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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 31, 1999
ATLANTIC RICHFIELD COMPANY
(Exact name of registrant as specified in its charter)
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DELAWARE 1-1196 23-0371610
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (213) 486-3511
Not applicable
(Former name or former address, if changed since last report)
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<PAGE>
2
Item 5. Other Events.
On March 31, 1999, Atlantic Richfield Company, a
Delaware corporation (the "Company"), entered into an
Agreement and Plan of Merger dated as of March 31, 1999 (the
"Merger Agreement"), with BP Amoco p.l.c., an English public
limited company ("BP Amoco"), and Prairie Holdings, Inc., a
Delaware corporation, pursuant to which a subsidiary of BP
Amoco will merge with the Company (the "Merger") on the terms
and subject to the conditions set forth in the Merger
Agreement. Pursuant to the Merger, each share of Company
common stock will be converted into the right to receive 4.92
BP Amoco ordinary shares. This would value the Company at
$26.8 billion, representing a premium of 26%, based on BP
Amoco's closing price of $16.74 per ordinary share on Friday,
March 23, 1999. Based on the closing prices of BP Amoco and
the Company on Wednesday, March 31, 1999, the premium is 13%.
Pursuant to a Stock Option Agreement (the "Stock
Option Agreement"), dated as of March 31, 1999, the Company
has granted BP Amoco an option to acquire 19.9% of the
outstanding common stock of the Company at a price of $82.82
per share (subject to adjustment), in the event that the
Merger is terminated in circumstances entitling BP Amoco to
receive a break-up fee under the terms and provisions of the
Merger Agreement.
The Merger is subject to various conditions set
forth in the Merger Agreement, including the approval of the
Merger Agreement by the stockholders of the Company and
shareholders of BP Amoco, respectively, and clearance under
the Hart- Scott-Rodino Antitrust Improvements Act of 1976.
Attached hereto and incorporated herein by
reference in their entirety as Exhibits 2.1, 10.1 and 99.1,
respectively, are copies of (1) the Merger Agreement, (2) the
Stock Option Agreement and (3) a press release of the Company
and BP Amoco announcing the signing of the Merger Agreement.
Item 7(c). Exhibits
2.1 Agreement and Plan of Merger dated as of March 31, 1999,
among BP Amoco p.l.c., Atlantic Richfield Company and
Prairie Holdings, Inc.
10.1 Stock Option Agreement dated as of March 31, 1999,
between Atlantic Richfield Company, as Issuer, and BP
Amoco p.l.c., as Grantee.
99.1 Press release dated April 1, 1999.
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3
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto
duly authorized.
Date: April 1, 1999 by: /s/ Allan L. Comstock
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Name: Allan L. Comstock
Title: Vice President and
Controller
<PAGE>
4
EXHIBIT INDEX
Exhibit Description
Number
2.1 Agreement and Plan of Merger dated as of March 31, 1999,
among BP Amoco p.l.c., Atlantic Richfield Company and
Prairie Holdings, Inc.
10.1 Stock Option Agreement dated as of March 31, 1999,
between Atlantic Richfield Company, as Issuer, and
BP Amoco p.l.c., as Grantee.
99.1 Press release dated April 1, 1999.
Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN
OF MERGER
Among
BP AMOCO p.l.c.,
ATLANTIC RICHFIELD COMPANY
and
PRAIRIE HOLDINGS, INC.
Dated as of March 31 , 1999
<PAGE>
i
TABLE OF CONTENTS
Page
ARTICLE I
The Closing and the Merger
1.1. Closing........................................................2
1.2. The Merger.....................................................2
1.3. Conversion and Exchange of Shares..............................3
1.4. Surrender and Payment..........................................5
1.5. ARCO Stock Options; Other Stock-Based Plans....................7
1.6. Fractional BP Amoco Shares....................................10
1.7. The Surviving Corporation.....................................11
1.8. Lost, Stolen or Destroyed Certificates........................11
ARTICLE II
Representations and Warranties
2.1. Representations and Warranties of BP Amoco and ARCO...........11
2.1.1. Organization, Good Standing and Qualification........12
2.1.2. Capital Structure....................................13
2.1.3. Corporate Authority; Approval and Fairness...........15
2.1.4. Governmental Filings; No Violations..................16
2.1.5. Reports; Financial Statements........................18
2.1.6. Absence of Certain Changes...........................20
2.1.7. Litigation and Liabilities...........................21
2.1.8. Takeover Statutes....................................21
2.1.9. Brokers and Finders..................................22
2.1.10. Ownership of Other Party's Common Stock..............22
2.1.11. Merger Sub...........................................22
2.1.12. ARCO Employee Benefit Plans..........................23
2.1.13. Environmental Matters................................23
2.1.14. ARCO Rights Plan.....................................24
2.1.15. ARCO Joint Ventures; Exclusivity Arrangements........24
2.1.16. Tax Matters..........................................25
ARTICLE III
Covenants
3.1. Interim Operations............................................26
<PAGE>
ii
3.1.1. Interim Operations of BP Amoco.......................26
3.1.2. Interim Operations of ARCO...........................27
3.1.3. Consultation as to Material Contracts................32
3.2. ARCO Acquisition Proposals....................................32
3.3. Information Supplied..........................................34
3.3.1. Registration Statement...............................34
3.3.2. BP Amoco Documents...................................36
3.4. Shareholders Meetings.........................................37
3.5. Filings; Other Actions; Notification..........................37
3.6. Access........................................................40
3.7. Publicity.....................................................40
3.8. Benefits and Other Matters....................................40
3.8.1. Employee Benefits....................................40
3.8.2. Director and Officer Liability.......................43
3.9. Expenses......................................................44
3.10. Takeover Statutes.............................................44
3.11. Dividends.....................................................44
3.12. Listing Applications..........................................44
3.13. Letters of Accountants........................................45
3.14. Agreements of ARCO Affiliates.................................45
3.15. Accounting Matters............................................46
3.16. Tax Matters...................................................46
3.17. Vastar........................................................46
ARTICLE IV
Conditions
4.1. Conditions to Each Party's Obligation to Effect the Merger....46
4.1.1. Shareholder Approvals................................46
4.1.2. Regulatory Consents..................................46
4.1.3. Laws and Orders......................................47
4.1.4. Effectiveness of Form F-4............................47
4.1.5. Exchange Listings....................................47
4.2. Conditions to Obligations of BP Amoco and Merger Sub..........47
4.2.1. Representations and Warranties of ARCO...............48
4.2.2. Performance of Obligations of ARCO...................48
4.3. Conditions to Obligation of ARCO..............................48
4.3.1. Representations and Warranties.......................48
4.3.2. Performance of Obligations of BP Amoco...............49
[4.3.3. Consents Under Agreements............................49
4.3.4. Tax Opinion..........................................49
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iii
ARTICLE V
Termination
5.1. Termination by Mutual Consent.................................49
5.2. Termination by Either BP Amoco or ARCO........................49
5.3. Termination by BP Amoco.......................................50
5.4. Termination by ARCO...........................................50
5.5. Effect of Termination and Abandonment.........................51
ARTICLE VI
Miscellaneous and General
6.1. Survival......................................................53
6.2. Modification or Amendment.....................................53
6.3. Waiver........................................................53
6.4. Failure or Indulgence Not Waiver; Remedies Cumulative.........53
6.5. Counterparts..................................................53
6.6. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.................54
6.7. Notices.......................................................55
6.8. Entire Agreement..............................................56
6.9. Obligations of BP Amoco and of ARCO...........................57
6.10. Severability..................................................57
6.11. Interpretation................................................57
6.12. Assignment....................................................58
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Index of Defined Terms
Affiliate..............................................................13
Agreement...............................................................1
ARCO....................................................................1
ARCO Preferred Stock...................................................14
ARCO Requisite Vote....................................................16
ARCO Alternative Agreement.............................................51
ARCO Termination Amount................................................51
ARCO Affiliates........................................................45
ARCO Proxy Statement...................................................34
ARCO Stock Plans.......................................................14
ARCO Common Shares......................................................1
ARCO Preference Stock..................................................14
ARCO $2.80 Preference Stock............................................14
ARCO $3.00 Preference Stock............................................14
ARCO Stockholders Meeting..............................................37
ARCO Audit Date........................................................19
ARCO Disclosure Letter.................................................11
ARCO Stock Option.......................................................7
ARCO Reports...........................................................20
ARCO Representatives...................................................33
ARCO Acquisition Proposal..............................................33
ARCO Executive Officers................................................21
ARCO Required Consents.................................................17
Audit Date.............................................................19
Bankruptcy and Equity Exception........................................16
BP Amoco Required Consents.............................................17
BP Amoco................................................................1
BP Amoco ADRs...........................................................3
BP Amoco Termination Amount............................................52
BP Amoco Executive Directors...........................................21
BP Amoco Depositary Shares..............................................3
BP Amoco Second Preference Shares......................................13
BP Amoco Disclosure Letter.............................................11
BP Amoco Ordinary Share.................................................3
BP Amoco First Preference Shares.......................................13
BP Amoco Reports.......................................................18
Canceled ARCO Share.....................................................3
Certificate of Merger...................................................2
Certificate.............................................................3
Closing Date............................................................2
Closing.................................................................2
Code....................................................................1
Companies Act..........................................................12
Confidentiality Agreement..............................................40
Constituent Corporations................................................1
Contracts..............................................................18
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ii
Deposit Agreement.......................................................3
Depositary..............................................................3
DGCL....................................................................1
Disclosure Letter......................................................11
Effective Time..........................................................3
Encumbrance............................................................13
Exchange Act...........................................................13
Exchange Agent..........................................................5
Exchange Ratio..........................................................3
Exon-Florio............................................................16
Form F-4"..............................................................34
FSA....................................................................36
Governmental Entity....................................................17
Governmental Consents..................................................46
HSR Act................................................................16
Indemnitees............................................................43
Joint Venture Agreements...............................................24
Law....................................................................18
Material Adverse Effect................................................12
Merger Sub..............................................................1
Merger..................................................................1
Merger Sub Common Stock.................................................4
Merger Consideration....................................................3
Option Schemes.........................................................13
Parties.................................................................1
Party...................................................................1
Person.................................................................13
Regulation.............................................................17
Reports................................................................20
SEC....................................................................10
Securities Act.........................................................10
Stock Option Agreement..................................................1
Subsidiary.............................................................12
Superior Proposal......................................................33
Surviving Corporation...................................................2
Takeover Panel.........................................................17
Takeover Statute.......................................................22
Termination Date.......................................................50
U.K. GAAP..............................................................19
U.S. GAAP..............................................................19
<PAGE>
This AGREEMENT AND PLAN OF MERGER, dated as of March 31, 1999
(this "Agreement"), among BP AMOCO p.l.c. ("BP Amoco"), an English public
limited company, ATLANTIC RICHFIELD COMPANY, a Delaware corporation
("ARCO"), and PRAIRIE HOLDINGS, INC., a Delaware corporation and a direct
wholly owned subsidiary of BP Amoco ("Merger Sub" and, together with ARCO,
the "Constituent Corporations");
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of each of ARCO, BP
Amoco and Merger Sub (each, a "Party" and, together, the "Parties") have
each determined that it is in the best interests of their respective
companies and stockholders or shareholders, as the case may be, to combine
their respective businesses;
WHEREAS, in furtherance of such combination, the respective
Boards of Directors of ARCO and Merger Sub have each adopted resolutions
approving this Agreement and declaring its advisability and approving the
merger (the "Merger") of Merger Sub with and into ARCO in accordance with
the Delaware General Corporation Law, as amended (the "DGCL"), upon the
terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Board of
Directors of BP Amoco adopted a resolution approving this Agreement and the
Merger, upon the terms and subject to the conditions set forth herein;
WHEREAS, it is intended that, for U.S. federal income tax
purposes, the Merger shall qualify as a reorganization under the provisions
of Section 368(a) of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder (the "Code") and that the
holders of ARCO Common Shares who will not be "five percent transferee
shareholders" as defined in Treasury Regulation Section
1.367(a)-3(c)(5)(ii) or who enter into five-year gain recognition
agreements in the form provided in Treasury Regulation Section
1.367(a)-8(b) ( "Eligible ARCO Shareholders") not recognize taxable gain
with respect to the Merger pursuant to Section 367(a) of the Code (except
with respect to cash received in lieu of fractional share interests);
WHEREAS, as an inducement to the willingness of BP Amoco to enter
into this Agreement, the Board of Directors of ARCO has approved the grant
to BP Amoco of an option to purchase shares of common stock, par value
$2.50 per share, of ARCO ("ARCO Common Shares") pursuant to a stock option
agreement, dated as of March 31, 1999, between ARCO and BP Amoco (the
"Stock Option Agreement"), and each of ARCO and BP Amoco has duly
authorized, executed and delivered the Stock Option Agreement; and
WHEREAS, ARCO and BP Amoco desire to make certain
representations, warranties, covenants and agreements in connection with
this Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
<PAGE>
ARTICLE I
The Closing and the Merger
1.1. Closing. The closing of the Merger (the "Closing") shall
take place (i) at the offices of Linklaters & Paines, One Silk Street,
London, England, with a meeting to be held simultaneously at the offices of
Sullivan & Cromwell, 125 Broad Street, New York, New York, for the delivery
of certain documents in connection therewith, at a time to be agreed by the
Parties on the third business day after the day on which the last to be
fulfilled or waived of the conditions set forth in Article IV (other than
those conditions that by their nature are to be fulfilled at the Closing,
but subject to the fulfillment or waiver of such conditions) shall be
fulfilled or waived in accordance with this Agreement or (ii) at such other
places and time and/or on such other date as ARCO and BP Amoco may agree in
writing (the "Closing Date").
1.2. The Merger.
1.2.1. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time (as defined in Section 1.2.2),
Merger Sub shall be merged with and into ARCO in accordance with the
DGCL, whereupon the separate existence of Merger Sub shall cease, and
ARCO shall be the surviving corporation in the Merger (the "Surviving
Corporation") and shall continue to be governed by the laws of the
State of Delaware, and the separate corporate existence of ARCO, with
all its rights, privileges, immunities, powers and franchises, shall
continue unaffected by the Merger except as set forth in this Article
I. The Merger shall have the effects specified in the DGCL.
1.2.2. As soon as practicable after satisfaction or waiver (to
the extent herein permitted) of the conditions to the obligations of
the Parties to consummate the Merger set forth in Article IV, ARCO and
Merger Sub will cause a certificate of merger (the "Certificate of
Merger") to be executed and filed with the Secretary of State of the
State of Delaware and make all other filings or recordings required by
applicable law in connection with the Merger. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with
the Secretary of State of the State of Delaware or at such later time
as is specified in the Certificate of Merger in accordance with the
DGCL (the "Effective Time").
1.3. Conversion and Exchange of Shares. At the Effective Time:
1.3.1. Each ARCO Common Share owned by BP Amoco, ARCO or any
Subsidiary (as defined in Section 2.1.1) of BP Amoco or ARCO (other
than CH-Twenty, Inc. , a Delaware corporation and a Subsidiary of ARCO
("CH- Twenty")) immediately prior to the Effective Time (each, a
"Canceled ARCO Share") shall, by virtue of the Merger, and without any
action on the part of the holder thereof, no longer be outstanding,
shall be canceled and retired without payment of any consideration
therefor and shall cease to exist. The ARCO Common Shares owned by
CH-Twenty immediately prior to the Merger (if any) (the "CH-Twenty
ARCO Shares" and, together with the Canceled ARCO Shares,
<PAGE>
the "Excluded ARCO Shares") shall remain outstanding, without change,
after the Effective Time, and no consideration shall be delivered in
exchange therefor.
1.3.2. Each ARCO Common Share outstanding immediately prior to
the Effective Time, other than Excluded ARCO Shares, shall be
converted into and shall be canceled in exchange for the right to
receive 4.92 (the "Exchange Ratio") ordinary shares, of nominal value
$0.50 each, of BP Amoco (each, a "BP Amoco Ordinary Share"), which
shall be delivered to the holders of ARCO Common Shares (other than
Excluded ARCO Shares) (i) in the form of American depositary shares
(the "BP Amoco Depositary Shares"), each representing the right to
receive six BP Amoco Ordinary Shares, or (ii) if and to the extent
elected by any such holder in the manner provided in Section 1.4.1, in
the form of BP Amoco Ordinary Shares, in registered form, rather than
BP Amoco Depositary Shares (the "Merger Consideration"). The BP Amoco
Depositary Shares may be evidenced by one or more receipts ("BP Amoco
ADRs") issued in accordance with the Amended and Restated Deposit
Agreement, dated as of December 31, 1998, among BP Amoco, Morgan
Guaranty Trust Company of New York, as Depositary (the "Depositary"),
and the holders from time to time of BP Amoco ADRs (the "Deposit
Agreement"). At the Effective Time, all ARCO Common Shares (other than
any CH-Twenty ARCO Shares) shall no longer be outstanding, shall be
canceled and retired and shall cease to exist, and each certificate (a
"Certificate") formerly representing any of such ARCO Common Shares
(other than Excluded ARCO Shares) shall thereafter represent only the
right to the Merger Consideration and the right, if any, to receive
pursuant to Section 1.6 cash in lieu of fractional BP Amoco Depositary
Shares (or, if applicable, fractional BP Amoco Ordinary Shares) and
any dividend or distribution pursuant to Section 1.4.6, in each case
without interest. BP Amoco shall, following the Closing, pay all stamp
duties, stamp duty reserve tax and other taxes and similar levies
imposed in connection with the issuance or creation of the BP Amoco
Ordinary Shares, BP Amoco Depositary Shares and any BP Amoco ADRs in
connection therewith.
1.3.3. Each share of common stock of Merger Sub, par value $.001
per share ("Merger Sub Common Stock"), outstanding immediately prior
to the Effective Time shall be canceled and, in consideration for the
issuance of the BP Amoco Ordinary Shares referred to in Section 1.3.4,
the Surviving Corporation shall issue to BP Amoco at the Effective
Time such number of shares of common stock as is equal to the number
of ARCO Common Shares outstanding immediately prior to the Effective
Time (excluding any CH-Twenty ARCO Shares) with the same rights,
powers and privileges as the ARCO Common Shares, which shares of
common stock, together with the CH-Twenty ARCO Shares, shall
constitute the only outstanding shares of common stock of the
Surviving Corporation.
1.3.4. In consideration of the issue to BP Amoco by the Surviving
Corporation of shares of common stock of the Surviving Corporation
pursuant to Section 1.3.3, BP Amoco shall issue, in accordance with
Section 1.4, such number of BP Amoco Ordinary Shares as is equal to
the number of ARCO Common Shares outstanding immediately prior to the
Effective Time (other than the
<PAGE>
Excluded ARCO Shares) multiplied by the Exchange Ratio to permit (i)
the issuance of BP Amoco Depositary Shares and (ii) if elected by any
holder of ARCO Common Shares in the manner provided in Section 1.4.1,
the delivery of BP Amoco Ordinary Shares, in registered form, to the
holders of such ARCO Common Shares for the purpose of giving effect to
the delivery of the Merger Consideration referred to in Section 1.3.2.
1.3.5. In the event that, subsequent to the date of this
Agreement but prior to the Effective Time, ARCO changes the number of
ARCO Common Shares, or BP Amoco changes the number of BP Amoco
Ordinary Shares, issued and outstanding as a result of a stock split,
stock combination, stock dividend, recapitalization, redenomination of
share capital or other similar transaction, the Exchange Ratio and
other items dependent thereon shall be appropriately adjusted.
1.3.6. Each share of ARCO $3.00 Preference Stock and each share
of ARCO $2.80 Preference Stock (each as defined in Section 2.1.2.2)
outstanding immediately prior to the Effective Time shall remain
outstanding, without change, after the Effective Time, and no
consideration shall be delivered in exchange therefor; provided,
however, BP Amoco agrees that from and after the Effective Time, the
number of BP Amoco Ordinary Shares into which each share of ARCO $3.00
Preference Stock and each share of ARCO $2.80 Preference Stock shall
be convertible shall be equal in each case to the number of ARCO
Common Shares into which such share was convertible immediately prior
to the Effective Time, multiplied by the Exchange Ratio (without any
adjustment pursuant to Section 1.3.5 in the conversion rates between
such ARCO Preference Stock and ARCO Common Shares for changes in ARCO
Common Shares prior to the Effective Time, for which changes the terms
of the ARCO $3.00 Preference Stock and the ARCO $2.80 Preference Stock
contained in the restated certificate of incorporation of ARCO shall
provide the relevant adjustment, if any).
1.4. Surrender and Payment.
1.4.1. Prior to the Effective Time, BP Amoco shall appoint an
agent reasonably acceptable to ARCO as exchange agent (the "Exchange
Agent") for the purpose of exchanging Certificates for BP Amoco
Depositary Shares or, if and to the extent elected by a holder of a
Certificate in the manner provided in this Section 1.4.1, for BP Amoco
Ordinary Shares in registered form. Promptly after the Effective Time,
the Surviving Corporation will send, or will cause the Exchange Agent
to send, to each holder of record as of the Effective Time of ARCO
Common Shares (other than holders of Excluded ARCO Shares) (i) a
letter of transmittal, in such form as ARCO and BP Amoco may
reasonably agree, for use in effecting delivery of ARCO Common Shares
to the Exchange Agent, which letter of transmittal shall include a
form of election by which each such holder may elect to receive (the
"Share Election") all or any part of the Merger Consideration to which
such holder is entitled in the form of BP Amoco Ordinary Shares in
registered form, rather than in the form of BP Amoco Depositary Shares
(such BP Amoco Ordinary Shares or BP Amoco Depositary Shares to be
received by a holder being referred to in this Agreement as "BP Amoco
Shares") and (ii)
<PAGE>
instructions for surrendering Certificates in exchange for the BP
Amoco Shares, and any cash in lieu of fractional shares and any cash
dividends or other distributions, that such holder has the right to
receive pursuant to this Article I.
