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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
SUMMIT PETROLEUM CORPORATION
(Name of Subject Company)
MRI ACQUISITION CORP.
MIDLAND RESOURCES, INC.
---------------
(BIDDERS)
COMMON STOCK, $.01 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
866228 307
(CUSIP NUMBER OF COMMON STOCK)
DEAS H. WARLEY III, PRESIDENT
MRI ACQUISITION CORP.
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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CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE
$1,890,129 $378
*For the purpose of calculating the fee assumes the purchase of 2,700,184
shares of Common Stock of Summit Petroleum Corporation at $0.70 per share.
Such number of shares includes all outstanding shares as of July 15, 1996,
and assumes the exercise of all stock options to purchase 300,000 shares of
Common Stock outstanding as of such date.
/ / Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
AMOUNT PREVIOUSLY PAID: N/A FILING PARTY: N/A
FORM OR REGISTRATION NO.: N/A DATE FILED: N/A
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The Index to Exhibits begins on page 7
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This Statement relates to a tender offer by MRI Acquisition Corp., a Texas
corporation (the "Purchaser") and a wholly owned subsidiary of Midland
Resources, Inc., a Texas corporation ("Parent"), to purchase all outstanding
shares of Common Stock, par value $.01 per share (the "Common Stock"or the
"Shares"), of Summit Petroleum Corporation, a Colorado corporation (the
"Company"), at a purchase price of $0.70 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated July 17, 1996 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"), copies of which are
filed as Exhibits (a)(1) and (a)(2) hereto, respectively, and which are
incorporated herein by reference. The Purchaser has been formed by Parent in
connection with the Offer and the transactions contemplated thereby.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Summit Petroleum Corporation,
Inc. The address of the principal executive offices of the
Company is set forth in Section 8 ("Certain Information
Concerning the Company") of the Offer to Purchase and is
incorporated herein by reference.
(b) The information set forth in the Introduction to the Offer to
Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) through (d), (g) This Schedule 14D-1 is filed by MRI Acquisition
Corp., a Texas corporation, , the Purchaser, and Midland Resources,
Inc., a Texas corporation, the Parent. The information set forth in
the Introduction and Section 9 ("Certain Information Concerning Parent
and the Purchaser") of the Offer to Purchase and in Schedules I and II
thereto is incorporated herein by reference.
(e) and (f) None of the Purchaser, Parent, or, to the best of their
knowledge, any of the persons listed in Schedule I of the Offer to
Purchase, has during the last five years (i)been convicted in a
criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such
laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) PRIOR TRANSACTIONS. Effective December 17, 1993, the Company entered
into a Stock Redemption and Purchase Agreement, whereby the Company redeemed,
and certain individuals acquired, an aggregate 1,169,549 shares (adjusted for a
1-for-20 reverse stock split) of common stock of the Company at $0.30 per share
(adjusted for the stock split) from unrelated shareholders and former directors
of the Company. At the time of the purchase, there was no established market
price for the Company's common stock. Of the 1,169,549 shares involved in the
transaction, the Company redeemed 924,816 shares, which the Company currently
holds as treasury stock, and the remaining 244,733 shares were purchased by
individual purchasers including Mr. Warley (1,000 shares), two officers, Ms.
Disch (6,700 shares) and Ms. Crass (500 shares), two trusts created by Mr.
Warley for the benefit of his children, Sharon N. Warley (15,000 shares) and
Christopher B. Warley (15,000 shares) and Mr. Whitaker, a director nominee
(25,000 shares). Mr. Warley does not serve as trustee of the two trusts and
disclaims beneficial ownership of those 30,000 shares. The purpose for the Stock
Redemption and Purchase transaction was for investment.
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 of the Company is a partner in this firm. In
1993, 1994, 1995 and through July 1, 1996 the firm received $2,116.54,
$12,964.74, $10,163.63, and $2,876.45
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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.
For the fiscal years 1990 through 1993 the Company's auditor was Darrell M.
Dillard. For fiscal year 1993 the Company paid Mr. Dillard $14,000 for
accounting and auditing services. Mr. Dillard was elected to the Board in 1995.
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 paid MRO a fee equal to
$10,000 per month during 1993, $9,000 per month during 1994, and $8,500 per
month during 1995. This agreement was amended effective January 1, 1996, whereby
the Company pays a fee equal to $5,000 per month during 1996 and will pay $4,500
per month during 1997. As a result of the Management Agreement the Company does
not maintain offices separate from those of MRO or Parent. Management fees
incurred under this agreement for the years ended July 31, 1993, 1994, 1995 and
through April 30, 1996 were $120,000, $113,000, $104,500, and $62,500,
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, 1993, 1994, 1995 and through April 30, 1996 was $13,854, $18,852,
$28,106, and $16,699, 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, 1993, 1994
and 1995 were $13,326, $8,283, and $4,200 respectively. Terms of the lease
agreement were determined from and are less than competitive market leases in
the area.
MRO had a similar management agreement with Parent until it was acquired by
Parent on December 31, 1993. Mr. Warley is President and Chairman of Parent,
owns approximately 36.2% of its common stock and formerly owned 80% of MRO prior
to its acquisition by Parent. Ms. Disch is Secretary of Parent and Ms. Crass
was Assistant Secretary and Controller of Parent until June, 1996. Although
Parent is unaware of similar management arrangements with other companies, the
services provided to the Company by Parent are those the Company provided for
itself prior to the management agreement . The services provided by the
management agreement are reflected as general and administrative costs.
Following the execution of the management agreement, general and administrative
costs were reduced from historical levels.
As of April 30, 1996 the Company owed MRO $130,537 for management,
operating and development costs.
On January 22, 1991, MRO acquired the Company's debt from Texas Commerce
Bank-Midland, the successor to United Bank of Midland for a cash payment equal
to the outstanding principal balance plus accrued interest for a total of
$100,080. The final installment on this note was made to MRO in February, 1992.
During 1992, the Company participated with MRO and Parent in one
acquisition of oil and gas properties. The Company purchased 5%, MRO purchased
10%, and Parent purchased 85% of that acquisition upon the same price basis,
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terms and conditions. For its interest, the Company paid approximately
$223,400; MRO became operator of the property.
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 Parent for $85,696, Parent's actual cost adjusted for
revenues and expenses through December 31, 1993.
Effective August 1, 1994 the Company acquired 10% of Parent's working
interest in certain oil and gas properties in Coke and Howard Counties, Texas
for $201,596, Parent'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 Parent, 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. As of April 30, 1996 the cost to the Company
for these projects was approximately $70,000. MRO will operate the project.
Effective September 1, 1995, the Company, in participation with Parent,
acquired a four percent working interest in certain Redfish Bay Field properties
in Nuecess County, Texas at a cost of approximately $82,000, which was at the
same cost basis per working interest percent as Parent.
(b) The information set forth in the Introduction and Section
11("Background of the Offer"), Section 8 ("Certain Information Concerning the
Company") and Section 9 ("Certain Information Concerning the Purchaser") of the
Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a) through (g) The information set forth in the Introduction, Section 7
("Effect of the Offer on Exchange Act Registration") and Section 12
("Purpose of the Offer and the Merger; Plans for the Company; The Merger
Agreement") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth in the Introduction and Section 9 ("Certain
Information Concerning Parent and the Purchaser") of the Offer to Purchase
and in Schedules I and II thereto is incorporated herein by reference.
(b) Not applicable.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
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The information set forth in the Introduction, Section 9 ("Certain
Information Concerning Parent and the Purchaser"), Section 10 ("Source and
Amount of Funds") and Section 12 ("Purpose of the Offer and the Merger; Plans
for the Company; The Merger Agreement") of the Offer to Purchase is incorporated
herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and in Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in The Offer to Purchase, the Introduction,
Section 9 ("Certain information Concerning Parent and the Purchaser")
and Section 12 ("Purpose of the Offer and the Merger"; Plans for the
Company"; "The Merger Agreement") is incorporated herein by reference.
(b),(c),(d),(e) Not applicable
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) The "Offer to Purchase"
(a)(2) Letter of Transmittal
(a)(3) Agreement and Plan of Merger among Midland Resources, Inc., MRI
Acquisition Corp. and the Company
(b)(1)* Loan Agreement with First Union National Bank of North Carolina
(Filed as Exhibit 10.1 to the Company's Form 10-KSB dated
December 31, 1995.)
(c)* 10.1 Pike Petroleum Corporation Management Agreement between
Miresco, Inc. and Pike Petroleum Corporation, The
Company and Deas H. Warley III dated August 28, 1989
(Filed as Exhibit 10.4 to the Company's Form 8-K dated
August 28, 1989.)
* 10.2 Assignment and Bill of Sale between the Company
and Midland Resources, Inc. dated August 15, 1994
(Filed as Exhibit 10.11 to the Company's Form 8-
K/A dated August 15, 1994.)
* 10.5 Partial Assignment of Oil and Gas Leases and Bill
of Sale between the Company and Midland Resources,
Inc. dated January 11, 1994 (Filed as Exhibit
10.14 to the Company's Form 10-KSB dated July 31,
1994.)
* 10.6 Assignment between the Company and Midland
Resources, Inc. dated August 1, 1995 (Filed as
Exhibit 10.6 to the Company's Form 10-KSB dated
July 31, 1995.)
* 10.7 Assignment between the Company and Midland
Resources, Inc. dated August 1, 1995 (Filed as
Exhibit 10.7 to the Company's Form 10-KSB dated
July 31, 1995.)
* 10.8 Purchase and Sale Agreement, Stipulation of
Interest and Exploration and Development Agreement
between the Company, Midland Resources, Inc.,
Midland Resources Operating Company, Inc., AXEM -
Blackbird L.L.C. and Pathfinder Oil & Gas,
Inc.(Filed as Exhibit 10.8 to the Company's Form
10-KSB
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dated July 31, 1995.)
* 99.1 Stock Redemption and Purchase Agreement dated
December 17, 1993 (Filed as an Exhibit of the same
number to the Company's Form 8-K dated December
17, 1993.)
____________________________________
* Incorporated by reference as indicated.
(d),(e),(f) Not applicable
SIGNATURE. After due 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.
MRI ACQUISITION CORP.
July 18, 1996 /s/ Deas H. Warley III, President
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Date Signature, Name and Title
MIDLAND RESOURCES, INC.
July 18, 1996 /s/ Deas H. Warley III, President
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Date Signature, Name and Title
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INDEX TO EXHIBITS
EXHIBIT NO. PAGE NO.
