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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-1/A
Tender Offer Statement
Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
---------------------
MCFARLAND ENERGY, INC.
(Name of Subject Company)
---------------------
MONTEREY ACQUISITION CORPORATION
MONTEREY RESOURCES, INC.
(Bidders)
---------------------
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
---------------------
580432 10 2
(CUSIP Number of Class of Securities)
---------------------
TERRY L. ANDERSON, ESQ.
MONTEREY RESOURCES, INC.
5201 TRUXTUN AVENUE
BAKERSFIELD, CALIFORNIA 93309
(805) 864-3008
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Bidders)
with a copy to:
G. MICHAEL O'LEARY, ESQ.
ANDREWS & KURTH L.L.P.
TEXAS COMMERCE TOWER
600 TRAVIS, SUITE 4200
HOUSTON, TEXAS 77002-3090
(713) 220-4200
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CALCULATION OF FILING FEE
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Transaction Valuation: $111,221,000* Amount of Filing Fee: $22,242
</TABLE>
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* For purposes of calculating fee only. The amount assumes the purchase of
5,727,422 Shares (as defined herein) at $18.55 per Share in cash, and 443,313
Shares issuable upon exercise of options, at a per share price equal to the
excess of $18.55 over the exercise price of each such option. The amount of
the filing fee, calculated in accordance with Rule 0-11(d) of the Securities
Exchange Act of 1934, as amended, equals 1/50 of one percent of the aggregate
of the cash offered for such number of Shares.
[X]Check box if any part of the fee is offset by Rule 0-11(a)(2) and identify
the filing with which the offsetting fee was previously paid. Identify the
previous filing by registration statement number, or the Form or Schedule and
the date of its filing.
<TABLE>
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Amount Previously Paid: $22,242 Filing Party: Monterey Resources, Inc.
Form or Registration No.: Schedule 14D-1 Date Filed: June 24, 1997
</TABLE>
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SCHEDULE 14D-1
CUSIP NO. 580432 10 2
(1) Name of reporting persons
S.S. or I.R.S. Identification No. of above person
Monterey Acquisition Corporation
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(2) Check the appropriate box if a member of a group
(a) [ ]
(b) [X]
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(3) SEC use only
- --------------------------------------------------------------------------------
(4) Sources of funds
BK
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(5) Check box if disclosure of legal proceedings is required pursuant to
Items 2(e) or 2(f)
[ ]
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(6) Citizenship or place of organization
Delaware
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(7) Aggregate amount beneficially owned by each reporting person
0.0%
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(8) Check if the aggregate amount in Row (7) excludes certain shares
[ ]
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(9) Percent of class represented by amount in Row (7)
0.0%
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(10) Type of reporting person
CO
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SCHEDULE 14D-1
CUSIP NO. 580432 10 2
(1) Name of reporting persons
S.S. or I.R.S. Identification No. of above person
Monterey Resources, Inc.
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Sources of funds
BK
- --------------------------------------------------------------------------------
(5) Check box if disclosure of legal proceedings is required pursuant to
Items 2(e) or 2(f)
[ ]
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization
Delaware
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(7) Aggregate amount beneficially owned by each reporting person
0.0%
- --------------------------------------------------------------------------------
(8) Check if the aggregate amount in Row (7) excludes certain shares
[ ]
- --------------------------------------------------------------------------------
(9) Percent of class represented by amount in Row (7)
0.0%
- --------------------------------------------------------------------------------
(10) Type of reporting person
CO
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3
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This Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1")
relates to the offer by Monterey Acquisition Corporation, a Delaware corporation
(the "Purchaser") and a wholly owned subsidiary of Monterey Resources, Inc., a
Delaware corporation ("Parent"), to purchase all outstanding shares of common
stock, par value $1.00 per share (the "Shares"), of McFarland Energy, Inc., a
Delaware corporation (the "Company"), upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated June 23, 1997 (the "Offer
to Purchase"), and in the related Letter of Transmittal (which together
constitute the "Offer"), which are annexed to and filed with this Statement as
Exhibits (a)(1) and (a)(2), respectively.
ITEM 1 -- SECURITY AND SUBJECT COMPANY
(a) The name of the subject company is McFarland Energy, Inc., a Delaware
corporation. The principal executive offices of the Company are located at 10425
South Painter Avenue, Santa Fe Springs, California 90670.
(b) The class of equity securities to which this Schedule 14D-1 relates is
the common stock, par value $1.00 per share, of the Company. The information set
forth in "Introduction" of the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2 -- IDENTITY AND BACKGROUND
(a)-(d) and (g) This Schedule 14D-1 is being filed by the Purchaser and
Parent. The information set forth in "Introduction," Section 8 ("Certain
Information Concerning the Purchaser and Monterey") and in Schedule I ("Certain
Information Concerning the Purchaser and Monterey") of the Offer to Purchase is
incorporated herein by reference.
(e) and (f) During the last five years, neither the Purchaser nor Parent
or, to the best of their knowledge, any of the persons listed in Schedule I
("Certain Information Concerning the Purchaser and Monterey") to the Offer to
Purchase (i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) was a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
further violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violations of such laws.
ITEM 3 -- PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY
(a)-(b) The information set forth in "Introduction," Section 8 ("Certain
Information Concerning the Purchaser and Monterey"), Section 10 ("Background of
the Offer; Past Contacts, Transactions or Negotiations with the Company") and
Section 11 ("Purpose of the Offer; the Merger; the Merger Agreement; Plans for
the Company") of the Offer to Purchase is incorporated herein by reference.
ITEM 4 -- SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a)-(b) The information set forth in Section 9 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5 -- PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER
(a)-(e) The information set forth in "Introduction," Section 6 ("Price
Range of Shares; Dividends"), Section 10 ("Background of the Offer; Past
Contacts, Transactions or Negotiations with the Company"), Section 11 ("Purpose
of the Offer; the Merger; the Merger Agreement; Plans for the Company") and
Section 13 ("Dividends and Distributions") of the Offer to Purchase is
incorporated herein by reference.
4
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(f)-(g) The information set forth in Section 12 ("Effect of the Offer on
the Market for Shares; Nasdaq Listing; Registration Under the Exchange Act") of
the Offer to Purchase is incorporated herein by reference.
ITEM 6 -- INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a)-(b) The information set forth in "Introduction," Section 8 ("Certain
Information Concerning the Purchaser and Monterey"), Section 10 ("Background of
the Offer; Past Contacts, Transactions or Negotiations with the Company") and
Section 11 ("Purpose of the Offer; the Merger; the Merger Agreement; Plans for
the Company") of the Offer to Purchase is incorporated herein by reference.
ITEM 7 -- CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES
The information set forth in "Introduction," Section 8 ("Certain
Information Concerning the Purchaser and Monterey"), Section 10 ("Background of
the Offer; Past Contacts, Transactions or Negotiations with the Company") and
Section 11 ("Purpose of the Offer; the Merger; the Merger Agreement; Plans for
the Company") of the Offer to Purchase is incorporated herein by reference.
ITEM 8 -- PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information set forth in "Introduction" and Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9 -- FINANCIAL STATEMENTS OF CERTAIN BIDDERS
The bidder does not believe that the bidder's financial condition is
material to a decision by a securityholder of the subject company whether to
sell, tender or hold securities being sought in the tender offer.
ITEM 10 -- ADDITIONAL INFORMATION
(a) The information set forth in "Introduction," Section 8 ("Certain
Information Concerning the Purchaser and Monterey"), Section 10 ("Background of
the Offer; Past Contacts, Transactions or Negotiations with the Company") and
Section 11 ("Purpose of the Offer; the Merger; the Merger Agreement; Plans for
the Company") of the Offer to Purchase is incorporated herein by reference.
(b)-(c) The information set forth in Section 11 ("Purpose of the Offer; the
Merger; the Merger Agreement; Plans for the Company") and Section 15 ("Certain
Legal Matters; Required Regulatory Approvals") of the Offer to Purchase is
incorporated herein by reference.
(d) The information set forth in Section 12 ("Effect of the Offer on the
Market for Shares; Nasdaq Listing; Registration Under the Exchange Act") of the
Offer to Purchase is incorporated herein by reference.
(e) The information set forth in Section 15 ("Certain Legal Matters;
Required Regulatory Approvals") of the Offer to Purchase is incorporated herein
by reference.
(f) The information set forth in the Offer to Purchase and the related
Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), respectively, is incorporated herein by reference in its entirety.
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ITEM 11 -- MATERIAL TO BE FILED AS EXHIBITS
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(a)(1) -- Offer to Purchase, dated June 23, 1997.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Notice of Guaranteed Delivery.
(a)(4) -- Letter from the Company to Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees, dated June 23,
1997.
(a)(5) -- Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) -- IRS Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
(a)(7)* -- Summary Advertisement, dated June 23, 1997.
(c)(1) -- Agreement and Plan of Merger, dated June 16, 1997 among
McFarland Energy Inc., Monterey Resources, Inc. and
Monterey Acquisition Corporation.
(c)(2) -- Stockholders Agreement, dated June 16,1997, between
Monterey Resources, Inc., Monterey Acquisition
Corporation and the McFarland Family Trust, J. C.
McFarland and Carolyn J. McFarland, and William E. Carl.
(d) -- Not applicable.
(e) -- Not applicable.
(f) -- Not applicable.
</TABLE>
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* To be filed by Amendment.
6
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SIGNATURE
After due inquiry and to the best of its knowledge and belief, each of the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: June 23, 1997 MONTEREY ACQUISITION CORPORATION
By:
----------------------------------
Name:
Title:
MONTEREY RESOURCES, INC.
By:
----------------------------------
Name:
Title:
7
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EXHIBIT INDEX
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EXHIBIT EXHIBIT NAME
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(a)(1) -- Offer to Purchase, dated June 23, 1997.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Notice of Guaranteed Delivery.
(a)(4) -- Letter from the Company to Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees, dated June 23,
1997.
(a)(5) -- Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) -- IRS Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
(a)(7)* -- Summary Advertisement, dated June 23, 1997.
(c)(1) -- Agreement and Plan of Merger, dated June 16, 1997 among
McFarland Energy Inc., Monterey Resources, Inc. and
Monterey Acquisition Corporation.
(c)(2) -- Stockholders Agreement, dated June 16,1997, between
Monterey Resources, Inc., Monterey Acquisition
Corporation and the McFarland Family Trust, J. C.
McFarland and Carolyn J. McFarland, and William E. Carl.
(d) -- Not applicable.
(e) -- Not applicable.
(f) -- Not applicable.
</TABLE>
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* To be filed by Amendment.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MCFARLAND ENERGY, INC.
AT
$18.55 NET PER SHARE
BY
MONTEREY ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY
OF
MONTEREY RESOURCES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JULY 21, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN AT THE EXPIRATION DATE A NUMBER OF SHARES WHICH WHEN
COMBINED WITH SHARES SUBJECT TO THE STOCKHOLDERS AGREEMENT CONSTITUTES A
MAJORITY OF THE COMPANY'S OUTSTANDING SHARES ON A FULLY DILUTED BASIS.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE
OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT HOLDERS OF SHARES ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (a) complete and sign the enclosed Letter of Transmittal
(or a facsimile copy thereof) in accordance with the instructions in the Letter
of Transmittal and mail or deliver it together with the certificate(s)
representing tendered Shares, and any other required documents, to the Paying
Agent or tender such Shares pursuant to the procedure for book-entry transfer
set forth in Section 3 or (b) request such stockholder's broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
such stockholder. A stockholder whose Shares are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if such
stockholder desires to tender such Shares.
Any stockholder who desires to tender such stockholder's Shares and whose
certificates representing such Shares are not immediately available or who
cannot comply with the procedures for book-entry transfer on a timely basis may
tender such Shares by following the procedures for guaranteed delivery set forth
in Section 3.
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone number set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and other related materials may
be obtained from the Information Agent or from brokers, dealers, commercial
banks and trust companies or other nominees.
June 23, 1997
<PAGE> 2
TABLE OF CONTENTS
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Introduction................................................ 1
Section 1. Terms of the Offer............................ 2
Section 2. Acceptance for Payment and Payment............ 3
Section 3. Procedures for Tendering Shares............... 4
Section 4. Withdrawal Rights............................. 6
Section 5. Certain Tax Consequences...................... 7
Section 6. Price Range of Shares; Dividends.............. 8
Section 7. Certain Information Concerning the Company.... 8
Section 8. Certain Information Concerning the Purchaser
and Monterey ................................. 10
Section 9. Source and Amount of Funds.................... 11
Section 10. Background of the Offer, Past Contacts,
Transactions or Negotiations with the Company
.............................................. 12
Section 11. Purpose of the Offer; the Merger; Merger
Agreement; Plans for the Company ............. 12
Section 12. Effect of the Offer on the Market for Shares;
Nasdaq Listing; Registration Under the
Exchange Act.................................. 21
Section 13. Dividends and Distributions................... 22
Section 14. Conditions to the Offer....................... 22
Section 15. Certain Legal Matters; Required Regulatory
Approvals .................................... 24
Section 16. Fees and Expenses............................. 26
Section 17. Miscellaneous................................. 26
Schedule I -- Directors and Executive Officers of the
Purchaser, Monterey and Santa Fe.......................... I-1
</TABLE>
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To Holders of Common Stock of
McFarland Energy, Inc.
INTRODUCTION
Monterey Acquisition Corporation, a Delaware corporation (the "Purchaser")
and a wholly owned subsidiary of Monterey Resources, Inc., a corporation
organized under the laws of Delaware ("Monterey"), hereby offers to purchase all
outstanding shares of common stock, par value $1.00 per share (the "Shares"), of
McFarland Energy, Inc., a Delaware corporation (the "Company"), at $18.55 per
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which together constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage commissions
or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Shares by the Purchaser pursuant to the Offer. However,
any tendering stockholder or other payee who fails to complete and sign the
Substitute Form W-9 that is included in the Letter of Transmittal may be subject
to a required backup federal income tax withholding of 31% of the gross proceeds
payable to such stockholder or other payee pursuant to the Offer. See Section 3.
The Purchaser will pay all charges and expenses of Corporate Investor
Communications, Inc., which is acting as the Information Agent (the "Information
Agent"), and First Chicago Trust Company of New York, which is acting as the
Paying Agent (the "Paying Agent"), incurred in connection with the Offer. See
Section 16.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN AT THE EXPIRATION DATE (AS HEREINAFTER DEFINED) A
NUMBER OF SHARES WHICH WHEN COMBINED WITH SHARES SUBJECT TO THE STOCKHOLDERS
AGREEMENT (AS HEREINAFTER DEFINED) CONSTITUTES A MAJORITY OF THE COMPANY'S THEN
OUTSTANDING SHARES ON A FULLY DILUTED BASIS. SEE SECTION 14.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE
OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT HOLDERS OF SHARES ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE BOARD OF DIRECTORS OF THE COMPANY HAS RECEIVED THE OPINION OF
OPPENHEIMER & CO., INC. ("OPPENHEIMER"), THE COMPANY'S FINANCIAL ADVISOR, THAT
THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF SHARES PURSUANT TO THE MERGER
AGREEMENT IS FAIR TO SUCH HOLDERS FROM A FINANCIAL POINT OF VIEW.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of June 16, 1997 (the "Merger Agreement"), among Monterey, the Purchaser and
the Company, pursuant to which, as promptly as practicable following the later
of the Expiration Date and the satisfaction or waiver of certain conditions, the
Purchaser will be merged with and into the Company (the "Merger"), with the
result that all of the outstanding common stock of the Company will be
beneficially owned by Monterey. At the effective time of the Merger (the
"Effective Time"), each then-outstanding Share (other than Shares held by
Monterey, the Purchaser or any of their subsidiaries, or in the treasury of the
Company, all of which will be canceled, and Shares held by stockholders who
perfect their appraisal rights under Delaware law) will be converted into the
right to receive $18.55 per Share in cash (or any higher price per Share paid
pursuant to the Offer), without interest thereon. See Section 11.
The Purchaser has been advised by the Company that, to the Company's
knowledge, all of the Company's directors and executive officers currently
intend to tender all Shares owned by them pursuant to the Offer.
1
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According to the Company, as of May 31, 1997, there were (i) 5,727,422
Shares issued and outstanding, all of which were validly issued, fully paid and
nonassessable, (ii) no Shares were held in the treasury of the Company, (iii) no
Shares were held by the Company's subsidiaries, and (iv) 650,687 Shares were
reserved for future issuance pursuant to the Company's 1996 Incentive Stock
Option, 1986 Stock Option Plan, 1989 Stock Option Plan and 1994 Non-Employee
Director Stock Option Plan of which 443,313 Shares were reserved for issuance
upon exercise of existing options. As of the date hereof, no shares of Company
preferred stock are issued and outstanding.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH STOCKHOLDERS SHOULD READ CAREFULLY BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER.
SECTION 1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will accept for payment and pay for all Shares which
are validly tendered prior to the Expiration Date and not withdrawn in
accordance with Section 4. The term "Expiration Date" means 12:00 midnight, New
York City time, on Monday, July 21, 1997 unless and until the Purchaser (subject
to the terms of the Merger Agreement) shall have extended the period of time
during which the Offer is open, in which event the term "Expiration Date" shall
refer to the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OF THE
MINIMUM CONDITION. The "Minimum Condition" is the condition to the Offer that
the number of Shares being validly tendered and not withdrawn prior to the
Expiration Date, when combined with Shares subject to the Stockholders Agreement
constitutes a majority of the outstanding Shares on a Fully Diluted Basis.
"Fully Diluted Basis" means the number of Shares outstanding as of the close of
business on Monday, June 16, 1997, increased by the number of Shares (i) issued
between such date and the Expiration Date, and (ii) issuable pursuant to the
exercise of rights to purchase Shares or upon conversion or exchange of other
securities. See Section 14 which sets forth the other conditions to the Offer.
If any condition to the Purchaser's obligation to purchase Shares under the
Offer is not satisfied prior to the Expiration Date, the Purchaser reserves the
right (but shall not be obligated) to (i) decline to purchase any of the Shares
tendered and terminate the Offer, (ii) waive such unsatisfied condition, subject
to the terms of the Merger Agreement and to compliance with applicable rules and
regulations of the Securities and Exchange Commission (the "SEC"), and purchase
all Shares validly tendered and not withdrawn, (iii) extend the Offer and,
subject to the right of stockholders to withdraw Shares as provided in Section
4, retain the Shares which have been tendered during the period or periods for
which the Offer is extended, or (iv) subject to the terms of the Merger
Agreement, amend the Offer.
The Merger Agreement provides that the Purchaser reserves the right to
increase the price per Share payable in the Offer or to otherwise amend the
Offer; provided, however, that no change may be made which (i) decreases the
price per Share, (ii) reduces the maximum number of Shares to be purchased in
the Offer, (iii) imposes conditions to the Offer in addition to those set forth
in the Merger Agreement, (iv) amends or changes the terms and conditions of the
Offer in any manner materially adverse to the holders of Shares (other than
Monterey and its subsidiaries) or (v) changes or waives the Minimum Condition.
Subject to the foregoing, the Purchaser expressly reserves the right, at any
time or from time to time, subject to the terms of the Merger Agreement and
regardless of whether or not any of the events set forth in Section 14 shall
have occurred or shall have been determined by the Purchaser to have occurred,
(i) to extend the period of time during which the Offer is open and thereby
delay acceptance for payment of, and the payment for, any Shares, by giving oral
or written notice of such extension to the Paying Agent, and (ii) to amend the
Offer in any respect by giving oral or written notice of such amendment to the
Paying Agent. The rights reserved by the Purchaser in this paragraph are in
addition to the Purchaser's rights to terminate the Offer described in Section
14. There can be no assurance, however, that the Purchaser will exercise its
rights to extend the Offer. Any extension, amendment or termination will be
followed as promptly as practicable by public announcement thereof, the
announcement in the case of an extension to be issued no later than 9:00 a.m.,
New York
2
<PAGE> 5
City time, on the next business day after the previously scheduled Expiration
Date in accordance with the announcement requirements of Rule 14d-4(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Without
limiting the obligation of the Purchaser under such Rule or the manner in which
the Purchaser may choose to make any public announcement, the Purchaser
currently intends to make announcements by issuing a release to the Dow Jones
News Service.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for any
reason, then without prejudice to the Purchaser's rights under the Offer, the
Paying Agent may retain tendered Shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in Section 4. However, the ability of
the Purchaser to delay the payment for Shares which the Purchaser has accepted
for payment is limited by Rule 14e-1(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities deposited
by or on behalf of holders of securities promptly after the termination or
withdrawal of the Offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances, including the relative
materiality of the terms or information. With respect to a change in price or a
change in percentage of securities sought, a minimum period of ten business days
is required to allow for adequate dissemination to stockholders and investor
response. If prior to the Expiration Date, the Purchaser should decide to
increase the price per Share being offered in the Offer, such increase will be
applicable to all stockholders whose Shares are accepted for payment pursuant to
the Offer. As used in this Offer to Purchase, "business day" has the meaning set
forth in Rule 14d-1 under the Exchange Act.
The Company has provided to the Purchaser its list of stockholders and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal and
other relevant materials will be mailed to record holders of Shares and
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the stockholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing, for subsequent transmittal to beneficial owners of
Shares.
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will purchase, by accepting for payment, and will pay
for, all Shares validly tendered prior to the Expiration Date (and not properly
withdrawn in accordance with Section 4) promptly after the Expiration Date. Any
determination concerning the satisfaction of such terms and conditions shall be
within the sole discretion of the Purchaser. See Section 14. The Purchaser
expressly reserves the right to delay acceptance for payment of, or, subject to
Rule 14e-1(c) under the Exchange Act, payment for, Shares in order to comply, in
whole or in part, with any applicable law, including the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"). The Purchaser
does not believe that the Offer and the Merger are subject to the notification
or waiting period requirements of the HSR Act. See Sections 14 and 15.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Paying Agent of (i) certificates for such
Shares or timely confirmation of book-entry transfer (a "Book-Entry
Confirmation") of such Shares into the Paying Agent's account at The Depository
Trust Company or the Philadelphia Depository Trust Company (each, a "Book-Entry
Transfer Facility") pursuant to the procedures set forth in Section 3, (ii) a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), with any required signature guarantees or an Agent's Message
(as defined
3
<PAGE> 6
below) in connection with a book-entry transfer, and (iii) any other documents
required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Paying Agent and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment (and thereby purchased) tendered Shares, if, as and when the
Purchaser gives oral or written notice to the Paying Agent of the Purchaser's
acceptance of such Shares for payment pursuant to the Offer. In all cases,
payment for Shares purchased pursuant to the Offer will be made by deposit of
the purchase price with the Paying Agent, which will act as agent for tendering
stockholders for the purpose of receiving payment from the Purchaser and
transmitting payment to tendering stockholders. Under no circumstances will
interest on the purchase price of the Shares be paid by the Purchaser.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates submitted represent more Shares than are tendered,
certificates for such Shares not purchased or tendered will be returned, without
expense to the tendering stockholder (or, in the case of Shares tendered by
book-entry transfer into the Paying Agent's account at a Book-Entry Transfer
Facility pursuant to the procedures set forth in Section 3, such Shares will be
credited to an account maintained at such Book-Entry Transfer Facility),
promptly after the expiration, termination or withdrawal of the Offer.
SECTION 3. PROCEDURES FOR TENDERING SHARES.
For Shares to be validly tendered pursuant to the Offer, a properly
completed and duly executed Letter of Transmittal or facsimile thereof, with any
required signature guarantees, or an Agent's Message in connection with a
book-entry delivery of Shares, and any other requirements, must be received by
the Paying Agent at one of its addresses set forth on the back cover of this
Offer to Purchase prior to the Expiration Date. In addition, either (i) the
certificates for Shares must be received by the Paying Agent along with the
Letter of Transmittal or Shares must be tendered pursuant to the procedures for
book-entry transfer described below and a Book-Entry Confirmation must be
received by the Paying Agent, in each case prior to the Expiration Date, or (ii)
the tendering stockholder must comply with the guaranteed delivery procedures
described below. The Paying Agent will establish an account with respect to the
Shares at each Book-Entry Transfer Facility for purposes of the Offer within two
business days after the date of this Offer to Purchase. Any financial
institution that is a participant in any of the Book-Entry Transfer Facilities'
systems may make book-entry delivery of Shares by causing a Book-Entry Transfer
Facility to transfer such Shares into the Paying Agent's account at a Book-Entry
Transfer Facility in accordance with such Book-Entry Transfer Facility's
procedures for transfer. However, although delivery of Shares may be effected
through book-entry transfer at a Book-Entry Transfer Facility, the Letter of
Transmittal or facsimile thereof properly completed and duly executed, with any
required signature guarantees, or an Agent's Message in connection with a
book-entry transfer, and any other required documents, must, in any case, be
transmitted to and received by the Paying Agent at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date
or the tendering stockholder must comply with the guaranteed delivery procedures
described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE PAYING AGENT.
Signatures on all Letters of Transmittal must be guaranteed by a member
firm of a registered national securities exchange, a member of the National
Association of Securities Dealers, Inc. ("NASD") or a commercial bank or trust
company having an office or correspondent in the United States (each of the
foregoing being referred to as an "Eligible Institution"), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" on the Letter of Transmittal, or (ii)
for the
4
<PAGE> 7
account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal. If the certificates are registered in the name of a person other
than the signer of the Letter of Transmittal or if payment is to be made or
certificates for Shares not accepted for payment or not tendered are to be
returned to a person other than the registered holder, then the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appear on the certificates, with the signatures on the certificates or
stock powers guaranteed as described above. See Instructions 1 and 5 of the
Letter of Transmittal.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL (OR A MANUALLY
SIGNED FACSIMILE THEREOF) AND ANY OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY
THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE
TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's certificates for Shares are not immediately available or time will
not permit all required documents to reach the Paying Agent on or prior to the
Expiration Date, or the procedure for book-entry transfer cannot be completed on
a timely basis, such Shares may nevertheless be tendered if all the following
conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Paying Agent as provided below, on or prior to the
Expiration Date as provided below; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a Letter of
Transmittal or facsimile thereof, properly completed and duly executed,
with any required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message) and any other documents required by the
Letter of Transmittal are received by the Paying Agent within three Nasdaq
Stock Market ("Nasdaq") trading days after the date of execution of such
Notice of Guaranteed Delivery. Stockholders may not extend the foregoing
time period for delivery of Shares to the Paying Agent by providing a
second Notice of Guaranteed Delivery with respect to such Shares. A
"trading day" is any day on which Nasdaq is open for business.
The Notice of Guaranteed Delivery may be sent by hand delivery, telegram,
facsimile transmission or mail to the Paying Agent and must include a guarantee
by an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will in all cases be made only after timely receipt by the
Paying Agent of certificates for the Shares or a timely Book-Entry Confirmation
of the delivery of such Shares, and a Letter of Transmittal (or manually signed
facsimile thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message) and any other documents required by the Letter of Transmittal.
Accordingly, payment might not be made to all tendering stockholders at the same
time, and will depend upon when certificates for the Shares or Book-Entry
Confirmations of the delivery of such Shares are received into the Paying
Agent's account at a Book-Entry Transfer Facility.
UNDER THE BACKUP FEDERAL INCOME TAX LAWS APPLICABLE TO CERTAIN STOCKHOLDERS
(OTHER THAN CERTAIN EXEMPT STOCKHOLDERS, INCLUDING, AMONG OTHERS, ALL
CORPORATIONS AND CERTAIN FOREIGN INDIVIDUALS), THE PAYING AGENT MAY BE REQUIRED
TO WITHHOLD 31% OF THE AMOUNT OF ANY PAYMENTS MADE TO SUCH STOCKHOLDERS PURSUANT
TO THE OFFER. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO
PAYMENT OF THE PURCHASE PRICE FOR SHARES PURCHASED PURSUANT TO THE OFFER, A
TENDERING STOCKHOLDER MUST PROVIDE THE PAYING AGENT WITH SUCH STOCKHOLDER'S
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH STOCKHOLDER IS NOT
SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE
FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 9 TO THE LETTER
OF TRANSMITTAL.
5
<PAGE> 8
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tendered Shares pursuant to any of
the procedures described above will be determined in the sole discretion of the
Purchaser, whose determination shall be final and binding. The Purchaser
reserves the absolute right to reject any or all tenders of any Shares
determined by it not to be in proper form if the acceptance for payment of, or
payment for, such Shares may, in the opinion of the Purchaser's counsel, be
unlawful. The Purchaser also reserves the absolute right, in its sole
discretion, subject to the Merger Agreement, to waive any of the conditions of
the Offer or any defect or irregularity in any tender with respect to Shares of
any particular stockholder, whether or not similar defects or irregularities are
waived in the case of other stockholders. The Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
Instructions thereto) will be final and binding. Neither the Purchaser,
Monterey, the Company, the Paying Agent, the Information Agent nor any other
person or entity will be under any duty to give notification of any defects or
irregularities in tenders or will incur any liability for failure to give any
such notification.
By executing a Letter of Transmittal or by causing the transmission of an
Agent's Message as set forth above, a tendering stockholder irrevocably appoints
designees of the Purchaser as the stockholder's attorneys-in-fact and proxies,
in the manner set forth in the Letter of Transmittal, each with full power of
substitution, to the full extent of the stockholder's rights with respect to the
Shares tendered by the stockholder and accepted for payment by the Purchaser
(and any and all other Shares or other securities issued or issuable in respect
of such Shares on or after the date of the Merger Agreement). All such powers of
attorney and proxies shall be considered to be coupled with an interest in the
tendered Shares. This appointment will be effective when, and only to the extent
that, the Purchaser accepts Shares for payment. Upon acceptance for payment, all
prior powers of attorney and proxies given by the stockholder with respect to
the Shares or other securities will, without further action, be revoked, and no
subsequent powers of attorney or proxies may be given nor any subsequent written
consent executed by such stockholder (and, if given or executed, will not be
deemed to be effective) with respect thereto. The designees of the Purchaser
will, with respect to the Shares and other securities, be empowered to exercise
all voting and other rights of such stockholder as they in their sole discretion
may deem proper at any annual, special or adjourned meeting of the Company's
stockholders, by written consent or otherwise. The Purchaser reserves the right
to require that, in order for Shares to be deemed validly tendered, immediately
upon the Purchaser's acceptance for payment of such Shares, the Purchaser must
be able to exercise full voting and other rights of a record and beneficial
holder, including rights in respect of acting by written consent, with respect
to such Shares.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer. The Purchaser's acceptance for payment for Shares
tendered pursuant to the Offer will constitute a binding agreement between the
tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
SECTION 4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by the Purchaser pursuant to the Offer, may also be
withdrawn at any time after August 21, 1997 (or such later date as may apply in
case the Offer is extended).
