<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or 14a-12
ALAMCO, INC.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount previously paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE> 2
ALAMCO, INC.
200 WEST MAIN STREET
CLARKSBURG, WEST VIRGINIA 26301
July 16, 1997
Dear Alamco Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Alamco, Inc. ("Alamco") to consider the acquisition of Alamco by Columbia
Natural Resources, Inc. ("CNR"). The Special Meeting will be held at The Westin
William Penn, 530 William Penn Place, Pittsburgh, Pennsylvania, on Thursday,
August 7, 1997, at 10:00 a.m., local time.
As is explained in the attached Notice of Special Meeting of Stockholders,
the purpose of the Special Meeting is to consider and vote upon the approval and
adoption of the Agreement and Plan of Merger, dated as of May 27, 1997, among
Alamco, CNR and Appalachian Acquisition Company, a subsidiary of CNR. If this
agreement is approved and adopted and the merger is consummated, each share of
Alamco common stock that you own will be converted into the right to receive
$15.75 per share in cash. Each outstanding warrant and option to purchase Alamco
common stock also will be converted into the right to receive $15.75 per share
in cash, net of the applicable exercise price.
The Board of Directors of Alamco carefully reviewed the terms of the
agreement and the proposed merger. Due to the significance of the proposed
merger to all stockholders of Alamco, the Board of Directors retained Principal
Financial Securities, Inc. to render its opinion as to the fairness from a
financial point of view of the consideration to be received by stockholders of
Alamco in the proposed merger. After considering a variety of factors, including
the favorable fairness opinion of Principal Financial Securities, Inc., the
Board of Directors of Alamco unanimously approved the proposed merger, and
recommends a vote FOR approval and adoption of the Agreement and Plan of Merger.
Alamco subsequently received a favorable update to the Principal Financial
Securities, Inc. opinion as of July 16, 1997.
You are urged to carefully review the attached Proxy Statement, which
describes the proposed merger more fully.
It is important that your shares be represented at the Special Meeting
whether or not you are personally able to attend the meeting. For the Agreement
and Plan of Merger to be approved, the affirmative vote of a majority of the
outstanding shares of stock entitled to vote on such agreement is required. In
order to ensure that your shares are represented, please complete and sign the
enclosed proxy card and return it promptly in the enclosed envelope. If you
attend the Special Meeting, you may revoke your proxy at the Special Meeting by
voting in person.
Sincerely,
/s/ John L. Schwager
John L. Schwager
President and Chief Executive Officer
<PAGE> 3
ALAMCO, INC.
200 WEST MAIN STREET
CLARKSBURG, WEST VIRGINIA 26301
(304) 623-6671
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 7, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Alamco,
Inc., a Delaware corporation ("Alamco"), will be held at The Westin William
Penn, 530 William Penn Place, Pittsburgh, Pennsylvania, on Thursday, August 7,
1997, at 10:00 a.m., local time, for the following purposes:
1. To consider and vote upon the approval and adoption of the
Agreement and Plan of Merger (the "Merger Agreement"), dated as of May 27,
1997, among Alamco, Columbia Natural Resources, Inc., a Texas corporation
("CNR"), and Appalachian Acquisition Company, a Delaware corporation and
wholly owned subsidiary of CNR ("AAC"), pursuant to which, upon the
satisfaction or waiver of certain conditions set forth therein, (i) AAC
will be merged (the "Merger") with and into Alamco, with Alamco surviving
as a wholly owned subsidiary of CNR, and (ii) each outstanding share of
common stock, par value $.10 per share, of Alamco ("Alamco Common Stock")
on a fully diluted basis (other than shares held by stockholders of Alamco
seeking appraisal rights) will be converted into the right to receive
$15.75 per share in cash; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only holders of record of Alamco Common Stock at the close of business on
June 25, 1997 are entitled to notice of and to vote at the Special Meeting and
any adjournment or postponement thereof.
No proxy granted that directs the shares represented thereby to be voted
against the first proposal above will be voted in favor of any adjournment of
the Special Meeting for purposes other than the absence of a quorum.
Any stockholder entitled to vote at the Special Meeting will have the right
to dissent from the Merger and obtain an appraisal of the fair value of his
shares upon compliance with the applicable provisions of Delaware law.
Copies of the Merger Agreement and Section 262 of the Delaware General
Corporation Law relating to appraisal rights of stockholders are attached at
Annex A and Annex C, respectively, to the accompanying Proxy Statement.
By Order of the Board of Directors,
G. Jane Merandi
July 16, 1997
YOUR VOTE IS IMPORTANT. IN ORDER TO ENSURE THAT YOUR SHARES ARE REPRESENTED
AT THE SPECIAL MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHICH NEEDS NO POSTAGE IF MAILED IN
THE UNITED STATES. YOUR PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS
INDICATED ON THE PROXY CARD, AND IF NO INSTRUCTIONS ARE GIVEN, YOUR PROXY WILL
BE VOTED FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
<PAGE> 4
ALAMCO, INC.
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 7, 1997
This Proxy Statement is being furnished to stockholders of Alamco, Inc., a
Delaware corporation ("Alamco"), in connection with the solicitation of proxies
by the Board of Directors of Alamco for use at the Special Meeting of
Stockholders of Alamco to be held on August 7, 1997 (the "Special Meeting") and
at any adjournment or postponement thereof.
At the Special Meeting, stockholders of Alamco eligible to vote will be
asked to consider and to vote on the approval and adoption of the Agreement and
Plan of Merger (the "Merger Agreement"), dated as of May 27, 1997, among Alamco,
Columbia Natural Resources, Inc., a Texas corporation ("CNR"), and Appalachian
Acquisition Company, a Delaware corporation and wholly owned subsidiary of CNR
("AAC"), pursuant to which, among other things and upon the satisfaction or
waiver of certain conditions set forth therein, (i) AAC will be merged (the
"Merger") with and into Alamco, with Alamco surviving as a wholly owned
subsidiary of CNR, and (ii) each issued and outstanding share of common stock,
par value $.10 per share, of Alamco ("Alamco Common Stock") on a fully diluted
basis (other than shares held by stockholders of Alamco seeking appraisal
rights) will be converted into the right to receive $15.75 per share in cash. A
copy of the Merger Agreement is attached as Annex A to this Proxy Statement.
Alamco is an Appalachian-based independent gas and oil producer actively
engaged in the acquisition, exploitation, exploration, development and
production of domestic gas and oil. Alamco's activities are conducted in West
Virginia, Tennessee and Kentucky, with an emphasis on producing natural gas for
ultimate sale to customers in the Northeast gas markets. Wright and Company,
Inc., independent petroleum engineers, estimate that the Company's proved
reserves totalled 147.8 equivalent billion cubic feet as of December 31, 1996,
using a conversion of six thousand cubic feet of gas to one barrel of oil. As of
December 31, 1996, Alamco had an average ownership interest of 86.3% in 1,203
gross wells and operated 94.7% of the wells in which it had an ownership
interest.
Alamco was organized in 1981 as the successor of a privately held entity,
Allegheny Land And Mineral Company, which had been engaged in the gas and oil
business since 1956, and to certain interests in various gas and oil programs
sponsored and/or operated by Alamco's predecessor. Alamco's principal executive
offices are located at 200 West Main Street, Clarksburg, West Virginia 26301,
and its telephone number is (304) 623-6671.
This Proxy Statement and the enclosed proxy card are first being mailed to
stockholders of Alamco on or about July 16, 1997.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.............................................................................. 3
The Special Meeting; Record Date; Vote Required.................................... 3
The Merger......................................................................... 3
The Special Meeting.................................................................. 9
Proxies............................................................................ 9
The Merger........................................................................... 10
Background of the Merger........................................................... 10
Reasons for the Merger; Recommendation of the Board of Directors................... 13
Opinion of Financial Advisor....................................................... 13
Interests of Certain Persons in the Merger......................................... 17
Appraisal Rights................................................................... 20
Certain Federal Income Tax Consequences............................................ 22
Accounting Treatment............................................................... 22
The Merger Agreement................................................................. 22
The Merger......................................................................... 22
Consideration...................................................................... 23
Exchange Procedures................................................................ 23
Stock Options; Warrant............................................................. 23
Indemnification.................................................................... 24
Employee Benefit Matters........................................................... 24
Representations and Warranties..................................................... 24
Certain Covenants.................................................................. 24
Conditions......................................................................... 25
Termination........................................................................ 25
Expenses........................................................................... 26
Amendment and Waiver............................................................... 26
Alamco Selected Consolidated Financial Information................................... 27
Market Prices and Dividends.......................................................... 28
Security Ownership of Certain Beneficial Owners and Management....................... 29
Security Ownership of Certain Beneficial Owners.................................... 29
Security Ownership of Management................................................... 30
Certain Information Regarding CNR.................................................... 30
Independent Certified Public Accountants............................................. 31
Stockholder Proposals................................................................ 31
Available Information................................................................ 31
Incorporation of Certain Documents by Reference...................................... 31
</TABLE>
Annexes:
A--Agreement and Plan of Merger
B--Opinion of Financial Advisor
C--Delaware General Corporation Law Provisions Regarding Appraisal Rights
2
<PAGE> 6
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement and is qualified in its entirety by reference to the more
detailed information contained elsewhere in this Proxy Statement, the
accompanying Annexes and the documents incorporated herein by reference.
THE SPECIAL MEETING; RECORD DATE; VOTE REQUIRED
The Special Meeting will be held at The Westin William Penn, 530 William
Penn Place, Pittsburgh, Pennsylvania, on August 7, 1997 at 10:00 a.m., local
time. At the Special Meeting, stockholders of Alamco will be asked to consider
and vote upon the approval and adoption of the Merger Agreement. Only holders of
record of Alamco Common Stock at the close of business on June 25, 1997 (the
"Record Date") will be entitled to notice of and to vote at the Special Meeting.
At the close of business on the Record Date, there were 4,779,031 shares of
Alamco Common Stock outstanding held by 1,220 holders of record. Each holder of
record of shares of Alamco Common Stock on the Record Date is entitled to cast
one vote per share on the proposal to approve and adopt the Merger Agreement and
on any other matters which may properly come before the Special Meeting. The
affirmative vote of a majority of the outstanding shares of stock entitled to
vote thereon is required to approve and adopt the Merger Agreement. Abstentions
and broker non-votes will constitute a vote against the proposal to approve and
adopt the Merger Agreement for purposes of the Special Meeting.
As of the Record Date, the directors and executive officers of Alamco were
the beneficial owners of an aggregate of 392,906 shares, or approximately 8.2%
of the outstanding shares, of Alamco Common Stock. The directors and executive
officers of Alamco have indicated that they intend to vote such shares in favor
of the approval and adoption of the Merger Agreement.
THE MERGER
Effects of the Merger
Upon consummation of the Merger pursuant to the Merger Agreement, (i) AAC
will be merged with and into Alamco, with Alamco surviving as a wholly owned
subsidiary of CNR, and (ii) each issued and outstanding share of Alamco Common
Stock (other than shares of Alamco Common Stock held by stockholders of Alamco
seeking appraisal rights in accordance with the Delaware General Corporation
Law) and each outstanding warrant and option to purchase Alamco Common Stock,
net of the applicable exercise price, will be converted into the right to
receive $15.75 per share in cash. Receipt of cash in respect of shares of Alamco
Common Stock as a result of the Merger will be a taxable transaction for federal
income tax purposes, and may also be a taxable transaction for state, local and
other tax purposes. See "The Merger-- Certain Federal Income Tax Consequences."
Upon consummation of the Merger, the former stockholders of Alamco will cease to
have any equity interest in Alamco. See "The Merger Agreement--Exchange
Procedures."
Reasons for the Merger
The Board of Directors of Alamco believes that the terms of the Merger are
fair to and in the best interests of Alamco and its stockholders. Based largely
on the business prospects of Alamco, the outlook for price appreciation of
Alamco Common Stock while remaining an independent entity and the favorable
market conditions for business combinations of independent oil and gas
producers, the Board of Directors of Alamco concluded that a business
combination transaction involving Alamco in the current time frame was in the
best interests of Alamco and its stockholders. See "The Merger--Background of
the Merger."
The reasons for approval of the Merger Agreement by the Board of Directors
included the following: (i) the financial benefits to the stockholders of Alamco
from the Merger; (ii) the opinion from Principal Financial Securities, Inc.
("PFS") that the consideration to be received by the holders of Alamco Common
Stock in the Merger is fair to stockholders of Alamco from a financial point of
view; (iii) Alamco's prospects for future growth as an independent entity in the
Appalachian Basin; and (iv) the continued trend toward
3
<PAGE> 7
further consolidation in the oil and gas industry, which might place Alamco at a
competitive disadvantage if it remained independent. See "The Merger--Background
of the Merger" for a discussion of the background of the Merger and the factors
considered by the Board of Directors in determining to recommend the Merger.
Recommendation of the Board of Directors
The Board of Directors of Alamco unanimously approved the Merger, the
Merger Agreement and the transactions contemplated thereby, and recommends a
vote FOR approval and adoption of the Merger Agreement. Alamco stockholders
should be aware that certain members of Alamco's management and Board of
Directors have certain interests in the Merger that are in addition to, and may
be deemed to be in conflict with, the interests of Alamco stockholders
generally. See "The Merger--Reasons for the Merger; Recommendation of the Board
of Directors" and "The Merger--Interests of Certain Persons in the Merger."
Effective Date of the Merger
It is anticipated that the Merger will become effective as soon as
practicable after the requisite stockholder approval has been obtained and all
other conditions precedent to the Merger have been satisfied or waived. The
Merger Agreement provides that the Merger will be consummated (i) the earlier of
October 15, 1997 and the first business day after satisfaction or waiver of the
last of the conditions precedent to the Merger or (ii) such other date as
specified by Alamco and CNR after satisfaction or waiver of all of the
conditions precedent to the Merger (the "Effective Date"). See "The Merger
Agreement--Conditions."
Opinion of Financial Advisor
PFS, Alamco's financial advisor, delivered its oral opinion to the Board of
Directors of Alamco on May 20, 1997 and subsequently confirmed such opinion in
writing on May 27, 1997, that the cash consideration to be received by the
current holders of Alamco Common Stock in the Merger was fair, from a financial
point of view, to such holders. PFS delivered a written update of such opinion,
dated as of July 16, 1997, that the cash consideration to be received by Alamco
stockholders in the Merger is fair, from a financial point of view, to
stockholders. A copy of the July 16, 1997 opinion, which sets forth the
assumptions made, matters considered and limitations on the review undertaken,
is attached to this Proxy Statement as Annex B. See "The Merger--Opinion of
Financial Advisor."
PFS entered into an engagement letter with Alamco dated as of November 18,
1996, pursuant to which PFS was retained to assist Alamco in exploring strategic
alternatives for increasing stockholder value, including the possibility of a
sale or merger of part or all of Alamco. For such services, Alamco agreed to pay
PFS certain advisory fees. PFS also was retained pursuant to an engagement
letter dated as of May 12, 1997 to render a fairness opinion in connection with
the Merger, for which Alamco agreed to pay certain fees. In addition, PFS holds
a warrant to purchase 50,000 shares of Alamco Common Stock at a purchase price
of $6.60 per share, which will be converted in the Merger into the right to
receive $15.75 per share, less the purchase price per share, or $457,500 in the
aggregate. The warrant was issued on July 29, 1993 as additional compensation
for PFS's services as the lead underwriter with respect to Alamco's public
offering of its Common Stock. See "The Merger--Opinion of Financial Advisor" and
"The Merger--Interests of Certain Persons in the Merger--Warrant."
Interests of Certain Persons in the Merger
In considering the recommendation of Alamco's Board of Directors that
stockholders vote FOR approval and adoption of the Merger Agreement, Alamco
stockholders should be aware that certain members of Alamco's management and
Board of Directors have certain interests in the Merger that are in addition to,
and may be deemed to be in conflict with, the interests of the stockholders of
Alamco generally. These interests include the treatment of stock options issued
pursuant to Alamco's stock option plans, severance and other benefits under
certain employment agreements between Alamco and certain executive officers,
indemnification of officers and directors and certain other matters.
4
<PAGE> 8
The maximum amount of all benefits estimated to be payable to members of
management and the Board of Directors of Alamco in connection with the Merger in
respect of options to purchase shares of Alamco Common Stock held by such
persons, severance benefits payable under employment agreements between certain
executive officers and Alamco (assuming that the Merger is consummated in August
1997, that the employment of each such executive officer is terminated under
specified circumstances immediately following the Merger and that no options to
purchase shares of Alamco Common Stock held by such persons are exercised after
the Record Date), all as more fully described below, would be approximately
$5,002,400 in the aggregate. Such amount does not include amounts that would be
payable by CNR as compensation to any executive officer of Alamco who may be
employed by Alamco or CNR following the Merger. See "The Merger--Interests of
Certain Persons in the Merger--Employment by Alamco or CNR."
Stock Options. The Merger Agreement provides that on the Effective Date,
Alamco's stock option plans will terminate, and each option to purchase Alamco
Common Stock outstanding thereunder as of the Merger will be converted into the
right to receive cash in exchange for the aggregate number of shares subject to
such option in an amount equal to the aggregate number of shares of Alamco
Common Stock subject to such option multiplied by $15.75, less the sum of any
applicable withholding taxes and the aggregate exercise price for all of the
shares of Alamco Common Stock subject to such option, determined without regard
to any vesting schedule that might otherwise apply. Certain options under
non-qualified plans and agreements held by executive officers also provide for
the reimbursement of income taxes associated with such options. The following
table sets forth, as to each director and executive officer of Alamco, (i) the
number of shares of Alamco Common Stock subject to options held by such persons
as of the Record Date, (ii) the respective weighted average per share exercise
price of such options, and (iii) the amount of cash such persons would be
entitled to receive in connection with the Merger in respect of such options,
assuming no exercise of options subsequent to the Record Date. In addition,
where the stock options provide for reimbursement of taxes, the amount of any
tax reimbursement payment has been added to the cash column.
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF SHARES AVERAGE PER
NAME OF HOLDER POSITION SUBJECT TO OPTIONS SHARE EXERCISE PRICE AMOUNT OF CASH
- ----------------------------------------------- ------------------ -------------------- --------------
<S> <C> <C> <C> <C>
John L. Schwager President, Chief 40,000 $ 6.750 $ 494,676
Executive Officer and
Director
Richard R. Hoffman Executive Vice 135,000 5.769 1,801,907
President, Chief
Operating Officer and
Director
Bridget D. Furbee Vice President, 35,000 7.500 339,255
Administration and Legal
Affairs
R. Mark Hackett Vice President of 24,474 6.994 277,635
Engineering
Mario L. Perri Vice President of Land 23,500 8.931 203,365
Carl F. Starr Vice President of 24,000 8.074 236,293
Production
Stephen L. Barr Director 18,200 11.100 84,625
Thomas M. Levine Director 17,000 11.625 70,125
Robert S. Maust Director 19,000 10.751 94,975
James H. Weber Director 17,000 11.625 70,125
----------
Total $3,672,981
==========
</TABLE>
Benefits Under Employment Agreements. Alamco is a party to employment
agreements with the following executive officers: John L. Schwager, President
and Chief Executive Officer, Richard R. Hoffman, Executive Vice President and
Chief Operating Officer and Bridget D. Furbee, Vice President, Administration
5
<PAGE> 9
and Legal Affairs. The employment agreements generally provide, among other
things, that in the event of termination of the executive under specified
circumstances after a "change in control" of Alamco, the executive will be
entitled to, among other things, a lump sum severance payment and, in the case
of Mr. Schwager, either three years of continued benefit plan participation or a
cash payment equal to two times the projected cost of such benefits. Assuming
that the Merger is consummated in August 1997 and that the employment of each of
Messrs. Schwager and Hoffman and Ms. Furbee is terminated under specified
circumstances immediately following the Merger, it is presently estimated that
the severance and related benefits that would be payable to such persons under
the employment agreements, exclusive of any other accrued obligations
(including, but not limited to vacation), would be as follows:
<TABLE>
<CAPTION>
ESTIMATED SEVERANCE
BENEFITS
EXECUTIVE OFFICER UNDER EMPLOYMENT AGREEMENTS
----------------- ---------------------------
<S> <C>
John L. Schwager.............................. $ 711,758
Richard R. Hoffman............................ 211,502
Bridget D. Furbee............................. 81,000
-------------
Total....................................... $ 1,004,260
</TABLE>
Mr. Schwager also will be entitled to incentive compensation under the
terms of his employment agreement in the amount of approximately $120,000. The
bonus is payable in increments of $30,000 for each $1.00 increase in the price
per share of Alamco Common Stock above $11.00 per share. The actual bonus paid
will depend upon the average trading prices over ten-day periods.
Benefits Under the Severance Plan and Retention Plan. The Alamco, Inc.
Special Severance Plan, as amended (the "Severance Plan"), provides for payments
to be made to any full-time employee of Alamco who does not have a written
employment contract with Alamco in the event of the employee's termination of
employment within three years after a change in control occurs, unless it is a
termination for cause, as defined in the Severance Plan. While the Severance
Plan does not provide any benefits for Messrs. Schwager, Hoffman or Ms. Furbee,
other officers of Alamco are eligible employees under the Plan, and will, upon a
qualifying termination, each receive a severance benefit, payable within 30 days
of the date of termination, equal to his or her monthly base salary times the
number of full and fractional years of service to Alamco. In addition, the
Manager of Exploration and Development of Alamco entered into an employment
agreement in 1996 providing for a payment upon a change of control which exceeds
the amount to which he would otherwise be entitled under the Severance Plan.
The Key Employee Retention Plan (the "Key Employee Plan") was adopted by
the Board of Directors as an incentive to certain key employees to remain with
Alamco until a change in control is brought to a successful conclusion. Twelve
persons are eligible for bonus payments as set forth in the Plan if they remain
actively employed by Alamco until the change in control date. Of the twelve,
four are executive officers of Alamco.
The amount (estimated as of August 1, 1997) to which each executive officer
of Alamco is entitled under the two plans is set forth in the table below:
<TABLE>
<CAPTION>
OFFICER SEVERANCE PLAN KEY EMPLOYEE PLAN TOTAL
--------------------------------------------- -------------- ----------------- --------
<S> <C> <C> <C>
Bridget D. Furbee............................ -- $20,250 $ 20,250
R. Mark Hackett.............................. $ 56,349 30,200 $ 86,549
Mario L. Perri............................... 95,966 13,160 109,126
Carl F. Starr................................ 94,984 14,250 109,234
-------- ------- --------
Total for Officers......................... $247,299 $77,860 $325,159
Total for Non-Officers*.................... $ 25,000 -- $ 25,000
-------- ------- --------
Total................................... $272,299 $77,860 $350,159
======== ======= ========
</TABLE>
- ---------
*Represents amount payable to Manager of Exploration and Development only.