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(a)(1) The "Offer to Purchase"
(a)(2) Letter of Transmittal
(a)(3) Agreement and Plan of Merger among Midland Resources, Inc.,
MRI Acquisition Corp. and the Company
(b)(1)* Loan Agreement with First Union National Bank of North
Carolina (Filed as Exhibit 10.1 to the Company's Form 10-KSB
dated December 31, 1995.)
(c)* 10.1 Pike Petroleum Corporation Management Agreement between
Miresco, Inc. and Pike Petroleum Corporation, The Company
and Deas H. Warley III dated August 28, 1989 (Filed as
Exhibit 10.4 to the Company's Form 8-K dated August 28,
1989.)
* 10.2 Assignment and Bill of Sale between the Company and Midland
Resources, Inc. dated August 15, 1994 (Filed as Exhibit
10.11 to the Company's Form 8-K/A dated August 15, 1994.)
* 10.5 Partial Assignment of Oil and Gas Leases and Bill of Sale
between the Company and Midland Resources, Inc. dated
January 11, 1994 (Filed as Exhibit 10.14 to the Company's
Form 10-KSB dated July 31, 1994.)
* 10.6 Assignment between the Company and Midland Resources, Inc.
dated August 1, 1995 (Filed as Exhibit 10.6 to the Company's
Form 10-KSB dated July 31, 1995.)
* 10.7 Assignment between the Company and Midland Resources, Inc.
dated August 1, 1995 (Filed as Exhibit 10.7 to the Company's
Form 10-KSB dated July 31, 1995.)
* 10.8 Purchase and Sale Agreement, Stipulation of Interest and
Exploration and Development Agreement between the Company,
Midland Resources, Inc., Midland Resources Operating
Company, Inc., AXEM - Blackbird L.L.C. and Pathfinder Oil &
Gas, Inc.(Filed as Exhibit 10.8 to the Company's Form 10-KSB
dated July 31, 1995.)
* 99.1 Stock Redemption and Purchase Agreement dated December 17,
1993 (Filed as an Exhibit of the same number to the
Company's Form 8-K dated December 17, 1993.)
____________________________________
* Incorporated by reference as indicated.
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EXHIBIT 99(a)(1)
OFFER TO PURCHASE
By MRI Acquisition Corp.
For
All Common Stock of Summit Petroleum Corporation
THIS OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED
AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER THAT NUMBER OF
SHARES WHICH WOULD REPRESENT AT LEAST A MAJORITY OF THE OUTSTANDING SHARES ON A
FULLY DILUTED BASIS (SUCH CONDITION THE "MINIMUM CONDITION", AND SUCH SHARES THE
"MINIMUM SHARES"). SEE SECTIONS 12 AND 14.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of July 17, 1996 (the "Merger Agreement"), among Parent, the Purchaser and
the Company, pursuant to which, as promptly as practicable following the later
of the consummation of the Offer and the satisfaction or waiver of certain
conditions, the Purchaser will be merged with and into the Company. Following
the consummation of the Merger, the Company will be the surviving corporation
(the "Surviving Corporation"). Under the Merger Agreement, with the mutual
agreement of the Parent and the Company, the Merger may be restructured to be a
merger of the Company into the Purchaser, in which case the Purchaser would be
the Surviving Corporation. The Purchaser also has the right to assign its rights
under the Merger Agreement to an affiliate of the Purchaser. In the Merger,
each outstanding Share (other than Shares held by the Company or owned by Parent
or the Purchaser or any other subsidiary of either Parent or the Purchaser and
other than Shares held by stockholders, if any, who perfect their appraisal
rights under Colorado law) will be converted into the right to receive $0.70,
without interest thereon, in cash (the "Merger Consideration") and the Company
will become a wholly owned subsidiary of Parent. See Section 12.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Securities and Exchange Commission (the "Commission"), the
Purchaser expressly reserves the right, in its sole discretion, at any time and
from time to time, and regardless of whether or not any of the events set forth
in Section 14 hereof shall have occurred or shall have been determined by the
purchaser to have occurred, (i) to extend the period of time during which the
offer is open, and thereby delay acceptance for payment of and the payment for
any Shares, by giving oral or written notice of such extension to the Depositary
and (ii) to amend the Offer in any other respect by giving oral or written
notice of such amendment to the Depositary. If by 12:00 Midnight, Houston,
Texas time, on Wednesday, August 14, 1996 (or any other date or time then set as
the Expiration Date), any or all conditions to the Offer have not been satisfied
or waived, the Purchaser reserves the right (but shall not be obligated),
subject to the terms and conditions contained in the Merger Agreement and to the
applicable rules and regulations of the Commission, to (i) terminate the Offer
and not accept for payment any Shares and return all tendered Shares to
tendering stockholders, (ii) waive all the unsatisfied conditions and, subject
to complying with the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn, (iii)
extend the Offer and, subject to the right of stockholders to withdraw Shares
until the Expiration Date, retain the Shares that have been tendered during the
period or periods for which the Offer is extended or (iv) amend the Offer. The
Merger Agreement provides that, 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.
There can be no assurance that the Purchaser will exercise its right to extend
the Offer. Any extension, waiver, amendment or termination will be followed as
promptly as practicable by public announcement thereof. In the case of an
extension, Rule 14e-1(d) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires that the announcement be issued no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(c) under the Exchange Act, subject to applicable law
(including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require
that any material change in the information
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published, sent or given to stockholders in connection with the Offer be
promptly disseminated to stockholders in a manner reasonably designed to
inform stockholders of such change). Without limiting the obligation of the
Purchaser under such rules or the manner in which the Purchaser may choose to
make any public announcement, the Purchaser will not have any obligation to
publish, advertise or otherwise communicate any such public announcement
other than by issuing a release to the Dow Jones News Service.
In the Merger Agreement, the Purchaser has agreed that, except as otherwise
required by law, it will not, without the prior consent of the Company, extend
the Offer if all of the Offer conditions are satisfied or waived, except that
the Purchaser may, in its sole discretion, 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 the Purchaser's obligation to accept for payment and pay for
Shares shall not have been satisfied or waived, (ii) for any period required by
any rule, regulation, interpretation or position of the Commission 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 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 (iv)) beyond the latest expiration date
that would be permitted under clause (i), (ii) or (iii) of this sentence. In
addition, the Purchaser has agreed that, without the prior written consent of
the Company it will not (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) change the form of consideration payable in the
Offer, or (v)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.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its acceptance for
payment of, or payment for, Shares or is unable to pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer, the Depositary may retain tendered Shares on behalf of the
Purchaser, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to withdrawal rights as described in Section 4.
However, the ability of the Purchaser to delay the payment for Shares that the
Purchaser has accepted for payment is limited by Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which requires
that a bidder pay the consideration offered or return the securities deposited
by or on behalf of holders of securities promptly after the termination or
withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, with the consent of the Company, the Minimum Condition), the
Purchaser will disseminate additional tender offer materials and extend the
offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of the offer or information concerning
the offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. With
respect to a change in price or a change in the percentage of securities sought,
a minimum period of 10 business days is generally required to allow for adequate
dissemination to stockholders. As used in this Offer to Purchase, "business
day" has the meaning set forth in Rule 14d-1 under the Exchange Act. Based on
the representations and warranties of the Company contained in the merger
Agreement and information provided by the Company, as of July 15, 1996, (i)
2,400,184 Shares were outstanding and (ii) 300,000 Shares were reserved for
issuance upon the exercise of outstanding employee stock options. Based on the
foregoing, the Minimum Condition will be satisfied if 1,377,094 Shares are
validly tendered and not withdrawn prior to the Expiration Date. The number of
Shares required to be validly tendered and not withdrawn in order to satisfy the
Minimum Condition will increase to the extent more than 2,700,184 Shares are
deemed to be outstanding on a fully diluted basis under the Merger agreement.
For purposes of the Merger Agreement, "on a fully diluted basis"means, as of any
date, the number of Shares outstanding, together with Shares the Company is then
required to issue pursuant to obligations outstanding at that date under
employee stock option or other benefit plans or otherwise (assuming all options
and other rights to acquire Shares are fully vested and exercisable and all
Shares issuable at any time have been issued), including without limitation,
pursuant to the Company's stock option plans (the "Stock Option Plans").
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The consummation of the Merger is subject to the satisfaction or waiver of
a number of conditions, including, if required, the approval of the Merger by
the requisite vote or consent of the stockholders of the Company. Under the
Colorado Business Corporation Act, as amended, of the State of Colorado
("Colorado Law") and the Company's Amended Certificate of Incorporation, the
stockholder vote necessary to approve the Merger will be the affirmative vote of
the holders of at least a majority of the outstanding Shares, including Shares
held by the Purchaser and its affiliates. The officers and directors of the
Company own directly and beneficially 1,144,600 Shares (42.4%) and have
indicated their intention to tender all of such shares pursuant to the terms of
the Offer. Accordingly, the Purchaser is likely to acquire a majority of the
outstanding Shares and will have the voting power required to approve the Merger
without the affirmative vote of any other stockholders of the Company.
Furthermore, if the Purchaser acquires at least 90% of the outstanding Shares
pursuant to the Offer or otherwise, the Purchaser would be able to effect the
Merger pursuant to the "short-form" merger provisions of Colorado Law, without
prior notice to, or any action by, any other stockholder of the Company. In
such event, the Purchaser intends to effect the Merger as promptly as
practicable following the purchase of Shares in the Offer. The Merger Agreement
is fully described in Section 12.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and conditions
of any such extension or amendment), the Purchaser will accept for payment and
pay for all Shares validly tendered prior to the Expiration Date and not
withdrawn in accordance with Section 4. The term "Expiration Date" means 12:00
Midnight, Houston, Texas time, on Wednesday, August 14, 1996, unless and until
the Purchaser (subject to the terms of the Merger Agreement) shall have extended
the period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire. Consummation of the Offer is
conditioned upon satisfaction of the Minimum Condition and the other conditions
set forth in Section 14. Subject to the terms and conditions contained in the
Merger Agreement, the Purchaser reserves the right (but shall not be obligated)
to waive any or all such conditions. The Company is providing the Purchaser
with its list of stockholders and security position listings for the purpose of
disseminating the Offer to holders of Shares. This Offer to Purchase and the
related Letter of Transmittal and other relevant materials will be mailed by the
Purchaser to record holders of Shares and will be furnished by the Purchaser to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the stockholder lists or, if
applicable, who are listed as participants in a clearing agency's security
position listing, for subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject
to the conditions of the Offer (including, if the Offer is extended or amended,
the terms and conditions of any such extension or amendment), the Purchaser will
accept for payment and will pay for all Shares validly tendered prior to the
Expiration Date, and not properly withdrawn in accordance with Section 4,
promptly after the Expiration Date. Any determination concerning the
satisfaction or waiver of such terms and conditions will be within the sole
discretion of the Purchaser, and such determination will be final and binding on
all tendering stockholders. See Sections 1 and 14. The Purchaser expressly
reserves the right, in its sole discretion, to delay acceptance for payment of,
or payment for, Shares in order to comply in whole or in part with any
applicable law. Any such delays will be effected in compliance with Rule
14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay
for or return tendered Shares promptly after the termination or withdrawal of
the Offer). In all cases, payment for Shares accepted for payment pursuant to
the Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares (ii) a Letter of Transmittal (or facsimile thereof)
properly completed and duly executed, with any required signature guarantees and
(iii) any other documents required by the Letter of Transmittal. The per Share
consideration paid to any stockholder pursuant to the Offer will be the highest
per Share consideration paid to any other stockholder pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased,
10
<PAGE>
Shares properly tendered to the Purchaser and not withdrawn as, if and when
the Purchaser gives oral or written notice to the Depositary of the
Purchaser's acceptance for payment of such Shares pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer, payment for Shares
accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the
Purchaser and transmitting payment to tendering stockholders.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES
TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
If the Purchaser is delayed in its acceptance for payment of, or payment
for, Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act,
which requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after the termination or withdrawal of a tender
offer), the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and any such Shares may not be withdrawn except to the extent
tendering stockholders are entitled to exercise, and duly exercise, withdrawal
rights as described in Section 4.
