
o the terms of other business combinations that J.P. Morgan deemed
relevant.
I-39
<PAGE>
Chapter One - The Merger
In addition, J.P. Morgan participated in discussions with certain members
of the management of Exxon and Mobil with respect to certain aspects of the
merger, the past and current business operations of Exxon and Mobil, the
financial condition and future prospects and operations of Exxon and Mobil, and
certain other matters J.P. Morgan believed necessary or appropriate to its
inquiry. J.P. Morgan reviewed such other financial studies and analyses and
considered such other information as it deemed appropriate for the purposes of
its opinion.
In giving its opinion, J.P. Morgan relied upon and assumed, without
independent verification, the accuracy and completeness of all information that
was publicly available or was furnished to it by Exxon and Mobil or otherwise
reviewed by J.P. Morgan, and J.P. Morgan has not assumed any responsibility or
liability therefor. J.P. Morgan has not conducted any evaluation or appraisal of
any assets or liabilities, nor have any such valuations or appraisals been
provided to J.P. Morgan. In relying on financial analyses provided to it of
potential synergies that may be realized from the merger, J.P. Morgan has
assumed that they have been reasonably prepared based on assumptions reflecting
the best currently available estimates and judgments by management of Exxon as
to such potential synergies. J.P. Morgan has also assumed that the merger will
have the tax consequences and pooling of interests accounting treatment
described in the merger agreement and this document, and that the transactions
contemplated by the merger agreement will be consummated as described in the
merger agreement and this document. J.P. Morgan relied as to all legal matters
relevant to rendering its opinion upon the advice of counsel.
J.P. Morgan's opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to J.P. Morgan as
of, the date of such opinion. Subsequent developments may affect its opinion,
and J.P. Morgan does not have any obligation to update, or revise or reaffirm
such opinion. J.P. Morgan expressed no opinion as to the price at which Exxon
common stock will trade at any future time.
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses utilized by J.P.
Morgan in connection with providing its December 1, 1998 opinion. J.P. Morgan
utilized substantially the same types of analyses in connection with providing
its updated opinion.
The elements of J.P. Morgan's analyses included:
o assessing the potential value creation as a result of the merger
(paragraphs 1-3);
o assessing the sharing of the combined pro forma entity given the
historical and forecast contributions of each company, and the
sharing of the potential value creation (paragraphs 4-6);
o testing the results on pro-forma Exxon earnings per share for the
potential accretion/dilution of earnings for the next 3 years
(paragraph 7); and
o checking the premium to be paid by Exxon in the merger against market
precedent (paragraph 8).
1. Comparable Return on Capital Employed. J.P. Morgan reviewed and
analyzed the return on capital employed ("ROCE") of both Exxon and Mobil since
1993. J.P. Morgan observed that Exxon's ROCE has consistently been 2-3% above
that of Mobil. J.P. Morgan's analysis indicated that if Mobil were to be merged
with Exxon, the combined entity's capital productivity would eventually be
higher than the pro forma capital productivity of Exxon and Mobil. J.P. Morgan
indicated that it would be reasonable to assume that the benefits of this
capital productivity increase would occur within three years of the closing of
the merger. J.P. Morgan pointed out, however, that its views in this respect
were based on discussions with senior management at Exxon and that there could
be no assurance that this increase in capital productivity would be realized.
2. Comparable P/E Analysis. J.P. Morgan performed an analysis comparing
Exxon's price to earnings multiples with Mobil's price to earnings multiples for
the past five years. The source for these price to earnings multiples was
the one and two year prospective price to earnings multiple estimates by
I/B/E/S International Inc. and First Call, organizations which compile
brokers' earnings estimates on public companies. Such analysis
I-40
<PAGE>
Chapter One - The Merger
indicated that Mobil has been trading in the recent past at an 8% to 15%
discount to Exxon. J.P. Morgan's analysis indicated that if Mobil were to
be valued at price to earnings multiples comparable to those of Exxon,
there would be an enhancement of value to its shareholders of approximately
$11 billion. Finally, this analysis suggested that the combined company
might enjoy an overall increase in its price to earnings multiple due to
the potential for improved capital productivity and the expected strategic
benefits of the merger. According to J.P. Morgan's analysis, a price to
earnings multiple increase of 1 for Exxon Mobil would result in an
enhancement of value to shareholders of approximately $10 billion. J.P.
Morgan pointed out, however, that there could be no assurance that these
values would be realized.
3. Annual Pre-Tax Synergies. J.P. Morgan reviewed and analyzed the future
synergies expected to result from the merger, estimated by management at $2.8
billion annually on a pre-tax basis. J.P. Morgan also analyzed stock-for-stock
merger transactions over the past three years where the market capitalization of
the smaller entity pre-announcement was greater than $5 billion. The analysis
indicated that for industrially logical mergers, the market granted a
post-announcement value pick-up to the companies of 6-9 times the anticipated
synergy benefits identified by management on a pre-tax basis. In cases where
management also had a good track record of cost cutting, J.P. Morgan indicated
that the market might be expected to capitalize synergies at a multiple of 8-9
times on a pre-tax basis. Based on the estimated synergies of $2.8 billion
expected to result from the merger, this suggested a potential value creation in
the short term of approximately $22-25 billion.
J.P. Morgan also indicated that the value of the potential synergies for
the combined company could be greater in the long term if management achieved
its stated objectives and the expected synergies were demonstrated to the
market. On this basis, J.P. Morgan estimated that as much as $11 billion in
value could be created in excess of the short term impact, in addition to the
potential enhancement of value described in paragraph 2 above.
In addition to expressing no opinion as to the potential future trading
price of the Exxon common stock, J.P. Morgan also pointed out that there could
be no assurance that either these short-term or long-term values would be
realized.
4. Sharing of Future Benefits of the Merger. J.P. Morgan reviewed the
elements of potential value creation, which were:
o immediate value pick-up based on estimated pre-tax synergies; and
o additional long-term value pick-up that could result from the possible
o realization of anticipated synergies,
o price to earnings multiple re-rating for Mobil, and
o price to earnings multiple re-rating for the combined company.
J.P. Morgan's review suggested that over the long term, the potential for value
creation from these elements could be as much as $47-57 billion. Since Exxon's
market capitalization is significantly larger than Mobil's, Exxon's shareholders
would enjoy a greater proportion of the value creation if no premium were paid
by Exxon in the merger. By offering a premium to Mobil's shareholders, this
potential value creation was instead shared in approximately equal proportions
between the companies' shareholders and such sharing was deemed to be a
reasonable allocation of value creation.
I-41
<PAGE>
Chapter One - The Merger
5. Historical Contribution Analysis. J.P. Morgan reviewed and analyzed the
relative historical contribution of both Exxon and Mobil to the combined pro
forma entity.
The following table illustrates the historical relative market
capitalization contribution by Exxon to a combined Exxon Mobil entity:
At closing on November 20, 1998....................................... 74.7%
Average for the one month prior to November 20, 1998.................. 74.9%
Average for the three months prior to November 20, 1998............... 74.3%
Average for the six months prior to November 20, 1998................. 74.4%
Average for the twelve months prior to November 20, 1998.............. 73.8%
The source for the table above was Datastream, an organization which
compiles share prices for public companies.
The following table illustrates the historical relative contribution by
Exxon to a combined Exxon Mobil entity for the different financial and physical
performance measures that were reviewed:
<TABLE>
<CAPTION>
9 months to
1992 1993 1994 1995 1996 1997 Sep 30, 1998
---- ---- ---- ---- ---- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Firm value........................ 71.3% 73.0%
Total revenues.................... 67.6% 68.7%
After tax earnings before change
in accounting principles....... 78.6% 71.7% 74.4% 73.1% 71.7% 72.1% 72.6%
Pre-tax earnings before interest
and pre-extraordinary items.... 70.5% 67.3% 67.9% 69.8% 66.0% 66.7% 68.4%
Earnings before interest, tax,
depreciation and amortization
pre-extraordinary items........ 68.1% 66.5% 65.6% 65.9% 66.1% 67.1% 68.6%
Dividends distributed............. 73.4% 73.4% 72.8% 72.2% 71.5% 70.5% 69.2%
After tax operating cash flow..... 69.6% 69.1% 68.1% 68.3% 68.5% 69.1% 71.5%
Capital employed.................. 65.3% 65.2% 66.8% 67.1% 66.4% 67.2% 66.3%
Pre tax earnings before interest,
depreciation and amortization
and exploration expense pre-
extraordinary items............ 66.8%
Net fixed assets.................. 73.0%
Oil and gas reserves.............. 66.6%
Refinery capacity................. 65.7%
Marketing sales................... 61.9%
Production........................ 61.2%
SEC-10............................ 63.1%
</TABLE>
J.P. Morgan observed that the relative contribution by Exxon to a combined
Exxon Mobil entity in the most recent full year of Exxon would have been between
61% and 73% depending on the measure used. J.P. Morgan compared this range of
relative contribution with the approximately 70% continuing ownership stake that
Exxon's shareholders would have in the combined company following the merger.
Sources for the historical financial information used in connection with the
ratios were Exxon's and Mobil's annual reports for the years 1992-1997,
inclusive, and first nine months results of 1998 as announced by both companies.
6. Forecast Contribution Analysis. J.P. Morgan reviewed and analyzed the
then most current First Call earnings and after-tax operating cash flow
forecasts for 1998, 1999 and 2000. J.P. Morgan observed that Exxon was
forecast to contribute between 70% and 73% of the future earnings and cash
flow of a combined Exxon Mobil
I-42
<PAGE>
Chapter One - The Merger
entity. J.P. Morgan compared this range of forecasted contribution with
the approximately 70% continuing ownership stake that Exxon's shareholders
would have in the combined company following the merger.
7. Exxon Pro Forma Merger Analysis. J.P. Morgan analyzed the then-current
pro forma Exxon earnings per share forecasts for 1999, 2000 and 2001 based on
First Call estimates. The analysis showed, assuming $2.8 billion in synergies
phased in over three years, on an equivalent share basis, that the merger would
be accretive from 1999 to Exxon's shareholders, excluding non-recurring
integration-related costs.
8. Analysis of Selected Comparable Transactions. J.P. Morgan reviewed 38
recently announced or closed large capitalization stock-for-stock transactions.
J.P. Morgan then compared the implied premiums resulting from the smaller
company's share of the pro forma combined company resulting from the transaction
as compared with the smaller company's market capitalization relative to the
combined market capitalization of the companies prior to announcement of the
transaction.
J.P. Morgan's analysis showed that for transactions involving smaller
companies with a relative market capitalization comparable to that of Mobil
pre-announcement, a premium of 15% to 25% matched market precedent. The analysis
indicated that, based on the closing share prices on November 30, 1998, the day
prior to announcement of the merger, the implied premium paid to Mobil
shareholders would be approximately 10%. The analysis also indicated that, based
on closing share prices on November 24, 1998, two trading days before Exxon and
Mobil issued a joint press release confirming that they were in discussions
concerning a possible merger, the implied premium paid to Mobil shareholders
would be approximately 20%.
The summary set forth above is not a complete description of the analyses
or data presented by J.P. Morgan. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. In arriving at its opinion, J.P. Morgan considered the
results of all of its analyses as a whole and did not attribute any particular
weight to any analysis or factor considered by it. Furthermore, J.P. Morgan
believes that selecting any portion of its analyses, without considering all
analyses, would create an incomplete view of the process underlying its opinion.
In addition, J.P. Morgan may have given various analyses and factors more or
less weight than other analyses and factors, and may have deemed various
assumptions more or less probable than other assumptions, so that the ranges of
valuation resulting from any particular analysis described should not be taken
as J.P. Morgan's view of the actual value of Exxon or Mobil. In performing its
analyses, J.P. Morgan made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of Exxon and Mobil. Any estimates contained in J.P.
Morgan's analyses are not necessarily indicative of future results or actual
values, which may be significantly more or less favorable than those suggested
by such estimates.
As a part of its investment banking business, J.P. Morgan and its
affiliates are continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, investments for passive
and control purposes, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements, and valuations for estate,
corporate and other purposes. J.P. Morgan was selected to advise Exxon and to
deliver a fairness opinion with respect to the merger on the basis of such
experience and its familiarity with Exxon.
Pursuant to a letter agreement dated November 9, 1998, Exxon engaged J.P.
Morgan as its exclusive financial advisor in connection with the merger.
Pursuant to the terms of the J.P. Morgan engagement letter, Exxon has agreed to
pay J.P. Morgan a fee equal to (i) $100,000 per month and (ii) $8,000,000
payable upon the consummation of the merger or acquisition of a majority of the
common stock or assets of Mobil by Exxon, with up to $2,400,000 of the fees paid
pursuant to clause (i) above to be creditable to any fees that become payable
pursuant to clause (ii) above. In addition, Exxon has agreed to reimburse J.P.
Morgan for its reasonable expenses incurred in connection with its services,
including the fees and disbursements of counsel, and will indemnify J.P. Morgan
against certain liabilities arising out of J.P. Morgan's engagement, including
liabilities under the federal securities laws. The SEC has taken the
position that such indemnification under the federal securities laws may
not be enforceable if it is found to be against public policy.
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<PAGE>
Chapter One - The Merger
J.P. Morgan has in the past provided financial advisory services to a
subsidiary of Exxon, and in the past has provided financial advisory and other
services to Mobil. In addition, Mr. Raymond has been a member of J.P. Morgan's
board of directors since 1987. As a result, a potential conflict of interest
could be deemed to exist. The Exxon Board did not consider this potential
conflict to be significant either to the selection of J.P. Morgan as financial
advisor or to relying on J.P. Morgan's opinion. In the ordinary course of their
businesses, J.P. Morgan and its affiliates may actively trade the debt and
equity securities of Exxon or Mobil for their own account or for the accounts of
customers and, accordingly, they may at any time hold long or short positions in
such securities.
Opinion of Mobil Financial Advisor
On December 1, 1998, Goldman Sachs delivered its written opinion to the
Mobil Board that, as of the date of such opinion, the exchange ratio pursuant to
the merger agreement was fair from a financial point of view to the holders of
Mobil common stock. Goldman Sachs reconfirmed its December 1, 1998 opinion by
delivery of its written opinion dated as of April 2, 1999.
The full text of the written opinion of Goldman Sachs, dated April 2, 1999,
which sets forth assumptions made, matters considered and limitations on the
review undertaken in connection with the opinion is attached as Annex D and is
incorporated by reference. Mobil shareholders are urged to, and should, read
such opinion in its entirety.
In connection with its opinion, Goldman Sachs reviewed, among other things:
o the merger agreement;
o the stock option agreement;
o Annual Reports to Stockholders and Annual Reports on Form 10-K of
Mobil and Exxon for the five years ended December 31, 1997 and, in
the case of its reconfirmed opinion, the Annual Reports on Form 10-K
of Mobil and Exxon for the year ended December 31, 1998 and this
document;
o certain interim reports to shareholders and Quarterly Reports on
Form 10-Q of Mobil and Exxon;
o certain other communications from Mobil and Exxon to their
respective shareholders;
o certain internal financial analyses and forecasts for Mobil prepared
by its management; and
o certain cost savings and operating synergies projected by the
managements of Mobil and Exxon to result from the merger.
Goldman Sachs also held discussions with members of the senior management
of Mobil regarding the strategic rationale for, and the potential benefits of,
the merger and Mobil's past and current business operations, financial condition
and future prospects. Goldman Sachs reviewed forecasts regarding selected
measures of future operating and financial performance of Exxon in summary form
prepared by management of Mobil based on its discussions with management of
Exxon. Internal financial analyses and forecasts prepared by Exxon were not
otherwise made available for review by Goldman Sachs. In addition, Goldman
Sachs:
o reviewed the reported price and trading activity for Mobil common
stock and Exxon common stock;
o compared certain financial and stock market information for Mobil and
Exxon with similar information for certain other companies the
securities of which are publicly traded;
o reviewed the financial terms of certain recent business combinations;
and
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Chapter One - The Merger
o performed such other studies and analyses as it considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of rendering its opinion. In that regard, Goldman
Sachs assumed, with the consent of the Mobil Board, that the synergies were
reasonably prepared on a basis reflecting the best available estimates and
judgments of Mobil and Exxon as of the date of its opinion. Goldman Sachs also
assumed, with the consent of the Mobil Board, that the merger will be accounted
for as a pooling of interests under generally accepted accounting principles.
Goldman Sachs also has assumed that all material governmental, regulatory or
other consents and approvals necessary for the completion of the merger will be
obtained without any meaningful adverse effect on Mobil or Exxon. In addition,
Goldman Sachs did not make an independent evaluation or appraisal of the assets
and liabilities of Mobil or Exxon or any of their subsidiaries and Goldman Sachs
was not furnished with any such evaluation or appraisal. The opinion of Goldman
Sachs was provided for the information and assistance of the Mobil Board in
connection with its consideration of the merger and is not a recommendation as
to how any holder of shares of Mobil common stock should vote.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its written opinion to the Mobil
Board on December 1, 1998. Goldman Sachs utilized substantially the same types
of financial analyses in connection with providing its opinion dated April 2,
1999.
1. Historical Stock Trading Analysis. Goldman Sachs reviewed the average
historical trading prices for the shares of Mobil common stock. In addition,
Goldman Sachs analyzed the consideration to be received by holders of Mobil
common stock pursuant to the merger agreement in relation to the average per
share closing price of Mobil common stock for the one week, one month, three
month, six month, one year, three year, five year and ten year periods ended
November 24, 1998 and in relation to the closing price of Mobil common stock on
November 24, 1998 and November 30, 1998. November 24, 1998 was chosen as a
reference date because it was the last trading day prior to public reports that
Mobil and Exxon were discussing a potential business combination transaction.
This analysis was based on the exchange ratio of 1.32015 and the per share
price of Exxon common stock of $75.00 on November 30, 1998, the last trading day
prior to the announcement of the execution of the merger agreement. The analysis
indicated that the consideration per share of Mobil common stock to be received
by holders of Mobil common stock pursuant to the merger agreement:
o in relation to the average closing price for the one week, one month,
three month, six month and one year periods ending November 24, 1998,
represented a premium of 33.4%, 33.6%, 31.5%, 32.5% and 33.4%,
respectively;
o in relation to the closing price of Mobil common stock on November
24, 1998 and November 30, 1998, represented a premium of 32.1% and
15.1%, respectively; and
o in relation to the closing price of Mobil common stock on May 1,
1998, the date of Mobil's all time high closing stock price prior to
November 25, 1998, represented a premium of 19.9%.
2. Exchange Ratio Analysis. Goldman Sachs calculated the average of the
historical daily exchange ratios of Exxon common stock to Mobil common stock
based on the closing prices of Exxon common stock and Mobil common stock for the
one week, one month, three month, six month and one year periods ended November
24, 1998. Such analysis indicated:
o that the average exchange ratios over such periods were 1.041, 1.035,
1.064, 1.059 and 1.096, respectively, compared to the exchange ratio
of 1.32015 pursuant to the merger agreement;
o that the average exchange ratio since the closing price of Mobil
common stock on May 1, 1998, the date of Mobil's all time high
closing price prior to November 25, 1998, was 1.092; and
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Chapter One - The Merger
o an exchange ratio of 1.147 for the closing price of Exxon common
stock to Mobil common stock on November 30, 1998, as compared to the
exchange ratio of 1.32015 pursuant to the merger agreement.
3. Contribution Analysis. Goldman Sachs reviewed certain historical and
estimated future operating and financial information, including, among other
things, equity market value, levered value, total assets, shareholders' equity,
earnings before interest, taxes, depreciation and amortization ("EBITDA"), net
income and discretionary cash flow for Exxon, Mobil and the pro forma combined
company resulting from the merger. Levered value is market value of equity plus
book value of debt less cash. Discretionary cash flow is net income plus
depreciation, depletion, amortization, deferred taxes and exploration expenses.
This analysis indicated that, excluding shares of Mobil common stock held in
trust pursuant to the Trust Agreement, dated June 29, 1992, as amended, between
Mobil and Bankers Trust (Delaware), holders of Mobil common stock would receive
30% of the outstanding common equity of the pro forma combined company after the
merger based on the exchange ratio of 1.32015 and contribute 25%, 26%, 31% and
34% of the equity market value, levered value, total assets and 1997 EBITDA of
the pro forma combined company, respectively.
Goldman Sachs also analyzed the relative income statement contribution of
Mobil and Exxon to the pro forma combined company resulting from the merger,
before taking into account any of the possible benefits that may be realized
following the merger, for 1997 and estimated years 1998, 1999 and 2000, based on
I/B/E/S International Inc. estimates of earnings and cash flows.
The results of these analyses are as follows:
<TABLE>
Contribution of Mobil
to the Pro Forma Combined Company
---------------------------------
1997 1998E 1999E 2000E
---- ----- ----- -----
<S> <C> <C> <C> <C>
Net Income.............................. 29% 27% 29% 30%
Discretionary Cash Flow................. 32% 29% 31% 33%
</TABLE>
4. Selected Companies Analysis. Goldman Sachs reviewed and compared
certain financial information, ratios and public market multiples relating to
Mobil to corresponding financial information, ratios and public market multiples
for the following six publicly traded companies:
o British Petroleum Company plc,
o Chevron Corporation,
o Exxon,
o Royal Dutch Petroleum Company,
o Shell Transport & Trading Co. plc, and
o Texaco Inc.
The selected companies were chosen because they are publicly traded
companies that for purposes of analysis may be considered similar to Mobil.
Goldman Sachs calculated and compared various financial multiples and
ratios. The multiples of Mobil were calculated using a price of $74.94 per
share, the closing price of Mobil common stock on November 24, 1998, the last
trading day prior to public reports that Mobil and Exxon were discussing a
potential business combination. The multiples and ratios for Mobil and for each
of the selected companies were based on the most recent publicly available
information.
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Chapter One - The Merger
The results of these analyses are as follows:
<TABLE>
The Selected Companies Mobil
--------------------------------- -----------------
1998E range 1999E range 1998E 1999E
-------------- -------------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Price/earnings ratio........................ 26.4x - 29.6x 19.3x - 23.8x 25.0x 20.1x
Price/cash flow ratio....................... 10.0x - 13.6x 8.5x - 12.5x 10.9x 9.6x
</TABLE>
The review also indicated that the dividend yield of the selected companies
ranged from 2.22% to 3.12%, compared to 3.04% for Mobil.
5. Pro Forma Merger Analysis. Goldman Sachs prepared a pro forma analysis
of the financial impact of the merger. Using I/B/E/S International Inc. earnings
estimates for 1999 and 2000, Goldman Sachs compared the earnings per share of
Mobil common stock on a stand-alone basis and Exxon common stock on a
stand-alone basis, to the earnings per share of the common stock of the pro
forma combined company. Goldman Sachs performed this analysis based on the
exchange ratio of 1.32015 and under three scenarios reflecting cost savings and
operating synergies projected by the management of Mobil and Exxon to result
from the merger:
o Scenario I - assuming no synergies;
o Scenario II - assuming $950 million in pre-tax synergies are realized
in 1999 and $1,820 million in pre-tax synergies are realized in 2000;
and
o Scenario III - assuming $2,800 million in pre-tax synergies are
realized in each of 1999 and 2000.
This analysis indicated that:
o assuming Scenario I, the merger would be dilutive - that is, would
represent a reduction - to both 1999 and 2000 earnings per share of
Exxon common stock on a stand-alone basis and would be accretive-that
is, would represent an addition - to 1999 and 2000 earnings per share
of Mobil common stock on a stand-alone basis; and
o assuming Scenario II or Scenario III, the merger would be accretive
in 1999 and 2000 to the earnings per share of Exxon common stock on a
stand-alone basis and the earnings per share of Mobil common stock on
a stand-alone basis.
6. Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to the proposed transaction in relation to certain publicly
available information for 28 stock-for-stock transactions, substantially all of
which were in excess of $10 billion. Such analysis indicated that for the
selected transactions the premiums paid in such transactions as compared to:
o the target's price one day prior to the announcement of the
transaction, ranged from a low of (5.8)% to a high of 58.8%, with a
median of 12.1% and a mean of 17.0%, as compared to 15.1% for the
proposed merger;
o the target's price one day prior to the date of any disclosure of the
possible transaction (the "Disclosure Date"), ranged from a low of
(5.2%) to a high of 70.5%, with a median of 20.7% and a mean of
24.1%, as compared to 32.1% for the proposed transaction;
o the target's 30-day average price prior to the Disclosure Date,
ranged from a low of (1.8)% to a high of 76.0%, with a median of
18.6% and a mean of 28.1%, as compared to 33.6% for the proposed
transaction;
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Chapter One - The Merger
o the target's 90-day average price prior to the Disclosure Date,
ranged from a low of (6.8)% to a high of 82.8%, with a median of
21.9% and a mean of 28.7%, as compared to 31.5% for the proposed
transaction; and
o the average of the daily exchange ratios for the 90-day period prior
to the Disclosure Date, ranged from a low of (8.8)% to a high of
53.6%, with a median of 16.9% and a mean of 18.6%, as compared to
24.1% for the proposed transaction.
The analysis further indicated that for the selected transactions, the
premium resulting from the target's share of the pro forma combined company
resulting from the transaction as compared with the target's market
capitalization relative to the combined market capitalization of the target and
the acquirer one day prior to the Disclosure Date ranged from a low of (4.4)% to
a high of 45.0%, with a median of 9.0% and a mean of 13.0%, as compared to 22.4%
for the proposed transaction.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
Mobil or Exxon or the contemplated transaction.
The analyses were prepared solely for purposes of Goldman Sachs' providing
its opinion to the Mobil Board as to the fairness from a financial point of view
of the exchange ratio to the holders, other than Exxon or any of its
subsidiaries or affiliates, of the outstanding shares of Mobil common stock and
do not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based upon forecasts of
future results are not necessarily indicative of actual future results, which
may be significantly more or less favorable than suggested by such analyses.
Because such analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of the parties or their respective
advisors, none of Mobil, Exxon, Goldman Sachs nor any other person assumes
responsibility if future results are materially different from those forecast.
As described above, Goldman Sachs' opinion to the Mobil Board was one of
many factors taken into consideration by the Mobil Board in making its
determination to approve the merger agreement. The foregoing summary does not
purport to be a complete description of the analysis performed by Goldman Sachs
in connection with such opinion and is qualified by reference to the written
opinion of Goldman Sachs set forth in Annex D.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Mobil selected Goldman
Sachs to render its opinion because it is a nationally recognized investment
banking firm that has substantial experience in transactions similar to the
merger. Goldman Sachs is familiar with Mobil having provided certain investment
banking services to Mobil from time to time, including having acted as dealer on
Mobil's commercial paper program; having acted as agent on Mobil's stock
repurchase program and medium term note program; and having acted as
lead-managing underwriter of a public offering of Mobil Corporation Pass Through
Certificates, Series 1997-A in May 1997. Goldman Sachs also has provided certain
investment banking services to Exxon from time to time, and may provide
investment banking services to Exxon in the future.
Goldman Sachs provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold securities, including derivative securities,
of Mobil or Exxon for its own account and for the accounts of customers.
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Chapter One - The Merger
Pursuant to a letter agreement dated November 22, 1998, Mobil engaged
Goldman Sachs to render its opinion in connection with the merger. Pursuant to
the terms of the Goldman Sachs engagement letter, Mobil has agreed to pay
Goldman Sachs a fee equal to (i) $100,000 per month beginning on November 30,
1998 and (ii) $8,000,000 payable upon the consummation of the merger or
acquisition of a majority of the common stock or assets of Mobil by Exxon, with
up to $2,400,000 of the fees paid pursuant to clause (i) above to be creditable
to any fees that become payable pursuant to clause (ii) above. From time to
time, Goldman Sachs has also provided other financial advisory services to
Mobil. Payment for certain of these services would be accelerated if the merger
is consummated. Mobil has also agreed to reimburse Goldman Sachs for its
reasonable out-of-pocket expenses, including attorney's fees, and to indemnify
Goldman Sachs against certain liabilities, including certain liabilities under
the federal securities laws. The SEC has taken the position that such
indemnification under the federal securities laws may not be enforceable if it
is found to be against public policy.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Mobil Board with respect to the
merger agreement, shareholders should be aware that certain members of the
management of Mobil and the Mobil Board have interests in the merger that may be
different from, or in addition to, the interests of the other shareholders of
Mobil generally.
Board of Directors
Exxon has agreed that, as of the closing, it will cause Mr. Noto and Mr.
Renna and four other persons who immediately prior to the closing were directors
but not employees of Mobil, to be elected to the Exxon Mobil Board. See "The
Merger Agreement--Exxon Mobil Board and Related Matters" on page I-55. It is
expected that Donald V. Fites, Charles A. Heimbold, Jr., Helene L. Kaplan and J.
Richard Munro will be the non-employee directors of Mobil who will be elected to
the Exxon Mobil Board as of the closing. For information about the benefits
received by Exxon directors, see "Chapter Four--Board of Directors Proposal:
Election of Directors--Director Compensation" on page IV-6.
Indemnification; Directors' and Officers' Insurance
For seven years after the closing, Exxon has agreed to indemnify, to the
extent provided under Mobil's charter and by-laws in effect on December 1, 1998,
the individuals who on or before the closing were officers, directors and
employees of Mobil or its subsidiaries with respect to all acts or omissions
before the closing by these individuals in these capacities. Exxon has further
agreed to cause Mobil to honor all its indemnification agreements, including
under Mobil's by-laws, in effect on December 1, 1998. Exxon has also agreed to
provide, for seven years after the closing, directors' and officers' liability
insurance in respect of acts or omissions occurring before the closing covering
each person currently covered by Mobil's directors' and officers' liability
insurance policy. Exxon can discharge this obligation by providing an insurance
policy underwritten by a wholly-owned subsidiary of Exxon. See "The Merger
Agreement--Certain Covenants--Indemnification and Insurance of Mobil Directors
and Officers" on page I-57.
Employee Severance Plan
On September 25, 1998, upon the recommendation of the Management
Compensation and Organization Committee of the Mobil Board (the "MCOC"), the
Mobil Board revoked Mobil's prior severance arrangements in the event of a
change in control of Mobil and adopted a cash-based employee severance plan.
Generally, all Mobil employees on the U.S. payroll who work a regular schedule
of at least 20 hours per week are eligible to participate in the severance plan.
However, temporary employees, employees represented by a collective bargaining
agent or subject to a collective bargaining agreement, leased employees,
employees of Mobil-owned and operated service stations and any person retained
pursuant to a written contract are not eligible to participate in the severance
plan.
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Chapter One - The Merger
Tier 1 employees comprising 19 senior executives, including Messrs. Noto,
Renna, Thomas C. DeLoach, Jr., Harold R. Cramer and Stephen D. Pryor and all
other executive officers of Mobil, as well as approximately 112 Tier 2
employees, approximately 1,329 Tier 3 employees and approximately 10,801 Tier 4
employees are eligible to receive severance benefits in the event of a
qualifying termination of their employment on or within two years following a
change in control, as such term is defined in the severance plan. In the
following discussion, we refer collectively to the employees listed in the
previous sentence as the covered employees and to Messrs. Noto, Renna, DeLoach,
Cramer and Pryor collectively as the Mobil named executive officers. A
qualifying termination of employment under the severance plan means (1) a
termination by the employer other than for "cause" (as defined in the severance
plan) or (2) a termination by the covered employee for "good reason" (as defined
in the severance plan). A termination by the covered employee for good reason
under the severance plan, in respect of a Tier 1, Tier 2 or Tier 3 employee
means:
o a reduction in the covered employee's base salary or incentive
compensation opportunity in effect immediately prior to the change in
control,
o the assignment to the covered employee of duties that in the
aggregate are inconsistent with the covered employee's level of
responsibility immediately before the change in control or any
decline in the nature or status of the covered employee's
responsibilities from those in effect immediately before the change
in control and including, in the case of a Tier 1 or Tier 2 employee
who was, immediately before the change in control, an executive
officer, that employee ceasing to be an executive officer of a public
company, or
o the relocation of the covered employee's principal place of
employment to a location more than 50 miles from that employee's
principal place of employment immediately before the change in
control.
A covered Tier 1, Tier 2 or Tier 3 employee who incurs a qualifying
termination of employment will be entitled to receive a cash lump sum severance
payment equal to:
o the sum of his or her annual base salary, plus the highest annual
bonus received in the three years immediately before the change in
control, plus the value of contributions or allocations made, as
applicable, by Mobil on that employee's behalf to the employees
savings plan of Mobil Oil Corporation and the supplemental savings
benefit plan of Mobil Oil Corporation in the calendar year before the
change in control,
o multiplied by 3 for Tier 1 employees, 2.5 for Tier 2 employees and
2.0 for Tier 3 employees.
A Tier 1, Tier 2 or Tier 3 employee who incurs a qualifying termination of
employment will also be provided with welfare benefits as if that employee had
continued to be employed by Mobil until the earlier to occur of:
o two years from the date of the qualifying termination of employment
and
o that employee obtaining employment providing substantially similar
welfare benefits.
Under the severance plan, Mobil is required, if necessary, to make an
additional gross-up payment to any covered employee to offset fully the effect
of any excise tax imposed by Section 4999 of the Internal Revenue Code on any
excess parachute payment, whether made to that employee under the severance plan
or otherwise. In general, Section 4999 imposes an excise tax on the recipient of
any excess parachute payment equal to 20% of that payment. A parachute payment
is any payment that is contingent on a change in control. Excess parachute
payments consist of the excess of parachute payments over an individual's
average taxable compensation received by him from the employer during the five
taxable years preceding the year in which the change in control occurs. If the
individual has been employed for fewer than five taxable years, the individual's
entire period of employment will be used to calculate the excess parachute
payment.
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Chapter One - The Merger
The merger will constitute a change in control under the severance plan. If
the closing had occurred on March 1, 1999 and if each of Messrs. Noto, Renna,
DeLoach, Cramer and Pryor had incurred a qualifying termination of employment
immediately following that date, the approximate amount of the cash severance
payment payable to each of the named executive officers would have been
$7,850,424 to Mr. Noto; $5,213,610 to Mr. Renna; $2,959,290 to Mr. DeLoach;
$2,352,000 to Mr. Cramer; and $2,342,190 to Mr. Pryor and the gross-up payment
payable would not be expected to exceed $5,712,767 to Mr. Noto; $3,413,624 to
Mr. Renna; $2,256,999 to Mr. DeLoach; $1,823,450 to Mr. Cramer; and $1,802,655
to Mr. Pryor.
Incentive Compensation and Stock Ownership Plans
At the effective time, each outstanding option granted by Mobil to purchase
shares of Mobil common stock will be assumed by Exxon Mobil and will, after the
effective time, constitute an option to acquire, on the same terms and
conditions as applied to the Mobil stock option prior to the effective time, the
number, rounded down to the nearest whole number, of shares of Exxon Mobil
common stock determined by multiplying:
o the number of shares of Mobil common stock subject to the option
immediately before the effective time by
o the exchange ratio.
The exercise price of each of these options will be a price per share of Exxon
Mobil common stock, rounded up to the nearest cent, equal to:
o the per share exercise price for Mobil common stock that otherwise
could have been purchased under the Mobil stock option divided by
o the exchange ratio.
Under the merger agreement, each other stock-based award granted by Mobil
under its employee or director plans or arrangements maintained as of December
1, 1998 will be converted, as of the effective time, into a similar Exxon Mobil
stock-based award, adjusted as appropriate to preserve the award's inherent
value.
The other terms and conditions of these other stock-based awards, and the
plans or agreements under which they were issued, will continue to apply in
accordance with their terms and conditions as these terms and conditions have
been interpreted and applied by Mobil in accordance with its past practice.
Upon a change in control, with respect to long-term conditional performance
shares previously granted to Mobil employees under Mobil's 1995 incentive
compensation and stock ownership plan and predecessor and successor plans, Exxon
Mobil will assume that all long-term incentive award performance factors have
been achieved at a 100% level. With respect to each employee and former employee
who has been granted performance shares relating to performance cycles in which
the change in control occurs, Exxon Mobil will calculate a prorated
number of the performance shares originally granted with respect to each
performance cycle. This number will be prorated for the number of months
completed in each performance cycle, to the date of the change in control. Exxon
Mobil will also calculate all notional dividends accrued to the date of the
change in control relating to all performance shares originally granted with
respect to each performance cycle. Similarly, Exxon Mobil will calculate any
notional dividends which are or may be accrued from the date of the change in
control relating to performance shares and notional dividends calculated as
provided above. Unless the employee, including a Mobil named executive officer,
before the end of the applicable performance cycle, is terminated for cause,
engages in willful misconduct, or voluntarily terminates his or her employment
to join a competitor, Exxon Mobil will pay the employee a cash amount in respect
of the performance shares and notional dividends calculated as provided above in
respect of the performance cycle at the same time and in the same manner as
would have been the case in the absence of a change in control. The merger will
constitute a change in control under the incentive plans.
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Chapter One - The Merger
In addition, upon a change in control, current and former Mobil employees,
including the Mobil named executive officers, who are eligible to receive annual
short-term incentive cash awards granted under incentive plans with respect to a
year in which a change in control occurs will receive an immediate payment of
that award for the year in which the change in control occurs, prorated for the
number of months completed in the year before the date of the change in control.
The award will be calculated by using the most current year information
available with respect to the attainment of applicable performance factors, or
where no current year information is available, using information from the full
preceding year.
Since all long-term incentive award payments under the incentive plans will
be made on future dates, and because such payments will be based on the closing
prices of Exxon Mobil stock and the number of performance shares and notional
dividends in a participant's account on these future dates, it is impossible to
calculate what payments, if any, an employee, including a Mobil named executive
officer, with one or more outstanding conditional long-term incentive awards may
become entitled to receive.
If the closing had occurred on March 1, 1999, each Mobil named executive
officer would have become entitled to a payment upon the closing of the merger
of a short-term incentive cash award for 1998, estimated to equal the following
amounts: $256,283 to Mr. Noto; $145,750 to Mr. Renna; $70,417 to Mr. DeLoach;
$56,250 to Mr. Cramer; and $56,250 to Mr. Pryor.
Management Retention Plan
The management retention plan provides for conditional retention awards to
selected executives of Mobil, including all of the Mobil named executive
officers and eight other executive officers. Generally, payment under the
management retention plan is only made after normal retirement, an approved
early retirement, or the death or disability of a participant, provided that the
participant's performance was at a level satisfactory to Mobil over the period
the award remained conditional. Before the merger, the MCOC determined that all
current management retention plan participants had rendered long-term service to
Mobil at a level satisfactory to Mobil. In the merger agreement, Exxon
acknowledged that the MCOC had determined that all participants covered by the
management retention plan had performed at a level satisfactory to Mobil over
the period that the conditional retention awards were outstanding and,
accordingly, that all participants would be entitled to full payment under the
management retention plan were they to retire or otherwise terminate their
employment with Mobil. Exxon agreed to give considerable weight to such
determination in administering the management retention plan after the merger,
given the significant length of time that has elapsed since the award grants.
If the closing had occurred on March 1, 1999, and if the employment of each
Mobil named executive officer had terminated immediately following that time,
the amount payable under the management retention plan in respect of retention
awards, based upon the per share closing price of Mobil stock on March 1, 1999
of $81 would have been $2,185,704 to Mr. Noto; $1,985,553 to Mr. Renna;
$1,385,019 to Mr. DeLoach; $923,238 to Mr. Cramer; and $461,538 to Mr. Pryor.
Rabbi Trust
Mobil maintains an irrevocable "rabbi trust" which secures Mobil's
obligations under certain employee benefit and executive compensation programs,
including the management retention plan and the obligations under the severance
plan relating to employees, including all executive officers, in salary group 20
or higher. As of December 31, 1998, the rabbi trust held assets valued at
approximately $692,951,000. The rabbi trust will continue to hold assets
following the merger.
Application of Past Practices
Exxon has agreed that the incentive plans, the management retention plan,
the supplemental pension annuity program of Mobil Oil Corporation, the executive
life insurance program of Mobil Oil Corporation and the severance plan, as well
as any award made under any of these executive arrangements, will be
administered in accordance with the past practices and interpretations of the
Mobil Board and the MCOC with respect to eligibility,
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Chapter One - The Merger
vesting, term and payment, among other matters. Any question regarding the
past practices and interpretations of the Mobil Board and the MCOC and the
application of these past practices and interpretations to the type of
facts and circumstances in a given case will be referred to Mr. Noto or
his designee for a final decision. This decision shall not be inconsistent
with the intention of the merger agreement and the merger.
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<PAGE>
Chapter One - The Merger
THE MERGER AGREEMENT
The following summary of the merger agreement is qualified by reference to
the complete text of the merger agreement, which is incorporated by reference
and attached as Annex A.
Structure of the Merger
Under the merger agreement, an Exxon subsidiary will merge into Mobil so
that Mobil becomes a wholly-owned subsidiary of Exxon Mobil.
Timing of Closing
The closing will occur within three business days after the day on which
the last of the conditions set forth in the merger agreement has been satisfied
or waived, unless Exxon and Mobil agree to a different date. We expect that,
immediately upon the closing of the merger, we will file a merger certificate
with the Secretary of State of the State of Delaware, at which time the merger
will be effective.
Merger Consideration
The merger agreement provides that each share of Mobil common stock
outstanding immediately prior to the effective time will, at the effective time,
be converted into the right to receive 1.32015 shares of Exxon Mobil common
stock. However, any shares of Mobil common stock held by Mobil as treasury stock
or owned by Exxon or any subsidiary of Exxon will be canceled without any
payment for those shares. Shares held in Mobil's rabbi trust will not be treated
as treasury stock for this purpose.
In addition, each outstanding share of Mobil ESOP preferred stock held in
the leveraged ESOP portion of the Employees Savings Plan of Mobil Oil
Corporation will, at the effective time, be converted into the right to receive
one share of a new series of Exxon preferred stock (the "Exxon Mobil ESOP
preferred stock") having, to the extent possible, terms identical to those of
the Mobil ESOP preferred stock.
Treatment of Mobil Stock Options; Other Mobil Stock-Based Awards
At the effective time, each outstanding option granted by Mobil to purchase
shares of Mobil common stock will be converted into an option to acquire Exxon
Mobil common stock having the same terms and conditions as the Mobil stock
option had before the effective time. The number of shares that the new Exxon
Mobil option will be exercisable for and the exercise price of the new Exxon
Mobil option will reflect the exchange ratio in the merger.
Each other stock-based award granted by Mobil under its employee or
director plans or arrangements maintained as of December 1, 1998 will be
converted, as of the effective time, into a similar Exxon Mobil stock-based
award, adjusted as appropriate to preserve the award's inherent value. For
additional information on Mobil stock-based awards, see "Interests of Certain
Persons in the Merger" on page I-49.
Exchange of Shares
We will appoint an exchange agent to handle the exchange of Mobil stock
certificates in the merger for Exxon Mobil stock and the payment of cash for
fractional shares of Mobil stock. Soon after the closing, the exchange agent
will send to each holder of Mobil stock a letter of transmittal for use in the
exchange and instructions explaining how to surrender Mobil stock certificates
to the exchange agent. Holders of Mobil stock that surrender their certificates
to the exchange agent, together with a properly completed letter of transmittal,
will receive the appropriate merger consideration. Holders of unexchanged shares
of Mobil stock will not be entitled to receive any dividends or other
distributions payable by Exxon Mobil after the closing until their certificates
are surrendered.
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Chapter One - The Merger
Exxon Mobil will not issue any fractional shares in the merger. Holders of
Mobil common stock will receive a cash payment in the amount of the proceeds
from the sale of their fractional shares in the market.
Exxon Mobil Board and Related Matters
Exxon has agreed to take the necessary corporate action so that, as of the
closing:
o The Exxon Mobil Board size will be increased from 13 to 19.
o Two employee directors of Mobil will become directors of Exxon Mobil.
They are expected to be Lucio A. Noto and Eugene A. Renna.
o Four non-employee directors of Mobil will become directors of Exxon
Mobil. They are expected to be Donald V. Fites, Charles A. Heimbold,
Jr., Helene L. Kaplan and J. Richard Munro.
o Mr. Noto will become Vice-Chairman of the Exxon Mobil Board.
o At least one Mobil designee will become a member of each of the Exxon
Mobil Audit Committee and the Exxon Mobil Compensation Committee.
If the closing is within nine months of the next regularly scheduled
annual meeting of shareholders of Exxon Mobil, Exxon has agreed, in each
case as of such next annual meeting, * to nominate the Mobil designees to
the Exxon Mobil Board, * to elect Mr. Noto as Vice Chairman, and * to
have at least one Mobil designee on each of the Compensation Committee and
Audit Committee of Exxon Mobil.
Certain Covenants
Each of Exxon and Mobil has undertaken certain covenants in the merger
agreement. The following summarizes the more significant of these covenants.
No Solicitation by Mobil. Mobil has agreed that it and its subsidiaries and
their officers, directors, employees and advisers will not take action to
solicit or encourage an offer for an alternative acquisition transaction
involving Mobil of a nature defined in the merger agreement.
Restricted actions include engaging in discussions or negotiations with any
potential bidder, or disclosing non-public information relating to Mobil or its
subsidiaries or affording access to their properties, books or records to a
potential bidder. These actions are permitted in response to an
unsolicited bona fide offer so long as prior to doing so: * the Mobil
Board by a majority vote determines in its good faith judgment that it is
necessary to do so to comply with its fiduciary duty to shareholders, after
receiving the advice of outside legal counsel, and * Mobil receives from
such person an executed confidentiality agreement with terms no less
favorable to Mobil than those contained in the existing confidentiality
agreement between Exxon and Mobil.
Mobil must keep Exxon informed of the identity of any potential bidder and
the terms and status of any offer. If its Board reaches the fiduciary duty
determination described in the previous paragraph that it is necessary to do so,
Mobil can withhold that information.
Mobil Board's Covenant to Recommend. The Mobil Board has agreed to
recommend the approval and adoption of the merger agreement to Mobil's
shareholders. However, the Mobil Board is permitted not to make, to
withdraw or to modify in a manner adverse to Exxon this recommendation if
* the Mobil Board by a majority vote determines in its good faith
judgment that it is necessary to do so to comply with its fiduciary duty to
shareholders under applicable law, after receiving the advice of outside
legal counsel, and * Mobil and the senior officers and directors of Mobil
have substantially complied with their obligations under the no-
solicitation covenant described above under "--No Solicitation by Mobil."
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Chapter One - The Merger
Exxon Board's Covenant to Recommend. The Exxon Board has agreed to
recommend the approval of the Exxon Merger Proposals to Exxon's shareholders.
However, the Exxon Board is permitted not to make, to withdraw or to modify in a
manner adverse to Mobil this recommendation if the Exxon Board by a majority
vote determines in its good faith judgment that it is necessary to do so to
comply with its fiduciary duty to shareholders under applicable law, after
receiving the advice of outside legal counsel.
Interim Operations of Exxon and Mobil. Each of Exxon and Mobil has
undertaken a separate covenant that places restrictions on it and its
subsidiaries until either the effective time or the merger agreement is
terminated. In general, Exxon and its subsidiaries and Mobil and its
subsidiaries are required to conduct their business in the ordinary course
consistent with past practice and to use their reasonable best efforts to
preserve intact their business organizations and relationships with third
parties. The companies have also agreed to some specific restrictions which are
subject to exceptions described in the merger agreement. The following table
summarizes the more significant of these restrictions undertaken by each
company:
<TABLE>
Restriction Exxon Mobil
................................................................ ........... .............
<S> <C> <C>
amending its organizational documents o *
................................................................ ........... .............
entering into any merger, liquidation or other significant
transaction o *
................................................................ ........... .............
issuing or disposing of equity securities, options or other
securities convertible into or exercisable for equity
securities, except to a limited extent to employees or
directors o *
................................................................ ........... .............
splitting, combining or reclassifying its capital stock o *
................................................................ ........... .............
declaring dividends, except for regular quarterly cash
dividends as they may periodically be increased
consistent with past practice and required dividends on
preferred stock o *
................................................................ ........... .............
redeeming or repurchasing its capital stock, except in
limited instances to prevent dilution o *
................................................................ ........... .............
amending the terms of any outstanding stock options *
................................................................ ........... .............
making capital expenditures, subject to certain ordinary
course exceptions *
................................................................ ........... .............
increasing employee compensation or benefits except for
normal ordinary course increases consistent with past
practice *
................................................................ ........... .............
acquiring or disposing of material assets, except for
disposing of assets pursuant to existing commitments *
................................................................ ........... .............
changing its accounting policies *
................................................................ ........... .............
entering into any material joint venture or partnership *
................................................................ ........... .............
taking any other action that would make any representation
or warranty by it inaccurate in any material respect o *
................................................................ ........... .............
</TABLE>
Best Efforts Covenant. Exxon and Mobil have agreed to cooperate with each
other and use their best efforts to take all actions and do all things necessary
or advisable under the merger agreement and applicable laws to complete the
merger and the other transactions contemplated by the merger agreement. However,
neither Exxon
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<PAGE>
Chapter One - The Merger
nor Mobil is required to take any action if the result would give Exxon the
right to decline to close the merger because such action could reasonably
be expected to result in a substantial detriment to Exxon, Mobil and their
subsidiaries, taken as a whole.
Certain Employee Benefits Matters. The merger agreement provides that Exxon
Mobil will cause Mobil to honor in accordance with their terms all obligations
under Mobil's executive benefit arrangements and under all other existing Mobil
employee and retiree arrangements and plans to the extent entitlements or rights
exist under those arrangements or plans as of the closing.
Exxon has also agreed, following the closing, to provide Mobil employees
who were employed by Mobil or its subsidiaries at the closing and who continue
as employees of Exxon Mobil or its subsidiaries, for so long as they remain so
employed, employee benefits, other than salary or incentive compensation,
* pursuant to benefit plans and arrangements as provided to those employees
immediately prior to the closing, or * pursuant to benefit plans and
arrangements maintained by Exxon Mobil providing coverage and benefits
which, in the aggregate, are no less favorable than those provided to
employees of Exxon Mobil in positions comparable to the positions held by
the continuing Mobil employees.
In addition, Exxon has agreed that, following the closing, Exxon Mobil
will continue to provide former employees of Mobil and its subsidiaries
(and to Mobil employees whose employment terminates prior to the closing)
post retirement benefits, other than pensions, * pursuant to benefit
plans and arrangements applicable to those retirees as in effect as of
December 1, 1998, or * pursuant to benefit plans or arrangements
maintained by Exxon Mobil or its subsidiaries providing post-retirement
coverage and benefits, other than pensions, which, in the aggregate, are no
less favorable than those provided to former employees of Exxon.
Please see "Interests of Certain Persons in the Merger," beginning on page
I-49, for additional information on employee benefits matters covered in the
merger agreement.
Indemnification and Insurance of Mobil Directors and Officers. Exxon has
agreed that:
o For seven years after closing, it will indemnify former Mobil
directors, officers and employees for liabilities from their acts or
omissions in those capacities occurring prior to closing to the
extent provided under Mobil's charter and by-laws as in effect on
December 1, 1998.
o It will cause Mobil to honor all indemnification agreements with its
former directors, officers and employees in effect as of December 1,
1998.
o For seven years after closing, it will provide officers' and
directors' liability insurance covering acts or omissions occurring
prior to closing by each person currently covered by Mobil's
officers' and directors' liability insurance policy. This Exxon Mobil
policy must be no less favorable than the Mobil policy in effect on
December 1, 1998, except that Exxon Mobil will only be obligated to
pay up to 300% of the annual premium paid by Mobil for such insurance
as of December 1, 1998. Exxon may provide this coverage through a
policy underwritten by a wholly-owned Exxon subsidiary.
Certain Other Covenants. The merger agreement contains mutual covenants of
the parties, the most significant of which are that each party agrees:
o not to jeopardize the intended tax or accounting treatment of the
merger, and
o to establish a transition committee to plan the integration of Exxon
and Mobil after the closing.
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<PAGE>
Chapter One - The Merger
Representations and Warranties
The merger agreement contains substantially reciprocal representations and
warranties made by Exxon and Mobil to each other. The most significant of these
relate to:
* corporate authorization to enter into the contemplated transaction
* the shareholder votes required to approve the contemplated
transaction * governmental approvals required in connection with the
contemplated transaction * absence of any breach of organizational
documents, law or certain material agreements as a result of the
contemplated transaction * capitalization * ownership of
subsidiaries * filings with the SEC * information provided by it
for inclusion in this joint proxy statement/prospectus * financial
statements * absence of certain material changes since a specified
balance sheet date * absence of undisclosed material liabilities *
litigation * tax matters * employee benefits matters *
compliance with laws * finders' or advisors' fees * environmental
matters * absence of circumstances inconsistent with the intended
accounting treatment of the merger and * the receipt of accountant's
letters regarding accounting treatment of the merger.
In addition, Mobil represents and warrants to Exxon as to certain other
matters, including the inapplicability of the Delaware anti-takeover statute and
Mobil's shareholder rights plan to the merger and the Mobil stock option. For
information about the anti-takeover statute and the rights plan, see "Chapter
Three--Certain Legal Information--Comparison of Shareholder Rights--Shareholder
Rights Plan" and "Certain Business Combinations" on pages III-4 and III-6.
The representations and warranties in the merger agreement do not survive
the closing or termination of the merger agreement.
Conditions to the Completion of the Merger
Mutual Closing Conditions. The obligations of Exxon and Mobil to complete
the merger are subject to the satisfaction or, to the extent legally
permissible, waiver of the following conditions:
o approval by the Exxon and Mobil shareholders
o expiration of the HSR Act waiting period
o approval by the European Commission of the contemplated transactions
o absence of legal prohibition on completion of the merger
o Exxon's registration statement on Form S-4, which includes this proxy
statement/prospectus, being effective and not subject to any stop
order by the SEC
o approval for the listing on the NYSE of the shares of Exxon Mobil
common stock to be issued in the merger
o receipt of letters from the independent public accountants of Exxon
and Mobil reconfirming their concurrence with Exxon's and Mobil's
managements, respectively, that "pooling of interests" accounting
treatment for the merger is appropriate
o receipt of opinions of Exxon's and Mobil's counsel that the merger
will qualify as a tax-free reorganization
o absence of a material adverse effect or any reasonable expectation of
a material adverse effect on Exxon or Mobil during the period from
December 1, 1998 until closing
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Chapter One - The Merger
o accuracy as of closing of the representations and warranties made by
the other party to the extent specified in the merger agreement
o performance in all material respects by the other party of the
obligations required to be performed by it at or prior to closing
Additional Closing Conditions for Exxon's Benefit. Exxon's obligation to
complete the merger is subject to the following additional conditions:
o there being no proceeding seeking to limit Exxon's ownership of Mobil
or to compel divestiture of assets, in either case to an extent that
could reasonably be expected to result in a substantial detriment to
Exxon and Mobil taken as a whole
o all regulatory approvals for the merger being obtained on terms that
are not reasonably likely to result in such a substantial detriment
Termination of the Merger Agreement
Right to Terminate. The merger agreement may be terminated at any time
prior to the closing in any of the following ways:
(a) The merger agreement may be terminated by mutual written consent of
Exxon and Mobil.
(b) The merger agreement may be terminated by either Exxon or Mobil if:
o the merger has not been completed by December 1, 1999.
However, that date becomes June 30, 2000 if the reason
for not closing by December 1, 1999 is that the
regulatory conditions specified in the merger agreement
have not been satisfied by that date,
o Exxon or Mobil shareholders fail to give the necessary
approval at a duly held meeting, or
o there is a permanent legal prohibition to closing the
merger.
(c) The merger agreement may be terminated by Exxon if the Mobil Board
fails to recommend the merger or withdraws or modifies in a manner adverse
to Exxon its approval or recommendation of the merger, breaches its
agreement to call the Mobil meeting or recommends a superior offer.
(d) The merger agreement may be terminated by Mobil if:
o the Mobil Board authorizes Mobil, subject to complying
with the merger agreement, to enter into a binding
written agreement concerning an acquisition proposal
for at least a majority of the Mobil stock on terms the
Mobil Board determines, in good faith after
consultation with its financial advisors, are more
favorable to Mobil shareholders than the merger, and
Mobil notifies Exxon in writing that it intends to
enter into such an agreement, attaching the most
current version of the agreement or a description of
all its material terms and conditions,
o Exxon does not make an offer, within three business
days after receiving the notice, that the Mobil Board
determines, in good faith after consultation
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<PAGE>
Chapter One - The Merger
with its financial advisors, is at least as
favorable to the Mobil shareholders as the
superior proposal, and
o Mobil has paid Exxon the cash termination fee described
under "--Termination Fees Payable by Mobil" below.
(e) The merger agreement may be terminated by Mobil if the Exxon Board
fails to recommend the merger or withdraws or modifies in a manner adverse
to Mobil its approval or recommendation of the merger or breaches its
agreement to call the Exxon meeting.
Neither Exxon nor Mobil can terminate the merger agreement for the reasons
described in the first bullet under paragraph (b) above if its failure to
fulfill in any material respect its obligations under the merger agreement has
resulted in the failure to complete the merger.
If the merger agreement is validly terminated, the agreement will become
void without any liability on the part of any party unless such party is in
willful breach thereof. However, the provisions of the merger agreement relating
to expenses and termination fees, as well as the confidentiality agreement and
the stock option agreement entered into between Exxon and Mobil, will continue
in effect notwithstanding termination of the merger agreement.
Termination Fees Payable by Mobil. Mobil has agreed to pay Exxon a cash
amount equal to $1.5 billion in any of the following circumstances:
o Mobil terminates the merger agreement as described in paragraph (d)
under "--Right to Terminate" above
o Exxon terminates the merger agreement as described in paragraph (c)
under "--Right to Terminate" above, unless at the relevant time Exxon
is in material breach in the manner described in the merger agreement
o either Exxon or Mobil terminates the merger agreement in
circumstances where the following three conditions are met:
o Mobil's shareholders do not vote in favor of the merger,
o a third party has made a proposal for an alternative transaction,
and
o within twelve months of the termination of the merger agreement
Mobil enters into an agreement for an alternative transaction with
that third party, or with another third party at a value per Mobil
share higher than $95.96.
Termination Fees Payable by Exxon. Exxon has agreed to pay Mobil a cash
amount equal to $1.5 billion if Mobil terminates the merger agreement as
described in paragraph (e) under "--Right to Terminate" above, unless at the
relevant time Mobil is in material breach in the manner described in the merger
agreement.
Other Expenses
Except as described above and subject to an exception relating to the
payment of transfer taxes, all costs and expenses incurred in connection with
the merger agreement and related transactions will be paid by the party
incurring such costs or expenses. We estimate that merger-related fees and
expenses, consisting primarily of SEC filing fees, fees and expenses of
investment bankers, attorneys and accountants, and financial printing and
other related charges, will total approximately $90 million assuming the
merger is completed.
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<PAGE>
Chapter One - The Merger
Amendments; Waivers
Any provision of the merger agreement may be amended or waived prior to
closing if the amendment or waiver is in writing and signed, in the case of an
amendment, by Mobil, Exxon and the merger subsidiary or, in the case of a
waiver, by the party against whom the waiver is to be effective. After the
approval of the merger agreement by the shareholders of Mobil, no amendment or
waiver that by law requires further approval by shareholders may be made without
the further approval of such shareholders.
Stock Option Agreement
The following summary of the stock option agreement is qualified by
reference to the complete text of the agreement, which is incorporated by
reference and attached as Annex B.
