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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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SUMMIT PETROLEUM CORPORATION
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(Name of Subject Company)
SUMMIT PETROLEUM CORPORATION
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(Name of Person(s) Filing Statement)
COMMON STOCK, $.01 PAR VALUE
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(TITLE OF CLASS OF SECURITIES)
866228 307
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(CUSIP NUMBER OF COMMON STOCK)
DEAS H. WARLEY III, PRESIDENT
SUMMIT PETROLEUM CORPORATION
16701 GREENSPOINT PARK DRIVE, SUITE 200
HOUSTON, TEXAS 77060
713-873-4828
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPY:
WAYNE M. WHITAKER
MICHENER, LARIMORE, SWINDLE, WHITAKER,
FLOWERS, REYNOLDS, SAWYER & CHALK, L.L.P.
301 COMMERCE STREET
3500 CITY CENTER TOWER II
FORT WORTH, TEXAS 76102
817-878-0530
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Index to Exhibits on page 18.
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ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Summit Petroleum Corporation, Inc.
(The "Company"). The address of the principal executive offices of the Company
is 16701 Greenspoint Park Drive, Suite 200, Houston, Texas 77060. The title of
the class of equity securities to which this Statement relate is the Common
Stock, par value $0.01 per share of the Company (the "Common Stock" or "Shares")
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer by MRI Acquisition Corp., a
Texas corporation (the "Purchaser"), and a wholly owned subsidiary of Midland
Resources, Inc. (the "Parent"), disclosed in a Tender Offer Statement on
Schedule 14D-1 dated July 18, 1996 (the "Schedule 14D-1"), to purchase all of
the outstanding Shares and common stock options at $0.70 per share, net to the
seller in cash, upon the terms and subject to the condition set forth in the
Offer to Purchase, dated July 17, 1996 the "Offer to Purchase"), and the related
Letter of Transmittal (which together constitutes the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
July 17, 1996 (the "Merger Agreement"), among Parent, the Purchaser and the
Company. The Merger Agreement provides, among other things, for the making of
the Offer by the Purchaser and further provides that, upon the terms and subject
to the conditions contained in the Merger Agreement, the Purchaser will merger
with and into the Company (the "Merger") as soon as practicable after the
consummation of the Offer. Following consummation of the Merger (the "Effective
Time"), the Company will continue as the surviving corporation. In the Merger
each Share issued and outstanding immediately prior to the Effective Time (other
than Shares owned by the Purchaser or held in the Treasury of the Company, all
of which will be canceled, and other than Shares held by stockholders who
perfect appraisal rights under Colorado law) and outstanding options to acquire
Shares, will be canceled and he holder will receive the right to receive the per
Share consideration in the Offer, without interest (the "Merger Consideration"),
with the amount paid with respect to the options being the excess of the Merger
Consideration over the per Share exercise price of such option, without
interest. A copy of the Merger Agreement is attached hereto as Exhibit 1 and
incorporated herein by reference.
The principal executive office of Purchaser and Parent are 16701
Greenspoint Park Drive, Suite 200, Houston, Texas 77060.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b)(1) Certain contracts, agreements, arrangements and understandings
between the Company or its affiliates and certain of its executive officers,
directors or affiliates are described
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under the heading "Security Ownership of Certain Beneficial Owners and
Management", "Executive Compensation", "Certain Transactions", and "Proposal for
Adoption of the Summit Petroleum Corporation Directors' Stock Option Plan" at
pages 1,2,4,5,6 and 7 of the Company's Proxy Statement dated December 19, 1995
(the "1996 Proxy Statement"). Copies of such pages are filed as Exhibit 2 hereto
and are incorporated herein by reference.
(b)(2).THE MERGER AGREEMENT The following is a summary of the material
terms of the Merger Agreement. This summary is not a complete description of the
terms and conditions thereof and is qualified in its entirety by reference to
the full text thereof, which is incorporated herein by reference and a copy of
which has been filed with the Commission as an exhibit to the Schedule 14D-1.
The Merger Agreement may be examined, and copies thereof may be obtained, as set
forth in Section 8.
THE OFFER. The Merger Agreement provides for the commencement of the Offer, in
connection with which Parent and the Purchaser have expressly reserved the right
to waive certain conditions of the Offer, but without the prior written consent
of the Company, the Purchaser has agreed not to (i) waive the Minimum Condition,
(ii) reduce the number of Shares subject to the Offer, (iii) reduce the price
per Share to be paid pursuant to the Offer, (iv) extend the Offer if all of the
Offer conditions are satisfied or waived, (v) change the form of consideration
payable in the Offer, or (vi) amend or modify any term or condition of the Offer
(including the conditions described in Section 14) in any manner adverse to the
holders of Shares. Notwithstanding the foregoing, the Purchaser may, in its sole
discretion without the consent of the Company, extend the Offer at any time and
from time to time (A) if at the then scheduled expiration date of the Offer any
of the conditions to the Purchaser's obligation to accept for payment and pay
for Shares shall not have been satisfied or waived; (B) for any period required
by any rule, regulation, interpretation or position of the Commission or its
staff applicable to the Offer; (C) for any period required by applicable law in
connection with an increase in the consideration to be paid pursuant to the
Offer; and (D) if all Offer conditions are satisfied or waived but the number of
Shares tendered is 85% or more, but less than 90%, of the then outstanding
number of Shares, for an aggregate period of not more than 5 business days (for
all such extensions under this clause (D)) beyond the latest expiration date
that would be permitted under clause (A), (B) or (C) of this sentence. So long
as the Merger Agreement is in effect and the offer conditions have not been
satisfied or waived, at the request of the Company, the Purchaser will, and
Parent will cause the Purchaser to, extend the Offer for an aggregate period of
not more than 20 business days (for all such extensions) beyond the originally
scheduled expiration date of the Offer.
CONSIDERATION TO BE PAID IN THE MERGER. The Merger Agreement provides that upon
the terms (but subject to the conditions) set forth in the Merger Agreement, the
Purchaser will be merged with and into the Company and the separate existence of
the Purchaser will cease, and the Company shall be the Surviving Corporation and
shall be a wholly owned subsidiary of the Parent. In the Merger, each share of
common stock, $.01 par value per share, of the Purchaser outstanding immediately
prior to the time of filing of a certificate of merger relating to the Merger
with the Secretary of State of the State of Colorado, or such later time as is
agreed by the parties (the "Effective Time"),shall be converted into and
exchanged for one validly issued, fully
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paid and non-assessable share of Common Stock, $.01 par value per share, of the
Surviving Corporation. In the Merger, each Share issued and outstanding
immediately prior to the Effective Time (other than Shares owned by Parent or
the Purchaser or held by the Company, all of which shall be canceled, and Shares
held by stockholders who perfect appraisal rights under Colorado law) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive the Merger Consideration, without
interest. The Merger Agreement provides that (subject to the provisions of the
Merger Agreement) the closing of the Merger shall occur as soon as practicable
following the satisfaction or, to the extent permitted under the Merger
Agreement, waiver of, the conditions to the Merger set forth in Article 9 of the
Merger Agreement. The Merger Agreement permits Parent and Purchaser, in their
sole discretion, to defer the closing of the Merger for a period of 90 days
following consummation of the Offer if, in Parent's and Purchaser's sole
judgment, the deferral is necessary to enable the Company to meet a condition to
the Merger.
TREATMENT OF STOCK OPTIONS.
The Merger Agreement provides that all options (individually, an "Option" and
collectively, the "Options") outstanding immediately prior to the Effective Time
under any of the Stock Option Plans, whether or not then exercisable, shall be
canceled and each holder of an Option will be entitled to receive from the
Surviving Corporation, for each Share subject to an Option, an amount in cash
equal to the excess, if any, of the Merger Consideration over the per share
exercise price of such Option, without interest. The amounts payable pursuant to
the Merger Agreement shall be paid with respect to Shares subject to Options at
the Effective Time. All amounts payable in respect of Options shall be subject
to all applicable withholding of taxes.
BOARD REPRESENTATION.
The Merger Agreement provides that, promptly upon the purchase of Shares
pursuant to the Offer, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, as will give Parent
representation on the Board of Directors equal to the product of (i) the number
of directors on the Board of Directors and (ii) the percentage that the number
of Shares purchased by the Purchaser or Parent or any affiliate bears to the
number of Shares outstanding, and the Company will, upon request by Parent,
promptly increase the size of the Board of Directors and/or exercise its best
efforts to secure the resignations of such number of directors as is necessary
to enable Parent's designees to be elected to the Board of Directors and will
cause Parent's designees to be so elected. The Company's obligations to appoint
designees to the Board of Directors are subject to Section 14(f) of the Exchange
Act. The parties have agreed to use their respective best efforts to ensure that
at least two of the members of the Board of Directors shall at all times prior
to the Effective Time be Continuing Directors (as defined in the Merger
Agreement).
STOCKHOLDER MEETING.
The Merger Agreement provides that, if required by applicable law, the Company,
acting through
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the Board of Directors, shall (i) call a meeting of its stockholders (the
"Stockholder Meeting") for the purpose of voting on the Merger, (ii) hold the
Stockholder Meeting as soon as practicable after the purchase of Shares pursuant
to the Offer and (iii) subject to its fiduciary duties under applicable law as
advised by outside counsel, recommend to its stockholders the approval of the
Merger. At the Stockholder Meeting, Parent shall cause all the Shares then owned
by Parent, the Purchaser and any of their subsidiaries or affiliates to be voted
in favor of the Merger. The Merger Agreement provides that, notwithstanding the
foregoing, if the Purchaser, or any other direct or indirect subsidiary of
Parent, shall acquire at least 90% of the outstanding Shares, the parties
thereto shall take all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after the expiration of the Offer
without a meeting of stockholders of the Company, in accordance with Colorado
Law. However, the Merger Agreement permits Parent and Purchaser, in their sole
discretion, to defer the closing of the Merger for a period of 90 days following
consummation of the Offer if, in Parent's and Purchaser's sole judgment, the
deferral is necessary to enable the Company to comply with a covenant.
REPRESENTATIONS AND WARRANTIES.
The Merger Agreement contains various representations and warranties of the
parties thereto. These include representations and warranties by the Company
with respect to (i) the due incorporation, existence and, subject to certain
limitations, the qualification, good standing, corporate power and authority of
the Company and certain significant subsidiaries; (ii) the due authorization,
execution, and delivery of the Merger Agreement and certain ancillary documents
executed in connection therewith and the consummation of transactions
contemplated thereby, and the validity and enforceability thereof; (iii) subject
to certain exceptions and limitations, the compliance by the Company with all
applicable foreign, federal, state or local laws, statutes, ordinances, rules,
regulations, orders, judgments, rulings and decrees ("Laws") of any foreign,
federal, state or local judicial, legislative, executive, administrative or
regulatory body or authority, or any court, arbitration, board or tribunal
("Governmental Entity"); (iv) the capitalization of the Company, including the
number of shares of capital stock of the Company outstanding, the number of
shares reserved for issuance on the exercise of options and similar rights to
purchase shares; (v) the identity, ownership (subject to certain exceptions and
limitations) by the Company of interests or investments in entities other than
subsidiaries of the Company; (vi) subject to certain exceptions and limitations,
the absence of consents and approvals necessary for consummation by the Company
of the Merger and the absence of any violations, breaches or defaults which
would result from compliance by the Company with any provision of the Merger
Agreement; (vii) compliance with the Securities Act and the Exchange Act, in
connection with each registration statement, report, proxy statement or
information statement (as defined under the Exchange Act) prepared by it since
January 1, 1993, each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "Company Reports") and the
financial statements included therein filed by the Company with the Commission,
the Schedule 14D-9 information statement, if any, filed by the Company in
connection with the Offer pursuant to Rule 14 f-1 under the Exchange Act; (viii)
subject to certain exceptions and limitations, the absence of pending or (to the
knowledge of the Company through receipt of written notice) threatened claims,
actions, suits, proceedings, arbitrations,
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investigations or audits (collectively, "Litigation") or violation of any law by
the Company which would have a material adverse effect on the business, results
of operations, assets, or financial condition of the Company ("Material Adverse
Effect"); (ix) the absence of certain changes or effects; (x) certain tax
matters; (xi) certain employee benefit and ERISA matters; (xii) certain labor
and employment matters; (xiii) certain fees in connection with the transactions
contemplated by the Merger Agreement; (xiv) subject to certain exceptions and
limitations, the possession by the Company; (xv) subject to certain exceptions
and limitations, title to assets; (xvi) material contracts of the Company; and
(xvii) the required vote of stockholders of the Company with respect to the
transactions contemplated by the Merger Agreement. Parent and the Purchaser and
have also made certain representations and warranties, including with respect to
(i) the due incorporation, existence, good standing and, subject to certain
limitations, corporate power and authority of Parent and the Purchaser; (ii) the
due authorization, execution and delivery of the Merger Agreement and certain
ancillary documents executed in connection therewith and the consummation of the
transactions contemplated thereby, and the validity and enforceability thereof;
(iii) the accuracy and the adequacy of the information contained in the Schedule
14D-1 and the documents therein pursuant to which the Offer is being made, any
Schedule required to be filed with the Commission, and any amendment or
supplement to any of the foregoing and the accuracy of the information provided
by Parent and the Purchaser for inclusion in the Schedule 14D-9; (iv) subject to
certain exceptions and limitations, the absence of consents and approvals
necessary for consummation by Parent and the Purchaser, and the absence of any
violations, breaches or defaults which would result from compliance by Parent
and the Purchaser with any provision of the Merger Agreement; and (v) the
sufficiency of funds available to Parent and the Purchaser for the consummation
of the Offer and the Merger.
CONDUCT OF BUSINESS PENDING MERGER.
The Company has agreed that from the date of the Merger Agreement to the
Effective Time, with certain exceptions, unless Parent has consented in writing
thereto, the Company will (i) conduct its operations according to its usual,
regular and ordinary course of business consistent with past practice; (ii) use
its reasonable best efforts to preserve intact its business organization and
goodwill, maintain in effect all existing qualifications, licenses, permits,
approvals and other authorizations, keep available the services of its officers
and employees and maintain satisfactory relationships with those persons having
business relationships with them; (iii) promptly upon the discovery thereof
notify Parent of the existence of any breach of any representation or warranty
contained in the Merger Agreement (or, in the case of any representation and
warranty that makes no reference to Material Adverse Effect, any breach of such
representation and warranty in any material respect) or the occurrence of any
event that would cause any representation or warranty contained in the Merger
Agreement no longer to be true and correct (or in the case of any representation
and warranty that makes no reference to Material Adverse Effect, to no longer be
true and correct in any material respect); and (iv) promptly deliver to the
Purchaser true and correct copies of any report, statement or schedule filed
with the Commission subsequent to the date of the Merger Agreement, any internal
monthly reports prepared for or delivered to the Board of Directors after the
date of the Merger Agreement and monthly financial statements for the Company
and its subsidiaries for and as of each month end subsequent to the date of the
Merger Agreement. The Company has agreed that
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from the date of the Merger Agreement to the Effective Time, with certain
exceptions, unless the Parent has consented in writing thereto, the Company
shall not, and shall not permit any of its Subsidiaries to (i) amend its
Certificate of Incorporation or Bylaws or comparable governing instruments; (ii)
issue, sell or pledge any shares of its capital stock or other ownership
interest in the Company (other than issuances of shares of Common Stock in
respect of any exercise of Options outstanding on the date of the Merger
Agreement and disclosed to Parent) or any of the subsidiaries, or any securities
convertible into or exchangeable for any such shares or ownership interest, or
any rights, warrants or options to acquire or with respect to any such shares of
capital stock, ownership interest, or convertible or exchangeable securities; or
accelerate any right to convert or exchange or acquire any securities of the
Company or any of its subsidiaries for any such shares or ownership interest;
(iii) effect any stock split or otherwise change its capitalization as it exists
on the date of the Merger Agreement; (iv) grant, confer or award any option,
warrant, convertible security or other right to acquire any shares of its
capital stock or take any action to cause to be exercisable any otherwise
unexercisable option under any existing stock option plan; (v) declare, set
aside or pay any dividend or make any other distribution or payment with respect
to any shares of its capital stock or other ownership interests (other than such
payments by a wholly owned subsidiary); (vi) sell, lease or otherwise dispose
of any of its assets, except in the ordinary course of business, none of which
dispositions individually or in the aggregate will be material; (vii) settle or
compromise any pending or threatened litigation, other than settlements which
involve solely the payment of money (without admission of liability) not to
exceed $5,000 in any one case; (viii) acquire by merger, purchase or any other
manner, any business or entity or otherwise acquire any assets that are
material, individually or in the aggregate, to the Company except for purchases
of inventory, supplies or capital equipment in the ordinary course of business
consistent with past practice; (ix) incur or assume any long-term or short-term
debt, except for working capital purposes in the ordinary course of business
under the Company's existing credit agreement; (x) assume, guarantee or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person; (xi) with certain
exceptions, make or forgive any loans, advances or capital continuations to, or
investments in, any other person; (xii) make any tax election or settle any tax
liability other than settlements involving solely the payment of money which
would be permitted by clause (vii); (xiii) except in certain circumstances,
grant any stock related or performance awards; (xiv) enter into any new
employment, severance, consulting or salary continuation agreements with any
officers, directors or employees or grant any increases in compensation or
benefits to employees other than increases permitted under certain
circumstances; (xv) adopt, amend in any material respect or terminate any
employee benefit plan or arrangement; (xvi) amend, change or waive (or exempt
any person or entity from the effect of) the Rights Agreement, except in
connection with the exercise of its fiduciary duties by the Board of Directors
or as set forth in the Merger Agreement; (xvii) permit any insurance policy
naming the Company or a loss payee to be canceled or terminated other than in
the ordinary course of business, or (xiii) agree in writing or otherwise to take
any of the foregoing actions.