1.4.2. Each holder of any ARCO Common Shares that have been
converted into a right to receive the consideration set forth in
Section 1.3.2 shall, upon surrender to the Exchange Agent of a
Certificate or Certificates, together with a properly completed letter
of transmittal covering the ARCO Common Shares represented by such
Certificate or Certificates, be entitled to receive (i) the number of
whole BP Amoco Shares to which such holder is entitled in respect of
such ARCO Common Shares pursuant to Section 1.3.2 (after giving effect
to any Share Election made by such holder) and (ii) a check in the
amount (after giving effect to any required tax withholdings) of (A)
any cash in lieu of fractional shares to be paid pursuant to Section
1.6, plus (B) any cash dividends or other distributions that such
holder has the right to receive pursuant to Section 1.4.6. Until so
surrendered, each Certificate shall, after the Effective Time,
represent for all purposes only the right to receive the number of
whole BP Amoco Shares to which such holder is entitled and the
applicable amounts provided in the foregoing clause (ii).
1.4.3. If any BP Amoco Shares are to be issued to a person other
than the registered holder of the ARCO Common Shares represented by a
Certificate or Certificates surrendered with respect thereto, it shall
be a condition to such issue that the Certificate or Certificates so
surrendered shall be properly endorsed or otherwise be in proper form
for transfer and that the person requesting such issue shall pay to
the Exchange Agent any transfer or other taxes required as a result of
such issue to a person other than the registered holder of such ARCO
Common Shares or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
1.4.4. After the close of the stock transfer books of ARCO on the
day prior to the Effective Time, there shall be no further
registration of transfers of ARCO Common Shares that were outstanding
prior to the Effective Time. After the Effective Time, Certificates
presented to the Surviving Corporation for transfer shall be canceled
and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article I.
1.4.5. Any BP Amoco Shares issued and delivered in respect of
ARCO Common Shares pursuant to this Article I and any cash in lieu of
fractional interests in BP Amoco Shares to be paid pursuant to Section
1.6, plus any cash dividend or other distribution that such holder has
the right to receive pursuant to Section 1.4.6, that remains unclaimed
by any holder of ARCO Common Shares six months after the Effective
Time shall be held by the Exchange Agent (or a successor agent
appointed by BP Amoco) or shall be delivered to the Depositary upon
the instruction of BP Amoco and held by the Depositary, in either case
subject to the instruction of BP Amoco in an account or accounts
designated for such purpose. BP Amoco shall not be liable to any
holder of ARCO Common Shares for any securities delivered or any
amount paid by the Depositary or the Exchange Agent, as the case may
be, to a public official pursuant to applicable
<PAGE>
abandoned property laws. Any cash remaining unclaimed by holders of
ARCO Common Shares three years after the Effective Time (or such
earlier date immediately prior to such time as such cash would
otherwise escheat to or become property of any governmental entity or
as is otherwise provided by applicable Law (as defined in Section
2.1.4.2)) shall, to the extent permitted by applicable Law, become the
property of the Surviving Corporation or BP Amoco, as BP Amoco may
determine.
1.4.6. No dividends, interest or other distributions with respect
to securities of BP Amoco or the Surviving Corporation issuable with
respect to ARCO Common Shares shall be paid to the holder of any
unsurrendered Certificates until such Certificates are surrendered as
provided in this Section. Subject to the effect of applicable Law,
upon such surrender, there shall be issued and/or paid to the holder
of the BP Amoco Shares issued in exchange therefor, without interest,
(A) at the time of such surrender, the dividends or other
distributions payable with respect to such BP Amoco Shares with a
record date after the Effective Time and a payment date on or prior to
the date of such surrender and not previously paid and (B) at the
appropriate payment date, the dividends or other distributions payable
with respect to such BP Amoco Shares with a record date after the
Effective Time but with a payment date subsequent to such surrender.
For purposes of dividends or other distributions in respect of BP
Amoco Shares, all BP Amoco Shares to be issued pursuant to the Merger
shall be deemed issued and outstanding as of the Effective Time.
1.4.7. The Parties may, by mutual agreement and without amending
this Agreement in accordance with Section 6.2, make any modifications
to the terms of or procedures for the Share Election, provided that
any such modification will not adversely affect the entitlement of
holders of ARCO Common Shares to the Merger Consideration and that
such modification shall be filed with the Secretary of ARCO and made
available to the stockholders of ARCO, without cost, upon request.
1.5. ARCO Stock Options; Other Stock-Based Plans.
1.5.1. At the Effective Time, each stock option to purchase ARCO
Common Shares under any ARCO Stock Plan (as defined in Section
2.1.2.2) (each, an "ARCO Stock Option") which is then outstanding and
unexercised shall cease to represent a right to acquire ARCO Common
Shares and shall be converted automatically into an option to purchase
BP Amoco Ordinary Shares, to be issued in the form of BP Amoco
Depositary Shares, and BP Amoco shall assume each such ARCO Stock
Option subject to the terms of the relevant ARCO Stock Plan, and the
agreement evidencing the grant thereunder; provided, however, that
from and after the Effective Time, (i) the number of BP Amoco Ordinary
Shares purchasable, in the form of BP Amoco Depositary Shares, upon
exercise of each such ARCO Stock Option shall be equal to the number
of ARCO Common Shares that were purchasable under such ARCO Stock
Option immediately prior to the Effective Time (without taking into
account any Dividend Share Credits under any ARCO Stock Plan),
multiplied by the Exchange Ratio, subject to adjustment as provided in
Section 1.3.5, and rounding down to the nearest whole BP Amoco
Ordinary Share and (ii) the per BP Amoco Ordinary Share exercise price
under each such ARCO Stock Option shall be obtained by dividing the
per share exercise price of each such ARCO Stock Option by the
Exchange Ratio, subject to adjustment as provided in Section 1.3.5,
and rounding down
<PAGE>
to the nearest cent. Notwithstanding the foregoing, the number of BP
Amoco Ordinary Shares and the per BP Amoco Ordinary Share exercise
price of each ARCO Stock Option which is intended to be an "incentive
stock option" (as defined in Section 422 of the Code) shall be
adjusted in accordance with the requirements of Section 424 of the
Code. Accordingly, with respect to any incentive stock options,
fractional BP Amoco Ordinary Shares shall be rounded down to the
nearest whole number of BP Amoco Ordinary Shares and where necessary
the per BP Amoco Ordinary Share exercise price shall be rounded up to
the nearest cent. BP Amoco Ordinary Shares to be issued upon the
exercise of ARCO Stock Options, shall, at the election of the holders
of such ARCO Stock Options, be delivered in the form of BP Amoco
Depositary Shares.
1.5.2. Shares of Restricted Stock and Performance-Based
Restricted Stock outstanding and held by participants in any ARCO
Stock Plan immediately prior to the Effective Time shall be converted
into and shall be canceled in exchange for the right to receive BP
Amoco Shares in accordance with Sections 1.3.2 and 1.4.1.
1.5.3. The obligation of ARCO to deliver ARCO Common Shares
pursuant to Article III, Subsection 3(b)(v)(1) of the ARCO 1985
Executive Long-Term Incentive Plan (the "ELTIP"), as amended through
the date hereof, in respect of Contingent Restricted Stock upon the
Change of Control represented by the Merger shall be satisfied through
the delivery by BP Amoco of (i) a number of BP Amoco Ordinary Shares
(to be issued in the form of BP Amoco Depositary Shares) equal to the
number of ARCO Common Shares that were otherwise so deliverable
multiplied by the Exchange Ratio, and (ii) such other amounts payable
in respect of such ARCO Common Shares pursuant to this Article I.
1.5.4. With respect to Dividend Share Credits under any ARCO
Stock Plan, including Prospective Dividend Share Credits to be
credited pursuant to Article IV, Subsection 4(b) of the ELTIP and
under Article II, Section 2.6 of the Director's Plan (as defined in
Section 1.5.6(b)) in connection with the Merger, BP Amoco and ARCO
agree that: (a) as of the Effective Time, ARCO Common Shares
represented by Dividend Share Credits, including such Prospective
Dividend Share Credits, shall be deemed converted into BP Amoco
Ordinary Shares at the Exchange Ratio; (b) after the Effective Time
the obligation of ARCO to deliver ARCO Common Shares under Article IV,
Section 3 of the ELTIP shall be satisfied through the delivery by BP
Amoco of a number of BP Amoco Ordinary Shares (to be issued in the
form of BP Amoco Depositary Shares) equal to the number of ARCO Common
Shares that were otherwise so deliverable multiplied by the Exchange
Ratio; and (c) after the Effective Time, references in Article IV of
the ELTIP and Article V of the Directors' Plan to "Common Stock" shall
be deemed references to "BP Amoco Ordinary Shares", and references in
Article I, Subsection 2(m) of the ELTIP and Article II,
<PAGE>
Subsection 2.7 of the Directors' Plan to "New York Stock Exchange"
shall be to "London Stock Exchange".
1.5.5. At the Effective Time, each right of any kind, whether
vested or unvested, contingent or accrued, to acquire or receive ARCO
Common Shares that may be held, awarded, outstanding, credited,
payable or reserved for issuance under the ARCO Stock Plans and any
other ARCO Compensation and Benefit Plan (as defined in 2.1.12),
except for ARCO Stock Options converted in accordance with Section
1.5.1, shares of Restricted Stock and Performance-Based Restricted
Stock converted in accordance with Section 1.5.2, Contingent
Restricted Stock converted in accordance with Section 1.5.3, and any
Dividend Share Credits converted in accordance with 1.5.4, shall be
deemed to be converted into a right to acquire or receive, as the case
may be, the number of BP Amoco Ordinary Shares (to be issued in the
form of BP Amoco Depositary Shares) equal to the number of ARCO Common
Shares subject to such right immediately prior to the Effective Time
multiplied by the Exchange Ratio, and such rights with respect to BP
Amoco Ordinary Shares shall otherwise be subject to the same terms,
conditions and restrictions, if any, as were applicable to the rights
with respect to ARCO Common Shares under the relevant ARCO Stock Plan
or ARCO Compensation and Benefit Plan. Similarly, all ARCO Stock Plans
and other ARCO Compensation and Benefit Plans (and awards thereunder)
providing for cash payments measured by the value of a number of ARCO
Common Shares shall be deemed to refer to the number of BP Amoco
Ordinary Shares equal to the result of multiplying such number of ARCO
Common Shares by the Exchange Ratio, and such cash payments shall
otherwise be made on the same terms, conditions and restrictions, if
any, as were applicable under the relevant ARCO Stock Plan or ARCO
Compensation and Benefit Plan. At or prior to the Effective Time, ARCO
shall adopt appropriate amendments to the ARCO Stock Plans and the
ARCO Compensation and Benefit Plans to effectuate the provisions of
this Section 1.5.5. Without limiting the applicability of the
foregoing, ARCO shall take all necessary action to ensure that the
Surviving Corporation will not be bound at the Effective Time by any
options, stock appreciation rights, warrants or other rights or
arrangements under any ARCO Compensation and Benefit Plan that would
entitle any person to own any ARCO Common Shares or to receive any
payments in respect thereof, and all ARCO Compensation and Benefit
Plans conferring any rights to ARCO Common Shares or other capital
stock of ARCO shall be deemed to be amended to be in conformity with
this Section.
1.5.6. (a) All capitalized terms used in this Section 1.5 and not
otherwise defined in this Agreement shall have the respective meanings
given such terms in the ELTIP.
(b) "Directors' Plan" means the Stock Option Plan for
Outside Directors of ARCO, as amended through the date hereof.
1.5.7. Prior to the Effective Time, BP Amoco shall make available
for issuance in accordance with Section 1.4.1 the number of BP Amoco
Ordinary Shares necessary to satisfy BP Amoco's obligations under this
Section 1.5. At the Effective Time, BP Amoco shall file with the
Securities and Exchange
<PAGE>
Commission (the "SEC") a registration statement on an appropriate form
or a post-effective amendment to a previously filed registration
statement under the Securities Act of 1933, as amended (the
"Securities Act"), (i) with respect to the BP Amoco Ordinary Shares
and the BP Amoco Depositary Shares subject to issuance or subject to
options pursuant to this Section 1.5, and (ii) if registration of any
other interests in any ARCO Stock Plan or any other ARCO Compensation
and Benefit Plan referred to in this Section 1.5, or the BP Amoco
Ordinary Shares and BP Amoco Depositary Shares to be issued
thereunder, is required under the Securities Act, with respect to such
interests or such BP Amoco Ordinary Shares or BP Amoco Depositary
Shares, BP Amoco shall use its best reasonable efforts to cause such
registration statement to become and remain effective and maintain the
current status of the prospectus contained therein, as well as comply
with any applicable state securities or "blue sky" laws, for so long
as such options remain outstanding.
1.6. Fractional BP Amoco Shares. No fraction of a BP Amoco Share
will be issued. In lieu of any such fractional shares, each holder of ARCO
Common Shares who would otherwise be entitled to such fractional shares
shall be entitled to an amount in cash, without interest, rounded to the
nearest cent, equal to the product of (i) the amount of the fractional
interest in an BP Amoco Ordinary Share or BP Amoco Depositary Share, as the
case may be, to which such holder is entitled under Section 1.3 (or would
be entitled but for this Section 1.6) and (ii) (A) in respect of fractional
interests in BP Amoco Depositary Shares, the average of the closing sale
prices for the BP Amoco Depositary Shares on the New York Stock Exchange
(the "NYSE"), as reported in The Wall Street Journal, Northeastern edition,
for each of the ten consecutive trading days ending with the fifth complete
trading day prior to the Closing Date (not counting the Closing Date) and
(B) in respect of fractional interests in BP Amoco Ordinary Shares, the
average of the closing mid-market prices for the BP Amoco Ordinary Shares
on the London Stock Exchange Limited (the "LSE"), as reported in The
Financial Times, for each of the ten consecutive trading days ending with
the fifth complete trading day prior to the Closing Date (not counting the
Closing Date). As soon as practicable after the determination of the amount
of cash, if any, to be paid to holders of ARCO Common Shares in lieu of any
fractional interests, the Exchange Agent shall make available such amounts
to such holders without interest.
1.7. The Surviving Corporation.
1.7.1. The certificate of incorporation of the Surviving
Corporation shall be the restated certificate of incorporation of
ARCO, unless this Agreement is adopted by the holders of 66 2/3% of
the outstanding stock entitled to vote at the ARCO Stockholders
Meeting (as defined in Section 3.4), in which case the restated
certificate of incorporation of the Surviving Corporation shall be
amended as of the Effective Time to delete Articles V, VI, VII and
VIII and to substitute therefor Articles V, VI and VII as set forth in
full in Exhibit A.
1.7.2. The bylaws of Merger Sub in effect at the Effective Time
shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
2
<PAGE>
1.7.3. From and after the Effective Time, until successors are
duly elected or appointed and qualified in accordance with applicable
law, (i) the directors of Merger Sub at the Effective Time shall be
the directors of the Surviving Corporation, and (ii) such officers as
are mutually agreed by BP Amoco and ARCO prior to the Effective Time
shall be the officers of the Surviving Corporation.
1.8. Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the holder's
compliance with the replacement requirements established by the Exchange
Agent, including, if necessary, the posting by such Person of a bond in
customary amount as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate, the Merger Consideration
and any cash payable in lieu of fractional BP Amoco Shares and any unpaid
dividends or other distributions deliverable pursuant to Section 1.4.6 in
respect of the ARCO Common Shares represented by such Certificate pursuant
to this Agreement.
ARTICLE II
Representations and Warranties
2.1. Representations and Warranties of BP Amoco and ARCO. Except
as set forth in the corresponding sections or subsections of the disclosure
letter, dated the date hereof and signed by an authorized officer,
delivered by BP Amoco to ARCO or by ARCO to BP Amoco (each a "Disclosure
Letter," and the "BP Amoco Disclosure Letter" and the "ARCO Disclosure
Letter," respectively), as the case may be, BP Amoco (except for Sections
2.1.2.2, 2.1.3.2, 2.1.5.2, 2.1.8, 2.1.9(ii), 2.1.10.2, 2.1.12, 2.1.14 and
2.1.15 and references in Section 2.1.1 to documents made available by ARCO
to BP Amoco) hereby represents and warrants to ARCO, and ARCO (except for
Sections 2.1.2.1, 2.1.3.1, 2.1.5.1, 2.1.9(i), 2.1.10.1 and 2.1.11 and
references in Section 2.1.1 to documents made available by BP Amoco to
ARCO), subject to Section 2.2, hereby represents and warrants to BP Amoco,
that:
2.1.1. Organization, Good Standing and Qualification. Each of it
and its Subsidiaries (as defined below), is duly organized, validly
existing and in good standing (with respect to jurisdictions that
recognize the concept of good standing) under the laws of its
respective jurisdiction of organization and has all requisite
corporate or similar power and authority, and has been duly authorized
by all necessary approvals and orders, to own, operate and lease its
properties and assets and to carry on its business as presently
conducted and is duly qualified to do business and is in good standing
in each jurisdiction where the ownership, operation or leasing of its
assets or properties or conduct of its business requires such
qualification, except where the failure to be so organized, qualified
or in good standing, or to have such power or authority, would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect (as defined below) on it. BP Amoco has made
available to ARCO complete and correct copies of its memorandum and
articles of association, and ARCO has made available to BP Amoco
complete and correct copies of its restated certificate
<PAGE>
of incorporation and by-laws, in all cases as amended to date. Such
memorandum and articles of association or restated certificate of
incorporation and by-laws, as the case may be, as so made available
are in full force and effect.
As used in this Agreement, the term (i) "Subsidiary" means, with
respect to BP Amoco, any body corporate which is a subsidiary or
subsidiary undertaking, in each case within the meaning of the
Companies Act of 1985 of the United Kingdom, as amended (the
"Companies Act"), and, with respect to ARCO, any entity, whether
incorporated or unincorporated, in which ARCO owns, directly or
indirectly, more than fifty percent of the securities or other
ownership interests having by their terms ordinary voting power to
elect more than fifty percent of the directors or other persons
performing similar functions, or the management and policies of which
ARCO otherwise has the power to direct, (ii) "Material Adverse Effect"
means, with respect to any Person (as defined below), a material
adverse effect on the financial condition, properties, business or
operating income of such Person and its Subsidiaries taken as a whole,
other than any such effect to the extent arising out of changes in
general United States, United Kingdom or international economic
conditions, conditions or changes in or affecting the United States,
United Kingdom or international oil and gas industry (including
changes in market prices), provided that, except as otherwise
specifically provided, all references to Material Adverse Effect on BP
Amoco or any of its Subsidiaries or to ARCO or any of its Subsidiaries
in this Article II or in Article III shall be deemed to refer solely
to BP Amoco and its Subsidiaries and ARCO and its Subsidiaries,
respectively, without giving effect to BP Amoco's ownership of ARCO
and its Subsidiaries after the Effective Time, (iii) "Person" shall
mean any individual, corporation (including not-for-profit), general
or limited partnership, limited liability or unlimited liability
company, joint venture, estate, trust, association, organization,
Governmental Entity (as defined in Section 2.1.4.1) or other entity of
any kind or nature, and (iv) "Affiliate" shall have the meaning
specified in Rule 12b-2 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
2.1.2. Capital Structure.
2.1.2.1. The authorized share capital of BP Amoco is
$6,000,000,000 and (pound)12,750,000. As of the close of business
on March 29, 1999, the allotted share capital of BP Amoco
consisted of 9,720,380,579 BP Amoco Ordinary Shares, not more
than 7,232,838 8% cumulative first preference shares, of nominal
value (pound)1 each ("BP Amoco First Preference Shares"), and not
more than 5,473,414 9% cumulative second preference shares, of
nominal value (pound)1 each ("BP Amoco Second Preference
Shares"). All of the outstanding BP Amoco Ordinary Shares, BP
Amoco First Preference Shares and BP Amoco Second Preference
Shares have been, and the BP Amoco Ordinary Shares to be issued
as Merger Consideration shall be, duly authorized and validly
issued and are or will be, as the case may be, fully paid or
credited as fully paid. BP Amoco has no BP Amoco Ordinary Shares,
BP Amoco First Preference Shares or BP Amoco Second Preference
Shares reserved for or otherwise subject to issuance, except for
BP Amoco Ordinary Shares held by trusts
<PAGE>
or otherwise subject to issuance in relation to option schemes
pursuant to which BP Amoco Ordinary Shares may be issued in the
ordinary course of business (the "Option Schemes"). Each of the
outstanding shares of capital stock or other ownership interests
of each of BP Amoco's Subsidiaries that constitutes a
"Significant Subsidiary" (as defined in Rule 1-02(w) of
Regulation S-X promulgated under the Exchange Act) is duly
authorized, validly issued, fully paid and nonassessable and
owned by BP Amoco or a direct or indirect wholly owned Subsidiary
of BP Amoco, in each case free and clear of any lien, pledge,
security interest, claim or other encumbrance ("Encumbrance").
Except as set forth above or as contemplated by this Agreement,
there are no pre-emptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights,
redemption rights, repurchase rights, agreements, arrangements,
calls, commitments or rights of any kind which obligate BP Amoco
or any of its Subsidiaries to issue or to sell any shares of
capital stock or other securities of BP Amoco or any of its
Subsidiaries or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a
right to subscribe for or acquire from BP Amoco or any of its
Subsidiaries, any securities of BP Amoco or any of its
Subsidiaries, and no securities or obligations evidencing such
rights are authorized, issued or outstanding. BP Amoco does not
have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which
are convertible into or exercisable for securities having the
right to vote) with the shareholders of BP Amoco on any matter.
