Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
dated as of
October 15, 2000
among
TEXACO INC.
CHEVRON CORPORATION
and
KEEPEP INC.
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TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGER...........................................................2
SECTION 1.1 The Merger......................................................2
SECTION 1.2 Conversion of Shares............................................2
SECTION 1.3 Surrender and Payment...........................................3
SECTION 1.4 Stock Options and Equity Awards.................................5
SECTION 1.5 Adjustments.....................................................6
SECTION 1.6 Fractional Shares...............................................7
SECTION 1.7 Withholding Rights..............................................8
SECTION 1.8 Lost Certificates...............................................8
SECTION 1.9 Shares Held by Company Affiliates...............................8
SECTION 1.10 Appraisal Rights...............................................8
ARTICLE 2 CERTAIN GOVERNANCE MATTERS...........................................9
SECTION 2.1 Name; Trade Name................................................9
SECTION 2.2 Parent Board of Directors.......................................9
SECTION 2.3 Transition Committee............................................9
SECTION 2.4 Certificate of Incorporation of the Surviving Corporation......10
SECTION 2.5 By-laws of the Surviving Corporation...........................10
SECTION 2.6 Directors and Officers of the Surviving Corporation............10
ARTICLE 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY............10
SECTION 3.1 Corporate Existence and Power..................................10
SECTION 3.2 Corporate Authorization........................................11
SECTION 3.3 Governmental Authorization.....................................12
SECTION 3.4 Non-Contravention..............................................12
SECTION 3.5 Capitalization.................................................13
SECTION 3.6 Subsidiaries...................................................14
SECTION 3.7 Commission Filings.............................................15
SECTION 3.8 Financial Statements...........................................16
SECTION 3.9 Disclosure Documents...........................................16
SECTION 3.10 Absence of Certain Changes....................................17
SECTION 3.11 No Undisclosed Material Liabilities...........................18
SECTION 3.12 Litigation....................................................18
SECTION 3.13 Taxes.........................................................18
SECTION 3.14 Employee Benefit Plans........................................19
SECTION 3.15 Compliance with Laws..........................................21
SECTION 3.16 Finders' or Advisors' Fees....................................22
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SECTION 3.17 Environmental Matters.........................................22
SECTION 3.18 Opinion of Financial Advisor..................................22
SECTION 3.19 Pooling; Tax Treatment........................................23
SECTION 3.20 Pooling Letter................................................23
SECTION 3.21 Takeover Statutes.............................................23
SECTION 3.22 Stockholder Rights Plan.......................................23
SECTION 3.23 Joint Ventures................................................24
ARTICLE 4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT.................24
SECTION 4.1 Corporate Existence and Power..................................24
SECTION 4.2 Corporate Authorization........................................25
SECTION 4.3 Governmental Authorization.....................................26
SECTION 4.4 Non-Contravention..............................................26
SECTION 4.5 Capitalization.................................................26
SECTION 4.6 Subsidiaries...................................................27
SECTION 4.7 Commission Filings.............................................28
SECTION 4.8 Financial Statements...........................................29
SECTION 4.9 Disclosure Documents...........................................29
SECTION 4.10 Absence of Certain Changes....................................30
SECTION 4.11 No Undisclosed Material Liabilities...........................31
SECTION 4.12 Litigation....................................................31
SECTION 4.13 Taxes.........................................................31
SECTION 4.14 Employee Benefit Plans........................................32
SECTION 4.15 Compliance with Laws..........................................33
SECTION 4.16 Finders' or Advisors' Fees....................................33
SECTION 4.17 Environmental Matters.........................................34
SECTION 4.18 Opinion of Financial Advisor..................................34
SECTION 4.19 Pooling; Tax Treatment........................................34
SECTION 4.20 Pooling Letter................................................34
SECTION 4.21 Takeover Statutes.............................................35
SECTION 4.22 Stockholder Rights Plan.......................................35
ARTICLE 5 COVENANTS OF THE COMPANY............................................35
SECTION 5.1 Conduct of the Company.........................................35
SECTION 5.2 Company Stockholder Meeting; Proxy Material....................38
SECTION 5.3 Equity Conversion..............................................40
SECTION 5.4 Resignation of Company Directors...............................40
ARTICLE 6 COVENANTS OF PARENT.................................................40
SECTION 6.1 Conduct of Parent..............................................40
SECTION 6.2 Obligations of Merger Subsidiary...............................42
SECTION 6.3 Director and Officer Liability.................................42
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SECTION 6.4 Parent Stockholder Meeting; Form S-4...........................43
SECTION 6.5 Stock Exchange Listing.........................................44
SECTION 6.6 Employee Benefits..............................................44
ARTICLE 7 COVENANTS OF PARENT AND THE COMPANY.................................45
SECTION 7.1 Best Efforts...................................................45
SECTION 7.2 Certain Filings................................................47
SECTION 7.3 Access to Information..........................................48
SECTION 7.4 Tax and Accounting Treatment...................................48
SECTION 7.5 Public Announcements...........................................48
SECTION 7.6 Further Assurances.............................................48
SECTION 7.7 Notices of Certain Events......................................49
SECTION 7.8 Affiliates.....................................................49
SECTION 7.9 Payment of Dividends...........................................50
SECTION 7.10 No Solicitation...............................................50
SECTION 7.11 Letters from Accountants......................................52
SECTION 7.12 Takeover Statutes.............................................53
SECTION 7.13 Headquarters..................................................53
SECTION 7.14 Section 16(b).................................................54
ARTICLE 8 CONDITIONS TO THE MERGER............................................54
SECTION 8.1 Conditions to the Obligations of Each Party....................54
SECTION 8.2 Conditions to the Obligations of Parent and Merger Subsidiary..55
SECTION 8.3 Conditions to the Obligations of the Company...................56
ARTICLE 9 TERMINATION.........................................................57
SECTION 9.1 Termination....................................................57
SECTION 9.2 Effect of Termination..........................................58
ARTICLE 10 MISCELLANEOUS......................................................59
SECTION 10.1 Notices.......................................................59
SECTION 10.2 Non-Survival of Representations and Warranties................60
SECTION 10.3 Amendments; No Waivers........................................60
SECTION 10.4 Expenses......................................................61
SECTION 10.5 Company Termination Fee.......................................61
SECTION 10.6 Parent Termination Fee........................................61
SECTION 10.7 Successors and Assigns........................................62
SECTION 10.8 Governing Law.................................................62
SECTION 10.9 Jurisdiction..................................................62
SECTION 10.10 Waiver of Jury Trial.........................................63
SECTION 10.11 Counterparts; Effectiveness..................................63
SECTION 10.12 Entire Agreement.............................................63
SECTION 10.13 Captions.....................................................63
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SECTION 10.14 Severability.................................................63
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EXHIBITS AND ANNEXES
Exhibit A.........-- Company Stock Option Agreement
Exhibit B.........-- Parent Stock Option Agreement
Exhibit C-1.......-- Affiliate's Pooling Letter (for Parent Affiliates)
Exhibit C-2.......-- Affiliate's Pooling Letter (for Company Affiliates)
Exhibit C-3.......-- Affiliate's Rule 145 Letter (for Company Affiliates)
Annex 7.1.........-- Form of Agreement and Declaration of Trust
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DEFINED TERMS
Section
368 Reorganization.....................................................3.19(b)
Acquisition Proposal...................................................7.10(b)
Affected Employees......................................................6.6(b)
Affected Retirees.......................................................6.6(b)
Agreement.............................................................Preamble
Alliance Interests...................................................7.1(d)(i)
Alliance Transaction Agreement.......................................7.1(d)(i)
Anti-Discrimination Laws...............................................3.14(h)
Benefit Triggers.......................................................3.14(e)
Certificates............................................................1.3(a)
Closing.................................................................1.1(d)
Closing Date............................................................1.1(d)
Code..................................................................Recitals
Commission............................................................Recitals
Common Shares Trust.....................................................1.6(b)
Common Stock Issuance......................................................4.2
Common Stock Issuance Approval.............................................4.2
Company...............................................................Preamble
Company 10-K...............................................................3.7
Company 2000 Capital Expenditure Budget.................................5.1(g)
Company 2001 Permitted Capital Expenditure Budget.......................5.1(g)
Company 2002 Permitted Capital Expenditure Budget.......................5.1(g)
Company Award...........................................................1.4(c)
Company Balance Sheet......................................................3.8
Company Balance Sheet Date.................................................3.8
Company Benefit Plans..................................................3.14(a)
Company Board Designees.................................................2.2(a)
Company Commission Documents...............................................3.7
Company Common Stock..................................................Recitals
Company Disclosure Schedules.........................................Article 3
Company Non-U.S. Employees.................................................3.7
Company Option Agreement..............................................Recitals
Company Proxy Statement....................................................3.9
Company Rights.............................................................3.5
Company Rights Agreement...................................................3.5
Company Securities.........................................................3.5
Company Stock Option....................................................1.4(a)
Company Stock Option Plans..............................................1.4(a)
Company Stockholder Approval...............................................3.2
Company Stockholder Meeting................................................5.2
Company Subsidiary Securities...........................................3.6(b)
Company U.S. Employees.................................................3.14(e)
Condition Satisfaction Time................................................5.2
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Confidentiality Agreement..................................................7.3
Delaware Law............................................................1.1(a)
downstream..............................................................5.1(l)
EC Merger Regulation.......................................................3.3
Effective Time..........................................................1.1(b)
employee benefit plan..................................................3.14(a)
End Date.............................................................9.1(b)(i)
Environmental Laws.....................................................3.17(b)
Equity Conversion..........................................................5.3
ERISA..................................................................3.14(a)
Excess Shares...........................................................1.6(a)
Exchange Act...............................................................3.3
Exchange Agent..........................................................1.3(a)
Exchange Ratio.....................................................1.2(a)(iii)
Foreign Company Benefit Plan...........................................3.14(a)
Foreign Parent Benefit Plan............................................4.14(a)
Form S-4................................................................4.9(a)
GAAP..................................................................Recitals
HSR Act....................................................................3.3
Indemnitees.............................................................6.3(a)
Joint Ventures............................................................3.23
Lien.......................................................................3.4
Market Auction Preferred Stock.............................................3.5
Material Adverse Effect....................................................3.1
Merger..................................................................1.1(a)
Merger Consideration....................................................1.2(b)
Merger Subsidiary.....................................................Preamble
mid-stream..............................................................5.1(l)
multiemployer plan.....................................................3.14(a)
Name Change Amendment...................................................2.1(a)
Name Change Amendment Approval..........................................4.2(a)
NYSE....................................................................1.6(a)
Option Agreements.....................................................Recitals
Parent................................................................Preamble
Parent 10-K.............................................................4.7(a)
Parent Balance Sheet.......................................................4.8
Parent Balance Sheet Date..................................................4.8
Parent Benefit Plans...................................................4.14(a)
Parent Commission Documents.............................................4.7(a)
Parent Common Stock...................................................Recitals
Parent Disclosure Schedules..........................................Article 4
Parent Option Agreement...............................................Recitals
Parent Proxy Statement..................................................4.9(a)
Parent Rights......................................................1.2(a)(iii)
Parent Rights Agreement............................................1.2(a)(iii)
Parent Securities..........................................................4.5
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Parent Stockholder Approvals............................................4.2(a)
Parent Stockholder Meeting.................................................6.4
Parent Subsidiary Securities............................................4.6(b)
Person..................................................................1.3(c)
Rabbi Trust Shares...................................................1.2(a)(i)
Securities Act..........................................................1.4(d)
Significant Subsidiary..................................................3.6(a)
Subsidiary..............................................................3.6(a)
Superior Proposal......................................................7.10(b)
Surviving Corporation...................................................1.1(a)
Tax Returns...............................................................3.13
Taxes.....................................................................3.13
Transition Committee......................................................2.3
Trust Agreement....................................................7.1(d)(iii)
Trustees...........................................................7.1(d)(iii)
upstream................................................................5.1(l)
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AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
October 15, 2000 by and among TEXACO INC., a Delaware corporation (the
"Company"), CHEVRON CORPORATION, a Delaware corporation ("Parent"), and KEEPEP
INC., a newly formed Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Subsidiary").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Merger
Subsidiary and the Company have approved this Agreement, and deem it advisable
and in the best interests of their respective stockholders to consummate the
merger of Merger Subsidiary with and into the Company on the terms and
conditions set forth herein;
WHEREAS, for United States federal income tax purposes, it is intended
that the Merger contemplated by this Agreement qualify as a "reorganization"
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder (the "Code");
WHEREAS, for accounting purposes, it is intended that the Merger be
accounted for as a "pooling of interests" under United States generally accepted
accounting principles ("GAAP") and the rules and regulations of the Securities
and Exchange Commission (the "Commission");
WHEREAS, (i) as a condition and inducement to Parent's willingness to
enter into this Agreement, concurrently with the execution and delivery of this
Agreement, Parent and the Company are entering into a Stock Option Agreement
dated as of the date of this Agreement in the form attached as Exhibit A (the
"Company Option Agreement"), pursuant to which the Company shall grant to Parent
an option to purchase shares of common stock, par value $3.125 per share, of the
Company ("Company Common Stock") at $53.71 per share, under certain
circumstances, and (ii) as a condition and inducement to the Company's
willingness to enter into this Agreement, concurrently with the execution and
delivery of this Agreement, Parent and the Company are entering into a Stock
Option Agreement dated as of the date of this Agreement in the form attached as
Exhibit B (the "Parent Option Agreement" and, together with the Company Option
Agreement, the "Option Agreements"), pursuant to which Parent shall grant to the
Company an option to purchase shares of common stock, par value $0.75 per share,
of Parent ("Parent Common Stock"), at $85.96 per share, under certain
circumstances.
NOW, THEREFORE, in consideration of the promises and the respective
representations, warranties, covenants, and agreements set forth herein, the
parties hereto agree as follows:
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ARTICLE 1
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THE MERGER
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SECTION 1.1 The Merger.
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(a)......At the Effective Time, Merger Subsidiary shall be merged (the
"Merger") with and into the Company in accordance with the requirements of the
General Corporation Law of the State of Delaware (the "Delaware Law"), whereupon
the separate existence of Merger Subsidiary shall cease, and the Company shall
be the surviving corporation in the Merger (the "Surviving Corporation").
(b)......On the Closing Date, immediately after the Closing, the
Company will file a certificate of merger with the Secretary of State of the
State of Delaware and make all other filings or recordings required by Delaware
Law in connection with the Merger. The Merger shall become effective at such
time as the certificate of merger is duly filed with the Secretary of State of
the State of Delaware or at such later time as is specified in the certificate
of merger (the "Effective Time").
(c)......From and after the Effective Time, the Surviving Corporation
shall possess all the rights, privileges, powers and franchises and be subject
to all of the restrictions, disabilities and duties of the Company and Merger
Subsidiary, all as provided under Delaware Law.
(d)......The closing of the Merger (the "Closing") shall take place (i)
at the offices of Pillsbury Madison & Sutro LLP, 50 Fremont Street, San
Francisco, California, as soon as practicable on the day on which the last to be
fulfilled or waived of the conditions set forth in Article 8 (other than those
conditions that by their nature are to be fulfilled at the Closing, but subject
to the fulfillment or waiver of such conditions) shall be fulfilled or waived in
accordance with this Agreement, including pursuant to Sections 5.2 and 7.1, or
(ii) at such other place and time or on such other date as the Company and
Parent may agree in writing (the date of the Closing, the "Closing Date").
SECTION 1.2 Conversion of Shares.
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(a)......At the Effective Time by virtue of the Merger and without any
action on the part of the holder thereof:
(i) each share of the Company Common Stock held by the Company
as treasury stock or owned by Parent or any subsidiary of Parent or the
Company (excluding shares, if any, held in any "Rabbi trust" identified
on Section 3.14 of the Company Disclosure Schedule, which may be
accounted for as treasury stock ("Rabbi Trust Shares")) immediately
prior to the Effective Time (together with the associated Company Right
(as defined in Section 3.5), if any) shall be canceled, and no payment
shall be made with respect thereto;
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(ii) each share of common stock of Merger Subsidiary
outstanding immediately prior to the Effective Time shall be converted
into and become one share of common stock of the Surviving Corporation
with the same rights, powers and privileges as the shares so converted
and shall constitute the only outstanding shares of capital stock of
the Surviving Corporation; and
(iii) each share of Company Common Stock (including each Rabbi
Trust Share) (together with the associated Company Right) outstanding
immediately prior to the Effective Time shall, except as otherwise
provided in Section 1.2(a)(i), be converted into the right to receive
0.77 of a share of Parent Common Stock (the "Exchange Ratio"),
including the corresponding fraction of a right to purchase shares of
Series A Participating Preferred Stock of Parent (the "Parent Rights")
in accordance with the Rights Agreement (the "Parent Rights Agreement")
dated as of November 23, 1998 between Parent and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent. References herein to
shares of Parent Common Stock issuable pursuant to the Merger shall
also be deemed to include the associated Parent Rights.
(b) All Parent Common Stock issued as provided in this Section 1.2
shall be of the same class and shall have the same terms as the currently
outstanding Parent Common Stock. The shares of Parent Common Stock to be
received as consideration pursuant to the Merger with respect to shares of
Company Common Stock (together with cash in lieu of fractional shares of Parent
Common Stock as specified below) are referred to herein as the "Merger
Consideration."
(c) From and after the Effective Time, all shares of Company Common
Stock (together with the associated Company Rights) converted in accordance with
Section 1.2(a)(iii) shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration and any dividends
payable pursuant to Section 1.3(f). From and after the Effective Time, all
certificates representing the common stock of Merger Subsidiary shall be deemed
for all purposes to represent the number of shares of common stock of the
Surviving Corporation into which they were converted in accordance with Section
1.2(a)(ii).
SECTION 1.3 Surrender and Payment.
---------------------
(a) Prior to the Effective Time, Parent shall appoint ChaseMellon
Shareholder Services, L.L.C. or such other exchange agent reasonably acceptable
to the Company (the "Exchange Agent") for the purpose of exchanging certificates
representing shares of Company Common Stock ("Certificates") for the Merger
Consideration. Parent will make available to the Exchange Agent, as needed, the
Merger Consideration to be delivered in respect of the shares of Company Common
Stock. Promptly after the Effective Time, Parent will send, or will cause the
Exchange Agent to send, to each holder of record of shares of Company Common
Stock as of the Effective Time, a letter of transmittal for use in such exchange
(which shall specify that the delivery shall be effected, and risk of loss and
title shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) in such form as the Company and Parent may reasonably
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agree, for use in effecting delivery of shares of Company Common Stock to the
Exchange Agent.
(b) Each holder of shares of Company Common Stock that have been
converted into a right to receive the Merger Consideration, upon surrender to
the Exchange Agent of a Certificate, together with a properly completed letter
of transmittal, will be entitled to receive the Merger Consideration in respect
of the shares of Company Common Stock represented by such Certificate. Until so
surrendered, each such Certificate shall, after the Effective Time, represent
for all purposes only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be registered in
the name of a Person other than the Person in whose name the applicable
surrendered Certificate is registered, it shall be a condition to the
registration thereof that the surrendered Certificate shall be properly endorsed
or otherwise be in proper form for transfer and that the Person requesting such
delivery of the Merger Consideration shall pay to the Exchange Agent any
transfer or other taxes required as a result of such registration in the name of
a Person other than the registered holder of such Certificate or establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable. For purposes of this Agreement, "Person" means an individual, a
corporation, a limited liability company, a partnership, an association, a trust
or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof.