If any tendered Shares are not purchased pursuant to the Offer because of
an invalid tender or otherwise, certificates for any such Shares will be
returned, without expense to the tendering stockholder (or, in the case of
Shares delivered by book-entry transfer of such Shares into the Depositary's
account at a Book-Entry Transfer Facility pursuant to the procedures set forth
in Section 3, such Shares will be credited to an account maintained at the
appropriate Book-Entry Transfer Facility), as promptly as practicable after the
expiration or termination of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to any of its affiliates (including Parent), the right to
purchase Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve the Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering stockholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES.
VALID TENDER. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), together with any required signature guarantees, and any
other documents required by the Letter of Transmittal, must be received by the
Depositary at its address set forth on the back cover of this Offer to Purchase
prior to the Expiration Date. In addition, either (i) certificates for tendered
Shares must be received by the Depositary along with the Letter of Transmittal
at one of such addresses, in each case prior to the Expiration Date, or (ii) the
tendering stockholder must comply with the guaranteed delivery procedure set
forth below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING
STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal if (i) the Letter of Transmittal is signed by the registered holder
of Shares tendered therewith and such registered holder has not completed either
the box entitled "Special Delivery Instructions" or the box entitled "Special
Payment Instructions" on the Letter of Transmittal or (ii) such Shares are
tendered for the account of a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of a recognized
Medallion Program approved by The Securities
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<PAGE>
Transfer Association, Inc. (an "Eligible Institution"). In all other cases,
all signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the
certificates for Shares are registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made or
certificates for Shares not tendered or not accepted for payment are to be
issued to a person other than the registered holder of the certificates
surrendered, the tendered certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names
of the registered holders or owners appear on the certificates, with the
signatures on the certificates or stock powers guaranteed as described above.
See Instruction 5 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to the
Offer and such stockholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date, such stockholder's tender may be effected if all
the following conditions are met: (1) such tender is made by or through an
Eligible Institution; (2) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by the Purchaser
herewith, is received by the Depositary as provided below, prior to the
Expiration Date; and (3) the certificates for all tendered Shares, in proper
form for transfer, together with a properly completed and duly executed Letter
of Transmittal (or a manually signed facsimile thereof), with any required
signature guarantees and any other documents required by the Letter of
Transmittal, are received by the Depositary within three New York Stock
Exchange, Inc. ("NYSE") trading days after the date of execution of such Notice
of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by
hand to the Depositary or transmitted by telegram, facsimile transmission or
mail to the Depositary and must include a signature guarantee by an Eligible
Institution in the form set forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for the Shares, (ii) a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), and (iii) any other documents required by the Letter of
Transmittal. Accordingly, tendering stockholders may be paid at different times
depending upon when certificates for Shares are actually received by the
Depositary.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES
TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering stockholder and
the Purchaser upon the terms and subject to the conditions of the Offer.
BACKUP WITHHOLDING. Payments in connection with the Offer or the Merger maybe
subject to "backup withholding" at a rate of 31%. Backup withholding generally
applies if the stockholder (a) fails to furnish his social security number, (b)
furnishes an incorrect taxpayer identification number ("TIN"), (c) fails to
properly include a reportable interest or dividend payment on his federal income
tax return, or (d) under certain circumstances, fails to provided a certified
statement, signed under penalties of perjury, that the TIN provided is his
correct number and that he is not subject to backup withholding. Backup
withholding is not an additional tax but merely an advance payment, which may be
refunded to the extent it results in an overpayment of tax. Certain persons
generally are entitled to exemption from backup withholding, including
corporations and financial institutions. Certain penalties apply for failure to
furnish correct information and for failure to include reportable payments in
income. Each stockholder should consult with his own tax advisor as to his
qualification for exemption from backup withholding and the procedure for
obtaining such exemption. Tendering stockholders may be able to prevent backup
withholding by completing the Substitute Form W-9 included in the appropriate
Letter of Transmittal. All stockholders surrendering Shares pursuant to the
Offer should complete and sign the main signature form and the Substitute Form
W-9 included as part of the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to the Purchaser and the
Depositary). Noncorporate foreign stockholders should complete and sign the
main signature form and a Form W-8, Certificate of Foreign Status, a copy of
which may be obtained from the Depositary, in order to avoid backup withholding.
See Instruction 10 to the
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<PAGE>
Letter of Transmittal.
APPOINTMENT. By executing the Letter of Transmittal, the tendering stockholder
will irrevocably appoint designees of the Purchaser as such stockholder's
attorneys-in-fact and proxies in the manner set forth in the Letter of
Transmittal, each with full power of substitution, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by the Purchaser and with respect to any and all other
Shares or other securities or rights issued or issuable in respect of such
Shares on or after July 18, 1996. All such proxies shall be considered coupled
with an interest in the tendered Shares. Such appointment will be effective
when, and only to the extent that, the Purchaser accepts for payment Shares
tendered by such stockholder as provided herein. Upon such acceptance for
payment, all prior powers of attorney and proxies given by such stockholder with
respect to such Shares or other securities or rights will, without further
action, be revoked and no subsequent powers of attorney and proxies may be given
(and, if given, will not be deemed effective). The designees of the Purchaser
will thereby be empowered to exercise all voting and other rights with respect
to such Shares or other securities or rights in respect of any annual, special
or adjourned meeting of the Company's stockholders, or otherwise, as they in
their sole discretion deem proper. The Purchaser reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares, the Purchaser must be able to
exercise full voting and other rights with respect to such Shares and other
securities or rights, including voting at any meeting of stockholders then
scheduled.
DETERMINATION OF VALIDITY. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Purchaser, in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form or the acceptance
for payment of or payment for which may, in the opinion of the Purchaser's
counsel, be unlawful. The Purchaser also reserves the absolute right, in its
sole discretion, subject to the terms and conditions of the Merger Agreement, to
waive any of the conditions of the Offer or any defect or irregularity in any
tender with respect to any particular Shares, whether or not similar defects or
irregularities are waived in the case of other Shares. No tender of Shares will
be deemed to have been validly made until all defects or irregularities relating
thereto have been cured or waived. None of Parent, the Purchaser, the
Depositary, or any other person will be under any duty to give notification of
any defects or irregularities in tenders or incur any liability for failure to
give any such notification. The Purchaser's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless accepted for payment and paid for by the Purchaser pursuant to the Offer,
may also be withdrawn at any time after August 14, 1996. For a withdrawal to
be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase and must specify the name of
the person having tendered the Shares to be withdrawn, the number of Shares to
be withdrawn and the name of the registered holder of the Shares to be
withdrawn, if different from the name of the person who tendered the Shares. If
certificates for Shares have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and,
unless such Shares have been tendered by an Eligible Institution, the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry transfer set
forth in Section 3, the notice of withdrawal must specify the name and number of
the account at the appropriate Book-Entry Transfer Facility to be credited with
the withdrawn Shares. Withdrawals of tenders of Shares may not be rescinded,
and any Shares properly withdrawn will thereafter be deemed not validly tendered
for any purposes of the Offer. However, withdrawn Shares may be re-tendered by
again following one of the procedures described in Section 3 at any time prior
to the Expiration Date. All questions as to the form and validity (including
time of receipt) of notices of withdrawal will be determined by the Purchaser in
its sole discretion, which determination will
13
<PAGE>
be final and binding. None of the Purchaser, Parent, the Depositary, or any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
THE FOLLOWING IS A SUMMARY OF THE PRINCIPAL FEDERAL INCOME TAX CONSEQUENCES OF
THE OFFER AND THE MERGER TO HOLDERS WHOSE SHARES ARE PURCHASED PURSUANT TO THE
OFFER OR WHOSE SHARES ARE CONVERTED INTO THE RIGHT TO RECEIVE CASH IN THE MERGER
(INCLUDING PURSUANT TO THE EXERCISE OF APPRAISAL RIGHTS). THE DISCUSSION
APPLIES ONLY TO HOLDERS OF SHARES IN WHOSE HANDS SHARES ARE CAPITAL ASSETS, AND
MAY NOT APPLY TO SHARES RECEIVED UPON CONVERSION OF SECURITIES OR EXERCISE OF
WARRANTS OR OTHER RIGHTS TO ACQUIRE SHARES OR PURSUANT TO THE EXERCISE OF
EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, OR TO HOLDERS OF SHARES WHO
ARE IN SPECIAL TAX SITUATIONS (SUCH AS INSURANCE COMPANIES, TAX-EXEMPT
ORGANIZATIONS OR NON-U.S. PERSONS). THE FEDERAL INCOME TAX CONSEQUENCES SET
FORTH BELOW ARE INCLUDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED
UPON CURRENT LAW. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF
SHARES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE
APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH STOCKHOLDER AND THE
PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION
AND EFFECT OF STATE, LOCAL AND OTHER INCOME TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger
(including pursuant to the exercise of appraisal rights) will be a taxable
transaction for federal income tax purposes under the Internal Revenue Code of
1986, as amended (and also may be a taxable transaction under applicable state,
local and other income tax laws). In general, for federal income tax purposes,
a holder of Shares will recognize gain or loss equal to the difference between
his adjusted tax basis in the Shares sold pursuant to the Offer or converted
into the right to receive cash in the Merger and the amount of cash received
therefor. Gain or loss must be determined separately for each block of Shares
(i.e., Shares acquired at the same cost in a single transaction) sold pursuant
to the Offer or converted to cash in the Merger. Such gain or loss will be
capital gain or loss (other than, with respect to the exercise of appraisal
rights, amounts, if any, which are or are deemed to be interest for federal
income tax purposes, which amounts will be taxed as ordinary income) and will be
long-term gain or loss if, on the date of sale (or, if applicable, the date of
the Merger), the Shares were held for more than one year. In the case of an
individual, net long-term capital gain may be subject to a reduced rate of tax
and net capital losses may be subject to limits on deductibility. Payments in
connection with the Offer or the Merger may be subject to"backup withholding".
