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As filed with the Securities and Exchange Commission on
June 24, 2005
Registration No. 333-125283
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
CHEVRON CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware |
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2911 |
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94-0890210 |
(State or other jurisdiction
of incorporation or organization) |
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(Primary Standard Industrial
Classification Code Number) |
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(I.R.S. Employer
Identification Number) |
6001 Bollinger Canyon Road
San Ramon, CA 94583
(925) 842-1000
(Address, Including Zip Code, and Telephone Number, including
Area Code, of Registrants Principal Executive Offices)
Charles A. James, Esq.
Vice President and General Counsel
Chevron Corporation
6001 Bollinger Canyon Road
San Ramon, CA 94583
(925) 842-1000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copies to:
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Terry M. Kee, Esq.
David R. Lamarre, Esq.
Pillsbury Winthrop Shaw Pittman LLP
50 Fremont Street
San Francisco, CA 94105
(415) 983-1000 |
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Samuel H. Gillespie III, Esq.
Senior Vice President, Chief Legal
Officer and General Counsel
Unocal Corporation
2141 Rosecrans Avenue, Suite 4000
El Segundo, CA 90245
(310) 726-7600 |
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Daniel A. Neff, Esq.
David C. Karp, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
(212) 403-1000 |
Approximate Date of Commencement of Proposed Sale to the
Public: As soon as practicable after the effectiveness of
this registration statement and the effective time of the merger
of Unocal Corporation (Unocal) with and into a
wholly owned subsidiary of the registrant as described in the
Agreement and Plan of Merger dated as of April 4, 2005 (the
Merger Agreement).
If the securities being registered on this form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following
box. o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
CALCULATION OF REGISTRATION FEE
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Proposed Maximum |
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Title of Each Class of Securities |
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Amount to be |
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Offering Price |
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Aggregate |
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Amount of |
to be Registered(1) |
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Registered(2) |
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per Share |
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Offering Price(3) |
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Registration Fee |
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Common stock, par value $0.75 per share
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216,805,247 |
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n/a |
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$10,741,669,317 |
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$1,264,294(4) |
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(1) |
This registration statement relates to shares of common stock,
par value $0.75 per share, of Chevron Corporation
(Chevron) issuable to holders of common stock, par
value $1.00 per share, of Unocal pursuant to the Merger
Agreement. |
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(2) |
The maximum number of shares of Chevron common stock issuable in
connection with the merger in exchange for shares of Unocal
common stock, based on the number of shares of Unocal common
stock exchangeable in the merger, equal to the sum of
(i) 271,798,190 shares of Unocal common stock
outstanding on May 16, 2005 multiplied by an exchange ratio
of 0.7725 of a share of Chevron common stock for each share of
Unocal common stock and (ii) the sum of up to 6,103,281
Unocal shares issuable on the exercise of options outstanding on
May 16, 2005 and up to 200,000 Unocal directors units
and dividend equivalents outstanding on May 16, 2005 and to
be issued at or prior to the effective time of the merger
multiplied by the exchange ratio of 0.7725 plus the number of
shares of Chevron common stock equal to such sum multiplied by
$16.25 and divided by the average of the high and low prices of
Chevron common stock as reported on the consolidated tape of the
New York Stock Exchange on May 20, 2005, which was $51.95. |
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(3) |
Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(c), Rule 457(f)(1) and
Rule 457(f)(3) of the Securities Act, based on the market
value of the Unocal shares to be exchanged in the merger, as
established by the average of the high and low prices of Unocal
common stock as reported on the consolidated tape of the New
York Stock Exchange on May 20, 2005, which was $54.88, and
the amount of cash to be paid by Chevron in exchange for shares
of Unocal common stock (equal to $16.25 multiplied by
278,101,471, the aggregate number of shares of Unocal common
stock set forth above). |
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(4) |
Previously paid. |
The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with section 8(a)
of the Securities Act or until the registration statement shall
become effective on such date as the Commission, acting pursuant
to said section 8(a), may determine.
The
information in this proxy statement/prospectus is not complete
and may be changed. Chevron may not distribute and issue the
shares of Chevron common stock being registered pursuant to this
registration statement until the registration statement filed
with the Securities and Exchange Commission is declared
effective. This proxy statement/prospectus is not an offer to
sell these securities and Chevron is not soliciting an offer to
buy these securities in any state where such offer or sale is
not
permitted.
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SUBJECT TO COMPLETION |
[ ], 2005 |
To Unocal Stockholders:
I am writing to you today about our proposed merger with Chevron
Corporation. The board of directors of Unocal Corporation has
approved a merger agreement with Chevron, providing for
Chevrons acquisition of all of the outstanding shares of
our common stock. The combined company will be one of the
worlds leading global energy providers. In order to
complete the merger, the holders of a majority of the
outstanding shares of Unocal common stock must approve and adopt
the merger agreement.
If the merger is completed, stockholders of Unocal will have the
right to elect to receive, for each Unocal share that you own:
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a combination of 0.7725 of a share of Chevron common stock and
$16.25 in cash; |
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1.03 shares of Chevron common stock; or |
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$65.00 in cash. |
This election is subject to proration to preserve an overall mix
of 0.7725 of a share of Chevron common stock and $16.25 in cash
for all of the outstanding shares of Unocal common stock taken
together.
Based on the closing price of Chevrons common stock on the
New York Stock Exchange on
[ ],
2005, the value of the per share consideration to be received by
Unocal stockholders who elect to receive only Chevron common
stock would be
$[ ],
and the value of the mixed election consideration would be
approximately
[ ]
per share.
The implied value of the stock consideration will fluctuate as
the market price of the Chevron common stock fluctuates, and,
because elections are subject to proration as described above, a
Unocal stockholder may receive some Chevron common stock, rather
than cash, even though that stockholder makes an all-cash
election (and vice versa). Unocal common stock trades on
the New York Stock Exchange under the ticker symbol
UCL. Chevron common stock trades on the New York
Stock Exchange under the ticker symbol CVX. We urge
you to obtain current market quotations of Chevron and Unocal
common stock. Upon completion of the merger, we estimate that
Unocals former stockholders will own approximately
[ ]%
of the common stock of Chevron.
You will be asked to vote on the merger at a special meeting of
Unocal stockholders to be held on
[ ],
2005, at
[ ],
Pacific Daylight Time, at
[ ].
Only stockholders who hold shares of Unocal common stock at the
close of business on June 29, 2005, the record date for the
special meeting, are entitled to vote at the special meeting.
Attached to this letter is an important document containing
detailed information about Chevron, Unocal and the proposed
merger. We urge you to read this document carefully and in its
entirety. In particular, see Risk Factors
beginning on page 19.
Whether or not you plan to attend the special meeting, please
vote as soon as possible so that your shares are represented at
the meeting. If you do not vote, it will have the same effect as
voting against the merger.
Unocals board of directors unanimously recommends that
stockholders vote FOR the merger and any adjournment of the
special meeting. We very much appreciate and look forward to
your support.
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Sincerely, |
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Charles R. Williamson |
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Chairman of the Board of Directors and |
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Chief Executive Officer |
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the
securities to be issued in connection with the merger or
determined if this document is accurate or complete. Any
representation to the contrary is a criminal offense.
This document is dated
[ ],
2005, and is first being mailed to stockholders of Unocal
Corporation on or about
[ ],
2005.
ADDITIONAL INFORMATION
This document, which is sometimes referred to as this
proxy statement/ prospectus, constitutes a proxy
statement of Unocal Corporation to Unocal stockholders with
respect to the solicitation of proxies for the special meeting
described within and a prospectus of Chevron Corporation for the
shares of Chevron common stock that Chevron will issue to Unocal
stockholders in the merger. As permitted under the rules of the
U.S. Securities and Exchange Commission, or the SEC, this
proxy statement/ prospectus incorporates important business and
financial information about Unocal, Chevron and their affiliates
that is contained in documents filed with the SEC and that is
not included in or delivered with this proxy statement/
prospectus. From October 9, 2001 until May 9, 2005,
Chevron was named, and filed reports with the SEC under the name
of, ChevronTexaco Corporation. You may obtain copies of these
documents, without charge, from the website maintained by the
SEC at www.sec.gov, as well as other sources. See
Additional Information for Stockholders Where
You Can Find More Information beginning on page 81.
You may also obtain copies of these documents, without charge,
from Chevron and from Unocal by writing or calling:
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Unocal Corporation
Unocal Stockholder Services
2141 Rosecrans Avenue, Suite 4000
El Segundo, CA 90245
(800) 252-2233 |
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Chevron Corporation
Chevron Comptrollers Department
6001 Bollinger Canyon Road A3201
San Ramon, CA 94583-2324
(925) 842-1000 |
You also may obtain documents incorporated by reference into
this document by requesting them in writing or by telephone from
MacKenzie Partners, the proxy solicitor for the merger, at the
following address and telephone number:
105 Madison Avenue
New York, NY 10016
(800) 322-2885
Please note that copies of the documents provided to you will
not include exhibits, unless the exhibits are specifically
incorporated by reference in the documents or this proxy
statement/ prospectus.
In order to receive timely delivery of requested documents in
advance of the special meeting, you should make your request no
later than
[ ],
2005.
In Questions and Answers About the Special Meeting and the
Merger and in the Summary below, we highlight
selected information from this proxy statement/ prospectus.
However, we may not have included all of the information that
may be important to you. To better understand the merger
agreement and the merger, and for a description of the legal
terms governing the merger, you should carefully read this
entire proxy statement/ prospectus, including the appendices, as
well as the documents that we have incorporated by reference
into this document. See Additional Information for
Stockholders Where You Can Find More
Information beginning on page 81.
VOTING ELECTRONICALLY OR BY TELEPHONE
In addition to voting by signing, dating and timely returning a
completed proxy card provided with this proxy statement/
prospectus, Unocals stockholders of record may submit
their proxies:
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through the Internet, by visiting a website established for this
purpose at http://www.proxyvoting.com/ucl and following
the instructions; or |
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by telephone, by calling the toll-free number
(866) 540-5760 in the United States, Puerto Rico or Canada
on a touch-tone pad and following the recorded instructions. |
Internet and telephone voting facilities will be available
24 hours a day and will close at 11:59 p.m., Eastern
Time, on
[ ] ,
2005. Please have your proxy card in hand when you use the
Internet or telephone voting options.
If your shares are held by a broker, bank or other holder of
record, please refer to your voting card or other information
forwarded by that entity to determine whether you may vote by
telephone or electronically on the Internet, following the
instructions on the card or other information provided by the
record holder.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
[ ],
2005
To Unocal Stockholders:
We will hold a special meeting of stockholders of Unocal
Corporation, a Delaware corporation, on
[ ],
2005, at
[ ],
Pacific Daylight Time at
[ ],
for the following purposes:
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to vote on a proposal to approve and adopt the Agreement and
Plan of Merger (referred to as the merger
agreement), dated as of April 4, 2005, by and among
Unocal, Chevron Corporation (referred to as Chevron)
and Blue Merger Sub Inc., a wholly owned subsidiary of Chevron; |
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to vote upon an adjournment or postponement of the special
meeting, if necessary, to solicit additional proxies; and |
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to transact any other business as may properly be brought before
the special meeting or any adjournment or postponement of the
special meeting. |
We have fixed June 29, 2005 as the record date for determining
those Unocal stockholders entitled to vote at the special
meeting. Accordingly, only stockholders of record at the close
of business on that date are entitled to notice of and to vote
at the special meeting or any adjournment or postponement of the
meeting.
The proposal to approve and adopt the merger agreement is
described in more detail in the accompanying proxy
statement/prospectus and its appendices. You should read these
documents in their entirety before voting.
Your board of directors has unanimously determined that the
proposed merger is advisable and in the best interests of Unocal
and its stockholders and unanimously recommends that Unocal
stockholders vote FOR the proposal to approve and adopt the
merger agreement and authorize any adjournment of the special
meeting.
Your vote is important. Whether or not you plan to attend the
special meeting, please complete, sign, date and return your
proxy card or voting instruction card in the enclosed envelope
promptly. For many stockholders, you may also vote your shares
by calling the toll-free telephone number or by using the
Internet as described in the instructions included with your
proxy card or voting instruction card.
We urge you to vote as soon as possible so that your shares will
be represented. A failure to vote will have the same effect as
voting against the approval of the merger agreement.
By Order of the Board of Directors
Bryan J. Pechersky
Corporate Secretary
[ ],
2005
El Segundo, California
TABLE OF CONTENTS
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14 |
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16 |
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31 |
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33 |
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34 |
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II-1 |
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EXHIBIT 23.4 |
EXHIBIT 23.5 |
EXHIBIT 23.6 |
EX-99.3 |
i
QUESTIONS AND ANSWERS ABOUT
THE MERGER AND THE SPECIAL MEETING
About the Merger
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Q: |
What am I voting on? |
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A: |
Chevron is proposing to acquire Unocal. You are being asked to
vote to approve and adopt an agreement and plan of merger
through which Unocal will merge with and into a wholly owned
subsidiary of Chevron, sometimes referred to as Merger
Sub. After the merger, Merger Sub will be the surviving
entity and a wholly owned subsidiary of Chevron, and Unocal will
no longer be a separate company. |
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Q: |
What will I receive in exchange for my Unocal shares? |
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A: |
You may elect to receive, for each Unocal common share that you
own, either: |
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a combination of 0.7725 of a share of Chevron common stock and
$16.25 in cash, |
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1.03 shares of Chevron common stock or |
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$65 in cash. |
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Unless you make an all-cash or an all-stock election, you will
receive the mixed consideration in the merger. In addition, the
all-cash and all-stock elections are subject to proration in
order to preserve an overall mix of 0.7725 of a share of Chevron
common stock and $16.25 in cash for all of the outstanding
shares of Unocal common stock taken together. |
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If you are a participant in the Unocal Savings Plan, the
Molycorp, Inc. 401(k) Retirement Savings Plan or the Pure
Resources 401(k) and Matching Plan (which we collectively refer
to in the proxy statement as the Unocal Plans), you will receive
instructions from the relevant plan trustee on how to elect to
have cash consideration or share consideration allocated to your
plan account in exchange for Unocal common stock in your plan
account. See Information About the Special Meeting and
Voting Voting and Elections by Participants in the
Unocal Plans beginning on page 72 for detailed
instructions. |
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Unocal Plan holders may be subject to an election deadline
earlier than the general deadline of the date of the Unocal
special meeting. Therefore, you should carefully read any
materials you receive from your broker or the relevant plan
trustee or administrator. |
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Q: |
Will I be taxed on the consideration that I receive in
exchange for my Unocal shares? |
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A: |
The transaction is intended to be tax-free to Unocal
stockholders for U.S. federal income tax purposes, except
with respect to any cash received. See The
Merger Material Federal Income Tax Consequences of
the Merger beginning on page 34 of this proxy
statement/prospectus. |
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Q: |
What is the required vote to approve and adopt the merger
agreement and the merger? |
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A: |
The holders of a majority of the outstanding shares of Unocal
common stock as of June 29, the record date for the special
meeting, must vote to approve and adopt the merger agreement in
order for the merger to be completed. Abstentions from voting
and broker non-votes are not considered affirmative
votes and therefore will have the same practical effect as a
vote against the merger. |
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No vote of the stockholders of Chevron is required to complete
the merger.
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Q: |
What does the Unocal board of directors recommend? |
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A: |
The board of directors of Unocal unanimously recommends that
Unocals stockholders vote in favor of the merger and any
adjournment of the special meeting. |
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Q: |
Do I have dissenters or appraisal rights with respect
to the merger? |
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A: |
Yes. Under Delaware law, you have the right to dissent from the
merger and, in lieu of receiving the merger consideration,
obtain payment in cash of the fair value of your shares of
Unocal common stock as determined by the Delaware Chancery
Court. To exercise appraisal rights, you must strictly follow
the procedures prescribed by Delaware law. These procedures are
summarized under The Merger Appraisal
Rights beginning on page 37 of this proxy
statement/prospectus. In addition, the text of the applicable
provisions of Delaware law is included as Annex C to this
proxy statement/prospectus. |
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Q: |
May I submit a form of election if I vote against the
merger? |
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Yes. You may submit a form of election even if you vote against
adopting the merger agreement. However, if you submit a properly
executed election form, you will thereby withdraw any previously
filed written demand for appraisal and will not be entitled to
appraisal rights. See The Merger Appraisal
Rights beginning on page 37 of this proxy
statement/prospectus. |
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Q: |
When do you expect the merger to occur? |
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A: |
We expect to complete the merger promptly after Unocal
stockholders approve and adopt the merger agreement and the
merger at the special meeting and after the satisfaction or
waiver of all other conditions to the merger. We currently
expect this to occur sometime this year. |
About the Special Meeting
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Q: |
When and where is the Unocal special stockholder meeting? |
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A: |
The Unocal special stockholder meeting will take place on
[ ],
2005, at
[ ],
Pacific Daylight Time, and will be held at
[ ]. |
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Q: |
Who is entitled to vote at the special meeting? |
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Holders of record of Unocal common stock at the close of
business on June 29, 2005, which is the date Unocals board
of directors has fixed as the record date for the special
meeting, are entitled to vote at the special meeting. |
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Q: |
What do I need to do now? |
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A: |
Please mail your signed proxy card in the enclosed return
envelope or vote by telephone or the Internet, as soon as
possible, so your shares will be represented at the special
meeting. In order to be sure that your vote is counted, please
submit your proxy as instructed on your proxy card even if you
plan to attend the special meeting in person. |
If your shares are held in street name, you should
follow the directions your broker or bank provides in order to
ensure your shares are voted at the special meeting.
Your proxy card will instruct the persons named on the proxy
card to vote your shares at the special meeting as you direct.
If you sign and send in your proxy card and do not indicate how
you want to vote, your proxy will be voted FOR the
approval and adoption of the merger agreement and the merger and
any adjournment of the special meeting.
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Q: |
May I change my vote after I have mailed my signed proxy
card? |
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A: |
Yes. You may change your vote at any time before your proxy is
voted at the special meeting. If your shares of Unocal common
stock are registered in your own name, you can do this in one of
three ways. |
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First, you can deliver to Unocal prior to the special meeting a
written notice stating that you want to revoke your proxy. The
notice should be sent to the attention of the Corporate
Secretary, 2141 Rosecrans Avenue, Suite 4000, El Segundo,
CA 90245, to arrive by the close of business on
[ ],
2005. |
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Second, you can complete and deliver prior to the special
meeting a new proxy card. The proxy card should be sent to the
addressee indicated on the pre-addressed envelope enclosed with
your initial proxy card to arrive by the close of business on
[ ],
2005. The latest dated and signed proxy actually received by
this addressee before the special meeting will be counted, and
any earlier proxies will be considered revoked. |
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If you vote your proxy electronically through the Internet or by
telephone, you can change your vote by submitting a different
vote through the Internet or by telephone, in which case your
later-submitted proxy will be recorded and your earlier proxy
revoked. |
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Third, you can attend the Unocal special meeting and vote in
person. Simply attending the meeting, however, will not revoke
your proxy, as you must vote at the special meeting in order to
revoke a prior proxy. |
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If you are a street-name stockholder and you vote by proxy, you
may later revoke your proxy |
2
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instructions by informing the holder of record in accordance
with that entitys procedures. |
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Q: |
If I beneficially own Unocal shares held pursuant to a Unocal
Plan, will I be able to vote on adoption of the merger
agreement? |
|
A: |
Yes. If you are a participant in a Unocal Plan, please submit
the voting form you receive from the plan adminis-trator or
trustee to indicate to the relevant plan administrator or
trustee how you want the Unocal common stock allocated to your
plan account to be voted. |
|
Q: |
If my shares are held in street name by my
broker, will my broker vote my shares for me? |
|
A: |
If you do not provide your broker with instructions on how to
vote your street name shares, your broker will not
be permitted to vote them on the merger. Therefore, you should
be sure to provide your broker with instructions on how to vote
your shares. Please check the voting form used by your broker to
see if it offers telephone or Internet voting. |
|
Q: |
Why is it important for me to vote? |
|
A: |
We cannot complete the merger without Unocal stockholders voting
in favor of the merger. |
|
Q: |
What if I dont vote? |
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A: |
If you do not give voting instructions to your broker or you do
not vote, you will, in effect, be voting against the merger. |
|
Q: |
Should I send in my stock certificates with my proxy card? |
|
A: |
No. Please do not send your stock
certificates with your proxy card. Prior to the election
deadline described in this proxy statement/ prospectus, you
should send your Unocal common stock certificates to the
exchange agent, together with a completed, signed election form
being provided to you with this document, or, if your shares are
held in street name, according to your brokers
instructions. |
About Electing the Merger Consideration
|
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Q: |
How do I elect the type of the merger consideration that I
prefer to receive? |
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A: |
Each Unocal stockholder is being sent an election form and
transmittal materials. You must properly complete and deliver to
the exchange agent the election materials, together with your
stock certificates (or a properly completed notice of guaranteed
delivery). A return envelope will be enclosed for submitting the
election form and certificates to the exchange agent. This is
different from the envelope that you will use to return your
completed proxy card. Please do not send your stock
certificates or form of election with your proxy card. |
Election forms and stock certificates (or a properly completed
notice of guaranteed delivery) must be received by the exchange
agent by the election deadline, which is 5:00 p.m., Eastern
time, on
[ ],
2005.
If your shares are held in a brokerage or other custodial
account, you should receive instructions from the entity where
your shares are held advising you of the procedures for making
your election and delivering your shares. If you do not receive
these instructions, you should contact the entity where your
shares are held.
If you do not properly submit your election form with your stock
certificates, then, promptly after the closing date of the
merger, the exchange agent will mail to you a letter of
transmittal and instructions for surrendering stock certificates
for use in exchanging your stock certificates for the mixed
merger consideration.
In the event the merger agreement is terminated, any Unocal
stock certificates that you previously sent to the exchange
agent will be promptly returned to you without charge.
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Q: |
Can I make one election for some of my shares and another
election for the rest? |
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A: |
Yes. The election form permits you to specify, among the shares
you are submitting, how many you are allocating to |
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a mixed election, |
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an all-stock election, |
3
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an all-cash election or |
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no election. |
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Q: |
What if I do not make an election? |
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A: |
If you do not submit a properly completed and signed election
form to the exchange agent by the election deadline (or if you
submit a properly completed election form indicating no
election, together with the certificates representing all of
your shares), then you will be deemed to have made the mixed
election and would therefore receive $16.25 in cash and 0.7725
of a share of Chevron common stock in exchange for each of your
shares of Unocal common stock. |
|
Q: |
Can I change my election after I submit an election form? |
|
A: |
Yes. You may revoke your election of merger consideration with
respect to all or a portion of your shares of Unocal common
stock by delivering written notice of your revocation to the
exchange agent prior to the election deadline. If you instructed
a broker to submit an election for your shares, you must follow
your brokers directions for changing those instructions.
In addition, any election of merger consideration you make will
automatically be revoked if the merger agreement is terminated. |
If an election is properly revoked with respect to shares of
Unocal common stock represented by stock certificates, the
certificates representing such shares will be promptly returned
to the holder who submitted them to the exchange agent.
You will not be entitled to revoke or change your election
following the election deadline. As a result, if you make an
election, then you will be unable to revoke your election or
sell your shares of Unocal common stock during the interval
between the election deadline and the date of completion of the
merger.
How to Get More Information
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Q: |
Where can I find more information about Unocal and
Chevron? |
|
A: |
You can find more information about Unocal and Chevron from
various sources described under the heading Additional
Information for Stockholders Where You Can Find More
Information beginning on page 81 of this proxy
statement/prospectus. |
|
Q: |
Who do I call if I have questions about the meeting or the
merger? |
|
A: |
If you have any questions about the merger or if you need
additional copies of this proxy statement/ prospectus or the
enclosed proxy card, you should contact: |
105 Madison Avenue
New York, NY 10016
(800) 322-2885
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If you need an additional election form, you should contact the
exchange agent: |
Mellon Investor Services
85 Challenger Road
Ridgefield Park, NJ 07660
(866) 865-6324
4
SUMMARY
This summary highlights selected information from this proxy
statement/ prospectus and may not contain all of the information
that is important to you. To understand the merger fully and for
a more complete description of the legal terms of the merger,
you should carefully read this document and the documents to
which we have referred you, including the merger agreement
attached as Annex A to this proxy statement/ prospectus.
See Additional Information for Stockholders
Where You Can Find More Information on page 81.
Who We Are
Chevron Corporation
6001 Bollinger Canyon Road
San Ramon, CA 94583
(925) 842-1000
Chevron Corporation (formerly ChevronTexaco Corporation), a
Delaware corporation, manages its investments in subsidiaries
and affiliates and provides administrative, financial and
management support to U.S. and foreign subsidiaries that engage
in fully integrated petroleum operations, chemicals operations,
coal mining, power and energy services. Chevron conducts
business activities in the United States and approximately 180
other countries. Petroleum operations consist of exploring for,
developing and producing crude oil and natural gas; refining
crude oil into finished petroleum products; marketing crude oil,
natural gas and the many products derived from petroleum; and
transporting crude oil, natural gas and petroleum products by
pipeline, marine vessel, motor equipment and rail car.
Unocal Corporation
2141 Rosecrans Avenue, Suite 4000
El Segundo, CA 90245
(310) 726-7600
Unocal Corporation was incorporated in Delaware in 1983 to
operate as the parent entity of Union Oil Company of California,
which was incorporated in California in 1890. Virtually all of
Unocals operations are conducted by Union Oil and its
subsidiaries.
Unocal is one of the worlds leading independent oil and
gas exploration and production companies, with principal
operations in North America and Asia. Unocal is also a leading
producer of geothermal energy and a provider of electrical power
in Asia. Unocals other activities include ownership in
proprietary and common carrier pipelines, natural gas storage
facilities and the marketing of hydrocarbon commodities.
Unocals Reasons for the Merger and Unocal Boards
Recommendation to Unocal Stockholders (page 31)
The Unocal board has determined that the merger is advisable and
in your best interests and unanimously recommends that you vote
FOR the approval and adoption of the merger agreement and
any adjournment of the special meeting.
You should refer to the factors considered by the Unocal board
of directors in making its decision to approve the merger
agreement and recommend its approval and adoption to the Unocal
stockholders.
Opinion of Unocals Financial Advisor (page 42)
In deciding to approve the merger, Unocal received an opinion
from Morgan Stanley & Co. Incorporated, dated
April 4, 2005, as to the fairness to the holders of Unocal
common stock of the consideration to be received in the merger
from a financial point of view. This opinion is attached as
Annex B. You may read this opinion for a discussion of the
assumptions made, matters considered and limitations on the
review by Morgan Stanley in rendering its opinion. This opinion
does not constitute a recommendation to any stockholder as to
how he or she should vote on the merger or as to the form of
consideration that a stockholder should elect.
5
Chevrons Reasons for the Merger (page 33)
Chevron believes that Unocals assets complement
Chevrons existing upstream portfolio. The merger is
consistent with Chevrons long-term strategies to grow
profitably in core upstream areas, build new legacy positions
and commercialize the companys large undeveloped natural
gas resource base.
These anticipated benefits depend on several factors, including
the ability to obtain the necessary approvals for the merger,
and on other uncertainties described beginning on page 19.
What Unocal Stockholders Will Receive in the Merger
(page 55)
Unocal stockholders may elect to receive, for each Unocal common
share:
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a combination of 0.7725 of a share of Chevron common stock and
$16.25 in cash (which we refer to as the mixed
consideration); |
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1.03 shares of Chevron common stock; or |
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$65 in cash. |
Unless you make an all-cash or an all-stock election, you will
receive the mixed consideration in the merger.
The all-stock and all-cash elections are subject to proration in
order to preserve an overall mix of 0.7725 of a share of Chevron
common stock and $16.25 in cash for all of the outstanding
shares of Unocal common stock taken together. This means
that, even if you make the all-stock or all-cash election, you
may receive a prorated amount of cash and Chevron common
stock. The formula that will be used to determine the actual
amount of proration is described beginning on page 56.
Fractional Shares
You will not be entitled to receive any fractional shares of
Chevron common stock. Instead, you will be entitled to receive
cash, without interest, for any fractional share of Chevron
common stock you might otherwise have been entitled to receive,
based on a portion of the proceeds from the sale of all
fractional shares in the market.
Stock Exchange Listing
The shares of Chevron common stock are listed on the New York
Stock Exchange under the ticker symbol CVX.
Material Federal Income Tax Consequences of the Merger
(page 34)
The merger has been structured to qualify as a reorganization
within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, which is referred to in this
document as the Code. It is a condition to the
closing of the merger that Unocal and Chevron receive opinions
from their respective tax counsel, dated as of the closing date
of the merger, to the effect that the merger will qualify as a
reorganization within the meaning of Section 368(a) of the
Code.
Assuming the merger qualifies as a reorganization, in general:
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If you receive a combination of Chevron common stock and cash in
exchange for your Unocal common stock and your tax basis in your
Unocal common stock is less than the sum of the cash and the
fair market value, as of the closing date of the merger, of the
Chevron common stock received, you generally will recognize gain
equal to the lesser of (1) the sum of the cash and the fair
market value of the Chevron common stock you receive, minus the
tax basis of your Unocal common stock surrendered and
(2) the amount of cash you receive in the merger. However,
if your tax basis in the Unocal common stock surrendered in the
merger is greater than the sum of the |
6
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cash and the fair market value of the Chevron common stock you
receive, your loss will not be currently allowed or recognized
for federal income tax purposes. |
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If you receive solely Chevron common stock in exchange for
Unocal common stock, then you generally will not recognize any
gain or loss, except with respect to cash you receive in lieu of
fractional shares of Chevron common stock. |
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|
If you receive solely cash in exchange for your Unocal common
stock, then you generally will recognize gain or loss equal to
the difference between the amount of cash you receive and the
tax basis in your shares of Unocal common stock. |
You should read The Merger Material Federal
Income Tax Consequences of the Merger beginning on
page 34 for a more complete discussion of the United States
federal income tax consequences of the merger. We urge you to
consult with your tax advisor for a full understanding of the
tax consequences of the merger to you.
Ownership of Chevron After the Merger
Chevron will issue approximately
[ ] million
shares of Chevron common stock to Unocal stockholders in the
merger. The shares of Chevron common stock to be issued to
Unocal stockholders in the merger will represent approximately
[ ]% of the outstanding Chevron
common stock after the merger. This information is based on the
number of Chevron and Unocal shares outstanding on
[ ],
2005 and does not take into account stock options or other
equity-based awards or any other shares that may be issued
before the merger as allowed by the merger agreement.
Unocal Stockholder Vote Required to Approve the Merger
(page 69)
Approval and adoption of the merger agreement requires the
affirmative vote of a majority of the shares of Unocal common
stock outstanding as of the close of business on June 29, 2005,
the record date for the special meeting of Unocal stockholders.
As of the record date, Unocals directors, executive
officers and their affiliates beneficially owned in the
aggregate
[ ]%
of Unocals outstanding common stock entitled to vote at
the Unocal special meeting.
Appraisal Rights (page 37)
You have the right to dissent from the merger and obtain, in
lieu of the merger consideration, a payment in cash of the fair
value of your Unocal shares, as determined by the Delaware
Chancery Court. To exercise appraisal rights, you must strictly
follow the procedures prescribed by Delaware law. If you want to
exercise appraisal rights, you should not submit a form of
election, which will be considered a withdrawal of any
previously filed written demand for appraisal.
The Interests of Certain Unocal Officers and Directors in the
Merger May Differ from Your Interests (page 51)
When you consider the Unocal boards recommendation that
Unocal stockholders vote in favor of the merger and any
adjournment of the special meeting, you should be aware that
some Unocal officers and directors may have interests in the
merger that may be different from, or in addition to, the
interests of Unocal stockholders generally. The Unocal board of
directors was aware of these interests and considered them in
approving the merger agreement and the merger.
Accounting Treatment (page 34)
The combination of the two companies will be accounted for as an
acquisition of Unocal by Chevron using the purchase method of
accounting.
The purchase price (reflecting the cash consideration and the
weighted average price of Chevrons common stock two days
before, two days after and on the day of the announcement of
Monday, April 4,
7
2005) will be allocated to Unocals identifiable assets and
liabilities based on their respective estimated fair values at
the closing date of the acquisition, and any excess of the
purchase price over those fair values will be accounted for as
goodwill.
The valuation of Unocals assets and liabilities and the
finalization of plans for restructuring after the closing of the
merger have not yet been completed. The allocation of the
purchase price reflected in this proxy statement/ prospectus may
be revised as additional information becomes available.
Completion of the Merger Is Subject to Certain Conditions
(page 66)
The completion of the merger depends upon meeting a number of
conditions, including the following:
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approval of the merger agreement and the merger by Unocal
stockholders; |
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expiration or termination of the relevant waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act); |
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absence of any legal prohibition on completion of the merger; |
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the registration statement of which this proxy statement/
prospectus is a part having been declared effective by the
Securities and Exchange Commission; |
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approval for listing on the New York Stock Exchange of the
shares of Chevron common stock to be issued in the merger; |
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absence of any condition to approval of the merger by the
Federal Trade Commission (FTC) or Department of Justice
that would result in or be reasonably likely to result in a
substantial detriment (as defined in this proxy
statement/ prospectus); |
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absence of any proceeding seeking to limit Chevrons
ownership of Unocal or to compel divestiture of assets if any
such matter would result in or be reasonably likely to result in
a substantial detriment; |
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absence of any statute, rule, or order applicable to the merger
that would result in or be reasonably likely to result in a
substantial detriment; |
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receipt of all material regulatory approvals for the merger on
terms that are not reasonably likely to result in a
substantial detriment; |
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performance by the other party in all material respects of its
obligations under the merger agreement; |
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accuracy as of the closing of the merger of the representations
and warranties made by the other party; |
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receipt by Chevron and Unocal of opinions of their respective
tax counsel to the effect that the merger will qualify as a
reorganization under the Code; and |
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absence of a material adverse effect on the other party during
the period from April 4, 2005 until the closing of the
merger. |
We Have Not Yet Obtained All Regulatory Approvals
(page 36)
Pursuant to the HSR Act, the merger cannot be completed until
after all applicable waiting periods have expired or been
terminated. On April 19, 2005, Chevron and Unocal filed the
applicable notifications with the FTC and the Antitrust Division
of the U.S. Department of Justice. On May 19, 2005,
the FTC issued a Request for Additional Information and
Documentary Material to Chevron and Unocal, thereby extending
the waiting period. Chevron and Unocal entered into separate
consent agreements with the FTC to address antitrust issues
associated with the proposed transaction and to resolve pending
litigation between Unocal and the FTC concerning Unocals
patents for reformulated gasoline. On June 10, 2005,
8
the FTC accepted the consents for public comment and granted
early termination of the HSR Act waiting period.
The merger is also subject to regulatory review in jurisdictions
other than the U.S.
Chevron and Unocal are working to obtain the required regulatory
approvals and consents. However, although we expect to receive
the remaining required regulatory approvals, we can give no
assurance as to when or whether these approvals and consents
will be obtained or the terms and conditions that may be imposed.
As described beginning on page 66, Chevron and Unocal are
not required to close the merger unless the regulatory
conditions to completion of the merger are satisfied.
The Merger Agreement May Be Terminated (page 67)
Either Chevron or Unocal can terminate the merger agreement if
any of the following occurs:
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the merger is not completed by December 31, 2005 (or
August 31, 2006, if the reason for not closing by
December 31, 2005 is that the regulatory conditions
specified in the merger agreement have not been satisfied); |
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the approval of Unocal stockholders has not been obtained by
reason of the failure to obtain the required vote at the Unocal
special meeting or any adjournment of the special meeting; |
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a law or court order permanently prohibits the merger; or |
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a breach by the other party of any of its representations,
warranties, covenants or obligations in the merger agreement if
that breach would result in the failure to satisfy the closing
condition relating to the representations, warranties and
covenants and the breach is not cured. |
In addition, Chevron can terminate the merger agreement if the
Unocal board changes its recommendation of the merger to its
stockholders in a manner adverse to Chevron or if Unocal fails
to comply with its obligations to hold the special meeting or
materially (and to the material detriment of Chevron) breaches
its obligations under the merger agreement with respect to
non-solicitation of other acquisition proposals.
Neither party can terminate the merger agreement for the reasons
described in the first bullet point above if the merger has not
closed because of that partys failure to fulfill any
obligation under the merger agreement.
Finally, Chevron and Unocal can mutually agree to terminate the
merger agreement even if the merger has been approved by
Unocals stockholders.
Fees May Be Payable on Termination (page 67)
Unocal must pay Chevron a termination fee of $250 million
in cash if:
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Chevron terminates the agreement because the Unocal board fails
to recommend the merger to its stockholders, because the Unocal
board otherwise changes or proposes publicly to change, in any
manner adverse to Chevron, its recommendation of the merger to
stockholders, because Unocal fails to comply with its
obligations to hold the special meeting or because Unocal has
materially (and to the material detriment of Chevron) breached
its obligation to refrain from soliciting other acquisition
proposals; |
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either Chevron or Unocal terminates the merger agreement because
Unocals stockholders do not approve the merger and, prior
to the Unocal stockholders meeting, a proposal by a third
party for an alternative transaction was made known to Unocal
(including any of its agents or representatives) and
communicated publicly or to any substantial number of Unocal
stockholders or was made directly to Unocals stockholders
or any person publicly announced an intention (whether or not
conditional) to make an alternative acquisition proposal; or |
9
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a proposal by a third party for an alternative transaction is
made known to Unocal (including any of its agents or
representatives) and communicated publicly or to any substantial
number of Unocal stockholders or is made directly to
Unocals stockholders by any person, or any person publicly
announces an intention (whether or not conditional) to make an
alternative acquisition proposal, and after any such event the
merger agreement is terminated by either Chevron or Unocal
because the merger is not completed by the end date, so long as
the Unocal stockholder approval has not been obtained. |
Unocal must pay Chevron an additional termination fee of
$250 million in cash if the merger agreements
termination gave rise to the initial $250 million
termination fee and an alternative transaction is consummated,
or Unocal enters into a definitive agreement providing for any
alternative transaction, in each case within 12 months
after the termination of the merger agreement.
Market Price Information (page 17)
Both Chevron and Unocal common stock trade on the New York Stock
Exchange. On April 1, 2005, the last trading day before the
public announcement of the merger, Chevron common stock closed
at $59.31 per share and Unocal common stock closed at
$64.35 per share. Based on these closing prices, the value
of the per share consideration to be received by Unocal
stockholders who elect to receive only Chevron common stock
would be approximately $61, and the value of the mixed election
consideration would be approximately $62 per share.
On
[ ],
2005, the most recent practicable date prior to the date of this
proxy statement/ prospectus, Chevron common stock closed at
$[ ] per
share and Unocal common stock closed at
$[ ] per
share. Based on the closing price of Chevrons common stock
on the New York Stock Exchange on
[ ],
2005, the value of the per share consideration to be received by
Unocal stockholders who elect to receive only Chevron common
stock would be
$[ ],
and the value of the mixed election consideration would be
approximately
$[ ]
per share. We urge you to obtain current market quotations.
10
Selected Historical Financial Data of Chevron (formerly
ChevronTexaco)
We are providing the following information to aid you in your
analysis of the financial aspects of the merger. The selected
historical financial data in the table below for the three-month
periods ended March 31, 2005 and 2004, were derived from
Chevrons unaudited consolidated financial statements. The
data for the five years ended December 31, 2004, were
derived from Chevrons audited consolidated financial
statements. This information is only a summary. You should read
it together with Chevrons historical financial statements
and related notes contained in the annual reports and other
information Chevron has filed with the SEC and incorporated by
reference into this proxy statement/prospectus. See
Additional Information for Stockholders Where
You Can Find More Information on page 81.
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Three Months | |
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Ended March 31, | |
|
Year Ended December 31, | |
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| |
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| |
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2005 | |
|
2004 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2000 | |
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| |
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| |
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| |
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| |
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(millions of dollars, except per-share amounts) | |
Sales and other operating revenue(1)(2)
|
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$ |
40,441 |
|
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$ |
33,063 |
|
|
$ |
150,865 |
|
|
$ |
119,575 |
|
|
$ |
98,340 |
|
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$ |
103,951 |
|
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$ |
116,619 |
|
Income from continuing operations
|
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|
2,677 |
|
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|
2,551 |
|
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13,034 |
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7,382 |
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|
1,102 |
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3,875 |
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7,638 |
|
Income from continuing operations per common share(3)
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Basic
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1.28 |
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1.21 |
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6.16 |
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3.55 |
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|
0.52 |
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1.82 |
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3.58 |
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Diluted
|
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|
1.28 |
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1.20 |
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6.14 |
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3.55 |
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|
0.52 |
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1.82 |
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|
3.57 |
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Cash dividends per common share(3)
|
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|
0.40 |
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0.36 |
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1.53 |
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|
1.43 |
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|
1.40 |
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|
1.33 |
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|
1.30 |
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Total assets
|
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95,803 |
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|
|
85,107 |
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|
93,208 |
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81,470 |
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|
|
77,359 |
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|
77,572 |
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77,621 |
|
Long-term debt and capital lease obligations
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10,422 |
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10,880 |
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10,456 |
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10,894 |
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|
|
10,911 |
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8,989 |
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12,821 |
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|
|
|
|
|
|
(1) Includes consumer excise taxes
|
|
|
2,116 |
|
|
|
1,857 |
|
|
|
7,968 |
|
|
|
7,095 |
|
|
|
7,006 |
|
|
|
6,546 |
|
|
|
6,601 |
|
(2) Includes amounts for buy/sell contracts
|
|
|
5,290 |
|
|
|
4,256 |
|
|
|
18,650 |
|
|
|
14,246 |
|
|
|
7,963 |
|
|
|
N/A |
(4) |
|
|
N/A |
(4) |
(3) All periods reflect a two-for-one stock split effected as a
100 percent stock dividend in September 2004. |
(4) Information for this period not readily available. |
11
Selected Historical Financial Data of Unocal
The selected historical financial data in the table below for
the three-month periods ended March 31, 2005 and 2004, were
derived from Unocals unaudited consolidated financial
statements. The data for the five years ended December 31,
2004, were derived from Unocals audited consolidated
financial statements, as supplemented by Unocal to reflect the
reclassification of the business of its former consolidated
subsidiary, 76 Seadrift Coke, LLC, as a discontinued
operation. This information is only a summary. You should read
it together with Unocals historical financial statements
and related notes contained in the annual reports and other
information Unocal has filed with the SEC and incorporated by
reference into this proxy statement/ prospectus, including the
Current Report on Form 8-K filed by Unocal on May 26,
2005, relating to the above-mentioned reclassification relating
to 76 Seadrift Coke, LLC. See Additional Information
for Stockholders Where You Can Find More
Information on page 81.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months | |
|
|
|
|
Ended March 31 | |
|
Year Ended December 31 | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2000 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(millions of dollars, except per-share amounts) | |
Sales and other operating revenue(1)
|
|
$ |
2,157 |
|
|
$ |
1,821 |
|
|
$ |
7,921 |
|
|
$ |
6,357 |
|
|
$ |
5,200 |
|
|
$ |
6,682 |
|
|
$ |
8,953 |
|
Income from continuing operations
|
|
|
449 |
|
|
|
267 |
|
|
|
1,146 |
|
|
|
699 |
|
|
|
323 |
|
|
|
591 |
|
|
|
722 |
|
Income from continuing operations per common share Basic
|
|
|
1.66 |
|
|
|
1.02 |
|
|
|
4.36 |
|
|
|
2.70 |
|
|
|
1.31 |
|
|
|
2.42 |
|
|
|
2.97 |
|
|
Diluted
|
|
|
1.64 |
|
|
|
0.99 |
|
|
|
4.25 |
|
|
|
2.66 |
|
|
|
1.31 |
|
|
|
2.40 |
|
|
|
2.93 |
|
Cash dividends per common share
|
|
|
0.20 |
|
|
|
0.20 |
|
|
|
0.80 |
|
|
|
0.80 |
|
|
|
0.80 |
|
|
|
0.80 |
|
|
|
0.80 |
|
Total assets
|
|
|
13,690 |
|
|
|
12,136 |
|
|
|
13,101 |
|
|
|
11,798 |
|
|
|
10,846 |
|
|
|
10,491 |
|
|
|
10,066 |
|
Long-term debt and capital lease obligations
|
|
|
2,302 |
|
|
|
3,199 |
|
|
|
2,571 |
|
|
|
2,635 |
|
|
|
3,002 |
|
|
|
2,897 |
|
|
|
2,392 |
|
Company-obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust holding solely-parent debentures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
522 |
|
|
|
522 |
|
|
|
522 |
|
|
|
522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes amounts for buy/sell contracts
|
|
|
163 |
|
|
|
252 |
|
|
|
965 |
|
|
|
820 |
|
|
|
604 |
|
|
|
601 |
|
|
|
533 |
|
12
Comparative Historical and Pro Forma Per Share Data
Set forth below are the Chevron and Unocal historical and pro
forma amounts per share of common stock for income from
continuing operations, cash dividends and book value. The
exchange ratio for the pro forma computations is 0.7725 of a
share of Chevron common stock for each share of Unocal common
stock. The basic consideration for the transaction is 0.7725 of
a share of Chevron common stock and $16.25 in cash for each
share of Unocal common stock outstanding immediately prior to
completion of the merger.
You should read the information below together with the
historical financial statements and related notes contained in
the Chevron and Unocal Annual Reports on Form 10-K for the
year ended December 31, 2004, and other information filed
with the SEC and incorporated by reference. See Additional
Information for Stockholders Where You Can Find More
Information on page 81.
The unaudited pro forma combined data below is for illustrative
purposes only. The pro forma adjustments for the balance sheet
are based on the assumption that the transaction was consummated
on March 31, 2005. The pro forma adjustments for the income
statements are based on the assumption that the transaction was
consummated on January 1, 2004.
The financial results may have been different had the companies
always been combined. You should not rely on this information as
being indicative of the historical results that would have been
achieved had the companies always been combined or of the future
results of the combined company. See Notes Concerning the
Preliminary Estimate of the Deemed Purchase Price for
Unocal on the following page for a discussion of the pro
forma financial data used in the comparative per-share amounts
in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
Year Ended | |
|
|
March 31, 2005 | |
|
December 31, 2004 | |
|
|
| |
|
| |
Chevron historical(1)
|
|
|
|
|
|
|
|
|
|
Income from continuing operations basic
|
|
$ |
1.28 |
|
|
$ |
6.16 |
|
|
Income from continuing operations diluted
|
|
|
1.28 |
|
|
|
6.14 |
|
|
Cash dividends
|
|
|
0.40 |
|
|
|
1.53 |
|
|
Book value at end of period
|
|
|
22.21 |
|
|
|
21.47 |
|
Chevron pro forma combined(1)
|
|
|
|
|
|
|
|
|
|
Income from continuing operations basic
|
|
|
1.34 |
|
|
|
6.06 |
|
|
Income from continuing operations diluted
|
|
|
1.34 |
|
|
|
6.02 |
|
|
Cash dividends(2)
|
|
|
0.40 |
|
|
|
1.53 |
|
|
Book value at end of period
|
|
|
25.47 |
|
|
|
N/A |
(3) |
Unocal historical
|
|
|
|
|
|
|
|
|
|
Income from continuing operations basic
|
|
|
1.66 |
|
|
|
4.36 |
|
|
Income from continuing operations diluted
|
|
|
1.64 |
|
|
|
4.25 |
|
|
Cash dividends
|
|
|
0.20 |
|
|
|
0.80 |
|
|
Book value at end of period
|
|
|
21.64 |
|
|
|
19.82 |
|
Unocal pro forma (equivalent)(4)
|
|
|
|
|
|
|
|
|
|
Income from continuing operations basic
|
|
|
1.04 |
|
|
|
4.68 |
|
|
Income from continuing operations diluted
|
|
|
1.03 |
|
|
|
4.65 |
|
|
Cash dividends
|
|
|
0.31 |
|
|
|
1.18 |
|
|
Book value at end of period
|
|
|
19.67 |
|
|
|
N/A |
(3) |
|
|
(1) |
Both periods reflect a two-for-one stock split effected as a
100 percent stock dividend in September 2004. |
|
(2) |
Same as Chevron historical since no change in dividend policy is
expected as a result of the merger. In April 2005, Chevron
increased its quarterly dividend to $0.45 per share. |
13
|
|
(3) |
Book value is presented on a pro forma basis only for the most
recent balance sheet date, March 31, 2005. |
|
(4) |
Derived using per-share amounts for Chevron pro forma
combined times the exchange ratio of 0.7725 Chevron common
shares for each Unocal common share. This computation does not
include the benefit to the Unocal stockholder of the cash
component of the transaction. |
Notes Concerning the Preliminary Estimate of the Deemed
Purchase Price for Unocal
The preliminary estimate of the deemed purchase price for Unocal
is $16.65 billion, composed of the following:
|
|
|
|
|
|
|
|
|
(Millions of dollars) | |
|
|
| |
Cash (25 percent of 271,654,896 Unocal shares
times $65.00 per share)
|
|
$ |
4,414 |
|
Chevron stock 209,853,407 shares times
$57.40 per share
|
|
|
12,046 |
|
|
(Weighted-average price of Chevron stock for a five-day period
beginning two days before the date of announcement) |
|
|
|
|
Unocal stock options estimated fair value that will
fully vest at the date of close
|
|
|
168 |
|
Transaction costs estimated direct fees
|
|
|
22 |
|
|
|
|
|
|
|
Total
|
|
$ |
16,650 |
|
|
|
|
|
This estimated purchase price does not represent a significant
acquisition for Chevron under the significance tests of the SEC
for business combinations. That is, each of the following tests
computes to a measure less than 20 percent:
|
|
|
|
|
Purchase price as a percentage of total assets of Chevron at
December 31, 2004. |
|
|
|
Unocal assets as a percentage of Chevron assets at
December 31, 2004. |
|
|
|
Unocal before-tax income from continuing operations for the year
ending December 31, 2004, as a percentage of Chevron
before-tax income from continuing operations for the same period. |
The pro forma per-share data on the previous page was based on a
preliminary allocation of the $16.65 billion purchase price
to the estimated fair values of the Unocal assets and
liabilities at March 31, 2005. An independent appraisal
firm was engaged to provide estimates of the fair values of
tangible and intangible assets. These and other preliminary
estimates will change as additional information becomes
available and is assessed by Chevron and the valuation firm.
