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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 27, 1998
EXXON CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
New Jersey 1-2256 13-5409005
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(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
5959 Las Colinas Boulevard
Irving, Texas 75039-2298
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(Address of Principal Executive Offices) (Zip Code)
(972) 444-1000
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(Registrant's telephone number, including area code)
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. Other Events.
On December 1, 1998, Exxon Corporation, a New Jersey corporation
("Exxon"), Mobil Corporation, a Delaware corporation ("Mobil"), and Lion
Acquisition Subsidiary Corporation, a Delaware corporation and a wholly-
owned direct subsidiary of Exxon ("Merger Subsidiary"), entered into an
Agreement and Plan of Merger (the "Merger Agreement"). Pursuant to the
Merger Agreement and subject to the terms and conditions set forth therein,
Merger Subsidiary will be merged with and into Mobil, with Mobil being the
surviving corporation of such merger (the "Merger"), and as a result of the
Merger, Mobil will become a wholly-owned subsidiary of Exxon. At the
Effective Time (as defined in the Merger Agreement) of the Merger, (i) each
issued and outstanding share of common stock, par value $1.00 per share, of
Mobil (the "Mobil Common Stock") will be converted into the right to
receive 1.32015 shares of common stock, without par value, of Exxon and
(ii) each issued and outstanding share of Series B ESOP Convertible
Preferred Stock, par value $1.00 per share, of Mobil (the "Series B
Preferred Stock") will be converted into the right to receive one share of
a new series of preferred stock to be issued by Exxon (having, to the
extent possible, terms identical to those of the Series B Preferred Stock
immediately prior to the Effective Time).
In connection with the execution of the Merger Agreement, Mobil and
Exxon entered into a Stock Option Agreement (the "Option Agreement")
pursuant to which Mobil granted Exxon an option (the "Option") to purchase
up to approximately 14.9% of the outstanding shares of Mobil Common Stock
(after giving effect to the Option) exercisable in the circumstances
specified in the Option agreement.
A copy of the Merger Agreement is attached hereto as Exhibit 2.1 and a copy
of the Option Agreement is attached hereto as Exhibit 2.2. The foregoing
description is qualified in its entirety by reference to the full text of such
exhibits. A joint press release confirming that Exxon and Mobil were in
discussions concerning a possible combination transaction was issued on November
27, 1998 and a joint press release announcing the execution of the Merger
Agreement and the Option Agreement was issued on December 1, 1998. The press
release issued on November 27, 1998 is attached hereto as Exhibit 99.1 and the
press release issued on December 1, 1998 is attached hereto as Exhibit 99.2.
ITEM 7(c). Exhibits.
Exhibit 2.1 Agreement and Plan of Merger dated as of December 1, 1998
among Exxon Corporation, Mobil Corporation and Lion
Acquisition Subsidiary Corporation (Schedules and Exhibits
omitted)
Exhibit 2.2 Stock Option Agreement dated as of December 1, 1998 between
Exxon Corporation and Mobil Corporation
Exhibit 99.1 Joint Press Release dated November 27, 1998
Exhibit 99.2 Joint Press Release dated December 1, 1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EXXON CORPORATION
Dated: December 1, 1998 By: /s/ Donald D. Humphreys
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Name: Donald D. Humphreys
Title: Vice President, Controller and
Principal Accounting Officer
INDEX TO EXHIBITS
Sequential
Exhibit No. Description Page No.
- --------------- --------------------------------- --------------
Exhibit 2.1 Agreement and Plan of Merger dated as of
December 1, 1998 among Exxon
Corporation, Mobil Corporation and Lion
Acquisition Subsidiary Corporation
(Schedules and Exhibits omitted)
Exhibit 2.2 Stock Option Agreement dated as of
December 1, 1998 between Exxon
Corporation and Mobil Corporation
Exhibit 99.1 Joint Press Release dated November 27,
1998
Exhibit 99.2 Joint Press Release dated December 1,
1998
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
dated as of
December 1, 1998
among
MOBIL CORPORATION
EXXON CORPORATION
and
LION ACQUISITION SUBSIDIARY CORPORATION
TABLE OF CONTENTS(1)
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PAGE
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ARTICLE 1
THE MERGER
SECTION 1.01. The Merger ...............................................2
SECTION 1.02. Conversion of Shares.......................................2
SECTION 1.03. Surrender and Payment......................................4
SECTION 1.04. Stock Options..............................................6
SECTION 1.05. Adjustments ...............................................8
SECTION 1.06. Fractional Shares..........................................8
SECTION 1.07. Withholding Rights.........................................9
SECTION 1.08. Lost Certificates..........................................9
SECTION 1.09. Shares Held by Company Affiliates..........................9
SECTION 1.10. Dissenter's Rights........................................10
ARTICLE 2
CERTAIN GOVERNANCE MATTERS
SECTION 2.01. Acquiror Name.............................................10
SECTION 2.02. Acquiror Board of Directors...............................10
SECTION 2.03. Transition Committee......................................11
SECTION 2.04. Certificate of Incorporation of the Surviving
Corporation...................................11
SECTION 2.05. By-laws of the Surviving Corporation......................11
SECTION 2.06. Directors and Officers of the Surviving
Corporation...................................11
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Corporate Existence and Power.............................12
SECTION 3.02. Corporate Authorization...................................12
SECTION 3.03. Governmental Authorization................................13
SECTION 3.04. Non-Contravention.........................................13
SECTION 3.05. Capitalization of the Company.............................14
SECTION 3.06. Subsidiaries..............................................15
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1 The Table of Contents is not a part of this Agreement.
i
PAGE
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SECTION 3.07. SEC Filings ..............................................16
SECTION 3.08. Financial Statements......................................17
SECTION 3.09. Disclosure Documents......................................17
SECTION 3.10. Absence of Certain Changes................................18
SECTION 3.11. No Undisclosed Material Liabilities.......................19
SECTION 3.12. Litigation ..............................................19
SECTION 3.13. Taxes ..............................................19
SECTION 3.14. Employee Benefit Plans....................................20
SECTION 3.15. Compliance with Laws......................................22
SECTION 3.16. Finders' or Advisors' Fees................................22
SECTION 3.17. Environmental Matters.....................................22
SECTION 3.18. Opinion of Financial Advisor..............................23
SECTION 3.19. Pooling; Tax Treatment....................................23
SECTION 3.20. Pooling Letter............................................23
SECTION 3.21. Takeover Statutes.........................................23
SECTION 3.22. Rights Agreement..........................................24
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
SECTION 4.01. Corporate Existence and Power.............................24
SECTION 4.02. Corporate Authorization...................................24
SECTION 4.03. Governmental Authorization................................25
SECTION 4.04. Non-Contravention.........................................25
SECTION 4.05. Capitalization............................................26
SECTION 4.06. Subsidiaries..............................................27
SECTION 4.07. SEC Filings ..............................................28
SECTION 4.08. Financial Statements......................................28
SECTION 4.09. Disclosure Documents......................................29
SECTION 4.10. Absence of Certain Changes................................30
SECTION 4.11. No Undisclosed Material Liabilities.......................30
SECTION 4.12. Litigation ..............................................30
SECTION 4.13. Taxes ..............................................31
SECTION 4.14. Employee Benefit Plans....................................31
SECTION 4.15. Compliance with Laws......................................32
SECTION 4.16. Finders' or Advisors' Fees................................33
SECTION 4.17. Environmental Matters.....................................33
SECTION 4.18. Opinion of Financial Advisor..............................33
SECTION 4.19. Pooling; Tax Treatment....................................33
SECTION 4.20. Pooling Letter............................................34
ii
PAGE
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ARTICLE 5
COVENANTS OF THE COMPANY
SECTION 5.01. Conduct of the Company....................................34
SECTION 5.02. Company Stockholder Meeting; Proxy Material...............36
SECTION 5.03. Other Offers..............................................37
ARTICLE 6
COVENANTS OF ACQUIROR
SECTION 6.01. Conduct of Acquiror.......................................39
SECTION 6.02. Obligations of Merger Subsidiary..........................40
SECTION 6.03. Director and Officer Liability............................40
SECTION 6.04. Acquiror Stockholder Meeting; Form S-4....................41
SECTION 6.05. Stock Exchange Listing....................................42
SECTION 6.06. Employee Benefits.........................................42
ARTICLE 7
COVENANTS OF ACQUIROR AND THE COMPANY
SECTION 7.01. Best Efforts ..............................................45
SECTION 7.02. Certain Filings...........................................45
SECTION 7.03. Access to Information.....................................46
SECTION 7.04. Tax and Accounting Treatment..............................46
SECTION 7.05. Public Announcements......................................46
SECTION 7.06. Further Assurances........................................47
SECTION 7.07. Notices of Certain Events.................................47
SECTION 7.08. Affiliates ..............................................47
SECTION 7.09. Payment of Dividends......................................48
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to the Obligations of Each Party...............48
SECTION 8.02. Conditions to the Obligations of Acquiror and
Merger Subsidiary.............................49
SECTION 8.03. Conditions to the Obligations of the Company..............51
iii
PAGE
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ARTICLE 9
TERMINATION
SECTION 9.01. Termination ..............................................52
SECTION 9.02. Effect of Termination.....................................54
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices ..............................................54
SECTION 10.02. Non-Survival of Representations and
Warranties....................................55
SECTION 10.03. Amendments; No Waivers...................................55
SECTION 10.04. Expenses ..............................................55
SECTION 10.05. Successors and Assigns...................................57
SECTION 10.06. Governing Law............................................57
SECTION 10.07. Jurisdiction.............................................57
SECTION 10.08. Waiver of Jury Trial.....................................57
SECTION 10.09. Counterparts; Effectiveness..............................58
SECTION 10.10. Entire Agreement.........................................58
SECTION 10.11. Captions ..............................................58
SECTION 10.12. Severability.............................................58
EXHIBITS AND SCHEDULES
Exhibit A - Stock Option Agreement
Exhibit B-1 - Affiliate's Letter Relating to Pooling (Company)
Exhibit B-2 - Affiliate's Letter Relating to Pooling (Acquiror)
Exhibit B-3 - Affiliate's Letter (Company)
Exhibit C-1 - Tax Certificate (Acquiror)
Exhibit C-2 - Tax Certificate (Company)
Schedule 1.04
Schedule 3.01
Schedule 3.04
Schedule 3.06(a)
Schedule 3.06(b)
Schedule 3.10
Schedule 3.11(c)
Schedule 3.13
Schedule 3.14
Schedule 4.11(c)
Schedule 4.13
Schedule 4.14
Schedule 7.08(a)
Schedule 7.08(b)
Schedule 8.01(e)
iv
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 1, 1998 among Mobil
Corporation, a Delaware corporation (the "Company"), Exxon Corporation, a New
Jersey corporation ("Acquiror"), and Lion Acquisition Subsidiary Corporation, a
newly-formed Delaware corporation and a wholly-owned first-tier subsidiary of
Acquiror ("Merger Subsidiary").
WHEREAS, the respective Boards of Directors of Acquiror, 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 (the "Code"), and the rules and regulations promulgated thereunder;
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
WHEREAS, as a condition and inducement to Acquiror entering into this
Agreement and incurring the obligations set forth herein, concurrently with the
execution and delivery of this Agreement, Acquiror and the Company are entering
into a Stock Option Agreement in the form of Exhibit A hereto (the "Option
Agreement") pursuant to which the Company has granted Acquiror an option,
exercisable under the circumstances specified therein, to purchase shares of
common stock, par value $1.00 per share, of the Company (the "Shares").
NOW, THEREFORE, in consideration of the promises and the respective
representations, warranties, covenants, and agreements set forth herein, the
parties hereto agree as follows:
1
ARTICLE 1
THE MERGER
SECTION 1.01. The Merger. (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) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger, the Company and
Merger Subsidiary 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 Davis Polk & Wardwell, 450 Lexington Avenue, New York, NY, as
soon as practicable, but in any event within three business days after 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 or (ii) at such
other place and time or on such other date as the Company and Acquiror may agree
in writing (the "Closing Date").
SECTION 1.02. Conversion of Shares. (a) At the Effective Time by virtue
of the Merger and without any action on the part of the holder thereof:
(i) each Share held by the Company as treasury stock or owned by
Acquiror or any subsidiary of Acquiror (excluding Shares, if any, held
in any "Rabbi trust" identified on Schedule 3.14, 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
2
in Section 3.05), if any) shall be canceled, and no payment shall be
made with respect thereto;
(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;
(iii) each Share (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 1.02(a)(i), be converted into the right to
receive 1.32015 (the "Exchange Ratio") shares of fully paid and
nonassessable common stock, without par value, of Acquiror
("Acquiror Common Stock"); and
(iv) Each issued and outstanding share of Series B ESOP
Convertible Preferred Stock, par value $1.00 per share, of the
Company (the "Series B Preferred Stock") held in the leveraged
ESOP portion of the Company's Employee Savings Plan (the
"Leveraged ESOP"), other than Dissenting Shares, shall be
converted into the right to receive one validly issued, fully paid
and nonassessable share of a new series of preferred stock to be
issued by Acquiror (as a successor under Section 8(A) of the
Certificate of Designation, Preferences and Rights establishing
the Series B Preferred Stock) at the Effective Time (the "Acquiror
Preferred Stock"). Each share of Acquiror Preferred Stock shall,
to the extent possible, have terms that are identical to those of
the Series B Preferred Stock immediately prior to the Effective
Time, except that, (a) as a result of the Merger the issuer
thereof shall be Acquiror rather than the Company, and (b) upon
conversion thereof (at the same times and subject to the same
terms and conditions under which Series B Preferred Stock is
convertible into Shares) each share of Acquiror Preferred Stock
shall be converted into that Merger Consideration (as defined
below) which the holder thereof would have received had the Series
B Preferred Stock of such holder been converted into Shares
immediately prior to the Effective Time.
(b) All Acquiror Common Stock issued as provided in this Section 1.02
shall be of the same class and shall have the same terms as the currently
outstanding Acquiror Common Stock. Acquiror shall, following the Closing, except
as provided in Section 1.03(c), pay all stamp duties and stamp duty reserve tax,
if any, imposed in connection with the issuance or creation of the Acquiror
3
Common Stock and Acquiror Preferred Stock in connection with the Merger. The
Company shall have the right to approve the Certificate of Designations
establishing the Acquiror Preferred Stock, such approval not to be unreasonably
withheld.
(c) From and after the Effective Time, all Shares (together with the
associated Company Rights) converted in accordance with Section 1.02(a)(iii) and
all Series B Preferred Stock (other than Dissenting Shares) converted in
accordance with Section 1.02(a)(iv) 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 or Series B Preferred Stock shall
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration or Preferred Merger Consideration (each as defined below),
as applicable, and any dividends payable pursuant to Section 1.03(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 1.02(a)(ii).
(d) The Acquiror Common Stock to be received as consideration pursuant
to the Merger by each holder of Shares (together with cash in lieu of fractional
shares of Acquiror Common Stock as specified below) is referred to herein as the
"Merger Consideration". The Acquiror Preferred Stock to be received as
consideration pursuant to the Merger by each holder of Series B Preferred Stock
is referred to herein as the "Preferred Merger Consideration."