2.1.2.2. The authorized capital stock of ARCO consists of
600,000,000 ARCO Common Shares, of which 325,937,777 ARCO Common
Shares were issued and outstanding as of the close of business on
March 26, 1999, 75,000,000 shares of Preferred Stock, par value
$.01 per share ("ARCO Preferred Stock"), of which no shares were
outstanding as of the date hereof; 78,089 shares of $3.00
Cumulative Convertible Preference Stock, par value $1.00 per
share ("ARCO $3.00 Preference Stock"), of which 49,749 shares
were outstanding as of March 26, 1999; and 833,776 shares of
$2.80 Cumulative Convertible Preference Stock, par value $1.00
per share ("ARCO $2.80 Preference Stock"), of which 564,439
shares were outstanding as of March 26, 1999 (the ARCO $3.00
Preference Stock and the ARCO $2.80 Preference Stock being
referred to herein as the "ARCO Preference Stock"). All of the
outstanding ARCO Common Shares and shares of ARCO Preference
Stock have been duly authorized and validly issued and are fully
paid and nonassessable. ARCO has no ARCO Common Shares, shares of
ARCO Preferred Stock or shares of ARCO Preference Stock reserved
for or otherwise subject to issuance, except that (i) as of the
close of business on March 29, 1999, there were 13,927,493.16
ARCO Common Shares subject to issuance pursuant to options or
other common stock equivalents (excluding Prospective Dividend
Share Credits (as defined in the ELTIP)) outstanding under the
plans of ARCO identified in paragraph 2.1.2.2 of the ARCO
Disclosure Letter as being the only ARCO Compensation and Benefit
Plans pursuant to which ARCO Common Shares may be issued
<PAGE>
(the "ARCO Stock Plans"); and (ii) as of the date hereof, there
are not less than 64,861,617 ARCO Common Shares reserved for
issuance pursuant to the Stock Option Agreement. Each of the
outstanding shares of capital stock or other ownership interests
of each of ARCO's Significant Subsidiaries (or, in the case of
Vastar Resources, Inc. ("Vastar"), the shares of capital stock of
Vastar owned by ARCO) is duly authorized, validly issued, fully
paid and nonassessable and owned by ARCO or a direct or indirect
wholly owned subsidiary of ARCO, in each case free and clear of
any Encumbrance. Except as set forth above or as contemplated by
this Agreement, there are no preemptive or other outstanding
rights, options, warrants, conversion rights, stock appreciation
rights, redemption rights, repurchase rights, agreements,
arrangements, calls, commitments or rights of any kind which
obligate ARCO or any of its Subsidiaries to issue or sell any
shares of capital stock or other securities of ARCO or any of its
Subsidiaries or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a
right to subscribe for or acquire from ARCO or any of its
Subsidiaries, any securities of ARCO or any of its Subsidiaries,
and no securities or obligations evidencing such rights are
authorized, issued or outstanding. The ARCO Common Shares
issuable pursuant to the Stock Option Agreement have been duly
reserved for issuance by ARCO, and upon any issuance of such ARCO
Common Shares in accordance with the terms of the Stock Option
Agreement, such ARCO Common Shares will be duly authorized,
validly issued, fully paid and nonassessable and free and clear
of any Encumbrance. ARCO does not have outstanding any bonds,
debentures, notes or other obligations the holders of which have
the right to vote (or which are convertible into or exercisable
for securities having the right to vote) with the stockholders of
ARCO on any matter.
2.1.3. Corporate Authority; Approval and Fairness.
2.1.3.1. BP Amoco has all requisite corporate power and
authority and has taken all corporate action necessary in order
to execute, deliver and perform its obligations under this
Agreement and the Stock Option Agreement and to consummate the
Merger and the other transactions contemplated hereby and
thereby, subject only to the approval of the Merger by, on a show
of hands, not less than the requisite majority of the holders of
outstanding BP Amoco Ordinary Shares, BP Amoco First Preference
Shares and BP Amoco Second Preference Shares (collectively, the
"BP Amoco Voting Shares") present in person or, on a poll, not
less than the requisite majority of the votes attaching to the BP
Amoco Voting Shares voted by the holders in person or by proxy at
the BP Amoco Shareholders Meeting (as defined in Section 3.4)
(the "BP Amoco Requisite Vote"). The execution, delivery and
performance of this Agreement and the Stock Option Agreement have
been duly authorized by all necessary corporate action on the
part of BP Amoco, and, assuming the due authorization, execution
and delivery of this Agreement and the Stock Option Agreement by
ARCO, this Agreement and the Stock Option Agreement constitute
valid and binding agreements of BP Amoco,
6
<PAGE>
enforceable against BP Amoco in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles (the "Bankruptcy and Equity
Exception"). The Board of Directors of BP Amoco has approved this
Agreement, the Stock Option Agreement, the Merger and the other
transactions contemplated hereby and thereby and the Board of
Directors has received the opinion of its financial advisor,
Morgan Stanley & Co. Incorporated, to the effect that, as of the
date of this Agreement, the Exchange Ratio is fair to BP Amoco,
from a financial point of view.
2.1.3.2. ARCO has all requisite corporate power and
authority and has taken all corporate action necessary in order
to execute, deliver and perform its obligations under this
Agreement and the Stock Option Agreement and to consummate the
Merger and the other transactions contemplated hereby and
thereby, subject only to the adoption of this Agreement by the
vote of the holders of a majority of the outstanding stock
entitled to vote at the ARCO Stockholders Meeting (as defined in
Section 3.4) (the "ARCO Requisite Vote"). The execution, delivery
and performance of this Agreement and the Stock Option Agreement
have been duly authorized by all necessary corporate action on
the part of ARCO and, assuming the due authorization, execution
and delivery of this Agreement and the Stock Option Agreement by
BP Amoco, this Agreement and the Stock Option Agreement
constitute valid and binding agreements of ARCO enforceable
against ARCO in accordance with their terms, subject to the
Bankruptcy and Equity Exception. The Board of Directors of ARCO
(A) has unanimously approved this Agreement, the Stock Option
Agreement, the Merger and the other transactions contemplated
hereby and thereby and declared the advisability of the Merger
Agreement and (B) has received the opinions of its financial
advisors, Goldman, Sachs & Co. and Salomon Smith Barney Inc., to
the effect that, as of the date of this Agreement, the Exchange
Ratio is fair to the holders of ARCO Common Shares (other than
holders of Excluded ARCO Shares) from a financial point of view.
2.1.4. Governmental Filings; No Violations.
2.1.4.1. Other than the necessary filings, permits,
authorizations, notices, approvals, confirmations, consents,
declarations and/or decisions (A) pursuant to Sections 1.2.2 and
3.3.1, (B) under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), the Exchange Act, the
Securities Act and the Exon-Florio provisions of the Omnibus
Trade and Competitiveness Act of 1988 ("Exon-Florio"), (C) to
comply with the rules and regulations of the NYSE or the LSE or
any other stock exchanges on which securities of BP Amoco, ARCO
or any of their respective Subsidiaries are listed, (D) to comply
with Council Regulation (EEC) No 4064/89 as amended (the
"Regulation"), (insofar as the Merger constitutes a concentration
with a Community dimension within the scope of the Regulation),
(E) from the UK Office of Fair
<PAGE>
Trading that is not the intention of the UK Secretary of State
for Trade and Industry to refer the Merger or any matters arising
therefrom to the UK Monopolies and Mergers Commission (the "MMC")
or from the Secretary of State for Trade and Industry in the
event that the Merger or any matters arising therefrom are
referred to the MMC (insofar as the Merger qualifies for
investigation by the MMC under the UK Fair Trading Act 1973 or a
referral is made by the European Commission to the UK Competent
Authority under Article 9 of the Regulation), (F) with or from
any other national authority within the European Community to
which the Merger (or any part of it) is referred pursuant to
Article 9 of the Regulation) and (G) from H.M. Treasury pursuant
to section 765 of the Income and Corporation Taxes Act 1988 (or
the confirmation from H.M. Treasury or the Inland Revenue that no
such consent is required to the transactions contemplated by this
Agreement) (such filings, permits, authorizations, notices,
approvals, confirmations, consents, declarations and/or decisions
to be made, given or obtained by BP Amoco being the "BP Amoco
Required Consents" and by ARCO being the "ARCO Required
Consents"), no filings, notices, declarations and/or decisions
are required to be made by it with, nor are any permits,
authorizations, approvals or other confirmations or consents
required to be obtained by it from, any governmental or
regulatory (including stock exchange) authority, agency, court,
commission, body or other governmental entity (including the U.K.
Panel on Takeovers and Mergers (the "Takeover Panel")) (each, a
"Governmental Entity"), in connection with the execution and
delivery by it of this Agreement and the Stock Option Agreement
and the consummation by it of the Merger and the other
transactions contemplated hereby and thereby, except those the
failure of which to make, give or obtain would not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect on it or prevent, materially delay or materially
impair its ability to consummate the Merger and the other
transactions contemplated by this Agreement and the Stock Option
Agreement.
2.1.4.2. The execution, delivery and performance of this
Agreement and the Stock Option Agreement by it do not, and the
consummation by it of the Merger and the other transactions
- - contemplated hereby and thereby (including, in the case of BP
Amoco, the issue of BP Amoco Ordinary Shares, and the deposit of
BP Amoco Ordinary Shares by or on behalf of BP Amoco with the
Depositary against issuance of BP Amoco Depositary Shares in
accordance with the Deposit Agreement) will not, constitute or
result in (A) a breach or violation of, or a default under, its
memorandum or articles of association, in the case of BP Amoco,
or its restated certificate of incorporation or by-laws, in the
case of ARCO, or the comparable governing instruments of any of
the Significant Subsidiaries of BP Amoco or ARCO (in each case as
amended from time to time), (B) subject to making, giving or
obtaining all necessary filings, permits, authorizations,
notices, approvals, confirmations, consents, declarations and/or
decisions described in Section 2.1.4.1 and all other necessary
third-party consents as set forth in paragraph 2.1.4.2 of its
<PAGE>
Disclosure Letter, a breach or violation of, or a default under,
the acceleration of any obligations or rights of third parties or
the creation of an Encumbrance on the assets of it or any of its
Subsidiaries (with or without notice, lapse of time or both)
pursuant to any agreement, lease, license, contract, note,
mortgage, indenture, arrangement or other obligation
("Contracts") binding upon it or any of its Subsidiaries or any
law, ordinance, regulation, judgment, order, decree, arbitration,
award, license or permit of any Governmental Entity ("Law") or
non- governmental permit or license to which it or any of its
Subsidiaries is subject, or (C) any change in the rights or
obligations of either Party under any of its Contracts, except,
in the case of clause (B) or (C) above, for any breach,
violation, default, acceleration, creation or change that,
individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on it or prevent,
materially delay or materially impair its ability to consummate
the Merger and the other transactions contemplated by this
Agreement and the Stock Option Agreement.
2.1.5. Reports; Financial Statements.
2.1.5.1. BP Amoco has made available to ARCO copies of (A)
each registration statement, report and annual report prepared by
it or its Subsidiaries and filed with the SEC since December 31,
1997, each in the form (including exhibits, annexes and any
amendments thereto) filed with the SEC, a draft as of the date
hereof of BP Amoco's Annual Report on Form 20-F for the year
ended December 31, 1998 (the "BP Amoco 20-F," December 31, 1998
being the "BP Amoco Audit Date"), and each quarterly report
distributed by BP Amoco to its shareholders (collectively,
including any such registration statement, report or annual
report filed with the SEC or, in the case of quarterly reports,
distributed to BP Amoco shareholders subsequent to the date
hereof, the "BP Amoco Reports"); and (B) all circulars, reports
and other documents distributed by BP Amoco to its shareholders
since the BP Amoco Audit Date. As of their respective dates, the
BP Amoco Reports (i) complied in all material respects with, and
any BP Amoco Report filed, distributed or delivered subsequent to
the date hereof will comply in all material respects with, any
applicable requirements of the Securities Act and the Exchange
Act and the rules and regulations of the SEC promulgated
thereunder and (ii) did not, and any BP Amoco Report filed,
distributed or delivered subsequent to the date hereof will not
(and all circulars, reports and other documents referred to in
clause (B) of the preceding sentence did not, and such materials
circulated subsequent to the date hereof will not), contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under
which they were made, not misleading. Each of the audited
consolidated balance sheets of BP Amoco and its Subsidiaries
included in or incorporated by reference into the BP Amoco
Reports (including the related notes and schedules) fairly
presents, or will fairly present, in all material respects, the
consolidated financial position of BP Amoco and its Subsidiaries
as of its date, and each of the related
9
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consolidated statements of income, changes in shareholders'
interest, total recognized gains and losses and cash flows
included in or incorporated by reference into the BP Amoco
Reports (including any related notes and schedules) fairly
presents, or will fairly present, in all material respects, the
consolidated results of its operations, retained earnings and
cash flows of BP Amoco and its Subsidiaries as of the relevant
dates for the periods set forth therein (subject, in the case of
unaudited statements, to notes and normal year-end audit
adjustments that will not be material in amount or effect), in
each case in accordance with generally accepted accounting
principles in the U.K. ("U.K. GAAP") consistently applied during
the periods involved except as may be noted therein. The related
notes reconciling to generally accepted accounting principles in
the United States ("U.S. GAAP") the consolidated net income and
shareholders' equity of BP Amoco and its Subsidiaries comply in
all material respects with the requirements of the SEC applicable
to such reconciliation.
2.1.5.2. ARCO has made available to BP Amoco copies of each
registration statement, report, proxy statement or information
statement prepared by it or any of its Subsidiaries and filed
with the SEC since December 31, 1998 (December 31, 1998 being the
"ARCO Audit Date," with the BP Amoco Audit Date and the ARCO
Audit Date each being referred to herein as the relevant Party's
"Audit Date"), including ARCO's Annual Report on Form 10-K for
the year ended December 31, 1998, each in the form (including
exhibits, annexes and any amendments thereto) filed with the SEC
(collectively, including any such registration statement, report,
proxy statement or information statement filed with the SEC
subsequent to the date hereof, the "ARCO Reports"). As of their
respective dates, the ARCO Reports (i) complied in all material
respects with, and any ARCO Report filed subsequent to the date
hereof will comply in all material respects with, any applicable
requirements of the Securities Act and the Exchange Act and the
rules and regulations of the SEC promulgated thereunder and (ii)
did not, and any ARCO Reports filed with the SEC subsequent to
the date hereof will not, contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets included in
or incorporated by reference into the ARCO Reports (including the
related notes and schedules) fairly presents, or will fairly
present, in all material respects, the consolidated financial
position of ARCO and its Subsidiaries as of its date and each of
the related consolidated statements of income, changes in
stockholders' equity and cash flows included in or incorporated
by reference into the ARCO Reports (including any related notes
and schedules) fairly presents, or will fairly present in all
material respects, the consolidated results of operations and
cash flows of ARCO and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to notes
and normal year-end audit adjustments that will not be material
in amount or effect), in each case in accordance with U.S. GAAP
consistently applied during the periods involved except as
10
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may be noted therein. The BP Amoco Reports and the ARCO Reports
are collectively referred to herein as the "Reports," and
references in this Agreement to "Reports filed prior to the date
hereof" shall include, with respect to BP Amoco, the BP Amoco
20-F provided to ARCO on or prior to the date hereof.
2.1.6. Absence of Certain Changes. Except as disclosed in the
Reports filed prior to the date hereof, or as expressly contemplated
by this Agreement, since its respective Audit Date it and its
Subsidiaries have conducted their respective businesses only in, and
have not engaged in any material transaction other than according to,
the ordinary and usual course of such businesses, and there has not
been (i) any change in the financial condition, properties, business
or operating income of it and its Subsidiaries except those changes
that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect on it; (ii)
any declaration, setting aside or payment of any dividend or other
distribution in cash, stock or property in respect of its capital
stock, except for dividends or other distributions on its capital
stock publicly announced prior to the date hereof and except as
expressly permitted hereby; (iii) any stock split, stock combination,
recapitalization, redenomination of share capital or other similar
transaction or issuance or authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock, except as expressly contemplated hereby or, in the
case of ARCO, in the Stock Option Agreement; or (iv) any change by it
in accounting principles, practices or methods except as required by
changes in U.K. GAAP or U.S. GAAP, as the case may be. Since its
respective Audit Date, except as provided for herein or as disclosed
in the Reports filed prior to the date hereof, there has not been any
material increase in the compensation payable or that could become
payable by it or any of its Subsidiaries to officers or key employees
or any amendment of any of its compensation or benefit plans or
agreements other than increases or amendments in the ordinary course
or as contemplated by this Agreement.
2.1.7. Litigation and Liabilities. Except as disclosed in the
Reports filed prior to the date hereof, there are no (i) civil,
criminal or administrative actions, suits, claims, hearings,
investigations, complaints or proceedings pending or, to the knowledge
of, in the case of BP Amoco, its Chief Executive Officer, Deputy Chief
Executive Officer, Chief Financial Officer or General Counsel ("BP
Amoco Executive Directors"), and, in the case of ARCO, its Chief
Executive Officer, President, Chief Financial Officer or General
Counsel ("ARCO Executive Officers"), threatened against it or any of
its Affiliates or (ii) obligations or liabilities, whether or not
accrued, contingent or otherwise and whether or not required to be
disclosed, or any other facts or circumstances of which, in the case
of BP Amoco, the BP Amoco Executive Directors, and, in the case of
ARCO, the ARCO Executive Officers, have knowledge that would
reasonably be expected to result in any claims against, or obligations
or liabilities of, it or any of its Subsidiaries, except, in each
case, for those that, individually or in the aggregate, have not had
and would not reasonably be expected to have a Material Adverse Effect
on it or prevent, materially delay or materially impair its ability to
consummate the Merger and the other transactions contemplated by this
Agreement and the Stock Option Agreement.
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2.1.8. Takeover Statutes. Assuming that BP Amoco's representation
and warranty set forth in Section 2.1.10.1 is true and correct, the
board of directors of ARCO has taken or will take all appropriate and
necessary action such that BP Amoco will not be prohibited from
entering in a "business combination" with ARCO as an "interested
stockholder" (in each case as such term is used in Section 203 of the
DGCL) without complying with Section 203(a)(3) of the DGCL as a result
of the execution and delivery of this Agreement and the Stock Option
Agreement or the consummation of the transactions contemplated hereby
and thereby. No other "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation,
including such business combination provisions of the DGCL (each, a
"Takeover Statute"), and no anti- takeover provision in the restated
certificate of incorporation or by-laws of ARCO is, or at the
Effective Time will be, applicable to the Merger or any of the other
transactions contemplated by this Agreement and the Stock Option
Agreement.
2.1.9. Brokers and Finders. Neither it nor any of its
Subsidiaries, officers, directors or employees has employed any broker
or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the execution and
delivery of this Agreement, the Stock Option Agreement, the Merger or
the other transactions contemplated by this Agreement and the Stock
Option Agreement, except that (i) BP Amoco has employed Morgan Stanley
& Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Cazenove & Co. as its financial advisors, the arrangements with
all of which have been disclosed to ARCO prior to the date hereof, and
(ii) ARCO has retained Goldman, Sachs & Co. and Salomon Smith Barney
Inc. as its financial advisors, the arrangements with both of which
have been disclosed to BP Amoco prior to the date hereof.
2.1.10. Ownership of Other Party's Common Stock.
2.1.10.1. Neither BP Amoco nor any of its Subsidiaries
"beneficially owns" (as such term is defined in Rule 13d-3 under
the Exchange Act) any ARCO Common Shares.
2.1.10.2. Neither ARCO nor any of its Subsidiaries
"beneficially owns" (as such term is defined in Rule 13d-3 under
the Exchange Act) any BP Amoco Ordinary Shares or BP Amoco
Depositary Shares (other than any BP Amoco Ordinary Shares or BP
Amoco Depositary Shares beneficially owned by an ARCO
Compensation and Benefit Plan or an ARCO sponsored non-U.S.
employee benefit plan).
2.1.11. Merger Sub. Merger Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby and has not (i)
engaged in any business activities, (ii) conducted any operations
other than in connection with the transactions contemplated hereby or
(iii) incurred any liabilities other than in connection with the
transactions contemplated hereby. The execution, delivery and
performance of this Agreement have been duly authorized by all
necessary corporate action on the part of Merger Sub and, assuming the
due authorization, execution and delivery of this Agreement by ARCO
and BP Amoco, this
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Agreement constitutes a valid and binding agreement of Merger Sub
enforceable against Merger Sub in accordance with its terms, subject
to the Bankruptcy and Equity Exception. BP Amoco, as Merger Sub's sole
stockholder, has approved Merger Sub's execution, delivery and
performance of this Agreement and has adopted this Agreement.
2.1.12. ARCO Employee Benefit Plans.
2.1.12.1. Set forth in Section 2.1.12 of the ARCO Disclosure
Letter are all significant compensation and benefit plans,
contracts, policies or arrangements currently in effect for U.S.
based employees covering current or former employees of ARCO and
its Subsidiaries and current or former directors of ARCO,
including, but not limited to, "employee benefit plans" within
the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and deferred
compensation, stock option, stock purchase, stock appreciation
rights, stock based, incentive and bonus plans (the "ARCO
Compensation and Benefit Plans"). True and complete copies of all
ARCO Compensation and Benefit Plans, including, but not limited
to, any trust instruments and insurance contracts forming a part
of any ARCO Compensation and Benefit Plan, and all amendments
thereto have been provided or made available to BP Amoco.
2.1.12.2. Except as set forth in Section 2.1.12 of the ARCO
Disclosure Letter, none of the execution and delivery of this
Agreement by ARCO, the performance by ARCO of its obligations
hereunder, the consummation of the transactions contemplated by
this Agreement nor any other action taken or failed to be taken
by ARCO prior to the execution of this Agreement will (a) limit
ARCO's right, in its sole discretion, to administer, amend or
terminate any ARCO Compensation and Benefit Plan or any related
trust instrument, (b) entitle any employees of ARCO or any of its
Subsidiaries to severance pay, (c) accelerate the time of payment
or vesting or trigger any payment or funding (through a grantor
trust or otherwise) of compensation, benefits or awards under,
increase the amount payable or trigger any other material
obligation pursuant to, any of the ARCO Compensation and Benefit
Plans or (d) result in any breach or violation of, or a default
under, any of the ARCO Compensation and Benefit Plans.