CONDITIONS TO THE MERGER.
The respective obligations of each party to effect the Merger are subject to
the satisfaction or waiver, where permissible, prior to the Effective Time,
of the following conditions: (i) if
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approval of the Merger Agreement and the Merger by the holders of Shares is
required by applicable law, the Merger Agreement and the Merger shall have been
approved by the requisite vote of such holders; and (ii) there shall not have
been issued any injunction or issued or enacted any Law which prohibits or has
the effect of prohibiting the consummation of the Merger or making such
consummation illegal. The obligations of Parent and the Purchaser to effect the
Merger shall be further subject to the satisfaction or waiver on or prior to the
Effective Time of the condition that the Purchaser shall have accepted for
payment and paid for Shares tendered pursuant to the Offer, provided the
condition will be deemed satisfied if Purchaser's failure to accept for payment
and pay for such shares is a breach of the Merger Agreement or violates the
terms and conditions of the Offer.
ACCESS TO INFORMATION. Under the Merger Agreement, from the date of the Merger
Agreement to the Merger Closing Date, the Company shall (i) give the Parent and
its authorized representatives and lender banks full access to all books,
records, personnel, offices and other facilities and properties of the Company
and its accountants and accountants' work papers, (ii) permit the Parent to make
such copies and inspections thereof as the Parent may reasonably request and
(iii) furnish the Parent with such financial and operating data and other
information with respect to the business and properties of the Company as the
Parent may from time to time reasonably request; provided that no investigation
or information furnished pursuant to the Merger Agreement shall affect any
representations or warranties made by the Company therein or the conditions to
the obligations of the Parent to consummate the transactions contemplated
thereby.
NO SOLICITATION. The Company has agreed in the Merger Agreement that neither it
nor any of its subsidiaries, nor any of their respective officers, directors,
employees, representatives, agents or affiliates, shall, directly or indirectly,
encourage, solicit, initiate or, except as is required in the exercise of the
fiduciary duties of the Company's directors to the Company or its stockholders
after consultation with outside counsel to the Company, participate in any way
in any discussions or negotiations with, or provide any information to, or
afford any access to the properties, books or records of the Company or any of
its subsidiaries to, or otherwise assist, facilitate or encourage, any
corporation, partnership, person or other entity or group (other than the Parent
or any affiliate or associate of Parent) concerning any merger, consolidation,
business combination, liquidation, reorganization, sale of substantial assets,
sale of shares of capital stock or similar transactions involving the Company
(an"Alternative Proposal"), and shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted theretofore with respect to any of the foregoing; provided, however,
that nothing contained in the Merger Agreement shall prohibit the Company or the
Board of Directors from complying with Rule 14e-2(a) under the Exchange Act or
taking such action promulgated thereunder or from making such disclosure to the
Company's stockholders or taking such action which, in the judgment of the Board
of Directors with the advice of outside counsel, may be required under
applicable law. The Company has agreed promptly to notify Parent if any such
information is requested from it or any such negotiations or discussions are
sought to be initiated with the Company.
FEES AND EXPENSES. Except as provided in the Merger Agreement, whether or not
the Offer
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or the Merger is consummated, all costs and expenses incurred in connection with
the transactions contemplated by the Merger Agreement shall be paid by the party
incurring such expenses. The Merger Agreement provides that, under certain
circumstances, the Company will pay the costs and expenses related to the Offer
and the Merger and for their foregoing of the opportunity to invest in the
Company. The Company is obligated to pay the costs and expenses under the
following circumstances: (i) the Company terminates the Merger Agreement because
of an Alternative Proposal which the Board of Directors in good faith determines
is more favorable from a financial point of view to the stockholders of the
Company as compared to the Offer and the Merger and the Board of Directors
determines, after consultation with its counsel that failure to terminate the
Merger Agreement would be inconsistent with the compliance by the Board of
Directors with its fiduciary duties, subject to certain provisos that would
render such termination right unavailable; (ii) Parent terminates the Merger
Agreement (x) because the Board of Directors failed to recommend, or withdraws,
modifies or amends in any material respect, its approval or recommendation of
the Offer or the Merger, or recommended acceptance of any Alternative Proposal,
or resolved to do any of the foregoing (unless the foregoing occurred solely as
a result of the Parent's willful breach in any material respect of its
representations, warranties or obligations under the Merger Agreement) or (y)
after December 31,1996 if Purchaser has not purchased any Shares by that date
because of the Company's willful breach or willful failure to comply in any
material respect with any of its material obligations under the Merger
Agreement; (iii) Parent or the Company terminate the Merger Agreement after
December 31, 1996 because of the failure of any condition to the Offer (which
failure was not caused by Parent's failure to fulfill its obligations under the
Merger Agreement) at a time when the Minimum Condition shall not have been
satisfied and (x) during the term of the Merger Agreement or within 12 months
after the termination of the Merger Agreement, the Board of Directors recommends
an Alternative Proposal or the Company enters into an agreement providing for an
Alternative Proposal or a majority of the outstanding Shares is acquired by a
third party (including a "group" as defined in the Exchange Act) (a "Stock
Acquisition") which Alternative Proposal (or another Alternative Proposal by the
same or a related person or entity) was made prior to the termination of the
Merger Agreement or (y) during the term of the Merger Agreement or within two
months after the termination of the Merger Agreement, the Board of Directors
recommends an Alternative Proposal or the Company enters into an agreement
providing for an Alternative Proposal or a Stock Acquisition occurs.
OTHER AGREEMENTS.
The Merger Agreement provides that, subject to the terms and conditions provided
in the Merger Agreement, the Company, Parent, and the Purchaser shall: (a) use
their best efforts to cooperate with one another in (i) determining which
filings are required to be made prior to the Effective Time with, and which
consents, approvals, permits, authorizations or waivers are required to be
obtained prior to the Effective Time from, Governmental Entities or other third
parties in connection with the execution and delivery of the Merger Agreement
and certain other ancillary documents and the consummation of the transactions
contemplated thereby and (ii) timely making all such filings and timely seeking
all such consents, approvals, permits, authorizations and waivers; and (b) use
their best efforts to take, or cause to be taken, all other action and do, or
cause to be done, all other things necessary, proper or appropriate to
consummate and make
<PAGE>
effective the transactions contemplated by the Merger Agreement. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purpose of the Merger Agreement, the proper officers and directors of
Parent and the Surviving Corporation shall take all such necessary action.
CONDITIONS TO THE MERGER.
The respective obligations of each party to effect the Merger are subject
to the satisfaction or waiver, where permissible, prior to the Effective Time,
of the following conditions: (a) if approval of the Merger Agreement and the
Merger by the holders of Shares is required by applicable law, the Merger
Agreement and the Merger shall have been approved by the requisite vote of such
holders; and (b) there shall not have been issued any injunction or issued or
enacted any Law which prohibits or has the effect of prohibiting the
consummation of the Merger or makes such consummation illegal. The obligations
of Parent and the Purchaser to effect the Merger shall be further subject to the
satisfaction or waiver on or prior to the Effective Time of the condition that
the Purchaser shall have accepted for payment and paid for Shares tendered
pursuant to the Offer.
TERMINATION.
The Merger Agreement may be terminated and the Merger contemplated thereby may
be abandoned at any time notwithstanding approval thereof by the stockholders of
the Company, but prior to the Effective Time:
(a) by mutual written consent of the Board of Directors of
Parent and the Company (which consent will require the
approval of a majority of the Continuing Directors if such
termination occurs following the election or appointment of
Parent's designees, if applicable);
(b) by the Parent or the Company:
(i) if the Effective Time shall not have occurred on or before
December 31, 1996 (provided that the right to terminate the
Merger Agreement pursuant to this clause shall not be
available to any party whose failure to fulfill any obligation
under the Merger Agreement has been the cause of or resulted
in the failure of the Effective Time to occur on or before
such date);
(ii) if there shall be any statute, law, rule or regulation that
makes consummation of the Offer or the Merger illegal or
prohibited or if any court of competent jurisdiction in the
United States or other Governmental Entity shall have issued
an order,
<PAGE>
judgment, decree or ruling, or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and
such order, judgment, decree, ruling or other action shall
have become final and non-appealable;
(iii) after December 31, 1996 if, on account of the failure of any
condition specified in Section 14, the Purchaser has not
purchased any Shares thereunder by that date (provided that
the right to terminate the Merger Agreement pursuant to this
clause (iii) shall not be available to any party whose
failure to fulfill any obligation under the Merger Agreement
has been the cause of or resulted in the failure of any such
condition); or
(iv) upon a vote at a duly held meeting or upon any adjournment
thereof, the stockholders of the Company shall have failed to
give any approval required by applicable law;
(c) by the Company if there is an Alternative Proposal which the Board of
Directors in good faith determines is more favorable from a financial
point of view to the stockholders of the Company as compared
to the Offer and the Merger, and the Board of Directors determines,
after consultation with its counsel that failure to terminate the
Merger Agreement would be inconsistent with the compliance by the
Board of Directors with its fiduciary duties to stockholders imposed
by law; provided, however, that the right to terminate the Merger
Agreement in such event shall not be available
(i) if the Company has breached in any material respect its
obligations not to solicit Alternative Proposals, or
(ii) if the Alternative Proposal (x) is subject to a financing
condition or (y) involves consideration that is not
entirely cash or does not permit stockholders to receive
the payment of the offered consideration in respect of all
Shares at the same time, unless the Board of Directors has
been furnished with a written opinion of an investment
banking firm to the effect that (in the case of clause (x))
the Alternative Proposal is readily financeable and (in the
case of clause (y)) that such offer provides a higher value
per share than the consideration per share pursuant to the
Offer or the Merger, or
(iii) if, prior to or concurrently with any purported termination
pursuant to this clause (c), the Company shall not have
paid the Commitment Fee and the Expenses, if applicable, or
(iv) if the Company has not provided Parent and the Purchaser
with prior written notice of its intent to so terminate the
Merger Agreement and delivered to Parent and the Purchaser a
copy of the written agreement embodying the Alternative
Proposal in its then most definitive form concurrently with
the earlier of (x) the public announcement of, or (y) filing
with the Commission of any documents relating to, the
Alternative
<PAGE>
Proposal; and
(d) by Parent if the Board of Directors shall have failed to recommend,
or shall have withdrawn, modified or amended in any material respect,
its approval or recommendation of the Offer or the Merger or shall
have recommended acceptance of any Alternative Proposal, or shall
have resolved to do any of the foregoing.
INDEMNIFICATION.
The Purchaser has agreed to cause the Surviving Corporation to keep in
effect in its By-Laws a provision for a period of not less than three years from
the Effective Time (or, in the case of matters occurring prior to the Effective
Time which have not been resolved prior to the third anniversary of the
Effective Time, until such matters are finally resolved) which provides for
indemnification of the past and present officers and directors of the Company to
the fullest extent permitted by the Colorado Law. The Merger Agreement
provides that from and after the Effective Time, Parent shall indemnify and hold
harmless, to the fullest extent permitted under applicable law, each person who
is, or has been at any time prior to the date of the Merger Agreement or who
becomes prior to the Effective Time, an officer or director of the Company or
any subsidiary against all losses, claims, damages, liabilities, costs or
expenses (including attorneys' fees), judgments, fines, penalties and amounts
paid in settlement (collectively, "Losses") in connection with any Litigation
arising out of or pertaining to acts or omissions, or alleged acts or omissions,
by them in their capacities as such, which acts or omissions existed or occurred
prior to the Effective Time, whether commenced, asserted or claimed before or
after the Effective Time, including, without limitation, liabilities arising
under the Securities Act, the Exchange Act and state corporation laws in
connection with the transactions contemplated hereby. The Company and, after the
Effective Time, the Parent shall periodically advance expenses as incurred with
respect to the foregoing to the fullest extent permitted under applicable law
provided that the person to whom the expenses are advanced provides an
undertaking to repay such advance if it is ultimately determined that such
person is not entitled to indemnification. If the Merger is consummated, the
Surviving Corporation shall, to the fullest extent permitted under applicable
law, indemnify and hold harmless Parent and any person or entity who was a
stockholder, officer, director or affiliate of Parent prior to the Effective
Time against any losses in connection with any Litigation arising out of or
pertaining to any of the transactions contemplated by the Merger Agreement or
certain ancillary documents relating thereto. Parent is required to periodically
advance expenses as incurred with respect to the foregoing to the fullest extent
permitted under applicable law provided that the person to whom the expenses are
advanced provides an undertaking to repay such advance if it is ultimately
determined that such person is not entitled to indemnification. The Surviving
Corporation will control the defense, through its counsel, of any action brought
against any person seeking indemnification pursuant to the preceding two
paragraphs (an "Indemnified Party"). Counsel for the Indemnified Party shall be
selected by the Indemnified Party and will be permitted to participate in the
defense of such action at the Surviving Corporation's expense.
CERTAIN EMPLOYEE MATTERS.
<PAGE>
The Merger Agreement provides that, from and after the Effective Time, the
Surviving Corporation will honor and assume, and Parent will cause the Surviving
Corporation to honor and assume, in accordance with their terms all existing
employment and severance agreements between the Company or any of its
subsidiaries and any officer, director, or employee of the Company or any of its
subsidiaries and all benefits or other amounts earned or accrued to the extent
vested or which becomes vested in the ordinary course, through the Effective
Time under all employee benefit plans of the Company.
AMENDMENT.
To the extent permitted by applicable law, the Merger Agreement may be
amended by action taken by or on behalf of the Board of Directors of the Company
(by action of a majority of the Continuing Directors if such amendment occurs
following the election or appointment of Parent's designees, if applicable) and
the Purchaser at any time before or after adoption of the Merger Agreement by
the stockholders of the Company but, after any such stockholder approval, no
amendment shall be made which decreases the Merger Consideration or which
adversely affects the rights of the Company's stockholders hereunder without the
approval of such stockholders. The Merger Agreement may not be amended except by
an instrument in writing signed on behalf of all of the parties.
TIMING.
The exact timing and details of the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by the Purchaser pursuant to the Offer. Although Parent has agreed to
cause the Merger to be consummated on the terms contained in the Merger
Agreement, there can be no assurance as to the timing of the Merger.
OTHER MATTERS
APPRAISAL RIGHTS. No appraisal rights are available to holders of Shares in
connection with the Offer. However, if the Merger is consummated, holders of
Shares will have certain rights under Colorado Law to dissent and demand
appraisal of, and payment in cash for the fair value of, their Shares. Such
rights, if the statutory procedures are complied with, could lead to a judicial
determination of the fair value (excluding any element of value arising from
accomplishment or expectation of the Merger) required to be paid in cash to
such dissenting holders for their Shares. Any such judicial determination of
the fair value of Shares could be based upon considerations other than the Offer
Price and the market value of the Shares, including asset values and the
investment value of the Shares. The value so determined could be more or less
than the Offer Price or the Merger Consideration. If any holder of Shares
who demands appraisal under Colorado Law fails to perfect, or effectively
withdraws or losses his right to appraisal, as provided in the Colorado Law,
the shares of such holder will be converted into the Merger Consideration in
accordance with the Merger Agreement. A stockholder may withdraw his demand
for appraisal by delivery to Parent of a written withdrawal of his demand for
appraisal and acceptance of the Merger. Failure to follow the steps required
by Colorado
<PAGE>
Law for perfecting appraisal rights may result in the loss of such rights.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) The Board of Directors of the Company have issued a press release
recommending the Company's shareholders accept the Offer and have authorized the
Purchaser to include that fact in its solicitation.