(e) 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. 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.
SECTION 1.03. Surrender and Payment. (a) Prior to the Effective Time,
Acquiror shall appoint an agent reasonably acceptable to the Company (the
"Exchange Agent") for the purpose of exchanging certificates representing
Shares or Series B Preferred Stock (the "Certificates") for the Merger
Consideration or Preferred Merger Consideration, as applicable. Acquiror will
4
make available to the Exchange Agent, as needed, the Merger Consideration and
Preferred Merger Consideration to be paid in respect of the Shares and the
Series B Preferred Stock, respectively. Promptly after the Effective Time,
Acquiror will send, or will cause the Exchange Agent to send, to each holder of
record at the Effective Time of Shares and Series B Preferred Stock 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 Acquiror may reasonably agree, for use in effecting delivery of Shares and
Series B Preferred Stock to the Exchange Agent.
(b) Each holder of Shares 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
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. Each holder of Series B Preferred Stock that
has been converted into a right to receive the Preferred 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 Preferred
Merger Consideration in respect of the Series B Preferred 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
Preferred Merger Consideration.
(c) If any portion of the Merger Consideration or the Preferred Merger
Consideration is to be paid to a Person other than the Person in whose name the
Certificate is registered, it shall be a condition to such payment that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the Person requesting such payment shall pay to the
Exchange Agent any transfer or other taxes required as a result of such payment
to 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.
(d) After the Effective Time, there shall be no further registration
of transfers of Shares or Series B Preferred Stock. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, 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 or the Preferred Merger
Consideration made available to the Exchange Agent pursuant to Section 1.03(a)
that remains unclaimed by the holders of Shares or Series B Preferred Stock one
5
year after the Effective Time shall be returned to Acquiror, upon demand, and
any such holder who has not exchanged his Shares for the Merger Consideration or
the Series B Preferred Stock for the Preferred Merger Consideration, as
applicable, in accordance with this Section prior to that time shall thereafter
look only to Acquiror for payment of the Merger Consideration in respect of his
Shares or the Preferred Merger Consideration in respect of the Series B
Preferred Stock. Notwithstanding the foregoing, Acquiror shall not be liable to
any holder of Shares or Series B Preferred Stock for any amount paid to a public
official pursuant to applicable abandoned property laws. Any amounts remaining
unclaimed by holders of Shares or Series B Preferred 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
Acquiror free and clear of any claims or interest of any Person previously
entitled thereto.
(f) No dividends or other distributions with respect to Acquiror
Common Stock or Acquiror Preferred 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. Subject to the effect of applicable
laws, following such surrender, there shall be paid, without interest, to the
record holder of the Acquiror Common Stock or Acquiror Preferred Stock, as
appropriate, issued in exchange therefor (i) at the time of such surrender, all
dividends and other distributions payable in respect of such Acquiror Common
Stock or Acquiror Preferred Stock, as the case may be, 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 Acquiror Common Stock or
Acquiror Preferred Stock, as the case may be, 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 Acquiror Common Stock
and Acquiror Preferred Stock, all Acquiror Common Stock and Acquiror Preferred
Stock to be issued pursuant to the Merger (but not options therefor issued
pursuant to Section 1.04 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 1.04. Stock Options. (a) At the Effective Time, each
outstanding option to purchase Shares (a "Company Stock Option") granted under
the Company's plans identified in Schedule 1.04 as being the only compensation
or benefit plans or agreements pursuant to which Shares may be issued
(collectively, the "Company Stock Option Plans"), whether vested or not vested,
shall be deemed assumed by Acquiror and shall thereafter be deemed to constitute
an
6
option to acquire, on the same terms and conditions as were applicable under
such Company Stock Option prior to the Effective Time (in accordance with the
past practice of the Company with respect to interpretation and application of
such terms and conditions), the number (rounded down to the nearest whole
number) of shares of Acquiror Common Stock determined by multiplying (x) the
number of Shares subject to such Company Stock Option immediately prior to the
Effective Time by (y) the Exchange Ratio, at a price per share of Acquiror
Common Stock (rounded up to the nearest whole cent) equal to (A) the exercise
price per Share otherwise purchasable pursuant to such Company Stock Option
divided by (B) the Exchange Ratio. In addition, prior to the Effective Time, the
Company will make any amendments to the terms of such stock option or
compensation plans or arrangements that are necessary to give effect to the
transactions contemplated by this Section. The Company represents that no
consents are necessary to give effect to the transactions contemplated by this
Section.
(b) Acquiror shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Acquiror Common Stock and Acquiror
Preferred Stock for delivery pursuant to the terms set forth in this Section
1.04.
(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 date hereof ("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 which provide for grants of equity-based awards or
equity- based accounts shall be amended or converted into a similar instrument
of Acquiror, 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). The Company represents that (i) there are no Company Awards
or Company Stock Options other than those reflected in Section 3.05 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 Schedule 1.04.
(d) At the Effective Time, Acquiror shall file with the Securities and
Exchange Commission (the "SEC") a registration statement on an appropriate form
or a post-effective amendment to a previously filed registration statement under
the Securities Act of 1933, as amended (the "1933 Act"), with respect to the
7
Acquiror Common Stock subject to options and other equity-based awards issued
pursuant to this Section 1.04, 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 1.05. Adjustments. 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 Acquiror or the Company (other than as contemplated
in Section 3.05 or Section 4.05 or permitted under this Agreement) shall occur,
including, without limitation, 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 and Preferred Merger Consideration shall be appropriately
adjusted.
SECTION 1.06. Fractional Shares. (a) No fractional shares of Acquiror
Common Stock shall be issued in the Merger, but in lieu thereof each holder of
Shares otherwise entitled to a fractional share of Acquiror Common Stock will be
entitled to receive, from the Exchange Agent in accordance with the provisions
of this Section 1.06, a cash payment in lieu of such fractional shares of
Acquiror Common Stock representing such holder's proportionate interest, if any,
in the proceeds from the sale by the Exchange Agent in one or more transactions
of the number of shares of Acquiror Common Stock delivered to the Exchange Agent
by Acquiror pursuant to Section 1.03(a) over the aggregate number of whole
shares of Acquiror Common Stock to be distributed to the holders of the
certificates representing Shares pursuant to Section 1.03(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, 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
8
by the Surviving Corporation out of its own funds and will not be paid directly
or indirectly by Acquiror. Until the proceeds of such sale or sales have been
distributed to the holders of Shares, the Exchange Agent shall hold such
proceeds in trust for the holders of Shares (the "Common Shares Trust"). The
Exchange Agent shall determine the portion of the Common Shares Trust to which
each holder of Shares 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 would otherwise be entitled and the denominator of which is the
aggregate amount of fractional share interests to which all holders of Shares
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 in lieu of any fractional shares
of Acquiror Common Stock, the Exchange Agent shall make available such amounts
to such holders of Shares without interest.
SECTION 1.07. Withholding Rights. Each of the Surviving Corporation and
Acquiror shall be entitled to deduct and withhold from the consideration
otherwise payable to any person pursuant to this Article 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 Acquiror, 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 in respect of which
such deduction and withholding was made by the Surviving Corporation or
Acquiror, as the case may be.
SECTION 1.08. 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 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 or Preferred Merger Consideration to be
paid in respect of the Shares or Series B Preferred Stock, as applicable,
represented by such Certificates as contemplated by this Article.
SECTION 1.09. Shares Held by Company Affiliates. Anything to the
contrary herein notwithstanding, any shares of Acquiror Common Stock (or
certificates therefor) issued to affiliates of the Company pursuant to Section
1.03 shall be subject to the restrictions described in Exhibit B-1 and Exhibit
B-3, and
9
such shares (or certificates therefor) shall bear a legend describing such
restrictions.
SECTION 1.10. Dissenter's Rights. Notwithstanding anything in this
Agreement to the contrary, any shares of Series B Preferred Stock outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has delivered a
written demand for appraisal of such shares in accordance with Section 262 of
the Delaware Law, if such Section 262 provides for appraisal rights for such
shares in the Merger ("Dissenting Shares"), shall not be converted into the
right to receive the Preferred Merger Consideration, unless and until such
holder fails to perfect or effectively withdraws or otherwise loses his right to
appraisal and payment under the Delaware Law. If, after the Effective Time, any
such holder fails to perfect or effectively withdraws or loses his right to
appraisal, such Dissenting Shares shall thereupon be treated as if they had been
converted as of the Effective Time into the right to receive the Preferred
Merger Consideration to which such holder is entitled, without interest or
dividends thereon. Any amounts paid to holders of Dissenting Shares in an
appraisal proceeding will be paid by the Surviving Corporation out of its own
funds and will not be paid, directly or indirectly, by Acquiror.
ARTICLE 2
CERTAIN GOVERNANCE MATTERS
SECTION 2.01. Acquiror Name. Acquiror shall take all such action as is
necessary to change its name to "Exxon Mobil Corporation" effective as of the
Effective Time, which action shall include, without limitation, seeking
stockholder approval to amend Acquiror's certificate of incorporation as
provided in Section 6.04.
SECTION 2.02. Acquiror Board of Directors. (a) At the Effective Time,
Acquiror shall cause the Board of Directors of Acquiror to consist of not more
than 19 directors, up to 13 of whom shall be the directors of Acquiror prior to
the Effective Time and six of whom shall be directors designated prior to the
Effective Time by the Company reasonably acceptable to Acquiror (of whom two
shall be Persons who immediately prior to the Effective Time were directors and
executive officers of the Company and four shall be Persons who immediately
prior to the Effective Time were directors but not executive officers of the
Company) (the "Company Board Designees"). Prior to the Effective Time, the Board
of Directors of Acquiror shall take all action necessary to amend the by-laws of
Acquiror to increase the size of the Board of Directors of Acquiror to not more
than 19 and to elect the Company Board Designees to the Board of Directors of
Acquiror, in each case as of the Effective Time.
(b) The Board of Directors of Acquiror shall take all action necessary
to cause Mr. Lucio A. Noto to be elected as Vice Chairman of the Board of
Directors of Acquiror as of the Effective Time.
(c) Acquiror shall cause there to be at least one Company Board
Designee on each of the Audit Committee and Compensation Committee of the Board
of Directors of Acquiror as of the Effective Time.
(d) If the Effective Time occurs on a date which is less than nine
months before the next regularly scheduled annual meeting of stockholders of
Acquiror, Acquiror further agrees to use all reasonable efforts necessary to (i)
nominate the Company Board Designees for election as directors, (ii) elect Mr.
Lucio A. Noto as Vice Chairman of the Board of Directors of Acquiror, and (iii)
cause at least one Company Board Designee to be on each of the Audit Committee
and Compensation Committee of the Board of Directors of Acquiror, in each case
in connection with and as of such next regularly scheduled annual meeting.
SECTION 2.03. Transition Committee. The parties agree to establish a
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 Mr. Lee R.
Raymond and Mr. Lucio A. Noto. The Transition Committee will be concerned with
matters relating to planning the integration after the Effective Time of
Acquiror and the Company, including organization and staffing. The Transition
Committee will draw upon the resources of Acquiror and the Company as necessary
or appropriate.
SECTION 2.04. 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 amended in accordance with applicable law.
SECTION 2.05. By-laws of the Surviving Corporation. The by-laws of
Merger Subsidiary in effect at the Effective Time shall be the by-laws of the
Surviving Corporation until amended in accordance with applicable law.
SECTION 2.06. 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
10
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.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Acquiror that:
SECTION 3.01. 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 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 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, taken as a whole, of
such Person and its Subsidiaries, taken as a whole, except to the extent
resulting from (w) any changes in general United States or global economic
conditions, (x) any changes affecting the oil and gas industry in general, (y)
matters whose significance or impact would reasonably be expected to be
primarily short term (i.e., under 18 months) or (z) matters disclosed on
Schedule 3.01. The Company has heretofore delivered to Acquiror true and
complete copies of the Company's certificate of incorporation and by-laws as
currently in effect.
SECTION 3.02. Corporate Authorization. (a) The execution, delivery and
performance by the Company of this Agreement and the Option Agreement 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 in connection with the consummation of the Merger,
have been duly authorized by all necessary corporate action. The affirmative
vote of holders of the outstanding Shares and outstanding shares of Series B
Preferred Stock having votes representing a majority of the votes of all such
outstanding capital stock, voting together as a single class, is the only vote
of
11
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 Agreement by Acquiror and Merger Subsidiary, as
applicable, each of this Agreement and the Option Agreement constitutes a valid
and binding agreement of the Company enforceable against the Company 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.
(b) The Company's Board of Directors, at a meeting duly called and
held, has (i) determined that this Agreement and the Option Agreement and the
transactions contemplated hereby and thereby (including the Merger) are fair to
and in the best interests of the Company's stockholders, (ii) approved and
adopted this Agreement and the Option Agreement and the transactions
contemplated hereby and thereby (including the Merger), and (iii) resolved
(subject to Section 5.02) to recommend approval and adoption of this Agreement
by its stockholders.
SECTION 3.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the Option Agreement and the
consummation of the Merger by the Company 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 Part IX of the Canadian Competition Act (the "Canadian Act"),
(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 1933 Act
and (g) other actions or filings which if not taken or made would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
SECTION 3.04. Non-Contravention. Except as set forth in Schedule 3.04,
the execution, delivery and performance by the Company of this Agreement and the
Option Agreement and the consummation by the Company of the transactions
contemplated hereby and thereby do not and will not (a) assuming compliance with
the matters referred to in Section 3.02, contravene or conflict with the
certificate of incorporation or by-laws of the Company, (b) assuming compliance
with the matters referred to in Section 3.03, contravene or conflict with or
12
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 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 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 Acquiror 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. Except as disclosed in Schedule 3.04, neither the Company nor any
Subsidiary of the Company is a party to any agreement that expressly limits the
ability of the Company or any Subsidiary of the Company, or would limit Acquiror
or any Subsidiary of Acquiror 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 be reasonably likely to have a
Material Adverse Effect on Acquiror after the Effective Time.