2.1.13. Environmental Matters. Except as disclosed in its Reports
filed prior to the date hereof and except for such matters that,
individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect on it, to the
knowledge of the BP Amoco Executive Officers or the ARCO Executive
Officers, as applicable, (i) it and its Subsidiaries are in compliance
with all applicable Environmental Laws; (ii) no property currently or
formerly owned or operated by it or its Subsidiaries is contaminated
with any Hazardous Substance requiring remediation under any
Environmental Law; (iii) neither it nor any of its Subsidiaries is
subject to liability under any Environmental Law for off-site disposal
or contamination; (iv) neither it nor any
<PAGE>
of its Subsidiaries has received any claim, notice, demand or letter
indicating that it may be in violation of, or subject to liability
under, any Environmental Law; (v) neither it nor any of its
Subsidiaries is subject to any order, decree, investigation,
injunction or agreement with any Governmental Entity or any third
party relating to any Environmental Law; and (vi) there are no other
circumstances or conditions involving it or any of its Subsidiaries
that reasonably could be expected to result in any claims, liabilities
or costs in connection with any Environmental Law.
As used herein, "Environmental Law" means any federal, state,
local and foreign law, regulation, order, decree, common law or agency
requirement relating to the protection of the environment or human
health and safety, and "Hazardous Substance" means any substance,
waste or byproduct in any concentration that is listed, classified or
regulated pursuant to any Environmental Law, including petroleum and
petroleum products and wastes, mine tailings and wastes, asbestos,
lead products and polychlorinated biphenyls.
2.1.14. ARCO Rights Plan. Assuming that BP Amoco's representation
and warranty set forth in Section 2.1.10.1 is true and correct, the
board of directors of ARCO has taken all action necessary to render
the rights (the "Rights") issued under the Rights Agreement, dated as
of July 24, 1995 (the "Rights Agreement"), between ARCO and First
Chicago Trust Company of New York inapplicable to the Merger, this
Agreement, the Stock Option Agreement and the other transactions
contemplated hereby and thereby. ARCO will take all necessary action
with respect to all of the outstanding Rights so that, as of
immediately prior to the Effective Time, (A) neither ARCO nor BP Amoco
will have any obligations under the Rights or the Rights Agreement and
(B) the holders of the Rights will have no rights under the Rights or
the Rights Agreement.
2.1.15. ARCO Joint Ventures; Exclusivity Arrangements. For
purposes of this Agreement, the material organizational documents,
shareholder, membership or voting agreements and material agreements
relating to the transfer of investments and management or
operatorships to which it or any of its Subsidiaries is a party in
connection with its joint ventures are referred to herein as the
"Joint Venture Agreements", and the non-compete, exclusivity or
similar agreements pursuant to which the ability of ARCO or any of its
Subsidiaries or Affiliates of any of them to engage in any line of
business, to contract with third parties or to do business in any
geographic area is restricted in any material manner, and any
area-of-mutual-interest agreements, are referred to herein as the
"Exclusivity Agreements". All of ARCO's Joint Venture Agreements and
Exclusivity Agreements are, with respect to it and its Subsidiaries,
valid and in full force and effect on the date hereof except for any
failures to be in full force and effect that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect on it. Neither ARCO nor any of its Subsidiaries has violated
any provision of, or committed or failed to perform any act which with
or without notice, lapse of time or both would constitute a default
under the provisions of, any of its Joint Venture Agreements or
Exclusivity Agreements, except in each case for such violations, acts
or omissions as, individually or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect on it;
it being understood that no effect arising out of the execution,
performance or consummation of this Agreement shall be deemed to have
a Material Adverse Effect for purposes of this Section 2.1.15.
2.1.16. Tax Matters. Neither it nor any of its Affiliates has
taken or agreed to take any action that would, or failed to take any
action the omission of which would, or has reason to believe that any
conditions exist that could reasonably be expected to (i) prevent or
impede the Merger from qualifying as a reorganization under Section
368(a) of the Code or (ii) cause the Eligible ARCO Shareholders to
recognize taxable gain with respect to the Merger pursuant to Section
367(a) of the Code (except with respect to cash received in lieu of
fractional BP Amoco Shares).
2.2. Vastar. Notwithstanding anything to the contrary in this
Article II, ARCO does not make any representation or warranty with respect
to Vastar and its Subsidiaries (i) as of any date after the date hereof or
(ii) for matters covered by the fifth sentence of Section 2.1.2.2, clauses
(B) and (C) of Section 2.1.4.2, the last sentence of Section 2.1.6, and
Section 2.1.12; provided, however, that (x) ARCO represents and warrants as
of the date hereof that, to the knowledge of the ARCO Executive Officers,
without any investigation or inquiry, the representations and warranties
referred to in the foregoing clause (ii) are true and accurate with respect
to Vastar and its Subsidiaries and (y) ARCO will make the representations
and warranties contained in Sections 2.1.5.2 and 2.1.6(i) with respect to
Vastar and its Subsidiaries as of the Closing Date as though made on the
Closing Date (except that any such representation or warranty that by its
terms expressly speaks as of an earlier date shall be true and correct as
of its date) for purposes of Section 4.2.1.
ARTICLE III
Covenants
3.1. Interim Operations.
3.1.1. Interim Operations of BP Amoco. BP Amoco covenants and
agrees as to itself and its Subsidiaries that, after the date hereof
and until the Effective Time (unless ARCO shall otherwise approve in
writing and except as otherwise expressly contemplated by or provided
in this Agreement (including the BP Amoco Disclosure Letter), or as
required by applicable Law):
3.1.1.1. BP Amoco shall not:
(i) amend its memorandum and articles of association in
any manner that would adversely affect the rights of any
Party under this Agreement, the transactions contemplated
hereby or the rights of holders of BP Amoco Ordinary Shares
or BP Amoco Depositary Shares;
(ii) split, combine, subdivide or reclassify its
outstanding shares of capital stock;
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(iii) declare, set aside or pay any dividend or
distribution payable in cash, stock or property in respect
of any capital stock other than (A) regular quarterly cash
dividends on BP Amoco Ordinary Shares consistent with past
practice, including periodic dividend increases consistent
with past practice, and (B) regular cash dividends on the
issued and outstanding BP Amoco First Preference Shares and
BP Amoco Second Preference Shares; or
(iv) repurchase, redeem or otherwise acquire, or permit
any of its Subsidiaries to purchase, redeem or otherwise
acquire (except for repurchases, redemptions or acquisitions
(A) required by the terms of its capital stock or securities
outstanding on the date hereof or (B) required by or in
connection with the respective terms as of the date hereof
of any Option Schemes or any dividend reinvestment plan as
in effect on the date hereof in the ordinary course of the
operation of such plans) any shares of the capital stock of
BP Amoco or any securities convertible into or exchangeable
or exercisable for any shares of the capital stock of BP
Amoco;
3.1.1.2. neither BP Amoco nor any of its Subsidiaries
shall issue, sell, pledge, dispose of or encumber any shares
of, or securities convertible into or exchangeable or
exercisable for, or rights, options, warrants, conversion
rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements, calls,
commitments or rights of any kind to acquire, the capital
stock of BP Amoco of any class (other than (x) BP Amoco
Ordinary Shares issuable or transferable pursuant to (A)
options outstanding on the date hereof under the Option
Schemes and (B) additional options or rights to acquire BP
Amoco Ordinary Shares granted under the terms of any Option
Scheme as in effect on the date hereof or as amended, or any
similar option scheme adopted in replacement of or as an
enhancement to any such option scheme, in each case in the
ordinary course of the operation of such option scheme, (y)
BP Amoco Ordinary Shares issuable or transferable pursuant
to such options or rights so granted and (z) issuances of
securities in connection with grants, awards or issuances of
stock-based compensation);
3.1.1.3. subject to the provisions of Section 3.5.1,
neither BP Amoco nor any of its Subsidiaries shall take any
action or omit to take any action for the purpose of
preventing, delaying or impeding the consummation of the
Merger or the other transactions contemplated by this
Agreement and the Stock Option Agreement including any
action or omission that would cause (i) the Merger to fail
to qualify as a reorganization under Section 368(a) of the
Code or (ii) the exchange of BP Amoco Shares for ARCO Common
Shares in the Merger to fail to qualify for nonrecognition
of gain (except with respect to (a) cash received in lieu of
fractional BP Amoco Shares or (b) stockholders of ARCO that
are not Eligible ARCO Shareholders); and
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3.1.1.4. neither BP Amoco nor any of its Subsidiaries
shall authorize or enter into an agreement to do any of the
foregoing.
3.1.2. Interim Operations of ARCO. ARCO covenants and agrees
as to itself and its Subsidiaries that, after the date hereof and
until the Effective Time (unless BP Amoco shall otherwise approve
in writing and except as otherwise expressly contemplated by or
provided in this Agreement (including the ARCO Disclosure Letter)
or the Stock Option Agreement, or as required by applicable Law,
and subject to Section 3.17):
3.1.2.1. the business of ARCO and its Subsidiaries
shall be conducted in the ordinary and usual course and, to
the extent consistent therewith, ARCO and each of its
Subsidiaries shall use their respective best reasonable
efforts to preserve its business organization intact and
maintain its existing relations, status and goodwill with
customers, suppliers, creditors, state, federal and foreign
governmental authorities, lessors, employees and business
associates;
3.1.2.2. ARCO shall not:
(i) amend its restated certificate of
incorporation; amend its by-laws in any manner that would
adversely affect the rights of any Party under this
Agreement or the transactions contemplated hereby or affect
the rights of holders of ARCO Common Shares; or, subject to
the fiduciary duties of ARCO's board of directors, amend,
modify or terminate the Rights Agreement;
(ii) split, combine, subdivide or reclassify its
outstanding shares of capital stock;
(iii) declare, set aside or pay any dividend or
distribution payable in cash, stock or property in respect
of any capital stock other than (A) regular quarterly cash
dividends on ARCO Common Shares not in excess of the
quarterly cash dividends declared by ARCO in the quarter
ended December 31, 1998 and (B) regular cash dividends on
the issued and outstanding shares of ARCO Preference Stock;
or
(iv) repurchase, redeem or otherwise acquire, or
permit any of its Subsidiaries to purchase, redeem or
otherwise acquire (except for repurchases, redemptions or
acquisitions (A) required by the terms of its capital stock
or securities outstanding on the date hereof or (B) required
by or in connection with the respective terms as of the date
hereof of any ARCO Stock Plans or any dividend reinvestment
plan as in effect on the date hereof in the ordinary course
of the operation of such plans) any shares of the capital
stock of ARCO or any securities convertible into or
exchangeable or exercisable for any shares of the capital
stock of ARCO;
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<PAGE>
3.1.2.3. neither ARCO nor any of its Subsidiaries
shall:
(i) issue, sell, pledge, dispose of or encumber
any shares of, or securities convertible into or
exchangeable or exercisable for, or rights, options,
warrants, conversion rights, stock appreciation rights,
redemption rights, repurchase rights, agreements,
arrangements, calls, commitments or rights of any kind to
acquire, the capital stock of ARCO of any class (other than
(A) ARCO Common Shares issuable or deliverable (x) pursuant
to options outstanding on the date hereof under the ARCO
Stock Plans, (y) in connection with the conversion of shares
of ARCO Preference Stock in accordance with their terms or
(z) pursuant to the Stock Option Agreement; (B) issuances of
ARCO Common Shares, including Restricted Stock,
Performance-Based Restricted Stock, Contingent Restricted
Stock and Dividend Share Credits, in connection with grants
and awards made prior to the date hereof; (C) issuances of
securities in connection with grants, awards or issuances of
stock-based compensation made in accordance with Section
3.1.2.4; (D) Rights issuable pursuant to the Rights
Agreement in respect of ARCO Common Shares issued or to be
issued in accordance with this clause (i) or Section
3.1.2.4; or (E) ARCO Common Shares issuable upon the
exercise of Rights);
(ii) transfer, lease, license, sell or otherwise
dispose of any of its property or assets (including capital
stock of any of its Subsidiaries), including any
contribution of property or assets to a joint venture
(including any joint venture that may be entered into
pursuant to Section 3.1.2.3 (vii)) and any transfer or
disposition in connection with financing transactions, other
than property or assets having an aggregate fair market
value of not more than $500 million; provided, however, that
ARCO shall not transfer, lease, license, sell or otherwise
dispose of any individual property or asset with a fair
market value in excess of $50 million without first
consulting with BP Amoco;
(iii) incur any indebtedness except for (x)
long-term indebtedness not in excess of $1.5 billion
incurred in connection with the refinancing of existing
indebtedness and (y) commercial paper and short- term
indebtedness repayable upon less than 30 days' notice
without penalty (other than LIBOR "breakage" costs);
provided, however, that ARCO shall provide reasonable
advance notice to and consult with BP Amoco on the
development of, and any proposed changes in, ARCO's plans
for such refinancings contemplated by clause (x) (including
expected maturities and other material terms);
(iv) make capital expenditures in an aggregate
amount in excess of $2.7 billion during 1999 and $2.7
billion during 2000, plus, in each year no more than an
additional 15% of such limit, after reasonable advance
notice to and consultation with BP Amoco with respect to
ARCO's plans for such additional capital expenditures; or,
without first consulting with BP Amoco, authorize or commit
to any individual future
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capital expenditure in an amount in excess of $50 million
unless such consultation would be inconsistent with
applicable Laws;
(v) by any means make or authorize or commit to
any acquisition of, or investment in, assets or stock of any
other Person or entity except to the extent that such
acquisition or investment is a capital expenditure permitted
pursuant to Section 3.1.2.3(iv) or a contribution to a joint
venture permitted pursuant to Section 3.1.2.3(ii);
(vi) terminate any existing line of business; or
(vii) without reasonable advance notice to and
consultation with BP Amoco, enter into any new shareholder,
membership or voting agreements or other agreements relating
to the transfer of investments or management or
operatorships in connection with joint ventures other than
any such agreements with respect to which the total book
value or fair market value (whichever is greater) of all of
the assets of ARCO and its Subsidiaries to be employed in or
subject to the relevant joint venture is less than $200
million;
3.1.2.4. neither ARCO nor any of its Subsidiaries shall
(i) terminate, establish, adopt, enter into, make
any new (or accelerate or otherwise modify any existing)
grants or awards of stock- based compensation or other
benefits under, amend or otherwise modify any ARCO
Compensation and Benefit Plan except for (A) grants or
awards to directors, officers and employees of it or any of
its Subsidiaries under existing ARCO Compensation and
Benefit Plans in the ordinary and usual course of business
consistent with past practice (which shall include normal
periodic performance reviews and the making of related
grants and awards with provisions consistent with past
practice; but shall not include any grants or awards that
would accelerate, vest or become payable solely as a result
of the consummation of the transactions contemplated by this
Agreement) and, with respect to stock-based compensation, in
any event not in excess of a number of grants or awards (x)
granted after the date of this Agreement and before December
31, 1999 that would (currently or with the passage of time
or the fulfillment of conditions), in the aggregate, entitle
the holders thereof to receive or to purchase 200,000 ARCO
Common Shares pursuant to at-market stock options; and (y)
granted after February 1, 2000 that would (currently or with
the passage of time or the fulfillment of conditions), in
the aggregate, entitle the holders thereof to receive or to
purchase 1.5 million ARCO Common Shares pursuant to
at-market stock options and 250,000 ARCO Common Shares
pursuant to other equity-based awards, except that
additional stock options may be substituted for other
equity-based awards on an equivalent value basis, with
calculation of the value of each equity instrument based on
reasonable and customary valuation methods; (B) actions
necessary to satisfy existing contractual obligations under
ARCO Compensation and Benefit Plans in force as of the date
hereof, as required by law or under the
18
<PAGE>
terms of any collective bargaining agreement or any other
action in the ordinary and usual course of business which
would not significantly increase the cost of such plan to
ARCO; and (C) actions necessary in order to extend the
effectiveness of the Enhanced Retirement Program as set
forth in Section 41 of the ARCO Retirement Plan, Section 19
of the CH- Twenty, Inc. Retirement Plan and Section 4A and
5A of the ARCO Special Termination Allowance Plan (the
"Enhanced Retirement Program"), including but not limited to
the final average salary feature, as currently in effect,
for qualifying terminations of employment occurring within
two years following the Effective Time;
(ii) increase the salary, wage, bonus or other
compensation of any directors, officers or employees except
for (A) increases occurring in the ordinary and usual course
of business (which shall include normal periodic performance
reviews and related compensation and benefit increases and
increases reasonably required to maintain competitive
compensation (based on market data) for specialized
employees) and (B) the provision of individual compensation
and benefit plans or agreements for newly hired or appointed
officers or employees in the ordinary and usual course of
business consistent with past practice; or
(iii) make any determination with respect to the
satisfaction of performance objectives under the ARCO
Compensation and Benefit Plans other than reasonable
determinations that are consistent with past practice;
3.1.2.5. subject to the provisions of Section 3.5.1,
neither ARCO nor any of its Subsidiaries shall take any
action or omit to take any action for the purpose of
preventing, delaying or impeding the consummation of the
Merger or the other transactions contemplated by this
Agreement and the Stock Option Agreement including any
action or omission that would cause (i) the Merger to fail
to qualify as a reorganization under Section 368(a) of the
Code or (ii) the exchange of BP Amoco Shares for ARCO Common
Shares in the Merger to fail to qualify for nonrecognition
of gain (except with respect to (a) cash received in lieu of
fractional BP Amoco Shares or (b) stockholders of ARCO who
are not Eligible ARCO Shareholders);
3.1.2.6. ARCO shall timely satisfy, or cause to be
timely satisfied, all applicable tax reporting and filing
requirements contained in the Code with respect to the
transactions contemplated hereby, including, without
limitation, the reporting requirements contained in United
States Treasury Regulation Section 1.367(a)-3(c)(6);
3.1.2.7. neither ARCO nor any of its Subsidiaries
shall:
(i) without reasonable advance notice to and
consultation with BP Amoco (unless BP Amoco is an adverse
party with respect to such claim or litigation or to the
extent such consultation would result in
<PAGE>
ARCO waiving its attorney-client privilege with respect to
such claim or litigation), settle or compromise any claims
or litigation where the amount of any such settlement or
compromise exceeds $50,000,000; or
(ii) make any election with respect to taxes that
could reasonably be expected to have a Material Adverse
Effect on it;
3.1.2.8. ARCO shall not modify any accounting policy
except as may be required by changes in Law or in U.S. GAAP;
3.1.2.9. ARCO shall not create, write down or change
any material reserve, except in the ordinary and usual
course of business, without reasonable advance notice to and
consultation with BP Amoco; and
3.1.2.10. neither ARCO nor any of its Subsidiaries
shall authorize or enter into an agreement to do any of the
foregoing.
3.1.3. Consultation as to Material Contracts. ARCO shall
cooperate with BP Amoco promptly after the date hereof in
identifying and creating a list of Contracts that may be
considered material to ARCO and its Subsidiaries. ARCO agrees
that it will provide reasonable advance notice to and consult
with BP Amoco with respect to any material amendment,
modification or termination of, or any waiver, release or
assignment of any material rights or claims under, the Contracts
so identified and listed other than in the ordinary and usual
course of business of ARCO and its Subsidiaries.
3.2. ARCO Acquisition Proposals.
3.2.1. ARCO agrees that, subject to Section 3.2.3 and except
as expressly contemplated by this Agreement, neither it nor any
of its Subsidiaries nor any of the officers or directors of it or
any of its Subsidiaries shall, and that it shall direct and use
its best efforts to cause its and its Subsidiaries' employees,
investment bankers, attorneys, accountants, financial advisors,
agents or other representatives (collectively, the "ARCO
Representatives") not to, directly or indirectly, initiate,
solicit, encourage or otherwise facilitate any inquiries or the
making of any proposal or offer with respect to a merger,
reorganization, share exchange, dual- holding company
transaction, consolidation or similar transaction involving ARCO,
or any purchase of, or offer to purchase, all or substantially
all of the equity securities of ARCO or of its and its
Subsidiaries' assets taken as a whole (any such proposal or offer
being hereinafter referred to as an "ARCO Acquisition Proposal").
ARCO further agrees that neither it nor any of its Subsidiaries
nor any of its or its Subsidiaries' officers or directors shall,
and that it shall direct and use its best efforts to cause the
ARCO Representatives not to, directly or indirectly, have any
discussions with or provide any confidential information or data
to any Person relating to an ARCO Acquisition Proposal or engage
in any negotiations concerning an ARCO Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement
an ARCO Acquisition Proposal; provided, however, that nothing
contained in this Agreement shall prevent ARCO or its board of
directors from (i) making any disclosure to its stockholders if,
in
<PAGE>
the good faith judgment of its board of directors, failure so to
disclose would be inconsistent with its obligations under
applicable Law; (ii) negotiating with or furnishing information
to any Person who has made a bona fide written ARCO Acquisition
Proposal which did not result from a breach of this Section
3.2.1; or (iii) recommending such an ARCO Acquisition Proposal to
its stockholders (and in connection therewith withdraw its
approval or favorable recommendation to stockholders of this
Agreement), if and only to the extent that, in the case of
actions referred to in clause (ii) or clause (iii), such ARCO
Acquisition Proposal is a Superior Proposal (as defined below).
For purposes of this Agreement, a "Superior Proposal" means any
ARCO Acquisition Proposal by a third party (x) on terms which the
board of directors of ARCO determines in its good faith judgment
after consultation with its financial advisors, to be more
favorable from a financial point of view to its stockholders than
the Merger and the other transactions contemplated hereby, and
(y) which the ARCO board of directors determines in its good
faith judgment to constitute a transaction that is reasonably
likely to be consummated on the terms set forth, taking into
account all legal, financial, regulatory and other aspects of
such proposal. ARCO agrees that it will, on the date hereof,
immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Person conducted
heretofore with respect to any ARCO Acquisition Proposal. ARCO
also agrees that if it has not already done so, it will promptly
request each Person, if any, that has heretofore executed a
confidentiality agreement within the 12 months prior to the date
hereof in connection with its consideration of any ARCO
Acquisition Proposal to return or destroy all confidential
information heretofore furnished to such Person by or on behalf
of it or any of its Subsidiaries.