For a withdrawal to be effective, a written, telegraphic, or facsimile
transmission notice of withdrawal must be timely received by the Paying Agent at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If certificates for Shares have been delivered or otherwise identified
to the Paying Agent, then, prior to the release of such certificates, the serial
numbers of the particular certificates evidencing the Shares to be withdrawn and
a signed notice of withdrawal with signatures guaranteed by an Eligible
Institution, except in the case of Shares tendered for account of an Eligible
Institution, must also be furnished to the Paying Agent as described above. If
Shares have been tendered pursuant to the procedures for book-entry transfer as
set forth in Section 3, any notice of withdrawal must also
6
<PAGE> 9
specify the name and number of the account at the appropriate Book-Entry
Transfer Facility to be credited with the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. Neither the
Purchaser, Monterey, the Company, the Paying Agent, the Information Agent nor
any other person or entity will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability for
failure to give any notification.
Any Shares properly withdrawn will be deemed to be not validly tendered for
purposes of the Offer. However, withdrawn Shares may be retendered by following
one of the procedures described in Section 3 at any time prior to the Expiration
Date.
SECTION 5. CERTAIN TAX CONSEQUENCES.
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to beneficial owners of Shares whose
Shares are purchased pursuant to the Offer or whose Shares are converted to cash
in the Merger. The discussion is for general information only and does not
purport to consider all aspects of federal income taxation that might be
relevant to beneficial owners of Shares. The discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
existing and temporary regulations promulgated thereunder and administrative and
judicial interpretations thereof, all of which are subject to change. The
discussion applies only to beneficial owners of Shares in whose hands Shares are
capital assets within the meaning of Section 1221 of the Code, and may not apply
to Shares received pursuant to the exercise of employee stock options or
otherwise as compensation, or to certain types of beneficial owners of Shares
(such as insurance companies, tax-exempt organizations and broker-dealers) who
may be subject to special rules. This discussion does not discuss the federal
income tax consequences to a beneficial owner of Shares who, for United States
federal income tax purposes, is a non-resident alien individual, a foreign
corporation, a foreign partnership or a foreign estate or trust, nor does it
consider the effect of any foreign, state or local tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH BENEFICIAL OWNER OF
SHARES SHOULD CONSULT SUCH BENEFICIAL OWNER'S OWN TAX ADVISOR TO DETERMINE THE
APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH BENEFICIAL OWNER AND THE
PARTICULAR TAX EFFECTS TO SUCH BENEFICIAL OWNER OF THE OFFER AND THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for federal income tax purposes. In general, for federal
income tax purposes, a beneficial owner of Shares will recognize gain or loss
equal to the difference between the beneficial owner's adjusted tax basis in the
Shares sold pursuant to the Offer or converted to cash in the Merger and the
amount of cash received therefor. Gain or loss must be determined separately for
each block of Shares (i.e., Shares acquired at the same cost in a single
transaction) sold pursuant to the Offer or converted to cash in the Merger,
although, under proposed legislation not yet effective, gain or loss would be
determined based on the average tax basis of all Shares held by the beneficial
owner. Such gain or loss will be capital gain or loss and will be long-term
capital gain or loss if the beneficial owner held the Shares for more than one
year as of the date of sale (in the case of the Offer) or the Effective Time (in
the case of the Merger). Long-term capital gain of individuals currently is
taxed at a maximum rate of 28%. Legislation has been proposed which, if enacted,
would favorably affect the taxation of capital gains. It is uncertain whether,
in what form, and with what effective date any such legislation will be enacted.
However, the chairmen of the House Ways and Means Committee and the Senate
Finance Committee have stated their present intention that any capital gains
legislation will be effective with respect to transactions occurring on or after
May 7, 1997.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%, unless a beneficial owner of Shares (a)
is a corporation or comes within certain exempt categories and, when required,
demonstrates this fact or (b) provides a correct taxpayer identification number
to the payor, certifies as to no loss of exemption from backup withholding and
otherwise complies with applicable withholding rules. A beneficial owner who
does not provide a correct taxpayer identification number may be
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<PAGE> 10
subject to penalties imposed by the Internal Revenue Service. Any amount paid as
backup withholding does not constitute an additional tax and will be creditable
against the beneficial owner's federal income tax liability. Each beneficial
owner of Shares should consult with his or her own tax advisor as to his or her
qualification for exemption from backup withholding and the procedure for
obtaining such exemption. Those tendering their Shares in the Offer may prevent
backup withholding by completing the Substitute Form W-9 included in the Letter
of Transmittal. See Section 3. Similarly, those who convert their Shares into
cash in the Merger may prevent backup withholding by completing a Substitute
Form W-9 and submitting it to the Paying Agent.
Monterey and the Purchaser will be entitled to deduct and withhold from the
consideration otherwise payable pursuant to the Merger Agreement to any holder
of Shares such amounts as Monterey and the Purchaser is required to deduct and
withhold with respect to the making of such payment. To the extent that amounts
are so withheld by Monterey or the Purchaser, such withheld amounts shall be
treated for all purposes as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made by Monterey and the
Purchaser.
SECTION 6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are listed and principally traded in the United States on Nasdaq
under the symbol "MCFE". The following table sets forth, for the calendar
quarters indicated, the high and low sales price per Share on Nasdaq. The
Company has never paid cash dividends on its Common Stock and has stated that it
does not intend to pay cash dividends on its Common Stock in the foreseeable
future. The terms of the Company's present credit agreement restrict the payment
of cash dividends when there exists outstanding borrowing under the facility.
All prices set forth below are as reported in published financial sources:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1995
First Quarter............................................. 8 57/8
Second Quarter............................................ 8 61/4
Third Quarter............................................. 71/2 63/4
Fourth Quarter............................................ 81/4 61/4
1996
First Quarter............................................. 83/4 71/4
Second Quarter............................................ 103/8 731/32
Third Quarter............................................. 101/2 9
Fourth Quarter............................................ 121/2 10
1997
First Quarter............................................. 13 111/8
Second Quarter (through June 20, 1997).................... 183/8 1125/64
</TABLE>
On June 16, 1997, the last full trading day prior to the announcement of
the Merger Agreement, the reported closing sales price per Share on Nasdaq was
16 5/8. On June 20, 1997, the last full trading day prior to the commencement of
the Offer, the reported closing sales price per Share on Nasdaq was 18 3/8.
Stockholders are urged to obtain a current market quotation for the Shares.
SECTION 7. CERTAIN INFORMATION CONCERNING THE COMPANY.
General. The Company was founded in 1972 as a California corporation and
reincorporated in Delaware in 1987. Its principal executive offices are located
at 10425 South Painter Avenue, Santa Fe Springs, California 90670. According to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996 (the "Company 10-K"), the Company is principally engaged in the production
and sale of crude oil and natural gas, oil and gas exploration and development,
and proven oil and gas property acquisition and development, all within the
continental United States.
8
<PAGE> 11
Selected Consolidated Financial Data. The following selected consolidated
financial data relating to the Company have been taken or derived from the
audited financial statements contained in the Company 10-K. More comprehensive
financial information (including the notes to the Company's financial
statements) is included in such Company 10-K and other documents filed by the
Company with the SEC, and the financial data set forth below are qualified in
their entirety by reference to such reports and other documents, including the
financial statements (and notes thereto) contained therein. Such reports and
other documents may be examined and copies may be obtained from the offices of
the SEC in the manner set forth below.
SELECTED CONSOLIDATED FINANCIAL DATA FOR MCFARLAND ENERGY, INC.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31
-----------------------------------------------
1996 1995(1) 1994 1993(2) 1992
------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Operating Results
Net operating revenues..................... $25,721 $19,883 $16,270 $12,862 $15,283
Income (loss) from continuing operations
before accounting change................ 7,126 13,641 1,508 (1,566) 925
Per share -- primary.................... 1.26 2.61 0.29 (0.30) 0.18
Per share -- fully diluted.............. 1.26 2.41 0.29 (0.30) 0.18
Net income (loss).......................... 7,126 13,641 1,508 (1,116) 925
Per share -- primary.................... 1.26 2.61 0.29 (0.21) 0.18
Per share -- fully diluted.............. 1.26 2.41 0.29 (0.21) 0.18
Financial Position
Working capital............................ $ 8,758 $ 4,793 $ 2,792 $ 2,902 $ 3,678
Total assets............................... 50,859 47,693 43,545 23,016 25,117
Convertible notes(3)....................... -- 2,600 2,600 2,600 2,592
Production payment notes................... 2,558 3,139 3,481 -- --
Long-term debt............................. -- -- 12,650 -- --
</TABLE>
- ---------------
(1) In January 1995, the Company recorded a litigation settlement of
$17,158,000, net of legal fees and other related costs.
(2) Net loss reflects the $450,000 ($0.09 per share) benefit of the cumulative
effect of the change in accounting for income taxes which resulted from the
Company's adoption of Financial Accounting Standards Board Statement No. 109
"Accounting for Income Taxes."
(3) In January 1996, the Company elected to convert the convertible note into
400,000 Shares.
The Company is subject to the information and filing requirements of the
Exchange Act and is required to file periodic reports, proxy statements and
other information with the SEC relating to its business, financial condition and
other matters. Information, as of particular dates, concerning the Company's
directors and officers, their remuneration, options granted to them, the
principal holders of the Company's securities and any material interest of such
persons in transactions with the Company is required to be described in proxy
statements distributed to the Company's stockholders and filed with the SEC.
These reports, proxy statements and other information should be available for
inspection and copying at the SEC's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at Seven
World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these
materials may also be obtained by mail, upon payment of the SEC's customary
fees, from the SEC's principal office at 450 Fifth Street, N.W., Washington,
D.C. 20549. The SEC also maintains a World Wide Web Site on the Internet at
http://www.sec.gov that contains reports, proxy statements and other information
filed electronically by the Company with the SEC. Such material should also be
available for inspection at the offices of Nasdaq, Corporate Financing
Department, 9513 Key West Avenue, Rockville, MD 20850.
9
<PAGE> 12
Other than as set forth below, the information concerning the Company
contained in this section has been taken from or based upon publicly available
documents on file with the SEC and other publicly available information.
Although neither the Purchaser nor Monterey has any knowledge that would
indicate that statements contained herein based upon such documents are untrue,
neither the Purchaser nor Monterey takes any responsibility for the accuracy or
completeness of the information contained in such documents or for any failure
by the Company to disclose events that may have occurred and may affect the
significance or accuracy of any such information but which are unknown to either
the Purchaser or Monterey.
In March 1997, Monterey and the Company began to engage in preliminary
discussions concerning a possible transaction involving the acquisition of the
Company by Monterey. Monterey conducted a financial due diligence investigation,
and the Company and its representatives discussed with Monterey and its
representatives certain matters regarding the business and financial condition
of the Company. See "Background of the Offer; Past Contacts; Transactions or
Negotiations with the Company." The Company provided Monterey with the budget of
the Company for the 1997 fiscal year. The budget is not publicly available, was
prepared for internal purposes only, and certain portions thereof are being
included in this Offer to Purchase solely because it was furnished to Monterey.
The budget necessarily reflects numerous assumptions with respect to the oil and
gas exploration and production business, general business and economic
conditions and other matters, many of which are inherently uncertain or beyond
the Company's control, and does not take into account any change in ownership of
the Company or any changes to Company operations or capital structure which may
result therefrom. Among the assumptions reflected in the budget are: (i) the
average price for crude oil is $20.00 per barrel of West Texas Intermediate and
(ii) the average price for natural gas delivered at the Henry Hub in Louisiana
is $2.10 per Mcf. It is not possible to predict whether the assumptions made in
preparing the budget will be valid and actual results may prove to be materially
higher or lower than those contained therein. The inclusion of this information
should not be regarded as an indication that Monterey, the Purchaser, the
Company, or anyone who received this information considered it a reliable
predictor of future events, and this information should not be relied on as
such. Neither Monterey, the Purchaser nor the Company assumes any responsibility
for the validity, reasonableness, accuracy or completeness of the budget.
Neither Monterey, the Purchaser nor the Company has made, or makes, any
representation to any person regarding the information contained in the budget
and none of them intends to update or otherwise revise the projections to
reflect circumstances existing after the date when made or to reflect the
occurrence of future events even in the event that any or all of the assumptions
underlying the budget are shown to be in error.
Set forth below is a summary of selected income statement and cash flow
information contained in the Company's budget and provided to Monterey as
described above.
<TABLE>
<CAPTION>
FOR THE YEAR ENDING
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
Net revenues................................................ $26,988
Costs and expenses.......................................... 17,864
Pretax income from operations............................... 9,124
Net income.................................................. 6,067
Net cash flow before expenditures........................... 14,456
</TABLE>
SECTION 8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND MONTEREY.
The Purchaser is a newly incorporated Delaware corporation and a wholly
owned subsidiary of Monterey which to date has not conducted any business other
than that incident to its formation, the execution and delivery of the Merger
Agreement and the commencement of the Offer. Accordingly, no meaningful
financial information with respect to the Purchaser is available. The principal
executive offices of Monterey and the Purchaser are located at 5201 Truxtun
Avenue, Bakersfield, California 93309. Monterey, which is a Delaware
corporation, is an independent oil and gas company engaged in the production,
development and acquisition of
10
<PAGE> 13
oil and natural gas in the State of California. Monterey was formed in 1996 to
own the properties and conduct the business of the Western Division of Santa Fe
Energy Resources, Inc. At December 31, 1996, Santa Fe Energy Resources, Inc.
("Santa Fe") owned 82.8% of Monterey's outstanding common stock. Monterey's
stock is listed on the New York Stock Exchange and trades under the symbol
"MRC."
The name, citizenship, business address, present principal occupation or
employment and five-year employment history of each of the directors and
executive officers of the Purchaser, Monterey and Santa Fe are set forth in
Schedule I hereto.
Monterey is subject to the informational filing requirements of the
Exchange Act and is required to file reports and other information with the SEC
relating to its business, financial condition and other matters. Reports and
other information may be inspected and copies may be obtained from the offices
of the SEC in the same manner as set forth with respect to information
concerning the Company in Section 7.
Except as provided in the Merger Agreement, and as otherwise described in
this Offer to Purchase, neither Monterey nor the Purchaser, nor to the best
knowledge of Monterey and the Purchaser, any of the persons listed on Schedule I
hereto, has any contract, arrangement, understanding, or relationship with any
other person with respect to any securities of the Company, including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or the voting of any securities of the Company, joint ventures,
loan or option arrangements, puts or calls, guarantees of loans, guarantees
against loss of the giving or withholding of proxies. Except as set forth in
this Offer to Purchase, neither Monterey nor the Purchaser, nor, to the best of
their knowledge, any of the persons listed on Schedule I hereto, has had, since
January 1, 1994, any business relationships or transactions with the Company or
any of its executive officers, directors, or affiliates that would require
reporting under the rules of the SEC applicable to this Offer to Purchase.
Except as set forth in this Offer to Purchase, since January 1, 1994, there have
been no contacts, negotiations or transactions between the Purchaser, Monterey
or any of its subsidiaries or, to the best knowledge of Monterey and the
Purchaser, any of the persons listed on Schedule I hereto, and the Company or
its affiliates, concerning a merger, consolidation or acquisition, tender offer
or other acquisition of securities, election of directors or a sale or other
transfer of a material amount of assets. Except as set forth in this Offer to
Purchase, neither Monterey nor the Purchaser, nor, to the best knowledge of
Monterey or the Purchaser, any of the persons listed on Schedule I hereto,
beneficially owns any Shares or has effected any transactions in the Shares in
the past 60 days.
SECTION 9. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Purchaser to purchase all
outstanding Shares is estimated to be approximately $111.2 million. The funds
necessary to purchase Shares pursuant to the Offer and to pay related fees and
expenses will be furnished to the Purchaser (i) by Monterey as a capital
contribution and (ii) through the financings described below.
Monterey, The Chase Manhattan Bank ("Chase"), as the administrative agent
and as lender, and four other lenders are currently parties to a five-year
revolving credit facility, entered into in November 1996, providing for
aggregate extensions of credit thereunder to Monterey of $75 million (the
"Existing Facility"). Chase and Monterey propose to restructure the Existing
Facility to increase to $200 million the aggregate principal amount of financing
initially available to Monterey, to extend the maturity date to a date five
years following closing, and to effect certain other modifications of the
Existing Facility (the "Amended Facility"). Although Chase proposes to syndicate
all or a portion of the Amended Facility to other lenders, it has advised
Monterey of its willingness, subject to customary conditions, to underwrite the
entire amount thereof.
Loans under the Amended Facility will bear interest, at Monterey's
election, at rates based upon Chase's prime rate or the federal funds effective
rate, or on the applicable LIBOR rate for interest periods of one, two, three or
six months. As does the Existing Facility, the Amended Facility will make
provision for issuance of letters of credit, with an availability sublimit of
$50 million. Overall availability of credit under the Amended Facility from time
to time will be a function of the Available Borrowing Base (initially to be
defined as $200 million). The Available Borrowing Base will be redetermined by
Chase from time to time as a function of the total amount of indebtedness that
can be supported by the proved oil and gas reserves of Monterey and
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its restricted subsidiaries, based upon periodic independent engineering
reports, minus their Other Liabilities. Such Other Liabilities will be defined
as liabilities in respect of certain outstanding indebtedness (which would
include, without limitation, for so long as the same shall remain outstanding,
Monterey's 10.61% Senior Notes due March 31, 2005, originally issued and
currently outstanding in the aggregate principal amount of $175 million), and
letter of credit obligations, in each case incurred outside of the Amended
Facility. The documentation relating to the Amended Facility is expected to
contain representations and warranties, affirmative and negative covenants
(including requirements to maintain certain financial ratios and limitations
upon debt incurrence, liens, asset sales, restricted payments and investments,
affiliate transactions, mergers, sale and leaseback transactions and certain
activities of restricted subsidiaries) binding upon Monterey and its restricted
subsidiaries, and events of default, similar to those contained in the Existing
Facility.
SECTION 10. BACKGROUND OF THE OFFER, PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
WITH THE COMPANY.
In late February, 1997 Monterey, through Petrie Parkman & Co., Inc.
("Petrie Parkman"), Monterey's financial advisor, contacted the Company to
explore the Company's desire to be acquired by Monterey. The initial contact was
followed up with a meeting in mid-March, 1997 between Monterey and the Company.
In early April, 1997, the Company advised Monterey that it would engage
Oppenheimer to provide advisory services, and invited Monterey to submit an
offer in writing, including an estimated value for the Company in a cash for
stock transaction. On April 8, 1997, Monterey submitted such an expression of
interest.
In mid-April, 1997, the Company advised Monterey that it would make
additional information available to Monterey subject to the execution by
Monterey of a confidentiality agreement. A confidentiality agreement between the
Company and Monterey was entered into on April 29, 1997, and Monterey
subsequently received additional information about the Company, which Monterey
reviewed with its representatives, including Petrie Parkman.
On May 6, 1997, Oppenheimer advised Monterey that it was soliciting
informal expressions of interest from potential acquirors of the Company. On May
14, 1997, Monterey submitted an expression of interest in response to the
Oppenheimer solicitation. On May 23, 1997, Oppenheimer advised Monterey that
final offers for an acquisition of all shares of the Company should be submitted
by June 9, 1997. On June 9, 1997, Monterey submitted its proposal and on June
11, 1997, the Company advised Monterey that the Company would like to enter into
negotiations to determine whether or not a transaction acceptable to Monterey
and the Company could be structured. During the period immediately following
such proposal, representatives of Monterey and the Company engaged in extensive
negotiations relating to the terms of the Merger Agreement.
On June 16, 1997, following approval by their respective Boards of
Directors, the Company, Monterey and the Purchaser entered into the Merger
Agreement. A summary of the terms of the Merger Agreement is set forth in
Section 11. A copy of the Merger Agreement has been filed as an Exhibit to the
Schedule 14D-1 filed by Monterey and the Purchaser with the SEC and is available
for inspection and copy at the principal office of the SEC in the manner set
forth in Section 7.
On June 23, 1997, the Purchaser commenced the Offer.
SECTION 11. PURPOSE OF THE OFFER; THE MERGER; MERGER AGREEMENT; PLANS FOR THE
COMPANY.
The purpose of the Offer, the Merger and the Merger Agreement is for
Monterey to acquire control of, and the entire equity interest in, the Company.
The Offer and the Merger Agreement are intended to increase the likelihood that
the Merger will be effected as promptly as practicable.
The Merger Agreement. The following summary of the Merger Agreement, a copy
of which is filed as an exhibit to the Schedule 14D-1, is qualified by reference
to the Merger Agreement.
The Offer. The Merger Agreement provides for the making of the Offer. The
obligation of the Purchaser to accept for payment or pay for Shares tendered
pursuant to the Offer is subject to the satisfaction of the Minimum Condition
and certain other conditions that are set forth in Section 14 hereof. The
Purchaser has reserved the right to waive any conditions of the Offer or to
modify any of the terms and conditions of the Offer except that, without the
consent of the Company, the Purchaser may not (i) decrease the price per
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<PAGE> 15
Share, (ii) reduce the maximum number of Shares to be purchased in the Offer,
(iii) impose conditions to the Offer in addition to those set forth the Merger
Agreement, (iv) amend or change the terms and conditions of the Offer in any
manner materially adverse to the holders of Shares (other than Monterey and its
subsidiaries) or (v) change or waive the Minimum Condition.
Recommendation. The Board of Directors of the Company, based in part upon
the opinion of Oppenheimer that the proposed consideration to be received by
holders of Shares pursuant to the Merger Agreement is fair from a financial
point of view to the holders of Shares, unanimously determined that the Offer
and the Merger are fair to and in the best interests of the Company and its
stockholders, approved the Merger Agreement and the transactions contemplated
thereby, and recommended that holders of Shares accept the Offer and tender
their Shares pursuant to the Offer. The Merger Agreement provides that if the
Board of Directors of the Company determines that it will not recommend
acceptance of the Offer and approval of the Merger by the Company's stockholders
(or if such recommendation is withdrawn) based upon the advice of legal counsel
that such action is necessary for the Board of Directors to comply with its
fiduciary duties to stockholders under applicable law, such non-recommendation
or withdrawal of the recommendation shall not constitute a breach of the Merger
Agreement but will entitle the Purchaser to receive a termination fee under
certain circumstances. See "Termination."
Board Representation. The Merger Agreement provides that, upon the
Purchaser's acquisition of a majority of the outstanding Shares pursuant to the
Offer, and from time to time thereafter so long as Monterey and/or any of its
direct or indirect wholly owned subsidiaries (including the Purchaser) owns a
majority of the outstanding Shares, the Purchaser shall be entitled to designate
up to such number of directors, rounded up to the next whole number, on the
Board of Directors as shall give the Purchaser representation on the Board of
Directors equal to the product of the total number of directors on the Board of
Directors (giving effect to the directors elected as described in this sentence)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by the Purchaser or any affiliate of the Purchaser at such time bears to
the total number of Shares then outstanding, and the Company shall, at such
time, promptly take all actions necessary to cause the Purchaser's designees to
be elected as directors of the Company, including increasing the size of the
Board of Directors or securing the resignations of incumbent directors or both.
At such times, the Company shall use its best efforts to cause persons
designated by the Purchaser to constitute the same percentage as persons
designated by the Purchaser shall constitute of the Board of Directors of (i)
each committee of the Board of Directors (some of whom may be required to be
independent as required by applicable law or rules of Nasdaq), (ii) each board
of directors of each domestic subsidiary and (iii) each committee of each such
board, in each case only to the extent permitted by applicable law, subject to
Section 14(f) of the Exchange Act; provided, that, until the time the Purchaser
acquires a majority of the then outstanding Shares on a Fully Diluted Basis, the
Company shall use its best efforts to ensure that all the members of its Board
of Directors and each committee of its Board of Directors and such boards and
committees of domestic subsidiaries as of the date hereof who are not employees
of the Company shall remain members of its Board of Directors and of such boards
and committees.
The Merger. The Merger Agreement provides that, unless the Merger Agreement
is terminated or abandoned (see "Termination" below), at the Effective Time, the
Purchaser will be merged with and into the Company, whereupon the separate
corporate existence of the Purchaser will cease and the Company will be the
surviving corporation in the Merger (the "Surviving Corporation"). The Merger
Agreement further provides that (i) subject to certain requirements in the
Merger Agreement, the Certificate of Incorporation and the By-Laws of the
Purchaser as in effect at the Effective Time shall be the Certificate of
Incorporation and the By-Laws of the Surviving Corporation, (ii) the directors
of the Purchaser immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, and (iii) the officers of the Company
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation.
Consideration to be Paid in the Merger. The Merger Agreement provides that
each Share outstanding immediately prior to the Effective Time (other than
Shares held in the treasury of the Company, Shares owned by Monterey, the
Purchaser, any other direct or indirect wholly owned subsidiary of Monterey, or
of the Company, and other than Dissenting Shares (as defined below under
"Dissenters' Rights")) shall, at the Effective Time, be canceled and converted
automatically into a right to receive in cash an amount per Share
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equal to the highest price per Share paid by the Purchaser pursuant to the
Offer, without interest, upon the surrender of the certificate formerly
representing such Share and each Share held in the treasury of the Company, and
each Share held by Monterey, the Purchaser or any direct or indirect subsidiary
of Monterey, or of the Company, immediately prior to the Effective Time shall,
at the Effective Time, be canceled without any conversion thereof and no payment
or distribution will be made with respect thereto. Each share of common stock of
the Purchaser, par value $.01 per share, issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable share of common stock, par value
$1.00 per share, of the Surviving Corporation.
Company Options. The Merger Agreement provides that prior to the date on
which the Purchaser shall have accepted for payment all Shares validly tendered
and not withdrawn prior to the Expiration Date (the "Tender Offer Acceptance
Date"), the Company shall enter into an agreement with each holder of an
employee or director stock option to purchase Shares (in each case, an "Option")
that provides that, immediately prior to the Effective Time, each Option that is
then outstanding, whether or not then exercisable or vested, shall be canceled
by the Company, and each holder of a canceled Option shall be entitled to
receive from the Purchaser at the time of such cancelation, an amount in cash
equal to the product of (i) the number of Shares previously subject to such
Option, whether or not then exercisable or vested, and (ii) the excess, if any,
of the amount per Share paid pursuant to the Offer over the exercise price per
Share applicable to such Option, reduced by any applicable withholding.
Stockholders' Meeting. In the Merger Agreement, the Company agreed to take
all action necessary in accordance with applicable law and its Certificate of
Incorporation and By-Laws to duly call, give notice of, convene and hold a
meeting of its stockholders as soon as practicable following the consummation of
the Offer to consider and vote upon the adoption of the Merger Agreement, if
such stockholder approval is required by applicable law. To the extent permitted
by law, Monterey and the Purchaser each agreed to vote all Shares beneficially
owned by them in favor of the Merger. Subject to its fiduciary duties under
applicable law, the Board of Directors of the Company will recommend that the
Company's stockholders approve adoption of the Merger Agreement, if such
stockholder approval is required.
Dissenters' Rights. Holders of Shares will not have appraisal rights as a
result of the Offer. If the Merger is consummated, however, persons who hold
Shares at the time would have the right to appraisal of their Shares in
accordance with Section 262 of the Delaware General Corporation Law. Such
appraisal rights, if the statutory procedures are complied with, would result in
a judicial determination of the "fair value" of the Shares (excluding any
element of value arising from the accomplishment or expectation of the Merger)
owned by such holders. In addition, such dissenting stockholders may be entitled
to receive payment of a fair rate of interest from the date of consummation of
the Merger on the amount determined to be the fair value of their Shares. Any
such judicial determination of the fair value of the Shares could be based upon
considerations other than or in addition to the price paid in the Offer and the
Merger and the market value of the Shares, including asset values, the
investment value of the Shares and any other valuation considerations generally
accepted in the investment community. The value so determined for Shares could
be more or less than the value of the consideration per Share to be paid
pursuant to the Offer or the Merger and payment of such consideration would take
place subsequent to payment pursuant to the Offer.
In addition, several decisions by the Delaware courts have held that a
controlling stockholder of a corporation involved in a merger has a fiduciary
duty to the other stockholders which requires that the merger be fair to such
other stockholders. In determining whether a merger is fair to minority
stockholders, the Delaware courts have considered, among other things, the type
and amount of consideration to be received by the stockholders and whether there
was fair dealing among the parties. In Weinberger v. UOP, Inc., the Delaware
Supreme Court stated, among other things, that although the remedy ordinarily
available in a merger that is found not to be "fair" to minority stockholders is
the right to appraisal described above, such appraisal remedy may not be
adequate "in certain cases, particularly where fraud, misrepresentation, self-
dealing, deliberate waste of corporate assets, or gross and palpable
overreaching are involved," and that in such cases the Delaware Chancery Court
would be free to fashion any form of appropriate relief.
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If the Purchaser purchases Shares pursuant to the Offer, and the Merger or
another merger or other business combination is consummated more than one year
after the completion of the Offer, or if such a merger or other business
combination were to provide for the payment of consideration less than that paid
pursuant to the Offer, compliance by the Purchaser with Rule 13e-3 under the
Exchange Act would be required, unless the Shares were to be deregistered under
the Exchange Act prior to such transaction. See Section 12. Rule 13e-3 would
require, among other things, that certain financial information concerning the
Company and certain information relating to the fairness of the proposed
transaction and the consideration offered to minority stockholders therein be
filed with the SEC and disclosed to minority stockholders prior to consummation
of the transaction.
Representations and Warranties. The Merger Agreement contains
representations and warranties by the Company, relating to, among other things,
(i) the organization of the Company and its subsidiaries and other corporate
matters, (ii) the capital structure of the Company, (iii) the authorization,
execution, delivery and consummation of the transactions contemplated by the
Merger Agreement, (iv) consents and approvals, (v) documents filed by the
Company with the SEC and the accuracy of the information contained therein, (vi)
the absence of certain changes and events, (vii) the accuracy of the information
contained in documents filed with the SEC in connection with the Offer and the
Merger, (viii) litigation, (ix) tax, insurance, and labor matters, and (x)
matters relating to Title IV of the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder. In
addition, the Merger Agreement contains representations and warranties by
Monterey and the Purchaser related to, among other things, (i) the organization
of Monterey and the Purchaser and other corporate matters, (ii) the
authorization, execution, delivery and consummation of the transactions
contemplated by the Merger Agreement, including, without limitation, each of the
Offer and the Merger (the "Transactions"), (iii) consents and approvals, (iv)
the existence of written commitments with respect to financing the Transactions,
and (v) the accuracy of the information contained in documents filed with the
SEC in connection with the Offer and the Merger.