6
<PAGE> 10
Employment by Alamco or CNR. As a result of the Merger, Alamco will
continue as the surviving corporation, and employees of Alamco, to the extent
retained by CNR, will remain employees of Alamco. CNR has advised Alamco that it
is working to identify operational efficiencies that may be obtained through the
consolidation of certain operations and activities of Alamco with those of CNR
and that it anticipates that some positions at Alamco may be eliminated
following the Effective Date, although it intends to retain Alamco's field
operations personnel. CNR has also advised Alamco that it is seeking to identify
positions within its organization that may be offered to persons whose positions
at Alamco may be eliminated. The Merger Agreement provides that CNR will
maintain Alamco's existing benefits plans until at least December 31, 1997, and
if any Alamco employee becomes eligible to participate in any of CNR's benefit
plans, all pre-existing condition limitations and medical certifications will be
waived. In addition, CNR will cause Alamco, as the surviving corporation in the
Merger, to provide such continuation of coverage as required under applicable
law. CNR has informed Alamco that it may or may not offer employment to certain
executive officers of Alamco. John L. Schwager has not sought and will not be
offered employment by CNR.
Warrant. PFS entered into a Warrant Purchase Agreement dated July 29, 1993
with Alamco in connection with the underwriting arrangement Alamco entered into
with PFS at that time, pursuant to which PFS was granted a warrant to purchase
up to 50,000 shares of Alamco Common Stock (the "Warrant") at a purchase price
of $6.60 per share. In connection with the Merger, the Warrant will be converted
into the right to receive $457,500.
Indemnification. The Merger Agreement provides that after the Effective
Date, Alamco, as the surviving corporation, will indemnify and hold harmless
each person who served as a director or officer of Alamco or any of its
subsidiaries on or before the Effective Date, to the fullest extent permitted
for officers and directors under the Certificate of Incorporation and Bylaws of
The Columbia Gas System, Inc. The surviving corporation will obtain and maintain
for five years after the Merger, directors and officers insurance coverage with
a liability limit of $15 million for the benefit of the Alamco officers and
directors. All Alamco officers and directors are parties to indemnification
agreements providing for full and complete indemnification, including the
advancement of expenses in connection with any litigation arising from their
service as officers and directors of Alamco. As a condition to the Merger, the
current directors will be required to amend their indemnification agreements to
limit the aggregate amount of indemnification thereunder to $15 million and to
require the surviving corporation to maintain directors and officers insurance
coverage with a liability limit of $15 million, with the aggregate amount of
such indemnification and insurance coverage limited to $15 million.
See "The Merger--Interests of Certain Persons in the Merger"; "The Merger
Agreement--Certain Covenants"; "The Merger Agreement--Indemnification"; and
"Security Ownership of Certain Beneficial Owners and Management."
Conditions to the Merger; Termination
The Merger Agreement provides that the obligations of Alamco, CNR and AAC
to consummate the Merger are subject to the satisfaction of certain conditions,
including, among others: performance by each party of its agreements and
covenants required to be performed by it under the Merger Agreement; the
representations and warranties of each party in the Merger Agreement being true
and correct in all material respects; the absence of any statute, rule,
regulation or court order enjoining or prohibiting the consummation of the
Merger and no proceeding seeking such an order has been threatened or
instituted; approval by the stockholders of Alamco; receipt of any necessary
consents; the redemption of all rights under Alamco's Preferred Stock Purchase
Rights Plan adopted on November 30, 1994 (the "Rights Plan"); receipt of a
fairness opinion from the financial advisor to Alamco dated the date of this
Proxy Statement; and receipt of certain opinions of counsel. See "The Merger
Agreement -- Conditions."
The Merger Agreement may be terminated by either Alamco or CNR at any time
after October 15, 1997, or prior to such time upon the occurrence of certain
events. See "The Merger Agreement-- Termination."
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Appraisal Rights
Any holder of record of shares of Alamco Common Stock who makes a written
demand prior to the taking of the vote regarding the Merger at the Special
Meeting, and who follows the procedures prescribed by Section 262 of the
Delaware General Corporation Law (the "DGCL"), has the right under Section 262
to an appraisal of the "fair value" of such shares by the Delaware Court of
Chancery, and to the payment of such fair value by Alamco, as the surviving
corporation in the Merger, in lieu of receiving the consideration provided under
the Merger Agreement.
A summary of the procedures relating to the exercise of appraisal rights as
provided in Section 262 of the DGCL is included herein under "The
Merger--Appraisal Rights." SUCH SUMMARY DOES NOT PURPORT TO BE A COMPLETE
STATEMENT OF THE PROVISIONS OF SECTION 262 OF THE DGCL AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THOSE PROVISIONS, A COPY OF WHICH IS ATTACHED HERETO AS
ANNEX C. THESE PROVISIONS MUST BE STRICTLY COMPLIED WITH OR A STOCKHOLDER'S
APPRAISAL RIGHTS MAY BE LOST.
Certain Federal Income Tax Consequences
The receipt of cash by a stockholder of Alamco pursuant to the Merger
Agreement will be a taxable transaction to such stockholder for federal income
tax purposes and may also be a taxable transaction under applicable state, local
or foreign laws. Each stockholder is urged to consult his or her own tax advisor
as to the particular tax consequences to such stockholder. See "The
Merger--Certain Federal Income Tax Consequences."
Accounting Treatment
The Merger will be accounted for as a purchase for accounting purposes. See
"The Merger--Accounting Treatment."
Market Prices
On January 15, 1997, the last full trading day prior to the public
announcement by Alamco that its Board of Directors had retained a financial
advisor to assist it in exploring strategic alternatives for increasing
stockholder value, including the possibility of a sale or merger of part or all
of Alamco, the closing sale price of Alamco Common Stock on the American Stock
Exchange (the "AMEX") was $12.625 per share. On May 23, 1997, the last full
trading day prior to the execution and delivery of the Merger Agreement and the
public announcement thereof, the closing sale price of Alamco Common Stock on
the AMEX was $14.625 per share. On July 14, 1997, the closing sale price of
Alamco Common Stock on the AMEX was $15.375 per share. See "Market Prices and
Dividends."
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THE SPECIAL MEETING
At the Special Meeting, stockholders of Alamco will consider and vote upon
a proposal to approve and adopt the Merger Agreement and such other business
matters as may properly come before the Special Meeting or any adjournment or
postponement thereof.
The Special Meeting will be held at The Westin William Penn, 530 William
Penn Place, Pittsburgh, Pennsylvania, on August 7, 1997, at 10:00 a.m., local
time. At the Special Meeting, stockholders of Alamco will be asked to consider
and vote upon the approval and adoption of the Merger Agreement. Only holders of
record of Alamco Common Stock at the close of business on the Record Date will
be entitled to notice of and to vote at the Special Meeting. At the close of
business on the Record Date, there were 4,779,031 shares of Alamco Common Stock
outstanding held by 1,220 holders of record. Each holder of record of shares of
Alamco Common Stock on the Record Date is entitled to cast one vote per share on
the proposal to approve and adopt the Merger Agreement and on any other matters
which may properly come before the Special Meeting. The affirmative vote of a
majority of the outstanding shares of stock entitled to vote thereon is required
to approve and adopt the Merger Agreement. Abstentions and broker non-votes will
constitute a vote against the proposal to approve and adopt the Merger Agreement
for purposes of the Special Meeting.
As of the Record Date, the directors and executive officers of Alamco were
the beneficial owners of an aggregate of 392,906 shares, or approximately 8.2%
of the outstanding shares of Alamco Common Stock. The directors and executive
officers of Alamco have indicated that they intend to vote such shares in favor
of the approval and adoption of the Merger Agreement. See "Security Ownership of
Certain Beneficial Owners and Management."
PROXIES
All shares of Alamco Common Stock that are entitled to vote and are
represented at the Special Meeting by properly executed proxies received prior
to or at the Special Meeting, and not revoked, will be voted at the Special
Meeting in accordance with the instructions indicated on such proxies. If no
instructions are indicated, all proxies solicited by the Alamco Board of
Directors will be voted FOR approval and adoption of the Merger Agreement.
It is not anticipated that any matter other than the proposal to approve
and adopt the Merger Agreement will be brought before the Special Meeting. If
any other matter is properly presented at the Special Meeting for consideration,
including, among other things, a motion to adjourn the Special Meeting to
another time and/or place (including, without limitation, for the purpose of
soliciting additional proxies), the persons named in the enclosed form of proxy
card and acting thereunder will have discretion to vote on such matter in
accordance with their best judgment; provided, however, that no proxy that
directs the shares represented thereby to be voted against the proposal to
approve and adopt the Merger Agreement will be voted in favor of any adjournment
of the Special Meeting for purposes other than the absence of a quorum.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Alamco, before the taking of the vote at the Special
Meeting, a written notice of revocation bearing a later date than the proxy
card, (ii) duly executing a later dated proxy card relating to the same shares
and delivering it to the Secretary of Alamco before the taking of the vote at
the Special Meeting or (iii) by attending the Special Meeting and giving the
Secretary of Alamco a written notice of revocation bearing a later date then the
proxy card, before the taking of the vote at the Special Meeting. Attendance at
the Special Meeting will not in and of itself constitute revocation of a proxy.
Any written notice of revocation or subsequent proxy from a stockholder should
be sent so as to be delivered to Alamco, Inc., 200 West Main Street, Clarksburg,
West Virginia 26301, Attention: Secretary, or hand delivered to the Secretary of
Alamco before the taking of the vote at the Special Meeting.
YOUR VOTE IS IMPORTANT. STOCKHOLDERS ARE URGED TO COMPLETE AND SIGN THE
ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHICH NEEDS
NO POSTAGE IF MAILED IN THE UNITED STATES. YOUR PROXY WILL BE VOTED IN
ACCORDANCE WITH THE INSTRUCTIONS INDICATED ON THE PROXY CARD. IF
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NO INSTRUCTIONS ARE GIVEN, YOUR PROXY WILL BE VOTED FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT.
All expenses of this solicitation will be paid by Alamco. In addition to
solicitation by use of the mails, proxies may be solicited by directors,
officers and employees of Alamco in person or by telephone, telegram or other
means of communication. Such directors, officers and employees will not be
additionally compensated, but may be reimbursed for reasonable out-of-pocket
expenses incurred in connection with such solicitation. Alamco has retained
Kissel-Blake, Inc. at an estimated cost of $5,000, plus reimbursement of
expenses, to assist in the solicitation of proxies. Arrangements will be made
with custodians, nominees and fiduciaries for forwarding of proxy solicitation
materials to beneficial owners of shares held of record by such custodians,
nominees and fiduciaries, and Alamco will reimburse such custodians, nominees
and fiduciaries for reasonable out-of-pocket expenses incurred in connection
therewith.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WHEN RETURNING THEIR
PROXY CARDS.
THE MERGER
BACKGROUND OF THE MERGER
Alamco's senior management and Board of Directors have closely followed
general trends within the oil and gas industry, particularly as they affect
independent oil and gas producers operating in the Appalachian Basin. The Board
of Directors of Alamco has from time to time considered and analyzed Alamco's
strategic options, including prospects for Alamco continuing as an independent
publicly held entity and possible business combination or acquisition
transactions with oil and gas companies of varying sizes and the effects of such
transactions on Alamco and its stockholders and employees. In addition, Alamco
senior management has in the past received informal inquiries from other oil and
gas companies regarding a possible business combination involving Alamco. At the
times such inquiries were received, Alamco had determined that it was in the
best interests of Alamco and its stockholders that Alamco remain independent,
and responded to such inquiries accordingly. None of such inquiries led to
negotiations regarding such a transaction.
On November 18, 1996, Alamco engaged PFS as its financial advisor to
provide valuation services and to assess Alamco's strategic alternatives. At
meetings of the Board of Directors of Alamco held on December 12 and 13, 1996,
the Board discussed at length Alamco's strategic options, including (i)
continuing with Alamco's existing business plan; (ii) a merger with another
entity with operations outside the Appalachian Basin; (iii) an equity offering,
with the use of proceeds to fund an acquisition; (iv) a sale of Alamco; and (v)
a management buyout. At the meetings, representatives of PFS reviewed in detail
with the Board a number of matters relating to the Board's analysis of the
strategic alternatives available to Alamco, including: (i) the general status of
the oil and gas industry, including those companies operating in the Appalachian
Basin; (ii) various valuation analyses of Alamco; (iii) management's financial
forecast for Alamco; (iv) historic and current independent oil and gas company
stock price levels; (v) terms of recent oil and gas mergers and acquisitions;
(vi) merger and consolidation trends in the oil and gas industry generally and
in the Appalachian Basin specifically; (vii) the outlook for price appreciation
of Alamco Common Stock; and (viii) prospects for Alamco continuing as an
independent entity, including its prospects of acquiring oil and gas companies
or expanding its current business to further increase size and earnings as an
independent entity. Following the PFS presentation, the Board considered various
factors affecting Alamco, including the continuing consolidation of the oil and
gas industry, the consideration that Alamco might be at a competitive
disadvantage as an independent oil and gas producer in a more consolidated
environment, the difficulty that Alamco had experienced in acquiring oil and gas
producing assets on acceptable terms, Alamco's prospects of further increasing
its size and earnings without effecting acquisitions of other oil and gas
producers in the Appalachian Basin or elsewhere, and the view of PFS that
prevailing market conditions for business combinations of oil and gas producers
were favorable. The discussion also focused on the effects that a potential
business combination transaction would have on Alamco's stockholders and
employees and on the timing of a potential transaction. At the close of the
meeting, the Board of Directors determined to consider Alamco's strategic
options further before taking any action and scheduled a meeting on January 15,
1997 for that purpose.
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<PAGE> 14
At the January 15th meeting, the Board of Directors met with
representatives of PFS who reviewed various strategies that might be considered
by the Board of Directors to maximize stockholder value. PFS also reviewed
current market conditions and the timing of a possible business combination. The
Board of Directors discussed at length strategic alternatives previously
identified and discussed at the December Board meeting and the advisability of
engaging an investment banking firm at this time. The Board took into account
the past advisory experience of PFS in oil and gas transactions and the role
that PFS has had with Alamco since Alamco's public offering in 1993. After
further discussion of these and other factors, the Board concluded that PFS
should be retained to assist Alamco in exploring strategic alternatives for
increasing stockholder value, including the possibility of a sale or merger of
part or all of Alamco. The Board of Directors determined that, while these
alternatives should be explored to see if they would yield a superior value for
stockholders, it had not made at that time any determination that Alamco would
be sold or merged or that such a transaction would be in the best interest of
its stockholders. No single factor predominated in the Board's determination
that exploration of a business combination in the current time frame was in the
best interests of Alamco and its stockholders. PFS was then engaged specifically
to advise Alamco with respect to strategic alternatives and to assist it in
evaluating whether any business transaction or other alternative would be in the
best interests of Alamco and its stockholders.
Following the January 15, 1997 meeting, PFS and senior management of Alamco
developed a transaction timeline, prepared a confidential information memorandum
concerning Alamco for distribution to potential acquirors and prepared a data
room so that selected potential acquirors could undertake a due diligence
investigation before making any offer. Senior management of Alamco and
representatives of PFS developed a list of oil and gas companies that they
believed might have an interest in an acquisition of Alamco, together with
financial, operational and, where applicable, stock market capitalization data
with respect to each such company. Senior management of Alamco authorized PFS to
contact these companies on a confidential basis to inquire as to the interest of
each company in a possible business combination with Alamco if Alamco's Board of
Directors were to determine to pursue the negotiation of such a transaction.
In January, February and March 1997, representatives of PFS made
confidential inquiries of the companies determined likely to have an interest in
and the ability to effect an acquisition of Alamco, including CNR, and
distributed confidential information about Alamco to 17 companies that had
expressed interest and executed confidentiality agreements in form satisfactory
to Alamco. On March 18, 1997, at a meeting of the Board of Directors of Alamco,
representatives of PFS reported on the status of their efforts. PFS reported
that as of March 15, 1997, 14 companies had signed confidentiality agreements,
copies of a confidential information memorandum had been distributed to such
companies, the data room had been organized and three companies had reviewed the
materials in the room and April 15, 1997 had been established as the deadline
for receipt of proposals from interested parties.
On April 24, 1997, the Board of Directors met with representatives of PFS
and reviewed the status of the acquisition inquiries. PFS provided a list of all
the oil and gas companies contacted, an identification of the seven oil and gas
companies which had by that date expressed interest in acquiring Alamco or its
assets, the principal features of the proposals received, including transaction
pricing levels and other terms, and an evaluation of the potential acquirors
based on financial, operational and, where applicable, stock market
capitalization data. Four of the proposals contemplated a cash merger with
Alamco, one a stock-for-stock merger of Alamco with the acquiring company, and
two an acquisition of substantially all the assets of Alamco for cash. PFS also
reviewed current market conditions and factors affecting the market and
summarized comparable oil and gas transactions completed during recent periods.
The Board of Directors determined, based upon a discussion of this data and upon
the advice of PFS, to authorize Alamco senior management to explore further the
terms and conditions of an acquisition of Alamco or its assets proposed by three
of the business combination candidates, including CNR, and to determine whether
any of the three companies would be interested in a transaction in which
Alamco's stockholders would receive more value than initially indicated by such
companies. The Board of Directors authorized further discussions with the three
business combination candidates that it believed were offering the highest
relative value to Alamco stockholders based on the current market value of
Alamco Common Stock.
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<PAGE> 15
During the next several days, representatives of PFS continued discussions
with CNR and the other companies that had expressed interest in a business
combination with Alamco. On April 30, 1997, CNR proposed increasing the cash
consideration it would pay to acquire all of the outstanding shares of Common
Stock of Alamco on a fully diluted basis to $15.75 per share, conditioned upon
Alamco's agreement to deal with CNR exclusively. PFS advised CNR that Alamco
would not enter into an exclusivity arrangement at that time, but would continue
negotiating with CNR. On May 5, 1997, one of the other companies which had
proposed a stock-for-stock merger with Alamco, in discussions with senior
management of Alamco and PFS, agreed to increase the stock-for-stock exchange
ratio from that initially proposed. However, the implied value of the increased
exchange ratio was less than the $15.75 cash merger offer and the ratio was
subject to fluctuations in the proposed acquiror's stock price.
On May 5, 1997, at a meeting of the Board of Directors, senior management
of Alamco and representatives of PFS reported on the status of discussions with
potential acquirors. PFS reviewed with the Board the proposals from CNR and the
other company that had agreed to increase the consideration offered, the status
of each potential acquiror's due diligence review, the timing of a possible
transaction and other matters. Representatives of PFS evaluated each proposal,
provided further information with respect to each potential acquiror as well as
certain pro forma financial data giving effect to a business combination or
transaction with each such company. Alamco's legal and accounting advisors
reported on aspects of the proposals, including legal, tax and accounting
considerations. The Board of Directors discussed at length the various issues
raised by PFS's presentation and the reports of Alamco's legal and accounting
advisors, as well as issues relating to the relative merits of a transaction
with each of these companies and the consequences of each proposed transaction
on Alamco, its stockholders and employees. Among the matters discussed were the
pricing levels proposed, including the effect of a pricing structure in the
stock-for-stock exchange ratio which would be subject to adjustment as a result
of price fluctuations in the potential acquiror's stock between the execution of
an acquisition agreement and the closing of a transaction, the tax effects of
each transaction, the scope of representations, warranties and indemnities,
conditions to closing, the timing of necessary Board and stockholder approvals,
and the status of each potential acquiror's due diligence efforts. The Board of
Directors also discussed the proposal of CNR to negotiate a definitive agreement
with Alamco at the price level proposed conditioned upon Alamco's agreement to
deal exclusively with CNR. The Board rejected any restrictions on Alamco's
ability to consider other acquisition proposals but approved in principle a
limited due diligence expense reimbursement agreement with CNR having a
termination date of May 23, 1997. The Board also considered that CNR had
proposed a cash merger transaction and had indicated its willingness to adhere
to expedited due diligence and closing schedules. After discussion of the status
of PFS's efforts, the Board of Directors requested that representatives of PFS
and senior management of Alamco concentrate their activities on negotiating an
acceptable definitive agreement with CNR, provided that CNR would agree to a
limited expense reimbursement agreement, without any exclusivity provisions.
On May 12, 1997, Alamco and CNR entered into a limited agreement relating
to CNR's cash merger proposal, which agreement would terminate on May 23, 1997.
Alamco agreed to enter into good faith negotiations with CNR with respect to the
proposed cash merger transaction and cooperated fully with CNR in its due
diligence investigation. CNR agreed that Alamco was not restricted from
considering any proposal to purchase all of the outstanding stock of Alamco (by
merger or otherwise) from a third party other than CNR, and Alamco agreed to
reimburse CNR for its reasonable third party due diligence costs and expenses up
to $350,000 incurred during the period May 7, 1997 through the earlier of the
execution of a definitive acquisition agreement or May 23, 1997. Thereafter,
representatives of CNR and Alamco entered into good faith negotiations with
respect to a definitive cash merger agreement, and CNR undertook an expedited
due diligence review of Alamco. During this period the other company which had
proposed a stock-for-stock business combination did not improve its proposal.
On May 20, 1997, the Board of Directors met to consider the terms of the
cash merger transaction being negotiated with CNR and the status of proposals
from any other companies. The status of the due diligence process and
negotiations with CNR was discussed. A draft of the Merger Agreement with CNR,
in substantially final form, was reviewed with the Board of Directors and the
effects of the proposed transaction on stockholders and employees of Alamco were
discussed. Representatives of PFS, based on their review of
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<PAGE> 16
the terms of proposed Merger Agreement, delivered an oral opinion (which was
subsequently confirmed in writing) to the Board of Directors of Alamco that the
consideration to be received by Alamco stockholders under the terms of the
Merger Agreement was fair from a financial point of view. After a review of the
matters considered by the Board and the process undertaken since December 1996,
as well as the terms of the proposed Merger Agreement and the fairness opinion
of PFS, the Board of Directors unanimously approved the Merger Agreement in
substantially the form presented at the meeting. Subsequently, on May 23, 1997,
the Board of Directors held a meeting by telephonic conference call to discuss
certain changes in the Merger Agreement proposed by CNR. After a discussion of
the proposed changes, which related to indemnification arrangements for
directors and officers of Alamco following the closing of the Merger, provisions
relating to employee benefit plans and certain conditions to CNR's obligations
to consummate the transaction, the Board of Directors authorized senior
management of Alamco to execute and deliver the Merger Agreement modified in a
manner consistent with the Board's views on these points. Representatives of PFS
reaffirmed their oral opinion that the consideration to be received by Alamco
stockholders was fair from a financial point of view. Following this meeting,
mutually satisfactory changes to the Merger Agreement with respect to the
matters described above, were negotiated by Alamco and CNR. On May 27, 1997, the
Merger Agreement was executed.
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
The reasons for approval of the Merger Agreement by the Board of Directors
of Alamco included the following: (i) the financial benefits to the stockholders
of Alamco from the Merger; (ii) the opinion from PFS that the consideration to
be received by the holders of Alamco Common Stock in the Merger is fair to the
stockholders of Alamco from a financial point of view; (iii) Alamco's prospects
for future growth as an independent entity in the Appalachian Basin; and (iv)
the continued trend toward further consolidation in the oil and gas industry,
which might place Alamco at a competitive disadvantage if it remained
independent. The Board of Directors concluded that the Merger represented a more
attractive alternative for achieving stockholder value than Alamco could achieve
as an independent entity for the reasons noted under "The Merger--Background of
the Merger," and that the cash consideration to be received by the Alamco
stockholders was fair in light of current market and industry conditions. The
Board of Directors of Alamco unanimously approved the Merger, the Merger
Agreement and the transactions contemplated thereby.