(d) After the Effective Time, there shall be no further registration of
transfers of shares of Company Common Stock. If, after the Effective Time,
Certificates are presented to the Exchange Agent, the Surviving Corporation or
the Parent, they shall be canceled and exchanged for the consideration provided
for, and in accordance with the procedures set forth, in this Article 1.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 1.3(a) that remains unclaimed by the holders
of shares of Company Common Stock one year after the Effective Time shall be
returned to Parent, upon demand, and any such holder who has not exchanged his
shares of Company Common Stock for the Merger Consideration in accordance with
this Section 1.3 prior to that time shall thereafter look only to Parent for
delivery of the Merger Consideration in respect of such holder's shares.
Notwithstanding the foregoing, Parent shall not be liable to any holder of
shares for any Merger Consideration delivered to a public official pursuant to
applicable abandoned property laws. Any Merger Consideration remaining unclaimed
by holders of shares of Company Common Stock three years after the Effective
Time (or such earlier date immediately prior to such time as such amounts would
otherwise escheat to or become property of any governmental entity) shall, to
the extent permitted by applicable law, become the property of Parent free and
clear of any claims or interest of any Person previously entitled thereto.
(f) No dividends or other distributions with respect to shares of
Parent Common Stock issued in the Merger shall be paid to the holder of any
unsurrendered Certificates until such Certificates are surrendered as provided
in this Section 1.3. Subject to the effect of applicable laws, following such
surrender, there shall be paid, without interest, to the record
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holder of the shares of Parent Common Stock issued in exchange therefor (i) at
the time of such surrender, all dividends and other distributions payable in
respect of such shares of Parent Common Stock with a record date after the
Effective Time and a payment date on or prior to the date of such surrender and
not previously paid and (ii) at the appropriate payment date, the dividends or
other distributions payable with respect to such shares of Parent Common Stock
with a record date after the Effective Time but with a payment date subsequent
to such surrender. For purposes of dividends or other distributions in respect
of shares of Parent Common Stock, all shares of Parent Common Stock to be issued
pursuant to the Merger (but not options therefor described in Section 1.4 unless
actually exercised at the Effective Time) shall be entitled to dividends
pursuant to the immediately preceding sentence as if issued and outstanding as
of the Effective Time.
SECTION 1.4 Stock Options and Equity Awards.
-------------------------------
(a) The Board of Directors of the Company shall take such action as is
necessary so that at the Effective Time, each outstanding option to purchase
shares of Company Common Stock (a "Company Stock Option") granted under the
Company's plans or agreements identified in Company Disclosure Schedule (defined
in the introductory clause to Article 3) 1.4 as being the only compensation or
benefit plans or agreements pursuant to which shares of Company Common Stock may
be issued (collectively, the "Company Stock Option Plans"), whether vested or
not vested, shall cease to represent a right to acquire shares of Company Common
Stock and shall thereafter constitute an option to acquire, on the same terms
and conditions as were applicable under such Company Stock Option (including
without limitation the stock option restoration feature applicable thereto)
pursuant to the relevant Company Stock Option Plan under which it was issued and
the agreement evidencing the grant thereof prior to the Effective Time, the
number (rounded to the nearest whole number) of shares of Parent Common Stock
determined by multiplying (x) the number of shares of Company Common Stock
subject to such Company Stock Option immediately prior to the Effective Time by
(y) the Exchange Ratio. The exercise price per share of Parent Common Stock
subject to any such Company Stock Option at and after the Effective Time shall
be an amount (rounded to the nearest one-hundredth of a cent) equal to (x) the
exercise price per share of Company Common Stock subject to such Company Stock
Option prior to the Effective Time, divided by (y) the Exchange Ratio.
Notwithstanding any other provisions of this Section 1.4(a), if use of the above
methods would disqualify the Merger as a "pooling of interests" for financial
accounting purposes, then such methods will be adjusted to the extent necessary
to preserve such accounting treatment. In addition, prior to the Effective Time,
the Company will make any amendments to the terms of such Company Stock Option
Plans that are necessary to give effect to the transactions contemplated by this
Section 1.4. The Company represents and warrants that no consents are or will be
necessary to give effect to the transactions contemplated by this Section 1.4.
(b) Parent shall take all corporate action necessary to assume as of
the Effective Time the Company's obligations under the Company Stock Options and
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery pursuant to the terms set forth in this Section 1.4.
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(c) At the Effective Time, each award or account (including restricted
stock, stock equivalents and stock units, but excluding Company Stock Options)
outstanding as of the Effective Time ("Company Award") that has been
established, made or granted under any employee incentive or benefit plans,
programs or arrangements and non-employee director plans maintained by the
Company on or prior to the date hereof that provide for grants of equity-based
awards or equity-based accounts and which are identified in Company Schedule 1.4
shall to the extent practicable be amended or converted into a similar
instrument of Parent, in each case with such adjustments to the terms and
conditions of such Company Awards as are appropriate to preserve the value
inherent in such Company Awards with no detrimental effects on the holders
thereof. The other terms and conditions of each Company Award, and the plans or
agreements under which they were issued, shall continue to apply in accordance
with their terms and conditions, including any provisions for acceleration (as
such terms and conditions have been interpreted and applied by the Company in
accordance with its past practice), but with such adjustments, if any, as may be
necessary or appropriate in light of the transactions contemplated hereby and
which do not materially affect the intended value of such awards, in each case
to the extent consistent with Section 7.4. The Company represents and warrants
that (i) there are as of the date hereof no Company Awards or Company Stock
Options other than those reflected in Section 3.5 and (ii) all employee
incentive or benefit plans, programs or arrangements and non-employee director
plans under which any Company Award has been established, made or granted and
all Company Stock Option Plans are disclosed in Company Disclosure Schedule 1.4.
(d) As soon as practicable after the Effective Time, Parent shall file
with the Commission a registration statement on an appropriate form or a
post-effective amendment to a previously filed registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Parent Common Stock subject to options and other equity based awards described
in this Section 1.4, and shall use its reasonable best efforts to maintain the
current status of the prospectus contained therein, as well as comply with any
applicable state securities or "blue sky" laws, for so long as such options or
other equity based awards remain outstanding.
SECTION 1.5 Adjustments.
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If at any time during the period between the date of this Agreement and the
Effective Time, any change in the outstanding shares of capital stock of Parent
or the Company shall occur by reason of any reclassification, recapitalization,
stock split or combination, exchange or readjustment of shares, or any stock
dividend thereon with a record date during such period, the Merger Consideration
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.
SECTION 1.6 Fractional Shares.
-----------------
(a) No fractional shares of Parent Common Stock shall be issued in the
Merger, but in lieu thereof each holder of shares of Company Common Stock
otherwise entitled to a fractional share of Parent Common Stock will be entitled
to receive, from the Exchange Agent in accordance with the provisions of this
Section 1.6, a cash payment in lieu of such fractional shares of Parent Common
Stock representing such holder's proportionate interest, if any, in the
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proceeds from the sale by the Exchange Agent in one or more transactions of
shares of Parent Common Stock equal to the excess of (x) the aggregate number of
shares of Parent Common Stock to be delivered to the Exchange Agent by Parent
pursuant to Section 1.3(a) over (y) the aggregate number of whole shares of
Parent Common Stock to be distributed to the holders of Certificates pursuant to
Section 1.3(b) (such excess being herein called the "Excess Shares"). The
parties acknowledge that payment of the cash consideration in lieu of issuing
fractional shares was not separately bargained for consideration but merely
represents a mechanical rounding off for purposes of simplifying the corporate
and accounting problems that would otherwise be caused by the issuance of
fractional shares. As soon as practicable after the Effective Time, the Exchange
Agent, as agent for the holders of the certificates representing shares of
Company Common Stock, shall sell the Excess Shares at then prevailing prices on
the New York Stock Exchange (the "NYSE") in the manner provided in the following
paragraph.
(b) The sale of the Excess Shares by the Exchange Agent, as agent for
the holders that would otherwise receive fractional shares, shall be executed on
the NYSE through one or more member firms of the NYSE and shall be executed in
round lots to the extent practicable. The compensation payable to the Exchange
Agent and the expenses incurred by the Exchange Agent, in each case, in
connection with such sale or sales of the Excess Shares, and all related
commissions, transfer taxes and other out-of-pocket transaction costs, will be
paid by the Surviving Corporation out of its own funds and will not be paid
directly or indirectly by Parent. Until the proceeds of such sale or sales have
been distributed to the holders of shares of Company Common Stock, the Exchange
Agent shall hold such proceeds in trust for the holders of shares of Company
Common Stock (the "Common Shares Trust"). The Exchange Agent shall determine the
portion of the Common Shares Trust to which each holder of shares of Company
Common Stock shall be entitled, if any, by multiplying the amount of the
aggregate proceeds comprising the Common Shares Trust by a fraction, the
numerator of which is the amount of the fractional share interest to which such
holder of shares of Company Common Stock would otherwise be entitled and the
denominator of which is the aggregate amount of fractional share interests to
which all holders of shares of Company Common Stock would otherwise be entitled.
(c) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of shares of Company Common Stock in lieu of
any fractional shares of Parent Common Stock, the Exchange Agent shall make
available such amounts to such holders of shares of Company Common Stock without
interest.
SECTION 1.7 Withholding Rights.
------------------
Each of the Surviving Corporation and Parent shall be entitled to deduct
and withhold from the consideration otherwise payable to any Person pursuant to
this Article 1 such amounts as it is required to deduct and withhold with
respect to the making of such payment under any provision of federal, state,
local or foreign tax law. To the extent that amounts are so withheld by the
Surviving Corporation or Parent, as the case may be, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of the shares of Company Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or Parent, as the case may be.
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SECTION 1.8 Lost Certificates.
-----------------
If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed and, if required by Parent or the Surviving
Corporation, the posting by such Person of a bond, in such reasonable amount as
the Surviving Corporation may direct, as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration to be paid in respect of the shares of Company Common Stock
represented by such Certificate as contemplated by this Article 1.
SECTION 1.9 Shares Held by Company Affiliates.
---------------------------------
Anything to the contrary herein notwithstanding, no shares of Parent Common
Stock (or certificates therefor) shall be issued in exchange for any Certificate
to any Person who may be an "affiliate" of the Company (identified pursuant to
Section 7.8) until such Person shall have delivered to Parent duly executed
letters as contemplated by Section 7.8. Such Person shall be subject to the
restrictions described in such letters, and such shares (or certificates
therefor) shall bear a legend describing such restrictions.
SECTION 1.10 Appraisal Rights.
-----------------
In accordance with Section 262 of the Delaware Law, no appraisal rights
shall be available to holders of shares of Company Common Stock in connection
with the Merger.
ARTICLE 2
---------
CERTAIN GOVERNANCE MATTERS
--------------------------
SECTION 2.1 Name; Trade Name.
----------------
(a) Parent shall take all such action as is necessary to change its
name to "ChevronTexaco Corporation" effective as of the Effective Time, which
action shall include, without limitation, seeking stockholder approval to amend
Parent's Restated Certificate of Incorporation to effect such name change (the
"Name Change Amendment") as provided in Section 6.4. Subject to Parent obtaining
the necessary approval of its stockholders under Delaware Law for the Name
Change Amendment, simultaneously with the filing of the certificate of merger
contemplated by Section 1.1(b), Parent shall file a certificate of amendment to
its Restated Certificate of Incorporation with the Secretary of State of the
State of Delaware and make all other filings and records required by Delaware
Law in connection with the amendment of the certificate of incorporation
contemplated hereby. This amendment shall become effective at the Effective
Time.
(b) It is the intention of Parent that the marketing operations
currently conducted by the Company and its Subsidiaries outside the United
States will continue to be conducted under the "Texaco" trademark.
SECTION 2.2 Parent Board of Directors.
-------------------------
(a) At the Effective Time, the Board of Directors of Parent shall
consist of fifteen
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(15) directors, of whom six (6) directors shall be persons who are directors of
the Company designated prior to the Effective Time by the Company and reasonably
acceptable to Parent (the "Company Board Designees"), and the remainder of whom
shall be directors of Parent prior to the Effective Time. Prior to the Effective
Time, the Board of Directors of Parent shall take all action necessary to
increase the size of the Board of Directors of Parent as necessary and to elect
the Company Board Designees to the Board of Directors of Parent, in each case as
of the Effective Time.
(b) The Board of Directors of Parent shall take all action necessary to
cause Peter I. Bijur to be elected as Vice Chairman of the Board of Directors of
Parent as of the Effective Time.
(c) Parent shall cause, as of the Effective Time, each Committee of the
Board of Directors of Parent to include at least one Company Board Designee.
SECTION 2.3 Transition Committee.
---------------------
The parties agree to establish a transition committee (the "Transition
Committee") which will have a consultative role and which will be in effect from
the date hereof until the earlier of the termination hereof and the Effective
Time. The Transition Committee shall be comprised of Peter I. Bijur and David J.
O'Reilly. The Transition Committee will be concerned with matters relating to
planning the integration after the Effective Time of Parent and the Company,
including organization and staffing. Notwithstanding anything in this Section
2.3, Parent shall not be deemed to control the business or operations of the
Company and, likewise, the Company shall not be deemed to control the business
or operations of Parent. The members of the Transition Committee may delegate
specific tasks to others and otherwise will draw upon the resources of Parent
and the Company as necessary or appropriate.
SECTION 2.4 Certificate of Incorporation of the Surviving Corporation.
----------------------------------------------------------
The certificate of incorporation of the Company in effect at the Effective
Time shall be the certificate of incorporation of the Surviving Corporation
until subsequently amended in accordance with applicable law.
SECTION 2.5 By-laws of the Surviving Corporation.
--------------------------------------
The by-laws of the Company in effect at the Effective Time shall be the
by-laws of the Surviving Corporation until subsequently amended in accordance
with applicable law.
SECTION 2.6 Directors and Officers of the Surviving Corporation.
----------------------------------------------------
From and after the Effective Time, until successors are duly elected or
appointed and qualified in accordance with applicable law, (a) the directors of
Merger Subsidiary at the Effective Time shall be the directors of the Surviving
Corporation, and (b) the officers of the Company at the Effective Time shall be
the officers of the Surviving Corporation.
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ARTICLE 3
---------
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
--------------------------------------------------------
The Company represents and warrants to Parent that (except as set forth
in the disclosure schedules delivered by the Company to Parent simultaneously
with the execution of this Agreement (the "Company Disclosure Schedules")):
SECTION 3.1 Corporate Existence and Power.
-----------------------------
The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, and has all corporate
powers and all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted, except for those the absence
of which would not, individually or in the aggregate, have, or be reasonably
likely to have, a Material Adverse Effect on the Company. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not, individually
or in the aggregate, have, or be reasonably likely to have, a Material Adverse
Effect on the Company. For purposes of this Agreement, a "Material Adverse
Effect" with respect to any Person means a material adverse effect on the
financial condition, business, liabilities, properties, assets or results of
operations of such Person and its Subsidiaries, taken as a whole, except, to the
extent resulting from (x) any changes in general United States or global
economic conditions, (y) any changes affecting the oil and gas industry in
general (including changes to commodity prices) except, other than where
referring to a Material Adverse Effect on Parent after the Effective Time, to
the extent that the changes disproportionately affect Parent or the Company, as
applicable, compared to the manner in which the changes affect the other party
or (z) any disposition of the Alliance Interests (as defined in Section 7.1) in
accordance with the terms of Section 7.1. The Company has heretofore delivered
to Parent true and complete copies of the Company's certificate of incorporation
and by-laws as currently in effect.
SECTION 3.2 Corporate Authorization.
-----------------------
(a) The execution, delivery and performance by the Company of this
Agreement and the Option Agreements and the consummation by the Company of the
transactions contemplated hereby and thereby are within the Company's corporate
powers and, except for any required approval by the Company's stockholders (the
"Company Stockholder Approval") in connection with the consummation of the
Merger, have been duly authorized by all necessary corporate action. The
affirmative vote of holders of a majority of the outstanding shares of Company
Common Stock in favor of the approval and adoption of this Agreement and the
Merger is the only vote of the holders of any of the Company's capital stock
necessary in connection with consummation of the Merger. Assuming due
authorization, execution and delivery of this Agreement and the Option
Agreements by Parent and/or Merger Subsidiary, as applicable, each of this
Agreement and each Option Agreement constitutes a valid and binding agreement of
the Company enforceable against the Company in accordance with its terms,
subject to bankruptcy,
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insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights, and to general
equity principles.
(b) The Company's Board of Directors, at a meeting duly called and held
on or prior to the date hereof, has (i) determined that this Agreement and the
Option Agreements and the transactions contemplated hereby and thereby
(including the Merger) are advisable, fair to and in the best interests of the
Company's stockholders, (ii) approved and adopted this Agreement and the Option
Agreements and the transactions contemplated hereby and thereby (including the
Merger), and (iii) resolved (subject to Section 5.2) to recommend the approval
and adoption of this Agreement and the Merger by its stockholders.
SECTION 3.3 Governmental Authorization.
---------------------------
The execution, delivery and performance by the Company of this Agreement
and the Option Agreements and the consummation by the Company of the
transactions contemplated hereby and thereby require no action by or in respect
of, or filing with, any governmental body, agency, official or authority other
than (a) the filing of a certificate of merger in accordance with Delaware Law,
(b) compliance with any applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), (c) compliance with any
applicable requirements of Council Regulation No. 4064/89 of the European
Community, as amended (the "EC Merger Regulation"), (d) compliance with any
applicable requirements of laws, rules and regulations in other foreign
jurisdictions governing antitrust or merger control matters, (e) compliance with
any applicable requirements of the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder (the "Exchange Act"), (f)
compliance with any applicable requirements of the Securities Act and (g) other
actions or filings which if not taken or made would not, individually or in the
aggregate, have, or be reasonably likely to have, a Material Adverse Effect on
the Company or prevent or materially delay the Company's consummation of the
Merger.
SECTION 3.4 Non-Contravention.
-----------------
The execution, delivery and performance by the Company of this Agreement
and the Option Agreements and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not, assuming
compliance with the matters referred to in Sections 3.2 and 3.3, (a) contravene
or conflict with the certificate of incorporation or by-laws of the Company, (b)
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Company or any of its Subsidiaries, (c) constitute a default
under or give rise to a right of termination, cancellation or acceleration of
any right or obligation of the Company or any of its Subsidiaries or to a loss
of any benefit to which the Company or any of its Subsidiaries is entitled under
any provision of any agreement, contract or other instrument binding upon the
Company or any of its Subsidiaries or any license, franchise, permit or other
similar authorization held by the Company or any of its Subsidiaries, or (d)
result in the creation or imposition of any Lien on any asset of the Company or
any of its Subsidiaries, except for such contraventions, conflicts or violations
referred to in clause (b) or defaults, rights of termination, cancellation or
acceleration, or losses or Liens referred to in clause (c) or (d) that would
not, individually or in the aggregate, have, or be reasonably likely to have, a
Material Adverse Effect on the Company. For purposes of this Agreement, "Lien"
means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such
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asset other than any such mortgage, lien, pledge, charge, security interest or
encumbrance (i) for Taxes (as defined in Section 3.13) not yet due or being
contested in good faith (and for which adequate accruals or reserves have been
established on the Parent Balance Sheet or the Company Balance Sheet, as the
case may be) or (ii) which is a carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like lien arising in the ordinary course of
business. Neither the Company nor any Subsidiary of the Company, nor to the
knowledge of the Company, neither Joint Venture (as defined in Section 3.23
herein) nor any of its Subsidiaries, is a party to any agreement that expressly
limits the ability of the Company or any Subsidiary of the Company, or would
limit Parent or any Subsidiary of Parent after the Effective Time, to compete in
or conduct any line of business or compete with any Person or in any geographic
area or during any period of time except to the extent that any such limitation,
individually or in the aggregate, would not have, or be reasonably likely to
have, a Material Adverse Effect on the Company.
SECTION 3.5 Capitalization.