Agreements with Respect to the Conduct of Business Pending the Merger. The
Merger Agreement provides that, between the date of the Merger Agreement and the
election or appointment of the Purchaser's designees to the Board of Directors
upon the purchase by the Purchaser of any Shares pursuant to the Offer (the
"Purchaser's Election Date"), unless Monterey shall otherwise agree in writing,
the businesses of the Company and its subsidiaries shall be conducted only in,
and the Company and its subsidiaries shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice; and
the Company shall use its reasonable best efforts to preserve substantially
intact the business organization of the Company and its subsidiaries, to keep
available the services of the current officers, employees and consultants of the
Company and its subsidiaries and to preserve the goodwill of those current
relationships of the Company and its subsidiaries with customers, suppliers and
other persons with which the Company or any subsidiary has significant business
relations. By way of amplification and not limitation, except as contemplated by
the Merger Agreement, the Company will not, between the date of the Merger
Agreement and the Purchaser's Election Date, directly or indirectly do, or
propose to do, any of the following without the prior written consent of
Monterey:
(a) amend or otherwise change the certificate of incorporation or
bylaws or equivalent organizational documents of the Company or its
subsidiaries;
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, (i) any
shares of capital stock of any class of the Company or any subsidiary, or
any options, warrants, convertible securities or other rights of any kind
to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the
Company or any subsidiary (except for the issuance of Shares issuable
pursuant to Options outstanding on the date of the Merger Agreement) or
(ii) any assets of the Company or any subsidiary, except for sales of
products in the ordinary course of business and in a manner consistent with
past practice;
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(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock (except for such declarations, set asides,
dividends and other distributions made from any subsidiary to the Company);
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation,
partnership, other business organization or any division thereof or any
material amount of assets other than in the ordinary course of business;
(ii) incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans or
advances or capital contribution to, or investments in, any other person
(other than such of the foregoing as are made by the Company to or in a
wholly-owned subsidiary of the Company), except in the ordinary course of
business and consistent with past practice; or (iii) enter into or amend
any contract, agreement, commitment or arrangement with respect to any
matter referred to in this paragraph;
(f) increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past
practices in salaries or wages of employees of the Company or any
subsidiary who are not officers of the Company or any subsidiary, or grant
any severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer or other employee of the
Company or any subsidiary, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, officer or employee;
(g) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(h) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of liabilities reflected or
reserved against in the Company's December 31, 1996 balance sheet or
subsequently incurred in the ordinary course of business and consistent
with past practice;
(i) settle or compromise any pending or threatened suit, action or
claim which is material or which relates to any of the Transactions;
(j) undertake any capital commitment not reflected in the Company's
budget in an individual amount greater than $100,000 or, when aggregated
with all other capital commitment not reflected in the Company's budget, in
an aggregate amount greater than $1,000,000; or
(k) take or offer or propose to take, or agree to take in writing, or
otherwise, any of the actions described in paragraphs (a) through (j) above
or any action which would result in any of the conditions to the Offer not
being satisfied (other than as contemplated by the Merger Agreement).
No Solicitation. The Merger Agreement provides that until the Merger
Agreement has been terminated in accordance with its terms, neither the Company
nor any subsidiary shall, directly or indirectly, through any officer, director
or agent or any investment banker, financial advisor, attorney, accountant or
other representative retained by the Company or any subsidiary or otherwise,
solicit, initiate or encourage, or take any other action to facilitate any
inquiries regarding the submission of any proposal or offer from any person
relating to any acquisition or purchase of all or (other than in the ordinary
course of business) any substantial portion of the assets of, or any equity
interest in, the Company or any business combination with the Company
(including, without limitation, any take-over bid or tender offer or exchange
offer, merger, consolidation, or similar transaction involving the Company or
any of its subsidiaries (other than the transactions contemplated by the Merger
Agreement) (any of such transactions being an "Acquisition Transaction") or any
business combination with the Company or, except to the extent required by
fiduciary obligations under applicable law
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as advised by independent counsel, participate in any negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other person to do or seek any of the foregoing;
provided, however, that nothing referred to herein shall prohibit the Board of
Directors of the Company from furnishing information to, or entering into
discussions or negotiations with, any person in connection with an unsolicited
(from the date of the Merger Agreement) proposal in writing by such person to
acquire the Company pursuant to a merger, consolidation, share exchange,
business combination or other similar transaction or to acquire all or
substantially all of the assets of the Company or any of its subsidiaries, if,
and only to the extent that, (i) the Board of Directors of the Company, after
consultation with independent counsel (which may include its regularly engaged
independent counsel), determines in good faith that such action is required for
the Board of Directors to act in a manner that is consistent with its fiduciary
duties to stockholders imposed by Delaware Law (such determination having been
made by the full Board and not having been delegated to any committee thereof)
and (ii) prior to furnishing such information to, or entering into discussions
or negotiations with, such person the Company obtains from such person an
executed confidentiality agreement on terms no less favorable to the Company
than those contained in the confidentiality agreement entered into between the
Company and Monterey on April 29, 1997. The Company immediately shall cease and
cause to be terminated all existing discussions or negotiations with any parties
conducted prior to, or on the date of the execution of the Merger Agreement with
respect to any of the foregoing. The Company is required to notify Monterey
promptly if any such proposal or offer, or any inquiry or contact with any
person with respect thereto, is made after the execution of the Merger
Agreement. The Company agrees not to release any third party from, or waive any
provision of, any confidentiality or, subject to the fiduciary duties of its
Board of Directors, standstill agreement to which the Company is or may become a
party.
Indemnification of Directors.
(a) The Purchaser and Monterey agreed in the Merger Agreement that the
certificate of incorporation of the Surviving Corporation and each of its
subsidiaries will contain provisions no less favorable with respect to
limitation of liability than are set forth in Article VII of the Restated
Certificate and Article V of the By-Laws of the Company as of the date of the
Merger Agreement, which provisions will not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would affect adversely the rights thereunder of individuals who at any time from
and after the date of the Merger Agreement and to and including the Effective
Time were directors, officers, employees, fiduciaries or agents of the Company
or any of its subsidiaries in respect of actions or omissions occurring at or
prior to the Effective time (including, without limitation, the matters
contemplated by the Merger Agreement), unless such modification is required by
law. From and after the Purchaser's Election Date, the Company has agreed not to
amend, repeal or otherwise modify the limitation or advancement of expenses
provisions in the Restated Certificate of any of the Company's subsidiaries in
any manner that would adversely affect the rights thereunder of individuals who
at any time from and after the date of the Merger Agreement and to and including
the Effective Time were directors, officers, employees, fiduciaries or agents of
the Company or any of its subsidiaries in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
matters contemplated by the Merger Agreement), unless such modification is
required by law.
(b) Pursuant to the Merger Agreement, Monterey has agreed for a period of
six years after the Effective Time, to cause the Surviving Corporation to
indemnify, defend and hold harmless the present and former officers, directors,
employees and agents of the Company and its subsidiaries (an "Indemnified
Party") against all costs and expenses (including attorneys' fees), judgments,
fines, losses, claims, damages or liabilities and settlement amounts paid in
connection with any threatened or actual claim, action, suit, proceeding or
investigation (whether arising or asserted or claimed before, on or after the
Effective Time) ("Claim") to the full extent provided under Delaware law, the
Certificate of Incorporation and By-Laws of the Company in effect at the date of
the Merger Agreement (and shall pay any expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
fullest extent permitted under Delaware Law, upon receipt from the Indemnified
Party to whom expenses are advanced of any undertaking to repay such advances
required under Delaware Law). In the event of any such claim, action, suit,
proceeding or investigation, (i) the Indemnified Parties may retain counsel
(including local counsel)
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satisfactory to them and the Company or the Surviving Corporation, as the case
may be, shall pay the reasonable fees and expenses of such counsel, promptly
after statements therefor are received and (ii) the Company and the Surviving
Corporation shall use all reasonable efforts in the vigorous defense of any such
matter; provided, however, that neither the Company nor the Surviving
Corporation shall be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld); and provided further
that neither the Company nor the Surviving Corporation shall be obligated
pursuant to the provision referred to herein to pay the fees and expenses of
more than one counsel (plus appropriate local counsel) for all Indemnified
Parties in any single action unless there is, as determined by counsel to the
Indemnified Parties, under applicable standards of professional conduct, a
conflict or a reasonable likelihood of a conflict on any significant issue
between the positions of any two or more Indemnified Parties, in which case such
additional counsel (including local counsel) as may be required to avoid any
such conflict or likely conflict may be retained by the Indemnified Parties at
the expense of the Company or the Surviving Corporation; and provided further
that, in the event that any claim for indemnification is asserted or made within
such six-year period, all rights to indemnification in respect of such claim
shall continue until the disposition of such claim.
(c) The Company has agreed that it will, from and after the date of the
Merger Agreement and to and including the Effective Time, and the Surviving
Corporation shall, for six years from the Effective Time, maintain in effect the
current directors' and officers' liability insurance policies maintained by the
Company (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous to such officers and directors so long
as substitution does not result in gaps or lapses in coverage) with respect to
matters occurring prior to the Effective Time.
(d) Except as otherwise provided in the Merger Agreement and only to the
extent permitted by applicable law and public policy, the Surviving Corporation,
Monterey and the Purchaser have agreed to release and discharge each Indemnified
Party from, and covenant not to sue any Indemnified Party with regard to, any
Claim, whether civil, criminal, administrative or investigative, arising out of
or pertaining to any action or omission in their capacity as an officer,
director, employee, fiduciary or agent (including, without limitation, any Claim
arising out of the Merger Agreement or any of the transactions contemplated
thereby or the operations of the Company or the condition of the assets of the
Company). Such release and covenant not to sue include Claims resulting in any
way from the negligence or strict liability of any Indemnified Party, whether
the negligence or strict liability is active, passive, joint, concurrent, or
sole.
(e) In the event the Company or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, the Merger
Agreement provides that proper provision shall be made so that the successors
and assigns of the Company or the Surviving Corporation, as the case may be, or
at Monterey's option, Monterey will assume the obligations referred to in this
paragraph.
(f) Pursuant to the Merger Agreement, the By-laws of the Surviving
Corporation and each of its subsidiaries will contain the provisions with
respect to indemnification, defense and advancement of expenses set forth in the
By-laws of the Company on the date of the Merger Agreement, and such provisions
will not be amended, repealed or otherwise modified for a period of six years
after the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who at any time from and after the date of the Merger
Agreement and to and including the Effective Time were directors, officers,
employees, fiduciaries or agents of the Company or any of its subsidiaries in
respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by the Merger
Agreement), unless such modification is required by law or is desired to conform
such provisions with comparable provisions in the By-laws of Monterey, which
By-law provisions shall be at least as favorable to such individuals as the
provisions contained in the By-laws of Monterey on the date of the Merger
Agreement. From and after the Purchaser's Election Date, the Company will not
amend, repeal or otherwise modify the indemnification, defense and advancement
of expenses provisions of the By-laws of the Company or the indemnification,
defense and advancement of expenses provisions in the By-laws of any of the
Company's
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subsidiaries in any manner that would adversely affect the rights thereunder of
individuals who at any time from and after the date of the Merger Agreement and
to and including the Effective Time were directors, officers, employees,
fiduciaries or agents of the Company or any of its subsidiaries in respect of
actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the matters contemplated by the Merger Agreement), unless
such modification is required by law or is desired to conform such provisions
with comparable provisions in the By-laws of Monterey, which By-law provisions
shall be at least as favorable to such individuals as the provisions contained
in the By-laws of Monterey on the date of the Merger Agreement.
(g) The obligations of the Company or the Surviving Corporation referred to
in the Merger Agreement will not be terminated or modified in such a manner as
to adversely affect any director, officer, employee, fiduciary and agent to whom
the foregoing provisions apply without the consent of each elected director,
officer, employee, fiduciary and agent (it being expressly agreed that the
directors, officers, employees, fiduciaries and agents to whom the foregoing
provisions apply shall be third-party beneficiaries of such provisions).
(h) In the event that the Company or the Surviving Corporation should fail,
at any time from and after the Purchaser's Election Date, to comply with any of
the foregoing obligations referred to in the Merger Agreement, for any reason,
Monterey will be responsible therefor and will perform such obligations
unconditionally without regard to any defense or other basis for nonperformance
which the Company or the Surviving Corporation may have or claim (except as
would be prohibited by applicable Delaware Law), it being the intention of the
parties to the Merger Agreement that the officers, directors, employees,
fiduciaries and agents of the Company and its subsidiaries shall be fully
indemnified and that the provisions of the Merger Agreement referred to above be
a primary obligation of Monterey and not merely a guarantee by Monterey of the
obligations of the Company or the Purchaser.
Monterey's Undertaking. Pursuant to the Merger Agreement, Monterey agreed
to take all action necessary to cause the Purchaser to perform all of the
Purchaser's, and the Surviving Corporation to perform all of the Surviving
Corporation's, agreements, covenants, and obligations under the Merger Agreement
and to consummate the Offer and the Merger on the terms set forth in the Merger
Agreement. The Merger Agreement further provides that Monterey would be liable
for any breach of any representation, warranty, covenant or agreement of the
Purchaser and for any breach of the covenant referred to in the preceding
sentence.
Termination. The Merger Agreement may be terminated and the Merger and the
other Transactions may be abandoned at any time prior to the Effective Time,
notwithstanding any requisite approval and adoption of the Merger Agreement and
the Transactions by the stockholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Monterey, the Purchaser and the Company prior to the
Purchaser's Election Date; or
(b) by Monterey, the Purchaser or the Company if (i) the Effective
Time shall not have occurred on or before September 30, 1997; provided,
however, that the right to terminate the Merger Agreement will not be
available to any party whose failure to fulfill any obligation under the
Merger Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date or (ii) any court of
competent jurisdiction in the United States or other governmental authority
shall have issued an order, decree, ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final or nonappealable; or
(c) by Monterey if (i) due to an occurrence or circumstance that
results in a failure to satisfy any condition set forth in Section 14
hereof, the Purchaser shall have (A) failed to commence the Offer within 10
days following the date of the Merger Agreement, (B) terminated the Offer
without having accepted any Shares for payment thereunder or (C) failed to
pay for Shares pursuant to the Offer within 90 days following the
commencement of the Offer, unless any such failure listed above shall have
been caused by or resulted from the failure of Monterey or the Purchaser to
perform in any material respect any material covenant or agreement of
either of them contained in the Merger Agreement or the material
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breach by Monterey or the Purchaser of any material representation or
warranty of either of them contained in the Merger Agreement or (ii) prior
to the purchase of Shares pursuant to the Offer, the Board of Directors or
any committee thereof (A) shall have withdrawn or modified in a manner
adverse to the Purchaser or Monterey its approval or recommendation of the
Offer, the Merger Agreement, the Merger or any other Transaction or (B)
shall have recommended another Acquisition Transaction with a third party.
(d) By the Company, upon approval of the Board of Directors, if (i)
the Purchaser shall have (A) failed to commence the Offer within 10 days
following the date of the Merger Agreement, (B) terminated the Offer
without having accepted any Shares for payment thereunder or (C) failed to
pay for Shares pursuant to the Offer within 90 days following the
commencement of the Offer, unless such failure to pay for Shares shall have
been caused by or resulted from the failure of the Company to satisfy the
conditions set forth in paragraphs (f) or (g) of Section 14 hereof or (ii)
prior to the purchase of Shares pursuant to the Offer, the Board, after
consultation with independent counsel, shall have withdrawn or modified in
a manner adverse to the Purchaser or Monterey its approval or
recommendation of the Offer, the Merger Agreement or the Merger as a result
of a proposal by a third party for an Acquisition Transaction.
Except as specified below, all costs and expenses incurred in connection
with the Merger Agreement and the Transactions will be paid by the party
incurring such expenses, regardless of whether any Transaction is consummated.
To compensate Monterey for entering into the Merger Agreement, taking actions to
consummate the Transactions and incurring the costs and expenses related thereto
and other losses and expenses, including the foregoing, the pursuit of other
opportunities by Monterey, the Company and Monterey agreed to the following:
(i) Provided that neither Monterey nor the Purchaser shall be in
material breach of its obligations under the Merger Agreement (which breach
has not been cured promptly following receipt by Monterey or the Purchaser,
as the case may be, of written notice thereof by the Company specifying in
reasonable detail the basis of such alleged breach), the Company has agreed
to pay to Monterey the sum of $2,780,000 (the "Termination Fee") if (i) the
Merger Agreement is terminated either (A) by the Company under the
provisions referred to in clause (d)(ii) above or (B) by Monterey or the
Purchaser under the provisions (c)(ii) above.
(ii) Any payment required by paragraph (i) above shall become payable
upon termination of the Merger Agreement in the manner provided in such
paragraph.
(iii) The Company has acknowledged that the agreements above regarding
the Termination Fee are an integral part of the transactions contemplated
in the Merger Agreement, and that, without these agreements, Monterey would
not enter into the Merger Agreement; accordingly, if the Company fails to
promptly pay the Termination Fee when due, the Company will in addition
thereto pay to Monterey all costs and expenses (including fees and
disbursements of counsel) incurred in collecting such Termination Fee, as
the case may be, together with interest on the amount of the Termination
Fee (or any unpaid portion thereof) from the date such payment was required
to be made until the date such payment is received by Monterey at the prime
rate of The Chase Manhattan Bank, N.A., as in effect from time to time
during such period.
Stockholders Agreement. On June 16, 1997, Monterey and the Purchaser
executed a stockholders agreement (the "Stockholders Agreement"), with the
McFarland Family Trust (which owns 527,696 Shares), Mr. J. C. McFarland and his
wife Carolyn J. McFarland (who together own 75,295 Shares and have rights to
140,500 Shares issuable upon exercise of options) and William Carl, a director
of the Company (who owns 116,362 Shares and has rights to 5,000 Shares issuable
upon exercise of options). Pursuant to the Stockholders Agreement, each of the
McFarland Family Trust, Mr. and Mrs. McFarland and Mr. Carl severally agreed to
tender all Shares owned by such stockholder into the Offer prior to the
expiration of the Offer and not to withdraw any Shares so tendered. In addition,
each of the McFarland Family Trust, Mr. and Mrs. McFarland and Mr. Carl
severally agreed to sell to the Purchaser, and the Purchaser agreed to purchase
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all Shares held by such person at a price per Share equal to $18.55 or such
higher price per Share as may be offered by the Purchaser in the Offer, provided
that such obligations to purchase and sell are both subject to (i) the Purchaser
having accepted Shares for payment under the Offer and the Minimum Condition
(minus any Shares which are the subject of the Stockholders Agreement but are
not purchased in the Offer) having been satisfied, and (ii) the expiration or
termination of any applicable waiting period under the HSR Act.
Consulting Agreement. Monterey has asked Mr. McFarland, the Chairman and
Chief Executive Officer of the Company, to become a consultant to Monterey and
to serve as a director of Monterey. Among other things, Mr. McFarland would be
paid his current annual base salary, agree not to compete with Monterey for a
specified period of time and be expected to spend up to one-half of his
professional time working for Monterey.
Short Form Merger. Under Delaware Law, if the Purchaser acquires at least
90% of the outstanding Shares, the Purchaser will be able to approve the merger
without a vote of the Company's stockholders. In such event, the Purchaser
anticipates that it will take all necessary and appropriate action to cause the
Merger to become effective as soon as reasonably practicable after such
acquisition without a meeting of the Company's stockholders. If the conditions
to the Purchaser's obligation to purchase Shares in the Offer are satisfied
prior to the tender of 90% of the outstanding Shares being tendered in the
Offer, the Purchaser may, subject to certain limitations set forth in the Merger
Agreement, delay its purchase of the Shares tendered to it in the Offer. See
Section 1. If the Purchaser does not acquire at least 90% of the outstanding
Shares pursuant to the Offer or otherwise, a significantly longer period of time
may be required to effect the Merger, because a vote of the Company's
stockholders would be required under Delaware Law. Pursuant to the Merger
Agreement, the Company has agreed to take all action necessary under Delaware
Law and its Certificate and Bylaws to convene a meeting of its stockholders
promptly following consummation of the Offer to consider an vote on the Merger,
if a stockholders' vote is required. If the Purchaser owns a majority of the
outstanding Shares, approval of the Merger may be obtained without the
affirmative vote of any other stockholder of the Company.
State Takeover Statutes. The Merger Agreement provides that the Company
will use its reasonable best efforts to (a) exempt the Company, the Offer and
the Merger from the requirements of any state takeover law by action of the
Company's Board of Directors or otherwise and (b) assist in any challenge by the
Purchaser to the validity or applicability to the Offer or the Merger of any
state takeover law. See Section 5.
SECTION 12. EFFECT OF THE OFFER ON THE MARKET FOR SHARES; NASDAQ LISTING;
REGISTRATION UNDER THE EXCHANGE ACT.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and the number of holders of Shares,
which could adversely affect the liquidity and market value of the remaining
shares held by stockholders other than the Purchaser.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the NASD for continued inclusion
on Nasdaq, which requirements include that an issuer have at least (i) 100,000
publicly held shares having a market value of at least $200,000, (ii) 300
stockholders, (iii) capital and surplus of at least $1 million and (iv) total
assets of at least $2 million. If the Shares ceased to be traded on Nasdaq, it
is possible that the Shares would continue to trade in the over-the-counter
market and that price or other quotations would be reported by other sources.
The extent of the public market for Shares and the availability of such
quotations would depend, however, upon such factors as the number of
stockholders and/or the aggregate market value of such Shares remaining at such
time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration under the Exchange
Act as described below and other factors. The Purchaser cannot predict whether
the reduction in the number of shares that might otherwise trade publicly would
have an adverse or beneficial effect on the market price for, or marketability
of, the Shares or whether it would cause future market prices to be greater or
lesser than the price offered pursuant the Offer.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of the Shares. Depending upon factors similar to those
described
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above regarding listing and market quotations, following the Offer it is
possible that the Shares would no longer constitute "margin securities" for the
purposes of the margin regulations of the Federal Reserve Board and therefore
could no longer be used as collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application by the
Company to the SEC if the Shares are not listed on a national securities
exchange and there are fewer than 300 record holders of the Shares. Termination
of registration of the Shares under the Exchange Act would reduce substantially
the information required to be furnished by the Company to its stockholders and
would make certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b), the requirement of furnishing a
proxy statement in connection with stockholders' meetings pursuant to Section
14(a) and the requirements of Rule 13e-3 under the Exchange Act with respect to
"going private" transactions no longer applicable to the Company. Furthermore,
if the Purchaser acquires a substantial number of Shares or the registration of
the Shares under the Exchange Act were to be terminated, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 under the Securities
Act may be impaired or eliminated. If registration of the Shares under the
Exchange Act were terminated prior to the consummation of the Merger, the Shares
would no longer be "margin securities" or be eligible for Nasdaq reporting. It
is the present intention of the Purchaser to seek to cause the Company to make
an application for termination of registration of the Shares as soon as possible
following the Offer if the requirements for termination of registration are met.
SECTION 13. DIVIDENDS AND DISTRIBUTIONS.
If, on or after June 16, 1997, the Company should, except as permitted
under the Merger Agreement, (i) split or combine the Shares, or otherwise change
the Shares or its capitalization, (ii) issue or sell any additional securities
of the Company (other than Shares issued or sold upon the exercise (in
accordance with the present terms thereof) of Company Options outstanding on
June 16, 1997), or (iii) acquire currently outstanding Shares or otherwise cause
a reduction in the number of outstanding Shares, then, without prejudice to the
Purchaser's rights under Sections 1 and 14, the Purchaser, in its sole
discretion (subject to the terms of the Merger Agreement), may make such
adjustments as it deems appropriate in the purchase price and other terms of the
Offer and the Merger including, without limitation, the amount and type of
securities offered to be purchased.
If, on or after June 16, 1997, the Company should, except as permitted
under the Merger Agreement, declare or pay any dividend on the Shares or make
any distribution (including, without limitation, the issuance of additional
Shares pursuant to a stock dividend or stock split, the issuance of other
securities or the issuance of rights for the purchase of any securities) with
respect to the Shares that is payable or distributable to stockholders of record
on a date prior to the transfer to the name of the Purchaser or its nominee or
transferee on the Company's stock transfer records of the Shares purchased
pursuant to the Offer, then, without prejudice to the Purchaser's rights under
Sections 1 and 14, (i) the purchase price per Share payable by the Purchaser
pursuant to the Offer will be reduced by the amount of any such cash dividend or
cash distribution and (ii) any such non-cash dividend, distribution or right to
be received by the tendering stockholders will be received and held by the
tendering stockholders for the account of the Purchaser and will be required to
be promptly remitted and transferred by each tendering stockholder to the Paying
Agent for the account of the Purchaser, accompanied by appropriate documentation
of transfer. Pending such remittance and subject to applicable law, the
Purchaser will be entitled to all rights and privileges as owner of any such
non-cash dividend, distribution or right and may withhold the entire purchase
price or deduct from the purchase price the amount or value thereof, as
determined by the Purchaser in its sole discretion.
SECTION 14. CONDITIONS TO THE OFFER.
Notwithstanding any other provision of the Offer, the Purchaser will not be
required to accept for payment or pay for any Shares tendered pursuant to the
Offer, and may terminate or amend the Offer and may postpone the acceptance for
payment of and payment for Shares tendered, if (i) the Minimum Condition shall
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not have been satisfied or (ii) at any time on or after the date of the Merger
Agreement, and prior to the acceptance for payment of Shares, any of the
following conditions shall exist:
(a) there shall have been issued and remain in effect any temporary
restraining order, preliminary or final injunction, order or decree by any
court or governmental, administrative or regulatory authority or agency,
domestic or foreign, resulting from any action or proceeding brought by any
person which (i) restrains or prohibits the making of the Offer or the
consummation of any other Transaction, (ii) prohibits or limits ownership
or operation by the Company, Monterey or the Purchaser of all or any
material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, Monterey or any of their subsidiaries, or
compels the Company, Monterey or any of their subsidiaries to dispose of or
hold separate all or any material portion of the business or assets of the
Company, Monterey or any of their subsidiaries or imposes any material
limitation on the ability of Monterey or the Purchaser to conduct such
business or own such assets, in each case as a result of the Transactions;
(iii) imposes material limitations on the ability of Monterey or the
Purchaser to exercise effectively full rights of ownership of any Shares,
including, without limitation, the right to vote any Shares acquired by the
Purchaser pursuant to the Offer, or otherwise on all matters properly
presented to the Company's stockholders, including, without limitation, the
approval and adoption of the Merger Agreement and the Transactions; (iv)
requires divestiture by Monterey or the Purchaser of any Shares;
(b) there shall have been any action taken, or any statute, rule,
regulation, order or injunction enacted, entered, enforced, promulgated,
amended, issued or deemed applicable to (i) Monterey, the Company or any
subsidiary or affiliate of Monterey or the Company or (ii) any Transaction,
by any legislative body, court, government or governmental, administrative
or regulatory authority or agency, domestic or foreign, in the case of both
(i) and (ii);
(c) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, trading in
securities on the NYSE or on the over-the-counter market, (ii) a
declaration of a banking moratorium or any limitation or suspension of
payments in respect of banks in the United States, (iii) any limitation
(whether or not mandatory) by any U.S. federal or state government, or
governmental, administrative or regulatory authority or agency on the
extension of credit by banks or other lending institutions, (iv) a
commencement of war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, or (v) in the
case of any of the foregoing existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof, or
(d) any representation and warranty of the Company in the Merger
Agreement shall not be true and correct and the failure to be true and
correct has a material adverse effect and such failure shall not have been
cured (provided five days' written notice of such failure has been provided
by the Purchaser to the Company) (if a representation and warranty of the
Company shall, by its terms, only be not true and correct if the
consequences thereof constitute a material adverse effect, then the failure
of such representation and warranty to be true and correct shall be deemed
to have a material adverse effect within the meaning of this paragraph
(d)); or
(e) (i) the Board of Directors shall have withdrawn or modified in a
manner adverse to Monterey or the Purchaser the approval or recommendation
of the Offer, the Merger or the Merger Agreement or approved or recommended
any takeover proposal or any other acquisition of Shares other than the
Offer and the Merger or (ii) the Board shall have resolved to do any of the
foregoing;
(f) (i) the Company shall have failed to perform in any material
respect any material obligation or to comply in any material respect with
any material agreement or covenant of the Company to be performed or
complied with by it under the Merger Agreement and shall not have cured
such default (provided five days' written notice of such failure has been
provided by the Purchaser to the Company);
(g) the Merger Agreement shall have been terminated in accordance with
its terms; or
(h) the Purchaser and the Company shall have agreed that the Purchaser
shall terminate the Offer or postpone the acceptance for payment of or
payment for Shares thereunder.
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The foregoing conditions are for the sole benefit of Monterey and the
Purchaser and may be asserted by Monterey or the Purchaser regardless of the
circumstances giving rise to any such condition or may be waived by Monterey or
the Purchaser in whole or in part at any time and from time to time in their
sole discretion. The failure by Monterey or the Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
SECTION 15. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS.
Except as set forth in this Offer to Purchase, based on a review of
publicly available filings by the Company with the SEC and other publicly
available information regarding the Company, neither Monterey nor the Purchaser
is aware of any licenses or regulatory permits that appear to be material to the
business of the Company and its subsidiaries, taken as a whole, and that might
be adversely affected by the Purchaser's acquisition of Shares (and the indirect
acquisition of the stock of the Company's subsidiaries) as contemplated herein,
or any approvals or other actions by or with any domestic, foreign or
supranational governmental authority or administrative or regulatory agency that
would be required for the acquisition or ownership of the Shares (or the
indirect acquisition of the stock of the Company's subsidiaries) by the
Purchaser pursuant to the Offer as contemplated herein. Should any such approval
or other action be required, it is presently contemplated that such approval or
action would be sought except as described below under "State Takeover Laws."
Should any such approval or other action be required, there can be no assurance
that any such approval or action, if needed, would be obtained without
substantial conditions or that adverse consequences might not result to the
Company's or its subsidiaries' businesses, or that certain parts of the
Company's, Monterey's, the Purchaser's or any of their respective subsidiaries'
businesses might not have to be disposed of or held separate or other
substantial conditions complied with in order to obtain such approval or action
or in the event that such approvals were not obtained or such actions were not
taken. The Purchaser's obligation to purchase and pay for Shares is subject to
certain conditions, including conditions with respect to injunctions and
governmental actions. See the Introduction and Section 14 for a description
thereof.
State Takeover Laws. A number of states (including Delaware, where the
Company is incorporated) have adopted takeover laws and regulations which
purport, to varying degrees, to be applicable to attempts to acquire securities
of corporations which are incorporated in such states or which have substantial
assets, stockholders, principal executive offices or principal places of
business therein. To the extent that certain provisions of certain of these
state takeover statutes purport to apply to the Offer or the Merger, the
Purchaser believes that such laws conflict with federal law and constitute an
unconstitutional burden on interstate commerce. In 1982, the Supreme Court of
the United States, in Edgar v. Mite Corp., invalidated on constitutional grounds
the Illinois Business Takeover Statute which, as a matter of state securities
law, made takeovers of corporations meeting certain requirements more difficult,
and the reasoning in such decision is likely to apply to certain other state
takeover statutes. In 1987, however, in CTS Corp. v. Dynamics Corp. of America,
the Supreme Court of the United States held that the State of Indiana could, as
a matter of corporate law and, in particular, those aspects of corporate law
concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without the prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions. Subsequently, in TLX Acquisition Corp. v. Telex
Corp., a federal district court in Oklahoma ruled that the Oklahoma statutes
were unconstitutional insofar as they apply to corporations incorporated outside
Oklahoma in that they would subject such corporations to inconsistent
regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a federal district
court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee. This
decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a federal district court in Florida held in Grand
Metropolitan PLC v. Butterworth that the provisions of the Florida Affiliated
Transactions Act and Florida Control Share Acquisition Act were unconstitutional
as applied to corporations incorporated outside of Florida.
