SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 15, 1999
SONAT INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 1-7179 63-0647939
- ---------------------------- ----------- -----------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
AMSOUTH-SONAT TOWER
BIRMINGHAM, ALABAMA 35203
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (205) 325-3800
<PAGE>
ITEM 5. OTHER EVENTS.
On March 13, 1999, Sonat Inc. (the "Company") and El Paso Energy
Corporation ("El Paso") entered into an Agreement and Plan of Merger (the
"Merger Agreement"), providing for, among other things, the merger of El Paso
and the Company. Under the terms of the Merger Agreement, the Company's
shareholders will receive one share of El Paso common stock, par value $3.00 per
share ( "El Paso Common Stock"), for each share of common stock, par value $1.00
per share, of the Company ("Company Common Stock"), they own. The merger is
subject to certain customary conditions, including, among others, approval by
the stockholders of the Company and receipt of certain required government
approvals. In the event El Paso stockholder approval for the issuance of El Paso
Common Stock in the merger is not obtained, El Paso has agreed to issue an
amount of El Paso Common Stock not to exceed, in the aggregate, 19.9 percent of
the outstanding El Paso Common Stock, with the balance of the merger
consideration to be paid in the form of non-convertible long-term preferred
stock (the "Preferred Stock"). The Preferred Stock will bear a dividend rate
designed to cause the stock to have a value equal to the greater of $32 and the
value of the El Paso Common Stock as of the time of the Company's shareholder
vote, subject to a cap of $44.50. The Preferred Stock will be redeemable in 21
years and will not be convertible. The foregoing description of the Preferred
Stock is qualified in its entirety by reference to the Form of Certificate of
Designation, Preferences and Rights of the __% Senior Cumulative Exchangeable
Preferred Stock of El Paso (the "Certificate of Designation"), a copy of which
is filed as an exhibit hereto and is incorporated by reference herein.
The foregoing description of the Merger Agreement is qualified in its
entirety by reference to the Merger Agreement, a copy of which is filed as an
exhibit hereto and is incorporated by reference herein.
In connection with the Merger Agreement, on March 13, 1999, the Company
and El Paso also entered into cross option agreements, pursuant to which, among
other things, (i) El Paso has been granted an option to purchase up to 19.9
percent of the Company Common Stock, exercisable if the Merger Agreement is
terminated under certain circumstances as set forth therein (the "Company Stock
Option Agreement") and (y) the Company has been granted an option to purchase up
to 19.9 percent of the El Paso Common Stock, exercisable if the Merger Agreement
is terminated under certain circumstances as set forth therein (the "El Paso
Stock Option Agreement" and, collectively with the Company Stock Option
Agreement, the "Stock Option Agreements"). The foregoing descriptions of the
Company Stock Option Agreement and El Paso Stock Option Agreement are qualified
in their entirety by reference to each such Stock Option Agreement, a copy of
each of which are filed as exhibits hereto and are incorporated by reference
herein.
On March 13, 1999, certain members of the Zilkha family and an affiliated
entity, who collectively own approximately 23% of the outstanding shares of
Company Common Stock, and Ronald L. Kuehn, Jr., chairman of the board, president
and chief executive officer of the Company, entered into separate voting
agreements with El Paso (the "Zilkha Voting Agreement"
<PAGE>
and the "Kuehn Voting Agreement", respectively, and together, the "Voting
Agreements"), pursuant to which, among other things, they agreed to vote their
shares of Company Common Stock in favor of the Merger Agreement. The foregoing
descriptions of the Zilkha Voting Agreement and the Kuehn Voting Agreement are
qualified in their entirety by reference to each such Voting Agreement, a copy
of each of which are filed as exhibits hereto and are incorporated by reference
herein.
On March 15, 1999, the Company and El Paso issued a joint press release
announcing the proposed merger and the signing of the Merger Agreement, the
Stock Option Agreements and the Zilkha Voting Agreement. A copy of the joint
press release is filed as an exhibit hereto and is incorporated by reference
herein.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits. The following exhibits are filed as part of this report:
2.1 Agreement and Plan of Merger, dated as of March
13, 1999, between El Paso and the Company
4.1 Form of Certificate of Designation, Preferences and
Rights of the __% Senior Cumulative Exchangeable
Preferred Stock of El Paso (incorporated by reference
to Exhibit E to exhibit 2.1 hereto)
99.1 El Paso Stock Option Agreement, dated as of March
13, 1999, between El Paso and the Company
99.2 Company Stock Option Agreement, dated as of March
13, 1999, between El Paso and the Company
99.3 Voting Agreement, dated March 13, 1999, between El
Paso and Selim K. Zilkha, in his individual
capacity and in his capacity as trustee of the
Selim K. Zilkha Trust, and Michael Zilkha
99.4 Voting Agreement, dated March 13, 1999, between El
Paso and Ronald L. Kuehn, Jr.
99.5 Joint press release, dated March 15, 1999, issued
by the Company and El Paso
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Dated: March 15, 1999
SONAT INC.
By /s/ William A. Smith
-------------------------------------
Name: William A. Smith
Title: Executive Vice President and
General Counsel
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
2.1 Agreement and Plan of Merger, dated as of March 13,
1999, between El Paso and the Company
4.1 Form of Certificate of Designation, Preferences and
Rights of the __% Senior Cumulative Exchangeable
Preferred Stock of El Paso (incorporated by reference
to Exhibit E to exhibit 2.1 hereto)
99.1 El Paso Stock Option Agreement, dated as of March
13, 1999, between El Paso and the Company
99.2 Company Stock Option Agreement, dated as of March
13, 1999, between El Paso and the Company
99.3 Voting Agreement, dated March 13, 1999, between El
Paso and Selim K. Zilkha, in his individual
capacity and in his capacity as trustee of the
Selim K. Zilkha Trust, and Michael Zilkha
99.4 Voting Agreement, dated March 13, 1999, between El
Paso and Ronald L. Kuehn, Jr.
99.5 Joint press release, dated March 15, 1999, issued by
the Company and El Paso
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF
March 13, 1999
BY AND BETWEEN
EL PASO ENERGY CORPORATION
AND
SONAT INC.
<PAGE>
TABLE OF CONTENTS
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..................13
Section 3.2 Restated Certificate of Incorporation and By-laws.............14
Section 3.3 Capitalization................................................14
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
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Section 3.11 Labor Matters.................................................22
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...29
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...........................................34
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...................................................40
Section 4.17 Public Utility Holding Company Act of 1935....................41
Section 4.18 Restrictions on Business Activities...........................41
Section 4.19 Year 2000.....................................................41
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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.......................................50
Section 6.5 Listing Application...........................................51
Section 6.6 Further Action................................................51
Section 6.7 Expenses......................................................52
Section 6.8 Access to Information.........................................52
Section 6.9 Insurance; Indemnity..........................................52
Section 6.10 Employee Benefit Plans........................................53
Section 6.11 Certain Appointments..........................................55
Section 6.12 Affiliates....................................................56
Section 6.13 Pooling-of-Interests..........................................56
Section 6.14 Certificate of Designation; Depositary Agreement..............57
Section 6.15 Takeover Statutes.............................................57
Section 6.16 Tax-Free Merger...............................................57
Section 6.17 Name; Headquarters............................................57
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.................61
Section 7.3 Additional Conditions to Obligations of the Company............62
ARTICLE VIII..................................................................63
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Section 8.1 Termination....................................................63
Section 8.2 Effect of Termination..........................................64
Section 8.3 Amendment......................................................66
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........................................................67
Section 9.4 Certain Definitions; Interpretation............................68
Section 9.5 Headings.......................................................70
Section 9.6 Severability...................................................70
Section 9.7 Assignment; Binding Effect; No Third Party Beneficiaries.......70
Section 9.8 ENFORCEMENT....................................................70
Section 9.9 Counterparts...................................................71
Section 9.10 Entire Agreement...............................................71
EXHIBITS
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
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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.
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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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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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<PAGE>
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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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
1.3(b)) and
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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 stock of Newco
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(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 exist and (other than those shares
held in the treasury of the Company, by Parent or by any of their
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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 "IMPLIED PRICE" shall mean the average
of the closing prices of the shares of Parent Common Stock
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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 Sub that is
issued and
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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).
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Unless and until 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 Common
Stock
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("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
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shares are 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:
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
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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.
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").
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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 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
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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.
(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
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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 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
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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 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
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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, 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,
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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.
(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
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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 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)
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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.
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
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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.
(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.
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(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:
"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,
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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. Sections 9601
et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. Sections 11001 ET SEQ., the Resource Conservation and Recovery Act, 42
U.S.C. Sections 6901 ET SEQ., the Toxic Substances Control Act, 15 U.S.C.
Sections 2601 ET SEQ., the Federal Insecticide, Fungicide, and Rodenticide Act,
7 U.S.C. Sections 136 ET SEQ., the Clean Air Act, 42 U.S.C. Sections 7401 ET.
SEQ., the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C.
Sections 1251 ET SEQ., the Safe Drinking Water Act, 42 U.S.C. Sections 300f ET
SEQ., the Occupational Safety and Health Act, 29 U.S.C. Sections 641, ET SEQ.,
the Hazardous Materials Transportation Act, 49 U.S.C. Sections 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
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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.
(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.
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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.
(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.
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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
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
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(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 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
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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 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
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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 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
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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 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
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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 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
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(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.
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
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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.
(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
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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 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
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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 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
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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 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
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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
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.
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(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.
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.
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(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 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.