--------------
The authorized capital stock of the Company consists of 850,000,000 shares
of Company Common Stock and 30,000,000 shares of preferred stock, par value
$1.00 per share (of which 3,000,000 are designated Series D Junior Participating
Preferred Stock, 300 are designated Market Auction Preferred Shares, Series G-1
through G-300, 300 are designated Market Auction Preferred Shares, Series H-1
through H-300, 300 are designated Market Auction Preferred Shares, Series I-1
through I-300 and 300 are designated Market Auction Preferred Shares, Series J-1
through J-300, and the remaining shares of such preferred stock are not subject
to any designation). As of the close of business on September 30, 2000, there
were outstanding, (i) 550,182,530 shares of Company Common Stock, including
9,200,000 Rabbi Trust Shares, (ii) no shares of Series D Junior Participating
Preferred Stock (all of which are reserved for issuance in accordance with the
Amended Rights Agreement (the "Company Rights Agreement"), dated as of March 16,
1989, by and between the Company and ChaseMellon Shareholder Services, L.L.C.,
as Rights Agent, as amended April 28, 1998, pursuant to which the Company has
issued rights to purchase Series D Junior Participating Preferred Stock
("Company Rights")), and (iii) 300 shares of Market Auction Preferred Shares,
Series G-1 through G-300, 300 shares of Market Auction Preferred Shares, Series
H-1 through H-300, 300 shares of Market Auction Preferred Shares, Series I-1
through I-300, 300 shares of Market Auction Preferred Shares, Series J-1 through
J-300 (collectively, the "Market Auction Preferred Stock") and no other shares
of capital stock or other voting securities of the Company were then
outstanding. All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable. As of
September 30, 2000, there were outstanding (i) Company Awards (other than shares
of restricted stock or other awards included in the number of shares of Company
Common Stock outstanding set forth above) with respect to 2,558,307 shares of
Company Common Stock and (ii) Company Stock Options to purchase 13,683,804
shares of Company Common Stock. Except as set forth in this Section 3.5 and
except for changes since the close of business on September 30, 2000 resulting
from the exercise of employee stock options outstanding on such date, or options
or other stock-based awards granted or other securities issued as permitted by
Section 5.1, there are outstanding (a) no shares of capital stock or other
voting securities of the Company, (b) no Company Awards, and (c) except for the
Company Rights, and the option granted pursuant to the Company Option Agreement,
(i) no options, warrants or other rights to acquire from the Company any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting
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securities of the Company, and (ii) no preemptive or similar rights,
subscription or other rights, convertible securities, agreements, arrangements
or commitments of any character, relating to the capital stock of the Company,
obligating the Company to issue, transfer or sell any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Company or obligating the Company to grant, extend or
enter into any such option, warrant, subscription or other right, convertible
security, agreement, arrangement or commitment (the items in clauses 3.5(a),
3.5(b) and 3.5(c) being referred to collectively as the "Company Securities").
Except as required by the terms of any series of the Market Auction Preferred
Stock or any Company Stock Options or as permitted by Section 5.1(e), there are
no outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any Company Securities.
SECTION 3.6 Subsidiaries.
------------
(a) Each Subsidiary of the Company is duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization, has all
powers and all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted, except for those the absence
of which would not, individually or in the aggregate, have, or be reasonably
likely to have, a Material Adverse Effect on the Company. For purposes of this
Agreement, the word "Subsidiary" when used with respect to any Person means any
other Person, whether incorporated or unincorporated, of which (i) more than
fifty percent of the securities or other ownership interests or (ii) securities
or other interests having by their terms ordinary voting power to elect more
than fifty percent of the board of directors or others performing similar
functions with respect to such corporation or other organization, is directly
owned or controlled by such Person or by any one or more of its subsidiaries.
Each Subsidiary of the Company is duly qualified to do business and is in good
standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except for those jurisdictions where failure to be so qualified would not,
individually or in the aggregate, have, or be reasonably likely to have, a
Material Adverse Effect on the Company. All "significant subsidiaries," as such
term is defined in Section 1-02 of Regulation S-X under the Exchange Act (each,
a "Significant Subsidiary") of the Company and their respective jurisdictions of
incorporation are identified in Section 3.6(a) of the Company Disclosure
Schedule.
(b) Except for directors' qualifying shares and except as set forth in
the Company 10-K, all of the outstanding capital stock of, or other ownership
interests in, each Significant Subsidiary of the Company is owned by the
Company, directly or indirectly, free and clear of any material Lien and free of
any other material limitation or restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
ownership interests). There are no outstanding (i) securities of the Company or
any of its Subsidiaries convertible into or exchangeable for shares of capital
stock or other voting securities or ownership interests in any Significant
Subsidiary of the Company or (ii) options, warrants or other rights to acquire
from the Company or any of its Significant Subsidiaries any capital stock,
voting securities or other ownership interests in, or any securities convertible
into or exchangeable for any capital stock, voting securities or ownership
interests in, any Significant Subsidiary of the Company, and no
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preemptive or similar rights, subscription or other rights, convertible
securities, agreements, arrangements or commitments of any character, relating
to the capital stock of any Significant Subsidiary of the Company, obligating
the Company or any of its Significant Subsidiaries to issue, transfer or sell,
any capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any Significant Subsidiary of the Company
or obligating the Company or any Significant Subsidiary of the Company to grant,
extend or enter into any such option, warrant, subscription or other right,
convertible security, agreement, arrangement or commitment (the items in clauses
3.6(b)(i) and 3.6(b)(ii) being referred to collectively as the "Company
Subsidiary Securities"). There are no outstanding obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any
outstanding Company Subsidiary Securities. As of the date hereof, the Company
indirectly owns a 44% limited liability company interest in Equilon Enterprises
LLC and a 30.6% limited liability company interest in Motiva Enterprises LLC.
SECTION 3.7 Commission Filings.
------------------
(a) The Company has made available to Parent (i) its annual reports on
Form 10-K for its fiscal years ended December 31, 1997, 1998 and 1999, (ii) its
quarterly reports on Form 10-Q for its fiscal quarters ended after December 31,
1999, (iii) its proxy or information statements relating to meetings of, or
actions taken without a meeting by, the stockholders of the Company held since
December 31, 1999, and (iv) all of its other reports, statements, schedules and
registration statements filed with the Commission since December 31, 1999 (the
documents referred to in this Section 3.7(a) being referred to collectively as
the "Company Commission Documents"). The Company's annual report on Form 10-K
for its fiscal year ended December 31, 1999 is referred to herein as the
"Company 10-K".
(b) As of its filing date, each Company Commission Document complied as
to form in all material respects with the applicable requirements of the
Exchange Act and the Securities Act.
(c) As of its filing date, each Company Commission Document filed
pursuant to the Exchange Act did not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(d) Each registration statement, as amended or supplemented, if
applicable, filed by the Company since January 1, 1997 pursuant to the
Securities Act as of the date such statement or amendment became effective did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
SECTION 3.8 Financial Statements.
---------------------
The audited consolidated financial statements and unaudited consolidated
interim financial statements of the Company (including any related notes and
schedules) included in its annual reports on Form 10-K and the quarterly reports
on Form 10-Q referred to in Section 3.7 present fairly, in all material
respects, the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the
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consolidated results of their operations and their cash flows for the periods
then ended (subject to normal year-end adjustments and the absence of notes in
the case of any unaudited interim financial statements), in each case in
conformity with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto). For purposes of this Agreement, "Company Balance Sheet"
means the consolidated balance sheet of the Company as of December 31, 1999 set
forth in the Company 10-K and "Company Balance Sheet Date" means December 31,
1999.
SECTION 3.9 Disclosure Documents.
--------------------
(a) Neither the proxy statement of the Company (the "Company Proxy
Statement") to be filed with the Commission in connection with the Merger, nor
any amendment or supplement thereto, will, at the date the Company Proxy
Statement or any such amendment or supplement is first mailed to stockholders of
the Company or at the time such stockholders vote on the adoption and approval
of this Agreement and the transactions contemplated hereby, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Company Proxy Statement, including all
amendments or supplements, will, when filed, comply as to form in all material
respects with the requirements of the Exchange Act. No representation or
warranty is made by the Company in this Section 3.9 with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or Merger Subsidiary for inclusion or incorporation by reference in the
Company Proxy Statement.
(b) None of the information supplied or to be supplied by the Company
for inclusion or incorporation by reference in the Parent Proxy Statement (as
defined in Section 4.9) or in the Form S-4 (as defined in Section 4.9) or any
amendment or supplement thereto will, at the time the Parent Proxy Statement or
any such supplement or amendment thereto is first mailed to the stockholders of
Parent or at the time such stockholders vote on the matters constituting the
Parent Stockholder Approvals (as defined in Section 4.2) or at the time the Form
S-4 or any such amendment or supplement becomes effective under the Securities
Act or at the Effective Time, as the case may be, contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
SECTION 3.10 Absence of Certain Changes.
---------------------------
Except as disclosed in the Company Commission Documents filed prior to the
date of this Agreement, or except as is not prohibited after the date hereof by
Section 5.1 (or as is otherwise permitted by Section 5.1), since the Company
Balance Sheet Date, the Company and its Subsidiaries have conducted their
business in the ordinary course, consistent with past practice, and there has
not been:
(a) any event, occurrence or development of a state of circumstances or
facts which, individually or in the aggregate, has had, or would be reasonably
likely to have, a Material Adverse Effect on the Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company (other
than (i) regular quarterly cash dividends payable by the Company (x) consistent
with past practice (including periodic dividend
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increases consistent with past practice) and (y) that are not special dividends,
or (ii) required dividends on the Market Auction Preferred Stock), or any
repurchase, redemption or other acquisition by the Company or any of its wholly
owned Subsidiaries of any outstanding shares of capital stock or other
securities of, or other ownership interests in, the Company or any of its
Significant Subsidiaries (other than any such repurchases prior to the date
hereof pursuant to the Company's publicly announced stock buyback program or,
after the date hereof, as permitted under Section 5.1(e) or Section 5.3 or
pursuant to the terms of Company Stock Options and Company Awards, in each case
subject to Section 7.4);
(c) any amendment of any material term of any outstanding security
of the Company or any of its Significant Subsidiaries;
(d) any transaction or commitment made, or any contract, agreement or
settlement entered into, by (or judgment, order or decree affecting) the Company
or any of its Subsidiaries relating to its assets or business (including the
acquisition or disposition of any assets) or any relinquishment by the Company
or any of its Subsidiaries of any contract or other right, in either case,
material to the Company and its Subsidiaries taken as a whole, other than
transactions, commitments, contracts, agreements or settlements (including
without limitation settlements of litigation and tax proceedings) in the
ordinary course of business consistent with past practice, those contemplated by
this Agreement, or as agreed to in writing by Parent;
(e) any change in any method of accounting or accounting practice
(other than any change for tax purposes) by the Company or any of its
Subsidiaries, except for any such change which is not material or which is
required by reason of a concurrent change in GAAP;
(f) any (i) grant of any severance or termination pay to (or amendment
to any such existing arrangement with) any director, officer or employee of the
Company or any of its Subsidiaries, (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of the Company or any
of its Subsidiaries, (iii) increase in benefits payable under any existing
severance or termination pay policies or (iv) increase in (or amendments to the
terms of) compensation, bonus or other benefits payable to directors, officers
or employees of the Company or any of its Subsidiaries, other than, in each case
(x) in the ordinary course of business consistent with past practice, (y) as
permitted by this Agreement, or (z) required by applicable law; or
(g) any (i) Tax election made or changed, (ii) audit settled, or (iii)
amended Tax return filed, in each case, that is reasonably likely to result in a
Tax liability material to the Company and its Subsidiaries, taken as a whole.
SECTION 3.11 No Undisclosed Material Liabilities.
--------------------------------------
There are no liabilities of the Company or any Subsidiary of the Company of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, other than:
(a) liabilities disclosed or provided for in the Company Balance
Sheet or in the notes thereto;
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(b) liabilities which, individually or in the aggregate, would not
have, or be reasonably likely to have, a Material Adverse Effect on the Company;
(c) liabilities disclosed in the Company Commission Documents
filed prior to the date of this Agreement; and
(d) liabilities under this Agreement.
SECTION 3.12 Litigation.
----------
Except as disclosed in the Company Commission Documents filed prior to the
date of this Agreement, there is no action, suit, investigation or proceeding
pending against, or to the knowledge of the Company threatened against or
affecting, the Company or any of its Subsidiaries or any of their respective
properties or any of their respective officers or directors before any court or
arbitrator or any governmental body, agency or official except as would not,
individually or in the aggregate, have, or be reasonably likely to have, a
Material Adverse Effect on the Company.
SECTION 3.13 Taxes.
-----
(a) Except as set forth in the Company Balance Sheet (including the
notes thereto) and except as would not, individually or in the aggregate, have,
or be reasonably likely to have, a Material Adverse Effect on the Company, (i)
all Company Tax Returns required to be filed with any taxing authority by, or
with respect to, the Company and its Subsidiaries have been filed in accordance
with all applicable laws; (ii) the Company and its Subsidiaries have timely paid
all Taxes shown as due and payable on the Company Tax Returns that have been so
filed, and, as of the time of filing, the Company Tax Returns correctly
reflected the facts regarding the income, business, assets, operations,
activities and the status of the Company and its Subsidiaries (other than Taxes
which are being contested in good faith and for which adequate reserves are
reflected on the Company Balance Sheet); (iii) the Company and its Subsidiaries
have made provision for all Taxes payable by the Company and its Subsidiaries
for which no Company Tax Return has yet been filed; (iv) the charges, accruals
and reserves for Taxes with respect to the Company and its Subsidiaries
reflected on the Company Balance Sheet are adequate under GAAP to cover the Tax
liabilities accruing through the date thereof; (v) there is no action, suit,
proceeding, audit or claim now proposed or pending against or with respect to
the Company or any of its Subsidiaries in respect of any Tax where there is a
reasonable possibility of an adverse determination; and (vi) to the best of the
Company's knowledge and belief, neither the Company nor any of its Subsidiaries
is liable for any Tax imposed on any entity other than such Person, except as
the result of the application of Treas. Reg. section 1.1502-6 (and any
comparable provision of the tax laws of any state, local or foreign
jurisdiction) to the affiliated group of which the Company is the common parent.
For purposes of this Agreement, "Taxes" shall mean any and all taxes, charges,
fees, levies or other assessments, including, without limitation, all net
income, gross income, gross receipts, excise, stamp, real or personal property,
ad valorem, withholding, social security (or similar), unemployment, occupation,
use, production, service, service use, license, net worth, payroll, franchise,
severance, transfer, recording, employment, premium, windfall profits,
environmental (including taxes under Section 59A of the Code), customs duties,
capital stock, profits, disability, sales, registration, value added,
alternative or add-on minimum,
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estimated or other taxes, assessments or charges imposed by any federal, state,
local or foreign governmental entity and any interest, penalties, or additions
to tax attributable thereto. For purposes of this Agreement, "Tax Returns" shall
mean any return, report, form or similar statement required to be filed with
respect to any Tax (including any attached schedules), including, without
limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
(b) Neither the Company nor any Company Subsidiary has constituted
either a "distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock
qualifying or intended to qualify for tax-free treatment under Section 355 of
the Code (i) in the two years prior to the date of this Agreement or (ii) in a
distribution that could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
SECTION 3.14 Employee Benefit Plans.
-----------------------
(a) The Company has provided Parent with a list (set forth in Section
3.14(a) of the Company Disclosure Schedule) identifying each material "employee
benefit plan", as defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), each material employment, severance
or similar contract, plan, arrangement or policy applicable to any director,
former director, employee or former employee of the Company and each material
plan or arrangement (written or oral), providing for compensation, bonuses,
profit-sharing, stock option or other stock related rights or other forms of
incentive or deferred compensation, vacation benefits, insurance coverage
(including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance benefits) which is
maintained, administered or contributed to by the Company or any Subsidiary and
covers any employee or director or former employee or director of the Company or
any Subsidiary, or under which the Company has any liability; provided however,
that such list need not include any Company Benefit Plan that constitutes a
Foreign Company Benefit Plan (as defined below). The material plans, agreements
or arrangements of the Company and its Subsidiaries referred to in the first
sentence of this paragraph (a) (excluding any such plan that is a "multiemployer
plan", as defined in section 3(37) of ERISA, but including Foreign Company
Benefit Plans) are referred to collectively herein as the "Company Benefit
Plans." "Foreign Company Benefit Plan" means any Company Benefit Plan of the
Company or any of its Subsidiaries that is governed by the laws of any
jurisdiction other than the United States. To the extent practicable, the
Company shall provide and deliver to Parent a list of Foreign Company Benefit
Plans as soon as practicable.
(b) Each Company Benefit Plan has been established and maintained in
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations (including but not limited to, to the
extent applicable, ERISA and the Code) which are applicable to such Plan, except
where failure to so comply would not, individually or in the aggregate, have, or
be reasonably likely to have, a Material Adverse Effect on the Company.
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(c) Neither the Company nor any affiliate of the Company has incurred a
liability under Title IV of ERISA that has not been satisfied in full, and no
condition exists that presents a material risk to the Company or any affiliate
of the Company of incurring any such liability other than liability for premiums
due the Pension Benefit Guaranty Corporation (which premiums have been paid when
due).
(d) Each Company Benefit Plan which is intended to be qualified under
section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from federal income tax pursuant to section 501(a) of the Code and, to
the knowledge of the Company, no circumstances exist which will adversely affect
such qualification or exemption.
(e) Section 3.14(e) of the Company Disclosure Schedule sets forth (a)
with respect to directors and officers of the Company as a group, the aggregate
amount of all severance and similar benefits, including enhanced or accelerated
benefits, to which such officers and directors will become entitled (including
any acceleration of vesting or lapse of repurchase rights or obligations with
respect to any Company Stock Option Plans or other benefit under any
compensation plan or arrangement of the Company), and (b) the aggregate amount
of all severance and similar benefits, including enhanced or accelerated
benefits, payable in cash or stock to which all other United States payroll
employees of the Company and its Subsidiaries (the "Company U.S. Employees")
will become entitled, in each case, (i) solely as a result of obtaining the
Company Stockholder Approval or the transactions contemplated hereby and (ii) if
a "second" trigger, including, but not limited to, a termination for "good
reason" or without "cause," is applicable, assuming it has occurred
(collectively, (i) and (ii) are hereinafter defined as the "Benefit Triggers").
With regard to employees of the Company and its Subsidiaries other than the
Company U.S. Employees (the "Company Non-U.S. Employees"), there are severance
pay plans (some legally mandated and others Company designed) in many countries
around the world which provide severance payments in the event of termination.
To the knowledge of the Company, there are no severance agreements with respect
to the Company Non-U.S. Employees which provide enhanced severance on account of
a change in control which would be triggered by the transactions contemplated
hereby. The Company Disclosure Schedule sets forth the aggregate amounts for the
Retirement Plan which will become vested upon a Change of Control. This amount
is based on the 1999 Actuarial Reports. In addition, the comparable amounts for
Supplement #1 and Supplement #3, calculated as of July 2000, are also disclosed.
To the Company's knowledge, there are no other retirement plans which require
accelerated vesting solely due to the transactions contemplated hereunder.
(f) Except as reflected in the Company Commission Documents filed prior
to the date hereof, no Company Benefit Plan provides post-retirement health and
medical, life or other insurance benefits for retired employees of the Company
or any of its Subsidiaries.
(g) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any of its Subsidiaries
relating to, or change in, employee participation or coverage under, any Company
Benefit Plan (other than a Foreign Company Benefit Plan) which would increase
materially the expense of maintaining such
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<PAGE>
Company Benefit Plan above the level of the expense incurred in respect thereof
for the 12 months ended on the Company Balance Sheet Date.
