<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
(Amendment No. 3)*
Sonat Inc.
(Name of Issuer)
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Common Stock, par value $1.00 per share
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(Title of Class of Securities)
835415000
--------------
(CUSIP Number)
Joseph Romano
Two Houston Center
909 Fannin, Suite 2910
Houston, Texas 77010
(713) 739-0836
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
March 13, 1999
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box .
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP No. 835415000
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1 NAME OF REPORTING PERSON
Michael Zilkha
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
Not Applicable
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
- -------------------------------- ------- ---------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
-----------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 8,994,664 shares
-----------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 8,814,664 shares
-----------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 180,000 shares
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,994,664 shares
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.2% (based upon the number of shares outstanding on March 11, 1999)
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14 TYPE OF REPORTING PERSON
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT! SCHEDULE 13D
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INTRODUCTORY STATEMENT
On March 13, 1999, Sonat Inc. (the "Company") entered into an
Agreement and Plan of Merger (the "El Paso Merger Agreement") with El Paso
Energy Corporation ("El Paso") providing, among other things, for a business
combination between the Company and El Paso. In connection with the El Paso
Merger Agreement, Michael Zilkha (the "Reporting Person"), and Selim K. Zilkha,
in his individual capacity and in his capacity as trustee of the Selim K. Zilkha
Trust (collectively, the "Stockholders"), entered into a Voting Agreement with
El Paso (the "Zilkha Voting Agreement"), dated March 13, 1999, relating to the
voting of certain shares of the Company's Common Stock, par value $1.00 per
share ("Company Common Stock"), then owned or thereafter acquired by the
Stockholders. This Amendment No. 3 is being filed to report the effect of the
Zilkha Voting Agreement on the Reporting Person's beneficial ownership of
Company Common Stock.
Unless otherwise indicated, each capitalized term used but not defined
herein shall have the meaning assigned to such term in the El Paso Merger
Agreement, the Zilkha Voting Agreement, or the Registration Rights Agreement
dated as of January 30, 1998 (the "Registration Rights Agreement"), among the
Company, the Stockholders and the Selim K. Zilkha (1996) Annuity Trust. The El
Paso Merger Agreement, the Zilkha Voting Agreement and the Registration Rights
Agreement are filed as exhibits hereto and are incorporated herein by reference.
Except as specifically provided herein, this Amendment No. 3 does not
modify any of the information previously reported on Amendment No. 2 to this
Schedule 13D, including information with respect to the persons other than the
Reporting Person.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Item 3 is hereby supplemented as follows:
No funds were used in connection with entering into the Zilkha Voting
Agreement.
ITEM 4. PURPOSE OF TRANSACTION
Item 4 is hereby supplemented to include the following:
Concurrently with the execution and delivery of the El Paso Merger
Agreement and as a condition and inducement to El Paso's willingness to enter
into the El Paso Merger Agreement, El Paso and the Stockholders (including the
Reporting Person) entered into the Zilkha Voting Agreement. Pursuant to the
Zilkha Voting Agreement, each Stockholder has agreed that he or it, at any
meeting of the stockholders of the Company, shall (1) appear at the meeting or
otherwise cause the shares of Company Common Stock subject to the agreement and
owned by him or it, together with any shares of Company Common Stock acquired by
him or it after the date of the El Paso Merger Agreement (collectively, the
"Company Shares"), to be counted as present thereat for purposes of establishing
a quorum or (2) vote his or its Company Shares, or cause his or its Company
Shares to be voted, in favor of the approval and adoption of the El Paso Merger
Agreement and the transactions contemplated thereby, and any action required in
furtherance thereof, if the El Paso Merger Agreement (as in effect as of March
13, 1999 and amendments thereto that do not effect a change to the transactions
contemplated thereby as of March 13, 1999 that would materially and adversely
affect the Stockholders) and the transactions contemplated thereby are presented
at the Company's stockholders' meeting. As security for each Stockholder's
obligations under the Zilkha Voting Agreement, each Stockholder irrevocably
appointed El Paso as his or its attorney and proxy to vote the Company
- Page 3 of 7 Pages -
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Shares at the Company's stockholders' meeting to the extent provided above. The
Zilkha Voting Agreement will terminate upon the earliest to occur of (1) the
effective time of the Parent Merger or the Alternative Merger and (2) the
termination of the El Paso Merger Agreement in accordance with its terms.
Pursuant to the terms of the Zilkha Voting Agreement, the Stockholders are not
permitted to transfer or sell their Company Shares.
The Zilkha Voting Agreement also requires El Paso, after the effective
time of the Parent Merger or the Alternative Merger, to comply with the
obligations of the Company contained in the Registration Rights Agreement as if
El Paso were the Company.
Under the El Paso Merger Agreement, the Board of Directors of El Paso
is required to take such action as is necessary so that as of the effective time
of the Parent Merger or the Alternative Merger, it has 15 members, nine of whom
are persons designated by the Board of Directors of El Paso prior to the
effective time (no more than one such person being an insider of El Paso) ("El
Paso Designees") and six of whom are persons designated by the Board of
Directors of the Company prior to the effective time (no more than one such
person being an insider of the Company and no more than one such person being a
Stockholder) ("Company Designees"). If any Company Designee or El Paso Designee
is over the age of 68 at the effective time, El Paso shall waive any age
limitation applicable to members of the Board of Directors, with respect to such
Company Designee or El Paso Designee, as applicable. After the effective time,
El Paso will not discriminate between Company Designees and El Paso Designees in
making any determination with respect to the waiver of the age limitation
applicable to members of the Board of Directors, it being understood that
determinations are made on a case-by-case basis and it being further understood
that El Paso waives such age limitation for Selim K. Zilkha, the Reporting
Person's father. The El Paso Merger Agreement further provides that Selim K.
Zilkha shall be nominated by El Paso's Board of Directors (or nominating
committee or other committee performing similar functions) for election to serve
as a director of El Paso for so long as Selim K. Zilkha and members of his
immediate family, including the Reporting Person, and trusts therefor own at
least 5% of the then outstanding shares of El Paso Common Stock.
The Reporting Person may change any of his current intentions, acquire
a beneficial interest in additional shares of Company Common Stock, sell or
otherwise dispose of all or any part of the shares of Company Common Stock
beneficially owned by him, or take any other action with respect to the Company
or any of its equity securities in any manner permitted by law and consistent
with the terms of the Zilkha Voting Agreement. Reference is hereby made to
Articles I, II, VI and VII of the El Paso Merger Agreement for a description of
other transactions or events of the type described in paragraphs (a) through (j)
of Item 4 of Schedule 13D. Except as disclosed in this Item 4, the Reporting
Person does not have any current plans or proposals that relate to or would
result in any of the events described in paragraphs (a) through (j) of Item 4 of
Schedule 13D.
The foregoing response to this Item 4 is qualified in its entirety by
reference to the El Paso Merger Agreement, the full text of which is filed as
Exhibit A hereto, the Zilkha Voting Agreement, the full text of which is filed
as Exhibit B hereto, and the Registration Rights Agreement, the full text of
which has previously been filed as an exhibit to Amendment No. 1 to Schedule 13D
filed by the Reporting Person. All such agreements are incorporated herein by
reference.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Item 5 is hereby amended and restated only with respect to the
Reporting Person's interest in securities of the Company as follows:
(a) The Company reported in the El Paso Merger Agreement that it had
outstanding as of the close of business on March 11, 1999 an aggregate of
110,047,818 shares of Company Common Stock. As of the date of this
- Page 4 of 7 Pages -
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Amendment No. 3 to Schedule 13D, the Reporting Person may be deemed to
beneficially own 8,994,664 shares, or approximately 8.2% of the outstanding
shares of Company Common Stock.
(b) The number of shares of Company Common Stock as to which there is
sole power to vote or to direct the vote, shared power to vote or direct the
vote, sole power to dispose or to direct the disposition, or shared power to
dispose or direct the disposition for the Reporting Person is set forth on the
cover page of this Amendment No. 3 to Schedule 13D, and such information is
incorporated herein by reference.
The Reporting Person shares the power to vote 8,814,664 shares of
Company Common Stock with El Paso, who holds the power to vote such shares on
certain matters as described above. El Paso Energy Corporation is a Delaware
corporation whose principle operations include the interstate and intrastate
transportation, gathering and processing of natural gas; the marketing of
natural gas, power and other commodities; and the development and operation of
energy infrastructure facilities worldwide. The address of El Paso's principal
office is 1001 Louisiana, Houston, Texas 77002. To the best of the Reporting
Person's knowledge, El Paso has not, during the last five years, been convicted
in a criminal proceeding, nor has El Paso been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction as a result of which
El Paso was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
The Reporting Person shares the power to vote and to dispose of
180,000 shares of Company Common Stock with his spouse as a 50% member of a
limited liability company that serves as general partner of a limited
partnership which holds such shares (the "Limited Partnership"). The Reporting
Person's spouse is Ms. Cornelia O'Leary Zilkha. Her principle business address
is 601 Jefferson, 38th Floor, Houston, Texas 77002. Ms. Zilkha is a housewife.
Ms. Zilkha has not, during the last five years, been convicted in a criminal
proceeding, nor has she been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which she was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
(c) Not applicable.
(d) The Reporting Person has the right to receive the dividends from,
and the proceeds from the sale of, 8,814,664 shares of Company Common Stock
reported by such person on the cover page of this Amendment No. 3 to Schedule
13D. The Limited Partnership has the right to receive dividends from, and the
proceeds from the sale of, the remaining 180,000 shares of Company Common Stock
reported on the cover page of this Amendment No. 3 to Schedule 13D.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER.
The response to Item 4, the Merger Agreement, the Zilkha Voting
Agreement and the Registration Rights Agreement are incorporated herein by
reference.
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The following are filed herewith as exhibits to this Amendment No. 3
to Schedule 13D:
A. Agreement and Plan of Merger, dated as of March 13, 1999, by
and between El Paso Energy Corporation and Sonat Inc.
B. Voting Agreement, dated March 13, 1999, by and between Michael
Zilkha and Selim Zilkha, in his individual capacity and in his
capacity as trustee of the Selim K. Zilkha Trust, and El Paso
Energy Corporation.
C. Registration Rights Agreement, dated as of January 30, 1998, by
and among Sonat Inc., Selim K. Zilkha, Michael Zilkha, the
Selim K. Zilkha Trust and the Selim K. Zilkha (1996) Annuity
Trust (incorporated by reference to Exhibit C to Amendment No.
1 to Schedule 13D filed by the Reporting Person with the
Securities and Exchange Commission on February 3, 1998).
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 17, 1999
/s/ MICHAEL ZILKHA
--------------------------
Michael Zilkha
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EXHIBIT INDEX
A. Agreement and Plan of Merger, dated as of March 13, 1999, by
and between El Paso Energy Corporation and Sonat Inc.
B. Voting Agreement, dated March 13, 1999, by and between Michael
Zilkha and Selim Zilkha, in his individual capacity and in his
capacity as trustee of the Selim K. Zilkha Trust, and El Paso
Energy Corporation.
C. Registration Rights Agreement, dated as of January 30, 1998, by
and among Sonat Inc., Selim K. Zilkha, Michael Zilkha, the
Selim K. Zilkha Trust and the Selim K. Zilkha (1996) Annuity
Trust (incorporated by reference to Exhibit C to Amendment No.
1 to Schedule 13D filed by the Reporting Person with the
Securities and Exchange Commission on February 3, 1998).
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
DATED AS OF
March 13, 1999
BY AND BETWEEN
EL PASO ENERGY CORPORATION
AND
SONAT INC.
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I........................................................................................................2
Section 1.1 Organization of Merger Sub........................................................2
Section 1.2 The Parent Merger and Alternative Merger..........................................2
Section 1.3 The Closing; Effective Time.......................................................4
Section 1.4 Subsequent Actions................................................................4
Section 1.5 Certificate of Incorporation; By-laws; Directors and Officers of the Surviving
Corporation.......................................................................5
ARTICLE II.......................................................................................................6
Section 2.1 Treatment of Common Stock.........................................................6
Section 2.2 Cancellation of Excluded Shares...................................................8
Section 2.3 Conversion of Common Stock of Merger Sub..........................................8
Section 2.4 Exchange Agent; Exchange Procedures...............................................9
Section 2.5 Transfer Books; Lost, Stolen or Destroyed Certificates...........................10
Section 2.6 No Fractional Share Certificates; Termination of Exchange Fund...................11
Section 2.7 Options..........................................................................11
Section 2.8 Appraisal Rights.................................................................13
Section 2.9 Dividends........................................................................13
Section 2.10 Certain Adjustments..............................................................13
ARTICLE III.....................................................................................................13
Section 3.1 Organization and Qualification; Subsidiaries.....................................14
Section 3.2 Restated Certificate of Incorporation and By-laws................................14
Section 3.3 Capitalization...................................................................15
Section 3.4 Power and Authority; Authorization; Valid and Binding............................15
Section 3.5 No Conflict; Required Filings and Consents.......................................16
Section 3.6 SEC Reports; Financial Statements................................................17
Section 3.7 Absence of Certain Changes.......................................................18
Section 3.8 Litigation; Liabilities..........................................................19
Section 3.9 Compliance; Permits..............................................................19
Section 3.10 Employee Matters; ERISA..........................................................20
</TABLE>
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<TABLE>
<S> <C> <C>
Section 3.11 Labor Matters....................................................................23
Section 3.12 Environmental Matters............................................................23
Section 3.13 Board Action; Company Rights Agreement; Vote Required............................26
Section 3.14 Opinion of Financial Advisor.....................................................27
Section 3.15 Brokers..........................................................................27
Section 3.16 Tax Matters......................................................................27
Section 3.17 Public Utility Holding Company Act of 1935.......................................28
Section 3.18 Restrictions on Business Activities..............................................28
Section 3.19 Year 2000........................................................................28
Section 3.20 Accounting Matters...............................................................28
ARTICLE IV......................................................................................................29
Section 4.1 Organization and Qualification; Subsidiaries.....................................29
Section 4.2 Restated Certificate of Incorporation and By-laws of Parent......................30
Section 4.3 Capitalization...................................................................30
Section 4.4 Power and Authority; Authorization; Valid and Binding............................31
Section 4.5 No Conflict; Required Filings and Consents.......................................31
Section 4.6 SEC Reports; Financial Statements................................................32
Section 4.7 Absence of Certain Changes.......................................................33
Section 4.8 Litigation; Liabilities..........................................................34
Section 4.9 Compliance; Permits..............................................................35
Section 4.10 Employee Matters; ERISA..........................................................35
Section 4.11 Labor Matters....................................................................37
Section 4.12 Environmental Matters............................................................38
Section 4.13 Board Action; Vote Required......................................................39
Section 4.14 Opinion of Financial Advisor.....................................................40
Section 4.15 Brokers..........................................................................40
Section 4.16 Tax Matters......................................................................41
Section 4.17 Public Utility Holding Company Act of 1935.......................................41
Section 4.18 Restrictions on Business Activities..............................................41
Section 4.19 Year 2000........................................................................42
</TABLE>
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<TABLE>
<S> <C> <C>
Section 4.20 Accounting Matters...............................................................42
ARTICLE V.......................................................................................................42
Section 5.1 Interim Operations of the Company................................................42
Section 5.2 Interim Operations of Parent.....................................................44
Section 5.3 No Solicitation..................................................................46
ARTICLE VI......................................................................................................49
Section 6.1 Meetings of Stockholders.........................................................49
Section 6.2 Filings; Other Action............................................................49
Section 6.3 Publicity........................................................................50
Section 6.4 Registration Statements..........................................................51
Section 6.5 Listing Application..............................................................51
Section 6.6 Further Action...................................................................52
Section 6.7 Expenses.........................................................................52
Section 6.8 Access to Information............................................................52
Section 6.9 Insurance; Indemnity.............................................................53
Section 6.10 Employee Benefit Plans...........................................................54
Section 6.11 Certain Appointments.............................................................55
Section 6.12 Affiliates.......................................................................56
Section 6.13 Pooling-of-Interests.............................................................57
Section 6.14 Certificate of Designation; Depositary Agreement.................................57
Section 6.15 Takeover Statutes................................................................57
Section 6.16 Tax-Free Merger..................................................................58
Section 6.17 Name; Headquarters...............................................................58
Section 6.18 Employment Matters...............................................................58
Section 6.19 Section 16(b)....................................................................58
Section 6.20 Reasonable Best Efforts..........................................................58
ARTICLE VII.....................................................................................................60
Section 7.1 Conditions to Obligations of the Parties.........................................60
Section 7.2 Additional Conditions to Obligations of Parent...................................62
Section 7.3 Additional Conditions to Obligations of the Company..............................62
ARTICLE VIII....................................................................................................63
</TABLE>
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<TABLE>
<S> <C> <C>
Section 8.1 Termination......................................................................63
Section 8.2 Effect of Termination............................................................65
Section 8.3 Amendment........................................................................67
Section 8.4 Extension; Waiver................................................................67
ARTICLE IX......................................................................................................67
Section 9.1 Non-Survival of Representations, Warranties and Agreements.......................67
Section 9.2 GOVERNING LAW....................................................................67
Section 9.3 Notices..........................................................................68
Section 9.4 Certain Definitions; Interpretation..............................................69
Section 9.5 Headings.........................................................................70
Section 9.6 Severability.....................................................................70
Section 9.7 Assignment; Binding Effect; No Third Party Beneficiaries.........................71
Section 9.8 ENFORCEMENT......................................................................71
Section 9.9 Counterparts.....................................................................71
Section 9.10 Entire Agreement.................................................................72
</TABLE>
EXHIBITS
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<TABLE>
<S> <C>
Exhibit A-1 Form of Initial Certificate of Incorporation of Merger Sub
Exhibit A-2 Form of Initial By-laws of Merger Sub
Exhibit B-1 Form of Restated Certificate of Incorporation of Parent as of the Effective Time in the event the
Parent Merger is consummated
Exhibit B-2 Form of By-laws of Parent
Exhibit C Form of Restated Certificate of Incorporation of the Company as of the Effective Time in the event
the Alternative Merger is consummated
Exhibit D Form of Depositary Agreement
Exhibit E Form of Certificate of Designation, Preferences and Rights of the __% Senior Cumulative Exchangeable
Preferred Stock of El Paso Energy Corporation
</TABLE>
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<TABLE>
<S> <C>
Exhibit F Form of Affiliate Letter of the Company's Affiliates
Exhibit G Form of Affiliate Letter of Parent's Affiliates
Exhibit H Form of Termination and Consulting Agreement with Ronald L. Kuehn, Jr.
</TABLE>
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INDEX OF DEFINED TERMS
DEFINED TERM Page No.
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ACM................................................................24
Acquisition Agreement..............................................46
Acquisition Transaction............................................47
Action.............................................................52
affiliate..........................................................67
Agreement...........................................................1
Alternative Merger..................................................3
Alternative Merger Excluded Shares..................................6
Alternative Surviving Corporation...................................3
Applicable Period..................................................45
Applicable Transaction..............................................3
Cap Amount.........................................................51
Certificate of Designation..........................................8
Closing.............................................................4
Closing Date........................................................4
Code................................................................1
Common Conversion Number............................................7
Company.............................................................1
Company Certificate.................................................6
Company Common Stock................................................1
Company Defined Benefit Plan.......................................21
Company Designees..................................................54
Company Disclosure Letter..........................................13
Company Employee Plans.............................................20
Company Equity Equivalent Security.................................15
Company ERISA Affiliate............................................20
Company Material Adverse Effect....................................67
Company Options....................................................11
Company Permits....................................................19
Company Preferred Stock............................................14
Company Rights Agreement...........................................15
Company SEC Reports................................................17
Company Stock Option Agreement......................................1
Company Termination Fee............................................64
Confidentiality Agreement..........................................25
control............................................................68
Depositary..........................................................7
Depositary Agreement................................................7
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Depositary Receipt..................................................7
Depositary Share....................................................7
Depositary Share Conversion Number..................................7
DGCL................................................................2
DLJ................................................................39
DOJ................................................................58
Effective Time......................................................4
Environmental Costs................................................24
Environmental Laws.................................................25
Environmental Matter...............................................24
Environmental Permits..............................................23
ERISA..............................................................19
Exchange Act.......................................................16
Exchange Agent......................................................8
Exchange Fund.......................................................9
Exchange Ratio......................................................6
FERC...............................................................16
Form S-4...........................................................49
GAAP................................................................1
Governmental Entity................................................17
Hazardous Substances...............................................24
Holding Company Act................................................27
HSR Act............................................................16
Indemnified Party..................................................52
IRS................................................................20
Joint Proxy Statement/Prospectus...................................49
knowledge..........................................................68
Kuehn Voting Agreement..............................................2
Major Company Stockholders..........................................2
Merger..............................................................3
Merger Sub..........................................................2
Merrill Lynch......................................................26
Newco...............................................................3
Notice.............................................................45
NYSE................................................................7
Parent..............................................................1
Parent Certificates.................................................9
Parent Common Stock.................................................1
Parent Defined Benefit Plan........................................36
Parent Designees...................................................54
Parent Disclosure Letter...........................................28
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<PAGE> 9
Parent Employee Plans..............................................34
Parent Equity Equivalent Security..................................30
Parent ERISA Affiliate.............................................34
Parent Material Adverse Effect.....................................67
Parent Meeting......................................................3
Parent Merger.......................................................3
Parent Merger Excluded Shares.......................................6
Parent Permits.....................................................34
Parent Preferred Stock..........................................8, 29
Parent Rights Agreement............................................29
Parent SEC Reports.................................................32
Parent Stock Option Agreement.......................................1
Parent Surviving Corporation........................................3
Parent Termination Fee.............................................64
Parent Trust Securities............................................29
PBGC...............................................................21
PCBs...............................................................25
Person.............................................................68
Regulatory Law.....................................................58
Representatives....................................................45
Revised Merger......................................................3
SEC.................................................................1
Securities Act.....................................................16
Stock Option Agreements.............................................1
Subsidiary.........................................................68
Superior Proposal..................................................47
Surviving Corporation...............................................3
Takeover Proposal..................................................46
Tax................................................................68
Termination Date...................................................62
Voting Agreements...................................................2
Zilkha Voting Agreement.............................................2
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 13, 1999
(this "Agreement"), by and between EL PASO ENERGY
CORPORATION, a Delaware corporation ("Parent"), and SONAT INC., a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent and
the Company have determined that a business combination between Parent and the
Company is in the best interests of their respective companies and stockholders
and presents an opportunity for their respective companies to achieve long-term
strategic and financial benefits and have approved the transactions provided
for herein upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, it is intended that the business combination
between Parent and the Company will qualify as a tax-free
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder (the "Code");
WHEREAS, it is intended that the business combination
between Parent and the Company will be accounted for as a
pooling of interests under United States generally accepted accounting
principles ("GAAP") and the applicable rules and regulations of the Securities
and Exchange Commission (the "SEC");
WHEREAS, concurrently with the execution and delivery
of this Agreement and as a condition and inducement to
Parent's willingness to enter into this Agreement, Parent and the Company are
executing and delivering a Stock Option Agreement, dated as of the date hereof
(the "Company Stock Option Agreement"), pursuant to which the Company is
granting to Parent an option to purchase, under certain circumstances, for a
purchase price of $27.238 per share, up to 21,899,515 shares of common stock,
par value $1.00 per share, of the Company (together with the associated
preference share purchase rights, the "Company Common Stock");
WHEREAS, concurrently with the execution and delivery
of this Agreement and as a condition and inducement to the
Company's willingness to enter into this Agreement, Parent and the Company are
executing and delivering a Stock Option Agreement, dated as of the date hereof
(the "Parent Stock Option Agreement", and together with the Company Stock
Option Agreement, the "Stock Option Agreements"), pursuant to which Parent is
granting to the Company an option to purchase, under certain circumstances, for
a purchase price of $37.725 per share, up to 24,349,638 shares of common stock,
par value $3.00 per share, of Parent (together with the associated preferred
stock purchase rights, the "Parent Common Stock"); and
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<PAGE> 11
WHEREAS, concurrently with the execution and delivery
of this Agreement and as a condition and inducement to
Parent's willingness to enter into this Agreement, Parent and Selim K. Zilkha,
in his individual capacity and in his capacity as trustee of the Selim K.