3.2.2. ARCO agrees that it will take the necessary steps
promptly to inform its Subsidiaries and its Subsidiaries'
officers, directors and the ARCO Representatives of the
obligations undertaken in this Section 3.2. ARCO agrees that it
will notify BP Amoco promptly if any such inquiries, proposals or
offers relating to or constituting an ARCO Acquisition Proposal
are received by, any such information is requested from, or any
such discussions or negotiations are sought to be initiated or
continued with, any of its or its Subsidiaries' officers,
directors and the ARCO Representatives indicating, in connection
with such notice, the name of such Person and the material terms
and conditions of any proposals or offers and thereafter shall
keep BP Amoco informed, on a current basis, of the status and
material terms and conditions of any such proposals or offers.
ARCO shall give BP Amoco at least five business days' notice of
all material terms and conditions of each ARCO Acquisition
Proposal and the opportunity to respond to such ARCO Acquisition
Proposal prior to any action by the ARCO board of directors
approving the execution and delivery of a definitive agreement to
implement a transaction in respect of such ARCO Acquisition
Proposal.
3.2.3. Nothing contained herein shall prohibit ARCO from
taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) under the Exchange Act with respect to an ARCO
Acquisition Proposal by means of a tender or exchange offer.
<PAGE>
3.3. Information Supplied.
3.3.1. Registration Statement.
3.3.1.1. Each of BP Amoco and ARCO shall cooperate with
respect to and as promptly as practicable prepare, and BP Amoco
shall file with the SEC as soon as practicable, a Registration
Statement on Form F-4 (the "Form F-4") under the Securities Act,
with respect to the issuance pursuant to this Agreement of the BP
Amoco Shares, which Registration Statement shall include the
proxy statement/prospectus to be sent to holders of ARCO Common
Shares (the "ARCO Proxy Statement") and, so far as appropriate,
the BP Amoco Documents (as defined in Section 3.3.2.1). The
Parties will cause the Form F-4 to comply as to form in all
material respects with the applicable provisions of the
Securities Act and the rules and regulations thereunder. Each of
BP Amoco and ARCO shall use its respective best reasonable
efforts to have the Form F-4 declared effective by the SEC as
promptly as practicable after such filing. BP Amoco shall use its
reasonable efforts to obtain, prior to the effective date of the
Form F-4, all necessary state securities law or "Blue Sky"
permits or approvals required to carry out the transactions
contemplated by this Agreement. BP Amoco will advise ARCO,
promptly after it receives notice thereof, of the time when the
Form F-4 has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the
qualification of the BP Amoco Shares issuable in connection with
the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the ARCO Proxy Statement or
the Form F-4 or comments thereon and responses thereto or
requests by the SEC for additional information.
3.3.1.2. BP Amoco and ARCO each agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion or incorporation
by reference in the Form F-4, including, without limitation, the
ARCO Proxy Statement, and any amendment or supplement thereto
will, at the time the Form F-4 becomes effective under the
Securities Act, at the date of mailing to stockholders and at the
time or times of the ARCO Stockholders Meeting (as defined in
Section 3.4), contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
If at any time prior to the date of the ARCO Stockholders Meeting
any information relating to ARCO or BP Amoco, or any of their
respective Affiliates, officers or directors, should be
discovered by ARCO or BP Amoco which should be set forth in an
amendment to the Form F-4 or a supplement to the ARCO Proxy
Statement, so that such document would not include any
misstatement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading, the Party which discovers such
information shall promptly notify the other Party
<PAGE>
and, to the extent required by Law, an appropriate amendment or
supplement describing such information shall be promptly filed
with the SEC and, to the extent required by law, disseminated to
the ARCO stockholders.
3.3.1.3. ARCO will use its best reasonable efforts to cause
the definitive ARCO Proxy Statement to be mailed to its
stockholders as promptly as practicable after the date hereof.
3.3.2. BP Amoco Documents.
3.3.2.1. BP Amoco shall, with the reasonable assistance of
ARCO, as promptly as practicable prepare and file with the LSE
(a) a circular to be sent to BP Amoco shareholders in connection
with the BP Amoco Shareholders Meeting (as defined in Section
3.4) (the "BP Amoco Circular"), containing (i) a notice convening
the BP Amoco Shareholders Meeting, (ii) such other information
(if any) as may be required by the LSE and (iii) such other
information as BP Amoco and ARCO shall agree to include therein;
and (b) listing particulars or an exempt listing document
relating to BP Amoco and its Subsidiaries and the BP Amoco
Ordinary Shares (together with any summary thereof, the "BP Amoco
Listing Document," and the BP Amoco Circular and the BP Amoco
Listing Document, together, the "BP Amoco Documents"). BP Amoco
and ARCO each agrees, as to itself and its Subsidiaries, that the
BP Amoco Documents and any supplements thereto and any circulars
or documents issued to shareholders, employees or
debentureholders of BP Amoco, will contain all particulars
relating to BP Amoco and ARCO required to comply in all material
respects with all United Kingdom statutory and other legal
provisions (including, without limitation, the Companies Act, the
Financial Services Act 1986 (the "FSA") and the rules and
regulations made thereunder, and the rules and requirements of
the LSE) and all such information contained in the BP Amoco
Documents will be substantially in accordance with the facts and
will not omit anything material likely to affect the import of
such information.
3.3.2.2. BP Amoco will use its best reasonable efforts to
cause the BP Amoco Documents to receive any clearance thereof
required from the LSE and to cause the definitive BP Amoco
Documents to be mailed to its shareholders, in each case as
promptly as practicable after the date hereof.
3.3.2.3. Notwithstanding any of the other provisions of this
Section 3.3 and for the avoidance of doubt, BP Amoco hereby
agrees that (i) for the purposes of the preparation of the BP
Amoco Circular and the BP Amoco Listing Document and any
amendments or supplements thereto, ARCO shall only be obliged
(pursuant to such other provisions) to supply BP Amoco with
information to the extent that it relates solely to ARCO and/or
its Subsidiaries, and (ii) neither ARCO, nor any of its
Subsidiaries, nor any of its or their directors or other officers
shall accept any responsibility for either the BP Amoco Circular
or the BP Amoco
<PAGE>
Listing Document or the information included therein or omitted
therefrom.
3.4. Shareholders Meetings. ARCO will take all action necessary
to convene a special meeting of the holders of ARCO Common Shares at which
the holders of ARCO Common Shares shall consider the adoption of this
Agreement (including any adjournments or postponements thereof, the "ARCO
Stockholders Meeting") as promptly as practicable after the Form F-4 has
been declared effective by the SEC. BP Amoco will take all action necessary
to convene an extraordinary general meeting of BP Amoco shareholders at
which an ordinary resolution will be proposed to consider the approval of
the Merger (the "BP Amoco Shareholder Meeting") after the BP Amoco
Documents are cleared by the LSE and the Form F-4 has been declared
effective by the SEC. BP Amoco and ARCO each agrees to use best reasonable
efforts such that, to the extent practical, the ARCO Stockholders Meeting
and the BP Amoco Shareholders Meeting each shall be held as promptly as
practicable after the conditions precedent to holding such meeting have
been fulfilled and as nearly contemporaneously as practicable. Subject to
the terms of this Agreement, including the provisions of Section 3.2, the
board of directors of each of BP Amoco and ARCO shall recommend to its
respective shareholders, in the case of BP Amoco, the approval of the
Merger and, in the case of ARCO, the adoption of the Merger Agreement and
shall use best reasonable efforts to solicit such adoption unless it
concludes, in the exercise of its fiduciary duties, after consultation with
outside counsel, that the Merger is no longer advisable for its
shareholders; provided, however, that neither BP Amoco nor ARCO shall be
entitled to withdraw its recommendation to its respective shareholders if
to do so would be inconsistent with the obligations it has expressly
assumed elsewhere in this Agreement. In the event that subsequent to the
date hereof, the board of directors of BP Amoco and/or ARCO determines that
the Merger or the Merger Agreement, as the case may be, is no longer
advisable and recommends that its respective shareholders reject it, BP
Amoco shall nevertheless submit the Merger to the holders of BP Amoco
Voting Shares for approval at the BP Amoco Shareholders meeting and ARCO
shall nevertheless submit this Agreement to the holders of ARCO Common
Shares, for adoption at the ARCO Stockholders Meeting, in each case unless
this Agreement shall have been terminated in accordance with its terms
prior to the date of the applicable meeting.
3.5. Filings; Other Actions; Notification.
3.5.1. BP Amoco and ARCO shall each cooperate with the other and
(i) use (and shall use best reasonable efforts to cause their
respective Subsidiaries to use) all their respective best reasonable
efforts promptly to take or cause to be taken all actions, and do or
cause to be done all things, necessary, proper or advisable under this
Agreement, the Stock Option Agreement and applicable Laws to
consummate and make effective the Merger and the other transactions
contemplated by this Agreement and the Stock Option Agreement as soon
as practicable, including preparing and filing as promptly as
practicable all documentation to effect all necessary filings,
notices, petitions, statements, registrations, submissions of
information, applications and other documents, (ii) use (and shall use
best reasonable efforts to cause their respective Subsidiaries to use)
all their respective best reasonable efforts to obtain as promptly as
practicable all approvals, consents, registrations, permits,
authorizations and other
<PAGE>
confirmations required to be obtained from any third party (other than
BP Amoco Required Consents and ARCO Required Consents) necessary,
proper or advisable to consummate the Merger and the other
transactions contemplated by this Agreement and the Stock Option
Agreement, and (iii) use (and shall use best reasonable efforts to
cause their respective Subsidiaries to use) their respective best
reasonable efforts to take or cause to be taken all actions, and do or
cause to be done all things, necessary, proper or advisable to obtain
the BP Amoco Required Consents or ARCO Required Consents, as the case
may be; it being understood that, for purposes of this Section 3.5,
the Parties agree that "best reasonable efforts" shall require
(without limitation of any other meaning of such words) each Party to
accept or agree to, at such time as may be required to cause the
condition set forth in Section 4.1.2 to be fulfilled prior to the
Termination Date, as it may be extended pursuant to Section 5.2, any
conditions, terms or restrictions in connection with any such BP Amoco
Required Consent or ARCO Required Consent, as the case may be, unless
all such conditions, terms and restrictions, in the aggregate, would
be reasonably likely to have a Material Adverse Effect on BP Amoco or
ARCO after the Effective Time (it being understood that, for this
purpose materiality shall be considered solely with respect to the
total value of the U.S. operations of BP Amoco, ARCO and their
Subsidiaries, taken together). Subject to applicable Laws relating to
the exchange of information, BP Amoco and ARCO shall have the right to
review in advance, and to the extent practicable each will consult the
other on, all the information relating to ARCO and its Subsidiaries or
BP Amoco and its Subsidiaries, as the case may be, that appears in any
filing made with, or written materials submitted to, any third party
and/or any Governmental Entity in connection with the Merger and the
other transactions contemplated by this Agreement and the Stock Option
Agreement. In exercising the foregoing right, each of BP Amoco and
ARCO shall act reasonably and as promptly as practicable.
3.5.2. BP Amoco and ARCO each shall, upon request by and
reasonable notice from the other, furnish the other with all
information concerning itself, its Subsidiaries, directors, officers
and shareholders or stockholders and such other matters as may be
reasonably necessary or advisable in connection with the Form F-4, the
BP Amoco Documents, the ARCO Proxy Statement or any other necessary or
appropriate filing, notice, petition, statement, registration,
submission of information or application made by or on behalf of BP
Amoco or ARCO or any of their respective Subsidiaries to any third
party and/or any Governmental Entity in connection with the Merger and
the other transactions contemplated by this Agreement and the Stock
Option Agreement.
3.5.3. BP Amoco and ARCO each shall keep the other apprised of
the status of matters relating to completion of the Merger and the
other transactions contemplated by this Agreement and the Stock Option
Agreement, including promptly furnishing the other with copies of
notices or other communications received by BP Amoco or ARCO, as the
case may be, or any of its Subsidiaries, from any third party and/or
any Governmental Entity with respect to the Merger and the other
transactions contemplated by this Agreement and the Stock Option
Agreement. BP Amoco and ARCO each shall give prompt notice to the
other of any change that would, individually or in the aggregate,
reasonably be expected
<PAGE>
to result in a Material Adverse Effect on it or of any failure of any
condition set forth in Article IV to the other Party's obligations to
effect the Merger.
3.5.4. Prior to making any filing, notice, petition, statement,
registration, submission of information or application to or with any
third party and/or Governmental Entity (including any domestic or
foreign national securities exchange) in connection with the
consummation of the Merger and the other transactions contemplated by
this Agreement and the Stock Option Agreement and except as may be
required by Law or by obligations pursuant to any listing agreement
with or rules of any domestic or foreign national securities exchange,
each Party shall make all reasonable efforts to consult with the other
Party with respect to the content of such filing, notice, petition,
statement, registration, submission of information or application and
to provide the other Party with copies of the proposed filing, notice,
petition, statement, registration, submission of information or
application. Neither BP Amoco nor ARCO shall agree to participate in
any meeting with any Governmental Entity in respect of any filings,
investigation or other inquiry relating to the Merger and the other
transactions contemplated by this Agreement or the Stock Option
Agreement unless it consults with the other Party in advance and, to
the extent practicable and permitted by such Governmental Entity,
gives the other Party the opportunity to attend and participate
thereat.
3.5.5. In the event any claim, action, suit, investigation or
other proceeding by any Governmental Entity or other Person or other
legal or administrative proceeding is commenced that questions the
validity or legality of this Agreement, the Stock Option Agreement, or
the Merger or the other transactions contemplated by this Agreement
and the Stock Option Agreement or claims damages in connection
therewith, the Parties agree to cooperate and use their best
reasonable efforts, subject to the limitations set forth in Section
3.5.1, to defend against, respond to and resolve such claim, action,
suit, investigation or other proceeding in a manner that permits the
consummation of the Merger prior to the Termination Date.
3.6. Access. In order to facilitate consummation of the Merger
and the other transactions contemplated by this Agreement, the Parties
hereby agree that upon reasonable request to any executive officer of BP
Amoco or ARCO, as the case may be, designated for the purpose, and except
as may otherwise be required by applicable Law, BP Amoco and ARCO each
shall (and shall cause its Subsidiaries to) afford the other's officers,
employees, investment bankers, attorneys, accountants, financial advisors,
agents or other representatives reasonable access, during normal business
hours throughout the period prior to the Effective Time, to its properties,
books, contracts and records and, during such period, each shall (and shall
cause its Subsidiaries to) furnish promptly to the other all information
concerning its business, properties and personnel as may reasonably be
requested, provided that no receipt of information pursuant to this Section
shall affect or be deemed to modify any representation or warranty made by
BP Amoco or ARCO hereunder, and provided, further, that the foregoing shall
not require BP Amoco or ARCO to permit any inquiry, or to disclose any
information, that in the reasonable judgment of BP Amoco or ARCO, as the
case may be, would (i) violate any antitrust or competition Law or (ii)
result in the disclosure of any trade secrets of third
<PAGE>
parties or violate any of its obligations with respect to confidentiality
to third parties unless the consent of such third party is obtained (and BP
Amoco or ARCO, as the case may be, shall use its reasonable efforts to
obtain the consent of such third party to such inspection or disclosure).
All such information shall be governed by the terms of the Confidentiality
Agreement, dated January 28, 1999, between BP Amoco and ARCO (the
"Confidentiality Agreement"), including without limitation all such
information disclosed in the Disclosure Letters.
3.7. Publicity. The initial press release concerning this
Agreement, the Merger and the other transactions contemplated by this
Agreement and the Stock Option Agreement shall be a joint press release,
and thereafter BP Amoco and ARCO shall consult with each other prior to
issuing any press releases or otherwise making public announcements with
respect to the Merger and the other transactions contemplated by this
Agreement and the Stock Option Agreement.
3.8. Benefits and Other Matters.
3.8.1. Employee Benefits.
3.8.1.1. It is the specific intention of the Parties that
the compensation and benefit programs (including annual and
long-term incentive programs) to be provided by BP Amoco and its
Subsidiaries for current and former employees of ARCO will be no
less favorable in the aggregate than is provided to similarly
situated employees of BP Amoco and its Subsidiaries.
3.8.1.2. For at least one year following the Effective Time,
BP Amoco shall provide or cause to be provided to current and
former employees and directors of ARCO and its Subsidiaries
compensation and benefits that are at least as favorable in the
aggregate (taking into account the benefits provided pursuant to
this Section 3.8) as the compensation and benefits they were
entitled to receive immediately prior to the Effective Time
(including, without limitation, benefits pursuant to qualified
and non-qualified retirement plans, savings plans, medical plans
and programs, deferred compensation arrangements, incentive
plans, and retiree benefit plans, policies and arrangements);
provided, however, that, with respect to employees who are
subject to collective bargaining, all benefits shall be provided
in accordance with the applicable collective bargaining or other
labor agreements; and provided, further, that all incentive,
bonus and similar plans shall after the Effective Time be
substantially performance- based.
3.8.1.3. BP Amoco shall cause (i) ARCO's and its
Subsidiaries' (other than Vastar's) existing severance programs
(as in effect immediately prior to the Effective Time) to
continue without any reduction in benefits for at least two years
following the Effective Time; (ii) beginning with the first full
plan year after the Effective Time, interest to be credited to
the accounts of participants under the Acorn Executive Deferral
Plan (as in effect at the Effective Time) at the greater of (x)
the interest rate credited
<PAGE>
under a comparable Oak plan maintained in the United States for
senior executives or (y) the "Citibank Base Rate," as defined in
the Acorn Executive Deferral Plan; provided, however, that for
the period ending upon completion of ten full plan years after
the Effective Time, such rate shall be no less than 125% of the
120-month rolling average of the 10-year U.S. Treasury Note rate
for each applicable 120-month period ending June 30 (determined
in a manner consistent with past practice), such rate to be
effective for the immediately following plan year, except that
the minimum rate shall be the Citibank Base Rate in those limited
circumstances in which it is determined by Acorn management, in
its sole discretion pursuant to a formal action taken prior to
the Effective Time, that any participant has failed to
satisfactorily perform his/her duties consistent with
pre-established goals previously communicated to the participant
and such failure to so perform has not otherwise been excused by
Acorn management; and (iii) the ARCO outplacement policies and,
for executives, financial counseling policies, as in effect as of
the date hereof, to be maintained for two years following the
Effective Time.
3.8.1.4. Following the Effective Time, BP Amoco shall, and
shall cause its Subsidiaries to, recognize service with ARCO and
its Subsidiaries and any predecessor entities (and any other
service credited by ARCO under similar benefit plans), prior to
the Effective Time for all purposes (including, without
limitation, eligibility to participate, vesting, benefit accrual,
eligibility to commence benefits and severance) under any benefit
plans of BP Amoco or its Subsidiaries in which the particular
employee or former employee of ARCO (or its respective
Subsidiaries) participates to the same extent as if such service
had been rendered to BP Amoco or any of its Subsidiaries;
provided however, that the foregoing shall not result in any
duplication of benefits for the same period of service. From and
after the Effective Time, BP Amoco shall, and shall cause its
Subsidiaries to, recognize any and all appropriate out-of-pocket
expenses of each employee or former employee of ARCO and its
Subsidiaries for purposes of determining such employee's and
former employee's (including their beneficiaries and dependents)
deductible and co-payment expenses under BP Amoco's medical
benefit plans. BP Amoco shall waive, or cause to be waived, any
pre-existing condition limitation under any welfare benefit plan
maintained by BP Amoco or any of its Subsidiaries in which
employees of ARCO and its Subsidiaries (and their respective
eligible dependents) will be eligible to participate on or
following the Effective Time to the extent such pre-existing
condition limitation was waived or satisfied under the comparable
ARCO plan.
3.8.1.5. From and after the Effective Time, BP Amoco shall
honor, fulfill and discharge, and shall cause its Subsidiaries to
honor, fulfill and discharge, in accordance with its terms, each
existing employment, change of control, severance and termination
agreement between ARCO or any of its Subsidiaries, and any
officer, director or employee of such company, including without
limitation (i) all legal and contractual obligations pursuant to
outstanding retirement plans, including
<PAGE>
the extension of the Enhanced Retirement Program, pursuant
to Section 3.1.2.4(i), salary and bonus deferral plans,
vested and accrued benefits and similar employment and
benefit arrangements and agreements in effect as of the
Effective Time, including all the "change of control"
provisions under the plans, programs, policies and
agreements listed in Section 3.8.1.5 of the ARCO Disclosure
Letter, and (ii) all vacation, personal and sick days
accrued by employees of ARCO and its Subsidiaries as of the
Effective Time. BP Amoco acknowledges that the consummation
of the Merger will constitute a "change of control" as
respectively defined under the plans, programs, policies and
agreements listed in Section 3.8.1.5 of the ARCO Disclosure
Letter.
3.8.1.6. From and after the Effective Time, BP Amoco
shall recognize, and cooperate in good faith with, the
Independent Plan Administrator (the "IPA") of the ARCO
Supplemental Executive Benefit Plans Trust Agreement;
provided, however, that BP Amoco agrees to cooperate with
ARCO and the IPA in an effort to effect the transfer and/or
assumptions of any plan, or portion thereof, under the
administration of ARCO or the IPA to any successor plan or
trust, as may be requested by ARCO or the IPA.
3.8.2. Director and Officer Liability.
3.8.2.1. BP Amoco agrees that all rights to
indemnification and all limitations on liability existing in
favor of any Indemnitee (as defined below) in respect of
acts or omissions of such Indemnitees on or prior to the
Effective Time as provided in the restated certificate of
incorporation and by-laws of ARCO or an agreement between an
Indemnitee and ARCO or its Subsidiaries in effect as of the
date hereof shall continue in full force and effect in
accordance with the terms thereof.