The $16.65 billion purchase price was allocated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Millions of dollars) | |
|
|
| |
Carryover basis of Unocal net assets
|
|
|
|
|
|
$ |
5,878 |
|
Net increase in assets to estimated fair value:
|
|
|
|
|
|
|
|
|
|
Upstream Proved properties
|
|
|
3,938 |
|
|
|
|
|
|
Upstream Unproved properties
|
|
|
5,888 |
|
|
|
|
|
|
Midstream and other assets
|
|
|
1,459 |
|
|
|
11,285 |
|
|
|
|
|
|
|
|
Net increase in liabilities to fair value, including
$4,221 million of deferred income taxes
|
|
|
|
|
|
|
(4,825 |
) |
Goodwill
|
|
|
|
|
|
|
4,312 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$ |
16,650 |
|
|
|
|
|
|
|
|
Chevron deems the $4.3 billion of goodwill to represent
benefits of the acquisition that are additional to the fair
values of the individual assets and liabilities acquired.
Chevron believes the going-concern element of the
Unocal businesses presents the opportunity to earn a higher rate
of return on the assembled collection of net assets than would
be expected if those assets were acquired separately. These
benefits include growth opportunities in upstream Asia-Pacific,
Gulf of Mexico and Caspian regions, some of which
14
contain Unocal operations that are complementary to those of
Chevron. Chevron also expects to achieve cost savings through
the elimination of duplicate activities, high-grading of the
asset portfolio and sharing of best practices in the operations
of each company.
Not included in the initial purchase price allocation was an
expected liability for the combined companys restructuring
activities following the date of close, including severance
costs associated with a workforce reduction for redundant
operations. As plans for these restructuring activities become
finalized, the associated liability will be among the final
adjustments to the purchase price allocation.
The effects of the purchase accounting estimates discussed above
on the pro forma income from continuing operations and reflected
in the per-share amounts on page 13 were not significant.
The largest of the pro forma adjustments related to
depreciation, depletion and amortization expense for the
increase in properties to their fair values. These net pro forma
adjustments were approximately 1% of the historical amounts for
the combined Unocal and Chevron income from continuing
operations for both the year ended December 31, 2004, and
the three months ended March 31, 2005.
15
Comparative Market Value of Securities
The following table sets forth the closing price per share of
Chevron common stock and the closing price per share of Unocal
common stock on April 1, 2005 (the last business day
preceding the public announcement of the merger) and
June 23, 2005 (the most recent practicable trading date).
The table also presents the equivalent market value per share of
Unocal common stock:
|
|
|
|
|
for a mixed election, by multiplying the closing price per share
of Chevron common stock on each of the two dates by the mixed
election exchange ratio of 0.7725 and adding $16.25; and |
|
|
|
for an all-stock election, by multiplying the closing price per
share of Chevron common stock on each of the two dates by the
all-stock election exchange ratio of 1.03, assuming no proration. |
You are urged to obtain current market quotations for shares of
Chevron common stock and Unocal common stock before making a
decision with respect to the merger.
No assurance can be given as to the market prices of Chevron
common stock or Unocal common stock at the closing of the
merger. Because the exchange ratio will not be adjusted for
changes in the market price of Chevron common stock, the market
value of the shares of Chevron common stock that holders of
Unocal common stock will receive at the effective time of the
merger may vary significantly from the market value of the
shares of Chevron common stock that holders of Unocal common
stock would have received if the merger were consummated on the
date of the merger agreement or on the date of this proxy
statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
Closing Price per Share | |
|
|
| |
|
|
April 1, 2005 | |
|
June 23, 2005 | |
|
|
| |
|
| |
Chevron Common Stock
|
|
$ |
59.31 |
|
|
$ |
57.33 |
|
Unocal Common Stock
|
|
$ |
64.35 |
|
|
$ |
65.02 |
|
Unocal Mixed Election Equivalent
|
|
$ |
62.07 |
|
|
$ |
60.54 |
|
Unocal Stock Election Equivalent
|
|
$ |
61.09 |
|
|
$ |
59.05 |
|
16
Historical Market Price and Dividend Data
The following table sets forth the high and low price per share
of Chevron and Unocal common stock, as adjusted for all stock
splits and as reported on the New York Stock Exchange, for the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chevron(1) | |
|
Unocal | |
|
|
| |
|
| |
For the quarterly period ended: |
|
High | |
|
Low | |
|
Dividends | |
|
High | |
|
Low | |
|
Dividends | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2002
|
|
$ |
45.80 |
|
|
$ |
40.40 |
|
|
$ |
0.35 |
|
|
$ |
39.24 |
|
|
$ |
33.09 |
|
|
$ |
0.20 |
|
|
June 30, 2002
|
|
$ |
45.52 |
|
|
$ |
41.78 |
|
|
$ |
0.35 |
|
|
$ |
39.70 |
|
|
$ |
35.25 |
|
|
$ |
0.20 |
|
|
September 30, 2002
|
|
$ |
44.47 |
|
|
$ |
32.82 |
|
|
$ |
0.35 |
|
|
$ |
36.92 |
|
|
$ |
29.14 |
|
|
$ |
0.20 |
|
|
December 31, 2002
|
|
$ |
37.72 |
|
|
$ |
32.70 |
|
|
$ |
0.35 |
|
|
$ |
32.40 |
|
|
$ |
26.58 |
|
|
$ |
0.20 |
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2003
|
|
$ |
35.20 |
|
|
$ |
30.65 |
|
|
$ |
0.35 |
|
|
$ |
31.76 |
|
|
$ |
24.97 |
|
|
$ |
0.20 |
|
|
June 30, 2003
|
|
$ |
38.11 |
|
|
$ |
31.06 |
|
|
$ |
0.35 |
|
|
$ |
31.38 |
|
|
$ |
26.14 |
|
|
$ |
0.20 |
|
|
September 30, 2003
|
|
$ |
37.28 |
|
|
$ |
35.02 |
|
|
$ |
0.36 |
|
|
$ |
32.45 |
|
|
$ |
27.79 |
|
|
$ |
0.20 |
|
|
December 31, 2003
|
|
$ |
43.49 |
|
|
$ |
35.57 |
|
|
$ |
0.37 |
|
|
$ |
37.08 |
|
|
$ |
30.72 |
|
|
$ |
0.20 |
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2004
|
|
$ |
45.71 |
|
|
$ |
41.99 |
|
|
$ |
0.36 |
|
|
$ |
39.40 |
|
|
$ |
35.12 |
|
|
$ |
0.20 |
|
|
June 30, 2004
|
|
$ |
47.50 |
|
|
$ |
43.95 |
|
|
$ |
0.37 |
|
|
$ |
39.70 |
|
|
$ |
34.18 |
|
|
$ |
0.20 |
|
|
September 30, 2004
|
|
$ |
54.49 |
|
|
$ |
46.21 |
|
|
$ |
0.40 |
|
|
$ |
43.50 |
|
|
$ |
34.65 |
|
|
$ |
0.20 |
|
|
December 31, 2004
|
|
$ |
56.07 |
|
|
$ |
50.99 |
|
|
$ |
0.40 |
|
|
$ |
46.50 |
|
|
$ |
40.56 |
|
|
$ |
0.20 |
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2005
|
|
$ |
63.15 |
|
|
$ |
50.40 |
|
|
$ |
0.40 |
|
|
$ |
63.98 |
|
|
$ |
41.06 |
|
|
$ |
0.20 |
|
|
April 1 - June 23, 2005
|
|
$ |
59.48 |
|
|
$ |
49.81 |
|
|
$ |
0.45 |
|
|
$ |
66.50 |
|
|
$ |
53.44 |
|
|
$ |
0.20 |
|
|
|
(1) |
Prices in all periods have been adjusted for two-for-one stock
split effected as a 100 percent stock dividend in September
2004. |
17
RECENT DEVELOPMENTS
On June 22, 2005, Unocal received a merger proposal from
CNOOC Limited, an affiliate of China National Offshore Oil
Company, to acquire all outstanding shares of Unocal for $67 in
cash. The board of directors of Unocal met telephonically on
June 22, 2005 to discuss developments relating to the CNOOC
Limited proposal and the merger with Chevron. On that date,
Unocal announced that the recommendation of its board of
directors in favor of the merger with Chevron remained in effect
and that it intended to evaluate the CNOOC proposal in a manner
consistent with the board of directors fiduciary duties
and Unocals obligations under the merger agreement with
Chevron. On June 23, 2005, Chevron granted Unocal a waiver
under the merger agreement enabling Unocal to engage in
discussions with CNOOC and its representatives at any time prior
to the date of the Unocal stockholder vote on the merger with
Chevron. Unocal announced that it intended promptly to commence
discussions with CNOOC, although there is no assurance that an
agreement with CNOOC would be reached. Unocal intends to update
its stockholders regarding the CNOOC proposal as developments
warrant.
Unocal Recent Developments
On May 10, 2005, Unocal announced that it intends to seek
proposals from qualified prospective purchasers for the sale of
its Northrock subsidiarys western Canada crude oil and
natural gas exploration and production assets. These assets
would not include the companys midstream and storage
assets in Canada.
Unocal and its directors have been named as defendants in two
purported class actions brought on behalf of public stockholders
of Unocal and filed in the Superior Court for the State of
California, County of Los Angeles. Each of the complaints
alleges, among other things, that Unocals directors
breached their fiduciary duties in connection with the proposed
transaction with Chevron, and, in particular, that the
consideration to be received by stockholders in the merger is
unfair and inadequate and that Unocals directors did not
undertake a legally adequate process to obtain the best
transaction available. As relief the complaints seek, among
other things, damages in an unspecified amount, an injunction
against consummation of the transaction, and, in the event the
transaction is consummated, rescission. The time for defendants
to answer the complaints has not yet elapsed. Unocal believes
the claims asserted in the complaint are without merit and that
Unocal has substantial defenses to these claims.
Chevron Recent Developments
As previously disclosed in Chevrons reports to the SEC, in
early 2005, Chevron was awarded onshore Block 177 in
Libyas first exploration license bid round under the
Exploration and Production Sharing Agreement IV terms.
Chevron was also made operator of the block with
100 percent equity. The events mark Chevrons return
to Libya after a 28-year absence. Effective March 31, 2005,
a Chevron subsidiary entered into an exploration and production
sharing agreement with National Oil Corporation, which is owned
by the government of Libya, following the award of
Block 177. A bonus of $600,000 was paid to the Libyan
government upon the award of the Block 177 license. The
agreement provides for a five-year exploration phase that
includes seismic evaluation and at least one exploratory well
and is backed by a $20 million Chevron guarantee, with a
total 30-year contract term if a commercial discovery is found
and developed.
Chevron has established a small office in Tripoli, Libya, and is
currently initiating planning work for the Block 177
program. It is possible that the company will participate in
exploration and production bid rounds in Libya in the future.
In April 2004, the United States lifted most aspects of its
embargo on trade and economic relations with Libya. As a
consequence, U.S. companies can now engage in many
commercial activities, financial transactions and investments in
Libya, including the operations contemplated by the exploration
and production sharing agreement entered into with the National
Oil Company.
18
RISK FACTORS
In addition to the other information included and
incorporated by reference into this proxy statement/ prospectus,
you should carefully read and consider the following factors in
evaluating the proposals to be voted on at the special meeting
of Unocal stockholders and in determining whether to make an
all-cash, an all-stock or a mixed consideration election. Please
also refer to the additional risk factors identified in the
periodic reports and other documents of Chevron and Unocal
incorporated by reference into this proxy statement/ prospectus
and listed in Additional Information for
Stockholders Where You Can Find More
Information.
Risk Factors Relating to the Merger
Unocal will be subject to business uncertainties and
contractual restrictions while the merger is pending.
Uncertainty about the effect of the merger on employees and
customers may have an adverse effect on Unocal and consequently
on Chevron. These uncertainties may impair Unocals ability
to attract, retain and motivate key personnel until the merger
is consummated, and could cause customers, and others that deal
with Unocal to defer purchases or other decisions concerning
Unocal, or to seek to change existing business relationships
with Unocal. Employee retention may be particularly challenging
during the pendency of the merger, as employees may experience
uncertainty about their future roles with Chevron. If key
employees depart because of issues relating to the uncertainty
and difficulty of integration or a desire not to remain with
Chevron, Chevrons business following the merger could be
harmed. In addition, the merger agreement restricts Unocal from
making certain acquisitions and taking other specified actions
until the merger occurs. These restrictions may prevent Unocal
from pursuing attractive business opportunities that may arise
prior to the completion of the merger. Please see the section
entitled The Merger Agreement Covenants
beginning on page 59 of this proxy statement/ prospectus
for a description of the restrictive covenants applicable to
Unocal.
The exchange ratio will not be adjusted in the event the
value of Chevron common stock declines before the merger is
completed. As a result, the value of the shares of Chevron
common stock at the time that Unocal stockholders receive them
could be less than the value of those shares today.
In the merger, Unocal stockholders will be entitled to elect to
receive a combination of 0.7725 of a share of Chevron common
stock and $16.25 in cash, 1.03 shares of Chevron common
stock or $65 in cash. Chevron and Unocal will not adjust the
exchange ratio for the portion of the merger consideration to be
paid in Chevron common stock as a result of any change in the
market price of Chevron common stock between the date of this
proxy statement/ prospectus and the date that you receive shares
of Chevron common stock in exchange for your shares of Unocal
common stock. The market price of Chevron common stock will
likely be different, and may be lower, on the date you receive
your shares of Chevron common stock than the market price of
shares of Chevron common stock as of the date of this proxy
statement/ prospectus. Differences in Chevrons stock price
may be the result of changes in the business, operations or
prospects of Chevron, market reactions to the proposed merger,
general market and economic conditions or other factors. If the
market price of Chevron common stock declines after you vote,
and you receive Chevron common stock as a portion of the merger
consideration, you will be receiving less value than you
expected when you voted. Neither Chevron nor Unocal is permitted
to terminate the merger agreement or resolicit the vote of
Unocal stockholders because of changes in the market prices of
their respective common stocks.
You may not know the exact mix of consideration you will
receive and might not be able to exchange your Unocal common
stock without recognizing gain for federal income tax
purposes.
The consideration to be received by Unocal stockholders in the
merger is subject to proration to preserve the overall mix of
0.7725 of a share of Chevron common stock and $16.25 in cash for
all outstanding shares of Unocal common stock taken together. If
you elect to receive all of the merger consideration in shares
of Chevron common stock and the all-stock election is
oversubscribed, then you will receive a portion of the merger
consideration in cash. Similarly, if you elect to receive all of
the
19
merger consideration in cash and the all-cash election is
oversubscribed, then you will receive a portion of the merger
consideration in shares of Chevron common stock. Accordingly,
you may not receive exactly the type of consideration you elect
to receive in the merger, which could result in, among other
things, tax consequences that differ from those that would have
resulted if you had received the form of consideration that you
elected (including the potential recognition of gain for federal
income tax purposes if you receive cash). A discussion of the
proration mechanism can be found under the heading The
Merger Agreement Merger Consideration and a
discussion of the material federal income tax consequences of
the merger can be found under the heading The
Merger Material Federal Income Tax Consequences of
the Merger.
If you deliver shares of Unocal common stock to make an
election, you will not be able to sell those shares unless you
revoke your election prior to the election deadline.
If you are a holder of Unocal common stock and wish to elect the
type of merger consideration you prefer to receive in the
merger, you must deliver your stock certificates and a properly
completed and signed election form to the exchange agent prior
to the election deadline, which is 5:00 p.m., Eastern time,
on
[ ],
2005. You will not be able to sell any shares of Unocal common
stock that you have delivered unless you revoke your election
before the deadline by providing written notice to the exchange
agent. If you do not revoke your election, you will not be able
to liquidate your investment in Unocal common stock for any
reason until you receive cash or Chevron common stock, or both,
in the merger. In the time between delivery of your shares and
the closing of the merger, the trading price of Unocal or
Chevron may increase or decrease, and you might otherwise want
to sell your shares of Unocal to gain access to cash, make other
investments, or reduce the potential for a decrease in the value
of your investment. The date that you will receive your merger
consideration depends on the completion date of the merger,
which is uncertain. The completion date of the merger might be
later than expected due to unforeseen events, such as delays in
obtaining required consents and approvals.
Failure to integrate Unocal successfully on a timely basis
could reduce Chevrons profitability and adversely affect
its stock price.
Chevron expects certain benefits to arise from the merger
including revenue and proved crude oil and natural gas reserve
improvements, and certain operating efficiencies and synergies.
See The Merger Chevrons Reasons for the
Merger. Achievement of these benefits will depend in part
upon how and when the businesses of Chevron and Unocal are
integrated. If Chevron is not successful in this integration,
its financial results could be adversely impacted.
Chevrons management may be required to dedicate
significant time and effort to this integration process, which
could divert their attention from other business concerns. The
challenges involved in this integration include the following:
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obtaining the required approvals of various regulatory agencies,
any of which could impose conditions or restrictions on its
approval; |
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minimizing the diversion of management attention from ongoing
business concerns; |
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addressing differences in the business cultures of Chevron and
Unocal; |
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coordinating and combining international operations,
relationships, and facilities, which may be subject to
additional complications resulting from operating in countries
that are new to Chevron and geographic distance from other
Chevron operations; and |
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retaining key employees and maintaining key employee morale,
particularly in areas where Chevron does not currently have
personnel. |
Some of the directors and executive officers of Unocal may
have interests and arrangements that could have influenced their
decisions to support or approve the merger.
The interests of some of the directors and executive officers of
Unocal may be different from those of Unocal stockholders, and
directors and officers of Unocal may have participated in
arrangements that are
20
different from, or in addition to, those of Unocal stockholders.
These interests are described in more detail in the section of
this proxy statement/ prospectus titled Interests of
Unocal Directors and Executive Officers in the Merger
beginning on page 51.
Unocal may need to obtain consents to change of control
under agreements it has with some third parties as a result of
the merger, and if it cannot obtain these consents, Unocal
and/or Chevron may not be able to maintain these relationships
on favorable terms or at all.
Unocal and Chevron are in the process of determining the need
under some of Unocals agreements for third-party consents
to a change of control. If they are unable to obtain any
required consents, Chevron may be forced to renegotiate these
agreements or enter into new agreements with various third
parties. Unocal agreements that potentially require consent
include agreements with project finance lenders, production
sharing agreement parties, revolving credit financers, and
certain extenders of credit supporting the issuance of surety
bonds, letters of credit and guaranties. There can be no
assurance that Chevron will be able to negotiate new agreements
on terms as favorable to it as those that Unocal had, or at all.
The merger agreement limits Unocals ability to
pursue alternatives to the merger.
The merger agreement contains provisions that make it more
difficult for Unocal to sell its business to a party other than
Chevron. These provisions include the prohibition on Unocal
generally from soliciting any acquisition proposal or offer for
a competing transaction, the requirement that Unocal pay
termination fees of up to $500 million in the aggregate if
the merger agreement is terminated in specified circumstances
thereafter and an alternative transaction is entered into or
completed and the requirement that Unocal submit the merger
agreement and the merger to a vote of Unocals stockholders
even if the Unocal board changes its recommendation. See
The Merger Agreement Covenants,
The Merger Agreement Termination of the Merger
Agreement and The Merger Agreement
Covenants Unocal Boards Recommendation to
Stockholders.
Chevron required Unocal to agree to these provisions as a
condition to Chevrons willingness to enter into the merger
agreement. These provisions, however, might discourage a third
party that might have an interest in acquiring all of or a
significant part of Unocal from considering or proposing that
acquisition, even if that party were prepared to pay
consideration with a higher per share market price than the
current proposed merger consideration. Furthermore, the
termination fee may result in a potential competing acquiror
proposing to pay a lower per share price to acquire Unocal than
it might otherwise have proposed to pay.
The price of Chevron common stock may be affected by
factors different from those affecting the price of Unocal
common stock.
Holders of Unocal common stock may receive Chevron common stock
in the merger and may thus become holders of Chevron common
stock. Chevrons business is different in certain ways from
that of Unocal, and Chevrons results of operations, as
well as the price of Chevron common stock, may be affected by
factors different from those affecting Unocals results of
operations and the price of Unocal common stock. The price of
Chevron common stock may fluctuate significantly following the
merger, including fluctuation due to factors over which Chevron
has no control. For a discussion of Chevrons business and
Unocals business and certain factors to consider in
connection with their businesses, including risk factors
associated with their businesses, see Chevrons Annual
Report on Form 10-K for the fiscal year ended
December 31, 2004 and Unocals Annual Report on
Form 10-K for the fiscal year ended December 31, 2004,
which are incorporated by reference into this proxy
statement/prospectus.
Failure to complete the merger could negatively impact the
stock price and the future business and financial results of
Unocal.
Although Unocal has agreed that its board will, subject to
fiduciary exceptions, recommend that stockholders approve the
proposal relating to the merger, there is no assurance that this
proposal will be
21
approved, and there is no assurance that Chevron and Unocal will
receive the necessary regulatory approvals or satisfy the other
conditions to the completion of the merger. If the merger is not
completed for any reason, Unocal will be subject to several
risks, including the following:
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Unocal may be required to pay Chevron fees of up to
$500 million in the aggregate if the merger agreement is
terminated under certain circumstances and Unocal enters into an
alternative transaction; |
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The current market price of Unocal common stock may reflect a
market assumption that the merger will occur, and a failure to
complete the merger could result in a negative perception by the
market of Unocal generally and a resulting decline in the market
price of Unocal common stock; |
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Many costs relating to the merger (such as legal, accounting and
financial advisory fees) are payable by Unocal whether or not
the merger is completed; |
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There may be substantial disruption to the business of Unocal
and a distraction of its management and employees from
day-to-day operations, because matters related to the merger
(including integration planning) may require substantial
commitments of time and resources, which could otherwise have
been devoted to other opportunities that could have been
beneficial; and |
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Unocal would continue to face the risks that it currently faces
as a independent company, as further described in the documents
that Unocal has filed with the SEC that are incorporated by
reference into this proxy statement/ prospectus. |
In addition, the company would not realize any of the expected
benefits of having completed the merger. If the merger is not
completed, these risks may materialize and materially adversely
affect Unocals business, financial results, financial
condition and stock price.
The shares of Chevron common stock to be received by
Unocal stockholders as a result of the merger will have
different rights from the shares of Unocal common stock.
The rights associated with Unocal common stock are different
from the rights associated with Chevron common stock. See the
section of this proxy statement/prospectus titled
Comparison of Stockholder Rights on page 73 for
a discussion of the different rights associated with Chevron
common stock.
Risk Factors Relating to Chevron
Chevron is a major fully integrated petroleum company with a
diversified business portfolio, strong balance sheet, and a
history of generating sufficient cash to fund capital and
exploratory expenditures and to pay dividends. Nevertheless,
some inherent risks could materially impact the companys
financial results of operations or financial condition.
Chevron is exposed to the effects of changing commodity
prices.
Chevron is primarily in a commodities business with a history of
price volatility. The single largest variable that affects the
companys results of operations is crude oil prices. Except
in the ordinary course of running an integrated petroleum
business, Chevron generally does not seek to hedge its exposure
to the effects of changes to the price of crude oil. A
significant, persistent decline in crude oil prices may have a
material adverse effect on its results of operations and its
capital and exploratory expenditure plans.
The scope of Chevrons business will decline if the
company does not successfully develop resources.
Chevron is in an extractive business; therefore, if it is not
successful in replacing the crude oil and natural gas it
produces with good prospects for future production, the
companys business will decline. Creating and maintaining
an inventory of projects depends on many factors, including
obtaining rights to explore, develop and produce hydrocarbons in
promising areas, drilling success, ability to bring long lead-
22
time, capital intensive projects to completion on budget and
schedule, and efficient and profitable operation of mature
properties.
Chevrons operations could be disrupted by natural or
human factors.
Chevron operates in both urban areas and remote and sometimes
inhospitable regions. The companys operations and
facilities are therefore subject to disruption from either
natural or human causes, including hurricanes, earthquakes,
floods and other forms of severe weather, war, civil unrest and
other political events, fires and explosions, any of which could
result in suspension of operations or harm to people or the
natural environment.
Chevrons business subjects the company to liability
risks.
Chevron produces, transports, refines and markets materials with
potential toxicity, and it purchases, handles and disposes of
other potentially toxic materials in the course of the
companys business. Chevron operations also produce
byproducts, which may be considered pollutants. Any of these
activities could result in liability, either as a result of an
accidental, unlawful discharge or as a result of new conclusions
on the effects of the companys operations on human health
or the environment.
Political instability could harm Chevrons
business.
Chevrons operations, particularly exploration and
production, can be affected by changing economic, regulatory and
political environments in the various countries in which it
operates. As has occurred in the past, actions could be taken by
host governments to increase public ownership of the
companys partially or wholly owned businesses, and/or to
impose additional taxes or royalties.
In some locations, host governments have imposed restrictions,
controls and taxes, and in others, political conditions have
existed that may threaten the safety of employees and the
companys continued presence in those countries. Internal
unrest, acts of violence or strained relations between a host
government and the company or other governments may affect the
companys operations. Those developments have, at times,
significantly affected the companys related operations and
results, and are carefully considered by management when
evaluating the level of current and future activity in such
countries. At December 31, 2004, approximately
27 percent of Chevrons proved reserves were located
in Kazakhstan. The company also has significant interests in
Organization of Petroleum Exporting Countries (OPEC)-member
countries including Indonesia, Nigeria, Venezuela and the
Partitioned Neutral Zone between Saudi Arabia and Kuwait.
Approximately 25 percent of the companys net proved
reserves, including affiliates, were located in OPEC countries
at December 31, 2004.
23
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus and the SEC filings that are
incorporated by reference into this proxy statement/prospectus
contain or incorporate by reference forward-looking statements
that have been made pursuant to the provisions of, and in
reliance on the safe harbor under, the Private Securities
Litigation Reform Act of 1995. These forward-looking statements
are not historical facts, but rather are based on current
expectations, estimates and projections. Words such as
anticipates, expects,
intends, plans, believes,
seeks, could, should,
will, projects, estimates
and similar expressions are intended to identify forward-looking
statements. These statements are not guarantees of future
performance and are subject to risks, uncertainties and other
factors, some of which are beyond our control, are difficult to
predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements.
In that event, Unocals or Chevrons business,
financial condition or results of operations could be materially
adversely affected, and investors in Unocals or
Chevrons securities could lose part or all of their
investment. You should not place undue reliance on these
forward-looking statements, which speak only as of the date of
this proxy statement/prospectus or, in the case of documents
incorporated by reference, the date referenced in those
documents. We are not obligated to update these statements or
publicly release the result of any revision to them to reflect
events or circumstances after the date of this proxy
statement/prospectus or, in the case of documents incorporated
by reference, the date referenced in those documents, or to
reflect the occurrence of unanticipated events.
You should understand that the following important factors, in
addition to those discussed elsewhere in this document and in
the documents which are incorporated by reference, could affect
the future results of Chevron and Unocal, and of the combined
company after the merger, and could cause those results or other
outcomes to differ materially from those expressed in our
forward-looking statements:
Economic and Industry Conditions
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materially adverse changes in economic, financial or industry
conditions generally or in the markets served by our companies |
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the competitiveness of alternative energy sources or product
substitutes |
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actions of competitors |
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crude oil and natural gas prices |
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refining and marketing margins |
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petrochemicals prices and competitive conditions affecting
supply and demand for aromatics, olefins and additives products |
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changes in demographics and consumer preferences |
Transaction or Commercial Factors
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the outcome of negotiations with partners, governments,
suppliers, unions, customers or others |
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our ability to successfully integrate the operations of Chevron
and Unocal after the merger and to minimize the diversion of
managements attention and resources during the integration
process |
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the process of, or conditions imposed in connection with,
obtaining regulatory approvals for the merger |
Political/ Governmental Factors
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political instability or civil unrest in the areas of the world
relating to our operations |
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political developments and laws and regulations, such as forced
divestiture of assets, restrictions on production or on imports
or exports, price controls, tax increases and retroactive tax
claims, expropriation of assets, cancellation of contract
rights, and environmental laws or regulations |
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potential liability for remedial actions under environmental
regulations and litigation |
Operating Factors
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potential failure to achieve expected production from existing
and future crude oil and natural gas development projects |
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potential delays in the development, construction or start-up of
planned projects |
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successful introduction of new products |
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labor relations |
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accidents or technical difficulties |
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changes in operating conditions and costs |
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weather and natural disasters |
Advances in Technology
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crude oil, natural gas and petrochemical project advancement |
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the development and use of new technology by us or our
competitors |
25
THE MERGER
General
Unocals board of directors is using this document to
solicit proxies from the holders of Unocal common stock for use
at the Unocal special meeting, where holders of Unocal common
stock will be asked to vote upon approval and adoption of the
merger agreement and the merger. In addition, Chevron is sending
this document to Unocal stockholders as a prospectus in
connection with the issuance of shares of Chevron common stock
in exchange for Unocal common stock in the merger.
The Companies
Chevron. Chevron Corporation was incorporated in Delaware
in 1926 as Standard Oil Company of California. In May 2005, the
company changed its name from ChevronTexaco Corporation to
Chevron Corporation. Chevron manages its investments in
subsidiaries and affiliates and provides administrative,
financial and management support to U.S. and foreign
subsidiaries that, in the aggregate, engage in fully integrated
petroleum operations, chemicals operations, coal mining, power
and energy services. The company conducts business activities in
the United States and approximately 180 other countries.
Petroleum operations consist of exploring for, developing and
producing crude oil and natural gas; refining crude oil into
finished petroleum products; marketing crude oil, natural gas
and the many products derived from petroleum; and transporting
crude oil, natural gas and petroleum products by pipeline,
marine vessel, motor equipment and rail car. Chemicals
operations include the manufacture and marketing, by affiliates,
of commodity petrochemicals for industrial uses, and the
manufacture and marketing, by a consolidated subsidiary, of fuel
and lubricating oil additives.
Chevrons exploration and production of crude oil, natural
gas liquids and natural gas operations may be referred to as
upstream activities. Refining, marketing and
transportation may be referred to as downstream
activities. The upstream and downstream activities of the
company are widely dispersed geographically. The company has
operations in North America, South America, Europe, Africa,
Middle East, Central and Far East Asia, and Australia. Besides
the large upstream and downstream businesses, the companys
other comparatively smaller business segment is chemicals, which
is conducted by the companys 50 percent-owned
affiliate Chevron Phillips Chemical Company LLC
(CPChem) and the wholly owned Chevron Oronite
Company. CPChem has operations in the United States, Puerto
Rico, Singapore, China, South Korea, Saudi Arabia, Qatar, Mexico
and Belgium. Chevron Oronite is a fuel and lubricating-oil
additives business that owns and operates facilities in the
United States, France, the Netherlands, Singapore, Japan and
Brazil and has equity interests in facilities in India and
Mexico.
Blue Merger Sub. Blue Merger Sub Inc., a wholly owned
subsidiary of Chevron, which we refer to as Merger
Sub, was incorporated in Delaware on April 1, 2005
solely for the purpose of effecting the merger with Unocal. It
has not carried on any activities other than in connection with
the merger agreement. Blue Merger Subs principal place of
business is located at 6001 Bollinger Canyon Road,
San Ramon, California 94583 and its telephone number is
(925) 842-1000.
Unocal. Unocal Corporation was incorporated in Delaware
in 1983 to operate as the parent entity of Union Oil Company of
California, which was incorporated in California in 1890.
Virtually all of Unocals operations are conducted by Union
Oil and its subsidiaries.
Unocal is one of the worlds leading independent oil and
gas exploration and production companies, with principal
operations in North America and Asia. It is also a leading
producer of geothermal energy and a provider of electrical power
in Asia. Other activities include ownership in proprietary and
common carrier pipelines, natural gas storage facilities and the
marketing of hydrocarbon commodities.
Background of the Merger
The board of directors and senior management of Unocal have
regularly discussed opportunities to maximize the potential of
Unocals portfolio of assets, as well as Unocals
overall position in the industry.
26
See Unocals Reasons for the Merger;
Recommendation of Unocals Board of Directors. In
that regard, Unocal had in previous years considered the
possibility of strategic transactions with various industry
participants and had discussed with Chevron the possibility of a
strategic business combination between the two companies.
In December 2004, the chairman and chief executive officer of a
non-U.S. industry participant (to which we refer in this
section as the initial potential acquiror) contacted
Charles R. Williamson, Unocals chairman and chief
executive officer, and in the following weeks expressed his
companys potential interest in an acquisition of Unocal.
Mr. Williamson and other senior executives from Unocal
discussed this matter generally with the initial potential
acquiror during the following weeks.
On January 6, 2005, a major publication in the United
Kingdom published a report indicating a potential bid for
Unocal. U.S.-based media published similar reports on the
following day. On January 6, David J. OReilly,
chairman and chief executive officer of Chevron, contacted
Mr. Williamson to inquire whether Unocal was interested in
discussing a potential strategic transaction with Chevron.
Mr. Williamson indicated that Unocal was not at that time
seeking offers for the company. During the following days,
Mr. Williamson and the chairman and chief executive officer
of the initial potential acquiror had additional communications
in which they discussed the effect of the recent publicity, and
the initial potential acquiror presented its views concerning
the timing of a potential transaction.
On January 12, a senior executive from another
non-U.S. industry participant (to which we refer in this
section as the second potential acquiror), contacted
Mr. Williamson and informed him that, if Unocal was
considering a strategic transaction with another industry
participant, his company might have an interest in exploring a
potential acquisition of Unocal. Following further discussions
between Mr. Williamson and that senior executive, Unocal
and the second potential acquiror executed a confidentiality
agreement on February 10. During the weeks following execution
of the confidentiality agreement, members of senior management
of Unocal and of the second potential acquiror exchanged
information on a confidential basis (including face-to-face
meetings). On January 24, Unocal retained Morgan Stanley as its
financial advisor.
On February 7, Mr. OReilly called
Mr. Williamson to express Chevrons interest in a
potential strategic transaction. Mr. Williamson informed
Mr. OReilly that, although Unocal was not soliciting
offers, it had been approached by one or more companies and
anticipated that acquisition proposals would be forthcoming.
Mr. Williamson indicated that any such proposal would be
evaluated by Unocals board to determine the course of
action that was in the best interests of Unocals
stockholders, and that any proposal that Chevron might decide to
make would be evaluated in that light.
At a meeting of Unocals board on February 8,
Mr. Williamson reviewed his contacts to date, and the
status of discussions, with each potential counterparty. The
board also discussed general trends, and Unocals overall
position, in the oil and gas industry and the advisability of
entering into a transaction of the nature that had been
discussed with each of the three potential counterparties.
Mr. OReilly subsequently called Mr. Williamson
to propose a process for evaluating a possible transaction.
Mr. OReilly requested that Unocal negotiate with
Chevron on an exclusive basis. Mr. Williamson informed
Mr. OReilly that although Unocal was willing to
consider a proposal from Chevron, Unocal was not prepared to
grant Chevron exclusivity. Mr. OReilly proposed a
period of mutual due diligence protected by a confidentiality
agreement. Messrs. OReilly and Williamson agreed to
move forward on that basis to determine if a mutually
satisfactory transaction could be developed. Within a matter of
days, Chevron retained Pillsbury Winthrop Shaw Pittman LLP to
serve as legal advisor and Lehman Brothers Inc. to serve as
financial advisor.
Unocal and Chevron executed a confidentiality agreement and,
during the week of February 14, Unocal began to provide
non-public information to Chevron in response to its various
requests (including face-to-face meetings).
On February 16, Unocals board met and was updated on
the status of discussions with each of the three parties that
had contacted Unocal and expressed interest in a business
combination. The board also
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discussed the anticipated timing for receiving definitive
proposals from each of those parties. At this meeting, the board
authorized Unocals senior management to continue
discussions with the three potentially interested parties and
engaged Wachtell, Lipton, Rosen & Katz as legal counsel.
On February 23, the Chevron board of directors met and,
after presentations by management and outside financial advisors
and legal counsel and discussion of the presentations,
authorized Mr. OReilly to make a proposal to Unocal.
On February 26, Mr. OReilly met with
Mr. Williamson and delivered a written proposal, subject to
customary conditions (such as due diligence and approval of
definitive agreements), contemplating an all-stock merger at an
exchange ratio of 0.94 share of Chevron common stock per
share of Unocal common stock.
On February 25, Mr. Williamson was contacted by the
chairman and chief executive officer of the initial potential
acquiror, who indicated a strong interest in commencing a more
detailed due diligence review of Unocal. After executing a
confidentiality agreement with the initial potential acquiror,
Unocal, directly and through its financial advisor, began
providing non-public information to the initial potential
acquiror and its financial advisor. During this time, Unocal,
directly and through its financial advisor, also continued to
provide non-public information to the second potential acquiror.
On February 27, the board of directors of Unocal met to
discuss the status of the interest in Unocal of each of the
three parties, including the proposal from Chevron. At this
meeting, the board directed senior management to inform Chevron
that the terms of its February 26 proposal were not sufficiently
attractive to warrant pursuing a transaction. The board also
authorized Unocals senior management to continue
discussions with the two other interested parties with a view to
promptly developing proposals from each of those parties.
On March 1, Mr. Williamson advised
Mr. OReilly that the Unocal board had determined to
decline Chevrons offer and that Unocal desired more
broadly to evaluate its options. Mr. OReilly asked
Mr. Williamson to contact him if Unocals thinking
changed. Senior management of Unocal contacted the initial
potential acquiror and the second potential acquiror and
requested preliminary proposals by March 7. Within Chevron,
Mr. OReilly suspended the work of the team evaluating
a possible Unocal transaction.
On March 7, Unocal was contacted by the initial potential
acquiror and the second potential acquiror. A senior executive
of the second potential acquiror orally indicated to
Mr. Williamson that the second potential acquiror was
considering a cash transaction at a price in the high
$50s per share, but cautioned that this indication was
subject to further internal discussions and that the second
potential acquiror was not yet prepared to make a proposal. The
initial potential acquiror submitted a written preliminary
proposal, subject to conditions such as due diligence and
negotiation of definitive agreements, for a cash transaction at
a price of $59 to $62 per share. It indicated that the
acquisition would be financed through bank debt and available
cash, and attached to its proposal letters from financing
sources preliminarily expressing their willingness to provide
acquisition financing for the initial potential acquiror.
On March 8, the Unocal board met and was briefed on the
communications of the previous day. At the conclusion of the
boards discussion and evaluation, the board instructed
senior management to continue to develop and seek to improve
proposals from the initial potential acquiror and the second
potential acquiror. To that end, the board instructed Unocal
management to continue furnishing non-public information about
Unocal to each of those parties as requested. After the board
meeting, senior management of Unocal, as well as Unocals
financial advisor, contacted representatives from the second
potential acquiror and its financial advisor and indicated to
that party that the price range that the second potential
acquiror was considering, if developed into a proposal on the
terms that had been communicated to Unocal on March 7,
would not be the most attractive of Unocals strategic
options. The second potential acquiror indicated that it was not
prepared to submit to Unocal a formal proposal or to increase
its contemplated price substantially at that time but requested
an opportunity to revisit the matter prior to Unocals
decision regarding a transaction.
Unocals representatives also requested that the initial
potential acquiror increase its proposed cash price to above the
upper end of its indicated range and informed the initial
potential acquiror that Unocal
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would respond promptly to any requests for additional legal and
business due diligence. The initial potential acquirors
advisors performed legal due diligence at the offices of
Unocals legal advisor beginning on March 14, and
members of senior management of the parties held face-to-face
meetings from March 12 to March 15.
On March 14 and 15, major U.S. publications
reported potential bids for Unocal, this time identifying a
number of bidders, including Chevron. On March 18, the
second potential acquiror indicated to Unocal a willingness to
explore a higher price than it had initially indicated and to
present to Unocal in due course a proposal to that effect.
During the week of March 21, the second potential acquiror
performed both legal and business due diligence at the offices
of Unocals legal advisor.
During the week of March 21, Unocals legal advisor
sent a draft merger agreement to the initial potential acquiror
and the second potential acquiror and engaged in negotiations
with legal advisors for each of those bidders relating to the
terms of the proposed agreement. At that time,
Mr. Williamson also communicated to each of those bidders
that Unocals board was scheduled to meet on March 30
to consider final proposals.
On March 28, Mr. Williamson informed
Mr. OReilly that Unocal was engaged in negotiations
with other bidders and expected that proposals from those
bidders would be considered at the boards March 30
meeting. Mr. Williamson indicated to Mr. OReilly
that if Chevron wished to make an improved proposal, it should
do so in time for the proposal to be considered at the
March 30 meeting of Unocals board.
Mr. OReilly interpreted that conversation to mean
that Unocal would entertain an offer from Chevron.
On March 29, Chevron made a revised all-stock proposal at
an exchange ratio of 1.03 shares of Chevron common stock
per Unocal common share and also delivered a proposed merger
agreement to Unocal. On that same day, the chairman and chief
executive officer of the initial potential acquiror communicated
to Mr. Williamson that his company would not present a
proposal for consideration at the March 30 board meeting
and his expectation that his company would not be prepared to
submit a proposal for a period of up to several weeks, but that
his company would endeavor to significantly accelerate its
anticipated timing.
On March 30, a senior executive from the second potential
acquiror orally communicated to Mr. Williamson a proposal
to acquire Unocal at a price of $58 in cash per share. He
indicated that this proposal remained conditioned on board
approval and that the proposal had not been presented to or
discussed with the board of directors of the second potential
acquiror. The Unocal board met that day to evaluate the various
proposals. Representatives of senior management and
Unocals financial and legal advisors were also present and
discussed with the board the terms of the proposal received from
Chevron and the most recent discussions with the two other
bidders, including the consideration indicated by the second
potential acquiror, the absence of any assurance that the second
potential acquiror would receive the requisite board approvals
to submit a definitive proposal to, or to engage in an
acquisition transaction with, Unocal and the existence of open
issues in the draft merger agreement with the second potential
acquiror. With regard to the Chevron proposal, management and
Unocals legal advisors informed the board that the terms
of the proposed merger agreement would require significant
changes to provide satisfactory assurance of consummation.
Mr. Williamson also discussed with the board the
desirability of including some cash in the consideration
proposed by Chevron. After discussing these matters, the board
instructed senior management to request a definitive proposal
from the initial potential acquiror no later than April 2,
and to inform the second potential acquiror that Unocal was not
prepared to pursue the potential transaction proposed by the
second potential acquiror. The board also instructed senior
management to continue discussions with Chevron and to engage in
a due diligence examination of Chevron. Unocals legal
advisors continued negotiations of a merger agreement with each
of Chevron and the initial potential acquiror. On that same day,
Mr. Williamson also informed a senior executive of the
second potential acquiror of the boards view of the second
potential acquirors proposal.
On March 31, Mr. Williamson contacted
Mr. OReilly and arranged for a team of Unocal
personnel, led by Unocals executive vice president and
chief financial officer, Terry G. Dallas, to conduct financial
and operating due diligence with respect to Chevron.
Mr. Williamson also informed Mr. OReilly that the
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Unocal board would meet again on April 2, at which time it
would likely make a final decision as to whether to pursue a
proposed transaction.
On April 1, Mr. Williamson spoke with the chairman and
chief executive officer of the initial potential acquiror, who
said he expected that the matters that had resulted in the
initial potential acquirors not submitting a proposal
prior to the March 30 board meeting would be resolved in
time for the initial potential acquiror to submit a definitive
acquisition proposal for consideration by Unocals board at
its April 2 meeting.
Also on April 1, a member of Chevrons senior
management reported to Mr. OReilly that, based on
discussions during the prior days due diligence meeting
with Unocal, he believed Unocal would look more favorably upon
an offer that included a cash component. Later that day,
Mr. OReilly reiterated to Mr. Williamson
Chevrons desire to pursue a strategic merger and indicated
a willingness to include a cash component in the transaction.
Early on the morning of April 2, the chairman and chief
executive officer of the initial potential acquiror informed
Mr. Williamson that his company was not prepared to present
a proposal at that time and requested that, in the event the
board opted not to pursue a transaction in April,
Mr. Williamson inform and consider the initial potential
acquiror in future discussions.
On April 2, Mr. OReilly convened a meeting of
the Chevron board of directors at which Chevron personnel again
presented the operational and financial case for the proposed
acquisition. The meeting also included presentations by
Chevrons legal counsel and financial advisor. After
discussion, the board authorized Mr. OReilly to
submit a revised proposal for a combination with Unocal that
would provide for the conversion of outstanding Unocal shares
into (i) 0.7725 of a share of Chevron common stock and
$16.25 in cash per Unocal share, (ii) Chevron common stock
at an exchange ratio of 1.03 Chevron shares per Unocal share, or
(iii) $65 in cash per Unocal share, all subject to
proration to preserve an overall mix of 0.7725 of a share of
Chevron common stock and $16.25 in cash for all of the
outstanding shares of Unocal common stock taken together.
Mr. OReilly sent Mr. Williamson a letter
memorializing the revised offer later that afternoon.
Chevrons legal counsel also delivered a revised merger
agreement to Unocals legal counsel.
On the evening of April 2, the Unocal board met to discuss
the Chevron proposal as well as the most recent communications
with the initial potential acquiror. At this meeting,
Unocals financial advisor summarized its financial
analyses relating to the Chevron proposal and, at the conclusion
of its presentation, noted that, absent any material changes in
the merger proposal, it would be prepared to deliver its opinion
regarding the fairness from a financial point of view of the
consideration proposed by Chevron in the revised merger
agreement to holders of Unocal common stock. After discussing
the terms of Chevrons revised proposal, the board
authorized Unocals management to continue negotiations
with Chevron and to seek to finalize a definitive merger
agreement to be presented to the board the following evening,
April 3. Mr. Williamson then called
Mr. OReilly to advise of the Unocal boards
decision. Negotiations between Unocal and Chevron on the revised
merger agreement commenced the following morning.
On the evening of April 3, the Unocal board met to discuss
and evaluate the Chevron proposal in light of the revised merger
agreement, which had been negotiated by Unocals senior
management and legal counsel since the Unocal board meeting of
April 2. After a detailed discussion with counsel of the terms
of the proposed agreement and receipt of Morgan Stanleys
oral fairness opinion (which was confirmed in writing as of
April 4, 2005), the Unocal board approved the merger and
the merger agreement with Chevron.