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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 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
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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;
(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;
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(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 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
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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 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.
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(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 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
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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 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
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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 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.
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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 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:
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(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.
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
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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 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,
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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.
(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
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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 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
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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 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
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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 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
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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.
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.
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(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 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
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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 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
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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 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
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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 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
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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 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
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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 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).
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(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;
(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
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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;
(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
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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 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
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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.
(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.
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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.
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
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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.
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.
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(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.
(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,
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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. Section 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 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
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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 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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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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EXHIBIT E TO
AGREEMENT AND
PLAN OF MERGER
FORM OF CERTIFICATE OF
DESIGNATION, PREFERENCES
AND RIGHTS OF THE
___ % SENIOR CUMULATIVE EXCHANGEABLE
PREFERRED STOCK OF EL PASO ENERGY CORPORATION
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
I, _______, [title] of El Paso Energy Corporation, a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DO HEREBY
CERTIFY as follows:
That pursuant to the authority conferred upon the Board of Directors
by the Restated Certificate of Incorporation of the Company (the "Restated
Certificate of Incorporation"), the Board of Directors on ____, duly adopted the
following resolution creating a series of ____ shares of Preferred Stock
designated as ___% Senior Cumulative Exchangeable Preferred Stock:
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of the Company in accordance with the provisions of the
Restated Certificate of Incorporation, which authorizes 50,000,000 shares of
preferred stock, $.01 par value per share (the "Preferred Stock"), the Board of
Directors hereby creates a series of preferred stock of the Company and hereby
states the designation and number of shares, and fixes the relative rights,
preferences and limitations thereof (in addition to the provisions set forth in
the Restated Certificate of Incorporation which are applicable to the preferred
stock of all classes and series) as follows:
SECTION 1. Designation, Rank. This series of preferred stock shall
be designated the "__% Senior Cumulative Exchangeable Preferred Stock," with a
par value of $.01 per share (the "Preferred Stock"). The Preferred Stock will
rank, with respect to dividend rights and rights on liquidation, winding-up and
dissolution, (i) senior to all classes of common stock of the Company, as they
exist on the date hereof or as such stock may be constituted from time to time
(the "Common Stock"), and each other class or series of capital stock
established by the Board to the extent the terms of such stock do not expressly
provide that it ranks on a parity with the Preferred Stock as to dividend
<PAGE>
rights and rights on liquidation, winding-up and dissolution, including the
Company's Series A Junior Preferred Stock, par value $.01 per share
(collectively, together with the Common Stock, the "Junior Securities"); and
(ii) on a parity with each other class or series of capital stock issued by the
Company established by the Board to the extent the terms of such stock expressly
provide that it will rank on a parity with the Preferred Stock as to dividend
rights and rights on liquidation, winding-up and dissolution (collectively, the
"Parity Securities"). Shares of additional series of Preferred Stock may be
issued from time to time by the Board of Directors, subject to limitations set
forth in the Restated Certificate of Incorporation and the resolutions of the
Board providing for any such series; provided that the Board may not establish
any class or series of capital stock the terms of which provide that such class
or series will rank senior to the Preferred Stock as to dividend rights and
rights on liquidation, winding-up and dissolution.
SECTION 2. Authorized Number. The authorized number of shares
constituting the Preferred Stock shall initially be [______] shares. Such number
of shares may be increased or decreased by resolution of the Board of Directors,
provided that no decrease shall reduce the number of shares of the Preferred
Stock to a number less than the number of shares then outstanding.
SECTION 3. Dividends. (a) Dividend Periods and Rates. Dividends on
each share of Preferred Stock shall be payable with respect to each quarter
beginning on the first day of January, April, July and October of each year and
ending on the day immediately prior to the first day of the next succeeding
period (each, a "Quarterly Dividend Period"). Dividends shall be payable in cash
when, as and if declared by the Board of Directors out of funds of the Company
legally available therefor, quarterly in arrears on the first day of January,
April, July and October of each year (each a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date following the first
issuance of the Preferred Stock. Dividends with respect to each Quarterly
Dividend Period will be payable at a per annum rate equal to ____ (the "Rate")
[the "Rate" shall be a percentage, to be jointly determined by the financial
advisors described in Sections 3.14 and 4.14 of the Merger Agreement, 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
their financial advisors 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.] multiplied by the Liquidation Preference (as
defined in Section 4) of each such share. Dividends for each full Quarterly
Dividend Period will be computed by dividing the Rate by four. Dividends payable
for any period less than a full Quarterly Dividend Period will be computed on
the basis of a 360-day year consisting of twelve 30-
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<PAGE>
day months. Each dividend will be payable to holders of record as they appear on
the books of the Company at the close of business on a record date, not more
than 60 nor less than 15 days before the related Quarterly Dividend Payment Date
fixed by the Board. Dividends will be cumulative from the date of original
issuance of the Preferred Stock. The Preferred Stock will not entitle the holder
thereof to any dividends, whether payable in cash, property or stock, in excess
of full cumulative dividends. No interest, or sum of money in lieu of interest,
will be payable in respect of any accrued and unpaid dividends. Dividends in
arrears for any past Quarterly Dividend Periods may be declared and paid at any
time without reference to any regular Quarterly Dividend Payment Date, to
holders of record on such date, not exceeding 45 days preceding the payment date
thereof, as may be fixed by the Board.
(b) Priority. So long as shares of Preferred Stock are outstanding,
no dividends may be declared or paid and no funds may be set apart for the
payment of dividends or other distributions on any Parity Securities (except
dividends on Parity Securities paid in shares of Junior Securities and except
dividends paid ratably on the Preferred Stock and all such Parity Securities on
which dividends are payable or in arrears in proportion to the total amounts to
which holders of all such shares are then entitled) for any period unless the
full cumulative dividends on all outstanding shares of Preferred Stock shall
have been declared and paid in full for all past Quarterly Dividend Periods. No
dividends or other distributions may be paid or declared and set apart for such
payment on Junior Securities or Parity Securities (except dividends paid in
additional shares of Junior Securities) and no Parity Securities or Junior
Securities may be repurchased, redeemed or otherwise retired nor may funds be
declared and set apart for payment with respect thereto, nor shall the Company
permit any corporation or entity directly or indirectly controlled by the
Company to purchase any Parity Securities or Junior Securities, unless, in each
case, the full cumulative dividends on all outstanding shares of Preferred Stock
shall have been declared and paid in full for all past Quarterly Dividend
Periods. Notwithstanding the foregoing, the Company may (i) make redemptions,
purchases or other acquisitions of Parity Securities or Junior Securities
payable in Junior Securities and (ii) make, pursuant to the Company's
Shareholder Rights Plan (the "Plan"), redemptions of Rights (as defined in the
Plan) distributed pursuant to the Plan.
SECTION 4. Liquidation Rights. The liquidation preference of each
share of Preferred Stock shall be $5,000 (the "Liquidation Preference"). In the
event of any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, after satisfaction of the claims of creditors and before any
payment or distribution of assets is made on any Junior Securities, including,
without limitation, the Common Stock, the holders of Preferred Stock shall
receive an amount equal to the Liquidation Preference of their shares, and shall
be entitled to receive an amount equal to all accrued and unpaid dividends
through the date of distribution (whether or not declared). If, upon such a
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<PAGE>
voluntary or involuntary liquidation, dissolution or winding-up of the Company,
the assets of the Company are insufficient to pay in full the amounts described
above as payable with respect to the Preferred Stock, the holders of the
Preferred Stock and any Parity Securities will share ratably in any distribution
of assets of the Company, first in proportion to their respective liquidation
preferences until such preferences are paid in full, and then in proportion to
their respective amounts of accrued but unpaid dividends. After payment in full
of any such liquidation preference and accrued but unpaid dividends, the
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Company. For purposes of this Section 4, neither
the sale or transfer of all or any part of the assets of the Company, nor the
merger or consolidation of the Company into or with any other corporation or a
merger of any other corporation with or into the Company, will be deemed to be a
liquidation, dissolution or winding-up of the Company.
SECTION 5. Voting Rights. (a) Except as provided below and as may be
required by Delaware law, the holders of Preferred Stock will be entitled to
vote together as one class with the holders of Common Stock on all matters
submitted for a vote of the Company's stockholders. Each share of Preferred
Stock shall entitle the holder thereof to 50 votes.
(b) (i) If at any time dividends on the Preferred Stock shall be in
arrears in an amount equal to six (6) or more quarterly dividends thereon
(whether or not consecutive), the occurrence of such contingency shall mark the
beginning of a period (herein called a "Default Period") which shall extend
until such time when all accrued and unpaid dividends for all previous Quarterly
Dividend Periods and for the current Quarterly Dividend Period on all shares of
Preferred Stock then outstanding shall have been paid in full. During each
Default Period, all holders of Preferred Stock, voting as a class, shall have
the right to elect two (2) directors, with each share of Preferred Stock
entitling the holder thereof to 50 votes.
(ii) So long as any shares of Preferred Stock shall be
outstanding, during any Default Period, the voting right described in subsection
(i) above may be exercised initially at a special meeting called pursuant to
subsection (iii) below or at any annual meeting of stockholders and thereafter
at annual meetings of stockholders. The absence of a quorum of holders of Common
Stock (or any class thereof) shall not affect the exercise of such voting rights
by the holders of Preferred Stock. At any meeting at which the holders of
Preferred Stock shall exercise such voting right initially during an existing
Default Period, they shall have the right, voting as a class, to elect directors
to fill such vacancies, if any, on the Board as may then exist up to two (2)
directors or, if such right is exercised at an annual meeting, to elect two (2)
directors. If the number of directors which may be so elected at any special
meeting does not amount to the required number of directors, the holders of the
Preferred Stock shall have the right to make such
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<PAGE>
increase in the number of directors as shall be necessary to permit the election
by them of the required number of directors. After the holders of the Preferred
Stock shall have exercised their right to elect directors in any Default Period
and during the continuance of such period, the number of directors on the Board
shall not be increased or decreased except by vote of the holders of Preferred
Stock as herein provided or pursuant to the rights of any Parity Securities.