3.8.2.2. For six years after the Effective Time, BP
Amoco shall indemnify and hold harmless the individuals who
on or prior to the Effective Time were officers or directors
of ARCO or any of its Subsidiaries (the "Indemnitees") (i)
with respect to all acts or omissions by them in their
capacities as officers or directors of ARCO in connection
with the approval of this Agreement and the transactions
contemplated hereby and (ii) to the same extent indemnified
as set forth in Section 3.8.2.1, with respect to all other
actions or omissions by them in their capacities as officers
or directors of ARCO, or taken by them at the request of,
ARCO or any of its Subsidiaries. In the event any claim in
respect of which indemnification is available pursuant to
the foregoing provisions is asserted or made within such
six-year period, all rights to indemnification shall
continue until such claim is disposed of or all judgments,
orders, decrees or other rulings in connection with such
claim are duly satisfied.
3.8.2.3. For six years after the Effective Time, BP
Amoco shall procure the provision of directors' and
officers' liability insurance in
<PAGE>
respect of acts or omissions occurring prior to the
Effective Time covering each such Person currently covered
by ARCO's directors' and officers' liability insurance
policy on terms set forth in the BP Amoco Disclosure Letter.
Such liability insurance procured by BP Amoco may provide
"first dollar" coverage, without any requirement to first
seek indemnification from the Surviving Corporation or BP
Amoco.
3.8.2.4. The obligations of BP Amoco under this Section
3.8.2 shall not be terminated or modified in such a manner
as to adversely affect any Indemnitee to whom this Section
3.8.2 applies without the consent of such affected
Indemnitee (it being expressly agreed that the Indemnitees
to whom this Section 3.8.2 applies shall be third party
beneficiaries of this Section 3.8.2).
3.9. Expenses. Except as otherwise provided in Section 5.5,
whether or not the Merger is consummated, all costs and expenses incurred
in connection with this Agreement, the Stock Option Agreement, the Merger
and the other transactions contemplated by this Agreement and the Stock
Option Agreement shall be paid by the party incurring such expense, except
that the parties shall share equally the costs and expenses of filing,
printing and distributing the Form F-4, the ARCO Proxy Statement, the BP
Amoco Documents and related documents.
3.10. Takeover Statutes. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement and the Stock Option Agreement, each of BP Amoco and ARCO and its
board of directors shall, subject to applicable Law, grant such approvals
and take such actions as are necessary so that the Merger and the other
transactions contemplated by this Agreement and the Stock Option Agreement
may be consummated as promptly as practicable on the terms contemplated by
this Agreement and the Stock Option Agreement, and otherwise act to
eliminate or minimize the effects of such Takeover Statute on such
transactions.
3.11. Dividends. At least until December 31, 2003, dividends on
the BP Amoco Ordinary Shares will be announced in U.S. dollars and paid to
holders of BP Amoco Depositary Shares in U.S. dollars and to holders of BP
Amoco Ordinary Shares in pounds sterling. ARCO agrees that it will
coordinate its record dates for dividends on ARCO Common Shares with BP
Amoco's record dates for dividends on BP Amoco Ordinary Shares so that
record dates with respect to dividends to which holders of ARCO Common
Shares will be entitled, whether declared with respect to ARCO Common
Shares or, after the Effective Time, with respect to BP Amoco Ordinary
Shares, do not occur more or less frequently than once each calendar
quarter.
3.12. Listing Applications. BP Amoco shall promptly prepare and
submit to the LSE a listing application with respect to the BP Amoco
Ordinary Shares issuable in the Merger, and to each of the NYSE and Pacific
Exchange a listing application in respect of the BP Amoco Depositary Shares
issuable in the Merger, and shall use its best efforts to obtain, prior to
the Effective Time, approval for the listing of such BP Amoco Ordinary
Shares, in the case of the LSE, subject to allotment, and such BP Amoco
Depositary Shares, in the case of the NYSE, subject to official notice of
issuance.
<PAGE>
3.13. Letters of Accountants.
3.13.1. BP Amoco shall use its best reasonable efforts to cause
to be delivered to ARCO "comfort" letters of Ernst & Young, BP Amoco's
independent public accountants, dated the effective date of the Form
F-4 and the Closing Date, respectively, and addressed to ARCO and its
directors, in form reasonably satisfactory to ARCO and customary in
scope and substance for "comfort" letters delivered by independent
public accountants in connection with registration statements similar
to the Form F-4.
3.13.2. ARCO shall use its best reasonable efforts to cause to be
delivered to BP Amoco "comfort" letters of PricewaterhouseCoopers,
ARCO's independent public accountants, dated the effective date of the
Form F-4 and the Closing Date, respectively, and addressed to BP Amoco
and its directors, in form reasonably satisfactory to BP Amoco and
customary in scope and substance for "comfort" letters delivered by
independent public accountants in connection with registration
statements similar to the Form F-4.
3.14. Agreements of ARCO Affiliates. Prior to the date of the
ARCO Stockholders Meeting, ARCO shall cause to be prepared and delivered to
BP Amoco a list identifying all persons who, at the time of the ARCO
Stockholders Meeting, ARCO believes may be deemed to be "affiliates" of
ARCO for purposes of Rule 145 under the Securities Act (the "ARCO
Affiliates"). BP Amoco shall be entitled to place restrictive legends on
any BP Amoco ADRs (or any underlying BP Amoco Ordinary Shares that may be
withdrawn upon surrender of such BP Amoco ADRs) received by such ARCO
Affiliates. ARCO shall use its best efforts to cause each person who is
identified as an ARCO Affiliate in such list to deliver to BP Amoco, at or
prior to the Effective Time, a written agreement, in the form to be
approved by the Parties, that such ARCO Affiliate will not sell, pledge,
transfer or otherwise dispose of any BP Amoco Depositary Shares or BP Amoco
Ordinary Shares issued to such ARCO Affiliate pursuant to the Merger (or
any underlying BP Amoco Ordinary Shares that may be withdrawn upon
surrender of such BP Amoco Depositary Shares), except pursuant to an
effective registration statement or in compliance with Rule 145 or an
exemption from the registration requirements of the Securities Act. BP
Amoco shall not register the transfer of any BP Amoco Ordinary Shares and
shall cause the Depositary not to register the transfer of any BP Amoco
Depositary Shares unless such transfer is made in compliance with the
foregoing.
3.15. Accounting Matters. At least until December 31, 2003, BP
Amoco shall include as supplemental disclosure in its consolidated
financial statements a reconciliation of its consolidated net income and
shareholders' equity to U.S. GAAP.
3.16. Tax Matters. BP Amoco shall timely satisfy, or cause to be
timely satisfied, all applicable tax reporting and filing requirements
contained in the Code with respect to the transactions contemplated hereby,
including, without limitation, the reporting requirements contained in the
United States Treasury Regulation Section 1.367(a)-3(c)(6).
3.17. Vastar. Notwithstanding anything to the contrary in this
Article III, if any action is taken by Vastar or any of its Subsidiaries,
or Vastar or any of its
<PAGE>
Subsidiaries fails to take any action, that would (but for this Section
3.17) constitute a violation by ARCO of a provision of this Article III,
ARCO shall be deemed to be in compliance with, and deemed not in violation
of, such provision if ARCO has used reasonable efforts, consistent with the
fiduciary duties of the Vastar directors designated by ARCO, to prevent
such action or such failure to take action, as the case may be, on the part
of Vastar and its Subsidiaries. For the purposes of Section 3.1.2.3,
transactions by Vastar and its Subsidiaries shall not count toward the
monetary amounts set forth therein.
3.18. Section 103. BP Amoco shall, if and to the extent required,
comply with its obligations under Section 103 of the U.K. Companies Act
1985 in respect of the Merger Consideration.
ARTICLE IV
Conditions
4.1. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of BP Amoco, Merger Sub and ARCO to effect the
Merger are subject to the satisfaction or waiver of each of the following
conditions:
4.1.1. Shareholder Approvals. This Agreement shall have been duly
adopted by holders of ARCO Common Shares constituting the ARCO
Requisite Vote, and the Merger shall have been duly approved by the
shareholders of BP Amoco constituting the BP Amoco Requisite Vote.
4.1.2. Regulatory Consents. All BP Amoco Required Consents and
ARCO Required Consents from or with any Governmental Entity
(collectively, "Governmental Consents") in connection with the
consummation of the Merger and the other transactions contemplated
hereby shall have been made or obtained, except where the failure to
obtain such Governmental Consent would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
BP Amoco or ARCO after the Effective Time, and such Governmental
Consents shall not contain any terms or impose any conditions, terms
or restrictions in connection with any such Governmental Consent
which, individually or in the aggregate, would be reasonably likely to
have a Material Adverse Effect on BP Amoco or ARCO after the Effective
Time (it being understood that, for this purpose, materiality shall be
considered solely with respect to the total value of the U.S.
operations of BP Amoco, ARCO and their Subsidiaries, taken together.
4.1.3. Laws and Orders. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Law (whether temporary, preliminary or permanent) that is
in effect and restrains, enjoins or otherwise prohibits the
consummation of the Merger or the other transactions contemplated by
this Agreement and that, individually or in the aggregate with all
other such Laws, is reasonably likely to have a Material Adverse
Effect on BP Amoco or ARCO or that would materially impair the ability
of BP Amoco to consummate the Merger (collectively, an "Order"). The
enactment, issuance, promulgation, enforcement or execution by any
<PAGE>
Governmental Entity of any Order with respect to a Governmental
Consent shall not result in a failure of the conditions set forth in
this Section 4.1.3 if such Order imposes on BP Amoco or ARCO or their
respective Subsidiaries conditions, terms or restrictions with respect
to or upon the consummation of the Merger and such conditions, terms
or restrictions, if contained solely in a Governmental Consent, would
not result in the failure of the condition set forth in Section 4.1.2.
4.1.4. Effectiveness of Form F-4. The Form F-4 shall have become
effective prior to the mailing of the ARCO Proxy Statement to its
stockholders, no stop order suspending the effectiveness of the Form
F-4 shall then be in effect, and no proceedings for that purpose shall
then be threatened by the SEC or shall have been initiated by the SEC
and not concluded or withdrawn.
4.1.5. Exchange Listings. The LSE shall have granted permission
for admission to the Official List of the LSE, subject to allotment,
of the BP Amoco Ordinary Shares to be issued pursuant to the Merger,
and such permission shall not have been withdrawn prior to the
Effective Time, and the BP Amoco Depositary Shares shall have been
authorized for listing on the NYSE, subject to official notice of
issuance.
4.2. Conditions to Obligations of BP Amoco and Merger Sub. The
obligations of BP Amoco and Merger Sub to effect the Merger is also subject
to the satisfaction or waiver by BP Amoco and Merger Sub prior to the
Effective Time of the following conditions:
4.2.1. Representations and Warranties of ARCO. The
representations and warranties of ARCO set forth in this Agreement (i)
to the extent qualified by Material Adverse Effect or any other
materiality qualification shall be true and correct and (ii) to the
extent not qualified by Material Adverse Effect or any other
materiality qualification shall be true and correct, in each case when
made and as of the Closing Date as though made on and as of the
Closing Date (except as provided in Section 2.2 and except that any
representation or warranty that by its terms expressly speaks as of an
earlier date shall be true and correct as of such date) (provided that
this clause (ii) shall be deemed satisfied so long as any failures of
such representations and warranties to be true and correct, taken
together, would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on ARCO), and BP Amoco
shall have received a certificate signed on behalf of ARCO by an
executive officer of ARCO to such effect.
4.2.2. Performance of Obligations of ARCO. ARCO shall have
performed all material obligations required to be performed by it
under this Agreement at or prior to the Closing Date, and BP Amoco
shall have received a certificate signed on behalf of ARCO by an
executive officer of ARCO to such effect.
4.3. Conditions to Obligation of ARCO. The obligation of ARCO to
effect the Merger is also subject to the satisfaction or waiver by ARCO
prior to the Effective Time of the following conditions:
<PAGE>
4.3.1. Representations and Warranties. The representations and
warranties of BP Amoco and Merger Sub set forth in this Agreement (i)
to the extent qualified by Material Adverse Effect or any other
materiality qualification shall be true and correct and (ii) to the
extent not qualified by Material Adverse Effect or any other
materiality qualification shall be true and correct, in each case when
made and as of the Closing Date as though made on and as of the
Closing Date (except that any representation or warranty that by its
terms expressly speaks as of an earlier date shall be true and correct
as of such date) (provided that this clause (ii) shall be deemed
satisfied so long as any failures of such representations and
warranties to be true and correct, taken together, would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on BP Amoco), and ARCO shall have received a
certificate signed on behalf of BP Amoco by an executive officer of BP
Amoco to such effect.
4.3.2. Performance of Obligations of BP Amoco. BP Amoco shall
have performed all material obligations required to be performed by it
under this Agreement at or prior to the Closing Date, and ARCO shall
have received a certificate signed on behalf of BP Amoco by an
executive officer of BP Amoco to such effect.
4.3.3. Tax Opinion. ARCO shall have received an opinion from
Cravath, Swaine & Moore, dated as of the Effective Time, substantially
to the effect that, on the basis of the facts, representations and
assumptions set forth in such opinion, the Merger will be treated for
U.S. federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and that no gain or loss will be
recognized by the stockholders of ARCO who exchange ARCO Common Shares
solely for BP Amoco Shares pursuant to the Merger (except with respect
to (i) cash received in lieu of fractional BP Amoco Shares or (ii)
stockholders of ARCO who are not Eligible ARCO Shareholders). In
rendering such opinion, counsel may require and rely upon
representation letters of BP Amoco and ARCO substantially in the form
set forth as Exhibits B and C hereto, respectively.
ARTICLE V
Termination
5.1. Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after the approval by shareholders of BP
Amoco and the stockholders of ARCO referred to in Section 4.1.1, by mutual
written consent of BP Amoco and ARCO, by action of their respective boards
of directors.
5.2. Termination by Either BP Amoco or ARCO. This Agreement may
be terminated and the Merger may be abandoned at any time prior to the
Effective Time by action of the board of directors of either BP Amoco or
ARCO if (i) the Merger shall not have been consummated by March 31, 2000,
whether such date is before or after the approvals by the shareholders of
BP Amoco and the stockholders of ARCO (subject to
<PAGE>
extension as provided below, the "Termination Date"), (ii) any
Order permanently restraining, enjoining or otherwise prohibiting the
consummation of the Merger shall have become final and non-appealable,
whether before or after the approval by the shareholders of BP Amoco or the
stockholders of ARCO, (iii) this Agreement shall not have been adopted by
holders of ARCO Common Shares constituting the ARCO Requisite Vote at the
duly held ARCO Stockholders Meeting, including any adjournment or
postponement thereof or (iv) the Merger shall not have been approved by
shareholders of BP Amoco constituting the BP Amoco Requisite Vote at the
duly held BP Amoco Shareholders Meeting, including any adjournment or
postponement thereof; provided that the right to terminate this Agreement
pursuant to this Section 5.2 shall not be available to a Party that has
breached in any material respect its obligations under Section 3.5 or any
of its other obligations under this Agreement in any manner that shall have
proximately contributed to the failure of the Merger to be consummated;
provided, further, that, if a condition set forth in Section 4.1.2 or 4.1.3
remains unsatisfied and shall not have been waived by each of the parties
hereto on or prior to the Termination Date, either ARCO or BP Amoco may
extend the Termination Date to June 30, 2000. The party electing pursuant
to the foregoing proviso to extend the Termination Date shall deliver
written notice to such effect to the other party on or before March 31,
2000, whereupon such extension shall be effective from and after April 1,
2000, and this Agreement may not be terminated and the Merger abandoned
pursuant to Section 5.2(i) until after such extended Termination Date.
5.3. Termination by BP Amoco. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time,
whether before or after the approval by the shareholders of BP Amoco
referred to in Section 4.1.1, by action of the board of directors of BP
Amoco, if (i) the board of directors of ARCO shall have withdrawn its
approval or favorable recommendation to stockholders of this Agreement; or
(ii) ARCO or its board of directors shall take any of the actions described
in clause (ii) or clause (iii) of the proviso to Section 3.2.1; or (iii)
there shall be a breach by ARCO of any representation, warranty, covenant
or agreement contained in this Agreement which would result in a failure of
a condition set forth in Section 4.2.1 or 4.2.2 and cannot be or is not
cured prior to the Termination Date.
5.4. Termination by ARCO. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time,
whether before or after the approval by stockholders of ARCO referred to in
Section 4.1.1, by action of the board of directors of ARCO, if (i) the
board of directors of BP Amoco shall have withdrawn its approval or
favorable recommendation to shareholders of the Merger or (ii) the board of
directors of ARCO becomes entitled pursuant to Section 3.2.1 to recommend
an ARCO Acquisition Proposal to its stockholders and, (A) at the time of
such termination pursuant to this clause (ii), ARCO is in compliance with
Section 3.2.1, (B) ARCO first pays to BP Amoco the ARCO Termination Amount
and any amounts due to BP Amoco under the Stock Option Agreement and (C)
ARCO concurrently enters into a definitive agreement to implement such ARCO
Acquisition Proposal, or (iii) there shall be a breach by BP Amoco of any
representation, warranty, covenant or agreement contained in this Agreement
which would result in a failure of a condition set forth in Section 4.3.1
or 4.3.2 and cannot be or is not cured prior to the Termination Date.
<PAGE>
5.5. Effect of Termination and Abandonment.
5.5.1. In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article V, this Agreement
(other than as set forth in Section 6.1) shall become void and of no
effect with no liability on the part of either Party (or of any of its
Representatives); provided, however, that no such termination shall
relieve either Party of any liability for damages resulting from any
willful breach of this Agreement or from any obligation to pay, if
applicable, the amounts payable pursuant to Section 5.5.2 or 5.5.3.
5.5.2. In the event that (i) this Agreement is terminated by
either BP Amoco or ARCO pursuant to Section 5.2(iii) and at the time
of the ARCO Stockholders Meeting (or at any adjournment thereof) an
ARCO Acquisition Proposal exists or (ii) (A) this Agreement is
terminated by either BP Amoco or ARCO pursuant to Section 5.2(iii) and
prior to such termination ARCO's board of directors shall have
withdrawn its approval or favorable recommendation to its stockholders
of this Agreement, (B) this Agreement is terminated by BP Amoco
pursuant to Section 5.3(i), Section 5.3(ii) (solely with respect to
the recommendation by ARCO or the board of directors of ARCO of an
ARCO Acquisition Proposal) or Section 5.3(iii) (solely with respect to
a willful breach of Section 3.2), or (C) this Agreement is terminated
by ARCO in accordance with Section 5.4(ii), then ARCO shall promptly,
but in no event later than two business days after the date of such
termination or, in the case of termination pursuant to Section
5.4(ii), at the time provided therein, pay to BP Amoco as compensation
for the Merger not becoming effective a termination payment equal to
the ARCO Termination Amount (as defined below), which amount shall be
exclusive of any expenses to be paid pursuant to Section 3.9, payable
by wire transfer of same day funds. The term "ARCO Termination Amount"
shall mean, in the case of termination by BP Amoco pursuant to clause
(ii) of the preceding sentence, $450,000,000 (inclusive of value added
tax, if any) or, in the case of termination by BP Amoco or ARCO
pursuant to clause (i) of the preceding sentence, "ARCO Termination
Amount" shall mean $250,000,000 (inclusive of value added tax, if
any), plus, if (x) ARCO executes and delivers an agreement with
respect to any ARCO Acquisition Proposal (an "ARCO Alternative
Agreement") or (y) an ARCO Acquisition Proposal with respect to ARCO
is consummated, in any such case, within 12 months from the date of
termination, an additional $200,000,000 (inclusive of value added tax,
if any) (which additional amount shall be paid promptly by wire
transfer in same day funds, and in no event later than two business
days after the earliest date on which the event requiring ARCO to pay
such additional sum occurs). In the event that the board of directors
of ARCO recommends the acceptance by ARCO stockholders of a
third-party tender or exchange offer for the ARCO Common Shares, such
recommendation shall be treated for purposes of this Section as though
an ARCO Alternative Agreement had been executed. ARCO acknowledges
that the agreements contained in this Section 5.5.2 are an integral
part of the transactions contemplated by this Agreement, and that,
without these agreements, BP Amoco would not enter into this
Agreement; accordingly, if ARCO fails promptly to pay any amount due
pursuant to this Section 5.5.2, and, in order to obtain such payment,
BP Amoco
<PAGE>
commences a suit which results in a judgment against ARCO for the
payment set forth in this Section 5.5.2, ARCO shall pay to BP Amoco
its costs and expenses (including attorneys' fees) in connection with
such suit, together with interest on the ARCO Termination Amount from
each date for payment until the date of such payment at the prime rate
of Citibank N.A. in effect on the date such payment was required to be
made plus 2 percent.
5.5.3. In the event that this Agreement is terminated (i) by ARCO
pursuant to Section 5.4(i) or (ii) by either BP Amoco or ARCO pursuant
to Section 5.2(iv) and prior to such termination BP Amoco's board of
directors shall have withdrawn its approval or favorable
recommendation to shareholders of the Merger, then BP Amoco shall
promptly, but in no event later than two business days after the date
of such termination, pay to ARCO a termination payment equal to the BP
Amoco Termination Amount (as defined below), which amount shall be
exclusive of any expenses to be paid pursuant to Section 3.9 payable
by wire transfer of same day funds. The term "BP Amoco Termination
Amount" shall mean $500,000,000 (inclusive of value added tax, if
any). BP Amoco acknowledges that the agreements contained in this
Section 5.5.3 are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, ARCO would not
enter into this Agreement; accordingly, if BP Amoco fails promptly to
pay any amount due pursuant to this Section 5.5.3, and, in order to
obtain such payment, ARCO commences a suit which results in a judgment
against BP Amoco for the payment set forth in this Section 5.5.3, BP
Amoco shall pay to ARCO its costs and expenses (including attorneys'
fees) in connection with such suit, together with interest on the BP
Amoco Termination Amount from each date for payment until the date of
such payment at the prime rate of Citibank N.A. in effect on the date
such payment was required to be made plus 2 percent.