SECTION 3.05. Capitalization of the Company. The authorized capital
stock of the Company consists of 1,200,000,000 Shares and 30,000,000 shares of
preferred stock, par value $1.00 per share (of which 6,000,000 shares are
designated Series A Junior Participating Preferred Stock and 191,062 are
designated Series B Preferred Stock). As of the close of business on November
27, 1998, there were outstanding 779,934,096 Shares, no shares of Series A
Junior Participating Preferred Stock (all of which are reserved for issuance in
accordance with the Rights Agreement (the "Company Rights Agreement"), dated as
of December 15, 1995, between the Company and Mellon Bank, N.A., as Rights
Agent, pursuant to which the Company has issued rights ("Company Rights") to
purchase the Series A Junior Participating Preferred Stock) and 165,791.77
shares of Series B Preferred Stock, and employee stock options to purchase an
aggregate of 31,337,561 Shares (of which options to purchase an aggregate of
19,313,161
13
Shares were exercisable) and Company Awards (other than outstanding restricted
stock) with respect to an aggregate of 1,257,513.9444 Shares. All outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. Except as set forth in this Section
and except for changes since the close of business on November 27, 1998
resulting from the exercise of employee stock options outstanding on such date
or options or stock-based awards granted as permitted by Section 5.01, there are
outstanding (a) no shares of capital stock or other voting securities of the
Company, (b) except for the Series B Preferred Stock, no securities of the
Company convertible into or exchangeable for shares of capital stock or voting
securities of the Company, and (c) except for the Series B Preferred Stock, and
except for the Option Agreement, no options, warrants or other rights to acquire
from the Company, and 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 3.05(a), 3.05(b) and 3.05(c)
being referred to collectively as the "Company Securities"). Except for the
Series B Preferred Stock, there are no outstanding obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities.
SECTION 3.06. 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, reasonably be expected to have a Material Adverse Effect on the
Company. 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 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 the Company's annual report on Form 10-K for the fiscal year ended December
31, 1997 (the "Company 10-K") or in Schedule 3.06(a).
(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
14
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, and no 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 except, in any such
case under clause (i) or (ii), to the extent relating to an insignificant equity
interest in any Significant Subsidiary (the items in clauses 3.06(b)(i) and
3.06(b)(ii) being referred to collectively as the "Company Subsidiary
Securities"). Except as set forth on Schedule 3.06(b), there are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any outstanding Company Subsidiary Securities.
SECTION 3.07. SEC Filings. (a) The Company has delivered to Acquiror
(i) its annual reports on Form 10-K for its fiscal years ended December 31,
1995, 1996 and 1997, (ii) its quarterly reports on Form 10-Q for its fiscal
quarters ended after December 31, 1997, (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, 1997, and (iv) all of its
other reports, statements, schedules and registration statements filed with the
SEC since December 31, 1997 (the documents referred to in this Section 3.07(a)
being referred to collectively as the "Company SEC Documents"). The Company's
quarterly report on Form 10-Q for its fiscal quarter ended September 30, 1998 is
referred to herein as the "Company 10-Q".
(b) As of its filing date, each Company SEC Document complied as to
form in all material respects with the applicable requirements of the Exchange
Act and the 1933 Act.
(c) As of its filing date, each Company SEC Document filed pursuant to
the Exchange Act did not contain any untrue statement of a material fact or omit
15
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 such registration statement, as amended or supplemented, if
applicable, filed pursuant to the 1933 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 3.08. 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 3.07 fairly present in all material respects, in conformity with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated in the notes thereto), the consolidated financial position
of the Company and its consolidated Subsidiaries as of the dates thereof and
their consolidated results of operations and changes in financial position 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). For
purposes of this Agreement, "Company Balance Sheet" means the consolidated
balance sheet of the Company as of September 30, 1998 set forth in the Company
10-Q and "Company Balance Sheet Date" means September 30, 1998.
SECTION 3.09. Disclosure Documents. (a) Neither the proxy statement of
the Company (the "Company Proxy Statement") to be filed with the SEC 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 shareholders of the Company or at the time such shareholders
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 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 3.09 with respect to statements
made or incorporated by reference therein based on information supplied by
Acquiror 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 Company for
inclusion or incorporation by reference in the Acquiror Proxy Statement (as
defined in Section 4.09) or in the Form S-4 (as defined in Section 4.09) or any
amendment or supplement thereto will, at the time the Acquiror Proxy Statement
16
or any such supplement or amendment thereto is first mailed to the stockholders
of Acquiror or at the time such stockholders vote on the matters constituting
the Acquiror Stockholder Approval (as defined in Section 4.02) or at the time
the Form S-4 or any such amendment or supplement becomes effective under the
1933 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 set forth in
Schedule 3.10, 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 has had or reasonably would be expected to have, individually or
in the aggregate, 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) quarterly cash dividends payable by the Company consistent with past
practice (including periodic dividend increases consistent with past practice),
but which for the sake of clarity shall not include any special dividends) or
(ii) required dividends on the Series B Preferred Stock) or any repurchase,
redemption or other acquisition by the Company or any of its Subsidiaries of any
outstanding shares of capital stock or other securities of, or other ownership
interests in, the Company or any of its 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 5.01(e));
(c) any amendment of any material term of any outstanding security of
the Company or any of its 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 Acquiror;
17
(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 significant or which is
required by reason of a concurrent change in GAAP; or
(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 employment agreements 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 the ordinary course of business consistent with past practice, as
permitted by this Agreement, or as agreed to in writing by Acquiror.
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;
(b) liabilities which in the aggregate would not reasonably be
expected to have a Material Adverse Effect on the Company;
(c) liabilities disclosed in the Company SEC Documents filed prior to
the date hereof or set forth in Schedule 3.11(c); and
(d) liabilities under this Agreement.
SECTION 3.12. Litigation. Except as disclosed in the Company SEC
Documents filed prior to the date hereof, 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 before any court or arbitrator or any
governmental body, agency or official which would reasonably be expected to have
a Material Adverse Effect on the Company.
SECTION 3.13. Taxes. Except as set forth in the Company Balance Sheet
(including the notes thereto) or as otherwise set forth in Schedule 3.13 and
except
18
as would not, individually or in the aggregate, 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. ss. 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, 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, 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.
SECTION 3.14. Employee Benefit Plans. (a) Prior to the date hereof, the
Company has provided Acquiror with a list (set forth on Schedule 3.14)
identifying each material "employee benefit plan," as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974 ("ERISA"), each material
employment, severance or similar contract, plan, arrangement or policy
applicable
19
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 and covers any
employee or director or former employee or director of the Company, or under
which the Company has any liability. Such material plans (excluding any such
plan that is a "multiemployer plan", as defined in Section 3(37) of ERISA) are
referred to collectively herein as the "Company Employee Plans".
(b) Each Company Employee Plan has been 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 ERISA and the Code) which
are applicable to such Plan, except where failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
(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 Employee 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.
(e) Except as set forth in Schedule 3.14, no director or officer or
other employee of the Company or any of its Subsidiaries will become entitled to
any retirement, severance or similar benefit or enhanced or accelerated benefit
(including any acceleration of vesting or lapse of repurchase rights or
obligations with respect to any employee stock option or other benefit under any
stock option plan or compensation plan or arrangement of the Company) solely as
a result of the transactions contemplated hereby.
(f) Except as reflected in the Company SEC Documents filed prior to
the date hereof, no Company Employee Plan provides post-retirement health and
20
medical, life or other insurance benefits for retired employees of the Company
or any of its Subsidiaries.
(g) Except as set forth on Schedule 3.14, there has been no amendment
to, written interpretation or announcement (whether or not written) by the
Company or any of its affiliates relating to, or change in employee
participation or coverage under, any Company Employee Plan which would increase
materially the expense of maintaining such Company Employee Plan above the level
of the expense incurred in respect thereof for the 12 months ended on the
Company Balance Sheet Date.
SECTION 3.15. Compliance with Laws. Neither the Company nor any of its
Subsidiaries is in violation of, or has since January 1, 1997 violated, any
applicable provisions of any laws, statutes, ordinances or regulations except
for any violations that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on the Company.
SECTION 3.16. Finders' or Advisors' Fees. Except for Goldman, Sachs &
Co., a copy of whose engagement agreement has been provided to Acquiror, 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 SEC Documents filed prior to the date hereof and with such exceptions
as, individually or in the aggregate, have not had, and would not reasonably be
expected 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 the current or prior business of the
Company or any of its Subsidiaries or any
21
property or facility now or previously owned, leased or operated by the Company
or any of its Subsidiaries which has not been delivered to Acquiror at least
five days prior to the date hereof.
(b) For purposes of this Section 3.17 and Section 4.17, the term
"Environmental Laws" means any 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 Goldman, Sachs & Co. 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 (other than Acquiror or any of its Subsidiaries or
affiliates), 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 SEC.
(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 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").
SECTION 3.20. Pooling Letter. The Company has received a letter from
Ernst & Young LLP dated as of November 22, 1998 and addressed to the Company, a
copy of which has been delivered to Acquiror, in which Ernst & Young LLP concurs
with the Company management's conclusion that, as of November 22, 1998, no
conditions exist related to the Company that would preclude the Acquiror from
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 3.21. Takeover Statutes. The Board of Directors of the Company
has taken the necessary action to make inapplicable the application of Section
203 of the Delaware Law, any other applicable antitakeover or similar statute or
regulation and the supermajority voting provisions of Article 6 of the
22
Company's certificate of incorporation to this Agreement and the Option
Agreement and the transactions contemplated hereby and thereby.
SECTION 3.22. Rights Agreement. The Board of Directors of the Company
has resolved to, and the Company promptly after the execution hereof 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 Option
Agreement and the other transactions contemplated hereby and thereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company that:
SECTION 4.01. Corporate Existence and Power. Each of Acquiror and
Merger Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation 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 a
Material Adverse Effect on Acquiror. Acquiror 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 a
Material Adverse Effect on Acquiror. Since the date of its incorporation, Merger
Subsidiary has not engaged in any activities other than in connection with or as
contemplated by this Agreement. Acquiror has heretofore delivered to the Company
true and complete copies of Acquiror's and Merger Subsidiary's certificate of
incorporation and by-laws as currently in effect.
SECTION 4.02. Corporate Authorization. (a) The execution, delivery and
performance by Acquiror and Merger Subsidiary of this Agreement, and by Acquiror
of the Option Agreement, and the consummation by Acquiror and Merger Subsidiary
of the transactions contemplated hereby and thereby are within the corporate
powers of Acquiror and Merger Subsidiary and have been duly authorized by all
necessary corporate action, except for any required approval by Acquiror's
stockholders of (i) the Merger, (ii) the amendment of Acquiror's certificate of
incorporation to increase the authorized shares of Acquiror Common Stock and to
change Acquiror's name in accordance with Section 2.01 and (iii) the
23
issuance of Acquiror Common Stock in connection with the Merger (clauses (i),
(ii) and (iii) being the "Acquiror Stockholder Approval") and except for the
designation by the Board of Directors of shares of the Acquiror's authorized
preferred stock as Acquiror Preferred Stock. The affirmative vote of the holders
of shares of Acquiror Common Stock and shares of Class A Preferred Stock having
votes representing a majority of the votes cast by all such shares, voting
together as a single class, is the only vote of the holders of any of Acquiror's
capital stock necessary in connection with obtaining the Acquiror Stockholder
Approval. Assuming due authorization, execution and delivery of this Agreement
and the Option Agreement by the Company, this Agreement constitutes a valid and
binding agreement of each of Acquiror and Merger Subsidiary and the Option
Agreement constitutes a valid and binding agreement of Acquiror, 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 Acquiror Common Stock and
Acquiror Preferred 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) Acquiror's Board of Directors, at a meeting duly called and held,
has (i) approved this Agreement and the Option Agreement and the transactions
contemplated hereby and thereby (including the Merger), and (ii) resolved
(subject to Section 6.04) to recommend approval by its stockholders of the
matters constituting the Acquiror Stockholder Approval.
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by Acquiror and Merger Subsidiary of this Agreement, and by Acquiror
of the Option Agreement, and the consummation by Acquiror 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 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 the Canadian Act, (e) compliance
with any applicable requirements of the Exchange Act, (f) compliance with any
applicable requirements of the 1933 Act and (g) other actions or filings which
if not taken or made would not, individually or in the aggregate, have a
Material Adverse Effect on Acquiror.
SECTION 4.04. Non-Contravention. The execution, delivery and
performance by Acquiror and Merger Subsidiary of this Agreement, and by
Acquiror of the Option Agreement, and the consummation by Acquiror and
24
Merger Subsidiary of the transactions contemplated hereby and thereby do not and
will not (a) assuming compliance with the matters referred to in Section 4.02,
contravene or conflict with the certificate of incorporation or by-laws of
Acquiror or Merger Subsidiary, (b) assuming compliance with the matters referred
to in Section 4.03, contravene or conflict with any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
Acquiror 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 Acquiror or any of its Subsidiaries or to a loss of any benefit to
which Acquiror or any of its Subsidiaries is entitled under any provision of any
agreement, contract or other instrument binding upon Acquiror or any of its
Subsidiaries or any license, franchise, permit or other similar authorization
held by Acquiror or any of its Subsidiaries or (d) result in the creation or
imposition of any Lien on any asset of Acquiror 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 a Material Adverse Effect on Acquiror. Neither Acquiror nor any
Subsidiary of Acquiror is a party to any agreement that expressly limits the
ability of Acquiror or any Subsidiary of Acquiror 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 be reasonably likely to have a Material Adverse
Effect on Acquiror after the Effective Time.
SECTION 4.05. Capitalization. The authorized capital stock of Acquiror
consists of 3,000,000,000 shares of Acquiror Common Stock and 200,000,000 shares
of preferred stock, without par value (of which 16,500,000 are designated Class
A Preferred Stock and 100,000,000 are designated Class B Preferred Stock). As of
the close of business on November 27, 1998, there were outstanding 2,427,693,787
shares of Acquiror Common Stock, 1,884,638 shares of Class A Preferred Stock and
no shares of Class B Preferred Stock, and employee stock options to purchase an
aggregate of 70,537,194 shares of Acquiror Common Stock (of which options to
purchase an aggregate of 59,117,944 shares of Acquiror Common Stock were
exercisable). All outstanding shares of capital stock of Acquiror have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
set forth in this Section and except for changes since the close of business on
November 27, 1998 resulting from the exercise of employee stock options
outstanding on such date or options or other stock-based awards granted as
permitted by Section 6.01 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 Acquiror, (b) no securities of Acquiror convertible into or
exchangeable for shares of capital stock or voting securities of Acquiror, and
(c) no options, warrants or other rights to acquire from Acquiror, and no
25
preemptive or similar rights, subscription or other rights, convertible
securities, agreements, arrangements, or commitments of any character, relating
to the capital stock of Acquiror, obligating Acquiror to issue, transfer or sell
any capital stock, voting security or securities convertible into or
exchangeable for capital stock or voting securities of Acquiror or obligating
Acquiror to grant, extend or enter into any such option, warrant, subscription
or other right, convertible security, agreement, arrangement or commitment (the
items in clauses 4.05(a), 4.05(b) and 4.05(c) being referred to collectively as
the "Acquiror Securities"). There are no outstanding obligations of Acquiror or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any Acquiror
Securities.
SECTION 4.06. Subsidiaries. (a) Each Subsidiary of Acquiror 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, reasonably be expected to have a Material
Adverse Effect on Acquiror. Each Subsidiary of Acquiror 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 a Material Adverse
Effect on Acquiror. All Significant Subsidiaries of Acquiror and their
respective jurisdictions of incorporation are identified in Acquiror's annual
report on Form 10-K for the fiscal year ended December 31, 1997 ("Acquiror
10-K").