General. At the same time that Exxon and Mobil entered into the merger
agreement, they also entered into a stock option agreement. Under the stock
option agreement, Mobil granted Exxon an irrevocable option to purchase up to
136.5 million shares of Mobil common stock at a price per share of $95.96. The
option is exercisable in the circumstances described below.
Exercise of the Stock Option. Exxon can exercise the option in whole or in
part at any time after the occurrence of any event, which we call a trigger
event in this section, entitling Exxon to receive the cash termination fee
payable by Mobil pursuant to the merger agreement (see "--Termination of the
Merger Agreement--Termination Fees Payable by Mobil") and prior to termination
of the option.
The option terminates upon the earliest to occur of
(1) the closing of the merger,
(2) 90 days after Mobil has paid the cash termination fee in full, or
(3) one day after termination of the merger agreement so long as, in the
case of this clause (3), no trigger event has occurred or could still
occur.
If a third party makes an offer to acquire Mobil at a value per share of
Mobil common stock which is lower than the $95.96 exercise price specified
above, the exercise price with respect to 1,000 option shares will be adjusted
to be 90% of the per share value offered by the third party. The exercise price
and number of option shares are also subject to certain anti-dilution and other
adjustments specified in the stock option agreement.
Any purchase of option shares is subject to specified closing conditions,
including receipt of applicable regulatory approvals. The closing of any
purchase of option shares may be postponed for up to nine months beyond the
termination of the option pending satisfaction of the conditions to purchase.
Cash Election. The stock option agreement further provides that, so long as
the option is exercisable, Exxon may, instead of exercising the option, elect to
require Mobil to pay to Exxon in exchange for the cancellation of the relevant
portion of the option an amount in cash equal to the "spread" (as defined below)
multiplied by the number of option shares as to which this cash election is
made.
"Spread" means the excess, if any, over the exercise price of the higher of
(1) the highest price per share of Mobil common stock paid or proposed to be
paid by any third party pursuant to an alternative acquisition proposal and (2)
the average of the closing price of the Mobil common stock on the NYSE at the
end of its regular session, as reported on the Consolidated Tape, for the
five consecutive trading days ending on and including the date immediately
preceding the date on which Exxon notifies Mobil of this cash election.
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Chapter One - The Merger
Listing and Registration Rights. Mobil has agreed to list the option shares
on the NYSE and to grant Exxon customary rights to require registration by Mobil
of option shares for sale by Exxon under the securities laws.
Limitation on Total Profit. The stock option agreement provides that,
notwithstanding any other provision of that agreement or the merger agreement,
Exxon's Total Profit (as defined below) will not exceed $2 billion in the
aggregate. If Exxon's Total Profit otherwise would exceed such amount, Exxon, at
its sole election, may (a) pay cash to Mobil, (b) deliver to Mobil for
cancellation Option Shares previously acquired by Exxon or (c) any combination
thereof, so that Exxon's actually realized Total Profit does not exceed $2
billion after taking into account the foregoing actions.
For purposes of the stock option agreement, "Total Profit" means the
aggregate amount, before taxes, of the following: (1) (x) the cash amount
actually received by Exxon in payment by Mobil of the termination fee under the
merger agreement, less (y) any repayment by Exxon as described in the preceding
paragraph; (2) the net cash amounts received by Exxon pursuant to the sale of
option shares (or of any other securities into or for which such option shares
are converted or exchanged), less Exxon's purchase price for such option shares
(or other securities), plus (3) the aggregate amount received by Exxon pursuant
to exercise of the cash election described under "--Cash Election" above.
The stock option agreement also provides that, notwithstanding any other
provision of the agreement, the option may not be exercised for a number of
option shares that would, as of the date of exercise, result in a Notional Total
Profit (as described below) exceeding $2 billion. For purposes of the stock
option agreement, the "Notional Total Profit" with respect to the option shares
for which Exxon may propose to exercise the option means the Total Profit
determined as of the date Exxon notifies Mobil of its intent to exercise the
option and assuming that the applicable option shares, together with all other
option shares previously acquired upon exercise of the option and held by Exxon
or its affiliates as of such date, were sold for cash at the NYSE closing price
on the preceding trading day.
Effect of Option. The option is intended to make it more likely that the
merger will be completed on the agreed terms and to compensate Exxon for its
efforts and costs in case the merger is not completed under circumstances
generally involving a third party proposal for a business combination with
Mobil. Among other effects, the option could prevent an alternative business
combination with Mobil from being accounted for as a "pooling of interests". The
option may therefore discourage proposals for alternative business combinations
with Mobil, even if a third party were prepared to offer Mobil shareholders
consideration with a higher market value than the value of the Exxon Mobil stock
to be exchanged for Mobil stock in the merger.
I-62
<PAGE>
CHAPTER TWO
INFORMATION ABOUT THE MEETINGS AND VOTING
Exxon's Board is using this joint proxy statement/prospectus to solicit
proxies from the holders of Exxon common stock and Exxon Class A preferred stock
for use at the Exxon meeting. Mobil's Board is also using this document to
solicit proxies from the holders of Mobil common stock and Mobil ESOP preferred
stock for use at the Mobil meeting. We are first mailing this joint proxy
statement/prospectus and accompanying form of proxy to Exxon and Mobil
shareholders on or about April 9, 1999.
Matters Relating to the Meetings
<TABLE>
Exxon Meeting Mobil Meeting
------------- -------------
<S> <C> <C>
Time and Place: May 27, 1999 May 27, 1999
10:00 a.m., Central Time 10:00 a.m., Central Time
Trinity Conference Center Regency Ballroom
Wyndham Anatole Hotel Fairmont Hotel
2201 Stemmons Freeway 1717 North Akard Street
Dallas, Texas Dallas, Texas
Purpose of 1. the merger, including the related 1. the merger agreement and the merger,
Meeting is to Vote issuance of Exxon Mobil common stock, as described under "The Merger
on the Following described under "The Merger Transaction--General" on page I-14;
Items Transaction--General" on page I-14;*
2. the election of directors to the Mobil
2. the amendments to the Exxon charter Board, as described under "Chapter
described under "Chapter Five--Other Mobil Annual Meeting
Three--Description of Exxon Capital Proposals" beginning on page V-1;
Stock--Amendment of Exxon Charter"
beginning on page III-10;* 3. the ratification of the appointment of
Mobil's independent auditors, as
3. the election of directors to the Exxon described under "Chapter Five--Other
Board, as described under "Chapter Mobil Annual Meeting Proposals" on
Four--Other Exxon Annual Meeting page V-4;
Proposals" beginning on page IV-1;
4. two Mobil shareholder proposals, as
4. the ratification of the appointment of described under "Chapter Five--Other
Exxon's independent accountants, as Mobil Annual Meeting Proposals"
described under "Chapter Four--Other beginning on page V-5; and
Exxon Annual Meeting Proposals"
beginning on page IV-19; 5. such other matters as may properly
come before the Mobil meeting,
5. four Exxon shareholder proposals, as including the approval of any
described under "Chapter Four--Other adjournment of the meeting.
Exxon Annual Meeting Proposals"
beginning on page IV-19; and
6. such other matters as may properly come
before the Exxon meeting, including the
approval of any adjournment of the meeting.
</TABLE>
-------------------
* The merger will not be completed and the Exxon
charter amendments will not be effected unless
each is approved by Exxon shareholders.
II-1
<PAGE>
Chapter Two - Information about the Meetings and Voting
<TABLE>
Exxon Meeting Mobil Meeting
------------- -------------
<S> <C> <C>
Record Date: The record date for shares entitled to vote is The record date for shares entitled to vote is
March 29, 1999. March 29, 1999.
Outstanding As of March 1, 1999, there were As of March 1, 1999, there were
Shares Held on 2,427,925,038 shares of Exxon common stock 781,227,938 shares of Mobil common stock
Record Date: and 1,593,644 shares of Exxon Class A and 163,383 shares of Mobil ESOP
preferred stock outstanding. All Exxon Class preferred stock outstanding. All Mobil
A preferred stock is held of record by the ESOP preferred stock is held of record by
trustee under Exxon's Thrift Plan (the "Exxon the trustee under Appendix A to the
ESOP"). Employees Savings Plan of Mobil Oil
Corporation (the "Mobil ESOP").
Shares Entitled to Shares entitled to vote are Exxon common Shares entitled to vote are Mobil common
Vote: stock and Exxon Class A preferred stock held stock and Mobil ESOP preferred stock held
at the close of business on the record date, at the close of business on the record date,
March 29, 1999. March 29, 1999.
Each share of Exxon common stock that you Each share of Mobil common stock that you
own entitles you to one vote. The Exxon Class own entitles you to one vote. The Mobil
A preferred stock is entitled to vote on all ESOP preferred stock is entitled to vote on
matters submitted to a vote of holders of all matters submitted to a vote of holders of
common stock, voting with the common stock common stock, voting with the common
as a single class. stock as a single class.
Each share of Exxon Class A preferred stock is Each share of Mobil ESOP preferred stock is
entitled to the number of votes equal to the entitled to the number of votes equal to the
number of shares of common stock into which number of shares of common stock into
the share of Class A preferred stock could be which the share of ESOP preferred stock
converted on the record date. Each share could be converted on the record date. Each
currently has two votes, subject to adjustment share currently has 100 votes, subject to
if certain dilutive events occur before the adjustment if certain dilutive events occur
record date. before the record date.
Each participant in the Exxon ESOP instructs Each participant in the Mobil ESOP
the trustee of the ESOP how to vote his or instructs the trustee of the ESOP how to
shares. As to unallocated shares and shares vote his or her shares. As to unallocated
with respect to which the trustee receives no shares and shares with respect to which the
timely voting instructions, the trustee, trustee receives no timely voting
pursuant to the ESOP Trust Agreement, votes instructions, the trustee, pursuant to the
these shares in the same proportion as it votes ESOP Trust Agreement, votes these shares
all the shares as to which it has received in the same proportion as it votes all the
timely voting instructions. shares allocated to the accounts of regular
Mobil employees as to which it has received
timely voting instructions.
Shares held by Exxon in its treasury are not Shares held by Mobil in its treasury are not
voted. voted. This does not include shares held in
its rabbi trust, which are treated in a manner
similar to treasury shares for accounting
purposes only.
</TABLE>
II-2
<PAGE>
Chapter Two - Information about the Meetings and Voting
<TABLE>
Exxon Meeting Mobil Meeting
<S> <C> <C>
Quorum A quorum of shareholders is necessary to hold A quorum of shareholders is necessary to
Requirement: a valid meeting. hold a valid meeting.
The presence in person or by proxy at the The presence in person or by proxy at the
meeting of holders of shares representing a meeting of holders of shares representing at
majority of the votes of the Exxon common least one-third of the votes of the Mobil
stock and Class A preferred stock entitled to common stock and ESOP preferred stock
vote at the Meeting is a quorum. Abstentions entitled to vote at the meeting is a quorum.
and broker "non-votes" count as present for Abstentions and broker "non-votes" count as
establishing a quorum. Shares held by Exxon present for establishing a quorum. Shares
in its treasury do not count toward a quorum. held by Mobil in its treasury do not count
toward a quorum, except for shares held in
its rabbi trust, which are treated in a manner
similar to treasury shares for accounting
purposes only.
A broker non-vote occurs on an item when a A broker non-vote occurs on an item when a
broker is not permitted to vote on that item broker is not permitted to vote on that item
without instruction from the beneficial owner without instruction from the beneficial
of the shares and no instruction is given. owner of the shares and no instruction is
given.
Shares 10,547,225 shares of Exxon common stock, 722,979 shares of Mobil common stock,
Beneficially including exercisable options. These shares including exercisable options and 74.49
Owned by Exxon represent in total approximately 0.43% of the shares of Mobil ESOP preferred stock.
and Mobil voting power of Exxon's voting securities, These shares represent in total
Directors and voting together as a single class. approximately .09% of the voting power of
Executive Officers Mobil's voting securities, voting together as
as of These individuals have indicated that they will a single class.
March 1, 1999: vote in favor of the merger and the other
proposals recommended by the Exxon Board, These individuals have indicated that they
and against the shareholder proposals to be will vote in favor of the merger and the
presented at the Exxon meeting. other proposals recommended by the Mobil Board
and against the shareholder proposals,
except one director as to the merger.
</TABLE>
II-3
<PAGE>
Chapter Two - Information about the Meetings and Voting
Vote Necessary to Approve Exxon and Mobil Proposals
<TABLE>
Item Vote Necessary*
<S> <C>
I. Merger Proposals Exxon: Approval of the merger and related
matters described on page I-14
requires a majority of the votes
cast by holders of the Exxon
common stock and Exxon Class A
preferred stock, voting as a
single class. Abstentions have
no effect on the vote.
Mobil: Approval of the merger and the
merger agreement requires the
affirmative vote of a majority
of the votes of the outstanding
shares of Mobil common stock and
Mobil ESOP preferred stock,
voting as a single class.
Withheld votes and abstentions
have the same effect as a vote
against.
II. Election of Directors Exxon: Directors are elected by a
plurality of the votes represented
by the shares of Exxon common
stock and Exxon Class A preferred
stock present at the meeting in
person or by proxy, voting as a
single class.
This means that the director
nominees with the most affirmative
votes are elected to fill the
available seats. Only the number
of votes "FOR" affect the outcome.
Withheld votes and abstentions
have no effect on the vote.
Mobil: Election of the director nominees
requires the affirmative vote of a
majority of the votes of the
shares of Mobil common stock and
Mobil ESOP preferred stock, voting
as a single class, present or
represented at the meeting.
Withheld votes and abstentions
have the same effect as a vote
against.
III. Ratification of Appointment of Exxon: Same as for Exxon Merger Proposals.
Independent
Accountants/Auditors Mobil: Same as for election of Mobil directors.
IV. Shareholder Proposals Exxon: Same as for Exxon Merger Proposals.
Mobil: Same as for election of Mobil directors.
</TABLE>
- -------------------
* Under New York Stock Exchange rules, if your broker holds your shares in
its name, your broker is permitted to vote your shares on Items II and III
even if it does not receive voting instructions from you. Your broker may
not vote your shares on Items I or IV absent instructions from you. Without
your voting instructions, a broker non-vote will occur on Items I and IV
and will as to Items I and IV (1) have no effect on the vote in the case of
Exxon and (2) have the effect of a vote against in the case of Mobil.
II-4
<PAGE>
Chapter Two - Information about the Meetings and Voting
Proxies
Voting Your Proxy. You may vote in person at your meeting or by proxy.
We recommend you vote by proxy even if you plan to attend your meeting. You can
always change your vote at the meeting.
Voting instructions are included on your proxy card. If you properly give
your proxy and submit it to us in time to vote, one of the individuals named as
your proxy will vote your shares as you have directed. You may vote for all,
some or none of your company's director candidates. You may also vote for or
against the other proposals or abstain from voting.
How to Vote by Proxy
<TABLE>
Exxon Mobil
----- -----
<S> <C> <C>
By Telephone*: Call toll-free 1-877-779-8683 and follow Call toll-free 1-800-840-1208 and follow
the instructions. You will need to give the the instructions. You will need to give the
personal identification number contained personal identification number contained
on your proxy card. on your proxy card.
By Internet*: Go to www.eproxyvote.com/xon and Go to www.mobil.com and follow the
follow the instructions. You will need to instructions. You will need to give the
give the personal identification number personal identification number contained
contained on your proxy card. on your proxy card.
In Writing: Complete, sign, date and return your Complete, sign, date and return your
proxy card in the enclosed envelope. proxy card in the enclosed envelope.
</TABLE>
- -------------------
* If you hold shares through a broker or other custodian, please check the
voting form used by that firm to see if it offers telephone or internet
voting.
Proxies for Participants in Exxon Plans. You may receive more than one
proxy or voting card depending on how you hold your shares. Shares registered in
your name and shares held in your Shareholder Investment Program (SIP) account
are covered by one card. Exxon employees receive a separate card for any shares
they hold in Exxon's Thrift Plan.
Proxies for Participants in Mobil Plans. If you are a participant in
Mobil's Stock Purchase and Dividend Reinvestment Plan, Employees Savings Plan
and/or Employee Stock Ownership Plan, you will receive a single proxy card which
covers shares credited to your plan accounts plus shares held of record in the
same name. If your account in any such plan is not carried in the same name as
the shares, if any, you hold of record, you will receive separate proxy cards
for your individual and plan holdings. If you are a participant in Mobil's
Employees Savings Plan and you do not vote the shares credited to your plan
account, such shares will be voted by the plan's trustee FOR approval and
adoption of the merger agreement, FOR the election of the nominees for director,
FOR the ratification of the appointment of Mobil's independent auditors and
AGAINST the three proposals submitted by shareholders of Mobil. If you are a
participant in Mobil's Employee Stock Ownership Plan and you do not vote the
shares credited to your plan account, such shares will be voted by the plan's
trustee in the same proportion that the trustee votes all the shares allocated
to the accounts of regular Mobil employees as to which it has received timely
voting instructions.
II-5
<PAGE>
Chapter Two - Information about the Meetings and Voting
If you submit your proxy but do not make specific choices, your proxy will
follow the Board's recommendations and vote your shares:
<TABLE>
Exxon Mobil
..................................................................................................
<S> <C> <C> <C>
o "FOR" the Exxon Merger Proposals o "FOR" the Mobil merger proposal
o "FOR" the election of all 13 nominees for o "FOR" the election of all four nominees
director (as described beginning on page for director, such persons to serve until
IV-1) the 2002 annual meeting of shareholders
(as described beginning on page V-1)*
o "FOR" the ratification of the appointment o "FOR" the ratification of the
of PricewaterhouseCoopers LLP as appointment of Ernst & Young LLP as
Exxon's independent accountants for Mobil's independent auditors for 1999
1999 (as described on page IV-19) (as described on page V-4)*
o "AGAINST" the four shareholder o "AGAINST" the two shareholder
proposals to be presented (as described proposals to be presented (as described
beginning on page IV-19) beginning on page V-5)*
o "FOR" any proposal by the Exxon Board o "FOR" any proposal by the Mobil Board
to adjourn the Exxon meeting to adjourn the Mobil meeting
o In its discretion as to any other business o In its discretion as to any other business
as may properly come before the Exxon as may properly come before the Mobil meeting
meeting
-------------------
* The indicated proposals, if
approved, will be superseded
upon completion of the merger.
</TABLE>
Revoking Your Proxy. You may revoke your proxy before it is voted by:
o submitting a new proxy with a later date, including a proxy given by
telephone or internet,
o notifying your company's Secretary in writing before the meeting
that you have revoked your proxy, or
o voting in person at the meeting.
Voting in person. If you plan to attend a meeting and wish to vote in
person, we will give you a ballot at the meeting. However, if your shares are
held in the name of your broker, bank or other nominee, you must bring an
account statement or letter from the nominee indicating that you are the
beneficial owner of the shares on March 29, 1999, the record date for voting.
People with disabilities. We can provide reasonable assistance to help you
participate in the meeting if you tell us about your disability and your plan to
attend. Please call or write the Secretary of your company at least two weeks
before your meeting at the number or address under "The Companies" on page I-2.
Confidential voting. Independent inspectors count the votes. Your
individual vote is kept confidential from us unless special circumstances exist.
For example, a copy of your proxy card will be sent to us if you write comments
on the card.
Proxy solicitation. We will pay our own costs of soliciting proxies.
In addition to this mailing, Exxon and Mobil employees may solicit proxies
personally, electronically or by telephone. Exxon is paying D. F. King & Co. a
fee of $25,000 plus expenses to help with the solicitation. Mobil is paying
Morrow & Co., Inc. a fee of $25,000 plus expenses to help with the solicitation.
II-6
<PAGE>
Chapter Two - Information about the Meetings and Voting
The extent to which these proxy soliciting efforts will be necessary
depends entirely upon how promptly proxies are submitted. You should send in
your proxy by mail, telephone or internet without delay. We also reimburse
brokers and other nominees for their expenses in sending these materials to you
and getting your voting instructions.
Do not send in any stock certificates with your proxy cards. The exchange
agent will mail transmittal forms with instructions for the surrender of stock
certificates for Mobil common stock and Mobil ESOP preferred stock to former
Mobil shareholders as soon as practicable after the completion of the merger.
Other Business; Adjournments
We are not currently aware of any other business to be acted upon at either
meeting. Under the laws of New Jersey, where Exxon is incorporated, no business
other than procedural matters may be raised at the Exxon meeting unless proper
notice to the shareholders has been given. If, however, other matters are
properly brought before either meeting, or any adjourned meeting, your proxies
will have discretion to vote or act on those matters according to their best
judgment, including to adjourn the meeting.
Adjournments may be made for the purpose of, among other things, soliciting
additional proxies. Any adjournment may be made from time to time by approval of
the holders of shares representing a majority of the votes present in person or
by proxy at the meeting, whether or not a quorum exists, without further notice
other than by an announcement made at the meeting. Neither of us currently
intends to seek an adjournment of our meeting.
II-7
<PAGE>
CHAPTER THREE
CERTAIN LEGAL INFORMATION
COMPARISON OF SHAREHOLDER RIGHTS
The rights of Mobil shareholders under Delaware law, the Mobil
charter and the Mobil by-laws prior to the merger are substantially the same
as the rights Exxon Mobil shareholders will have following the merger under
New Jersey law, the Exxon Mobil charter and the Exxon Mobil by-laws, with
certain principal exceptions summarized in the chart below. Copies of the
Mobil charter, the Mobil by-laws, the Exxon charter and the Exxon by-laws are
incorporated by reference and will be sent to holders of shares of Mobil
common stock and Mobil ESOP preferred stock upon request. See "Where You Can
Find More Information" on page VI-1. The summary contained in the following
chart is not intended to be complete and is qualified by reference to Delaware
law, New Jersey law, the Mobil charter, the Mobil by-laws, the Exxon charter
and the Exxon by-laws.
Summary of Material Differences Between Current Rights of Mobil Shareholders
and Rights Those Shareholders Will Have as Exxon Mobil Shareholders
Following the Merger
<TABLE>
<CAPTION>
Exxon Mobil
Mobil Shareholder Rights Shareholder Rights
<S> <C> <C>
Corporate The rights of Mobil shareholders are The rights of Exxon shareholders are
Governance: currently governed by Delaware law and the currently governed by New Jersey law and
charter and by-laws of Mobil. the charter and by-laws of Exxon.
Upon completion of the merger, the rights of Upon completion of the merger, the rights
Mobil shareholders who become Exxon of Exxon Mobil shareholders will be
Mobil shareholders in the merger will be governed by New Jersey law, the Exxon
governed by New Jersey law, the Exxon Mobil charter and the Exxon Mobil by-
Mobil charter and the Exxon Mobil by-laws. laws. The charter and by-laws of Exxon
The charter and by-laws of Exxon Mobil will Mobil will be identical in all respects to
be identical in all respects to those of Exxon those of Exxon after giving effect to the
after giving effect to the Exxon charter Exxon charter amendments adopted at the
amendments adopted at the Exxon meeting Exxon meeting and the changes
and the changes contemplated by the merger contemplated by the merger agreement.
agreement.
Authorized The authorized capital stock of Mobil The authorized capital stock of Exxon is
Capital Stock: consists of 1.2 billion shares of common set forth under "Description of Exxon
stock and 30 million shares of preferred Capital Stock--Authorized Capital Stock"
stock. below.
Number of Mobil's by-laws provide that the number of Exxon's charter provides that the number
Directors: directors will be as determined by the Mobil of directors may be determined by the
Board but shall not be less than three. The Exxon Board. Exxon's by-laws provide
Mobil Board currently consists of 13 that Exxon's Board consist of not less than
directors. 10 and not more than 15 directors.
Exxon's Board currently consists of 13
directors.
If the merger is completed, the Exxon
Mobil by-laws will be amended to provide
that the number of directors will be not less
than 10 nor more than 19, as determined by
III-1
<PAGE>
Chapter Three - Certain Legal Information
Exxon Mobil
Mobil Shareholder Rights Shareholder Rights
Number of the Exxon Mobil Board, and the size of the
Directors Exxon Mobil Board will be increased from
(continued): 13 to 19.
Classification of Mobil's Board is divided into three classes as Exxon does not have a classified board.
Board of nearly equal in number as possible, with each The Exxon by-laws require that all
Directors: class serving a staggered three-year term. directors be elected at each annual meeting
of shareholders for a term of one year.
Removal of Delaware law provides that a company with a New Jersey law allows removal for cause
Directors: classified board may remove a director only or, unless otherwise provided in the
for cause, unless its charter provides charter, without cause by the affirmative
otherwise. The Mobil charter and the Mobil vote of the majority of shareholders
by-laws provide that Mobil directors may be entitled to vote in the election of directors.
removed from office without cause only by In addition, the Exxon charter allows the
the affirmative vote of the holders of 80% of removal of an Exxon director for cause by
the voting power of the then outstanding a majority of the Exxon directors in office
shares entitled to vote generally in the if, in the judgment of such majority, the
election of directors, voting as a single class. director's continuation in office would be
harmful to the corporation. The Exxon
Board may suspend a director pending a
final determination that cause for removal
exists.
Quorum: The Mobil by-laws provide that the presence The Exxon by-laws provide that the
in person or by proxy at a meeting of the presence in person or by proxy at a meeting
holders of shares representing at least one- of the holders of shares representing a
third of the votes of the Mobil common stock majority of the votes of the Exxon common
and ESOP preferred stock entitled to vote at stock and ESOP preferred stock entitled to
the meeting is a quorum. vote at the meeting is a quorum.
Vote Required for The Mobil by-laws provide that, unless New Jersey law requires that shareholder
Certain otherwise required by law, the Mobil charter action, including for approval of a merger
Shareholder or the Mobil by-laws, the affirmative vote of or consolidation but not for the election of
Actions; Effect of a majority of the votes of the shares present directors, be taken by the affirmative vote
Abstentions: or represented at the meeting and entitled to of a majority of the votes cast by
vote on such matter shall be deemed the act shareholders entitled to vote thereon,
of the shareholders. unless the charter provides for a greater
approval requirement. Exxon's charter
Under Delaware law, the approval of any does not provide otherwise. Abstentions
merger or consolidation or a sale of all or have no effect on the vote.
substantially all of a corporation's assets
requires the affirmative vote of a majority of
the total votes represented by the outstanding
stock of the corporation entitled to vote on
such matter.
Abstentions have the effect of a vote against.
III-2
<PAGE>
Chapter Three - Certain Legal Information
Exxon Mobil
Mobil Shareholder Rights Shareholder Rights
Shareholder Under Delaware law, unless otherwise Except as otherwise provided by a
Action by Written provided in a corporation's charter, corporation's charter, New Jersey law
Consent: shareholders may act by written consent. permits shareholder approval to be
However, the Mobil charter and the Mobil obtained by written consent without a
by-laws provide that any action required or meeting except for the annual election of
permitted to be taken by the shareholders directors which may be by written consent
must be effected at a duly called annual or only if unanimous. The required written
special meeting of shareholders and not by consent is that of shareholders representing
written consent. a majority of the voting power of the
outstanding common stock and ESOP
preferred stock, voting as a single class.
Exxon's charter does not otherwise
provide.
Amendment of Generally, the Mobil by-laws may be Exxon's charter may be amended by the
Charter and amended by shares representing a majority of affirmative vote of the majority of the votes
By-laws: votes present in person or by proxy and cast by the holders of Exxon shares entitled
entitled to vote at the meeting. A majority of to vote thereon.
the Mobil Board may also amend the by-laws
or enact new by-laws. The affirmative vote of a majority of
Exxon's Board is necessary to make or
However, the Mobil charter provides that the amend Exxon's by-laws and the affirmative
amendment of certain specified by-laws (and vote of a majority of the votes cast by
provisions of its charter) requires the Exxon's shareholders entitled to vote
affirmative vote of at least 80% of the voting thereon is necessary to alter or repeal by-
power of Mobil's outstanding voting stock. laws made by the Exxon Board or to enact
These include by-law and charter provisions new by-laws.
relating to * shareholder action, * business
combinations, * by-law and charter
amendments, * the number and election of
directors and * procedures for annual meeting
proposals.
Under Delaware law, the Mobil charter may
be amended by the affirmative vote of a
majority of the outstanding stock entitled to
vote thereon at the shareholders meeting and
a majority of the outstanding stock of each
class entitled to vote thereon as a class.
Voting Stock: The outstanding voting securities of Mobil The outstanding voting securities of Exxon
are the shares of Mobil common stock and are the shares of Exxon common stock and
the shares of Mobil ESOP preferred stock. the shares of Exxon Class A preferred
stock. After completion of the merger,
Exxon Mobil ESOP preferred stock will
also be voting securities of Exxon Mobil.
III-3
<PAGE>
Chapter Three - Certain Legal Information
Exxon Mobil
Mobil Shareholder Rights Shareholder Rights
Repurchase of Under Delaware law, a corporation may Under New Jersey law, a corporation may
Shares: generally redeem or repurchase shares of its generally acquire its own shares subject to
stock unless the capital of the corporation is restrictions imposed by its charter. The
impaired or such redemption or repurchase Exxon charter does not impose any such
would impair the capital of the corporation. restrictions.
Exculpation of The Mobil charter provides that no director The Exxon charter limits the liability of the
Directors and shall be personally liable to the corporation or directors and officers of Exxon to the
Officers: any of its shareholders for monetary damages fullest extent permitted by law. New
for breaches of fiduciary duty except as Jersey law prohibits exculpation
follows.
o for a breach of such person's duty of
A director would be liable under Section 174 loyalty to the corporation or its
of the Delaware General Corporation Law, shareholders,
which creates liability for unlawful payment
of dividends and unlawful stock purchases or o for acts or omissions not in good
redemptions. faith or that involve intentional
misconduct or a knowing violation of
A director would also be liable under any law, or
other applicable provision of law by reason
that such director o for any act or omission from which
the director derived an improper
o breached the director's duty of loyalty personal benefit.
to the corporation or its shareholders,
o acted in bad faith, failed to act in good
faith or acted in a manner that involved
intentional misconduct or a knowing
violation of law, or
o derived an improper personal benefit.
The Mobil charter does not contain
provisions limiting the liability of officers in
this manner.
Shareholder Mobil has entered into a Rights Agreement, Exxon does not have a shareholder rights
Rights Plan: dated as of December 15, 1995, between plan. While Exxon has no present
Mobil and Mellon Bank, N.A., as Rights intention to adopt a shareholder rights plan,
Agent, as amended, pursuant to which Mobil the Exxon Board, pursuant to its authority
has issued rights to purchase its Series A to issue preferred stock, could do so
Junior Participating Preferred Stock. Mobil without shareholder approval at any future
has taken all action necessary to render the time. See "Description of Exxon Capital
rights issued pursuant to the terms of the Stock--Exxon Preferred Stock--Blank
Rights Agreement inapplicable to the merger Check Preferred Stock" on page III-8.
and the related agreements and transactions.
III-4
<PAGE>
Chapter Three - Certain Legal Information
Exxon Mobil
Mobil Shareholder Rights Shareholder Rights
Appraisal Rights: Under Delaware law, the rights of dissenting Under New Jersey law, appraisal rights are
shareholders to obtain the fair value for their available in connection with a merger or
shares (so-called "appraisal rights") may be consolidation or any sale, lease or
available in connection with a statutory exchange or other disposition of all or
merger or consolidation in certain specific substantially all of a corporation's assets
situations. Appraisal rights are not available other than in the usual and regular course
to a corporation's shareholders under of business, unless an exception applies or
Delaware law when the corporation is to be the corporation's charter provides
the surviving corporation and no vote of its otherwise. Exxon's charter does not
shareholders is required to approve the provide otherwise.
merger.
Appraisal rights are not available under
In addition, unless otherwise provided in the New Jersey law to shareholders of a
charter, no appraisal rights are available surviving corporation with respect to a
under Delaware law to holders of shares of merger if the merger did not require
any class of stock which is either * listed on shareholder approval.
a national securities exchange or designated as
a national market system security on an In addition, unless provided for in the
interdealer quotation system by the NASD or corporation's charter, no appraisal rights
* held of record by more than 2,000 are available in a merger or consolidation
shareholders, unless such shareholders are with respect to shares
required by the terms of the merger to accept
anything other than: o which are listed on a national
securities exchange or are held of
o shares of stock of the surviving record by at least 1,000 holders or
corporation;
o for which, pursuant to the merger or
o shares of stock of another corporation consolidation, the shareholder will
which, as of the effective date of the receive * cash, * shares, obligations
merger or consolidation, are of the kind or other securities of the kind
described in the two *s above; described in the previous bullet or
* cash and such securities.
o cash instead of fractional shares of such
stock; or Furthermore, unless provided in the
corporation's charter, no appraisal rights
o any combination of the above three are available in a sale, lease, exchange or
bullets. other disposition of all or substantially all
of a corporation's assets
Appraisal rights are not available under
Delaware law in the event of the sale of all or o with respect to shares which are
substantially all of a corporation's assets or listed on a national securities
the adoption of an amendment to its charter, exchange or are held of record by at
unless such rights are granted in the least 1,000 holders, or
corporation's charter. The Mobil charter
does not grant such rights. o from a dissolution transaction in
which substantially all of a
corporation's net assets are to be
distributed to its shareholders within
one year after the date of the
transaction, so long as the transaction
III-5
<PAGE>
Chapter Three - Certain Legal Information
Exxon Mobil
Mobil Shareholder Rights Shareholder Rights
Appraisal Rights is wholly for * cash, * shares,
(continued): obligations or other securities which
will be listed on a national securities
exchange or held of record by not
less than 1,000 holders or * cash and
such securities.
Certain Business Section 203 of the Delaware General New Jersey law restricts the ability of
Combinations: Corporation Law provides that, if a person certain persons to acquire control of a New
acquires 15% or more of the stock of a Jersey corporation.
Delaware corporation without the approval of
the board of directors of that corporation, In general, a New Jersey corporation with
thereby becoming an "interested its principal executive offices or significant
shareholder", that person may not engage in operations in New Jersey may not engage
certain transactions with the corporation for a in a "business combination" with an
period of three years unless one of the "interested shareholder" for a period of
following three exceptions applies: five years following the interested
shareholder's becoming such. The
o the board of directors approved the business combination is permitted where it
acquisition of stock or the transaction is approved by the Board of Directors prior
prior to the time that the person became to the stock acquisition.
an interested shareholder,
Covered business combinations include,
o the person became an interested certain mergers, dispositions of assets or
shareholder and 85% owner of the shares and recapitalizations. An interested
voting stock of the corporation in the shareholder is generally a shareholder
transaction, excluding voting stock owning at least 10% of the voting power of
owned by directors who are also a corporation's outstanding shares.
officers and certain employee stock
plans, or In addition, New Jersey corporations may
not engage at any time in a business
o the transaction is approved by the board combination with any interested
of directors and by the affirmative vote shareholder other than:
of two-thirds of the outstanding voting
stock which is not owned by the o a business combination approved by
interested shareholder. the Board of Directors of such
corporation prior to the stock
A Delaware corporation may elect not to be acquisition,
governed by Section 203. Mobil has not so
elected and the Mobil Board has taken the o a business combination approved by
necessary action to make Section 203 the affirmative vote of the holders of
inapplicable to the merger and the related two-thirds of the voting stock not
transactions (including the option). beneficially owned by such interested
shareholder at a meeting for such
The Mobil charter provides that any Business purpose, or
Combination with an interested shareholder
of Mobil requires, in addition to any vote o a business combination in which the
required by law, the affirmative approval of interested shareholder pays a formula
at least 80% of the voting power of the price designed to ensure that all other
III-6
<PAGE>
Chapter Three - Certain Legal Information
Exxon Mobil
Mobil Shareholder Rights Shareholder Rights
Certain Business outstanding shares of voting stock, voting shareholders receive at least the
Combinations together as a single class, unless either (i) a highest price per share paid by such
(continued): majority of disinterested directors, as defined interested shareholder.
in Mobil's charter, have expressly approved
the Business Combination or (ii) certain fair A New Jersey corporation may not opt out
price criteria and disclosure obligations are of the foregoing provisions.
satisfied.
There is no super-majority voting, fair
"Business Combination" is defined in price or similar provision in the Exxon
Mobil's charter, and generally includes a charter.
merger, significant asset sales, significant
stock issuances, and certain other significant
transactions. "Interested shareholder" is also
defined in the Mobil charter and generally
means a 5% shareholder of Mobil.
The Mobil Board has taken the necessary
action to make the foregoing provisions of the
Mobil charter inapplicable to the merger and
the related transactions (including the option).
Annual Meeting Delaware law requires that the written notice New Jersey law requires that the written
Proposals: of an annual meeting of shareholders specify notice of any shareholder meeting specify
the place, date and hour of the meeting. the time, place and purpose or purposes of
Notices of special meetings must also state the meeting. Therefore, business
the purpose or purposes of the meeting. conducted at shareholder meetings is
limited to the business specified in the
meeting notice.
</TABLE>
III-7
<PAGE>
Chapter Three - Certain Legal Information
DESCRIPTION OF EXXON CAPITAL STOCK
The following summary of the current terms of the capital stock
of Exxon and the terms of the capital stock of Exxon Mobil to be in effect
after completion of the merger is not meant to be complete and is qualified by
reference to the Exxon charter and Exxon by-laws. Copies of the Exxon charter
and Exxon by-laws are incorporated by reference and will be sent to holders of
shares of Exxon common stock, Exxon Class A preferred stock, Mobil common
stock and Mobil ESOP preferred stock upon request. See "Where You Can Find
More Information" on page VI-1.
Authorized Capital Stock
Prior to Completion of the Merger. Under the Exxon charter,
Exxon's authorized capital stock consists of three billion shares of Exxon
common stock, without par value, and 200 million shares of preferred stock,
without par value, of which 16.5 million shares are designated as Exxon Class
A preferred stock and 100 million are designated as Exxon Class B preferred
stock, each without par value.
Following Completion of the Merger. If the merger is
completed, the Exxon Mobil charter will be amended to increase the authorized
number of shares of Exxon Mobil common stock to 4.5 billion and to eliminate
the Exxon Class B preferred stock, none of which is outstanding. See
"Amendment of Exxon Charter" beginning on page III-10. In connection with the
merger, the Exxon Board has agreed to create the Exxon Mobil ESOP preferred
stock. The Exxon Mobil ESOP preferred stock will have, to the extent
possible, terms that are identical to those of the Mobil ESOP preferred stock.
Exxon Common Stock
Exxon Common Stock Outstanding. The outstanding shares of
Exxon common stock are, and the shares of Exxon Mobil common stock issued
pursuant to the merger will be, duly authorized, validly issued, fully paid and
nonassessable.
Voting Rights. Each holder of Exxon common stock is entitled
to one vote for each share of Exxon common stock held of record on the
applicable record date on all matters submitted to a vote of shareholders.
See page II-2 for additional information on Exxon voting rights.
Dividend Rights; Rights upon Liquidation. The holders of Exxon
common stock are entitled to receive, from funds legally available for the
payment thereof, dividends when and as declared by resolution of the Exxon
Board, subject to any preferential dividend rights granted to the holders of
any outstanding Exxon preferred stock. In the event of liquidation, each
share of Exxon common stock is entitled to share pro rata in any distribution
of Exxon's assets after payment or providing for the payment of liabilities
and the liquidation preference of any outstanding Exxon preferred stock.
Preemptive Rights. Holders of Exxon common stock have no
preemptive rights to purchase, subscribe for or otherwise acquire any unissued
or treasury shares or other securities.
Exxon Preferred Stock
Exxon Preferred Stock Outstanding. As of March 1, 1999, (1)
1,593,644 shares of Exxon Class A preferred stock were issued and outstanding
and (2) no other shares of preferred stock were issued or outstanding.
As of March 1, 1999, approximately 163,383 shares of Mobil ESOP
preferred stock were issued and outstanding.
Blank Check Preferred Stock. Under the Exxon charter, the
Exxon Board has the authority, without shareholder approval, to create one or
more classes or series within a class of preferred stock, to issue shares of
III-8
<PAGE>
Chapter Three - Certain Legal Information
preferred stock in such class or series up to the maximum number of shares of
the relevant class or series of preferred stock authorized, and to determine
the preferences, rights, privileges and restrictions of any such class or
series, including the dividend rights, voting rights, the rights and terms of
redemption, the rights and terms of conversion, liquidation preferences, the
number of shares constituting any such class or series and the designation of
such class or series. Acting under this authority, the Exxon Board could
create and issue a class or series of preferred stock with rights, privileges
or restrictions, and adopt a shareholder rights plan, having the effect of
discriminating against an existing or prospective holder of securities as a
result of such shareholder beneficially owning or commencing a tender offer
for a substantial amount of Exxon common stock. One of the effects of
authorized but unissued and unreserved shares of capital stock may be to
render more difficult or discourage an attempt by a potential acquiror to
obtain control of Exxon by means of a merger, tender offer, proxy contest or
otherwise, and thereby protect the continuity of Exxon's management. The
issuance of such shares of capital stock may have the effect of delaying,
deferring or preventing a change in control of Exxon without any further
action by the shareholders of Exxon. Exxon has no present intention to adopt
a shareholder rights plan, but could do so without shareholder approval at any
future time.
Voting Rights of Exxon Class A Preferred Stock and Exxon Mobil
ESOP Preferred Stock. Each holder of Exxon Class A preferred stock is
entitled to vote on all matters submitted to a vote of Exxon common stock,
voting together with the Exxon common stock as a single class. Each share of
Exxon Class A preferred stock is entitled to the number of votes equal to the
number of shares of Exxon common stock into which such share of Exxon Class
A preferred stock could be converted on the record date for the applicable
meeting, subject to adjustment in the case of certain dilutive events.
Upon completion of the merger, holders of Exxon Mobil ESOP
preferred stock will be entitled to vote on all matters submitted to a vote of
holders of Exxon Mobil common stock, voting together with the Exxon Mobil
common stock and the Exxon Class A preferred stock, as a single class. Each
share of Exxon Mobil ESOP preferred stock will be entitled to the number of
votes equal to the number of shares of Exxon Mobil common stock into which
such share of Exxon Mobil ESOP preferred stock could be converted on the
record date for the applicable meeting, subject to adjustment in the case of
certain dilutive events.
Dividend Rights and Rights Upon Liquidation of Exxon Class A
Preferred Stock and Exxon Mobil ESOP Preferred Stock. The holders of Exxon
Class A preferred stock are entitled to receive, from funds legally available
for the payment thereof, dividends when and as declared by resolution of the
Exxon Board at a per share rate of $4.68 per annum, subject to adjustment in
the case of certain dilutive events. In the event of liquidation or
dissolution, after payment or providing for the payment of liabilities and the
liquidation preference of any class of stock ranking senior to the Exxon Class
A preferred stock, each share of Exxon Class A preferred stock will be
entitled to receive $61.50 per share of Exxon Class A preferred stock, subject
to adjustment, plus accrued and unpaid dividends.
Upon completion of the merger, holders of Exxon Mobil ESOP
preferred stock will be entitled to dividends and liquidation preference on
terms that, to the extent possible, are identical to the terms of the Mobil
ESOP preferred stock. Holders of Mobil ESOP preferred stock are entitled to
receive, from funds legally available for the payment thereof, dividends when
and as declared by resolution of the Mobil Board at a per share rate of $300
per annum, subject to adjustment in the case of certain dilutive events. In
the event of liquidation or dissolution, after payment or providing for the
payment of liabilities and the liquidation preference of any class of stock
ranking senior to the Mobil ESOP preferred stock, each share of Mobil ESOP
preferred stock is entitled to receive $3,887.50 per share of Mobil ESOP
preferred stock, subject to adjustment, plus accrued and unpaid dividends.
Redemption Rights. Shares of Exxon Class A preferred stock are
redeemable at the option of Exxon at any time for $61.50 plus accrued and
unpaid dividends. Shares of Exxon Mobil ESOP preferred stock will be
redeemable at the option of Exxon Mobil at any time after November 22, 1999 at
the liquidation price plus accrued and unpaid dividends. These shares are
redeemable before November 22, 1999 for 100.775% of the liquidation price plus
accrued and unpaid dividends.
III-9
<PAGE>
Chapter Three - Certain Legal Information
Preemptive Rights. Holders of Exxon Class A preferred stock
have no preemptive rights to purchase, subscribe for or otherwise acquire any
unissued or treasury shares or other securities.
Upon completion of the merger, the holders of Exxon Mobil ESOP
preferred stock will have no preemptive rights to purchase, subscribe for or
otherwise acquire any unissued or treasury shares or other securities.
Amendment of Exxon Charter (Item 2 on Exxon's proxy card)
At the Exxon meeting, holders of Exxon stock will be asked to
approve the amendment of Exxon's Restated Certificate of Incorporation. The
amendment will increase the number of authorized shares of Exxon common stock
to 4.5 billion, change Exxon's name to "Exxon Mobil Corporation" and eliminate
Exxon's Class B preferred stock, none of which is outstanding. Approval by
Exxon shareholders of the merger, including the related issuance of Exxon
Mobil common stock, as described under "The Merger Transaction--General" on
page I-14, is a condition to effecting the Exxon charter amendment, and
approval of the Exxon charter amendment is a condition to completing the
merger.
Increase of Authorized Common Stock. Exxon's charter currently
authorizes three billion shares of common stock and 200 million shares of
preferred stock. On March 1, 1999, 2,427,925,038 shares of Exxon common stock
were issued and outstanding, not counting shares held in Exxon's treasury.
To complete the merger, Exxon expects that approximately 1.03
billion Exxon Mobil shares will be required to be issued to holders of Mobil
common stock and that approximately 67.5 million Exxon Mobil shares will be
required to be reserved for issuance under Mobil employee stock options and
other stock-based awards and for similar purposes.
As these numbers show, the three billion shares of common stock
currently authorized under Exxon's charter will not be sufficient to complete
the merger. We therefore ask Exxon shareholders to approve the amendment,
which will change Article FOURTH of Exxon's charter to increase the number of
authorized shares of Exxon common stock from 3 billion to 4.5 billion.
The increased number of authorized shares will give Exxon
sufficient shares to complete the merger. At present, Exxon has no plans to
issue shares for any other purpose. However, we believe it is desirable to
have additional shares available for other corporate purposes that might arise
in the future. For example, although Exxon currently meets its obligations to
deliver shares under employee stock options and similar arrangements with
treasury shares (meaning previously issued shares that have been reacquired by
Exxon), it may become desirable in the future to use newly issued shares for
this purpose. Shares could also be used for acquisitions or to raise capital.
Under some circumstances, it is also possible for a company to use unissued
shares for antitakeover purposes, but Exxon has no present intention to take
any such action.
Whether or not any future issuance of shares unrelated to the
merger would be submitted for shareholder vote depends upon the nature of the
issuance, legal and stock exchange requirements, and the judgment of Exxon's
Board at the time.
Name change. The merger agreement provides that, when the
merger takes effect, Exxon's name will be changed from "Exxon Corporation" to
"Exxon Mobil Corporation". The proposed amendment implements this change to
Article FIRST of Exxon's charter.
Elimination of Class B Preferred Stock. Exxon's charter
currently authorizes the issuance of 100 million shares of Class B preferred
stock. This class of stock was created in connection with Exxon's ESOP but
has never been issued and is no longer useful. The proposed amendment of
Exxon's charter will eliminate the Class B preferred stock.
III-10
<PAGE>
Chapter Three - Certain Legal Information
Transfer Agent and Registrar
BankBoston, N.A. is the transfer agent and registrar for the
Exxon common stock.
Stock Exchange Listing; Delisting and Deregistration of Mobil Common Stock
It is a condition to the merger that the shares of Exxon Mobil
common stock issuable in the merger be approved for listing on the NYSE at or
prior to the closing, subject to official notice of issuance. If the merger is
completed, Mobil common stock will cease to be listed. The Exxon Mobil ESOP
preferred stock will not be listed on any stock exchange.
LEGAL MATTERS
The validity of the Exxon Mobil common stock to be issued to
Mobil shareholders pursuant to the merger will be passed upon by Charles W.
Matthews, Jr., General Counsel of Exxon. It is a condition to the completion
of the merger that Exxon and Mobil receive opinions from Davis Polk & Wardwell
and Skadden, Arps, Slate, Meagher & Flom LLP, respectively, with respect to
the tax treatment of the merger. See "The Merger Agreement--Conditions to the
Merger" and "The Merger--Material Federal Income Tax Consequences of the
Merger."
EXPERTS
The consolidated financial statements of Exxon incorporated in
this joint proxy statement/prospectus by reference to the Form 10-K for Exxon
for the year ended December 31, 1998 have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
Ernst & Young LLP, independent auditors, have audited Mobil's
consolidated financial statements included in Mobil's Annual Report on Form
10-K for the year ended December 31, 1998 as set forth in their report, which
is incorporated in this joint proxy statement/prospectus by reference.
Mobil's consolidated financial statements are incorporated by reference in
reliance on their report, given on their authority as experts in accounting
and auditing.
III-11
<PAGE>
CHAPTER FOUR
OTHER EXXON ANNUAL MEETING PROPOSALS
BOARD OF DIRECTORS PROPOSAL: ELECTION OF DIRECTORS (Item 3 on Exxon's Proxy
Card)
The Exxon Board has nominated the director candidates named below.
Personal information on each of our nominees is given below. All of our
nominees currently serve as Exxon directors. Each current director was elected
by shareholders at the last annual meeting except for Mr. Esrey, who was
elected by the Board in July 1998.
The Board of Directors performs a number of services for Exxon and its
shareholders including:
o overseeing the management of the company on your behalf,
o reviewing Exxon's long-term strategic plans,
o exercising direct decision-making authority in key areas, such as
declaring dividends,
o choosing the CEO, setting the scope of his authority to manage the
company's business day to day and evaluating his performance, and
o reviewing development and succession plans for Exxon's top executives.
Most Exxon directors -- including nine of our 13 nominees -- are not Exxon
employees. Only nonemployee directors serve on Exxon's Audit, Board
Compensation, and Board Affairs committees. All Exxon directors are elected for
one-year terms. Nonemployee directors may not stand for election after age 70.
Employee directors usually leave the Board when they retire from Exxon.
The Board was saddened by the death on July 8, 1998 of Mr. D. Wayne
Calloway, who served as a director since 1988. His wise counsel will be missed.
The Board met 10 times during 1998. All of Exxon's current directors
attended 100% of Board and committee meetings during the period they were
directors.
If a director nominee becomes unavailable before the election, your proxy
authorizes us to vote for a replacement nominee if the Board names one.
The Board recommends you vote FOR each of the following candidates:
Biographies of our Board Nominees
Michael J. Boskin T. M. Friedman Professor of Economics, and
Senior Fellow, Hoover Institution, Stanford
University. Holds bachelor's, master's, and
Ph.D. degrees in economics. Joined Stanford
University in 1970. Adjunct Scholar, American
Enterprise Institute; Research Associate,
[Graphic Omitted] National Bureau of Economic Research. Director,
[Photograph of AirTouch Communications, Inc.; First Health
Michael J. Boskin] Group Corporation; Oracle Corporation. Chairman,
Congressional Advisory Commission on the
Consumer Price Index 1995-96; Council of
Economic Advisors, 1989-93. Member, Advisory
Committee of the Joint Committee on Taxation of
the U.S. Congress; Panel of Advisors to the
Age 53 Congressional Budget Office. Dr. Boskin is the
Director since 1996 recipient of numerous professional awards.
........................................
IV-1
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Rene Dahan Senior Vice President. Holds a degree in
nautical science. Principal responsibilities
include Exxon's worldwide refining, marketing
and transportation activities; middle east
operations; Exxon Chemical Company; Exxon
Research and Engineering Company; environment
[Graphic Omitted] and safety; medicine and occupational health.
[Photograph of Since joining the Exxon organization in 1963,
Rene Dahan] Mr. Dahan has held a variety of management
positions in domestic and foreign operations,
including President and Chief Executive Officer
of our Benelux affiliate; President, Exxon
Company, International. Elected Senior Vice
President of Exxon in 1995 and Director in 1998.
Member, International Advisory Board of
Age 57 Instituto de Empresa; Board of Directors, Junior
Director since 1998 Achievement International.
........................................
William T. Esrey Chairman and Chief Executive Officer, Sprint
Corporation. Holds bachelor's degree in
economics and master of business administration
degree. Joined Sprint Corporation, then known as
United Telecommunications, Inc., a domestic and
international long distance and local exchange
telecommunications, product distribution, and
[Graphic Omitted] directory publishing company, in 1980. Held a
[Photograph of variety of management positions. Elected chief
William T. Esrey] executive officer in 1985 and chairman in 1990.
Prior to joining Sprint Corporation, Mr. Esrey
held management positions with Dillon, Read and
Company, AT&T, New York Telephone Company, and
Empire City Subway Co., Ltd. Director, Duke
Energy Corporation; Earthlink; Everen Capital
Corporation; General Mills, Inc. Member, The
Age 59 Business Council; The Business Roundtable;
Director since 1998 Trilateral Commission.
........................................
Jess Hay Chairman, Texas Foundation for Higher Education;
HCB Enterprises Inc, a private investment firm.
Holds bachelor of business administration and
law degrees. Prior to his retirement in December
1994, Mr. Hay served for 29 years as Chief
Executive Officer of The Lomas Financial Group,
[Graphic Omitted] a diversified financial services group of
[Photograph companies engaged principally in mortgage
of Jess Hay] banking and real estate lending. Practiced law
in Dallas, Texas prior to joining Lomas in 1965.
Director, The Viad Corporation; SBC
Communications Inc.; Trinity Industries, Inc.
Member of the Board, Greater Dallas Planning
Council; Southwestern Medical Foundation; Texas
Research League; Zale-Lipshy Hospital of Dallas;
World War II Memorial Advisory Board; State Fair
Age 68 of Texas. Member, American, Dallas, and Texas
Director since 1981 Bar Associations.
........................................
IV-2
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
James R. Houghton Chairman of the Board Emeritus, Corning
Incorporated. Holds bachelor of arts and master
of business administration degrees. Joined
Corning Incorporated, a communications, advanced
materials and display products company, in 1962.
[Graphic Omitted] Elected Chairman of the Board and Chief
[Photograph of Executive Officer of Corning Incorporated in
James R. Houghton] 1983. Retired in 1996. Director, Corning
Incorporated; J.P. Morgan & Co. Incorporated;
Metropolitan Life Insurance Company. Trustee,
Corning Museum of Glass; The Metropolitan Museum
of Art; The Pierpont Morgan Library. Member, The
Age 63 Business Council; Council on Foreign Relations;
Director since 1994 Harvard Corporation.
........................................
William R. Howell Chairman Emeritus, J.C. Penney Company, Inc.
Holds bachelor of business administration
degree. Joined J.C. Penney Company, Inc., a
department store and catalog chain, in 1958.
[Graphic Omitted] Elected Chairman of the Board and Chief
[Photograph of Executive Officer in 1983. Retired as Chairman
William R. Howell] of the Board in 1997. Director, Bankers Trust
New York Corporation and Bankers Trust Company;
Central and South West Corporation; Halliburton
Co.; Warner-Lambert Company; The Williams
Age 63 Companies. Chairman, Board of Trustees, Southern
Director since 1982 Methodist University.
........................................
Reatha Clark King President and Executive Director, General Mills
Foundation; Vice President, General Mills, Inc.,
a manufacturer and marketer of consumer food
products. Holds bachelor of science degree in
chemistry and mathematics, master of science
degree in chemistry, master of business
administration degree in finance and management,
and Ph.D. degree in thermochemistry. Prior to
joining the General Mills Foundation in 1988,
[Graphic Omitted] Dr. King held a variety of scientific and
[Photograph of educational positions, including Research
Reatha Clark King] Chemist, National Bureau of Standards; Chemistry
Professor, Associate Dean for Division of
Natural Science & Mathematics, and Associate
Dean for Academic Affairs, York College, City
University of New York; President, Metropolitan
State University. Director, H.B. Fuller Company;
Minnesota Mutual Companies, Inc.; Wells Fargo
and Company. Trustee, H.B. Fuller Foundation;
University of Chicago. Dr. King is the recipient
Age 61 of numerous awards, including 13 honorary
Director since 1997 doctorate degrees.
........................................
IV-3
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Philip E. Lippincott Retired Chairman and Chief Executive Officer,
Scott Paper Company. Holds bachelor of arts
degree and master of business administration
degree in food distribution. Joined Scott Paper
Company, a company involved in sanitary paper,
printing and publishing papers, and forestry
operations, in 1959. Held a variety of
[Graphic Omitted] management positions. Elected Chief Executive
[Photograph of Officer in 1982 and Chairman in 1983. Retired in
Philip E. Lippincott] 1994. Director, Campbell Soup Company. Chairman
of the Board and Director, Fox Chase Cancer
Center. Trustee, The Penn Mutual Life Insurance
Company. Board of Overseers, The Huntsman Center
for Competition and Innovation, The Wharton
Age 63 School, University of Pennsylvania. Member, The
Director since 1986 Business Council.
........................................
Harry J. Longwell Senior Vice President. Holds bachelor's degree
in petroleum engineering. Principal
responsibilities include Exxon's oil, gas, coal
and minerals exploration and production
activities; venture operations in the
Commonwealth of Independent States and China;
Exxon Coal and Minerals Company; Exxon
Exploration Company; Exxon Production Research
Company; human resources. Since joining the
Exxon organization in 1963, Mr. Longwell has
held a variety of management positions in
[Graphic Omitted] domestic and foreign operations, including Vice
[Photograph of President-Production and President, Exxon
Harry J. Longwell] Company, U.S.A.; Vice President, Esso Europe
Inc.; Vice President-Exploration and Production,
Senior Vice President-Exploration, Production,
and Gas, and Executive Vice President, Exxon
Company, International. Elected Senior Vice
President and Director of Exxon in 1995.
Director, U.S.-China Business Council; Louisiana
State University Foundation; National Action
Council or Minorities in Engineering; United Way
of Dallas. Member, Board of Visitors, University
of Texas, M.D. Anderson Cancer Center; Advisory
Board, Dallas Area Habitat for Humanity;
Age 57 American Petroleum Institute; Society of
Director since 1995 Petroleum Engineers.
........................................
Marilyn Carlson Nelson Chief Executive Officer, President and Chief
Operating Officer, Carlson Companies, Inc.;
Co-Chair, Carlson Wagonlit Travel. Holds
bachelor's degree in international economics.
Since joining Carlson Companies, Inc., a travel,
hotel, restaurant and marketing services
company, in 1989, Mrs. Nelson has held a number
[Graphic Omitted] of management positions, including Director,
[Photograph of Senior Vice President and Vice Chair, Carlson
Marilyn Carlson Nelson] Holdings, Inc. Director, Carlson Companies,
Inc.; U.S. West Inc. President-elect, Travel
Industry of America. Member, Center for
International Leadership; Committee of 200;
International Advisory Council; United States
National Tourism Organization; World Travel and
Tourism Council. Mrs. Nelson is the recipient of
Age 59 numerous awards, including three honorary
Director since 1991 doctorate degrees.
........................................
IV-4
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Lee R. Raymond Chairman of the Board and Chief Executive
Officer. Holds bachelor's and Ph.D. degrees in
chemical engineering. Since joining the Exxon
organization in 1963, Mr. Raymond held a variety
of management positions in domestic and foreign
operations, including Exxon Company, U.S.A.;
Creole Petroleum Corporation; Exxon
International Company; Exxon Enterprises; Esso
Inter-America Inc. Elected Senior Vice President
[Graphic Omitted] and Director of Exxon in 1984, President in
[Photograph of 1987, Chairman and Chief Executive Officer in
Lee R. Raymond] 1993, and added title of President in 1996.