(iii) Unless the holders of Preferred Stock, if any such
shares are then outstanding, have, during an existing Default Period, previously
exercised their right to elect directors, the Board may, and upon the request of
the holders of record of not less than 25% of the aggregate liquidation
preference of Preferred Stock then outstanding, the Board shall, order the
calling of a special meeting of holders of Preferred Stock, which meeting shall
thereupon be called by the Chairman of the Board or the President and Chief
Executive Officer of the Company. Notice of such meeting and of any annual
meeting at which holders of Preferred Stock are entitled to vote pursuant to
this subsection (iii) shall be given to each holder of record of Preferred Stock
by mailing a copy of such notice to such holder at such holder's last address as
it appears on the books of the Company. Such meeting shall be called for a date
not earlier than 10 days and not later than 60 days after such order or request,
or, in default of the calling of such meeting within 60 days after such order or
request, such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than 25% of the aggregate
liquidation preference of the Preferred Stock then outstanding. Any holder of
the Preferred Stock shall have access to the stock books of the Company for the
purpose of causing a meeting of stockholders to be called pursuant to these
provisions. Notwithstanding the provisions of this subsection (iii), no such
special meeting shall be called during the period within 90 days immediately
preceding the date fixed for the next annual meeting of stockholders of the
Company.
(iv) During any Default Period, the holders of Common Stock,
and other classes of stock of the Company, if applicable, shall continue to be
entitled to elect all of the directors unless and until the holders of Preferred
Stock shall have exercised their right pursuant to this Section 5(b) to elect
two (2) directors voting as a class. After the exercise of such right (x) the
directors so elected by the holders of Preferred Stock shall continue in office
until the earlier of (A) such time as their successors shall have been elected
by such holders and (B) the expiration of the Default Period, and (y) any
vacancy in the Board with respect to a directorship to be elected pursuant to
this Section 5(b) by the holders of Preferred Stock may be filled by vote of the
remaining director previously elected by such holders. References in this
subsection (b)(iv) to directors elected by the holders of a particular class of
stock shall include directors elected by such directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
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<PAGE>
(v) Immediately upon the expiration of a Default Period (and
subject to revesting of the rights provided for in this Section 5(b) upon the
subsequent occurrence of a Default Period), (x) the right of the holders of
Preferred Stock to elect directors pursuant to this Section 5(b) shall cease,
(y) the term of any directors elected by the holders of Preferred Stock pursuant
to this Section 5(b) shall terminate, and (z) the number of directors shall be
such number as may be provided for in the Restated Certificate of Incorporation
or bylaws of the Company irrespective of any increase made pursuant to
subsection (ii) of this subsection (b) (such number being subject, however, to
subsequent change in any manner provided by law or in the Restated Certificate
of Incorporation or bylaws of the Company). Any vacancies in the Board of
Directors effected by the provisions of clauses (y) and (z) in the preceding
sentence may be filled by a majority of the remaining Directors.
(c) Except as set forth herein, holders of Preferred Stock shall
have no special voting rights and their consent shall not be required (except to
the extent they are entitled to vote with holders of Common Stock or holders of
any other class of capital stock as set forth herein) for taking any corporate
action.
SECTION 6. Redemption. (a) On [ ], 20_ [the 21st anniversary of
Closing], the Company shall redeem, in cash out of funds legally available
therefor, all outstanding shares of Preferred Stock, at the Liquidation
Preference thereof plus an amount equal to accrued and unpaid dividends, if any
(whether or not declared), up to but excluding such date.
(b) Notice of redemption of Preferred Stock will be given by (i)
first-class mail, not less than 30 nor more than 60 days prior to the date fixed
for redemption thereof, to each record holder of shares of Preferred Stock to be
redeemed at the address of such holder in the books of the Company and (ii)
publication in The Wall Street Journal. On the date such notices are mailed, the
Company shall issue a press release announcing the redemption. The mailed and
published notice shall state, as appropriate: (1) the redemption date and record
date for purposes of such redemption; (2) the number of shares of Preferred
Stock to be redeemed and, if fewer than all shares of Preferred Stock held by
any holder are to be redeemed, the number of shares to be redeemed from such
holder; (3) the place or places at which certificates for such shares are to be
surrendered; (4) the redemption price; and (5) that dividends on the Preferred
Stock to be redeemed shall cease to accrue on such redemption date, except as
otherwise provided herein. If a notice of redemption has been given, from and
after the specified redemption date (unless the Company defaults in making
payment of the redemption price), dividends on the Preferred Stock so called for
redemption will cease to accrue, such shares will no longer be deemed to be
outstanding, and all rights of the holders thereof as stockholders of the
Company (except the right to receive the redemption price and any dividend due
on
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<PAGE>
a Quarterly Dividend Payment Date after the redemption date relating to a
dividend record date prior to such redemption date) will cease.
(c) If, at the time of the mandatory redemption of the outstanding
shares of Preferred Stock, the funds of the Company legally available for
redemption of such shares of Preferred Stock are insufficient to redeem such
shares, those funds legally available shall be used to redeem the maximum
possible number of shares, pro rata based upon the number of shares of Preferred
Stock to be redeemed from each holder. At any time thereafter when additional
funds of the Company become legally available for such purpose, such funds shall
immediately be used to redeem any additional shares of Preferred Stock which the
Company is obligated to redeem, but which it has not so redeemed.
SECTION 7. Consolidation, Merger, Etc. In the event that the Company
shall consummate any consolidation, merger or similar business combination,
pursuant to which the outstanding shares of Common Stock are by operation of law
exchanged for or changed, reclassified or converted into stock of any successor
or resulting corporation (including the Company), a cash payment or any other
property, the shares of Preferred Stock shall, in connection with such
consolidation, merger or similar business combination, be assumed by and shall
become preferred stock of the Principal Party (as defined below), having,
insofar as possible, the same powers, preferences and relative, participating,
optional or other special rights (including the redemption rights and the
exchange rights provided by Sections 6 and 8 hereof), and the qualifications,
limitations or restrictions thereon, that the Preferred Stock had immediately
prior to such transaction. "Principal Party" shall refer to the surviving or
resulting Person in such consolidation, merger or similar business combination;
provided that if such Person is a subsidiary, directly or indirectly, of any
other entity, then Principal Party shall refer to the "ultimate parent entity"
of such Person as such term is defined in the rules promulgated under the
Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended. As used
herein, "Person" means a corporation, partnership, trust, limited liability
company or other entity. The Company shall not consummate any such
consolidation, merger or similar business combination unless prior thereto the
Company and the other party or parties to such transaction shall have provided
for the fulfillment of the requirements of this Section 7 in any agreement
relating thereto.
SECTION 8. Exchange.(1) (a) At any time, the Company shall have the
right to exchange the outstanding shares of the Preferred Stock, in whole or in
part, for shares of Common Stock, subject to the notice provisions set forth
below. Within five business days after the surrender of any certificate or
certificates for the shares of Preferred Stock being exchanged, the Company
shall deliver or cause to be delivered to
- --------
(1) The Company will take all actions necessary to ensure that the exchange
feature of the Preferred Stock does not affect the listing of the
Preferred Stock on the New York Stock Exchange.
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<PAGE>
the holders of the Preferred Stock, in exchange for each share of Preferred
Stock being exchanged (i) the number of shares of Common Stock equal to the
Exchange Rate in effect on the applicable Exchange Date, adjusted as provided
below, (ii) an amount in cash equal to all accrued and unpaid dividends on such
shares of Preferred Stock up to but excluding the applicable Exchange Date and
(iii) if less than all of the shares of Preferred Stock are being exchanged, a
new certificate representing the number of shares of Preferred Stock which
remains outstanding upon such partial exchange. Such exchange shall be deemed to
have been made at the close of business on the applicable Exchange Date so that
the rights of the holder thereof as to the shares of Preferred Stock being
exchanged shall cease except for the right to receive shares of Common Stock in
accordance herewith, and the person entitled to receive the shares of Common
Stock shall be treated for all purposes as having become the record holder of
such shares of Common Stock at such time.