(b) Except for directors' qualifying shares and except as set forth in
the Acquiror 10-K, all of the outstanding capital stock of, or other ownership
interests in, each Significant Subsidiary of Acquiror is owned by Acquiror,
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 Acquiror 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
Acquiror, and (ii) options, warrants or other rights to acquire from Acquiror or
any of its Significant Subsidiaries, 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 Acquiror, obligating Acquiror 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 Acquiror or obligating Acquiror or any
Significant
26
Subsidiary of Acquiror to grant, extend or enter into any such option, warrant,
subscription or other right, convertible security, agreement, arrangement or
commitment except, in any such case under clause (i) or (ii), to the extent
relating to an insignificant equity interest in any Significant Subsidiary
(items in clauses 4.06(b)(i) and 4.06(b)(ii) being referred to collectively as
the "Acquiror Subsidiary Securities"). There are no outstanding obligations of
Acquiror or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any outstanding Acquiror Subsidiary Securities.
SECTION 4.07. SEC Filings. (a) Acquiror has delivered to the Company
(i) its annual reports on Form 10-K for its fiscal years ended December 31,
1995, 1996 and 1997, (ii) its quarterly reports on Form 10-Q for its fiscal
quarters ended after December 31, 1997, (iii) its proxy or information
statements relating to meetings, of, or actions taken without a meeting by, the
stockholders of Acquiror held since December 31, 1997, and (iv) all of its other
reports, statements, schedules and registration statements filed with the SEC
since December 31, 1997 (the documents referred to in this Section 4.07(a) being
referred to collectively as the "Acquiror SEC Documents"). The Acquiror's
quarterly report on Form 10- Q for its fiscal quarter ended September 30, 1998
is referred to herein as the "Acquiror 10-Q".
(b) As of its filing date, each Acquiror SEC Document complied as to
form in all material respects with the applicable requirements of the Exchange
Act and the 1933 Act.
(c) As of its filing date, each Acquiror SEC 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 such registration statement as amended or supplemented, if
applicable, filed pursuant to the 1933 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 4.08. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Acquiror
(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 4.07
fairly present in all material respects, in conformity with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of Acquiror and its
27
consolidated Subsidiaries as of the dates thereof and their consolidated results
of operations and changes in financial position 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). For purposes of this Agreement,
"Acquiror Balance Sheet" means the consolidated balance sheet of Acquiror as of
September 30, 1998 set forth in the Acquiror 10-Q and "Acquiror Balance Sheet
Date" means September 30, 1998.
SECTION 4.09. Disclosure Documents. (a) The proxy statement of Acquiror
(the "Acquiror Proxy Statement") to be filed with the SEC in connection with the
Merger and the Registration Statement on Form S-4 of Acquiror (the "Form S-4")
to be filed under the 1933 Act relating to the issuance of Acquiror Common Stock
in the Merger, that may be required to be filed with the SEC in connection with
the issuance of shares of Acquiror Common Stock pursuant to the Merger and any
amendments or supplements thereto, will, when filed, subject to the last
sentence of Section 4.09(b), comply as to form in all material respects with the
applicable requirements of the 1933 Act.
(b) Neither the Acquiror Proxy Statement nor any amendment or
supplement thereto, will, at the date the Acquiror Proxy Statement or any such
amendment or supplement is first mailed to shareholders of Acquiror or at the
time such shareholders vote on the matters constituting the Acquiror 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 1933 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 Acquiror in this Section 4.09 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 Acquiror Proxy
Statement or the Form S-4.
(c) None of the information supplied or to be supplied by Acquiror 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.
28
SECTION 4.10. Absence of Certain Changes. Since the Acquiror Balance
Sheet Date, Acquiror 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 has had or reasonably would be expected to have, individually or
in the aggregate, a Material Adverse Effect on Acquiror;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Acquiror (other than
(i) quarterly cash dividends payable by Acquiror consistent with past practice
(including periodic dividend increases consistent with past practice), but which
for the sake of clarity shall not include any special dividends), or (ii)
required dividends on preferred stock outstanding on the date hereof) or any
repurchase, redemption or other acquisition by Acquiror or any of its
Subsidiaries of any outstanding shares of capital stock or other equity
securities of, or other ownership interests in, Acquiror (other than any such
repurchases prior to the date hereof pursuant to Acquiror's publicly announced
stock buyback program or, after the date hereof, as permitted under Section
6.01(e)); 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 Acquiror or any
of its Subsidiaries, except for any such change which is not significant or
which is required by reason of a concurrent change in GAAP.
SECTION 4.11. No Undisclosed Material Liabilities. There are no
liabilities of the Acquiror or any Subsidiary of the Acquiror of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, other than:
(a) liabilities disclosed or provided for in the Acquiror Balance
Sheet or in the notes thereto;
(b) liabilities which in the aggregate would not reasonably be
expected to have a Material Adverse Effect on Acquiror;
(c) liabilities disclosed in the Acquiror SEC Documents filed prior to
the date hereof or set forth in Schedule 4.11(c); and
(d) liabilities under this Agreement.
29
SECTION 4.12. Litigation. Except as disclosed in the Acquiror SEC
Documents filed prior to the date hereof, there is no action, suit,
investigation or proceeding pending against, or to the knowledge of Acquiror
threatened against or affecting, Acquiror or any of its Subsidiaries or any of
their respective properties before any court or arbitrator or any governmental
body, agency or official which would reasonably be expected to have a Material
Adverse Effect on Acquiror.
SECTION 4.13. Taxes. Except as set forth in the Acquiror Balance Sheet
(including the notes thereto) or as otherwise set forth on Schedule 4.13 and
except as would not, individually or in the aggregate, have a Material Adverse
Effect on Acquiror, (i) all Acquiror Tax Returns required to be filed with any
taxing authority by, or with respect to, Acquiror and its Subsidiaries have been
filed in accordance with all applicable laws; (ii) Acquiror and its Subsidiaries
have timely paid all Taxes shown as due and payable on Acquiror Tax Returns that
have been so filed, and, as of the time of filing, Acquiror Tax Returns
correctly reflected the facts regarding the income, business, assets,
operations, activities and the status of Acquiror and its Subsidiaries (other
than Taxes which are being contested in good faith and for which adequate
reserves are reflected on the Acquiror Balance Sheet); (iii) Acquiror and its
Subsidiaries have made provision for all Taxes payable by Acquiror and its
Subsidiaries for which no Acquiror Tax Return has yet been filed; (iv) the
charges, accruals and reserves for Taxes with respect to Acquiror and its
Subsidiaries reflected on the Acquiror 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 Acquiror 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
Acquiror's knowledge and belief, neither Acquiror 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. ss. 1.1502-6 (and any comparable
provision of the tax laws of any state, local or foreign jurisdiction) to the
affiliated group of which Acquiror is the common parent.
SECTION 4.14. Employee Benefit Plans. (a) Prior to the date hereof,
Acquiror has provided the Company with a list (set forth on Schedule 4.14)
identifying each material "employee benefit plan," as defined in Section 3(3) of
ERISA, each employment, severance or similar contract, plan, arrangement or
policy applicable to any director, former director, employee or former employee
of Acquiror 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
30
compensation, pension, health, medical or life insurance benefits) which is
maintained, administered or contributed to by Acquiror and covers any employee
or director or former employee or director of Acquiror, or under which Acquiror
has any liability. Such material plans (excluding any such plan that is a
"multiemployer plan", as defined in Section 3(37) of ERISA) are referred to
collectively herein as the "Acquiror Employee Plans".
(b) Each Acquiror Employee Plan has been 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 ERISA and the Code) which
are applicable to such Plan, except where failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect on Acquiror.
(c) Neither Acquiror nor any affiliate of Acquiror 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 Acquiror or any affiliate of
Acquiror 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 Acquiror Employee 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.
(e) No director or officer or other employee of Acquiror or any of its
Subsidiaries will become entitled to any retirement, severance or similar
benefit or enhanced or accelerated benefit solely as a result of the
transactions contemplated hereby.
(f) Except as reflected in the Acquiror SEC Documents filed prior to
the date hereof, no Acquiror Employee Plan provides post-retirement health and
medical, life or other insurance benefits for retired employees of Acquiror or
any of its Subsidiaries.
(g) There has been no amendment to, written interpretation or
announcement (whether or not written) by Acquiror or any of its affiliates
relating to, or change in employee participation or coverage under, any Acquiror
Employee Plan which would increase materially the expense of maintaining such
Acquiror Employee Plan above the level of the expense incurred in respect
thereof for the 12 months ended on the Acquiror Balance Sheet Date.
SECTION 4.15. Compliance with Laws. Neither Acquiror nor any of its
Subsidiaries is in violation of, or has since January 1, 1997 violated, any
31
applicable provisions of any laws, statutes, ordinances or regulations except
for any violations that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on Acquiror.
SECTION 4.16. Finders' or Advisors' Fees. Except for J.P. Morgan
Securities Inc., whose fees will be paid by Acquiror, there is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of Acquiror 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
Acquiror SEC Documents filed prior to the date hereof and with such exceptions
as, individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Material Adverse Effect on Acquiror, (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 Acquiror or any of its
Subsidiaries, threatened by any Person against, Acquiror or any of its
Subsidiaries, and no penalty has been assessed against Acquiror or any of its
Subsidiaries, in each case, with respect to any matters relating to or arising
out of any Environmental Law; (ii) Acquiror and its Subsidiaries are and have
been in compliance with all Environmental Laws; (iii) there are no liabilities
of or relating to Acquiror 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
Acquiror has knowledge in relation to the current or prior business of Acquiror
or any of its Subsidiaries or any property or facility now or previously owned,
leased or operated by Acquiror or any of its Subsidiaries which has not been
delivered to the Company at least five days prior to the date hereof.
SECTION 4.18. Opinion of Financial Advisor. Acquiror has received the
opinion of J.P. Morgan Securities Inc. to the effect that, as of the date of
such opinion, the consideration to be paid by Acquiror in the Merger is fair,
from a financial point of view, to Acquiror, and, as of the date hereof, such
opinion has not been withdrawn.
SECTION 4.19. Pooling; Tax Treatment. (a) Acquiror intends that the
Merger be accounted for as a "pooling of interests" as described in Section
3.19(a).
32
(b) Neither Acquiror nor any of its affiliates has taken or agreed to
take any action or is 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.
SECTION 4.20. Pooling Letter. Acquiror has received a letter from
PricewaterhouseCoopers LLP dated as of November 25, 1998 and addressed to
Acquiror, 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 Acquiror's management and based on the letter from Ernst & Young
LLP referenced in Section 3.20, PricewaterhouseCoopers LLP concurs with Acquiror
management's conclusion that, as of November 25, 1998, no conditions exist that
would preclude Acquiror'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.
ARTICLE 5
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.01. Conduct of the Company. From the date hereof until the
Effective Time, the Company and its Subsidiaries shall conduct their business in
the ordinary course consistent with past practice 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 Acquiror or as contemplated by this Agreement,
and, in the case of clauses (g), (i), (j) and (l) below, except in the ordinary
course of business not representing a new strategic direction of the Company,
from the date hereof until the Effective Time:
(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;
(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);
33
(c) the Company will not, and will not permit any material 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 material 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
3.05 or are granted in accordance with clause (ii) below and (ii) additional
options or stock-based awards to acquire Shares 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;
(d) the Company will not, and will not permit any material 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 7.09, (x) regular quarterly cash dividends
payable by the Company or such material Subsidiary consistent with past practice
(including periodic dividend increases consistent with past practice), but which
for the sake of clarity shall not include any special dividend, (y) any required
dividends on the Series B Preferred Stock or (z) dividends paid by any
Subsidiary of the Company to the Company or any wholly-owned Subsidiary of the
Company;
(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 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, (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 7.04 or (z) effected in the ordinary course consistent
with past practice and only to the extent consistent with Section 7.04;
(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 (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 MCOC (as defined in Section
6.06(e)) to the extent consistent with Section 7.04) or amend the terms of or
terminate the Leveraged ESOP;
34
(g) the Company will not, and will not permit any Subsidiary of the
Company to, make or commit to make any capital expenditure;
(h) the Company will not, and will not permit any Subsidiary of the
Company to, 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;
(i) the Company will not, and will not permit any of its Subsidiaries
to, acquire a material amount of assets (as measured with respect to the
consolidated assets of the Company and its Subsidiaries taken as a whole) of any
other Person;
(j) the Company will not, and will not permit any of its Subsidiaries
to, sell, lease, license or otherwise dispose of any material assets or property
except pursuant to existing contracts or commitments;
(k) except for any such change which is not significant 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;
(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; and
(n) the Company will not, and will not permit any of its Subsidiaries
to, agree or commit to do any of the foregoing.
SECTION 5.02. Company Stockholder Meeting; Proxy Material. Unless the
Board of Directors of Acquiror shall take any action permitted by the third
sentence of Section 6.04, the Company shall cause a meeting of its stockholders
(the "Company Stockholder Meeting") to be duly called and held as soon as
reasonably practicable, on a date reasonably acceptable to Acquiror, for the
purpose of voting on the approval and adoption of this Agreement and the Merger
(the "Company Stockholder Approval"). Except as provided in the next sentence,
the Board of Directors of the Company shall recommend approval and
35
adoption of this Agreement by the Company's stockholders. The Board of Directors
of the Company shall be permitted to (i) not recommend to the Company's
shareholders that they give the Company Stockholder Approval or (ii) withdraw or
modify in a manner adverse to Acquiror its recommendation to the Company's
shareholders that they give the Company Stockholder Approval, only (x) if the
Board of Directors of the Company by a majority vote determines in its good
faith judgment that it is necessary to so withdraw or modify its recommendation
to comply with its fiduciary duty to shareholders under applicable law, after
receiving the advice of outside legal counsel, and (y) if the Company and the
senior officers and directors of the Company have substantially complied with
their obligations set forth in Section 5.03. In connection with the Company
Stockholder Meeting, the Company (x) will promptly prepare and file with the
SEC, will use its reasonable best efforts to have cleared by the SEC and will
thereafter mail to its shareholders as promptly as practicable the Company Proxy
Statement and all other proxy materials for the Company Stockholder Meeting, (y)
will use its reasonable best efforts, subject to the immediately preceding
sentence, to obtain the Company Stockholder Approval and (z) will otherwise
comply with all legal requirements applicable to the Company Stockholder
Meeting.