(b) Each of Messrs. Warley, Whitaker and Dillard are members of both the Board
of Directors of the Company and the Parent. At a Board of Directors meeting of
Parent held on May 31,1996 an agenda item was the discussion of an acquisition
of an unrelated publicly held oil and gas company. During this meeting, which
was attended by the full board of the Parent, Mr. Warley brought up for
discussion whether or not Parent should consider the acquisition of the Company
in light of the Parent's prior public announcement of its intention to consider
acquisitions of oil and gas companies. Mr. Warley indicated that acquiring the
Company would be beneficial to the Parent for several reasons. First, it would
remove a concern that had been expressed to him by members of the investment
community regarding the appearance of a conflict of interest and dealings among
related parties between the Parent and the Company. Second, given the nature of
the Parent's involvement in the Company's overall operations resulting from the
management contract, as well as the overlapping members on the boards of
directors, the Parent was familiar with the Company, its properties and
operations. After a general discussion among the board, the Parent's board
agreed that an acquisition of the Company might be beneficial. The Parent's
board acknowledged the fact that the members of the Company's entire board were
also members of the Parent's board and any potential offer to the Company would
require a fairness opinion that would independently arrive at a fair price.
Further at this meeting the Parent's board discussed whether or not to consider
an offer that included Parent's stock or cash or some combination of stock and
cash. After a discussion of the relative cost and length of time to pursue an
offer using Parent stock, the board concluded a cash offer was more appropriate.
The Parent's board then agreed to pursue the matter by authorizing the Parent to
engage an investment banking firm to arrive at a fair price to offer for the
Company. Messrs. Warley, Whitaker and Dillard
informed the Parent's board at that meeting that, given the fact of their being
the entire board of directors of the Company they would entertain a proposal for
the Parent to acquire the Company, provided Parent would share the fairness
opinion with the Company and make the investment banking firm available to meet
with them separately to discuss their opinion. The Parent's board agreed to
this request.
On June 3, 1996 Parent engaged Southwest Merchant Group to analyze the
Company and provide an opinion as to a fair price to offer. On July 3,1996, a
representative of Southwest Merchant Group met with the entire board of Parent
and presented their opinion that a cash price of $0.70 per share for all of the
Company's common stock, including outstanding options, was fair from a financial
point of view. The Parent's board inquired regarding the nature of certain of
the assumptions regarding oil and gas prices, oil and gas reserve estimates, as
well as the availability of comparable transactions involving entire companies,
and transactions that involved only the purchase of oil and gas properties both
with and without related well operations. The members of Parent's board, other
than Messrs. Warley, Whitaker and Dillard,
<PAGE>
then discussed whether or not Parent should request certain lock up provisions
with the Company such as an option to acquire Company shares, a termination fee
if the Merger did not occur due to a competing offer, and reimbursement of
transaction costs. Messrs. Warley, Whitaker and Dillard, in their capacity as
Company board members indicated that the Company would only consider reimbursing
Parent for transaction costs in the event a competing offer resulted in the
proposed transaction not being consummated. Following this discussion the
Parent's board unanimously agreed to proceed to make the offer to the Company
acquire for cash all of the Company's outstanding common stock, including stock
options, at $0.70 per share pursuant to a merger agreement..
Also on July 3, 1996, and following the meeting of the Parent's board, the
board of the Company met. At this meeting Mr. Warley informed the board that he
has made prior attempts to locate potential purchasers for the Company, but that
he was unsuccessful in locating anyone who would agree to acquire the entire
Company. The Company' board then met with the representative of Southwest
Merchant Group and further inquired as to certain of their assumptions,
including the value of the Company's net operating loss carry forward for income
tax purposes. The Board further discussed that Parent's willingness to
continue to include the Company in future acquisitions might be restricted due
to the appearance of a conflict and Parent may not be willing in the future to
permit the Company to own amounts to Parent for well operations. The Board
concluded that the value of the Company's operations was more likely to be worth
more to Parent than anyone else and the price per share reached by Southwest
Merchant Group appeared to take this fact into account. After these
discussions, the Company's board agreed to recommend acceptance of the Parent's
offer and to proceed with the necessary documentation.
On July 3, 1996 the boards of Parent, Purchaser and the Company approved
the Merger Agreements and the immediate commencing of the Offer. Following the
meetings on July 3, 1996, the Parent began preparing the documentation to make
the offer, including the Merger Agreement.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED .
The Company has not retained, employed or agreed to compensate any person
on its behalf to make solicitations or recommendations to its shareholders with
respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60
days by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, each executive officer,
director and affiliate of the Company currently intends to tender all Shares
over which he or she has dispositive power to the Purchaser.
<PAGE>
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) There are presently no transactions, board resolutions, agreements in
principle or signed contracts in response to the Offer, other than as described
in or incorporated by referenced into Item 3(b), which relate to or would result
in one or more of the matters referred to in Item 7(a) (i), (ii), (iii) or (iv).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
No appraisal rights are available to holders of Shares in connection with
the Offer. However, if the Merger is consummated, holders of Shares will have
certain rights under Colorado Law to dissent and demand appraisal of, and
payment in cash for the fair value of, their Shares. Such rights, if the
statutory procedure are complied with, could lead to a judicial determination of
the fair value (excluding any element of value arising from accomplishment or
expectation of the Merger) required to be paid in cash to such dissenting
holders for their Shares. Any such judicial determination of the fair value of
Shares could be based upon considerations other than in addition to the Offer
Price and the market value of the Shares, including asset values and the
investment value of the Shares. The value so determined could be more or less
that the Offer Price or the Merger Consideration.
If any holder of Shares who demands appraisal under Colorado Law fails to
perfect, or effectively withdraws or losses his right to appraisal, as provided
in the Colorado Law, the Shares of such holder will be converted into the Merger
Consideration in accordance with the Merger Agreement. A stockholder may
withdraw his demand for appraisal by delivery to Parent of a written withdrawal
of his demand for appraisal and acceptance of the Merger.
Failure to follow the steps required by Colorado Law for perfecting
appraisal rights may result in the loss of such rights.
ITEM 9. MATERIAL TO BE FILED AS EXHIBIT.
Exhibit No. Description of Exhibit
- ----------- ----------------------------------------------------------------
Exhibit 1 Agreement and Plan of Merger, dated as of July 17, 1996, by and
among Parent, the Purchaser and the Company.
Exhibit 2 Pages 1,2,4,5,6 and 7 of the Company's Proxy Statement dated
December 19, 1995.
Exhibit 3 Press Release issued jointly by Parent and Company, dated July
18, 1996.
<PAGE>
Exhibit 4 Letter to Stockholder of the Company, dated July 18, 1996.
SIGNATURE.
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
July 18, 1996 SUMMIT PETROLEUM CORPORATION
By: /s/ Deas H. Warley III
Name: Deas H. Warley III
Title: President
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit Page No.
- ----------- --------------------------------------------------
Exhibit 1 Agreement and Plan of Merger, dated as of July 17,
1996, by and among Parent, the Purchaser and the
Company.
Exhibit 2 Pages 1,2,4,5,6 and 7 of the Company's Proxy
Statement dated December 19, 1995.
Exhibit 3 Press Release issued jointly by Parent and
Company, dated July 18, 1996.
Exhibit 4 Letter to Stockholder of the Company, dated July
18, 1996.
<PAGE>
Exhibit 1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of July 17, 1996,
between Midland Resources, Inc., a Texas corporation ("PURCHASER"), MRI
Acquisition Corp., a Texas corporation and a wholly owned subsidiary of
Purchaser ("MERGER SUB"), and Summit Petroleum Corporation., a Colorado
corporation (the "COMPANY").
RECITALS WHEREAS, the Boards of Directors of Purchaser and the Company each have
determined that it is in the best interests of their respective companies and
stockholders for Purchaser to acquire the Company upon the terms and subject to
the conditions set forth herein.
WHEREAS, the parties hereto desire to make certain representations, warranties,
covenants and agreements in connection herewith.
NOW, THEREFORE, in consideration of the foregoing, and of the representations,
warranties, covenants and agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE 1: THE OFFER
1.1 THE OFFER. (a) Subject to the provisions of this Agreement and this
Agreement not having been terminated, as promptly as practicable but in no event
later than July 31, 1996, Merger Sub shall, and Purchaser shall cause Merger Sub
to commence, within the meaning of Rule 14d-2 under the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder
(the "EXCHANGE ACT"), an offer to purchase all of the outstanding shares of
Common Stock, par value $.01 per share (the "COMMON STOCK") of the Company, at a
price of $0.70 (seventy cents) per share of Common Stock net to the seller in
cash (the "OFFER"). The obligation of Merger Sub to, and of Purchaser to cause
Merger Sub to, commence the Offer and accept for payment, and pay for, any
shares of Common Stock tendered pursuant to the Offer shall be subject to the
conditions set forth in EXHIBIT A and to the terms and conditions of this
Agreement. Subject to the provisions of this Agreement, the Offer shall expire
20 business days after the date of its commencement, unless this Agreement is
terminated in accordance with ARTICLE 10, in which case the Offer (whether or
not previously extended in accordance with the terms hereof) shall expire on
such date of termination.
(b) Without the prior written consent of the Company, Merger Sub shall
not (i) waive the Minimum Condition (as defined in EXHIBIT A), (ii) reduce the
number of shares of Common Stock subject to the Offer, (iii) reduce the price
per share of Common Stock to be paid pursuant to the Offer, (iv) extend the
Offer if all of the Offer conditions are satisfied or waived, (v) change the
form of consideration payable in the Offer, or (vi) amend or modify any term or
condition of the Offer (including the conditions set forth on EXHIBIT A) in
any manner adverse to the holders of Common Stock. Notwithstanding anything
here into the contrary, Merger Sub may, in its sole discretion without the
consent of the Company, extend the Offer at any time and from time to time
(i) if at the then scheduled expiration date of the Offer any of the
conditions to Merger Sub's obligation to accept for payment and pay for
shares of Common Stock shall not have been satisfied or waived; (ii) for any
period required by any rule, regulation, interpretation or position of the
Securities and Exchange Commission (the "SEC") or its staff applicable to the
Offer; (iii) for any period required by applicable law in connection with an
increase in the consideration to be paid pursuant to the Offer; and (iv) if
all Offer conditions are satisfied or waived but the number of shares of
Common Stock tendered is 85% or more, but less than 90%, of the then
outstanding number of shares of Common Stock, for an aggregate period of not
more than 5 business days (for all such extensions under this clause (iv))
beyond the latest expiration date that would be permitted under clause (i),
(ii) or (iii) of this sentence. So long as this Agreement is in effect and
the Offer conditions have not been satisfied or waived, at the request of the
Company, Merger Sub shall, and Purchaser shall cause Merger Sub to, extend
the Offer for an aggregate period of not more than 20 business days (for all
such extensions) beyond the originally scheduled expiration date of the
Offer. Subject to the terms and conditions of the Offer and this Agreement
(but subject to the right of termination in
1
<PAGE>
accordance with ARTICLE 10), Merger Sub shall, and Purchaser shall cause Merger
Sub to, accept for payment, in accordance with the terms of the Offer, all
shares of Common Stock validly tendered and not withdrawn pursuant to the Offer
as soon as practicable after the expiration of the Offer.
1.2. ACTIONS BY PURCHASER AND MERGER SUB. (a) As soon as reasonably
practicable following execution of this Agreement, but in no event later than
five business days from the date hereof, Purchaser and Merger Sub shall file
with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer, which shall contain an offer to purchase and a related letter of
transmittal and any other ancillary documents pursuant to which the Offer shall
be made (such Schedule 14D-1 and the documents therein pursuant to which the
Offer will be made, together with any supplements or amendments thereto, the
"OFFER DOCUMENTS"). The Company and its counsel shall be given an opportunity
to review and comment upon the Offer Documents prior to the filing thereof with
the SEC. The Offer Documents shall comply as to form in all material respects
with the requirements of the Exchange Act, and on the date filed with the SEC
and on the date first published, sent or given to the Company's stockholders,
the Offer Documents shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by
Purchaser or Merger Sub with respect to information supplied by the Company for
inclusion in the Offer Documents. Each of Purchaser, Merger Sub and the Company
agrees promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information shall have become false or
misleading in any material respect, and each of Purchaser, Merger Sub and the
Company further agrees to take all steps necessary to cause the Offer Documents
as so corrected to be filed with the SEC and to be disseminated to holders of
shares of Common Stock, in each case as and to the extent required by applicable
federal securities laws. Purchaser and Merger Sub agree to provide the Company
and its counsel in writing with any comments Purchaser, Merger Sub or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after receipt of such comments and with copies of any written
responses and telephonic notification of any verbal responses by Purchaser,
Merger Sub or their counsel.
(b) Purchaser shall provide or cause to be provided to Merger Sub all of
the funds necessary to purchase any shares of Common Stock that Merger Sub
becomes obligated to purchase pursuant to the Offer.
1.3. ACTIONS BY THE COMPANY. (a) The Company hereby approves of and
consents to the Offer and represents and warrants that the Board of Directors of
the Company (the "BOARD OF DIRECTORS" or the "BOARD") at a meeting duly called
and held has duly adopted, by unanimous vote, resolutions approving this
Agreement, the Offer and the Merger (as hereinafter defined), determining that
the Merger is advisable and that the terms of the Offer and Merger are fair to,
and in the best interests of, the Company's stockholders and recommending that
the Company's stockholders accept the Offer and approve the Merger and this
Agreement inapplicable to the Offer, the Merger and this Agreement or any of the
transactions contemplated hereby or thereby. The Company hereby consents to the
inclusion in the Offer Documents of the recommendation of the Board of Directors
described in the first sentence of this SECTION 1.3(a).
(b) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the Offer (such Schedule 14D-9, as amended from time to
time, the "SCHEDULE 14D-9") containing the recommendations described in
paragraph (a) above and shall mail the Schedule 14D-9 to the stockholders of the
Company. To the extent practicable, the Company shall cooperate with Purchaser
in mailing or otherwise disseminating the Schedule 14D-9 with the appropriate
Offer Documents to the Company's stockholders. Purchaser and its counsel shall
be given an opportunity to review and comment upon the Schedule 14D-9 prior to
the filing thereof with the SEC. The Schedule 14D-9 shall comply as to form in
all material respects with the requirements of the Exchange Act and, on the date
filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstance
sunder which they were made, not misleading, except that no representation is
made by the Company with respect to information supplied by Purchaser or Merger
Sub for inclusion in the Schedule 14D-9. Each of the Company, Purchaser and
Merger Sub
2
<PAGE>
agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect, and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed
with the SEC and to be disseminated to the holders of shares of Common Stock, in
each case as and to the extent required by applicable federal securities laws.
The Company agrees to provide Purchaser and Merger Sub and their counsel in
writing with any comments the Company or its counsel may receive from the SEC or
its staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments and with copies of any written responses and telephonic notification of
any verbal responses by the Company or its counsel.
(c) In connection with the Offer, the Company shall cause its transfer
agent to furnish Merger Sub with mailing labels containing the names and
addresses of the record holders of Common Stock as of a recent date and of those
persons becoming record holders subsequent to such date, together with copies of
all lists of stockholders, security position listings and computer files and all
other information in the Company's possession or control regarding the
beneficial owners of Common Stock, and shall furnish to Merger Sub such
information and assistance (including updated lists of stockholders, security
position listings and computer files) as Merger Sub may reasonably request in
communicating the Offer to the Company's stockholders. Subject to the
requirements of law, and except for such steps as are necessary to disseminate
the Offer Documents and any other documents necessary to consummate the Offer
and the Merger, Purchaser and Merger Sub and each of their affiliates and
associates shall hold in confidence the information contained in any of such
labels, lists and files, shall use such information only in connection with the
Offer and the Merger, and, if this Agreement is terminated, shall promptly
deliver to the Company all copies of such information then in their possession.
(d) Subject to the terms and conditions of this Agreement, if there shall
occur a change in law or in a binding judicial interpretation of existing law
which would, in the absence of action by the Company or the Board, prevent the
merger Sub, were it to acquire a specified percentage of the shares of Common
Stock then outstanding, from approving and adopting this Agreement by its
affirmative vote as the holder of a majority of shares of Common Stock and
without the affirmative vote of any other stockholder, the Company will use its
best efforts to promptly take or cause such action to be taken.