(h) The Company and its Subsidiaries are in compliance in all material
respects with all applicable material federal, state and local laws, rules and
regulations respecting employment, employment practices, labor, terms and
conditions of employment and wages and hours, including all civil rights and
anti-discrimination laws, rules and regulations (collectively,
"Anti-Discrimination Laws"), and no material work stoppage or slowdown or labor
strike against the Company or any of its Subsidiaries is pending or threatened,
nor is the Company or any of its Subsidiaries involved in or threatened with
labor disputes, grievances, or litigation relating to labor matters, including
with respect to Anti-Discrimination Laws, involving classes or alleged classes
of persons.
SECTION 3.15 Compliance with Laws.
---------------------
Neither the Company nor any of its Subsidiaries is in violation of, or has
since January 1, 1998 violated, any applicable provisions of any laws, statutes,
ordinances or regulations except for any violations that, individually or in the
aggregate, would not have, or be reasonably likely to have, a Material Adverse
Effect on the Company.
SECTION 3.16 Finders' or Advisors' Fees.
--------------------------
Except for Credit Suisse First Boston Corporation and Morgan Stanley & Co.
Incorporated, copies of whose engagement agreements have been provided to
Parent, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of the Company or
any of its Subsidiaries who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 3.17 Environmental Matters.
---------------------
(a) Except as set forth in the Company Commission Documents filed prior
to the date hereof and with such exceptions as, individually or in the
aggregate, would not have, or be reasonably likely to have, a Material Adverse
Effect on the Company, (i) no notice, notification, demand, request for
information, citation, summons, complaint or order has been received by, and no
investigation, action, claim, suit, proceeding or review is pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened by any Person
against, the Company or any of its Subsidiaries, and no penalty has been
assessed against the Company or any of its Subsidiaries, in each case, with
respect to any matters relating to or arising out of any Environmental Law; (ii)
the Company and its Subsidiaries are and have been in compliance with all
Environmental Laws; (iii) there are no liabilities of or relating to the Company
or any of its Subsidiaries relating to or arising out of any Environmental Law
of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition, situation or set
of circumstances which could reasonably be expected to result in such a
liability; and (iv) there has been no environmental investigation, study, audit,
test, review or other analysis conducted of which the Company has knowledge in
relation to any current or prior business of the Company or any of its
Subsidiaries or any property or facility now or previously owned, leased or
operated by the Company or any of its Subsidiaries which has not been delivered
to
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Parent prior to the date hereof.
(b) For purposes of this Section 3.17 and Section 4.17, the term
"Environmental Laws" means federal, state, local and foreign statutes, laws
(including, without limitation, common law), judicial decisions, regulations,
ordinances, rules, judgments, orders, codes, injunctions, permits, governmental
agreements or governmental restrictions relating to human health and safety, the
environment or to pollutants, contaminants, wastes, or chemicals.
SECTION 3.18 Opinion of Financial Advisor.
----------------------------
The Company has received the opinion of Credit Suisse First Boston
Corporation to the effect that, as of the date of such opinion, the Exchange
Ratio is fair from a financial point of view to the holders of shares of Company
Common Stock, and as of the date hereof such opinion has not been withdrawn.
SECTION 3.19 Pooling; Tax Treatment.
-----------------------
(a) The Company intends that the Merger be accounted for under the
"pooling of interests" method under the requirements of Opinion No. 16 (Business
Combinations) of the Accounting Principles Board of the American Institute of
Certified Public Accountants, the Financial Accounting Standards Board, and the
rules and regulations of the Commission.
(b) Neither the Company nor any of its affiliates has taken or agreed
to take any action or is aware of any fact or circumstance with respect to the
Company that would prevent the Merger from qualifying (i) for "pooling of
interests" accounting treatment as described in (a) above or (ii) as a
reorganization within the meaning of Section 368 of the Code (a "368
Reorganization").
(c) Immediately after the execution of this Agreement, the Company will
terminate all stock repurchase programs (provided that the Company shall be
permitted to effect the redemption contemplated by Section 5.3).
SECTION 3.20 Pooling Letter.
---------------
The Company has received a letter from Arthur Andersen LLP dated as of
October 15, 2000 and addressed to the Company, a copy of which has been
delivered to Parent, stating that Arthur Andersen LLP concurs with the Company
management's conclusion that, as of October 15, 2000, the Company is eligible to
participate in a transaction accounted for as a "pooling of interests" under
Opinion 16 (Business Combination) of the Accounting Principles Board of the
American Institute of Certified Public Accountants and the rules and regulations
of the Commission.
SECTION 3.21 Takeover Statutes.
------------------
The Board of Directors of the Company has taken the necessary action to
render section 203 of the Delaware Law, any other potentially applicable
antitakeover or similar statute or regulation and the supermajority voting
provisions of Article XIII of the Company's certificate of incorporation and
Article VII of the Company's by-laws inapplicable to this Agreement and the
Company Option Agreement and the transactions contemplated hereby and thereby.
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SECTION 3.22 Stockholder Rights Plan.
-------------------------
The Board of Directors of the Company has resolved to, and the Company
promptly after execution of this Agreement will, take all action necessary to
render the rights issued pursuant to the terms of the Company Rights Agreement
inapplicable to the Merger, this Agreement, the Company Option Agreement and the
other transactions contemplated hereby and thereby.
SECTION 3.23 Joint Ventures.
---------------
To the knowledge of the Company, the audited consolidated financial
statements of each of Equilon Enterprises LLC and Motiva Enterprises LLC (the
"Joint Ventures") for the years ended and at December 31, 1999 and 1998
(including the notes thereto) previously furnished by the Company to Parent
present fairly, in all material respects, the consolidated financial position of
the applicable Joint Venture as of the dates thereof and the consolidated
results of operations and their cash flows for the periods then ended, in each
case in conformity with GAAP applied on a consistent basis (except as may be
indicated in the notes thereto). To the knowledge of the Company, neither Joint
Venture nor any of its Subsidiaries is subject to any liabilities of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, other than: (a) liabilities disclosed or provided for in the
respective consolidated balance sheets at December 31, 1999 of the applicable
Joint Venture included in the audited consolidated financial statements referred
to above, (b) liabilities which, individually or in the aggregate, would not
have, or be reasonably likely to have, a Material Adverse Effect on the Company,
and (c) liabilities disclosed in the Company Commission Documents filed prior to
the date of this Agreement. To the knowledge of the Company, since December 31,
1999, the Joint Ventures have conducted their respective businesses in the
ordinary course.
ARTICLE 4
---------
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT
---------------------------------------------------
Parent represents and warrants to the Company that (except as set forth
in the disclosure schedules delivered by Parent to the Company simultaneously
with the execution of this Agreement (the "Parent Disclosure Schedules")):
SECTION 4.1 Corporate Existence and Power.
-------------------------------
Each of Parent and Merger Subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and has all corporate powers and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted,
except for those the absence of which would not, individually or in the
aggregate, have, or be reasonably likely to have, a Material Adverse Effect on
Parent. Parent is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where the character of the property owned
or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be so qualified
would not, individually or in the aggregate, have, or be reasonably likely to
have, a Material Adverse Effect on Parent. Since the
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date of its incorporation, Merger Subsidiary has not engaged in any activities
other than in connection with or as contemplated by this Agreement. Parent has
heretofore delivered to the Company true and complete copies of Parent's and
Merger Subsidiary's certificate of incorporation and by-laws as currently in
effect.
SECTION 4.2 Corporate Authorization.
-----------------------
(a) The execution, delivery and performance by Parent and Merger
Subsidiary of this Agreement, and by Parent of the Option Agreements, and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby and thereby are within the corporate powers of Parent and Merger
Subsidiary and have been duly authorized by all necessary corporate action,
except for the required approval of Parent's stockholders of (i) the Name Change
Amendment (the "Name Change Amendment Approval") and (ii) the issuance of Parent
Common Stock (the "Common Stock Issuance") in accordance with the rules and
regulations of the NYSE (the "Common Stock Issuance Approval", together with the
Name Change Amendment Approval, the "Parent Stockholder Approvals")) in each
case, in connection with the Merger. The affirmative vote of holders of at least
a majority of the outstanding shares of Parent Common Stock in favor of the Name
Change Amendment is the only vote of the holders of any of the Parent's capital
stock necessary in connection with obtaining the Name Change Amendment. The
affirmative vote in favor of the Common Stock Issuance of a majority of the
votes cast with respect to the Common Stock Issuance by the holders of Parent
Common Stock (provided that the total number of the votes cast in favor of or
against the Common Stock Issuance represents at least a majority of the
outstanding shares of Parent Common Stock) is the only vote of the holders of
any of Parent's capital stock necessary in connection with obtaining the Common
Stock Issuance Approval. Assuming due authorization, execution and delivery of
this Agreement and the Option Agreements by the Company, this Agreement
constitutes a valid and binding agreement of each of Parent and Merger
Subsidiary and each Option Agreement constitutes a valid and binding agreement
of Parent, in each case enforceable against such party in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles. The shares of Parent Common
Stock issued pursuant to the Merger, when issued in accordance with the terms
hereof, will be duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights.
(b) Parent's Board of Directors, at a meeting duly called and held on
or prior to the date hereof, has (i) determined that this Agreement and the
Option Agreements and the transactions contemplated hereby and thereby
(including the Merger) are fair to and in the best interests of Parent's
stockholders (and, in the case of the Name Change Amendment, declaring its
advisability), (ii) approved this Agreement and the Option Agreements and the
transactions contemplated hereby and thereby (including the Merger and the
Common Stock Issuance), and (iii) resolved (subject to Section 6.4) to recommend
approval by Parent's stockholders of the matters constituting the Parent
Stockholder Approvals.
SECTION 4.3 Governmental Authorization.
---------------------------
The execution, delivery and performance by Parent and Merger Subsidiary of
this Agreement, and by Parent of the Option Agreements,
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and the consummation by Parent and Merger Subsidiary of the transactions
contemplated hereby and thereby require no action by or in respect of, or filing
with, any governmental body, agency, official or authority other than (a) the
filing of a certificate of merger and a certificate of amendment to Parent's
certificate of incorporation, in each case in accordance with Delaware Law, (b)
compliance with any applicable requirements of the HSR Act, (c) compliance with
any applicable requirements of the EC Merger Regulation, (d) compliance with any
applicable requirements of laws, rules and regulations in other foreign
jurisdictions governing antitrust or merger control matters, (e) compliance with
any applicable requirements of the Exchange Act, (f) compliance with any
applicable requirements of the Securities Act and (g) other actions or filings
which if not taken or made would not, individually or in the aggregate, have, or
be reasonably likely to have, a Material Adverse Effect on Parent or prevent or
materially delay Parent's and Merger Subsidiary's consummation of the Merger.
SECTION 4.4 Non-Contravention.
-----------------
The execution, delivery and performance by Parent and Merger Subsidiary of
this Agreement, and by Parent of the Option Agreements, and the consummation by
Parent and Merger Subsidiary of the transactions contemplated hereby and thereby
do not and will not, assuming compliance with the matters referred to in
Sections 4.2 and 4.3, (a) contravene or conflict with the certificate of
incorporation or by-laws of Parent or Merger Subsidiary, (b) contravene or
conflict with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to Parent or
any of its Subsidiaries, (c) constitute a default under or give rise to any
right of termination, cancellation or acceleration of any right or obligation of
Parent or any of its Subsidiaries or to a loss of any benefit to which Parent or
any of its Subsidiaries is entitled under any provision of any agreement,
contract or other instrument binding upon Parent or any of its Subsidiaries or
any license, franchise, permit or other similar authorization held by Parent or
any of its Subsidiaries or (d) result in the creation or imposition of any Lien
on any asset of Parent or any of its Subsidiaries, except for such
contraventions, conflicts or violations referred to in clause (b) or defaults,
rights of termination, cancellation or acceleration, or losses or Liens referred
to in clause (c) or (d) that would not, individually or in the aggregate, have,
or be reasonably likely to have, a Material Adverse Effect on Parent. Neither
Parent nor any Subsidiary of Parent is a party to any agreement that expressly
limits the ability of Parent or any Subsidiary of Parent to compete in or
conduct any line of business or compete with any Person or in any geographic
area or during any period of time except to the extent that any such limitation,
individually or in the aggregate, would not have, or be reasonably likely to
have, a Material Adverse Effect on Parent.
SECTION 4.5 Capitalization.
--------------
The authorized capital stock of Parent consists of 2,000,000,000 shares of
Parent Common Stock, and 100,000,000 shares of preferred stock, par value $1.00
per share (of which 5,000,000 are designated Series A Participating Preferred
Stock, and the remaining shares of such preferred stock are not subject to any
designation). As of the close of business on September 30, 2000, there were
outstanding 642,411,517 shares of Parent Common Stock, no shares of Series A
Participating Preferred Stock (all of which are reserved for issuance in
accordance with the Parent Rights Agreement pursuant to which Parent has issued
Parent Rights), and no other shares of capital stock or other voting securities
of Parent. All outstanding shares of capital stock of Parent have been duly
authorized and validly issued and are fully paid and nonassessable. As of
September 30, 2000, there were outstanding (i) options
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to purchase 11,320,461 shares of Parent Common Stock and (ii) other stock-based
awards (other than shares of restricted stock or other equity-based awards
included in the number of shares of Parent Common Stock outstanding set forth
above) with respect to 1,475,291 shares of Parent Common Stock. Except as set
forth in this Section 4.5 and except for changes since the close of business on
September 30, 2000 resulting from the exercise of employee stock options
outstanding on such date or options or other stock-based awards granted or
securities issued as permitted by Section 6.1 and except for the shares to be
issued in connection with the Merger, there are outstanding (a) no shares of
capital stock or other voting securities of Parent, and (b) except for
securities issuable pursuant to compensation plans or arrangements, including
options issued pursuant to Parent stock option plans and performance units of
Parent convertible into Parent Common Stock and the option granted pursuant to
the Parent Option Agreement, (i) no options, warrants or other rights to acquire
from Parent any capital stock, voting securities or securities convertible into
or exchangeable for capital stock or voting securities of Parent, and (ii) no
preemptive or similar rights, subscription or other rights, convertible
securities, agreements, arrangements, or commitments of any character, relating
to the capital stock of Parent, obligating Parent to issue, transfer or sell any
capital stock, voting security or securities convertible into or exchangeable
for capital stock or voting securities of Parent or obligating Parent to grant,
extend or enter into any such option, warrant, subscription or other right,
convertible security, agreement, arrangement or commitment (the items in clauses
4.5(a), 4.5(b) and 4.5(c) being referred to collectively as the "Parent
Securities"). Except as required by the terms of any employee or director
options or other stock based awards and or as permitted by 6.1(e), there are no
outstanding obligations of Parent or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any Parent Securities.
SECTION 4.6 Subsidiaries.
------------
(a) Each Subsidiary of Parent is duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization, has all
powers and all governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted, except for those
the absence of which would not, individually or in the aggregate, have, or be
reasonably likely to have, a Material Adverse Effect on Parent. Each Subsidiary
of Parent is duly qualified to do business and is in good standing in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualifications necessary, except for those
jurisdictions where failure to be so qualified would not, individually or in the
aggregate, have, or be reasonably likely to have, a Material Adverse Effect on
Parent. All Significant Subsidiaries of Parent and their respective
jurisdictions of incorporation are identified in Section 4.6(a) of the Parent
Disclosure Schedule.
(b) Except for directors' qualifying shares and except as set forth in
the Parent 10-K, all of the outstanding capital stock of, or other ownership
interests in, each Significant Subsidiary of Parent is owned by Parent, directly
or indirectly, free and clear of any material Lien and free of any other
material limitation or restriction (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other ownership
interests). There are no outstanding (i) securities of Parent or any of its
Subsidiaries convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any Significant
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<PAGE>
Subsidiary of Parent, or (ii) options, warrants or other rights to acquire from
Parent or any of its Significant Subsidiaries any capital stock, voting
securities or other ownership interests in, or any securities convertible into
or exchangeable for any capital stock, voting securities or ownership interests
in, any Significant Subsidiary of Parent, and no preemptive or similar rights,
subscriptions or other rights, convertible securities, agreements, arrangements
or commitments of any character, relating to the capital stock of any
Significant Subsidiary of Parent, obligating Parent or any of its Significant
Subsidiaries to issue, transfer or sell, any capital stock, voting securities or
other ownership interests in, or any securities convertible into or exchangeable
for any capital stock, voting securities or ownership interests in, any
Significant Subsidiary of Parent or obligating Parent or any Significant
Subsidiary of Parent to grant, extend or enter into any such option, warrant,
subscription or other right, convertible security, agreement, arrangement or
commitment (items in clauses 4.6(b)(i) and 4.6(b)(ii) being referred to
collectively as the "Parent Subsidiary Securities"). There are no outstanding
obligations of Parent or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any outstanding Parent Subsidiary Securities.
SECTION 4.7 Commission Filings.
------------------
(a) Parent has made available to the Company (i) its annual reports on
Form 10-K for its fiscal years ended December 31, 1997, 1998 and 1999, (ii) its
quarterly reports on Form 10-Q for its fiscal quarters ended after December 31,
1999, (iii) its proxy or information statements relating to meetings of, or
actions taken without a meeting by, the stockholders of Parent held since
December 31, 1999, and (iv) all of its other reports, statements, schedules and
registration statements filed with the Commission since December 31, 1999 (the
documents referred to in this Section 4.7(a) being referred to collectively as
the "Parent Commission Documents"). Parent's annual report on Form 10-K for its
fiscal year ended December 31, 1999 is referred to herein as the "Parent 10-K".
(b) As of its filing date, each Parent Commission Document complied as
to form in all material respects with the applicable requirements of the
Exchange Act and the Securities Act.
(c) As of its filing date, each Parent Commission Document filed
pursuant to the Exchange Act did not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(d) Each registration statement, as amended or supplemented, if
applicable, filed by Parent since January 1, 1997 pursuant to the Securities Act
as of the date such statement or amendment became effective did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
SECTION 4.8 Financial Statements.
---------------------
The audited consolidated financial statements and unaudited consolidated
interim financial statements of Parent (including any related notes and
schedules) included in the annual reports on Form 10-K and the quarterly reports
on Form 10-Q referred to in Section 4.7 present fairly, in all material
respects, the consolidated financial position of Parent and its Subsidiaries as
of the dates thereof and the consolidated results of their
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operations and their cash flows for the periods then ended (subject to normal
year-end adjustments and the absence of notes in the case of any unaudited
interim financial statements), in each case in conformity with GAAP applied on a
consistent basis (except as may be indicated in the notes thereto). For purposes
of this Agreement, "Parent Balance Sheet" means the consolidated balance sheet
of Parent as of December 31, 1999 set forth in the Parent 10-K and "Parent
Balance Sheet Date" means December 31, 1999.
SECTION 4.9 Disclosure Documents.
--------------------
(a) The proxy statement of Parent (the "Parent Proxy Statement") to be
filed with the Commission in connection with the Merger and the Registration
Statement on Form S-4 of Parent (the "Form S-4") to be filed under the
Securities Act relating to the issuance of Parent Common Stock in the Merger,
and any amendments or supplements thereto, will, when filed, subject to the last
sentence of Section 4.9(b), comply as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act.
(b) Neither the Parent Proxy Statement nor any amendment or supplement
thereto, will, at the date the Parent Proxy Statement or any such amendment or
supplement is first mailed to stockholders of Parent or at the time such
stockholders vote on the matters constituting the Parent Stockholder Approval,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Neither the Form S-4
nor any amendment or supplement thereto will at the time it becomes effective
under the Securities Act or at the Effective Time contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. No
representation or warranty is made by Parent in this Section 4.9 with respect to
statements made or incorporated by reference therein based on information
supplied by the Company for inclusion or incorporation by reference in the
Parent Proxy Statement or the Form S-4.
