Filed pursuant to Rule 424(b)(2)
SEC File No. 333-34399
NUMAR CORPORATION
508 LAPP ROAD
MALVERN, PENNSYLVANIA 19355
Dear Shareholder:
A Special Meeting of Shareholders (the "Special Meeting") of NUMAR
Corporation ("NUMAR") will be held at the offices of NUMAR, 508 Lapp Road,
Malvern, Pennsylvania, on September 30, 1997 at 9:00 a.m. local time.
At the Special Meeting you will be asked to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger dated as of June
9, 1997 (the "Merger Agreement") providing for the merger (the "Merger") of a
wholly owned subsidiary ("Merger Sub") of Halliburton Company ("Halliburton")
with and into NUMAR, pursuant to which (a) NUMAR will be the corporation
surviving the Merger (the "Surviving Corporation"), (b) each common share, par
value $.01 per share, of NUMAR ("NUMAR Common Stock") outstanding immediately
prior to the consummation of the Merger will be converted into 0.9664 (after
giving effect to the two-for-one split of the common stock, par value $2.50
per share, of Halliburton ("Halliburton Common Stock") described in the
accompanying Proxy Statement/Prospectus) of one share of Halliburton Common
Stock (the "Exchange Ratio"), (c) all outstanding options and warrants to
purchase shares of NUMAR Common Stock will be converted into options and
warrants to purchase shares of Halliburton Common Stock and (d) NUMAR will
become a wholly owned subsidiary of Halliburton. In the materials accompanying
this letter, you will find a Notice of Special Meeting of Shareholders, a
Proxy Statement/Prospectus relating to the actions to be taken by NUMAR
shareholders at the Special Meeting and a proxy card. The Proxy
Statement/Prospectus more fully describes the proposed Merger and includes
information about NUMAR and Halliburton.
Schroder Wertheim & Co. Incorporated, the investment banking firm retained
by the Board of Directors of NUMAR to act as its financial advisor in
connection with the Merger, has rendered its opinion both as of June 9, 1997,
and as of the date of this Proxy Statement/Prospectus that, as of such dates,
the Exchange Ratio was fair from a financial point of view to the holders of
shares of NUMAR Common Stock.
THE NUMAR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE TRANSACTIONS RELATED THERETO AND HAS DETERMINED THAT THEY ARE FAIR TO
AND IN THE BEST INTERESTS OF NUMAR. AFTER CAREFUL CONSIDERATION, YOUR BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR ADOPTION OF THE
MERGER AGREEMENT.
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE SPECIAL MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, HOWEVER, PLEASE
COMPLETE, SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE. IF YOU
ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN THOUGH
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY. IT IS IMPORTANT THAT YOUR SHARES BE
REPRESENTED AND VOTED AT THE SPECIAL MEETING.
Sincerely,
[SIGNATURE OF MELVIN N. MILLER APPEARS HERE]
MELVIN N. MILLER, Ph.D.
Chairman of the Board,
President and Chief Executive
Officer
NUMAR CORPORATION
508 LAPP ROAD
MALVERN, PENNSYLVANIA 19355
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 30, 1997
To the Shareholders of NUMAR Corporation:
A Special Meeting of Shareholders (the "Special Meeting") of NUMAR
Corporation, a Pennsylvania corporation ("NUMAR"), will be held on Tuesday,
September 30, 1997 at 9:00 a.m., local time, at the offices of NUMAR, 508 Lapp
Road, Malvern, Pennsylvania, for the following purposes:
1. To consider and vote upon a proposal to adopt the Agreement and Plan
of Merger dated as of June 9, 1997 (the "Merger Agreement") among
Halliburton Company, a Delaware corporation ("Halliburton"), Halliburton
M.S. Corp., a Delaware corporation and a wholly owned subsidiary of
Halliburton ("Merger Sub"), and NUMAR. Pursuant to the Merger Agreement,
Merger Sub would be merged with and into NUMAR (the "Merger") and, among
other things, each common share, par value $.01 per share, of NUMAR ("NUMAR
Common Stock") outstanding at the effective time of the Merger would be
converted into 0.9664 (after giving effect to the two-for-one split of
Halliburton's common stock described in the accompanying Proxy
Statement/Prospectus) of one share of common stock, par value $2.50 per
share, of Halliburton, all as more fully set forth in the accompanying
Proxy Statement/Prospectus and in the Merger Agreement, a copy of which is
included as Appendix A thereto; and
2. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
The Board of Directors of NUMAR has fixed the close of business on July 25,
1997 as the record date for the determination of shareholders entitled to
notice of, and to vote at, the Special Meeting and any adjournment thereof.
Only holders of record of shares of NUMAR Common Stock at the close of
business on the record date are entitled to notice of, and to vote at, the
Special Meeting. A complete list of such shareholders will be available for
examination at the offices of NUMAR in Malvern, Pennsylvania during normal
business hours by any NUMAR shareholder, for any purpose germane to the
Special Meeting, for a period of 10 days prior to the meeting. Shareholders of
NUMAR are entitled to appraisal rights under the Pennsylvania Business
Corporation Law in respect of the Merger. See "Dissenters' Rights" in the
Proxy Statement/Prospectus and Appendix E thereto.
YOUR VOTE IS IMPORTANT. THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST
BY ALL HOLDERS OF NUMAR COMMON STOCK ENTITLED TO VOTE IS REQUIRED FOR ADOPTION
OF THE MERGER AGREEMENT. EVEN IF YOU PLAN TO ATTEND THE SPECIAL MEETING IN
PERSON, WE REQUEST THAT YOU SIGN AND RETURN THE ENCLOSED PROXY OR VOTING
INSTRUCTION CARD AND THUS ENSURE THAT YOUR SHARES WILL BE REPRESENTED AT THE
SPECIAL MEETING IF YOU ARE UNABLE TO ATTEND. IF YOU DO ATTEND THE SPECIAL
MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN
PERSON.
By Order of the Board of Directors
[SIGNATURE OF RUTH E. LARSEN APPEARS HERE]
RUTH E. LARSEN
Assistant Secretary
Malvern, Pennsylvania
August 29, 1997
PROXY STATEMENT/PROSPECTUS
PROSPECTUS
OF
HALLIBURTON COMPANY
PROXY STATEMENT
OF
NUMAR CORPORATION
This Proxy Statement/Prospectus relates to the proposed merger of
Halliburton M.S. Corp., a Delaware corporation ("Merger Sub") and a wholly
owned subsidiary of Halliburton Company, a Delaware corporation
("Halliburton") with and into NUMAR Corporation, a Pennsylvania corporation
("NUMAR"), pursuant to the Agreement and Plan of Merger dated as of June 9,
1997 among Halliburton, Merger Sub and NUMAR (the "Merger Agreement"). The
merger contemplated by the Merger Agreement is referred to herein as the
"Merger."
As a result of the Merger, (i) each common share, par value $.01 per share,
of NUMAR ("NUMAR Common Stock") outstanding immediately prior to the effective
time of the Merger (the "Effective Time"), other than shares of NUMAR Common
Stock held directly or indirectly by Halliburton or NUMAR and Dissenting
Shares (as hereinafter defined), will be converted into 0.9664 (after giving
effect to the stock split discussed below) of one share of common stock, par
value $2.50 per share, of Halliburton ("Halliburton Common Stock") and (ii)
NUMAR will become a wholly owned subsidiary of Halliburton.
Halliburton has effected a two-for-one stock split in the form of a 100%
stock dividend paid on July 21, 1997 to holders of Halliburton Common Stock of
record on June 26, 1997 (the "Stock Split"). All information relating to
Halliburton Common Stock set forth herein, including the Exchange Ratio and
all per share information, gives effect to the two-for-one Stock Split (except
as otherwise indicated and except for the information set forth in "The
Merger--Opinion of Financial Advisor to NUMAR").
This Proxy Statement/Prospectus is being furnished to holders of NUMAR
Common Stock in connection with the solicitation of proxies by the Board of
Directors of NUMAR for use at the special meeting of shareholders of NUMAR to
be held on September 30, 1997. At the NUMAR special meeting, holders of NUMAR
Common Stock will be asked to consider adoption of the Merger Agreement. This
Proxy Statement/Prospectus and the accompanying form of proxy are first being
mailed to shareholders of NUMAR on or about September 2, 1997.
This Proxy Statement/Prospectus also constitutes a prospectus of Halliburton
with respect to up to 8,835,058 shares of Halliburton Common Stock to be
issued pursuant to the Merger Agreement in exchange for currently outstanding
shares of NUMAR Common Stock and additional shares of NUMAR Common Stock that
may become outstanding prior to the Merger upon the exercise of options
("NUMAR Options") to purchase NUMAR Common Stock outstanding on the date of
the Merger Agreement. The shares of Halliburton Common Stock issued pursuant
to the Merger will be listed on the New York Stock Exchange (the "NYSE").
On August 28, 1997, the closing prices of Halliburton Common Stock and NUMAR
Common Stock, as reported on the NYSE Composite Tape and The Nasdaq National
Market, were $48.25 and $46.00, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY OTHER STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS AUGUST 29, 1997.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES
MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HALLIBURTON OR NUMAR. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE
SECURITIES OFFERED HEREBY SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF HALLIBURTON OR NUMAR SINCE THE
DATE HEREOF OR THAT THE INFORMATION SET FORTH OR INCORPORATED BY REFERENCE
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO PURCHASE, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN
ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION OF AN OFFER OR PROXY SOLICITATION.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. HALLIBURTON AND NUMAR
EACH UNDERTAKES TO PROVIDE COPIES OF SUCH DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE), WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO
WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST TO, IN THE CASE OF DOCUMENTS RELATING TO HALLIBURTON, GUY T. MARCUS,
VICE PRESIDENT-INVESTOR RELATIONS, HALLIBURTON COMPANY, 3600 LINCOLN PLAZA,
500 NORTH AKARD STREET, DALLAS, TEXAS, 75201-3391 (TELEPHONE (214) 978-2600),
AND, IN THE CASE OF DOCUMENTS RELATING TO NUMAR, RUTH E. LARSEN, ASSISTANT
SECRETARY, NUMAR CORPORATION, 508 LAPP ROAD, MALVERN, PENNSYLVANIA 19355
(TELEPHONE (610) 251-0116). IN ORDER TO ENSURE DELIVERY OF THE DOCUMENTS, SUCH
REQUESTS SHOULD BE RECEIVED BY SEPTEMBER 23, 1997.
AVAILABLE INFORMATION
Halliburton and NUMAR are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (File Nos. 1-
03492 and 0-23718, respectively), and, in accordance therewith, file periodic
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission") relating to their respective
businesses, financial statements and other matters. Reports, proxy statements
and other information filed by Halliburton and NUMAR can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at
the Commission's Regional Offices at Seven World Trade Center, 13th Floor, New
York, New York 10048 and CitiCorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained by mail
from the Public Reference Section of the Commission at 450 West Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission also
maintains a web site that contains reports, proxy and information statements
and other information regarding Halliburton and NUMAR. The address of that web
site is http://www.sec.gov. In addition, reports, proxy statements and other
information concerning (i) Halliburton may be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005 and (ii) NUMAR may be
inspected at the offices of The Nasdaq National Market at 1735 K. Street,
N.W., Washington, D.C. 20006-1500.
Halliburton has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, supplements and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the offering, sale and delivery of the
Halliburton Common Stock to be issued pursuant to the Merger Agreement,
certain parts of which were omitted from this Proxy Statement/Prospectus in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement.
All information contained in this Proxy Statement/Prospectus or incorporated
herein by reference with respect to Halliburton was supplied by Halliburton,
and all information contained in this Proxy Statement/Prospectus or
incorporated herein by reference with respect to NUMAR was supplied by NUMAR.
2
FORWARD-LOOKING INFORMATION
Certain of the information relating to Halliburton contained in this Proxy
Statement/Prospectus is forward-looking in nature. Such forward-looking
information constitutes estimates reflecting Halliburton's best judgment based
on current information and involve a number of risks and uncertainties, and
there can be no assurance that other factors will not affect the accuracy of
such forward-looking information. While it is impossible to identify all such
factors, those that could cause actual results to differ materially from those
estimated by Halliburton include unsettled political conditions, war, civil
unrest, currency controls and governmental actions in countries of operation;
trade restrictions and economic embargoes; environmental laws, including those
that require emission performance standards for new and existing facilities;
the magnitude of governmental spending for military and logistical support of
the type provided by Halliburton; operations in high risk countries;
technological and structural changes in the industries served by Halliburton;
changes in the price of oil and natural gas; changes in capital spending by
customers in the hydrocarbon industry for exploration, development,
production, processing, refining and pipeline delivery networks; changes in
capital spending by customers in the wood pulp and paper industries for plants
and equipment; and changes in capital spending by governments for
infrastructure. In addition, future trends for revenues and profitability
remain difficult to predict in the industries served by Halliburton.
Certain of the information in this Proxy Statement/Prospectus relating to
NUMAR is forward-looking in nature, and such statements involve risks and
uncertainties. Although NUMAR believes that its expectations are based on
reasonable assumptions, it can give no assurance that the anticipated results
will occur. Important factors that could cause actual results to differ
materially from those anticipated include technological changes in the
oilfield services industry, development and marketing of competitive well
logging tools by NUMAR's competitors and loss of one or more of NUMAR's key
employees, as well as all of the factors relating to the oil and gas industry
referred to above with respect to Halliburton, all of which are also
applicable to NUMAR.
3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission pursuant
to the Exchange Act, are incorporated herein by reference:
1. For Halliburton, its:
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997
and June 30, 1997;
(c) Current Reports on Form 8-K filed with the Commission on January 14,
1997, January 23, 1997, January 31, 1997, February 10, 1997, February 12,
1997, February 14, 1997, February 21, 1997, March 4, 1997, March 18, 1997,
March 31, 1997, April 24, 1997, May 8, 1997, May 9, 1997, May 21, 1997,
May 23, 1997, May 30, 1997, May 30, 1997, June 3, 1997, June 11, 1997, June
13, 1997; July 7, 1997; July 7, 1997; July 7, 1997; July 17, 1997; July 18,
1997; July 22, 1997; July 23, 1997; July 25, 1997; July 29, 1997; August 4,
1997; August 4, 1997; and August 7, 1997; and
(d) Registration Statement on Form 8-B dated December 12, 1996.
2. For NUMAR, its:
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997
and June 30, 1997;
(c) Current Reports on Form 8-K filed with the Commission on June 15,
1997; and
(d) Registration Statement on Form 8-A dated March 24, 1994.
All documents filed by Halliburton or NUMAR pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the date of the special meeting of the
shareholders of NUMAR shall be deemed to be incorporated by reference herein
and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained
herein or in any other subsequently filed document that also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
4
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION..................................................... 2
Forward-Looking Information............................................. 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 4
SUMMARY................................................................... 6
The Companies........................................................... 6
The Special Meeting..................................................... 6
Reasons for the Merger.................................................. 7
Opinion of Financial Advisor............................................ 8
The Merger and the Merger Agreement..................................... 9
Stock Option Agreement.................................................. 12
Voting Agreements....................................................... 12
Certain Federal Income Tax Consequences................................. 13
Anticipated Accounting Treatment........................................ 13
Rights of Dissenting Shareholders....................................... 13
Exchange of NUMAR Common Stock Certificates............................. 13
Certain Potential Conflicts of Interest................................. 14
Comparative Rights of NUMAR and Halliburton Stockholders................ 15
Market Price and Dividend Data.......................................... 16
Halliburton Selected Historical Consolidated Financial Information...... 17
NUMAR Selected Historical Consolidated Financial Information............ 18
Selected Unaudited Pro Forma Combined Balance Sheet Information......... 19
Comparative Per Share Data.............................................. 20
THE COMPANIES............................................................. 21
Halliburton............................................................. 21
Merger Sub.............................................................. 22
NUMAR................................................................... 22
THE SPECIAL MEETING....................................................... 22
Date, Time and Place.................................................... 22
Purpose of the Special Meeting.......................................... 23
Record Date and Outstanding Shares...................................... 23
Voting and Revocation of Proxies........................................ 23
Vote Required........................................................... 23
Solicitation of Proxies................................................. 24
Other Matters........................................................... 24
THE MERGER................................................................ 25
General Description of the Merger....................................... 25
Background of the Merger................................................ 25
Certain Information Provided............................................ 28
Halliburton's Reasons for the Merger.................................... 29
NUMAR's Reasons for the Merger; Recommendation of the Board of Directors
of NUMAR............................................................... 30
Opinion of Financial Advisor to NUMAR................................... 32
Certain Potential Conflicts of Interest................................. 36
Certain Federal Income Tax Consequences................................. 38
Accounting Treatment..................................................... 39
Governmental and Regulatory Approvals.................................... 40
Restrictions on Resales by Affiliates.................................... 40
Rights of Dissenting Shareholders........................................ 40
CERTAIN TERMS OF THE MERGER AGREEMENT...................................... 42
Effective Time of the Merger............................................. 42
Manner and Basis of Converting Shares.................................... 43
NUMAR Options............................................................ 44
Conditions to the Merger................................................. 44
Representations and Warranties........................................... 45
Certain Covenants; Conduct of Business Prior to the Merger............... 46
No Solicitation.......................................................... 47
Certain Post-Merger Matters.............................................. 48
Termination or Amendment of the Merger Agreement......................... 48
Expenses and Termination Fee............................................. 49
Indemnification.......................................................... 50
STOCK OPTION AGREEMENT..................................................... 50
VOTING AGREEMENTS.......................................................... 52
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET INFORMATION........... 53
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS............................ 55
Halliburton.............................................................. 55
NUMAR.................................................................... 55
DESCRIPTION OF HALLIBURTON CAPITAL STOCK................................... 58
General.................................................................. 58
Halliburton Common Stock................................................. 58
Rights to Purchase Preferred Stock....................................... 58
Halliburton Preferred Stock.............................................. 60
Certain Provisions of Halliburton
Charter and Bylaws...................................................... 60
Transfer Agent and Registrar............................................. 61
COMPARATIVE RIGHTS OF HALLIBURTON AND NUMAR STOCKHOLDERS................... 61
LEGAL MATTERS.............................................................. 67
EXPERTS.................................................................... 67
STOCKHOLDER PROPOSALS...................................................... 68
Appendices:
A--Agreement and Plan of Merger
B--Stock Option Agreement
C--Form of Voting Agreement
D--Opinion of Schroder Wertheim & Co. Incorporated
E--Provisions of Pennsylvania Business Corporation Law regarding Dissenters'
Rights of Appraisal
5
SUMMARY
A substantial portion of the following information is a summary of
information contained elsewhere in this Proxy Statement/Prospectus. Reference
is made to, and this summary is qualified in its entirety by, the more detailed
information contained in or incorporated by reference in this Proxy
Statement/Prospectus and the Appendices hereto. Shareholders are urged to read
carefully this Proxy Statement/Prospectus and the Appendices hereto in their
entirety. As used in this Proxy Statement/Prospectus, unless otherwise required
by the context, the term "Halliburton" means Halliburton Company and its
consolidated subsidiaries and the term "NUMAR" means NUMAR Corporation and its
consolidated subsidiaries. Capitalized terms used herein without definition
are, unless otherwise indicated, defined in the Merger Agreement and used
herein with such meanings.
THE COMPANIES
HALLIBURTON AND MERGER SUB. Halliburton is one of the world's largest
diversified energy services and engineering and construction services
companies. Such services include those related to the exploration, development,
and production of oil and natural gas, in the case of energy services, and the
design, procurement, construction, project management and maintenance of
industrial facilities, in the case of engineering and construction services.
Halliburton conducts business worldwide in more than 100 countries.
At June 30, 1997, Halliburton had consolidated total assets of approximately
$5.2 billion and consolidated stockholders' equity of approximately $2.3
billion and employed approximately 60,000 persons worldwide.
Halliburton's predecessor was established in 1919, incorporated under the
laws of the State of Delaware in 1924 and reorganized under the laws of the
State of Delaware in 1996. Merger Sub is a wholly owned subsidiary of
Halliburton incorporated on May 30, 1997 in the State of Delaware. Halliburton
and Merger Sub maintain their principal executive offices at 3600 Lincoln
Plaza, 500 North Akard Street, Dallas, Texas 75201-3391. Their telephone number
at such offices is (214) 978-2600.
NUMAR. NUMAR designs, manufactures, and markets a patented, proprietary well
logging device, the Magnetic Resonance Imaging Logging ("MRIL(R)") tool, which
utilizes magnetic resonance imaging ("MRI") technology, widely used in medical
diagnostic imaging devices, to evaluate subsurface rock formations in newly-
drilled oil and gas wells. The MRIL(R) tool is a commercially-available well
logging tool able to measure, in real time at the wellsite, the proportion of
fluid that is free to flow within a formation, effective formation porosity,
fluid viscosity and rock grain size, to perform direct hydrocarbon typing
("DHT(R)") and to derive formation permeability. Further, a new application was
introduced in 1996, which allows the MRIL(R) to identify clay bound water and
thus determine total porosity ("C/TP").
At June 30, 1997, NUMAR had consolidated total assets of $34.4 million and
consolidated shareholders' equity of $20.8 million and employed approximately
140 persons.
NUMAR was incorporated under the laws of the Commonwealth of Pennsylvania in
1983 and maintains its principal executive offices at 508 Lapp Road, Malvern,
Pennsylvania 19355. Its telephone number at such offices is (610) 251-0116.
THE SPECIAL MEETING
DATE, TIME AND PLACE. The Special Meeting of Shareholders of NUMAR (the
"Special Meeting") will be held on Tuesday, September 30, 1997, at the offices
of NUMAR, 508 Lapp Road, Malvern, Pennsylvania, commencing at 9:00 a.m. local
time.
6
PURPOSES. The purposes of the Special Meeting are (i) to consider and vote
upon a proposal to adopt the Merger Agreement; and (ii) to transact such other
business as may properly come before the Special Meeting.
RECORD DATE; SHARES ENTITLED TO VOTE. The Board of Directors of NUMAR has
fixed the close of business on July 25, 1997 as the record date (the "Record
Date") for the determination of shareholders entitled to notice of, and to vote
at, the Special Meeting and any adjournment thereof. Each issued and
outstanding share of NUMAR Common Stock is entitled to one vote on each matter
to be presented at the Special Meeting. Only holders of record of shares of
NUMAR Common Stock at the close of business on the Record Date are entitled to
notice of and to vote at the Special Meeting. On such date, there were
8,418,541 shares of NUMAR Common Stock outstanding, each of which will be
entitled to one vote on each matter to be acted upon at the Special Meeting.
QUORUM; VOTE REQUIRED. The presence, in person or by proxy, at the Special
Meeting of the holders of a majority of the shares of NUMAR Common Stock
outstanding and entitled to vote at the Special Meeting is necessary to
constitute a quorum at the meeting. The affirmative vote of a majority of the
votes cast by all holders of NUMAR Common Stock entitled to vote thereon at the
Special Meeting is required under the Business Corporation Law of the
Commonwealth of Pennsylvania (the "PBCL") to approve and adopt the Merger
Agreement. In determining whether the Merger Agreement has received the
requisite number of affirmative votes, abstentions and broker non-votes will
have the same effect as a vote against the Merger Agreement.
SECURITY OWNERSHIP OF NUMAR MANAGEMENT. At the Record Date, the directors and
executive officers of NUMAR beneficially owned approximately 13.3% of the
outstanding shares of NUMAR Common Stock entitled to vote at the Special
Meeting. Four directors of NUMAR (Dr. Melvin N. Miller, the Chairman of the
Board, President and Chief Executive Officer, Barry M. Davis, Seymour G.
Mandell and Dr. James H. Simons), Davis Venture Partners, L.P., an affiliate of
Mr. Davis, and the Bermuda Trust Company Limited, as trustee of the Lord Jim
Trust, of which Dr. Simons is a beneficiary (Dr. Simons disclaims beneficial
ownership of the shares held by such trust, which shares represent
approximately 10.7% of the outstanding shares of NUMAR Common Stock entitled to
vote at the Special Meeting) have entered into Voting Agreements with
Halliburton dated as of June 9, 1997 (the "Voting Agreements") pursuant to
which they have agreed to vote all shares of NUMAR Common Stock owned by them
in favor of the Merger Agreement. At the Record Date, an aggregate of 1,938,290
shares of NUMAR Common Stock (representing approximately 23.0% of the
outstanding shares) entitled to vote at the Special Meeting were subject to the
Voting Agreements. See "Voting Agreements." In addition, each of the other
directors and executive officers of NUMAR, who on the Record Date together
owned beneficially an aggregate of 77,575 shares of NUMAR Common Stock
(approximately 0.9% of the outstanding NUMAR Common Stock) entitled to vote at
the Special Meeting, has advised NUMAR that he or she plans to vote or to
direct the vote of all such shares of NUMAR Common Stock in favor of the Merger
Agreement. As a result, the affirmative vote of holders of only 34.3% of the
outstanding shares of NUMAR Common Stock entitled to vote at the Special
Meeting (other than shares subject to the Voting Agreements and shares held by
officers and directors of NUMAR) is required to approve and adopt the Merger
Agreement.
REASONS FOR THE MERGER
HALLIBURTON. The Board of Directors of Halliburton believes that the Merger
will represent a significant step in achieving an important Halliburton
objective: to offer customers a complete array of oil field services. The Board
of Directors also believes that the Merger will strengthen Halliburton's
position in the provision of formation evaluation services. For further
information, see "The Merger--Halliburton's Reasons for the Merger."
NUMAR. The Board of Directors of NUMAR has determined that the Merger is fair
to and in the best interests of NUMAR. In its deliberations with respect to the
Merger, the Board of Directors consulted with management of NUMAR and the
financial and legal advisors to NUMAR. The composite mix of information
available to the Board of Directors with respect to the Merger included
information regarding the matters enumerated under "The Merger--NUMAR's Reasons
for the Merger; Recommendation of the Board of Directors of NUMAR." While this
information was considered by the Board of Directors, the Board of Directors
7
did not evaluate and make determinations with respect to each such factor.
Rather, the Board of Directors made its determination with respect to the
Merger based on the total mix of information available to it and the judgments
of individual directors may have been influenced to a greater or lesser degree
by differing factors. Such information included: (i) the fact that the
consideration to be received by NUMAR's shareholders represents a significant
premium over the historical price of NUMAR Common Stock; (ii) the fact that
Halliburton is an industry leader and that its stock price historically has
been strong; (iii) management's determination that the long term growth
potential with Halliburton compares very favorably to that presented by a
business combination with other potential acquirors and is superior to NUMAR
remaining an independent public company; (iv) the opinion of Schroder Wertheim
& Co. Incorporated ("Schroder Wertheim") dated June 9, 1997 to the effect that,
as of such date and based on certain matters stated therein, the Exchange Ratio
was fair, from a financial point of view, to the shareholders of NUMAR; (v)
management's view that the Merger would result in significant efficiencies,
operating benefits and commercial and other synergies that would benefit NUMAR,
its customers, the public and its shareholders through their continued interest
in the combined company; (vi) management's belief that the resulting
efficiencies, benefits and synergies would better meet needs of NUMAR's
constituencies than combinations with other possible acquirors; (vii) the
resulting benefits to customers of both NUMAR and Halliburton from the enhanced
services that can be provided by a combined company with the financial strength
to support substantial research and development; (viii) the fact that local
communities in Pennsylvania will benefit from maintaining NUMAR's Malvern
facility; (ix) the fact that all of the executive officers of NUMAR have agreed
to enter into employment agreements effective at the Effective Time that will
allow them to continue pursuing their strategic view of the future of NUMAR;
(x) the treatment of the transaction as a tax free reorganization; (xi) the
fact that entering into a merger or similar transaction with some other
potential acquiror may raise more serious antitrust concerns than those raised
by the Merger and could result in the prevention of the consummation of a
proposed third-party transaction; and (xii) the friendly and cooperative
working relationships between NUMAR and Halliburton.
The Board of Directors of NUMAR also considered the following negative
factors: (i) the fact that the execution of the Merger Agreement would
contractually prohibit NUMAR from soliciting or facilitating other offers from
third parties; and (ii) the potentially adverse effect the Merger may have on
the employees of NUMAR'S various field offices in the long term. In the view of
the Board of Directors of NUMAR, these considerations were not sufficient,
either individually or collectively, to outweigh the advantages of the proposed
combination in the manner in which it was proposed. With respect to the
possibility that the Merger might foreclose other options that could be viewed
as preferable, the Board of Directors of NUMAR took into consideration the fact
that, under Pennsylvania law, the directors of a Pennsylvania corporation may,
after considering all of the factors involved in a proposed transaction, bind
the corporation to a business combination agreement that the Board of Directors
believes is fair to and in the best interests of the corporation, even in the
face of a subsequent, arguably superior proposal. Moreover, management and the
Board of Directors of NUMAR believe that the shareholders of NUMAR could vote
against the Merger if a third party should commence a tender or exchange offer
that was regarded as superior to the Merger transaction. See "Certain Terms of
the Merger Agreement--No Solicitation."
THE BOARD OF DIRECTORS OF NUMAR HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS
FAIR TO, AND IN THE BEST INTERESTS OF NUMAR AND RECOMMENDS THAT THE
SHAREHOLDERS OF NUMAR ADOPT THE MERGER AGREEMENT.
For further information, see "The Merger--NUMAR's Reasons for the Merger;
Recommendation of the Board of Directors of NUMAR."
OPINION OF FINANCIAL ADVISOR
Schroder Wertheim was retained by NUMAR to act as its financial advisor in
connection with the Merger and related matters based on Schroder Wertheim's
experience and expertise. At the meeting of the Board of
8
Directors of NUMAR held on June 9, 1997, Schroder Wertheim rendered to the
Board of Directors of NUMAR a written opinion, subsequently confirmed as of the
date of this Proxy Statement/Prospectus, to the effect that, as of such dates
and based on certain matters stated therein, the Exchange Ratio (as defined
below) pursuant to the Merger Agreement was fair from a financial point of view
to the holders of shares of NUMAR Common Stock. The full text of the Schroder
Wertheim opinion dated as of the date hereof (the "Schroder Wertheim Opinion"
or its "Opinion"), which is substantially equivalent to its opinion dated June
9, 1997 and sets forth the assumptions made, matters considered and limitations
on the review undertaken, is attached as Appendix D to this Proxy
Statement/Prospectus and is incorporated herein by reference. Holders of NUMAR
Common Stock should read the Schroder Wertheim Opinion carefully in its
entirety. Each Schroder Wertheim opinion is directed to the Board of Directors
of NUMAR and addresses the fairness of the Exchange Ratio from a financial
point of view to the holders of shares of NUMAR Common Stock; it does not
address any other aspect of the Merger nor does it constitute a recommendation
to any holder of NUMAR Common Stock as to how to vote at the Special Meeting.
The summary of the Schroder Wertheim Opinion set forth in this Proxy
Statement/Prospectus is qualified in its entirety by reference to the full text
of such Opinion. See "The Merger--Opinion of Financial Advisor to NUMAR." For
information regarding the fees to be paid to Schroder Wertheim for its services
as financial advisor to NUMAR, see "The Merger--Opinion of Financial Advisor to
NUMAR."
THE MERGER AND THE MERGER AGREEMENT
THE MERGER. At the Effective Time, Merger Sub will be merged with and into
NUMAR, with NUMAR being the surviving corporation and continuing as a wholly
owned subsidiary of Halliburton (the "Surviving Corporation"). In the Merger,
each share of NUMAR Common Stock outstanding at the Effective Time (other than
shares held directly or indirectly by Halliburton or NUMAR and Dissenting
Shares) will be converted into 0.9664 of one share of Halliburton Common Stock
(the "Exchange Ratio"). The Exchange Ratio reflects the two-for-one Stock Split
of the Halliburton Common Stock effected in the form of a 100% stock dividend
paid on July 21, 1997 to stockholders of record on June 26, 1997.
Based on the numbers of shares of Halliburton Common Stock and NUMAR Common
Stock outstanding as of the Record Date, 8,135,678 shares of Halliburton Common
Stock will be issuable pursuant to the Merger Agreement (assuming no exercise
prior to the Effective Time of NUMAR Options and warrants), representing
approximately 3.2% of the total Halliburton Common Stock to be outstanding
after such issuance. In addition, Halliburton will be required to reserve for
issuance an aggregate of approximately 956,000 shares of Halliburton Common
Stock that may be issued upon the exercise of NUMAR Options and warrants after
the Effective Time (assuming no exercise thereof after the Record Date and
prior to the Effective Time.) See "Certain Terms of the Merger Agreement--NUMAR
Options."
RECOMMENDATION OF THE BOARD OF DIRECTORS OF NUMAR. THE BOARD OF DIRECTORS OF
NUMAR HAS DETERMINED THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF
NUMAR AND RECOMMENDS THAT THE SHAREHOLDERS OF NUMAR ADOPT THE MERGER AGREEMENT.
See "The Merger--Background of the Merger" and "--NUMAR's Reasons for the
Merger; Recommendation of the Board of Directors of NUMAR." In considering the
recommendation of the NUMAR Board with respect to the Merger, NUMAR
shareholders should be aware that certain officers and directors of NUMAR have
certain interests respecting the Merger, apart from their interests as
shareholders of NUMAR. See "The Merger--Certain Potential Conflicts of
Interest."
EFFECTIVE TIME OF THE MERGER. The Merger will become effective upon the
filing of articles of merger with the Secretary of State of the Commonwealth of
Pennsylvania and a certificate of merger with the Secretary of State of the
State of Delaware. Assuming all conditions to the Merger contained in the
Merger Agreement are satisfied or, if permissible, waived prior thereto, it is
anticipated that the Effective Time of the Merger will occur as soon as
practicable following the Special Meeting.
9
CERTAIN CONDITIONS TO THE CONSUMMATION OF THE MERGER. The respective
obligations of Halliburton and NUMAR to consummate the Merger are subject to
the satisfaction of certain conditions, including the following: (i) adoption
of the Merger Agreement by the shareholders of NUMAR; (ii) the absence of any
law, regulation or order making the Merger illegal or otherwise prohibiting
consummation of the Merger; (iii) Halliburton and NUMAR having been advised in
writing by Arthur Andersen LLP that the Merger should be treated for financial
accounting purposes as a "pooling of interests;" (iv) the holders of record of
no more than 7% of the outstanding shares of NUMAR Common Stock immediately
prior to Effective Time having perfected and continued to perfect Dissenters
Rights (as defined below); (v) the accuracy of the representations and
warranties of each party (except to the extent that the aggregate of any
inaccuracies is not material to such party) and compliance in all material
respects with all agreements and covenants by each party; and (vi) the listing,
subject to official notice of issuance, on the New York Stock Exchange, Inc.
(the "NYSE") of the Halliburton Common Stock to be issued in the Merger.
Halliburton and NUMAR anticipate that all of the conditions to the
consummation of the Merger (other than obtaining the required approvals of the
shareholders of NUMAR) will be satisfied prior to or at the time of the Special
Meeting. Either Halliburton or NUMAR may extend the time for performance of any
of the obligations of the other party or, in certain instances, may waive
compliance with those obligations at its discretion. See "Certain Terms of the
Merger Agreement--Conditions to the Merger."
GOVERNMENTAL APPROVALS. On June 13, 1997, Halliburton and NUMAR each filed a
notification and report, together with requests for early termination of the
waiting period, under the HSR Act with the Federal Trade Commission and the
Antitrust Division of the Department of Justice in respect of the Merger.
Expiration or early termination of the applicable waiting period under the HSR
Act was a condition to the obligations of Halliburton and NUMAR to consummate
the Merger. The waiting period expired on July 13, 1997. See "The Merger--
Governmental and Regulatory Approvals." Neither Halliburton nor NUMAR is aware
of any other governmental or regulatory approval required for consummation of
the Merger, other than compliance with applicable securities laws.
NO SOLICITATION. Pursuant to the Merger Agreement, NUMAR has agreed (i) that
it will not (a) initiate, solicit or encourage (including by way of furnishing
nonpublic information or assistance) or take any other action knowingly to
facilitate any inquiries from any other person or entity or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Competing Transaction (as defined below), (b) enter into discussions or
negotiations with any person or entity in furtherance of such inquiries or to
obtain a Competing Transaction, (c) agree to, or endorse, a Competing
Transaction or (d) authorize or permit any of its directors, officers,
employees or other representatives to take any such action, (ii) that it will
promptly notify Halliburton of all relevant terms of any such inquiries and
proposals received by NUMAR or any of its directors, officers, employees or
other representatives and (iii) that, if such inquiry or proposal is in
writing, it will deliver a copy thereof promptly to Halliburton; provided,
however, that this provision of the Merger Agreement will not prevent the Board
of Directors of NUMAR from complying with Rule 14e-2 under the Exchange Act
with regard to a tender or exchange offer for the NUMAR Common Stock commenced
prior to the Special Meeting. A "Competing Transaction" means (a) any merger,
consolidation, share exchange, business combination or similar transaction
involving NUMAR or any of its Significant Subsidiaries (as defined in the
Merger Agreement), (b) a sale, lease, exchange, transfer or other disposition
of 35% or more of the assets of NUMAR and its Subsidiaries, taken as a whole,
in a single transaction or series of related transactions, (c) the acquisition
by a person or group (in the case of a group, through the formation thereof or
otherwise) of beneficial ownership of 35% or more of the outstanding NUMAR
Common Stock, whether by tender or exchange offer or otherwise or (d) the
acquisition in any manner, directly or indirectly, of a Material (as defined in
the Merger Agreement) equity interest in any voting securities of, or a
substantial portion of the assets of, NUMAR or any of its Significant
Subsidiaries, other than the transactions contemplated by the Merger Agreement.
See "Certain Terms of the Merger Agreement--No Solicitation." Moreover, NUMAR
has agreed that, prior to the Effective Time, it will not, through action of
its Board of Directors, approve the acquisition of NUMAR Common Stock by any
person who, following such acquisition, would be an "interested shareholder"
under Subchapter F of Chapter 25 of the PBCL.
10
TERMINATION OF THE MERGER AGREEMENT.
BY EITHER PARTY. The Merger Agreement may be terminated at any time prior to
the Effective Time (i) by mutual consent of Halliburton and NUMAR or (ii) by
either party if (a) the Merger has not been consummated before December 31,
1997 (or February 28, 1998, if the Merger shall not have been consummated as a
result of either party having failed by December 31, 1997 to receive all
required regulatory approvals or consents with respect to the Merger), (b)
consummation of the Merger shall have been prohibited by order of a court or
governmental authority or (c) the required approval of the shareholders of
NUMAR is not received at the Special Meeting.
BY HALLIBURTON. Halliburton may terminate the Merger Agreement (i) upon a
material breach of any covenant or agreement on the part of NUMAR set forth in
the Merger Agreement or if any representation or warranty of NUMAR shall have
become untrue in any material respect, in either case such that Halliburton's
conditions to consummation of the Merger would not be satisfied, (ii) if any
person (other than Halliburton or any of its Affiliates) shall have commenced a
tender or exchange offer to purchase 35% or more of the outstanding NUMAR
Common Stock and the NUMAR Board of Directors, within 10 business days
thereafter, either fails to recommend against acceptance of such tender or
exchange offer by the NUMAR shareholders or takes no position with respect
thereto; or (iii) if any person (other than Halliburton or any of its
Subsidiaries) or group shall, subsequent to the date of this Agreement, acquire
beneficial ownership or the right to acquire beneficial ownership of (A) 35% or
more of the then outstanding NUMAR Common Stock and the Merger Agreement has
failed to receive the requisite vote for adoption thereof at the Special
Meeting or (B) 45% or more of the then outstanding NUMAR Common Stock.
BY NUMAR. NUMAR may terminate the Merger Agreement upon a material breach of
any covenant or agreement on the part of Halliburton set forth in the Merger
Agreement or if any representation or warranty of Halliburton shall have become
untrue in any material respect, in either case such that NUMAR's conditions to
closing of the Merger would not be satisfied.
See "Certain Terms of the Merger Agreement--Termination or Amendment of the
Merger Agreement."
TERMINATION FEE. Upon termination of the Merger Agreement under certain
specific circumstances, NUMAR will be required to pay to Halliburton a
termination fee of $9 million. For a specific list of such circumstances, see
"Certain Terms of the Merger Agreement--Termination or Amendment of the Merger
Agreement." Moreover, the occurrence of those events will also cause the Stock
Option to become exercisable. For information regarding these events, see
"Stock Option Agreement." NUMAR will be required to pay Halliburton an
additional amount of up to $3 million if Halliburton should thereafter exercise
its rights pursuant to the Stock Option Agreement to cause NUMAR to purchase
any NUMAR Common Stock acquired by Halliburton pursuant to the Stock Option or
to cause NUMAR to purchase the unexercised portion of the Stock Option.
CONDUCT OF BUSINESS PRIOR TO THE MERGER. Prior to the Effective Time,
Halliburton and NUMAR have agreed to operate their respective businesses in the
usual and ordinary course and to preserve and maintain their respective
business organizations. NUMAR also has agreed to certain restrictions on its
activities prior to the Effective Time, including certain restrictions with
respect to (i) increasing or changing employee compensation, (ii) paying
dividends or other distributions with respect to its capital stock, (iii)
acquiring its own capital stock, (iv) amending or changing its capital
structure, (v) effecting business combinations, sales of its assets or
businesses or acquisitions of assets or businesses and (vi) incurring
obligations for borrowed money. In addition, Halliburton has agreed to certain
restrictions on its activities prior to the Effective Time, including certain
restrictions with respect to (i) paying extraordinary dividends or
distributions with respect to its capital stock, (ii) acquiring its own capital
stock, (iii) amending or changing its capital structure, (iv) effecting certain
business combinations, sales of its assets or businesses or acquisitions of
assets or businesses and (v) incurring obligations
11
for borrowed money. See "Certain Terms of the Merger Agreement--Certain
Covenants; Conduct of Business Prior to the Merger."
ASSUMPTION OF NUMAR OPTIONS. As of the Effective Time, each NUMAR Option that
remains unexercised in whole or in part will be assumed by the Surviving
Corporation and will become an option to purchase, in lieu of the shares of
NUMAR Common Stock previously subject thereto, that number of shares of
Halliburton Common Stock equal to the product of the number of shares of NUMAR
Common Stock subject to the NUMAR Option and the Exchange Ratio. The exercise
price per share of Halliburton Common Stock subject to each option so assumed
will be equal to the previous exercise price per share under the NUMAR Option
divided by the Exchange Ratio. Assuming that no shares of NUMAR Common Stock
are issued subsequent to the Record Date and prior to the Effective Time on
exercise of any NUMAR Options, Halliburton will be required to reserve for
issuance an aggregate of approximately 924,000 shares of Halliburton Common
Stock for such purpose. See "Certain Terms of the Merger Agreement--NUMAR
Options."
INDEMNIFICATION. The Merger Agreement also provides that, for a period of six
years after the Effective Time, (i) indemnification provisions of the Surviving
Corporation's charter and bylaws will not be amended in a manner that would
reduce or limit the rights of indemnity thereunder of present or former
directors and officers of NUMAR or reduce or limit the ability of the Surviving
Corporation to indemnify such persons or hinder or delay the exercise of such
rights by such persons and (ii) Halliburton will, subject to certain
limitations, cause to be maintained in effect NUMAR's current directors' and
officers' liability insurance, or policies that are substantially equivalent
thereto. See "Certain Terms of the Merger Agreement--Indemnification."
STOCK OPTION AGREEMENT
Halliburton and NUMAR have entered into a Stock Option Agreement in
connection with, and as an inducement for, the execution and delivery of the
Merger Agreement by Halliburton and Merger Sub. Under the Stock Option
Agreement, NUMAR has granted to Halliburton an irrevocable option to purchase,
out of the authorized but unissued shares of NUMAR Common Stock, a number of
shares equal to up to 15% of the shares of NUMAR Common Stock outstanding as of
June 9, 1997 (as adjusted as set forth in the Stock Option Agreement) for an
exercise price of $36.00 per share, which option is exercisable only after the
occurrence of certain specific events. These events, in general, involve either
(i) the commencement by any person (other than Halliburton or any of its
Affiliates) of a tender or exchange offer to purchase 35% or more of the
outstanding NUMAR Common Stock and the failure of the NUMAR Board of Directors,
within 10 business days thereafter, to recommend against acceptance of such
tender or exchange offer by the NUMAR shareholders or its election to take no
position with respect thereto; or (ii) the acquisition by any person (other
than the Halliburton or any of its Subsidiaries) or group, subsequent to the
date of the Merger Agreement, of beneficial ownership or the right to acquire
beneficial ownership of (A) 35% or more of the then outstanding NUMAR Common
Stock and the Merger Agreement has failed to receive the requisite vote for
adoption thereof at the Special Meeting or (B) 45% or more of the then
outstanding NUMAR Common Stock. See "Certain Terms of the Merger Agreement--
Termination or Amendment of the Merger Agreement" and "Stock Option Agreement."
VOTING AGREEMENTS
Four directors of NUMAR and affiliates of two of them have entered into
Voting Agreements with Halliburton pursuant to which such directors and
affiliates have agreed to vote all shares of NUMAR Common Stock owned by them
in favor of the Merger Agreement. These directors are Dr. Melvin N. Miller, the
Chairman of the Board, President and Chief Executive Officer of NUMAR, Barry M.
Davis, Seymour G. Mandell and James H. Simons. The affiliates are Davis Venture
Partners, L.P., an affiliate of Mr. Davis, and the Bermuda Trust Company
Limited, as trustee of the Lord Jim Trust, of which Mr. Simons is a
beneficiary. At the Record Date, an aggregate of 1,938,290 shares of NUMAR
Common Stock (representing approximately 23.0% of the outstanding NUMAR Common
Stock) were subject to these Voting Agreements. See "Voting Agreements."
12
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is intended that the Merger qualify as a reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that,
accordingly, for federal income tax purposes, no gain or loss will be
recognized by Halliburton, Merger Sub or NUMAR as a result of the Merger. A
holder of NUMAR Common Stock generally will not recognize any gain or loss for
federal income tax purposes by reason of the conversion of NUMAR Common Stock
into Halliburton Common Stock, except to the extent of cash received, if any,
in lieu of fractional shares of Halliburton Common Stock. For a discussion of
all material federal income tax considerations in connection with the Merger
and the opinions received from counsel to Halliburton and NUMAR, see "The
Merger--Certain Federal Income Tax Consequences." HOLDERS OF NUMAR COMMON STOCK
ARE ADVISED AND EXPECTED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER IN LIGHT OF THE PERSONAL
CIRCUMSTANCES OF SUCH HOLDERS AND THE CONSEQUENCES UNDER STATE, LOCAL AND
FOREIGN TAX LAWS.
ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to be accounted for as a "pooling of interests" for
financial accounting purposes. See "The Merger--Accounting Treatment." Receipt
of written advice from Arthur Andersen LLP that such firm knows of no reason
why the Merger should not be treated for financial accounting purposes as a
"pooling of interests" is a condition to the obligations of both Halliburton
and NUMAR to consummate the Merger.
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of NUMAR Common Stock who do not wish to accept the Merger
consideration to be paid under the terms of the Merger Agreement may dissent
from the Merger and elect to have a judicial determination of the fair value of
their shares of NUMAR Common Stock ("Dissenting Shares") at the Effective Time
(exclusive of any element of value arising from the accomplishment or
expectation of the Merger). To do so, such shareholders must comply with the
requirements of Subchapter 15D of the PBCL, 15 Pa C.S.A. Sections 1571 through
1580 ("Dissenters Rights"), the full text of which is attached as Appendix E to
this Proxy Statement/Prospectus. These requirements include filing with NUMAR a
written notice of intention to demand payment for the "fair value" of such
shares prior to the taking of any shareholder vote on the Merger. To exercise
such rights properly, holders of NUMAR Common Stock must hold their shares on
the date of mailing of the notice of intention to demand payment and
continuously hold such shares through the Effective Time, and must comply with
all other procedural requirements of Sections 1571 through 1580 of the PBCL.
Failure to follow any of these and other applicable procedures may result in
the loss of Dissenters Rights. By itself, a vote against the Merger is not
sufficient to exercise Dissenters Rights. See "The Merger--Rights of Dissenting
Shareholders."
EXCHANGE OF NUMAR COMMON STOCK CERTIFICATES
Promptly after consummation of the Merger, Halliburton will mail a letter of
transmittal with instructions to each holder of record of NUMAR Common Stock
immediately before the Effective Time for use in exchanging certificates
formerly representing shares of NUMAR Common Stock for certificates
representing shares of Halliburton Common Stock and cash in lieu of any
fractional shares. Certificates should not be surrendered by the holders of
NUMAR Common Stock until they have received the letter of transmittal from
Halliburton. For more detailed information in this regard, see "Certain Terms
of the Merger Agreement--Manner and Basis of Converting Shares."
13
CERTAIN POTENTIAL CONFLICTS OF INTEREST
EMPLOYMENT AGREEMENTS. At the insistence of Halliburton, NUMAR entered into
Executive Employment Agreements with Dr. Melvin N. Miller, Chairman of the
Board, President and Chief Executive Officer of NUMAR, and five other officers
of NUMAR. The other officers are Thomas Blades, Executive Vice President and
Chief Operating Officer; Edward P. Delson, Senior Vice President-Finance and
Administration, Chief Financial Officer and Treasurer; Dr. Richard N. Chandler,
Vice President-Engineering and Manufacturing; George R. Coates, Vice President-
Petrophysical Applications; and Dr. Manfred G. Prammer, Vice President-
Research. Halliburton conditioned its offer to acquire NUMAR upon execution of
the Executive Employment Agreements because, in its view, the continued
employment of these six officers was essential to the continued development and
implementation of the MRIL(R) tool and the related technology. Except as noted
below, the terms of the Executive Employment Agreements are substantially
similar. The term of each Executive Employment Agreement begins at the
Effective Time and ends on December 31, 2000 (2001, in the case of Dr. Miller.)