At 4:30 a.m., Pacific time, on April 4,
Messrs. OReilly and Williamson signed the agreement
and shortly thereafter announced the transaction to the public
through a joint press release issued before the opening of
trading.
On June 22, Unocal received a merger proposal from CNOOC
Limited, an affiliate of China National Offshore Oil Company, to
acquire all outstanding shares of Unocal for $67 in cash. The
board of directors
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of Unocal met telephonically on June 22 to discuss developments
relating to the CNOOC Limited proposal and the merger with
Chevron. On that date, Unocal announced that the recommendation
of its board of directors in favor of the merger with Chevron
remained in effect and that it intended to evaluate the CNOOC
proposal in a manner consistent with the board of
directors fiduciary duties and Unocals obligations
under the merger agreement with Chevron. On June 23,
Chevron granted Unocal a waiver under the merger agreement
enabling Unocal to engage in discussions with CNOOC and its
representatives at any time prior to the date of the Unocal
stockholder vote on the merger with Chevron. Unocal announced
that it intended promptly to commence discussions with CNOOC,
although there is no assurance that an agreement with CNOOC
would be reached. Unocal intends to update its stockholders
regarding the CNOOC proposal as developments warrant.
Unocals Reasons for the Merger; Recommendation of
Unocals Board of Directors
The Unocal board of directors, at a special meeting held on
April 3, 2005, determined that the merger and the merger
agreement are advisable, fair to and in the best interests of
Unocal and its stockholders. Accordingly, the Unocal board
unanimously recommends that you vote FOR approval and
adoption of the merger and the merger agreement at the special
meeting and any adjournment of the special meeting.
In the course of making this determination and its
recommendation, the board consulted with management, as well as
its financial and legal advisors, and considered a number of
factors, including the following:
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the boards familiarity with, and understanding of,
Unocals business, financial condition, results of
operations, current business strategy and earnings and prospects
and of Chevrons business, financial condition, results of
operations, business strategy and earnings (including the report
of Unocals management and financial advisor on the results
of their due diligence review of Chevron); |
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the boards understanding of the current and prospective
markets in which Unocal operates, including global, national and
local economic conditions, the competitive landscape for oil and
gas industry participants generally and the likely effect of
these factors on Unocal in light of, and in the absence of, the
merger; |
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the boards understanding, and managements review, of
Unocals current and prospective holdings, including
Unocals international and deepwater assets, and the
boards and managements views concerning maximizing
the future benefits relating to these holdings in view of
Unocals size and position in the oil and gas industry. In
this regard, Unocals board and management believe that: |
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maximizing Unocals unique international asset base would
require very significant capital outlays and the assumption of a
degree of risk and potential volatility in the results of the
business that in each case would be borne significantly more
readily if the company were larger and more diversified; and |
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by virtue of its financial and technical resources and
geographic scope, Chevron would be better positioned, and
therefore more likely, to develop these prospects without
subjecting Chevron to the same degree of volatility; |
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managements review, and the boards understanding, of
the geopolitical risks inherent in Unocals asset
portfolio, and of the likelihood that a business combination
with Chevron would diversify these risks significantly. In this
regard, the board noted that on a barrels of oil-equivalent
basis, as of December 31, 2004, approximately
67 percent of Unocals oil and gas production and
approximately 74 percent of Unocals proved oil and
gas reserves were located outside the United States; |
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the fact that, because most of the merger consideration is
payable in the form of Chevron shares, Unocal stockholders will
have the opportunity to participate in the performance of the
combined post-merger company. In that regard, the Unocal board
understood that the volatility of prices for oil and gas would
cause the value of the merger consideration to fluctuate,
perhaps significantly, but |
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was of the view that on a long-term basis it would be desirable
for stockholders to have an opportunity to retain some
continuing investment in the post-merger combined company.
Unocals board and management noted that the combined
company was expected to be highly competitive across all key
aspects of the energy sector and would benefit from the
integration of Unocals and Chevrons complementary
businesses and strategies and from the combined expertise of
each companys personnel. The board noted specifically the
strengthening of the combined companys operations in the
following core geographic areas: |
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the Asia-Pacific region, where, after the merger, Chevron is
expected to be in the top tier of natural gas producers and
marketers, the top oil and gas producer in Thailand and will
have an enhanced presence in key areas such as Indonesia; |
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the Gulf of Mexico, where, after the merger, Chevron is expected
to have an enhanced position in terms of available assets and
deepwater opportunities; |
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the Caspian Region, where the acquisition will give Chevron the
second-largest interest in oil producing operations in the
Azerbaijan International Operating Company and will broaden
Chevrons status as a leading oil company in that region. |
The board also noted the key ongoing business strategies shared
by each of the companies, including:
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maintaining focus on high-impact exploration and growth and
leveraging Unocals advantaged positions in the Gulf of
Thailand and deepwater Indonesia; |
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building large-scale businesses in Asia and pursuing regional
expansion in Asia in general; |
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continuing exploration and development efforts in the Gulf of
Mexico deepwater; and |
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the greater likelihood of pursuing these strategies effectively,
in light of the market conditions and the oil and gas industry
landscape, if the companies were combined; |
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the boards belief, supported by the views and information
provided by Unocals management and financial advisor, that
Unocals stock price following the publication in early
2005 of news reports relating to a potential transaction (see
Background of the Merger) reflected, in
part, takeover speculation and therefore was higher than
Unocals unaffected trading price, and that the
consideration offered by Chevron in the merger represented a
premium to the unaffected trading price of Unocal common stock; |
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the boards understanding, and managements review, of
overall market conditions, including then-current and
prospective commodity prices and Unocals unaffected
trading price, and the boards determination that, in light
of these factors, the timing of a potential transaction was
favorable to Unocal; |
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the fact that the dividend yield of Chevron common stock is
considerably higher than that of Unocal, and the boards
expectation that Unocal stockholders who receive Chevron common
stock in the merger would receive higher annual dividends than
the dividends paid with respect to Unocals common stock; |
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the potential savings from operational synergies and reduced
corporate expenses, currently estimated by Chevron to be
approximately $325 million before tax annually, and the
related potential impact of these savings on the combined
companys earnings; |
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the review by the board with Unocals legal and financial
advisors of the structure of the merger and the financial and
other terms of the merger agreement, including the blend of cash
and stock consideration, the covenants of each party and the
conditions to consummation of the merger; |
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the quantitative analyses of the financial terms of the merger
presented to the board by Unocals financial advisor; |
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the opinion of Unocals financial advisor that, as of the
date of that opinion, and based upon and subject to the
qualifications, assumptions and limitations in the opinion, the
consideration to be received by holders of Unocals common
stock in the merger agreement was fair from a financial point of
view to those stockholders (see Opinion of
Unocals Financial Advisor); |
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the expectation that the merger would qualify as a
reorganization for federal income tax purposes. |
The Unocal board of directors also considered potential risks
associated with the merger in connection with its evaluation of
the proposed transaction, including:
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the risks of the type and nature described under Risk
Factors; |
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the challenges of integrating the businesses and operations of
the two companies, and the risk that the anticipated cost
savings and other expected synergies may not be achieved as and
when planned; |
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with respect to the equity component of the consideration, the
volatility of trading prices of oil and gas companies, which
typically corresponds to changes in commodity prices, and the
fact that the fixed exchange ratio, by its nature, would not
adjust upwards to compensate for declines, or downwards to
compensate for increases, in Chevrons stock price prior to
completion of the merger; and that the terms of the merger
agreement did not include collar provisions or
stock-price-based termination rights that would be triggered by
a decrease in the value of the equity component of the merger
consideration attributable to the Chevron stock price; |
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the interests of certain of Unocals officers and directors
described under Interests of Unocal Directors and
Executive Officers in the Merger; |
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the restrictions on the conduct of Unocals business prior
to the consummation of the merger, requiring Unocal to conduct
its business in the ordinary course consistent with past
practice and in a manner not involving the entry by Unocal into
businesses that are materially different from the businesses of
Unocal on the date of the merger agreement, subject to specific
limitations, which may delay or prevent Unocal from undertaking
business opportunities that may arise pending completion of the
merger; |
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the requirement that Unocal submit the merger agreement to its
stockholders even if the Unocal board withdraws its
recommendation, which could delay or prevent Unocal from
pursuing a superior proposal if one were to become
available; and |
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the risk, which is common in transactions of this type, that the
terms of the merger agreement, including provisions relating to
Unocals payment of a termination fee under specified
circumstances, might discourage other parties that could
otherwise have an interest in a business combination with, or an
acquisition of, Unocal from proposing such a transaction (see
The Merger Agreement Termination of the Merger
Agreement). |
In view of the variety of factors and the quality and amount of
information considered as well as the complexity of these
matters, the board did not find it practicable to, and did not
attempt to, make specific assessments of, quantify, rank or
otherwise assign relative weights to the specific factors
considered in reaching its determination. The Unocal board
conducted an overall analysis of the factors described above,
including thorough discussion with, and questioning of, Unocal
management and Unocals legal and financial advisors, and
considered the factors overall to be favorable to, and to
support, its determination. The board did not undertake to make
any specific determination as to whether any particular factor,
or any aspect of any particular factor, was favorable or
unfavorable to its ultimate determination. Individual members of
the board may have given different weight to different factors.
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Chevrons Reasons for the Merger
Chevron believes that a merger with Unocal presents Chevron with
the opportunity
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to acquire a portfolio of high quality upstream exploration and
production assets that complement Chevrons core areas
worldwide, including the Asia-Pacific, Gulf of Mexico and
Caspian regions; |
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to improve Chevrons resource base, including through the
addition of 1.75 billion barrels of oil-equivalent proved
reserves; and |
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to achieve synergies through the rationalization of duplicate
activities, highgrading the combined companys investment
programs and sharing best practices. |
Accounting Treatment
The combination of the two companies will be accounted for as an
acquisition of Unocal by Chevron using the purchase method of
accounting.
The purchase price (reflecting the cash consideration and the
weighted average price of Chevrons common stock two days
before, two days after and on the day of the announcement of
Monday, April 4, 2005) will be allocated to Unocals
identifiable assets and liabilities based on their respective
estimated fair values at the closing date of the acquisition,
and any excess of the purchase price over those fair values will
be accounted for as goodwill. The valuation of Unocals
assets and liabilities and the finalization of plans for
restructuring after the closing of the merger have not yet been
completed. The allocation of the purchase price reflected in
this proxy statement/prospectus may be revised as additional
information becomes available.
Material Federal Income Tax Consequences of the Merger
The following is a summary of the material United States federal
income tax consequences of the merger to U.S. holders of
Unocal common stock. This summary does not address any tax
consequences arising under the laws of any state, local or
foreign jurisdiction. The summary is based on the Code, United
States Treasury regulations promulgated thereunder,
administrative rulings and court decisions in effect as of the
date of this proxy statement/prospectus, all of which are
subject to change at any time, possibly with retroactive effect.
For purposes of this summary, the term
U.S. holder means:
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a citizen or resident of the United States; |
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a corporation, or other entity taxable as a corporation for
United States federal income tax purposes, created or organized
under the laws of the United States or any of its political
subdivisions; |
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a trust if it (1) is subject to the primary supervision of
a court within the United States and one or more United States
persons have the authority to control all substantial decisions
of the trust, or (2) has a valid election in effect under
applicable Treasury regulations to be treated as a United States
person; or |
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an estate that is subject to United States federal income tax on
its income regardless of its source. |
If a partnership holds Unocal common stock, the tax treatment of
a partner will generally depend on the status of the partners
and the activities of the partnership. If a U.S. holder is
a partner in a partnership holding Unocal common stock, such
holder should consult its tax advisor.
This discussion only addresses Unocal stockholders that hold
their shares of Unocal common stock as a capital asset within
the meaning of Section 1221 of the Code. Further, this
summary does not address all aspects of United States federal
income taxation that may be relevant to a Unocal stockholder in
light of such holders particular circumstances or that may
be applicable to holders subject to special treatment under
United States federal income tax laws (including, for example,
non-United States persons, financial
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institutions, dealers in securities, insurance companies,
tax-exempt entities, holders who acquired Unocal common stock
pursuant to the exercise of employee stock options or otherwise
as compensation, holders subject to the alternative minimum tax
provisions of the Code, and holders who hold Unocal common stock
as part of a hedge, straddle, constructive sale or conversion
transaction). In addition, no information is provided herein
with respect to the tax consequences of the merger under
applicable state, local or non-United States laws.
HOLDERS ARE URGED TO CONSULT WITH THEIR TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING
THE EFFECTS OF UNITED STATES FEDERAL, STATE AND LOCAL, FOREIGN
AND OTHER TAX LAWS.
The merger has been structured to qualify as a reorganization
under Section 368(a) of the Code for United States federal
income tax purposes. It is a condition to each partys
obligation to consummate the merger that it receive an opinion
from its tax counsel, dated as of the closing date of the
merger, 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. These
opinions will be based on representation letters provided by
Chevron and Unocal to be delivered at the time of closing.
No ruling has been or will be sought from the Internal Revenue
Service as to the United States federal income tax consequences
of the merger, and the opinions of counsel are not binding upon
the Internal Revenue Service or any court. Accordingly, there
can be no assurances that the Internal Revenue Service will not
disagree with or challenge any of the conclusions described
herein.
Assuming the merger qualifies as a reorganization within the
meaning of Section 368(a) of the Code, the material United
States federal income tax consequences of the merger to
U.S. holders of Unocal common stock are, in general, as
follows:
Holders Who Receive Solely Chevron Common Stock. A holder
of Unocal common stock will not recognize gain or loss upon
receipt of Chevron common stock solely in exchange for Unocal
common stock, except with respect to cash received in lieu of
fractional shares of Chevron common stock (as discussed below).
The aggregate tax basis of the shares of Chevron common stock
received (including any fractional shares deemed received and
exchanged for cash) will be equal to the aggregate tax basis in
the shares of Unocal common stock surrendered. The holding
period of the Chevron common stock received (including any
fractional shares deemed received and exchanged for cash) will
include the holding period of the shares of Unocal common stock
surrendered.
Holders Who Receive Solely Cash. The exchange of Unocal
common stock solely for cash generally will result in
recognition of gain or loss by the holder in an amount equal to
the difference between the amount of cash received and the
holders tax basis in the Unocal common stock surrendered.
The gain or loss recognized will be long-term capital gain or
loss if, as of the effective date of the merger, the
holders holding period for the Unocal common stock
surrendered exceeds one year. The deductibility of capital
losses is subject to limitations. In some cases, if a holder
actually or constructively owns Chevron common stock after the
merger, the cash received could be treated as having the effect
of the distribution of a dividend under the tests set forth in
Section 302 of the Code, in which case such holder may have
dividend income up to the amount of the cash received. In such
cases, holders that are corporations should consult their tax
advisors regarding the potential applicability of the
extraordinary dividend provisions of the Code.
Holders Who Receive a Combination of Chevron Common Stock and
Cash. If the holders adjusted tax basis in the Unocal
common stock surrendered is less than the sum of the fair market
value, as of the closing date of the merger, of the Chevron
common stock and the amount of cash received by the holder, then
the holder will recognize gain in an amount equal to the lesser
of (1) the sum of the amount of cash and the fair market
value of the Chevron common stock received, minus the adjusted
tax basis of the Unocal common stock surrendered in exchange
therefor, and (2) the amount of cash received by the holder
in the merger. However, if a holders adjusted tax basis in
the Unocal common stock surrendered is greater than the sum of
the amount of cash and the fair market value of the Chevron
common stock
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received, the holders loss will not be currently allowed
or recognized for United States federal income tax purposes. If
a holder of Unocal common stock acquired different blocks of
Unocal common stock at different times or different prices, the
holder should consult the holders tax advisor regarding
the manner in which gain or loss should be determined. Any
recognized gain generally will be long-term capital gain if, as
of the effective date of the merger, the holders holding
period with respect to the Unocal common stock surrendered
exceeds one year. In some cases, if the holder actually or
constructively owns Chevron common stock other than Chevron
common stock received in the merger, the recognized gain could
be treated as having the effect of the distribution of a
dividend under the tests set forth in Section 302 of the
Code, in which case such gain would be treated as dividend
income. In such cases, holders that are corporations should
consult their tax advisors regarding the potential applicability
of the extraordinary dividend provisions of the
Code. The aggregate tax basis of the Chevron common stock
received (including any fractional shares deemed received and
exchanged for cash) by a holder that exchanges its shares of
Unocal common stock for a combination of Chevron common stock
and cash will be equal to the aggregate adjusted tax basis of
the shares of Unocal common stock surrendered, reduced by the
amount of cash received by the holder (excluding any cash
received instead of fractional shares of Chevron common stock)
and increased by the amount of gain, if any, recognized by the
holder (excluding any gain recognized with respect to cash
received in lieu of fractional shares of Chevron common stock)
on the exchange. The holding period of the Chevron common stock
received (including any fractional shares deemed received and
exchanged for cash) will include the holding period of the
Unocal common stock surrendered. Holders receiving a combination
of Chevron common stock and cash should consult their tax
advisors regarding the manner in which cash and Chevron common
stock should be allocated among the holders shares of
Unocal common stock and the manner in which the above rules
would apply in the holders particular circumstances.
Cash in Lieu of Fractional Shares. A holder of Unocal
common stock who receives cash in lieu of a fractional share of
Chevron common stock generally will be treated as having
received such fractional share in the merger and then as having
received cash in exchange for such fractional share. Gain or
loss generally will be recognized based on the difference
between the amount of cash received in lieu of the fractional
share and the tax basis allocated to such fractional share of
Chevron common stock. Such gain or loss generally will be
long-term capital gain or loss if, as of the effective date of
the merger, the holding period for such shares is greater than
one year.
Backup Withholding and Information Reporting. Payments of
cash made in connection with the merger may, under certain
circumstances, be subject to information reporting and
backup withholding at a rate of 28 percent,
unless a holder of Unocal common stock provides proof of an
applicable exemption or furnishes its taxpayer identification
number, and otherwise complies with all applicable requirements
of the backup withholding rules. Any amounts withheld from
payments to a holder under the backup withholding rules are not
additional tax and will be allowed as a refund or credit against
the holders federal income tax liability, provided the
required information is furnished to the Internal Revenue
Service.
Regulatory Matters
U.S. Antitrust. Under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, which we
refer to as the HSR Act, and the related rules, the merger may
not be completed until notifications have been submitted to the
FTC and the Antitrust Division of the U.S. Department of
Justice, furnishing them with certain information, and specified
waiting period requirements have been satisfied. Chevron and
Unocal submitted the applicable forms on April 19, 2005.
The FTC has assumed responsibility to conduct the federal
antitrust review of the proposed transaction. On May 19,
2005, the FTC issued a Request for Additional Information and
Documentary Material to Chevron and Unocal, thereby extending
the waiting period until 30 days after the parties have
complied with the request, unless terminated earlier by the FTC.
Chevron and Unocal entered into separate consent agreements with
the FTC to address antitrust issues associated with the proposed
transaction and to resolve pending litigation between Unocal and
the FTC concerning Unocals patents for reformulated
gasoline, or the RFG patents.
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Under the terms of the proposed consent agreements, Chevron and
Unocal will cease enforcing Unocals RFG patents, will not
undertake any new enforcement efforts related to the patents,
and will cease all attempts to collect damages, royalties, or
other payments related to the use of any of the patents. These
obligations will become effective on the date the merger is
consummated. Within 30 days of the effective date of the
merger, the companies will file the necessary documents with the
U.S. Patent and Trademark Office to disclaim or dedicate to
the public the remaining term of the relevant U.S. patents.
In addition, the companies will move to dismiss all pending
legal actions related to alleged infringement of the RFG
patents, including the two actions currently pending before the
U.S. District Court for the District of California. The
agreements will expire 20 years after the date they become
final.
The FTC accepted the consent agreements for public comment on
June 10 and placed the consents on the public record for a
30 day public comment period, which expires on July 9,
2005. After reviewing the public comments, if any, the FTC can
vote to enter the consent agreements as Final Orders or withdraw
from the proposed consent agreements. If it determines to
withdraw from the consent agreements, the FTC may seek to
exercise its authority to challenge the merger by seeking a
federal court order temporarily enjoining the transaction
pending conclusion of an administrative hearing. The FTC may
also proceed with an administrative proceeding if the injunction
is denied, and if the merger is found to be anticompetitive,
challenge it after the fact. If the consent agreements are
withdrawn, we can give no assurance that a challenge to the
merger will not be made or, if such a challenge is made, that it
would be unsuccessful.
With the acceptance of the proposed consent agreements for
public comment, the FTC granted early termination of the HSR Act
waiting period on June 10, 2005. This termination of the
HSR Act waiting period satisfies a condition to the merger. See
The Merger Agreement Conditions to the
Completion of the Merger on page 66.
Other Laws. Chevron and Unocal conduct operations in a
number of jurisdictions where other regulatory filings or
approvals may be required or advisable in connection with the
completion of the merger. We have made filings in Brazil, Canada
and the Netherlands, and we presently expect to file in
Argentina. On May 24, 2005, Chevron and Unocal received the
requisite Canadian approvals in the form of an Advance Ruling
Certificate from the Canadian Competition Bureau. We are
currently in the process of reviewing whether other filings or
approvals may be required or desirable in other jurisdictions.
We recognize that some of these filings may not be completed
before the closing, and that some of these approvals, which are
not as a matter of practice required to be obtained prior to
effectiveness of a merger transaction, may not be obtained prior
to the closing.
General. While we believe that we will receive the
remaining requisite regulatory approvals and clearances for the
merger, it is possible that governmental entities having
jurisdiction over Chevron and Unocal may challenge, withhold
approval or prohibit the merger on antitrust grounds, or seek
regulatory concessions as conditions for granting approval of
the merger. If any regulatory bodys approval contains
terms which would result in or be reasonably likely to result in
a substantial detriment, Chevron or Unocal can
decline to close under the merger agreement. We can give no
assurance that the required regulatory approvals will be
obtained on terms that satisfy the conditions to closing of the
merger or within the time frame contemplated by Chevron and
Unocal. See The Merger Agreement Conditions to
the Completion of the Merger on page 66.
Appraisal Rights
Under Delaware law, holders of shares of Unocal common stock who
do not wish to accept the merger consideration may elect to have
the fair value of their shares of Unocal common stock judicially
determined and paid in cash, together with a fair rate of
interest, if any. The valuation will exclude any element of
value arising from the accomplishment or expectation of the
merger. A stockholder may only exercise these appraisal rights
by complying with the provisions of Section 262 of the
Delaware General Corporation Law.
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The following summary of the provisions of Section 262 of
the Delaware General Corporation Law is not a complete statement
of the law pertaining to appraisal rights under the Delaware
General Corporation Law, and is qualified in its entirety by
reference to the full text of Section 262 of the Delaware
General Corporation Law, a copy of which is attached to this
proxy statement/ prospectus as Annex C. If you wish to
exercise appraisal rights or wish to preserve your right to do
so, you should carefully review Section 262 and are urged
to consult a legal advisor.
All references in Section 262 and in this summary to a
stockholder are to the record holder of shares of
Unocal common stock as to which appraisal rights are asserted. A
person having a beneficial interest in shares of Unocal common
stock held of record in the name of another person, such as a
broker or nominee, must act promptly to cause the record holder
to follow properly the steps summarized below and in a timely
manner to perfect appraisal rights.
Under Section 262, where a proposed merger is to be
submitted for approval at a meeting of stockholders, as in the
case of Unocals special meeting, Unocal, not less than
twenty days prior to the meeting, must notify each of its
stockholders entitled to appraisal rights that these appraisal
rights are available and include in the notice a copy of
Section 262. This proxy statement/ prospectus constitutes
notice to the Unocal stockholders and the applicable statutory
provisions of the Delaware General Corporation Law are attached
as Annex C to this proxy statement/ prospectus.
If you wish to exercise the right to demand appraisal under
Section 262 of the Delaware General Corporation Law, you
must satisfy each of the following conditions:
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You must deliver to Unocal a written demand for appraisal of
your shares of Unocal common stock before the vote on the merger
agreement at Unocals special meeting. This demand will be
sufficient if it reasonably informs Unocal of your identity and
that you intend by that writing to demand the appraisal of your
shares. Voting against, abstaining from voting on or failing to
vote on the proposal to adopt the merger agreement will not
constitute a written demand for appraisal within the meaning of
Section 262. The written demand for appraisal must be in
addition to and separate from any proxy you deliver or vote you
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You must not vote your shares of Unocal common stock in favor of
the merger agreement. A proxy that does not contain voting
instructions will, unless revoked, be voted in favor of the
adoption of the merger agreement. Therefore, if you vote by
proxy and wish to exercise appraisal rights, you must vote
against the adoption of the merger agreement or mark your proxy
card to indicate that you abstain from voting on the adoption of
the merger agreement. |
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You must continuously hold your shares of Unocal common stock
from the date of making the demand through the completion of the
merger. If you are the record holder of shares of Unocal common
stock on the date the written demand for appraisal is made but
you thereafter transfer those shares prior to the completion of
the merger, you will lose any right to appraisal in respect of
those shares. |
Only a holder of record of shares of Unocal common stock is
entitled to demand an exercise of appraisal rights for those
shares registered in that holders name. Therefore, demand
for appraisal should be executed by or on behalf of the
stockholder of record, fully and correctly, as its name appears
on the share transfer records of Unocal.
If the shares of Unocal common stock are owned of record by a
person in a fiduciary capacity, such as a trustee, guardian or
custodian, the demand should be executed in that capacity. If
the shares are owned of record by more than one person as in a
joint tenancy or tenancy in common, the demand should be
executed by or on behalf of all of the owners. An authorized
agent, including an agent for two or more joint owners, may
execute a demand for appraisal on behalf of a stockholder;
however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, the
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agent is acting as agent for such owner or owners. A record
holder, such as a broker, who holds shares as nominee for
several beneficial owners may exercise appraisal rights with
respect to the shares held for one or more beneficial owners
while not exercising these rights with respect to the shares
held for one or more other beneficial owners. In that case, the
written demand should set forth the number of shares as to which
appraisal is sought, and where no number of shares is expressly
mentioned the demand will be presumed to cover all shares held
in the name of the record owner.
Stockholders who hold their shares of Unocal common stock in
brokerage accounts or other nominee forms and who wish to
exercise appraisal rights are urged to consult with their
brokers to determine appropriate procedures for making a demand
for appraisal.
A stockholder who elects to exercise appraisal rights under
Section 262 should mail or deliver a written demand to:
Unocal Corporation
Corporate Secretary
2141 Rosecrans Avenue, Suite 4000
El Segundo, California 90245
Any stockholder who wishes to assert appraisal rights should not
submit an election form, as doing so will be considered a
withdrawal of any previously filed written demand for appraisal.
Within ten days after the completion of the merger, Chevron must
send a notice as to the completion of the merger to each of
Unocals former stockholders who has made a written demand
for appraisal in accordance with Section 262 and who has
not voted to adopt the merger agreement. Within 120 days
after the completion of the merger, but not after that date,
either Chevron or any stockholder who has complied with the
requirements of Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the
value of common stock held by all stockholders demanding
appraisal of their shares. Chevron is under no obligation to,
and has no present intent to, file a petition for appraisal, and
stockholders seeking to exercise appraisal rights should not
assume that Chevron will file a petition or that it will
initiate any negotiations with respect to the fair value of the
shares. Accordingly, stockholders who desire to have their
shares appraised should initiate any petitions necessary for the
perfection of their appraisal rights within the time periods and
in the manner prescribed in Section 262. Since Chevron has
no obligation to file a petition, the failure of affected
stockholders to do so within the period specified could nullify
any previous written demand for appraisal.
Within 120 days after the completion of the merger, any
stockholder that complies with the provisions of
Section 262 to that point in time will be entitled to
receive from Chevron, upon written request, a statement setting
forth the aggregate number of shares of Unocal common stock not
voted in favor of the adoption of the merger agreement and with
respect to which Unocal received demands for appraisal and the
aggregate number of holders of those shares. Chevron must mail
this statement to the stockholder by the later of ten days after
receipt of the request and ten days after expiration of the
period for delivery of demands for appraisals under
Section 262. As used in this paragraph and throughout the
remainder of this section, references to Chevron mean the
corporation that survives the merger.
A stockholder who timely files a petition for appraisal with the
Delaware Court of Chancery must serve a copy upon Chevron.
Chevron must, within 20 days, file with the Delaware
Register in Chancery a duly verified list containing the names
and addresses of all stockholders who have demanded appraisal of
their shares of Unocal common stock and who have not reached
agreements with it as to the value of their shares. After notice
to stockholders as may be ordered by the Delaware Court of
Chancery, the Delaware Court of Chancery is empowered to conduct
a hearing on the petition to determine which stockholders are
entitled to appraisal rights. The Delaware Court of Chancery may
require stockholders who have demanded an appraisal for their
shares of Unocal common stock and who hold shares represented by
certificates to submit their certificates to the Register in
Chancery for notation on the certificates of the
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pendency of the appraisal proceedings, and if any stockholder
fails to comply with the requirement, the Delaware Court of
Chancery may dismiss the proceedings as to that stockholder.
After determining which stockholders are entitled to an
appraisal, the Delaware Court of Chancery will appraise the
fair value of their shares of Unocal common stock.
This value will exclude any element of value arising from the
accomplishment or expectation of the merger, but will include a
fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. The costs of the action may be
determined by the Delaware Court of Chancery and taxed upon the
parties as the Delaware Court of Chancery deems equitable.
However, costs do not include attorneys or expert witness
fees. Upon application of a stockholder, the Delaware Court of
Chancery may also order that all or a portion of the expenses
incurred by any stockholder in connection with the appraisal
proceeding be charged pro rata against the value of all of the
shares entitled to appraisal. These expenses may include,
without limitation, reasonable attorneys fees and the fees
and expenses of experts. Stockholders considering seeking
appraisal should be aware that the fair value of their shares as
determined under Section 262 could be more than, the same
as, or less than the value of the merger consideration they
would be entitled to receive pursuant to the merger agreement if
they did not seek appraisal of their shares. Stockholders should
also be aware that investment banking opinions as to fairness
from a financial point of view are not opinions as to fair value
under Section 262.
In determining fair value and, if applicable, a fair rate of
interest, the Delaware Court of Chancery is to take into account
all relevant factors. In Weinberger v. UOP, Inc.,
the Delaware Supreme Court discussed the factors that could be
considered in determining fair value in an appraisal proceeding,
stating that proof of value by any techniques or methods
which are generally considered acceptable in the financial
community and otherwise admissible in court should be
considered, and that fair price obviously requires
consideration of all relevant factors involving the value of a
company.
Section 262 provides that fair value is to be
exclusive of any element of value arising from the
accomplishment or expectation of the merger. In
Cede & Co. v. Technicolor, Inc., the
Delaware Supreme Court stated that such exclusion is a
narrow exclusion [that] does not encompass known elements
of value, but which rather applies only to the speculative
elements of value arising from such accomplishment or
expectation. In Weinberger, the Delaware Supreme Court
construed Section 262 to mean that elements of future
value, including the nature of the enterprise, which are known
or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered. Any stockholder
who has duly demanded an appraisal in compliance with
Section 262 will not, after the completion of the merger,
be entitled to vote the shares of Unocal common stock subject to
that demand for any purpose or be entitled to the payment of
dividends or other distributions on those shares. However,
stockholders will be entitled to dividends or other
distributions payable to holders of record of shares of Unocal
common stock as of a record date prior to the completion of the
merger.
Any stockholder may withdraw its demand for appraisal and accept
the merger consideration by delivering to Chevron a written
withdrawal of the stockholders demands for appraisal. Any
attempt to withdraw made more than 60 days after the
effectiveness of the merger will require the written approval of
Chevron and no appraisal proceeding before the Delaware Court of
Chancery as to any stockholder will be dismissed without the
approval of the Delaware Court of Chancery, and this approval
may be conditioned upon any terms the Delaware Court of Chancery
deems just. If Chevron does not approve a stockholders
request to withdraw a demand for appraisal when the approval is
required or if the Delaware Court of Chancery does not approve
the dismissal of an appraisal proceeding, the stockholder would
be entitled to receive only the appraised value determined in
any such appraisal proceeding. This value could be higher or
lower than, or the same as, the value of the merger
consideration.
Failure to follow the steps required by Section 262 of the
Delaware General Corporation Law for perfecting appraisal rights
may result in the loss of appraisal rights, in which event you
will be entitled to receive the consideration with respect to
your dissenting shares in accordance with the merger agreement.
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In view of the complexity of the provisions of Section 262
of the Delaware General Corporation Law, if you are considering
exercising your appraisal rights under the Delaware General
Corporation Law, you are urged to consult your own legal advisor.
Federal Securities Laws Consequences; Stock Transfer
Restriction Agreements
This proxy statement/prospectus does not cover any resales of
the Chevron common stock to be received by the stockholders of
Unocal upon completion of the merger, and no person is
authorized to make any use of this proxy statement/prospectus in
connection with any such resale.
All shares of Chevron common stock received by Unocal
stockholders in the merger will be freely transferable, except
that shares of Chevron common stock received by persons who are
deemed to be affiliates of Unocal under the
Securities Act of 1933, as amended, at the time of the Unocal
meeting may be resold by them only in transactions permitted by
Rule 145 under the Securities Act or as otherwise permitted
under the Securities Act. Persons who may be deemed to be
affiliates of Unocal for such purposes generally include
individuals or entities that control, are controlled by or are
under common control with Unocal and include directors and
executive officers of Unocal. The merger agreement requires
Unocal to use its reasonable best efforts to cause its
affiliates to execute a written agreement to the effect that
they will not sell, assign, transfer or otherwise dispose of any
of the shares of Chevron common stock issued to them in the
merger in violation of the Securities Act or the related SEC
rules.
41
OPINION OF UNOCALS FINANCIAL ADVISOR
Unocal retained Morgan Stanley to act as its financial advisor
and to provide a financial fairness opinion to the board of
directors of Unocal in connection with the merger. The board of
directors selected Morgan Stanley to act as its financial
advisor based on Morgan Stanleys qualifications,
expertise, reputation and its knowledge of the business of
Unocal. At the meetings of the board of directors on
April 2 and April 3, 2005, Morgan Stanley rendered its
oral opinion, which was subsequently confirmed in writing as of
April 4, 2005, that based upon and subject to the
assumptions, qualifications and limitations set forth in the
opinion, the consideration to be received by the holders of
shares of Unocal common stock pursuant to the merger agreement
was fair from a financial point of view to such holders.
The full text of Morgan Stanleys opinion, dated
April 4, 2005, which sets forth, among other things, the
assumptions made, procedures followed, matters considered and
qualifications and limitations of the reviews undertaken in
rendering its opinion is attached as Annex B to this proxy
statement/prospectus. The summary of Morgan Stanleys
fairness opinion set forth in this proxy statement/ prospectus
is qualified in its entirety by reference to the full text of
the opinion. Stockholders should read this opinion carefully and
in its entirety. Morgan Stanleys opinion is directed to
the board of directors of Unocal, addresses only the fairness
from a financial point of view of the consideration to be
received by holders of Unocal common stock pursuant to the
merger agreement, and does not address any other aspect of the
merger. Morgan Stanleys opinion does not constitute a
recommendation to any stockholders of Unocal as to how such
stockholders should vote with respect to the proposed
transaction or what election they should make with respect to
the consideration offered.
In connection with rendering its opinion, Morgan Stanley, among
other things:
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reviewed certain publicly available financial statements and
other business and financial information of Unocal and Chevron; |
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reviewed certain internal financial statements and other
financial and operating data, including internal oil and gas
reserve and production estimates, concerning Unocal prepared by
the management of Unocal; |
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reviewed certain financial projections prepared by the
management of Unocal; |
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discussed the past and current operations and financial
condition and the prospects of Unocal, including internal oil
and gas reserve and production estimates, with senior management
of Unocal; |
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reviewed certain internal financial statements and other
financial and operating data, including internal oil and gas
production estimates, concerning Chevron prepared by the
management of Chevron; |
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reviewed certain financial projections prepared by the
management of Chevron; |
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discussed the past and current operations and financial
condition and the prospects of Chevron, including internal oil
and gas production estimates, with senior management of Chevron; |
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reviewed the pro forma impact of the merger on Chevrons
earnings per share, cash flow per share, return on capital
employed, and oil and gas reserves and production; |
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reviewed the reported prices and trading activity for Unocal
Common Stock and for Chevron Common Stock; |
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compared the financial performance of Unocal and the prices and
trading activity of Unocal Common Stock with that of certain
other comparable publicly-traded companies and their securities; |
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compared the financial performance of Chevron and the prices and
trading activity of Chevron Common Stock with that of certain
other comparable publicly-traded companies and their securities; |
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reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions; |
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reviewed certain reserve reports prepared by Unocal; |
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discussed certain information prepared by the management of
Unocal relating to strategic, financial and operational benefits
anticipated from the merger and the strategic rationale for the
merger with senior management of Unocal; |
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participated in discussions among representatives of Unocal,
Chevron and certain other parties; |
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reviewed the draft merger agreement and certain related
documents; and |
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performed such other analyses and considered such other factors
as Morgan Stanley deemed appropriate. |
In arriving at its opinion, Morgan Stanley assumed and relied
upon without independent verification the accuracy and
completeness of the information supplied or otherwise made
available to Morgan Stanley by Unocal for the purposes of its
opinion. With respect to the financial projections and other
financial and operating data, Morgan Stanley assumed that they
were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial
performance of Unocal and Chevron. Morgan Stanley relied without
independent verification on the assessment by the management of
Unocal of the strategic rationale of the merger, including
information related to certain strategic, financial and
operational benefits anticipated from the merger. In addition,
Morgan Stanley assumed that the merger will be consummated in
accordance with the terms set forth in the merger agreement
without material modification, waiver or delay, including, among
other things, that the merger will be treated as a tax-free
reorganization pursuant to the Internal Revenue Code of 1986, as
amended. Morgan Stanley assumed that in connection with the
receipt of all the necessary regulatory approvals for the
proposed merger, no restrictions will be imposed that would have
a material adverse effect on the contemplated benefits expected
to be derived in the proposed merger. Morgan Stanley did not
make any independent valuation or appraisal of the assets or
liabilities of Unocal or Chevron. With respect to the reserve
estimates and reports referred to above, Morgan Stanley is not
an expert in the engineering evaluation of oil and gas
properties and, with the Unocal boards consent, it relied,
without independent verification, solely upon the internal
reserve estimates of Unocal. In addition, Morgan Stanley is not
a legal, regulatory or tax expert and it relied, without
independent verification, on the assessment of Unocal and
Chevron and their advisors with respect to such matters. Morgan
Stanleys opinion was necessarily based on financial,
economic, market and other conditions as in effect on, and the
information made available to it as of, April 4, 2005.
The following is a summary of the material financial analyses
performed by Morgan Stanley in connection with its opinion dated
as of April 4, 2005. In connection with arriving at its
opinion, Morgan Stanley considered all of its analyses as a
whole and did not attribute any particular weight to any
analysis described below. Some of these summaries include
information in tabular format. In order to understand fully the
financial analyses used by Morgan Stanley, the tables must be
read together with the text of each summary. The tables alone do
not constitute a complete description of the analyses.
In arriving at its opinion regarding the consideration to be
paid to holders of Unocal common stock, Morgan Stanley
calculated the implied blended merger consideration.
This calculation was made on the basis that, in the aggregate,
25% of the consideration in the merger would consist of $65.00
in cash for each share of Unocal common stock and 75% of the
consideration in the merger would consist of 1.03 shares of
Chevron common stock for each share of Unocal common stock. As a
result, Morgan Stanley calculated that the implied blended
merger consideration was $62.07 per share of Unocal common
stock as of April 1, 2005, which was the sum of $16.25 in
cash (which equals 0.25 multiplied by $65.00) plus $45.82 (which
equals 0.75 multiplied by 1.03 multiplied by $59.31, the closing
price of Chevron common stock on April 1, 2005). Morgan
Stanley also calculated the implied blended merger
exchange ratio by dividing the implied blended merger
consideration of $62.07 by the per share closing price of
Chevron common stock of $59.31 on April 1, 2005 which
yielded a ratio of 1.0465x.
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Historical Share Price Analysis
Morgan Stanley performed an historical share price analysis to
obtain background information and perspective with respect to
the relative historical share prices of Unocal and Chevron
common stock. Consequently, Morgan Stanley reviewed the
historical price performance of Unocal and Chevron common stock
from April 1, 2004 through April 1, 2005. For the
period from April 1, 2004 through April 1, 2005, the
closing price of Unocals common stock ranged from $34.26
to $64.35 and Chevrons common stock ranged from $43.98 to
$62.08. Morgan Stanley noted that the closing price of Unocal
common stock on April 1, 2005 was $64.35 per share and
the closing price of Chevron common stock was $59.31 per
share. Morgan Stanley also noted that the per share implied
blended merger consideration was $62.07 as of April 1, 2005.
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Unaffected Price and Unaffected
Exchange Ratio Analysis |
Morgan Stanley noted that Unocals common stock price had
been affected by rumors appearing in the financial press and
performed an analysis to estimate the unaffected
price of Unocal common stock. Morgan Stanley calculated the
market value weighted average return between January 5,
2005, the day prior to the first news article regarding a
possible transaction in the Financial Times, and April 1,
2005 for the common stock of those companies that are comparable
to Unocal (see the list of comparable companies described under
Comparable Company Analysis below).
Based upon and subject to the foregoing, Morgan Stanley
calculated a market value weighted average return of 33.0%.
Morgan Stanley then applied the market value weighted average
return to the closing price of Unocal common stock on
January 5, 2005 of $41.19. This calculation yielded an
implied unaffected price of $54.77.
In addition, Morgan Stanley also analyzed the
unaffected exchange ratio using the closing price of
Unocal common stock of $41.19 and closing price of Chevron
common stock of $50.88 on January 5, 2005. Morgan Stanley
divided the Unocal common stock price of $41.19 by
Chevrons stock price of $50.88 to derive the
unaffected exchange ratio of 0.8096x.
Morgan Stanley noted that the implied blended merger
consideration for Unocal common stock was $62.07 per share
and that the implied blended merger exchange ratio was 1.0465x,
both as of April 1, 2005.
The following table displays the implied percentage premium of
the $62.07 implied blended merger consideration as of
April 1, 2005 as compared to Unocals closing common
stock prices over various periods. The following analysis was
performed to provide perspective on the historical trading price
of Unocal common stock versus the implied merger consideration.
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Per Share Merger Consideration Value as Compared to Unocals Common Stock Price: | |
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| |
Consideration |
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|
10 Day | |
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30 Day | |
|
60 Day | |
|
90 Day | |
|
LTM | |
|
LTM | |
|
LTM | |
Value(1) |
|
4/1/05 | |
|
Unaffected(2) | |
|
Avg. | |
|
Avg. | |
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Avg. | |
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Avg. | |
|
High | |
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Low | |
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Avg. | |
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| |
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| |
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| |
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| |
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| |
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| |
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| |
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| |
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| |
$62.07
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(3.5 |
)% |
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13.3 |
% |
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1.6 |
% |
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5.7 |
% |
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|
16.9 |
% |
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24.4 |
% |
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|
(3.5 |
)% |
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|
81.2 |
% |
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|
45.7 |
% |
LTM = Last Twelve Months
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(1) |
As of April 1, 2005. |
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(2) |
Calculation of unaffected price of $54.77 described
in Unaffected Price and Unaffected Exchange Ratio Analysis
paragraph above. |
The following table displays the implied percentage premium of
the 1.0465 implied blended merger exchange ratio as of
April 1, 2005 as compared to the exchange ratio implied by
Unocals and Chevrons closing common stock prices
over various periods. The following analysis was performed to
provide
44
perspective on the historical exchange ratio of Unocal and
Chevron common stock versus the implied blended merger exchange
ratio.
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Implied Merger Exchange Ratio as Compared to Period Average Exchange Ratio: |
Implied |
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Merger |
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Exchange |
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|
10 Day |
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30 Day |
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60 Day |
|
90 Day |
|
LTM |
|
LTM |
|
LTM |
Ratio(1) |
|
4/1/05 |
|
Unaffected(2) |
|
Avg. |
|
Avg. |
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Avg. |
|
Avg. |
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High |
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Low |
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Avg |
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$62.07
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(3.5)% |
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29.3% |
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1.0% |
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5.8% |
|
12.2% |
|
16.7% |
|
(3.5)% |
|
41.8% |
|
26.2% |
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|
(1) |
As of April 1, 2005. |
|
(2) |
Calculation of unaffected exchange ratio of 0.8096x
described in Unaffected Price and Unaffected Exchange Ratio
Analysis paragraph above. |
Morgan Stanley reviewed the range of publicly available equity
research analyst price targets for Unocal. This
analysis resulted in a range of values of $45.00 to
$75.00 per share of Unocal common stock. Morgan Stanley
noted that the per share implied blended merger consideration
was $62.07 as of April 1, 2005.
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|
Comparable Company Analysis |
Morgan Stanley performed a comparable company analysis, which
attempts to provide an implied value for Unocal by comparing it
to similar companies. For purposes of its analysis, Morgan
Stanley reviewed certain public market trading multiples for the
following eight public companies which, based on its experience
with companies in the energy industry, Morgan Stanley considered
similar to Unocal in size and business mix:
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Amerada Hess Corp. |
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Anadarko Petroleum Corp. |
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Apache Corp. |
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Burlington Resources Inc. |
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Devon Energy Corp. |
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EOG Resources Inc. |
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Marathon Oil Corp. |
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Occidental Petroleum Corp. |
Selected multiples, which are commonly used by participants and
investors in the energy industry, for Unocal and each of the
comparable companies were reviewed in this analysis. The
selected multiples analyzed for these companies included the
following:
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|
the per share price divided by 2005 and 2006 estimated cash flow
per share |
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|
the per share price divided by 2005 estimated earnings per share |
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the aggregate trading value divided by 2005 estimated EBITDAX |
EBITDAX is net earnings before interest, taxes, depreciation,
depletion and amortization, impairments, exploration expenses,
dry hole costs, special items and the cumulative effect of
accounting changes. Morgan Stanley calculated these financial
multiples and ratios based on publicly available financial data
as of April 1, 2005.
45
A summary of the range of market trading multiples of the
comparable companies and those multiples calculated for Unocal
are set forth below:
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|
Comparable Companies | |
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Metric |
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Range of Multiples | |
|
Average | |
|
Unocal | |
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| |
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| |
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| |
Price/2005E Earnings
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10.3x - 17.1 |
x |
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12.0 |
x |
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13.5x |
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Price/2005E Cash Flow
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4.6x - 6.9 |
x |
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5.6 |
x |
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6.3x |
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Price/2006E Cash Flow
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4.3x - 6.7 |
x |
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5.6 |
x |
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6.5x |
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Aggregate Value/2005E EBITDAX
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4.8x - 6.6 |
x |
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5.3 |
x |
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5.2x |
|
E = estimated.
Morgan Stanley, based on its experience with mergers and
acquisitions and companies in the energy industry and taking
into account the ranges expressed above, selected for its
comparable company analysis of Unocal, a representative multiple
range of per share price divided by 2005E cash flow of 4.7x to
5.7x and a range of aggregate value divided by 2005E EBITDAX of
4.5x to 5.5x.
Based upon and subject to the foregoing, Morgan Stanley
calculated an implied valuation range for Unocal common stock of
$48.50 to $58.75 per share based on a price divided by 2005
cash flow multiple range and $55.00 to $68.25 based on an
aggregate value divided by 2005 estimated EBITDAX multiple
range. Morgan Stanley noted that the per share implied blended
merger consideration was $62.07 per share as of
April 1, 2005.
Morgan Stanley also reviewed and analyzed certain public market
trading multiples for public companies similar to Chevron from a
size and business mix perspective. For purposes of this
analysis, Morgan Stanley identified the following six publicly
traded companies which, based on its experience with companies
in the energy industry, Morgan Stanley considered similar to
Chevron in size and business mix:
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BP plc |
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ConocoPhillips |
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Eni SpA |
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ExxonMobil Corp. |
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Royal Dutch/ Shell Group |
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Total S.A. |
The selected multiples analyzed for these companies included the
following:
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|
the per share price divided by 2005 and 2006 estimated earnings
per share |
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|
the per share price divided by 2005 estimated cash flow per share |
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|
The aggregate market value divided by 2005 estimated EBITDAX |
Morgan Stanley calculated these financial multiples and ratios
based on publicly available financial data as of April 1,
2005.