(c) None of the information supplied or to be supplied by Parent for
inclusion or incorporation by reference in the Company Proxy Statement or any
amendment or supplement thereto will, at the date the Company Proxy Statement or
any amendment or supplement thereto is first mailed to stockholders of Company
or at the time such stockholders vote on the adoption and approval of this
Agreement and the transactions contemplated hereby, contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
SECTION 4.10 Absence of Certain Changes.
---------------------------
Except as disclosed in the Parent Commission Documents filed prior to the
date of this Agreement, or except as is not prohibited after the date hereof by
Section 6.1 (or as is otherwise permitted by Section 6.1), since the Parent
Balance Sheet Date, Parent and its Subsidiaries have conducted their business in
the ordinary course consistent with past practice and there has not been:
(a) any event, occurrence or development of a state of circumstances or
facts which, individually or in the aggregate, has had, or would be reasonably
likely to have, a Material Adverse Effect on Parent; or
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(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Parent (other than
regular quarterly cash dividends payable by Parent (x) consistent with past
practice (including periodic dividend increases consistent with past practice)
and (y) that are not special dividends), or any repurchase, redemption or other
acquisition by Parent or any of its wholly owned Subsidiaries of any outstanding
shares of capital stock or other equity securities of, or other ownership
interests in, Parent or any of its Significant Subsidiaries (other than any such
repurchases prior to the date hereof pursuant to Parent's publicly announced
stock buyback program or, after the date hereof, as permitted under Section
6.1(e), or pursuant to the terms of employee and director stock options); or
(c) any change prior to the date hereof in any method of accounting or
accounting practice (other than any change for tax purposes) by Parent or any of
its Subsidiaries, except for any such change which is not material or which is
required by reason of a concurrent change in GAAP; or
(d) any transaction or commitment made, or any contract, agreement or
settlement entered into, by (or judgment, order or decree affecting) Parent or
any of its Subsidiaries relating to its assets or business (including the
acquisition or disposition of any assets) or any relinquishment by Parent or any
of its Subsidiaries of any contract or other right, in either case, material to
Parent and its Subsidiaries taken as a whole, other than transactions,
commitments, contracts, agreements or settlements (including without limitation
settlements of litigation and tax proceedings) in the ordinary course of
business consistent with past practice, those contemplated by this Agreement, or
as agreed to in writing by the Company;
(e) any amendment of any material term of any outstanding security of
Parent or any of its Significant Subsidiaries; or
(f) any (i) Tax election made or changed, (ii) audit settled, or (iii)
amended Tax return filed, in each case, that is reasonably likely to result in a
Tax liability material to Parent and its Subsidiaries, taken as a whole.
SECTION 4.11 No Undisclosed Material Liabilities.
--------------------------------------
There are no liabilities of the Parent or any Subsidiary of the Parent of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, other than:
(a) liabilities disclosed or provided for in the Parent Balance
Sheet or in the notes thereto;
(b) liabilities which, individually or in the aggregate, would not
have, or be reasonably likely to have, a Material Adverse
Effect on Parent;
(c) liabilities disclosed in the Parent Commission Documents filed
prior to the date of this Agreement; and
(d) liabilities under this Agreement.
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SECTION 4.12 Litigation.
----------
Except as disclosed in the Parent Commission Documents filed prior to the
date of this Agreement, there is no action, suit, investigation or proceeding
pending against, or to the knowledge of Parent threatened against or affecting,
Parent or any of its Subsidiaries or any of their respective properties or any
of their respective officers or directors before any court or arbitrator or any
governmental body, agency or official except as would not, individually or in
the aggregate, have, or be reasonably likely to have, a Material Adverse Effect
on Parent.
SECTION 4.13 Taxes.
-----
Except as set forth in the Parent Balance Sheet (including the notes
thereto) and except as would not, individually or in the aggregate, have, or be
reasonably likely to have, a Material Adverse Effect on Parent, (i) all Parent
Tax Returns required to be filed with any taxing authority by, or with respect
to, Parent and its Subsidiaries have been filed in accordance with all
applicable laws; (ii) Parent and its Subsidiaries have timely paid all Taxes
shown as due and payable on Parent Tax Returns that have been so filed, and, as
of the time of filing, the Parent Tax Returns correctly reflected the facts
regarding the income, business, assets, operations, activities and the status of
Parent and its Subsidiaries (other than Taxes which are being contested in good
faith and for which adequate reserves are reflected on the Parent Balance
Sheet); (iii) Parent and its Subsidiaries have made provision for all Taxes
payable by Parent and its Subsidiaries for which no Parent Tax Return has yet
been filed; (iv) the charges, accruals and reserves for Taxes with respect to
Parent and its Subsidiaries reflected on the Parent Balance Sheet are adequate
under GAAP to cover the Tax liabilities accruing through the date thereof; (v)
there is no action, suit, proceeding, audit or claim now proposed or pending
against or with respect to Parent or any of its Subsidiaries in respect of any
Tax where there is a reasonable possibility of an adverse determination; and
(vi) to the best of Parent's knowledge and belief, neither Parent nor any of its
Subsidiaries is liable for any Tax imposed on any entity other than such Person,
except as the result of the application of Treas. Reg. section 1.1502-6 (and any
comparable provision of the tax laws of any state, local or foreign
jurisdiction) to the affiliated group of which Parent is the common parent.
SECTION 4.14 Employee Benefit Plans.
----------------------
(a) Parent has provided the Company with a list (set forth in Section
4.14(c) of the Parent Disclosure) identifying each material "employee benefit
plan," as defined in section 3(3) of ERISA, each material management,
consulting, non-compete, employment, severance or similar contract, plan,
arrangement or policy applicable to any director, former director, employee or
former employee of Parent and each material plan, program, policy, agreement or
arrangement (written or oral), providing for compensation, bonuses,
profit-sharing, stock option or other stock related rights or other forms of
incentive or deferred compensation, vacation benefits, insurance coverage
(including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance benefits) or other
employee benefits of any kind, whether funded or unfunded which is maintained,
administered or contributed to by Parent or any Subsidiary and covers any
employee or director or former employee or director of Parent, or under which
Parent or any Subsidiary has any liability, contingent or otherwise; provided
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however, that such list need not include any Parent Benefit Plan that
constitutes a Foreign Parent Benefit Plan (as defined below). The material
plans, agreement or arrangements of the Parent and its Subsidiaries referred to
in the first sentence of this paragraph (a) (excluding any such plan that is a
"multiemployer plan," as defined in section 3(37) of ERISA, but including
Foreign Parent Benefit Plans) are referred to collectively herein as the "Parent
Benefit Plans." "Foreign Parent Benefit Plan" means any Parent Benefit Plan of
Parent or any of its Subsidiaries that is governed by the laws of any
jurisdiction other than the United States. To the extent practicable, Parent
shall provide and deliver to the Company a list of Foreign Parent Benefit Plans
as soon as practicable.
(b) Each Parent Benefit Plan has been established and maintained in
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations (including but not limited to, to the
extent applicable, ERISA and the Code) which are applicable to such Plan, except
where failure to so comply would not, individually or in the aggregate, have, or
be reasonably likely to have, a Material Adverse Effect on Parent.
(c) Neither Parent nor any affiliate of Parent has incurred a liability
under Title IV of ERISA that has not been satisfied in full, and no condition
exists that presents a material risk to Parent or any affiliate of Parent of
incurring any such liability other than liability for premiums due the Pension
Benefit Guaranty Corporation (which premiums have been paid when due).
(d) Each Parent Benefit Plan which is intended to be qualified under
section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from federal income tax pursuant to section 501(a) of the Code and, to
the knowledge of Parent, no circumstances exist which will adversely affect such
qualification or exemption.
(e) No director, officer or other employee of Parent will become
entitled to any severance or similar benefit or enhanced or accelerated benefit
solely as a result of obtaining the Parent Stockholder Approval or otherwise as
a result of the transactions contemplated hereby.
(f) Except as reflected in the Parent Commission Documents filed prior
to the date hereof, no Parent Benefit Plan provides post-retirement health and
medical, life or other insurance benefits for retired employees of Parent or any
of its Subsidiaries.
(g) There has been no amendment to, written interpretation or
announcement (whether or not written) by Parent, any Subsidiary or any of its
affiliates relating to, or change in employee participation or coverage under,
any Parent Benefit Plan (other than a Foreign Parent Benefit Plan) which would
increase materially the expense of maintaining such Parent Benefit Plan above
the level of the expense incurred in respect thereof for the 12 months ended on
the Parent Balance Sheet Date.
(h) Parent and its Subsidiaries are in compliance in all material
respects with all applicable material federal, state and local laws, rules and
regulations respecting employment, employment practices, labor, terms and
conditions of employment and wages and hours, including Anti-Discrimination
Laws, and no material work stoppage or slowdown or labor strike
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against Parent or any of its Subsidiaries is pending or threatened, nor is
Parent or any of its Subsidiaries involved in or threatened with labor disputes,
grievances or litigation relating to labor matters involving any employees,
including with respect to Anti-Discrimination Laws, involving classes or alleged
classes of persons.
SECTION 4.15 Compliance with Laws.
----------------------
Neither Parent nor any of its Subsidiaries is in violation of, or has since
January 1, 1998 violated, any applicable provisions of any laws, statutes,
ordinances or regulations except for any violations that, individually or in the
aggregate, would not have, or be reasonably likely to have, a Material Adverse
Effect on Parent.
SECTION 4.16 Finders' or Advisors' Fees.
---------------------------
Except for Lehman Brothers Inc., whose fees will be paid by Parent, there
is no investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of Parent or any of its
Subsidiaries who might be entitled to any fee or commission in connection with
the transactions contemplated by this Agreement.
SECTION 4.17 Environmental Matters.
----------------------
Except as set forth in the Parent Commission Documents filed prior to the
date hereof and with such exceptions as, individually or in the aggregate, would
not have, or be reasonably likely to have, a Material Adverse Effect on Parent,
(i) no notice, notification, demand, request for information, citation, summons,
complaint or order has been received by, and no investigation, action, claim,
suit, proceeding or review is pending or, to the knowledge of Parent or any of
its Subsidiaries, threatened by any Person against, Parent or any of its
Subsidiaries, and no penalty has been assessed against Parent or any of its
Subsidiaries, in each case, with respect to any matters relating to or arising
out of any Environmental Law; (ii) Parent and its Subsidiaries are and have been
in compliance with all Environmental Laws; (iii) there are no liabilities of or
relating to Parent or any of its Subsidiaries relating to or arising out of any
Environmental Law of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability; and (iv) there has been no environmental investigation,
study, audit, test, review or other analysis conducted of which Parent has
knowledge in relation to any current or prior business of Parent or any of its
Subsidiaries or any property or facility now or previously owned, leased or
operated by Parent or any of its Subsidiaries which has not been delivered to
the Company prior to the date hereof.
SECTION 4.18 Opinion of Financial Advisor.
------------------------------
Parent has received the opinion of Lehman Brothers Inc. to the effect that,
as of the date of such opinion, the exchange ratio to be paid by Parent in the
Merger is fair, from a financial point of view, to Parent, and, as of the date
hereof, such opinion has not been withdrawn.
SECTION 4.19 Pooling; Tax Treatment.
----------------------
(a) Parent intends that the Merger be accounted for as a "pooling of
interests" as described in Section 3.19(a).
(b) Neither Parent nor any of its affiliates has taken or agreed to
take any action or is
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aware of any fact or circumstance that would prevent the Merger from qualifying
(i) for "pooling of interests" accounting treatment as described in Section
3.19(a) or (ii) as a 368 Reorganization.
(c) Immediately after execution of this Agreement, Parent will
terminate all stock repurchase programs.
SECTION 4.20 Pooling Letter.
---------------
Parent has received a letter from PricewaterhouseCoopers LLP dated as of
October 15, 2000 and addressed to Parent, a copy of which has been delivered to
the Company, stating that based on the information furnished to
PricewaterhouseCoopers LLP in the related certificate of Parent's management and
based on the letter from Arthur Andersen LLP referenced in Section 3.20,
PricewaterhouseCoopers LLP concurs with Parent management's conclusion that, as
of October 15, 2000, no conditions exist that would preclude Parent's accounting
for the Merger as a pooling of interests, and such letter has not been withdrawn
or modified in any material respect as of the date hereof.
SECTION 4.21 Takeover Statutes.
------------------
The Board of Directors of Parent has (i) taken the necessary action to
render section 203 of the Delaware Law and any other potentially applicable
antitakeover or similar statute or regulation inapplicable to this Agreement and
the Parent Option Agreement and the transactions contemplated hereby and thereby
and (ii) has resolved to, and promptly after the execution of this Agreement
will, take the necessary action to render the supermajority voting provisions of
Article VII of Parent's Certificate of Incorporation inapplicable to this
Agreement and the Parent Option Agreement and the transactions contemplated
hereby and thereby.
SECTION 4.22 Stockholder Rights Plan.
------------------------
The Board of Directors of Parent has resolved to, and Parent promptly after
execution of this Agreement will, take all action necessary to render the rights
issued pursuant to the terms of the Parent Rights Agreement inapplicable to the
Merger, this Agreement, the Parent Option Agreement and the other transactions
contemplated hereby and thereby.
ARTICLE 5
---------
COVENANTS OF THE COMPANY
------------------------
The Company agrees that:
SECTION 5.1 Conduct of the Company.
-----------------------
From the date of this Agreement until the Effective Time, the Company and
its Subsidiaries shall conduct their business in the ordinary course consistent
with past practice and in a manner not representing a new strategic direction
for the Company and its Subsidiaries and shall use their reasonable best efforts
to preserve intact their business organizations and relationships with third
parties. Without limiting the generality of the foregoing, except with the prior
written consent of Parent or as contemplated by this Agreement or as set forth
in the Company Disclosure Schedule, from the date hereof until the Effective
Time:
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(a) the Company will not, and will not permit any of its Significant
Subsidiaries to, adopt or propose any change in its certificate of incorporation
or by-laws, except that any Significant Subsidiary may make any changes that
would not adversely affect the rights of the Company, Parent or its stockholders
under this Agreement, the transactions contemplated by this Agreement, or the
rights of holders of Company Common Stock;
(b) the Company will not, and will not permit any Significant
Subsidiary of the Company to, adopt a plan or agreement of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other material reorganization of the Company or any of its Significant
Subsidiaries (other than a merger or consolidation between its wholly owned
Subsidiaries, and immaterial recapitalizations of Significant Subsidiaries);
(c) the Company will not, and will not permit any Subsidiary of the
Company to, issue, sell, transfer, pledge, dispose of or encumber any shares of,
or securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class or series of the Company or its Subsidiaries other than (i) issuances
pursuant to the exercise of convertible securities outstanding on the date
hereof or issuances pursuant to stock based awards or options that are
outstanding on the date hereof and are reflected in Section 3.5 or are granted
in accordance with clause 5.1(c)(ii), (ii) additional options or stock-based
awards to acquire shares of Company Common Stock granted under the terms of any
Company Stock Option Plan as in effect on the date hereof in the ordinary course
consistent with past practice, (iii) issuances of such securities as
consideration in acquisition transactions permitted by Section 5.1(i) and
Section 5.1(l), provided that the aggregate value of all such securities issued
pursuant to this clause 5.1(c)(iii) in any period of any twelve consecutive
months following the date of this Agreement shall in no event exceed $100
million, and that the value of any securities issued in connection with any
acquisition transaction or a series of related acquisition transactions
permitted by Section 5.1(i) and Section 5.1(l) shall in no event exceed $25
million (valued, in each case, at the fair market value of such securities as of
the date of the agreement to issue such securities) and such securities shall be
issued only to the extent consistent with Section 7.4, (iv) transfers or
issuances of shares of any Subsidiary of the Company to the Company or any of
its wholly-owned Subsidiaries, and (v) where required by applicable law,
issuances of director qualifying shares in jurisdictions other than the United
States;
(d) the Company will not, and will not permit any Subsidiary of the
Company to, (i) split, combine, subdivide or reclassify its outstanding shares
of capital stock, or (ii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock other than, subject to Section 7.9, (x) regular quarterly cash dividends
payable by the Company, or regular periodic cash or other required dividends
payable by any Subsidiary of the Company, in each case (1) consistent with past
practice (including periodic dividend increases consistent with past practice)
and (2) that are not special dividends, unless, in either case, required to be
paid under an applicable agreement in effect as of the date of this Agreement,
(y) any required dividends on the Market Auction Preferred Stock or (z)
dividends paid by any Subsidiary of the Company to the Company or any wholly
owned Subsidiary of the Company;
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(e) the Company will not, and will not permit any Subsidiary of the
Company to, redeem, purchase or otherwise acquire directly or indirectly any of
the Company's or any Subsidiary's capital stock, except for repurchases,
redemptions or acquisitions (x) required by the terms of its capital stock or
any securities outstanding on the date hereof or required under Section 5.3, (y)
required by or in connection with the respective terms, as of the date hereof,
of any Company Stock Option Plan or any dividend reinvestment plan as in effect
on the date hereof in the ordinary course of the operations of such plan
consistent with past practice and only to the extent consistent with Section 7.4
or (z) effected in the ordinary course consistent with past practice and only to
the extent consistent with Section 7.4;
(f) the Company will not amend the terms (including the terms relating
to accelerating the vesting or lapse of repurchase rights or obligations) of any
outstanding options to purchase shares of Company Common Stock (which, it is
understood, will not limit the administration of the relevant plans in
accordance with past practices and interpretations of the Company's Board and
the Company's Compensation Committee to the extent consistent with Section 7.4);
(g) the Company will not, and will not permit any Subsidiary of the
Company to, (x) make or commit to make any capital expenditure in 2000 except
within the aggregate amount of the capital expenditure budget for 2000
heretofore furnished to Parent (the "Company 2000 Capital Expenditure Budget"),
(y) make or commit to make any capital expenditure in 2001 except within a
Company 2001 Permitted Capital Expenditure Budget or (z) make or commit to make
any capital expenditure in 2002 except within a Company 2002 Permitted Capital
Expenditure Budget. A "Company 2001 Permitted Capital Expenditure Budget" means
any capital expenditure budget of the Company for 2001 adopted by the board of
directors of the Company in the ordinary course of business so long as the
aggregate amount of capital expenditures for 2001 provided for therein does not
exceed 120% of the aggregate amount of capital expenditures provided for in the
Company 2000 Capital Expenditure Budget. "Company 2002 Permitted Capital
Expenditure Budget" means any capital expenditure budget of the Company for 2002
adopted by the board of directors of the Company in the ordinary course of
business so long as the aggregate amount of capital expenditures for 2002
provided for therein does not exceed 120% of the aggregate amount of capital
expenditures provided for in the Company 2001 Capital Expenditure Budget;
(h) the Company will not, and will not permit any Subsidiary of the
Company to, (1) increase the compensation or benefits of any director, officer
or employee, except for normal increases in the ordinary course of business
consistent with past practice or as required under applicable law or any
existing agreement or commitment, or (2) enter into (or adopt) any employment or
severance agreement or arrangement except, with respect to individual non-U.S.
payroll employees, in the ordinary course of business consistent with past
practice or as required by applicable law;
(i) the Company will not, and will not permit any of its Subsidiaries
to, acquire a material amount of assets or property (as measured with respect to
the consolidated assets of the Company and its Subsidiaries taken as a whole) of
any other Person, except in the ordinary
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course of business consistent with past practice;
(j) except as contemplated by Section 7.1 hereof, the Company will not,
and will not permit any of its Subsidiaries to, sell, lease, license, encumber
(including by the grant of any option thereon) or otherwise dispose of any
material assets or property (as measured with respect to the consolidated assets
of the Company and its Subsidiaries taken as a whole) except pursuant to
existing contracts or commitments or except in the ordinary course of business
consistent with past practice;
(k) except for any such change which is not material or which is
required by reason of a concurrent change in GAAP, the Company will not, and
will not permit any Subsidiary of the Company to, change any method of
accounting or accounting practice (other than any change for tax purposes) used
by it;
(l) the Company will not, and will not permit any Subsidiary of the
Company to, enter into any material joint venture, partnership or other similar
arrangement except in the ordinary course of business, and so long as such
arrangements do not obligate the Company or any Subsidiary to invest assets or
resources, or to assume or incur a liability or loss, in excess of $250 million
with respect to any individual mid-stream or downstream (including power)
arrangement or $500 million, with respect to any individual upstream
arrangement. The terms "downstream", "mid-stream" and "upstream" shall have the
meanings commonly assigned to them in the oil and gas industry.