ARTICLE VI
Miscellaneous and General
6.1. Survival. This Article VI and the agreements of BP Amoco and
ARCO contained in Article I, Sections 3.8 (Benefits and Other Matters),
3.15 (Accounting Matters) and Section 3.16 (Tax Matters) shall survive the
Effective Time. This Article VI, the representations and warranties
contained in Section 2.1.3 (Corporate Authority; Approval and Fairness),
the agreements of BP Amoco and ARCO contained in Section 3.7 (Publicity),
Section 3.9 (Expenses), Section 5.5 (Effect of Termination and
Abandonment), and the last sentence of Section 3.6 (Access) shall survive
the termination of this Agreement. All other representations, warranties,
agreements and covenants in this Agreement shall not survive the Effective
Time or the termination of this Agreement.
6.2. Modification or Amendment. This Agreement may be modified or
amended by agreement of the Parties, by action taken or authorized by their
respective boards of directors, at any time prior to the Effective Time;
provided, however, that, after approval by ARCO stockholders of the matters
presented at the ARCO Stockholders Meeting, no modification or amendment
shall be made which under applicable Law
<PAGE>
requires further approval by such stockholders without such further
approval. This Agreement may not be modified or amended except by an
instrument in writing executed and delivered by duly authorized officers of
each of the Parties.
6.3. Waiver. Any provision of this Agreement may be waived prior
to the Effective Time if, and only if, such waiver is in writing and signed
by the Party against whom the waiver is to be effective.
6.4. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay by any Party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. Except as otherwise
herein provided, the rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by Law.
6.5. Counterparts. This Agreement may be executed in any number
of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
6.6. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.
6.6.1. THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN, AND IN ALL
RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS TO BE PERFORMED WHOLLY IN SUCH STATE, EXCEPT TO THE EXTENT
THAT IN THE CASE OF BP AMOCO, THE COMPANIES ACT AND ENGLISH LAW ARE
APPLICABLE. The Parties hereby irrevocably submit to the jurisdiction
of the federal courts of the United States of America located in the
State of Delaware and the state courts of the State of Delaware,
solely in respect of the interpretation and enforcement of the
provisions of this Agreement and in respect of the transactions
contemplated hereby and hereby waive, and agree not to assert, as a
defense in any action, suit or proceeding for the interpretation or
enforcement hereof, that it is not subject thereto or that such
action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or
that this Agreement may not be enforced in or by such courts, and the
Parties irrevocably agree that all claims with respect to such action
or proceeding shall be heard and determined in such a court. The
Parties hereby consent to and grant any such court jurisdiction over
the person of such Parties and over the subject matter of such dispute
and agree that mailing of process or other papers in connection with
any such action or proceeding in the manner provided in Section 6.7,
or in such other manner as may be permitted by Law, shall be valid and
sufficient service thereof.
6.6.2. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED
AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY
AND
<PAGE>
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH
PARTY UNDERSTANDS AND WITH THE ADVICE OF COUNSEL HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 6.6.
6.7. Notices. Notices, requests, instructions or other documents
to be given under this Agreement shall be in writing and shall be deemed
given, (i) when sent if sent by facsimile, provided that the facsimile is
promptly confirmed by telephone confirmation thereof, (ii) when delivered,
if delivered personally to the intended recipient, and (iii) one business
day later, if sent by overnight delivery via a national courier service,
and in each case, addressed to a Party at the following address for such
Party:
if to ARCO:
ARCO
Atlantic Richfield Company
333 South Hope Street
Los Angeles, California 90071
Attention: Bruce Whitmore, Esq.
Telecopier: 213-486-1818
with copies to
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Richard Hall, Esq.
Telecopier: (212) 474-3700
and
Clifford Chance
200 Aldersgate Street
London EC1A 4J5
England
<PAGE>
Attention: Adam Signy, Esq.
Telecopier: 44-171-600-5555
if to BP Amoco or Merger Sub:
BP Amoco p.l.c.
Brittanic House
1 Finsbury Circus
London EC2M 7BA
England
Attention: Peter B.P. Bevan, Esq.
General Counsel
Telecopier: 44-171-496-4592
with copies to
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Benjamin F. Stapleton, Esq.
Telecopier: (212) 558-3588
and
Linklaters & Paines
One Silk Street
London EC2Y 8HQ
Attention: David Cheyne, Esq.
Telecopier: 011-44-171-456-2222
or to such other Persons or addresses as may be designated in writing by
the Party to receive such notice as provided above.
6.8. Entire Agreement. This Agreement (including any exhibits
hereto), the Stock Option Agreement and the Confidentiality Agreement
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties both written and oral,
between the Parties with respect to the subject matter hereof. References
herein to this Agreement shall for all purposes be deemed to include
references to the BP Amoco Disclosure Letter and the ARCO Disclosure
Letter. Except as set forth in Sections 1.3, 1.5 and 3.8 (except for the
provisions of Section 3.8.1.1 and 3.8.1.2), this Agreement is not intended
to confer upon any Person other than the Parties any rights or remedies
hereunder. EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE REPRESENTATIONS
AND WARRANTIES CONTAINED IN THIS AGREEMENT, THE STOCK OPTION AGREEMENT OR
ANY OTHER AGREEMENT CONTEMPLATED HEREBY OR THEREBY, NONE OF BP AMOCO, ARCO
OR MERGER SUB MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND EACH
HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR
ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
<PAGE>
FINANCIAL AND LEGAL ADVISORS OR OTHER REPRESENTATIVES WITH RESPECT TO THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE STOCK OPTION AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, NOTWITHSTANDING THE DELIVERY
OR DISCLOSURE TO THE OTHER OR THE OTHER'S REPRESENTATIVES OF ANY
DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE
FOREGOING.
6.9. Obligations of BP Amoco and of ARCO. Whenever this Agreement
requires a Subsidiary of BP Amoco to take any action, such requirement
shall be deemed to include an undertaking on the part of BP Amoco to use
best reasonable efforts to cause such Subsidiary to take such action.
Subject to Section 3.17, whenever this Agreement requires a Subsidiary of
ARCO to take any action, such requirement shall be deemed to include an
undertaking on the part of ARCO to use best reasonable efforts to cause
such Subsidiary to take such action.
6.10. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other provisions
hereof. If any provision of this Agreement, or the application thereof to
any Person or any circumstance, is invalid or unenforceable, (a) a suitable
and equitable provision shall be substituted therefor in order to carry
out, so far as may be valid and enforceable, the intent and purpose of such
invalid or unenforceable provision unless the substitution of such
provision would materially frustrate the express intent and purposes of
this Agreement, and (b) the remainder of this Agreement and the application
of such provision to other Persons or circumstances shall not be affected
by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision,
or the application thereof, in any other jurisdiction.
6.11. Interpretation. The headings herein are for convenience of
reference only, do not constitute part of this Agreement and shall not be
deemed to limit or otherwise affect any of the provisions hereof. Where a
reference in this Agreement is made to a Section or Exhibit, such reference
shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words
"without limitation."
6.12. Assignment. This Agreement shall not be assignable by
operation of law or otherwise, and any purported assignment in violation of
this provision shall be void.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of BP Amoco, ARCO and Merger Sub
as of the date hereof.
BP AMOCO p.l.c.
By: /s/ John Browne
----------------------------------
Name: (E.J.P. Browne) - Sir Browne
Title: Chief Executive Officer
By: /s/ B.E. Grote
----------------------------------
Name: B.E. Grote
Title: Executive Vice President
ATLANTIC RICHFIELD COMPANY
By: /s/ Mike R. Bowlin
----------------------------------
Name: Mike R. Bowlin
Title: Chairman of the Board and
Chief Executive Officer
PRAIRIE HOLDINGS, INC.
By: /s/ Peter B.P. Bevan
----------------------------------
Name: P.B.P. Bevan
Title: President
Exhibit 10.1
STOCK OPTION AGREEMENT, dated as of the 31st day of March, 1999
(this "Agreement"), between Atlantic Richfield Company, a Delaware
corporation ("Issuer"), and BP Amoco p.l.c., an English public limited
company (including any assigns permitted under Section 11 hereof,
"Grantee").
RECITALS
A. The Merger Agreement. Contemporaneously with the entry into
this Agreement and the grant of the Option (as defined in Section 1(a)),
Issuer, Grantee, and Prairie Holdings, Inc., a Delaware corporation and a
wholly-owned subsidiary of Grantee ("Merger Sub"), are entering into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), pursuant to which Grantee and Issuer intend to effect the
Merger (as defined in the Merger Agreement).
B. The Stock Option Agreement. As an inducement and condition to
Grantee's willingness to enter into the Merger Agreement, and in
consideration thereof, the board of directors of Issuer has approved the
grant to Grantee of the Option pursuant to this Agreement and the
acquisition of Common Stock (as defined below) by Grantee pursuant to this
Agreement; provided, that such grant was expressly conditioned upon, and
made to have no effect until after, execution and delivery by Issuer,
Grantee and Merger Sub of the Merger Agreement.
C. Capitalized Terms. Capitalized terms used herein but not
defined herein shall have the meanings ascribed to such terms in the Merger
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. The Option. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable option (the "Option") to purchase, subject to
the terms hereof, up to 64,861,617 fully paid and nonassessable shares
("Option Shares") of common stock, par value $2.50 per share, of Issuer
("Common Stock") at a price per share in cash equal to $82.82 (subject to
adjustment in accordance with this Agreement, the "Option Price");
provided, however, that in no event shall the number of Option Shares
exceed 19.9% of the shares
<PAGE>
of Common Stock issued and outstanding at the time of exercise (without
giving effect to the Option Shares issued or issuable under the Option)
(the "Maximum Applicable Percentage"). The number of Option Shares
purchasable upon exercise of the Option and the Option Price are subject to
adjustment as set forth herein.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement
(other than pursuant to this Agreement), the aggregate number of Option
Shares purchasable upon exercise of the Option shall automatically be
increased (without any further action on the part of Issuer or Grantee
being necessary) so that, taking into consideration any such issuance, such
aggregate number equals the Maximum Applicable Percentage.
(c) The Option Price with respect to the Option Shares as to
which Grantee may propose to exercise this Option pursuant to Section 2, or
to request the repurchase of this Option by Issuer pursuant to Section 9
(in either case, the "Proposed Exercise Shares"), shall not be greater
than, and shall be adjusted downward to the extent necessary to be, the
Maximum Option Price (as defined below). The "Maximum Option Price" with
respect to any Proposed Exercise Shares shall be that price per share in
cash at which the Option must be exercisable in order to result in a Total
Profit (as defined in Section 19) to Grantee, determined as of the date of
such proposal, of $25,000,000, assuming for such purpose that this Option
were exercised on such date for all of the Option Shares subject to this
Option and that all of such Option Shares were sold for cash at the closing
market price on the New York Stock Exchange, Inc. (the "NYSE") for the
Common Stock as of the close of business on the preceding trading day (less
customary brokerage commissions); provided that the Maximum Option Price
may not be less than the par value per share of the Common Stock.
2. Exercise; Closing. (a) Conditions to Exercise; Termination.
Grantee may exercise the Option, in whole but not in part (except as
provided in Section 14 and Section 19), by giving a written notice thereof
as provided in Section 2(d) within 180 days following the occurrence of a
Triggering Event (as defined in Section 2(b)) unless prior to the giving of
such notice the Effective Time (as defined in the Merger Agreement) shall
have occurred. The Option shall terminate upon either (i) the occurrence of
the Effective Time or (ii) the close of business on the earlier of (x) the
date 180 days after the date on which a Triggering Event occurs and (y) the
date on which it is no
<PAGE>
longer possible for a Triggering Event to occur, provided that no
Triggering Event shall have occurred prior to or upon such date.
(b) Triggering Event. A "Triggering Event" shall have occurred if
the Merger Agreement is terminated and Grantee then or thereafter becomes
entitled to receive an aggregate of $450,000,000 (taking into account any
amounts to which Grantee will have theretofore become entitled) as the ARCO
Termination Amount pursuant to Section 5.5.2 of the Merger Agreement.
(c) Notice of Triggering Event by Issuer. Issuer shall notify
Grantee promptly in writing of the occurrence of any Triggering Event and
the number of shares of Common Stock issued and outstanding as of the date
of such notice, it being understood that the giving of such notice by
Issuer shall not be a condition to the right of Grantee to exercise the
Option.
(d) Notice of Exercise by Grantee. If Grantee shall be entitled
to and wishes to exercise the Option, it shall send to Issuer a written
notice (an "Exercise Notice" and the date of which is referred to herein as
the "Notice Date") specifying (i) the total amount payable to Issuer on the
exercise of the Option in respect of the Option Shares and (ii) a place and
date (the "Closing Date") not earlier than three business days nor later
than 60 business days from the Notice Date for the closing of such purchase
(the "Closing"); provided, that if a filing is required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), or prior notification to or application for approval of any other
regulatory authority in the U.S., U.K. or elsewhere is required in
connection with such purchase, Grantee and Issuer, as required, promptly
after the giving of the Exercise Notice shall file any and all required
notices, applications or other documents necessary for approval and shall
expeditiously process the same and in such event the period of time
referred to in clause (ii) shall commence on the date on which Grantee
furnishes to Issuer a supplemental written notice setting forth the Closing
Date, which notice shall be furnished as promptly as practicable after all
required notification periods shall have expired or been terminated and all
required approvals shall have been obtained and all requisite waiting
periods shall have passed. Each of Grantee and the Issuer agrees to use its
best reasonable efforts to cooperate with and provide information to Issuer
or Grantee, as the case may be, with respect to any required
<PAGE>
filing, notice or application for approval to such regulatory authority.
(e) Payment of Purchase Price. At the Closing, Grantee shall pay
to Issuer the aggregate Option Price for the Option Shares in immediately
available funds by a wire transfer to a bank account designated by Issuer;
provided, that failure or refusal of Issuer to designate such a bank
account shall not preclude Grantee from exercising the Option.
(f) Delivery of Common Stock. At the Closing, simultaneously with
the payment of the purchase price by Grantee, Issuer shall deliver to
Grantee or such other Person as Grantee may nominate in writing, a
certificate or certificates representing the number of Option Shares
purchased by Grantee. If at the time of issuance of the Option Shares
hereunder, Issuer shall have issued any rights or other securities which
are attached to or otherwise associated with the Common Stock, then each
Option Share shall also represent such rights or other securities with
terms substantially the same as, and at least as favorable to Grantee as,
are provided under any shareholder rights agreement or similar agreement of
Issuer then in effect.
(g) Resale Restriction. The Grantee will not sell or transfer any
Option Shares or other securities acquired by Grantee upon exercise of the
Option except pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), or in a
transaction exempt from registration under the Securities Act. Each
certificate for Common Stock delivered at the Closing may be endorsed with
a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to resale restrictions arising under the Securities Act of
1933, as amended."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such reference if Grantee
shall have delivered to Issuer a copy of a letter from the staff of the
Securities and Exchange Commission, or a written opinion of counsel, in
form and substance reasonably satisfactory to Issuer, to the effect that
such legend is not required for purposes of the Securities Act. In
addition, such certificate or certificates shall bear any other legend as
may be required by applicable law.
<PAGE>
(h) Ownership of Record; Tender of Purchase Price; Expenses. Upon
the tender of the applicable purchase price in immediately available funds
(following the giving of the Exercise Notice) at the Closing, Grantee shall
be deemed to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books of Issuer
may then be closed or that a certificate or certificates representing such
shares of Common Stock may not have been delivered to Grantee. Issuer shall
pay all expenses, and any and all federal, national, state, provincial and
local taxes and other charges worldwide that may be payable in connection
with the preparation, issuance and delivery of stock certificates under
this Section 2 in the name of Grantee or its nominee, assignee, transferee
or designee.
3. Covenants of Issuer. In addition to its other agreements and
covenants herein, Issuer agrees:
(a) Shares Reserved for Issuance. To maintain, free from
preemptive rights, sufficient authorized but unissued or treasury
shares of Common Stock so that the Option may be fully exercised
without additional authorization of Common Stock after giving effect
to all other options, warrants, convertible securities and other
rights of third parties to purchase shares of Common Stock from
Issuer, and to issue the appropriate number of shares of Common Stock
pursuant to the terms of this Agreement;
(b) No Avoidance. Not to avoid or seek to avoid (whether by
charter amendment or through reorganiza tion, consolidation, merger,
issuance of rights, dissolution or sale of assets, or by any other
volun tary act) the observance or performance of any of the covenants,
agreements or conditions to be observed or performed hereunder by
Issuer; and
(c) Further Assurances. Promptly after the date hereof to take
all actions as may from time to time be required (including (i)
complying with all applicable premerger notification, reporting and
waiting period requirements under the HSR Act and (ii) in the event
that prior filing with, notification to or approval of any other
regulatory authority in the U.S., U.K. or elsewhere is necessary
before the Option may be exercised, cooperating fully with Grantee in
preparing and processing the required filings, notices or appli
cations) in order to permit Grantee to exercise the Option, to
purchase Option Shares pursuant to such
<PAGE>
exercise and otherwise to exercise Grantee's rights under this
Agreement and to take all action necessary to protect the rights of
Grantee against dilution.
4. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:
(a) Merger Agreement. Issuer hereby makes each of the
representations and warranties contained in Sections 2.1.2.2 and 2.1.4
of the Merger Agreement as they relate to Issuer and this Agreement,
as if such representations and warranties were set forth herein.
(b) Shares Reserved for Issuance; Capital Stock. The Option
Shares issuable in accordance with the terms of this Agreement have
been duly reserved for issuance by Issuer and upon any issuance of
such shares in accordance with the terms hereof, such Option Shares
will be duly authorized, validly issued, fully paid and nonassessable,
and will be delivered free and clear of any lien, pledge, security
interest, claim or other encumbrance (other than those created by this
Agreement) and not subject to any preemptive rights.
(c) Corporate Authority. Issuer has all requisite corporate power
and authority and has taken all corporate action necessary in order to
execute, deliver and perform its obligations under this Agreement and
to consummate the transactions contemplated hereby; the execution and
delivery of this Agreement have been duly authorized by all necessary
corporate action on the part of Issuer, and, assuming the due
authorization, execution and delivery of this Agreement by Grantee,
this Agreement constitutes a valid and binding agreement of Issuer
enforceable against Issuer in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(d) Takeover Statutes. Assuming that Grantee's representation and
warranty in Section 2.1.10.1 of the Merger Agreement is true and
correct, Issuer's board of directors has taken all appropriate and
necessary actions such that Section 203 of the DGCL is inapplicable to
the execution and delivery of this Agreement and to the consummation
of the transactions contemplated hereby. No other "fair price,"
"moratorium," "control share acquisition" or other
<PAGE>
similar anti-takeover statute or regulation (each a "Takeover
Statute") as in effect on the date hereof is applicable to the
execution and delivery of this Agreement, the Common Stock issuable
hereunder or to the other transactions contemplated by this Agreement.
No anti-takeover provision contained in Issuer's certificate of
incorporation or its by-laws prohibits or restricts the execution and
delivery of this Agreement or, at the time of any exercise of the
Option, will prohibit or restrict the issuance of Common Stock
hereunder or the consummation of the other transactions contemplated
by this Agreement.
5. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has all requisite corporate
power and authority and has taken all corporate action necessary in order
to execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby; the execution and delivery
of this Agreement have been duly authorized by all necessary corporate
action on the part of Grantee, and, assuming the due authorization,
execution and delivery of this Agreement by Issuer, constitutes a valid and
binding agreement of Grantee enforceable against Grantee in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
6. Replacement. Upon (i) receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction, or mutilation of this
Agreement, (ii) receipt by Issuer of reasonably satisfactory
indemnification in the case of loss, theft or destruction and (iii)
surrender and cancellation of this Agreement in the case of mutilation,
Issuer will execute and deliver a new Agreement of like tenor and date. Any
such new Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the Agreement
so lost, stolen, destroyed or mutilated shall at any time be enforceable by
any Person other than the holder of the new Agreement.
7. Adjustments. In addition to the adjustment to the total number
of Option Shares pursuant to Section 1(b) and the adjustment to the Option
Price pursuant to Section 1(c), the total number of Option Shares
purchasable upon the exercise of the Option hereof and the Option Price
shall be subject to adjustment from time to time as follows:
<PAGE>
(a) In the event of any change in the outstanding shares of
Common Stock by reason of stock dividends, splits, combinations,
subdivisions or reclassifications, mergers, recapitalizations,
extraordinary dividends or distributions, exchanges of shares or the
like, the type and number of Option Shares purchasable upon exercise
of the Option shall be appropriately adjusted, and proper provision
shall be made in the agreements governing any such transaction, so
that (i) Grantee shall receive upon exercise of the Option the number
and class of shares, other securities, property or cash that Grantee
would have received in respect of the Option Shares purchasable upon
exercise of the Option if the Option had been exercised and such
Option Shares had been issued to Grantee immediately prior to such
event or the record date therefor, as applicable; and (ii) in the
event any additional shares of Common Stock are to be issued or
otherwise become outstanding as a result of any such change (other
than pursuant to an exercise of the Option), the number of Option
Shares purchasable upon exercise of the Option shall be increased so
that, after such issuance the number of Option Shares so purchasable
equals the Maximum Applicable Percentage of the number of shares of
Common Stock issued and outstanding immediately after the consummation
of such change; and
(b) Whenever the number of Option Shares purchasable upon
exercise hereof is adjusted as pro vided in this Section 7, the Option
Price shall be adjusted by multiplying the Option Price by a fraction,
the numerator of which is equal to the number of Option Shares
purchasable prior to the adjustment and the denominator of which is
equal to the number of Option Shares purchasable after the adjustment.