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The Purchaser has not attempted to comply with any state takeover statutes
in connection with the Offer or the Merger. The Purchaser reserves the right to
challenge the validity or applicability of any state law allegedly applicable to
the Offer or the Merger and nothing in this Offer to Purchase nor any action
taken in connection herewith is intended as a waiver of that right. In the event
that it is asserted that one or more takeover statutes apply to the Offer or the
Merger, and it is not determined by an appropriate court that such statute or
statutes do not apply or are invalid as applied to the Offer or the Merger, as
applicable, the Purchaser may be required to file certain documents with, or
receive approvals from, the relevant state authorities, and the Purchaser might
be unable to accept for payment or purchase Shares tendered pursuant to the
Offer or be delayed in continuing or consummating the Offer. In such case, the
Purchaser may not be obligated to accept for purchase, or pay for, any Shares
tendered. See Section 14.
Antitrust. The Purchaser does not believe that the Offer and Merger are
subject to the notification or waiting period requirements of the HSR Act, which
provides that certain acquisition transactions may not be consummated unless
certain information has been furnished to the Antitrust Division of the
Department of Justice (the "Antitrust Division") and the Federal Trade
Commission ("FTC") and certain waiting period requirements have been satisfied.
If the acquisition of Shares is delayed pursuant to a request by the FTC or
the Antitrust Division for information or documentary material pursuant to the
HSR Act, the Offer may, at the discretion of the Purchaser (subject to the terms
and conditions of the Merger Agreement) be extended and, in any event the
purchase of and payment for Shares will be deferred until the applicable waiting
period expires or is terminated. Unless the Offer is extended, any extension of
the waiting period will not give rise to any additional withdrawal rights. See
Section 4.
In practice, complying with a request for information or documentary
material can take a significant amount of time. In addition, if the Antitrust
Division or the FTC raises substantive issues in connection with a proposed
transaction, the parties frequently engage in negotiations with the relevant
governmental agency concerning possible means of addressing those issues and may
agree to delay consummation of the transaction while such negotiations continue.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of Shares
pursuant to the Offer and the Merger. At any time before or after the
Purchaser's acquisition of Shares, the Antitrust Division or the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares pursuant
to the Offer or otherwise or seeking divestiture of Shares acquired by the
Purchaser or divestiture of substantial assets of Monterey or its subsidiaries.
Private parties and state attorneys general may also bring legal action under
the antitrust laws under certain circumstances. Based upon an examination of
publicly available information relating to the businesses in which Monterey and
the Company are engaged, Monterey and the Purchaser believe that the acquisition
of Shares by the Purchaser will not violate the antitrust laws. Nevertheless,
there can be no assurance that a challenge to the Offer or other acquisition of
Shares by the Purchaser on antitrust grounds will not be made or, if such a
challenge is made, of the result. See Section 14 for certain conditions to the
Offer, including conditions with respect to injunctions and certain governmental
actions.
25
<PAGE> 28
SECTION 16. FEES AND EXPENSES.
Corporate Investor Communications, Inc. has been retained by the Purchaser
as Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, telex, telegraph and personal
interview and may request brokers, dealers and other nominee stockholders to
forward material relating to the Offer to beneficial owners of Shares. The
Purchaser will pay the Information Agent reasonable and customary compensation
for all such services in addition to reimbursing the Information Agent for
reasonable out-of-pocket expenses in connection therewith.
In addition, First Chicago Trust Company of New York has been retained as
the Paying Agent. The Purchaser will pay the Paying Agent reasonable and
customary compensation for its services in connection with the Offer, will
reimburse the Paying Agent for its reasonable out-of-pocket expenses in
connection therewith.
Except as set forth above, neither Monterey nor the Purchaser will pay any
fees or commissions to any broker, dealer or other person for soliciting tenders
of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies and other nominees will, upon request, be reimbursed by Monterey or
the Purchaser for customary clerical and mailing expenses incurred by them in
forwarding offering materials to their customers.
SECTION 17. MISCELLANEOUS.
The Purchaser is not aware of any jurisdiction in which the making of the
Offer is not in compliance with applicable law. If the Purchaser becomes aware
of any jurisdiction in which the making of the Offer would not be in compliance
with applicable law, the Purchaser will make a good faith effort to comply with
any such law. If, after such good faith effort, the Purchaser cannot comply with
any such law, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Shares residing in such jurisdiction. In those
jurisdictions whose securities or blue sky laws require the Offer to be made by
a licensed broker or dealer, the Offer is being made on behalf of the Purchaser
by one or more registered brokers or dealers which are licensed under the laws
of such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Purchaser or Monterey not contained in this
Offer to Purchase or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been authorized.
The Purchaser has filed with the SEC the Schedule 14D-1 pursuant to Rule
14d-3 under the Exchange Act, furnishing certain additional information with
respect to the Offer, and may file amendments thereto. The Schedule 14D-1 and
any amendments thereto, including exhibits, may be inspected and copies may be
obtained at the same places and in the same manner as set forth in Section 7
(except that they will not be available at the regional offices of the SEC).
MONTEREY ACQUISITION CORPORATION
26
<PAGE> 29
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER,
MONTEREY AND SANTA FE
1. Directors and Executive Officers of the Purchaser.
The following table sets forth the name, current business address and
present principal occupation or employment and material occupations, positions,
offices or employments for the past five years of each director and executive
officer of the Purchaser. Unless otherwise indicated, the current business
address of each person is c/o 5201 Truxtun Avenue, Bakersfield, California
93309, and each occupation set forth opposite an individual's name refers to
employment with the Purchaser. Each such person is a citizen of the United
States, unless otherwise indicated.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND CURRENT BUSINESS ADDRESS;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND BUSINESS ADDRESSES THEREOF
---- ---------------------------------------------------------------------------------
<S> <C>
R. Graham Whaling....... Director; Chief Executive Officer; see "Directors and Executive Officers of
Monterey."
D.B. Kilpatrick......... President; see "Directors and Executive Officers of Monterey."
Gerald R. Carman........ Director; Vice President and Chief Financial Officer; see "Directors and
Executive Officers of Monterey."
Terry L. Anderson....... Director; Vice President and Secretary; see "Directors and Executive Officers of
Monterey."
</TABLE>
2. Directors and Executive Officers of Monterey.
The following table sets forth the name, business address and present
principal occupation or employment, and material occupations, positions, offices
or employments for the past five years of each director and executive officer of
Monterey. Unless otherwise indicated, the current business address of each such
person is c/o 5201 Truxtun Avenue, Bakersfield, California 93309, and each
occupation set forth opposite an individual's name refers to employment with
Monterey. Each such person is a citizen of the United States, unless otherwise
indicated.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND CURRENT BUSINESS ADDRESS;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND BUSINESS ADDRESSES THEREOF
---- ---------------------------------------------------------------------------------
<S> <C>
Hugh L. Boyt........... Director since 1996. Mr. Boyt has also acted as Senior Vice President --
Production of Santa Fe since March 1990.
Michael A. Morphy...... Director since 1996. Mr. Morphy was a director of Santa Fe from 1990 to 1996, is
the Retired Chairman and Chief Executive Officer of California Portland Cement
Company, and is also currently a director of Cyprus Amax Minerals Co. and Santa
Fe Pacific Pipelines, Inc.
Robert F. Vagt......... Director since 1996. Mr. Vagt was a director of Santa Fe from 1992 to 1996;
Chairman of the Board, President, Chief Executive Officer and director of Global
Natural Resources, Inc. (Oil and gas exploration and production) from May 1992 to
October 1996; President and Chief Executive Officer of Adobe Resources
Corporation (oil and gas exploration and production) from November 1990 to May
1992. Mr. Vagt is also currently a director of First Albany Corporation
(brokerage firm).
</TABLE>
I-1
<PAGE> 30
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND CURRENT BUSINESS ADDRESS;
MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND BUSINESS ADDRESSES
NAME THEREOF
- -------------------------------- --------------------------------------------------------------------------------
<S> <C>
1993.Robert J. Wasielewski...... Director since 1996. Mr. Wasielewski has been employed by GKH Partners, L.P.
("GKH") since October 1991. GKH is an investment partnership whose general
partners include entities controlled by Jay and Tom Pritzker, Dan W. Lufkin and
Melvyn N. Klein. From July 1996 to the present Mr. Wasielewski has held the
position of Managing Director of GKH. He was employed by Citicorp in the
Leveraged Capital Division from September 1987 to October 1991, serving as
assistant Vice President from December 1990 until joining GKH. Mr. Wasielewski
serves as a director and officer of various privately held affiliates of GKH.
GKH through an affiliate, HC Associates, a Delaware general partnership,
currently holds approximately 5.5% of Santa Fe's outstanding common stock.
James L. Payne.................. Director since 1996. Mr. Payne has been Chairman of the Board, President and
Chief Executive Officer of Santa Fe since 1990. He is also a director of Pool
Energy Services Co., an oil field services corporation.
R. Graham Whaling............... Director and Chief Executive Officer since 1996. Mr. Whaling was Senior Vice
President and Chief Financial Officer of Santa Fe from January 1995 to November
1996. Prior to that time, he was with CS First Boston, an investment banking
firm, as Vice President, Corporate Finance from 1991 to 1994 and Director,
Corporate Finance from 1994 to 1995. Prior to joining First Boston, Mr. Whaling
served as a petroleum engineer from Sun Oil Corporation and petroleum reservoir
consulting engineer from Ryder Scott.
David B. Kilpatrick............. President and Chief Operating Officer since November 1996. Mr. Kilpatrick was
Division Manager -- Production for Santa Fe's Western Division from January 1990
until November 1996.
Gerald R. Carman................ Vice President, Chief Financial Officer and Treasurer. Mr. Carman was Treasurer
of Santa Fe from January 1995 until December 1996. Prior to 1995, Mr. Carman was
Director of Corporate Planning and Manager of Tax Planning for Santa Fe.
Terry L. Anderson............... General Counsel and Secretary since November 1996. Mr. Anderson was
Manager -- Business Development of Santa Fe from December 1994 until November
1996. Prior to that time and beginning in 1988, Mr. Anderson was Senior Counsel
of Santa Fe.
C. Ed Hall...................... Vice President -- Public Affairs since November 1996. Mr. Hall was Vice
President Public Affairs of Santa Fe from March 1991 until November 1996.
Jeffrey B. Williams............. Vice President -- Development since November 1996. Mr. Williams was Corporate
Production Manager of Santa Fe from July 1996 until November 1996. Prior to that
time, Mr. Williams was employed by Santa Fe as Regional, Corporate or Division
Production Manager, a position he assumed in 1983.
Lou E. Shuflin.................. Director -- Administration since November 1996. Mr. Shuflin was
Manager -- Strategic Analysis of Santa Fe from September 1994 until November
1996. Mr. Shuflin also served as Santa Fe's Corporate Manager -- Production from
May 1993 to August 1993 and District Manager -- Production beginning in 1987.
</TABLE>
I-2
<PAGE> 31
3. Directors and Executive Officers of Santa Fe.
The following table sets forth the name, business address and present
principal occupation or employment, and material occupations, positions, offices
or employments for the past five years of each director and executive officer of
Santa Fe. Unless otherwise indicated, the current business address of each such
person is c/o 1616 South Voss, Houston, Texas 77057, and each occupation set
forth opposite an individual's name refers to employment with Santa Fe. Each
such person is a citizen of the United States, unless otherwise indicated.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND CURRENT BUSINESS ADDRESS;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND BUSINESS ADDRESSES THEREOF
---- ---------------------------------------------------------------------------------
<S> <C>
Marc J. Shapiro........ Director since 1990; Chairman and Chief Executive Officer of Texas Commerce Bank
National Association (banking) since 1987, and a member of the Policy council of
Chase Manhattan Corporation (successor to the Management Committee of Chemical
Banking Corporation) since December 1991. Mr. Shapiro is also a director of
Browning-Ferris Industries, Burlington Northern Santa Fe Corporation and a
trustee of Wingarten Realty Investors.
William E. Greehey..... Director since 1991; Chairman of the Board, Chief Executive Officer and director
of Valero Energy Corporation (refining and marketing, gas transmission and
processing) since 1983. Greehey is also a director of Weatherford-Enterra.
Melvyn N. Klein........ Director since 1993; Attorney and Counsel at Law; private investor; the sole
stockholder of a general partner in GKH Partners, L.P., Mr. Klein is also a
principal of Questor Management Company, and director of Anixter International
and Bayou Steel Corporation (specialty steel manufacturer).
James L. Payne......... Director since 1986; Chairman of the Board, President and Chief Executive Officer
of Santa Fe since June 1990. Mr. Payne was President of Santa Fe Energy Company,
a predecessor in interest of Santa Fe from January 1986 to January 1990 when he
became President of Santa Fe. Mr. Payne is also a director of Pool Services Co.
(oilfield services), and Monterey.
Allan V. Martini....... Director since 1990; Retired Vice President Exploration/Production and director
of Chevron Corporation (petroleum operations) since August 1988. Mr. Martini
served in that position from July 1986 until his retirement.
Reuben F. Richards..... Director since 1992; Chairman of the Board, Terra Industries Inc. (agribusiness)
from December 1982 until retirement in March 1996. Chief Executive Officer
thereof from December 1982 to May 1991 and President thereof from July 1983 to
May 1991; Chairman of the Board, Engelhard Corporation (specialty chemicals,
engineered materials and precious metals management services) from May 1985 to
December 1994 and director thereof since prior to 1990; Director, Minorco
(U.S.A.) Inc., Chairman of the Board from May 1990 to March 1996 and Chief
Executive Officer and President from February 1994 to March 1996. Mr. Richards is
also a director of Ecolab, Inc. (cleaning and sanitizing products), Engelhard
Corporation, Potlatch Corporation (forest product), and Minorco.
Kathryn D. Wriston..... Director since 1990; Director of various corporations and organizations for the
past five years, including Northwestern Mutual Life Insurance Company and the
Stanley Works and a trustee of the Financial Accounting Foundation.
Hugh L. Boyt........... Senior Vice President -- Production since March 1, 1990. From 1989 until March
1990, Mr. Boyt served as Corporate Production Manager.
</TABLE>
I-3
<PAGE> 32
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND CURRENT BUSINESS ADDRESS;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND BUSINESS ADDRESSES THEREOF
---- ---------------------------------------------------------------------------------
<S> <C>
Jerry L. Bridwell...... Senior Vice President -- Exploration and Land since 1986.
Janet S. Clark......... Vice President and Chief Financial Officer since January 1997. Ms. Clark was with
Southcoast Capital Corporation from January 1994 until she joined Santa Fe. While
with Southcoast Capital, Ms. Clark served as Vice President from January 1994 to
June 1996 and as Director, Corporate Finance, from June 1996 to December 1996.
From December 1992 to January 1994 Ms. Clark served as Senior Vice President with
Williams MacKay Jordan & Company. Prior to December 1992 Ms. Clark was an
independent financial consultant.
E. Everett Deschner.... Vice President -- Engineering and Evaluation since April 1990.
Charles G. Hain........ Vice President -- Human and Data Resources since 1994. Vice President -- Employee
Relations from 1988 until 1994.
Kathy Hager............ Vice President -- Public Affairs since January 1997. From January 1994 to January
1997 Ms. Hager served as Director, Investor Relations and from September 1990 to
January 1994 as Manager, Investor Relations.
David L. Hicks......... Vice President -- Law and General Counsel since March 1991.
Mark A. Older.......... Secretary
Michael S. Wilkes...... Controller
</TABLE>
I-4
<PAGE> 33
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Paying Agent at one of its addresses set forth below:
The Paying Agent for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<C> <C> <C> <C>
By Mail: By Hand: By Facsimile By Overnight Courier:
Tenders & Exchanges Tenders & Exchanges Transmission: Tenders & Exchanges
PO Box 2569 -- Suite c/o The Depository Trust (201) 222-4720 14 Wall Street, Suite
4660 Company or 4680
Jersey City, New Jersey 55 Water Street (201) 222-4721 8th Floor
07303-2569 DTC TAD (for Eligible New York, New York
Vietnam Veterans' Institutions Only) 10005
Memorial Plaza
New York, New York
10041
</TABLE>
To Confirm Receipt of Guaranteed Delivery:
(201) 222-4707
Any questions or requests for assistance may be directed to the Information
Agent at its address and telephone number listed below. Additional copies of the
Offer to Purchase, this Letter of Transmittal and other tender offer materials
may be obtained from the Information Agent as set forth below, and will be
furnished promptly at the Purchaser's expense. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 Commerce Road
Carlstadt, New Jersey 07072
Call Toll Free: (888) 264-3343
Call Collect: (201) 896-1900
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES
OF
COMMON STOCK
OF
MCFARLAND ENERGY, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED JUNE 23, 1997
BY
MONTEREY ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
MONTEREY RESOURCES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JULY 21, 1997
(THE "EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED.
The Paying Agent for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<C> <C> <C> <C>
By Mail: By Hand: By Facsimile By Overnight Courier:
Tenders & Exchanges Tenders & Exchanges Transmission: Tenders & Exchanges
PO Box 2569-Suite 4660 c/o The Depository Trust (201) 222-4720 14 Wall Street, Suite
Jersey City, New Jersey Company or 4680
07303-2569 55 Water Street (201) 222-4721 8th Floor
DTC TAD (for Eligible New York, New York 10005
Vietnam Veteran's Institutions Only)
Memorial Plaza
New York, New York 10041
</TABLE>
To Confirm Receipt of Guaranteed Delivery:
(201) 222-4707
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders if
certificates for Shares (as defined in the Offer to Purchase, dated June 23,
1997 (the "Offer to Purchase")), are to be forwarded herewith or, unless an
Agent's Message (as defined in the Offer to Purchase) is utilized, if tenders of
shares are made by book-entry transfer to an account maintained by First Chicago
Trust Company of New York (the "Paying Agent") at The Depository Trust Company
("DTC") or Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry
Transfer Facility" and collectively referred to as the "Book-Entry Transfer
Facilities"), pursuant to the procedures set forth in Section 3 of the Offer to
Purchase. Stockholders who tender Shares by book-entry transfer are referred to
herein as "Book-Entry Stockholders".
Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available, or who cannot deliver their Share
Certificates and all other required documents to the Paying Agent on or prior to
the Expiration Date, must tender their Shares according to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase. See
Instruction 2.
NOTE: SIGNATURES MUST BE PROVIDED ON THE INSIDE AND REVERSE BACK COVER.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
<PAGE> 2
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE PAYING AGENT'S ACCOUNT AT ONE OF THE BOOK-ENTRY
TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
Check Box of Book-Entry Transfer Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account No. Transaction Code No.
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE PAYING AGENT AND COMPLETE
THE FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED
DELIVERY.
Name(s) of Registered Holder(s):
Window Ticket Number (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution which Guaranteed Delivery:
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) AND
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARE(S) TENDERED
APPEAR(S) ON SHARE CERTIFICATES) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
SHARE REPRESENTED NUMBER OF
CERTIFICATE BY SHARE SHARES
NUMBER(S) CERTIFICATE(S)* TENDERED**
===============================================================
===============================================================
---------------------------------------------------------------
Total Shares --------------------------------
========================================================================================================================
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated, it will be assumed that all Shares represented by certificates delivered to the
Paying Agent are being tendered. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Ladies and Gentlemen:
The undersigned hereby tenders to Monterey Acquisition Corporation (the
"Purchaser"), a Delaware corporation and a wholly owned subsidiary of Monterey
Resources, Inc., a Delaware corporation ("Monterey"), the described shares of
Common Stock, par value $1.00 per share (the "Shares"), of McFarland Energy,
Inc., a Delaware corporation (the "Company"), at a price of $18.55 per Share,
net to the seller in cash, without interest thereon, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated June 23, 1997 (the
"Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which together with the Offer to Purchase constitute the
"Offer"). The undersigned understands that the Purchaser reserves the right to
transfer or assign, in whole or from time to time in part, to Monterey or one or
more of Monterey's subsidiaries or affiliates, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), the undersigned hereby
sells, assigns, and transfers to, or upon the order of, the Purchaser all right,
title and interest in and to all of the Shares that are being tendered hereby
and any and all dividends on the Shares or any distribution (including, without
limitation, the issuance of additional Shares pursuant to a stock dividend or
stock split, the issuance of other securities or the issuance of rights for the
purchase of any securities) with respect to the Shares that is declared or paid
by the Company on or after June 16, 1997 and is payable or distributable to
stockholders of record on a date prior to the transfer into the name of the
Purchaser or its nominees or transferees on the Company's stock transfer records
of the Shares purchased pursuant to the Offer (a "Distribution"), and
constitutes and irrevocably appoints the Paying Agent the true and lawful agent,
attorney-in-fact and proxy of the undersigned to the full extent of the
undersigned's rights with respect to such Shares (and any Distributions) with
full power of substitution (such power of attorney and proxy being deemed to be
an irrevocable power coupled with an interest), to (i) deliver Share
Certificates (and any Distributions) or transfer ownership of such Shares on the
account
<PAGE> 3
books maintained by the Book-Entry Transfer Facilities, together in either such
case with all accompanying evidences of transfer and authenticity, to or upon
the order of the Purchaser upon receipt by the Paying Agent, as the
undersigned's agent, of the purchase price, (ii) present Shares (and any
Distributions) for transfer on the books of the Company and (iii) receive all
benefits and otherwise exercise all rights of beneficial ownership of Shares
(and any Distributions), all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints R. Graham Whaling and Terry L.
Anderson, and each of them individually, the attorneys-in-fact and proxies of
the undersigned, each with full power of substitution, to vote in such manner as
each such attorney and proxy or his substitute shall, in his sole discretion,
deem proper, and otherwise act (including pursuant to written consent) with
respect to all of the Shares tendered hereby which have been accepted for
payment by the Purchaser prior to the time of such vote or action (and any
Distributions) which the undersigned is entitled to vote at any meeting of
stockholders (whether annual or special and whether or not an adjourned or
postponed meeting) of the Company, or by consent in lieu of such meeting, or
otherwise. This power of attorney and proxy is coupled with an interest in the
tendered Shares and is irrevocable and is granted in consideration of, and is
effective upon, the acceptance for payment of such Shares by the Purchaser in
accordance with the terms of the Offer. Such acceptance for payment shall
revoke, without further action, any other power of attorney or proxy granted by
the undersigned at any time with respect to the Shares (and any Distributions)
and no subsequent powers of attorney or proxies will be given (and if given will
be deemed not to be effective) with respect thereto by the undersigned. The
undersigned understands that the Purchaser reserves the right to require that,
in order for Shares to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares, the Purchaser or its
designees is able to exercise full voting rights with respect to such Shares and
other securities, including voting at any meeting of stockholders.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any Distributions) and that, when the same are accepted for
payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver all additional documents
deemed by the Paying Agent or the Purchaser to be necessary or desirable to
complete the sale, assignment and transfer of the Shares tendered hereby (and
any Distributions). In addition, the undersigned shall promptly remit and
transfer to the Paying Agent for the account of the Purchaser any and all other
Distributions in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer and, pending such remittance or
appropriate assurance thereof, the Purchaser shall be entitled to all rights and
privileges as owner of any such Distributions, and may withhold the entire
purchase price or deduct from the purchase price of Shares tendered hereby the
amount or value thereof, as determined by the Purchaser in its sole discretion.
All authority herein conferred or herein agreed to be conferred shall not
be affected by, and shall survive, the death or incapacity of the undersigned
and any obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, legal representatives, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer,
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Share
Certificates not tendered or accepted for payment in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price and/or return any
Share Certificates not tendered or accepted for payment (and accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature. In the event that either or both the "Special Delivery
Instructions" and the "Special Payment Instructions" are completed, please issue
the check for the purchase price and/or return any Share Certificates not
tendered or accepted for payment in the name(s) of, and deliver said check
and/or return Share Certificates to, the person or persons so indicated. The
undersigned recognizes that the Purchaser has no obligation pursuant to the
"Special Payment Instructions" to transfer any Shares from the name of the
registered holder thereof if the Purchaser does not accept for payment any of
such Shares.
<PAGE> 4
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates not tendered or not purchased and/or
the check for the purchase price of Shares purchased are to be issued in the
name of someone other than the undersigned, or if Shares tendered by book-entry
transfer which are not purchased are returned by credit to an account maintained
at a Book-Entry Transfer Facility other than that designated on the front cover.
Issue check and/or certificates to:
Name:
- --------------------------------------------
(PLEASE PRINT)
Address:
- ------------------------------------------
- ----------------------------------------------------
- ----------------------------------------------------
(INCLUDE ZIP CODE)
- ----------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 BELOW)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates not tendered or not purchased and/or
the check for the purchase price of Shares purchased are to be sent to someone
other than the undersigned, or to the undersigned at an address other than that
shown on the front cover.
Mail check and/or certificates to:
Name:
- --------------------------------------------
(PLEASE PRINT)
Address:
- ------------------------------------------
- ----------------------------------------------------
- ----------------------------------------------------
(INCLUDE ZIP CODE)
<PAGE> 5
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SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW) SIGN
HERE
X 7/8
------------------------------------------------------------
X
------------------------------------------------------------
Signature(s) of Owner(s)
Dated:
------------------------------------------------------------
(Must be signed by the registered holder(s) exactly as
name(s) appear(s) on the Share Certificate(s) or on a
security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees,
executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or
representative capacity, please provide the necessary
information. See Instruction 5.)
Name(s):
============================================================
(Please Print)
Capacity (Full Title):
------------------------------------------------------------
Address:
============================================================
(Include Zip Code)
Area Code and Telephone Number:
------------------------------------------------------------
Tax Identification or Social Security No.:
------------------------------------------------------------
(See Substitute Form W-9 Below)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
------------------------------------------------------------
Name:
------------------------------------------------------------
Name of Firm:
------------------------------------------------------------
Address:
============================================================
------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
------------------------------------------------------------
Dated:
------------------------------------------------------------
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<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (a) if this Letter of Transmittal is signed by the
registered holder of the Shares tendered herewith, unless such holder has
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" or (b) if such Shares are tendered for
the account of a bank or trust company in the United States or by a firm that is
a member of the National Association of Securities Dealers, Inc. or of a
registered national securities exchange which is a member of a recognized member
of a Medallion Signature Guarantee Program (an "Eligible Institution"). In all
other cases, all signatures on this Letter of Transmittal must be guaranteed by
an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be used if Share Certificates are to be forwarded herewith or,
unless an Agent's Message is utilized, if tenders are to be made pursuant to the
procedures for tender by book-entry transfer set forth in Section 3 of the Offer
to Purchase. Share Certificates, or timely confirmation (a "Book-Entry
Confirmation") of a book-entry transfer of such Shares into the Paying Agent's
account at a Book-Entry Transfer Facility, as well as this Letter of Transmittal
(or a facsimile hereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry transfer, and any other documents
required by this Letter of Transmittal, must be received by the Paying Agent at
one of its addresses set forth herein prior to the Expiration Date and, if
later, stockholders who cannot deliver their Share Certificates and all other
required documents to the Paying Agent prior to the Expiration Date or who
cannot complete the procedures for delivery by book-entry transfer on a timely
basis must tender their Shares by properly completing and duly executing a
Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set
forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (a)
such tender must be made by or through an Eligible Institution; (b) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in the
form made available by the Purchaser, must be received by the Paying Agent on or
prior to the Expiration Date; and (c) the Share Certificates (or a Book-Entry
Confirmation) representing all tendered Shares, in proper form for transfer
together with a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile hereof), with any required signature guarantees (or,
in the case of a book-entry transfer, an Agent's Message) and any other
documents required by this Letter of Transmittal, must be received by the Paying
Agent within three Nasdaq National Market trading days after the date of
execution of such Notice of Guaranteed Delivery as provided in Section 3 of the
Offer to Purchase. If Share Certificates are forwarded separately to the Paying
Agent, a properly completed and duly executed Letter of Transmittal (or
facsimile hereof) must accompany each such delivery.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE PAYING AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted. All
tendering stockholders, by execution of this Letter of Transmittal or facsimile
hereof, waive any right to receive any notice of the acceptance of their Shares
for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the certificate numbers and/or the number of
Shares and any other required information should be listed on a separate
schedule attached hereto and separately signed on each page thereof in the same
manner as this Letter of Transmittal is signed.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares evidenced by any certificate submitted
are to be tendered, fill in the number of Shares which are to be tendered in the
box entitled "Number of Shares Tendered." In such case, new certificate(s) for
the remainder of the Shares that were evidenced by your old certificate(s) will
be sent to you, unless otherwise provided in the appropriate box marked "Special
Payment Instructions" and/or "Special Delivery Instructions" on this Letter of
Transmittal, as soon as practicable after the Expiration Date. All Shares
represented by certificates delivered to the Paying Agent will be deemed to have
been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the certificate(s) without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority so to act must be submitted.
<PAGE> 7
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Share Certificates or
separate stock powers are required unless payment is to be made to, or
certificates for Shares not tendered or purchased are to be issued in the name
of, a person other than the registered holder(s). Signatures on such Share
Certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares listed, the Share Certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered holder(s) appear(s) on the
certificates. Signatures on such Share Certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of purchased Shares to it or its order pursuant to the
Offer. If, however, payment of the purchase price is to be made to, or if
certificates for Shares not tendered or purchased are to be registered in the
name of, any person other than the registered holder, or if tendered Share
Certificates are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any stock transfer taxes
(whether imposed on the registered holder or such person) payable on account of
the transfer to such person will be deducted from the purchase price unless
satisfactory evidence of the payment of such taxes or exemption therefrom is
submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES LISTED IN THIS
LETTER OF TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of and/or certificates for unpurchased Shares are to be returned to a
person other than the signer of this Letter of Transmittal or if a check is to
be sent and/or such Share Certificates are to be returned to someone other than
the signer of this Letter of Transmittal or to an address other than that shown
on the front cover hereof, the appropriate boxes on this Letter of Transmittal
should be completed. See Instruction 1.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance may be directed to the Information Agent at its address or telephone
number set forth below. Requests for additional copies of the Offer to Purchase
and this Letter of Transmittal may be directed to the Information Agent or to
brokers, dealers, commercial banks or trust companies.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a stockholder whose tendered Shares are accepted for payment is
required to provide the Paying Agent with such stockholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Paying Agent
is not provided with the correct TIN, the Internal Revenue Service may subject
the stockholder or other payee to a $50 penalty. In addition, payments that are
made to such stockholder or other payee with respect to Shares purchased
pursuant to the Offer may be subject to 31% backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Paying Agent. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Paying Agent is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The stockholder is required to give the Paying Agent the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares has (have) been lost, destroyed or stolen, the stockholder
should promptly notify the Transfer Agent for the Company, First Chicago Trust
Company of New York. The stockholder will then be instructed as to the steps
that must be taken in order to replace the certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE COPY
HEREOF) OR AN AGENT'S MESSAGE TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION
OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
PAYING AGENT ON OR PRIOR TO THE EXPIRATION DATE.
