SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Amendment No.___
Filed by the Registrant _X_
Filed by a Party other than the Registrant ___
Check the appropriate box:
___ Preliminary Proxy Statement
___ Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e) (2))
_X_ Definitive Proxy Statement
___ Definitive Additional Materials
___ Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.142-12
Clinton Gas Systems, Inc.
(Name of Registrant as Specified In Its Charter)
___________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
___ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
___ $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
___ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Shares
(2) Aggregate number of securities to which transaction applies:
5,533,411
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$6.75
(4) Proposed maximum aggregate value of transaction:
$37,350,524
(5) Total fee paid:
$7,470.11
_X_ Fee paid previously with preliminary materials.
___ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
_______________________________
TABLE OF CONTENTS
SUMMARY
The Special Meeting................................................. 2
Recommendation of Board of Directors and Special Committee of Outside
Directors..................................................... 2
The Parties to the Merger........................................... 2
Certain Terms of the Merger......................................... 3
Opinion of Financial Advisor........................................ 4
Interests of Certain Persons in the Merger.......................... 5
Surrender of Certificates........................................... 5
No Solicitation of Other Bids....................................... 5
Sources and Amount of Funds......................................... 5
Certain Federal Income Tax Consequences............................. 6
Rights of Dissenting Shareholders................................... 6
Market Price Information............................................ 6
Selected Summary Consolidated Financial Information
Concerning the Company..............................................7
AVAILABLE INFORMATION..................................................... 8
GENERAL INFORMATION REGARDING THE SPECIAL MEETING......................... 8
Date, Time, Place and Purpose of Special Meeting.................... 8
Vote Required for Approval; Shares Entitled to Vote; Record Date.... 9
Solicitation and Revocability of Proxies............................ 10
Approval by JEDI and Purchaser...................................... 10
JEDI and Purchaser Information...................................... 10
THE COMPANIES............................................................. 10
The Company......................................................... 10
JEDI and Purchaser.................................................. 11
THE MERGER................................................................ 11
General............................................................. 11
Background of the Merger............................................ 12
Recommendation of the Special Committee and the Board
of Directors; Reasons for the Merger............................. 16
Opinion of Financial Advisor........................................ 17
Interests of Certain Persons in the Merger.......................... 18
Indemnification and Insurance....................................... 20
Miscellaneous Provisions in the Merger Agreement.................... 21
Effective Time; Effect of Merger.................................... 22
Surrender of Certificates........................................... 22
Conditions to Consummation of the Merger............................ 23
Representations and Warranties...................................... 24
Business of the Company Pending the Merger.......................... 25
Obligations of JEDI and Purchaser Pending the Merger................ 25
Amendment, Waiver and Termination................................... 25
Expenses; Termination Fees.......................................... 26
No Solicitation of Other Bids....................................... 27
Survival of Representations, Warranties and Agreements.............. 28
Sources and Amount of Funds......................................... 28
Operation and Management of Surviving Corporation After the Merger.. 28
Certain Federal Income Tax Consequences............................. 29
Accounting Treatment................................................ 30
Chapter 1704 of the Ohio Revised Code............................... 30
RIGHTS OF DISSENTING SHAREHOLDERS......................................... 30
SELECTED CONSOLIDATED FINANCIAL DATA...................................... 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................... 33
DIVIDENDS ON AND MARKET PRICES OF THE COMPANY COMMON STOCK................ 34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............ 35
INDEPENDENT PUBLIC ACCOUNTANTS............................................ 36
OTHER BUSINESS............................................................ 36
SHAREHOLDER PROPOSALS..................................................... 36
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE......................... 37
APPENDICES................................................................ 38
APPENDIX A - AGREEMENT AND PLAN OF MERGER........................... A-1
APPENDIX B - FAIRNESS OPINION OF MCDONALD & COMPANY
SECURITIES, INC. ...................................... B-1
APPENDIX C - SECTION 1701.85 OF OHIO GENERAL CORPORATION
LAW.................................................... C-1
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CLINTON GAS SYSTEMS, INC.
4770 INDIANOLA AVENUE
COLUMBUS, OHIO 43214
(614) 888-9588
July 25, 1996
To the Shareholders of Clinton Gas Systems, Inc.:
You are cordially invited to attend the Special Meeting of Shareholders
(the "Special Meeting") of Clinton Gas Systems, Inc. (the "Company") to be
held on August 22, 1996, at 10:00 a.m., Columbus time. The meeting will be
held at The Marriott North, 6500 Doubletree Ave., Columbus, Ohio 43229.
At the Special Meeting, you will be asked to vote upon a proposal to
approve and adopt the Agreement and Plan of Merger, dated as of May 24, 1996
(the "Merger Agreement"), among Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership ("JEDI") and an affiliate of Enron
Capital & Trade Resources Corp., a Delaware corporation, Jenco Acquisition,
Inc., a newly-formed Ohio corporation ("Purchaser") and a subsidiary of JEDI,
and the Company. The Merger Agreement provides for the merger (the "Merger")
of Purchaser with and into the Company, with the Company surviving the Merger
(the "Surviving Corporation"). Subject to the terms and conditions of the
Merger Agreement, at the effective time of the Merger, all then-outstanding
shares of the Company's common shares, without par value (the "Company Common
Stock") (other than (A) shares of the Company Common Stock held by Purchaser,
the Company or any Company subsidiary, all of which will be canceled without
payment of any consideration, and (B) shares of the Company Common Stock held
by shareholders who perfect their rights as dissenting shareholders), will be
converted into the right to receive, in cash, $6.75 per share of the Company
Common Stock, without interest.
The affirmative vote of the holders of a majority of the outstanding
shares of the Company Common Stock entitled to vote at the Special Meeting is
required for the approval of the Merger Agreement.
Your vote is important. Regardless of the number of shares you hold or
whether you plan to attend the Special Meeting, we urge you to complete, sign,
date and return the enclosed proxy card immediately. If you attend the Special
Meeting, you may vote in person if you wish, even if you have previously
returned your proxy card.
If the Company shareholders approve the adoption of the Merger
Agreement, it is currently anticipated that the Merger will be consummated as
promptly as practicable after the satisfaction of all conditions to the
Merger. Promptly after the Merger is consummated, a Letter of Transmittal will
be mailed to all shareholders of record to use in surrendering their
certificates representing shares of the Company Common Stock. PLEASE DO NOT
SEND YOUR STOCK CERTIFICATES TO THE COMPANY UNTIL YOU RECEIVE THE LETTER OF
TRANSMITTAL, WHICH WILL INCLUDE INSTRUCTIONS ON THE PROCEDURE TO BE USED IN
SENDING IN YOUR CERTIFICATES.
Enclosed is a Proxy Statement that describes, and contains other
important information relating to, the Merger Agreement and the proposed
Merger. A copy of the Merger Agreement is included in the Proxy Statement. You
are urged to read the Proxy Statement, including the Appendices, carefully.
<PAGE>
Your Board of Directors and a Special Committee of outside directors have
approved the Merger Agreement, having determined that the acquisition of the
Company pursuant to the Merger Agreement is fair to, and in the best interests
of, the Company and its shareholders. McDonald & Company Securities, Inc., the
Board's financial advisor, has advised the Board that, in its opinion, the
Merger consideration is fair, from a financial point of view, to the
shareholders. Your Board of Directors and the Special Committee of outside
directors unanimously recommend that you vote "FOR" the adoption and approval
of the Merger Agreement.
On behalf of the Board of Directors,
Jerry D. Jordan
Chairman of the Board and
Chief Executive Officer
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD.
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CLINTON GAS SYSTEMS, INC.
4770 Indianola Avenue
Columbus, Ohio 43214
(614) 888-9588
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 22, 1996
To the Shareholders of Clinton Gas Systems, Inc.:
Notice is hereby given that a Special Meeting of Shareholders (the
"Special Meeting") of Clinton Gas Systems, Inc., an Ohio corporation (the
"Company"), will be held at The Marriott North, 6500 Doubletree Ave.,
Columbus, Ohio, on August 22, 1996, at 10:00 a.m., Columbus time, for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of May 24, 1996 (the "Merger
Agreement"), among Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership ("JEDI"), Jenco Acquisition,
Inc., a newly-formed Ohio corporation ("Purchaser") and a subsidiary of
JEDI, and the Company.
2. To transact such other business as may properly come before the
Special Meeting, including any and all adjournment(s) or postponement(s)
thereof.
Information regarding the matters to be acted upon at the Special
Meeting is contained in the Proxy Statement attached to this Notice. A copy of
the Merger Agreement appears as Appendix A to, and is summarized in, the
accompanying Proxy Statement.
Only holders of the Company common shares of record at the close of
business on July 10, 1996, are entitled to notice of and to vote at the
Special Meeting or any adjournment(s) or postponement(s) thereof. The Special
Meeting may be adjourned from time to time without notice other than by
announcement at the Special Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER
OF SHARES YOU MAY HOLD. WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE. THE PROXY IS REVOCABLE AND WILL NOT
BE USED IF YOU ARE PRESENT AT THE SPECIAL MEETING AND PREFER TO VOTE IN
PERSON. FAILURE TO SIGN AND RETURN YOUR PROXY, OR TO OTHERWISE VOTE AT THE
SPECIAL MEETING, IS THE EQUIVALENT OF A VOTE AGAINST APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT, WHICH HAS BEEN RECOMMENDED BY A SPECIAL COMMITTEE OF
OUTSIDE DIRECTORS AND BY THE BOARD OF DIRECTORS OF THE COMPANY.
This Notice, the accompanying Proxy Statement and the enclosed proxy
card are sent to you by order of the Board of Directors of the Company.
Columbus, Ohio
July 25, 1996
R.L. Richards
Secretary
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CLINTON GAS SYSTEMS, INC.
4770 Indianola Avenue
Columbus, Ohio 43214
(614) 888-9588
PROXY STATEMENT
FOR ITS
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 22, 1996
This Proxy Statement is being furnished to the holders of common shares,
without par value (the "Company Common Stock") of Clinton Gas Systems, Inc.,
an Ohio corporation (the "Company") in connection with the solicitation of
proxies by the Board of Directors of the Company to be voted at the Special
Meeting of Shareholders of the Company (the "Special Meeting") to be held at
The Marriott North, 6500 Doubletree Ave. Columbus, Ohio, on August 22, 1996,
at 10:00 a.m., Columbus time, and any and all adjournment(s) or
postponement(s) thereof. The purpose of the Special Meeting is to consider and
vote upon a proposal to approve and adopt the Agreement and Plan of Merger,
dated as of May 24, 1996, (the "Merger Agreement"), among Joint Energy
Development Investments Limited Partnership, a Delaware limited partnership
("JEDI"), Jenco Acquisition, Inc., a newly-formed Ohio corporation
("Purchaser") and a subsidiary of JEDI, and the Company. A copy of the Merger
Agreement is attached to this Proxy Statement as Appendix A. This Proxy
Statement, the enclosed Notice of Special Meeting and the enclosed proxy card
are first being sent or given to shareholders of the Company on or about July
25, 1996.
A Special Committee of outside directors (the "Special Committee") and
the Board of Directors of the Company have approved the Merger Agreement,
having determined that the acquisition of the Company pursuant to the Merger
Agreement is fair to, and in the best interests of, the Company and its
shareholders. Accordingly, the Special Committee and the Board of Directors
unanimously recommend that the shareholders vote "FOR" the adoption and
approval of the Merger Agreement.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement or in the documents
incorporated herein by reference in connection with the solicitation made
hereby and, if given or made, such information or representations should not
be relied upon as having been authorized by the Company. The delivery of this
Proxy Statement shall not, under any circumstances, create any implication
that the information contained herein or in any document incorporated herein
by reference is correct as of any time subsequent to the date hereof or the
date of such document, as the case may be, or that there has been no change in
the affairs of the Company since the date hereof or the date of such document,
as the case may be. This Proxy Statement does not constitute the solicitation
of a proxy from any person in any jurisdiction in which it is unlawful to make
such proxy solicitation.
The date of this Proxy Statement is July 25, 1996.
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement and does not purport to be complete. The information
contained in this Summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information appearing elsewhere in this
Proxy Statement, the Appendices hereto and the documents incorporated herein
by reference. The Appendices attached to this Proxy Statement constitute a
part of the Proxy Statement. Shareholders are urged to read this Proxy
Statement in its entirety. The full text of the Merger Agreement is attached
as Appendix A and should be read in its entirety.
THE SPECIAL MEETING
Date, Time, Place and Purpose of Special Meeting. The Special Meeting
will be held on August 22, 1996, at The Marriott North, 6500 Doubletree Ave.,
Columbus, Ohio, commencing at 10:00 a.m., Columbus time, to consider and vote
upon a proposal to approve and adopt the Merger Agreement, which provides for
the merger (the "Merger") of Purchaser into the Company, with the Company
surviving the Merger (the "Surviving Corporation"). The Company would become a
majority-owned subsidiary of JEDI as a result of the Merger. See "GENERAL
INFORMATION REGARDING THE SPECIAL MEETING -- Date, Time, Place and Purpose of
Special Meeting."
Record Date; Shares Entitled to Vote. Only holders of record of the
Company Common Stock at the close of business on July 10, 1996 (the "Record
Date") will be entitled to notice of and to vote at the Special Meeting. Only
shares of the Company Common Stock are entitled to vote on matters presented
at the Special Meeting. Each holder of record of the Company Common Stock is
entitled to cast one vote per share on the Merger proposal or upon any other
matters that may properly come before the Special Meeting or any
adjournment(s) or postponement(s) thereof. See "GENERAL INFORMATION REGARDING
THE SPECIAL MEETING -- Vote Required for Approval; Shares Entitled to Vote;
Record Date."
Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of the Company Common Stock entitled to vote at the
Special Meeting is required for the approval of the Merger Agreement. See
"GENERAL INFORMATION REGARDING THE SPECIAL MEETING -- Vote Required for
Approval; Shares Entitled to Vote; Record Date."
RECOMMENDATION OF BOARD OF DIRECTORS AND SPECIAL COMMITTEE OF OUTSIDE
DIRECTORS
The Special Committee, which was composed of Hal W. Field, Michael S. Guy
and R.L. Richards, each of whom is an outside director, has approved the
Merger Agreement and has determined that the Merger and the transactions
related thereto are fair to, and in the best interests of, the Company and its
shareholders. The Special Committee and the Company's Board of Directors both
have unanimously recommended that the shareholders of the Company vote "FOR"
the approval and adoption of the Merger Agreement. See "THE MERGER" --
Recommendation of the Special Committee and the Board of Directors; Reasons
for the Merger." Certain members of the Board of Directors had, and currently
have, certain interests that may present them with a potential conflict of
interest in connection with the Merger. See "THE MERGER -- Interests of
Certain Persons in the Merger."
THE PARTIES TO THE MERGER
The Company. The Company is an Ohio corporation that is primarily
engaged in the business of natural gas and oil exploration, development,
production, acquisition of reserves and the management and marketing of
natural gas. The Company's natural gas and oil business is conducted
principally through its direct subsidiaries, The Clinton Oil Company and
Clinton Gas Marketing, Inc.
The principal executive offices of the Company are located at 4770
Indianola Avenue, Columbus, Ohio 43214, and the telephone number at that
address is (614) 888-9588. See "THE COMPANIES -- The Company."
JEDI and Purchaser. JEDI is a Delaware limited partnership whose sole
general partner, Enron Capital Management Limited Partnership, is an affiliate
of Enron Capital & Trade Resources Corp. ("ECT"), which is a wholly-owned
subsidiary of Enron Corp. The limited partner of JEDI is the California Public
Employees' Retirement System ("CalPERS"). The purpose of JEDI is to invest in
a diversified portfolio of energy related assets. The principal executive
offices of JEDI are located at 1400 Smith Street, Houston, Texas 77002, and
the telephone number at that address is (713) 853-6161.
Purchaser is an Ohio corporation formed solely for the purpose of
effecting the Merger and has not carried on any activities other than in
connection with the Merger. As of the date of this Proxy Statement, Purchaser
is a wholly-owned subsidiary of JEDI. Immediately prior to the consummation of
the Merger, the Company's Chairman and Chief Executive Officer, Jerry D.
Jordan, will become a shareholder of the Purchaser and, upon consummation of
the Merger, will become a shareholder of the Surviving Corporation. See "THE
MERGER -- Interests of Certain Persons in the Merger." The principal executive
offices of Purchaser are located at 1400 Smith Street, Houston, Texas 77002
and the telephone number at that address is (713) 853-6161. The separate
corporate existence of Purchaser will cease as of the effective time of the
Merger. See "THE COMPANIES -- JEDI and Purchaser."
CERTAIN TERMS OF THE MERGER
Principal Effects of the Merger. Purchaser will be merged into the
Company, with the Company as the Surviving Corporation. Subject to the terms
and conditions of the Merger Agreement, at the effective time of the Merger
(the "Effective Time"), all then-outstanding shares of the Company Common
Stock (other than (A) shares of the Company Common Stock held by Purchaser,
the Company or any Company subsidiary, all of which will be canceled without
payment of any consideration, and (B) shares of the Company Common Stock held
by shareholders who perfect their rights as dissenting shareholders under
Section 1701.85 of the Ohio General Corporation Law ("Section 1701.85" of the
"OGCL") will be converted into the right to receive, in cash, $6.75 per share
of the Company Common Stock, without interest. See "THE MERGER -- Effective
Time; Effect of Merger."
Effective Time. The Effective Time of the Merger will be the date and
time when a properly executed certificate of merger is duly filed with the
Secretary of State of the State of Ohio, or at such later time as the parties
to the Merger Agreement designate in such filing as the Effective Time. It is
anticipated that, subject to the satisfaction or waiver, if permissible, of
the conditions to consummation of the Merger set forth in the Merger
Agreement, such filing will be made approximately ten days after the Merger
Agreement has been approved by the Company shareholders. See "THE MERGER --
Effective Time; Effect of Merger" and "-- Conditions to Consummation of the
Merger."
Conditions to the Merger. The respective obligations of the Company,
JEDI and Purchaser to effect the Merger are subject to the satisfaction, or
waiver if applicable, at or prior to the Effective Time, of various
conditions, including (i) the Merger Agreement shall have been approved and
adopted by the requisite vote of the holders of the Company Common Stock and
ten days shall have elapsed following the date of such approval and adoption;
(ii) the Company shall have received from McDonald & Company Securities, Inc.
("McDonald & Company") its written opinion confirming the opinion attached
hereto as Appendix B, to the effect that the Merger consideration is fair,
from a financial point of view, to the shareholders of the Company; (iii) no
governmental authority shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, executive order, decree, injunction or
other order which has the effect of making the Merger illegal or otherwise
prohibiting the consummation of the Merger; and (iv) the Merger complies with
Section 1704.03(A)(4) of the Ohio Revised Code. See "THE MERGER -- Chapter
1704 of the Ohio Revised Code". Furthermore, the Company, on the one hand, and
the Purchaser, on the other hand, have additional conditions to their
respective obligations to consummate the Merger. Among the conditions to
Purchaser consummating the Merger are that (i) certain members of the
Company's existing management shall have not breached or anticipatorily
breached certain employment agreements with Purchaser that are to become
effective in conjunction with the consummation of the Merger and such persons
shall not have died or become disabled; and (ii) the number of shares of the
Company Common Stock held by shareholders perfecting their rights as
dissenting shareholders in accordance with Section 1701.85 of the OGCL shall
not exceed 10% of the outstanding shares of the Company Common Stock.
Accordingly, although the holders of the Company Common Stock may approve and
adopt the Merger Agreement at the Special Meeting, there can be no assurance
that the Merger will be consummated if any of the conditions has not yet been
satisfied. See "THE MERGER -- Conditions to Consummation of the Merger."
Termination; Expenses and Termination Fees. Under certain conditions,
the Merger Agreement may be terminated prior to the Effective Time, whether
prior to or after approval of the Merger Agreement by the shareholders of the
Company. One of the conditions permitting the termination of the Merger
Agreement by either the Company or the Purchaser is if the Merger shall not
have been consummated on or before September 16, 1996 (unless such
circumstance is the result of a breach of the terms of the Merger Agreement by
the party wishing to exercise such termination right). In the event of the
termination of the Merger Agreement, there will be no obligation or liability
on the part of any party thereto, except as described under "THE MERGER --
Expenses; Termination Fees" or as otherwise expressly provided for in the
Merger Agreement. See "THE MERGER -- Amendment, Waiver and Termination."
Pursuant to the Merger Agreement, if the Merger Agreement is terminated by
Purchaser for certain reasons, then the Company is obligated to reimburse
Purchaser for certain out-of-pocket expenses not to exceed $1,000,000. If the
Merger Agreement is terminated by the Company due to a material breach on the
part of JEDI or Purchaser, Purchaser is obligated to reimburse the Company for
certain expenses not to exceed $250,000. See "THE MERGER -- Expenses;
Termination Fees."
In addition to the payment of expenses described above, (i) if the
Merger Agreement is terminated for certain reasons and if the Company were to
be acquired (by merger, purchase of assets or otherwise) by another buyer
prior to the first anniversary of the Merger Agreement in a transaction that
provides a better value to the Company's shareholders than the Merger would
have provided, or (ii) if (A) any person (other than Purchaser or any
affiliate thereof) or group becomes the beneficial owner of more than 20% of
the outstanding Company Common Stock; (B) either the Merger Agreement is
terminated for certain specified reasons or such beneficial owner takes any
action to oppose or prevent the consummation of the Merger and the Merger
Agreement is terminated for any reason; and (C) the Company is acquired by
another buyer within one calendar year of the date of the Special Meeting,
then the Company is obligated to pay JEDI a fee (the "Break-up Fee") of $5
million. See "THE MERGER -- Expenses; Termination Fees."
Business of the Company. The Company has agreed that, during the period
from the date of the Merger Agreement to the Effective Time, except as
otherwise contemplated by the Merger Agreement or unless JEDI otherwise
consents in writing, the Company will conduct its operations in the ordinary
course of business, consistent with past practices. In addition, unless JEDI
consents in writing or except as otherwise permitted pursuant to the Merger
Agreement, prior to the Effective Time, the Company is not permitted to engage
in certain actions specified in the Merger Agreement. See "THE MERGER --
Business of the Company Pending the Merger."
Other Agreements. Each of the Company, JEDI and Purchaser have made
certain other agreements concerning various matters both prior to and
subsequent to the Effective Time. See "The MERGER -- Miscellaneous
Provisions."
OPINION OF FINANCIAL ADVISOR
The Board engaged McDonald & Company to act as its financial advisor in
connection with the Merger and related matters. On May 24, 1996, McDonald &
Company delivered its written opinion to the Board that the Merger
consideration is fair, from a financial point of view, to the Company's
shareholders. McDonald & Company updated its opinion as of the date of this
Proxy Statement, and the full text of the updated opinion of McDonald &
Company is attached as Appendix B to this Proxy Statement and should be read
carefully in its entirety. See "THE MERGER -- Opinion of Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Purchaser has entered into employment agreements, to be effective
as of the Effective Time, with Jerry D. Jordan, the Company's Chairman and
Chief Executive Officer, and certain other employees of The Clinton Oil
Company, a subsidiary of the Company. In addition, Jerry D. Jordan has entered
into various other agreements with the Purchaser and others, pursuant to which
Mr. Jordan will, among other things, acquire an equity interest in the
Surviving Corporation. In addition, an affiliate of the Purchaser has entered
into a non-competition agreement with F. Daniel Ryan, the Company's President.
See "THE MERGER -- Interests of Certain Persons in the Merger."
SURRENDER OF CERTIFICATES
Prior to the Effective Time, the Company and Purchaser have agreed to
appoint American Stock Transfer & Trust Company as paying agent (the "Paying
Agent") to receive, hold and disburse the funds to which holders of shares of
the Company Common Stock will become entitled upon consummation of the Merger.
Promptly after the Effective Time, the Paying Agent will mail to each person
who was a record holder of shares of the Company Common Stock immediately
prior to the Effective Time (other than Purchaser, the Company, the Company's
subsidiaries and holders of shares who perfect their rights as dissenting
shareholders under Section 1701.85 of the OGCL), a form of letter of
transmittal and instructions advising the holder of the procedures for
surrendering for payment the certificates that immediately prior to the
Effective Time represented shares of the Company Common Stock (the
"Certificates"). Holders of Certificates should not submit their Certificates
to the Paying Agent until they have received such materials. Payment for
shares of the Company Common Stock will be made to former holders of the
Company Common Stock as promptly as practicable following receipt by the
Paying Agent of Certificates and other documents required by the letter of
transmittal. No interest will accrue or be paid on the cash payable upon the
surrender of Certificates. See "THE MERGER -- Surrender of Certificates."
SHAREHOLDERS SHOULD NOT SEND ANY CERTIFICATES TO THE COMPANY AT THIS TIME.
NO SOLICITATION OF OTHER BIDS
Prior to the Effective Time, the Company has agreed not to, nor to
permit any of its subsidiaries to, nor to authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to, directly or indirectly, initiate, solicit, negotiate or
encourage (including by way of furnishing information), or take any other
action to facilitate or entertain, any inquiries or the making of any proposal
that constitutes, or may be reasonably expected to lead to, any proposal or
offer to acquire all or any substantial part of the business of the Company
and its subsidiaries, or all or substantially all of the capital stock of the
Company; provided, however, that the Company may negotiate with a potential
acquirer if (i) the potential acquirer has made a tender or exchange offer or
a proposal to the Company's Board of Directors to acquire the Company, (ii)
the Company's Board of Directors believes, based in part upon advice of its
financial advisor and after having an opportunity to discuss any such proposal
with the potential acquirer, that such potential acquirer has the financial
wherewithal to consummate such offer or transaction and such offer or
transaction would yield a better value to the Company's shareholders than
would the Merger and (iii) based upon the opinion of counsel to the Company
given to the Board of Directors, the Board of Directors determines in good
faith that there is a significant risk that the failure to negotiate with the
potential acquirer would constitute a breach of the Board of Directors'
fiduciary duty to the Company's shareholders. The acceptance by the Company of
any such competing offer may subject the Company to an obligation to pay a
significant fee to Purchaser. See "THE MERGER -- No Solicitation of Other
Bids."
SOURCES AND AMOUNT OF FUNDS
The total amount of funds required by JEDI and Purchaser to acquire all
of the then-outstanding shares of Company Common Stock (excluding the shares
of the Company Common Stock held by Purchaser), is estimated to be
approximately $37.35 million. JEDI will cause Purchaser to have available to
it at the Effective Time sufficient funds to consummate the Merger. The
obligation of JEDI and Purchaser to consummate the Merger under the Merger
Agreement is not subject to a condition that any financing be available to
JEDI or Purchaser. See "THE MERGER -- Sources and Amount of Funds."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash for shares of the Company Common Stock pursuant to
the Merger or pursuant to the exercise of dissenters' rights will be a taxable
transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign or other tax laws. For
United States federal income tax purposes, in general, a shareholder who
receives cash for shares of the Company Common Stock pursuant to the Merger
will recognize a gain or loss equal to the difference between the
shareholder's tax basis for the shares of the Company Common Stock converted
into the right to receive cash in such transaction and the amount of cash
received in exchange therefor. Assuming that the shares of the Company Common
Stock constitute capital assets in the hands of the shareholder, such gain or
loss will be long-term capital gain or loss if, as of the date of disposition
(i.e., the Effective Time), such shares of the Company Common Stock have been
held for more than one year. See "THE MERGER -- Certain Federal Income Tax
Consequences."
ALL SHAREHOLDERS SHOULD READ CAREFULLY THE DISCUSSIONS IN "THE MERGER --
CERTAIN FEDERAL INCOME TAX CONSEQUENCES" AND ARE URGED TO CONSULT THEIR OWN
ADVISORS AS TO SPECIFIC CONSEQUENCES TO THEM OF THE MERGER UNDER FEDERAL,
STATE, LOCAL, FOREIGN OR ANY OTHER APPLICABLE TAX LAWS.
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of Company Common Stock who do not vote in favor of approval and
adoption of the Merger Agreement and who otherwise comply with the applicable
requirements of Ohio law ("Dissenting Shareholders") may dissent from the
Merger and elect to have the "fair cash value" of their Company Common Stock,
excluding any appreciation or depreciation resulting from the Merger,
judicially determined and paid to them. In order to have such "fair cash
value" judicially determined and paid to him, a Dissenting Shareholder must
deliver to the Company a written demand for payment of such "fair cash value"
of his Company Common Stock not later than ten days after the taking of the
vote on the Merger Agreement and must comply with the other requirements of
applicable Ohio law, including Section 1701.85 of the OGCL, the full text of
which is attached as Appendix C to this Proxy Statement. Any deviation from
such requirements may result in the forfeiture of rights as a Dissenting
Shareholder. See "Rights of Dissenting Shareholders" and Appendix C hereto.
MARKET PRICE INFORMATION
The Company Common Stock is quoted on the NASDAQ National Market Tier of
The NASDAQ Stock Market (the "NASDAQ Stock Market") under the trading symbol
"CGAS." The following table sets forth for the periods indicated the high and
low closing prices per share of the Company Common Stock, as reported on The
NASDAQ Stock Market. For current price information, shareholders should
consult publicly available sources.
High Low
1993
First Quarter................................... $3.125 $2.188
Second Quarter.................................. 3.125 2.500
Third Quarter................................... 3.375 2.688
Fourth Quarter.................................. 3.625 2.750
1994
First Quarter................................... $3.875 $3.000
Second Quarter.................................. 4.125 2.750
Third Quarter................................... 4.125 3.625
Fourth Quarter.................................. 4.500 3.625
1995
First Quarter................................... $4.500 $3.750
Second Quarter.................................. 4.500 3.438
Third Quarter................................... 5.875 4.125
Fourth Quarter.................................. 5.625 4.875
1996
First Quarter................................... $6.625 $5.000
Second Quarter.................................. $6.625 $6.000
On May 23, 1996, the last full trading day prior to the public
announcement that the Company entered into a Merger Agreement, the reported
high and low sales prices per share of the Company Common Stock on The NASDAQ
Stock Market were $6.375 and $6.3125, respectively. On July 19, 1996, the most
recent available date prior to printing this Proxy Statement, the reported
high and low sales prices per share of the Company Common Stock on The NASDAQ
Stock Market were $6.5625 and $6.4375, respectively.