Zilkha Trust and Michael Zilkha (the "Major Company Stockholders") are
executing and delivering a Voting Agreement, dated as of the date hereof (the
"Zilkha Voting Agreement"), pursuant to which each of the Major Company
Stockholders is agreeing to vote all of his or its shares of Company Common
Stock in favor of the approval and adoption of this Agreement and the
transactions contemplated hereby; and
WHEREAS, concurrently with the execution and delivery
of this Agreement and as a condition and inducement to
Parent's willingness to enter into this Agreement, Parent and Ronald L. Kuehn,
Jr. are executing and delivering a Voting Agreement, dated as of the date
hereof (the "Kuehn Voting Agreement," and together with the Zilkha Voting
Agreement, the "Voting Agreements"), pursuant to which he is agreeing to vote
all of his shares of Company Common Stock in favor of the approval and adoption
of this Agreement and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements contained in this
Agreement, and intending to be legally bound hereby, the parties hereto agree
as follows:
ARTICLE I
Section 1.1 Organization of Merger Sub. As promptly as practicable
following the execution of this Agreement, Parent shall (i) duly organize under
the laws of the State of Delaware a wholly owned subsidiary corporation
("Merger Sub"), (ii) cause directors of Merger Sub to be duly elected or
appointed, (iii) cause the directors of Merger Sub to elect officers of Merger
Sub, (iv) cause the directors of Merger Sub to duly ratify and approve this
Agreement and the Alternative Merger (as defined in Section 1.2(b)) and cause
the officers of Merger Sub to duly execute and deliver on behalf of Merger Sub
such documentation as is necessary to make Merger Sub a party hereto, (v) in
its capacity as sole stockholder of Merger Sub, duly approve and adopt this
Agreement and the Alternative Merger in accordance with the Delaware General
Corporation Law (the "DGCL"), and (vi) cause the directors and officers of
Merger Sub to take such steps as are necessary for Merger Sub to perform its
obligations hereunder. The initial certificate of incorporation and bylaws of
Merger Sub shall be substantially in the forms of the certificate of
incorporation and bylaws set forth in Exhibit A-1 hereto and Exhibit A-2
hereto, respectively.
Section 1.2 The Parent Merger and Alternative Merger. (a) Subject to
paragraph (b) of this Section 1.2, at the Effective Time (as defined in Section
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1.3(b)) and subject to and upon the terms and conditions of this Agreement and
in accordance with the provisions of Section 251 of the DGCL, the Company shall
be merged with and into Parent (such merger, the "Parent Merger"), the separate
corporate existence of the Company shall cease, and Parent shall continue as
the surviving corporation (sometimes referred to herein as the "Parent
Surviving Corporation") in the Parent Merger. The effects and consequences of
the Parent Merger shall be as specified in this Agreement and in Section 259(a)
of the DGCL.
(b) Notwithstanding paragraph (a) of this Section
1.2, in the event that this Agreement and the Parent
Merger are not approved by the requisite vote of the stockholders of Parent
pursuant to the DGCL at a duly noticed and held stockholders' meeting,
including any adjournments or postponements thereof (a "Parent Meeting"), at
the Effective Time and subject to and upon the terms and conditions of this
Agreement and in accordance with the provisions of Section 251 of the DGCL,
Merger Sub shall be merged with and into the Company (such merger the
"Alternative Merger") and the separate existence of Merger Sub shall cease. The
Company shall continue as the surviving corporation (the "Alternative Surviving
Corporation") in the Alternative Merger and, as of the Effective Time, shall be
a wholly-owned subsidiary of Parent. The effects and consequences of the
Alternative Merger shall be as specified in this Agreement and in Section
259(a) of the DGCL. The Parent Surviving Corporation shall, in the event the
Parent Merger is consummated, and the Alternative Surviving Corporation shall,
in the event the Alternative Merger is consummated, sometimes be referred to
herein as the "Surviving Corporation"; and the Parent Merger shall, in the
event the Parent Merger is consummated, and the Alternative Merger shall, in
the event the Alternative Merger is consummated, sometimes be referred to
herein as the "Merger." In the event that the approval of the stockholders of
Parent referenced in the first sentence of this paragraph (b) is obtained at a
Parent Meeting, each reference herein to the "Applicable Transaction" shall be
deemed to be a reference to the Parent Merger, and in the event that such
approval of the stockholders of Parent is not obtained at a Parent Meeting
called to vote with respect thereto, each reference herein to the "Applicable
Transaction" shall be deemed to be a reference to the Alternative Merger.
(c) Nothwithstanding any other provision of this
Agreement, the Company agrees with Parent that, at the
request of Parent at any time prior to the effective date of the Form S-4 (as
defined in Section 6.4), the form of the business combination contemplated by
this Agreement may be amended to substitute for the Parent Merger a business
combination in which Parent and the Company will form a Delaware corporation,
which will be half-owned by each of Parent and the Company ("Newco") and will
cause Newco to form two wholly owned subsidiaries, one of which will merge with
and into Parent and one of which will merge with and into the Company, and as a
result of which each outstanding share of Parent Common Stock and Company
Common Stock will be converted into the right to receive one share of common
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stock of Newco (together with one associated preferred stock purchase right of
Newco) (the "Revised Merger"); provided that the Revised Merger will only be
effected if such transaction would reduce the transaction costs associated with
the consummation of the Parent Merger and would not adversely affect the
holders of Company Common Stock; and provided further that such amendment shall
not affect Parent's obligation to effect the Alternative Merger if required
pursuant to this Agreement. If the Revised Merger is being substituted for the
Parent Merger, the parties shall execute an appropriate amendment to this
Agreement in a form mutually acceptable to Parent and the Company to provide
for the Revised Merger.
Section 1.3 The Closing; Effective Time. (a) The closing of the
Applicable Transaction (the "Closing") shall take place (i) at the offices of
Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New
York 10004, at 10:00 A.M. local time, on the first business day on which the
last to be satisfied or waived of the conditions set forth in Article VII
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions) shall
be satisfied or waived in accordance with this Agreement or (ii) at such other
place, time and/or date as Parent and the Company shall agree (the date of the
Closing, the "Closing Date").
(b) On the Closing Date, Parent and the Company
shall cause a certificate of merger with respect to the
Applicable Transaction, meeting the requirements of Section 251 of the DGCL, to
be properly executed and filed with the Secretary of State of the State of
Delaware in accordance with the applicable provisions of the DGCL. The
Applicable Transaction shall become effective at the time at which the
certificate of merger with respect thereto shall be duly filed with Secretary
of State of the State of Delaware, or at such later time specified in such
certificate of merger as shall be agreed by Parent and the Company (the time
that the Applicable Transaction becomes effective, the "Effective Time").
Section 1.4 Subsequent Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to continue in, vest, perfect or confirm of record or
otherwise the Surviving Corporation's right, title or interest in, to or under
any of the rights, properties, privileges, franchises or assets of either of
its constituent corporations acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger, or otherwise to
carry out the intent of this Agreement, the officers and directors of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of either of the constituent corporations of the Merger, all such
deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of such corporations or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
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any and all right, title and interest in, to and under such rights, properties,
privileges, franchises or assets in the Surviving Corporation or otherwise to
carry out the intent of this Agreement.
Section 1.5 Certificate of Incorporation; By-laws; Directors and
Officers of the Surviving Corporation. (a) Unless otherwise agreed by Parent
and the Company prior to the Closing, in the event the Parent Merger is
consummated:
(i) At the Effective Time, the Restated
Certificate of Incorporation of Parent shall be amended
to read in its entirety as set forth in Exhibit B hereto. As so amended, such
Restated Certificate of Incorporation shall constitute at and after the
Effective Time (until amended as provided by applicable law and such Restated
Certificate of Incorporation, as applicable) the certificate of incorporation
of the Parent Surviving Corporation.
(ii) The By-laws of Parent shall be amended
immediately prior to the Effective Time to read in
its entirety as set forth in Exhibit B-2 as so amended, such By-laws shall
constitute at and after the Effective Time (until amended as provided by
applicable law and the applicable certificate of incorporation and bylaws) the
By-laws of the Parent Surviving Corporation.
(iii) The officers of Parent immediately prior
to the Effective Time shall continue to serve in
their respective offices of the Parent Surviving Corporation from and after the
Effective Time, until their successors are elected or appointed and qualified
or until their resignation or removal; and
(iv) The directors of Parent Surviving
Corporation as of the Effective Time shall be determined
in accordance with Section 6.11 hereof. The directors of Parent Surviving
Corporation determined in accordance with Section 6.11 hereof shall be the
directors of the Parent Surviving Corporation from and after the Effective
Time, until their successors are elected or appointed and qualified or until
their resignation or removal.
(b) Unless otherwise agreed by Parent and the Company
prior to the Closing, in the event the Alternative Merger is consummated:
(i) At the Effective Time, the Restated
Certificate of Incorporation of the Company shall be
amended to read in its entirety as set forth in Exhibit C hereto. As so
amended, such Restated Certificate of Incorporation shall constitute at and
after the Effective Time (until amended as provided by applicable law and such
Restated Certificate of Incorporation, as applicable) the certificate of
incorporation of the Alternative Surviving Corporation.
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(ii) The By-laws of the Company in effect
immediately prior to the Effective Time shall
constitute at and after the Effective Time (until amended as provided by
applicable law and the certificate of incorporation and bylaws, as applicable)
the By-laws of the Alternative Surviving Corporation.
(iii) The officers of the Company immediately
prior to the Effective Time shall continue to serve
in their respective offices of the Alternative Surviving Corporation from and
after the Effective Time, until their successors are elected or appointed and
qualified or until their resignation or removal.
(iv) The directors of Merger Sub immediately
prior to the Effective Time shall be the directors
of the Alternative Surviving Corporation from and after the Effective Time,
until their successors are elected or appointed and qualified or until their
resignation or removal.
(v) The By-laws of Parent shall be amended
immediately prior to the Effective Time to read in
its entirety as set forth in Exhibit B-2.
ARTICLE II
Section 2.1 Treatment of Common Stock. (a) Subject to paragraph (b)
of this Section 2.1, at the Effective Time, without any action on the part of
any holder thereof (but subject to Sections 2.4, 2.5 and 2.6 of this
Agreement), (i) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time, and all rights in respect thereof,
shall forthwith cease to exist and (other than those shares held in the
treasury of the Company, by Parent or by any of their respective Subsidiaries
(collectively, the "Parent Merger Excluded Shares")) shall be converted into a
right to receive one validly issued, fully paid and nonassessable share of
Parent Common Stock (the "Exchange Ratio") and (ii) each issued and/or
outstanding share of Parent Common Stock shall remain issued and/or
outstanding, as applicable, as one share of Parent Common Stock. Subject to
paragraph (b) of this Section 2.1 and except as otherwise provided herein, each
certificate (a "Company Certificate") that immediately prior to the Effective
Time represented issued and outstanding shares of Company Common Stock (other
than Parent Merger Excluded Shares) shall evidence the right to receive Parent
Common Stock on the basis set forth in this paragraph (a) (subject to Sections
2.4, 2.5 and 2.6 of this Agreement).
(b) Notwithstanding paragraph (a) of this Section 2.1,
in the event the Alternative Merger is being
consummated, at the Effective Time, without any action on the part of any
holder thereof (but subject to Sections 2.4, 2.5 and 2.6 of this Agreement),
each share of Company Common Stock issued and outstanding immediately prior to
the Effective Time, and all rights in respect thereof, shall forthwith cease to
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<PAGE> 16
exist and (other than those shares held in the treasury of the Company, by
Parent or by any of their respective Subsidiaries (collectively, the
"Alternative Merger Excluded Shares")) shall be converted into the right to
receive: (1) that fraction of a validly issued, fully paid and nonassessable
share of Parent Common Stock (including any associated fractional preferred
stock purchase right) that is equal to the Common Conversion Number and (2)
that fraction of a validly issued, fully paid and nonassessable Depositary
Share that is equal to the Depositary Share Conversion Number (each as defined
below).
For purposes of this Agreement:
"Common Conversion Number" means the result obtained
by dividing (x) (i) the maximum number shares of Parent
Common Stock that may be issued by Parent as of the date prior to the Closing
Date without obtaining the approval of stockholders of Parent pursuant to the
rules and regulations of the New York Stock Exchange (the "NYSE") minus (ii)
the number of shares of Parent Common Stock required pursuant to Section 2.7 to
be reserved for issuance upon exercise of Company Options (as defined in
Section 2.7) outstanding immediately prior to the Effective Time by (y) the
number of shares of Company Common Stock (excluding Alternative Merger Excluded
Shares) outstanding immediately prior to the Effective Time as certified to
Parent by the principal registrar and transfer agent of the Company.
"Depositary" means BankBoston, N.A. or such other
depositary selected by Parent that is reasonably acceptable to the Company.
"Depositary Agreement" means the Depositary Agreement
between Parent and the Depositary substantially in the form attached as
Exhibit D hereto.
"Depositary Receipt" means a depositary receipt issued by
the Depositary to evidence a Depositary Share.
"Depositary Share" means a unit representing such
fractional interest in a whole share of Parent Preferred Stock
that has a "Liquidation Preference" (as set forth in the Certificate of
Designation (as defined below)) equal to $100. Each Depositary Share shall be
evidenced by a Depositary Receipt issued to the person entitled to such
fractional interest and which shall entitle the holder thereof, pursuant to the
Depositary Agreement, to rights equivalent to those of a holder of a whole
share of Parent Preferred Stock (to the extent of such fractional interest
therein).
"Depositary Share Conversion Number" means the result
obtained by dividing (a) the product of (x) (i) the
Exchange Ratio (ii) minus the Common Conversion Number and (y) the Implied
Price (as defined below) by (b) the "Liquidation Preference" (as set forth in
the Certificate of Designation) of such fractional interest in a whole share of
Parent Preferred Stock that is represented by each Depositary Share. The
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"Implied Price" shall mean the average of the closing prices of the shares of
Parent Common Stock on the NYSE Composite Transaction Reporting System as
reported in The Wall Street Journal (but subject to correction for
typographical or other manifest errors in such reporting) over the 10 trading
day period immediately preceding the second trading day prior to the date of
the meeting of the Company's stockholders contemplated by Section 6.1; provided
that the Implied Price shall in no event be less than $32.00, or greater than
$44.50.
"Parent Preferred Stock" means the series of voting
preferred stock of Parent to be designated as Cumulative
Preferred Stock having the powers, rights, designations and preferences and the
qualifications, limitations and restrictions described in the form of
Certificate of Designation therefor attached hereto as Exhibit E hereto (the
"Certificate of Designation"); provided, however, that the Rate (as defined in
the Certificate of Designation) shall be such percentage, to be jointly
determined by the financial advisors in Sections 3.14 and 4.14 hereof, that
such financial advisors believe would cause the trading price per Depositary
Share on a fully distributed basis after the Effective Time to be as nearly
equal as possible to the Liquidation Preference (as set forth in the
Certificate of Designation) of the fractional interest in a whole share of
Parent Preferred Stock that is represented by one Depositary Share. In the
event that such financial advisors are unable to agree on the Rate, the parties
shall direct the financial advisors identified in Sections 3.14 and 4.14 to
jointly select a nationally recognized investment bank to determine the Rate.
The determination of such investment bank shall be binding on the parties
hereto.
Notwithstanding paragraph (a) of this Section 2.1, in
the event that the Alternative Merger is consummated,
except as otherwise provided herein, each Company Certificate (other than
Company Certificates representing Alternative Merger Excluded Shares) shall
evidence, commencing immediately after the Effective Time, the right to receive
shares of Parent Common Stock and Depositary Shares on the basis set forth in
this paragraph (b) (subject to Sections 2.4, 2.5 and 2.6 of this Agreement).
Section 2.2 Cancellation of Excluded Shares. At the Effective Time,
without any action on the part of the holder thereof, in the event the Parent
Merger is consummated, each Parent Merger Excluded Share, and in the event the
Alternative Merger is consummated, each Alternative Merger Excluded Share, as
applicable, shall forthwith cease to be outstanding and shall be canceled and
retired, and no shares of stock or other securities of Parent, the Company or
the Surviving Corporation shall be issuable, and no payment or other
consideration shall be made or paid, in respect thereof.
Section 2.3 Conversion of Common Stock of Merger Sub. In the event
the Alternative Merger is consummated, at the Effective Time, without any
action on the part of the holder thereof, each share of common stock of Merger
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Sub that is issued and outstanding immediately prior the Effective Time shall
be converted into one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation.
Section 2.4 Exchange Agent; Exchange Procedures. (a) Subject to the
terms and conditions of this Agreement, at or prior to the Effective Time,
Parent shall appoint BankBoston, N.A., or such other exchange agent selected by
Parent that is reasonably acceptable to the Company (the "Exchange Agent"), to
effect the exchange of shares of Company Common Stock for, in the event the
Parent Merger is consummated, shares of Parent Common Stock or, in the event
the Alternative Merger is consummated, shares of Parent Common Stock and
Depositary Shares, in each case in accordance with the provisions of this
Article II. As soon as reasonably practicable following the Effective Time,
Parent shall deposit, or cause to be deposited, with the Exchange Agent, for
exchange in accordance with this Article II, in the event the Parent Merger is
consummated, certificates representing shares of Parent Common Stock ("Parent
Certificates"), and in the event the Alternative Merger is consummated, Parent
Certificates and Depositary Receipts in amounts sufficient to allow the
Exchange Agent to make all deliveries of Parent Certificates and Depositary
Receipts in exchange for Company Certificates in connection with the Applicable
Transaction, as contemplated by this Section 2.4 and any cash payable in
respect of fractional shares in accordance with Section 2.6(a) hereof and any
dividends or other distributions payable in accordance with Section 2.4(a) (the
"Exchange Fund").
(b) Parent shall instruct the Exchange Agent to
mail to each record holder of shares of Company Common
Stock as soon as reasonably practicable after the Effective Time (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to shares of Company Common Stock shall pass, only upon the
delivery of a Company Certificate or Company Certificates representing such
shares to the Exchange Agent, and which letter shall otherwise be in such form
and have such other provisions as Parent shall reasonably specify, which form
shall be reasonably acceptable to the Company) and (ii) instructions for use in
effecting the surrender of Company Certificates for Parent Certificates (and,
if applicable, Depositary Receipts) and cash in lieu of fractional shares, if
any. Commencing immediately after the Effective Time, upon the surrender to the
Exchange Agent of a Company Certificate, together with a duly executed and
completed letter of transmittal and all other documents and other materials
reasonably required by the Exchange Agent to be delivered in connection
therewith, the holder thereof shall be entitled to receive a Parent Certificate
or Parent Certificates representing the number of whole shares of Parent Common
Stock (and, if applicable, a Depositary Receipt or Depositary Receipts
representing whole Depositary Shares) into which the shares of the Company
Common Stock which immediately prior to the Effective Time were represented by
such Company Certificate so surrendered shall have been converted in accordance
with the provisions of Section 2.1, together with a cash payment in lieu of
fractional shares, if any, in accordance with Section 2.6(a). Unless and until
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any Company Certificate is so surrendered, no dividends or other distributions,
if any, payable to the holders of record of shares of Parent Common Stock (and,
if applicable, to holders of record of Depositary Shares) as of any date
subsequent to the Effective Time shall be paid to the holder of such Company
Certificate in respect thereof. Upon the surrender of any Company Certificate,
the record holder of the Parent Certificate or Parent Certificates representing
shares of Parent Common Stock (and, if applicable, a Depositary Receipt or
Depositary Receipts representing Depositary Shares) issued in exchange therefor
shall be entitled to receive, (i) at the time of surrender, the amount of any
dividends or other distributions in respect of such shares of Parent Common
Stock (and, if applicable, Depositary Shares) having a record date after the
Effective Time and a payment date prior to the surrender date, and (ii) at the
appropriate payment date, the amount of dividends or other distributions in
respect of such shares of Parent Common Stock (and, if applicable, Depositary
Shares) having a record date after the Effective Time and a payment date
subsequent to the date of such surrender. No interest shall be payable in
respect of the payment of dividends or distributions pursuant to the
immediately preceding sentence.
(c) The Parent, the Surviving Corporation and
the Exchange Agent shall be entitled to deduct and withhold
from the shares of the Parent Common Stock (and, if applicable, Depositary
Shares) and cash in lieu of fractional shares otherwise payable to any holder
of shares of the Company Common Stock pursuant to this Article II, and from any
dividends or other distributions which such holder is entitled to receive
pursuant to Section 2.4(b), such amounts as Parent, the Surviving Corporation
and/or the Exchange Agent is required to deduct or withhold therefrom under the
Code and/or any applicable provision of state, local or foreign law.
Section 2.5 Transfer Books; Lost, Stolen or Destroyed Certificates.
(a) The stock transfer books of the Company shall be closed at the Effective
Time and no transfer of any shares of Company Common Stock shall thereafter be
recorded on any of such stock transfer books. In the event of a transfer of
ownership of any shares of the Company Common Stock that is not registered in
the stock transfer records of the Company at the Effective Time, a Parent
Certificate or Parent Certificates representing the number of whole shares of
Parent Common Stock (and, if applicable, a Depositary Receipt or Depositary
Receipts representing whole Depositary Shares) into which such shares of the
Company Common Stock shall have been converted in the Applicable Transaction
shall be issued to the transferee together with a cash payment in lieu of
fractional shares, if any, in accordance with Section 2.6(a), and payment of
dividends or distributions, if any, in accordance with Section 2.4(b) only if
the Company Certificate or Company Certificates are surrendered as provided in
Section 2.4 (but subject to Section 2.5(b) hereof), accompanied by all
documents required to evidence and effect such transfer and evidence of payment
of any applicable stock transfer taxes.
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(b) In the event any Company Certificate shall
have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Company Certificate,
upon the delivery of a duly executed affidavit of that fact by the holder
thereof, Parent Certificates in accordance with Section 2.4, cash in lieu of
fractional shares, if any, in accordance with Section 2.6(a), and payment of
dividends and distributions, if any, in accordance with Section 2.4(b);
provided, however, that Parent may, in its discretion, require the owner of
such lost, stolen or destroyed Company Certificate to deliver a bond in such
sum as Parent may reasonably direct as indemnity against any claim that may be
made against Parent, the Company, the Surviving Corporation or the Exchange
Agent with respect to that Company Certificate alleged to have been lost,
stolen or destroyed.
Section 2.6 No Fractional Share Certificates; Termination of
Exchange Fund. (a) No scrip or certificates for fractional shares of Parent
Common Stock (and, if applicable, fractional Depositary Shares) will be issued
upon the surrender for exchange of Company Certificates, and no fractional
interest in a share of Parent Common Stock (and, if applicable, in any
fractional Depositary Share) will entitle the holder thereof to vote or receive
dividends or distributions or any other rights of a stockholder of Parent, with
respect to any such fractional share interest. Each Person entitled to receive,
but for this Section 2.6(a), a fractional share of Parent Common Stock (and/or,
if applicable, fractional Depositary Shares) shall be entitled to receive an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the average of the closing prices of the
shares of Parent Common Stock on the NYSE Composite Transaction Reporting
System as reported in The Wall Street Journal (but subject to correction for
typographical or other manifest errors in such reporting) over the four trading
day period immediately preceding the Closing Date.
(b) Any portion of the Exchange Fund which
remains undistributed one year after the Effective Time shall
be delivered to Parent upon demand, and each holder of shares of the Company
Common Stock who has not theretofore surrendered such holder's Company
Certificates in accordance with the provisions of this Article II shall
thereafter look only to Parent for satisfaction of such holder's claims for
shares of Parent Common Stock (and, if applicable, Depositary Shares), any cash
in lieu of fractional shares of Parent Common Stock (and, if applicable,
fractional Depositary Shares) payable in accordance with Section 2.6(a) and any
dividends or distributions payable in accordance with Section 2.4(b).
Notwithstanding the foregoing, none of Parent, the Company, the Surviving
Corporation or the Exchange Agent shall be liable to any former holder of
shares of Company Common Stock for any shares or amounts properly delivered to
a public official pursuant to applicable abandoned property, escheat or similar
laws.
Section 2.7 Options. (a) All options to purchase shares of Company
Common Stock ("Company Options"), and all options to purchase shares of Parent
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Common Stock ("Parent Options"), outstanding at the Effective Time under any
stock option plan or other arrangement of the Company shall remain outstanding
following the Effective Time. Prior to the Effective Time, the Company shall
take all action necessary with respect to each of its stock option plans or
other arrangements pursuant to which Company Options will be outstanding
immediately prior to the Effective Time such that as of the Effective Time (i)
each Company Option shall entitle the holder thereof to purchase such number of
shares of Parent Common Stock as is equal to the product of (x) the number of
shares of Company Common Stock subject to such option immediately prior to the
Effective Time and (y) the Exchange Ratio (whether or not the Applicable
Transaction is the Parent Merger) and (ii) the exercise price per share of
Parent Common Stock subject to any such Company Option as of and after the
Effective Time shall be equal to (x) the exercise price per share of the
Company Common Stock subject to such Company Option immediately prior to the
Effective Time divided by (y) the Exchange Ratio (whether or not the Applicable
Transaction is the Parent Merger). As of the Effective Time, Parent shall
assume all obligations of the Company in respect of outstanding Company
Options.