SECTION 5.03. Other Offers. The Company and its Subsidiaries will not,
and the Company will use its reasonable best efforts to cause the officers,
directors, employees, investment bankers, consultants and other agents of the
Company and its Subsidiaries 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 Company Rights Agreement) or any inquiry with respect thereto or
engage in discussions or negotiations with any Person with respect thereto, or
disclose any non-public information relating to the Company or any Subsidiary of
the Company or afford access to the properties, books or records of the Company
or any Subsidiary of the Company to, any Person that has made, or to the
Company's knowledge, is considering making, any Acquisition Proposal; provided
that nothing contained in this Section 5.03 shall prevent the Company from
furnishing non-public information to, or entering into discussions or
negotiations with, or affording access to the properties, books or records of
the Company or its Subsidiaries to, any Person in connection with an unsolicited
bona fide Acquisition Proposal received from such Person so long as prior to
furnishing non-public information to, or entering into discussions or
negotiations with, such Person, (i) the Board of Directors of the Company by a
majority vote determines in its good faith judgment that it is necessary to do
so to comply with its fiduciary duty to shareholders under applicable law, after
receiving the advice of outside legal counsel, and (ii) the Company receives
from such Person an executed confidentiality agreement with terms no less
favorable to the Company
36
than those contained in the Confidentiality Agreement (as defined in Section
7.03). Nothing contained in this Agreement shall prevent the Board of Directors
of 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 the Company
shall not recommend that the shareholders of the Company tender their shares in
connection with a tender offer except to the extent the Board of Directors of
the Company by a majority vote determines in its good faith judgment that such a
recommendation is required to comply with the fiduciary duties of the Board of
Directors of the Company to shareholders under applicable law, after receiving
the advice of outside legal counsel. Unless the Board of Directors of the
Company by a majority vote determines in its good faith judgment that it is
necessary not to do so to comply with its fiduciary duty to shareholders under
applicable law, after receiving the advice of outside legal counsel, the Company
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) Acquiror after receipt of any Acquisition
Proposal, any indication of which the Company has knowledge that any Person is
considering making an Acquisition Proposal or any request for non-public
information relating to the Company or any Subsidiary of the Company or for
access to the properties, books or records of the Company or any Subsidiary of
the Company by any Person that has made, or to the Company's knowledge may be
considering making, an Acquisition Proposal, and (b) will keep Acquiror informed
of the status and material terms of any such Acquisition Proposal or request.
The Company and its Subsidiaries will, and the Company will use its reasonable
best efforts to cause the officers, directors, employees, investment bankers,
consultants and other agents of the Company and its Subsidiaries 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 parties with respect to any
Acquisition Proposal.
For purposes of this Agreement, "Acquisition Proposal" means any offer
or proposal for, or any indication of interest in, any (i) direct or indirect
acquisition or purchase of a business or assets that constitute 20% or more of
the net revenues, net income or the assets of the Company 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 the Company or any of its Subsidiaries
whose business constitutes 20% or more of the net revenues, net income or assets
of the Company 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 the Company or any of
its Subsidiaries whose business constitutes 20% or more the net revenues, net
income or assets of the Company and its Subsidiaries, taken as a whole, or (iv)
merger, consolidation,
37
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of its Subsidiaries whose business
constitutes 20% or more of the net revenue, net income or assets of the Company
and its Subsidiaries, taken as a whole, other than the transactions contemplated
by this Agreement. For purposes of this Agreement, "Superior Proposal" means any
bona fide Acquisition Proposal for or in respect of at least a majority of the
outstanding Shares on terms that the Board of Directors of the Company
determines in its good faith judgment (after consultation with 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 to
all of the Company's stockholders than the Merger.
ARTICLE 6
COVENANTS OF ACQUIROR
Acquiror agrees that:
SECTION 6.01. Conduct of Acquiror. From the date hereof until the
Effective Time, Acquiror and its Subsidiaries shall conduct their business in
the ordinary course consistent with past practice 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, from the date hereof until the Effective Time:
(a) Acquiror will not adopt or propose any change in its certificate
of incorporation or by-laws, except as contemplated in Section 4.02(a) or
2.02(a);
(b) Acquiror will not adopt a plan or agreement of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other material reorganization of Acquiror;
(c) Acquiror 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 Acquiror, 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 (ii) below and
(ii) additional options or
38
stock-based awards to acquire Acquiror Common Stock granted under the terms of
any employee or director stock option or compensation plan or arrangement of
Acquiror as in effect as of the date hereof in the ordinary course consistent
with past practice;
(d) Acquiror 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 7.09, (x) regular quarterly
cash dividends payable by Acquiror on Acquiror Common Stock consistent with past
practice (including periodic dividend increases consistent with past practice),
but which for the sake of clarity shall not include any special dividend or (y)
any required dividends on preferred stock outstanding on the date hereof;
(e) Acquiror will not, and will not permit any Subsidiary of Acquiror
to, redeem, purchase or otherwise acquire directly or indirectly any of
Acquiror'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 Acquiror 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 7.04 or (z)
effected in the ordinary course consistent with past practice and only to the
extent consistent with Section 7.04;
(f) Acquiror will not, and will not permit any of its Subsidiaries to,
take any action that would make any representation or warranty of Acquiror
hereunder inaccurate in any material respect at, or as of any time prior to, the
Effective Time; and
(g) Acquiror will not, and will not permit any of its Subsidiaries to,
agree or commit to do any of the foregoing.
SECTION 6.02. Obligations of Merger Subsidiary. Acquiror 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 6.03. Director and Officer Liability. (a) For seven years after
the Effective Time, Acquiror 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
39
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. Acquiror 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. To the best knowledge of the Company, the Company has disclosed to
Acquiror all such indemnification agreements prior to the date hereof.
(b) For seven years after the Effective Time, Acquiror 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 (it being understood that
Acquiror may discharge its obligations pursuant to this paragraph by providing
an insurance policy underwritten by Ancon Insurance Company, Inc., a
wholly-owned Subsidiary of Acquiror); 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 Acquiror 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 Acquiror under this Section 6.03 shall not be
terminated or modified in such a manner as to adversely affect any Indemnitee to
whom this Section 6.03 applies without the consent of such affected Indemnitee
(it being expressly agreed that the Indemnitees to whom this Section 6.03
applies shall be third party beneficiaries of this Section 6.03).
SECTION 6.04. Acquiror Stockholder Meeting; Form S-4. Unless the Board
of Directors of the Company shall take any action permitted by the third
sentence of Section 5.02, Acquiror shall cause a meeting of its stockholders
(the "Acquiror Stockholder Meeting") to be duly called and held as soon as
reasonably practicable, on a date reasonably acceptable to the Company, for the
purpose of approving the matters constituting the Acquiror Stockholder Approval.
Except as provided in the next sentence, the Board of Directors of Acquiror
shall recommend approval of the matters constituting the Acquiror Stockholder
Approval. The Board of Directors of Acquiror shall be permitted to (i) not
recommend to Acquiror's shareholders that they give the Acquiror Stockholder
Approval or (ii) withdraw or modify in a manner adverse to the Company its
recommendation to the Acquiror's shareholders that they give the Acquiror
Stockholder Approval, only if the Board of Directors of Acquiror by a majority
vote determines in its good faith judgment that it is necessary to so withdraw
or
40
modify its recommendation to comply with its fiduciary duty to shareholders
under applicable law, after receiving the advice of outside legal counsel. In
connection with the Acquiror Stockholder Meeting, Acquiror (x) will promptly
prepare and file with the SEC, will use its reasonable best efforts to have
cleared by the SEC, and will thereafter mail to its stockholders as promptly as
practicable, the Acquiror Proxy Statement and all other proxy materials for such
meeting, (y) will use its reasonable best efforts, subject to the immediately
preceding sentence, to obtain the Acquiror Stockholder Approval, and (z) will
otherwise comply with all legal requirements applicable to the Acquiror
Stockholder Meeting. Subject to the terms and conditions of this Agreement and
unless the Board of Directors of the Company shall take any action permitted by
the third sentence of Section 5.02, Acquiror shall prepare and file with the SEC
under the 1933 Act the Form S-4, and shall use its reasonable best efforts to
cause the Form S-4 to be declared effective by the SEC as promptly as
practicable. Acquiror shall promptly take any action required to be taken under
foreign or state securities or Blue Sky laws in connection with the issuance of
Acquiror Common Stock in connection with the Merger. The parties acknowledge and
agree that Acquiror may include in such proxy statement to be mailed to its
stockholders a proposal to amend Acquiror's certificate of incorporation to
eliminate the Class B Preferred Stock.
SECTION 6.05. Stock Exchange Listing. Acquiror shall use its reasonable
best efforts to cause the shares of Acquiror Common Stock to be issued in
connection with the Merger to be listed on the NYSE, subject to official notice
of issuance.
SECTION 6.06. Employee Benefits. (a) From and after the Effective Time,
Acquiror shall cause the Surviving Corporation to honor in accordance with their
terms all benefits and obligations under the Executive Arrangements (as defined
in Section 6.06(f)) and, subject to Section 6.06(b), the other Company Employee
Plans, each as in effect on the date hereof (or as amended with the prior
written consent of Acquiror), 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. Acquiror 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 Employee Plans, pursuant to the terms of such
plans in effect on the date hereof. No provision of this Section 6.06(a) shall
be construed as a limitation on the right of Acquiror to amend or terminate any
Company Employee Plans which the Company would otherwise have under the terms of
such Company Employee Plan, and no provision of this Section 6.06(a) shall be
construed to create a right in any employee or beneficiary of such employee
under
41
a Company Employee Plan that such employee or beneficiary would not otherwise
have under the terms of such Company Employee Plan.
(b) Following the Effective Time, Acquiror shall continue to provide to
individuals who are employed by the Company and its Subsidiaries as of the
Effective Time who remain employed with Acquiror or any Subsidiary of Acquiror
("Affected Employees"), for so long as such Affected Employees remain employed
by Acquiror or any Subsidiary of Acquiror, employee benefits (other than salary
or incentive compensation) (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 Acquiror or any
Subsidiary of Acquiror providing coverage and benefits which, in the aggregate,
are no less favorable than those provided to employees of Acquiror in positions
comparable to positions held by Affected Employees with Acquiror or its
Subsidiaries from time to time after the Effective Time. Following the Effective
Time, Acquiror 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 Employee
Plans applicable to such Affected Retirees, each as in effect on the date
hereof, or (ii) pursuant to employee benefit plans, programs, policies or
arrangements maintained by Acquiror or any Subsidiary of Acquiror providing post
retirement coverage and benefits (other than pensions) which, in the aggregate,
are no less favorable than those provided to former employees of Acquiror.
(c) Acquiror will, or will cause the Surviving Corporation to, give
Affected Employees full credit for purposes of eligibility, vesting, 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) and determination of the level of benefits under
any employee benefit plans or arrangements maintained by Acquiror or any
Subsidiary of Acquiror 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) Acquiror 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
42
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.
(e) Acquiror (i) acknowledges that the Company's Board and the
Management Compensation and Organization Committee (the "MCOC") of the Company's
Board has determined that all officers and employees covered by the Company
Management Retention Plan have performed at a level satisfactory to the Company
over the period that the conditional retention awards granted thereunder have
been outstanding and, accordingly, that all such individuals would be entitled
to full payment under the Company Management Retention Plan were they to retire
or otherwise terminate their employment with the Company or any of its
Subsidiaries and (ii) agrees to give considerable weight to such determination
in administering the Company Management Retention Plan after the Effective Time,
given the significant length of time that has elapsed since the award grants.
(f) Acquiror agrees that the 1986, 1991 and 1995 Company Incentive
Compensation and Stock Ownership Plans, the Company Management Retention Plan,
the Supplemental Pension Annuity Program of Mobil Corporation, the Executive
Life Insurance Program of Mobil Corporation and the Company Employee Severance
Plan (collectively, the "Executive Arrangements"), as well as any award made
under any Executive Arrangement (including Company Stock Options and Company
Awards), shall be administered in accordance with the past practices and
interpretations of the Company's Board and the MCOC (including those past
practices and interpretations previously disclosed by the Company to Acquiror)
with respect to eligibility, vesting, term and payment, among other matters. Any
question regarding the past practices and interpretations of the Company's Board
and the MCOC and the application thereof to the type of facts and circumstances
in a given case shall be referred to Mr. Lucio A. Noto or his designee for a
final decision with respect thereto, which decision shall not be inconsistent
with the intention of this Agreement and the Merger.
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ARTICLE 7
COVENANTS OF ACQUIROR AND THE COMPANY
The parties hereto agree that:
SECTION 7.01. Best Efforts. (a) The Company and Acquiror shall each
cooperate with the other and use (and shall use best efforts to cause their
respective Subsidiaries to use) their respective best efforts to promptly (i)
take or cause to be taken all 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 as promptly as practicable 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 Acquiror 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 Acquiror 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) Notwithstanding anything else contained herein, the provisions of
this Section 7.01 shall not be construed to require either party to undertake
any efforts or to take any action if the result thereof would give Acquiror the
right to decline to consummate the transactions contemplated by this Agreement
pursuant to Section 8.02 by reason of giving rise to a Substantial Detriment.
SECTION 7.02. Certain Filings. The Company and Acquiror shall cooperate
with one another (a) in connection with the preparation of the Company Proxy
Statement, the Acquiror 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 Acquiror
44
Proxy Statement or the Form S-4 and seeking timely to obtain any such actions,
consents, approvals or waivers.
SECTION 7.03. Access to Information. From the date hereof until the
Effective Time, to the extent permitted by applicable law, the Company and
Acquiror will 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, 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 Acquiror, 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 Acquiror
or the Company pursuant to this Section shall be kept confidential in accordance
with, and shall otherwise be subject to the terms of, the Confidentiality
Agreement dated November 12, 1998 between Acquiror and the Company (the
"Confidentiality Agreement").
SECTION 7.04. Tax and Accounting Treatment. (a) Each of Acquiror and
the Company shall not take any action and shall 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.
(b) Acquiror shall use its reasonable best efforts to provide to Davis
Polk & Wardwell and Skadden, Arps, Slate, Meagher & Flom LLP a certificate
substantially in the form attached hereto as Exhibit C-1. The Company shall use
its reasonable best efforts to provide to Davis Polk & Wardwell and Skadden,
Arps, Slate, Meagher & Flom LLP a certificate substantially in the form attached
hereto as Exhibit C-2.
SECTION 7.05. Public Announcements. Acquiror 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 such press release or make any such public
statement without the prior consent of the other party, which consent shall not
be unreasonably withheld. Notwithstanding the foregoing, any such 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 such release or statement has used its
reasonable efforts to consult with the other party.
45
SECTION 7.06. 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 and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things 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 7.07. Notices of Certain Events. (a) Each of the Company and
Acquiror 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 Acquiror 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 7.08. Affiliates. (a) The Company shall use its reasonable best
efforts to deliver to Acquiror, within 15 days of the date hereof, a letter
agreement substantially in the form of Exhibit B-1 hereto executed by each
Person listed on Schedule 7.08(a).
(b) Acquiror shall use its reasonable best efforts to obtain, within
15 days of the date hereof, a letter agreement substantially in the form of
Exhibit B-2 hereto executed by each Person listed on Schedule 7.08(b).
(c) Prior to the Effective Time, the Company shall cause to be
delivered to Acquiror a letter identifying, to the best of the Company's
knowledge, all Persons who are, at the time of the Company Stockholder Meeting,
"affiliates" of the Company for purposes of Rule 145 under the 1933 Act. The
Company shall furnish such information and documents as Acquiror may reasonably
request for the purpose of reviewing such list. The Company shall use its
reasonable best efforts to cause each Person who is so identified as an
affiliate to deliver to
46
Acquiror on or prior to the Effective Time a letter agreement substantially in
the form of Exhibit B-3 to this Agreement.