(m) the Company will not, and will not permit any of its Subsidiaries
to, take any action that would make any representation or warranty of the
Company hereunder inaccurate in any material respect at, or as of any time prior
to, the Effective Time;
(n) the Company will not amend or waive any provisions of any
standstill agreement;
(o) the Company will not (i) make or change any Tax election, (ii)
settle any audit or (iii) file any amended Tax Return, in each case, that is
reasonably likely to result in a Tax liability material to the Company and its
Subsidiaries, taken as a whole;
(p) the Company will not, and will not permit any of its Subsidiaries
to, enter into any agreement that limits (other than in an insignificant manner)
the ability of the Company or any Subsidiary of the Company, or would limit
(other than in an insignificant manner) the ability of Parent or any Subsidiary
of Parent after the Effective Time, to compete in or conduct any line of
business or compete with any Person in any geographic area or during any period;
and
(q) the Company will not, and will not permit any of its Subsidiaries
to, take any action that would prevent, materially delay or materially impede
the consummation of the Merger; and
(r) the Company will not, and will not permit any of its Subsidiaries
to, agree or commit to do any of the foregoing.
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SECTION 5.2 Company Stockholder Meeting; Proxy Material.
---------------------------------------------
Even if the Board of Directors of Parent shall take any action permitted by
the third sentence of Section 6.4, at such time at which Parent and the Company
determine in their reasonable judgment that, within 60 days, the Condition
Satisfaction Time will occur, the Company shall cause a meeting of its
stockholders (the "Company Stockholder Meeting") to be duly called and held for
the purpose of voting on the approval and adoption of this Agreement and the
Merger; provided that the Company shall not hold the Company Stockholder
Meeting, and if the Company Stockholder Meeting has been called, the Company
shall adjourn the Company Stockholder Meeting, until such time (the "Condition
Satisfaction Time") at which, in the reasonable judgment of Parent and the
Company, all conditions to the Closing (other than the condition set forth in
Section 8.1(a)) have been satisfied or (to the extent legally permissible)
waived (by the applicable party) or are then capable of being satisfied,
including by placing the Alliance Interests into an irrevocable trust as
contemplated by Section 7.1(d)(iii), (assuming that all references to the
Closing Date contained in Sections 8.2(a) and 8.3(a) are deemed to be references
to the date of the Condition Satisfaction Time). Except as provided in the next
sentence, the Board of Directors of the Company shall recommend approval and
adoption of this Agreement and the Merger by the Company's stockholders. The
Board of Directors of the Company shall be permitted (i) not to recommend to the
Company's stockholders that they give the Company Stockholder Approval or (ii)
to withdraw or modify in a manner adverse to Parent its recommendation to the
Company's stockholders that they give the Company Stockholder Approval, only if
(v) the Company has received a Superior Proposal (defined in Section 7.10), (w)
the Board of Directors of the Company determines in its good faith judgment,
after receiving the advice of outside legal counsel, that, in light of the
Superior Proposal, failure to so withdraw or modify its recommendation would be
reasonably likely to be inconsistent with fulfilling its fiduciary duty to
stockholders under applicable law, (x) five business days have elapsed following
delivery by the Company to Parent of written notice advising Parent that the
Board of Directors of the Company has resolved to so withdraw or modify its
recommendation, specifying the material terms and conditions of the Superior
Proposal and identifying the Person making the Superior Proposal, (y) the
Company has given Parent the opportunity to propose revisions to the terms of
this Agreement in response to the Superior Proposal and negotiated in good faith
with Parent with respect to the proposed revisions, if any, and (z) the Company
has complied with its obligations set forth in Section 7.10 in all material
respects; provided, however, that in the case of (i) and (ii) above, the Company
shall nevertheless submit this Agreement and the Merger to the holders of shares
of Company Common Stock for approval at the Company Stockholder Meeting unless
this Agreement shall have been terminated in accordance with its terms prior to
the date of the Company Stockholder Meeting. In connection with the Company
Stockholder Meeting, the Company (i) will prepare and file with the Commission,
will use its reasonable best efforts to have cleared by the Commission the
Company Proxy Statement and all other materials for the Company Stockholder
Meeting, and (ii) will mail to its stockholders the Company Proxy Statement and
all other proxy materials for the Company Stockholder Meeting a sufficient time
prior to the Company Stockholder Meeting as is necessary to comply with
applicable law, including applicable rules and regulations of the Commission,
(iii) will use its reasonable best efforts, subject to the immediately preceding
sentence, to obtain the Company Stockholder Approval and (iv) will otherwise
comply with all legal requirements applicable to the Company Stockholder
Meeting.
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SECTION 5.3 Equity Conversion.
------------------
Prior to the Closing Date, the Company shall cause each issued and
outstanding share of the Market Auction Preferred Stock to be redeemed for cash
(the "Equity Conversion").
SECTION 5.4 Resignation of Company Directors.
---------------------------------
In order to fulfill the requirements of Section 2.6 hereof, the Company
shall (i) cause each director of the Company to deliver a written resignation to
the Company effective at the Effective Time and (ii) cause the vacancies
resulting from such resignations to be filled by persons who are directors of
Merger Subsidiary immediately prior to the Effective Time.
ARTICLE 6
---------
COVENANTS OF PARENT
-------------------
Parent agrees that:
SECTION 6.1 Conduct of Parent.
-----------------
From the date of this Agreement until the Effective Time, Parent and its
Subsidiaries shall conduct their business in the ordinary course consistent with
past practice and in a manner not representing a new strategic direction for
Parent and its Subsidiaries and shall use their reasonable best efforts to
preserve intact their business organizations and relationships with third
parties. Without limiting the generality of the foregoing, and except with the
prior written consent of the Company or as contemplated by this Agreement or as
set forth in the Parent Disclosure Schedule, from the date hereof until the
Effective Time:
(a) Parent will not, and will not permit any of its Significant
Subsidiaries to, adopt or propose any change in its certificate of incorporation
or by-laws, except as contemplated hereby, and except that any Significant
Subsidiary may make any changes that would not adversely affect the rights of
Parent, the Company or its stockholders under this Agreement, the transactions
contemplated by this Agreement, or the rights of holders of Parent Common Stock;
(b) Parent will not, and will not permit any of its Significant
Subsidiaries to, adopt a plan or agreement of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
material reorganization of Parent or any of its Significant Subsidiaries (other
than a merger or consolidation between its wholly-owned Subsidiaries, and
immaterial recapitalizations of Significant Subsidiaries);
(c) Parent will not issue, sell, transfer, pledge, dispose of or
encumber any shares of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire, any
shares of capital stock of any class or series of Parent, other than (i)
issuances pursuant to the exercise of convertible securities outstanding on the
date hereof or issuances pursuant to stock-based awards or options outstanding
on the date hereof or that are granted in accordance with clause 6.1(c)(ii),
(ii) additional options or stock-based awards to acquire Parent Common Stock
granted under the terms of any employee or director stock option or compensation
plan or arrangement of Parent as in effect as of the date hereof in the ordinary
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course consistent with past practice, (iii) issuances of such securities for any
other purpose, provided that the aggregate number of shares of Parent Common
Stock issued (which shall include, for purposes of this paragraph (c), the
number of shares of Parent Common Stock issuable upon the exercise, conversion
or exchange of convertible securities, options, warrants or other similar
rights) pursuant to this clause 6.1(c)(iii) in any period of any twelve
consecutive months following the date of this Agreement shall in no event exceed
more than 2% of the total number of shares of Parent Common Stock outstanding as
of the close of business on September 30, 2000 as set forth in Section 4.5 and
such shares and securities shall be issued only to the extent consistent with
Section 7.4, and (iv) transfers or issuances of shares of any Subsidiary of
Parent to Parent or any of its wholly owned Subsidiaries;
(d) Parent will not (i) split, combine, subdivide or reclassify its
outstanding shares of capital stock or (ii) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with respect
to its capital stock other than, subject to Section 7.9, (a) regular quarterly
cash dividends payable by Parent in respect of the shares of Parent Common
Stock, or regular periodic cash or other required dividends payable by any
Subsidiary of Parent, in each case (x) consistent with past practice (including
periodic dividend increases consistent with past practice) and (y) that are not
special dividends, unless, in either case, required to be paid under an
applicable agreement in effect as of the date of this Agreement, or (b)
dividends paid by any Subsidiary of Parent to Parent or any wholly owned
Subsidiary of Parent;
(e) Parent will not, and will not permit any Subsidiary of Parent to,
redeem, purchase or otherwise acquire directly or indirectly any of Parent's
capital stock, except for repurchases, redemptions or acquisitions (x) required
by the terms of capital stock or any securities outstanding on the date hereof,
(y) required by or in connection with the respective terms, as of the date
hereof, of any employee stock option plan or compensation plan or arrangement of
Parent or any dividend reinvestment plan as in effect as of the date hereof in
the ordinary course of operations of such plan consistent with past practice and
only to the extent consistent with Section 7.4 or (z) effected in the ordinary
course consistent with past practice and only to the extent consistent with
Section 7.4;
(f) except for any such change which is not significant or which is
required by reason of a concurrent change in GAAP, Parent will not, and will not
permit any Subsidiary of Parent to, change any method of accounting or
accounting practice (other than any change for tax purposes) used by it;
(g) Parent will not (i) make or change any Tax election, (ii) settle
any audit or (iii) file any amended Tax Return, in each case, that is reasonably
likely to result in a Tax liability material to Parent and its Subsidiaries,
taken as a whole;
(h) Parent will not, and will not permit any of its Subsidiaries to,
take any action that would make any representation or warranty of Parent
hereunder inaccurate in any material respect at, or as of any time prior to, the
Effective Time; and
(i) Parent will not, and will not permit any of its Subsidiaries to,
take any action which would prevent, materially delay or materially impede the
consummation of the Merger.
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(j) Parent will not, and will not permit any of its Subsidiaries to,
sell, lease, license, encumber (including by the grant of any option thereon) or
otherwise dispose of any of its assets or properties which would be material to
Parent and its Subsidiaries, taken as a whole.
(k) Parent will not, and will not permit any of its Subsidiaries to,
agree or commit to do any of the foregoing.
SECTION 6.2 Obligations of Merger Subsidiary.
----------------------------------
Parent will take all action necessary to cause Merger Subsidiary to perform
its obligations under this Agreement and to consummate the Merger on the terms
and conditions set forth in this Agreement.
SECTION 6.3 Director and Officer Liability.
------------------------------
(a) Parent shall indemnify and hold harmless the individuals who on or
prior to the Effective Time were officers, directors and employees of the
Company or its Subsidiaries (collectively, the "Indemnitees") with respect to
all acts or omissions by them in their capacities as such or taken at the
request of the Company or any of its Subsidiaries at any time prior to the
Effective Time to the extent provided under the Company's certificate of
incorporation and by-laws in effect on the date hereof. Parent shall cause the
Surviving Corporation to honor all indemnification agreements with Indemnitees
(including under the Company's by-laws) in effect as of the date hereof in
accordance with the terms thereof. The Company has disclosed to Parent all such
indemnification agreements prior to the date hereof.
(b) For six years after the Effective Time, Parent shall procure the
provision of officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Effective Time covering each such Person
currently covered by the Company's officers' and directors' liability insurance
policy on terms with respect to coverage and in amounts no less favorable than
those of such policy in effect on the date hereof; provided, that if the
aggregate annual premiums for such insurance at any time during such period
shall exceed 300% of the per annum rate of premium paid by the Company and its
Subsidiaries as of the date hereof for such insurance, then Parent shall, or
shall cause its Subsidiaries to, provide only such coverage as shall then be
available at an annual premium equal to 300% of such rate.
(c) The obligations of Parent under this Section 6.3 shall not be
terminated or modified in such a manner as to adversely affect any Indemnitee to
whom this Section 6.3 applies without the consent of such affected Indemnitee
(it being expressly agreed that the Indemnitees to whom this Section 6.3 applies
shall be third party beneficiaries of this Section 6.3).
SECTION 6.4 Parent Stockholder Meeting;
--------------------------
Form S-4. Even if the Board of Directors of the Company shall take any
action permitted by the third sentence of Section 5.2, Parent shall cause a
meeting of its stockholders (the "Parent Stockholder Meeting") to be duly called
and held for the purpose of approving the matters constituting the Parent
Stockholder Approvals; provided that the Parent Stockholder Meeting shall
conclude prior to the Company Stockholder Meeting and may be held on the same
date as the Company Stockholder Meeting. Except as provided in the next
sentence, the Board of Directors of Parent shall recommend approval of the
matters
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constituting the Parent Stockholder Approvals. The Board of Directors of Parent
shall be permitted (i) not to recommend to Parent's stockholders that they give
the Parent Stockholder Approvals or (ii) to withdraw or modify in a manner
adverse to the Company its recommendation to the Parent's stockholders that they
give the Parent Stockholder Approval, only if (v) Parent has received a Superior
Proposal, (w) the Board of Directors of Parent determines, after receiving the
advice of outside legal counsel, in its good faith judgment that, in light of
the Superior Proposal, failure to so withdraw or modify its recommendation would
be reasonably likely to be inconsistent with fulfilling its fiduciary duty to
stockholders under applicable law, (x) five business days have elapsed following
delivery by Parent to the Company of written notice advising the Company that
the Board of Directors of Parent has resolved to so withdraw or modify its
recommendation, specifying the material terms and conditions of the Superior
Proposal and identifying the Person making the Superior Proposal, (y) Parent has
given the Company the opportunity to propose revisions to the terms of this
Agreement in response to the Superior Proposal and negotiated in good faith with
the Company with respect to the proposed revisions, if any, and (z) Parent has
complied with its obligations set forth in Section 7.10; provided, however, that
in the case of (i) and (ii) above, Parent shall nevertheless submit the matters
constituting the Parent Stockholder Approvals to Parent's stockholders for
approval at the Parent Stockholder Meeting unless this Agreement shall have been
terminated in accordance with its terms prior to the date of the Parent
Stockholder Meeting. In connection with the Parent Stockholder Meeting, Parent
(i) will promptly prepare and file with the Commission, will use its reasonable
best efforts to have cleared by the Commission, (ii) will mail to its
stockholders the Parent Proxy Statement and all other proxy materials for such
meeting a sufficient time prior to the Parent Stockholder Meeting as is
necessary to comply with applicable laws including the rules and regulations of
the Commission, (iii) will use its reasonable best efforts, subject to the
immediately preceding sentence, to obtain the Parent Stockholder Approvals, and
(iv) will otherwise comply with all legal requirements applicable to the Parent
Stockholder Meeting. Subject to the terms and conditions of this Agreement,
Parent shall prepare and file with the Commission under the Securities Act the
Form S-4, and shall use its reasonable best efforts to cause the Form S-4 to be
declared effective by the Commission a sufficient time prior to the Parent
Stockholder Meeting to allow the Company and Parent to mail the Company Proxy
Statement or Parent Proxy Statement, as applicable, to their respective
stockholders, as required by applicable laws, including the rules and
regulations of the Commission, prior to the meeting of their respective
stockholders. Parent shall take any action required to be taken under foreign or
state securities or Blue Sky laws in connection with the issuance of Parent
Common Stock in connection with the Merger.
SECTION 6.5 Stock Exchange Listing.
------------------------
Parent shall use its reasonable best efforts to cause the shares of Parent
Common Stock to be issued in connection with the Merger to be listed on the
NYSE, subject to official notice of issuance.
SECTION 6.6 Employee Benefits.
-----------------
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to honor in accordance with their terms all benefits and
obligations, subject to Section 6.6(b) hereof, under the Company Benefit Plans,
each as in effect on the date hereof (or as amended
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with the prior written consent of Parent), to the extent that entitlements or
rights, actual or contingent (whether such entitlements or rights are vested as
of the Effective Time or become vested or payable only upon the occurrence of a
further event, including a discretionary determination) exist in respect thereof
as of the Effective Time. Parent and the Company hereby agree that the
consummation of the Merger shall constitute a "Change in Control" for purpose of
any employee arrangement and all other Company Benefit Plans, pursuant to the
terms of such plans in effect on the date hereof, provided, however, to the
extent consistent with Section 7.4, that the Board of Directors of the Company
will take all actions necessary so that the consummation of the Merger and
related transactions hereunder will not create additional funding obligations on
behalf of Parent, the Company or the Surviving Corporation with respect to the
Company Stock Grantor Trust. No provision of this Section 6.6(a) shall be
construed as a limitation on the right of Parent to amend or terminate any
Company Benefit Plans which the Company would otherwise have under the terms of
such Company Benefit Plan, and no provision of this Section 6.6(a) shall be
construed to create a right in any employee or beneficiary of such employee
under a Company Benefit Plan that such employee or beneficiary would not
otherwise have under the terms of such Company Benefit Plan; provided, however,
the Parent agrees that it will respect deferrals of salary, bonus or other
compensation in place prior to the Effective Time pursuant to the Company
Benefit Plans. Parent acknowledges that the Company's Separation Pay Plan by its
terms provides that benefits thereunder are vested on the day immediately prior
to a change of control.
(b) Following the Effective Time, Parent shall continue to provide to
individuals who are employed by the Company and its Subsidiaries as of the
Effective Time who remain employed with Parent or any Subsidiary of Parent
("Affected Employees"), for so long as such Affected Employees remain employed
by Parent or any Subsidiary of Parent, employee benefits (i) pursuant to the
Company's or its Subsidiaries' employee benefit plans, programs, policies and
arrangements as provided to such employees immediately prior to the Effective
Time or (ii) pursuant to employee benefit plans, programs, policies or
arrangements maintained by Parent or any Subsidiary of Parent providing coverage
and benefits which, in the aggregate, are no less favorable than those provided
to employees of Parent in positions comparable to positions held by Affected
Employees with Parent or its Subsidiaries from time to time after the Effective
Time. Following the Effective Time, Parent shall continue to provide to former
employees of the Company or its Subsidiaries (and to employees of the Company or
its Subsidiaries whose employment terminates prior to the Effective Time)
("Affected Retirees") post-retirement benefits (other than pensions) (i)
pursuant to the Company Benefit Plans applicable to such Affected Retirees, each
as in effect on the date of this Agreement, or (ii) pursuant to employee benefit
plans, programs, policies or arrangements maintained by Parent or any Subsidiary
of Parent providing post-retirement coverage and benefits (other than pensions)
which, in the aggregate, are no less favorable than those provided to former
employees of Parent.
(c) Parent will, or will cause the Surviving Corporation to, give
Affected Employees full credit for purposes of eligibility, vesting and benefit
accrual (including benefit accrual under any defined benefit pension plans,
provided that a participant's benefit under any such defined benefit pension
plan may be offset by such participant's accrued benefit under the Company
defined benefit pension plan) under any employee benefit plans or arrangements
maintained by
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Parent or any Subsidiary of Parent for such Affected Employees' service with the
Company or any Subsidiary of the Company to the same extent recognized by the
Company immediately prior to the Effective Time.