Each of the officers is to be employed in his current capacity at the base
salary indicated below; each is entitled, commencing January 1, 1998, to
participate in an incentive compensation plan pursuant to which he will have
the opportunity to earn an annual incentive bonus of up to the percentage of
his base salary indicated below; each will receive a nonqualified stock option
under the Halliburton 1993 Stock and Long-Term Incentive Plan (the "Halliburton
Incentive Plan") to purchase the number of shares of Halliburton Common Stock
indicated below at an exercise price equal to the market price of the
Halliburton Common Stock on the date of grant; certain of such officers will
receive awards under the Halliburton Incentive Plan of "restricted stock" in
the amounts indicated below; and each will be entitled to participate, on the
same basis generally as other employees of NUMAR, in all such general employee
benefit plans as are made available to substantially all of NUMAR's executive
employees. Each of such officers will continue to be entitled to all of his
rights under NUMAR Options held by him prior to the Effective Time. In
addition, Dr. Miller will be entitled, commencing January 1, 1998, to
participate in the Halliburton Senior Executives' Deferred Compensation Plan
and in each calendar year during the term will receive an allocation of at
least $62,500 to his deferred compensation account.
Pursuant to each Executive Employment Agreement, if the employment of such
officer is terminated during the term for any reason other than by his death or
permanent disability, by NUMAR for "cause" (as defined therein) or by him in a
"Voluntary Termination," such officer is entitled to be paid as a severance
benefit his base salary at the rate in effect on the date of such officer's
termination of employment and all options to purchase Halliburton Common Stock
then held by such officer will vest in full. The term "Voluntary Termination"
excludes any termination (i) because of an uncorrected material breach of the
agreement by the employer or (ii) within six months following a reduction in
title, a material reduction in responsibility or a required relocation outside
a 60-mile radius of Malvern, Pennsylvania or, with respect to Messrs. Blades
and Coates, Houston, Texas. Each of the Employment Agreements contains a
noncompetition covenant pursuant to which the officer agrees not to compete
with NUMAR commencing on termination of the agreement and continuing for two
years thereafter or, if longer, the period over which such officer's severance
benefit is to be paid.
BASE INCENTIVE OPTION RESTRICTED
NAME OF OFFICER SALARY MAXIMUM SHARES(A) SHARES(A)
--------------- -------- --------- --------- ----------
Dr. Melvin N. Miller.................... $250,000 70% 25,000 --
Thomas Blades........................... $207,200 70% 20,000 8,000
Edward P. Delson........................ $170,000 40% 15,000 6,000
Dr. Richard N. Chandler................. $150,000 40% 15,000 6,000
George R. Coates........................ $143,600 30% 15,000 6,000
Dr. Manfred G. Prammer.................. $160,000 40% 15,000 6,000
- --------
(a) Adjusted to reflect the Stock Split.
14
Certain terms of the Executive Employment Agreements entered into by each of
Dr. Miller and the five other officers of NUMAR are more favorable than their
existing employment arrangements with NUMAR. Specifically, Dr. Miller's new
Executive Employment Agreement contains a slightly longer term than his
previous employment agreement, provides for an annual base salary of $250,000
(as opposed to his 1997 base salary of $225,000 and his 1998 base salary of
$240,000), and allows him to participate in Halliburton's Senior Executive
Deferred Compensation Plan. The 1997 annual base salaries of Messrs. Blades,
Delson, Chandler, Prammer and Coates are $192,000, $150,000, $112,200 and
$132,300, respectively, which in each case is less than the base salaries
provided for by the relevant Executive Employment Agreement. In addition, as
set forth in the table above, the Executive Employment Agreements provide for
grants of stock options and restricted stock while the grant of stock-based
compensation pursuant to NUMAR's plans is at the discretion of the compensation
committee of NUMAR.
See "The Merger--Certain Potential Conflicts of Interest."
STOCK OPTIONS. The Merger Agreement provides that at the Effective Time,
automatically and without any action on the part of the holder thereof, each
NUMAR Option will become an option to purchase Halliburton Common Stock. The
number of shares of Halliburton Common Stock subject thereto will be determined
by multiplying the number of shares of NUMAR Common Stock previously subject
thereto by the Exchange Ratio, and the exercise price will be determined by
dividing the exercise price per share of NUMAR Common Stock stated therein by
the Exchange Ratio. Otherwise, the terms and conditions of such NUMAR Stock
Options will remain the same. For information as to the holdings of NUMAR Stock
Options by directors and executive officers of NUMAR, see "The Merger--Certain
Potential Conflicts of Interest."
COMPARATIVE RIGHTS OF NUMAR AND HALLIBURTON STOCKHOLDERS
The shareholders of NUMAR are being asked to adopt the Merger Agreement
pursuant to which each share of NUMAR Common Stock (other than shares of NUMAR
Common Stock held directly or indirectly by Halliburton or NUMAR and Dissenting
Shares) will be converted into 0.9664 (after giving effect to the Stock Split)
of one share of Halliburton Common Stock. Consequently, such shareholders will
no longer hold shares in a Pennsylvania corporation but will instead hold
shares in Halliburton, a Delaware corporation whose internal affairs are
governed by the Halliburton Charter and Bylaws (as defined below) and by the
General Corporation Law of the State of Delaware (the "DGCL").
Rights of shareholders of NUMAR are currently governed by the PBCL, the
Articles of Incorporation, as amended, of NUMAR (the "NUMAR Charter") and
NUMAR's By-Laws, as amended (the "NUMAR Bylaws"). Upon consummation of the
Merger, NUMAR shareholders will become stockholders of Halliburton and their
rights as stockholders of Halliburton will be governed by the DGCL, the
Restated Certificate of Incorporation of Halliburton (the "Halliburton
Charter") and Halliburton's By-Laws, as amended (the "Halliburton Bylaws").
There are various differences between the rights of NUMAR shareholders and the
rights of Halliburton stockholders. See "Comparative Rights of Halliburton and
NUMAR Stockholders" and "Description of Halliburton Capital Stock."
15
MARKET PRICE AND DIVIDEND DATA
MARKET PRICES. Halliburton Common Stock is traded on the NYSE under the
symbol "HAL" and NUMAR Common Stock is included in The Nasdaq National Market
under the symbol "NUMR". The following table sets forth, for the periods
indicated, the range of high and low per share sales prices for Halliburton
Common Stock and NUMAR Common Stock as reported on the NYSE Composite Tape and
The Nasdaq National Market. Prices for the Halliburton Common Stock have been
restated to adjust mathematically for the two-for-one Stock Split effected by
means of a 100% stock dividend paid on July 21, 1997 to holders of Halliburton
Common Stock of record on June 26, 1997.
NUMAR
HALLIBURTON NUMAR PRO FORMA(A)
------------- ------------ -------------
HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ----- ------ ------
1995
First Quarter........................ $19.44 $16.75 $12.38 $8.00 $18.79 $16.19
Second Quarter....................... 19.75 17.75 13.00 9.00 19.09 17.15
Third Quarter........................ 22.63 17.57 12.63 9.50 21.87 16.98
Fourth Quarter....................... 25.32 19.88 12.50 10.00 24.47 19.21
1996
First Quarter........................ 29.19 22.88 14.38 10.63 28.21 22.11
Second Quarter....................... 29.38 25.00 18.00 12.75 28.39 24.16
Third Quarter........................ 28.63 25.38 17.00 13.50 27.67 24.53
Fourth Quarter....................... 31.44 25.94 16.88 13.13 30.38 25.07
1997
First Quarter........................ 36.69 30.00 21.75 13.38 35.46 28.99
Second Quarter ...................... 41.94 31.63 40.50 17.50 40.53 30.57
Third Quarter (through August 28).... 48.25 39.31 46.25 37.38 46.63 37.99
- --------
(a) Determined by multiplying the applicable sales price for Halliburton Common
Stock by the Exchange Ratio.
On June 9, 1997, the last trading day prior to the date of the joint
announcement by Halliburton and NUMAR that they had entered into the Merger
Agreement, the closing per share sales prices of Halliburton Common Stock
(adjusted mathematically for the Stock Split) and NUMAR Common Stock, as
reported on the NYSE Composite Tape and The Nasdaq National Market, were $41.00
and $20.75, respectively. See the cover page of this Proxy Statement/Prospectus
for recent closing prices of Halliburton Common Stock and NUMAR Common Stock.
Following the Merger, Halliburton Common Stock will continue to be traded on
the NYSE, NUMAR Common Stock will cease to be traded on The Nasdaq National
Market and there will be no further market for the NUMAR Common Stock.
DIVIDENDS. No cash dividends have ever been declared or paid on the NUMAR
Common Stock.
In each of the calendar quarters indicated in the table above, Halliburton
declared and paid a cash dividend of $0.125 per share of Halliburton Common
Stock (adjusted mathematically for the Stock Split). On July 17, 1997, the
Board of Directors of Halliburton declared a cash dividend of $0.125 per share
of Halliburton Common Stock payable September 24, 1997 to stockholders of
record at the close of business on September 3, 1997.
The Board of Directors of Halliburton intends to continue to consider the
payment of quarterly dividends on the outstanding shares of Halliburton Common
Stock. The declaration and payment of future dividends, however, will be at the
discretion of the Board of Directors of Halliburton and will depend upon, among
other things, future earnings of Halliburton, its general financial condition,
the success of its business activities, its capital requirements and general
business conditions.
16
HALLIBURTON SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information for each
of the years ended December 31, 1992 through 1996 has been derived from
Halliburton's Consolidated Financial Statements, which have been audited by
Arthur Andersen LLP, independent public accountants. The selected historical
consolidated financial information as of June 30, 1996 and 1997 and for the six
month periods then ended, derived from the unaudited consolidated financial
statements of Halliburton, has been prepared on the same basis as the other
financial statements of Halliburton and, in the opinion of Halliburton,
includes all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial position and results of
operations of Halliburton for such periods. The information set forth below is
qualified by reference to and should be read in conjunction with the
consolidated financial statements and related notes included in Halliburton's
Annual Report on Form 10-K for the year ended December 31, 1996 and its
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, incorporated
by reference in this Proxy Statement/Prospectus.
SIX MONTHS
YEARS ENDED DECEMBER 31 ENDED JUNE 30
------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
CONSOLIDATED INCOME
STATEMENT DATA:
Revenues:
Energy group........... $3,536.9 $3,765.1 $3,364.0 $3,604.0 $4,286.3 $1,896.1 $2,576.7
Engineering and
construction group.... 2,848.1 2,459.6 2,297.1 2,278.9 3,098.8 1,639.4 1,551.9
-------- -------- -------- -------- -------- -------- --------
Total revenues........ $6,385.0 $6,224.7 $5,661.1 $5,882.9 $7,385.1 $3,535.5 $4,128.6
======== ======== ======== ======== ======== ======== ========
Operating income (loss):
Energy group........... $ 205.1 $ 253.1 $ 264.1 $ 398.2 $ 484.4 $ 207.2 $ 277.3
Engineering and
construction group.... (19.3) 13.3 15.2 44.6 53.7 9.5 59.4
Special charges (a).... (272.9) (321.8) (16.6) (8.4) (85.8) (12.2) --
General corporate...... (21.0) (22.0) (22.9) (33.5) (34.4) (17.2) (16.0)
-------- -------- -------- -------- -------- -------- --------
Total operating income
(loss) (a)........... $ (108.1) $ (77.4) $ 239.8 $ 400.9 $ 417.9 $ 187.3 $ 320.7
======== ======== ======== ======== ======== ======== ========
Income (loss) from
continuing
operations........... $ (142.5) $ (127.9) $ 175.4 $ 249.2 $ 300.4 $ 117.3 $ 184.9
======== ======== ======== ======== ======== ======== ========
Income (loss) per share
(b):
Continuing operations.. $ (0.62) $ (0.53) $ 0.71 $ 1.00 $ 1.19 $ 0.47 $ 0.72
Cash dividends per
share................. 0.50 0.50 0.50 0.50 0.50 0.25 0.25
Average common shares
outstanding........... 230.0 242.0 248.4 249.4 252.2 251.1 255.7
CONSOLIDATED BALANCE
SHEET DATA:
Net working capital..... $1,150.0 $1,217.7 $1,366.5 $ 987.9 $ 893.3 $ 968.5 $ 959.6
Total assets............ 4,185.3 4,318.6 4,197.4 3,862.0 4,436.6 4,104.6 5,162.9
Property, plant, and
equipment.............. 1,214.6 1,189.3 1,117.4 1,157.9 1,291.6 1,172.0 1,487.7
Long-term debt.......... 657.8 637.4 655.7 205.2 200.1 200.2 433.4
Shareholders' equity.... 1,982.8 2,023.5 2,090.2 1,920.2 2,159.2 1,996.3 2,339.5
Total capitalization.... 2,641.3 2,752.9 2,776.6 2,130.2 2,405.6 2,248.9 2,931.1
Shareholders' equity per
share.................. 8.62 8.19 8.44 7.71 8.62 8.00 9.24
- --------
(a) Operating income (loss) includes the following special charges: in 1996 and
1995, $85.8 million and $8.4 million, respectively, related to merger and
restructuring costs, including severance costs, and the write-off of
acquired in-process research and development activities; in 1994, $16.6
million related to merger and restructuring costs; in 1993, $321.8 million
related to loss on sale of geophysical business and employee severance
costs; in 1992, $272.9 million related to restructuring/reorganization
costs and consolidation of certain support functions.
(b) Adjusted for the two-for-one Stock Split.
17
NUMAR SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information for each
of the years ended December 31, 1992 through 1996 has been derived from NUMAR's
Consolidated Financial Statements, which have been audited by Coopers & Lybrand
L.L.P., independent accountants. The selected historical consolidated financial
information as of June 30, 1996 and 1997 and for the six month periods then
ended, derived from the unaudited consolidated financial statements of NUMAR,
has been prepared on the same basis as the other financial statements of NUMAR
and, in the opinion of NUMAR, includes all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the
financial position and results of operations of NUMAR for such periods. The
information set forth below is qualified by reference to and should be read in
conjunction with the consolidated financial statements and related notes
included in NUMAR's Annual Report on Form 10-K for the year ended December 31,
1996 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 1997,
incorporated by reference in this Proxy Statement/Prospectus.
SIX MONTHS
YEARS ENDED DECEMBER 31 ENDED JUNE 30
------------------------------------------- -------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED INCOME
STATEMENT DATA:
Revenues................ $ 1,445 $ 4,121 $ 6,610 $10,239 $18,795 $ 7,079 $12,738
Cost of sales and
services............... 3,048 4,348 5,830 8,383 12,272 4,899 7,078
Depreciation of fixed
assets................. 612 1,257 1,505 2,448 4,000 1,845 2,269
Write-down of "B" Series
tools.................. -- -- 878 -- -- -- --
------- ------- ------- ------- ------- ------- -------
Gross profit (loss).... $(2,215) $(1,484) $(1,603) $ (592) $ 2,523 $ 335 $ 3,391
General and
administrative expense. 856 1,024 1,125 1,444 1,570 790 736
Research and development
expense................ 1,131 934 1,551 1,769 2,096 973 1,203
------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............ $(4,202) $(3,442) $(4,279) $(3,805) $(1,143) $(1,428) $ 1,452
Interest income......... -- -- 389 417 294 158 138
Interest expense........ (999) (1,572) (289) (35) (24) (15) (11)
Other income (expense).. 44 17 4 (34) (14) -- --
------- ------- ------- ------- ------- ------- -------
Income (loss) before
income taxes.......... $(5,157) $(4,997) $(4,175) $(3,457) $ (887) $(1,285) $ 1,579
Income tax expense
(benefit).............. -- 104 135 309 223 68 104
------- ------- ------- ------- ------- ------- -------
Net income (loss)...... $(5,157) $(5,101) $(4,310) $(3,766) $(1,110) $(1,353) $ 1,475
======= ======= ======= ======= ======= ======= =======
Net income (loss)
applicable to common
shares (a)............ $(6,044) $(5,985) $(4,310) $(3,766) $(1,110) $(1,353) $ 1,475
======= ======= ======= ======= ======= ======= =======
Net income (loss) per
common share (a)...... $(18.72) $(17.54) $ (0.63) $ (0.48) $ (0.13) $ (0.16) $ 0.17
======= ======= ======= ======= ======= ======= =======
Weighted average common
shares outstanding (b). 323 341 6,812 7,788 8,334 8,291 8,399
======= ======= ======= ======= ======= ======= =======
Supplementary pro forma
net loss per share (c). $ (0.52)
=======
Depreciation and
amortization........... $ 1,038 $ 1,499 $ 1,814 $ 2,811 $ 4,350 $ 2,068 $ 2,423
Research and development
expense................ 1,131 934 1,551 1,769 2,096 973 1,203
Capital expenditures.... 2,898 2,245 7,508 12,165 5,778 4,198 3,411
CONSOLIDATED BALANCE
SHEET DATA:
Working capital
(deficiency)........... $(5,384) $ 392 $ 8,952 $ 5,151 $ 4,135 $ 3,040 $ 5,320
Total assets............ 6,241 9,108 21,755 30,327 31,829 31,959 34,448
Total debt.............. 12,298 6,379 380 291 205 291 162
Redeemable preferred
shares................. 15,465 -- -- -- -- -- --
Shareholders' equity
(deficit).............. (22,229) (2,432) 15,033 19,674 19,130 18,847 20,845
- --------
(a) Net loss utilized in calculating net loss per share, on a historical basis,
has been increased by $887 and $883 for deemed dividends on preferred
shares for the years ended December 1992 and 1993, respectively.
(b) The weighted average number of shares is calculated based on common shares
issued and outstanding. The common share equivalents related to stock
options issued and all other common share equivalents are not included in
the per share calculations for periods in which NUMAR reported losses
because they are anti-dilutive. NUMAR's reorganization on December 31, 1993
increased the number of shares outstanding to 5,423 on that date. NUMAR's
initial public offering on April 14, 1994 further increased the number of
shares outstanding by 1,950, and NUMAR's public offering on July 25, 1995
increased the number of shares outstanding by an additional 900.
(c) NUMAR significantly changed its capital structure on December 31, 1993. The
supplementary pro forma net loss per common share has been computed by
adjusting the 1993 net loss and weighted average common shares outstanding
to show the effects of (i) the December 31, 1993 reorganization and (ii)
the repayment of the $5.4 million of subordinated debentures with a portion
of the proceeds of NUMAR's initial public offering as if these transactions
had occurred on January 1, 1993. These events, had they occurred on January
1, 1993, would have increased NUMAR's weighted average shares outstanding
by 6,921 shares and decreased the net loss applicable to common shares for
1993 by $2,199 by eliminating certain interest costs and dividend and
accretion charges required during 1993.
18
SELECTED UNAUDITED PRO FORMA COMBINED BALANCE SHEET INFORMATION
The following selected unaudited pro forma combined balance sheet information
has been derived from and should be read in conjunction with the unaudited pro
forma condensed combined balance sheet information and notes thereto included
elsewhere in this Proxy Statement/Prospectus, and is based on adjustments to
the historical consolidated balance sheets of Halliburton and NUMAR to give
effect to the Merger using the pooling of interests method of accounting for
business combinations. Halliburton considers the proposed transaction an
immaterial pooling of interests combination and will not restate its historical
financial statements subsequent to the Merger. Accordingly, unaudited pro forma
condensed combined income statements have not been presented. The following
selected unaudited pro forma combined balance sheet information may not
necessarily reflect the financial condition of Halliburton that would have
actually resulted had the Merger occurred as of the date indicated.
Intercompany transactions are not material to the selected unaudited pro forma
combined balance sheet information.
JUNE 30, 1997
-------------
(IN MILLIONS,
EXCEPT PER
SHARE DATA)
COMBINED BALANCE SHEET DATA:
Net working capital.............................................. $ 964.9
Total assets..................................................... 5,197.3
Property, plant, and equipment................................... 1,509.3
Long-term debt................................................... 425.1
Shareholders' equity............................................. 2,360.3
Total capitalization............................................. 2,952.1
Shareholders' equity per share (a)............................... 9.03
- --------
(a) Adjusted for the two-for-one Stock Split.
19
COMPARATIVE PER SHARE DATA
Set forth below are the income (loss) from continuing operations, cash
dividends and book value per common share data for each of Halliburton and
NUMAR on an historical basis and similar data on a pro forma basis for
Halliburton and on an equivalent pro forma basis for NUMAR. The Halliburton pro
forma data was derived by combining historical consolidated financial
information of Halliburton and NUMAR using the pooling of interests method of
accounting for business combinations. The equivalent pro forma data for NUMAR
was calculated by multiplying the Halliburton pro forma per common share data
by the Exchange Ratio of 0.9664 (adjusted for the Stock Split). While
Halliburton paid dividends of $0.125 per share of Halliburton Common Stock
(after adjustment for the Stock Split) during each calendar quarter of each
period presented, NUMAR paid no dividends during such periods.
The information set forth below should be read in conjunction with the
respective audited and unaudited consolidated financial statements and related
notes of Halliburton and NUMAR incorporated by reference in this Proxy
Statement/Prospectus and the unaudited pro forma condensed combined balance
sheet and notes thereto included elsewhere in this Proxy Statement/Prospectus.
Intercompany transactions are not material to the pro forma per common share
data.
SIX MONTHS
YEARS ENDED ENDED JUNE
DECEMBER 31, 30,
---------------------- -------------
1994 1995 1996 1996 1997
------ ------ ------ ------ -----
Halliburton Historical Per Common Share
Data (a):
Income (loss) from continuing
operations........................... $ 0.71 $ 1.00 $ 1.19 $ 0.47 $0.72
Cash dividends........................ 0.50 0.50 0.50 0.25 0.25
Book value............................ 8.44 7.71 8.62 8.00 9.24
Halliburton Pro Forma Per Common Share
Data (a) :
Income (loss) from continuing
operations........................... $ 0.67 $ 0.96 $ 1.15 $ 0.45 $0.71
Cash dividends........................ 0.50 0.50 0.50 0.25 0.25
Book value............................ 8.42 9.03
NUMAR Historical Per Common Share Data:
Income (loss) from continuing
operations........................... $(0.63) $(0.48) $(0.13) $(0.16) $0.17
Cash dividends........................ --- --- --- --- ---
Book value............................ 2.04 2.38 2.28 2.25 2.48
NUMAR Pro Forma Per Equivalent Common
Share Data (a):
Income (loss) from continuing
operations........................... $ 0.65 $ 0.93 $ 1.11 $ 0.43 $0.69
Cash dividends........................ 0.48 0.48 0.48 0.24 0.24
Book value............................ 8.14 8.73
- --------
(a) Adjusted for the two-for-one Stock Split.
20
THE COMPANIES
HALLIBURTON
Halliburton, whose predecessor was established in 1919, incorporated in
Delaware in 1924 and reorganized under the laws of the State of Delaware in
1996, together with its subsidiaries, is one of the world's largest
diversified energy services and engineering and construction services
companies.
DESCRIPTION OF SERVICES AND PRODUCTS. The following summary briefly
describes Halliburton's services and products for each business segment.
The energy group business segment ("Energy Group") offers a wide range of
services and products to provide integrated solutions to customers in the
exploration, development and production of oil and natural gas. The Energy
Group operates worldwide, serving major oil companies, independent operators
and national oil companies. The segment includes Halliburton Energy Services,
which offers drilling systems and services, pressure pumping equipment and
services, logging and perforating products and services, specialized
completion and production equipment and services and well control products and
services; Brown & Root Energy Services, which provides upstream oil and gas
engineering, construction, project management and maintenance activities,
subsea construction, fabrication and installation of subsea pipelines,
offshore platforms, and production platforms, marine engineering and other
marine related projects; Landmark Graphics Corporation, which provides
integrated exploration and production information systems and professional
services; and Halliburton Energy Development, which has been formed to create
business opportunities for the development, production and operation of
customers' oil and gas fields.
The engineering and construction group ("Engineering and Construction
Group") provides conceptual design, process design, detailed engineering,
procurement, project and construction management; construction of chemical
plants, petrochemical plants, refineries, pulp and paper mills, metal
processing plants, highways and bridges; technical and economic feasibility
studies, site evaluation, contract maintenance and operations and maintenance
services for both industry and government; engineering and environmental
consulting and waste management services for industry, utilities and
government; and remedial engineering and construction services for hazardous
waste sites.
MARKETS AND COMPETITION. Halliburton is one of the world's largest
diversified energy services and engineering and construction services
companies. Halliburton's services and products are sold in highly competitive
markets throughout the world. Competition in both services and products is
based upon a combination of price, service (including the ability to deliver
services and products on an "as needed, where needed" basis), product quality,
warranty and technical proficiency. Some customers have indicated a preference
for integrated services and solutions. These integrated solutions, in the case
of the Energy Group, relate to all phases of exploration and production of oil
and gas, and, in the case of the Engineering and Construction Group, relate to
all phases of design, procurement, construction, project management and
maintenance of a facility. Demand for these types of integrated solutions is
based primarily upon quality of service, technical proficiency and overall
price.
Halliburton conducts business worldwide in over 100 countries. Since the
market for Halliburton's services and products is so large and crosses many
geographic lines, a meaningful estimate of the number of competitors cannot be
made. The markets are, however, highly competitive with many substantial
companies operating in each market. Generally, Halliburton's services and
products are marketed through its own servicing and sales organizations. A
small percentage of sales of the Energy Group's products is made by supply
stores and third-party representatives.
Operations in some countries may be affected by unsettled political
conditions, expropriation or other governmental actions, and exchange control
and currency problems. Halliburton believes the geographic diversification of
its business activities reduces the risk that loss of its operations in any
one country would be material to the conduct of its operations taken as a
whole.
21
HOLDING COMPANY REORGANIZATION. Halliburton's predecessor (the
"Predecessor") reorganized its corporate structure on December 12, 1996 to
establish Halliburton as the parent corporation for the operating subsidiaries
(the "Reorganization"). In order to effect the Reorganization, the Predecessor
incorporated a new holding company (being Halliburton) as a wholly owned
subsidiary of the Predecessor and merged with an indirect, wholly owned
subsidiary of the new holding company. The merger was effected without a vote
of stockholders of the Predecessor pursuant to the provisions of the DGCL. In
connection with the merger, the name of the new holding company was changed to
"Halliburton Company" and all the issued common stock of the Predecessor was
converted into a like number of shares of common stock of the new holding
company (being Halliburton). The capital structure of Halliburton upon
completion of the Reorganization was the same as that of the Predecessor prior
to the merger.
MERGER SUB
Merger Sub is a wholly owned subsidiary of Halliburton incorporated on May
30, 1997 in the State of Delaware. Merger Sub has conducted no operations
other than those related to the transactions contemplated by the Merger
Agreement.
NUMAR
NUMAR designs, manufactures, and markets a patented, proprietary well
logging device, the MRIL(R) tool, which utilizes MRI technology, widely used
in medical diagnostic imaging devices, to evaluate subsurface rock formations
in newly-drilled oil and gas wells. The MRIL(R) tool is a commercially-
available well logging tool able to measure, in real time at the wellsite, the
proportion of fluid that is free to flow within a formation, effective
formation porosity, fluid viscosity and rock grain size, to perform DHT(R) and
to derive formation permeability. Further, a new application was introduced in
1996, which allows the MRIL(R) to identify clay bound water and thus determine
total porosity. The MRIL(R) tool addresses some of the limitations of
conventional well logging tools and has the capability of replacing a number
of such tools.
The MRIL(R) tool is compatible with the standard seven conductor wireline
cable used on well logging units and can be lowered into the hole
simultaneously with other wireline logging companies' tools using NUMAR's
switching sub. This procedure, however, does not allow for automatic
interpretation of the MRIL(R) log with other logs. Working with its industry
partners, NUMAR has fully integrated the MRIL(R) tool with the Western Atlas
Logging Services ("WALS") and Halliburton tool strings. NUMAR also provides
special processing and interpretation services of MRIL(R) data.
NUMAR's customers include both major oil companies, independent production
companies and NUMAR's industry partners, including WALS and Halliburton.
The well logging industry, one of the largest sectors of the oil field
services business, is dominated by Schlumberger, Ltd. Other major competitors
in the well logging industry include WALS and Halliburton. A large number of
small companies also compete in the wireline logging market. The major well
logging companies all have on-going tool development programs to upgrade and
improve their existing logging tools and to develop new technologies.
THE SPECIAL MEETING
DATE, TIME AND PLACE
The Special Meeting of Shareholders of NUMAR will be held on Tuesday,
September 30, 1997, at the offices of NUMAR, 508 Lapp Road, Malvern,
Pennsylvania, commencing at 9:00 a.m. local time.
22
PURPOSE OF THE SPECIAL MEETING
The purposes of the Special Meeting are to consider and vote upon (i) a
proposal to adopt the Merger Agreement and (ii) such other matters as may
properly be brought before the Special Meeting.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of NUMAR Common Stock at the close of business on the
Record Date (July 25, 1997) are entitled to notice of, and to vote at, the
Special Meeting. There were approximately 170 holders of record of NUMAR
Common Stock on the Record Date, with 8,418,541 shares of NUMAR Common Stock
issued and outstanding. Each share of NUMAR Common Stock entitles the holder
thereof to one vote on each matter submitted for shareholder approval. See
"Security Ownership by Certain Beneficial Owners" for information regarding
persons known to the management of NUMAR to be the beneficial owners of more
than 5% of the outstanding NUMAR Common Stock.
VOTING AND REVOCATION OF PROXIES
All properly executed proxies that are not revoked will be voted at the
Special Meeting in accordance with the instructions contained therein. If a
holder of NUMAR Common Stock executes and returns a proxy and does not specify
otherwise, the shares represented by such proxy will be voted "for" adoption
of the Merger Agreement in accordance with the recommendation of the Board of
Directors of NUMAR. A shareholder of NUMAR who has executed and returned a
proxy may revoke it at any time before it is voted at the Special Meeting by
(i) executing and returning a proxy bearing a later date, (ii) filing written
notice of such revocation with the Secretary of NUMAR, stating that the proxy
is revoked, or (iii) attending the Special Meeting and voting in person.
VOTE REQUIRED
The presence at the Special Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of NUMAR Common Stock entitled to vote
at the meeting will constitute a quorum for the transaction of business, and
adoption of the Merger Agreement requires the affirmative vote of a majority
of votes cast by all holders of NUMAR Common Stock entitled to vote thereon.
On the Record Date, there were 8,418,541 shares of NUMAR Common Stock
outstanding and entitled to vote at the Special Meeting. In determining
whether the Merger Agreement has received the requisite number of affirmative
votes, abstentions and broker non-votes will have the same effect as a vote
against the Merger Agreement.
Four directors of NUMAR, including Dr. Melvin N. Miller, the Chairman of the
Board, President and Chief Executive Officer, an affiliate of one of the
directors and a trust of which one of the directors is a beneficiary (such
director disclaims beneficial ownership of the shares held by such trust,
which shares represent approximately 10.7% of the outstanding shares of NUMAR
Common Stock entitled to vote at the Special Meeting) have entered into Voting
Agreements with Halliburton dated as of June 9, 1997 (the "Voting Agreements")
pursuant to which they have agreed to vote all shares of NUMAR Common Stock
owned by them in favor of the Merger Agreement. At the Record Date, an
aggregate of 1,938,290 shares of NUMAR Common Stock (representing
approximately 23.0% of the outstanding shares) entitled to vote at the Special
Meeting were subject to the Voting Agreements. See "Voting Agreements." The
signatories to the Voting Agreements (other than Halliburton) have also agreed
to vote such shares against any business combination proposal or other matter
that may interfere or be inconsistent with the Merger or the Merger Agreement
(including, without limitation, a Competing Transaction). The obligations of
the signatories to the Voting Agreements are not subject to the continued
support of the Board of Directors of NUMAR in recommending adoption of the
Merger Agreement (although the Voting Agreements would terminate upon a
termination of the Merger Agreement). See "Voting Agreements."
23
In addition, directors and officers of NUMAR, other than those party to the
Voting Agreements, owned beneficially an aggregate of 77,575 shares of NUMAR
common Stock that were issued and outstanding on the Record Date (representing
approximately 0.9% of the outstanding NUMAR Common Stock on the Record Date).
Each of such directors and officers has advised NUMAR that he or she intends
to vote or direct the vote of all such shares of NUMAR Common Stock in favor
of adoption of the Merger Agreement at the Special Meeting. See "Security
Ownership of Certain Beneficial Owners."
As a result, the affirmative vote of holders of only 34.3% of the
outstanding shares of NUMAR Common Stock entitled to vote at the Special
Meeting (other than shares subject to the Voting Agreements and shares held by
officers and directors of NUMAR) is required to approve and adopt the Merger
Agreement.
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers, employees and
agents of NUMAR may solicit proxies from its shareholders by personal
interview, telephone, telegram or otherwise. NUMAR will bear the costs of the
solicitation of proxies from its shareholders, except that Halliburton and
NUMAR will each pay one-half of the cost of printing this Proxy
Statement/Prospectus, Commission and other regulatory filing fees incurred in
connection with this Proxy Statement/Prospectus and the solicitation fee of
$8,500 described below. Arrangements will also be made with brokerage firms
and other custodians, nominees and fiduciaries who hold of record voting
securities of NUMAR for the forwarding of solicitation materials to the
beneficial owners thereof. NUMAR will reimburse such brokers, custodians,
nominees and fiduciaries for the reasonable out-of-pocket expenses incurred by
them in connection therewith. NUMAR has engaged the services of Georgeson &
Company Inc. to distribute proxy solicitation materials to brokers, banks and
other nominees and to assist in the solicitation of proxies from NUMAR
shareholders for a fee of $8,500 plus payment of certain transaction costs and
additional out-of-pocket expenses.
OTHER MATTERS
At the date of this Proxy Statement/Prospectus, the Board of Directors of
NUMAR does not know of any business to be presented at the Special Meeting
other than as set forth in the notice accompanying this Proxy
Statement/Prospectus. If any other matters should properly come before the
Special Meeting, it is intended that the shares represented by proxies will be
voted with respect to such matters in accordance with the judgment of the
persons voting such proxies.
A representative of Coopers & Lybrand L.L.P. is expected to be present at
the Special Meeting to make a statement if desired and to be available to
respond to any appropriate questions.
24
THE MERGER
GENERAL DESCRIPTION OF THE MERGER
The Merger Agreement provides that, at the Effective Time, Merger Sub will
be merged with and into NUMAR with NUMAR being the Surviving Corporation. Also
at the Effective Time, each outstanding share of NUMAR Common Stock (other
than shares of NUMAR Common Stock held in the treasury of NUMAR or owned by
Halliburton or by any direct or indirect wholly owned subsidiary of
Halliburton or of NUMAR and Dissenting Shares), will be converted into 0.9664
of one share of Halliburton Common Stock (after adjustment for the Stock
Split). Any resulting fractional shares will be settled in cash in the manner
described under "Certain Terms of the Merger Agreement--Manner and Basis of
Converting Shares."
Based on the number of shares of Halliburton Common Stock and NUMAR Common
Stock outstanding as of the Record Date, 8,135,678 shares of Halliburton
Common Stock will be issuable pursuant to the Merger Agreement (assuming no
exercise subsequent to the Record Dates and prior to the Effective Time of the
NUMAR Options), representing approximately 3.1% of the total Halliburton
Common Stock to be outstanding after such issuance.
BACKGROUND OF THE MERGER
On April 3, 1997, NUMAR received an unsolicited inquiry from Halliburton as
to whether NUMAR was interested in being acquired by Halliburton. At that
time, the management of NUMAR indicated that NUMAR was not for sale, but, if
Halliburton made an offer, management would bring such offer to the attention
of the Board of Directors of NUMAR. NUMAR had not considered, or received any
solicitation regarding, a business combination with another party since its
initial public offering in April 1994. NUMAR retained Schroder Wertheim to act
as its financial advisor in connection with a possible transaction subject to
negotiation and execution of a formal engagement letter. Schroder Wertheim
provided advice to NUMAR prior to being formally engaged as NUMAR's financial
advisor in the expectation that a formal engagement agreement would be entered
into in due course. On April 4, 1997, representatives from NUMAR, Schroder
Wertheim and counsel to NUMAR, in a telephone conference, discussed the
possibility of a merger between NUMAR and Halliburton. NUMAR's management
reported that Halliburton's representatives had stated that they contemplated
a merger of NUMAR with a subsidiary of Halliburton in which the NUMAR Common
Stock would be converted into Halliburton Common Stock that would constitute a
tax-free reorganization and, for financial accounting purposes, a pooling of
interests. The Halliburton representatives further indicated that a
Halliburton offer would be conditioned upon an exclusive acquisition agreement
between Halliburton and NUMAR, as well as a stock option agreement between
Halliburton and NUMAR and voting agreements between Halliburton and certain
affiliates of NUMAR. Immediately thereafter, a meeting was scheduled among
representatives of NUMAR and Halliburton and their financial and legal
advisors to be held on April 8, 1997 in Philadelphia to explore the
possibility of a business combination of NUMAR with Halliburton.
On April 8, 1997, Lester L. Coleman, Executive Vice President and General
Counsel of Halliburton, met in Philadelphia with Dr. Melvin N. Miller, the
Chairman of the Board, President and Chief Executive Officer of NUMAR, and
Edward P. Delson, Senior Vice President--Finance and Administration, Chief
Financial Officer and Treasurer of NUMAR, together with the financial and
legal advisors to Halliburton and NUMAR. At that time, Halliburton made an
initial proposal to acquire NUMAR in a merger with a wholly owned subsidiary
of Halliburton in which the outstanding NUMAR Common Stock would be converted
into Halliburton Common Stock. Halliburton's initial proposal contemplated a
fixed conversion ratio that would imply a value of $30.00 per share of NUMAR
Common Stock. The closing sales price for the NUMAR Common Stock on April 7,
1997 was $19.00. Halliburton's representatives indicated that, if NUMAR were
to be acquired by Halliburton, it would be Halliburton's intention (i) to
continue NUMAR's current operations in Pennsylvania, (ii) to continue to
employ NUMAR's key technical and other personnel and (iii) eventually to
consolidate NUMAR's field operations with those of Halliburton. Halliburton
advised NUMAR that Halliburton did not want to jeopardize the existing
business relationship between the two companies by precipitating an auction
for NUMAR and accordingly advised NUMAR that its initial proposal was
conditioned on maintenance of confidentiality of the proposal and that it
would be withdrawn if NUMAR believed it would compel an auction of NUMAR.
NUMAR's representatives told Halliburton that, although NUMAR was not for
sale, they would submit Halliburton's proposal to the Board of Directors of
NUMAR for its consideration.
25
On April 17, 1997, NUMAR formally engaged Schroder Wertheim to act as its
financial advisor in connection with the Merger.
The Board of Directors of NUMAR met with its financial and legal advisors on
April 18, 1997 in New York and received a report from Schroder Wertheim
regarding Halliburton's initial proposal. Schroder Wertheim also made a
presentation to the Board of Directors of NUMAR regarding the various methods
it used to derive a valuation of NUMAR. (For additional information regarding
the presentation by Schroder Wertheim, see "The Merger--Opinion of Financial
Advisor to NUMAR.") The Board of Directors of NUMAR discussed with its
financial and legal advisors the business prospects of NUMAR, the potential
existence of any events or agreements that could influence the share value of
NUMAR and the likelihood of receiving any offers from third parties to acquire
NUMAR. While the Board of Directors considered seeking business combination
proposals from other parties, it chose not to do so, primarily because of
Halliburton's concern for confidentiality and the likelihood that to do so
would cause Halliburton to withdraw its proposal and to withdraw from further
discussions. Additionally, the Board of Directors of NUMAR discussed the
fiduciary responsibilities of directors under Pennsylvania law with counsel to
NUMAR. In light of the conversations that occurred during the course of the
meeting, the Board of Directors of NUMAR voted to reject Halliburton's initial
offer and to authorize its representatives to contact Halliburton and attempt
to solicit a higher bid.
On April 23, 1997, NUMAR engaged B. G. Consulting Corporation ("B.G.
Consulting") to assist NUMAR in the negotiation process with a view toward
obtaining greater consideration for the shareholders of NUMAR in the Merger.
B. G. Consulting was engaged because of its expertise in negotiating
transactions involving technology companies and was not engaged to render any
report, opinion or appraisal with respect to the Merger or the Exchange Ratio.
On April 23, 1997, NUMAR's financial advisors met with Halliburton's
financial advisors at the New York office of Schroder Wertheim. NUMAR's
financial advisors informed Halliburton's representatives during the course of
the meeting that NUMAR was not for sale. Additionally, NUMAR's financial
advisors stated that the Board of Directors of NUMAR believed that
Halliburton's offer of $30.00 per share of NUMAR Common Stock was inadequate
and had rejected Halliburton's initial proposal.
The Board of Directors of NUMAR met again by telephone conference on May 2,
1997 with the Board's financial advisors in attendance during the call. The
Board of Directors discussed its dissatisfaction with the price offered by
Halliburton, and expressed the view that a significantly higher bid by
Halliburton would be required in order to compensate shareholders fully for
their NUMAR Common Stock and to justify the Board's approval of an exclusive
acquisition agreement as requested by Halliburton. The Board of Directors of
NUMAR also discussed the likelihood that NUMAR would receive an offer for a
higher price from any other potential acquiror and concluded that NUMAR's
value to other strategic acquirors was not likely to be higher than its value
to Halliburton. The Board of Directors of NUMAR also concluded, based on
conversations with its financial advisors, that Halliburton's offer of an
exchange ratio based on $30.00 per share of NUMAR Common Stock was within the
range of prices offered in comparable transactions in the technology industry.
On May 5, 1997, NUMAR's financial advisors met with representatives of
Halliburton and its financial advisors in New York. During the course of the
meeting, NUMAR's financial advisors reiterated the position of the Board of
Directors of NUMAR that Halliburton's current offer of a conversion ratio
based on $30.00 per share of NUMAR Common Stock was inadequate. Halliburton
then, through its financial advisors, increased its bid by revising the
proposed conversion ratio to indicate an implied value to NUMAR's shareholders
of $33.00 per share based on a value of $70.25 per share of Halliburton Common
Stock. The closing sales price for the NUMAR Common Shares on May 5, 1997 was
$21.25. Halliburton's representatives also expressed a desire to complete
negotiations in time to present a concrete proposal to the Board of Directors
of Halliburton for its consideration at the board meeting to be held on May
20, 1997.
The following day, the Board of Directors of NUMAR again met with its
financial and legal advisors by telephone conference to discuss the revised
Halliburton offer. The Board of Directors and management of NUMAR discussed
extensively with its financial and legal advisors the likelihood of NUMAR
receiving a rival offer from other potential acquirors, as well as the
purchase price such potential acquirors might be willing to offer. The Board
of Directors of NUMAR determined that Halliburton was the most likely company
of all the
26
potential acquirors to pursue a business combination with NUMAR at a higher
price and agreed that the best strategy would be to counter Halliburton's then
pending offer by proposing a merger transaction with a conversion ratio with
an implied value of $36.00 per share of NUMAR Common Stock. The Board of
Directors of NUMAR authorized such counteroffer subject to (i) the results of
a meeting between Dr. Miller, Chairman of the Board, President and Chief
Executive Officer of NUMAR, and Richard B. Cheney, Chairman of the Board,
President and Chief Executive Officer of Halliburton (which occurred on May
29, 1997) and (ii) the negotiation of acceptable agreements to document the
terms of the proposed merger.
On May 9, 1997, the Board of Directors of NUMAR met again with its financial
advisors by telephone conference to discuss the likelihood of NUMAR receiving
an offer from a potential third party acquiror and whether or not such
potential acquiror would be likely to make an offer superior to the one made
by Halliburton.
On May 20, 1997, the Board of Directors of Halliburton authorized a revised
offer to NUMAR that included a fixed conversion ratio of 0.4832 of one share
of Halliburton Common Stock (before giving effect to the Stock Split) for each
share of NUMAR Common Stock. The revised offer would imply a value of $36.00
per share of NUMAR Common Stock based on the closing price of Halliburton
Common Stock on May 19, 1997 of $74.50 per share. Later that day,
representatives of Halliburton conveyed the revised offer to representatives
of NUMAR. The closing sales price for NUMAR Common Stock on May 20, 1997 was
$20.50 per share.
On May 21, 1997, the Board of Directors of NUMAR held a telephonic board
meeting during which it discussed with its financial advisors the latest
information received from Halliburton. The Board of Directors of NUMAR was
informed of the revised offer from Halliburton. NUMAR's financial advisors
informed the Board of Directors of NUMAR that the conversion ratio contained
in the revised offer was less than the conversion ratio of 0.5125 proposed in
NUMAR's counteroffer. The Board of Directors of NUMAR considered the recent
price appreciation of Halliburton Common Stock and the potential exposure to
declines in the price of Halliburton Common Stock. Additionally, the directors
discussed with NUMAR's financial advisors contractual provisions that could be
used to limit such exposure. As a result of these discussions, the Board of
Directors of NUMAR voted to approve Halliburton's offer subject to (i) the
implementation of contractual provisions to limit such exposure to declines in
the price of Halliburton Common Stock and (ii) the outcome of the meeting
between Dr. Miller and Mr. Cheney.
The following day, May 22, 1997, representatives of NUMAR, Halliburton and
their financial advisors conferred by telephone. Halliburton's representatives
were informed that Halliburton's latest proposal was acceptable to the Board
of Directors of NUMAR subject to (i) a satisfactory meeting between Dr. Miller
and Mr. Cheney, (ii) the negotiation of acceptable merger documents and (iii)
the acceptance by Halliburton of a variable conversion ratio that would imply
a value of $36.00 per share of NUMAR Common Stock if the price of Halliburton
Common Stock fell below $70.25 per share. The Halliburton representatives
objected to the third condition on the basis that a fixed conversion ratio was
essential in order to permit Halliburton to offer as high a conversion ratio
as it had in its last proposal. NUMAR's representatives indicated that they
would need to discuss Halliburton's position with respect to the variable
conversion ratio with the Board of Directors of NUMAR before they could
respond.
Later that day, NUMAR's financial advisors spoke with Dr. Miller and relayed
to him the substance of their earlier conversations with representatives of
Halliburton and Halliburton's financial advisors. Dr. Miller, after consulting
individually with each other member of NUMAR's Board of Directors, indicated
that NUMAR accepted Halliburton's rationale for a fixed conversion ratio and
withdrew its request for a variable conversion ratio and accept Halliburton's
most recent proposal.
On May 27, 1997, prior to Halliburton's commencing its due diligence review
of NUMAR, Halliburton and NUMAR executed and delivered a Mutual
Confidentiality Agreement. Halliburton's representatives conducted their
financial and legal due diligence review at the offices of NUMAR's corporate
counsel in Philadelphia through May 29, 1997. Halliburton's patent counsel
began their due diligence review at the Philadelphia offices of NUMAR's
corporate counsel on May 27, 1997, continued its efforts at the New York
offices of NUMAR's patent counsel on May 28, 1997 and completed their due
diligence review in the offices of NUMAR's corporate counsel in Philadelphia
on May 29, 1997.
27
On May 29, 1997, Dr. Miller met in Philadelphia with Mr. Cheney to discuss
their views concerning the wireline logging business, NUMAR's involvement in
that business, Dr. Miller's views concerning the future of its MRIL(R) tool
and the related technology and Halliburton's views of the compatibility of the
business and organization of NUMAR and those of Halliburton. They also
discussed the anticipated relationship of Dr. Miller, as President of NUMAR
after the Merger, to the other senior management of Halliburton. The two chief
executive officers concluded that the business and organizations of NUMAR and
Halliburton were compatible and that the merger discussions should continue.
They did not discuss the financial or other terms of the Merger.
On May 30, 1997, Halliburton's legal counsel provided NUMAR and its
financial and legal advisors with drafts of the Merger Agreement, Stock Option
Agreement and Voting Agreements for their consideration. Thereafter,
representatives of Halliburton and NUMAR and their financial and legal
advisors initiated discussions regarding the terms and provisions of the
Merger Agreement, Stock Option Agreement and Voting Agreements at the
Washington, D.C. offices of Halliburton's legal counsel on June 4, 1997. Such
negotiations continued at such offices and by telephone conference thereafter
through the morning of June 9, 1997. Drafts of the Executive Employment
Agreements Halliburton proposed to enter into with the executive officers of
NUMAR were delivered to representatives of NUMAR on June 5, 1997. Negotiations
with respect to the Executive Employment Agreements were conducted directly by
Halliburton and such employees and were completed by June 9, 1997.
Both the Board of Directors of NUMAR and the Board of Directors of
Halliburton, at special meetings thereof held on June 9, 1997, considered the
Merger Agreement, Stock Option Agreement, Voting Agreements and Executive
Employment Agreements.
During the course of the special meeting of the Board of Directors of NUMAR,
the financial and legal advisors of NUMAR provided the Board of Directors of
NUMAR with their analysis of the proposed Merger. Counsel to NUMAR explained
the terms of the Merger Agreement and the Stock Option Agreement to the Board
of Directors of NUMAR. Additionally, counsel reminded the Board of Directors
of NUMAR of their fiduciary duties under Pennsylvania law. Schroder Wertheim
advised the Board of Directors of NUMAR that, as of that date and based on
certain matters discussed during the course of the Special Meeting, in the
opinion of Schroder Wertheim, the Exchange Ratio was fair from a financial
point of view to the holders of shares of NUMAR Common Stock. While B.G.