(b) The "Exchange Rate" for any exchange hereunder shall be
determined by dividing $5,000 by the Current Market Price. "Current Market
Price" means the average of the daily Closing Prices for the twenty (20)
consecutive Trading Dates ending on and including the date immediately preceding
the date of publication in The Wall Street Journal of the applicable notice of
exchange of Preferred Stock (each, a "Notice Date"), subject to equitable
adjustment for any stock splits, stock dividends, reclassifications or similar
events during such twenty (20) trading day period, and subject to further
adjustment as provided in subsection (c) hereof. The term "Closing Price" on any
day shall mean the closing sale price regular way (with any relevant due bills
attached) of a share of Common Stock on such day, or in case no such sale takes
place on such day, the average of the reported closing bid and asked prices
regular way (with any relevant due bills attached) of a share of Common Stock on
such day, in each case on the New York Stock Exchange Consolidated Tape (or any
successor composite tape reporting transactions on national securities
exchanges), or, if the Common Stock is not listed or admitted to trading on such
Exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading (which shall be the national securities
exchange on which the greatest number of shares of Common Stock has been traded
during the ten consecutive Trading Dates ending on and including the date
immediately preceding the applicable Notice Date) or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, the average
of the closing bid and asked prices regular way (with any relevant due bills
attached) of a share of the Common Stock on the over-the-counter market on the
day in question as reported by the National Association of Securities Dealers
Automated Quotations System, or a similarly generally accepted reporting
service, or if not so available, the market price of a share of Common Stock as
determined in good faith by the Board of Directors on the basis of such relevant
factors as the Board of Directors in good faith considers appropriate. The term
"Trading Date" shall mean a date on which the New York Stock Exchange (or any
successor to such Exchange) is open for the transaction of business. The
Exchange Rate
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<PAGE>
shall be subject to adjustment from time to time as provided in subsection (c)
hereof, but all adjustments to the Exchange Rate shall be calculated to the
nearest one one-hundredth of a share of Common Stock.
(c) (i) In case the Company shall at any time or from time to time
after a Notice Date (A) pay a dividend, or make a distribution, on the
outstanding shares of Common Stock in shares of Common Stock, (B) subdivide the
outstanding shares of Common Stock, (C) combine the outstanding shares of Common
Stock into a smaller number of shares or (D) issue by reclassification of the
shares of Common Stock any shares of capital stock of the Company, then, and in
each such case, the Exchange Rate applicable with respect to such Notice Date
shall be adjusted so that the holder of any shares of Preferred Stock required
to be surrendered for exchange on the applicable Exchange Date shall be entitled
to receive the number of shares of Common Stock or other securities of the
Company which such holder would have owned or have been entitled to receive
after the happening of any of the events described above, had such shares of
Preferred Stock been surrendered for exchange immediately prior to the happening
of such event or the record date therefor, whichever is earlier. An adjustment
made pursuant to this clause (i) shall become effective (x) in the case of any
such dividend or distribution, immediately after the close of business on the
record date for the determination of holders of shares of Common Stock entitled
to receive such dividend or distribution, or (y) in the case of such
subdivision, reclassification or combination, at the close of business on the
day upon which such corporate action becomes effective.
(ii) In case the Company shall at any time or from time to
time after a Notice Date declare, order, pay or make a dividend or other
distribution (including, without limitation, any distribution of stock or other
securities or property or rights or warrants to subscribe for securities of the
Company or any of its Subsidiaries by way of dividend or spinoff), on its Common
Stock, other than dividends or distributions of shares of Common Stock which are
referred to in clause (i) of this paragraph (c), and regular quarterly cash
dividends on the Common Stock, at such rates as may be fixed by the Board of
Directors at any time or from time to time, then, and in each such case, the
Exchange Rate applicable with respect to such Notice date shall be adjusted so
that the holder of each share of Preferred Stock required to be surrendered on
the applicable Exchange Date shall be entitled to receive, upon the exchange
thereof, the number of shares of Common Stock determined by multiplying (1) the
applicable Exchange Rate on the day immediately prior to the record date fixed
for the determination of stockholders entitled to receive such dividend or
distribution by (2) a fraction, the numerator of which shall be the Market Price
per share of Common Stock as of such date, and the denominator of which shall be
such Market Price per share of Common Stock less the Fair Market Value per share
of Common Stock of such dividend or distribution.
(iii) For purposes of this paragraph (c), the number of shares
of
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Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Company.
(iv) The certificate of any firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company (which may be the firm of independent public accountants regularly
employed by the Company) shall be presumptively correct for any computation made
under this paragraph (c).
(v) If the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of exchange granted by this paragraph
(c) or in the applicable Exchange Rate shall be required by reason of the taking
of such record.
(vi) In the event that, as a result of an adjustment made
pursuant to this paragraph (c), the holder of any share of Preferred Stock
required to be surrendered for exchange shall be entitled to receive any shares
of capital stock of the Company other than shares of Common Stock, the
applicable Exchange Rate of such other shares so receivable upon conversion of
any shares of Preferred Stock shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to the provisions
with respect to Common Stock contained in this paragraph (c).
(vii) For the purposes of this paragraph (c):
"Adjustment Period" shall mean the period of twenty (20)
consecutive Trading Dates preceding the date as of which the Fair Market Value
or Market Price of any security is to be determined.
"Market Price," when used with reference to shares of Common
Stock or other securities as of any date, shall mean the average of the daily
Closing Prices per share of Common Stock or such other securities for the
Adjustment Period.
"Fair Market Value" shall mean, as to shares of Common Stock
or any other securities of the Company or any other issuer which are publicly
traded, the average of the Closing Prices of such shares or securities for each
day of the Adjustment Period. The "Fair Market Value" of any security which is
not publicly traded or of any other property shall mean the fair value thereof
as determined in good faith by the Board of Directors on the basis of such
relevant factors as the Board of Directors in good faith considers appropriate.
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(d) Before taking any action which would cause an adjustment to the
Exchange Rate that would cause the Company to issue shares of Common Stock for
consideration below the then par value (if any) of the Common Stock upon
exchange of the Preferred Stock, the Company will take any corporate action that
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock at
the Exchange Rate.
(e) Notice of exchange of Preferred Stock will be given by (i)
first-class mail, not less than 20 nor more than 60 days prior to the date fixed
for exchange thereof, to each record holder of shares of Preferred Stock at the
address of such holder in the books of the Company and (ii) publication in The
Wall Street Journal. On the date such notices are mailed the Company shall issue
a press release announcing the exchange. The mailed and published notice shall
state, as appropriate: (1) the Exchange Date for the shares of Preferred Stock
to be exchanged (the "Exchange Date") and record date for purposes of such
exchange; (2) the number of shares of Preferred Stock to be exchanged and, if
fewer than all shares of Preferred Stock held by any holder are to be exchanged,
the number of shares of such holder to be exchanged; (3) the place or places at
which certificates for shares of Preferred Stock are to be surrendered, and (4)
that dividends on the Preferred Stock to be exchanged shall cease to accrue on
the applicable Exchange Date, except as otherwise provided herein. From and
after the applicable Exchange Date (unless the Company defaults in delivery of
the shares of Common Stock to be exchanged for Preferred Stock, or any cash with
respect to accrued and unpaid dividends up to the applicable Exchange Date, in
which event the exchange shall be null and void as to all shares of Preferred
Stock), dividends on the Preferred Stock to be exchanged on such Exchange Date
will cease to accrue, such shares will no longer be deemed to be outstanding,
and all rights of the holders thereof with respect to such shares (except the
right to receive shares of Common Stock in exchange therefor and any dividends
due on a Quarterly Dividend Payment Date after the applicable Exchange Date
relating to a dividend record date prior to the Exchange Date) will cease.
(f) Each holder of shares of Preferred Stock to be exchanged shall
surrender the certificates evidencing such shares (properly endorsed or assigned
for transfer, if the Board of Directors of the Company shall so require and the
notice shall so state) to the Company at the place designated in the notice of
such exchange and shall thereupon be entitled to receive certificates evidencing
shares of Common Stock and to receive any other funds payable pursuant to this
Section 8 upon such surrender and following the applicable Exchange Date.
(g) No fractional shares or scrip representing fractional shares of
Common Stock shall be issued upon the exchange of any shares of Preferred Stock.
In lieu of any fractional interest in a share of Common Stock which would
otherwise be deliverable upon the exchange of a share of Preferred Stock, the
Company shall, at its election, either
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(i) sell such fractional share, as agent for the person entitled thereto, and
distribute the proceeds of such sale, net of any discounts, commissions, fees or
expenses associated with such sale, to such person, all in accordance with
applicable rules under the Securities Act of 1933, as amended, or (ii) pay to
the holder entitled thereto an amount in cash (computed to the nearest cent)
equal to the current value such fraction represents of the Market Price, or
(iii) round such fractional share otherwise issuable to any holder up to the
nearest whole number of shares of Common Stock. If more than one share shall be
surrendered for exchange by the same holder, the number of full shares of Common
Stock issuable to such holder upon exchange thereof shall be computed on the
basis of the aggregate number of shares of Preferred Stock so surrendered by
such holder.
SECTION 9. Status of Reacquired Shares. If shares of Preferred Stock
are redeemed pursuant to Section 6 or exchanged pursuant to Section 8, the
shares so reacquired shall, upon compliance with any statutory requirements,
assume the status of authorized but unissued shares of preferred stock of the
Company, but may not be reissued as Preferred Stock.
SECTION 10. Amendment. The Restated Certificate of Incorporation of
the Company shall not be amended in any manner which would alter or change the
powers, preferences or special rights of the shares of Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of two-thirds
or more of the outstanding shares of Preferred Stock, voting together as a
single class, the holder of each such share being entitled to 50 votes.
SECTION 11. Preemptive Rights. The Preferred Stock does not entitle
the holders thereof to any preemptive or subscription rights in respect of any
securities of the Company.
SECTION 12. Severability of Provisions. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective and valid under
applicable law.
IN WITNESS WHEREOF, El Paso Energy Corporation has caused this
Certificate of Designation to be duly executed by its duly authorized officer
and attested by its Secretary this __ day of ______, _____.
E-12
EXHIBIT 99.1
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of March 13, 1999 (this
"Agreement"), by and between SONAT INC., a Delaware corporation (the "Company"),
and EL PASO ENERGY CORPORATION, a Delaware corporation ("Parent").