6. PRICE RANGE OF SHARES; DIVIDENDS. According to the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1995 (the "Company Form
10-KSB") and information supplied to the Purchaser by the Company, there is no
established public trading market for the Shares. There is only limited,
sporadic and infrequent trades of the Shares in the over-the-counter market,
consequently there are no reliable quotations of trading prices during the
fiscal years ended July 31,1994 and 1995 and the period from August 1, 1995 to
the date hereof. For at least the past five years, the Company has not paid or
declared cash or other dividends on the Shares.
7. EFFECT OF THE OFFER ON THE MARKET FOR SHARES; STOCK QUOTATION; EXCHANGE ACT
REGISTRATION AND MARGIN SECURITIES.
The purchase of Shares pursuant to the Offer will reduce the number of holders
of Shares and the number of Shares that might otherwise trade publicly and could
adversely affect the liquidity and market value of the remaining Shares, if any,
held by the public. As of July 15,1996 the Company indicated there were 1073
shareholders of record. The Shares are not currently listed for trading on any
registered stock exchange nor are they listed for trading on NASDAQ.
14
<PAGE>
The Shares are currently registered under the Exchange Act. Registration
of the Shares under the Exchange Act may be terminated upon application of the
Company to the Commission if the Shares are neither listed on a national
securities exchange nor held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to its stockholders and to
the Commission and would make certain provisions of the Exchange Act no longer
applicable to the Company, such as the short-swing profit recovery provisions of
Section 16(b) of the Exchange Act, the requirement of furnishing a proxy
statement pursuant to Section 14(a) of the Exchange Act in connection with
stockholders' meetings and the related requirement of furnishing an annual
report to stockholders, and the requirements of Rule 13e-3 under the Exchange
Act with respect to "going private" transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 or 144A promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), may be
impaired or eliminated. The Purchaser intends to apply for termination of
registration of the Shares under the Exchange Act as soon after the completion
of the Offer as the requirements for such termination are met. If registration
of the Shares is not terminated prior to the Merger, then the registration of
the Shares under the Exchange Act will be terminated following the consummation
of the Merger. The Shares are not currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of not
allowing brokers to extend credit on the collateral of the Shares.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The historical information concerning the Company contained in this Offer to
Purchase, including financial information, has been taken from or based upon
publicly available documents and records on file with the Commission and other
public sources. None of Parent, the Purchaser or the Depositary assumes any
responsibility for the accuracy or completeness of the information concerning
the Company contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information to Parent or the Purchaser.
The Company is a Colorado corporation with its principal place of business
located at 16701 Greenspoint Park Drive, Suite 200, Houston, Texas 77060.
According to the Company's Form 10-KSB for its fiscal year ended July 31, 1995,
the Company is engaged in the production and sale of oil and gas. Principal
products are crude oil and natural gas which are sold to various purchasers,
including pipeline companies which service the areas in which the producing
wells are located. The Company also serves as operator for most of the oil and
gas properties in which it owns an interest. The Company has no operations in
foreign countries and no portion of its sales or revenues is derived from sales
to customers in foreign countries.
Set forth below is certain selected historical consolidated financial
information with respect to the Company excerpted or derived from the audited
consolidated financial statements included in the Company Form 10-KSB and from
the unaudited financial statements included in the Company's Quarterly Report on
Form 10-QSB for the quarter ended April 30, 1996. More comprehensive financial
information is included in such reports and other documents filed by the Company
with the Commission, and the following summary is qualified in its entirety by
reference to such reports and such other documents and all the financial
information (including any related notes) contained therein. The reports and
other documents filed with the Commission should be available for inspection and
copies thereof should be obtainable in the manner set forth below under
"Available Information".
15
<PAGE>
SUMMIT PETROLEUM CORPORATION
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
------------------------------------------ ---------------
Year Ended Nine Months
June 30, Ended April 30,
------------------------------------------ ---------------
1993 1994 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating Revenues $ 691,022 $ 643,360 $ 627,930 $ 481,938
Total Revenues $ 704,081 $ 652,938 $ 652,938 $ 483,122
Income (loss) before cumulative effect and
extraordinary items $ 187,640 $ 85,417 $ 36,014 $ 49,700
Income (loss) per share before cumulative
effect and extraordinary items $ 0.056 $ 0.032 $ 0.015 $ 0.021
Weighted average number of commons shares
outstanding, adjusted for subsequent stock
splits 3,325,000 2,708,456 2,400,184 2,400,185
Total Assets $ 792,266 $ 916,882 $1,013,170 $1,190,116
Net Working Capital (deficit) $ 238,329 $ 65,613 $ 15,891 $ 17,670
Term Debt, including current position $ 168,400 $ 202,854 $ 302,872 $ 299,790
Stockholders' Equity $ 486,662 $ 596,820 $ 632,834 $ 682,534
</TABLE>
COMPANY PROJECTIONS. To the knowledge of Parent and the Purchaser, the
Company does not as a matter of course make public forecasts as to its future
financial performance.
The Company is subject to the reporting requirements of the Exchange Act
and, in accordance therewith, is required to file reports and other information
with the Commission relating to its business, financial condition and other
matters. Information as of particular dates concerning the Company's directors
and officers, their remuneration, options granted to them, the principal holders
of the Company's securities and any material interests of such persons in
transactions with the Company is required to be disclosed in proxy statements
distributed to the Company's stockholders and filed with the Commission. Such
reports, proxy statements and other information should be available for
inspection at the public reference facilities of the Commission located at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located in the Northwestern Atrium Center, 500 West Madison Street
(Suite 1400), Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor,
New York, New York 10048. Copies should be obtainable, by mail, upon payment of
the Commission's customary charges, by writing to the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such information
should also be available for inspection at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
9. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER.
Parent is an independent oil and gas company engaged primarily in the
exploration and development of domestic oil and gas. Parent is subject to the
reporting requirements of the Exchange Act and, in accordance therewith, is
required to file reports and other information with the Commission relating to
its business, financial condition and other matters. Information as of
particular dates concerning Parent's directors and officers, their remuneration,
options granted to them, the principal holders of Parent's securities and any
material interests of such persons in transactions with Parent is required to be
disclosed in proxy statements distributed to the Parent's stockholders and filed
with the Commission. Parent owns all the outstanding capital stock of the
Purchaser. It is not anticipated that, prior to the consummation of the Offer
and the Merger, the Purchaser will have any significant assets or liabilities or
will engage in any activities other than those incident to the Offer and the
Merger and the financing thereof.
For certain information concerning the directors and executive officers of
the Purchaser, see Schedule to this Offer to Purchase. Except as set forth in
this Offer to Purchase, including the Schedule: (i) none of Parent and the
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Purchaser nor, to the best knowledge of any of the foregoing, any of the persons
listed in Schedule I to this Offer to Purchase or any associate or majority
owned subsidiary of any of the foregoing, beneficially owns or has a right to
acquire any Shares or any other equity securities of the Company; (ii) to the
best knowledge of Purchaser, neither the Purchaser nor any of the persons or
entities referred to in clause (i) above or any of their executive officers,
directors, or subsidiaries has effected any transaction in the Shares or any
other equity securities of the Company during the past 60 days; (iii) none of
the Parent and the Purchaser nor, to the best knowledge of any of the foregoing,
any of the persons listed in Schedule I to this Offer to Purchase has any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of the Company, including but not limited to,
contracts, arrangements, understandings or relationships concerning the transfer
or voting thereof, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding of
proxies, consents or authorizations; (iv) since January 1, 1993, all
transactions and business relationships which would be required to be disclosed
under the rules and regulations of the Commission between any of Parent and the
Purchaser or any of their respective subsidiaries or, to the best knowledge of
any of the Parent and the Purchaser, any of the persons listed in Schedule I to
this Offer to Purchase, on the one hand, and the Company or any of its executive
officers, directors or affiliates, on the other hand, are disclosed in Schedule
I to this Offer; and (v) since January 1, 1993, there have been no contracts,
negotiations or transactions between any of the Parent and the Purchaser or any
of their respective subsidiaries or, to the best knowledge of any of the Parent
and the Purchaser, any of the persons listed in Schedule I to this Offer to
Purchase, on the one hand, and the Company or its subsidiaries or affiliates, on
the other hand, concerning a merger, consolidation or acquisition, tender offer
or other acquisition of securities, an election of directors or a sale or other
transfer of a material amount of assets of the Company or any of its
subsidiaries. Except as set forth in this Offer to Purchase and Schedule I to
this Offer, none of the Parent and the Purchaser had any relationship with the
Company prior to the commencement of the discussions which led to the execution
of the Merger Agreement. See Section 11. Each of the Parent and the Purchaser
disclaims that it is an "affiliate" of the Company within the meaning of Rule
13e-3 under the Exchange Act, although such status may be deemed to exist by
reason of (a) there being common members to the board of directors of Parent,
Purchaser and the Company, (b) the president of Parent is also the president of
the Company, (c) a wholly owned subsidiary of Parent manages certain of the
operations of the Company and (d) certain beneficial owners of a significant
amount of the Company's Shares also own a significant amount of the Parent's
common stock.
10. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Purchaser to purchase all of the
Shares pursuant to the Offer and the Merger and to pay related fees and expenses
is expected to be approximately $1,900,000. Of this amount approximately
$669,000 will be paid to Mr. Warley and $453,641 (plus accrued interest at 7%
per annum) of such amount will be paid in the form a cancellation of a note from
Mr. Warley to Parent. Mr. Warley originally borrowed $582,805 under an eighteen
month term note to Parent and Mr. Warley has agreed in the Merger Agreement to
offset the current balance plus accrued interest from the total amount due him
for tendering the Company's shares and cancellation of his Company stock
options. In addition, the total amount of funds required by the Company to
repurchase or refinance certain of its existing indebtedness is expected to be
approximately $200,000. The Offer is not conditioned on the obtaining of
financing. The Parent and the Purchaser expect to obtain the funds required to
purchase the tendered Shares and the payment of the consideration payable in the
Merger to the holders of Shares from its existing working capital, the sale of
existing marketable securities, the cancellation of Mr. Warley's note and the
balance will be obtained from the Parents existing bank facility. The Parent's
current bank facility is a $20,000,000 credit facility with First Union National
Bank of North Carolina, expiring October, 1997 and secured by oil and gas
properties, requiring the Parent to maintain certain financial and profitability
ratios and restricting the Parent's ability to incur debt, sell assets,
substantially change the ownership or management of Parent or pay dividends.