THE BOARD OF DIRECTORS OF ALAMCO BELIEVES THAT THE TERMS OF THE MERGER ARE
FAIR TO AND IN THE BEST INTERESTS OF ALAMCO AND ITS STOCKHOLDERS, AND RECOMMENDS
THAT STOCKHOLDERS OF ALAMCO VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR
On January 16, 1997, the Board of Directors of Alamco announced that it had
engaged an independent investment banker for the purpose of analyzing the
options that might be available to Alamco to maximize its stockholders' value.
The investment banking firm hired for that purpose was PFS. Pursuant to an
engagement letter dated as of November 18, 1996, PFS provided to the Board of
Directors an analysis of the value of Alamco under certain available options.
PFS received a fee of $50,000 for its initial work, and was reimbursed for
certain expenses. In addition, pursuant to its engagement, PFS agreed to provide
financial advisory services to Alamco in the event that the Board of Directors
selected an option relating to a possible sale, merger, combination,
reorganization, recapitalization or joint venture of Alamco. In that connection,
Alamco agreed to pay PFS a monthly retainer of $10,000 commencing January 15,
1997, and a contingent advisory fee equal to 0.75% of the aggregate
consideration of the transaction, as defined, less the initial fee and the
monthly retainer fees. The Merger as described in this Proxy Statement will
result in a total fee payable to PFS upon the closing of the Merger in the
amount of $757,500. In addition, PFS is to be reimbursed for certain expenses.
During the performance of its financial advisory services, among other things,
PFS advised the Board of Directors on the conduct of the bidding process
described elsewhere in this Proxy Statement and advised Alamco regarding its
negotiation of the terms of the Merger Agreement.
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After determining to negotiate with CNR, the Board of Directors then
separately engaged PFS pursuant to an engagement letter dated as of May 12, 1997
to provide an opinion to the Board of Directors as to the fairness from a
financial point of view to Alamco and the stockholders of Alamco of the
consideration to be received in the Merger. Alamco agreed to pay PFS for its
advice and delivery of its fairness opinion a fee of $250,000, of which $125,000
has been paid by Alamco, and the balance of which is payable upon closing of the
Merger. In addition, PFS is to be reimbursed for its expenses. Under both the
November 18, 1996 and the May 12, 1997 engagement letters, PFS is entitled to
indemnification by Alamco for certain liabilities, including liabilities under
the securities laws.
In connection with the Merger, the Warrant which PFS received as additional
compensation in connection with Alamco's 1993 public offering will be converted
into the right to receive $457,500 in the aggregate.
Alamco retained PFS to act as financial advisor in connection with the
Merger. PFS was selected by Alamco based on PFS's experience, expertise and
familiarity with Alamco and its businesses. PFS is a nationally recognized
investment banking firm and is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, leveraged buyouts,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes.
In connection with PFS's engagement, Alamco requested that PFS evaluate the
fairness, from a financial point of view, to Alamco of the consideration to be
paid to its stockholders in connection with the Merger. At a meeting of the
Board of Directors of Alamco held on May 20, 1997, at which the Alamco Board of
Directors approved the Merger, PFS rendered to the Alamco Board of Directors an
oral opinion to the effect that, as of such date and based upon and subject to
certain matters, the consideration proposed to be paid to Alamco pursuant to the
Merger was fair to Alamco from a financial point of view. At a Board of
Directors meeting held by telephonic conference call on May 23, 1997, PFS
reaffirmed its oral opinion. PFS confirmed this oral opinion by delivery of a
written opinion dated May 27, 1997.
PFS's opinion is addressed to the Alamco Board of Directors and addresses
only the fairness to Alamco from a financial point of view of the consideration
proposed to be paid to Alamco's stockholders pursuant to the Merger and does not
constitute a recommendation to any Alamco stockholder as to how such stockholder
should vote at the Special Meeting. The consideration was determined through
negotiations between Alamco and CNR and was approved by the Alamco Board of
Directors and CNR. PFS provided advice to Alamco during the course of such
negotiations. The PFS opinion does not address the fairness of the consideration
to be received in the Merger from a financial point of view or otherwise to CNR
and, consequently, does not constitute a recommendation to CNR in respect of
CNR's decision.
In arriving at its opinion, PFS reviewed the Merger Agreement, which
includes a description of the Merger and certain related documents, and certain
publicly available business and financial information relating to Alamco and
CNR. PFS also reviewed certain other information, including financial forecasts,
provided to it by Alamco and met with the management of Alamco to discuss the
businesses and prospects of Alamco. PFS also considered certain financial,
operational and stock market data of Alamco and compared such data with similar
data for other publicly held companies in businesses similar to Alamco and
considered, to the extent publicly available, the financial terms of certain
other business combinations and other transactions which have recently been
effected. PFS also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria that PFS
deemed relevant.
In connection with its review, PFS did not assume any responsibility for
independent verification of any of the foregoing information and relied upon its
being complete and accurate in all material respects. With respect to financial
forecasts, PFS assumed that such forecasts were reasonably prepared on bases
reflecting the best currently available estimates and judgments of Alamco's
management as to the future financial performance of Alamco. In addition, PFS
has not made an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of Alamco, nor was PFS furnished with any such
evaluations or appraisals. PFS's opinion is necessarily based upon financial,
economic, market and other conditions as they existed or could be evaluated on
the date of its opinion.
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In preparing its opinion for the Alamco Board of Directors, PFS performed a
variety of financial and comparative analyses and considered a variety of
factors, including those described below performed by PFS in connection with its
presentation to the Alamco Board of Directors on May 20, 1997. The summary of
PFS's analyses set forth below does not purport to be a complete description of
the analyses underlying PFS's opinion. The preparation of a fairness opinion is
a complex analytic process involving various determinations as the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. In arriving at its opinion, as
described below, PFS made qualitative judgments as to the significance and
relevance of each analysis and factor that it considered. Accordingly, PFS
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and factors, without considering all analyses and
factors, could create a misleading or incomplete view of the processes
underlying such analyses and its opinion. All analyses and factors considered by
PFS that were material and were presented to the Alamco Board of Directors are
set forth herein.
In its analyses, PFS made numerous assumptions with respect to Alamco,
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Alamco. No
company, transaction or business used in such analyses as a comparison is
identical to Alamco or the Merger, nor is an evaluation of the results of such
analyses entirely mathematical; rather, it involves complex considerations and
judgments concerning financial and operating characteristics and other factors
that could affect the acquisition, public trading or other values of the
companies, business segments or transactions being analyzed. The estimates
contained in such analyses and the valuations resulting from any particular
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than those
suggested by such analyses. In addition, analyses relating to the value of
business or securities do not purport to be appraisals or to reflect the prices
at which businesses or securities actually may be sold. Accordingly, such
estimates are inherently subject to substantial uncertainty. PFS's opinion
(together with the related financial analyses) was only one of the factors
considered by the Alamco Board of Directors in its evaluation of the Merger.
The following is a summary of the financial analyses used by PFS in
connection with its presentation to Alamco's Board of Directors on May 20, 1997
and its written opinion delivered on May 27, 1997. A copy of the opinion of PFS
dated July 16, 1997 is attached hereto as Annex B and is incorporated by
reference herein in its entirety.
Comparable Companies Trading Analysis--PFS examined 16 companies PFS and
Alamco believed to be comparable to Alamco on various financial and operational
parameters. The comparable companies included were Basin Exploration, Belden &
Blake, Bellwether Exploration, Callon Petroleum, Coho Energy, Comstock
Resources, HarCor Energy, Hugoton Energy, Lomak Petroleum, Petroleum Development
Corporation, St. Mary Land & Exploration, Stone Energy, Swift Energy, Texas
Meridian Corporation, Unit Corporation, and Wiser Oil Company (the "Comparable
Companies"). With respect to the Comparable Companies, PFS analyzed, among other
things, current market value multiples relative to 1996 year-end, after-tax cash
flows and 1997 estimated after-tax cash flows as reported by I/B/E/S, an
independent company that monitors and provides such data. Based on closing
prices as of May 16, 1997, the Comparable Companies had a mean (excluding the
high and low) 1996 year-end after-tax multiple of 7.21x as compared to Alamco's
multiple based on the $15.75 acquisition price of 6.81x (excluding options and
warrants outstanding). The Comparable Companies had a mean (excluding the high
and low) 1997 estimated after-tax cash flow multiple of 6.05x as compared to
Alamco's multiple based on the $15.75 acquisition price of 8.12x (excluding
options and warrants outstanding).
Historical Stock Trading Analysis--PFS reviewed the historical trading
prices and volumes for Alamco Common Stock. Such analysis indicated that the
price per share of Alamco Common Stock to be paid pursuant to the Merger
Agreement represented a premium of 32.6% per share based on a closing price of
$11.875 per share of Alamco Common Stock on January 10, 1997, three trading days
prior to Alamco's announcement that the Board of Directors had retained PFS as
financial advisor in considering Alamco's strategic options including the
possibility of a sale of the company. This analysis also showed that the oil and
gas industry had experienced an overall decline in market values since January
10, 1997. The average change
15
<PAGE> 19
in market value of the Comparable Companies declined 5.8% from January 10, 1997
through May 16, 1997 and the PFS Small Cap E&P Index had declined 12.6% during
the same period.
Comparable Reserve Acquisitions Analysis--In calculating the relative value
of Alamco's oil and gas reserves, PFS examined comparable oil and gas reserve
acquisition transactions that occurred from 1994 through 1996 in the Appalachian
region of the United States as reported by John S. Herold, Inc., an independent
petroleum research company that tracks such data. There were 10 such
transactions that occurred during the aforementioned period with purchase prices
ranging from $0.23 to $0.73 per Mcf equivalent, with an average (excluding the
high and low) purchase price of $0.58 per Mcf equivalent reserves. At the
acquisition price of $15.75 per share, after corporate adjustments and on a
fully diluted basis, the Alamco stockholders are receiving the equivalent of
$0.66 per Mcf equivalent. The 10 transactions reviewed included the transactions
between Belden & Blake Corp. and TGX Corp.; Eastern States Oil & Gas and
Southeastern Public Service; Ashland/Penn Virginia Oil & Gas and United
Meridian; Belden & Blake and U.S. Energy; Belden & Blake and Quaker State; Lomak
Petroleum and Parker & Parsley; Lomak Petroleum and an undisclosed seller;
Dominion Energy, Inc. and Chesterfield/Gas E & D/Stonewall Gas; MCN Corp. and
CONSOL Coal Group; and Enron Capital & Trade and Clinton Gas Systems. PFS
applied a range of multiples from the low to the high and including the mean per
Mcf equivalent to Alamco's proved reserves as provided to PFS by Alamco and as
reported in Alamco's 1996 Form 10-K. Based on the reserves reported in Alamco's
1996 Form 10-K, PFS assumed proved reserves of 147.8 billion cubic feet of gas
equivalent and converted Alamco's proved oil reserves into 6 billion cubic feet
of gas for each 1 million barrels of oil. PFS then adjusted the equity value
ranges to account for certain assets and liabilities of Alamco that were not
included as part of such analysis. Based on this analysis, PFS calculated an
approximate implied equity value range for Alamco of $3.80 to $17.82 per share,
with an average value of $13.61 per share. PFS also noted that Alamco's R/P
Ratio or reserve life index was 21.36 years (the number of years required to
produce all of Alamco's reserves based on the last 12 months of production),
which was in excess of certain of the Comparable Companies. Generally, reserves
with a lower R/P Ratio will be valued at a higher per Mcf equivalent than
reserves with a higher R/P Ratio, which gives effect to discounting associated
with production of reserves and the timing of that production.
Other Factors and Analyses--In the course of its opinion, PFS performed
certain other analyses and reviewed and relied on certain other matters
including (i) the trading characteristics of Alamco Common Stock; (ii) various
analyses prepared by PFS for the Company's December 12, 1996 Board meeting,
including a discounted cash flow analysis which resulted in an imputed $8.91 per
share value (excluding options and warrants) and (iii) the auction process that
resulted in the Merger Agreement following the Company's engagement of PFS to
explore strategic alternatives for Alamco on January 15, 1997. With respect to
the trading characteristics of Alamco Common Stock, PFS monitored the price of
Alamco Common Stock and the stock price of the Comparable Companies. The $15.75
cash acquisition price from CNR represents a 35.6% premium over Alamco's average
share price of $11.619 for the 30 days preceding Alamco's January 16, 1997
announcement that it had retained a financial advisor to consider strategic
alternatives or 35.5% over the $11.625 average share price for the six months
preceding the announcement. Further, the composite average share price for the
Comparable Companies was down 5.8% from the Friday (January 10, 1997) preceding
Alamco's announcement to the Friday (May 16, 1997) preceding the May 20, 1997
Alamco Board meeting at which PFS delivered its written materials and draft of
its fairness opinion to Alamco's Board of Directors. With respect to the
analyses performed by PFS for the December 12, 1996 Board Meeting, one of the
value calculations estimated the cash flow from reserves over the remaining life
plus estimated cash flow from well tending operations, less estimated general
and administrative expenses and estimated federal income taxes, plus an
estimated value of other assets and liabilities. The present value of all
components was determined using a 10% discount factor, resulting in the $8.91
per share (excluding options and warrants) valuation. With respect to the
auction process, the process led to 17 companies expressing interest and
executing confidentiality agreements in form satisfactory to Alamco as described
above under "The Merger--Background of the Merger." Through the negotiation
process the $15.75 cash merger offer submitted by CNR resulted in the highest
per share value to the stockholders of Alamco.
16
<PAGE> 20
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of Alamco's Board of Directors with
respect to the Merger, the Merger Agreement and the transactions contemplated
thereby, Alamco stockholders should be aware that certain members of Alamco's
management and Board of Directors (as identified in the following paragraphs)
have interests in the Merger, certain of which are in addition to, and may be
deemed to conflict with, the interests of the stockholders of Alamco generally.
The Board of Directors of Alamco was aware of these interests and considered
them, among other matters, in approving the Merger, the Merger Agreement and the
transactions contemplated thereby.
The maximum amount of all benefits estimated to be payable to members of
management and the Board of Directors of Alamco in connection with the Merger in
respect of options to purchase shares of Alamco Common Stock held by such
persons, and severance benefits payable under employment agreements between
certain executive officers and Alamco (assuming that the Merger is consummated
in August 1997, that the employment of each of such executive officer is
terminated under specified circumstances immediately following the Merger and
that no options to purchase shares of Alamco Common Stock held by such persons
were exercised after the Record Date), all as more fully described below, would
be approximately $5,002,400 in the aggregate. Such amount does not include
amounts that would be payable by CNR as compensation to any executive officer of
Alamco who may be employed by Alamco or CNR following the Merger. See "The
Merger--Interests of Certain Persons in the Merger--Employment by Alamco or
CNR."
Stock Options. The Merger Agreement provides that on the Effective Date,
Alamco's stock option plans will terminate, and each option to purchase Alamco
Common Stock outstanding thereunder as of the Merger will be converted into the
right to receive cash in exchange for the aggregate number of shares subject to
such option in an amount equal to the aggregate number of shares of Alamco
Common Stock subject to such option multiplied by $15.75, less the sum of any
applicable withholding taxes and the aggregate exercise price for all of the
shares of Alamco Common Stock subject to such option, determined without regard
to any vesting schedule that might otherwise apply. Certain options under
non-qualified plans and agreements held by executive officers also provide for
the reimbursement of income taxes associated with such options. The following
table sets forth, as to each director and executive officer of Alamco, (i) the
number of shares of Alamco Common Stock subject to options held by such persons
as of the Record Date, (ii) the respective weighted average per share exercise
price of such options, and (iii) the amount of cash such persons would be
entitled to receive in connection with the Merger in respect of such options,
assuming no exercise of options
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<PAGE> 21
subsequent to the Record Date. In addition, where the outstanding stock options
provide for the reimbursement of taxes, the amount of any tax reimbursement
payment has been added to the cash column.
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF SHARES AVERAGE PER
NAME OF HOLDER POSITION SUBJECT TO OPTIONS SHARE EXERCISE PRICE AMOUNT OF CASH
-------------- -------- ------------------ -------------------- --------------
<S> <C> <C> <C> <C>
John L. Schwager President, Chief
Executive Officer and
Director 40,000 $ 6.750 $ 494,676
Richard R. Hoffman Executive Vice
President, Chief
Operating Officer and
Director 135,000 5.769 1,801,907
Bridget D. Furbee Vice President,
Administration and
Legal Affairs 35,000 7.500 339,255
R. Mark Hackett Vice President of
Engineering 24,474 6.994 227,635
Mario L. Perri Vice President of Land 23,500 8.931 203,365
Carl F. Starr Vice President of
Production 24,000 8.074 236,293
Stephen L. Barr Director 18,200 11.100 84,625
Thomas M. Levine Director 17,000 11.625 70,125
Robert S. Maust Director 19,000 10.751 94,975
James H. Weber Director 17,000 11.625 70,125
----------
Total $3,672,981
==========
</TABLE>
Benefits Under Employment Agreements. Alamco is a party to employment
agreements with the following executive officers: John L. Schwager, Richard R.
Hoffman and Bridget D. Furbee. The employment agreements generally provide,
among other things, that in the event of employment termination of the executive
under specified circumstances after a "change in control" of Alamco, the
executive will be entitled to, among other things, a lump sum severance payment
and, in the case of Mr. Schwager, either three years of continued benefit plan
participation or a cash payment equal to two times the projected cost of such
benefits. The Merger will constitute a "change in control" of Alamco for
purposes of the employment agreements, thus entitling such persons to the
benefits described above in the event of employment termination of the executive
under specified circumstances following the Merger. Assuming that the Merger is
consummated in August 1997 and that the employment of each of Messrs. Schwager
and Hoffman and Ms. Furbee is terminated under such specified circumstances
immediately following the Merger, it is presently estimated that the severance
and related benefits that would be payable to such persons under the employment
agreements, exclusive of any other accrued obligations (including, but not
limited to vacation), would be as follows:
<TABLE>
<CAPTION>
ESTIMATED SEVERANCE
BENEFITS
EXECUTIVE OFFICER UNDER EMPLOYMENT AGREEMENTS
----------------- ---------------------------
<S> <C>
John L. Schwager.............................. $ 711,758
Richard R. Hoffman............................ 211,502
Bridget D. Furbee............................. 81,000
----------
Total....................................... $1,004,260
</TABLE>
Mr. Schwager also will be entitled to incentive compensation under the
terms of his employment agreement in the amount of approximately $120,000. The
bonuses is payable in increments of $30,000 for each
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<PAGE> 22
$1.00 increase in the price per share of Alamco Common Stock above $11.00 per
share. The actual bonus paid will depend upon the average trading prices over
ten-day periods.
Benefits Under the Severance Plan and Retention Plan. The Severance Plan
provides for payments to be made to any full-time employee of Alamco who does
not have a written employment contract with Alamco in the event of the
employee's termination of employment within three years after a change in
control occurs, unless it is a termination for cause, as defined in the
Severance Plan. While the Severance Plan does not provide any benefits for
Messrs. Schwager, Hoffman or Ms. Furbee, other officers of Alamco are eligible
employees under the Plan, and will, upon a qualifying termination, each receive
a severance benefit, payable within 30 days of the date of termination, equal to
his or her monthly base salary times the number of full and fractional years of
service to Alamco. In addition, the Manager of Exploration and Development of
Alamco entered into an employment agreement in 1996 providing for a payment upon
a change of control which exceeds the amount to which he would otherwise be
entitled under the Severance Plan.
The Key Employee Plan was adopted by the Board of Directors as an incentive
to certain key employees to remain with Alamco until change in control is
brought to a successful conclusion. Twelve persons are eligible for bonus
payments as set forth in the Key Employee Plan if they remain actively employed
by Alamco until the change in control date. Of the twelve, four are executive
officers of Alamco.
The amount (estimated as of August 1, 1997) to which each executive officer
of Alamco is entitled under the two plans is set forth in the table below:
<TABLE>
<CAPTION>
OFFICER SEVERANCE PLAN KEY EMPLOYEE PLAN TOTAL
------- -------------- ----------------- --------
<S> <C> <C> <C>
Bridget D. Furbee............................ -- $20,250 $ 20,250
R. Mark Hackett.............................. $ 56,349 30,200 86,549
Mario L. Perri............................... 95,966 13,150 109,126
Carl F. Starr................................ 94,984 14,250 109,234
-------- -------- --------
Total for Officers......................... $247,299 $77,860 $325,159
Total for Non-Officers*.................... $ 25,000 -- $ 25,000
Total................................... $272,299 $77,860 $350,159
======== ======= ========
</TABLE>
- ---------
*Represents amount payable to Manager of Exploration and Development only.
Employment by Alamco or CNR. As a result of the Merger, Alamco will be the
surviving corporation, and employees of Alamco, to the extent retained by CNR,
will remain employees of Alamco. CNR has advised Alamco that it is working to
identify operational efficiencies that may be obtained through the consolidation
of certain operations and activities of Alamco with those of CNR and that it
anticipates that some positions at Alamco may be eliminated following the
Effective Date, although it intends to retain Alamco's field operations
personnel. CNR has also advised Alamco that it is seeking to identify positions
within its organization that may be offered to persons whose positions at Alamco
may be eliminated. The Merger Agreement provides that CNR will maintain Alamco's
existing benefits plans until at least December 31, 1997, and, if any Alamco
employee becomes eligible to participate in any of CNR's benefit plans, all
pre-existing condition limitations and medical certifications will be waived. In
addition, CNR will cause Alamco, as the surviving corporation in the Merger, to
provide such continuation of coverage as required under applicable law. CNR has
informed Alamco that it may or may not offer employment to certain executive
officers of Alamco. John L. Schwager has not sought and will not be offered
employment by CNR.
Warrant. PFS entered into a Warrant Purchase Agreement dated July 29, 1993
with Alamco in connection with the underwriting arrangements Alamco entered into
with PFS at that time, pursuant to which PFS was granted the Warrant to purchase
up to 50,000 shares of Alamco Common Stock at a purchase price of $6.60 per
share. In connection with the Merger, the Warrant will be converted into the
right to receive $457,500.
Indemnification. The Merger Agreement provides that after the Effective
Date, Alamco, as the surviving corporation, will indemnify and hold harmless
each person who served as a director or officer of Alamco on or
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<PAGE> 23
before the Effective Date to the fullest extent permitted for officers and
directors under the Certificate of Incorporation and Bylaws of The Columbia Gas
System, Inc. The surviving corporation will obtain and maintain for five years
after the Merger, directors and officers insurance coverage with a liability
limit of $15 million for the benefit of the Alamco officers and directors. All
Alamco officers and directors are parties to indemnification agreements
providing for full and completion indemnification, including the advancement of
expenses in connection with any litigation arising from their service as
officers and directors of Alamco. As a condition to the Merger, the current
directors will be required to amend their indemnification agreements to limit
the aggregate amount of indemnification thereunder to $15 million and to require
the surviving corporation to maintain directors and officers insurance coverage
with a liability limit of $15 million, with the aggregate amount of such
indemnification and insurance coverage limited to $15 million.