RECITALS
A. The Company and Parent have entered into an Agreement and Plan of
Reorganization and Merger, dated as of the date hereof (the "Merger Agreement"),
providing for, among other things, a business combination between Parent and the
Company.
B. As a condition and inducement to the Company's willingness to
enter into the Merger Agreement, the Company has requested that Parent agree,
and Parent has agreed, to grant the Company the option contemplated hereby.
C. Capitalized terms not defined herein shall have the meanings set
forth in the Merger Agreement.
D. This Agreement and the Merger Agreement are being entered into
simultaneously.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
Company and Parent agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
herein, Parent hereby grants to the Company an irrevocable option (the "Option")
to purchase up to 24,349,638 (as adjusted as set forth herein) shares (the
"Option Shares") of Parent's Common Stock, par value $3.00 per share ("Parent
Stock"), at a purchase price of $37.725 (as adjusted as set forth herein) per
Option Share (the "Purchase Price").
2. Exercise of Option. (a) The Company may exercise the Option, in
whole or in part, at any time or from time to time after the occurrence of any
event as a result of which the Company is entitled to receive the Parent
Termination Fee pursuant to Section 8.2 of the Merger Agreement if the Merger
Agreement is being or has been terminated (an "Exercise Event"); provided,
however, that except as provided in the last sentence of this Section 2(a), the
Option shall terminate and be of no further force and effect upon the earliest
to occur of (A) the Effective Time and (B) nine months after the first
occurrence of an Exercise Event. Notwithstanding the termination of the Option,
the Company shall be entitled to purchase the Option Shares if it has exercised
the Option in accordance with the terms hereof prior to the termination of the
Option and the
<PAGE>
termination of the Option shall not affect any rights hereunder which by their
terms do not terminate or expire prior to or as of such termination.
(b) Notice of Exercise. In the event that the Company wishes
to exercise the Option, it shall send to Parent a written notice (the date of
each such notice being herein referred to as a "Notice Date") to that effect,
which notice also specifies a date not earlier than three business days nor
later than 30 business days from the Notice Date for the closing of such
purchase (an "Option Closing Date"); provided, however, that (i) if the closing
of a purchase and sale pursuant to the Option (an "Option Closing") cannot be
consummated by reason of any applicable judgment, decree, order, law or
regulation, the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated and (ii) without limiting the
foregoing, if prior notification to or approval of any regulatory authority is
required in connection with such purchase, Parent and the Company shall promptly
file the required notice or application for approval and shall cooperate in the
expeditious filing of such notice or application, and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which, as the case may be, (A) any required notification period has expired or
been terminated or (B) any required approval has been obtained, and in either
event, any requisite waiting period has expired or been terminated. Each of
Parent and the Company agrees to use commercially reasonable efforts to
cooperate with and provide information to the other, for the purpose of any
required notice or application for approval. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto. The place of any Option
Closing shall be at the offices of Fried, Frank, Harris, Shriver & Jacobson, One
New York Plaza, New York, New York, and the time of the Option Closing shall be
10:00 a.m. (Eastern Time) on the applicable Option Closing Date.
3. Payment and Delivery of Certificates. (a) At any Option Closing,
the Company shall pay to Parent in immediately available funds by wire transfer
to a bank account designated in writing by Parent an amount equal to the
Purchase Price multiplied by the number of Option Shares for which the Option is
being exercised; provided, that failure or refusal of Parent to designate a bank
account shall not preclude the Company from exercising the Option, in whole or
in part.
(b) At any Option Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), Parent shall deliver to
the Company a certificate or certificates representing the Option Shares to be
purchased at such Option Closing, which Option Shares shall be free and clear of
all liens, claims, charges and encumbrances of any kind whatsoever. If at the
time of issuance of the Option Shares pursuant to the exercise of the Option
hereunder Parent shall not have redeemed the rights issued pursuant to the
Parent Rights Agreement (the "Parent Rights"), or shall have issued any similar
securities, then each Option Share issued pursuant to such
2
<PAGE>
exercise shall be accompanied by a corresponding Parent Right or new rights with
terms substantially the same as and at least as favorable to the Company as are
provided under the Parent Rights Agreement or any similar agreement then in
effect.
(c) Restrictive Legend. Certificates for the Option Shares
delivered at any Option Closing shall have typed or printed thereon a
restrictive legend which shall read substantially as follows:
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY BE REOFFERED OR SOLD ONLY IF SO
REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE."
It is understood and agreed that the foregoing legend shall be removed by
delivery of substitute certificate(s) without such legend upon the sale of the
Option Shares pursuant to a registered public offering or Rule 144 under the
Securities Act or any other sale as a result of which such legend is no longer
required.
4. Adjustment upon Changes in Capitalization, Etc. (a) In the event
of any change in Parent Stock by reason of a stock dividend, split-up, merger,
recapitalization, combination, exchange of shares or similar transaction, the
type and number of shares or securities subject to the Option, and the Purchase
Price therefor, shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction, so that the Company shall
receive upon exercise of the Option the number and class of shares or other
securities or property that the Company would have received in respect of Parent
Stock if the Option had been exercised immediately prior to such event or the
record date therefor, as applicable.
(b) Without limiting the parties' relative rights and
obligations under the Merger Agreement, in the event that Parent enters into an
agreement (i) to consolidate with or merge into any person, other than the
Company or one of its subsidiaries, and Parent shall not be the continuing or
surviving corporation in such consolidation or merger, (ii) to permit any
person, other than the Company or one of its subsidiaries, to merge into or
consolidate with Parent and Parent shall be the continuing or surviving
corporation, but in connection with such merger or consolidation, the shares of
Parent Stock outstanding immediately prior to the consummation of such merger or
consolidation shall be changed into or exchanged for stock or other securities
of Parent or any other person or cash or any other property, or the shares of
Parent Stock outstanding immediately prior to the consummation of such merger or
consolidation shall, after such merger or consolidation, represent less than 50%
of the outstanding voting securities of
3
<PAGE>
the merged or consolidated company, or (iii) to sell or otherwise transfer all
or substantially all of its assets to any person, other than the Company or one
of its subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities, cash or property that the Company would have received in respect of
Parent Stock if the Option had been exercised immediately prior to such
consolidation, merger, sale or transfer, or the record date therefor, as
applicable.
(c) If, prior to the termination of the Option in accordance
with Section 2, Parent enters into any agreement (x) pursuant to which all
outstanding shares of Parent Stock are to be purchased for, or converted into
the right to receive in whole or in part (other than in respect of fractional
shares) cash or (y) with respect to any transaction described in clauses (i),
(ii) and (iii) of paragraph (b) (each of (x) and (y), a "Transaction"), Parent
covenants that proper provision shall be made in such agreement to provide that,
if the Option shall not theretofore have been exercised, then upon the
consummation of the Transaction (which in the case of a Transaction involving a
tender offer shall be when shares of Parent Stock are accepted for payment), the
Company shall have the right, at its election, by not less than two business
days' prior written notice to Parent, to receive in exchange for the
cancellation of the Option an amount in cash equal to the Spread. For purposes
of this Agreement, the term "Spread" means the number of Option Shares
multiplied by the excess of (A) the higher of the closing sales price per share
of Parent Stock on the principal securities exchange or quotation system on
which the Parent Stock is then listed or traded, as reported by The Wall Street
Journal, on the day (i) the average of the closing prices of the shares of
Parent Stock as reported by The Wall Street Journal over the ten-trading day
period beginning on the trading day immediately following the announcement of
such agreement or (ii) the average of the closing prices of the shares of Parent
Stock as reported by The Wall Street Journal over the ten-trading day period
ending on the trading day immediately prior to the consummation of such
Transaction, over (B) the Purchase Price. Notwithstanding the foregoing, the
amount of the Spread, when added to any Parent Termination Fee paid or payable
to the Company, shall not exceed $175 million.
(d) Following exercise of the Option by the Company, in the
event that the Company sells, pledges or otherwise disposes of (including,
without limitation, by merger or exchange) any of the Option Shares (a "Sale"),
then:
(i) any Parent Termination Fee due and payable by
Parent following such time shall be reduced by an amount, if any, equal to the
excess of (1) the total of (A) the Parent Termination Fee and (B) the excess of
(w) the aggregate amounts
4
<PAGE>
received (whether in cash, securities or otherwise) by the Company in all such
Sales, over (x) the aggregate Purchase Price of the Option Shares sold in such
Sales (such excess in this sub-clause (B) being the "Offset Amounts") over (2)
$175 million; and
(ii) if Parent has paid to the Company the Parent
Termination Fee prior to the Sale, then the Company shall immediately remit to
Parent, as additional Purchase Price for the Option Shares, the excess, if any,
of (y) the total of the Parent Termination Fee and the Offset Amounts of all
Sales over (z) $175 million.
(e) Notwithstanding anything to the contrary in this Agreement
or the Merger Agreement, in no event shall the aggregate of any Parent
Termination Fee, all Offset Amounts and the Spread exceed $175 million.
5. Covenants of the Company and Parent. (a) Parent covenants (i) to
maintain, free from preemptive rights, sufficient authorized but unissued or
treasury shares of Parent Stock so that the Option may be fully exercised
without additional authorization of Parent Stock after giving effect to all
other options, warrants, convertible securities and other rights of third
parties to purchase shares of Parent Stock; (ii) not to seek to avoid the
observance or performance of any of the covenants, agreements or conditions to
be observed or performed hereunder by Parent and not to take any action which
would cause any of its representations or warranties not to be true; and (iii)
not to engage in any action or omit to take any action which would have the
effect of preventing or disabling Parent from delivering the Option Shares to
the Company upon exercise of the Option or otherwise performing its obligations
under this Agreement.