1.4. DIRECTORS. (a) Promptly upon the purchase of shares of Common Stock
pursuant to the Offer, Purchaser shall be entitled to designate such number of
directors, rounded up to the next whole number, as will give Purchaser
representation on the Board of Directors equal to the product of (i) the number
of directors on the Board of Directors and (ii) the percentage that the number
of shares of Common Stock purchased by Merger Sub or Purchaser or any affiliate
bears to the number of shares of Common Stock outstanding (the "PERCENTAGE"),
and the Company shall, upon request by Purchaser, promptly increase the size of
the Board of Directors and/or exercise its best efforts to secure the
resignations of such number of directors as is necessary to enable Purchaser's
designees to be elected to the Board of Directors and shall cause the
Purchaser's designees to be so elected. At the request of Purchaser, the
Company will use its best efforts to cause such individuals designated by
Purchaser to constitute the same Percentage of (i) each committee of the Board.
The Company's obligations to appoint designees to the Board of Directors shall
be subject to Section 14(f) of the Exchange Act. The Company shall, at
Purchaser's request, take, at the Company's expense, all action necessary to
effect any such election, and shall include in the Schedule 14D-9 the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. Purchaser will supply to Company in writing and be
solely responsible for any information with respect to itself and its nominees,
directors and affiliates required by Section 14(f) and Rule 14f-1.
Notwithstanding the foregoing, the parties hereto shall use their respective
best efforts to ensure that at least two of the members of the Board of
Directors shall at all times prior to the Effective Time (as hereinafter
defined) be Continuing Directors (as hereinafter defined).
(b) If Purchaser shall exercise its right to designate members to the
Board of Directors as permitted in this SECTION 1.4, then following the election
or appointment of Purchaser's designees pursuant to this SECTION 1.4 and prior
to the Effective Time, the approval of a majority of the directors of the
Company then in office who are not designated by Purchaser (the "CONTINUING
DIRECTORS") shall be required to authorize (and such authorization shall
constitute the authorization of the Board of Directors and no other action on
the part of the Company, including any action by any other director of the
Company, shall be required to authorize) any
3
<PAGE>
termination of this Agreement by the Company, any amendment of this
Agreement requiring action by the Board of Directors, any extension of time for
the performance of any of the obligations or other acts of Purchaser or Merger
Sub, and any waiver of compliance with any of the agreements or conditions
contained herein for the benefit of the Company.
ARTICLE 2: THE MERGER
2.1. THE MERGER. Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in SECTION 2.3), Merger Sub shall be merged with and
into the Company in accordance with this Agreement and the applicable provisions
of the CBCA, and the separate corporate existence of Merger Sub shall thereupon
cease (the "MERGER"). The Company shall be the surviving corporation in the
Merger (sometimes hereinafter referred to as the "SURVIVING CORPORATION"). The
Merger shall have the effects specified in the CBCA.
2.2. THE CLOSING. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "CLOSING") shall take place at the offices of
Michener, Larimore, Swindle, Whitaker, Flowers, Sawyer, Reynolds & Chalk,
L.L.P., 301 Commerce Street, Suite 3500, Fort Worth, Texas 76102 at 10:00 a.m.,
local time, as soon as practicable following the satisfaction (or waiver if
permissible) of the conditions set forth in ARTICLE 9. The date on which the
Closing occurs is hereinafter referred to as the "CLOSING DATE."
2.3. EFFECTIVE TIME. If all the conditions to the Merger set forth in ARTICLE 9
shall have been fulfilled or waived in accordance herewith and this Agreement
shall not have been terminated as provided in ARTICLE 10, the parties hereto
shall cause a Certificate of Merger meeting the requirements of the CBCA to be
properly executed and filed in accordance with such Section on the Closing Date.
The Merger shall become effective at the time of filing of the Certificate of
Merger with the Secretary of State of the State of Colorado in accordance with
the CBCA or at such later time which the parties hereto shall have agreed upon
and designated in such filing as the effective time of the Merger (the
"EFFECTIVE TIME")
ARTICLE 3 CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION
3.1. CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of the
Surviving Corporation shall be in the form attached hereto as EXHIBIT B, until
duly amended in accordance with applicable law.
3.2. BYLAWS. The Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law.
ARTICLE 4 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
4.1. DIRECTORS. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time and until their successors are duly appointed or elected in
accordance with applicable law.
4.2. OFFICERS. The Merger Sub immediately prior to the Effective Time shall
be the officers of the Surviving Corporation as of the Effective Time and until
their successors are duly appointed or elected in accordance with applicable
law.
ARTICLE 5 EFFECT OF THE MERGER ON SECURITIES OF MERGER SUB AND THE COMPANY
5.1. MERGER SUB STOCK. At the Effective Time, each share of Common Stock, $.01
Par value per share, of Merger Sub outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and non-assessable share of common stock, $.01 Par value per share,
of the Surviving
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Corporation.
5.2. COMPANY SECURITIES. (a) At the Effective Time, each share of
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares of Common Stock owned by Purchaser or Merger Sub or held by
the Company, all of which shall be canceled, and other than shares of Dissenting
Common Stock (as hereinafter defined)) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive the per share consideration in the Offer, without interest (the
"MERGER CONSIDERATION").
(b) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time all shares of Common Stock shall cease to
be outstanding and shall be canceled and retired and shall cease to exist, and
each holder of shares of Common Stock (other than Merger Sub, Purchaser and the
Company) shall thereafter cease to have any rights with respect to such shares
of Common Stock, except the right to receive, without interest, the merger
Consideration in accordance with SECTION 5.3 upon the surrender of a certificate
or certificates (a "CERTIFICATE") representing such shares of Common Stock.
(c) Each share of Common Stock issued and held in the Company's treasury
at the Effective Time shall, by virtue of the Merger, cease to be outstanding
and shall be canceled and retired without payment of any consideration therefor.
(d) All options (individually, an "OPTION" and collectively,
the "OPTIONS") outstanding immediately prior to the Effective Time under any
Company stock option plan (the "STOCK OPTION PLANS"), whether or not then
exercisable, shall be canceled and each holder of an Option will be entitled to
receive from the Surviving Corporation, for each share of Common Stock subject
to an Option, an amount in cash equal to the excess, if any, of the Merger
Consideration over the per share exercise price of such Option, without
interest. All amounts payable pursuant to this SECTION 5.2(d) shall be subject
to all applicable withholding of taxes. The Company shall use its reasonable
best efforts to obtain all necessary consents of the holders of Options,
provided, however, that the failure of the Company to obtain any one or more of
such consents shall have no effect on the Purchaser's and Merger Sub's
obligation to consummate the Offer and the Merger and shall not afford any basis
for them to assert the condition set forth in clause (ii) of paragraph (d) of
Exhibit A.
5.3. EXCHANGE OF CERTIFICATES REPRESENTING COMMON STOCK. (a) Promptly after
the Effective Time, Purchaser shall mail to each holder of record of shares of
Common Stock (i) a letter of transmittal which shall specify that delivery shall
be effected, and risk of loss and title to such Certificates shall pass, only
upon delivery of the Certificates to the Depositary and which letter shall be
in such form and have such other provisions as Purchaser may reasonably specify
and (ii) instructions for effecting the surrender of such Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate to the
Depositary together with such letter of transmittal, duly executed and completed
in accordance with the instructions thereto, and such other documents as may
reasonably be required by the Depositary, the holder of such Certificate shall
promptly receive in exchange therefor the amount of cash into which shares of
Common Stock theretofore represented by such Certificate shall have been
converted pursuant to SECTION 5.2, and the shares represented by the Certificate
so surrendered shall forthwith be canceled. No interest will be paid or will
accrue on the cash payable upon surrender of any Certificate. In the event of a
transfer of ownership of Common Stock which is not registered in the transfer
records of the Company, payment may be made with respect to such Common Stock to
such a transferee if the Certificate representing such shares of Common Stock is
presented to the Depositary, accompanied by all documents required to evidence
and effect such transfer and to evidence that any applicable stock transfer
taxes have been paid.
(c) At or after the Effective Time, there shall be no transfers on the
stock transfer books of the company of the shares of Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged as provided in this ARTICLE 5.
(d) Any portion of the consideration that remains unclaimed by the
former stockholders of the Company six months after the Effective Time shall be
delivered to the Surviving Corporation. Any former stockholders of the Company
who have not theretofore complied with this ARTICLE 5 shall thereafter look only
to the Surviving Corporation for payment of any Merger Consideration that may be
payable in respect of each share of Common
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Stock such stockholder holds as determined pursuant to this Agreement, without
any interest thereon.
(e) None of Purchaser, the Company, the Surviving Corporation, the
Depositary or any other person shall be liable to any former holder of shares of
Common Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(f) 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 Depositary will issue in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration payable in
respect thereof pursuant to this Agreement.
5.4. ADJUSTMENT OF MERGER CONSIDERATION. If, subsequent to the date of this
Agreement but prior to the Effective Time, the outstanding shares of Common
Stock shall have been changed into a different number of shares or a different
class as a result of a stock split, reverse stock split, stock dividend,
subdivision, reclassification, split, combination, exchange, recapitalization or
other similar transaction, the Merger Consideration shall be appropriately
adjusted.
5.5. DISSENTING COMPANY STOCKHOLDERS. Notwithstanding any provision of this
Agreement to the contrary, if required by the CBCA but only to the extent
required thereby, shares of Common Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by holders of such
shares of Common Stock who have properly exercised appraisal rights with respect
thereto in accordance with the CBCA (the "DISSENTING COMMON STOCK") will not be
exchangeable for the right to receive the Merger Consideration, and holders of
such shares of Dissenting Common Stock will be entitled to receive payment of
the appraised value of such shares of Common Stock in accordance with the
provisions of CBCA unless and until such holders fail to perfect or effectively
withdraw or lose their rights to appraisal and payment under the CBCA. If,
after the Effective Time, any such holder fails to perfect or effectively
withdraws or loses such right, such shares of Common Stock will thereupon be
treated as if they had been converted into and to have become exchangeable for,
at the Effective Time, the right to receive the Merger Consideration, without
any interest thereon. The Company will give Purchaser prompt notice of any
demands received by the Company for appraisals of shares of Common Stock. The
Company shall not, except with the prior written consent of Purchaser, make any
payment with respect to any demands for appraisal or offer to settle or settle
any such demands.
5.6. MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding the foregoing
but subject to the provisions of Section 8.3(f), if Merger Sub, or any other
direct or indirect subsidiary of Purchaser, shall acquire at least 90% of the
outstanding shares of Common Stock, the parties hereto shall take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after the expiration of the Offer without a meeting of stockholders
of the Company, in accordance with the CBCA.
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser and Merger Sub as
follows:
6.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. The Company is (i) a
corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and (ii) is duly licensed or
qualified to do business as a foreign corporation and is in good standing
under the laws of any other state of the United States in which the character
of the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary, except where the failure to be
so qualified or to be in good standing, individually or in the aggregate,
would not have a Material Adverse Effect (as hereinafter defined). The
Company has all requisite corporate power and authority to own, operate and
lease its properties and carry on its business as now conducted, except where
the failure to have such power and authority, individually or in the
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aggregate, would not have a Material Adverse Effect. The Company has
heretofore delivered to Purchaser true and correct copies of the Company's
Certificate of Incorporation and Bylaws as currently in effect.
6.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby or executed in connection
herewith (the "ANCILLARY DOCUMENTS") and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Ancillary Documents by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors, and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement and the Ancillary
Documents or to consummate the transactions contemplated hereby and thereby
(other than the approval of this Agreement by the holders of a majority of the
shares of Common Stock if required by applicable law). This Agreement has been,
and any Ancillary Document at the time of execution will have been, duly and
validly executed and delivered by the Company, and (assuming this Agreement and
such Ancillary Documents each constitutes a valid and binding obligation of the
Purchaser and Merger Sub) constitutes and will constitute the valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equity.
6.3. COMPLIANCE WITH LAWS. Except as set forth in the Company Reports (as
hereinafter defined), each of the Company and its Subsidiaries is incompliance
with all applicable foreign, federal, state or local laws, statutes, ordinances,
rules, regulations, orders, judgments, rulings and decrees ("LAWS") of any
foreign, federal, state or local judicial, legislative, executive,
administrative or regulatory body or authority or any court, arbitration, board
or tribunal ("GOVERNMENTAL ENTITY"), except where the failure to be
incompliance, individually or in the aggregate, would not have a Material
Adverse Effect.
6.4. CAPITALIZATION. The authorized capital stock of the Company consists of
80,000,000 shares of Common Stock and 20,000,000 shares of preferred stock, $.01
par value. As of July 15, 1996, (a) 2,400,184 shares of Common Stock were
issued and outstanding, (b) No shares of Preferred Stock were issued and
outstanding, (c) Options to purchase an aggregate of 300,000 shares of Common
Stock were outstanding and there are no stock appreciation rights or limited
stock appreciation rights outstanding other than those attached to such Options,
and (d) no shares of Common Stock were held by the Company in its treasury. The
Company has no outstanding bonds, debentures, notes or other obligations
entitling the holders thereof to vote (or which are convertible into or
exercisable for securities having the right to vote) with the stockholders of
the Company on any matter. Since July 15, 1996, the Company (i) has not issued
any shares of Common Stock, (ii) has granted no Options to purchase shares of
Common Stock under the Stock Option Plans, and (iii) has not split, combined or
reclassified any of its shares of capital stock. All issued and outstanding
shares of Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. There are no other shares of
capital stock or voting securities of the Company, and no existing options,
warrants, calls, subscriptions, convertible securities, or other rights,
agreements or commitments which obligate the Company to issue, transfer or sell
any shares of capital stock of, or equity interests in, the Company. There are
no outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company and there are no performance
awards outstanding under the Stock Option Plan or any other outstanding stock
related awards. After the Effective Time, the Surviving Corporation will have
no obligation to issue, transfer or sell any shares of capital stock of the
Company or the SURVIVING CORPORATION pursuant to any Company Benefit Plan (as
defined in SECTION 6.11). There are no voting trusts or other agreements or
understandings to which the Company is a party with respect to the voting of
capital stock of the Company.
6.5. SUBSIDIARIES. The Company has no subsidiaries.
6.6. NO VIOLATION. Except as set forth in SCHEDULE 6.6, neither the execution
and delivery by the Company of this Agreement or any of the Ancillary Documents
nor the consummation by the Company of the
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transactions contemplated hereby or thereby will: (i) violate, conflict with or
result in a breach of any provisions of the Certificate of Incorporation or
Bylaws of the Company; (ii) violate, conflict with, result in a breach of any
provision of, constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, result in the termination or in
a right of termination of, accelerate the performance required by or benefit
obtainable under, result in the triggering of any payment or other obligations
pursuant to, result in the creation of any Encumbrance upon any of the
properties of the Company under, or result in there being declared void,
voidable, or without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust or any license,
franchise, permit, lease, contract, agreement or other instrument, commitment or
obligation to which the Company is a party, or by which the Company or any of
its properties is bound (each, a "CONTRACT" and collectively, "CONTRACTS"),
Except for any of the foregoing matters which individually or in the aggregate
would not have a Material Adverse Effect; (iii) other than the filings provided
for in SECTION 2.3 and the filings required under the Exchange Act and the
Securities Act of 1933, as amended (the "SECURITIES ACT"), require any consent,
approval or authorization of, or declaration, filing or registration with, any
Governmental Entity, the lack of which individually or in the aggregate would
have a Material Adverse Effect or by Law prevent the consummation of the
transactions contemplated hereby; and (iv) violate any Laws applicable to the
Company, or any of its respective assets, except for violations which
individually or in the aggregate would not have a Material Adverse Effect or
materially adversely affect the ability of the Company to consummate the
transactions contemplated hereby.