Director, J.P. Morgan & Co. Incorporated; Morgan
Guaranty Trust Company of New York; American
Petroleum Institute; United Negro College Fund.
Trustee, Southern Methodist University;
Wisconsin Alumni Research Foundation. Member,
The Business Council; The Business Roundtable;
Council on Foreign Relations; Emergency
Committee for American Trade; National Petroleum
Council; Singapore-U.S. Business Council;
Age 60 Trilateral Commission; University of Wisconsin
Director since 1984 Foundation.
........................................
Walter V. Shipley Chairman of the Board and Chief Executive
Officer, The Chase Manhattan Corporation and The
Chase Manhattan Bank, a banking and finance
company. Holds bachelor of science degree.
Joined Chase Bank in 1956. Held a variety of
management positions. Director, Bell Atlantic
[Graphic Omitted] Corporation; Champion International Corporation;
[Photograph of Federal Reserve Bank of New York; Lincoln Center
Walter V. Shipley] for the Performing Arts, Inc.; New York City
Partnership and Chamber of Commerce; United Way
of Tri-State; United Cerebral Palsy Research and
Educational Foundation, Inc. President and
Director, Goodwill Industries of Greater New
York, Inc. Member, The Bankers Roundtable; The
Business Council; The Business Roundtable;
Age 63 U.S.-Japan Business Council, Inc. Board of
Director since 1998 Trustees, American Museum of Natural History.
........................................
Robert E. Wilhelm Senior Vice President. Holds bachelor of science
and master of business administration degrees.
Principal responsibilities include Exxon
Company, U.S.A.; Imperial Oil Limited;
accounting and financial control; corporate
planning; public affairs; treasurer's. Since
joining the Exxon organization in 1963, Mr.
Wilhelm has held a variety of management
[Graphic Omitted] positions in domestic and foreign operations,
[Photograph of including Vice President-Petroleum Products,
Robert E. Wilhelm] Esso Europe Inc.; President, Esso Inter-America
Inc.; Executive Vice President, Exxon Company,
International. Elected Senior Vice President of
Exxon in 1990 and Director in 1992. Vice
Chairman, Council of the Americas. Board of
Governors, Foreign Policy Association. Member,
Coal Industry Advisory Board of the
International Energy Agency; Council on Foreign
Relations; Massachusetts Institute of Technology
Corporation. Vice President, Circle 10 Council,
Age 58 Boy Scouts of America. Trustee, Greenhill
Director since 1992 School, Dallas, Texas.
........................................
IV-5
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Director Compensation
Exxon employees receive no extra pay for serving as directors.
Nonemployee directors receive a base fee of $40,000 a year; $1,500 per
Board and committee meeting attended; and reimbursement of meeting
expenses. Except for the Executive Committee, nonemployee directors also
receive $3,000 per committee membership and $5,000 per committee
chairmanship. Nonemployee directors may elect to defer all or part of
these fees. Deferred fees are payable after the director leaves the Board
in one to five annual installments. We credit deferred fees with interest
at Citibank's prime rate.
We also pay a portion of director compensation in stock. Each
nonemployee director receives 4,000 shares of restricted stock when first
elected to the Board and, if the director remains in office, an additional
600 restricted shares each following year. While on the Board, the
nonemployee director receives the same cash dividends on restricted shares
as a holder of regular common stock, but the director is not allowed to sell
the shares.
Board Committees
The Board appoints committees to help carry out its duties. In
particular, Board committees work on key issues in greater detail than
would be possible at full Board meetings. Each committee reviews the
results of its meetings with the full Board.
Audit Committee
Mr. Houghton (Chairperson)
Mr. Esrey
Mr. Howell
Dr. King
Mrs. Nelson
The Audit Committee met three times during 1998. The committee is
responsible for accounting and internal control matters. Subject to
shareholder approval, the committee chooses the independent public
accountants to audit Exxon's financial statements. The committee consults
with the independent accountants and reviews their audit and other work.
The committee also consults with Exxon's Controller and General Auditor and
reviews Exxon's internal controls and compliance with policies. In addition
to its regular activities, the committee is available to meet on call of
the independent accountants, Controller, or General Auditor whenever a
special situation arises.
Board Advisory Committee on Contributions
Mr. Hay (Chairperson)
Mr. Esrey
Dr. King
Mr. Lippincott
Mrs. Nelson
Mr. Wilhelm
The Board Advisory Committee on Contributions met two times during 1998.
The committee reviews the level of Exxon's support for education and other
public service programs, including the company's contributions to the Exxon
Education Foundation. The Foundation works to improve the quality of
education in America at all levels, with special emphasis on math and
science.
IV-6
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Board Affairs Committee
Mrs. Nelson (Chairperson)
Mr. Hay
Mr. Howell
Mr. Lippincott
Mr. Shipley
The Board Affairs Committee met two times during 1998. The committee
recommends director candidates; reviews nonemployee director compensation;
and reviews other corporate governance practices. The committee will
consider your suggestions for possible director candidates if you submit
the name and biographical information in writing to Exxon's Secretary at
the address under "The Companies" on page I-2. On request, the Secretary
will also provide a description of the qualifications we look for in
director candidates.
Board Compensation Committee
Mr. Howell (Chairperson)
Dr. Boskin
Mr. Hay
Mr. Shipley
The Board Compensation Committee, which we also call the BCC, met five
times during 1998. The committee oversees compensation for Exxon's senior
executives, including salary, bonus, and incentive awards. The committee
also reviews succession plans for key executive positions. The committee's
report on executive compensation starts on page IV-10.
Finance Committee
Mr. Raymond (Chairperson)
Dr. Boskin
Mr. Esrey
Mr. Houghton
Mr. Shipley
The Finance Committee met two times during 1998. The committee reviews
Exxon's financial policies and strategies, including our capital structure,
and authorizes corporate debt within limits set by the Board.
Public Issues Committee
Mr. Lippincott (Chairperson)
Dr. Boskin
Mr. Dahan
Mr. Houghton
Dr. King
Mr. Longwell
The Public Issues Committee met two times during 1998. The committee
reviews Exxon's policies and practices on relevant public issues, including
their effects on the environment, safety, and health. The committee hears
reports from operating units on environmental and safety activities. The
committee also visits operating sites to observe and comment on current
practices, including spill and hazard prevention.
IV-7
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Executive Committee
Mr. Raymond (Chairperson)
Mr. Hay
Mr. Howell
Mr. Lippincott
Mrs. Nelson
Other directors serve as alternate members on a rotational basis.
The Executive Committee did not meet during 1998. The committee has
broad power to act on behalf of the Board. In practice, the committee only
meets when it is impractical to call a meeting of the full Board.
IV-8
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Director and Executive Officer Stock Ownership
These tables show how much Exxon common stock each executive named in
the Summary Compensation Table on page IV-14 and each nonemployee director
and nominee owned on March 1, 1999. None of these individuals owns more
than 0.14 percent of the outstanding shares.
Shares Covered by
Named Executive Officer Shares Owned Exercisable Options
----------------------- ------------ -------------------
Lee R. Raymond............ 459,747 (1) 2,848,980
Rene Dahan................ 98,311 (2) 710,570
Harry J. Longwell......... 163,230 (3) 1,063,980
Robert E. Wilhelm......... 198,878 (4) 1,176,658
Ray B. Nesbitt............ 113,105 435,344
------------
(1) Includes 1,200 shares held as estate representative
(2) Includes 44,014 shares owned jointly with spouse
(3) Includes 48 shares owned by spouse and 19,852 shares owned jointly
with spouse
(4) Includes 3,070 shares owned jointly with spouse and 8,567 shares in
trust for children.
Nonemployee Director/Nominee Shares Owned*
---------------------------- -------------
Michael J. Boskin.................................. 5,800
W. T. Esrey........................................ 5,120 (1)
Jess Hay........................................... 21,600 (2)
James R. Houghton.................................. 8,800 (3)
William R. Howell.................................. 9,000 (4)
Reatha Clark King.................................. 5,573
Philip E. Lippincott............................... 10,600
Marilyn Carlson Nelson............................. 16,800 (5)
Walter V. Shipley.................................. 5,600
------------
* The nonemployee directors are not granted Exxon stock options.
(1) Includes 520 shares owned jointly with spouse
(2) Includes 12,400 shares in a defined benefit plan
(3) Includes 1,200 shares owned by spouse
(4) Includes 2,700 shares held as constructive trustee for former spouse
(5) Includes 9,000 shares in trust
On March 1, 1999, Exxon's directors and executive officers (23 people)
together owned 1,775,415 shares of Exxon stock and 8,771,810 shares covered
by exercisable options, representing about 0.43 percent of the outstanding
shares.
The trustee of Exxon's Thrift Plan holds and votes all the outstanding
shares of Exxon's Class A preferred stock. See page II-2 for more details.
The trustee is a committee of five Exxon executives, none of whom is a
director or nominee.
IV-9
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Board Compensation Committee Report on Executive Compensation
Overview
Exxon's executive compensation program is designed to motivate, reward,
and retain the management talent our company needs to achieve its business
goals and maintain its leadership. Our program makes a significant portion
of senior executives' potential compensation dependent upon increases in
shareholder value.
Exxon's success depends on retaining and motivating executives who have
developed the skills and expertise required to lead a global organization.
We do this with:
o Competitive base salaries in keeping with a philosophy of career
continuity
o Rewards for exceptional performance and accomplishments
o Incentives to meet short-term and long-term objectives
The nature of the petroleum business requires long-term and
capital-intensive investments. These investments often take years to
generate a return to shareholders. Accordingly, we grant incentive awards
with a view toward long-term corporate performance. These awards may not
fluctuate as much as year-to-year financial results.
Exxon pays for performance based on an individual's level of
responsibility. For this purpose, performance means both individual and
corporate performance. We motivate performance by recognizing the past
year's results and by providing incentives for further improvement in the
future.
Individual performance includes the ability to put Exxon's business
plans into effect and to react to unanticipated events. We base
compensation decisions for all executives, including the Chief Executive
Officer (CEO) and the other executives named in the Summary Compensation
Table on page IV-14 on these criteria.
The three major components of Exxon's compensation program are base
salary, short term incentive awards, and long term incentive awards.
Base Salary
In keeping with the long-term and highly technical nature of Exxon's
business, we take a long-term approach to management development. This
career-oriented philosophy requires a competitive base salary.
Each year, we adjust Exxon's salary structure based on competitive
positioning (comparing Exxon's salary structure with salaries paid by other
companies); Exxon's own business performance; and general economic factors.
Specific weights are not given to these factors, but competitive
positioning is the most important factor. Business and other economic
factors, such as net income and estimates of inflation, are secondary
considerations.
We use a number of surveys to determine Exxon's competitive salary
position. Primarily, we compare our salary structure with the U.S.-based
oil companies in the industry group used for comparing stock performance on
page IV-18. We do not consider salary data from the foreign-based oil
companies in that group. Their executive compensation structures are not
considered comparable.
Exxon's business, and the competition for executives, extend beyond the
oil industry. Therefore, we also compare our salary structure with other
major U.S.-based corporations.
IV-10
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Exxon is larger and more diverse than the other surveyed companies.
Therefore, Exxon targets its salary ranges between the median and high end
of the survey data. Within these ranges, we determine individual executive
salaries based on individual performance, level of responsibility, and
experience. The BCC recommends the CEO's salary to the Board of Directors,
sets the salaries for Exxon's other elected officers, and reviews the
salaries of other senior executives.
Short Term Incentive Awards
Short term incentive awards consist of cash bonuses and Earnings Bonus
Units (EBUs). See page IV-16 for a description of the terms of EBUs. We
grant short term awards to executives to reward their contributions to the
business during the past year. We also grant EBUs as incentives for
strong, mid-term corporate performance. EBUs help stress that decisions
and contributions in any one year affect future years. In 1998,
approximately one half of executive bonuses were in the form of EBUs. The
cumulative earnings required for maximum payout of each EBU granted this
year was the same as that for last year.
Each year, the BCC establishes a ceiling for cash bonuses and EBUs. The
ceiling for 1998 was $60 million. Almost all of that amount was granted in
awards to approximately 1,000 employees. The ceiling is based on Exxon's
business performance, progress towards long-term goals, and competitive
position. No particular formula is used. Some of the measures of
performance considered by the BCC include net income, earnings per share,
return on capital employed, return on equity, and dividends. The BCC does
not give specific weights to these measures. The 1998 ceiling was reduced
from the 1997 ceiling. In reaching this decision, no formula was used.
The BCC considered several factors, including Exxon's financial performance
(which, while strong relative to its major competitors in a difficult
business environment, was still down relative to last year's record level),
its continued strengthening of its worldwide competitive position and its
progress towards long-range strategic goals.
The bonus an executive receives depends on the executive's individual
performance and level of responsibility. Each year, we assess relative
performance based on factors including initiative, business judgment,
technical expertise, and management skills.
Long Term Incentive Awards
Long term incentive awards are intended to develop and retain strong
management through share ownership and incentive awards that recognize
future performance. Stock options were the primary long term incentive
granted to executive officers and over 3,500 other key employees in 1998.
The parameters, guidelines, and administration of the 1998 grants were the
same as those used for the 1997 grants. The BCC believes that a
significant portion of senior executives' compensation should depend on
value created for the shareholders. Options are an excellent way to
accomplish this because they tie the executives' interests directly to the
shareholders' interests. See page IV-15 for a description of the terms of
options.
The number of options granted to executive officers is based on
individual performance and level of responsibility. For this purpose, the
Committee measures performance the same way as described above for short
term awards. Option grants must be sufficient in size to provide a strong
incentive for executives to work for long-term business interests and
become significant owners of the business. The number of options held by
an executive is not a factor in determining subsequent grants. Granting
options on that basis could create an incentive for executives to exercise
options and sell their shares.
The Company does not have required levels for equity holdings by senior
management, but long-term awards are designed to encourage share ownership.
The five officers named in the Summary Compensation Table on page IV-14
have, on average, equity holdings of approximately 14 times salary as of
year-end 1998. In addition, other elected officers have holdings which
exceed typical ownership guidelines used by some companies in industry.
IV-11
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Last year, the BCC granted Career Shares to a limited number of senior
executives. Career Shares are shares of Exxon common stock that normally
may not be sold until after an executive reaches normal retirement age.
The shares may be forfeited if an executive leaves before that time. Given
the size, complexity, and global scope of Exxon's business, it is essential
to retain an experienced senior management team. Career Shares help Exxon
retain key strategic and operating executives for the long term. These
awards also provide an additional incentive for superior long-term
corporate performance. The number of Career Shares granted to senior
executives also reflects the increased responsibility and complexity of
senior positions.
The Committee bases individual Career Share grants on the executive's
personal contribution and level of responsibility. The number of shares
held by an executive is not a factor in determining individual grants since
Career Shares are primarily designed to promote long-term retention.
U.S. Income Tax Limits on Deductibility
U.S. income tax law limits the amount Exxon can deduct for compensation
paid to the CEO and the other four most highly paid executives.
Performance-based compensation that meets IRS requirements is not subject
to this limit. The short term awards and stock option grants described
above are designed to meet these requirements so that Exxon can continue to
deduct the related expenses. Specifically, the shareholders have approved
broad performance measures for short term awards to the top executives.
The shareholders also set limits on short term awards to these executives
(0.2% of operating net income) and on individual option grants (0.2% of
outstanding shares at year-end 1996, adjusted for stock splits). These are
not targets, only maximums established for deductibility purposes. Actual
award levels have been significantly less based on the factors and
judgments described in the preceding sections of this report.
CEO Compensation
Within the framework described above, the BCC determines the CEO's
compensation by judging his individual contributions to Exxon's business,
level of responsibility, and career experience. The BCC does not think
narrow quantitative measures or formulas are sufficient for determining Mr.
Raymond's compensation. The Committee does not give specific weights to
the factors considered, but the primary factor is the CEO's individual
contributions to the business.
The Committee also considers Exxon's size, complexity, and business
results as compared to its competitors in the industry and other major
U.S.-based corporations outside the industry. The BCC believes the
combination of Mr. Raymond's base salary and short-term awards is
appropriate compared to CEOs of Exxon's competitors.
Mr. Raymond's long-term incentive awards reflect his level of
responsibility, his leadership, and the BCC's judgment of his overall
contribution as CEO. In making this determination, the BCC considered the
complex, highly technical, and long-term nature of Exxon's business. The
Career Share award granted to Mr. Raymond recognizes his outstanding
contributions to Exxon's business performance, continued strengthening of
the Corporation's worldwide competitive position, and its progress toward
long-range strategic goals. The restrictions on the award are designed to
retain his leadership for the remainder of his career.
IV-12
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Summary
The BCC is made up of nonemployee directors who do not participate in
any of the compensation plans they administer. The BCC approves or
endorses all the programs that involve compensation paid or awarded to
senior executives.
The BCC is responsible for seeing that Exxon's compensation program
serves the best interest of its shareholders. To help meet this
responsibility, the BCC is guided by an independent analysis of the
competitiveness of Exxon's executive compensation. This analysis is
prepared each year by a leading public accounting firm. The BCC also
considers the results of the salary surveys described above.
In the opinion of the Committee, Exxon has an appropriate and
competitive compensation program. The combination of sound base salary,
competitive short term bonuses, and emphasis on long term incentives
provides a balanced and stable foundation for effective executive
leadership.
William R. Howell, Chairman Jess Hay
Michael J. Boskin Walter V. Shipley
IV-13
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Executive Compensation Tables
These tables show the compensation of Exxon's Chairman and the four
other most highly paid executives. See the Board Compensation Committee
report beginning on page IV-10 for an explanation of our compensation
philosophy.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-------------------------------------- -----------------------------------------
Awards Payouts
------------------------ --------------
Other Annual Restricted All Other
Name and Salary Bonus Compensation Stock Options LTIP Compensation
Principal Position Year ($) ($) ($) Award(s)($)(1) (#) Payouts ($)(2) ($)(3)
- ------------------ ---- --------- --------- ------------ -------------- ------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
L.R. Raymond 1998 1,900,000 1,400,000 55,849 (4) 7,162,500 425,000 1,275,000 114,000
Chairman and 1997 1,750,000 1,500,000 26,472 6,087,500 425,000 850,000 105,000
CEO 1996 1,550,000 1,250,000 19,977 943,125 450,000 525,000 93,000
R. Dahan 1998 860,000 440,000 244,935 (5) 716,250 200,000 382,500 65,686
Senior Vice 1997 780,001 500,000 4,488 608,750 200,000 297,500 60,173
President 1996 685,000 385,000 3,590 330,094 220,000 150,000 53,019
and
Director
H.J. Longwell 1998 860,000 440,000 5,660 716,250 200,000 382,500 65,686
Senior Vice 1997 780,001 500,000 5,725 608,750 200,000 297,500 60,173
President 1996 685,000 385,000 6,129 330,094 220,000 150,000 53,019
and
Director
R.E. Wilhelm 1998 860,000 440,000 14,152 716,250 200,000 408,000 65,664
Senior Vice 1997 807,001 500,000 7,192 608,750 200,000 348,500 62,174
President 1996 745,000 415,000 6,461 330,094 220,000 210,000 57,497
and
Director
R.B. Nesbitt 1998 769,615 (6) 290,000 9,719 -0- -0- 263,500 62,134
Vice President; 1997 648,000 300,000 8,411 -0- 130,000 217,600 55,820
President, 1996 595,000 265,000 10,170 235,781 140,000 132,000 51,366
Exxon
Chemical
Company
---------
(1) Number of restricted shares times the market price of Exxon stock on
the day of grant. As of December 31, 1998, the total number and
value of restricted shares held by these executives were: Mr.
Raymond: 280,000 shares ($20,475,000); Mr. Dahan: 46,000 shares
($3,363,750); Mr. Longwell: 46,000 shares ($3,363,750); Mr.
Wilhelm: 48,000 shares ($3,510,000); and Mr. Nesbitt: 18,000 shares
($1,316,250). The values given do not reflect the fact that the
shares are restricted. The executives receive the same cash
dividends on restricted shares as holders of regular common stock,
but cannot sell the shares during the restricted period. See page
IV-12 for more information on these shares, which we call Career
Shares.
(2) Settlements of Earnings Bonus Units. See page IV-16 for more details.
(3) 1998 values represent matching credits under Exxon's thrift plans
(Mr. Raymond: $114,000; Mr. Dahan: $52,683; Mr. Longwell:
$52,683; Mr. Wilhelm: $52,661; and Mr. Nesbitt: $42,593) and costs
of supplemental life insurance (Mr. Dahan: $13,003; Mr. Longwell:
$13,003; Mr. Wilhelm: $13,003; and Mr. Nesbitt: $19,541).
(4) Represents certain perquisites, including membership fees of $20,860
and tax assistance of $20,624.
(5) Represents certain perquisites, including relocation expenses of
$141,502 and tax assistance of $80,597.
(6) Includes $79,615 representing cash for unused vacation.
</TABLE>
IV-14
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants (1) Appreciation for Option Term (2)
------------------------------------------------------- -----------------------------------
If Stock At If Stock At
$117.89 $187.72
------------- -------------
Number of
Securities % of Total
Underlying Options
Options Granted to Exercise or
Granted Employees in Base Price Expiration 5% 10%
Name (#) Fiscal Year ($/Share) Date ($) ($)
---- ---------- ------------ ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
All Shareholders' Stock N/A N/A N/A N/A 110.5 Billion 280.1 Billion
Appreciation
L. R. Raymond 425,000 3.9% 72.38 11/24/08 19,344,406 49,022,522
R. Dahan 200,000 1.9% 72.38 11/24/08 9,103,250 23,069,422
H. J. Longwell 200,000 1.9% 72.38 11/24/08 9,103,250 23,069,422
R. E. Wilhelm 200,000 1.9% 72.38 11/24/08 9,103,250 23,069,422
R. B. Nesbitt -0- N/A N/A N/A N/A N/A
</TABLE>
-----------
(1) The exercise price of options is the market price of Exxon stock on
the grant date. Options granted to senior executives become
exercisable after one year of continuous employment or on death.
The maximum option term is 10 years after grant or five years
after death, if earlier. Options may be forfeited in cases of
detrimental activity or early termination of employment. We did
not grant any stock appreciation rights to senior executives last
year.
(2) These columns show the gains option holders and all shareholders
could realize if Exxon stock appreciates at a 5% or 10% rate.
These growth rates are arbitrary assumptions specified by the
SEC, not Exxon's predictions.
IV-15
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised, In-The-
Number of Underlying Unexercised Money Options/SARs at FY-
Shares Options/SARs at FY-End (#) End ($)*
Underlying ------------------------------- -------------------------------
Options/SARs Value
Name Exercised Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
L. R. Raymond 204,232 8,719,565 2,848,980 425,000 97,119,946 318,750
R. Dahan 136,696 4,545,765 716,854 200,000 18,966,808 150,000
H. J. Longwell 60,252 2,617,312 1,063,980 200,000 33,990,728 150,000
R. E. Wilhelm 236,572 8,120,526 1,176,658 200,000 38,231,813 150,000
R. B. Nesbitt 174,656 7,298,378 435,344 - 0 - 11,214,113 - 0 -
</TABLE>
- -----------
* The difference between the option exercise price and the market price
of Exxon stock at year-end. The actual gain, if any, an executive
realizes will depend on the market price of Exxon stock at the time
of exercise. "In-the-money" means the market price of the stock is
greater than the exercise price of the option on the date
specified.
Long Term Incentive Plans - Awards in Last Fiscal Year
<TABLE>
Estimated Future
Payouts Under Non-
Stock Price-Based
Plans
-----------------
Number of Shares, Units, or Other Performance or Other Period Until
Name Rights* Maturation or Payout Maximum ($)
- ---- --------------------------------- --------------------------------- -----------------
<S> <C> <C> <C>
L. R. Raymond 301,140 5 years maximum 1,355,130
R. Dahan 98,560 5 years maximum 443,520
H. J. Longwell 98,560 5 years maximum 443,520
R. E. Wilhelm 98,560 5 years maximum 443,520
R. B. Nesbitt 62,650 5 years maximum 281,925
</TABLE>
- -----------
* These are Earnings Bonus Units or EBUs. Each EBU entitles the
executive to receive an amount equal to Exxon's cumulative net
income per common share announced each quarter beginning after the
grant. Payout occurs on the fifth anniversary of grant or when the
maximum settlement value of $4.50 per unit is reached, if earlier.
SEC rules classify EBUs as long-term incentives, but because of the
nature of Exxon's business we view EBUs as short-term awards. See
page IV-11 for more details.
IV-16
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Pension Plan Table
Years of Service
-------------------------------------------------------
Remuneration* 30 35 40 45
- ------------- ---------- ---------- ---------- ----------
$ 1,000,000 $ 480,000 $ 560,000 $ 640,000 $ 720,000
1,500,000 720,000 840,000 960,000 1,080,000
2,000,000 960,000 1,120,000 1,280,000 1,440,000
2,500,000 1,200,000 1,400,000 1,600,000 1,800,000
3,000,000 1,440,000 1,680,000 1,920,000 2,160,000
3,500,000 1,680,000 1,960,000 2,240,000 2,520,000
4,000,000 1,920,000 2,240,000 2,560,000 2,880,000
4,500,000 2,160,000 2,520,000 2,880,000 3,240,000
5,000,000 2,400,000 2,800,000 3,200,000 3,600,000
5,500,000 2,640,000 3,080,000 3,520,000 3,960,000
- -----------
* For plan purposes, this means (1) average annual salary over the
highest paid 36-month period during the employee's last 10 years of
employment, plus (2) the average of the three highest cash bonus
and EBU awards during the employee's last five years of employment.
Employees who meet the age, service, and other requirements of Exxon's
annuity plans are eligible for an annuity (or pension) after retirement.
The table shows the approximate yearly annuity that would be paid to an
Exxon employee in the top compensation (salary and bonus) and period of
service categories. The annuity is calculated on a straight life basis with
a five year minimum. The actual annuity would be reduced by a portion of
the employee's Social Security benefits.
For annuity purposes, covered compensation for the executives named in
the Summary Compensation Table on page IV-14 includes amounts shown in the
"Salary" and "Bonus" columns of that table, plus EBU awards shown in the
Long Term Incentive Plans table on page IV-16.
At January 31, 1999*, the covered compensation and credited years of
service for these executives were:
Covered Years of
Executive Compensation Service
--------- ------------ --------
Mr. Raymond $ 4,495,460 36
Mr. Dahan 1,649,090 37
Mr. Longwell 1,649,090 36
Mr. Wilhelm 1,694,368 38
Mr. Nesbitt 1,216,142 45
* Figures given at Mr. Nesbitt's retirement effective
January 1, 1999.
IV-17
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Stock Performance Graphs
Annual total returns to Exxon shareholders were 22% in 1998, 28% in
1997, and 26% in 1996. Total returns mean share price increase plus
dividends paid, with dividends reinvested. The graphs below show the
relative investment performance of Exxon common stock, the S&P 500, and an
industry peer group over the last five- and 10-year periods. The peer group
consists of seven other international integrated oil companies: Amoco,
British Petroleum, Chevron, Mobil, Royal Dutch, "Shell" Transport and
Trading, and Texaco.
[Graphic Omitted]
[Five-Year Cumulative Total Returns]
Fiscal Years Ended December 31
---------------------------------------------------
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------
EXXON CORPORATION 100 101 139 176 226 276
S&P 500 100 101 139 171 229 294
INDUSTRY GROUP 100 111 146 186 228 245
[Graphic Omitted]
[Ten-Year Cumulative Total Returns]
<TABLE>
<CAPTION>
Fiscal Years Ended December 31
------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EXXON CORPORATION 100 119 130 160 169 182 184 253 320 411 503
S&P 500 100 132 128 166 179 197 200 275 338 451 580
INDUSTRY GROUP 100 143 156 166 161 209 231 305 387 476 511
</TABLE>
IV-18
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
BOARD OF DIRECTORS PROPOSAL: RATIFICATION OF INDEPENDENT ACCOUNTANTS (Item 4
on Exxon's proxy card)
The Audit Committee of the Board has appointed PricewaterhouseCoopers
LLP (PwC) to audit our financial statements for 1999. We are asking you to
ratify that appointment.
PwC (as successor to Price Waterhouse LLP) has been Exxon's independent
accounting firm for many years, and we believe they are well qualified for
the job. A PwC representative will be at the annual meeting to answer
appropriate questions and to make a statement if he desires.
The Board recommends you vote FOR this proposal.
SHAREHOLDER PROPOSALS (Items 5 through 8 on Exxon's proxy card)
We expect the following proposals to be presented by shareholders at the
annual meeting. Following SEC rules, we are reprinting the proposals and
supporting statements as they were submitted to us. We take no
responsibility for them. On request to the address under "The Companies" on
page I-2, the Secretary will provide information about the shareholdings of
the proposal sponsors.
The Board recommends you vote AGAINST these proposals for the reasons we
give after each one.
Shareholder Proposal: Term Limit for Nonemployee Directors (Item 5 on Exxon's
proxy card)
This proposal was submitted by Mrs. Evelyn Y. Davis, Watergate Office
Building, 2600 Virginia Avenue, N.W., Suite 215, Washington, DC 20037.
"RESOLVED, That the stockholders of Exxon recommend that the Board take
the necessary steps so that future outside directors shall not serve for
more than six years."
REASONS: "The President of the U.S.A. has a term limit, so do Governors
of many states.
Newer directors may bring in fresh outlooks and different
approaches with benefits to all shareholders.
No director should be able to feel that his or her
directorship is until retirement.
If you AGREE, please mark your proxy FOR this resolution."
The Board recommends you vote AGAINST this proposal for the following
reasons:
The Board believes that its current practices and those of the Board
Affairs Committee concerning the nomination and service of directors ensure
a balanced Board where individuals with diverse backgrounds, knowledge, and
experience function well as a unit.
The Board Affairs Committee, which is comprised only of nonemployee
directors, recommends candidates for Board membership to the full Board of
Directors. The Committee annually develops a proposed slate of nominees
which the Board must approve to be voted on by all shareholders.
Shareholders vote every year on each of the directors. Historically, over
99% of the shareholders voting have voted in favor of each of the directors
standing for election for any given year. In developing and recommending
candidates, the Committee considers the overall needs of the Board, such as
continuity and depth of knowledge and experience, as well as an
individual's ability to contribute.
IV-19
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Arbitrarily imposing a maximum of six years service for future
nonemployee directors could result in the premature loss of directors who
have acquired a great deal of knowledge and perspective about the company's
operations and who may be in a position to make their most valuable
contributions to Exxon's business.
A similar proposal was submitted by this proponent for the 1985 Annual
Meeting, and almost 97% of shareholders voting, voted AGAINST it.
Shareholder Proposal: Limitation on Shareholder Voting (Item 6 on Exxon's
proxy card)
This proposal was submitted by Mr. J. F. Quilter, 500 Westridge Drive,
Portola Valley, CA 94028-7721.
"WHEREAS it is the usual practice for annual stockholders' meeting
announcements to include a statement to the effect that if no direction is
made the proxy will be voted for the nominations made or positions held by
management.
This clouds the voting results as to votes for directors and auditors,
does not accurately reflect the desires of voting stockholders and skews
the results. In a political election it would be tantamount to counting
votes of those who do not vote as being in favor of the incumbent.
THEREFORE IT IS RESOLVED, That the shareholders recommend that the Board
of Directors take the necessary action to cause proxy balloting on nominees
and items contained in the notice of the annual meeting to be tabulated for
each nominee and proposal as in favor, opposed, abstain and returned
unmarked. The decision shall be determined by the number of those voted in
favor and opposed.
Unmarked ballots shall be considered only for the demonstration of a
quorum.
For each nominee and proposal, stockholders shall be advised of the
official results in the normal course of communication with stockholders."
The Board recommends you vote AGAINST this proposal for the following
reasons:
Exxon uses the same proxy voting procedure as the vast majority of other
public corporations. For Exxon to use a different procedure could result
in unnecessary confusion.
The proposal would deprive shareholders of a simple, easily understood
way to vote for all of the Board of Directors' recommendations. It is
based on the assumption that shareholders do not read or understand the
clearly explained voting instructions.
Exxon's proxy card provides shareholders the option to vote for,
against, or to abstain on all items of business except the election of
directors. In the case of directors, the shareholders may vote for or
against each director. The proponent of this proposal assumes that
shareholders who sign and return their proxy cards without marking specific
items do not intend to cast their votes. It seems more likely that
individuals who wish to be counted for quorum purposes, but do not want to
vote on specific items, would simply mark "abstain".
The proxy card states in boldface letters that "If no other indication
is made, the proxies shall vote (a) for the election of the director
nominees and (b) in accordance with the recommendations of the Board of
Directors on the other matters referred to on the reverse side." The Board
believes that shareholders read proxy card instructions, understand this
long-time practice, and fully intend to cast their votes in accordance with
the instructions by simply and conveniently signing and returning the card.
IV-20
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Shareholder Proposal: Additional Report on Climate Change (Item 7 on Exxon's
proxy card)
This proposal was submitted by The Province of St. Joseph of the
Capuchin Order, 1015 North Ninth Street, Milwaukee, WI 53233 and twenty
co-proponents.
"WHEREAS, this resolution's proponents are convinced overwhelming
scientific evidence demonstrates that fossil fuel burning contributes to
global warming.
-- Despite this evidence, Exxon's management has led efforts
which, we believe, undermine national and international
responses addressing the problem:
1. At last year's annual meeting shareholders had the
opportunity to vote on the same resolution contained on these
pages. However Lee R. Raymond stated (in regard to climate
change): "What is perfectly clear is that 'nothing is clear.'
There needs to be continuing public debate." On the one hand,
management says it wants a debate; on the other, it has gone
to the Securities and Exchange Commission trying to keep
shareholders from voting on this resolution.
2. The proponents of this resolution believe management's
position is inaccurate, short-sighted and potentially damaging
to the long-term financial interests of this company.
3. Last year, management urged shareholders to vote against the
resolution, claiming without substantiation that "cuts in
fossil fuel use ... would severely damage economies, industry
and jobs." Yet 2000 economists have stated "the United States
would be able to reduce its emissions to slow global warming
without damaging the economy" (WP 2/14/97).
4. We believe that management is part of a large-scale and
highly-funded effort which is attempting to undermine existing
public policy attempts to address the issue of human causation
of global warming.
5. The top two U.S. automobile companies have begun to make
changes in their products which recognize the need to have less
emissions from the burning of fossil fuels.
6. Two of the largest European fossil fuel companies, Royal
Dutch Shell and British Petroleum, have already begun making
decisions for their long-term growth which factor in the
conclusions of the scientific community warning about the
effect of fossil fuel combustion on climate change. John
Browne, Group Chief Executive of BP America has stated: "The
time to consider the policy dimensions of climate change is
... when the possibility cannot be discounted. ... We in BP
have reached that point."
-- Such an admission from an executive of a major competitor in
the fossil fuel industry should have led Exxon's management to
seriously re-examine the issue. Despite this, management
continues to share with concerned shareholders and others only
those opinions of scientists that agree with management's
position. Many of these studies and/or scientists have been
funded by management. We know of no case where such
"evidence" regarding the burning of fossil fuels and climate
change being proffered by such scientists has been subject to
peer review.
RESOLVED, Shareholders request the Board to create a committee of
outside directors to independently review and issue (at reasonable cost and
omitting proprietary information) a full report to shareholders by August,
1999 regarding the impact of climate change on our company's policies and
practices. We recommend the following issues to be included: 1) any
anticipated liabilities Exxon may incur from its possible contribution to
the problem; 2) what Exxon can do to reduce carbon dioxide emissions from
our fossil fuels.
If you agree, please vote 'yes' for this resolution."
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Chapter Four - Other Exxon Annual Meeting Proposals
The Board recommends you vote AGAINST this proposal for the following
reasons:
A similar proposal was presented by this same proponent at Exxon's 1998
annual meeting and was rejected by shareholders owning more than 95 percent
of the shares voted.
The proposal calls for a new Board committee to study global climate
change. The Board believes such a committee would be an unwarranted
duplication of effort since it is already kept well informed about this
issue. The proposal also calls for a special report despite extensive,
ongoing communications on this subject. Exxon already provides information
to shareholders, employees, and the public through publications such as the
annual report, The Lamp, Perspectives, special information booklets such as
Global Climate Change:
Everyone's Debate, and Exxon Initiatives Related to Global Climate, and
executive speeches. These and other sources of information are available
on Exxon's website (www.exxon.com).
Regrettably, in attempting to justify this proposal, the proponent has
chosen to engage in personal allegations rather than address the major
scientific, technical, economic, and social issues involved in the global
climate change debate. The fact that Exxon's views are different from the
proponent's is not an appropriate basis to characterize Exxon as
"undermining public policy."
Contrary to the proponent's claim, there is a broad range of interested
and informed parties such as business, labor, consumer, agriculture, and
other groups that, along with Exxon, are participating in legitimate public
debate on this issue. This does not undermine public policy. It is an
important component of the democratic process. Indeed, the views of most
participants are similar to those of the U.S. Senate as expressed in Senate
Resolution 98. The Senate passed (by a vote of 95-0) a resolution that the
United States should not agree to a treaty that does not include specific
mandated commitments by all nations or that would result in serious harm to
the economy of the United States.
Similarly, statements by the proponent that scientific studies cited by
Exxon are only those "funded by management" and have not been "subject to
peer review" are incorrect. This is particularly disappointing since we
have offered the proponent an opportunity to talk with numerous technical
and economic experts. Had the proponent done so, it would have found that,
contrary to the above assertion, the company has indeed cited numerous
peer-reviewed studies in its communications regarding climate change.
Earth's climate is affected by many complex variables. Throughout
history, climate has fluctuated between periods of cooling and periods of
warming. Some of those changes lasted hundreds of years, others hundreds
of thousands. Over the past century, there has been a slight warming trend
of one-half degree Celsius (about one degree Fahrenheit). This recent
warming trend falls well within the range of the natural changes in the
Earth's temperature over the past 250,000 years. The debate about climate
change concerns whether this recent warming is primarily connected with our
use of fossil fuels - coal, oil, and natural gas.
Scientists concerned about global warming point to the greenhouse
effect, a proven natural phenomenon. Water vapor and carbon dioxide
(CO(2)) and other gases trap some of the sun's energy, creating a warming,
or greenhouse effect. Nearly all CO(2) emissions come from natural
sources. Only a small amount comes from burning fossil fuels. Does the
tiny portion of greenhouse gases caused by burning fossil fuels have a
measurable effect on worldwide climate? That is the crux of the debate.
In December 1997, representatives from many governments attended
meetings in Kyoto, Japan. The outcome of the meetings was a treaty which,
if ratified, would commit certain countries to reduce CO(2) and other
greenhouse gas emissions. The agreement would commit 38 developed
countries, including the United States, to reduce their combined emissions
an average of five percent below 1990 levels in the next 10 to 14 years.
But the treaty excludes more than 130 developing countries from any
commitments. It also left many implementation questions unanswered and
little progress has been made since then in resolving these questions or in
meeting the standards established by the Senate resolution.
IV-22
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
The published, peer-reviewed economic literature shows that the
financial and social impact of these substantial, mandated fossil fuel
reductions (through taxes, rationing, or other measures) would severely
damage economies, industry, and jobs. Independent economists project
that the targeted reductions in fossil-fuel would require price
increases such as 40 percent for gasoline, 50 percent for home heating
oil, 25 percent for electricity, and 50 percent for natural gas. These
and other price hikes could cost the average American family of four
about $2,700 a year. This work was confirmed by a government analysis
(U.S. Department of Energy's Energy Information Administration-October
1998) which projects that meeting this target could increase U.S. energy
prices by up to 83 percent and cost the economy over $300 billion
annually.
Excluding developing nations from such reductions, which renders the
Kyoto targets largely ineffective, will not prevent those countries from
being hurt. Their exports will suffer as the economic growth of
industrialized nations is impaired. In developing nations, reducing
economic growth would mean fewer financial resources available for
meeting real and immediate social needs, such as reduced poverty, clean
drinking water, health care, and education.
The potential for climate change caused by elevated levels of CO(2) in
the atmosphere is a legitimate concern, and reducing the scientific
uncertainties is important. The public should support additional research
on this issue. Industries should continue voluntary market-driven efforts
to identify cost-effective ways to reduce energy use and emissions. Exxon
and others are already working in areas such as energy efficiency and fuel
switching-which means, for example, changing from coal to cleaner-burning
natural gas. At Exxon, our refineries and chemical plants are 35 percent
more energy-efficient today than they were 25 years ago. In addition, we
operate or have an interest in 26 cogeneration plants around the world.
Cogeneration makes steam and electricity simultaneously, using 30 percent
less energy than making them separately.
Advanced technology is one of the main tools industry is applying to
reduce energy use and, with it, CO(2) emissions. Long-term research should
continue to render substantial improvements - 50 percent to 100 percent--in
energy efficiency. For example, Exxon is involved in several partnerships
to develop advanced technology for greatly improved efficiency in
transportation.
Fortunately, all indications are that climate change is a very long-term
phenomenon. The U.S. Congressional Office of Technology Assessment
concluded, "Delaying the implementation of emissions controls for 10 to 20
years will have little effect on atmospheric concentrations of greenhouse
gas emissions." We can make good use of that time. Researchers will be
able to gain a better understanding of climate science. And there is a lot
of research going on - about $2 billion worth a year in the U.S. alone.
Exxon itself has funded studies by several major research organizations.
Exxon believes that sound science and sound economics should light the
way as society addresses climate change. Patience is important as we allow
facts to guide our course of action. With such an approach, the world can
resolve global climate change in a way that also keeps economies healthy
and growing. But the first step is an open and honest debate on the issue.
Creating another Board committee and adding another special report are
unnecessary, duplicative, and wasteful since the issue of global climate
change is reviewed frequently with the full Board of Directors, the company
has already produced extensive communications, and is committed to continue
speaking out on this important matter.
IV-23
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
Shareholder Proposal: Sexual Orientation Principles (Item 8 on Exxon's proxy
card)
This proposal was submitted by Ms. Marianne Weil, Box 341, Orient, New
York 11957 and three co-proponents.
"WHEREAS, our Company has pledged its commitment to principles of
non-discrimination, but has not in written form explicitly barred
discrimination based on sexual orientation;
WHEREAS, employment discrimination and the denial of equal benefits on
the basis of sexual orientation diminishes employee morale and productivity;
WHEREAS, a National Gay and Lesbian Task Force study revealed that
between 16% and 44% of gay men and lesbians in twenty cities nationwide
have experienced some form of workplace harassment or discrimination
related to their sexual orientation;
WHEREAS, San Francisco, Atlanta and New York have adopted and other
jurisdictions are considering adopting legislation restricting business
with companies which do not guarantee equal treatment for lesbian and gay
employees;
WHEREAS, our company has operations in and makes sales to public
institutions in states and cities which prohibit discrimination on the
basis of sexual orientation;
WHEREAS, stakeholders in our company have an interest in preventing
discrimination and resolving complaints internally to avoid costly
litigation or damage to our reputation as an equal opportunity employer;
WHEREAS, numerous major companies in the petroleum and energy industries
have written policy barring sexual orientation discrimination;
WHEREAS, the hundreds of corporations that have adopted sexual
orientation non-discrimination policies - including over 100
publicly-traded companies also providing spousal benefits to same-sex
partners of employees - place themselves in a more competitive position to
recruit and retain employees from the widest available pool of talent;
WHEREAS, national polls have consistently found more than three-quarters
of Americans support equal rights in the workplace for gay men, lesbians
and bisexuals;
WHEREAS, prominent gay and lesbian political and community leaders have
proposed "The Equality Principles on Sexual Orientation" to serve as
guidelines for corporate policies:
1. Explicit prohibitions against discrimination based on sexual
orientation will be included in the company's written employment policy
statement.
2. Discrimination against HIV-positive employees or those with AIDS
will be strictly prohibited.
3. Employee groups, regardless of sexual orientation, will be given
equal standing with other employee associations.
4. Diversity training will include sexual orientation issues.
5. Spousal benefits will be offered to domestic partners of employees,
regardless of sexual orientation, on an equal basis with those
granted to married employees.
IV-24
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
6. Company advertising policy will bar negative sexual orientation
stereotypes and will not discriminate against advertising in
publications on the basis of sexual orientation.
7. The Company will not discriminate in the sale of goods or services
on the basis of sexual orientation.
8. Written non-discrimination policies on sexual orientation must be
disseminated throughout the company. A senior company official will
be appointed to monitor compliance corporate wide.
RESOLVED, The Shareholders request the Board of Directors adopt and
implement a written policy barring sexual orientation discrimination.
SUPPORTING STATEMENT: Sexual orientation discrimination is a morally
wrong and self-defeating business practice. By implementing an equitable
policy, our Company will ensure a respectful and supportive atmosphere for
all employees and enhance its competitive edge by joining the growing ranks
of energy companies guaranteeing equal opportunity for all employees.
The Board recommends you vote AGAINST this proposal for the following
reasons:
Exxon believes that its current policies on "Equal Employment
Opportunity" and "Harassment in the Workplace" already meet the proponent's
stated objective that the Corporation adopt a written policy barring
discrimination based on the grounds of sexual orientation.
When this issue was raised at last year's Annual Meeting of
Shareholders, Mr. Lee Raymond, Chairman and Chief Executive Officer of the
Corporation, stated that ". . . we have a policy to not discriminate
against anybody for any reason, period."
It has been Exxon's long-standing policy and practice to not tolerate
discrimination or harassment of any kind in the workplace. Earlier this
year, an updated "Harassment in the Workplace Policy" was issued to confirm
and strengthen those underlying objectives. It provides in part:
"It is the policy of Exxon Corporation to prohibit any form of
unlawful harassment based on race, color, sex, religion, national
origin, citizenship status, age, physical or mental disability or
veteran status. In addition, the Corporation's harassment policy
prohibits any other form of harassment. Such conduct, while perhaps
not unlawful is considered unacceptable in Exxon's workplace."
It is Exxon's practice to list as forms of harassment in its policies
only those which are specifically prohibited by federal law. To name all
possible examples of harassment could provide a long list which would only
divert attention from the basic need for a harassment-free workplace. The
revised language in the Harassment Policy makes it clear that "any other
form of harassment" is prohibited. The Harassment Policy goes on to broadly
define harassment as follows:
"Harassment is any inappropriate conduct which has the purpose or effect
of:
o Creating an intimidating, hostile, or offensive work environment;
o Unreasonably interfering with an individual's work performance; or
o Affecting an individual's employment opportunity."
This definition of "harassment" and the language prohibiting harassment
of any kind provide for a broad anti-discrimination policy that clearly
encompasses discrimination on the basis of sexual orientation in the
workplace. The Harassment Policy also sets forth the procedures for
individuals to follow in the event they believe that they have been
subjected to harassment. The Harassment Policy thus comprises a
comprehensive
IV-25
<PAGE>
Chapter Four - Other Exxon Annual Meeting Proposals
anti-harassment policy that is applicable to individuals who have been
subjected to harassment or discrimination on the basis of sexual
orientation.
In summary, the revised Harassment Policy makes it unequivocally clear
that Exxon does not tolerate discrimination on any grounds, including
sexual orientation. Thus, the Corporation has already implemented a
written policy barring sexual orientation discrimination, and there is no
need to make the changes recommended by the proponent.
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934 requires that
our executive officers and directors file reports of their ownership and
changes in ownership of Exxon stock on Forms 3, 4 and 5 with the SEC and
the NYSE. In 1998, Mr. Esrey's initial filing on Form 3 inadvertently
failed to report ownership of 380 shares of Exxon common stock. The error
was corrected in a subsequent filing.
IV-26
<PAGE>
CHAPTER FIVE
OTHER MOBIL ANNUAL MEETING PROPOSALS
BOARD OF DIRECTORS PROPOSAL: ELECTION OF DIRECTORS
(Item 2 on Mobil's proxy card)
The Mobil Board is classified into three classes, as nearly equal in
number as possible. The members of the Board serve for three years. The
terms of office of the members of one class of directors expire each year
in rotation so that the members of one class are elected at each annual
meeting for full three-year terms. The terms of office of four of the
present directors will expire at this annual meeting.
We wish to advise you that Robert O. Swanson, a director since 1991 and
an Executive Vice President, retired on August 1, 1998, after more than 39
years of service to Mobil. We also wish to advise you that Lewis M.
Branscomb, a director since 1978, and Allen F. Jacobson, a director since
1988, will each resign effective May 1, 1999, in accordance with our
retirement policies. We deeply appreciate Messrs. Swanson's, Brancomb's
and Jacobson's contributions to Mobil.
Four directors have been nominated for election to three-year terms
expiring at the annual meeting in 2002 or until completion of the merger,
if earlier. The terms of the other directors will continue as indicated
below.
The ages of directors are as of March 1, 1999.
The Mobil Board recommends you vote FOR each of the nominees listed
below.
NOMINEES FOR TERMS EXPIRING IN 2002
(OR UNTIL COMPLETION OF THE MERGER, IF EARLIER)
Charles A. Heimbold, Jr. Since 1995, Mr. Heimbold has been chairman and
chief executive officer of Bristol-Myers Squibb
Company, a manufacturer of consumer products
[Graphic Omitted] and pharmaceuticals. He served as president
[Photograph of of Bristol-Myers Squibb Company from 1992 to
Charles A. Heimbold, Jr.] 1994 and president and chief executive
officer from 1994 to 1995. Mr. Heimbold is
a member of Mobil's Audit Committee,
Age 65 Committee on Directors and Board Affairs and
Director since 1995 Finance Committee.
........................................
Samuel C. Johnson Mr. Johnson is chairman of the board of S. C.
Johnson & Son, Inc., a manufacturer of chemical
specialty products. He is also a director of
[Graphic Omitted] Deere and Company, H. J. Heinz Company, a
[Photograph of Director and chairman of Johnson International
Samuel C. Johnson] Inc., and a director and chairman of Johnson
Worldwide Associates, Inc. Mr. Johnson is
chairman of Mobil's Public Issues Committee
Age 70 and a member of Mobil's Management
Director since 1981 Compensation and Organization Committee.
........................................
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<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
Helene L. Kaplan Mrs. Kaplan is Of Counsel to Skadden, Arps,
Slate, Meagher & Flom LLP, a law firm which
Mobil and/or affiliates of Mobil retained during
[Graphic Omitted] 1998 and 1999. Mrs. Kaplan is also a
[Photograph of director of Bell Atlantic Corporation, Chase
Helene L. Kaplan] Manhattan Corporation, the May Department
Stores Company and Metropolitan Life
Insurance Company. Mrs. Kaplan is a member
of Mobil's Audit Committee, Committee on
Age 65 Directors and Board Affairs and Finance
Director since 1989 Committee.
........................................
Aulana L. Peters Mrs. Peters is a partner in Gibson, Dunn &
Crutcher, a law firm which Mobil and/or
affiliates of Mobil retained during 1998 and may
[Graphic Omitted] retain in 1999. She is also a director of
[Photograph of the Minnesota Mining and Manufacturing
Aulana L. Peters] Company, Callaway Golf Company, Merrill Lynch
& Co. and Northrop Grumman Corporation. Mrs.
Peters is a member of Mobil's Audit
Age 57 Committee, Finance Committee and Public
Director since 1992 Issues Committee.
........................................
DIRECTORS WHOSE TERMS EXPIRE IN 2000
(OR UPON COMPLETION OF THE MERGER, IF EARLIER)
Eugene A. Renna Mr. Renna joined Mobil in 1968 and has been
President and Chief Operating Officer since
March 1, 1998. From 1996 until March 1,
[Graphic Omitted] 1998, Mr. Renna was an executive vice
[Photograph of president with responsibility for the North
Eugene A. Renna] America Marketing and Refining, Europe/Former
Soviet Union, South America and Supply,
Trading and Transportation business groups
and, from September 1, 1997, with
responsibility also for the North America
Exploration and Producing business group.
From 1986 to 1996, he was an executive vice
president of Mobil Oil Corporation and
president of its Marketing and Refining
Division. He has been a director of
Mobil Oil Corporation since 1985. Mr. Renna
Age 54 is a director of Brands, Inc. and is a
Director since 1986 member of Mobil's Executive Committee.
........................................
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<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
Donald V. Fites Mr. Fites is the former chairman and chief
executive officer of Caterpillar Inc., a
manufacturer of heavy machinery. He is also
[Graphic Omitted] a director of Caterpillar Inc., AT&T Corp.,
[Photograph of Georgia-Pacific Corporation and Wolverine
Donald V. Fites] World Wide, Inc. Mr. Fites is a member of
Mobil's Committee on Directors and Board
Age 65 Affairs, Finance Committee and Management
Director since 1990 Compensation and Organization Committee.
........................................
Charles S. Sanford, Jr. Mr. Sanford is the retired chairman and chief
[Graphic Omitted] executive officer of Bankers Trust Corporation
[Photograph of and its principal subsidiary, Bankers Trust
Charles S. Sanford, Jr. Company. He is also a director of J. C. Penney
Company, Inc. Mr. Sanford is chairman of
Age 62 Mobil's Finance Committee and a member of its
Director since 1990 Committee on Directors and Board Affairs.
........................................
Robert G. Schwartz Mr. Schwartz is the former chairman of the
board, president and chief executive officer of
Metropolitan Life Insurance Company. He is a
[Graphic Omitted] director of Metropolitan Life Insurance Company,
[Photograph of COMSAT Corporation, Lone Star Industries, Inc.,
Robert G. Schwartz] Lowe's Companies, Inc. and Potlatch Corporation
and is a member of the board of trustees of
Consolidated Edison Company of New York. Mr.
Schwartz is Chairman of Mobil's Management
Age 70 Compensation and Organization Committee and a
Director since 1987 member of its Public Issues Committee.
........................................
Iain D. T. Vallance Mr. Vallance is chairman of British
[Graphic Omitted] Telecommunications plc. He also serves as
[Photograph of vice-chairman of The Royal Bank of Scotland.
Iain D. T. Vallance] Mr. Vallance is a member of Mobil's Audit
Age 55 Committee, Finance Committee and Public Issues
Director since 1996 Committee.
........................................
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<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
DIRECTORS WHOSE TERMS EXPIRE IN 2001
(OR UPON COMPLETION OF THE MERGER, IF EARLIER)
J. Richard Munro Since 1997, Mr. Munro has been chairman of the
board of Genentech, Inc., a manufacturer of
pharmaceuticals. He is the former chairman
[Graphic Omitted] of the executive committee of the board of
[Photograph of directors, co-chairman of the board and co-
J. Richard Munro] chief executive officer of Time-Warner Inc.,
a publishing and communications company. He
is also a director of Kmart Corporation, The
Kellogg Company and Sensormatic Company. Mr.
Munro is a member of Mobil's Management
Age 68 Compensation and Organization Committee and
Director since 1989 its Public Issues Committee.
........................................
Lucio A. Noto Mr. Noto joined Mobil in 1962 and has been
chairman and chief executive officer since
1994. He was president and chief operating
[Graphic Omitted] officer from 1993 until March 1, 1998. He
[Photograph of has been a director of Mobil Oil Corporation
Lucip A. Noto] since 1986 and chairman of the board and
chief executive officer of Mobil Oil
Corporation since 1994. He is also a
director of International Business Machines
Corporation and Philip Morris Companies Inc.
Age 60 Mr. Noto is chairman of Mobil's Executive
Director since 1988 Committee.
BOARD OF DIRECTORS PROPOSAL: APPROVAL AND RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS FOR FISCAL YEAR 1999 (Item 3 on Mobil's proxy card)
The Mobil Board desires, in accordance with its established policy,
to obtain from you an indication of your approval or disapproval of the
Board's appointment of Ernst & Young LLP, Fairfax Square-Tower II, 8075
Leesburg Pike, Vienna, Virginia 22182-2709, as independent auditors of
Mobil and its subsidiaries for 1999.
Ernst & Young LLP has been serving Mobil and its subsidiaries for
many years. It has no direct financial interest or any material indirect
financial interest in Mobil or any of its subsidiaries. While serving as
independent auditor, Ernst & Young LLP has had no connection with Mobil or
any of its subsidiaries as promoter, underwriter, voting trustee, director,
officer or employee. During 1998, Ernst & Young LLP rendered audit
services amounting to $12.9 million.
The Audit Committee recommended and the Mobil Board approved the
appointment of Ernst & Young LLP as independent auditors. The Audit
Committee reviewed the performance of Ernst & Young LLP in prior years as well
as the firm's reputation for integrity and competence in the fields of
accounting and auditing, and the status of litigation involving the firm. The
Audit Committee is satisfied with Ernst & Young LLP in these respects.
Representatives of Ernst & Young LLP will be present at the Mobil
meeting to respond to appropriate questions from those of you attending the
meeting and to make such statements as they may desire.
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<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
The Mobil Board recommends you vote FOR the following
resolution which will be presented at the meeting:
"RESOLVED, that the appointment, by the Board of Directors of
the Corporation, of Ernst & Young LLP as independent auditors of the
Corporation and its subsidiary companies, for fiscal year 1999, be
and hereby is approved and ratified."
If the resolution is defeated, the adverse vote will be considered a
direction to the Mobil Board to select other auditors for the following
year. However, because of the difficulty and expense in making any
substitution of auditors so long after the beginning of the current year,
it is contemplated that the appointment for the year 1999 will be permitted
to stand unless the Mobil Board finds other good reasons for making a
change.
SHAREHOLDER PROPOSALS (Items 4 and 5 on Mobil's proxy card)
We expect the following proposals to be presented by shareholders at
the annual meeting. Following SEC rules, we are reprinting the proposals
and supporting statements as they were submitted to us. We take no
responsibility for them.
Shareholder Proposal: Voting of Signed but Unmarked Proxies (Item 4 on
Mobil's proxy card)
The following proposal was submitted by J.F. Quilter, 500
Westridge Drive, Portola Valley, California 94028, the owner of 1,352.6814
shares of Mobil common stock:
WHEREAS, it is the usual practice for annual stockholders'
meeting announcements to include a statement to the effect that if no
direction is made the proxy will be voted for the nominations made or
positions held by management.
This clouds the voting results as to votes for directors and
auditors, does not accurately reflect the desires of voting
stockholders and skews the results. In a political election it would
be tantamount to counting votes of those who do not vote as being in
favor of the incumbent.
THEREFORE, it is RESOLVED that the shareholders recommend that
the Board of Directors take the necessary action to cause proxy
balloting on nominees and items contained in the notice of the annual
meeting to be tabulated for each nominee and proposal as in favor,
opposed, abstain and returned unmarked. The decision shall be
determined by the number of those voted in favor and opposed.
Unmarked ballots shall be considered only for the demonstration
of a quorum.
For each nominee and proposal, stockholders shall be advised of
the official results in the normal course of communication with
stockholders.
The Mobil Board recommends you vote AGAINST the adoption of
this proposal.
As permitted by applicable laws and regulations, and consistent with the
practice of virtually all public corporations, Mobil advises shareholders
that if they sign, date and return their proxy cards without indicating how
they wish to vote, their proxies will be voted in accordance with the
Board's recommendations. This entirely lawful and customary procedure
serves as a convenience to those shareholders who wish to vote on all
matters as management recommends. The proponent asserts that the procedure
"clouds the voting results. . . , does not accurately reflect the desires
of voting stockholders and skews the results." However, it in no way
affects the rights of any shareholder to vote in opposition to management's
recommendations on any or all matters or to abstain from voting: a
shareholder need only mark the appropriate boxes on the proxy card to
record his or her votes. Accordingly, the Mobil Board strongly disagrees
with the proponent's assertion.