(b) The Company covenants not to sell, assign, transfer or
otherwise dispose of the Option, any part thereof, or any of its other rights
hereunder to any third party without the prior written consent of Parent which
consent shall not be unreasonably withheld or delayed. The Company may offer or
sell Option Shares only pursuant to an registration under the Securities Act or
an exemption therefrom.
6. Listing. If Parent Stock or any other securities to be acquired
upon exercise of the Option are then listed on the NYSE (or any other national
securities exchange or national securities quotation system), Parent, upon the
request of the Company, shall promptly file an application to list the shares of
Parent Stock or other securities to be acquired upon exercise of the Option on
the NYSE (and any such other national securities exchange or national securities
quotation system) and shall use reasonable best efforts to obtain approval of
such listing as promptly as practicable.
7. Loss or Mutilation. Upon receipt by Parent of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Parent shall execute and
5
<PAGE>
deliver a new Agreement of like tenor and date. Any such new Agreement executed
and delivered shall constitute an additional contractual obligation on the part
of Parent, whether or not the Agreement so lost, stolen, destroyed, or mutilated
shall at any time be enforceable by anyone.
8. Registration Rights. Parent shall, if requested by the Company at
any time and from time to time within two years after the date of first exercise
of the Option, as expeditiously as possible prepare and file up to two
registration statements under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of any or all
securities that have been acquired by exercise by the Company of the Option, in
accordance with the intended method of sale or other disposition stated by the
Company, including a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision; and Parent shall use reasonable best
efforts to qualify such securities under any applicable state securities laws.
The Company agrees to use reasonable best efforts to cause, and to cause any
underwriters of any sale or other disposition to cause, any sale or other
disposition pursuant to such registration statement to be effected on a widely
distributed basis. Parent shall use reasonable best efforts to cause each such
registration statement to become effective, to obtain all consents or waivers of
other parties which are required therefor, and to keep such registration
statement effective for such period not in excess of 90 calendar days from the
day such registration statement first becomes effective as may be reasonably
necessary to effect such sale or other disposition. The obligations of the
Parent to file a registration statement and to maintain its effectiveness may be
suspended for one or more periods of time not exceeding 90 calendar days in the
aggregate with respect to any registration statement if the Board of Directors
of Parent shall have determined that the filing of such registration statement
or the maintenance of its effectiveness would require disclosure of nonpublic
information that would materially and adversely affect Parent or would interfere
with a planned merger, sale of material assets, recapitalization or other
significant corporate action (other than the issuance of equity securities). Any
registration statement prepared and filed under this Section, and any sale
covered thereby, shall be at Parent's expense except for underwriting discounts
or commissions and brokers' fees, which shall be borne solely by the Company.
The Company shall provide in writing all information reasonably requested by
Parent for inclusion in any registration statement to be filed hereunder. If,
during the time periods referred to in the first sentence of this Section,
Parent effects a registration under the Securities Act of Parent's equity
securities for its own account or for any other of its stockholders (other than
on Form S-4 or Form S-8, or any successor form), it shall allow the Company the
right to participate in such registration; provided that, if the managing
underwriters of such offering advise Parent that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering on a commercially reasonable basis, priority
shall be given to the securities intended to be included therein by Parent for
its own account and, thereafter, Parent shall include the securities requested
6
<PAGE>
to be included therein by the Company pro rata with the securities intended to
be included therein by other stockholders of Parent. In connection with any
registration pursuant to this Section, Parent and the Company shall provide each
other and any underwriter of the offering with customary representations,
warranties, covenants, indemnification, and contribution in connection with such
registration.
9. 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.
(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 the Company:
Sonat Inc.
Amsouth-Sonat Tower
Birmingham, AL 35203
Attention: William A. Smith, Esq.
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
7
<PAGE>
If to Parent:
El Paso Energy Corporation
1001 Louisiana Street
Houston, TX 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.
(e) Assignment; Binding Effect; No Third Party Beneficiaries.
Neither this Agreement nor any of the rights, interests or obligations hereunder
shall be sold, assigned, disposed of or otherwise transferred by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. 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, 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.
(f) Further Assurances. In the event of any exercise of the
Option by the Company, the Company and Parent shall execute and deliver all such
documents and instruments and take all such further action that may be
reasonably necessary in order to consummate the transactions provided for by
such exercise.
(g) Survival. All Parent's representations, warranties and
covenants contained herein shall survive each Option Closing.
(h) 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
8
<PAGE>
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.
(i) 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.
9
<PAGE>
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
10
EXHIBIT 99.2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of March 13, 1999 (this
"Agreement"), by and between SONAT INC., a Delaware corporation (the "Company"),
and EL PASO ENERGY CORPORATION, a Delaware corporation ("Parent").
RECITALS
A. The Company and Parent have entered into an Agreement and Plan of
Reorganization and Merger, dated as of the date hereof (the "Merger Agreement"),
providing for, among other things, a business combination between Parent and the
Company.
B. As a condition and inducement to Parent's willingness to enter
into the Merger Agreement, Parent has requested that the Company agree, and the
Company has agreed, to grant Parent the option contemplated hereby.
C. Capitalized terms not defined herein shall have the meanings set
forth in the Merger Agreement.
D. This Agreement and the Merger Agreement are being entered into
simultaneously.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
Company and Parent agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
herein, the Company hereby grants to Parent an irrevocable option (the "Option")
to purchase up to 21,899,515 (as adjusted as set forth herein) shares (the
"Option Shares") of the Company's Common Stock, par value $1.00 per share
("Company Stock"), at a purchase price of $27.238 (as adjusted as set forth
herein) per Option Share (the "Purchase Price").
2. Exercise of Option. (a) Parent may exercise the Option, in whole
or in part, at any time or from time to time after the occurrence of any event
as a result of which Parent is entitled to receive the Company Termination Fee
pursuant to Section 8.2 of the Merger Agreement and the Merger Agreement is
being or has been terminated (an "Exercise Event"); provided, however, that
except as provided in the last sentence of this Section 2(a), the Option shall
terminate and be of no further force and effect upon the earliest to occur of
(A) the Effective Time and (B) nine months after the first occurrence of an
Exercise Event. Notwithstanding the termination of the Option, Parent shall be
entitled to purchase the Option Shares if it has exercised the Option in
accordance with the terms hereof prior to the termination of the Option and the
termination of the Option
<PAGE>
shall not affect any rights hereunder which by their terms do not terminate or
expire prior to or as of such termination.
(b) Notice of Exercise. In the event that Parent wishes to
exercise the Option, it shall send to the Company a written notice (the date of
each such notice being herein referred to as a "Notice Date") to that effect,
which notice also specifies a date not earlier than three business days nor
later than 30 business days from the Notice Date for the closing of such
purchase (an "Option Closing Date"); provided, however, that (i) if the closing
of a purchase and sale pursuant to the Option (an "Option Closing") cannot be
consummated by reason of any applicable judgment, decree, order, law or
regulation, the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated and (ii) without limiting the
foregoing, if prior notification to or approval of any regulatory authority is
required in connection with such purchase, Parent and the Company shall promptly
file the required notice or application for approval and shall cooperate in the
expeditious filing of such notice or application, and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which, as the case may be, (A) any required notification period has expired or
been terminated or (B) any required approval has been obtained, and in either
event, any requisite waiting period has expired or been terminated. Each of
Parent and the Company agrees to use commercially reasonable efforts to
cooperate with and provide information to the other, for the purpose of any
required notice or application for approval. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto. The place of any Option
Closing shall be at the offices of Fried, Frank, Harris, Shriver & Jacobson, One
New York Plaza, New York, New York, and the time of the Option Closing shall be
10:00 a.m. (Eastern Time) on the applicable Option Closing Date.
3. Payment and Delivery of Certificates. (a) At any Option Closing,
Parent shall pay to the Company in immediately available funds by wire transfer
to a bank account designated in writing by the Company an amount equal to the
Purchase Price multiplied by the number of Option Shares for which the Option is
being exercised; provided, that failure or refusal of the Company to designate a
bank account shall not preclude Parent from exercising the Option, in whole or
in part.
(b) At any Option Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), the Company shall
deliver to Parent a certificate or certificates representing the Option Shares
to be purchased at such Option Closing, which Option Shares shall be free and
clear of all liens, claims, charges and encumbrances of any kind whatsoever. If
at the time of issuance of the Option Shares pursuant to the exercise of the
Option hereunder, the Company shall not have redeemed the rights issued pursuant
to the Company Rights Agreement (the "Company Rights"), or shall have issued any
similar securities, then each Option Share issued
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<PAGE>
pursuant to such exercise shall be accompanied by a corresponding Company Right
or new rights with terms substantially the same as and at least as favorable to
Parent as are provided under the Company Rights Agreement or any similar
agreement then in effect.
(c) Restrictive Legend. Certificates for the Option Shares
delivered at any Option Closing shall have typed or printed thereon a
restrictive legend which shall read substantially as follows:
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY BE REOFFERED OR SOLD ONLY IF SO
REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE."
It is understood and agreed that the foregoing legend shall be removed by
delivery of substitute certificate(s) without such legend upon the sale of the
Option Shares pursuant to a registered public offering or Rule 144 under the
Securities Act or any other sale as a result of which such legend is no longer
required.