Consulting was not engaged to render any report, opinion or appraisal with
respect to the Merger or the Exchange Ratio, Bernard Goldstein, a principal of
B.G. Consulting Corp. present at the meeting, having listened to the
presentation by Schroder Wertheim, expressed the unsolicited oral view, based
on such presentation and B.G. Consulting's participation in the negotiation
process, that he concurred in their analysis. Written confirmation of such
view was neither requested nor provided. (For additional information regarding
the opinion of Schroder Wertheim, see "The Merger--Opinion of Financial
Advisor to NUMAR.") Following such presentations, the Board of Directors of
NUMAR concluded that the proposal presented by Halliburton was in the best
interests of NUMAR and unanimously approved the Merger Agreement, the Stock
Option Agreement and the Executive Employment Agreements and recommended that
the shareholders of NUMAR vote for adoption of the Merger Agreement. For more
detailed discussions of the Merger Agreement and the Stock Option Agreement,
see "Certain Terms of the Merger Agreement" and "Stock Option Agreement." For
a more detailed discussion of the Employment Agreements, see "The Merger--
Interests of Certain Persons in the Merger--Employment Agreements".
At its special meeting on June 9, 1997, the Board of Directors of
Halliburton approved the transactions contemplated by the Merger Agreement.
The Merger Agreement and related documents were executed and delivered by
the parties thereto on June 10, 1997.
CERTAIN INFORMATION PROVIDED
In connection with the discussions between Halliburton and NUMAR described
above, NUMAR provided to Halliburton a summary of the NUMAR consolidated
budget for the year ending December 31, 1997 (the
28
"1997 Budget"). The 1997 Budget was developed for internal use only, was not
prepared with the intent that it would be publicly distributed, was based on
numerous assumptions (many of which are beyond the control of NUMAR) and is
not necessarily indicative of future results. The 1997 Budget estimated 1997
revenues at approximately $28.9 million. See "Available Information--Forward-
Looking Information."
In connection with its engagement, Schroder Wertheim, NUMAR's financial
advisor, in conjunction with management of NUMAR, prepared (i) a financial
model for NUMAR by extrapolating the consolidated results of operations and
cash flows for the five years ending December 31, 2001 from the 1997 Budget
(the "Financial Model") and (ii) estimates of the synergies (reduction in
operating expenses and increase in revenues) that would result from the
combination of Halliburton and NUMAR. The Financial Model and estimated
synergies were developed solely for use by Schroder Wertheim in its analysis
of the value of NUMAR and to assist it in providing financial advice to NUMAR
with respect to a business combination transaction.
The Financial Model assumed sales growth of 84% between 1997 and 1998, 59%
between 1998 and 1999, 60% between 1999 and 2000 and 50.5% between 2000 and
2001, which implies a compound average annual growth in revenue of 61% between
1997 and 2001. The assumptions also assume an increase in NUMAR's operating
margins from 3.2% in 1997 to 49.0% in 2001. The Financial Model assumes the
number of MRIL(R) logging tools, including those operated by NUMAR and those
that are sold directly to industry partners, grows from 47 in 1997 to 282 in
2001. NUMAR does not intend and, if the Merger is consummated, Halliburton
does not intend, by disclosing information regarding these financial
projections, that such disclosure shall constitute a current projection of
revenues or operating income for such periods. Moreover, if the Merger is
consummated, Halliburton does not intend to report separately the results of
operations of NUMAR. See "Available Information--Forward-Looking Information."
The anticipated reduction in operating expenses and general and
administrative expenses resulting from a combination of Halliburton and NUMAR
was estimated to be approximately $7 million in the aggregate over the five
year period ended December 31, 2001 and the anticipated increase in revenues
of the combined enterprise with respect to open hole wire line operations,
formation evaluation and measurement while drilling operations and integrated
service operations through increased market share was estimated to range from
$135 million to $181 million in the aggregate over the same period. The
estimated increase in revenues was based on a number of assumptions, including
(i) market conditions in the oil and gas services industry which industry is
heavily dependent on the price of oil and gas, the level of development
activity, the availability of alternative energy resources and overall global
economic conditions; (ii) market demand for the oil and gas services to be
offered by the combined enterprise; (iii) the incremental attractiveness to
the customers of each enterprise and the ability of the combined enterprise to
provide a broader range of services; and (iv) the potential barriers to
competitors to develop a competitive range of services. These assumptions are
subject to a number of risks and uncertainties, many of which will be beyond
the control of the combined enterprise, and, as a result, the actual increase
in revenues may differ significantly from such estimate.
In connection with NUMAR's investigation of the business, operations and
prospects of Halliburton prior to executing and delivering the Merger
Agreement, representatives of NUMAR's financial advisors interviewed several
officers of Halliburton and its units regarding the general business prospects
of Halliburton. Halliburton does not prepare long range financial projections
and, accordingly, did not provide any such financial projections to NUMAR or
its financial advisors.
HALLIBURTON'S REASONS FOR THE MERGER
The Board of Directors of Halliburton believes that the Merger will
represent a significant step in achieving an important Halliburton objective:
to offer customers a complete array of oil field services. The Board of
Directors also believes that the Merger will strengthen Halliburton's position
in the provision of formation evaluation services.
Management of Halliburton expects that the Merger will allow Halliburton to
help NUMAR accelerate development, delivery and application of MRIL(R)
technology to the benefit of customers by utilizing Halliburton's worldwide
infrastructure in the oil and gas industry and that synergies will be achieved
through integration of NUMAR's tools and services with existing oil field
products and services of Halliburton. The Board of Directors believes that
NUMAR has established itself as an industry leader with its proprietary
MRIL(R) and DHT(R) technology and that, while the technology is currently
applied to a small percentage of wells drilled worldwide, the future growth
opportunities are significant.
29
The Board of Directors of Halliburton determined that the Merger is in the
best interests of Halliburton and its stockholders. In reaching its
determination, the Board of Directors considered a number of factors,
including the matters discussed above and the following: (i) the judgment,
advice and analyses of management of Halliburton, including its favorable
recommendation of the Merger; (ii) the technological achievements of NUMAR and
especially its development of the MRIL(R) technology, (iii) the financial
condition and results of operations of Halliburton and NUMAR on an historical
basis and a pro forma combined enterprise basis for both historical and
certain future periods; (iv) the synergies and operating efficiencies that are
expected to be achieved as a result of the Merger; (v) the strategic benefits
of the Merger to Halliburton, including the advancement of its objective to
provide a complete array of oil field services to its customers; (vi) the
terms of the Merger Agreement and related agreements, including price and
structure, which were considered by both management and the Board of Directors
of Halliburton to provide an equitable basis for the Merger; (vii) the adverse
competitive effect on Halliburton if a competitor should acquire NUMAR; (viii)
the historical market prices and trading information with respect to the
Halliburton Common Stock and the NUMAR Common Stock; (ix) the ability to
effect the Merger on both a tax-free basis and as a pooling of interests for
financial accounting purposes; and (x) the significantly enhanced position of
the combined enterprise in the market for the provision of formation
evaluation services in the oil field industry.
In evaluating the Merger, the Board of Directors of Halliburton considered
that the Merger would have certain dilutive effects on the pro forma income
per share of the combined companies. The Board of Directors also evaluated the
risks, inherent in any transaction such as the Merger, that currently
unanticipated difficulties could arise in integrating the operations and that
the synergies expected from combining the operations of NUMAR with those of
Halliburton may not be realized or, if realized, may not be realized within
the period expected.
In analyzing the proposed Merger, the Board of Directors of Halliburton did
not view any single factor as determinative and did not quantify or assign
weight to any of the factors. Rather, the Board of Directors of Halliburton
made its determination based on the total mix of information available to it.
NUMAR'S REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS OF
NUMAR
The Board of Directors of NUMAR has determined that the Merger is fair to
and in the best interests of NUMAR. In making such determination, the Board of
Directors of NUMAR considered, among other things, the following factors,
which constitute all the material factors considered:
(i) The historical and recent market prices of shares of NUMAR Common
Stock and the fact that approval of the Merger Agreement would enable the
holders of such shares to realize a significant premium over the prices at
which such shares are currently trading. On May 22, 1997, the date that
NUMAR agreed to the Exchange Ratio, the Exchange Ratio implied a value of
$36.00 price per share of NUMAR Common Stock based on the closing price per
share of Halliburton Common Stock of $74.50, resulting in a 75.6% premium
over NUMAR's closing price per share of $20.50. On June 9, 1997, the day
immediately prior to the public announcement of the Merger, the Exchange
Ratio implied a premium of 93.3% based on the closing prices of Halliburton
Common Stock ($82.00) and NUMAR Common Stock ($20.50);
(ii) The historical and recent market prices of the shares of the
Halliburton Common Stock, as well as its prominence as an industry leader.
Halliburton's historical performance when compared to the historical
performance of other competitors in the industry has led management to
believe that the long term growth opportunity presented to NUMAR and its
shareholders through a merger with a wholly owned subsidiary of Halliburton
compares very favorably to that presented by a business combination with
any of Halliburton's competitors in the industry and is superior to NUMAR
remaining an independent public company;
(iii) The opinion of Schroder Wertheim dated June 9, 1997 to the effect
that, as of such date and based on certain matters stated therein, the
Exchange Ratio is fair to NUMAR's shareholders from a financial point of
view. The Board of Directors did not consider the unsolicited oral
concurrence by Bernard Goldstein, a principal of B.G. Consulting, in the
analysis presented by Schroder Wertheim to be material in arriving at the
Board's determination as to the fairness of the Exchange Ratio;
(iv) Management's view that the transactions contemplated by the Merger
Agreement would result in significant efficiencies, operating benefits and
commercial and other synergies attainable through the combination of
NUMAR's technology with Halliburton's significant financial resources and
much larger field operations and marketing capabilities; that, while the
reduction in operating expenses and general and administrative expenses
would be modest, the increase in revenues of the combined enterprise with
respect
30
to open hole wire line operations, formation evaluation and measurement
while drilling operations and integrated service operations through
increased market share was expected to be significant (see "--Certain
Information Provided" for a further information regarding such anticipated
synergies); that such efficiencies, benefits, and synergies would benefit
NUMAR and its customers and be in the public interest, and that such
efficiencies, benefits and synergies would benefit NUMAR's shareholders
through their continued interest in the combined company;
(v) Management's view that the efficiencies, benefits and synergies that
would result pursuant to the consummation of the transactions contemplated
by the Merger Agreement would better meet the needs of NUMAR's
constituencies than would combinations with other potential suitors.
Management has based the conclusions set forth in this section and the
previous section on the representations Halliburton has made with respect
to (a) maintaining NUMAR's Malvern facility; (b) continuing to employ
substantially all of NUMAR's employees in much the same fashion as they are
currently being employed by NUMAR, including maintaining the benefits
currently provided by NUMAR until such benefits can gradually be phased out
in favor of the benefit programs provided by Halliburton; and (c)
maintaining the customer relationships and performance currently provided
by NUMAR.
(vi) The benefits that the transactions contemplated by the Merger
Agreement would provide to the customers of both NUMAR and Halliburton,
including enhanced services and the benefits that can be provided by a
combined company with the financial strength to support substantial
research and development;
(vii) The benefits provided generally to the communities served by NUMAR,
and particularly to the local communities in Pennsylvania, by maintaining
NUMAR's Malvern facility and maintaining the field operations of NUMAR for
at least the short term (Halliburton had advised NUMAR that Halliburton
intended to maintain NUMAR's field operations until late 1997 or early 1998
and then blend them into Halliburton's field operations without any
anticipated termination of NUMAR employees);
(viii) The fact that each of the current executive officers of NUMAR has
entered into an employment agreement effective as of the Effective Time and
will therefore be able to continue the pursuit of their strategic view of
the future of NUMAR;
(ix) The intended advantageous tax treatment of the transactions
contemplated by the Merger Agreement as a tax-free reorganization;
(x) Management's belief that other potential suitors might be competitors
in the oil field services industry and that any combination with such a
company could present more serious antitrust concerns than those presented
by the Merger and could prevent the consummation of the proposed third-
party transaction; and
(xi) The friendly and cooperative working relationships that have existed
between NUMAR and Halliburton in connection with the provision of
engineering support by NUMAR to Halliburton pursuant to the license
agreement entered into in March 1996 as well as the interaction of each
party's personnel through the administration of that agreement.
The Board of Directors of NUMAR also considered the following negative
factors: (i) the fact that the execution of the Merger Agreement would
contractually prohibit it from soliciting or facilitating other offers from
third parties; and (ii) the potentially adverse effect the Merger may have on
the employees of NUMAR'S various field offices in the long term. In the view
of the Board of Directors of NUMAR, these considerations were not sufficient,
either individually or together, to outweigh the advantages of the proposed
combination in the manner in which it was proposed.
With respect to the possibility that the Merger might foreclose other
options that could be viewed as preferable, the Board of Directors of NUMAR
took into consideration the fact that, under Pennsylvania law, directors of
Pennsylvania corporations may, after considering all of the factors involved
in a proposed transaction, bind the corporation to a business combination
agreement that the Board of Directors believes is fair
to and in the best interests of the corporation, even in the face of a
subsequent, arguably superior proposal. Moreover, management and the Board of
Directors of NUMAR believe that the shareholders of NUMAR could vote against
the Merger if a third party should commence a tender or exchange offer that
was regarded as superior to the Merger transaction. See "Certain Terms of the
Merger Agreement--No Solicitation."
31
In evaluating the fairness of the Merger to NUMAR, the Board of Directors of
NUMAR considered the interests of NUMAR, the shareholders of NUMAR and various
constituencies of NUMAR and gave no special consideration to any constituency,
individual or group of shareholders. The composite mix of information
available to the Board of Directors with respect to the Merger included
information regarding the matters enumerated above. While this information was
considered by the Board of Directors of NUMAR, the Board of Directors did not
evaluate and make determinations with respect to each such factor. Rather, the
Board of Directors made its determination with respect to the Merger based on
the total mix of information available to it and the judgments of individual
directors may have been influenced to a greater or lesser degree by differing
factors.
THE BOARD OF DIRECTORS OF NUMAR HAS UNANIMOUSLY DETERMINED THAT THE MERGER
IS FAIR TO, AND IN THE BEST INTERESTS OF, NUMAR AND UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE FOR ADOPTION OF THE MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR TO NUMAR
Schroder Wertheim was retained by NUMAR to act as its financial advisor in
connection with the Merger and related matters based upon Schroder Wertheim's
experience and expertise. At the April 18, 1997 meeting of the Board of
Directors of NUMAR, Schroder Wertheim made a preliminary presentation which
included an analysis of NUMAR's value on a discounted cash flow basis; a
comparable company analysis; a comparable transaction analysis; and an
analysis of the dilutive effect of the Merger on Halliburton's pro forma
earnings per share. These analyses were substantially identical to the
analyses described below with respect to the opinion rendered at the June 9,
1997 meeting of the Board of Directors of NUMAR, except that (a) fewer
comparable transactions were considered and described than in the June 9, 1997
presentation; (b) the presentation on April 18, 1997 did not include an
analysis of premiums paid in all major public transactions since 1992; and (c)
the presentation on April 18, 1997 included an analysis of NUMAR's possible
value to certain other potential acquirors. This latter analysis, based in
part on hypothetical assumptions regarding cost savings, synergies and market
shares, implied a discounted cash flow value range that was greater than the
values produced by comparable calculations with respect to four of
Halliburton's principal competitors and suggested that, of the group of
potential acquirors considered, NUMAR was likely to be of the greatest value
to Halliburton. At the June 9, 1997 meeting of the Board of Directors of
NUMAR, Schroder Wertheim rendered to the Board of Directors of NUMAR its
written opinion, which was confirmed as of the date of this Proxy
Statement/Prospectus, to the effect that, as of such dates and based on
certain matters stated therein, the Exchange Ratio pursuant to the Merger
Agreement was fair, from a financial point of view, to the holders of shares
of NUMAR Common Stock. Schroder Wertheim has consented to the inclusion of its
written opinion in this Proxy Statement/Prospectus.
A COPY OF THE SCHRODER WERTHEIM OPINION DATED AS OF THE DATE HEREOF, WHICH
SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
SCOPE OF REVIEW UNDERTAKEN BY SCHRODER WERTHEIM, IS ATTACHED AS APPENDIX D TO
THIS PROXY STATEMENT/PROSPECTUS. SCHRODER WERTHEIM ADDRESSED ITS OPINION TO
THE BOARD OF DIRECTORS OF NUMAR AND SUCH OPINION IS DIRECTED ONLY TO THE
FAIRNESS OF THE EXCHANGE RATIO FROM A FINANCIAL POINT OF VIEW AND DOES NOT
ADDRESS THE MERITS OF THE UNDERLYING DECISION OF NUMAR TO ENGAGE IN THE MERGER
OR CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER
SHOULD VOTE ON THE PROPOSED MERGER. THE SUMMARY OF THE SCHRODER WERTHEIM
OPINION SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE SCHRODER WERTHEIM OPINION WHICH
IS ATTACHED HERETO AS APPENDIX D.
In arriving at its Opinion, Schroder Wertheim (i) analyzed certain publicly
available financial statements and other information of NUMAR; (ii) analyzed
certain publicly available financial statements and other information of
Halliburton; (iii) analyzed certain internal financial statements and other
financial operating data concerning NUMAR prepared by the management of NUMAR;
(iv) considered certain prospective financial information provided by the
management of NUMAR; (v) discussed the past and current business operations
32
and financial condition and the prospects of NUMAR with senior executives of
NUMAR; (vi) discussed the past and current business operations and financial
condition and the prospects of Halliburton with senior executives of
Halliburton and analyzed the pro forma impact of the Merger on Halliburton's
earnings per share, consolidated capitalization and financial ratios; (vii)
reviewed the reported prices and trading activity for NUMAR Common Stock;
(viii) reviewed the reported prices and trading activity for the Halliburton
Common Stock; (ix) compared the financial performance of NUMAR Common Stock
and the prices, trading activity and trading multiples of NUMAR Common Stock
with that of certain other comparable publicly traded companies and their
securities; (x) compared the financial performance of Halliburton and the
prices, trading activity and trading multiples of the Halliburton Common Stock
with that of certain other comparable publicly traded companies and their
securities; (xi) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions; (xii) participated
in discussions and negotiations among representatives of NUMAR, Halliburton
and certain other parties and their financial and legal advisors; (xiii)
reviewed the Merger Agreement and certain related documents; and (xiv)
performed such other analyses as it deemed appropriate (none of which analyses
referenced in this clause (xiv) was material to Schroder Wertheim in arriving
at its Opinion). Schroder Wertheim has consented to the inclusion of its
Opinion in this Proxy Statement/Prospectus.
In rendering its opinion, Schroder Wertheim assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by Schroder Wertheim for purposes of its opinion. With respect to
financial projections, Schroder Wertheim assumed that they had been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the future financial performance of NUMAR. Schroder Wertheim did
not make an independent valuation or appraisal of the assets or liabilities of
NUMAR or Halliburton, nor was Schroder Wertheim furnished with any such
appraisals. Schroder Wertheim assumed that the Merger will be accounted for as
a "pooling of interests" business combination in accordance with United States
generally accepted accounting principles and will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code. Schroder
Wertheim also assumed that the Merger will be consummated in accordance with
the terms set forth in the Merger Agreement. The Schroder Wertheim Opinion is
necessarily based on economic, market and other conditions as in effect on,
and the information made available to Schroder Wertheim as of, the date
thereof.
The following is a brief summary of certain analyses performed by Schroder
Wertheim and reviewed with the Board of Directors of NUMAR at its meeting on
June 9, 1997 as the basis for the Schroder Wertheim opinion dated June 9,
1997, as well as the Schroder Wertheim Opinion.
COMPARABLE COMPANY ANALYSIS. Schroder Wertheim prepared a comparable company
analysis that compared different valuation multiples which relate share price
to historical and projected earnings for NUMAR and a selected group of peer
companies. Schroder Wertheim analyzed the trading performance of NUMAR and a
group of companies in the oil field services sector (the "Comparable
Companies"). Companies in this group include: Western Atlas, Inc.,
Schlumberger, Ltd., Halliburton Company, Petroleum Geo-Services A/S,
Input/Output Inc., GeoSciences Corp. and Seitel, Inc. The Comparable Companies
were selected based on general business, operating and financial
characteristics representative of companies in industries in which NUMAR
operates. This analysis seeks to impute enterprise value and market price from
the multiples applicable to the Comparable Companies. NUMAR currently lacks
the operating history and stability of revenues and earnings of the Comparable
Companies. As a result, NUMAR currently has higher ratios than the Comparable
Companies. Valuation multiples, however, typically diminish with maturity and
size and therefore were considered to provide an appropriate indicator of
future enterprise value for NUMAR. Historical financial information used in
connection with the ratios provided below with respect to the Comparable
Companies is as of the most recent financial statements publicly available for
each company. Market information used in calculating the ratios below was as
of June 5, 1997. Revenues, earnings before interest, taxes, depreciation and
amortization ("EBITDA") and cash flow estimates for NUMAR and the Comparable
Companies were provided by Investext(R) Group (a division of Thomson Financial
Networks). Earnings per share ("EPS") estimates for NUMAR, Halliburton and the
Comparable Companies were median analyst estimates provided by FIRST CALL.
Schroder Wertheim analyzed the relative performance and value for NUMAR by
comparing certain market trading statistics for NUMAR with the Comparable
Companies. Among the market trading information
33
considered in the valuation analysis were the ratios of (i) enterprise value,
defined as market price times outstanding shares plus total debt less cash, to
revenue estimates for 1997 and 1998; (ii) enterprise value to EBITDA estimates
for 1997 and 1998; (iii) market price times outstanding shares to cash flow
estimates for 1997 and 1998; and (iv) market price to EPS estimates for 1997
and 1998. Enterprise values and market prices were determined as of June 5,
1997. The pre-announcement ratios of enterprise value to revenue estimates for
NUMAR for 1997 and 1998 were 5.9x and 3.8x, respectively. The low and high
ratios of enterprise value to revenue estimates for the Comparable Companies
were .9x and 3.8x in 1997 (with a median of 2.7x), and 1.1x and 2.7x in 1998,
respectively (with a median of 2.1x). The pre-announcement ratios of
enterprise value to EBITDA estimates for NUMAR for 1997 and 1998 were 21.3x
and 10.6x, respectively. The low and high ratios of enterprise value to EBITDA
estimates for the Comparable Companies were 5.8x and 13.1x in 1997, and 6.7x
and 10.9x in 1998 (with a median of 9.4x). The ratios of market price times
outstanding shares to cash flow estimates for NUMAR for 1997 and 1998 were
22.5x and 12.9x, respectively. The low and high ratios of market price times
outstanding shares to cash flow estimates for the Comparable Companies were
6.0x and 17.3x in 1997 (with a median of 13.0x), and 7.7x and 13.7x in 1998
(with a median of 12.2x). The pre-announcement ratios of market price to EPS
estimates for NUMAR for 1997 and 1998 were 53.3x and 28.5x, respectively. The
low and high ratios of market price to EPS estimates for the Comparable
Companies were 13.3x and 29.2x in 1997 (with a median of 24.6x), and 13.6x and
22.5x in 1998 (with a median of 18.7x). Based upon this analysis, Schroder
Wertheim calculated per share equity values for NUMAR ranging from $4.28 to
$26.12 on a fully diluted basis.
No company utilized in the comparable companies analysis as a comparison is
identical to NUMAR. In evaluating the Comparable Companies, Schroder Wertheim
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 NUMAR, such as the impact of competition on
the business of NUMAR and the industry generally, industry growth and the
absence of any adverse material change in the financial conditions and
prospects of NUMAR or the industry or in the financial markets in general.
COMPARABLE TRANSACTION ANALYSIS. Schroder Wertheim performed an analysis of
29 precedent transactions ("Comparable Transactions") involving certain
technology ("Technology Comparable Transactions") and oil field services
("Oilfield Services Comparable Transactions") companies which, in Schroder
Wertheim's judgment, were deemed to be comparable to the Merger for purposes
of this analysis. Schroder Wertheim chose transactions involving companies
that performed substantially similar business functions to NUMAR (i.e.,
providing technology-related oil field services). Because NUMAR's business is
based on patented, proprietary technology, the transaction universe was
expanded to include transactions involving pure technology companies that are
typically valued on the basis of a multiple of revenues. The purchase prices
in such transactions expressed as multiples of the revenues and EBITDA of the
acquired companies for the last twelve months preceding announcement of the
transaction for the Comparable Transactions were based upon available public
information. The Technology Comparable Transactions were announced during the
period from November 1994 through January 1997. The Oilfield Services
Comparable Transactions were announced during the period from August 1994
through March 1997. For the Technology Comparable Transactions and the
Oilfield Services Comparable Transactions the analysis showed that the
purchase prices for such transactions represented low and high multiples of
such revenues of 4.0x and 19.9x and low and high multiples of such EBITDA of
9.9x and 36.0x. Based upon this analysis, Schroder Wertheim calculated per
share equity values for NUMAR ranging from $2.98 to $63.50 on a fully diluted
basis.
No transaction utilized in the comparable transaction analysis is identical
to the Merger. In evaluating the precedent transactions, Schroder Wertheim
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 NUMAR, such as impact of competition on the
business of NUMAR and the industry generally, industry growth and the absence
of any adverse material change in the financial condition and prospects of
NUMAR or the industry or in the financial markets in general.
34
DISCOUNTED CASH FLOW ANALYSIS. Schroder Wertheim performed a discounted cash
flow analysis to estimate the present value of the stand-alone unlevered free
cash flows that NUMAR is expected to generate if it performs in accordance
with the Financial Model (see "--Certain Information Provided for a detailed
description of the Financial Model). Unlevered free cash flows of NUMAR were
calculated as the sum of net income, depreciation and amortization, deferred
taxes, minority interest, other noncash expenses and after-tax net interest
expense less capital expenditures and investment in working capital. Schroder
Wertheim calculated terminal values by applying a range of exit multiples to
the unlevered free cash flows in fiscal 2001 from 4.0x to 6.0x representing
estimated ranges of unlevered free cash flows. The unlevered free cash flows
and terminal values were then discounted to their present value using a range
of discount rates from 12.5% to 17.5%. The discount rate ranges were selected
based upon a weighted average cost of capital analysis. Based upon this
analysis, Schroder Wertheim calculated per share equity values of NUMAR
ranging from $28.54 to $49.49 on a fully diluted basis.
PREMIUM ANALYSIS. Schroder Wertheim performed an analysis comparing premiums
paid in various transactions involving companies in the technology and oil
field services businesses since 1992. These transactions were the same as
those analyzed by Schroder Wertheim for purposes of its comparable transaction
analysis described above. In particular, the analysis examined premiums paid
in 29 precedent transactions in the energy industry ("Energy Premiums"), in
all other transactions ("General Premiums") and in the interim period of 1997
("1997 Premiums"). In analyzing the various classes of premiums, Schroder
Wertheim included reference points of 1 day and 4 weeks prior to the
announcement of the specific transaction. Schroder Wertheim observed a low and
high range of 23.0% and 33.6% respectively for the Energy Premiums; 31.0% and
43.0%, respectively for the General Premiums; and 30.5% and 44.1%,
respectively for the 1997 Premiums. Based upon NUMAR's market price of $20.50,
one day and $20.13, 4 weeks before the announcement, the Exchange Ratio
implies low and high premiums of 93.3% and 96.9%.
PRO FORMA ANALYSIS OF THE MERGER. Schroder Wertheim analyzed the pro forma
impact of the Merger on Halliburton's earnings per share for the fiscal years
ended 1997 and 1998. Such analysis was based on EPS estimates provided by
FIRST CALL for the fiscal years ended 1997 and 1998. Schroder Wertheim
observed that, if the Merger were treated as a pooling of interests for
accounting purposes and if no post Merger synergies were assumed, the issuance
of Halliburton Common Stock in the Merger would have a dilutive effect on pro
forma earnings per share of Halliburton Common Stock of approximately 2.7% in
fiscal year 1997 and 1.4% in fiscal year 1998. In light of the relatively
modest dilutive effect of the Merger on earnings per share of Halliburton
Common Stock, dilution was not expected to have any significant adverse effect
on the value of the Halliburton Common Stock.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Schroder Wertheim considered the results of all its
analyses as a whole and did not attribute any particular weight to any
particular analyses or factor considered by it. Furthermore, selecting any
portion of Schroder Wertheim's analyses, without considering all analyses,
would create an incomplete view of the process underlying the Schroder
Wertheim Opinion. In addition, Schroder Wertheim may have deemed various
assumptions more or less probable than other assumptions, so that the ranges
of valuations resulting for any particular analysis described above should not
be taken to be Schroder Wertheim's view of the actual value of NUMAR.
In performing its analysis, Schroder Wertheim made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of NUMAR or Halliburton.
The analyses performed by Schroder Wertheim are not necessarily indicative of
actual values, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as a part of
Schroder Wertheim's analysis of the fairness of the Exchange Ratio from a
financial point of view to the holders of shares of NUMAR Common Stock and
were provided to the Board of Directors of NUMAR in connection with the
delivery of the Schroder Wertheim opinion dated June 9, 1997. The analyses do
not purport to be appraisals or to reflect the prices at which NUMAR or
Halliburton might actually be sold. Because such estimates are inherently
subject to uncertainty, neither NUMAR, Halliburton or Schroder Wertheim nor
any other person assumes responsibility for their accuracy, except with
respect to information supplied by NUMAR or Halliburton as to which each is
responsible. In addition, as described above,
35
the Schroder Wertheim opinion dated June 9, 1997, including Schroder
Wertheim's presentation to the Board of Directors of NUMAR, was one of the
many factors taken into consideration by the Board of Directors of NUMAR in
making its determination to approve the Merger.
The Board of Directors of NUMAR retained Schroder Wertheim based upon its
experience and expertise. Schroder Wertheim is an internationally recognized
investment banking and advisory firm. Schroder Wertheim, as part of its
investment banking business, is continuously engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for
corporate and other purposes. Schroder Wertheim is a full-service securities
firm engaged in securities trading and brokerage activities, as well as
providing investment banking and financial advisory services. In the ordinary
course of its trading and brokerage activities, Schroder Wertheim or its
affiliates may at any time hold long or short positions, and may trade or
otherwise effect transactions, for its own account or the account of
customers, in securities of NUMAR or Halliburton. Except in its capacity as a
market maker with respect to the NUMAR Common Stock, Schroder Wertheim and its
affiliates do not own any shares of NUMAR Common Stock or options or warrants
to purchase such shares. In the past, Schroder Wertheim and its affiliates
have provided financial advisory services to NUMAR and have received customary
fees for the rendering of these services. Schroder Wertheim acted as a
managing underwriter for NUMAR's initial public offering in April 1994 and its
secondary public offering in July 1995 for which it received customary
underwriting discounts and fees.
FINANCIAL ADVISOR FEES. Pursuant to a letter agreement dated April 17, 1997,
NUMAR has agreed to pay Schroder Wertheim (i) an advisory fee of $200,000 and
(ii), if the Merger is consummated, a total fee equal to not more than 1.15%
of the total consideration received by NUMAR and/or its shareholders (against
which any previously paid fees would be credited). Based on the closing price
of Halliburton Common Stock on August 25, 1997, Schroder Wertheim's total fees
would be $4,542,500. In addition to the foregoing compensation, NUMAR has
agreed to reimburse Schroder Wertheim for its expenses, including reasonable
fees and expenses of its counsel, and to indemnify Schroder Wertheim for
liabilities and expenses arising out of the engagement and the transactions in
connection therewith, including liabilities under federal securities laws.
In addition, by agreement dated April 23, 1997, NUMAR has agreed to pay B.G.
Consulting a financial advisory fee that is equal to 10% of the fee payable to
Schroder Wertheim and to reimburse its out-of-pocket expenses as incurred.
CERTAIN POTENTIAL CONFLICTS OF INTEREST
In considering the recommendation of NUMAR's Board of Directors with respect
to the Merger, NUMAR's shareholders should be aware that certain members of
NUMAR's Board of Directors and officers have certain interests respecting the
Merger separate from their interests as holders of NUMAR Common Stock,
including those referred to below. In addition, Schroder Wertheim, NUMAR's
financial advisor that rendered its opinion to the Board of Directors that the
Exchange Ratio was fair from a financial point of view to the holders of NUMAR
Common Stock, and B.G. Consulting will receive additional compensation if the
Merger is effected. See "--Opinion of Financial Advisor to NUMAR--Financial
Advisor Fees."
EMPLOYMENT AGREEMENTS. At the insistence of Halliburton, NUMAR entered into
Executive Employment Agreements with Dr. Melvin N. Miller, the Chairman of the
Board, President and Chief Executive Officer of NUMAR, and with five other
officers of NUMAR. The other officers are Thomas Blades, Executive Vice
President and Chief Operating Officer; Edward P. Delson, Senior Vice
President--Finance and Administration, Chief Financial Officer and Treasurer;
Dr. Richard N. Chandler, Vice President--Engineering and Manufacturing; George
R. Coates, Vice President--Petrophysical Applications; and Dr. Manfred G.
Prammer, Vice President--Research. Except as noted below, the terms of the
Executive Employment Agreements are substantially similar. The term of each
Executive Employment Agreement begins at the Effective Time and ends on
December 31, 2000 (2001, in the case of Dr. Miller.) Each of the officers is
to be employed in his current capacity at the base salary indicated below;
each is entitled, commencing January 1, 1998, to participate in an incentive
compensation plan pursuant to which he will have the opportunity to earn an
annual incentive bonus of
36
up to the percentage of his base salary indicated below; each will receive a
nonqualified stock option under the Halliburton 1993 Stock and Long-Term
Incentive Plan (the "Halliburton Incentive Plan") to purchase the number of
shares of Halliburton Common Stock indicated below at an exercise price equal
to the market price of the Halliburton Common Stock on the date of grant;
certain of such officers will receive awards under the Halliburton Incentive
Plan of "restricted stock" in the amounts indicated below; and each will be
entitled to participate, on the same basis generally as other employees of
NUMAR, in all such general employee benefit plans as are made available to
substantially all of NUMAR's executive employees. Each of such officers will
continue to be entitled to all of his rights under NUMAR Options held by him
prior to the Effective Time. In addition, Dr. Miller will be entitled,
commencing January 1, 1998, to participate in the Halliburton Senior
Executives' Deferred Compensation Plan and in each calendar year during the
term of his Executive Employment Agreement will receive an allocation of at
least $62,500 to his deferred compensation account.
Under the Executive Employment Agreements, if the employment of such officer
is terminated during the term for any reason other than by his death or
permanent disability, by the employer for "cause" (as defined therein) or by
him in a "Voluntary Termination", each of such officers is entitled to be paid
as a severance benefit for the remainder of his unexpired employment term his
base salary at the rate in effect on the date of such officer's termination of
employment and all options to purchase Halliburton Common Stock then held by
such officer will vest in full. The term "Voluntary Termination" excludes any
termination (i) because of an uncorrected material breach of the agreement by
the employer or (ii) within six months following a reduction in title, a
material reduction in responsibility or a required relocation outside a 60-
mile radius of Malvern, Pennsylvania or, with respect to Messrs. Blades and
Coates, Houston, Texas. Each of the Employment Agreements contains a
noncompetition covenant pursuant to which the officer agrees not to compete
with NUMAR commencing on termination of the agreement and continuing for two
years thereafter or, if longer, the period over which such officer's severance
benefit is to be paid.
BASE INCENTIVE OPTION RESTRICTED
NAME OF OFFICER SALARY MAXIMUM SHARES(A) SHARES(A)
--------------- -------- --------- --------- ----------
Dr. Melvin N. Miller.................... $250,000 70% 25,000 --
Thomas Blades........................... $207,200 70% 20,000 8,000
Edward P. Delson........................ $170,000 40% 15,000 6,000
Dr. Richard N. Chandler................. $150,000 40% 15,000 6,000
George R. Coates........................ $143,600 30% 15,000 6,000
Dr. Manfred G. Prammer.................. $160,000 40% 15,000 6,000
- --------
(a) Adjusted to reflect the Stock Split.
Certain terms of the Executive Employment Agreements entered into by each of
Dr. Miller and the five other officers of NUMAR are more favorable than their
existing employment arrangements with NUMAR. Specifically, Dr. Miller's new
Executive Employment Agreement contains a slightly longer term than his
previous employment agreement, provides for an annual base salary of $250,000
(as opposed to his 1997 base salary of $225,000 and his 1998 base salary of
$240,000), and allows him to participate in Halliburton's Senior Executive
Deferred Compensation Plan. The 1997 annual base salaries of Messrs. Blades,
Delson, Chandler, Prammer and Coates are $192,000, $150,000, $112,200 and
$132,300, respectively, which in each case is less than the base salaries
provided for by the relevant Executive Employment Agreement. In addition, as
set forth in the table above, the Executive Employment Agreements provide for
grants of stock options and restricted stock while the grant of stock-based
compensation pursuant to NUMAR's plans is at the discretion of the
compensation committee of NUMAR.
STOCK OPTIONS. The Merger Agreement provides that at the Effective Time,
automatically and without any action on the part of the holder thereof, each
NUMAR Option will become an option to purchase Halliburton Common Stock. The
number of shares of Halliburton Common Stock subject thereto will be obtained
by multiplying the number of shares of NUMAR Common Stock previously subject
thereto by the Exchange Ratio and the exercise price per share of Halliburton
Common Stock will be obtained by dividing the exercise price per share of
NUMAR Common Stock stated therein by the Exchange Ratio. Otherwise, the terms
and conditions of such NUMAR Options will remain the same.
37
The following table sets forth the names of those directors and executive
officers of NUMAR who hold NUMAR Options, the number of shares of NUMAR Common
Stock subject to such NUMAR Options, the average exercise price thereunder,
the number of shares of NUMAR Common Stock subject thereto that are currently
unvested, the number of shares subject thereto that will vest upon the
occurrence of the Merger by virtue of the terms of the NUMAR Option or the
plan pursuant to which such NUMAR Option was issued, the number of shares of
Halliburton Common Stock to which all NUMAR Options will apply after the
Effective Time and the average exercise price per share of Halliburton Common
Stock.
WEIGHTED UNVESTED NUMAR WEIGHTED
NUMAR AVERAGE NUMAR COMMON HALLIBURTON AVERAGE
NAME OF DIRECTOR OR COMMON EXERCISE COMMON STOCK TO COMMON EXERCISE
EXECUTIVE OFFICER STOCK PRICE STOCK VEST (A) STOCK(B) PRICE(B)
------------------- ------- -------- -------- -------- ----------- --------
Dr. Melvin N. Miller.... 317,101 $ 9.02 106,000 106,000 306,446 $ 9.33
Edward P. Delson........ 85,244 $ 9.63 40,700 40,700 82,379 $ 9.97
Thomas Blades........... 100,000 $14.03 100,000 100,000 96,640 $14.52
Dr. Richard N. Chandler. 55,122 $10.14 25,000 24,200 53,269 $10.49
George R. Coates........ 54,311 $10.98 27,500 25,500 52,486 $11.36
Dr. Manfred G. Prammer.. 51,500 $13.12 35,600 35,200 49,769 $13.58
Barry M. Davis.......... 7,500 $15.60 2,500 2,500 7,248 $16.15
David S. Hirsch......... 9,000 $15.60 3,000 3,000 8,697 $16.15
Seymour G. Mandell...... 7,500 $15.60 2,500 2,500 7,248 $16.15
Dr. James H. Simons..... 7,000 $15.54 2,500 2,500 6,764 $16.09
Ralph F. Spinnler....... 17,000 $13.37 4,000 4,000 16,428 $13.83
All directors and
executive officers
as a group............. 711,278 $10.78 349,300 346,100 687,374 $11.15
- --------
(a) Pursuant to the NUMAR Corporation 1994 Stock Incentive Plan.
(b) Adjusted for the Stock Split.
INDEMNIFICATION. The Merger Agreement provides that, for a period of six
years after the Effective Time, the indemnification provisions of the Charter
and Bylaws of the Surviving Corporation will not be amended in a manner that
would reduce or limit the rights of indemnity thereunder of present or former
directors and officers of NUMAR, to reduce or limit the ability of the
Surviving Corporation to indemnify such persons or to hinder or delay the
exercise of such rights by such persons. In addition, the Merger Agreement
requires Halliburton, subject to certain limitations, to cause to be
maintained in effect for a comparable period the current NUMAR directors' and
officers' liability insurance or policies that are substantially equivalent
thereto. See "Certain Terms of the Merger Agreement--Indemnification."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material federal income tax
consequences of the Merger to the holders of NUMAR Common Stock and is based
upon current provisions of the Code, existing regulations thereunder and
current administrative rulings and court decisions, all of which are subject
to change. No attempt has been made to comment on all federal income tax
consequences of the Merger that may be relevant to particular holders,
including holders that are subject to special tax rules such as dealers in
securities, foreign persons, mutual funds, insurance companies, tax-exempt
entities and holders who do not hold their shares as capital assets. Holders
of NUMAR Common Stock are advised and expected to consult their own tax
advisers regarding the federal income tax consequences of the Merger in light
of their personal circumstances and the consequences under state, local and
foreign tax laws.
No ruling from the Internal Revenue Service (the "IRS") has been or will be
requested in connection with the Merger. Halliburton has received from its
counsel, Vinson & Elkins L.L.P., an opinion to the effect that the Merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, that Halliburton, Merger Sub and NUMAR
will each be a party to the reorganization within the
38
meaning of Section 368(b) of the Code, and that Halliburton, Merger Sub and
NUMAR will not recognize any gain or loss as a result of the Merger. NUMAR has
received from its counsel, Drinker Biddle & Reath LLP, an opinion to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, that
Halliburton, Merger Sub and NUMAR will each be a party to the reorganization
within the meaning of Section 368(b) of the Code, and that:
(a) no gain or loss will be recognized by a holder of NUMAR Common Stock
upon the exchange of all of such holder's shares of NUMAR Common Stock
solely for shares of Halliburton Common Stock in the Merger;
(b) the aggregate basis of the shares of Halliburton Common Stock
received by a NUMAR shareholder in the Merger (including any fractional
share deemed received) will be the same as the aggregate basis of the
shares of NUMAR Common Stock surrendered in exchange therefor;
(c) the holding period of the shares of Halliburton Common Stock received
by a NUMAR shareholder in the Merger (including any fractional share deemed
received) will include the holding period of the shares of NUMAR Common
Stock surrendered in exchange therefor, provided that such shares of NUMAR
Common Stock are held as capital assets at the Effective Time; and
(d) a shareholder of NUMAR who receives cash in lieu of a fractional
share will recognize gain or loss equal to the difference, if any, between
such shareholder's basis in the fractional share (as described in paragraph
(b) above) and the amount of cash received. Such gain or loss will be a
capital gain or loss if the NUMAR Common Stock is held by such shareholder
as a capital asset at the Effective Time, with the tax rate applicable to
such capital gain or loss depending on the holding period for the
fractional share (as described in paragraph (c) above) as of that time.
The foregoing opinions cover all of the material federal income tax
consequences of the Merger to the participants to the Merger and to the
shareholders of NUMAR. Such opinions are based upon the Merger Agreement
(including the representations and warranties contained in Sections 4.18 and
5.16 thereof (in general, no plan or intention on the part of certain
shareholders of NUMAR to dispose of a certain number of shares of Halliburton
Common Stock to be received in the Merger; payment of expenses incurred in
connection with the Merger; no intercorporate indebtedness existing between
Halliburton and NUMAR that was issued, acquired or will be settled at a
discount; NUMAR is not an investment company as defined in the Code; NUMAR is
not in bankruptcy, receivership or a similar proceeding; following the Merger
the Surviving Corporation will hold a certain percentage of the net and gross
assets of NUMAR and Merger Sub; no plan or intention on the part of
Halliburton to liquidate, merge or dispose of shares of the Surviving
Corporation (subject to certain exceptions), to issue shares of capital stock
of the Surviving Corporation such that Halliburton would lose control (as
defined in the Code) of the Surviving Corporation, to dispose of assets of the
Surviving Corporation (subject to certain exceptions) or to reacquire any
shares of Halliburton Common Stock issued in the Merger; the Surviving
Corporation will continue the historic business of NUMAR or use a significant
portion of its assets in a business; and Halliburton has not owned during the
past five years any shares of capital stock of NUMAR)), the facts set forth in
the Registration Statement (including this Proxy Statement/Prospectus),
written representations of officers of NUMAR and Halliburton (including
representations substantially similar to the representations and warranties
contained in Sections 4.18 and 5.16 of the Merger Agreement), current
provisions of the Code, existing regulations thereunder, current
administrative rulings of the IRS, court decisions and the assumption that the
transaction contemplated by the Merger Agreement will be carried out strictly
in accordance with the terms thereof. Shareholders of NUMAR should be aware
that such opinions are not binding on the IRS and no assurance can be given
that the IRS will not adopt a contrary position or that a contrary IRS
position would not be sustained by a court. Each of such opinions has been
filed with the Commission as an exhibit to the Registration Statement.
ACCOUNTING TREATMENT
The Merger is expected to be accounted for using the "pooling of interests"
method of accounting pursuant to Opinion No. 16 of the Accounting Principles
Board. Halliburton considers the proposed transaction an immaterial pooling of
interests combination and will not restate its historical financial statements
subsequent to the Merger. Accordingly, unaudited pro forma condensed combined
income statements have not been presented.
Halliburton has been preliminarily advised by its independent public
accountants, Arthur Andersen LLP, that the Merger should be treated as a
pooling of interests in accordance with generally accepted accounting
39
principles. Consummation of the Merger is conditioned upon the written
confirmation of such advice. Also, such advice contemplates that each person
who may be deemed an affiliate of NUMAR or Halliburton will enter into an
agreement with Halliburton not to sell or otherwise transfer any shares of
NUMAR Common Stock or Halliburton Common Stock, as the case may be, within 30
days prior to the Effective Time or any Halliburton Common Stock thereafter
prior to the publication of financial results that include at least 30 days of
post-Merger combined operations of Halliburton and NUMAR. Forms of such
agreements ("Affiliate's Agreements") are attached as Annexes B and C to the
Merger Agreement, a copy of which is attached to this Proxy
Statement/Prospectus as Appendix A. In accordance with the provisions of the
Merger Agreement, Halliburton and NUMAR have heretofore obtained executed
Affiliate's Agreements from all persons known to the managements of
Halliburton or NUMAR to be affiliates of such corporations, respectively.
GOVERNMENTAL AND REGULATORY APPROVALS
Transactions such as the Merger are reviewed by the Department of Justice
and the FTC to determine whether they comply with applicable antitrust laws.
Under the provisions of the HSR Act, the Merger may not be consummated until
such time as the specified waiting period requirements of the HSR Act have
been satisfied. Halliburton and NUMAR filed notification reports, together
with requests for early termination of the waiting period, with the Department
of Justice and the FTC under the HSR Act on June 13, 1997. The applicable
waiting period expired on July 13, 1997.
At any time before or after the Effective Time, the Department of Justice,
the FTC or a private person or entity could seek under the antitrust laws,
among other things, to enjoin the Merger or to cause Halliburton to divest
itself, in whole or in part, of NUMAR or of other businesses conducted by
Halliburton. There can be no assurance that a challenge to the Merger will not
be made or that, if such a challenge is made, Halliburton and NUMAR will
prevail.
Halliburton and NUMAR are aware of no other governmental or regulatory
approvals required for consummation of the Merger, other than compliance with
applicable federal and state securities laws.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of Halliburton Common Stock to be received by NUMAR shareholders
in connection with the Merger have been registered under the Securities Act
and, except as set forth in this paragraph, may be traded without restriction.
The shares of Halliburton Common Stock to be issued in connection with the
Merger and received by persons who are deemed to be "affiliates" (as that term
is defined in Rule 144 under the Securities Act) of NUMAR prior to the Merger
may be resold by them only in transactions permitted by the resale provisions
of Rule 145 under the Securities Act (or, in case any such person should
become an affiliate of Halliburton, Rule 144 under the Securities Act) or as
otherwise permitted under the Securities Act. Under guidelines published by
the Commission, the sale or other disposition of Halliburton Common Stock or
NUMAR Common Stock by an affiliate of either Halliburton or NUMAR, as the case
may be, within 30 days prior to the Effective Time or the sale or other
disposition of Halliburton Common Stock thereafter prior to the publication of
financial results that include at least 30 days of post-Merger combined
operations of Halliburton and NUMAR (the "Pooling Period") could preclude
pooling of interests accounting treatment of the Merger. Accordingly, the
Merger Agreement provides that each of NUMAR and Halliburton will use all
reasonable efforts to cause its affiliates to execute an agreement (an
"Affiliates' Agreement"), in the form thereof attached to the Merger Agreement
as Annexes B and C, respectively, to the effect that such persons will not
sell, transfer or otherwise dispose of any shares of NUMAR Common Stock or
Halliburton Common Stock, as the case may be, during the Pooling Period and,
with respect to affiliates of NUMAR, that such persons will not sell, transfer
or otherwise dispose of Halliburton Common Stock at any time in violation of
the Securities Act or the rules and regulations promulgated thereunder,
including Rule 145. As indicated under "--Accounting Treatment," Halliburton
and NUMAR have heretofore obtained executed Affiliates' Agreements from all
persons known to the managements of Halliburton or NUMAR to be affiliates of
such corporations, respectively.
RIGHTS OF DISSENTING SHAREHOLDERS
Pursuant to Subchapter 15D of the PBCL, holders of record of shares of NUMAR
Common Stock are entitled to assert Dissenters Rights in connection with the
Merger and obtain payment of the "fair value" of
40
their shares, provided that such shareholders comply with the requirements of
the PBCL. The following is a summary of the procedures to be followed by
holders of shares of NUMAR Common Stock electing to exercise their Dissenters
Rights and is qualified in its entirety by reference to the PBCL, the full
text of which is set forth in Appendix E to this Proxy Statement. The PBCL
should be reviewed carefully by such shareholders who wish to assert their
Dissenters Rights or who wish to preserve the right to do so, since failure to
comply with those procedures will result in the loss of such Dissenters
Rights.