(b) Notwithstanding the foregoing, the
number of shares of Parent Common Stock deliverable upon
exercise of each Company Option at and after the Effective Time as contemplated
by paragraph (a) above shall be rounded, if necessary, to the nearest whole
share of Parent Common Stock, and the exercise price with respect thereto shall
be rounded, if necessary, to the nearest one one-hundredth of a cent (it being
understood that all options exercisable at the same price and granted on the
same date to the same individual shall be aggregated for this purpose). Other
than as provided in paragraph (a) above and in the prior sentence of this
paragraph (b), as of and after the Effective Time, each Company Option shall be
subject to the same terms and conditions as in effect immediately prior to the
Effective Time, but giving effect to the Applicable Transaction.
(c) As soon as practicable after the Effective
Time, Parent shall deliver (i) to the holders of
Company Options which become fully vested and exercisable by virtue of the
Applicable Transaction a notice stating that by virtue of the Applicable
Transaction and pursuant to the terms of the relevant Company Employee Plan (as
defined in Section 3.10(a)) such Company Options have become fully vested and
exercisable and (ii) to the holders of all Company Options a notice stating
that the agreements evidencing the grants of such Company Options shall
continue in effect on the same terms and conditions (subject to the
adjustments, if any, required by this Section 2.7 after giving effect to the
transactions contemplated hereby and the terms of the relevant Company Employee
Plan).
(d) Parent shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of Company Options and shall use
reasonable best efforts to ensure that such shares are
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listed on the NYSE upon issuance. As soon as practicable after the Effective
Time, Parent shall file with the SEC a registration statement on Form S-8 of
the SEC (if available) (or any successor or other appropriate form) with
respect to the shares of Parent Common Stock issuable upon the exercise of such
options and shall use reasonable best efforts to maintain the effectiveness of
such registration statement, and to maintain the current status of the
prospectus or prospectuses contained therein, until all such options have been
exercised, expired or forfeited.
Section 2.8 Appraisal Rights. In accordance with Section 262 of the
DGCL, no appraisal rights shall be available to holders of shares of Parent
Common Stock or Company Common Stock in connection with the Parent Merger or
the Alternative Merger.
Section 2.9 Dividends. Parent and the Company shall coordinate with
each other the declaration of, and the setting of record dates and payment
dates for, dividends in respect of their respective shares of common stock so
that, in respect of any fiscal quarter, holders of shares of Company Common
Stock do not (i) receive dividends in respect of both (x) shares of Company
Common Stock and (y) any shares of Parent Common Stock received pursuant to the
Applicable Transaction in exchange therefor or (ii) fail to receive a dividend
in respect of both (x) shares of Company Common Stock and (y) shares of Parent
Common Stock received pursuant to the Applicable Transaction.
Section 2.10 Certain Adjustments. If between the date of this
Agreement and the Effective Time, whether or not permitted pursuant to the
terms hereof, the outstanding shares of Company Common Stock or Parent Common
Stock shall be changed into a different number of shares or other securities by
reason of any stock split, combination, merger, consolidation, reorganization
or other transaction, or any dividend payable in stock shall be declared
thereon with a record date within such period, the Exchange Ratio, the formula
for calculating the Common Conversion Number and the Depositary Share
Conversion Number, as applicable, and the form of securities issuable in the
Applicable Transaction shall be appropriately adjusted to provide the holders
of shares of Company Common Stock the same economic effect as contemplated by
this Agreement prior to such event.
ARTICLE III
Except as set forth in the corresponding sections or
subsections of the disclosure letter, dated the date of this Agreement,
delivered by the Company to Parent (the "Company Disclosure
Letter"), the Company hereby represents and warrants to Parent as follows:
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Section 3.1 Organization and Qualification; Subsidiaries. (a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of the Subsidiaries of the
Company is a corporation or other business entity duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, and each of the Company and its Subsidiaries has
the requisite corporate or similar organizational power and authority to own,
operate or lease its properties and to carry on its business as it is now being
conducted, and is duly qualified as a foreign corporation to do business, and
is in good standing, in each jurisdiction where the character of its properties
owned, operated or leased or the nature of its activities makes such
qualification necessary, except as would not, in the aggregate, have, or
reasonably be expected to have, a Company Material Adverse Effect (as defined
in Section 9.3).
(b) Except as disclosed in the Company SEC Reports
(as defined in Section 3.6) filed prior to the date of
this Agreement, and except as would not, in the aggregate, have, or reasonably
be expected to have, a Company Material Adverse Effect, (i) all of the
outstanding shares of capital stock and other equity securities of the
Subsidiaries of the Company are owned, directly or indirectly, by the Company
free and clear of all liens, pledges, security interests, or other
encumbrances, (ii) all of the outstanding shares of capital stock or other
equity securities of the Subsidiaries of the Company have been validly issued
and are fully paid and nonassessable, (iii) there are no subscriptions,
options, warrants, calls, commitments, agreements, conversion rights or other
rights of any character (contingent or otherwise) entitling any person to
purchase or otherwise acquire from the Company or any of its Subsidiaries at
any time, or upon the happening of any stated event, any shares of capital
stock or other equity securities of any of the Subsidiaries of the Company.
There are no outstanding obligations, contingent or otherwise, of the Company
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock or other equity securities, or any securities
convertible, exchangeable or exercisable for or into, shares of capital stock
or other equity securities of any Subsidiary of the Company.
Section 3.2 Restated Certificate of Incorporation and By-laws. The
Company has furnished or otherwise made available to Parent a complete and
correct copy of the Company's Restated Certificate of Incorporation and
By-laws, in each case as amended to the date of this Agreement. Such Restated
Certificate of Incorporation and By-laws and all similar organizational
documents of the Subsidiaries of the Company are in full force and effect. The
Company is not in violation of its Restated Certificate of Incorporation or
By-laws and, except as would not, in the aggregate, have, or reasonably be
expected to have, a Company Material Adverse Effect, none of the Subsidiaries
of the Company is in violation of any similar organizational documents of
Subsidiaries of the Company.
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<PAGE> 24
Section 3.3 Capitalization. (a) The authorized capital stock of the
Company consists of 400,000,000 shares of Company Common Stock and 10,000,000
shares of Serial Preference Stock, par value $1.00 per share (the "Company
Preferred Stock"). 1,000,000 shares of Company Preferred Stock have been
designated "Series A Participating Preference Stock," and, other than as
contemplated or permitted hereby, no other shares of Company Preferred Stock
are subject to any designation. At the close of business on March 11, 1999,
110,047,818 shares of Company Common Stock were issued and outstanding. No
shares of Company Preferred Stock are issued and outstanding. 1,325,788 shares
of Company Common Stock, and no shares of Company Preferred Stock, are held by
the Company in its treasury. No shares of capital stock of the Company are held
by any of the Company's Subsidiaries. All of the issued and outstanding shares
of Company Common Stock are validly issued, fully paid, nonassessable and free
of preemptive rights. At the close of business on March 10, 1999, Company
Options exercisable for 3,434,775 shares of Company Common Stock, in the
aggregate, were outstanding. As of the date of this Agreement, other than (i)
the option granted pursuant to the Company Stock Option Agreement, (ii) the
preference share purchase rights (none of which are exercisable) issued
pursuant to the Rights Agreement (the "Company Rights Agreement"), dated as of
January 8, 1996, as amended, between the Company and Chemical Mellon
Shareholder Services, L.L.C., as rights agent, and (iii) the Company Options,
the Company did not have outstanding any subscriptions, options, warrants,
calls, commitments, agreements, conversion rights or other rights of any
character (contingent or otherwise) entitling any person to purchase or
otherwise acquire from the Company or any of its Subsidiaries at any time, or
upon the happening of any stated event, any shares of the capital stock of the
Company (each of the foregoing, a "Company Equity Equivalent Security"). From
the close of business on March 10, 1999, no shares of Company Common Stock or
Company Equity Equivalent Securities (other than the option granted pursuant to
the Stock Option Agreement) have been issued, sold or otherwise transferred by
the Company (except (x) in connection with the exercise, conversion or exchange
of outstanding Company Equity Equivalent Securities and (y) as described in
Section 5.1 of the Company Disclosure Letter).
(b) As of the date of this Agreement, there are
no outstanding obligations, contingent or otherwise, of
the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of Company Common Stock or any Company Equity Equivalent
Securities (except in connection with the exercise, conversion or exchange of
outstanding Company Equity Equivalent Securities). As of the date of this
Agreement, there are no bonds, debentures, notes or other indebtedness issued
and outstanding having the right to vote together with the Company's
stockholders on any matter in respect of which the Company's stockholders are
entitled to vote.
Section 3.4 Power and Authority; Authorization; Valid and Binding.
The Company has the necessary corporate power and authority to execute and
deliver this Agreement and the Stock Option Agreements and to perform its
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<PAGE> 25
obligations hereunder and thereunder, as applicable, except that the
consummation of the Parent Merger or, if applicable, the Alternative Merger is
subject to the adoption of this Agreement by the Company's stockholders as set
forth in Section 3.13(c). The execution and delivery of this Agreement and the
Stock Option Agreements by the Company and the performance by it of its
obligations hereunder and thereunder, as applicable, have been duly authorized
by all necessary corporate action on the part of the Company, except that the
consummation of the Parent Merger or, if applicable, the Alternative Merger is
subject to the adoption of this Agreement by the Company's stockholders as set
forth in Section 3.13(c). This Agreement and the Stock Option Agreements have
been duly executed and delivered by the Company, and assuming the corporate
authority of, and the due authorization, execution and delivery by, Parent,
each of such agreements constitutes a legal, valid and binding obligation of
the Company enforceable against it in accordance with the terms hereof and
thereof, as applicable, subject to bankruptcy, insolvency, fraudulent transfer,
moratorium, reorganization and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
Section 3.5 No Conflict; Required Filings and Consents. (a) The
execution and delivery by the Company of this Agreement and the Stock Option
Agreements do not and will not, and the performance by Company of its
obligations hereunder and thereunder do not and will not, (i) violate or
conflict with the Restated Certificate of Incorporation or By-laws of the
Company, (ii) subject to obtaining or making the notices, reports, filings,
waivers, consents, approvals or authorizations referred to in paragraph (b)
below and to the adoption of this Agreement by the stockholders of the Company
as set forth in Section 3.13(c), conflict with or violate any law, regulation,
order, judgment or decree applicable to the Company or any of its Subsidiaries
or by which any of their respective property is bound or affected, (iii) result
in any breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, impair the Company's or
any of its Subsidiaries' rights under or alter the rights or obligations of any
other party to, give to others any rights of termination, cancellation,
vesting, modification, alteration or acceleration of any obligation under,
result in the creation of a lien, claim or encumbrance on any of the properties
or assets of the Company or any of its Subsidiaries pursuant to, require the
consent of any other party to, or result in any obligation on the part of the
Company or any of its Subsidiaries to repurchase (with respect to a debenture,
bond or note), pursuant to any agreement, contract, instrument, debenture,
bond, note, indenture, permit, license or franchise to which the Company or any
of its Subsidiaries is a party or by which the Company, any of its Subsidiaries
or any of their respective property is bound or affected, except, in the case
of clauses (ii) and (iii) above, as would not, in the aggregate, have, or
reasonably be expected to have, a Company Material Adverse Effect.
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<PAGE> 26
(b) Except for (i) applicable filings required
under the premerger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), (ii) required filings with and the
approval of the Federal Energy Regulatory Commission (the "FERC"), (iii)
applicable filings and approvals under federal, state, local or foreign
regulatory laws, and applicable requirements of foreign, state or local public
utility or similar commissions or agencies, all of which are set forth in the
Company Disclosure Letter, (iv) the filing of a certificate of merger with
respect to the Applicable Transaction as required by the DGCL, (v) filings with
the SEC under the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act"), and the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder (the "Exchange
Act"), (vi) applicable filings with the NYSE, and (vii) any filings required or
approvals necessary pursuant to any state securities or "blue sky" laws,
neither the Company nor any of its Subsidiaries is required to submit any
notice, report or other filing to any governmental or regulatory authority,
court, agency, commission or other governmental entity or any securities
exchange or other self-regulatory body, domestic or foreign ("Governmental
Entity"), and no waiver, consent, approval, order or authorization of any
Governmental Entity is required to be obtained by the Company or any of its
Subsidiaries, in connection with the execution, delivery or performance of this
Agreement except for such notices, reports, filings, waivers, consents,
approvals or authorizations that, if not made or obtained, would not, in the
aggregate, have, or reasonably be expected to have, a Company Material Adverse
Effect.
Section 3.6 SEC Reports; Financial Statements. (a) The Company has
filed all forms, reports, statements and other documents (including all
annexes, exhibits, schedules, amendments and supplements thereto) required to
be filed by it with the SEC since January 1, 1997, has delivered or made
available to Parent all forms, reports, statements, schedules and other
documents (except for preliminary materials) (including all annexes, exhibits,
schedules, amendments and supplements thereto) filed by it with the SEC since
January 1, 1997 (such forms, reports, statements, schedules and documents filed
by the Company with the SEC, including any such forms, reports, statements and
other documents filed by the Company with the SEC after the date of this
Agreement and prior to the Closing Date, are referred to herein, collectively,
as the "Company SEC Reports"), and with respect to the Company SEC Reports
filed by the Company after the date of this Agreement and prior to the Closing
Date, will deliver or make available to Parent all of such Company SEC Reports
in the form filed with the SEC. As of their respective filing dates, the
Company SEC Reports (including all information incorporated therein by
reference) (i) complied as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, as applicable, and (ii)
did not contain any untrue statement of a material fact or omit to state a
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<PAGE> 27
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.
(b) Each of the consolidated balance sheets of the Company and its Subsidiaries
(including all related notes) included in the financial statements contained in
the Company SEC Reports (or incorporated therein by reference) present fairly,
in all material respects, the consolidated financial position of the Company
and its Subsidiaries as of the respective dates indicated, and each of the
consolidated statements of income, consolidated statements of cash flows and
consolidated statements of changes in stockholders' equity of the Company and
its Subsidiaries (including all related notes) contained in such financial
statements present fairly, in all material respects, the consolidated results
of operations, cash flows and changes in stockholders' equity of the Company
and its Subsidiaries for the respective periods indicated, in each case in
conformity with GAAP applied on a consistent basis throughout the periods
involved (except for changes in accounting principles disclosed in the notes
thereto) and the rules and regulations of the SEC, except that unaudited
interim financial statements are subject to normal and recurring year-end
adjustments and any other adjustments described therein and do not include
certain notes and other information which may be required by GAAP but which are
not required under the Exchange Act. The financial statements included in the
Company SEC Reports are in all material respects in accordance with the books
and records of the Company and its Subsidiaries.
(c) Notwithstanding the foregoing, no representation or warranty is
being made in this Section 3.6 with respect to information or statements
(including financial information and statements) that are provided by Parent
and set forth in any Company SEC Report filed after the date hereof or with
respect to any Parent SEC Reports (as defined in Section 4.6) incorporated
therein by reference.
Section 3.7 Absence of Certain Changes. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement and as otherwise
contemplated or permitted hereby, since September 30, 1998 (a) the Company and
its Subsidiaries have conducted their respective businesses in all material
respects in the ordinary course of such businesses and there have not been any
changes to the condition (financial or otherwise), assets, liabilities,
business or results of operations of the Company and its Subsidiaries, or any
other developments with respect to the Company or any of its Subsidiaries, in
each case whether or not in the ordinary course of business, that, in the
aggregate with all other changes and developments, have had, or would
reasonably be expected to have, a Company Material Adverse Effect, and (b)
there has not been (i) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) in respect
of any shares of the capital stock or other equity securities, or any
securities convertible, exercisable or exchangeable for or into shares of
capital stock or other equity securities, of the Company or any of its
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Subsidiaries, other than (x) quarterly cash dividends of $.27 per share in
respect of the outstanding Company Common Stock and (y) dividends and
distributions by wholly owned Subsidiaries of the Company; (ii) any change by
the Company to its accounting policies, practices or methods; (iii) other than
in connection with the exercise, exchange or conversion of Company Equity
Equivalent Securities, any repurchase, redemption or other acquisition of any
shares of capital stock or other equity securities or any securities
convertible, exchangeable or exercisable for or into shares of capital stock or
other equity securities, of the Company or any of its Subsidiaries; (iv) except
as required by applicable law or pursuant to contractual obligations existing
as of September 30, 1998, (w) any execution, establishment, adoption or
amendment of, or acceleration of rights or benefits under, any agreement
relating to severance, any Company Employee Plan, any employment or consulting
agreement or any collective bargaining agreement, (x) any increase in the
compensation payable or to become payable to any officer, director or employee
of the Company or any of its Subsidiaries (except increases in the ordinary
course of business), (y) any grant of any severance or termination paid to any
officer or director of the Company, or (z) any grant of any stock options or
other equity related awards other than in the ordinary course consistent with
past practice; or (v) any agreement or commitment entered into with respect to
the foregoing. The Company has determined prior to the date of this Agreement
all annual increases in the ordinary course of business to the compensation of
officers of the Company contemplated to be made in calendar year 1999.
Section 3.8 Litigation; Liabilities. (a) Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement, there are no
civil, criminal or administrative actions, suits, claims, proceedings or
investigations pending or, to the knowledge of the Company, threatened, against
the Company or any of its Subsidiaries or any of their respective assets or
properties, except as would not, in the aggregate, have, or reasonably be
expected to have, a Company Material Adverse Effect.
(b) Except as set forth in the Company SEC Reports
filed prior to the date of this Agreement, neither the
Company nor any of its Subsidiaries has or is subject to any liabilities
(absolute, accrued, contingent or otherwise), except liabilities (a) adequately
reflected on the unaudited consolidated balance sheet of the Company and its
Subsidiaries (including any related notes thereto) as of September 30, 1998
included in the Company's Quarterly Report of Form 10-Q for the quarter ended
September 30, 1998, or (b) which, in the aggregate, would not have, or
reasonably be expected to have, a Company Material Adverse Effect.
Section 3.9 Compliance; Permits. (a) Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement, neither the
Company nor any of its Subsidiaries is in conflict with, or in default or
violation of, (i) any law, rule, regulation, order, judgment or decree
applicable to the Company or any of its Subsidiaries or by which its or any of
their respective assets or properties is bound or affected or (ii) any note,
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<PAGE> 29
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise, easement, right-of-way or other instrument or obligation to which
the Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries or its or any of their respective assets or properties
is bound or affected, except for such conflicts, defaults or violations which,
in the aggregate, would not have, or reasonably be expected to have, a Company
Material Adverse Effect.
(b) Except as disclosed in the Company SEC Reports
filed prior to the date of this Agreement, the Company
and its Subsidiaries hold all permits, licenses, easements, rights-of-way,
variances, exemptions, consents, certificates, orders and approvals which are
material to the operation of the businesses of the Company and its Subsidiaries
(collectively, the "Company Permits"), except where the failure to hold such
Company Permits, in the aggregate, would not have, or reasonably be expected to
have, a Company Material Adverse Effect. The Company and its Subsidiaries are
in compliance with the terms of the Company Permits, except as described in the
Company SEC Reports or where the failure to so comply, in the aggregate, would
not have, or reasonably be expected to have, a Company Material Adverse Effect.
Section 3.10 Employee Matters; ERISA. (a) The Company Disclosure
Letter lists all employee pension benefit plans (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder ("ERISA")), all employee welfare benefit
plans (as defined in Section 3(1) of ERISA), all bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other or similar material fringe or employee benefit plans, programs or
arrangements, all consulting agreements with former officers and directors of
the Company and all employment, termination, change-in-control or severance
agreements, in each case, pursuant to which the Company or any of its
Subsidiaries may have any liability that is material to the Company and its
Subsidiaries, taken as a whole (together, the "Company Employee Plans"),
excluding, however, employee benefit plans that are primarily subject to the
laws of any jurisdiction outside of the United States.
(b) Except as disclosed in the Company SEC Reports
filed prior to the date of this Agreement, no material
liability under Title IV of ERISA has been or is reasonably expected to be
incurred by the Company or any Subsidiary of the Company or any entity which is
considered a single employer with the Company or any Subsidiary of the Company
under Section 4001(a)(15) of ERISA or Section 414 of the Code (a "Company ERISA
Affiliate"), other than liabilities for premium payments to the Pension Benefit
Guaranty Corporation ("PBGC") and liabilities that have previously been
satisfied.
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(c) Except as disclosed in the Company SEC Reports
filed prior to the date hereof, none of the Company
Employee Plans promises or provides retiree medical or other retiree welfare
benefits to any person, other than health continuation coverage as required by
Section 4980B of the Code or Part 6 of Title I of ERISA, and none of the
Company Employee Plans is a "multiemployer plan" as such term is defined in
Section 3(37) of ERISA. Except as set forth in the Company SEC Reports filed
prior to the date of this Agreement and except, in the aggregate, as would not
have, or reasonably be expected to have, a Company Material Adverse Effect, (i)
no party in interest or disqualified person (as defined in Section 3(14) of
ERISA and Section 4975 of the Code) has at any time engaged in a transaction
with respect to any Company Employee Plan which could subject the Company or
any Company ERISA Affiliate, directly or indirectly, to any tax, penalty or
other liability for prohibited transactions under ERISA or Section 4975 of the
Code; (ii) no fiduciary of any Company Employee Plan has breached any of the
responsibilities or obligations imposed upon fiduciaries under Title I of
ERISA; (iii) all Company Employee Plans have been established and maintained
substantially in accordance with their terms and have operated in compliance
with the requirements of applicable law, and the Company and its Subsidiaries
have performed all obligations required to be performed by them under and are
not in default under or in violation of any of the Company Employee Plans; (iv)
each Company Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified, is the subject of a favorable determination
letter from the Internal Revenue Service ("IRS"), and, to the Company's
knowledge, nothing has occurred which may reasonably be expected to result in
the revocation of such determination; (v) all contributions required to be made
with respect to any Company Employee Plan pursuant to Section 412 of the Code
and Section 302 of ERISA, or pursuant to the terms of the Company Employee Plan
or any collective bargaining agreement, have been made on or before their due
dates (including any extensions thereof); (vi) with respect to each Company
Employee Plan, no "reportable event" within the meaning of Section 4043 of
ERISA (excluding any such event for which the 30 day notice requirement has
been waived under the regulations to Section 4043 of ERISA) has occurred for
which there is any outstanding liability to the Company or any Company ERISA
Affiliate, nor would the execution, delivery or consummation of the
transactions contemplated hereby constitute a reportable event for which the
30-day requirement has not been waived; and (vii) no Company Employee Plan is
under audit or investigation by the IRS, the Department of Labor or the PBGC
nor, to the knowledge of the Company, is any such audit or investigation
threatened.
(d) The Company Disclosure Letter sets forth
a true and complete list of each current or former employee,
officer or director of the Company or any of its Subsidiaries who holds (i) any
Company Option as of the date of this Agreement, together with the number of
shares of Company Common Stock subject to such option, the exercise price of
such option, the vested and unvested portion of such option, whether such
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option is intended to qualify as an incentive stock option within the meaning
of Section 422(b) of the Code, and the expiration date of such option or (ii)
any shares of Company Common Stock that are restricted and the date(s) of lapse
of such restrictions. In addition, the Company Disclosure Letter sets forth, in
the aggregate, the number of shares of Company Common Stock underlying (i) all
other outstanding rights under Company Employee Plans (other than plans that
are qualified plans under Section 401(a) of the Code) to receive shares of
Company Common Stock, to the extent that such shares of Company Common Stock
are not included in the number of shares set forth in the third sentence of
Section 3.3, and (ii) compensation based on the value of shares of Company
Common Stock.
(e) The PBGC has not notified the Company
regarding the institution of proceedings to terminate any
Company Employee Plan that is subject to Title IV of ERISA (each, a "Company
Defined Benefit Plan"). The Company Defined Benefit Plans have no accumulated
or waived funding deficiencies within the meaning of Section 412 of the Code
nor have any extensions of any amortization period within the meaning of
Section 412 of the Code or 302 of ERISA been applied for with respect thereto.
(f) To the knowledge of the Company, all employee
benefit plans of the Company and any of its
Subsidiaries that are primarily subject to the laws of any jurisdiction outside
of the United States have been maintained in compliance with all applicable law
(including, if they are intended to qualify for special tax treatment,
applicable tax laws), except for noncompliance that would not individually or
in the aggregate have a Company Material Adverse Effect.