4. Adjustment upon Changes in Capitalization, Etc. (a) In the event
of any change in Company Stock by reason of a stock dividend, split-up, merger,
recapitalization, combination, exchange of shares or similar transaction, the
type and number of shares or securities subject to the Option, and the Purchase
Price therefor, shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction, so that Parent shall receive
upon exercise of the Option the number and class of shares or other securities
or property that Parent would have received in respect of Company Stock if the
Option had been exercised immediately prior to such event or the record date
therefor, as applicable.
(b) Without limiting the parties' relative rights and
obligations under the Merger Agreement, in the event that the Company enters
into an agreement (i) to consolidate with or merge into any person, other than
Parent or one of its subsidiaries, and the Company shall not be the continuing
or surviving corporation in such consolidation or merger, (ii) to permit any
person, other than Parent or one of its subsidiaries, to merge into or
consolidate with the Company and the Company shall be the continuing or
surviving corporation, but in connection with such merger or consolidation, the
shares of Company Stock outstanding immediately prior to the consummation of
such merger or consolidation shall be changed into or exchanged for stock or
other securities of the Company or any other person or cash or any other
property, or the shares of Company Stock outstanding immediately prior to the
consummation of such merger or consolidation shall, after such merger or
consolidation,
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<PAGE>
represent less than 50% of the outstanding voting securities of the merged or
consolidated company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Parent or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities, cash or property that Parent would have received in respect of
Company Stock if the Option had been exercised immediately prior to such
consolidation, merger, sale or transfer, or the record date therefor, as
applicable.
(c) If, prior to the termination of the Option in accordance
with Section 2, the Company enters into any agreement (x) pursuant to which all
outstanding shares of Company Stock are to be purchased for, or converted into
the right to receive in whole or in part (other than in respect of fractional
shares) cash or (y) with respect to any transaction described in clauses (i),
(ii) and (iii) of paragraph (b) (each of (x) and (y), a "Transaction"), the
Company covenants that proper provision shall be made in such agreement to
provide that, if the Option shall not theretofore have been exercised, then upon
the consummation of the Transaction (which in the case of a Transaction
involving a tender offer shall be when shares of Company Stock are accepted for
payment), Parent shall have the right, at its election, by not less than two
business days' prior written notice to the Company, to receive in exchange for
the cancellation of the Option an amount in cash equal to the Spread. For
purposes of this Agreement, the term "Spread" means the number of Option Shares
multiplied by the excess of (A) the higher of the closing sales price per share
of Company Stock on the principal securities exchange or quotation system on
which the Company Stock is then listed or traded, as reported by The Wall Street
Journal, on the day (i) the average of the closing prices of the shares of
Company Stock as reported by The Wall Street Journal over the ten-trading day
period beginning on the trading day immediately following the announcement of
such agreement or (ii) the average of the closing prices of the shares of
Company Stock as reported by The Wall Street Journal over the ten-trading day
period ending on the trading day immediately prior to the consummation of such
Transaction, over (B) the Purchase Price. Notwithstanding the foregoing, the
amount of the Spread, when added to any Company Termination Fee paid or payable
to Parent, shall not exceed $175 million.
(d) Following exercise of the Option by Parent, in the event
that Parent sells, pledges or otherwise disposes of (including, without
limitation, by merger or exchange) any of the Option Shares (a "Sale"), then:
(i) any Company Termination Fee due and payable by
the Company following such time shall be reduced by an amount, if any, equal to
the excess of (1) the total of (A) the Company Termination Fee and (B) the
excess of (w) the
4
<PAGE>
aggregate amounts received (whether in cash, securities or otherwise) by Parent
in all such Sales, over (x) the aggregate Purchase Price of the Option Shares
sold in such Sales (such excess in this sub-clause (B) being the "Offset
Amounts") over (2) $175 million; and
(ii) if the Company has paid to Parent the Company
Termination Fee prior to the Sale, then Parent shall immediately remit to the
Company, as additional Purchase Price for the Option Shares, the excess, if any,
of (y) the total of the Termination Fee and the Offset Amounts of all Sales over
(z) $175 million.
(e) Notwithstanding anything to the contrary in this Agreement
or the Merger Agreement, in no event shall the aggregate of any Company
Termination Fee, all Offset Amounts and the Spread exceed $175 million.
5. Covenants of the Company and Parent. (a) The Company covenants
(i) to maintain, free from preemptive rights, sufficient authorized but unissued
or treasury shares of Company Stock so that the Option may be fully exercised
without additional authorization of Company Stock after giving effect to all
other options, warrants, convertible securities and other rights of third
parties to purchase shares of Company Stock; (ii) not to seek to avoid the
observance or performance of any of the covenants, agreements or conditions to
be observed or performed hereunder by the Company and not to take any action
which would cause any of its representations or warranties not to be true; and
(iii) not to engage in any action or omit to take any action which would have
the effect of preventing or disabling the Company from delivering the Option
Shares to the Parent upon exercise of the Option or otherwise performing its
obligations under this Agreement.
(b) Parent covenants not to sell, assign, transfer or
otherwise dispose of the Option, any part thereof, or any of its other rights
hereunder to any third party without the prior written consent of the Company
which consent shall not be unreasonably withheld or delayed. Parent may offer or
sell Option Shares only pursuant to a registration under the Securities Act or
an exemption therefrom.
6. Listing. If Company Stock or any other securities to be acquired
upon exercise of the Option are then listed on the NYSE (or any other national
securities exchange or national securities quotation system), the Company, upon
the request of Parent, shall promptly file an application to list the shares of
Company Stock or other securities to be acquired upon exercise of the Option on
the NYSE (and any such other national securities exchange or national securities
quotation system) and shall use reasonable best efforts to obtain approval of
such listing as promptly as practicable.
7. Loss or Mutilation. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement,
5
<PAGE>
and (in the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Agreement, if
mutilated, the Company shall execute and deliver a new Agreement of like tenor
and date. Any such new Agreement executed and delivered shall constitute an
additional contractual obligation on the part of the Company, whether or not the
Agreement so lost, stolen, destroyed, or mutilated shall at any time be
enforceable by anyone.
8. Registration Rights. The Company shall, if requested by Parent at
any time and from time to time within two years after the date of first exercise
of the Option, as expeditiously as possible prepare and file up to two
registration statements under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of any or all
securities that have been acquired by exercise by Parent of the Option, in
accordance with the intended method of sale or other disposition stated by
Parent, including a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision; and the Company shall use
commercially reasonable efforts to qualify such securities under any applicable
state securities laws. Parent agrees to use reasonable best efforts to cause,
and to cause any underwriters of any sale or other disposition to cause, any
sale or other disposition pursuant to such registration statement to be effected
on a widely distributed basis. The Company shall use reasonable best efforts to
cause each such registration statement to become effective, to obtain all
consents or waivers of other parties which are required therefor, and to keep
such registration statement effective for such period not in excess of 90
calendar days from the day such registration statement first becomes effective
as may be reasonably necessary to effect such sale or other disposition. The
obligations of the Company to file a registration statement and to maintain its
effectiveness may be suspended for one or more periods of time not exceeding 90
calendar days in the aggregate with respect to any registration statement if the
Board of Directors of the Company shall have determined that the filing of such
registration statement or the maintenance of its effectiveness would require
disclosure of nonpublic information that would materially and adversely affect
the Company or would interfere with a planned merger, sale of material assets,
recapitalization or other significant corporate action (other than the issuance
of equity securities). Any registration statement prepared and filed under this
Section, and any sale covered thereby, shall be at the Company's expense except
for underwriting discounts or commissions and brokers' fees, which shall be
borne solely by Parent. Parent shall provide in writing all information
reasonably requested by the Company for inclusion in any registration statement
to be filed hereunder. If, during the time periods referred to in the first
sentence of this Section, the Company effects a registration under the
Securities Act of the Company's equity securities for its own account or for any
other of its stockholders (other than on Form S-4 or Form S-8, or any successor
form), it shall allow Parent the right to participate in such registration;
provided that, if the managing underwriters of such offering advise the Company
that in their opinion the number of securities requested to be included in such
registration exceeds the number which can be
6
<PAGE>
sold in such offering on a commercially reasonable basis, priority shall be
given to the securities intended to be included therein by the Company for its
own account and, thereafter, the Company shall include the securities requested
to be included therein by Parent pro rata with the securities intended to be
included therein by other stockholders of the Company. In connection with any
registration pursuant to this Section, Parent and the Company shall provide each
other and any underwriter of the offering with customary representations,
warranties, covenants, indemnification, and contribution in connection with such
registration.
9. 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.
(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 the Company:
Sonat Inc.
Amsouth-Sonat Tower
Birmingham, AL 35203
Attention: William A. Smith, Esq.
Telecopy No.: (205) 325-7444
7
<PAGE>
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:
El Paso Energy Corporation
1001 Louisiana Street
Houston, TX 77002
Attention: Britton White, Jr., Esq.
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 sold, assigned, disposed of or otherwise transferred by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. 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, 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.
(f) Further Assurances. In the event of any exercise of the
Option by Parent, the Company and Parent shall execute and deliver all such
documents and instruments and take all such further action that may be
reasonably necessary in order to consummate the transactions provided for by
such exercise.
8
<PAGE>
(g) Survival. All the Company's representations, warranties
and covenants contained herein shall survive each Option Closing.
(h) 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.
(i) 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.
9
<PAGE>
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
10
EXHIBIT 99.3
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 adoption of the
<PAGE>
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
2
<PAGE>
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
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, license,
lease,
3
<PAGE>
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.