6.7. COMPANY REPORTS; OFFER DOCUMENTS. (a) The Company has
delivered to Purchaser each registration statement, report, proxy statement
or information statement (as defined under the Exchange Act) prepared by it
since January 1, 1993, each in the form (including exhibits and any
amendments thereto) filed with the SEC (collectively, the "COMPANY
REPORTS"). As of their respective dates, (i) the Company Reports filed since
December 31, 1994 complied as to form in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, and the
rules and regulations thereunder and (ii) the Company Reports did not 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 made
therein, in the light of the circumstances under which they were made, not
misleading. Each of the balance sheets of the Company included in or
incorporated by reference into the Company Reports (including the related
notes and schedules) fairly presents the financial position of the Company as
of its date, and each of the statements of income, retained earnings and cash
flows of the Company included in or incorporated by reference into the
Company Reports (including any related notes and schedules) fairly presents
the results of operations, retained earnings or cash flows, as the case may
be, of the Company for the periods set forth therein, in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein. Except as set
forth in SCHEDULE 6.7, the Company has no liabilities or obligations,
contingent or otherwise, except (i) liabilities and obligations in the
respective amounts reflected or reserved against in the Company's balance
sheet as of April 30, 1996 included in the Company Reports or (ii)
liabilities and obligations incurred in the ordinary course of business since
April 30, 1996 which individually or in the aggregate would not have a
Material Adverse Effect.
(b) None of the Schedule 14D-9, the information statement, if any, filed
by the Company in connection with the Offer pursuant to Rule 14f-1 under the
Exchange Act (the "INFORMATION STATEMENT"), any schedule required to be filed by
the Company with the SEC or any amendment or supplement thereto, at the
respective times such documents are filed with the SEC or first published, sent
or given to the Company's stockholders, will contain any untrue statement of a
material fact or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading except that no
representation is made by the Company with respect to information supplied by
the Purchaser or Merger Sub specifically for inclusion in the Schedule 14D-9 or
information Statement or any amendment or supplement. None of the information
supplied or to be supplied by the Company in writing specifically for inclusion
or incorporation by reference in the Offer Documents will, at the date of filing
with the SEC, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. If at any time prior to the Effective Time the Company
shall obtain knowledge of any facts with respect
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to itself, any of its officers and directors that would require the supplement
or amendment to any of the foregoing documents in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or to comply with applicable Laws, such amendment or supplement
shall be promptly filed with the SEC and, as required by Law, disseminated to
the stockholders of the Company, and in the event Purchaser shall advise the
Company as to its obtaining knowledge of any facts that would make it necessary
to supplement or amend any of the foregoing documents, the Company shall
promptly amend or supplement such document as required and distribute the same
to its stockholders.
6.8. LITIGATION. Except as set forth in SCHEDULE 6.8 or in the Company
Reports, (i) there are no claims, actions, suits, proceedings, arbitrations,
investigations or audits (collectively, "LITIGATION") by a Governmental Entity
pending or, to the knowledge of the Company through receipt of written notice,
threatened against the Company, at law or in equity, other than those in the
ordinary course of business which individually or in the aggregate would not
have a Material Adverse Effect, and (ii) there are no claims, actions, suits,
proceedings, or arbitrations by a non-Governmental Entity third party pending
or, to the knowledge of the Company, threatened against the Company, at law or
at equity, other than those in the ordinary course of business which
individually or in the aggregate would not have a Material Adverse Effect.
Except as set forth in the Company Reports, no Governmental Entity has indicated
in writing an intention to conduct any audit, investigation or other review with
respect to the Company which investigation or review, if adversely determined,
individually or in the aggregate would have a Material Adverse Effect.
6.9. ABSENCE OF CERTAIN CHANGES. Except as set forth in SCHEDULE 6.9 or in
the Company Reports, since July 31, 1995, the Company has conducted its
business only in the ordinary course of such business consistent with past
practices, and there has not been (i) any events or states of fact which
individually or in the aggregate would have a Material Adverse Effect; (ii) any
declaration, setting aside or payment of any dividend or other distribution with
respect to its capital stock; (iii) any repurchase, redemption or any other
acquisition by the Company of any outstanding shares of capital stock or other
securities of, or other ownership interests in, the Company; (iv) any material
change in accounting principles, practices or methods; (v) any entry into any
employment agreement with, or any increase in the rate or terms (including,
without limitation, any acceleration of the right to receive payment) of
compensation payable or to become payable by the Company to, its directors,
officers or employees, except normal increases of hourly employees; or (vi) any
increase in the rate or terms (including, without limitation, any acceleration
of the right to receive payment) of any bonus, insurance, pension or other
employee benefit plan or arrangement covering any directors, officers or
employees.
6.10. TAXES. Except as set forth in SCHEDULE 6.10, the Company has timely
filed all material Tax Returns required to be filed by any of them. All such Tax
Returns are true, correct and complete, except for such instances which
individually or in the aggregate would not have a Material Adverse Effect. All
Taxes of the Company which are (i) shown as due on such Returns, (ii) otherwise
due and payable or (iii) claimed or asserted by any taxing authority to be due,
have been paid, except for those Taxes being contested in good faith and for
which adequate reserves have been established in the financial statements
included in the Company Reports in accordance with generally accepted accounting
principles. The Company does not know of any proposed or threatened Tax claims
or assessments which, if upheld, would individually or in the aggregate have a
Material Adverse Effect. Except as set forth in SCHEDULE 6.10, the Company has
withheld and paid over to the relevant taxing authority all Taxes required to
have been withheld and paid in connection with payments to employees,
independent contractors, creditors, stockholders or other third parties, except
for such Taxes which individually or in the aggregate would not have a Material
Adverse Effect. For purposes of this Agreement, (a) "TAX" (and, with
correlative meaning, "TAXES") means any federal, state, local or foreign income,
gross receipts, property, sales, use, license, excise, franchise, employment,
payroll, premium, withholding, alternative or added minimum, ad valorem,
transfer or excise tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any Governmental Entity, and (b) "TAX RETURN"
means any return, report 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
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estimated Tax.
6.11. EMPLOYEE BENEFIT PLANS. All employee benefit plans, compensation
arrangements and other benefit arrangements covering employees of the Company
(the "COMPANY BENEFIT PLANS") and all employee agreements providing
compensation, severance or other benefits to any employee or former employee of
the Company which are not disclosed in the Company Reports and which exceed
$1,000 per annum are set forth in SCHEDULE 6.11. True and complete copies of
the Company Benefit Plans have been made available to Purchaser. To the extent
applicable, the Company Benefit Plans comply with the requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
Internal Revenue Code of 1986, as amended (the "CODE"), and any Company Benefit
Plan intended to be qualified under Section 401(a) of the Code has received a
determination letter and, to the knowledge of the Company continues to satisfy
the requirements for such qualification. Neither the Company nor any ERISA
Affiliate of the Company maintains, contributes to or has maintained or
contributed in the past six years to any benefit plan which is covered by Title
IV of ERISA or Section 412 of the Code. No Company Benefit Plan nor the Company
nor any Subsidiary has incurred any liability or penalty under Section 4975 of
the Code or Section 502(i) of ERISA or, to the knowledge of the Company, engaged
in any transaction that is reasonably likely to result in any such liability or
penalty. Except as set forth on SCHEDULE 6.11, each Company Benefit Plan has
been maintained and administered in compliance with its terms and with ERISA and
the Code to the extent applicable thereto, except for such non-compliance which
individually or in the aggregate would not have a Material Adverse Effect.
There is no pending or, to the knowledge of the Company, anticipated Litigation
against or otherwise involving any of the Company Benefit Plans and no
Litigation (excluding claims for benefits incurred in the ordinary course of
Company Benefit Plan activities) has been brought against or with respect to any
such Company Benefit Plan, except for any of the foregoing which individually or
in the aggregate would not have a Material Adverse Effect. All contributions
required to be made as of the date hereof to the Company Benefit Plans have been
made or provided for. Except as described in the Company Reports or as required
by Law, the Company does not maintain or contribute to any plan or arrangement
which provides or has any liability to provide life insurance or medical or
other employee welfare benefits to any employee or former employee upon his
retirement or termination of employment, and the Company has not ever
represented, promised or contracted (whether in oral or written form) to any
employee or former employee that such benefits would be provided. Except as set
forth in SCHEDULE 6.11, the execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) constitute an event under any benefit plan,
policy, arrangement or agreement or any trustor loan that will or may result in
any payment (whether of severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any employee. Except as set forth in SCHEDULE
6.11, no payment or benefit which will or may be made by the Company, any
ERISA Affiliate or Purchaser or Merger Sub with respect to any employee will
constitute an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code. For purposes of this Agreement "ERISA AFFILIATE"
means any business or entity which is a member of the same "controlled group
of corporations," under "common control" or an "affiliated service group"
with an entity within the meanings of Sections 414(b), (c) or (m) of the
Code, or required to be aggregated with the entity under Section 414(o) of
the Code, or is under "common control" with the entity, within the meaning of
Section 4001(a)(14) of ERISA, or any regulations promulgated or proposed
under any of the foregoing Sections.
6.12. LABOR AND EMPLOYMENT MATTERS. Except as set forth in SCHEDULE 6.12, the
Company is not a party to, or bound by, any collective bargaining agreement or
other Contracts or understanding with a labor union or labor organization.
Except for such matters which, individually or in the aggregate, would not have
a Material Adverse Effect, there is no (i) unfair labor practice, labor dispute
(other than routine individual grievances) or labor arbitration proceeding
pending or, to the knowledge of the Company, threatened against the Company
relating to their business, (ii) to the knowledge of the Company, activity or
proceeding by a labor union or representative thereof to organize any employees
of the Company, or (iii) lockouts, strikes, slowdowns, work stops or threats
thereof by or with respect to such employees.
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6.13. BROKERS. No broker, finder or financial advisor is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company and (ii) the Company's fee arrangements with the
Financial Advisor have been disclosed to the Purchaser.
6.14. ENVIRONMENTAL COMPLIANCE AND DISCLOSURE. (a) Except as set forth on
SCHEDULE 6.17 or except for any matters which individually or in the aggregate
would not have a Material Adverse Effect, (i) the Company is in full compliance
with all applicable Laws relating to Environmental Matters (as defined below);
(ii) the Company has obtained, and is in full compliance with, all Permits
required by applicable Laws for the use, storage, treatment, transportation,
release, emission and disposal of raw materials, by-products, wastes and other
substances used or produced by or otherwise relating to the operations of any of
them; (iii) to the Company's knowledge, there are no past or present events,
conditions, activities or practices that would prevent compliance or continued
compliance with any Law or give rise to any Environmental Liability (as defined
below).
(b) As used in this Agreement, the term "ENVIRONMENTAL MATTERS" means any
matter arising out of or relating to pollution or protection of the environment,
human safety or health, or sanitation, including matters relating to emissions,
discharges, releases, exposures, or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes including petroleum and
its fractions, radiation, biohazards and all toxic agents of whatever type or
nature into ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or hazardous or
toxic materials or wastes including petroleum and its fractions, radiation,
biohazards and all toxic agents of whatever type or nature. "ENVIRONMENTAL
LIABILITY" shall mean any liability or obligation arising under any Law or under
any other current theory of law or equity (including, without limitation, any
liability for personal injury, property damage or remediation) that results
from, or is based upon or related to, the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or
the emission, discharge, release, exposures or threatened release into the
environment, of any pollutant, contaminant, chemical, or industrial, toxic or
hazardous substance or waste.
6.15. TITLE TO ASSETS. (a) Except as set forth in the 1995 Balance Sheet,
the Company have good and marketable title to all of their real and personal
properties and assets reflected on the 1995 Balance Sheet (other than assets
disposed of since December 31, 1995 in the ordinary course of business
consistent with past practice) or acquired since December 31, 1995, in each case
free and clear of all Encumbrances except for (i) Encumbrances which secure
indebtedness which is properly reflected in the 1995 Balance Sheet; (ii) liens
for Taxes accrued but not yet payable; (iii) liens arising as a matter of law in
the ordinary course of business with respect to obligations incurred after the
date of the 1995 Balance Sheet, provided that the obligations secured by such
liens are not delinquent; and (iv) such imperfections of title and Encumbrances,
if any, as individually or in the aggregate would not have a Material Adverse
Effect. Except as set forth in SCHEDULE 6.18, the Company either own, or have
valid leasehold interests in, all properties and assets used by them in the
conduct of their business except where the absence of such ownership or
leasehold interest would not individually or in the aggregate have a Material
adverse Effect. (b) Except as set forth in SCHEDULE 6.18, neither the Company n
has any legal obligation, absolute or contingent, to any other person to sell or
otherwise dispose of any interest in any assets, or to sell or dispose of any of
its other assets with an individual value of $1,000 or an aggregate value in
excess of $5,000.
6.16. MATERIAL CONTRACTS. SCHEDULE 6.19 sets forth a list of all (i)
Contracts for borrowed money or guarantees thereof involving a currently
outstanding principal amount in excess of $1,000 , (ii) Contracts to acquire or
dispose of assets (iii) Contracts containing non-compete covenants by the
Company or any Subsidiary and (iv) other Contracts (other than national supply
and national purchasing Contracts for the purchase of supplies in the ordinary
course of business) which involve the payment or receipt of $100,000 or more per
year. All Contracts to which the Company is a party or by which any of their
respective assets is bound are valid and binding, in full force and effect and
enforceable against the Company, as the case may be, and to the knowledge of
the Company, the other parties thereto in accordance with their respective
terms, subject to applicable bankruptcy, insolvency or other
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similar laws relating to creditors' rights and general principles of equity,
except where the failure to be so valid and binding, in full force and effect or
enforceable would not individually or in the aggregate have a Material Adverse
Effect.
6.17. REQUIRED VOTE OF COMPANY STOCKHOLDERS. Unless the Merger maybe
consummated in accordance with the CBCA, the only vote of the stockholders of
the Company required to adopt this Agreement and approve the Merger is the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock.
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB
Purchaser and Merger Sub hereby represent and warrant to the Company as follows:
7.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of Purchaser and
Merger Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own, operate and lease its
properties and carry on its business as now conducted, except where the
failure to have such power and authority individually or in the aggregate
would not materially adversely affect the Purchaser and Merger Sub, taken as
a whole.
7.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Each of purchaser and
Merger Sub has the requisite corporate power and authority to execute and
deliver this Agreement and the Ancillary Documents and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Ancillary Documents and the consummation by Purchaser and
Merger Sub of the transactions contemplated hereby and thereby have been duly
and validly authorized by the respective Boards of Directors of Purchaser and
Merger Sub and by Purchaser as the sole stockholder of Merger Sub and no other
corporate proceedings on the part of Purchaser or Merger Sub are necessary to
authorize this Agreement and the Ancillary Documents or to consummate the
transactions contemplated hereby and thereby. This Agreement has been, and any
Ancillary Documents at the time of execution will have been, duly and validly
executed and delivered by Purchaser and Merger Sub, and (assuming this Agreement
and such Ancillary Documents each constitutes a valid and binding obligation of
the Company) constitutes and will constitute the valid and binding obligations
of each of Purchaser and Merger Sub, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
7.3. OFFER DOCUMENTS. None of the Offer Documents, any schedule required to be
filed by Purchaser or Merger Sub with the SEC or any amendment or supplement
will contain, on the date of filing with the SEC, any untrue statement of a
material fact or will omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances under which they are made, not misleading, except that no
representation is made by the Purchaser or Merger Sub with respect to
information supplied by the Company specifically for inclusion in the Offer
Documents, any schedule required to be filed with the SEC or any amendment or
supplement. None of the information supplied by the Purchaser or Merger Sub in
writing specifically for inclusion or incorporation by reference in the Schedule
14D-9 will, at the date of filing with the SEC, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If at any time prior
to the Effective Time either the Purchaser or Merger Sub shall obtain knowledge
of any facts with respect to itself, any of its officers and directors that
would require the supplement or amendment to any of the foregoing documents in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or to comply with applicable Laws, such
amendment or supplement shall be promptly filed with the SEC and, as required by
Law, disseminated to the stockholders of the Company, and in the event the
Company shall advise the Purchaser or Merger Sub as to its obtaining knowledge
of any facts that would make it necessary to supplement or amend any of the
foregoing documents, the Purchaser or Merger Sub shall
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promptly amend or supplement such document as required and distribute the same
to the stockholders of the Company.