<PAGE> 8
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 9)
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- ------------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
-------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE -------------------------------------------
FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING AND Social Security Number
DEPARTMENT OF THE TREASURY, DATING BELOW. or
INTERNAL REVENUE SERVICE -------------------------------------------
Employer Identification Number
----------------------------------------------------------------------------------------------
PAYER'S REQUEST FOR PART 2 -- Certification -- Under penalties of perjury, I certify that:
TAXPAYER IDENTIFICATION
NUMBER ("TIN") (1) The number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me) and
(2) I am not subject to backup withholding because: (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject
to backup withholding as a result of a failure to report all interest or dividends, or
(c) the IRS has notified me that I am no longer subject to backup withholding.
Certification Instructions -- You must cross out item (2) above if you have been notified
by the IRS that you are currently subject to backup withholding because of
under-reporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding, you received another
notification from the IRS that you are no longer subject to backup withholding, do not
cross out such Item (2).
----------------------------------------------------------------------------------------------
Signature PART 3 --
Date Awaiting TIN [ ]
</TABLE>
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a Taxpayer Identification Number by the time of payment, 31%
of all reportable payments made to me will be withheld, but that such amounts
will be refunded to me if I then provide a Taxpayer Identification Number within
sixty (60) days.
Signature
- --------------------------------------------- Date
- ------------------------, 1997
<PAGE> 9
Any questions or requests for assistance may be directed to the Information
Agent at its address and telephone number listed below. Additional copies of the
Offer to Purchase, this Letter of Transmittal and other tender offer materials
may be obtained from the Information Agent as set forth below, and will be
furnished promptly at the Purchaser's expense. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 Commerce Road
Carlstadt, New Jersey 07072
Call Toll-Free: (888) 264-3343
Call Collect: (201) 896-1900
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
MCFARLAND ENERGY, INC.
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Offer (as defined below) if certificates representing
shares of common stock, par value $1.00 per share (the "Shares"), of McFarland
Energy, Inc., a Delaware corporation (the "Company"), are not immediately
available or time will not permit all required documents to reach The First
Chicago Trust Company of New York (the "Paying Agent") on or prior to the
Expiration Date (as defined in the Offer to Purchase), or the procedures for
delivery by book-entry transfer cannot be completed on a timely basis. This
Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile
transmission or mail to the Paying Agent. See Section 3 of the Offer to
Purchase.
The Paying Agent for the Offer is:
First Chicago Trust Company of New York
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By Mail: By Hand: By Facsimile By Overnight Courier:
Tenders & Exchanges Tenders & Exchanges Transmission: Tenders & Exchanges
PO Box 2569 -- Suite c/o The Depository Trust (210) 222-4720 14 Wall Street, Suite
4660 Company or 4680
Jersey City, New Jersey 55 Water Street (201) 222-4721 8th Floor
07303-2569 DTC TAD (for Eligible New York, New York
Vietnam Veterans' Institutions Only) 10005
Memorial Plaza
New York, New York
10041
</TABLE>
To Confirm Receipt of Guaranteed Delivery:
(201) 222-4707
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Monterey Acquisition Corporation, a
Delaware corporation (the "Purchaser"), upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated June 23, 1997 (the "Offer
to Purchase"), and in the related Letter of Transmittal (which together
constitute the "Offer"), receipt of each of which is hereby acknowledged, the
number of Shares indicated below pursuant to the guaranteed delivery procedures
set forth in Section 3 of the Offer to Purchase.
Number of Shares:
- ------------------------ Shares
Certificate No(s). (if available):
======================================================
If Share(s) will be tendered by book-entry transfer, check one box.
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Name(s) of Record Holder(s):
- -------------------
- ------------------------------------------------------
Address(es):
- ---------------------------------------
======================================================
Area Code and Telephone Number(s):
- -----------
- ------------------------------------------------------
Signature(s):
- ---------------------------------------
- ------------------------------------------------------
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program, hereby (1) represents that the
tender of Shares effected hereby complies with Rule 14e-4 under the Securities
Exchange Act of 1934, as amended, and (2) guarantees to deliver to the Paying
Agent, at one of its addresses set forth above, the certificates representing
all tendered Shares, in proper form for transfer, or a Book-Entry Confirmation
(as defined in the Offer to Purchase), together with a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or, in the case of book-entry transfer of Shares, an
Agent's Message (as defined in the Offer to Purchase), and any other documents
required by the Letter of Transmittal within three Nasdaq National Market
trading days after the date of execution of this Notice of Guaranteed Delivery.
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- ----------------------------------------------------- -----------------------------------------------------
Name of Firm (Authorized Signature)
- ----------------------------------------------------- -----------------------------------------------------
Address Title
Name: ----------------------------------------------
- -----------------------------------------------------
(Please type or print)
Date: -----------------------------------------------
- -----------------------------------------------------
Area Code and Telephone Number
</TABLE>
NOTE: DO NOT SEND SHARE CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MCFARLAND ENERGY, INC.
AT
$18.55 NET PER SHARE
BY
MONTEREY ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
MONTEREY RESOURCES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, JULY 21, 1997 (THE "EXPIRATION DATE"),
UNLESS THE OFFER IS EXTENDED.
June 23, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Monterey Acquisition Corporation, a Delaware corporation (the "Purchaser")
and a wholly owned subsidiary of Monterey Resources, Inc., a Delaware
corporation ("Monterey"), has commenced an offer to purchase all outstanding
shares of common stock, par value $1.00 per share (the "Shares"), of McFarland
Energy, Inc., a Delaware corporation (the "Company"), at a purchase price of
$18.55 per Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
June 23, 1997 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together constitute the "Offer") enclosed herewith.
Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Shares
according to the guaranteed delivery procedures set forth in Section 3 of the
Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
The Offer is conditioned upon, among other things, a number of Shares that
when combined with any Shares subject to the Stockholders Agreement (as defined
in the Offer to Purchase) constitutes a majority of the Company's then
outstanding Shares on a Fully Diluted Basis (as defined in the Offer to
Purchase) being validly tendered and not withdrawn prior to the expiration of
the Offer (the "Minimum Condition"). The Offer is also subject to other terms
and conditions contained in the Offer to Purchase. See the Introduction and
Sections 1, 14 and 15 of the Offer to Purchase.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated June 23, 1997.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal may
be used to tender Shares.
3. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if certificates for Shares are not immediately available or if such
certificates and all other required documents cannot be delivered to
<PAGE> 2
First Chicago Trust Company of New York (the "Paying Agent") by the Expiration
Date or if the procedure for book-entry transfer cannot be completed by the
Expiration Date.
4. A letter to stockholders of the Company from J. C. McFarland, Chairman
of the Board and Chief Executive Officer of the Company, together with the
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with regard to the
Offer.
6. Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9.
7. A return envelope addressed to the Paying Agent.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JULY 21, 1997, UNLESS
THE OFFER IS EXTENDED.
In order to accept the Offer, a duly executed and properly completed Letter
of Transmittal or manually signed facsimile thereof and any required signature
guarantees, or an Agent's Message (as defined in the Offer to Purchase) in
connection with a book-entry delivery of Shares, and any other required
documents should be sent to the Paying Agent and Share Certificates representing
the tendered Shares should be delivered to the Paying Agent or such Shares
should be tendered by book-entry transfer into the Paying Agent's account
maintained at one of the Book Entry Transfer Facilities (as described in the
Offer to Purchase), all in accordance with the instructions set forth in the
Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or other required documents on or prior to the
Expiration Date or to comply with the book-entry transfer procedures on a timely
basis, a tender of Shares may be effected by following the guaranteed delivery
procedures specified in Section 3 of the Offer to Purchase.
The Purchaser will not pay any commission or fees to any broker, dealer or
other person (other than the Information Agent, as described in the Offer to
Purchase) for soliciting tenders of Shares pursuant to the Offer. The Purchaser
will, however, upon request, reimburse you for customary clerical and mailing
expenses incurred by you in forwarding any of the enclosed materials to your
clients. The Purchaser will pay or cause to be paid any stock transfer taxes
payable on the transfers of Shares to it, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Corporate Investor Communications, Inc., the Information Agent, at its address
and telephone number set forth on the back cover of the Offer to Purchase.
Requests for additional copies of the enclosed materials may be directed to the
Information Agent or to brokers, dealers, commercial banks or trust companies.
Very truly yours,
Monterey Resources, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE COMPANY, THE PAYING AGENT OR
THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM
IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MCFARLAND ENERGY, INC.
AT
$18.55 NET PER SHARE
BY
MONTEREY ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
MONTEREY RESOURCES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JULY 21, 1997 (THE "EXPIRATION DATE"), UNLESS THE OFFER IS
EXTENDED.
To our Clients:
Enclosed for your consideration are the Offer to Purchase, dated June 23,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") relating to the offer by Monterey Acquisition
Corporation, a Delaware corporation (the "Purchaser") and a wholly owned
subsidiary of Monterey Resources Inc., a Delaware corporation ("Monterey"), to
purchase all outstanding shares of common stock, par value $1.00 per share (the
"Shares"), of McFarland Energy, Inc., a Delaware corporation (the "Company"), at
a purchase price of $18.55 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase and in the related Letter of Transmittal enclosed herewith.
Holders of Shares whose certificates for such Shares (the "Share Certificates")
are not immediately available or who cannot deliver all required documents to
First Chicago Trust Company of New York (the "Paying Agent") on or prior to the
Expiration Date, or who cannot complete the procedures for book-entry transfer
on a timely basis, must tender their Shares according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all Shares held by us for your account pursuant to
the terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is $18.55 per Share, net to you in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer.
2. The Offer is being made for all Shares.
3. The Offer is conditioned upon, among other things, a number of Shares
that when combined with Shares subject to the Stockholders Agreement (as defined
in the Offer to Purchase) constitutes a majority of the Company's then
outstanding Shares on a Fully Diluted Basis (as defined in the Offer to
Purchase) being validly tendered and not withdrawn prior to the expiration of
the Offer (the "Minimum Condition"). The Offer is also subject to other terms
and conditions contained in the Offer to Purchase. See the Introduction and
Sections 1, 14 and 15 of the Offer to Purchase.
<PAGE> 2
4. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the Purchaser
pursuant to the Offer.
5. The Offer and withdrawal rights will expire at 12:00 midnight, New York
City time, on Monday, July 21, 1997, unless the Offer is extended.
6. Payment for Shares purchased pursuant to the Offer will in all cases be
made only after timely receipt by the Paying Agent of (a) Share Certificates for
such Shares or timely confirmation of the book-entry transfer of such Shares
into the account maintained by the Paying Agent at The Depository Trust Company
or Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer
Facilities"), pursuant to the procedures set forth in Section 3 of the Offer to
Purchase, (b) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees or an Agent's Message (as defined in the Offer to Purchase), in
connection with a book-entry transfer, and (c) all other documents required by
the Letter of Transmittal. Accordingly, payment may not be made to all tendering
stockholders at the same time depending upon when Share Certificates or
confirmations of book-entry transfer of such Shares into the Paying Agent's
account at a Book-Entry Transfer Facility are actually received by the Paying
Agent.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form set forth below. If you authorize the tender of your
Shares, all such Shares will be tendered unless otherwise specified below. An
envelope to return your instructions to us is enclosed. Your instructions should
be forwarded to us in ample time to permit us to submit a tender on your behalf
prior to the expiration of the Offer.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, the Purchaser
may, in its discretion, take such action as it may deem necessary to make the
Offer in any jurisdiction and extend the Offer to holders of Shares in such
jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer is being made on
behalf of the Purchaser by one or more registered brokers or dealers that are
licensed under the laws of such jurisdiction.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH ALL SHARES OF COMMON STOCK
OF
MCFARLAND ENERGY, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated June 23, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which together constitute the "Offer") in
connection with the offer by Monterey Acquisition Corporation, a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Monterey
Resources, Inc., a Delaware corporation ("Monterey"), to purchase all
outstanding shares of common stock, par value $1.00 per share (the "Shares"), of
McFarland Energy, Inc., a Delaware corporation (the "Company"), at a purchase
price of $18.55 per Share, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares), which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
Number of Shares to Be Tendered:
- ------------------------------ Shares
SIGN HERE
Signature(s):
Print Name(s):
Print Address(es):
Area Code and Telephone Number(s):
Taxpayer Identification or Social Security Number(s):
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER -- Social Security Numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer Identification Numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the type
of number to give the payer.
- ---------------------------------------------------------------
---------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- --------------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- --------------------------------------------------------------
<C> <S> <C>
1. Individual The individual
2. Two or more individuals(1) The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(2)
3. Custodian account of a minor The minor(3)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-trustee(2)
trust (grantor is also
trustee) The actual owner(2)
b. So-called trust account that
is not a legal or valid
trust under State law
5. Sole proprietorship The owner(4)
6. Sole proprietorship The owner(4)
</TABLE>
7. A valid trust, estate, or The legal entity(5)
pension trust
8. Corporate account The corporation
9. Association, club, religious, The organization
charitable, educational or
other tax-exempt organization
10. Partnership account The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state
or local government, school
district, or prison) that
receives agricultural program
payments
- ---------------------------------------------------------------
---------------------------------------------------------------
(1) Includes husband and wife, and adult and minor. If adult and minor, give
Social Security number of the adult or, if the minor is the only
contributor, the minor.
(2) List first and circle the name of the person whose number you furnish.
(3) Circle the minor's name and furnish the minor's social security number.
(4) Show your individual name. You may also enter your business name. You may
use either your SSN or EIN.
(5) List first and circle the name of the valid trust, estate or pension fund.
(Do not furnish the identifying number of the personal representative or
trustee unless the legal entity is not designated in the account title.)
NOTE:If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER (TIN) ON SUBSTITUTE FORM W-9
(SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE)
PAGE 2
NAME
If your are an individual, you must generally provide the name shown on your
social security card. However, if you have changed your last name, for instance,
due to marriage, without informing the Social Security Administration of the
name change, please enter your first name, the last name shown on your social
security card, and your new last name.
OBTAINING A NUMBER
If you don't have a taxpayer identification number ("TIN"), apply for one
immediately. To apply, obtain Form SS-5, Application for a Social Security Card,
from our local office of the Social Security Administration, or Form SS-4,
Application for Employer Identification Number, from you local Internal Revenue
Service (the "IRS") office.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees generally exempt from backup withholding and
or which no information reporting is required. For interest and dividends, all
listed payees are exempt except item (9). For broker transactions, payees listed
in (1) through (13) and a person registered under the Investment Advisers Act of
1940 who regularly acts as a broker are exempt. Payments subject to reporting
under sections 6041 and 6041A are generally exempt from backup withholding only
if made to payees described in items (1) through (7), except that a corporation
(except certain hospitals described in Regulations section 1.6041-3(a)) that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan ("IRA"), or a custodial account under section 403(b)(7) if
the account satisfies the requirements of section 401(f)(2).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivision or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any of its agencies or instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S., the
District of Columbia or a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the Investment
Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under section 664(c) or described in section
4947(a)(1).
Payments of dividends generally not subject to backup withholding include the
following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
that have a least one nonresident alien partner.
- - Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payor's trade or business and you have not provided your
correct TIN to the payor.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to nonresident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Mortgage interest paid by you.
Payments that are not subject to information reporting are generally also not
subject to backup withholding. For details, see sections 6041, 6041A(a), 6042,
6044, 6045, 6049, 6050A, and 6050N, and the regulations under those sections.
PRIVACY ACT NOTICE. -- Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, cancellation of debt, or
contributions you made to an IRA. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. You must provide
your TIN whether or not you are required to file a tax return. Payors must
generally withhold 31% of taxable interest, dividend, and certain other payments
to a payee who does not furnish a TIN to a payor. Certain penalties may also
apply.
PENALTIES
(1) FAILURE TO FURNISH TIN. -- If you fail to furnish your correct TIN to a
requester (the person asking you to furnish your TIN), you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR
TAX CONSULTANT OR THE IRS
<PAGE> 1
EXHIBIT 2.1
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Among
MONTEREY RESOURCES, INC.
MONTEREY ACQUISITION CORPORATION
and
McFARLAND ENERGY, INC.
Dated as of June 16, 1997
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
THE OFFER .............................................................2
SECTION 1.01. The Offer....................................................2
SECTION 1.02. Company Action...............................................3
ARTICLE II
THE MERGER .............................................................4
SECTION 2.01. The Merger...................................................4
SECTION 2.02. Effective Time; Closing......................................5
SECTION 2.03. Effect of the Merger.........................................5
SECTION 2.04. Certificate of Incorporation; By-laws........................5
SECTION 2.05. Directors and Officers.......................................5
SECTION 2.06. Conversion of Securities.....................................5
SECTION 2.07. Employee Stock Options; Director Options.....................6
SECTION 2.08. Dissenting Shares............................................6
SECTION 2.09. Surrender of Shares; Stock Transfer Books....................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................8
SECTION 3.01. Organization and Qualification; Subsidiaries.................8
SECTION 3.02. Certificate of Incorporation and By-laws.....................9
SECTION 3.03. Capitalization...............................................9
SECTION 3.04. Authority Relative to this Agreement........................10
SECTION 3.05. No Conflict; Required Filings and Consents..................10
SECTION 3.06. SEC Filings; Financial Statements...........................11
SECTION 3.07. Absence of Certain Changes or Events........................12
SECTION 3.08. Absence of Litigation.......................................12
SECTION 3.09. Compliance with Applicable Laws.............................13
SECTION 3.10. Employee Benefit Plans......................................13
SECTION 3.11. Labor Matters...............................................15
SECTION 3.12. Offer Documents; Schedule 14D-9.............................15
SECTION 3.13. Taxes.......................................................15
SECTION 3.14. Brokers.....................................................17
SECTION 3.15. Insurance...................................................18
-i-
<PAGE> 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER.....................18
SECTION 4.01. Corporate Organization......................................18
SECTION 4.02. Authority Relative to this Agreement........................18
SECTION 4.03. No Conflict; Required Filings and Consents..................18
SECTION 4.04. Offer Documents; Proxy Statement............................19
SECTION 4.05. Brokers.....................................................20
SECTION 4.06. Financing...................................................20
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER.....................................20
SECTION 5.01. Conduct of Business by the Company Pending the
Purchaser's Election Date...................................20
ARTICLE VI
ADDITIONAL AGREEMENTS ....................................................22
SECTION 6.01. Stockholders Meeting........................................22
SECTION 6.02. Proxy Statement.............................................22
SECTION 6.03. Company Board Representation; Section 14(f).................23
SECTION 6.04. Access to Information; Confidentiality......................24
SECTION 6.05. No Solicitation of Transactions.............................24
SECTION 6.06. Employee Compensation and Other Employee Benefits Matters...25
SECTION 6.07. Directors' and Officers' Indemnification and Insurance......25
SECTION 6.08. Further Action; Reasonable Best Efforts.....................28
SECTION 6.09. Compliance with Antitrust Laws..............................29
SECTION 6.10. Public Announcements........................................29
SECTION 6.11. Parent Guarantee............................................29
SECTION 6.12. Participation in Closing....................................29
SECTION 6.13. Notification of Certain Other Matters.......................29
SECTION 6.14. State Takeover Statutes.....................................30
ARTICLE VII
CONDITIONS TO THE MERGER...................................................30
SECTION 7.01. Conditions to the Merger....................................30
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER..........................................30
SECTION 8.01. Termination.................................................30
-ii-
<PAGE> 4
SECTION 8.02. Effect of Termination.......................................31
SECTION 8.03. Costs and Expenses..........................................32
SECTION 8.04. Amendment...................................................32
SECTION 8.05. Waiver......................................................32
ARTICLE IX
GENERAL PROVISIONS.........................................................33
SECTION 9.01. Non-Survival of Representations, Warranties and Agreements..33
SECTION 9.02. Scope of Representations and Warranties.....................33
SECTION 9.03. Notices.....................................................33
SECTION 9.04. Certain Definitions.........................................35
SECTION 9.05. Severability................................................35
SECTION 9.06. Entire Agreement; Assignment................................36
SECTION 9.07. Parties in Interest.........................................36
SECTION 9.08. Specific Performance........................................36
SECTION 9.09. Governing Law...............................................36
SECTION 9.10. Headings....................................................36
SECTION 9.11. Counterparts................................................36
ANNEX A Conditions to the Offer
ANNEX B Employee Benefits
-iii-
<PAGE> 5
Glossary of Defined Terms
Location of
Defined Term Definition
Acquisition Transaction............................. Section 6.05
affiliate........................................... Section 9.04(a)
Agreement........................................... Preamble
beneficial owner.................................... Section 9.04(b)
Blue Sky Laws....................................... Section 3.05(b)
Board............................................... Recitals
business day........................................ Section 9.04(c)
Certificate of Merger............................... Section 2.02
Certificates........................................ Section 2.09(b)
Claim............................................... Section 6.07(b)
Code................................................ Section 3.10(a)
Company............................................. Preamble
Company Common Stock................................ Recitals
Company Preferred Stock............................. Section 3.03
Confidentiality Agreement........................... Section 6.04(c)
control............................................. Section 9.04(d)
Delaware Law........................................ Recitals
Disclosure Schedule................................. Section 3.01
Dissenting Shares................................... Section 2.08(a)
Effective Time...................................... Section 2.02
ERISA............................................... Section 3.10(a)
Exchange Act........................................ Section 1.01(a)
GAAP................................................ Section 3.06(b)
Governmental Entity................................. Section 3.09
HSR Act............................................. Section 3.05(b)
Indemnified Parties................................. Section 6.07(b)
IRS................................................. Section 3.10(a)
JCMc................................................ Annex B
Material Adverse Effect............................. Section 3.01
Merger.............................................. Recitals
Merger Consideration................................ Section 2.06(a)
Minimum Condition................................... Section 1.01(a)
Multiemployer Plan.................................. Section 3.10(b)
Multiple Employer Plan.............................. Section 3.10(b)
1996 Balance Sheet.................................. Section 3.06(c)
Offer............................................... Recitals
Offer Documents..................................... Section 1.01(b)
Offer to Purchase................................... Section 1.01(b)
-iv-
<PAGE> 6
Oppenheimer......................................... Section 1.02(a)
Option.............................................. Section 2.07
Parent.............................................. Preamble
Paying Agent........................................ Section 2.09(a)
Per Share Amount.................................... Recitals
person.............................................. Section 9.04(e)
Plans............................................... Section 3.10(a)
Proxy Statement..................................... Section 4.04
Purchaser........................................... Preamble
Purchaser's Election Date........................... Section 5.01
Restated Certificate................................ Section 1.02
Returns............................................. Section 3.13(a)
Schedule 14D-1...................................... Section 1.01(b)
Schedule 14D-9...................................... Section 1.02(b)
SEC................................................. Section 1.01(b)
SEC Reports......................................... Section 3.06(a)
Securities Act...................................... Section 3.06(a)
Shares.............................................. Recitals
Stock Option Plans.................................. Section 2.07
Stockholders Agreement.............................. Recitals
Stockholders Meeting................................ Section 6.01(a)
Subsidiary.......................................... Section 3.01
subsidiary.......................................... Section 9.04(f)
Surviving Corporation............................... Section 2.01
Tax................................................. Section 3.13(o)
Tender Offer Acceptance Date........................ Section 2.07
Transactions........................................ Section 1.02(a)
-v-
<PAGE> 7
AGREEMENT AND PLAN OF MERGER, dated as of June 16, 1997 (this
"Agreement"), among Monterey Resources, Inc., a Delaware corporation ("Parent"),
Monterey Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of Parent ("Purchaser"), and McFarland Energy, Inc., a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent, Purchaser and the
Company have each determined that it is in the best interests of their
respective stockholders for Parent, through Purchaser, to acquire the Company
upon the terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance of such acquisition, it is proposed
that Purchaser shall make a cash tender offer (the "Offer") to acquire all the
issued and outstanding shares of Common Stock, par value $1.00 per share, of the
Company ("Company Common Stock"; shares of Company Common Stock being
hereinafter collectively referred to as the "Shares") for $18.55 per Share (such
amount, or any greater amount per Share paid pursuant to the Offer, being
hereinafter referred to as the "Per Share Amount") net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions of this
Agreement and the Offer; and
WHEREAS, the Board of Directors of Parent and Purchaser have
approved the making of the Offer and the transactions related thereto; and
WHEREAS, the Board of Directors of the Company (the "Board")
has approved the making of the Offer and resolved and agreed, subject to the
terms and conditions contained herein, to recommend that holders of Shares
tender their Shares pursuant to the Offer; and
WHEREAS, also in furtherance of such acquisition, the Boards
of Directors of Parent, Purchaser and the Company have each approved the merger
(the "Merger") of Purchaser with and into the Company in accordance with the
General Corporation Law of the State of Delaware ("Delaware Law") following the
consummation of the Offer and upon the terms and subject to the conditions set
forth herein; and
WHEREAS, Parent and certain stockholders of the Company have
entered into a Stockholders Agreement, dated as of the date hereof (the
"Stockholders Agreement"), providing for the agreement of such stockholders to
tender pursuant to the Offer all Shares owned by such stockholders subject to
the terms and conditions of the Stockholders Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements herein contained,
and intending to be legally bound hereby, Parent, Purchaser and the Company
hereby agree as follows:
<PAGE> 8
ARTICLE I
THE OFFER
SECTION 1.01. The Offer. (a) Provided that this Agreement
shall not have been terminated in accordance with Section 8.01 and none of the
events set forth in Annex A hereto shall have occurred or be existing (unless
such event shall have been waived by Purchaser), Parent shall cause Purchaser to
commence (within the meaning of Rule 14d-2(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), and Purchaser shall commence, the Offer
at the Per Share Amount as promptly as reasonably practicable after the date
hereof, but in no event later than five business days after the public
announcement of Purchaser's intention to commence the Offer. The obligation of
Purchaser to accept for payment and pay for Shares tendered pursuant to the
Offer shall be subject only to (i) the condition (the "Minimum Condition") that
at least the number of Shares that, when combined with the Shares already owned
by Parent and its direct or indirect subsidiaries and any Shares purchased
pursuant to the Stockholders Agreement, constitute a majority of the then
outstanding Shares on a fully diluted basis, including, without limitation, all
Shares issuable upon the conversion of any convertible securities or upon the
exercise of any options, warrants or rights, shall have been validly tendered
and not withdrawn prior to the expiration of the Offer and (ii) the satisfaction
or waiver of the other conditions set forth in Annex A hereto. Purchaser
expressly reserves the right to waive any such condition (other than the Minimum
Condition), to increase the per Share Amount, and to make any other changes in
the terms and conditions of the Offer; provided, however, that (notwithstanding
Section 8.04) no change may be made which (A) decreases the Per Share Amount,
(B) reduces the maximum number of Shares to be purchased in the Offer, (C)
imposes conditions to the Offer in addition to those set forth in Annex A
hereto, (D) amends or changes the terms and conditions of the Offer in any
manner materially adverse to the holders of Shares (other than Parent and its
subsidiaries) or (E) changes or waives the Minimum Condition. The Per Share
Amount shall, subject to applicable withholding of taxes, be net to the seller
in cash, without interest thereon, upon the terms and subject to the conditions
of the Offer. Subject to the terms and conditions of the Offer (including,
without limitation, the Minimum Condition), Purchaser shall accept for payment
and pay, as promptly as practicable after expiration of the Offer, for all
Shares validly tendered and not withdrawn.
(b) As soon as reasonably practicable on the date of
commencement of the Offer, Purchaser shall file with the Securities and Exchange
Commission (the "SEC") and disseminate to holders of Shares to the extent
required by law a Tender Offer Statement on Schedule 14D-1 (together with all
amendments and supplements thereto, the "Schedule 14D-1") with respect to the
Offer and the other Transactions (as hereinafter defined). The Schedule 14D-1
shall contain or shall incorporate by reference an offer to purchase (the "Offer
to Purchase") and forms of the related letter of transmittal and any related
summary advertisement (the Schedule 14D-1, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being referred
to herein collectively as the "Offer Documents"). Parent, Purchaser and the
Company agree to correct promptly any information provided by any of them for
use in the Offer Documents which shall have become false or misleading, and
Parent and Purchaser further agree to take all steps
-2-
<PAGE> 9
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the other Offer Documents as so corrected to be disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given an opportunity to
review and comment on the Offer Documents and any amendments thereto prior to
the filing thereof with the SEC. Parent and Purchaser will provide the Company
and its counsel with a copy of any written comments or telephonic notification
of any verbal comments Parent or Purchaser may receive from the SEC or its staff
with respect to the Offer Documents promptly after the receipt thereof and will
provide the Company and its counsel with a copy of any written responses and
telephonic notification of any verbal response of Parent, Purchaser or their
counsel. In the event that the Offer is terminated or withdrawn by Purchaser,
Parent and Purchaser shall cause all tendered Shares to be returned to the
registered holders of the Shares represented by the certificate or certificates
surrendered to the Paying Agent (as defined herein).
SECTION 1.02. Company Action. (a) The Company hereby approves
of and consents to the Offer and represents that (i) the Board, at a meeting
duly called and held on June 16, 1997, has unanimously (A) determined that this
Agreement and the transactions contemplated hereby, including, without
limitation, each of the Offer and the Merger (the "Transactions"), are fair to
and in the best interests of the holders of Shares (other than Parent and its
subsidiaries), (B) approved and adopted this Agreement and the Transactions,
including for purposes of satisfying the requirements of Section 203(a)(1) of
the Delaware Law with respect to the Transactions, (C) taken all action as may
be required by the Company's Restated Certificate of Incorporation (the
"Restated Certificate") so that Article VIII, Section A.1 of the Restated
Certificate is not applicable to the Transactions and, as a result, the
supermajority voting requirements of Article VIII, Section A.1 of the Restated
Certificate will not apply to this Agreement and the Transactions, (D) to the
extent required by that certain letter agreement dated September 1, 1989, as
amended January 4, 1993, between the Company and certain of its stockholders,
approved the tender by such stockholders of their Shares for purchase pursuant
to the Offer and the sale of such Shares in the Merger and (E) resolved to
recommend, subject to the conditions set forth herein, that the stockholders of
the Company accept the Offer and approve and adopt this Agreement and the
Transactions, and (ii) Oppenheimer & Co., Inc. ("Oppenheimer") has delivered to
the Board a written opinion that the consideration to be received by the holders
of Shares pursuant to each of the Offer and the Merger is fair to such holders
from a financial point of view. The Company has been authorized by Oppenheimer,
subject to prior review by such financial advisor, to include such fairness
opinion (or references thereto) in the Offer Documents and in the Schedule 14D-9
(as defined in paragraph (b) of this Section 1.02) and the Proxy Statement
referred to in Section 4.04. Subject to the fiduciary duties of the Board under
applicable law as advised in writing by independent counsel (which shall, for
all purposes under this Agreement, include the Company's regular outside
counsel), the Company hereby consents to the inclusion in the Offer Documents of
the recommendation of the Board described above.