SELECTED SUMMARY CONSOLIDATED FINANCIAL INFORMATION CONCERNING THE COMPANY
The following table presents certain selected summary consolidated
financial data of the Company as of and for the years ended December 31, 1991,
1992, 1993, 1994 and 1995 and as of and for the three months ended March 31,
1995 and 1996. The financial data set forth below should be read in
conjunction with the financial statements of the Company and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
incorporated by reference in this Proxy Statement from the accompanying Annual
Report on Form 10-K of the Company for the fiscal year ended December 31,
1995, as amended, and the accompanying Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996. See "SELECTED CONSOLIDATED FINANCIAL DATA" and
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
<TABLE>
(Information Reported in Thousands, except per share data)
------------------------------------------------------------
Year Ended December 31 (3 Months (3 Months
Ended) Ended)
1991 1992 1993 1994 1995 3/31/95 3/31/96
---- ---- ---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Revenue........... $68,030 $68,710 $85,409 $99,313 $87,887 $20,666 $45,804
Income before
cumulative effect of
change in accounting $568 $80 $570 $85 $2,456 $311 $208
principle.............
Cumulative effect of
change in accounting $-0- $916 $-0- $-0- $-0- $-0- $-0-
for income taxes......
Net income.............. $568 $996 $570 $85 $2,456 $311 $208
Total assets(1)......... $48,626 $47,482 $54,568 $50,183 $51,918 $48,874 $57,456
Long-term debt(2)....... $16,452 $15,907 $16,887 $17,106 $13,378 $17,057 $14,894
Income per share before
cumulative effect of
change in accounting $0.10 $0.01 $0.10 $0.02 $0.43 $0.06 $0.04
principle(3)..........
Cumulative effect of
change in accounting
for income taxes per $-0- $0.16 $-0- $-0- $-0- $-0- $-0-
share(3)..............
Net income per share(3). $0.10 $0.17 $0.10 $0.02 $0.43 $0.06 $0.04
Cash dividends per share $-0- $-0- $-0- $-0- $-0- $-0- $-0-
Book value per share.... $3.39 $3.58 $3.68 $3.69 $4.13 $3.75 $4.16
(1) At the end of reported period.
(2) Excludes current maturities.
(3) Primary and fully diluted.
</TABLE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission") relating to its
business, financial condition and other matters. The Company is required to
disclose in such reports and proxy statements certain information, as of
particular dates, concerning the Company's directors and executive officers,
their remuneration, stock options granted to them, the Company's principal
shareholders and any material interest of such persons in transactions with
the Company. Such reports, proxy statements and other information filed with
the Commission in accordance with the Exchange Act can be inspected and copied
at the public reference facilities maintained by the Commission at Judiciary
Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
certain regional offices of the Commission located at 7 World Trade Center,
New York, New York 10048, and at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material also may
be obtained by mail at prescribed rates from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549.
GENERAL INFORMATION REGARDING
THE SPECIAL MEETING
DATE, TIME, PLACE AND PURPOSE OF THE SPECIAL MEETING
The Special Meeting will be held on August 22, 1996 at The Marriott
North, 6500 Doubletree Ave., Columbus, Ohio, beginning at 10:00 a.m., Columbus
time. This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the Special
Meeting and at any adjournments or postponements thereof. These materials were
first mailed or given to the Company's shareholders on or about July 25, 1996.
The purpose of the Special Meeting is to consider and vote upon a proposal to
approve and adopt the Merger Agreement, pursuant to which Purchaser will be
merged with and into the Company, with the Company surviving the Merger as the
Surviving Corporation. Upon consummation of the Merger, the Company will
become a majority-owned subsidiary of JEDI.
Pursuant to the terms of the Merger Agreement, after the approval and
adoption of the Merger Agreement by the Company's shareholders, the
satisfaction or waiver of the other conditions to the Merger and the filing of
a copy of a Certificate of Merger with the Secretary of State of the State of
Ohio, all then-outstanding shares of the Company Common Stock (other than (A)
shares of the Company Common Stock held by Purchaser, the Company or any
Company subsidiary, all of which will be canceled without payment of any
consideration, and (B) shares of the Company Common Stock held by shareholders
who perfect their rights as dissenting shareholders under Section 1701.85 of
the OGCL), will be converted into the right to receive, in cash, $6.75 per
share of the Company Common Stock, without interest.
VOTE REQUIRED FOR APPROVAL; SHARES ENTITLED TO VOTE; RECORD DATE
This Proxy Statement is being mailed to all shareholders of record of
the Company as of the Record Date. Only holders of record of the Company
Common Stock at the close of business on the Record Date will be entitled to
notice of, and to vote at, the Special Meeting or any adjournment(s) or
postponement(s) thereof. As of the Record Date, 5,681,517 shares of the
Company Common Stock were outstanding, all of which were entitled to vote and
which were held of record by 1,076 holders.
The shares of the Company Common Stock constitute the only shares of
voting securities of the Company issued and outstanding and entitled to vote
on matters to be presented at the Special Meeting. Each share of the Company
Common Stock is entitled to one vote on each matter submitted to a vote at the
Special Meeting or any adjournment(s) or postponement(s) thereof.
The presence at the Special Meeting, whether in person or by proxy, of
the holders of a majority of the outstanding shares of the Company Common
Stock entitled to vote thereat will constitute a quorum for the transaction of
business. The affirmative vote, in person or by proxy, of the holders of a
majority of the outstanding shares of the Company Common Stock entitled to
vote at the Special Meeting is required for the approval of the Merger
Agreement. Shares of the Company Common Stock represented by a properly
signed, dated and returned proxy will be treated as present at the Special
Meeting for purposes of determining a quorum, without regard to whether the
proxy is marked as casting a vote or abstaining. Abstentions are counted in
the tabulation of the votes cast on proposals presented to shareholders.
Proxies relating to "street name" shares that are voted by brokers will be
counted as shares present for purposes of determining a quorum, but will not
be treated as shares having voted at the Special Meeting as to the Merger
proposal if authority to vote is withheld by the broker. ACCORDINGLY,
ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS VOTES AGAINST
THE APPROVAL OF THE MERGER AGREEMENT.
As of July 10, 1996, JEDI and Purchaser did not own any shares of the
Company Common Stock. However, pursuant to an agreement with Jerry D. Jordan,
the Chairman of the Company, Purchaser has the right immediately prior to the
Effective Time to acquire 148,150 shares of Company Common Stock from Mr.
Jordan in exchange for Purchaser Common Stock. See "THE MERGER -- Interests of
Certain Persons in the Merger." As of July 10, 1996, the Company's directors
and executive officers held an aggregate of 2,952,766 shares of the Company
Common Stock, representing approximately 52% of the outstanding shares of the
Company Common Stock on the Record Date. The Company anticipates that its
directors and executive officers will vote their shares of the Company Common
Stock in favor of the Merger Agreement, which would constitute sufficient
votes for approval of the Merger Agreement; however, each shareholder is
encouraged to vote on the Merger proposal. For information with respect to the
beneficial ownership of shares of the Company Common Stock by each of the
Company's directors, by the named executive officers, by all directors and
executive officers as a group and by each person known to the Company to be a
beneficial owner of more than five percent of the outstanding shares of the
Company Common Stock, see "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT."
Shareholders have the right to dissent from the Merger and to be paid
the "fair cash value" of their shares of the Company Common Stock, by
following the procedures prescribed in Section 1701.85 of the OGCL. See
Appendix C and "RIGHTS OF DISSENTING SHAREHOLDERS."
INSTRUCTIONS WITH REGARD TO THE SURRENDER OF CERTIFICATES TO THE PAYING
AGENT, TOGETHER WITH A LETTER OF TRANSMITTAL TO BE USED FOR THIS PURPOSE, WILL
BE FORWARDED TO THE COMPANY'S SHAREHOLDERS AS PROMPTLY AS PRACTICABLE
FOLLOWING THE EFFECTIVE TIME. SHAREHOLDERS SHOULD SURRENDER CERTIFICATES ONLY
AFTER RECEIVING A LETTER OF TRANSMITTAL. SHAREHOLDERS SHOULD NOT SEND ANY
CERTIFICATES TO THE COMPANY AT THIS TIME.
SOLICITATION AND REVOCABILITY OF PROXIES
The Company expects to solicit proxies primarily by mail, but directors,
officers, employees and agents of the Company may also solicit proxies in
person, by telephone or by other electronic means, although none will receive
additional compensation for such services. However, such persons will be
reimbursed by the Company for out-of-pocket expenses incurred in connection
therewith. The Company will also request brokerage houses, banks and other
fiduciaries to forward soliciting materials to the beneficial owners of shares
of the Company Common Stock held of record by such fiduciaries and will
reimburse such persons for their reasonable expenses in connection therewith.
The accompanying proxy card is being solicited on behalf of the Board of
Directors of the Company for use at the Special Meeting and at any
adjournment(s) or postponement(s) thereof and the cost of preparing,
assembling and mailing the proxy cards and accompanying materials for the
Special Meeting, including the cost of reimbursing brokers and nominees for
forwarding proxy cards and proxy statements to their principals, will be paid
by the Company.
If the enclosed proxy card is properly executed, duly returned and not
revoked, the shares represented thereby will be voted in accordance with the
instructions contained therein, if any. Unless authority to do so is withheld
or the shareholder abstains from voting, the proxy will be voted "FOR"
approval of the Merger Agreement. Each proxy granted may be revoked by the
shareholder granting such proxy at any time before it is voted by filing with
the Secretary of the Company a written revocation or a duly executed proxy
card bearing a later date, or by attending the Special Meeting and voting in
person. Attendance at the Special Meeting will not in itself constitute the
revocation of a proxy. Proxy cards marked as withholding authority or
abstaining will be treated as present for purposes of determining whether a
quorum is present at the Special Meeting, but will not be counted as a vote
for any proposal as to which authority is withheld or abstention indicated.
Proxy cards returned by brokers as "non-votes" will be treated as present for
purposes of determining whether a quorum is present at the Special Meeting,
but will not be counted as a vote for any proposal as to which a non-vote is
indicated.
If the Special Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the Special Meeting all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the Special Meeting (except for proxies that have theretofore effectively been
revoked or withdrawn), notwithstanding that they may have been effectively
voted on the same or any other matter at a previous meeting.
APPROVAL BY JEDI AND PURCHASER
The affirmative vote of the holders of a majority of the outstanding
shares of Purchaser common stock is required to approve and adopt the Merger
Agreement. As of the date hereof, all of the outstanding shares of Purchaser
common stock are held by JEDI, and such shares have previously been voted by
written consent of JEDI, as Purchaser's sole shareholder, in favor of the
Merger Agreement.
JEDI AND PURCHASER INFORMATION
All information contained in this Proxy Statement with respect to JEDI
and Purchaser has been supplied by JEDI or Purchaser for inclusion herein and
has not been independently verified by the Company.
THE COMPANIES
THE COMPANY
The Company is an Ohio corporation that is primarily engaged in the
business of natural gas and oil exploration, development, production,
acquisition of reserves and the management and marketing of natural gas. The
Company's natural gas and oil business is conducted principally through its
direct subsidiaries, The Clinton Oil Company and Clinton Gas Marketing, Inc.
Additional information concerning the Company's business, assets,
management, results of operations and other matters is included in the
Company's reports filed under the Exchange Act, including the Company's Annual
Report on Form l0-K for the fiscal year ended December 31, 1995, which are
incorporated by reference in this Proxy Statement. See "INCORPORATION OF
CERTAIN INFORMATION BY REFERENCE." The mailing address for the Company's
principal executive offices is 4770 Indianola Avenue, Columbus, Ohio 43214,
and the telephone number at that address is (614) 888-9588.
JEDI AND PURCHASER
JEDI is a Delaware limited partnership whose general partner, Enron
Capital Management Limited Partnership, is an affiliate of ECT, which is a
wholly-owned subsidiary of Enron Corp. The limited partner of JEDI is CalPERS.
The purpose of JEDI is to invest in a diversified portfolio of energy related
assets. The principal executive offices of JEDI are located at 1400 Smith
Street, Houston, Texas 77002, and the telephone number at that address is
(713) 853-6161.
Purchaser is an Ohio corporation formed solely for the purpose of
effecting the Merger and has not carried on any activities other than in
connection with the Merger. Purchaser is a subsidiary of JEDI. The principal
executive offices of Purchaser are located at 1400 Smith Street, Houston,
Texas 77002, and the telephone number at that address is (713) 853-6161.
THE MERGER
THE DISCUSSION IN THIS PROXY STATEMENT OF THE MERGER AND THE MERGER
AGREEMENT AND THE SUMMARY OF THE MERGER AGREEMENT'S PRINCIPAL TERMS ARE
SUBJECT TO AND QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE MERGER
AGREEMENT, A COPY OF WHICH IS ATTACHED TO THIS PROXY STATEMENT AS APPENDIX A
AND WHICH IS INCORPORATED HEREIN BY REFERENCE. THE FOLLOWING SUMMARY OF THE
MERGER AGREEMENT DOES NOT MODIFY OR SUPPLEMENT THE TERMS OF THE MERGER
AGREEMENT.
GENERAL
The Merger Agreement provides, among other things, for the merger of
Purchaser with and into the Company, with the Company surviving the Merger as
the Surviving Corporation. Pursuant to and subject to the terms and conditions
of the Merger Agreement, at the Effective Time of the Merger, all
then-outstanding shares of the Company Common Stock (other than (A) shares of
the Company Common Stock held by Purchaser, the Company or any Company
subsidiary, all of which will be canceled without payment of any
consideration, and (B) shares of the Company Common Stock held by shareholders
who perfect their rights under Section 1701.85 of the OGCL), will be converted
into the right to receive, in cash, $6.75 per share of the Company Common
Stock, without interest.
As a result of the Merger, and without any action on the part of the
holder thereof, all then-outstanding shares of the Company Common Stock will
cease to be outstanding and will be canceled and retired and will cease to
exist, and each holder of a certificate representing shares of the Company
Common Stock will thereafter cease to have any rights with respect to such
shares of the Company Common Stock, except the right to receive, without
interest, $6.75 in cash per share of the Company Common Stock or the right to
receive the "fair cash value" for such shares available under Section 1701.85
of the OGCL and except that shares of the Company Common Stock held by
Purchaser, the Company or any Company subsidiary will be canceled without
payment of any consideration. The Company shareholders who do not vote in
favor of the proposal to adopt the Merger Agreement and who comply with the
statutory procedure set forth in Section 1701.85 of the OGCL will be entitled
to rights as dissenting shareholders with respect to any shares of the Company
Common Stock held by them to be converted at the Effective Time of the Merger.
See "RIGHTS OF DISSENTING SHAREHOLDERS."
Jerry D. Jordan, the Chairman of the Company, has agreed to acquire
shares of common stock of Purchaser (the "Purchaser Common Stock"), which will
be converted into shares of common stock of the Surviving Corporation in the
Merger (representing approximately 3.0% of such common stock outstanding after
the Effective Time), in exchange for 148,150 shares of Company Common Stock
owned by Mr. Jordan. As a result, immediately following the Merger, JEDI and
Mr. Jordan will own approximately 97.0 and 3.0%, respectively, of the
outstanding shares of Surviving Corporation common stock. Mr. Jordan has
entered into a stockholders agreement with JEDI and Purchaser pursuant to
which the shares of Purchaser Common Stock owned by Mr. Jordan will be subject
to certain termination restrictions, and buy-sell and similar obligations. In
addition, six individuals who are officers of a subsidiary of the Company have
entered into employment agreements with Purchaser to be effective at the
Effective Time of the Merger and the President of the Company has entered into
a noncompetition agreement with an affiliate of Purchaser. See "THE MERGER--
Interests of Certain Persons in the Merger."
BACKGROUND OF THE MERGER
The Company's Board of Directors has been concerned for a number of
years that the stock market has not adequately valued the Company Common
Stock. The Board of Directors believes that the low valuation of the Company
in the public market has resulted from a number of factors, including the
limited number of shares of Company Common Stock that are available for
trading in the public market, the small number of securities firms who make a
market in the Company's Common Stock and the lack of industry analysts who
regularly follow and report on the Company. In light of these circumstances,
and with the goal of increasing shareholder value, the Company's Board of
Directors and senior management began in 1992 to explore alternatives for
increasing the value to the Company's shareholders of their investment in the
Company. During 1992 and 1993, the Board of Directors and management discussed
these goals with several different investment banking firms and held
exploratory discussions with at least one energy-related company that had
expressed a possible interest in participating in a business combination with
the Company. In addition to a sale or other business combination, the Board
and management also evaluated, on a preliminary basis, a number of
alternatives for enhancing shareholder value, including efforts to enhance
investor interest in the Company, a going private transaction, and the sale of
certain assets of the Company.
After considering a number of possible strategies for boosting the
Company's market price, in the second half of 1995, the Company's Board of
Directors and senior management decided to explore a possible sale of the
Company. The shares of Company Common Stock were trading in a range of $4.125
to $5.875 per share at such time. The Board concluded that a sale or other
business combination presented the best opportunity for shareholders to
recognize the value of their shares of the Company.
In September 1995, the Board of Directors authorized the Company's
Chairman and Chief Executive Officer to investigate and recommend a strategy
for identifying potential acquirers of the Company. The Company's Chairman
interviewed several investment banking firms and made confidential inquiries
to a selected number of possible acquirers. In November 1995, the Chairman
recommended to the Board of Directors that the Company enter into a
confidentiality agreement and pursue acquisition discussions with Mark Energy
Capital Group, Ltd., a firm located in Houston, Texas, which had expressed a
high degree of interest in pursuing an acquisition of the Company ("Mark
Energy"). On November 20, 1995, the Board of Directors authorized the Company
to enter into a confidentiality agreement with Mark Energy (the "Mark
Confidentiality Agreement"). The Mark Confidentiality Agreement, which the
Company entered into on November 22, 1995, gave Mark Energy an exclusive right
to conduct due diligence and negotiate a possible acquisition of the Company
through December 15, 1995. On December 14, 1995, the exclusivity period was
extended through January 20, 1996. During this exclusivity period, Mark Energy
conducted an examination of the Company and its assets and held discussions
with Company management regarding a possible acquisition. In early January
1996, Mark Energy advised the Company that Mark Energy might not be able to
raise sufficient funds on its own to finance the acquisition of the Company
and to support the future growth of the Company following an acquisition. Mark
Energy requested the Company's permission to discuss the proposed acquisition
of the Company with one or more firms that Mark Energy believed could assist
it to complete quickly an acquisition. The Company agreed to permit Mark
Energy to discuss an acquisition of the Company with third parties on a
limited basis. The Company further advised Mark Energy that the Company
intended to pursue other avenues for the sale of the Company if Mark Energy
did not present a proposal by January 20, 1996.
On January 17, 1996 representatives of Mark Energy presented to the
Company a preliminary proposal of Mark Energy's interest in acquiring all of
the outstanding shares of the Company for $6.50 per share in cash. The
acquisition proposal from Mark Energy did not address, nor had there been any
discussions with representatives of Mark Energy prior to January 17, 1996 in
regard to, any terms of the proposed acquisition other than price and form of
payment. The Mark Energy proposal did not address employment agreements or
equity participation in the acquiring company for Company management or any
other benefit to management. The proposal from Mark Energy also did not
explain how Mark Energy would finance the acquisition or whom the participant
or participants in the acquisition would be.
At a meeting on January 18, 1996, the Company's Board of Directors
evaluated the Mark Energy proposal and concluded that the Mark Energy proposal
was not acceptable to the Board. The Board then agreed to extend further Mark
Energy's exclusivity period for one week, through January 27, 1996, so that
Mark Energy could consider whether it desired to make a new acquisition
proposal. Also, on January 18, 1996, the Board advised Mark Energy that the
Board could recommend to the Company's shareholders a cash offer for all
outstanding shares of the Company at a price of $7.15 per share, subject to
the Board's obtaining the opinion of an investment banking firm that such
price was fair to the Company's shareholders and the satisfaction of certain
other conditions. The Company also advised Mark Energy that the Board's
support for a transaction at a price of $7.15 per share was conditioned upon
its receipt of a firm offer for the Company at that price on or before January
27, 1996. The $7.15 per share price proposed by the Board was not the result
of, or supported by, a report, opinion or appraisal from an outside party.
After reviewing internally prepared financial analyses and projections for the
Company and discussing each director's position on pricing, the Board reached
a consensus that it could support the sale of the Company for a price of $7.15
per share. In making its determination, the Board did not rely exclusively on
any specific appraisal methodology.
On January 27, 1996, Mark Energy advised the Company that Mark Energy
had held discussions regarding the sale of the Company with Encap Investments
L.C. ("Encap"), a Houston investment banking firm, and ECT, which had been
identified by Encap as a possible source of financing for the Company. On
January 30, 1996, representatives of Mark Energy and ECT met with Company
management in Columbus to discuss ECT's interest in pursuing an acquisition of
the Company. ECT advised the Company at the meeting that ECT had a serious
interest in pursuing the acquisition but that it would have to conduct its own
due diligence review before it could decide whether to make an offer to
purchase the Company. Peter M. Mark, the President of Mark Energy, reported at
the meeting that he desired to participate in the management of the Surviving
Corporation if the acquisition of the Company were completed.
On January 30, 1996, the Company's Board of Directors met to consider
whether to commence acquisition discussions with ECT or to pursue a different
strategy for selling the Company. The Company's management summarized for the
Board management's discussions with ECT. The Company's Chairman stated that
ECT had indicated its intention to operate the Company as an independent
entity following any acquisition and that ECT would want Mr. Jordan and
possibly other current members of management to continue to oversee the
Company's operations. The Chairman anticipated that ECT might require
management agreements and equity participation from the Company's management
as a condition to an acquisition.
The Board of Directors of the Company authorized the Company's
management to begin discussions with ECT relative to an acquisition. The
Board's decision was influenced by ECT's strong interest in an acquisition and
ECT's recognized financial ability to complete such an acquisition. The Board
of Directors also appointed the Special Committee for the purpose, among other
things, of making a recommendation to the full Board regarding any acquisition
proposal that might be made by ECT. The Special Committee consists of Hal W.
Field (Chairman), Michael S. Guy and R. L. Richards, each of whom is an
independent director of the Company.
At a meeting on February 7, 1996 the Board of Directors of the Company
authorized the Company to enter into an agreement with ECT (the "Enron
Exclusivity Agreement") whereby ECT and its affiliates were given a 45-day
exclusive dealing period in which to conduct a review of the Company. During
that 45-day period, the Company was prohibited from soliciting, negotiating,
entertaining or encouraging inquiries or proposals regarding the purchase of
the assets (in their entirety) or stock of the Company from any party other
than ECT. The Enron Exclusivity Agreement also required the Company to
reimburse ECT for up to $300,000 of the costs and expenses actually incurred
by it in connection with its due diligence investigation of the Company if,
during the exclusive dealing period, an offer was made by a party other than
ECT to acquire the Company and such offer was consummated prior to the date
one year after the date of termination of ECT's exclusive dealing period. The
Company issued a press release on February 13, 1996, disclosing that it had
granted to an unnamed party the exclusive right to conduct a review of the
Company through March 28, 1996.
Prior to the Company's execution of the Enron Exclusivity Agreement, ECT
advised the Company that it would also enter into an agreement (the "Enron
Finders' Agreement") with Peter M. Mark, the President of Mark Energy, William
H. Hoffman III, a business associate of Mr. Mark, and Encap (the "Finders"),
wherein ECT would reimburse certain costs incurred by Peter Mark in assisting
ECT with its due diligence, and, in the event ECT completed an acquisition of
the Company, make certain payments to the Finders. Pursuant to the Enron
Finders' Agreement, which was entered into among ECT and the Finders on
February 9, 1996, ECT agreed to reimburse Peter Mark and his associates for
all reasonable out-of-pocket expenses and other specified expenses incurred
after the date of the Enron Finders' Agreement in connection with assisting
ECT in due diligence investigations and discussions and negotiations with the
Company and, upon consummation of the acquisition of the Company, pay to the
Finders a fee equal to the lesser of 1.5% of the value of the transaction or
$750,000.
Contemporaneously with the Company's signing of the Enron Exclusivity
Agreement, the Company, Mark Energy and Peter Mark entered into a Mutual
Release whereby Mark Energy, Peter Mark and their affiliates and other related
parties agreed to release the Company and its affiliates and other related
parties, and the Company and its affiliates and other related parties agreed
to release Mark Energy, Peter Mark and their respective affiliates and other
related parties from any and all claims which any of them then had or may
later have against the others relating to or arising out of their prior
negotiations, discussions, agreements or dealings in connection with the
possible sale of the Company.
After the Enron Exclusivity Agreement was executed by the parties, ECT
began its due diligence efforts. While ECT was engaged in its due diligence,
the Company received letters from two companies expressing an interest in
exploring an acquisition of the Company. The first letter was received by the
Company on February 16, 1996, and expressed an interest in discussing with the
Company a possible business acquisition. The second of these letters was
received on February 19, 1996, from a firm with which the Company had engaged
in preliminary merger discussions in 1993. These discussions terminated in
1993 because of the conclusion of the Company's Board of Directors that the
other party was unwilling to pay a price that the Board believed to be
adequate. Neither of these two companies disclosed in their February letters
to the Company a price that such company would be willing to pay for the
Company's shares. The Company notified both companies that it was prohibited
under an exclusive dealing agreement from engaging in any acquisition
discussions during the exclusivity period. Further correspondence was received
from these two companies noting their continuing interest in exploring a
transaction with the Company.
On March 20, 1996, the Company extended the exclusive dealing period in
the Enron Exclusivity Agreement from March 28, 1996, to April 11, 1996. The
Company agreed to such an extension in order to allow ECT additional time in
which to conduct its review of the Company.
On March 28, 1996, a representative of ECT met with six members of the
Company's Board of Directors and presented ECT's preliminary acquisition
proposal. The ECT representative stated that ECT, in conjunction with an
affiliate, was willing to acquire all of the outstanding shares of the Company
for a cash purchase price of $6.50 per share. The acquisition proposal was
subject to the condition that Jerry D. Jordan, the Company's Chairman, agree
to enter into an employment agreement with the post-acquisition company (the
"Post-Acquisition Company") and agree to invest in the Post-Acquisition
Company. The ECT representative also stated that other members of the
Company's operational management would be given employment contracts with the
Post-Acquisition Company. The members of the Board of Directors advised the
ECT representative that the proposal would be reviewed and considered by the
Special Committee and the full Board.
The Company's Board of Directors met on April 1, 1996, to consider the
ECT proposal. Mr. Jordan reported at the meeting that he had not yet agreed to
the terms of the proposal as they applied to him. Mr. Jordan reported that ECT
desired that he continue as a shareholder of the Post-Acquisition Company and
retain a $2 million investment in the Post-Acquisition Company. He also
indicated that ECT desired for him to enter into a five year employment
agreement. He stated that he intended to negotiate the terms of his employment
agreement and equity contribution separately and through his own personal
legal counsel. After meeting with Mr. Jordan, the Board concluded that it
would not discuss or negotiate with ECT a purchase price or other terms of an
acquisition until Mr. Jordan had reached agreement with ECT regarding the
basic terms of his equity participation in the Post-Acquisition Company and
his employment with that company.
On April 3, 1996, Jerry D. Jordan reported to each of the Company's
directors by telephone that he had advised ECT that he was unwilling to
participate as an investor in the Post-Acquisition Company on the terms set
forth by ECT and that he would not enter into an employment agreement with the
Post-Acquisition Company. He stated further that ECT had later responded that
it continued to have an interest in acquiring the Company, even if he did not
participate as an investor in the Post-Acquisition Company, but that it would
have to obtain a price proposal from the Company's Board of Directors in order
to proceed further and key members of the operating management of the Clinton
Oil Company would be required to enter into employment contracts with the
Post-Acquisition Company. The directors then discussed the price that should
be proposed to ECT. After reviewing the position of each of the directors on
pricing, the Board authorized Mr. Jordan to propose to ECT a purchase price of
$7.02 per share, which the directors concluded would be a fair price for the
Company. The Board's decision represented the consensus of the Board and was
not based on, or the result of, a report, appraisal or opinion of any outside
party. The Board was willing to reduce the proposed price from the $7.15 per
share amount proposed to Mark Energy after weighing the risk of losing the
fully financed acquisition proposal from ECT, which the Board recognized would
not pay a purchase price of $7.15 per share, against the possibility of
exploring whether a higher meaningful bid could be obtained from another
bidder.
Mr. Jordan communicated the Board's $7.02 proposal to ECT on April 3,
1996. On April 4, 1996, a representative of ECT reported to Mr. Jordan that
ECT would be willing to pay $6.60 per share for the Company.
The Board of Directors of the Company met on April 5, 1996, to consider
the ECT proposal to purchase all of the outstanding shares of the Company for
$6.60 per share in cash. Mr. Jordan reported to the Board that ECT had
expressed concern that it might not have senior management for the
Post-Acquisition Company in place because Mr. Jordan was unwilling to enter
into an employment agreement. Mr. Jordan reported to the Board that, in order
to alleviate that concern, he was willing to commit to a three year employment
agreement in which ECT could terminate his employment at any time on thirty
days notice.
After discussion, the Board of Directors of the Company, including the
members of the Special Committee, agreed that they would recommend to the
Company's shareholders that they accept a proposal from ECT to purchase for
cash all of the outstanding shares of the Company for $6.75 per share, subject
to obtaining the opinion of McDonald & Company, the Company's investment
banking firm, that the price is fair to the Company's shareholders from a
financial standpoint. In deciding to offer a price less than the $7.02
initially proposed to ECT and the $7.15 proposed to Mark Energy, the directors
concluded that the price of $6.75 was still an acceptable price for the
Company and that it would not be prudent to seek a higher price from another
bidder and thereby create a substantial risk that ECT would terminate its
interest in pursuing an acquisition of the Company. The directors' decision to
recommend that the Company's shareholders accept a price of $6.75 per share
was subject to the conditions that (i) ECT's senior management confirm their
support for the $6.75 per share price and recommend it to the ECT Board of
Directors by April 11, 1996 and (ii) a definitive agreement be executed within
forty-five days after April 11, 1996.
Mr. Jordan communicated the Board's support for an acquisition at $6.75
per share to ECT on April 5, 1996. He also advised ECT that he would be
willing to serve as a member of management of the Post-Acquisition Company for
up to three years and that ECT could terminate his employment at any time
during such three year period on thirty days notice. On the same day, a
representative of ECT advised the Company that he would recommend to ECT's
senior management that an acquisition offer be made at a cash purchase price
of $6.75 per share.
On April 11, 1996, a representative of ECT advised the Company that the
senior management of ECT would recommend to the ECT Board that an acquisition
proposal be made at $6.75 per share in cash for all of the outstanding shares
of the Company. Mr. Jordan thereafter received a telephone call from a
representative of ECT informing him that substantial concerns had been raised
within ECT about the proposed acquisition because Mr. Jordan had not agreed to
acquire an equity interest in the Post-Acquisition Company. As a result of the
concerns raised by ECT, Mr. Jordan informed ECT that he would agree to invest
up to $1 million in the Post-Acquisition Company and enter into a three year
employment agreement containing customary terms and conditions. Immediately
thereafter, Mr. Jordan informed the Company's directors that he had had
further discussions with representatives of ECT and had agreed to invest up to
$1 million in the Post-Acquisition Company and enter into a three-year
employment agreement with the Post-Acquisition Company. Mr. Jordan advised the
directors that he would be negotiating with ECT the terms of his involvement
in the Post-Acquisition Company through his personal legal counsel.