V-5
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
For the foregoing reasons, the Mobil Board recommends you vote
AGAINST the adoption of the proposal.
Shareholder Proposal: Global Warming (Item 5 on Mobil's proxy card)
The following proposal was submitted by Friends of the Earth
Action, 1025 Vermont Avenue, NW #300, Washington, DC 20005-6303 and the
National Council of the Churches of Christ in the USA, 475 Riverside Drive,
New York, New York 10115-0050, which state that they are the holders of a
total of 5,858 shares of Mobil common stock, and six other shareholders who
state that they hold 60,900 shares of Mobil common stock in the aggregate and
whose names and addresses will be furnished on request:
WHEREAS:
The overwhelming majority of independent, peer-reviewed
atmospheric scientists agree that global warming is not hypothetical
but a real, existing problem posing serious challenges for modern
civilization;
The impacts of global warming on our public health and welfare
include increased occurrence of extreme weather events, sea-level
rise, increased spread of infectious diseases, and more frequent and
deadly heat waves like the summer of 1998 which was linked to more
than 150 deaths in Texas alone.
British Petroleum and Royal Dutch Shell have already begun
making decisions for their long-term growth which factor in the
conclusions of the scientific community warning about the effect of
fossil fuel combustion on climate change. John Browne, Group Chief
Executive of BP America has stated: "The time to consider the policy
dimensions of climate change is...when the possibility cannot be
discounted.... We in BP have reached that point."
WE BELIEVE:
It will cost U.S. taxpayers billions of dollars to combat the
impacts of global warming. So far, our company has not lived up to
its responsibility as a producer of the pollution which causes global
warming. In order to leave the children of the world a safe and
healthy environment, and protect threatened plants and animals, it is
time for Mobil to catch up with other companies who are preparing for
the future now by taking the concrete steps necessary to assess their
opportunities for reducing the amount of carbon pollution they
produce. Failing to rise to the challenge set by industry leaders
will hurt our company's competitiveness and cost our shareholders
increasing amounts of money.
RESOLVED: that the shareholders of Mobil request that the Board
of Directors report (at reasonable costs and omitting proprietary
information), to shareholders by August 1999, on the greenhouse gas
emissions from our company's own operations and products, including
(with dollar amounts where relevant) (i) what our company is doing
in research and/or action to reduce those emissions and ameliorate
the problem, (ii) the financial exposure of our company and its
shareholders due to the likely costs of reducing those emissions and
potential liability for damages associated with climate change, and
(iii) actions by our company, or by the industry associations to
which it pays dues, promoting the view that the issue of climate
change is exaggerated, not real, or that global warming may be
beneficial.
SUPPORTING STATEMENT
We believe that Mobil is exposing its shareholders to financial
risk by continuing to produce unnecessary amounts of the pollution
which causes global warming, even as the problem of climate change
becomes more severe, more widely understood, and more likely to lead
to legislation that will penalize excessive carbon polluters.
Furthermore, we believe that our company is incurring costs for
advertising and lobbying to suggest that the problem of global
warming is exaggerated, not real, or too costly to deal with; and
thus using our prestige and influence to delay any lessening of
climate change.
V-6
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Chapter Five - Other Mobil Annual Meeting Proposals
The Mobil Board recommends you vote AGAINST the adoption of this
proposal.
Mobil has consistently communicated its view that all energy resources,
including our products, should be used wisely. Furthermore, Mobil has
undertaken numerous energy-saving initiatives in the interest of maximizing
the efficiency of its operations. Information on these measures, as well as
Mobil's position on global climate change, is already widely available in
publications such as Mobil's opinion-editorials appearing in major newspapers
and magazines worldwide, in Mobil's climate primer entitled, "Global Climate
Change: Issues, Impacts and Solutions," in Mobil World, and in the special
global climate section of Mobil's web site which can be found at www.mobil.com.
In addition, Mobil's Annual Environmental, Health and Safety Report will
include this year, for the first time, an inventory of carbon emissions
from Mobil's global operations in 1998. These figures will also be
available on Mobil's web site. Thus, the Mobil Board believes that Mobil
is fulfilling its obligations to the public and its shareholders by sharing
information on its views about, and its extensive activities relating to,
global warming. Therefore, the Board recommends that you vote against this
proposal.
Mobil has stated that it is concerned about the possible impacts of
human emissions of greenhouse gases on the world's climate. However, Mobil
believes that a system of mandated emission targets as embodied in the
Kyoto Protocol is the wrong approach to addressing this issue. The
magnitude and timing of potential climate change or the effectiveness of
proposed solutions and their impacts on the quality of life are not
understood. Yet there are many voluntary steps that are being taken to use
our energy resources more wisely. And there are promising technologies
that can make a sizeable difference in the future.
We have also stated, "The choice at this time is not between action
and inaction, but between responsible actions and actions that put our
economy and business at risk." Mobil supports prudent voluntary cost-
effective actions now while learning more about climate change and the
possible responses to its effects.
To enhance its learning about these issues, Mobil actively supports
climate change research programs at universities and leading institutions.
Mobil supports two efforts at the Massachusetts Institute of Technology:
the Joint Program on Science and Policy of Global Changes, and the Energy
Choices for a Greenhouse Constrained World. Mobil also supports the
Battelle Northwest Study: A Global Energy Technology Strategy to Address
Climate Change. These are independent groups that share our desire to find
some common-sense answers to the questions asked in the climate change
debate.
Contrary to the assertions in this resolution, Mobil is taking
"concrete steps" to assess opportunities for reducing greenhouse gases from
its operations. While we seek to learn more about the science of climate
change, Mobil remains committed to research and development efforts that
assess technologies that reduce emissions of greenhouse gases. In addition
to tracking emissions from Mobil facilities, we are implementing projects
to reduce flaring and venting in our operations in the North Sea and
offshore Nigeria. Mobil is also supporting projects to counter emissions
through initiatives such as our reforestation projects with American
Forest. Mobil's joint venture with Ford Motor Company, called "Let's Drive
for a Better Future," will develop new energy-efficient fuel and power-
train technologies as well as assess opportunities involving direct-
injection diesel, hydrocarbon processors for fuel-cell systems, and
alternative fuels. These efforts will result in significant contributions
toward the efficient and low emissions use of Mobil products.
Mobil also participates in the International Energy Agency's
Greenhouse Gas Research and Development Program, which includes technology
assessment, and research and development target-setting for the oil and
petrochemical industry. Mobil has installed energy saving technologies at
refineries, undertaken energy management audits and worked to reduce gas
flaring in our offshore producing fields. Mobil participates in government
programs to promote energy efficiency in office buildings and has been
recognized by the U.S. EPA for a host of awards. In addition, use of
Mobil's industry-leading synthetic lubricants has measurable energy
efficiency benefits in many applications.
V-7
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
Mobil has cut its carbon emissions by more than one million metric
tons in the past three years. In addition to being effective, our
emissions reduction programs are economically logical and justified.
With its continued support for scientific research, Mobil is taking a
leadership role in the effort to achieve an understanding of how man-made
emissions affect climate. Mobil believes that while such an understanding
is being pursued, reasonable companies should take actions to reduce
greenhouse emissions within the framework of good economic sense. Mobil is
doing just that.
For the foregoing reasons, the Mobil Board recommends you vote
AGAINST the adoption of the proposal.
V-8
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
THE MOBIL BOARD
Directors' Meetings
During 1998, the Mobil Board met 11 times and all current
directors attended more than 75 percent of the meetings of the Mobil
Board and their respective Board committees.
Directors' Compensation
Mobil employees receive no extra pay for serving on the Mobil
Board or its committees. Each non-employee director receives an
annual retainer comprised of $36,000 and 600 shares of Mobil common
stock in the form of deferred common share equivalents. Non-employee
directors also receive a fee of $1,250 for each Board meeting and
committee meeting attended, plus travel allowances where appropriate.
Directors who chair committees receive additional annual fees of
$8,000. Non-employee directors may not participate in Mobil's
incentive compensation or other employee benefit programs. However,
Mobil provides $100,000 of non-contributory group life insurance and
$500,000 of accidental death insurance for accidents occurring while
on Mobil business.
Under the deferred fee plan, non-employee directors may defer,
until retirement, receipt of all or a part of their fees and the cash
portion of their annual retainers. Deferred amounts may either be
credited with notional interest or be represented by common share
equivalents which earn notional dividends equal to dividends declared
on Mobil common stock. Notional interest on deferred cash accounts
is credited at the average rate for 10-year U.S. Treasury bonds over
a six-month period, plus 1%, currently 6.08% per year.
Committees of the Mobil Board
The Mobil Board appoints standing committees to help carry out
its duties. The functions and current membership of the five
standing committees established by the Mobil Board are described
below. Each committee meets regularly during the year and promptly
following each meeting advises the full Board of its actions and
recommendations. Each committee is composed entirely of non-employee
directors.
The Audit Committee, established in 1969, reviews with the
independent auditors and Mobil's General Auditor the general scope of
their respective audit coverages. Such reviews include consideration
of Mobil's accounting practices, procedures and system of internal
accounting controls and any significant problems encountered. The
committee also recommends to the Board the appointment of Mobil's
principal independent auditors.
At least annually, the committee reviews the services performed
and the fees charged by Mobil's independent auditors and determines
that the non-audit services rendered by the independent auditors do
not compromise their independence.
The independent auditors and Mobil's General Auditor have
direct access to the committee and may discuss with it any matters
which may arise in connection with audits, the maintenance of
internal accounting controls or any other matters relating to Mobil's
financial affairs. Furthermore, the committee may authorize the
independent auditors to investigate any matters which the committee
deems appropriate and may present its recommendations and conclusions
to the Board.
V-9
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
The committee members are:
Lewis M. Branscomb (Chairman)
Charles A. Heimbold, Jr.
Helene L. Kaplan
Aulana L. Peters
Iain D. T. Vallance
Meetings last year: four.
The Committee on Directors and Board Affairs, established in
1977, reviews and makes recommendations to the Board regarding:
corporate governance matters, including effectiveness of the Board,
its committees and individual directors; procedures of the Board and
its committees; and the composition, duties and responsibilities of
the committees. The committee also reviews and makes recommendations
to the Board regarding compensation and meeting fees of non-employee
directors.
In addition, the committee proposes to the Board a slate of
directors for election by the shareholders at the annual meeting and
identifies and proposes to the Board candidates to fill Board
vacancies. The committee considers suggestions from many sources,
including shareholders, regarding possible candidates for director.
The committee will consider your suggestions for possible
director candidates if you follow the procedure described below:
You should send your nomination(s) to the Secretary of the
Committee on Directors and Board Affairs, Mobil Corporation, 3225
Gallows Road, Fairfax, Virginia 22037-0001. Your nomination(s)
should describe the qualifications of the candidate and should be
accompanied by a written statement that the candidate is willing to
serve and is committed to representing the interests of all the
shareholders. Candidates must be endorsed by a member of the
Committee on Directors and Board Affairs or be supported by the
holders of not less than 200 shares of common stock. This number is
subject to periodic review by the Committee on Directors and Board
Affairs.
You may also make your nomination(s) at an annual shareholders'
meeting in the manner provided in the Mobil by-laws. The Mobil by-
laws require, among other things, that you provide written notice of
your nomination(s) to Mobil at least 90 days before the anniversary
date of the preceding annual meeting. For a description of the full
procedure governing these nominations, you should read the Mobil by-
laws. You may obtain a copy of the Mobil by-laws from the Secretary
of Mobil. At any meeting of shareholders, the presiding officer may
refuse to acknowledge the nomination of any person not made in
compliance with the procedure specified in the Mobil by-laws.
The committee members are:
Allen F. Jacobson (Chairman)
Donald V. Fites
Charles A. Heimbold, Jr.
Helene L. Kaplan
Charles S. Sanford, Jr.
Meetings last year: two.
The Management Compensation and Organization Committee, established
in 1960, reviews, approves and recommends to the Mobil Board: (1) Mobil's
employee and management compensation and benefit policies; (2) management
incentive compensation plans, including stock option plans; (3) the amount
V-10
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
and form of compensation of employee directors and senior managers of
Mobil; and (4) all senior management appointments and any significant
structural changes in the management and organization of Mobil. The
committee also administers the Mobil incentive compensation and stock
option plans.
The committee members are:
Robert G. Schwartz (Chairman)
Donald V. Fites
Allen F. Jacobson
Samuel C. Johnson
J. Richard Munro
Meetings last year: six.
The report of the committee on executive compensation starts on
page V-12.
The Public Issues Committee, established in 1973, reviews and
makes recommendations regarding: (1) Mobil's domestic and
international policies, programs, position and strategies involving
political, social and environmental trends and issues; (2)
shareholder proposals; (3) support of business, charitable and
educational organizations; (4) Mobil's employment and workplace
policies and practices, including those relating to equal employment
opportunity, non-discrimination and diversity in the workplace; and
(5) Mobil's environmental, health and safety policies, programs,
practices and performance.
The committee members are:
Samuel C. Johnson (Chairman)
Lewis M. Branscomb
J. Richard Munro
Aulana L. Peters
Robert G. Schwartz
Iain D. T. Vallance
Meetings last year: three.
The Finance Committee, established in February 1998, reviews
and makes recommendations to the Mobil Board regarding: Mobil's
financial structure, condition and major policies; Mobil's policies
and programs for the management of risk, including its insurance
program; and the funding, performance and administration of pension
benefit plans.
The committee members are:
Charles S. Sanford, Jr. (Chairman)
Donald V. Fites
Charles A. Heimbold
Helene L. Kaplan
Aulana L. Peters
Iain D.T. Vallance.
Meetings last year: two.
V-11
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
EXECUTIVE COMPENSATION
Management Compensation and Organization Committee Report
The Management Compensation and Organization Committee of the
Mobil Board consists of directors who are neither employees nor
officers of Mobil. The committee regularly reviews Mobil's executive
compensation policies and programs and determines the compensation of
the senior executive officers. Mobil's decisions on compensation of
the chairman and chief executive officer and other employee directors
are reviewed with and approved by all of the non-employee directors,
who constitute a majority of the Board.
The executive compensation program includes four elements
which, in the committee's view, constitute a flexible and balanced
method of establishing total compensation for senior management. The
four compensation elements, further discussed below, are base salary,
short-term incentive awards, long-term incentive awards, and stock
options.
The committee's overall philosophy regarding the compensation
of Mobil's executive officers is that these officers should receive
total compensation that is equal to the average for comparable
positions paid by the seven petroleum comparator or peer companies
referred to in the following section when Mobil's performance is
average compared to those companies; total compensation that is below
the average for comparable positions when Mobil's comparative
performance is below average; and total compensation that is above
the average for comparable positions when Mobil's comparative
performance is above average.
Base Salaries
The committee annually reviews salary ranges for senior
positions and approves adjustments necessary to align these ranges
with the competitive rates of pay reported by seven major petroleum
companies for similar positions. These companies constitute Mobil's
petroleum comparator group, and are named in the Performance Graph on
page V-16, except that the salary data for the U.S. subsidiaries of
British Petroleum Company p.l.c. and Royal Dutch Petroleum Company/
"Shell" Transport and Trading Company p.l.c. are used because parent
company data are not available. The committee chose these seven
companies as comparators because they are the major companies in
direct competition with Mobil in most of its areas of business.
The committee annually adopts guidelines for executive salary
increases which are consistent with guidelines for all U.S. salaried
employees. These guidelines are generally based on the average
salary increase budget within the comparator group. Actual salaries
within the established salary ranges are determined based on the
individual executive's performance, position in the salary range and
experience level.
The committee's guidelines apply to annual periods beginning on
July 1. The guidelines adopted by the committee for the year
beginning July 1, 1998 provided for base pay increases for employees
whose salaries were below the competitive rate for their jobs, and
lump sum payments instead of base pay increases for employees whose
salaries were above the competitive rate for their jobs. Mr. Noto's
performance in 1998 was excellent. Faced with deteriorating industry
fundamentals and economic problems in some key markets, Mobil fared
better than the average of the petroleum comparator group in several
important performance measures, such as return on capital employed,
earnings per share growth and total return to shareholders. Benefits
from expense reduction programs and other self-help initiatives
offset significantly lower crude prices. For this reason, and in
view of the fact that Mr. Noto's salary is below the competitive
rate for the job, the committee approved an increase in Mr. Noto's
base salary to $980,000.
Mr. Noto's salary continues to be below the average and median
base salary paid for a comparable position by the companies in the
petroleum comparator group.
V-12
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
Short-Term Incentive Program
The goal of the short-term incentive program is to place a
portion of executives' annual compensation at risk to encourage and
reward sustained high performance each year.
Under guidelines adopted by the committee for administering the
1995 Mobil incentive compensation and stock ownership plan, under
which short-term incentive awards for 1998 were made, a short-term
incentive award target has been set for each eligible employee. This
target is the difference between the estimated total cash
compensation (base salary plus short-term incentive award) for
comparable positions at the petroleum comparator companies and the
midpoint of the salary range for the employee's salary grade. This
target is then multiplied by a performance factor which, in the case
of the chairman and chief executive officer and the other four
executive officers identified in the Summary Compensation Table on
page V-17, can range from 0 to 1.75 depending equally on Mobil's
rankings in return on capital employed and earnings per share growth
during the preceding year, in each case relative to that of the peer
companies during the same year.
Based on Mobil's performance during 1998, Mobil's ranking among
its peers was third in return on capital employed and second in
earnings per share growth, indicating an above average performance
factor of 1.40. Accordingly, the committee approved an award of
$1,537,700 for Mr. Noto, which was the amount determined by
multiplying Mr. Noto's incentive award target by the 1998
performance factor. The Committee notes that this award does not
exceed the maximum award payable to Mr. Noto under the terms of the
plan as approved by shareholders.
Long-Term Incentive Program
The long-term incentive program links executive rewards to
growth in long-term shareholder value. The program is intended to
focus executives' attention on Mobil's performance over a period of
longer than one year. The committee believes this program is a key
tool in building value for Mobil shareholders, because it rewards the
strategic decisions on capital investments which are necessary for
success in the petroleum industry. It is structured in four-year
performance cycles during which achievement of longer-term financial,
strategic and operational objectives is measured.
The committee allots contingent stock equivalents, also known
as performance shares, to key executives annually, at the beginning
of each four-year performance cycle. The committee allots a number
of performance shares to each executive based on a dollar amount,
calculated by multiplying the midpoint of the executive's salary
grade by a percentage which varies with position level. The
committee then converts the amount determined in this manner into
performance shares at the average market price of Mobil common stock
over the 30 trading days immediately before the date of allotment.
Over the four-year performance cycle, dividend equivalents are
credited with respect to these allotments. These dividend
equivalents are immediately converted into additional performance
shares.
At the end of the four-year cycle, the committee determines the
amount of the long-term award by multiplying the number of
performance shares then-credited to an executive's account by (1) the
average market price of Mobil common stock over the 30 trading days
immediately before the end of the cycle and (2) a performance factor.
The performance factor can range from between 0 and 150% depending on
Mobil's performance over the cycle relative to its petroleum
comparator group as measured by three criteria: return to
shareholders (weighted 50%), earnings per share growth (weighted
25%), and return on capital employed (weighted 25%). The design of
the plan provides for a performance factor of 100% when Mobil
achieves average performance within the comparator group, with a
higher or lower factor for higher than average or lower than average
performance.
For the 1995-1998 performance cycle, a special incentive was
provided. Prior to the start of the cycle, Mobil's chairman set
three challenging goals for Mobil to achieve by the end of 1998:
annual net income of $3.0 billion; annual return on capital employed
of 12%; and a stock price of $125 prior to the two-for-one
V-13
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
stock split effective May 20, 1997. When the committee made the allotments
of performance shares at the start of the 1995-1998 cycle, it determined
that the awards otherwise payable at the end of the cycle would be
increased by 5% if one of these goals was achieved by the end of 1998, 15%
if two of these goals were achieved within that time or 30% if all three
of these goals were achieved within that time.
At the end of the 1995-1998 cycle, the committee compared
Mobil's performance for the cycle with the performance of its
petroleum comparator companies as measured by the three criteria
described above. Relative to the comparator group, Mobil's total
return to shareholders ranked third, at 23.8%, its earnings per share
growth ranked sixth, and its return on capital employed ranked
fourth. Taking all of these factors and their relative weightings
into account, the committee determined that the performance factor
for the cycle was 100%.
Mr. Noto was allotted 23,320 performance shares at the start
of the 1995-1998 cycle. Based on the market price of Mobil common
stock at the time of the allotment, $43.16 per share, the shares
allotted to him had a nominal value at the time of grant equal to the
midpoint of his salary group at Mobil at that time. At the end of
the 1995-1998 cycle, through the crediting of dividend equivalents to
his account, there were 26,532 performance shares credited to his
account. The market price of Mobil common stock at the end of the
cycle was $86.55. Accordingly, applying the formula described above,
his actual long-term incentive award was $2,296,234. This reflected
in part an increase in the price of Mobil common stock over the cycle
of $43.39 per share. In addition, because Mobil had, well before
1998, achieved the three performance goals described above, each
long-term incentive award otherwise payable was increased by 30%. As
a result, Mr. Noto's total award for the 1995-1998 cycle was
$2,985,052. Mr. Noto elected to defer 90% of this award and
received 31,041 common share equivalents as a result of such
deferral.
Stock Options
Stock options are granted to emphasize the importance of
increasing shareholder value over the long term, and to encourage and
facilitate executives' personal ownership of Mobil stock. The
committee's policy is to grant options annually, at fair market
value, to sustain executives' long-term perspective. The committee
has established stock ownership guidelines which provide a strong
incentive for executives to strive for long-term results and to
become significant Mobil shareholders. These guidelines call for
executives to own Mobil stock equal in value to a specified multiple
of their respective annual salaries, with the multiple increasing
with increases in executives' salary grades. Executives moving to
positions requiring higher levels of stock ownership are given five
years to comply with these guidelines.
The size of the stock option grant is related to the level of
responsibility and individual performance of the executive and is
intended, in conjunction with the long-term incentive program, to
provide executives with the opportunity for total average long-term
incentive compensation comparable to that afforded for similar
positions by the petroleum comparator companies over time. Because a
number of Mobil's competitors have just one form of long-term
compensation, generally stock options, the grant size is not targeted
to the number of options granted by other companies.
In 1998, the committee awarded Mr. Noto 200,000 stock
options. The committee believes the 1998 stock option grant
level is competitively justified for the reasons described
above.
Summary
Each year, the Committee reviews the compensation program,
giving particular attention to the program's linkage to increasing
shareholder value while maintaining competitive total compensation within
the petroleum comparator group. Since the competitive market for executive
talent extends beyond the petroleum industry, the committee also makes
cross checks each year against a broader comparator group. In 1997 and
1998, an outside consultant reviewed for the committee the total
compensation of the chairman and chief executive
V-14
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
officer and other senior executives. This review was based on a survey of
comparable positions at 18 other major corporations of similar size,
complexity and quality from both the oil and other industries.
The committee believes that the compensation program described
above effectively links executive and shareholder interests and
provides incentives that are consistent with the long-term strategies
required for success in the petroleum industry. Generally, a
majority share of a senior executive's total compensation is
structured in the form of incentives which reward the executive
depending on corporate and individual performance. Within the
program's mix of performance-based incentives, an executive has an
opportunity to earn above average total compensation for above
average corporate and individual performance.
Executive Compensation Tax Deductibility
U.S. income tax law limits the amount Mobil can deduct for
compensation paid to named executive officers. Performance-based
compensation that meets IRS requirements is not subject to this limit.
All awards made to the named executive officers under the 1995
Mobil incentive compensation and stock ownership plan are designed to
meet these requirements so that Mobil can deduct the related
expenses. Awards made under prior plans are deductible for Federal
income tax purposes to the extent permitted by transitional rules
provided by IRS regulations.
The committee recognizes the possibility that at times, the
amount of the base salary of a named executive officer, and other
compensation not described in the preceding paragraph, may exceed the
$1 million deduction limit allowed by the IRS and so may not be fully
deductible for Federal income tax purposes. The committee's policy
is to make a determination at any such time whether to authorize the
payment of these amounts without regard to deductibility or whether
the terms of the payment should be modified so as to preserve any
deduction otherwise available.
Management Compensation and Organization Committee
Robert G. Schwartz, Chairman
Donald V. Fites
Allen F. Jacobson
Samuel C. Johnson
J. Richard Munro
V-15
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
Performance Graph
The following graph compares the five-year cumulative total
shareholder return, including reinvested dividends, on Mobil common
stock, with two other indexes:
FIVE-YEAR CUMMULATIVE TOTAL RETURNS(1)
VALUE OF $100 INVESTED AT YEAR-END 1993
[Graphic Omitted]
Fiscal Years ended December 31
------------------------------------------------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Mobil 100 111 153 173 211 262
S&P 500 100 101 139 171 228 293
Industry Group 100 107 141 181 224 244
Assumes $100 invested on December 31, 1993, in Mobil common stock, S&P 500
Index, and a composite index, weighted by market capitalization each year, of
the following seven major petroleum companies: Exxon Corporation, Chevron
Corporation, Amoco Corporation, Royal Dutch Petroleum Company/ "Shell"
Transport and Trading Company p.l.c., Atlantic Richfield Company, British
Petroleum Company p.l.c., and Texaco Inc.
- ---------------
(1) Total return assumes reinvestment of dividends.
V-16
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
The following table presents information for the past three
years for the chief executive officer and the other four most highly
compensated executive officers of Mobil. See the Management
Compensation and Organization Committee report beginning on page V-12
for an explanation of our compensation philosophy.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-term Compensation
--------------------------
Annual Compensation Awards Payouts
------------------------------------------ ----------- ------------
Securities
Underlying
Name and Principal Position Other Annual Optional All Other
As of December 31, 1998 Year Salary Bonus Compensation(1) SARs(2) LTIP Payouts Compensation(3)
- --------------------------- ---- ---------- ---------- ---------------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lucio A. Noto................. 1998 $ 955,000 $1,537,700 $ 0 200,000 $2,985,052 $102,016
chairman of the board 1997 890,000 1,130,400 43,142 280,000 1,417,335 61,833
and chief executive officer, 1996 850,000 650,000 72,883 140,000 1,089,086 113,000
Mobil Corporation
Eugene A. Renna............... 1998 754,167 874,500 0 115,000 1,657,785 80,396
president and chief 1997 670,000 473,900 32,355 70,000 1,062,967 84,349
operating officer, 1996 670,000 350,000 64,468 70,000 1,140,984 76,860
Mobil Corporation
Thomas C. DeLoach, Jr......... 1998 495,000 422,500 0 55,000 1,027,472 70,053
executive vice president, 1997 482,500 352,000 15,569 55,000 511,494 28,825
Mobil Oil Corporation 1996 470,000 225,000 32,530 55,000 598,906 49,400
Harold R. Cramer.............. 1998 391,500 337,500 0 45,000 578,905 332,399
executive vice president
and chief financial officer,
Mobil Corporation
Stephen D. Pryor.............. 1998 383,500 337,500 0 45,000 375,955 33,484
executive vice president,
Mobil Oil Corporation
</TABLE>
- ---------------
(1) Dividend equivalent payments in respect of allotments of contingent share
equivalents under the long-term incentive program.
(2) Number of shares covered by grants may be exercised as stock options only.
(3) 1998 values represent: (1) Company allocations to Mobil's supplemental
employees savings plan (Mr. Noto: $99,108; Mr. Renna: $78,371; Mr. DeLoach:
$45,930; Mr. Cramer: $33,500; and Mr. Pryor: $33,230); (2) premiums paid by
the Company under the executive life insurance plan (Mr. Noto: $2,908; Mr.
Renna: $2,025; Mr. DeLoach: $1,123; Mr. Cramer: $1,276; and Mr. Pryor:
$254); (3) lump sum payment of $23,000 to Mr. DeLoach instead of
salary increase; and (4) payments of $247,623 to Mr. Cramer in respect
of an overseas assignment and $50,000 as a special award for
outstanding contribution during the merger negotiations.
V-17
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
OPTION TABLES
The following two tables present further details on stock options.
Option/SAR Grants in 1998
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term(2)
------------------------------------------------- -------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise Grant Date
Options Employees or Base Expiration Present
Name Granted(1) in 1998 Price Date 0% 5% 10% Value(3)
- ----------------------- ---------- ---------- -------- ---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$71.22(4) $116.01(4) $184.72(4)
Lucio A. Noto.......... 200,000 4.5% $ 71.21875 2/26/2008 $0 8,958,250 22,700,250 $2,610,000
Eugene A. Renna........ 115,000 2.6% $ 71.21875 2/26/2008 $0 5,150,994 13,052,644 $1,500,750
Thomas C. DeLoach, Jr.. 55,000 1.2% $ 71.21875 2/26/2008 $0 2,463,519 6,242,569 $717,750
Harold R. Cramer....... 45,000 1.0% $ 71.21875 2/26/2008 $0 2,015,606 5,107,556 $587,250
Stephen D. Pryor....... 45,000 1.0% $ 71.21875 2/26/2008 $0 2,015,606 5,107,556 $587,250
</TABLE>
- ---------------
(1) Number of shares covered by grants which may be exercised as stock
options. Options may be granted to employees as qualified stock options,
which are defined as incentive stock options in the Internal Revenue Code,
or options which are not qualified. All options are granted at an option
price equal to the fair market value of a share of Mobil common stock on
the date of grant (but not less than the par value) for up to ten years
after grant as determined by the Management Compensation and Organization
Committee. All options are 100% exercisable after three years. Options
are not transferable by the employee. If the employee dies before
exercising an option, it may be exercised on behalf of his or her estate
or distributed to an heir or legatee.
(2) The figures shown are potential future undiscounted values and are
unrelated to the grant date present values shown in the next column.
(3) Value based on modified Black-Scholes option pricing model which includes
assumptions for variables such as interest rates, stock price volatility
and future dividend yield. Mobil's use of this model should not be
construed as an endorsement of its accuracy. Whether the model
assumptions used will prove to be accurate cannot be known at the date
of grant. The Black-Scholes model produces a value based on freely
tradeable securities. Mobil employee stock options are not
transferable, so the "present value" shown cannot be realized by the
holder. Recognizing the limitations of the model as described, the
following assumptions were used to estimate the grant date present
value: dividend yield of 3.20%, five-year zero-coupon risk-free
interest rate of 5.66%, estimated volatility of 18% and estimated
average expected option term of five years. Mobil stock options are
issued at the fair market value of its stock on the date of grant, and
terminate if unexercised after ten years. The holder can derive a
benefit only to the extent the market value of Mobil common stock is
higher than the exercise price at the date of the actual exercise.
(4) If the assumed annual rate of stock price appreciation of 0%, 5% or 10%
per year should occur, the market value per share of Mobil common stock
at the end of the ten-year option term would be $71.22, $116.01 or
$184.72, as the case may be.
V-18
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
Aggregated Option/SAR Exercises in 1998 and Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs (4)
at FY-end at FY-end
---------------- ----------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(1) Realized(2) Unexercisable(3) Unexercisable(3)
- ----------------------------- ---------------- ------------ ---------------- ----------------
<S> <C> <C> <C> <C>
Lucio A. Noto................ 28,582 $ 1,148,290 355,000 $ 16,799,844
620,000 14,433,750
Eugene A. Renna.............. 20,000 $ 1,023,125 166,522 $ 7,811,982
255,000 5,679,219
Thomas C. DeLoach, Jr........ 2,290 $ 81,438 247,454 $ 12,727,028
165,000 3,899,844
Harold R. Cramer............. 7,628 $ 351,961 108,388 $ 5,602,682
117,000 2,695,781
Stephen D. Pryor............. 2,266 $ 143,365 90,334 $ 4,638,317
103,000 2,281,031
</TABLE>
- ---------------
(1) Represents number of shares covered by stock options or SARs exercised.
(2) Difference between exercise price and market value on date of exercise.
(3) Qualified options granted prior to 1995 were 100% exercisable after one
year. Non-qualified options granted prior to 1995 were 50% exercisable
after one year and 100% exercisable after two years. All options granted
in 1995 and thereafter are 100% exercisable after three years.
(4) Value of unexercised in-the-money options is based on the December 31,
1998 stock price of $87.125.
Long-term Incentive Program Contingent Allotments in 1998
<TABLE>
Performance
Number of or Other Estimated Future Payouts
Contingent Period Until -------------------------------------------
Stock Maturation or
Name Equivalents Payouts Threshold Target Maximum
- --------------------------- ----------- --------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Lucio A. Noto.............. 16,906 1998-2001 $ 0 $1,472,935 $2,209,403
Eugene A. Renna............ 12,535 1998-2001 0 1,092,112 1,638,168
Thomas C. DeLoach, Jr...... 5,711 1998-2001 0 497,571 746,356
Harold R. Cramer........... 5,168 1998-2001 0 450,262 675,393
Stephen D. Pryor........... 5,168 1998-2001 0 450,262 675,393
</TABLE>
Under this program, we determine allotments of contingent stock
equivalents, also known as performance shares, for participants annually,
at the start of a four-year performance period. We base these allotments
on dollar amounts, determined by reference to the participants' level
within Mobil and the midpoint of the participants' salary grade at the
beginning of each period, which we then convert into performance shares at
the average market price for Mobil common stock over the 30 trading days
immediately preceding the allotment. Over the four-year cycle, we will
credit dividend equivalents with respect to these allotments, which we
will immediately convert into additional performance shares. After the end
of the period, the Management
V-19
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
Compensation and Organization Committee of the Mobil Board determines the
extent to which the contingent allotments should be converted into actual
awards. The committee's policy in granting actual awards is based on
Mobil's performance relative to its petroleum comparator group using three
criteria: earnings per share growth, return on capital employed, and total
shareholder return.
Payouts under the program are based in part on the price of the
Mobil common stock. The price used for the estimates provided is
$87.125 per share, which was the closing price of Mobil common stock
on the New York Stock Exchange on December 31, 1998. Actual payouts,
if any, will be based on the mean of the high and low sales prices of
Mobil common stock on the Exchange for a period of 30 trading days
immediately before the determination of the committee referred to in
the preceding paragraph.
Pension Table
Mobil employees in the higher salary classifications receive
pension benefits under two non-contributory plans: a retirement plan
qualified under U.S. tax law, which is non-discriminatory, and a
supplemental plan that provides benefits that cannot be provided
under the qualified plan, due to the limitations imposed by U.S. tax
law, plus certain additional benefits. Employees who retire or
terminate as vested participants are entitled to receive retirement
benefits under these plans computed under a final average pay
formula. Benefits under the qualified plan are provided, at an
employee's election, either in the form of a life annuity or in one
of several alternative forms having an equivalent actuarial value.
Benefits under the supplemental plan, which will constitute the
majority of the benefits payable to Messrs. Noto, Renna, DeLoach,
Cramer and Pryor, are provided only in the form of an annuity for a
fixed number of years equal to one-half the employee's life
expectancy. The table below shows the annual annuity amount that
would be payable for life to employees in the higher salary
classifications, commencing at age 60 or older, if they were to elect
a life annuity under the qualified plan and if the benefits provided
under the supplemental plan for one-half the employee's life
expectancy were converted to a life annuity having an equivalent
actuarial value.
Additional Retirement Compensation
Under Mobil Oil Corporation's executive life insurance program,
executives, including Mobil named executive officers, who retire
after reaching age 55, or after age 50 with Mobil's consent, are
entitled, in addition to term coverage to age 65, to a series of cash
payments. These payments commence once the executive attains age 65
and continue for three to 15 years, according to the executive's
advance election, and may be used to continue the policy or taken in
cash. The amounts of these payments are the amounts determined to be
necessary, based on the insurance company's applicable mortality
tables and an interest rate of 7.5%, to provide a fully paid up
policy with a death benefit equal to two times the sum of the
executive's final base pay and bonus.
V-20
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
Estimated Annual Benefits under Final Average Pay Formula
<TABLE>
<CAPTION>
Earnings Credited
For Retirement
Plan Benefits* Years of Service at Retirement
- -------------------- ---------------------------------------------------------------------------------------------------
15 20 25 30 35 40 45
---------- ---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 400,000 $ 104,000 $ 138,000 $ 172,000 $ 206,000 $ 241,000 $ 276,000 $ 311,000
600,000 160,000 213,000 266,000 319,000 372,000 426,000 480,000
800,000 216,000 288,000 359,000 431,000 503,000 576,000 649,000
1,000,000 273,000 363,000 453,000 544,000 634,000 726,000 817,000
1,200,000 329,000 438,000 547,000 656,000 766,000 876,000 986,000
1,400,000 385,000 513,000 641,000 769,000 897,000 1,026,000 1,155,000
1,600,000 441,000 588,000 735,000 881,000 1,028,000 1,176,000 1,324,000
1,800,000 498,000 663,000 828,000 994,000 1,159,000 1,326,000 1,492,000
2,000,000 554,000 738,000 922,000 1,106,000 1,291,000 1,476,000 1,661,000
2,200,000 610,000 813,000 1,016,000 1,219,000 1,422,000 1,626,000 1,830,000
2,400,000 666,000 888,000 1,110,000 1,331,000 1,553,000 1,776,000 1,999,000
2,600,000 723,000 963,000 1,203,000 1,444,000 1,684,000 1,926,000 2,168,000
</TABLE>
- -------------
* Earnings credited for retirement plan benefits represent one-third of the
highest consecutive 36 months of base salary (the salary column in the
table on page V-17) out of the last 120 months before retirement plus
one-third of 100% of the highest three consecutive completed calendar years
of short-term incentive compensation (the bonus column in the table on page
V-17) awarded out of the last 10 completed calendar years before
retirement. The amounts shown reflect the estimated amount of the offset
under the plan for Social Security benefits. Estimated credited years of
service are as follows for Mr. Noto, 38 years; Mr. Renna, 30 years; Mr.
DeLoach, 30 years; Mr. Cramer, 25 years; and Mr. Pryor, 25 years.
V-21
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
STOCK-BASED HOLDINGS OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table shows the shares of Mobil common stock, the shares
of such stock acquirable within 60 days pursuant to the exercise of employee
stock options, the units of interest in shares of Mobil's ESOP preferred
stock, the deferred common share equivalents, and the total Mobil stock-based
holdings, which are beneficially owned by each director and nominee for
director, each executive officer named in the Summary Compensation Table on
page V-17 who is not a director, and all directors and executive officers as a
group. The table indicates the alignment of these individuals' personal
financial interests with the interests of Mobil's shareholders because the
value of their total holdings is dependent upon the price of Mobil common
stock.
<TABLE>
<CAPTION>
Units of
Common Interest in
Shares Mobil Deferred
Common Acquirable ESOP Common Total
Shares Within Preferred Share Stock-Based
Directors, Nominees and Executive Officers Owned 60 Days Shares Equivalents Holdings
- --------------------------------------------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Lewis M. Branscomb........................... 2,000 0 0 1,680 3,680
Harold R. Cramer............................. 54,026 144,388 200 3,997 202,611
Thomas C. DeLoach, Jr........................ 101,430 302,454 111 7,760 411,755
Donald V. Fites.............................. 3,966 0 0 6,008 9,974
Charles A. Heimbold, Jr...................... 2,000 0 0 2,568 4,568
Allen F. Jacobson............................ 2,316 0 0 25,277 27,593
Samuel C. Johnson............................ 40,000 0 0 1,680 41,680
Helene L. Kaplan............................. 8,000 0 0 14,594 22,594
J. Richard Munro............................. 2,000 0 0 6,945 8,945
Lucio A. Noto................................ 134,611 495,000 139 84,781 714,531
Aulana L. Peters............................. 200 0 0 10,669 10,869
Stephen D. Pryor............................. 22,501 112,334 860 6,701 142,396
Eugene A. Renna.............................. 117,357 236,522 128 8,982 362,989
Charles S. Sanford, Jr....................... 4,002 0 0 5,569 9,571
Robert G. Schwartz........................... 2,000 0 0 21,030 23,030
Iain D.T. Vallance........................... 0 0 0 1,244 1,244
All directors and executive officers as a
group, including those named above.......... 722,979 2,073,915 7,449 263,043 3,067,386
</TABLE>
The information in the table is as of March 1, 1999. Shares of
Mobil common stock owned by directors and executive officers include 14,199
shares held by family members or family trusts of certain directors and
officers, as to which shares these persons disclaim beneficial ownership.
Shares of Mobil common stock owned by directors and executive officers also
include 62,000 shares of restricted stock held by certain officers as to which
shares these officers possess sole voting power, but no investment power,
during the restricted period. The directors and executive officers have sole
discretion as to voting and investment power as to all remaining shares of
Mobil common stock which they presently hold. Owners of units of Mobil ESOP
preferred stock possess sole voting power, but no investment power, with
respect to these units. Deferred common share equivalents are stock
equivalents equal in value to common stock which earn dividend equivalents
equal to dividends declared on common stock. Executive officers are credited
with deferred common share equivalents under the supplemental employees
savings plan of Mobil Oil Corporation, and incentive awards to these officers
may be deferred and paid in equivalents under the 1995 Mobil incentive
compensation and stock ownership plan and its predecessors. Non-employee
directors receive a portion of their annual retainers in equivalents
and may elect to receive all or part of their fees and the cash portion of
their annual retainers in equivalents under the deferred fee plan referred to on
V-22
<PAGE>
Chapter Five - Other Mobil Annual Meeting Proposals
page V-9. In addition, when the retirement plan for non-employee directors
was terminated in January 1997, some directors elected to receive the
actuarial present values of their accrued benefits under that plan in such
equivalents. Individuals credited with deferred common share equivalents do
not have voting power and may only exercise investment power in very limited
circumstances, in respect of these equivalents.
No individual named above owns beneficially more than 1% of the outstanding
shares of either of Mobil's classes of voting securities, nor do all directors
and current executive officers as a group, including those named above. As of
March 1, 1999, the trustee under the employees savings plan of Mobil Oil
Corporation held 28,015,387 shares of the common stock of Mobil in the plan,
which is approximately 3.59% of the total number of shares of Mobil common stock
outstanding at that date. As of the same date, the trustee under the Mobil
ESOP, which is incorporated in the employees savings plan of Mobil Oil
Corporation, held all 163,469 outstanding shares of the Mobil ESOP preferred
stock. The shares of common stock and preferred stock held by the trustees
together represented 5.57% of the votes which may be cast by the voting
securities of Mobil outstanding as of March 1, 1999. All these shares of
common stock are beneficially owned by participants in the employees savings
plan of Mobil Oil Corporation; all these shares of Mobil ESOP preferred stock
which have been allocated to participants in the Mobil ESOP, numbering 90,260,
are beneficially owned by these participants, the balance being held for
allocation over the life of the plan.
Special Arrangements Relating to Possible Change of Control
For a discussion of special arrangements affecting executive
management which would result from a change of control, see "Interests
of Certain Persons in the Merger" on page I-49.
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Securities and Exchange Act of
1934, Mobil's directors and officers are required to file reports with
the SEC and the NYSE, within specified monthly and annual due dates,
relating to their ownership of and transactions in Mobil's equity
securities. Robert F. Amrhein, an officer of Mobil, inadvertently
filed one monthly report relating to one transaction after the date by
which it should have been filed.
V-23
<PAGE>
CHAPTER SIX
ADDITIONAL INFORMATION FOR SHAREHOLDERS
FUTURE SHAREHOLDER PROPOSALS
Exxon
Any shareholder proposal for Exxon's annual meeting in 2000 must be sent to
the Secretary at the address of Exxon's principal executive office given under
"The Companies" on page I-2. The deadline for receipt of a proposal to be
considered for inclusion in Exxon's proxy statement is December 11, 1999. The
deadline for notice of a proposal for which a shareholder will conduct his or
her own solicitation is February 23, 2000. On request, the Secretary will
provide detailed instructions for submitting proposals.
Mobil
Mobil will hold an annual meeting in the year 2000 only if the merger has
not already been completed. If such meeting is held, shareholders' proposals
will be eligible for consideration for inclusion in the proxy statement for the
2000 annual meeting pursuant to Rule 14a-8 under the Securities and Exchange Act
of 1934, as amended, if such proposals are received by Mobil before the close of
business on December 10, 1999. Notices of shareholders' proposals submitted
outside the processes of Rule 14a-8 will be considered timely, pursuant to the
advance notice requirement set forth in Article II, Section 1 of Mobil's
by-laws, if such notices are delivered to or mailed and received by Mobil during
the period beginning on February 25, 2000 and ending at the close of business on
March 27, 2000. Any such proposal or notice should be directed to the attention
of the Secretary, Mobil Corporation, 3225 Gallows Road, Fairfax, Virginia
22037-0001.
SEC rules set forth standards for the exclusion of some shareholder
proposals from a proxy statement for an annual meeting.
WHERE YOU CAN FIND MORE INFORMATION
Exxon and Mobil file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Our SEC filings are also available to the public from commercial document
retrieval services and at the web site maintained by the SEC at
"http://www.sec.gov."
Exxon filed a registration statement on Form S-4 to register with the SEC
the Exxon common stock to be issued to Mobil shareholders in the merger. This
joint proxy statement/prospectus is a part of that registration statement and
constitutes a prospectus of Exxon in addition to being a proxy statement of
Exxon and Mobil for the meetings. As allowed by SEC rules, this joint proxy
statement/prospectus does not contain all the information you can find in the
registration statement or the exhibits to the registration statement.
The SEC allows us to "incorporate by reference" information into this joint
proxy statement/prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
joint proxy statement/prospectus, except for any information superseded by
information in, or incorporated by reference in, this joint proxy statement/
prospectus. This joint proxy statement/prospectus incorporates by reference the
documents set forth below that we have previously filed with the SEC. These
documents contain important information about our companies and their finances.
VI-1
<PAGE>
Chapter Six - Additional Information for Shareholders
Exxon SEC Filings (File No. 1-2256) Period
...............................................................................
Annual Report on Form 10-K Fiscal Year ended December 31, 1998
Current Report on Form 8-K Filed on December 1, 1998
The description of Exxon common stock
set forth in the Registration
Statement on Form 10 filed April 9,
1935, as amended by Current Report
on Form 8-K for the month of May 1970
and Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993
Mobil SEC Filings (File No. 001-07555) Period
...............................................................................
Annual Report on Form 10-K Fiscal Year ended December 31, 1998
Current Report on Form 8-K Filed on January 27, 1999
Current Report on Form 8-K Filed on December 2, 1998
We are also incorporating by reference additional documents that we file
with the SEC between the date of this joint proxy statement/prospectus and the
date of the meetings.
Exxon has supplied all information contained or incorporated by reference
in this joint proxy statement/prospectus relating to Exxon, and Mobil has
supplied all such information relating to Mobil.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this joint proxy statement/prospectus. Shareholders may obtain
documents incorporated by reference in this joint proxy statement/prospectus by
requesting them in writing or by telephone from the appropriate party at the
following address:
Exxon Shareholder Services Mobil Corporation
P.O. Box 8033 3225 Gallows Road
Boston, MA 02266-8033 Fairfax, VA 22307-0001
Tel: (800) 252-1800 Tel: (703) 846-3893
If you would like to request documents from us, please do so by May 20,
1999 to receive them before the Meetings.
You can also get more information by visiting Exxon's web site at
www.exxon.com and Mobil's web site at www.mobil.com. Web site materials are not
part of this joint proxy statement/prospectus.
You should rely only on the information contained or incorporated by reference
in this joint proxy statement/prospectus to vote on the Exxon proposals and the
Mobil proposals. We have not authorized anyone to provide you with information
that is different from what is contained in this joint proxy statement/
prospectus. This joint proxy statement/prospectus is dated April 5, 1999. You
should not assume that the information contained in the joint proxy statement/
prospectus is accurate as of any date other than such date, an neither the
mailing of this joint proxy statement/prospectus to shareholders nor the
issuance of Exxon common stock in the merger shall create any implication to
the contrary.
VI-2
<PAGE>
Annex A
AGREEMENT AND PLAN OF MERGER
dated as of
December 1, 1998
among
MOBIL CORPORATION
EXXON CORPORATION
and
LION ACQUISITION SUBSIDIARY CORPORATION
<PAGE>
TABLE OF CONTENTS*
----------------
PAGE
----
ARTICLE 1
THE MERGER
SECTION 1.01. The Merger..............................................A-1
SECTION 1.02. Conversion of Shares....................................A-2
SECTION 1.03. Surrender and Payment...................................A-3
SECTION 1.04. Stock Options...........................................A-4
SECTION 1.05. Adjustments.............................................A-5
SECTION 1.06. Fractional Shares.......................................A-5
SECTION 1.07. Withholding Rights......................................A-6
SECTION 1.08. Lost Certificates.......................................A-6
SECTION 1.09. Shares Held by Company Affiliates.......................A-6
SECTION 1.10. Dissenter's Rights......................................A-6
ARTICLE 2
CERTAIN GOVERNANCE MATTERS
SECTION 2.01. Acquiror Name...........................................A-6
SECTION 2.02. Acquiror Board of Directors.............................A-6
SECTION 2.03. Transition Committee....................................A-7
SECTION 2.04. Certificate of Incorporation of the Surviving
Corporation.............................................A-7
SECTION 2.05. By-laws of the Surviving Corporation....................A-7
SECTION 2.06. Directors and Officers of the Surviving Corporation.....A-7
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Corporate Existence and Power...........................A-7
SECTION 3.02. Corporate Authorization.................................A-8
SECTION 3.03. Governmental Authorization..............................A-8
SECTION 3.04. Non-Contravention.......................................A-8
SECTION 3.05. Capitalization of the Company...........................A-9
SECTION 3.06. Subsidiaries............................................A-9
SECTION 3.07. SEC Filings............................................A-10
SECTION 3.08. Financial Statements...................................A-10
SECTION 3.09. Disclosure Documents...................................A-11
SECTION 3.10. Absence of Certain Changes.............................A-11
SECTION 3.11. No Undisclosed Material Liabilities....................A-12
SECTION 3.12. Litigation.............................................A-12
SECTION 3.13. Taxes..................................................A-12
SECTION 3.14. Employee Benefit Plans.................................A-13
SECTION 3.15. Compliance with Laws...................................A-14
SECTION 3.16. Finders' or Advisors' Fees.............................A-14
SECTION 3.17. Environmental Matters..................................A-14
SECTION 3.18. Opinion of Financial Advisor...........................A-14
SECTION 3.19. Pooling; Tax Treatment.................................A-14
- ---------------
*Table of Contents is not a part of this Agreement.
<PAGE>
PAGE
----
SECTION 3.20. Pooling Letter.........................................A-15
SECTION 3.21. Takeover Statutes......................................A-15
SECTION 3.22. Rights Agreement.......................................A-15
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
SECTION 4.01. Corporate Existence and Power..........................A-15
SECTION 4.02. Corporate Authorization................................A-15
SECTION 4.03. Governmental Authorization.............................A-16
SECTION 4.04. Non-Contravention......................................A-16
SECTION 4.05. Capitalization.........................................A-16
SECTION 4.06. Subsidiaries...........................................A-17
SECTION 4.07. SEC Filings............................................A-17
SECTION 4.08. Financial Statements...................................A-18
SECTION 4.09. Disclosure Documents...................................A-18
SECTION 4.10. Absence of Certain Changes.............................A-18
SECTION 4.11. No Undisclosed Material Liabilities....................A-19
SECTION 4.12. Litigation.............................................A-19
SECTION 4.13. Taxes..................................................A-19
SECTION 4.14. Employee Benefit Plans.................................A-20
SECTION 4.15. Compliance with Laws...................................A-20
SECTION 4.16. Finders' or Advisors' Fees.............................A-21
SECTION 4.17. Environmental Matters..................................A-21
SECTION 4.18. Opinion of Financial Advisor...........................A-21
SECTION 4.19. Pooling; Tax Treatment.................................A-21
SECTION 4.20. Pooling Letter.........................................A-21
ARTICLE 5
COVENANTS OF THE COMPANY
SECTION 5.01. Conduct of the Company.................................A-21
SECTION 5.02. Company Stockholder Meeting; Proxy Material............A-23
SECTION 5.03. Other Offers...........................................A-23
ARTICLE 6
COVENANTS OF ACQUIROR
SECTION 6.01. Conduct of Acquiror....................................A-25
SECTION 6.02. Obligations of Merger Subsidiary.......................A-26
SECTION 6.03. Director and Officer Liability.........................A-26
SECTION 6.04. Acquiror Stockholder Meeting; Form S-4.................A-26
SECTION 6.05. Stock Exchange Listing.................................A-27
SECTION 6.06. Employee Benefits......................................A-27
ARTICLE 7
COVENANTS OF ACQUIROR AND THE COMPANY
SECTION 7.01. Best Efforts...........................................A-28
SECTION 7.02. Certain Filings........................................A-29
SECTION 7.03. Access to Information..................................A-29
SECTION 7.04. Tax and Accounting Treatment...........................A-29
A-ii
<PAGE>
PAGE
----
SECTION 7.05. Public Announcements...................................A-29
SECTION 7.06. Further Assurances.....................................A-29
SECTION 7.07. Notices of Certain Events..............................A-30
SECTION 7.08. Affiliates.............................................A-30
SECTION 7.09. Payment of Dividends...................................A-30
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to the Obligations of Each Party............A-30
SECTION 8.02. Conditions to the Obligations of Acquiror and
Merger Subsidiary......................................A-31
SECTION 8.03. Conditions to the Obligations of the Company...........A-32
ARTICLE 9
TERMINATION
SECTION 9.01. Termination............................................A-33
SECTION 9.02. Effect of Termination..................................A-34
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices...............................................A-34
SECTION 10.02. Non-Survival of Representations and Warranties........A-35
SECTION 10.03. Amendments; No Waivers................................A-35
SECTION 10.04. Expenses..............................................A-35
SECTION 10.05. Successors and Assigns................................A-36
SECTION 10.06. Governing Law.........................................A-36
SECTION 10.07. Jurisdiction..........................................A-36
SECTION 10.08. Waiver of Jury Trial..................................A-37
SECTION 10.09. Counterparts; Effectiveness...........................A-37
SECTION 10.10. Entire Agreement......................................A-37
SECTION 10.11. Captions..............................................A-37
SECTION 10.12. Severability..........................................A-37
A-iii
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit A - Stock Option Agreement
Exhibit B-1 - Letter Relating to Pooling (Company)
Exhibit B-2 - Letter Relating to Pooling (Acquiror)
Exhibit B-3 - Affiliate's Letter (Company)
Exhibit C-1 - Tax Certificate (Acquiror)
Exhibit C-2 - Tax Certificate (Company)
Schedule 1.04
Schedule 3.01
Schedule 3.04
Schedule 3.06(a)
Schedule 3.06(b)
Schedule 3.10
Schedule 3.11(c)
Schedule 3.13
Schedule 3.14
Schedule 4.11(c)
Schedule 4.13
Schedule 4.14
Schedule 7.08(a)
Schedule 7.08(b)
Schedule 8.01(e)
A-iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 1, 1998 among Mobil
Corporation, a Delaware corporation (the "Company"), Exxon Corporation, a New
Jersey corporation ("Acquiror"), and Lion Acquisition Subsidiary Corporation, a
newly-formed Delaware corporation and a wholly-owned first-tier subsidiary of
Acquiror ("Merger Subsidiary").
WHEREAS, the respective Boards of Directors of Acquiror, Merger Subsidiary
and the Company have approved this Agreement, and deem it advisable and in the
best interests of their respective stockholders to consummate the merger of
Merger Subsidiary with and into the Company on the terms and conditions set
forth herein;
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger contemplated by this Agreement qualify as a "reorganization" within
the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the rules and regulations promulgated thereunder;
WHEREAS, for accounting purposes, it is intended that the Merger be
accounted for as a pooling of interests under United States generally accepted
accounting principles ("GAAP"); and
WHEREAS, as a condition and inducement to Acquiror entering into this
Agreement and incurring the obligations set forth herein, concurrently with the
execution and delivery of this Agreement, Acquiror and the Company are entering
into a Stock Option Agreement in the form of Exhibit A hereto (the "Option
Agreement") pursuant to which the Company has granted Acquiror an option,
exercisable under the circumstances specified therein, to purchase shares of
common stock, par value $1.00 per share, of the Company (the "Shares").
NOW, THEREFORE, in consideration of the promises and the respective
representations, warranties, covenants, and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.01. The Merger. (a) At the Effective Time, Merger Subsidiary
shall be merged (the "Merger") with and into the Company in accordance with the
requirements of the General Corporation Law of the State of Delaware (the
"Delaware Law"), whereupon the separate existence of Merger Subsidiary shall
cease, and the Company shall be the surviving corporation in the Merger (the
"Surviving Corporation").
(b) As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger, the Company and Merger
Subsidiary will file a certificate of merger with the Secretary of State of the
State of Delaware and make all other filings or recordings required by Delaware
Law in connection with the Merger. The Merger shall become effective at such
time as the certificate of merger is duly filed with the Secretary of State of
the State of Delaware or at such later time as is specified in the certificate
of merger (the "Effective Time").
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities and duties of the Company and Merger
Subsidiary, all as provided under Delaware Law.
(d) The closing of the Merger (the "Closing") shall take place (i) at the
offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, NY, as soon as
practicable, but in any event within three business days after the day on which
the last to be fulfilled or waived of the conditions set forth in Article 8
(other than those conditions that by their nature are to be fulfilled at the
Closing, but subject to the fulfillment or waiver of such conditions) shall be
fulfilled or waived in accordance with this Agreement or (ii) at such other
place and time or on such other date as the Company and Acquiror may agree
in writing (the "Closing Date").
<PAGE>
Annex A -- Agreement and Plan of Merger
SECTION 1.02. Conversion of Shares. (a) At the Effective Time by
virtue of the Merger and without any action on the part of the holder
thereof:
(i) each Share held by the Company as treasury stock or owned by
Acquiror or any subsidiary of Acquiror (excluding Shares, if any, held in
any "Rabbi trust" identified on Schedule 3.14, which may be accounted for
as treasury stock ("Rabbi Trust Shares")) immediately prior to the
Effective Time (together with the associated Company Right (as defined in
Section 3.05), if any) shall be canceled, and no payment shall be made with
respect thereto;
(ii) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become
one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so converted and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation;
(iii) each Share (including each Rabbi Trust Share) (together with the
associated Company Right) outstanding immediately prior to the Effective
Time shall, except as otherwise provided in Section 1.02(a)(i), be
converted into the right to receive 1.32015 (the "Exchange Ratio") shares
of fully paid and nonassessable common stock, without par value, of
Acquiror ("Acquiror Common Stock"); and
(iv) Each issued and outstanding share of Series B ESOP Convertible
Preferred Stock, par value $1.00 per share, of the Company (the "Series B
Preferred Stock") held in the leveraged ESOP portion of the Company's
Employee Savings Plan (the "Leveraged ESOP"), other than Dissenting Shares,
shall be converted into the right to receive one validly issued, fully paid
and nonassessable share of a new series of preferred stock to be issued by
Acquiror (as a successor under Section 8(A) of the Certificate of
Designation, Preferences and Rights establishing the Series B Preferred
Stock) at the Effective Time (the "Acquiror Preferred Stock"). Each share
of Acquiror Preferred Stock shall, to the extent possible, have terms that
are identical to those of the Series B Preferred Stock immediately prior to
the Effective Time, except that, (a) as a result of the Merger the issuer
thereof shall be Acquiror rather than the Company, and (b) upon conversion
thereof (at the same times and subject to the same terms and conditions
under which Series B Preferred Stock is convertible into Shares) each share
of Acquiror Preferred Stock shall be converted into that Merger
Consideration (as defined below) which the holder thereof would have
received had the Series B Preferred Stock of such holder been converted
into Shares immediately prior to the Effective Time.