APPRAISAL RIGHTS
Any holder of record of shares of Alamco Common Stock who makes a written
demand prior to the taking of the vote regarding the Merger at the Special
Meeting, and who follows the procedures prescribed by Section 262 of the DGCL,
has the right under Section 262 to an appraisal of the "fair value" of such
shares by the Delaware Court of Chancery (the "Court"), and to the payment of
such fair value by Alamco, as the surviving corporation in the Merger, in lieu
of receiving the consideration provided under the Merger Agreement.
Set forth below is a summary of the procedures relating to the exercise of
appraisal rights as provided in Section 262 of the DGCL. SUCH SUMMARY DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROVISIONS OF SECTION 262 OF THE DGCL
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THOSE PROVISIONS, A COPY OF
WHICH IS ATTACHED HERETO AS ANNEX C. THESE PROVISIONS MUST BE STRICTLY COMPLIED
WITH OR A STOCKHOLDER'S APPRAISAL RIGHTS MAY BE LOST.
Dissenting stockholders who follow the procedures set forth in Section 262
of the DGCL may receive a cash payment from Alamco, as the surviving corporation
in the Merger, equal to the fair value of their Dissenting Shares, determined
exclusive of any element of value arising from the accomplishment or expectation
of the Merger. Unless all the procedures set forth in Section 262 are followed
by a stockholder who wishes to exercise appraisal rights, such stockholder will
be bound by the terms of the Merger. Each stockholder electing to demand the
appraisal of his or her shares must (i) deliver to Alamco, prior to the vote
with respect to the Merger, a written demand for appraisal of the stockholder's
shares, setting forth the stockholder's intent to demand an appraisal and giving
the stockholder's identity and (ii) not vote such stockholder's shares in favor
of the approval and adoption of the Merger Agreement. Within 10 days after the
Effective Date, Alamco shall notify each stockholder who has complied with these
requirements that the Merger has become effective.
Within 120 days after the Effective Date, any dissenting stockholder who
has perfected rights of appraisal as set forth in Section 262 of the DGCL and
who is otherwise entitled to appraisal rights ("Dissenting Stockholder"), upon
written request, shall be entitled to receive a statement from Alamco, setting
forth (i) the aggregate number of shares which were not voted in favor of the
Merger and with respect to which demands for appraisal have been received and
(ii) the aggregate number of holders of such shares. Alamco shall then mail such
written statement to the Dissenting Stockholder as set forth in Section 262 of
the DGCL.
Within 120 days after the Effective Date, a Dissenting Stockholder may file
a petition in the Delaware Court of Chancery demanding a determination of the
value of all of such Dissenting Stockholder's shares of Alamco stock
("Dissenting Shares"). Upon the filing of any such petition by a Dissenting
Stockholder, such Dissenting Stockholder is required to serve a copy thereof
upon Alamco. At the hearing on such petition, the Court shall determine the
Dissenting Stockholders that have complied with the provisions of Section 262 of
the DGCL and have become entitled to appraisal rights. The Court may require the
stockholders who have demanded an appraisal for their shares and who hold stock
represented by certificates to submit their certificates of stock to the
Delaware Register in Chancery for notation thereon of the pendency of the
appraisal proceedings. Failure to comply with such a demand by the Court could
result in the Court's dismissal of the proceedings as to such stockholder. The
Delaware Register in Chancery, if so ordered by the Court, shall give
20
<PAGE> 24
notice of the time and place fixed for the hearing of the petition by registered
or certified mail to Alamco and to the stockholders who have demanded payment
for their shares and with whom agreements as to the value of their shares have
not been reached by Alamco. Notice shall also be given by one or more
publications at least one week before the day of the hearing in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by Alamco.
After determining the Dissenting Stockholders entitled to an appraisal, the
Court shall appraise the Dissenting Shares by determining their fair value
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining fair value, the Court
is to take into account all relevant factors. The Delaware Supreme Court has
stated that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered in the appraisal proceedings and that "fair price
obviously requires consideration of all relevant factors involving the value of
a company." The Delaware Supreme Court has stated that, in making this
determination of fair value, the court must consider "market value, asset value,
dividends, earnings prospects, the nature of the enterprise and any other facts
which were known or which could be ascertained as of the date of the merger
which throw any light on future prospects of the merger corporation." The
Delaware Supreme Court has also held that "elements of future value, including
the nature of the enterprise, which are known or susceptible of proof as of the
date of the merger and not the product of speculation, may be considered." The
Court may, in its discretion, permit discovery or other pretrial proceedings and
may proceed to trial upon the appraisal before a final determination of all
stockholders entitled to an appraisal.
The Court shall direct the payment of the fair value of the shares,
together with interest thereon, if any, by Alamco to the stockholders entitled
to payment. Payment shall be made to the holders of Dissenting Shares only upon
the surrender to Alamco of the certificates representing such Dissenting Shares.
The costs of the proceedings shall be allocated between the parties in the
manner that the Court deems equitable in the circumstances. Upon application of
a Dissenting Stockholder, the Court may order all or a portion of the expenses
incurred in connection with the appraisal proceeding, including reasonable
attorney's fees and the fees and expenses of experts, to be charged pro rata
against the value of all of the shares entitled to an appraisal.
From and after the Effective Date, no Dissenting Stockholder shall be
entitled to vote or to receive payment of dividends or other distributions on
his or her Dissenting Shares (except for dividends or other distributions
payable to stockholders of record as of a date prior to the Effective Date).
Any Dissenting Stockholder may, within 60 days after the Effective Date,
withdraw such demand and accept the terms of the Merger. No such demand may be
withdrawn after the expiration of the 60 day period, however, unless Alamco
shall consent thereto. If no petition for an appraisal of such Dissenting Shares
by the Court shall have been filed within the time provided in Section 262(e) of
the DGCL, or if the Dissenting Stockholder delivers a written withdrawal of his
or her demand for an appraisal and an acceptance of the Merger, either within 60
days after the Effective Time or thereafter with the written approval of Alamco,
the right of such Dissenting Stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Delaware Court of
Chancery shall be dismissed as to any Dissenting Stockholder without the
approval of the Court, which may be conditioned upon such terms as the Court
deems just.
A VOTE AGAINST APPROVAL AND ADOPTION OF THE MERGER AGREEMENT WILL NOT
SATISFY THE REQUIREMENT FOR A WRITTEN DEMAND FOR APPRAISAL.
Exercise of the right to an appraisal under the DGCL may result in a
judicial determination that the "fair value" of a Dissenting Stockholder's
Dissenting Shares is higher or lower than the value of the payment to be
received in respect thereof pursuant to the Merger Agreement. If Alamco complies
with the requirements of the DGCL, any stockholder who fails to comply with the
requirements of the DGCL will be without a statutory remedy for the recovery of
the value of his or her shares or for money damages to the stockholder with
respect to the Merger. Any stockholder who fails to comply with the requirements
of the DGCL will remain eligible to receive the consideration provided under the
Merger Agreement.
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<PAGE> 25
Reference is made to Annex C attached hereto for the complete text of the
provisions of Section 262 of the DGCL relating to the rights of Dissenting
Stockholders. Statements made in this Proxy Statement summarizing those
provisions are qualified in their entirety by reference to Annex C. The
provisions are technical in nature and complex. It is suggested that any
stockholder who desires to exercise rights to an appraisal of shares of Alamco
Common Stock consult counsel. Failure to comply strictly with the provisions of
the statute may defeat a stockholder's right to an appraisal.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash in the amount of $15.75 per share of Alamco Common
Stock pursuant to the Merger or the receipt of cash pursuant to the exercise and
perfection of statutory appraisal rights will be a taxable transaction for
federal income tax purposes under the Internal Revenue Code of 1986, as amended
(the "Code"), and may also be a taxable transaction for state, local and other
tax purposes. For federal income tax purposes, each holder of shares of Alamco
Common Stock will recognize gain or loss equal to the difference between the
amount of cash received and such holder's adjusted tax basis for such shares.
The gain or loss will be a capital gain or loss if the Alamco Common Stock is
held as a capital asset and any such capital gain or loss will be long-term if
the holder has held the Alamco Common Stock for more than one year.
Each stockholder of Alamco will, in general, be required to provide his or
her Social Security number or other taxpayer identification number ("TIN"), or
in some instances certain other information, in order to avoid the "backup
withholding" requirements which might otherwise apply under the Code. A
stockholder who does not furnish his or her correct TIN may be subject to backup
withholding and may also be subject to a penalty imposed by the Internal Revenue
Service.
THE FOREGOING TAX DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY. THE
TAX CONSEQUENCES FOR EACH PARTICULAR STOCKHOLDER MAY BE AFFECTED BY MATTERS NOT
DISCUSSED HEREIN. EACH STOCKHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO HIM OR HER,
INCLUDING THE EFFECT AND APPLICABILITY OF FEDERAL, STATE, LOCAL AND OTHER TAX
LAWS.
ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase transaction. Under the
purchase method of accounting, the assets and liabilities of Alamco will be
recorded on the books of CNR at their respective fair market values at the
Effective Date.
THE MERGER AGREEMENT
The following is a summary of material provisions of the Merger Agreement,
a copy of which is attached as Annex A hereto, and is incorporated by reference
herein. This summary is qualified in its entirety by reference to the full text
of the Merger Agreement.
THE MERGER
The Merger Agreement provides that, subject to the terms and conditions of
the Merger Agreement, on the Effective Date, pursuant to a Certificate of
Merger, AAC will be merged with and into Alamco. On the Effective Date, the
separate existence of AAC will cease and Alamco, as the surviving entity and a
wholly-owned subsidiary of CNR (sometimes hereinafter referred to as the
"Surviving Corporation"), will continue unaffected and unimpaired by the Merger.
The Merger will have the effects specified in the DGCL.
The transactions contemplated by the Merger Agreement will be consummated
at a closing (the "Closing Date") to be held on (i) the earlier of October 15,
1997 and the first business day after satisfaction or waiver of the last of the
conditions to the Merger; or (ii) on such other date as specified by Alamco and
CNR after satisfaction or waiver of all of the conditions to the Merger. In
connection with the closing, Alamco, as the Surviving Corporation, will execute
and cause a Certificate of Merger to be filed with the
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<PAGE> 26
Delaware Secretary of State. The Merger will become effective on the Effective
Date at the time and on the date specified in such Certificate of Merger.
The Certificate of Incorporation of the Surviving Corporation in effect
immediately after the Effective Date will read as set forth in an exhibit to the
Merger Agreement. On the Effective Date, the Board of Directors of the Surviving
Corporation will consist of those persons serving as directors of AAC
immediately prior to the Effective Date. The stock transfer books of Alamco will
be closed and no transfer of Alamco Common Stock will be made or recognized on
or after the Effective Date.
CONSIDERATION
At the Effective Date and upon consummation of the Merger, each issued and
outstanding share of Alamco Common Stock (other than shares of Alamco Common
Stock held by stockholders of Alamco perfecting appraisal rights in accordance
with the DGCL) and each outstanding warrant and option to purchase Alamco Common
Stock will be converted into the right to receive $15.75 per share in cash. On
January 15, 1997, the last full trading day prior to the public announcement by
Alamco that its Board of Directors had retained a financial advisor to assist it
in exploring strategic alternatives for increasing stockholder value, including
the possibility of a sale or merger of part or all of Alamco, the closing sale
price of Alamco Common Stock on the AMEX was $12.625 per share. On May 23, 1997,
the last full trading day prior to the execution and delivery of the Merger
Agreement and the public announcement thereof, the closing sale price of Alamco
Common Stock on the AMEX was $14.625 per share. On July 14, 1997, the closing
sale price of Alamco Common Stock on the AMEX was $15.375 per share.
Upon execution of the Merger Agreement, CNR deposited $5 million in an
escrow account at Bank One, Texas, National Association, for the benefit of
Alamco. In the event the Merger is not consummated due to the failure of CNR to
perform its obligations under the Merger Agreement, Alamco will be entitled to
the $5 million deposit.
EXCHANGE PROCEDURES
On and after the Effective Date, each holder of a certificate(s)
("Certificate") formerly representing outstanding shares of Alamco Common Stock
may surrender the same to the Surviving Corporation or its agent for
cancellation and each such holder will be entitled upon such surrender to
receive in exchange therefor a check in an amount equal to the amount of cash,
without interest, to which such holder is entitled under the Merger Agreement.
If any check is to be made payable to a name other than that in which a
Certificate surrendered for exchange is issued, the Certificate so surrendered
will be properly endorsed and otherwise in proper form for transfer and the
person requesting such exchange will be required to affix any requisite stock
transfer tax stamps and provide funds for the purchase of such stamps or
establish to the satisfaction of the Surviving Corporation or its agent that
such taxes are not payable.
No conversion will be made in respect of any share of Alamco Common Stock
as to which an Alamco stockholder has elected to exercise appraisal rights until
such time, if any, as such stockholder shall have effectively lost appraisal
rights.
STOCK OPTIONS; WARRANT
On the Effective Date, Alamco's stock option plans will terminate, and each
holder of an option to acquire Alamco Common Stock outstanding thereunder will
be entitled to receive cash in exchange for the aggregate number of shares
subject to such option in an amount equal to the aggregate number of shares of
Alamco Common Stock subject to such option multiplied by $15.75, less the sum of
(i) any applicable withholding taxes and (ii) the aggregate exercise price for
all of the shares of Alamco Common Stock subject to such option, determined
without regard to any vesting schedule that might otherwise apply. Certain
options under non-qualified plans and agreements held by executive officers also
provide for the reimbursement of income taxes associated with such options,
which amounts will be paid at the Effective Date. In addition, on the Effective
Date, Principal Financial will be entitled to receive cash in the aggregate
amount of $457,500 in exchange for the Warrant. See "The Merger--Interests of
Certain Persons in the Merger."
23
<PAGE> 27
INDEMNIFICATION
The Merger Agreement provides that after the Effective Date, Alamco, as the
Surviving Corporation, will indemnify and hold harmless each person who served
as a director and officer of Alamco on or before the Effective Date to the
fullest extent permitted for officers and directors under the Certificate of
Incorporation and Bylaws of The Columbia Gas System, Inc. The Surviving
Corporation will obtain and maintain for five years after the Merger, directors
and officers insurance coverage with a liability limit of $15 million for the
benefit of the Alamco officers and directors. All Alamco officers and directors
are parties to indemnification agreements providing for full and complete
indemnification, including the advancement of expenses in connection with any
litigation arising from their service as officers and directors of Alamco. As a
condition to the Merger, the current directors will be required to amend their
indemnification agreements to limit the aggregate amount of indemnification
thereunder to $15 million and to require the surviving corporation to maintain
directors and officers insurance coverage with a liability limit of $15 million,
with the aggregate amount of such indemnification and insurance coverage limited
to $15 million.
EMPLOYEE BENEFIT MATTERS
The Merger Agreement provides that CNR will maintain Alamco's existing
benefit plans until at least December 31, 1997, and if any Alamco employee
becomes eligible to participate in any of CNR's benefit plans, all preexisting
condition limitations and medical certifications will be waived. In addition,
the Surviving Corporation will provide such continuation of coverage as required
under applicable law.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties relating to, among other things: (i) the capital structure of Alamco;
(ii) the organization, standing and authority of Alamco, CNR and AAC; (iii) the
ownership of Alamco's subsidiaries; (iv) the authorization, execution and
delivery of the Merger Agreement and the corporate power and authority of
Alamco, CNR and AAC; (v) the enforceability of the Merger Agreement; (vi)
compliance by Alamco with applicable federal securities laws; (vii) the absence
of undisclosed liabilities of Alamco; (viii) the absence of material adverse
changes of Alamco; (ix) brokers and finders with respect to the Merger; (x)
certain information provided by Alamco, CNR and AAC in connection with this
Proxy Statement; (xi) with regard to Alamco, certain tax matters, benefit plans,
certain contracts, legal proceedings, trade names, labor matters, compliance
with certain laws; and (xii) with regard to CNR, sources of financing.
CERTAIN COVENANTS
Alamco has agreed that until the Closing Date, it will give CNR, AAC and
their representatives full and complete access upon reasonable notice to all
officers, employees, offices, properties, agreements, records and affairs of
Alamco. Alamco agreed to use commercially reasonable efforts to continue to
conduct its business in the ordinary course. Except with the consent of CNR,
Alamco has agreed that it will not, and it will cause its subsidiaries not to:
(i) adopt any material change in any accounting method or practice, except as
required by generally accepted accounting principles; (ii) amend its charter or
by-laws; (iii) sell, mortgage, pledge or otherwise dispose of any material
assets or properties; (iv) merge or consolidate or purchase all or substantially
all the assets of any other business entity, or agree to do the same; (v) issue
any shares of its capital stock or securities convertible into capital stock,
except in connection with Alamco's Rights Plan or upon the exercise of
outstanding stock options or warrants; (vi) incur or agree to incur any debt for
borrowed monies other than under Alamco's existing revolving credit facility;
(vii) declare, set aside or pay any dividend or other distribution with respect
to its securities, except in accordance with past practices and without any
increases; (viii) redeem or acquire any of its stock; (ix) increase compensation
payable to any employee, officer or director, except normal merit pay increases
in the ordinary course of business; and (x) amend any benefit plan. Alamco and
its subsidiaries also agreed to use commercially reasonable efforts to: (i)
preserve its business relationships; (ii) develop, maintain and operate its oil
and gas properties; (iii) maintain its insurance as now in effect; and (iv) keep
its oil and gas contracts (taken as a whole) in full force and effect in all
material respects.
24
<PAGE> 28
Alamco has agreed to cease all discussions or negotiations with any other
person with respect to an acquisition of all or a substantial part of Alamco.
However, if Alamco is advised by counsel that its fiduciary obligations under
applicable law so require, then Alamco may provide non-public information to and
participate in negotiations with a person who has made a bona fide offer to
acquire Alamco for an all-cash purchase price in excess of the aggregate
consideration under the Merger Agreement, and accept an offer to acquire Alamco
which the Board of Directors of Alamco, on the advice of its financial advisor,
believes is more favorable to Alamco's stockholders. See also "Termination"
below. Alamco agreed to notify CNR in writing of any event or omission which
would result in any of Alamco's representations and warranties under the Merger
Agreement being or becoming materially inaccurate or misleading or in any
material breach by Alamco of the Merger Agreement.
CONDITIONS
The respective obligations of Alamco, CNR and AAC to effect the Merger are
subject to satisfaction or waiver of certain conditions, including among others:
(i) the Merger Agreement having been duly approved by the stockholders of
Alamco; (ii) the absence of any statute, rule, regulation or court order
enjoining or prohibiting the consummation of the Merger and no proceeding
seeking such an order being threatened or instituted; and (iii) the redemption
of all rights under Alamco's Rights Plan.
The obligations of Alamco to effect the Merger are subject to satisfaction
or waiver of certain additional conditions, including among others: (i) the
representations and warranties of CNR and AAC set forth in the Merger Agreement
being true and correct as of the date of the Merger Agreement and as of the
Closing Date as though made on and as of the Closing Date except as otherwise
contemplated by the Merger Agreement; (ii) CNR and AAC having in all material
respects performed all agreements and complied with all covenants required by
the Merger Agreement; (iii) CNR and AAC having delivered to Alamco a
certificate, dated the Closing Date, certifying as to the satisfaction of
certain obligations of CNR and AAC; (iv) the Board of Directors of Alamco having
received an opinion from its financial advisor as of the date of this Proxy
Statement to the effect that the Merger is fair from a financial point of view
to the stockholders of Alamco and such opinion not having been withdrawn on or
prior to the Closing Date; (v) AAC having delivered the aggregate consideration
under the Merger Agreement; (vi) all payments under Alamco's benefit plans
required due to the Merger having been made; and (vii) CNR having paid in full
all indebtedness of Alamco to Bank One, Texas, National Association or obtaining
the consent of such bank to the Merger.
The obligations of CNR and AAC with respect to the Merger are subject to
satisfaction or waiver of certain additional conditions, including among others:
(i) the representations and warranties of Alamco set forth in the Merger
Agreement being true and correct in all material respects as of the day of the
Merger Agreement and as of the Closing Date as though made on and as of the
Closing Date except as otherwise contemplated by the Merger Agreement; (ii)
Alamco having in all material respects performed all agreements and complied
with all covenants required by the Merger Agreement; (iii) Alamco having
delivered to CNR and AAC a certificate, dated the Closing Date, as to the
satisfaction of certain obligations of Alamco set forth in the Merger Agreement;
(iv) certain consents having been received; and (v) CNR having received an
opinion of Kirkpatrick & Lockhart LLP, counsel to Alamco, dated the Closing
Date, as to certain matters.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Closing
Date: (i) by the mutual written consent of Alamco, CNR and AAC; (ii) by the
Board of Directors of Alamco if the Board of Directors has withdrawn or
adversely modified its approval of the Merger in order to approve another merger
or acquisition transaction with a third party; (iii) by Alamco if stockholder
approval is not obtained; or (iv) by Alamco, CNR or AAC, upon written notice to
the other parties at any time after October 15, 1997. None of Alamco, CNR or AAC
may terminate the Merger Agreement if the failure to consummate the Merger
resulted from the failure of Alamco, CNR or AAC, as the case may be, to fulfill
any of their respective obligations under the Merger Agreement.
In the event CNR or AAC defaults in their respective obligations under the
Merger Agreement, Alamco shall be entitled to receive a $5 million deposit
amount which had been placed in escrow by CNR at the time
25
<PAGE> 29
the Merger Agreement was executed and delivered. In the event Alamco terminates
the Merger Agreement as described in clause (ii) above, Alamco shall pay CNR a
break-up fee of $8 million.
EXPENSES
Each of Alamco and CNR will bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated by the Merger Agreement.
AMENDMENT AND WAIVER
The Merger Agreement may not be modified or amended except in a writing
signed by Alamco, CNR and AAC, except that Alamco may supplement or amend any
schedules to the Merger Agreement. After receipt of Alamco stockholder approval,
no amendment may be made to the Merger Agreement which decreases the aggregate
consideration payable thereunder or otherwise materially adversely affects the
stockholders of Alamco, without further approval by the Alamco stockholders. Any
waiver of any provision of the Merger Agreement must be in writing executed by
the party granting the waiver.