NOTICE OF INTENTION TO DISSENT. Holders of shares of NUMAR Common Stock who
elect to exercise Dissenters Rights must satisfy each of the following
conditions: (1) before the taking of the vote with respect to the Merger, such
holders must file with NUMAR written notice of their intention to demand
payment of the fair value of their shares (this written notice must be in
addition to and separate from any proxy or vote against the Merger; neither
voting against nor a failure to vote for the Merger will constitute such a
notice); (2) such holders must effect no change in the beneficial ownership of
their shares from the date of such filing continuously through the Effective
Date; and (3) such holders must not vote in favor of the Merger (a failure to
vote will satisfy this requirement, but a vote in favor of the Merger, by
proxy or in person, will constitute a waiver of such holder's Dissenters
Rights and will nullify any previously filed written notice of intent to
demand payment). Holders of shares of NUMAR Common Stock who fail to comply
with any of these conditions will have no Dissenters Rights with respect to
their shares.
All written notices should be addressed to: NUMAR Corporation, 508 Lapp
Road, Malvern, Pennsylvania 19355, Attention: Secretary and should be executed
by, or with the consent of, the holder of record. The notice must identify the
shareholder and indicate the intention of such shareholder to demand payment
for the fair value for his or her shares of NUMAR Common Stock. In the notice,
the shareholder's name should be stated as it appears on his or her stock
certificates. A beneficial owner of shares of NUMAR Common Stock who is not
the holder of record may assert Dissenters Rights as to shares held on such
person's behalf, provided that such beneficial owner submits a written consent
of the holder of record to NUMAR at or before the time such rights are
asserted.
A holder of shares of NUMAR Common Stock may not assert Dissenters Rights as
to less than all of the shares registered in his or her name except in the
situation in which certain shares are beneficially owned by another person but
registered in such shareholder's name. If a holder of shares of NUMAR Common
Stock wishes to dissent with respect to shares beneficially owned by another
person, such shareholder must dissent with respect to all of such shares and
disclose the name and address of the beneficial owner on whose behalf the
holder is dissenting.
NUMAR'S NOTICE TO DEMAND PAYMENT. After a vote approving the Merger, and
assuming the Merger is consummated, NUMAR must give written notice that the
Merger has been approved to each shareholder who filed a written notice of
intent to demand payment for such shareholder's shares of NUMAR Common Stock
and who did not vote in favor of the Merger. NUMAR's notice shall specify the
address to which a demand for payment and stock certificates must be sent by
the dissenting shareholder in order to obtain payment and shall include a form
for demanding payment to be completed by the shareholder. In order to receive
the fair value of his or her shares, a dissenting shareholder must, within 30
days after the mailing date of NUMAR's notice, send his or her demand for
payment and stock certificates, together with certain information pertaining
to such stock on the form supplied by NUMAR. A shareholder who fails timely to
demand payment, or who fails timely to deposit certificates, as required by
NUMAR's notice, shall not have any right to receive payment of the fair value
of his shares of NUMAR Common Stock.
PAYMENT FOR SHARES; SHAREHOLDER'S ESTIMATE OF FAIR VALUE. If a valid demand
for payment and the related certificates are timely received by NUMAR, NUMAR
must promptly remit to each dissenting shareholder who has complied with the
requirements either (i) the amount NUMAR estimates to be the fair value of
that shareholder's shares of NUMAR Common Stock, or (ii) give written notice
that no remittance will be made, in each case together with a statement of the
method used to determine such estimate, the closing balance sheet and
statement of income of NUMAR for the period ended December 31, 1996, the
latest updated interim financial statements of NUMAR, and a copy of subchapter
D of Chapter 15 of the PBCL. NUMAR believes that the Merger consideration is
equal to the fair value of the shares of NUMAR Common Stock.
41
If a dissenting shareholder believes that the amount remitted by NUMAR is
less than the fair value of his or her shares of NUMAR Common Stock, plus
interest, or if NUMAR gives written notice that no remittance will be made and
such notice contains an estimate by NUMAR of the fair value of the dissenting
shareholder's shares which such shareholder believes is less than the fair
value of his or her shares, the holder of shares of NUMAR Common Stock may
give written notice to NUMAR of his or her own estimate of the fair value of
his or her shares within 30 days after the mailing date of NUMAR's remittance
or NUMAR's notice, as the case may be, and demand payment of the difference.
FAILURE TO COMPLY WITH NOTICE TO DEMAND PAYMENT. If the shareholder fails to
give written notice of his or her estimate and demand payment of the
difference within the 30-day time period, such shareholder will be entitled
only to the amount remitted by NUMAR or the amount of NUMAR's estimate of the
fair value of such shareholder's shares provided in NUMAR's notice, as the
case may be. Notwithstanding any such failure of the shareholder, he or she
shall retain all other rights of a shareholder under the PBCL until modified
by effectuation of the Merger.
VALUATION PROCEEDINGS. If NUMAR and the dissenting shareholder are unable to
settle the shareholder's demand within 60 days, NUMAR may file in court a
petition requesting that the court determine the fair value of the shares of
NUMAR Common Stock, plus interest. If NUMAR fails to file a petition as
provided above, any dissenting shareholder who made a demand and who has not
already settled his claim against NUMAR may do so in the name of NUMAR at any
time within 30 days after the expiration of the 60-day period. If a dissenting
shareholder does not file an application within the 30-day period, each
dissenter entitled to file an application will be paid NUMAR's estimate of the
fair value of the shares and no more, and may bring an action to recover any
amount not previously remitted. All holders of shares of NUMAR Common Stock
whose demands are not settled within the applicable 60-day settlement periods
shall be made parties to this proceeding. The court, after determining that
the shareholder has complied with all statutory requirements, may use any
valuation method or combination of methods it deems appropriate, whether or
not used by NUMAR or the dissenting shareholder, or may appoint appraisers to
determine the fair value of the shares of NUMAR Common Stock. The court's
determination is binding on all holders of shares of NUMAR Common Stock and
the court must enter judgment for any amount by which the court determines
fair value exceeds the amount remitted to the shareholders by NUMAR.
COSTS AND EXPENSES OF VALUATION PROCEEDINGS. The costs and expenses of such
a proceeding, including the expenses and compensation of any appraisers, will
be assessed against NUMAR, unless the court, in its discretion, determines
that the dissenting shareholder's action in demanding supplemental payment is
dilatory, obdurate, arbitrary, vexatious or in bad faith, in which event the
court may assess all or a part of such costs against the shareholder. Fees and
expenses of counsel for the dissenting shareholder may be awarded by the court
out of the amount, if any, awarded to such shareholder.
The Board of Directors recommends to any holder of shares of NUMAR Common
Stock having questions with respect to his or her rights under the PBCL to
consult with his or her legal counsel.
CERTAIN TERMS OF THE MERGER AGREEMENT
The following is a description of all of the material terms of the Merger
Agreement. The description does not, however, purport to be complete and is
qualified in its entirety by reference to the Merger Agreement, a copy of
which is attached as Appendix A to this Proxy Statement/Prospectus and is
incorporated herein by reference.
EFFECTIVE TIME OF THE MERGER
The Merger Agreement provides that, promptly after the satisfaction or, if
permissible, the waiver of the conditions to effecting the Merger or at such
other time as the parties to the Merger Agreement may agree, the
42
parties shall cause the Merger to be consummated by filing Articles of Merger
with the Secretary of State of the Commonwealth of Pennsylvania and a
Certificate of Merger with the Secretary of State of the State of Delaware, in
such forms as required by, and executed in accordance with, the relevant
provisions of the PBCL and the DGCL. It is anticipated that, if the Merger
Agreement is approved and adopted at the Special Meeting and all other
conditions to the Merger have been satisfied or waived, the Effective Time
will occur on the date of the Special Meeting or as soon thereafter as
practicable.
MANNER AND BASIS OF CONVERTING SHARES
At the Effective Time, except for shares of NUMAR Common Stock held in the
treasury of NUMAR or owned by Halliburton or any direct or indirect wholly
owned subsidiary of either Halliburton or NUMAR, which shares will be canceled
at the Effective Time, and except for Dissenting Shares, each outstanding
share of NUMAR Common Stock will be converted into 0.9664 of one share of
Halliburton Common Stock. The foregoing Exchange Ratio has been adjusted to
reflect the two-for-one Stock Split of the Halliburton Common Stock effected
in the form of a 100% stock dividend paid on July 21, 1997 to holders of
Halliburton Common Stock of record on June 26, 1997. If between the date of
the Merger Agreement and the Effective Time the outstanding shares of
Halliburton Common Stock shall again have been changed, or if the outstanding
shares of NUMAR Common Stock shall have been changed, into a different number
of shares or a different class, by reason of any stock dividend, any
subdivision, combination or exchange of shares or any reclassification or
recapitalization, the Exchange Ratio will again be correspondingly adjusted to
reflect such stock dividend, subdivision, combination or exchange of shares or
any reclassification or recapitalization.
As soon as practicable following the Effective Time, Halliburton will cause
ChaseMellon Shareholder Services, L.L.C., which has been selected by
Halliburton to act as exchange agent pursuant to the Merger Agreement (the
"Exchange Agent"), to mail to each record holder of NUMAR Common Stock
immediately prior to the Effective Time, information advising such holder of
the consummation of the Merger and a letter of transmittal for use in
exchanging NUMAR Common Stock certificates for Halliburton Common Stock
certificates and cash in lieu of fractional shares. Letters of transmittal
will also be available following the Effective Time at the offices of the
Exchange Agent at ChaseMellon Shareholder Services, L.L.C., 120 Broadway, 13th
Floor, New York, NY 10271, Attention: Reorganization Department, and holders
of certificates that previously evidenced NUMAR Common Stock may, at their
option after the Effective Time, surrender such certificates for certificates
evidencing Halliburton Common Stock at the offices of the Exchange Agent in
person. After the Effective Time, there will be no further registration of
transfers on the stock transfer books of NUMAR of shares of NUMAR Common Stock
that were outstanding immediately prior to the Effective Time. Share
certificates should not be surrendered for exchange by shareholders of NUMAR
prior to the Effective Time.
No fractional shares of Halliburton Common Stock will be issued in the
Merger. Each holder of NUMAR Common Stock entitled to a fractional share will
receive an amount in cash, without interest thereon, determined as follows:
Pursuant to instructions from Halliburton, the Exchange Agent will determine
the number of fractional shares allocable to all holders of NUMAR Common Stock
pursuant to the Merger Agreement, will aggregate all such fractional shares
into whole shares, will sell such whole shares of Halliburton Common Stock in
the open market at then prevailing prices on behalf of the holders who would
otherwise be entitled thereto and will distribute to each such holder, at the
time of surrender of such holder's NUMAR Common Stock certificates, such
holder's ratable share of such proceeds, after withholding federal income
taxes and any applicable transfer taxes. All brokers' fees and commissions and
fees of the Exchange Agent incurred in connection with such sales will be paid
by Halliburton.
Until so surrendered and exchanged, each certificate previously evidencing
NUMAR Common Stock will be deemed, for all purposes other than the payment of
dividends and other distributions, to evidence whole shares of Halliburton
Common Stock and the right to receive cash in lieu of fractional shares of
Halliburton Common Stock. Unless and until any such certificates that
previously evidenced NUMAR Common Stock are so surrendered and exchanged, no
dividends or other distributions payable to the holders of record of
Halliburton Common Stock as of any time on or after the Effective Time will be
paid to the holders of such certificates previously evidencing NUMAR Common
Stock. Upon any such surrender and exchange of such certificates,
43
however, there will be paid to the record holders of the certificates issued
and exchanged therefor (i), at the time of such surrender and exchange, the
amount, without interest thereon, of dividends and other distributions, if
any, with a record date on or after the Effective Time theretofore paid with
respect to such whole shares of Halliburton Common Stock and (ii), at the
appropriate payment date, the amount of dividends or other distributions, if
any, with a record date on or after the Effective Time but prior to surrender
and a payment date occurring after surrender, payable with respect to such
whole shares of Halliburton Common Stock.
NUMAR OPTIONS
The Merger Agreement provides that at the Effective Time, automatically and
without any action on the part of the holder thereof, each NUMAR Option will
be assumed by the Surviving Corporation and will become an option to purchase
Halliburton Common Stock. The number of shares of Halliburton Common Stock
subject thereto will be obtained by multiplying the number of shares of NUMAR
Common Stock previously subject thereto (without regard to any vesting
schedule) by the Exchange Ratio and the exercise price per share of
Halliburton Common Stock will be obtained by dividing the exercise price per
share of NUMAR Common Stock stated therein by the Exchange Ratio. Otherwise,
the terms and conditions of such NUMAR Options will remain the same.
Based on the NUMAR Options outstanding at the Record Date and assuming none
of such NUMAR Options are exercised prior to the Effective Time, Halliburton
will be required at the Effective Time to reserve an aggregate of
approximately 924,000 shares of Halliburton Common Stock for issuance upon
exercise of NUMAR Options.
The NUMAR 1994 Stock Incentive Plan provides that, in the event of a "Change
in Control" as defined therein, the options granted thereunder shall become
fully vested and immediately exercisable. As a result, NUMAR Options relating
to an aggregate of approximately 561,000 shares of NUMAR Common Stock
(equivalent to approximately 542,000 shares of Halliburton Common Stock) that
were unvested will, at the Effective Time, become fully vested and immediately
exercisable. Of such shares, 346,100 shares of NUMAR Common Stock (equivalent
to approximately 334,471 shares of Halliburton Common Stock) are subject to
stock options held by NUMAR directors and officers. For information as to the
individual holdings of NUMAR Options by directors and executive officers of
NUMAR, see "The Merger--Certain Potential Conflicts of Interest."
For information regarding the effect of the Executive Employment Agreements
on options held by those executive officers of NUMAR who are parties to the
Executive Employment Agreements, see "The Merger--Certain Potential Conflicts
of Interest."
CONDITIONS TO THE MERGER
The respective obligations of Halliburton and NUMAR to consummate the Merger
are subject to the satisfaction of the following conditions: (a) the
Registration Statement shall have been declared effective by the Commission
under the Securities Act, no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the Commission and no
proceedings for that purpose shall have been initiated by the Commission; (b)
the Merger Agreement and the Merger shall have been approved and adopted by
the requisite vote of the shareholders of NUMAR; (c) no Court or Governmental
Authority (as such terms are defined in the Merger Agreement) shall have
enacted, issued, promulgated, enforced or entered any Law, Regulation, or
Order (all as defined in the Merger Agreement) (whether temporary, preliminary
or permanent) which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger; (d) the
applicable waiting period under the HSR Act with respect to the transactions
contemplated by the Merger Agreement shall have expired or been terminated;
(e) Halliburton and NUMAR shall have been advised in writing by Arthur
Andersen LLP on the date of the Effective Time that such firm knows of no
reason why the Merger should not be treated for financial accounting purposes
as a pooling of interests in accordance with generally accepted accounting
principles and the rules, regulations and interpretations of the Commission;
and
44
(f) the holders of record of no more than 7% of the outstanding shares of NUMAR
Common Stock shall, immediately prior to the Effective Time, have perfected and
continued to perfect Dissenters Rights. The condition specified in clause (e)
may be waived by Halliburton and NUMAR; neither Halliburton nor NUMAR, however,
intends to waive such condition without resoliciting the votes of the
shareholders of NUMAR.
The obligation of Halliburton to effect the Merger is also subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived in writing by Halliburton, in whole or in part,
to the extent permitted by applicable law: (a) each of the representations and
warranties of NUMAR contained in the Merger Agreement shall be true and correct
as of the date of the Merger Agreement and as of the Effective Time as though
made again as of the Effective Time, except to the extent that any
misrepresentations and breaches of warranty shall not in the aggregate be
Material (as such term is defined in the Merger Agreement) to NUMAR; and (b)
NUMAR shall have performed or complied in all material respects with all
agreements and covenants required by the Merger Agreement to be performed or
complied with by it on or prior to the Effective Time.
The obligation of NUMAR to effect the Merger is also subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived in writing by NUMAR, in whole or in part, to the
extent permitted by applicable law: (a) each of the representations and
warranties of Halliburton and Merger Sub contained in the Merger Agreement
shall be true and correct as of the date of the Merger Agreement and as of the
Effective Time as though made again as of the Effective Time, except to the
extent that any misrepresentations and breaches of warranty shall not in the
aggregate be Material (as such term is defined in the Merger Agreement) to
Halliburton; (b) Halliburton and Merger Sub shall have performed or complied in
all material respects with all agreements and covenants required by the Merger
Agreement to be performed or complied with by them on or prior to the Effective
Time; and (c) the shares of Halliburton Common Stock to be issued pursuant to
the Merger shall have been approved for listing, subject to official notice of
issuance, on the NYSE.
There can be no assurance that all of the conditions to the Merger will be
satisfied. All the conditions referenced in the two preceding paragraphs, other
than clause (c) of the immediately preceding paragraph, may be waived by the
party entitled to satisfaction thereof. Neither Halliburton nor NUMAR, however,
intends to waive satisfaction of any such condition if such waiver would be
material to the consideration and vote of the shareholders of NUMAR upon the
proposal to adopt the Merger Agreement without resoliciting the votes of such
shareholders.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of each
of NUMAR and Halliburton relating to, among other things, (i) its organization
and similar corporate matters, (ii) its capitalization, (iii) the
authorization, execution, delivery, performance and enforceability of the
Merger Agreement and the Stock Option Agreement and the absence of conflicts,
violations and defaults under its charter and bylaws and certain other
agreements and documents, (iv) the documents and reports filed by it with the
Commission and the accuracy of the information contained therein, (v) the
absence of certain changes and events, (vi) the title to its assets and
properties, (vii) its material contracts and agreements, (viii) the material
permits and orders from Governmental Authorities required to conduct its
business, (ix) its litigation and compliance with laws, (x) its employee
benefit plans, (xi) its taxes, (xii) certain environmental matters, (xiii) its
insurance policies, (xiv) certain matters relating to pooling of interests
accounting and taxes, (xv) its brokers or investment bankers involved in the
transaction and (xvi) certain business practices. In addition, the Merger
Agreement contains representations and warranties by NUMAR relating to (i)
reports filed by it with Governmental Authorities in addition to the
Commission, (ii) its intellectual property and (iii) the receipt of an opinion
from its investment banker with respect to the Exchange Ratio. The
representations and warranties of NUMAR and Halliburton also extend in many
respects to their respective subsidiaries and, in the case of Halliburton,
Merger Sub joins in the representations and warranties. The representations and
warranties expire at the Effective Time.
45
CERTAIN COVENANTS; CONDUCT OF BUSINESS PRIOR TO THE MERGER
BUSINESS MAINTENANCE. NUMAR has agreed that, prior to the Effective Time,
unless expressly contemplated by the Merger Agreement or otherwise consented to
in writing by Halliburton, NUMAR will do and will cause its subsidiaries to do
the following: (a) operate its business in the usual and ordinary course
consistent with past practices; (b) use all reasonable efforts to preserve
substantially intact its business organization, maintain its material rights
and franchises, retain the services of its respective key employees and
maintain its relationships with its respective customers and suppliers; (c)
maintain and keep its properties and assets in as good repair and condition as
at present, ordinary wear and tear excepted, and maintain supplies and
inventories in quantities consistent with its customary business practice; and
(d) use all reasonable efforts to keep in full force and effect insurance and
bonds comparable in amount and scope of coverage to that currently maintained.
NEGATIVE COVENANTS. NUMAR has agreed that, prior to the Effective Time,
subject to certain exceptions and unless expressly contemplated by the Merger
Agreement or otherwise consented to in writing by Halliburton, it will not do,
and will not permit any of its subsidiaries to do, any of the following: (a)(i)
increase the compensation payable to or to become payable to any director or
executive officer; (ii) grant any severance or termination pay to, or enter
into or amend in any material respect any employment or severance agreement
with, any director, officer or employee; (iii) establish, adopt or enter into
any employee benefit plan; or (iv) amend, or take any other actions with
respect to, any employee benefit plans of such party; (b) declare or pay any
dividend on, or make any other distribution in respect of, outstanding shares
of capital stock; (c)(i) redeem, purchase or acquire, or offer to purchase or
acquire, any outstanding shares of capital stock of, or other equity interests
in, or any outstanding options, warrants or rights of any kind to acquire any
shares of capital stock of, or other equity interests in, NUMAR or any of its
subsidiaries; (ii) effect any reorganization or recapitalization; or (iii)
split, combine or reclassify any of the capital stock, or other equity
interests in, or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of capital
stock, or such equity interests, of NUMAR or any of its subsidiaries; (d)(i)
offer, sell, issue or grant, or authorize the offering, sale, issuance or
grant, of any shares of capital stock of, or other equity interests in, any
securities convertible into or exchangeable for any shares of capital stock of,
or other equity interest in, or any options, warrants or rights of any kind to
acquire any shares of capital stock of, or other equity interest in, NUMAR or
any of its subsidiaries; (ii) amend or otherwise modify the terms of any such
rights, warrants or options the effect of which shall be to make such terms
more favorable to the holders thereof; (iii) take any action to accelerate the
vesting of NUMAR Options; or (iv) grant any lien with respect to any shares of
capital stock of, or other equity interest in, any subsidiary of NUMAR; (e)
acquire or agree to acquire any business or other entity, or otherwise acquire
or agree to acquire any assets of any other person; (f) sell or otherwise
dispose of, or grant any lien with respect to, any of its material assets or
any material assets of any of its subsidiaries; (g) adopt certain amendments to
its charter or bylaws; (h) change any of its significant accounting policies or
take certain actions with respect to taxes; (i) incur any obligation for
borrowed money or purchase money indebtedness; (j) release any third party from
its obligations under any existing standstill provision relating to a Competing
Transaction or otherwise under any confidentiality or similar agreement; (k)
enter into certain material contracts; or (l) agree in writing or otherwise to
do any of the foregoing.
Halliburton has agreed that, prior to the Effective Date, subject to certain
exceptions and unless expressly contemplated by the Merger Agreement or
otherwise consented to in writing by NUMAR, it will not do, and will not permit
any of its Subsidiaries to do, any of the following: (a) declare or pay any
extraordinary dividend or distribution in cash or property (other than
Halliburton Common Stock), other than, in the case of the parent company,
regular quarterly dividends payable to holders of Halliburton Common Stock;
(b)(i) redeem, purchase or acquire, or offer to purchase or acquire, any
outstanding shares of capital stock of, or other equity interests in, or any
securities that are convertible into or exchangeable for any shares of capital
stock of, or other equity interests in, or any outstanding options, warrants or
rights of any kind to acquire any shares of capital stock of, or other equity
interests in, Halliburton or any of its subsidiaries; or (ii) effect any
reorganization or recapitalization, other than any such reorganization or
recapitalization that could not reasonably be expected to have a material
adverse effect on Halliburton's ability to perform its obligations under the
Merger Agreement;
46
(c) offer, sell, issue or grant, or authorize the offering, sale, issuance or
grant, of any shares of capital stock of, or other equity interest in, any
securities convertible into or exchangeable for any shares of capital stock of,
or other equity interest in, or any options, warrants or rights of any kind to
acquire any shares of capital stock of, or other equity interest in,
Halliburton or any of its subsidiaries, other than any issuance of shares of
Halliburton Common Stock for cash or in connection with any acquisition of
equity interests, assets or businesses that could not reasonably be expected to
have a material adverse effect on Halliburton's ability to perform its
obligations under the Merger Agreement; (d) acquire or agree to acquire any
business or other entity, or otherwise acquire or agree to acquire any assets
of any other person, other than any such acquisition that could not reasonably
be expected to have a material adverse effect on Halliburton's ability to
perform its obligations under the Merger Agreement; (e) sell or otherwise
dispose of, or grant any lien with respect to, any of its material assets or
any material assets of any of its subsidiaries; (f) adopt certain amendments to
its charter or bylaws; (g) incur any obligations for borrowed money or purchase
money indebtedness other than any such obligations that could not reasonably be
expected to have a material adverse effect on Halliburton's ability to perform
its obligations under the Merger Agreement; or (h) agree in writing or
otherwise to do any of the foregoing.
ACCESS TO BUSINESS OF OTHER PARTY. During the pendency of the Merger
Agreement, Halliburton and NUMAR have each agreed to afford, and to cause its
subsidiaries to afford, to the other party and its representatives access at
reasonable times to the officers, employees, agents, properties, offices and
other facilities of such party and its subsidiaries and to their books and
records. Each of them has also agreed to furnish, and to cause its subsidiaries
to furnish, to the other party and its representatives such information
concerning the business, properties, contracts, records and personnel of such
party and its subsidiaries as may be reasonably requested. If the Merger
Agreement is terminated in accordance with its terms, a party that has received
information pursuant to the Merger Agreement is obligated to return or destroy
such information within ten days after a request therefor by the other party.
All information furnished by either party pursuant to the Merger Agreement is
subject to a confidentiality agreement executed and delivered by Halliburton
and NUMAR prior to negotiation of the Merger Agreement.
NO SOLICITATION
As an inducement to Halliburton to enter into the Merger Agreement, NUMAR has
agreed that it will not initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action knowingly to
facilitate, any inquiries from any person or entity, or the making of any
proposal by any person or entity that constitutes or may reasonably be expected
to lead to, any Competing Transaction, or enter into discussions or negotiate
with any person or entity in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction, or
authorize or permit any of the officers, directors or employees of NUMAR or any
of its subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative retained by NUMAR or any of NUMAR's
subsidiaries to take any such action, that NUMAR will promptly notify
Halliburton of all relevant terms of any such inquiries and proposals received
by NUMAR or any of its subsidiaries or by any such officer, director, employee,
investment banker, financial advisor, attorney, accountant or other
representative relating to any of such matters and, if such inquiry or proposal
is in writing, that NUMAR will promptly deliver a copy of it to Halliburton;
provided, however, that this provision of the Merger Agreement will not prevent
the Board of Directors of NUMAR from complying with Rule 14e-2 under the
Exchange Act with regard to a tender or exchange offer for the NUMAR Common
Stock commenced prior to the Special Meeting. For this purpose, a "Competing
Transaction" means (a) any merger, consolidation, share exchange, business
combination or similar transaction involving NUMAR or any of its Significant
Subsidiaries (as defined in the Merger Agreement), (b) a sale, lease, exchange,
transfer or other disposition of 35% or more of the assets of NUMAR and its
Subsidiaries, taken as a whole, in a single transaction or series of related
transactions, (c) the acquisition by a person or group (in the case of a group,
through the formation thereof or otherwise) of beneficial ownership of 35% or
more of the outstanding NUMAR Common Stock, whether by tender or exchange offer
or otherwise or (d) the acquisition in any manner, directly or indirectly, of a
Material (as defined in the Merger Agreement) equity interest in any voting
securities of, or a substantial portion of the assets of, NUMAR or any of its
Significant Subsidiaries, other than the transactions
47
contemplated by the Merger Agreement. See "Certain Terms of the Merger
Agreement--No Solicitation." Moreover, NUMAR has agreed that, prior to the
Effective Time, it will not, through action of its Board of Directors, approve
the acquisition of NUMAR Common Stock by any person who, following such
acquisition, would be an "interested shareholder" under Subchapter F of Chapter
25 of the PBCL.
CERTAIN POST-MERGER MATTERS
Once the Merger is consummated, Merger Sub will cease to exist as a
corporation, and NUMAR, as the Surviving Corporation, will succeed to all of
the assets, rights and obligations of NUMAR and Merger Sub.
Pursuant to the Merger Agreement, the articles of incorporation and the
bylaws of NUMAR, as in effect immediately prior to the Effective Time, will be
the articles of incorporation and bylaws of the Surviving Corporation until
amended as provided therein and pursuant to the PBCL.
TERMINATION OR AMENDMENT OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the Merger Agreement and the Merger
by the shareholders of NUMAR: (a) by mutual consent of Halliburton and NUMAR;
(b) by Halliburton, upon a material breach of any covenant or agreement on the
part of NUMAR set forth in the Merger Agreement or if any representation or
warranty of NUMAR shall have become untrue in any material respect, in either
case such that the conditions to the obligation of Halliburton to consummate
the Merger would not be satisfied, subject to a cure period under certain
circumstances (a "Terminating NUMAR Breach"); (c) by NUMAR, upon a material
breach of any covenant or agreement on the part of Halliburton or Merger Sub
set forth in the Merger Agreement or if any representation or warranty of
Halliburton or Merger Sub shall have become untrue in any material respect, in
either case such that the conditions to the obligation of NUMAR to consummate
the Merger would not be satisfied, subject to a cure period under certain
circumstances (a "Terminating Halliburton Breach"); (d) by either Halliburton
or NUMAR, if there shall be any order of any court or governmental authority
that is final and nonappealable preventing the consummation of the Merger,
subject to a limited exception; (e) by either Halliburton or NUMAR, if the
Merger shall not have been consummated before December 31, 1997; provided,
however, that the Merger Agreement may be extended by written notice given by
either Halliburton or NUMAR to a date not later than February 28, 1998 if the
Merger shall not have been consummated as a direct result of NUMAR, Halliburton
or Merger Sub having failed by December 31, 1997 to receive all required
regulatory approvals or consents with respect to the Merger or as the result of
the entering of an order by a court or governmental authority; (f) by either
Halliburton or NUMAR, if the Merger Agreement shall fail to receive the
requisite vote for adoption by the shareholders of NUMAR at the Special
Meeting; (g) by Halliburton, (1) if any person (other than Halliburton or any
of its Affiliates) shall have commenced a tender or exchange offer to purchase
35% or more of the outstanding NUMAR Common Stock and the NUMAR Board of
Directors, within 10 business days thereafter, either fails to recommend
against acceptance of such tender or exchange offer by the NUMAR shareholders
or takes no position with respect thereto; or (2) if any person (other than
Halliburton or any of its Subsidiaries) or group shall, subsequent to the date
of the Merger Agreement, acquire beneficial ownership or the right to acquire
beneficial ownership of (A) 35% or more of the then outstanding NUMAR Common
Stock and the Merger Agreement has failed to receive the requisite vote for
adoption thereof at the Special Meeting or (B) 45% or more of the then
outstanding NUMAR Common Stock.
Subject to limited exceptions, including the survival of NUMAR's agreement to
pay a termination fee to Halliburton under certain circumstances, as discussed
below, in the event of the termination of the Merger Agreement, the Merger
Agreement shall become void, there shall be no liability on the part of
Halliburton, Merger Sub or NUMAR to the other, and all rights and obligations
of the parties thereto shall cease, except that no party will be relieved from
its obligations with respect to any breach of the Merger Agreement.
The Merger Agreement may be amended by the parties thereto by action taken by
or on behalf of their respective Boards of Directors at any time prior to the
Effective Time; provided, however, that, after approval of
48
the Merger by the shareholders of NUMAR, no amendment may be made that would
reduce the amount or change the type of consideration into which each share of
NUMAR Common Stock will be converted pursuant to the Merger Agreement upon
consummation of the Merger. Any such amendment to the Merger Agreement must be
set forth in a writing signed by Halliburton, Merger Sub, and NUMAR. At any
time prior to the Effective Time, any party to the Merger Agreement may (a)
extend the time for the performance of any of the obligations or other acts of
the other party thereto, (b) waive any inaccuracies in the representations and
warranties of the other party contained therein or in any document delivered
pursuant thereto and (c) waive compliance by the other party with any of the
agreements or conditions contained therein. Any such extension or waiver shall
be valid only if set forth in a writing signed by the party or parties to be
bound thereby. Neither Halliburton nor NUMAR, however, intends to enter into
any amendment to the Merger Agreement or to waive compliance by the other with
the terms of the Merger Agreement if such amendment or waiver would be material
to the consideration and vote of the shareholders of NUMAR upon the proposal to
adopt the Merger Agreement without resoliciting the votes of such shareholders.
EXPENSES AND TERMINATION FEE
All expenses incurred by Halliburton, Merger Sub, and NUMAR will be borne by
the party incurring such expenses; provided, however, that the allocable share
of Halliburton and Merger Sub, as a group, and NUMAR for all expenses related
to printing, filing and mailing this Proxy Statement/Prospectus and all
Commission and other regulatory filing fees incurred in connection with the
Registration Statement or this Proxy Statement/Prospectus shall be one-half
each; and provided further, however, that Halliburton may, at its option, pay
any expenses of NUMAR that are solely and directly related to the Merger.
The Merger Agreement provides that NUMAR will pay to Halliburton a
Termination Fee equal to $9 million if:
(a) the Merger Agreement is terminated by Halliburton because a tender or
exchange offer for 35% or more of the capital stock of NUMAR is commenced,
and NUMAR's Board of Directors, within 10 business days after such tender
offer or exchange offer is so commenced, either fails to recommend against
acceptance of such tender or exchange offer by the NUMAR shareholders or
takes no position with respect to the acceptance of such tender or exchange
offer by the NUMAR shareholders;
(b) the Merger Agreement is terminated by Halliburton because any person
(other than Halliburton or any of its Subsidiaries) or group shall,
subsequent to the date of the Merger Agreement, acquire beneficial
ownership or the right to acquire beneficial ownership of (A) 35% or more
of the then outstanding NUMAR Common Stock and the Merger Agreement has
failed to receive the requisite vote for adoption thereof at the Special
Meeting or (B) 45% or more of the then outstanding NUMAR Common Stock.
(c) (i) the Merger Agreement is terminated by Halliburton because of an
intentional or willful Terminating NUMAR Breach and (ii) either within 12
months thereafter (A) NUMAR shall have entered into a definitive agreement
with respect to a Competing Transaction with any person or "group" (as
defined under Section 13(d) of the Exchange Act and the regulations
thereunder), other than Halliburton, its subsidiaries or affiliates, to
which NUMAR shall have furnished information or with which NUMAR shall have
had any contacts or entered into any discussions or negotiations relating
to a Competing Transaction at any time during the period commencing 12
months prior to the date of the Merger Agreement and ending on the date of
termination of the Merger Agreement or (B) any such person or "group" (as
defined above) to which NUMAR shall have furnished such information or with
which it shall have had such contacts, discussions or negotiations shall
have acquired beneficial ownership by tender offer or exchange offer or
otherwise of 35% or more of the outstanding shares of NUMAR Common Stock
and, in the case of either clause (A) or (B), the NUMAR shareholders shall,
as a result, have received consideration having a higher value per share
than the consideration per share payable to the NUMAR shareholders under
the Merger Agreement or such transaction shall be on more favorable terms
to the NUMAR shareholders than the Merger.
49
INDEMNIFICATION
The Merger Agreement provides that, for a period of six years after the
Effective Time, (i) the articles of incorporation and bylaws of the Surviving
Corporation as in effect immediately following the Effective Time shall not be
amended to reduce or limit the rights of indemnity afforded to the present and
former directors and officers of NUMAR thereunder or as to the ability of the
Surviving Corporation to indemnify such persons or to hinder, delay or make
more difficult the exercise of such rights of indemnity or the ability to
indemnify with respect to any claims made against such persons arising from
their service in such capacities; and (ii) Halliburton shall cause to be
maintained in effect the current policies of directors' and officers' liability
insurance maintained by NUMAR (or substitute policies under certain
circumstances) with respect to claims arising from facts or events which
occurred before the Effective Time; provided, however, that in no event shall
Halliburton or the Surviving Corporation be required to expend more than 200%
of the current annual premiums paid by NUMAR for such insurance.
STOCK OPTION AGREEMENT
The following is a description of all of the material terms of the Stock
Option Agreement. The description does not, however, purport to be complete and
is qualified in its entirety by reference to the Stock Option Agreement, a copy
of which is attached as Appendix B to this Proxy Statement/Prospectus and is
incorporated herein by reference.
Pursuant to the Stock Option Agreement, NUMAR has granted to Halliburton an
option ("the Option") to acquire up to 1,261,908 shares, subject to certain
adjustments (the "Option Shares"), of NUMAR Common Stock for $36.00 per share
in cash, subject to certain adjustments (the "Exercise Price"). The number of
Option Shares represents 15% of the shares of NUMAR Common Stock outstanding on
June 9, 1997, the date of the Stock Option Agreement. The Option was granted by
NUMAR as a condition of and as an inducement for Halliburton's entering into
the Merger Agreement.
The Option will remain in full force and effect from the date of the Stock
Option Agreement until the earliest to occur of (i) the Effective Time; (ii)
the first anniversary of the receipt by Halliburton of written notice from
NUMAR of the occurrence of an Exercise Event, as defined below; or (iii)
termination of the Merger Agreement prior to the occurrence of such an Exercise
Event (such period being herein called the "Option Term").
Halliburton may exercise the Option, in whole or in part, at any time during
the Option Term following the occurrence of any of the following Exercise
Events:
(i) any Person (other than Halliburton or any of its Affiliates) shall
have commenced a tender or exchange offer to purchase any shares of NUMAR
Common Stock such that, upon consummation of such offer, such Person would
own or control 35% or more of the then outstanding NUMAR Common Stock and
the Board of Directors of NUMAR, within ten Business Days thereafter,
either fails to recommend against acceptance of such tender or exchange
offer by NUMAR's shareholders or takes no position with respect thereto; or
(ii) any Person (other than Halliburton or any of its Subsidiaries)
shall, subsequent to the date of the Stock Option Agreement, acquire
beneficial ownership (as such term is defined in Rule 13d-3 under the
Exchange Act) or the right to acquire beneficial ownership of, or any group
shall have been formed that beneficially owns, or has the right to acquire
beneficial ownership of, (A) 35% or more of the then outstanding NUMAR
Common Stock and the Merger Agreement has failed to receive the requisite
vote at the Special Meeting or (B) 45% or more of the then outstanding
NUMAR Common Stock.
The Stock Option Agreement contains provisions governing the procedure for
exercise of the Option and payment for the Option Shares purchased upon such
exercise and other provisions that adjust the number of
50
Option Shares and the Exercise Price therefor upon the occurrence of certain
events, such as stock dividends, divisions, combinations and recapitalizations,
as well as certain mergers, consolidations, share exchanges and sales of assets
involving NUMAR.
The Stock Option Agreement further provides (the "Put Option") that, upon the
occurrence of an Exercise Event and for a period of one year thereafter, NUMAR
will, upon the request of Halliburton, repurchase (a) that portion of the
Option that then remains unexercised and (b) all the shares of NUMAR Common
Stock theretofore acquired upon exercise of the Option and then held by
Halliburton. The price for such repurchase shall be paid in cash and shall be
equal to the sum of:
(i) the aggregate exercise price paid for any shares of NUMAR Common
Stock upon exercise of the Option and then held by Halliburton;
(ii) the excess, if any, of the Applicable Price (as defined below) over
the Exercise Price paid for each share of NUMAR Common Stock acquired by
Halliburton upon exercise of the Option and then held by Halliburton times
the number of such shares; and
(iii) the excess, if any, of the Applicable Price over the Exercise Price
per share of NUMAR Common Stock times the number of Option Shares as to
which the Option has not yet been exercised.
For this purpose, "Applicable Price" means the highest of (a) the highest
price per share paid pursuant to a tender or exchange offer made for shares of
NUMAR Common Stock subsequent to the date of the Stock Option Agreement; (b)
the price per share to be paid by any third person or entity for shares of
NUMAR Common Stock pursuant to any agreement for a business combination
involving NUMAR entered into prior to the exercise by Halliburton of the Put
Option; and (c) the highest bid price for the NUMAR Common Stock reported by
The Nasdaq National Market during the 60 business days preceding such exercise.
Notwithstanding these repurchase rights, Halliburton may not exercise the Put
Option in a manner that would result in the payment to Halliburton of an
aggregate amount of more than $12 million, including the amount of the
Termination Fee, if any.
The Stock Option Agreement also contains provisions granting NUMAR, under
certain circumstances, a right of first refusal to purchase shares of NUMAR
Common Stock acquired by Halliburton upon exercise of the Option and a right at
NUMAR's election, for a period of six months following the date of expiration
of the Put Option, to purchase all the shares of NUMAR Common Stock acquired by
Halliburton upon exercise of the Option.
Finally, the Stock Option Agreement contains provisions obligating NUMAR, if
requested by Halliburton at any time within two years following the first
exercise of the Stock Option, to prepare, file and cause to be made effective
up to two registration statements for the purpose of registering under the
Securities Act the offering, sale and delivery of the NUMAR Common Stock
acquired by Halliburton upon exercise of the Stock Option. Under such
circumstances, NUMAR is also obligated to use all reasonable efforts to qualify
such shares under any applicable state securities laws. The expenses associated
with the preparation and filing of any such registration statement and any sale
covered thereby, except for any underwriting discounts or commissions or
brokers' fees in respect to shares sold by Halliburton and fees and expenses of
Halliburton's counsel, would be for the account of NUMAR. In connection with
any such offering, NUMAR and Halliburton are required to provide each other and
each underwriter of the offering with customary representations, warranties and
covenants, including covenants of indemnification and contribution.
51
VOTING AGREEMENTS
The following is a description of all of the material terms of the Voting
Agreements. The description does not, however, purport to be complete and is
qualified in its entirety by reference to the Voting Agreements, a form of
which is attached as Appendix C to this Proxy Statement/Prospectus and is
incorporated herein by reference.
In order to induce Halliburton to enter into the Merger Agreement, four
directors of NUMAR, an affiliate of one of the directors and a trust of which
one of the directors is a beneficiary have entered into Voting Agreements with
Halliburton pursuant to which such directors and affiliates have agreed to
vote all shares of NUMAR Common Stock owned by them in favor of the Merger
Agreement. These directors are Dr. Melvin N. Miller, the Chairman of the
Board, President and Chief Executive Officer of NUMAR, Barry M. Davis, Seymour
G. Mandell and Dr. James H. Simons. The two related entities are Davis Venture
Partners, L.P., an affiliate of Mr. Davis, and the Bermuda Trust Company
Limited, as trustee of the Lord Jim Trust, of which Dr. Simons is a
beneficiary. An aggregate of 1,938,290 shares of NUMAR Common Stock entitled
to vote at the Special Meeting are subject to the Voting Agreements. Such
shares, as of the Record Date, represented approximately 23.0% of the then
outstanding shares of NUMAR Common Stock.
Pursuant to the Voting Agreements, these affiliates have, among other
things, agreed to vote all shares of NUMAR Common Stock beneficially owned by
them in favor of the Merger and against any business combination proposal or
other matter that may interfere or be inconsistent with the Merger (including
a Competing Transaction). They have also agreed, if reasonably requested by
Halliburton in order to facilitate the Merger, not to attend and not to vote
any NUMAR Common Stock beneficially owned by them at any annual or special
meeting of shareholders and not to execute any written consent of
shareholders.
Each of these affiliates has also agreed that neither such affiliate nor any
corporation or other person or entity controlled by such affiliate, other than
NUMAR and its subsidiaries (an "Affiliate Group"), will, directly or
indirectly, sell, transfer, pledge or otherwise dispose of, or grant a proxy
with respect to, any shares of NUMAR Common Stock beneficially owned by any
member of such Affiliate Group to any person or entity (other than to any
member of such Affiliate Group or its designee), or grant an option with
respect to any of the foregoing, or enter into any other agreement or
arrangement with respect to any of the foregoing.
The Voting Agreements will terminate on the earlier of December 31, 1997 or
the termination of the Merger Agreement.
52
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET INFORMATION
The following unaudited pro forma condensed combined balance sheet
information reflects adjustments to the historical consolidated balance sheets
of Halliburton and NUMAR to give effect to the Merger, using the pooling of
interests method of accounting for a business combination. Halliburton
considers the proposed transaction an immaterial pooling of interests
combination and will not restate its historical financial statements subsequent
to the Merger. Accordingly, unaudited pro forma condensed combined income
statements have not been presented herein.
The following unaudited pro forma condensed combined information has been
prepared from, and should be read in conjunction with, the historical
consolidated financial statements and notes thereto of Halliburton and NUMAR,
incorporated by reference into this Proxy Statement/Prospectus.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1997
-------------------------------------------
PRO FORMA PRO FORMA
HALLIBURTON NUMAR ADJUSTMENTS COMBINED
----------- ------ ----------- ---------
(IN MILLIONS)
Current assets:
Cash and equivalents.............. $ 50.4 $ 4.7 $ -- $ 55.1
Receivables....................... 2,119.9 6.7 -- 2,126.6
Inventories....................... 350.2 0.1 -- 350.3
Other current assets.............. 215.9 0.6 -- 216.5
-------- ------ ------ --------
Total current assets............ 2,736.4 12.1 -- 2,748.5
Property, plant and equipment, net.. 1,487.7 21.6 -- 1,509.3
Other assets........................ 938.8 0.7 -- 939.5
-------- ------ ------ --------
Total assets.................... $5,162.9 $ 34.4 $ -- $5,197.3
======== ====== ====== ========
Current Liabilities:
Short-term notes payable.......... $ 158.2 $ -- $ -- $ 158.2
Current maturities of long-term
debt............................. 8.4 0.1 -- 8.5
Accounts payable.................. 533.0 1.1 -- 534.1
Advance billings on uncompleted
contracts........................ 322.4 -- -- 322.4
Other current liabilities......... 754.8 5.6 -- 760.4
-------- ------ ------ --------
Total current liabilities....... 1,776.8 6.8 -- 1,783.6
Long-term debt...................... 425.0 0.1 -- 425.1
Other liabilities................... 621.6 6.7 -- 628.3
-------- ------ ------ --------
Total liabilities............... 2,823.4 13.6 -- 2,837.0
-------- ------ ------ --------
Shareholders' equity:
Common stock...................... 650.1 0.1 20.3 (a) 670.5
Paid-in capital in excess of par
value............................ 32.6 56.6 (20.3)(a) 68.9
Cumulative translation adjustment. (10.7) -- -- (10.7)
Retained earnings................. 1,777.9 (35.9) -- 1,742.0
-------- ------ ------ --------
2,449.9 20.8 -- 2,470.7
Less treasury stock, at cost........ 110.4 -- -- 110.4
-------- ------ ------ --------
Total shareholders' equity.......... 2,339.5 20.8 -- 2,360.3
-------- ------ ------ --------
Total liabilities and
shareholders' equity........... $5,162.9 $ 34.4 $ -- $5,197.3
======== ====== ====== ========
53
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma condensed combined balance sheet is based on the
balance sheets of Halliburton and NUMAR at June 30, 1997 and upon the
adjustments and assumptions described below. Halliburton considers the
proposed transaction an immaterial pooling of interests combination and will
not restate its historical financial statements subsequent to the Merger.
Accordingly, unaudited pro forma condensed combined income statements have not
been presented herein.
The unaudited pro forma condensed combined balance sheet does not reflect
expenses expected to be incurred by Halliburton and NUMAR in connection with
the Merger or the effect of anticipated cost savings, that may be realized
after consummation of the Merger.
Halliburton and NUMAR employ accounting policies that are in accordance with
generally accepted accounting principles in the United States. The preparation
of financial statements in conformity with generally accepted accounting
principles requires Halliburton and NUMAR management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Ultimate results could differ from those estimates. In the
opinion of Halliburton and NUMAR, the unaudited pro forma condensed combined
balance sheet includes all adjustments necessary to present fairly the pro
forma combined financial position of Halliburton and NUMAR. Intercompany
transactions are not material to the unaudited pro forma condensed combined
balance sheet.
NOTE 2. PRO FORMA ADJUSTMENTS
The unaudited pro forma condensed combined balance sheet reflects the
following pro forma adjustment:
(a) The unaudited pro forma condensed combined balance sheet reflects the
issuance of 0.9664 of a share of Halliburton Common Stock for each share of
NUMAR Common Stock outstanding at March 31, 1997. Therefore, the historical
combined common stock and paid-in capital balances have been adjusted to
reflect the number of shares assumed to be issued and the differences in
par value per common share of Halliburton and NUMAR.
Halliburton and NUMAR expect to incur charges to operations of approximately
$6.0 million for transaction fees and costs incident to the Merger. These
expenses are not reflected in the unaudited pro forma condensed combined
balance sheet. Moreover, no adjustments have been reflected in the unaudited
pro forma condensed combined balance sheet for the benefits that Halliburton
management anticipates to result from the Merger as described under "The
Merger--Halliburton's Reasons for the Merger."
54
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
HALLIBURTON
The following table sets forth information with respect to stockholders of
Halliburton who were believed by management of Halliburton to own more than 5%
of the Halliburton Common Stock outstanding as of the Record Date. The
information set forth below is based solely upon information furnished by such
stockholders or contained in filings made by such persons with the Commission,
and is as of the dates specified below.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTOF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
------------------------------------ ---------- ---------
FMR Corp................................................ 13,948,787(1) 11.1%
82 Devonshire Street
Boston, MA.
- --------
(1) Based on information contained in a Schedule 13G filed with the Commission
with respect to beneficial ownership at December 31, 1996. The number of
shares reported includes 12,198,191 shares beneficially owned by Fidelity
Management & Research Company, 1,678,396 shares owned by Fidelity
Management Trust Company and 72,200 shares held by Fidelity International
Limited. FMR Corp., through control of Fidelity Management & Research
Company and Fidelity Management Trust Company, has sole dispositive power
over the shares with the exception of those held beneficially by Fidelity
International Limited. FMR Corp. has sole power to vote or to direct the
vote of 1,011,496 shares of Halliburton Common Stock.
NUMAR
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The
following table sets forth, as of the close of business on June 30, 1997
unless otherwise indicated, certain information with respect to the beneficial
share holdings of each director and each of the five most highly compensated
executive officers of NUMAR and all executive officers and directors as a
group, as well as the holdings of each shareholder who was known to NUMAR to
be the beneficial owner, as defined in Rule 13d-3 under the Exchange Act of
more than 5% of the NUMAR Common Stock, based upon NUMAR records or Commission
records.