In order to provide sufficient time for the parties to negotiate and
execute a definitive merger agreement, the Company agreed on April 11, 1996,
to extend the exclusive dealing period under the Enron Exclusivity Agreement
to May 3, 1996. The Company also agreed to increase the cap on expenses of ECT
for which the Company would be responsible under the Enron Exclusivity
Agreement from $300,000 to $750,000. The exclusive dealing period was again
further extended to May 28, 1996, to give ECT additional time in which to
conduct its due diligence review and to give ECT and the Company additional
time to negotiate the Merger Agreement.
On May 22, 1996, acting on the unanimous recommendation and approval of
the Special Committee, the Board of Directors of the Company approved the
execution and delivery by the Company of the Merger Agreement. Mr. Jordan
abstained from voting on the Merger Agreement and related resolutions because
of his interest in respect of the transactions. Mr. Jordan has entered into
agreements with Purchaser pursuant to which he will be employed by the
Post-Acquisition Company subsequent to the Merger and will acquire an equity
interest in the Post-Acquisition Company through an investment in Purchaser
immediately prior to the Effective Time. In addition, F. Daniel Ryan, the
President of the Company, will receive a two-year noncompetition agreement
from an affiliate of ECT and certain officers of the Company's subsidiary, The
Clinton Oil Company, will receive employment agreements with the Post
Acquisition Company. See "THE MERGER --Interests of Certain Persons in the
Merger." Prior to the directors' vote on the Merger Agreement, they received
the opinion of McDonald & Company that, in its opinion, the Merger
consideration is fair from a financial point of view to the Company's
shareholders.
The terms of the Merger Agreement, other than the purchase price, were
negotiated on behalf of the Company by its management with the assistance of
Company legal counsel. The members of the Special Committee were apprised on a
regular basis of the status of these negotiations and their advice was
utilized in the negotiations. The members of the full Board also reviewed the
Merger Agreement prior to its execution and discussed proposed changes to such
document with the Company's legal counsel.
In determining to recommend that the full Board approve the Merger
Agreement, the Special Committee considered whether to pursue the inquiries
received from the two parties who had expressed an interest in acquiring the
Company before approving the Merger Agreement The Special Committee concluded
that it was in the best interest of the shareholders of the Company to enter
into an agreement with Purchaser without pursuing discussions with these other
firms for the following reasons: (a) the substantial risk that ECT would
terminate its interest in pursuing an acquisition of the Company if the
Special Committee explored whether a higher price could be obtained from other
parties, (b) while such other firms had expressed an interest in acquiring the
Company, they had not offered a firm price for the Company, (c) the Special
Committee was advised by McDonald & Company that the price offered by ECT was
fair to the shareholders from a financial point of view, and (d) the Merger
Agreement permits the Company, under specified conditions, to terminate the
Merger Agreement, subject to certain terms and conditions, if any person makes
a bona fide offer to acquire the Company that the Board of Directors believes
in its good faith judgment would yield a better value to the Company
shareholders than the Merger Agreement
RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS; REASONS
FOR THE MERGER
The Company's Board of Directors and the Special Committee have approved
the Merger Agreement, having determined that the acquisition of the Company
pursuant to the Merger Agreement is fair to, and in the interests of, the
Company and its shareholders. Accordingly, the Company's Board of Directors
and the Special Committee unanimously recommend that the holders of the
Company's Common Stock vote "FOR" the approval and adoption of the Merger
Agreement.
The Special Committee and the full Board of Directors have extensively
considered the Merger, the Merger Agreement and related documents. In
determining to recommend approval of the Merger Agreement, the Board of
Directors and the Special Committee considered the following factors: (i) the
terms and conditions of the Merger Agreement; (ii) the trading price of the
Company's shares over the past three years and the fact that the $6.75 per
share price in the Merger Agreement represents a premium of 25 cents per share
over the closing sales price for the Company's shares on The NASDAQ Stock
Market on February 12, 1996, the last trading day prior to the public
announcement by the Company that it was engaged in discussions with a third
party regarding a possible acquisition of the Company, and a premium of
approximately 50% over the highest closing price on The NASDAQ Stock Market
for the quarter ended December 31, 1995; (iii) the written opinion of McDonald
& Company that, as of the date of such opinion, the Merger consideration was
fair, from a financial point of view, to Company shareholders; (iv) the fact
that the Merger Agreement permits the Company, under specified conditions, to
terminate the Merger Agreement, subject to certain terms and conditions, if
any person makes a bona fide offer to acquire the Company that the Board of
Directors believes in its good faith judgment would yield a better value to
the Company shareholders than the Merger Agreement; (v) information with
respect to the financial condition, results of operations and business and
future prospects and capital needs of the Company; (vi) the fact that the
Company is expected to continue after the Merger to have its principal offices
in Central Ohio and is expected to operate with many of the same employees;
and (vii) the strategic direction of the Company's business and future
prospects of the oil and gas industry.
The members of the Company's Board of Directors and the Company's
executive officers own a total of 2,952,766 shares of the Company Common
Stock, or approximately 52% of the issued and outstanding shares entitled to
vote on the Merger Agreement. It is anticipated that the directors and
executive officers will vote their shares in favor of the Merger Agreement,
which would constitute sufficient votes to approve the Merger Agreement;
however, each shareholder is encouraged to vote on the Merger Agreement. See
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
OPINION OF FINANCIAL ADVISOR
In March 1996, the Board agreed to retain McDonald & Company to act as
financial advisor to the Board and to render an opinion as to the fairness of
the Merger, from a financial point of view, to the shareholders of the
Company.
In requesting a fairness opinion from McDonald & Company, the Board of
Directors did not give any special instructions to McDonald & Company or
impose any limitations upon the scope of the investigations that McDonald &
Company deemed necessary to enable it to deliver its opinion. The Board of
Directors engaged McDonald & Company because it is a recognized investment
banking firm and because of its experience in rendering fairness opinions.
In connection with the fairness opinion, McDonald & Company reviewed,
among other things, the following: (i) the Merger Agreement, including the
exhibits and schedules thereto; (ii) certain publicly available information
concerning the Company, including its Annual Report on Form 10-K for the year
ended December 31, 1995 (including the three years of audited financial
statements included therein and an estimate of proved developed reserves of
the Company included therein, which were reviewed by John G. Redic, an
independent consulting engineer); (iii) certain other internal information,
primarily financial in nature, concerning the business, earnings, assets and
prospects of the Company furnished to McDonald & Company by management of the
Company; (iv) certain publicly available information concerning the trading
of, and the trading market for, the Company Common Stock; (v) certain publicly
available information with respect to certain other companies that McDonald &
Company believed to be comparable to the Company and the trading markets for
certain of such other companies' securities; and (vi) certain publicly
available information concerning the nature and financial terms of certain
other merger transactions that McDonald & Company considered relevant to its
inquiry.
In its review and analysis, McDonald relied upon the accuracy and
completeness of the financial and other information prepared or otherwise
provided to it by the parties or that was publicly available. McDonald was not
engaged to, and did not independently attempt to, verify any such information.
If any such information provided to it by the parties or that was publicly
available were materially inaccurate or incomplete, the opinion of McDonald
could be materially different.
Based on the above analyses, McDonald & Company opined that the Merger
consideration was fair, from a financial point of view, to the shareholders of
the Company.
As compensation for rendering the fairness opinion, the Company paid
McDonald & Company a fee of $95,000. In addition, the Company has agreed to
reimburse McDonald & Company for certain out-of-pocket expenses, including
legal fees, and has agreed to indemnify McDonald & Company against certain
liabilities, including certain liabilities under the federal securities laws.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors with respect
to the Merger, shareholders should be aware that certain members of management
and certain members of the Board of Directors at the time of approval of the
Merger Agreement had, and currently have, certain interests which may present
them with potential conflicts of interest in connection with the Merger, as
summarized below.
Agreements with Jerry D. Jordan. Jerry D. Jordan, Chairman and Chief
Executive Officer of the Company, has entered into various agreements with
Purchaser relating to his relationship with the Surviving Corporation
subsequent to the consummation of the Merger. These agreements will terminate
automatically if the Merger Agreement is terminated. The agreements are
summarized below:
Subscription Agreement. Purchaser entered into a Subscription
Agreement dated as of May 24, 1996, with Mr. Jordan (the "Subscription
Agreement") which provides for the acquisition by Mr. Jordan of Purchaser
common stock. Under the Subscription Agreement, Mr. Jordan agreed to
contribute to Purchaser 148,150 shares of Company Common Stock owned by him.
Those shares of Company Common Stock shall be contributed to the Purchaser
effective immediately prior to the Effective Time. At the closing of the
transactions contemplated by the Merger Agreement, and effective immediately
prior to the Effective Time, Purchaser shall issue 1,000 shares of Purchaser
common stock to Mr. Jordan in consideration for such shares. Subject to the
consummation of the Merger, JEDI will make a capital contribution to Purchaser
at or prior to the Effective Time in the amount of $31,354,000 in
consideration for 31,354 shares of Purchaser common stock that immediately
after the Effective Time will represent approximately 97% of the outstanding
common stock of the Surviving Corporation on a fully diluted basis. Mr. Jordan
will own, immediately after the Effective Time, 1,000 shares of Purchaser
common stock which will represent approximately 3% of the outstanding common
stock of the Surviving Corporation on a fully diluted basis.
Shareholders Agreement. Purchaser, JEDI and Mr. Jordan have entered into
a Shareholders Agreement dated as of May 24, 1996 (the "Shareholders
Agreement"), which provides generally that Mr. Jordan shall not make any
transfer of the Surviving Corporation common stock (the "Common Stock"),
directly or indirectly, except as expressly permitted therein. Mr. Jordan may
transfer, from time to time, any Common Stock to permitted family transferees.
Mr. Jordan may transfer Common Stock to any other transferee if, but only if,
the Surviving Corporation has not exercised its right to match any bona fide
written third party offer to purchase the Common Stock. The Surviving
Corporation's right to match such third party offer may be assigned, in whole
or in part, to JEDI. The Shareholders Agreement further provides that if JEDI
or any of its affiliates propose to sell Common Stock for value (excluding
certain sales set forth in the Shareholders Agreement), then such transferor
shall offer to include in the proposed sale a number of shares of Common Stock
designated by Mr. Jordan (the "Tagalong Right"), not to exceed the number of
shares equal to the product of (A) the aggregate number of shares to be sold
by the transferor to the proposed transferee and (B) a fraction with a
numerator equal to the number of shares of fully-diluted Common Stock held by
Mr. Jordan and a denominator equal to the number of shares of fully-diluted
Common Stock held by the transferor and Mr. Jordan. The Shareholders Agreement
further provides that if the Surviving Corporation at any time proposes to
sell Common Stock pursuant to a registration statement filed under the
Securities Act of 1933, as amended (other than registrations on Forms S-4 or
S-8 or any successor forms thereto), the Surviving Corporation will each such
time promptly give written notice to Mr. Jordan of its intention to do so and,
upon the written request of Mr. Jordan, the Surviving Corporation will use its
best efforts to cause the number of shares owned by Mr. Jordan and so
designated to be registered under such registration statement to the extent
requisite to permit the sale or other disposition by Mr. Jordan of such shares
(the "Registration Right"). The Shareholders Agreement further provides that
the Surviving Corporation shall be obligated to purchase Mr. Jordan's shares
of Common Stock upon termination of Mr. Jordan's employment (the "Stock Sale
Rights"). Mr. Jordan shall have the right to cause the Surviving Corporation
to purchase all, but not less than all, shares of Common Stock then owned by
Mr. Jordan at any time following the date Mr. Jordan ceases to be an employee
of Surviving Corporation (the "Employment Termination Date") at a price per
share equal to an appraised value as defined in the Shareholders Agreement. In
addition, if the Employment Termination Date occurs as the result of the death
or incapacity of Mr. Jordan, the Surviving Corporation shall purchase such
shares and pay Mr. Jordan (or his representative) the purchase price thereof
on the date which is no later than 30 days following the date of the Surviving
Corporation's receipt of such notice, and the appraised value shall be
determined as of the end of the second month immediately preceding such date
of receipt. If the Employment Termination Date occurs as a result of any other
reason, such purchase and payment shall occur on the date which is the later
of three years following the Effective Time, or 30 days following the date of
the Surviving Corporation's receipt of the notice referred to above, and the
appraised value shall be determined as of the end of the second month
immediately preceding such date of purchase and payment. The Surviving
Corporation shall have the right to purchase all, but not less than all,
shares of Common Stock owned by Mr. Jordan at any time following the
Employment Termination Date at a price equal to an appraised value. Such right
may be assigned by the Surviving Corporation, in whole or in part, to JEDI.
The Shareholders Agreement shall terminate upon the earliest of (i) the
termination of the Merger Agreement in accordance with its terms, (ii) the
date which is 10 years following the Effective Time, (iii) the date a
qualified initial public offering (as defined in the Shareholders Agreement)
is consummated (except that in such event, Mr. Jordan's Tagalong Right,
Registration Right and Stock Sale Rights will continue until Mr. Jordan has
sold all of his shares of Common Stock), (iv) the date of the dissolution,
liquidation or winding-up of the Surviving Corporation or (v) the date of
delivery to the Surviving Corporation of a written termination notice executed
by the parties to the Shareholders Agreement.
Business Opportunity Agreement. ECT, Purchaser, JEDI and Mr.
Jordan also entered into a Business Opportunity Agreement dated May 24, 1996
(the "Business Opportunity Agreement") that is intended to make it clear that
Enron Corp., a Delaware corporation ("Enron") and the parent of ECT, and its
affiliates, have no duty to make business opportunities available to the
Surviving Corporation in most circumstances. The Business Opportunity
Agreement also provides that ECT and its affiliates may pursue certain
business opportunities to the exclusion of the Surviving Corporation. In
addition, there may be circumstances in which the Surviving Corporation will
offer business opportunities to certain affiliates of Enron. If an Enron
affiliate is offered such an opportunity and decides to pursue it, the
Surviving Corporation may be unable to pursue it.
Employment Agreement. Mr. Jordan and Purchaser entered into an
employment agreement to be effective as of the Effective Time (the "Employment
Agreement"). The Employment Agreement is for a period of three years after the
Effective Time. The Employment Agreement provides that Mr. Jordan will serve
as the Chairman of the Board and Chief Executive Officer of the Surviving
Corporation and will be paid an annual base salary of $250,000. The Employment
Agreement provides that Mr. Jordan shall be allowed to participate, on the
same basis generally as other employees of the Surviving Corporation, in all
general employee benefit plans and programs, including improvements or
modifications to the same, which are in effect as of the Effective Time or
thereafter are made available by the Surviving Corporation to all or
substantially all of its employees. Upon a voluntary termination (as defined
in the Employment Agreement) of the employment relationship prior to the
expiration of the term of the Employment Agreement , all future compensation
to which Mr. Jordan is entitled and all future benefits for which Mr. Jordan
is eligible shall cease and terminate as of the date of termination. Mr.
Jordan shall be entitled to pro rata salary through the date of such
termination plus any other payments generally available to other departing
employees of Surviving Corporation, but Mr. Jordan shall not be entitled to
any individual bonuses or individual incentive compensation not yet paid at
the date of such termination. If Mr. Jordan's employment shall be terminated
for cause (as defined in Employment Agreement) prior to the expiration of the
term of the Employment Agreement, all future compensation to which Mr. Jordan
is entitled and all future benefits for which Mr. Jordan is eligible shall
cease and terminate as of the date of termination. Upon an involuntary
termination (as defined in the Employment Agreement) prior to the expiration
of the term of the Employment Agreement, Mr. Jordan shall be entitled, in
consideration of Mr. Jordan's continuing obligations under the Employment
Agreement after such termination, to receive his base salary as if his
employment has continued for the full term of the Employment Agreement. The
Employment Agreement provides that Mr. Jordan shall not compete with the
Surviving Corporation until the later of (a) three years after the Effective
Time or (b) one year after the termination of the employment relationship. See
also "-- Operation and Management of Surviving Corporation After the Merger"
for a discussion of Mr. Jordan's appointment to the Surviving Corporation's
Board of Directors.
Employment Agreements and Non-Competition Agreement. Purchaser also
entered into employment agreements, to be effective as of the Effective Time,
with Marilyn A. Ennis, John L. Forman, William A. Grubaugh, Mark D. Jordan,
Donald E. Kreager and Connie J. Slocum, all of whom are currently officers of
a subsidiary of the Company. In addition, an affiliate of the Purchaser
entered into a non-competition agreement with F. Daniel Ryan, the Company's
President.
INDEMNIFICATION AND INSURANCE
The parties to the Merger Agreement have agreed that, for a period of
six years after the Effective Time, the Code of Regulations of the Surviving
Corporation will contain provisions that acknowledge and agree that, to the
fullest extent permitted or authorized by law, the provisions relating to
indemnification and advancement of expenses that are set forth in the
Purchaser's existing Code of Regulations shall remain effective with respect
to individuals who at any time from and after the date of the Merger Agreement
to and including the Effective Time were directors, officers, employees,
fiduciaries or agents of the Company or of any Company subsidiary in respect
of acts or omissions occurring at or prior to the Effective Time (including,
without limitation, the matters contemplated by the Merger Agreement).
Pursuant to the Merger Agreement, the Surviving Corporation shall not amend or
repeal such provisions to the detriment of such persons for a period of six
years from the Effective Time.
Furthermore, the parties to the Merger Agreement have agreed that the
Surviving Corporation will, for a period of six years from the Effective Time,
maintain in effect the current directors' and officers' liability insurance
coverage maintained by the Company on the date of the Merger Agreement with
respect to matters occurring through the Effective Time. The Surviving
Corporation may substitute policies of at least the same coverage and amounts
and containing terms and conditions that are no less advantageous to such
officers and directors so long as such substitution does not result in gaps or
lapses in coverage. However, in no event will the Surviving Corporation be
required to expend, to maintain or procure such insurance coverage, any amount
per annum, for any of the first three years after the Effective Time, in
excess of 75% of the aggregate premiums paid by the Company in 1995, or for
the fourth, fifth or sixth year after the Effective Time in excess of 50% of
the aggregate premiums paid by the Company in 1995.
The above obligations of the Surviving Corporation may not be terminated
or modified so as to adversely affect any director, officer, employee,
fiduciary or agent who benefits from such obligations without the consent of
each affected person. In the event the Surviving Corporation or any of its
successors or assigns consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity after such
consolidation or merger, or transfers all or substantially all of its assets
to any person, then, in each such case, the Merger Agreement provides that the
successors and assigns of the Surviving Corporation or, at JEDI's option,
JEDI, shall assume the indemnification and insurance obligations of the
Surviving Corporation described above.
MISCELLANEOUS PROVISIONS IN THE MERGER AGREEMENT
JEDI's Commitment to Fund the Merger. JEDI has agreed, at the closing of
the Merger, to cause to be deposited in trust with the Paying Agent cash that
will be sufficient to enable the Paying Agent to make payments with respect to
each share of Common Stock for which the Merger Consideration is payable.
Access and Information. The Company and its subsidiaries have agreed to
allow Purchaser and Purchaser's affiliates, accountants, lenders, counsel and
other representatives full access to all of their properties, books,
contracts, commitments, records and personnel and to promptly furnish
Purchaser with a copy of (i) each report, schedule or other document filed or
received by them pursuant to the requirements of federal or state securities
laws and (ii) all other information concerning their business, properties and
personnel as Purchaser may reasonably request. JEDI and Purchaser have agreed
to keep all such information confidential.
Reasonable Best Efforts. Each of JEDI, Purchaser and the Company has
agreed, subject to the terms and conditions of the Merger Agreement, to
cooperate with each other and to use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, in each case
consistent with the fiduciary duties of their respective Boards of Directors,
all things necessary, proper or advisable (i) under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Merger Agreement as soon as reasonably practicable, including to obtain
all necessary waivers, consents and approvals and to effect all necessary
registrations and filings and (ii) to lift any injunction or other legal bar
to the Merger as soon as reasonably practicable (and, in such case, to proceed
with the Merger as expeditiously as possible); provided, however, that nothing
contained in the Merger Agreement will require any party to the Merger
Agreement to incur expenses in connection with the transactions contemplated
by the Merger Agreement that are not reasonable under the circumstances in
relation to the size of the transaction contemplated by the Merger Agreement,
or to require any party or any affiliate of any party to hold separate or make
any divestiture of any significant asset or otherwise agree to any material
restriction on the operations of any party in order to obtain any waiver,
consent or approval required by the Merger Agreement.
Obligations of JEDI and Purchaser. JEDI has agreed to take all action
necessary to cause Purchaser to perform all of Purchaser's covenants and
obligations. Purchaser and JEDI have agreed to be liable for any breach of any
representation, warranty, covenant or agreement of Purchaser or Surviving
Corporation; provided, however, that JEDI will not be responsible for, or
provide any guaranties of, any actions of Purchaser after the Effective Time
other than its obligation to deposit sufficient funds with the Paying Agent as
required under the Merger Agreement (see "-- JEDI's Commitment to Fund the
Merger").
Certain Employee Benefit Matters. As of the date of the Merger
Agreement, it is anticipated that Surviving Corporation will not become a
participating employer in any employee benefit or compensation plans sponsored
or maintained by Enron Corp. (the parent corporation of ECT) for the benefit
of its subsidiaries or affiliated companies.
Public Announcements. So long as the Merger Agreement is in effect,
JEDI, Purchaser and the Company have agreed that none of them will issue a
press release or otherwise make any public statement with respect to the
transactions contemplated by the Merger Agreement without the consent of the
others, unless such press release or public statement is required by law or
rules of any applicable market or exchange, in which case such press release
or public statement may be made after providing the other parties a reasonable
opportunity to comment thereon.
EFFECTIVE TIME; EFFECT OF MERGER
Effective Time. The Effective Time of the Merger will be the date and
time when a properly executed certificate of merger, in such form as is
required by and executed in accordance with the OGCL, is duly filed with the
Secretary of State of the State of Ohio, or at such later time as the parties
to the Merger Agreement designate in such filing as the Effective Time. It is
anticipated that, subject to the satisfaction or waiver, if permissible, of
the conditions to consummation of the Merger set forth in the Merger
Agreement, such filing will be made approximately ten days after the Merger
Agreement has been approved by the Company's shareholders.
Effect of Merger. As of the Effective Time, Purchaser will be merged
with and into the Company and Purchaser's separate corporate existence will
terminate. The Company will be the Surviving Corporation and will own all of
Purchaser's assets and will be responsible for all of Purchaser's liabilities.
The Company, as the Surviving Corporation, will continue to be governed by the
OGCL, and the separate corporate existence of the Company will continue
unaffected by the Merger, except as provided in the Merger Agreement.
At the Effective Time, the articles of incorporation of the Purchaser,
as in effect prior to the Effective Time, will become the articles of the
Surviving Corporation, except that Article 1 of the Purchaser's articles shall
be changed to provide that the name of the Surviving Corporation shall be
"Clinton Gas Systems, Inc." and a new article shall be added to the articles
that eliminates cumulative voting in the election of directors. The Code of
Regulations of the Purchaser as in effect at the Effective Time will be the
Code of the Surviving Corporation. The directors of Purchaser and the officers
of the Company immediately prior to the Effective Time, subject to the
applicable provisions of the articles of incorporation and code of regulations
of the Surviving Corporation, will be the directors and officers,
respectively, of the Surviving Corporation until their respective successors
are duly elected or appointed and qualified. It is anticipated that Jerry D.
Jordan will be elected to the Board of Directors of the Surviving Corporation
immediately after the Effective Time.
SURRENDER OF CERTIFICATES
The Company and Purchaser have agreed to appoint American Stock Transfer
& Trust Company as the Paying Agent to receive, hold and disburse the funds to
which holders of shares of the Company Common Stock will become entitled upon
consummation of the Merger. Promptly after the Effective Time, the Surviving
Corporation will cause the Paying Agent to mail to each person who was a
record holder of shares of the Company Common Stock immediately prior to the
Effective Time (other than Purchaser, the Company, the Company's subsidiaries
and holders of shares who perfect their dissenters rights under Section
1701.85 of the OGCL), a form of letter of transmittal and instructions
advising the holders of the procedure for surrendering for payment their
Certificates. Holders of shares of the Company Common Stock should not submit
their Certificates to the Paying Agent until they have received such
materials. Upon surrender of a Certificate to the Paying Agent, together with
a duly executed and completed letter of transmittal and any other required
documents, the holder of the Certificate will receive in exchange, and the
Paying Agent will pay (via U.S. mail, postage prepaid) as soon as practicable
to such holder, cash in an amount equal to the product of the number of shares
of the Company Common Stock represented by the Certificate surrendered and
$6.75, without any interest thereon and less any required withholding of
taxes. The surrendered Certificates will then be canceled.
If the payment is to be made to a person other than the person in whose
name a surrendered Certificate is registered, the person requesting such
payment must present the Paying Agent with all documents required to evidence
that the stock has been transferred to such person and that all applicable
transfer or other taxes have been paid.
The Surviving Corporation will pay all charges and expenses, including
those of the Paying Agent, in connection with the distribution of the
consideration to be paid to the holders of Certificates in connection with the
Merger.
No interest will accrue or be paid on the cash payable upon the
surrender of Certificates. No dividends will be paid to, or accrued for the
benefit of, former holders of shares of the Company Common Stock after the
Effective Time. From and after the Effective Time, until surrendered in
accordance with the instructions contained in the instruction letter from the
Surviving Corporation, holders of Certificates will cease to have any rights
with respect to such shares except the right to receive $6.75 per share in
cash multiplied by the number of shares of the Company Common Stock evidenced
by such Certificates, without any interest thereon, and any dissenters rights
available under the OGCL.
On or after the one hundred eightieth day following the Effective Time,
the Surviving Corporation may by written request require the Paying Agent to
pay to the Surviving Corporation that portion of the funds deposited with the
Paying Agent (and any income earned thereon) that has not been disbursed, and
holders of Certificates shall thereafter look only to the Surviving
Corporation for any payment to be made pursuant to the Merger.
CONDITIONS TO CONSUMMATION OF THE MERGER
Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party to effect the Merger are subject to the
satisfaction, or waiver if applicable, at or prior to the Effective Time, of
various conditions, including, among other things, (i) the approval and
adoption of the Merger Agreement by the requisite vote of the holders of the
Company Common Stock, and ten days elapsing following the date of such
approval and adoption; (ii) the absence of the enactment, issuance,
promulgation, enforcement or entry by any federal or state governmental
authority or other agency or commission or court of any law, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) that is then in effect and has the effect of making
the Merger illegal or otherwise preventing or prohibiting consummation of the
Merger; (iii) the Company having received from McDonald & Company confirmation
of its opinion attached hereto as Appendix B, that the Merger consideration is
fair to the Company shareholders, from a financial point of view; and (iv) as
of the Effective Time, the Merger complies with Section 1704.03(A)(4) of the
Ohio Revised Code.(See "THE MERGER -- Chapter 1704 of the Ohio Revised Code").
Conditions to the Obligations of Purchaser. Additional conditions to the
obligations of Purchaser to effect the Merger include (i) the performance in
all material respects by the Company of its agreements contained in the Merger
Agreement required to be performed on or prior to the Effective Time; (ii) the
representations and warranties of the Company contained in the Merger
Agreement that are qualified with respect to materiality are true and correct
in all respects, and such representations and warranties that are not so
qualified are true and correct in all material respects, each when made and on
and as of the Effective Time as if made at such time (except to the extent
they expressly relate to the date of the Merger Agreement or any other
particular date); (iii) the receipt by Purchaser of a certificate of the
President or Chief Executive Officer of the Company, dated the closing date,
with respect to the matters set forth in (i) and (ii) above; (iv) the receipt
by the Company of all required permits, consents, authorizations, approvals,
registrations, qualifications, designations and declarations required to be
delivered by the Company, on terms and conditions reasonably satisfactory to
Purchaser, and, to the extent required to be submitted prior to the Effective
Time, that all required filings and notices shall have been submitted by the
Company; (v) the receipt by Purchaser of the opinion of Vorys Sater, Seymour
and Pease, legal counsel to the Company, dated the closing date of the Merger,
with respect to certain matters; (vi) that the number of shares of the Company
Common Stock held by shareholders dissenting in accordance with Section
1701.85 of the OGCL shall not exceed 10% of the outstanding shares of the
Company Common Stock; (vii) that none of Messrs. John L. Forman, William A.
Grubaugh or Jerry D. Jordan shall have breached or anticipatorily breached any
of their respective Employment Agreements, (viii) none of Messrs. Forman,
Grubaugh or Jordan shall have died or become disabled (provided, however, that
if such a person dies or becomes disabled at a time when the Company has in
force term life insurance in a specified amount for such person, the person's
death or disability will not result in a failure of a condition to closing the
transaction); (ix) the receipt by Purchaser of the written resignations,
effective as of the Effective Time, of each director of the Company and its
subsidiaries and (x) there shall not be pending any action, proceeding or
investigation brought by any person before any governmental entity
challenging, affecting, or seeking material damages in connection with, the
transactions contemplated by the Merger Agreement.
Conditions to the Obligations of the Company. Other conditions to the
obligations of the Company to effect the Merger include (i) the performance in
all material respects by JEDI and Purchaser of their respective agreements
contained in the Merger Agreement required to be performed on or prior to the
Effective Time; (ii) the representations and warranties of JEDI and Purchaser
contained in the Merger Agreement are true and correct in all material
respects when made and on and as of the Effective Time as if made at such time
(except to the extent they expressly relate to the date of the Merger
Agreement or any other particular date); (iii) the receipt by the Company of a
certificate of the President or Chief Executive Officer (or comparable
officer) of JEDI and Purchaser, dated the closing date, with respect to the
matters set forth in (i) and (ii) above; and (iv) the receipt by the Company
of the legal opinion of Vinson & Elkins L.L.P., legal counsel to Purchaser and
JEDI, dated the closing date, with respect to certain matters.
The Company has no obligation to consummate the Merger if any condition
to its obligation to consummate the Merger is not satisfied on or prior to the
Effective Time, and JEDI and Purchaser have no obligation to consummate the
Merger if any condition to their obligations to consummate the Merger is not
satisfied on or prior to the Effective Time. Any of the conditions to the
obligations of the Company, JEDI or Purchaser to consummate the Merger may be
waived by the party that is, or whose shareholders are, entitled to the
benefits thereof.