(b) All Acquiror Common Stock issued as provided in this Section 1.02 shall
be of the same class and shall have the same terms as the currently outstanding
Acquiror Common Stock. Acquiror shall, following the Closing, except as provided
in Section 1.03(c), pay all stamp duties and stamp duty reserve tax, if any,
imposed in connection with the issuance or creation of the Acquiror Common Stock
and Acquiror Preferred Stock in connection with the Merger. The Company shall
have the right to approve the Certificate of Designations establishing the
Acquiror Preferred Stock, such approval not to be unreasonably withheld.
(c) From and after the Effective Time, all Shares (together with the
associated Company Rights) converted in accordance with Section 1.02(a)(iii) and
all Series B Preferred Stock (other than Dissenting Shares) converted in
accordance with Section 1.02(a)(iv) shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares or Series B Preferred Stock shall
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration or Preferred Merger Consideration (each as defined below),
as applicable, and any dividends payable pursuant to Section 1.03(f). From and
after the Effective Time, all certificates representing the common stock of
Merger Subsidiary shall be deemed for all purposes to represent the number of
shares of common stock of the Surviving Corporation into which they were
converted in accordance with Section 1.02(a)(ii).
A-2
<PAGE>
Annex A -- Agreement and Plan of Merger
(d) The Acquiror Common Stock to be received as consideration pursuant to
the Merger by each holder of Shares (together with cash in lieu of fractional
shares of Acquiror Common Stock as specified below) is referred to herein as the
"Merger Consideration". The Acquiror Preferred Stock to be received as
consideration pursuant to the Merger by each holder of Series B Preferred Stock
is referred to herein as the "Preferred Merger Consideration."
(e) For purposes of this Agreement, the word "Subsidiary" when used with
respect to any Person means any other Person, whether incorporated or
unincorporated, of which (i) more than fifty percent of the securities or other
ownership interests or (ii) securities or other interests having by their terms
ordinary voting power to elect more than fifty percent of the board of directors
or others performing similar functions with respect to such corporation or other
organization, is directly owned or controlled by such Person or by any one or
more of its Subsidiaries. For purposes of this Agreement, "Person" means an
individual, a corporation, a limited liability company, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or any agency or instrumentality thereof.
SECTION 1.03. Surrender and Payment. (a) Prior to the Effective Time,
Acquiror shall appoint an agent reasonably acceptable to the Company (the
"Exchange Agent") for the purpose of exchanging certificates representing Shares
or Series B Preferred Stock (the "Certificates") for the Merger Consideration or
Preferred Merger Consideration, as applicable. Acquiror will make available to
the Exchange Agent, as needed, the Merger Consideration and Preferred Merger
Consideration to be paid in respect of the Shares and the Series B Preferred
Stock, respectively. Promptly after the Effective Time, Acquiror will send, or
will cause the Exchange Agent to send, to each holder of record at the Effective
Time of Shares and Series B Preferred Stock a letter of transmittal for use in
such exchange (which shall specify that the delivery shall be effected, and risk
of loss and title shall pass, only upon proper delivery of the Certificates to
the Exchange Agent) in such form as the Company and Acquiror may reasonably
agree, for use in effecting delivery of Shares and Series B Preferred Stock to
the Exchange Agent.
(b) Each holder of Shares that have been converted into a right to receive
the Merger Consideration, upon surrender to the Exchange Agent of a Certificate,
together with a properly completed letter of transmittal, will be entitled to
receive the Merger Consideration in respect of the Shares represented by such
Certificate. Until so surrendered, each such Certificate shall, after the
Effective Time, represent for all purposes only the right to receive such Merger
Consideration. Each holder of Series B Preferred Stock that has been converted
into a right to receive the Preferred Merger Consideration, upon surrender to
the Exchange Agent of a Certificate, together with a properly completed letter
of transmittal, will be entitled to receive the Preferred Merger Consideration
in respect of the Series B Preferred Stock represented by such Certificate.
Until so surrendered, each such Certificate shall, after the Effective Time,
represent for all purposes only the right to receive such Preferred Merger
Consideration.
(c) If any portion of the Merger Consideration or the Preferred Merger
Consideration is to be paid to a Person other than the Person in whose name the
Certificate is registered, it shall be a condition to such payment that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the Person requesting such payment shall pay to the
Exchange Agent any transfer or other taxes required as a result of such payment
to a Person other than the registered holder of such Certificate or establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) After the Effective Time, there shall be no further registration of
transfers of Shares or Series B Preferred Stock. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged for the consideration provided for, and in accordance with the
procedures set forth, in this Article 1.
(e) Any portion of the Merger Consideration or the Preferred Merger
Consideration made available to the Exchange Agent pursuant to Section 1.03(a)
that remains unclaimed by the holders of Shares or Series B Preferred Stock one
year after the Effective Time shall be returned to Acquiror, upon demand, and
any such holder who has not
A-3
<PAGE>
Annex A -- Agreement and Plan of Merger
exchanged his Shares for the Merger Consideration or the Series B Preferred
Stock for the Preferred Merger Consideration, as applicable, in accordance
with this Section prior to that time shall thereafter look only to Acquiror
for payment of the Merger Consideration in respect of his Shares or the
Preferred Merger Consideration in respect of the Series B Preferred Stock.
Notwithstanding the foregoing, Acquiror shall not be liable to any holder
of Shares or Series B Preferred Stock for any amount paid to a public
official pursuant to applicable abandoned property laws. Any amounts
remaining unclaimed by holders of Shares or Series B Preferred Stock three
years after the Effective Time (or such earlier date immediately prior to
such time as such amounts would otherwise escheat to or become property of
any governmental entity) shall, to the extent permitted by applicable law,
become the property of Acquiror free and clear of any claims or interest of
any Person previously entitled thereto.
(f) No dividends or other distributions with respect to Acquiror Common
Stock or Acquiror Preferred Stock issued in the Merger shall be paid to the
holder of any unsurrendered Certificates until such Certificates are surrendered
as provided in this Section. Subject to the effect of applicable laws, following
such surrender, there shall be paid, without interest, to the record holder of
the Acquiror Common Stock or Acquiror Preferred Stock, as appropriate, issued in
exchange therefor (i) at the time of such surrender, all dividends and other
distributions payable in respect of such Acquiror Common Stock or Acquiror
Preferred Stock, as the case may be, with a record date after the Effective Time
and a payment date on or prior to the date of such surrender and not previously
paid and (ii) at the appropriate payment date, the dividends or other
distributions payable with respect to such Acquiror Common Stock or Acquiror
Preferred Stock, as the case may be, with a record date after the Effective Time
but with a payment date subsequent to such surrender. For purposes of dividends
or other distributions in respect of Acquiror Common Stock and Acquiror
Preferred Stock, all Acquiror Common Stock and Acquiror Preferred Stock to be
issued pursuant to the Merger (but not options therefor issued pursuant to
Section 1.04 unless actually exercised at the Effective Time) shall be entitled
to dividends pursuant to the immediately preceding sentence as if issued and
outstanding as of the Effective Time.
SECTION 1.04. Stock Options. (a) At the Effective Time, each outstanding
option to purchase Shares (a "Company Stock Option") granted under the Company's
plans identified in Schedule 1.04 as being the only compensation or benefit
plans or agreements pursuant to which Shares may be issued (collectively, the
"Company Stock Option Plans"), whether vested or not vested, shall be deemed
assumed by Acquiror and shall thereafter be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such Company
Stock Option prior to the Effective Time (in accordance with the past practice
of the Company with respect to interpretation and application of such terms and
conditions), the number (rounded down to the nearest whole number) of shares of
Acquiror Common Stock determined by multiplying (x) the number of Shares subject
to such Company Stock Option immediately prior to the Effective Time by (y) the
Exchange Ratio, at a price per share of Acquiror Common Stock (rounded up to the
nearest whole cent) equal to (A) the exercise price per Share otherwise
purchasable pursuant to such Company Stock Option divided by (B) the Exchange
Ratio. In addition, prior to the Effective Time, the Company will make any
amendments to the terms of such stock option or compensation plans or
arrangements that are necessary to give effect to the transactions contemplated
by this Section. The Company represents that no consents are necessary to give
effect to the transactions contemplated by this Section.
(b) Acquiror shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Acquiror Common Stock and Acquiror
Preferred Stock for delivery pursuant to the terms set forth in this Section
1.04.
(c) At the Effective Time, each award or account (including restricted
stock, stock equivalents and stock units, but excluding Company Stock Options)
outstanding as of the date hereof ("Company Award") that has been established,
made or granted under any employee incentive or benefit plans, programs or
arrangements and non-employee director plans maintained by the Company on
or prior to the date hereof which provide for grants of equity-based awards
or equity-based accounts shall be amended or converted into a similar
instrument of Acquiror, in each case with such adjustments to the terms and
conditions of such Company Awards as are appropriate to preserve the value
inherent in such Company Awards with no detrimental effects on the holders
thereof. The other terms and conditions of each Company Award, and the
plans or agreements under which they were issued, shall continue to apply
A-4
<PAGE>
Annex A -- Agreement and Plan of Merger
in accordance with their terms and conditions, including any provisions for
acceleration (as such terms and conditions have been interpreted and
applied by the Company in accordance with its past practice). The Company
represents that (i) there are no Company Awards or Company Stock Options
other than those reflected in Section 3.05 and (ii) all employee incentive
or benefit plans, programs or arrangements and non-employee director plans
under which any Company Award has been established, made or granted and all
Company Stock Option Plans are disclosed in Schedule 1.04.
(d) At the Effective Time, Acquiror shall file with the Securities and
Exchange Commission (the "SEC") a registration statement on an appropriate form
or a post-effective amendment to a previously filed registration statement under
the Securities Act of 1933, as amended (the "1933 Act"), with respect to the
Acquiror Common Stock subject to options and other equity-based awards issued
pursuant to this Section 1.04, and shall use its reasonable best efforts to
maintain the current status of the prospectus contained therein, as well as
comply with any applicable state securities or "blue sky" laws, for so long as
such options or other equity-based awards remain outstanding.
SECTION 1.05. Adjustments. If at any time during the period between the
date of this Agreement and the Effective Time, any change in the outstanding
shares of capital stock of Acquiror or the Company (other than as contemplated
in Section 3.05 or Section 4.05 or permitted under this Agreement) shall occur,
including, without limitation, by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any stock dividend thereon with a record date during such period, the
Merger Consideration and Preferred Merger Consideration shall be appropriately
adjusted.
SECTION 1.06. Fractional Shares. (a) No fractional shares of Acquiror
Common Stock shall be issued in the Merger, but in lieu thereof each holder of
Shares otherwise entitled to a fractional share of Acquiror Common Stock will be
entitled to receive, from the Exchange Agent in accordance with the provisions
of this Section 1.06, a cash payment in lieu of such fractional shares of
Acquiror Common Stock representing such holder's proportionate interest, if any,
in the proceeds from the sale by the Exchange Agent in one or more transactions
of the number of shares of Acquiror Common Stock delivered to the Exchange Agent
by Acquiror pursuant to Section 1.03(a) over the aggregate number of whole
shares of Acquiror Common Stock to be distributed to the holders of the
certificates representing Shares pursuant to Section 1.03(b) (such excess being
herein called the "Excess Shares"). The parties acknowledge that payment of the
cash consideration in lieu of issuing fractional shares was not separately
bargained for consideration but merely represents a mechanical rounding off for
purposes of simplifying the corporate and accounting problems that would
otherwise be caused by the issuance of fractional shares. As soon as practicable
after the Effective Time, the Exchange Agent, as agent for the holders of the
certificates representing Shares, shall sell the Excess Shares at then
prevailing prices on the New York Stock Exchange (the "NYSE") in the manner
provided in the following paragraph.
(b) The sale of the Excess Shares by the Exchange Agent, as agent for the
holders that would otherwise receive fractional shares, shall be executed on the
NYSE through one or more member firms of the NYSE and shall be executed in round
lots to the extent practicable. The compensation payable to the Exchange Agent
and the expenses incurred by the Exchange Agent, in each case, in connection
with such sale or sales of the Excess Shares, and all related commissions,
transfer taxes and other out-of-pocket transaction costs, will be paid by the
Surviving Corporation out of its own funds and will not be paid directly or
indirectly by Acquiror. Until the proceeds of such sale or sales have been
distributed to the holders of Shares, the Exchange Agent shall hold such
proceeds in trust for the holders of Shares (the "Common Shares Trust"). The
Exchange Agent shall determine the portion of the Common Shares Trust to which
each holder of Shares shall be entitled, if any, by multiplying the amount of
the aggregate proceeds comprising the Common Shares Trust by a fraction,
the numerator of which is the amount of the fractional share interest to
which such holder of Shares would otherwise be entitled and the denominator
of which is the aggregate amount of fractional share interests to which all
holders of Shares would otherwise be entitled.
A-5
<PAGE>
Annex A -- Agreement and Plan of Merger
(c) As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of Shares in lieu of any fractional shares of
Acquiror Common Stock, the Exchange Agent shall make available such amounts to
such holders of Shares without interest.
SECTION 1.07. Withholding Rights. Each of the Surviving Corporation and
Acquiror shall be entitled to deduct and withhold from the consideration
otherwise payable to any person pursuant to this Article such amounts as it is
required to deduct and withhold with respect to the making of such payment under
any provision of federal, state, local or foreign tax law. To the extent that
amounts are so withheld by the Surviving Corporation or Acquiror, as the case
may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by the Surviving Corporation or
Acquiror, as the case may be.
SECTION 1.08. Lost Certificates. If any Certificate shall have 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 and, if required by
the Surviving Corporation, the posting by such person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration or Preferred Merger Consideration to be
paid in respect of the Shares or Series B Preferred Stock, as applicable,
represented by such Certificates as contemplated by this Article.
SECTION 1.09. Shares Held by Company Affiliates. Anything to the contrary
herein notwithstanding, any shares of Acquiror Common Stock (or certificates
therefor) issued to affiliates of the Company pursuant to Section 1.03 shall be
subject to the restrictions described in Exhibit B-1 and Exhibit B-3, and such
shares (or certificates therefor) shall bear a legend describing such
restrictions.
SECTION 1.10. Dissenter's Rights. Notwithstanding anything in this
Agreement to the contrary, any shares of Series B Preferred Stock outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has delivered a
written demand for appraisal of such shares in accordance with Section 262 of
the Delaware Law, if such Section 262 provides for appraisal rights for such
shares in the Merger ("Dissenting Shares"), shall not be converted into the
right to receive the Preferred Merger Consideration, unless and until such
holder fails to perfect or effectively withdraws or otherwise loses his right to
appraisal and payment under the Delaware Law. If, after the Effective Time, any
such holder fails to perfect or effectively withdraws or loses his right to
appraisal, such Dissenting Shares shall thereupon be treated as if they had been
converted as of the Effective Time into the right to receive the Preferred
Merger Consideration to which such holder is entitled, without interest or
dividends thereon. Any amounts paid to holders of Dissenting Shares in an
appraisal proceeding will be paid by the Surviving Corporation out of its own
funds and will not be paid, directly or indirectly, by Acquiror.
ARTICLE 2
CERTAIN GOVERNANCE MATTERS
SECTION 2.01. Acquiror Name. Acquiror shall take all such action as is
necessary to change its name to "Exxon Mobil Corporation" effective as of the
Effective Time, which action shall include, without limitation, seeking
stockholder approval to amend Acquiror's certificate of incorporation as
provided in Section 6.04.
SECTION 2.02. Acquiror Board of Directors. (a) At the Effective Time,
Acquiror shall cause the Board of Directors of Acquiror to consist of not more
than 19 directors, up to 13 of whom shall be the directors of Acquiror prior to
the Effective Time and six of whom shall be directors designated prior to the
Effective Time by the Company
A-6
<PAGE>
Annex A -- Agreement and Plan of Merger
reasonably acceptable to Acquiror (of whom two shall be Persons who
immediately prior to the Effective Time were directors and executive
officers of the Company and four shall be Persons who immediately prior to
the Effective Time were directors but not executive officers of the
Company) (the "Company Board Designees"). Prior to the Effective Time,
the Board of Directors of Acquiror shall take all action necessary to amend
the by-laws of Acquiror to increase the size of the Board of Directors of
Acquiror to not more than 19 and to elect the Company Board Designees to
the Board of Directors of Acquiror, in each case as of the Effective Time.
(b) The Board of Directors of Acquiror shall take all action necessary to
cause Mr. Lucio A. Noto to be elected as Vice Chairman of the Board of Directors
of Acquiror as of the Effective Time.
(c) Acquiror shall cause there to be at least one Company Board Designee on
each of the Audit Committee and Compensation Committee of the Board of Directors
of Acquiror as of the Effective Time.
(d) If the Effective Time occurs on a date which is less than nine months
before the next regularly scheduled annual meeting of stockholders of Acquiror,
Acquiror further agrees to use all reasonable efforts necessary to (i) nominate
the Company Board Designees for election as directors, (ii) elect Mr. Lucio A.
Noto as Vice Chairman of the Board of Directors of Acquiror, and (iii) cause at
least one Company Board Designee to be on each of the Audit Committee and
Compensation Committee of the Board of Directors of Acquiror, in each case in
connection with and as of such next regularly scheduled annual meeting.
SECTION 2.03. Transition Committee. The parties agree to establish a
Transition Committee which will have a consultative role and which will be in
effect from the date hereof until the earlier of the termination hereof and the
Effective Time. The Transition Committee shall be comprised of Mr. Lee R.
Raymond and Mr. Lucio A. Noto. The Transition Committee will be concerned with
matters relating to planning the integration after the Effective Time of
Acquiror and the Company, including organization and staffing. The Transition
Committee will draw upon the resources of Acquiror and the Company as necessary
or appropriate.
SECTION 2.04. Certificate of Incorporation of the Surviving Corporation.
The certificate of incorporation of the Company in effect at the Effective Time
shall be the certificate of incorporation of the Surviving Corporation until
amended in accordance with applicable law.
SECTION 2.05. By-laws of the Surviving Corporation. The by-laws of Merger
Subsidiary in effect at the Effective Time shall be the by-laws of the Surviving
Corporation until amended in accordance with applicable law.
SECTION 2.06. Directors and Officers of the Surviving Corporation. From
and after the Effective Time, until successors are duly elected or appointed and
qualified in accordance with applicable law, (a) the directors of Merger
Subsidiary at the Effective Time shall be the directors of the Surviving
Corporation, and (b) the officers of the Company at the Effective Time shall be
the officers of the Surviving Corporation.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Acquiror that:
SECTION 3.01. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except for those the absence of which would not, individually or in
the aggregate, have a Material Adverse Effect on the Company. The
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Company is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure
to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. For purposes of this Agreement, a
"Material Adverse Effect" with respect to any Person means a material
adverse effect on the financial condition, business, liabilities,
properties, assets or results of operations, taken as a whole, of such
Person and its Subsidiaries, taken as a whole, except to the extent
resulting from (w) any changes in general United States or global economic
conditions, (x) any changes affecting the oil and gas industry in general,
(y) matters whose significance or impact would reasonably be expected to be
primarily short term (i.e., under 18 months) or (z) matters disclosed on
Schedule 3.01. The Company has heretofore delivered to Acquiror true and
complete copies of the Company's certificate of incorporation and by-laws
as currently in effect.
SECTION 3.02. Corporate Authorization. (a) The execution, delivery and
performance by the Company of this Agreement and the Option Agreement and the
consummation by the Company of the transactions contemplated hereby and thereby
are within the Company's corporate powers and, except for any required approval
by the Company's stockholders in connection with the consummation of the Merger,
have been duly authorized by all necessary corporate action. The affirmative
vote of holders of the outstanding Shares and outstanding shares of Series B
Preferred Stock having votes representing a majority of the votes of all such
outstanding capital stock, voting together as a single class, is the only vote
of the holders of any of the Company's capital stock necessary in connection
with consummation of the Merger. Assuming due authorization, execution and
delivery of this Agreement and the Option Agreement by Acquiror and Merger
Subsidiary, as applicable, each of this Agreement and the Option Agreement
constitutes a valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(b) The Company's Board of Directors, at a meeting duly called and held,
has (i) determined that this Agreement and the Option Agreement and the
transactions contemplated hereby and thereby (including the Merger) are fair to
and in the best interests of the Company's stockholders, (ii) approved and
adopted this Agreement and the Option Agreement and the transactions
contemplated hereby and thereby (including the Merger), and (iii) resolved
(subject to Section 5.02) to recommend approval and adoption of this Agreement
by its stockholders.
SECTION 3.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the Option Agreement and the
consummation of the Merger by the Company require no action by or in respect of,
or filing with, any governmental body, agency, official or authority other than
(a) the filing of a certificate of merger in accordance with Delaware Law, (b)
compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), (c) compliance with any applicable
requirements of Council Regulation No. 4064/89 of the European Community, as
amended (the "EC Merger Regulation"), (d) compliance with any applicable
requirements of Part IX of the Canadian Competition Act (the "Canadian Act"),
(e) compliance with any applicable requirements of the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), (f) compliance with any applicable requirements of the
1933 Act and (g) other actions or filings which if not taken or made would
not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
SECTION 3.04. Non-Contravention. Except as set forth in Schedule 3.04, the
execution, delivery and performance by the Company of this Agreement and the
Option Agreement and the consummation by the Company of the transactions
contemplated hereby and thereby do not and will not (a) assuming compliance with
the matters referred to in Section 3.02, contravene or conflict with the
certificate of incorporation or by-laws of the Company, (b) assuming compliance
with the matters referred to in Section 3.03, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to the Company or any of
its Subsidiaries, (c) constitute a default under or give rise to a right of
termination, cancellation or acceleration of any right or obligation of the
Company or any of its Subsidiaries or to a loss of any benefit to which the
Company
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Annex A -- Agreement and Plan of Merger
or any of its Subsidiaries is entitled under any provision of any
agreement, contract or other instrument binding upon the Company or any of
its Subsidiaries or any license, franchise, permit or other similar
authorization held by the Company or any of its Subsidiaries, or (d) result
in the creation or imposition of any Lien on any asset of the Company or
any of its Subsidiaries, except for such contraventions, conflicts or
violations referred to in clause (b) or defaults, rights of termination,
cancellation or acceleration, or losses or Liens referred to in clause (c)
or (d) that would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. For purposes of this Agreement, "Lien"
means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset other
than any such mortgage, lien, pledge, charge, security interest or
encumbrance (i) for Taxes (as defined in Section 3.13) not yet due or being
contested in good faith (and for which adequate accruals or reserves have
been established on the Acquiror Balance Sheet or the Company Balance
Sheet, as the case may be) or (ii) which is a carriers', warehousemen's,
mechanics', materialmen's, repairmen's or other like lien arising in the
ordinary course of business. Except as disclosed in Schedule 3.04, neither
the Company nor any Subsidiary of the Company is a party to any agreement
that expressly limits the ability of the Company or any Subsidiary of the
Company, or would limit Acquiror or any Subsidiary of Acquiror after the
Effective Time, to compete in or conduct any line of business or compete
with any Person or in any geographic area or during any period of time
except to the extent that any such limitation, individually or in the
aggregate, would not be reasonably likely to have a Material Adverse Effect
on Acquiror after the Effective Time.
SECTION 3.05. Capitalization of the Company. The authorized capital stock
of the Company consists of 1,200,000,000 Shares and 30,000,000 shares of
preferred stock, par value $1.00 per share (of which 6,000,000 shares are
designated Series A Junior Participating Preferred Stock and 191,062 are
designated Series B Preferred Stock). As of the close of business on November
27, 1998, there were outstanding 779,934,096 Shares, no shares of Series A
Junior Participating Preferred Stock (all of which are reserved for issuance in
accordance with the Rights Agreement (the "Company Rights Agreement"), dated as
of December 15, 1995, between the Company and Mellon Bank, N.A., as Rights
Agent, pursuant to which the Company has issued rights ("Company Rights") to
purchase the Series A Junior Participating Preferred Stock) and 165,791.77
shares of Series B Preferred Stock, and employee stock options to purchase an
aggregate of 31,337,561 Shares (of which options to purchase an aggregate of
19,313,161 Shares were exercisable) and Company Awards (other than outstanding
restricted stock) with respect to an aggregate of 1,257,513.9444 Shares. All
outstanding shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. Except as set forth in this
Section and except for changes since the close of business on November 27, 1998
resulting from the exercise of employee stock options outstanding on such date
or options or stock-based awards granted as permitted by Section 5.01, there are
outstanding (a) no shares of capital stock or other voting securities of the
Company, (b) except for the Series B Preferred Stock, no securities of the
Company convertible into or exchangeable for shares of capital stock or voting
securities of the Company, and (c) except for the Series B Preferred Stock, and
except for the Option Agreement, no options, warrants or other rights to acquire
from the Company, and no preemptive or similar rights, subscription or other
rights, convertible securities, agreements, arrangements or commitments of any
character, relating to the capital stock of the Company, obligating the Company
to issue, transfer or sell, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
the Company or obligating the Company to grant, extend or enter into any
such option, warrant, subscription or other right, convertible security,
agreement, arrangement or commitment (the items in clauses 3.05(a), 3.05(b)
and 3.05(c) being referred to collectively as the "Company Securities").
Except for the Series B Preferred Stock, there are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any Company Securities.
SECTION 3.06. Subsidiaries. (a) Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, has all powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except for those the absence of which would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company. Each Subsidiary of the Company is duly qualified to do business and is
in good standing in each jurisdiction where the character of the property owned
or leased by it or the nature of its activities makes such qualification
necessary, except
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for those jurisdictions where failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company. All "significant subsidiaries", as such term is defined in
Section 1-02 of Regulation S-X under the Exchange Act (each, a "Significant
Subsidiary") of the Company and their respective jurisdictions of
incorporation are identified in the Company's annual report on Form 10-K
for the fiscal year ended December 31, 1997 (the "Company 10-K") or in
Schedule 3.06(a).
(b) Except for directors' qualifying shares and except as set forth in the
Company 10-K, all of the outstanding capital stock of, or other ownership
interests in, each Significant Subsidiary of the Company is owned by the
Company, directly or indirectly, free and clear of any material Lien and free of
any other material limitation or restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
ownership interests). There are no outstanding (i) securities of the Company or
any of its Subsidiaries convertible into or exchangeable for shares of capital
stock or other voting securities or ownership interests in any Significant
Subsidiary of the Company or (ii) options, warrants or other rights to acquire
from the Company or any of its Significant Subsidiaries, and no preemptive or
similar rights, subscription or other rights, convertible securities,
agreements, arrangements or commitments of any character, relating to the
capital stock of any Significant Subsidiary of the Company, obligating the
Company or any of its Significant Subsidiaries to issue, transfer or sell, any
capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any Significant Subsidiary of the Company
or obligating the Company or any Significant Subsidiary of the Company to grant,
extend or enter into any such option, warrant, subscription or other right,
convertible security, agreement, arrangement or commitment except, in any such
case under clause (i) or (ii), to the extent relating to an insignificant equity
interest in any Significant Subsidiary (the items in clauses 3.06(b)(i) and
3.06(b)(ii) being referred to collectively as the "Company Subsidiary
Securities"). Except as set forth on Schedule 3.06(b), there are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any outstanding Company Subsidiary Securities.
SECTION 3.07. SEC Filings. (a) The Company has delivered to Acquiror (i)
its annual reports on Form 10-K for its fiscal years ended December 31, 1995,
1996 and 1997, (ii) its quarterly reports on Form 10-Q for its fiscal quarters
ended after December 31, 1997, (iii) its proxy or information statements
relating to meetings of, or actions taken without a meeting by, the stockholders
of the Company held since December 31, 1997, and (iv) all of its other reports,
statements, schedules and registration statements filed with the SEC since
December 31, 1997 (the documents referred to in this Section 3.07(a) being
referred to collectively as the "Company SEC Documents"). The Company's
quarterly report on Form 10-Q for its fiscal quarter ended September 30, 1998 is
referred to herein as the "Company 10-Q".
(b) As of its filing date, each Company SEC Document complied as to form in
all material respects with the applicable requirements of the Exchange Act and
the 1933 Act.
(c) As of its filing date, each Company SEC Document filed pursuant to the
Exchange Act did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
(d) Each such registration statement, as amended or supplemented, if
applicable, filed pursuant to the 1933 Act as of the date such statement or
amendment became effective did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
SECTION 3.08. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company (including any related notes and schedules) included in its annual
reports on Form 10-K and the quarterly reports on Form 10-Q referred to in
Section 3.07 fairly present in all material respects, in conformity with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated in the notes thereto), the consolidated financial position
of the Company and its consolidated Subsidiaries as of the dates
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Annex A -- Agreement and Plan of Merger
thereof and their consolidated results of operations and changes in
financial position for the periods then ended (subject to normal year-end
adjustments and the absence of notes in the case of any unaudited interim
financial statements). For purposes of this Agreement, "Company Balance
Sheet" means the consolidated balance sheet of the Company as of September
30, 1998 set forth in the Company 10-Q and "Company Balance Sheet Date"
means September 30, 1998.
SECTION 3.09. Disclosure Documents. (a) Neither the proxy statement of the
Company (the "Company Proxy Statement") to be filed with the SEC in connection
with the Merger, nor any amendment or supplement thereto, will, at the date the
Company Proxy Statement or any such amendment or supplement is first mailed to
shareholders of the Company or at the time such shareholders vote on the
adoption and approval of this Agreement and the transactions contemplated
hereby, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company Proxy
Statement will, when filed, comply as to form in all material respects with the
requirements of the Exchange Act. No representation or warranty is made by the
Company in this Section 3.09 with respect to statements made or incorporated by
reference therein based on information supplied by Acquiror or Merger Subsidiary
for inclusion or incorporation by reference in the Company Proxy Statement.
(b) None of the information supplied or to be supplied by Company for
inclusion or incorporation by reference in the Acquiror Proxy Statement (as
defined in Section 4.09) or in the Form S-4 (as defined in Section 4.09) or any
amendment or supplement thereto will, at the time the Acquiror Proxy Statement
or any such supplement or amendment thereto is first mailed to the stockholders
of Acquiror or at the time such stockholders vote on the matters constituting
the Acquiror Stockholder Approval (as defined in Section 4.02) or at the time
the Form S-4 or any such amendment or supplement becomes effective under the
1933 Act or at the Effective Time, as the case may be, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
SECTION 3.10. Absence of Certain Changes. Except as set forth in Schedule
3.10, since the Company Balance Sheet Date, the Company and its Subsidiaries
have conducted their business in the ordinary course consistent with past
practice and there has not been:
(a) any event, occurrence or development of a state of
circumstances or facts which has had or reasonably would be expected
to have, individually or in the aggregate, a Material Adverse Effect
on the Company;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the
Company (other than (i) quarterly cash dividends payable by the
Company consistent with past practice (including periodic dividend
increases consistent with past practice), but which for the sake of
clarity shall not include any special dividends) or (ii) required
dividends on the Series B Preferred Stock) or any repurchase,
redemption or other acquisition by the Company or any of its
Subsidiaries of any outstanding shares of capital stock or other
securities of, or other ownership interests in, the Company or any of
its Subsidiaries (other than any such repurchases prior to the date
hereof pursuant to the Company's publicly announced stock buyback
program or, after the date hereof, as permitted under Section
5.01(e));
(c) any amendment of any material term of any outstanding
security of the Company or any of its Subsidiaries;
(d) any transaction or commitment made, or any contract,
agreement or settlement entered into, by (or judgment, order or decree
affecting) the Company or any of its Subsidiaries relating to its
assets or business (including the acquisition or disposition of any
assets) or any relinquishment by the Company or any of its
Subsidiaries of any contract or other right, in either case, material
to the Company and its Subsidiaries taken as a whole, other than
transactions, commitments, contracts, agreements or settlements
(including without limitation
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Annex A -- Agreement and Plan of Merger
settlements of litigation and tax proceedings) in the ordinary course
of business consistent with past practice, those contemplated by this
Agreement, or as agreed to in writing by Acquiror;
(e) any change in any method of accounting or accounting practice
(other than any change for tax purposes) by the Company or any of its
Subsidiaries, except for any such change which is not significant or
which is required by reason of a concurrent change in GAAP; or
(f) any (i) grant of any severance or termination pay to (or
amendment to any such existing arrangement with) any director, officer
or employee of the Company or any of its Subsidiaries, (ii) entering
into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any
director, officer or employee of the Company or any of its
Subsidiaries, (iii) increase in benefits payable under any existing
severance or termination pay policies or employment agreements or (iv)
increase in (or amendments to the terms of) compensation, bonus or
other benefits payable to directors, officers or employees of the
Company or any of its Subsidiaries, other than in the ordinary course
of business consistent with past practice, as permitted by this
Agreement, or as agreed to in writing by Acquiror.
SECTION 3.11. No Undisclosed Material Liabilities. There are no
liabilities of the Company or any Subsidiary of the Company of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, other than:
(a) liabilities disclosed or provided for in the Company Balance
Sheet or in the notes thereto;
(b) liabilities which in the aggregate would not reasonably be
expected to have a Material Adverse Effect on the Company;
(c) liabilities disclosed in the Company SEC Documents filed
prior to the date hereof or set forth in Schedule 3.11(c); and
(d) liabilities under this Agreement.
SECTION 3.12. Litigation. Except as disclosed in the Company SEC Documents
filed prior to the date hereof, there is no action, suit, investigation or
proceeding pending against, or to the knowledge of the Company threatened
against or affecting, the Company or any of its Subsidiaries or any of their
respective properties before any court or arbitrator or any governmental
body, agency or official which would reasonably be expected to have a
Material Adverse Effect on the Company.
SECTION 3.13. Taxes. Except as set forth in the Company Balance
Sheet (including the notes thereto) or as otherwise set forth in Schedule
3.13 and except as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, (i) all Company Tax Returns
required to be filed with any taxing authority by, or with respect to, the
Company and its Subsidiaries have been filed in accordance with all
applicable laws; (ii) the Company and its Subsidiaries have timely paid
all Taxes shown as due and payable on the Company Tax Returns that have
been so filed, and, as of the time of filing, the Company Tax Returns
correctly reflected the facts regarding the income, business, assets,
operations, activities and the status of the Company and its Subsidiaries
(other than Taxes which are being contested in good faith and for which
adequate reserves are reflected on the Company Balance Sheet); (iii) the
Company and its Subsidiaries have made provision for all Taxes payable by
the Company and its Subsidiaries for which no Company Tax Return has yet
been filed; (iv) the charges, accruals and reserves for Taxes with respect
to the Company and its Subsidiaries reflected on the Company Balance Sheet
are adequate under GAAP to cover the Tax liabilities accruing through the
date thereof; (v) there is no action, suit, proceeding, audit or claim now
proposed or pending against or with respect to the Company or any of its
Subsidiaries in respect of any Tax where there is a reasonable possibility
of an adverse determination; and (vi) to the best of the Company's
knowledge and belief, neither the
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Company nor any of its Subsidiaries is liable for any Tax imposed on any
entity other than such Person, except as the result of the application of
Treas. Reg. Section 1.1502-6 (and any comparable provision of the tax
laws of any state, local or foreign jurisdiction) to the affiliated group
of which the Company is the common parent. For purposes of this Agreement,
"Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income,
gross receipts, excise, stamp, real or personal property, ad valorem,
withholding, social security (or similar), unemployment, occupation, use,
service, service use, license, net worth, payroll, franchise, severance,
transfer, recording, employment, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties, capital
stock, profits, disability, sales, registration, value added, alternative
or add-on minimum, estimated or other taxes, assessments or charges imposed
by any federal, state, local or foreign governmental entity and any
interest, penalties, or additions to tax attributable thereto. For
purposes of this Agreement, "Tax Returns" shall mean any return, report,
form or similar statement required to be filed with respect to any Tax
(including any attached schedules), including, without limitation, any
information return, claim for refund, amended return or declaration of
estimated Tax.
SECTION 3.14. Employee Benefit Plans. (a) Prior to the date hereof, the
Company has provided Acquiror with a list (set forth on Schedule 3.14)
identifying each material "employee benefit plan," as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974 ("ERISA"), each material
employment, severance or similar contract, plan, arrangement or policy
applicable to any director, former director, employee or former employee of the
Company and each material plan or arrangement (written or oral), providing for
compensation, bonuses, profit-sharing, stock option or other stock related
rights or other forms of incentive or deferred compensation, vacation benefits,
insurance coverage (including any self-insured arrangements), health or medical
benefits, disability benefits, workers' compensation, supplemental unemployment
benefits, severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance benefits)
which is maintained, administered or contributed to by the Company and covers
any employee or director or former employee or director of the Company, or under
which the Company has any liability. Such material plans (excluding any such
plan that is a "multiemployer plan", as defined in Section 3(37) of ERISA) are
referred to collectively herein as the "Company Employee Plans".
(b) Each Company Employee Plan has been maintained in compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations (including but not limited to ERISA and the Code) which
are applicable to such Plan, except where failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
(c) Neither the Company nor any affiliate of the Company has incurred a
liability under Title IV of ERISA that has not been satisfied in full, and no
condition exists that presents a material risk to the Company or any affiliate
of the Company of incurring any such liability other than liability for premiums
due the Pension Benefit Guaranty Corporation (which premiums have been paid when
due).
(d) Each Company Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from federal income tax pursuant to Section 501(a) of the Code.
(e) Except as set forth in Schedule 3.14, no director or officer or other
employee of the Company or any of its Subsidiaries will become entitled to any
retirement, severance or similar benefit or enhanced or accelerated benefit
(including any acceleration of vesting or lapse of repurchase rights or
obligations with respect to any employee stock option or other benefit under any
stock option plan or compensation plan or arrangement of the Company) solely as
a result of the transactions contemplated hereby.
(f) Except as reflected in the Company SEC Documents filed prior to the
date hereof, no Company Employee Plan provides post-retirement health and
medical, life or other insurance benefits for retired employees of the Company
or any of its Subsidiaries.
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(g) Except as set forth on Schedule 3.14, there has been no amendment to,
written interpretation or announcement (whether or not written) by the Company
or any of its affiliates relating to, or change in employee participation or
coverage under, any Company Employee Plan which would increase materially the
expense of maintaining such Company Employee Plan above the level of the expense
incurred in respect thereof for the 12 months ended on the Company Balance Sheet
Date.
SECTION 3.15. Compliance with Laws. Neither the Company nor any of its
Subsidiaries is in violation of, or has since January 1, 1997 violated, any
applicable provisions of any laws, statutes, ordinances or regulations except
for any violations that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on the Company.
SECTION 3.16. Finders' or Advisors' Fees. Except for Goldman, Sachs & Co.,
a copy of whose engagement agreement has been provided to Acquiror, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of the Company or any of its Subsidiaries
who might be entitled to any fee or commission in connection with the
transactions contemplated by this Agreement.
SECTION 3.17. Environmental Matters. (a) Except as set forth in the
Company SEC Documents filed prior to the date hereof and with such exceptions
as, individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company, (i) no notice,
notification, demand, request for information, citation, summons, complaint or
order has been received by, and no investigation, action, claim, suit,
proceeding or review is pending or, to the knowledge of the Company or any of
its Subsidiaries, threatened by any Person against, the Company or any of its
Subsidiaries, and no penalty has been assessed against the Company or any of its
Subsidiaries, in each case, with respect to any matters relating to or arising
out of any Environmental Law; (ii) the Company and its Subsidiaries are and have
been in compliance with all Environmental Laws; (iii) there are no liabilities
of or relating to the Company or any of its Subsidiaries relating to or arising
out of any Environmental Law of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability; and (iv) there has been no environmental
investigation, study, audit, test, review or other analysis conducted of which
the Company has knowledge in relation to the current or prior business of the
Company or any of its Subsidiaries or any property or facility now or
previously owned, leased or operated by the Company or any of its
Subsidiaries which has not been delivered to Acquiror at least five days
prior to the date hereof.
(b) For purposes of this Section 3.17 and Section 4.17, the term
"Environmental Laws" means any federal, state, local and foreign statutes, laws
(including, without limitation, common law), judicial decisions, regulations,
ordinances, rules, judgments, orders, codes, injunctions, permits, governmental
agreements or governmental restrictions relating to human health and safety, the
environment or to pollutants, contaminants, wastes, or chemicals.
SECTION 3.18. Opinion of Financial Advisor. The Company has received the
opinion of Goldman, Sachs & Co. to the effect that, as of the date of such
opinion, the Exchange Ratio is fair from a financial point of view to the
holders of Shares (other than Acquiror or any of its Subsidiaries or
affiliates), and, as of the date hereof, such opinion has not been withdrawn.
SECTION 3.19. Pooling; Tax Treatment. (a) The Company intends
that the Merger be accounted for under the "pooling of interests" method
under the requirements of Opinion No. 16 (Business Combinations) of the
Accounting Principles Board of the American Institute of Certified Public
Accountants, the Financial Accounting Standards Board, and the rules and
regulations of the SEC.
(b) Neither the Company nor any of its affiliates has taken or agreed
to take any action or is aware of any fact or circumstance that would
prevent the Merger from qualifying (i) for "pooling of interests"
accounting treatment as
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Annex A -- Agreement and Plan of Merger
described in (a) above or (ii) as a reorganization within the meaning of
Section 368 of the Code (a "368 Reorganization").
SECTION 3.20. Pooling Letter. The Company has received a letter from Ernst
& Young LLP dated as of November 22, 1998 and addressed to the Company, a copy
of which has been delivered to Acquiror, in which Ernst & Young LLP concurs with
the Company management's conclusion that, as of November 22, 1998, no conditions
exist related to the Company that would preclude the Acquiror from accounting
for the Merger as a pooling of interests, and such letter has not been withdrawn
or modified in any material respect as of the date hereof.
SECTION 3.21. Takeover Statutes. The Board of Directors of the Company has
taken the necessary action to make inapplicable the application of Section 203
of the Delaware Law, any other applicable antitakeover or similar statute or
regulation and the supermajority voting provisions of Article 6 of the Company's
certificate of incorporation to this Agreement and the Option Agreement and the
transactions contemplated hereby and thereby.
SECTION 3.22. Rights Agreement. The Board of Directors of the Company has
resolved to, and the Company promptly after the execution hereof will, take all
action necessary to render the rights issued pursuant to the terms of the
Company Rights Agreement inapplicable to the Merger, this Agreement, the Option
Agreement and the other transactions contemplated hereby and thereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company that:
SECTION 4.01. Corporate Existence and Power. Each of Acquiror and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except for
those the absence of which would not, individually or in the aggregate,
have a Material Adverse Effect on Acquiror. Acquiror is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect on
Acquiror. Since the date of its incorporation, Merger Subsidiary has not
engaged in any activities other than in connection with or as contemplated
by this Agreement. Acquiror has heretofore delivered to the Company true
and complete copies of Acquiror's and Merger Subsidiary's certificate of
incorporation and by-laws as currently in effect.
SECTION 4.02. Corporate Authorization. (a) The execution, delivery and
performance by Acquiror and Merger Subsidiary of this Agreement, and by Acquiror
of the Option Agreement, and the consummation by Acquiror and Merger Subsidiary
of the transactions contemplated hereby and thereby are within the corporate
powers of Acquiror and Merger Subsidiary and have been duly authorized by all
necessary corporate action, except for any required approval by Acquiror's
stockholders of (i) the Merger, (ii) the amendment of Acquiror's certificate of
incorporation to increase the authorized shares of Acquiror Common Stock and to
change Acquiror's name in accordance with Section 2.01 and (iii) the issuance of
Acquiror Common Stock in connection with the Merger (clauses (i), (ii) and (iii)
being the "Acquiror Stockholder Approval") and except for the designation by the
Board of Directors of shares of the Acquiror's authorized preferred stock as
Acquiror Preferred Stock. The affirmative vote of the holders of shares of
Acquiror Common Stock and shares of Class A Preferred Stock having votes
representing a majority of the votes cast by all such shares, voting together as
a single class, is the only vote of the holders of any of Acquiror's capital
stock necessary in connection with obtaining the Acquiror Stockholder Approval.
Assuming due authorization, execution
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Annex A -- Agreement and Plan of Merger
and delivery of this Agreement and the Option Agreement by the Company,
this Agreement constitutes a valid and binding agreement of each of
Acquiror and Merger Subsidiary and the Option Agreement constitutes a valid
and binding agreement of Acquiror, in each case enforceable against such
party in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles. The shares of Acquiror Common Stock and Acquiror
Preferred Stock issued pursuant to the Merger, when issued in accordance
with the terms hereof, will be duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights.
(b) Acquiror's Board of Directors, at a meeting duly called and held, has
(i) approved this Agreement and the Option Agreement and the transactions
contemplated hereby and thereby (including the Merger), and (ii) resolved
(subject to Section 6.04) to recommend approval by its stockholders of the
matters constituting the Acquiror Stockholder Approval.
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by Acquiror and Merger Subsidiary of this Agreement, and by Acquiror
of the Option Agreement, and the consummation by Acquiror and Merger Subsidiary
of the transactions contemplated hereby and thereby require no action by or in
respect of, or filing with, any governmental body, agency, official or authority
other than (a) the filing of a certificate of merger in accordance with Delaware
Law, (b) compliance with any applicable requirements of the HSR Act, (c)
compliance with any applicable requirements of the EC Merger Regulation, (d)
compliance with any applicable requirements of the Canadian Act, (e) compliance
with any applicable requirements of the Exchange Act, (f) compliance with any
applicable requirements of the 1933 Act and (g) other actions or filings which
if not taken or made would not, individually or in the aggregate, have a
Material Adverse Effect on Acquiror.
SECTION 4.04. Non-Contravention. The execution, delivery and performance
by Acquiror and Merger Subsidiary of this Agreement, and by Acquiror of the
Option Agreement, and the consummation by Acquiror and Merger Subsidiary of the
transactions contemplated hereby and thereby do not and will not (a) assuming
compliance with the matters referred to in Section 4.02, contravene or conflict
with the certificate of incorporation or by-laws of Acquiror or Merger
Subsidiary, (b) assuming compliance with the matters referred to in Section
4.03, contravene or conflict with any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to
Acquiror or any of its Subsidiaries, (c) constitute a default under or give
rise to any right of termination, cancellation or acceleration of any right
or obligation of Acquiror or any of its Subsidiaries or to a loss of any
benefit to which Acquiror or any of its Subsidiaries is entitled under any
provision of any agreement, contract or other instrument binding upon
Acquiror or any of its Subsidiaries or any license, franchise, permit or
other similar authorization held by Acquiror or any of its Subsidiaries or
(d) result in the creation or imposition of any Lien on any asset of
Acquiror or any of its Subsidiaries, except for such contraventions,
conflicts or violations referred to in clause (b) or defaults, rights of
termination, cancellation or acceleration, or losses or Liens referred to
in clause (c) or (d) that would not, individually or in the aggregate, have
a Material Adverse Effect on Acquiror. Neither Acquiror nor any Subsidiary
of Acquiror is a party to any agreement that expressly limits the ability
of Acquiror or any Subsidiary of Acquiror to compete in or conduct any line
of business or compete with any Person or in any geographic area or during
any period of time except to the extent that any such limitation,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect on Acquiror after the Effective Time.
SECTION 4.05. Capitalization. The authorized capital stock of Acquiror
consists of 3,000,000,000 shares of Acquiror Common Stock and 200,000,000 shares
of preferred stock, without par value (of which 16,500,000 are designated Class
A Preferred Stock and 100,000,000 are designated Class B Preferred Stock). As of
the close of business on November 27, 1998, there were outstanding 2,427,693,787
shares of Acquiror Common Stock, 1,884,638 shares of Class A Preferred Stock and
no shares of Class B Preferred Stock, and employee stock options to purchase an
aggregate of 70,537,194 shares of Acquiror Common Stock (of which options to
purchase an aggregate of 59,117,944 shares of Acquiror Common Stock were
exercisable). All outstanding shares of capital stock of Acquiror have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
set forth in this Section
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Annex A -- Agreement and Plan of Merger
and except for changes since the close of business on November 27, 1998
resulting from the exercise of employee stock options outstanding on such
date or options or other stock-based awards granted as permitted by Section
6.01 and except for the shares to be issued in connection with the Merger,
there are outstanding (a) no shares of capital stock or other voting
securities of Acquiror, (b) no securities of Acquiror convertible into or
exchangeable for shares of capital stock or voting securities of Acquiror,
and (c) no options, warrants or other rights to acquire from Acquiror, and
no preemptive or similar rights, subscription or other rights, convertible
securities, agreements, arrangements, or commitments of any character,
relating to the capital stock of Acquiror, obligating Acquiror to issue,
transfer or sell any capital stock, voting security or securities
convertible into or exchangeable for capital stock or voting securities of
Acquiror or obligating Acquiror to grant, extend or enter into any such
option, warrant, subscription or other right, convertible security,
agreement, arrangement or commitment (the items in clauses 4.05(a), 4.05(b)
and 4.05(c) being referred to collectively as the "Acquiror Securities").
There are no outstanding obligations of Acquiror or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any Acquiror Securities.
SECTION 4.06. Subsidiaries. (a) Each Subsidiary of Acquiror is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, has all powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those the absence of which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Acquiror. Each Subsidiary of Acquiror is duly qualified to do
business and is in good standing in each jurisdiction where the character of the
property owned or leased by it or the nature of its activities makes such
qualifications necessary, except for those jurisdictions where failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse
Effect on Acquiror. All Significant Subsidiaries of Acquiror and their
respective jurisdictions of incorporation are identified in Acquiror's annual
report on Form 10-K for the fiscal year ended December 31, 1997 ("Acquiror
10-K").
(b) Except for directors' qualifying shares and except as set forth in the
Acquiror 10-K, all of the outstanding capital stock of, or other ownership
interests in, each Significant Subsidiary of Acquiror is owned by Acquiror,
directly or indirectly, free and clear of any material Lien and free of any
other material limitation or restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
ownership interests). There are no outstanding (i) securities of Acquiror
or any of its Subsidiaries convertible into or exchangeable for shares of
capital stock or other voting securities or ownership interests in any
Significant Subsidiary of Acquiror, and (ii) options, warrants or other
rights to acquire from Acquiror or any of its Significant Subsidiaries, and
no preemptive or similar rights, subscriptions or other rights, convertible
securities, agreements, arrangements or commitments of any character,
relating to the capital stock of any Significant Subsidiary of Acquiror,
obligating Acquiror or any of its Significant Subsidiaries to issue,
transfer or sell, any capital stock, voting securities or other ownership
interests in, or any securities convertible into or exchangeable for any
capital stock, voting securities or ownership interests in, any Significant
Subsidiary of Acquiror or obligating Acquiror or any Significant Subsidiary
of Acquiror to grant, extend or enter into any such option, warrant,
subscription or other right, convertible security, agreement, arrangement
or commitment except, in any such case under clause (i) or (ii), to the
extent relating to an insignificant equity interest in any Significant
Subsidiary (items in clauses 4.06(b)(i) and 4.06(b)(ii) being referred to
collectively as the "Acquiror Subsidiary Securities"). There are no
outstanding obligations of Acquiror or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any outstanding Acquiror Subsidiary
Securities.
SECTION 4.07. SEC Filings. (a) Acquiror has delivered to the Company (i)
its annual reports on Form 10-K for its fiscal years ended December 31, 1995,
1996 and 1997, (ii) its quarterly reports on Form 10-Q for its fiscal quarters
ended after December 31, 1997, (iii) its proxy or information statements
relating to meetings, of, or actions taken without a meeting by, the
stockholders of Acquiror held since December 31, 1997, and (iv) all of its other
reports, statements, schedules and registration statements filed with the SEC
since December 31, 1997 (the documents referred to in this Section 4.07(a) being
referred to collectively as the "Acquiror SEC Documents"). The Acquiror's
quarterly report on Form 10-Q for its fiscal quarter ended September 30, 1998 is
referred to herein as the "Acquiror 10-Q".
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Annex A -- Agreement and Plan of Merger
(b) As of its filing date, each Acquiror SEC Document complied as to form
in all material respects with the applicable requirements of the Exchange Act
and the 1933 Act.
(c) As of its filing date, each Acquiror SEC Document filed pursuant to the
Exchange Act did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
(d) Each such registration statement as amended or supplemented, if
applicable, filed pursuant to the 1933 Act as of the date such statement or
amendment became effective did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
SECTION 4.08. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Acquiror
(including any related notes and schedules) included in the annual reports on
Form 10-K and the quarterly reports on Form 10-Q referred to in Section 4.07
fairly present in all material respects, in conformity with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of Acquiror and its
consolidated Subsidiaries as of the dates thereof and their consolidated results
of operations and changes in financial position for the periods then ended
(subject to normal year-end adjustments and the absence of notes in the case of
any unaudited interim financial statements). For purposes of this Agreement,
"Acquiror Balance Sheet" means the consolidated balance sheet of Acquiror as of
September 30, 1998 set forth in the Acquiror 10-Q and "Acquiror Balance Sheet
Date" means September 30, 1998.
SECTION 4.09. Disclosure Documents. (a) The proxy statement of Acquiror
(the "Acquiror Proxy Statement") to be filed with the SEC in connection with the
Merger and the Registration Statement on Form S-4 of Acquiror (the "Form S-4")
to be filed under the 1933 Act relating to the issuance of Acquiror Common Stock
in the Merger, that may be required to be filed with the SEC in connection with
the issuance of shares of Acquiror Common Stock pursuant to the Merger and
any amendments or supplements thereto, will, when filed, subject to the
last sentence of Section 4.09(b), comply as to form in all material
respects with the applicable requirements of the 1933 Act.
(b) Neither the Acquiror Proxy Statement nor any amendment or supplement
thereto, will, at the date the Acquiror Proxy Statement or any such amendment or
supplement is first mailed to shareholders of Acquiror or at the time such
shareholders vote on the matters constituting the Acquiror Stockholder Approval,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Neither the Form S-4
nor any amendment or supplement thereto will at the time it becomes effective
under the 1933 Act or at the Effective Time contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. No representation or
warranty is made by Acquiror in this Section 4.09 with respect to statements
made or incorporated by reference therein based on information supplied by the
Company for inclusion or incorporation by reference in the Acquiror Proxy
Statement or the Form S-4.
(c) None of the information supplied or to be supplied by Acquiror for
inclusion or incorporation by reference in the Company Proxy Statement or any
amendment or supplement thereto will, at the date the Company Proxy Statement or
any amendment or supplement thereto is first mailed to stockholders of Company
or at the time such stockholders vote on the adoption and approval of this
Agreement and the transactions contemplated hereby, contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
SECTION 4.10. Absence of Certain Changes. Since the Acquiror Balance Sheet
Date, Acquiror and its Subsidiaries have conducted their business in the
ordinary course consistent with past practice and there has not been:
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Annex A -- Agreement and Plan of Merger
(a) any event, occurrence or development of a state of
circumstances or facts which has had or reasonably would be expected
to have, individually or in the aggregate, a Material Adverse Effect
on Acquiror;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of
Acquiror (other than (i) quarterly cash dividends payable by Acquiror
consistent with past practice (including periodic dividend increases
consistent with past practice), but which for the sake of clarity
shall not include any special dividends), or (ii) required dividends
on preferred stock outstanding on the date hereof) or any repurchase,
redemption or other acquisition by Acquiror or any of its
Subsidiaries of any outstanding shares of capital stock or other
equity securities of, or other ownership interests in, Acquiror
(other than any such repurchases prior to the date hereof pursuant to
Acquiror's publicly announced stock buyback program or, after the
date hereof, as permitted under Section 6.01(e)); or
(c) any change prior to the date hereof in any method of
accounting or accounting practice (other than any change for tax
purposes) by Acquiror or any of its Subsidiaries, except for any such
change which is not significant or which is required by reason of a
concurrent change in GAAP.
SECTION 4.11. No Undisclosed Material Liabilities. There are no
liabilities of the Acquiror or any Subsidiary of the Acquiror of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, other than:
(a) liabilities disclosed or provided for in the Acquiror Balance
Sheet or in the notes thereto;
(b) liabilities which in the aggregate would not reasonably be
expected to have a Material Adverse Effect on Acquiror;
(c) liabilities disclosed in the Acquiror SEC Documents filed
prior to the date hereof or set forth in Schedule 4.11(c); and
(d) liabilities under this Agreement.
SECTION 4.12. Litigation. Except as disclosed in the Acquiror SEC
Documents filed prior to the date hereof, there is no action, suit,
investigation or proceeding pending against, or to the knowledge of Acquiror
threatened against or affecting, Acquiror or any of its Subsidiaries or any of
their respective properties before any court or arbitrator or any governmental
body, agency or official which would reasonably be expected to have a Material
Adverse Effect on Acquiror.
SECTION 4.13. Taxes. Except as set forth in the Acquiror Balance
Sheet (including the notes thereto) or as otherwise set forth on Schedule
4.13 and except as would not, individually or in the aggregate, have a
Material Adverse Effect on Acquiror, (i) all Acquiror Tax Returns required
to be filed with any taxing authority by, or with respect to, Acquiror and
its Subsidiaries have been filed in accordance with all applicable laws;
(ii) Acquiror and its Subsidiaries have timely paid all Taxes shown as due
and payable on Acquiror Tax Returns that have been so filed, and, as of the
time of filing, Acquiror Tax Returns correctly reflected the facts
regarding the income, business, assets, operations, activities and the
status of Acquiror and its Subsidiaries (other than Taxes which are being
contested in good faith and for which adequate reserves are reflected on
the Acquiror Balance Sheet); (iii) Acquiror and its Subsidiaries have
made provision for all Taxes payable by Acquiror and its Subsidiaries for
which no Acquiror Tax Return has yet been filed; (iv) the charges,
accruals and reserves for Taxes with respect to Acquiror and its
Subsidiaries reflected on the Acquiror Balance Sheet are adequate under
GAAP to cover the Tax liabilities accruing through the date thereof; (v)
there is no action, suit, proceeding, audit or claim now proposed or
pending against or with respect to Acquiror or any of its Subsidiaries in
respect of any Tax where there is a reasonable possibility of an adverse
determination; and (vi) to the best of Acquiror's knowledge and belief,
neither Acquiror nor any of its Subsidiaries is liable for any Tax imposed
on
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Annex A -- Agreement and Plan of Merger
any entity other than such Person, except as the result of the application
of Treas. Reg. Section 1.1502-6 (and any comparable provision of the tax
laws of any state, local or foreign jurisdiction) to the affiliated group
of which Acquiror is the common parent.
SECTION 4.14. Employee Benefit Plans. (a) Prior to the date hereof,
Acquiror has provided the Company with a list (set forth on Schedule 4.14)
identifying each material "employee benefit plan," as defined in Section 3(3) of
ERISA, each employment, severance or similar contract, plan, arrangement or
policy applicable to any director, former director, employee or former employee
of Acquiror and each material plan or arrangement (written or oral), providing
for compensation, bonuses, profit-sharing, stock option or other stock related
rights or other forms of incentive or deferred compensation, vacation benefits,
insurance coverage (including any self-insured arrangements), health or medical
benefits, disability benefits, workers' compensation, supplemental unemployment
benefits, severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance benefits)
which is maintained, administered or contributed to by Acquiror and covers any
employee or director or former employee or director of Acquiror, or under which
Acquiror has any liability. Such material plans (excluding any such plan that is
a "multiemployer plan", as defined in Section 3(37) of ERISA) are referred to
collectively herein as the "Acquiror Employee Plans".