COMMON
SHARES
BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER OWNED OF CLASS
------------------------ ------------ --------
Halliburton Company................................. 1,938,290(2) 23.0%
3600 Lincoln Plaza
500 North Akard Street
Dallas, Texas 75201-3391
Bermuda Trust Company Limited....................... 900,000(1)(2) 10.7
as Trustee of the Lord Jim Trust
c/o Bank of Bermuda
6 Front Street
Hamilton, Bermuda
Barry M. Davis...................................... 723,144(2)(4) 8.6
c/o Davis Venture Partners, L.P.
320 South Boston, Suite 1000
Tulsa, Oklahoma 74103
Prince Resources Limited............................ 491,870 5.9
505 Park Avenue
New York, New York 10022
55
COMMON
SHARES
BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER OWNED OF CLASS
------------------------ ------------ --------
Davis Venture Partners, L.P......................... 700,486(2) 8.3
320 South Boston, Suite 1000
Tulsa, Oklahoma 74103
Wellington Management Company....................... 644,300 7.7
75 State Street
Boston, Massachusetts 02109
Melvin N. Miller.................................... 334,143(2)(5) 3.9
Seymour G. Mandell.................................. 174,771(2)(6) 2.1
1735 Market Street, Suite 3410
Philadelphia, Pennsylvania 19103
Thomas Blades....................................... - -
Richard N. Chandler................................. 34,622(7) *
George R. Coates.................................... 21,811(8) *
Edward P. Delson.................................... 49,219(9) *
David S. Hirsch..................................... 57,375(10) *
Manfred G. Prammer.................................. 10,700(11) *
James H. Simons..................................... 13,434(2)(12) *
Ralph F. Spinnler................................... 10,875(13) *
All directors and executive officers as a group (11
persons)........................................... 1,430,094(14) 16.4%
- --------
* Less than 1% of the outstanding shares.
(1) The beneficiaries of the Lord Jim Trust are Dr. Simons, a director of
NUMAR, and members of his immediate family. Dr. Simons disclaims
beneficial ownership of the shares held by the trust.
(2) Halliburton has shared voting power with respect to these shares pursuant
to the Voting Agreements. See "Voting Agreements."
(3) Consists of 325,641 shares, 241,000 shares, 139,500 shares, 63,500
shares, and 28,900 shares owned by Centennial Associates, L.P.,
Centennial Energy Partners, L.P., Tercentennial Energy Partners, L.P.,
Quadrennial Partners, L.P. and Joseph H. Reich & Co., Inc., respectively.
Joseph H. Reich and Peter K. Seldin share voting and investment power
with respect to each of these shares. Messrs. Reich and Seldin are
general partners of each of Centennial Associates, L.P. and Centennial
Energy Partners, L.P. Mr. Reich is the President, sole director and
shareholder of Joseph H. Reich & Co. and Mr. Seldin is its Vice
President.
(4) Includes 700,486 shares owned by Davis Venture Partners, L.P. ("Davis
Venture Partners"), 13,864 shares owned by Davis Resources, 4,419 shares
held by trusts for which Mr. Davis acts as trustee and 4,375 shares
issuable upon exercise of the vested portion of outstanding stock
options. Mr. Davis is a general partner of Davis Venture Partners and a
general partner of Davis Resources. Mr. Davis disclaims beneficial
ownership of 6,932 of the shares owned by Davis Resources and the 4,419
shares held in the trusts.
(5) Consists of 153,042 shares held jointly with Dr. Miller's wife and
183,101 shares issuable upon exercise of the vested portion of
outstanding stock options.
(6) Includes 4,375 shares issuable upon exercise of the vested portion of
outstanding stock options.
(7) Includes 25,622 shares issuable upon exercise of the vested portion of
outstanding stock options.
(8) Includes 18,811 shares issuable upon exercise of the vested portion of
outstanding stock options.
(9) Includes 39,144 shares issuable upon exercise of the vested portion of
outstanding stock options.
(10) Includes 27,500 shares held in a retirement plan for Mr. Hirsch's benefit
and 4,875 shares issuable upon exercise after vested portion of
outstanding stock options.
(11) Includes 7,700 shares issuable upon exercise of the vested portion of
outstanding stock options.
(12) Includes 4,000 shares issuable upon exercise of the vested portion of
outstanding stock options.
(13) Represents shares issuable upon exercise of the vested portion of
outstanding stock options.
(14) Includes 302,378 shares issuable upon exercise of the vested portion of
outstanding stock options.
56
Except as otherwise indicated, (i) the persons named in the above table have
sole voting and investment power with respect to all shares of NUMAR Common
Stock shown as beneficially owned by them, and (ii) none of the shares shown
in such table or referred to in the footnotes thereto are shares of which the
persons named in the table have the right to acquire beneficial ownership as
specified in Rule 13d-3(d)(1) under the Exchange Act.
57
DESCRIPTION OF HALLIBURTON CAPITAL STOCK
GENERAL
The following description of all of the material provisions of the
certificate of incorporation and bylaws of Halliburton is necessarily general
and does not purport to be complete and is qualified in its entirety by
reference to such documents, which are included as exhibits to the
Registration Statement of which this Proxy Statement/Prospectus is a part.
HALLIBURTON COMMON STOCK
Halliburton is authorized to issue 400,000,000 shares of Halliburton Common
Stock, par value $2.50. As of July 22, 1997, there were, after giving effect
to the Stock Split, 260,069,832 shares of Halliburton Common Stock issued and
outstanding and approximately 14,500 holders of record of Halliburton Common
Stock. The holders of Halliburton Common Stock are entitled to one vote for
each share on all matters submitted to a vote of stockholders. The holders of
Halliburton Common Stock do not have cumulative voting rights in the election
of directors. Subject to the rights of the holders of Halliburton Preferred
Stock (as defined below), the holders of Halliburton Common Stock are entitled
to receive ratably such dividends, if any, as may be declared by the Board of
Directors of Halliburton out of legally available funds. In the event of
liquidation, dissolution or winding up of Halliburton, the holders of
Halliburton Common Stock are entitled to share ratably in all assets of
Halliburton remaining after payment of the full amounts, if any, to which the
holders of outstanding Halliburton Preferred Stock are entitled. The holders
of Halliburton Common Stock have no preemptive, subscription, redemptive or
conversion rights. The outstanding shares are fully paid and nonassessable.
The rights, preferences and privileges of holders of Halliburton Common Stock
are subject to those of holders of Halliburton Preferred Stock.
RIGHTS TO PURCHASE PREFERRED STOCK
Halliburton is a party to that certain Restated Rights Agreement dated as of
December 1, 1996 (the "Restated Rights Agreement") pursuant to which one
preferred share purchase right (a "Right") has been distributed as a dividend
for each share of Halliburton Common Stock outstanding or issued prior to the
Distribution Date (as hereinafter defined) or termination of the Restated
Rights Agreement. Each share of Halliburton Common Stock into which NUMAR
Common Stock will be converted pursuant to the Merger will be accompanied by
one Right. After giving effect to adjustments required by the Restated Rights
Agreement as a result of the Stock Split, each Right now entitles the
registered holder to purchase from Halliburton one two-hundredth of a share of
Series A Junior Participating Preferred Stock, without par value ("Halliburton
Series A Preferred Stock"), of Halliburton, at a price of $75.00 per one two-
hundredth of a share (the "Purchase Price"), subject to further adjustment.
See "--Halliburton Preferred Stock--Halliburton Series A Preferred Stock."
Until the occurrence of certain events described below, the Rights are not
exercisable, will be evidenced by the certificates for Halliburton Common
Stock and will not be transferable apart from the Halliburton Common Stock.
DETACHMENT OF RIGHTS; EXERCISE. The Rights are currently attached to all
certificates representing outstanding shares of Halliburton Common Stock and
no separate Right Certificates have been distributed. The Rights will separate
from the Halliburton Common Stock and a distribution date ("Distribution
Date") will occur upon the earlier of (i) the tenth business day following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired beneficial ownership of 15% or more of
the outstanding Voting Shares (as defined in the Restated Rights Agreement) of
Halliburton and (ii) the tenth business day following the commencement or
announcement of an intention to commence a tender offer or exchange offer, the
consummation of which would result in the beneficial ownership by a person or
group of 15% or more of such outstanding Voting Shares.
58
The Rights are not exercisable until the Distribution Date. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights (the "Right Certificates") will be mailed to holders of record of
Halliburton Common Stock as of the close of business on the Distribution Date
and such separate Right Certificates alone will thereafter evidence the
Rights.
If a person or group were to acquire 15% or more of the Voting Shares of
Halliburton, each Right then outstanding (other than Rights beneficially owned
by the Acquiring Person which would become null and void) would become a right
to buy that number of shares of Halliburton Common Stock (or under certain
circumstances, the equivalent number of one two-hundredths of a share of
Halliburton Series A Preferred Stock) that at the time of such acquisition
would have a market value of two times the Purchase Price of the Right.
If Halliburton were acquired in a merger or other business combination
transaction or more than 50% of its consolidated assets or earning power were
sold, proper provision is required to be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price of the Right, that number of shares of common
stock of the acquiring company which at the time of such transaction would
have a market value of two times the Purchase Price of the Right.
ANTIDILUTION AND OTHER ADJUSTMENTS. The number of shares (or fractions
thereof) of Halliburton Series A Preferred Stock or other securities or
property issuable upon exercise of the Rights, and the Purchase Price payable,
are subject to customary adjustments from time to time to prevent dilution.
The number of outstanding Rights and the number of shares (or fractions
thereof) of Halliburton Series A Preferred Stock issuable upon exercise of
each Right are also subject to adjustment in the event of a stock split of the
Halliburton Common Stock or a stock dividend on the Halliburton Common Stock
payable in Halliburton Common Stock or subdivisions, consolidations or
combinations of the Halliburton Common Stock occurring, in any such case,
prior to the Distribution Date.
EXCHANGE OPTION. At any time after the acquisition by a person or group of
affiliated or associated persons of beneficial ownership of 15% or more of the
outstanding Voting Shares of Halliburton and before the acquisition by a
person or group of 50% or more of the outstanding Voting Shares of
Halliburton, the Halliburton Board of Directors may, at its option, issue
Halliburton Common Stock in mandatory redemption of, and in exchange for, all
or part of the then outstanding and exercisable Rights (other than Rights
owned by such person or group which would become null and void) at an exchange
ratio of one share of Halliburton Common Stock (or one two-hundredth of a
share of Halliburton Series A Preferred Stock) for each two shares of
Halliburton Common Stock for which each Right is then exercisable, subject to
adjustment.
REDEMPTION OF RIGHTS. At any time prior to the first public announcement
that a person or group has become the beneficial owner of 15% or more of the
outstanding Voting Shares, the Halliburton Board of Directors may redeem all
but not less than all the then outstanding Rights at a price of $.01 per Right
(the "Redemption Price"). The redemption of the Rights may be made effective
at such time, on such basis and with such conditions as the Halliburton Board
of Directors in its sole discretion may establish. Immediately upon the action
of the Halliburton Board of Directors ordering redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders
of Rights will be to receive the Redemption Price.
EXPIRATION; AMENDMENT OF RIGHTS. The Rights will expire on December 15,
2005, unless earlier redeemed or exchanged. The terms of the Rights may be
amended by the Halliburton Board of Directors without the consent of the
holders of the Rights, including an amendment to extend the expiration date of
the Rights, and, provided a Distribution Date has not occurred, to extend the
period during which the Rights may be redeemed, except that after the first
public announcement that a person or group has become the beneficial owner of
15% or more of the outstanding Voting Shares, no such amendment may materially
and adversely affect the interests of the holders of the Rights.
The Rights have certain anti-takeover effects. The rights will cause
substantial dilution to a person or group that attempts to acquire Halliburton
without the approval of the Halliburton Board of Directors. The Rights
59
should not, however, interfere with any merger or other business combination
that is approved by the Halliburton Board of Directors.
The foregoing description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement, a copy of
which is filed as an exhibit to the Registration Statement and is available
free of charge from Halliburton.
HALLIBURTON PREFERRED STOCK
GENERAL. Halliburton is authorized to issue 5,000,000 shares of Preferred
Stock, without par value (the "Halliburton Preferred Stock"), of which
2,000,000 shares have been designated as Series A Junior Participating
Preferred Stock (the "Halliburton Series A Preferred Stock"). No shares of
Halliburton Preferred Stock were outstanding at March 31, 1997. The
Halliburton Board of Directors has authority, without stockholder approval, to
issue shares of Halliburton Preferred Stock in one or more series and to
determine the number of shares, designations, dividend rights, conversion
rights, voting power, redemption rights, liquidation preferences and other
terms of such series. The issuance of Halliburton Preferred Stock, while
providing desired flexibility in connection with possible acquisitions and
other corporate purposes, could adversely affect the voting power of holders
of Halliburton Common Stock and the likelihood that such holders will receive
dividend payments and payments upon liquidation and could have the effect of
delaying, deferring or preventing a change in control of Halliburton.
Halliburton has no present plans to issue any Halliburton Preferred Stock.
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK. The terms of the Halliburton
Series A Preferred Stock are designed so that the value of each two-hundredth
of a share purchasable upon exercise of a Right will approximate the value of
one share of Halliburton Common Stock. The Halliburton Series A Preferred
Stock is nonredeemable and will rank junior to all other series of Halliburton
Preferred Stock. Each whole share of Halliburton Series A Preferred Stock is
entitled to receive a cumulative quarterly preferential dividend in an amount
per share equal to the greater of (i) $1.00 in cash or (ii), in the aggregate,
200 times the dividend declared on the Halliburton Common Stock. In the event
of liquidation, the holders of the Halliburton Series A Preferred Stock are
entitled to receive a preferential liquidation payment equal to the greater of
(i) $100.00 per share or (ii), in the aggregate, 200 times the payment made on
the Halliburton Common stock, plus, in either case, the accrued and unpaid
dividends and distributions thereon. In the event of any merger, consolidation
or other transaction in which the Halliburton Common Stock is exchanged for or
changed into other stock or securities, cash or property, each whole share of
Halliburton Series A Preferred Stock is entitled to receive 200 times the
amount received per share of Halliburton Common Stock. Each whole share of
Halliburton Series A Preferred Stock is entitled to 200 votes on all matters
submitted to a vote of the stockholders of Halliburton, and holders of
Halliburton Series A Preferred Stock will generally vote together as one class
with the holders of Halliburton Common Stock and any other capital stock on
all matters submitted to a vote of stockholders of Halliburton.
CERTAIN PROVISIONS OF HALLIBURTON CHARTER AND BYLAWS
The Halliburton Charter contains provisions authorizing the indemnification
of persons who become parties to any threatened, pending or completed action,
suit or proceeding by reason of the fact that such person is or was a
director, officer, employee or agent of Halliburton or is or was serving at
the request of Halliburton as a director, officer, employee or agent of
another corporation, partnership or other enterprise against expenses and
damages incurred thereby under the circumstances set forth therein. The
Halliburton Charter also contains provisions that, in accordance with the
DGCL, limit the liability of directors of Halliburton for breach of fiduciary
duty by directors acting in such capacity. Pursuant to these provisions,
directors of Halliburton may be liable for breach of fiduciary duty only (a)
under Section 174 of the DGCL (relating to the payment of unlawful dividends
and unlawful purchases of stock of the corporation) or (b) if, in addition to
any and all other requirements for such liability, any such director (i) shall
have breached the duty of loyalty to Halliburton, (ii) in acting or failing to
act, shall not have acted in good faith or shall have acted in a manner
involving intentional misconduct or a knowing violation of law or (iii) shall
have derived an improper personal benefit.
60
The provisions of the Halliburton Charter may be amended or repealed by the
vote of holders of a majority of the outstanding capital stock of Halliburton
entitled to vote thereon.
Except in the case of nominations by or at the direction of the Halliburton
Board of Directors, written notice must be given of any nomination of a
director (i), with respect to an election to be held at an annual meeting of
stockholders, not later than ninety days prior to the first anniversary of the
immediately preceding annual meeting and (ii), with respect to an election to
be held at a special meeting of stockholders, not later than the close of
business on the tenth day following the day of notice of such meeting.
Except in the case of a national emergency, all actions taken by the
Halliburton Board of Directors, including the appointment and removal of
officers of Halliburton and the establishment and dissolution of divisions of
Halliburton, require the affirmative vote of a majority of the directors. The
Halliburton Bylaws provide that the number of directors on the Halliburton
Board of Directors may be increased or decreased with the approval of a
majority of the then-authorized number of directors. Also, newly created
directorships resulting from any increase in the authorized number of
directors and any vacant directorships may be filled by the affirmative vote
of a majority of the directors then in office.
The Halliburton Bylaws may be adopted, amended or rescinded by the vote of a
majority of the Halliburton Board of Directors or by the majority of the
outstanding shares of capital stock entitled to vote.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Halliburton Common Stock is
ChaseMellon Shareholders Services, L.L.C.
COMPARATIVE RIGHTS OF HALLIBURTON AND NUMAR STOCKHOLDERS
If the Merger is consummated, the shareholders of NUMAR will become
stockholders of Halliburton. The rights of the stockholders of Halliburton and
NUMAR are governed by and subject to the provisions of the DGCL and the PBCL,
respectively. The rights of current NUMAR shareholders following the Merger
will be governed by the Halliburton Charter and Bylaws rather than the
provisions of the NUMAR Charter and Bylaws. The following is a brief summary
of certain differences between the rights of Halliburton stockholders and the
rights of NUMAR shareholders, and is qualified in its entirety by reference to
the relevant provisions of the DGCL, the PBCL, the Halliburton Charter and
Bylaws and the NUMAR Charter and Bylaws.
Although the DGCL and the PBCL are similar in many respects, there are a
number of differences between the two statutes that should be carefully
considered by the shareholders of NUMAR in evaluating the proposed Merger. The
following summary does not purport to be a complete statement of all
differences between the DGCL and the PBCL, nor does it purport to be a
complete statement of the provisions of the two statutes which it compares;
nonetheless, the following discussion does set forth all material differences
between the rights of holders of NUMAR Common Stock and those of holders of
Halliburton Common Stock.
FIDUCIARY DUTIES OF DIRECTORS
Both Delaware and Pennsylvania law provide that the board of directors has
the ultimate responsibility for managing the business and affairs of a
corporation. In discharging this function, directors of Pennsylvania and
Delaware corporations owe fiduciary duties of care and loyalty to the
corporations for which they serve as directors. Directors of Delaware
corporations also owe fiduciary duties of care and loyalty to stockholders.
The fiduciary duty provisions included in the DGCL, which are applicable to
Halliburton, may provide significantly narrower discretion, and lessened
protection from liability, to directors in exercising their fiduciary duties,
particularly in a change in control context.
61
The following summarizes certain aspects of Pennsylvania and Delaware law,
including the PBCL and the DGCL, as they relate to fiduciary duties of
directors:
STANDARD OF CARE. Delaware courts have held that the directors of a Delaware
corporation are required to exercise an informed business judgment in the
performance of their duties. An informed business judgment means that the
directors have informed themselves of all material information reasonably
available to them. Delaware courts have also imposed a heightened standard of
conduct upon directors in matters involving a contest for control of the
corporation.
A director of a Pennsylvania business corporation stands in a fiduciary
relationship to the corporation (and, in contrast to Delaware, not to
shareholders) and must perform his duties as a director, in good faith, in a
manner he reasonably believes to be in the best interests of the corporation
and with such care, including reasonable inquiry, skill and diligence, as a
person of ordinary prudence would use under similar circumstances.
JUSTIFIABLE RELIANCE. A director of a Delaware corporation, in the
performance of his duties, is fully protected in relying, in good faith, upon
the records of the corporation and upon such information, opinions, reports or
statements presented to the corporation by any of the corporation's officers
or employees, or committees of the board of directors, or by any other person
as to matters the member reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the corporation.
In performing his duties, a director of a Pennsylvania business corporation
is entitled to rely, in good faith, on information, opinions, reports or
statements, including financial statements and other financial data, in each
case prepared or presented by any of the following: (i) one or more officers
or employees who the director reasonably believes to be reliable and competent
in the matters presented; (ii) counsel, public accountants, investment bankers
or other persons as to matters which the director reasonably believes to be
within the professional competence of such persons; and (iii) a committee of
the board upon which he does not serve, duly designated in accordance with
law, as to matters within its designated authority, which committee the
director reasonably believes to merit confidence. A director will not be
considered to be acting in good faith if he has knowledge concerning the
matter in question which would cause his reliance to be unwarranted.
CONSIDERATION OF FACTORS. The DGCL does not contain any statutory provision
permitting the board of directors, committees of the board and individual
directors, when discharging the duties of their respective positions, to
consider the interests of any constituencies other than the corporation or its
stockholders.
The PBCL provides that in discharging the duties of their respective
positions, the board of directors, committees of the board and individual
directors of a Pennsylvania corporation may, in considering what is in the
best interests of the corporation, consider, to the extent they deem
appropriate, (i) the effects of any action upon any or all groups affected by
such action, including shareholders, employees, suppliers, customers and
creditors of the corporation, and on communities served by the corporation,
without prioritization of these constituencies, (ii) the corporation's short-
term and long-term interests, including benefits which may accrue to the
corporation from its tong-term plans and the possibility that these interests
may be best served by the corporation's continued independence, (iii) the
resources, intent and conduct (past, stated and potential) of any person
seeking to acquire control of the corporation and (iv) all other pertinent
factors.
It is unclear under the current state of development of Delaware law whether
and the extent to which the board of directors, committees of the board and
individual directors of a Delaware corporation may, in considering what is in
the corporation's best interests or the effects of any action on the
corporation, take into account the interests of any constituency other than
the stockholders of the corporation. In contrast to Delaware law, Pennsylvania
law provides that a director of a Pennsylvania corporation owes a duty only to
the corporation (and not to the shareholders), and in considering what is in
the best interests of the corporation, may choose to subordinate the interests
of shareholders to the interests of employees, suppliers, customers or
creditors of the corporation or to the interests of the communities served by
the corporation.
62
In addition, the duty of the board of directors, committees of the board and
individual directors of a Delaware corporation may be enforced directly by the
corporation or may be enforced by a stockholder, as such, by an action in the
right of the corporation, or may be enforced directly by a stockholder or by
any other person or group, whereas such duty of the board with respect to a
Pennsylvania corporation may not be enforced directly by a shareholder or by
any person or other group.
SPECIFIC APPLICATIONS. Delaware courts have imposed a heightened standard of
conduct upon directors of a Delaware corporation who take any action designed
to defeat a threatened change in control of the corporation. The heightened
standard has two elements. First, it must be demonstrated that there is some
basis for a board to conclude that a proper corporate purpose is served by
implementation of any defensive measure, and, second, that measure must be
found to be reasonable in relation to the perceived threat posed by the change
in control.
In exercising corporate powers, and in no way limiting their discretion, the
fiduciary duty of directors of a Pennsylvania corporation does not require
them to act solely because of the effect such action might have on an
acquisition or potential or proposed acquisition of control of the corporation
or the consideration which might be offered or paid to shareholders in such an
acquisition. In particular, directors of a Pennsylvania corporation are not
required to redeem rights issued under any shareholder rights plan, and under
existing case law, have the statutory authority under the PBCL simply to
reject a potential or proposed acquisition of the corporation's shares.
In addition, under Delaware law, unlike Pennsylvania law, when the board of
directors of a Delaware corporation approves the sale of the corporation, the
board of directors may have a duty to obtain the highest value reasonably
available to the stockholders.
PRESUMPTION. Under Delaware law, it is presumed that the directors of a
Delaware corporation acted on an informed basis, in good faith and in the
honest belief that the action taken was in the best interest of the
corporation. This presumption may be overcome, however, if it is shown by a
preponderance of the evidence that the directors' decision involved a breach
of fiduciary duty such as fraud, overreaching, lack of good faith, failure of
the board to inform itself properly or actions by the board to entrench itself
in office.
Under Pennsylvania law, absent a lack of good faith or self-dealing (i.e.,
entering into contracts or transactions with a director or an entity in which
a director has a financial or other interest), any act of the board of
directors, a committee of the board or an individual director is presumed to
be in the corporation's best interests. In assessing whether a director of a
Pennsylvania corporation has met his or her statutory duty of care, there is
not any greater obligation to justify, or higher burden of proof with respect
to, any act relating to or affecting an acquisition or potential or proposed
acquisition of control of the corporation than is applied to any other action.
Notwithstanding the preceding, any board action relating to or affecting an
acquisition or potential or proposed acquisition of control which is approved
by a majority of the corporation's "disinterested directors" (i.e., directors
who (i) are not affiliated with the person seeking control and (ii) are not
officers or employees of the corporation) is presumed to satisfy the statutory
duty of care under Pennsylvania law, unless it is proven by clear and
convincing evidence that the disinterested directors did not assent to such
act in good faith, after reasonable investigation.
The net effect of the differences between Pennsylvania and Delaware law is
that the board of directors of a Delaware corporation is afforded less
discretion, and therefore less protection against liability, in connection
with a decision to engage in, or decline to engage in, almost any transaction.
LIMITATION OF DIRECTOR LIABILITY
Both Delaware and Pennsylvania law permit a corporation's certificate or
articles of incorporation to limit a director's exposure to monetary liability
for breach of fiduciary duty.
63
The Halliburton Charter currently eliminates a director's personal liability
for monetary damages to the fullest extent permitted by Delaware law. Under
Delaware law, this means that a director presently has no monetary liability
except for liability for (i) breach of the duty of loyalty, (ii) acts or
omissions not in good faith or constituting intentional misconduct or knowing
violation of the law, (iii) declaration of an improper dividend or an improper
redemption of stock or (iv) any transaction from which the director derived an
improper personal benefit.
Currently, the NUMAR Bylaws eliminate a director's liability to the fullest
extent permitted by Pennsylvania law. Under Pennsylvania law, this means that
a director has no monetary liability for any action taken or omitted unless
(i) the director breaches or fails to perform his or her duties and (ii) the
breach or failure to perform constitutes self-dealing, willful misconduct or
recklessness. Under Pennsylvania law, a director also remains personally
liable where the responsibility or liability is pursuant to any criminal
statute or is for the non-payment of taxes under Federal, State or local law.
IDEMNIFICATION
The Halliburton Charter and Bylaws require indemnification of its directors
and officers to the fullest extent permitted under Delaware law. The NUMAR
Charter and Bylaws provide for such indemnification to the fullest extent
permitted by Pennsylvania law.
Both Delaware and Pennsylvania law permit a corporation to indemnify any
person involved in a third party action by reason of his agreeing to serve,
serving or formerly serving as an officer or director of the corporation,
against expenses, judgments, fines and settlement amounts paid in such third
party action (and against expenses incurred in any derivative action), if such
person acted in good faith and reasonably believed that his actions were in,
or not opposed to, the best interests of the corporation and, with respect to
any criminal proceeding, had no reasonable cause to believe that his conduct
was unlawful. Furthermore, both states' laws provide that a corporation may
advance expenses incurred in defending any action upon receipt of an
undertaking by the person to repay the amount advanced if it is ultimately
determined that such person is not entitled to indemnification.
In general, no indemnification for expenses in derivative actions is
permitted under either state law where the person has been adjudged liable to
the corporation, unless a court finds him entitled to such indemnification.
If, however, the person has been successful in defending a third party or
derivative action, indemnification for expenses incurred is mandatory under
both states' laws.
In both states, the statutory provisions for indemnification are non-
exclusive with respect to any other rights, such as contractual rights (and,
in the case of a Pennsylvania corporation, under any bylaw, vote of
shareholders, vote of disinterested directors or otherwise), to which a person
seeking indemnification may be entitled. Unlike Pennsylvania law, however,
Delaware law does not expressly permit such contractual or other rights to
provide for indemnification against judgments and settlements paid in a
derivative action. Although this broader right to indemnification in the
context of derivative actions is included in the Halliburton Charter, its
treatment by a court in Delaware is uncertain.
ANTI-TAKEOVER LAWS
Section 203 of the DGCL contains certain "anti-takeover" provisions which
apply to a Delaware corporation, unless the corporation elects not to be
governed by such provisions in its certificate of incorporation or bylaws.
Neither the Halliburton Charter nor the Halliburton Bylaws contain such an
election. Thus, Halliburton is governed by Section 203 of the DGCL which
precludes a corporation from engaging in any "business combination" (i.e.,
mergers, consolidations, sales of substantially all assets, etc.) with any
person (other than the corporation and any direct or indirect majority-owned
subsidiary of the corporation) that owns 15% or more of the outstanding voting
stock of the corporation (except for any such person whose ownership of shares
in excess of the 15% limitation is the result of action taken solely by the
corporation) for a period of three years following the time that such
stockholder obtained ownership of more than 15% of the outstanding voting
64
stock of the corporation. The three year waiting period does not apply,
however, if (i) prior to the time such person obtained ownership of more than
15% of the outstanding voting stock of the corporation, the board of directors
of the corporation approved either the business combination or the transaction
which resulted in such stockholder owning in excess of 15% of such stock,
(ii), upon consummation of the transaction which resulted in the stockholder
owning in excess of 15% of the outstanding voting stock of the corporation,
such stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time that the transaction commenced, or (iii) at or
subsequent to such time as the stockholder obtained more than 15% of the
outstanding voting stock of the corporation, the business combination is
approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote
of at least 66% of the outstanding voting stock that is not owned by the
acquiring stockholder.
In contrast, the PBCL's anti-takeover statutes applicable to NUMAR provide
different limitations. The relevant provisions are contained in Subchapters
25E through 25H of the PBCL and generally do not act as an impediment to a
potential acquiror until such person has acquired 20% or more of the target
corporation's voting stock. Once the statute is triggered, however, a five
year delay is imposed on any business combination between such person and the
target corporation.
AMENDMENTS TO CHARTER
Under Delaware law, amendment of the certificate of incorporation requires
the approval of the holders of a majority of the shares entitled to vote.
Pennsylvania law only requires the affirmative vote of a majority of the votes
actually cast on a proposed amendment at a meeting at which a quorum is
present, unless the articles of incorporation require a greater percentage.
Pennsylvania law also does not require shareholder approval of certain non-
material amendments to the articles of incorporation. Thus, it may be more
difficult under Delaware law to adopt future amendments to the Halliburton
Charter than it is to amend the NUMAR Charter under Pennsylvania law.
MERGERS AND OTHER FUNDAMENTAL TRANSACTIONS
Under Delaware law, fundamental corporate transactions (such as mergers,
sales of all or substantially all of the corporation's assets, dissolutions,
etc.) require the approval of the holders of a majority of the shares entitled
to vote. This threshold is higher than the approval threshold under
Pennsylvania law, which only requires approval of a majority of the votes
actually cast by the shareholders at a meeting at which a quorum is present.
Delaware and Pennsylvania laws each permit a corporation to increase the
minimum percentage vote required. The Halliburton Charter does not contain any
super-majority vote requirements to approve any fundamental transaction.
ISSUANCE OF ADDITIONAL SHARES OF CAPITAL STOCK
The Halliburton Charter authorizes the issuance of up to 400,000,000 shares
of common stock, par value $2.50 per share, and 5,000,000 shares of preferred
stock, no par value. Upon completion of the merger (based upon the number of
shares of Halliburton Common Stock and NUMAR Common Stock outstanding on July
22, 1997 and the Record Date, respectively), there will be 268,205,510 shares
of Common Stock and no shares of Halliburton preferred stock issued and
outstanding.
The NUMAR Charter authorizes the issuance of up to 50,000,000 shares of
common stock and up to 10,000,000 shares of preferred stock. As of August 26,
1997, 8,494,572 shares of NUMAR Common Stock and no shares of NUMAR preferred
stock were issued and outstanding.
The Board of Directors of Halliburton has the same authority as the Board of
Directors of NUMAR with respect to the issuance of additional shares of common
stock and preferred stock.
DIVIDENDS
Delaware law permits dividends to be paid out of (i) surplus (the excess of
net assets of the corporation over capital), or (ii) net profits for the
current or immediately preceding fiscal year, unless the net assets are less
65
than the capital of any outstanding preferred stock. Pennsylvania law permits
the payment of dividends unless they would render the corporation insolvent,
meaning either (i) the corporation would be unable to pay its debts as they
become due in the ordinary course of business, or (ii) the total assets of the
corporation would be less than the sum of its total liabilities plus the
amount that would be needed upon dissolution of the corporation to pay the
holders of shares having a liquidation preference.
STOCK REPURCHASES
Under Delaware law, a corporation may not purchase or redeem its own shares
when the capital of the corporation is impaired or when such purchase or
redemption would cause an impairment of the capital of the corporation. A
Delaware corporation may, however, purchase or redeem out of capital any of
its preferred shares if such shares will be retired upon acquisition, thereby
reducing the capital of the corporation. In contrast, Pennsylvania law permits
a corporation to redeem any and all classes of its shares and treats such
redemption or repurchase like a dividend, subject to the same limitations
described under "--Dividends."
VOTING RIGHTS
Under Delaware law cumulative voting in the election of directors is only
permitted if expressly authorized in a corporation's charter. The Halliburton
Charter, however, expressly prohibits cumulative voting. This represents a
departure from Pennsylvania law, pursuant to which shareholders automatically
have cumulative voting rights unless the Pennsylvania corporation's charter
provides otherwise.
APPRAISAL OR DISSENTERS' RIGHTS
The rights of stockholders to demand payment in cash by a corporation of the
fair value of their shares under certain circumstances are called appraisal
rights under the DGCL and dissenters' rights under the PBCL. Delaware law does
not afford appraisal rights to holders of shares which are either listed on a
national securities exchange, quoted on The Nasdaq National Market or held of
record by more than 2,000 stockholders when the plan of merger or
consolidation converts such shares into stock of the surviving corporation or
stock of another corporation which is either listed on a national securities
exchange, quoted on The NASDAQ National Market or held of record by more than
2,000 stockholders. Pennsylvania law with respect to dissenters' rights is
similar to Delaware law regarding appraisal rights, except that Pennsylvania
law does provide dissenters' rights to holders of shares which are quoted on
The NASDAQ National Market unless such shares are held of record by more than
2,000 shareholders or listed on a national securities exchange. As a result of
the Merger, new stockholders of Halliburton will not have dissenters' rights
with respect to certain corporate actions, including mergers, consolidations
or share exchanges, which they had as shareholders of NUMAR.
The definition of "fair value" in payment for shares upon exercise of
appraisal or dissenters' rights is substantially identical under both states'
laws. Any valuation methods may be used which are generally acceptable in the
financial community.
AMENDMENTS TO BYLAWS
Under Delaware law, if the certificate of incorporation confers on the board
of directors the power to amend the Bylaws, as does the Halliburton Charter,
the DGCL does not limit the power of the board to make changes in the bylaws.
Under Pennsylvania law, however, the board's power to adopt or amend bylaw
provisions on specified subjects is limited absent a contrary provision in the
bylaws. Therefore, Halliburton's board has broader authority to amend the
Halliburton Bylaws than NUMAR's board has under Pennsylvania law.
Under Delaware law, a corporation's bylaws may be amended by the
stockholders at any annual meeting, without the need to obtain the consent of
the board of directors or to give prior notice that such action would be taken
at the meeting. As such, the amendment process may be somewhat less
restrictive than that prescribed by Pennsylvania law,
66
which requires that a copy of any proposed amendment to the bylaws, or a
summary thereof, be included with the notice of the meeting at which the
shareholders wish to amend a Pennsylvania corporation's bylaws.
ACTION BY WRITTEN CONSENT
Delaware law permits a majority of stockholders to consent in writing to any
action without a meeting. In contrast, Pennsylvania law permits shareholder
action by majority written consent only where the articles specifically
authorize less than unanimous consent.
SPECIAL MEETING OF STOCKHOLDERS
Both Delaware and Pennsylvania laws permit a special meeting of the
shareholders to be called by the board of directors or such other person as
may be authorized by the corporation's charter or bylaws. Pennsylvania law,
however, explicitly states that shareholders of a registered corporation, such
as NUMAR, shall not have a statutory right to call special meetings.
ANNUAL MEETING OF STOCKHOLDERS
Under Delaware law, if the annual meeting for the election of directors is
not held on a designated date, the directors are required to cause such
meeting to be held as soon thereafter as may be convenient. If they fail to do
so for a period of 30 days after the designated date, or if no date has been
designated, for a period of 13 months after the organization of the
corporation or after its last annual meeting, the Court of Chancery may
summarily order a meeting to be held upon application of any stockholder or
director.
Under Pennsylvania law, if the annual meeting of shareholders for election
of directors is not called and held within six months after the designated
time, any shareholder may call such meeting at any time thereafter without
application to any court.
CASE LAW AND COURT SYSTEMS
There is a substantial body of case law in Delaware interpreting the
corporation laws of that state. A comparable body of judicial interpretations
does not exist in Pennsylvania. Delaware also has established a system of
Chancery Courts to adjudicate matters arising under the DGCL. Pennsylvania has
not established an equivalent court system.
LEGAL MATTERS
The validity of the Halliburton Common Stock to be issued in the Merger has
been passed upon for Halliburton by Vinson & Elkins L.L.P., Houston, Texas.
Certain federal income tax consequences of the Merger have been passed upon
for Halliburton by Vinson & Elkins L.L.P., Houston, Texas, and for NUMAR by
Drinker Biddle & Reath LLP, Philadelphia, Pennsylvania.
EXPERTS
The consolidated financial statements included in the Halliburton Annual
Report on Form 10-K for the year ended December 31, 1996 incorporated herein
by reference have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
The consolidated financial statements included in the NUMAR Annual Report on
Form 10-K for the year ended December 31, 1996, incorporated by reference in
this Proxy Statement/Prospectus, have been incorporated herein in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
67
STOCKHOLDER PROPOSALS
Any proposals of holders of Halliburton Common Stock intended to be
presented at the Annual Meeting of Stockholders of Halliburton to be held in
1998 must be received by Halliburton, addressed to the Secretary of
Halliburton at 3600 Lincoln Plaza, 500 North Akard Street, Dallas, Texas,
75201-3391, no later than November 27, 1997, to be considered for inclusion in
the proxy statement and form of proxy relating to that meeting.
If the Merger is not consummated, any proposals of shareholders of NUMAR
intended to be presented at the Annual Meeting of Shareholders of NUMAR to be
held in 1998 must be received by NUMAR, addressed to the Secretary of NUMAR at
508 Lapp Road, Malvern, Pennsylvania 19355 no later than December 17, 1997, to
be considered for inclusion in the proxy statement and form of proxy relating
to that meeting.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 9, 1997
BY AND AMONG
HALLIBURTON COMPANY,
HALLIBURTON M.S. CORP.
AND
NUMAR CORPORATION
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS
Section 1.01 Definitions............................................. A-1
Section 1.02 Rules of Construction................................... A-1
ARTICLE II
TERMS OF MERGER
Section 2.01 Statutory Merger........................................ A-1
Section 2.02 Effective Time.......................................... A-2
Section 2.03 Effect of the Merger.................................... A-2
Section 2.04 Articles of Incorporation; Bylaws....................... A-2
Section 2.05 Directors and Officers.................................. A-2
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 3.01 Merger Consideration; Conversion and Cancellation of
Securities............................................. A-2
Section 3.02 Exchange of Certificates................................ A-3
Section 3.03 Closing................................................. A-5
Section 3.04 Stock Transfer Books.................................... A-5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.01 Organization and Qualification; Subsidiaries............ A-5
Section 4.02 Articles of Incorporation and Bylaws.................... A-5
Section 4.03 Capitalization.......................................... A-5
Section 4.04 Authorization of Plan................................... A-7
Section 4.05 Approvals............................................... A-7
Section 4.06 No Violation............................................ A-7
Section 4.07 Reports................................................. A-7
Section 4.08 No Material Adverse Effect; Conduct..................... A-8
Section 4.09 Title to Properties..................................... A-8
Section 4.10 Certain Obligations..................................... A-9
Section 4.11 Authorizations; Compliance.............................. A-9
Section 4.12 Litigation; Compliance with Laws........................ A-9
Section 4.13 Employee Benefit Plans.................................. A-9
Section 4.14 Taxes................................................... A-11
Section 4.15 Environmental Matters................................... A-11
Section 4.16 Intellectual Property................................... A-12
Section 4.17 Insurance............................................... A-13
Section 4.18 Pooling; Tax Matters.................................... A-13
Section 4.19 Affiliates.............................................. A-14
Section 4.20 Certain Business Practices.............................. A-14
Section 4.21 Opinion of Financial Advisor............................ A-14
Section 4.22 Brokers................................................. A-14
Section 4.23 AntiTakeover Law........................................ A-14
A-i
PAGE
----
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Section 5.01 Organization and Qualification; Subsidiaries............ A-15
Section 5.02 Certificate of Incorporation and Bylaws................. A-15
Section 5.03 Capitalization.......................................... A-15
Section 5.04 Authorization of Plan................................... A-16
Section 5.05 Approvals............................................... A-16
Section 5.06 No Violation............................................ A-16
Section 5.07 Reports................................................. A-17
Section 5.08 No Material Adverse Effect; Conduct..................... A-17
Section 5.09 Title to Properties..................................... A-17
Section 5.10 Certain Obligations..................................... A-18
Section 5.11 Authorizations; Compliance.............................. A-18
Section 5.12 Litigation; Compliance with Laws........................ A-18
Section 5.13 Employee Benefit Plans.................................. A-18
Section 5.14 Taxes................................................... A-19
Section 5.15 Environmental Matters................................... A-19
Section 5.16 Pooling; Tax Matters.................................... A-19
Section 5.17 Insurance............................................... A-20
Section 5.18 Affiliates.............................................. A-20
Section 5.19 Certain Business Practices.............................. A-20
Section 5.20 Brokers................................................. A-21
Section 5.21 Acquiring Person........................................ A-21
ARTICLE VI
COVENANTS
Section 6.01 Affirmative Covenants................................... A-21
Section 6.02 Negative Covenants...................................... A-21
Section 6.03 No Solicitation......................................... A-24
Section 6.04 Access and Information.................................. A-24
Section 6.05 Confidentiality Agreement............................... A-25
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.01 Meeting of Shareholders................................. A-25
Section 7.02 Registration Statement; Proxy Statements................ A-25
Section 7.03 Appropriate Action; Consents; Filings................... A-26
Section 7.04 Affiliates; Pooling; Tax Treatment...................... A-28
Section 7.05 Public Announcements.................................... A-28
Section 7.06 NYSE Listing............................................ A-28
Section 7.07 Comfort Letters......................................... A-28
Section 7.08 Assumption of Obligations to Issue Stock and Obligations
of Employee Benefit Plans.............................. A-28
Section 7.09 Operations of Company................................... A-29
Section 7.10 Indemnification of Directors and Officers............... A-29
Section 7.11 Newco................................................... A-30
Section 7.12 Event Notices........................................... A-30
A-ii
PAGE
----
ARTICLE VIII
CLOSING CONDITIONS
Section 8.01 Conditions to Obligations of Each Party Under This
Plan.................................................. A-30
Section 8.02 Additional Conditions to Obligations of the Acquiror
Companies............................................. A-31
Section 8.03 Additional Conditions to Obligations of the Company.... A-31
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.01 Termination............................................ A-32
Section 9.02 Effect of Termination.................................. A-33
Section 9.03 Amendment.............................................. A-33
Section 9.04 Waiver................................................. A-33
Section 9.05 Fees, Expenses and Other Payments...................... A-33
ARTICLE X
GENERAL PROVISIONS
Section 10.01 Effectiveness of Representations, Warranties and
Agreements............................................ A-34
Section 10.02 Notices................................................ A-34
Section 10.03 Headings............................................... A-35
Section 10.04 Severability........................................... A-35
Section 10.05 Entire Agreement....................................... A-35
Section 10.06 Assignment............................................. A-35
Section 10.07 Parties in Interest.................................... A-35
Section 10.08 Failure or Indulgence Not Waiver; Remedies Cumulative.. A-36
Section 10.09 Governing Law.......................................... A-36
Section 10.10 Specific Performance................................... A-36
Section 10.11 Counterparts........................................... A-36
ANNEXES
Annex ASchedule of Defined Terms............................................A-37
Annex BNUMAR Affiliate's Agreement..........................................A-45
Annex CHalliburton Affiliate's Agreement....................................A-47
A-iii
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 9, 1997 (this "Plan"),
is by and among Halliburton Company, a Delaware corporation ("Acquiror"),
Halliburton M.S. Corp., a Delaware corporation and a wholly owned subsidiary
of Acquiror ("Newco"), and NUMAR Corporation, a Pennsylvania corporation (the
"Company"). The Acquiror and Newco are sometimes referred to herein as the
"Acquiror Companies."
RECITALS:
The Board of Directors of the Company has determined that the business
combination to be effected by means of the Merger is consistent with and in
furtherance of the long-term business strategy of the Company and is fair to,
and in the best interests of, the Company and has approved and adopted this
Plan and recommended approval and adoption of this Plan by the shareholders of
the Company.
The Board of Directors of the Acquiror has determined that the business
combination to be effected by means of the Merger is consistent with and in
furtherance of the long-term business strategy of the Acquiror and is fair to,
and in the best interests of, the Acquiror and its stockholders and has
approved and adopted this Plan.
Upon the terms and subject to the conditions of this Plan and in accordance
with the PBCL, Newco will merge with and into the Company and the Company will
be the Surviving Corporation.
For federal income tax purposes, it is intended that the Merger will qualify
as a reorganization within the meaning of the provisions of Section 368(a) of
the Code.
The Merger is intended to be treated as a "pooling of interests" for
accounting purposes.
The parties hereto acknowledge the execution and delivery of the Stock
Option Agreement and the Voting Agreements concurrently with the execution and
delivery of this Plan.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this Plan,
the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01 Definitions. Certain capitalized and other terms used in this
Plan are defined in Annex A hereto and are used herein with the meanings
ascribed to them therein.
Section 1.02 Rules of Construction. Unless the context otherwise requires,
as used in this Plan: (a) a term has the meaning ascribed to it; (b) an
accounting term not otherwise defined has the meaning ascribed to it in
accordance with GAAP; (c) "or" is not exclusive; (d) "including" means
"including, without limitation;" (e) words in the singular include the plural;
(f) words in the plural include the singular; (g) words applicable to one
gender shall be construed to apply to each gender; (h) the terms "hereof,"
"herein," "hereby," "hereto" and derivative or similar words refer to this
entire Plan; and (i) the terms "Article" or "Section" shall refer to the
specified Article or Section of this Plan.
ARTICLE II
Terms of Merger
Section 2.01 Statutory Merger. Subject to the terms and conditions and in
reliance upon the representations, warranties, covenants and agreements
contained herein, Newco shall merge with and into the Company at the Effective
Time. The terms and conditions of the Merger and the mode of carrying the same
into
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effect shall be as set forth in this Plan. As a result of the Merger, the
constituent corporations shall be a single corporation which shall be the
Company as the corporation herein designated as the Surviving Corporation, and
the separate corporate existence of each of the constituent corporations shall
cease except that of the Company, which shall continue as the Surviving
Corporation.
Section 2.02 Effective Time. As soon as practicable after the satisfaction
or, if permissible, waiver of the conditions set forth in Article VIII, the
parties hereto shall cause the Merger to be consummated by filing Articles of
Merger with the Secretary of State of the Commonwealth of Pennsylvania and a
Certificate of Merger with the Secretary of State of the State of Delaware, in
such form as required by, and executed in accordance with, the relevant
provisions of the PBCL and the DGCL.
Section 2.03 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the PBCL,
including Section 1929 thereof. Without limiting the generality of the
foregoing but subject thereto, all the property, real, personal and mixed, and
franchises of each of the constituent corporations, and all debts due on
whatever account to either of them, including subscriptions for shares and
other choses in action belonging to either of them, shall be deemed to be
transferred to and vested in the Surviving Corporation without further action,
and the title to any real estate, or any interest therein, vested in either of
the corporations shall not revert or be in any way impaired by reason of the
Merger. The Surviving Corporation shall from and after the Effective Time be
responsible for all the liabilities of each of the corporations so merged.
Section 2.04 Articles of Incorporation; Bylaws. At the Effective Time, the
articles of incorporation and the bylaws of the Company, as in effect
immediately prior to the Effective Time, shall become the articles of
incorporation and the bylaws of the Surviving Corporation.
Section 2.05 Directors and Officers. The directors of Newco immediately
prior to the Effective Time shall be the directors of the Surviving
Corporation, each to hold office in accordance with the articles of
incorporation and bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
ARTICLE III
Conversion of Securities; Exchange of Certificates
Section 3.01 Merger Consideration; Conversion and Cancellation of
Securities. The manner and basis of converting in the Merger the shares of
each corporation into shares of the Surviving Corporation or the shares or
other obligations of the Acquiror shall be as set forth in this Article III.
At the Effective Time, by virtue of the Merger and without any action on the
part of the Acquiror Companies, the Company or the holders of any of the
following securities:
(a) Subject to the other provisions of this Article III, each share of
Company Common Stock issued and outstanding immediately prior to the
Effective Time (excluding Dissenters' Shares and any Company Common Stock
described in Section 3.01(c)) shall be converted into 0.4832 of one share
of Acquiror Common Stock. Notwithstanding the foregoing, if between the
date of this Plan and the Effective Time the outstanding shares of Acquiror
Common Stock or Company Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Common Stock Exchange Ratio shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares.