REPRESENTATIONS AND WARRANTIES
The Company. The Merger Agreement contains various representations and
warranties of the parties thereto. The Merger Agreement includes
representations by the Company as to (i) the corporate organization,
existence, standing, power and qualification as a foreign corporation of the
Company and its subsidiaries; (ii) the capitalization of the Company; (iii)
the status of its subsidiaries and other investments; (iv) the due and valid
execution and delivery of the Merger Agreement and the legal, valid and
binding effect of the same; (v) the Merger Agreement's noncontravention of any
agreement, law or provision of the Company's articles or code of regulations
and the absence of the need (except as specified) for governmental or third
party filings, authorizations or consents to the Merger; (vi) the status of
documents filed with the Commission and the accuracy of the information
contained therein, including the financial statements; (vii) the absence of
certain changes or events involving the Company; (viii) the status of pending
or threatened litigation; (ix) the accuracy of the information with respect to
the Company and its subsidiaries contained in this Proxy Statement and its
compliance with the federal securities laws; (x) the accuracy of information
disclosed by the Company in the Merger Agreement; (xi) the status of certain
employee benefits and labor matters; (xii) certain environmental matters;
(xiii) the inapplicability of the Public Utility Holding Company Act of 1935
and the Investment Company Act of 1940 to the Company or its subsidiaries;
(xiv) the status and extent of the Company's engaging in natural gas or other
futures or options trading and fixed price contracts and hydrocarbon price
swaps, hedges, futures or similar instruments to which Enron or any of its
affiliates is a party; (xv) the Company's compliance with Chapter 1704 of the
Ohio Revised Code; (xvi) the receipt of the fairness opinion from McDonald &
Company; (xvii) brokers and finders employed by the Company; (xviii)
compliance with applicable laws; (xix) certain tax matters; (xx) the absence
of certain agreements, (xxi) information with respect to certain engineering
reports; (xxii) information with respect to certain oil and gas reserve
reports, oil and gas interests of the Company and significant wells of the
Company; (xxiii) good and defensible title to the Company's properties; (xxiv)
information concerning insurance policies of the Company; (xxv) certain
transactions with affiliates; and (xxvi) the value of the Company's assets for
purposes of compliance with the Hart-Scott-Rodino Antitrust Improvements Act
of 1976.
The representations and warranties of the Company are contained in
Article VII of the Merger Agreement.
Purchaser. The Merger Agreement also includes representations and
warranties by Purchaser as to (i) the corporate organization, existence,
standing, power and qualification as a foreign corporation of Purchaser; (ii)
the due and valid execution and delivery of the Merger Agreement and the
legal, valid and binding effect of the same; (iii) the Merger Agreement's
noncontravention of any agreement, law and articles or code of regulation
provision and the absence of the need (except as specified) for governmental
or third party filings, authorizations or consents to the Merger; (iv) the
accuracy and adequacy of the information supplied by Purchaser for inclusion
in this Proxy Statement; (v) Purchaser's capitalization; (vi) the availability
of funds sufficient to consummate the Merger; and (vii) information concerning
certain broker or finder fees employed by Purchaser.
The representations and warranties of Purchaser are contained in Article
V of the Merger Agreement.
JEDI. The Merger Agreement also includes representations and warranties
by JEDI as to (i) the organization, existence, standing and power of JEDI;
(ii) the partners comprising the JEDI partnership and their relative
partnership percentages; (iii) the due and valid execution and delivery of the
Merger Agreement and the legal, valid and binding effect of the same; (iv) the
Merger Agreement's non-contravention of agreements, laws or partnership
agreement provisions and the absence of the need (except as specified) for
governmental or third party filings, authorizations or consents to the Merger;
(v) the accuracy of JEDI's financial statements; (vi) the availability of
funds sufficient to consummate the Merger; (vii) the accuracy and adequacy of
the information supplied by JEDI for inclusion in this Proxy Statement; and
(viii) information concerning certain broker or finder fees.
The representations and warranties of JEDI are contained in Article VI
of the Merger Agreement.
BUSINESS OF THE COMPANY PENDING THE MERGER
The Company has agreed in the Merger Agreement that, during the period
from the date of the Merger Agreement to the Effective Time, unless JEDI
otherwise consents in writing, the businesses of the Company and its
subsidiaries will be conducted only in the usual and ordinary course
consistent with past practice, and the Company and its subsidiaries shall each
use its reasonable best efforts to preserve substantially intact its present
business organization, keep available the services of its present officers and
employees, maintain and keep its material assets in as good repair and
condition as of the date of the Merger Agreement, ordinary wear and tear
excepted, and preserve its relationships with customers, suppliers and others
having business dealings with it to the end that its goodwill and on-going
business shall be materially unimpaired at the Effective Time. The Company has
agreed with certain other restrictive covenants concerning its business and
activities prior to the Effective Time of the Merger that the Company believes
are customary in transactions of this nature. Such covenants are contained in
Article VIII of the Merger Agreement.
OBLIGATIONS OF JEDI AND PURCHASER PENDING THE MERGER
Each of JEDI and Purchaser has agreed to use its reasonable best efforts
to refrain from taking any action that would, or reasonably might be expected
to, result in any of its representations and warranties set forth in the
Merger Agreement being or becoming untrue in any material respect as of the
Effective Time, in any of the conditions to the Merger not being satisfied, or
(unless such action is required by applicable law) that would adversely affect
the ability of JEDI or Purchaser to obtain any of the regulatory approvals
required to consummate the Merger.
AMENDMENT, WAIVER AND TERMINATION
The Merger Agreement may be amended by mutual written agreement of the
parties, by or pursuant to action taken by their respective Boards of
Directors, at any time before or after approval of the Merger Agreement by the
Company shareholders, but, after such approval by the Company shareholders, no
amendment may be made to the Merger Agreement that under applicable law
requires further approval of the Company shareholders without such further
approval. In addition, at any time prior to the Effective Time, the parties
may extend the time for the performance of any of the obligations or other
acts of the other parties to the Merger Agreement, waive any inaccuracies in
the representations and warranties of any other party contained in the Merger
Agreement or in any documents delivered pursuant thereto by any other party
and waive compliance with any of the agreements or conditions contained in the
Merger Agreement.
Under certain conditions, the Merger Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval by the
shareholders of the Company. The conditions under which the Merger Agreement
may be terminated include termination (i) by mutual consent of the Boards of
Directors of the Company and Purchaser; (ii) by either the Company or
Purchaser if the Merger shall not have been consummated on or before September
16, 1996 (unless such circumstance is the result of a breach of the terms of
the Merger Agreement by the party wishing to exercise the termination right);
(iii) by Purchaser if there has been a material breach on the part of the
Company, or by the Company if there has been a material breach on the part of
Purchaser or JEDI, of any representation, warranty, covenant or agreement set
forth in the Merger Agreement, which breach has not been cured within 15
business days following receipt by the breaching party of written notice of
such breach; (iv) by either the Company or Purchaser upon written notice to
the other party if any governmental entity of competent jurisdiction shall
have issued (A) a final permanent order enjoining or otherwise prohibiting the
consummation of any of the transactions contemplated by the Merger Agreement,
and in any such case the time for appeal or petition for reconsideration of
such order shall have expired without such appeal or petition being granted,
or (B) any order or directive that does not directly enjoin or otherwise
prohibit the consummation of the transactions contemplated by the Merger
Agreement, but that would, if JEDI, Purchaser or the Company were to comply
with such order or directive as a condition to consummating the transactions
contemplated by the Merger Agreement, have a material adverse effect on the
business, operations or financial condition of either JEDI or the Surviving
Corporation and its subsidiaries, taken as a whole; (v) by the Company if (A)
the Board of Directors of the Company reasonably determines that an Other
Acquisition Transaction (defined below) is a Superior Proposal (defined below)
(see "-- No Solicitation of Other Bids"), (B) the ten business day period
specified in the Company's agreement not to solicit shall have expired (see
"-- No Solicitation of Other Bids") and (C) simultaneously with such
termination the Company enters into a definitive agreement to effect such
Other Acquisition Transaction; (vi) by either Purchaser or the Company if the
required approval of the Company shareholders is not received in a vote duly
taken at the Special Meeting; (vii) by Purchaser if the Board of Directors of
the Company or any committee thereof (A) shall have amended, modified,
rescinded or repealed the recommendation of the Company's Board of Directors
to the shareholders of the Company to approve the Merger and the adoption of
the Merger Agreement, or (B) shall have adopted any other resolution in
connection with the Merger Agreement and the transactions contemplated thereby
inconsistent with such recommendation of the consummation of the transactions
contemplated thereby; and (viii) by Purchaser, if any representation or
warranty of the Company shall have become untrue such that the condition that
the Company's representations and warranties shall be true and correct when
made and at the Effective Time would be incapable of being satisfied by
September 16, 1996, or by the Company if any representation or warranty of
Purchaser or JEDI shall have become untrue such that the condition that JEDI's
and Purchaser's representations and warranties shall be true and correct when
made and at the Effective Time would be incapable of being satisfied by
September 16, 1996.
In the event of the termination of the Merger Agreement, no party to the
Merger Agreement will have any obligation or liability to the other party,
except that (i) JEDI and Purchaser will continue to hold in confidence
information regarding the Company; (ii) the provisions of the Merger Agreement
regarding the payment of expenses and termination fees will survive; (iii)
certain provisions regarding the construction and interpretation of the Merger
Agreement will survive; and (iv) no party will be relieved from liability for
any breach of the Merger Agreement. See "-- Expenses; Termination Fees."
The amendment, waiver and termination provisions of the Merger Agreement
are contained in Article XI of the Merger Agreement.
EXPENSES; TERMINATION FEES
Except as set forth below, whether or not the Merger is consummated, all
costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby shall be paid by the party incurring such
expenses.
If the Merger Agreement is terminated by Purchaser pursuant to clauses
(iii), (vi) or (vii), or by the Company pursuant to clause (v) of the second
paragraph of "-- Amendment, Waiver and Termination" above, then the Company
has agreed, by wire transfer of immediately available funds to an account
designated by Purchaser, to reimburse Purchaser and its affiliates, not later
than two business days after Purchaser submits to the Company statements
therefor, for all out-of-pocket fees and expenses (including, without
limitation, all fees and expenses of counsel, accountants, financial
institutions, experts and consultants) and all internal costs (determined by
multiplying $100 by the aggregate number of hours actually spent by employees
of JEDI and its affiliates) incurred in connection with or related to the
authorization, preparation, negotiation, execution and performance of the
Merger Agreement, the arranging of financing for the Merger and all other
matters related to the consummation of the transactions contemplated thereby
up to a maximum amount of $1,000,000 The parties have further agreed that a
payment contemplated by this paragraph will not limit Purchaser's right to
pursue all other available remedies if the Company has breached the Merger
Agreement, although neither JEDI nor Purchaser will be permitted to recover
such fees and expenses more than once.
If the Merger Agreement is terminated by the Company pursuant to clause
(iii) of the second paragraph of "-- Amendment, Waiver and Termination" above,
then JEDI has agreed, by wire transfer of immediately available funds to an
account designated by the Company, to reimburse the Company and its
affiliates, not later than two business days after the Company submits to
Purchaser statements therefor, for all out-of-pocket fees and expenses
(including, without limitation, all fees and expenses of counsel, accountants,
financial institutions, experts and consultants) incurred in connection with
or related to the authorization, preparation, negotiation, execution and
performance of the Merger Agreement, and all other matters related to the
consummation of the transactions contemplated thereby up to a maximum amount
of $250,000. The parties have further agreed that a payment contemplated by
this paragraph will not limit the Company's right to pursue all other
available remedies if either Purchaser or JEDI has breached the Merger
Agreement.
In addition to payment of the expenses as described above, if the Merger
Agreement is terminated for any reason other than a termination by Purchaser
pursuant to clause (ii) or (iv) of the second paragraph of "-- Amendment,
Waiver and Termination" above, or by the Company pursuant to clause (ii),
(iii) or (iv) of the second paragraph of "-- Amendment, Waiver and
Termination" above, then if (i) a Terminating Other Acquisition Transaction
(as defined in the Merger Agreement) is consummated or (ii) an Other
Acquisition Transaction (as defined below under "-- No Solicitation of Other
Bids") that provides a higher value to the holders of the Company Common Stock
than the Merger would have provided is consummated prior to the first
anniversary of the date of the Merger Agreement, then the Company shall pay to
JEDI, by wire transfer of immediately available funds to an account designated
by JEDI, the Break-Up Fee not later than the second business day following
such consummation. The parties have agreed that a payment contemplated by this
paragraph will not limit Purchaser's right to pursue all other available
remedies if the Company has breached the Merger Agreement.
If (i) prior to the termination of the Merger Agreement, any person
(other than Purchaser or any affiliate thereof) or group (as such term is
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) becomes the beneficial owner (within the meaning of Rule l3d-3
under the Exchange Act) of 20% or more of the outstanding Company Common
Stock; (ii) either the Merger Agreement is terminated pursuant to clause (vi)
of the second paragraph of "-- Amendment, Waiver and Termination" above or
such beneficial owner takes any action to oppose or prevent the consummation
of the Merger and the Merger Agreement is terminated for any reason; and (iii)
an Other Acquisition Transaction is consummated within one calendar year of
the date of the Special Meeting, then the Company shall pay to JEDI, by wire
transfer of immediately available funds to an account designated by JEDI, the
Break-Up Fee plus all out-of-pocket fees and expenses (of the type and subject
to the limitations set forth above) not later than two business days after
Purchaser submits to the Company a request therefor. Notwithstanding the
foregoing, in no event shall the Company be required to pay the Break-Up Fee
more than once as a result of the consummation of any combination of the
transactions described above. A payment as set forth above shall not limit
Purchaser's right to pursue all other available remedies if the Company has
breached the Merger Agreement.
The provisions regarding the payment of the termination fees and
expenses are contained in Section 12.3 of the Merger Agreement.
NO SOLICITATION OF OTHER BIDS
Prior to the Effective Time, the Company has agreed not to, nor to
permit any of its subsidiaries to, nor to authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to, directly or indirectly, initiate, solicit, negotiate or
encourage (including by way of furnishing information), or take any other
action to facilitate or entertain, any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any proposal or
offer to acquire all or any substantial part of the business of the Company
and its subsidiaries, or all or substantially all of the capital stock of the
Company, whether by merger, purchase of assets, tender offer, exchange offer
or otherwise, whether for cash, securities or any other consideration or
combination thereof (any such transaction being referred to as an "Other
Acquisition Transaction") or agree to endorse or recommend any such Other
Acquisition Transaction. However, pursuant to the terms of the Merger
Agreement, the Company and subsidiaries may negotiate with a corporation,
partnership, person or other entity or group (a "Potential Acquirer") if (i)
the Potential Acquirer has, in circumstances not involving any prior breach by
the Company of the provisions described above, made a tender or exchange offer
for, or a proposal to the Board of Directors of the Company to acquire, a
majority of the capital stock of the Company or made a proposal for a merger,
purchase of all or any substantial part of the assets of the Company or other
business combination transaction involving a change of control of the Company;
(ii) the Company's Board of Directors believes, based in part upon the advice
of its financial advisor, and after having an opportunity to discuss any such
proposal with the Potential Acquirer, that such Potential Acquirer has the
financial wherewithal to consummate such offer or transaction and such offer
or transaction would yield a better value to the Company's shareholders than
would the Merger (a "Superior Proposal") and (iii) based upon the written
opinion of counsel to the Company to such effect given to the Board of
Directors of the Company (notice of which opinion has been furnished to JEDI),
the Company's Board of Directors determines in good faith that there is a
significant risk that the failure to negotiate with the Potential Acquirer
would constitute a breach of the Board's fiduciary duties to the shareholders
of the Company. The Company has agreed to promptly advise JEDI in writing of
any request for non-public written information or of any Other Acquisition
Transaction, or any inquiry that could reasonably be expected to lead to any
Other Acquisition Transaction, the terms and conditions of such request, Other
Acquisition Transaction or inquiry, the identity of the person making any such
request, Other Acquisition Transaction or inquiry, and whether the Company has
elected to negotiate with a Potential Acquirer in accordance with the
preceding sentence. The Company has agreed to use its reasonable best efforts
to keep JEDI fully informed of the status and details of any such request,
Other Acquisition Transaction, inquiry or negotiation. The Company has further
agreed not to enter into a definitive agreement for an Other Acquisition
Transaction with a Potential Acquirer with which the Company is permitted to
negotiate, as described above, unless (i) at least 10 business days prior to
the Company's execution thereof, the Company shall have furnished JEDI with a
description of all of the material terms thereof and (ii) the Company shall
have terminated the Merger Agreement in accordance with Section 11.1(e)
thereof.
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
All representations, warranties, agreements and covenants set forth in
the Merger Agreement will terminate at the Effective Time or upon termination
of the Merger Agreement, as the case may be, except that (i) the agreements
set forth in Sections 9.3, 9.4(b) and 9.6 and Articles III and XII (excluding
Section 12.3) of the Merger Agreement will survive the Effective Time and (ii)
the agreements set forth in the third to the last and the last sentences of
Section 9.1 and in Article XII (including Section 12.3) of the Merger
Agreement will survive termination, in each case until the expiration of the
applicable statute of limitations.
SOURCES AND AMOUNT OF FUNDS
The total amount of funds required by JEDI and Purchaser to acquire all
of the then-outstanding shares of capital stock of the Company is estimated to
be approximately $37.35 million. The actual amount payable will depend on the
number of shares of the Company Common Stock outstanding at the Effective Time
and entitled to receive the Merger Consideration. JEDI will cause Purchaser to
have available to it at the Effective Time sufficient funds to consummate the
Merger.
OPERATION AND MANAGEMENT OF SURVIVING CORPORATION AFTER THE MERGER
Immediately following the Merger, JEDI and Mr. Jordan will own
approximately 97% and 3%, respectively, of the outstanding shares of Surviving
Corporation common stock. The Surviving Corporation is expected to continue to
manage and operate the Company's business and properties substantially as
before the Merger and is expected to maintain the Company's current offices in
Columbus, Ohio. It is anticipated that Mr. Jordan will be appointed to the
Board of Directors of the Surviving Corporation and will be elected Chairman
of the Surviving Corporation immediately after the Effective Time.
If the Merger is consummated, the Company Common Stock will cease to be
listed on The NASDAQ Stock Market, public trading of the Company Common Stock
will cease and the registration of the Company Common Stock under the Exchange
Act is expected to be terminated.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A
COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS. THE DISCUSSION DOES
NOT ADDRESS THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO A PARTICULAR HOLDER
OF THE COMPANY COMMON STOCK SUBJECT TO SPECIAL TREATMENT UNDER CERTAIN FEDERAL
INCOME TAX LAWS, SUCH AS DEALERS IN SECURITIES OR TRUSTS, NOR ANY CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCALITY OR FOREIGN JURISDICTION. NO
RULINGS WILL BE SOUGHT FROM THE INTERNAL REVENUE SERVICE WITH RESPECT TO THE
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER OR THE TRANSACTIONS RELATED
THERETO. THE DISCUSSION BELOW IS BASED UPON THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED, TREASURY REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS AND
COURT DECISIONS AS OF THE DATE HEREOF. ALL OF THE FOREGOING ARE SUBJECT TO
CHANGE, AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS
DISCUSSION. HOLDERS OF THE COMPANY COMMON STOCK ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES
OF THE MERGER AND THE RELATED TRANSACTIONS.
The receipt of cash for shares of the Company Common Stock pursuant to
the Merger or pursuant to the exercise of dissenter's rights will be a taxable
transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local or foreign tax laws. The tax
consequences will vary depending upon, among other things, the particular
circumstances of the shareholder. In general, a shareholder who receives cash
for shares of the Company Common Stock pursuant to the Merger or pursuant to
the exercise of dissenter's rights will recognize a gain or loss for federal
income tax purposes equal to the difference between the amount of cash
received and such shareholder's adjusted tax basis in the shares exchanged.
Provided the shares of the Company Common Stock constitute capital assets in
the hands of the shareholder, the gain or loss will be a capital gain or loss.
If the holder has held the shares of the Company Common Stock for more than
one year at the time of the exchange, the gain or loss will be a long-term
capital gain or loss. The holding period and gain or loss will be determined
separately for each share, or block of shares, of the Company Common Stock
exchanged pursuant to the Merger Agreement or Section 1701.85 of the OGCL.
Under the backup withholding rules, unless an exemption applies under
the applicable law and regulations, the Paying Agent will be required to
withhold, and will withhold, 20% of all cash payments made in exchange for
Company Common Stock unless the shareholder or other payee provides his or her
tax identification number (social security number, in the case of an
individual, or employer identification number in the case of a corporation or
other business entity) and certifies that such number is correct. Each
shareholder and, if applicable, each other payee should complete and sign the
substitute Form W-9 to be included in the transmittal materials and
instructions relating to share certificates to be mailed to shareholders as
soon as practicable after the Effective Time, so as to provide the information
and certification necessary to avoid backup withholding, unless an applicable
exemption exists and is proved in a manner satisfactory to the Surviving
Corporation and the Paying Agent.
The foregoing discussion may not be applicable to certain types of
shareholders, including shareholders who acquired shares of the Company Common
Stock pursuant to the exercise of employee stock options or otherwise as
compensation, individuals who are not citizens or residents of the United
States, foreign corporations and entities that are otherwise subject to
special tax treatment under the Internal Revenue Code of 1986, as amended,
such as insurance companies, tax-exempt entities and regulated investment
companies.
ACCOUNTING TREATMENT
The Merger will be accounted for under the "purchase" method of
accounting.
CHAPTER 1704 OF THE OHIO REVISED CODE
Subject to certain exceptions, Chapter 1704 of the Ohio Revised Code
(the "Ohio Statute") prohibits an Ohio corporation from engaging in certain
transactions (including mergers, consolidations, asset sales, loans, and
disproportionate distributions of property) with a person (or the affiliates
or associates of any such person) that owns shares representing 10% or more of
the voting power of a corporation (an "Interested Shareholder") for a period
of three years after such person becomes an Interested Shareholder unless,
prior to the date that the Interested Shareholder became such, the directors
approve either the transaction or the acquisition of the corporation's shares
that resulted in the person becoming an Interested Shareholder. Following the
three-year moratorium period, the corporation may engage in certain
transactions with an Interested Shareholder only if, among other things, (i)
the transaction receives the approval of the holders of two-thirds of all the
voting shares and the approval of the holders of a majority of the voting
shares held by persons other than an Interested Shareholder or (ii) the
transaction meets certain criteria designated to ensure that the remaining
shareholders receive fair consideration for their shares ("Fair Price
Criteria").
Jerry D. Jordan, the Chairman of the Company, has been an Interested
Shareholder of the Company for more than three years. Because Mr. Jordan will
be an officer and shareholder of the surviving corporation and has entered
into certain agreements with Purchaser, as described in this Proxy Statement,
the Merger may be subject to the Ohio Statute. The Board of Directors of the
Company authorized and approved all of the agreements, transactions and
relationships involving Mr. Jordan, the Purchaser and/or JEDI or any of their
affiliates or associates. See "THE MERGER --Interests of Certain Persons in
the Merger." In addition, the Company believes that the Fair Price Criteria
will be satisfied by the Merger as of the Effective Time. Compliance with the
Ohio Statute is a condition to the consummation of the Merger. See "THE MERGER
- -- Conditions to Consummation of the Merger."
RIGHTS OF DISSENTING SHAREHOLDERS
Under Section 1701.85 of the OGCL, any holder of record of Company
Common Stock on the Record Date may have the "fair cash value" of his Company
Common Stock judicially determined and paid to him by complying with the
requirements of such section if the Merger is consummated.
Set forth below is a summary of the procedures relating to the exercise
of statutory dissenters' rights ("Dissenters' Rights"), which summary does not
purport to be complete and is qualified in its entirety by express reference
to applicable Ohio law, including Section 1701.85 of the OGCL, a copy of which
is attached as Appendix C hereto. Any shareholder of the Company contemplating
exercising Dissenters' Rights with respect to Company Common Stock held by him
of record on the Record Date ("Dissenting Shares") is urged to review
carefully such provisions and to consult an attorney, since Dissenters' Rights
will be lost if the procedural requirements under Section 1701.85 are not
fully and precisely satisfied.
To perfect his Dissenters' Rights, a Dissenting Shareholder must satisfy
each of the following conditions:
1. No Vote in Favor of the Merger. Dissenting Shares must not be
voted in favor of the Merger. This requirement will be satisfied if a proxy is
signed and returned with instructions to vote against approval and adoption of
the Merger Agreement or to abstain from such vote, if no proxy is returned and
no vote is cast at the Meeting in favor of approval and adoption of the
Agreement, if the holders of Dissenting Shares abstain from voting with
respect to the Merger Agreement or if Dissenting Shares are voted at the
Meeting against approval and adoption of the Merger Agreement. A vote in favor
of approval and adoption of the Merger Agreement constitutes a waiver of
Dissenters' Rights. A proxy that is returned signed but on which no voting
preference is indicated will be voted for the approval and adoption of the
Merger Agreement, and will be deemed a waiver of Dissenters' Rights. A
Dissenting Shareholder may revoke his proxy at any time before its exercise by
filing with the Secretary of the Company an instrument revoking it or a duly
executed proxy bearing a later date, or by attending and voting at the Meeting
(although attendance at the Meeting will not in and of itself constitute
revocation of a proxy).
2. Filing Written Demand. Not later than ten days after the taking
of the vote on the Merger Agreement, a Dissenting Shareholder must deliver to
the Company a written demand (the "Demand") for payment of the fair cash value
of the Dissenting Shares. The Demand should be delivered to the Company at
4770 Indianola Avenue, Columbus, Ohio 43214, Attn: Jerry D. Jordan. It is
recommended, although not required, that the Demand be sent by registered or
certified mail, return receipt requested. Voting against the merger does not
itself constitute a Demand. The Company does not intend to send any further
notice to its shareholders as to the date on which such ten-day period
expires.
The Demand must identify the holder of record of the Dissenting
Shares and his address, the number and class of the Dissenting Shares and the
amount claimed as the fair cash value thereof. A beneficial owner must, in all
cases, have the record holder submit the Demand in respect of his Dissenting
Shares.
From the time the Demand is given until either the termination of
the rights and obligations arising from such Demand or the purchase of the
Dissenting Shares relative thereto by the Company all other rights accruing to
the holder of the Dissenting Shares, including voting and dividend or
distribution rights, will be suspended. If any dividend or distribution is
paid on the Company Common Stock during the suspension, an amount equal to the
dividend or distribution which would have been payable on the Dissenting
Shares, but for such suspension, shall be paid to the holder of record of the
Dissenting Shares as a credit upon the fair cash value of the Dissenting
Shares. If the right to receive the fair cash value is terminated otherwise
than by the purchase of the Dissenting Shares by the Company, all rights will
be restored to the Dissenting Shareholder and any distribution that would have
been made to the holder of record of the Dissenting Shares, but for the
suspension, will be made at the time of the termination.
3. Endorsement of Certificates. After receiving the Demand, the
Company may request in writing that the Dissenting Shareholder deliver to it
the certificates representing the Dissenting Shares. The Dissenting
Shareholder must then deliver such certificates to the Company at the address
stated above, within fifteen days of the sending of such request, to permit
the Company to place a legend on such certificates stating that a demand for
fair cash value of such Dissenting Shares has been made. The Company then must
return such certificates promptly to the Dissenting Shareholder. Failure of a
Dissenting Shareholder to deliver certificates upon the request of the Company
terminates his rights as a Dissenting Shareholder, unless a court directs
otherwise. If the Dissenting Shares represented by a certificate bearing such
legend are transferred, a transferee acquires only the rights which were held
by the original Dissenting Shareholder immediately after the delivery of the
Demand.
4. Petition to be Filed in Court. Within three months after the
service of the Demand, if the Company and the Dissenting Shareholder do not
reach an agreement on the fair cash value of the Dissenting shares, the
Dissenting Shareholder or the Company may file a petition in the Court of
Common Pleas of Franklin County, Ohio (which is the county in which the
principal office of the Company is located), or join or be joined in an action
similarly brought by another Dissenting Shareholder of the Company, for a
judicial determination of the fair cash value of the Dissenting Shares. The
Company does not intend to offer to pay more than $6.75 per share to be paid
in the Merger for any Dissenting Shares or to file any petition for a judicial
determination of the fair cash value of the Dissenting shares.
Upon motion of the petitioner, the Court will hold a hearing to
determine whether the Dissenting Shareholder is entitled to be paid the fair
cash value of his Dissenting Shares. If the Court finds that the Dissenting
Shareholder is so entitled, it may appoint one or more appraisers to receive
evidence by which to recommend a decision on the amount of such value. The
Court is required to make a finding as to the fair cash value of the
Dissenting Shares and to render a judgment against the Company for the payment
thereof, with interest at such rate and from such date as the Court considers
equitable. Costs of the proceedings, including reasonable compensation to the
appraiser or appraisers to be fixed by the Court, are to be apportioned or
assessed as the Court considers equitable. Payment of the fair cash value of
the Dissenting Shares shall be made within 30 days after the date of final
determination of such value or the Effective Time of the Merger, whichever is
later, only upon surrender to the Company of the certificate representing the
shares for which payment is made.
Fair cash value is the amount which a willing seller, under no
compulsion to sell, would be willing to accept, and which a willing buyer,
under no compulsion to purchase, would be willing to pay, but in no event may
the fair cash value exceed the amount specified in the Demand. The fair cash
value is to be determined as of the day prior to the day of the vote on the
Merger, and may be greater than, the same as or less than the Merger
Consideration per share which the Company's shareholders will be entitled to
receive in the Merger. In computing this value, any appreciation or
depreciation in the market value of the Dissenting Shares resulting from the
merger proposal is excluded.
The Dissenters' Rights of any Dissenting Shareholder will terminate if,
among other things, (a) he has not complied with Section 1701.85 of the OGCL
(unless the Board of Directors of the Company waives compliance); (b) the
Merger is abandoned or otherwise not carried out; (c) he withdraws his Demand
(with the consent of the Board of Directors of the Company); or (d) no
agreement has been reached between the Company and the Dissenting Shareholder
with respect to the fair cash value of the Dissenting Shares and no petition
has been timely filed in the Court of Common Pleas of Franklin County, Ohio.
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents certain selected summary consolidated
financial data of the Company as of and for the years ended December 31, 1991,
1992, 1993, 1994 and 1995 and as of and for the three months ended March 31,
1995 and 1996. The financial data set forth below should be read in
conjunction with the financial statements of the Company and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
incorporated by reference in this Proxy Statement from the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, as amended,
and the Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.