(b) As soon as reasonably practicable on the date of
commencement of the Offer, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing, subject
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to the fiduciary duties of the Board under applicable law as advised in writing
by independent counsel, the recommendation of the Board described in Section
1.02(a) and shall disseminate the Schedule 14D-9 to the extent required by Rule
14D-9 promulgated under the Exchange Act and any other applicable federal
securities laws; provided, however, that such recommendation may be withdrawn,
modified or changed to the extent that the Board determines after consultation
with independent counsel that such withdrawal, modification or change is
consistent with its fiduciary obligations. Any such withdrawal, modification or
change shall not constitute a breach of this Agreement, but will nonetheless be
subject to the provisions of Sections 8.01 and 8.03. The Company, Parent and
Purchaser agree to correct promptly any information provided by any of them for
use in the Schedule 14D-9 which shall have become false or misleading, and the
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and disseminated to holders of Shares,
in each case as and to the extent required by applicable federal securities
laws. Parent, Purchaser and their counsel shall be given a reasonable
opportunity to review and comment on the Schedule 14D-9 and any amendments
thereto prior to the filing thereof with the SEC. The Company will provide
Parent and Purchaser and their counsel with a copy of any written comments or
telephonic notification of any oral comments the Company may receive from the
SEC or its staff with respect to the Offer Documents promptly after the receipt
thereof and will provide Parent and Purchaser and their counsel with a copy of
any written responses and telephonic notification of any oral response of the
Company or its counsel.
(c) The Company shall promptly furnish Purchaser with mailing
labels containing the names and addresses of all record holders of Shares and
with security position listings of Shares held in stock depositories, each as of
the most recent date reasonably practicable, together with all other available
listings and computer files containing names, addresses and security position
listings of record holders and non-objecting beneficial owners of Shares as of
the most recent date reasonably practicable. The Company shall furnish Purchaser
with such additional information, including, without limitation, updated
listings and computer files of stockholders, mailing labels and security
position listings, and such other assistance as Parent, Purchaser or their
agents may reasonably request. Subject to the requirements of applicable law,
and except for such steps as are necessary to disseminate the Offer Documents
and any other documents necessary to consummate the Offer or the Merger, Parent
and Purchaser shall hold in confidence the information contained in such labels,
listings and files, shall use such information only in connection with the Offer
and the Merger, and, if this Agreement shall be terminated in accordance with
Section 8.01, shall, at the request of the Company, deliver promptly to the
Company all copies of such information then in their possession and shall
certify in writing to the Company its compliance with this Section 1.02(c).
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and subject to the
conditions set forth in Article VII, and in accordance with Delaware Law, at
the Effective Time (as hereinafter defined), Purchaser shall be merged with and
into the Company. As a result of the Merger, the separate
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corporate existence of Purchaser shall cease and the Company shall continue as
the surviving corporation of the Merger (the "Surviving Corporation").
SECTION 2.02. Effective Time; Closing. As promptly as
practicable after the satisfaction or, if permissible, waiver of the conditions
set forth in Article VII, the parties hereto shall cause the Merger to be
consummated by filing this Agreement or a certificate of merger (in either case,
the "Certificate of Merger") with the Secretary of State of the State of
Delaware, in such form as is required by, and executed in accordance with the
relevant provisions of, Delaware Law (the date and time of such filing being the
"Effective Time"). Prior to such filing, a closing shall be held at the offices
of Baker & Botts, L.L.P., 910 Louisiana, Suite 3000, Houston, Texas 77002, or
such other place as the parties shall agree, for the purpose of confirming the
satisfaction or waiver, as the case may be, of the conditions set forth in
Article VII.
SECTION 2.03. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of the Company and Purchaser shall vest in the Surviving Corporation,
and all debts, liabilities, obligations, restrictions, disabilities and duties
of the Company and Purchaser shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 2.04. Certificate of Incorporation; By-laws. (a)
Subject to the requirements of Section 6.07, at the Effective Time, the
Certificate of Incorporation of Purchaser, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation.
(b) Subject to the requirements of Section 6.07, the By-laws
of Purchaser, as in effect immediately prior to the Effective Time, shall be the
By-laws of the Surviving Corporation until thereafter amended as provided by
law, the Certificate of Incorporation of the Surviving Corporation and such
By-laws.
SECTION 2.05. Directors and Officers. The directors of
Purchaser immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and By-laws of the Surviving Corporation, and the
officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
SECTION 2.06. Conversion of Securities. At the Effective
Time, by virtue of the Merger and without any action on the part of Purchaser,
the Company or the holders of any of the Shares:
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(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be cancelled pursuant to
Section 2.06(b) and any Dissenting Shares (as hereinafter defined))
shall be cancelled and shall be converted automatically into the right
to receive an amount equal to the Per Share Amount in cash (the "Merger
Consideration") payable, without interest, to the holder of such Share,
upon surrender, in the manner provided in Section 2.09, of the
certificate that formerly evidenced such Share;
(b) Each Share held in the treasury of the Company and each
Share owned by Purchaser, Parent or any direct or indirect wholly owned
subsidiary of Parent or of the Company immediately prior to the
Effective Time shall be cancelled without any conversion thereof and no
payment or distribution shall be made with respect thereto; and
(c) Each share of common stock, par value $.01 per share, of
Purchaser issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of Common Stock, par value $1.00 per
share, of the Surviving Corporation.
SECTION 2.07. Employee Stock Options; Director Options. Prior
to the date on which Purchaser shall have accepted for payment all Shares
validly tendered and not withdrawn prior to the expiration date with respect to
the Offer (the "Tender Offer Acceptance Date"), the Company shall enter into an
agreement with each holder of an employee or director stock option to purchase
Shares (in each case, an "Option") that provides that, immediately prior to the
Effective Time, each Option that is then outstanding, whether or not then
exercisable or vested, shall be cancelled by the Company, and each holder of a
cancelled Option shall be entitled to receive from the Purchaser at the time of
such cancellation, and Purchaser shall pay, an amount in cash equal to the
product of (i) the number of Shares previously subject to such Option, whether
or not then exercisable or vested, and (ii) the excess, if any, of the Per Share
Amount over the exercise price per Share applicable to such Option, reduced by
any applicable withholding.
SECTION 2.08. Dissenting Shares. (a) Notwithstanding any
provision of this Agreement to the contrary, Shares that are outstanding
immediately prior to the Effective Time and which are held by stockholders who
shall have not voted in favor of the Merger or consented thereto in writing and
who shall have demanded properly in writing appraisal for such Shares in
accordance with Section 262 of the Delaware Law (collectively, the "Dissenting
Shares") shall not be converted into or represent the right to receive the
Merger Consideration. Such stockholders shall be entitled to receive payment
from the Surviving Corporation of the appraised value of such Shares held by
them in accordance with the provisions of such Section 262, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
Shares under such Section 262 shall thereupon be deemed to have been converted
into and to have become exchangeable for, as of the Effective Time, the right to
receive the Merger Consideration, without any interest thereon, upon surrender,
in the manner provided in Section 2.09, of the certificate or certificates that
formerly evidenced such Shares.
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(b) The Company shall give Parent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of such demands, and
any other instruments served pursuant to Delaware Law in respect of Dissenting
Shares and received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under
Delaware Law. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to any demands for appraisal or offer to
settle or settle any such demands.
SECTION 2.09. Surrender of Shares; Stock Transfer Books. (a)
Prior to the Effective Time, Purchaser shall designate a bank or trust company
reasonably satisfactory to the Company to act as agent (the "Paying Agent") in
connection with the Merger to receive the funds to which holders of Shares shall
become entitled pursuant to Section 2.06(a). Immediately prior to the Effective
Time, Parent shall cause Surviving Corporation to have sufficient funds to
deposit, and shall cause Surviving Corporation to deposit in trust with the
Paying Agent, cash in the aggregate amount equal to the product of (i) the
number of shares outstanding immediately prior to the Effective Time (other than
Shares owned by Parent or Purchaser and Shares as to which dissenters' rights
have been exercised as of the Effective Time) and (ii) the Per Share Amount.
Such funds shall be invested by the Paying Agent as directed by the Surviving
Corporation, provided that such investments shall be in obligations of or
guaranteed by the United States of America or of any agency thereof and backed
by the full faith and credit of the United States of America, in commercial
paper obligations rated A-1 or P-1 or better by Moody's Investors Services, Inc.
or Standard & Poor's Corporation, respectively, or in deposit accounts,
certificates of deposit or banker's acceptances of, repurchase or reverse
repurchase agreements with, or Eurodollar time deposits purchased from,
commercial banks with capital, surplus and undivided profits aggregating in
excess of $100 million (based on the most recent financial statements of such
bank which are then publicly available at the SEC or otherwise); provided,
however, that no loss on any investment made pursuant to this Section 2.09 shall
relieve Parent or the Surviving Corporation of its obligation to pay the Per
Share Amount for each Share outstanding immediately prior to the Effective Time.
(b) Promptly after the Effective Time, Parent shall cause the
Surviving Corporation to mail to each person who was, at the Effective Time, a
holder of record of Shares entitled to receive the Merger Consideration pursuant
to Section 2.06(a) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares (the "Certificates") shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use in
effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as may be required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share formerly
evidenced by such Certificate, and such Certificate shall then be cancelled. No
interest shall accrue or be paid on the Merger Consideration payable upon the
surrender of any Certificate for the benefit of the holder of such Certificate.
If payment of the Merger Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is registered on the stock
transfer books of the Company, it shall be a condition of payment that the
Certificate so surrendered shall
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be endorsed properly or otherwise be in proper form for transfer and that the
person requesting such payment shall have paid all transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such taxes
either have been paid or are not applicable. The Surviving Corporation shall pay
all charges and expenses, including those of the Paying Agent, in connection
with the distribution of the Merger Consideration.
(c) At any time following the third month after the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it) and, thereafter, such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat and other similar
laws) only as general creditors thereof with respect to any Merger Consideration
that may be payable upon due surrender of the Certificates held by them.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Share for any Merger Consideration
delivered in respect of such Share to a public official pursuant to any
abandoned property, escheat or other similar law.
(d) At Effective Time, the stock transfer books of the Company
shall be closed and, thereafter, there shall be no further registration of
transfers of Shares on the records of the Company. From and after the Effective
Time, the holders of Shares outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such Shares except as otherwise
provided herein or by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Purchaser that:
SECTION 3.01. Organization and Qualification; Subsidiaries.
Each of the Company and each subsidiary of the Company (a "Subsidiary") is a
corporation or partnership duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has the requisite
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power and authority
would not, individually or in the aggregate, have a Material Adverse Effect (as
defined below). The Company and each Subsidiary is duly qualified or licensed as
a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a Material
Adverse Effect. When used in connection with the Company or any Subsidiary, the
term "Material Adverse Effect" means any change or effect that, when taken
together with all other adverse changes
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and effects, is or is reasonably likely to be materially adverse to the
business, operations, assets, or condition (financial or otherwise) of the
Company and the Subsidiaries taken as a whole. A true and complete list of all
the Subsidiaries, together with the jurisdiction of incorporation of each
Subsidiary, and the percentage of the outstanding capital stock of each
Subsidiary owned by the Company and each other Subsidiary, is set forth in
Section 3.01 of the Disclosure Schedule delivered concurrently with the
execution and delivery of this Agreement by the Company to Parent (the
"Disclosure Schedule"). Except as disclosed in such Section 3.01 of the
Disclosure Schedule, the Company does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for or have voting rights with respect to, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity, other than indirect equity and similar interests held for
investment which are not, in the aggregate, material to the Company. Except as
set forth in Section 3.01 of the Disclosure Schedule, there are not now, and on
the Tender Offer Acceptance Date there will not be, any voting trusts or other
agreements or understandings to which the Company or any Subsidiary is a party
or is bound with respect to the voting of the capital stock of the Company. No
Subsidiary is material to the business, operations or condition (financial or
otherwise) of the Company or has any material assets or liabilities.
SECTION 3.02. Certificate of Incorporation and By-laws. The
Company has heretofore furnished to Parent a complete and correct copy of the
Certificate of Incorporation and the By-laws or equivalent organizational
documents, each as amended to date, of the Company and its Subsidiaries. Such
Certificate of Incorporation, By-laws and equivalent organization documents are
in full force and effect. Neither the Company nor any Subsidiary is in violation
of any provision of its Certificate of Incorporation, By-laws or equivalent
organizational documents.
SECTION 3.03. Capitalization. The authorized capital stock of
the Company consists of 10,000,000 Shares and 10,000,000 shares of Preferred
Stock, par value $1.00 per share ("Company Preferred Stock"). As of May 31,
1997, (i) 5,727,422 Shares were issued and outstanding, all of which were
validly issued, fully paid and nonassessable and not subject to preemptive
rights, (ii) no Shares were held in the treasury of the Company, (iii) no Shares
were held by the Subsidiaries, and (iv) 650,687 Shares were reserved for future
issuance pursuant to the Stock Option Plans of which 443,313 Shares were
reserved for issuance upon exercise of existing options. As of the date hereof,
no shares of Company Preferred Stock are issued and outstanding. Since May 31,
1997 to the date of this Agreement, the Company has not issued any Shares or
granted any Options covering Shares. Except as set forth in this Section 3.03,
or Section 3.03 of the Disclosure Schedule, there are no options, convertible
securities, warrants or other rights, agreements, arrangements or commitments
relating to the issued or unissued capital stock obligating the Company or any
Subsidiary to issue or sell or cause to be issued, delivered or sold, additional
shares of capital stock of the Company or obligating the Company to grant,
extend or enter into any subscription, option, warrant, right, convertible
security or other similar agreement or commitment any shares of capital stock
of, or other equity interests in, the Company or any Subsidiary. All Shares
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid
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and nonassessable. There are no outstanding contractual obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise acquire any Shares
or any capital stock of any Subsidiary or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
Subsidiary or any other person. Except as disclosed in Section 3.01 of the
Disclosure Schedule, (i) all of the outstanding capital stock of, or other
ownership interests in, each Subsidiary, has been validly issued, is (in the
case of capital stock) fully paid and nonassessable and (in the case of
partnership interests) not subject to current or future capital calls, and is
owned by the Company, directly or indirectly, free and clear of any lien and
free of any other charge, claim, encumbrance, limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests) and (ii) there are not now, and
on the Tender Offer Acceptance Date there will not be, any outstanding
subscriptions, options, warrants, calls, rights, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of any of the Subsidiaries, or otherwise
obligating the Company or any Subsidiary to issue, transfer or sell any such
securities or to make any payments in respect of any of its securities or its
equity.
SECTION 3.04. Authority Relative to this Agreement. The
Company has all necessary power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
Transactions, subject, with respect to the Merger, to the approval and adoption
of this Agreement by the affirmative votes of the stockholders of the Company to
the extent required by Delaware Law, and the filing and recordation of
appropriate merger documents as required by Delaware Law. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the Transactions have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the Transactions
(other than, with respect to the Merger, the approval and adoption of this
Agreement by the affirmative votes of the stockholders of the Company to the
extent required by Delaware Law, and the filing and recordation of appropriate
merger documents as required by Delaware Law). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Purchaser, constitutes a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the Restated Certificate or By-laws of the Company, (ii) assuming that
required filings under the HSR Act (as hereinafter defined) and Delaware Law are
made by the appropriate parties, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Company or by which any
property or asset of the Company is bound or affected, or (iii) except as set
forth in Section 3.05 of the Disclosure Schedule, result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of the Company or any of its
Subsidiaries pursuant to, any note, bond, mortgage or indenture, deed of trust,
license,
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lease or, to the knowledge of the Company, any other contract, agreement, or
other instrument or obligation to which the Company is a party or by which the
Company or any such Subsidiary or any property or asset of the Company or
Subsidiary is bound or affected, except, in the cases of (ii) and (iii), for any
such conflicts, violations, breaches, defaults or other occurrences which do
not, individually or in the aggregate, have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company will not,
require any consent, approval, authorization or permit of, or filing with, or
notification to, any governmental or regulatory authority to be obtained or made
by the Company, domestic or foreign, except (i) for applicable requirements, if
any, of the Exchange Act, state securities or "blue sky" laws ("Blue Sky Laws")
and state takeover laws, the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), and filing and recordation of
appropriate merger documents as required by Delaware Law or (ii) where failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay consummation of the Offer
or the Merger, or otherwise prevent the Company from performing its obligations
in any material way under this Agreement, and does not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.06. SEC Filings; Financial Statements. (a) The
Company has filed all forms, reports and documents required to be filed by it
with the SEC since December 31, 1995 (collectively, the "SEC Reports"). The SEC
Reports (i) were prepared in all material respects in accordance with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the Exchange Act, as the case may be, and the rules and regulations
thereunder and as of their respective filing dates, complied as to form in all
material respects with all applicable requirements of the Securities Act and the
Exchange Act, and (ii) did not, at the time they were filed (or at the effective
date thereof in the case of registration statements), contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. No
Subsidiary is currently required to file any form, report or other document with
the SEC under Section 12 of the Exchange Act.
(b) Each of the consolidated audited and unaudited financial
statements (including, in each case, any notes thereto) of the Company contained
in the SEC Reports was prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis ("GAAP") throughout
the periods indicated (except as may be indicated in the notes thereto and
except that financial statements included with quarterly reports on Form 10-Q do
not contain all GAAP notes to such financial statements) and each fairly
presented the consolidated financial position, results of operations and changes
in stockholders' equity and cash flows of the Company and the consolidated
Subsidiaries as at the respective dates thereof and for the respective periods
indicated therein (subject, in the case of unaudited statements, to normal and
recurring year-end adjustments which were not and are not expected, individually
or in the aggregate, to have a Material Adverse Effect).
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(c) Except as (i) and to the extent set forth on the
consolidated balance sheet of the Company and the consolidated Subsidiaries as
at December 31, 1996, including the notes thereto (the "1996 Balance Sheet"),
(ii) set forth in Section 3.06(c) of the Disclosure Schedule or (iii) disclosed
in any SEC Report filed by the Company after December 31, 1996, neither the
Company nor any Subsidiary has any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise) which would be required to
be reflected on a balance sheet, or in the notes thereto, prepared in accordance
with GAAP, except for liabilities and obligations incurred in the ordinary
course of business consistent with past practice since December 31, 1996 which
would not, individually or in the aggregate, be material in amount.
SECTION 3.07. Absence of Certain Changes or Events. Since
December 31, 1996, except as contemplated by this Agreement or disclosed in any
SEC Report or as set forth in Section 3.07 of the Disclosure Schedule, there has
not been (i) any event or change having, individually or in the aggregate, a
Material Adverse Effect, except for general economic changes and changes that
may affect generally the industries in which the Company operates, (ii) any
material change by the Company in its accounting methods, principles or
practices, (iii) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company or any redemption,
purchase or other acquisition of any of its securities, (iv) any entry into any
agreement or understanding, whether written or (if enforceable) oral, between
the Company or any Subsidiary on the one hand, and any of their respective
employees, on the other hand, providing for the employment of any such employees
or any severance or termination benefits payable or to become payable by the
Company or any Subsidiary to any employee, or (v) except as permitted by this
Agreement and except for increases made prior to the date of this Agreement in
accordance with past practices, any increase (including any increase effective
in the future) in (A) the compensation, severance or termination benefits
payable or to become payable by the Company or any Subsidiary to any employee
(or any increase in benefits under any change in control severance arrangement
applicable to employees of the Company and the subsidiaries, generally) or (B)
any bonus, insurance, pension or other employee benefits (including without
limitation the granting of stock options, stock appreciation rights or
restricted stock awards) made to, for or with any employee. All contracts,
agreements or understandings, whether written or (if enforceable) oral, between
the Company or any Subsidiary on the one hand, and any of their respective
employees on the other hand, are set forth in Schedule 3.07 of the Disclosure
Schedule and have been furnished to Parent prior to the date hereof. At April
30, 1997, the working capital (current assets minus current liabilities) of the
Company was $10.1 million, of which $9.9 million consisted of cash, and the
long-term indebtedness of the Company was less than $2.4 million. Since such
date, except as contemplated by this Agreement or as set forth in Section 3.07
of the Disclosure Schedule, there has not been (i) any decrease in the working
capital of the Company other than such as may result from actions taken in the
ordinary course of business of the Company or (ii) any increase in the long-term
indebtedness of the Company.
SECTION 3.08. Absence of Litigation. Except as disclosed in
the SEC Reports filed prior to the date of this Agreement or in Section 3.08
of the Disclosure Schedule, there is no claim, action, proceeding or
investigation pending or, to the best knowledge of the Company, threatened
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against the Company or any Subsidiary, or affecting any property or asset of the
Company or any Subsidiary, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign, which (i)
individually or in the aggregate, is reasonably expected to have a Material
Adverse Effect (other than any claim, action, proceeding or investigation
seeking to delay or prevent the consummation of any Transaction) or (ii) seeks
to delay or prevent the consummation of any Transaction. Neither the Company nor
any Subsidiary nor any property or asset of the Company or any Subsidiary is
subject to any order, writ, judgment, injunction, decree, determination or award
having, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.09. Compliance with Applicable Laws. The Company and
each Subsidiary hold all licenses, franchises, permits and authorizations
necessary for the lawful conduct of its business as it is currently conducted
except where the failure to so hold is not reasonably expected to have a
Material Adverse Effect. Except as disclosed in the Disclosure Schedule or in
any SEC Report filed prior to the date of this agreement or as to matters for
which reserves have been established and which reserves have been disclosed to
Purchaser, the businesses of the Company and the Subsidiaries currently are not
being conducted, and have not previously been conducted, in violation of any
law, ordinance or regulation of any court, governmental authority or other
regulatory or administrative agency or commission, domestic or foreign
("Governmental Entity"), except for possible violations which individually or in
the aggregate do not have a Material Adverse Effect. Except as described in SEC
Reports filed prior to the date of this Agreement, no investigation or review by
any Governmental Entity concerning any such possible violations by the Company
or any Subsidiary is pending or, to the knowledge of the executive officers of
the Company, threatened, nor has any Governmental Entity indicated an intention
to conduct the same in each case other than those the outcome of which could
reasonably be expected to have a Material Adverse Effect.
SECTION 3.10. Employee Benefit Plans. (a) Section 3.10 of the
Disclosure Schedule contains a true and complete list of (i) all employee
benefit plans (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance or other benefit
plans, programs or arrangements, and all employment, termination, severance or
other contracts or agreements to which the Company or any Subsidiary is a party,
with respect to which the Company or any Subsidiary has any obligation or which
are maintained, contributed to or sponsored by the Company or any Subsidiary for
the benefit of any current or former employee, officer or director of the
Company or any Subsidiary and (ii) each employee benefit plan for which the
Company or any Subsidiary could incur liability not otherwise provided for in
the Company's financial statements contained in the SEC Reports under Section
4069 of ERISA, in the event such plan were terminated, or under Section 4212(c)
of ERISA, or in respect of which the Company or any Subsidiary remains
secondarily liable under Section 4204 of ERISA (collectively, (i) and (ii)
referred to herein as the "Plans"). Each Plan is in writing and the Company has
made available to Parent true and complete copies of each Plan and true and
complete copies of each material document prepared in connection with each such
Plan, including, without limitation, (i) a copy of each trust or other funding
arrangement, (ii) each
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summary plan description and summary of material modifications, (iii) the most
recently filed Internal Revenue Service ("IRS") Form 5500, (iv) the most
recently received IRS determination letter for each such Plan, and (v) the most
recently prepared actuarial report and financial statement in connection with
each such Plan. Except as specifically provided by this Agreement, neither the
Company nor any Subsidiary has any express or implied commitment (i) to create,
incur liability with respect to or cause to exist any other employee benefit
plan, program or arrangement, (ii) to enter into any contract or agreement to
provide compensation or benefits to any individual or (iii) to modify, change or
terminate any Plan, other than with respect to a modification, change or
termination required by ERISA or the Internal Revenue Code of 1986, as amended
(the "Code").
(b) None of the Plans is a multiemployer plan, within the
meaning of Section 3(37) or 4001(a)(3) of ERISA (a "Multiemployer Plan"), or is
a single employer pension plan, within the meaning of Section 4001(a)(15) of
ERISA, for which the Company or any Subsidiary could incur liability under
Section 4063 or 4064 of ERISA (a "Multiple Employer Plan"). Except to the extent
set forth in Plans listed in Section 3.09 of the Disclosure Schedule, none of
the Plans (i) provides for the payment of separation, severance, termination or
similar-type benefits to any person, (ii) obligates the Company or any
Subsidiary to pay separation, severance, termination or other benefits as a
result of any Transaction or (iii) obligates the Company or any Subsidiary to
make any payment or provide any benefit that could be subject to a tax under
Section 4999 of the Code. Except as disclosed in Section 3.09 of the Disclosure
Schedule, none of the Plans provides for or promises retiree medical, disability
or life insurance benefits to any current or former employee, officer or
director of the Company or any Subsidiary.
(c) Each Plan which is intended to be qualified under Section
401(a) or 401(k) of the Code has received a favorable determination letter from
the IRS that such Plan is so qualified, and each trust established in connection
with any Plan which is intended to be exempt from federal income taxation under
Section 501(a) of the Code has received a determination letter from the IRS that
such trust is so exempt. No fact or event has occurred that could adversely
affect the qualified status of any such Plan or the exempt status of any such
trust, other than those which have been remedied by the IRS' Voluntary
Compliance Resolution or Closing Agreement Programs. Each trust maintained or
contributed to by the Company or any Subsidiary which is intended to be
qualified as a voluntary employees' beneficiary association exempt from federal
income taxation under Sections 501(a) and 501(c)(9) of the Code has received a
favorable determination letter from the IRS that it is so qualified and so
exempt, and no fact or event has occurred that could adversely affect such
qualified or exempt status.
(d) Except to the extent as does not constitute a Material
Adverse Effect, each Plan is now and has been operated in all respects in
accordance with the requirements of all applicable laws, including, without
limitation, ERISA and the Code, and the Company and each Subsidiary have
performed all obligations required to be performed by them under, are not in any
respect in default under or in violation of, and have no knowledge of any
default or violation by any party to, any Plan. No Plan has incurred an
"accumulated funding deficiency" (within the meaning of Section 302 of ERISA or
Section 412 of the Code), whether or not waived. The Company's financial
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statements contained in the SEC Reports reflect an accrual (through March 31,
1997) of all material amounts of employer contributions and premiums accrued but
unpaid with respect to the Plans. With respect to each Plan subject to Title IV
of ERISA, the Company has no knowledge that, as of the date hereof, the excess
of the accumulated benefit obligations of such Plan over the fair market value
of the assets of such Plan has increased above such excess determined as of the
date of the most recent actuarial valuation report prepared for such Plan.
(e) The Company and the Subsidiaries have not incurred any
liability under, and have complied in all respects with, the Worker Adjustment
Retraining Notification Act and the regulations promulgated thereunder and do
not reasonably expect to incur any such liability as a result of actions taken
or not taken prior to the consummation of the Offer.
(f) Except as set forth in Section 3.10 of the Disclosure
Schedule, each Plan may be unilaterally terminated at any time by the Company or
a Subsidiary without material liability.
SECTION 3.11. Labor Matters. Except as set forth in Section
3.11 of the Disclosure Schedule, and other than exceptions as do not have a
Material Adverse Effect, (i) there are no controversies including any labor
strike, material organized work stoppage or other material organized labor
controversy pending or, to the best knowledge of the Company, threatened between
the Company or any Subsidiary and any of their respective employees; (ii)
neither the Company nor any Subsidiary is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or any Subsidiary, nor, to the best knowledge of the Company, are there
any activities or proceedings of any labor union to organize any such employees;
(iii) there are no grievances outstanding against the Company or any Subsidiary
under any such agreement or contract; (iv) there are no unfair labor practice
complaints pending against the Company or any Subsidiary before the National
Labor Relations Board or any current union representation questions involving
employees of the Company or any Subsidiary; (v) there is no strike, slowdown,
work stoppage or lockout, or, to the best knowledge of the Company, threat
thereof, by or with respect to any employees of the Company or any Subsidiary
and (vi) the Company and each Subsidiary is in compliance with all applicable
agreements, contracts and policies relating to employment, employment practices,
wages, hours and terms and conditions of employment of the employees.
SECTION 3.12. Offer Documents; Schedule 14D-9. Neither the
Schedule 14D-9 nor any information supplied by the Company for inclusion in the
Offer Documents shall, at the respective times the Schedule 14D-9, the Offer
Documents, or any amendments or supplements thereto are filed with the SEC or
are first published, sent or given to stockholders of the Company, as the case
may be, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they are
made, not misleading, except that no representation or warranty is made by the
Company with respect to information supplied by Purchaser or Parent for
inclusion in the Schedule 14D-9. The Schedule 14D-9 shall comply in all material
respects as to form with the requirements of the Exchange Act and the rules and
regulations thereunder.
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SECTION 3.13. Taxes. (a) Except as set forth on Section 3.13
of the Disclosure Schedule, (i) the Company and each Subsidiary, and any
affiliated, combined or unitary group of which the Company or any Subsidiary is
or was a member has properly completed and timely (taking into account any
extensions) filed all federal and all material state, local and foreign returns,
declarations, reports, estimates, information returns and statements ("Returns")
required to be filed in respect of any Tax and has timely paid all Taxes that
are shown by such Returns to be due and payable and (ii) the Returns correctly
and accurately (except perhaps for one or more matters the aggregate effect of
which is not material) reflect the facts regarding the income, business and
assets, operations, activities, status or other matters of the Company required
to be shown thereon or any other information required to be shown thereon and
are not subject to penalties under Section 6662 of the Code, relating to
accuracy-related penalties, or any corresponding provision of applicable state,
local or foreign tax law or any predecessor provision law, (iii) the Company and
each Subsidiary has established reserves that are adequate in the aggregate for
the payment of all material Taxes not yet due and payable with respect to the
results of operations of the Company and the Subsidiary through the date hereof,
and (iv) the Company and each Subsidiary have complied in all material respects
with all applicable laws, rules and regulations relating to the payment and
withholding of Taxes and the filing of federal Returns and any material state or
local Return.
(b) Section 3.13 of the Disclosure Schedule sets forth the
last taxable period through which the federal income Tax Returns of the Company
and each Subsidiary have been examined by the IRS. Except to the extent being
contested in good faith, all material deficiencies asserted as a result of such
examinations and any examination by any applicable state or local taxing
authority have been paid, fully settled or adequately provided for in the
Company's most recent audited financial statements. Except as provided for in
Section 3.13 of the Disclosure Schedule, no material federal, state or local
income or franchise tax audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes for which the Company
or any of the Subsidiaries would be liable, and no material deficiency which has
not yet been paid for any such Taxes has been proposed, asserted or assessed
against the Company or any of the Subsidiaries with respect to any period.