(b) All shares of Company Common Stock shall, upon conversion thereof
into shares of Acquiror Common Stock at the Effective Time, cease to be
outstanding and shall be automatically canceled and retired, and each
certificate previously evidencing Company Common Stock outstanding
immediately prior
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to the Effective Time (other than Dissenters' Shares and Company Common
Stock described in Section 3.01(c)) shall thereafter be deemed, for all
purposes, other than the payment of dividends or distributions, to
represent that number of shares of Acquiror Common Stock determined
pursuant to the Common Stock Exchange Ratio and, if applicable, the right
to receive cash pursuant to Section 3.02(e). The holders of certificates
previously evidencing Company Common Stock shall cease to have any rights
with respect to such Company Common Stock except as otherwise provided
herein or by law.
(c) Notwithstanding any provision of this Plan to the contrary, each
share of Company Common Stock held in the treasury of the Company and each
share of Company Common Stock, if any, owned by the Acquiror or any direct
or indirect wholly owned subsidiary of the Acquiror or of the Company
immediately prior to the Effective Time shall be canceled and extinguished
without conversion thereof.
(d) Each share of common stock, par value $1.00 per share, of Newco
issued and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock, par value $1.00 per share, of the
Surviving Corporation.
(e) Notwithstanding anything herein to the contrary, shares of Company
Common Stock outstanding immediately prior to the Effective Time and held
by a holder who has not voted in favor of the Plan or consented thereto in
writing and who has demanded the right to be paid the fair value for such
shares of Company Common Stock in accordance with Section 1930 of the PBCL
("Dissenters' Shares") shall not be converted into shares of Acquiror
Common Stock as otherwise provided in this Section 3.01 unless and until
such holder fails to continue perfection of, or withdraws or otherwise
loses, such right to be paid the fair value for such shares. If after the
Effective Time any such holder fails to continue perfection of, or
withdraws or loses, such right of appraisal, such Dissenters' Shares shall
thereupon be deemed to have been, and shall be treated as if they had been,
converted into shares of Acquiror Common Stock as provided in this Section
3.01
Section 3.02 Exchange of Certificates.
(a) Exchange Fund. At the Closing, the Acquiror shall deposit, or cause to
be deposited, with the Exchange Agent, for the benefit of the former holders
of Company Common Stock and for exchange through the Exchange Agent in
accordance with this Article III, certificates evidencing that number of
shares of Acquiror Common Stock equal to the product of the Common Stock
Exchange Ratio and the number of shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time (exclusive of any
Dissenters' Shares and any such shares to be canceled pursuant to Section
3.01(c)). The Exchange Agent shall, pursuant to irrevocable instructions from
the Acquiror, deliver certificates evidencing Acquiror Common Stock, together
with any cash to be paid in lieu of fractional interests in shares of Acquiror
Common Stock pursuant to Section 3.02(e) and any dividends or distributions
related to such Acquiror Common Stock, in exchange for certificates
theretofore evidencing Company Common Stock surrendered to the Exchange Agent
pursuant to Section 3.02(c). Except as contemplated by Sections 3.02(e) and
(h), the Exchange Fund shall not be used for any other purpose.
(b) Letter of Transmittal. Promptly after the Effective Time, the Acquiror
will cause the Exchange Agent to send to each record holder of Company Common
Stock immediately prior to the Effective Time (other than Dissenters' Shares)
a letter of transmittal and other appropriate materials for use in
surrendering to the Exchange Agent certificates that prior to the Effective
Time evidenced shares of Company Common Stock.
(c) Exchange Procedures. Promptly after the Effective Time, the Exchange
Agent shall distribute to each former holder of Company Common Stock, upon
surrender to the Exchange Agent for cancellation of one or more certificates
that theretofore evidenced shares of Company Common Stock, certificates
evidencing the appropriate number of shares of Acquiror Common Stock into
which such shares of Company Common Stock were converted pursuant to the
Merger. If shares of Acquiror Common Stock are to be issued to a Person other
than the Person in whose name the surrendered certificate or certificates are
registered, it shall be a condition of issuance of the Acquiror Common Stock
that the surrendered certificate or certificates shall be properly endorsed,
with signatures guaranteed, or otherwise in proper form for transfer and that
the Person requesting such payment
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shall pay any transfer or other taxes required by reason of the issuance of
Acquiror Common Stock to a Person other than the registered holder of the
surrendered certificate or certificates or such Person shall establish to the
satisfaction of the Acquiror that such tax has been paid or is not applicable.
(d) Distributions with Respect to Unexchanged Shares of Company Common
Stock. No dividends or other distributions declared or made with respect to
Acquiror Common Stock with a record date after the Effective Time shall be
paid to the holder of any certificate that theretofore evidenced shares of
Company Common Stock until the holder of such certificate shall surrender such
certificate. Subject to the effect of any applicable escheat laws, following
surrender of any such certificate, there shall be paid to the holder of the
certificates evidencing whole shares of Acquiror Common Stock issued in
exchange therefor, without interest, (i) promptly, the amount of any cash
payable with respect to a fractional share of Acquiror Common Stock to which
such holder is entitled pursuant to Section 3.02(e) and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Acquiror Common Stock
and (ii), at the appropriate payment date, the amount of dividends or other
distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect
to such whole shares of Acquiror Common Stock.
(e) No Fractional Shares. Notwithstanding anything herein to the contrary,
no certificates or scrip evidencing fractional shares of Acquiror Common Stock
shall be issued in connection with the Merger, and any such fractional share
interests to which a holder of record of Company Common Stock at the Effective
Time would otherwise be entitled shall not entitle such holder to vote or to
any rights of a stockholder of the Acquiror. In lieu of any such fractional
shares, each holder of record of Company Common Stock at the Effective Time
who but for the provisions of this Section 3.02(e) would be entitled to
receive a fractional interest of a share of Acquiror Common Stock by virtue of
the Merger shall be paid cash, without any interest thereon, as hereinafter
provided. The Acquiror shall instruct the Exchange Agent to determine the
number of whole shares and fractional shares of Acquiror Common Stock
allocable to each holder of record of Company Common Stock at the Effective
Time, to aggregate all such fractional shares into whole shares, to sell the
whole shares obtained thereby in the open market at then prevailing prices on
behalf of holders who otherwise would be entitled to receive fractional share
interests and to distribute to each such holder such holder's ratable share of
the total proceeds of such sale, after making appropriate deductions of the
amount, if any, required for federal income tax withholding purposes and after
deducting any applicable transfer taxes. All brokers' fees and commissions
incurred in connection with such sales shall be paid by the Acquiror.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund that
remains unclaimed by the former holders of Company Common Stock for 12 months
after the Effective Time shall be delivered to the Acquiror, upon demand, and
any former holders of Company Common Stock who have not theretofore complied
with this Article III shall thereafter look only to the Acquiror for the
Acquiror Common Stock and any cash to which they are entitled. Notwithstanding
any other provisions herein, neither the Exchange Agent nor any party hereto
shall be liable to any former holder of Company Common Stock for any Acquiror
Common Stock, cash in lieu of fractional share interests or dividends or
distributions thereon delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any certificates
evidencing Company Common Stock shall not have been surrendered prior to the
seventh anniversary of the Effective Time (or such earlier date on which any
shares of Acquiror Common Stock, any cash in lieu of fractional share
interests or dividends or distributions with respect to Acquiror Common Stock
to which the holder of such certificates would otherwise be entitled would
escheat to or become the property of any governmental entity), then,
immediately prior to such date, any such shares, cash, dividends or
distributions in respect of such shares shall, to the extent permitted by
applicable Law, become the property of the Acquiror, free and clear of all
adverse claims and interests of any Person previously entitled thereto.
(g) Withholding of Tax. The Acquiror shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Plan to any
former holder of Company Common Stock such amounts as the Acquiror (or any
affiliate thereof) or the Exchange Agent is required to deduct and withhold
with respect to the
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making of such payment under the Code or any state, local or foreign tax Law.
To the extent that amounts are so withheld by the Acquiror, such withheld
amounts shall be treated for all purposes of this Plan as having been paid to
the former holder of Company Common Stock in respect of which such deduction
and withholding was made by the Acquiror.
(h) Investment of Exchange Fund. The Exchange Agent may invest any cash
included in the Exchange Fund in deposit accounts or short-term money market
instruments, as directed by the Acquiror, on a daily basis. Any interest and
other income resulting from such investments shall be paid to the Acquiror.
The Acquiror shall deposit with the Exchange Agent as part of the Exchange
Fund cash in an amount equal to any loss of principal resulting from such
investments promptly after the incurrence of such a loss.
Section 3.03 Closing. The Closing shall take place at the offices of Vinson
& Elkins L.L.P., 2001 Ross Avenue, Dallas, Texas 75201 promptly after
satisfaction or, if permissible, waiver of the conditions to Closing set forth
in Article VIII herein. At the conclusion of the Closing on the Closing Date,
the parties hereto shall cause the Articles of Merger to be filed with the
Secretary of State of the Commonwealth of Pennsylvania and the Certificate of
Merger with the Secretary of State of the State of Delaware.
Section 3.04 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company other than to reflect transfers of shares through the
date on which the Effective Time occurs.
ARTICLE IV
Representations and Warranties of the Company
The Company hereby represents and warrants to the Acquiror Companies that:
Section 4.01 Organization and Qualification; Subsidiaries. The Company and
each Subsidiary of the Company are legal entities duly organized, validly
existing and in good standing under the Laws of their respective jurisdictions
of incorporation or organization, have all requisite corporate power and
authority to own, lease and operate their respective properties and to carry
on their businesses as they are now being conducted and are duly qualified and
in good standing to do business in the jurisdictions in which the nature of
the businesses conducted by them or the ownership or leasing of their
respective properties makes such qualification necessary, other than any
matters, including the failure to be so qualified and in good standing, that
could not reasonably be expected to have a Material Adverse Effect on the
Company. Section 4.01 of the Company's Disclosure Letter sets forth, as of the
date of this Plan, a true and complete list of all the Company's directly or
indirectly owned Subsidiaries, together with (A) a specification of the nature
of legal organization of such Subsidiary, (B) the jurisdiction of
incorporation or other organization of such Subsidiary and (C) an indication
of whether such Subsidiary is a Significant Subsidiary. Neither the Company
nor any of its Subsidiaries owns an equity interest in any other partnership,
joint venture arrangement or other business entity that is Material to the
Company.
Section 4.02 Articles of Incorporation and Bylaws. The Company has
heretofore marked for identification and delivered to the Acquiror complete
and correct copies of the articles of incorporation and the bylaws or the
equivalent organizational documents, in each case as amended or restated to
the date hereof, of the Company and each of its Subsidiaries. Neither the
Company nor any of its Subsidiaries is in violation of any of the provisions
of its articles of incorporation or bylaws (or equivalent organizational
documents).
Section 4.03 Capitalization.
(a) The authorized capital stock of the Company consists of (i) 50,000,000
shares of Company Common Stock, of which, as of March 31, 1997, 8,389,653
shares were issued and outstanding, all of which are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights
created by statute,
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the Company's articles of incorporation or bylaws or any agreement to which
the Company is a party or is bound, and (ii) 10,000,000 shares of Preferred
Stock, par value $0.01 per share, none of which is issued and outstanding.
Between March 31, 1997 and the date of this Plan, no shares of Company Common
Stock have been issued by the Company, except upon exercise of Company Stock
Options outstanding under the Company Option Plans. Except as set forth in
Section 4.03(a) of the Company's Disclosure Letter, the Company has not, since
March 31, 1997, granted any options for, or other rights to purchase, shares
of Company Common Stock.
(b) Except for shares reserved for issuance upon exercise of Company Stock
Options granted pursuant to the Company Option Plans or the Company Warrants
and, in each case, listed in Section 4.03(b) of the Company's Disclosure
Letter, no shares of Common Stock are reserved for issuance, and, except for
such Company Stock Options, there are no contracts, agreements, commitments or
arrangements obligating the Company (i) to offer, sell, issue or grant any
shares of, or any options, warrants or rights of any kind to acquire any
shares of, or any securities that are convertible into or exchangeable for any
shares of, capital stock of the Company or (ii) to redeem, purchase or
acquire, or offer to purchase or acquire, any outstanding shares of, or any
outstanding options, warrants or rights of any kind to acquire any shares of,
or any outstanding securities that are convertible into or exchangeable for
any shares of, capital stock of the Company.
(c) Section 4.03(c) of the Company's Disclosure Letter sets forth with
respect to each Subsidiary of the Company (i) the numbers of shares of
authorized, issued and outstanding capital stock of, or other equity interests
in, each such Subsidiary, (ii) the number of such shares of capital stock or
other equity interests owned of record and beneficially by the Company or
another Subsidiary of the Company, together with the name of such holder or
holders, and (iii) the names and addresses of any holders, other than the
Company or another Subsidiary, of record or beneficially of the capital stock
or other equity interests of such Subsidiary. Except as set forth in Section
4.03(c) of the Company's Disclosure Letter, (x) the issued and outstanding
shares of capital stock of, or other equity interests in, each of the
Subsidiaries of the Company that are owned by the Company or any of its
Subsidiaries have been duly authorized and are validly issued, and, with
respect to capital stock, are fully paid and nonassessable, and were not
issued in violation of any preemptive or similar rights of any past or present
equity holder of such Subsidiary; (y) all such issued and outstanding shares,
or other equity interests, that are indicated as owned by the Company or one
of its Subsidiaries in Section 4.03(c) of the Company's Disclosure Letter are
owned (A) beneficially as set forth therein and (B) free and clear of all
Liens; (z) no shares of capital stock of, or other equity interests in, any
Subsidiary of the Company are reserved for issuance, and there are no
contracts, agreements, commitments or arrangements obligating the Company or
any of its Subsidiaries (A) to offer, sell, issue, grant, pledge, dispose of
or encumber any shares of capital stock of, or other equity interests in, or
any options, warrants or rights of any kind to acquire any shares of capital
stock of, or other equity interests in, or any securities that are convertible
into or exchangeable for any shares of capital stock of, or other equity
interests in, any of the Subsidiaries of the Company or (B) to redeem,
purchase or acquire, or offer to purchase or acquire, any outstanding shares
of capital stock of, or other equity interests in, or any outstanding options,
warrants or rights of any kind to acquire any shares of capital stock of, or
other equity interest in, or any outstanding securities that are convertible
into or exchangeable for, any shares of capital stock of, or other equity
interests in, any of the Subsidiaries of the Company or (C) to grant any Lien
on any outstanding shares of capital stock of, or other equity interest in,
any of the Subsidiaries of the Company; except for any matter under clause
(x), (y) or (z) of this Section 4.03(c) that could not reasonably be expected
to have a Material Adverse Effect on the Company.
(d) Except for the Company Stock Options and the Company Warrants listed in
Section 4.03(b) of the Company's Disclosure Letter, there are no voting
trusts, proxies or other agreements, commitments or understandings of any
character to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound with respect to the
voting of any shares of capital stock of the Company or any of its
Subsidiaries, with respect to the registration of the offering, sale or
delivery of any shares of capital stock of the Company or any of its
Subsidiaries under the Securities Act or otherwise relating to any shares of
capital stock of the Company or any of its Subsidiaries, except in the case of
any Subsidiaries of the Company that are not Significant Subsidiaries for any
matters that could not reasonably be expected to have a Material Adverse
Effect on the Company.
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Section 4.04 Authorization of Plan. The Company has all requisite corporate
power and authority to execute and deliver this Plan and, subject to approval
of the Plan by the shareholders of the Company as required by the applicable
provisions of the PBCL, each instrument required hereby to be executed and
delivered by it at the Closing, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby. The
execution and delivery by the Company of this Plan and each instrument
required hereby to be executed and delivered by it at the Closing and the
performance of its obligations hereunder and thereunder have been duly and
validly authorized by all requisite corporate action on the part of the
Company (other than, with respect to the Merger, the approval and adoption of
this Plan by the holders of a majority of the outstanding shares of Company
Common Stock in accordance with the applicable provisions of the PBCL and the
Company's articles of incorporation). This Plan has been duly executed and
delivered by the Company and (assuming due authorization, execution and
delivery hereof by the other parties hereto) constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as the same may be limited by legal
principles of general applicability conerning the application and availability
of equitable remedies.
Section 4.05 Approvals. Except for the applicable requirements, if any, of
(a) the Securities Act, (b) the Exchange Act, (c) state securities or blue sky
laws, (d) the HSR Act, (e) the NASD, (f) the filing and recordation of
appropriate merger documents as required by the PBCL and (g) those Laws,
Regulations and Orders noncompliance with which could not reasonably be
expected to have a material adverse effect on the ability of the Company to
perform its obligations under this Plan or to have a Material Adverse Effect
on the Company, no filing or registration with, no waiting period imposed by
and no Authorization of, any Governmental Authority is required under any Law,
Regulation or Order applicable to the Company or any of its Subsidiaries to
permit the Company to execute, deliver or perform this Plan or any instrument
required hereby to be executed and delivered by it at the Closing.
Section 4.06 No Violation. Assuming effectuation of all filings and
registrations with, termination or expiration of any applicable waiting
periods imposed by and receipt of all Authorizations of Governmental
Authorities indicated as required in Section 4.05 and receipt of the approval
of the Plan by the shareholders of the Company as required by the applicable
provisions of the PBCL, neither the execution and delivery by the Company of
this Plan or any instrument required hereby to be executed and delivered by it
at the Closing nor the performance by the Company of its obligations hereunder
or thereunder will (a) violate or breach the terms of or cause a default under
(i) any Law, Regulation or Order applicable to the Company, (ii) the articles
of incorporation or bylaws of the Company or (iii) any contract or agreement
to which the Company or any of its Subsidiaries is a party or by which it or
any of its properties or assets is bound, or (b) with the passage of time, the
giving of notice or the taking of any action by a third Person, have any of
the effects set forth in clause (a) of this Section, except in any such case
for any matters described in this Section (other than clause (ii) hereof) that
could not reasonably be expected to have either a material adverse effect upon
the ability of the Company to perform its obligations under this Plan or a
Material Adverse Effect on the Company. Prior to the execution of this Plan,
the Board of Directors of the Company has taken all necessary action to cause
this Plan and the transactions contemplated hereby to be exempt from the
provisions of Subchapter F (Business Combinations) of Chapter 25 of the PBCL.
Section 4.07 Reports.
(a) Since April 14, 1994, the Company has filed (i) all SEC Reports required
to be filed by it with the Commission and (ii) the Company and its
Subsidiaries have filed all other Reports required to be filed by any of them
with any other Governmental Authorities, including state securities
administrators, except where the failure to file any such Reports could not
reasonably be expected to have a Material Adverse Effect on the Company. Such
Reports, including all those filed after the date of this Plan and prior to
the Effective Time, (x) were prepared in all material respects in accordance
with the requirements of applicable Law (including, with respect to SEC
Reports, the Securities Act and the Exchange Act, as the case may be, and the
applicable Regulations of the Commission thereunder) and (y), in the case of
the SEC Reports, did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary
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in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) The Company Consolidated Financial Statements and any consolidated
financial statements of the Company (including any related notes thereto)
contained in any SEC Reports filed by the Company with the Commission after
the date of this Plan (i) have been or will have been prepared in accordance
with the published Regulations of the Commission and in accordance with GAAP
(except (A) to the extent required by changes in GAAP and (B), with respect to
the SEC Reports filed by the Company prior to the date of this Plan, as may be
indicated in the notes thereto) and (ii) fairly present the consolidated
financial position of the Company and its Subsidiaries as of the respective
dates thereof and the consolidated results of their operations and cash flows
for the periods indicated (including, in the case of any unaudited interim
financial statements, reasonable estimates of normal and recurring year-end
adjustments).
(c) Except as set forth in Section 4.07(c) of the Company's Disclosure
Letter, there exist no liabilities or obligations of the Company and its
Subsidiaries that are Material to the Company, whether accrued, absolute,
contingent or threatened, and that would be required to be reflected, reserved
for or disclosed under GAAP in consolidated financial statements of the
Company as of and for the period ended on the date of this representation and
warranty, other than (i) liabilities or obligations that are adequately
reflected, reserved for or disclosed in the Company's Consolidated Financial
Statements, (ii) liabilities or obligations incurred in the ordinary course of
business of the Company since March 31, 1997 and (iii) liabilities or
obligations the incurrence of which is permitted by Section 6.02(a).
Section 4.08 No Material Adverse Effect; Conduct.
(a) Since March 31, 1997, no event (other than any event that is of general
application to all or a substantial portion of the Company's industry and
other than any event that is expressly subject to any other representation or
warranty contained in Article IV) has, to the Knowledge of the Company,
occurred that, individually or together with other similar events, could
reasonably be expected to constitute or cause a Material Adverse Effect on the
Company.
(b) Except as set forth in Section 4.08(b) of the Company's Disclosure
Letter, during the period from March 31, 1997 to the date of this Plan,
neither the Company nor any of its Subsidiaries has engaged in any conduct
that is proscribed during the period from the date of this Plan to the
Effective Time by subsections (i) through (xii) of Section 6.02(a).
Section 4.09 Title to Properties. The Company or its Subsidiaries,
individually or together, have indefeasible title to all of the properties
reflected in the Company's Consolidated Balance Sheet, other than any
properties reflected in the Company's Consolidated Balance Sheet that have
been sold or otherwise disposed of since the date of the Company's
Consolidated Balance Sheet or are not, individually or in the aggregate,
Material to the Company, free and clear of Liens, other than (x) Liens the
existence of which is reflected in the Company's Consolidated Financial
Statements, (y) Permitted Encumbrances and (z) Liens that, individually or in
the aggregate, are not Material to the Company. The Company or its
Subsidiaries, individually or together, hold under valid lease agreements all
real and personal properties reflected in the Company's Consolidated Balance
Sheet as being held under capitalized leases, and all real and personal
property that is subject to the operating leases to which reference is made in
the notes to the Company's Audited Consolidated Financial Statements, and
enjoy peaceful and undisturbed possession of such properties under such
leases, other than (i) any properties as to which such leases have terminated
in the ordinary course of business since the date of the Company's
Consolidated Balance Sheet and (ii) any properties that, individually or in
the aggregate, are not Material to the Company. Neither the Company nor any of
its Subsidiaries has received any written notice of any adverse claim to the
title to any properties owned by them or with respect to any lease under which
any properties are held by them, other than any claims that, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on the Company.
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Section 4.10 Certain Obligations. Except for those listed in Section 4.10 of
the Company's Disclosure Letter or filed as Exhibits to the Company's SEC
Reports, neither the Company nor any of its Subsidiaries is a party to or
bound by any Material Contract. Except as set forth in Section 4.10 of the
Company's Disclosure Letter, all Material Contracts to which the Company or
any of its Subsidiaries is a party are in full force and effect, the Company
or the Subsidiary of the Company that is a party to or bound by such Material
Contract has performed its obligations thereunder to date and, to the
Knowledge of the Company, each other party thereto has performed its
obligations thereunder to date, other than any failure of a Material Contract
to be in full force and effect or any nonperformance thereof that could not
reasonably be expected to have a Material Adverse Effect on the Company.
Section 4.11 Authorizations; Compliance. The Company and its Subsidiaries
have obtained all Authorizations that are necessary to carry on their
businesses as currently conducted, except for any such Authorizations as to
which, individually or in the aggregate, the failure to possess could not
reasonably be expected to have a Material Adverse Effect on the Company. Such
Authorizations are in full force and effect, have not been violated in any
respect that could reasonably be expected to have a Material Adverse Effect on
the Company and there is no action, proceeding or investigation pending or, to
the Knowledge of the Company, threatened regarding suspension, revocation or
cancellation of any such Authorization, except in the case of any suspension,
revocation or cancellation of any such Authorization that could not reasonably
be expected to have a Material Adverse Effect on the Company.
Section 4.12 Litigation; Compliance with Laws. There are no actions, suits,
investigations or proceedings (including any proceedings in arbitration)
pending or, to the Knowledge of the Company, threatened against the Company or
any of its Subsidiaries, at law or in equity, in any Court or before or by any
Governmental Authority, except actions, suits or proceedings that are set
forth in Section 4.12 or Section 4.15 of the Company's Disclosure Letter or,
individually or, with respect to multiple actions, suits or proceedings that
allege similar theories of recovery based on similar facts, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on the
Company. There are no claims pending or, to the Knowledge of the Company,
threatened by any Persons against the Company or any of its Subsidiaries for
indemnification pursuant to any statute, organizational document, contract or
otherwise with respect to any action, suit, investigation or proceeding
pending in any Court or before or by any Governmental Authority. Except as set
forth in Section 4.12 of the Company's Disclosure Letter, the Company and its
Subsidiaries are in substantial compliance with all applicable Laws and
Regulations and are not in default with respect to any Order applicable to the
Company or any of its Subsidiaries, except such events of noncompliance or
defaults that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company.
Section 4.13 Employee Benefit Plans.
(a) Each Benefit Plan of the Company and its Subsidiaries is listed in
Section 4.13(a) of the Company's Disclosure Letter, including, with respect to
Terminated Benefit Plans, the date of termination. True and correct copies of
each of the following have been made available to the Acquiror: the most
recent annual report (Form 5500) relating to each such Current Benefit Plan
filed with the IRS, each such Current Benefit Plan, the trust agreement, if
any, relating to each such Current Benefit Plan, the most recent summary plan
description for each such Current Benefit Plan for which a summary plan
description is required by ERISA, the most recent actuarial report or
valuation relating to each such Current Benefit Plan subject to Title IV of
ERISA and the most recent determination letter, if any, issued by the IRS with
respect to any such Current Benefit Plan qualified under Section 401 of the
Code.
(b) Except as set forth in Section 4.13(b) of the Company's Disclosure
Letter, with respect to such Benefit Plans, no event has occurred and, to the
Knowledge of the Company, there exists no condition or set of circumstances in
connection with which the Company or any of its Subsidiaries could be subject
to any liability under the terms of such Benefit Plans, ERISA, the Code or any
other applicable Law, other than any condition or set of circumstances that
could not reasonably be expected to have a Material Adverse Effect on the
Company.
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(c) As to any such Current Benefit Plan intended to be qualified under
Section 401 of the Code, such Benefit Plan satisfies in form the requirements
of such Section, except to the extent amendments are not required by Law to be
made until a date after the Effective Time. There has been no termination or
partial termination of any such Benefit Plan within the meaning of Section
411(d)(3) of the Code.
(d) As to any such Terminated Benefit Plan intended to have been qualified
under Section 401 of the Code, such Terminated Benefit Plan received a
favorable determination letter from the IRS with respect to its termination.
(e) There are no actions, suits or claims pending (other than routine claims
for benefits) or, to the Knowledge of the Company, threatened against, or with
respect to, any of such Benefit Plans or their assets that could reasonably be
expected to have a Material Adverse Effect on the Company.
(f) There is no matter pending (other than routine qualification
determination filings) with respect to any of such Benefit Plans before the
IRS, the Department of Labor or the PBGC.
(g) All contributions required to be made to such Benefit Plans pursuant to
their terms and provisions have been made timely.
(h) As to any such Current Benefit Plan subject to Title IV of ERISA, (i)
there has been no event or condition which presents a significant risk of plan
termination, (ii) no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, (iii) no reportable event within the meaning of Section 4043 of
ERISA (for which the disclosure requirements of Regulation section 2615.3 and
section 4043.1 et seq., promulgated by the PBGC, have not been waived) has
occurred within six years prior to the date of this Plan, (iv) no notice of
intent to terminate such Benefit Plan has been given under Section 4041 of
ERISA, (v) no proceeding has been instituted under Section 4042 of ERISA to
terminate such Benefit Plan, (vi) no liability to the PBGC has been incurred
(other than with respect to required premium payments) and (vii) the assets of
the Benefit Plan equal or exceed the actuarial present value of the benefit
liabilities, within the meaning of Section 4041 of ERISA, under the Benefit
Plan, based upon reasonable actuarial assumptions and the asset valuation
principles established by the PBGC.
(i) Except as set forth in Section 4.13(i) of the Company's Disclosure
Letter, in connection with the consummation of the transactions contemplated
by this Plan, no payments have been or will be made under any such Current
Benefit Plans or any of the programs, agreements, policies or other
arrangements described in Section 4.13(k) of the Company's Disclosure Letter
which, in the aggregate, would be nondeductible under Section 280G of the
Code.
(j) Except as set forth in Section 4.13(j) of the Company's Disclosure
Letter, the execution and delivery of this Plan and the consummation of the
transactions contemplated hereby will not (i) require the Company or any of
its Subsidiaries to make a larger contribution to, or pay greater benefits
under, any Current Benefit Plan or any of the programs, agreements, policies
or other arrangements described in Section 4.13(k) of the Company's Disclosure
Letter than it otherwise would or (ii) create or give rise to any additional
vested rights or service credits under any Current Benefit Plan or any of such
programs, agreements, policies or other arrangements.
(k) Except as set forth in Section 4.13(k) of the Company's Disclosure
Letter, neither the Company nor any of its Subsidiaries is a party to or is
bound by any severance agreement (involving $50,000 or more), program or
policy. True and correct copies of all employment agreements and change-in-
control agreements with officers and employees of the Company and its
Subsidiaries, and all vacation, overtime and other compensation policies of
the Company and its Subsidiaries relating to their employees have been made
available to the Acquiror.
(l) Except as set forth in Section 4.13(l) of the Company's Disclosure
Letter, no Benefit Plan provides retiree medical or retiree life insurance
benefits to any Person and neither the Company nor any of its Subsidiaries is
contractually or otherwise obligated (whether or not in writing) to provide
any Person with life insurance or
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medical benefits upon retirement or termination of employment, other than as
required by the provisions of Sections 601 through 608 of ERISA and Section
4980B of the Code. Each Benefit Plan or other arrangement described in Section
4.13(l) of the Company's Disclosure Letter may be unilaterally amended or
terminated in its entirety without liability except as to benefits accrued
thereunder prior to such amendment or termination.
(m) Neither the Company nor any of its Subsidiaries contributes or has an
obligation to contribute, and has not within six years prior to the date of
this Plan contributed or had an obligation to contribute, to a multiemployer
plan within the meaning of Section 3(37) of ERISA.
(n) The vacation policies of the Company and its Subsidiaries do not provide
for carryover of vacation from one calendar year to the next.
(o) No collective bargaining agreement to which the Company or any of its
Subsidiaries is a party is currently in effect or is being negotiated by the
Company or any of its Subsidiaries. There is no pending or, to the Knowledge
of the Company, threatened labor dispute, strike or work stoppage against the
Company or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect on the Company. To the Knowledge of the Company and
except as set forth in Section 4.13(o) of the Company's Disclosure Letter,
neither the Company or any of its Subsidiaries nor any representative or
employee of the Company or any of its Subsidiaries has committed any unfair
labor practices in connection with the operation of the business of the
Company and its Subsidiaries, and there is no pending or, to the Knowledge of
the Company, threatened charge or complaint against the Company or any of its
Subsidiaries by the National Labor Relations Board or any comparable agency of
any state of the United States.
Section 4.14 Taxes.
(a) Except for such matters as could not reasonably be expected to have a
Material Adverse Effect on the Company, all returns and reports of or with
respect to any Tax ("Tax Returns") that are required to be filed by or with
respect to the Company or any of its Subsidiaries on or before the Effective
Time have been or will be timely filed, all Taxes that are due on or before
the Effective Time have been or will be timely paid in full, all withholding
Tax requirements imposed on or with respect to the Company or any of its
Subsidiaries have been or will be satisfied in full in all respects and no
penalty, interest or other charge is or will become due with respect to the
late filing of any such Tax Return or late payment of any such Tax.
(b) Except as set forth in Section 4.14(b) of the Company's Disclosure
Letter, all such Tax Returns have been audited by the applicable Governmental
Authority or the applicable statute of limitations has expired for the period
covered by such Tax Returns.
(c) Except as set forth in Section 4.14(c) of the Company's Disclosure
Letter, there is not in force any extension of time with respect to the due
date for the filing of any such Tax Return or any waiver or agreement for any
extension of time for the assessment or payment of any Tax due with respect to
the period covered by any such Tax Return.
(d) There is no claim against the Company or any of its Subsidiaries for any
Taxes, and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any such Tax Return, that, in either case, could
reasonably be expected to have a Material Adverse Effect on the Company.
(e) Except as set forth in Section 4.14(e) of the Company's Disclosure
Letter, none of the Company and its Subsidiaries, during the last ten years,
has been a member of an affiliated group filing a consolidated federal income
Tax Return.
Section 4.15 Environmental Matters. Except for matters disclosed in Section
4.15 of the Company's Disclosure Letter and except for matters that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Company, (a) the properties, operations and
activities of the Company and its Subsidiaries are in compliance with all
applicable Environmental Laws; (b) the Company and its
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Subsidiaries and the properties and operations of the Company and its
Subsidiaries are not subject to any existing, pending or, to the Knowledge of
the Company, threatened action, suit, investigation, inquiry or proceeding by
or before any Court or Governmental Authority under any Environmental Law; (c)
all Authorizations, if any, required to be obtained or filed by the Company or
any of its Subsidiaries under any Environmental Law in connection with the
business of the Company and its Subsidiaries have been obtained or filed and
are valid and currently in full force and effect; (d) there has been no
release of any hazardous substance, pollutant or contaminant into the
environment by the Company or its Subsidiaries or in connection with their
properties or operations; (e) there has been no exposure of any Person or
property to any hazardous substance, pollutant or contaminant in connection
with the properties, operations and activities of the Company and its
Subsidiaries; and (f) the Company and its Subsidiaries have made available to
the Acquiror all internal and external environmental audits and studies and
all correspondence on substantial environmental matters (in each case relevant
to the Company or any of its Subsidiaries) in the possession of the Company or
its Subsidiaries.
Section 4.16 Intellectual Property.
(a) Schedule 4.16(a) to the Company's Disclosure Letter contains:
(i) A listing and identification of all unexpired U.S. and foreign
patents, pending patent applications and unpatented, but identified,
inventions which are owned by the Company or its Subsidiaries (the "Patents
List");
(ii) A listing of all U.S. and all foreign trademarks, service marks,
registrations and pending applications for registrations of marks, trade
names and registered U.S. and foreign copyrights which are owned by the
Company or any Subsidiary of the Company (the "Trademark/Copyright List");
(iii) A listing (the "Agreements List") of all agreements to which the
Company or any Subsidiary of the Company is a party (A) under which
royalties presently are payable or in the future will or may become payable
by or to the Company or any Subsidiary of the Company, or (B) which concern
rights to patents, technology, processes or proprietary information of any
Person relating to the businesses of the Company and its Subsidiaries as
they presently are conducted, have been conducted in the past or may be
conducted in the future, or (C) which in any other way affect ownership,
control, use or disclosure of intellectual property or technology material
in any way to the businesses of the Company and its Subsidiaries as they
presently are conducted, have been conducted in the past or may be
conducted in the future.
(b) Except as disclosed in Schedule 4.16(b) to the Company's Disclosure
Letter:
(i) The Company or a Subsidiary of the Company is the record owner of,
and has good title, free of any liens or other encumbrances, to all of the
items on the Patents List and the Trademark/Copyright List;
(ii) To the Knowledge of the Company, no Person has asserted that either
the Company or any Subsidiary of the Company or any licensee of the Company
or any Subsidiary of the Company, is infringing or has infringed within the
six years prior to the date hereof, any foreign or domestic patent,
trademark, service mark, trade name, or copyright, or has misappropriated
or improperly used or disclosed any trade secret, confidential information
or know how or any Person;
(iii) To the Knowledge of the Company, no Person is infringing or has
infringed, within the six years prior to the date hereof, any item on the
Patents List or the Trademark/Copyright List, or has misappropriated or
improperly used or disclosed any trade secret, confidential information or
know-how of the Company or any Subsidiary of the Company;
(iv) To the Knowledge of the Company, no operations of the Company or its
Subsidiaries are infringing, or have infringed within the six years prior
to the date hereof, any foreign or domestic patent, trademark, service
mark, trade name or copyright of any Person, or has involved any
misappropriation or improper use or disclosure of any trade secret,
confidential information or know-how of any Person;
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(v) All necessary working requirements, all proofs of use, renewals and
all fees, annuities and other payments which are due on or before the date
of this Plan for any items in the Patents List and/or Trademark/Copyright
List have been met or paid;
(vi) None of the items in the Patents List or the Trademark/Copyright
List is the subject of any pending or, to the Knowledge of the Company,
threatened interference, re-examination, opposition, cancellation or other
protest proceeding;
(vii) To the Knowledge of the Company, the claims contained in the issued
patents on the Patents List are valid;
(viii) It has been the policy and practice of the Company and its
Subsidiaries to require that all employees, consultants and other Persons
to whom confidential information relating to the business of the Company
and its Subsidiaries is disclosed shall execute and deliver written
agreements (A) not to use or disclose any such confidential information,
except pursuant to the terms of such agreements or with the written consent
of the Company or its Subsidiary, as the case may be, and (B) to reduce to
writing, disclose and assign to the Company or its Subsidiary, as the case
may be, all inventions, discoveries and improvements, patentable or
unpatentable, and there has been no material deviation from such policy and
practice;
(ix) To the Knowledge of the Company, there is no foreign or domestic
patent which is reasonably expected by the Company or any of its
Subsidiaries to restrict materially the Acquiring Companies or their
Affiliates from practicing, licensing or otherwise exploiting the
intellectual property of the Company and its Subsidiaries, comprising, (A)
the items on the Patents List and the Trademark/Copyright List and (B) the
Company's and its Subsidiaries' confidential business information and trade
secrets;
(x) To the Knowledge of the Company and its Subsidiaries, all Material
obligations required to be performed to date, by the Company, its
Subsidiaries and any other Person pursuant to the agreements on the
Agreements List have been performed and no party to any such agreement is
materially in default in any respect thereunder.
Section 4.17 Insurance. The Company and its Subsidiaries own and are
beneficiaries under all such insurance policies underwritten by reputable
insurers that, as to risks insured, coverages and related limits and
deductibles, are customary in the industry in which the Company and its
Subsidiaries operate. All premiums due with respect to all such insurance
policies that are Material have been paid and, to the Knowledge of the
Company, all such policies are in full force and effect. Section 4.17 of the
Company's Disclosure Letter sets forth a list, including the name of the
underwriter, the risks insured, coverage and related limits and deductibles,
expiration dates and significant riders, of the principal insurance policies
currently maintained by the Company and its Subsidiaries.
Section 4.18 Pooling; Tax Matters. Neither the Company nor, to the Knowledge
of the Company, any of its Affiliates has taken or agreed to take any action
that would prevent (a) the Merger from being treated as a "pooling of
interests" in accordance with GAAP and the Regulations of the Commission or
(b) the Merger from constituting a reorganization within the meaning of
section 368(a) of the Code. Without limiting the generality of the foregoing:
(a) There is no plan or intention by any shareholder of the Company who
owns 5% or more of the Company Common Stock, and to the Knowledge of the
management of the Company, there is no plan or intention on the part of any
of the remaining shareholders of the Company, to sell, exchange or
otherwise dispose of a number of shares of Acquiror Common Stock to be
received in the Merger that would reduce the ownership of Acquiror Common
Stock by the holders of Company Common Stock who will receive such Acquiror
Common Stock in the Merger to a number of shares having a value, as of the
Effective Time, of less than 50% of the value of all Company Common Stock
(including shares of Company Common Stock sold for cash in lieu of
fractional shares of Acquiror Common Stock and Dissenters' Shares)
outstanding immediately prior to the Effective Time.
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(b) To the Knowledge of the Company, there is no agreement, plan or
intention by any shareholder of the Company that owns 5% or more of the
outstanding Company Common Stock to sell, exchange or otherwise dispose of
any of the shares of Acquiror Common Stock to be received by such
shareholder in the Merger.
(c) The Company and the shareholders of the Company will each pay their
respective expenses, if any, incurred in connection with the Merger.
(d) There is no intercorporate indebtedness existing between the Company
and the Acquiror or between the Company and Newco that was issued, acquired
or will be settled at a discount.
(e) The Company is not an investment company as defined in section
368(a)(2)(F)(iii) and (iv) of the Code.
(f) The Company is not under the jurisdiction of a court in a title 11 or
similar case within the meaning of section 368(a)(3)(A) of the Code.
Section 4.19 Affiliates. Section 4.19 of the Company's Disclosure Letter
contains a true and complete list of all Persons who are directors or
executive officers of the Company and any other Persons who, to the Knowledge
of the Company, may be deemed to be Affiliates of the Company. Concurrently
with the execution and delivery of this Plan, the Company has delivered to the
Acquiror an executed letter agreement, substantially in the form of Annex B
hereto, from each such Person so identified.
Section 4.20 Certain Business Practices. As of the date of this Plan,
neither the Company or 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, (b) made any unlawful payment to any
foreign or domestic government official or employee or to any foreign or
domestic political party or campaign or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, (c) consummated any transaction,
made any payment, entered into any agreement or arrangement or taken any other
action in violation of Section 1128B(b) of the Social Security Act, as
amended, or (d) made any other unlawful payment, except for any such matters
that could not reasonably be expected to have a Material Adverse Effect on the
Company.
Section 4.21 Opinion of Financial Advisor. The Company has received the
opinion of Schroder Wertheim & Co. Incorporated on the date of this Plan to
the effect that the Common Stock Exchange Ratio is fair, from a financial
point of view, to the holders of Company Common Stock in the Merger.
Section 4.22 Brokers. Except as set forth in Section 4.22 of the Company's
Disclosure Letter, no broker, finder or investment banker (other than Schroder
Wertheim & Co. Incorporated and B. G. Consulting Corp.) is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Plan based upon arrangements made by or on
behalf of the Company. Prior to the date of this Plan, the Company has made
available to the Acquiror a complete and correct copy of all agreements
between the Company and Schroder Wertheim & Co. Incorporated and B. G.
Consulting Corp. pursuant to which such firms will be entitled to any payment
relating to the transactions contemplated by this Plan.
Section 4.23 AntiTakeover Law. None of the provisions of Subchapters E, G
and H of Chapter 25 of the PBCL is applicable to the Plan or the Merger by
virtue of the operation of Article 9 of the Company's articles of
incorporation. The provisions of Subchapter F of Chapter 25 of the PBCL are
not applicable to the Plan or the Merger by virtue of the actions of the Board
of Directors of the Company in adopting the Plan on June 9, 1997.
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ARTICLE V
Representations and Warranties of Acquiror
The Acquiror Companies hereby represent and warrant to the Company that:
Section 5.01 Organization and Qualification; Subsidiaries. The Acquiror,
Newco and each other Significant Subsidiary of the Acquiror are legal entities
duly organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation or organization, have all requisite
corporate power and authority to own, lease and operate their respective
properties and to carry on their businesses as they are now being conducted
and are duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by them or the
ownership or leasing of their respective properties makes such qualification
necessary, other than any matters, including the failure to be so qualified
and in good standing, that could not reasonably be expected to have a Material
Adverse Effect on the Acquiror. Section 5.01 of the Acquiror's Disclosure
Letter sets forth, as of the date of this Plan, a true and complete list of
all Significant Subsidiaries of the Acquiror, together with the jurisdiction
of incorporation of each such Subsidiary and the percentage of each such
Subsidiary's outstanding capital stock or other equity interests owned by the
Acquiror or another Subsidiary of the Acquiror.
Section 5.02 Certificate of Incorporation and Bylaws. The Acquiror has
heretofore marked for identification and furnished to the Company complete and
correct copies of the certificate of incorporation and the bylaws or the
equivalent organizational documents, in each case as amended or restated to
the date hereof, of the Acquiror and each of its Significant Subsidiaries.
Neither the Acquiror nor any of its Significant Subsidiaries is in violation
of any of the provisions of its certificate of incorporation or bylaws (or
equivalent organizational documents).
Section 5.03 Capitalization.
(a) The authorized capital stock of the Acquiror consists of (i) 400,000,000
shares of Acquiror Common Stock of which as of March 31, 1997 126,455,962
shares were issued and outstanding, all of which are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights
created by statute, the Acquiror's certificate of incorporation or bylaws or
any agreement to which the Acquiror is a party or is bound and (ii) 5,000,000
shares of Preferred Stock, without par value, of which none is issued but of
which 2,000,000 shares have been designated as Series A Junior Participating
Preferred Stock. Between March 31, 1997 and the date of this Plan, no shares
of Acquiror Common Stock have been issued by the Acquiror except Acquiror
Common Stock issued pursuant to the exercise of outstanding Acquiror Stock
Options, Acquiror Restricted Stock and Acquiror Common Stock issued otherwise
as set forth in Section 5.03(a) of the Acquiror's Disclosure Letter. Except as
set forth in Section 5.03(a) of the Acquiror's Disclosure Letter, the Acquiror
has not, since March 31, 1997, granted any options for, or other rights to
purchase, shares of Acquiror Common Stock.
(b) Except as set forth in Section 5.03(b) of the Acquiror's Disclosure
Letter and except for shares reserved for issuance pursuant to the Acquiror
Stock Plans, no shares of Common Stock are reserved for issuance, and, except
for Acquiror Stock Options, Acquiror Restricted Stock agreements and for the
Acquiror's obligations under the Acquiror's Rights Agreement, there are no
contracts, agreements, commitments or arrangements obligating the Acquiror to
offer, sell, issue or grant any shares of, or any options, warrants or rights
of any kind to acquire any shares of, or any securities that are convertible
into or exchangeable for any shares of, capital stock of the Acquiror, to
redeem, purchase or acquire, or offer to purchase or acquire, any outstanding
shares of, or any outstanding options, warrants or rights of any kind to
acquire any shares of, or any outstanding securities that are convertible into
or exchangeable for any shares of, capital stock of the Acquiror or to grant
any Lien on any shares of capital stock of the Acquiror.
(c) Except as set forth in Section 5.03(c) of the Acquiror's Disclosure
Letter, (i) all the issued and outstanding shares of capital stock of, or
other equity interests in, each Significant Subsidiary of the Acquiror are
owned by the Acquiror or one of its Subsidiaries, have been duly authorized
and are validly issued, and, with
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respect to capital stock, are fully paid and nonassessable, and were not
issued in violation of any preemptive or similar rights of any past or present
equity holder of such Subsidiary; (ii) all such issued and outstanding shares,
or other equity interests, that are owned by the Acquiror or one of its
Subsidiaries are owned free and clear of all Liens; (iii) no shares of capital
stock of, or other equity interests in, any Significant Subsidiary of the
Acquiror are reserved for issuance, and there are no contracts, agreements,
commitments or arrangements obligating the Acquiror or any of its Significant
Subsidiaries (A) to offer, sell, issue, grant, pledge, dispose of or encumber
any shares of capital stock of, or other equity interests in, or any options,
warrants or rights of any kind to acquire any shares of capital stock of, or
other equity interests in, or any securities that are convertible into or
exchangeable for any shares of capital stock of, or other equity interests in,
any of the Significant Subsidiaries of the Acquiror or (B) to redeem, purchase
or acquire, or offer to purchase or acquire, any outstanding shares of capital
stock of, or other equity interests in, or any outstanding options, warrants
or rights of any kind to acquire any shares of capital stock of, or other
equity interests in, or any outstanding securities that are convertible into
or exchangeable for, any shares of capital stock of, or other equity interests
in, any of the Significant Subsidiaries of the Acquiror or (C) to grant any
Lien on any outstanding shares of capital stock of, or other equity interests
in, any of the Significant Subsidiaries of the Acquiror; except for any matter
under clause (i), (ii) or (iii) of this Section 5.03(c) that could not
reasonably be expected to have a Material Adverse Effect on the Acquiror.
(d) Except for revocable proxies granted by the Acquiror or its Subsidiaries
with respect to the capital stock of Subsidiaries owned by the Acquiror or its
Subsidiaries, there are no voting trusts, proxies or other agreements,
commitments or understandings of any character to which the Acquiror or any of
its Significant Subsidiaries is a party or by which the Acquiror or any of its
Significant Subsidiaries is bound with respect to the voting of any shares of
capital stock of the Acquiror or any of its Significant Subsidiaries.
Section 5.04 Authorization of Plan. Each of the Acquiror and Newco has all
requisite corporate power and authority to execute and deliver this Plan and
each instrument required hereby to be executed and delivered by it at the
Closing, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby. The execution and delivery by each of
Acquiror and Newco of this Plan and each instrument required hereby to be
executed and delivered by each of them at the Closing and the performance of
their respective obligations hereunder and thereunder have been duly and
validly authorized by all requisite corporate action on the part of the
Acquiror and Newco, respectively. This Plan has been duly executed and
delivered by the Acquiror and Newco and (assuming due authorization, execution
and delivery hereof by the other party hereto) constitutes a legal, valid and
binding obligation of the Acquiror and Newco, enforceable against the Acquiror
and Newco in accordance with its terms, except as the same may be limited by
legal principles of general applicability governing the application and
availability of equitable remedies.
Section 5.05 Approvals. Except for the applicable requirements, if any, of
(a) the Securities Act, (b) the Exchange Act, (c) state securities or blue sky
laws, (d) the HSR Act, (e) the NYSE, (f) the filing and recordation of
appropriate merger documents as required by the PBCL and the DGCL and (g)
those Laws, Regulations and Orders noncompliance with which could not
reasonably be expected to have a material adverse effect on the ability of the
Acquiror or Newco to perform its obligations under this Plan or to have a
Material Adverse Effect on the Acquiror, no filing or registration with, no
waiting period imposed by and no Authorization of, any Governmental Authority
is required under any Law, Regulation or Order applicable to the Acquiror or
Newco to permit the Acquiror or Newco to execute, deliver or perform this Plan
or any instrument required hereby to be executed and delivered by it at the
Closing. To the Knowledge of the Acquiror, there are no facts or circumstances
that could reasonably be expected to preclude the Acquiror Common Stock to be
issued in the Merger from being approved for listing on the NYSE.