See "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
<PAGE>
<TABLE>
(Information Reported in Thousands, except per share data)
------------------------------------------------------------
Year Ended December 31, (3 Months (3 Months
Ended) Ended)
1991 1992 1993 1994 1995 3/31/95 3/31/96
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Revenue ............. $68,030 $68,710 $85,409 $99,313 $87,887 $20,666 $45,804
Income before
cumulative effect of
change in accounting
principle ............... $568 $80 $570 $85 $2,456 $311 $208
Cumulative effect of
change in accounting
for income taxes ........ $-0- $916 $-0- $-0- $-0- $-0- $-0-
Net income ................ $568 $996 $570 $85 $2,456 $311 $208
Total assets(1) ........... $48,626 $47,482 $54,568 $50,183 $51,918 $48,874 $57,456
Long-term debt(2) ......... $16,452 $15,907 $16,887 $17,106 $13,378 $17,057 $14,894
Income per share before
cumulative effect of
change in accounting
principle(3) ............ $0.10 $0.01 $0.10 $0.02 $0.43 $0.06 $0.04
Cumulative effect of
change in accounting
for income taxes per
share(3) ................ $-0- $0.16 $-0- $-0- $-0- $-0- $-0-
Net income per share(3) ... $0.10 $0.17 $0.10 $0.02 $0.43 $0.06 $0.04
Cash dividends per share .. $-0- $-0- $-0- $-0- $-0- $-0- $-0-
Book value per share ...... $3.39 $3.58 $3.68 $3.69 $4.13 $3.75 $4.16
(1) At end of reported period.
(2) Excludes current maturities.
(3) Primary and fully diluted.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For a discussion of the Company's financial condition and results of
operations during the three most recent fiscal years and for the first quarter
of 1996, see the discussions entitled "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" in the Company's Annual Report
on Form l0-K for the fiscal year ended December 31, 1995, and its quarterly
report on Form l0-Q for the quarter ended March 31, 1996, copies of which
reports, which are incorporated herein by reference, are included with this
Proxy Statement. See "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE" and
"RECENT DEVELOPMENTS REGARDING THE COMPANY."
<PAGE>
DIVIDENDS ON AND MARKET PRICES
OF THE COMPANY COMMON STOCK
The Company Common Stock is quoted on The NASDAQ Stock Market under the
trading symbol "CGAS." The following table sets forth for the periods
indicated the high and low closing prices per share of the Company Common
Stock, as reported on The NASDAQ Stock Market. For current price information,
shareholders should consult publicly available sources.
High Low
1993
First Quarter................................... $3.125 $2.188
Second Quarter.................................. 3.125 2.500
Third Quarter................................... 3.375 2.688
Fourth Quarter.................................. 3.625 2.750
1994
First Quarter................................... $3.875 $3.000
Second Quarter.................................. 4.125 2.750
Third Quarter................................... 4.125 3.625
Fourth Quarter.................................. 4.500 3.625
1995
First Quarter................................... $4.500 $3.750
Second Quarter.................................. 4.500 3.438
Third Quarter................................... 5.875 4.125
Fourth Quarter.................................. 5.625 4.875
1996
First Quarter................................... $6.625 $5.000
Second Quarter.................................. $6.625 $6.000
On May 23, 1996, the last full trading day prior to the public
announcement that the Company entered into a Merger Agreement, the reported
high and low sales prices per share of the Company Common Stock on The NASDAQ
Stock Market were $6.375 and $6.3125 respectively. On July 19, 1996, the most
recent available date prior to printing this Proxy Statement, the reported
high and low sales prices per share of the Company Common Stock on The NASDAQ
Stock Market were $6.5625 and $6.4375, respectively.
The Company has not paid cash dividends to date on shares of the Company
Common Stock and does not intend to pay dividends in the foreseeable future.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of July 25, 1996, certain information
with respect to the shares of Company Common Stock owned beneficially by the
only persons known to the Company to be the beneficial owners of more than
five percent (5%) of the outstanding shares of the Company Common Stock, by
each director, by each executive officer, and by all directors and officers of
the Company as a group:
Amount and Nature of Percent of
Name and Address* Beneficial Ownership(1) Common Shares (2)
- ----------------- ----------------------- -----------------
Jerry D. Jordan (3) (4) 709,313 (5) 12.5%
4770 Indianola Ave.
Columbus, OH 43214
Duke W. Thomas (3) 616,895 10.9%
52 East Gay Street
Columbus, OH 43215
Thomas B. Ridgley 616,895 10.9%
52 East Gay Street
Columbus, OH 43215
Hal W. Field (3) 592,860 (6) 10.4%
6251 Crooked Creek Road
Norcross, GA 43214
F. Daniel Ryan (3) (4) 579,696 (7)(8) 10.2%
4770 Indianola Ave.
Columbus, OH 43214
R. David Thomas (3) 234,273 (9) 4.1%
Donald A. Nay (3) (4) 130,015 (8)(10) 2.3%
Michael S. Guy (3) 70,589 (11) 1.2%
R. L. Richards (3)(12) 19,125 **
All directors and officers 2,952,766 52%
as a group (5)(6)(7)(8)(9)(10)(11)(12)
(8 Persons)
__________________
* Address shown for beneficial owners of more than 5% only.
** Represents less than 1% of class.
(1) Represents sole voting and investment power except as otherwise noted.
The information with respect to beneficial ownership is based upon
information furnished by each director or officer, or information
contained in filings made with the Securities and Exchange Commission.
(2) Based upon 5,681,517 of the Company's common shares outstanding as of
July 10, 1996.
(3) Director of the Company.
(4) Executive Officer of the Company.
(5) Does not include 2,756 common shares held of record by Mr. Jordan's wife
as to which Mr. Jordan disclaims any beneficial ownership.
(6) All of Mr. Field's common shares are held by Mr. Field as Trustee or
jointly as a Co-Trustee of certain trusts. Mr. Field has retained sole
or shared voting and investment power.
(7) Mr. Ryan has sole voting and investment power with respect to 578,996 of
these common shares. Includes 700 shares which Mr. Ryan holds as
custodian for his two minor children.
(8) Includes shares held in the 401(k) accounts of Mr. Ryan (4,464 shares)
and Mr. Nay (3,166 shares).
(9) Does not include 47,249 common shares held of record by the wife of Mr.
R. David Thomas as to which Mr. Thomas disclaims any beneficial interest.
Does not include 40,000 common shares held of record by the wife of Mr.
Thomas for the benefit of six grandchildren of Mr. Thomas and his wife
for which his wife serves as custodian and as to which Mr. Thomas
disclaims any beneficial interest. Also does not include 1,867 common
shares which may be acquired upon conversion of $14,000 in face amount of
the Company Debentures held of record by the wife of Mr. Thomas, or 6,133
in the aggregate of common shares which may be acquired upon conversion
of $46,000 in the aggregate of Debentures held of record by trust for the
benefit of four grandchildren of Mr. Thomas and his wife for which his
wife serves as custodian and as to which Mr. Thomas disclaims any
beneficial interest. The Debentures are immediately convertible into
common shares of the Company at an initial conversion price of $7.50 per
share, subject to adjustment under certain circumstances.
(10) Includes 1,391 shares held in Mr. Nay's IRA account. Does not include
1,043 shares held in the IRA account of Mr. Nay's wife as to which Mr.
Nay disclaims any beneficial ownership.
(11) Includes 7,033 common shares held of record by Michael S. Guy Keogh #1
and 27,150 common shares held of record by Michael S. Guy IRA Rollover.
(12) Includes 9,225 shares held by Mr. Richards' children; Mr. Richards has
retained sole voting and investment power with respect to such shares.
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP has served as the Company's independent auditors
starting with the Company's fiscal year ended January 31, 1983. The Company
anticipates that one or more representatives from Deloitte & Touche LLP will
be present at the Special Meeting with the opportunity to make statements if
they so desire. The Company expects that these representatives will also be
able to respond to appropriate questions from the floor at the Special
Meeting.
OTHER BUSINESS
The only business to come before the Special Meeting of which the
management is aware is set forth in this Proxy Statement. If any other
business is presented, it is intended that discretionary authority to vote the
proxies shall be exercised with respect thereto.
SHAREHOLDER PROPOSALS
If the Merger is consummated, the 1996 Annual Meeting of Shareholders of
the Company will not occur. If, but only if, the Merger is not consummated,
the Company's 1996 Annual Meeting will be held on October 2, 1996, and any
shareholder desiring to submit a proposal for inclusion in the Company's proxy
statement and form of proxy relating to the 1996 Annual Meeting of
Shareholders of the Company must have advised the Secretary of the Company of
such proposals in writing, not later than August 29, 1996. All such proposals
must comply with Rule l4a-8 promulgated by the Commission under the Exchange
Act.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Incorporated by reference in this Proxy Statement as of the date of
filing, and subject in each case to information contained in this Proxy
Statement, are the following documents filed by the Company with the
Commission pursuant to the Exchange Act.
(i) Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as amended by Form 10-K/A;
(ii) Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996;
(iii) Current Report on Form 8-K dated June 3, 1996;
THIS PROXY STATEMENT IS ACCOMPANIED BY A COPY OF THE COMPANY ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995, AS AMENDED BY
FORM 10-K/A AND THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED MARCH 31, 1996. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON
TO WHOM THIS PROXY STATEMENT IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF
SUCH PERSON, A COPY OF ANY AND ALL OF THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN AND NOT ATTACHED HERETO AS AN APPENDIX (OTHER THAN EXHIBITS AND
SCHEDULES TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS OR SCHEDULES ARE
SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS). EXHIBITS AND
SCHEDULES NOT SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS WILL BE
PROVIDED UPON THE PAYMENT OF A REASONABLE FEE. SUCH REQUESTS SHOULD BE
DIRECTED TO DONALD A. NAY, CLINTON GAS SYSTEMS, INC., 4770 INDIANOLA AVE.,
COLUMBUS, OHIO 43214-0981 (TELEPHONE: (614) 888-9588). IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, REQUESTS SHOULD BE MADE BY AUGUST 8, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Proxy Statement
and prior to the date of the Special Meeting shall be deemed to be
incorporated by reference in this Proxy Statement and to be a part hereof from
the date of filing such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
modified or superseded, for purposes of this Proxy Statement, to the extent
that a statement contained herein or in any subsequently filed document that
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Proxy Statement.
<PAGE>
APPENDICES
EACH OF THE FOLLOWING APPENDICES CONSTITUTES A PART OF THIS PROXY
STATEMENT AND SHOULD BE CONSIDERED AS SUCH.
APPENDIX A - AGREEMENT AND PLAN OF MERGER........................... A-1
APPENDIX B - FAIRNESS OPINION OF MCDONALD & COMPANY
SECURITIES, INC. ...................................... B-1
APPENDIX C - SECTION 1701.85 OF OHIO GENERAL CORPORATION LAW........ C-1
____________________
______________
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
CLINTON GAS SYSTEMS, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
The undersigned, having received the Notice of Special Meeting and Proxy
Statement dated July 25, 1996, hereby appoints Jerry D. Jordan, F. Daniel Ryan
and Donald A. Nay, or any one or more of them, proxies of the undersigned,
with full power of substitution, to attend the Special Meeting of Shareholders
of Clinton Gas Systems, Inc., an Ohio corporation (the "Company"), to be held
at the Marriott North, 6500 Doubletree Avenue, Columbus, Ohio 43229, on August
22, 1996 at 10:00 A.M. (local time) and at any adjournment or adjournments
thereof, and thereat to vote all of the common shares of the Company which the
undersigned would be entitled to vote if personally present as follows:
(1) To approve and adopt the Agreement and Plan of Merger dated as of May
24, 1996 by and between JENCO Acquisition, Inc., Joint Energy
Development Investments Limited Partnership and the Company.
FOR |_| AGAINST |_| ABSTAIN |_|
(2) In accordance with his or their best judgment on any other matters
properly coming before the meeting or any adjournment or adjournments
thereof.
This proxy will be voted as directed, or if no such direction is
indicated in respect of item (1) , it will be voted in favor thereof.
Dated: ___________________, 1996
-----------------------------------
-----------------------------------
Signature
*NOTE: Please date and sign exactly
as name or names appear hereon and
return in the enclosed envelope
which requires no postage. When
signing as Attorney, Executor,
Trustee, Guardian or Officer of a
corporation, please give title as
such.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May
24, 1996, by and among Jenco Acquisition, Inc., an Ohio corporation ("Sub"),
Clinton Gas Systems, Inc., an Ohio corporation (the "Company") and Joint
Energy Development Investments Limited Partnership, a Delaware limited
partnership ("JEDI"), which holds all of the outstanding capital stock of Sub:
W I T N E S S E T H:
WHEREAS, JEDI and the Company desire to effect a merger of Sub with and
into the Company (the "Merger");
WHEREAS, the Board of Directors of the Company has appointed a special
committee of independent directors (the "Special Committee") to consider the
Merger;
WHEREAS, the Special Committee has unanimously recommended that the
Board of Directors of the Company approve this Agreement and the transactions
contemplated hereby;
WHEREAS, the Board of Directors of the Company, with the advice and
assistance of McDonald & Co. and independent legal counsel, has unanimously
determined it to be advisable and in the best interests of the Company's
shareholders to approve this Agreement and the transactions contemplated
hereby and to consummate the Merger, upon the terms and subject to the
conditions set forth herein;
WHEREAS, the Board of Directors of Sub has unanimously determined it to
be advisable and in the best interests of Sub's shareholders to approve this
Agreement and the transactions contemplated hereby and to consummate the
Merger, upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the General Corporation Law of
the State of Ohio (the "OGCL"), at the Effective Time (as hereinafter
defined), Sub shall be merged with and into the Company and the separate
corporate existence of Sub shall thereupon cease, and the Company, as the
surviving corporation in the Merger (the "Surviving Corporation"), shall by
virtue of the Merger continue its corporate existence in accordance with the
OGCL.
<PAGE>
Section 1.2 Effective Time of the Merger. The Merger shall become
effective at the date and time (the "Effective Time") when a properly executed
certificate of merger, in such form as is required by the OGCL and the
Secretary of State of Ohio, is duly filed with the Secretary of State of the
State of Ohio or at such later time as the parties hereto shall have provided
in such certificate. The parties hereto shall cause such filing to occur as
soon as practicable on or after the Closing Date (as hereinafter defined).
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Articles of Incorporation. At the Effective Time, the
Articles of Incorporation of Sub, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided by law; provided, however,
that, at the Effective Time, Article 1. of the Articles of Incorporation of
the Surviving Corporation shall be amended to read as follows: "1. The name of
the corporation is Clinton Gas Systems, Inc."; and a new Article 15 will be
added to the Articles of Incorporation of the Surviving Corporation which will
read as follows:
15. NO RIGHT TO VOTE CUMULATIVELY
Notwithstanding any provision of the General Corporation Law of Ohio now
or hereafter in effect, no shareholder shall have the right to vote
cumulatively in the election of directors. Without limiting the
generality of the immediately preceding sentence, no shareholder shall
have the right at any time in the election of directors either to give
one candidate as many votes as the number of directors to be elected
multiplied by the number of his votes equals or to distribute his votes
on the same principle among two or more candidates.
NOTICE IS HEREBY GIVEN THAT AN EFFECT OF THE AMENDMENT ADOPTING ARTICLE 15 TO
THE ARTICLES WILL BE TO DO BOTH OF THE FOLLOWING: (1) TO PERMIT A MAJORITY OF
A QUORUM OF THE VOTING POWER IN THE ELECTION OR REMOVAL OF DIRECTORS TO ELECT
OR REMOVE EVERY DIRECTOR; (2) TO PRECLUDE A MINORITY OF A QUORUM OF THE VOTING
POWER IN THE ELECTION OR REMOVAL OF DIRECTORS FROM ELECTING OR PREVENTING THE
REMOVAL OF ANY DIRECTOR.
Section 2.2 Regulations. The Regulations of Sub as in effect at the
Effective Time shall be the Regulations of the Surviving Corporation until
thereafter amended as provided by law.
Section 2.3 Board of Directors and Officers of the Surviving
Corporation. The directors of Sub and the officers of the Company immediately
prior to the Effective Time, subject to the applicable provisions of the
Articles of Incorporation and Regulations of the Surviving Corporation, shall
be the directors and officers of the Surviving Corporation until their
respective successors shall be duly elected or appointed and qualified.
Section 2.4 Effects of Merger. The Merger shall have the effects set
forth in Section 1701.82 of the OGCL. The corporate existence of the Company
shall continue unaffected and unimpaired by the Merger and, as the Surviving
Corporation, it shall be governed by the laws of the State of Ohio and succeed
to all rights, assets, liabilities and obligations of Sub in accordance with
the applicable provisions of the OGCL.
ARTICLE III
CONVERSION OF SECURITIES
Section 3.1 Merger Consideration. At the Effective Time, by virtue of
the Merger and without any action on the part of Sub, the Company or their
respective shareholders (other than the filing of the certificate of merger
referred to in Section 1.2 hereof) (a) each share (a "Share") of common stock,
without par value, of the Company ("Company Common Stock") issued and
outstanding immediately prior to the Effective Time (other than (i) Shares
held by Sub, (ii) Shares held in the treasury of the Company or owned by any
subsidiary of the Company and (iii) Dissenting Shares (as hereinafter defined)
in respect of which dissenters' rights are properly exercised and perfected)
shall be canceled and extinguished and be converted automatically into the
right to receive, pursuant to Section 3.2 hereof, $6.75 per Share in cash,
without interest thereon (the "Merger Consideration"), less any required
withholding of taxes, which Merger Consideration shall be payable upon
surrender of the certificate formerly representing such Share (a
"Certificate") in the manner provided in Section 3.2(b), (b) each Share then
held in the treasury of the Company and each Share owned by any subsidiary of
the Company shall be canceled and retired without conversion thereof and
without payment of any consideration and shall cease to exist, and (c) each
Share owned beneficially or of record by the Sub immediately prior to the
Effective Time shall be canceled and retired without conversion thereof and
without payment of any consideration and shall cease to exist.
Section 3.2 Paying Agent and Surrender of Certificates. (a) Prior to the
Effective Time, Sub and the Company shall appoint American Stock Transfer &
Trust Company, the Company's Transfer Agent, as paying agent (the "Paying
Agent"), for purposes of this Agreement. At Closing, JEDI shall cause to be
deposited in trust with the Paying Agent, on behalf of Sub, funds that will be
sufficient to enable the Paying Agent to make payments with respect to all
outstanding Certificates representing Shares for which the Merger
Consideration is payable in accordance with Section 3.1. Such funds shall be
invested by the Paying Agent as directed by JEDI, 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 Commission (as hereinafter defined) or otherwise); provided,
however, that no loss on any investment made pursuant to this Section 3.2(a)
shall relieve JEDI or the Surviving Corporation of its obligation to pay the
Merger Consideration for each Share outstanding immediately prior to the
Effective Time.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause the Paying Agent to mail to each person who was a record holder of
Shares immediately prior to the Effective Time (other than holders of
Dissenting Shares, Sub, the Company and the Company's subsidiaries), a form of
letter of transmittal and instructions for use in effecting the surrender for
payment of Certificates that immediately prior to the Effective Time
represented Shares. Upon surrender of a Certificate to the Paying Agent,
together with a duly executed and completed letter of transmittal and any
other required documents, the holder of the Certificate shall be entitled to
receive in exchange therefor, and the Paying Agent will pay (via U.S. mail
postage prepaid) as soon as practicable to such holder, cash in an amount
equal to the product of the number of Shares represented by the Certificate or
Certificates surrendered and the Merger Consideration, without any interest
thereon and less any required withholding of taxes, and such Certificate(s)
shall forthwith be canceled. If the payment is to be made to a person other
than the person in whose name a surrendered Certificate is registered, it
shall be a condition of payment that (x) the Certificate so surrendered shall
be properly endorsed or otherwise in proper form for transfer and that (y) the
person requesting such payment shall either pay any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the Certificate surrendered or establish to the satisfaction of the
Surviving Corporation or the Paying Agent that such tax has been paid or is
not applicable. The Surviving Corporation shall pay all charges and expenses,
including those of the Paying Agent, incurred in connection with the
distribution of the Merger Consideration. After the Effective Time, until
surrendered in accordance with the provisions of this Section 3.2(b), a
Certificate shall represent only the right to receive the Merger Consideration
in cash multiplied by the number of Shares evidenced by such Certificate,
without any interest thereon. On or after the one-hundred eightieth day
following the Effective Time, the Surviving Corporation may by written request
require the Paying Agent to pay to the Surviving Corporation that portion of
the funds deposited with the Paying Agent pursuant to this Section 3.2(b) (and
any income earned thereon) that have not been disbursed pursuant to this
Section 3.2(b), and holders of Certificates shall thereafter look only to the
Surviving Corporation for any payment to be made pursuant to this Section
3.2(b). Notwithstanding anything to the contrary, none of the Paying Agent,
the Surviving Corporation or any party hereto shall be liable to a holder of a
Certificate for any amount delivered to a public official pursuant to
applicable abandoned property, escheat or similar law.
Section 3.3 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares that are issued and outstanding immediately
prior to the Effective Time and which are held by shareholders who have
properly exercised dissenters' rights with respect thereto under Section
1701.85 of the OGCL (the "Dissenting Shares") shall not be converted into or
represent the right to receive the Merger Consideration as provided in
Sections 3.1 and 3.2, but the holders of Dissenting Shares shall be entitled
to receive such payment of the fair cash value of such Shares held by them
from the Surviving Corporation (or the Paying Agent, if applicable) as shall
be determined pursuant to Section 1701.85 of the OGCL; provided, however, that
if any such holder shall have failed to perfect or shall withdraw or lose such
holder's rights under Section 1701.85 of the OGCL, each such holder's Shares
shall thereupon be deemed to have been converted as of the Effective Time into
the right to receive the Merger Consideration, without any interest thereon
and less any required withholding of taxes, as provided in Section 3.1, and
upon the surrender of the Certificates representing such Shares, in the manner
provided in Section 3.2, such Shares shall no longer be Dissenting Shares.
Section 3.4 Conversion of Sub Securities. At the Effective Time, each
share of common stock, par value $0.01 per share, of Sub issued and
outstanding immediately prior to the Effective Time shall be converted, by
virtue of the Merger and without any action on the part of the holder thereof,
into one fully paid and nonassessable share of the common stock of the
Surviving Corporation.
Section 3.5 Shareholders to Have No Further Rights. At and after the
Effective Time, the holder of a Certificate shall cease to have any rights as
a shareholder of the Company, except for (i) the right to surrender such
Certificate in exchange for the amount of Merger Consideration to which such
holder is entitled under this Agreement and (ii) the rights available under
the OGCL for Dissenting Shares.
Section 3.6 Shareholders' Meeting. The Company, acting through its Board
of Directors, shall take all action necessary, in accordance with applicable
law and its Articles of Incorporation and Regulations, to convene a special
meeting of the holders of Company Common Stock (the "Company Meeting") as
promptly as practicable for the purpose of considering and taking action to
authorize and adopt this Agreement pursuant to the OGCL. The Company shall
file with the Commission the Company's preliminary proxy material for the
Company Meeting by a date (the "Filing Date") as soon as practicable but in no
event later than June 24, 1996. The Company shall convene the Company Meeting
by no later than September 6, 1996, unless the Company encounters a delay by
the staff of the Commission which causes the period from the Filing Date to
the date of the staff's clearance of the Proxy Statement to exceed seven
weeks. Subject to its fiduciary duties under applicable law as advised in
writing by outside counsel (notice of which advice shall also have been
communicated to JEDI) in connection with the receipt by the Company of an
Other Acquisition Transaction (as hereinafter defined) that the Board of
Directors of the Company reasonably determines will result in a Superior
Proposal (as hereinafter defined), the Board of Directors of the Company will
recommend that holders of Company Common Stock vote in favor of and approve
the Merger and the adoption of this Agreement at the Company Meeting. At the
Company Meeting, all of the shares of Company Common Stock then owned by Sub,
or with respect to which Sub holds the power to direct the voting, will be
voted in favor of approval of the Merger and adoption of this Agreement. The
vote required under the Company's Articles of Incorporation as permitted by
Section 1701.78(F) of the OGCL for approval of the Merger and adoption of this
Agreement is the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock.
Section 3.7 Closing of the Company's Transfer Books. At the Effective
Time, the stock transfer books of the Company shall be closed and no transfer
of Shares shall be made thereafter. In the event that, after the Effective
Time, Certificates are presented for transfer to the Surviving Corporation,
they shall be canceled and exchanged for the Merger Consideration as provided
in Section 3.1 and 3.2.
Section 3.8 Closing. Unless this Agreement is terminated and the
transactions contemplated herein abandoned pursuant to Section 11.1 and
subject to the satisfaction or, if permissible, waiver of the conditions set
forth in Article X, the consummation of the Merger and the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place
(i) at the offices of Vinson & Elkins L.L.P., Houston, Texas, at 9:00 A.M.
local time on a date to be specified by the JEDI and the Company, but as soon
as practicable (and in any event within two business days) after the day on
which the last of the conditions set forth in Article X is fulfilled (other
than deliveries of instruments to be made at Closing) or, if permissible,
waived by the relevant party or (ii) at such other time and place as JEDI and
the Company shall agree in writing. The date on which the Closing occurs is
referred to herein as the "Closing Date."
ARTICLE IV
DEFINITIONS
Section 4.1 Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Agreement" shall have the meaning set forth in the opening paragraph.
"CERCLA" shall mean the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, as amended.
"Certificate" shall have the meaning set forth in Section 3.1.
"Closing" shall have the meaning set forth in Section 3.8.
"Closing Date" shall have the meaning set forth in Section 3.8.
"Code" shall have the meaning set forth in Section 7.9(b).
"Commission" shall have the meaning set forth in Section 7.5.
"Commonly Controlled Entity" shall have the meaning set forth in Section
7.9(b).
"Company" shall have the meaning set forth in the opening paragraph of
the Agreement.
"Company Common Stock" shall have the meaning set forth in Section 3.1.
"Company Disclosure Schedule" shall have the meaning set forth in Section
7.1.
"Company Estimated Proved Reserves" shall have the meaning set forth in
Section 7.19(a).
"Company Material Adverse Effect" shall have the meaning set forth in
Section 7.1.
"Company Meeting" shall have the meaning set forth in Section 3.6.
"Company Reserve Report" shall have the meaning set forth in Section
7.19(a).
"Company SEC Reports" shall have the meaning set forth in Section 7.5.
"Company Voting Debt" shall have the meaning set forth in Section 7.2.
"Confidentiality Agreement" shall have the meaning set forth in Section
9.1.
"Debentures" shall have the meaning set forth in Section 7.2.
"Defensible Title" shall mean, subject to and except for the Permitted
Encumbrances, (i) the title of the Company and its Subsidiaries to such assets
is free and clear of all liens, encumbrances and defects of any kind
whatsoever, and (ii) as to those wells for which a "Working Interest" and a
"Net Revenue Interest" are set forth in the Company Reserve Report, the
Company or its Subsidiaries are entitled to receive the percentage of all
Hydrocarbons produced, saved and marketed from such wells in an amount not
less than the Net Revenue Interest set forth in the such engineering report,
without reduction, suspension or termination throughout the duration of the
productive life of such wells (except as set forth in such report), and such
party is obligated to bear the percentage of costs and expenses related to the
maintenance, development and operation of such wells in an amount not greater
than the Working Interest set forth in such engineering report, without
increase throughout the productive life of such wells, except increases that
also result in a proportionate increase in Net Revenue Interest and as set
forth in such report.
"Dissenting Shares" shall have the meaning set forth in Section 3.3.
"ECT" shall have the meaning set forth in Section 9.1.
"Effective Time" shall have the meaning set forth in Section 1.2.
"Environmental Laws" shall mean any and all laws, statutes, ordinances,
rules, regulations, or orders of any Governmental Entity pertaining to health
or the environment currently in effect in any or all jurisdictions in which
the Company and its Subsidiaries own property or conduct business, including
without limitation, the Clean Air Act, as amended, CERCLA, the Federal Water
Pollution Control Act, as amended, the Occupational Safety and Health Act of
1970, as amended, RCRA, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Hazardous & Solid Waste Amendments Act
of 1984, as amended, the Superfund Amendments and Reauthorization Act of 1986,
as amended, the Hazardous Materials Transportation Act, as amended, the Oil
Pollution Act of 1990 ("OPA"), any state laws implementing the foregoing
federal laws, any state laws pertaining to the handling of oil and gas
exploration and production wastes or the use, maintenance, and closure of pits
and impoundments, and all other environmental conservation or protection laws.
"ERISA" shall have the meaning set forth in Section 7.9(a).
"Exchange Act" shall have the meaning set forth in Section 5.2.
"Fixed Price Contracts" means any contracts, commitments or agreements
for the purchase or sale of Hydrocarbons (i) having, as of the date hereof, a
remaining term of two months or more, wherein the purchase or sales price
thereunder throughout all or part of the life of such contract, commitment or
agreement is a fixed amount or an amount that is otherwise reasonably
determinable as of the date hereof pursuant to the terms of such contract,
commitment or agreement, or (ii) which the Company or any Subsidiary thereof
has hedged with futures contracts or otherwise; provided, that the term Fixed
Price Contracts will not include any contract, commitment or agreement wherein
the purchase or sales price thereunder throughout all of the life of the
contract, commitment or agreement is based on a market responsive reference
price for a Hydrocarbon.
"GAAP" shall have the meaning set forth in Section 6.3.
"Governmental Entity" shall have the meaning set forth in Section 7.16.
"Hydrocarbons" means oil, gas, condensate, casinghead gas, helium,
carbon dioxide, mineral and other liquid or gaseous hydrocarbons.
"Indebtedness" means any liability in respect of (A) borrowed money, (B)
capitalized lease obligations, (C) the deferred purchase price of property or
services (other than trade payables in the ordinary course of business) and
(D) guarantees of any of the foregoing.
"JEDI" shall have the meaning set forth in the opening paragraph of the
Agreement.
"JEDI Disclosure Schedule" shall have the meaning set forth in Section
6.1.
"JEDI Material Adverse Effect" shall have the meaning set forth in
Section 6.2(b).
"Leases" shall have the meaning set forth in Section 7.20(e).
"Material Company Assets" shall have the meaning set forth in Section
7.21.
"Merger" shall have the meaning set forth in the recitals.
"Merger Consideration" shall have the meaning set forth in Section 3.1.
"OGCL" shall have the meaning set forth in Section 1.1.
"Oil and Gas Interests" means, when used with respect to the Company or
its Subsidiaries, direct and indirect interests in and rights with respect to
Hydrocarbons and related properties and assets of any kind and nature, direct
or indirect, including working, royalty, and overriding royalty interests,
production payments, operating rights, net profits interests, other nonworking
interests, and nonoperating interests; and all revenues therefrom and all
contracts in connection therewith and claims and rights thereto (including all
oil and gas leases, operating agreements, unitization and pooling agreements
and orders, divisions orders, transfer orders, mineral deeds, royalty deeds,
oil and gas sales, exchange and processing contracts and agreements, and in
each case, interests thereunder), surface interests, fee interests,
reversionary interests, reservations, and concessions; all easements, rights
of way, licenses, permits, leases, and other interests associated with,
appurtenant to, or necessary for the operation of any of the foregoing; and
all interests in equipment and machinery (including tanks, batteries,
pipelines, and gathering systems), pumps, water plants, electric plants,
gasoline and gas processing plants, refineries, and other tangible personal
property and fixtures associated with, appurtenant to, or necessary for the
operation of any of the foregoing.