4
<PAGE>
(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.
5
<PAGE>
(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.
6
<PAGE>
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
7
<PAGE>
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.
8
EXHIBIT 99.4
VOTING AGREEMENT
VOTING AGREEMENT (this "Agreement"), dated March 13, 1999 by and
between El Paso Energy Corporation, a Delaware corporation ("Parent"), and
Ronald L. Kuehn, Jr. ( the "Stockholder").
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 Stockholder owns beneficially
and of record the shares of common stock, par value $1.00 per share, of the
Company ("Company Common Stock"), set forth opposite his name on Exhibit A (the
shares of Company Common Stock owned by the Stockholder are referred to as the
"Owned Shares").
C. As an inducement and a condition to its willingness to enter into
the Merger Agreement, Parent has required that the Stockholder 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. The 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 shall (i) appear at the meeting or
otherwise cause his Owned Shares, together with any shares of Company Common
Stock acquired by him after the date of this Agreement, whether upon the
exercise of options, conversion of convertible securities or otherwise (such
acquired shares, together with the Owned Shares, are referred to herein as the
"Shares"), to be counted as present thereat for purposes of establishing a
quorum, or (ii) vote his Shares, or cause his Shares to be voted, in favor of
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby, and any action required in furtherance thereof, if the
Merger Agreement (as in
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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 Stockholder) and the transactions
contemplated thereby are presented at the Company Stockholders' Meeting.
2. Irrevocable Proxy. As security for the Stockholder's obligations
under Section 1 hereof, the Stockholder hereby irrevocably constitutes and
appoints Parent as his 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. The
Stockholder hereby revokes all other proxies and powers of attorney with respect
to his Shares that he 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 the 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 Stockholder 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
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
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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. [Intentionally Omitted.]
6. Covenants. The Stockholder hereby covenants and agrees as follows:
(a) The 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 the Stockholder contained herein untrue or
incorrect or have the effect of preventing or disabling the Stockholder from
performing his obligations under this Agreement.
(b) The Stockholder hereby agrees, while this Agreement is in effect,
to promptly notify Parent of the number of new shares of capital stock acquired
by the Stockholder, if any, after the date of this Agreement.
(c) The 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, the 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 or officer 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
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DELAWARE, WITHOUT REGARD TO ITS CONFLICT OF LAWS RULES OR PRINCIPLES.
(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 the Stockholder:
to the address set forth
beneath the name of the
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 either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party. 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 any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
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<PAGE>
(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.
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<PAGE>
IN WITNESS WHEREOF, Parent and the Stockholder 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/ Ronald L. Kuehn, Jr.
------------------------------------
Ronald L. Kuehn, Jr.
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<PAGE>
EXHIBIT A
RONALD L. KUEHN, JR.
SHARES OF SONAT INC.
COMMON STOCK
DIRECT 4,654
RESTRICTED 118,400
SONAT SAVINGS PLAN 53,455
EXHIBIT 99.5
FOR IMMEDIATE RELEASE
EL PASO ENERGY CORPORATION AND SONAT INC.
ANNOUNCE MERGER AGREEMENT
HOUSTON, TEXAS, MARCH 15, 1999--El Paso Energy Corporation (NYSE:EPG) and
Sonat Inc. (NYST:SNT) announced today the execution of definitive agreements for
the merger of El Paso Energy and Sonat. The total value of the transaction is
approximately $6 billion, including $2 billion of assumed Sonat debt. In the
merger, each Sonat share will be converted into one share of El Paso Energy
common stock. It is expected that the merger will be completed during the third
or fourth quarter of 1999. The total enterprise value of the combined company,
based on El Paso's closing price on Friday, would exceed $14 billion.
"The merger between El Paso and Sonat will create the preeminent natural
gas company in North America. The combined company will rank among the leaders
in all key sectors of our industry including interstate transmission, intrastate
transmission, gas gathering and processing, energy marketing and power
development," said William A. Wise, chairman, president and chief executive
officer of El Paso Energy. "Our combined interstate transmission systems alone
will consist of an impressive 40,000 miles of pipeline reaching all the major
growth areas in the country and moving more gas than any other U.S.
company--nearly a quarter of all the natural gas transported in the U.S. every
day.
"Both El Paso and Sonat are dynamic organizations that complement each
other operationally and geographically. Our merged interstate pipeline systems
will stretch from Bakersfield to Birmingham and Brownsville to Boston. They will
tap the most prolific supply basins in North America and access the largest and
fastest growing natural gas markets in the United States, including Florida and
other key southeastern states. New gas-fueled power generation development is
particularly active in these areas. Our ability to access
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these new markets will further diversify our market base and allow us to employ
our combined expertise in energy marketing and power generation.
"The transaction will also provide exciting opportunities for our El Paso
Field Services business unit. Sonat Exploration has a substantial oil and gas
exploration and production base that spans the southern United States from Texas
to Alabama, including an important presence in the Gulf of Mexico. Our onshore
gathering and processing facilities and Leviathan Gas Pipeline's offshore
gathering operations will provide Sonat Exploration's existing 1.6 trillion
cubic feet of natural gas equivalent reserves access to burgeoning power
generation markets and the best interstate pipeline network in the U.S.
"This merger is consistent with our ongoing strategy of maintaining future
growth through seeking significant acquisitions and mergers within our industry.
Three years ago we purchased Tenneco Energy in what has come to be regarded as
the most successful merger within the pipeline industry. We expect to realize
similar benefits from the combination with Sonat. The merger will be earnings
and cash flow accretive in the year 2000, the first full year of operations, and
beyond," Mr. Wise added.
Ronald L. Kuehn, Jr., chairman, president and chief executive officer of
Sonat said, "This is clearly an excellent transaction for our shareholders and
customers. We are creating a company with exceptional natural gas and electric
opportunities across the United States and literally around the world."
The combined company will retain the El Paso Energy name and be
headquartered in Houston, Texas. Sonat is currently headquartered in Birmingham,
Alabama, and the headquarters of Sonat's interstate pipeline, Southern Natural
Gas Company, will remain in Birmingham. William A. Wise, the current chairman,
president and chief executive officer of El Paso Energy, will continue as
president and chief executive officer of the new company. Ronald L. Kuehn, Jr.,
who is currently the chairman, president, and chief executive officer of Sonat,
will become the non-executive chairman of the board for the combined company
until December 31, 2000. The Board of Directors for the combined company will
consist of
<PAGE>
15 directors--nine who will be designated by El Paso and six who will be
designated by Sonat.
The merger is subject to customary conditions, including approval by the
stockholders of Sonat and receipt of certain required governmental approvals. In
order to provide Sonat stockholders greater certainty that the transaction will
be completed, El Paso Energy has agreed that if El Paso stockholder approval for
the common issuance were not obtained, El Paso would issue 19.9 percent of its
outstanding common stock as merger consideration, with the balance of the merger
consideration paid in the form of non-convertible, long-term preferred stock.
The merger agreement included customary non-solicitation, termination fee
and expense reimbursement provisions. In addition, each of the companies has
granted the other an option to purchase up to 19.9 percent of its outstanding of
its outstanding common stock, excercisable if the merger is terminated under
certain circumstances. Members of the Zilkha family, who own approximately 21
percent of the outstanding Sonat shares, have agreed to vote their shares in
favor of the merger.
Donaldson, Lufkin and Jenrette Securities Corporation is acting as El
Paso's financial advisor for the transaction, while Merrill Lynch Corporation is
advisor to Sonat. The law firm of Fried, Frank, Harris, Shriver & Jacobson is El
Paso's legal advisor, and Sonat is represented by the law firm of Wachtell,
Lipton, Rosen & Katz.
With over $10 billion in assets, El Paso Energy Corporation provides
energy solutions through five business units: Tennessee Gas Pipeline Company, El
Paso Natural Gas Company, El Paso Field Services Company, El Paso Energy
Marketing Company, and El Paso Energy International Company. The company owns
the nation's only integrated coast-to-coast natural gas pipeline system and has
operations in natural gas transmission, gas gathering and processing, energy
marketing, power generation and international energy infrastructure development.
Visit El Paso Energy's web site at www.epenergy.com.
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Sonat Inc., headquartered in Birmingham, is a diversified energy company
engaged in exploration and production of oil and natural gas, interstate
transmission of natural gas, and energy services. Visit Sonat's web site at
www.sonat.com.
FORWARD-LOOKING STATEMENT
This release includes forward-looking statements and projections, made in
reliance on the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The company has made every reasonable effort to ensure that
the information and assumptions on which these statements and projections are
based are current, reasonable, and complete. However, a variety of factors could
cause actual results to differ materially from the projections, anticipated
results or other expectations expressed in this release, including, without
limitation, oil and gas prices; general economic and weather conditions in
geographic regions or markets served by El Paso and Sonat and their affiliates,
or where operations of the companies and their affiliates are located; inability
to realize anticipated synergies on an efficient basis; difficulty in
integration of operations; and competition. While the company makes these
statements and projections in good faith, neither the company nor its management
can guarantee that the anticipated future results will be achieved. Reference
should be made to the company's (and its affiliates') and Sonat Inc.'s (and its
affiliates') Securities and Exchange Commission filings for additional important
factors that may affect actual results.
# # #
CONTACTS:
EL PASO ENERGY
Media Relations: Paula Delaney (713) 420-6885
Mel Scott (713) 420-3039
Investor Relations: Bridget McEvoy (713) 420-5597
SONAT INC.
Media and Investor Relations: Bruce Connery (205) 325-3898