Section 5.06 No Violation. Assuming effectuation of all filings and
registrations with, termination or expiration of any applicable waiting
periods imposed by, and receipt of all Authorizations of, Governmental
Authorities indicated as required in Section 5.05, neither the execution and
delivery by the Acquiror or Newco of this Plan or any instrument required
hereby to be executed and delivered by it at the Closing nor the performance
by the Acquiror or Newco of its obligations hereunder or thereunder will (a)
violate or breach the terms of or cause a default under (i) any Law,
Regulation or Order applicable to the Acquiror or Newco, (ii) the
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certificate of incorporation or bylaws of the Acquiror or Newco or (iii) any
contract or agreement to which the Acquiror or any of its Subsidiaries is a
party or by which it or any of its properties or assets is bound, or (b) with
the passage of time, the giving of notice or the taking of any action by a
third Person, have any of the effects set forth in clause (a) of this Section,
except in any such case for any matters described in this Section that could
not reasonably be expected to have a material adverse effect upon the ability
of the Acquiror or Newco to perform its obligations under this Plan or a
Material Adverse Effect on the Acquiror.
Section 5.07 Reports.
(a) Since December 31, 1993, the Acquiror has filed all SEC Reports required
to be filed by the Acquiror with the Commission. The Acquiror's SEC Reports,
including those filed after the date of this Plan and prior to the Effective
Time, (i) were prepared in all material respects in accordance with the
applicable requirements of the Securities Act and the Exchange Act, as the
case may be, and the applicable Regulations of the Commission thereunder and
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The Acquiror's Consolidated Financial Statements and any consolidated
financial statements of the Acquiror (including any related notes thereto)
contained in any SEC Reports filed by the Acquiror with the Commission after
the date of this Plan (i) have been or will have been prepared in accordance
with the published Regulations of the Commission and in accordance with GAAP
(except (A) to the extent required by changes in GAAP and (B), with respect to
SEC Reports filed by the Acquiror prior to the date of this Plan, as may be
indicated in the notes thereto) and (ii) fairly present the consolidated
financial position of the Acquiror and its Subsidiaries as of the respective
dates thereof and the consolidated results of their operations and cash flows
for the periods indicated (including, in the case of any unaudited interim
financial statements, reasonable estimates of normal and recurring year-end
adjustments).
(c) Except as set forth in Section 5.07(c) of the Acquiror's Disclosure
Letter, there exist no liabilities or obligations of the Acquiror and its
Subsidiaries that are Material to the Acquiror, whether accrued, absolute,
contingent or threatened, that would be required to be reflected, reserved for
or disclosed under GAAP in consolidated financial statements of the Acquiror
as of and for the period ended on the date of this representation and
warranty, other than (i) liabilities or obligations that are adequately
reflected, reserved for or disclosed in the Acquiror's Consolidated Financial
Statements, (ii) liabilities or obligations incurred in the ordinary course of
business of the Acquiror since March 31, 1997, (iii) liabilities or
obligations the incurrence of which is permitted by Section 6.02(b) and (iv)
liabilities or obligations that are not Material to the Acquiror.
Section 5.08 No Material Adverse Effect; Conduct.
(a) Since March 31, 1997, no event (other than any event that is of general
application to all or a substantial portion of the Acquiror's industries and
other than any event that is expressly subject to any other representation or
warranty contained in Article V) has, to the Knowledge of the Acquiror,
occurred that, individually or together with other similar events, could
reasonably be expected to constitute or cause a Material Adverse Effect on the
Acquiror.
(b) Except as set forth in Section 5.08(b) of the Acquiror's Disclosure
Letter, during the period from March 31, 1997 to the date of this Plan,
neither the Acquiror nor any of its Subsidiaries has engaged in any conduct
that is proscribed during the period from the date of this Plan to the
Effective Time by subsections (i) through (viii) of Section 6.02(b).
Section 5.09 Title to Properties. The Acquiror or its Subsidiaries,
individually or together, have indefeasible title to all of the properties
reflected in the Acquiror's Consolidated Balance Sheet, other than any
properties reflected in the Acquiror's Consolidated Balance Sheet that have
been sold or otherwise disposed of since the date of the Acquiror's
Consolidated Balance Sheet or are not, individually or in the aggregate,
Material to the Acquiror, free and clear of Liens, other than (x) Liens the
existence of which is reflected in the Acquiror's
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Consolidated Financial Statements, (y) Permitted Encumbrances and (z) Liens
that, individually or in the aggregate, are not Material to the Acquiror. The
Acquiror or its Subsidiaries, individually or together, hold under valid lease
agreements all real and personal properties reflected in the Acquiror's
Consolidated Balance Sheet as being held under capitalized leases, and all
real and personal property that is subject to the operating leases to which
reference is made in the notes to the Acquiror's Audited Consolidated
Financial Statements, and enjoy peaceful and undisturbed possession of such
properties under such leases, other than (i) any properties as to which such
leases have terminated in the ordinary course of business since the date of
the Acquiror's Consolidated Balance Sheet and (ii) any properties that,
individually or in the aggregate, are not Material to the Acquiror.
Section 5.10 Certain Obligations. Except as set forth in Section 5.10 of the
Acquiror's Disclosure Letter, all Material Contracts to which the Acquiror or
any of its Subsidiaries is a party are in full force and effect, the Acquiror
or the Subsidiary of the Acquiror that is a party to or bound by such Material
Contract has performed its obligations thereunder to date and, to the
Knowledge of the Acquiror, each other party thereto has performed its
obligations thereunder to date, other than any failure of any such Material
Contract to be in full force and effect or any nonperformance thereof that
could not reasonably be expected to have a Material Adverse Effect on the
Acquiror.
Section 5.11 Authorizations; Compliance. To the Knowledge of the Acquiror,
the Acquiror and its Subsidiaries have obtained all Authorizations that are
necessary to carry on their businesses as currently conducted, except for any
such Authorizations as to which the failure to possess, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect
on the Acquiror. Such Authorizations are in full force and effect, have not
been violated in any respect that could reasonably be expected to have a
Material Adverse Effect on the Acquiror and there is no action, proceeding or
investigation pending or threatened regarding suspension, revocation or
cancellation of any of such Authorizations, except in the case of any
suspension, revocation or cancellation of such Authorizations that could not
reasonably be expected to have a Material Adverse Effect on the Acquiror.
Section 5.12 Litigation; Compliance with Laws. There are no actions, suits,
investigations or proceedings (including any proceedings in arbitration)
pending or, to the Knowledge of the Acquiror, threatened against the Acquiror
or any of its Subsidiaries, at law or in equity, in any Court or before or by
any Governmental Authority, except actions, suits or proceedings that are set
forth in Section 5.12 or Section 5.15 of the Acquiror's Disclosure Letter or ,
individually or, with respect to multiple actions, suits or proceedings that
allege similar theories of recovery based on similar facts, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on the
Acquiror. The Acquiror and its Subsidiaries are in substantial compliance with
all applicable Laws and Regulations and are not in default with respect to any
Order applicable to the Acquiror or any of its Subsidiaries, except such
events of noncompliance or defaults that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on the
Acquiror.
Section 5.13 Employee Benefit Plans. Except as set forth in Section 5.13 of
the Acquiror's Disclosure Letter:
(a) No event has occurred and, to the Knowledge of the Acquiror, there
exists no condition or set of circumstances in connection with which the
Acquiror or any of its Subsidiaries could be subject to any liability under
the terms of any Benefit Plans of the Acquiror or any of its Significant
Subsidiaries or, with respect to any such Benefit Plan, under ERISA, the
Code or any other applicable Law, other than any condition or set of
circumstances that could not reasonably be expected to have a Material
Adverse Effect on the Acquiror.
(b) As to any such Current Benefit Plan intended to be qualified under
Section 401 of the Code, such Benefit Plan satisfies in form the
requirements of such Section, except to the extent amendments are not
required by Law to be made until a date after the Effective Time. There has
been no termination or partial termination of any such Benefit Plan within
the meaning of Section 411(d)(3) of the Code.
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(c) As to any such Terminated Benefit Plan intended to have been
qualified under Section 401 of the Code, such Terminated Benefit Plan
received a favorable determination letter from the IRS with respect to its
termination.
(d) There are no actions, suits or claims pending (other than routine
claims for benefits) or, to the Knowledge of the Acquiror, threatened
against, or with respect to, any of such Benefit Plans or their assets that
could reasonably be expected to have a Material Adverse Effect on the
Acquiror.
(e) As to any such Current Benefit Plan subject to Title IV of ERISA, (i)
there has been no event or condition which presents the material risk of
plan termination, (ii) no accumulated funding deficiency, whether or not
waived, within the meaning of Section 302 of ERISA or Section 412 of the
Code has been incurred, (iii) no reportable event within the meaning of
Section 4043 of ERISA (for which the disclosure requirements of Regulation
section 2615.3 and section 4043.1 et seq., promulgated by the PBGC, have
not been waived) has occurred within six years prior to the date of this
Plan, (iv) no notice of intent to terminate such Benefit Plan has been
given under Section 4041 of ERISA, (v) no proceeding has been instituted
under Section 4042 of ERISA to terminate such Benefit Plan, (vi) no
liability to the PBGC has been incurred (other than with respect to
required premium payments) and (vii) the assets of the Benefit Plan equal
or exceed the actuarial present value of the benefit liabilities, within
the meaning of Section 4041 of ERISA, under the Benefit Plan, based upon
reasonable actuarial assumptions and the asset valuation principles
established by the PBGC.
(f) Neither the Acquiror nor any of its Subsidiaries contributes or has
an obligation to contribute, and has not within six years prior to the date
of this Plan contributed or had an obligation to contribute, to a
multiemployer plan within the meaning of Section 3(37) of ERISA.
Section 5.14 Taxes.
(a) Except for such matters as could not reasonably be expected to have a
Material Adverse Effect on the Acquiror, all Tax Returns that are required
to be filed by or with respect to the Acquiror or any of its Subsidiaries
on or before the Effective Time have been or will be timely filed, all
Taxes that are due on or before the Effective Time have been or will be
timely paid in full, all withholding Tax requirements imposed on or with
respect to the Acquiror or any of its Subsidiaries have been or will be
satisfied in full in all respects and no penalty, interest or other charge
is or will become due with respect to the late filing of any such Tax
Return or late payment of any such Tax.
(b) There is no claim against the Acquiror or any of its Subsidiaries for
any Taxes, and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any such Tax Return, that, in either case, could
reasonably be expected to have a Material Adverse Effect on the Acquiror.
Section 5.15 Environmental Matters. Except for matters disclosed in Section
5.15 of the Acquiror's Disclosure Letter and except for matters that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Acquiror, (a) the properties, operations and
activities of the Acquiror and its Subsidiaries are in compliance with all
applicable Environmental Laws; (b) the Acquiror and its Subsidiaries and the
properties and operations of the Acquiror and its Subsidiaries are not subject
to any existing, pending or, to the Knowledge of the Acquiror, threatened
action, suit, investigation, inquiry or proceeding by or before any Court or
Governmental Authority under any Environmental Law; (c) all Authorizations, if
any, required to be obtained or filed by the Acquiror or any of its
Subsidiaries under any Environmental Law in connection with the business of
the Acquiror and its Subsidiaries have been obtained or filed and are valid
and currently in full force and effect; (d) there has been no release of any
hazardous substance, pollutant or contaminant into the environment by the
Acquiror or its Subsidiaries or in connection with their properties or
operations; and (e) there has been no exposure of any Person or property to
any hazardous substance, pollutant or contaminant in connection with the
properties, operations and activities of the Acquiror and its Subsidiaries.
Section 5.16 Pooling; Tax Matters. Neither the Acquiror nor, to the
Knowledge of the Acquiror, any of its Affiliates has taken or agreed to take
any action that would prevent (a) the Merger from being treated for financial
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accounting purposes as a "pooling of interests" in accordance with GAAP and
the Regulations of the Commission or (b) the Merger from constituting a
reorganization within the meaning of section 368(a) of the Code. Without
limiting the generality of the foregoing:
(a) Following the Merger, the Surviving Corporation will hold at least 90
percent of the fair market value of the Company's net assets, at least 70
percent of the fair market value of the Company's gross assets, at least 90
percent of the fair market value of the net assets of Newco and at least 70
percent of the fair market value of the gross assets of Newco, held
immediately prior to the Merger, taking into account amounts paid for
Dissenters' Shares and used to pay Merger Expenses and any distributions
other than regular dividends.
(b) The Acquiror has no plan or intention to (A) liquidate the Surviving
Corporation, (B) merge the Surviving Corporation with or into another
corporation, (C) sell or otherwise dispose of the stock of the Surviving
Corporation except for transfers of stock to corporations controlled
(within the meaning of section 368(c) of the Code) by the Acquiror, (D)
cause or permit the Surviving Corporation to issue additional shares of its
capital stock that would result in the Acquiror's losing control (within
the meaning of section 368(c) of the Code) of the Surviving Corporation,
(E) cause or permit the Surviving Corporation to sell or otherwise dispose
of any of its assets or of any of the assets acquired from Newco except for
dispositions made in the ordinary course of business or transfers of assets
to a corporation controlled by the Surviving Corporation or (F) reacquire
any of the Acquiror Common Stock issued to the holders of Company Common
Stock in the Merger.
(c) Newco has no liabilities that will be assumed by the Surviving
Corporation in the Merger and will not transfer to the Surviving
Corporation in the Merger any assets subject to liabilities.
(d) Following the Merger, the Surviving Corporation will continue the
historic business of the Company or use a significant portion of its assets
in a business.
(e) There is no intercorporate indebtedness existing between the Company
and the Acquiror or between the Company and Newco that was issued,
acquired, or will be settled at a discount.
(f) The Acquiror does not own, nor has it owned during the past five
years, any shares of capital stock of the Company.
Section 5.17 Insurance. The Acquiror and its Subsidiaries own and are
beneficiaries under all such insurance policies underwritten by reputable
insurers that, as to risks insured, coverages and related limits and
deductibles, are customary for a company of the size and nature of the
Acquiror and which is similarly situated. All premiums due with respect to all
such insurance policies that are Material have been paid and, to the Knowledge
of the Acquiror, all such policies are in full force and effect.
Section 5.18 Affiliates. Section 5.18 of the Acquiror's Disclosure Letter
contains a true and complete list of all Persons who, to the Knowledge of the
Acquiror, may be deemed to be Affiliates of the Acquiror, including all
directors and executive officers of the Acquiror. Concurrently with the
execution and delivery of this Plan, the Acquiror has delivered to the Company
an executed letter agreement, substantially in the form of Annex C hereto,
from each such Person so identified as an Affiliate of the Acquiror.
Section 5.19 Certain Business Practices. As of the date of this Plan,
neither the Acquiror or any of its Subsidiaries nor any director, officer,
employee or agent of the Acquiror or any of its Subsidiaries has (a) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (b) made any unlawful payment to any
foreign or domestic government official or employee or to any foreign or
domestic political party or campaign or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, (c) consummated any transaction,
made any payment, entered into any agreement or arrangement or taken any other
action in violation of Section 1128B(b) of the Social Security Act, as
amended, or (d) made any other unlawful payment, except for any such matters
that could not reasonably be expected to have a Material Adverse Effect on the
Acquiror.
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Section 5.20 Brokers. Except as set forth in Section 5.20 of the Acquiror's
Disclosure Letter, no broker, finder or investment banker (other than Dillon,
Read & Co. Inc.) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Plan based
upon arrangements made by or on behalf of the Acquiror.
Section 5.21 Acquiring Person. Based on the information set forth in the
Company's SEC Reports, no holder of 5% or more of the outstanding Company
Common Stock whose existence is disclosed therein will at the Effective Time
become an "Acquiring Person," as such term is defined in the Acquiror's Rights
Agreement, as a result of any of the transactions contemplated by this Plan.
ARTICLE VI
Covenants
Section 6.01 Affirmative Covenants. The Company hereby covenants and agrees
that, prior to the Effective Time, unless otherwise expressly contemplated by
this Plan or consented to in writing by the Acquiror, it will and will cause
its Subsidiaries to:
(a) operate its business in the usual and ordinary course consistent with
past practices;
(b) use all reasonable efforts to preserve substantially intact its
business organization, maintain its rights and franchises, retain the
services of its respective key employees and maintain its relationships
with its respective customers and suppliers;
(c) maintain and keep its properties and assets in as good repair and
condition as at present, ordinary wear and tear excepted, and maintain
supplies and inventories in quantities consistent with its customary
business practice; and
(d) use all reasonable efforts to keep in full force and effect insurance
and bonds comparable in amount and scope of coverage to that currently
maintained;
except for any matters that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Company.
Section 6.02 Negative Covenants.
(a) The Company covenants and agrees that, except as expressly contemplated
by this Plan or otherwise consented to in writing by the Acquiror, from the
date of this Plan until the Effective Time, it will not do, and will not
permit any of its Subsidiaries to do, any of the following:
(i) (A) increase the compensation payable to or to become payable to any
director or executive officer, except for increases in salary or wages
payable or to become payable upon promotion to an office having greater
operational responsibilities or otherwise in the ordinary course of
business and consistent with past practice; (B) grant any severance or
termination pay (other than pursuant to the normal severance policy of the
Company or its Subsidiaries as in effect on the date of this Plan) to, or
enter into any employment or severance agreement with, any director,
officer or employee, either individually or as part of a class of similarly
situated persons; (C) establish, adopt or enter into any Benefit Plan or
(D), except as may be required by applicable Law and actions that are not
inconsistent with the provisions of Section 7.08 of this Plan, amend or
take any other actions (including the acceleration of vesting, waiving of
performance criteria or the adjustment of awards or any other actions
permitted upon a change in control of such party or a filing under Section
13(d) or 14(d) of the Exchange Act with respect to such party) with respect
to any of the Benefit Plans of such party;
(ii) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock, except for dividends by a
wholly owned Subsidiary of the Company to the Company or another wholly
owned Subsidiary of the Company;
(iii) (A) redeem, purchase or acquire, or offer to purchase or acquire,
any outstanding shares of capital stock of, or other equity interests in,
or any securities that are convertible into or exchangeable for any
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shares of capital stock of, or other equity interests in, or any
outstanding options, warrants or rights of any kind to acquire any shares
of capital stock of, or other equity interests in, the Company or any of
its Subsidiaries (other than (1) any such acquisition by the Company or any
of its wholly owned Subsidiaries directly from any wholly owned Subsidiary
of the Company, (2) any repurchase, forfeiture or retirement of shares of
Company Common Stock or Company Stock Options occurring pursuant to the
terms (as in effect on the date of this Plan) of any existing Benefit Plan
of the Company or any of its Subsidiaries or (3) any periodic purchase of
Company Common Stock for allocation to employee's accounts occurring
pursuant to the terms (as in effect on the date of this Plan) of any
existing employee stock purchase plan); (B) to effect any reorganization or
recapitalization; or (C) to split, combine or reclassify any of the capital
stock of, or other equity interests in, the Company or any of its
Subsidiaries or to issue or to authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for, shares
of such capital stock or such equity interests;
(iv) (A) offer, sell, issue or grant, or authorize the offering, sale,
issuance or grant, of any shares of capital stock of, or other equity
interests in, any securities convertible into or exchangeable for any
shares of capital stock of, or other equity interests in, or any options,
warrants or rights of any kind to acquire any shares of capital stock of,
or other equity interests in, the Company or any of its Subsidiaries, other
than issuances of Company Common Stock (1) upon the exercise of Company
Stock Options outstanding at the date of this Plan in accordance with the
terms thereof (as in effect on the date of this Plan), (2) upon the
expiration of any restrictions upon issuance of any grant existing at the
date of this Plan of restricted stock or bonus stock pursuant to the terms
(as in effect on the date of this Plan) of any Benefit Plans of the Company
or any of its Subsidiaries or (3) any periodic issuance of shares of
Company Common Stock required by the terms (as in effect on the date of
this Plan) of any Benefit Plans of the Company or any of its Subsidiaries,
(B) amend or otherwise modify the terms (as in effect on the date of this
Plan) of any outstanding options, warrants or rights the effect of which
shall be to make such terms more favorable to the holders thereof (except
as may be required by ERISA or other applicable Law); (C) take any action
to accelerate the vesting of any outstanding Company Stock Options or (D)
grant any Lien with respect to any shares of capital stock of, or other
equity interests in, any Subsidiary of the Company;
(v) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or all or a portion of the assets of, or
in any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
to acquire any assets of any other Person (other than the purchase of
assets from suppliers or vendors in the ordinary course of business and
consistent with past practice);
(vi) sell, lease, exchange or otherwise dispose of, or grant any Lien
(other than a Permitted Encumbrance) with respect to, any of the assets of
the Company or any of its Subsidiaries that are Material to the Company,
except for dispositions of assets and inventories in the ordinary course of
business and consistent with past practice and dispositions of assets and
purchase money Liens incurred in connection with the original acquisition
of assets and secured by the assets acquired in an amount not to exceed
$50,000 in the aggregate;
(vii) adopt any amendments to its charter or bylaws or other
organizational documents that would alter the terms of its capital stock or
other equity interests or would have a material adverse effect on the
ability of the Company to perform its obligations under this Plan;
(viii) (A) change any of its methods of accounting in effect at December
31, 1996, except as may be required to comply with GAAP, (B) make or
rescind any election relating to Taxes (other than any election which must
be made periodically which is made consistent with past practice), (C)
settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes (except
where the cost to the Company and its Subsidiaries of such settlements or
compromises, individually or in the aggregate, does not exceed $50,000) or
(D) change any of its methods of reporting income or deductions for federal
income tax purposes from those employed in the preparation of the federal
income tax returns for the taxable year ending December 31, 1995, except,
in each case, as may be required
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by Law and for matters that could not reasonably be expected to have a
Material Adverse Effect on the Company;
(ix) incur any obligations for borrowed money or purchase money
indebtedness (other than purchase money indebtedness as to which Liens may
be granted as permitted by Section 6.02(a)(vi)) that are Material to the
Company, whether or not evidenced by a note, bond, debenture or similar
instrument, except drawings under credit lines existing at the date of this
Plan or otherwise in the ordinary course of business consistent with past
practice and, in the latter instance, in no event (including purchase money
indebtedness as to which Liens may be granted pursuant to Section
6.02(a)(vi)) in excess of $50,000;
(x) release any third Person from its obligations under any existing
standstill agreement relating to a Competing Transaction or otherwise under
any confidentiality agreement or similar agreement;
(xi) enter into any Material Contract with any third Person that provides
for an exclusive arrangement with that third Person or is substantially
more restrictive on the Company or any of its Subsidiaries or substantially
less advantageous to the Company or any of its Subsidiaries than Material
Contracts existing on the date hereof; or
(xii) agree in writing or otherwise to do any of the foregoing.
(b) The Acquiror covenants and agrees that, except as expressly contemplated
by this Plan or otherwise consented to in writing by the Company, from the
date of this Plan until the Effective Time, it will not do, and will not
permit any of its Subsidiaries to do, any of the following:
(i) declare or pay any extraordinary dividend or distribution (such term
not including the Acquiror's regular quarterly dividend or any change
thereto) in cash or property other than Acquiror Common Stock, except for
dividends by a wholly owned Subsidiary of the Acquiror to the Acquiror or
another wholly owned Subsidiary of the Acquiror;
(ii) (A) redeem, purchase or acquire, or offer to purchase or acquire,
any outstanding shares of capital stock of, or other equity interests in,
or any securities that are convertible into or exchangeable for any shares
of capital stock of, or other equity interests in, or any outstanding
options, warrants or rights of any kind to acquire any shares of capital
stock of, or other equity interests in, the Acquiror or any of its
Subsidiaries (other than (1) any such acquisition by the Acquiror or any of
its wholly owned Subsidiaries directly from any wholly owned Subsidiary of
the Acquiror, (2) any repurchase, forfeiture or retirement of shares of
Acquiror Common Stock or Acquiror Stock Options occurring pursuant to the
terms of any existing Benefit Plan of the Acquiror or any of its
Subsidiaries or (3) any periodic purchase of Acquiror Common Stock for
allocation to employee's accounts occurring pursuant to the terms of any
existing Benefit Plan of the Acquiror or any of its Subsidiaries) or (B)
effect any reorganization or recapitalization other than any reorganization
or recapitalization that could not reasonably be expected to have a
material adverse effect on the ability of the Acquiror to perform its
obligations under this Plan;
(iii) offer, sell, issue or grant, or authorize the offering, sale,
issuance or grant, of any shares of capital stock of, or other equity
interests in, any securities convertible into or exchangeable for any
shares of capital stock of, or other equity interests in, or any options,
warrants or rights of any kind to acquire any shares of capital stock of,
or other equity interests in, the Acquiror or any of its Subsidiaries,
other than issuances of Acquiror Common Stock (A) upon the exercise of
Acquiror Stock Options outstanding at the date of this Plan in accordance
with the terms thereof, (B) as Acquiror Restricted Stock, (C) upon the
expiration of any restrictions upon issuance of any grant existing at the
date of this Plan of restricted stock or bonus stock pursuant to the terms
of any Benefit Plans of the Acquiror or any of its Subsidiaries, (D) any
periodic issuance of shares of Acquiror Common Stock occurring pursuant to
the terms of any Benefit Plan of the Acquiror or any of its Subsidiaries or
(E) any issuance of shares of Acquiror Common Stock for cash or in
connection with any acquisition of equity interests, assets or businesses
that could not reasonably be expected to have a material adverse effect on
the ability of the Acquiror to perform its obligations under this Plan;
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(iv) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or all or a portion of the assets of, or
in any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise to acquire any assets of any other Person (other than the
purchase of assets from suppliers or vendors in the ordinary course of
business and consistent with past practice and acquisitions of equity
interests, assets and businesses that could not reasonably be expected to
have a material adverse effect on the ability of the Acquiror to perform
its obligations under this Plan);
(v) sell, lease, exchange or otherwise dispose of, or grant any Lien
(other than a Permitted Encumbrance) with respect to, any of the assets of
the Acquiror or any of its Subsidiaries that are Material to the Acquiror,
except for dispositions of assets and inventories in the ordinary course of
business and consistent with past practice and dispositions of assets and
incurrences of Liens that could not reasonably be expected to have a
material adverse effect on the ability of the Acquiror to perform its
obligations under this Plan;
(vi) adopt any amendments to its charter or bylaws or other
organizational documents that would alter the terms of the Acquiror's
Common Stock or could reasonably be expected to have a material adverse
effect on the ability of the Acquiror to perform its obligations under this
Plan;
(vii) incur any obligations for borrowed money or purchase money
indebtedness that are Material to the Acquiror, whether or not evidenced by
a note, bond, debenture or similar instrument, except drawings under credit
lines existing at the date of this Plan, obligations incurred in the
ordinary course of business consistent with past practice and obligations
that could not reasonably be expected to have a material adverse effect on
the ability of the Acquiror to perform its obligations under this Plan; or
(viii) agree in writing or otherwise to do any of the foregoing.
Section 6.03 No Solicitation. From the date of this Plan until the Effective
Time or the termination of this Plan pursuant to Section 9.01, the Company
agrees that it will not (a) initiate, solicit or encourage (including by way
of furnishing information or assistance), or take any other action knowingly
to facilitate, any inquiries from any Person or the making of any proposal by
any Person that constitutes, or may reasonably be expected to lead to, any
Competing Transaction, (b) enter into discussions or negotiate with any Person
in furtherance of such inquiries or to obtain a Competing Transaction, (c)
agree to or endorse any Competing Transaction or (d) authorize or permit any
of the Company's Representatives to take any such action, and the Company
shall promptly notify the Acquiror of all relevant terms of any such inquiries
and proposals received by the Company, any of its Subsidiaries or any Company
Representative relating to any of such matters and, if such inquiry or
proposal is in writing, the Company shall promptly deliver or cause to be
delivered to the Acquiror a copy of such inquiry or proposal; provided,
however, that nothing contained in this Section 6.03 shall prohibit the Board
of Directors of the Company from complying with Rule 14e-2 promulgated under
the Exchange Act with regard to a tender offer or exchange offer for shares of
Company Common Stock commenced prior to the Company Shareholders' Meeting.
Pending the Effective Time or the termination of the Plan, the Company shall
not, through action of its Board of Directors, approve the acquisition of
Company Common Stock by any Person, other than the Acquiror and any of its
Subsidiaries and Affiliates, who, following such acquisition, would be an
"interested shareholder" under Subchapter F of Chapter 25 of the PBCL.
Section 6.04 Access and Information.
(a) Each of the Company and the Acquiror shall, and shall cause its
Subsidiaries to, (i) afford to the other and its officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, in the case of the Company, the "Company's
Representatives" and, in the case of the Acquiror, the "Acquiror's
Representatives") access, at reasonable times upon reasonable prior notice, to
the officers, employees, agents, properties, offices and other facilities of
the other and to its books and records and (ii) furnish promptly to the other
and its Representatives such information concerning its business, properties,
contracts, records and personnel (including financial, operating and other
data and information) as may be reasonably requested, from time to time, by or
on behalf of the other party.
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(b) If this Plan is terminated for any reason pursuant to Article IX hereof,
each of the Company and the Acquiror shall, within ten days after a request
therefor from the other, return or destroy (and provide the other party within
such ten day time period with a certificate of an executive officer certifying
such destruction) all of the information furnished to such party and its
Representatives pursuant to the provisions of Section 6.04(a) and all internal
memoranda, analyses, evaluations and other similar material containing,
reflecting or prepared from any such information, in each case other than
information available to the general public without restriction.
Section 6.05 Confidentiality Agreement. The parties shall comply with, and
shall cause their respective Representatives to comply with, all of their
respective obligations under the Confidentiality Agreement.
ARTICLE VII
Additional Agreements
Section 7.01 Meeting of Shareholders. The Company shall, promptly after the
date of this Plan, take all actions necessary in accordance with the PBCL and
the Company's articles of incorporation and bylaws to convene a special
meeting of the Company's shareholders to consider adoption of this Plan (the
"Company Shareholders' Meeting"), and the Company shall consult with the
Acquiror in connection therewith. The Company covenants and agrees that (i)
the Board of Directors of the Company shall recommend approval of the Plan to
the shareholders of the Company at the Company Shareholders' Meeting, (ii) the
Company Proxy Statement shall include the recommendation of the Company's
Board of Directors in favor of the Plan; and (iii) the Company shall use all
reasonable efforts to solicit from shareholders of the Company proxies in
favor of the adoption of this Plan and to secure the vote or consent of
shareholders required by the PBCL and the Company's articles of incorporation
and bylaws to approve and adopt this Plan; provided, however, that the Board
of Directors of the Company may withdraw, modify or change its recommendation
of this Plan to the extent necessary to conform such recommendation to a
recommendation adopted in good faith by the Board of Directors pursuant to
section 14e-2 of the Exchange Act in response to a tender offer or exchange
offer for the Company Common Stock commenced after the date of this Plan and
prior to the Effective Time.
Section 7.02 Registration Statement; Proxy Statements.
(a) As promptly as practicable after the date of this Plan, the Acquiror
shall prepare a registration statement on Form S-4 (such registration
statement, together with any amendments thereof or supplements thereto, being
the "Registration Statement"), which, with the assistance of the Company,
shall contain a prospectus/proxy statement relating to the vote of
shareholders of the Company at the Company Shareholders' Meeting (the
"Prospectus/Proxy Statement"), in connection with the registration under the
Securities Act of the offering, sale and delivery of Acquiror Common Stock to
be issued in the Merger pursuant to this Plan. As promptly as practicable
after the date of this Plan, the Company shall assist the Acquiror in
preparing the Prospectus/Proxy Statement and shall, pursuant to the Proxy
Rules under the Exchange Act, file the same, in preliminary form, with the
Commission, together with a form of proxy, in connection with the vote of the
Company's shareholders with respect to this Plan (such Prospectus/Proxy
Statement, together with any amendments thereof or supplements thereto, in
each case in the form or forms mailed to the Company's shareholders, being the
"Company Proxy Statement"). The Acquiror and the Company agree to use all
reasonable efforts to effect such filing on or before June 17, 1997 and to
mail such Prospectus/Proxy Statement to the shareholders of the Company on or
before July 30, 1997; provided, however, that neither party shall be compelled
by such undertaking to make any concession to any Governmental Authority that
it in good faith regards as inappropriate. As soon as reasonably appropriate,
the Acquiror shall file the Registration Statement with the Commission
pursuant to the registration provisions of the Securities Act. The Acquiror
and the Company will use all reasonable efforts to have or cause the
Registration Statement to become effective as promptly as practicable, and
shall take any action required to be taken under any applicable federal or
state securities Laws in connection with the issuance of shares of Acquiror
Common Stock in the Merger. Each of the Acquiror Companies and the Company
shall furnish all information concerning it and the holders of its capital
stock as the other may reasonably request in connection with such actions. As
promptly as practicable after the Registration Statement
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shall have become effective, the Company shall mail the Company Proxy
Statement to its shareholders entitled to notice of and to vote at the Company
Shareholders' Meeting.
(b) The information supplied by the Company for inclusion in the
Registration Statement shall not, at the time the Registration Statement is
declared effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading. The information supplied by the
Company for inclusion in the Company Proxy Statement to be sent to the
shareholders of the Company in connection with the Company Shareholders'
Meeting shall not, at the date the Company Proxy Statement (or any supplement
thereto) is first mailed to shareholders or at the time of the Company
Shareholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. If at any time prior to the Effective Time any
event or circumstance relating to the Company or any of its Affiliates, or its
or their respective officers or directors, should be discovered by the Company
that should be set forth in an amendment to the Registration Statement or a
supplement to the Company Proxy Statement, the Company shall promptly inform
the Acquiror. All documents that the Company is responsible for filing with
the SEC in connection with the transactions contemplated herein shall comply
as to form in all material respects with the applicable requirements of the
Securities Act and the Regulations thereunder and the Exchange Act and the
Regulations thereunder.
(c) The information supplied by the Acquiror Companies for inclusion in the
Registration Statement shall not, at the time the Registration Statement is
declared effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading. The information supplied by the
Acquiror Companies for inclusion in the Company Proxy Statement to be sent to
the shareholders of the Company in connection with the Company Shareholders'
Meeting shall not, at the date the Company Proxy Statement (or any supplement
thereto) is first mailed to shareholders or at the time of the Company
Shareholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they are made, not misleading. If at any time prior to the Effective Time any
event or circumstance relating to the Acquiror or any of its Affiliates, or to
their respective officers or directors, should be discovered by the Acquiror
that should be set forth in an amendment to the Registration Statement or a
supplement to the Company Proxy Statement, the Acquiror shall promptly inform
the Company. All documents that the Acquiror Companies are responsible for
filing with the Commission in connection with the transactions contemplated
hereby shall comply as to form in all material respects with the applicable
requirements of the Securities Act and the Regulations thereunder and the
Exchange Act and the Regulations thereunder.
(d) No amendment or supplement to the Registration Statement or the Company
Proxy Statement will be made by the Acquiror or the Company without the
approval of the other party which will not be unreasonably withheld or
delayed. The Acquiror and the Company each will advise the other, promptly
after it receives notice thereof, of the time when the Registration Statement
has become effective or any supplement or amendment has been filed, the
issuance of any stop order suspending the effectiveness of the Registration
Statement or the solicitation of proxies pursuant to the Company Proxy
Statement, the suspension of the qualification of the Acquiror Common Stock
issuable in connection with the Merger for offering or sale in any
jurisdiction, any request by the staff of the Commission for amendment of the
Registration Statement or the Company Proxy Statement, the receipt from the
staff of the Commission of comments thereon or any request by the staff of the
Commission for additional information with respect thereto.
Section 7.03 Appropriate Action; Consents; Filings.
(a) The Company and the Acquiror shall each use all reasonable efforts (i)
to take, or to cause to be taken, all actions, and to do, or to cause to be
done, all things that, in either case, are necessary, proper or advisable
under applicable Law or otherwise to consummate and make effective the
transactions contemplated by this Plan, (ii) to obtain from any Governmental
Authorities any Authorizations or Orders required to be obtained or made
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by the Acquiror or the Company or any of their Subsidiaries in connection with
the authorization, execution, delivery and performance of this Plan and the
consummation of the transactions contemplated hereby, including the Merger,
(iii) to make all necessary filings, and thereafter make any other required
submissions, with respect to this Plan and the Merger required under (A) the
Securities Act (in the case of Acquiror) and the Exchange Act and the
Regulations thereunder, and any other applicable federal or state securities
Laws, (B) the HSR Act and (C) any other applicable Law. The Acquiror and the
Company shall cooperate with each other in connection with the making of all
such filings, including providing copies of all such documents to the
nonfiling party and its advisors prior to filings and, if requested, shall
accept all reasonable additions, deletions or changes suggested in connection
therewith. The Company and the Acquiror shall furnish all information required
for any application or other filing to be made pursuant to any applicable Law
or any applicable Regulations of any Governmental Authority (including all
information required to be included in the Company Proxy Statement or the
Registration Statement) in connection with the transactions contemplated by
this Plan.
(b) Each of the Company and the Acquiror shall give prompt notice to the
other of (i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
Merger, (ii) any notice or other communication from any Governmental Authority
in connection with the Merger, (iii) any actions, suits, claims,
investigations or proceedings commenced or threatened in writing against,
relating to or involving or otherwise affecting the Company, the Acquiror or
their Subsidiaries that relate to the consummation of the Merger; (iv) the
occurrence of a default or event that, with notice or lapse of time or both,
will become a default under any Material Contract of the Acquiror or Material
Contract of the Company; and (v) any change that is reasonably likely to have
a Material Adverse Effect on the Company or the Acquiror or is likely to delay
or impede the ability of either the Acquiror or the Company to consummate the
transactions contemplated by this Agreement or to fulfill their respective
obligations set forth herein.
(c) The Acquiror Companies and the Company agree to cooperate and use all
reasonable efforts vigorously to contest and resist any action, including
legislative, administrative or judicial action, and to have vacated, lifted,
reversed or overturned any Order (whether temporary, preliminary or permanent)
of any Court or Governmental Authority that is in effect and that restricts,
prevents or prohibits the consummation of the Merger or any other transactions
contemplated by this Plan, including the vigorous pursuit of all available
avenues of administrative and judicial appeal and all available legislative
action. Each of the Acquiror Companies and the Company also agree to take any
and all actions, including the disposition of assets or the withdrawal from
doing business in particular jurisdictions, required by any Court or
Governmental Authority as a condition to the granting of any Authorization or
Order necessary for the consummation of the Merger or as may be required to
avoid, lift, vacate or reverse any legislative or judicial action which would
otherwise cause any condition to the Closing not to be satisfied; provided,
however, that in no event shall either party take, or be required to take, any
action that could reasonably be expected to have an Material Adverse Effect on
the Company or the Acquiror.
(d) (i) Each of the Company and Acquiror shall give (or shall cause their
respective Subsidiaries to give) any notices to third Persons, and use, and
cause their respective Subsidiaries to use, all reasonable efforts to
obtain any consents from third Persons (A) necessary, proper or advisable
to consummate the transactions contemplated by this Plan, (B) otherwise
required under any contracts, licenses, leases or other agreements in
connection with the consummation of the transactions contemplated hereby or
(C) required to prevent a Material Adverse Effect on the Company from
occurring prior to or after the Effective Time or a Material Adverse Effect
on the Acquiror from occurring after the Effective Time.
(ii) If any party shall fail to obtain any consent from a third Person
described in subsection (d)(i) above, such party shall use all reasonable
efforts, and shall take any such actions reasonably requested by the other
parties, to limit the adverse effect upon the Company and Acquiror, their
respective Subsidiaries, and their respective businesses resulting, or
which could reasonably be expected to result after the Effective Time, from
the failure to obtain such consent.
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Section 7.04 Affiliates; Pooling; Tax Treatment.
(a) The Company shall use all reasonable efforts to obtain from any Person
who may be deemed to have become an Affiliate of the Company after the date of
this Plan and on or prior to the Effective Time a written agreement
substantially in the form of Annex B hereto as soon as practicable after
attaining such status.
(b) The Acquiror Companies shall not be required to maintain the
effectiveness of the Registration Statement for the purpose of resale by
shareholders of the Company who may be Affiliates of the Company pursuant to
Rule 145 under the Securities Act.
(c) Each party hereto shall use all reasonable efforts to cause the Merger
to be treated for financial accounting purposes as a Pooling Transaction, and
shall not take, and shall use all reasonable efforts to prevent any Affiliate
of such party from taking, any actions which could prevent the Merger from
being treated for financial accounting purposes as a Pooling Transaction.
(d) Each party hereto shall use all reasonable efforts to cause the Merger
to qualify, and shall not take, and shall use all reasonable efforts to
prevent any Affiliate of such party from taking, any actions which could
prevent the Merger from qualifying, as a reorganization under the provisions
of Section 368(a) of the Code.
Section 7.05 Public Announcements. The Acquiror and the Company shall
consult with each other before issuing any press release or otherwise making
any public statements with respect to the Merger and shall not issue any such
press release or make any such public statement prior to such consultation.
Section 7.06 NYSE Listing. The Acquiror shall use all reasonable efforts to
cause the shares of Acquiror Common Stock to be issued in the Merger to be
approved for listing (subject to official notice of issuance) on the NYSE
prior to the Effective Time.
Section 7.07 Comfort Letters.
(a) The Company shall use all reasonable efforts to cause Coopers & Lybrand
LLP, the Company's independent accountants, to deliver a letter dated as of
the date of the Company Proxy Statement, and addressed to the Company and the
Acquiror, in form and substance reasonably satisfactory to Acquiror and
customary in scope and substance for agreed upon procedures letters delivered
by independent public accountants in connection with registration statements
and proxy statements similar to the Registration Statement and the Company
Proxy Statement.
(b) The Acquiror shall use all reasonable efforts to cause Arthur Andersen
LLP, the Acquiror's independent accountants, to deliver a letter dated as of
the date of the Prospectus/Proxy Statement, and addressed to the Acquiror and
the Company, in form and substance reasonably satisfactory to the Company and
customary in scope and substance for agreed upon procedures letters delivered
by independent public accounts in connection with registration statements and
proxy statements similar to the Registration Statement and the
Prospectus/Proxy Statement.
Section 7.08 Assumption of Obligations to Issue Stock and Obligations of
Employee Benefit Plans.
(a) At the Effective Time, automatically and without any action on the part
of the holder thereof, each outstanding Company Stock Option shall be assumed
by the Surviving Corporation and shall become an option to purchase that
number of shares of Acquiror Common Stock obtained by multiplying the number
of shares of Company Common Stock issuable upon the exercise of such option by
the Common Stock Exchange Ratio at an exercise price per share equal to the
per share exercise price of such option divided by the Common Stock Exchange
Ratio and otherwise upon the same terms and conditions as such outstanding
option to purchase Company Common Stock; provided, however, that in the case
of any option to which Section 421 of the Internal Revenue Code applies by
reason of the qualifications under Section 422 or 423 of such Code, the
exercise price, the number of shares purchasable pursuant to such option and
the terms and conditions of exercise of such option shall be determined in a
manner that complies with Section 424(a) of the Code.
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(b) On or prior to the Effective Time, the Company shall take or cause to be
taken all such actions, reasonably satisfactory to the Acquiror, as may be
necessary or desirable in order to authorize the transactions contemplated by
subsection (a) of this Section.
(c) The Acquiror shall take all corporate actions necessary to reserve for
issuance a sufficient number of shares of Acquiror Common Stock for delivery
upon exercise of the Company Stock Options assumed by the Surviving
Corporation pursuant to Section 7.08(a) above.
(d) As promptly as practicable after the Effective Time, the Acquiror shall
file one or more Registration Statements on Form S-8 (or any successor or
other appropriate forms) with respect to the shares of Acquiror Common Stock
subject to the Company Stock Options and shall use its reasonable efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding and to
comply with applicable state securities and blue sky laws.
(e) Except as provided herein or as otherwise agreed to by the parties, each
of the Company Option Plans providing for the issuance or grant of Company
Stock Options shall be assumed as of the Effective Time by the Surviving
Corporation with such amendments thereto as may be required to reflect the
Merger.
(f) Provided that the Acquiror shall not be obligated with respect to any
action taken by the Company or its Subsidiaries with respect to the Employee
Benefit Plans of the Company or its Subsidiaries in violation of the
provisions of Section 6.02(a), the Acquiror hereby agrees to guarantee and to
cause the Surviving Corporation and each Subsidiary of the Surviving
Corporation to honor and perform all obligations of the Surviving Corporation
and each Subsidiary of the Surviving Corporation under all Benefit Plans of
the Company and such Subsidiaries listed on Section 4.13(a) of the Company's
Disclosure Letter and all employment contracts of the Company listed on
Section 4.10 of the Company's Disclosure Letter.
Section 7.09 Operations of Company. Section 7.09 of the Acquiror Disclosure
Letter sets forth the intentions of the Acquiror with respect to the method of
operating the business of the Company and its Subsidiaries from and after the
Effective Time and with respect to the continuation by the Company and its
Subsidiaries of the employment of their respective employees. Such matters are
the intentions of the Acquiror as of the date of the Plan, are subject to
change in the discretion of the Acquiror and shall not be construed to create
any third party rights in any Person other than the parties to this Agreement.
Section 7.10 Indemnification of Directors and Officers.
(a) Until six years from the Effective Time, the articles of incorporation
and bylaws of the Surviving Corporation as in effect immediately after the
Effective Time shall not be amended to reduce or limit the rights of indemnity
afforded to the present and former directors and officers of the Company
thereunder or to reduce or limit the ability of the Company to indemnify such
persons or to hinder, delay or make more difficult the exercise of such rights
of indemnity or the ability to indemnify. The Surviving Corporation will at
all times exercise the powers granted to it by its articles of incorporation,
its bylaws and applicable law to indemnify to the fullest extent possible the
present and former directors, officers, employees and agents of the Company
against claims made against them arising from their service in such capacities
prior to the Effective Time.
(b) If any claim or claims shall, subsequent to the Effective Time and
within six years thereafter, be made against any present or former director,
officer, employee or agent of the Company based on or arising out of the
services of such Person prior to the Effective Time in the capacity of such
Person as a director, officer, employee or agent of the Company, the
provisions of subsection (a) of this Section respecting the articles of
incorporation and bylaws of the Surviving Corporation shall continue in effect
until the final disposition of all such claims.
(c) The Acquiror hereby agrees after the Effective Time to guarantee the
payment of the Surviving Corporation's indemnification obligations described
in Section 7.10(a) up to an amount determined as of the Effective Time equal
to (i) the fair market value of any assets of the Surviving Corporation or any
of its
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Subsidiaries distributed to the Acquiror or any of its Subsidiaries (other
than the Surviving Corporation and its Subsidiaries), minus (ii) any
liabilities of the Surviving Corporation or any of its Subsidiaries assumed by
the Acquiror or any of its Subsidiaries (other than the Surviving Corporation
and its Subsidiaries), minus (iii) the fair market value of any assets of the
Acquiror or any of its Subsidiaries (other than the Surviving Corporation and
its Subsidiaries) contributed to the Surviving Corporation or any of its
Subsidiaries and (iv) plus any liabilities of the Acquiror or any of its
Subsidiaries (other than the Surviving Corporation and its Subsidiaries)
assumed by the Surviving Corporation or any of its Subsidiaries.
(d) Notwithstanding subsections (a), (b) and (c) of this Section 7.10, the
Acquiror and the Surviving Corporation shall be released from the obligations
imposed by such subsection if the Acquiror shall assume the obligations of the
Surviving Corporation thereunder by operation of Law or otherwise.
Notwithstanding anything to the contrary in this Section 7.10, neither the
Acquiror nor the Surviving Corporation shall be liable for any settlement
effected without its written consent, which shall not be unreasonably
withheld.
(e) The Acquiror shall cause to be maintained in effect until six years from
the Effective Time the current policies of directors' and officers' liability
insurance maintained by the Company (or substitute policies providing at least
the same coverage and limits and containing terms and conditions that are not
materially less advantageous) with respect to claims arising from facts or
events which occurred before the Effective Time; provided, however, that in no
event shall the Acquiror or the Surviving Corporation be required to expend
more than 200 percent of the current annual premiums paid by the Company for
such insurance.
(f) The provisions of this Section 7.10 are intended to be for the benefit
of, and shall be enforceable by, each Person entitled to indemnification
hereunder and the heirs and representatives of such Person.
Section 7.11 Newco. Prior to the Effective Time, Newco shall not conduct any
business or make any investments other than as specifically contemplated by
this Plan and will not have any assets (other than the minimum amount of cash
required to be paid to Newco for the valid issuance of its stock to the
Acquiror).
Section 7.12 Event Notices. From and after the date of this Agreement until
the Effective Time, each party hereto shall promptly notify the other party
hereto of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any condition to the
obligations of such party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied and (ii) the failure of
such party to comply with any covenant or agreement to be complied with by it
pursuant to this Agreement which would be likely to result in any condition to
the obligations of such party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied. No delivery of any notice
pursuant to this Section 7.12 shall cure any breach of any representation or
warranty of such party contained in this Agreement or otherwise limit or
affect the remedies available hereunder to the party receiving such notice.
ARTICLE VII
Closing Conditions
Section 8.01 Conditions to Obligations of Each Party Under This Plan. The
respective obligations of each party to effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which
may be waived by the parties hereto, in whole or in part, to the extent
permitted by applicable Law:
(a) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the Commission under the
Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the Commission and no
proceedings for that purpose shall have been initiated by the Commission.
(b) Shareholder Approval. This Plan shall have been approved and adopted
by the requisite votes of the shareholders of the Company.
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(c) No Order. No Court or Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any Law, Regulation or Order
(whether temporary, preliminary or permanent) that is in effect and has the
effect of making the Merger illegal or otherwise prohibiting consummation
of the Merger.