26
<PAGE> 30
ALAMCO SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected historical consolidated information of Alamco set forth below
has been derived from and should be read in conjunction with the audited
financial statements and other financial information of Alamco incorporated by
reference in this Proxy Statement. Financial information at March 31, 1997 and
1996 and for each of the three month periods then ended is unaudited. In the
opinion of Alamco's management, the financial information for such periods
includes all adjustments, consisting of normal, recurring adjustments, necessary
to present fairly the results for such periods. Results of operations for the
three months ended March 31, 1997 are not necessarily indicative of results that
may be achieved for the full year ending December 31, 1997. See "Incorporation
of Certain Documents by Reference."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- ------------------
1996 1995 1994 1993 1992 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues (a)....................... $23,065 $18,539 $13,671 $11,900 $ 11,350 $ 6,624 $ 6,322
Income from operations (b)......... 4,162 1,898 1,672 1,746 837 1,801 1,127
Income before change in DD&A
accounting principle (b)......... 2,671 1,279 1,675 1,352 729 1,298 913
Change in DD&A accounting principle
(c).............................. -- -- -- -- 1,058 -- --
------- ------- ------- ------- -------- ------- -------
Net income (b)................... 2,671 1,279 1,675 1,352 1,787 1,298 913
------- ------- ------- ------- -------- ------- -------
Cash dividends................... -- -- -- -- -- -- --
BALANCE SHEET DATA:
Total assets (b)................... $70,698 $59,900 $56,132 $43,337 $ 40,275 $63,601 $69,740
Working capital.................... 3,869 610 719 1,202 2,415 4,577 3,131
Total long-term debt (d)........... 20,786 13,707 12,995 1,003 9,561 16,892 18,070
Stockholders' equity (b), (d)...... 33,986 30,496 28,557 26,827 15,265 32,358 35,580
PER SHARE DATA:
Income from operations (b)......... $ .85 $ .41 $ .36 $ .51 $ .33 $ .37 $ .23
Income before change in DD&A
accounting principle (b)......... .54 .27 .36 .39 .29 .27 .18
Change in DD&A accounting principle
(c).............................. -- -- -- -- .41 -- --
------- ------- ------- ------- -------- ------- -------
Net income (b)................... $ .54 $ .27 $ .36 $ .39 $ .70 $ .27 $ .18
------- ------- ------- ------- -------- ------- -------
FINANCIAL RATIO DATA:
Book value per share (b), (c),
(d).............................. $ 7.15 $ 6.49 $ 6.14 $ 5.79 $ 5.95 $ 6.86 $ 7.45
Total debt to stockholders' equity
(b), (d)......................... 6 .4 .5 -- .6 .5 .5
Current ratio (b).................. 1.8 1.1 1.1 1.2 1.4 2.0 1.7
</TABLE>
Notes to Selected Consolidated Financial Information:
(a) Revenues in 1995 include proceeds from the settlement of Alamco's contract
rejection claims against Columbia Gas Transmission Corp. in the amount of
$4,164,000. During 1994, Alamco acquired a total of 172.6 net producing
wells from various third parties.
(b) Restated for the years 1992 through 1995 for the effect of the stock option
plan compensation expense adjustments.
(c) During 1992, Alamco changed its method of computing unit-of-production
depreciation from a well-by-well basis to a depositional group basis.
(d) In July 1993, Alamco consummated a public offering in which 2,071,404 new
shares of Alamco Common Stock were issued. Alamco used the proceeds from the
stock offering in 1993 to repay the then outstanding balance on its
revolving bank credit facility.
27
<PAGE> 31
MARKET PRICES AND DIVIDENDS
Alamco Common Stock is listed on the AMEX under the trading symbol "AXO".
The following table sets forth for the periods indicated the high and low sales
price of Alamco Common Stock for each quarter in 1996 and 1995 and the first
three quarters in 1997, through July 14, 1997.
<TABLE>
<CAPTION>
1995 HIGH LOW
---- ---- ---
<S> <C> <C>
First Quarter.............................................. $ 6 3/8 $5 5/8
Second Quarter............................................. 8 3/4 6
Third Quarter.............................................. 8 15/16 7 1/2
Fourth Quarter............................................. 8 3/4 7 5/8
1996
First Quarter.............................................. $10 1/8 $7 3/4
Second Quarter............................................. 11 5/8 9 1/4
Third Quarter.............................................. 12 1/4 10 5/8
Fourth Quarter............................................. 12 1/4 10 7/8
1997
First Quarter.............................................. $15 5/8 $11 1/4
Second Quarter............................................. $15 3/4 $13
Third Quarter (through July 14)............................ $15 7/16 $15 3/8
</TABLE>
On January 15, 1997, the last full trading day prior to the public
announcement by Alamco that its Board of Directors had retained a financial
advisor to assist it in exploring strategic alternatives for increasing
stockholder value, including the possibility of a sale or merger of part or all
of Alamco, the closing sale price of Alamco Common Stock on the AMEX was $12.625
per share. On May 23, 1997, the last full trading day prior to the execution and
delivery of the Merger Agreement and the public announcement thereof, the
closing sale price of Alamco Common Stock on the AMEX was $14.625 per share. On
July 14, 1997, the closing sale price of Alamco Common Stock on the AMEX was
$15.375 per share. As of June 25, 1997, there were approximately 1,220 record
holders of Alamco Common Stock. Since its incorporation in 1981, Alamco has not
declared or paid any dividends with respect to its Common Stock. The Merger
Agreement provides that Alamco will not declare, set aside, or pay, directly or
indirectly, any dividend, cash or stock, or other distribution in respect to its
securities (except in accordance with past practices and without any increase).
28
<PAGE> 32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the knowledge of the Company, Fleet Financial Group Inc., FMR
Corporation, The Guardian Life Insurance Company of America, Ingalls & Snyder
LLC and Wellington Management Company, LLP, are the only entities which owned of
record or beneficially more than five percent (5%) of the outstanding Common
Stock as of the Record Date. The following table indicates the beneficial
ownership of each such entity based on their respective Schedule 13G filings as
of the dates noted therein.
<TABLE>
<CAPTION>
TITLE OF NAME AND ADDRESS OF AMOUNT AND NATURE OF
CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
-------- ------------------ -------------------- ----------------
<S> <C> <C> <C>
Common Stock Fleet Financial Group, Inc. 427,083 shares(1) 9.0%
One Federal Street
Boston, MA 02211
Common Stock FMR Corp. and certain of its affiliates 465,300 shares(2) 9.8%
82 Devonshire Street
Boston, MA 02109
Common Stock The Guardian Life Insurance Company of 437,800 shares(3) 9.2%
America and certain of its affiliates
201 Park Avenue, South
New York, NY 10003
Common Stock Ingalls & Snyder LLC 315,200 shares(4) 6.6%
61 Broadway
New York, NY 10006
Common Stock Wellington Management Company, LLP 297,000 shares(5) 6.2%
75 State Street
Boston, MA 02109
</TABLE>
- ---------
(1) As stated in its Schedule 13G filing dated as of February 13, 1997, Fleet
Financial Group, Inc. has sole dispositive power over all shares, and sole
voting power over 364,183 shares.
(2) As stated in its Schedule 13G filing dated as of January 10, 1996, as
amended February 14, 1997, FMR Corporation has sole dispositive power over
all shares. Voting of the shares by Fidelity Low Priced Stock Fund is done
in accordance with guidelines established by the Fund's Board of Trustees.
(3) As stated in its Schedule 13G filing dated as of February 14, 1997, The
Guardian Life Insurance Company has sole voting and dispositive power over
325,000 shares and shares voting and dispositive power with two of its
affiliates.
(4) As stated in its Schedule 13G filing dated as of January 16, 1997, Ingalls &
Snyder, it has sole disposition power over all shares and has sole voting
power over 10,000 shares.
(5) As stated in its Schedule 13G filing dated as of January 24, 1997,
Wellington Management Company, it has shared dispositive power over all
shares and shared voting power over 239,000 shares.
29
<PAGE> 33
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of June 25, 1997 certain information
concerning ownership of shares of Alamco Common Stock by the directors of
Alamco, the Chief Executive Officer and the other named executive officer of
Alamco, and all directors and executive officers of Alamco as a group.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
------------------------ ---------------- ----------------
<S> <C> <C>
Stephen L. Barr................................ 16,250(1)(2) *
Richard R. Hoffman............................. 141,429(3) 3%
Thomas M. Levine............................... 7,290 *
Robert S. Maust................................ 30,414(1)(2)(4) *
John L. Schwager............................... 126,476(5) 2.6%
James H. Weber................................. 7,985(2) *
Directors and executive officers as a group (10
persons)..................................... 392,906(6) 8.2%
</TABLE>
- ---------
* Less than 1%.
(1) Shares beneficially owned by Messrs. Maust and Barr include 2,000 shares and
1,200 shares, respectively, which each such director has the right to
acquire upon the exercise of stock options under the Alamco, Inc. 1982
Outside Directors' Stock Option Plan. The per share average exercise price
of such options held by Messrs. Maust and Barr are $3.325 and $3.667,
respectively. Such options have expiration dates ranging from November 7,
1997 to November 7, 2001.
(2) Each of Messrs. Barr, Levine, Maust and Weber beneficially own 5,000 shares
which may be acquired upon the exercise of stock options under the Alamco,
Inc. 1996 Stock Option Plan for Non-Employee Directors. The options are
exercisable on and after July 1, 1997 at an exercise price of $11.625 per
share.
(3) The number of shares of common stock, par value $.10 per share, of the
Company ("Common Stock") beneficially owned by Mr. Hoffman includes 135,000
shares which he has the right to acquire upon the exercise of currently
exercisable stock options and 2,929 shares that have been allocated to his
account under the Alamco, Inc. Savings and Protection Plan.
(4) The shares beneficially owned by Mr. Maust include 1,200 shares held as
joint tenant with his wife, 100 shares held in trust with Mr. Maust as the
trustee and as to which Mr. Maust has sole voting control, and 1,000 shares
held in trust for Mr. Maust's son, as to which Mr. Maust has sole voting
control.
(5) The number of shares of Common Stock beneficially owned by Mr. Schwager
includes 40,000 shares which he has the right to acquire upon the exercise
of currently exercisable stock options, 120 shares held jointly with his
wife, 41,100 shares held by his wife, which ownership Mr. Schwager
disclaims, and 4,605 shares that have been allocated to his account under
the Alamco, Inc. Savings and Protection Plan.
(6) Includes options to acquire 255,672 shares upon the exercise of currently
exercisable stock options or options which are exercisable within 60 days of
June 25, 1997.
CERTAIN INFORMATION REGARDING CNR
CNR is The Columbia Gas System, Inc.'s wholly owned exploration and
production subsidiary. CNR produces natural gas and oil from more than 6,400
wells in New York, Pennsylvania, Ohio, Maryland, West Virginia, Virginia and
Kentucky. CNR holds more than 2 million net acres of oil and gas leases and
proved gas reserves of approximately 645 billion cubic feet. It also operates
more than 3,300 miles of natural gas gathering pipeline. The Columbia Gas
System, Inc. is one of the United States' largest natural gas systems. Its
operating companies are engaged in all phases of the gas business plus
marketing, fuel management services and electric power generation. CNR's
principal executive offices are located at 900 Pennsylvania Avenue, Charleston,
West Virginia 25362-0070.
30
<PAGE> 34
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The financial statements and schedules of Alamco as of December 31, 1996
and for each of the years in the three-year period ended December 31, 1996
incorporated by reference in this Proxy Statement have been included herein in
reliance upon the reports of Coopers & Lybrand L.L.P., independent certified
public accountants and upon the authority of such firm as experts in accounting
and auditing. A representative of Coopers & Lybrand L.L.P. will be present at
the Special Meeting in order to respond to questions and to make any other
statement he deems appropriate.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), stockholders may present proper proposals for
inclusion in Alamco's proxy statement and for consideration at the next annual
meeting of its stockholders by submitting such proposals to Alamco in a timely
manner. The 1998 annual meeting will be held only if the Merger is not
consummated. In order to be so included for the 1998 annual meeting, stockholder
proposals must be received by Alamco no later than December 12, 1997, and must
otherwise have complied with the requirements of Rule 14a-8.
AVAILABLE INFORMATION
Alamco is subject to the informational requirements of the Exchange Act and
in accordance therewith files periodic reports, proxy solicitation materials and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy solicitation materials and other information
can be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's Regional Offices located at Seven World Trade Center,
Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission maintains a Website that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. Such
reports, proxy and information statements and other information may be found on
the Commission's site address, http://www.sec.gov. Alamco Common Stock is listed
on the AMEX. Such reports, proxy solicitation materials and other information
can also be inspected and copied at the AMEX at 86 Trinity Place, New York, New
York 10006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Alamco with the Commission (File No.
1-8490) pursuant to the Exchange Act are incorporated herein by reference:
1. Alamco's Annual Report on Form 10-K for the year ended December 31, 1996
(as amended);
2. Alamco's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997; and
3. Alamco's Current Report on Form 8-K dated May 27, 1997.
A copy of Alamco's Annual Report on Form 10-K for the year ended December
31, 1996 (as amended) and its Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997 accompany this Proxy Statement. The Company will provide
without charge to each person to whom a copy of this Proxy Statement is
delivered, upon the written or oral request of such person, a copy of any or all
of the documents that are incorporated herein by reference, other than exhibits
to such information (unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to Alamco, Inc., 200
West Main Street, Clarksburg, West Virginia 26301, Attention: Secretary,
telephone number (304) 623-6671.
31
<PAGE> 35
ANNEX A
AGREEMENT AND PLAN OF MERGER
among
Columbia Natural Resources, Inc.
Appalachian Acquisition Company
and
Alamco, Inc.
<PAGE> 36
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 DEFINITIONS............................................................. 1
ARTICLE 2 THE MERGER.............................................................. 1
2.1 Effective Time of the Merger............................................ 1
2.2 Closing................................................................. 1
2.3 Effects of the Merger................................................... 1
ARTICLE 3 CONVERSION OF SHARES; PAYMENT OF MERGER CONSIDERATION................... 2
3.1 Conversion of Shares.................................................... 2
3.2 Payment................................................................. 2
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................... 3
4.1 Organization and Good Standing.......................................... 3
4.2 Capitalization of the Company........................................... 3
4.3 Subsidiaries............................................................ 3
4.4 Authority; No Conflicts................................................. 4
4.5 SEC Filings............................................................. 4
4.6 Consents................................................................ 5
4.7 No Brokers.............................................................. 5
4.8 Proxy Statement......................................................... 5
4.9 Absence of Changes...................................................... 5
4.10 Absence of Undisclosed Liabilities...................................... 6
4.11 Tax Returns............................................................. 6
4.12 Trade Names and Rights.................................................. 6
4.13 Material Contracts...................................................... 6
4.14 Contracts and Permits................................................... 6
4.15 Labor Matters........................................................... 7
4.16 Benefit Plans........................................................... 7
4.17 Litigation.............................................................. 8
4.18 Absence of Sensitive Payments........................................... 8
4.19 Compliance with Laws.................................................... 8
4.20 Disclaimers............................................................. 8
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB......................... 9
5.1 Organization and Good Standing.......................................... 9
5.2 Execution and Effect of Agreement....................................... 9
5.3 No Conflicts............................................................ 9
5.4 Consents................................................................ 9
5.5 Availability of Funds................................................... 10
5.6 No Brokers.............................................................. 10
5.7 Proxy Statement and Other Information................................... 10
ARTICLE 6 ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES.......... 10
6.1 Limitation; No Survival................................................. 10
6.2 Right to Update Schedules............................................... 10
6.3 Schedules and Exhibits.................................................. 10
ARTICLE 7 ADDITIONAL COVENANTS AND UNDERTAKINGS................................... 10
7.1 Stockholder Approval.................................................... 10
7.2 Further Assurances and Assistance....................................... 11
7.3 Access to Information................................................... 11
7.4 Conduct of Business Prior to Closing.................................... 12
7.5 H-S-R Act............................................................... 13
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
7.6 Books and Records....................................................... 13
7.7 Inquiries and Negotiations.............................................. 13
7.8 Indemnification; Director's and Officer's Insurance..................... 13
7.9 Notice of Default....................................................... 14
7.10 Benefit Matters After Closing........................................... 14
ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE............. 15
8.1 Conditions Precedent to the Obligation of Buyer and Sub................. 15
8.2 Conditions Precedent to the Obligation of the Company................... 15
ARTICLE 9 EXPENSES................................................................ 16
ARTICLE 10 TERMINATION............................................................. 16
10.1 Termination............................................................. 16
10.2 Deposit Escrow.......................................................... 17
10.3 Break-Up Fee............................................................ 17
ARTICLE 11 NOTICES................................................................. 17
ARTICLE 12 MISCELLANEOUS........................................................... 18
12.1 Headings................................................................ 18
12.2 Schedules and Exhibits.................................................. 18
12.3 Execution in Counterparts............................................... 18
12.4 Entire Agreement........................................................ 18
12.5 Governing Law........................................................... 18
12.6 Modification............................................................ 18
12.7 Successors and Assigns.................................................. 18
12.8 Waiver.................................................................. 18
12.9 Severability............................................................ 18
12.10 Announcements........................................................... 19
</TABLE>
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ANNEX I DEFINITIONS
EXHIBITS
A -- Certificate of Incorporation
B -- Escrow Agreement
SCHEDULES
4.3 -- Subsidiaries
4.4 -- Conflicts
4.6 -- Company Consents
4.9 -- Absence of Changes
4.12 -- Trade Names
4.13 -- Material Contracts
4.14 -- Contracts and Permits
4.15 -- Labor Matters
4.16 -- Benefit Plans
4.17 -- Litigation
5.4 -- Buyer and Sub Consents
7.4 -- Transactions Prior to Closing
8.1 -- Indemnified Individuals
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of this 27th
day of May, 1997, is entered into by and among Columbia Natural Resources, Inc.,
a Texas corporation ("Buyer"), Appalachian Acquisition Company, a Delaware
corporation and a wholly-owned subsidiary of Buyer ("Sub"), and Alamco, Inc., a
Delaware corporation (the "Company"). The Company and Sub are the only parties
to the merger hereby contemplated and are sometimes referred to herein as the
"Constituent Corporations," and the Company is sometimes referred to herein as
the "Continuing Corporation."
WITNESSETH:
WHEREAS, the Company is an independent gas and oil producer engaged in the
acquisition, exploitation, exploration, development and production of natural
gas and oil primarily in West Virginia, Tennessee and Kentucky.
WHEREAS, the respective Boards of Directors of the Constituent Corporations
have approved this Agreement and deem it advisable and in the best interests of
their respective corporations and stockholders that Sub merge with and into the
Company on the terms and conditions herein set forth, whereby the Company will
become a wholly-owned subsidiary of Buyer (the "Merger").
NOW, THEREFORE, for the purpose of consummating the above transaction and
in consideration of the promises and mutual covenants herein contained, the
parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, capitalized terms shall have the meanings
specified in the text hereof or on Annex I hereto (which is incorporated herein
by reference), which meanings shall be applicable to both the singular and
plural forms of the terms defined.
ARTICLE 2
THE MERGER
2.1 Effective Time of the Merger. Subject to the provisions of this
Agreement, a Certificate of Merger (the "Certificate of Merger") in such form as
required by the relevant provisions of the Delaware General Corporation Law (the
"GCL") shall be duly prepared, executed and acknowledged by each of the
Constituent Corporations and thereafter delivered to the Secretary of State of
the State of Delaware for filing, as provided in the GCL, on the Closing Date.
The Merger shall become effective upon the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware or at such time thereafter
as is provided in the Certificate of Merger (the "Effective Time").
2.2 Closing. The closing of the Merger (the "Closing") will take place at
the offices of Kirkpatrick & Lockhart LLP, 1500 Oliver Building, Pittsburgh,
Pennsylvania 15222-2312 at 10:00 a.m., prevailing time, on (i) the earlier of
(A) October 15, 1997 and (B) the first Business Day after the last of the
conditions set forth in Article 8 is fulfilled or waived, or (ii) on such other
date as is specified by Buyer and the Company after all of the conditions to the
Merger set forth in Article 8 have been satisfied or waived, subject to the
rights of termination and abandonment hereinafter set forth (the "Closing
Date").
2.3 Effects of the Merger.
(a) At the Effective Time (i) the separate existence of Sub shall cease and
Sub shall be merged with and into the Company, (ii) the Certificate of
Incorporation of the Company, as the Continuing Corporation, shall be amended to
read in its entirety as set forth in Exhibit A, (iii) the Bylaws of Sub as in
effect immediately prior to the Effective Time shall be the Bylaws of the
Continuing Corporation, and (iv) the officers and
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directors of Sub at the Effective Time shall be the officers and directors of
the Continuing Corporation and hold office as provided in the Bylaws of the
Continuing Corporation.
(b) At and after the Effective Time, the Continuing Corporation shall
possess all the rights, privileges, powers and franchises of a public as well as
of a private nature, and be subject to all the restrictions, disabilities and
duties of each of the Constituent Corporations; and all and singular rights,
privileges, powers and franchises of each of the Constituent Corporations, and
all property, real, personal and mixed, and all debts due to either of the
Constituent Corporations on whatever account, as well as for stock subscriptions
and all other things in action or belonging to each of the Constituent
Corporations, shall be vested in the Continuing Corporation, and all property,
rights, privileges, powers and franchises, and all and every other interest
shall be thereafter as effectually the property of the Continuing Corporation as
they were of the Constituent Corporations, and the title to any real estate
vested by deed or otherwise, in either of the Constituent Corporations, shall
not revert or be in any way impaired; but all rights of creditors and all liens
upon any property of either of the Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities and duties of the Constituent
Corporations shall thereafter attach to the Continuing Corporation, and may be
enforced against it to the same extent as if such debts and liabilities had been
incurred by it.
ARTICLE 3
CONVERSION OF SHARES; PAYMENT
OF MERGER CONSIDERATION
3.1 Conversion of Shares. As of the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any shares of capital stock
of Sub or the Company:
(a) All issued and outstanding shares of Stock of the Company shall be
canceled and extinguished and each share shall be converted into the right to
receive $15.75 in cash (the "Merger Consideration"). Until surrendered, the
certificates representing shares of the Company's Stock shall represent for all
purposes only the right to receive the Merger Consideration. At and after the
Effective Time, the holders of such certificates shall cease to have any rights
as stockholders of the Company, except such rights, if any, as they may have
pursuant to the GCL.
(b) Each issued and outstanding share of the capital stock of Sub shall be
converted into and become one validly issued, fully paid and non-assessable
share of Common Stock, par value $.01 per share, of the Continuing Corporation.
Until surrender, each certificate representing shares of Sub Common Stock shall,
following the Merger, represent for all purposes a like number of shares of
Common Stock of the Continuing Corporation as the number of shares of Common
Stock of Sub formerly represented by such certificate.
(c) The parties acknowledge that options to purchase shares of Stock (the
"Options") shall not be converted into and become rights to purchase shares of
Common Stock of the Continuing Corporation. Accordingly, the Company shall take
all necessary action to provide that all options under the Benefit Plans listed
on Schedule 4.16 shall become exercisable in full prior to the Effective Date of
the Merger, in accordance with the terms of the relevant Benefit Plans. For
purposes of this Agreement, all shares of Stock receivable upon exercise of the
Options and the Warrant shall be deemed outstanding at the Effective Time of the
Merger, to the extent the Options and the Warrant have not, in fact, been
exercised, and holders of such Options and the Warrant shall be entitled to
receive the Merger Consideration payable for the aggregate number of shares of
Stock subject to such Options or the Warrant less the sum of (i) any applicable
withholding and (ii) the aggregate amount of the exercise price for the
aggregate number of shares of Stock subject to such Option or the Warrant.