(g) The execution and delivery of, and performance
of the transactions contemplated in, this Agreement
will not (either alone or upon the occurrence of any additional or subsequent
events) (i) constitute an event under any Company Employee Plan, trust or loan
that will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any current or former
employee of the Company or any Subsidiary of the Company, or (ii) result in the
triggering or imposition of any restrictions or limitations on the right of the
Company or any Subsidiary of the Company to amend or terminate any Company
Employee Plan. No payment or benefit which is required to be paid or
distributed, prior to or after the Closing, by Parent, the Company, the Parent
Surviving Corporation or any of their respective Subsidiaries under any Company
Employee Plan or any other plan, program or arrangement of the Company to any
current or former employee of the Company or any Subsidiary of the Company will
be characterized as an "excess parachute payment," within the meaning of
Section 280G(b)(1) of the Code.
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<PAGE> 32
Section 3.11 Labor Matters. Except as set forth in the Company SEC
Reports filed prior to the date of this Agreement, (i) there are no
controversies pending or, to the knowledge of the Company, threatened, between
the Company or any of its Subsidiaries and any of their respective employees,
which controversies, in the aggregate, have had, or would reasonably be
expected to have, a Company Material Adverse Effect; (ii) neither the Company
nor any of its Subsidiaries is in breach of any material collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or its Subsidiaries which, in the aggregate, would have, or reasonably
be expected to have, a Company Material Adverse Effect, nor does the Company
know of any activities or proceedings of any labor union to organize any
significant number of such employees; and (iii) neither the Company nor any of
its Subsidiaries is in breach of any material collective bargaining agreement
or other labor union contract, nor does the Company have any knowledge of any
strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with
respect to any employees of the Company or any of its Subsidiaries except, in
the aggregate, as would not have, or reasonably be expected to have, a Company
Material Adverse Effect.
Section 3.12 Environmental Matters. Except as set forth in the
Company SEC Reports filed prior to the date of this Agreement and except for
those matters, in the aggregate, that would not have, or reasonably be expected
to have, a Company Material Adverse Effect:
(a) The Company and each of its Subsidiaries,
and, to the knowledge of the Company, their respective
predecessors, if any, have been at all times operated, and are, in full
compliance in all material respects with all applicable Environmental Laws,
including all limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in all applicable
Environmental Laws.
(b) The Company and each of its Subsidiaries
have obtained, are in compliance with, and have made all
appropriate filings for issuance or renewal of, all material permits, licenses,
authorizations, registrations and other governmental consents required by
applicable Environmental Laws ("Environmental Permits"), including, without
limitation, those regulating emissions, discharges or releases of Hazardous
Substances, or the use, storage, treatment, transportation, release, emission
and disposal of raw materials, by-products, wastes and other substances used or
produced by or otherwise relating to the business of the Company or any of its
Subsidiaries.
(c) All of the Company's and its Subsidiaries'
owned or, to the knowledge of the Company, leased real
property is free of any Hazardous Substances (except those authorized pursuant
to and in accordance with Environmental Permits held by the Company and its
Subsidiaries) and free of all contamination arising from, relating to or
resulting from any release, discharge or emission of Hazardous Substances.
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(d) There are no claims, notices, civil, criminal
or administrative actions, suits, hearings,
investigations, inquiries or proceedings pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries that are
based on or related to any Environmental Matters or the failure to have any
required Environmental Permits.
(e) There are no past or present conditions,
events, circumstances, facts, activities, practices,
incidents, actions, omissions or plans: (1) that is reasonably likely to give
rise to any liability or other obligation under any Environmental Laws that is
reasonably likely to require the Company or any of its Subsidiaries to incur
any actual or potential Environmental Costs, or (2) that is reasonably likely
to form the basis of any claim, action, suit, proceeding, hearing,
investigation or inquiry against or involving the Company or any of its
Subsidiaries based on or related to any Environmental Matter or that could
require the Company or any of its Subsidiaries to incur any Environmental
Costs.
(f) There are no underground or aboveground
storage tanks, incinerators or surface impoundments at, on,
or about, under or within any real property owned, operated or controlled in
whole or in part by the Company or any of its Subsidiaries.
(g) Neither the Company nor any of its Subsidiaries
has received any notice (written or oral) or other
communication that any of them is or may be a potentially responsible person or
otherwise liable in connection with any waste disposal site allegedly
containing any Hazardous Substances, or other location used for the disposal of
any Hazardous Substances, or notice of any failure of the Company or any of its
Subsidiaries to comply in any material respect with any Environmental Law or
the requirements of any Environmental Permit.
(h) Neither the Company nor any of its Subsidiaries
has used any waste disposal site, or otherwise
disposed of, transported, or arranged for the transportation of, any Hazardous
Substances to any place or location, or in violation of any Environmental Laws.
(i) Neither the Company nor any of its Subsidiaries
has been in violation of any Environmental Laws, nor
has it been requested or required by any Governmental Entity to perform any
investigatory or remedial activity or other action in connection with any
actual or alleged release of Hazardous Substances or any other Environmental
Matter.
For the purposes of this Agreement, the following terms
shall have the meanings indicated:
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"Environmental Costs" means, without limitation,
any actual or potential cleanup costs, remediation, removal or
other response costs (which without limitation shall include costs to cause the
representing party or its Subsidiaries to come into compliance with
Environmental Laws), investigation costs (including without limitation fees of
consultants, counsel and other experts in connection with any environmental
investigation, testing, audits or studies), losses, liabilities or obligations
(including without limitation, liabilities or obligations under any lease or
other contract), payments, damages (including without limitation any actual,
punitive or consequential damages under any statutory laws, common law cause of
action or contractual obligations or otherwise, including without limitation
damages (a) to third parties for personal injury or property damage, or (b) to
natural resources), civil or criminal fines or penalties, judgments and amounts
paid in settlement arising out of or relating to or resulting from any
Environmental Matter.
"Environmental Matter" means any matter arising
out of, relating to, or resulting from pollution, contamination,
protection of the environment, human health or safety, health or safety of
employees, sanitation, and any matters relating to emissions, discharges,
disseminations, releases or threatened releases, of Hazardous Substances into
the air (indoor and outdoor), surface water, groundwater, soil, land surface or
subsurface, buildings, facilities, real or personal property or fixtures or
otherwise arising out of, relating to, or resulting from the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
handling, release or threatened release of Hazardous Substances.
"Hazardous Substances" means any pollutants,
contaminants, toxic or hazardous or extremely hazardous substances,
materials, wastes, constituents, compounds, chemicals, natural or man-made
elements or forces (including, without limitation, petroleum or any by-products
or fractions thereof, any form of natural gas, Bevill Amendment materials,
lead, asbestos and asbestos-containing materials ("ACM"), building construction
materials and debris, polychlorinated biphenyls ("PCBs") and PCB-containing
equipment, radon and other radioactive elements, ionizing radiation,
electromagnetic field radiation and other non-ionizing radiation, sonic forces
and other natural forces, infectious, carcinogenic, mutagenic, or etiologic
agents, pesticides, defoliants, explosives, flammables, corrosives and urea
formaldehyde foam insulation) that are regulated by, or may now or in the
future form the basis of liability under, any Environmental Laws.
"Environmental Laws" means, without limitation,
the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss.ss. 9601 et seq., the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. ss.ss. 11001 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. ss.ss. 6901
et seq., the Toxic Substances Control Act, 15 U.S.C. ss.ss. 2601 et
seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C.
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ss.ss. 136 et seq., the Clean Air Act, 42 U.S.C. ss.ss. 7401 et.
seq., the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C.
ss.ss. 1251 et seq., the Safe Drinking Water Act, 42 U.S.C.
ss.ss. 300f et seq., the Occupational Safety and Health Act, 29 U.S.C.
ss.ss. 641, et seq., the Hazardous Materials Transportation Act,
49 U.S.C. ss.ss. 1801, et seq., as any of the above statutes have been or
may be amended from time to time, all rules and regulations
promulgated pursuant to any of the above statutes, and any other foreign,
federal, state or local law, statute, ordinance, rule or
regulation governing Environmental Matters, as the same have been or
may be amended from time to time, including any common law
cause of action providing any right or remedy relating to Environmental
Matters, all indemnity agreements and other contractual
obligations (including leases, asset purchase and merger agreements)
relating to environmental matters, and all applicable judicial
and administrative decisions, orders, and decrees relating to
Environmental Matters.
Section 3.13 Board Action; Company Rights Agreement; Vote Required.
(a) The Company's Board of Directors has unanimously approved (including, with
respect to Parent, Merger Sub and their respective affiliates and associates,
for purposes of Section 203 of the DGCL, Article SEVENTH of the Company's
Restated Certificate of Incorporation, the Capital Stock Agreement of Citrus
Corp. dated June 30, 1986 and paragraph 6 of the Confidentiality Agreement
dated February 5, 1999, between Parent and the Company (the "Confidentiality
Agreement") this Agreement, the Stock Option Agreements and the transactions
contemplated hereby and thereby (including the Voting Agreements), has
determined that the transactions contemplated hereby are fair to and in the
best interests of Company and its stockholders and has resolved to recommend to
stockholders that they vote in favor of approving and adopting this Agreement,
the Parent Merger and the Alternative Merger. No "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute applicable
to the Company will prevent or otherwise delay the consummation of transactions
contemplated hereby.
(b) The Board of Directors of the Company has
taken all necessary actions such that, (i) none of Parent,
Merger Sub, the Surviving Corporation or any of their affiliates shall become
an "Acquiring Person" (as defined in the Company Rights Agreement), and (ii) no
"Distribution Date," "Shares Acquisition Date" (each as defined in the Company
Rights Agreement) or any event which would entitle any holders of Rights (as
defined in the Company Rights Agreement) to purchase any shares of the
Surviving Corporation, Merger Sub, the Company or Parent or any of their
respective affiliates pursuant to Section 13 of the Company Rights Agreement,
shall have occurred or shall occur, in each case by reason of the execution,
delivery or performance of this Agreement, the Stock Option Agreements or the
Voting Agreements or any announcement thereof.
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(c) The affirmative vote of the holders of a
majority of all outstanding shares of Company Common Stock
is necessary to approve and adopt this Agreement, the Parent Merger and the
Alternative Merger. Such vote is the only vote or approval of holders of shares
of any class or series of the Company's capital stock required in connection
with this Agreement, the Stock Option Agreements and the transactions
contemplated hereby and thereby.
Section 3.14 Opinion of Financial Advisor. The Board of Directors of
the Company has received the written opinion of Merrill Lynch, Pierce Fenner &
Smith Incorporated ("Merrill Lynch"), dated as of the date of this Agreement,
to the effect that, subject to the qualifications and limitations contained
therein, as of the date of this Agreement, the consideration to be received by
the holders of shares of Company Common Stock (other than Parent and its
affiliates) in the Parent Merger or the Alternative Merger is fair to such
holders from a financial point of view.
Section 3.15 Brokers. Merrill Lynch is the only broker, finder,
investment banker or other person entitled to any brokerage, finder's,
investment banking or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or any of its Subsidiaries. The Company has previously
provided to Parent a copy of the letter agreement, dated February 1, 1999,
between Merrill Lynch and the Company giving rise to a fee to Merrill Lynch.
Section 3.16 Tax Matters. (a) Except as would not, in the aggregate,
have or reasonably be expected to have, a Company Material Adverse Effect, the
Company and its Subsidiaries (i) have timely filed all federal, state and
foreign Tax returns required to be filed by any of them for Tax years ended
prior to the date of this Agreement or requests for extensions have been timely
filed and any such request has been granted and has not expired, and all such
returns are correct and complete and (ii) have paid or accrued in accordance
with GAAP all Taxes shown to be due and payable on such returns.
(b) There is no dispute or claim concerning any
Tax liability of any of the Company and its Subsidiaries
claimed or raised by any authority in writing.
(c) No written claims that, in the aggregate,
could reasonably be expected to have a Company Material
Adverse Effect have been made by an authority in a jurisdiction where any of
the Company and its Subsidiaries does not file Tax returns that it is or may be
subject to Taxation by that jurisdiction.
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(d) None of the Company and its Subsidiaries
has waived any statute of limitations in respect of income
Taxes or agreed to any extension of time with respect to an income Tax
assessment or deficiency.
(e) Neither the Company nor any of its
Subsidiaries has taken or agreed to take any action, nor does the
Company have any knowledge of any fact or circumstance with respect to the
Company or its Subsidiaries, which would prevent the Parent Merger or the
Alternative Merger from qualifying as a "reorganization" within the meaning of
Section 368 of the Code.
Section 3.17 Public Utility Holding Company Act of 1935. The Company
is not a "holding company," a "subsidiary company" of a "holding company," or
an "affiliate of a holding company," or a "public utility company" as such
terms are defined in the Public Utility Holding Company Act of 1935, as
amended, and rules and regulations thereunder (the "Holding Company Act").
Section 3.18 Restrictions on Business Activities. Except for this
Agreement or as set forth in the Company SEC Reports filed prior to the date of
this Agreement, there is no judgment, injunction, order or decree or material
agreement (including, without limitation, agreements containing provisions
restricting the Company or any of its Subsidiaries from entering or engaging in
any line of business, agreements containing geographic restrictions on the
Company's or any of its Subsidiaries' ability to operate their respective
businesses and agreements containing rights of first refusal, rights of first
offer, exclusivity, "requirements" or similar provisions) binding upon the
Company or any of its Subsidiaries which has or would reasonably be expected to
have the effect of materially prohibiting or impairing the conduct of the
businesses of the Company or any of its Subsidiaries or, to the Company's
knowledge, after the Effective Time, Parent or any of its Subsidiaries, taken
together.
Section 3.19 Year 2000. Except as set forth in the Company SEC
Reports filed prior to the date of this Agreement, the systems operated or used
by the Company or any of its Subsidiaries are capable of providing or are being
adapted to provide uninterrupted millennium functionality on or after January
1, 2000 to share, record, process and present data in substantially the same
manner and with the same functionality as such systems share, record, process
and present such data on or before December 31, 1999, except, in the aggregate,
as would not have, or reasonably be expected to have, a Company Material
Adverse Effect. The costs of the adaptations referred to in the prior sentence,
in the aggregate, will not have a Company Material Adverse Effect.
Section 3.20 Accounting Matters. Neither the Company nor any of its
Subsidiaries has taken or agreed to take action, nor does the Company have any
knowledge of any fact or circumstance with respect to the Company or its
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Subsidiaries, which would prevent the business combination to be effected
pursuant to the Parent Merger from being accounted for as a
pooling-of-interests under GAAP or the rules and regulations of the SEC. Ernst
& Young LLP ("E&Y") has advised the Company that it is not aware as of the date
of this Agreement of any reason why E&Y would be unable to deliver at the
Closing the letter referred to in the second sentence of Section 6.13(b).
ARTICLE IV
Except as set forth in the corresponding sections or
subsections of the disclosure letter, dated the date of this Agreement,
delivered by Parent to the Company (the "Parent Disclosure Letter"), Parent
hereby represents and warrants to the Company as follows:
Section 4.1 Organization and Qualification; Subsidiaries. (a) Parent
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. Each of the Subsidiaries of Parent is a
corporation or other business entity duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, and each of Parent and its Subsidiaries has the requisite
corporate or similar organizational power and authority to own, operate or
lease its properties and to carry on its business as it is now being conducted,
and is duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary, except as would not, in the aggregate, have, or reasonably be
expected to have, a Parent Material Adverse Effect (as defined in Section 9.3).
(b) Except as disclosed in the Parent SEC Reports
(as defined in Section 4.6) filed prior to the date
hereof, and except as would not, in the aggregate, have, or reasonably be
expected to have, a Parent Material Adverse Effect, (i) all of the outstanding
shares of capital stock and other equity securities) of the Subsidiaries of
Parent are owned, directly or indirectly, by Parent free and clear of all
liens, pledges, security interests, or other encumbrances, (ii) all of the
outstanding shares of capital stock or other equity securities of the
Subsidiaries of Parent have been validly issued and are fully paid and
nonassessable, (iii) there are no subscriptions, options, warrants, calls,
commitments, agreements, conversion rights or other rights of any character
(contingent or otherwise) entitling any person to purchase or otherwise acquire
from Parent or any of its Subsidiaries at any time, or upon the happening of
any stated event, any shares of capital stock or other equity securities of any
of the Subsidiaries of Parent and there are no outstanding obligations,
contingent or otherwise, of Parent or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock or other equity
securities, or any securities convertible, exchangeable or exercisable for or
into shares of capital stock or other equity securities, of any Subsidiary of
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Parent. There are no outstanding obligations, contingent or otherwise, of
Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock or other equity securities, or any securities
convertible, exchangeable or exercisable for or into, shares of capital stock
or other equity securities of any Subsidiary of Parent.
Section 4.2 Restated Certificate of Incorporation and By-laws of
Parent. Parent has furnished or otherwise made available to the Company a
complete and correct copy of Parent's Restated Certificate of Incorporation and
By-laws, in each case as amended to the date of this Agreement. Such Restated
Certificate of Incorporation and By-laws of Parent and all similar
organizational documents of Subsidiaries of Parent are in full force and
effect. Parent is not in violation of its Restated Certificate of Incorporation
or By-laws and, except as would not, in the aggregate, have, or reasonably be
expected to have, a Parent material Adverse Effect, none of the Subsidiaries of
Parent is in violation of any similar organizational documents of Subsidiaries
of Parent.
Section 4.3 Capitalization. (a) The authorized capital stock of
Parent consists of 275,000,000 shares of Parent Common Stock and 25,000,000
shares of serial Preferred Stock, par value $.01 per share (the "Parent
Preferred Stock"). 2,750,000 shares of the Parent Preferred Stock have been
designated as "Series A Junior Participating Preferred Stock" and, other than
as contemplated or permitted hereby, no other shares of Parent Preferred Stock
are subject to any designation. At the close of business on March 12, 1999,
122,359,989 shares of Parent Common Stock (including 1,360,000 shares held in
Parent's Benefit Protection Trust), and no shares of Parent Preferred Stock,
were issued and outstanding. 2,869,162 shares of Parent Common Stock and no
Shares of Parent Preferred Stock are held by Parent in its treasury. No shares
of capital stock of Parent are held by any of Parent's Subsidiaries. All of the
issued and outstanding shares of Parent Common Stock are validly issued, fully
paid, nonassessable and free of preemptive rights. At the close of business on
March 12, 1999, 9,610,855 Parent Options, exercisable for 9,610,855 shares of
Parent Common Stock, in the aggregate, were outstanding. As of the date of this
Agreement, other than (i) the options granted pursuant to the Parent Stock
Option Agreement, (ii) the preferred stock purchase rights (none of which are
exercisable) issued pursuant to the Amended and Restated Shareholder Rights
Agreement (the "Parent Rights Agreement"), effective January 20, 1999, between
the Parent and BankBoston, N.A., as rights agent, (iii) the 6,500,000 4-3/4%
Trust Convertible Preferred Securities of El Paso Energy Capital Trust I (the
"Parent Trust Securities") (and the underlying 4-3/4% Subordinated Convertible
Debentures due 2028 of Parent in the aggregate principal amount of $325
million) outstanding and (iv) the Parent Options, the Parent does not have
outstanding any subscriptions, options, warrants, calls, commitments,
agreements, conversion rights or other rights of any character (contingent or
otherwise) entitling any person to purchase or otherwise acquire from Parent or
any of its Subsidiaries at any time, or upon the happening of any stated event,
any shares of the capital stock of Parent (each of the foregoing, a "Parent
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Equity Equivalent Security"). From the close of business on March 12, 1999
through the date of this Agreement, no shares of Parent Common Stock have been
issued, sold or otherwise transferred by Parent (except in connection with the
exercise, conversion or exchange of outstanding Parent Equity Equivalent
Securities).
(b) As of the date of this Agreement, there are
no outstanding obligations, contingent or otherwise, of
Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of Parent Common Stock or any Parent Equity Equivalent Securities
(except in connection with the exercise, conversion or exchange of outstanding
Parent Equity Equivalent Securities). As of the date of this Agreement, there
are no bonds, debentures, notes or other indebtedness issued and outstanding
having the right to vote together with Parent's stockholders on any matter in
respect of which the Parent's stockholders are entitled to vote.
Section 4.4 Power and Authority; Authorization; Valid and Binding.
Parent has the necessary corporate power and authority to execute and deliver
this Agreement and the Stock Option Agreements and to perform its obligations
hereunder and thereunder, as applicable, except that the consummation of Parent
Merger is subject to the approval of the stockholders of Parent as set forth in
Section 4.13(c). The execution and delivery of this Agreement and the Stock
Option Agreements by Parent, and the performance by it of its obligations
hereunder and thereunder, as applicable, have been duly authorized by all
necessary corporate action on the part of Parent, except that the consummation
of Parent Merger is subject to the approval of the stockholders of Parent as
set forth in Section 4.13(c). This Agreement and the Stock Option Agreements
have been duly executed and delivered by Parent, and assuming the corporate
authority of, and the due authorization, execution and delivery by, the
Company, each of such agreements constitutes a legal, valid and binding
obligation of Parent enforceable against Parent in accordance with the terms
hereof or thereof, as applicable, subject to bankruptcy, insolvency, fraudulent
transfer, moratorium, reorganization and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
Section 4.5 No Conflict; Required Filings and Consents. (a) The
execution and delivery by Parent of this Agreement and the Stock Option
Agreements do not and will not, and the performance by Parent of its
obligations hereunder and thereunder do not and will not, (i) violate or
conflict with the Restated Certificate of Incorporation or By-laws of Parent,
(ii) subject to obtaining or making the notices, reports, filings, waivers,
consents, approvals or authorizations referred to in paragraph (b) below and to
the adoption of this Agreement by Parent's stockholders as set forth in Section
4.13(c) in connection with a Parent Merger, conflict with or violate any law,
regulation, order, judgment or decree applicable to Parent or any of its
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Subsidiaries or by which any of their respective property is bound or affected,
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, impair Parent's
or any of its Subsidiaries' rights under or alter the rights or obligations of
any other party to, give to others any rights of termination, cancellation,
vesting, modification, alteration or acceleration of any obligation under,
result in the creation of a lien, claim or encumbrance on any of the properties
or assets of Parent or any of its Subsidiaries pursuant to, require the consent
of any other party to, or result in any obligation on the part of Parent or any
of its Subsidiaries to repurchase (with respect to a debenture, bond or note),
pursuant to any agreement, contract, instrument, debenture, bond, note,
indenture, permit, license or franchise to which Parent or any of its
Subsidiaries is a party or by which Parent, any of its Subsidiaries or any of
their respective property is bound or affected, except, in the case of clauses
(ii) and (iii) above, as would not, in the aggregate, have, or reasonably be
expected to have, a Parent Material Adverse Effect.
(b) Except for (i) applicable filings required
under the premerger notification requirements of the HSR
Act, (ii) required filings with and approvals of the FERC, (iii) applicable
filings and approvals under federal, state, local or foreign regulatory laws,
and applicable requirements of foreign, state or local public utility or
similar commissions or agencies, all of which are set forth in the Parent
Disclosure Letter, (iv) the filing of a certificate of merger with respect to
the Applicable Transaction as required by the DGCL, (v) filings with the SEC
under the Securities Act and the Exchange Act, (vi) applicable filings with the
NYSE, and (vii) any filings required or approvals necessary pursuant to any
state securities or "blue sky" laws, neither Parent nor any of its Subsidiaries
is required to submit any notice, report or other filing to any Governmental
Entity, and no waiver, consent, approval, order or authorization of any
Governmental Entity is required to be obtained by Parent or any of its
Subsidiaries, in connection with the execution, delivery or performance of this
Agreement except for such notices, reports, filings, waivers, consents,
approvals or authorizations that, if not made or obtained, would not, in the
aggregate, have, or reasonably be expected to have, a Parent Material Adverse
Effect.