(b) Each Acquiror Employee Plan has been maintained in compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations (including but not limited to ERISA and the Code) which
are applicable to such Plan, except where failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect on Acquiror.
(c) Neither Acquiror nor any affiliate of Acquiror has incurred a liability
under Title IV of ERISA that has not been satisfied in full, and no condition
exists that presents a material risk to Acquiror or any affiliate of Acquiror of
incurring any such liability other than liability for premiums due the Pension
Benefit Guaranty Corporation (which premiums have been paid when due).
(d) Each Acquiror Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from federal income tax pursuant to Section 501(a) of the Code.
(e) No director or officer or other employee of Acquiror or any of its
Subsidiaries will become entitled to any retirement, severance or similar
benefit or enhanced or accelerated benefit solely as a result of the
transactions contemplated hereby.
(f) Except as reflected in the Acquiror SEC Documents filed prior to the
date hereof, no Acquiror Employee Plan provides post-retirement health and
medical, life or other insurance benefits for retired employees of Acquiror or
any of its Subsidiaries.
(g) There has been no amendment to, written interpretation or announcement
(whether or not written) by Acquiror or any of its affiliates relating to, or
change in employee participation or coverage under, any Acquiror Employee Plan
which would increase materially the expense of maintaining such Acquiror
Employee Plan above the level of the expense incurred in respect thereof for the
12 months ended on the Acquiror Balance Sheet Date.
SECTION 4.15. Compliance with Laws. Neither Acquiror nor any of its
Subsidiaries is in violation of, or has since January 1, 1997 violated, any
applicable provisions of any laws, statutes, ordinances or regulations except
for any violations that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on Acquiror.
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Annex A -- Agreement and Plan of Merger
SECTION 4.16. Finders' or Advisors' Fees. Except for J.P. Morgan
Securities Inc., whose fees will be paid by Acquiror, there is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of Acquiror or any of its Subsidiaries who might be
entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
SECTION 4.17. Environmental Matters. Except as set forth in the Acquiror
SEC Documents filed prior to the date hereof and with such exceptions as,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Material Adverse Effect on Acquiror, (i) no notice,
notification, demand, request for information, citation, summons, complaint or
order has been received by, and no investigation, action, claim, suit,
proceeding or review is pending or, to the knowledge of Acquiror or any of its
Subsidiaries, threatened by any Person against, Acquiror or any of its
Subsidiaries, and no penalty has been assessed against Acquiror or any of its
Subsidiaries, in each case, with respect to any matters relating to or arising
out of any Environmental Law; (ii) Acquiror and its Subsidiaries are and have
been in compliance with all Environmental Laws; (iii) there are no liabilities
of or relating to Acquiror or any of its Subsidiaries relating to or arising out
of any Environmental Law of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability; and (iv) there has been no environmental
investigation, study, audit, test, review or other analysis conducted of which
Acquiror has knowledge in relation to the current or prior business of Acquiror
or any of its Subsidiaries or any property or facility now or previously owned,
leased or operated by Acquiror or any of its Subsidiaries which has not been
delivered to the Company at least five days prior to the date hereof.
SECTION 4.18. Opinion of Financial Advisor. Acquiror has received
the opinion of J.P. Morgan Securities Inc. to the effect that, as of the
date of such opinion, the consideration to be paid by Acquiror in the
Merger is fair, from a financial point of view, to Acquiror, and, as of the
date hereof, such opinion has not been withdrawn.
SECTION 4.19. Pooling; Tax Treatment. (a) Acquiror intends that
the Merger be accounted for as a "pooling of interests" as described in
Section 3.19(a).
(b) Neither Acquiror nor any of its affiliates has taken or agreed to
take any action or is aware of any fact or circumstance that would prevent
the Merger from qualifying (i) for "pooling of interests" accounting
treatment as described in Section 3.19(a) or (ii) as a 368 Reorganization.
SECTION 4.20. Pooling Letter. Acquiror has received a letter from
PricewaterhouseCoopers LLP dated as of November 25, 1998 and addressed to
Acquiror, a copy of which has been delivered to the Company, stating that based
on the information furnished to PricewaterhouseCoopers LLP in the related
certificate of Acquiror's management and based on the letter from Ernst & Young
LLP referenced in Section 3.20, PricewaterhouseCoopers LLP concurs with Acquiror
management's conclusion that, as of November 25, 1998, no conditions exist that
would preclude Acquiror's accounting for the Merger as a pooling of interests,
and such letter has not been withdrawn or modified in any material respect as of
the date hereof.
ARTICLE 5
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.01. Conduct of the Company. From the date hereof until the
Effective Time, the Company and its Subsidiaries shall conduct their business in
the ordinary course consistent with past practice and shall use their reasonable
best efforts to preserve intact their business organizations and relationships
with third parties. Without
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limiting the generality of the foregoing, except with the prior written
consent of Acquiror or as contemplated by this Agreement, and, in the case
of clauses (g), (i), (j) and (l) below, except in the ordinary course of
business not representing a new strategic direction of the Company, from
the date hereof until the Effective Time:
(a) the Company will not, and will not permit any of its Significant
Subsidiaries to, adopt or propose any change in its certificate of
incorporation or by-laws;
(b) the Company will not, and will not permit any Significant
Subsidiary of the Company to, adopt a plan or agreement of complete
or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other material reorganization of
the Company or any of its Significant Subsidiaries (other than a
merger or consolidation between its wholly-owned Subsidiaries);
(c) the Company will not, and will not permit any material
Subsidiary of the Company to, issue, sell, transfer, pledge, dispose
of or encumber any shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights
of any kind to acquire, any shares of capital stock of any class or
series of the Company or its material Subsidiaries other than (i)
issuances pursuant to the exercise of convertible securities
outstanding on the date hereof or issuances pursuant to stock based
awards or options that are outstanding on the date hereof and are
reflected in Section 3.05 or are granted in accordance with clause
(ii) below and (ii) additional options or stock-based awards to
acquire Shares granted under the terms of any Company Stock Option
Plan as in effect on the date hereof in the ordinary course
consistent with past practice;
(d) the Company will not, and will not permit any material
Subsidiary of the Company to, (i) split, combine, subdivide or
reclassify its outstanding shares of capital stock, or (ii) declare,
set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to its capital stock other than,
subject to Section 7.09, (x) regular quarterly cash dividends payable
by the Company or such material Subsidiary consistent with past
practice (including periodic dividend increases consistent with past
practice), but which for the sake of clarity shall not include any
special dividend, (y) any required dividends on the Series B
Preferred Stock or (z) dividends paid by any Subsidiary of the
Company to the Company or any wholly-owned Subsidiary of the Company;
(e) the Company will not, and will not permit any Subsidiary of
the Company to, redeem, purchase or otherwise acquire directly or
indirectly any of the Company's capital stock, except for
repurchases, redemptions or acquisitions (x) required by the terms of
its capital stock or any securities outstanding on the date hereof,
(y) required by or in connection with the respective terms, as of the
date hereof, of any Company Stock Option Plan or any dividend
reinvestment plan as in effect on the date hereof in the ordinary
course of the operations of such plan consistent with past practice
and only to the extent consistent with Section 7.04 or (z) effected
in the ordinary course consistent with past practice and only to the
extent consistent with Section 7.04;
(f) the Company will not amend the terms (including the terms
relating to accelerating the vesting or lapse of repurchase rights or
obligations) of any outstanding options to purchase Shares (which, it
is understood, will not limit the administration of the relevant
plans in accordance with past practices and interpretations of the
Company's Board and the MCOC (as defined in Section 6.06(e)) to the
extent consistent with Section 7.04) or amend the terms of or
terminate the Leveraged ESOP;
(g) the Company will not, and will not permit any Subsidiary of
the Company to, make or commit to make any capital expenditure;
(h) the Company will not, and will not permit any Subsidiary of
the Company to, increase the compensation or benefits of any
director, officer or employee, except for normal increases in the
ordinary course of business consistent with past practice or as
required under applicable law or any existing agreement or
commitment;
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(i) the Company will not, and will not permit any of its
Subsidiaries to, acquire a material amount of assets (as measured
with respect to the consolidated assets of the Company and its
Subsidiaries taken as a whole) of any other Person;
(j) the Company will not, and will not permit any of its
Subsidiaries to, sell, lease, license or otherwise dispose of any
material assets or property except pursuant to existing contracts or
commitments;
(k) except for any such change which is not significant or which
is required by reason of a concurrent change in GAAP, the Company
will not, and will not permit any Subsidiary of the Company to,
change any method of accounting or accounting practice (other than
any change for tax purposes) used by it;
(l) the Company will not, and will not permit any Subsidiary of
the Company to, enter into any material joint venture, partnership or
other similar arrangement;
(m) the Company will not, and will not permit any of its
Subsidiaries to, take any action that would make any representation
or warranty of the Company hereunder inaccurate in any material
respect at, or as of any time prior to, the Effective Time; and
(n) the Company will not, and will not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing.
SECTION 5.02. Company Stockholder Meeting; Proxy Material. Unless the
Board of Directors of Acquiror shall take any action permitted by the third
sentence of Section 6.04, the Company shall cause a meeting of its stockholders
(the "Company Stockholder Meeting") to be duly called and held as soon as
reasonably practicable, on a date reasonably acceptable to Acquiror, for the
purpose of voting on the approval and adoption of this Agreement and the Merger
(the "Company Stockholder Approval"). Except as provided in the next sentence,
the Board of Directors of the Company shall recommend approval and adoption of
this Agreement by the Company's stockholders. The Board of Directors of the
Company shall be permitted to (i) not recommend to the Company's shareholders
that they give the Company Stockholder Approval or (ii) withdraw or modify in a
manner adverse to Acquiror its recommendation to the Company's shareholders that
they give the Company Stockholder Approval, only (x) if the Board of Directors
of the Company by a majority vote determines in its good faith judgment that it
is necessary to so withdraw or modify its recommendation to comply with its
fiduciary duty to shareholders under applicable law, after receiving the advice
of outside legal counsel, and (y) if the Company and the senior officers and
directors of the Company have substantially complied with their obligations set
forth in Section 5.03. In connection with the Company Stockholder Meeting, the
Company (x) will promptly prepare and file with the SEC, will use its reasonable
best efforts to have cleared by the SEC and will thereafter mail to its
shareholders as promptly as practicable the Company Proxy Statement and all
other proxy materials for the Company Stockholder Meeting, (y) will use its
reasonable best efforts, subject to the immediately preceding sentence, to
obtain the Company Stockholder Approval and (z) will otherwise comply with all
legal requirements applicable to the Company Stockholder Meeting.
SECTION 5.03. Other Offers. The Company and its Subsidiaries will not, and
the Company will use its reasonable best efforts to cause the officers,
directors, employees, investment bankers, consultants and other agents of the
Company and its Subsidiaries not to, directly or indirectly, take any action to
solicit, initiate, encourage or facilitate the making of any Acquisition
Proposal (including without limitation by amending, or granting any waiver
under, the Company Rights Agreement) or any inquiry with respect thereto or
engage in discussions or negotiations with any Person with respect thereto, or
disclose any non-public information relating to the Company or any Subsidiary of
the Company or afford access to the properties, books or records of the Company
or any Subsidiary of the Company to, any Person that has made, or to the
Company's knowledge, is considering making, any Acquisition Proposal; provided
that nothing contained in this Section 5.03 shall prevent the Company from
furnishing non-public information to, or entering into
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discussions or negotiations with, or affording access to the properties,
books or records of the Company or its Subsidiaries to, any Person in
connection with an unsolicited bona fide Acquisition Proposal received from
such Person so long as prior to furnishing non-public information to, or
entering into discussions or negotiations with, such Person, (i) the Board
of Directors of the Company by a majority vote determines in its good faith
judgment that it is necessary to do so to comply with its fiduciary duty to
shareholders under applicable law, after receiving the advice of outside
legal counsel, and (ii) the Company receives from such Person an executed
confidentiality agreement with terms no less favorable to the Company than
those contained in the Confidentiality Agreement (as defined in Section
7.03). Nothing contained in this Agreement shall prevent the Board of
Directors of the Company from complying with Rule 14e-2 under the Exchange
Act with regard to an Acquisition Proposal; provided that the Board of
Directors of the Company shall not recommend that the shareholders of the
Company tender their shares in connection with a tender offer except to the
extent the Board of Directors of the Company by a majority vote determines
in its good faith judgment that such a recommendation is required to comply
with the fiduciary duties of the Board of Directors of the Company to
shareholders under applicable law, after receiving the advice of outside
legal counsel. Unless the Board of Directors of the Company by a majority
vote determines in its good faith judgment that it is necessary not to do
so to comply with its fiduciary duty to shareholders under applicable law,
after receiving the advice of outside legal counsel, the Company will (a)
promptly (and in no event later than 48 hours after receipt of any
Acquisition Proposal) notify (which notice shall be provided orally and in
writing and shall identify the Person making such Acquisition Proposal and
set forth the material terms thereof) Acquiror after receipt of any
Acquisition Proposal, any indication of which the Company has knowledge
that any Person is considering making an Acquisition Proposal or any
request for non-public information relating to the Company or any
Subsidiary of the Company or for access to the properties, books or records
of the Company or any Subsidiary of the Company by any Person that has
made, or to the Company's knowledge may be considering making, an
Acquisition Proposal, and (b) will keep Acquiror informed of the status and
material terms of any such Acquisition Proposal or request. The Company
and its Subsidiaries will, and the Company will use its reasonable best
efforts to cause the officers, directors, employees, investment bankers,
consultants and other agents of the Company and its Subsidiaries to,
immediately cease and cause to be terminated all discussions and
negotiations, if any, that have taken place prior to the date hereof with
any parties with respect to any Acquisition Proposal.
For purposes of this Agreement, "Acquisition Proposal" means any offer or
proposal for, or any indication of interest in, any (i) direct or indirect
acquisition or purchase of a business or assets that constitute 20% or more of
the net revenues, net income or the assets of the Company and its Subsidiaries,
taken as a whole, (ii) direct or indirect acquisition or purchase of 20% or more
of any class of equity securities of the Company or any of its Subsidiaries
whose business constitutes 20% or more of the net revenues, net income or assets
of the Company and its Subsidiaries, taken as a whole, (iii) tender offer or
exchange offer that if consummated would result in any person beneficially
owning 20% or more of any class of equity securities of the Company or any of
its Subsidiaries whose business constitutes 20% or more the net revenues, net
income or assets of the Company and its Subsidiaries, taken as a whole, or (iv)
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
Subsidiaries whose business constitutes 20% or more of the net revenue, net
income or assets of the Company and its Subsidiaries, taken as a whole, other
than the transactions contemplated by this Agreement. For purposes of this
Agreement, "Superior Proposal" means any bona fide Acquisition Proposal for or
in respect of at least a majority of the outstanding Shares on terms that the
Board of Directors of the Company determines in its good faith judgment (after
consultation with a financial advisor of nationally recognized reputation,
taking into account all the terms and conditions of the Acquisition Proposal,
including any break-up fees, expense reimbursement provisions and conditions to
consummation) are more favorable to all of the Company's stockholders than the
Merger.
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Annex A -- Agreement and Plan of Merger
ARTICLE 6
COVENANTS OF ACQUIROR
Acquiror agrees that:
SECTION 6.01. Conduct of Acquiror. From the date hereof until the
Effective Time, Acquiror and its Subsidiaries shall conduct their business in
the ordinary course consistent with past practice and shall use their reasonable
best efforts to preserve intact their business organizations and relationships
with third parties. Without limiting the generality of the foregoing, and except
with the prior written consent of the Company or as contemplated by this
Agreement, from the date hereof until the Effective Time:
(a) Acquiror will not adopt or propose any change in its
certificate of incorporation or by-laws, except as contemplated in
Section 4.02(a) or 2.02(a);
(b) Acquiror will not adopt a plan or agreement of complete or
partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other material reorganization of
Acquiror;
(c) Acquiror will not issue, sell, transfer, pledge, dispose of
or encumber any shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights
of any kind to acquire, any shares of capital stock of any class or
series of Acquiror, other than (i) issuances pursuant to the exercise
of convertible securities outstanding on the date hereof or issuances
pursuant to stock-based awards or options outstanding on the date
hereof or that are granted in accordance with clause (ii) below and
(ii) additional options or stock-based awards to acquire Acquiror
Common Stock granted under the terms of any employee or director
stock option or compensation plan or arrangement of Acquiror as in
effect as of the date hereof in the ordinary course consistent with
past practice;
(d) Acquiror will not (i) split, combine, subdivide or
reclassify its outstanding shares of capital stock or (ii) declare,
set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to its capital stock other than,
subject to Section 7.09, (x) regular quarterly cash dividends payable
by Acquiror on Acquiror Common Stock consistent with past practice
(including periodic dividend increases consistent with past
practice), but which for the sake of clarity shall not include any
special dividend or (y) any required dividends on preferred stock
outstanding on the date hereof;
(e) Acquiror will not, and will not permit any Subsidiary of
Acquiror to, redeem, purchase or otherwise acquire directly or
indirectly any of Acquiror's capital stock, except for repurchases,
redemptions or acquisitions (x) required by the terms of capital
stock or any securities outstanding on the date hereof, (y) required
by or in connection with the respective terms, as of the date hereof,
of any employee stock option plan or compensation plan or arrangement
of Acquiror or any dividend reinvestment plan as in effect as of the
date hereof in the ordinary course of operations of such plan
consistent with past practice and only to the extent consistent with
Section 7.04 or (z) effected in the ordinary course consistent with
past practice and only to the extent consistent with Section 7.04;
(f) Acquiror will not, and will not permit any of its
Subsidiaries to, take any action that would make any representation
or warranty of Acquiror hereunder inaccurate in any material respect
at, or as of any time prior to, the Effective Time; and
(g) Acquiror will not, and will not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing.
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Annex A -- Agreement and Plan of Merger
SECTION 6.02. Obligations of Merger Subsidiary. Acquiror will take all
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
SECTION 6.03. Director and Officer Liability. (a) For seven years after
the Effective Time, Acquiror shall indemnify and hold harmless the individuals
who on or prior to the Effective Time were officers, directors and employees of
the Company or its Subsidiaries (collectively, the "Indemnitees") with respect
to all acts or omissions by them in their capacities as such or taken at the
request of the Company or any of its Subsidiaries at any time prior to the
Effective Time to the extent provided under the Company's certificate of
incorporation and by-laws in effect on the date hereof. Acquiror shall cause the
Surviving Corporation to honor all indemnification agreements with Indemnitees
(including under the Company's by-laws) in effect as of the date hereof in
accordance with the terms thereof. To the best knowledge of the Company, the
Company has disclosed to Acquiror all such indemnification agreements prior to
the date hereof.
(b) For seven years after the Effective Time, Acquiror shall procure the
provision of officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Effective Time covering each such Person
currently covered by the Company's officers' and directors' liability insurance
policy on terms with respect to coverage and in amounts no less favorable than
those of such policy in effect on the date hereof (it being understood that
Acquiror may discharge its obligations pursuant to this paragraph by providing
an insurance policy underwritten by Ancon Insurance Company, Inc., a
wholly-owned Subsidiary of Acquiror); provided, that if the aggregate annual
premiums for such insurance at any time during such period shall exceed 300% of
the per annum rate of premium paid by the Company and its Subsidiaries as
of the date hereof for such insurance, then Acquiror shall, or shall cause
its Subsidiaries to, provide only such coverage as shall then be available
at an annual premium equal to 300% of such rate.
(c) The obligations of Acquiror under this Section 6.03 shall not be
terminated or modified in such a manner as to adversely affect any Indemnitee to
whom this Section 6.03 applies without the consent of such affected Indemnitee
(it being expressly agreed that the Indemnitees to whom this Section 6.03
applies shall be third party beneficiaries of this Section 6.03).
SECTION 6.04. Acquiror Stockholder Meeting; Form S-4. Unless the Board of
Directors of the Company shall take any action permitted by the third sentence
of Section 5.02, Acquiror shall cause a meeting of its stockholders (the
"Acquiror Stockholder Meeting") to be duly called and held as soon as reasonably
practicable, on a date reasonably acceptable to the Company, for the purpose of
approving the matters constituting the Acquiror Stockholder Approval. Except as
provided in the next sentence, the Board of Directors of Acquiror shall
recommend approval of the matters constituting the Acquiror Stockholder
Approval. The Board of Directors of Acquiror shall be permitted to (i) not
recommend to Acquiror's shareholders that they give the Acquiror Stockholder
Approval or (ii) withdraw or modify in a manner adverse to the Company its
recommendation to the Acquiror's shareholders that they give the Acquiror
Stockholder Approval, only if the Board of Directors of Acquiror by a majority
vote determines in its good faith judgment that it is necessary to so withdraw
or modify its recommendation to comply with its fiduciary duty to shareholders
under applicable law, after receiving the advice of outside legal counsel. In
connection with the Acquiror Stockholder Meeting, Acquiror (x) will promptly
prepare and file with the SEC, will use its reasonable best efforts to have
cleared by the SEC, and will thereafter mail to its stockholders as promptly as
practicable, the Acquiror Proxy Statement and all other proxy materials for such
meeting, (y) will use its reasonable best efforts, subject to the immediately
preceding sentence, to obtain the Acquiror Stockholder Approval, and (z) will
otherwise comply with all legal requirements applicable to the Acquiror
Stockholder Meeting. Subject to the terms and conditions of this Agreement and
unless the Board of Directors of the Company shall take any action permitted by
the third sentence of Section 5.02, Acquiror shall prepare and file with the SEC
under the 1933 Act the Form S-4, and shall use its reasonable best efforts to
cause the Form S-4 to be declared effective by the SEC as promptly as
practicable. Acquiror shall promptly take any action required to be taken under
foreign or state securities or Blue Sky laws in connection with the issuance of
Acquiror Common Stock in connection with the Merger. The parties acknowledge and
agree that
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Annex A -- Agreement and Plan of Merger
Acquiror may include in such proxy statement to be mailed to its
stockholders a proposal to amend Acquiror's certificate of incorporation to
eliminate the Class B Preferred Stock.
SECTION 6.05. Stock Exchange Listing. Acquiror shall use its reasonable
best efforts to cause the shares of Acquiror Common Stock to be issued in
connection with the Merger to be listed on the NYSE, subject to official notice
of issuance.
SECTION 6.06. Employee Benefits. (a) From and after the Effective Time,
Acquiror shall cause the Surviving Corporation to honor in accordance with their
terms all benefits and obligations under the Executive Arrangements (as defined
in Section 6.06(f)) and, subject to Section 6.06(b), the other Company Employee
Plans, each as in effect on the date hereof (or as amended with the prior
written consent of Acquiror), to the extent that entitlements or rights, actual
or contingent (whether such entitlements or rights are vested as of the
Effective Time or become vested or payable only upon the occurrence of a further
event, including a discretionary determination) exist in respect thereof as of
the Effective Time. Acquiror and the Company hereby agree that the consummation
of the Merger shall constitute a "Change in Control" for purpose of any employee
arrangement and all other Company Employee Plans, pursuant to the terms of such
plans in effect on the date hereof. No provision of this Section 6.06(a) shall
be construed as a limitation on the right of Acquiror to amend or terminate any
Company Employee Plans which the Company would otherwise have under the terms of
such Company Employee Plan, and no provision of this Section 6.06(a) shall be
construed to create a right in any employee or beneficiary of such employee
under a Company Employee Plan that such employee or beneficiary would not
otherwise have under the terms of such Company Employee Plan.
(b) Following the Effective Time, Acquiror shall continue to provide to
individuals who are employed by the Company and its Subsidiaries as of the
Effective Time who remain employed with Acquiror or any Subsidiary of Acquiror
("Affected Employees"), for so long as such Affected Employees remain employed
by Acquiror or any Subsidiary of Acquiror, employee benefits (other than salary
or incentive compensation) (i) pursuant to the Company's or its Subsidiaries'
employee benefit plans, programs, policies and arrangements as provided to such
employees immediately prior to the Effective Time or (ii) pursuant to employee
benefit plans, programs, policies or arrangements maintained by Acquiror or any
Subsidiary of Acquiror providing coverage and benefits which, in the aggregate,
are no less favorable than those provided to employees of Acquiror in positions
comparable to positions held by Affected Employees with Acquiror or its
Subsidiaries from time to time after the Effective Time. Following the Effective
Time, Acquiror shall continue to provide to former employees of the Company or
its Subsidiaries (and to employees of the Company or its Subsidiaries whose
employment terminates prior to the Effective Time) ("Affected Retirees") post
retirement benefits (other than pensions) (i) pursuant to the Company Employee
Plans applicable to such Affected Retirees, each as in effect on the date
hereof, or (ii) pursuant to employee benefit plans, programs, policies or
arrangements maintained by Acquiror or any Subsidiary of Acquiror providing post
retirement coverage and benefits (other than pensions) which, in the aggregate,
are no less favorable than those provided to former employees of Acquiror.
(c) Acquiror will, or will cause the Surviving Corporation to, give
Affected Employees full credit for purposes of eligibility, vesting, benefit
accrual (including benefit accrual under any defined benefit pension plans,
provided that a participant's benefit under any such defined benefit pension
plan may be offset by such participant's accrued benefit under the Company
defined benefit pension plan) and determination of the level of benefits under
any employee benefit plans or arrangements maintained by Acquiror or any
Subsidiary of Acquiror for such Affected Employees' service with the Company or
any Subsidiary of the Company to the same extent recognized by the Company
immediately prior to the Effective Time.
(d) Acquiror will, or will cause the Surviving Corporation to, (i) waive
all limitations as to preexisting conditions, exclusions and waiting periods
with respect to participation and coverage requirements applicable to the
Affected Employees under any welfare benefit plans that such employees may be
eligible to participate in after the Effective Time, other than limitations or
waiting periods that are already in effect with respect to such employees and
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Annex A -- Agreement and Plan of Merger
that have not been satisfied as of the Effective Time under any welfare plan
maintained for the Affected Employees immediately prior to the Effective Time,
and (ii) provide each Affected Employee with credit for any co-payments and
deductibles paid prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Effective Time.
(e) Acquiror (i) acknowledges that the Company's Board and the Management
Compensation and Organization Committee (the "MCOC") of the Company's Board has
determined that all officers and employees covered by the Company Management
Retention Plan have performed at a level satisfactory to the Company over the
period that the conditional retention awards granted thereunder have been
outstanding and, accordingly, that all such individuals would be entitled to
full payment under the Company Management Retention Plan were they to retire or
otherwise terminate their employment with the Company or any of its Subsidiaries
and (ii) agrees to give considerable weight to such determination in
administering the Company Management Retention Plan after the Effective Time,
given the significant length of time that has elapsed since the award grants.
(f) Acquiror agrees that the 1986, 1991 and 1995 Company Incentive
Compensation and Stock Ownership Plans, the Company Management Retention Plan,
the Supplemental Pension Annuity Program of Mobil Corporation, the Executive
Life Insurance Program of Mobil Corporation and the Company Employee Severance
Plan (collectively, the "Executive Arrangements"), as well as any award made
under any Executive Arrangement (including Company Stock Options and Company
Awards), shall be administered in accordance with the past practices and
interpretations of the Company's Board and the MCOC (including those past
practices and interpretations previously disclosed by the Company to
Acquiror) with respect to eligibility, vesting, term and payment, among
other matters. Any question regarding the past practices and
interpretations of the Company's Board and the MCOC and the application
thereof to the type of facts and circumstances in a given case shall be
referred to Mr. Lucio A. Noto or his designee for a final decision with
respect thereto, which decision shall not be inconsistent with the
intention of this Agreement and the Merger.
ARTICLE 7
COVENANTS OF ACQUIROR AND THE COMPANY
The parties hereto agree that:
SECTION 7.01. Best Efforts. (a) The Company and Acquiror shall each
cooperate with the other and use (and shall use best efforts to cause their
respective Subsidiaries to use) their respective best efforts to promptly (i)
take or cause to be taken all actions, and do or cause to be done all things,
necessary, proper or advisable under this Agreement and applicable laws to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement as soon as practicable, including, without limitation,
preparing and filing as promptly as practicable all documentation to effect all
necessary filings, notices, petitions, statements, registrations, submissions of
information, applications and other documents and (ii) obtain all approvals,
consents, registrations, permits, authorizations and other confirmations
required to be obtained from any third party necessary, proper or advisable to
consummate the Merger and the other transactions contemplated by this Agreement.
Subject to applicable laws relating to the exchange of information, the Company
and Acquiror shall have the right to review in advance, and to the extent
practicable each will consult the other on, all the information relating to the
Company and its Subsidiaries or Acquiror and its Subsidiaries, as the case may
be, that appears in any filing made with, or written materials submitted to, any
third party and/or any governmental authority in connection with the Merger and
the other transactions contemplated by this Agreement.
(b) Notwithstanding anything else contained herein, the provisions of this
Section 7.01 shall not be construed to require either party to undertake any
efforts or to take any action if the result thereof would give Acquiror the
right
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Annex A -- Agreement and Plan of Merger
to decline to consummate the transactions contemplated by this Agreement
pursuant to Section 8.02 by reason of giving rise to a Substantial Detriment.
SECTION 7.02. Certain Filings. The Company and Acquiror shall cooperate
with one another (a) in connection with the preparation of the Company Proxy
Statement, the Acquiror Proxy Statement and the Form S-4, (b) in determining
whether any action by or in respect of, or filing with, any governmental body,
agency or official, or authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions contemplated
by this Agreement and (c) in seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information required in
connection therewith or with the Company Proxy Statement, the Acquiror Proxy
Statement or the Form S-4 and seeking timely to obtain any such actions,
consents, approvals or waivers.
SECTION 7.03. Access to Information. From the date hereof until the
Effective Time, to the extent permitted by applicable law, the Company and
Acquiror will give the other party, its counsel, financial advisors, auditors
and other authorized representatives reasonable access to the offices,
properties, books and records of such party and its Subsidiaries, furnish to the
other party, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
Persons may reasonably request and will instruct its own employees, counsel and
financial advisors to cooperate with the other party in its investigation of the
business of the Company or Acquiror, as the case may be; provided that no
investigation of the other party's business shall affect any representation
or warranty given by either party hereunder. All information obtained by
Acquiror or the Company pursuant to this Section shall be kept confidential
in accordance with, and shall otherwise be subject to the terms of, the
Confidentiality Agreement dated November 12, 1998 between Acquiror and the
Company (the "Confidentiality Agreement").
SECTION 7.04. Tax and Accounting Treatment. (a) Each of Acquiror and the
Company shall not take any action and shall not fail to take any action which
action or failure to act would prevent, or would be reasonably likely to
prevent, the Merger from qualifying (a) for "pooling of interests" accounting
treatment as described in Section 3.19(a) or (b) as a 368 Reorganization.
(b) Acquiror shall use its reasonable best efforts to provide to Davis Polk
& Wardwell and Skadden, Arps, Slate, Meagher & Flom LLP a certificate
substantially in the form attached hereto as Exhibit C-1. The Company shall use
its reasonable best efforts to provide to Davis Polk & Wardwell and Skadden,
Arps, Slate, Meagher & Flom LLP a certificate substantially in the form attached
hereto as Exhibit C-2.
SECTION 7.05. Public Announcements. Acquiror and the Company will consult
with each other before issuing any press release or making any public statement
with respect to this Agreement and the transactions contemplated hereby and
shall not issue any such press release or make any such public statement without
the prior consent of the other party, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, any such press release or public
statement as may be required by applicable law or any listing agreement with any
national securities exchange may be issued prior to such consultation, if the
party making such release or statement has used its reasonable efforts to
consult with the other party.
SECTION 7.06. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
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SECTION 7.07. Notices of Certain Events. (a) Each of the Company
and Acquiror shall promptly notify the other party of:
(i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement; and
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement.
(b) The Company and Acquiror shall promptly notify the other party of any
actions, suits, claims, investigations or proceedings commenced or, to the best
of its knowledge threatened against, relating to or involving or otherwise
affecting such party or any of its Subsidiaries which relate to the consummation
of the transactions contemplated by this Agreement.
SECTION 7.08. Affiliates. (a) The Company shall use its reasonable best
efforts to deliver to Acquiror, within 15 days of the date hereof, a letter
agreement substantially in the form of Exhibit B-1 hereto executed by each
Person listed on Schedule 7.08(a).
(b) Acquiror shall use its reasonable best efforts to obtain, within 15
days of the date hereof, a letter agreement substantially in the form of Exhibit
B-2 hereto executed by each Person listed on Schedule 7.08(b).
(c) Prior to the Effective Time, the Company shall cause to be delivered to
Acquiror a letter identifying, to the best of the Company's knowledge, all
Persons who are, at the time of the Company Stockholder Meeting, "affiliates" of
the Company for purposes of Rule 145 under the 1933 Act. The Company shall
furnish such information and documents as Acquiror may reasonably request for
the purpose of reviewing such list. The Company shall use its reasonable best
efforts to cause each Person who is so identified as an affiliate to deliver to
Acquiror on or prior to the Effective Time a letter agreement substantially in
the form of Exhibit B-3 to this Agreement.
SECTION 7.09. Payment of Dividends. From the date hereof until the
Effective Time, Acquiror and the Company will coordinate with each other
regarding the declaration of dividends in respect of the shares of Acquiror
Common Stock and the Shares and the record dates and payment dates relating
thereto, it being the intention of the parties that holders of Shares will not
receive two dividends, or fail to receive one dividend, for any single calendar
quarter with respect to their Shares and the shares of Acquiror Common Stock any
holder of Shares receives in exchange therefor in connection with the Merger.
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to the Obligations of Each Party. The obligations
of the Company, Acquiror and Merger Subsidiary to consummate the Merger are
subject to the satisfaction (or, to the extent legally permissible, waiver) of
the following conditions:
(a) this Agreement shall have been adopted by the stockholders of
the Company in accordance with Delaware Law;
(b) any applicable waiting period under the HSR Act relating to
the Merger shall have expired;
(c) the approval by the European Commission of the transactions
contemplated by this Agreement shall have been obtained pursuant to
the EC Merger Regulation;
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(d) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit or enjoin the
consummation of the Merger;
(e) the parties shall have received all required approvals and
third party consents listed on Schedule 8.01(e);
(f) the matters constituting the Acquiror Stockholder Approval
shall have been approved by the stockholders of Acquiror in
accordance with applicable law or regulation;
(g) the Form S-4 shall have been declared effective under the
1933 Act and no stop order suspending the effectiveness of the Form
S-4 shall be in effect and no proceedings for such purpose shall be
pending before or threatened by the SEC;
(h) the shares of Acquiror Common Stock to be issued in the
Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance; and
(i) (i) Acquiror shall have received a letter from
PricewaterhouseCoopers LLP dated as of the Closing Date and addressed
to Acquiror (a copy of which shall have been furnished to the
Company), stating that based on the information furnished to
PricewaterhouseCoopers LLP in the related certificate of Acquiror's
management and based on the letter from Ernst & Young LLP referenced
in clause (ii) below, PricewaterhouseCoopers LLP concurs with
Acquiror management's conclusion that, as of the Closing Date, no
conditions exist that would preclude Acquiror's accounting for the
Merger as a pooling of interests and such letter shall not have been
withdrawn or modified in any material respect and (ii) the Company
shall have received a letter from Ernst & Young LLP dated as of the
Closing Date and addressed to the Company (a copy of which shall have
been furnished to Acquiror), in which Ernst & Young LLP concurs with
the Company management's conclusion that no conditions exist relating
to the Company that would preclude the Acquiror from accounting for
the Merger as a pooling of interests, and such letter shall not have
been withdrawn or modified in any material respect.
SECTION 8.02. Conditions to the Obligations of Acquiror and Merger
Subsidiary. The obligations of Acquiror and Merger Subsidiary to consummate the
Merger are subject to the satisfaction (or, to the extent legally permissible,
waiver) of the following further conditions:
(a) (i) the Company shall have performed in all material
respects all of its obligations hereunder required to be performed by
it at or prior to the Effective Time, (ii) except to the extent
expressly permitted under this Agreement, the representations and
warranties of the Company contained in this Agreement and in any
certificate or other writing delivered by the Company pursuant hereto
(x) that are qualified by materiality or Material Adverse Effect
shall be true at and as of the Effective Time as if made at and as of
such time, and (y) that are not qualified by materiality or Material
Adverse Effect shall be true in all material respects at and as of
the Effective Time as if made at and as of such time and (iii)
Acquiror shall have received a certificate signed by a vice-president
of the Company to the foregoing effect;
(b) there shall not be instituted or pending any action or
proceeding by any governmental authority (whether domestic, foreign
or supranational) before any court or governmental authority or
agency, domestic, foreign or supranational, (i) seeking to restrain,
prohibit or otherwise interfere with the ownership or operation by
Acquiror or any Subsidiary of Acquiror of all or any portion of the
business of the Company or any of its Subsidiaries or of Acquiror or
any of its Subsidiaries or to compel Acquiror or any Subsidiary of
Acquiror to dispose of or hold separate all or any portion of the
business or assets of the Company or any of its Subsidiaries or of
Acquiror or any of its Subsidiaries, (ii) seeking to impose or
confirm limitations on the ability of Acquiror or any Subsidiary of
Acquiror effectively to exercise full rights of ownership of the
Shares (or shares of stock of
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the Surviving Corporation) including, without limitation, the right
to vote any Shares (or shares of stock of the Surviving Corporation)
on any matters properly presented to stockholders or (iii) seeking to
require divestiture by Acquiror or any Subsidiary of Acquiror of any
Shares (or shares of stock of the Surviving Corporation) if any such
matter referred to in clause (i), (ii) or (iii) hereof could
reasonably be expected to result in a substantial detriment to the
Acquiror and its Subsidiaries (including the Company and its
Subsidiaries), taken as a whole (any such substantial detriment being
referred to in this Agreement as a "Substantial Detriment");
(c) there shall not be any statute, rule, regulation, injunction,
order or decree, enacted, enforced, promulgated, entered, issued or
deemed applicable to the Merger and the other transactions
contemplated hereby (or in the case of any statute, rule or
regulation, awaiting signature or reasonably expected to become law),
by any court, government or governmental authority or agency or
legislative body, domestic, foreign or supranational, that is
reasonably likely, directly or indirectly, to result in a Substantial
Detriment;
(d) (i) all required approvals or consents of any governmental
authority (whether domestic, foreign or supranational) in connection
with the Merger and the consummation of the other transactions
contemplated hereby shall have been obtained (and all relevant
statutory, regulatory or other governmental waiting periods, whether
domestic, foreign or supranational, shall have expired) unless the
failure to receive any such approval or consent would not be
reasonably likely, directly or indirectly, to result in a Substantial
Detriment and (ii) all such approvals and consents which have been
obtained shall be on terms that are not reasonably likely, directly
or indirectly, to result in a Substantial Detriment;
(e) Acquiror shall have received an opinion of Davis Polk &
Wardwell in form and substance reasonably satisfactory to Acquiror,
on the basis of certain facts, representations and assumptions set
forth in such opinion, dated the Effective Time, to the effect that
the Merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of Section 368(a) of
the Code and that each of Acquiror, Merger Subsidiary and the Company
will be a party to the reorganization within the meaning of Section
368(b) of the Code. In rendering such opinion, such counsel shall be
entitled to rely upon certain representations of officers of Acquiror
and the Company reasonably requested by counsel, including without
limitation those contained in certificates substantially in the form
attached as Exhibits C-1 and C-2; and
(f) since the date of this Agreement, there shall not have been
any event, occurrence, development or state of circumstances which,
individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect on the Company.
SECTION 8.03. Conditions to the Obligations of the Company. The obligation
of the Company to consummate the Merger is subject to the satisfaction (or, to
the extent legally permissible, waiver) of the following further conditions:
(a) (i) Acquiror shall have performed in all material respects
all of its obligations hereunder required to be performed by it at or
prior to the Effective Time, (ii) except to the extent expressly
permitted under this Agreement, the representations and warranties of
Acquiror contained in this Agreement and in any certificate or other
writing delivered by Acquiror pursuant hereto (x) that are qualified
by materiality or Material Adverse Effect shall be true at and as of
the Effective Time as if made at and as of such time, and (y) that
are not qualified by materiality or Material Adverse Effect shall be
true in all material respects at and as of the Effective Time as if
made at and as of such time and (iii) the Company shall have received
a certificate signed by a vice-president of Acquiror to the foregoing
effect;
(b) the Company shall have received an opinion of Skadden, Arps,
Slate, Meagher & Flom LLP in form and substance reasonably
satisfactory to the Company, on the basis of certain facts,
representations and assumptions set forth in such opinion, dated the
Effective Time, to the effect that the Merger will be treated for
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federal income tax purposes as a reorganization qualifying under the
provisions of Section 368(a) of the Code and that each of Acquiror,
Merger Subsidiary and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code. In
rendering such opinion, such counsel shall be entitled to rely upon
certain representations of officers of Acquiror and the Company
reasonably requested by counsel, including without limitation those
contained in certificates substantially in the form attached as
Exhibits C-1 and C-2; and
(c) since the date of this Agreement, there shall not have been
any event, occurrence, development or state of circumstances which,
individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect on Acquiror.
ARTICLE 9
TERMINATION
SECTION 9.01. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of the Company or any approval of
the matters constituting the Acquiror Stockholder Approval by the stockholders
of Acquiror):
(a) by mutual written consent of the Company and Acquiror;
(b) by either the Company or Acquiror,
(i) if the Merger has not been consummated by the
first anniversary of the date hereof (the "End Date"); provided
that if (x) the Effective Time has not occurred by such first
anniversary by reason of non- satisfaction of any of the
conditions set forth in Sections 8.01(b), 8.01(c), 8.01(e),
8.02(b), 8.02(c) or 8.02(d) and (y) all other conditions in
Article 8 have theretofore been satisfied or (to the extent
legally permissible) waived or are then capable of being
satisfied, the End Date will be June 30, 2000; provided further
that the right to terminate this Agreement under this Section
9.01(b)(i) shall not be available to any party whose failure to
fulfill in any material respect any obligation under this
Agreement has caused or resulted in the failure of the Effective
Time to occur on or before the End Date;
(ii) if the Company Stockholder Approval shall not
have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of stockholders or any
adjournment thereof; or
(iii) if the Acquiror Stockholder Approval shall not
have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of stockholders or any
adjournment thereof;
(c) by either the Company or Acquiror, if there shall be any law
or regulation that makes consummation of the Merger illegal or
otherwise prohibited or if any judgment, injunction, order or decree
enjoining Acquiror or the Company from consummating the Merger is
entered and such judgment, injunction, order or decree shall become
final and nonappealable;
(d) by Acquiror, if the Board of Directors of the Company shall
have failed to recommend or withdrawn or modified or changed in a
manner adverse to Acquiror its approval or recommendation of this
Agreement or the Merger, or shall have failed to call the Company
Stockholder Meeting in accordance with Section 5.02, or shall have
recommended a Superior Proposal (or the Board of Directors of the
Company resolves to do any of the foregoing);
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Annex A -- Agreement and Plan of Merger
(e) by the Company, if (i) the Board of Directors of the Company
authorizes the Company, subject to complying with the terms of this
Agreement, to enter into a binding written agreement concerning a
transaction that constitutes a Superior Proposal and the Company
notifies Acquiror in writing that it intends to enter into such an
agreement, attaching the most current version of such agreement (or a
description of all material terms and conditions thereof) to such
notice, (ii) Acquiror does not make, within three business days of
receipt of the Company's written notification of its intention to
enter into a binding agreement for a Superior Proposal, an offer that
the Board of Directors of the Company determines, in good faith after
consultation with its financial advisors, is at least as favorable to
the shareholders of the Company as the Superior Proposal, it being
understood that the Company shall not enter into any such binding
agreement during such three day period and (iii) the Company prior to
such termination pursuant to this clause (e) pays to Acquiror in
immediately available funds the fees required to be paid pursuant to
Section 10.04. The Company agrees to notify Acquiror promptly if its
intention to enter into a written agreement referred to in its
notification shall change at any time after giving such notification;
or
(f) by the Company, if the Board of Directors of Acquiror shall
have failed to recommend or withdrawn or modified or changed in a
manner adverse to the Company its approval and recommendation of the
matters constituting the Acquiror Stockholder Approval, or shall have
failed to call the Acquiror Stockholder Meeting in accordance with
Section 6.04 (or the Board of Directors of Acquiror resolves to do
any of the foregoing).
The party desiring to terminate this Agreement pursuant to clause (b),
(c), (d), (e), or (f) of this Section 9.01 shall give written notice of such
termination to the other party in accordance with Section 10.01, specifying the
provision hereof pursuant to which such termination is effected.
SECTION 9.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 9.01, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except that (a) the agreements
contained in this Section 9.02, in Section 10.04, in the Option Agreement and in
the Confidentiality Agreement shall survive the termination hereof and (b) no
such termination shall relieve any party of any liability or damages resulting
from any willful breach by that party of this Agreement.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including
facsimile or similar writing) and shall be given,
if to Acquiror or Merger Subsidiary, to:
Charles W. Matthews
Exxon Corporation
5959 Las Colinas Boulevard
Irving, Texas 75039-2298
Facsimile No.: (972) 444-1438
with a copy to:
George R. Bason, Jr.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Facsimile No.: (212) 450-4800
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Annex A -- Agreement and Plan of Merger
if to the Company, to:
Samuel H. Gillespie III
Mobil Corporation
3225 Gallows Road
Fairfax, Virginia 22307-0001
Facsimile No.: (703) 846-4674
with a copy to:
Roger S. Aaron
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile No.: (212) 735-2000
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice, request
or other communication shall be effective (a) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified in this Section and
the appropriate facsimile confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.
SECTION 10.02. Non-Survival of Representations and Warranties. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time or the
termination of this Agreement.
SECTION 10.03. Amendments; No Waivers. (a) Any provision of this Agreement
(including the Exhibits and Schedules hereto) may be amended or waived prior to
the Effective Time if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company, Acquiror and Merger
Subsidiary, or in the case of a waiver, by the party against whom the waiver is
to be effective; provided that after the adoption of this Agreement by the
stockholders of the Company, no such amendment or waiver shall, without the
further approval of such stockholders, alter or change (i) the amount or kind of
consideration to be received in exchange for any shares of capital stock of the
Company, (ii) any term of the certificate of incorporation of the Surviving
Corporation or (iii) any of the terms or conditions of this Agreement if such
alteration or change would adversely affect the holders of any shares of capital
stock of the Company.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.04. Expenses. (a) Except as otherwise specified in this Section
10.04 or the Option Agreement or agreed in writing by the parties, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such cost or
expense; provided that all liability for transfer taxes (other than transfer
taxes to be paid by Acquiror in connection with the issuance and creation of
Acquiror Common Stock and Acquiror Preferred Stock in the Merger, as provided in
Section 1.02(b)) incurred by the Company or the Company's stockholders in
connection with the transactions contemplated hereby shall be paid by the
Surviving Corporation out of its own funds and will not be paid, directly or
indirectly, by Acquiror.
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(b) If:
(i) the Company shall terminate this Agreement pursuant to
Section 9.01(e);
(ii) Acquiror shall terminate this Agreement pursuant to Section
9.01(d), unless at the time of such failure to recommend, withdrawal
or adverse modification or change, failure to call the Company
Stockholder Meeting or recommendation of a Superior Proposal, any of
the conditions set forth in Section 8.03(a) or 8.03(c) would not have
been satisfied as of such date and would not be reasonably capable of
being satisfied; or
(iii) either the Company or Acquiror shall terminate this Agreement
pursuant to Section 9.01(b)(ii) in circumstances where the Company
Stockholder Approval has not been obtained and prior to the Company
Stockholder Meeting an Acquisition Proposal is made by any Person and
the Company enters into a definitive agreement within twelve months
after termination of this Agreement either (1) in respect of any
Acquisition Proposal with such Person or its affiliate or (2) in
respect of any Acquisition Proposal with any other Person (other than
Acquiror or any affiliate of Acquiror) providing, in the case of this
clause (2), greater value per Share than the Exercise Price (as
defined in the Option Agreement),
then in any case as described in clause (i), (ii) or (iii) (each such case of
termination being referred to as a "Trigger Event") the Company shall pay to
Acquiror (by wire transfer of immediately available funds not later than the
date of termination of this Agreement or, in the case of clause (iii), the date
of such definitive agreement) an amount equal to $1,500,000,000. Acceptance by
Acquiror of the payment referred to in the foregoing sentence shall constitute
conclusive evidence that this Agreement has been validly terminated and upon
acceptance of payment of such amount the Company shall be fully released and
discharged from any liability or obligation resulting from or under this
Agreement (but without limiting the Company's obligations under the Option
Agreement).
(c) If the Company shall terminate this Agreement pursuant to Section
9.01(f) unless at the time of such failure to recommend, withdrawal or adverse
modification or change or failure to call the Acquiror Stockholder Meeting any
of the conditions set forth in Section 8.02(a) or 8.02(f) would not have been
satisfied as of such date and would not be reasonably capable of being
satisfied, then Acquiror shall pay to the Company (by wire transfer of
immediately available funds not later than the date of termination of this
Agreement) an amount equal to $1,500,000,000. Acceptance by the Company of the
payment referred to in the foregoing sentence shall constitute conclusive
evidence that this Agreement has been validly terminated and upon acceptance of
payment of such amount the Acquiror shall be fully released and discharged from
any liability or obligation resulting from or under this Agreement.
SECTION 10.05. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto except that Merger Subsidiary
may transfer or assign, in whole or from time to time in part, to one or more of
its affiliates, its rights under this Agreement, but any such transfer or
assignment will not relieve Merger Subsidiary of its obligations hereunder.
SECTION 10.06. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware, without
regard to principles of conflicts of law.
SECTION 10.07. Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any federal or state court located in the State of Delaware, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is
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brought in any such court has been brought in an inconvenient forum.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any
such court. Without limiting the foregoing, each party agrees that service
of process on such party as provided in Section 10.01 shall be deemed
effective service of process on such party.
SECTION 10.08. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 10.09. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
SECTION 10.10. Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto), the Option Agreement and the Confidentiality Agreement
constitute the entire agreement between the parties with respect to the subject
matter of this Agreement and supersede all prior agreements and understandings,
both oral and written, between the parties with respect to the subject matter
hereof and thereof. Except as provided in Section 6.03(c), no provision of this
Agreement or any other agreement contemplated hereby is intended to confer on
any Person other than the parties hereto any rights or remedies.
SECTION 10.11. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
SECTION 10.12. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
MOBIL CORPORATION
By: /s/ Lucio A. Noto
--------------------------------
Name: Lucio A. Noto
Title: Chairman and
Chief Executive Officer
EXXON CORPORATION
By: /s/ Lee R. Raymond
--------------------------------
Name: Lee R. Raymond
Title: Chairman of the Board
LION ACQUISITION SUBSIDIARY
CORPORATION
By: /s/ T. Peter Townsend
--------------------------------
Name: T. Peter Townsend
Title: President
A-38
<PAGE>
Annex A -- Agreement and Plan of Merger
EXHIBIT A TO ANNEX A
STOCK OPTION AGREEMENT
[See Annex B]
<PAGE>
Annex A -- Agreement and Plan of Merger
EXHIBIT B-1 TO ANNEX A
LETTER RELATING TO POOLING
(Mobil Corporation)
[Date]
Exxon Corporation
5959 Las Colinas Boulevard
Irving, Texas 75039-2298
Mobil Corporation
3225 Gallows Road
Fairfax, Virginia 22307-0001
Ladies and Gentlemen:
Pursuant to the terms of the Agreement and Plan of Merger dated as of
December 1, 1998 (the "Agreement") among Exxon Corporation, a New Jersey
corporation ("Exxon"), Mobil Corporation, a Delaware corporation (the
"Company"), and Lion Acquisition Subsidiary Corporation, a Delaware corporation
and a wholly-owned subsidiary of Exxon ("Merger Subsidiary"), Merger Subsidiary
will be merged with and into the Company with the Company to be the surviving
corporation in the Merger (the "Merger").
The undersigned represents, warrants and covenants with and to Exxon and
the Company that:
A. The undersigned understands that the Merger is intended to be accounted
for using the "pooling-of-interests" method and that such treatment for
financial accounting purposes is dependent upon the accuracy of certain of the
representations and warranties, and the undersigned's compliance with certain of
the covenants and agreements, set forth herein. Accordingly, the undersigned
will not sell, transfer or otherwise dispose of the undersigned's interests in,
or acquire or sell any options or other securities relating to securities of
Exxon or the Company that would be intended to reduce the undersigned's risk
relative to, any shares of common stock of either Exxon or the Company
beneficially owned by the undersigned, during the period commencing on the 30th
day prior to the effectiveness of the Merger and ending at such time as Exxon
publicly releases a report (the "Combined Financial Results Report") covering at
least 30 days of combined operations of Exxon and the Company after the Merger.
Exxon shall notify the undersigned of the publication of such results.
B. The undersigned also understands that stop transfer instructions will be
given to the transfer agents of Exxon and the Company in order to prevent any
breach of the covenants and agreements made by the undersigned in paragraph A,
although such stop transfer instructions will be promptly rescinded upon the
publication of the Combined Financial Results Report.
<PAGE>
Annex A -- Agreement and Plan of Merger
C. The undersigned understands and agrees that this letter agreement shall
apply to all shares of the capital stock of Exxon and the Company that are
deemed to be beneficially owned by the undersigned pursuant to applicable
federal securities laws.
Very truly yours,
By:
-------------------------------
Name:
Accepted this ____ day of
__________, 19__.
EXXON CORPORATION
By:
-------------------------------
Name:
Title:
A-B-1-2
<PAGE>
Annex A -- Agreement and Plan of Merger
EXHIBIT B-2 TO ANNEX A
LETTER RELATING TO POOLING
(Exxon Corporation)
[Date]
Exxon Corporation
5959 Las Colinas Boulevard
Irving, Texas 75039-2298
Mobil Corporation
3225 Gallows Road
Fairfax, Virginia 22307-0001
Ladies and Gentlemen:
Pursuant to the terms of the Agreement and Plan of Merger dated as of
December 1, 1998 (the "Agreement") among Exxon Corporation, a New Jersey
corporation ("Exxon"), Mobil Corporation, a Delaware corporation (the
"Company"), and Lion Acquisition Subsidiary Corporation, a Delaware corporation
and a wholly-owned subsidiary of Exxon ("Merger Subsidiary"), Merger Subsidiary
will be merged with and into the Company with the Company to be the surviving
corporation in the Merger (the "Merger").
The undersigned represents, warrants and covenants with and to Exxon and
the Company that:
A. The undersigned understands that the Merger is intended to be accounted
for using the "pooling-of-interests" method and that such treatment for
financial accounting purposes is dependent upon the accuracy of certain of the
representations and warranties, and the undersigned's compliance with certain of
the covenants and agreements, set forth herein. Accordingly, the undersigned
will not sell, transfer or otherwise dispose of the undersigned's interests in,
or acquire or sell any options or other securities relating to securities of
Exxon or the Company that would be intended to reduce the undersigned's risk
relative to, any shares of common stock of either Exxon or the Company
beneficially owned by the undersigned, during the period commencing on the 30th
day prior to the effectiveness of the Merger and ending at such time as Exxon
publicly releases a report (the "Combined Financial Results Report") covering at
least 30 days of combined operations of Exxon and the Company after the Merger.
Exxon shall notify the undersigned of the publication of such results.
B. The undersigned also understands that stop transfer instructions will be
given to the transfer agents of Exxon and the Company in order to prevent any
breach of the covenants and agreements made by the undersigned in paragraph A,
although such stop transfer instructions will be promptly rescinded upon the
publication of the Combined Financial Results Report.
<PAGE>
Annex A -- Agreement and Plan of Merger
C. The undersigned understands and agrees that this letter agreement shall
apply to all shares of the capital stock of Exxon and the Company that are
deemed to be beneficially owned by the undersigned pursuant to applicable
federal securities laws.
Very truly yours,
----------------------------------
Name:
Accepted this ____ day of
___________, 19__.
EXXON CORPORATION
By:
-------------------------------
Name:
Title:
A-B-2-2
<PAGE>
Annex A -- Agreement and Plan of Merger
EXHIBIT B-3 TO ANNEX A
AFFILIATE'S LETTER
(Mobil Corporation)
[Date]
Exxon Corporation
5959 Las Colinas Boulevard
Irving, Texas 750039-2298
Mobil Corporation
3225 Gallows Road
Fairfax, Virginia 22307-0001
Ladies and Gentlemen:
The undersigned has been advised that as of the date of this letter the
undersigned may be deemed to be an "affiliate" of Mobil Corporation, a Delaware
corporation (the "Company"), as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger dated as of December 1, 1998 (the "Agreement")
among the Company, Exxon Corporation, a New Jersey corporation ("Exxon"), and
Lion Acquisition Subsidiary Corporation, a Delaware corporation and a
wholly-owned subsidiary of Exxon ("Merger Subsidiary"), Merger Subsidiary will
be merged with and into the Company with the Company to be the surviving
corporation in the merger (the "Merger").
As a result of the Merger, the undersigned will receive shares of common
stock, no par value, of Exxon (the "Exxon Common Stock") in exchange for shares
owned by the undersigned of common stock, par value $1.00 per share, of the
Company (the "Company Common Stock").
The undersigned represents, warrants and covenants to Exxon and the Company
that as of the date the undersigned receives any Exxon Common Stock as a result
of the Merger:
A. The undersigned shall not make any sale, transfer or other disposition
of the Exxon Common Stock in violation of the Act or the Rules and Regulations.
B. The undersigned has carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable limitations
upon the undersigned's ability to sell, transfer or otherwise dispose of the
Exxon Common Stock to the extent the undersigned felt necessary with the
undersigned's counsel or counsel for the Company.
C. The undersigned has been advised that the issuance of Exxon Common Stock
to the undersigned pursuant to the Merger will be registered with the Commission
under the Act on a Registration Statement on Form S-4. However, the undersigned
has also been advised that, because at the time the Merger is submitted for a
vote of the stockholders of the Company, the undersigned may be deemed to be an
affiliate of the Company, the undersigned may not sell, transfer or
otherwise dispose of the Exxon Common Stock issued to the undersigned in
<PAGE>
Annex A -- Agreement and Plan of Merger
the Merger unless (i) such sale, transfer or other disposition has been
registered under the Act, (ii) such sale, transfer or other disposition is
made in conformity with Rule 145 promulgated by the Commission under the
Act, or (iii) in the opinion of counsel reasonably acceptable to Exxon, or
pursuant to a "no action" letter obtained by the undersigned from the staff
of the Commission, such sale, transfer or other disposition is otherwise
exempt from registration under the Act.
D. The undersigned understands that Exxon is under no obligation to
register the sale, transfer or other disposition of the Exxon Common Stock by
the undersigned or on the undersigned's behalf under the Act or to take any
other action necessary in order to enable such sale, transfer or other
disposition by the undersigned to be made in compliance with an exemption from
such registration.
E. The undersigned also understands that there will be placed on any
certificates for the Exxon Common Stock issued to the undersigned a legend
stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT
OF 1933 APPLIES. THE SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF ONLY IN
ACCORDANCE WITH THE TERMS OF A LETTER AGREEMENT BETWEEN THE
REGISTERED HOLDER HEREOF AND EXXON CORPORATION, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF EXXON
CORPORATION."