This facility provides for an $8,000,000 borrowing base with principal payments
of $100,000 per month and interest payable monthly at that banks prime rate plus
0.75%. As of June 1, 1996 the Parent had $6,480,000 outstanding under this
facility.
11. BACKGROUND OF THE OFFER. 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
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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' board, other
than Messrs. Warley, Whitaker and Dillard, 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. 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.
12. PURPOSE OF THE OFFER AND THE MERGER
The purpose of the Offer is to enable Parent to acquire control of, and the
entire equity interest in, the Company. The
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purpose of the Merger is to acquire all outstanding Shares not purchased
pursuant to the Offer. The purchase of Shares pursuant to the Offer will
increase the likelihood that the Merger will be effected. Following the
completion of the Offer, Parent intends to acquire any remaining Shares not
then owned by it by consummating the Merger. In the Merger, each outstanding
Share (other than Shares held by the Company as treasury stock, or owned by
Parent, the Purchaser or any other subsidiary of either Parent or the
Purchaser and other than Shares held by stockholders who perfect appraisal
rights, if any, under Colorado Law), will be converted into the right to
receive the Merger Consideration, without interest, and the Company will
become a wholly owned subsidiary of Parent. The acquisition of the entire
interest in the Company is structured as a cash tender offer followed by a
merger in order to expedite the opportunity for Parent to obtain a
controlling interest in the Company. Under Colorado Law and the Company's
Certificate of Incorporation, the affirmative vote of the holders of a
majority of the outstanding Shares is required to approve the Merger. If the
Minimum Condition is satisfied, Parent would have sufficient voting power to
approve the Merger without the affirmative vote of any other stockholder of
the Company.
PLANS FOR THE COMPANY. If and to the extent that the Purchaser acquires
control of the Company, the Parent intends to conduct a detailed review of the
Company assets, corporate structure, capitalization, operations and properties
and consider and determine what, if any, changes would be desirable in light of
the circumstances which then exist. The Purchaser and Parent have no present
plans nor proposals that would result in an extraordinary corporate transaction,
such as a merger, reorganization, liquidation, or sale or transfer of a material
amount of assets, involving the Company. The Company is in the same business as
the Parent and the Parent in its normal course buys and sells properties and may
do so with respect to properties owned by the Company.
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
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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 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 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
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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 14f-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, 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
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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 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
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
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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 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 to Parent, in such
manner as is designated by Parent, the amount of 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 of Parent 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.
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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 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
(i) 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, 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
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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 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 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. 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
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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 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.
- --RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act("Rule
13e-3"), which is applicable to certain "going private" transactions. Rule 13e-3
requires, among other things, that certain financial information concerning the
company and certain information relating to the fairness of the proposed
transaction and the consideration offered to minority stockholders in such
transaction be filed with the Commission and disclosed to stockholders prior to
consummation of the transaction. Parent has filed Schedule 13e-3. There can
be no assurance that the Merger will take place, even though each party has
agreed in the Merger Agreement to use its best efforts to cause the Merger to
occur, because the Merger is subject to certain conditions, some of which are
beyond the control of either the Purchaser or the Company. Since the Purchaser's
ultimate objective is to acquire ownership of all the Shares, if the Merger does
not take place, the Purchaser would consider the acquisition, whether directly
or through an affiliate of Shares through private or open market purchases, or
subsequent tender offers or a different type of merger or other combination of
the Company with the Purchaser or an affiliate or subsidiary thereof, or by any
other permissible means deemed advisable by it. Except as described in the
section captioned "The Merger Agreement", any of these possible transactions
might be on terms the same as, or more or less favorable than, those of the
Offer or the Merger.
- --RULE 13E-4. The Commission has adopted Rule 13e-4 under the Exchange Act("Rule
13e-4"), which is applicable to certain "issuer tender offers". Rule 13e-4
requires, among other things, that certain financial information concerning the
company and certain other information relating to the proposed transaction be
filed with the Commission and disclosed to stockholders prior to consummation of
the transaction. Parent has filed Schedule 13e-4.
13. DIVIDENDS AND DISTRIBUTIONS. Pursuant to the terms of the Merger
Agreement, the Company is
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prohibited from taking any of the actions described in the two following
paragraphs, and nothing herein shall constitute a waiver by the Purchaser or
Parent of any of its rights under the Merger Agreement or a limitation of
remedies available to the Purchaser or Parent for any breach of the Merger
Agreement, including termination thereof. If on or after the date of the
Merger Agreement the Company should (a) split, combine or otherwise change
the Shares or its capitalization, (b) acquire currently outstanding Shares or
otherwise cause a reduction in the number of outstanding Shares or (c) issue
or sell additional Shares, shares of any other class of capital stock, other
voting securities or any securities convertible into, or rights, warrants or
options, conditional or otherwise, to acquire, any of the foregoing, other
than Shares issued pursuant to the exercise of outstanding employee stock
options, then subject to the provisions of Section 14 below, the Purchaser,
in its sole discretion, may make such adjustments as it deems appropriate in
the Offer Price and other terms of the Offer, including, without limitation,
the number or type of securities offered to be purchased. If on or after
the date of the Merger Agreement the Company should declare or pay any cash
dividend on the Shares or other distribution on the Shares, or issue with
respect to the Shares any additional Shares, shares of any other class of
capital stock, other voting securities or any securities convertible into, or
rights, warrants or options, conditional or otherwise, to acquire, any of the
foregoing, payable or distributable to stockholders of record on a date prior
to the transfer of the Shares purchased pursuant to the Offer to the
Purchaser or its nominee or transferee on the Company's stock transfer
records, then, subject to the provisions of Section 14 below, (a) the Offer
Price may, in the sole discretion of the Purchaser, be reduced by the amount
of any such cash dividend or cash distribution and (b) the whole of any such
noncash dividend, distribution or issuance to be received by the tendering
stockholders will (i) be received and held by the tendering stockholders for
the account of the Purchaser and will be required to be promptly remitted and
transferred by each tendering stockholder to the Depositary for the account
of the Purchaser, accompanied by appropriate documentation of transfer, or
(ii) at the direction of the Purchaser, be exercised for the benefit of the
Purchaser, in which case the proceeds of such exercise will promptly be
remitted to the Purchaser. Pending such remittance and subject to applicable
law, the Purchaser will be entitled to all rights and privileges as owner of
any such noncash dividend, distribution, issuance or proceeds and may
withhold the entire Offer Price or deduct from the Offer Price the amount or
value thereof, as determined by the Purchaser in its sole discretion.
14. CERTAIN CONDITIONS TO THE OFFER. Notwithstanding any other term of the
Offer, the Purchaser shall not be required to accept for payment or pay for,
subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) of the Exchange Act, any Shares not theretofore accepted for
payment or paid for and may terminate or amend the Offer as to such Shares
unless there shall have been validly tendered and not withdrawn prior to the
expiration of the Offer that number of Shares which would represent at least a
majority of the outstanding Shares on a fully diluted basis. Furthermore,
notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser shall not be required to accept for payment or, subject as aforesaid,
to pay for any Shares not theretofore accepted for payment or paid for, and may
terminate or amend the Offer if at any time on or after the date of the Merger
Agreement and before the acceptance of such Shares 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 Parent or the Purchaser
(or any of its affiliates) of Shares 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 pursuant to the Offer or the Merger illegal,
(iii) which seeks to impose limitations on the ability of Parent or
the Purchaser (or any of their affiliates) effectively to
acquire or hold, or to require Parent, the Purchaser 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 Parent, the
Purchaser or their affiliates to exercise full rights of
ownership of the Shares 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
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Company, or
(v) which seeks to limit or prohibit any future business activity by
Parent, the Purchaser 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 Parent,
the Purchaser 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) the Merger Agreement shall have been terminated in accordance with its
terms; or
(d) (i) any of the representations and warranties made by the Company in
the Merger 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 the Merger Agreement; or
(e) any corporation, entity, "group" or "person" (as defined in the Exchange
Act), other than Parent or the Purchaser, shall have acquired beneficial
ownership of more than 49% of the outstanding Shares; or
(f) except as set forth in the Company Reports thereto or the schedules to the
Merger 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 and its
Subsidiaries 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
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 the Merger
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 Parent,
a material acceleration or worsening thereof.
The foregoing conditions are for the sole benefit of Parent and the Purchaser
and may be asserted by Parent or the Purchaser regardless of the circumstances
(including any action or inaction by Parent or the Company) giving rise to any
such condition and may be waived by Parent or the Purchaser, in whole or in
part, at any time and from time to time, in the sole discretion of Parent. The
failure by Parent or the Purchaser 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 not theretofore accepted for payment shall forthwith be returned
by the depositary to the tendering stockholders.
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15. CERTAIN REGULATORY AND LEGAL MATTERS. Except as described in this Section
15, based on a review of publicly available filings made by the Company with the
Commission and other publicly available information concerning the Company, as
well as certain representations made to the Purchaser and Parent in the Merger
Agreement by the Company, neither the Purchaser nor Parent is aware of any
license or regulatory permit that appears to be material to the business of the
Company and its subsidiaries, taken as a whole, that might be adversely affected
by the Purchaser's acquisition of Shares as contemplated herein or of any
approval or other action by any Governmental Entity that would be required for
the acquisition or ownership of Shares by the Purchaser as contemplated herein.
Should any such approval or other action be required, the Purchaser and Parent
currently contemplate that such approval or other action will be sought, except
as described below under "State Takeover Laws". While, except as otherwise
expressly described in this Section 15, the Purchaser does not presently intend
to delay the acceptance for payment of, or payment for, Shares tendered pursuant
to the Offer, pending the outcome of any such matter, there can be no assurance
that any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that failure to obtain any such
approval or other action might not result in consequences adverse to the
Company's business, or that certain parts of the Company's business might not
have to be disposed of if such approvals were not obtained or such other actions
were not taken or in order to obtain any such approval or other action. If
certain types of adverse action are taken with respect to the matters discussed
below, the Purchaser could decline to accept for payment or pay for any Shares
tendered. See Section 14 for certain conditions to the Offer.
STATE TAKEOVER LAWS. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, stockholders, executive offices or places of business in such states. In
EDGAR V. MITE CORP., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS CORP.