3.2 Payment.
(a) Simultaneously with the execution and delivery of this Agreement,
$5,000,000 (the "Deposit Escrow") shall be delivered to Bank One, Texas,
National Association to be held in escrow pursuant to the Escrow Agreement in
the form of Exhibit B hereto (the "Escrow Agreement"). At the Closing, Buyer and
the Company shall cause the Deposit Escrow to be released to the Disbursing
Agent.
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(b) Five Business Days prior to the Effective Date, the Company shall
designate a bank account to receive the Aggregate Merger Consideration. Sub
shall, immediately prior and as a condition to the Merger, pay the Aggregate
Merger Consideration less the amount of the Deposit Escrow by wire transfer to
the account designated by the Company and such Aggregate Merger Consideration
shall thereafter be disbursed to the stockholders of the Company by the
Disbursing Agent.
(c) As soon as practicable after the Effective Time, the Disbursing Agent
shall mail or otherwise cause to be delivered to each record holder of
certificates representing shares of the Company's Stock who has not already
delivered a transmittal form and related stock certificates to the Disbursing
Agent, a notice and transmittal form for use in effecting the surrender of such
holder's stock certificates for payment therefor. Upon surrender to the
Disbursing Agent of stock certificates together with such letter of transmittal
duly executed, the holder of such certificate(s) shall be entitled to receive in
exchange therefor cash in an amount equal to the product of the number of shares
of Stock previously represented by such certificate and the Merger
Consideration, and such certificate shall forthwith be canceled. Any cash
deposited with the Disbursing Agent for payment to former stockholders of the
Company pursuant to this Agreement which remains unclaimed after the expiration
of six months after the Effective Date shall be delivered to the Continuing
Corporation by the Disbursing Agent (together with any interest earned thereon)
and thereafter the Disbursing Agent shall not be liable to any person claiming
the same and former stockholders of the Company shall be entitled to look only
to the Company (subject to abandoned property, escheat and other similar laws)
for payment of the Merger Consideration upon due surrender of their stock
certificates.
(d) All payments made in respect of shares of Stock of the Company which
are made in accordance with the terms of this Article shall be deemed to have
been made in full satisfaction of all rights pertaining to such shares of Stock.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer and Sub as follows:
4.1 Organization and Good Standing. The Company and each Subsidiary is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of formation, and has full power and authority to carry on its
business as it is now being conducted. The Company and each Subsidiary is
qualified as a foreign corporation and is in good standing under the laws of
each jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect.
4.2 Capitalization of the Company. The authorized capital stock of the
Company consists of 15,000,000 shares of Common Stock, par value $.10 per share
(the "Stock"), of which 4,774,031 shares are issued and outstanding and
1,000,000 shares of Preferred Stock, par value $1.00 per share, of which no
shares are issued and outstanding as of May 1, 1997. All the outstanding shares
of Stock have been validly issued and are fully paid and nonassessable. Except
as described in the Company's SEC Reports, (i) no shares of capital stock of the
Company are held in treasury, (ii) there are no other issued or outstanding
equity securities of the Company and (iii) there are no other issued or
outstanding securities of any of the Company convertible at any time into equity
securities of the Company. Except for outstanding stock options granted pursuant
to the Company's stock option plans, rights pursuant to the Company's Rights
Plan and the Warrant, the Company is not subject to any commitment or obligation
that would require the issuance or sale of additional shares of capital stock of
the Company at any time under options, subscriptions, warrants, rights or any
other obligations that require the Company to purchase or redeem any common
stock or other securities convertible into, exchangeable for or evidencing the
right to subscribe for any shares of capital stock of or other ownership right
in the Company.
4.3 Subsidiaries. The Company has no Subsidiaries except Hawg Hauling &
Disposal, Inc., a West Virginia corporation, Alamco-Delaware, Inc., a Delaware
corporation and Phoenix-Alamco Ventures, a West Virginia limited liability
company. All of the outstanding shares of capital stock of each of the
wholly-owned
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Subsidiaries (Hawg Hauling & Disposal, Inc. and Alamco-Delaware, Inc.) are duly
authorized, validly issued, fully paid and nonassessable and are owned of record
by the Company and fifty percent of the membership interests in Phoenix-Alamco
Ventures are owned by the Company. There are no existing options, warrants,
calls, commitments or agreements obligating any Subsidiary to issue shares of
capital stock of any Subsidiary to any person or that require any of the
Subsidiaries to purchase or redeem any common stock or other securities
convertible into, exchangeable for or evidencing the right to subscribe for any
shares of capital stock or other ownership interest in any Subsidiary. Except as
set forth on Schedule 4.3, neither the Company nor its Subsidiaries directly or
indirectly owns any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any corporation, partnership, joint
venture or other business association or entity.
4.4 Authority; No Conflicts.
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval of
this Agreement and the Merger by the Company's stockholders. This Agreement has
been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Buyer and Sub, constitutes the valid
and binding obligation of the Company, enforceable in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
creditors rights generally and (ii) the availability of injunctive relief and
other equitable remedies.
(b) Except as described on Schedule 4.4, neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will (i) conflict with or result in any violation or breach of any provision of
the Certificate of Incorporation or Bylaws of the Company, or (ii) result in any
violation or breach of, or constitute a default under the terms, conditions or
provisions of any agreement, indenture, mortgage or instrument to which the
Company or any Subsidiary is a party or to which their property is subject, or
(iii) subject to obtaining the approval of the Company's stockholders of the
Merger and compliance with the requirements of Section 4.6 below, conflict with
or result in any violation of any judgment, order, decree, statute or law
applicable to the Company or any of its Subsidiaries or any of its or their
properties or assets, except, in the case of (ii) and (iii) for any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which would not have a Material Adverse Effect.
(c) Except as contemplated by this Agreement, no consent, approval, order
or authorization of, or registration, declaration or filing with any
Governmental Authority is required by or with respect to the Company or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.
4.5 SEC Filings. The Company has filed all forms, reports and documents
required to be filed by the Company with the SEC and has previously furnished to
Buyer a true and complete copy of each of (i) its Annual Report on Form 10-K for
each of the years ended December 31, 1996, 1995 and 1994, and any amendments
thereto, (ii) its Quarterly Report on Form 10-Q for the period ended March 31,
1997, and the periods ended March 31, June 30 and September 30 in each of the
years 1996, 1995 and 1994, and any amendments thereto, (iii) its definitive
proxy statement with respect to the annual meeting of stockholders in each of
the years 1995 and 1994, and (iv) all other reports or other correspondence
filed by it with the SEC pursuant to the Exchange Act, since January 1, 1994, in
each case, as filed with the SEC (collectively, together with any forms, reports
and documents filed by the Company with the SEC after the date hereof until the
Closing, the "Company SEC Reports"). Each such report, when filed, complied in
all material respects with the requirements of the Exchange Act and all
applicable regulations thereunder and, as of their respective dates, none of
such reports contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Any statement contained in any Company SEC Report shall be
deemed to be modified, corrected or superseded to the extent that a statement
contained in any subsequent Company SEC Report modifies, corrects, or supersedes
such statement.
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4.6 Consents. Except (i) for filings, consents, approvals and
authorizations that the failure to obtain or make would not have a Material
Adverse Effect, (ii) as set forth on Schedule 4.6 hereto or (iii) for filings
pursuant to the H-S-R Act (to the extent necessary), no filing, consent,
approval or authorization of any governmental authority or of any third party on
the part of the Company or any Subsidiary is required in connection with the
execution and delivery of this Agreement or the consummation of any of the
transactions contemplated hereby.
4.7 No Brokers. Neither the Company nor anyone acting on its behalf has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the sale of the Company and the
transactions contemplated by this Agreement, other than the Company's engagement
of Principal Financial Securities, Inc. as financial advisor to the Company.
4.8 Proxy Statement. None of the information included in the Proxy
Statement (as amended or supplemented) will, at the time the Proxy Statement is
mailed or at the time of the meeting of stockholders of the Company to which the
Proxy Statement relates, contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation or warranty is made with respect to information relating to Buyer
or Sub supplied by Buyer or Sub for inclusion in the Proxy Statement. The Proxy
Statement will comply in all material respects, as to form and otherwise, with
the requirements of the Exchange Act and the rules and regulations promulgated
by the SEC thereunder.
4.9 Absence Of Changes. Except as disclosed on Schedule 4.9, from March 31,
1997 until the date hereof, there has not been any:
(a) transaction by the Company or any Subsidiary except in the ordinary
course of business as conducted on that date;
(b) capital expenditure by the Company or any Subsidiary exceeding
$2,000,000;
(c) material adverse change with respect to the Companies;
(d) destruction, damage to, or loss of any asset of the Company or any
Subsidiary (whether or not covered by insurance) that could have a Material
Adverse Effect;
(e) labor trouble affecting the Company or any Subsidiary that could have a
Material Adverse Effect;
(f) change in accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies or rates) by the
Company or any Subsidiary;
(g) re-valuation by the Company or any Subsidiary of any of its Assets;
(h) declaration, setting aside or payment of a dividend or other
distribution in respect to the capital stock of the Company or any Subsidiary,
or any direct or indirect redemption, purchase or other acquisition by the
Company or any Subsidiary of any of its shares of capital stock;
(i) increase in the salary or other compensation payable or to become
payable by the Company or any Subsidiary to any of its officers, directors or
employees, or the declaration, payment or commitment or obligation of any kind
for the payment by the Company or any Subsidiary of a bonus or other additional
salary or compensation to any such person except, in each case any increase or
payment in the ordinary course of business or pursuant to existing contractual
arrangements;
(j) sale or transfer of any Asset of the Company or any Subsidiary, except
in the ordinary course of business;
(k) amendment or termination of any material Contract, to which the Company
or any Subsidiary is a party, except in the ordinary course of business;
(l) loan by the Company or any Subsidiary to any Person or guaranty by the
Company or any Subsidiary of any loan;
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(m) mortgage, pledge or other encumbrance of any Asset of the Company or
any Subsidiary other than as provided under existing bank credit arrangements
(as identified on Schedule 4.4) or other contracts;
(n) waiver or release of any material right or claim of the Company or any
Subsidiary other than settlements of pending litigation in the ordinary cause;
(o) issuance or sale by the Company or any Subsidiary of any shares of its
capital stock of any class, or of any other of its securities, except upon
exercise of outstanding options or warrants for the Company's stock; or
(p) agreement by the Company or any Subsidiary to do any of the things
described in the preceding clauses (a) through (o).
4.10 Absence of Undisclosed Liabilities. Except as set forth in the Company
SEC Reports filed prior to the date of this Agreement, at the date of the most
recent audited financial statements of the Company included in the Company SEC
Reports, neither the Company nor any of its Subsidiaries had, and since such
date neither the Company nor any of such Subsidiaries has incurred, any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by generally accepted accounting principles to be set
forth on a financial statement or in the notes thereto or which, individually or
in the aggregate, could reasonably be expected to have a Material Adverse Effect
on the Company.
4.11 Tax Returns. Within the times and in the manner prescribed by Law, the
Company and each Subsidiary have filed all federal, state and local tax returns
required by Law and have paid all taxes, assessments and penalties due and
payable. The federal income tax returns of the Company and each Subsidiary have
been audited by the Internal Revenue Service for the fiscal year ended December
31, 1993, and the results of that audit are accurately reflected in the
financial statements filed with the Company SEC Reports. The provisions for
taxes reflected in the financial statements are adequate for any and all
federal, state, county and local taxes for the period ending on the date of the
financial statements and for all prior periods, whether or not disputed. There
are no present disputes as to taxes of any nature payable by the Company or any
Subsidiary.
4.12 Trade Names and Rights. Schedule 4.12 sets forth all trade names,
trademarks, service marks and copyrights and their registrations, owned by the
Company or any Subsidiary or in which it has any rights or licenses, together
with a brief description of each. To the Company's knowledge, neither the
Company nor any Subsidiary has infringed, and is not now infringing, on any
trade name, trademarks, service mark, copyright or other right belonging to any
other person, firm or corporation. Except as set forth in Schedule 4.12, neither
the Company nor any Subsidiary is a party to any license, agreement or
arrangement, whether as licensor, licensee, or otherwise, with respect to any
trademarks, service marks and trade names or applications for them, or any
copyrights. The Company and each Subsidiary own, or hold adequate licenses or
other rights to use, all trademarks, service marks, trade names and copyrights
necessary for their respective businesses as now conducted by them.
4.13 Material Contracts. Except for (i) Contracts which are terminable
within a year from the date hereof and (ii) Contracts providing for aggregate
consideration of less than $250,000 in any fiscal year, Schedule 4.13 sets forth
a complete and current list of all material Contracts of the Company and the
Subsidiaries.
4.14 Contracts and Permits. Each material Contract and material Permit is
valid and binding upon each party thereto and is in full force and effect
according to its terms, and there have been no amendments, modifications or
supplements thereto other than such as are specifically described on Schedule
4.14. Except as set forth on Schedule 4.14, to the Company's knowledge, there is
no default or claim of default under any material Contract or material Permit
and no event has occurred which, with the passage of time or the giving of
notice (or both), would constitute a default by the Company or any Subsidiary,
or any other party thereto, under any material Contract or material Permit, or
would permit modification, acceleration or termination of any material Contract
or material Permit, or result in the creation of any lien or encumbrance on any
of the Assets which would have Material Adverse Effect. Except as indicated on
Schedule 4.14, none of the material Contracts or material Permits will require
the consent of or notice to any Person thereto with respect to any of the
transactions contemplated hereby, except to the extent that the failure to
obtain such consent or provide
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<PAGE> 45
notice will not have a Material Adverse Effect. None of the material Permits
requires the payments of any further extraordinary fees except as listed on
Schedule 4.14, nor, to the Company's knowledge, do any facts or circumstances
exist which would indicate that the Company or any Subsidiary will not be
entitled to renew any material Permit upon its expiration or would be required
to pay an extraordinary fee or charge in connection therewith. Except for the
Permits listed on Schedule 4.14 and except where the failure to have such
Permits would not have a Material Adverse Effect, no other Permit is required
for the operation of the businesses of the Company or any Subsidiaries as
presently conducted.
4.15 Labor Matters. Except as set forth on Schedule 4.15, there are no
collective bargaining agreements or other labor union agreements or
understandings to which the Company or any of its Subsidiaries is a party or by
which any of them is bound, nor is it nor any of its Subsidiaries the subject of
any proceeding asserting that it or any subsidiary has committed an unfair labor
practice or seeking to compel it to bargain with any labor organization as to
wages or conditions. Except as set forth on Schedule 4.15, to the best knowledge
of the Company, since December 31, 1993, neither the Company nor any of its
Subsidiaries has encountered any labor union organizing activity, or had any
actual or threatened employee strikes, work stoppages, slowdowns or lockouts.
4.16 Benefit Plans. Neither the Company nor any Subsidiary contributes to
or has any current or future liability for any Benefit Plan, except for the
Benefit Plans set forth on Schedule 4.16, and they do not, and have not had or
contributed to, any Benefit Plans which are "Multiemployer Plans" within the
meaning of Sections 3(2) and 3(37)(A) of ERISA or "defined benefit plans" within
the meaning of Section 3(35) of ERISA.
Except as set forth on Schedule 4.16:
(a) Each Benefit Plan and related trust intending to qualify under Section
401 and 501(a), respectively, of the Code does so qualify in form and operation
in all material respects; a favorable determination letter has been received
from the Internal Revenue Service with respect to each such plan and trust; and
there have been no amendments to the respective plan or trust since the date of
such determination letter;
(b) Each Benefit Plan and each funding medium which may be attendant
thereto, including group annuity contracts, has been in all material respects
operated and administered in accordance with its provisions and applicable Law;
(c) The Company has made or will have made prior to the Closing all other
contributions or payments required to be paid or accrued with respect to such
Benefit Plan;
(d) Other than routine claims for benefits under the Benefit Plans in the
ordinary course of business, there are no actions, suits or claims pending or,
to the knowledge of the Company threatened against any Benefit Plan or any of
its assets, to the knowledge of the Company there are no actions, suits or
claims pending or threatened against any fiduciary of any Benefit Plan and the
Company has no knowledge of any facts which could give rise to any such actions,
suits or claims which if adversely determined would be expected to have a
material adverse effect on the Company or the financial position of any Benefit
Plan or qualified status under the Code or ERISA of any Benefit Plan;
(e) The Company and the Subsidiaries and their respective affiliates,
directors, officers, representatives and employees have not, with respect to the
Benefit Plans, engaged in any "prohibited transaction" (as such term is defined
in the Code and ERISA) which has not been exempted under the statutory as
opposed to administrative provisions of Section 408 of ERISA, and, to the
Company's knowledge, no such Benefit Plan, related trust, trustee, administrator
or other "party-in-interest" (as defined in ERISA) has engaged directly or
indirectly, in any transaction to which any sanctions, taxes or penalties on or
with respect to prohibited transactions may be imposed under the Code or ERISA;
(f) The Company and the Subsidiaries and their respective directors,
officers, representatives and employees, and, to the best of Seller's knowledge,
any other "fiduciary" (as defined in ERISA), has not, with respect to any
Benefit Plan, committed any breach of fiduciary responsibility imposed by ERISA
or any other
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applicable Law which could subject the Company or any of the Subsidiaries, or
any of their respective directors or officers to a material liability under
ERISA or any Laws; and
(g) No Benefit Plan provides any material medical, life, disability or
other form of welfare benefits to employees or independent contractors of the
Company or any Subsidiary beyond termination of their employment with the
Company or any Subsidiary, as the case may be, by reason of retirement or
otherwise, other than coverage that may be required under Code Section 4980B or
Part 6 of ERISA, or under any continuation of coverage provisions of the laws of
any state or locality. The Company and its Subsidiaries have complied with all
material requirements under Code Section 4980B and Part 6 of ERISA and all
applicable laws of any state or locality with regard to continuation of
benefits.
4.17 Litigation. Except as disclosed on Schedule 4.17, there is no suit,
action, proceeding or investigation pending or, to the best of the Company's
knowledge, threatened against or affecting the Company or any of its
Subsidiaries or their respective officers and directors (in their capacity as
such) nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Company or any of its
Subsidiaries having, or which, insofar as reasonably foreseen, in the future
could have, any such effect.
4.18 Absence of Sensitive Payments. Since December 31, 1991, neither the
Company nor any wholly-owned Subsidiary nor, to the knowledge of the Company,
Phoenix-Alamco Ventures, or any of their respective directors, officers, agents,
stockholders or employees has:
(a) made or has agreed to make any contributions, payments or gifts of
funds or property through any governmental official, employee or agent where
either the payment or purpose of such contribution, payment or gift was or is
illegal under applicable Law (foreign or domestic);
(b) established or maintained any unrecorded fund or asset for any purpose,
or has made any false or artificial entries on any of its books or records for
any reason; or
(c) made or had agreed to make any contribution or expenditure, or had
reimbursed any political gift or contribution or any expenditure made by any
other person to candidates for public office, whether federal, state or local
(foreign or domestic) where such contributions were or would be in violation of
applicable Law.
4.19 Compliance with Laws. Neither the Company nor any of its Subsidiaries
has violated or failed to comply with any statute, law, ordinance, regulation,
rule, permit or order of any Federal, state or local government, domestic or
foreign, or any Governmental Entity, applicable to the Company or any of its
Subsidiaries or their respective business, assets, or operations, except for
violations and failures to comply that could not, individually or in the
aggregate, reasonably be deemed to have a Material Adverse Effect on the
Company.
4.20 Disclaimers. THE EXPRESS REPRESENTATIONS AND WARRANTIES OF THE COMPANY
CONTAINED IN THIS ARTICLE 4 ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER
REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND
THE COMPANY EXPRESSLY DISCLAIMS ANY AND ALL SUCH OTHER WARRANTIES. WITHOUT
LIMITATION OF THE FOREGOING, THE COMPANY SHALL NOT BE DEEMED TO HAVE MADE ANY
REPRESENTATION OR WARRANTY, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, OR
RELATING TO THE TITLE, CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR
PURPOSE OR FITNESS FOR ANY PURPOSE, WITH RESPECT TO THE COMPANY AND ITS
SUBSIDIARIES OR ITS OR THEIR ASSETS. BUYER SHALL HAVE INSPECTED, OR WAIVED (AND
UPON CLOSING SHALL BE DEEMED TO HAVE WAIVED) ITS RIGHT TO INSPECT, ANY
PROPERTIES OF THE COMPANIES FOR ALL PURPOSES AND SATISFIED ITSELF AS TO THE
TITLE TO SUCH PROPERTIES, THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH
SURFACE AND SUBSURFACE, INCLUDING BUT NOT LIMITED TO CONDITIONS RELATED TO THE
PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS SUBSTANCES, SOLID WASTES, ASBESTOS
AND OTHER MAN MADE FIBERS, OR NATURALLY OCCURRING RADIOACTIVE MATERIALS. BUYER
IS RELYING SOLELY UPON ITS OWN INSPECTION OF THE TITLE RECORDS
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AND PROPERTIES OF THE COMPANIES, AND BUYER SHALL, EXCEPT AS PROVIDED OTHERWISE
HEREIN, ACCEPT ALL OF THE SAME IN THEIR "AS IS, WHERE IS" CONDITION. ALSO
WITHOUT LIMITATION OF THE FOREGOING, THE COMPANY MAKES NO REPRESENTATION OR
WARRANTY, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AS TO THE ACCURACY OR
COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION OR
MATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED OR MADE AVAILABLE TO BUYER IN
CONNECTION WITH THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, RELATIVE TO
PRICING ASSUMPTIONS, OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY)
ATTRIBUTABLE TO THE PROPERTIES OF THE COMPANIES OR THE COMPANIES' TITLE OR
RIGHTS THERETO OR THE ABILITY OR POTENTIAL OF THE PROPERTIES TO PRODUCE
HYDROCARBONS OR THE ENVIRONMENTAL CONDITION OF THE PROPERTIES OR ANY OTHER
MATTERS CONTAINED IN THE DATA OR ANY OTHER MATERIALS FURNISHED OR MADE AVAILABLE
TO BUYER BY THE COMPANY OR BY THE COMPANY'S AGENTS OR REPRESENTATIVES OR BY ANY
OTHER PARTY. ANY AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS, INFORMATION
AND OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED OR OTHERWISE MADE AVAILABLE OR
DISCLOSED TO BUYER ARE PROVIDED TO BUYER AS A CONVENIENCE AND SHALL NOT CREATE
OR GIVE RISE TO ANY LIABILITY OF OR AGAINST THE COMPANY AND ANY RELIANCE ON OR
USE OF THE SAME SHALL BE AT BUYER'S SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY
LAW.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB
Buyer and Sub hereby jointly and severally represent and warrant to the
Company as follows:
5.1 Organization and Good Standing. Each of Buyer and Sub is a corporation
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its formation. Each of Buyer and Sub has full power and
authority to carry on its business as it is now being conducted.
5.2 Execution and Effect of Agreement. Each of Buyer and Sub has full power
and authority to enter into this Agreement. The consummation of the transactions
contemplated hereby has been duly authorized by all necessary action on the part
of Buyer and Sub. This Agreement has been duly executed and delivered by Buyer
and Sub and constitutes a legal, valid and binding obligation of Buyer and Sub,
enforceable against Buyer and Sub in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and to the exercise of judicial
discretion in accordance with general principles of equity (whether applied by a
court of law or equity).