Section 4.6 SEC Reports; Financial Statements. (a) Parent (with
respect to the period prior to August 1, 1998, for purposes of this Section
4.6, all references to the "Parent" shall be deemed to refer to El Paso Natural
Gas Company) has filed all forms, reports, statements, schedules and other
documents (including all annexes, exhibits, schedules, amendments and
supplements thereto) required to be filed by it with the SEC since January 1,
1997, has delivered or made available to the Company all forms, reports,
statements, schedules and other documents (except for preliminary materials)
(including all annexes, exhibits, schedules, amendments and supplements
thereto) filed by it with the SEC since January 1, 1997 (such forms, reports,
statements, schedules and documents filed by Parent with the SEC, including any
such forms, reports, statements, schedules and other documents filed by Parent
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with the SEC after the date of this Agreement and prior to the Closing Date,
are referred to herein, collectively, as the "Parent SEC Reports"), and with
respect to the Parent SEC Reports filed by Parent after the date of this
Agreement and prior to the Closing Date, will deliver or make available to the
Company all of such Parent SEC Reports in the form filed with the SEC. As of
their respective filing dates, the Parent SEC Reports (including all
information incorporated therein by reference) (i) complied as to form in all
material respects with the requirements of the Securities Act or the Exchange
Act, as applicable, and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated balance sheets of
Parent and its Subsidiaries (including all related notes)
included in the financial statements contained in the Parent SEC Reports (or
incorporated therein by reference) present fairly, in all material respects,
the consolidated financial position of Parent and its Subsidiaries as of the
respective dates indicated, and each of the consolidated statements of income,
consolidated statements of cash flows and consolidated statements of changes in
stockholders' equity of Parent and its Subsidiaries (including all related
notes) contained in such financial statements present fairly, in all material
respects, the consolidated results of operations, cash flows and changes in
stockholders' equity of Parent and its Subsidiaries for the respective periods
indicated, in each case in conformity with GAAP applied on a consistent basis
throughout the periods involved (except for changes in accounting principles
disclosed in the notes thereto) and the rules and regulations of the SEC,
except that unaudited interim financial statements are subject to normal and
recurring year-end adjustments and any other adjustments described therein and
do not include certain notes and other information which may be required by
GAAP but which are not required under the Exchange Act. The financial
statements included in the Parent SEC Reports are in all material respects in
accordance with the books and records of Parent and its Subsidiaries.
(c) Notwithstanding the foregoing, no representation or
warranty is being made in this Section 4.6 with
respect to information or statements (including financial information and
statements) that are provided by the Company and set forth in any Parent SEC
Report filed after the date hereof or with respect to any Company SEC Reports
incorporated therein by reference.
Section 4.7 Absence of Certain Changes. Except as disclosed in the
Parent SEC Reports filed prior to the date of this Agreement and as otherwise
contemplated or permitted hereby, since December 31, 1998, (a) Parent and its
Subsidiaries have conducted their respective businesses in all material
respects in the ordinary course of such businesses and there have not been any
changes to the condition (financial or otherwise), assets, liabilities,
business or results of operations of Parent and its Subsidiaries, or any other
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developments with respect to Parent or any of its Subsidiaries, in each case
whether or not in the ordinary course of business, that, in the aggregate with
all other changes and developments, have had, or would reasonably be expected
to have, a Parent Material Adverse Effect, and (b) there has not been (i) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) in respect of any shares of the capital
stock or other equity securities, or any securities convertible, exercisable or
exchangeable for or into shares of capital stock or other equity securities, of
Parent or any of its Subsidiaries, other than (x) regular quarterly cash
dividends of $.20 per share in respect of the outstanding Parent Common Stock
and (y) dividends and distributions by wholly owned Subsidiaries of Parent;
(ii) any change by Parent to its accounting policies, practices or methods;
(iii) other than in connection with the exercise, exchange or conversion of
Parent Equity Equivalent Securities, any repurchase, redemption or other
acquisition of any shares of capital stock or other equity securities or any
securities convertible, exchangeable or exercisable for or into shares of
capital stock or other equity securities, of Parent or any of its Subsidiaries;
or (iv) except as required by applicable law or pursuant to contractual
obligations existing as of September 30, 1998, (w) any execution,
establishment, adoption or amendment of, or acceleration of rights or benefits
under, any agreement relating to severance, any Parent Employee Plan, any
employment or consulting agreement or any collective bargaining agreement, (x)
any increase in the compensation payable or to become payable to any officer,
director or employee of Parent or any of its Subsidiaries (except increases in
the ordinary course of business), (y) any grant of any severance or termination
paid to any officer or director of Parent, or (z) any grant of any stock
options or other equity related awards other than in the ordinary course
consistent with past practice; or (v) any agreement or commitment entered into
with respect to the foregoing.
Section 4.8 Litigation; Liabilities. (a) Except as disclosed in the
Parent SEC Reports filed prior to the date of this Agreement, there are no
civil, criminal or administrative actions, suits, claims, proceedings, or
investigations pending or, to the knowledge of Parent, threatened, against
Parent or any of its Subsidiaries or any of their respective properties, except
as would not, in the aggregate, have, or reasonably be expected to have, a
Parent Material Adverse Effect.
(b) Except as set forth in the Parent SEC
Reports filed prior to the date of this Agreement, neither
Parent nor any of its Subsidiaries has or is subject to any liabilities
(absolute, accrued, contingent or otherwise), except liabilities (a) adequately
reflected on the unaudited consolidated balance sheet of Parent and its
Subsidiaries (including any related notes thereto) as of December 31, 1998
included in Parent's Annual Report of Form 10-K for the quarter ended December
31, 1998, or (b) which, in the aggregate, would not have, or reasonably be
expected to have, a Parent Material Adverse Effect.
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Section 4.9 Compliance; Permits. (a) Except as disclosed in the
Parent SEC Reports filed prior to the date of this Agreement, neither Parent
nor any of its Subsidiaries is in conflict with, or in default or violation of,
(i) any law, rule, regulation, order, judgment or decree applicable to Parent
or any of its subsidiaries or by which its or any of their respective assets or
properties is bound or affected or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, easement, right-of-way
or other instrument or obligation to which Parent or any of its Subsidiaries is
a party or by which Parent or any of its Subsidiaries or its or any of their
respective assets or properties is bound or affected, except for such
conflicts, defaults or violations which, in the aggregate, would not have, or
reasonably be expected to have, a Parent Material Adverse Effect.
(b) Except as disclosed in the Parent SEC
Reports filed prior to the date of this Agreement, Parent and
its Subsidiaries hold all permits, licenses, easements, rights-of-way,
variances, exemptions, consents, certificates, orders and approvals which are
material to the operation of the businesses of Parent and its Subsidiaries
(collectively, the "Parent Permits"), except where the failure to hold such
Parent Permits, in the aggregate, would not have, or reasonably be expected to
have, a Parent Material Adverse Effect. Parent and its Subsidiaries are in
compliance with the terms of the Parent Permits, except as described in the
Parent SEC Reports filed prior to the date hereof or where the failure to so
comply, in the aggregate, would not have, or reasonably be expected to have, a
Parent Material Adverse Effect.
Section 4.10 Employee Matters; ERISA. (a) The Parent Disclosure
Letter lists all employee pension benefit plans (as defined in Section 3(2) of
ERISA), all employee welfare benefit plans (as defined in Section 3(1) of
ERISA), all bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance and other or similar material
fringe or employee benefit plans, programs or arrangements, all consulting
agreements with former officers and directors of Parent and all employment,
termination, change-in-control or severance agreements, in each case, pursuant
to which Parent or any of its Subsidiaries may have any liability material to
Parent and its Subsidiaries, taken as a whole (together, the "Parent Employee
Plans"), excluding, however, employee benefit plans that are primarily subject
to the laws of any jurisdiction outside the United States.
(b) Except as disclosed in the Parent SEC Reports
filed prior to the date hereof, no material liability
under Title IV of ERISA has been or is reasonably expected to be incurred by
the Parent or any Subsidiary of the Parent or any entity which is considered a
single employer with the Parent or any Subsidiary of the Parent under Section
4001(a)(15) of ERISA or Section 414 of the Code (a "Parent ERISA Affiliate"),
other than liabilities for premium payments to the PBGC and liabilities that
have previously been satisfied.
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(c) Except as disclosed in the Parent SEC Reports
filed prior to the date of this Agreement, none of the
Parent Employee Plans promises or provides retiree medical or other retiree
welfare benefits to any person, other than health continuation coverage as
required by Section 4980B of the Code or Part 6 of Title I of ERISA, and none
of the Parent Employee Plans is a "multiemployer plan" as such term is defined
in Section 3(37) of ERISA. Except as set forth in the Parent SEC Reports filed
prior to the date of this Agreement and except, in the aggregate, as would not
have, or reasonably be expected to have, a Parent Material Adverse Effect, (i)
no party in interest or disqualified person (as defined in Section 3(14) of
ERISA and Section 4975 of the Code) has at any time engaged in a transaction
with respect to any Parent Employee Plan which could subject Parent or any
Parent ERISA Affiliate, directly or indirectly, to any tax, penalty or other
liability for prohibited transactions under ERISA or Section 4975 of the Code;
(ii) no fiduciary of any Parent Employee Plan has breached any of the
responsibilities or obligations imposed upon fiduciaries under Title I of
ERISA; (iii) all Parent Employee Plans have been established and maintained
substantially in accordance with their terms and have operated in compliance
with the requirements of applicable law, and Parent and its Subsidiaries have
performed all obligations required to be performed by them under and are not in
default under or in violation of any of Parent Employee Plans; (iv) each Parent
Employee Plan which is intended to be qualified under Section 401(a) of the
Code is so qualified, is the subject of a favorable determination letter from
the IRS, and, to Parent's knowledge, nothing has occurred which may reasonably
be expected to result in the revocation of such determination; (v) all
contributions required to be made with respect to any Parent Employee Plan
pursuant to Section 412 of the Code and Section 302 of ERISA, or pursuant to
the terms of Parent Employee Plan or any collective bargaining agreement, have
been made on or before their due dates (including any extensions thereof); (vi)
with respect to each Parent Employee Plan, no "reportable event" within the
meaning of Section 4043 of ERISA (excluding any such event for which the 30 day
notice requirement has been waived under the regulations to Section 4043 of
ERISA) has occurred for which there is any outstanding liability to Parent or
any Parent ERISA Affiliate, nor would the execution, delivery or consummation
of the transactions contemplated hereby constitute a reportable event for which
the 30-day requirement has not been waived; and (vii) no Parent Employee Plan
is under audit or investigation by the IRS, the Department of Labor or the PBGC
nor, to the knowledge of Parent, is any such audit or investigation threatened.
(d) The Parent Disclosure Letter sets forth a
true and complete list of each current or former officer or
director of Parent or any of its Subsidiaries who holds (i) any Parent Option
as of the date of this Agreement, together with the number of shares of Parent
Common Stock subject to such option, the exercise price of such option, the
vested and unvested portion of such option, whether such option is intended to
qualify as an incentive stock option within the meaning of Section 422(b) of
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the Code, and the expiration date of such option; or (ii) any shares of Parent
Common Stock that are restricted and the date(s) of lapse of such restrictions.
The Parent Disclosure Letter also sets forth the number of options outstanding
as of the date hereof and the different exercise prices and expiration dates
for such options. In addition, the Parent Disclosure Letter sets forth, in the
aggregate, the number of shares of Parent Common Stock underlying (i) all other
outstanding rights under Parent Employee Plans (other than plans that are
qualified plans under Section 401(a) of the Code) to receive shares of Parent
Common Stock, to the extent that such shares of Parent Common Stock are not
included in the number of shares set forth in the second sentence of Section
4.3, and (ii) compensation based on the value of shares of Parent Common Stock.
(e) The PBGC has not notified Parent regarding
the institution of proceedings to terminate any Parent
Employee Plan that is subject to Title IV of ERISA (each, a "Parent Defined
Benefit Plan"). The Parent Defined Benefit Plans have no accumulated or waived
funding deficiencies within the meaning of Section 412 of the Code nor have any
extensions of any amortization period within the meaning of Section 412 of the
Code or 302 of ERISA been applied for with respect thereto.
(f) To the knowledge of Parent, all employee
benefit plans of Parent and any of its Subsidiaries that are
primarily subject to the laws of any jurisdiction outside of the United States
have been maintained in compliance with all applicable law (including, if they
are intended to qualify for special tax treatment, applicable tax laws), except
for noncompliance that would not individually or in the aggregate have a Parent
Material Adverse Effect.
(g) The execution and delivery of, and performance
of the transactions contemplated in, this Agreement
will not (either alone or upon the occurrence of any additional or subsequent
events) (i) constitute an event under any Parent Employee Plan, trust or loan
that will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any current or former
employee of Parent or any Subsidiary of Parent, or (ii) result in the
triggering or imposition of any restrictions or limitations on the right of the
Parent or any Subsidiary of Parent to amend or terminate any Parent Employee
Plan. No payment or benefit which is required to be paid or distributed, prior
to or after the Closing, by Parent, the Company, the Parent Surviving
Corporation or any of their respective Subsidiaries under any Parent Employee
Plan or any other plan, program or arrangement of Parent to any current or
former employee of Parent or any Subsidiary of Parent will be characterized as
an "excess parachute payment," within the meaning of Section 280G(b)(1) of the
Code.
Section 4.11 Labor Matters. Except as set forth in the Parent SEC
Reports filed prior to the date of this Agreement, (i) there are no
controversies pending or, to the knowledge of Parent, threatened, between
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Parent or any of its Subsidiaries and any of their respective employees, which
controversies, in the aggregate, have had, or would reasonably be expected to
have, a Parent Material Adverse Effect; (ii) neither Parent nor any of its
Subsidiaries is in breach of any material collective bargaining agreement or
other labor union contract applicable to persons employed by Parent or its
Subsidiaries which, in the aggregate, would have, or reasonably be expected to
have, a Parent Material Adverse Effect, nor does Parent know of any activities
or proceedings of any labor union to organize any significant number of such
employees; and (iii) neither Parent nor any of its Subsidiaries is in breach of
any material collective bargaining agreement or other labor union contract, nor
does Parent have any knowledge of any strikes, slowdowns, work stoppages,
lockouts, or threats thereof, by or with respect to any employees of Parent or
any of its Subsidiaries except, in the aggregate, as would not have, or
reasonably be expected to have, a Parent Material Adverse Effect.
Section 4.12 Environmental Matters. Except as set forth in the
Parent SEC Reports filed prior to the date of this Agreement and except for
those matters, in the aggregate, that would not have, or reasonably be expected
to have, a Parent Material Adverse Effect:
(a) Parent and each of its Subsidiaries,
and, to the knowledge of Parent, their respective predecessors,
if any, have been at all times operated, and are, in full compliance in all
material respects with all applicable Environmental Laws, including all
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in all applicable Environmental
Laws.
(b) Parent and each of its Subsidiaries have
obtained, are in compliance with, and have made all
appropriate filings for issuance or renewal of, all material Environmental
Permits, including, without limitation, those regulating emissions, discharges,
or releases of Hazardous Substances, or the use, storage, treatment,
transportation, release, emission and disposal of raw materials, by-products,
wastes and other substances used or produced by or otherwise relating to the
business of Parent or any of its Subsidiaries.
(c) All of Parent's and its Subsidiaries' owned
or, to the knowledge of Parent, leased real property is
free of any Hazardous Substances (except those authorized pursuant to and in
accordance with Environmental Permits held by Parent and its Subsidiaries) and
free of all contamination arising from, relating to, or resulting from any
release, discharge or emission of Hazardous Substances.
(d) There are no claims, notices, civil, criminal
or administrative actions, suits, hearings, investigations, inquiries or
proceedings pending or, to the knowledge of Parent, threatened against Parent
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or any of its Subsidiaries that are based on or related to any Environmental
Matters or the failure to have any required Environmental Permits.
(e) There are no past or present conditions,
events, circumstances, facts, activities, practices,
incidents, actions, omissions or plans: (1) that is reasonably likely to give
rise to any liability or other obligation under any Environmental Laws that may
require Parent or any of its Subsidiaries to incur any actual or potential
Environmental Costs, or (2) that is reasonably likely to form the basis of any
claim, action, suit, proceeding, hearing, investigation or inquiry against or
involving Parent or any of its Subsidiaries based on or related to any
Environmental Matter or that could require Parent or any of its Subsidiaries to
incur any Environmental Costs.
(f) There are no underground or aboveground
storage tanks, incinerators or surface impoundments at, on,
or about, under or within any real property owned, operated or controlled in
whole or in part by Parent or any of its Subsidiaries.
(g) Neither Parent nor any of its Subsidiaries
has received any notice (written or oral) or other
communication that any of them is or may be a potentially responsible person or
otherwise liable in connection with any waste disposal site allegedly
containing any Hazardous Substances, or other location used for the disposal of
any Hazardous Substances, or notice of any failure of Parent or any of its
Subsidiaries to comply in any material respect with any Environmental Law or
the requirements of any Environmental Permit.
(h) Neither Parent nor any of its Subsidiaries
has used any waste disposal site, or otherwise disposed
of, transported, or arranged for the transportation of, any Hazardous
Substances to any place or location, or in violation of any Environmental Laws.
(i) Neither Parent nor any of its Subsidiaries
has been in violation of any Environmental Laws, nor has
it been requested or required by any Governmental Entity to perform any
investigatory or remedial activity or other action in connection with any
actual or alleged release of Hazardous Substances or any other Environmental
Matter.
Section 4.13 Board Action; Vote Required. (a) Parent's Board of
Directors has unanimously approved (including, with respect to the Company and
its affiliates and associates, for purposes of Section 203 of the DGCL, Article
12 of Parent's Restated Certificate of Incorporation and paragraph 6 of the
Confidentiality Agreement) this Agreement, the Stock Option Agreements, the
Voting Agreements and the transactions contemplated hereby and thereby, has
adopted a resolution in accordance with Section 151 of the DGCL providing for
the issuance, in the event the Alternative Merger is consummated, of shares of
Parent Preferred Stock having the powers, rights, designations and preferences
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and the qualifications, limitations and restrictions described in the
Certificate of Designation, has determined that the transactions contemplated
hereby and, in the event the Alternative Merger is consummated, the issuance of
shares of Parent Common Stock, Parent Preferred Stock and the Depositary Shares
pursuant thereto are fair to and in the best interests of Parent and its
stockholders and has resolved to recommend to its stockholders that they vote
in favor of this Agreement and the Parent Merger. No "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover
statute applicable to Parent will prevent or otherwise delay the consummation
of the transaction as contemplated hereby.
(b) The Board of Directors of Parent has taken
all necessary actions such that, (i) none of the Company
or any of its affiliates shall become an "Acquiring Person" (each as defined in
the Parent Rights Agreement), and (ii) no "Distribution Date," "Stock
Acquisition Date" or "Triggering Event" (each as defined in the Parent Rights
Agreement) shall have occurred or shall occur, in each case by reason of the
execution, delivery or performance of this Agreement or the Stock Option
Agreements or any announcement thereof.
(c) The affirmative vote of the holders of a
majority of all outstanding shares of Parent Common Stock is
necessary to approve and adopt this Agreement and the Parent Merger. Such vote
is the only vote or approval of holders of shares of any class or series of
Parent's capital stock required in connection with this Agreement, the Stock
Option Agreements, the Voting Agreements and the transactions contemplated
hereby and thereby. No vote of the holders of shares of Parent Common Stock is
necessary in connection with the Alternative Merger.
Section 4.14 Opinion of Financial Advisor. The Board of Directors of
Parent has received the written opinion of Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), dated as of the date of this Agreement, to the
effect that, subject to the qualifications and limitations contained therein,
as of the date of this Agreement, the Exchange Ratio pursuant to the Parent
Merger and the consideration to be paid by Parent in the Alternative Merger, as
the case may be, in each case is fair to Parent from a financial point of view.
Section 4.15 Brokers. DLJ is the only broker, finder or investment
banker or other person entitled to any brokerage, finder's, investment banking
or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or any of its Subsidiaries. Parent has previously provided to the
Company a copy of the letter agreement between DLJ and Parent giving rise to a
fee to DLJ.
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Section 4.16 Tax Matters. (a) Except as would not, in the aggregate,
have or reasonably be expected to have a Parent Material Adverse Effect, Parent
and its Subsidiaries (i) have timely filed all federal, state and foreign Tax
returns required to be filed by any of them for Tax years ended prior to the
date of this Agreement or requests for extensions have been timely filed and
any such request has been granted and has not expired, and all such returns are
correct and complete and (ii) have paid or accrued in accordance with GAAP all
Taxes shown to be due and payable on such returns.
(b) There is no dispute or claim concerning any
Tax liability of any of Parent and its Subsidiaries
claimed or raised by any authority in writing.
(c) No written claims that, in the aggregate,
could reasonably be expected to have a Parent Material
Adverse Effect have been made by an authority in a jurisdiction where any of
Parent and its Subsidiaries does not file Tax returns that it is or may be
subject to Taxation by that jurisdiction.
(d) None of Parent and its Subsidiaries has
waived any statute of limitations in respect of income Taxes
or agreed to any extension of time with respect to an income Tax assessment
or deficiency.
(e) Neither Parent nor any of its Subsidiaries
has taken or agreed to take any action, nor does Parent
have any knowledge of any fact or circumstance with respect to Parent or its
Subsidiaries, which would prevent Parent Merger or the Alternative Merger from
qualifying as a "reorganization" within the meaning of Section 368 of the Code.
Section 4.17 Public Utility Holding Company Act of 1935. Parent is
not a "holding company," a "subsidiary company" of a "holding company," an
"affiliate of a holding company," or a "public utility company," as such terms
are defined in the Holding Company Act.
Section 4.18 Restrictions on Business Activities. Except for this
Agreement or as set forth in Parent SEC Reports filed prior to the date of this
Agreement, there is no judgment, injunction, order or decree or material
agreement (including, without limitation, agreements containing provisions
restricting Parent or any of its Subsidiaries from entering or engaging in any
line of business, agreements containing geographic restrictions on Parent's or
any of its Subsidiaries' ability to operate their respective businesses and
agreements containing rights of first refusal, rights of first offer,
exclusivity, "requirements" or similar provisions) binding upon Parent or any
of its Subsidiaries which has or would reasonably be expected to have the
effect of materially prohibiting or impairing the conduct of the business of
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Parent or any of its Subsidiaries or, to the knowledge of Parent, after the
Effective Time, Parent or any of its Subsidiaries, taken together.
Section 4.19 Year 2000. Except as set forth in the Parent SEC
Reports filed prior to the date of this Agreement, the systems operated or used
by Parent or any of its Subsidiaries are capable of providing or are being
adapted to provide uninterrupted millennium functionality on or after January
1, 2000 to share, record, process and present data in substantially the same
manner and with the same functionality as such systems share, record, process
and present such data falling on or before December 31, 1999, except, in the
aggregate, as would not have, or reasonably be expected to have, a Parent
Material Adverse Effect . The costs of the adaptations referred to in the prior
sentence, in the aggregate, will not have a Parent Material Adverse Effect.
Section 4.20 Accounting Matters. Neither Parent nor any of its
Subsidiaries has taken or agreed to take any action, nor does Parent have any
knowledge of any fact or circumstance with respect to Parent or its
Subsidiaries, which would prevent the business combination to be effected
pursuant to the Parent Merger from being account for as a pooling-of-interests
under GAAP or the rules and regulations of the SEC. PricewaterhouseCoopers LLP
("PWC") has advised Parent that it is not aware as of the date of this
Agreement of any reason why PWC would be unable to deliver at the Closing the
letter referred to in the second sentence of Section 6.13(a).