7.4. NO VIOLATION. Neither the execution and delivery of this Agreement or
any of the Ancillary Documents by the Purchaser and Merger Sub nor the
consummation by them of the transactions contemplated hereby or thereby will(i)
violate, conflict with or result in any breach of any provision of the
respective Certificates of Incorporation or By-Laws of the Purchaser or Merger
Sub; (ii) other than the filings provided for in SECTION 2.3 and the filings
required under the Exchange Act and the Securities Act, require any consent,
approval or authorization of, or declaration, filing or registration with, any
Governmental entity, the lack of which individually or in the aggregate would
have a Material adverse effect on the ability of the Purchaser or Merger Sub to
consummate the transactions contemplated hereby, (iii) violate any Laws
applicable to the Purchaser or the Merger Sub or any of their respective assets,
except for violations which individually or in the aggregate would not have a
Material adverse effect on the ability of the Purchaser or Merger Sub to
consummate the transactions contemplated hereby, and (iv) violate, conflict with
or result in a breach of any provision of, constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
result in the termination or in a right of termination of, accelerate the
performance required by or benefit obtainable under, result in the creation of
any Encumbrance upon any of the properties of the Purchaser or Merger Sub under,
or result in there being declared void, voidable, or without further binding
effect, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust or any license, franchise, permit, lease, contract,
agreement or other instrument, commitment or obligation to which the Purchaser
or Merger Sub is bound, except for any of the foregoing matters which would not
individually or in the aggregate have a material adverse effect on the Purchaser
and Merger Sub, taken as a whole.
ARTICLE 8 COVENANTS
8.1. NO SOLICITATION. Neither the Company, nor any of its respective officers,
directors, employees, representatives, agents or affiliates, shall, directly or
indirectly, encourage, solicit, initiate or, except as is required in the
exercise of the fiduciary duties of the Company's directors to the Company or
its stockholders after consultation with outside counsel (as hereinafter
defined) to the Company, participate in any way in any discussions or
negotiations with, or provide any information to, or afford any access to the
properties, books or records of the Company to, or otherwise assist, facilitate
or encourage, any corporation, partnership, person or other entity or group
(other than the Purchaser or any affiliate or associate of the Purchaser)
concerning any merger, consolidation, business combination, liquidation,
reorganization, sale of substantial assets, sale of shares of capital stock or
similar transactions involving the Company or any Subsidiary or any division of
any thereof (an"ALTERNATIVE PROPOSAL"), and shall immediately cease and cause to
be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing; provided,
however, that nothing contained in this SECTION 8.1 shall prohibit the Company
or its Board of Directors from complying with Rule 14e-2(a) promulgated under
the Exchange Actor from making such disclosure to the Company's stockholders or
from taking such action which, in the judgment of the Board of Directors with
the advice of outside counsel, may be required under applicable law. The
Company will promptly notify the Purchaser if any such information is requested
from it or any such negotiations or discussions are sought to be initiated with
the Company.
8.2. INTERIM OPERATIONS. (a) From the date of this Agreement to the
Effective Time, except asset forth in SCHEDULE 8.2(a), unless Purchaser has
consented in writing thereto, the Company shall, and shall cause each of its
Subsidiaries to, (i) conduct its operations according to its usual, regular and
ordinary course of business consistent with past practice; (ii) use its
reasonable best efforts to preserve intact their business organizations and
goodwill, maintain in effect all existing qualifications, licenses, permits,
approvals and other authorizations referred to in SECTIONS 6.1 and 6.14, keep
available the services of their officers and employees and maintain satisfactory
relationships with those persons having business relationships with them; (iii)
promptly upon the discovery thereof notify Purchaser of the existence of any
breach of any representation or warranty contained herein (or, in the case of
any representation or warranty that makes no reference to Material Adverse
Effect, any breach of such representation or warranty in any material respect)
or the occurrence of any event that would cause any
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representation or warranty contained herein no longer to be true and correct
(or, in the case of any representation or warranty that makes no reference to
Material Adverse Effect, to no longer be true and correct in any material
respect); and (iv) promptly deliver to Purchaser true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of this
Agreement, any internal monthly reports prepared for or delivered to the Board
of Directors after the date hereof and monthly financial statements for the
Company for and as of each month end subsequent to the date of this Agreement.
(b) From and after the date of this Agreement to the Effective Time,
except as set forth on SCHEDULE 8.2(b), unless Purchaser has consented in
writing thereto, the Company shall not, and shall not permit to, (i) amend its
Certificate of Incorporation or Bylaws or comparable governing instruments; (ii)
issue, sell or pledge any shares of its capital stock or other ownership
interest in the Company (other than issuances of Common Stock in respect of any
exercise of Options outstanding on the date hereof and disclosed in SCHEDULE
6.4) or any of the Subsidiaries, or any securities convertible into or
exchangeable for any such shares or ownership interest, or any rights, warrants
or options to acquire or with respect to any such shares of capital stock,
ownership interest, or convertible or exchangeable securities; or accelerate any
right to convert or exchange or acquire any securities of the Company for any
such shares or ownership interest; (iii) effect any stock split or otherwise
change its capitalization as it exists on the date hereof; (iv) grant, confer or
award any option, warrant, convertible security or other right to acquire any
shares of its capital stock or take any action to cause to be exercisable any
otherwise unexercisable option under any existing stock option plan; (v)
declare, set aside or pay any dividend or make any other distribution or payment
with respect to any shares of its capital stock or other ownership interests
(other than such payments by a wholly-owned Subsidiary); (vi) directly or
indirectly redeem, purchase or otherwise acquire any shares of its capital stock
or capital stock of ; (vii) sell, lease or otherwise dispose of any of its
assets (including capital stock of Subsidiaries), except in the ordinary course
of business, none of which dispositions individually or in the aggregate will be
material; (viii) settle or compromise any pending or threatened Litigation,
other than settlements which involve solely the payment of money (without
admission of liability) not to exceed $500 in any one case; (ix) acquire by
merger, purchase or any other manner, any business or entity or otherwise
acquire any assets that are material, individually or in the aggregate, to the
Company taken as a whole, except for purchases of inventory, supplies or
capital equipment in the ordinary course of business consistent with past
practice; (x) incur or assume any long-term or short-term debt, except for
working capital purposes in the ordinary course of business under the Company's
existing credit agreement set forth in SCHEDULE 6.19;(xi) assume, guarantee or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person except wholly owned
Subsidiaries of the Company; (xii) make or forgive any loans, advances or
capital continuations to, or investments in, any other person other than loans
and advances to employees in the ordinary course of business which do not exceed
$5,000 in the aggregate at any one time outstanding;(xiii) make any Tax election
or settle any Tax liability other than settlements involving solely the payment
of money, which settlement would be permitted by clause (viii); (xiv) grant any
stock related or performance awards; (xv) enter into any employment, severance,
consulting or salary continuation agreements with any officers, directors or
employees or grant any increases incompensation or benefits to employees; (xvi)
adopt, amend in any material respect or terminate any employee benefit plan or
arrangement;(xvi) permit any insurance policy naming the Company or any
Subsidiary as a beneficiary or a loss payee to be canceled or terminated other
than in the ordinary course of business; and (xvii) agree in writing or
otherwise to take any of the foregoing actions.
8.3. COMPANY STOCKHOLDER APPROVAL; PROXY STATEMENT. (a) If approval or
action in respect of the Merger by the stockholders of the Company is required
by applicable law, the Company, acting through the Board of Directors, shall (i)
call a meeting of its stockholders (the"STOCKHOLDERS MEETING") for the purpose
of voting upon the Merger, (ii) hold the Stockholder Meeting as soon as
practicable following the purchase of shares of Common Stock pursuant to the
Offer, and (iii) subject to its fiduciary duties under applicable law as advised
by outside counsel, recommend to its stockholders the approval of the Merger.
The record date for the Stockholders meeting shall be a date subsequent to the
date Purchaser or Merger Sub becomes a record holder of Common Stock purchased
pursuant to the Offer.
(b) If required by applicable law, the Company will, as soon as
practicable following the expiration of the Offer, prepare and file a
preliminary Proxy Statement (such proxy statement, and any amendments or
supplements
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thereto, the "PROXY STATEMENT") or, if applicable, an Information Statement with
the SEC with respect to the Stockholders Meeting and will use its best efforts
to respond to any comments of the SEC or its staff and to cause the Proxy
Statement to be cleared by the SEC. The Company will notify Purchaser of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply Purchaser with copies of all
correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. The Company shall give Purchaser and its counsel the
opportunity to review the Proxy Statement prior to its being filed with the SEC
and shall give Purchaser and its counsel the opportunity to review all
amendments and supplements to the Proxy Statement and all responses to requests
for additional information and replies to comments prior to their being filed
with, or sent to, the SEC. Each of the Company and Purchaser agrees to use its
best efforts, after consultation with the other parties hereto, to respond
promptly to all such comments of and requests by the SEC. As promptly as
practicable after the Proxy Statement has been cleared by the SEC, the Company
shall mail the Proxy Statement to the stockholders of the Company. If at
anytime prior to the approval of this Agreement by the Company's stockholders
there shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement, the Company will prepare and mail to its
stockholders such an amendment or supplement.
(c) The Company represents and warrants that the Proxy Statement will
comply as to form in all material respects with the Exchange Act and, at the
respective times filed with the SEC and distributed to stockholders of the
Company, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, that the Company makes no representation or
warranty as to any information included in the Proxy Statement which was
provided by Purchaser or Merger Sub. The Purchaser represents and warrants that
none of the information supplied by Purchaser or Merger Sub for inclusion in the
Proxy Statement will, at the respective times filed with the SEC and distributed
to stockholders of the Company, contain any untrue statement of a material
factor omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) The Company shall use its best efforts to obtain the necessary
approvals by its stockholders of the Merger, this Agreement and the
transactions contemplated hereby.
(e) Purchaser agrees, subject to applicable law, to cause all shares of
Common Stock purchased by Merger Sub pursuant to the Offer and all other shares
of Common Stock owned by Purchaser, Merger Sub or any other subsidiary or
affiliate of Purchaser to be voted in favor of the approval of the Merger.
(f) Notwithstanding anything in this Agreement to the contrary, Purchaser
and Merger Sub, in their sole discretion, shall have the right to defer the
closing of the Merger for a period of 90 days following the consummation of the
Offer if, in Purchaser's and Merger Sub's sole judgment, such deferral is
necessary in order to enable the Company to effect a covenant.
8.4. FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided, the Company, Purchaser, and Merger Sub shall: (a) use their best
efforts to cooperate with one another in (i) determining which filings are
required to be made prior to the Effective Time with, and which consents,
approvals, permits, authorizations or waivers are required to be obtained
prior to the Effective Time from, Governmental Entities or other third
parties in connection with the execution and delivery of this Agreement and
any other Ancillary Documents and the consummation of the transactions
contemplated hereby and thereby and (ii) timely making all such filings and
timely seeking all such consents, approvals, permits, authorizations and
waivers; and (b) use their best efforts to take, or cause to be taken, all
other action and do, or cause to be done, all other things necessary, proper
or appropriate to consummate and make effective the transactions contemplated
by this Agreement. If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purpose of this Agreement,
the proper officers and directors of Purchaser and the Surviving Corporation
shall take all such necessary action.
8.5. ACCESS TO INFORMATION. From the date of this Agreement to the
Closing, the Company shall, and shall cause its Subsidiaries to, (i) give
Purchaser and its authorized representatives and lender banks full access
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to all books, records, personnel, offices and other facilities and properties of
the Company and their accountants and accountants' work papers, (ii) permit
Purchaser to make such copies and inspections thereof as Purchaser may
reasonably request and(iii) furnish Purchaser with such financial and operating
data and other information with respect to the business and properties of the
Company as Purchaser may from time to time reasonably request; provided that no
investigation or information furnished pursuant to this SECTION 8.5 shall affect
any representations or warranties made by the Company herein or the conditions
to the obligations of the Purchaser to consummate the transactions contemplated
hereby.
8.6. PUBLICITY. The initial press release relating to this Agreement shall be a
joint press release and thereafter the Company and Purchaser shall, subject to
their respective legal obligations, consult with each other before issuing any
such press release or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filings with any Governmental
Entity or with any national securities exchange with respect thereto.
8.7. FURTHER ACTION. Each party hereto shall, subject to the fulfillment at or
before the Effective Time of each of the conditions of performance set forth
herein or the waiver thereof, perform such further acts and execute such
documents as may be reasonably required to effect the Merger.
8.8. INSURANCE; INDEMNITY. (a) The Purchaser shall cause the Surviving
Corporation to keep in effect in its By-Laws a provision for a period of not
less than three years from the Effective Time (or, in the case of matters
occurring prior to the Effective Time which have not been resolved prior to the
third anniversary of the Effective Time, until such matters are finally
resolved) which provides for indemnification of the past and present officers
and directors of the Company to the fullest extent permitted by the CBCA. From
and after the Effective Time, the Purchaser shall indemnify and hold harmless,
to the fullest extent permitted under applicable law, each person who is, or has
been at any time prior to the date hereof or who becomes prior to the Effective
Time, an officer or director of the Company or any Subsidiary against all
losses, claims, damages, liabilities, costs or expenses(including attorneys'
fees), judgments, fines, penalties and amounts paid in settlement (collectively,
"LOSSES") in connection with any Litigation arising out of or pertaining to acts
or omissions, or alleged acts or omissions, by them in their capacities as such,
which acts or omissions existed or occurred at or prior to the Effective Time,
whether commenced, asserted or claimed before or after the Effective Time,
including, without limitation, liabilities arising under the Securities Act, the
Exchange Act and state corporation laws in connection with the transactions
contemplated hereby.
(b) Without limiting the foregoing, the Company and after the Effective
Time the Purchaser shall periodically advance expenses as incurred with respect
to the foregoing to the fullest extent permitted under applicable law provided
that the person to whom the expenses are advanced provides an undertaking to
repay such advance if it is ultimately determined that such person is not
entitled to indemnification.
(c) If the Merger shall have been consummated, the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify and hold
harmless the Purchaser and any person or entity who was a stockholder, officer,
director or affiliate of Purchaser prior to the Effective Time against any
Losses in connection with any Litigation arising out of or pertaining to any of
the transactions contemplated by this Agreement or the Ancillary Documents. The
Purchaser shall periodically advance expenses as incurred with respect to the
foregoing to the fullest extent permitted under applicable law provided that the
person to whom the expenses are advanced provides an undertaking to repay such
advance if it is ultimately determined that such person is not entitled to
indemnification.
(d) If any Litigation described in paragraph (b) or (c) of this SECTION
8.8 (each, an "ACTION") arises or occurs, the Surviving Corporation shall
control the defense of such Action through its counsel, but counsel for the
party seeking indemnification pursuant to paragraph (b) or (c) of this SECTION
8.8 (each, an "INDEMNIFIED PARTY") shall be selected by the Indemnified Party,
which counsel shall be reasonably acceptable to the Surviving Corporation, and
the Indemnified Parties
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shall be permitted to participate in the defense of such Action through such
counsel at the Corporation's expense. If there is any conflict between the
Surviving Corporation and any Indemnified Parties or there are additional
defenses available to any Indemnified Parties, the Indemnified Parties shall be
permitted to participate in the defense of such Action with counsel selected by
the Indemnified Parties, which counsel shall be reasonably acceptable to the
Surviving Corporation; provided that the Surviving Corporation shall not be
obligated to pay the reasonable fees and expenses of more than one counsel for
all Indemnified Parties in any single Action except to the extent that, in the
opinion of counsel for the Indemnified Parties, two or more of such Indemnified
Parties have conflicting interests in the outcome of such Action. The Surviving
Corporation shall not be liable for any settlement effected without its written
consent, which consent shall not unreasonably be withheld. The Purchaser shall
cause the Surviving Corporation to cooperate in the defense of any Action.
(e) This Section 8.8 is intended to benefit each of the persons referred
to herein and shall be binding on all successors and assigns of the Company and
the Purchaser.
8.9. RESTRUCTURING OF MERGER. Upon the mutual agreement of Purchaser and the
Company, the Merger shall be restructured in the form of a forward subsidiary
merger of the Company into Merger Sub, with Merger Sub being the Surviving
corporation, or as a merger of the Company into Purchaser, with Purchaser being
the surviving corporation. In such event, this Agreement shall be deemed
appropriately modified to reflect such form of merger.
8.10. EMPLOYEE BENEFIT PLANS. (a) From and after the Effective Time,
the Surviving Corporation and their respective subsidiaries will honor and
assume, and Purchaser will cause the Surviving Corporation to honor and assume,
in accordance with their terms, all existing employment and severance agreements
between the Company and any officer, director, or employee of the Company and
all benefits or other amounts earned or accrued to the extent vested or which
becomes vested in the ordinary course, through the Effective Time under all
employee benefit plans of the Company.