"Other Acquisition Transaction" shall have the meaning set forth in
Section 9.5.
"Paying Agent" shall have the meaning set forth in Section 3.2.
"PBGC" shall have the meaning set forth in Section 7.9(b).
"Permitted Encumbrances" shall mean any of the following: (i) any liens
for taxes and assessments not yet delinquent or, if delinquent, that are being
contested in good faith in the ordinary course of business; (ii) any
obligations or duties to any municipality or public authority with respect to
any franchise, grant, certificate, license or permit, and all applicable laws;
(iii) any easements, rights-of-way, servitudes, permits and other rights in
respect of surface operations, pipelines or the like, and easements for
pipelines, power lines and other similar rights-of-way, and encroachments, on,
over or in respect of any property or lands of the Company and its
Subsidiaries or over which such party owns rights-of-way, easements, permits
or licenses, that do not unreasonably or materially interfere with the
operation of any property or lands for exploration and production of
hydrocarbon or related operations; (iv) all royalties, overriding royalties,
net profits interests, production payments, carried interests, reversionary
interests, calls on production and other burdens on or deductions from the
proceeds of production that do not operate to (A) reduce the Net Revenue
Interest below that set forth in the Company Reserve Report, or (B) increase
the Working Interest of the Company and its Subsidiaries above that set forth
in the engineering report without a proportionate increase in the Net Revenue
Interest of such party; (v) the terms and conditions of all leases,
servitudes, production sales contracts, division orders, contracts for sale,
purchase, exchange, refining or processing of hydrocarbons, unitization and
pooling designations, declarations, orders and agreements, operating
agreements, agreements of development, area of mutual interest agreements,
farmout agreements, gas balancing or deferred production agreements,
processing agreements, plant agreements, pipeline, gathering and
transportation agreements, injection, repressuring and recycling agreements,
carbon dioxide purchase or sale agreements, salt water or other disposal
agreements, seismic or geophysical permits or agreements, and other
agreements, to the extent that such contracts and agreements do not (A) reduce
the Net Revenue Interest below that set forth in the Company Reserve Report,
or (B) increase the Working Interest above that set forth in the Company
Reserve Report, as applicable, without a proportionate increase in the Net
Revenue Interest of the applicable party; (vi) conventional rights of
reassignment prior to abandonment; (vii) materialmen's, mechanics',
repairmen's, employees', contractors', operators', tax and other similar liens
or charges arising in the ordinary course of business incidental to
construction, maintenance or operation of any of the Company's assets (A) if
they have not been filed pursuant to law, (B) if filed, they have not yet
become due and payable or payment is being withheld as provided by law or (C)
if their validity is being contested in good faith in the ordinary course of
business by appropriate action; and (viii) any other encumbrances that (A) do
not secure an obligation in respect of borrowed money or (B) do not interfere
materially with the operation, value or use of assets of the Company or its
Subsidiaries.
"Potential Acquiror" shall have the meaning set forth in Section 9.5.
"Proxy Statement" shall have the meaning set forth in Section 5.3.
"RCRA" shall mean the Resource Conservation and Recovery Act of 1976, as
amended.
"Securities Act" shall have the meaning set forth in Section 7.5.
"Share" shall have the meaning set forth in Section 3.1.
"Significant Wells" shall have the meaning set forth in Section 7.19.
"Sub" shall have the meaning set forth in the opening paragraph of the
Agreement.
"Sub Material Adverse Effect" shall have the meaning set forth in Section
5.1.
"Subsidiaries" shall have the meaning set forth in Section 7.3.
"Superior Proposal" shall have the meaning set forth in Section 9.5.
"Surviving Corporation" shall have the meaning set forth in Section 1.1.
"Tax" shall mean all federal, state, local and foreign income, profits,
franchise, gross receipts, payroll, sales, employment, use, property,
withholding, excise and other taxes, imposts, duties and assessments of any
nature whatsoever together with all interest, penalties and additions imposed
with respect to such amounts.
"Tax Return" shall mean any return, declaration, report, estimate, claim
for refund, information return, statement, request for extension, or other
similar document relating to any Tax, including any schedule or attachment
thereto, and including any amendment thereof.
"Terminating Other Acquisition Transaction" shall have the meaning set
forth in Section 11.1(e).
"401(k) Plan" shall have the meaning set forth in Section 9.7.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SUB
Sub hereby represents and warrants to the Company as follows:
Section 5.1 Organization and Qualification. Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Ohio and has the corporate power to carry on its business as it is now
being conducted. Sub is duly qualified as a foreign corporation and is in good
standing in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities make such qualification
necessary, except where the failure to be so qualified or in good standing
would not, individually or in the aggregate, have a material adverse effect on
the business, assets, condition (financial or otherwise), liabilities,
prospects or operations of Sub or Sub's ability to consummate the Merger (a
"Sub Material Adverse Effect"). Complete and correct copies as of the date
hereof of the Articles of Incorporation and Regulations of Sub have been
delivered to the Company.
Section 5.2 Authority Relative to this Agreement.
(a) Sub has the requisite corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement by Sub and the consummation of the transactions
contemplated hereby by Sub have been duly authorized by all necessary
corporate action on the part of Sub. This Agreement has been duly executed and
delivered by Sub and, assuming the due authorization, execution and delivery
of this Agreement by the Company and JEDI, this Agreement constitutes a legal,
valid and binding obligation of Sub enforceable in accordance with its terms
except as enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
(b) Neither the execution, delivery and performance of this Agreement
nor the consummation of the transactions contemplated hereby will (i) conflict
with or violate the Articles of Incorporation or Regulations of Sub or (ii)
result in any breach or constitute a default (with or without notice or lapse
of time, or both) under or give rise in others to any rights of termination,
cancellation or acceleration under, any indenture, contract, loan agreement,
license, franchise, permit, order, decree, concession, lease, instrument,
judgment, statute, law, ordinance, rule or regulation applicable to Sub or its
assets, other than, in the case of clause (ii) only, such breaches, defaults,
violations and losses of rights that would not, individually or in the
aggregate, have a Sub Material Adverse Effect. Except as referred to herein,
or in connection or in compliance with the provisions of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the filing of the
certificate of merger pursuant to the OGCL, no filing or registration with, or
authorization, consent or approval of, any governmental or regulatory body or
authority or third party is necessary for the consummation by Sub of the
Merger or the other transactions contemplated by this Agreement, except where
the failure to make any such filing or registration or to obtain such
authorization, consent or approval would not, individually or in the
aggregate, (x) prevent Sub from consummating the Merger or (y) have a Sub
Material Adverse Effect.
Section 5.3 Information in Proxy Statement. None of the written
information supplied by Sub for inclusion in the definitive proxy statement of
the Company and any amendments or supplements thereto (collectively the "Proxy
Statement") to be mailed to the shareholders of the Company in connection with
the Merger will, at the time of the mailing thereof or at the time of the
Company Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading.
Section 5.4 Capitalization of Sub. The authorized capital stock of Sub
consists of 50,000 shares of common stock, par value $0.01 per share, 1 of
which shares is validly issued and outstanding, fully paid and nonassessable
and is owned by JEDI free and clear of all liens, claims and encumbrances.
Section 5.5 Financing. Sub has or will have available to it at the time
the Surviving Corporation is required to pay for the Shares pursuant to
Article III hereof sufficient funds (i) to permit it to pay for all of the
outstanding shares of Company Common Stock and (ii) to permit the Surviving
Corporation to pay amounts due to shareholders of the Company who have
perfected dissenters' rights in accordance with the OGCL.
Section 5.6. Finder's Fees. Sub has not made any arrangements with any
broker, finder or investment banker that would require the Company to pay any
fee or commission if the Merger or the other transactions contemplated by this
Agreement are not consummated.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF JEDI
JEDI hereby represents and warrants to the Company as follows:
Section 6.1 Organization. JEDI is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the partnership power to carry on its business as it is now being
conducted. The names of the general partner and of the limited partner of JEDI
and their respective percentages of ownership are set forth on Schedule 6.1 of
a disclosure schedule delivered by JEDI to the Company on the date of this
Agreement (the "JEDI Disclosure Schedule").
Section 6.2 Authority and Capacity; No Violation or Consent.
(a) JEDI has the requisite partnership power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement by JEDI and the consummation of the transactions
contemplated hereby by JEDI have been duly authorized by all necessary
partnership action on the part of JEDI. This Agreement has been duly executed
and delivered by JEDI and, assuming the due authorization, execution and
delivery of this Agreement by the Company and Sub, this Agreement constitutes
a legal, valid and binding obligation of JEDI enforceable in accordance with
its terms except as enforcement may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally
and except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
(b) Neither the execution, delivery and performance of this Agreement
nor the consummation of the transactions contemplated hereby will (i) conflict
with or violate the partnership agreement of JEDI or (ii) result in any breach
or constitute a default (with or without notice or lapse of time or both)
under, or give rise in others to any rights of termination, cancellation or
acceleration under, any indenture, contract, instrument, or loan agreement
pursuant to which JEDI is a borrower, or any license, franchise, permit,
order, decree, concession, lease, judgment, statute, law, ordinance, rule or
regulation applicable to JEDI or its assets, other than, in the case of clause
(ii) only, such breaches, defaults, violations and losses of rights that would
not, individually or in the aggregate, have a Sub Material Adverse Effect or a
material adverse effect on the business, assets, condition (financial or
otherwise), liabilities, prospects or operations of JEDI or JEDI's ability to
consummate the Merger (a "JEDI Material Adverse Effect"). Except as referred
to herein, or in connection with compliance with the Exchange Act and the
filing of a certificate of merger in accordance with the OGCL, no filing or
registration with, or authorization, consent or approval of any governmental
or regulatory body or authority or third party is necessary for the
performance of its obligations pursuant to this Agreement or the transactions
contemplated hereby, except where such failure to make such filing or
registration or obtain such authorization, consent or approval would not,
individually or in the aggregate, (i) prevent JEDI from consummating the
Merger, (ii) have a Sub Material Adverse Effect or (iii) have a JEDI Material
Adverse Effect.
Section 6.3 Financial Information.
(a) JEDI has furnished the Company with true and complete copies of
JEDI's audited consolidated financial statements as of December 31, 1995 and
unaudited interim financial statements as of March 31, 1996. As of their
respective dates, the audited financial statements and unaudited interim
financial statements of JEDI were (i) prepared in accordance with generally
accepted accounting principles applied on a consistent basis ("GAAP") during
the periods presented (except as may be indicated therein or in the notes
thereto, or in the case of the unaudited statements, subject to normal
year-end audit adjustments), (ii) present fairly, in all material respects,
the financial position of JEDI as of the dates thereof and the results of
their operations and cash flow for the periods then ended subject, in the case
of the unaudited interim financial statements, to normal year-end audit
adjustments and any other adjustments described therein and (iii) are, in all
material respects, in accordance with the books of account and records of
JEDI.
(b) JEDI has or will have sufficient funds available to perform its
obligations under Section 9.6 of this Agreement.
Section 6.4 Information in Proxy Statement. None of the information
supplied in writing by JEDI for inclusion in the Proxy Statement will, at the
time of mailing thereof or at the time of the Company Meeting, contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading.
Section 6.5. Finder's Fees. JEDI has not made any arrangements with any
broker, finder or investment banker that would require the Company to pay any
fee or commission if the Merger or the other transactions contemplated by this
Agreement are not consummated. The only arrangement which JEDI has made with
any broker, finder or investment banker pertaining to the transactions
contemplated by this Agreement is described on Schedule 6.5 of the JEDI
Disclosure Schedule.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to JEDI and Sub as follows:
Section 7.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio and has the corporate power to carry on its business as it is
now being conducted. The Company is duly qualified as a foreign corporation
and is in good standing in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified or
in good standing would not, individually or in the aggregate, have a direct or
indirect material adverse effect on the business, assets, condition (financial
or otherwise), liabilities, prospects or operations of the Company and its
Subsidiaries (as hereinafter defined) taken as a whole or its ability to
consummate the Merger (a "Company Material Adverse Effect"). Complete and
correct copies of the Articles of Incorporation or other charter documents and
Regulations, by-laws or comparable organizational documents of the Company and
each of its Subsidiaries as of the date hereof have been previously delivered
to JEDI, and a list of each jurisdiction of incorporation and each
jurisdiction in which the Company and each of its Subsidiaries is duly
qualified as a foreign corporation has been delivered to Sub as Schedule 7.1
of a disclosure schedule delivered by the Company to Sub on the date of this
Agreement (the "Company Disclosure Schedule").
Section 7.2 Capitalization. The authorized capital stock of the Company
consists of 10,000,000 shares of Company Common Stock and 2,000,000 shares of
preferred stock, without par value. As of the date of this Agreement,
5,661,561 shares of Company Common Stock were outstanding, 533,368 shares of
Company Common Stock were held by the Company and its Subsidiaries, 294,000
shares of Company Common Stock were reserved for issuance upon conversion of
the Company's 9% Convertible Subordinated Debentures due 2006 (the
"Debentures"), 20,000 shares of Company Common Stock were reserved for
issuance upon exercise of an option granted to Peter E. Susey, which expires
on June 3, 1996 (the "Susey Option"), and no shares of preferred stock were
outstanding. The Company has delivered to JEDI true and complete copies of all
agreements and any amendments thereto related to the Susey Option. All the
outstanding shares of Company Common Stock are validly issued, fully paid and
non-assessable and were issued free of preemptive rights. As of the date
hereof, there are not issued or outstanding any bonds, debentures, notes or
other evidences of indebtedness having the right to vote on any matters on
which the Company's shareholders may vote ("Company Voting Debt"). Except as
set forth in Schedule 7.2 of the Company Disclosure Schedule, there are no
options, warrants, calls or other rights, agreements or commitments
outstanding obligating the Company to issue, deliver or sell shares of its
capital stock or debt securities, or obligating the Company to grant, extend
or enter into any such option, warrant, call or other such right, agreement or
commitment.
Section 7.3 Subsidiaries. Schedule 7.3 of the Company Disclosure
Schedule lists all subsidiaries of the Company (the "Subsidiaries") and their
jurisdictions of incorporation. Each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to carry on its business as it is now being conducted. Each
Subsidiary is duly qualified as a foreign corporation, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified or in good standing
would not, individually or in the aggregate, have a Company Material Adverse
Effect. Except as set forth on Schedule 7.3, all the outstanding shares of
capital stock of each Subsidiary are validly issued, fully paid and
nonassessable and are owned by the Company free and clear of any liens, claims
or encumbrances. There are no existing options, warrants, calls or other
rights, agreements or commitments of any character relating to the issued or
unissued capital stock or other securities of any of the Subsidiaries. Other
than the Subsidiaries and except as set forth in Schedule 7.3, the Company
does not directly or indirectly own any interest in any other corporation,
partnership, joint venture or other business association or entity, excluding
joint working interest operations of oil and gas wells and drilling ventures
arising in the ordinary course of business.
Section 7.4 Authority Relative to this Agreement.
(a) The Company has the requisite corporate power to enter into this
Agreement and, subject to approval of this Agreement by the holders of the
Company Common Stock as described in Section 3.6, the corporate power and
authority to carry out its obligations hereunder. The execution and delivery
of this Agreement by the Company and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Company (except for the approval of the holders of
Company Common Stock as described in Section 3.6). This Agreement has been
duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery of this Agreement by Sub and JEDI, this
Agreement constitutes a legal, valid and binding obligation of the Company
enforceable in accordance with its terms except as enforcement may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought.
(b) Except as set forth in Schedule 7.4 of the Company Disclosure
Schedule, neither the execution, delivery and performance of this Agreement
nor the consummation of the transactions contemplated hereby will (i) conflict
with or violate the Articles of Incorporation or other charter documents or
Regulations or bylaws of the Company or any of its Subsidiaries, or (ii)
result in any breach or constitute a default (with or without notice or lapse
of time, or both) under, or give rise in others to any rights of termination,
cancellation or acceleration under, any indenture, contract, loan agreement,
license, franchise, permit, order, decree, concession, lease, instrument,
judgment, statute, law, ordinance, rule or regulation applicable to the
Company or any of its Subsidiaries or its or their respective assets, other
than, in the case of clause (ii) only, such breaches, defaults, violations and
losses of rights that would not, individually or in the aggregate, have a
Company Material Adverse Effect. Except as disclosed in Schedule 7.4 of the
Company Disclosure Schedule or, in connection or in compliance with the
provisions of the Exchange Act and the filing of the certificate of merger
pursuant to the OGCL, no filing or registration with, or authorization,
consent or approval of, any governmental or regulatory body or authority or
third party is necessary for the consummation by the Company of the Merger or
the other transactions contemplated hereby, except where failure to make such
filing or registration or obtain such authorization, consent or approval would
not, individually or in the aggregate (y) prevent the Company from
consummating the Merger or (z) have a Company Material Adverse Effect.
Section 7.5 Reports and Financial Statements. The Company has furnished
JEDI with true and complete copies of the Company's (i) Annual Reports on Form
10-K for the fiscal years ended December 31, 1994 and December 31, 1995, as
filed with the Securities and Exchange Commission (the "Commission"), (ii)
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994, June 30,
1994, September 30, 1994, March 31, 1995, June 30, 1995 and September 30, 1995
as filed with the Commission, (iii) proxy statements related to all meetings
of its shareholders (whether annual or special) held since January 1, 1994 and
(iv) all other reports on Form 8-K, Form 10-KA and registration statements
declared effective by the Commission since December 31, 1993, except
registration statements on Form S-8 relating to employee benefit plans and
Reports on Form 10-C relating to securities quoted on the NASDAQ Interdealer
Quotation System, which are all the documents (other than preliminary
material) that the Company was required to file with the Commission since
January 1, 1994 relating to matters occurring since January 1, 1994 (all items
in clauses (i) through (iv) being referred to herein collectively as the
"Company SEC Reports"). As of their respective dates, the Company SEC Reports
complied in all material respects with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case
may be, and the rules and regulations of the Commission thereunder applicable
to such Company SEC Reports. As of their respective dates, the Company SEC
Reports did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the audited consolidated
financial statements and unaudited interim financial statements of the Company
included in the Company SEC Reports complied in all material respects with
applicable accounting requirements of the Securities Act and the Exchange Act,
and with the published rules and regulations of the Commission with respect
thereto. The financial statements included in the Company SEC Reports (i) have
been prepared in accordance with GAAP during the periods presented (except as
may be indicated therein or in the notes thereto or in the case of the
unaudited statements, subject to normal year-end audit adjustments and except
for the fact that such unaudited financial statements do not contain all notes
required by GAAP), (ii) present fairly, in all material respects, the
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flow
for the periods then ended (except as may be indicated therein or in the notes
thereto or, in the case of the unaudited interim financial statements, to
normal year-end audit adjustments and any other adjustments described therein
and except for the fact that certain information and notes have been condensed
or omitted in accordance with the Securities Act and the Exchange Act and the
rules promulgated thereunder) and (iii) are, in all material respects, in
accordance with the books of account and records of the Company. Neither the
Company nor any of its Subsidiaries has any liability or is subject to any
loss contingency material to the Company and its Subsidiaries, taken as a
whole, other than as reflected or disclosed in the financial statements or
notes thereto included in the Company SEC Reports filed prior to the date
hereof. Any reports or other material filed by the Company with the
Commission after the date hereof and prior to the Effective Time (other than
preliminary material) shall be deemed to be included in the defined term
"Company SEC Reports" for purposes of this Agreement, and, other than written
information supplied by JEDI or Sub to the Company for inclusion by the
Company in any subsequent report filed by the Company with the Commission, the
Company shall be deemed to have made the representations set forth in this
Section 7.5 in respect of such reports or other material and any financial
statements set forth therein.
Section 7.6 Absence of Certain Changes or Events. Except as contemplated
by this Agreement or as disclosed in any of the Company SEC Reports filed
prior to the date hereof, there have not been since December 31, 1995 (i) any
transactions, commitments, disputes, events, damage, destruction or losses,
whether or not covered by insurance, development or condition (financial or
otherwise) of any character (whether or not in the ordinary course of
business) individually or in the aggregate having, or which could reasonably
be expected to have, a Company Material Adverse Effect or (ii) (A) any entry
into any commitment or transaction material to the Company and its
Subsidiaries taken as a whole (including, without limitation, any borrowing or
sale of assets) except in the ordinary course of business consistent with past
practice or (B) any action taken by the Company or its Board of Directors in
connection with the adoption or implementation of any plan or arrangement or
the entry into any agreement (x) principally intended to discourage an Other
Acquisition Transaction, or (y) pursuant to which the officers, directors or
employees of the Company or its Subsidiaries have been granted any benefits
payable or distributable upon severance or upon a change of control of the
Company or pursuant to which any rights held by such persons have been
accelerated to occur or vest at or prior to a change of control, including
without limitation any amendments to, modifications of, or elections of other
rights under existing benefit plans (including the 401(k) Plan).
Section 7.7 Litigation. Except as disclosed in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 or as disclosed in
Schedule 7.7 of the Company Disclosure Schedule, there is no claim, suit,
action or proceeding pending or, to the knowledge of the Company, threatened,
against or affecting the Company or any of its Subsidiaries which, either
individually or in the aggregate, has or could reasonably be expected to have
a Company Material Adverse Effect, nor is there any judgment, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or arbitrator outstanding against the Company or any
of its Subsidiaries.
Section 7.8 Information in Disclosure Documents. None of the information
with respect to the Company or its Subsidiaries included or incorporated by
reference in the Proxy Statement will, at the time of the mailing thereof and
at the time of the Company Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, however,
that this provision shall not apply to, and no representation or warranty is
made by the Company with respect to, statements or omissions in the Proxy
Statement based upon information furnished in writing by or on behalf of JEDI
or Sub expressly for use therein. The Proxy Statement will comply in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder. No representation or warranty made by the Company
contained in this Agreement and no statement contained in the Company
Disclosure Schedule or in any certificate delivered pursuant to this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
Section 7.9 Employee Benefits Plans; Labor Matters.
(a) Schedule 7.9 (a) of the Company Disclosure Schedule lists each
"employee benefit plan," as such term is defined in section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")
(including, but not limited to, employee benefit plans, such as foreign plans,
which are not subject to the provisions of ERISA) ("Plan"), sponsored,
maintained or contributed to by the Company or any of its Subsidiaries for the
benefit of the employees of the Company or any of its Subsidiaries, or that
has been so sponsored, maintained or contributed to by Company or any of its
Subsidiaries within six years prior to the Closing.
(b) Except as otherwise set forth in Schedule 7.9(b) of the Company
Disclosure Schedule:
(i) the Company and its Subsidiaries do not contribute to or have
an obligation to contribute to, and have not at any time within six years
prior to the Closing contributed to or had an obligation to contribute to, a
multiemployer plan within the meaning of Section 3(37) of ERISA;
(ii) all reports and disclosures relating to the Plans required to
be filed with or furnished to governmental agencies, Plan participants or Plan
beneficiaries have been filed or furnished in accordance with applicable law
in a timely manner, and each Plan has been administered in substantial
compliance with its governing documents and in accordance with ERISA, the
Internal Revenue Code of 1986, as amended (the "Code"), and other applicable
laws;
(iii) there are no actions, suits, claims, investigations or
audits pending (other than routine claims for benefits) or, to the knowledge
of the Company, threatened against, or with respect to, any of the Plans or
their assets;
(iv) no act, omission or transaction has occurred which would
result in imposition on the Company of (A) breach of fiduciary duty liability
damages under Section 409 of ERISA, (B) a civil penalty assessed pursuant to
subsections (c), (i) or (l) of Section 502 of ERISA or (C) a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code, which could have a Company
Material Adverse Effect;
(v) each of the Plans intended to be qualified under Section 401
of the Code satisfies the requirements of such Section and has received a
favorable determination letter from the Internal Revenue Service regarding
such qualified status and has not, since receipt of the most recent favorable
determination letter, been amended or, to the knowledge of Company, operated
in a way which would adversely affect such qualified status;
(vi) no Plan is subject to Title IV of ERISA;
(vii) as to any Plan intended to be qualified under Section 401 of
the Code, there has been no termination or partial termination of the Plan
within the meaning of Section 411(d)(3) of the Code; and
(viii) with respect to any Plan which is sponsored, maintained or
contributed to, or has been sponsored, maintained or contributed to within six
years prior to the Closing Date, by any corporation, trade, business or entity
under common control with the Company, within the meaning of Section 4104(b),
(c) or (m) of the Code or Section 4001 of ERISA ("Commonly Controlled
Entity"), (A) no withdrawal liability, within the meaning of Section 4201 of
ERISA, has been incurred, which withdrawal liability has not been satisfied,
(B) no liability to the Pension Benefit Guaranty Corporation ("PBGC") has been
incurred by any Commonly Controlled Entity, which liability has not been
satisfied, (C) no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, and (D) all contributions (including installments) to such Plan
required by Section 302 of ERISA and Section 412 of the Code have been timely
made.
(c) Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining or other labor union contracts. There is no pending or
threatened labor dispute, strike or work stoppage against the Company or any
of its Subsidiaries which may interfere with the respective business
activities of the Company or any of its Subsidiaries.
(d) Except as set forth in Schedule 7.9(d) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to or is
bound by any severance agreements, programs or policies. Schedule 7.9(d) of
the Company Disclosure Schedule sets forth, and the Company has provided to
Sub, true and correct copies (where in writing) of (i) all agreements with
employees or consultants of the Company or its Subsidiaries, obligating the
Company or any Subsidiary to make annual cash payments in an amount exceeding
$10,000, (ii) all non-competition agreements with the Company or a Subsidiary
executed by officers of the Company or a Subsidiary, and (iii) all plans,
programs, agreements and other arrangements of the Company or its Subsidiaries
with or relating to the employment and to the remuneration and compensation of
its employees.
(e) (i) No Plan provides retiree medical or retiree life insurance
benefits to any person and (ii) neither the Company nor any of its
Subsidiaries is contractually or otherwise obligated (whether or not in
writing) to provide any person with life insurance or medical benefits upon
retirement or termination of employment, other than as required by the
provisions of Section 601 through 608 of ERISA and Section 4980B of the Code.
(f) Except as set forth in Schedule 7.9(f) of the Company Disclosure
Schedule, the Company has not amended, terminated or taken any other actions
with respect to any of the Plans or any of the plans, programs, agreements,
policies or other arrangements described in Section 7.9 of this Agreement
since December 31, 1995.
Section 7.10 Environmental Matters. Except for matters disclosed in
Schedule 7.10 of the Company Disclosure Schedule, the Company and its
Subsidiaries and the properties and operations of the Company and its
Subsidiaries are not subject to any existing, pending or, to the knowledge of
the Company, threatened action, suit, investigation, inquiry or proceeding by
or before any Governmental Entity under any Environmental Law. Except for
matters disclosed in Schedule 7.10 of the Company Disclosure Schedule and
except for matters that would not result, individually or in the aggregate, in
a Company Material Adverse Effect, (i) the properties, operations and
activities of the Company and its Subsidiaries are in compliance with all
applicable Environmental Laws; (ii) all notices, permits, licenses, or similar
authorizations, if any, required to be obtained or filed by the Company or any
of its Subsidiaries under any Environmental Law in connection with any aspect
of the business of the Company or its Subsidiaries, including without
limitation those relating to the treatment, storage, disposal or release of a
hazardous substance, have been duly obtained or filed and will remain valid
and in effect after the Merger, and the Company and its Subsidiaries are in
compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations; (iii) there are no physical or
environmental conditions existing on any property of the Company or its
Subsidiaries or resulting from the Company's or such Subsidiaries' operations
or activities, past or present, at any location, that would give rise to any
on-site or off-site remedial obligations imposed on the Company or any of its
Subsidiaries under any Environmental Laws; (iv) to the Company's knowledge,
since the effective date of the relevant requirements of applicable
Environmental Laws and to the extent required by such applicable Environmental
Laws, all hazardous substances generated by the Company and its Subsidiaries
have been transported only by carriers authorized under Environmental Laws to
transport such substances and wastes, and disposed of only at treatment,
storage, and disposal facilities authorized under Environmental Laws to treat,
store or dispose of such substances and wastes; (v) there has neither been any
exposure of any person or property to hazardous substances or any pollutant or
contaminant released by the Company or its Subsidiaries, nor has there been
any release of hazardous substances, or any pollutant or contaminant into the
environment by the Company or its Subsidiaries or in connection with their
properties or operations that could reasonably be expected to give rise to any
claim against the Company or any of its Subsidiaries for damages or
compensation; and (vi) the Company and its Subsidiaries have made available to
Sub all internal and external environmental audits and studies and all
correspondence on substantial environmental matters in the possession of the
Company or its Subsidiaries relating to any of the current or former
properties or operations of the Company and its Subsidiaries. For purposes of
this Agreement, the terms "hazardous substance" and "release" have the
meanings specified in CERCLA, and the term "disposal" has the meaning
specified in RCRA; provided, however, that to the extent the laws of the state
in which the property is located establish a meaning for "hazardous
substance," "release," or "disposal" that is broader than that specified in
either CERCLA or RCRA, such broader meaning shall apply.
Section 7.11 Public Utility Holding Company Act/Investment Company Act.
None of the Company or any of its Subsidiaries is subject to regulation under
(i) the Public Utility Holding Company Act of 1935, as amended, and the rules
and regulations thereunder, or (ii) the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
Section 7.12 Futures Trading and Fixed Price Exposure. None of the
Company or any of its Subsidiaries engages in any natural gas or other futures
or options trading or is a party to any price swaps, hedges, futures or
similar instruments, except for transactions and agreements entered into
primarily to hedge contracts for the purchase or sale of Hydrocarbons to which
the Company or one of its Subsidiaries is a party. Schedule 7.12 to the
Company Disclosure Schedule sets forth a true and correct statement of the
position, as of the date hereof, of the Company and its Subsidiaries with
respect to obligations under Fixed Price Contracts (including, with respect to
each Fixed Price Contract, location of delivery and variations in the
obligation to take or deliver) and related Hydrocarbon price swaps, hedges,
futures or similar instruments to which Enron Corp. or any of its affiliates
is a party.
Section 7.13 Interested Shareholder Provisions Inapplicable. As of the
date hereof the Company is in compliance with Chapter 1704 of the OGCL and the
Merger and the transactions contemplated hereby would not violate such Chapter
if the Merger were consummated on the date hereof.
Section 7.14 Fairness Opinion. The Company has received the written
opinion of McDonald & Co., financial advisor to the Company, dated the date
hereof, to the effect that the Merger Consideration is fair to the
shareholders of the Company from a financial point of view.