A summary of the range of market trading multiples of the
comparable companies and those multiples calculated for Chevron
are set forth below:
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|
Comparable Companies | |
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|
Metric |
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Range of Multiples | |
|
Average | |
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Chevron | |
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| |
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| |
Price/ 2005E Earnings
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9.3x - 14.9 |
x |
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12.3 |
x |
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11.0x |
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Price/ 2006E Earnings
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10.5x - 15.1 |
x |
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13.1 |
x |
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12.2x |
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Price/ 2005E Cash Flow
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|
6.0x - 10.5 |
x |
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7.6 |
x |
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7.6x |
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Aggregate Value/ 2005E EBITDAX
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|
4.7x - 7.0 |
x |
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5.9 |
x |
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5.0x |
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46
Although the foregoing companies were compared to Unocal and
Chevron for purposes of this analysis, Morgan Stanley noted that
no company utilized in this analysis is identical to Unocal or
Chevron because of differences between the business mix,
regulatory environment, operations and other characteristics of
Unocal, Chevron and the comparable companies. In evaluating the
comparable companies, Morgan Stanley made judgments and
assumptions with regard to industry performance, general
business, economic, regulatory, market and financial conditions
and other matters, many of which are beyond the control of
Unocal and Chevron, such as the impact of competition on the
business of Unocal and Chevron and on the industry generally,
industry growth and the absence of any adverse material change
in the financial condition and prospects of Unocal and Chevron
or the industry or in the markets generally. Mathematical
analysis (such as determining the average or median) is not in
itself a meaningful method of using comparable company data.
|
|
|
Sum-of-the-Parts Analysis |
Morgan Stanley analyzed Unocal as the sum of its constituent
business units, or as the sum of its parts, to
determine an implied valuation range for Unocal common stock.
Morgan Stanley valued Unocals businesses in a
Sum-of-the-Parts analysis by combining two methods:
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|
Discounted Cash Flow Method. Morgan Stanley analyzed each
individual Unocal business using a discounted cash flow
analysis. This discounted after-tax unlevered free cash flow
analysis, calculated as of December 31, 2004, was based on
company projections. Additionally, Morgan Stanley performed
sensitivities, including production profiles and oil prices, on
the projections provided by Unocal management. The range of
discount rates utilized in this analysis was 8% to 12%, which
was chosen based upon an analysis of the weighted average cost
of capital of Unocal and other comparable companies. |
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|
Multiple Method. For selected business units, Morgan Stanley
also reviewed and compared various actual and forecasted
financial and operating information of these businesses with
that of various precedent transactions which shared certain
characteristics with these businesses. Based upon the aggregate
transaction value divided by proved reserves in these precedent
transactions and Morgan Stanleys experience in mergers and
acquisitions in the energy industry, Morgan Stanley estimated
reference valuation metric ranges for these business units.
Morgan Stanley then calculated the potential implied after-tax
valuation range for these business units. |
Morgan Stanley calculated the Sum-of-the-Parts valuation
range by adding the ranges of implied value per share of Unocal
common stock for each business unit utilizing results of both
methods and Unocals assessment of the risks associated
with achieving such results. Based upon and subject to the
foregoing, Morgan Stanley calculated an implied Sum-of-the-Parts
valuation range for Unocal common stock of $48.00 to
$66.50 per share. Morgan Stanley noted that the per share
acquisition consideration for Unocal common stock was
$62.07 per share as of April 1, 2005.
Selected Precedent Transaction Analysis
Morgan Stanley reviewed and compared the proposed financial
terms and the premia implied in the Chevron/ Unocal merger to
corresponding publicly available financial terms and premia of
selected transactions. In selecting these transactions Morgan
Stanley reviewed corporate transactions since January 1,
2000 to the present in the energy industry. In its analysis,
Morgan Stanley reviewed the following precedent transactions as
of the announcement date:
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1/26/2005 Cimarex/ Magnum Hunter |
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12/16/2004 Noble/ Patina |
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6/9/2004 Petro-Canada/ Prima Energy |
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5/24/2004 Forest/ Wiser |
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5/4/2004 Pioneer/ Evergreen |
47
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4/15/2004 EnCana/ Tom Brown |
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4/7/2004 Kerr-McGee/ Westport Resources |
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2/12/2004 Plains/ Nuevo |
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2/24/2003 Devon/ Ocean |
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9/4/2001 Devon/ Anderson Exploration |
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8/14/2001 Devon/ Mitchell Energy |
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7/10/2001 Amerada Hess/ Triton Energy |
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5/29/2001 Conoco/ Gulf Canada Resources |
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5/14/2001 Kerr-McGee/ HS Resources |
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5/7/2001 Williams/ Barrett |
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12/22/2000 Marathon/ Pennaco |
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12/21/2000 ENI SpA; Agip/ LASMO |
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5/26/2000 Devon Energy/ Santa Fe Snyder |
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4/3/2000 Anadarko/ Union Pacific Resources |
No transaction utilized in the selected precedent transactions
analysis is identical to the merger. In evaluating the
transactions, Morgan Stanley made judgments and assumptions with
regard to industry performance, general business, economic,
market and financial conditions and other matters, many of which
are beyond the control of Unocal or Chevron, such as the impact
of competition on Unocal or Chevron and the industry generally,
industry growth and the absence of any adverse material change
in the financial condition and prospects of Unocal or Chevron or
in the financial markets in general. Mathematical analysis, such
as determining the mean or median, or the high or the low, is
not in itself a meaningful method of using comparable
transaction data.
Morgan Stanley derived from these selected transactions a
reference range of premia paid relative to the trading share
prices four weeks prior to and trading share prices one day
prior to the deal announcement for transactions announced in two
different periods of time. For transactions announced before
January 1, 2003, the premium paid relative to the share
price four weeks prior to deal announcement ranged from 17.6% to
75.0% with a mean of 45.0%, while the premium paid relative to
the share price one day prior to deal announcement ranged from
5.8% to 51.0% with a mean of 30.9%. For transactions announced
after January 1, 2003, the premium paid relative to the
share price four weeks prior to deal announcement ranged from
2.7% to 33.7% with a mean of 17.8%, while the premium paid
relative to the share price one day prior to deal announcement
ranged from -3.2% to 32.2% with a mean of 12.0%. Morgan Stanley
then selected a premia range of 10% to 30% based on the
precedent transactions as listed above and applied that range to
the unaffected Unocal common stock price of $54.77, which
resulted in a valuation range of $60.25 to $71.25 per share
of Unocal stock. Morgan Stanley also applied the 10% to 30%
premia range to the unaffected exchange ratio of 0.8096x, which
resulted in a valuation ranging from of $52.75 to
$62.50 per share of Unocal stock based on Chevrons
common stock price as of April 1, 2005.
In addition, Morgan Stanley derived from these selected
transactions a reference range of aggregate value divided by
year 1 EBITDAX multiple range for transactions announced in two
different periods of time. The aggregate value divided by year 1
EBITDAX multiple range for transaction announced before
January 1, 2003 ranged from 4.1x to 10.0x with a mean of
6.1x. The aggregate value divided by year 1 EBITDAX multiple
range for transaction announced after January 1, 2003
ranged from 4.0x to 8.3x with a mean of 6.0x. Morgan Stanley
then selected a aggregate value divided by year 1 EBITDAX
multiple range of 5.0x to 6.5x based on the precedent
transactions as listed above and applied that range to Unocal
2005E EBITDAX which resulted in a valuation range of $61.50 to
$81.50.
48
Morgan Stanley noted that the per share implied blended merger
consideration was $62.07 as of April 1, 2005.
Contribution Analysis
Morgan Stanley compared the contribution, based on research
analyst estimates and I/ B/ E/ S estimates, of each of Unocal
and Chevron to pro forma combined company statistics. The
implied contribution by Unocal, based on a variety of operating
and market statistics, ranged from 4.0% to 15.2%. Based on an
exchange ratio of 1.03 and assuming 100% stock consideration,
the pro forma ownership of the combined company by Unocal
stockholders was approximately 11.8%.
Pro Forma Analysis
In connection with its pro forma analysis, Morgan Stanley
analyzed a number of illustrative transaction structures and
price levels for a potential transaction and calculated the pro
forma impact on key financial metrics for Chevron for these
illustrative structures and price levels. The final transaction
structure and price levels were within the range considered in
Morgan Stanleys analysis.
Morgan Stanley analyzed the pro forma impact of the acquisition
on Chevrons pro forma earnings per share and pro forma
cash flow per share. Such analysis was based on 2005 and 2006
earning and cash flow projections based on I/B/E/S estimates.
The analysis assumed purchase prices of $61.09 and
$62.28 per share of Unocal common stock, which represented
exchange ratios of 1.03x and 1.05x respectively based on per
share closing price of Chevrons common stock on
April 1, 2005. The analysis also assumed three scenarios of
consideration mix: 100% equity, 25% cash and 75% equity, and 50%
cash and 50% equity. In addition, the analysis assumed annual
pretax synergies of $300 million. Based upon and subject to
the foregoing, Morgan Stanley observed that the earnings per
share impact of the merger for Chevron stockholders ranged from
0.9% accretion to 3.1% dilution in 2005 and 0.1% dilution to
3.8% dilution in 2006. Morgan Stanley also observed that the
cash flow per share impact of the acquisition for Chevron
stockholders ranged from 4.1% accretion to 9.2% accretion in
2005 and 3.9% accretion to 8.9% accretion in 2006. The analysis
did not take into account any one-time charges.
Furthermore, Morgan Stanley analyzed the pro forma impact of the
merger on Chevrons return on capital employed in 2006.
Such analysis was based on 2006 earning projections based on
I/B/E/S estimates. The analysis assumed purchase prices of
$61.09 and $62.28 per share of Unocal common stock, which
represented exchange ratios of 1.03x and 1.05x respectively
based on the per share closing price of Chevrons common
stock on April 1, 2005. Based on these assumptions, Morgan
Stanley calculated the pro forma return on capital employed
ranged from 18.4% to 18.6% in 2006 compared to an estimated
return on capital employed for Chevron on a standalone basis of
23.5%.
Morgan Stanley performed a variety of financial and comparable
analyses for purposes of rendering its opinion. The preparation
of a fairness opinion is a complex process and is not
susceptible to partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results
of all of its analyses as a whole and did not attribute any
particular weight to any analysis or factor considered.
Furthermore, Morgan Stanley believes that the summary provided
and the analyses described above must be considered as a whole
and that selecting any portion of the analyses, without
considering all of them, would create an incomplete view of the
process underlying Morgan Stanleys analysis and opinion.
As a result, the ranges of valuations resulting from any
particular analysis or combination of analyses described above
should not be taken to be the view of Morgan Stanley with
respect to the actual value of Unocal or Chevron or their common
stock.
In performing its analyses, Morgan Stanley made numerous
assumptions with respect to the industry performance, general
business, regulatory and economic conditions and other matters,
many of which are beyond the control of Morgan Stanley, Unocal
or Chevron. Any estimates contained in the analysis of Morgan
Stanley are not necessarily indicative of future results or
actual values, which may be significantly more or less favorable
than those suggested by such estimates. The analyses performed
were prepared solely as part of the analyses of Morgan Stanley
of the fairness of the consideration to be received by
49
holders of shares of Unocal common stock pursuant to the merger
agreement from a financial point of view, and were prepared in
connection with the delivery by Morgan Stanley of its opinion on
April 4, 2005 to Unocals board of directors.
The merger consideration was determined through
arms-length negotiations between Unocal and Chevron and
was approved by Unocals board of directors. Morgan Stanley
provided advice to Unocal during these negotiations. Morgan
Stanley did not, however, recommend any specific merger
consideration to Unocal or that any specific merger
consideration constituted the only appropriate merger
consideration for the merger.
Morgan Stanleys opinion and its presentation to
Unocals board of directors was one of many factors taken
into consideration by Unocals board of directors in
deciding to approve, adopt and authorize the merger agreement.
Consequently, the analyses as described above should not be
viewed as determinative of the opinion of Unocals board of
directors with respect to the merger consideration or of whether
Unocals board of directors would have been willing to
agree to a different merger consideration. Moreover, these
analyses do not purport to be appraisals or to reflect the
prices at which shares of common shares of Unocal might actually
trade. The foregoing summary does not purport to be a complete
description of the analyses performed by Morgan Stanley.
Morgan Stanley is an internationally recognized investment
banking and advisory firm. Morgan Stanley, as part of its
investment banking business, is continuously engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate,
estate and other purposes. In the ordinary course of its
business, Morgan Stanley and its affiliates may from time to
time trade in the securities or the indebtedness of Unocal,
Chevron and their affiliates or any currencies or commodities
(or derivative thereof) for its own account, the accounts of
investment funds and other clients under the management of
Morgan Stanley and for the accounts of its customers and
accordingly, may at any time hold a long or short position in
such securities, indebtedness, currencies or commodities (or
derivative thereof) for any such account. In the past, Morgan
Stanley and its affiliates have provided financial advisory and
financing services for both Unocal and Chevron and have received
fees from Chevron for the rendering of these services. Morgan
Stanley may also seek to provide such services to Chevron in the
future and may receive fees in connection with such services.
Pursuant to an engagement letter dated February 17, 2005,
Unocal has agreed to pay Morgan Stanley a customary transaction
fee of approximately $29 million (based on closing stock
prices as of June 20, 2005), a significant portion of which
is contingent upon the consummation of the merger. Unocal has
also agreed to reimburse Morgan Stanley for its fees and
expenses incurred in performing its services. In addition,
Unocal has agreed to indemnify Morgan Stanley and its
affiliates, their respective directors, officers, agents and
employees and each person, if any, controlling Morgan Stanley or
any of its affiliates against certain liabilities and expenses,
including certain liabilities under the federal securities laws,
related to or arising out of Morgan Stanleys engagement
and any related transactions.
50
INTERESTS OF UNOCAL DIRECTORS AND EXECUTIVE OFFICERS IN THE
MERGER
In considering the recommendation of the Unocal board of
directors with respect to the merger agreement and any
adjournment of the special meeting, Unocal stockholders should
be aware that certain members of the management of Unocal and
the Unocal board have interests in the merger that may be
different from, or in addition to, the interests of the other
stockholders of Unocal generally. The Unocal board of directors
was aware of these interests and considered them, among other
matters, in reaching its decisions to approve the merger
agreement and to recommend that Unocals stockholders vote
in favor of approving the merger agreement and any adjournment
of the special meeting.
Indemnification; Directors and Officers
Insurance
Chevron has agreed to cause the surviving corporation in the
merger to indemnify, for six years after the effective time of
the merger, to the greatest extent permitted by law on
April 4, 2005, the individuals who on or before the
effective time of the merger were officers, directors and
employees of Unocal or its subsidiaries with respect to all acts
or omissions before the effective time of the merger by these
individuals in these capacities or taken at the request of
Unocal or its subsidiaries. Chevron has further agreed to cause
the surviving corporation to honor all of Unocals
indemnification agreements, including under Unocals
bylaws, in effect on April 4, 2005. Chevron has also agreed
to provide, for six years after the effective time of the
merger, directors and officers liability insurance
in respect of acts or omissions occurring before the effective
time of the merger covering each person currently covered by
Unocals directors and officers liability
insurance policy on terms with respect to coverage and in
amounts no less favorable than those of the policy in effect on
April 4, 2005, at an aggregate annual premium not to exceed
300 percent of the annual premium rate paid by Unocal and
its subsidiaries as of April 4, 2005 for such insurance. If
the aggregate annual premium for the equivalent coverage would
be more than 300 percent of the April 4, 2005 level,
then Chevron will only provide the coverage that is available at
the 300 percent level. See The Merger
Agreement Covenants Indemnification and
Insurance of Unocal Directors and Officers on page 64.
Employment Contracts
Unocal is a party to employment agreements with Charles
Williamson, Joseph Bryant, Terry Dallas, Samuel Gillespie and
Randolph Howard that contain change-of-control severance
provisions. The completion of the merger will be a change of
control for purposes of these agreements. The employment
agreements for Messrs. Williamson, Bryant, Dallas and
Gillespie provide that, in the event that any of the executives
is terminated by Unocal without cause or following an alteration
of the employees employment or compensation situation, as
set forth in the employment agreements (referred to in this
discussion as a termination without cause), the
executive will be entitled to a lump sum payment equal to the
sum of (i) 3.18 times (2.12 times, in the case of Mr.
Howard) the greater of the executives annual salary as set
forth in the employment agreement or in effect as of the date of
termination and (ii) 3 times (2 times, in the case of Mr.
Howard) the executives target bonus applicable as of the
beginning of the calendar year in which the termination without
cause occurs. The employment agreements also provide for either
continued medical, dental, life and disability insurance
coverage for two years following termination without cause or,
at the election of Unocal, an additional lump sum payment of
$25,000. In the event of an executives termination without
cause within 24 months following a change of control (as
defined in the employment agreements), the executives would also
be entitled to an amount equal to the increase in the lump sum
value of their benefits under Unocals qualified and
nonqualified retirement plans that would result if three years
were added to their benefit service and ages under such plans.
Under the employment agreements, if any payments or
distributions to the executives (whether payable pursuant to the
employment agreements or otherwise) would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986 (referred to in this discussion as the Code), then,
subject to the following sentence, the executive will receive an
additional payment such that he is placed in the same after-tax
position as if no excise tax had been imposed. If Unocals
distributions and payments to be made that are contingent on a
change of control do not exceed 110 percent of the greatest
amount
51
that could be paid to the executive without the executive being
subject to the excise tax, then no gross-up payment will be made
and the payments will be reduced to the maximum amount that
could be paid to the executive without subjecting him to the tax.
Equity Compensation Awards
Upon a change in control of Unocal, such as
completion of the merger, unvested stock options will become
vested and restricted stock will vest in full. Performance
shares generally will be paid out at not less than the target
number of shares, subject to the limitation that the fair market
value of the shares paid out may not exceed 400 percent of
the fair market value of the initial award of performance
shares. In addition, directors restricted stock units will
become vested, and directors vested stock units,
restricted stock units and deferral units will become payable
unless the director has elected otherwise.
The following table shows the unvested stock options outstanding
at June 20, 2005 that would become vested and restricted
stock and performance shares outstanding at June 20, 2005
that would be paid out for Unocals named executive
officers in the event of a change in control in accordance with
the relevant award agreements.
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Unvested Options at | |
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June 20, 2005 | |
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Number of | |
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Outstanding | |
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Outstanding | |
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Underlying | |
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Weighted | |
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Options | |
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Average Price | |
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June 20, 2005 | |
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at June 20, 2005 | |
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Mr. Williamson
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113,475 |
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$ |
49.31 |
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107,373 |
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150,729 |
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Mr. Bryant
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200,000 |
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46.44 |
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19,692 |
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16,342 |
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Mr. Dallas
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18,913 |
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49.31 |
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19,554 |
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39,291 |
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Mr. Gillespie
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29,091 |
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44.64 |
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21,284 |
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16,560 |
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Mr. Howard
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25,287 |
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40.08 |
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13,418 |
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21,981 |
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The treatment of outstanding Unocal stock options in the merger
is discussed under The Merger Agreement Merger
Consideration Treatment of Unocal Options and Equity
Awards beginning on page 58.
Qualified Plans
Retirement Plan. Each of Unocals executive officers
is a participant in the Unocal Retirement Plan. Upon the
occurrence of a change of control, such as completion of the
merger, each participant in the Retirement Plan will vest in his
or her accrued benefit under the retirement plan. In addition,
in the event that a participant in the retirement plan who has
at least five years of vesting service under the retirement plan
incurs an involuntary termination of employment (other than for
death, disability or misconduct) or a constructive
discharge (in each case, as defined in the retirement
plan) during the two-year period following the completion of the
merger, the participant will receive 36 months of
additional service credit under the retirement plan, and the
participant will be credited with three additional years or age
for the purpose of determining his or her entitlement to early
retirement benefits and the amount of such benefits. In
addition, the participants monthly compensation for
purposes of determining his or her benefit under the retirement
plan will be the average of the 12-month period (rather than the
36-month period, which applies in other circumstances) during
which the participant had the highest compensation within his or
her most recent 10 years of employment.
Savings Plan. Each of Unocals executive officers is
a participant in the Unocal Savings Plan. Upon the occurrence of
a change of control, such as completion of the merger, each
participant in the savings plan will vest in 100 percent of
his or her basic Unocal contributions and matching Unocal
contributions under the savings plan.
52
Nonqualified Plans
Nonqualified Retirement Plans. Participants in
Unocals nonqualified retirement plans are entitled to
commence payment of their nonqualified retirement plan benefits
at the same time as under the Unocal Retirement Plan, in effect
providing that executive officers who experience an involuntary
termination of employment (other than for death, disability or
misconduct) or a constructive discharge (in each
case, as defined in the retirement plan) during the two-year
period following the completion of the merger will be entitled
to commence receiving benefits under the nonqualified retirement
plans.
Deferred Compensation Plan. Under Unocals Deferred
Compensation Plan, eligible employees are allowed to receive
payouts of vested plan balances after a change of control, such
as completion of the merger, if such employees elected, in their
initial election or in a change in election made at least
12 months prior to the date of the change of control, to
receive those payouts. Each of Unocals executive officers
is a participant in the Unocal Deferred Compensation Plan. The
grantor trust funding the Unocal Deferred Compensation Plan
provides for the sum of (i) 120 percent of the amounts
credited to participant accounts under such plan and
(ii) the present value of a reasonable estimate of trustee
fees and expenses for the succeeding 10 years to be funded
in the grantor trust under the plan following a potential
change in control. The signing of the merger agreement is
a potential change of control as defined in the grantor trust
and Unocal expects so to fund the trust prior to the effective
time of the merger. No later than five business days after a
change in control, the sum of (i) the account
balances of participant accounts under certain other deferred
compensation programs and (ii) the present value of a
reasonable estimate of the trustee and recordkeeper fees and
expenses due over the remaining duration of the trust must be
funded in the grantor trust.
Annual Bonuses
If the completion of the merger occurs in 2005, participants in
the Unocal annual bonus plan will be entitled to receive pro
rata bonus payments following the completion of the merger in
accordance with the terms of the plan. In addition, Chevron will
cause Unocal to maintain a bonus plan for the remainder of 2005
on the same terms and conditions and subject to the same targets
and performance criteria as were in effect under the annual
bonus plan for 2005. Within two and one-half months following
the end of the 2005 calendar year, Chevron will pay bonuses
equal to the excess of (i) the bonuses that participants
would have received for the entire calendar year under the new
plan over (ii) the amount of their pro rata bonus payments.
If the completion of the merger occurs in 2006, Unocal will be
permitted to establish an annual bonus plan for 2006 based upon
targets and goals substantially similar to those established for
2005, and participants will be entitled to receive pro rata
bonus payments following the completion in accordance with the
terms of the plan. Total bonuses for 2006 will be calculated
based upon the excess of the bonuses that participants would
have received for the entire calendar year over the amount of
their pro rata bonus payments, in the same manner as bonuses
would have been calculated for 2005 if the completion occurred
in 2005. No pro rata bonus payment for 2005 or 2006 may exceed
150 percent of the employees target bonus amount for
the year.
Enhanced Severance Program
In 2000, Unocals board of directors and the board of
Unocals Union Oil Company of California subsidiary each
approved an enhanced severance program for U.S. payroll
employees not represented by collective bargaining agents in the
event of a change of control of Unocal occurring before 2005.
The plan was renewed in 2005, and the boards of Unocal and Union
Oil have extended this enhanced severance program until such
time as the program is effectively terminated by the boards in
accordance with the terms of Unocals benefits plans.
Among other benefits, the program provides the following in the
event of an eligible employees involuntary termination of
employment (other than for death, disability or misconduct) or
constructive
53
discharge (as defined in the plans comprising the program)
within two years following a change of control:
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Employees with less than five years of service in the Unocal
Retirement Plan would receive four months of base pay plus
three-fourths of a month of base pay for every year of service. |
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Employees with five or more years of service in the Unocal
Retirement Plan would receive four months of base pay, plus an
enhanced retirement benefit which offsets the remainder of the
severance payment. The enhanced retirement benefit would add
three years to each of the employees service and age, plus
the benefit would utilize the highest consecutive 12 months
of pensionable pay in the most recent 120 months of service. |
Although all current executive officers are entitled to the
benefits described in the preceding paragraphs, payment of such
benefits would reduce the amounts payable to
Messrs. Williamson, Bryant, Dallas, Gillespie, and Howard
under their employment agreements.
The program provides for subsidized COBRA medical
and dental coverage for 18 months after termination of
employment, adds three years to each of the employees age
and service for determining eligibility under Unocals
retiree and special continuation medical coverage and for
determining eligibility under Unocals retiree life and
accidental death and dismemberment insurance plans, as well as
certain other benefits.
The program includes a tax gross-up arrangement for
employees who are subject to the excise tax provided for by
Section 280G of the Code. If any payments or distributions
to participants in the program (whether payable pursuant to the
program or otherwise) would be subject to the excise tax imposed
by Section 4999 of the Code, then, subject to the following
sentence, the participant will receive an additional payment
such that he or she is placed in the same after-tax position as
if no excise tax had been imposed. If Unocals
distributions and payments to be made that are contingent on a
change of control do not exceed 110 percent of the greatest
amount that could be paid to the participant without the
participant being subject to the excise tax, then no gross up
payment will be made and the payments will be reduced to the
maximum amount that could be paid without subjecting the
participant to the tax.
54
THE MERGER AGREEMENT
The following summary of the merger agreement is qualified by
reference to the complete text of the merger agreement, which is
attached as Annex A and incorporated by reference into this
discussion.
The merger agreement contains representations and warranties
Chevron and Unocal made to each other. The assertions embodied
in those representations and warranties are qualified by
information in confidential disclosure schedules that Chevron
and Unocal have exchanged in connection with signing the merger
agreement. The disclosure schedules contain information that
modifies, qualifies and creates exceptions to the
representations and warranties set forth in the attached merger
agreement. Accordingly, you should keep in mind that the
representations and warranties are modified in important part by
the underlying disclosure schedules. The disclosure schedules
contain information that has been included in Chevrons and
Unocals general prior public disclosures, as well as
additional information, some of which is non-public. Neither
Chevron nor Unocal believes that the disclosure schedules
contain information that the securities laws require either or
both of them to publicly disclose except as discussed in this
proxy statement/prospectus. Moreover, information concerning the
subject matter of the representations and warranties may have
changed since the date of the agreement, and this information
may or may not be fully reflected in the companies public
disclosures.
Structure of the Merger
Under the merger agreement, Unocal will merge with and into a
Chevron wholly owned subsidiary. After the merger, the Chevron
subsidiary will be the surviving entity and the separate
corporate existence of Unocal will cease. The effectiveness of
the merger will not affect the separate corporate existence of
Unocals subsidiary entities.
Timing of Closing
We expect that the closing will occur on the day on which the
last of the conditions set forth in the merger agreement has
been satisfied or waived. Immediately after the closing of the
merger, we will file a certificate of merger with the Secretary
of State of the State of Delaware, at which time the merger will
be effective.
Merger Consideration
At the completion of the merger, each outstanding share of
Unocal common stock will be converted into the right to receive:
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a combination of 0.7725 of a share of Chevron common stock and
$16.25 in cash; |
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1.03 shares of Chevron common stock; or |
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$65 in cash. |
Unocal stockholders may elect to receive one of these three
categories of consideration. However, the all-stock and
all-cash elections are subject to proration to preserve an
overall mix of 0.7725 of a share of Chevron common stock and
$16.25 in cash for all outstanding shares of Unocal common stock
taken together. As a result, even if you make the all-stock or
all-cash election, you may receive a prorated amount of cash and
Chevron common stock. Unocal stockholders who fail to make
an election will be deemed to have elected to receive the mixed
merger consideration of 0.7725 of a share of Chevron common
stock and $16.25 in cash.
Shares of Chevron common stock are traded on the New York Stock
Exchange under the symbol CVX.
55
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Explanation of the Proration of the Stock and Cash
Elections |
The total amount of cash that will be paid to holders of Unocal
common stock in the merger will be equal to $16.25 multiplied by
the total number of shares of Unocal common stock outstanding
immediately prior to completion of the merger. The overall
amount of Chevron common stock that will be issued in the merger
to holders of Unocal common stock will be equal to the product
of (x) the total number of shares of Unocal common stock
outstanding immediately prior to completion of the merger
multiplied by (y) 0.7725. All-stock and all-cash elections
are subject to proration to preserve an overall mix of 0.7725 of
a share of Chevron common stock and $16.25 in cash for all of
the outstanding shares of Unocal common stock taken together.
Therefore, unless the number of all-stock elections is
significantly greater than the number of all-cash elections,
Unocal stockholders making the all-cash election will not
receive $65.00 in cash for each share of Unocal common stock,
but instead will receive a mix of stock and cash calculated to
preserve the overall stock and cash mix described above, after
taking into account all of the elections made by all of the
Unocal stockholders. In all cases, Unocal stockholders who make
the all-cash election will receive at least as much cash as is
received by stockholders electing the mixed merger
consideration. Similarly, if too few stockholders elect the
all-cash consideration, Unocal stockholders making the all-stock
election will not receive 1.03 shares of Chevron common
stock for each share of Unocal common stock, but instead will
receive a mix of stock and cash calculated to preserve the
overall stock and cash mix described above, after taking into
account all of the elections made by all of the Unocal
stockholders. In all cases, Unocal stockholders who make the
all-stock election will receive at least as much stock as is
received by stockholders electing the mixed merger
consideration. Unocal stockholders who elect the mixed merger
consideration will not be subject to proration.
We illustrate below how the proration mechanism will be used.
For ease of reference, we refer to the amount of cash derived by
multiplying $16.25 by the total number of shares of Unocal
common stock outstanding immediately prior to completion of the
merger as the aggregate cash amount.
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Proration If Too Much Cash Is Elected |
Unless the number of all-stock elections is significantly
greater than the number of all-cash elections, Unocal
stockholders making the all-cash election will not receive
$65.00 in cash for each share of Unocal common stock, but
instead will receive a mix of stock and cash calculated in the
following manner:
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Step 1: Derive the available cash election amount: The
available cash election amount is the aggregate cash amount
minus the amount of cash to be paid in respect of shares
of Unocal common stock as to which a valid election for the
mixed merger consideration was made or is deemed to have been
made. |
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Step 2: Derive the elected cash amount: The elected cash
amount is an amount equal to $65.00 multiplied by the
number of shares of Unocal common stock as to which a valid
all-cash election was made. |
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Step 3: Derive the cash proration factor: The cash
proration factor equals the available cash election amount
divided by the elected cash amount. |
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Step 4: Derive the prorated cash merger consideration:
The prorated cash merger consideration is an amount in cash
equal to $65.00 multiplied by the cash proration factor. |
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Step 5: Derive the prorated stock merger consideration:
The prorated stock merger consideration is a number of shares of
Chevron common stock equal to (x) 1.03 multiplied by
(y) a number equal to 1 minus the cash proration
factor. |
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Step 6: Determine the stock and cash mix: Each share of
Unocal common stock as to which a valid all-cash election was
made will be converted into the right to receive the prorated
cash merger consideration and the prorated stock merger
consideration. |
56
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Proration If Too Many Shares of Chevron Common Stock Are
Elected |
If too few stockholders elect the all-cash consideration, Unocal
stockholders making the all-stock election will not receive
1.03 shares of Chevron common stock for each share of
Unocal common stock, but instead will receive a mix of stock and
cash calculated in the following manner:
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Step 1: Derive the available cash election amount: As
stated above, the available cash election amount is the
aggregate cash amount minus the amount of cash to be paid
in respect of shares of Unocal common stock as to which a valid
election for mixed merger consideration was made or is deemed to
have been made. |
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Step 2: Derive the elected cash amount: As stated above,
the elected cash amount is an amount equal to $65.00
multiplied by the number of shares of Unocal common stock
as to which a valid all-cash election was made. |
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Step 3: Derive the excess cash amount: The excess cash
amount is the difference between the available cash amount and
the elected cash amount. |
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Step 4: Derive the prorated cash merger consideration:
The prorated cash merger consideration is an amount in cash
equal to the excess cash amount divided by the number of
shares of Unocal common stock as to which a valid all-stock
election was made. |
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Step 5: Derive the stock proration factor: The stock
proration factor is a fraction the numerator of which is equal
to $65.00 minus the per share prorated cash consideration
calculated in Step 4 and the denominator of which is $65.00. |
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Step 6: Derive the prorated stock merger consideration:
The prorated stock merger consideration is a number of shares of
Chevron common stock equal to 1.03 multiplied by the
stock proration factor. |
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Step 7: Determine the stock and cash mix: Each share of
Unocal common stock as to which a valid all-stock election was
made will be converted into the right to receive the prorated
cash merger consideration and the prorated stock merger
consideration. |
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Explanation of Potential Adjustment to Merger
Consideration |
In the event that, before the completion of the merger, any
change in the outstanding shares of capital stock of Chevron or
Unocal occurs as a result 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 relevant components of the
merger consideration will be appropriately adjusted in order to
provide Unocal stockholders with the economic effect
contemplated by the parties in the merger agreement.
At the effective time of the merger, each outstanding share of
Unocal common stock (other than shares held by Unocal, Chevron,
Merger Sub and stockholders who properly exercise their
dissenters rights) will automatically be canceled and
retired, will cease to exist and will be converted into the
right to the merger consideration elected, subject to proration
as described above. Shares of Unocal common stock owned by
Unocal, Chevron or Merger Sub will be canceled in the merger
without payment of any merger consideration. Each share of
Unocal common stock owned by any direct or indirect wholly owned
subsidiary of Unocal or Chevron (other than Merger Sub)
immediately prior to the effective time of the merger will be
converted into the right to receive 1.03 shares of Chevron
common stock. The entities holding these shares will not be
deemed to have made all-stock elections, and the stock
consideration paid to these entities will not be subject to, and
will not be taken into account in calculating, any proration of
the stock merger consideration.
57
Following the merger, Chevron will make available to the
exchange agent, as needed, the merger consideration to be
delivered in respect of shares of Unocal common stock. Chevron
has appointed Mellon Investor Services to act as exchange agent
for the merger. The merger agreement provides that an election
form and other appropriate and customary transmittal materials
will be mailed together with this proxy statement/prospectus (or
at such other time as Chevron and Unocal may agree), to each
holder of record of Unocal common stock as of the close of
business on the record date for notice of the Unocal special
meeting of stockholders. Each election form will allow the
holder to elect its preferred merger consideration. The exchange
agent will also make election forms available to holders of
Unocal common stock who request such forms prior to the election
deadline, which is 5:00 p.m., Eastern time, on
[ ],
2005.
Holders of Unocal common stock who wish to elect the type of
merger consideration they will receive in the merger should
carefully review and follow the instructions set forth on the
election form. To make an election, a Unocal stockholder must
submit a properly completed election form, together with stock
certificates representing all shares covered by the election
form, so that the form is actually received by the exchange
agent at or prior to the election deadline in accordance with
the instructions on the form. Shares of Unocal common stock as
to which the holder has not made a valid election prior to the
election deadline will be deemed to have elected to receive the
mixed merger consideration of 0.7725 of a share of Chevron
common stock and $16.25 in cash in exchange for each of his or
her shares of Unocal common stock.
Once Unocal stockholders deliver their election forms and stock
certificates to the exchange agent, they may revoke their
elections by submitting written notice of revocation to the
exchange agent, so that the notice is actually received by the
exchange agent at or prior to the election deadline. If a Unocal
stockholder revokes his or her election and fails to elect an
alternate form of merger consideration, the stockholder will be
deemed to have elected to receive the mixed merger
consideration. If a stockholders election is revoked, the
exchange agent will return to the holder any stock certificates
that the holder may have previously submitted together with the
original election form. Unocal stockholders will not be able to
revoke their elections following the election deadline.
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Exchange of Unocal Stock Certificates |
Promptly after the closing, the exchange agent will send to each
holder of Unocal common stock (other than holders who have
already surrendered all of their stock certificates with an
election form) a letter of transmittal for use in the exchange
and instructions explaining how to surrender Unocal shares to
the exchange agent. Holders of Unocal common stock who surrender
their certificates to the exchange agent, together with a
properly completed letter of transmittal, will receive the
appropriate merger consideration. Holders of unexchanged shares
of Unocal common stock will not be entitled to receive any
dividends or other distributions payable by Chevron after the
closing until their shares are properly surrendered.
Chevron will not issue any fractional shares in the merger.
Holders of Unocal common stock will receive a cash payment in
the amount of the proceeds from the sale of their fractional
shares in the market.
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Treatment of Unocal Options and Equity Awards |
At the effective time of the merger, each outstanding option to
purchase shares of Unocal common stock (a Unocal Stock Option)
and each outstanding phantom option to receive cash as measured
by the increase in value of Unocal common stock over a specified
base or exercise price (a Unocal Phantom Stock Option) granted
under any of Unocals plans and agreements, whether or not
vested, will be converted into an option to acquire (or a
phantom option with respect to) a number of shares of Chevron
common stock equal to the product of (a) the number of
shares of Unocal common stock subject to such option or phantom
option immediately prior to the effective time multiplied by
(b) the Option Ratio (as defined in the next sentence),
rounded down to the nearest whole share. The Option
Ratio means the
58
sum of 0.7725 and a fraction, the numerator of which is 16.25
and the denominator of which is the closing per share price of
Chevron common stock on the New York Stock Exchange on the
trading day immediately preceding the closing date under the
merger agreement. The exercise or base price per share of
Chevron common stock subject to any such converted option or
phantom option will be an amount equal to (a) the exercise
or base price per share of Unocal common stock subject to such
option or phantom option prior to the effective time of the
merger divided by (b) the Option Ratio, rounded up
to the nearest one hundredth of a cent. All other terms of
Unocal Stock Options and Unocal Phantom Stock Options will
continue to apply after conversion, including any provisions for
the acceleration of vesting.
Additionally, at the effective time of the merger, each right,
award or account to receive Unocal common stock or benefits
measured in whole or in part by the value of a number of shares
of Unocal common stock and outstanding prior to the effective
time of the merger, other than Unocal Stock Options and Unocal
Phantom Stock Options (a Unocal Award) granted under any plans
maintained by Unocal and providing for grants of equity-based
awards or accounts, whether or not vested, will be converted
into a right, award or account with respect to a number of
shares of Chevron common stock equal to the product of
(a) the number of shares of Unocal common stock subject to
such Unocal Award immediately prior to the effective time of the
merger multiplied by (b) the Option Ratio, rounded
to the nearest whole number. Any performance shares outstanding
as of the effective time will be paid at the effective time at
100 percent of target, except that the 2005 performance
share awards will be paid at the effective time at between
100 percent and 150 percent of target, as determined
in good faith by Unocals Management Development and
Compensation Committee pursuant to the terms of the plan and the
underlying award agreement. All other terms of Unocal Awards
will continue to apply after the conversion, including any
provisions for the acceleration of vesting.
For additional information on Unocals stock-based awards,
see Interests of Unocal Directors and Executive Officers
in the Merger beginning on page 51.
Covenants
Each of Chevron and Unocal has undertaken various covenants in
the merger agreement. The following summarizes the more
significant of these covenants.
No Solicitation. Unocal has agreed that it and its
subsidiaries will not, and that it will direct and use its
reasonable best efforts to cause its and its subsidiaries
respective officers, directors, employees, advisors and other
representatives, directly or indirectly, not to
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take any action to solicit, initiate or knowingly encourage or
facilitate the making of any alternative acquisition proposal
involving Unocal or any inquiry with respect to an alternative
acquisition proposal; |
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engage in discussions or negotiations with any person with
respect to an alternative acquisition proposal; |
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disclose any nonpublic information or afford access to
properties, books or records to, any person that has made, or to
Unocals knowledge is considering making, an alternative
acquisition proposal; |
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approve or recommend, or propose to approve or recommend, or
execute or enter into any agreement relating to an alternative
acquisition proposal; or |
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propose publicly or agree to do any of the above relating to an
alternative acquisition proposal. |
An alternative acquisition proposal is any bona fide
written offer or proposal for, or bona fide written indication
of interest in, any:
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direct or indirect acquisition or purchase of a business or
assets of Unocal or any of its subsidiaries that constitutes,
either individually or in the aggregate, 20 percent or more
of the net revenue, net income or assets of Unocal and its
subsidiaries, taken as a whole; |
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direct or indirect acquisition or purchase of 20 percent or
more of any class of equity securities of Unocal or of any of
its subsidiaries whose business constitutes 20 percent or
more of the net revenue, net income or assets of Unocal and its
subsidiaries, taken as a whole; |
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tender offer or exchange offer that, if completed, would result
in any person owning 20 percent or more of any class of
equity securities of Unocal, or any of its subsidiaries whose
business constitutes 20 percent or more of the net revenue,
net income or assets of Unocal and its subsidiaries, taken as a
whole; or |
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merger, consolidation, business combination, joint venture,
partnership, recapitalization, liquidation, dissolution or
similar transaction involving Unocal or any of its subsidiaries
whose business constitutes 20 percent or more of the net
revenue, net income or assets of Unocal and its subsidiaries,
taken as a whole. |
Unocals board of directors may, however, make any
disclosure if, in the good faith judgment of Unocals
board, after consultation with outside counsel, failure to make
the disclosure would be inconsistent with the Unocal
directors exercise of their fiduciary obligations to
Unocals stockholders. If the disclosure relates to an
alternative acquisition proposal, it will be deemed to
constitute a change in the Unocal boards recommendation of
the merger unless the Unocal board reaffirms its recommendation
in that disclosure. In addition, prior to the approval of the
merger by the Unocal stockholders, Unocal may:
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furnish information and access, but only in response to a
request, to a person making an alternative acquisition proposal
to Unocals board of directors that was not solicited,
initiated or knowingly encouraged by Unocal or any of its
affiliates or any director, employee, representative or agent of
Unocal or any of its subsidiaries; and |
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participate in discussions and negotiate with the person making
the alternative acquisition proposal. |
Unocal may only furnish information and participate in
discussions as described above, however, if:
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the Unocal board concludes in good faith, after receipt of the
advice of a financial advisor of nationally recognized
reputation and outside legal counsel, that there is a reasonable
likelihood that the alternative acquisition proposal will result
in a superior proposal and, taking into account any revised
terms proposed by Chevron, that doing so is necessary for the
Unocal board to comply with its fiduciary duties to
Unocals stockholders; |
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Unocal complies with its obligations to keep Chevron informed as
to the details of such offer, to convene and hold the Unocal
stockholder meeting and to recommend the approval and adoption
of the merger agreement and the merger; and |
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the Unocal board receives from the person making the alternative
acquisition proposal an executed confidentiality agreement whose
material confidentiality terms are, in all material respects, no
less favorable to Unocal and no less restrictive to the person
making the alternative acquisition proposal than those contained
in the existing confidentiality agreement between Unocal and
Chevron, and any information provided to such person also has
been provided or is provided promptly to Chevron. |
Unocal must keep Chevron informed of the identity of any
potential bidder and the material terms and status of any offer.
A superior proposal is a bona fide written
alternative acquisition proposal for or in respect of at least a
majority of the outstanding shares of Unocal common stock or all
or substantially all of Unocal and its subsidiaries assets:
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on terms that Unocals board determines, in its good faith
judgment (after consultation with, and taking into account the
advice of, a financial advisor of nationally recognized
reputation and outside legal counsel), taking into account all
the terms and conditions of that alternative acquisition
proposal, including any break-up fees, expense reimbursement
provisions and conditions to consummation, as well as any
revisions to the terms of the merger or the merger agreement
proposed by Chevron, are more favorable to Unocal and its
stockholders than the merger; and |
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that constitutes a transaction that is reasonably likely to be
consummated on the terms proposed, taking into account all
legal, financial, regulatory and other aspects of that proposal. |
Unocal Boards Recommendation to Stockholders.
Unocal has agreed that its board will recommend the approval and
adoption of the merger and the merger agreement to Unocals
stockholders. However, prior to the approval of the merger by
the Unocal stockholders, the Unocal board is permitted not to
make this recommendation or to withdraw or modify it in a manner
adverse to Chevron if:
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the Unocal board determines in its good faith judgment, after
consulting with outside legal counsel, that failure to withdraw
or modify its recommendation would be inconsistent with
fulfilling its fiduciary duty to stockholders; |
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Unocal has given Chevron advance written notice of its decision
to withdraw or modify its recommendation, including the reasons
for the change and, if the decision relates to an alternative
acquisition proposal, the notice specifies the material terms
and conditions of that proposal and identifies the person making
the proposal; |
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Unocal has given Chevron the opportunity, for at least three
business days after delivery of that notice, to propose
revisions to the merger agreement or to make another proposal in
response to an alternative acquisition proposal and negotiated
in good faith with Chevron with respect to those revisions or
that other proposal; |
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if the withdrawal or modification relates to an alternative
acquisition proposal, that proposal is a superior
proposal; and |
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Unocal has complied with its obligations under the no
solicitation covenant described above under No
Solicitation. |
Even if the Unocal board changes, in a manner adverse to
Chevron, its recommendation in favor of the merger, Unocal must
still call a stockholders meeting as otherwise required by
the merger agreement and submit the merger agreement and the
merger to the vote of Unocals stockholders.