F. The undersigned also understands that unless a sale or transfer by the
undersigned of the undersigned's Exxon Common Stock has been registered under
the Act or is a sale made in conformity with the provisions of Rule 145 under
the Act, Exxon reserves the right to put the following legend on the
certificates issued to the undersigned's transferee:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM
A PERSON WHO RECEIVED SUCH SECURITIES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SECURITIES HAVE NOT BEEN ACQUIRED BY THE HOLDER WITH A VIEW TO, OR
FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE
MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OF 1933."
It is understood and agreed that the legends set forth in paragraphs E and
F above shall be removed by delivery of substitute certificates without such
legend if (i) the securities represented thereby have been registered for sale
by the undersigned under the Act or (ii) Exxon has received either an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to Exxon, or
a "no-action" letter obtained by the undersigned from the staff of the
Commission, to the effect that the restrictions imposed by Rule 145 under the
Act no longer apply to the undersigned.
G. The undersigned further understands and agrees that the representations,
warranties, covenants and agreements of the undersigned set forth herein are for
the benefit of Exxon, the Company and the Surviving Corporation (as defined
in the Merger Agreement) and will be relied upon by such entities and their
respective counsel and accountants.
A-B-3-2
<PAGE>
Annex A -- Agreement and Plan of Merger
H. The undersigned understands and agrees that this letter agreement shall
apply to all shares of the capital stock of Exxon and the Company that are
deemed to be beneficially owned by the undersigned pursuant to applicable
federal securities laws.
Execution of this letter should not be considered an admission on the part
of the undersigned that the undersigned is an "affiliate" of the Company as
described in the first paragraph of this letter or as a waiver of any rights the
undersigned may have to object to any claim that the undersigned is such an
affiliate on or after the date of this letter.
Very truly yours,
By:
-------------------------------
Name:
Accepted this ____ day of
____________, 19__.
EXXON CORPORATION
By:
-------------------------------
Name:
Title:
A-B-3-3
<PAGE>
Annex A -- Agreement and Plan of Merger
EXHIBIT C-1 TO ANNEX A
(as amended April 2, 1999)
EXXON CORPORATION AND
LION ACQUISITION SUBSIDIARY CORPORATION
REPRESENTATION LETTER
[Date]
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections
8.02(e) and 8.03(b) of the Agreement and Plan of Merger (the "Agreement")* dated
as of December 1, 1998, among Mobil, a Delaware corporation ("Company"), Exxon,
a New Jersey corporation ("Parent"), and Lion Acquisition Subsidiary
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Merger Subsidiary"), and the opinions which, pursuant to the requirements of
Item 601(b)(8) of Regulation S-K under the Securities Act of 1933, as amended,
will be included in the Registration Statement on Form S-4, the undersigned
officers of Parent and Merger Subsidiary hereby certify and represent as to
Parent and Merger Subsidiary that the facts relating to the merger (the
"Merger") of Merger Subsidiary with and into Company pursuant to the Agreement,
and as described in the Joint Proxy Statement/Prospectus of Parent and Company
relating to the Merger (the "Proxy Statement") are true, correct and complete in
all respects as of the date hereof and will be true, correct and complete in all
respects at the Effective Time and that:
1. The Merger Consideration and Preferred Merger Consideration to be
received in the Merger by holders of common stock of Company ("Company Stock")
and Series B Preferred Stock of Company ("Series B Preferred Stock"),
respectively, was determined by arm's length negotiations between the
managements of Parent and Company and will be approximately equal to the fair
market value of the Company Stock and Series B Preferred Stock, respectively,
surrendered in exchange. In connection with the Merger, no holder of Company
Stock will receive in exchange for such stock, directly or indirectly, any
consideration other than common stock of Parent ("Parent Stock") and, in lieu of
fractional shares of Parent Stock, cash. In connection with the Merger, no
holder of Series B Preferred Stock, other than any such holders who dissent in
the merger and perfect their right to appraisal and payment, will receive in
exchange for such stock, directly or indirectly, any consideration other than
preferred stock to be issued by Parent ("Parent Preferred Stock") at the
Effective Time.
2. Other than cash paid in lieu of fractional shares of Parent Stock,
none of
- -----------------
*References contained in this Certificate to the Agreement include, unless
the context otherwise requires, each document attached as an exhibit or annex.
All defined terms used herein and not otherwise defined have the meaning
ascribed to them in the Agreement.
<PAGE>
Annex A -- Agreement and Plan of Merger
(i) Parent (or any successor corporation),
(ii) a corporation that, immediately before or immediately after
such purchase, exchange, redemption, or other acquisition, is a
member of an Affiliated Group (as defined herein) of which Parent (or
any successor corporation) is a member, or
(iii) a corporation in which Parent (or any successor corporation)
owns, or which owns with respect to Parent (or any successor
corporation), directly or indirectly, immediately before or
immediately after such purchase, exchange, redemption, or other
acquisition, at least 50% of the total combined voting power of all
classes of stock entitled to vote or at least 50% of the total value
of shares of all classes of stock, taking into account for purposes
of this clause (iii)
o any stock owned by 5% or greater stockholders of Parent
(or any successor) or such corporation,
o a proportionate share of the stock owned by entities in
which Parent (or any successor) or such corporation owns an
interest, and
o any stock which may be acquired pursuant to the exercise
of options
(a "Parent Related Person") has any current plan or intention to redeem,
purchase, exchange or otherwise reacquire any of the Parent Stock or Parent
Preferred Stock to be issued in the Merger. Parent will implement its stock
repurchase plan consistent with the resolution adopted by the Board of Parent on
November 25, 1998. Parent intends that all stock repurchases made pursuant to
this stock repurchase plan, or any other stock repurchase plan adopted by
Parent,
(a) shall be undertaken for a corporate business purpose,
(b) shall be made in the open market for stock of the Parent
which is widely held and publicly traded, except that Parent may
acquire stock in block trades made directly with an entity that is
not known to Parent to have acquired such stock in the Merger, and
any redemptions or repurchases of stock issued in the Merger that
occur shall be incidental to the operation of such stock repurchase
plan, and
(c) shall be limited to, in the aggregate, a small percentage of
each class of stock of Parent outstanding at the time of the
redemption or repurchase.
In addition, Parent will cause all Parent Related Persons and any person
acting as an agent of Parent not to redeem, purchase, exchange or otherwise
acquire (including by derivative transactions such as an equity swap which would
have the economic effect of an acquisition), directly or indirectly (including
through partnerships or through third parties in connection with a plan to so
acquire), a number of shares of Parent Stock and Parent Preferred Stock to be
received by Company shareholders in connection with the Merger that would reduce
the Company shareholders' ownership of Parent Stock and Parent Preferred Stock
to a number of shares having a value, as of the Effective Time, of less than 50%
of the total value of Company Stock and Series B Preferred Stock immediately
prior to the Effective Time.
For purposes of this representation, shares of Company Stock exchanged for
cash in lieu of fractional shares of Parent Stock are treated as outstanding
shares of Company Stock at the Effective Time. Moreover, shares of
Company Stock and Series B Preferred Stock that are redeemed or sold or
otherwise transferred to Company,
A-C-1-2
<PAGE>
Annex A -- Agreement and Plan of Merger
Parent, or any person related to Company or Parent prior to the Merger and
in contemplation or as part of the Merger will be taken into account for
purposes of this representation.
For purposes of this Certificate, "Affiliated Group" shall mean one or more
chains of corporations connected through stock ownership with a common parent
corporation, but only if
(x) the common parent owns directly stock that possesses at
least 80% of the total voting power, and has a value at least equal to
80% of the total value, of the stock in at least one of the other
corporations, and
(y) stock possessing at least 80% of the total voting power, and
having a value at least equal to 80% of the total value, of the stock
in each corporation (except the common parent) is owned directly by
one or more of the other corporations.
For purposes of the preceding sentence, "stock" does not include any
stock which
(a) is not entitled to vote,
(b) is limited and preferred as to dividends and does not
participate in corporate growth to any significant extent,
(c) has redemption and liquidation rights which do not exceed
the issue price of such stock (except for a reasonable redemption or
liquidation premium), and
(d) is not convertible into another class of stock.
3. After the Merger, Company will hold at least 90% of the fair market
value of the net assets and at least 70% of the fair market value of the gross
assets held by Merger Subsidiary immediately prior to the Merger, and at least
90% of the fair market value of the net assets and at least 70% of the fair
market value of the gross assets held by Company immediately prior to the
Merger. For purposes of this representation, assets of Merger Subsidiary or
Company held immediately prior to the Merger include amounts paid or incurred by
Merger Subsidiary or Company in connection with the Merger, including amounts
used to pay reorganization expenses or dissenting shareholders or to make
payments to shareholders who receive cash or other property (including cash in
lieu of fractional shares) and all payments, redemptions and distributions
(except for regular, normal dividends) made in contemplation or as part of the
Merger.
4. Prior to and at the Effective Time of the Merger, Parent will be in
Control of Merger Subsidiary. Merger Subsidiary is wholly and directly owned by
Parent and has been newly formed solely in order to consummate the Merger, and
at no time has or will Merger Subsidiary conduct any business activities or
other operations of any kind other than the issuance of its stock to Parent
prior to the Effective Time. For purposes of this Certificate, "Control" with
respect to a corporation shall mean ownership of at least 80% of the total
combined voting power of all classes of stock entitled to vote and at least 80%
of the total number of shares of each other class of stock of the corporation.
5. Following the Merger, Parent has no plan or intention to cause Company
to issue additional shares of stock, or any plan or intention to take any
action, that could result in Parent losing Control of Company.
6. Parent has no plan or intention to liquidate Company, to merge Company
with or into another corporation, to sell, exchange, transfer or otherwise
dispose of any stock of Company or to cause Company to sell, exchange,
transfer or otherwise dispose of any of its assets or of any assets
acquired from Merger Subsidiary in the Merger, except for (i) dispositions
made in the ordinary course of business, (ii) transfers or successive
transfers if
A-C-1-3
<PAGE>
Annex A -- Agreement and Plan of Merger
in each case the transferor is in Control of the transferee, or (iii) arm's
length dispositions to unrelated persons other than dispositions which
would result in Parent ceasing to use a significant portion of the
Company's historic business assets in a business.
7. In the Merger, Merger Subsidiary will have no liabilities assumed by
Company and will not transfer to Company any assets subject to liabilities.
8. Following the Merger, Parent will cause Company to continue its
historic business or use a significant portion of its historic business assets
in a business. For this purpose, Parent will be treated as holding all of the
businesses and assets of its Qualified Group and Parent will be treated as
owning its proportionate share of the Company business assets used in a business
of any partnership in which members of Parent's Qualified Group either own a
significant interest or have active and substantial management functions as a
partner with respect to that partnership business. A Qualified Group is one or
more chains of corporations connected through stock ownership with Parent but
only if Parent is in Control of at least one other corporation and each of the
corporations (other than Parent) is Controlled directly by one of the other
corporations.
9. Except as provided below, Parent, Merger Subsidiary, Company and the
Company shareholders each will bear its or their own expenses, if any, incurred
in connection with or as part of the Merger or related transactions. However, to
the extent any expenses related to the Merger are to be funded directly or
indirectly by a party other than the incurring party, such expenses are solely
and directly related to the Merger, and do not include expenses incurred for
investment or estate planning advice, or expenses incurred by an individual
shareholder or group of shareholders for legal, accounting or investment advice
or counsel relating to the merger. Neither Parent nor Merger Subsidiary has paid
or will pay, directly or indirectly, any expenses (including transfer taxes)
incurred or to be incurred by any holder of Company Stock or Series B Preferred
Stock in connection with or as part of the Merger or any related transactions;
provided that any stamp duties and stamp duty reserve taxes in connection with
the issuance and creation of Parent Stock or Series B Preferred Stock of Parent
in the Merger will be paid by Parent. Neither Parent nor Merger Subsidiary has
agreed to assume, nor will it directly or indirectly assume, any other expense
or other liability, whether fixed or contingent, of any holder of Company Stock
or Series B Preferred Stock. To the extent that any transfer tax or other
expense is a liability of a shareholder of Company, such liability will be paid
by Company or such shareholder, but in no event by Parent.
10. There is no intercorporate indebtedness existing between Parent and
Company or between Merger Subsidiary and Company that was issued, acquired or
will be settled at a discount.
11. All shares of Parent Stock into which shares of Company Stock will be
converted pursuant to the Merger will be newly issued or treasury shares, and
will be issued by Parent directly to record holders of Company Stock pursuant to
the Merger. All shares of Parent Preferred Stock into which Series B Preferred
Stock will be converted will be newly issued and will be issued by Parent
directly to record holders of Series B Preferred Stock pursuant to the Merger.
12. In the Merger, shares of Company Stock and Series B Preferred Stock
representing Control of Company will be exchanged solely for voting stock of
Parent and cash in lieu of fractional shares. Under the Agreement, all shares of
Company Stock and Series B Preferred Stock as to which dissenters' rights are
not perfected will be exchanged in the Merger for voting stock of Parent and
cash in lieu of fractional shares. For purposes of this representation, if any
stock of Company is exchanged for cash or other property originating with
Parent, such stock will be treated as outstanding stock of Company acquired by
Parent at the Effective Time. The payment of cash in lieu of fractional shares
of Parent Stock to holders of Company Stock is solely for the purpose of
avoiding the expense and inconvenience to Parent of issuing fractional
shares and does not represent separately bargained for consideration. To
the best knowledge of the management of Parent, the total cash
consideration that will be paid in
A-C-1-4
<PAGE>
Annex A -- Agreement and Plan of Merger
the Merger to holders of Company Stock instead of issuing fractional shares
of Parent Stock will not exceed one percent of the total consideration that
will be issued to the holders of Company Stock in the Merger.
13. In the Merger, no liabilities of shareholders of Company will be
assumed by Parent, and Parent will not assume any liabilities relating to any
Company Stock or Series B Preferred Stock acquired by Parent in the Merger.
Furthermore, there is no plan or intention for Parent to assume any liabilities
of Company.
14. The Series B Preferred Stock is the only class of stock of Company
that grants its holders dissenters' rights. In the event that any holders of
Series B Preferred Stock of Company do not vote in favor of the Merger and
perfect their right to appraisal and payment, any amounts paid to such holders
in an appraisal proceeding will be paid by Company out of its own funds. No
funds will be supplied for such payments, directly or indirectly, by Parent, nor
will Parent directly or indirectly reimburse Company for any such payments.
15. Neither Parent nor Merger Subsidiary is a regulated investment
company, a real estate investment trust, or a corporation fifty percent (50%) or
more of the value of whose assets are stock and securities and eighty percent
(80%) or more of the value of whose total assets are assets held for investment
(each, an "Investment Company"). For purposes of this representation, in making
the 50% and 80% determinations under the preceding sentence, (i) stock and
securities in any subsidiary corporation shall be disregarded and the parent
corporation shall be deemed to own its ratable share of the subsidiary's assets,
and (ii) a corporation shall be considered a subsidiary if the parent owns 50%
or more of the combined voting power of all classes of stock entitled to vote or
50% or more of the total value of shares of all classes of stock outstanding. In
determining total assets there shall be excluded cash and cash items (including
receivables), government securities, and assets acquired (through incurring
indebtedness or otherwise) for purposes of ceasing to be an Investment Company.
16. None of the employee compensation received or to be received by any
shareholder-employees of Company is or will be separate consideration for, or
allocable to, any of their shares of Company Stock or Series B Preferred Stock
to be surrendered in the Merger. None of the shares of Parent Stock or Parent
Preferred Stock to be received by any shareholder-employee of Company in the
Merger is or will be separate consideration for, or allocable to, any
employment, consulting or similar arrangement. Any compensation paid or to be
paid to any shareholder of Company, who will be an employee of or perform
advisory services for Parent, Company, or any affiliate thereof after the
Merger, will be determined by bargaining at arm's length.
17. At the Effective Time, neither Parent nor any Parent Related Person
will own any class of stock of Company or any securities of Company or any
instrument giving the holder the right to acquire any such stock or securities
except for the Option Agreement that appears as Exhibit A to the Agreement.
18. The Merger is being effected for bona fide business reasons and will
be carried out strictly in accordance with the Agreement, and as described in
the Proxy Statement, and none of the material terms and conditions therein have
been or will be waived or modified.
19. The Agreement and the documents described in the Agreement, the Proxy
Statement and the Form S-4 represent the entire understanding between or among
(i) Parent and its subsidiaries and (ii) Company and its subsidiaries and, to
the best knowledge of the management of Parent, between or among such entities
and the affiliates and shareholders of Parent and Company with respect to the
Merger and there are no written or oral agreements regarding the Merger other
than those expressly referred to in the Agreement, the Proxy Statement and the
Form S-4.
20. None of Parent, Merger Subsidiary or, after the Merger, Company will
take any position on any Federal, state, or local income or franchise tax
return, or take any other tax reporting position, that is inconsistent with the
treatment of the Merger as a tax-free reorganization or any of the foregoing
representations, unless otherwise
A-C-1-5
<PAGE>
Annex A -- Agreement and Plan of Merger
required by a decision by the Tax Court or a judgment, decree, or other
order by any court of competent jurisdiction, which has become final, or by
applicable state or local income or franchise tax law.
21. Except for cash in lieu of fractional shares, Parent will acquire the
Company Stock and the Series B Preferred Stock solely in exchange for voting
shares of Parent Stock and Parent Preferred Stock. For purposes of this
representation, stock of Company redeemed for cash or other property furnished
by Parent will be considered as acquired by Parent. Further, no liabilities of
Company or the Company shareholders will be assumed by Parent, and Parent will
not assume any liabilities relating to any Company Stock or Series B Preferred
Stock acquired by Parent in the Merger.
We understand that Davis Polk & Wardwell and Skadden, Arps, Slate, Meagher
& Flom LLP will rely, without further inquiry, on this Certificate in rendering
their opinions as to certain United States Federal income tax consequences of
the Merger, and we will promptly and timely inform them if, after signing this
Certificate, we have reason to believe that any of the facts described herein or
in the Proxy Statement or any of the representations made in this Certificate
are or have become untrue, incorrect or incomplete in any respect.
Very truly yours,
EXXON CORPORATION
By:
---------------------------------
Title:
------------------------------
LION ACQUISITION SUBSIDIARY CORPORATION
By:
---------------------------------
Title:
------------------------------
A-C-1-6
<PAGE>
Annex A -- Agreement and Plan of Merger
EXHIBIT C-2 TO ANNEX A
(as amended April 2, 1999)
MOBIL CORPORATION REPRESENTATION LETTER
[Date]
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections
8.02(e) and 8.03(b) of the Agreement and Plan of Merger (the "Agreement")* dated
as of December 1, 1998, among Mobil, a Delaware corporation ("Company"), Exxon,
a New Jersey corporation ("Parent"), and Lion Acquisition Subsidiary
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Merger Subsidiary"), and the opinions which, pursuant to the requirements of
Item 601(b)(8) of Regulation S-K under the Securities Act of 1933, as amended,
will be included in the Registration Statement on Form S-4, the undersigned
officer of Company hereby certifies and represents as to Company that the facts
relating to the merger (the "Merger") of Merger Subsidiary with and into Company
pursuant to the Agreement and as described in the Joint Proxy
Statement/Prospectus of Parent and Company relating to the Merger (the "Proxy
Statement") are true, correct and complete in all respects as of the date hereof
and will be true correct and complete in all respects at the Effective Time and
that:
1. The Merger Consideration and Preferred Merger Consideration to be
received in the Merger by holders of common stock of the Company ("Company
Stock") and Series B Preferred Stock of Company ("Series B Preferred Stock"),
respectively, was determined by arm's length negotiations between the
managements of Parent and Company and will be approximately equal to the fair
market value of the Company Stock and Series B Preferred Stock, respectively,
surrendered in exchange. In connection with the Merger, no holder of Company
Stock will receive in exchange for such stock, directly or indirectly, any
consideration other than common stock of Parent ("Parent Stock") and, in lieu of
fractional shares of Parent Stock, cash. In connection with the Merger, no
holder of Series B Preferred Stock of Company, other than any such holders who
dissent in the Merger and perfect their right to appraisal and payment, will
receive in exchange for such stock, directly or indirectly, any consideration
other than preferred stock to be issued by Parent ("Parent Preferred Stock") at
the Effective Time.
2. To the best knowledge of the management of Company, there is no plan
or intention on the part of holders of Company Stock or Series B Preferred Stock
to sell, exchange or otherwise transfer ownership (including by derivative
transactions such as a an equity swap which would have the economic effect of a
transfer of ownership) to Parent, Company or any Related Person with
respect to either of them, directly or indirectly
- ------------
*References contained in this Certificate to the Agreement include, unless
the context otherwise requires, each document attached as an exhibit or annex.
All defined terms used herein and not otherwise defined have the meaning
ascribed to them in the Agreement.
<PAGE>
Annex A -- Agreement and Plan of Merger
(including through partnerships or through third parties in connection with
a plan to so transfer ownership), of a number of shares of Parent Stock or
Parent Preferred Stock to be received by Company shareholders in connection
with the Merger that would reduce the Company shareholders' ownership of
Parent Stock and Parent Preferred Stock to a number of shares having a
value, as of the Effective Time, of less than 50% of the total value of all
of the formerly outstanding stock of Company immediately prior to the
Effective Time. For purposes of this representation, shares of Company
Stock exchanged for cash in lieu of fractional shares of Parent Stock and
Series B Preferred Stock redeemed pursuant to the perfection of the
holder's appraisal rights are treated as outstanding shares of Company
Stock or Series B Preferred Stock at the Effective Time. Moreover, shares
of Company Stock and Parent Stock and Parent Preferred Stock held by
shareholders of Company that are redeemed or sold or otherwise transferred
to Company, Parent, or any person related to Company or Parent prior or
subsequent to the Merger and in contemplation or as part of the Merger will
be taken into account for purposes of this representation.
For purposes of this Certificate, a Related Person with respect to either
Parent or Company shall mean
(i) a corporation that, immediately before or immediately after
such purchase, exchange, redemption, or other acquisition, is a member
of an Affiliated Group (as defined herein) of which Parent or Company,
as the case may be, (or any successor corporation) is a member, or
(ii) a corporation in which Parent or Company, as the case may be,
(or any successor corporation), owns, or which owns with respect to
Parent or Company, as the case may be, (or any successor corporation)
directly or indirectly, immediately before or immediately after such
purchase, exchange, redemption, or other acquisition, at least 50% of
the total combined voting power of all classes of stock entitled to
vote or at least 50% of the total value of shares of all classes of
stock, taking into account for purposes of this clause (ii) any stock
owned by 5% or greater stockholders of Parent or Company, as the case
may be, (or any successor) or such corporation, a proportionate share
of the stock owned by entities in which Parent or Company, as the case
may be, (or any successor) or such corporation owns an interest, and
any stock which may be acquired pursuant to the exercise of options.
For purposes of this Certificate, "Affiliated Group" shall mean one or more
chains of corporations connected through stock ownership with a common parent
corporation, but only if
(x) the common parent owns directly stock that possesses at least
80% of the total voting power, and has a value at least equal to 80%
of the total value, of the stock in at least one of the other
corporations, and
(y) stock possessing at least 80% of the total voting power, and
having a value at least equal to 80% of the total value, of the stock
in each corporation (except the common parent) is owned directly by
one or more of the other corporations.
For purposes of the preceding sentence, "stock" does not include any stock which
(a) is not entitled to vote, (b) is limited and preferred as to dividends and
does not participate in corporate growth to any significant extent, (c) has
redemption and liquidation rights which do not exceed the issue price of such
stock (except for a reasonable redemption or liquidation premium), and (d) is
not convertible into another class of stock.
3. After the Merger, to the knowledge of the management of Company,
Company will hold at least 90% of the fair market value of the net assets and at
least 70% of the fair market value of the gross assets held by Merger Subsidiary
immediately prior to the Merger and at least 90% of the fair market value of the
net assets and at least 70% of the fair market value of the gross assets held by
Company immediately prior to the Merger. For purposes of this representation,
assets of Merger Subsidiary or Company held immediately prior to the Merger
include amounts paid or incurred by Merger Subsidiary or Company in
connection with the Merger, including amounts used to pay Company's
reorganization expenses or dissenting shareholders or to make payments to
shareholders who receive
A-C-2-2
<PAGE>
Annex A -- Agreement and Plan of Merger
cash or other property (including cash in lieu of fractional shares) and
all payments, redemptions and distributions (except for regular, normal
dividends, if any) made in contemplation or as part of the Merger. Any
dispositions in contemplation or as part of the Merger of assets held by
Company prior to the Merger will be for fair market value, and the proceeds
thereof will be retained by the Company.
4. The Company has no plan or intention to issue additional shares of its
stock that would result in Parent losing Control of the Company. For purposes of
this Certificate, "Control" with respect to a corporation shall mean ownership
of at least 80% of the total combined voting power of all classes of stock
entitled to vote and at least 80% of the total number of shares of each other
class of stock of the corporation.
5. In the Merger, to the knowledge of the management of Company, Merger
Subsidiary will have no liabilities assumed by the Company and will not transfer
to Company any assets subject to liabilities.
6. No assets of Company have been sold, transferred or otherwise disposed
of which would prevent Parent from continuing the historic business of Company
or from using a significant portion of Company's historic business assets in a
business following the merger, and Company intends to continue its historic
business or use a significant portion of its historic business assets in a
business.
7. Except as specified below, Parent, Merger Subsidiary, Company and the
Company shareholders each will bear its or their own expenses, if any, incurred
in connection with or as part of the Merger or related transactions. However, to
the extent any expenses related to the Merger are to be funded directly or
indirectly by a party other than the incurring party, such expenses are solely
and directly related to the Merger, and do not include expenses incurred for
investment or estate planning advice, or expenses incurred by an individual
shareholder or group of shareholders for legal, accounting or investment advice
or counsel relating to the merger. Company has not paid or will not pay,
directly or indirectly, any expenses incurred by any shareholder of Company in
connection with or as part of the Merger or any related transactions; provided
that all liability for transfer taxes (except for stamp duties and stamp duty
reserve taxes to be paid by Parent in connection with the issuance and creation
of Parent Stock or Parent Preferred Stock in the Merger) incurred by the holders
of Company Stock or Series B Preferred Stock will be paid by Company or the
Company shareholders and in no event by Parent. Company has not agreed to
assume, nor will it directly or indirectly assume, any other expense or other
liability, whether fixed or contingent, of any holder of Company Stock or Series
B Preferred Stock.
8. There is no intercorporate indebtedness existing between Parent and
Company or between Merger Subsidiary and Company that was issued, acquired or
will be settled at a discount.
9. Company has no authorized stock other than common stock par value
$1.00 per share, and preferred stock, par value $1.00 per share. At the date
hereof, the only capital stock of Company issued and outstanding is Company
Stock and Series B Preferred Stock.
10. In the Merger, Company Stock and Series B Preferred Stock representing
Control of Company will be exchanged solely for voting stock of Parent other
than cash in lieu of fractional shares. For purposes of this representation,
stock of Company exchanged for cash or other property originating with Parent,
if any, will be treated as outstanding stock of Company acquired by Parent at
the Effective Time. The payment of cash in lieu of fractional shares of Parent
stock to holders of Company Stock is solely for the purpose of avoiding the
expense and inconvenience to Parent of issuing fractional shares and does not
represent separately bargained for consideration. To the best knowledge of the
management of Company, the total cash consideration that will be paid in the
Merger to holders of Company Stock instead of issuing fractional shares of
Parent Stock will not exceed one percent of the total consideration that
will be issued to the holders of Company Stock in the Merger. To the best
knowledge of the management of Company, the fractional share interest of
each Company shareholder will be aggregated, and no
A-C-2-3
<PAGE>
Annex A -- Agreement and Plan of Merger
Company shareholder is intended to receive cash in an amount greater than
the value of one full share of Parent Stock.
11. There exist no options, warrants, convertible securities,
equity-linked securities or other rights to acquire Company Stock or Series B
Preferred Stock (whether settled in stock or cash) other than rights pursuant to
the Company Rights, the Series B Preferred Stock, the Option Agreement, the
Company Awards and employee stock options and employee stock purchase plans in
existence as of the date of the Agreement (all as referred to in Section 3.05 of
the Agreement), and even if such rights were exercised or converted, it would
not affect the acquisition or retention of Control of Company. All such rights
will terminate at the Effective Time.
12. To the knowledge of the management of Company, in the Merger, no
liabilities of shareholders of Company will be assumed by Parent, and Parent
will not assume any liabilities relating to any Company Stock or Series B
Preferred Stock acquired by Parent in the Merger. Furthermore, to the knowledge
of the management of Company, there is no plan or intention for Parent to assume
any liabilities of Company.
13. The Series B Preferred Stock is the only class of stock of Company
that grants its holders dissenters' rights. In the event that any holders of
Series B Preferred Stock of Company do not vote in favor of the Merger and
perfect their right to appraisal and payment, any amounts paid to such holders
in an appraisal proceeding will be paid by Company out of its own funds. No
funds will be supplied for such payments, directly or indirectly, by Parent, nor
will Parent directly or indirectly reimburse Company for any such payments.
14. Company is not a regulated investment company, a real estate
investment trust, or a corporation fifty percent (50%) or more of the value of
whose assets are stock and securities and eighty percent (80%) or more of the
value of whose total assets are assets held for investment (each, an "Investment
Company"). For purposes of this representation, in making the 50% and 80%
determinations under the preceding sentence, (i) stock and securities in any
subsidiary corporation shall be disregarded and the parent corporation shall be
deemed to own its ratable share of the subsidiary's assets, and (ii) a
corporation shall be considered a subsidiary if the parent owns 50% or more of
the combined voting power of all classes of stock entitled to vote or 50% or
more of the total value of shares of all classes of stock outstanding. In
determining total assets there shall be excluded cash and cash items (including
receivables), government securities, and assets acquired (through incurring
indebtedness or otherwise) for purposes of ceasing to be an Investment Company.
15. None of the employee compensation received or to be received by any
shareholder-employees of Company is or will be separate consideration for, or
allocable to, any of their shares of Company Stock or Series B Preferred Stock
to be surrendered in the Merger. None of the shares of Parent Stock or Parent
Preferred Stock to be received by any shareholder-employee of Company in the
Merger is or will be separate consideration for, or allocable to, any
employment, consulting or similar arrangement. Any compensation paid or to be
paid to any shareholder of Company who will be an employee of or perform
advisory services for Parent, Company, or any affiliate thereof after the
Merger, will be determined by bargaining at arm's length.
16. Since the date of the Agreement, except for the issuance of Company
Stock pursuant to the rights described in paragraph 11 hereof, Company has not
issued any additional shares of Company Stock.
17. No holders of Company Stock have dissenters' rights with respect to
the Merger under applicable laws.
18. Prior to and in connection with the Merger no Company Stock or Series
B Preferred Stock has been (i) redeemed by Company, (ii) acquired by a Related
Person with respect to Company (except that for the purposes of this
representation, clause (i) of the definition of Related Person shall not
apply) with consideration other than stock of Company or Parent or (iii)
the subject of any extraordinary distribution by Company.
A-C-2-4
<PAGE>
Annex A -- Agreement and Plan of Merger
19. Except as disclosed in the Company's Schedule of Exceptions, Company
has not redeemed any of its stock, made any distributions with respect to its
stock, or disposed of any of its assets in contemplation or as part of the
Merger, excluding for purposes of this representation regular, normal dividends
and Company Stock acquired in the ordinary course of business in connection with
employee incentive and benefit programs, or other programs or arrangements in
existence on the date hereof.
20. The Merger is being effected for bona fide business reasons and will
be carried out strictly in accordance with the Agreement, and as described in
the Proxy Statement, and none of the material terms and conditions therein has
been or will be waived or modified.
21. The Agreement and the documents described in the Agreement, the Proxy
Statement and the Form S-4 represent the entire understanding between or among
(i) Parent and its subsidiaries and (ii) Company and its subsidiaries and, to
the best knowledge of the management of Company, between or among such entities
and the affiliates and shareholders of Parent and Company with respect to the
Merger and there are no other written or oral agreements regarding the Merger
other than those expressly referred to in the Agreement, the Proxy Statement and
the Form S-4.
22. The fair market value of the assets of Company will exceed the sum of
its liabilities, plus the amount of liabilities, if any, to which those assets
are subject.
23. Company will not be under the jurisdiction of a federal or state court
in a Title 11 case or in a receivership, foreclosure or similar proceeding.
24. Except for cash in lieu of fractional shares, Parent will acquire the
Company Stock and the Series B Preferred Stock solely in exchange for voting
shares of Parent Stock and Parent Preferred Stock. For purposes of this
representation, stock of Company redeemed for cash or other property furnished
by Parent will be considered as acquired by Parent.
25. None of Parent, Merger Subsidiary or, after the Merger, Company will
take any position on any Federal, state, or local income or franchise tax
return, or take any other tax reporting position, that is inconsistent with the
treatment of the Merger as a tax-free reorganization or any of the foregoing
representations, unless otherwise required by a decision by the Tax Court or a
judgment, decree, or other order by any court of competent jurisdiction, which
has become final, or by applicable state or local income or franchise tax law.
We understand that Davis Polk & Wardwell and Skadden, Arps, Slate,
Meagher & Flom LLP rely, without further inquiry, on this Certificate in
rendering their opinions as to certain United States Federal income tax
consequences of the Merger, and we will promptly and timely inform them if,
after signing this Certificate, we have reason to believe that any of the
facts described herein or in the Proxy Statement or any of the
representations made in this Certificate are or have become untrue,
incorrect or incomplete in any respect.
Very truly yours,
MOBIL CORPORATION
By:
--------------------------------
Name:
--------------------------
Title:
--------------------------
A-C-2-5
<PAGE>
Annex B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of December 1, 1998 (the "Agreement")
between Exxon Corporation, a New Jersey corporation ("Exxon"), and Mobil
Corporation, a Delaware corporation ("Mobil").
W I T N E S S E T H :
WHEREAS, Exxon and Mobil are simultaneously with the execution and delivery
of this Agreement entering into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which, among other things, Merger Subsidiary will merge
with and into Mobil on the terms and subject to the conditions stated therein;
and
WHEREAS, in order to induce Exxon to enter into the Merger Agreement, Mobil
has granted to Exxon the Stock Option (as hereinafter defined), on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and in the Merger Agreement, and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions. Capitalized terms used and not defined
herein have the respective meanings ascribed to them in the Merger
Agreement.
SECTION 2. Grant of Stock Option. Mobil hereby grants to Exxon an
irrevocable option (the "Stock Option") to purchase, on the terms and subject to
the conditions hereof, for $95.96 per share (the "Exercise Price") in cash up to
136,500,000 fully paid and non-assessable shares (the "Option Shares") of
Mobil's common stock, $1.00 par value per share (the "Common Stock"). The
Exercise Price and number of Option Shares shall be subject to adjustment as
provided in Section 6 below. Notwithstanding the foregoing, if at any time that
this Stock Option is exercisable pursuant to the terms and conditions of this
Agreement an Acquisition Proposal has theretofore been made for a per Share
value (such value to be determined as of the close of the market on the trading
day immediately prior to the date of the Stock Exercise Notice or Cash Exercise
Notice, as applicable) below the Exercise Price, then Exxon's Exercise Price as
to 1,000 Option Shares (as such 1,000 shares may be adjusted pursuant to Section
6) will be adjusted to be 90% of such per Share value (it being understood that
such adjusted Exercise Price will not apply as to any other Option Shares).
SECTION 3. Exercise of Stock Option. (a) Exxon may, subject to the
provisions of this Section, exercise the Stock Option, in whole or in part, at
any time or from time to time, after the occurrence of a Trigger Event and prior
to the Termination Date. "Termination Date" shall mean the earliest of (i) the
Effective Time of the Merger, (ii) 90 days after the date full payment is made
by Mobil to Exxon under Section 10.04(b) of the Merger Agreement or (iii) one
day after the date of the termination of the Merger Agreement so long as, in the
case of this clause (iii), no Trigger Event has occurred or could still occur
under Section 10.04(b) of the Merger Agreement. Subject to the proviso in the
last sentence of Section 3(c), notwithstanding the occurrence of the Termination
Date, Exxon shall be entitled to purchase Option Shares pursuant to any exercise
of the Stock Option, on the terms and subject to the conditions hereof, to the
extent Exxon exercised the Stock Option prior to the occurrence of the
Termination Date.
(b) Exxon may purchase Option Shares pursuant to the Stock Option only if
all of the following conditions are satisfied: (i) no preliminary or permanent
injunction or other order issued by any federal or state court of competent
jurisdiction in the United States shall be in effect prohibiting delivery of the
Option Shares, (ii) any applicable waiting period under the HSR Act shall have
expired or been terminated, and (iii) any prior notification to or approval of
any other regulatory authority in the U.S. or elsewhere required in connection
with such purchase shall have been made or obtained other than those which if
not made or obtained would not reasonably be expected to result in a significant
detriment to Mobil and its Subsidiaries, taken as a whole.
<PAGE>
Annex B -- Stock Option Agreement
(c) If Exxon shall be entitled to and wishes to exercise the Stock Option,
it shall do so by giving Mobil written notice (the "Stock Exercise Notice") to
such effect, specifying the number of Option Shares to be purchased and a place
and closing date not earlier than three business days nor later than 10 business
days from the date of such Stock Exercise Notice. If the closing cannot be
consummated on such date because any condition to the purchase of Option Shares
has not been satisfied or as a result of any restriction arising under any
applicable law or regulation, the closing shall occur five days (or such earlier
time as Exxon may specify) after satisfaction of all such conditions and the
cessation of all such restrictions; provided that in no event shall the closing
of the purchase be postponed by more than nine months after the Termination Date
as a result of this clause (c).
(d) So long as the Stock Option is exercisable pursuant to the terms of
Section 3(a) hereof, Exxon may elect, in lieu of exercising the Stock Option as
provided in Section 3(c) hereof, to send a written notice to Mobil (the "Cash
Exercise Notice") specifying a date not later than 20 business days and not
earlier than 10 business days following the date such notice is given on which
date Mobil shall pay to Exxon in exchange for the cancellation of the relevant
portion of the Stock Option an amount in cash equal to the Spread (as
hereinafter defined) multiplied by all or such portion of the Option Shares
subject to the Stock Option as Exxon shall specify. As used herein "Spread"
shall mean the excess, if any, over the Exercise Price of the higher of (x) if
applicable, the highest price per share of Common Stock paid or proposed to be
paid by any Person pursuant to any Acquisition Proposal (the "Alternative
Exercise Price") or (y) the average of the closing price of the shares of Common
Stock on the NYSE at the end of the regular session, as reported on the
Consolidated Tape, Network A (the "Closing Price") for the five consecutive
trading days ending on and including the trading date immediately preceding the
date of the Cash Exercise Notice. If the Alternative Exercise Price includes any
property other than cash, the Alternative Exercise Price shall be the sum of (i)
the fixed cash amount, if any, included in the Alternative Exercise Price plus
(ii) the fair market value of such other property. If such other property
consists of securities with an existing public trading market, the average of
the closing prices (or the average of the closing bid and asked prices if
closing prices are unavailable) for such securities in their principal public
trading market on the five trading days ending five days prior to the date of
the Cash Exercise Notice shall be deemed to equal the fair market value of such
property. If such other property consists of something other than cash or
securities with an existing public trading market and, as of the payment date
for the Spread, agreement on the value of such other property has not been
reached, the Alternative Exercise Price shall be deemed to equal such Closing
Price. Upon exercise of its right pursuant to this Section 3(d) and the receipt
by Exxon of the applicable cash amount with respect to the Option Shares or the
applicable portion thereof, the obligations of Mobil to deliver Option Shares
pursuant to Section 3(e) shall be terminated with respect to the number of
Option Shares for which Exxon shall have elected to be paid the Spread. The
Spread shall be appropriately adjusted, if applicable, to give effect to Section
6.
(e) (i) At any closing pursuant to Section 3(c) hereof, Exxon shall make
payment to Mobil of the aggregate purchase price for the Option Shares to be
purchased and Mobil shall deliver to Exxon a certificate representing the
purchased Option Shares, registered in the name of Exxon or its designee and
(ii) at any closing pursuant to Section 3(d) hereof, Mobil will deliver to Exxon
cash in an amount determined pursuant to Section 3(d) hereof. Any payment made
by Exxon to Mobil, or by Mobil to Exxon, pursuant to this Agreement shall be
made by certified or official bank check or by wire transfer of federal funds to
a bank designated by the party receiving such funds.
(f) Certificates for Common Stock delivered at the closing described in
Section 3(c) hereof shall be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is subject to
resale restrictions arising under the Securities Act of 1933, as amended."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such reference (i) if Exxon shall
have delivered to Mobil a copy of a no-action letter from the staff of the
Securities and Exchange Commission, or a written opinion of counsel, in
form and substance reasonably satisfactory to Mobil,
B-2
<PAGE>
Annex B -- Stock Option Agreement
to the effect that such legend is not required for purposes of, or resale
may be effected pursuant to an exemption from registration under, the 1933
Act or (ii) in connection with any sale registered under the 1933 Act. In
addition, such certificates shall bear any other legend as may be required
by applicable law.
SECTION 4. Representations and Warranties of Mobil. Mobil hereby
represents and warrants to Exxon as follows:
(a) Mobil is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. The execution, delivery and
performance by Mobil of this Agreement and the consummation of the transactions
contemplated hereby (i) are within Mobil's corporate powers, (ii) have been duly
authorized by all necessary corporate action, (iii) require no action by or in
respect of, or filing with, any governmental body, agency or official, except
for any filings required to be made under the HSR Act, the EC Merger Regulation,
the Canadian Act and the Exchange Act, (iv) do not contravene, or constitute a
violation of, any provision of applicable law or regulation or of the
certificate of incorporation or by-laws of Mobil or of any judgment, injunction,
order or decree binding upon Mobil or any of its Subsidiaries, (v) do not and
will not constitute a default under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of Mobil or any of its
Subsidiaries or to a loss of any benefit to which Mobil or any of its
Subsidiaries is entitled under any provision of any agreement, contract or other
instrument binding upon Mobil or any of its Subsidiaries or any license,
franchise, permit or other similar authorization held by Mobil or any of its
Subsidiaries, and (vi) do not and will not result in the creation or imposition
of any Lien on any asset of Mobil or any of its Subsidiaries, except for such
contraventions, conflicts or violations referred to in clause (iv) or defaults,
rights of termination, cancellation or acceleration, or losses or Liens referred
to in clauses (v) and (vi) that would not, individually or in the aggregate,
have a Material Adverse Effect on Mobil. This Agreement has been duly executed
and delivered by Mobil and constitutes a valid and binding agreement of Mobil.
(b) Mobil has taken all necessary corporate action to authorize and reserve
and to permit it to issue, and at all times from the date hereof until such time
as the obligation to deliver Option Shares upon the exercise of the Stock Option
terminates, will have reserved for issuance upon any exercise of the Stock
Option, the number of Option Shares subject to the Stock Option (less the number
of Option Shares previously issued upon any partial exercise of the Stock
Option). All of the Option Shares to be issued pursuant to the Stock Option have
been duly authorized and, upon issuance and delivery thereof pursuant to this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and shall be delivered free and clear of all claims, liens,
charges, encumbrances and security interests (other than those created by this
Agreement). Option Shares issued upon exercise of the Stock Option will not be
subject to any preemptive or similar rights. The Board of Directors of Mobil has
resolved to, and Mobil promptly after the execution hereof will, take all
necessary action to render the Company Rights Agreement inapplicable to the
grant or exercise of the Stock Option and the transactions contemplated hereby.
(c) The Board of Directors of Mobil has taken the necessary action to make
inapplicable the application of Section 203 of the Delaware Law, or any other
applicable antitakeover statute or similar statute or regulation and the
supermajority voting provisions of Article 6 of Mobil's certificate of
incorporation to the acquisition of the Option Shares pursuant to this
Agreement.
SECTION 5. Representations and Warranties of Exxon. Exxon hereby represents
and warrants to Mobil as follows: Exxon is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of New Jersey.
The execution, delivery and performance by Exxon of this Agreement and the
consummation of the transactions contemplated hereby (i) are within Exxon's
corporate powers and (ii) have been duly authorized by all necessary corporate
action. The Option Shares acquired by Exxon upon the exercise of the Stock
Options will not be, and the Stock Option is not being, acquired by Exxon with
the intention of making a public distribution thereof. Neither the Stock Option
nor the Option Shares acquired upon exercise of the Stock Option will be sold or
otherwise disposed of by Exxon except in compliance with the 1933 Act.
This agreement has been duly executed and delivered by Exxon and
constitutes a valid and binding agreement of Exxon.
B-3
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Annex B -- Stock Option Agreement
SECTION 6. Adjustment upon Changes in Capitalization or Merger. (a) In the
event of any change in the outstanding shares of Common Stock by reason of a
stock dividend, stock split, split-up, merger, consolidation, recapitalization,
combination, conversion, exchange of shares, extraordinary or liquidating
dividend or similar transaction which would have the effect of diluting Exxon's
rights hereunder, the type and number of shares or securities purchasable upon
the exercise of the Stock Option and the Exercise Price shall be adjusted
appropriately, and proper provision will be made in the agreements governing
such transaction, so that Exxon will receive upon exercise of the Stock Option
the number and class of shares or other securities or property that Exxon would
have received in respect of the Option Shares had the Stock Option been
exercised immediately prior to such event or the record date therefor, as
applicable. In no event shall the number of shares of Common Stock subject to
the Stock Option exceed 14.9% of the number of shares of Common Stock issued and
outstanding at the time of exercise (treating as outstanding for this purpose
the shares subject to the Stock Option).
(b) Without limiting the foregoing, whenever the number of Option Shares
purchasable upon exercise of the Stock Option is adjusted as provided in this
Section 6, the Exercise Price shall be adjusted by multiplying the Exercise
Price by a fraction, the numerator of which is equal to the number of Option
Shares purchasable prior to the adjustment and the denominator of which is equal
to the number of Option Shares purchasable after the adjustment.
(c) Without limiting the parties' relative rights and obligations under the
Merger Agreement, in the event that Mobil enters into an agreement (i) to
consolidate with or merge into any person, other than Exxon or one of its
subsidiaries, and Mobil will not be the continuing or surviving corporation in
such consolidation or merger, (ii) to permit any person, other than Exxon or one
of its subsidiaries, to merge into Mobil and Mobil will be the continuing or
surviving corporation, but in connection with such merger, the shares of Common
Stock outstanding immediately prior to the consummation of such merger will be
changed into or exchanged for stock or other securities of Mobil or any other
person or cash or any other property, or the shares of Common Stock outstanding
immediately prior to the consummation of such merger will, after such merger,
represent less than 50% of the outstanding voting securities of the merged
company, or (iii) to sell or otherwise transfer all or substantially all of its
assets to any person, other than Exxon or one of its subsidiaries, then, and in
each such case, the agreement governing such transaction will make proper
provision so that the Stock Option will, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option with identical terms appropriately adjusted to
acquire the number and class of shares or other securities or property that
Exxon would have received in respect of Option Shares had the Stock Option been
exercised immediately prior to such consolidation, merger, sale or transfer or
the record date therefor, as applicable, and will make any other necessary
adjustments. Mobil shall take such steps in connection with such consolidation,
merger, liquidation or other such transaction as may be reasonably necessary to
assure that the provisions hereof shall thereafter apply as nearly as possible
to any securities or property thereafter deliverable upon exercise of the Stock
Option.
SECTION 7. Further Assurances; Remedies. (a) Mobil agrees to maintain, free
from preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Stock Option may be fully exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights of third parties to purchase
shares of Common Stock from Mobil, and to issue the appropriate number of shares
of Common Stock pursuant to the terms of this Agreement.
(b) Mobil agrees not to avoid or seek to avoid (whether by charter
amendment or through reorganization, consolidation, merger, issuance of rights,
dissolution or sale of assets, or by any other voluntary act) the observance or
performance of any of the covenants, agreements or conditions to be observed or
performed hereunder by Mobil.
(c) Mobil agrees that promptly after the date hereof it shall take all
actions as may from time to time be required (including (i) complying with all
applicable premerger notification, reporting and waiting period requirements
under the HSR Act and (ii) in the event that prior notification to or approval
of any other regulatory authority in the U.S. or elsewhere is necessary before
the Stock Option may be exercised, cooperating with Exxon in preparing and
processing
B-4
<PAGE>
Annex B -- Stock Option Agreement
the required notices or applications) in order to permit Exxon to exercise
the Stock Option and purchase Option Shares pursuant to such exercise and
to take all reasonable action necessary to protect the rights of Exxon
against dilution.
(d) The parties agree that Exxon would be irreparably damaged if for any
reason Mobil failed to issue any of the Option Shares (or other securities or
property deliverable pursuant to Section 6 hereof) upon exercise of the Stock
Option or to perform any of its other obligations under this Agreement, and that
Exxon would not have an adequate remedy at law for money damages in such event.
Accordingly, Exxon shall be entitled to specific performance and injunctive and
other equitable relief to enforce the performance of this Agreement by Mobil.
Accordingly, if Exxon should institute an action or proceeding seeking specific
enforcement of the provisions hereof, Mobil hereby waives the claim or defense
that Exxon has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or defense that such a remedy at law exists.
Mobil further agrees to waive any requirements for the securing or posting of
any bond in connection with obtaining any such equitable relief. This provision
is without prejudice to any other rights that Exxon may have against Mobil for
any failure to perform its obligations under this Agreement.
SECTION 8. Listing of Option Shares. Promptly after the date hereof, and
from time to time thereafter if necessary, Mobil will apply to list all of the
Option Shares subject to the Stock Option on the New York Stock Exchange and
will use its reasonable best efforts to obtain approval of such listing as soon
as practicable.
SECTION 9. Registration of the Option Shares. (a) If Exxon requests Mobil
in writing, within two years of the exercise of the Stock Option, to register
under the 1933 Act any of the Option Shares purchased by Exxon hereunder, Mobil
will use its reasonable best efforts to cause the offering of the Option Shares
so specified in such request to be registered as soon as practicable so as to
permit the sale or other distribution by Exxon of the Option Shares specified in
its request (and to keep such registration in effect for a period of at least 90
days), and in connection therewith Mobil will prepare and file as promptly as
reasonably possible (but in no event later than 60 days from receipt of Exxon's
request) a registration statement under the 1933 Act to effect such registration
on an appropriate form, which would permit the sale of the Option Shares by
Exxon in accordance with the plan of disposition specified by Exxon in its
request. Mobil shall not be obligated to make effective more than two
registration statements pursuant to the foregoing sentence; provided, however,
that Mobil may postpone the filing of a registration statement relating to a
registration request by Exxon under this Section 9 for a period of time (not in
excess of 90 days) if in Mobil's reasonable, good faith judgment such filing
would require the disclosure of material information that Mobil has a bonafide
business purpose for preserving as confidential (but in no event shall Mobil
exercise such postponement right more than once in any twelve-month period).
(b) Mobil shall notify Exxon in writing not less than 10 days prior to
filing a registration statement under the 1933 Act (other than a filing on Form
S-4 or S-8 or any successor form) with respect to any Common Stock. If Exxon
wishes to have any portion of its Option Shares included in such registration
statement, it shall advise Mobil in writing to that effect within two business
days following receipt of such notice, and Mobil will thereupon include the
number of Option Shares indicated by Exxon under such Registration Statement;
provided that if the managing underwriter(s) of the offering pursuant to such
registration statement advise Mobil that in their opinion the number of shares
of Common Stock requested to be included in such registration exceeds the number
which can be sold in such offering, Mobil shall only include in such
registration such number or dollar amount of Option Shares which, in the good
faith opinion of the managing underwriter(s), can be sold without materially and
adversely affecting such offering.
(c) All expenses relating to or in connection with any registration
contemplated under this Section 9 and the transactions contemplated thereby
(including all filing, printing, reasonable professional and other fees and
expenses relating thereto) will be at Mobil's expense except for underwriting
discounts or commissions and brokers' fees. Mobil and Exxon agree to enter into
a customary underwriting agreement with underwriters upon such terms and
conditions as are customarily contained in underwriting agreements with respect
to secondary distributions. Mobil shall indemnify Exxon, its officers,
directors, agents, other controlling persons and any underwriters retained by
Exxon in connection
B-5
<PAGE>
Annex B -- Stock Option Agreement
with such sale of such Option Shares in the customary way, and shall agree
to customary contribution provisions with such persons, with respect to
claims, damages, losses and liabilities (and any expenses relating thereto)
arising (or to which Exxon, its officers, directors, agents, other
controlling persons or underwriters may be subject) in connection with any
such offer or sale under the federal securities laws or otherwise, except
for information furnished in writing by Exxon or its underwriters to Mobil.
Exxon and its underwriters, respectively, shall indemnify Mobil to the same
extent with respect to information furnished in writing to Mobil by Exxon
and such underwriters, respectively.
SECTION 10. Miscellaneous. (a) Extension of Exercise Periods. The
periods for exercise of certain rights under Sections 3(d) and 3(e) hereof
shall be extended in each such case at the request of Exxon to the extent
necessary to avoid liability by Exxon under Section 16(b) of the Exchange
Act by reason of such exercise.
(b) Amendments; Entire Agreement. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto. This Agreement, together with
the Merger Agreement (including any exhibits and schedules thereto), contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions.
(c) Notices. All notices, requests and other communications to either party
hereunder shall be in writing (including facsimile or similar writing) and shall
be given,
if to Exxon, to:
Charles W. Matthews
Exxon Corporation
5959 Las Colinas Boulevard
Irving, Texas 75039-2298
Facsimile No.: (972) 444-1438
with a copy to:
George R. Bason, Jr.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Facsimile No.: (212) 450-4800
if to Mobil, to:
Samuel H. Gillespie III
Mobil Corporation
3225 Gallows Road
Fairfax, Virginia 22037-0001
Facsimile No.: (703) 846-4674
with a copy to:
Roger S. Aaron
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile No.: (212) 735-2000
B-6
<PAGE>
Annex B -- Stock Option Agreement
or to such other address or facsimile number as either party may hereafter
specify for the purpose by notice to the other party hereto. Each such notice,
request or other communication shall be effective (i) if given by facsimile,
when such facsimile is transmitted to the facsimile number specified in this
Section and the appropriate facsimile confirmation is received or (ii) if given
by any other means, when delivered at the address specified in this Section.
(d) Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided herein
and without limiting anything contained in the Merger Agreement.
(e) Severability. If any term, provision, covenant or restriction of this
Agreement is held to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
(f) Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
principles of conflicts of law. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any federal or state court located in the State of Delaware, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 10(c) hereof shall be
deemed effective service of process on such party.
(g) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(h) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(i) Headings. The section headings herein are for convenience only and
shall not affect the construction hereof.
(j) Assignment. This Agreement shall be binding upon each party hereto and
such party's successors and assigns. This Agreement shall not be assignable by
Mobil, but may be assigned by Exxon in whole or in part to any direct or
indirect wholly-owned subsidiary of Exxon, provided that Exxon shall remain
liable for any obligations so assigned.
(k) Survival. All representations, warranties and covenants contained
herein shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(l) Time of the Essence. The parties agree that time shall be of the
essence in the performance of obligations hereunder.
(m) Public Announcement. Exxon and Mobil will consult with each other
before issuing any press release or making any public statement with respect to
this Agreement and the transactions contemplated hereby and shall not issue any
such press release or make any such public statement without the prior consent
of the other party, which shall not be unreasonably withheld. Notwithstanding
the foregoing, any such press release or public statement as may be
B-7
<PAGE>
Annex B -- Stock Option Agreement
required by applicable law or any listing agreement with any national
securities exchange, may be issued prior to such consultation, if the party
making such release or statement has used its reasonable efforts to consult
with the other party.
SECTION 11. Profit Limitation. (a) Notwithstanding any other provision of
this Agreement or the Merger Agreement, in no event shall Exxon's Total Profit
(as defined below) exceed $2,000,000,000 (the "Maximum Amount") and, if it
otherwise would exceed such Maximum Amount, Exxon at its sole election may (i)
pay cash to Mobil, (ii) deliver to Mobil for cancellation Option Shares
previously purchased by Exxon, or (iii) any combination thereof, so that Exxon's
actually realized Total Profit (as defined below) shall not exceed the Maximum
Amount after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Stock Option
may not be exercised for a number of Option Shares as would, as of the date of
the Stock Exercise Notice, result in a Notional Total Profit (as defined below)
of more than the Maximum Amount and, if exercise of the Stock Option otherwise
would result in the Notional Total Profit exceeding such amount, Exxon, at its
discretion, may (in addition to any of the actions specified in Section 11(a)
above) increase the Exercise Price for that number of Option Shares set forth in
the Stock Exercise Notice so that the Notional Total Profit shall not exceed the
Maximum Amount; provided, that nothing in this sentence shall restrict any
exercise of the Stock Option permitted hereby on any subsequent date at the
Exercise Price set forth in Section 3(d) hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the cash amount actually received by Exxon
pursuant to Section 10.04(b) of the Merger Agreement less any repayment by Exxon
to Mobil pursuant to Section 11(a)(i) hereof, (ii) (x) the net cash amounts or
the fair market value of any property received by Exxon pursuant to the sale of
Option Shares (or of any other securities into or for which such Option Shares
are converted or exchanged), less (y) Exxon's purchase price for such Option
Shares (or other securities) plus (iii) the aggregate amounts received by Exxon
pursuant to Section 3(d).
(d) As used herein, the term "Notional Total Profit" with respect to any
number of Option Shares as to which Exxon may propose to exercise the Stock
Option shall be the Total Profit determined as of the date of the Stock Exercise
Notice assuming that the Stock Option was exercised on such date for such number
of Option Shares and assuming that such Option Shares, together with all other
Option Shares previously acquired upon exercise of the Stock Option and held by
Exxon and its affiliates as of such date, were sold for cash at the Closing
Price on the preceding trading day (less customary brokerage commissions).
B-8
<PAGE>
Annex B -- Stock Option Agreement
IN WITNESS WHEREOF, Mobil and Exxon have caused this Agreement to be duly
executed as of the day and year first above written.
MOBIL CORPORATION
By: /s/ Lucio A. Noto
------------------------------------
Name: Lucio A. Noto
Title: Chairman and Chief
Executive Officer
EXXON CORPORATION
By: /s/ Lee R. Raymond
------------------------------------
Name: Lee R. Raymond
Title: Chairman of the Board
B-9
<PAGE>
Annex C
JPMorgan
J.P. Morgan Securities Inc.
60 Wall Street
New York NY
10260-0060
April 2, 1999
The Board of Directors
Exxon Corporation
5959 Las Colinas Boulevard
Irving, Texas 75039-2298
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a
financial point of view, to Exxon Corporation (the "Acquiror") of the
consideration proposed to be paid by the Acquiror in connection with
the proposed merger (the "Merger") of Lion Acquisition Subsidiary
Corporation, a wholly-owned subsidiary of the Acquiror ("Merger
Subsidiary"), with and into Mobil Corporation (the "Company").
Pursuant to the Agreement and Plan of Merger, dated as of December 1,
1998 (together with its exhibits, the "Agreement"), among the
Acquiror, Merger Subsidiary and the Company, Merger Subsidiary will
merge with and into the Company, the Company will continue as the
surviving corporation and become a wholly-owned subsidiary of the
Acquiror, and (i) each share of common stock, par value $1.00 per
share, of the Company outstanding immediately prior to the effective
time of the Merger (other than shares held by the Company as treasury
stock (excluding certain such shares held in "Rabbi trusts") or owned
by the Acquiror or any subsidiary of the Acquiror) shall be converted
into the right to receive 1.32015 shares of fully-paid and non-
assessable common stock, without par value, of the Acquiror (the
"Acquiror's Common Stock") and (ii) each share of Series B ESOP
Convertible Preferred Stock, par value $1.00 per share, of the Company
shall be converted into the right to receive one fully-paid and non-
assessable share of a new series of preferred stock to be issued by
the Acquiror having terms and conditions that are, to the extent
possible, identical to the terms and conditions of the Series B ESOP
Convertible Preferred Stock immediately prior to the effective time of
the Merger.