ARTICLE V
Section 5.1 Interim Operations of the Company. Between the date of
this Agreement and the Effective Time, the Company shall, and shall cause each
of its Subsidiaries to (unless Parent shall otherwise approve in writing or
except as otherwise contemplated by this Agreement or disclosed in the Company
Disclosure Letter):
(i) conduct its business in all
material respects in the ordinary course consistent with past
practice and, to the extent consistent therewith, use reasonable best efforts
to (x) preserve intact its business organization, (y) keep available the
services of its officers and employees and (z) maintain its existing relations
and goodwill with customers, suppliers, regulators, distributors, creditors,
lessors and others having business dealings with it; provided that the failure
of any officer or employee of the Company or its Subsidiaries to remain an
officer or employee of the Company or its Subsidiaries shall not constitute a
breach of this covenant;
(ii) not (A) amend the Restated
Certificate of Incorporation or By-laws of the Company;
(B) split, combine, subdivide or reclassify its outstanding shares of capital
stock or other equity securities; (C) declare, set aside or pay any dividend or
distribution payable in cash, stock or property in respect of any of its shares
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of capital stock or other equity securities, or securities convertible into,
exercisable for or exchangeable for, any of its shares of capital stock or
other equity securities, other than (x) quarterly cash dividends of $.27 per
share in respect of the outstanding shares of Company Common Stock, declared,
set aside and paid at such times during the quarter as is consistent with past
practice, and (y) dividends and distributions by wholly owned Subsidiaries of
the Company; (D) repurchase, redeem or otherwise acquire or permit any of its
Subsidiaries to purchase, redeem or otherwise acquire, any shares of its
capital stock or other equity securities, or securities convertible into,
exercisable for or exchangeable for, any of its shares of capital stock or
other equity securities (it being understood that this clause (D) shall not
prohibit the exercise, exchange or conversion of Company Equity Equivalent
Securities); or (E) enter into any agreement or letter of intent, agreement in
principle or similar arrangement to sell, transfer or otherwise dispose of, or
purchase or otherwise acquire, in the aggregate, a material amount of assets or
properties or any material business by merger, consolidation, transfer or
acquisition of shares of capital stock or otherwise;
(iii) not take any action that to the
knowledge of the Company would prevent the business
combination to be effected pursuant to the Parent Merger from qualifying for
pooling of interests accounting treatment under GAAP and the rules and
regulations of the SEC or would prevent the business combination to be effected
pursuant to the Parent Merger or the Alternative Merger, as applicable, from
qualifying as a "reorganization" within the meaning of Section 368 of the Code;
(iv) except as required by applicable
law or pursuant to contractual obligations in effect as of
the date of this Agreement, not (A) execute, establish, adopt or amend, or
accelerate rights or benefits under, any agreement relating to severance or
change-in-control, any Company Employee Plan, any employment or consulting
agreement with current or former officers or directors or any collective
bargaining agreement, (B) increase the compensation payable or to become
payable to any of its officers, directors or employees (except for increases in
the ordinary course of business consistent with past practices), (C) grant any
severance or termination pay to any officer or director of the Company, or (D)
grant any stock options or other equity related awards;
(v) not issue, deliver, grant, sell, pledge or
otherwise dispose of shares of any class of its
capital stock, other equity securities, or any securities convertible,
exercisable or exchangeable for or into, any such shares or other equity
securities, except upon the exercise, exchange or conversion of Company Equity
Equivalent Securities;
(vi) not change its accounting policies,
practices or methods except as required by GAAP or by the rules and
regulations of the SEC;
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(vii) not (x) take any action to
amend the Company Rights Agreement, (y) redeem
the rights subject to the Company Rights Agreement, or (z) take any action to
render inapplicable, or to exempt any third party from, any provision of the
Restated Certificate of Incorporation of the Company or any statute referred to
in Section 6.15;
(viii) not take any action that would be
reasonably likely to result in any of the conditions set forth in Article VII
of this Agreement not being satisfied or that would impair the ability of the
Company to consummate the transactions contemplated hereby in accordance with
the terms hereof or delay such consummation;
(ix) not take any action to cause the shares of
Company Common Stock to cease to be listed on the NYSE;
(x) not waive any of its rights under, or
release any other party from such other party's obligation under, or amend
any provision of any standstill agreement;
(xi) not issue, deliver, grant, sell, pledge
or otherwise dispose of any bonds, debentures, notes or other indebtedness,
in each case having the right to vote together with the Company's stockholders
on any matter; and
(xii) not enter into any commitments or
agreements to do any of the foregoing.
Section 5.2 Interim Operations of Parent. Between the date of this
Agreement and the Effective Time, Parent shall, and shall cause each of its
Subsidiaries to (unless the Company shall otherwise approve in writing or
except as otherwise expressly contemplated by this Agreement or disclosed in
the Parent Disclosure Letter):
(i) conduct its business in all material
respects in the ordinary course and, to the extent
consistent therewith, use reasonable best efforts to (x) preserve intact its
business organization, (y) keep available the services of its officers and
employees and (z) maintain its existing relations and goodwill with customers,
suppliers, regulators, distributors, creditors, lessors, and others having
business dealings with it; provided that the failure of any officer or employee
of Parent or its Subsidiaries to remain an officer or employee of Parent or its
Subsidiaries shall not constitute a breach of this covenant.
(ii) not (A) amend the Restated
Certificate of Incorporation or By-laws of Parent; (B) split,
combine, subdivide or reclassify its outstanding shares of capital stock or
other equity securities; (C) declare, set aside or pay any dividend or
distribution payable in cash, stock or property in respect of any of its shares
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of capital stock or other equity securities, or securities convertible into,
exercisable for or exchangeable for, any of its shares of capital stock or
other equity securities, other than (x) quarterly cash dividends of $.20 per
share in respect of the outstanding shares of Parent Common Stock, declared,
set aside and paid at such times during the quarter as is consistent with past
practice, and (y) dividends and distributions by wholly owned Subsidiaries of
Parent; (D) repurchase, redeem or otherwise acquire or permit any of its
Subsidiaries to purchase, redeem or otherwise acquire, any shares of its
capital stock or other equity securities, or securities convertible into,
exercisable for or exchangeable for, any of its shares of capital stock or
other equity securities (it being understood that this clause (D) shall not
prohibit the exercise, exchange or conversion of Parent Equity Equivalent
Securities); or (E) enter into any agreement, letter of intent, agreement in
principle or similar agreement to sell, transfer or otherwise dispose of, or
purchase or otherwise acquire assets of any business that generated net
revenues or net income in the most recently completed fiscal year constituting,
or is comprised of net assets having a book value equal to, 25% or more of the
consolidated net revenue or net income of Parent for its most recently
completed fiscal year, or the consolidated net assets of Parent, as applicable,
by merger, consolidation, transfer or acquisition of shares of capital stock or
otherwise;
(iii) not take any action that to the
knowledge of Parent would prevent the business combination
to be effected pursuant to the Parent Merger from qualifying for pooling of
interests accounting treatment under GAAP and the rules and regulations of the
SEC or would prevent the business combination to be effected pursuant to the
Parent Merger or the Alternative Merger, as applicable, from qualifying as a
"reorganization" within the meaning of Section 368 of the Code;
(iv) except as required by applicable
law or pursuant to contractual obligations in effect as of
the date of this Agreement, not (A) execute, establish, adopt or amend, or
accelerate rights or benefits under, any agreement relating to severance or
change-in-control or any Parent Employee Plan (provided that Parent and its
Subsidiaries shall be permitted hereunder to (i) enter into or amend
consulting, employment and collective bargaining agreements and (ii) to amend
its Key Executive Severance Protection Plan and Employee Severance Protection
Plan to exclude the employees of the Company and its Subsidiaries from
participating therein following the Effective Time), (B) increase the
compensation payable to any of its officers, directors or employees (except for
increases in the ordinary course consistent with past practices), (C) grant any
severance or termination pay to an officer or director of Parent, or (D) grant
any stock options or other equity related awards;
(v) not issue, deliver, grant, sell,
pledge or otherwise dispose of shares of any class of its
capital stock, other equity securities, or any securities convertible,
exercisable or exchangeable for or into, any such shares as other equity
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securities, except (x) upon the exercise, exchange or conversion of Parent
Equity Equivalent Securities, and (y) in connection with a purchase or
acquisition permitted under Section 5.2 (ii)(E), provided that the issuance,
delivery, grant, sale, pledge or other disposition does not require the
approval of the stockholders of Parent under the rules of the NYSE or
applicable law;
(vi) not change its accounting policies,
practices or methods except as required by GAAP or by
the rules and regulations of the SEC;
(vii) not (x) take any action to amend the
Parent Rights Agreement, (y) redeem the rights subject
to the Parent Rights Agreement or (z) take any action to render inapplicable,
or to exempt any third party from, any provision of the Restated Certificate of
Incorporation of Parent or any statute referred to in Section 6.15.
(viii) not take any action to cause the shares
of Parent Common Stock to cease to be listed on the
NYSE;
(ix) not take any action that would be
reasonably likely to result in any of the conditions set
forth in Article VII hereof not being satisfied or that would impair the
ability of Parent to consummate the transactions contemplated hereby in
accordance with the terms hereof or delay such consummation;
(x) not waive any of its rights under, or
release any other party from such other party's
obligations under, or amend any provision of, any standstill agreement;
(xi) not issue, deliver, grant, sell, pledge or
otherwise dispose of any bonds, debentures, notes or other indebtedness, in
each case having the right to vote together with Parent's stockholders on
any matter; and
(xii) not enter into any commitments or
agreements to do any of the foregoing.
Section 5.3 No Solicitation. (a) Neither the Company nor Parent
shall, nor shall either permit its respective Subsidiaries to, or authorize any
of its officers, directors, employees, accountants, counsel, investment
bankers, financial advisors and other representatives ("Representatives") to,
(i) directly or indirectly, initiate, solicit or encourage, or take any action
to facilitate the making of any Takeover Proposal (defined below), or (ii)
directly or indirectly engage in negotiations or provide any confidential
information or data to any person relating to any Takeover Proposal; provided,
however, that at any time prior to the date of the Company's stockholders'
meeting contemplated by Section 6.1 (the "Applicable Period"), in the case of
the Company, or at any time prior to the date of Parent's stockholders' meeting
contemplated by Section 6.1, in the case of Parent, the Company or Parent, as
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applicable, may, in response to a Superior Proposal (as defined below) which
was not solicited by it and which did not otherwise result from a breach of
this Section 5.3(a), and subject to providing prior written notice of its
decision to take such action to the other party (the "Notice") and compliance
with Section 5.3(c) following delivery of the Notice (x) furnish information
with respect to the Company or Parent, as applicable, and/or its Subsidiaries
to any person making a Superior Proposal pursuant to a customary
confidentiality agreement (as determined by such party after consultation with
its outside counsel) and (y) participate in discussions or negotiations
regarding such Superior Proposal.
(b) (i) Neither the Board of Directors of the
Company nor any committee thereof shall (x) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by the Board of Directors of the Company or any such
committee of the Parent Merger, the Alternative Merger or this Agreement, (y)
approve any letter of intent, agreement in principle, acquisition agreement or
similar agreement (other than a confidentiality agreement in connection with a
Superior Proposal which is entered into by such party in accordance with
Section 5.3(a)) relating to any Takeover Proposal (each, an "Acquisition
Agreement"), or (z) approve or recommend, or propose to approve or recommend,
any Takeover Proposal. Notwithstanding the foregoing, in response to a Superior
Proposal which was not solicited by the Company and which did not otherwise
result from a breach of Section 5.3(a), the Board of Directors for the Company
may (subject to this sentence) terminate this Agreement (and concurrently with
or after such termination, if it so chooses, cause the Company to enter into
any Acquisition Agreement with respect to any Superior Proposal), but only at a
time that is during the Applicable Period and is after the fifth business day
following Parent's receipt of written notice advising Parent that the Board of
Directors of the Company has resolved to accept a Superior Proposal (subject to
such termination), specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal.
(ii) Neither the Board of Directors of
Parent nor any committee thereof shall (x) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to the Company,
the approval by the Board of Directors of Parent of this Agreement and the
transactions contemplated hereby or the recommendation by the Board of
Directors of the Parent Merger, (y) approve any Acquisition Agreement or (z)
approve or recommend, or propose to approve or recommend, any Takeover
Proposal.
(c) Each party promptly shall advise the other
party orally and in writing of any Takeover Proposal or any inquiry
with respect to or that could reasonably be expected to lead to any
Takeover Proposal, the identity of the person making any such Takeover Proposal
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or inquiry and the material terms of any such Takeover Proposal or inquiry.
Such party shall keep the other party fully informed of the status and material
terms of any such Takeover Proposal or inquiry.
(d) The Company and Parent shall each immediately
cease and cause to be terminated all existing
discussions and negotiations, if any, with any other persons conducted
heretofore with respect to any Takeover Proposal.
For purposes of this Agreement, a "Takeover Proposal"
with respect to the Company or Parent, as applicable, means any
inquiry, proposal or offer from any person relating to (i) any direct
or indirect acquisition or purchase of a business that constitutes 25% or more
of the net revenues, net income or the assets of the Company or Parent, as
applicable, and its Subsidiaries, taken as a whole, or 25% or more of any class
of equity securities of the Company or Parent, as applicable, or any of its
Subsidiaries, (ii) any tender offer or exchange offer that if consummated would
result in any person beneficially owning 25% or more of any class of equity
securities of the Company or Parent, as applicable, or any of its Subsidiaries,
or (iii) any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or
Parent, as applicable, or any of its Subsidiaries that constitutes 25% or more
of the net revenues, net income or the assets of the Company or Parent, as
applicable, and its Subsidiaries taken as a whole, in each case other than the
transactions contemplated by this Agreement, the Stock Option Agreements and
the Voting Agreements and transactions permitted under Sections 5.1 or 5.2, as
applicable. Each of the transactions referred to in clauses (i) - (iii) of the
foregoing definition of Takeover Proposal, other than the transactions
contemplated by this Agreement or by the Stock Option Agreements and the Voting
Agreements and transactions permitted under Sections 5.1 or 5.2, as applicable,
is referred to herein as an "Acquisition Transaction."
For purposes of this Agreement, a "Superior Proposal"
with respect to the Company or Parent, as applicable, means any
proposal made by a third party to acquire, directly or indirectly,
including pursuant to a tender offer, exchange offer merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction, for consideration consisting of cash and/or securities, more than
50% of the combined voting power of the shares of Company Common Stock or
Parent Common Stock, as applicable, then outstanding or at least 50% of the
assets of the Company or Parent, as applicable, and its Subsidiaries, taken
together, and if (x) the proposal is otherwise on terms which the Board of
Directors of the Company or Parent, as applicable, determines in its good faith
judgment (based on the advice of a financial advisor of nationally recognized
reputation and such other matters as the Board of Directors of the Company or
Parent, as applicable, deems relevant) to be more favorable to the Company's
stockholders or Parent's stockholders, as applicable, than the Parent Merger
and for which financing, to the extent required, is then committed or which, in
the good faith judgment of the Board of Directors of the Company or Parent, as
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applicable, is reasonably capable of being obtained by such third party and (y)
such Board of Directors, after considering such matters as such Board of
Directors deems relevant (including the written opinion of outside counsel),
determines in good faith that, in the case of the Company and Parent,
furnishing information to the third party, participating in discussions or
negotiations with respect to the Superior Proposal or withdrawing or modifying
its recommendation or recommending a Takeover Proposal, as applicable, or, in
the case of the Company only, terminating this Agreement, is required for the
Board of Directors of the Company or Parent, as applicable, to comply with its
fiduciary duties to the Company or Parent, as applicable, and its stockholders
under applicable law.
(e) Nothing contained in this Agreement shall
prohibit the Company from taking and disclosing to its stockholders a
position contemplated by Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange Act.
ARTICLE VI
Section 6.1 Meetings of Stockholders. Each of Parent and the Company
will take all action necessary in accordance with applicable law and its
articles or certificate of incorporation, as applicable, and bylaws to call,
give notice of, convene and hold a meeting of its stockholders as promptly as
practicable to consider and vote upon the approval and adoption of this
Agreement, the Parent Merger and the Alternative Merger in the case of the
Company, or the approval and adoption of this Agreement and the Parent Merger,
in the case of Parent. The Board of Directors of each such party shall
recommend that its stockholders vote in favor of the approval and adoption of
this Agreement, the Parent Merger and the Alternative Merger, in the case of
the Company, or the approval and adoption of this Agreement and the Parent
Merger, in the case of Parent, and such recommendations shall be included in
the Joint Proxy Statement/Prospectus (as defined in Section 6.4); provided,
however, that nothing contained in Section 5.3(b) or this Section 6.1 shall
require the Board of Directors of either party to make any recommendation or
refrain from making any recommendation with respect to a Superior Proposal,
which such Board of Directors, after considering such matters as such Board of
Directors deems relevant (including the written advice of outside counsel),
determines in good faith would result in a breach of its fiduciary duty under
applicable law. Each of such parties shall take all lawful action necessary or
advisable to solicit the approval of its respective stockholders including,
without limitation, timely mailing to its stockholders the Joint Proxy
Statement/Prospectus as promptly as practicable after the Form S-4 (as defined
in Section 6.4) shall be declared effective. The parties shall coordinate and
cooperate with respect to the timing of such meetings and shall, unless
otherwise agreed, hold such meetings on the same day.
Section 6.2 Filings; Other Action. (a) Subject to the terms and
conditions herein provided, each of the Company and Parent shall (i) cooperate
with the other in (x) determining which other notices, reports or filings are
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required to be made prior to the Effective Time with, and which other waivers,
consents, approvals or authorizations are required to be obtained prior to the
Effective Time in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby; and (y) timely
making all such notices, reports or filings and timely seeking all such
waivers, consents, approvals or authorizations; and (ii) furnish the other
party with such necessary information regarding itself and its Subsidiaries and
reasonable assistance as such other party and its affiliates may reasonably
request in connection with their preparation of necessary notices, reports or
filings, or submissions of information to any Governmental Entity.
(b) Each of Parent and the Company shall give prompt
notice to the other party of the following:
(x) the occurrence of or failure to occur
of any event the occurrence or failure to occur of which would be likely to
result in (i) any condition set forth in Article VII being incapable
of being satisfied or (ii) a Company Material Adverse Effect or
a Parent Material Adverse Effect, as applicable;
(y) any failure of such party to comply in any
material respect with any of its covenants or agreements hereunder; and
(z) such party becoming aware that statements
relating to such party or any of its Subsidiaries
set forth in the Joint Proxy Statement/Prospectus or the Form S-4 contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make such statements therein, in
light of the circumstance under which they were made, not misleading.
Notwithstanding the foregoing, the delivery of any notice
pursuant to this Section 6.2(b) shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 6.3 Publicity. The parties agree that the initial press
release with respect to this Agreement and the transactions contemplated hereby
shall be a joint press release (to include such text as the parties may
mutually agree). Thereafter, subject to their respective legal obligations
(including requirements of securities exchanges and other similar regulatory
bodies), Parent and the Company shall consult with each other and use their
reasonable best efforts to agree upon the text of any press release before
issuing any such press release or otherwise making public statements with
respect to the transactions contemplated hereby and in making any public
statement or disclosure required by any Governmental Entity, securities
exchange or other similar regulatory body with respect thereto.
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Section 6.4 Registration Statements. The parties shall cooperate and
promptly prepare, and Parent shall file with the SEC as soon as practicable a
registration statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the shares of Parent Common Stock issuable in the Parent Merger
and the shares of Parent Common Stock and the Depositary Shares issuable in the
Alternative Merger, a portion of which Form S-4 shall also serve as the joint
proxy statement with respect to the meetings of the stockholders of each of
Parent and the Company in connection with this Agreement and the transactions
contemplated hereby and a prospectus with respect to the shares of Parent
Common Stock and Depositary Shares issuable pursuant to the transactions
contemplated hereby (the "Joint Proxy Statement/Prospectus"). The parties will
cause the Joint Proxy Statement/Prospectus and the Form S-4 to comply as to
form in all material respects with the applicable provisions of the Securities
Act and the Exchange Act. The parties agree to use reasonable best efforts and
shall cooperate to have the Form S-4 declared effective by the SEC as promptly
as practicable and to keep the Form S-4 effective as long as is necessary to
consummate the Applicable Transaction and Parent shall use reasonable best
efforts to obtain, prior to the effective date of the Form S-4, all necessary
state securities law or "blue sky" permits or approvals required in connection
with the issuance of shares of Parent Common Stock and Depositary Shares
pursuant to the transactions contemplated hereby (provided that Parent shall
not be required to qualify to do business in any jurisdiction in which it is
not now so qualified). Each of Parent and the Company agrees that the
information provided by it for inclusion in the Form S-4 and the Joint Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof to stockholders, at the time of the respective meetings of the
stockholders of the parties, and at the time it is filed or becomes effective,
will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Each party will advise the other promptly after it receives notice
thereof of the time when the Form S-4 has or is to become effective or when any
supplement or amendment has been filed, the issuance of any stop order, or any
request by the SEC for amendment of the Joint Proxy Statement/Prospectus or the
Form S-4. The parties will provide each other with reasonable opportunity to
review and comment on any amendments or supplements to the Form S-4 and/or the
Joint Proxy Statement/Prospectus prior to filing such amendments or supplements
with the SEC, and further agree that each party will be provided with such
number of copies of all filings made with the SEC as such party or Parent (if
applicable) shall reasonably request. No filings of the Form S-4 or the Joint
Proxy Statement/Prospectus (or any amendments or supplements to either of them)
shall be made without the approval of both parties (which consent shall not be
unreasonably withheld).
Section 6.5 Listing Application. Parent shall promptly prepare and
submit to the NYSE a listing application with respect to the shares of Parent
Common Stock and Depositary Shares issuable in the transactions contemplated
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hereby, and Parent shall use reasonable best efforts to obtain, prior to the
Effective Time, approval for the listing of such shares of Parent Common Stock
and Depositary Shares on the NYSE, subject to official notice of issuance.
Section 6.6 Further Action. Each of the parties shall, subject to
the fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, use reasonable best efforts
to perform such further acts and execute such documents as may be reasonably
required to effect the transactions contemplated hereby. Each of the parties
will comply in all material respects with all applicable laws and with all
applicable rules and regulations of any Governmental Entity in connection with
its execution, delivery and performance of this Agreement and the Stock Option
Agreements and the transactions contemplated hereby and thereby. Each of the
parties agrees to use reasonable best efforts to obtain in a timely manner all
necessary waivers, consents, approvals, orders, authorizations and opinions, to
effect all necessary registrations and to make all notices, reports and
filings, and use reasonable best efforts to take, or cause to be taken, all
other actions and to do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated hereby.
Section 6.7 Expenses. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including the Parent Merger and the
Alternative Merger, shall be paid by the party hereto incurring such costs or
expenses except as expressly provided herein and except that (a) the filing
fees in respect of filings made pursuant to HSR Act, (b) filing fees in
connection with the filing of the Form S-4 and Proxy Statement/Prospectus with
the SEC, (c) all filing fees in connection with any filing, permits or
approvals made or obtained under applicable state securities and "blue sky"
laws, (d) all printing, mailing and related expenses incurred in connection
with the printing and mailing of the Proxy Statement/Prospectus and (e) all
other expenses not directly attributable to any one of the parties, shall be
shared equally by Parent and the Company.
Section 6.8 Access to Information. (a) From the date of this
Agreement to the Effective Time, each of Parent and the Company shall, and
shall cause its respective Subsidiaries, and its and their Representatives to,
afford the Representatives of the other party reasonable access at reasonable
times upon reasonable notice to each of the party's and its Subsidiaries'
officers, employees, auditors, counsel, agents, properties, offices and other
facilities and to all of their respective books and records, and shall furnish
the other party with all financial, operating and other data and information as
such other party may reasonably request, in each case only to the extent, in
the judgment of counsel to such party, permitted by law, including antitrust
law.
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(b) Each of Parent and the Company agrees that all
information so received from the other party shall be
deemed received pursuant to the Confidentiality Agreement, and that party
shall, and shall cause its affiliates and each of its and their Representatives
to, comply with the provisions of the applicable Confidentiality Agreement with
respect to such information, and the provisions of the Confidentiality
Agreement are hereby incorporated herein by reference with the same effect as
if fully set forth in this Agreement.
Section 6.9 Insurance; Indemnity. (a) The Surviving Corporation
shall, and, if applicable, Parent shall cause the Surviving Corporation to,
maintain in effect for not less than six years after the Effective Time the
current directors' and officers' insurance policies (or policies containing
substantially similar coverage) of the Company with respect to acts or failures
to act prior to or as of the Effective Time (other than to the extent the
available limit of any such insurance policy may be reduced or exhausted by
reason of the payment of claims thereunder); provided, however, that in order
to maintain or procure such coverage, neither Parent nor the Surviving
Corporation, as applicable, shall be required to pay, in the aggregate, an
annual premium in excess of 200% of the current annual premium paid by Parent
or the Company for its existing coverage (the "Cap Amount"); and provided,
further, that if equivalent coverage cannot be obtained, or can be obtained
only by paying an annual premium in excess of the Cap Amount, the Parent and
the Surviving Corporation shall only be required to obtain as much coverage as
can be obtained by paying, in the aggregate, an annual premium equal to the Cap
Amount. From and after the Effective Time, the Surviving Corporation shall,
and, if applicable, Parent shall cause the Surviving Corporation to, indemnify
and hold harmless, and provide advancement of expenses to, to the fullest
extent permitted under applicable law, each person who is a current or former
officer or director of the Company or Subsidiaries (each, an "Indemnified
Party") against all losses, claims, damages, liabilities, costs or expenses
(including reasonable attorneys' fees), judgments, fines, penalties and amounts
paid in settlement in connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to acts or omissions, or alleged
acts or omissions, by them in their capacities as such, which acts or omissions
occurred prior to the Effective Time. In the event of any such claim, action,
suit, proceeding or investigation (an "Action"), the indemnifying party shall
control the defense of such Action with counsel selected by it; provided,
however, that the Indemnified Party shall be permitted to participate in the
defense of such Action through counsel selected by it at the Indemnified
Party's expense.