Interim Operations of Unocal. The merger agreement
provides that until the effective time of the merger, Unocal and
its subsidiaries will conduct their business in the ordinary
course consistent with past practice and in a manner not
involving entry into businesses that are materially different
from the business of Unocal and its subsidiaries on the date of
the merger agreement. Unocal has also agreed that during this
period it and its subsidiaries will use their commercially
reasonable efforts to preserve intact their business
organizations and relationships with third parties. In addition,
Unocal has agreed to the following specific restrictions on the
conduct of its business during this period which are subject to
exceptions described in the merger agreement. Unocal generally
has agreed that, except with the prior written consent of
Chevron, it will not, and will not permit any of its
subsidiaries to:
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amend its charter or bylaws or the Unocal stockholder rights
agreement; |
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adopt a plan of liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization; |
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issue or sell any of its capital stock or any securities
convertible into its capital stock; |
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effect a stock split, combination or reclassification or declare
any dividends, other than regular quarterly cash dividends
consistent with past practice and intra-group dividends among
Unocal and its subsidiaries; |
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redeem or repurchase any of its capital stock; |
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amend the terms of any outstanding options to purchase shares of
Unocal common stock or of any outstanding restricted stock,
stock units or stock appreciation rights; |
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make or authorize any capital expenditures in excess of
$50 million; |
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increase the compensation or benefits of any director, officer
or employee or enter into, adopt, extend or renew employment
agreements or benefit plans; |
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acquire a material amount of assets or property, except in the
ordinary course consistent with past practice; |
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sell, lease, license, encumber or otherwise dispose of any
material assets or property, except pursuant to existing
contracts or commitments or except in the ordinary course
consistent with past practice and in no event in an amount in
exceeding $50 million in the aggregate; |
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incur any indebtedness for borrowed money, except for
intra-group indebtedness among Unocal and its subsidiaries and
additional short-term debt not to exceed $500 million in
the aggregate; |
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guarantee or assume indebtedness for borrowed money, or enter
into any keep well or other arrangement to maintain
any financial condition of another person, other than in the
ordinary course consistent with past practice; |
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modify, amend or terminate any material contract or enter into
an agreement that would constitute a material contract, other
than in the ordinary course of business consistent with past
practice; |
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settle or compromise any claim, demand, lawsuit or regulatory
proceeding in an amount in excess of $20 million or that is
otherwise qualitatively material to Unocal (provided that
Chevron will not unreasonably withhold its consent to any such
settlement or compromise); |
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change any method of financial accounting or financial
accounting practice (except for changes that are not material or
are required by concurrent changes in GAAP or applicable law); |
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enter into any material joint venture, partnership or similar
arrangement or make any loan, capital contribution or advance to
or investment in any other person, except in the ordinary course
consistent with past practice or in an amount not exceeding
$10 million; |
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take any action which would limit Chevrons or
Unocals freedom to license, cross-license or otherwise
dispose of any of Unocals intellectual property; |
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amend or waive any provisions of any standstill agreement; |
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except as required by law, make or change any tax election,
settle any tax audit or file any amended tax return, in each
case, that is reasonably likely to result in an increase to a
tax liability, if that increase is material to Unocal and its
subsidiaries taken as a whole; |
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enter into any agreement that limits (other than in an
insignificant manner) the ability of Unocal or its subsidiaries
or would limit (other than in an insignificant manner) the
ability of Chevron or its subsidiaries after the merger to
compete in any line of business or geographic area. For this
purpose, it is understood that any restriction that by its terms
does not extend more than six months beyond the effective time
of the merger will be considered insignificant; or |
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take any action that would prevent, materially delay or
materially impede the consummation of the merger. |
Best Efforts Covenant. Chevron and Unocal have agreed to
cooperate with each other and use their best efforts to promptly:
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take all actions and do all things necessary or advisable under
the merger agreement and applicable laws to complete the merger
and the other transactions contemplated by the merger agreement
as soon as practicable, including preparing and filing all
necessary regulatory filings; and |
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obtain as soon as practicable all required regulatory or
third-party approvals for consummation of the merger. |
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Chevron and Unocal have also agreed to use their best efforts to
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avoid the entry of, or to have vacated or terminated, any
decree, order or judgment that would restrain, prevent or delay
the closing, on or before the end date, including defending
through litigation on the merits any claim asserted in any court
by any person; and |
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avoid or eliminate every impediment under any antitrust,
competition or trade regulation law that may be asserted by any
governmental authority with respect to the merger so that the
closing can occur as soon as reasonably possible. This includes
proposing, negotiating, committing to and effecting the sale,
divestiture or disposition of businesses, product lines or
assets of Chevron, Unocal and their respective subsidiaries; and
otherwise taking or committing to take actions that after the
closing date would limit Chevrons or its
subsidiaries freedom of action with respect to, or its or
their ability to retain, one or more of the businesses, product
lines or assets of Chevron, Unocal and their subsidiaries, in
each case as may be required in order to avoid a government
order that would prevent or materially delay the closing. |
However, neither Chevron nor Unocal is required to take any
action if it would result in a substantial detriment. For this
purpose, substantial detriment means changes or
effects which, individually or in the aggregate and after giving
effect to any reasonably expected proceeds of any divestiture or
sale of assets would result in, or be reasonably likely to
result in, a material adverse effect on Unocal and its
subsidiaries, taken as a whole, at or after the effective time
of the merger. Any requirement to divest or hold separate or
limit the operation of any of the businesses, assets or
properties owned by Chevron and its subsidiaries prior to the
merger will be deemed to result in a substantial detriment if
that action with respect to a comparable amount of assets or
businesses of Unocal and its subsidiaries would be reasonably
likely, in the aggregate, to have a material adverse effect on
Unocal, at or after the effective time of the merger. Chevron
and Unocal have agreed that, for purposes of the merger
agreement, no change affecting Unocals RFG patents
(including any loss of economic benefits in connection with
those patents or expected to be derived from the patents) will
be deemed to constitute a substantial detriment, and
no such change will be aggregated with other changes when
determining the occurrence of a substantial
detriment.
Certain Employee Benefits Matters. The merger agreement
provides that Chevron will cause the Chevron subsidiary that
will survive the merger with Unocal, which we refer to as the
surviving corporation, to honor in accordance with their terms
all obligations under Unocals executive benefit
arrangements and under all other existing Unocal employee and
retiree arrangements and plans to the extent entitlements or
rights exist under those arrangements or plans as of the
effective time of the merger. Chevron and Unocal have agreed
that the merger will constitute a change in control under
Unocals employment arrangements and benefit plans in
accordance with the terms of those arrangements and plans. The
other terms of such arrangements and plans, including any
conditions that an employee must incur a termination of
employment or constructive discharge to receive benefits, will
continue to apply.
Chevron has also agreed, following the effective time of the
merger, to provide Unocal employees who were employed by Unocal
or its subsidiaries at the effective time of the merger and who
continue as employees of Chevron or its subsidiaries, for so
long as they remain so employed, compensation and employee
benefits, pursuant to compensation and benefit plans and
arrangements as provided to those employees immediately prior to
the effective time of the merger, or pursuant to compensation
and benefit plans and arrangements maintained by Chevron
providing coverage and benefits which, in the aggregate, are no
less favorable than those provided to employees of Chevron in
positions comparable to the positions held by the continuing
Unocal employees.
In addition, Chevron has agreed that, following the effective
time of the merger, Chevron will continue to provide former
employees of Unocal and its subsidiaries (and to Unocal
employees whose employment terminates prior to the effective
time of the merger) post-retirement benefits, other than
pensions, pursuant to benefit plans and arrangements applicable
to those retirees as in effect as of April 4, 2005, or
pursuant to benefit plans or arrangements maintained by Chevron
or its subsidiaries providing
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post-retirement coverage and benefits, other than pensions,
which, in the aggregate, are no less favorable than those
provided after the merger to former employees of Chevron that
served in comparable positions.
If the effective time of the merger occurs in 2005, participants
in the Unocal annual bonus plan will be entitled to receive pro
rata bonus payments following the effective time of the merger
in accordance with the terms of the plan. In addition, Chevron
will cause Unocal to maintain a bonus plan for the remainder of
2005 on the same terms and conditions and subject to the same
targets and performance criteria as were in effect under the
annual bonus plan for 2005. Within two and one-half months
following the end of the 2005 calendar year, Chevron will pay
bonuses equal to the excess of (i) the bonuses that
participants would have received for the entire calendar year
under the new plan over (ii) the amount of their pro rata
bonus payments. If the effective time of the merger occurs in
2006, Unocal will be permitted to establish an annual bonus plan
for 2006 based upon targets and goals substantially similar to
those established for 2005, and participants will be entitled to
receive pro rata bonus payments following the effective time of
the merger in accordance with the terms of the plan. Total
bonuses for 2006 will be calculated based upon the excess of the
bonuses that participants would have received for the entire
calendar year over the amount of their pro rata bonus payments,
in the same manner as bonuses would have been calculated for
2005 if the effective time of the merger occurred in 2005. No
pro rata bonus payment for 2005 or 2006 may exceed
150 percent of the employees target amount for the
year.
Please see Interests of Unocal Directors and Executive
Officers in the Merger, beginning on page 51, for
additional information on employee benefits matters covered in
the merger agreement.
Indemnification and Insurance of Unocal Directors and
Officers. Chevron has agreed that:
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for six years after the merger becomes effective, it will cause
the surviving corporation to indemnify, to the greatest extent
permitted by law as of April 4, 2005, the individuals who
on or prior to the effective time of the merger were directors,
officers and employees of Unocal or its subsidiaries with
respect to all acts or omissions in those capacities occurring
prior to the effective time of the merger; |
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it will cause the surviving corporation to honor all
indemnification agreements with the individuals who on or prior
to the effective time of the merger were directors, officers and
employees in effect as of April 4, 2005; and |
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for six years after the effective time of the merger, it will
provide officers and directors liability insurance
covering acts or omissions occurring prior to the effective time
of the merger by each person currently covered by Unocals
officers and directors liability insurance policy,
on terms no less favorable than the Unocal policy in effect as
of April 4, 2005, except that Chevron will be obligated to
pay only up to 300 percent of the annual premium paid by
Unocal for such insurance as of April 4, 2005. |
Other Covenants. The merger agreement contains additional
mutual covenants of the parties, including an agreement not to
jeopardize the intended tax treatment of the merger.
Representations and Warranties
Unocal makes various representations and warranties to Chevron
and Merger Sub in the merger agreement. The most significant of
these relate to:
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corporate authorization to enter into the merger agreement and
to consummate the transactions contemplated by the merger
agreement; |
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the stockholder vote and governmental approvals required in
connection with the contemplated transactions; |
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absence of any breach of organizational documents, law or
certain material agreements as a result of the contemplated
transactions; |
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capitalization; |
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ownership of subsidiaries; |
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filings with the SEC; |
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financial statements; |
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accuracy of information provided for inclusion in this proxy
statement/ prospectus; |
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disclosure controls and procedures and internal control over
financial reporting; |
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absence of material changes since December 31, 2004; |
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absence of defaults and violations; |
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absence of undisclosed material liabilities; |
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litigation; |
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tax matters; |
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employee benefits matters; |
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compliance with laws, including the Foreign Corrupt Practices
Act of 1977, as amended; |
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environmental matters; |
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title to properties; |
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material contracts and contracts relating to Unocals
exploration and production operations; |
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intellectual property; |
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confidentiality and standstill agreements; |
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finders or advisors fees; |
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inapplicability of the Delaware anti-takeover statute; and |
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amendment of the Unocal stockholder rights plan to render it
inapplicable to the merger. |
In addition, Chevron makes representations and warranties to
Unocal relating to:
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corporate authorization to enter into the merger agreement and
to consummate the transactions contemplated by the merger
agreement; |
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the governmental approvals required in connection with the
contemplated transactions; |
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absence of any breach of organizational documents, law or
certain material agreements as a result of the contemplated
transactions; |
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capitalization; |
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filings with the SEC; |
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financial statements; |
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accuracy of information provided for inclusion in this proxy
statement/ prospectus; |
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disclosure controls and procedures and internal control over
financial reporting; |
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absence of material changes since December 31, 2004; |
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absence of undisclosed material liabilities; |
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litigation; |
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compliance with laws; |
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tax matters; and |
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capitalization of Merger Sub. |
The representations and warranties in the merger agreement do
not survive the closing or termination of the merger agreement.
Conditions to the Completion of the Merger
The obligations of Chevron and Unocal to complete the merger are
subject to the satisfaction or, to the extent legally
permissible, waiver of the following conditions:
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approval and adoption by the Unocal stockholders of the merger
agreement and the merger; |
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expiration of the HSR Act waiting period; |
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approval by the European Commission of the contemplated
transactions (if applicable); |
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absence of any legal prohibition on completion of the merger; |
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Chevrons registration statement on Form S-4, which
includes this proxy statement/ prospectus, being effective and
not subject to any stop order by the SEC; |
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approval for the listing on the New York Stock Exchange of the
shares of Chevron common stock to be issued in the merger; |
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absence of any condition to approval of the merger by the
U.S. Federal Trade Commission or the U.S. Department
of Justice that would result in or be reasonably likely to
result in a substantial detriment; |
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absence of any proceeding seeking to limit Chevrons
ownership of Unocal or to compel divestiture of assets, in
either case that would result in or be reasonably likely to
result in a substantial detriment; |
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absence of any statute, rule or other governmental order
applicable to the merger that would result in or be reasonably
likely to result in a substantial detriment; |
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receipt of all material regulatory approvals for the merger on
terms that are not reasonably likely to result in a substantial
detriment; and |
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performance in all material respects by the other party of the
obligations required to be performed by it at or prior to
closing. |
In addition, the obligations of Chevron and Unocal to complete
the merger are subject to the satisfaction or, to the extent
legally permissible, waiver of the following conditions:
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accuracy as of closing of the representations and warranties
made by the other party to the extent specified in the merger
agreement; |
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receipt by that party of an opinion of counsel to the effect
that the merger will qualify as a reorganization under
Section 368(a) the Code; and |
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absence of any event, occurrence, development or state of
circumstances which, individually or in the aggregate, would be
reasonably likely to have a material adverse effect on the other
party. |
For purposes of the merger agreement, material adverse
effect means, with respect to either Chevron or Unocal, as
applicable, a material adverse effect on the financial
condition, business, liabilities, assets or continuing results
of operations of the relevant company and its subsidiaries,
taken as a whole, except to the extent resulting from:
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any changes in general United States or global economic
conditions or |
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any changes affecting the oil and gas industry in general
(including changes to commodity prices). |
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Chevron and Unocal have agreed that, for purposes of the merger
agreement, no change affecting Unocals RFG patents
(including any loss of economic benefits in connection with
those patents or expected to be derived from the patents) will
be deemed to constitute a material adverse effect on Unocal and
no such change will be aggregated with other changes when
determining the occurrence of a material adverse effect on
Unocal.
Termination of the Merger Agreement
Right to Terminate. The merger agreement may be
terminated at any time prior to the closing in any of the
following ways:
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by mutual written consent of Chevron and Unocal; |
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by either Chevron or Unocal if: |
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the merger has not been completed by December 31, 2005 (or
if the reason for not closing by December 31, 2005 is that
the regulatory conditions specified in the merger agreement have
not been satisfied by that date, August 31, 2006) (but
neither Chevron nor Unocal can terminate the merger agreement
for this reason if its failure to fulfill in any material
respect its obligations under the merger agreement has resulted
in the failure to complete the merger); |
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the approval of Unocal stockholders has not been obtained by
reason of the failure to obtain the required vote at the Unocal
special meeting of stockholders or at any adjournment of that
special meeting; or |
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there is a permanent legal prohibition to closing the merger. |
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by Chevron if the Unocal board fails to recommend the merger or
withdraws or modifies in a manner adverse to Chevron its
approval or recommendation of the merger, Unocal breaches its
obligation to call the Unocal stockholder meeting or Unocal has
materially breached its obligations described above under
No Solicitation to the material detriment of Chevron. |
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by Chevron or Unocal if the other party has breached any of its
representations, warranties, covenants or obligations under the
merger agreement, and that breach would result in the failure to
satisfy certain specified closing conditions and is incapable of
being cured, or, if capable of being cured, has not been cured
within 30 days after the party alleged to have breached
receives written notice of the breach. |
If the merger agreement is validly terminated, the agreement
will become void without any liability on the part of any party
unless such party is in willful breach. However, the provisions
of the merger agreement relating to expenses and termination
fees, as well as the confidentiality agreement, will continue in
effect notwithstanding termination of the merger agreement.
Termination Fees Payable by Unocal. Unocal has agreed to
pay Chevron $250 million in cash if:
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Chevron terminates the merger agreement because the Unocal board
fails to recommend the merger to its stockholders, because the
Unocal board otherwise changes or proposes publicly to change
its recommendation of the merger to stockholders, because Unocal
fails to comply with its obligation to hold the special meeting
or to obtain SEC clearance for this proxy statement/ prospectus
or because Unocal has materially (and to the material detriment
of Chevron) breached its obligations under the merger agreement
with respect to non-solicitation of other acquisition proposals
as described above; |
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either Chevron or Unocal terminates the merger agreement because
Unocals stockholders fail to approve the merger and, prior
to the Unocal stockholders meeting but after April 4,
2005, an alternative acquisition proposal was made known to
Unocal (including any of its agents or representatives) and
communicated publicly or to any substantial number of Unocal
stockholders or was made directly to Unocals stockholders
or any person publicly announced an intention (whether or not
conditional) to make an alternative acquisition proposal; or |
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after April 4, 2005, an alternative acquisition proposal is
made known to Unocal (including any of its agents or
representatives) and communicated publicly or to any substantial
number of Unocal stockholders or is made directly to
Unocals stockholders by any person, or any person publicly
announces an intention (whether or not conditional) to make an
alternative acquisition proposal, and after any such event the
merger agreement is terminated by either Chevron or Unocal
because the merger is not completed by the end date, so long as
the Unocal stockholder approval has not been obtained. |
Unocal has agreed to pay Chevron an additional termination fee
of $250 million in cash if the merger agreements
termination gave rise to the initial $250 million
termination fee and an alternative acquisition proposal is
consummated, or Unocal enters into a definitive agreement
providing for any alternative acquisition proposal, in each case
within 12 months after the termination of the merger
agreement. For purposes of this additional termination fee, all
references in the definition of alternative acquisition
proposal to 20 percent instead refer to
50 percent.
Expenses
Except as described above, all costs and expenses incurred in
connection with the merger agreement and related transactions
will be paid by the party incurring such costs or expenses,
except that Chevron will pay expenses incurred in connection
with printing, mailing and filing this proxy statement/
prospectus and fees paid in respect of the HSR Act in connection
with the merger.
Amendments; Waivers
Any provision of the merger agreement may be amended or waived
prior to closing if the amendment or waiver is in writing and
signed, in the case of an amendment, by Chevron, Unocal and
Merger Sub or, in the case of a waiver, by the party against
whom the waiver is to be effective. After the adoption of the
merger agreement by the stockholders of Unocal, no amendment or
waiver may, without the further approval of Unocals
stockholders, alter or change the amount or kind of merger
consideration or any term of Chevrons certificate of
incorporation.
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INFORMATION ABOUT THE SPECIAL MEETING AND VOTING
This proxy statement/prospectus is being furnished to Unocal
stockholders by Unocals board of directors in connection
with the solicitation of proxies from the holders of Unocal
common stock for use at the special meeting of Unocal
stockholders and any adjournments or postponements of the
special meeting. This proxy statement/prospectus also is being
furnished to Unocal stockholders as a prospectus of Chevron in
connection with the issuance by Chevron of shares of Chevron
common stock to Unocal stockholders in connection with the
merger.
Date, Time and Place
The special meeting of stockholders of Unocal will be held at
[ ],
Pacific Daylight Time, on
[ ],
2005 at
[ ].
Matters to Be Considered
At the special meeting, Unocal stockholders will be asked:
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to consider and vote upon a proposal to approve and adopt the
merger agreement; |
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to vote upon an adjournment or postponement of the special
meeting, if necessary, to solicit additional proxies; and |
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to transact any other business as may properly be brought before
the special meeting or any adjournment or postponement of the
special meeting. |
At this time, the Unocal board of directors is unaware of any
matters, other than those set forth in the preceding sentence,
that may properly come before the special meeting.
Stockholders Entitled to Vote
The close of business on June 29, 2005 has been fixed by
Unocals board as the record date for the determination of
those holders of Unocal common stock who are entitled to notice
of and to vote at the special meeting and any adjournment or
postponement of the special meeting.
At the close of business on the record date, there were
[ ] shares
of Unocal common stock outstanding and entitled to vote, held by
approximately
[ ]
holders of record. A list of the stockholders of record entitled
to vote at the special meeting will be available for examination
by Unocal stockholders for any purpose germane to the meeting.
The list will be available at the meeting and for ten days prior
to the meeting during ordinary business hours by contacting
Unocals Corporate Secretary at 2141 Rosecrans Avenue,
Suite 4000, El Segundo, California 90245.
Quorum and Required Vote
Each holder of record of shares of Unocal common stock as of the
record date is entitled to cast one vote per share at the
special meeting on each proposal. The presence, in person or by
proxy, of the holders of one-third of the issued and outstanding
shares of Unocal common stock entitled to vote at the special
meeting constitutes a quorum for the transaction of business at
the special meeting. The affirmative vote of at least a majority
of the shares of Unocal common stock outstanding as of the
record date is required to approve and adopt the merger
agreement.
As of the record date for the special meeting, directors and
executive officers of Unocal and their affiliates beneficially
owned an aggregate of
[ ] shares
of Unocal common stock entitled to vote at the special meeting.
These shares represent approximately
[ ] percent
of the Unocal common stock outstanding and entitled to vote as
of the record date. Although these individuals are not party to
any voting agreements with Unocal or Chevron and do not have any
obligations to vote in favor of the merger, they have indicated
their intention to vote their outstanding shares of Unocal
common stock in favor of the merger.
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As of June 22, 2005, Chevron and its directors, executive
officers and their affiliates owned less than one percent of the
outstanding shares of Unocal common stock. Chevron expects that
its board of directors will take the required steps to exempt
any dispositions of Unocal common stock or acquisitions of
Chevron common stock by these persons in connection with the
merger from the SECs short-swing profit rules.
How Shares Will Be Voted at the Special Meeting
All shares of Unocal common stock represented by properly
executed proxies received before or at the special meeting, and
not properly revoked, will be voted as specified in the proxies.
Properly executed proxies that do not contain voting
instructions will be voted FOR the adoption of the merger
agreement and any adjournment of the special meeting.
A properly executed proxy marked Abstain with
respect to any proposal will be counted as present for purposes
of determining whether there is a quorum at the special meeting.
However, because adoption of the merger agreement requires the
affirmative vote of a majority of the outstanding shares
entitled to vote, an abstention will have the same effect as a
vote AGAINST the merger.
If you hold shares of Unocal common stock in street name through
a bank, broker or other nominee holder, the nominee holder may
only vote your shares in accordance with your instructions. If
you do not give specific instructions to your nominee holder as
to how you want your shares voted, your nominee will indicate
that it does not have authority to vote on the proposal, which
will result in what is called a broker non-vote.
Broker non-votes will be counted for purposes of determining
whether there is a quorum present at the special meeting, but
because adoption of the merger agreement requires the
affirmative vote of a majority of the outstanding shares
entitled to vote, broker non-votes will have the same effect as
a vote AGAINST the merger.
If any other matters are properly brought before the special
meeting, the proxies named in the proxy card will have
discretion to vote the shares represented by duly executed
proxies in their sole discretion.
If you are a Unocal employee and hold shares of restricted
Unocal common stock awarded under a Unocal incentive plan and do
not submit voting instructions for those shares, they will be
voted as recommended by Unocals board of directors.
How to Vote Your Shares
Registered Stockholders
Registered stockholders may vote by one of the following methods:
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By Mail. You may vote by signing, dating and returning
your proxy card in the enclosed pre-addressed envelope; |
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By Telephone. You may vote by telephone (from U.S.,
Puerto Rico and Canada only) using the toll-free number listed
on the proxy card. Please have your proxy card in hand when you
call. Easy-to-follow voice prompts allow you to vote your shares
and confirm that your instructions have been properly recorded.
Telephone voting facilities will be available 24 hours a
day and will close at 11:59 p.m., Eastern Time, on
[ ],
2005; |
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By Internet. You may vote electronically on the Internet,
using the web site listed on the proxy card. Please have your
proxy card in hand when you log onto the web site. Internet
voting facilities will be available 24 hours a day and will
close at 11:59 p.m., Eastern Time, on
[ ],
2005; or |
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In Person. You may vote in person at the special meeting. |
70
Street-name Stockholders
If your shares are held by a broker, bank or other nominee, you
must follow the instructions on the form you receive from your
broker, bank or other nominee in order for your shares to be
voted. Please follow their instructions carefully. Also, please
note that if the holder of record of your shares is a broker,
bank or other nominee and you wish to vote at the special
meeting, you must request a legal proxy from the bank, broker or
other nominee that holds your shares and present that proxy and
proof of identification at the special meeting to vote your
shares.
Based on the instructions provided by the broker, bank or other
holder of record of their shares, street-name stockholders may
generally vote by one of the following methods:
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By Mail. You may vote by signing, dating and returning
your proxy card in the enclosed pre-addressed envelope; |
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By Methods Listed on Proxy Card. Please refer to your
voting card or other information forwarded by your bank, broker
or other holder of record to determine whether you may vote by
telephone or electronically on the Internet, following the
instructions on the card or other information provided by the
record holder; or |
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In Person With a Proxy from the Record Holder. A
street-name stockholder who wishes to vote at the meeting will
need to obtain a legal proxy from his or her bank or brokerage
firm. Please consult the voting form sent to you by your bank or
broker to determine how to obtain a legal proxy in order to vote
in person at the annual meeting. |
How to Change Your Vote
If you are a registered stockholder, you may revoke your proxy
at any time before the shares are voted at the special meeting
by:
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sending a written notice to the Corporate Secretary of Unocal,
2141 Rosecrans Avenue, Suite 4000, El Segundo, CA 90245, by
the close of business on
[ ],
2005, indicating you are revoking your earlier proxy; |
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completing, signing and timely submitting a new proxy card to
the addressee indicated on the pre-addressed envelope enclosed
with your initial proxy card by the close of business on
[ ],
2005. The latest dated and signed proxy actually received by
such addressee before the special meeting will be counted, and
any earlier proxies will be considered revoked; or |
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attending the special meeting and voting in person. |
If you vote your shares by telephone or via the Internet, you
may revoke your prior telephone or Internet vote by:
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subsequently recording a different vote by telephone or Internet; |
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signing and returning a proxy card after your last telephone or
Internet vote; or |
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attending the special meeting and voting in person. |
Merely attending the meeting without voting will not revoke any
prior votes or proxies.
If you are a street-name stockholder and you vote by proxy, you
may later revoke your proxy instructions by informing the holder
of record in accordance with that entitys procedures.
Confidential Voting
Unocals board of directors has adopted a policy of
confidentiality for stockholder votes to encourage stockholder
participation in corporate governance. Unocal retains
independent third parties to receive and tabulate stockholder
votes. The manner in which any stockholder votes on any
particular issue shall, subject to federal or state law
requirements, be strictly confidential.
71
Unocals board of directors considers that some registered
stockholders may want Unocal to know how they have voted and
Unocal, where possible, may wish to inquire as to how
stockholders have voted. If you want Unocal to have access to
your proxy card, you may check the box marked OPEN
BALLOT on the proxy card and your proxy will be made
available to Unocal. Your vote will remain confidential if you
do not check the OPEN BALLOT box.
Solicitation of Proxies
In addition to solicitation by mail, directors, officers and
employees of Unocal may solicit proxies for the special meeting
from Unocal stockholders personally or by telephone and other
electronic means without compensation other than reimbursement
for their actual expenses.
Chevron will pay the expenses incurred in connection with the
filing, printing and mailing of this document. Unocal has also
made arrangements with MacKenzie Partners, Inc., New York, New
York to assist Unocal in soliciting proxies for the special
meeting and has agreed to pay MacKenzie Partners a fee not
expected to exceed $25,000, plus reasonable out-of-pocket
expenses, for these services. Arrangements also will be made
with brokerage firms and other custodians, nominees and
fiduciaries for the forwarding of solicitation material to the
beneficial owners of shares of Unocal stock held of record by
those persons.
Special Meeting Admission
If you wish to attend the special meeting in person, you must
present either an admission ticket or appropriate proof of
ownership of Unocal stock, as well as a form of personal
identification. If you are a registered stockholder and plan to
attend the meeting in person, please mark the attendance box on
your proxy card and bring the tear-off admission ticket with you
to the meeting. If you are a beneficial owner of Unocal common
stock that is held by a bank, broker or other nominee, you will
need proof of ownership to be admitted to the meeting. A recent
brokerage statement or a letter from your bank or broker are
examples of proof of ownership.
No cameras, recording equipment, electronic devices, large bags,
briefcases or packages will be permitted in the meeting.
Voting and Elections by Participants in the Unocal Plans
Participants in the Unocal Savings Plan, Molycorp, Inc. 401(k)
Retirement Savings Plan or the Pure Resources 401(k) and
Matching Plan (which we collectively refer to in the proxy
statement as the Unocal Plans) will be able to direct how they
want the shares of Unocal common stock allocated to their
accounts as of the record date to be voted and whether they want
to elect cash consideration or share consideration to be
allocated to their accounts in ex-change for each share of
Unocal common stock in their accounts as of the closing date.
All voting instructions submitted by Unocal Plan participants
are confidential and will not be disclosed to Unocals
management. After the voting instructions with respect to the
Unocal Plans are tabulated, the results will be given to an
independent fiduciary (who has been specially retained in
connection with the mergers and is a fiduciary to the Unocal
Plans) who will, following such instructions, to the extent not
inconsistent with ERISA, direct the trustee as to how to vote on
the adoption of the merger agreement and what form of merger
consideration to elect. If you are a participant in the Unocal
Plans and do not submit voting instructions for any shares held
in Unocal common stock in such plans, the shares will be voted
pro rata with the vote of Unocal Plan shares for which
instructions are received. Your instructions on how to vote on
the adoption of the merger agreement and to elect the merger
consideration will be subject, in the case of all Unocal Plans,
to the extent consistent with the applicable fiduciarys
duties under ERISA. If you are a participant in the Unocal
Plans, please follow the instructions that you receive for
voting and elections with respect to the shares allocated to
your account, which will set forth in detail how elections will
be made for Unocal common stock held in your account under the
Unocal Plans in the event that you fail to properly provide any
instructions as to how you want elections to be made with
respect to shares of Unocal common stock allocated to your plan
account.
72
COMPARISON OF STOCKHOLDER RIGHTS
The rights of Unocal stockholders under Delaware law, the Unocal
certificate of incorporation and the Unocal bylaws prior to the
merger are substantially the same as the rights Chevron
stockholders will have following the merger under Delaware law,
the Chevron restated certificate of incorporation and the
Chevron bylaws, with principal exceptions summarized in the
chart below. Copies of the Unocal certificate of incorporation,
the Unocal bylaws, the Chevron restated certificate of
incorporation and the Chevron bylaws are incorporated by
reference and will be sent to holders of shares of Unocal common
stock upon request. See Additional Information for
Stockholders Where You Can Find More
Information on page 81. The summary contained in the
following chart is qualified by reference to Delaware law, the
Unocal certificate of incorporation, the Unocal bylaws, the
Chevron restated certificate of incorporation and the Chevron
bylaws.
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Unocal Stockholder Rights |
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Chevron Stockholder Rights |
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Authorized
Capital Stock |
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Unocals certificate of incorporation authorizes Unocal to
issue 850,000,000 shares consisting of
750,000,000 shares of common stock and
100,000,000 shares of preferred stock.
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Chevrons certificate of incorporation authorizes Chevron
to issue 4,100,000,000 shares consisting of
4,000,000,000 shares of common stock and
100,000,000 shares of preferred stock.
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Unocals board of directors has the authority to issue one
or more series of preferred stock, having terms designated by
Unocals board. As of March 31, 2005, there were
271,654,896 shares of common stock and no shares of
preferred stock outstanding.
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Chevrons board of directors has the authority to issue one
or more series of preferred stock, having terms designated by
Chevrons board. As of March 31, 2005, there were
2,098,220,174 shares of common stock and no shares of
preferred stock outstanding.
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Unocals common stock is listed on the New York Stock
Exchange.
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Chevrons common stock is listed on the New York Stock
Exchange and the Pacific Exchange.
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Voting Rights |
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Each share of Unocals common stock entitles its holder to
one vote on all matters on which stockholders are entitled to
vote.
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Each share of Chevrons common stock entitles its holder to
one vote on all matters on which stockholders are entitled to
vote.
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Conversion Rights |
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Unocal common stock is not subject to any conversion rights.
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Chevron common stock is not subject to any conversion rights.
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Stockholder Proposals |
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Unocals bylaws provide that any stockholder who intends to
bring a matter before the stockholders meeting must
deliver written notice of his or her intent to do so to
Unocals secretary. For an annual meeting, the secretary
must receive the notice no later than 90 days prior to the
meeting, unless there has been an amendment to the bylaws since
the last annual meeting changing the date of the annual meeting,
in which case the notice must be delivered no later than
90 days prior to the meeting or the tenth day following the
date of public disclosure of the new meeting date. See the
subsection entitled Nomination of Directors below
for more information.
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Chevrons bylaws do not contain advance notice provisions
for stockholder proposals. Chevrons restated certificate
of incorporation, however, precludes taking action on any
proposal at a stockholder meeting that is not included in the
proxy statement for that meeting (unless this requirement is
waived by the board of directors). In practice, this means that
stockholder proposals must comply with the submission standards
under federal proxy rules and must be submitted to Chevron
consistent with the companys deadline set forth in the
proxy statement for the prior years annual meeting of
stockholders.
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Unocal Stockholder Rights |
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Chevron Stockholder Rights |
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In any case, the business must be a proper matter for
stockholder action and the notice must include:
a brief description of each matter desired to be
brought before the meeting;
the name and address of the proposing stockholder
(if the stockholder is a holder of record, they must be as in
Unocals stock ownership records);
the class and number of shares of Unocal that are
beneficially owned by the stockholder presenting the proposed
business (and if the stockholder is not a holder of record,
proof of beneficial ownership);
a description of any material interest of the
proponent in the business being brought; and
a statement as to whether the proponent intends to
deliver a proxy statement and a form of proxy to a sufficient
number of stockholders.
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Nomination of Directors |
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Unocals bylaws provide that a Unocal stockholder may
nominate one or more persons for election as directors at an
annual or special meeting called for the election of directors,
but only if the stockholder delivers written notice of his or
her intent to make the nomination to Unocals secretary.
The timing requirements for receiving the notice are similar to
those for receiving notice of stockholder proposals described
above.
The notice must include:
such information concerning each nominee as would be
required under SEC rules to be included in a proxy statement
soliciting proxies for the election of the nominee as a
director; and
a written and signed consent of each nominee to
serve as a Unocal director if elected.
In addition, if the number of directors to be elected to the
board of directors is increased and there is no public
announcement naming all of the
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Chevrons board of directors proposes a slate of nominees
for director each year. Chevrons Nominating and Governance
Committee identifies, investigates and recommends prospective
directors to the board. Stockholders may recommend a nominee by
writing to the corporate secretary, specifying the
nominees name and qualifications for board membership. All
recommendations are brought to the attention of the Nominating
and Governance Committee.
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Unocal Stockholder Rights |
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Chevron Stockholder Rights |
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nominees for director or specifying the size of the increased
board of directors at least 100 days prior to the annual
meeting, a stockholders notice will be deemed to be timely
received, but only with respect to the nominees for any new
positions created by such increase, if it is delivered on or
prior to the tenth day following the date of public disclosure
of the meeting date.
For a special meeting, nominations of persons to be elected to
the board of directors by or at the direction of the board of
directors or a nominating stockholder must be made by notice to
the secretary no later than the close of business on the later
of the 90th day prior to such special meeting or the tenth day
following the date of public disclosure of the meeting date.
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Advance Notice of Stockholder Meetings |
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Unocals bylaws provide that written notice of meetings
shall be given to stockholders not less than 10 or more than
60 days prior to the meeting.
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Chevrons certificate of incorporation provides that
written notice of meetings shall be given to stockholders not
less than 30 days prior to the meeting, together with a
proxy statement.
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Calling Special Meetings of Stockholders |
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Unocals restated certificate of incorporation provides
that a special meeting of stockholders can be called at any time
by the board, or by a majority of the board, or by a committee
of the board duly designated by the board as provided in a
resolution of the board.
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Chevrons bylaws provide that a special meeting of
stockholders may be called by the board or the chairman of the
board, and shall be called by the chairman of the board or the
secretary at the request in writing of at least one third of the
members of the board.
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Quorum |
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Unocals bylaws provide that the holders of one-third of
the outstanding shares of stock entitled to vote shall
constitute a quorum for transacting business at a meeting of
stockholders.
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Chevrons bylaws provide that a majority of the outstanding
shares of stock entitled to vote shall constitute a quorum for
action at a meeting of stockholders.
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Number of Directors |
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Unocals bylaws provide that the number of directors shall
be 10 and the Unocal certificate of incorporation provides that
any by-law amendment increasing or reducing the authorized
number of directors must be adopted by the affirmative vote of
not less than 75% of the directors. Unocals board
currently consists of 10 directors.
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Chevrons bylaws provide that the number of directors will
be determined by resolution of the board approved by at least a
majority of the directors then in office. Chevrons board
currently consists of 12 directors.
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Unocal Stockholder Rights |
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Chevron Stockholder Rights |
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Classification of Board of Directors |
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Unocals restated certificate of incorporation and bylaws
provide that Unocals board of directors is to be divided
into three classes, with the classes having an equal or near
equal number of directors and the directors of each class
entitled to serve for three-year terms.
Unocals board of directors currently has three outstanding
classes, two composed of three members and one composed of four
members.
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Chevron does not have a classified board. Chevrons bylaws
require that all directors be elected at each annual meeting of
stockholders for a term of one year.
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Removal of Directors |
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Neither Unocals bylaws nor its restated certificate of
incorporation contains any express provisions with respect to
the removal of directors; however, Delaware law provides that
directors of a corporation with a classified board may only be
removed for cause.
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Chevron stockholders may remove directors with or without cause
by the affirmative vote of the majority of stockholders entitled
to vote in the election of directors.
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Filling of Board Vacancies |
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Unocals bylaws provide that any vacancy occurring on the
board of directors may be filled by a majority of the remaining
directors or by a sole remaining director, each such director to
hold office until a successor is elected at an annual or special
meeting of the stockholders.
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Chevrons bylaws provide that any vacancy occurring on the
board of directors may be filled by a majority of the directors
then in office, each such director to hold office until a
successor is elected at an annual or special meeting of the
stockholders.
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Action by Written Consent |
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Unocals restated certificate of incorporation provides
that no action of stockholders may be taken by written consent
without a meeting.
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Chevrons restated certificate of incorporation provides
that action which may be taken at an annual or special meeting
and which requires the approval of at least a majority of
the voting power of the securities present at the
meeting and entitled to vote on the action, or
the shares of common stock present at the
meeting,
may not be taken except by vote at a meeting.
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Unocal Stockholder Rights |
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Chevron Stockholder Rights |
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Amendment of Certificate of Incorporation |
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The affirmative vote of at least 75% of the voting power of
Unocals outstanding voting stock is required to amend
various provisions of the Unocal restated certificate of
incorporation, including provisions relating to
the adoption, amendment or repeal of bylaws,
the classified board,
business combinations,
actions by stockholders by written consent without a
meeting,
the call of special meetings, and
amendments to the restated certificate of
incorporation.
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The affirmative vote of at least two-thirds of the voting power
of Chevrons outstanding voting stock is required to amend
various provisions of the Chevron restated certificate of
incorporation, including provisions relating to
prior notice of stockholders meetings, and
the fairness committee.
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Amendment of Bylaws |
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Unocals bylaws may be amended by a vote of 75% of the
outstanding stock entitled to vote or by the board of directors.
However, any bylaw amendment by the board of directors regarding
an increase or decrease to the number of directors or regarding
the amendment of bylaws requires a resolution adopted by at
least 75% of the directors.
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Chevrons bylaws may be amended by the affirmative vote of
the holders of a majority of the outstanding shares of common
stock, or by a resolution of the board approved by at least a
majority of the directors then in office. However, special
restrictions apply to the amendment of the bylaw provisions
governing change in control benefit protection.
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Stockholder Rights Plan |
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Unocals stockholder rights plan grants stockholders one
preferred stock purchase right for each share of common stock
held. Ten business days after a public announcement that a
person has acquired beneficial ownership of 15% or more of
Unocals common stock or the commencement of a tender offer
that, if successful, would result in such an acquisition, each
purchase right will become exercisable and entitle its holder to
purchase from Unocal that number of shares of Unocals
common stock having a market value equal to twice the $180
exercise price of the right.
However, Unocals stockholder rights plan has been amended
so that it will not apply to the merger.
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Chevron does not currently have a stockholder rights plan.
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Unocal Stockholder Rights |
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Chevron Stockholder Rights |
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Certain Business Combinations |
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Unocals restated certificate of incorporation requires the
affirmative vote of not less than 75% of the outstanding shares
of Unocals voting stock to approve any of the
following:
mergers or consolidations with a related
corporation (as described below);
a sale or exchange of all or a substantial part of
Unocals assets to or with a related corporation; or
the issuance or delivery of Unocal stock or other
Unocal securities in exchange for any properties or assets of or
securities issued by a related corporation, or in a merger of
any affiliate of Unocal with or into a related corporation or
its affiliates.
For this purpose, a related corporation means any
corporation that owns, together with its affiliates, more than
10% of the voting power of Unocals outstanding voting
stock. The above 75% stockholder voting requirement does not
apply:
if the transaction was approved by 75% of the
directors prior to the related corporations acquisition of
more than 10% of the total voting power of Unocals
outstanding voting stock; or
to any transaction between Unocal and any
corporation of which Unocal owns more than 50% or more of the
voting stock.
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Chevrons restated certificate of incorporation provides
that a fairness committee of the board of directors will be
established during any period of the existence of a 10%
stockholder. The fairness committee will consist of all
directors serving at the time any such stockholder becomes a 10%
stockholder. The fairness committee will look into the fairness
to the corporation and its stockholders of transactions the
committee deems extraordinary, which may include
mergers or liquidations, transactions with major stockholders,
major asset sales or recapitalizations. The fairness committee
may require that the corporations stockholders ratify such
an extraordinary transaction by the affirmative vote of two-
thirds of the shares of outstanding common stock or a majority
of the outstanding shares of common stock, excluding shares held
by the 10% stockholder.
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78
DESCRIPTION OF CHEVRON CAPITAL STOCK
The following describes the material terms of the capital stock
of Chevron. This description is qualified in its entirety by
reference to the restated certificate of incorporation and
bylaws of Chevron which are incorporated herein by reference
into this proxy statement/prospectus. See Additional
Information for Stockholders Where You Can Find More
Information on page 81 for more information about the
documents incorporated by reference into this proxy
statement/prospectus.
The authorized capital stock of Chevron currently consists of
four billion shares of common stock, par value $0.75 per
share, and one hundred million shares of preferred stock, par
value $1.00 per share. As of March 31, 2005, there
were 2,098,220,174 shares of Chevron common stock
outstanding.
Chevron Common Stock
The holders of Chevron common stock are entitled to receive such
dividends or distributions as are lawfully declared on Chevron
common stock, to have notice of any authorized meeting of
stockholders, and to one vote for each share of Chevron common
stock on all matters which are properly submitted to a vote of
Chevron stockholders. As a Delaware corporation, Chevron is
subject to statutory limitations on the declaration and payment
of dividends. In the event of a liquidation, dissolution or
winding up of Chevron, holders of Chevron common stock have the
right to a ratable portion of assets remaining after
satisfaction in full of the prior rights of creditors, including
holders of Chevrons indebtedness, all liabilities and the
aggregate liquidation preferences of any outstanding shares of
Chevron preferred stock. The holders of Chevron common stock
have no conversion, redemption, preemptive or cumulative voting
rights. All outstanding shares of Chevron common stock are, and
the shares of Chevron common stock to be issued in the merger
will be, validly issued, fully paid and non-assessable. At
June 17, 2005, there were approximately 225,000 holders of
Chevron common stock.
Chevron Preferred Stock
Chevrons restated certificate of incorporation expressly
authorizes the board of directors to issue preferred stock in
one or more series, to establish the number of shares in any
series and to set the designation and preferences of any series
and the powers, rights, qualifications, limitations or
restrictions on each series of preferred stock.
Note on Delaware Law Change regarding Uncertificated
Shares
On August 1, 2005, Delaware law will change to permit
corporations incorporated in Delaware to issue stock only in
book entry, or uncertificated, form. This law change will allow
companies to eliminate the physical handling and safekeeping
responsibilities associated with owning transferable stock
certificates and also the need to return a duly executed stock
certificate to transfer the stock represented by the physical
certificates. Chevron currently expects that it will avail
itself of the new law when it goes into effect. Therefore, if
Chevron changes to book-entry only shares and the merger occurs
after this change is made, then shares issued to former Unocal
stockholders pursuant to the merger will be in book-entry form
only and no stock certificates representing those shares will be
issued. Instead, the exchange agent will send a confirmation of
the number of shares of Chevron common stock held by each holder
in book-entry form.
Mellon Investor Services will continue to act as the registrar
and transfer agent for Chevron common stock after the merger.
After the merger, holders will be able to transfer shares of
Chevron common stock held in book-entry form by mailing to
Mellon Investor Services a transfer and assignment form, which
Mellon Investor Services will provide to holders at no charge
upon written request.
79
LEGAL MATTERS
The validity of the Chevron common stock to be issued to Unocal
stockholders pursuant to the merger will be passed upon by
Pillsbury Winthrop Shaw Pittman LLP, San Francisco,
California.
EXPERTS
The consolidated financial statements and managements
assessment of the effectiveness of internal control over
financial reporting (which is included in Managements
Report on Internal Control over Financial Reporting)
incorporated in this proxy statement/ prospectus by reference to
the Annual Reports on Form 10-K of Chevron Corporation and
of Unocal Corporation (except, in the case of Unocal
Corporation, for Items 6, 7 and 8, which are superseded by
Unocals Current Report on Form 8-K dated May 26,
2005), each for the year ended December 31, 2004, have been
so incorporated in reliance on the reports of
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, stockholders may present proper proposals for inclusion in
a companys proxy statement and for consideration at the
next annual meeting of its stockholders by submitting their
proposals to the company in a timely manner.
Unocal will hold an annual meeting in the year 2006 only if the
merger has not already been completed. Proposals submitted for
inclusion in Unocals proxy statement for the 2006 annual
meeting of stockholders pursuant to Rule 14a-8 of the
Securities Exchange Act must be received by the Corporate
Secretary at 2141 Rosecrans Avenue, Suite 4000,
El Segundo, California 90245, on or before
December 12, 2005. Under Unocals bylaws, stockholder
proposals for consideration at the 2006 annual meeting, but not
for inclusion in the proxy statement, must be received by the
Corporate Secretary no later than February 21, 2006. If
Unocals bylaws are amended to change the date of the 2006
annual meeting, the deadline for submitting such proposals shall
be the later of 90 days before the meeting date or the 10th
day following the day on which public announcement of the
meeting date is first made. Notice of such proposals must also
comply with the provisions of Section 7 of Article III
of Unocals bylaws.
80
ADDITIONAL INFORMATION FOR STOCKHOLDERS
Where You Can Find More Information
Chevron and Unocal file annual, quarterly and special reports,
proxy statements and other information with the SEC. You may
read and copy any reports, statements or other information we
file at the SECs public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the
SEC at 1-800-SEC-0330 for further information on the operation
of the public reference room. Our SEC filings are also available
to the public from commercial document retrieval services and at
the web site maintained by the SEC at http://www.sec.gov.
Chevron filed a registration statement on Form S-4 to
register with the SEC the Chevron common stock to be issued to
Unocal stockholders in the merger. This proxy
statement/prospectus is a part of that registration statement
and constitutes a prospectus of Chevron in addition to being a
proxy statement of Unocal for the special meeting of Unocal
stockholders. As allowed by SEC rules, this proxy
statement/prospectus does not contain all the information you
can find in the registration statement or the exhibits to the
registration statement.
Documents Incorporated by Reference
The SEC allows us to incorporate by reference
information into this proxy statement/prospectus, which means
that we can disclose important information to you by referring
you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of
this proxy statement/prospectus, except for any information
superseded by information in, or incorporated by reference in,
this proxy statement/prospectus. This proxy statement/prospectus
incorporates by reference the documents set forth below that we
have previously filed with the SEC. These documents contain
important information about our companies and their finances.
Chevron SEC Filings (File No. 1-368-2)
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1. |
Annual Report on Form 10-K for the year ended
December 31, 2004. |
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2. |
Quarterly Report on Form 10-Q for the quarter ended
March 31, 2005. |
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3. |
Current Reports on Form 8-K filed April 4,
April 7, April 28 and May 10, 2005. |
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4. |
The description of Chevrons common stock contained in
Chevrons Current Reports on Form 8-K dated
November 1, 2001 and November 19, 2002. |
Unocal SEC Filings (File No. 1-8483)
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1. |
Annual Report on Form 10-K for the year ended
December 31, 2004, except for Items 6, 7 and 8, which are
superseded by the Current Report on Form 8-K dated May 26,
2005. |
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2. |
Quarterly Report on Form 10-Q for the quarter ended
March 31, 2005. |
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3. |
Current Reports on Form 8-K filed on March 31,
April 4, April 7, May 10, May 24,
May 26, June 9, June 10, June 23 and June 24 2005. |
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4. |
The description of Unocals common stock, $1.00 par
value per share, excluding that of the associated Preferred
Stock Purchase Rights, set forth under the caption
Description of the Common Stock, included in the
prospectus dated September 25, 1998, of Union Oil Company
of California and Unocal (File Nos. 333-58415 and
333-58415-01). |
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5. |
Rights Agreement, dated as of January 5, 2000, between
Unocal and Mellon Investor Services, L.L.C., as Rights Agent
(incorporated by reference to Exhibit 4 to Unocals
Current Report on Form 8-K dated January 5, 2000, File
No. 1-8483), as amended by (1) Amendment to Rights
Agreement, dated as of March 27, 2002 (incorporated by
reference to Exhibit 10 to Unocals Current Report on
Form 8-K dated March 27, 2002, File No. 1-8483);
(2) Amendment No. 2 to |
81
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Rights Agreement, dated as of August 2, 2002 (incorporated
by reference to Exhibit 10 to Unocals Current Report
on Form 8-K dated August 2, 2002, File
No. 1-8483); (3) Amendment No. 3 to Rights
Agreement, dated as of April 1, 2003 (incorporated by
reference to Exhibit 10.1 to Unocals Current Report
on Form 10-Q for the quarter ended March 31, 2003,
File No. 1-8483) and (4) Amendment No. 4 to
Rights Agreement, dated as of April 4, 2005 (incorporated
by reference to Exhibit 4.2 to Unocals
Form 8-A/A for Registration of Certain Classes of
Securities Pursuant to Section 12(b) dated April 7,
2005, File No. 1-8483). |
We are also incorporating by reference all documents that we
file with the SEC pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act between the date of this proxy
statement/prospectus and the date of the Unocal stockholder
meeting.