In arriving at our opinion, we have reviewed (i) the Agreement;
(ii) the Joint Proxy Statement/Prospectus of the Acquiror and the
Company relating to the Merger (the "Proxy Statement); (iii) certain
publicly available information concerning the business of the Company
and of certain other companies engaged in businesses comparable to
those of the Company, and the reported market prices for certain other
companies' securities deemed comparable; (iv) publicly available
terms of certain transactions involving companies comparable to the
Company and the consideration received for such companies; (v)
current and historical market prices of the common stock of the
Company and the Acquiror; (vi) the audited financial statements of
the Acquiror and the
<PAGE>
Annex C -- Opinion of J.P. Morgan Securities Inc. JPMORGAN
Company for the fiscal year ended December 31, 1998; (vii) certain
internal financial analyses of potential synergies that may be
realized from the Merger prepared by the Acquiror and the Company and
their respective managements; (viii) certain presentations made by
the Acquiror and the Company in 1998 to equity analysts regarding the
performance of their respective businesses; and (ix) the terms of
other business combinations that we deemed relevant.
In addition, we have participated in discussions with certain
members of the management of the Acquiror and the Company with respect
to certain aspects of the Merger, the past and current business
operations of the Acquiror and the Company, the financial condition
and future prospects and operations of the Acquiror and the Company,
and certain other matters we believed necessary or appropriate to our
inquiry. We have reviewed such other financial studies and analyses
and considered such other information as we deemed appropriate for the
purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all
information that was publicly available or was furnished to us by the
Acquiror and the Company or otherwise reviewed by us, and we have not
assumed any responsibility or liability therefor. We have not
conducted any valuation or appraisal of any assets or liabilities, nor
have any such valuations or appraisals been provided to us. In
relying on financial analyses provided to us of potential synergies
that may be realized from the Merger, we have assumed that they have
been reasonably prepared based on assumptions reflecting the best
currently available estimates and judgments by management as to such
potential synergies. We have also assumed that the Merger will have
the tax consequences and pooling-of-interests accounting treatment
described in the Agreement and the Proxy Statement, and that the
transactions contemplated by the Agreement will be consummated as
described in the Agreement and the Proxy Statement. We have relied as
to all legal matters relevant to rendering our opinion upon the advice
of counsel.
Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us
as of, the date hereof. It should be understood that subsequent
developments may affect this opinion and that we do not have any
obligation to update, revise, or reaffirm this opinion. We are
expressing no opinion herein as to the price at which the Acquiror's
Common Stock will trade at any future time.
We have acted as financial advisor to the Acquiror with respect
to the proposed Merger and will receive a fee from the Acquiror for
our services. We will also receive all additional fee if the proposed
Merger is consummated. As you are aware, in the past we have provided
financial advisory services to a subsidiary of the Acquiror. Please
be advised that in the past we have provided financial advisory and
other services to the Company. In the ordinary course of their
businesses, our affiliates may actively trade the debt and equity
securities of the Acquiror or the Company for their own account or for
the accounts of customers and, accordingly, they may at any time hold
long or short positions in such securities.
C-2
<PAGE>
Annex C -- Opinion of J.P. Morgan Securities Inc.
JPMORGAN
On the basis of and subject to the foregoing, it is our opinion
as of the date hereof that the consideration to be paid by the
Acquiror in the proposed Merger is fair, from a financial point of
view, to the Acquiror.
This letter is provided to the Board of Directors of the Acquiror
in connection with and for the purposes of its evaluation of the
Merger. This opinion does not constitute a recommendation to any
stockholder of the Acquiror as to how such stockholder should vote
with respect to the Merger.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ James R. Elliott III
--------------------------------
Name: James R. Elliott III
Title: Managing Director
C-3
<PAGE>
Annex D
- ------------------------------------------------------------------------------
Goldman, Sachs & Co. | 85 Broad Street | New York, New York 10004
Tel: 212-902-1000
Goldman
Sachs logo
PERSONAL AND CONFIDENTIAL
- ------------------------------------------------------------------------------
April 2, 1999
Board of Directors
Mobil Corporation
3225 Gallows Road
Fairfax, Virginia 22037-0001
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders (other than Exxon Corporation ("Acquiror") or any of its
subsidiaries or affiliates) (the "Holders") of the outstanding shares of
Common Stock, par value $1.00 per share (the "Shares"), of Mobil Corporation
(the "Company") of the exchange ratio of 1.32015 shares of Common Stock,
without par value ("Acquiror Shares"), of Acquiror to be received for each
Share (the "Exchange Ratio") pursuant to the Agreement and Plan of Merger,
dated as of December 1, 1998, among Acquiror, Lion Acquisition Subsidiary
Corporation, a wholly-owned subsidiary of Acquiror, and the Company (the
"Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. We are familiar with the Company having provided certain investment
banking services to the Company from time to time, including having acted as
dealer on the Company's commercial paper program; having acted as agent on the
Company's stock repurchase program and medium term note program; and having
acted as lead-managing underwriter of a public offering of Mobil
Corporation Pass Through Certificates, Series 1997-A in May 1997. We also
have provided certain investment banking services to Acquiror from time to
time and may provide investment banking services to Acquiror in the future.
Goldman, Sachs & Co. provides a full range of financial advisory and
securities services and, in the course of its normal trading activities,
may from time to time effect transactions and hold securities, including
derivative securities, of the Company or Acquiror for its own account and
for the accounts of customers. As of March 29, 1999, Goldman, Sachs & Co.
accumulated a net short position of 299,546 Shares. As of March 29, 1999,
Goldman, Sachs & Co. accumulated a net short position of 71,699 Acquiror
Shares, a net short position of options to purchase 150,000 Acquiror Shares
and a net long position of warrants to purchase 4,175,795 Acquiror Shares.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Stock Option Agreement dated as of December 1, 1998 between
Acquiror and the Company; the Joint Proxy Statement/Prospectus relating to
the Annual Meetings of Stockholders of the Company and the
<PAGE>
Annex D - Opinion of Goldman, Sachs & Co.
Mobil Corporation
April 2, 1999
Page Two
Acquiror to be held in connection with the Agreement; Annual Reports to
Stockholders and Annual Reports on Form 10-K of the Company and Acquiror
for the five years ended December 31, 1998; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of the Company and
Acquiror; certain other communications from the Company and Acquiror to
their respective stockholders; certain internal financial analyses and
forecasts for the Company prepared by its management; and certain cost
savings and operating synergies projected by the managements of the Company
and Acquiror to result from the transaction contemplated by the Agreement
(the "Synergies"). We also have held discussions with members of the
senior management of the Company regarding the strategic rationale for, and
the potential benefits of, the transaction contemplated by the Agreement
and the Company's past and current business operations, financial condition
and future prospects. We reviewed forecasts regarding selected measures of
future operating and financial performance of Acquiror in summary form
prepared by management of the Company based on their discussions with
management of Acquiror. Internal financial analyses and forecasts prepared
by Acquiror were not otherwise made available for our review. In addition,
we have reviewed the reported price and trading activity for the Shares and
Acquiror Shares, compared certain financial and stock market information
for the Company and Acquiror with similar information for certain other
companies the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations and performed such
other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In that regard, we have
assumed with your consent that the Synergies have been reasonably prepared on
a basis reflecting the best currently available estimates and judgments of the
Company and Acquiror. We have assumed with your consent that the transaction
contemplated by the Agreement will be accounted for as a pooling-of-interests
under generally accepted accounting principles. We also have assumed that all
material governmental, regulatory or other consents and approvals necessary
for the consummation of the transaction contemplated by the Agreement will be
obtained without any meaningful adverse effect on the Company or Acquiror. In
addition, we have not made an independent evaluation or appraisal of the
assets and liabilities of the Company or Acquiror or any of their subsidiaries
and we have not been furnished with any such evaluation or appraisal. Our
advisory services and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the
Agreement and such opinion does not constitute a recommendation as to how any
holder of Shares should vote with respect to such transaction.
D-2
<PAGE>
Annex D - Opinion of Goldman, Sachs & Co.
Mobil Corporation
April 2, 1999
Page Three
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio pursuant to the Agreement is fair from a financial point of
view to the Holders of Shares.
Very truly yours,
/s/ Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
D-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Indemnification under Exxon By-Laws and New Jersey Law. Exxon Corporation
does not have any provisions for indemnification of directors or officers in its
charter. Article Ten of the By-laws of Exxon provides that Exxon shall indemnify
to the full extent permitted by law any director or officer made or threatened
to be made a party to any legal action by reason of the fact that such person is
or was a director, officer, employee or other corporate agent of Exxon or any
subsidiary or served any other enterprise at the request of Exxon against
expenses, judgments, fines, penalties, excise taxes and amounts paid in
settlement. The New Jersey Business Corporation Act provides for the
indemnification of directors and officers under certain conditions.
Exxon D&O Insurance. The directors and officers of Exxon are insured under
a policy of directors' and officers' liability insurance issued by a
wholly-owned subsidiary of Exxon.
Merger Agreement Provisions Relating To Mobil Directors and Officers. The
merger agreement provides that for seven years after the closing , Exxon will
indemnify and hold harmless each person who was a director or officer of Mobil
at or prior to the date of the merger agreement from their acts or omissions in
those capacities occurring prior to the closing to the extent provided under
Mobil's charter and by-laws as in effect on December 1, 1998.
The merger agreement also provides that for a period of seven years after
the closing, Exxon will provide directors' and officers' liability insurance
covering acts or omissions occurring prior to closing by each person currently
covered by Mobil's officers' and directors' liability insurance policy. This
insurance policy must be no less favorable than the Mobil policy in effect on
December 1, 1998, except that Exxon will only be obligated to pay up to 300% of
the annual premium paid by Mobil for such insurance as of December 1, 1998.
Exxon may provide this coverage through a policy underwritten by a wholly-owned
subsidiary of Exxon.
Item 21. Exhibits and Financial Statement Schedules.
(a) List of Exhibits
Exhibit
Number Description
------ -----------
2 Agreement and Plan of Merger dated as of December 1, 1998
among Mobil Corporation, Exxon Corporation and Lion
Acquisition Subsidiary Corporation (with Exhibits
C-1 and C-2 thereto amended April 2, 1999)
(included as Annex A to the Joint Proxy
Statement/Prospectus contained in this Registration
Statement).
3(a) Restated Certificate of Incorporation of Exxon
(incorporated herein by reference to Exhibit 3(i) to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997).
3(b) Bylaws of Exxon (incorporated herein by reference to
Exhibit 3(ii) to the Registrant's Annual Report on Form
10-K for 1995).
5 Opinion of Charles W. Matthews, General Counsel of Exxon
Corporation, regarding the validity of the securities
being registered.
8(a) Opinion of Davis Polk & Wardwell regarding certain
federal income tax consequences relating to the merger.
S4-II-1
<PAGE>
Exhibit
Number Description
------ -----------
8(b) Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding certain federal income tax consequences
relating to the merger.
10 Stock Option Agreement dated as of December 1, 1998
between Exxon Corporation and Mobil Corporation (included
as Annex B to the Joint Proxy Statement/Prospectus
contained in this Registration Statement).
21 Subsidiaries of the Registrant (incorporated by reference
to the Registrant's Annual Report on 10-K for the fiscal
year ended December 31, 1998).
23(a) Consent of PricewaterhouseCoopers LLP.
23(b) Consent of Ernst & Young LLP.
23(c) Consent of Charles W. Matthews (included in the opinion
filed as Exhibit 5 to this Registration Statement).
23(d) Consent of Davis Polk & Wardwell (included in the opinion
filed as Exhibit 8(a) to this Registration Statement).
23(e) Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in the opinion filed as Exhibit 8(b) to this
Registration Statement).
23(f) Consent of J.P. Morgan Securities Inc.
23(g) Consent of Goldman, Sachs & Co.
24 Power of Attorney.
99(a) Form of Exxon Proxy Card.
99(b) Form of Mobil Proxy Card.
99(c) Consent of Lucio A. Noto to be named as a nominee for
director of Exxon Mobil Corporation.
99(d) Consent of Eugene A. Renna to be named as a nominee for
director of Exxon Mobil Corporation.
99(e) Consent of Donald V. Fites to be named as a nominee for
director of Exxon Mobil Corporation.
99(f) Consent of Charles A. Heimbold, Jr. to be named as a
nominee for director of Exxon Mobil Corporation.
99(g) Consent of Helene L. Kaplan to be named as a nominee for
director of Exxon Mobil Corporation.
99(h) Consent of J. Richard Munro to be named as a nominee for
director of Exxon Mobil Corporation.
S4-II-2
<PAGE>
Item 22. 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. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
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.
(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 initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(5) That every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes 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 initial bona fide offering thereof.
(6) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement 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.
(7) To respond to requests for information that is incorporated by
reference into the Joint Proxy Statement/Prospectus pursuant to Item 4,
10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes
S4-II-3
<PAGE>
information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
S4-II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irving, State of Texas,
on April 5, 1999.
EXXON CORPORATION
(Registrant)
By: /s/ Lee R. Raymond
---------------------------------
Name: Lee R. Raymond
Title: Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Lee R. Raymond Chairman of the Board April 5, 1999
- -----------------------------
(Lee R. Raymond)
* Director April 5, 1999
- -----------------------------
(Michael J. Boskin)
* Director April 5, 1999
- -----------------------------
(Rene Dahan)
* Director April 5, 1999
- -----------------------------
(William T. Esrey)
* Director April 5, 1999
- -----------------------------
(Jess Hay)
* Director April 5, 1999
- -----------------------------
(James R. Houghton)
* Director April 5, 1999
- -----------------------------
(William R. Howell)
* Director April 5, 1999
- -----------------------------
(Reatha Clark King)
* Director April 5, 1999
- -----------------------------
(Philip E. Lippincott)
* Director April 5, 1999
- -----------------------------
(Harry J. Longwell)
* Director April 5, 1999
- -----------------------------
(Marilyn Carlson Nelson)
S4-II-5
<PAGE>
Signature Title Date
--------- ----- ----
* Director April 5, 1999
- -----------------------------
(Walter V. Shipley)
* Director April 5, 1999
- -----------------------------
(Robert E. Wilhelm)
* Treasurer April 5, 1999
- ----------------------------- (Principal Financial
(Frank A. Risch) Officer)
* Controller April 5, 1999
- ----------------------------- (Principal Accounting
(Donald D. Humphreys) Officer)
/s/ Richard E. Gutman
- ---------------------
(Richard E. Gutman)
Attorney-in-Fact
* An asterisk denotes execution by Richard E. Gutman as Attorney-in-Fact.
S4-II-6
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
2 Agreement and Plan of Merger dated as of December 1, 1998
among Mobil Corporation, Exxon Corporation and Lion
Acquisition Subsidiary Corporation (with Exhibits
C-1 and C-2 thereto amended April 2, 1999)
(included as Annex A to the Joint Proxy
Statement/Prospectus contained in this Registration
Statement).
3(a) Form of Restated Certificate of Incorporation of Exxon
(incorporated herein by reference to Exhibit 3(i) to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997).
3(b) Bylaws of Exxon (incorporated herein by reference to
Exhibit 3(ii) to the Registrant's Annual Report on Form
10-K for 1995).
5 Opinion of Charles W. Matthews, General Counsel of Exxon
Corporation, regarding the validity of the securities
being registered.
8(a) Opinion of Davis Polk & Wardwell regarding certain
federal income tax consequences relating to the merger.
8(b) Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding certain federal income tax consequences
relating to the merger.
10 Stock Option Agreement dated as of December 1, 1998
between Exxon Corporation and Mobil Corporation (included
as Annex B to the Joint Proxy Statement/Prospectus
contained in this Registration Statement).
21 Subsidiaries of the Registrant (incorporated by reference
to the Registrant's Annual Report on 10-K for the fiscal
year ended December 31, 1998).
23(a) Consent of PricewaterhouseCoopers LLP.
23(b) Consent of Ernst & Young LLP.
23(c) Consent of Charles W. Matthews (included in the opinion
filed as Exhibit 5 to this Registration Statement).
23(d) Consent of Davis Polk & Wardwell (included in the opinion
filed as Exhibit 8(a) to this Registration Statement).
23(e) Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in the opinion filed as Exhibit 8(b) to this
Registration Statement).
23(f) Consent of J.P. Morgan Securities Inc.
23(g) Consent of Goldman, Sachs & Co.
24 Power of Attorney.
99(a) Form of Exxon Proxy Card.
99(b) Form of Mobil Proxy Card.
99(c) Consent of Lucio A. Noto to be named as a nominee for
director of Exxon Mobil Corporation.
99(d) Consent of Eugene A. Renna to be named as a nominee for
director of Exxon Mobil Corporation.
99(e) Consent of Donald V. Fites to be named as a nominee for
director of Exxon Mobil Corporation.
99(f) Consent of Charles A. Heimbold, Jr. to be named as a
nominee for director of Exxon Mobil Corporation.
99(g) Consent of Helene L. Kaplan to be named as a nominee for
director of Exxon Mobil Corporation.
99(h) Consent of J. Richard Munro to be named as a nominee for
director of Exxon Mobil Corporation.
<PAGE>
EXHIBIT 5
[Exxon Letterhead]
April 5, 1999
Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D. C. 20549
Ladies and Gentlemen:
As General Counsel of Exxon Corporation, a New Jersey corporation
("Exxon"), I am familiar with its Restated Certificate of Incorporation and
By-laws, as amended to date. I have examined its corporate proceedings in
connection with the preparation and filing under the Securities Act of 1933, as
amended (the "Securities Act"), of a registration statement on Form S-4 of even
date herewith (the "Registration Statement"), covering shares (the "Shares") of
Exxon's common stock, no par value, to be issued in connection with the merger
of Mobil Corporation ("Mobil") and Lion Acquisition Subsidiary Corporation, a
wholly-owned subsidiary of Exxon, pursuant to the terms of the Agreement and
Plan of Merger dated as of December 1, 1998, among Exxon, Mobil, and Lion
Acquisition Subsidiary Corporation (the "Merger Agreement").
I have also examined originals or copies, certified or otherwise
authenticated to my satisfaction, of all such documents and records and
conducted such other investigations of fact and law as I have deemed necessary
as a basis for this opinion. As to certain questions of fact, I have relied upon
statements of officers of Exxon and others.
In rendering this opinion I have assumed that prior to the issuance of any
of the Shares (i) the Registration Statement, as then amended, will have become
effective under the Securities Act, (ii) the shareholders of Exxon will have
approved the Merger Agreement and the issuance of the Shares, (iii) the
shareholders of Mobil will have approved and adopted the Merger Agreement, and
(iv) the transactions contemplated by the Merger Agreement are consummated.
On the basis of the foregoing, I am of the opinion that the Shares, when
issued and delivered in accordance with the terms and conditions of the Merger
Agreement, will be duly authorized, validly issued, fully paid, and
non-assessable.
This opinion relates solely to the federal laws of the United States and
the corporate law of the State of New Jersey.
I consent to the filing of this opinion as an exhibit to the Registration
Statement. In addition, I consent to the reference to me under the caption
"Legal Matters" in the Joint Proxy Statement/Prospectus constituting a part of
the Registration Statement. In giving this consent, I do not admit that I am in
the category of persons whose consent is required under Section 7 of the
Securities Act.
Very truly yours,
/s/ Charles W. Matthews
<PAGE>
EXHIBIT 8(a)
[Davis Polk & Wardwell letterhead]
April 2, 1999
Re: Registration Statement on Form S-4
Exxon Corporation
5959 Las Colinas Blvd.
Irving, Texas 75039-2298
Ladies and Gentlemen:
We have acted as counsel for Exxon Corporation ("Exxon"), a New
Jersey corporation, in connection with (i) the Merger, as defined and
described in the Agreement and Plan of Merger dated as of December 1, 1998
(the "Merger Agreement") among Mobil Corporation ("Mobil"), a Delaware
corporation, Lion Acquisition Subsidiary Corporation ("Merger Subsidiary"),
a Delaware corporation and newly formed, wholly owned subsidiary of Exxon,
and Exxon and (ii) the preparation and filing of the related Registration
Statement on Form S-4 (the "Registration Statement"), which includes the
Proxy Statement/Prospectus (the "Proxy Statement/Prospectus"), filed with
the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act") and the
Securities Exchange Act of 1934, as amended. Unless otherwise indicated,
each capitalized term used herein has the meaning ascribed to it in the
Merger Agreement.
In connection with this opinion, we have examined the Merger
Agreement, the Proxy Statement/Prospectus and such other documents as we
have deemed necessary or appropriate in order to enable us to render our
opinion. For purposes of this opinion, we have assumed (i) the validity
and accuracy of the documents that we have examined, (ii) that the Merger
would be consummated in the manner described in Merger Agreement and the
Proxy Statement/Prospectus, and that the representations made and the
representations to be made by Exxon (together with Merger Subsidiary) and
Mobil pursuant to Section 8.02(e) of the Merger Agreement are and will be
accurate and complete. In rendering our opinion, we have considered the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Department regulations promulgated thereunder, pertinent
judicial authorities, interpretive rulings of the IRS and such other
authorities as we have considered relevant. It should be noted that
<PAGE>
Exxon Corporation 2 April 2, 1999
statutes, regulations, judicial decisions and administrative
interpretations are subject to change at any time (possibly with
retroactive effect). A change in the authorities or the inaccuracy of any
of the documents or assumptions on which our opinion is based could affect
our conclusions.
Based upon the foregoing, in our opinion, the Merger will be
treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and Exxon, Mobil and Merger
Subsidiary will each be a party to that reorganization within the meaning
of Section 368(b) of the Code, and accordingly, for U.S. federal income tax
purposes:
(i) holders of Exxon stock will not recognize any gain or loss as
a result of the Merger;
(ii) except in respect of cash received instead of fractional
shares of Exxon Mobil common stock, holders of shares of
Mobil stock will (1) not recognize any gain or loss as a
result of the exchange of their shares of Mobil stock for
Exxon Mobil stock, (2) have a tax basis in the Exxon Mobil
stock received in the merger equal to the tax basis of the
Mobil stock surrendered in the Merger, and (3) have a
holding period with respect to the Exxon Mobil stock
received in the Merger that includes the holding period of
the Mobil stock surrendered in the Merger;
(iii) a holder of Mobil common stock will be required to recognize
gain or loss with respect to cash received instead of a
fractional share of Exxon Mobil common stock, measured by
the difference between the amount of cash received and the
portion of the tax basis of the holder's shares of Mobil
common stock allocable to the fractional share, which gain
or loss will be capital gain or loss if the holder of Mobil
common stock holds such stock as a capital asset within the
meaning of Section 1221 of the Code and will be long-term
capital gain or loss if the share of Mobil common stock
exchanged for the fractional share was held for more than
one year at the Effective Time;
(iv) although the matter is not free from doubt (because of the
absence of legislative, judicial or other authority directly
on point), Mobil's payment of transfer taxes for which the
Mobil shareholders are primarily liable, if any, may be
taxable as a dividend to the Mobil shareholders; and
<PAGE>
Exxon Corporation 3 April 2, 1999
(v) none of Exxon, Mobil or Merger Subsidiary will recognize gain
or loss as a result of the Merger.
The preceding are all of the material U.S. federal income tax
consequences of the Merger. However, our opinion does not address U.S.
federal income tax consequences which may vary with, or are contingent
upon, a shareholder's individual circumstances. In addition, our opinion
does not address any non-income tax or any foreign, state or local tax
consequences of the Merger.
In accordance with the requirements of Item 601(b)(23) of
Regulation S-K under the Securities Act, we hereby consent to the
discussion of this opinion in the Proxy Statement/Prospectus, to the filing
of this opinion as an exhibit to the Proxy Statement/Prospectus and to the
reference to our firm under the headings "THE MERGER TRANSACTION-Material
Federal Income Tax Consequences of the Merger," "THE MERGER AGREEMENT-
Conditions to the Completion of the Merger" and "LEGAL MATTERS" in the
Proxy Statement/Prospectus. In giving such consent, we do not thereby
admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations of the
Commission thereunder.
Very truly yours,
/s/ Davis Polk & Wardwell
<PAGE>
EXHIBIT 8(b)
[Skadden, Arps, Slate, Meagher & Flom LLP Letterhead]
April 2, 1999
Mobil Corporation
3225 Gallows Road
Fairfax, Virginia 22307
Ladies and Gentlemen:
We have acted as counsel to Mobil Corporation, a Delaware corporation
("Mobil"), in connection with (i) the Merger, as defined and described in the
Agreement and Plan of Merger, dated as of December 1, 1998 (the "Merger
Agreement"), among Mobil, Exxon Corporation, a New Jersey corporation ("Exxon")
and Lion Acquisition Subsidiary Corporation, a Delaware corporation and a
newly-formed, wholly-owned subsidiary of Exxon ("Merger Subsidiary"), and (ii)
the preparation and filing of the Registration Statement on Form S-4 (the
"Registration Statement"), which includes the Proxy Statement/Prospectus (the
"Proxy Statement/Prospectus"), filed with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Securities
Act") and the Securities Exchange Act of 1934, as amended. Unless otherwise
indicated, each capitalized term used herein has the meaning ascribed to it in
the Merger Agreement.
In connection with this opinion, we have examined the Merger Agreement, the
Proxy Statement/Prospectus and such other documents and corporate records as we
have deemed necessary or appropriate in order to enable us to render the opinion
below. For purposes of this opinion, we have assumed (i) the validity and
accuracy of the documents and corporate records that we have examined, and the
facts and representations concerning the Merger that have come to our attention
during our engagement, and (ii) that the Merger will be consummated in the
manner described in the Merger Agreement and the Proxy Statement/Prospectus.
Subject to the assumptions set forth above, the representations made to us
by Mobil, Exxon and Merger Subsidiary in their respective letters dated the date
hereof and the assumptions and qualifications set forth in the discussion in the
Proxy Statement/Prospectus under the heading "Material Federal Income Tax
Consequences of the Merger", in our opinion, the Merger will be treated for
federal income tax purposes as a reorganization qualifying under the provisions
of Section 368(a) of the Code and each of Exxon, Merger Subsidiary and Mobil
will be a party to the reorganization within the meaning of Section 368(b) of
the Code, and accordingly, for U.S. federal income tax purposes:
(i) holders of Exxon stock will not recognize any gain or loss as a
result of the Merger;
(ii) except in respect of cash received instead of fractional shares of
Exxon Mobil common stock, holders of shares of Mobil stock will (1) not
recognize any gain or loss as a result of the exchange of their shares of
Mobil stock for Exxon Mobil stock, (2) have a tax basis in the Exxon Mobil
stock received in the Merger equal to the tax basis of the Mobil stock
surrendered in the Merger, and (3) have a holding period with respect to
the Exxon Mobil stock received in the Merger that includes the holding
period of the Mobil stock surrendered in the Merger;
(iii) a holder of Mobil common stock will be required to recognize gain
or loss with respect to cash received instead of a fractional share of
Exxon Mobil common stock, measured by the difference between the amount of
cash received and the portion of the tax basis of the holder's shares of
Mobil common stock allocable to the fractional share, which gain or loss
will be capital gain or loss if the holder of Mobil common stock holds such
stock as a capital asset within the meaning of Section 1221 of the Code and
will be long-term capital gain or loss
<PAGE>
if the share of Mobil common stock exchanged for the fractional share was
held for more than one year at the Effective Time;
(iv) although the matter is not free from doubt (because of the
absence of legislative, judicial or other authority directly on
point), Mobil's payment of transfer taxes for which the Mobil
shareholders are primarily liable, if any, may be taxable as a
dividend to the Mobil shareholders; and
(v) none of Exxon, Mobil or Merger Subsidiary will recognize gain or
loss as a result of the Merger.
The preceding are all of the material U.S. federal income tax
consequences of the Merger. However, our opinion does not address U.S.
federal income tax consequences which may vary with, or are contingent
upon, a shareholder's individual circumstances. In addition, our opinion
does not address any non-income tax or any foreign, state or local tax
consequences of the Merger.
This opinion is delivered in accordance with the requirements of Item
601(b)(8) of Regulation S-K under the Securities Act. In rendering our opinion,
we have considered the applicable provisions of the Code, Treasury Department
regulations promulgated thereunder, pertinent judicial authorities, interpretive
rulings of the IRS and such other authorities as we have considered relevant. It
should be noted that statutes, regulations, judicial decisions and
administrative interpretations are subject to change at any time (possibly with
retroactive effect). A change in the authorities or the accuracy or completeness
of any of the information, documents, corporate records, covenants, statements,
representations or assumptions on which our opinion is based could affect our
conclusions. This opinion is expressed as of the date hereof, and we are under
no obligation to supplement or revise our opinion to reflect any changes
(including changes that have retroactive effect) (i) in applicable law or (ii)
in any information, document, corporate record, covenant, statement,
representation or assumption stated herein which becomes untrue or incorrect.
This letter is furnished to you solely for use in connection with the
Merger, as described in the Merger Agreement and the Proxy
Statement/Prospectus, and is not to be used, circulated, quoted, or
otherwise referred to for any other purpose without our express written
permission. In accordance with the requirements of Item 601(b)(23) of
Regulation S-K under the Securities Act, we hereby consent to the
discussion of this opinion in the Proxy Statement/Prospectus, to the filing
of this opinion as an exhibit to the Proxy Statement/Prospectus and to the
reference to our firm under the headings "THE MERGER TRANSACTION--Material
Federal Income Tax Consequences of the Merger," "THE MERGER AGREEMENT--
Conditions to the Completion of the Merger" and "LEGAL MATTERS" in the
Proxy Statement. In giving such consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of
the Securities Act or the rules and regulations of the Commission
thereunder.
Very truly yours,
/s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
<PAGE>
EXHIBIT 23(a)
[Pricewaterhouse Coopers LLP Letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Exxon
Corporation of our report dated February 24, 1999, which appears on page F9 of
Exxon Corporation's 1998 Annual Report to shareholders, which is incorporated by
reference in its Annual Report on Form 10-K for the year ended December 31,
1998. We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ PRICEWATERHOUSECOOPERS LLP
------------------------------
April 5, 1999
<PAGE>
EXHIBIT 23(b)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 26, 1999 on the Mobil Corporation
consolidated financial statements as of December 31, 1998 and 1997 and for each
of the three years then ended, incorporated by reference in the Joint Proxy
Statement/Prospectus of Exxon Corporation and Mobil Corporation that is made a
part of the Registration Statement (Form S-4) and Prospectus of Exxon Mobil
Corporation for the registration of shares of its common stock.
/s/ ERNST & YOUNG LLP
---------------------
Fairfax, Virginia
April 1, 1999
<PAGE>
EXHIBIT 23(f)
[J.P. Morgan Securities Inc. Letterhead]
CONSENT OF J.P. MORGAN SECURITIES INC.
We hereby consent to (i) the use of our opinion letter to the Board of
Directors of Exxon Corporation (the "Company") included as Annex C to the Joint
Proxy Statement/Prospectus which forms a part of the Registration Statement on
Form S-4 relating to the proposed merger of the Company and Mobil Corporation,
and (ii) the references to such opinion in such Joint Proxy
Statement/Prospectus. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we hereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
J.P. MORGAN SECURITIES INC.
By: /s/ James R. Elliott III
------------------------
James R. Elliott III
Managing Director
March 16, 1999
<PAGE>
EXHIBIT 23(g)
Goldman, Sachs & Co. Letterhead
CONSENT OF GOLDMAN, SACHS & CO.
April 2, 1999
Board of Directors
Mobil Corporation
3225 Gallows Road
Fairfax, Virginia 22037-0001
Re: Registration Statement (File No. 333- ) of
Mobil Corporation and Exxon Corporation
Ladies and Gentlemen:
Reference is made to our opinion letter dated April 2, 1999 with
respect to the fairness from a financial point of view to the holders
(other than Exxon Corporation ("Exxon") or any of its subsidiaries or
affiliates (the "Holders")) of the outstanding shares of Common Stock, par
value $1.00 per share (the "Shares"), of Mobil Corporation ("Mobil") of the
exchange ratio of 1.32015 shares of Common Stock, without par value ("Exxon
Shares"), of Exxon to be received for each Share (the "Exchange Ratio")
pursuant to the Agreement and Plan of Merger, dated as of December 1, 1998,
among Exxon, Lion Acquisition Subsidiary Corporation, a wholly-owned
subsidiary of Exxon, and Mobil.
The foregoing opinion letter is provided for the information and assistance
of the Board of Directors of Mobil in connection with its consideration of the
transaction contemplated therein and is not to be used, circulated, quoted or
otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent. We understand that the Company has determined to include our
opinion in the above-referenced Registration Statement.
In that regard, we hereby consent to the reference to the opinion of our
Firm under the caption(s) "Summary", "The Merger Transaction" and "Opinions of
Financial Advisors" and to the inclusion of the foregoing opinion in the Joint
Proxy Statement/Prospectus included in the above-mentioned Registration
Statement, as amended. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
/s/ Goldman, Sachs & Co.
------------------------------
<PAGE>
EXHIBIT 24
EXXON CORPORATION POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Frank A. Risch, Richard E. Gutman and Millie P. Bradley, and each of them, with
full power to act without the other, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her own name, place and stead, in
any and all capacities, to sign a Registration Statement on Form S-4 relating to
the issuance of the registrant's common stock in connection with the merger of
Mobil Corporation with and into a wholly-owned subsidiary of the registrant and
any and all amendments (including post-effective amendments and other amendments
thereto) to such Registration Statement and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
as he or she could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title Date
--------- ----- ----
/s/ Lee R. Raymond Chairman of the Board February 24, 1999
- -------------------------------
(Lee R. Raymond)
/s/ Michael J. Boskin Director March 10, 1999
- -------------------------------
(Michael J. Boskin)
/s/ Rene Dahan Director February 24, 1999
- -------------------------------
(Rene Dahan)
/s/ William T. Esrey Director February 24, 1999
- -------------------------------
(William T. Esrey)
/s/ Jess Hay Director February 24, 1999
- -------------------------------
(Jess Hay)
/s/ James R. Houghton Director February 24, 1999
- -------------------------------
(James R. Houghton)
/s/ William R. Howell Director February 24, 1999
- -------------------------------
(William R. Howell)
/s/ Reatha Clark King Director February 24, 1999
- -------------------------------
(Reatha Clark King)
/s/ Philip E. Lippincott Director February 24, 1999
- -------------------------------
(Philip E. Lippincott)
/s/ Harry J. Longwell Director February 24, 1999
- -------------------------------
(Harry J. Longwell)
/s/ Marilyn Carlson Nelson Director February 26, 1999
- -------------------------------
(Marilyn Carlson Nelson)
/s/ Walter V. Shipley Director February 24, 1999
- -------------------------------
(Walter V. Shipley)
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Robert E. Wilhelm Director February 24, 1999
- -------------------------------
(Robert E. Wilhelm)
/s/ Frank A. Risch Treasurer February 24, 1999
- ------------------------------- (Principal
(Frank A. Risch) Financial Officer)
/s/ Donald D. Humphreys Controller February 24, 1999
- ------------------------------- (Principal
(Donald D. Humphreys) Accounting Officer)
<PAGE>
EXHIBIT 99(a)
[FORM OF EXXON PROXY CARD]
<PAGE>
- ------------------------------------------------------------------------------
EXXON CORPORATION
1999 ANNUAL MEETING
- ------------------------------------------------------------------------------
ADMISSION TICKET
You are cordially invited to attend the annual meeting of shareholders of
Exxon Corporation on Thursday, May 27 at the Trinity Conference Center,
Wyndham Anatole Hotel, 2201 Steemons Freeway, Dallas, Texas. The meeting will
begin at 10:00 a.m., Central Time. Admission is limited to shareholders and
guests of the Corporation. This ticket will admit you and an approved guest
and should be presented at the meeting to expedite registration. Free parking
is available. You should allow time for possible traffic delays and for
walking to the conference center after arriving at the hotel.
To avoid delays, please arrive early and present this ticket.
- ------------------------------------------------------------------------------
PROXY VOTING INSTRUCTIONS
Exxon Corporation encourages all shareholders to vote their proxies. We now
provide three convenient methods for voting:
1. PROXY CARD: Complete, sign, date, and return the proxy card attached below
in the enclosed postage-paid envelope, or
2. TELEPHONE: Call toll-free on a touch-tone phone 1-877-779-8683, 7 days a
week, 24 hours a day, or
3. INTERNET: Log on to the Web site http://www.eproxyvote.com/xon
If you choose to vote by telephone or Internet, you will be given
instructions and asked to enter the 14-digit voter control number
located above your name on this proxy card. Choosing either of these
options eliminates the need to return your proxy card.
DETACH CARD BEFORE MAILING
- ------------------------------------------------------------------------------
[X] Please mark
votes as in
this example.
<TABLE>
The Board of Directors recommends The Board of Directors recommends The Board of Directors recommends
a vote FOR items 1 and 2. a vote FOR items 3 and 4. a vote AGAINST items 5 through 8.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
To vote in favor of the merger, you must vote Other annual FOR AGAINST ABSTAIN
FOR both merger proposals: meeting proposals: 5. Term limit for [ ] [ ] [ ]
WITHHELD nonemployee
FOR ALL FROM ALL directors (p. IV-19)
FOR AGAINST ABSTAIN 3. Election of 6. Limitation on [ ] [ ] [ ]
1. Approve merger and [ ] [ ] [ ] Directors [ ] [ ] shareholder voting
related issuance of (p. IV-1) (p. IV-20)
Exxon stock (p. I-14)
7. Additional report [ ] [ ] [ ]
2. Amendment of Exxon [ ] [ ] [ ] on climate change
charter (p. III-10) -------------------------------------- (p. IV-21)
For all nominees except as noted above
8. Sexual orientation [ ] [ ] [ ]
FOR AGAINST ABSTAIN principles (p. IV-24)
4. Ratify [ ] [ ] [ ]
independent ---------------------------------------------
accountants
(p. IV-19) A. I have made comments on this card [ ]
or an attachment.
B. Discontinue duplicate annual report. [ ]
Signature: ________________ Date: ________ 1999 Signature: ________________ Date: ________ 1999
NOTE: Please sign exactly as name appears hereon. When signing as attorney,
executor, administrator, trustee, or guardian, please give full name as such.
</TABLE>
<PAGE>
(MAP AND DIRECTIONS)
- ------------------------------------------------------------------------------
EXXON CORPORATION PROXY
SOLICITED BY BOARD OF DIRECTORS
c/o Proxy Services ANNUAL MEETING, MAY 27, 1999
P.O. Box 8033 DALLAS, TEXAS
Boston, MA 02266-8033
The undersigned hereby appoints J. Hay, W.R. Howell, P.E. Lippincott, M.C.
Nelson, and L.R. Raymond, or each or any of them, with power of substitution,
proxies for the undersigned to act and vote at the 1999 annual meeting of
shareholders of Exxon Corporation and at any adjournments thereof, as
indicated, upon all matters referred to on the reverse side and described in
the proxy statement for the meeting and, at their discretion, upon any other
matters that may properly come before the meeting.
<TABLE>
<S> <C> <C> <C>
1. Election of Directors(1)
Nominees: (01) M.J. Boskin, (02) R. Dahan, (03) W.T. Esrey,
(04) J. Hay, (05) J.R. Houghton, (06) W.R. Howell, (07) R.C. King,
(08) P.E. Lippincott, (09) H.J. Longwell, (10) M.C. Nelson, (11) L.R. Raymond,
(12) W.V. Shipley, (13) R.E. Wilhelm.
</TABLE>
If no other indication is made, the proxies shall vote (a) for the election
of the director nominees and (b) in accordance with the recommendations of
the Board of Directors on the other matters referred to on the reverse
side.
(1) The numbers in front of the nominees' names are provided to assist in
telephone and Internet voting.
(OVER)
<PAGE>
- ------------------------------------------------------------------------------
EXXON CORPORATION
1999 ANNUAL MEETING
- ------------------------------------------------------------------------------
ADMISSION TICKET
You are cordially invited to attend the annual meeting of shareholders of
Exxon Corporation on Thursday, May 27 at the Trinity Conference Center,
Wyndham Anatole Hotel, 2201 Steemons Freeway, Dallas, Texas. The meeting will
begin at 10:00 a.m., Central Time. Admission is limited to shareholders and
guests of the Corporation. This ticket will admit you and an approved guest
and should be presented at the meeting to expedite registration. Free parking
is available. You should allow time for possible traffic delays and for
walking to the conference center after arriving at the hotel.
To avoid delays, please arrive early and present this ticket.
- ------------------------------------------------------------------------------
PROXY VOTING INSTRUCTIONS
Exxon Corporation encourages all shareholders to vote their proxies. We now
provide three convenient methods for voting:
1. PROXY CARD: Complete, sign, date, and return the proxy card attached below
in the enclosed postage-paid envelope, or
2. TELEPHONE: Call toll-free on a touch-tone phone 1-877-779-8683, 7 days a
week, 24 hours a day, or
3. INTERNET: Log on to the Web site http://www.eproxyvote.com/xon
If you choose to vote by telephone or Internet, you will be given
instructions and asked to enter the 14-digit voter control number
located above your name on this proxy card. Choosing either of these
options eliminates the need to return your proxy card.
DETACH CARD BEFORE MAILING
- ------------------------------------------------------------------------------
[X] Please mark
votes as in
this example.
<TABLE>
The Board of Directors recommends The Board of Directors recommends The Board of Directors recommends
a vote FOR items 1 and 2. a vote FOR items 3 and 4. a vote AGAINST items 5 through 8.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
To vote in favor of the merger, you must vote Other annual FOR AGAINST ABSTAIN
FOR both merger proposals: meeting proposals: 5. Term limit for [ ] [ ] [ ]
WITHHELD nonemployee
FOR ALL FROM ALL directors (p. IV-19)
FOR AGAINST ABSTAIN 3. Election of 6. Limitation on [ ] [ ] [ ]
1. Approve merger and [ ] [ ] [ ] Directors [ ] [ ] shareholder voting
related issuance of (p. IV-1) (p. IV-20)
Exxon stock (p. I-14)
7. Additional report [ ] [ ] [ ]
2. Amendment of Exxon [ ] [ ] [ ] on climate change
charter (p. III-10) -------------------------------------- (p. IV-21)
For all nominees except as noted above
8. Sexual orientation [ ] [ ] [ ]
FOR AGAINST ABSTAIN principles (p. IV-24)
4. Ratify [ ] [ ] [ ]
independent ---------------------------------------------
accountants
(p. IV-19) A. I have made comments on this card [ ]
or an attachment.
Signature: ________________ Date: ________ 1999 Signature: ________________ Date: ________ 1999
NOTE: Please sign exactly as name appears hereon. When signing as attorney,
executor, administrator, trustee, or guardian, please give full name as such.
</TABLE>
<PAGE>
(MAP AND DIRECTIONS)
- ------------------------------------------------------------------------------
EXXON CORPORATION VOTING INSTRUCTION CARD
SOLICITED BY BOARD OF DIRECTORS
c/o Proxy Services ANNUAL MEETING, MAY 27, 1999
P.O. Box 8033 DALLAS, TEXAS
Boston, MA 02266-8033
To Trustee-Thrift Fund: You are hereby instructed to appoint J. Hay, W.R.
Howell, P.E. Lippincott, M.C. Nelson, and L.R. Raymond, or each or any of
them, with power of substitution, proxies to act and vote at the 1999 annual
meeting of shareholders of Exxon Corporation and at any adjournments thereof,
any shares of common stock of the Corporation in my account in the Thrift Fund
(including all shares, if any, in my Thrift Account, E Account, K Account, and
Direct Dividend Account), as indicated, upon all matters referred to on the
reverse side and described in the proxy statement for the meeting and, at
their discretion, upon any other matters that may properly come before the
meeting.
<TABLE>
<S> <C> <C> <C>
1. Election of Directors(1)
Nominees: (01) M.J. Boskin, (02) R. Dahan, (03) W.T. Esrey,
(04) J. Hay, (05) J.R. Houghton, (06) W.R. Howell, (07) R.C. King,
(08) P.E. Lippincott, (09) H.J. Longwell, (10) M.C. Nelson, (11) L.R. Raymond,
(12) W.V. Shipley, (13) R.E. Wilhelm.
</TABLE>
If no other indication is made, the proxies shall vote (a) for the election
of the director nominees and (b) in accordance with the recommendations of
the Board of Directors on the other matters referred to on the reverse
side.
(1) The numbers in front of the nominees' names are provided to assist in
telephone and Internet voting.
(OVER)
<PAGE>
- ------------------------------------------------------------------------------
EXXON CORPORATION
1999 ANNUAL MEETING
- ------------------------------------------------------------------------------
ADMISSION TICKET
You are cordially invited to attend the annual meeting of shareholders of
Exxon Corporation on Thursday, May 27 at the Trinity Conference Center,
Wyndham Anatole Hotel, 2201 Steemons Freeway, Dallas, Texas. The meeting will
begin at 10:00 a.m., Central Time. Admission is limited to shareholders and
guests of the Corporation. This ticket will admit you and an approved guest
and should be presented at the meeting to expedite registration. Free parking
is available. You should allow time for possible traffic delays and for
walking to the conference center after arriving at the hotel.
To avoid delays, please arrive early and present this ticket.
- ------------------------------------------------------------------------------
PROXY VOTING INSTRUCTIONS
Exxon Corporation encourages all shareholders to vote their proxies. We now
provide three convenient methods for voting:
1. PROXY CARD: Complete, sign, date, and return the proxy card attached below
in the enclosed postage-paid envelope, or
2. TELEPHONE: Call toll-free on a touch-tone phone 1-877-779-8683, 7 days a
week, 24 hours a day, or
3. INTERNET: Log on to the Web site http://www.eproxyvote.com/xon
If you choose to vote by telephone or Internet, you will be given
instructions and asked to enter the 14-digit voter control number
located above your name on this proxy card. Choosing either of these
options eliminates the need to return your proxy card.
DETACH CARD BEFORE MAILING
- ------------------------------------------------------------------------------
[X] Please mark
votes as in
this example.
<TABLE>
The Board of Directors recommends The Board of Directors recommends The Board of Directors recommends
a vote FOR items 1 and 2. a vote FOR items 3 and 4. a vote AGAINST items 5 through 8.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
To vote in favor of the merger, you must vote Other annual FOR AGAINST ABSTAIN
FOR both merger proposals: meeting proposals: 5. Term limit for [ ] [ ] [ ]
WITHHELD nonemployee
FOR ALL FROM ALL directors (p. IV-19)
FOR AGAINST ABSTAIN 3. Election of 6. Limitation on [ ] [ ] [ ]
1. Approve merger and [ ] [ ] [ ] Directors [ ] [ ] shareholder voting
related issuance of (p. IV-1) (p. IV-20)
Exxon stock (p. I-14)
7. Additional report [ ] [ ] [ ]
2. Amendment of Exxon [ ] [ ] [ ] on climate change
charter (p. III-10) -------------------------------------- (p. IV-21)
For all nominees except as noted above
8. Sexual orientation [ ] [ ] [ ]
FOR AGAINST ABSTAIN principles (p. IV-24)
4. Ratify [ ] [ ] [ ]
independent ---------------------------------------------
accountants
(p. IV-19) A. I have made comments on this card [ ]
or an attachment.
Signature: ________________ Date: ________ 1999 Signature: ________________ Date: ________ 1999
NOTE: Please sign exactly as name appears hereon. When signing as attorney,
executor, administrator, trustee, or guardian, please give full name as such.
</TABLE>
<PAGE>
(MAP AND DIRECTIONS)
- ------------------------------------------------------------------------------
EXXON CORPORATION VOTING INSTRUCTION CARD
SOLICITED BY BOARD OF DIRECTORS
c/o Proxy Services ANNUAL MEETING, MAY 27, 1999
P.O. Box 8033 DALLAS, TEXAS
Boston, MA 02266-8033
To Trustee-Exxon Shareholder Investment Program IRA: You are hereby
instructed to appoint J. Hay, W.R. Howell, P.E. Lippincott, M.C. Nelson, and
L.R. Raymond, or each or any of them, with power of substitution, proxies to
act and vote at the 1999 annual meeting of shareholders of Exxon Corporation
and at any adjournments thereof, any shares of common stock of the Corporation
in my Exxon Shareholder Investment Program IRA account, as indicated, upon all
matters referred to on the reverse side and described in the proxy statement
for the meeting and, at their discretion, upon any other matters that may
properly come before the meeting.
<TABLE>
<S> <C> <C> <C>
1. Election of Directors(1)
Nominees: (01) M.J. Boskin, (02) R. Dahan, (03) W.T. Esrey,
(04) J. Hay, (05) J.R. Houghton, (06) W.R. Howell, (07) R.C. King,
(08) P.E. Lippincott, (09) H.J. Longwell, (10) M.C. Nelson, (11) L.R. Raymond,
(12) W.V. Shipley, (13) R.E. Wilhelm.
</TABLE>
If no other indication is made, the proxies shall vote (a) for the election
of the director nominees and (b) in accordance with the recommendations of
the Board of Directors on the other matters referred to on the reverse
side.
(1) The numbers in front of the nominees' names are provided to assist in
telephone and Internet voting.
(OVER)
<PAGE>
EXHIBIT 99(b)
[FORM OF MOBIL PROXY CARD]
<PAGE>
Mobil Corporation proxy
- --------------------------------------------------------------------------------
SOLICITED BY THE BOARD OF DIRECTORS for Annual Meeting of Stockholders
REGENCY BALLROOM
FAIRMONT HOTEL
1717 NORTH AKARD STREET
DALLAS, TEXAS 75201
THURSDAY, MAY 27, 1999
AT 10:00 A.M. (CENTRAL TIME)
The undersigned hereby appoints Lucio A. Noto, Eugene A. Renna and Carole J.
Yaley or any one of them, each with power of substitution, the attorneys of the
undersigned to vote all shares held of record on the record date by the
undersigned, as directed and, in their discretion, on all other matters which
may properly come before the 1999 Annual Meeting of Stockholders of Mobil
Corporation, and any adjournment or postponement thereof. The undersigned
directs said attorneys to vote as specified upon the items shown on the reverse
side, which are referred to in the Notice of Annual Meeting and set forth in the
Proxy Statement.
This card also provides voting instructions for shares held in the Stock
Purchase and Dividend Reinvestment Plan. For participants in the Mobile Oil
Employees Savings Plan and the Mobil Employee Stock Ownership Plan, if you wish
to provide voting instructions for the shares of Mobil stock credited to your
accounts, please vote by telephone or by the Internet by noon on May 24, 1999 or
fill in and sign this card and mail it in time to be received no later than noon
on May 24, 1999.
If you use this card to vote, you are encouraged to specify your choices by
marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes
if you wish to vote in accordance with the Board of Directors' recommendations.
(Continued, and to be signed, on the reverse side)
Fold and Detach Here and Read the Reverse Side
Mobil Corporation
YOUR VOTE IS IMPORTANT!
You can vote in one of three ways:
1. For U.S. Stockholders only, call toll-free 1-800-840-1208 on a Touch-Tone
telephone and follow the instructions on the reverse side. There is NO
CHARGE to you for this call.
or
2. Vote by Internet at our Internet Address: http://www.mobil.com
or
3. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.
PLEASE VOTE
IF YOU VOTED BY INTERNET OR BY PHONE,
THERE IS NO NEED TO RETURN YOUR PROXY CARD.
<PAGE>
The votes represented by this proxy will be
voted as marked by you. However, if you execute
and return the proxy unmarked, such votes Please mark [X]
will be voted"FOR" Proposals 1, 2 and 3 and your vote
"AGAINST" Proposals 4 and 5. with an X
<TABLE>
The Board of Directors Recommends a Vote "FOR" Items 1, 2 and 3.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR AGAINST ABSTAIN WITHHELD
FOR FOR ALL
1. Approval and adoption [ ] [ ] [ ] 2. Election of Directors [ ] [ ]
of the merger agree- to serve a three=year
ment dated December term (or until completion
1, 1998 with Exxon of the merger, if earlier)
Corporation 01 Charles A. Heimbold, Jr.
02 Samuel C. Johnson
03 Helene L. Kaplan
04 Aulana L. Peters
3. Ratification of inde- FOR AGAINST ABSTAIN Withheld for the following only (write the
pendent auditors [ ] [ ] [ ] nominee's name(s) in the space below) _________________________
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Board of Directors Recommends a Vote "AGAINST" Items 4 and 5.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
4. Voting of signed but [ ] [ ] [ ]
unmarked proxies
5. Global Warming [ ] [ ] [ ]
- --------------------------------------------------------------------------------
Please date and sign below as your name appears to the left and return in
the enclosed envelope. If acting as executor, administrator, trustee,
guardian, etc., you should so indicate when signing. If the signer is a
corporation, please sign the full corporate name, by a duly authorized
officer. If shares are held jointly, each stockholder named should sign.
Dated____________________________, 1999
_______________________________________
Signature
_______________________________________
Signature if held jointly
Fold and Detach Here and Read the Reverse Side
Mobil Corporation
<PAGE>
---------------------------------
VOTE BY TELEPHONE OR INTERNET
QUICK * * * EASY * * * IMMEDIATE
---------------------------------
Your telephone or Internet vote authorizes the named attorneys to vote your
shares in the same manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE: FOR U.S. STOCKHOLDERS ONLY, CALL TOLL-FREE ON A TOUCH-TONE
TELEPHONE 1-800-840-1208 ANYTIME.
THERE IS NO CHARGE TO YOU FOR THIS CALL.
You will be asked to enter the
11-digit Control Number located in
the lower right-hand corner of this
form.
--------------------------------------------------------------------
OPTION A: To vote as the Board of Directors recommends
on ALL items, press 1.
--------------------------------------------------------------------
OPTION B: If you choose to vote on each item separately,
press 0. You will hear these instructions:
--------------------------------------------------------------------
Item 1: To vote FOR the merger agreement, press
1; AGAINST, press 9; ABSTAIN, press 0.
Item 2: To vote FOR ALL nominees, press 1; to
WITHHOLD FOR ALL nominees, press 9. To WITHHOLD
FOR AN INDIVIDUAL nominee, press 0 and listen
to instructions.
Item 3: To vote FOR, press 1; AGAINST, press 9;
ABSTAIN, press 0.
Items 4 and 5: The instructions are the same as
for Item 3.
When asked, you must confirm your vote by
pressing 1.
VOTE BY INTERNET: THE WEB ADDRESS IS http://www.mobil.com
Simply follow the instructions on the screen.
THANK YOU FOR VOTING.
<PAGE>
EXHIBIT 99(c)
CONSENT OF LUCIO A. NOTO
I hereby consent to being named as a person who will become a director of
Exxon Corporation, a New Jersey corporation ("Exxon"), in connection with the
consummation of the merger (the "Merger") contemplated by the Agreement and Plan
of Merger, dated as of December 1, 1998, among Exxon, Mobil Corporation, a
Delaware corporation, and Lion Acquisition Subsidiary Corporation, a Delaware
corporation, in the Registration Statement on Form S-4 to be filed by Exxon with
the Securities and Exchange Commission in connection with the Merger (the
"Registration Statement"), and to the filing of this consent as an exhibit to
the Registration Statement.
Signature: /s/ Lucio A. Noto
---------------------
Lucio A. Noto
Date: March 24, 1999
<PAGE>
EXHIBIT 99(d)
CONSENT OF EUGENE A. RENNA
I hereby consent to being named as a person who will become a director of
Exxon Corporation, a New Jersey corporation ("Exxon"), in connection with the
consummation of the merger (the "Merger") contemplated by the Agreement and Plan
of Merger, dated as of December 1, 1998, among Exxon, Mobil Corporation, a
Delaware corporation, and Lion Acquisition Subsidiary Corporation, a Delaware
corporation, in the Registration Statement on Form S-4 to be filed by Exxon with
the Securities and Exchange Commission in connection with the Merger (the
"Registration Statement"), and to the filing of this consent as an exhibit to
the Registration Statement.
Signature: /s/ Eugene A. Renna
---------------------
Eugene A. Renna
Date: March 24, 1999
<PAGE>
EXHIBIT 99(e)
CONSENT OF DONALD V. FITES
I hereby consent to being named as a person who will become a director of
Exxon Corporation, a New Jersey corporation ("Exxon"), in connection with the
consummation of the merger (the "Merger") contemplated by the Agreement and Plan
of Merger, dated as of December 1, 1998, among Exxon, Mobil Corporation, a
Delaware corporation, and Lion Acquisition Subsidiary Corporation, a Delaware
corporation, in the Registration Statement on Form S-4 to be filed by Exxon with
the Securities and Exchange Commission in connection with the Merger (the
"Registration Statement"), and to the filing of this consent as an exhibit to
the Registration Statement.
Signature: /s/ Donald V. Fites
---------------------
Donald V. Fites
Date: March 24, 1999
<PAGE>
EXHIBIT 99(f)
CONSENT OF CHARLES A. HEIMBOLD, JR.
I hereby consent to being named as a person who will become a director of
Exxon Corporation, a New Jersey corporation ("Exxon"), in connection with the
consummation of the merger (the "Merger") contemplated by the Agreement and Plan
of Merger, dated as of December 1, 1998, among Exxon, Mobil Corporation, a
Delaware corporation, and Lion Acquisition Subsidiary Corporation, a Delaware
corporation, in the Registration Statement on Form S-4 to be filed by Exxon with
the Securities and Exchange Commission in connection with the Merger (the
"Registration Statement"), and to the filing of this consent as an exhibit to
the Registration Statement.
Signature: /s/ Charles A. Heimbold, Jr.
----------------------------
Charles A. Heimbold, Jr.
Date: March 24, 1999
<PAGE>
EXHIBIT 99(g)
CONSENT OF HELENE L. KAPLAN
I hereby consent to being named as a person who will become a director of
Exxon Corporation, a New Jersey corporation ("Exxon"), in connection with the
consummation of the merger (the "Merger") contemplated by the Agreement and Plan
of Merger, dated as of December 1, 1998, among Exxon, Mobil Corporation, a
Delaware corporation, and Lion Acquisition Subsidiary Corporation, a Delaware
corporation, in the Registration Statement on Form S-4 to be filed by Exxon with
the Securities and Exchange Commission in connection with the Merger (the
"Registration Statement"), and to the filing of this consent as an exhibit to
the Registration Statement.
Signature: /s/ Helene L. Kaplan
---------------------
Helene L. Kaplan
Date: March 24, 1999
<PAGE>
EXHIBIT 99(h)
CONSENT OF J. RICHARD MUNRO
I hereby consent to being named as a person who will become a director of
Exxon Corporation, a New Jersey corporation ("Exxon"), in connection with the
consummation of the merger (the "Merger") contemplated by the Agreement and Plan
of Merger, dated as of December 1, 1998, among Exxon, Mobil Corporation, a
Delaware corporation, and Lion Acquisition Subsidiary Corporation, a Delaware
corporation, in the Registration Statement on Form S-4 to be filed by Exxon with
the Securities and Exchange Commission in connection with the Merger (the
"Registration Statement"), and to the filing of this consent as an exhibit to
the Registration Statement.
Signature: /s/ J. Richard Munro
---------------------
J. Richard Munro
Date: March 24, 1999