(b) Parent agrees that, in the event the Alternative
Merger is consummated, the provisions of the Company Restated Certificate of
Incorporation and By-laws in effect as of the date of this Agreement affecting
the Indemnified Parties' rights to indemnification, limitation of liability and
advancement of expenses shall survive the consummation of the Alternative
Merger and shall continue in full force and effect, without any amendment
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thereto (unless required by DGCL or federal law), for a period of six years
from the Effective Time. Parent agrees that, in the event the Parent Merger is
consummated the Indemnified Parties shall for a period of six years after the
Effective Time, be entitled to the benefit of the provisions of Parent's
Restated Certificate of Incorporation and By-laws relating to indemnification,
limitation of liability and advancement of expenses of officers and directors
of Parent.
(c) The provisions of this Section 6.9 are intended
to be for the benefit of, and shall be enforceable by, each of the Indemnified
Parties, their heirs and their representatives.
Section 6.10 Employee Benefit Plans. (a) From and after the
Effective Time, subject to applicable law, the Parent Surviving Corporation
shall assume and honor the obligations of the Company and its Subsidiaries
under all existing Company Employee Plans and shall perform the obligations of
the Company and its Subsidiaries under such Company Employee Plans in the same
manner and to the same extent that the Company and its Subsidiaries would have
been required to perform thereunder; provided, however, that, except as
otherwise explicitly provided, nothing herein shall be construed to prevent, on
or following the Effective Time, (i) the termination of employment of any
individual who immediately prior to the Effective Time was an employee of the
Company or any of its Subsidiaries (such employees, the "Company Employees") or
(ii) the amendment and termination of any Company Employee Plan to the extent
permitted by the terms thereof and applicable law.
(b) Following the Effective Time, subject to
applicable law, the Parent Surviving Corporation intends to,
or intends to cause one or more of its Subsidiaries to, provide compensation
and employee benefits to the Company Employees which will be substantially
similar, in the aggregate, to the compensation and employee benefits that the
Parent Surviving Corporation provides to similarly situated employees other
than the Company Employees (the employees other than the Company Employees, the
"Parent Employees") (excluding, however, participation in the El Paso Energy
Corporation Key Executive Severance Protection Plan and the El Paso Energy
Corporation Employee Severance Protection Plan), including without limitation
participation in the El Paso Energy Corporation Employee Stock Purchase Plan
(so long as such plan has been approved by stockholders of Parent prior to the
Effective Time and is in effect with respect to the Parent Employees).
(c) To the extent that any employee benefit plan
is made available to Company Employees on or following
the Effective Time, the Parent Surviving Corporation shall, or shall cause one
of its Subsidiaries to, grant Company Employees credit for all service with the
Company and its Subsidiaries prior to the Effective Time for purposes of
eligibility and vesting (but not benefit accrual), to the extent that service
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of Parent Employees is recognized for any such purpose. Notwithstanding the
foregoing sentence, credit for service with the Company and its Subsidiaries
shall be given for the purposes of cash balance pay credit, the Extended
Illness Bank, Paid Time Off, and employee recognition awards; provided,
further, that the foregoing sentence shall not be applied to service if its
application would cause such plan to violate ERISA or the Code. In addition,
and without limiting the generality of the foregoing: (i) each Company Employee
shall be immediately eligible to participate, without any waiting time, in any
and all Parent Employee Plans, or any other employee benefit plans sponsored by
the Parent Surviving Corporation and its Subsidiaries (such plans,
collectively, the "New Plans") to the extent coverage under such plan replaces
coverage under a comparable Company Employee Plan in which such employee
participates immediately before or at any time after the Effective Time (such
plans, collectively, the "Old Plans"); and (ii) for purposes of each New Plan
providing medical, dental, pharmaceutical, vision and/or disability benefits to
any Company Employee, the Parent Surviving Corporation shall cause all
pre-existing condition exclusions and actively-at-work requirements of such New
Plan to be waived for such employee and his or her covered dependents, and the
Parent Surviving Corporation shall cause any eligible expenses incurred by such
employee and his or her covered dependents during the portion of the plan year
of the Old Plan ending on the date such employee's participation in the
corresponding New Plan begins to be taken into account under such New Plan for
purposes of satisfying all deductible, coinsurance and maximum out-of-pocket
requirements applicable to such employee and his or her covered dependents for
the applicable plan year as if such amounts had been paid in accordance with
such New Plan.
(d) Without limiting the generality of the foregoing,
Parent and the Company agree to the matters set forth on Section 6.10 of
the Parent Disclosure Letter, and the Parent Surviving Corporation shall
comply therewith.
(e) (i) No written communication shall be made to
Company Employees regarding the compensation and
employee benefits to be provided at and following the Effective Time without
the express consent of Parent, which consent shall not be unreasonably
withheld; and (ii) the Company shall cause no oral communication to be made
regarding compensation and employee benefits that (x) establishes obligations
of Parent or the Parent Surviving Corporation or any of their Subsidiaries
other than as set forth herein or (y) increases any such obligations.
Section 6.11 Certain Appointments. The Board of Directors of Parent
shall take such action as is necessary so that as of the Effective Time it has
15 members, 9 of whom are persons designated by the Board of Directors of
Parent prior to the Effective Time (no more than one such person being an
insider of Parent) (the "Parent Designees") and 6 of whom are persons
designated by the Board of Directors of the Company prior to the Effective Time
(no more than one such person being an insider of the Company and no more than
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one such person being a Major Company Stockholder) ("Company Designees"). If
any Company Designee or Parent Designee is over the age of 68 at the Effective
Time, Parent shall waive any age limitation applicable to members of the Board
of Directors, with respect to such Company Designee or Parent Designee, as
applicable. After the Effective Time, Parent will not discriminate between
Company Designees and Parent Designees in making any determination with respect
to the waiver of the age limitation applicable to members of the Board of
Directors, it being understood that such determinations are made on a
case-by-case basis and it being further understood that Parent waives such age
limitation for Selim K. Zilkha. Notwithstanding anything set forth in this
Section 6.11, Selim K. Zilkha shall be nominated by the Parent's Board of
Directors (or nominating committee or other committee performing similar
functions) for election to serve as a director of Parent for so long as Selim
K. Zilkha and members of his immediate family and trusts therefor own at least
5% of the then outstanding shares of the Parent Common Stock. As of and from
the Effective Time through December 31, 2000, Ronald L. Kuehn, Jr. shall be the
Non-Executive Chairman of the Parent's Board of Directors and thereupon the
Parent's Board of Directors shall appoint William A. Wise Chairman of the
Parent's Board of Directors to replace Ronald L. Kuehn, Jr.
Section 6.12 Affiliates. (a) Not less than 45 days prior to the
Closing Date, each of Parent and the Company (i) shall have delivered to the
other party a letter identifying all Persons who, in the opinion of the party
delivering such letter, may be, as of the date this Agreement is submitted for
approval by such party's shareholders, its "affiliates" for purposes of SEC
Accounting Series Release 135 and/or, in the case of the Company, for purposes
of Rule 145 under the Securities Act, and (ii) shall use its reasonable best
efforts to cause each Person who is identified as an "affiliate" of it in such
letter to deliver, as promptly as practicable but in no event later than 30
days prior to the Closing (or such later date as the parties may agree), a
signed agreement, in the case of affiliates of the Company, to the Company and
Parent substantially in the form attached as Exhibit F hereto, and in the case
of affiliates of Parent, to Parent and the Company substantially in the form
attached as Exhibit G hereto. Each of Parent and the Company shall, after the
date hereof and prior to the Closing, notify the other party from time to time
after the delivery of the letter described in the prior sentence of any Person
not identified in such letter who then is, or may be, such an "affiliate" and
use reasonable best efforts to cause each additional Person who is identified
as an "affiliate" to execute a signed agreement as set forth in this Section
6.12(a).
(b) Parent shall use its reasonable best efforts
to publish or cause to be published no later than
30 days after the end of the first month after the Effective Time (which month
may be the month in which the Effective Time occurs) in which there are at
least 30 days of post-Merger combined operations, combined sales and net income
figures as contemplated by and in accordance with the terms of SEC Accounting
Series Release No. 135.
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Section 6.13 Pooling-of-Interests. (a) Parent shall use reasonable
best efforts to cause to be delivered to the Company two letters from PWC, one
dated the date on which the Form S-4 shall become effective and one dated the
Closing Date, each addressed to Parent and the Company, in form and substance
reasonably satisfactory to the Company and customary in scope and substance for
comfort letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4. If the Parent Merger is being
consummated, Parent shall use reasonable best efforts to cause to be delivered
to the Company a letter from PWC, dated as of the Closing Date, stating that
PWC concurs with Parent's management's conclusion that accounting for the
Parent Merger as a pooling-of-interests under Opinion 16 of the Accounting
Principles Board is appropriate if the Parent Merger is closed and consummated
in accordance with the terms hereof.
(b) The Company shall use reasonable best efforts
to cause to be delivered to Parent two letters from
E&Y, one dated the date on which the Form S-4 shall become effective and one
dated the Closing Date, each addressed to the Company and Parent, in form and
substance reasonably satisfactory to Parent and customary in scope and
substance for comfort letters delivered by independent public accountants in
connection with registration statement similar to the Form S-4. If the Parent
Merger is being consummated, the Company shall use reasonable best efforts to
cause to be delivered to Parent a letter from E&Y, dated as of the Closing
Date, stating that E&Y concurs with the Company's management's conclusion that
the Company is eligible to participate in a transaction accounted for as a
pooling-of-interests under Opinion 16 of the Accounting Principles Board.
(c) Each of the parties will use reasonable best
efforts to cause the Parent Merger to be accounted for
as a "pooling-of-interests" in accordance with GAAP and the rules and
regulations of the SEC, and each party agrees that it will not take any action
that it knows, or could reasonably expect, will cause such accounting treatment
not to be obtained.
Section 6.14 Certificate of Designation; Depositary Agreement. If
the Depositary Shares are required to be issued in the Merger, prior to or as
of the Effective Time, Parent shall file with the Secretary of State of the
State of Delaware a Certificate of Designation in the form of Exhibit E hereto
(as revised in accordance with Section 2.1(b) and shall enter into the
Depositary Agreement with the Depositary.
Section 6.15 Takeover Statutes. If any "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or
regulation is or may become applicable to the transactions contemplated hereby,
each of the parties hereto and its Board of Directors shall grant such
approvals and take all such actions as are legally permissible so that the
transactions contemplated hereby may be consummated as promptly as practicable
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on the terms contemplated hereby and otherwise act to eliminate or minimize the
effects of any such statute or regulation on the transactions contemplated
hereby.
Section 6.16 Tax-Free Merger. Each of the parties will use
reasonable best efforts to cause the Applicable Transaction to qualify as a
tax-free "reorganization" under Section 368 of the Code.
Section 6.17 Name; Headquarters. After the Effective Time, the name
of Parent shall be "El Paso Energy Corporation" and the headquarters of Parent
shall continue to be located in Houston, Texas. The headquarters of the
Company's Subsidiary, Southern Natural Gas Company and the entities that as of
the date hereof are (x) Subsidiaries thereof and (y) operate natural gas
pipelines shall continue to be located in Birmingham, Alabama, after the
Effective Time.
Section 6.18 Employment Matters. (a) Parent shall or, if Section
1.2(c) applies, shall cause Newco, to offer to enter into a termination and
consulting agreement with Ronald L. Kuehn, Jr., to become effective as of the
Effective Time, which shall be in the form of Exhibit G to this Agreement.
Section 6.19 Section 16(b). Parent shall take all such steps as may
be required to cause the transactions contemplated hereby and any other
dispositions of equity securities of the Company (including derivative
securities) or acquisitions of Parent equity securities (including derivative
securities) in connection with this Agreement by each individual who (a) is a
director or officer of the Company or (b) at the Effective Time, will become a
director or officer of Parent, to be exempt under Rule 16b-3 promulgated under
the Exchange Act.
Section 6.20 Reasonable Best Efforts. (a) Subject to the terms and
conditions of this Agreement, each party will use its reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the Applicable Transaction and the other transactions contemplated
by this Agreement as soon as practicable after the date hereof, including (i)
preparing and filing as promptly as practicable all documentation to effect all
necessary applications, notices, petitions, filings, tax ruling requests and
other documents and to obtain as promptly as practicable all consents, waivers,
licenses, orders, registrations, approvals, permits, tax rulings and
authorizations necessary or advisable to be obtained from any third party
and/or any Governmental Entity in order to consummate the Applicable
Transaction or any of the other transactions contemplated by this Agreement and
(ii) taking all reasonable steps as may be necessary to obtain all such
material consents, waivers, licenses, registrations, permits, authorizations,
tax rulings, orders and approvals. In furtherance and not in limitation of the
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foregoing, each party hereto agrees to make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act and any other Regulatory
Law (as defined below) with respect to the transactions contemplated hereby as
promptly as practicable after the date hereof and to supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to the HSR Act and any other Regulatory Law and to take all
other actions necessary to cause the expiration or termination of the
applicable waiting periods under the HSR Act as soon as practicable. Nothing in
this Section 6.20 shall require any of Parent and its Subsidiaries or the
Company and its Subsidiaries to sell, hold separate or otherwise dispose of or
conduct their business in a specified manner, or agree to sell, hold separate
or otherwise dispose of or conduct their business in a specified manner, or
permit the sale, holding separate or other disposition of, any assets of
Parent, the Company or their respective Subsidiaries or the conduct of their
business in a specified manner, whether as a condition to obtaining any
approval from a Governmental Entity or any other Person or for any other
reason, if such sales, holdings separate of assets or other dispositions or the
conduct of their business in a specified manner, individually or in the
aggregate, is not conditioned on the Closing or would, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
business, assets, results of operations or condition (financial or otherwise)
of Parent and its Subsidiaries (including the Surviving Corporation and its
Subsidiaries, taken together, after giving effect to the Applicable
Transaction; it being understood, moreover, that Parent and its Subsidiaries
shall not be obligated pursuant to this Agreement to take any action that would
reasonably likely have a material adverse effect on or with respect to
Tennessee Gas Pipeline Company.
(b) Each of Parent and the Company shall,
in connection with the efforts referenced in Section 6.20(a) to
obtain all requisite material approvals and authorizations for the transactions
contemplated by this Agreement under the HSR Act or any other Regulatory Law,
use its reasonable best efforts to (i) cooperate in all respects with each
other in connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a party,
(ii) promptly inform the other party of any communication received by such
party from, or given by such party to, the Antitrust Division of the Department
of Justice (the "DOJ") or any other Governmental Entity and of any material
communication received or given in connection with any proceeding by a private
party, in each case regarding any of the transactions contemplated hereby, and
(iii) permit the other party to review any communication given by it to, and
consult with each other in advance of any meeting or conference with, the DOJ
or any such other Governmental Entity or, in connection with any proceeding by
a private party, with any other Person, and to the extent permitted by the DOJ
or such other applicable Governmental Entity or other Person, give the other
party the opportunity to attend and participate in such meetings and
conferences. For purposes of this Agreement, "Regulatory Law" means the Sherman
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Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade
Commission Act, as amended, and all other federal, state and foreign, if any,
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines and other laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade or lessening of the competition.
(c) Subject to the terms and conditions of
this Agreement, in furtherance and not in limitation of the
covenants of the parties contained in Sections 6.20(a) and 6.20(b), if any
administrative or judicial action or proceeding, including and proceeding by a
private party, is instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement as violative of any Regulatory Law,
each of Parent and the Company shall cooperate in all respects with each other
and use its respective reasonable best efforts to contest and resist any such
action or proceeding and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, nothing
in this Section 6.20 shall limit a party's right to terminate this Agreement
pursuant to Article VIII.
(d) If any objections are asserted with respect
to the transactions contemplated hereby under any Regulatory Law or if any suit
is instituted by any Governmental Entity or any private party challenging any
of the transactions contemplated hereby as violative of any Regulatory Law,
each of Parent and the Company shall use reasonable best efforts to resolve any
such objections or challenge as such Governmental Entity or private party may
have to such transactions under such Regulatory Law so as to permit
consummation of the transactions contemplated by this Agreement.
ARTICLE VII
Section 7.1 Conditions to Obligations of the Parties. The respective
obligation of each of the parties hereto to consummate the transactions
contemplated hereby shall be subject to the satisfaction of each of the
following conditions:
(a) Stockholders' Approval. This Agreement,
Parent Merger and the Alternative Merger shall have been
approved and adopted by the requisite vote of the stockholders of the Company
in accordance with the Restated Certificate of Incorporation of the Company and
DGCL.
(b) Legality. No statute, rule, regulation
or other law and no order, decree or injunction shall have been
enacted, issued, promulgated, entered or issued by any Governmental Entity
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of competent jurisdiction which is in effect and has the effect of making the
consummation of the Applicable Transaction illegal or prevents or prohibits
consummation of the transactions contemplated hereby. Each party agrees that,
in the event that any such order, decree or injunction shall be entered or
issued, it shall use all reasonable best efforts to cause such order, decree or
injunction to be lifted or vacated.
(c) HSR Act. The waiting period (or any extension
thereof) under the HSR Act applicable to transactions contemplated hereby
shall have expired or been terminated.
(d) Regulatory Consents. All waivers, consents,
approvals, orders and authorizations of, and notices,
reports and filings with, Governmental Entities necessary for the consummation
of the transactions contemplated hereby (other than those matters addressed in
Section 7.1(c)) shall have been obtained or made and shall be in full force and
effect without the imposition of any terms, conditions, restrictions or
limitations, except for the imposition of any terms, conditions, restrictions
and limitations in respect of, and failures to have obtained or made, or
failures to be in full force and effect of, such waivers, consents, approvals,
orders, authorizations, notices, reports or filings which, in the aggregate,
would not have, or reasonably be expected to have, a Parent Material Adverse
Effect or a Company Material Adverse Effect.
(e) Form S-4 Effective; State Securities
Approvals. The Form S-4 shall have become effective, and no
stop order suspending the effectiveness of the Form S-4 shall then be in effect
and no proceeding for that purpose shall have been initiated or, to the
knowledge of Parent or the Company, threatened, and all material necessary
approvals and permits under state securities or "blue sky" laws relating to the
issuance of shares of Parent Common Stock, in the event the Parent Merger is
being consummated, or Parent Common Stock and Depositary Shares, in the event
of the Alternative Merger is being consummated, shall have been obtained.
(f) NYSE Listing. The shares of Parent
Common Stock, in the event the Parent Merger is being
consummated, or Parent Common Stock and Depositary Shares, in the event the
Alternative Merger is being consummated, to be issued pursuant to the Parent
Merger or the Alternative Merger, as applicable, shall have been duly approved
for listing on the NYSE, subject to official notice of issuance.
(g) Pooling Letters. In the event the
Parent Merger is being consummated, the Company shall have
received and delivered to Parent and Parent's independent public accountants, a
letter from E&Y, dated as of the Closing Date, stating that E&Y concurs with
the Company's management's conclusion that the Company is eligible to
participate in a transaction with Parent accounted for as a
pooling-of-interests under Opinion 16 of the Accounting Principles Board, and
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Parent shall have received and delivered to the Company and the Company's
independent public accountants, a letter from PWC, dated as of the Closing
Date, stating that PWC concurs with Parent's management's conclusion that
accounting for the Parent Merger as a pooling-of-interests under Opinion 16 of
the Accounting Principles Board is appropriate if the Parent Merger is closed
and consummated in accordance with the terms hereof.
Section 7.2 Additional Conditions to Obligations of Parent. The
obligations of Parent to consummate the transactions contemplated hereby shall
also be subject to the satisfaction or waiver of each of the following
conditions:
(a) Representations and Warranties. The
representations and warranties of the Company contained in this
Agreement shall be true and correct when made and as of the Closing Date as if
made on and as of such date (provided that such representations and warranties
which are by their express provisions made as of a specific date need be true
and correct only as of such specific date), except to the extent that any
failures of such representations and warranties to be so true and correct, in
the aggregate, would not have, or reasonably be expected to have, a Company
Material Adverse Effect (disregarding for these purposes any materiality
qualifications therein contained).
(b) Agreements and Covenants. The Company
shall have performed or complied in all material respects with
all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time, except that the Company
shall have performed or complied in all respects with the covenants and
agreements contained in Section 5.1(ii).
(c) Certificate. Parent shall have received a
certificate of an executive officer of the Company that
the conditions set forth in paragraphs (a) and (b) above have been satisfied.
(d) Tax Opinions. Parent shall have received
an opinion of Fried, Frank, Harris, Shriver & Jacobson,
dated as of the Closing Date, in form and substance reasonably satisfactory to
it, substantially to the effect that, on the basis of the facts and assumptions
described in the opinion, the Applicable Transaction constitutes a tax-free
reorganization under Section 368 of the Code. In rendering such opinion,
counsel may require and rely upon representations and warranties and covenants,
including those contained herein, or in certificates of officers of Parent, the
Company and others.
Section 7.3 Additional Conditions to Obligations of the Company. The
obligations of the Company to consummate the transactions contemplated hereby
shall also be subject to the satisfaction or waiver of each of the following
conditions:
(a) Representations and Warranties. The
representations and warranties of Parent contained in this
Agreement shall be true and correct when made, and as of the Closing Date as if
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made on and as of such date (provided that such representations and warranties
which are expressly made as of a specific date need be true and correct only as
of such specific date), except to the extent that any failures of such
representations and warranties to be so true and correct, in the aggregate,
would not have, or reasonably be expected to have, a Parent Material Adverse
Effect (disregarding for these purposes any materiality qualifiers therein
contained).
(b) Agreements and Covenants. Each of Parent
and Merger Sub shall have performed or complied with all
agreements and covenants required by this Agreement to be performed or complied
with by it on or prior to the Effective Time, except that Parent shall have
performed or complied in all respects with the covenants contained in Section
5.2(ii).
(c) Certificate. The Company shall have
received a certificate of an executive officer of Parent that
the conditions set forth in the paragraphs (a) and (b) above have been
satisfied.
(d) Tax Opinion. The Company shall have received
the opinion of Wachtell, Lipton, Rosen & Katz, dated as
of the Closing Date, in form and substance reasonably satisfactory to it,
substantially to the effect that, on the basis of the facts and assumptions
described in the opinion, the Applicable Transaction constitutes a tax-free
reorganization under Section 368 of the Code. In rendering such opinion,
counsel may require and rely upon representations and covenants including those
contained in this Agreement or in certificates of officers of the parties and
others.
ARTICLE VIII
Section 8.1 Termination. This Agreement may be terminated at any
time before the Effective Time, whether before or after this Agreement, the
Parent Merger and the Alternative Merger have been approved and adopted by the
stockholders of the Company or this Agreement and the Parent Merger have been
approved and adopted by the stockholders of Parent, as follows:
(a) by mutual written consent of each of Parent and
the Company;
(b) by Parent or the Company, if the Effective Time
shall not have occurred on or before March 31, 2000 (the "Termination Date");
provided, however, that the right to terminate this Agreement under this
Section 8.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before the Termination Date;
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(c) by Parent or the Company, if a Governmental
Entity shall have issued an order, decree or injunction
or taken any other action (in each case, which the terminating party has used
reasonable best efforts to resist, resolve or lift, as applicable, in
accordance with Section 6.20) having the effect of making the transactions
contemplated hereby illegal or permanently prohibiting the consummation
thereof, and such order, decree or injunction shall have become final and
nonappealable (but only if such party shall have used all reasonable best
efforts to cause such order, decree or injunction to be lifted or vacated in
accordance with Section 6.20);
(d) by either Company or Parent, if there
shall have been a material breach by the other of any of the
other's representations, warranties, covenants or agreements contained in this
Agreement, which breach would result in the failure to satisfy one or more of
the conditions set forth in Section 7.2(a) or (b) (in the case of a breach by
the Company) or Section 7.3(a) or (b) (in the case of a breach by Parent), and
such breach shall be incapable of being cured or, if capable of being cured,
shall not have been cured within 20 days after written notice thereof shall
have been received by the party alleged to be in breach;
(e) by Parent, if the Board of Directors of
the Company or any committee of the Board of Directors of the
Company, whether or not permitted pursuant to the terms hereof, (w) shall fail
to reaffirm its approval or recommendation of this Agreement, the Parent Merger
and the Alternative Merger within 15 days after a request by Parent (provided
that Parent make such request only once with respect to any Takeover Proposal),
(x) shall withdraw or modify in any manner adverse to Parent its approval or
recommendation of this Agreement, the Parent Merger and the Alternative Merger,
(y) shall approve or recommend any Takeover Proposal or Acquisition Transaction
involving the Company or (z) shall resolve to take any of the actions specified
in clause (w), (x) or (y) above;
(f) by either Parent or the Company, if the
required approval and adoption of this Agreement, the Parent
Merger and the Alternative Merger by the stockholders of the Company shall not
have been obtained at a duly held stockholders meeting called for the purpose
of obtaining such approval, including any adjournments or postponements
thereof;
(g) by the Company, in accordance with Section 5.3(b);
provided, however, in order for the termination of this Agreement pursuant to
this Section (g) to be deemed effective, the Company shall have complied with
all provisions contained in Sections 5.3(a), (b) and (c), including the notice
provisions therein, and with applicable requirements of Section 8.2, including
the payment of the Company Termination Fee;
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(h) by Parent, if a Share Acquisition Date shall
have occurred pursuant to the Company Rights Agreement
and, assuming all of the rights issued pursuant thereto shall have been
exercised or exchanged for shares of Company Common Stock, the Acquiring Person
(as defined in the Company Rights Agreement) would beneficially own (within the
meaning of the Parents Rights Agreement) 25% or more of the outstanding shares
of Company Common Stock; or
(i) by the Company, if a Stock Acquisition Date
shall have occurred pursuant to the Parent Rights
Agreement and, assuming all of the rights issued pursuant thereto shall have
been exercised or exchanged for shares of Parent Common Stock, the Acquiring
Person (as defined in the Parent Rights Agreement) would beneficially own
(within the meaning of the Company Rights Agreement) 25% or more of the
outstanding shares of Parent Common Stock.