SECTION 7.09. Payment of Dividends. From the date hereof until the
Effective Time, Acquiror and the Company will coordinate with each other
regarding the declaration of dividends in respect of the shares of Acquiror
Common Stock and the Shares and the record dates and payment dates relating
thereto, it being the intention of the parties that holders of Shares will not
receive two dividends, or fail to receive one dividend, for any single calendar
quarter with respect to their Shares and the shares of Acquiror Common Stock any
holder of Shares receives in exchange therefor in connection with the Merger.
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to the Obligations of Each Party. The
obligations of the Company, Acquiror 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 shall have been 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 shall prohibit or enjoin the consummation of the
Merger;
(e) the parties shall have received all required approvals and third
party consents listed on Schedule 8.01(e);
(f) the matters constituting the Acquiror Stockholder Approval shall
have been approved by the stockholders of Acquiror in accordance with applicable
law or regulation;
47
(g) the Form S-4 shall have been declared effective under the 1933 Act
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 SEC;
(h) the shares of Acquiror Common Stock to be issued in the Merger
shall have been approved for listing on the NYSE, subject to official notice of
issuance; and
(i) (i) Acquiror shall have received a letter from
PricewaterhouseCoopers LLP dated as of the Closing Date and addressed to
Acquiror (a copy of which shall have been furnished to the Company), stating
that based on the information furnished to PricewaterhouseCoopers LLP in the
related certificate of Acquiror's management and based on the letter from Ernst
& Young LLP referenced in clause (ii) below, PricewaterhouseCoopers LLP concurs
with Acquiror management's conclusion that, as of the Closing Date, no
conditions exist that would preclude Acquiror's accounting for the Merger as a
pooling of interests and such letter shall not have been withdrawn or modified
in any material respect and (ii) the Company shall have received a letter from
Ernst & Young LLP dated as of the Closing Date and addressed to the Company (a
copy of which shall have been furnished to Acquiror), in which Ernst & Young LLP
concurs with the Company management's conclusion that no conditions exist
relating to the Company that would preclude the Acquiror from accounting for the
Merger as a pooling of interests, and such letter shall not have been withdrawn
or modified in any material respect.
SECTION 8.02. Conditions to the Obligations of Acquiror and Merger
Subsidiary. The obligations of Acquiror 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 at or prior to the
Effective Time, (ii) except to the extent expressly permitted under this
Agreement, the representations and warranties of the Company contained in this
Agreement and in any certificate or other writing delivered by the Company
pursuant hereto (x) that are qualified by materiality or Material Adverse Effect
shall be true at and as of the Effective Time as if made at and as of such time,
and (y) that are not qualified by materiality or Material Adverse Effect shall
be true in all material respects at and as of the Effective Time as if made at
and as of such time and (iii) Acquiror shall have received a certificate signed
by a vice-president of the Company to the foregoing effect;
48
(b) 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, (i) seeking to restrain, prohibit or otherwise interfere with the
ownership or operation by Acquiror or any Subsidiary of Acquiror of all or any
portion of the business of the Company or any of its Subsidiaries or of Acquiror
or any of its Subsidiaries or to compel Acquiror or any Subsidiary of Acquiror
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 Acquiror or any of its
Subsidiaries, (ii) seeking to impose or confirm limitations on the ability of
Acquiror or any Subsidiary of Acquiror effectively to exercise full rights of
ownership of the Shares (or shares of stock of the Surviving Corporation)
including, without limitation, the right to vote any Shares (or shares of stock
of the Surviving Corporation) on any matters properly presented to stockholders
or (iii) seeking to require divestiture by Acquiror or any Subsidiary of
Acquiror of any Shares (or shares of stock of the Surviving Corporation) if any
such matter referred to in clause (i), (ii) or (iii) hereof could reasonably be
expected to result in a substantial detriment to the Acquiror and its
Subsidiaries (including the Company and its Subsidiaries), taken as a whole (any
such substantial detriment being referred to in this Agreement as a "Substantial
Detriment");
(c) 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, that is
reasonably likely, directly or indirectly, to result in a Substantial Detriment;
(d) (i) 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 be
reasonably likely, directly or indirectly, to result in a Substantial Detriment
and (ii) all such approvals and consents which have been obtained shall be on
terms that are not reasonably likely, directly or indirectly, to result in a
Substantial Detriment;
(e) Acquiror shall have received an opinion of Davis Polk & Wardwell in
form and substance reasonably satisfactory to Acquiror, on the basis of certain
facts, 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
49
purposes as a reorganization qualifying under the provisions of Section 368(a)
of the Code and that each of Acquiror, Merger Subsidiary and the Company will be
a party to the reorganization within the meaning of Section 368(b) of the Code.
In rendering such opinion, such counsel shall be entitled to rely upon certain
representations of officers of Acquiror and the Company reasonably requested by
counsel, including without limitation those contained in certificates
substantially in the form attached as Exhibits C-1 and C-2; and
(f) 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, has had or would reasonably be expected to have a Material
Adverse Effect on the Company.
SECTION 8.03. 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) Acquiror shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) except to the extent expressly permitted under this
Agreement, the representations and warranties of Acquiror contained in this
Agreement and in any certificate or other writing delivered by Acquiror pursuant
hereto (x) that are qualified by materiality or Material Adverse Effect shall be
true at and as of the Effective Time as if made at and as of such time, and (y)
that are not qualified by materiality or Material Adverse Effect shall be true
in all material respects at and as of the Effective Time as if made at and as of
such time and (iii) the Company shall have received a certificate signed by a
vice-president of Acquiror to the foregoing effect;
(b) the Company shall have received an opinion of Skadden, Arps,
Slate, Meagher & Flom LLP in form and substance reasonably satisfactory to the
Company, on the basis of certain facts, 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 and that each of Acquiror,
Merger Subsidiary and the Company will be a party to the reorganization within
the meaning of Section 368(b) of the Code. In rendering such opinion, such
counsel shall be entitled to rely upon certain representations of officers of
Acquiror and the Company reasonably requested by counsel, including without
limitation those contained in certificates substantially in the form attached as
Exhibits C-1 and C-2; and
50
(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, has had or would reasonably be expected to have a Material
Adverse Effect on Acquiror.
ARTICLE 9
TERMINATION
SECTION 9.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by the stockholders of the Company or any
approval of the matters constituting the Acquiror Stockholder Approval by the
stockholders of Acquiror):
(a) by mutual written consent of the Company and Acquiror;
(b) by either the Company or Acquiror,
(i) if the Merger has not been consummated by the first
anniversary of the date hereof (the "End Date"); provided that if
(x) the Effective Time has not occurred by such first anniversary
by reason of non-satisfaction of any of the conditions set forth
in Sections 8.01(b), 8.01(c), 8.01(e), 8.02(b), 8.02(c) or 8.02(d)
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 June 30,
2000; provided further that the right to terminate this Agreement
under this Section 9.01(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 Acquiror 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;
51
(c) by either the Company or Acquiror, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise prohibited
or if any judgment, injunction, order or decree enjoining Acquiror or the
Company from consummating the Merger is entered and such judgment, injunction,
order or decree shall become final and nonappealable;
(d) by Acquiror, if the Board of Directors of the Company shall have
failed to recommend or withdrawn or modified or changed in a manner adverse to
Acquiror its approval or recommendation of this Agreement or the Merger, or
shall have failed to call the Company Stockholder Meeting in accordance with
Section 5.02, or shall have recommended a Superior Proposal (or the Board of
Directors of the Company resolves to do any of the foregoing);
(e) by the Company, if (i) the Board of Directors of the Company
authorizes the Company, subject to complying with the terms of this Agreement,
to enter into a binding written agreement concerning a transaction that
constitutes a Superior Proposal and the Company notifies Acquiror in writing
that it intends to enter into such an agreement, attaching the most current
version of such agreement (or a description of all material terms and conditions
thereof) to such notice, (ii) Acquiror does not make, within three business days
of receipt of the Company's written notification of its intention to enter into
a binding agreement for a Superior Proposal, an offer that the Board of
Directors of the Company determines, in good faith after consultation with its
financial advisors, is at least as favorable to the shareholders of the Company
as the Superior Proposal, it being understood that the Company shall not enter
into any such binding agreement during such three day period and (iii) the
Company prior to such termination pursuant to this clause (e) pays to Acquiror
in immediately available funds the fees required to be paid pursuant to Section
10.04. The Company agrees to notify Acquiror promptly if its intention to enter
into a written agreement referred to in its notification shall change at any
time after giving such notification; or
(f) by the Company, if the Board of Directors of Acquiror shall have
failed to recommend or withdrawn or modified or changed in a manner adverse to
the Company its approval and recommendation of the matters constituting the
Acquiror Stockholder Approval, or shall have failed to call the Acquiror
Stockholder Meeting in accordance with Section 6.04 (or the Board of Directors
of Acquiror resolves to do any of the foregoing).
The party desiring to terminate this Agreement pursuant to clause (b),
(c), (d), (e), or (f) of this Section 9.01 shall give written notice of such
termination to the other party in accordance with Section 10.01, specifying the
provision hereof pursuant to which such termination is effected.
52
SECTION 9.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 9.01, 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 9.02, in Section 10.04, in the Option Agreement and in
the Confidentiality Agreement 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.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. 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 Acquiror or Merger Subsidiary, to:
Charles W. Matthews
Exxon Corporation
5959 Las Colinas Boulevard
Irving, Texas 75039-2298
Facsimile No.: (972) 444-1438
with a copy to:
George R. Bason, Jr.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Facsimile No.: (212) 450-4800
if to the Company, to:
Samuel H. Gillespie III
Mobil Corporation
3225 Gallows Road
Fairfax, Virginia 22307-0001
Facsimile No.: (703) 846-4674
with a copy to:
53
Roger S. Aaron
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile No.: (212) 735-2000
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 10.02. 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 10.03. 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, Acquiror 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 (i) the amount or kind of
consideration to be received in exchange for any shares of capital stock of the
Company, (ii) any term of the certificate of incorporation of the Surviving
Corporation or (iii) any of the terms or conditions of this Agreement if such
alteration or change would adversely affect the holders of any shares of capital
stock of the Company.
(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 10.04. Expenses. (a) Except as otherwise specified in this
Section 10.04 or the Option Agreement or agreed 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; provided that all liability for transfer taxes (other than
54
transfer taxes to be paid by Acquiror in connection with the issuance and
creation of Acquiror Common Stock and Acquiror Preferred Stock in the Merger, as
provided in Section 1.02(b)) incurred by the Company or the Company's
stockholders in connection with the transactions contemplated hereby shall be
paid by the Surviving Corporation out of its own funds and will not be paid,
directly or indirectly, by Acquiror.
(b) If:
(i) the Company shall terminate this Agreement pursuant to
Section 9.01(e);
(ii) Acquiror shall terminate this Agreement pursuant to
Section 9.01(d), unless at the time of such failure to recommend,
withdrawal or adverse modification or change, failure to call the
Company Stockholder Meeting or recommendation of a Superior
Proposal, any of the conditions set forth in Section 8.03(a) or
8.03(c) would not have been satisfied as of such date and would
not be reasonably capable of being satisfied; or
(iii) either the Company or Acquiror shall terminate this
Agreement pursuant to Section 9.01(b)(ii) in circumstances where
the Company Stockholder Approval has not been obtained and prior
to the Company Stockholder Meeting an Acquisition Proposal is made
by any Person and the Company enters into a definitive agreement
within twelve months after termination of this Agreement either
(1) in respect of any Acquisition Proposal with such Person or its
affiliate or (2) in respect of any Acquisition Proposal with any
other Person (other than Acquiror or any affiliate of Acquiror)
providing, in the case of this clause (2), greater value per Share
than the Exercise Price (as defined in the Option Agreement),
then in any case as described in clause (i), (ii) or (iii) (each such case of
termination being referred to as a "Trigger Event") the Company shall pay to
Acquiror (by wire transfer of immediately available funds not later than the
date of termination of this Agreement or, in the case of clause (iii), the date
of such definitive agreement) an amount equal to $1,500,000,000. Acceptance by
Acquiror of the payment referred to in the foregoing sentence shall constitute
conclusive evidence that this Agreement has been validly terminated and upon
acceptance of payment of such amount the Company shall be fully released and
discharged from any liability or obligation resulting from or under this
Agreement (but without limiting the Company's obligations under the Option
Agreement).
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(c) If the Company shall terminate this Agreement pursuant to Section
9.01(f) unless at the time of such failure to recommend, withdrawal or adverse
modification or change or failure to call the Acquiror Stockholder Meeting any
of the conditions set forth in Section 8.02(a) or 8.02(f) would not have been
satisfied as of such date and would not be reasonably capable of being
satisfied, then Acquiror shall pay to the Company (by wire transfer of
immediately available funds not later than the date of termination of this
Agreement) an amount equal to $1,500,000,000. Acceptance by the Company of the
payment referred to in the foregoing sentence shall constitute conclusive
evidence that this Agreement has been validly terminated and upon acceptance of
payment of such amount the Acquiror shall be fully released and discharged from
any liability or obligation resulting from or under this Agreement.
SECTION 10.05. 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 10.06. Governing Law. 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 10.07. Jurisdiction. 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 or the transactions contemplated hereby 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 10.01 shall be deemed
effective service of process on such party.
SECTION 10.08. Waiver of Jury Trial. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
56
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 10.09. Counterparts; Effectiveness. 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 effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
SECTION 10.10. Entire Agreement. This Agreement (including the Exhibits
and Schedules hereto), the Option Agreement 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 6.03(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 10.11. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
SECTION 10.12. Severability. 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.
57
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.
MOBIL CORPORATION
By: /s/ Lucio A. Noto
-------------------------------
Name: Lucio A. Noto
Title: Chairman and Chief
Executive Officer
EXXON CORPORATION
By: /s/ Lee R. Raymond
-------------------------------
Name: Lee R. Raymond
Title: Chairman of the Board
LION ACQUISITION SUBSIDIARY
CORPORATION
By: /s/ T. Peter Townsend
--------------------------------
Name: T. Peter Townsend
Title: President
58
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of December 1, 1998 (the "Agreement")
between Exxon Corporation, a New Jersey corporation ("Exxon"), and Mobil
Corporation, a Delaware corporation ("Mobil").
W I T N E S S E T H :
WHEREAS, Exxon and Mobil are simultaneously with the execution and
delivery of this Agreement entering into an Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which, among other things, Merger Subsidiary
will merge with and into Mobil on the terms and subject to the conditions stated
therein; and
WHEREAS, in order to induce Exxon to enter into the Merger Agreement,
Mobil has granted to Exxon the Stock Option (as hereinafter defined), on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and in the Merger Agreement, and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions. Capitalized terms used and not defined herein
have the respective meanings ascribed to them in the Merger Agreement.