(b) The Purchaser confirms that it is the Purchaser's intention that,
until the first anniversary of the Effective Time, the Surviving Corporation
will provide benefits to their employees (excluding employees covered by
collective bargaining agreements, if any) which benefits will, in the aggregate,
be substantially equivalent to those currently provided by the Company to such
employees (other than pursuant to stock option, stock purchase or other stock
based plans). The Purchaser intends that, after the first anniversary of the
Effective Time, the Surviving Corporation audits Subsidiaries will provide
benefits to their employees (excluding employees covered by collective
bargaining agreements, if any) which benefits are appropriate in the judgment of
the Surviving Corporation, taking into account all relevant factors, including,
without limitation, the businesses in which the Surviving Corporation are
engaged.
8.11. NO LIABILITY FOR FAILURE TO OBTAIN CONSENT OF LENDERS. The Purchaser
and Merger Sub hereby agree that neither the Company nor any of its Affiliates
(as defined below) will incur any liability to Purchaser or Merger Sub if the
transactions contemplated hereby are not consummated because of the failure or
inability to obtain any consent, approval or waiver by the Company's Lenders.
ARTICLE 9 CONDITIONS
9.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective
obligation of each party to effect the Merger shall be subject to the
satisfaction or waiver, where permissible, prior to the Effective Time, of the
following conditions:
(a) If approval of this Agreement and the Merger by the holders of Common
Stock is required by applicable law, this Agreement and the Merger shall have
been approved by the requisite vote of such holders.
(b) There shall not have been issued any injunction or issued or
enacted any Law which prohibits or has the effect of prohibiting the
consummation of the Merger or makes such consummation illegal. .
9.2. CONDITIONS TO OBLIGATION OF PURCHASER AND MERGER SUB TO EFFECT THE MERGER.
The obligations of Purchaser and Merger Sub to effect the Merger shall be
further subject to the satisfaction or waiver on or prior to the Effective Time
of the condition that Purchaser shall have accepted for payment and paid for
shares of Common Stock tendered pursuant to the Offer; provided that this
condition shall be
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deemed satisfied if the Purchaser's failure to accept for payment and pay for
such shares breaches this Agreement or violates the terms and conditions of the
Offer.
ARTICLE 10 TERMINATION; AMENDMENT; WAIVER
10.1. TERMINATION. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time notwithstanding approval
thereof by the stockholders of the Company, but prior to the Effective Time:
(a) by mutual written consent of the Board of Directors of the
Company(subject to SECTION 1.4) and the Purchaser;
(b) by the Purchaser or the Company: (i) if the Effective Time shall
not have occurred on or before December 31, 1996 (provided that the right to
terminate this Agreement pursuant to this clause (i) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the cause of or resulted in the failure of the Effective Time to occur on or
before such date); (ii) if there shall be any statute, law, rule or
regulation that makes consummation of the Offer or the Merger illegal or
prohibited or if any court of competent jurisdiction in the United States or
other Governmental Entity shall have issued an order, judgment, decree or
ruling, or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, judgment, decree, ruling or other action
shall have become final and non-appealable; (iii) after December 31, 1996 if, on
account of the failure of any condition specified in EXHIBIT A, the Merger Sub
has not purchased any shares of Common Stock in the Offer by that date (provided
that the right to terminate this Agreement pursuant to this clause (iii) shall
not be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of any such
condition); or (iv) upon a vote at a duly held meeting or upon any adjournment
thereof, the stockholders of the Company shall have failed to give any approval
required by applicable law;
(c) by the Company if there is an Alternative Proposal which the Board of
Directors in good faith determines is more favorable from a financial point of
view to the stockholders of the Company as compared to the Offer and the Merger,
and the Board of Directors determines, after consultation with counsel ("
COUNSEL"), that failure to terminate this Agreement would be inconsistent with
the compliance by the Board of Directors with its fiduciary duties to
stockholders imposed by law; provided, however, that the right to terminate this
Agreement pursuant to this SECTION 10.1(c)shall not be available (i) if the
Company has breached in any material respect its obligations under SECTION 8.1,
or (ii) if the Alternative Proposal (x) is subject to a financing condition or
(y) involves consideration that is not entirely cash or does not permit
stockholders to receive the payment of the offered consideration in respect of
all shares at the same time, unless the Board of Directors has been furnished
with a written opinion of the Financial Advisor or other nationally recognized
investment banking firm to the effect that (in the case of clause (x)) the
Alternative Proposal is readily financeable and (in the case of clause (y)) that
such offer provides a higher value per share than the consideration per share
pursuant to the Offer or the Merger, or(iii) if, prior to or concurrently with
any purported termination pursuant to this SECTION 10.1(c), the Company shall
not have paid the fees and expenses contemplated by SECTION 11.5, or (iv) if the
Company has not provided Purchaser and Merger Sub with prior written notice of
its intent to so terminate this Agreement and delivered to the Purchaser and
Merger Sub a copy of the written agreement embodying the Alternative Proposal in
its then most definitive form concurrently with the earlier of (x) the public
announcement of, or (y) filing with the SEC of any documents relating to, the
Alternative Proposal; and (d) by the Purchaser if the Board of Directors shall
have failed to recommend, or shall have withdrawn, modified or amended in any
material respect, its approval or recommendation of the Offer or the Merger, or
shall have recommended acceptance of any Alternative Proposal, or shall have
resolved to do any of the foregoing.
10.2. EFFECT OF TERMINATION. If this Agreement is terminated and the Merger
is abandoned pursuant to SECTION 10.1 hereof, this Agreement, except for the
provisions of SECTIONS 1.3(c), 8.5(b), 8.6 and ARTICLE 11, shall terminate,
without any liability on the part of any party or its directors, officers or
stockholders. Nothing herein shall relieve any party to this Agreement of
liability for breach of this Agreement or prejudice the ability of the
non-breaching party to seek damages from any other party for any breach of this
Agreement, including without
18
<PAGE>
limitation, attorneys' fees and the right to pursue any remedy at law or in
equity.
10.3. AMENDMENT. To the extent permitted by applicable law, this Agreement
may be amended by action taken by or on behalf of the Board of Directors of the
Company (subject to SECTION 1.4) and the Purchaser at any time before or after
adoption of this Agreement by the stockholders of the Company but, after any
such stockholder approval, no amendment shall be made which decreases the Merger
Consideration or which adversely affects the rights of the Company's
stockholders hereunder without the approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of all of the parties.
10.4. EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken by or on behalf of the Board of Directors of the
Company (subject to SECTION 1.4) and the Purchaser, may (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein by any other applicable party or in any document, certificate
or writing delivered pursuant hereto by any other applicable party or (iii)waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE 11 GENERAL PROVISIONS
11.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time.
11.2. NOTICES. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission (with a
confirmatory copy sent by overnight courier), by courier service (with proof of
service), hand delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed as reflected on the
signature page hereto
11.3. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties; provided, however, that either Purchaser
or Merger Sub (or both) may assign its rights hereunder (including without
limitation the right to make the Offer and/or to purchase shares of Common Stock
in the Offer) to an affiliate but nothing shall relieve the assignor from its
obligations hereunder. Subject to the preceding sentence, this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and the
irrespective successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, except for the provisions of SECTION 8.8, nothing in
this Agreement, expressed or implied, is intended to confer on any person other
than the parties hereto or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
11.4. ENTIRE AGREEMENT. This Agreement, the Confidentiality Agreement, the
Schedules, the Exhibits, the Ancillary Documents and any other documents
delivered by the parties in connection herewith constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the parties with respect thereto.
11.5. FEES AND EXPENSES. (a) Except as provided in SECTION 11.5(b),
whether or not the Offer or the Merger is consummated, all costs and expenses
incurred in connection with the transactions contemplated by this Agreement
shall be paid by the party incurring such expenses.
(b)(1) The Company shall reimburse the Purchaser and its affiliates for the
documented reasonable out-of-pocket expenses of the Purchaser and its
affiliates, incurred in connection with or arising out of the Offer, the Merger,
this Agreement and the Ancillary Documents and the transactions contemplated
hereby (including, without limitation, amounts paid or payable to banks and
investment bankers, fees and expenses of counsel, accountants and
19
<PAGE>
consultants, and printing expenses),regardless of when those expenses are
incurred, if this Agreement is terminated(i) by the Company pursuant to SECTION
10.1(c); (ii) by the Purchaser (x)pursuant to SECTION 10.1(d) (unless the event
described therein occurs solely as a result of the Purchaser's willful breach in
any material respect of its representations, warranties or obligations contained
herein) or (y) pursuant to SECTION 10.1(b)(iii) because of the failure of the
condition set forth in paragraph (d) of EXHIBIT A, or (iii) pursuant to SECTION
10.1(b)(iii) at a time when the Minimum Condition shall not have been satisfied
and, either (x) during the term of this Agreement or within 12 months after the
termination of this Agreement, the Board of Directors recommends an Alternative
Proposal or the Company enters into an agreement providing for an Alternative
Proposal or a Stock Acquisition occurs which Alternative Proposal (or another
Alternative Proposal by the same or a related person or entity) was made prior
to the termination of this Agreement, or (y) during the term of this Agreement
or within two months after the termination of this Agreement, the Board of
Directors recommends an Alternative proposal or the Company enters into an
agreement providing for an Alternative proposal or a Stock Acquisition occurs.
No amounts in reimbursement of expenses shall be payable pursuant to this
paragraph (1) if the Commitment Amount has been paid. If the Company shall have
reimbursed the Purchaser for expenses incurred by the Purchaser and its
affiliates pursuant to this paragraph (1) and thereafter the Commitment Amount
shall become payable pursuant to paragraph (1)of this Section 11.5(b), then the
Commitment Amount shall be reduced by the amount of any reimbursed expenses.
(2) The Company acknowledges that the agreements contained in this SECTION
11.5(b) are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, the Purchaser would not enter into this
Agreement. Accordingly, if the Company fails to promptly pay any amounts owing
pursuant to this SECTION 11.5(b) when due, the Company shall in addition thereto
pay to the Purchaser and its affiliates all costs and expenses(including fees
and disbursements of counsel) incurred in collecting such amounts, together with
interest on such amounts (or any unpaid portion thereof)from the date such
payment was required to be made until the date such payment is received by the
Purchaser at the prime rate of Chemical Bank as in effect from time to time
during such period.
11.6. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without regard to its rules of
conflict of laws. Each of the Company, Purchaser and Merger Sub hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of Texas and of the United States of America located
in the State of Texas (the "TEXAS COURTS") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waives
any objection to the laying of venue of any such litigation in the Texas Courts
and agrees not to plead or claim in any Texas Court that such litigation brought
therein has been brought in an inconvenient forum.
11.7. HEADINGS. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
11.8. INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa. Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." As used in this Agreement, "Subsidiary" shall mean, when used with
respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which such party directly or indirectly owns
or controls at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of directors
or others performing similar functions with respect to such corporation or other
organization. "Significant Subsidiaries" shall refer to Subsidiaries (as
defined above) which constitute "significant subsidiaries" under Rule 12b2 under
the Exchange Act. As used in this Agreement, "MATERIAL ADVERSE EFFECT"shall
mean a material adverse effect on the business, results of operations, assets or
financial condition of the Company taken as a whole.
20
<PAGE>
11.9. INVESTIGATIONS. No action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or agreements
contained in this Agreement.
11.10. SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
11.11. ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any Delaware Court, this being
in addition to any other remedy to which they are entitled at law or in equity.
11.12. COUNTERPARTS. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all, of the parties hereto. IN
WITNESS WHEREOF, the parties have executed this Agreement and caused the same to
be duly delivered on their behalf on the day and year first written above.
SUMMIT PETROLEUM CORPORATION
16701 Greenspoint Park Drive, Suite 200
Houston, Texas 77060
By:
-----------------------------------------------------
Name: Deas H. Warley III
Title : President
MRI ACQUISITION CORP
16701 Greenspoint Park Drive, Suite 200
Houston, Texas 77060
By:
-----------------------------------------------------
Name: Deas H. Warley III
Title: President
MIDLAND RESOURCES, INC.
16701 Greenspoint Park Drive, Suite 200
Houston, Texas 77060
By:
-----------------------------------------------------
Name: Deas H. Warley III
Title: President
21
<PAGE>
EXHIBIT A CONDITIONS OF THE OFFER Notwithstanding any other term of the
Offer, Merger Sub shall not be required to accept for payment or pay for,
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) of the Exchange Act, any shares of Common Stock not theretofore
accepted for payment or paid for and may terminate or amend the Offer as to such
shares of Common Stock unless there shall have been validly tendered and not
withdrawn prior to the expiration of the Offer that number of shares of Common
Stock which would represent at least a majority of the outstanding shares of
Common Stock on a fully diluted basis (the"MINIMUM CONDITION"). Furthermore,
notwithstanding any other term of the Offeror this Agreement, Merger Sub shall
not be required to accept for payment or, subject as aforesaid, to pay for any
shares of Common Stock not theretofore accepted for payment or paid for, and may
terminate or amend the Offer if at anytime on or after the date of this
Agreement and before the acceptance of such shares of Common Stock for payment
or the payment therefor, any of the following conditions exist or shall occur
and remain in effect: (a) there shall have been instituted or pending any
litigation by the Government of the United States of America or any agency or
instrumentality thereof (i) which seeks to challenge the acquisition by
Purchaser or Merger Sub (or any of its affiliates) of shares of Common Stock
pursuant to the Offer or restrain, prohibit or delay the making or consummation
of the Offer or the Merger, (ii) which seeks to make the purchase of or payment
for some or all of the shares of Common Stock pursuant to the Offer or the
Merger illegal, (iii) which seeks to impose limitations on the ability of
Purchaser or Merger Sub (or any of their affiliates) effectively to acquire or
hold, or to require the Purchaser, Merger Sub or the Company or any of their
respective affiliates or subsidiaries to dispose of or hold separate, any
material portion of their assets or business, (iv) which seeks to impose
limitations on the ability of Purchaser, Merger Sub or their affiliates to
exercise full rights of ownership of the shares of Common Stock purchased by
it, including, without limitation, the right to vote the shares purchased by it
on all matters properly presented to the stockholders of the Company, or (v)
which seeks to limit or prohibit any future business activity by Purchaser,
Merger Sub or any of their affiliates, including, without limitation, requiring
the prior consent of any person or entity (including the Government of the
United States of America or any agency or instrumentality thereof) to future
transactions by Purchaser, Merger Sub or any of their affiliates; or (b) there
shall have been promulgated, enacted, entered, enforced or deemed applicable to
the Offer or the Merger, by any Governmental Entity, any Law or there shall
have been issued any injunction that results in any of the consequences referred
to in subsection (a) above; or -C- this Agreement shall have been terminated
in accordance with its terms; or (d) (i) any of the representations and
warranties made by the Company in this Agreement shall not have been true and
correct in all material respects when made, or shall thereafter have ceased to
be true and correct in all material respects as if made as of such later date
(other than representations and warranties made as of a specified date) or (ii)
the Company shall have breached or failed to comply in any material respect
with any of its obligations under this Agreement; or (e) any corporation,
entity, "group" or "person" (as defined in the Exchange Act), other than
Purchaser or Merger Sub, shall have acquired beneficial ownership of more than
49% of the outstanding shares of Common Stock; or (f) except as set forth in
the Company Reports or the Schedules to the Agreement, any change shall have
occurred or be threatened which individually or in the aggregate has had or is
continuing to have a material adverse effect on the prospects of the Company
, taken as a whole; or (g) there shall have occurred (i) any general suspension
of, or limitation on prices for, trading in securities on any national
securities exchange or in the over the counter market in the United States,
(ii) a declaration of any banking moratorium by federal or state authorities or
any suspension of payments in respect of banks or any limitation (whether or not
mandatory) imposed by federal or state authorities on the extension of credit by
lending institutions in the United States, (iii) a commencement of a war, armed
hostilities or any other international or national calamity directly or
indirectly involving the United States, other than any war, armed hostilities or
other international calamity involving the former Yugoslavia, (iv) any mandatory
limitation by the federal government on the extension of credit by banks or
other financial institutions generally, (v) any increase of 500 or more basis
points in the prime rate as announced by Chemical Bank, measured from the date
of this Agreement, or (vi) in the case of the foregoing clause (iii), if
existing at the time of the commencement of the Offer, in the reasonable
judgment of the Purchaser, a material
22
<PAGE>
acceleration or worsening thereof.