5.3 No Conflicts. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) violate any of
the provisions of the charter or by-laws of Buyer and Sub, (ii) to Buyer's or
Sub's Knowledge, violate any provision of applicable law, rule or regulation
which violation would have a material adverse effect on the business or
financial condition of Buyer or Sub or prevent or materially interfere with
Buyer's or Sub's ability to perform hereunder or (iii) conflict with or result
in a breach of, or give rise to a right of termination of, or accelerate the
performance required by the terms of any judgment, court order or consent
decree, or any agreement, indenture, mortgage or instrument to which either
Buyer or Sub is a party or to which their respective properties are subject, or
constitute a default thereunder, except where such conflict, breach, right of
termination, acceleration or default would not have a material adverse effect on
the business or financial condition of Buyer or Sub or prevent or materially
interfere with Buyer's or Sub's ability to perform hereunder.
5.4 Consents. Except (i) as set forth on Schedule 5.4 hereto, or (ii) for
filings pursuant to the H-S-R Act, to the extent necessary, no filing, consent,
approval or authorization of any governmental authority or of any third party on
the part of Buyer or Sub is required in connection with the execution and
delivery of this Agreement by Buyer or Sub or the consummation of any of the
transactions contemplated hereby.
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5.5 Availability of Funds. Buyer and Sub have available and will have
available on the Closing Date sufficient funds to enable them to consummate the
transactions contemplated by this Agreement, including the payment of the
Aggregate Merger Consideration. At the Company's request, Buyer and Sub shall
provide the Company with evidence reasonably satisfactory to the Company of the
availability of such funds.
5.6 No Brokers. Neither Buyer nor Sub nor anyone acting on their behalf has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the purchase of the Company and
the transactions contemplated by this Agreement. Buyer has obtained at its sole
expense an opinion from Bear Stearns & Co. in form and substance satisfactory to
Buyer as to the consideration payable in connection with the Merger.
5.7 Proxy Statement and Other Information. None of the information relating
to Buyer or Sub which is supplied by Buyer for inclusion in the Proxy Statement
(as amended or supplemented) will, at the time the Proxy Statement is mailed or
at the time of the meeting of the stockholders of the Company to which the Proxy
Statement relates, contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation or warranty is otherwise made by Buyer or Sub with respect to the
Proxy Statement.
ARTICLE 6
ADDITIONAL PROVISIONS REGARDING
REPRESENTATIONS AND WARRANTIES
6.1 Limitation: No Survival. Except as specifically set forth herein or in
any Schedule, Exhibit or other document delivered pursuant hereto, no party has
made any representation or warranty with respect to the transactions to be
consummated hereunder. The representations and warranties herein shall not
survive the Closing.
6.2 Right to Update Schedules. The Company shall have the right, without
being deemed to be in breach of its representations and warranties set forth in
this Agreement, to supplement or amend the Schedules to this Agreement with
respect to any matter arising after the date hereof or, as to any representation
and warranty that is limited to Company's Knowledge, discovered by Company
between the date hereof and the Closing Date. Copies of any amended or
supplemented Schedules shall be promptly provided to the Buyer. Any such amended
or supplemented disclosure shall not give Buyer or Sub the right not to proceed
to Closing, unless the facts underlying such amended or supplemented disclosure
have a Material Adverse Effect.
6.3 Schedules and Exhibits. Any fact or item disclosed in any Schedule or
Exhibit hereto shall be deemed to have been disclosed in all other Schedules or
Exhibits requiring such disclosure and for purposes of all other representations
and warranties made herein.
ARTICLE 7
ADDITIONAL COVENANTS AND UNDERTAKINGS
7.1 Stockholder Approval.
(a) As soon as reasonably practicable following the date of this Agreement,
the Company shall take all action necessary in accordance with the Exchange Act,
the laws of the State of Delaware and its Certificate of Incorporation and
Bylaws to call, give notice of and convene a meeting (the "Meeting") of its
stockholders to consider and vote upon the approval and adoption of this
Agreement and the Merger and for such other purposes as may be necessary or
desirable. The Board of Directors of the Company shall, subject to its fiduciary
duties, recommend that the Company's stockholders vote to approve and adopt this
Agreement and the Merger and any other matters to be submitted to the Company's
stockholders in connection therewith. The Board of Directors of the Company
shall, subject to its fiduciary duties, use its reasonable best efforts to
solicit and secure from stockholders of the Company such approval and adoption,
which efforts include
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without limitation causing the Company to solicit stockholder proxies therefor
and to advise Buyer upon its request from time to time as to the status of the
stockholder vote then tabulated.
(b) Promptly following the date of this Agreement, the Company shall
prepare and file with the SEC under the Exchange Act and the rules and
regulations promulgated by the SEC thereunder, a preliminary draft of the Proxy
Statement. Buyer and Sub shall have an opportunity to preview all filings to be
made with the SEC and cooperate fully with the Company in the preparation and
filing of the Proxy Statement and any amendments and supplements thereto. The
Proxy Statement shall not be filed, and no amendment or supplement thereto shall
be made by the Company, without in each case, prior consultation with Buyer and
Sub. The Company will use its best efforts to have any review of the Proxy
Statement conducted by the SEC promptly. As soon as reasonably practicable
following the date of this Agreement, the Company shall cause to be mailed a
definitive Proxy Statement to its stockholders entitled to vote at the Meeting
promptly following completion of any review by, or in the absence of such
review, the termination of any applicable waiting period of, the SEC.
7.2 Further Assurances and Assistance. Buyer, Sub and the Company agree
that each will execute and deliver to the other any and all documents, in
addition to those expressly provided for herein, that may be necessary or
appropriate to implement the provisions of this Agreement, whether before, at or
after the Closing. The parties agree to cooperate with each other to any extent
reasonably required in order to accomplish fully the transactions herein
contemplated.
7.3 Access to Information.
(a) The Company has made available to Buyer the information requested by
Buyer in its letter dated April 24, 1997, as indicated in the Company's
correspondence dated May 2, 1997 and May 19, 1997. Buyer acknowledges that the
Company, prior to the date of this Agreement, has given Buyer, Sub and their
respective employees and counsel full and complete access to all officers,
employees, offices, properties, agreements, records and affairs of the Company
or otherwise relating to the Business (including but not limited to all of the
Company's existing title files, title opinions, division order files, marketing
files, accounting and production revenue disbursement files and production,
severance and ad valorem tax records), has provided Buyer with all regularly
prepared financial statements of the Company and copies of such information
concerning the Company and the Business as Buyer and Sub may have reasonably
requested.
(b) The Company from and after the date of this Agreement and until the
Closing Date, shall give Buyer, Sub and their respective employees and counsel
full and complete access upon reasonable notice during normal business hours, to
all officers, employees, offices, properties, agreements, records and affairs of
the Company or otherwise relating to the Business, will provide Buyer with all
regularly prepared financial statements of the Company, and will provide copies
of such information concerning the Company and the Business as Buyer or Sub may
reasonably request; provided however, that the foregoing shall not permit Buyer,
Sub or any agent thereof to (i) disrupt the Business or (ii) contact any
employee of the Company without providing reasonable prior notice to the Company
and allowing a representative of the Company to be present. Buyer shall return
all copies so made to the Company if the Closing does not occur. BUYER
RECOGNIZES AND AGREES THAT ALL MATERIALS PREPARED BY THIRD PARTIES AND MADE
AVAILABLE TO IT IN CONNECTION WITH THE TRANSACTION CONTEMPLATED HEREBY PURSUANT
TO THIS SECTION ARE MADE AVAILABLE TO IT AS AN ACCOMMODATION AND WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND AS TO THE ACCURACY AND COMPLETENESS OF
SUCH MATERIALS. NO WARRANTY OF ANY KIND IS MADE BY THE COMPANY AS TO ANY OF SUCH
INFORMATION SUPPLIED TO BUYER OR WITH RESPECT TO THE COMPANY'S PROPERTIES TO
WHICH ANY OF SUCH INFORMATION RELATES, AND BUYER EXPRESSLY AGREES THAT ANY
CONCLUSIONS DRAWN THEREFROM SHALL BE THE RESULT OF ITS OWN INDEPENDENT REVIEW
AND JUDGMENT.
(c) To the extent not completed prior to the date of the Agreement, the
Company shall make a good faith effort to obtain for Buyer, or Buyer's
authorized representatives, upon adequate notice to the Company, physical access
to the Company's properties for the purpose of inspecting same. Buyer recognizes
that some of the properties are operated by parties other than the Company and
that the Company's ability to obtain access
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to such properties, and the manner and extent of such access, is subject to the
consent of such third parties. Buyer agrees to comply fully with the rules,
regulations and instructions issued by the Company (and, where properties are
operated by other parties, such other parties) regarding the actions of Buyer
while upon, entering or leaving the properties. If Buyer exercises rights of
access under this Section or otherwise, or conducts examinations or inspections
under this Section or otherwise, then (a) such access, examination and
inspection shall be at Buyer's sole risk, cost and expense and Buyer waives and
releases all claims against the Company (and its affiliates and the directors,
officers, employees, attorneys, contractors and agents of the Company and such
affiliates) arising in any way therefrom or in any way connected therewith or
arising in connection with the conduct of its directors, officers, employees,
attorneys, contractors and agents in connection therewith and (b) Buyer shall
indemnify, defend and hold harmless the Company (and its affiliates and the
officers, directors, employees, attorneys, contractors and agents of the Company
and such affiliates) from any and all claims, actions, causes of action,
liabilities, damages, losses, costs or expenses (including, without limitation,
court costs and attorney's fees), or liens or encumbrances for labor or
materials, arising out of or in any way connected with such matters.
7.4 Conduct of Business Prior to Closing. Except as contemplated by this
Agreement, from and after the date hereof the Company shall use commercially
reasonable efforts (without requiring the Company to incur material costs or
expenses outside the ordinary course of the Business) to conduct such Business
in the ordinary course. Except as contemplated by this Agreement or as consented
to by Buyer (which consent shall not unreasonably be withheld), from and after
the date hereof the Company shall act, and shall cause the Companies to act, as
follows:
(a) The Companies will not adopt any material change in any method of
accounting or accounting practice, except as contemplated or required by GAAP;
(b) The Companies will not amend their charters or by-laws;
(c) Except (i) for the disposition of obsolete equipment in the ordinary
course of business, or (ii) as set forth on Schedule 7.4 hereto, the Companies
will not sell, mortgage, pledge or otherwise dispose of any material assets or
properties owned or used in the operation of their Business;
(d) Subject to the provisions of Section 7.7 hereof, the Companies will not
merge or consolidate with, or agree to merge or consolidate with, or purchase or
agree to purchase all or substantially all of the assets of, or otherwise
acquire, any other business entity;
(e) Except as provided pursuant to the terms of the Company's Rights Plan
or in connection with the exercise of any outstanding stock options and
warrants, the Companies will not authorize for issuance, issue or sell any
additional shares of its capital stock or any securities or obligations
convertible into shares of its capital stock or issue or grant any option,
warrant or other right to purchase any shares of its capital stock;
(f) The Companies will not incur, or agree to incur, any debt for borrowed
money other than borrowings under the Company's existing revolving credit
facility;
(g) The Company will not declare, set aside, or pay, directly or
indirectly, any dividend, cash or stock, or other distribution in respect to its
securities (except in accordance with past practices and without any increase
from the previous dividends paid by the Company);
(h) No stock of the Company shall be redeemed or acquired by the Companies
(other than as permitted by subparagraph (e) hereof);
(i) Except with respect to increases in the salary of employees who are not
officers or directors of the Company that arise pursuant to normal merit reviews
in the ordinary course of business, between the date of this Agreement and prior
to the Closing Date, the Company shall not make any increase in the compensation
payable to any employee, officer or director of any of the Companies without the
prior approval of Buyer;
(j) The Company shall not make or cause to be made any amendment to any
Benefit Plan;
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(k) The Company shall use commercially reasonable efforts to preserve the
business relationships of the Companies, their directors, officers, employees or
agents, suppliers, customers, and others having business relations with the
Companies;
(l) The Companies shall use commercially reasonable efforts to develop,
maintain and operate the Oil and Gas Properties which are operated by them in a
good and workmanlike manner and conduct themselves with respect to the Oil and
Gas Properties which are not operated by them in substantially the same manner
as heretofore;
(m) The Company shall use commercially reasonable efforts to maintain the
insurance now in force with respect to the Companies (or insurance that is
substantially equivalent); and
(n) The Companies shall use all commercially reasonable efforts to keep the
Oil and Gas Contracts (taken as a whole) in full force and effect in all
material respects, unless any such Oil and Gas Contract terminates pursuant to
its own terms or in the ordinary course of business and to otherwise perform and
comply with all of the material covenants and conditions contained in such Oil
and Gas Contracts in all material respects (except for good faith disputes).
7.5 H-S-R Act. Each of Buyer and Sub and the Company shall, within ten
Business Days following the date hereof, file, if necessary, duly completed and
executed Pre-Merger Notification and Report Forms as required under the H-S-R
Act and shall otherwise use their respective best efforts (without requiring any
of Buyer, Sub or the Company to incur material costs or expenses) to comply
promptly with any requests made by the Federal Trade Commission or the
Department of Justice pursuant to the H-S-R Act or the regulations promulgated
thereunder. All filing fees and other payments in connection with the H-S-R Act
shall be paid by Buyer.
7.6 Books and Records. Following the Closing, Buyer and Sub shall permit
the Company (i) to have reasonable access to the books and records of Buyer and
Sub and those retained or maintained by the Company relating to the operation of
the Business prior to the Closing or after the Closing to the extent related to
transactions or events occurring prior to the Closing, and (ii) to have
reasonable access to employees of the Company, Buyer and Sub to obtain
information relating to such matters. Buyer and Sub shall maintain such books
and records for a period of seven years following the Closing.
7.7 Inquiries and Negotiations. The Company shall immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any Person conducted heretofore in respect of the acquisition of all or any
substantial part of the business and properties of the Company, whether by sale
of assets or shares of capital stock of the Company, or by merger,
consolidation, recapitalization, liquidation or similar transaction including
the Company (each, an "Acquisition Transaction"). The Company shall not, and
shall not permit its officers, employees, representatives, or agents to,
directly or indirectly, (i) solicit or initiate discussions or negotiations
with, or provide any non-public information to, any person other than Buyer or
its affiliates concerning an Acquisition Transaction, or (ii) otherwise solicit,
initiate or encourage inquiries or the submissions or any proposal contemplating
an Acquisition Transaction. The Company shall promptly communicate to Buyer the
terms of any inquiry or proposal which it may receive in respect of an
Acquisition Transaction. The Company's notification under this Section 7.7 shall
include the identity of the person making such proposal or any other such
information with respect thereto as Buyer may reasonably request. Nothing
contained in this Agreement shall be construed to prohibit the Company from (a),
if advised in writing by counsel to be required by fiduciary obligations under
applicable law, providing non-public information to, and participating in
negotiations with, a Person who has made a bona fide offer to effect an
Acquisition Transaction for an all cash purchase price in excess of the
Aggregate Merger Consideration and (b) accepting an offer for an Acquisition
Transaction which the Board of Directors of the Company, on the advice in
writing of its financial advisor, believes is more favorable to the Company's
stockholders than the Merger contemplated hereby; provided, however, in the
event that an offer for an Acquisition Transaction is accepted by the Company
pursuant to this Section, the provisions of Section 10.3 shall be applicable.
7.8 Indemnification; Director's and Officer's Insurance. After the
Effective Time, the Continuing Corporation shall indemnify and hold harmless
(and shall also advance expenses as incurred to the fullest
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extent permitted under applicable law) to each person who is now, or has been
prior to the date hereof or who becomes prior to the Effective Time an officer
or director of the Company or any of its subsidiaries (the "Indemnified
Parties") against (i) all losses, claims, damages, costs, expenses (including
without limitation counsel fees and expenses), settlement payments or
liabilities arising out of, or in connection with any claim, demand, action,
suit, proceeding or investigation based in whole or in part on, or arising in
whole or in part out of, the fact that such person is or was an officer or
director of the Company whether or not pertaining to any matter existing or
occurring at or prior to the Effective Time and whether or not asserted or
claimed prior to or at or after the Effective Time ("Indemnified Liabilities")
and (ii) all Indemnified Liabilities based in whole or in part on, or arising in
whole or in part out of, or pertaining to this Agreement, any Related Agreement
or the transactions contemplated hereby or thereby, in each case to the fullest
extent permitted for officers and directors under the Certificate of
Incorporation and Bylaws of The Columbia Gas System, Inc. Any determination
required to be made with respect to whether an Indemnified Party's conduct
complies with the standards set forth under applicable law or the Certificate of
Incorporation or Bylaws of The Columbia Gas System, Inc. shall be made by
independent counsel mutually acceptable to the Continuing Corporation and the
Indemnified Party. The parties hereto intend, to the extent not prohibited by
applicable law, that the indemnification provided for in this Section 7.8 shall
apply without limitation to negligent acts or omissions by an Indemnified Party.
The Continuing Corporation shall maintain, for not less than five years after
the Effective Time, director's and officer's liability insurance with an
aggregate limit of liability of $15,000,000 covering each Indemnified Person on
terms not materially less favorable than the insurance maintained in effect by
the Company on the date hereof in terms of coverage (including without
limitation types of claims, time period of claims, exclusions and persons
covered), amounts and deductibles and including coverage with respect to claims
arising or events which occurred before the Effective Time. Buyer hereby
guarantees the payment and performance of the Continuing Corporation's
obligations in this Section 7.8 and shall provide the indemnification provided
herein only in the event such insurance coverage is not available or such
coverage is denied. Each Indemnified Party is intended to be a third party
beneficiary of this Section 7.8 and may specifically enforce its terms. This
Section 7.8 shall not limit or otherwise adversely affect any rights any
Indemnified Party may have under any agreement with the Company or under the
Company's Certificate of Incorporation or Bylaws.
7.9 Notice of Default. The Company shall give written notice to Buyer
promptly after the Company or any of its Subsidiaries obtains knowledge of the
occurrence, or promptly after the receipt by the Company or any of its
Subsidiaries of any notice claiming or alleging the occurrence of:
(a) any event or omission which would result in any of the Company's
representations and warranties contained in this Agreement being or becoming
materially inaccurate or misleading; or
(b) any material breach by Company of this Agreement.
7.10 Benefit Matters After Closing.
(a) Continuation of Benefits. Buyer shall maintain the Company's existing
401(k) Savings and Protection Plan and medical, life and disability insurance
plans until at least December 31, 1997.
(b) Waiver of Pre-existing Conditions. If any employee of the Company
becomes eligible to participate in a medical, dental or health plan of the Buyer
(or its affiliates) after the Closing Date, the Buyer shall cause such plan to
waive any pre-existing condition limitations for conditions covered under the
applicable medical, dental or health plans. If an employee becomes eligible to
participate in a group term life insurance plan maintained by the Buyer or its
affiliates, the Buyer shall cause such plan to waive any medical certification
for such employee up to the amount of coverage provided under Buyer's plans.
(c) Continuation Coverage. The Continuing Corporation shall perform the
duties required of a successor employer with respect to continuation coverage
required by Section 4980B of the Code, including, but not limited to, making
such coverage available to the employees of the Company on and after the Closing
Date upon their termination of employment with the Continuing Corporation to the
extent required by law.
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ARTICLE 8
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE
8.1 Conditions Precedent to the Obligation of Buyer and Sub. The obligation
of Buyer and Sub to consummate the Closing is subject to the fulfillment or
waiver, on or prior to the Closing Date, of each of the following conditions
precedent:
(a) The Company shall have complied in all material respects with its
agreements and covenants contained herein to be performed at or prior to the
Closing, and the representations and warranties of the Company contained herein,
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though made on and as of the Closing Date, except that
representations and warranties that were made as of a specified date shall
continue on the Closing Date to have been true as of the specified date, and
Buyer and Sub shall have received an officer's certificate in form and substance
satisfactory to Buyer and its counsel of the Company, dated as of the Closing
Date, certifying as to the fulfillment of the condition set forth in this
Section 8.1 (a) ("Company's Bring-Down Certificate").
(b) No statute, rule or regulation, or order of any court or administrative
agency shall be in effect which restrains or prohibits Buyer or Sub from
consummating the transactions contemplated hereby and no proceeding seeking such
an order shall have been instituted or threatened.
(c) All applicable waiting periods under the H-S-R Act shall have expired
or been terminated.
(d) All consents identified on Schedule 4.6 shall have been received.
(e) This Agreement and the Merger shall have been approved and adopted by
the affirmative vote of the holders of a majority of the outstanding shares of
the Company's Stock.
(f) The Rights issued to the stockholders of the Company pursuant to the
Rights Plan shall have been redeemed in accordance with the terms of the Rights
Plan.
(g) Buyer shall have received the written opinion of Kirkpatrick & Lockhart
LLP, counsel for the Company, dated the Closing Date in form and substance
reasonably satisfactory to Buyer and its counsel relating to due incorporation,
authorization and noncontravention of the Agreement with Law and material
Contracts (and the transactions contemplated thereby) to which the Company is a
party.
(h) Buyer shall have received an opinion from its financial advisor, in
form and substance satisfactory to it, to the effect that the Merger is fair
from a financial point of view to the Buyer. Buyer acknowledges that it has
received such opinion dated as of the date hereof satisfying this condition.
(i) The Indemnification Agreements between the Company and the individuals
identified on Schedule 8.1 (collectively, the "Indemnification Agreements")
shall have been amended by the Company and the scheduled individuals to (x)
limit the aggregate amount of indemnification provided by such agreements to
$15,000,000 and (y) require the Continuing Corporation to obtain and maintain
the insurance required by Section 7.8 hereof to insure performance by the
Continuing Corporation of its obligations under such amended Indemnification
Agreements, it being understood that in no event will the aggregate amount of
such indemnification or insurance coverage exceed $15,000,000 with respect to
the Indemnification Agreements.
8.2 Conditions Precedent to the Obligation of the Company. The obligation
of the Company to consummate the Closing is subject to the fulfillment or
waiver, on or prior to the Closing Date, of each of the following conditions
precedent:
(a) Each of Buyer and Sub shall have complied in all material respects with
its agreements and covenants contained herein to be performed at or prior to the
Closing, and the representations and warranties of Buyer and Sub contained
herein shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though made on and as of the Closing Date,
except that representations and warranties that were made as of a specified date
shall continue on the Closing Date to have been true as of the specified date,
and the Company shall have received officer's certificates of Buyer and Sub,
dated as of the
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Closing Date, certifying as to the fulfillment of the condition set forth in
this Section 8.2(a) ("Buyer's Bring-Down Certificate").
(b) No statute, rule, or regulation or order of any court or administrative
agency shall be in effect which restrains or prohibits the Company from
consummating the transactions contemplated hereby and no proceeding seeking such
an order shall have been instituted or threatened.
(c) All applicable waiting periods under the H-S-R Act shall have expired
or been terminated.