V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions.
The Board of Directors has unanimously approved the Merger Agreement and the
transactions contemplated thereby, including the Offer. Neither the Purchaser
nor Parent has currently complied with any state takeover statute or regulation.
The Purchaser reserves the right to challenge the applicability or validity of
any state law purportedly applicable to the Offer or the Merger and nothing in
this Offer to Purchase or any action taken in connection with the Offer or the
Merger is intended as a waiver of such right. If it is asserted that any state
takeover statute is applicable to the Offer or the Merger and an appropriate
court does not determine that it is inapplicable or invalid as applied to the
Offer or the Merger, the Purchaser might be required to file certain information
with, or to receive approvals from, the relevant state authorities, and the
Purchaser might be unable to accept for payment or pay for Shares tendered
pursuant to the Offer or be delayed in consummating the Offer or the Merger. In
such case, the Purchaser may not be obliged to accept for payment or pay for any
Shares tendered pursuant to the Offer.
ANTITRUST. There are exemptions from requirements for filing under the
antitrust laws with the Federal Trade Commission (the "FTC") or the Antitrust
Division of the United States Department of Justice.
OTHER REGULATORY APPROVAL. The Company will seek to obtain all necessary
licenses or certifications as expeditiously as possible.
16. FEES AND EXPENSES. The Purchaser has retained Stock Transfer Company of
America, Inc. to serve as the Depositary in connection with the Offer. The
Depositary will receive reasonable and customary compensation for its services,
be reimbursed for certain reasonable out-of-pocket expenses and be indemnified
against certain liabilities and expenses in connection therewith, including
certain liabilities under the federal securities laws. Neither the Purchaser
nor Parent will pay any fees or commissions to any broker or dealer or other
person in connection with the solicitation of tenders of Shares pursuant to the
Offer, except as may be required to reimburse for forwarding information to the
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beneficial owners by nominee holders.
17. MISCELLANEOUS. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction. Neither the Purchaser nor Parent is aware of
any jurisdiction in which the making of the Offer or the tender of Shares in
connection therewith would not be in compliance with the laws of such
jurisdiction. If the Purchaser or Parent becomes aware of any state law
prohibiting the making of the Offer or the acceptance of Shares pursuant thereto
in such state, the Purchaser will make a good faith effort to comply with any
such state statute or seek to have such state statute declared inapplicable to
the Offer. If, after such good faith effort, the Purchaser cannot comply with
any such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THE
DELIVERY OF THIS OFFER TO PURCHASE NOR ANY PURCHASE PURSUANT TO THE OFFER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF PARENT, THE PURCHASER OR THE COMPANY SINCE THE DATE AS OF WHICH
INFORMATION IS FURNISHED OR THE DATE OF THIS OFFER TO PURCHASE.
The Purchaser or Parent has filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional
information with respect to the Offer. In addition, the Company has filed with
the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act,
setting forth its recommendation with respect to the Offer and the reasons for
such recommendation and furnishing certain additional related information. Such
Schedules and any amendments thereto, including exhibits, should be available
for inspection and copies should be obtainable in the manner set forth in
Sections 8 and 9 (except that they will not be available at the regional offices
of the Commission).
FORWARDING COSTS. Parent will reimburse any nominee holder of Company Shares
its reasonable out of pocket costs in forwarding the offer to beneficial owners
of the Shares
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SCHEDULE I
CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS
OF PARENT AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT.
Set forth below is the name, business address, age, position with
Parent, present principal occupation or employment and five-year employment
history of each director and executive officer of Parent. All persons listed
below are citizens of the United States of America.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME OFFICE HELD IN PARENT FIVE-YEAR
EMPLOYMENT HISTORY AGE
Name Age Position and Occupation
DEAS H. WARLEY III 53 President and Chairman of the Board of
16701 Greenspoint Directors of Parent has been employed in the
Park Drive, Suite 200 oil and gas industry since 1979. Mr. Warley has
Houston, TX 77060 been Chairman and President of Midland
Resources Operating Company, Inc. ("MRO"), an
oil and gas operating company, since its
inception in 1988. Mr. Warley has been Chairman
and President of Summit Petroleum, Inc. (the
"Company"), a public oil and gas production and
operating corporation with properties in Texas,
Colorado, Oklahoma and Wyoming, since 1989 and
owns approximately 37.5 percent of the Company.
From May, 1984 until its sale and dissolution
in October, 1988, Mr. Warley was the founder,
Chairman, and co-owner of another entity also
then known as Midland Resources, Inc., also an
oil and gas company. Mr. Warley received a
Bachelor of Science Degree in Engineering from
Arizona State University in 1971 and Master of
Science Degree in Engineering from the Air
Force Institute of Technology in 1973. Mr.
Warley is a member of the National Petroleum
Council, the Texas representative to the
Strategic Technological Council, and a member
of the Review Panel for the Department of
Energy Natural Gas and Oil Technology
Partnership. Mr. Warley is a registered
Professional Engineer in the state of Texas. He
is a member of the Independent Petroleum
Association of America, the Permian Basin
Petroleum Association, the North Texas Oil and
Gas Association, and the Society of Petroleum
Engineers.
DARRELL M. DILLARD 48 Darrell M. Dillard was elected as a director of
415 West Wall Parent in July 1994, Vice President in April
Suite 1510 1995 and Chief Financial Officer in December,
Midland, TX 79701 1995. He is an independent Certified Public
Accountant who has been engaged in public and
industry accounting for the oil and gas
industry in Midland, Texas since 1980. Prior to
1980, Mr. Dillard worked for the U.S.
Department of Treasury. He served from 1981 to
1982 on the board of directors and as treasurer
for a large independent oil and gas exploration
and production company with operations in
various states. He is a member of the American
Institute of Certified Public Accountants, the
Texas Society of Certified Public Accountants,
the Petroleum Accountants Society, and the
Independent Petroleum Association of America.
Mr. Dillard graduated from Midwestern State
University with a Bachelors degree in Business
Administration in Accounting in 1975. Mr.
Dillard has been a director of the Company, a
public oil and gas corporation since 1995.
<PAGE>
ROBERT R. DONNELLY 47 Robert R. Donnelly was elected a director of
415 West Wall Parent in July 1990. Mr. Donnelly has been the
Suite 1510 Corporate Vice President and Treasurer of
Midland, TX 79701 Eastland Oil Company since 1988, responsible
for gas contracts, land department, accounting
and administration; from 1985 until 1988 Vice
President in charge of land management; and
from 1983 until 1985 he was land manager and in
charge of partnership relations. Mr. Donnelly
has 18 years of experience in various domestic
and international land and land management
positions with major and independent oil and
gas companies. He graduated from the University
of Texas in 1973 with a Bachelor of Arts Degree
in Economics and is a Certified Professional
Landman. He has served as Director of the
Independent Petroleum Association of America,
the Permian Basin Association of Petroleum
Landsmen, and the West Texas Producers Forum.
SAM R. BROCK 50 Sam R. Brock was elected as a director of
16701 Greenspoint Parent on April 10, 1995. He has been active in
Park Drive, Suite 200 the oil and gas industry since 1974. From
Houston, TX 77060 February 1994 until the present he has owned
and operated NRG Consultants, Inc., a
commercial crude oil trading and transportation
consulting company. From 1987 until 1994 he was
Vice President-Gathering Division of Phibro
Energy USA, Inc., a subsidiary of Solomon
Brothers, Inc. From 1980 until 1986 he was
President and majority shareholder of NRG
Gathering Company a private oil and gas
gathering company that was sold in 1986 to
Tesoro Petroleum Corporation. Mr. Brock
graduated from Texas Tech University with a
Bachelor's degree in marketing in 1969.
WAYNE M. WHITAKER 48 Mr. Whitaker has been a partner in the firm
301 Commerce St. Michener, Larimore, Swindle, Whitaker, Flowers,
Suite 3500 Sawyer, Reynolds & Chalk, L.L.P. (and its
Ft. Worth, TX 76102 predecessor firms) since 1978. He received his
business and law degrees from Baylor University
in 1971, and his Master of Laws from Southern
Methodist University in 1972. From 1972 until
1978 he worked for the Securities and Exchange
Commission in Fort Worth, Texas. Mr. Whitaker
has been a director of the Company, a public
oil and gas corporation since 1995.
2. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER.
Unless otherwise indicated below, all information concerning each person
listed below is the same as shown above.
NAME OFFICE HELD IN PURCHASER
DEAS H. WARLEY III DIRECTOR, PRESIDENT, SECRETARY, TREASURER
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK OF
SUMMIT PETROLEUM CORPORATION
PURSUANT TO THE OFFER TO PURCHASE DATED JULY 17, 1996
BY MRI ACQUISITION CORP. A CORPORATION FORMED BY MIDLAND RESOURCES, INC.
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 DEPOSITARY FOR THE OFFER IS
STOCK TRANSFER COMPANY OF AMERICA, INC.
BY MAIL: BY HAND/OVERNIGHT:
P.O. BOX 796277 2415 MIDWAY ROAD, NO. 125
DALLAS, TEXAS 75379 DALLAS, TEXAS 75006
TELEPHONE (214)733-3060
FOR INFORMATION:(713) 873-4828
BY FACSIMILE TRANSMISSION:(713) 873-5058
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN THAT SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST
SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED
BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. THE INSTRUCTIONS
ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders of Shares (as
defined below) (the "Tendering Stockholders") for the certificates evidencing
Shares ("Certificates") to be forwarded herewith.. Tendering Stockholders whose
Certificates for Shares are not immediately available or who cannot deliver
their Certificates for their Shares and all other required documents to the
Depositary prior to the expiration Date (as defined in Section 1 of the Offer
to Purchase) may tender their Shares according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2
hereof.
DESCRIPTION OF SHARES TENDERED:
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
-----------------------------
(PLEASE FILL IN EXACTLY AS NAME(S) APPEARS -----------------------------
ON THE CERTIFICATE(S)) -----------------------------
-----------------------------
TOTAL NUMBER OF SHARES* -----------------------------
(*) UNLESS OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL SHARES
REPRESENTED BY CERTIFICATES DELIVERED TO THE DEPOSITARY ARE BEING
TENDERED. SEE INSTRUCTION 4.