Section 7.15 Finder's Fees. Neither the Company nor any of its
Subsidiaries has any outstanding agreement with any broker, finder or
investment banker that would require the Company or any of its Subsidiaries to
pay any fee or commission in connection with any material transaction by the
Company or any of its Subsidiaries, and no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. A complete and
correct copy of all agreements referenced in Schedule 7.15 of the Company
Disclosure Schedule has been provided to Sub.
Section 7.16 Compliance with Applicable Laws. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement, the Company and
the Subsidiaries are not in violation of any law, ordinance, regulation, order
or writ of any courts, administrative agencies or commissions or other
governmental authorities or instrumentalities, domestic or foreign (each a
"Governmental Entity") applicable to the Company or any of the Subsidiaries or
by which any of them or their assets may be bound, except for violations that,
individually or in the aggregate, would not have a Company Material Adverse
Effect. Neither the Company nor any of the Subsidiaries has received notice
of violation of any law, ordinance, regulation, order or writ, or is in
default with respect to any order, writ, judgment, award, injunction or decree
of any Governmental Entity, except for such notices or defaults which would
not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
Section 7.17 Taxes.
(a) Except as set forth in Schedule 7.17, (i) all material Tax Returns
required to be filed on or before the Closing Date (taking into account
permitted extensions) by or with respect to the Company or any of the
Subsidiaries have been or will be duly and timely filed, (ii) all items of
income, gain, loss, deduction and credit or other items required to be
included in each such Tax Return have been or will be so included and all
information provided in each such Tax Return is true, correct and complete in
all material respects, (iii) all Taxes which have become or will become due
with respect to the period covered by each such Tax Return have been or will
be timely paid in full, (iv) all withholding Tax requirements imposed on or
with respect to the Company and any of the Subsidiaries have been or will be
satisfied in full in all material respects, and (v) no penalty, interest or
other charge is or will become due with respect to the late filing of any such
Tax Return or late payment of any such Tax.
(b) None of the Tax Returns of or with respect to the Company or any of
the Subsidiaries has been audited by the applicable governmental authority
except as set forth in Schedule 7.17 and except for Tax Returns for periods
for which the statute of limitations has expired.
(c) There is no material claim against the Company or any of the
Subsidiaries for any Taxes, and no assessment, deficiency or adjustment has
been asserted or proposed with respect to any Tax Return of or with respect to
the Company or any of the Subsidiaries, other than those disclosed (and to
which are attached true and complete copies of all audit or similar reports)
in Schedule 7.17.
(d) Except as set forth in Schedule 7.17, there is not in force any
extension of time with respect to the due date for the filing of any Tax
Return of or with respect to the Company or any of the Subsidiaries or any
waiver or agreement for any extension of time for the assessment or payment of
any Tax of or with respect to the Company or any of the Subsidiaries.
(e) The total amounts set up as liabilities for current and deferred
Taxes in the financial statements included in the Company's SEC Reports are
sufficient to cover in all material respects the payment of all Taxes, whether
or not assessed or disputed, which are, or are hereafter found to be, or to
have been, due by or with respect to the Company and any of the Subsidiaries
up to and through the periods covered thereby.
(f) Except as set forth in Schedule 7.17, there are no Tax allocation or
sharing agreements affecting the Company or any of the Subsidiaries.
(g) Except as set forth in Schedule 7.17, neither the Company nor any of
the Subsidiaries owns any interest in any controlled foreign corporation (as
defined in section 957 of the Code) or passive foreign investment company (as
defined in section 1296 of the Code).
(h) Except as set forth in Schedule 7.17, neither the Company nor any
Subsidiary will be required to include any amount in income for any taxable
period beginning after December 31, 1994 as a result of a change in accounting
method for any taxable period ending on or before December 31, 1995 or
pursuant to any agreement with any Tax authority with respect to any such
taxable period.
(i) Neither the Company nor any of the Subsidiaries has consented to
have the provisions of section 341(f) of the Code apply with respect to a sale
of its stock.
(j) Neither the Company nor any of the Subsidiaries is a party to or
obligated under any agreement, commitment, or arrangement that could require
the payment of any "excess parachute payment" within the meaning of section
280G of the Code.
Section 7.18. Certain Agreements.
Except as listed as an exhibit to the Company SEC Reports filed prior to
the date of this Agreement, or as disclosed in Schedule 7.18 of the Company
Disclosure Schedule, neither the Company nor any of the Subsidiaries is a
party to any oral or written (i) agreements, contracts, indentures or other
instruments relating to Indebtedness in an amount exceeding $10,000, (ii)
confidentiality agreement, standstill agreement or other contract or agreement
which, after giving effect to the transactions contemplated by this Agreement,
purports to restrict or bind Sub or any of its affiliates (other than the
Surviving Corporation and its subsidiaries), (iii) collective bargaining
agreement, (iv) contract, agreement or commitment not entered into in the
ordinary course of business consistent with past practice and for which the
Company could become liable for payments in excess of $10,000 (in respect of
any such single contract, agreement or commitment) or $100,000 (in respect of
all such contracts, agreements or commitments, collectively), (v) any contract
or agreement not entered into in the ordinary course of business granting a
preferential right of purchase or similar right to any person or entity with
respect to any Material Company Asset, or (vi) material contract or agreement
that is not expected to be fully performed within 30 days following the
Effective Time, other than oil and gas leases, farmout agreements, joint
operating agreements, unit operating agreements, unit agreements, gas
marketing agreements, co-ownership agreements and other similar agreements
entered into in the ordinary course of business. The Company has delivered to
JEDI true and complete copies of all Exhibits to the Company SEC Reports and
all documents listed on Schedule 7.18 of the Company Disclosure Schedule.
Section 7.19. Engineering Reports.
(a) The estimates of proved reserves of oil and natural gas (the
"Company Estimated Proved Reserves") prepared by the Company and set forth in
the report of Company Estimated Proved Reserves as of December 31, 1995 (the
"Company Reserve Report"), the documents constituting the Company Reserve
Report having been made available for inspection by JEDI: (i) are reasonable;
(ii) with respect to proved developed reserves, were reviewed by independent
consulting engineer John Redic as indicated in, and with the conclusion set
forth in, his reports dated March 16, 1996; (iii) were prepared in accordance
with generally accepted petroleum engineering and evaluation principles as set
forth in the Standards Pertaining to the Estimating and Auditing of Oil and
Gas Reserve Information promulgated by the Society of Petroleum Engineers; and
(iv) conform in all material respects to the requirements of the Commission
respecting the inclusion of reserve information in filings under the
Securities Act.
(b) All information and production data provided to John Redic for the
preparation of the Company Reserve Report were true and correct in all
material respects as of the date provided;
(c) Set forth in Schedule 7.19(c) to the Company Disclosure Schedule is
a list of each completed well or unit (the "Significant Wells) or well
location that had a "Present Value of Estimated Future Net Revenues" from
proved developed and undeveloped oil and natural gas reserves of $100,000, or
more as of December 31, 1995, which present worth calculation was made in
accordance with Regulation S-X 4-10(k)(6)(ii) as promulgated by the
Commission; and, except as set forth in Schedule 7.19(c) of the Company
Disclosure Schedule, to the knowledge of the Company, since December 31, 1995
to the date of this Agreement there has been no change in the mechanical
capability or production facilities of any Significant Well or the reservoir
performance (other than normal depletion by subsequent production) of any
Significant Well, the effect of any of which would reduce its Present Value of
Estimated Future Net Revenues by more than the greater of 10% or $25,000.
Section 7.20 Oil and Gas Reserve Information. Except for exceptions that
would not, and could not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect:
(a) None of the wells included in the Oil and Gas Interests of the
Company and its Subsidiaries has been overproduced such that it is subject or
liable to being shut-in or to any other overproduction penalty (including cash
payments);
(b) There have been no changes proposed in the production allowables for
any wells included in the Oil and Gas Interests of the Company and its
Subsidiaries;
(c) All wells included in the Oil and Gas Interests of the Company and
its Subsidiaries have been drilled and (if completed) completed, operated, and
produced in accordance with good oil and gas field practices and in compliance
in all respects with the applicable oil and gas leases and all applicable
laws, rules, regulations and orders;
(d) Except as set forth in Schedule 7.20 (d) to the Company Disclosure
Schedule, there are no wells included in the Oil and Gas Interests of the
Company and its Subsidiaries that: (i) the Company or any of its Subsidiaries
are currently obligated by law or contract to plug and abandon; (ii) are
subject to exceptions to a requirement to plug and abandon issued by a
regulatory authority having jurisdiction over such Oil and Gas Interests; or
(iii) to the knowledge of the Company, have been plugged and abandoned but
have not been plugged or reclaimed in accordance with all applicable
requirements of each regulatory authority having jurisdiction over such Oil
and Gas Interests;
(e) Proceeds from the sale of Hydrocarbons produced from the Oil and Gas
Interests of the Company and its Subsidiaries are being received by the
Company and its Subsidiaries in a timely manner and are not being held in
suspense for any reason (except for amounts, individually or in the aggregate,
not in excess of $10,000);
(f) Except as set forth in Schedule 7.20(f) of the Company Disclosure
Schedule, no person has any call on, option to purchase, or similar rights
with respect to the Oil and Gas Interests of the Company and its Subsidiaries
(including without limitation the production attributable thereto) and upon
consummation of the transactions contemplated by this Agreement, the Company
and its Subsidiaries will have the right to market production from the Oil and
Gas Interests of the Company and its Subsidiaries on terms no less favorable
than the terms upon which such company is currently marketing such production;
(g) All of the wells included in the Oil and Gas Interests of the
Company and its Subsidiaries have been drilled and completed within the
boundaries of the leases included in such Oil and Gas Interests or within
limits otherwise permitted by contract, pooling or unitization agreement and
by applicable law;
(h) All royalties, overriding royalties, compensatory royalties and
other payments due with respect to the Oil and Gas Interests of the Company
and its Subsidiaries (excluding those held in suspense in accordance with past
operating practices or in connection with post-closing adjustments in respect
of acquired properties) have been properly and timely paid;
(i) Except as set forth in Schedule 7.20(i) of the Company Disclosure
Schedule, with respect to those assets of the Company and its Subsidiaries
that are oil and gas leases ("Leases") (but only to the Company's knowledge
with respect to Leases not operated by the Company or its Subsidiaries): (i)
the Leases are presently in full force and effect; (ii) there has not occurred
any event, fact or circumstance which with the lapse of time or the giving of
notice, or both, would constitute such a breach or default on behalf of the
Company and its Subsidiaries or, to the knowledge of the Company and its
Subsidiaries, with respect to any other parties; and (iii) there are no
provisions of the Leases or under any contract or law applicable to the Leases
which increase the royalty share of the lessor thereunder or excise or similar
taxes claimed by persons with jurisdiction over the land covered thereby; and
(j) The Company has not (i) received any material advance, "take-or-pay"
or other similar payments under production sales contracts that entitled the
purchasers to "make up" or otherwise receive deliveries of Hydrocarbons at any
time after the date hereof without paying at such time the contract price
therefor, or (ii) taken or received any material amount of Hydrocarbons under
any gas balancing agreements or any similar arrangements that permit any party
to thereafter receive any portion of the interest of the Company to "balance"
any disproportionate allocation of Hydrocarbons.
Section 7.21 Title to Property. Except as set forth on Schedule 7.21,
the Company or its Subsidiaries has Defensible Title to all of the material
assets reflected on the consolidated balance sheets of the Company included in
the Company SEC Reports as being owned by it or its Subsidiaries (including
Oil and Gas Interests of the Company and its Subsidiaries) and all of the
material assets acquired after the dates of such balance sheets by it or its
Subsidiaries (except to the extent that such assets have been disposed of
after the dates of such balance sheets in the ordinary course of business
consistent with past practice) (collectively, the "Material Company Assets").
All material payments of any kind required to be made by the Company and its
Subsidiaries to third parties under any contract or agreement relating to the
Material Company Assets have been or will be properly and timely paid or
provided for.
Section 7.22 Insurance. Schedule 7.22 to the Company Disclosure Schedule
contains a summary of all policies of insurance maintained by the Company and
its Subsidiaries during the past five calendar years. Copies of all such
policies have been made available to JEDI.
Section 7.23 Affiliate Transactions. Except for the transactions
described in Schedule 7.23 of the Company Disclosure Schedule, all
transactions between the Company or any of its Subsidiaries and any third
party required to be disclosed in the Company SEC Reports in accordance with
Item 404 of Regulation S-K have been so disclosed, and since December 31,
1995, neither the Company nor any of its Subsidiaries has entered into any
transactions with any third parties that would be required to be disclosed in
future public filings under the Exchange Act pursuant to such Item which have
not already been disclosed in the Company SEC Reports filed prior to the date
hereof.
Section 7.24 Hart-Scott-Rodino Exemption. The aggregate fair market
value of the assets of the Company and its Subsidiaries which are not exempt
under ss. 7A(c)(2) of the Hart-Scott-Rodino Antitrust Improvements Act of 1976
or 16 C.F.R. ss.ss. 802.2, 802.3 or 802.5 (and which do not constitute current
assets) is not in excess of $15,000,000.
ARTICLE VIII
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME
Section 8.1 Conduct of Business by the Company. From the date hereof and
prior to the Effective Time, unless JEDI shall otherwise agree in writing:
(a) subject to the limitations contained in or transactions contemplated
by this Agreement, the Company shall, and shall cause its Subsidiaries to,
carry on their respective operations in the usual and ordinary course
consistent with past practice, and shall use its reasonable best efforts, and
shall cause each of its Subsidiaries to use its reasonable best efforts, to
preserve substantially intact its present business organization, keep
available the services of its present officers and employees, maintain and
keep its material assets in as good repair and condition as of the date
hereof, ordinary wear and tear excepted, and preserve its relationships with
customers, suppliers and others having business dealings with it to the end
that its goodwill and on-going businesses shall be materially unimpaired at
the Effective Time;
(b) the Company shall not, nor shall it propose to, except as required
by this Agreement, (i) sell or pledge or agree to sell or pledge any capital
stock owned by it in any of its Subsidiaries, (ii) amend its Articles of
Incorporation or Regulations, (iii) split, combine or reclassify its
outstanding capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
the capital stock, or declare, set aside or pay any dividend or other
distribution payable in cash, stock or property, or (iv) directly or
indirectly redeem, purchase or otherwise acquire or agree to redeem, purchase
or otherwise acquire any shares of its capital stock;
(c) the Company shall not, nor shall it permit any of its Subsidiaries
to, (i) except as required by this Agreement, issue, deliver or sell or agree
to issue, deliver or sell any additional shares of, or stock appreciation
rights or rights of any kind to acquire any shares of, its capital stock of
any class, any Company Voting Debt, or any option, rights or warrants to
acquire, or securities convertible into, shares of capital stock, (ii) permit
any employees that have not, prior to the date hereof, made an election to
acquire stock under the 401(k) Plan to make such an election on or after the
date hereof or permit any participants that have, prior to the date hereof,
made an election to acquire stock under the 401(k) Plan to increase such prior
election on or after the date hereof, (iii) acquire or lease or agree to
acquire or lease any capital assets, or make any other capital expenditures,
which exceed the Company's capital expenditure budgets for the year ended
December 31, 1996 set forth in Schedule 8.1(c) of the Company Disclosure
Schedule, in the aggregate for all such assets or other capital expenditures,
in excess of $100,000 (including in such calculation the proceeds of any
sale/leaseback transactions), (iv) dispose or agree to dispose of capital
assets or any other assets other than in the ordinary course of business with
a value in excess of $100,000, (v) (A) create, incur, assume or permit
additional indebtedness (including obligations in respect of capital leases),
other than (y) the refinancing of the existing mortgage on the Company's
property located at 4770 Indianola, Columbus, Ohio and (z) periodic drawdowns
under the Company's credit facilities existing as of the date hereof, provided
that such drawdowns are in the ordinary course of business consistent with
past practice, and provided further that the amount available under such
facilities as of the date hereof is not increased, (B) assume, guarantee,
endorse or otherwise become liable or responsible for the obligations of any
other person (other than a Subsidiary of the Company, or, as to a Subsidiary,
another Subsidiary or the Company), (C) encumber or grant a security interest
in any asset other than with respect to the Company's credit facilities and
capital leases existing at the date hereof, or (D) make any loans or advances
to any other person (excluding intercompany transactions), enter into any
agreement or instrument relating to the borrowing of money or the extension of
credit or enter into any other material transaction, other than in each case
in the ordinary course of business consistent with past practice, (vi) acquire
or agree to acquire oil or gas properties or prospects or program interests
not listed on Schedule 8.1(c) of the Company Disclosure Schedule or any other
assets outside the ordinary course of business, or acquire or agree to acquire
by merging or consolidating with, or by purchasing the assets of or a
substantial equity interest in, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof, (vii) enter into or renew any material agreements, contracts
or other commitments that are not expected to be fully performed within thirty
days after the Effective Time, except oil and gas leases, farmout agreements,
gas sales or purchase contracts, joint operating agreements, unit operating
agreements and unit agreements entered into in the ordinary course of business
and consistent with past practice, or (viii) adopt, enter into, amend or
terminate any contract, agreement, commitment or arrangement with respect to
any of the foregoing;
(d) the Company shall not, nor shall it permit any of its Subsidiaries
to, except as required to comply with applicable law and except as
contemplated by this Agreement, (i) adopt, enter into, terminate or amend any
bonus, profit sharing, compensation, severance, termination, stock option,
pension, retirement, deferred compensation, employment or other Plan,
agreement, trust, fund or other arrangement for the benefit or welfare of any
current or former director, officer or employee, (ii) increase in any manner
the compensation or fringe benefits of any director, executive officer or
employee (provided, however, that the Company shall be permitted to award
normal salary increases to employees (other than executive officers) of the
Company in the ordinary course of business that are consistent with past
practice (including in connection with any promotion of such employee) and
that, in the aggregate, do not result in a material increase in compensation
expense to the Company and its Subsidiaries relative to the level in effect
prior to such increase), (iii) pay any benefit not provided under any existing
plan or arrangement, (iv) grant any awards under the 401(k) Plan or any other
bonus, incentive, performance or other compensation plan or arrangement or
Plan (including, without limitation, the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance units or
restricted stock, or the removal of existing restrictions in any Plans or
agreements or awards made thereunder), (v) take any action to fund or in any
other way secure the payment of compensation or benefits under any employee
plan, agreement, contract or arrangement or Plan, other than in the ordinary
course of business consistent with past practice, or (vi) adopt, enter into,
amend or terminate any contract, agreement, commitment or arrangement to do
any of the foregoing;
(e) the Company shall not, nor shall it permit its Subsidiaries to, make
any change in its accounting policies or procedures, except as required under
GAAP;
(f) the Company shall use its reasonable best efforts to refrain from
taking, and shall use its reasonable best efforts to cause its Subsidiaries to
refrain from taking, any action that would, or reasonably might be expected
to, result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect as of the Effective
Time, or in any of the conditions to the Merger set forth in Article X not
being satisfied, or (unless such action is required by applicable law) that
would adversely affect the ability of the Company to obtain any of the
regulatory approvals required to consummate the Merger;
(g) the Company shall not settle or compromise any claim for dissenters'
rights in respect of the Merger;
(h) the Company shall maintain in full force and effect all of its
policies of insurance in existence as of the date hereof or insurance
comparable to the coverage afforded by such policies; and
(i) the Company shall not enter into any natural gas or other future or
options trading or be a party to any price swaps, hedges, futures or similar
instruments.
Section 8.2 Obligations of JEDI and Sub; Conduct of Business of Sub.
Each of JEDI and Sub shall use its reasonable best efforts to refrain from
taking any action that would, or reasonably might be expected to, result in
any of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect as of the Effective Time, or in any of
the conditions to the Merger set forth in Article X not being satisfied, or
(unless such action is required by applicable law) that would adversely affect
the ability of the JEDI or Sub to obtain any of the regulatory approvals
required to consummate the Merger.
Section 8.3 Notice. Each party shall promptly give written notice to the
other party upon becoming aware of the occurrence or, to its knowledge,
impending or threatened occurrence, of any event that would cause any of the
representations and warranties to be untrue at the Effective Time or cause a
breach of any covenant contained or referenced in this Agreement and will use
its reasonable best efforts to prevent or promptly remedy the same. Any such
notification shall not be deemed to amend the representations, warranties and
covenants of the parties, unless consented to by the parties.
ARTICLE IX
ADDITIONAL AGREEMENTS
Section 9.1 Access and Information. Upon reasonable notice, the Company
and its Subsidiaries shall afford to Sub and to Sub's affiliates, accountants,
lenders, counsel and other representatives full access, during normal business
hours (and at such other times as the parties may mutually agree) and in a
manner so as not to materially interfere with the normal business operations
of the Company and its Subsidiaries throughout the period prior to the
Effective Time, to all of their properties (which shall include the right to
conduct an environmental assessment thereof), books, contracts, commitments,
records and personnel. During such period, the Company shall furnish promptly
to Sub (i) a copy of each report, schedule and other document filed or
received by it pursuant to the requirements of federal or state securities
laws and (ii) all other information concerning its business, properties and
personnel as Sub may reasonably request. JEDI and Sub shall hold all such
information in confidence and hereby assume all of the obligations of Enron
Capital & Trade Resources Corp. ("ECT") in accordance with the terms of the
letter agreement regarding confidential information and certain other matters,
dated February 9, 1996, between ECT and the Company (the "Confidentiality
Agreement"), and, in the event of termination of this Agreement for any
reason, will promptly comply with the terms of the Confidentiality Agreement.
During the period prior to the Effective Time, the Company shall make its
accountants, counsel, lenders and other representatives available to Sub and
to Sub's affiliates, accountants, lenders, counsel and other representatives
at reasonable times. The foregoing assumption of ECT's obligations under the
Confidentiality Agreement shall not be deemed to release ECT from such
obligations.
Section 9.2 Proxy Statement. (a) As promptly as reasonably practicable
after the execution of this Agreement, the Company shall prepare and file with
the Commission preliminary proxy materials with respect to the actions to be
taken at the Company Meeting, which shall be in form and substance reasonably
satisfactory to JEDI. As promptly as reasonably practicable after comments are
received from the Commission with respect to such preliminary proxy materials,
the Company shall use its reasonable best efforts to respond to the comments
of the Commission. Sub and JEDI shall provide the Company with such
information as may be required to be included in the proxy statement or as may
be reasonably required to respond to any comment of the Commission. After all
the comments received from the Commission have been cleared by the Commission
staff and all information required to be contained in the proxy statement has
been included therein by the Company, the Company shall file with the
Commission the Proxy Statement and the Company shall use its reasonable best
efforts to have the Proxy Statement cleared by the Commission as soon
thereafter as practicable. The Company shall cause the Proxy Statement to be
mailed to its shareholders of record as promptly as reasonably practicable
after clearance by the Commission. Unless the Company is advised in writing by
outside counsel that such a recommendation is no longer consistent with the
discharge of applicable fiduciary duties of directors of the Company, the
Proxy Statement shall include the recommendation of the Board of Directors of
the Company in favor of the Merger. If requested by JEDI, the Company shall
use its reasonable best efforts to obtain a "SAS No. 71 letter" from the
Company's independent public accountants addressed to the Company, in form and
substance reasonably satisfactory to JEDI, with respect to interim financial
statements, if any, included in the Proxy Statement.
(b) Each of Sub and the Company shall make all necessary filings
applicable to it with respect to the Merger under the Exchange Act and the
rules and regulations thereunder and shall use its reasonable best efforts to
obtain required clearances with respect thereto.
Section 9.3 Indemnification.
(a) The provisions relating to indemnification and advancement of
expenses that are set forth in the Code of Regulations of Sub as of the date
of this Agreement, a true and complete copy of which has been delivered to the
Company, shall remain effective in the Code of Regulations of the Surviving
Corporation for a period of six years from the Effective Time with respect to
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), and the
Surviving Corporation shall not amend or repeal such provisions to the
detriment of such individuals for a period of six years from the Effective
Time.
(b) The Surviving Corporation shall, for six years from the Effective
Time, maintain in effect the current directors' and officers' liability
insurance coverage listed, and identified as such, on Schedule 7.22 of the
Company's Disclosure Schedule 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
through the Effective Time, provided that in no event shall the Surviving
Corporation be required to expend to maintain or procure insurance coverage
pursuant to this Section 9.3 any amount per annum, for any of the first three
years after the Effective Time, in excess of 75% of the aggregate premiums
paid in 1995 on an annualized basis for such purpose, or for the fourth, fifth
or sixth year after the Effective Time, in excess of 50% of the aggregate
premiums paid in 1995 on an annualized basis for such purpose (such
limitations on annual aggregate premiums being herein referred to as the
"Ceiling Limits"). In the event that the amount required to maintain or
procure insurance coverage pursuant to Section 9.3 shall exceed the
appropriate Ceiling Limit in any year, the Surviving Corporation shall notify
the persons who were directors of the Company on the date of this Agreement
within 30 days prior to the termination of such insurance coverage. Such
notification shall identify (a) the amount by which the insurance premium
needed to maintain or procure the insurance coverage pursuant to Section 9.3
exceeds the appropriate Ceiling Limit and (b) the liability limits for such
insurance coverage that the Surviving Corporation could procure by expending
only the appropriate Ceiling Limit. Within 20 days after receipt of such
notification, a majority of such persons shall be entitled to notify the
Surviving Corporation in a written instrument that such persons desire for the
Surviving Corporation (y) to expend the appropriate Ceiling Limit to purchase
insurance coverage with the lower liability limits referenced in the Surviving
Corporation's notification to the former directors or (z) to purchase
insurance coverage necessary to maintain or procure the comparable insurance
coverage referenced in Section 9.3; provided, however, that the Surviving
Corporation shall not be required to purchase the comparable insurance
coverage under clause (z) unless the notification from the former directors is
also accompanied by a check payable to the Surviving Corporation in an amount
equal to the amount by which the insurance premium needed to maintain or
procure the comparable insurance coverage for such year exceeds the
appropriate Ceiling Limit.
(c) In the event the Surviving Corporation or any of its 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 Surviving Corporation, or at JEDI's
option, JEDI, shall assume the obligations set forth in this Section 9.3.
(d) The obligations of the Surviving Corporation under this Section 9.3
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 9.3
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 9.3 applies shall be
third-party beneficiaries of this Section 9.3).
Section 9.4 Reasonable Best Efforts. (a) Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to cooperate
with each other and to use its reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, in each case consistent
with the fiduciary duties of their respective Boards of Directors, all things
necessary, proper or advisable (i) under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
as soon as reasonably practicable, including to obtain all necessary waivers,
consents and approvals and to effect all necessary registrations and filings
and (ii) to lift any injunction or other legal bar to the Merger as soon as
reasonably practicable (and, in such case, to proceed with the Merger as
expeditiously as possible); provided, however, that nothing in this Section
9.4 or elsewhere in this Agreement shall require any party hereto to incur
expenses in connection with the transactions contemplated hereby which are not
reasonable under the circumstances in relation to the size of the transaction
contemplated hereby or to require any party or any affiliate of any party, in
order to obtain any requisite approval of any Government Entity or third
party, to hold separate or make any divestiture of any significant asset or
otherwise agree to any material restrictions upon its operations.
(b) In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the
Surviving Corporation shall take all such necessary action.
(c) If at any time prior to the Effective Time any information, event or
circumstance shall be discovered that should be set forth in a supplement to
the Proxy Statement, the discovering party shall promptly inform the other
party of such information, event or circumstance, and the Company shall as
soon as practicable prepare a supplement to the Proxy Statement, which shall
be in form and substance reasonably satisfactory to JEDI, and mail such
supplement to its shareholders.
Section 9.5 No Solicitation. Prior to the Effective Time, the Company
shall not, nor shall it permit any of its Subsidiaries to, nor shall it
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to, directly or
indirectly, initiate, solicit, negotiate or encourage (including by way of
furnishing information), or take any other action to facilitate or entertain,
any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any proposal or offer to acquire all or any
substantial part of the business of the Company and its Subsidiaries, or all
or substantially all of the capital stock of the Company, whether by merger,
purchase of assets, tender offer, exchange offer or otherwise, whether for
cash, securities or any other consideration or combination thereof (any such
transaction being referred to herein as an "Other Acquisition Transaction") or
agree to endorse or recommend any such Other Acquisition Transaction;
provided, however, that the Company and its Subsidiaries may negotiate with a
corporation, partnership, person or other entity or group (a "Potential
Acquiror") if (i) the Potential Acquiror has, in circumstances not involving
any prior breach by the Company of the foregoing provisions, made a tender or
exchange offer for, or a proposal to the Board of Directors of the Company to
acquire, a majority of the capital stock of the Company or made a proposal for
a merger, purchase of all or any substantial part of the assets of the
Company, or other business combination transaction involving a change of
control of the Company, (ii) the Company's Board of Directors believes, based
in part upon advice of its financial advisor, and after having an opportunity
to discuss any such proposal with the Potential Acquiror, which contacts shall
not been deemed a violation of this Section 9.5, that such Potential Acquiror
has the financial wherewithal to consummate such offer or transaction and such
offer or transaction would yield a better value to the Company's shareholders
than would the Merger (a "Superior Proposal"), and (iii) based upon the
written opinion of counsel to the Company to such effect addressed and
delivered to the Board of Directors of the Company (notice of which opinion
shall also have been furnished by the Company to JEDI), the Company's Board of
Directors determines in good faith that there is a significant risk that the
failure to negotiate with the Potential Acquiror would constitute a breach of
the Board's fiduciary duty to the shareholders of the Company. The Company
shall promptly advise JEDI in writing of any request for non-public written
information or of any Other Acquisition Transaction, or any inquiry with
respect to or which appears to be intended to or could reasonably be expected
to lead to any Other Acquisition Transaction, the terms and conditions of such
request, Other Acquisition Transaction or inquiry, the identity of the person
making any such request, Other Acquisition Transaction or inquiry, and whether
the Company has elected to negotiate with a Potential Acquiror in accordance
with the preceding sentence. If the Company elects to negotiate with a
Potential Acquiror in accordance with the foregoing provisions, the Company
may provide non-public information to, and have discussions with, the
Potential Acquiror and its representatives. Such negotiations and delivery of
documents shall not violate the terms of this Agreement or the Confidentiality
Agreement. The Company shall use its reasonable best efforts to keep JEDI
fully informed of the status and details of any such request, Other
Acquisition Transaction, inquiry, or negotiation. The Company may not enter
into a definitive agreement for an Other Acquisition Transaction with a
Potential Acquiror with which the Company is permitted to negotiate pursuant
to this Section 9.5 unless (i) at least 10 business days prior to the
Company's execution thereof the Company shall have furnished JEDI with a
description of all of the material terms thereof and (ii) the Company shall
terminate this Agreement in accordance with Section 11.1(e) hereof.