(d) Parent will, or will cause the Surviving Corporation to, (i) waive
all limitations as to preexisting conditions, exclusions and waiting periods
with respect to participation and coverage requirements applicable to the
Affected Employees under any welfare benefit plans that such employees may be
eligible to participate in after the Effective Time, other than limitations or
waiting periods that are already in effect with respect to such employees and
that have not been satisfied as of the Effective Time under any welfare plan
maintained for the Affected Employees immediately prior to the Effective Time,
and (ii) provide each Affected Employee with credit for any co-payments and
deductibles paid prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Effective Time.
ARTICLE 7
---------
COVENANTS OF PARENT AND THE COMPANY
-----------------------------------
The parties hereto agree that:
SECTION 7.1 Best Efforts.
------------
(a) Subject to Sections 5.2, 6.4, 7.1(b), 7.1(c) and 7.1(d), Company
and Parent shall each cooperate with the other and use (and shall cause their
respective Subsidiaries to use) their respective best efforts to promptly (i)
take or cause to be taken all necessary actions, and do or cause to be done all
things, necessary, proper or advisable under this Agreement and applicable laws
to consummate and make effective the Merger and the other transactions
contemplated by this Agreement as soon as practicable, including, without
limitation, preparing and filing promptly and fully all documentation to effect
all necessary filings, notices, petitions, statements, registrations,
submissions of information, applications and other documents and (ii) obtain all
approvals, consents, registrations, permits, authorizations and other
confirmations required to be obtained from any third party necessary, proper or
advisable to consummate the Merger and the other transactions contemplated by
this Agreement. Subject to applicable laws relating to the exchange of
information, the Company and Parent shall have the right to review in advance,
and to the extent practicable each will consult the other on, all the
information relating to the Company and its Subsidiaries or Parent and its
Subsidiaries, as the case may be, that appears in any filing made with, or
written materials submitted to, any third party and/or any governmental
authority in connection with the Merger and the other transactions contemplated
by this Agreement.
(b) Without limiting Section 7.1(a), Parent and the Company shall
subject to Sections 7.1(c) and 7.1(d), as applicable:
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(i) Each use its best efforts to avoid the entry of, or to
have vacated or terminated, any decree, order, or judgment that would
restrain, prevent or delay the Closing, on or before the End Date (as
defined in Section 9.1(b)(i)), including without limitation defending
through litigation on the merits any claim asserted in any court by any
Person; and
(ii) each use its best efforts to avoid or eliminate each and
every impediment under any antitrust, competition or trade regulation
law that may be asserted by any governmental authority with respect to
the Merger so as to enable the Closing to occur as soon as reasonably
possible (and in any event no later than the End Date), including,
without limitation, (x) proposing, negotiating, committing to and
effecting, by consent decree, hold separate order, or otherwise, the
sale, divestiture or disposition of such assets or businesses of Parent
or the Company (or any of their respective Subsidiaries) and (y)
otherwise taking or committing to take actions that after the Closing
Date would limit Parent or its Subsidiaries' freedom of action with
respect to, or its ability to retain, one or more of its or its
Subsidiaries' businesses, product lines or assets, in each case as may
be required in order to avoid the entry of, or to effect the
dissolution of, any injunction, temporary restraining order, or other
order in any suit or proceeding, which would otherwise have the effect
of preventing or materially delaying the Closing.
(c) Notwithstanding anything else contained herein, the provisions of
this Section 7.1 shall not be construed to require either party to undertake any
efforts or to take any action if such efforts or action would, or would
reasonably be expected to, result in a Material Adverse Effect on Parent and its
Subsidiaries (including the Surviving Corporation and its Subsidiaries), taken
as a whole, at or after the Effective Time; provided, further, that any
requirement to divest or hold separate, or limit in any material respect the
operations of the business of Parent and its Subsidiaries (prior to Closing)
involving the refining, marketing or transportation of petroleum products in the
Western United States, other than with respect to insignificant operations of
such business shall be deemed for purposes of this Section 7.1(c) and Sections
8.1(d), 8.1(i), 8.1(j), 8.1(k) and 8.1(l) to result in a Material Adverse
Effect.
(d) (i) The parties anticipate that there will be objections
raised by the United States Federal Trade Commission or the
Antitrust Division of the United States Department of Justice to the
combination of Parent's United States downstream operations
with the Company's interests in the Joint Ventures
(collectively, the "Alliance Interests"). The parties will
jointly determine how to address any objections promptly and
the Company will, subject to Section 7.4 and in consultation
on an ongoing basis with Parent, negotiate one or more
definitive agreements responsive to the regulatory
requirements (each, an "Alliance Transaction Agreement")
and shall promptly inform Parent of all material
developments in the negotiations. The Company shall be
permitted to enter into any Alliance Transaction Agreement
only with the prior written consent of Parent, which consent
shall not be unreasonably withheld.
(ii) In the event the Company shall not have entered into an
Alliance Transaction Agreement fifteen days prior to the scheduled date
of the Company
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Stockholder Meeting, the Chairman of Parent and the
Chairman of the Company shall meet to discuss the status of such
efforts by the Company.
(iii) If the stockholders of the Company, at the Company
Stockholder Meeting (which shall not take place prior to the Condition
Satisfaction Time), approve and adopt the Merger and the Merger
Agreement in accordance with Delaware Law, then, immediately upon the
conclusion of such meeting, the parties shall consummate the Closing.
If the utilization of the Trust Agreement, described below, is required
in order to meet immediately any remaining conditions to Closing, the
Company shall cause all of the then outstanding capital stock of the
Subsidiary or the Subsidiaries of the Company which own the Alliance
Interests, and such other assets as Parent and the Company shall agree,
to be placed into an irrevocable trust pursuant to an Agreement and
Declaration of Trust (the "Trust Agreement") substantially in the form
of Annex 7.1 to this Agreement, with only such changes as are (x)
required by any governmental body, agency, official or authority or (y)
mutually agreed by Parent, the Company and the Trustees. For purposes
of this Section 7.1(d), "Trustees" shall mean those Persons selected
jointly by Parent and the Company to serve as the trustees under the
Trust Agreement.
SECTION 7.2 Certain Filings.
----------------
The Company and Parent shall cooperate with one another (a) in connection
with the preparation of the Company Proxy Statement, the Parent Proxy Statement
and the Form S-4, (b) in determining whether any action by or in respect of, or
filing with, any governmental body, agency or official, or authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (c) in
seeking any such actions, consents, approvals or waivers or making any such
filings, furnishing information required in connection therewith or with the
Company Proxy Statement, the Parent Proxy Statement or the Form S-4 and seeking
timely to obtain any such actions, consents, approvals or waivers.
SECTION 7.3 Access to Information.
----------------------
From the date of this Agreement until the Effective Time, to the extent
permitted by applicable law, the Company and Parent will upon reasonable request
give the other party, its counsel, financial advisors, auditors and other
authorized representatives reasonable access to the offices, properties, books
and records of such party and its Subsidiaries during normal business hours,
furnish to the other party, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information as such Persons may reasonably request and will instruct its own
employees, counsel and financial advisors to cooperate with the other party in
its investigation of the business of the Company or Parent, as the case may be;
provided that no investigation of the other party's business shall affect any
representation or warranty given by either party hereunder. All information
obtained by Parent or the Company pursuant to this Section 7.3 shall be kept
confidential in accordance with, and shall otherwise be subject to the terms of,
the Confidentiality Agreement dated February 5, 1999 between Parent and the
Company (the "Confidentiality Agreement").
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SECTION 7.4 Tax and Accounting Treatment.
-------------------------------
Neither Parent nor the Company shall, nor shall they permit their
Subsidiaries to take, any action, and Parent and the Company shall not, and
shall ensure that its Subsidiaries do not, fail to take any action which action
or failure to act would prevent, or would be reasonably likely to prevent, the
Merger from qualifying (a) for "pooling of interests" accounting treatment as
described in Section 3.19(a) or (b) as a 368 Reorganization.
SECTION 7.5 Public Announcements.
---------------------
Parent and the Company will consult with each other before issuing any
press release or making any public statement with respect to this Agreement and
the transactions contemplated hereby and shall not issue any press release or
make any public statement without the prior consent of the other party, which
consent shall not be unreasonably withheld. Notwithstanding the foregoing, any
press release or public statement as may be required by applicable law or any
listing agreement with any national securities exchange may be issued prior to
such consultation, if the party making the release or statement has used its
reasonable best efforts to consult with the other party.
SECTION 7.6 Further Assurances.
-------------------
At and after the Effective Time, the officers and directors of the
Surviving Corporation will be authorized to execute and deliver, in the name and
on behalf of the Company or Merger Subsidiary, any deeds, bills of sale,
assignments or assurances and to take any other actions and do any other things,
in the name and on behalf of the Company or Merger Subsidiary, reasonably
necessary to vest, perfect or confirm of record or otherwise in the Surviving
Corporation any and all right, title and interest in, to and under any of the
rights, properties or assets of the Company acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger.
SECTION 7.7 Notices of Certain Events.
-------------------------
(a) Each of the Company and Parent shall promptly notify the other
party of:
(i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement; and
(ii) any notice or other communication from any governmental
or regulatory agency or authority in connection with the transactions
contemplated by this Agreement.
(b) The Company and Parent shall promptly notify the other party of any
actions, suits, claims, investigations or proceedings commenced or, to the best
of its knowledge threatened against, relating to or involving or otherwise
affecting such party or any of its Subsidiaries which relate to the consummation
of the transactions contemplated by this Agreement.
SECTION 7.8 Affiliates.
----------
(a) Not less than 45 days prior to the Effective Time, each of Parent
and the Company (i) shall have delivered to the other party a letter identifying
all Persons who, in the opinion of
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the party delivering the letter, may be, as of the date of the Company
Stockholder Meeting or Parent Stockholder Meeting, as applicable, its
"affiliates" for purposes of SEC Accounting Series Releases 130 and 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 after
such later date as the Parent and the Company may agree) to Parent in the case
of affiliates of Parent, a signed agreement substantially in the form attached
as Exhibit C-1, and in the case of affiliates of the Company, substantially in
the forms attached as Exhibits C-2 and C-3. Each of Parent and the Company shall
notify the other party from time to time after the delivery of the letter
described in Section 7.8(a)(i) of any Person not identified on such letter who
then is, or may be, such an "affiliate" and use its reasonable best efforts to
cause each additional Person who is identified as an "affiliate" to execute a
signed agreement or agreements as set forth in this Section 7.8(a).
(b) Shares of Parent Common Stock and shares of Company Common Stock
beneficially owned by each such "affiliate" of Parent or Company who has not
provided a signed agreement or agreements, as applicable, in accordance with
Section 7.8(a) shall not be transferable during any period prior to and after
the Effective Time if, as a result of this transfer during any such period,
taking into account the nature, extent and timing of this transfer and similar
transfers by all other "affiliates" of Parent and the Company, this transfer
will, in the reasonable judgment of accountants of Parent, interfere with, or
prevent the Merger from being accounted for, as a "pooling-of-interests" under
GAAP and/or the rules and regulations of the SEC. Neither Parent or the Company
shall register, or allow its transfer agent to register, on its books, any
transfer of any shares of Parent Common Stock or Company Common Stock of any
affiliate of Parent or the Company who has not provided a signed agreement in
accordance with Section 7.8(a) unless the transfer is made in compliance with
the foregoing.
SECTION 7.9 Payment of Dividends.
----------------------
From the date hereof until the Effective Time, Parent and the Company will
coordinate with each other regarding the declaration of dividends in respect of
the shares of Parent Common Stock and the shares of Company Common Stock and the
record dates and payment dates relating thereto, it being the intention of the
parties that holders of shares of Company Common Stock will not receive two
dividends, or fail to receive one dividend, for any single calendar quarter with
respect to their shares of Company Common Stock and the shares of Parent Common
Stock any holder of shares of Company Common Stock receives in exchange therefor
in connection with the Merger.
SECTION 7.10 No Solicitation.
---------------
(a) Each of Parent and the Company and their respective Subsidiaries
will not, and Parent and the Company will direct and use their respective best
efforts to cause their and their Subsidiaries' respective officers, directors,
employees, investment bankers, consultants, attorneys, accountants, agents and
other representatives not to, directly or indirectly, take any action to
solicit, initiate, encourage or facilitate the making of any Acquisition
Proposal (including without limitation by amending, or granting any waiver
under, the Parent Rights Agreement or the Company Rights Agreement, as
applicable) or any inquiry with respect thereto
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or engage in discussions or negotiations with any Person with respect thereto,
or disclose any nonpublic information or afford access to properties, books or
records to, any Person that has made, or to such party's knowledge, is
considering making, any Acquisition Proposal. Nothing contained in this
Agreement shall prevent the Board of Directors of Parent or the Company from
complying with Rule 14e-2 under the Exchange Act with regard to an Acquisition
Proposal; provided that the Board of Directors of such party shall not recommend
that the stockholders of such party tender their shares in connection with a
tender offer or exchange offer except to the extent that, after receiving a
Superior Proposal, such Board of Directors of such party determines in its good
faith judgment, after receiving the advice of outside legal counsel, that, in
light of such Superior Proposal, failure to make such a recommendation would be
reasonably likely to be inconsistent with fulfilling the fiduciary duties of the
Board of Directors to such party's stockholders under applicable law and such
party shall have complied with the procedure set forth in Section 5.2 or 6.4, to
the extent applicable. Notwithstanding anything to the contrary in this
Agreement, prior to the date of approval of this Agreement and the Merger by the
stockholders of Parent or the Company, as applicable, Parent or the Company may
(A) furnish information and access to a third party, but only in response to a
request for information or access, to any Person making an Acquisition Proposal
to the board of directors of Parent or the Company, as applicable, after the
date hereof which was not knowingly encouraged, solicited or initiated by Parent
or the Company, as applicable, or any of its affiliates or any director,
employee, representative or agent of Parent or the Company, as applicable, or
any of its respective Subsidiaries (including, without limitation, any
investment banker, attorney or accountant retained by Parent or the Company or
any of its Subsidiaries) on or after the date hereof and (B) may participate in
discussions and negotiate with such Person concerning any such Acquisition
Proposal, if and only if, in any such case set forth in clause A or B of this
paragraph, (i) the Board of Directors of Parent or Company, as applicable,
concludes in good faith, after receipt of the advice of a financial advisor of
nationally recognized reputation and outside legal counsel, that such
Acquisition Proposal is reasonably likely to result in a Superior Proposal with
respect to Parent or the Company, as applicable, (ii) the Company or Parent, as
applicable, complies with all of its obligations under this Agreement, and (iii)
the board of directors of Parent or the Company, as applicable, receives from
the Person making such an Acquisition Proposal an executed confidentiality
agreement the material terms of which are (without regard to the terms of such
Acquisition Proposal) in all material respects (x) no less favorable to the
Company or Parent, as applicable, and (y) no less restrictive to the Person
making such Acquisition Proposal than those contained in the Confidentiality
Agreement.
(b) Any party receiving an Acquisition Proposal will (A) promptly (and
in no event later than 48 hours after receipt of any Acquisition Proposal)
notify (which notice shall be provided orally and in writing and shall identify
the Person making such Acquisition Proposal and set forth the material terms
thereof) the other party to this Agreement after receipt of any Acquisition
Proposal, any indication of which such party has knowledge that any Person is
considering making an Acquisition Proposal, or any request for nonpublic
information relating to such party or any Subsidiary of such party or for access
to the properties, books or records of such party or any Subsidiary of such
party by any Person that has made, or to such party's knowledge may be
considering making, an Acquisition Proposal, and (B) will keep the other party
to this Agreement informed of the status and material terms of (including all
changes to the
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status or material terms of) any such Acquisition Proposal or request. Each of
Parent and the Company (x) shall, and shall cause their respective Subsidiaries
to, immediately cease and cause to be terminated and shall use reasonable best
efforts to cause its and their officers, directors, employees, investment
bankers, consultants, attorneys, accountants, agents and other representatives
to, immediately cease and cause to be terminated, all discussions and
negotiations, if any, that have taken place prior to the date hereof with any
Persons with respect to any Acquisition Proposal and (y) shall promptly request
each Person, if any, that has executed a confidentiality agreement within the 9
months prior to the date hereof in connection with its consideration of any
Acquisition Proposal to return or destroy all confidential information
heretofore furnished to such Person by or on behalf of it or any of its
Subsidiaries.
For purposes of this Agreement, "Acquisition Proposal" means any bona
fide written offer or proposal for, or any written indication of interest in,
any (i) direct or indirect acquisition or purchase of any business or assets of
Parent or the Company or any of their respective Subsidiaries that, individually
or in the aggregate, constitutes 20% or more of the net revenues, net income or
assets of such party and its Subsidiaries, taken as a whole, (ii) direct or
indirect acquisition or purchase of 20% or more of any class of equity
securities of Parent or the Company or any of their respective Subsidiaries
whose business constitutes 20% or more of the net revenues, net income or assets
of such party and its Subsidiaries, taken as a whole, (iii) tender offer or
exchange offer that, if consummated, would result in any Person beneficially
owning 20% or more of any class of equity securities of Parent or the Company or
any of their respective Subsidiaries whose business constitutes 20% or more the
net revenues, net income or assets of such party and its Subsidiaries, taken as
a whole, or (iv) merger, consolidation, business combination, joint venture,
partnership, recapitalization, liquidation, dissolution or similar transaction
involving Parent or the Company or any of their respective Subsidiaries whose
business constitutes 20% or more of the net revenue, net income or assets of
such party and its Subsidiaries, taken as a whole, other than the transactions
contemplated by this Agreement; provided, however, that (a) with respect to
Parent, an offer or proposal shall not be deemed an Acquisition Proposal if (x)
the execution of agreement with respect to, and consummation of, the transaction
contemplated thereby would not be reasonably likely to prevent the Parent and
Merger Subsidiary from consummating the Merger or to materially delay Parent's
or Merger Subsidiary's ability to consummate the Merger and (y) execution of an
agreement with respect to the transaction contemplated thereby is not prohibited
by Section 6.1, or, if the execution of such agreement would be prohibited by
Section 6.1, such an agreement will not be entered into until after the
provisions contained in Section 6.1 are no longer in effect and (b) with respect
to the Company, any offer or proposal for the disposition by the Company of the
Alliance Interests shall not be deemed to be an Acquisition Proposal. For
purposes of this Agreement, "Superior Proposal" means any bona fide written
Acquisition Proposal for or in respect of at least a majority of the outstanding
shares of Company Common Stock, or Parent Common Stock, as applicable (i) on
terms that the Board of Directors of Parent or the Company, as applicable,
determines in its good faith judgment (after consultation with, and taking into
account the advice of, a financial advisor of nationally recognized reputation,
taking into account all the terms and conditions of the Acquisition Proposal,
including any break-up fees, expense reimbursement provisions and conditions to
consummation) are more favorable from a financial point of view to its
stockholders than the Merger and the other transactions contemplated hereby and
(ii) that
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constitutes a transaction that is reasonably likely to be consummated on the
terms set forth, taking into account all legal, financial, regulatory and other
aspects of such proposal.
(c) Each of the Company and Parent agrees that it will take the
necessary steps promptly to inform its Subsidiaries and its officers, directors,
investment bankers, consultants, attorneys, accountants, agents and other
representatives of the obligations undertaken in this Section 7.10.
SECTION 7.11 Letters from Accountants.
------------------------
(a) Parent shall use reasonable best efforts to cause to be delivered
to Parent and the Company two letters from PricewaterhouseCoopers LLP, one dated
the date on which the Form S-4 shall become effective and one dated the Closing
Date, each addressed to the Boards of Directors of 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.