Chevron has supplied all information contained or incorporated
by reference into this proxy statement/prospectus relating to
Chevron, and Unocal has supplied all such information relating
to Unocal.
If you are a stockholder, we may have sent you some of the
documents incorporated by reference, but you can obtain any of
them through us or the SEC. Documents incorporated by reference
are available from us without charge, excluding all exhibits
unless we have specifically incorporated by reference an exhibit
in this proxy statement/prospectus. You may obtain documents
incorporated by reference into this proxy statement/prospectus
by requesting them in writing or by telephone from the
appropriate party at the following address:
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Unocal Corporation |
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Chevron Corporation |
Unocal Stockholder Services
2141 Rosecrans Avenue, Suite 4000
El Segundo, CA 90245
(800) 252-2233 |
|
Chevron Comptrollers Department
6001 Bollinger Canyon Road A3201
San Ramon, CA 94583-2324
(925) 842-1000 |
If you would like to request documents from us, please do so by
[ ],
2005, to receive them before the meeting.
You can also get more information by visiting Chevrons web
site at www.Chevron.com and Unocals web site at
www.Unocal.com. Web site materials are not part of this proxy
statement/prospectus.
You should rely only on the information contained or
incorporated by reference into this proxy statement/prospectus
to vote on the proposals described in this document. We have not
authorized anyone to provide you with information that is
different from what is contained in this proxy
statement/prospectus. This proxy statement/prospectus is dated
[ ],
2005. You should not assume that the information contained in
the proxy statement/prospectus is accurate as of any date other
than such date, and neither the mailing of this proxy
statement/prospectus to stockholders nor the issuance of Chevron
common stock in the merger shall create any implication to the
contrary.
82
ANNEX A
AGREEMENT AND PLAN OF MERGER
dated as of
April 4, 2005
among
UNOCAL CORPORATION,
CHEVRONTEXACO CORPORATION
and
BLUE MERGER SUB INC.
TABLE OF CONTENTS
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ARTICLE I The
Merger
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A-1 |
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Section 1.1 |
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The Merger |
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A-1 |
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Section 1.2 |
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Certificate of Incorporation and Bylaws of the Surviving
Corporation |
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A-2 |
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Section 1.3 |
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Directors and Officers of the Surviving Corporation |
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A-2 |
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Section 1.4 |
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Effect on Capital Stock |
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A-2 |
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Section 1.5 |
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Election Procedures |
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A-3 |
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Section 1.6 |
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Dissenting Shares |
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A-4 |
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Section 1.7 |
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Stock Options and Equity Awards |
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A-5 |
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Section 1.8 |
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Shares Held by Company Affiliates |
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A-6 |
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ARTICLE II Exchange
of Certificates
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A-6 |
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Section 2.1 |
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Surrender and Payment |
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A-6 |
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Section 2.2 |
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Fractional Shares |
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A-8 |
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Section 2.3 |
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Lost Certificates |
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A-8 |
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Section 2.4 |
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Withholding Rights |
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A-8 |
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ARTICLE III Representations
and Warranties of the Company
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A-9 |
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Section 3.1 |
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Corporate Existence and Power |
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A-9 |
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Section 3.2 |
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Corporate Authorization |
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A-9 |
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Section 3.3 |
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Governmental Authorization |
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A-9 |
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Section 3.4 |
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Non-Contravention |
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A-10 |
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Section 3.5 |
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Capitalization |
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A-10 |
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Section 3.6 |
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Subsidiaries |
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A-11 |
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Section 3.7 |
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Commission Filings |
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A-12 |
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Section 3.8 |
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Financial Statements |
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A-12 |
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Section 3.9 |
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Disclosure Documents |
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A-12 |
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Section 3.10 |
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Controls and Procedures |
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A-13 |
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Section 3.11 |
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Absence of Certain Changes |
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A-14 |
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Section 3.12 |
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No Default |
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A-15 |
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Section 3.13 |
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No Undisclosed Material Liabilities |
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A-15 |
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Section 3.14 |
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Litigation |
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A-15 |
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Section 3.15 |
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Taxes |
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A-15 |
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Section 3.16 |
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Employee Benefit Plans; Employment |
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A-16 |
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Section 3.17 |
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Compliance with Laws |
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A-18 |
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Section 3.18 |
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Certain Business Practices |
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A-18 |
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Section 3.19 |
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Environmental Matters |
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A-18 |
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Section 3.20 |
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Title to Properties |
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A-18 |
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Section 3.21 |
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Hydrocarbon Contracts |
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A-19 |
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Section 3.22 |
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Material Contracts |
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A-19 |
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Section 3.23 |
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Intellectual Property |
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A-19 |
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Section 3.24 |
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Confidentiality and Other Agreements |
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A-20 |
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Section 3.25 |
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Brokers; Financial Advisors |
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A-20 |
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Section 3.26 |
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Opinion of Financial Advisor |
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A-20 |
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Section 3.27 |
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Takeover Statutes |
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A-20 |
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Section 3.28 |
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Stockholder Rights Plan |
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A-20 |
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ARTICLE IV Representations
and Warranties of Parent and Merger Subsidiary
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A-20 |
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Section 4.1 |
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Corporate Existence and Power |
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A-21 |
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Section 4.2 |
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Corporate Authorization |
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A-21 |
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Section 4.3 |
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Governmental Authorization |
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A-21 |
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Section 4.4 |
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Non-Contravention |
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A-21 |
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Section 4.5 |
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Capitalization |
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A-22 |
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Section 4.6 |
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Commission Filings |
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A-22 |
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Section 4.7 |
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Financial Statements |
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A-23 |
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Section 4.8 |
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Disclosure Documents |
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A-23 |
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Section 4.9 |
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Controls and Procedures |
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A-23 |
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Section 4.10 |
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Absence of Certain Changes |
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A-24 |
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Section 4.11 |
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No Undisclosed Material Liabilities |
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A-25 |
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Section 4.12 |
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Litigation |
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A-25 |
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Section 4.13 |
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Compliance with Laws |
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A-25 |
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Section 4.14 |
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Tax Treatment |
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A-25 |
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Section 4.15 |
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Capitalization of Merger Subsidiary |
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A-25 |
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ARTICLE V Covenants
of the Company
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A-25 |
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Section 5.1 |
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Conduct of the Company |
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A-25 |
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Section 5.2 |
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Company Stockholder Meeting; Proxy Material |
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A-28 |
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Section 5.3 |
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Resignation of Company Directors |
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A-30 |
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Section 5.4 |
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Other Actions |
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A-30 |
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ARTICLE VI Covenants
of Parent
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A-30 |
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Section 6.1 |
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Obligations of Merger Subsidiary |
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A-30 |
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Section 6.2 |
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Director and Officer Liability |
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A-30 |
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Section 6.3 |
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Form S-4 |
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A-30 |
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Section 6.4 |
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Stock Exchange Listing |
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A-30 |
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Section 6.5 |
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Employee Benefits |
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A-31 |
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ARTICLE VII Covenants
of Parent and the Company
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A-32 |
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Section 7.1 |
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Best Efforts |
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A-32 |
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Section 7.2 |
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Certain Filings |
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A-33 |
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Section 7.3 |
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Access to Information |
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A-34 |
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Section 7.4 |
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Tax Treatment |
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A-34 |
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Section 7.5 |
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Public Announcements |
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A-34 |
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Section 7.6 |
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Further Assurances |
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A-34 |
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Section 7.7 |
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Notices of Certain Events |
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A-34 |
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Section 7.8 |
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Affiliates |
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A-34 |
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Section 7.9 |
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No Solicitation |
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A-35 |
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Section 7.10 |
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Takeover Statutes |
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A-36 |
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Section 7.11 |
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Section 16(b) |
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A-37 |
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ARTICLE VIII Conditions
to the Merger
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A-37 |
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Section 8.1 |
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Conditions to the Obligations of Each Party |
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A-37 |
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Section 8.2 |
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Conditions to the Obligations of Parent and Merger Subsidiary |
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A-38 |
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Section 8.3 |
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Conditions to the Obligations of the Company |
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A-38 |
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ARTICLE IX Termination
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A-39 |
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Section 9.1 |
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Termination |
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A-39 |
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Section 9.2 |
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Effect of Termination |
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A-40 |
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ARTICLE X Miscellaneous
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A-40 |
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Section 10.1 |
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Notices |
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A-40 |
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Section 10.2 |
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Non-Survival of Representations and Warranties |
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A-41 |
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Section 10.3 |
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Amendments; No Waivers |
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A-41 |
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Section 10.4 |
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Expenses |
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A-41 |
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Section 10.5 |
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Company Termination Fee |
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A-41 |
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Section 10.6 |
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Successors and Assigns |
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A-42 |
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Section 10.7 |
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Governing Law |
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A-42 |
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Section 10.8 |
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Enforcement; Jurisdiction |
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A-42 |
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Section 10.9 |
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Waiver of Jury Trial |
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A-42 |
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Section 10.10 |
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Counterparts; Effectiveness |
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A-42 |
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Section 10.11 |
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Entire Agreement |
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A-42 |
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Section 10.12 |
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Captions |
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A-42 |
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Section 10.13 |
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Severability |
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A-42 |
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EXHIBITS
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Exhibit A Form of Certificate of
Incorporation of Merger Subsidiary |
Exhibit B Form of Affiliates
Rule 145 Letter |
DEFINED TERMS
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Section |
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2005 Pro Rata Bonus
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6.5(e) |
2006 Pro Rata Bonus
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6.5(e) |
Acquisition Proposal
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7.9(b) |
Affected Employees
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6.5(b) |
Affected Retirees
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6.5(b) |
Affiliate Agreement
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7.8(a) |
Agreement
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Preamble |
Anti-Discrimination Laws
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3.16(j) |
Antitrust Laws
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7.1(b)(ii) |
Available Cash Election Amount
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1.4(a)(ii) |
Book-Entry Shares
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2.1(a) |
Cancelled Shares
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1.4(d) |
Cash Election
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1.4(a)(ii) |
Cash Election Amount
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1.4(a)(ii) |
Cash Election Share
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1.4(a)(ii) |
Cash Fraction
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1.4(a)(ii) |
CERCLA
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3.19(b) |
Certificate
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1.4(b) |
Change in Control
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6.5(a) |
Change in the Company Recommendation
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5.2(a) |
Closing
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1.1(d) |
Closing Date
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1.1(d) |
Code
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Recitals |
Commission
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1.7(c) |
Common Shares Trust
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2.2(b) |
Company
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Preamble |
Company 10-K
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3.7(a) |
Company Award
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1.7(b) |
Company Award Plans
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1.7(b) |
Company Balance Sheet
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3.8 |
Company Balance Sheet Date
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3.8 |
Company Benefit Plans
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3.16(a) |
Company By-laws
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3.1 |
Company Capital Stock
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3.5 |
Company Charter
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3.1 |
Company Commission Documents
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3.7(a) |
Company Common Stock
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3.5 |
Company Disclosure Schedules
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Article 3 |
Company Intellectual Property
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3.23(a) |
Company Material Adverse Effect
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3.1 |
Company Material Contracts
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3.22 |
Company Pension Plan
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3.16(e) |
Company Phantom Stock Option
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1.7(a) |
Company Preferred Stock
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3.5 |
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Section |
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Company Proxy Statement
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3.9(a) |
Company Recommendation
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5.2(f) |
Company Rights
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3.5 |
Company Rights Agreement
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3.5 |
Company Securities
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3.5 |
Company Stock Option
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1.7(a) |
Company Stock Option Plans
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1.7(a) |
Company Stockholder Approval
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3.2(a) |
Company Stockholder Meeting
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5.2(f) |
Company Subsidiary Securities
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3.6(b) |
Confidentiality Agreement
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7.3 |
DGCL
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1.1(a) |
Dissenting Share
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1.6 |
EC Merger Regulation
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3.3 |
Effective Time
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1.1(b) |
Electing Stockholder
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2.1(a) |
Election Deadline
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1.5(b) |
Election Form
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1.5(a) |
Election Form Record Date
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1.5(a) |
End Date
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9.1(b)(i) |
Environmental Laws
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3.19(b) |
ERISA
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3.16(a) |
ERISA Affiliate
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3.16(d) |
Excess Shares
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2.2(a) |
Exchange Act
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3.3 |
Exchange Agent
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2.1(a) |
Exchange Ratio
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1.4(a)(iii) |
Financial Advisor
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3.25 |
Foreign Company Benefit Plan
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3.16(a) |
Form S-4
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4.8(a) |
GAAP
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3.8 |
Hazardous Substance
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3.19(b) |
HSR Act
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3.3 |
Hydrocarbon Contract
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3.21(a) |
Hydrocarbons
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3.21(a) |
Indemnitees
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6.2(a) |
Intellectual Property
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3.23(a) |
Knowledge
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3.10(e) |
Lien
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3.4 |
Mailing Date
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1.5(a) |
Merger
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1.1(a) |
Merger Consideration
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1.4(a) |
Merger Subsidiary
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Preamble |
Mixed Consideration Election Share
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1.4(a)(i) |
Mixed Election
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1.4(a)(i) |
Mixed Election Stock Exchange Ratio
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1.4(a)(i) |
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Section |
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No Election Shares
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1.5(b) |
NYSE
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2.2(a) |
Parent
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Preamble |
Parent 10-K
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4.6(a) |
Parent Balance Sheet
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4.7 |
Parent Balance Sheet Date
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4.7 |
Parent Commission Documents
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4.6(a) |
Parent Common Stock
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4.5 |
Parent Disclosure Schedules
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Article IV |
Parent Material Adverse Effect
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4.1 |
Parent Securities
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4.5 |
Per Share Cash Amount
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1.4(a)(i) |
Per Share Cash Election Consideration
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1.4(a)(ii) |
Per Share Mixed Consideration
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1.4(a)(i) |
Person
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2.1(c) |
RCRA
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3.19(b) |
Release
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3.19(b) |
RFG Patents
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3.23(a) |
Sarbanes-Oxley Act
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3.10(a) |
Securities Act
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3.3 |
Significant Subsidiaries
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3.6(a) |
Stock Award Exchange Ratio
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1.7(a) |
Stock Consideration
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1.4(a)(iii) |
Stock Election
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1.4(a)(iii) |
Stock Election Share
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1.4(a)(iii) |
Subsidiary
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3.6(a) |
Substantial Detriment
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7.1(c) |
Superior Proposal
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7.9(b) |
Surviving Corporation
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1.1(a) |
Tax Returns
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3.15 |
Taxes
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3.15 |
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this
Agreement) dated as of April 4, 2005 by and
among UNOCAL CORPORATION, a Delaware corporation (the
Company), CHEVRONTEXACO CORPORATION, a
Delaware corporation (Parent), and BLUE
MERGER SUB INC., a newly formed Delaware corporation and a
direct wholly-owned subsidiary of Parent (Merger
Subsidiary).
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Merger
Subsidiary and the Company have each approved this Agreement and
the transactions contemplated hereby, including the merger of
the Company with and into Merger Subsidiary (the
Merger), upon the terms and subject to the
conditions set forth herein;
WHEREAS, the Board of Directors of the Company deems it
advisable and in the best interest of the Company and its
stockholders that the Company enter into the Merger to advance
the strategic business interests of the Company by putting under
common ownership, and permitting the coordination of activities
conducted by, Company subsidiaries and subsidiaries of Parent,
and otherwise participating in growth opportunities of Parent,
its subsidiaries and affiliates; and
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger will qualify as a reorganization within
the meaning of Section 368 of the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated
thereunder (the Code);
NOW, THEREFORE, in consideration of the promises and the
respective representations, warranties, covenants, and
agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
The Merger
Section 1.1 The
Merger.
(a) Upon the terms and subject to the conditions set forth
in this Agreement, at the Effective Time (as defined below), the
Company shall be merged (the Merger) with and
into Merger Subsidiary in accordance with the requirements of
the General Corporation Law of the State of Delaware (the
DGCL), whereupon the separate existence of
the Company shall cease, and Merger Subsidiary shall be the
surviving corporation in the Merger (the Surviving
Corporation).
(b) On the Closing Date, immediately after the Closing, the
Company will file a certificate of merger with the Secretary of
State of the State of Delaware and make all other filings or
recordings required by the DGCL 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 Parent and the
Company may agree and 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 the DGCL.
(d) The closing of the Merger (the
Closing) shall take place (i) at the
offices of Pillsbury Winthrop Shaw Pittman LLP, 50 Fremont
Street, San Francisco, California, as soon as practicable
on the day on which the last to be fulfilled or waived of the
conditions set forth in Article 8 (other than those
conditions that by their nature are to be fulfilled at the
Closing, but subject to the fulfillment or waiver of such
conditions) shall be fulfilled or waived in accordance with this
Agreement, or (ii) at such other place and time as the
Company and Parent may agree in writing (the Closing
Date).
A-1
Section 1.2 Certificate
of Incorporation and By-Laws of the Surviving Corporation.
(a) At the Effective Time, the certificate of incorporation
of the Surviving Corporation, shall be the certificate of
incorporation of Merger Subsidiary as set forth in
Exhibit A, except for Article FIRST thereof which
shall be amended to read as follows: The name of this
corporation is Unocal Corporation.
(b) The by-laws of Merger Subsidiary, as in effect
immediately prior to the Effective Time, shall be the by-laws of
the Surviving Corporation until thereafter amended or changed as
provided therein or by the DGCL.
Section 1.3 Directors
and Officers of the Surviving Corporation. The directors of
Merger Subsidiary immediately prior to the Effective Time shall
be the initial directors of the Surviving Corporation, each to
hold office in accordance with the certificate of incorporation
and by-laws of the Surviving Corporation, and the officers of
Merger Subsidiary immediately prior to the Effective Time shall
be the initial officers of the Surviving Corporation, in each
case until their respective successors are duly elected or
appointed and qualified or until their earlier death,
resignation or removal.
Section 1.4 Effect
on Capital Stock.
(a) At the Effective Time, subject to the other provisions
of Articles 1 and 2, each share of Company Common
Stock issued and outstanding immediately prior to the Effective
Time (other than shares of Company Common Stock owned by Parent,
Merger Subsidiary or the Company or any of their respective
wholly-owned subsidiaries and except for any Dissenting Shares),
together with the Company Rights attached thereto or associated
therewith, shall, by virtue of this Agreement and without any
action on the part of the holder thereof, be converted into and
shall thereafter represent the right to receive the following
consideration (collectively, the Merger
Consideration):
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(i) Each share of Company Common Stock with respect to
which an election to receive a combination of stock and cash
(a Mixed Election) has been effectively made
and not revoked or lost pursuant to Section 2.1 (each, a
Mixed Consideration Election Share) and each No
Election Share (as that term is defined in Section 1.5(b)
hereof) shall be converted into the right to receive the
combination (which combination shall hereinafter be referred to
as the Per Share Mixed Consideration) of
(x) $16.25 in cash (the Per Share Cash
Amount) and (y) 0.7725 of a share of validly
issued, fully paid and non-assessable shares of Parent Common
Stock (the Mixed Election Stock Exchange
Ratio), subject to adjustment in accordance with
Section 1.4(c); |
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(ii) Each share of Company Common Stock with respect to
which an election to receive cash (a Cash
Election) has been effectively made and not revoked or
lost pursuant to Section 2.1 (each, a Cash
Election Share) shall be converted (provided that the
Available Cash Election Amount (as defined below) equals or
exceeds the Cash Election Amount (as defined below)) into the
right to receive $65.00 in cash without interest (the
Per Share Cash Election Consideration);
if, however, (A) the product of the number of
Cash Election Shares and the Per Share Cash Election
Consideration (such product being the Cash Election
Amount) exceeds (B) the difference between
(x) the product of the Per Share Cash Amount and the total
number of shares of Company Common Stock (other than the
Cancelled Shares) issued and outstanding immediately prior to
the Effective Time minus (y) the product of the number of
Mixed Consideration Election Shares (provided that No Election
Shares shall be deemed to be Mixed Consideration Election Shares
for purposes of this Section 1.4(a)(ii)) and the Per Share
Cash Amount (such difference being the Available Cash
Election Amount), then each Cash Election Share shall
be converted into a right to receive (1) an amount of cash
(without interest) equal to the product of (p) the Per
Share Cash Election Consideration and (q) a fraction, the
numerator of which shall be the Available Cash Election Amount
and the denominator of which shall be the Cash Election Amount
(such fraction being the Cash Fraction) and
(2) a number of validly issued, fully paid and
non-assessable shares of Parent Common Stock equal to the
product of (r) the Exchange Ratio and (s) one
(1) minus the Cash Fraction; |
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(iii) Each share of Company Common Stock with respect to
which an election to receive stock consideration (a
Stock Election) is properly made and not revoked
or lost pursuant to Section 2.1 |
A-2
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(each, a Stock Election Share) shall be
converted (provided that the Cash Election Amount equals or
exceeds the Available Cash Election Amount), into the right to
receive 1.03 shares (the Exchange Ratio)
of validly issued, fully paid and non-assessable shares of
Parent Common Stock, subject to adjustment in accordance with
Section 1.4(c) (together with any cash in lieu of
fractional shares of Parent Common Stock to be paid pursuant to
Section 2.2, the Stock Consideration);
provided however, if the Available Cash Election Amount
exceeds the Cash Election Amount, then each Stock Election Share
shall be converted into the right to receive (1) an amount
of cash (without interest) equal to the amount of such excess
divided by the number of Stock Election Shares and (2) a
number of validly issued, fully paid and non-assessable shares
of Parent Common stock equal to the product of (x) the
Exchange Ratio and (y) a fraction, the numerator of which
shall be the Per Share Cash Election Consideration minus the
amount calculated in clause (1) of this paragraph and the
denominator of which shall be the Per Share Cash Election
Consideration. |
(b) From and after the Effective Time, all of the shares of
Company Common Stock, and associated Company Rights, converted
into the Merger Consideration pursuant to this Article 1
shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder
of a certificate (each a Certificate)
previously representing any such shares of Company Common Stock
shall thereafter cease to have any rights with respect to such
securities, except the right to receive (i) the Merger
Consideration, (ii) any dividends and other distributions
in accordance with Section 2.1(f), and (iii) any cash
to be paid in lieu of any fractional share of Parent Common
Stock in accordance with Section 2.2.
(c) If at any time during the period between the date of
this Agreement and the Effective Time, any change in the
outstanding shares of capital stock of Parent or the Company
shall occur by reason of any reclassification, recapitalization,
stock split or combination, exchange or readjustment of shares,
or any stock dividend thereon with a record date during such
period, the Merger Consideration, the Per Share Cash Amount, the
Mixed Election Stock Exchange Ratio, the Exchange Ratio and any
other similarly dependent items, as the case may be, shall be
appropriately adjusted to provide the holders of shares of
Company Common Stock the same economic effect as contemplated by
this Agreement prior to such event.
(d) At the Effective Time, (1) all shares of Company
Common Stock that are owned by Parent, Merger Subsidiary or the
Company (the Cancelled Shares) shall be
cancelled and retired and shall cease to exist and no stock of
Parent, cash or other consideration shall be delivered in
exchange therefor and (2) each share of Company Common
Stock held by any direct or indirect wholly-owned Subsidiary of
Parent (other than Merger Subsidiary) or the Company, in each
case, immediately prior to the Effective Time, shall be
converted into the right to receive the Per Share Stock
Consideration. The Per Share Stock Consideration paid pursuant
to this Section 1.4(d) shall not be subject to, and will
not be deemed to be Stock Election Shares or otherwise taken
into account in calculating, adjustments under the proviso to
Section 1.4(a)(iii). For the avoidance of doubt, this
Section 1.4(d) shall not apply to shares of Company Common
Stock held in trust or otherwise set aside from shares held in
the Companys treasury pursuant to a Company Benefit Plan
(as such term is defined in Section 3.16) other than a
Company Stock Option Plan or a Company Award Plan.
(e) Each issued and outstanding share of common stock, par
value $0.01 per share of Merger Subsidiary issued and
outstanding immediately prior to the Effective Time shall remain
outstanding as one fully paid and nonassessable share of common
stock, par value $0.01 per share, of the Surviving
Corporation.
Section 1.5 Election
Procedures.
(a) An election form and other appropriate and customary
transmittal materials (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates
theretofore representing shares of Company Common Stock shall
pass, only upon proper delivery of such Certificates to the
Exchange Agent) in such form as Parent shall specify and as
shall be reasonably acceptable to the Company (the
Election Form) shall be mailed together with
the Proxy Statement or at such other time as the Company and
Parent may agree (the Mailing Date) to each
holder of record of Company Common Stock as of the close of
business on the record date for notice of the Company
Stockholder Meeting (the Election Form Record
Date).
A-3
(b) Each Election Form shall permit the holder (or the
beneficial owner through appropriate and customary documentation
and instructions), other than any holder of Dissenting Shares,
to specify (i) the number of shares of such holders
Company Common Stock with respect to which such holder elects to
receive the Per Share Mixed Consideration, (ii) the number
of shares of such holders Company Common Stock with
respect to which such holder elects to receive the Per Share
Stock Consideration, (iii) the number of shares of such
holders Company Common Stock with respect to which such
holder elects to receive the Per Share Cash Consideration, or
(iv) that such holder makes no election with respect to
such holders Company Common Stock (No Election
Shares). Any Company Common Stock with respect to
which the Exchange Agent has not received an effective, properly
completed Election Form on or before 5:00 p.m., New York
time, on the twentieth (20th) day following the Mailing Date (or
such other time and date as the Company and Parent shall agree)
(the Election Deadline) (other than any
shares of Company Common Stock that constitute Dissenting Shares
as of such time) shall also be deemed to be No Election Shares.
(c) Parent shall make available one or more Election Forms
as may reasonably be requested from time to time by all Persons
who become holders (or beneficial owners) of Company Common
Stock between the Election Form Record Date and the close
of business on the Business Day prior to the Election Deadline,
and the Company shall provide to the Exchange Agent all
information reasonably necessary for it to perform as specified
herein.
(d) Any such election shall have been properly made only if
the Exchange Agent shall have actually received a properly
completed Election Form by the Election Deadline. An Election
Form shall be deemed properly completed only if accompanied by
one or more Certificates (or customary affidavits and, if
required by Parent or the Surviving Corporation, the posting by
such Person of a bond, in such reasonable amount as the
Surviving Corporation may direct, as indemnity against any claim
that may be made against it with respect to such Certificate)
representing all shares of Company Common Stock covered by such
Election Form, together with duly executed transmittal materials
included in the Election Form. Any Election Form may be revoked
or changed by the Person submitting such Election Form, by
written notice received by the Exchange Agent prior to the
Election Deadline. In the event an Election Form is revoked
prior to the Election Deadline, the shares of Company Common
Stock represented by such Election Form shall become No Election
Shares and Parent shall cause the Certificates representing such
shares of Company Common Stock to be promptly returned without
charge to the Person submitting the Election Form upon written
request to that effect from the holder who submitted the
Election Form, except to the extent (if any) a subsequent
election is properly made with respect to any or all of such
shares of Company Common Stock. Subject to the terms of this
Agreement and of the Election Form, the Exchange Agent shall
have reasonable discretion to determine whether any election,
revocation or change has been properly or timely made and to
disregard immaterial defects in the Election Forms, and any good
faith decisions of the Exchange Agent regarding such matters
shall be binding and conclusive. None of Parent, Company or the
Exchange Agent shall be under any obligation to notify any
Person of any defect in an Election Form.
Section 1.6 Dissenting
Shares. Notwithstanding anything in this Agreement to the
contrary, with respect to each share of Company Common Stock as
to which the holder thereof shall have properly complied with
the provisions of section 262 of the DGCL as to appraisal
rights (each, a Dissenting Share), if any,
such holder shall be entitled to payment, solely from the
Surviving Corporation, of the appraisal value of the Dissenting
Shares to the extent permitted by and in accordance with the
provisions of section 262 of the DGCL; provided, however,
that (i) if any holder of Dissenting Shares, under the
circumstances permitted by and in accordance with the DGCL,
affirmatively withdraws his demand for appraisal of such
Dissenting Shares, (ii) if any holder of Dissenting Shares
fails to establish his entitlement to appraisal rights as
provided in the DGCL or (iii) if any holder of Dissenting
Shares takes or fails to take any action the consequence of
which is that such holder is not entitled to payment for his
shares under the DGCL, such holder or holders (as the case may
be) shall forfeit the right to appraisal of such shares of
Company Common Stock and such shares of Company Common Stock
shall thereupon cease to constitute Dissenting Shares and if
such forfeiture shall occur following the Election Deadline,
each such share of Company Common Stock shall thereafter be
deemed to have been converted into and to have become, as of the
Effective Time, the right to receive, without interest thereon,
the Per Share Stock Consideration; provided that Parent shall be
entitled to
A-4
convert each such share into the right to receive the Per Share
Cash Consideration or a combination of the Per Share Cash
Consideration and Per Share Stock Consideration if
(x) Parent shall have received an opinion from McDermott
Will & Emery LLP and (y) the Company shall have
received an opinion from Wachtell, Lipton, Rosen &
Katz, in each case, to the effect that the Merger will not fail
to satisfy the continuity of interest requirement under
Section 368 of the Code as a result thereof. The Company
shall give Parent prompt notice of any demands received by the
Company for appraisal of shares of Company Common Stock, and
Parent shall have the right to participate in all negotiations
and proceedings with respect to such demands. The Company shall
not settle, make any payments with respect to, or offer to
settle, any claim with respect to Dissenting Shares without the
written consent of Parent.
Section 1.7 Stock
Options and Equity Awards.
(a) The Board of Directors of the Company shall take such
action as is necessary so that at the Effective Time, each
outstanding option to purchase shares of Company Common Stock (a
Company Stock Option) and each phantom option
to receive cash measured by an increase in value of Company
Common Stock over a specified base or exercise price (a
Company Phantom Stock Option) granted under
the Companys plans or agreements identified in
Section 3.16(a) of the Company Disclosure Schedules as
being, to the Companys knowledge, the only employee
benefit plans or agreements (including nonemployee director
plans) as to which shares of Company Common Stock may be issued
upon exercise of an option (collectively the Company
Stock Option Plans), whether or not vested, shall
cease to represent a right to acquire shares of Company Common
Stock or a Company Phantom Stock Option with respect to Company
Common Stock, and shall thereafter constitute an option to
acquire or to be a phantom option with respect to, as the case
may be, on the same terms and conditions as were applicable
under such Company Stock Option or Company Phantom Stock Option,
as applicable, pursuant to the relevant Company Stock Option
Plan under which it was issued and the agreement evidencing the
grant thereof prior to the Effective Time, 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 number (rounded down to the nearest
whole number) of shares of Parent Common Stock determined by
multiplying (x) the number of shares of Company Common
Stock subject to such Company Stock Option or Company Phantom
Stock Option immediately prior to the Effective Time by
(y) the Stock Award Exchange Ratio. The exercise price or
base price per share of Parent Common Stock subject to any such
Company Stock Option or Company Phantom Stock Option at and
after the Effective Time shall be an amount (rounded up to the
nearest one hundredth of a cent) equal to (A) the exercise
price or base price per share of Company Common Stock subject to
such Company Stock Option or Company Phantom Stock Option prior
to the Effective Time divided by (B) the Stock Award
Exchange Ratio. In addition, prior to the Effective Time, the
Company shall make any amendments to the terms of such Company
Stock Option Plans that are necessary to give effect to the
transactions contemplated by this Section 1.7. For purposes
of this Section 1.7, the Stock Award Exchange
Ratio shall mean the sum of (i) the Mixed
Election Stock Exchange Ratio plus (ii) the fraction
resulting from dividing the Per Share Cash Amount by the closing
price per share of the Parent Common Stock on the NYSE on the
last trading day immediately preceding the Closing Date.
(b) At the Effective Time each right, award or account,
contingent or accrued, to receive shares of Company Common Stock
or benefits measured in whole or in part by the value of a
number of shares of Company Common Stock, and each award of any
kind consisting of shares of Company Common Stock, outstanding
as of the Effective Time other than a Company Stock Option or a
Company Phantom Stock Option (a Company
Award) granted under any employee incentive or benefit
plan, program or agreement or nonemployee director plan
maintained by the Company or any Subsidiary on or prior to the
date hereof that provides for grants of equity-based awards or
equity-based accounts and which are identified on
Schedule 3.16 (collectively the Company Award
Plans) whether or not vested, shall cease to represent
a right, award or account with respect Company Common Stock and
shall thereafter constitute a right, award or account, on the
same terms and conditions as were applicable under such Company
Award pursuant to the relevant Company Award Plan under which it
was issued and the agreement, including any provisions for
acceleration (as such terms and conditions have been interpreted
and applied by the Company in accordance with its past
practice), with respect to the number (rounded to the nearest
whole number) of shares of Parent Common
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Stock determined by multiplying (x) the number of shares of
Company Common Stock subject to such Company Award immediately
prior to the Effective Time by (y) the Stock Award Exchange
Ratio, provided that in the case of any performance
shares outstanding as of the Effective Time, such performance
shares shall be paid at the Effective Time at 100% of target,
except that the 2005 performance share awards shall be paid at
the Effective Time at between 100% and 150% of target, as
determined in good faith by the Companys Management
Development and Compensation Committee pursuant to the terms of
the plan and the underlying award agreement. 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 and warrants that to
the Companys knowledge there are as of the date hereof no
Company Awards or Company Stock Options other than those
reflected in Schedule 3.5.
(c) (i) Parent shall take all corporate action
necessary to assume as of the Effective Time the Companys
obligations under the Company Stock Options and Company Awards
and reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery pursuant to the terms set forth in
this Section 1.7. (ii) As soon as practicable after
the Effective Time and in any event no later than five days
after the Effective Time, Parent shall file with the
U.S. Securities and Exchange Commission (the
Commission) a registration statement on an
appropriate form or a post-effective amendment to a previously
filed registration statement under the Securities Act with
respect to the Parent Common Stock subject to options and other
equity-based awards described in this Section 1.7 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 1.8 Shares
Held by Company Affiliates. Anything to the contrary herein
notwithstanding, no shares of Parent Common Stock (or
certificates therefor) shall be issued in exchange for any
Certificate to any affiliate of the Company
(identified pursuant to Section 7.8) until such Person
shall have delivered to Parent duly executed letters as
contemplated by Section 7.8. Such Persons shall be subject
to the restrictions described in such letters, and such shares
(or certificates therefor) shall bear a legend describing such
restrictions.
ARTICLE II
Exchange of Certificates
Section 2.1 Surrender
and Payment.
(a) Prior to the Effective Time, Parent shall appoint
Mellon Investor Services LLC or such other exchange agent
reasonably acceptable to the Company (the Exchange
Agent) for the purpose of exchanging Certificates
representing shares of Company Common Stock and non-certificated
shares represented by book entry (Book-Entry
Shares) for the Merger Consideration. Parent will make
available to the Exchange Agent, as needed, the Merger
Consideration to be delivered in respect of the shares of
Company Common Stock. Promptly after the Effective Time, Parent
will send, or will cause the Exchange Agent to send, to each
holder of record of shares of Company Common Stock as of the
Effective Time (other than any holder which has previously and
properly surrendered all of its Certificates(s) to the Exchange
Agent in accordance with Section 1.5 (each, an
Electing Stockholder)), a letter of
transmittal for use in such exchange (which shall specify that
the delivery shall be effected, and risk of loss and title shall
pass, only upon proper delivery of the Certificates to the
Exchange Agent) in such form as the Company and Parent may
reasonably agree, for use in effecting delivery of shares of
Company Common Stock to the Exchange Agent. Exchange of any
Book-Entry Shares shall be effected in accordance with
Parents customary procedures with respect to securities
represented by book entry.
(b) Each holder of shares of Company Common Stock that have
been converted into a right to receive the Merger Consideration,
upon (i) with respect to any Electing Stockholder,
completion of the calculations required by Section 1.4(a)
or (ii) with respect to any holder that is not an Electing
Stockholder, surrender to
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the Exchange Agent of a Certificate, together with a properly
completed letter of transmittal, will be entitled to receive
(A) one or more shares of Parent Common Stock (which shall
be in non-certificated book-entry form unless a physical
certificate is requested) representing, in the aggregate, the
whole number of shares of Parent Common Stock, if any, that such
holder has the right to receive pursuant to Section 1.4 and
(B) a check in the amount equal to the cash portion of the
Merger Consideration, if any, that such holder has the right to
receive pursuant to Section 1.4 and this Article 2,
including cash payable in lieu of fractional shares pursuant to
Section 2.2 and dividends and other distributions pursuant
to Section 2.1(f). No interest shall be paid or accrued on
any Merger Consideration, cash in lieu of fractional shares or
on any unpaid dividends and distributions payable to holders of
Certificates. Until so surrendered, each such Certificate shall,
after the Effective Time, represent for all purposes only the
right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be
registered in the name of a Person other than the Person in
whose name the applicable surrendered Certificate is registered,
it shall be a condition to the registration thereof that the
surrendered Certificate shall be properly endorsed or otherwise
be in proper form for transfer and that the Person requesting
such delivery of the Merger Consideration shall pay to the
Exchange Agent any transfer or other similar Taxes required as a
result of such registration in the name of a Person other than
the registered holder of such Certificate or establish to the
satisfaction of the Exchange Agent that such Tax has been paid
or is not payable. For purposes of this Agreement,
Person means an individual, a corporation, a
limited liability company, a partnership, an association, a
trust or any other entity or organization, including a
government or political subdivision or any agency or
instrumentality thereof.
(d) After the Effective Time, there shall be no further
registration of transfers of shares of Company Common Stock. If,
after the Effective Time, Certificates are presented to the
Exchange Agent, the Surviving Corporation or the Parent, they
shall be canceled and exchanged for the consideration provided
for, and in accordance with the procedures set forth, in this
Article 2.
(e) Any portion of the Merger Consideration made available
to the Exchange Agent pursuant to Section 2.1(a) that
remains unclaimed by the holders of shares of Company Common
Stock one year after the Effective Time shall be returned to
Parent, upon demand, and any such holder who has not exchanged
his shares of Company Common Stock for the Merger Consideration
in accordance with this Section 2.1 prior to that time
shall thereafter look only to Parent for delivery of the Merger
Consideration in respect of such holders shares.
Notwithstanding the foregoing, Parent shall not be liable to any
holder of shares for any Merger Consideration delivered to a
public official pursuant to applicable abandoned property laws.
Any Merger Consideration remaining unclaimed by holders of
shares of Company Common Stock three years after the Effective
Time (or such earlier date immediately prior to such time as
such amounts would otherwise escheat to or become property of
any governmental entity) shall, to the extent permitted by
applicable law, become the property of Parent free and clear of
any claims or interest of any Person previously entitled thereto.
(f) No dividends or other distributions with respect to
shares of Parent Common Stock issued in the Merger shall be paid
to the holder of any unsurrendered Certificates or Book-Entry
Shares until such Certificates or Book-Entry Shares are
surrendered as provided in this Section 2.1. Following such
surrender, there shall be paid, without interest, to the record
holder of the shares of Parent Common Stock issued in exchange
therefor (i) at the time of such surrender, all dividends
and other distributions payable in respect of such shares of
Parent Common Stock with a record date after the Effective Time
and a payment date on or prior to the date of such surrender and
not previously paid and (ii) at the appropriate payment
date, the dividends or other distributions payable with respect
to such shares of Parent Common Stock with a record date after
the Effective Time but with a payment date subsequent to such
surrender. For purposes of dividends or other distributions in
respect of shares of Parent Common Stock, all shares of Parent
Common Stock to be issued pursuant to the Merger shall be
entitled to dividends pursuant to the immediately preceding
sentence as if issued and outstanding as of the Effective Time.
(g) Any portion of the Merger Consideration deposited with
the Exchange Agent pursuant to Section 2.1 to pay for
Shares for which appraisal rights shall have been perfected
shall be returned to Parent, upon demand.
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Section 2.2 Fractional
Shares.
(a) No fractional shares of Parent Common Stock shall be
issued in the Merger, but in lieu thereof each holder of shares
of Company Common Stock otherwise entitled to a fractional share
of Parent Common Stock will be entitled to receive, from the
Exchange Agent in accordance with the provisions of this
Section 2.2, a cash payment in lieu of such fractional
shares of Parent Common Stock representing such holders
proportionate interest, if any, in the proceeds from the sale by
the Exchange Agent in one or more transactions of shares of
Parent Common Stock equal to the excess of (x) the
aggregate number of shares of Parent Common Stock to be
delivered to the Exchange Agent by Parent pursuant to
Section 2.1(a) over (y) the aggregate number of whole
shares of Parent Common Stock to be distributed to the holders
of Certificates pursuant to Section 2.1(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 avoiding the expense and
inconvenience to Parent that would otherwise be caused by the
issuance of fractional shares. As soon as practicable after the
Effective Time, the Exchange Agent, as agent for the holders of
the Certificates representing shares of Company Common Stock,
shall sell the Excess Shares at then prevailing prices on the
New York Stock Exchange (NYSE) in the manner
provided in the following paragraph.
(b) The sale of the Excess Shares by the Exchange Agent, as
agent for the holders that would otherwise receive fractional
shares, shall be executed on the NYSE through one or more member
firms of the NYSE and shall be executed in round lots to the
extent practicable. The compensation payable to the Exchange
Agent and the expenses incurred by the Exchange Agent, in each
case, in connection with such sale or sales of the Excess
Shares, and all related commissions, transfer taxes and other
out-of-pocket transaction costs, will be paid by the Surviving
Corporation out of its own funds and will not be paid directly
or indirectly by Parent. Until the proceeds of such sale or
sales have been distributed to the holders of shares of Company
Common Stock, the Exchange Agent shall hold such proceeds in
trust for the holders of shares of Company Common Stock (the
Common Shares Trust). The Exchange Agent
shall determine the portion of the Common Shares Trust to which
each holder of shares of Company Common Stock shall be entitled,
if any, by multiplying the amount of the aggregate proceeds
comprising the Common Shares Trust by a fraction, the numerator
of which is the amount of the fractional share interest to which
such holder of shares of Company Common Stock would otherwise be
entitled and the denominator of which is the aggregate amount of
fractional share interests to which all holders of shares of
Company Common Stock would otherwise be entitled.
(c) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of shares of
Company Common Stock in lieu of any fractional shares of Parent
Common Stock, the Exchange Agent shall make available such
amounts to such holders of shares of Company Common Stock
without interest, subject to and in accordance with
Section 2.1.
Section 2.3 Lost
Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen
or destroyed and, if required by Parent or the Surviving
Corporation, the posting by such Person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as
indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the
Merger Consideration to be paid in respect of the shares of
Company Common Stock represented by such Certificate as
contemplated by this Article 2.
Section 2.4 Withholding
Rights. Each of the Surviving Corporation and Parent shall
be entitled to deduct and withhold from the consideration
otherwise payable to any Person pursuant to Articles 1 and
2 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 deducted or withheld by the Surviving Corporation
or Parent, as the case may be, and paid over to the applicable
governmental entity, such deducted or withheld amounts shall be
treated for all purposes of this Agreement as having been paid
to the holder of the shares of Company Common Stock in respect
of which such deduction and withholding was made by the
Surviving Corporation or Parent, as the case may be.
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ARTICLE III
Representations and
Warranties of the Company
The Company represents and warrants to Parent that, except as
disclosed in the Company Commission Documents (as hereinafter
defined) filed or furnished prior to the date hereof or in the
correspondingly numbered section of the disclosure schedules
delivered by the Company to Parent simultaneously with the
execution of this Agreement (the Company Disclosure
Schedules) (it being agreed that disclosure of any
item in any section of the Company Disclosure Schedules shall be
deemed disclosure with respect to any other section of this
Agreement to which the relevance of such item is reasonably
apparent):
Section 3.1 Corporate
Existence and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all corporate powers and
all governmental franchises, licenses, permits, authorizations,
consents and approvals required to enable it to own, lease or
otherwise hold its properties and assets and to carry on its
business as now conducted, except for those the absence of which
would not, individually or in the aggregate, be reasonably
likely to have a Company Material Adverse Effect (as defined
below). 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 or the ownership or leasing of its
properties make such qualification necessary, except for those
jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, be reasonably likely to have a
Company Material Adverse Effect. For purposes of this Agreement,
Company Material Adverse Effect means a
material adverse effect on the financial condition, business,
liabilities, assets or continuing results of operations of the
Company and its Subsidiaries, taken as a whole, except to the
extent resulting from (x) any changes in general United
States or global economic conditions, or (y) any changes
affecting the oil and gas industry in general (including changes
to commodity prices). The Company has heretofore made available
to Parent true and complete copies of the Certificate of
Incorporation of the Company, as amended to the date of this
Agreement (as so amended, the Company
Charter), and the By-laws of the Company, as amended
to the date of this Agreement (as so amended, the
Company By-laws).
Section 3.2 Corporate
Authorization.
(a) The execution, delivery and performance by the Company
of this Agreement and the consummation by the Company of the
transactions contemplated hereby are within the Companys
corporate powers and, except for any required approval by the
Companys stockholders (the Company Stockholder
Approval) in connection with the consummation of the
Merger, have been duly authorized by all necessary corporate
action. The affirmative vote of holders of a majority of the
outstanding shares of Company Common Stock in favor of the
approval and adoption of this Agreement and the Merger is the
only vote of the holders of any of the Companys capital
stock necessary in connection with consummation of the Merger.
Assuming due authorization, execution and delivery of this
Agreement by Parent and Merger Subsidiary this 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 Companys Board of Directors, at a meeting
duly called and held on or prior to the date hereof, has
(i) determined that this Agreement and the transactions
contemplated hereby (including the Merger) are fair to and in
the best interests of the Companys stockholders,
(ii) approved and adopted this Agreement and the
transactions contemplated hereby (including the Merger), and
(iii) resolved (subject to Section 5.2) to recommend
the approval and adoption of this Agreement and the Merger by
its stockholders.
Section 3.3 Governmental
Authorization. The execution, delivery and performance by
the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby 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 the DGCL,
(b) compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the HSR Act), (c) compliance
with any applicable requirements of Council Regulation
(EC) No. 139/2004 of 20 January 2004 on the control of
concentrations between undertakings (published in the Official
Journal of the European
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Union on January 29, 2004 at L 24/1) (the EC
Merger Regulation), (d) compliance with any
applicable requirements of laws, rules and regulations in other
foreign jurisdictions governing antitrust or merger control
matters, (e) compliance with any applicable requirements of
the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the Exchange
Act), (f) compliance with any applicable
requirements of the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the
Securities Act); (g) the appropriate
filings and approvals under the rules of the NYSE; and
(h) other actions or filings which if not taken or made
would not, individually or in the aggregate, be reasonably
likely to have a Company Material Adverse Effect.
Section 3.4 Non-Contravention.
The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the
transactions contemplated hereby do not and will not, assuming
compliance with the matters referred to in Sections 3.2 and
3.3, (a) contravene or conflict with the Company Charter or
the Company By-Laws or the organizational documents of any
Company Subsidiary, (b) contravene or conflict with or
constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable
to the Company or any of its Subsidiaries, (c) constitute a
default (or an event which with notice or the passage of time
would become a default) under or give rise to a material 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 material 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, be reasonably likely to have a
Company Material Adverse Effect. 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 3.15) not yet due
or being contested in good faith (and for which adequate
accruals or reserves have been established on the Parent Balance
Sheet or the Company Balance Sheet, as the case may be) or
(ii) which is a carriers, warehousemens,
mechanics, materialmens, repairmens or other
like lien arising in the ordinary course of business.
Section 3.5 Capitalization.