(c) Except as disclosed on Section 3.13 of the Disclosure
Schedule, neither the Company nor any Subsidiary has executed or entered into
(or prior to the close of business on the Closing Date will execute or enter
into) with the IRS or any taxing authority (i) any agreement extending the
period for assessment or collection of any Tax for which the Company or any
Subsidiary is liable or (ii) a closing agreement pursuant to Section 7121 of the
Code or any similar provision of state or local income tax law that relates to
the Company or any Subsidiary. Neither the Company nor any Subsidiary has made
an election under Section 341(f) of the Code or has agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code) owned by the Company or
any Subsidiary. Except as set forth in Schedule 3.13, neither the Company nor
any Subsidiary is a party to, is bound by or has any obligation under any tax
sharing agreement or similar agreement or arrangement. Neither the Company nor
any Subsidiary is a party to any agreement or other arrangement that would
result
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separately or in the aggregate in the payment of any "excess parachute payments"
within the meaning of Section 280G of the Code.
(d) There are no liens for Taxes (other than for current Taxes
not yet due and payable) on the assets of the Company or any Subsidiary.
(e) Except for the group of which the Company is presently a
member, neither the Company nor any Subsidiary has ever been a member of an
affiliated group of corporations, within the meaning of Section 1504 of the
Code, other than as a common parent corporation.
(f) After the date hereof, no election which is inconsistent
with past practices with respect to Taxes will be made without the written
consent of Buyer
(g) None of the assets of the Company or any Subsidiary is
property that the Company is required to treat as being owned by any other
person pursuant to the "safe harbor lease" provisions of former Section
168(f)(8) of the Code.
(h) None of the assets of the Company or any Subsidiary
directly or indirectly secures any debt the interest on which is tax-exempt
under Section 103(a) of the Code.
(i) None of the assets of the Company or any Subsidiary is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(j) Neither the Company nor any Subsidiary has agreed to make
nor is it required to make any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise which will have any adverse
effect on any Tax for a period which ends after December 31, 1996.
(k) Neither the Company nor any Subsidiary has participated in
an international boycott within the meaning of Section 999 of the Code.
(l) Neither the Company nor any Subsidiary has nor has either
had a permanent establishment in any foreign country, as defined in any
applicable tax treaty or convention between the United States and such foreign
country.
(m) Schedule 3.13 of the Disclosure Schedule identifies each
arrangement to which the Company or a Subsidiary is a party and which is a
partnership for federal income tax purposes and which was required to file an
income tax return for a taxable year of such partnership which ended in 1996
(taking into account any election which permitted such arrangement not to file
such a return).
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(n) Schedule 3.13 of the Disclosure Schedule identifies the
Company's basis and excess loss account, if any, in each Subsidiary which had on
December 31, 1996 assets with a fair market value in excess of $500,000.
(o) "Tax" or "Taxes" means any and all taxes, fees, levies,
duties, tariffs, imposts, and other charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and documentation fees; and custom duties, tariffs, and
similar charges.
SECTION 3.14. Brokers. No broker, finder intermediary or
investment banker (other than Oppenheimer) is entitled to any brokerage,
finder's or other fee or commission in connection with the Transactions based
upon arrangements made by or on behalf of the Company. The Company has
heretofore furnished to Parent a complete and correct copy of all agreements
between the Company and Oppenheimer pursuant to which such firm would be
entitled to any payment relating to the Transactions.
SECTION 3.15. Insurance. Section 3.15 of the Disclosure
Schedule lists all insurance policies currently held by the Company or any of
the Subsidiaries insuring occurrences or claims on or made on the date hereof.
There is no default by the Company or any subsidiary with respect to any
provision contained in any such insurance policy which would permit the denial
of coverage or cancellation of coverage thereunder, except for defaults or
failures which, individually or in the aggregate, would not have a Material
Adverse Effect and the Subsidiaries taken as a whole.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent
and warrant to the Company that:
SECTION 4.01. Corporate Organization. Each of Parent and
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has the requisite
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted, except where the failure to have such
power and authority would not, individually or in the aggregate, have a material
adverse effect on the ability of Parent and Purchaser to perform their
obligations hereunder and to consummate the Transactions.
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<PAGE> 25
SECTION 4.02. Authority Relative to this Agreement. Each of
Parent and Purchaser has all necessary corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions, subject, with respect to the Merger, to the filing
and recordation of appropriate merger documents as required by Delaware Law. The
execution and delivery of this Agreement by Parent and Purchaser and the
consummation by Parent and Purchaser of the Transactions have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Parent or Purchaser are necessary to authorize this
Agreement or to consummate the Transactions (other than, with respect to the
Merger, the filing and recordation of appropriate merger documents as required
by Delaware Law). This Agreement has been duly and validly executed and
delivered by Parent and Purchaser and, assuming the due authorization, execution
and delivery by the Company, constitutes a legal, valid and binding obligation
of each of Parent and Purchaser enforceable against each of Parent and Purchaser
in accordance with its terms.
SECTION 4.03. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by Parent and Purchaser do not, and
the performance of this Agreement by Parent and Purchaser will not, (i) conflict
with or violate the Certificate of Incorporation or Bylaws of either Parent or
Purchaser, (ii) assuming that required filings under the HSR Act and Delaware
Law are made by the appropriate parties, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Parent or Purchaser or by
which any property or asset of either of them is bound or affected, or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of Parent
or Purchaser pursuant to, any note, bond, mortgage or indenture, deed of trust,
license, lease or, to the knowledge of Parent and Purchaser, any other contract,
agreement or other instrument or obligation to which Parent or Purchaser is a
party or by which Parent or Purchaser or any property or asset of either of them
is bound or affected, except, in the cases of (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, prevent Parent and Purchaser from performing
their respective obligations in any material way under this Agreement and
consummating the Transactions.
(b) The execution and delivery of this Agreement by Parent and
Purchaser do not, and the performance of this Agreement by Parent and Purchaser
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, except (i) for applicable requirements, if any, of the Exchange Act,
Blue Sky Laws and state takeover laws, the HSR Act, and filing and recordation
of appropriate merger documents as required by Delaware Law and (ii) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay consummation of
the Transactions, or otherwise prevent Parent or Purchaser from performing their
respective obligations in any material way under this Agreement.
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<PAGE> 26
SECTION 4.04. Offer Documents; Proxy Statement. The Offer
Documents will not, at the time the Offer Documents are filed with the SEC or
are first published, sent or given to stockholders of the Company, as the case
may be, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they are
made, not misleading. The information supplied by Parent for inclusion in the
proxy statement to be sent to the stockholders of the Company in connection with
the Stockholders Meeting (as hereinafter defined) (such proxy statement, as
amended and supplemented, being referred to herein as the "Proxy Statement") and
Schedule 14D-9 will not, on the date the Proxy Statement or Schedule 14D-9 (or
any amendment or supplement thereto) is first mailed to stockholders of the
Company, at the time of the Stockholders Meeting and at the Effective Time,
contain any statement which, at such time and in light of the circumstances
under which it is made, is false or misleading with respect to any material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholders Meeting which shall have become
false or misleading. Notwithstanding the foregoing, Parent and Purchaser make no
representation or warranty with respect to any information supplied by the
Company or any of its representatives which is contained in any of the foregoing
documents or the Offer Documents. The Offer Documents shall comply in all
material respects as to form with the requirements of the Exchange Act and the
rules and regulations thereunder.
SECTION 4.05. Brokers. No broker, finder, intermediary or
investment banker (other than Petrie Parkman & Co., Inc.) is entitled to any
brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Parent or
Purchaser.
SECTION 4.06. Financing. Parent has, or will have available to
it at the time Purchaser is required to pay for Shares under the terms of the
Offer, and will make available to Purchaser, sufficient funds to permit
Purchaser to acquire all the outstanding Shares in the Offer and the Merger.
Parent has obtained written commitments for such funds and has provided the
Company with copies of such commitments.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the
Purchaser's Election Date. The Company covenants and agrees that, between the
date of this Agreement and the election or appointment of Purchaser's designees
to the Board pursuant to Section 6.03 upon the purchase by Purchaser of any
Shares pursuant to the Offer (the "Purchaser's Election Date"), unless Parent
shall otherwise agree in writing, the businesses of the Company and the
Subsidiaries shall be conducted only in, and the Company and the Subsidiaries
shall not take any action except in, the ordinary course of business and in a
manner consistent with past practice; and the Company shall
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use its reasonable best efforts to preserve substantially intact the business
organization of the Company and the Subsidiaries, to keep available the services
of the current officers, employees and consultants of the Company and the
Subsidiaries and to preserve the goodwill of those current relationships of the
Company and the Subsidiaries with customers, suppliers and other persons with
which the Company or any Subsidiary has significant business relations. By way
of amplification and not limitation, except as contemplated by this Agreement or
as disclosed in Section 5.01 of the Disclosure Schedule, the Company shall not,
between the date of this Agreement and the Purchaser's Election Date, directly
or indirectly do, or propose to do, any of the following without the prior
written consent of Parent:
(a) amend or otherwise change the certificate of incorporation
or by-laws or equivalent organizational documents of the Company or
the Subsidiaries;
(b) issue, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, sale, pledge, disposition, grant or encumbrance
of, (i) any shares of capital stock of any class of the Company or any
Subsidiary, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including, without limitation, any phantom
interest), of the Company or any Subsidiary (except for the issuance of
Shares issuable pursuant to Options outstanding on the date hereof) or
(ii) any assets of the Company or any Subsidiary, except for sales of
products in the ordinary course of business and in a manner consistent
with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock (except for such declarations, set
asides, dividends and other distributions made from any Subsidiary to
the Company);
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation,
partnership, other business organization or any division thereof or any
material amount of assets other than in the ordinary course of
business; (ii) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person, or
make any loans, advances or capital contribution to, or investments in,
any other person (other than such of the foregoing as are made by the
Company to or in a wholly-owned subsidiary of the Company), except in
the ordinary course of business and consistent with past practice; or
(iii) enter into or amend any contract, agreement, commitment or
arrangement with respect to any matter set forth in this Section
5.01(e);
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<PAGE> 28
(f) increase the compensation payable or to become payable to
its officers or employees, except for increases in accordance with past
practices in salaries or wages of employees of the Company or any
Subsidiary who are not officers of the Company or any Subsidiary, or
grant any severance or termination pay to, or enter into any employment
or severance agreement with, any director, officer or other employee of
the Company or any Subsidiary, or establish, adopt, enter into or amend
any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee;
(g) make any tax election or settle or compromise any
material federal, state, local or foreign income tax liability;
(h) pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business and consistent with past practice, of
liabilities reflected or reserved against in the 1996 Balance Sheet or
subsequently incurred in the ordinary course of business and consistent
with past practice;
(i) settle or compromise any pending or threatened suit,
action or claim which is material or which relates to any of the
Transactions;
(j) undertake any capital commitment not reflected in the
Company's budget in an individual amount greater than $100,000 or, when
aggregated with all other capital commitments not reflected in the
Company's budget, in an aggregate amount greater than $1,000,000; or
(k) take or offer or propose to take, or agree to take in
writing, or otherwise, any of the actions described in paragraphs (a)
through (j) of this Section 5.01 or any action which would result in
any of the conditions to the Offer not being satisfied (other than as
contemplated by this Agreement).
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders Meeting. Subject to its fiduciary
duties under applicable law as advised by independent counsel, the Company,
acting through the Board, shall, if required by applicable law and the Restated
Certificate and By-laws of the Company, (a) duly call, give notice of, convene
and hold an annual or special meeting of its stockholders as soon as practicable
following consummation of the Offer for the purpose of considering and taking
action on this Agreement and the transactions contemplated hereby (the
"Stockholders Meeting") and (b) include in the Proxy Statement the
recommendation of the Board that the stockholders of the
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Company approve and adopt this Agreement and the Transactions; provided,
however, that such recommendation and approval may be withdrawn, modified or
changed to the extent that the Board determines after consultation with
independent counsel that such withdrawal, modification or change is consistent
with its fiduciary duties. Any such withdrawal, modification or change shall not
constitute a breach of this Agreement but will nonetheless be subject to the
provisions of Sections 8.01 and 8.03. To the extent permitted by law, Parent and
Purchaser each agree to vote all Shares beneficially owned by them in favor of
the Merger.
SECTION 6.02. Proxy Statement. As soon as practicable
following the purchase of all Shares validly tendered and not withdrawn pursuant
to the Offer, if required by applicable law the Company shall file the Proxy
Statement with the SEC under the Exchange Act, and shall use its reasonable best
efforts to have the Proxy Statement cleared by the SEC. Parent, Purchaser and
the Company shall cooperate with each other in the preparation of the Proxy
Statement, and the Company shall notify Parent of the receipt of any comments of
the SEC with respect to the Proxy Statement and of any requests by the SEC for
any amendment or supplement thereto or for additional information and shall
provide to Parent promptly copies of all correspondence between the Company or
any representative of the Company and the SEC. The Company shall give Parent and
its counsel the opportunity to review the Proxy Statement prior to its being
filed with the SEC and shall give Parent and its counsel the opportunity to
review all amendments and supplements to the Proxy Statement and all responses
to requests for additional information and replies to comments prior to their
being filed with, or sent to, the SEC. Each of the Company, Parent and Purchaser
agrees to use its reasonable best efforts, after consultation with the other
parties hereto, to respond promptly to all such comments of and requests by the
SEC and to cause the Proxy Statement and all required amendments and supplements
thereto to be mailed to the holders of Shares entitled to vote at the
Stockholders Meeting at the earliest practicable time with the intent being to
complete the Merger before September 30, 1997.
SECTION 6.03. Company Board Representation; Section 14(f). (a)
Promptly upon the purchase by Purchaser of Shares pursuant to the Offer, and
from time to time thereafter, Purchaser shall be entitled to designate up to
such number of directors, rounded up to the next whole number, on the Board as
shall give Purchaser representation on the Board equal to the product of the
total number of directors on the Board (giving effect to the directors elected
pursuant to this sentence) multiplied by the percentage that the aggregate
number of Shares beneficially owned by Purchaser or any affiliate of Purchaser
at such time bears to the total number of Shares then outstanding, and the
Company shall, at such time, promptly take all actions necessary to cause
Purchaser's designees to be elected as directors of the Company, including
increasing the size of the Board or securing the resignations of incumbent
directors or both. At such times, the Company shall use its best efforts to
cause persons designated by Purchaser to constitute the same percentage as
persons designated by Purchaser shall constitute of the Board of (i) each
committee of the Board (some of whom may be required to be independent as
required by applicable law or rules of the National Association of Securities
Dealers Automated Quotation National market System ("NASDAQ/NMS")), (ii) each
board of directors of each domestic Subsidiary and (iii) each committee of each
such board, in each case only to the extent permitted by applicable law.
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Notwithstanding the foregoing, until the time Purchaser acquires a majority of
the then outstanding Shares on a fully diluted basis, the Company shall use its
best efforts to ensure that all the members of the Board and each committee of
the Board and such boards and committees of the domestic Subsidiaries as of the
date hereof who are not employees of the Company shall remain members of the
Board and of such boards and committees.
(b) The Company shall promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations under this Section 6.03 and shall
include in the Schedule 14D-9 an Information Statement pursuant to Section 14(f)
providing such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. Parent or Purchaser shall supply to the Company and be solely
responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1.
(c) Following the election or appointment of designees of
Purchaser pursuant to this Section 6.03, prior to the Effective Time, any
amendment of this Agreement or the Restated Certificate or By-laws of the
Company, any termination of this Agreement by the Company, any extension by the
Company of the time for the performance of any of the obligations or other acts
of Parent or Purchaser or waiver of any of the Company's rights hereunder shall
require the concurrence of a majority of the directors of the Company then in
office who neither were designated by Purchaser nor are employees of the Company
or if no such directors are then in office, no such amendment, termination,
extension or waiver shall be effected which is materially adverse to the holders
of Shares (other than Parent and its subsidiaries).
SECTION 6.04. Access to Information; Confidentiality. (a) From
the date hereof to the consummation of the Offer, the Company shall, and shall
cause the Subsidiaries and the officers, directors, employees, auditors and
agents of the Company and the Subsidiaries to, afford the officers, employees
and agents of Parent and Purchaser and persons providing or committing to
provide Parent or Purchaser with financing for the Transactions complete access
at all reasonable times to the officers, employees, agents, properties, offices,
plants and other facilities, books and records of the Company and each
Subsidiary, and shall furnish Parent and Purchaser and persons providing or
committing to provide Parent or Purchaser with financing for the Transactions
with all financial, operating and other data and information as Parent or
Purchaser, through its officers, employees or agents, may reasonably request.
(b) To the extent permitted by applicable law, in order to
facilitate the continuing operation of the Company by Parent and Purchaser from
and after the completion of the Offer without disruption and to assist in the
achievement of an orderly transition in the ownership and management of the
Company, from the date of this Agreement and until completion of the Offer, the
Company, Parent and Purchaser shall cooperate reasonably with each other to
effect an orderly transition including, without limitation, with respect to
communications with employees.
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(c) All information obtained by Parent or Purchaser pursuant
to this Section 6.04 shall be kept confidential in accordance with the
confidentiality agreement, dated April 29, 1997 (the "Confidentiality
Agreement"), between Parent and the Company.
SECTION 6.05. No Solicitation of Transactions. Until this
Agreement shall have been terminated pursuant to Section 8.01, neither the
Company nor any Subsidiary shall, directly or indirectly, through any officer,
director or any agent, investment banker, financial advisor, attorney,
accountant or other representative retained by the Company or any Subsidiary or
otherwise, solicit, initiate or encourage the submission of any proposal or
offer from any person relating to any acquisition or purchase of all or (other
than in the ordinary course of business) any substantial portion of the assets
of, or any equity interest in, the Company (including, without limitation, any
take-over bid or tender offer or exchange offer, merger, consolidation or
similar transaction involving the Company or any of its subsidiaries (other than
the transactions contemplated by this Agreement) (any of such transactions being
an "Acquisition Transaction") or any business combination with the Company or,
except to the extent required by fiduciary obligations under applicable law as
advised by independent counsel, participate in any negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other person to do or seek any of the foregoing;
provided, however, that nothing contained in this Section 6.05 shall prohibit
the Board from furnishing information to, or entering into discussions or
negotiations with, any person in connection with an unsolicited (from the date
of this Agreement) proposal in writing by such person to acquire the Company
pursuant to a merger, consolidation, share exchange, business combination or
other similar transaction or to acquire all or substantially all of the assets
of the Company or any of its Subsidiaries, if, and only to the extent that, (i)
the Board, after consultation with independent counsel (which may include its
regularly engaged independent counsel), determines in good faith that such
action is required for the Board to act in a manner that is consistent with its
fiduciary duties to stockholders imposed by Delaware Law (such determination
having been made by the full Board and not having been delegated to any
committee thereof) and (ii) prior to furnishing such information to, or entering
into discussions or negotiations with, such person the Company obtains from such
person an executed confidentiality agreement on terms no less favorable to the
Company than those contained in the Confidentiality Agreement. The Company
immediately shall cease and cause to be terminated all existing discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. The Company shall notify Parent promptly if any such proposal or
offer, or any inquiry or contact with any person with respect thereto, is made
after the execution hereof. The Company agrees not to release any third party
from, or waive any provision of, any confidentiality or, subject to the
fiduciary duties of the Board, standstill agreement to which the Company is or
may become a party.
SECTION 6.06. Employee Compensation and Other Employee
Benefits Matters. Annex B hereto sets forth certain agreements among the parties
hereto with respect to the Plans and other employee benefits matters.
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SECTION 6.07. Directors' and Officers' Indemnification
and Insurance.
(a) The Certificate of Incorporation of the Surviving
Corporation and each of its Subsidiaries shall contain provisions no less
favorable with respect to limitation of liability than are set forth in Article
VII of the Restated Certificate and Article V of the Bylaws of the Company as of
the date of this Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals who at
any time from and after the date of this Agreement and to and including the
Effective Time were directors, officers, employees, fiduciaries or agents of the
Company or any of its Subsidiaries in respect of actions or omissions occurring
at or prior to the Effective Time (including, without limitation, the matters
contemplated by this Agreement), unless such modification is required by law.
From and after the Purchaser's Election Date, the Company shall not amend,
repeal or otherwise modify the limitation of liability provisions of Article VII
of the Restated Certificate or the indemnification or advancement of expenses
provisions in the Restated Certificate of any of the Company's Subsidiaries in
any manner that would adversely affect the rights thereunder of individuals who
at any time from and after the date of this Agreement and to and including the
Effective Time were directors, officers, employees, fiduciaries or agents of the
Company or any of its Subsidiaries in respect of actions or omissions occurring
at or prior to the Effective Time (including, without limitation, the matters
contemplated by this Agreement), unless such modification is required by law.
(b) The Company shall, to the fullest extent permitted under
applicable law and regardless of whether the Merger becomes effective,
indemnify, hold harmless and defend, and, after the Effective Time, the
Surviving Corporation shall, to the fullest extent permitted under applicable
law, indemnify, hold harmless and defend, each present and former director,
officer, employee, fiduciary and agent of the Company and each Subsidiary
(collectively, the "Indemnified Parties") against all costs and expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and settlement amounts paid in connection with any threatened or
actual claim, action, suit, proceeding or investigation (whether arising before,
on or after the Effective Time) ("Claim"), whether civil, criminal,
administrative or investigative, arising out of or pertaining to any action or
omission in their capacity as an officer, director, employee, fiduciary or agent
(including, without limitation, any Claim arising out of this Agreement or any
of the transactions contemplated hereby or the operations of the Company or the
condition of the assets of the Company), whether occurring before, on or after
the Effective Time, whether asserted or claimed prior to, at or after the
Effective Time, for a period of six years after the later of the date of this
Agreement and the Effective Time, in each case to the fullest extent permitted
under Delaware Law (and shall pay any expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
fullest extent permitted under Delaware Law, upon receipt from the Indemnified
Party to whom expenses are advanced of any undertaking to repay such advances
required under Delaware Law). In the event of any such claim, action, suit,
proceeding or investigation, (i) the Indemnified Parties may retain counsel
(including local counsel) satisfactory to them and the Company or the Surviving
Corporation, as the case may be, shall pay the reasonable fees and expenses of
such counsel, promptly after statements therefor are received and (ii) the
Company and the Surviving Corporation
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shall use all reasonable efforts in the vigorous defense of any such matter;
provided, however, that neither the Company nor the Surviving Corporation shall
be liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld); and provided further that neither the
Company nor the Surviving Corporation shall be obligated pursuant to this
Section 6.07(b) to pay the fees and expenses of more than one counsel (plus
appropriate local counsel) for all Indemnified Parties in any single action
unless there is, as determined by counsel to the Indemnified Parties, under
applicable standards of professional conduct, a conflict or a reasonable
likelihood of a conflict on any significant issue between the positions of any
two or more Indemnified Parties, in which case such additional counsel
(including local counsel) as may be required to avoid any such conflict or
likely conflict may be retained by the Indemnified Parties at the expense of the
Company or the Surviving Corporation; and provided further that, in the event
that any claim for indemnification is asserted or made within such six-year
period, all rights to indemnification in respect of such claim shall continue
until the disposition of such claim.
(c) The Company shall, from and after the date of this
Agreement and to and including the Effective Time, and the Surviving Corporation
shall, for six years from the Effective Time, maintain in effect the current
directors' and officers' liability insurance policies maintained by the Company
(provided that the Surviving Corporation may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions which are no
less advantageous to such officers and directors so long as substitution does
not result in gaps or lapses in coverage) with respect to matters occurring
prior to the Effective Time.
(d) Except as otherwise provided in this Agreement and only to
the extent permitted by applicable law and public policy, the Surviving
Corporation, Parent and Purchaser each hereby release and discharge each
Indemnified Party from, and covenant not to sue any Indemnified Party with
regard to, any Claim, whether civil, criminal, administrative or investigative,
arising out of or pertaining to any action or omission in their capacity as an
officer, director, employee, fiduciary or agent (including, without limitation,
any Claim arising out of this Agreement or any of the transactions contemplated
hereby or the operations of the Company or the condition of the assets of the
Company). Such release and covenant not to sue include Claims resulting in any
way from the negligence or strict liability of any Indemnified Party, whether
the negligence or strict liability is active, passive, joint, concurrent, or
sole.
(e) In the event the Company or the Surviving Corporation or
any of their respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any person, then, and in each such case,
proper provision shall be made so that the successors and assigns of the Company
or the Surviving Corporation, as the case may be, or at Parent's option, Parent,
shall assume the obligations set forth in this Section 6.07.
(f) The By-laws of the Surviving Corporation and each of its
Subsidiaries shall contain the provisions with respect to indemnification,
defense and advancement of expenses set
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forth in the By-laws of the Company on the date of this Agreement, and such
provisions shall not be amended, repealed or otherwise modified for a period of
six years after the Effective Time in any manner that would affect adversely the
rights thereunder of individuals who at any time from and after the date of this
Agreement and to and including the Effective Time were directors, officers,
employees, fiduciaries or agents of the Company or any of its Subsidiaries in
respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement), unless such modification is required by law or is desired to conform
such provisions with comparable provisions in the By-laws of Parent, which
By-law provisions shall be at least as favorable to such individuals as the
provisions contained in the Bylaws of Parent on the date of this Agreement. From
and after the Purchaser's Election Date, the Company shall not amend, repeal or
otherwise modify the indemnification, defense and advancement of expenses
provisions of the By-laws of the Company or the indemnification, defense and
advancement of expenses provisions in the By-laws of any of the Company's
Subsidiaries in any manner that would adversely affect the rights thereunder of
individuals who at any time from and after the date of this Agreement and to and
including the Effective Time were directors, officers, employees, fiduciaries or
agents of the Company or any of its Subsidiaries in respect of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the matters contemplated by this Agreement), unless such
modification is required by law or is desired to conform such provisions with
comparable provisions in the By-laws of Parent, which By-law provisions shall be
at least as favorable to such individuals as the provisions contained in the
Bylaws of Parent on the date of this Agreement.
(g) The obligations of the Company or the Surviving
Corporation under this Section 6.07 shall not be terminated or modified in such
a manner as to adversely affect any director, officer, employee, fiduciary and
agent to whom this Section 6.07 applies without the consent of each affected
director, officer, employee, fiduciary and agent (it being expressly agreed that
the directors, officers, employees, fiduciaries and agents to whom this Section
6.07 applies shall be third-party beneficiaries of this Section 6.07).
(h) In the event that the Company or the Surviving Corporation
should fail, at any time from and after the Purchaser's Election Date, to comply
with any of the foregoing obligation set forth in this Section 6.07, for any
reason, Parent shall be responsible therefor and hereby agrees to perform such
obligations unconditionally without regard to any defense or other basis for
nonperformance which the Company or the Surviving Corporation may have or claim
(except as would be prohibited by applicable Delaware Law), it being the
intention of this subsection (h) that the officers, directors, employees,
fiduciaries and agents of the Company and its Subsidiaries shall be fully
indemnified and that the provisions of this subsection (h) be a primary
obligation of Parent and not merely a guarantee by Parent of the obligations of
the Company or Purchaser.
(i) Parent and Purchaser understand that the Company has
entered into contractual indemnification arrangements with each of its current
directors and executive officers.
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SECTION 6.08. Further Action; Reasonable Best Efforts. Upon
the terms and subject to the conditions hereof, each of the parties hereto shall
(i) make promptly its respective filings, and thereafter make any other required
submissions, under the HSR Act with respect to the Transactions, (ii) use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
Transactions, including, without limitation, using its reasonable best efforts
to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Company and the Subsidiaries as are necessary for the consummation of
the Transactions and to fulfill the conditions to the Offer and the Merger and
(iii) except as contemplated by this Agreement, use its reasonable best efforts
not to take any action, or enter into any transaction, which would cause any of
its representations or warranties contained in this Agreement to be untrue or
result in a breach of any covenant made by it in this Agreement. If, at any time
after the Effective Time the Surviving Corporation considers or is advised that
any deeds, bills of sale assignments, assurances or any other actions or things
are necessary or desirable to vest, perfect or confirm of record or otherwise in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of either of the parties to the Merger acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with the Merger or otherwise to carry out the purposes of this Agreement, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of each of the parties to the
Merger or otherwise, all such deeds, bills of sale, assignments and assurances
and to take and do, in the name and on behalf of each, all such other actions
and things as may be necessary or desirable to vest, perfect or conform any and
all right, title and interest in, to and under such rights, properties or assets
in the Surviving Corporation or otherwise to carry out the purposes of this
Agreement.
SECTION 6.09. Compliance with Antitrust Laws. Each of Parent,
Purchaser and the Company will use its reasonable best efforts to resolve such
objections, if any, which may be asserted with respect to the Offer or the
Merger under the antitrust laws. In the event a suit is instituted challenging
the Offer or the merger as violative of the antitrust laws, each of Parent,
Purchaser and the Company will use its reasonable best efforts to resist or
resolve such suit. Parent, Purchaser and the Company will use their reasonable
best efforts to take such action as may be required (a) by the Antitrust
Division of the Department of Justice or the Federal Trade Commission in order
to resolve such objections as either of them may have to the Offer or the Merger
under the antitrust laws or (b) by any federal or state court of the United
States, in any suit brought by a private party or Governmental Entity
challenging the Offer or the merger as violative of the antitrust laws, in order
to avoid the entry of, or to effect the dissolution of, any injunction,
temporary restraining order or other order which has the effect of preventing
the consummation of the Offer or the Merger.
SECTION 6.10. Public Announcements. Parent and the Company
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement or the Transactions
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by law or any listing
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agreement with a national securities exchange or the NASDAQ/NMS to which Parent
or the Company is a party.
SECTION 6.11. Parent Guarantee. Parent agrees to take all
action necessary to cause Purchaser to perform all of Purchaser's, and the
Surviving Corporation to perform all of the Surviving Corporation's, agreements,
covenants and obligations under this Agreement and to consummate the Offer and
the Merger on the terms and conditions set forth in this Agreement. Parent shall
be liable for any breach of any representation, warranty, covenant or agreement
of Purchaser and for any breach of this covenant.
SECTION 6.12. Participation in Closing. Parent and Purchaser
agree that their participation in the closing of the Offer and the Merger
constitutes an acknowledgment by them that they have had access to sufficient
information concerning the Company to make an informed decision to consummate
the Transactions.
SECTION 6.13. Notification of Certain Other Matters. The
Company will promptly notify Parent of:
(a) any written notice or other written communication from any
third party alleging that the consent of such third party is or may be
required in connection with the Transactions;
(b) any written notice or other written communication from
any Governmental Entity in connection with the Transactions; and
(c) any fact, development or occurrence that constitutes a
Material Adverse Effect or is reasonably expected to result in such an
effect.