/___/ CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
NAME(S) OF REGISTERED HOLDER(S): ------------------------------
WINDOW TICKET NUMBER (IF ANY): ------------------------------
DATE OF EXECUTION OF NOTICE OF GUARANTEED ------------------------------
DELIVERY: ------------------------------
NAME OF INSTITUTION WHICH GUARANTEED DELIVERY: ------------------------------
------------------------------
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to MRI Acquisition Corp. ("Purchaser"), a
Texas corporation and a wholly owned subsidiary of Midland Resources, Inc.,
Texas corporation ("Parent"), the above-described shares of Common Stock, par
value $.01 per share (the "Common Stock" or the"Shares"), of Summit
Petroleum Corporation, a Colorado corporation ("Company"), at a purchase
price of $0.70 per Share, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated July 17, 1996 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively, constitute the "Offer"). The
Purchaser has been formed by Parent in connection with the Offer and the
transactions contemplated thereby. The Offer is being made in connection with
the Agreement and Plan of Merger dated as of July 17 ,1996, among Parent, the
Purchaser and the Company. The undersigned understands that the Purchaser
reserves the right to transfer or assign, in whole or from time to time
in part, to one or more of its or Parent's affiliates, the right to purchase
all or any portion of the Shares tendered pursuant to the Offer, but any
such transfer or assignment will not relieve the purchaser of its obligations
under the Offer or prejudice the rights of tendering Stockholders to
receive payment for Shares validly tendered and accepted for payment
pursuant to the Offer. Subject to, and effective upon, acceptance for payment
of, or payment for, Shares tendered herewith in accordance with the terms
and subject to the conditions of the Offer (including, if the Offer is
extended or amended, the terms or conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to, or upon the
order of, the Purchaser all right, title and interest in and to all of the
Shares that are being tendered hereby and any and all other Shares or other
securities issued or issuable in respect of such Shares on or after July 17,
1996 (a "Distribution") and irrevocably constitutes and appoints the Depositary
the true and lawful agent and attorney-in-fact of the undersigned with respect
to such Shares (and any distributions), with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest) to (i) deliver Certificates evidencing such Shares (and
Distributions)with all accompanying evidences of transfer and authenticity to,
or upon the order of, the Purchaser, upon receipt by the Depositary as the
undersigned's agent, of the purchase price with respect to such Shares, (ii)
present such Shares (and all Distributions)for transfer on the books of the
Company and (iii) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares (and any distributions), all in accordance
with the terms and subject to the conditions of the Offer. The undersigned
hereby irrevocably appoints each of Deas H. Warley, Wayne M. Whitaker and
Marilyn Wade (each a "Purchaser Designee") as the attorney-in-fact and proxy
of the undersigned, each with full power of substitution, to the full extent of
the undersigned's rights with respect to all Shares tendered hereby and accepted
for payment and paid for by the Purchaser(and any Distributions), including,
without limitation, the right to vote such Shares (and any Distributions) in
such manner as each such attorney and proxy or his substitute shall, in his ole
discretion, deem proper. All such powers of attorney and proxies, being deemed
to be irrevocable, shall be considered coupled with an interest in the Shares
tendered herewith. Such appointment will be effective when, and only to the
extent that, the Purchaser accepts such Shares for payment. Upon such
acceptance for payment, all prior powers of attorney and proxies given by the
undersigned with respect to such Shares (and any distributions)will be revoked,
without further action, and no subsequent powers of attorney and proxies may be
given with respect thereto (and, if given, will be deemed ineffective). The
Purchaser Designees will, with respect to the Shares(and any Distributions), for
which such appointment is effective, be empowered to exercise all voting and
other rights of the undersigned with respect to such Shares (and any
Distributions) as they in their sole discretion may deem proper. The Purchaser
reserves the absolute right to require that, in order for Shares to be deemed
validly tendered, immediately upon the acceptance for payment of such Shares,
the Purchaser or the Purchaser Designees are able to exercise full voting rights
and all other rights which inure to a record and beneficial holder with respect
to such Shares (and any Distributions), including voting at any meeting of
stockholders then scheduled. All authority conferred or agreed to be conferred
in this Letter of Transmittal shall be binding upon the successors, assigns,
heirs, executors, administrators, trustee in bankruptcy, personal and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. Except as stated in the
Offer to Purchase, this tender is irrevocable, provided that the Shares
tendered pursuant to the Offer may be withdrawn prior to their acceptance for
payment. The undersigned hereby represents and warrants that the undersigned
has full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any Distributions) and that, when the same are accepted for
payment and paid for by the Purchaser, the Purchaser will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and
<PAGE>
encumbrances, and that the Shares tendered hereby (and any Distributions)will
not be subject to any adverse claim. The undersigned, upon request, will
execute and deliver any additional documents deemed by the Depositary or the
purchaser to be necessary or desirable to complete the sale, assignment and
transfer of Shares tendered hereby (and any Distributions). In addition, the
undersigned shall promptly remit and transfer to the Depositary for the
account of the Purchaser any and all Distributions issued to the undersigned
on or after July 17, 1996 in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer, and, pending such
remittance and transferor appropriate assurance thereof, the Purchaser shall
be entitled to all rights and privileges as owner of any such Distributions
and may withhold the entire purchase price or deduct from the purchase price
the amount of value thereof, as determined by the Purchaser in its sole
discretion. The undersigned understands that the valid tender of Shares
pursuant to anyone of the procedures described in Section 3 of the Offer to
Purchase and in the instructions hereto will constitute a binding agreement
between the undersigned and the Purchaser with respect to such Shares upon
the terms and subject to the conditions of the Offer. The undersigned
recognizes that, under certain circumstances set forth in the Offer to
Purchase, the Purchaser may not be required to accept for payment any of the
Shares tendered hereby or may accept for payment fewer than all of the Shares
tendered hereby. Unless otherwise indicated herein under "Special Payment
Instructions,"please issue a check for the purchase price and/or return any
Certificates evidencing Shares not tendered or not accepted for payment in
the names(s) of the registered holder(s) appearing under "Description of
Shares Tendered." Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail the check for the purchase price and/or
return any Certificates evidencing Shares not tendered or not accepted for
payment (and accompanying documents, as appropriate) to the address(es) of
the registered holder(s)appearing under "Description of Shares Tendered." In
the event that both the"Special Payment Instructions" and the "Special
Delivery Instructions" are completed, please issue the check for the purchase
price and/or return any such Certificates evidencing Shares not tendered or
not accepted for payment (and accompanying documents, as appropriate) in the
name(s) of, and deliver such check and/or return such Certificates (and
accompanying documents, as appropriate) to, the person(s) so indicated. The
undersigned recognizes that the Purchaser has no obligations pursuant to
the"Special Payment Instructions" to transfer any Shares from the name of the
registered holder thereof if the Purchaser does not accept for payment any of
the Shares tendered hereby.
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed only if
Certificates for Shares not
tendered or not accepted for
payment and/or the check for
the purchase price of Shares
accepted for payment are to be
issued in the name of someone
other than the undersigned.
ISSUE (check appropriate
box(es)
/ / Check to:
/ / Certificates to:
Name
- -------------------------------
Address -----------------------
- -------------------------------
- -------------------------------
(include Zip Code)
- -------------------------------
Tax Identification No. /or/
Social Security Number
See Form W-9
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be Completed only if
Certificates for Shares not
tendered or not accepted for
payment and/or the check for
the purchase price of Shares
accepted for payment are to be
sent to someone other than the
undersigned or to the
undersigned at an address other
than that shown above.
MAIL (check appropriate box(es)
/ / Check to
/ / Certificate to:
Name
- -------------------------------
Address -----------------------
- -------------------------------
- -------------------------------
(include Zip Code)
- -------------------------------
Tax identification
No. /or/ Social Security Number
See Form W-9
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES.
Except as otherwise provided below, signatures on this Letter of
Transmittal must be guaranteed by a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of a recognized
Medallion Program approved by The Securities Transfer Association, Inc. (an
"Eligible Institution"), unless the Shares tendered hereby are tendered (i) by
the registered holder of such Shares who has completed neither the box labeled
"Special Payment Instructions" nor the box labeled "Special Delivery
Instructions" herein or (ii) for the account of an Eligible Institution. See
Instruction 5. If the Certificates are registered in the name of a person other
than the signer of this Letter of Transmittal, or if payment is to be made or
delivered to, or Certificates evidencing unpurchased Shares are to be issued or
returned to, a person other than the registered owner, then the tendered
Certificates must be endorsed or accompanied by duly executed stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appear on the Certificates or stock powers guaranteed by an Eligible
Institution as provided herein. See Instruction 5.
2. REQUIREMENTS OF TENDER.
This Letter of Transmittal is to be completed by Tendering Stockholders
if Certificates evidencing Shares are to be forwarded herewith. For a Tendering
Stockholder to validly tender Shares pursuant to the Offer, either (a) a
properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) with any required signature guarantees, and any
other documents required by this Letter of Transmittal, must be received
by the Depositary at its address set forth herein on or prior to the
Expiration Date or (b) the Tendering Stockholder must comply with the
guaranteed delivery procedures set forth below and in Section 3 of the Offer
to Purchase. Tendering Stockholders whose Certificates are not immediately
available or who cannot deliver their Certificates and all other required
documents to the Depositary on or prior to the expiration Date may tender
their Shares by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such
tender must be made by or through an Eligible Institution, (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially
in the form made available by the Purchaser, must be received by the Depositary
prior to the Expiration Date, and (iii) the Certificates representing
all tendered Shares in proper form for transfer together with a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) with any required signature guarantees and any other
documents required by this Letter of Transmittal, must be received by the
Depositary within three NYSE trading days after the date of such Notice of
Guaranteed Delivery. If Certificates are forwarded separately to the Depositary,
a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof) must accompany each such delivery. THE
METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or
contingent tenders will be accepted and no fractional Shares will be purchased.
All tendering Stockholders, by execution of this Letter of Transmittal (or a
facsimile thereof), waive any right to receive any notice of the acceptance of
their Shares for payment.
3. INADEQUATE SPACE.
If the space provided herein is inadequate, the information required
under "Description of Shares Tendered" should be listed on a separate signed
schedule attached hereto.
4. PARTIAL TENDERS.
If fewer than all the Shares represented by any Certificates delivered
to the Depositary herewith are to be tendered hereby, fill in the number of
Shares which are to be tendered in the box entitled"Number of Shares
Tendered." In such case, a new Certificate for the remainder of the Shares that
were evidenced by your old certificate(s) will be sent, without expense, to
the person(s) signing this Letter of Transmittal, unless otherwise provided in
the box entitled
<PAGE>
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions" or this Letter of Transmittal, as soon as practicable after
the Expiration Date. All Shares represented by Certificate(s) delivered to
the Depositary will be deemed to have been tendered unless otherwise
indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, INSTRUMENTS OF TRANSFER AND
ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, the signature(s) must correspond with the name(s) as
written on the face of the Certificates without alteration, enlargement or any
change whatsoever. If any of the Shares tendered hereby are owned of record by
two or more joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of Certificates. If
this Letter of Transmittal or any Certificates or instruments of transfer are
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Purchaser of such person's authority to so act must be
submitted. If this Letter of Transmittal is signed by the registered holder(s)
of the Shares listed and transmitted hereby, no endorsements of Certificates
or separate instruments of transfer are required unless payment is to be made,
or Certificates not tendered or not purchased are to be issued or returned, to a
person other than the registered holder(s). Signatures on such Certificates or
instruments of transfer must be guaranteed by an Eligible Institution. If this
Letter of Transmittal is signed by a person other than the registered
holder(s) of the Shares evidenced by the certificate(s) listed and transmitted
hereby, the Certificate(s) must be endorsed or accompanied by appropriate
instruments of transfer, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the Certificate(s). Signatures on any such
Certificates or instruments of transfer must be guaranteed by an Eligible
Institution.