Section 8.2 Effect of Termination. (a) (i) In the event that (x) (1)
any person shall have made a Takeover Proposal to the Company or to its
stockholders after the date hereof and thereafter this Agreement is terminated
(i) by either party pursuant to Section 8.1(b) or (ii) by either party pursuant
to Section 8.1(f) and (2) within 12 months after the termination of this
Agreement any Acquisition Transaction involving the Company shall have been
consummated or any Acquisition Agreement with respect to an Acquisition
Transaction involving the Company shall have been entered into, (y) this
Agreement is terminated by Parent pursuant to Section 8.1(e) or Section 8.1(h)
or (z) this Agreement is terminated by the Company pursuant to Section 8.1(g),
then, in any such case, the Company shall in no event later than (i) the date
an Acquisition Agreement is entered into with respect to such Acquisition
Transaction involving the Company, or if no such agreement is entered into,
upon the date of consummation of such Acquisition Transaction involving the
Company, in the case of a termination described in clause (x), (ii) two days
after such termination, in the case of a termination described in the clause
(y) or (iii) concurrently with such termination, in the case of a termination
described in clause (z), pay Parent a fee of $150 million (the "Company
Termination Fee"), which amount shall be payable by wire transfer of same day
funds to a bank account designated by Parent.
(ii) In the event that (x) any person shall
have made a Takeover Proposal to the Company or its
stockholders and thereafter this Agreement is terminated by either party
pursuant to Section 8.1(b) and within 12 months after such termination any
Acquisition Transaction involving the Company shall have been consummated or
any Acquisition Agreement with respect to an Acquisition Transaction involving
the Company shall have been entered into, or (y) this Agreement is terminated
by Parent pursuant to Section 8.1(e) or Section 8.1(h), by either party
pursuant to Section 8.1(f) or by the Company pursuant to Section 8.1(g), after
any such termination, the Company shall reimburse Parent, promptly after being
requested to do so by Parent, for all out-of-pocket costs and expenses incurred
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by Parent in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, reasonable fees and expenses of
accountants, attorneys and financial advisors and reasonable fees and expenses
otherwise allocated to the Parent pursuant to Section 6.7, up to an aggregate
of $10 million.
(b) (i) In the event that (x) (1) any person shall
have made a Takeover Proposal to Parent or to its
stockholders and thereafter this Agreement is terminated by either party
pursuant to Section 8.1(b) and (2) within 12 months after the termination of
this Agreement any Acquisition Transaction involving Parent shall have been
consummated or any Acquisition Agreement with respect to an Acquisition
Transaction involving Parent shall have been entered into, or (y) this
Agreement is terminated by the Company pursuant to Section 8.1(i), then, in any
such case, Parent shall in no event later than (i) the date an Acquisition
Agreement is entered into with respect to such Acquisition Transaction
involving Parent, or if no such agreement is entered into, upon the date of
consummation of such Acquisition Transaction involving Parent in the case of a
termination described in clause (x), or (ii) two days after such termination,
in the case of a termination described in the clause (y), pay the Company a fee
of $150 million (the "Parent Termination Fee"), which amount shall be payable
by wire transfer of same day funds to a bank account designated by the Company.
(ii) In the event that (x) any person shall have
made a Takeover Proposal to Parent or its stockholders and thereafter this
Agreement is terminated by either party pursuant to Section 8.1(b) and within
12 months after such termination any Acquisition Transaction involving Parent
shall have been consummated or any Acquisition Agreement with respect to an
Acquisition Transaction involving Parent shall have been entered into, (y) this
Agreement is terminated by the Company pursuant to Section 8.1(i), after any
such termination, Parent shall reimburse the Company, promptly after being
requested to do so by the Company, for all out-of-pocket costs and expenses
incurred by the Company in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, reasonable fees and
expenses of accountants, attorneys and financial advisors and reasonable fees
and expenses otherwise allocated to the Company pursuant to Section 6.7, up to
an aggregate of $10 million.
(c) Each of the parties acknowledges that
the agreements contained in this Section 8.2 are an integral
part of the transactions contemplated in this Agreement, and that, without
these agreements, the parties would not enter into this Agreement; accordingly,
if either party fails to promptly pay the amount due from it pursuant to this
Section 8.2, and in order to obtain such payment the other party commences a
suit which results in a judgment for the fees and expenses set forth in this
Section 8.2, the other party shall pay to the party bringing such suit its
costs and expenses (including reasonable attorneys' fees) in connection with
such suit.
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(d) In the event of termination of this Agreement
pursuant to this Article VIII, this Agreement (other
than as set forth in Section 9.1) shall become void and of no effect with no
liability (other than as set forth in this Section 8.2) on the part of any
party hereto; provided, however, no such termination shall relieve any party
hereto from any liability for damages resulting from any willful or intentional
breach of this Agreement.
Section 8.3 Amendment. This Agreement may be amended by the parties
hereto pursuant to action of their respective Boards of Directors, at any time
before or after approval of the matters and transactions contemplated hereby by
the stockholders of Parent and the Company and prior to the Effective Time, but
after such approvals, no such amendment shall be made which, by law or in
accordance with the rules of any relevant stock exchange, requires further
approval by such stockholders without such further approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
Section 8.4 Extension; Waiver. At any time prior to the Effective
Time, any party hereto may (a) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions for such party's benefit
contained herein. Any agreement to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by a duly authorized
officer of the party to be bound thereby. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
ARTICLE IX
Section 9.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties, covenants and agreements in this
Agreement shall terminate at the Effective Time or upon the termination of this
Agreement pursuant to Section 8.1, as the case may be, except that (a) the
agreements set forth in Sections 6.9 and 6.10 and such other agreements to be
performed in whole or in part after the Effective Time shall survive the
Effective Time, and (b) the agreements set forth in Sections 6.7, 6.8(b), 8.2
and 8.3 and this Article IX shall survive termination indefinitely.
Section 9.2 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD
TO ITS CONFLICT OF LAWS RULES OR PRINCIPLES.
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Section 9.3 Notices. All notices or other communications under this
Agreement shall be in writing and shall be deemed given (a) on the date of
delivery, if delivered in person or by telecopy or facsimile (upon confirmation
of receipt), (b) on the first business day following the date of dispatch, if
delivered by a recognized next-day courier service, or (c) on the seventh
business day following the date of mailing, if delivered by registered or
certified mail, postage prepaid, return receipt requested, addressed as
follows:
If to the Company:
William A. Smith, Esq.
Sonat Inc.
Amsouth-Sonat Tower
Birmingham, Alabama 35203
Telecopy No: (205) 325-7444
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Seth Kaplan, Esq.
Telecopy No.: (212) 403-2000
If to Parent:
Britton White, Jr., Esq.
El Paso Energy Corporation
1001 Louisiana
Houston, Texas 77002
Telecopy No: (713) 420-4993
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Gary P. Cooperstein, Esq.
Warren de Wied, Esq.
Telecopy No.: (212) 859-4000
or to such other address as any party may have furnished to the other parties
in writing in accordance with this Section.
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Section 9.4 Certain Definitions; Interpretation. (a) For
purposes of this Agreement, the following terms shall have the following
meanings:
(i) "Company Material Adverse Effect"
means any changes in or effects that in the aggregate
together with all other changes and effects (x) are materially adverse to the
business, assets, liabilities, results of operations or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole, or (y) will
prevent the Company's consummating the transactions contemplated hereby or
materially delay the Company's ability to consummate the transactions
contemplated hereby, provided that, in determining whether a Company Material
Adverse Effect has occurred, changes or effects relating to the natural gas
pipeline industry and/or the oil and gas exploration and production industry
and/or any other industry in which the Company or its Subsidiaries are engaged
generally or to United States or global economic conditions or financial
markets in general, shall not be considered.
(ii) "Parent Material Adverse Effect" means any
changes in or effects that in the aggregate
together with all other changes and effects (x) are materially adverse to the
business, assets, liabilities, results of operations or condition (financial or
otherwise) of Parent and its Subsidiaries taken as a whole or (y) will prevent
Parent's consummating the transactions contemplated hereby or materially delay
Parent's ability to consummate the transactions contemplated hereby, provided
that, in determining whether a Parent Material Adverse Effect has occurred,
changes or effects relating to the natural gas pipeline industry and/or the oil
and gas exploration and production industry and/or any other industry in which
Parent or its Subsidiaries are engaged generally or to United States or global
economic conditions or financial markets in general, shall not be considered.
(iii) "affiliate" of a Person means (for all
purposes other than Section 6.12 in which
Section "affiliate" shall have the meaning designated therein) a Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned Person.
(iv) "control" (including the terms "controlled
by" and "under common control with") means the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of a Person, whether through the ownership of
stock, as trustee or executor, by contract or credit arrangement or otherwise.
(v) "knowledge" of any party shall mean the
actual knowledge of the executive officers of that
party.
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(vi) "Person" and "person" means an individual,
corporation, partnership, limited liability
company, association, trust, unincorporated organization, entity or group (as
defined in the Exchange Act).
(vii) "Subsidiary," of a Person means any
corporation or other legal entity of which such Person
(either alone or through or together with any other Subsidiary or Subsidiaries)
is the general partner or managing entity or of which 50% or more of the
capital stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or others
performing similar functions of such corporation or other legal entity is
directly or indirectly owned or controlled by such Person (either alone or
through or together with any other Subsidiary or Subsidiaries).
(viii) "Tax" means any federal, state, local, or
foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A of the Code), customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not, and including any liability for the
Taxes of any Person under Treas. Reg. ss. 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(b) When a reference is made in this Agreement
to Articles, Sections, Disclosure Letters or Exhibits,
such reference is to an Article or a Section of, or an Exhibit to, this
Agreement, unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Whenever the
words "include," "includes" or "including" are used in this Agreement, they
shall be understood to be followed by the words "without limitation."
Section 9.5 Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.6 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon a determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
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<PAGE> 80
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the maximum extent
possible.
Section 9.7 Assignment; Binding Effect; No Third Party
Beneficiaries. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of Parent
and the Company. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, except for Section 6.9 (Insurance; Indemnity),
nothing in this Agreement, expressed or implied, is intended to confer on any
person other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
Section 9.8 ENFORCEMENT. THE PARTIES HERETO AGREE THAT IRREPARABLE
DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT
WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE
BREACHED. IT IS ACCORDINGLY AGREED THAT, SUBJECT TO THE NEXT SENTENCE HEREOF,
THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT
BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS
HEREOF IN ANY COURT OF THE UNITED STATES OR ANY STATE HAVING JURISDICTION, THIS
BEING IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN
EQUITY. EACH OF THE PARTIES HERETO (I) CONSENTS TO SUBMIT ITSELF TO THE
PERSONAL JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE STATE OF DELAWARE OR
ANY DELAWARE STATE COURT IN THE EVENT ANY DISPUTE ARISES OUT OF THIS AGREEMENT
OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (II) AGREES THAT IT
SHALL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR
OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (III) AGREES THAT IT SHALL NOT
BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT IN ANY COURT OTHER THAN A FEDERAL COURT SITTING
IN THE STATE OF DELAWARE OR A DELAWARE STATE COURT.
Section 9.9 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
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constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed by
all of the parties hereto.
Section 9.10 Entire Agreement. This Agreement, the Confidentiality
Agreement and the Stock Option Agreements constitute the entire agreement
between the parties hereto and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
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<PAGE> 82
IN WITNESS WHEREOF, the Company and Parent have caused
this Agreement to be signed by their respective officers
thereunto duly authorized as of the day and year first written above.
SONAT INC.
By: /s/ Ronald L. Kuehn, Jr.
----------------------------------
Name: Ronald L. Kuehn, Jr.
Title: Chairman of the Board,
President and Chief
Executive Officer
EL PASO ENERGY CORPORATION
By: /s/ Britton White Jr.
----------------------------------
Name: Britton White Jr.
Title: Executive Vice President
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<PAGE> 1
VOTING AGREEMENT
VOTING AGREEMENT (this "Agreement"), dated March 13, 1999 by
and between El Paso Energy Corporation, a Delaware corporation ("Parent"), and
Selim K. Zilkha, in his individual capacity and in his capacity as trustee of
the Selim K. Zilkha Trust, and Michael Zilkha (collectively, the
"Stockholders").
RECITALS
A. Parent and Sonat Inc., a Delaware corporation (the
"Company"), are entering into an Agreement and Plan Merger of even date
herewith (the "Merger Agreement") providing for, among other things, a business
combination between Parent and the Company.
B. As of the date of this Agreement, the Stockholders own
beneficially and of record the shares of common stock, par value $1.00 per
share, of the Company ("Company Common Stock"), set forth opposite their
respective names on Exhibit A (the shares of Company Common Stock owned by each
Stockholder are referred to as such Stockholder's "Owned Shares").
C. As an inducement and a condition to its willingness to enter
into the Merger Agreement, Parent has required that the Stockholders enter into
this Agreement.
D. Capitalized terms not defined herein shall have the meanings
set forth in the Merger Agreement.
E. This Agreement and the Merger Agreement are being entered
into simultaneously.
NOW, THEREFORE, in consideration of the execution and delivery
by Parent of the Merger Agreement and the mutual covenants, conditions and
agreements contained herein and therein, and intending to be legally bound
hereby, the parties agree as follows:
1. Voting Agreement. Each Stockholder hereby agrees that,
during the time this Agreement is in effect, at any meeting of the stockholders
of the Company (a "Company Stockholders' Meeting"), however called, and at
every adjournment or postponement thereof, he or it shall (i) appear at the
meeting or otherwise cause his or its Owned Shares, together with any shares of
Company Common Stock acquired by such Stockholder after the date of this
Agreement, whether upon the exercise of options, conversion of convertible
securities or otherwise (such acquired shares, together with such Stockholder's
Owned Shares, are referred to herein as his or its "Shares"), to be counted as
present thereat for purposes of establishing a quorum, or (ii) vote his or its
Shares, or cause his or its Shares to be voted, in favor of the approval and
<PAGE> 2
adoption of the Merger Agreement and the transactions contemplated thereby, and
any action required in furtherance thereof, if the Merger Agreement (as in
effect as of the date hereof and amendments thereto that do not effect a change
to the transactions contemplated thereby as of the date hereof that would
materially and adversely affect the Stockholders) and the transactions
contemplated thereby are presented at the Company Stockholders' Meeting.
2. Irrevocable Proxy. As security for the Stockholders'
obligations under Section 1 hereof, each of the Stockholders hereby irrevocably
constitutes and appoints Parent as his or its attorney and proxy in accordance
with the provisions of Section 212(c) of the DGCL, with full power of
substitution and resubstitution, to vote the Shares at any Company
Stockholders' Meeting, however called, as and to the extent provided in clauses
(i) and (ii) of Section 1 hereof. THIS PROXY AND POWER OF ATTORNEY IS
IRREVOCABLE AND COUPLED WITH AN INTEREST. Each Stockholder hereby revokes all
other proxies and powers of attorney with respect to his or its Shares that he
or it may have heretofore appointed or granted, and no subsequent proxy or
power of attorney shall be granted (and if granted, shall not be effective) by
any Stockholder with respect thereto, other than for the sole purpose of voting
Shares as contemplated by Section 1 hereof.
3. Termination. This Agreement shall terminate upon the
earliest to occur of (i) the Effective Time and (ii) the termination of the
Merger Agreement in accordance with its terms.
4. Representations and Warranties of Parent. Parent represents
and warrants to the Stockholders as follows:
(a) Organization; Due Authorization; Enforceability. Parent is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Parent has full corporate power and authority to
execute and deliver this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of Parent, and no
other corporate proceedings on the part of Parent are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Parent and
constitutes a valid and binding agreement of Parent, enforceable against Parent
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and to general
principles of equity.
(b) No Conflicts. No authorization, consent or approval of, or
filing with, any court or any public body or authority is necessary for the
consummation by Parent of the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement by Parent will not
constitute a breach, violation or default (or any event which, with notice or
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<PAGE> 3
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration under, or result in the creation of any lien or
encumbrance upon any of the properties or assets of Parent under, any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument to which Parent is a party or by which its properties or assets are
bound, other than breaches, violations, defaults, terminations, accelerations
or creation of liens and encumbrances which, in the aggregate, would not
materially impair the ability of Parent to perform its obligations hereunder.
5. Representations and Warranties of the Stockholders. Each
Stockholder hereby severally and not jointly represents and warrants to Parent
as follows:
(a) Organization; Due Authorization; Enforceability. Such
Stockholder has full power and authority to execute and deliver this Agreement.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary action on the part of such Stockholder, and no other proceedings on
the part of such Stockholder are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by such Stockholder and constitutes a valid
and binding agreement of such Stockholder, enforceable against such Stockholder
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and to general
principles of equity.
(b) Ownership of Shares of Company Common Stock; Voting Rights.
Except as set forth on Exhibit A, such Stockholder owns, of record and
beneficially, the shares of Company Common Stock set forth opposite such
Stockholder's name on Exhibit A. Such Stockholder has sole voting power with
respect to his or its Owned Shares. Except pursuant to this Agreement or as set
forth on Exhibit A, such Stockholder's Owned Shares are not subject to any
voting trust agreement or other contract, agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting, dividend rights
or disposition of such Owned Shares.
(c) No Conflicts. No authorization, consent or approval of, or
filing with, any court or any public body or authority is necessary for the
consummation by such Stockholder of the transactions contemplated by this
Agreement. The execution, delivery and performance of this Agreement by such
Stockholder will not constitute a breach, violation or default (or any event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien or encumbrance upon any of the properties or assets of
such Stockholder under, any note, bond, mortgage, indenture, deed of trust,
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<PAGE> 4
license, lease, agreement or other instrument to which such Stockholder is a
party or by which his or its properties or assets are bound, other than
breaches, violations, defaults, terminations, accelerations or creation of
liens and encumbrances which, in the aggregate, would not materially impair the
ability of such Stockholder to perform his or its obligations hereunder.
6. Covenants. Each Stockholder hereby severally covenants and
agrees as follows:
(a) Such Stockholder hereby agrees that, while this Agreement
is in effect, and except as contemplated hereby, (i) not to grant any proxies,
powers of attorney or other authorization or consent, deposit any shares of
capital stock of the Company into a voting trust or enter into a voting
agreement with respect to any such Shares and (ii) not to take any action that
would make any representation or warranty of such Stockholder contained herein
untrue or incorrect or have the effect of preventing or disabling such
Stockholder from performing his or its obligations under this Agreement.
(b) Such Stockholder hereby agrees, while this Agreement is in
effect, to promptly notify Parent of the number of new shares of capital stock
acquired by such Stockholder, if any, after the date of this Agreement.
(c) Such Stockholder shall immediately cease any discussions or
negotiations with any parties other than Parent that may be ongoing with
respect to a Takeover Proposal. While this Agreement is in effect, such
Stockholder shall not (i) solicit, initiate or encourage any inquiries or the
making of any Takeover Proposal, or (ii) participate in any discussions or
negotiations regarding any Takeover Proposal, except to the extent such
discussions or negotiations are participated in by the Stockholder in his
capacity as a director of the Company in accordance with the terms of the
Merger Agreement.
7. Miscellaneous.
(a) Fees and Expenses. Except as otherwise provided in the
Merger Agreement, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by the party
incurring such expenses.
(b) Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
(c) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD
TO ITS CONFLICT OF LAWS RULES OR PRINCIPLES.
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<PAGE> 5
(d) Notices. All notices or other communications under this
Agreement shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by cable, telegram, telex
or other standard form of telecommunications, or by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
If to a Stockholder:
to the address set forth beneath the
name of such Stockholder on Exhibit A
If to Parent:
El Paso Energy Corporation
1001 Louisiana Street
Houston, Texas 77002
Attention: General Counsel
Telecopy No: (713) 420-4993
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Gary P. Cooperstein, Esq.
Warren de Wied, Esq.
Telecopy No.: (212) 859-4000
or to such other address as any party may have furnished to the other parties
in writing in accordance with this Section.
(e) Assignment; Binding Effect; No Third Party Beneficiaries.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other party.
Subject to the preceding sentence, this Agreement (including the obligations of
each Stockholder under Sections 1 and 2 hereof) shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns. Notwithstanding anything contained in this Agreement to the contrary,
nothing in this Agreement, expressed or implied, is intended to confer on any
person other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
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<PAGE> 6
(f) ENFORCEMENT. THE PARTIES HERETO AGREE THAT IRREPARABLE
DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT
WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE
BREACHED. IT IS ACCORDINGLY AGREED THAT, SUBJECT TO THE NEXT SENTENCE,THE
PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES
OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS HEREOF
IN ANY COURT OF THE UNITED STATES OR ANY STATE HAVING JURISDICTION, THIS BEING
IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY.
EACH OF THE PARTIES HERETO (I) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL
JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE STATE OF DELAWARE OR ANY
DELAWARE STATE COURT IN THE EVENT ANY DISPUTE ARISES OUT OF THIS AGREEMENT OR
ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (II) AGREES THAT IT
SHALL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR
OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (III) AGREES THAT IT SHALL NOT
BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT IN ANY COURT OTHER THAN A FEDERAL COURT SITTING
IN THE STATE OF DELAWARE OR A DELAWARE STATE COURT.
(g) Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
(h) Registration Rights Agreement. Parent agrees and
acknowledges that the rights of the Stockholders set forth in the Registration
Rights Agreement, dated as of January 30, 1998, by and among the Company and
the Stockholders and the Selim K. Zilkha (1996) Annuity Trust shall continue in
effect after the Effective Time, and after the Effective Time, Parent shall
comply with the obligations of the Company thereunder as if it were the
Company.
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IN WITNESS WHEREOF, Parent and the Stockholders have caused
this Agreement to be duly executed as of the day and year first above written.
EL PASO ENERGY CORPORATION
By: /s/ Britton White Jr.
------------------------------------
Name: Britton White Jr.
Title: Executive Vice President
/s/ Selim K. Zilkha
------------------------------------
Selim K. Zilkha, as trustee of
the Selim K. Zilkha Trust
/s/ Selim K. Zilkha
------------------------------------
Selim K. Zilkha
/s/ Michael Zilkha
------------------------------------
Michael Zilkha
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EXHIBIT A
STOCKHOLDER SHARES(1) MARGIN(2)
----------- --------- ---------
Selim K. Zilkha Trust 14,116,816 319,091
Two Houston Center
909 Fannin, Suite 2900
Houston, Texas 77010
Selim K. Zilkha 2,100(3) --
Two Houston Center
909 Fannin, Suite 2900
Houston, Texas 77010
Michael Zilkha 8,814,664(3) 412,364
Two Houston Center
909 Fannin, Suite 2900
Houston, Texas 77010
- ------------------------------
1 Includes shares held in such Stockholder's margin account.
2 Such shares are held on a margin account subject to the terms of an
Individual Account Agreement between Goldman, Sachs & Co. and each
Stockholder.
3 Includes 2,000 shares of restricted stock granted to such person under a
stock plan for directors on April 1, 1998. The 2,000 shares vest in five equal
increments of 400 shares each on each anniversary of the original grant,
provided that all shares vest immediately upon a change of control of the
Company. The Stockholder has the right to vote all 2,000 shares.
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