The authorized capital stock of the Company consists of
750,000,000 shares of common stock, par value
$1.00 per share (the Company Common
Stock) and 100,000,000 shares of preferred stock,
par value $0.10 per share (the Company Preferred
Stock, and together with the Company Common Stock, the
Company Capital Stock). As of March 31,
2005, there were outstanding (i) 271,654,896 shares of
Company Common Stock, (ii) no shares of Series B
Junior Participating Preferred Stock (all of which are reserved
for issuance in accordance with the Rights Agreement (as
amended, the Company Rights Agreement) dated
as of January 5, 2000, as amended, between the Company and
Mellon Investor Services LLC (formerly known as ChaseMellon
Shareholder Services, L.L.C.), as Rights Agent, pursuant to
which the Company has issued rights to purchase Series B
Junior Participating Preferred Stock (Company
Rights)) and no other shares of capital stock or other
voting securities of the Company were then outstanding. All
outstanding shares of Company Capital Stock have been duly
authorized, validly issued, and are fully paid and
nonassessable. As of March 31, 2005, there were outstanding
(A) Company Awards (other than shares of restricted stock
or other awards included in the number of shares of Company
Common Stock outstanding set forth above) with respect to
983,963 shares of Company Common Stock and (B) Company
Stock Options to purchase 6,278,458 shares of Company
Common Stock. Except as set forth in this Section 3.5 and
except for changes since the close of business on March 31,
2005 resulting from the exercise of employee stock options
outstanding on such date, or the payment or redemption of other
stock-based awards outstanding on such date or other securities
issued as permitted by Section 5.1, there are outstanding
(a) no shares of capital stock or other voting securities
of the Company, (b) no Company Awards and (c) except
for the Company Rights, (1) no options, warrants or other
rights to acquire from the Company any capital stock, voting
securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company, and
(2) no preemptive or similar rights,
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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 the foregoing
subclauses (a), (b) and (c) being referred to
collectively as Company Securities). Except
as required by the terms of any Company Stock Options or Company
Awards as permitted by Section 5.1(e), there are no
outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any
Company Securities.
Section 3.6 Subsidiaries.
(a) Each Subsidiary of the Company is duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization, has all powers and all
governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted, except for
those the absence of which would not, individually or in the
aggregate, be reasonably likely to have a Company Material
Adverse Effect. For purposes of this Agreement, the term
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
voting securities or other ownership interests or
(ii) securities or other interests having by their terms
ordinary voting power to elect more than fifty percent of the
board of directors or others performing similar functions with
respect to such corporation or other organization, is directly
owned or controlled by such Person or by any one or more of its
Subsidiaries. Each Subsidiary of the Company is duly qualified
to do business and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary,
except for those jurisdictions where failure to be so qualified
would not, individually or in the aggregate, be reasonably
likely to have a Company Material Adverse Effect. All
significant subsidiaries, as such term is defined in
Section 1-02 of Regulation S-X under the Exchange Act
of the Company and all entities listed on Exhibit 21 to the
Company 10-K (collectively, Significant
Subsidiaries) and their respective jurisdictions of
incorporation are identified in Section 3.6(a) of the
Company Disclosure Schedules.
(b) Except for directors qualifying shares, all of
the outstanding capital stock of, or other ownership interests
in, each Significant Subsidiary of the Company is owned by the
Company, directly or indirectly, free and clear of any material
Lien and free of any other material limitation or restriction
(including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership
interests). There are no outstanding (i) securities of the
Company or any of its Significant Subsidiaries convertible into
or exchangeable for shares of capital stock or other voting
securities or ownership interests in any Significant Subsidiary
of the Company or (ii) options, warrants or other rights to
acquire from the Company or any of its Significant Subsidiaries
any capital stock, voting securities or other ownership
interests in, or any securities convertible into or exchangeable
for any capital stock, voting securities or ownership interests
in, any Significant Subsidiary of the Company, and no preemptive
or similar rights, subscription or other rights, convertible
securities, agreements, arrangements or commitments of any
character, relating to the capital stock of any Significant
Subsidiary of the Company, obligating the Company or any of its
Significant Subsidiaries to issue, transfer or sell, any capital
stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital
stock, voting securities or ownership interests in, any
Significant Subsidiary of the Company or obligating the Company
or any Significant Subsidiary of the Company to grant, extend or
enter into any such option, warrant, subscription or other
right, convertible security, agreement, arrangement or
commitment (the items in the foregoing subclauses 3.6(b)(i) and
(ii) being referred to collectively as Company
Subsidiary Securities). There are no outstanding
obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any outstanding Company
Subsidiary Securities. No Subsidiary of the Company is, or since
January 1, 2003 has been, subject to any requirement to
file periodic reports under the Exchange Act.
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Section 3.7 Commission
Filings.
(a) The Company has made available to Parent (i) its
annual reports on Form 10-K for its fiscal years ended
December 31, 2003 and 2004, (ii) its quarterly reports
on Form 10-Q for its fiscal quarters ended after
December 31, 2004, (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, 2003, and (iv) all of its other reports,
statements, schedules and registration statements filed with the
Commission since December 31, 2003 (the documents referred
to in this Section 3.7(a) being referred to collectively as
the Company Commission Documents). The
Companys annual report on Form 10-K for its fiscal
year ended December 31, 2004 is referred to herein as the
Company 10-K.
(b) As of its filing date, each Company Commission Document
complied as to form in all material respects with the applicable
requirements of the Exchange Act, the Securities Act and the
Sarbanes-Oxley Act of 2002 and the rules and regulations
thereunder.
(c) As of its filing date, each Company Commission Document
filed pursuant to the Exchange Act did not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading.
(d) Each registration statement, as amended or
supplemented, if applicable, filed by the Company since
January 1, 2003 pursuant to the Securities Act as of the
date such statement or amendment became effective did not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading.
(e) The Company has timely filed with or furnished to the
Commission all forms, reports, schedules, registration
statements, proxy statements and other documents required to be
filed with or furnished to the Commission by the Company since
January 1, 2003.
Section 3.8 Financial
Statements. The audited consolidated financial statements
and unaudited consolidated interim financial statements of the
Company (including any related notes and schedules) included in
its annual reports on Form 10-K and the quarterly reports
on Form 10-Q referred to in Section 3.7 present
fairly, in all material respects, the consolidated financial
position of the Company and its consolidated Subsidiaries as of
the dates thereof and the consolidated results of their
operations and their cash flows for the periods then ended
(subject to normal year-end adjustments and the absence of notes
in the case of any unaudited interim financial statements), in
each case in conformity with United States generally accepted
accounting principles (GAAP) applied on a
consistent basis (except as may be indicated in the notes
thereto). For purposes of this Agreement, Company
Balance Sheet means the consolidated balance sheet of
the Company as of December 31, 2004 set forth in the
Company 10-K and Company Balance Sheet Date
means December 31, 2004.
Section 3.9 Disclosure
Documents.
(a) Neither the proxy statement of the Company (the
Company Proxy Statement) to be filed with the
Commission in connection with the Merger, nor any amendment or
supplement thereto, will, at the date the Company Proxy
Statement or any such amendment or supplement is first mailed to
stockholders of the Company or at the time such stockholders
vote on the adoption and approval of this Agreement and the
transactions contemplated hereby, contain any untrue statement
of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
Company Proxy Statement, including all amendments or supplements
thereto, will, when filed, comply as to form in all material
respects with the requirements of the Exchange Act.
Notwithstanding the foregoing, no representation or warranty is
made by the Company in this Section 3.9 with respect to
statements made or incorporated by reference therein based on
information supplied by Parent or Merger Subsidiary for
inclusion or incorporation by reference in the Company Proxy
Statement.
(b) None of the information supplied or to be supplied by
the Company for inclusion or incorporation by reference in the
Form S-4 (as defined in Section 4.8(a)) or any
amendment or supplement thereto will, at the
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time the Form S-4 or any such amendment or supplement
becomes effective under the Securities Act or at the Effective
Time, as the case may be, contain any untrue statement of a
material fact or omit to state a material fact required to be
included in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 3.10 Controls
and Procedures.
(a) Each of the principal executive officer and the
principal financial officer of the Company (or each former
principal executive officer and former principal financial
officer of the Company, as applicable) has made all
certifications required under Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002 and the related rules and regulations
promulgated thereunder and under the Exchange Act (collectively,
the Sarbanes-Oxley Act) with respect to
Company Commission Documents, and the Company has delivered to
Parent a summary of any disclosure made by management to the
Companys auditors and audit committee since
January 1, 2003 referred to in such certifications. For
purposes of the preceding sentence, principal executive
officer and principal financial officer shall
have the meanings given to such terms in the Sarbanes-Oxley Act.
(b) The Company has (i) designed and maintained
disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Exchange Act) to ensure that
material information required to be disclosed by the Company in
the reports it files or furnishes under the Exchange Act is
communicated to its management by others within those entities
as appropriate to allow timely decisions regarding required
disclosure, (ii) disclosed, based on its most recent
evaluation, to its auditors and the audit committee of its Board
of Directors (A) any significant deficiencies or material
weaknesses in the design or operation of internal controls over
financial reporting which could adversely affect its ability to
record, process, summarize and report financial data and
(B) any fraud, whether or not material, that involves
management or other employees who have a significant role in its
internal controls over financial reporting and
(iii) identified for the Companys auditors any
material weaknesses in internal controls. The Company has
provided to Parent true and correct copies of any of the
foregoing disclosures to the auditors or audit committee that
have been made in writing from January 1, 2003 through the
date hereof, and will promptly provide to Parent true and
correct copies of any such disclosure that is made after the
date hereof.
(c) The Company has designed and maintains a system of
internal controls over financial reporting (as defined in
Rule 13a-15(f) under the Exchange Act) sufficient to
provide reasonable assurance concerning the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP, including
reasonable assurance (i) that transactions are executed in
accordance with managements general or specific
authorizations and recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to maintain
asset accountability and (ii) regarding prevention or
timely detection of any unauthorized acquisition, use or
disposition of assets that could have a material effect on the
Companys financial statements. The Companys
management, with the participation of the Companys
principal executive and financial officers, has completed an
assessment of the effectiveness of the Companys internal
controls over financial reporting in compliance with the
requirements of Section 404 of the Sarbanes-Oxley Act for
the year ended December 31, 2004, and such assessment
concluded that such internal controls were effective using the
framework specified in the Company 10-K.
(d) No personal loan or other extension of credit by the
Company or any Subsidiary to any of its or their executive
officers or directors has been made or modified (other than as
permitted by Section 13 of the Exchange Act and
Section 402 of the Sarbanes-Oxley Act) since July 31,
2002.
(e) Since January 1, 2003, (i) neither the
Company nor any of its Subsidiaries nor, to the Companys
knowledge, any director, officer, employee, auditor, accountant
or representative of the Company or any of its Subsidiaries has
received any written complaint, allegation, assertion, or claim
that the Company or any of its Subsidiaries has engaged in
improper or illegal accounting or auditing practices or
maintains improper or inadequate internal accounting controls
and (ii) no attorney representing the Company or any of its
Subsidiaries, whether or not employed by the Company or any of
its Subsidiaries, has reported evidence of a material violation
of U.S. federal or state securities laws, a material breach
of fiduciary duty or similar material violation by the Company,
any of its Subsidiaries or any of their respective officers,
director,
A-13
employees or agents to any officer of the Company, the Board of
Directors of the Company or any member or committee thereof. For
purposes of this Agreement, knowledge of any Person
means the actual knowledge of any officer (as such term is
defined in Rule 16a-1(f) under the Exchange Act) of such
Person.
Section
3.11 Absence of Certain
Changes. From the Company Balance Sheet Date to the date
hereof, the Company and its Subsidiaries have conducted their
business in the ordinary course of business, consistent with
past practice, and there has not been:
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(a) any event, occurrence, change or development of a state
of circumstances or facts which, individually or in the
aggregate, has had, or would be reasonably likely to have, a
Company Material Adverse Effect; |
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(b) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of
capital stock of the Company (other than the Companys
regular quarterly cash dividend and dividends or distributions
by any direct or indirect wholly-owned Subsidiary to the Company
or any wholly-owned Subsidiary of the Company, and except for
dividends or distributions by other Subsidiaries of the Company
for which the portion of such dividends or distributions not
payable to a direct or indirect wholly-owned Subsidiary of the
Company did not exceed $10,000,000 in value in the aggregate for
all such dividends and distributions), or any repurchase,
redemption or other acquisition by the Company or any of its
wholly-owned Subsidiaries of any outstanding shares of capital
stock or other securities of, or other ownership interests in,
the Company or any of its Significant Subsidiaries (other than
(i) any such repurchases prior to the date hereof pursuant
to the Companys publicly announced stock buyback program
or, after the date hereof, as permitted under
Section 5.1(e) or pursuant to the terms of Company Stock
Options and Company Awards, in each case subject to
Section 7.4), and (ii) any such transaction solely
among the Company and its wholly-owned Subsidiaries or solely
among the Companys wholly-owned Subsidiaries; |
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(c) any amendment of any material term of any outstanding
security of the Company or any of its Significant Subsidiaries
(other than wholly-owned Subsidiaries); |
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(d) to the knowledge of the Companys Management
Committee, 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
expressly permitted by this Agreement, or as agreed to in
writing by Parent; |
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(e) any change in any method of financial accounting or
financial accounting practice (other than any change for tax
purposes) by the Company or any of its Subsidiaries, except for
any such change which is not material or which is required by
reason of a concurrent change in GAAP or applicable law; |
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(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, other than in accordance with existing plans and
policies, (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, other than in
accordance with existing plans and policies, (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 increases made in
the ordinary course of business with respect to employees other
than executives; or |
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(g) any (i) Tax election made or changed,
(ii) Tax audit settled, or (iii) amended Tax Return
filed, in each case, that is reasonably likely to result in an
increase to a Tax liability, which increase is material to the
Company and its Subsidiaries, taken as a whole. |
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Section
3.12 No Default. Neither the
Company nor any of its Subsidiaries is in default or violation
(and no event has occurred which, with notice or the lapse of
time or both, would constitute a default or violation) of any
term, condition or provision of (i) its certificate of
incorporation, by-laws or the comparable charter or
organizational documents, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license
to which the Company or any of its Subsidiaries is now a party
or by which the Company or any of its Subsidiaries or any of
their respective properties or assets is bound or (iii) any
permit, license, order, writ, injunction, decree, statute, rule
or regulation applicable to the Company or any of its
Subsidiaries, except in the case of (ii) and (iii) for
defaults or violations which in the aggregate would not
reasonably be expected to result in a Company Material Adverse
Effect.
Section
3.13 No Undisclosed Material
Liabilities. As of the date hereof, there are no material
liabilities of the Company or any Subsidiary of the Company of
any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, other than:
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(a) liabilities disclosed or provided for in the Company
Balance Sheet or in the notes thereto; |
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(b) liabilities incurred since the Company Balance Sheet
Date in the ordinary course of business consistent with past
practice and which, individually or in the aggregate, would not
be reasonably likely to have a Company Material Adverse Effect; |
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(c) liabilities disclosed in the Company Commission
Documents filed prior to the date of this Agreement; |
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(d) liabilities or obligations that have been discharged or
paid in full in the ordinary course of business; and |
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(e) liabilities under this Agreement. |
Section
3.14 Litigation. There is no
action, suit, investigation or proceeding pending against, or,
to the knowledge of the Company, threatened against or
affecting, the Company or any of its Subsidiaries or any of
their respective properties or any of their respective officers
or directors before any court or arbitrator or any governmental
body, agency or official except as would not, individually or in
the aggregate, be reasonably likely to have a Company Material
Adverse Effect.
Section
3.15 Taxes. Except as set
forth in the Company Balance Sheet (including the notes thereto)
and except as would not, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect,
(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, in the
case of clause (i) or clause (ii) hereof, with respect
to Taxes and Tax Returns for which the position has been taken
in good faith and for which adequate reserves are reflected on
the Company Balance Sheet, as adjusted for operations in the
ordinary course of business since the date of 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; (vi) to the best
of the Companys knowledge and belief, neither the Company
nor any of its Subsidiaries is liable for any Tax imposed on any
entity other than such Person, except as the result of the
application of Treas. Reg. section 1.1502-6 (and any
comparable provision of the tax laws of any state, local or
foreign jurisdiction) to the affiliated group of which the
Company or any of its Subsidiaries is or was the common parent;
and (vii) neither the Company nor any Company Subsidiary
has constituted either a distributing corporation or
a controlled corporation (within the meaning of
Section 355(a)(1)(A) of the
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Code) in a distribution of stock qualifying or intended to
qualify for tax-free treatment under Section 355 of the
Code in the two years prior to the date of this Agreement. For
purposes of this Agreement, Taxes shall mean
any and all taxes, charges, fees, levies or other assessments,
including, without limitation, all net income, gross income,
gross receipts, excise, stamp, real or personal property, ad
valorem, withholding, social security (or similar),
unemployment, occupation, use, production, service, service use,
license, net worth, payroll, franchise, severance, transfer,
recording, employment, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs
duties, capital stock, profits, disability, sales, registration,
value added, alternative or add-on minimum, 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
3.16 Employee Benefit Plans;
Employment.
(a) The Company has provided Parent with a list (set forth
in Section 3.16(a) of the Company Disclosure Schedules)
identifying each material employee benefit plan, as
defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (ERISA),
each material employment, consulting, severance, change in
control or similar contract, plan, funding arrangement or policy
applicable to any director, former director, employee or former
employee of the Company or any Company Subsidiary, and each
material plan, funding vehicle 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, death benefits, disability benefits, workers
compensation, supplemental unemployment benefits, severance
benefits, change in control benefits and post-employment or
retirement benefits (including compensation, pension, health,
medical or life insurance benefits) which is maintained,
administered or contributed to by the Company or its
subsidiaries) and covers any employee or director or former
employee or director of the Company or any of its Subsidiaries;
provided, however, that such list need not include any
Company Benefit Plan that constitutes a Foreign Company Benefit
Plan (as defined below). The material plans, agreements or
arrangements of the Company and its Subsidiaries referred to in
the first sentence of this paragraph (a) (excluding any
such plan that is a multiemployer plan, as defined
in section 3(37) of ERISA, but including Foreign Company
Benefit Plans) are referred to collectively herein as the
Company Benefit Plans. Foreign Company
Benefit Plan means any Company Benefit Plan primarily
maintained for the benefit of employees and former employees in
jurisdictions other than the United States. To the extent
practicable, the Company shall provide and deliver to Parent a
list of Foreign Company Benefit Plans as soon as practicable
following the date hereof.
(b) The Company has made available to Parent true, complete
and correct copies of (i) each Company Benefit Plan (or, in
the case of any unwritten Company Benefit Plan, a description
thereof) and any amendments thereto, (ii) the most recent
annual report on Form 5500 and Schedule B thereto
(including any related actuarial valuation report) filed with
the Internal Revenue Service with respect to each Company
Benefit Plan (if any such report was required), and
(iii) the most recent summary plan description for each
Company Benefit Plan for which such summary plan description is
required.
(c) Each Company Benefit Plan has been established and
maintained in material compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules
and regulations (including, but not limited to, the extent
applicable, ERISA and the Code) which are applicable to such
Plan.
(d) (i) Neither the Company nor any other entity which
is a member of a controlled group of entities (within the
meaning of Sections 414(b), (c), (m) or (o) of
the Code) of which the Company is a member (each, an
ERISA Affiliate) has incurred a material
liability under Title IV of ERISA or Section 412 of
the Code that has not been satisfied in full, and no reasonably
foreseeable condition exists that presents a material risk to
the Company or any ERISA Affiliate of incurring any such
liability; and (ii) all material insurance premiums with
respect to Company Benefit Plans, including premiums to the
Pension Benefit Guaranty Corporation, have been paid when due.
A-16
(e) All employee pension benefit plans (as
defined in Section 3(2) of ERISA) that are Company Benefit
Plans (Company Pension Plan) intended to be
qualified under Section 401(a) of the Code have been the
subject of GUST II determination letters from
the Internal Revenue Service to the effect that such Company
Pension Plans are qualified and exempt from Federal income taxes
under Sections 401(a) and 501(a), respectively, of the
Code. No Company Benefit Plan is a multiemployer
plan, as defined in Section 3(37) of ERISA.
(f) Other than (i) any provision that delays the
effective date of such amendment or termination or (ii) any
benefit under a Company Benefit Plan disclosed on
Section 3.16(g) of the Company Disclosure Schedules that
arises solely as a result of the transactions contemplated by
this Agreement or (iii) any employment agreement to which
the Company or any of its Subsidiaries is a party, each Company
Benefit Plan that is an employee welfare benefit
plan (as defined in Section 3(1) of ERISA) (including
any such plan covering retirees or other former employees) may
be freely amended or terminated by the Company, any ERISA
Affiliate or any successor thereto on or at any time after the
Effective Time.
(g) Set forth on Section 3.16(g) of the Company
Disclosure Schedules is, based on the assumptions set forth
therein, (i) a good faith estimate of a reasonable amount
subject to Section 280G of the Code, including any tax
gross-up, that could be paid to each of the 65 most-highly
compensated employees of the Company and its Subsidiaries under
all employment, severance and termination agreements, other
compensation arrangements and Company Benefit Plans currently in
effect as a result of the transactions contemplated by this
Agreement, and (ii) the estimated cost to the Company and
its Subsidiaries of making such payments, including any tax
gross-ups with respect to such employees.
(h) The consummation of the transactions contemplated by
this Agreement will not, either alone or in combination with
another event, (A) entitle any current or former employee,
consultant or officer of the Company or any its Subsidiaries to
severance pay, unemployment compensation or any other payment,
except as expressly provided in this Agreement or as required by
applicable Law, or (B) accelerate the time of payment or
vesting, increase the amount of compensation due any such
employee, consultant or officer or trigger any other material
obligation pursuant to any Company Benefit Plan, except as
expressly provided in this Agreement. Section 3.16 of the
Company Disclosure Schedules lists all the agreements,
arrangements and other instruments which give rise to an
obligation to make or set aside amounts payable to or on behalf
of the officers of the Company and its Subsidiaries as a result
of the transactions contemplated by this Agreement and/or any
subsequent employment termination, true and complete copies of
which have been previously provided to Parent.
(i) There has been no amendment to, written interpretation
or announcement (whether or not written) by the Company or any
of its Subsidiaries relating to, or change in, employee
participation or coverage under, or any adoption of, any Company
Benefit Plan (other than a Foreign Company Benefit Plan) which
would increase materially the expense of maintaining such
Company Benefit Plan above the level of expense incurred in
respect thereof for the 12 months ended on the Company
Balance Sheet Date.
(j) Except as would not, individually or in the aggregate,
be reasonably likely to have a Company Material Adverse Effect,
the Company and its Subsidiaries are in material compliance with
all collective bargaining agreements and all applicable federal,
state and local laws, rules and regulations respecting
employment, employment practices, labor, occupational safety and
health, and wages and hours, including Section 8 of the
National Labor Relations Act and all civil rights and
anti-discrimination laws, rules and regulations (collectively,
Anti-Discrimination Laws). Except as would
not, individually or in the aggregate, be reasonably likely to
have a Company Material Adverse Effect, no work stoppage,
slowdown or labor strike against the Company or any of its
Subsidiaries is pending or threatened, nor is the Company or any
of its Subsidiaries involved in or threatened with material
labor disputes, grievances or litigation relating to labor
matters, including with respect to Anti-Discrimination Laws.
(k) No Company Benefit Plan provides a gross-up for any
Taxes which may be imposed for failure to comply with the
requirements of section 409A of the Code.
A-17
Section 3.17 Compliance
with Laws. To the Companys knowledge, neither the
Company nor any of its Subsidiaries is in violation of, or,
since January 1, 2002, has violated, any applicable
provisions of any laws, statutes, ordinances or regulations
except for any violations that, individually or in the
aggregate, would not be reasonably likely to have a Company
Material Adverse Effect.
Section 3.18 Certain
Business Practices. To the knowledge of the Companys
Management Committee, since January 1, 2002, neither the
Company nor any of its Subsidiaries nor any director, officer,
employee or agent of the Company or any of its Subsidiaries has
(a) used any funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political
activity or (b) made any unlawful payment to any government
official or employee or to any political party or campaign or
violated any provision of the Foreign Corrupt Practices Act of
1977, as amended.
Section 3.19 Environmental
Matters.
(a) Except as set forth in the Company Commission Documents
filed prior to the date hereof and with such exceptions as,
individually or in the aggregate, would not be reasonably likely
to have a Company Material Adverse Effect, (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, 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 arising
out of any Environmental Law; (ii) the Company and its
Subsidiaries are in compliance with all Environmental Laws;
(iii) there are no liabilities of the Company or any of its
Subsidiaries arising out of any Environmental Law, whether
accrued, contingent, absolute, or determined, and, to the
knowledge of the Company, there is no existing condition,
situation or set of circumstances which would reasonably be
expected to result in such a liability; and (iv) there has
been no material environmental investigation, study, audit,
test, review or other analysis conducted since January 1,
2005 of which the Company has knowledge in relation to any
current or prior business of the Company or any of its
Subsidiaries or any property or facility now or previously
owned, leased or operated by the Company or any of its
Subsidiaries which has not been delivered to Parent prior to the
date hereof.
(b) For purposes of this Section 3.19, the term
Environmental Laws means federal, state,
local and foreign statutes, laws (including, without limitation,
common law), judicial decisions, regulations, ordinances, rules,
judgments, orders, codes, injunctions, permits, governmental
agreements or governmental restrictions relating to relating to:
(A) the protection, investigation or restoration of the
environment or natural resources, (B) the handling, use,
presence, disposal, Release or threatened Release of any
Hazardous Substance or (C) noise, odor, indoor air,
employee exposure, electromagnetic fields, wetlands, pollution,
contamination or any injury or threat of injury to persons or
property relating to any Hazardous Substance. As used herein,
the term Hazardous Substance means any
hazardous substance and any pollutant or
contaminant as those terms are defined in the
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (CERCLA);
any hazardous waste as that term is defined in the
Resource Conservation and Recovery Act
(RCRA); and any hazardous
material as that term is defined in the Hazardous
Materials Transportation Act (49 U.S.C. § 1801
et seq.), as amended (including as those terms are
further defined, construed, or otherwise used in rules,
regulations, standards, orders, guidelines, directives, and
publications issued pursuant to, or otherwise in implementation
of, said Laws); and including, without limitation, any petroleum
product or byproduct, solvent, flammable or explosive material,
radioactive material, asbestos, lead paint, polychlorinated
biphenyls (or PCBs), dioxins, dibenzofurans, heavy metals, radon
gas, mold, mold spores, and mycotoxins. As used herein, the term
Release means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, placing, discarding, abandonment, or
disposing into the environment (including the placing,
discarding or abandonment of any barrel, container or other
receptacle containing any Hazardous Substance or other material).
Section 3.20 Title
to Properties. Except in each case as would not reasonably
be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, each of the Company and each of its
Subsidiaries has good title to, or valid leasehold or other
ownership interests or rights in, all its material properties
and assets except: (i) for such interest or rights as are
no longer used or useful in the conduct of its
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businesses or as have been disposed of in the ordinary course of
business, and (ii) for defects in title, easements,
restrictive covenants and similar encumbrances or impediments
that, in the aggregate, do not and will not interfere with its
ability to conduct its business as currently conducted. As of
the date of this Agreement, none of the properties and assets of
the Company or any of its Subsidiaries are subject to any Liens
that, in the aggregate, interfere with the ability of the
Company and the Company Subsidiaries to conduct business as
currently conducted to an extent that have had or would
reasonably be expected to have a Company Material Adverse Effect.
Section 3.21 Hydrocarbon
Contracts.
(a) Except in each case as would not reasonably be expected
to have, individually or in the aggregate, a Company Material
Adverse Effect; (i) the Hydrocarbon Contracts are in full
force and effect in accordance with their respective terms;
(ii) all royalties, rentals and other payments due
thereunder have been properly and timely paid; (iii) there
are currently pending no written requests or demands for
payments, adjustments of payments or performance pursuant
thereto; (iv) none of the Company or any of its
Subsidiaries is in breach of any of its obligations under any
Hydrocarbon Contracts; and (v) to the knowledge of the
Company, no other party to any Hydrocarbon Contract is in breach
of any of its obligations thereunder. The term
Hydrocarbon Contract means a material
Hydrocarbon production sharing contract, lease or license,
permit or other similar agreement or right permitting the
Company or any of its Subsidiaries to explore for, develop, use,
produce, sever, process, operate and occupy Hydrocarbon
interests and associated fixtures or structures for a specified
period of time. The term Hydrocarbon Contract
also includes any farm-out or farm-in agreement, operating
agreement, unit agreement, pooling or communitization agreement,
declaration or order, joint venture, option or acquisition
agreement, any oil and gas production, sales, marketing,
transportation, exchange and processing contract and agreement,
or any other contract affecting the ownership or operation of
properties held for exploration or production of Hydrocarbons,
or the disposition of the Hydrocarbons produced therefrom, in
each case to which the Company or any of its Subsidiaries is a
party. The term Hydrocarbons means any of
oil, bitumen and products derived therefrom, synthetic crude
oil, petroleum, natural gas, natural gas liquids, coal bed
methane, and any and all other substances produced in
association with any of the foregoing, whether liquid, solid or
gaseous.
(b) Except in each case as would not reasonably be expected
to have, individually or in the aggregate, a Company Material
Adverse Effect, (i) the Company and its Subsidiaries have
filed with the applicable government authorities all
applications and obtained all licenses, permits and other
authorizations required for operations under the Hydrocarbon
Contracts, and (ii) the Company and its Subsidiaries have
complied with all rules and regulations of any applicable
government authority with respect to operations under the
Hydrocarbon Contracts.
Section 3.22 Material
Contracts. Except for this Agreement and except as set forth
in the Company Commission Documents, as of the date hereof,
neither the Company nor any of its Subsidiaries is a party to or
bound by any material contract (as such term is
defined in item 601(b)(10) of Regulation S-K of the
Commission) (all contracts of the type described in this
Section 3.22 being referred to herein as Company
Material Contracts).
Section 3.23 Intellectual
Property.
(a) Except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect, (i) the Company and its Subsidiaries possess the
valid right to use, license and enforce all patents, trademarks,
trade names, service marks, Internet domain names, copyrights,
applications for any of the foregoing, computer software
programs or applications, geophysical data, trade secrets,
know-how, data and other proprietary rights (collectively,
Intellectual Property) that are used in the
conduct of the business of the Company and its Subsidiaries as
currently conducted (collectively, the Company
Intellectual Property); (ii) to the knowledge of
the Company, the conduct of the business of the Company and its
Subsidiaries and use of the Company Intellectual Property does
not infringe upon or otherwise violate any Intellectual Property
rights of any other Person; (iii) to the knowledge of the
Company, no third party is challenging, infringing or otherwise
violating any right of the Company and its Subsidiaries in the
Company Intellectual Property; (iv) neither the Company nor
any of its Subsidiaries has received written notice of any
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pending claim, order or proceeding with respect to any alleged
or potential infringement or other violation of Intellectual
Property rights of any other Person or with respect to any
Company Intellectual Property; and (v) to the knowledge of
the Company, no Company Intellectual Property is being used or
enforced by the Company or any of its Subsidiaries in a manner
that would reasonably be expected to result in the abandonment,
cancellation or unenforceability of any Company Intellectual
Property; provided, however, that for purposes of
this Section 3.23 only, Company Intellectual Property shall
not include RFG Patents. For purposes of this Agreement, the
term RFG Patents shall mean United States
Patent Nos. 5,288,393; 5,593,567; 5,653,866; 5,837,126 and
6,030,521 and any reissues, divisionals, reexaminations,
continuations or continuations-in-part or foreign counterparts
of such United States Patents.
(b) As of the date hereof, the Company and its Subsidiaries
have not entered into any contractual arrangement that would
limit Parents or the Companys or their respective
Subsidiaries freedom to license, cross-license or
otherwise dispose of the RFG Patents, except for the nine
(9) licensing agreements the Company or its Subsidiaries
have heretofore entered into with motor gasoline refiners,
blenders and importers under the RFG Patents, as identified in
the Company 10-K.
Section 3.24 Confidentiality
and Other Agreements.
(a) None of the confidentiality agreements or standstill
agreements the Company has entered into with any third party (or
any agent thereof) that is in effect on the date hereof contains
any exclusivity or standstill provisions that are or will be
binding on the Company, any of its Subsidiaries or, after the
Effective Time, Parent or any of its Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries is a
party to any agreement that would expressly and materially limit
the ability of Parent or any Subsidiary of Parent, after the
Effective Time, to compete in or conduct any line of business or
compete with any Person or in any geographic area or during any
period of time.
Section 3.25 Brokers;
Financial Advisors. No broker, investment banker, financial
advisor or other Person, other than Morgan Stanley (the
Financial Advisor) (the terms of the
engagement having been heretofore provided to Parent), and the
fees and expenses of which will be paid by the Company, is
entitled to any brokers, finders, financial
advisors or other similar fee or commission in connection
with the Merger as a result of being engaged by the Company or
any Subsidiary or affiliate of the Company.
Section 3.26 Opinion
of Financial Advisor. The Company has received the opinion
of the Financial Advisor, dated the date of this Agreement, to
the effect that, as of such date, the consideration to be
received in the Merger by the holders of the shares of Company
Common Stock is fair to the Companys stockholders from a
financial point of view.
Section 3.27 Takeover
Statutes. The Board of Directors of the Company has taken
the necessary action to render section 203 of the DGCL, any
other potentially applicable antitakeover or similar statute or
regulation and the provisions of Article SEVENTH of the
Company Charter inapplicable to this Agreement and the
transactions contemplated hereby.
Section 3.28 Stockholder
Rights Plan. The Board of Directors of the Company has
resolved to, and the Company promptly after execution of this
Agreement will, take all action necessary to render the rights
issued pursuant to the terms of the Company Rights Agreement
inapplicable to the Merger and this Agreement and the other
transactions contemplated hereby.
ARTICLE IV
Representations and
Warranties of Parent and Merger Subsidiary
Parent and Merger Subsidiary represent and warrant to the
Company that, except as disclosed in the Parent Commission
Documents (as hereinafter defined) filed or furnished prior to
the date hereof or in the correspondingly numbered section of
the disclosure schedules delivered by Parent to the Company
simultaneously with the execution of this Agreement (the
Parent Disclosure Schedules) (it being agreed
that
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disclosure of any item in any section of the Parent Disclosure
Schedules shall be deemed disclosure with respect to any other
section of this Agreement to which the relevance of such item is
reasonably apparent):
Section 4.1 Corporate
Existence and Power. Each of Parent and Merger Subsidiary is
a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has all
corporate powers and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now
conducted, except for those the absence of which would not,
individually or in the aggregate be reasonably likely to have a
Parent Material Adverse Effect. Parent is duly qualified to do
business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where
the failure to be so qualified would not, individually or in the
aggregate, be reasonably likely to have a Parent Material
Adverse Effect. For purposes of this Agreement, the term
Parent Material Adverse Effect means a material
adverse effect on the financial condition, business,
liabilities, assets or continuing results of operations of
Parent and its Subsidiaries, taken as a whole, except to the
extent resulting from (x) any changes in general United
States or global economic conditions, or (y) any changes
affecting the oil and gas industry in general (including changes
to commodity prices). 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. Parent
has heretofore delivered to the Company true and complete copies
of Parents and Merger Subsidiarys certificate of
incorporation and by-laws as currently in effect.
Section 4.2 Corporate
Authorization.
(a) The execution, delivery and performance by Parent and
Merger Subsidiary of this Agreement and the consummation by
Parent and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Parent and Merger
Subsidiary and have been duly authorized by all necessary
corporate action. Assuming due authorization, execution and
delivery of this Agreement by the Company, this Agreement
constitutes a valid and binding agreement of each of Parent and
Merger Subsidiary, enforceable against such party in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors rights
and to general equity principles. The shares of Parent Common
Stock issued pursuant to the Merger, when issued in accordance
with the terms hereof, will be duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive
rights.
(b) Parents Board of Directors, at a meeting duly
called and held on or prior to the date hereof, has
(i) determined that the transactions contemplated hereby
(including the Merger) are fair to and in the best interests of
Parents stockholders and (ii) approved the execution
of this Agreement and the transactions contemplated hereby
(including the Merger).
Section 4.3 Governmental
Authorization. The execution, delivery and performance by
Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions
contemplated hereby 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 the DGCL, (b) compliance with any
applicable requirements of the HSR Act, (c) compliance with
any applicable requirements of the EC Merger Regulation,
(d) compliance with any applicable requirements of laws,
rules and regulations in other foreign jurisdictions governing
antitrust or merger control matters, (e) compliance with
any applicable requirements of the Exchange Act,
(f) compliance with any applicable requirements of the
Securities Act, (g) the appropriate filings and approvals
under the rules of the NYSE and (h) other actions or
filings which if not taken or made would not, individually or in
the aggregate, be reasonably likely to have a Parent Material
Adverse Effect or prevent or materially delay Parents and
Merger Subsidiarys consummation of the Merger.
Section 4.4 Non-Contravention.
The execution, delivery and performance by Parent and Merger
Subsidiary of this Agreement and the consummation by Parent and
Merger Subsidiary of the transactions contemplated hereby do not
and will not, assuming compliance with the matters referred to
in Sections 4.2 and 4.3, (a) contravene or conflict
with the certificate of incorporation or by-laws of Parent or
Merger Subsidiary, (b) contravene or conflict with or
constitute a violation of any provision of any law, regulation,
judgment,
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injunction, order or decree binding upon or applicable to Parent
or any of its Subsidiaries, (c) constitute a default under
or give rise to any material right of termination, cancellation
or acceleration of any right or obligation of Parent or any of
its Subsidiaries or to a loss of any material benefit to which
Parent or any of its Subsidiaries is entitled under any
provision of any agreement, contract or other instrument binding
upon Parent or any of its Subsidiaries or any license,
franchise, permit or other similar authorization held by Parent
or any of its Subsidiaries or (d) result in the creation or
imposition of any Lien on any asset of Parent or any of its
Subsidiaries, except for such contraventions, conflicts or
violations referred to in clause (b) or defaults,
rights of termination, cancellation or acceleration, or losses
or Liens referred to in clause (c) or (d) that would
not, individually or in the aggregate, be reasonably likely to
have a Parent Material Adverse Effect. The approval of the
stockholders of Parent is not required by applicable law or the
rules of the NYSE to effect the transactions contemplated by
this Agreement.
Section 4.5 Capitalization.
The authorized capital stock of Parent consists of
4,000,000,000 shares of common stock, par value
$0.75 per share (Parent Common Stock),
and 100,000,000 shares of preferred stock, par value
$1.00 per share (of which 5,000,000 are designated
Series A Participating Preferred Stock, and the remaining
shares of such preferred stock are not subject to any
designation). As of the close of business on December 31,
2004, there were outstanding 2,274,032,014 shares of Parent
Common Stock, no shares of Series A Participating Preferred
Stock, and no other shares of capital stock or other voting
securities of Parent. All outstanding shares of capital stock of
Parent have been duly authorized and validly issued and are
fully paid and nonassessable. As of December 31, 2004,
there were outstanding (i) options to
purchase 54,352,000 shares of Parent Common Stock and
(ii) other stock-based awards (other than shares of
restricted stock or other equity based awards included in the
number of shares of Parent Common Stock outstanding set forth
above) with respect to 200,747 shares of Parent Common
Stock. Except as set forth in this Section 4.5 and except
for changes since the close of business on December 31,
2004 resulting from the exercise of employee stock options
outstanding on such date or the payment or redemption of other
stock-based awards outstanding on such date and except for the
shares to be issued in connection with the Merger, there are
outstanding (a) no shares of capital stock or other voting
securities of Parent, and (b) except for securities
issuable pursuant to employee benefit plans or arrangements,
including options issued pursuant to Parent stock option plans
and awards payable in Parent Common Stock, (i) no options,
warrants or other rights to acquire from Parent any capital
stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Parent,
and (ii) no preemptive or similar rights, subscription or
other rights, convertible securities, agreements, arrangements,
or commitments of any character, relating to the capital stock
of Parent, obligating Parent to issue, transfer or sell any
capital stock, voting security or securities convertible into or
exchangeable for capital stock or voting securities of Parent or
obligating Parent to grant, extend or enter into any such
option, warrant, subscription or other right, convertible
security, agreement, arrangement or commitment (the items in the
foregoing subclauses (a) and (b) being referred to
collectively as Parent Securities). Except as
required by the terms of any employee or director options or
other stock based awards, there are no outstanding obligations
of Parent or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any Parent Securities.
Section 4.6 Commission
Filings.
(a) Parent has made available to the Company (i) its
annual reports on Form 10-K for its fiscal years ended
December 31, 2003 and 2004, (ii) its quarterly reports
on Form 10-Q for its fiscal quarters ended after
December 31, 2004, (iii) its proxy or information
statements relating to meetings of, or actions taken without a
meeting by, the stockholders of Parent held since
December 31, 2003, and (iv) all of its other reports,
statements, schedules and registration statements filed with the
Commission since December 31, 2003 (the documents referred
to in this Section 4.6(a) being referred to collectively as
the Parent Commission Documents).
Parents annual report on Form 10-K for its fiscal
year ended December 31, 2004 is referred to herein as the
Parent 10-K.
(b) As of its filing date, each Parent Commission Document
complied as to form in all material respects with the applicable
requirements of the Exchange Act, the Securities Act and the
Sarbanes-Oxley Act.
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(c) As of its filing date, each Parent Commission Document
filed pursuant to the Exchange Act did not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading.
(d) Each registration statement, as amended or
supplemented, if applicable, filed by Parent since
January 1, 2003 pursuant to the Securities Act as of the
date such statement or amendment became effective did not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading.
(e) Parent has timely filed with or furnished to the
Commission all forms, reports, schedules, registration
statements, proxy statements and other documents required to be
filed with or furnished to the Commission by Parent since
January 1, 2003.
Section 4.7 Financial
Statements. The audited consolidated financial statements
and unaudited consolidated interim financial statements of
Parent (including any related notes and schedules) included in
the annual reports on Form 10-K and the quarterly reports
on Form 10-Q referred to in Section 4.6 present
fairly, in all material respects, the consolidated financial
position of Parent and its Subsidiaries as of the dates thereof
and the consolidated results of their operations and their cash
flows for the periods then ended (subject to normal year-end
adjustments and the absence of notes in the case of any
unaudited interim financial statements), in each case in
conformity with GAAP applied on a consistent basis (except as
may be indicated in the notes thereto). For purposes of this
Agreement, Parent Balance Sheet means the
consolidated balance sheet of Parent as of December 31,
2004 set forth in the Parent 10-K and Parent Balance
Sheet Date means December 31, 2004.
Section 4.8 Disclosure
Documents.
(a) The Registration Statement on Form S-4 of Parent
(the Form S-4) to be filed under the
Securities Act relating to the issuance of Parent Common Stock
in the Merger, and any amendments or supplements thereto, will,
when filed, subject to the last sentence of Section 4.8(b),
comply as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act.
(b) Neither the Form S-4 nor any amendment or
supplement thereto will at the time it becomes effective under
the Securities Act or at the Effective Time contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading. Notwithstanding the
foregoing, no representation or warranty is made by Parent in
this Section 4.8 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 Form S-4.
(c) None of the information supplied or to be supplied by
Parent for inclusion or incorporation by reference in the
Company Proxy Statement or any amendment or supplement thereto
will, at the date the Company Proxy Statement or any amendment
or supplement thereto is first mailed to stockholders of Company
or at the time such stockholders vote on the adoption and
approval of this Agreement and the transactions contemplated
hereby, contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
Section 4.9 Controls
and Procedures.
(a) Each of the principal executive officer and the
principal financial officer of Parent (or each former principal
executive officer and former principal financial officer of
Parent, as applicable) has made all certifications required
under Sections 302 and 906 of the Sarbanes-Oxley Act with
respect to Parent Commission Documents, and Parent has delivered
to the Company a summary of any disclosure made by management to
Parents auditors and audit committee since January 1,
2003 referred to in such certifications. For purposes of the
preceding sentence, principal executive officer and
principal financial officer shall have the meanings
given to such terms in the Sarbanes-Oxley Act.
(b) Parent has (i) designed and maintained disclosure
controls and procedures (as defined in Rule 13a-15(e) under
the Exchange Act) to ensure that material information required
to be disclosed by
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Parent in the reports it files or furnishes under the Exchange
Act is communicated to its management by others within those
entities as appropriate to allow timely decisions regarding
required disclosure, (ii) disclosed, based on its most
recent evaluation, to its auditors and the audit committee of
its Board of Directors (A) any significant deficiencies or
material weaknesses in the design or operation of internal
controls over financial reporting which could adversely affect
its ability to record, process, summarize and report financial
data and (B) any fraud, whether or not material, that
involves management or other employees who have a significant
role in its internal controls over financial reporting and
(iii) identified for Parents auditors any material
weaknesses in internal controls. Parent has provided to the
Company true and correct copies of any of the foregoing
disclosures to the auditors or audit committee that have been
made in writing from January 1, 2003 through the date
hereof, and will promptly provide to the Company true and
correct copies of any such disclosure that is made after the
date hereof.
(c) Parent has designed and maintains a system of internal
controls over financial reporting (as defined in
Rule 13a-15(f) under the Exchange Act) sufficient to
provide reasonable assurance concerning the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP, including
reasonable assurance (i) that transactions are executed in
accordance with managements general or specific
authorizations and recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to maintain
asset accountability and (ii) regarding prevention or
timely detection of any unauthorized acquisition, use or
disposition of assets that could have a material effect on
Parents financial statements. Parents management,
with the participation of Parents principal executive and
financial officers, has completed an assessment of the
effectiveness of Parents internal controls over financial
reporting in compliance with the requirements of
Section 404 of the Sarbanes-Oxley Act for the year ended
December 31, 2004, and such assessment concluded that such
internal controls were effective using the framework specified
in the Parent 10-K.
(d) No personal loan or other extension of credit by Parent
or any Subsidiary to any of its or their executive officers or
directors has been made or modified (other than as permitted by
Section 13 of the Exchange Act and Section 402 of the
Sarbanes-Oxley Act) since July 31, 2002.
(e) Since January 1, 2003, (i) neither Parent nor
any of its Subsidiaries nor, to Parents knowledge, any
director, officer, employee, auditor, accountant or
representative of Parent or any of its Subsidiaries has received
any written complaint, allegation, assertion, or claim that
Parent or any of its Subsidiaries has engaged in improper or
illegal accounting or auditing practices or maintains improper
or inadequate internal accounting controls and (ii) no
attorney representing Parent or any of its Subsidiaries, whether
or not employed by Parent or any of its Subsidiaries, has
reported evidence of a material violation of U.S. federal
or state securities laws, a material breach of fiduciary duty or
similar material violation by Parent, any of its Subsidiaries or
any of their respective officers, directors, employees or agents
to any officer of Parent, the Board of Directors of Parent or
any member or committee thereof.
Section 4.10 Absence
of Certain Changes. Since the Parent Balance Sheet Date,
Parent and its Subsidiaries have conducted their business in the
ordinary course of business, consistent with past practice and
there has not been:
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(a) any event, occurrence, change or development of a state
of circumstances or facts which, individually or in the
aggregate, has had, or would be reasonably likely to have, a
Parent Material Adverse Effect; or |
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(b) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of
capital stock of Parent (other than regular quarterly cash
dividends payable by Parent (x) consistent with past
practice (including periodic dividend increases consistent with
past practice) and (y) that are not special dividends), or
any repurchase, redemption or other acquisition by Parent or any
of its wholly-owned Subsidiaries of any outstanding shares of
capital stock or other equity securities of, or other ownership
interests in, Parent or any of its Significant Subsidiaries
(other than (i) any such repurchases prior to the date
hereof pursuant to Parents publicly announced stock
buyback program or, after the date hereof, or pursuant to the
terms of employee and director stock options and (ii) any
such |
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transaction solely among Parent and its wholly-owned
Subsidiaries or solely among Parents wholly-owned
Subsidiaries); |
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(c) any change prior to the date hereof in any method of
financial accounting or financial accounting practice by Parent
or any of its Subsidiaries, except for any such change which is
not material or which is required by reason of a concurrent
change in GAAP or by applicable law; or |
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(d) any (i) Tax election made or changed,
(ii) Tax audit settled, or (iii) amended Tax Return
filed, in each case, that is reasonably likely to result in an
increase to a Tax liability, which increase is material to
Parent and its Subsidiaries, taken as a whole. |
Section 4.11 No
Undisclosed Material Liabilities. As of the date hereof,
there are no material liabilities of Parent or any Subsidiary of
Parent of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, other than:
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(a) liabilities disclosed or provided for in the Parent
Balance Sheet or in the notes thereto; |
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(b) liabilities incurred since the Parent Balance Sheet
Date in the ordinary course of business consistent with past
practice and which, individually or in the aggregate, would not
be reasonably likely to have a Parent Material Adverse Effect; |
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(c) liabilities disclosed in the Parent Commission
Documents filed prior to the date of this Agreement; |
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(d) liabilities or obligations that have been discharged or
paid in full in the ordinary course of business; and |
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(e) liabilities under this Agreement. |
Section 4.12 Litigation.