6. TRANSFER TAXES.
Except as set forth in this Instruction 6, the purchaser will pay or
cause to be paid any transfer taxes with respect to the transfer and sale of
Shares to it or its order pursuant to the Offer. If, however, payment of the
purchase price is to be made to, or (in the circumstances permitted hereby) if
Certificates for Shares not tendered or not purchased are to be registered in
the name of, any person other than the registered holder(s), or if tendered
Certificates are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any transfer taxes (whether
imposed on the registered holder(s) or such persons) payable on account of the
transfer to such person will be deducted from the purchase price unless
satisfactory evidence of the payment of such taxes or exemption therefrom is
submitted. Except as provided in this Instruction 6, it will not be necessary
for transfer tax stamps to be affixed to the Certificate(s) listed in this
Letter of Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS.
If a check and/or Certificates for unpurchased Shares are to be issued in
the name of a person other than the signer of this Letter of Transmittal or if a
check is to be sent and/or such Certificates are to be returned to someone other
than the signer of this Letter of Transmittal or to an address other than that
shown above, the appropriate boxes on this Letter of Transmittal must be
completed.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions and requests for assistance may be directed to the Depositary at
its respective address or telephone number set forth above and requests for
additional copies of the Offer to Purchase, this Letter of Transmittal and the
Notice of Guaranteed Delivery may be directed to the Purchaser or Depositary
and such materials will be furnished at the Purchaser's expense.
9. WAIVER OF CONDITIONS.
The conditions of the Offer may be waived by the purchaser, in whole or in
part, at any time or from time to time, in the purchaser's sole discretion.
10. BACKUP WITHHOLDING.
<PAGE>
Each Tendering Stockholder is required to provide the Depositary with a
correct Taxpayer Identification Number ("TIN") on Form W-9, which is provided
under "Important Tax Information" below and to certify that the stockholder is
not subject to backup withholding. Failure to provide the information on the
Substitute Form W-9 may subject the Tendering Stockholder to 31% federal income
tax backup withholding on the payment of the purchase price for the Shares. The
Tendering Stockholder should indicate in the box in Part III of the Substitute
Form W-9 if the TENDERING STOCKHOLDER has not been issued a TIN and has applied
for a TIN or intends to apply for a TIN in the near future. If the Tendering
Stockholder has indicated in the box in Part III that a TIN has been applied for
and the Depositary is not provided with a TIN by the time of payment, the
Depositary will withhold 31% of all payments of the purchase price, if any,
made thereafter pursuant to the Offer until a TIN is provided by the
Depositary.
11. LOST OR DESTROYED CERTIFICATES.
If any Certificate representing Shares has been lost or destroyed, the
holder(s) should promptly notify the Company's transfer agent and registrar,
Stock Transfer Company of America, Inc., (if by delivery) 2415 Midway Road,
Suite 125, Carrollton, Texas 75006, (if by mail) P.O. Box 796277, Dallas, Texas
75379, telephone (214) 733-3060. The holders will then be instructed as to the
procedure to be followed in order to replace such Certificate. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost or destroyed Certificates have been followed. IMPORTANT: THIS
LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE THEREOF (TOGETHER WITH
CERTIFICATES AND ANY OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE
DEPOSITARY, OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Tendering Stockholder whose tendered Shares
are accepted for payment is required to provide the Depositary (as payor) with
such Tendering Stockholder's correct TIN on Form W-9 below. If such Tendering
Stockholder is an individual, the TIN is his social security number. If the
Tendering Stockholder has not been issued a TIN and has applied for a number or
intends to apply for a number in the near future, such TENDERING STOCKHOLDER
should so indicate on the Form W-9. If the Depositary is not provided with the
correct TIN, the Tendering Stockholder may be subject to a $50 penalty imposed
by the Internal Revenue Service. In addition, payments that are made to such
Tendering Stockholders with respect to Shares purchased pursuant to the Offer
may be subject to backup federal income tax withholding. Certain Tendering
Stockholders (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that Tendering Stockholder must submit a statement, signed under
penalties of perjury, attesting to that individual's exempt status. Forms for
such statements may be obtained from the Depositary. See the enclosed Form W-9
for additional instructions. If backup withholding applies, the Depositary is
required to withhold 31% of any payments made to the Tendering Stockholder.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of taxes, a refund may
be obtained from the Internal Revenue Service.
PURPOSE OF FORM W-9
To prevent backup federal income tax withholding on payments of the
purchase price for Shares purchased pursuant to the Offer, a Tendering
Stockholder must provide the depositary with his or her correct TIN by
completing the Form W-9 below, certifying that the TIN provided on Form W-9 is
correct (or that such Tendering Stockholder is awaiting a TIN) and that (1) such
Tendering Stockholder has not been notified by the Internal Revenue Service that
he or she is subject to backup withholding as a result of failure to report all
interest or dividends or (2) the Internal Revenue Service has notified the
Tendering Stockholder that he or she is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Tendering Stockholder is required to give the Depositary the social
security number or employer identification number of the record owner of the
Shares tendered hereby. If the Shares are registered in more than one name or
are not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Form W-9 for additional
guidelines on which number to report. If the Tendering Stockholder has not
been issued a TIN and has applied for a number or intends to apply for a number
in the near future, he or she
<PAGE>
should write "Applied For" in the space provided for in the TIN in Part III,
and sign and date the Form W-9. If "Applied For" is written in Part III and
the Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% on all payments of the purchase price made thereafter until a
TIN is provided to the Depositary.
IMPORTANT TENDERING SHAREHOLDER: SIGN HERE AND COMPLETE FORM W-9 ON REVERSE
Dated: , 1996
- ------------------------------------------ ----------
SIGNATURE(S) OF TENDERING STOCKHOLDERS(S))
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock Certificate(s) or on a security position listing or by the person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, agent, officer of a corporation
or other person acting in a fiduciary or representative capacity, please
set forth full title and see Instruction 5).
NAME(S):
(PLEASE PRINT)
----------------------------------------------
CAPACITY (FULL TITLE):
--------------------------------------
(SEE INSTRUCTION 5)
ADDRESS:
----------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
(INCLUDE ZIP CODE)
AREA CODE AND TELEPHONE NO.:
(HOME)
-------------------------------------------------------
(BUSINESS)
---------------------------------------------------
TAX IDENTIFICATION NO. OR SOCIAL SECURITY NO.:
--------------------
(COMPLETE ATTACHED FORM W-9)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY
FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE BELOW
- --------------------------------------------------------------------------------
FOR INFORMATION
MIDLAND RESOURCES, INC.
16701 GREENSPOINT PARK DRIVE, SUITE 200
HOUSTON, TEXAS 77060
CALL (713)873-4828
FAX (713) 873-5058
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[OFFICIAL INTERNAL REVENUE
SERVICE FORM W-9]
<PAGE>
LOST STOCK CERTIFICATE INSTRUCTIONS:
If you cannot locate your Stock Certificate then you MUST COMPLETE WITH AN
ORIGINAL SIGNATURE AND NOTARY, the affidavit below AND submit it to the
Depositary PRIOR to the Expiration Date as follows:
<TABLE>
<S> <C>
If by Mail: Stock Transfer Company of America, Inc. If by deliveryservice: Stock Transfer Company of America, Inc.
P.O. Box 796277 2415 Midway Road, Suite 125
Dallas, Texas 75379 Carrollton, Texas 75006
Tele. (214) 733-3060
</TABLE>
AFFIDAVIT AND AGREEMENT OF INDEMNITY:
"THE UNDERSIGNED, for the purpose of inducing MRI Acquisition Corp.
("Purchaser") to pay for my Shares in accordance with the terms of the Offer
without my delivering the stock certificate representing my Shares being
submitted for tender and without the reissuance of a replacement stock
certificate, does hereby certify and agree:
That the following original stock certificate has been mislaid, lost, stolen, or
destroyed:
Certificate No.:
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No. of Shares:
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In name of:
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That I have made or caused to be made a diligent search for said original
stock certificate and have been unable to find or recover it; that none of said
stock nor any interest therein has been sold, assigned, endorsed, transferred,
deposited under any agreement, hypothecated, pawned, pledged for any loan, or
disposed of in any manner by me or on my behalf; that neither I nor anyone on my
behalf has signed any power of attorney, any stock power, or other assignment or
authorization respecting said original stock certificate which now is
outstanding and in force; and that no other person, firm or corporation has any
right, title, claim, equity, or interest in, to, or respecting said original
stock certificate and the shares of the Company represented thereby; and
That if said original stock certificate comes into my hands, custody, or
control, I will deliver or cause said stock certificate to be delivered to the
Depositary, in order that same be canceled.
I hereby agree that I, will indemnify forever and fully and save harmless
the Purchaser, Parent and the Company, its shareholders, directors, officers,
employees, attorneys, representatives and agents from any loss, liability, and
damage to which they or any or either of them may be subjected by reason of said
original stock Certificate. I further agree that in consideration of SEABOARD
SURETY COMPANY assuming liability or liability attaching under its indemnity
Bond in favor of the Company and its agents, the undersigned (jointly and
severally, if more than one) hereby agrees at all times to indemnify and save
harmless SEABOARD SURETY COMPANY from and against any and all liabilities,
losses, damages, judgments, costs, charges, counsel fees and expenses of every
nature and character which they may sustain or incur by reason or on account of
assuming liability or liability attaching under its indemnity Bond."
EXECUTED under oath this day of ,1996.
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/
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Signature of Registered Holder(s)
NOTICE: The signature of the registered holder
must correspond in every way with the name
appearing on the face of the Stock Certificate.
Subscribed and sworn to before me this day of , 1996.
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Notary Public for
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[Notary Seal]
Notary Signature
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Notary Name
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Exhibit 99(a)(3)
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
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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
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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
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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. (a) 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. (a) 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
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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
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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.
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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
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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
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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.
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