(d) Sub shall have delivered to the Company the Aggregate Merger
Consideration.
(e) This Agreement and the Merger shall have been approved and adopted by
the affirmative vote of the holders of a majority of the outstanding shares of
the Company's Stock.
(f) The Rights issued to the stockholders of the Company pursuant to the
Rights Plan shall have been redeemed in accordance with the terms of the Rights
Plan.
(g) The Company's Board of Directors shall have received an opinion from
its financial advisor, in form and substance satisfactory to the Board, as of
the date of this Agreement and as of the mailing date of the Proxy Statement
referred to as Section 7.1(b) hereof, to the effect that the Merger is fair from
a financial point of view to the stockholders of the Company and such opinion
shall not have been withdrawn on or prior to the Closing Date.
(h) All payments required pursuant to the terms of the Benefits Plans by
virtue of the Merger shall have been made.
(i) Buyer shall have either paid in full all indebtedness owed by the
Company to Bank One, Texas, National Association or it shall have obtained the
consent of such bank to the Merger.
ARTICLE 9
EXPENSES
Each party will pay its own fees, expenses, and disbursements and those of
its counsel in connection with the subject matter of this Agreement (including
the negotiations with respect hereto and the preparation of any documents) and
all other costs and expenses incurred by it in the performance and compliance
with all conditions and obligations to be performed by it pursuant to this
Agreement or as contemplated hereby. The payment of costs and expenses by Buyer
or the Company shall not reduce the Aggregate Merger Consideration. Buyer shall
cause the Continuing Corporation to make all payments which under this Article
were to be paid by the Company on or prior to the Closing Date, but which are
not so paid prior to the Effective Time, including, without limitation, fees
payable to the Company's financial advisor.
ARTICLE 10
TERMINATION
10.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to Closing: (a) by mutual
written consent of Buyer, Sub and the Company; (b) by the Board of Directors of
the Company if the Board of Directors shall have withdrawn or modified in a
manner adverse to Buyer or Sub its approval or recommendation of the Merger in
order to approve an Acquisition Transaction with any third party; (c) by the
Company if stockholder approval is not obtained or (d) by any party to this
Agreement, upon written notice to the other parties, at any time after October
15, 1997 except that the right to terminate this Agreement pursuant to this
Article 10 shall not be available to (A) the Company, if the failure to
consummate the Closing on or before such date was caused by or resulted from
Company's failure to fulfill any of its obligations under this Agreement or (B)
Buyer or Sub, if the failure to consummate the Closing on or before such date
was caused by or resulted from Buyer's or Sub's failure to fulfill any of their
obligations under this Agreement. Upon such termination, all further obligations
of the parties hereto shall become null and void and no party shall have any
liability to any other party, unless
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the basis for such termination was the failure by such party to fulfill its
covenants and agreements set forth herein. Notwithstanding anything to the
contrary herein, (i) the provisions of the Confidentiality Letter dated as of
March 14, 1997 between Buyer and the Company (the "Confidentiality Agreement"),
shall remain in effect either until the Closing, if it occurs, or for the stated
term thereof, if there is no Closing and (ii) the Escrow Agreement shall remain
in effect in accordance with its terms.
10.2 Deposit Escrow. Notwithstanding anything to the contrary contained in
this Agreement, if Buyer or Sub shall default in their respective obligations to
consummate this Agreement other than as a result of the failure by the Company
to fulfill its obligations under Article 8 of this Agreement, then the Company
shall be entitled to receive on demand the Deposit Escrow.
10.3 Break-Up Fee. In the event that the Company terminates this Agreement
pursuant to Article 10.1 (b) above, the Company shall pay to Buyer within ten
(10) days of termination of this Agreement the sum of EIGHT MILLION DOLLARS
($8,000,000) in immediately available funds as directed by Buyer. This
obligation shall survive termination of this Agreement and shall be Buyer's sole
remedy in the event of termination by the Company pursuant to Article 10.1 (b).
ARTICLE 11
NOTICES
All notices, requests, consents, payments, demands, and other communications
required or contemplated under this Agreement shall be in writing and (a)
personally delivered or sent via telecopy (receipt confirmed), or (b) sent by
Federal Express or other reputable overnight delivery service (for next Business
Day delivery), shipping prepaid, as follows:
If to Buyer or Sub to:
Columbia Natural Resources, Inc.
900 Pennsylvania Avenue
P. O. Box 6070
Charleston, WV 25362-0070
Attention: W.H. Harmon, President and CEO
With a copy to:
Mr. Neal Pierce, General Counsel
Columbia Natural Resources, Inc.
900 Pennsylvania Avenue
P. O. Box 6070
Charleston, WV 25362-0070
If to the Company to:
Alamco, Inc.
200 West Main Street
Clarksburg,WV 26301
Attention: John L. Schwager, President
with a copy to:
Michael C. McLean, Esquire
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
or to such other Persons or addresses as any Person may request by notice given
as aforesaid. Notices shall be deemed given and received at the time of personal
delivery or completed telecopying, or, if sent by Federal Express or such other
overnight delivery service one Business Day after such sending.
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ARTICLE 12
MISCELLANEOUS
12.1 Headings. The headings contained in this Agreement (including but not
limited to the titles of the Schedules and Exhibits hereto) have been inserted
for the convenience of reference only, and neither such headings nor the
placement of any term hereof under any particular heading shall in any way
restrict or modify any of the terms or provisions hereof. Terms used in the
singular shall be read in the plural, and vice versa, and terms used in the
masculine gender shall be read in the feminine or neuter gender when the context
so requires.
12.2 Schedules and Exhibits. All Schedules, Annexes and Exhibits attached
to this Agreement constitute an integral part of this Agreement as if fully
rewritten herein.
12.3 Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
12.4 Entire Agreement. This Agreement, the Related Agreements and the
documents to be delivered hereunder and thereunder constitute the entire
understanding and agreement between the parties hereto concerning the subject
matter hereof. All negotiations and writings between the parties hereto are
merged into this Agreement, and there are no representations, warranties,
covenants, understandings, or agreements, oral or otherwise, in relation thereto
between the parties other than those incorporated herein or to be delivered
hereunder.
12.5 Governing Law. This Agreement is to be delivered in and should be
construed in accordance with and governed by the laws of the State of Delaware
without giving effect to conflict of laws principles.
12.6 Modification. Except as provided in Section 6.2, this Agreement cannot
be modified or amended except in writing signed by each of the parties hereto.
After approval of the Merger by the stockholders of the Company, no amendment
may be made which decreases the Aggregate Merger Consideration or otherwise
materially adversely affects the stockholders of the Company without the further
approval of the stockholders of the Company.
12.7 Successors and Assigns. Neither this Agreement nor any of the rights
and obligations hereunder shall be assigned, delegated, sold, transferred,
sublicensed, or otherwise disposed of by operation of law or otherwise, without
the prior written consent of each of the other parties hereto. In the event of
such permitted assignment or other transfer, all of the rights, obligations,
liabilities, and other terms and provisions of this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by and against, the respective
successors and assigns of the parties hereto, whether so expressed or not.
12.8 Waiver. Any waiver of any provision hereof (or in any related document
or instrument) shall not be effective unless made expressly and in a writing
executed in the name of the party sought to be charged. The failure of any party
to insist, in any one or more instances, on performance of any of the terms or
conditions of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or of the future performance of
any such term, covenant, or condition, but the obligations of the parties with
respect hereto shall continue in full force and effect.
12.9 Severability. The provisions of this Agreement shall be deemed
severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make the
provision, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding or unenforceable in its entirety or partially or as to any party, for
any reason, and if such provision cannot be changed consistent with the intent
of the parties hereto to make it fully legal, valid, binding and enforceable,
then such provisions shall be stricken from this Agreement, and the remaining
provisions of this Agreement shall not in any way be affected or impaired, but
shall remain in full force and effect.
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12.10 Announcements. From the date of this Agreement, all further public
announcements relating to this Agreement or the transactions contemplated hereby
will be made only as agreed upon jointly by the parties hereto, except that
nothing herein shall prevent the Company, Buyer or Sub from making any
disclosure in connection with the transactions contemplated by this Agreement if
required by applicable law or otherwise as a result of its being a public
company, provided that prior notice of such disclosure is given to the other
party hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date and year first written above.
Alamco, Inc.
By: /s/ JOHN L. SCHWAGER
------------------------------------
President and CEO
Columbia Natural Resources, Inc.
By: /s/ W. H. HARMON
------------------------------------
President and CEO
Appalachian Acquisition Company
By: /s/ W. H. HARMON
------------------------------------
President
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ANNEX I
DEFINITIONS
As used in the attached Agreement and Plan of Merger, the following terms
shall have the corresponding meaning set forth below:
a. "Acquisition Transaction" has the meaning set forth in Section 7.7 of
the Agreement.
b. "Aggregate Merger Consideration" means an amount equal to the product of
the total number of shares of Stock outstanding immediately prior to the Merger
and the Merger Consideration.
c. "Assets" means properties, privileges, rights, interests and claims for
interests therein, tangible and intangible, of every type and description, to
and including, trademarks, trade names, labels and brands of the Company and its
Subsidiaries.
d. "Agreement" has the meaning set forth in the preamble to the attached
Agreement and Plan of Merger.
e. "Benefit Plan" means any pension, profit sharing, savings, bonus,
phantom stock, severance, incentive, option, insurance, welfare or other
employee benefit plans, contracts or arrangements providing for employee or
director remuneration or benefits.
f. "Business" means the natural gas and oil operations of the Company.
g. "Business Day" means any day on which banks in New York City are open
for business.
h. "Buyer" has the meaning set forth in the preamble to the Agreement.
i. "Buyer's Bring-Down Certificate" has the meaning set forth in Section
8.2(a) of the Agreement.
j. "Certificate of Merger" has the meaning set forth in Section 2.1 of the
Agreement.
k. "Closing" has the meaning set forth in Section 2.2 of the Agreement.
l. "Closing Date" has the meaning set forth in Section 2.2 of the
Agreement.
m. "Code" means the Internal Revenue Code of 1986, as amended.
n. "Companies" means the Company and each of its Subsidiaries.
o. "Company" has the meaning set forth in the preamble to the Agreement.
p. "Company SEC Reports" has the meaning set forth in Section 4.5 of the
Agreement.
q. "Company's Bring-Down Certificate" has the meaning set forth in Section
8.1 (a) of this Agreement.
r. "Company's Knowledge" means the actual knowledge, with due inquiry being
required, of the officers or directors of the Companies.
s. "Confidentiality Agreement" has the meaning set forth in Section 10(a)
of the Agreement.
t. "Contracts" means any contract or instrument, including without
limitation, any mortgages, deeds of trust, notes or guarantees, leases, pledges,
liens, charges or conditional sales agreements to which the Person referred to
is a party or by which any of its Assets may be bound.
u. "Disbursing Agent" means Bank One, or such other person as the Company
may determine.
v. "Effective Time" has the meaning set forth in Section 2.1 of the
Agreement.
w. "ERISA" means the Employee Retirement Income Security Act of 1994.
x. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
y. "GAAP" means generally accepted accounting principles.
z. "GCL" has the meaning set forth in Section 2.1 of the Agreement.
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aa. "H-S-R Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
bb. "Indemnified Liabilities" has the meaning set forth in Section 7.8 of
the Agreement.
cc. "Indemnified Parties" has the meaning set forth in Section 7.8 of the
Agreement.
dd. "Law" means applicable state and federal law and rules and regulations
promulgated thereunder.
ee. "Material Adverse Effect" shall mean a material adverse effect on the
business or financial condition of the Companies taken as a whole.
ff. "Meeting" has the meaning set forth in Section 7.1 of the Agreement.
hh. "Merger" has the meaning set forth in the recitals to the Agreement.
ii. "Merger Consideration" has the meaning set forth in Section 3.1 of the
Agreement.
jj. "Oil and Gas Contracts" means all of the oil and gas leases, operating
agreements, unit agreements, farmout agreements, farmin agreements, joint
venture agreements, partnership agreements, gas purchase and sale agreements,
gas gathering agreements, gas processing agreements, gas transportation
agreements, surface leases, licences, permits, rights-of-way, easements, and
other contracts and agreements of every nature and kind which are presently in
force and effect and which relate to the Oil and Gas Properties.
kk. "Oil and Gas Properties" means the interests of the Company or any
Subsidiary in (i) the Wells, together with the oil and gas leases and lands
related to each Well, (ii) the oil and gas leases and lands identified by the
Company as being owned by the Company, and (iii) the perpetual mineral
interests, term mineral interests, executive rights and other interests in real
property identified by the Company as being owned by the Company and its
Subsidiaries.
ll. "Options" has the meaning set forth in Section 3.1(c) of the Agreement.
mm. "Permit" means any federal or state governmental approval,
authorization, certificate, franchise, license or permit.
nn. "Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government (or agency or political subdivision thereof).
oo. "Proxy Statement" means a proxy statement as contemplated by Rules 14
a-1 et. seq. under the Exchange Act.
pp. "Related Agreement" means any document delivered at the Closing and any
contract which is to be entered into at the Closing or otherwise pursuant to
this Agreement, including, without limitation the Confidentiality Agreement.
qq. "Reserve Report" means the Evaluation of Oil and Gas Reserves for the
Interests of Alamco, Inc. in Certain Properties located in Kentucky, Tennessee
and West Virginia, effective as of January 1, 1997, prepared by Wright &
Company.
rr. "Rights Plan" means the Company's Preferred Stock Purchase Rights Plan
adopted on November 30, 1994.
ss. "SEC" means the Securities and Exchange Commission.
tt. "Stock" has the meaning set forth in Section 4.2 of the Agreement.
uu. "Sub" has the meaning set forth in the preamble to the Agreement.
vv. "Subsidiary" means any person which is an affiliate within the meaning
of the regulations promulgated under the Securities Act of 1933, as such
regulations and act are amended or in effect on the date in question.
ww. "Tax" means any federal, state, local, domestic or foreign income tax,
premium tax, ad valorem tax, excise tax, sales tax, use tax, franchise tax,
employment, payroll or withholding tax, real or personal property
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tax, windfall profits tax, transfer tax, or other tax, together with and
including, without limitation, any and all interest, fines, penalties and
additions to tax resulting from, relating to, or incurred in connection with
such tax or any content or dispute thereof.
xx. "Warrant" means the warrant in respect of 50,000 shares of Common Stock
of the Company exercisable by Principal/Eppler, Guerin & Turner, Inc., now known
as Principal Financial Securities, Inc.
yy. "Wells" means the oil and gas wells and the units that are identified
in the Reserve Report or that are owned by the Company.
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ANNEX B
PRINCIPAL FINANCIAL SECURITIES, INC.
Investment Bankers - Member New York Stock Exchange
July 16, 1997
The Board of Directors
ALAMCO, INC.
200 West Main Street
Clarksburg, WV 26302
Gentlemen:
Principal Financial Securities, Inc. ("PFS") understands that Alamco, Inc.
and its wholly owned subsidiaries ("Alamco" or the "Company"), will enter into a
transaction ("Transaction") pursuant to an Agreement and Plan of Merger, dated
May 27, 1997 (the "Agreement"), whereby all issued and outstanding shares of
common stock (including all options and warrants to purchase common stock) of
the Company shall be cancelled and extinguished and each share shall be
converted into the right to receive $15.75 in cash (the "Merger Consideration").
You have asked us to advise you as to the fairness of the terms of the
Agreement, from a financial point of view, to the current stockholders of the
Company.
In arriving at out opinion we have:
1. Reviewed the Agreement;
2. Reviewed Alamco's Form 10-K for the fiscal year ended December 31, 1996
and certain other publicly available financial statements and reports
regarding the Company;
3. Reviewed certain reserve information provided by the Company relating to
the producing properties of the Company prepared by Wright & Company;
4. Reviewed the Company's pro forma financial and reserve information
including capitalization ratios, earnings, cash flow, book value and
production (on an equivalent Mcf basis), both in the aggregate and,
where applicable, on a per share basis;
5. Reviewed certain financial and stock market data of the Company and
compared that data with similar data for other publicly-held companies
that have operations similar in some respect to the operations of the
Company;
6. Reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
7. Discussed with management of Alamco the operations of and business
prospects for Alamco; and
8. Performed other analyses as are customary in our industry.
As part of our investment banking business, we regularly issue fairness
opinions and are continually engaged in the valuation of companies and their
securities in connection with business reorganizations, private placements,
negotiated underwritings, mergers and acquisitions and valuations for estate,
corporate and other purposes. In the ordinary course of business, Principal
Financial Securities, Inc. and its affiliates at any time may hold long or short
positions, and may trade or otherwise effect transactions as principal or for
the accounts of customers, in debt or equity securities or options on securities
of the Company.
In connection with our review, we have not independently verified any of
the information concerning the Company and have relied on its being complete and
accurate in all material respects. We have assumed that the pro forma financial
and reserve information reviewed by us has been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the Company's
management as to the future performance reflected therein. In addition, we have
not made an independent evaluation or appraisal of the
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assets of the Company, nor have we been furnished with any such independent
evaluations or appraisals (other than certain reserve reports prepared by
independent petroleum engineers for the Company).
Our opinion is necessarily based solely upon the information set forth
herein as reviewed by us and circumstances existing as of the date hereof.
Events occurring after the date hereof could materially affect the assumptions
used both in preparing this opinion and in the documents reviewed by us.
We are not opining, and were not requested by you to opine, as to the
fairness of any aspect of the Transaction other than the financial terms of the
Agreement to the current stockholders of the Company. We have assumed that the
Agreement and all other aspects of the proposed Transaction will be, in all
respects, in compliance with all laws and regulations that are applicable to
Alamco, or the proposed Transaction (and we have relied as to all legal matters
relating thereto on counsel to Alamco).
Prior to commencing this engagement, we were engaged to act as, and have
acted as, financial advisor to the Board of Directors in connection with this
Transaction and will receive a fee for our services, a portion of which is
contingent upon consummation of the Transaction. In addition, we have previously
rendered investment banking and financial advisory services to Alamco for which
we received compensation.
This letter shall be for the use of the Board of Directors of the Company
in considering the Transaction. The Company may not publish or refer to this
letter (either in its entirety or through excerpt or summaries) or disclose the
existence of our engagement hereunder or describe or characterize the advice
provided by us without the prior approval of PFS, which approval shall not be
unreasonably withheld. It is expressly understood that this letter may be
included in certain regulatory filings, including any proxy statement to be
mailed to the stockholders of the Company in connection with the Transaction, or
as otherwise required by law, rule or regulation of any governmental authority
or the rules of the American Stock Exchange and that such approval hereby is
provided subject to PFS's prior review of disclosures relating to PFS's
engagement and the letter.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that, on the date hereof,
the terms of the Agreement are fair, from a financial point of view, to the
current stockholders of the Company.
Very truly yours,
/s/ Principal Financial Securities, Inc.
PRINCIPAL FINANCIAL SECURITIES, INC.
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ANNEX C
DELAWARE GENERAL CORPORATION LAW
sec. 262. Appraisal Rights
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to the provisions of
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with the provisions of subsection (d) of this Section and
who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to sec.228 of this Chapter shall be entitled to an
appraisal by the Court of Chancery of the fair value of his shares of stock
under the circumstances described in subsections (b) and (c) of this Section. As
used in this Section, the word "stockholder" means a holder of record of stock
in a stock corporation and also a member of record of a non-stock corporation;
the words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a non-stock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Sections 251 (other than a corporation which has in its
certificate of incorporation the provision required by subsection (g)(7)(i) of
Section 251 of this title), 252, 254, 257, 258, 263 or 264 of this Chapter.
(1) provided, however, that no appraisal rights under this Section
shall be available for the shares of any class or series of stock which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this Chapter.
(2) Notwithstanding the provisions of subsection (b)(1) of this
Section, appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent corporation if the
holders thereof are required by the terms of an agreement of merger or
consolidation pursuant to Sections 251, 252, 254, 257, 258, 263 and 264 of
this Chapter to accept for such stock anything except (i) shares of stock
of the corporation surviving or resulting from such merger or
consolidation, or depository receipts in respect thereof; (ii) shares of
stock of any other corporation or depository receipts in respect thereof,
which shares of stock or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a market as a market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders; (iii) cash in
lieu of fractional shares or fractional depository receipts described in
the foregoing clauses (i) and (ii); or (iv) any combination of the shares
of stock, depository receipts and cash in lieu of fractional shares, or
fractional depository receipts described in the foregoing clauses (i), (ii)
and (iii) of this subsection.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this Chapter is not owned
by the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this Section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains
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such a provision, the procedures of this Section, including those set forth in
subsections (d) and (e), shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this Section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
Section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with the
provisions of this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation
has become effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given; provided that,
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with the provisions of subsections (a) and (d) hereof and who is
otherwise entitled to appraisal rights, may file a petition in the Court of
Chancery demanding a
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determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such as duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by one or more publications at
least one week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publications
at the Court deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs thereof shall be borne
by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with the provisions of this Section and who have
become entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest which the surviving or resulting corporation would have had to pay
to borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this Section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this Section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and in the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any other state.
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<PAGE> 66
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all of
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this Section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this Section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this Section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation into which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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<PAGE> 67
PROXY
ALAMCO, INC.
This proxy is solicited on Behalf of the Board of Directors
The undersigned hereby appoints G. Jane Merandi and Bridget D. Furbee, and each
of them, with power to act without the other and with full power of
substitution, as proxies and hereby authorizes them to represent and to vote
all the shares of Common Stock of Alamco, Inc. ("Alamco") held of record by the
undersigned on the close of business on June 25, 1997, at the Special Meeting
of Stockholders to be held on August 7, 1997, and at any adjournment or
adjournments thereof (a) in the manner designated on the reverse side, and (b)
in their discretion, upon other business as may properly come before the
meeting or any adjournments thereof.
PLEASE MARK, SIGN AND DATE ON THE REVERSE SIDE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE> 68
A [ X ] PLEASE MARK YOUR
VOTES AS INDICATED
IN THIS EXAMPLE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Approval and adoption of Agreement and Plan of Merger: To consider and vote
upon the approval and adoption of the Agreement and Plan of Merger, dated as
of May 27, 1997, among Alamco, Columbia Natural Resources, Inc., a Texas FOR AGAINST ABSTAIN
corporation ("CNR"), and Appalachian Acquisition Company, a Delaware [ ] [ ] [ ]
corporation and wholly owned subsidiary of CNR ("AAC"), pursuant to which,
upon the satisfaction or waiver of certain conditions set forth therein, (i)
AAC will be merged (the "Merger") with and into Alamco, with Alamco surviving
as a wholly owned subsidiary of CNR, and (ii) each outstanding share of
common stock, par value $.10 per share, of Alamco, on a fully diluted basis
(other than shares held by stockholders of Alamco seeking appraisal rights)
will be converted into the right to receive $15.75 per share in cash.
</TABLE>
Date: , 1997
- ------------------------------------------------ -----------------
SIGNATURE
Date: , 1997
- ------------------------------------------------ -----------------
SIGNATURE IF HELD JOINTLY
Please sign exactly as name appears on this proxy. When shares are held by joint
owners, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