8. Registration. (a) Upon the occurrence of a Triggering Event,
Issuer shall, at the request of Grantee included in the Exercise Notice, as
promptly as practicable prepare, file and keep current a shelf registration
state ment under the Securities Act covering all Option Shares issued and
issuable pursuant to the Option and shall use its best efforts to cause
such registration statement to become effective and remain current in order
to permit the sale or other disposition of any Option Shares issued upon
exercise of the Option in accordance with any plan of disposition requested
by Grantee; provided, however, that Issuer may postpone the filing of a
registration statement relating to a registration request by Grantee under
this Section 8 for a
<PAGE>
period of time (not in excess of 30 days) if in its judgment such filing
would require the disclosure of material information that Issuer has a bona
fide business purpose for preserving as confidential. Issuer will use its
best efforts to cause such registration statement first to become effective
and then to remain effective for 270 days from the day such registration
statement first becomes effective or until such earlier date as all shares
registered shall have been sold by Grantee. In connection with any such
registration, Issuer and Grantee shall provide each other with
representations, warranties, indemnities, contribution and other agreements
customarily given in connection with such registrations. If requested by
Grantee in connection with such registration, Issuer shall become a party
to any underwriting agreement relating to the sale of such shares, but only
to the extent of obligating Issuer in respect of representations,
warranties, indemnities, contribution and other agreements customarily made
by issuers in such underwriting agreements.
(b) In the event that Grantee so requests, the closing of the
sale or other disposition of the Option Shares or other securities pursuant
to a registration statement filed pursuant to Section 8(a) shall occur
substantially simultaneously with the exercise of the Option.
9. Repurchase of Option and/or Shares. (a) Repurchase; Repurchase
Price. At the request of Grantee, given in writing within 180 days
following the occurrence of a Triggering Event (or such later period as is
provided in Section 2(d) with respect to any required filing, notice or
application for approval or pursuant to a request by Grantee in accordance
with Section 10), (i) Issuer shall repurchase the Option from Grantee, in
whole but not in part (except as provided in Section 9(c) and Section 19),
at a price (the "Option Repurchase Price") equal to the number of Option
Shares then purchasable upon exercise of the Option multiplied by the
amount by which the Market Price (as defined below) exceeds the applicable
Option Price (giving effect to the Maximum Option Price) or (ii) Issuer
shall repurchase all Option Shares then owned by Grantee at a price (the
"Option Share Repurchase Price") equal to the number of such Option Shares
multiplied by the Market Price; provided, however, that the Option
Repurchase Price or the Option Share Repurchase Price, as the case may be,
shall be reduced to the extent necessary for it not to exceed the maximum
amount for which Issuer is permitted, without a vote of the stockholders of
Issuer, to repurchase the Option or Option Shares, as the case may be, on
the date
<PAGE>
of repurchase in accordance with the provisions of Article VII of
the certificate of incorporation of Issuer. The term "Market Price" shall
mean, for any share of Common Stock, the average of the closing sale prices
during the 90-day period immediately preceding the delivery of the
Repurchase Notice on the Composite Tape for NYSE-listed stocks, or, if the
Common Stock is not quoted on the Composite Tape, on the NYSE, or if the
Common Stock is not listed on the NYSE, on the principal United States
securities exchange registered under the Securities Exchange Act of 1934 on
which the Common Stock is listed, or if the Common Stock is not listed on
any such exchange, the average of the closing bid quotations with respect
to a share of Common Stock during the 90-day period immediately preceding
the date of the Repurchase Notice on the National Association of Securities
Dealers, Inc. Automated Quotations System or any system then is use, or if
no such quotations are available, the Market Price on the date of the
Repurchase Notice of a share of Common Stock, as determined by the Board of
Directors of Issuer in good faith.
(b) Method of Repurchase. Grantee may exercise its right to
require Issuer to repurchase the Option, in whole but not in part, or all
Option Shares then owned by Grantee pursuant to this Section 9 by
surrendering for such purpose to Issuer, at its principal office, this
Agreement or certificates for such Option Shares, as applicable,
accompanied by a written notice or notices stating that Grantee elects to
require Issuer to repurchase the Option or such Option Shares in accordance
with the provisions of this Section 9 (such notice, a "Repurchase Notice").
As promptly as practicable, and in any event within 15 business days after
the surrender of this Agreement or a certificate or certificates
representing Option Shares and the receipt of the Repurchase Notice
relating thereto, Issuer shall deliver or cause to be delivered to Grantee
the applicable Option Repurchase Price or the Option Share Repurchase
Price.
(c) Effect of Statutory or Regulatory Restraints on Repurchase.
To the extent that, upon or following the giving of a Repurchase Notice,
Issuer is prohibited under applicable law or regulation from repurchasing
the Option or any Option Shares subject to such Repurchase Notice (and
Issuer hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly
as practicable in order to accomplish such repurchase), Issuer shall
immediately so notify Grantee in writing and thereafter deliver or cause to
be delivered, from time to time, to Grantee the portion of the Option
Repurchase Price or the Option Share Repurchase
<PAGE>
Price that Issuer is no longer prohibited from delivering, within 2
business days after the date on which it is no longer so prohibited;
provided, however, that upon notification by Issuer in writing of such
prohibition, Grantee may, within 5 days of receipt of such notification
from Issuer, revoke in writing its Repurchase Notice, whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer
shall promptly (i) deliver to Grantee that portion of the Option Repurchase
Price or the Option Share Repurchase Price that Issuer is not prohibited
from delivering; and (ii) deliver to Grantee, as appropriate, (A) with
respect to the Option, a new stock option agreement evidencing the right of
Grantee to purchase that number of Option Shares for which the surrendered
stock option agreement was exercisable at the time of delivery of the
Repurchase Notice less the number of shares as to which the Option
Repurchase Price has theretofore been delivered to Grantee, or (B) with
respect to Option Shares, a certificate for the Option Shares as to which
the Option Share Repurchase Price has not theretofore been delivered to
Grantee. Notwithstanding anything to the contrary in this Agreement,
including, without limitation, the time limitations on the exercise of the
Option, Grantee may give notice of exercise of the Option for 180 days
after a notice of revocation has been issued pursuant to this Section 9(c)
and thereafter exercise the Option in accordance with the applicable
provisions of this Agreement.
(d) Acquisition Transactions. In addition to any other
restrictions or covenants, Issuer hereby agrees that, in the event that
Grantee delivers a Repurchase Notice, it shall not enter or agree to enter
into an agreement or series of agreements relating to a merger with or into
or the consolidation with any other Person, the sale of all or
substantially all of the assets of Issuer or any similar transaction or
disposition unless the other party or parties to such agreement or
agreements agree to assume in writing Issuer's obligations under Section
9(a) and, notwithstanding any notice of revocation delivered pursuant to
the proviso to Section 9(c), Grantee may require such other party or
parties to perform Issuer's obligations under Section 9(a) unless such
party or parties are prohibited by law or regulation from such performance,
in which case such party or parties shall be subject to the obligations of
the Issuer under Section 9(c).
10. Extension of Exercise Periods. The 180-day periods for
exercise of certain rights under Sections 2 and 9 shall be extended in each
such case at the request of Grantee to the extent necessary to avoid
liability by
<PAGE>
Grantee under Section 16(b) of the Exchange Act by reason of such exercise.
11. Assignment. Neither party hereto may assign or delegate any
of its rights or obligations under this Agreement or the Option to any
other Person without the express written consent of the other party, except
that this Agreement or the Option may be assigned to any direct or indirect
wholly owned Subsidiary of Grantee. Any attempted assignment or delegation
in contravention of the preceding sentence shall be null and void.
12. Filings; Other Actions. Each of Grantee and Issuer will use
its best efforts to make all filings with, notices to and applications for
approval of, and to obtain consents of, all third parties and governmental
authorities necessary for the consummation of the transactions contemplated
by this Agreement. Subject to applicable law and the rules and regulations
of the NYSE, the Issuer will promptly file an application to have the
Option Shares listed on the NYSE, subject to notice of issuance, and will
use its best reasonable efforts to obtain approval of such application;
provided, that if the Issuer is unable to effect such listing on the NYSE
by the Closing Date, the Issuer will nevertheless be obligated to deliver
the Option Shares upon the Closing Date.
13. Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement by
either party hereto and that the obligations of the parties hereto shall be
specifically enforceable through injunctive or other equitable relief.
14. Severability; Etc. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other provisions
hereof. If any provision of this Agreement, or the application thereof to
any Person or any circumstance, is invalid or unenforceable, (a) a suitable
and equitable provision shall be substituted therefor in order to carry
out, so far as may be valid and enforceable, the intent and purpose of such
invalid or unenforceable provision unless the substitution of such
provision would materially frustrate the express intent and purposes of
this Agreement, and (b) the remainder of this Agreement and the application
of such provision to other Persons or circumstances shall not be affected
by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision,
or the application thereof, in any other
<PAGE>
jurisdiction. If for any reason a court or regulatory agency determines
that Grantee is not permitted to acquire pursuant to Section 2 the full
number of Option Shares provided in Section 1(a) hereof (as adjusted
pursuant to Sections 1(b) and 7 hereof), it is the express intention of
Issuer to allow Grantee to acquire such lesser number of Option Shares as
may be permissible, without any amendment or modification hereof.
15. Notices. Notices, requests, instructions or other documents
to be given under this Agreement shall be in writing and shall be deemed
given (i) when sent if sent by facsimile, provided that the facsimile is
promptly confirmed by telephone confirmation thereof, (ii) when delivered,
if delivered personally to the intended recipient, and (iii) one business
day later, if sent by overnight delivery via a national courier service,
and in each case addressed to a party at the respective addresses of the
parties set forth in the Merger Agreement.
16. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. THIS AGREEMENT
SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED,
CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE APPLICABLE TO CONTRACTS TO BE PERFORMED WHOLLY IN SUCH STATE. The
parties hereby irrevocably submit to the jurisdiction of the Federal courts
of the United States of America located in the State of Delaware and the
state courts of the State of Delaware solely in respect of the
interpretation and enforcement of the provisions of this Agreement and in
respect of the transactions contemplated hereby and hereby waive, and agree
not to assert, as a defense in any action, suit or proceeding for the
interpre tation or enforcement hereof, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not
maintainable in said courts or that the venue thereof may not be
appropriate or that this Agreement may not be enforced in or by such
courts, and the parties irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such a court.
The parties hereby consent to and grant any such court jurisdiction over
the person of such parties and over the subject matter of such dispute and
agree that mailing of process or other papers in connection with any such
action or proceeding in the manner provided in Section 15, or in such other
manner as may be permitted by Law, shall be valid and sufficient service
thereof. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
<PAGE>
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 16.
17. Expenses. Except as otherwise expressly pro vided herein or
in the Merger Agreement, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated by this Agreement shall be
paid by the party incurring such expense, except that Issuer shall be
responsible for all fees and expenses (other than underwriting discounts or
commissions) relating to the registration of securities pursuant to Section
8.
18. Entire Agreement, Etc. This Agreement, the Confidentiality
Agreement and the Merger Agreement (including any exhibits thereto, the BP
Amoco Disclosure Letter and the ARCO Disclosure Letter) constitute the
entire agreement, and supersede all other prior agreements, understandings,
representations and warranties, both written and oral, between the parties
with respect to the subject matter hereof. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. This Agreement is not intended to confer
upon any Person, other than the parties hereto, and their respective
successors and permitted assigns, any rights or remedies hereunder.
19. Limitation on Profit. (a) Notwithstanding any other provision
of this Agreement, in no event shall Grantee's Total Profit (as hereinafter
defined) plus any ARCO Termination Amount paid to Grantee pursuant to
Section 5.5.2 of the Merger Agreement exceed in the aggregate $500,000,000
(the "Maximum Amount") and, if it otherwise would exceed such amount,
Grantee, at its sole election, shall either (i) reduce the number of Option
Shares subject to this Option, (ii) deliver to the Issuer for cancellation
Option Shares previously purchased by Grantee, (iii) pay cash to the
Issuer, or (iv) any combination thereof, so that Grantee's actually
realized Total Profit, when aggregated with such ARCO Termination
<PAGE>
Amount so paid to Grantee, shall not exceed the Maximum Amount taking into
account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this
Option may not be exercised for a number of Option Shares as would, as of
the date of exercise, result in a Notional Total Profit (as defined below)
which, together with any ARCO Termination Amount theretofore paid to
Grantee pursuant to Section 5.5.2 of the Merger Agreement, and after giving
effect to any election made by Grantee under Section 19(a), would exceed
the Maximum Amount; provided, that nothing in this sentence shall restrict
any exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received
by Grantee pursuant to Issuer's repurchase of the Option or any Option
Shares pursuant to Section 9, less, in the case of any repurchase of Option
Shares, Grantee's purchase price for such Option Shares, and (ii) (x) the
fair market value, or the aggregate net cash amounts received by Grantee
pursuant to the sale, of Option Shares (or (A) any other securities into
which such Option Shares are converted or exchanged or (B) any property,
cash or other securities received pursuant to adjustments made under
Section 7 ("Additional Property")), less (y) Grantee's purchase price for
such Option Shares.
(d) As used herein, the term "Notional Total Profit" with respect
to the Option Shares subject to this Option shall be the Total Profit
determined as of the date of such proposal assuming that this Option were
exercised in full on such date and assuming that (i) such Option Shares (or
any other securities into which such Option Shares are converted or
exchanged) were sold for cash at the closing market price on the NYSE for
the Common Stock as of the close of business on the preceding trading day
(less customary brokerage commissions) and (ii) any Additional Property was
sold at fair market value.
20. Captions. The Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions
hereof.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by duly authorized officers of the parties hereto as of the day
and year first hereinabove written.
ATLANTIC RICHFIELD COMPANY
By: /s/ Mike R. Bowlin
---------------------------------------
Name: Mike R. Bowlin
Title: Chairman of the Board and
Chief Executive Officer
BP AMOCO p.l.c.
By: /s/ John Browne
---------------------------------------
Name: (E.J.P. Browne) - Sir John Browne
Title: Chief Executive Officer
By: /s/ B.E. Grote
----------------------------------------
Name: B.E. Grote
Title: Executive Vice President
Exhibit 99.1
FOR IMMEDIATE RELEASE
April 1, 1999
BP AMOCO AND ARCO IN $26.8 BILLION DEAL
AGREED BY BOARDS OF BOTH COMPANIES
o Makes BP Amoco biggest non-state oil producer
o Combined market capitalisation of some $190 billion
o Annual pre-tax synergies of $1 billion by 2001
o Improved economics will drive Alaskan growth
o Quantum leap in Asian gas position
o Top West Coast network gives US coast-to-coast retail reach
LONDON, April 1: BP Amoco confirmed today that, following a successful
outcome to talks between the two companies, it has reached agreement to
combine with the Atlantic Richfield Company (ARCO) of Los Angeles.
The all-share transaction, approved by the boards of both companies, will
involve the exchange of 0.82 BP Amoco American Depositary Shares (ADS) for
each ARCO share.
At BP Amoco's closing price of $100.44 per ADS on Friday, March 26, 1999,
this valued ARCO at $26.8 billion, representing a premium of 26 per cent.
Based on the closing prices of the two companies last night (Wednesday,
March 31) the premium was 13 per cent.
Describing the deal as "a compelling strategic and geographic fit of
quality assets", BP Amoco chief executive Sir John Browne said it would
yield annualised pre-tax synergies of around $1 billion by the year 2001.
The deal will substantially boost BP Amoco's reserves and production,
giving it the largest oil output of any non-state company, and will
consolidate its position in Alaska where the resulting synergies and
cost-savings are likely to increase the region's competitiveness and
significantly encourage future investment.
"For BP Amoco, the strategic rationale for this deal is the immense
potential it offers for future growth," Browne said. "In Alaska in
particular, the synergies we can achieve from combining our operations will
greatly increase the competitiveness of
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the state in the face of uncertain oil prices and provide a strong
incentive for significant investment in existing and future fields."
Browne said the deal would also give BP Amoco entry to the key West Coast
retail markets of the US where ARCO has a leading market share in five
states and owns two of the most efficient refineries in the region. With
the prime refining and retail network BP Amoco already has east of the
Rockies, this makes it a coast-to-coast marketer in the US.
Elsewhere, onshore the US and the Gulf of Mexico, ARCO will add 360,000
barrels of oil equivalent to BP Amoco's daily output - half of it gas,
chiefly from ARCO's 82 per cent stake in Vastar, one of the most profitable
operators in the Lower 48.
Internationally, the deal will add major volumes in South East Asia, most
notably in Indonesia where ARCO has an estimated net share of up to eight
trillion cubic feet in the Tangguh gas field, regarded as one of the best
liquefied natural gas projects in the region.
It also adds gas reserves in the South China Sea, Malaysia, Thailand and
Qatar and oil interests in Algeria, Venezuela, the Caspian and Russia.
In the UK, ARCO will add gas and oil production equivalent of over 100,000
barrels a day from fields that are complementary to BP Amoco's North Sea
operations, making the group the largest single supplier of UKCS gas.
"The addition of ARCO's international assets powerfully strengthens our
global portfolio," Browne said. "Most significantly, it gives us a major
platform for upstream growth in Asia where we will now have world-class gas
reserves ready to supply Japan, Korea and other key markets when recovery
comes to the region, which it undoubtedly will."
In Alaska, Browne said the deal could help unlock the potential for large
volumes of gas "which are currently uneconomic to develop but could make an
enormous contribution to the energy needs of the US in the next century.
"We have proprietary BP Amoco technology which we believe may allow us to
convert some of that gas into liquids that can be transported through the
existing oil pipeline. We have plans to build a $70 million pilot plant on
the North Slope to test that technology and if it is successful, we will
consider full-scale development."
Browne disclosed that the deal was the outcome of negotiations which began
in January after an approach from ARCO's executive management to consider
options for closer co-operation between the two companies.
In a joint statement today, Browne and ARCO Chairman Mike Bowlin said:
"Against the background of uncertain oil prices and the increased
competitive pressure across
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the sector, it is clear that the uniquely complementary operations of our
companies can compete more effectively together than apart to deliver our
respective shareholders a superior return on their investment."
BP Amoco said the $1 billion synergies - which are on top of the $500
million cost- savings already targeted by ARCO - would be achieved from a
mix of organisational efficiencies, more focused exploration, improved
business processes including IT, and rationalisation of operations.
The company said that it expected to take a restructuring charge of $1
billion on the transaction. This would cover both a Stamp Duty Reserve Tax
charge of some $400 million and the costs associated with achieving the
synergies.
Some $710 million of the synergy savings are expected from exploration and
production, including $200 million from streamlining Alaskan operations.
Some $110 million are targeted from refining and marketing and $180 million
from corporate costs.
Approximately 2,000 jobs are expected to be lost as a consequence of
merging the operations of the two companies, with the impact likely to be
concentrated on locations in the Lower 48.
ARCO has proven oil reserves of some 2.8 billion barrels, mainly in Alaska
where it shares major interests with BP Amoco in five fields, including
Prudhoe Bay. Its proven gas reserves total 9.8 trillion cubic feet, mainly
in the Gulf of Mexico, the UK North Sea and the South China Sea, but it
holds unbooked gas volumes of a further 15 trillion cubic feet, mainly in
Indonesia, Thailand, Malaysia and Qatar.
In 1998 it produced 660,000 barrels of oil a day, approximately half from
Alaska, and 2.1 billion cubic feet of gas, mainly from the Gulf of Mexico,
the UK North Sea and Indonesia.
ARCO's refining and marketing business is the leading gasoline marketer on
the US west coast, with 1,760 retail sites spread across California,
Arizona, Nevada, Oregon and Washington. Its two refineries, in Carson,
California and Cherry Point, Washington, are among the top quartile
performers in the region.
The transaction is subject to the approval of the shareholders of both
companies and the consent of various state and regulatory authorities,
including the US Federal Trade Commission (FTC) and the European
Commission. The process of obtaining regulatory consents will be led by BP
Amoco co-chairman Larry Fuller.
Pending completion of the deal and subject to normal legal constraints on
the exchange of competitive data in the interim, the two companies will
establish a small team of executives from both sides to plan the
integration of their operations. This will be led by BP Amoco executive
vice president, Dr Byron Grote.
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Browne said ARCO's assets would be absorbed with minimal impact into the BP
Amoco organisational structure. The team planning the integration would be
'ring- fenced' so that the deal does not interfere with the ongoing
integration of BP and Amoco assets which was progressing more rapidly than
expected and likely to be concluded during the year.
The company said that closure of the ARCO transaction is currently
estimated to occur around the end of the year.
Browne said the deal would not affect BP Amoco's rigorous approach to the
management of its balance sheet. "On a combined basis, taking a snapshot of
the current position, our ratio of net debt to net-debt-plus-equity would
remain below the 30 per cent ceiling we have set ourselves.
"Neither will there be any impact on our dividend policy," he said. "We
will continue to aim to pay out around 50 per cent of underlying earnings
on a through-cycle basis."
The transaction will be accounted for as a purchase under UK GAAP rules.
Further information on BP Amoco and ARCO is set out in Part ll of this
release and a summary of the proposed transaction is set out in Part lll.
The companies said they intend to publish detailed information for dispatch
to shareholders within the next three months.
Investment bank advisers: Morgan Stanley for BP and Goldman Sachs and
Salomon Smith Barney for ARCO.
CONTACTS FOR FURTHER INFORMATION
BP AMOCO LONDON ARCO LOS ANGELES
Press - Roddy Kennedy Press - Linda Dozier
Tel: 44 (0)171 496 4624 Tel: (1) 213 486 3384
Investor Relations - David Peattie Investor Relations - David De Sonier
Tel: 44 (0)171 496 4717 Tel: (1) 213 486 1811
BP AMOCO NEW YORK
Press - Tom Koch
Tel: (1) 212 451 8019
Investor Relations - Chuck Koepke
- Terry Lamore
Tel: (1) 212 451 8034
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BROKER CONTACTS
FOR BP AMOCO FOR ARCO
Bob Maguire - Morgan Stanley Michael Carr - Goldman Sachs
Tel: 44 (0) 171 425 5643 Tel: (1) 212 902 2266
Steve Munger - Morgan Stanley Maureen Hendricks - Salomon
Tel: (1) 212 761 4257 Smith Barney
Tel: (1) 212 816 0967
Stephen Robinson - Merrill Lynch
Tel: 44 (0) 171 772 2608
David Mayhew - Cazenove & Co
Tel: 44 (0) 171 825 9453
Further information on the two companies is available on the Internet at:
http://www.bpamoco.com and http://www.arco.com