Section 9.6 JEDI. JEDI agrees to take all action necessary to cause Sub
to perform all of Sub's covenants and obligations under this Agreement. Sub
and JEDI shall be liable for any breach of any representation, warranty,
covenant or agreement of Sub or Surviving Corporation and for any breach of
this covenant; provided, however, that JEDI shall not have any responsibility
for, or provide any guaranties of, any actions of Sub or any obligation or
liability otherwise hereunder except as expressly provided in Section 3.2.
Section 9.7 401(k) Plan. Immediately after the execution of this
Agreement, the Company shall suspend the purchase of, or allocation of,
Company Common Stock pursuant to the Company's 1993 401(k) Savings Plan (the
"401(k) Plan"). The Company shall take such actions as may be necessary to
effect and permit the foregoing. In particular, prior to the Closing Date, the
Board of Directors of the Company shall rescind its resolutions adopted
October 16, 1989 with respect to permitting up to 50% of the Company's
contribution to the 401(k) Plan to be used to purchase Company Common Stock.
Section 9.8 Certain Employee Benefit Matters. The Company acknowledges
and agrees that it is currently anticipated that the Surviving Corporation
will not become a participating employer in any employee benefit or
compensation plans sponsored or maintained by Enron Corp. for the benefit of
its subsidiaries or affiliated companies.
ARTICLE X
CONDITIONS PRECEDENT
Section 10.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions, any one or more of which may be waived in a writing executed by
JEDI and the Company subject to and in accordance with Section 11.4 hereof:
(a) This Agreement shall have been approved and adopted by the requisite
vote of the holders of the Company Common Stock, and ten days shall have
elapsed following the date of such approval and adoption.
(b) No United States or state governmental authority or other agency or
commission or 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 Merger illegal or otherwise preventing or prohibiting
consummation of the Merger.
(c) The Company shall have received the written opinion of McDonald &
Co., dated as of a recent date, confirming its opinion referred to in Section
7.14 hereof.
(d) As of the Effective Time, the Merger complies with Section
1704.03(A)(4) of the Ohio Revised Code.
Section 10.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following additional
conditions, unless waived in writing by the Company in accordance with Section
11.4 hereof:
(a) JEDI and Sub shall have performed in all material respects their
respective agreements contained in this Agreement required to be performed at
or prior to the Effective Time and the representations and warranties of JEDI
and Sub contained in this Agreement shall be true and correct in all material
respects when made and on and at the Effective Time as if made on and at such
time (except to the extent they expressly relate to the date of this Agreement
or any other particular date), and the Company shall have received a
certificate of the President or Chief Executive Officer (or comparable
officer) of JEDI and Sub, dated the Closing Date, to that effect.
(b) The Company shall have received the opinion of Vinson & Elkins
L.L.P., dated the Closing Date, substantially in the form of Exhibit A hereto.
Section 10.3 Conditions to Obligations of Sub to Effect the Merger. The
obligations of Sub to effect the Merger shall be subject to the fulfillment at
or prior to the Effective Time of the following additional conditions, unless
waived in writing by Sub in accordance with Section 11.4 hereof:
(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed at or prior to
the Effective Time and the representations and warranties of the Company
contained in this Agreement which are qualified with respect to materiality
shall be true and correct in all respects, and such representations and
warranties not so qualified shall be true and correct in all material
respects, in each case when made and at the Effective Time as if made at such
time (except to the extent they expressly relate to the date of this Agreement
or any other particular date), and Sub shall have received a certificate of
the President or Chief Executive Officer of the Company, dated the Closing
Date, to that effect. Notwithstanding anything to the contrary herein, the
condition set forth in this Section 10.3(a) shall be deemed conclusively to
not have been satisfied if (i) the representations and warranties of the
Company when made or on and as of the Closing Date or agreements of the
Company to be performed at or prior to the Effective Time, in each case
without regard to any "materiality qualifications," were breached or would
have been breached and such breach resulted or would result in a Loss with
respect to any individual representation, warranty or agreement in excess of
$2.0 million or, with respect to all such representations, warranties and
agreements, resulted or would result in an aggregate Loss in excess of $3.5
million. "Loss" shall mean the amount that would be required to be contributed
to the Surviving Corporation at the Effective Time so that the owners of the
Surviving Corporation would be in the same economic position as they would
have been if the representations and warranties so breached had been true and
correct in all respects. Without regard to any "materiality qualifications"
shall mean that references to "material" and words of similar import shall,
for such purpose, be considered to have been deleted from the text herein and
that references to exclusions or other qualifications for items that would not
have or cause a Company Material Adverse Effect or phrases of similar import
shall, for such purposes, be considered to have been deleted from the text
herein.
(b) All permits, consents, authorizations, approvals, registrations,
qualifications, designations and declarations set forth in Schedule 7.4 of the
Company Disclosure Schedule as a result of the last sentence of Section 7.4(b)
hereof shall have been obtained, on terms and conditions reasonably
satisfactory to Sub, and, to the extent required to be submitted prior to the
Effective Time, all filings and notices set forth on Schedule 7.4 of the
Company Disclosure Schedule as a result of the last sentence of Section 7.4(b)
hereof shall have been submitted by the Company.
(c) Sub shall have received the opinion of Vorys, Sater, Seymour and
Pease, dated the Closing Date, substantially in the form of Exhibit B hereto.
(d) The number of Dissenting Shares shall not exceed 10% of the number
of outstanding shares of Company Common Stock.
(e) None of the parties (other than Sub) to the Employment Agreements
referred to in Exhibit 10.3(e) shall have breached or anticipatorily breached
any such agreements. None of the parties (other than Sub) to such Employment
Agreement shall have died or become disabled; however, if prior to the Closing
Date any of such parties dies or becomes disabled and at the time of death or
disability the Company has in full force and effect a one-year term life
insurance policy covering the death of such party in the amount of $5,000,000
for Jerry Jordan or $2,000,000 for John L. Forman or $2,000,000 for William A.
Grubaugh, which policy the Company has purchased for premiums not exceeding
$50,000, $10,000 and $5,000, respectively, the condition set forth in this
sentence shall not apply as to the death or disability of such party.
(f) Sub shall have received the written resignations, effective as of
the Effective Time, of each director of each of the Company and its
Subsidiaries.
(g) There shall not be pending any action, proceeding or investigation
brought by any person or entity before any Governmental Entity challenging,
affecting, or seeking material damages in connection with, the transactions
contemplated by this Agreement.
(h) All members of management shall have repaid all indebtedness to the
Company owed by them or of partnerships of which such member(s) are general
partners.
(i) The Company shall have taken all actions necessary to eliminate
permanently the Company Common Stock allocation option in the 401(k) Plan, as
contemplated by Section 9.7.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
Section 11.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the shareholders of the Company:
(a) by mutual consent of the Board of Directors of Sub and the Board of
Directors of the Company;
(b) by either Sub or the Company if the Merger shall not have been
consummated on or before September 16, 1996 (unless, such circumstance is the
result of a breach of the terms hereof by the party exercising the termination
right);
(c) by Sub if there has been a material breach on the part of the
Company, or by the Company if there has been a material breach on the part of
Sub or JEDI of any representation, warranty, covenant or agreement set forth
in this Agreement, which breach has not been cured within fifteen business
days following receipt by the breaching party of written notice of such
breach;
(d) by either Sub or the Company upon written notice to the other party
if any Governmental Entity of competent jurisdiction shall have issued (i) a
final permanent order enjoining or otherwise prohibiting the consummation of
any of the transactions contemplated by this Agreement, and in any such case
the time for appeal or petition for reconsideration of such order shall have
expired without such appeal or petition being granted, or (ii) any order or
directive that does not directly enjoin or otherwise prohibit the consummation
of the transactions contemplated by this Agreement, but that would, if JEDI,
Sub or the Company were to comply with such order or directive as a condition
to consummating the transactions contemplated hereby, have a material adverse
effect on the business, operations or financial condition of either JEDI or
the Surviving Corporation and its Subsidiaries, taken as a whole;
(e) by the Company if (i) the Board of Directors of the Company
reasonably determines that an Other Acquisition Transaction is a Superior
Proposal, (ii) the ten business day period referred to in the last sentence of
Section 9.5 shall have expired, and (iii) simultaneously with such termination
the Company enters into a definitive agreement to effect such Other
Acquisition Transaction (a "Terminating Other Acquisition Transaction");
(f) by either Sub or the Company if the required approval of the
Company's shareholders is not received in a vote duly taken at the Company
Meeting contemplated by Section 3.6 hereof;
(g) by Sub if the Board of Directors of the Company or any committee
thereof (i) shall have amended, modified, rescinded or repealed the
recommendation of the Company's Board of Directors to the shareholders of the
Company to approve the Merger and the adoption of this Agreement, or (ii)
shall have adopted any other resolution in connection with this Agreement and
the transactions contemplated hereby inconsistent with such recommendation of
the consummation of the transactions contemplated hereby; or
(h) by Sub, if any representation or warranty of the Company which was
true on the date of this Agreement shall have become untrue such that the
condition set forth in Section 10.3(a) would be incapable of being satisfied
by September 16, 1996 or by the Company if any representation or warranty of
Sub or JEDI which was true on the date of this Agreement shall have become
untrue such that the condition set forth in Section 10.2(a) would be incapable
of being satisfied by September 16, 1996.
Section 11.2 Effect of Termination. In the event of termination of this
Agreement pursuant to Section 11.1, no party hereto shall have any obligation
or liability to any other party hereto except (i) that the third to the last
and the last sentences of Section 9.1, this Section 11.2 and Article XII shall
survive any such termination and (ii) that, except as set forth herein,
nothing herein and no termination pursuant hereto will relieve any party from
liability for any breach of this Agreement.
Section 11.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of
Directors, at any time before or after approval hereof by the shareholders of
the Company, but, after such approval, no amendment shall be made that under
applicable law requires further approval of such shareholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 11.4 Waiver. At any time prior to the Effective Time, the
parties hereto, by or pursuant to action taken by their respective Boards of
Directors, may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of any other party
contained herein or in any documents delivered pursuant hereto by any other
party and (iii) waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE XII
GENERAL PROVISIONS
Section 12.1 Non-Survival of Representations and Warranties. All
representations, warranties covenants and agreements set forth in this
Agreement shall terminate at the Effective Time or upon termination of this
Agreement pursuant to Section 11.1, as the case may be, except that (i) the
agreements set forth in Sections 9.3, 9.4(b) and 9.6 and Articles III and XII
(other than Section 12.3) shall survive the Effective Time, and (ii) the
agreements set forth in the third to the last and the last sentences of
Section 9.1 and in Article XII (including Section 12.3) shall survive
termination, in each case until the expiration of the applicable statute of
limitations on actions arising under contract .
Section 12.2 Notices. All notices or other communications under this
Agreement shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by facsimile transmission
or by delivery service, or by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
If to the Company:
Clinton Gas Systems, Inc.
4770 Indianola Avenue
Columbus, Ohio 43214
Attention: Jerry D. Jordan
Chairman of the Board and
Chief Executive Officer
Telecopy No.: (614) 888-6287
With a copy to:
Vorys, Sater, Seymour and Pease
52 East Gay Street
Columbus, Ohio 43216-1008
Attention: Roger E. Lautzenhiser
Telecopy No.: (614) 464-6350
If to Sub or JEDI:
c/o Enron Corp.
1400 Smith Street
Houston, Texas 77002
Attention: Brenda McGee, Specialist
Telecopy No.: (713) 646-3602
Telephone No.: (713) 853-5259
With a copy to:
Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, Texas 77002
Attention: W. Craig Childers
W. Lance Schuler
Telecopy No.: (713) 646-3393
and
Vinson & Elkins L.L.P.
1001 Fannin Street, Suite 2300
Houston, Texas 77002
Attention: Michael P. Finch
Telecopy No.: (713) 615-5282
or to such other address as any party may have furnished to the other parties
in writing in accordance with this Section 12.2.
Section 12.3 Expenses; Termination Fees. (a) Subject to Sections
12.3(b), (d) and (e), whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated herein shall be paid by the party incurring such expenses.
(b) If this Agreement is terminated by Sub pursuant to Sections 11.1(c),
(f) or (g), or by the Company pursuant to Section 11.1(e), then the Company
shall, by wire transfer of immediately available funds to an account
designated by Sub, reimburse Sub and its affiliates, not later than two
business days after Sub submits to the Company statements therefor, for all
out-of-pocket fees and expenses (including, without limitation, all fees and
expenses of counsel, accountants, financial institutions, experts and
consultants) and all internal costs (determined by multiplying $100 by the
aggregate number of hours actually spent by employees of JEDI and its
affiliates), incurred in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement, the
arranging of financing for the Merger and all other matters related to the
consummation of the transactions contemplated hereby, the aggregate total of
which recoverable fees, expenses and costs shall not exceed $1,000,000. A
payment under this Section 12.3(b) shall not limit Sub's right to pursue all
other available remedies if the Company has breached this Agreement, although
neither Sub nor JEDI shall be permitted to recover such fees, expenses and
costs more than once.
(c) In addition to any amounts payable pursuant to Section 12.3(b), if
this Agreement is terminated for any reason other than as a result of
termination by Sub pursuant to Section 11.1(b) or (d) or by the Company
pursuant to Section 11.1(b), (c) or (d), then if (i) a Terminating Other
Acquisition Transaction is consummated or (ii) an Other Acquisition
Transaction that provides a higher value to the holders of Company Common
Stock than the Merger would have provided is consummated prior to the first
anniversary of the date of this Agreement, then the Company shall pay to JEDI,
by wire transfer of immediately available funds to an account designated by
JEDI, $5.0 million not later than the second business day following such
consummation. A payment under this Section 12.3(c) shall not limit Sub's right
to pursue all other available remedies if the Company has breached this
Agreement.
(d) If (i) prior to the termination of this Agreement, any person (other
than Sub or any affiliate thereof) or group (as such term is defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder)
becomes the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of 20% or more of the outstanding Company Common Stock, (ii)
either this Agreement is terminated pursuant to Section 11.1(f) or such
beneficial owner takes any action to oppose or prevent the consummation of the
Merger and this Agreement is terminated for any reason, and (iii) an Other
Acquisition Transaction is consummated within one calendar year of the
scheduled date of the Company Meeting, then the Company shall pay to JEDI, by
wire transfer of immediately available funds to an account designated by JEDI
$5.0 million plus all out-of-pocket fees and expenses (of the type referred to
in and subject to the limitations set forth in Section 12.3(b)) not later than
two business days after Sub submits to the Company a request therefore.
Notwithstanding the foregoing, no payment shall be required under Sections
12.3(b) or 12.3(c), if the payment specified by this Section 12.3(d) has been
made to Sub, and no payment shall be required under this Section 12.3(d) if
the payments specified by Sections 12.3(b) and (c) have been made to Sub. A
payment under this Section 12.3(d) shall not limit Sub's right to pursue all
other available remedies if the Company has breached this Agreement.
(e) If this Agreement is terminated by the Company pursuant to Section
11.1(c), then Sub shall, by wire transfer of immediately available funds to an
account designated by the Company, reimburse the Company and its affiliates,
not later than two business days after the Company submits to Sub statements
therefor, for all out-of-pocket fees and expenses (including, without
limitation, all fees and expenses of counsel, accountants, financial
institutions, experts and consultants) incurred in connection with or related
to the authorization, preparation, negotiation, execution and performance of
this Agreement and all other matters related to the consummation of the
transactions contemplated hereby, the aggregate total of which recoverable
fees and expenses shall not exceed $250,000. A payment under this Section
12(e) shall not limit the Company's right to pursue all other available
remedies if Sub or JEDI has breached this Agreement.
Section 12.4 Publicity. So long as this Agreement is in effect, none of
JEDI, Sub nor the Company shall issue any press release or otherwise make any
public statement with respect to the transactions contemplated by this
Agreement without the consent of the other, which consent shall not be
unreasonably withheld, unless such press release or public statement is
required by law or the applicable rules of any securities market, in which
case such press release or public statement may be made after providing the
other parties hereto a reasonable opportunity to comment thereon.
Section 12.5 Interpretation. 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.
Section 12.6 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 contemplated hereby is not affected in any
manner 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 contemplated hereby may be
consummated to the fullest extent possible.
Section 12.7 Miscellaneous.
(a) This Agreement (together with the exhibits and the Company
Disclosure Schedule referred to herein) and the Confidentiality Agreement (i)
constitute the entire agreement and supersede all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof, (ii) is not intended to confer upon any
other person any rights or remedies hereunder and shall be binding upon and
inure to the benefit solely of each party hereto, and their respective
successors and assigns, (iii) shall not be assigned by operation of law or
otherwise, except that Sub shall have the right to assign to any direct wholly
owned subsidiary of JEDI incorporated under the laws of Ohio any and all
rights and obligations of Sub under this Agreement, and (iv) shall be governed
in all respects, including validity, interpretation and effect, by the laws of
the State of Ohio with respect to the procedures applicable to the Merger and
the internal affairs of the parties and the laws of the State of Ohio, with
respect to all other matters (without giving effect to the provisions thereof
relating to conflicts of law). This Agreement may be executed in any number of
counterparts which together shall constitute a single agreement.
(b) In the event any action, suit, proceeding or claim is commenced or
asserted by a party against another party and/or any director or officer of
such other party relating, directly or indirectly, to this Agreement, it is
expressly agreed that no party shall be entitled to obtain any punitive,
exemplary, treble, or consequential damages of any type under any
circumstances in connection with such action, suit, proceeding or claim,
regardless of whether such damages may be available under law, the parties
hereby waiving their rights, if any, to recover any such damages in connection
with any such action, suit, proceeding or claim.
(c) Pronouns, whenever used in this Agreement, and of whatever gender,
shall include persons of every kind and character, and the singular shall
include the plural whenever and as often as may be appropriate. Any reference
herein to "including" and words of similar import refer to "including without
limitation."
<PAGE>
IN WITNESS WHEREOF, JEDI, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunder duly authorized all as of
the date first written above.
JENCO ACQUISITION, INC.
By: /s/ W. Craig Childers
___________________________________
W. Craig Childers
Vice President
CLINTON GAS SYSTEMS, INC.
By: /s/ Jerry D. Jordan
___________________________________
Jerry D. Jordan
Chairman of the Board and
Chief Executive Officer
/s/ F. Daniel Ryan
____________________________________
F. Daniel Ryan
President
JOINT ENERGY
DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
By: Enron Capital Management
Limited Partnership, its general partner
By: Enron Capital Corp., its general partner
By: /s/ W. Craig Childers
____________________________________
W. Craig Childers
Agent and Attorney-in-Fact
July 25, 1996
PERSONAL AND CONFIDENTIAL
Board of Directors
Clinton Gas Systems, Inc.
4770 Indianola Avenue
Columbus, Ohio 43214
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of Clinton Gas Systems, Inc., an Ohio Company
(the "Company") of the consideration to be paid to such shareholders pursuant
to the Agreement and Plan of Merger (the "Agreement") dated May 24, 1996, by
and between the Company and Jenco Acquisition, Inc., an Ohio corporation
("Merger Sub"), which is wholly-owned by Joint Energy Development Investments
Limited, a Delaware limited partnership ("JEDI").
You have advised us that under the terms of the Agreement, Merger Sub
will be merged with and into the Company (the "Merger") and the separate
corporate existence of Merger Sub shall thereupon cease. The Company, as the
surviving corporation, shall by virtue of the Merger continue its corporate
existence. You have also advised us that, pursuant to the Merger, the shares
of common stock of the Company issued and outstanding immediately prior to the
Merger will be canceled and extinguished and be converted automatically into
the right to receive $6.75 per common share in cash. The total amount of cash
that holders of the Company's common stock will be entitled to receive as a
result of the Merger will be $37.35 million and hereinafter will be referred
to as the "Merger Consideration."
McDonald & Company Securities, Inc., as part of its investment banking
business, is customarily engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes.
<PAGE>
Fairness Opinion
July 25, 1996
Page Two
In connection with rendering this opinion, we have reviewed and analyzed,
among other things, the following: (i) the Agreement, including the exhibits
and schedules thereto; (ii) certain publicly available information concerning
the Company, including its Annual Report on Form 10-K for the year ended
December 31, 1995 (including the three years of audited financial statements
included therein and an estimate of proved developed reserves of the Company
included therein, which were reviewed by John G. Redic, an independent
consulting engineer); (iii) certain other internal information, primarily
financial in nature, concerning the business, earnings, assets and prospects
of the Company furnished to us by management of the Company for purposes of
our analysis; (iv) certain publicly available information concerning the
trading of, and the trading market for, the Company's common stock; (v)
certain publicly available information with respect to certain other companies
that we believe to be comparable to the Company and the trading markets for
certain of such other companies' securities; (vi) certain publicly available
information concerning the nature and financial terms of certain other merger
transactions that we consider relevant to our inquiry. We have also met with
certain officers and employees of the Company to discuss the business and
prospects of the Company, as well as other matters we believe relevant to our
inquiry.
In our review and analysis and in arriving at our opinion, we have
assumed and relied upon the accuracy and completeness of all of the financial
and other information provided to us or publicly available and have assumed
and relied upon the representations and warranties contained in the Agreement.
We have not been engaged to, and have not independently attempted to, verify
any of such information. We have also relied upon the management of the
Company to verify the reasonableness and achievability of the financial and
operating projections (and the assumptions and bases therefor) prepared by us
and, with your consent, we have assumed that such projections reflect the best
currently available estimates and judgments of the management of the Company.
We have not been engaged to assess the achievability of such projections or
the assumptions on which they were based and express no view as to such
projections or assumptions. In addition, we have not conducted a physical
inspection or appraisal of any of the assets, properties or facilities of the
Company nor have we been furnished with any such evaluation or appraisal. We
have also assumed that the conditions to consummation of the transaction as
set forth in the Agreement would be satisfied and that the transaction would
be consummated on a timely basis in the manner contemplated by the Agreement.
It should be noted that this opinion is based on economic and
market conditions and other circumstances existing on, and information made
available as of, the date hereof and does not address any matters subsequent
to such date. In addition, our opinion is, in any event, limited to the
fairness, as of the date hereof, from a financial point of view to the
shareholders of the Company of the Merger Consideration payable pursuant to
the Agreement and does not address the Company's underlying business decision
to enter into the Agreement or any other terms of the transaction.
<PAGE>
Fairness Opinion
July 25, 1996
Page Three
We will receive a fee for rendering this opinion.
In the ordinary course of our business, we may actively trade securities
of the Company for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in the common stock
of the Company.
Our opinion is directed to the Board of Directors and does not constitute
a recommendation to any stockholder of the Company as to how such stockholder
should vote at the meeting held in connection with the Merger.
Based upon and subject to the foregoing and based upon and subject to
such other matters as we consider relevant, it is our opinion that as of the
date hereof, the Merger Consideration to be paid pursuant to the Agreement is
fair, from a financial point of view, to the shareholders of the Company.
Very truly yours,
McDONALD & COMPANY SECURITIES, INC.
APPENDIX C
1701.85. Qualifications of and Procedures for Dissenting Shareholders
(A) (1) A shareholder of a domestic corporation is entitled to
relief as a dissenting shareholder in respect of the proposals described in
sections 1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance
with this section.
(2) If the proposal must be submitted to the shareholders of
the corporation involved, the dissenting shareholder shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date
fixed for the determination of shareholders entitled to notice of a meeting of
the shareholders at which the proposal is to be submitted, and such shares
shall not have been voted in favor of the proposal. Not later than ten days
after the date on which the vote on the proposal was taken at the meeting of
the shareholders, the dissenting shareholder shall deliver to the corporation
a written demand for payment to him of the fair cash value of the shares as to
which he seeks relief, which demand shall state his address, the number and
class of such shares, and the amount claimed by him as the fair cash value of
the shares.
(3) The dissenting shareholder entitled to relief under
division (C) of section 1701.84 of the Revised Code in the case of a merger
pursuant to section 1701.80 of the Revised Code and a dissenting shareholder
entitled to relief under division (E) of section 1701.84 of the Revised Code
in the case of a merger pursuant to section 1701.801 of the Revised Code shall
be a record holder of the shares of the corporation as to which he seeks
relief as of the date on which the agreement of merger was adopted by the
directors of that corporation. Within twenty days after he has been sent the
notice provided in section 1701.80 or 1701.801 of the Revised Code, the
dissenting shareholder shall deliver to the corporation a written demand for
payment with the same information as that provided for in division (A)(2) of
this section.
(4) In the case of a merger or consolidation, a demand
served on the constituent corporation involved constitutes service on the
surviving or the new entity, whether the demand is served before, on, or after
the effective date of the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder,
at the address specified in his demand, a request for the certificates
representing the shares as to which he seeks relief, the dissenting
shareholder, within fifteen days from the date of the sending of such request,
shall deliver to the corporation the certificates requested so that the
corporation may forthwith endorse on them a legend to the effect that demand
for the fair cash value of such shares has been made. The corporation promptly
shall return such endorsed certificates to the dissenting shareholder. A
dissenting shareholder's failure to deliver such certificates terminates his
rights as a dissenting shareholder, at the option of the corporation,
exercised by written notice sent to the dissenting shareholder within twenty
days after the lapse of the fifteen-day period, unless a court for good cause
shown otherwise directs. If shares represented by a certificate on which such
a legend has been endorsed are transferred, each new certificate issued for
them shall bear a similar legend, together with the name of the original
dissenting holder of such shares. Upon receiving a demand for payment from a
dissenting shareholder who is the record holder of uncertificated securities,
the corporation shall make an appropriate notation of the demand for payment
in its shareholder records. If uncertificated shares for which payment has
been demanded are to be transferred, any new certificate issued for the shares
shall bear the legend required for certificated securities as provided in this
paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of the
shares. A request under this paragraph by the corporation is not an admission
by the corporation that the shareholder is entitled to relief under this
section.
(B) Unless the corporation and the dissenting shareholder have
come to an agreement on the fair cash value per share of the shares as to
which the dissenting shareholder seeks relief, the dissenting shareholder or
the corporation, which in case of a merger or consolidation may be the
surviving or new entity, within three months after the service of the demand
by the dissenting shareholder, may file a complaint in the court of common
pleas of the county in which the principal office of the corporation that
issued the shares is located or was located when the proposal was adopted by
the shareholders of the corporation, or, if the proposal was not required to
be submitted to the shareholder, was approved by the directors. Other
dissenting shareholders, within that three-month period, may join as
plaintiffs or may be joined as defendants in any such proceeding, and any two
or more such proceedings may be consolidated. The complaint shall contain a
brief statement of the facts, including the vote and the facts entitling the
dissenting shareholder to the relief demanded. No answer to such a complaint
is required. Upon the filing of such a complaint, the court, on motion of the
petitioner, shall enter an order fixing a date for a hearing on the complaint
and requiring that a copy of the complaint and a notice of the filing and of
the date for hearing be given to the respondent or defendant in the manner in
which summons is required to be served or substituted service is required to
be made in other cases. On the day fixed for the hearing on the complaint or
any adjournment of it, the court shall determine from the complaint and from
such evidence as is submitted by either party whether the dissenting
shareholder is entitled to be paid the fair cash value of any shares and, if
so, the number and class of such shares. If the court finds that the
dissenting shareholder is so entitled, the court may appoint one or more
persons as appraisers to receive evidence and to recommend a decision on the
amount of the fair cash value. The appraisers have such power and authority as
is specified in the order of their appointment. The court thereupon shall make
a finding as to the fair cash value of a share and shall render judgment
against the corporation for the payment of it, with interest at such rate and
from such date as the court considers equitable. The costs of the proceeding,
including reasonable compensation to the appraisers to be fixed by the court,
shall be assessed or apportioned as the court considers equitable. The
proceeding is a special proceeding and final orders in it may be vacated,
modified, or reversed on appeal pursuant to the Rules of Appellate Procedure
and, to the extent not in conflict with those rules, Chapter 2505. of the
Revised Code. If, during the pendency of any proceeding instituted under this
section, a suit or proceeding is or has been instituted to enjoin or otherwise
to prevent the carrying out of the action as to which the shareholder has
dissented, the proceeding instituted under this section shall be stayed until
the final determination of the other suit or proceeding. Unless any provision
in division (D) of this section is applicable, the fair cash value of the
shares that is agreed upon by the parties or fixed under this section shall be
paid within thirty days after the date of final determination of such value
under this division, the effective date of the amendment to the articles, or
the consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a
holder of uncertificated securities entitled to such payment. In the case of
holders of shares represented by certificates, payment shall be made only upon
and simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the
shareholders of the corporation, fair cash value as to those shareholders
shall be determined as of the day prior to the day on which the vote by the
shareholders was taken and, in the case of a merger pursuant to section
1701.80 or 1701.801 of the Revised Code, fair cash value as to shareholders of
a constituent subsidiary corporation shall be determined as of the day before
the adoption of the agreement of merger by the directors of the particular
subsidiary corporation. The fair cash value of a share for the purposes of
this section is the amount that a willing seller who is under no compulsion to
sell would be willing to accept and that a willing buyer who is under no
compulsion to purchase would be willing to pay, but in no event shall the fair
cash value of a share exceed the amount specified in the demand of the
particular shareholder. In computing such fair cash value, any appreciation or
depreciation in market value resulting from the proposal submitted to the
directors or to the shareholders shall be excluded.
(D) (1) The right and obligation of a dissenting shareholder to
receive such fair cash value and to sell such shares as to which he seeks
relief, and the right and obligation of the corporation to purchase such
shares and to pay the fair cash value of them terminates if any of the
following applies:
(a) The dissenting shareholder has not complied with this
section, unless the corporation by its directors waives
such failure;
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the
shareholders rescind their adoption of the action
involved;
(c) The dissenting shareholder withdraws his demand, with the
consent of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not
come to an agreement as to the fair cash value per share,
and neither the shareholder nor the corporation has filed
or joined in a complaint under division (B) of this
section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the
merger or consolidation has become effective and the surviving or new entity
is not a corporation, action required to be taken by the directors of the
corporation shall be taken by the general partners of a surviving or new
partnership or the comparable representatives of any other surviving or new
entity.
(E) From the time of the dissenting shareholder's giving of the
demand until either the termination of the rights and obligations arising from
it or the purchase of the shares by the corporation, all other rights accruing
from such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinquishment of or in
substitution for such shares, an amount equal to the dividend, distribution,
or interest which, except for the suspension, would have been payable upon
such shares or securities, shall be paid to the holder of record as a credit
upon the fair cash value of the shares. If the right to receive fair cash
value is terminated other than by the purchase of the shares by the
corporation, all rights of the holder shall be restored and all distributions
which, except for the suspension, would have been made shall be made to the
holder of record of the shares at the time of termination.