SECTION 6.14. State Takeover Statutes. The Company will use
its reasonable best efforts to (i) exempt the Company, the Offer and the Merger
from requirements of any state takeover law by action of the Company's Board of
Directors or otherwise and (ii) assist in any challenge by Purchaser to the
validity or applicability to the Offer or the Merger of any state takeover law.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Merger. The respective
obligations of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions and
only the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the affirmative vote of the
stockholders of the Company to the extent required by Delaware Law
and the Restated Certificate;
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(b) HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated;
(c) No Order. No foreign, United States or state governmental
authority or other agency or commission or foreign, United States or
state court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of
making the acquisition of Shares by Parent or Purchaser or any
affiliate of either of them illegal or otherwise preventing or
prohibiting consummation of the Transactions; and
(d) Offer. Purchaser or its permitted assignee shall have
purchased all Shares validly tendered and not withdrawn pursuant to the
Offer; provided, however, that neither Parent nor Purchaser shall be
entitled to assert the failure of this condition if, in breach of this
Agreement or the terms of the Offer, Purchaser fails to purchase any
Shares validly tendered and not withdrawn pursuant to the Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated
and the Merger and the other Transactions may be abandoned at any time prior to
the Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the transactions contemplated hereby by the stockholders of the
Company:
(a) By mutual written consent duly authorized by the Boards of
Directors of Parent, Purchaser and the Company prior to Purchaser's
Election Date; or
(b) By Parent, Purchaser or the Company if (i) the Effective
Time shall not have occurred on or before September 30, 1997; provided,
however, that the right to terminate this Agreement under this Section
8.01(b) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before such date
or (ii) any court of competent jurisdiction in the United States or
other governmental authority shall have issued an order, decree, ruling
or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable; or
(c) By Parent if (i) due to an occurrence or circumstance that
results in a failure to satisfy any condition set forth in Annex A
hereto, Purchaser shall have (A) failed to commence the Offer within 10
days following the date of this Agreement, (B) terminated the Offer
without having accepted any Shares for payment thereunder or (C) failed
to pay for
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Shares pursuant to the Offer within 90 days following the commencement
of the Offer, unless any such failure listed above shall have been
caused by or resulted from the failure of Parent or Purchaser to
perform in any material respect any material covenant or agreement of
either of them contained in this Agreement or the material breach by
Parent or Purchaser of any material representation or warranty of
either of them contained in this Agreement or (ii) prior to the
purchase of Shares pursuant to the Offer, the Board or any committee
thereof (A) shall have withdrawn or modified in a manner adverse to
Purchaser or Parent its approval or recommendation of the Offer, this
Agreement, the Merger or any other Transaction or (B) shall have
recommended another Acquisition Transaction with a third party.
(d) By the Company, upon approval of the Board, if (i)
Purchaser shall have (A) failed to commence the Offer within 10 days
following the date of this Agreement, (B) terminated the Offer without
having accepted any Shares for payment thereunder or (C) failed to pay
for Shares pursuant to the Offer within 90 days following the
commencement of the Offer, unless such failure to pay for Shares shall
have been caused by or resulted from the failure of the Company to
satisfy the conditions set forth in paragraphs (f) or (g) of Annex A or
(ii) prior to the purchase of Shares pursuant to the Offer, the Board,
after consultation with independent counsel, shall have withdrawn or
modified in a manner adverse to Purchaser or Parent its approval or
recommendation of the Offer, this Agreement or the Merger as a result
of a proposal by a third party for an Acquisition Transaction.
SECTION 8.02. Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 8.01, this Agreement shall
forthwith become void, and there shall be no liability on the part of any party
hereto, except as set forth in Section 8.03 and Section 9.01, and nothing herein
shall relieve any party from liability for any breach hereof.
SECTION 8.03. Costs and Expenses. Except as specified herein,
all costs and expenses incurred in connection with this Agreement and the
Transactions shall be paid by the party incurring such expenses, regardless of
whether any Transaction is consummated. To compensate Parent for entering into
this Agreement, taking actions to consummate the transactions contemplated
hereunder and incurring the costs and expenses related thereto and other losses
and expenses, including the foregoing the pursuit of other opportunities by
Parent, the Company and Parent agree as follows:
(a) Provided that neither Parent nor Purchaser shall be in
material breach of its obligations under this Agreement (which breach has not
been cured promptly following receipt by Parent or Purchaser, as the case may
be, of written notice thereof by the Company specifying in reasonable detail the
basis of such alleged breach), the Company shall pay to the Parent the sum of
$2,780,000 (the "Termination Fee") if (i) this Agreement is terminated either
(A) by the Company under the provisions of Section 8.01(d)(ii) or (B) by Parent
or Purchaser under the provisions of Section 8.01(c)(ii).
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(b) Any payment required by paragraph (a) of this Section
shall become payable upon termination of the Agreement in the manner provided in
such paragraph.
(c) The Company acknowledges that the agreements contained in
this Section 8.02 are an integral party of the transactions contemplated in this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if the Company fails to promptly pay the Termination Fee
when due, the Company shall in addition thereto pay to Parent all costs and
expenses (including fees and disbursements of counsel) incurred in collecting
such Termination Fee, as the case may be, together with interest on the amount
of the Termination Fee (or any unpaid portion thereof) from the date such
payment was required to be made until the date such payment is received by
Parent at the prime rate of The Chase Manhattan Bank, N.A., as in effect from
time to time during such period.
SECTION 8.04. Amendment. Subject to the limitations set forth
in Section 6.03(c), this Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that no amendment may be made
which (i) reduces the amount or changes the type of consideration into which
each Share shall be converted upon consummation of the Merger, (ii) imposes
conditions to the Merger in addition to those set forth in Section 7.01 or (iii)
would otherwise amend or change the terms and conditions of the Merger in any
manner materially adverse to the holders of Shares. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
SECTION 8.05. Waiver. Subject to the limitations set forth in
Section 6.03(c), at any time prior to the Effective Time, any party hereto may
(i) extend the time for the performance of any obligation or other act of any
other party hereto, (ii) waive any inaccuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.01, as the case may be, except that (i) the
representations and warranties of the Company set forth in Article III shall
terminate on the Purchaser's Election Date, (ii) the agreements set forth in
Articles II and IX and Sections 6.06, 6.07 and 6.11 shall survive the Effective
Time indefinitely and (iii) the agreements set forth in Sections 6.04(c) and
8.03 and Article IX shall survive termination indefinitely.
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SECTION 9.02. Scope of Representations and Warranties.
(a) Except as and to the extent expressly set forth in this
Agreement, the Company makes no, and disclaims any, representations or
warranties whatsoever, whether express or implied. The Company disclaims all
liability or responsibility for any other statement or information made or
communicated (orally or in writing) to Parent, Purchaser, their affiliates or
any stockholder, officer, director, employee, representative, consultant,
attorney, agent, lender or other advisor of Parent, Purchaser or their
affiliates (including, but not limited to, any opinion, information or advice
which may have been provided to any such person by any representative of the
Company or any other person or contained in the files or records of the
Company), wherever and however made.
(b) Except as and to the extent expressly set forth in this
Agreement, neither Parent nor Purchaser makes, and each disclaims, any
representations or warranties whatsoever, whether express or implied. Each of
Parent and Purchaser disclaims all liability and responsibility for any other
statement or information made or communicated (orally or in writing) to the
Company, its affiliates or any stockholder, officer, director, employee,
representative, consultant, attorney, agent, lender or other advisor of the
Company or its affiliates (including, but not limited to, any opinion,
information or advice which may have been provided to any such person by any
representative of Parent, Purchaser or any other person), wherever and however
made.
SECTION 9.03. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
cable, telecopy, facsimile, telegram or telex or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 9.03):
if to Parent or Purchaser:
Monterey Resources, Inc.
5201 Truxtun Avenue
Bakersfield, California
Facsimile No.: (805) 864-3050
Attention: R. Graham Whaling
with a copy to:
Andrews & Kurth L.L.P.
600 Travis, Suite 4200
Houston, Texas 77002
Facsimile No.: (713) 220-4285
Attention: G. Michael O'Leary
-34-
<PAGE> 41
if to the Company:
McFarland Energy, Inc.
10425 South Painter Avenue
Santa Fe Springs, California 90670
Facsimile No.: (562) 906-4022
Attention: J. C. McFarland
with a copy to:
Baker & Botts, L.L.P.
910 Louisiana, Suite 3000
Houston, Texas 77002
Facsimile No.: (713) 229-1522
Attention: Walter J. Smith, Esq.
and
Oppenheimer & Co., Inc.
10880 Wilshire Boulevard
Los Angeles, California 90024
Facsimile No.: (310) 446-7444
Attention: Ronald D. Ormand
SECTION 9.04. Certain Definitions. For purposes of this
Agreement, the term:
(a) "affiliate" of a specified person means a person who
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, such specified person;
(b) "beneficial owner" with respect to any Shares means a
person who shall be deemed to be the beneficial owner of such Shares
(i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 promulgated under the Exchange Act)
beneficially owns, directly or indirectly, (ii) which such person or
any of its affiliates or associates has, directly or indirectly, (A)
the right to acquire (whether such right is exercisable immediately or
subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration
rights, exchange rights, warrants or options, or otherwise, or (B) the
right to vote pursuant to any agreement, arrangement or understanding
or (iii) which are beneficially owned, directly or indirectly, by any
other persons with whom such person or any of its affiliates or
associates or person with whom such person or any of its affiliates or
associates has any agreement,
-35-
<PAGE> 42
arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any Shares;
(c) "business day" means any day on which the principal
offices of the SEC in Washington, D.C. are open to accept filings, or,
in the case of determining a date when any payment is due, any day on
which banks are not required or authorized to close in the City of Los
Angeles, California;
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management and policies of a person, whether through the
ownership of voting securities, as trustee or executor, by contract or
credit arrangement or otherwise;
(e) "person" means an individual, corporation, partnership,
limited partnership, syndicate, person (including, without limitation,
a "person" as defined in Section 13(d)(3) of the Exchange Act), trust,
association or entity or government, political subdivision, agency or
instrumentality of a government; and
(f) "subsidiary" or "subsidiaries" of the Company, the
Surviving Corporation, Parent or any other person means an affiliate
controlled by such person, directly or indirectly, through one or more
intermediaries.
SECTION 9.05. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the Transactions is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.06. Entire Agreement; Assignment. This Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes, except as set forth in Section 6.04(c), all prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof, except that the Confidentiality
Agreement shall remain in full force and effect. This Agreement shall not be
assigned by operation of law or otherwise, except that Parent and Purchaser may
assign all or any of their rights and obligations hereunder to any wholly owned
subsidiary of Parent provided that no such assignment shall relieve the
assigning party of its obligations hereunder if such assignee does not perform
such obligations.
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<PAGE> 43
SECTION 9.07. Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, other than Section 6.07 (which is intended to be for
the benefit of the persons covered thereby and may be enforced by such persons).
SECTION 9.08. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
SECTION 9.09. Governing Law. Except to the extent that
Delaware Law applies to the Transactions, this Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware applicable
to contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in any Delaware state or federal court sitting in the City of
Wilmington.
SECTION 9.10. Headings. The descriptive headings contained
in this Agreement are included for convenience of reference only and shall
not affect in any way the meaning or interpretation of this Agreement.
SECTION 9.11. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
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<PAGE> 44
IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
MONTEREY RESOURCES, INC.
By /s/ R. Graham Whaling
--------------------------------------
Name: R. Graham Whaling
Title: Chairman of the Board and
Chief Executive Officer
MONTEREY ACQUISITION CORPORATION
By /s/ R. Graham Whaling
--------------------------------------
Name: R. Graham Whaling
Title: Chairman of the Board and
Chief Executive Officer
McFARLAND RESOURCES, INC.
By /s/ J. C. McFarland
--------------------------------------
Name: J. C. McFarland
Title: Chairman of the Board and
Chief Executive Officer
-38-
<PAGE> 45
ANNEX A
-------
Conditions to the Offer
Notwithstanding any other provision of the Offer, Purchaser
shall not be required to accept for payment or pay for any Shares tendered
pursuant to the Offer, and may terminate or amend the Offer and may postpone the
acceptance for payment of and payment for Shares tendered, if (i) the Minimum
Condition shall not have been satisfied, (ii) any applicable waiting period
under the HSR Act shall not have expired or been terminated prior to the
expiration of the Offer after 30 days from the commencement of the Offer or
(iii) at any time on or after the date of this Agreement, and prior to the
acceptance for payment of Shares, any of the following conditions shall exist:
(a) there shall have been issued and remain in effect any
temporary restraining order, preliminary or final injunction, order or
decree by any court or governmental, administrative or regulatory
authority or agency, domestic or foreign, resulting from any action or
proceeding brought by any person which (i) restrains or prohibits the
making of the Offer or the consummation of any other Transaction, (ii)
prohibits or limits ownership or operation by the Company, Parent or
Purchaser of all or any material portion of the business or assets of
the Company and its Subsidiaries, taken as a whole, Parent or any of
their subsidiaries, or compels the Company, Parent or any of their
subsidiaries to dispose of or hold separate all or any material portion
of the business or assets of the Company, Parent or any of their
subsidiaries or imposes any material limitation on the ability of
Parent or Purchaser to conduct such business or own such assets, in
each case as a result of the Transactions; (iii) imposes material
limitations on the ability of Parent or Purchaser to exercise
effectively full rights of ownership of any Shares, including, without
limitation, the right to vote any Shares acquired by Purchaser pursuant
to the Offer, or otherwise on all matters properly presented to the
Company's stockholders, including, without limitation, the approval and
adoption of this Agreement and the Transactions; (iv) requires
divestiture by Parent or Purchaser of any Shares;
(b) there shall have been any action taken, or any statute,
rule, regulation, order or injunction enacted, entered, enforced,
promulgated, amended, issued or deemed applicable to (i) Parent, the
Company or any subsidiary or affiliate of Parent or the Company or (ii)
any Transaction, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency,
domestic or foreign, in the case of both (i) and (ii) other than the
routine application of the waiting period provisions of the HSR Act to
the Offer, or the Merger, in each case which results in any of the
consequences referred to in clauses (i) through (iv) of paragraph (a)
above;
(c) there shall have occurred and be continuing (i) any
general suspension of, or limitation on prices for, trading in
securities on the New York Stock Exchange or in the over-the-counter
market, (ii) a declaration of a banking moratorium or any substantial
limitation
A-1
<PAGE> 46
or suspension of, payments in respect of banks in the United States,
(iii) any limitation (whether or not mandatory) by any U.S. federal or
state government or governmental, administrative or regulatory
authority or agency on the extension of credit by banks or other
lending institutions, (iv) a commencement of a war or armed hostilities
or other national or international calamity directly or indirectly
involving the United States or (v) in the case of any of the foregoing
existing on the date hereof, a material acceleration or worsening
thereof;
(d) (i) the Board shall have withdrawn or modified in a manner
adverse to Parent or Purchaser the approval or recommendation of the
Offer, the Merger or this Agreement or approved or recommended any
takeover proposal or any other acquisition of Shares other than the
Offer and the Merger or (ii) the Board shall have resolved to do any of
the foregoing;
(e) any representation and warranty of the Company in this
Agreement shall not be true and correct and the failure to be true and
correct has a Material Adverse Effect and such failure shall not have
been cured (provided five days' written notice of such failure has been
provided by Purchaser to the Company) (if a representation and warranty
of the Company shall, by its terms, only be not true and correct if the
consequences thereof constitute a Material Adverse Effect, then the
failure of such representation and warranty to be true and correct
shall be deemed to have a Material Adverse Effect with in the meaning
of this paragraph (e));
(f) the Company shall have failed to perform in any material
respect any material obligation or to comply in any material respect
with any material agreement or covenant of the Company to be performed
or complied with by it under this Agreement and shall not have cured
such default (provided five days' written notice of such failure has
been provided by Purchaser to the Company);
(g) this Agreement shall have been terminated in accordance
with its terms; or
(h) Purchaser and the Company shall have agreed that Purchaser
shall terminate the Offer or postpone the acceptance for payment of or
payment for Shares thereunder;
The foregoing conditions are for the sole benefit of Purchaser
and Parent and may be asserted by Purchaser or Parent regardless of the
circumstances giving rise to any such condition or may be waived by Purchaser or
Parent in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent or Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right; the waiver
of any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances; and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
A-2
<PAGE> 47
ANNEX B
-------
Employee Benefits
(a) Employees. Nothing in this Agreement shall operate or be
construed as an obligation of Parent, the Company or any Subsidiary to continue
the employment of any employee of the Company or any of its Subsidiaries for any
fixed period after the Tender Offer Acceptance Date.
(b) Compensation and Benefits. Except to the extent otherwise
required by paragraph (c) of this Annex B, Parent agrees to provide the
Company's employees with compensation and employee benefit plans or programs on
substantially the same basis as the same are provided to similarly situated
employees of Parent or any of its subsidiaries; provided, however, in lieu
thereof Parent may elect to continue one or more of the Company's existing
benefit plans for any continuing employees for such period or periods as Parent
may determine; and provided further, however, that employees of the Company
shall be given credit for all purposes for years of service with the Parent and
Purchaser equal to the number of years of service with the Company.
(c) Severance; Outplacement. Parent agrees that until two
years after the Tender Offer Acceptance Date, the Surviving Corporation will
provide (i) severance payments consistent with the Company's existing Change in
Control Retention/Severance Plan to all officers and employees, and (ii)
reasonable outplacement services for all officers of the Company and its
subsidiaries employed by the Company or its subsidiaries at the Tender Offer
Acceptance Date, in each case, who are terminated without cause (as that term is
defined in the Company's Change in Control Retention/Severance Plan), prior to
such date.
(d) Individual Agreements. Parent agrees that the occurrence
of the Tender Offer Acceptance Date shall be treated as a Change in Control for
purposes of the Company's Change in Control Retention/Severance Plan and for
each of the Agreements regarding employment listed below:
Name of Executive Date of Agreement
----------------- -----------------
J. C. McFarland August 9, 1995
Craig M. Sturtevant August 8, 1995 (as amended December 10, 1996)
Ronald T. Yoshihara August 8, 1995
William H. Moodie August 25, 1995 (as amended December 10, 1996)
Robert E. Ransom August 10, 1995
Reinhard J. Suchsland July 22, 1996
Parent agrees that the cash amounts and benefits owing under
such Agreements if the employment of the executive a party thereto is
Involuntarily Terminated are as calculated and set forth in a schedule thereof
previously delivered to Parent.
B-1
<PAGE> 48
(e) Full Vesting. Parent commits that the Company's Employee
Retirement Savings and Stock Ownership Plan and Trust shall be amended to
provide that all participants therein as of the Tender Offer Acceptance Date
shall be fully vested in their benefits thereunder as of such date.
(f) Consulting Agreement. Prior to the Tender Offer Acceptance
Date, but conditioned thereon, Parent and J. C. McFarland ("JCMc") will enter
into a consulting agreement pursuant to which JCMc will agree to consult with
Parent and assist on any project or subject within his area of expertise, as
reasonably requested and subject to the limitation that such activities shall
not require more than one-half of his time. The agreement will have a four-year
term and will provide for compensation in an amount per year equal to JCMc's
current base salary with the Company, together with health benefits and
reimbursement for all direct out-of-pocket expenses reasonably incurred. In
addition, prior to the end of 1997, JCMc will be appointed to Parent's Board of
Directors as a member of the class of directors whose term expires in the year
2000. In such capacity, JCMc will be considered a non-employee director and will
receive all compensation and other benefits granted by Parent to non-employee
directors, other than the annual cash retainer. Pursuant to the consulting
agreement, JCMc will agree to utilize all cash severance benefits payable under
his employment agreement with the Company, net of any taxes owing thereon, to
purchase shares of common stock of Parent in the open market. The parties agree
that the compensation to be received by Mr. McFarland pursuant to the Consulting
Agreement is reasonable compensation for services to be rendered under the
agreement.
B-2
<PAGE> 1
EXHIBIT 3
STOCKHOLDERS AGREEMENT dated as of June 17, 1997, among
Monterey Resources, Inc., a Delaware corporation ("Parent"), Monterey
Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of
Parent ("Purchaser"), and the other parties identified on Schedule A hereto
(each, a "Stockholder").
WHEREAS, each Stockholder desires that McFarland Energy, Inc.,
a Delaware corporation (the "Company"), Parent and Purchaser enter into an
Agreement and Plan of Merger dated as of the date hereof (as the same may be
amended or supplemented, the "Merger Agreement") with respect to the merger of
Purchaser with and into the Company (the "Merger"); and
WHEREAS, each Stockholder is executing this Agreement as an
inducement to Parent and Purchaser to enter into and execute the Merger
Agreement.
NOW, THEREFORE, in consideration of the execution and delivery
by Parent and Purchaser of the Merger Agreement and the mutual covenants,
conditions and agreements contained herein and therein, the parties agree as
follows:
Section 1. Representations and Warranties. Each
Stockholder severally, and not jointly, represents and warrants to Parent and
Purchaser as follows:
(a) Such Stockholder is the record or beneficial owner of
the number of shares of Common Stock, par value $1.00 per share, of
the Company (the "Company Common Stock"), and holds options for shares
of Company Common Stock, each as set forth opposite such Stockholder's
name in Schedule A hereto (as may be adjusted from time to time
pursuant to Section 4, such Stockholder's "Shares"). Except for such
Stockholder's Shares, such Stockholder is not the record or beneficial
owner of any shares of Company Common Stock. Any of such Shares which
are described on Schedule A as option shares shall be deemed "Option
Shares" for the purposes of this Agreement. All other shares shall be
deemed "Owned Shares." Any Option Shares which are exercised prior to
the termination of this Agreement shall be deemed to be "Owned
Shares."
(b) This Agreement has been duly authorized, executed and
delivered by such Stockholder and constitutes the legal, valid and
binding obligation of such Stockholder, enforceable against such
Stockholder in accordance with its terms. Neither the execution and
delivery of this Agreement nor the consummation by such Stockholder of
the transactions contemplated hereby will result in a violation of, or
a default under, or conflict with, any contract, trust, commitment,
agreement, understanding, arrangement or restriction of any kind to
which such Stockholder is a party or bound or to which such
Stockholder's Shares are subject. To the best of such Stockholder's
knowledge, consummation by such Stockholder of the transactions
contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order,
decree, statute, law, rule or regulation applicable to such
Stockholder or such Stockholder's Shares, except for any necessary
filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), or state takeover laws.
<PAGE> 2
(c) Such Stockholder's Owned Shares and the certificates
representing such Owned Shares are now and at all times during the
term hereof will be held by such Stockholder, or by a nominee or
custodian for the benefit of such Stockholder, free and clear of all
liens, claims, security interests, proxies, voting trusts or
agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances arising hereunder.
(d) Such Stockholder understands and acknowledges that
Parent is entering into, and causing Purchaser to enter into, the
Merger Agreement in reliance upon such Stockholder's execution and
delivery of this Agreement.
Section 2. Purchase and Sale of Shares. So long as the
Per Share Amount in the Offer is not less than $18.55 in cash (net to the
seller), each Stockholder hereby severally agrees that it shall tender its
Shares into the Offer prior to the expiration of the Offer and that it shall
not withdraw any Shares so tendered (it being understood that the obligation
contained in this sentence is unconditional). In addition, each Stockholder
hereby severally agrees to sell to Purchaser, and Purchaser hereby agrees to
purchase, all such Stockholder's Owned Shares at a price per Share equal to
$18.55, or such higher price per Share as may be offered by Purchaser in the
Offer, provided that such obligations to purchase and sell are both subject to
(i) Purchaser having accepted Shares for payment under the Offer and the
Minimum Condition (as defined in the Merger Agreement) (minus any Shares which
are the subject of this Agreement but are not purchased in the Offer) having
been satisfied, and (ii) the expiration or termination of any applicable
waiting period under the HSR Act.
Section 3. Covenants. Each Stockholder severally, and
not jointly, agrees with, and covenants to, Parent and Purchaser as follows:
such Stockholder shall not, except as contemplated by the terms of this
Agreement, during the term of this Agreement, (i) transfer (which term shall
include, without limitation, for the purposes of this Agreement, any sale,
gift, pledge or other disposition), or consent to any transfer of, any or all
of such Stockholder's Shares or any interest therein, (ii) enter into any
contract, option or other agreement or understanding with respect to any
transfer of any or all of such Shares or any interest therein, (iii) grant any
proxy, power-of-attorney or other authorization or consent in or with respect
to such Shares, (iv) deposit such Shares into a voting trust or enter into a
voting agreement or arrangement with respect to such Shares or (v) take any
other action that would in any way restrict, limit or interfere with the
performance of its obligations hereunder or the transactions contemplated
hereby; provided that each Stockholder shall be entitled to transfer all or any
portion of such Shareholder's Shares to any person or entity which agrees in
writing to be bound by the provisions of this Agreement.
Section 4. Certain Events. Each Stockholder agrees that
this Agreement and the obligations hereunder shall attach to such Stockholder's
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such Shares shall pass, whether by operation of law or
otherwise, including without limitation such Stockholder's heirs, guardians,
administrators or successors. In the event of any stock split, stock dividend,
merger, reorganization, recapitalization or other change in the capital
structure of the Company affecting the Company Common Stock, or the acquisition
of additional shares of Company Common Stock or other securities or rights of
the
-2-
<PAGE> 3
Company by any Stockholder, the number of Owned Shares and Option Shares listed
on Schedule A beside the name of such Stockholder shall be adjusted
appropriately and this Agreement and the obligations hereunder shall attach to
any additional shares of Company Common Stock or other securities or rights of
the Company issued to or acquired by such Stockholder.
Section 5. Transfer. Each Stockholder agrees with and
covenants to Parent that such Stockholder shall not request that the Company
register the transfer (booked as entry or otherwise) of any certificated or
uncertificated interest representing any of the securities of the Company,
unless such transfer is made in compliance with this Agreement.
Section 6. Voidability. If prior to the execution
hereof, the Board of Directors of the Company shall not have duly and validly
authorized and approved by all necessary corporate action the acquisition of
Company Common Stock by Parent and Purchaser and other transactions
contemplated by this Agreement and the Merger Agreement, so that by the
execution and delivery hereof Parent or Purchaser would become, or could
reasonably be expected to become, an "interested stockholder" with whom the
Company would be prevented for any period pursuant to Section 203 of the DGCL
from engaging in any "business combination" (as such terms are defined in
Section 203 of the DGCL), then this Agreement shall be void and unenforceable
until such time as such authorization and approval shall have been duly and
validly obtained.
Section 7. Stockholder Capacity. No person executing
this Agreement who is or becomes during the term hereof a director or officer
of the Company makes any agreement or understanding herein in his or her
capacity as such director or officer. Each Stockholder signs solely in his or
her capacity as the record holder and beneficial owner of such Stockholder's
Shares and nothing herein shall limit or affect any actions taken by a
Stockholder in its capacity as an officer or director for the Company to the
extent specifically permitted by the Merger Agreement.
Section 8. Further Assurances. Each Stockholder shall,
upon request of Parent or Purchaser, execute and deliver any additional
documents and take such further actions as may reasonably be deemed by Parent
or Purchaser to be necessary or desirable to carry out the provisions hereof.
Section 9. Termination. This Agreement, and all rights
and obligations of the parties hereunder, shall terminate upon the earlier of
(a) the date upon which the Merger Agreement is terminated by the Company,
Parent or Purchaser for any reason in accordance with its terms or (b) the date
that Parent or Purchaser shall have purchased and paid for the Shares of each
Stockholder pursuant to Section 2.
Section 10. Miscellaneous.
(a) Capitalized terms used and not otherwise defined in
this Agreement shall have the respective meanings assigned to such
terms in the Merger Agreement.
-3-
<PAGE> 4
(b) All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier
(providing proof of delivery) to the parties at the following
addresses (or such other address for a party as shall be specified by
like notice): (i) if to Parent or Purchaser, to the address set forth
in Section 9.03 of the Merger Agreement; and (ii) if to a Stockholder,
to the address set forth on Schedule A hereto, or such other address
as may be specified in writing by such Stockholder.
(c) The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(d) This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same
agreement, and shall become effective (even without the signature of
any other Stockholder) as to any Stockholder when one or more
counterparts have been signed by each of Parent, Purchaser and such
Stockholder and delivered to Parent, Purchaser and such Stockholder.
(e) This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement, and
supersedes all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of
conflicts or laws thereof.
(g) Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in
whole or in party, by operation of law or otherwise, by any of the
parties without the prior written consent of the other parties, except
by laws of descent. Any assignment in violation of the foregoing
shall be void.
(h) If any term, provision, covenant or restriction
herein, or the application thereof to any circumstance, shall, to any
extent, be held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions herein and the application thereof to any
other circumstances, shall remain in full force and effect, shall not
in any way be affected, impaired or invalidated, and shall be enforced
to the fullest extent permitted by law.
(i) Each Stockholder agrees that irreparable damage would
occur and that Parent and Purchaser would not have any adequate remedy
at law in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that Parent and
Purchaser shall be entitled to an injunction or injunctions to prevent
breaches by any Stockholder of this Agreement and to enforce
specifically the terms and provisions of this Agreement.
-4-
<PAGE> 5
(j) No amendment, modification or waiver in respect of
this Agreement shall be effective against any party unless it shall be
in writing and signed by such party.
-5-
<PAGE> 6
IN WITNESS WHEREOF, Parent, Purchaser and the Stockholders
have caused this Agreement to be duly executed and delivered as of the date
first written above.
MONTEREY RESOURCES, INC.
By: /s/ R. Graham Whaling
-------------------------------------
R. Graham Whaling
Chairman of the Board and
Chief Executive Officer
MONTEREY ACQUISITION CORPORATION
By: /s/ R. Graham Whaling
-------------------------------------
R. Graham Whaling
Chairman of the Board and
Chief Executive Officer
McFARLAND FAMILY TRUST
By: /s/ J. C. McFarland
-------------------------------------
J.C. McFarland, Trustee
By: /s/ Ruth S. McFarland
-------------------------------------
Ruth S. McFarland, Trustee
/s/ J. C. McFarland
-------------------------------------
J.C. McFARLAND
/s/ Carolyn J. McFarland
-------------------------------------
CAROLYN J. McFARLAND
/s/ William E. Carl
-------------------------------------
WILLIAM E. CARL
-6-
<PAGE> 7
Schedule A
----------
<TABLE>
<CAPTION>
Number of Shares of Common Stock
Number of Shares of Issuable upon Exercise of
Stockholder (including address) Common Stock Owned Options
------------------------------- ------------------ ---------------------------------
<S> <C> <C>
McFarland Family Trust 527,696 0
10425 So. Painter Avenue
Santa Fe Springs, CA 90670
J.C. McFarland and 75,295 140,500
Carolyn J. McFarland
10425 So. Painter Avenue
Santa Fe Springs, CA 90670
William E. Carl 116,362 5,000
RR HCR8
Box 641
Beeville, TX 78104
</TABLE>
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