The foregoing conditions are for the sole benefit of Purchaser and Merger
Sub and may be asserted by Purchaser or Merger Sub regardless of the
circumstances (including any action or inaction by the Purchaser or the
Company)giving rise to any such condition and may be waived by Purchaser or
Merger sub in whole or in part, at any time and from time to time, in the sole
discretion of Purchaser. The failure by Purchaser or Merger Sub at any time to
exercise any of the foregoing rights will not be deemed a waiver of any right,
the waiver of such right with respect to any particular facts or circumstances
shall not be deemed a waiver with respect to any other facts or circumstances,
and each right will be deemed an ongoing right which may be asserted at any time
and from time to time. Should the Offer be terminated pursuant to the foregoing
provisions, all tendered shares of Common Stock not theretofore accepted for
payment shall forthwith be returned by the depositary to the tendering
stockholders.
23
<PAGE>
EXHIBIT 2. REFERENCED SECTIONS ON PPS. 1, 2, 4, 5, 6 AND 7 OF THE COMPANY'S
PROXY STATEMENT DATED DECEMBER 19, 1995
PAGE 1.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of December 1, 1995, certain information
regarding beneficial ownership of Common Stock by (a) each person known by the
Company to own beneficially more than 5% of its outstanding Common Stock, (b)
each director and director nominee of the Company, and (c) all directors and
officers as a group. Each person listed below is a director or director nominee.
Each person listed below has sole voting and dispositive power over the shares
indicated.
PAGE 2.
<TABLE>
<CAPTION>
AMOUNT & NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OUTSTANDING
OF BENEFICIAL OWNER OWNERSHIP SHARES
- ------------------------------------------------ ---------------- -------------
<S> <C> <C>
Deas H. Warley III (1)(3) 956,250 37.50
16701 Greenspoint Park Drive, Suite 200
Houston, Texas 77060
Darrell M. Dillard (1)(2) 50,000 2.04
415 West Wall, Suite 1510
Midland, Texas 79701
Wayne M. Whitaker (1)(3) 120,000 4.90
3500 City Center Tower II,
301 Commerce Street
Fort Worth, Texas 76102
All officers and directors as a group (3) 1,173,450 43.62
(5 persons)
</TABLE>
- ------------------------
(1) Director.
(2) These shares represent unexercised stock options granted to Mr. Dillard
pursuant to the Summit Petroleum Corporation Directors' Stock Option Plan,
subject to shareholder approval of such plan at the 1996 Annual Meeting for
which this Proxy is delivered.
(3) Mr. Whitaker owns 25,000 shares in an IRA account. In addition, 50,000 of
the shares noted above represent unexercised stock options granted to Mr.
Whitaker pursuant to the Summit Petroleum Corporation Directors' Stock
Option Plan, subject to shareholder approval of such plan at the 1996 Annual
Meeting for which this Proxy is delivered. In addition, Mr. Whitaker is the
trustee of the Sharron N. Warley Trust and the Christopher B. Warley Trust,
each of which owns 22,500 shares. The trusts were created by Mr. Warley for
the benefit of his children; however, Mr. Warley disclaims beneficial
ownership of such shares.
The Company is not aware of any contractual arrangement the operation of
which may at any subsequent date result in a change in control of the Company.
1
<PAGE>
PAGE 4.
EXECUTIVE COMPENSATION
None of the officers of the Company receive direct compensation from the
Company for their service in those capacities. Officers of the Company are also
officers of and receive compensation from MRI. MRI, through MRO, has a contract
to provide management services for the Company (See "Certain Transactions").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
(2)
ANNUAL COMPENSATION (1) -------------------
SECURITIES
---------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY ($) OPTION/SARS (#) COMPENSATION ($)
- ------------------------------- ------------- ------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Deas H. Warley III 1995 -0- 150,000 -0-
President, Chief Financial 1994 -0- -0- -0-
Officer, Director 1993 -0- -0- -0-
</TABLE>
- ------------------------
(1) The column for "Bonus and Other Annual Compensation" provided in the SEC's
standard summary compensation table is omitted because no such benefits or
other compensation were provided.
(2) The Company did not award restricted stock or stock appreciation rights
("SARs") during fiscal years 1993 through 1995, nor did it make any payouts
pursuant to long-term incentive plans during such period. Accordingly, the
columns for such items provided in the SEC's standard summary compensation
table have been omitted.
The Company has no existing or proposed plan for the provision of annuity,
pension or retirement benefits to its officers and directors.
Other than the proposed Summit Petroleum Corporation Directors' Stock Option
Plan, and the existing 1995 Summit Petroleum Corporation Long-Term Incentive
Plan, the Company has no existing or proposed plan involving any incentive
compensation for officers and directors or for stock purchase, profit sharing or
thrift plans for any officer or director.
The Company has no existing or proposed plan or arrangement for any officer
or director to receive remuneration resulting from his resignation, retirement
or other termination or from a change in control of the Company or a change in
the individual's responsibilities after such a change in control. Further, the
Company has not engaged in any transactions with third parties where the primary
purpose of such transaction was to furnish remuneration to any officer or
director of the Company.
2
<PAGE>
PAGE 5.
OPTION/SAR GRANTS IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The table below lists the described information for all grants of stock
options of the Company under existing and proposed plans. No SARs have been
granted and no options have been exercised.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
NUMBER OF UNDERLYING IN-THE-MONEY
SECURITIES % OF TOTAL UNEXERCISED OPTIONS/ SARS
UNDERLYING OPTIONS/SARS OPTIONS/SARS AT FY- END
OPTIONS/ GRANTED TO EXERCISE OR AT FY-END (#) ($)(5)
SARS EMPLOYEES IN BASE PRICE EXPIRATION EXERCISABLE/ EXERCISABLE/
NAME GRANTED (#) FISCAL YEAR ($/SH.)(4) DATE UNEXERCISABLE UNEXERCISABLE
- --------------------- ------------ --------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Deas H. Warley III 150,000 50.00 $ .0625 May 31, 2000 150,000/0 $ 5,625/$0
(1)
Linda J. Crass (1) 25,000 8.33 $ .0625 May 31, 2000 25,000/0 $ 938/$0
Marilyn Wade (1) 15,000 5.00 $ .0625 May 31, 2000 15,000/0 $ 563/$0
Mark Longhurst (2) 10,000 3.33 $ .0625 May 31, 2000 10,000/0 $ 375/$0
Darrell M. Dillard 50,000(3) 16.66 $ .0625 May 31, 2000 50,000/0 $ 1,875/$0
Wayne M. Whitaker 50,000(3) 16.66 $ .0625 May 31, 2000 50,000/0 $ 1,875/$0
</TABLE>
- ------------------------
(1) Officer of the Company.
(2) Employee of the Company.
(3) Represents options granted pursuant to the Directors' Stock Option Plan and
subject to shareholder approval at the 1996 Annual Shareholders meeting.
(4) The Company's stock trades infrequently and the last trade prior to the date
of grant of the Options on June 1, 1995 was on April 4, 1995 at $.04 per
share. As of June 1, 1995 there was a published bid price of $.0625 per
share which the Board determined to be the fair market value of the stock on
that date and was therefore used in establishing the exercise price.
(5) Based upon a fair market value of $.10/share, which was the price the stock
traded on October 4, 1995 and the last reported trade as of December 1,
1995.
PAGE 6.
CERTAIN TRANSACTIONS
Since 1989 the firm of Michener, Larimore, Swindle, Whitaker, Flowers,
Sawyer, Reynolds & Chalk, L.L.P. (or its predecessors) have represented the
Company. Mr. Whitaker, a director and nominee is a partner in this firm. In
1993, 1994, and 1995 the firm has received $2,116.54, $12,964.74, and $11,372
(as of September 30, 1995) respectively as legal fees and reimbursable expenses
(which did not amount to 5% of such firm's total fees during such years). The
firm continues to provide routine legal representation for the Company.
The Company and MRO entered into a Management Agreement on August 28, 1989,
which was extended and amended by agreement on December 31, 1993, which provides
that MRO will provide day-to-day management, administrative, bookkeeping and
accounting services to the Company. Under the Management Agreement as extended
and amended, in exchange for MRO providing such administrative services and
management of the Company's operations, the Company pays MRO a fee equal to
$8,500 per month during 1995, $8,000 per month during 1996, and $7,500 per month
during 1997 and thereafter if the Agreement is then further extended without
amendment. However, this agreement has been further amended, with such
amendments to be effective January 1, 1996, whereby the Company will pay a fee
equal to $5,000 per month during 1996, $4,500 per month during 1997, $4,000 per
month during 1998. As a result of the Management Agreement the Company does
3
<PAGE>
not maintain offices separate from those of MRO and MRI. Management fees
incurred under this agreement for the years ended July 31, 1995, 1994 and 1993
were $104,500, $113,000, and $120,000 respectively. This agreement may be
terminated by either party at any time.
MRO acts as operator of a substantial portion of the Company's oil and gas
properties. For all services performed as operator of those properties, MRO is
entitled to receive the compensation and reimbursements provided the operator
under the applicable operating agreement. However, any charges by MRO under an
operating agreement in such a situation for the use of its personnel, properties
and equipment, as well as the prices of materials sold by it, must be at rates
equal to the competitive charges of unaffiliated third parties for comparable
services or materials in the same geographic area. Further, those services can
be provided only pursuant to a written agreement which precisely describes the
services to be rendered and the compensation to be paid. The Company's share of
operation and supervision charges incurred on these properties for the years
ended July 31, 1995, 1994, and 1993 was $28,106, $18,852, and $13,854,
respectively. Until May, 1995, the Company leased a truck for use by its field
personnel, and at times prior thereto, the Company had leased two trucks for
such purpose, from MRO. In May, 1995 the Company purchased, at trade in value,
the two trucks formerly being leased. Lease expenses incurred under these
agreements for the years ended July 31, 1995, 1994 and 1993 were $4,200, $8,283,
and $13,326, respectively. Terms of the lease agreement were determined from and
are less than competitive market leases in the area.
Effective January 1, 1994 the Company purchased a 10% working interest with
an approximate 8.75% revenue interest in certain oil and gas properties in Ward
County, Texas from MRI for $85,696, MRI's actual cost adjusted for revenues and
expenses through December 31, 1993.
Effective August 1, 1994 the Company acquired 10% of MRI's working interest
in certain oil and gas properties in Coke and Howard Counties, Texas for
$201,596, MRI's actual cost adjusted for revenues and expenses from August 1,
1994 through August 15, 1994, the closing date, and transaction costs.
Effective May 26, 1995, the Company, in participation with MRI, acquired a
five percent working interest in certain oil and gas leases and seismic options
in the Sunburst Project, Terry County, Texas, and the Latigo Project, Hockley
County, Texas in exchange for a commitment to expend certain monies in
connection with certain oil and gas leases, seismic options, conducting 3-D
geophysical surveys, interpretation of 3-D seismic data and the drilling of two
or more test wells, MRO will operate the projects. Closing occurred on July 14,
1995.
Effective July 11, 1995, the Company acquired a five percent working
interest in certain oil and gas leases and seismic options in the Lakota
Project, Hockley County, Texas in exchange for a commitment to expend certain
monies in connection with certain oil and gas leases, seismic options,
conducting 3-D geophysical surveys, interpretation of 3-D seismic data and the
drilling of one or more test wells. MRO will operate to project.
PAGE 7.
MRI acquires oil and gas properties from unrelated third parties through
competitive bidding and negotiated transactions. The Company benefits from the
MRI acquisition efforts by acquiring interests in the MRI acquisitions at the
same cost basis as MRI.
PROPOSAL FOR APPROVAL OF THE
SUMMIT PETROLEUM CORPORATION DIRECTORS' STOCK OPTION PLAN
The Board of Directors has recommended for shareholder approval the Summit
Petroleum Corporation -- Directors' Stock Option Plan (the "Plan"). The purposes
of the Plan are to give those members of the Board of Directors who were elected
at the 1995 Annual Shareholders Meeting an opportunity to acquire shares of the
common stock of the Company to provide an incentive for such directors to
continue to promote the best interests of the Company and enhance its long-term
performance. Reference should be made to Attachment A for a complete statement
of the provisions of
4
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the Plan which are summarized below. Certain capitalized terms used in this
summary have the meanings ascribed to them in the Plan. Messrs. Dillard and
Whitaker have been granted options to purchase shares of common stock pursuant
to this Plan, subject to shareholder approval of the Plan.
SHARES AVAILABLE
An aggregate of 100,000 shares (subject to adjustment for certain
transactions affecting the Common Stock) of Common Stock will be available for
awards under the Plan, and options to purchase all of the 100,000 shares have
been granted with 50,000 each to Messrs. Dillard and Whitaker, effective on June
1, 1995 at an exercise price per share of $.0625, subject to shareholder
approval of the Plan. Shares covered by any stock option or stock appreciation
right that expire or terminate unexercised or are canceled or forfeited would
again be available for awards under the Plan.
5
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Midland Resources, Inc.
PRESS RELEASE Houston, Texas
NASDAQ: MRIX
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FOR IMMEDIATE RELEASE July 18, 1996
MIDLAND RESOURCES TO ACQUIRE SUMMIT PETROLEUM
HOUSTON, TEXAS -- Midland Resources, Inc. (NASDAQ: MRIX) and Summit
Petroleum Corporation (OTC: SMMP), also of Houston, Texas, today announced that
a definitive agreement was signed on July 17, 1996, for Midland Resources to
acquire all of the outstanding shares of Summit Petroleum for $0.70 per share in
cash. The total value of the transaction is approximately $2.4 million,
including assumed debt. The transaction was approved unanimously by the Board
of Directors of Summit Petroleum after an analysis of a fairness opinion
completed by Southwest Merchant Group of Dallas, Texas and provided to the Board
of Summit Petroleum by the Board of Midland Resources. Not subject to financing
or antitrust clearance, the transaction is expected to be completed by late
August. A Midland Resources, Inc. entity will commence immediately a tender
offer for all shares of Summit Petroleum Corporation. The offer and withdrawal
rights will expire at 12:00 midnight, Houston, Texas time, on Wednesday, August
14, 1996, unless the offer is extended. The offer is subject to certain
conditions which are described in an Offer to Purchase being mailed to all
shareholders of Summit Petroleum Corporation. Stock Transfer Company of America
will act as depository for the tender offer.
Deas H. Warley, Chairman of the Board of Midland Resources, commented,
"Summit Petroleum has been a participant with Midland Resources in several of
our major projects, including the 3D seismic exploration projects in West Texas
and the Texas Gulf Coast. The acquisition of Summit will increase our ownership
position in those key projects and expand our operations to the DJ Basin of
Colorado."
Midland Resources specializes in the application of advanced technology for
the exploration, development and production of natural gas and oil. The Company
owns oil and gas interests principally in the Permian Basin of West Texas and
the Texas Gulf Coast. The common stock of the Company trades in the NASDAQ
SmallCap Market with the symbol MRIX.
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<PAGE>
16701 Greenspoint Park Drive, Suite 200
Houston, Texas 77060
(713) 873-4828
FAX (713) 873-5058
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SUMMIT PETROLEUM CORPORATION Deas H. Warley III
President and Chairman
July 18, 1996
Dear Fellow Shareholders:
Since assuming control of Summit in August 1989, returning value to the
Shareholders has certainly been a challenge. Recalling a statement I made in my
Letter to Shareholders in the 1994 Annual Report regarding the condition of
Summit in August 1989:
"... THE COMPANY WAS VIRTUALLY BANKRUPT. LONG TERM DEBT OBLIGATIONS
AND OVERHEAD EXCEEDED THE GROSS MONTHLY REVENUES BY ALMOST 200
PERCENT, TAXES WERE DELINQUENT, ROYALTY PAYMENTS WERE DELINQUENT,
WORKING INTEREST REVENUE PAYMENTS WERE DELINQUENT, VENDOR ACCOUNTS
WERE DELINQUENT, AND THE LIST WENT ON. FUNDS WERE SIMPLY UNAVAILABLE
TO MEET ORDINARY DAILY OPERATING EXPENSES. SHAREHOLDER EQUITY HAD
BEEN REDUCED TO A $173,000 DEFICIT AND THE COMPANY HAD JUST FINISHED
THE 1989 YEAR WITH A $413,000 LOSS."
We have come a long way since then and I am pleased to report to you that we now
have the opportunity to "cash-in" on the effort.
On July 3, 1996, the Board of Directors voted unanimously to recommend to all
shareholders of Summit Petroleum Corporation that they accept the offer by
Midland Resources, Inc. (through a subsidiary corporation, MRI Acquisition Corp)
to purchase all the outstanding stock of Summit at a purchase price of $0.70 per
share.
I certainly enjoyed the challenge of rebuilding the Company and the support I
have received from the shareholders.
Sincerely,
/s/ Deas H. "Gene" Warley
Deas H. "Gene" Warley
President