SECTION 2. Grant of Stock Option. Mobil hereby grants to Exxon an
irrevocable option (the "Stock Option") to purchase, on the terms and subject to
the conditions hereof, for $95.96 per share (the "Exercise Price") in cash up to
136,500,000 fully paid and non-assessable shares (the "Option Shares") of
Mobil's common stock, $1.00 par value per share (the "Common Stock"). The
Exercise Price and number of Option Shares shall be subject to adjustment as
provided in Section 6 below. Notwithstanding the foregoing, if at any time that
this Stock Option is exercisable pursuant to the terms and conditions of this
Agreement an Acquisition Proposal has theretofore been made for a per Share
value (such value to be determined as of the close of the market on the trading
day immediately prior to the date of the Stock Exercise Notice or Cash Exercise
Notice, as applicable) below the Exercise Price, then Exxon's Exercise Price as
to 1,000 Option Shares (as such 1,000 shares may be adjusted pursuant to Section
6) will be adjusted to be 90% of such per Share value (it being understood that
such adjusted Exercise Price will not apply as to any other Option Shares).
SECTION 3. Exercise of Stock Option. (a) Exxon may, subject to the
provisions of this Section, exercise the Stock Option, in whole or in part, at
any time or from time to time, after the occurrence of a Trigger Event and prior
to the Termination Date. "Termination Date" shall mean the earliest of (i) the
Effective Time of the Merger, (ii) 90 days after the date full payment is made
by Mobil to Exxon under Section 10.04(b) of the Merger Agreement or (iii) one
day after the date of the termination of the Merger Agreement so long as, in the
case of this clause (iii), no Trigger Event has occurred or could still occur
under Section 10.04(b) of the Merger Agreement. Subject to the proviso in the
last sentence of Section 3(c), notwithstanding the occurrence of the Termination
Date, Exxon shall be entitled to purchase Option Shares pursuant to any exercise
of the Stock Option, on the terms and subject to the conditions hereof, to the
extent Exxon exercised the Stock Option prior to the occurrence of the
Termination Date.
(b) Exxon may purchase Option Shares pursuant to the Stock Option only
if all of the following conditions are satisfied: (i) no preliminary or
permanent injunction or other order issued by any federal or state court of
competent jurisdiction in the United States shall be in effect prohibiting
delivery of the Option Shares, (ii) any applicable waiting period under the HSR
Act shall have expired or been terminated, and (iii) any prior notification to
or approval of any other regulatory authority in the U.S. or elsewhere required
in connection with such purchase shall have been made or obtained other than
those which if not made or obtained would not reasonably be expected to result
in a significant detriment to Mobil and its Subsidiaries, taken as a whole.
(c) If Exxon shall be entitled to and wishes to exercise the Stock
Option, it shall do so by giving Mobil written notice (the "Stock Exercise
Notice") to such effect, specifying the number of Option Shares to be purchased
and a place and closing date not earlier than three business days nor later than
10 business days from the date of such Stock Exercise Notice. If the closing
cannot be consummated on such date because any condition to the purchase of
Option Shares has not been satisfied or as a result of any restriction arising
under any applicable law or regulation, the closing shall occur five days (or
such earlier time as Exxon may specify) after satisfaction of all such
conditions and the cessation of all such restrictions; provided that in no event
shall the closing of the purchase be postponed by more than nine months after
the Termination Date as a result of this clause (c).
(d) So long as the Stock Option is exercisable pursuant to the terms of
Section 3(a) hereof, Exxon may elect, in lieu of exercising the Stock Option as
provided in Section 3(c) hereof, to send a written notice to Mobil (the "Cash
Exercise Notice") specifying a date not later than 20 business days and not
earlier than 10 business days following the date such notice is given on which
date Mobil shall pay to Exxon in exchange for the cancellation of the relevant
portion of the Stock Option an amount in cash equal to the Spread (as
hereinafter defined) multiplied by all or such portion of the Option Shares
subject to the Stock Option as Exxon shall specify. As used herein "Spread"
shall mean the excess, if any, over the Exercise Price of the higher of (x) if
applicable, the highest price per share of Common Stock paid or proposed to be
paid by any Person pursuant to any Acquisition Proposal (the "Alternative
Exercise Price") or (y) the average of the closing price of the shares of Common
Stock on the NYSE at the end of the regular session, as reported on the
Consolidated Tape, Network A (the "Closing Price") for the five consecutive
trading days ending on and including the trading date immediately preceding the
date of the Cash Exercise Notice. If the Alternative Exercise Price includes any
property other than cash, the Alternative Exercise Price shall be the sum of (i)
the fixed cash amount, if any, included in the Alternative Exercise Price plus
(ii) the fair market value of such other property. If such other property
consists of securities with an existing public trading market, the average of
the closing prices (or the average of the closing bid and asked prices if
closing prices are unavailable) for such securities in their principal public
trading market on the five trading days ending five days prior to the date of
the Cash Exercise Notice shall be deemed to equal the fair market value of such
property. If such other property consists of something other than cash or
securities with an existing public trading market and, as of the payment date
for the Spread, agreement on the value of such other property has not been
reached, the Alternative Exercise Price shall be deemed to equal such Closing
Price. Upon exercise of its right pursuant to this Section 3(d) and the receipt
by Exxon of the applicable cash amount with respect to the Option Shares or the
applicable portion thereof, the obligations of Mobil to deliver Option Shares
pursuant to Section 3(e) shall be terminated with respect to the number of
Option Shares for which Exxon shall have elected to be paid the Spread. The
Spread shall be appropriately adjusted, if applicable, to give effect to Section
6.
(e) (i) At any closing pursuant to Section 3(c) hereof, Exxon shall
make payment to Mobil of the aggregate purchase price for the Option Shares to
be purchased and Mobil shall deliver to Exxon a certificate representing the
purchased Option Shares, registered in the name of Exxon or its designee and
(ii) at any closing pursuant to Section 3(d) hereof, Mobil will deliver to Exxon
cash in an amount determined pursuant to Section 3(d) hereof. Any payment made
by Exxon to Mobil, or by Mobil to Exxon, pursuant to this Agreement shall be
made by certified or official bank check or by wire transfer of federal funds to
a bank designated by the party receiving such funds.
(f) Certificates for Common Stock delivered at the closing described
in Section 3(c) hereof shall be endorsed with a restrictive legend that shall
read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to resale restrictions arising under the Securities Act of 1933, as
amended."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such reference (i) if Exxon shall
have delivered to Mobil a copy of a no-action letter from the staff of the
Securities and Exchange Commission, or a written opinion of counsel, in form and
substance reasonably satisfactory to Mobil, to the effect that such legend is
not required for purposes of, or resale may be effected pursuant to an exemption
from registration under, the 1933 Act or (ii) in connection with any sale
registered under the 1933 Act. In addition, such certificates shall bear any
other legend as may be required by applicable law.
SECTION 4. Representations and Warranties of Mobil. Mobil hereby
represents and warrants to Exxon as follows:
(a) Mobil is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware. The execution, delivery
and performance by Mobil of this Agreement and the consummation of the
transactions contemplated hereby (i) are within Mobil's corporate powers, (ii)
have been duly authorized by all necessary corporate action, (iii) require no
action by or in respect of, or filing with, any governmental body, agency or
official, except for any filings required to be made under the HSR Act, the EC
Merger Regulation, the Canadian Act and the Exchange Act, (iv) do not
contravene, or constitute a violation of, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of Mobil or of any
judgment, injunction, order or decree binding upon Mobil or any of its
Subsidiaries, (v) do not and will not constitute a default under or give rise to
a right of termination, cancellation or acceleration of any right or obligation
of Mobil or any of its Subsidiaries or to a loss of any benefit to which Mobil
or any of its Subsidiaries is entitled under any provision of any agreement,
contract or other instrument binding upon Mobil or any of its Subsidiaries or
any license, franchise, permit or other similar authorization held by Mobil or
any of its Subsidiaries, and (vi) do not and will not result in the creation or
imposition of any Lien on any asset of Mobil or any of its Subsidiaries, except
for such contraventions, conflicts or violations referred to in clause (iv) or
defaults, rights of termination, cancellation or acceleration, or losses or
Liens referred to in clauses (v) and (vi) that would not, individually or in the
aggregate, have a Material Adverse Effect on Mobil. This Agreement has been
duly executed and delivered by Mobil and constitutes a valid and binding
agreement of Mobil.
(b) Mobil has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof until
such time as the obligation to deliver Option Shares upon the exercise of the
Stock Option terminates, will have reserved for issuance upon any exercise of
the Stock Option, the number of Option Shares subject to the Stock Option (less
the number of Option Shares previously issued upon any partial exercise of the
Stock Option). All of the Option Shares to be issued pursuant to the Stock
Option have been duly authorized and, upon issuance and delivery thereof
pursuant to this Agreement, will be duly authorized, validly issued, fully paid
and nonassessable, and shall be delivered free and clear of all claims, liens,
charges, encumbrances and security interests (other than those created by this
Agreement). Option Shares issued upon exercise of the Stock Option will not be
subject to any preemptive or similar rights. The Board of Directors of Mobil has
resolved to, and Mobil promptly after the execution hereof will, take all
necessary action to render the Company Rights Agreement inapplicable to the
grant or exercise of the Stock Option and the transactions contemplated hereby.
(c) The Board of Directors of Mobil has taken the necessary action to
make inapplicable the application of Section 203 of the Delaware Law, or any
other applicable antitakeover statute or similar statute or regulation and the
supermajority voting provisions of Article 6 of Mobil's certificate of
incorporation to the acquisition of the Option Shares pursuant to this
Agreement.
SECTION 5. Representations and Warranties of Exxon. Exxon hereby
represents and warrants to Mobil as follows: Exxon is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New Jersey. The execution, delivery and performance by Exxon of this
Agreement and the consummation of the transactions contemplated hereby (i) are
within Exxon's corporate powers and (ii) have been duly authorized by all
necessary corporate action. The Option Shares acquired by Exxon upon the
exercise of the Stock Options will not be, and the Stock Option is not being,
acquired by Exxon with the intention of making a public distribution thereof.
Neither the Stock Option nor the Option Shares acquired upon exercise of the
Stock Option will be sold or otherwise disposed of by Exxon except in compliance
with the 1933 Act. This agreement has been duly executed and delivered by Exxon
and constitutes a valid and binding agreement of Exxon.
SECTION 6. Adjustment upon Changes in Capitalization or Merger. (a) In
the event of any change in the outstanding shares of Common Stock by reason of a
stock dividend, stock split, split-up, merger, consolidation, recapitalization,
combination, conversion, exchange of shares, extraordinary or liquidating
dividend or similar transaction which would have the effect of diluting Exxon's
rights hereunder, the type and number of shares or securities purchasable upon
the exercise of the Stock Option and the Exercise Price shall be adjusted
appropriately, and proper provision will be made in the agreements governing
such transaction, so that Exxon will receive upon exercise of the Stock Option
the number and class of shares or other securities or property that Exxon would
have received in respect of the Option Shares had the Stock Option been
exercised immediately prior to such event or the record date therefor, as
applicable. In no event shall the number of shares of Common Stock subject to
the Stock Option exceed 14.9% of the number of shares of Common Stock issued and
outstanding at the time of exercise (treating as outstanding for this purpose
the shares subject to the Stock Option).
(b) Without limiting the foregoing, whenever the number of Option
Shares purchasable upon exercise of the Stock Option is adjusted as provided in
this Section 6, the Exercise Price shall be adjusted by multiplying the Exercise
Price by a fraction, the numerator of which is equal to the number of Option
Shares purchasable prior to the adjustment and the denominator of which is equal
to the number of Option Shares purchasable after the adjustment.
(c) Without limiting the parties' relative rights and obligations
under the Merger Agreement, in the event that Mobil enters into an agreement (i)
to consolidate with or merge into any person, other than Exxon or one of its
subsidiaries, and Mobil will not be the continuing or surviving corporation in
such consolidation or merger, (ii) to permit any person, other than Exxon or one
of its subsidiaries, to merge into Mobil and Mobil will be the continuing or
surviving corporation, but in connection with such merger, the shares of Common
Stock outstanding immediately prior to the consummation of such merger will be
changed into or exchanged for stock or other securities of Mobil or any other
person or cash or any other property, or the shares of Common Stock outstanding
immediately prior to the consummation of such merger will, after such merger,
represent less than 50% of the outstanding voting securities of the merged
company, or (iii) to sell or otherwise transfer all or substantially all of its
assets to any person, other than Exxon or one of its subsidiaries, then, and in
each such case, the agreement governing such transaction will make proper
provision so that the Stock Option will, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option with identical terms appropriately adjusted to
acquire the number and class of shares or other securities or property that
Exxon would have received in respect of Option Shares had the Stock Option been
exercised immediately prior to such consolidation, merger, sale or transfer or
the record date therefor, as applicable, and will make any other necessary
adjustments. Mobil shall take such steps in connection with such consolidation,
merger, liquidation or other such transaction as may be reasonably necessary to
assure that the provisions hereof shall thereafter apply as nearly as possible
to any securities or property thereafter deliverable upon exercise of the Stock
Option.
SECTION 7. Further Assurances; Remedies. (a) Mobil agrees to maintain,
free from preemptive rights, sufficient authorized but unissued or treasury
shares of Common Stock so that the Stock Option may be fully exercised without
additional authorization of Common Stock after giving effect to all other
options, warrants, convertible securities and other rights of third parties to
purchase shares of Common Stock from Mobil, and to issue the appropriate number
of shares of Common Stock pursuant to the terms of this Agreement.
(b) Mobil agrees not to avoid or seek to avoid (whether by charter
amendment or through reorganization, consolidation, merger, issuance of rights,
dissolution or sale of assets, or by any other voluntary act) the observance or
performance of any of the covenants, agreements or conditions to be observed or
performed hereunder by Mobil.
(c) Mobil agrees that promptly after the date hereof it shall take all
actions as may from time to time be required (including (i) complying with all
applicable premerger notification, reporting and waiting period requirements
under the HSR Act and (ii) in the event that prior notification to or approval
of any other regulatory authority in the U.S. or elsewhere is necessary before
the Stock Option may be exercised, cooperating with Exxon in preparing and
processing the required notices or applications) in order to permit Exxon to
exercise the Stock Option and purchase Option Shares pursuant to such exercise
and to take all reasonable action necessary to protect the rights of Exxon
against dilution.
(d) The parties agree that Exxon would be irreparably damaged if for
any reason Mobil failed to issue any of the Option Shares (or other securities
or property deliverable pursuant to Section 6 hereof) upon exercise of the Stock
Option or to perform any of its other obligations under this Agreement, and that
Exxon would not have an adequate remedy at law for money damages in such event.
Accordingly, Exxon shall be entitled to specific performance and injunctive and
other equitable relief to enforce the performance of this Agreement by Mobil.
Accordingly, if Exxon should institute an action or proceeding seeking specific
enforcement of the provisions hereof, Mobil hereby waives the claim or defense
that Exxon has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or defense that such a remedy at law exists.