There is no action, suit, investigation or proceeding pending
against, or to the knowledge of Parent threatened against or
affecting, Parent or any of its Subsidiaries or any of their
respective properties or any of their respective officers or
directors before any court or arbitrator or any governmental
body, agency or official except as would not, individually or in
the aggregate, be reasonably likely to have a Parent Material
Adverse Effect.
Section 4.13 Compliance
with Laws. To Parents knowledge, neither Parent nor
any of its Subsidiaries is in violation of, or has since
January 1, 2003 violated, any applicable provisions of any
laws, statutes, ordinances or regulations except for any
violations that, individually or in the aggregate, have not had,
and would not be reasonably likely to have, a Parent Material
Adverse Effect.
Section 4.14 Tax
Treatment. Neither Parent nor any of its Subsidiaries has
taken or agreed to take any action or is aware of any fact or
circumstance that would prevent or impede, or would be
reasonably likely to prevent or impede, the Merger from
qualifying as a reorganization under Section 368(a) of the
Code.
Section 4.15 Capitalization
of Merger Subsidiary. The authorized capital stock of Merger
Subsidiary consists solely of 1,000 shares of Common Stock,
par value $0.01 per share, all of which are validly issued
and outstanding. All of the issued and outstanding capital stock
of Merger Subsidiary is, and at the Effective Time will be,
owned by Parent. Merger Subsidiary has not conducted any
business prior to the date hereof and has, and prior to the
Effective Time will have, no assets, liabilities or obligations
of any nature other than those incident to its formation and
pursuant to this Agreement and the Merger and the other
transactions contemplated by this Agreement.
ARTICLE V
Covenants of the Company
Company agrees that:
Section 5.1 Conduct
of the Company. From the date of this Agreement until the
Effective Time, the Company and its Subsidiaries shall conduct
their business in the ordinary course consistent with past
practice
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and in a manner not involving the entry by the Company or its
Subsidiaries into businesses that are materially different from
the businesses of the Company and its Subsidiaries on the date
hereof, and shall use their commercially reasonable efforts to
preserve intact their business organizations and relationships
with third parties. Without limiting the generality of the
foregoing, except with the prior written consent of Parent, as
expressly permitted by this Agreement or as set forth in
Section 5.1 of the Company Disclosure Schedules, from the
date hereof until the Effective Time:
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(a) the Company will not, and will not permit any of its
Subsidiaries to, adopt or propose any change in its certificate
of incorporation or by-laws, or amend or waive any provision of
the Company Rights Agreement; |
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(b) the Company will not, and will not permit any
Subsidiary of the Company to, adopt a plan or agreement of
complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries; |
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(c) the Company will not, and will not permit any
Subsidiary of the Company to, issue, sell, transfer, pledge,
dispose of or encumber any shares of, or securities convertible
into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of
capital stock of any class or series of the Company or its
Subsidiaries other than (i) issuances pursuant to the
exercise of convertible securities outstanding on the date
hereof or issuances pursuant to stock based awards or options
that are outstanding on the date hereof and are reflected in
Section 3.5 or are granted in accordance with
clause 5.1(c), (ii) if the Effective Time occurs in
2006, grants to be made in 2006 in accordance with the
Companys customary schedule in accordance with past
practice and (iii) grants made to directors of the Company
and newly hired and promoted employees in the ordinary course of
business in accordance with past practice; |
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(d) the Company will not, and will not permit any
Subsidiary of the Company to, (i) split, combine, subdivide
or reclassify its outstanding shares of capital stock, or
(ii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to
its capital stock other than (x) regular quarterly cash
dividends payable by the Company or such Subsidiary consistent
with past practice, but not including any special dividend or
(y) dividends paid by any Subsidiary of the Company to the
Company or any wholly-owned Subsidiary of the Company; |
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(e) the Company will not, and will not permit any
Subsidiary of the Company to, redeem, purchase or otherwise
acquire directly or indirectly any of the Companys or any
Subsidiarys 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 7.4 or (z) effected in the
ordinary course consistent with past practice and only to the
extent consistent with Section 7.4; |
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(f) the Company will not amend the terms (including the
terms relating to accelerating the vesting or lapse of
repurchase rights or obligations) of any outstanding options to
purchase shares of Company Common Stock or of any outstanding
restricted stock, stock units or stock appreciation rights
(which, it is understood, will not limit the administration of
the relevant plans in accordance with past practices and
interpretations of the Companys Board and the
Companys Compensation Committee to the extent consistent
with Section 7.4); |
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(g) except (A) as consistent with the capital budgets
set forth in Section 5.1(g) of the Company Disclosure
Schedules or (B) if the Effective Time occurs in 2006, with
respect to capital expenditures in future periods that are not
covered by such capital budgets, as based on a reasonable
extrapolation of permissible expenditures for the capital
budgets set forth in Section 5.1(g) of the Company
Disclosure Schedules, the Company will not, and will not permit
any Subsidiary of the Company to, make or authorize any capital
expenditure in excess of $50 million; |
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(h) the Company will not, and will not permit any
Subsidiary of the Company to, (1) increase the compensation
or benefits of any director, officer or employee, except for
normal increases in the ordinary course of business consistent
with past practice or as required under applicable law or any
Company Benefit Plan existing on the date hereof, or (2)(i)
enter into, (ii) adopt, (iii) extend or renew (with
respect to clause (iii) only, for a term in excess of one
year) (or waive or amend any performance or vesting criteria or
accelerate funding under) any employment, change in control,
severance, bonus, profit sharing, retirement, restricted stock,
stock option, deferred compensation or other director, executive
or employee benefit plan, policy, agreement or arrangement
except as required by applicable law or the terms of an
agreement or arrangement existing on the date hereof or, with
respect to individual non-U.S. payroll employees, in the
ordinary course of business consistent with past practice or as
required by applicable law; |
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(i) the Company will not, and will not permit any of its
Subsidiaries to, acquire a material amount of assets or property
(as measured with respect to the consolidated assets of the
Company and its Subsidiaries taken as a whole) of any other
Person (other than the Company or a wholly-owned Subsidiary of
the Company), except in the ordinary course of business
consistent with past practice; |
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(j) except as expressly permitted by Section 7.1, the
Company will not, and will not permit any of its Subsidiaries
to, sell, lease, license, encumber (including by the grant of
any option thereon) or otherwise dispose of any material assets
or property except pursuant to existing contracts or commitments
or except in the ordinary course of business consistent with
past practice and in no event in an amount exceeding
$50 million in the aggregate; |
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(k) the Company will not, and will not permit any of its
Subsidiaries to, incur any indebtedness for borrowed money
(other than (i) any such indebtedness among the Company and
its wholly-owned Subsidiaries or among the Companys
wholly-owned Subsidiaries or (ii) additional short-term
debt not to exceed $500,000,000 in the aggregate) or guarantee
or assume any such indebtedness of another Person, issue or sell
any debt securities or warrants or other rights to acquire any
debt securities of the Company or any of its Subsidiaries,
guarantee any such indebtedness of another Person, enter into
any keep well or other agreement to maintain any
financial condition of another Person or enter into any
arrangement having the economic effect of any of the foregoing,
in each case other than in the ordinary course of business,
consistent with past practice; |
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(l) the Company will not, and will not permit any of its
Subsidiaries to, (i) modify, amend, terminate or waive any
material rights under any Company Material Contract or
(ii) enter into any agreement that would constitute a
Company Material Contract if entered into as of the date of this
Agreement other than (with respect to clause (ii)) in the
ordinary course of business, consistent with past practice; |
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(m) the Company will not, and will not permit any of its
Subsidiaries to, settle or compromise any claim, demand, lawsuit
or state or federal regulatory proceeding, whether now pending
or hereafter made or brought, or waive, release or assign any
rights or claims, in any such case in an amount in excess of
$20 million or that is otherwise qualitatively material to
the Company, provided that Parent will not unreasonably withhold
its consent to any such settlement or compromise; |
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(n) except for any such change which is not material or
which is required by reason of a concurrent change in GAAP or
applicable law, the Company will not, and will not permit any
Subsidiary of the Company to, change any method of financial
accounting or financial accounting practice (other than any
change for tax purposes) used by it; |
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(o) 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 or make any
loan, capital contribution or advance to or investment in any
other Person (other than the Company or any wholly-owned
Subsidiary of the Company) other than in the ordinary course of
business, consistent with past practice or in an amount not
exceeding $10 million; |
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(p) the Company will not, and will not permit any of its
Subsidiaries to, take any action which would limit Parents
or the Companys freedom to license, cross-license or
otherwise dispose of any Company Intellectual Property; |
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(q) the Company will not amend or waive any provisions of
any standstill agreement; |
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(r) except as required by Law, the Company will not
(i) make or change any Tax election, (ii) settle any
Tax audit or (iii) file any amended Tax Return, in each
case, that is reasonably likely to result in an increase to a
Tax liability, which increase is material to the Company and its
Subsidiaries, taken as a whole; |
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(s) except as contemplated by Section 7.1, the Company
will not, and will not permit any of its Subsidiaries to, enter
into any agreement that limits (other than in an insignificant
manner) the ability of the Company or any Subsidiary of the
Company, or would limit (other than in an insignificant manner)
the ability of Parent or any Subsidiary of Parent after the
Effective Time, to compete in or conduct any line of business or
compete with any Person in any geographic area or during any
period, it being understood that any restriction that by its
terms does not extend more than six (6) months beyond the
Effective Time shall be deemed to be insignificant; |
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(t) the Company will not, and will not permit any of its
Subsidiaries to, take any action that would prevent, materially
delay or materially impede the consummation of the
Merger; and |
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(u) the Company will not, and will not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing. |
Section 5.2 Company
Stockholder Meeting; Proxy Material.
(a) Except as permitted by Section 5.2(b) below, the
Board of Directors of the Company shall recommend approval and
adoption of this Agreement and the Merger by the Companys
stockholders, and unless permitted by Section 5.2(b),
neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw, modify or qualify, or propose
publicly to withdraw, modify or qualify, in any manner adverse
to Parent, the approval of this Agreement, the Merger or the
Company Recommendation (as defined in Section 5.2(f) below)
(any of the foregoing, a Change in the Company
Recommendation), or (ii) approve or recommend, or
propose publicly to approve or recommend, any Acquisition
Proposal. For purposes of this Agreement, a Change in the
Company Recommendation shall include any approval or
recommendation (or public proposal to approve or recommend), by
the Board of Directors of the Company or any committee thereof
of an Acquisition Proposal, or any failure by the Companys
Board of Directors to recommend against an Acquisition Proposal.
(b) The Board of Directors of the Company shall be
permitted not to recommend to the Companys stockholders
that they give the Company Stockholder Approval or to withdraw
or modify in a manner adverse to Parent the Company
Recommendation, only if and to the extent that all of the
following conditions are met: (v) the Company Stockholder
Approval has not been obtained; (w) the Board of Directors
of the Company determines in good faith, after consulting with
outside legal counsel, that failure to so withdraw or modify the
Company Recommendation would be inconsistent with the
directors exercise of their fiduciary duties to
stockholders under applicable law; (x) before taking any
such action, the Company promptly gives Parent written notice
advising Parent of the decision of the Board of Directors of the
Company to take such action, including the reasons therefor and,
in the event that such decision relates to an Acquisition
Proposal, such notice specifies the material terms and
conditions of such Acquisition Proposal and identifies the
Person making such Acquisition Proposal (and the Company will
also promptly give Parent such a notice with respect to any
subsequent change in such proposal) and the Company has given
Parent at least three (3) Business Days after delivery of
each such notice to propose revisions to the terms of this
Agreement (or to make another proposal) in response to such
Acquisition Proposal and has negotiated in good faith with
Parent with respect to such proposed revisions or other
proposal, if any, (y) if such withdrawal or modification
relates to an Acquisition Proposal received by the Company or
made directly to the Companys stockholders, such
Acquisition Proposal constitutes a Superior Proposal (as defined
in Section 7.9(b)); and (z) the Company has complied
with its obligations set forth in Section 7.9; provided,
however, that notwithstanding any Change
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in the Company Recommendation, the Company shall nevertheless
submit this Agreement and the Merger to the stockholders of the
Company for the purpose of obtaining the Company Stockholder
Approval at the Company Stockholder Meeting and nothing
contained herein shall be deemed to relieve the Company of such
obligation, unless Parent otherwise directs the Company in
writing or this Agreement shall have been terminated in
accordance with its terms prior to the Company Stockholder
Meeting.
(c) As promptly as practicable following the date of this
Agreement, Parent and the Company shall prepare, and Parent
shall file with the Commission, the Form S-4, in which the
Company Proxy Statement will be included as a prospectus. Each
of Parent and the Company shall use all reasonable efforts to
have the Form S-4 declared effective under the Securities
Act, and for the Company Proxy Statement to be cleared by the
Commission and its staff under the Exchange Act, as promptly as
practicable after such filing. Without limiting any other
provision herein, the Form S-4 and the Company Proxy
Statement will contain such information and disclosure
reasonably requested by either Parent or the Company so that the
Form S-4 conforms in form and substance to the requirements
of the Securities Act and the Company Proxy Statement conforms
in form and substance to the requirements of the Exchange Act.
The Company shall use its reasonable best efforts to cause the
Company Proxy Statement to be mailed to holders of Company
Common Stock as promptly as practicable after the Form S-4
is declared effective.
(d) If at any time prior to the Effective Time there shall
occur (i) any event with respect to the Company or any of
its Subsidiaries, or with respect to other information supplied
by Company for inclusion in the Form S-4 or the Proxy
Statement, or (ii) any event with respect to Parent, or
with respect to information supplied by Parent for inclusion in
the Form S-4 or the Company Proxy Statement, in either
case, which event is required to be described in an amendment of
or a supplement to the Form S-4 or the Company Proxy
Statement, such event shall be so described, and such amendment
or supplement shall be promptly filed with the Commission and,
as required by Law, disseminated to the stockholders of the
Company.
(e) Each of the Company and Parent shall (i) promptly
notify the other of the receipt of any comments from the
Commission or its staff or any other applicable government
official and of any requests by the Commission or its staff or
any other applicable government official for amendments or
supplements to any of the filings with the Commission in
connection with the Merger and other transactions contemplated
hereby or for additional information and (ii) promptly
supply the other with copies of all correspondence between the
Company or any of its representatives, or Parent or any of its
representatives, as the case may be, on the one hand, and the
Commission or its staff or any other applicable government
official, on the other hand, with respect thereto. The Company
and Parent shall use their respective reasonable best efforts to
respond to any comments of the Commission or its staff with
respect to the Form S-4 and the Company Proxy Statement as
promptly as practicable. The Company and Parent shall cooperate
with each other and provide to each other all information
necessary in order to prepare the Form S-4 and the Company
Proxy Statement as expeditiously as practicable, and each of
them shall provide promptly to the other party any information
that such party may obtain that could necessitate an amendment
or supplement to any such document.
(f) The Company shall, as promptly as practicable after the
Form S-4 is declared effective under the Securities Act,
duly call, give notice of, convene and hold a meeting of its
stockholders (the Company Stockholder
Meeting) for the purpose of obtaining the Company
Stockholder Approval, and the Company Board shall recommend to
the Companys stockholders the approval and adoption of
this Agreement, the Merger and the other transactions
contemplated hereby (the Company
Recommendation) and shall include such recommendation
in the Company Proxy Statement; provided, however, that
the Company Board shall not be required to make such Company
Recommendation to the extent that it effects a Change in the
Company Recommendation in accordance with Section 5.2(b).
Without limiting the generality of the foregoing, the Company
agrees that its obligations pursuant to the first sentence of
this Section 5.2(f) or its other obligations under this
Section 5.2 shall not be affected by the commencement,
public proposal, public disclosure or communication to the
Company or its representatives of any Acquisition Proposal. The
Company shall use its best efforts to hold the Company
Stockholder Meeting as soon as practicable after the
Form S-4 becomes effective and (subject to any Change in
the Company Recommendation expressly permitted by
Section 5.2(b)) to obtain the Company Stockholder Approval.
The Company shall otherwise coordinate and
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cooperate with Parent with respect to the timing of the Company
Stockholder Meeting and will otherwise comply with all legal
requirements applicable to the Company Stockholder Meeting.
Section 5.3 Resignation
of Company Directors. In order to fulfill the requirements
of Section 1.3, the Company shall (i) cause each
director of the Company to deliver a written resignation to the
Company effective at the Effective Time and (ii) cause the
vacancies resulting from such resignations to be filled by
Persons who are directors of Merger Subsidiary immediately prior
to the Effective Time.
Section 5.4 Other
Actions. As provided in Article VII, the Company and
Parent shall cooperate with each other to lift any injunctions
or remove any other impediment to the consummation of the
transactions contemplated herein.
ARTICLE VI
Covenants of Parent
Parent agrees that:
Section 6.1 Obligations
of Merger Subsidiary. Parent will take all action necessary
to cause Merger Subsidiary to perform its obligations under this
Agreement and to consummate the Merger on the terms and
conditions set forth in this Agreement.
Section 6.2 Director
and Officer Liability.
(a) For six years after the Effective Time, Parent shall
cause the Surviving Corporation to indemnify and hold harmless,
to the greatest extent permitted by law as of the date of this
Agreement, the individuals who on or prior to the Effective Time
were officers, directors and employees of the Company or its
Subsidiaries (collectively, the Indemnitees)
with respect to all acts or omissions by them in their
capacities as such or taken at the request of the Company or any
of its Subsidiaries at any time prior to the Effective Time.
Parent shall cause the Surviving Corporation to honor all
indemnification agreements with Indemnitees (including under the
Companys by-laws) in effect as of the date hereof in
accordance with the terms thereof. The Company has disclosed to
Parent all such indemnification agreements prior to the date
hereof.
(b) For six years after the Effective Time, Parent shall
procure the provision of officers and directors
liability insurance in respect of acts or omissions occurring
prior to the Effective Time covering each such Person currently
covered by the Companys officers and directors
liability insurance policy on terms with respect to coverage and
in amounts no less favorable than those of such policy in effect
on the date hereof; provided, that if the annual
aggregate premiums for such insurance at any time during such
period shall exceed 300% of the per annum rate of premium paid
by the Company and its Subsidiaries as of the date hereof for
such insurance, then Parent shall, or shall cause its
Subsidiaries to, provide only such coverage as shall then be
available at an annual premium equal to 300% of such rate.
(c) The obligations of Parent under this Section 6.2
shall not be terminated or modified in such a manner as to
adversely affect any Indemnitee to whom this Section 6.2
applies without the consent of such affected Indemnitee (it
being expressly agreed that the Indemnitees to whom this
Section 6.2 applies shall be third party beneficiaries of
this Section 6.2).
Section 6.3 Form S-4.
Subject to the terms and conditions of this Agreement, Parent
shall prepare and file with the Commission under the Securities
Act the Form S-4, and shall use its reasonable best efforts
to cause the Form S-4 to be declared effective by the
Commission a sufficient time prior to the Company Stockholder
Meeting to allow the Company to mail the Company Proxy Statement
to the Company stockholders, as required by the rules and
regulations of the Commission, prior to the Company Stockholder
Meeting. Parent shall take any action required to be taken under
foreign or state securities or Blue Sky laws in connection with
the issuance of Parent Common Stock in connection with the
Merger.
Section 6.4 Stock
Exchange Listing. Parent shall use its reasonable best
efforts to cause the shares of Parent Common Stock to be issued
in connection with the Merger to be listed on the NYSE, subject
to official notice of issuance.
A-30
Section 6.5 Employee
Benefits.
(a) From and after the Effective Time, Parent shall cause
the Surviving Corporation to honor in accordance with their
terms all benefits and obligations, subject to
Section 6.5(b) hereof, under the Company Benefit Plans,
each as in effect on the date hereof (or as amended to the
extent permitted by Section 5.1), to the extent that
entitlements or rights, actual or contingent (whether such
entitlements or rights are vested as of the Effective Time or
become vested or payable only upon the occurrence of a further
event, including a discretionary determination) exist in respect
thereof as of the Effective Time. Parent and the Company hereby
agree that the consummation of the Merger shall constitute a
Change in Control for purpose of any employee
arrangement and all other Company Benefit Plans, pursuant to the
terms of such plans in effect on the date hereof. No provision
of this Section 6.5(a) shall be construed as a limitation
on the right of Parent to amend or terminate any Company Benefit
Plans which the Company would otherwise have under the terms of
such Company Benefit Plan, and no provision of this
Section 6.5(a) shall be construed to create a right in any
employee or beneficiary of such employee under a Company Benefit
Plan that such employee or beneficiary would not otherwise have
under the terms of such plan; provided, however,
that Parent agrees that it will respect deferrals of salary,
bonus or other compensation in place prior to the Effective Time
pursuant to the Company Benefit Plans.
(b) Following the Effective Time, Parent shall continue to
provide to individuals who are employed by the Company and the
Company Subsidiaries as of the Effective Time who remain
employed with Parent or any Subsidiary of Parent
(Affected Employees), for so long as such
Affected Employees remain employed by Parent or any Subsidiary
of Parent, compensation and employee benefits (i) pursuant
to the Companys or the Company Subsidiaries
compensation and employee benefit plans, programs, policies and
arrangements as provided to such employees immediately prior to
the Effective Time or (ii) pursuant to compensation and
employee benefit plans, programs, policies or arrangements
maintained by Parent or any Subsidiary of Parent providing
coverage and benefits, which, in the aggregate, are no less
favorable than those provided to employees of Parent in
positions comparable to positions held by Affected Employees of
Parent and its Subsidiaries from time to time after the
Effective Time. Following the Effective Time, Parent shall
continue to provide to former employees of the Company or its
Company Subsidiaries (and to employees of the Company or its
Company Subsidiaries whose employment terminates prior to the
Effective Time) (Affected Retirees)
post-retirement benefits (other than pensions) (i) pursuant
to the Company Benefit Plans applicable to such Affected
Retirees, each as in effect on the date of this Agreement, or
(ii) pursuant to employee benefit plans, programs, policies
or arrangements maintained by Parent or any Subsidiary of Parent
providing post-retirement coverage and benefits (other than
pensions), which, in the aggregate, are no less favorable than
those provided from time to time after the Effective Time to
former employees of Parent that served in positions comparable
to positions that were held by Affected Retirees of Parent and
its Subsidiaries.
(c) Parent will, or will cause the Surviving Corporation
to, give Affected Employees full credit for purposes of
eligibility, vesting and benefit accrual (including benefit
accrual under any defined benefit pension plans, provided
that a participants benefit under any such defined
benefit pension plan may be offset by such participants
benefit accrued through the Effective Time under the Unocal
Corporation Retirement Plan) under any employee benefit plans or
arrangements maintained by Parent or any Subsidiary of Parent
for such Affected Employees service with the Company or
any Subsidiary to the same extent recognized by the Company
immediately prior to the Effective Time.
(d) Parent will, or will cause the Surviving Corporation
to, (i) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and
coverage requirements applicable to the Affected Employees under
any welfare benefit plans that such employees may be eligible to
participate in after the Effective Time, other than limitations
or waiting periods that are already in effect with respect to
such employees and that have not been satisfied as of the
Effective Time under any welfare plan maintained for the
Affected Employees immediately prior to the Effective Time, and
(ii) provide each Affected Employee with credit for any
co-payments and deductibles paid prior to the Effective Time in
satisfying any applicable deductible or out-of-pocket
requirements under any welfare plans that such employees are
eligible to participate in after the Effective Time.
A-31
(e) If the Effective Time occurs in 2005, following the
payment of pro rata bonuses under the annual bonus plan for 2005
as provided under, and in accordance with the terms of such
bonus plan (the 2005 Pro Rata Bonus), Parent
will cause the Company to (A) maintain a bonus plan for the
remainder of 2005 on the same terms and conditions and pursuant
to the same targets and performance measures as were in effect
for the 2005 calendar year and (B) pay bonuses within two
and a half months following the end of the 2005 calendar year in
an amount equal to the excess, if any, of (i) the annual
bonus which would have been earned by the participants for the
entire 2005 calendar year under the bonus plan described in
clause (A) of this Section 6.5(e) (without
reference to the 2005 Pro Rata Bonus) over (ii) the 2005
Pro Rata Bonus. If the Effective Time occurs in 2006, the
Company shall be permitted prior to the Effective Time to
establish a bonus plan for 2006, based upon targets and goals
substantially similar to those established for 2005. In
addition, in the event the Effective Time occurs in 2006,
participants in the 2006 bonus plan will be paid a pro rata
bonus for 2006 (the 2006 Pro Rata Bonus) in
accordance with the terms of the Companys annual bonus
plan, and total bonuses for 2006 will be calculated based upon
the excess of actual bonus earned for 2006 over the 2006 Pro
Rata Bonus in the same manner as total bonuses for 2005 would
have been calculated as described above had the Effective Time
occurred in 2005. Company performance in respect of calculations
made under the bonus plans and the Company Plans for the
calendar years 2005 and 2006 shall be calculated without taking
into account any expenses or costs associated with or arising as
a result of transactions contemplated by this Agreement or any
nonrecurring charges that would not reasonably be expected to
have been incurred had the transactions contemplated by this
Agreement not occurred, and if the Effective Time occurs prior
to payment of 2005 calendar year bonuses, shall not be subject
to negative discretion by the administrator for the Bonus Plan.
In no event will the 2005 Pro Rata Bonus or the 2006 Pro Rata
Bonus for any employee exceed 150% of the target amount for such
employee for such year.
ARTICLE VII
Covenants of Parent and
the Company
The parties hereto agree that:
Section 7.1 Best
Efforts.
(a) Subject to Sections 5.2, 7.1(b) and 7.1(c), the
Company and Parent shall each cooperate with the other and use
(and shall cause their respective Subsidiaries to use) their
respective best efforts to promptly (i) take or cause to be
taken all necessary actions, and do or cause to be done all
things, necessary, proper or advisable under this Agreement and
applicable laws to consummate and make effective the Merger and
the other transactions contemplated by this Agreement as soon as
practicable, including, without limitation, preparing and filing
promptly and fully all documentation to effect all necessary
filings, notices, petitions, statements, registrations,
submissions of information, applications and other documents and
(ii) obtain as soon as practicable all approvals, consents,
registrations, permits, authorizations and other confirmations
required to be obtained from any third party necessary, proper
or advisable to consummate the Merger and the other transactions
contemplated by this Agreement. Subject to applicable laws
relating to the exchange of information, the Company and Parent
shall have the right to review in advance, and to the extent
practicable each will consult the other on 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. The Company
and Parent shall provide the other party with the opportunity to
participate in any meeting with any governmental entity in
respect of any filing, investigation or other inquiry in
connection with the transactions contemplated hereby;
provided that Parent will lead all such processes;
provided further that the foregoing shall not limit in
any respect any partys obligations under this Agreement.
Prior to the Effective Time, Parent shall not, and shall not
permit any of its Subsidiaries to, enter into or agree to enter
into any agreement for the acquisition of any business or Person
which acquisition would reasonably be expected to materially
impair Parents ability to consummate the transactions
contemplated hereby.
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(b) Without limiting Section 7.1(a), Parent and the
Company shall, subject to Section 7.1(c), as applicable:
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(i) each use its best efforts to avoid the entry of, or to
have vacated or terminated, any decree, order, or judgment that
would restrain, prevent or delay the Closing, on or before the
End Date (as defined in Section 9.1(b)(i)), including
without limitation defending through litigation on the merits
any claim asserted in any court by any Person; and |
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(ii) each use its best efforts to avoid or eliminate each
and every impediment under any antitrust, competition or trade
regulation law that may be asserted by any governmental
authority with respect to the Merger (collectively,
Antitrust Laws) so as to enable the Closing
to occur as soon as reasonably possible (and in any event no
later than the End Date), including, without limitation,
(x) proposing, negotiating, committing to and effecting, by
consent decree, hold separate order, or otherwise, the sale,
divestiture or disposition of such businesses, product lines or
assets of Parent, the Company and their respective Subsidiaries
and (y) otherwise taking or committing to take actions that
after the Closing Date would limit Parent or its
Subsidiaries freedom of action with respect to, or its or
their ability to retain, one or more of the businesses, product
lines or assets of Parent, the Company and their respective
Subsidiaries, in each case as may be required in order to avoid
the entry of, or to effect the dissolution of, any injunction,
temporary restraining order, or other order in any suit or
proceeding, which would otherwise have the effect of preventing
or materially delaying the Closing. Parent and, if requested by
Parent, the Company shall agree to divest, sell, dispose of,
hold separate, or otherwise take or commit to take any action
that limits its freedom of action with respect to, or Parent or
Parents Subsidiaries ability to retain, any of the
businesses, product lines or assets of Parent, the Company or
any of their respective Subsidiaries, provided that any such
action is conditioned upon the consummation of the Merger. The
Company agrees and acknowledges that, notwithstanding anything
to the contrary in this Section 7.1, in connection with any
filing or submission required, action to be taken or commitment
to be made by Parent, the Company or any of their respective
Subsidiaries to consummate the Merger or other transactions
contemplated by this Agreement, neither the Company nor any of
the Companys Subsidiaries shall, without Parents
prior written consent, sell, divest, or dispose of any assets,
license any Company Intellectual Property, commit to any sale,
divestiture or disposal of businesses, product lines or assets
of the Company and the Companys Subsidiaries or any
license of Company Intellectual Property or take any other
action or commit to take any action that would limit the
Companys, Parents or any of their respective
Subsidiaries freedom of action with respect to, or their
ability to retain any of, their businesses, product lines or
assets or Company Intellectual Property; provided that the
foregoing shall not relieve any party of its obligations under
this Agreement. |
(c) Notwithstanding anything else contained herein, the
provisions of this Section 7.1 shall not be construed to
require Parent or any of Parents Subsidiaries to undertake
any efforts or to take any action if such efforts or action
would, or would reasonably be expected to, result in a
Substantial Detriment. Substantial Detriment
shall mean changes or effects which would, individually or in
the aggregate (and after giving effect to any reasonably
expected proceeds of any divestiture or sale of assets), result
in, or be reasonably likely to result in, a Company Material
Adverse Effect, at or after the Effective Time; provided
that any requirement to divest or hold separate, or limit the
operation of, any division, Subsidiary, interest, business,
product line, asset or property relating to the operations
conducted by Parent and its Subsidiaries prior to the Effective
Time shall be deemed to result in a Substantial Detriment if
such action with respect to a comparable amount of assets or
businesses of the Company and its Subsidiaries would be
reasonably likely, in the aggregate, to have a Company Material
Adverse Effect, at or after the Effective Time.
Section 7.2 Certain
Filings. The Company and Parent
shall cooperate with one another (a) 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 (b) 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 or the Form S-4 and seeking timely to
obtain any such actions, consents, approvals or waivers.
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Section 7.3 Access
to Information. From the date
of this Agreement until the Effective Time, to the extent
permitted by applicable law, the Company and Parent will, during
normal business hours and upon reasonable request give the other
party, its counsel, financial advisors, auditors and other
authorized representatives complete access at all reasonable
times 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 Parent, as the case may be;
provided, that such investigation shall not disrupt the
Companys or Parents operations; and, provided
further that no such investigation shall affect any
representation or warranty given by either party hereunder. All
information obtained by Parent or the Company pursuant to this
Section 7.3 shall be kept confidential in accordance with,
and shall otherwise be subject to the terms of, the
Confidentiality Agreement dated as of February 11, 2005
between Parent and the Company (the Confidentiality
Agreement).
Section 7.4 Tax
Treatment. Neither Parent nor
the Company shall, nor shall they permit their Subsidiaries to,
take any action, and Parent and the Company shall not, and shall
ensure that its Subsidiaries do not, fail to take any action
which action or failure to act would prevent or impede, or would
be reasonably likely to prevent or impede, the Merger from
qualifying as a reorganization under Section 368(a) of the
Code.
Section 7.5 Public
Announcements. Parent and the
Company will consult with each other before issuing any press
release or making any public statement with respect to this
Agreement and the transactions contemplated hereby and shall not
issue any press release or make any public statement without the
prior consent of the other party, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, any press
release or public statement as may be required by applicable law
or any listing agreement with any national securities exchange
may be issued prior to such consultation, if the party making
the release or statement has used its reasonable best efforts to
consult with the other party.
Section 7.6 Further
Assurances. At and after the
Effective Time, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver, in the
name and on behalf of the Company or Merger Subsidiary, any
deeds, bills of sale, assignments or assurances and to take any
other actions and do any other things, in the name and on behalf
of the Company or Merger Subsidiary, reasonably necessary to
vest, perfect or confirm of record or otherwise in the Surviving
Corporation any and all right, title and interest in, to and
under any of the rights, properties or assets of the Company
acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger.
Section 7.7 Notices
of Certain Events.
(a) Each of the Company and Parent shall promptly notify
the other Party of:
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(i) Any written notice or other written 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; |
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(ii) Any notice or other written communication from any
governmental or regulatory agency or authority in connection
with the transactions contemplated by this Agreement; and |
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(iii) Any actions, suits, claims, investigations or
proceedings (A) commenced or (B) 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. |
provided, however, that no such notification (and no
other notification required to be given by the Company under any
other Section of this Agreement) shall affect the
representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties
under this Agreement.
Section 7.8 Affiliates.
(a) Not less than forty-five (45) days prior to the
Effective Time, the Company (i) shall deliver to Parent a
letter identifying all Persons who, in the Companys
opinion, may be, as of the Effective Time, its
affiliates for purposes of Rule 145 under the
Securities Act, and (ii) shall use its reasonable best
efforts to
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cause each Person who is identified as an affiliate
of it in such letter to deliver to Parent, as promptly as
practicable but in no event later than thirty (30) days
prior to the Effective Time, a signed agreement substantially in
the form attached as Exhibit A (an Affiliate
Agreement). The Company shall notify Parent from time
to time after the delivery of the letter described above of any
Person not identified on such letter who then is, or may be,
such an affiliate and use its reasonable best
efforts to cause each additional Person who is identified as an
affiliate to execute an Affiliate Agreement.
(b) Neither Parent or the Company shall register, or allow
its transfer agent to register, on its books, any transfer of
any shares of Parent Common Stock or Company Common Stock of any
affiliate of the Company who has not provided an executed
Affiliate Agreement in accordance with this Section 7.8
unless the transfer is made in compliance with the foregoing.
Section 7.9 No
Solicitation.
(a) The Company and its Subsidiaries will not, and the
Company will direct and use its reasonable best efforts to cause
its and its Subsidiaries respective officers, directors,
employees, investment bankers, consultants, attorneys,
accountants, agents and other representatives not to, directly
or indirectly, take any action to solicit, initiate, or
knowingly encourage or facilitate the making of any Acquisition
Proposal (including without limitation by amending, or granting
any waiver under, the Company Rights Agreement, as applicable)
or any inquiry with respect thereto or engage in discussions or
negotiations with any Person with respect thereto (except to
notify such Person of the existence of the provisions of this
Section 7.9), or disclose any nonpublic information or
afford access to properties, books or records to, any Person
that has made, or to the Companys knowledge is considering
making, any Acquisition Proposal, or approve or recommend, or
propose to approve or recommend, or execute or enter into any
letter of intent, agreement in principle, merger agreement,
option agreement, acquisition agreement or other similar
agreement relating to an Acquisition Proposal, or propose
publicly or agree to do any of the foregoing relating to an
Acquisition Proposal. Nothing contained in this Agreement shall
prevent the Board of Directors of the Company from
(i) complying with Rule 14e-2 under the Exchange Act
with regard to an Acquisition Proposal or (ii) making any
disclosure if, in the good faith judgment of the Companys
Board of Directors, after consultation with outside counsel,
failure so to disclose would be inconsistent with the
directors exercise of their fiduciary obligations to the
Companys stockholders under applicable law; provided,
however, that any such disclosure that relates to an
Acquisition Proposal shall be deemed to be a Change in the
Company Recommendation unless the Companys Board of
Directors reaffirms the Company Recommendation in such
disclosure. Notwithstanding anything to the contrary in this
Agreement, prior to (but not after) the date of the Company
Stockholder Approval, the Company may, directly or indirectly
through its advisors, agents or other intermediaries
(A) furnish information and access, but only in response to
a request for information or access, to any Person making an
Acquisition Proposal to the Board of Directors of the Company
after the date hereof which was not solicited, initiated or
knowingly encouraged by the Company or any of its affiliates or
any director, employee, representative or agent of the Company
or any of its Subsidiaries (including, without limitation, any
investment banker, attorney or accountant retained by the
Company or any of its Subsidiaries) on or after the date hereof
(and to such Persons advisors, agents and intermediaries)
and (B) may participate in discussions and negotiate with
such Person concerning any such unsolicited Acquisition
Proposal, if and only if, in any such case set forth in
clause (A) or (B) of this sentence, (i) the
Board of Directors of the Company concludes in good faith, after
(x) receipt of the advice of a financial advisor of
nationally recognized reputation and outside legal counsel, that
there is a reasonable likelihood that such Acquisition Proposal
will result in a Superior Proposal and (y) taking into
account any revisions to the terms of the Merger or this
Agreement proposed by Parent after being notified pursuant to
Section 5.2(b), that doing so is necessary for the
Companys Board of Directors to comply with its fiduciary
duties to the Companys stockholders under applicable law,
(ii) the Company complies with all of its obligations under
Section 5.2 and Section 7.9(b) below, and
(iii) the Board of Directors of the Company receives from
the Person making such an Acquisition Proposal an executed
confidentiality agreement the material terms of which, as they
relate to confidentiality, are (without regard to the terms of
such Acquisition Proposal) in all material respects (x) no
less favorable to the Company and (y) no less restrictive
to the Person making such Acquisition Proposal than those
contained
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in the Confidentiality Agreement and any information provided to
such Person has previously been provided to Parent or is
provided to Parent promptly after its provision to such Person.
(b) In the event the Company receives an Acquisition
Proposal, any indication of which the Company has knowledge that
any Person is considering making an Acquisition Proposal, or any
request for nonpublic 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 Companys knowledge may
be considering making, an Acquisition Proposal, the Company will
(A) promptly (and in no event later than twenty-four
(24) 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 or
request and set forth the material terms thereof) Parent thereof
and (B) will keep Parent reasonably and promptly informed
of the status and material terms of (including with respect to
changes to the status or material terms of) any such Acquisition
Proposal or request. The Company (x) shall, and shall cause
its Subsidiaries to, immediately cease and cause to be
terminated and shall use reasonable best efforts to cause its
and their officers, directors, employees, investment bankers,
consultants, attorneys, accountants, agents and other
representatives to, immediately cease and cause to be
terminated, all discussions and negotiations, if any, that have
taken place prior to the date hereof with any Persons with
respect to any Acquisition Proposal and (y) shall promptly
request each Person, if any, that has executed a confidentiality
agreement within the nine (9) months prior to the date
hereof in connection with its consideration of any Acquisition
Proposal to return or destroy all confidential information
heretofore furnished to such Person by or on behalf of it or any
of its Subsidiaries.
For purposes of this Agreement, Acquisition
Proposal means any bona fide written offer or proposal
for, or any bona fide written indication of interest in, any
(i) direct or indirect acquisition or purchase of any
business or assets of the Company or any of its Subsidiaries
that, individually or in the aggregate, constitutes 20% or more
of the net revenues, net income or 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, business combination, joint venture, partnership,
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 written Acquisition
Proposal for or in respect of at least a majority of the
outstanding shares of Company Common Stock or all or
substantially all of the Companys and its
Subsidiaries assets (i) on terms that the Board of
Directors of the Company determines in its good faith judgment
(after consultation with, and taking into account the advice of,
a financial advisor of nationally recognized reputation and
outside legal counsel, taking into account all the terms and
conditions of such Acquisition Proposal, including any break-up
fees, expense reimbursement provisions and conditions to
consummation, as well as any revisions to the terms of the
Merger or this Agreement proposed by Parent after being notified
pursuant to Section 5.2(b)) are more favorable to the
Company and its stockholders than the Merger and the other
transactions contemplated hereby and (ii) that constitutes
a transaction that is reasonably likely to be consummated on the
terms so proposed, taking into account all legal, financial,
regulatory and other aspects of such proposal.
(c) The Company agrees that it will take the necessary
steps promptly to inform its Subsidiaries and its officers,
directors, investment bankers, consultants, attorneys,
accountants, agents and other representatives of the obligations
undertaken in this Section 7.9.
Section 7.10 Takeover
Statutes. If any anti-takeover or similar statute or
regulation is or may become applicable to the transactions
contemplated hereby, each of the parties and its Board of
Directors shall grant such approvals and take all such actions
as are legally permissible so that the transactions contemplated
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hereby may be consummated as promptly as practicable on the
terms contemplated hereby and otherwise act to eliminate or
minimize the effects of any such statute or regulation on the
transactions contemplated hereby.
Section 7.11 Section 16(b).
Parent shall take all such steps as may be reasonably necessary
to cause the transactions contemplated hereby and any other
dispositions of equity securities of the Company (including
derivative securities) or acquisitions of Parent equity
securities (including derivative securities) in connection with
this Agreement by each individual who (a) is a director or
officer of the Company or (b) at the Effective Time will
become a director or officer of Parent, to be exempt under
Rule 16b-3 promulgated under the Exchange Act.
ARTICLE VIII
Conditions to the Merger
Section 8.1 Conditions
to the Obligations of Each Party. The obligations of the
Company, Parent and Merger Subsidiary to consummate the Merger
are subject to the satisfaction (or, to the extent legally
permissible, waiver) of the following conditions:
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(a) this Agreement and the Merger shall have been approved
and adopted by the stockholders of the Company in accordance
with DGCL; |
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(b) any applicable waiting period under the HSR Act
relating to the Merger shall have expired; |
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(c) any applicable approval by the European Commission of
the transactions contemplated by this Agreement shall have been
obtained pursuant to the EC Merger Regulation; |
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(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; |
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(e) the Form S-4 shall have been declared effective
under the Securities 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 Commission; |
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(f) the shares of Parent Common Stock to be issued in the
Merger shall have been approved for listing on the NYSE, subject
to official notice of issuance; |
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(g) neither the U.S. Federal Trade Commission nor the
Antitrust Division of the U.S. Department of Justice, as
the case may be, shall have, as a condition to its approval of
the Merger and the other transactions contemplated by this
Agreement, required Parent to take any action which,
individually or in the aggregate, would result in, or be
reasonably likely to result in, a Substantial Detriment; |
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(h) there shall not be instituted or pending any action or
proceeding by any governmental authority (whether domestic,
foreign or supranational) before any court or governmental
authority or agency, domestic, foreign or supranational, seeking
to (i) restrain, prohibit or otherwise interfere with the
ownership or operation by Parent or any Subsidiary of Parent of
all or any material portion of the business of the Company or
any of its Subsidiaries or of Parent or any of its Subsidiaries
or to compel Parent or any Subsidiary of Parent to dispose of or
hold separate all or any portion of the businesses, product
lines or assets of the Company or any of its Subsidiaries or of
Parent or any of its Subsidiaries, (ii) impose or confirm
limitations on the ability of Parent or any Subsidiary of Parent
effectively to exercise full rights of ownership of the shares
of Company Common Stock (or shares of stock of the Surviving
Corporation) including, without limitation, the right to vote
any shares of Company Common Stock (or shares of stock of the
Surviving Corporation) on any matters properly presented to
stockholders or (iii) require divestiture by Parent or any
Subsidiary of Parent of any shares of Company Common Stock (or
shares of stock of the Surviving Corporation), if any such
matter referred to in subclauses (i), (ii) and
(iii) hereof, individually or in the aggregate, would
result in, or would be reasonably likely to result in, a
Substantial Detriment; |
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(i) there shall not be any statute, rule, regulation,
injunction, order or decree, enacted, enforced, promulgated,
entered, issued or deemed applicable to the Merger and the other
transactions contemplated hereby (or in the case of any statute,
rule or regulation, awaiting signature or reasonably expected to
become law), by any court, government or governmental authority
or agency or legislative body, domestic, foreign or
supranational, which, individually or in the aggregate, would
result in, or would be reasonably likely to result in, a
Substantial Detriment; and |
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(j) 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 expected to result in a
Substantial Detriment and all such approvals and consents which
have been obtained shall be on terms which, individually or in
the aggregate, would not be reasonably likely to result in, a
Substantial Detriment. |
Section 8.2 Conditions
to the Obligations of Parent and Merger Subsidiary. The
obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction (or, to the extent
legally permissible, waiver) of the following further conditions:
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(a)(i) The Company shall have performed in all material
respects all of its obligations hereunder required to be
performed by it as of or prior to the Closing Date,
(ii)(A) the representations and warranties of the Company
set forth in this Agreement which are qualified by a
Company Material Adverse Effect qualification shall
be true and correct in all respects as so qualified at and as of
the date of this Agreement and at and as of the Closing Date as
though made at and as of the Closing Date and (B) the
representations and warranties of the Company set forth in this
Agreement which are not qualified by a Company Material
Adverse Effect qualification shall be true and correct at
and as of the date of this Agreement and at and as of the
Closing Date as though made at and as of the Closing Date,
except for such failures to be true and correct as would not, in
the aggregate, reasonably be expected to have a Company Material
Adverse Effect; provided, however, that, with respect to
clauses (A) and (B) hereof, representations and
warranties that are made as of a particular date or period shall
be true and correct (in the manner set forth in
clauses (A) or (B), as applicable), only as of such
date or period; |
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(b) Parent shall have received an opinion of McDermott
Will & Emery LLP (or such other counsel reasonably
acceptable to Parent), on the basis of representations and
assumptions set forth or referred to in such opinion, dated as
of the Closing Date, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization
qualifying under the provisions of Section 368(a) of the
Code. In rendering such opinion, such counsel shall be entitled
to receive and rely upon representations of officers of Parent,
the Company or others reasonably requested by counsel; and |
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(c) since the date of this Agreement, there shall not have
been any event, occurrence, development or state of
circumstances which, individually or in the aggregate, would be
reasonably likely to have a Company Material Adverse Effect. |
Section 8.3 Conditions
to the Obligations of the Company. The obligation of the
Company to consummate the Merger is subject to the satisfaction
(or, to the extent legally permissible, waiver) of the following
further conditions:
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(a) (i) Parent shall have performed in all material
respects all of its obligations hereunder required to be
performed by it as of or prior to the Closing Date,
(ii) (A) the representations and warranties of Parent
and Merger Subsidiary set forth in this Agreement which are
qualified by a Parent Material Adverse Effect
qualification shall be true and correct in all respects as so
qualified at and as of the date of this Agreement and at and as
of the Closing Date as though made at and as of the Closing Date
and (B) the representations and warranties of Parent and
Merger Subsidiary set forth in this Agreement which are not
qualified by a Parent Material Adverse Effect
qualification shall be true and correct at and as of the date of
this Agreement and at and as of the Closing Date as though made
at and as of the Closing Date, except for such failures to be
true and correct as would not, in the aggregate, reasonably be |
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expected to have a Parent Material Adverse Effect; provided,
however, that, with respect to clauses (A) and
(B) hereof, representations and warranties that are made as
of a particular date or period shall be true and correct (in the
manner set forth in clauses (A) or (B), as
applicable), only as of such date or period; |
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(b) the Company shall have received an opinion of Wachtell,
Lipton, Rosen & Katz (or such other counsel reasonably
acceptable to the Company), on the basis of representations and
assumptions set forth or referred to in such opinion, dated as
of the Closing Date, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization
qualifying under the provisions of Section 368(a) of the
Code. In rendering such opinion, such counsel shall be entitled
to rely upon representations of officers of Parent, the Company
or others reasonably requested by counsel; and |
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(c) since the date of this Agreement, there |