(b) Parent shall use reasonable best efforts to cause to be delivered
to Parent and the Company a letter from PricewaterhouseCoopers LLP, dated as of
the Closing Date, addressed to the Boards of Directors of Parent and the
Company, stating that PricewaterhouseCoopers LLP concurs with Parent's
management's conclusion that accounting for the Merger as a "pooling of
interests" under Opinion No. 16 (Business Combination) of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the rules and regulations of the Commission is appropriate if the Merger is
closed and consummated in accordance with the terms hereof.
(c) The Company shall use reasonable best efforts to cause to be
delivered to the Company and Parent two letters from Arthur Andersen LLP, one
dated the date on which the Form S-4 shall become effective and one dated the
Closing Date, each addressed to the Boards of Directors of 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.
(d) The Company shall use reasonable best efforts to cause to be
delivered to the Company a letter from Arthur Andersen LLP, dated as of the
Closing Date, addressed to the Board of Directors of the Company, stating that
Arthur Andersen LLP 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 No. 16 (Business Combination) of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the rules and regulations of the Commission.
SECTION 7.12 Takeover Statutes.
-----------------
If any anti-takeover or similar statute or regulation is or may become
applicable to the transactions contemplated hereby, each of the parties 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
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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 7.13 Headquarters.
------------
After the Effective Time, the headquarters of Parent shall continue to be
located in San Francisco, California.
SECTION 7.14 Section 16(b).
-------------
Parent shall take all such steps reasonably necessary 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.
ARTICLE 8
---------
CONDITIONS TO THE MERGER
------------------------
SECTION 8.1 Conditions to the Obligations of Each Party.
--------------------------------------------------
The obligations of the Company, Parent and Merger Subsidiary to consummate
the Merger are subject to the satisfaction (or, to the extent legally
permissible, waiver) of the following conditions:
(a) this Agreement and the Merger shall have been approved and
adopted by the stockholders of the Company in accordance with Delaware Law;
(b) any applicable waiting period under the HSR Act relating to
the Merger shall have expired;
(c) the approval by the European Commission of the transactions
contemplated by this Agreement shall have been obtained pursuant to the EC
Merger Regulation;
(d) no provision of any applicable law or regulation and no judgment,
injunction, order or decree (i) shall prohibit or enjoin the consummation of the
Merger or (ii) if not complied with, shall have or be reasonably likely to have
a Material Adverse Effect on Parent (including the Surviving Corporation) after
the Effective Time;
(e) the Common Stock Issuance shall have been approved by the
stockholders of Parent in accordance with the rules and regulations of the NYSE;
(f) the Form S-4 shall have been declared effective under the
Securities Act and such Form S-4 shall indicate that Parent will account for the
Merger as a "pooling of interests," and no stop order suspending the
effectiveness of the Form S-4 shall be in effect and no proceedings for such
purpose shall be pending before or threatened by the Commission;
(g) the shares of Parent Common Stock to be issued in the Merger shall
have been approved for listing on the NYSE, subject to official notice of
issuance;
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(h) Parent shall have received letters of PricewaterhouseCoopers LLP
and Arthur Andersen LLP as contemplated by paragraphs (b) and (d) of
Section 7.11;
(i) neither the Federal Trade Commission nor the Antitrust Division of
the Department of Justice, as the case may be, shall have, as a condition to its
approval of the Merger and the other transactions contemplated by this
Agreement, required Parent to take any action which, individually or in the
aggregate, would result in, or be reasonably likely to result in, a Material
Adverse Effect on Parent (including the Surviving Corporation) after the
Effective Time;
(j) there shall not be instituted or pending any action or proceeding
by any governmental authority (whether domestic, foreign or supranational)
before any court or governmental authority or agency, domestic, foreign or
supranational, seeking to (i) restrain, prohibit or otherwise interfere with the
ownership or operation by Parent or any Subsidiary of Parent of all or any
portion of the business of the Company or any of its Subsidiaries or of Parent
or any of its Subsidiaries or to compel Parent or any Subsidiary of Parent to
dispose of or hold separate all or any portion of the business or assets of the
Company or any of its Subsidiaries or of Parent or any of its Subsidiaries, (ii)
to impose or confirm limitations on the ability of Parent or any Subsidiary of
Parent effectively to exercise full rights of ownership of the shares of Company
Common Stock (or shares of stock of the Surviving Corporation) including,
without limitation, the right to vote any shares of Company Common Stock (or
shares of stock of the Surviving Corporation) on any matters properly presented
to stockholders or (iii) seeking to require divestiture by Parent or any
Subsidiary of Parent of any shares of Company Common Stock (or shares of stock
of the Surviving Corporation), if any such matter referred to in subclauses (i),
(ii) and (iii) hereof, individually or in the aggregate, would result in, or
would be reasonably likely to result in, a Material Adverse Effect on Parent
(including the Surviving Corporation) after the Effective Time;
(k) there shall not be any statute, rule, regulation, injunction, order
or decree, enacted, enforced, promulgated, entered, issued or deemed applicable
to the Merger and the other transactions contemplated hereby (or in the case of
any statute, rule or regulation, awaiting signature or reasonably expected to
become law), by any court, government or governmental authority or agency or
legislative body, domestic, foreign or supranational, which, individually or in
the aggregate, would result in, or would be reasonably likely to result in, a
Material Adverse Effect on Parent (including the Surviving Corporation) after
the Effective Time; and
(l) all required approvals or consents of any governmental authority
(whether domestic, foreign or supranational) in connection with the Merger and
the consummation of the other transactions contemplated hereby shall have been
obtained (and all relevant statutory, regulatory or other governmental waiting
periods, whether domestic, foreign or supranational, shall have expired) unless
the failure to receive any such approval or consent would not and would not be
reasonably expected to result in a Material Adverse Effect on Parent (including
the Surviving Corporation) after the Effective Time and (ii) all such approvals
and consents which have been obtained shall be on terms which, individually or
in the aggregate, would not result in, or would not be reasonably likely to
result in, a Material Adverse Effect on Parent (including the
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Surviving Corporation) after the Effective Time;
SECTION 8.2 Conditions to the Obligations of Parent and Merger
---------------------------------------------------------
Subsidiary.
----------
The obligations of Parent and Merger Subsidiary to consummate the Merger
are subject to the satisfaction (or, to the extent legally permissible, waiver)
of the following further conditions:
(a) (i) the Company shall have performed in all material respects all
of its obligations hereunder required to be performed by it as of or prior to
the Closing Date, (ii) the representations and warranties of the Company
contained in this Agreement and in any certificate or other writing delivered by
the Company pursuant hereto shall be true and correct (without giving effect to
any limitation as to "materiality" or "Material Adverse Effect" set forth
therein) when made and at and as of the Effective Time as if made at and as of
such time (except to the extent expressly made as of an earlier date, in which
case as of such earlier date), except where the failure of such representations
and warranties to be true and correct (without giving effect to any limitation
as to "materiality" or "Material Adverse Effect" set forth therein) would not,
individually or in the aggregate, have, or be reasonably likely to have, a
Material Adverse Effect on the Company, and (iii) Parent shall have received a
certificate signed by an executive officer of the Company to the foregoing
effect;
(b) Parent shall have received an opinion of McDermott, Will & Emery
(or such other counsel reasonably acceptable to Parent), on the basis of
customary representations and assumptions set forth in such opinion, dated the
Effective Time, to the effect that the Merger will be treated for federal income
tax purposes as a reorganization qualifying under the provisions of Section
368(a) of the Code. In rendering such opinion, such counsel shall be entitled to
rely upon customary representations of officers of Parent and the Company
reasonably requested by counsel; and
(c) since the date of this Agreement, there shall not have been any
event, occurrence, development or state of circumstances which, individually or
in the aggregate, would have, or would be reasonably likely to have, a Material
Adverse Effect on the Company.
SECTION 8.3 Conditions to the Obligations of the Company.
--------------------------------------------------
The obligation of the Company to consummate the Merger is subject to the
satisfaction (or, to the extent legally permissible, waiver) of the following
further conditions:
(a) (i) Parent shall have performed in all material respects all of its
obligations hereunder required to be performed by it as of or prior to the
Closing Date, (ii) the representations and warranties of Parent contained in
this Agreement and in any certificate or other writing delivered by Parent
pursuant hereto shall be true and correct (without giving effect to any
limitation as to "materiality" or "Material Adverse Effect" set forth herein)
when made and at and as of the Effective Time as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such earlier date, except where the failure of such representations to be true
and correct (without giving effect to any limitation as to "materiality" or
"Material Adverse Effect" set forth herein) would not, individually or in the
aggregate, have, or be reasonably likely to have, a Material Adverse Effect on
Parent and (iii) the Company shall have received a certificate signed by an
executive officer of Parent to the
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foregoing effect;
(b) the Company shall have received an opinion of Davis Polk & Wardwell
(or such other counsel reasonably acceptable to the Company), on the basis of
customary representations and assumptions set forth in such opinion, dated the
Effective Time, to the effect that the Merger will be treated for federal income
tax purposes as a reorganization qualifying under the provisions of Section
368(a) of the Code. In rendering such opinion, such counsel shall be entitled to
rely upon customary representations of officers of Parent and the Company
reasonably requested by counsel; and
(c) since the date of this Agreement, there shall not have been any
event, occurrence, development or state of circumstances which, individually or
in the aggregate, would have, or would be reasonably likely to have, a Material
Adverse Effect on Parent.
ARTICLE 9
---------
TERMINATION
-----------
SECTION 9.1 Termination.
-----------
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time (notwithstanding the obtaining of the Company
Stockholder Approval or the Parent Stockholder Approval);
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent;
(i) if the Merger has not been consummated by October 15, 2001
(the "End Date"); provided, however, that if (x) the Effective Time has
not occurred by such date by reason of nonsatisfaction of any of the
conditions set forth in Sections 8.1(b), 8.1(c), 8.1(i), 8.1(j),
8.1(k), 8.1(l) and (y) all other conditions in Article 8 have
theretofore been satisfied or (to the extent legally permissible)
waived or are then capable of being satisfied, the End Date will be
April 15, 2002; provided further that the right to terminate this
Agreement under this Section 9.1(b)(i) shall not be available to any
party whose failure to fulfill in any material respect any obligation
under this Agreement has caused or resulted in the failure of the
Effective Time to occur on or before the End Date;
(ii) if the Company Stockholder Approval shall not have been
obtained by reason of the failure to obtain the required vote at a duly
held meeting of stockholders or any adjournment thereof; or
(iii) if the Common Stock Issuance Approval shall not have
been obtained by reason of the failure to obtain the required vote at a
duly held meeting of stockholders or any adjournment thereof;
(c) by either the Company or Parent, if there shall be any law or
regulation that makes
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consummation of the Merger illegal or otherwise prohibited or if any judgment,
injunction, order or decree enjoining Parent or the Company from consummating
the Merger is entered and such judgment, injunction, order or decree shall
become final and nonappealable;
(d) by Parent, if the Board of Directors of the Company shall have
failed to recommend or withdrawn or modified or changed in a manner adverse to
Parent its approval or recommendation of this Agreement or the Merger, whether
or not permitted by the terms hereof, or shall have failed to call and hold the
Company Stockholder Meeting in accordance with Section 5.2, or shall have
recommended a Superior Proposal (or the Board of Directors of the Company shall
resolve to do any of the foregoing);
(e) by the Company, if the Board of Directors of Parent shall have
failed to recommend or shall have withdrawn or modified or changed in a manner
adverse to the Company its approval and recommendation of the Common Stock
Issuance or the Name Change Amendment, whether or not permitted by the terms
hereof, or shall have failed to call and hold the Parent Stockholder Meeting in
accordance with Section 6.4 or shall have recommended a Superior Proposal (or
the Board of Directors of Parent resolves to do any of the foregoing);
(f) by either Parent or the Company, if there shall have been a breach
by the other of any of its representations, warranties, covenants or obligations
contained in this Agreement, which breach would result in the failure to satisfy
one or more of the conditions set forth in Section 8.2(a) (in the case of a
breach by the Company) or Section 8.3(a) (in the case of a breach by Parent),
and in any such case such breach shall be incapable of being cured or, if
capable of being cured, shall not have been cured within 30 days after written
notice thereof shall have been received by the party alleged to be in breach;
The party desiring to terminate this Agreement pursuant to clause (b),
(c), (d), (e) or (f) of this Section 9.1 shall give written notice of such
termination to the other party in accordance with Section 10.1, specifying the
provision hereof pursuant to which such termination is effected.
SECTION 9.2 Effect of Termination.
----------------------
If this Agreement is terminated pursuant to Section 9.1, this Agreement
shall become void and of no effect with no liability on the part of any party
hereto, except that (a) the agreements contained in this Section 9.2, in Section
10.4, 10.5 and 10.6 hereof or in the Option Agreements and in the
Confidentiality Agreement, and the representations and warranties with respect
to the Option Agreements, shall survive the termination hereof and (b) no such
termination shall relieve any party of any liability or damages resulting from
any willful breach by that party of this Agreement or the Option Agreements.
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ARTICLE 10
----------
MISCELLANEOUS
-------------
SECTION 10.1 Notices.
-------
All notices, requests and other communications to any party hereunder shall
be in writing (including facsimile or similar writing) and shall be given,
if to Parent or Merger Subsidiary, to:
Harvey D. Hinman, Esq.
Vice President and General Counsel
Chevron Corporation
575 Market Street
San Francisco, California 94105
Facsimile No.: (415) 894-6017
with copies to:
Alfred L. Pepin, Esq.
1156 Mee Lane
St. Helena, California 94574
Facsimile No.: (707) 967-0551
and
Arthur Fleischer, Jr., Esq.
Gary P. Cooperstein, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004-1980
Facsimile No.: (212) 859-4000
and
Terry M. Kee, Esq.
Rodney R. Peck, Esq.
Pillsbury Madison & Sutro LLP
50 Fremont Street
San Francisco, California 94105
Facsimile No.: (415) 983-1200
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if to the Company, to:
William M. Wicker
Senior Vice President
Texaco Inc.
2000 Westchester Avenue
White Plains, New York 10650
Facsimile No.: (914) 253-4280
with copies to:
Deval Patrick, Esq.
General Counsel and Vice President
Texaco Inc.
2000 Westchester Avenue
White Plains, New York 10650
Facsimile No.: (914) 253-4477
and
Dennis S. Hersch, Esq.
Ulrika Ekman, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Facsimile No.: (212) 450-4800
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice, request
or other communication shall be effective (a) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified in this Section and
the appropriate facsimile confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.
SECTION 10.2 Non-Survival of Representations and Warranties.
--------------------------------------------------
The representations and warranties contained herein and in any certificate
or other writing delivered pursuant hereto shall not survive the Effective Time
or the termination of this Agreement.
SECTION 10.3 Amendments; No Waivers.
-----------------------
(a) Any provision of this Agreement (including the Exhibits and
Schedules hereto) may be amended or waived prior to the Effective Time if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Company, Parent and Merger Subsidiary, or in the case of a
waiver, by the party against whom the waiver is to be effective; provided that
after the adoption of this Agreement by the stockholders of the Company, no such
amendment or waiver shall, without the further approval of such stockholders,
alter or change
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(i) the amount or kind of consideration to be received in exchange for any
shares of capital stock of the Company or (ii) any term of the certificate of
incorporation of Parent.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.4 Expenses.
--------
(a) Except as otherwise specified in Section 10.5 or 10.6, or the
Option Agreements or as otherwise agreed to in writing by the parties, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such cost or
expense.
SECTION 10.5 Company Termination Fee. If:
-----------------------
(i) Parent shall terminate this Agreement pursuant to
Section 9.1(d), or
(ii) either the Company or Parent shall terminate this
Agreement pursuant to Section 9.1(b)(ii) and prior to the Company
Stockholder Meeting an Acquisition Proposal relating to the Company has
been made to the Company or to the stockholders of the Company by any
Person; or
(iii) any Person shall have made to the Company or to the
stockholders of the Company an Acquisition Proposal relating to the
Company and thereafter this Agreement is terminated pursuant to Section
9.1(b)(i);
then in any case as described in clause (i), (ii), or (iii) the Company shall
pay to Parent (by wire transfer of immediately available funds) (x) $500,000,000
not later than the date of termination of this Agreement and (y) an additional
$500,000,000, if and not later than the date an Acquisition Proposal is
consummated or a definitive agreement is entered into by the Company in
connection with any Acquisition Proposal, as long as such Acquisition Proposal
is consummated or such definitive agreement is executed within 12 months after
the date of termination of this Agreement.
SECTION 10.6 Parent Termination Fee. If:
----------------------
(i) The Company shall terminate this Agreement pursuant to
Section 9.1(e); or
(ii) either the Company or Parent shall terminate this
Agreement pursuant to Section 9.1(b)(iii) and prior to the Parent
Stockholder Meeting an Acquisition Proposal relating to Parent has been
made by any Person to the Parent or the stockholders of Parent by any
Person; or
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(iii) any Person shall have made to Parent or its stockholders
an Acquisition Proposal relating to Parent and thereafter this
Agreement is terminated pursuant to Section 9.1(b)(i);
then in any case as described in clause (i), (ii) or (iii) Parent shall pay to
the Company (by wire transfer of immediately available funds) (x) $500,000,000
not later than the date of termination of this Agreement and (y) an additional
$500,000,000, if and not later than the date an Acquisition Proposal is
consummated or a definitive agreement is entered into by Parent in connection
with any Acquisition Proposal, as long as such Acquisition Proposal is
consummated or such definitive agreement is executed within 12 months after the
date of termination of this Agreement.
SECTION 10.7 Successors and Assigns.
----------------------
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided that no party may assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the consent of the other
parties hereto except that Merger Subsidiary may transfer or assign, in whole or
from time to time in part, to one or more of its affiliates, its rights under
this Agreement, but any such transfer or assignment will not relieve Merger
Subsidiary of its obligations hereunder.
SECTION 10.8 Governing Law.
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This Agreement shall be construed in accordance with and governed by the
law of the State of Delaware, without regard to principles of conflicts of law.
SECTION 10.9 Jurisdiction.
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Any suit, action or proceeding seeking to enforce any provision of, or
based on any matter arising out of or in connection with, this Agreement, the
Option Agreements or the transactions contemplated hereby or thereby may be
brought in any federal or state court located in the State of Delaware, and each
of the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 10.1 shall be deemed
effective service of process on such party.
SECTION 10.10 Waiver of Jury Trial.
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EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 10.11 Counterparts; Effectiveness.
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This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement shall become
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effective when each party hereto shall have received counterparts hereof signed
by all of the other parties hereto.
SECTION 10.12 Entire Agreement.
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This Agreement (including the Exhibits and Schedules hereto), the Option
Agreements and the Confidentiality Agreement constitute the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof and thereof.
Except as provided in Section 6.3(c), no provision of this Agreement or any
other agreement contemplated hereby is intended to confer on any Person other
than the parties hereto any rights or remedies.
SECTION 10.13 Captions.
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The captions herein are included for convenience of reference only and
shall be ignored in the construction or interpretation hereof.
SECTION 10.14 Severability.
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If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated 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 such a determination, 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 in order
that the transactions contemplated hereby be consummated as originally
contemplated to the fullest extent possible.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TEXACO INC.
By: /s/ PETER I. BIJUR
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Name: Peter I. Bijur
Title: Chairman of the Board and
Chief Executive Officer
CHEVRON CORPORATION
By: /s/ DAVID J. O'REILLY
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Name: David J. O'Reilly
Title: Chairman of the Board and
Chief Executive Officer
KEEPEP INC.
By: /s/ DAVID J. O'REILLY
----------------------------------
Name: David J. O'Reilly
Title: President
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