Mobil further agrees to waive any requirements for the securing or posting of
any bond in connection with obtaining any such equitable relief. This provision
is without prejudice to any other rights that Exxon may have against Mobil for
any failure to perform its obligations under this Agreement.
SECTION 8. Listing of Option Shares. Promptly after the date hereof,
and from time to time thereafter if necessary, Mobil will apply to list all of
the Option Shares subject to the Stock Option on the New York Stock Exchange and
will use its reasonable best efforts to obtain approval of such listing as soon
as practicable.
SECTION 9. Registration of the Option Shares. (a) If Exxon requests
Mobil in writing, within two years of the exercise of the Stock Option, to
register under the 1933 Act any of the Option Shares purchased by Exxon
hereunder, Mobil will use its reasonable best efforts to cause the offering of
the Option Shares so specified in such request to be registered as soon as
practicable so as to permit the sale or other distribution by Exxon of the
Option Shares specified in its request (and to keep such registration in effect
for a period of at least 90 days), and in connection therewith Mobil will
prepare and file as promptly as reasonably possible (but in no event later than
60 days from receipt of Exxon's request) a registration statement under the 1933
Act to effect such registration on an appropriate form, which would permit the
sale of the Option Shares by Exxon in accordance with the plan of disposition
specified by Exxon in its request. Mobil shall not be obligated to make
effective more than two registration statements pursuant to the foregoing
sentence; provided, however, that Mobil may postpone the filing of a
registration statement relating to a registration request by Exxon under this
Section 9 for a period of time (not in excess of 90 days) if in Mobil's
reasonable, good faith judgment such filing would require the disclosure of
material information that Mobil has a bonafide business purpose for preserving
as confidential (but in no event shall Mobil exercise such postponement right
more than once in any twelve-month period).
(b) Mobil shall notify Exxon in writing not less than 10 days prior to
filing a registration statement under the 1933 Act (other than a filing on Form
S-4 or S-8 or any successor form) with respect to any Common Stock. If Exxon
wishes to have any portion of its Option Shares included in such registration
statement, it shall advise Mobil in writing to that effect within two business
days following receipt of such notice, and Mobil will thereupon include the
number of Option Shares indicated by Exxon under such Registration Statement;
provided that if the managing underwriter(s) of the offering pursuant to such
registration statement advise Mobil that in their opinion the number of shares
of Common Stock requested to be included in such registration exceeds the number
which can be sold in such offering, Mobil shall only include in such
registration such number or dollar amount of Option Shares which, in the good
faith opinion of the managing underwriter(s), can be sold without materially and
adversely affecting such offering.
(c) All expenses relating to or in connection with any registration
contemplated under this Section 9 and the transactions contemplated thereby
(including all filing, printing, reasonable professional and other fees and
expenses relating thereto) will be at Mobil's expense except for underwriting
discounts or commissions and brokers' fees. Mobil and Exxon agree to enter into
a customary underwriting agreement with underwriters upon such terms and
conditions as are customarily contained in underwriting agreements with respect
to secondary distributions. Mobil shall indemnify Exxon, its officers,
directors, agents, other controlling persons and any underwriters retained by
Exxon in connection with such sale of such Option Shares in the customary way,
and shall agree to customary contribution provisions with such persons, with
respect to claims, damages, losses and liabilities (and any expenses relating
thereto) arising (or to which Exxon, its officers, directors, agents, other
controlling persons or underwriters may be subject) in connection with any such
offer or sale under the federal securities laws or otherwise, except for
information furnished in writing by Exxon or its underwriters to Mobil. Exxon
and its underwriters, respectively, shall indemnify Mobil to the same extent
with respect to information furnished in writing to Mobil by Exxon and such
underwriters, respectively.
SECTION 10. Miscellaneous. (a) Extension of Exercise Periods. The
periods for exercise of certain rights under Sections 2 and 3 hereof shall be
extended in each such case at the request of Exxon to the extent necessary to
avoid liability by Exxon under Section 16(b) of the Exchange Act by reason of
such exercise.
(b) Amendments; Entire Agreement. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto. This Agreement, together with
the Merger Agreement (including any exhibits and schedules thereto), contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions.
(c) Notices. All notices, requests and other communications to either
party hereunder shall be in writing (including facsimile or similar writing) and
shall be given,
if to Exxon, to:
Charles W. Matthews
Exxon Corporation
5959 Las Colinas Boulevard
Irving, Texas 75039-2298
Facsimile No.: (972) 444-1438
with a copy to:
George R. Bason, Jr.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Facsimile No.: (212) 450-4800
if to Mobil, to:
Samuel H. Gillespie III
Mobil Corporation
3225 Gallows Road
Fairfax, Virginia 22037-0001
Facsimile No.: (703) 846-4674
with a copy to:
Roger S. Aaron
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile No.: (212) 735-2000
or to such other address or facsimile number as either party may hereafter
specify for the purpose by notice to the other party hereto. Each such notice,
request or other communication shall be effective (i) 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 (ii) if given
by any other means, when delivered at the address specified in this Section.
(d) Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided herein
and without limiting anything contained in the Merger Agreement.
(e) Severability. If any term, provision, covenant or restriction of
this Agreement is held 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.
(f) Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
regard to principles of conflicts of law. 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 or the transactions contemplated hereby 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(c) hereof shall be
deemed effective service of process on such party.
(g) Waiver of Jury Trial. 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.
(h) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(i) Headings. The section headings herein are for convenience only and
shall not affect the construction hereof.
(j) Assignment. This Agreement shall be binding upon each party hereto
and such party's successors and assigns. This Agreement shall not be assignable
by Mobil, but may be assigned by Exxon in whole or in part to any direct or
indirect wholly-owned subsidiary of Exxon, provided that Exxon shall remain
liable for any obligations so assigned.
(k) Survival. All representations, warranties and covenants contained
herein shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(l) Time of the Essence. The parties agree that time shall be of the
essence in the performance of obligations hereunder.
(m) Public Announcement. Exxon and Mobil 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
such press release or make any such public statement without the prior consent
of the other party, which shall not be unreasonably withheld. Notwithstanding
the foregoing, any such 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 such release or
statement has used its reasonable efforts to consult with the other party.
SECTION 11. Profit Limitation. (a) Notwithstanding any other provision
of this Agreement or the Merger Agreement, in no event shall Exxon's Total
Profit (as defined below) exceed $2,000,000,000 (the "Maximum Amount") and, if
it otherwise would exceed such Maximum Amount, Exxon at its sole election may
(i) pay cash to Mobil, (ii) deliver to Mobil for cancellation Option Shares
previously purchased by Exxon, or (iii) any combination thereof, so that Exxon's
actually realized Total Profit (as defined below) shall not exceed the Maximum
Amount after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Stock
Option may not be exercised for a number of Option Shares as would, as of the
date of the Stock Exercise Notice, result in a Notional Total Profit (as defined
below) of more than the Maximum Amount and, if exercise of the Stock Option
otherwise would result in the Notional Total Profit exceeding such amount,
Exxon, at its discretion, may (in addition to any of the actions specified in
Section 11(a) above) increase the Exercise Price for that number of Option
Shares set forth in the Stock Exercise Notice so that the Notional Total Profit
shall not exceed the Maximum Amount; provided, that nothing in this sentence
shall restrict any exercise of the Stock Option permitted hereby on any
subsequent date at the Exercise Price set forth in Section 2 hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the cash amount actually received by
Exxon pursuant to Section 10.04(b) of the Merger Agreement less any repayment by
Exxon to Mobil pursuant to Section 11(a)(i) hereof, (ii) (x) the net cash
amounts or the fair market value of any property received by Exxon pursuant to
the sale of Option Shares (or of any other securities into or for which such
Option Shares are converted or exchanged), less (y) Exxon's purchase price for
such Option Shares (or other securities) plus (iii) the aggregate amounts
received by Exxon pursuant to Section 3(d).
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Option Shares as to which Exxon may propose to exercise the Stock
Option shall be the Total Profit determined as of the date of the Stock Exercise
Notice assuming that the Stock Option was exercised on such date for such number
of Option Shares and assuming that such Option Shares, together with all other
Option Shares previously acquired upon exercise of the Stock Option and held by
Exxon and its affiliates as of such date, were sold for cash at the Closing
Price on the preceding trading day (less customary brokerage commissions).
IN WITNESS WHEREOF, Mobil and Exxon have caused this Agreement to be
duly executed as of the day and year first above written.
MOBIL CORPORATION
By: /s/ Lucio A. Noto
--------------------------------
Name: Lucio A. Noto
Title: Chairman and Chief
Executive Officer
EXXON CORPORATION
By: /s/ Lee R. Raymond
--------------------------------
Name: Lee R. Raymond
Title: Chairman of the Board
FOR IMMEDIATE RELEASE
FRIDAY, NOVEMBER 27, 1998
EXXON AND MOBIL JOINT STATEMENT
IRVING, TX and FAIRFAX, VA, November 27 -- Exxon and Mobil confirm that
they are in discussions concerning a possible combination transaction. No
definitive agreement has been reached. We cannot give any assurance that an
agreement will be reached. Beyond this statement, we have no further comment.
# # #
For further information, contact:
Exxon Media Relations Mobil Media Relations
Phone: 972-444-1107 Phone: 703-846-2500
FOR IMMEDIATE RELEASE
TUESDAY, DECEMBER 1, 1998
EXXON AND MOBIL SIGN MERGER AGREEMENT
NEW YORK, December 1 -- Exxon and Mobil announced today that they have
signed a definitive agreement to merge the two companies.
Under the terms of the agreement, each share of Mobil will be converted
into 1.32015 shares of Exxon. As a result of the merger, Mobil shareholders will
own about 30 percent of the company, while Exxon shareholders will own about 70
percent.
Upon completion of the merger, the company's name will be Exxon Mobil
Corporation, with headquarters in Irving, Texas.
L.R. Raymond will be the Chairman, Chief Executive Officer and
President of Exxon Mobil Corporation. L.A. Noto will join the Exxon Mobil
Board of Directors as Vice Chairman.
E.A. Renna will join the Board as a Senior Vice President and Director.
Four additional members of Mobil's Board will be invited to join the Exxon Mobil
Board as non-employee Directors, bringing Board membership for the company to a
total of 19 Directors.
The company will be organized on a functional basis. The Upstream will
report to H.J. Longwell, the Downstream to Mr. Renna and the Chemical business
to R. Dahan. Worldwide downstream headquarters for the company will be
located in Fairfax, Virginia. Worldwide upstream and chemical headquarters will
be in Houston, Texas. Exxon Mobil will continue to use both the Exxon brand
and the Mobil brand.
"This merger brings together two outstanding organizations that share
common values, have compatible strategies and demonstrated track records of
achievement," said Mr. Raymond and Mr. Noto in a joint statement. "The merger
will significantly enhance shareholder value by enabling us to manage the
combined assets of Exxon and Mobil to produce a higher return on capital
employed than either company could achieve on a stand-alone basis.
"The merging of these two companies will deliver significant near-term
pre-tax synergies of about $2.8 billion," they said. "This merger will enhance
our
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ability to be an effective global competitor in a volatile world economy and in
an industry that is more and more competitive. It allows us to manage our
expanded, combined asset base to deliver increasing returns and growth to our
shareholders while reducing our operating costs. It also allows us to continue
delivering quality products to our customers at competitive prices into the
future. We are confident that with the exceptional quality of Exxon's and
Mobil's employees, we will succeed in meeting these objectives."
They noted that combining Exxon and Mobil will create a major global
company, headquartered in the U.S., with the technology, the resources and the
people to compete effectively with other companies of a similar or larger scale
in the world oil industry of the 21st Century. "The relative strengths of our
two companies are highly complementary," they said. "When combined, Exxon Mobil
will provide better opportunities for both our shareholders and employees than
those they would experience without this merger. By combining our operations, we
also will be better able to meet the needs of our customers for quality products
in the next century. It's a good match."
"While we expect to benefit from a reduction of costs in the
short-term, our real objective is to maximize growth and return on investment by
successfully managing the existing assets of Exxon and Mobil and by selecting
the best projects from the large portfolio of investment options that will be
created by this merger," they said. "Combining the proprietary technologies and
management expertise of the two companies also will reinforce the selection of
Exxon Mobil as the partner of choice, creating additional resource opportunities
in the future."
In discussing the strategic fit of Exxon and Mobil, Mr. Raymond said
the two companies line up well with each other in almost every facet of the
business. "In the exploration and production area, for example, Mobil's and
Exxon's respective strengths in West Africa, the Caspian region, Russia, South
America, and North America line up well, with minimal overlap. Our respective
deepwater assets and deepwater technology also complement each other well."
Exxon Mobil will have combined natural gas sales of about 14 billion
cubic feet per day, giving the company a solid position in this increasingly
important worldwide fuel resource. Mobil also brings major LNG assets and
experience to the combined company that complement Exxon's assets and technology
with little overlap.
Mr. Noto said that in refining and marketing, Exxon and Mobil each have
significant global brand recognition, expertise and technology. "In the
lubricant area, for example, Exxon is an important producer of lube base stocks,
which fits well with Mobil's leadership in lubes marketing."
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In the U.S., Exxon Mobil will approach the size and scale nationally
and regionally of the new downstream joint venture companies announced by other
major competitors. Outside the U.S., Exxon Mobil will be competitively well
positioned in key Asian markets and will have complementary positions in South
America. The merger also builds on Mobil's significant position in Africa.
"Chemicals are another area where there is a good strategic fit," said
Mr. Raymond. "Exxon's chemical product line aligns well with Mobil's chemical
products. The two companies also share a common focus on efficiency and site
integration. Exxon Mobil should realize immediate benefits through sharing the
proprietary technology and best practices of each company.
Exxon and Mobil also bring important, state-of-the-art proprietary
technologies to the venture that will greatly benefit the merged company. In
exploration and production, this includes leading-edge geoscience technology to
find and develop oil and gas reserves, arctic technology, and heavy oil
technology. In refining, marketing and chemicals, this includes catalyst,
synthetic lubricant and chemical manufacturing technology.
The merger is subject to shareholder and regulatory approval, as well
as other customary conditions. It is intended that the merger will qualify as a
tax-free reorganization in the United States and that it will be accounted for
on a "pooling of interests" basis. In addition, the merger agreement provides
for payment of termination fees of $1.5 billion under certain circumstances. The
parties also have entered in an option agreement that grants Exxon the option
under specified circumstances to purchase up to 14.9 percent of the authorized
but unissued common stock of Mobil.
Exxon and Mobil expect to provide details of the proposed merger to
their shareholders prior to their annual meetings in April and May,
respectively.
Exxon's program of repurchasing its share to reduce the number of
shares outstanding will be discontinued; however, Exxon will continue to
repurchase its shares to offset dilution from employee incentive programs.
Exxon was advised on the merger by J.P. Morgan. Mobil was advised by
Goldman Sachs.
# # #
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FOR FURTHER INFORMATION, CONTACT:
Exxon Media Relations Mobil Media Relations
Phone: 972-444-1107 Phone: 703-846-2500
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