(d) HSR Act. The applicable waiting period under the HSR Act shall have
expired or been terminated.
(e) Pooling of Interests. The Acquiror and the Company shall have been
advised in writing by Arthur Andersen LLP on the date upon which the
Effective Time is to occur that, in reliance in part on the concurrent
opinion of Coopers & Lybrand LLP that the Company is a "poolable entity",
the Merger should for financial accounting purposes be treated as a Pooling
Transaction.
(f) Dissenters' Rights. The holders of record of no more than 7% of the
outstanding Company Common Stock shall, immediately prior to the Closing,
have perfected and continued to perfect statutory dissenters' rights under
Subchapter D of the PBCL.
Section 8.02 Additional Conditions to Obligations of the Acquiror Companies.
The obligations of the Acquiror Companies to effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which
may be waived by the Acquiror Companies, in whole or in part, to the extent
permitted by applicable Law:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Plan shall be true and correct
as of the date of this Plan and as of the Effective Time as though made
again on and as of the Effective Time except to the extent that any
misrepresentations and breaches of warranty at the Closing shall not in the
aggregate be Material to the Company. The Acquiror Companies shall have
received a certificate of the President and the Chief Financial Officer of
the Company, dated the date of the Effective Time, to such effect.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Plan to be performed or complied with by it on or prior to
the Effective Time. The Acquiror Companies shall have received a
certificate of the President and the Chief Financial Officer of the
Company, dated the date of the Effective Time, to such effect.
(c) Tax Opinion. The Acquiror shall have received the opinion dated on or
prior to the effective date of the Registration Statement of Vinson &
Elkins L.L.P. to the effect that (i) the Merger will constitute a
reorganization under section 368(a) of the Code, (ii) the Acquiror, the
Company and Newco will each be a party to that reorganization, and (iii) no
gain or loss will be recognized by the Acquiror, the Company or Newco by
reason of the Merger.
Section 8.03 Additional Conditions to Obligations of the Company. The
obligations of the Company to effect the Merger and the other transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions, any or all of which may be waived
by the Company, in whole or in part, to the extent permitted by applicable
Law.
(a) Representations and Warranties. Each of the representations and
warranties of the Acquiror Companies contained in this Plan shall be true
and correct as of the date of this Plan and as of the Effective Time as
though made again on and as of the Effective Time except to the extent that
any misrepresentations and breaches of warranty at the Closing shall not in
the aggregate be Material to the Acquiror. The Company shall have received
a certificate of the Chairman of the Board, the President or any Vice
President and the Chief Financial Officer of each of the Acquiror
Companies, dated the date of the Effective Time, to such effect.
(b) Agreements and Covenants. The Acquiror Companies shall have performed
or complied in all material respects with all agreements and covenants
required by this Plan to be performed or complied with by them on or prior
to the Effective Time. The Company shall have received a certificate of the
Chairman of the Board, the President or any Vice President and the Chief
Financial Officer of each of the Acquiror Companies, dated the date of the
Effective Time, to such effect.
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(c) Tax Opinion. The Company shall have received the opinion dated on or
prior to the effective date of the Registration Statement of Drinker Biddle
& Reath LLP to the effect that (i) the Merger will constitute a
reorganization under section 368(a) of the Code, (ii) the Acquiror, the
Company and Newco will each be a party to that reorganization, and (iii) no
gain or loss will be recognized by the shareholders of the Company upon the
receipt of shares of Acquiror Common Stock in exchange for shares of
Company Common Stock pursuant to the Merger except with respect to any cash
received in lieu of fractional share interests.
(d) Investment Banker's Opinion. The Company shall have received, on or
prior to the date of mailing of the Company Proxy Statement to the holders
of Company Common Stock, a written opinion from Schroder Wertheim & Co.
Incorporated, dated the date of such mailing, confirming the opinion to
which reference is made in Section 4.21.
ARTICLE IX
Termination, Amendment and Waiver
Section 9.01 Termination. This Plan may be terminated at any time prior to
the Effective Time, whether before or after approval of this Plan and the
Merger by the shareholders of the Company:
(a) by mutual consent of the Acquiror and the Company;
(b) by the Acquiror, upon a material breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in
this Plan, or if any representation or warranty of the Company shall have
become untrue in any material respect, in either case such that the
conditions set forth in Section 8.02(a) or Section 8.02(b) would not be
satisfied (a "Terminating Company Breach"); provided that, if such
Terminating Company Breach is curable by the Company through the exercise
of reasonable efforts and for so long as the Company continues to exercise
such reasonable efforts, the Acquiror may not terminate this Plan under
this Section 9.01(b);
(c) by the Company, upon a material breach of any representation,
warranty, covenant or agreement on the part of the Acquiror Companies set
forth in this Plan, or if any representation or warranty of the Acquiror
Companies shall have become untrue in any material respect, in either case
such that the conditions set forth in Section 8.03(a) or Section 8.03(b)
would not be satisfied (a "Terminating Acquiror Breach"); provided that, if
such Terminating Acquiror Breach is curable by the Acquiror Companies
through the exercise of their reasonable efforts and for so long as the
Acquiror Companies continue to exercise such reasonable efforts, the
Company may not terminate this Plan under this Section 9.01(c);
(d) by either Acquiror or the Company, if there shall be any Order which
is final and nonappealable preventing the consummation of the Merger,
unless the party relying on such Order has not complied with its
obligations under Section 7.03;
(e) by either Acquiror or the Company, if the Merger shall not have been
consummated before December 31, 1997; provided, however, that this Plan may
be extended by written notice of either Acquiror or the Company to a date
not later than February 28, 1998, if the Merger shall not have been
consummated as a result of the Company or the Acquiror Companies having
failed by December 31, 1997 to receive all required Authorizations and
Orders with respect to the Merger or as a result of the entering of an
Order by a Court or Governmental Authority; and provided, further, that,
prior to February 28, 1998, no party shall be entitled to terminate this
Plan pursuant to this Section 9.01(e) if such party is in material breach
of any representation, warranty, covenant or agreement on the part of such
party set forth in this Plan;
(f) by either Acquiror or the Company, if this Plan shall fail to receive
the requisite vote for approval and adoption by the shareholders of the
Company at the Company Shareholders' Meeting;
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(g) by the Acquiror, if
(i) any Person (other than the Acquiror or any Affiliate of the
Acquiror) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act) a tender or exchange offer to purchase any
shares of Company Common Stock such that, upon consummation of such
offer, such Person would own or control 35% or more of the then
outstanding Company Common Stock and the Board of Directors of the
Company, within 10 Business Days thereafter, either fails to recommend
against acceptance of such tender or exchange offer by the Company's
shareholders or takes no position with respect thereto; or
(ii) any Person (other than the Acquiror, the Company or any of their
Subsidiaries) shall, subsequent to the date of this Agreement, acquire
beneficial ownership (as such term is defined in Rule 13d-3 under the
Exchange Act) or the right to acquire beneficial ownership of, or any
Group shall have been formed that beneficially owns, or has the right
to acquire beneficial ownership (as such term is defined in Rule 13d-3
under the Exchange Act) of, (A) 35% or more of the then outstanding
Company Common Stock and the Plan has failed to receive the requisite
vote at the Company Shareholders' Meeting or (B) 45% or more of the
then outstanding Company Common Stock.
The right of any party hereto to terminate this Plan pursuant to this
Section 9.01 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any Person
controlling any such party or any of their respective officers, directors,
representatives or agents, whether prior to or after the execution of this
Plan.
Section 9.02 Effect of Termination. Except as provided in Section 9.05 of
this Plan, in the event of the termination of this Plan pursuant to Section
9.01, this Plan shall forthwith become void, there shall be no liability on
the part of the Acquiror Companies or the Company or any of their respective
officers or directors to the other and all rights and obligations of any party
hereto shall cease, except that nothing herein shall relieve any party from
liability for any misrepresentation or breach of any covenant or agreement
under this Plan.
Section 9.03 Amendment. This Plan may be amended by the parties hereto by
action authorized by their respective Boards of Directors at any time prior to
the Effective Time; provided, however, that, after approval of the Plan by the
shareholders of the Company, no amendment may be made which would reduce the
amount or change the type of consideration into which each share of Company
Common Stock shall be converted pursuant to this Plan upon consummation of the
Merger. This Plan may not be amended except by an instrument in writing signed
by the parties hereto.
Section 9.04 Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations
or other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance by the other party
with any of the agreements or conditions contained herein. Any such extension
or waiver shall be valid only if set forth in an instrument in writing signed
by the party or parties to be bound thereby. For purposes of this Section
9.04, the Acquiror Companies shall be deemed to be one party.
Section 9.05 Fees, Expenses and Other Payments.
(a) Except as provided in subsections (b) and (c) of this Section 9.05, all
Expenses incurred by the parties hereto shall be borne solely and entirely by
the party that incurred such Expenses; provided, however, that the allocable
share of the Acquiror Companies as a group and the Company for all Expenses of
printing, filing and mailing the Registration Statement and the Company Proxy
Statement and all Commission and other regulatory filing fees incurred in
connection with the Registration Statement and the Company Proxy Statement
shall be one-half each; and provided, further that Acquiror may, at its
option, pay any Expenses of the Company.
(b) (i) The Company agrees that, if the Acquiror shall terminate this Plan
pursuant to Section 9.01(g)(i) or 9.01(g)(ii), then in each such case the
Company shall pay to the Acquiror $ 9 million.
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(ii) The Company agrees that, if (A) Acquiror shall terminate this Plan
pursuant to Section 9.01(b) and such termination is the result of an
intentional or willful breach by the Company of any agreement, covenant,
representation or warranty herein and (B) either (1) within 12 months after
such termination of this Plan the Company shall have entered into a definitive
agreement with respect to a Competing Transaction with any Person or Group,
other than Acquiror, its Subsidiaries or Affiliates, to which the Company
shall have furnished information or with which the Company shall have had any
contacts or entered into any discussions or negotiations relating to a
Competing Transaction at any time during the period commencing 12 months prior
to the date of this Plan through the date of termination of this Plan or (2)
within 12 months after such termination of this Plan, any Person or Group to
which the Company shall have furnished such information or with which it shall
have had such contacts, discussions or negotiations shall have acquired
beneficial ownership, by tender offer or exchange offer or otherwise, of 35%
or more of the outstanding Company Common Stock and, in either case, the
consideration received or to be received by the shareholders of the Company
participating in such transaction shall be higher on a per share basis than
the consideration payable to the shareholders of the Company under this Plan
on a per share basis or such transaction shall be on more favorable terms to
the shareholders of the Company than the Merger, then in such case the Company
shall pay to Acquiror $9 million.
(iii) For purposes of subsection (b)(ii) of this Section 9.05, the value of
the consideration received or to be received by the Company's shareholders
shall be determined as of the date of the agreement or the transaction therein
referenced, the value of the consideration payable to such shareholders under
this Plan shall be determined as of the date of termination of this Plan and
the consideration per share received or to be received by the shareholders of
the Company in any transaction other than the Merger shall be equitably
adjusted to give effect to any stock dividend, stock split or stock
combination effected subsequent to the date of this Plan.
(c) Any payment required to be made pursuant to Section 9.05(b) of this Plan
shall be made to the Acquiror not later than two Business Days after delivery
to the Company of notice of demand for payment, and shall be made by wire
transfer of immediately available funds to an account designated by the
Acquiror in the notice of demand for payment delivered pursuant to this
Section 9.05(c).
ARTICLE X
General Provisions
Section 10.01 Effectiveness of Representations, Warranties and Agreements.
(a) Except as set forth in Section 10.01(b) of this Plan, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any Person controlling any such party
or any of their officers, directors, representatives or agents whether prior
to or after the execution of this Plan.
(b) The representations and warranties in this Plan shall terminate at the
Effective Time.
Section 10.02 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given upon receipt, if delivered personally, mailed by registered or certified
mail (postage prepaid, return receipt requested) to the parties at the
following addresses or sent by electronic transmission to the telecopier
number specified below:
(a) If to any of the Acquiror Companies, to:
Halliburton Company
3600 Lincoln Plaza
500 North Akard
Dallas, Texas 75201-3391
Attention:Lester L. Coleman
Executive Vice President and General Counsel
Telecopier No.: (214) 978-2658
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with a copy to:
Vinson & Elkins L.L.P.
First City Tower
1001 Fannin
Houston, Texas 77002-6760
Attention: William E. Joor III
Telecopier No.: (713) 758-2346
(b) If to the Company, to:
NUMAR Corporation
508 Lapp Road
Malvern, Pennsylvania 19355
Attention:Edward P. Delson
Senior Vice President and Chief Financial Officer
Telecopier No.: (610) 644-8131
with a copy to:
Drinker Biddle & Reath LLP
1000 Westlakes Drive
Suite 300
Berwyn, Pennsylvania 19312
Attention: Walter Mostek, Jr.
Telecopier No.: 610/993-8585
or to such other address or telecopier number as any party may, from time to
time, designate in a written notice given in a like manner. Notice given by
telecopier shall be deemed delivered on the day the sender receives telecopier
confirmation that such notice was received at the telecopier number of the
addressee. Notice given by mail as set out above shall be deemed delivered
three days after the date the same is postmarked.
Section 10.03 Headings. The headings contained in this Plan are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Plan.
Section 10.04 Severability. If any term or other provision of this Plan is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Plan shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Plan so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the
end that transactions contemplated hereby are fulfilled to the extent
possible.
Section 10.05 Entire Agreement. This Plan (together with the Annexes, the
Company's Disclosure Letter and the Acquiror's Disclosure Letter) constitutes
the entire agreement of the parties, and, except for the Confidentiality
Agreement which shall remain in full force and effect, supersedes all prior
agreements and undertakings, both written and oral, among the parties, with
respect to the subject matter hereof.
Section 10.06 Assignment. This Plan shall not be assigned by operation of
Law or otherwise.
Section 10.07 Parties in Interest. This Plan shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Plan, express
or implied, other than Section 7.10 which is intended also to benefit the
directors and officers of the Company therein referenced, is intended to or
shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Plan.
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Section 10.08 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Plan are cumulative to, and not exclusive to, and
not exclusive of, any rights or remedies otherwise available.
Section 10.09 Governing Law. This Plan shall be governed by, and construed
in accordance with, the Laws of the State of Texas, regardless of the Laws
that might otherwise govern under applicable principles of conflicts of law;
provided, however, that any matter involving the internal corporate affairs of
the Company shall be governed by the provisions of the PBCL and that any
matter involving the internal corporate affairs of the Acquiror or Newco shall
be governed by the provisions of the DGCL.
Section 10.10 Specific Performance. The parties hereby acknowledge and agree
that the failure of any party to this Plan to perform its agreements and
covenants hereunder, including its failure to take all actions as are
necessary on its part to the consummation of the Merger, will cause
irreparable injury to the other parties to this Plan for which damages, even
if available, will not be an adequate remedy. Accordingly, each of the parties
hereto hereby consents to the granting of equitable relief (including specific
performance and injunctive relief) by any court of competent jurisdiction to
enforce any party's obligations hereunder. The parties further agree to waive
any requirement for the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this Section is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Plan.
Section 10.11 Counterparts. This Plan may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Plan to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
HALLIBURTON COMPANY
/s/ Lester L. Coleman
By:__________________________________
Lester L. Coleman
Executive Vice President and
General Counsel
HALLIBURTON M. S. CORP.
/s/ Lester L. Coleman
By:__________________________________
Lester L. Coleman
President
NUMAR CORPORATION
/s/ Melvin M. Miller
By:__________________________________
Melvin M. Miller
Chairman of the Board, President
and Chief Executive Officer
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ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Plan shall have the meanings set forth
below unless the context shall otherwise require:
"Acquiror" shall mean Halliburton Company, a Delaware corporation, and its
successors from time to time.
"Acquiror Common Stock" shall mean the common stock, par value $2.50 per
share, of the Acquiror.
"Acquiror Companies" shall have the meaning ascribed to such term in the
first paragraph of this Plan.
"Acquiror Representatives" shall have the meaning ascribed to such term in
Section 6.04.
"Acquiror Restricted Stock" shall mean Acquiror Common Stock issued in
restricted stock awards pursuant to the Halliburton Company 1993 Stock and
Long-Term Incentive Plan or the Halliburton Company Restricted Stock Plan for
Non-Employee Directors and subject to the restrictions provided therein.
"Acquiror Stock Options" shall mean stock options granted pursuant to the
Acquiror Stock Plans.
"Acquiror Stock Plans" shall mean the Halliburton Company 1993 Stock and
Long-Term Incentive Plan and the Halliburton Company Restricted Stock Plan for
Non-Employee Directors and the Landmark Graphics Corporation 1984 Incentive
Stock Option Plan, the Landmark Graphics Corporation 1985 Incentive Stock
Option Plan, the Landmark Graphics Corporation 1987 Nonqualified Stock Option
Plan, the Landmark Graphics Corporation 1989 Flexible Stock Option Plan, the
Landmark Graphics Corporation Directors' Stock Option Plan, the Landmark
Graphics Corporation Consultants' Stock Option Plan, the Landmark Graphics
Corporation 1990 Employee Stock Option Plan and the Landmark Graphics
Corporation 1994 Flexible Incentive Plan.
"Acquiror's Audited Consolidated Financial Statements" shall mean the
consolidated balance sheets of the Acquiror and its Subsidiaries as of
December 31, 1995 and December 31, 1996 and the related consolidated
statements of operations and cash flows for the fiscal years ended December
31, 1994, 1995 and 1996, together with the notes thereto, all as audited by
Arthur Andersen LLP, independent accountants, under their report with respect
thereto dated January 22, 1997 and included in the Acquiror's Annual Report on
Form 10-K for the year ended December 31, 1996 filed with the Commission.
"Acquiror's Consolidated Balance Sheet" shall mean the consolidated balance
sheet of the Acquiror as of December 31, 1996 included in the Acquiror's
Audited Consolidated Financial Statements.
"Acquiror's Consolidated Financial Statements" shall mean the Acquiror's
Audited Consolidated Financial Statements and the Acquiror's Unaudited
Consolidated Financial Statements.
"Acquiror's Disclosure Letter" shall mean a letter of even date herewith
delivered by the Acquiror to the Company with the execution of the Plan,
which, among other things, shall identify exceptions to the Acquiror's
representations and warranties contained in Article V by specific section and
subsection references.
"Acquiror's Rights Agreement" shall mean the Restated Rights Agreement dated
December 1, 1996 between Halliburton Company and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent.
"Acquiror's Unaudited Consolidated Financial Statements" shall mean the
unaudited consolidated balance sheet of the Acquiror and its Subsidiaries as
of March 31, 1997 and the related consolidated statements of operations and
cash flows for the fiscal quarters ended March 31, 1996 and March 31, 1997,
together with the notes thereto, included in the Acquiror's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997 filed with the Commission.
A-37
"Affiliate" shall, with respect to any Person, mean any other Person that
controls, is controlled by or is under common control with the former.
"Articles of Merger" shall have the meaning ascribed to such term in Section
1926 of the PBCL.
"Authorization" shall mean any and all permits, licenses, authorizations,
orders, certificates, registrations or other approvals granted by any
Governmental Authority.
"Benefit Plans" shall mean, with respect to a specified Person, any employee
pension benefit plan (whether or not insured), as defined in Section 3(2) of
ERISA, any employee welfare benefit plan (whether or not insured) as defined
in Section 3(1) of ERISA, any plans that would be employee pension benefit
plans or employee welfare benefit plans if they were subject to ERISA, such as
foreign plans and plans for directors, any stock bonus, stock ownership, stock
option, stock purchase, stock appreciation rights, phantom stock or other
stock plan (whether qualified or nonqualified), and any bonus or incentive
compensation plan sponsored, maintained, or contributed to by the specified
Person or any of its Subsidiaries for the benefit of any of the present or
former directors, officers, employees, agents, consultants or other similar
representatives providing services to or for the specified Person or any of
its Subsidiaries in connection with such services or any such plans which have
been so sponsored, maintained, or contributed to within six years prior to the
date of this Plan; provided, however, that such term shall not include (a)
routine employment policies and procedures developed and applied in the
ordinary course of business and consistent with past practice, including wage,
vacation, holiday and sick or other leave policies, (b) workers compensation
insurance and (c) directors and officers liability insurance.
"Business Day" means any day other than a day on which banks in the State of
Texas or the Commonwealth of Pennsylvania are authorized or obligated to be
closed;
"Certificate of Merger" shall have the meaning ascribed to such term in
Section 252 of the DGCL.
"Closing" shall mean a meeting, which shall be held in accordance with
Section 3.03, of representatives of the parties to the Plan at which, among
other things, all documents deemed necessary by the parties to the Plan to
evidence the fulfillment or waiver of all conditions precedent to the
consummation of the transactions contemplated by the Plan are executed and
delivered.
"Closing Date" shall mean the date of the Closing as determined pursuant to
Section 3.03.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Common Stock Exchange Ratio" shall mean the ratio of conversion of Company
Common Stock into Acquiror Common Stock pursuant to the Merger as provided in
Section 3.01(a).
"Company" shall mean NUMAR Corporation, a Pennsylvania corporation, and its
successors from time to time.
"Company Common Stock" shall mean the common shares, par value $0.01 per
share, of the Company.
"Company Option Plans" shall mean the Company's 1994 Stock Incentive Plan,
1995 Employee Stock Purchase Plan and the individual stock option agreements
with the individuals named in Section 4.03(b) of the Company's Disclosure
Letter.
"Company Proxy Statement" shall have the meaning ascribed to such term in
Section 7.02(a).
"Company Representatives" shall have the meaning ascribed to such term in
Section 6.03.
"Company Stock Options" shall mean stock options granted pursuant to the
Company Option Plans.
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"Company Shareholders' Meeting" shall have the meaning ascribed to such term
in Section 7.01.
"Company Warrants" shall mean those certain warrants to purchase 37,879
shares of Company Common Stock pursuant to the Warrant Agreement between the
Company and MMC/GATX Partnership No. I dated August 16, 1991, as amended by
Amendments Nos. 1, 2 and 3 thereto.
"Company's Consolidated Balance Sheet" shall mean the consolidated balance
sheet of the Company as of December 31, 1996 included in the Company's Audited
Consolidated Financial Statements.
"Company's Disclosure Letter" shall mean a letter of even date herewith
delivered by the Company to the Acquiror Companies concurrently with the
execution of the Plan, which, among other things, shall identify exceptions to
the Company's representations and warranties contained in Article IV by
specific section and subsection references.
"Company's Audited Consolidated Financial Statements" shall mean the
consolidated balance sheets of the Company and its Subsidiaries as of December
31, 1995 and December 31, 1996 and the related consolidated and combined
statements of operations and cash flows for the fiscal years ended December
31, 1994, 1995 and 1996, together with the notes thereto, all as audited by
Coopers & Lybrand LLP, independent accountants, under their report with
respect thereto dated March 4, 1997 and included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 filed with the
Commission.
"Company's Consolidated Financial Statements" shall mean the Company's
Audited Consolidated Financial Statements and the Company's Unaudited
Consolidated Financial Statements.
"Company's Unaudited Consolidated Financial Statements" shall mean the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
March 31, 1997 and the related consolidated statements of operations and cash
flows for the three months periods ended March 31, 1996 and March 31, 1997,
together with the notes thereto, included in the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997 filed with the Commission.
"Competing Transaction" shall mean (a) a merger, consolidation, share
exchange, business combination or similar transaction involving the Company or
any of its Significant Subsidiaries; (b) a sale, lease, exchange, transfer or
other disposition of 35% or more of the assets of the Company and its
Subsidiaries, taken as a whole, in a single transaction or series of
transactions; or (c) the acquisition (in the case of a Group, through the
formation of such Group or otherwise) by a Person or Group of beneficial
ownership (as such term is defined in Rule 13d-3 under the Exchange Act) or
the right to acquire beneficial ownership of 35% or more of the outstanding
Company Common Stock, whether by tender offer or exchange offer or otherwise
or (d) the acquisition in any manner, directly or indirectly, of a Material
equity interest in any voting securities of, or a substantial portion of the
assets of, the Company or any of its Significant Subsidiaries, other than the
transactions contemplated by this Plan.
"Confidentiality Agreement" shall mean that certain confidentiality
agreement between the Acquiror and the Company dated May 27, 1997.
"Constituent Corporations" shall mean the Company and Newco.
"control" (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or
as trustee or executor, by contract or credit arrangement or otherwise.
"Court" shall mean any court or arbitration tribunal of the United States,
any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
A-39
"Current Benefit Plans" shall mean Benefit Plans that are sponsored,
maintained, or contributed to by a specified Person or any of its Subsidiaries
as of the date of this Plan.
"DGCL" shall mean the General Corporation Law of the State of Delaware.
"Dissenters' Shares" shall have the meaning ascribed to such term in Section
3.01(e).
"Effective Time" shall mean the date and time of the completion of the
filing of the Articles of Merger with the Secretary of State of the
Commonwealth of Pennsylvania in accordance with Section 2.02.
"Environmental Law or Laws" shall mean any and all laws, statutes,
ordinances, rules, regulations, or orders of any Governmental Authority
pertaining to health or the environment currently in effect and applicable to
a specified Person and its Subsidiaries, including the Clean Air Act, as
amended, the Comprehensive Environmental, Response, Compensation, and
Liability Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Hazardous & Solid Waste Amendments Act of 1984, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as amended,
the Hazardous Materials Transportation Act, as amended, the Oil Pollution Act
of 1990, as amended ("OPA"), any state or local Laws implementing the
foregoing federal Laws, and all other environmental conservation or protection
Laws. For purposes of the Plan, the terms "hazardous substance" and "release"
have the meanings specified in CERCLA; provided, however, that, to the extent
the Laws of the state or locality in which the property is located establish a
meaning for "hazardous substance" or "release" that is broader than that
specified in either CERCLA, such broader meaning shall apply, and the term
"hazardous substance" shall include all dehydration and treating wastes, waste
(or spilled) oil, and waste (or spilled) petroleum products, and (to the
extent in excess of background levels) radioactive material, even if such are
specifically exempt from classification as hazardous substances pursuant to
CERCLA or RCRA or the analogous statutes of any jurisdiction applicable to the
specified Person or its Subsidiaries or any of their respective properties or
assets.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the Regulations promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the Regulations promulgated thereunder.
"Exchange Agent" shall mean ChaseMellon Shareholder Services, L.L.C.
"Exchange Fund" shall mean the fund of Acquiror Common Stock, cash in lieu
of fractional share interests and dividends and distributions, if any, with
respect to such shares of Acquiror Common Stock established at the Exchange
Agent pursuant to Section 3.02(a).
"Expenses" shall mean all reasonable out-of-pocket expenses (including all
fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its Affiliates) incurred by a party or on
its behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Plan, the preparation,
printing, filing and mailing of the Registration Statement and the Company
Proxy Statement, the solicitation of stockholder approvals and all other
matters related to the consummation of the transactions contemplated hereby.
"GAAP" shall mean accounting principles generally accepted in the United
States as in effect from time to time consistently applied by a specified
Person.
"Governmental Authority" shall mean any governmental agency or authority
(other than a Court) of the United States, any foreign country, or any
domestic or foreign state, and any political subdivision thereof, and shall
include any multinational authority having governmental or quasi-governmental
powers.
A-40
"Group" shall have the meaning accorded to such term as it is defined under
Section 13(d) of the Exchange Act and the Regulations promulgated thereunder.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean, with respect to either the Company or the Acquiror,
the actual knowledge of any executive officer of such party.
"Law" shall mean all laws, statutes, ordinances, rules and regulations of
the United States, any foreign country, or any domestic or foreign state, and
any political subdivision or agency thereof, including all decisions of Courts
having the effect of law in each such jurisdiction.
"Lien" shall mean any mortgage, pledge, security interest, adverse claim,
encumbrance, lien or charge of any kind (including any agreement to give any
of the foregoing), any conditional sale or other title retention agreement,
any lease in the nature thereof or the filing of or agreement to give any
financing statement under the Laws of any jurisdiction.
"Material" shall mean material to the condition (financial and other),
results of operations, business or prospects of a specified Person and its
Subsidiaries, if any, taken as a whole; provided, however, that, as used in
this definition the word "material" shall have the meaning accorded thereto
pursuant to Section 11 of the Securities Act.
"Material Adverse Effect" shall mean any change or effect that would be
material and adverse to the consolidated business, condition (financial or
otherwise), operations, performance or properties of a specified Person and
its Subsidiaries, if any, taken as a whole; provided, however, that, as used
in this definition the word "material" shall have the meaning accorded thereto
pursuant to Section 11 of the Securities Act.
"Material Contract" shall mean each contract, lease, indenture, agreement,
arrangement or understanding to which a specified Person or any of its
Subsidiaries is a party or to which any of the assets or operations of such
specified Person or any of its Subsidiaries is subject that is of a type that
would be required to be included as an exhibit to a registration statement on
Form S-1 pursuant, in the case of the Company, to Paragraph (2), (4) or (10)
of Item 601(b) and, in the case of the Acquiror, to Paragraph (10) (other than
clause (iii) thereof) of Item 601(b) of Regulation S-K under the Securities
Act if such a registration statement were to be filed by such Person under the
Securities Act on the date of determination. Notwithstanding the foregoing,
such term shall, in the case of the Company, include any of the following
contracts, agreements or commitments, whether oral or written:
(1) Any collective bargaining agreement or other agreement with any labor
union;
(2) any agreement, contract or commitment with any other Person, other
than any agency or representation entered in the ordinary course of
business, containing any covenant limiting the freedom of such specified
Person or any of its Subsidiaries to engage in any line of business or to
compete with any other Person;
(3) any partnership, joint venture or profit sharing agreement with any
Person, which partnership, joint venture or profit sharing agreement
generated revenues during its most recently completed fiscal year of
$100,000 or more;
(4) any employment or consulting agreement, contract or commitment
between the Company or any of its Subsidiaries and any employee, officer or
director thereof (i) having more than one year to run from the date hereof,
(ii) providing for an obligation to pay or accrue compensation of $100,000
or more per annum or (iii) providing for the payment or accrual of any
additional compensation upon a change in control of
A-41
such Person or any of its Subsidiaries or upon any termination of such
employment or consulting relationship following a change in control of such
Person or any of its Subsidiaries;
(5) any agency or representation agreement with any Person that is not
terminable by the Company or one of its Subsidiaries without penalty upon
not more than one year's notice; and
(6) any confidentiality agreement, development agreement or license
agreement relating to the products of the Company or any of its
Subsidiaries.
"Merger" shall mean the merger of Newco with an into the Company as provided
in Article II of this Plan.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Newco" shall mean Halliburton M.S. Corp., a Delaware corporation and a
wholly owned Subsidiary of the Acquiror.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"PBCL" shall mean the Business Corporation Law of the Commonwealth of
Pennsylvania.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean the following:
(1) liens for taxes, assessments and other governmental charges not
delinquent or which are currently being contested in good faith by
appropriate proceedings; provided that, in the latter case, the specified
Person or one of its Subsidiaries shall have set aside on its books
adequate reserves with respect thereto;
(2) mechanics' and materialmen's liens not filed of record and similar
charges not delinquent or which are filed of record but are being contested
in good faith by appropriate proceedings; provided that, in the latter
case, the specified Person or one of its Subsidiaries shall have set aside
on its books adequate reserves with respect thereto;
(3) liens in respect of judgments or awards with respect to which the
specified Person or one of its Subsidiaries shall in good faith currently
be prosecuting an appeal or other proceeding for review and with respect to
which such Person or such Subsidiary shall have secured a stay of execution
pending such appeal or such proceeding for review; provided that such
Person or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto;
(4) easements, leases, reservations or other rights of others in, or
minor defects and irregularities in title to, property or assets of a
specified Person or any of its Subsidiaries; provided that such easements,
leases, reservations, rights, defects or irregularities do not materially
impair the use of such property or assets for the purposes for which they
are held; and
(5) any lien or privilege vested in any lessor, licensor or permittor for
rent or other obligations of a specified Person or any of its Subsidiaries
thereunder so long as the payment of such rent or the performance of such
obligations is not delinquent.
"Person" shall mean an individual, partnership, limited liability company,
corporation, joint stock company, trust, estate, joint venture, association or
unincorporated organization, or any other form of business or professional
entity, but shall not include a Court or Governmental Authority.
"Plan" shall mean the Agreement and Plan of Merger made and entered into as
of June 9, 1997 among Acquiror, Newco and the Company, including any
amendments thereto and each Annex (including this Annex A) and schedule
thereto (including the Acquiror's Disclosure Letter and the Company's
Disclosure Letter).
A-42
"Pooling Transaction" shall mean a business combination that is treated for
financial accounting purposes as a "pooling of interests" in accordance with
GAAP and the Regulations of the Commission.
"Prospectus/Proxy Statement" shall have the meaning ascribed to such term in
Section 7.02(a).
"Registration Statement" shall have the meaning ascribed to such term in
Section 7.02(a).
"Regulation" shall mean any rule or regulation of any Governmental Authority
having the effect of Law or of any rule or regulation of any self-regulatory
organization, such as the NYSE or the NASD.
"Reports" shall mean, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be
filed by the specified Person or any of its Subsidiaries with any Governmental
Authority (other than the Commission).
"Representatives" shall mean, collectively, the Company's Representatives
and the Acquiror's Representatives.
"SEC Reports" shall mean (1) all Annual Reports on Form 10-K, (2) all
Quarterly Reports on Form 10-Q, (3) all proxy statements relating to meetings
of shareholders (whether annual or special), (4) all Current Reports on Form
8-K and (5) all other reports, schedules, registration statements or other
documents required to be filed during a specified period by a specified Person
with the Commission pursuant to the Securities Act or the Exchange Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Significant Subsidiary" means any Subsidiary of the Company or Acquiror, as
the case may be, that constitutes a significant subsidiary of such party as
such term is defined in Rule 1-02 of Regulation S-X of the Commission.
"Stock Option Agreement" shall mean that certain Stock Option Agreement of
even date herewith between the Acquiror and the Company.
A "Subsidiary" of a specified Person shall be any corporation, partnership,
limited liability company, joint venture or other legal entity of which the
specified Person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the stock or other
equity or partnership interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of
such corporation or other legal entity or of which the specified Person
controls the management.
"Surviving Corporation" shall mean the Company as the corporation surviving
the Merger.
"Tax Returns" shall have the meaning ascribed to such term in Section
4.14(a) of the Plan.
"Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies or
other similar assessments or liabilities, including income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, real property, personal property,
windfall profits, sales, use, transfers, licensing, employment, payroll and
franchises imposed by or under any Law; and such terms shall include any
interest, fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any such tax or any contest or
dispute thereof.
"Terminated Benefit Plans" shall mean Benefit Plans that were sponsored,
maintained, or contributed to by a specified Person or any of its Subsidiaries
within six years prior to the date of this Plan but which have been terminated
prior to the date of this Plan.
A-43
"Terminating Acquiror Breach" shall have the meaning ascribed to such term in
Section 9.01(c).
"Terminating Company Breach" shall have the meaning ascribed to such term in
Section 9.01(b).
"Voting Agreement" shall mean one of those several Voting Agreements of even
date herewith between the Acquiror and certain shareholders of the Company.
A-44
ANNEX B
NUMAR AFFILIATE'S AGREEMENT
Halliburton Company
3600 Lincoln Plaza
500 N. Akard Street
Dallas, Texas 75201-3391
Ladies and Gentlemen:
The undersigned has been advised that, as of the date hereof, the
undersigned may be deemed to be an "affiliate" of NUMAR Corporation, a
Pennsylvania corporation (the "Company"), as that term is defined in the
Regulations of the Commission under the Securities Act.
Pursuant to the terms and subject to the conditions of that certain
Agreement and Plan of Merger by and among Halliburton Company, a Delaware
corporation (the "Acquiror"), Halliburton M.S. Corp., a newly formed Delaware
corporation and a wholly owned subsidiary of the Acquiror ("Newco"), and the
Company to be dated as of June 9, 1997 (the "Plan") providing, among other
things, for the merger of Newco with and into the Company (the "Merger"), the
undersigned will be entitled to receive shares of Acquiror Common Stock in
exchange for shares of Company Common Stock owned by the undersigned at the
Effective Time of the Merger as determined pursuant to the Plan. Capitalized
terms used but not defined herein are defined in Annex A to the Plan and are
used herein with the same meanings as ascribed to them therein.
The undersigned understands that the Merger will be treated for financial
accounting purposes as a "pooling of interests" in accordance with GAAP and
that the staff of the Commission has issued certain guidelines that should be
followed to ensure the application of pooling of interests accounting to the
transaction.
In consideration of the agreements contained herein, the Acquiror's reliance
on this letter in connection with the consummation of the Merger and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the undersigned hereby represents, warrants and agrees
that the undersigned will not make any sale, transfer or other disposition of
(i) Company Common Stock during the period from the date hereof until the
earlier of the Effective Time and the termination of the Plan (which period,
if the Merger is consummated, will be greater than 30 days), (ii) Acquiror
Common Stock received by the undersigned pursuant to the Merger or otherwise
owned by the undersigned until such time as financial statements that include
at least 30 days of combined operations of the Company and the Acquiror after
the Merger shall have been publicly reported, unless the undersigned shall
have delivered to the Acquiror prior to any such sale, transfer or other
disposition, a written opinion from Arthur Andersen LLP, independent public
accountants for the Acquiror, or a written no-action letter from the
accounting staff of the Commission, in either case in form and substance
reasonably satisfactory to the Acquiror, to the effect that such sale,
transfer or other disposition will not cause the Merger to not to be treated
as a "pooling of interests" for financial accounting purposes in accordance
with GAAP and the Regulations of the Commission or (iii) Acquiror Common Stock
received by the undersigned pursuant to the Merger in violation of the
Securities Act or the Regulations thereunder. The undersigned has been advised
that the offering, sale and delivery of the shares of Acquiror Common Stock
pursuant to the Merger will have been registered with the Commission under the
Securities Act on a Registration Statement on Form S-4. The undersigned has
also been advised, however, that, since the undersigned may be deemed to be an
affiliate of the Company at the time the Merger is submitted for a vote of the
shareholders of the Company, the Acquiror Common Stock received by the
undersigned pursuant to the Merger can be sold by the undersigned only (i)
pursuant to an effective registration statement under the Securities Act, (ii)
in conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Securities Act or (iii) in reliance upon an exemption
from registration that is available under the Securities Act.
The undersigned also understands that instructions will be given to the
transfer agent for the Acquiror Common Stock with respect to the Acquiror
Common Stock to be received by the undersigned pursuant to the
A-45
Merger and that there will be placed on the certificates representing such
shares of Acquiror Common Stock, or any substitutions therefor, a legend
stating in substance as follows:
"These shares were issued in a transaction to which Rule 145 promulgated
under the Securities Act of 1933, as amended, applies. These shares may
only be transferred in accordance with the terms of such Rule and an
Affiliate's Agreement between the original holder of such shares and
Halliburton Company, a copy of which agreement is on file at the principal
offices of Halliburton Company."
It is understood and agreed that the legend set forth above shall be removed
upon surrender of certificates bearing such legend by delivery of substitute
certificates without such legend if (i) the undersigned shall have delivered
to the Acquiror an opinion of counsel, in form and substance reasonably
satisfactory to the Acquiror, to the effect that (A) the sale or other
disposition of the shares represented by the surrendered certificates may be
effected without registration of the offering, sale and delivery of such
shares under the Securities Act and (B) the shares to be so transferred may be
publicly offered, sold and delivered by the transferee thereof without
compliance with the registration provisions of the Securities Act and (ii) the
other restrictions set forth herein are no longer applicable.
By its execution hereof, the Acquiror agrees that it will, as long as the
undersigned owns any Acquiror Common Stock to be received by the undersigned
pursuant to the Merger, take all reasonable efforts to make timely filings
with the Commission of all reports required to be filed by it pursuant to the
Exchange Act and will promptly furnish upon written request of the undersigned
a written statement confirming that such reports have been so timely filed.
If you are in agreement with the foregoing, please so indicate by signing
below and returning a copy of this letter to the undersigned, at which time
this letter shall become a binding agreement between us.
Very truly yours,
By:__________________________________
Name:
Title:
Date:
Address:
ACCEPTED this day of June, 1997
Halliburton Company
By:__________________________________
Name:
Title:
A-46
ANNEX C
HALLIBURTON AFFILIATE'S AGREEMENT
Halliburton Company
3600 Lincoln Plaza
500 N. Akard Street
Dallas, Texas 75201-3391
Ladies and Gentlemen:
The undersigned has been advised that, as of the date hereof, the
undersigned may be deemed to be an "affiliate" of Halliburton Company, a
Delaware corporation (the "Acquiror"), as that term is defined in the
Regulations of the Commission under the Securities Act.
The undertakings contained in this Affiliate's Agreement are being given by
the undersigned in connection with that certain Agreement and Plan of Merger
by and among the Acquiror, Halliburton M.S. Corp., a newly formed Delaware
corporation and a wholly owned subsidiary of the Acquiror ("Newco"), and NUMAR
Corporation, a Pennsylvania corporation (the "Company"), to be dated as of
June 9, 1997 (the "Plan"), providing, among other things, for the merger of
Newco with and into the Company (the "Merger"). Capitalized terms used but not
defined herein are defined in Annex A to the Plan and are used herein with the
same meanings as ascribed to them therein.
The undersigned understands that the Merger will be treated for financial
accounting purposes as a "pooling of interests" in accordance with GAAP and
that the staff of the Commission has issued certain guidelines that should be
followed to ensure the application of pooling of interests accounting to the
transaction.
In consideration of the agreements contained herein, the Acquiror's reliance
on this letter in connection with the consummation of the Merger and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the undersigned hereby represents, warrants and agrees
that the undersigned will not make any sale, transfer or other disposition of
(i) Company Common Stock during the period from the date hereof until the
earlier of the Effective Time and the termination of the Plan (which period,
if the Merger is consummated, will be greater than 30 days) or (ii) Acquiror
Common Stock owned by the undersigned until such time as financial statements
that include at least 30 days of combined operations of the Company and the
Acquiror after the Merger shall have been publicly reported, unless the
undersigned shall have delivered to the Acquiror prior to any such sale,
transfer or other disposition, a written opinion from Arthur Andersen LLP,
independent public accountants for the Acquiror, or a written no-action letter
from the accounting staff of the Commission, in either case in form and
substance reasonably satisfactory to the Acquiror, to the effect that such
sale, transfer or other disposition will not cause the Merger to not to be
treated as a "pooling of interests" for financial accounting purposes in
accordance with GAAP and the Regulations of the Commission.
If you are in agreement with the foregoing, please so indicate by signing
below and returning a copy of this letter to the undersigned, at which time
this letter shall become a binding agreement between us.
Very truly yours,
By:__________________________________
Name:
Title:
Date:
Address:
ACCEPTED this day of June, 1997
Halliburton Company
By:__________________________________
Name:
Title:
A-47
APPENDIX B
STOCK OPTION AGREEMENT
BY AND BETWEEN
HALLIBURTON COMPANY
AND
NUMAR CORPORATION
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated as of June 9, 1997, by and
between NUMAR Corporation, a Pennsylvania corporation (the "Company"), and
Halliburton Company, a Delaware corporation (the "Grantee").
RECITALS
The Grantee, the Company and Halliburton M.S. Corp., a Delaware corporation
and a wholly owned subsidiary of the Grantee ("Newco") propose to enter into
an Agreement and Plan of Merger dated as of the date hereof (the "Plan")
providing, among other things, for the merger (the "Merger") of Newco with and
into the Company which shall be the surviving corporation.
The Board of Directors of the Company has recommended the approval of the
Plan by the stockholders of the Company.
As a condition and inducement to the Grantee's willingness to enter into the
Plan, the Grantee has requested that the Company agree, and the Company has
agreed, to grant the Grantee the Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, the Company and the Grantee agree as follows:
1. Capitalized Terms. Capitalized terms used but not defined herein are
defined in the Plan and are used herein with the same meanings as ascribed to
them therein; provided, however, that, as used in this Agreement, "Person"
shall have the meaning specified in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act.
2. Grant of Option. Subject to the terms and conditions set forth herein,
the Company hereby grants to the Grantee an irrevocable option (the "Option")
to purchase, out of the authorized but unissued Company Common Stock, a number
of shares equal to up to 15.0% of the shares of Company Common Stock
outstanding as of the date hereof (as adjusted as set forth herein) (the
"Option Shares"), at a purchase price of $36.00 per Option Share (the
"Exercise Price").
3. Term. The Option shall be exercisable and shall remain in full force and
effect until the earliest to occur of (i) the Effective Time, (ii) the first
anniversary of the receipt by Grantee of written notice from the Company of
the occurrence of an Exercise Event (as hereinafter defined) or (iii)
termination of the Plan prior to the occurrence of an Exercise Event (the
"Option Term"). The rights and obligations set forth in Sections 7, 8, 9 and
10 shall not terminate at the expiration of the Option Term, but shall extend
to such time as is provided in those Sections.
4. Exercise of Option.
(a) The Grantee may exercise the Option, in whole or in part, at any time
and from time to time during the Option Term following the occurrence of an
Exercise Event. Notwithstanding the expiration of the Option Term, the Grantee
shall be entitled to purchase those Option Shares with respect to which it has
exercised the Option in accordance with the terms hereof prior to the
expiration of the Option Term.
(b) As used herein, an "Exercise Event" shall mean any of the following
events:
(i) any Person (other than the Grantee or any Affiliate of the Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act) a tender or exchange offer to purchase any shares of Company
Common Stock such that, upon consummation of such offer, such Person would
own or control 35% or more of the then outstanding Company Common Stock and
the Board of Directors of the Company, within ten Business Days thereafter,
either fails to recommend against acceptance of such tender or exchange
offer by the Company's shareholders or takes no position with respect
thereto; or
B-1
(ii) any Person (other than the Grantee, the Company or any of their
Subsidiaries) shall, subsequent to the date of this Agreement, acquire
beneficial ownership (as such term is defined in Rule 13d-3 under the
Exchange Act) or the right to acquire beneficial ownership of, or any Group
shall have been formed that beneficially owns, or has the right to acquire
beneficial ownership (as such term is defined in Rule 13d-3 under the
Exchange Act) of, (A) 35% or more of the then outstanding Company Common
Stock and the Plan has failed to receive the requisite vote at the Company
Shareholders' Meeting or (B) 45% or more of the then outstanding Company
Common Stock.
(c) If the Grantee wishes to exercise the Option, it shall send a written
notice (the date of which being herein referred to as the "Notice Date") to
the Company specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and a date not earlier
than three Business Days nor later than 15 Business Days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided, however,
that, if the closing of the purchase and sale pursuant to the Option (the
"Closing") cannot be consummated by reason of any applicable Law, Regulation
or Order, the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and, provided, further, that,
without limiting the foregoing, if prior notification to, or Authorization of,
any Governmental Authority is required in connection with such purchase, the
Grantee and, if applicable, the Company shall promptly file the required
notice or application for Authorization and shall expeditiously process the
same (and the Company shall cooperate with the Grantee in the filing of any
such notice or application and the obtaining of any such Authorization), and
the period of time that otherwise would run pursuant to this sentence shall
run instead from the date on which, as the case may be, (i) any required
notification period has expired or been terminated or (ii) such Authorization
has been obtained and, in either event, any requisite waiting period has
passed.
(d) Notwithstanding Section 4(c), in no event shall any Closing Date be more
than 12 months after the related Notice Date, and, if the Closing Date shall
not have occurred within 12 months after the related Notice Date due to the
failure to obtain any required Authorization of a Governmental Authority, the
exercise of the Option effected on the Notice Date shall be deemed to have
expired. If (i) the Grantee receives official notice that an Authorization of
any Governmental Authority required for the purchase of Option Shares will not
be issued or granted or (ii) a Closing Date shall not have occurred within 12
months after the related Notice Date due to the failure to obtain any such
required Authorization of a Governmental Authority, the Grantee shall be
entitled to exercise its right as set forth in Section 7 or to exercise the
Option in connection with the resale of the Company Common Stock or other
securities pursuant to a registration statement as provided in Section 9. The
provisions of this Section 4 and Section 5 shall apply with appropriate
adjustments to any such exercise in connection with such a resale.
5. Payment and Delivery of Certificates.
(a) On each Closing Date, the Grantee shall pay to the Company in
immediately available funds by wire transfer to a bank account designated by
the Company an amount equal to the Exercise Price multiplied by the Option
Shares to be purchased on such Closing Date.
(b) At each Closing, simultaneously with the delivery of immediately
available funds as provided in Section 5(a), the Company shall deliver to the
Grantee a certificate or certificates representing the Option Shares to be
purchased at such Closing, which Option Shares shall be duly authorized,
validly issued, fully paid and nonassessable and free and clear of all Liens,
and Grantee shall deliver to the Company its written agreement that the
Grantee will not offer to sell or otherwise dispose of such Option Shares in
violation of applicable Law or the provisions of this Agreement.
B-2
(c) Certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend that shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF JUNE 9, 1997.
A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY THE COMPANY OF A WRITTEN REQUEST THEREFOR.
A new certificate or certificates evidencing the same number of shares of
the Company Common Stock will be issued to the Grantee in lieu of the
certificate bearing the above legend, and such new certificate shall not bear
such legend, insofar as it applies to the Securities Act, if the Grantee shall
have delivered to the Company a copy of a letter from the staff of the
Commission, or an opinion of counsel in form and substance reasonably
satisfactory to the Company and its counsel, to the effect that such legend is
not required for purposes of the Securities Act.
6. Adjustment Upon Changes in Capitalization, Etc.
(a) In the event of any change in the Company Common Stock by reason of a
stock dividend, split-up, combination, recapitalization, exchange of shares or
similar transaction, the type and number of shares or securities subject to
the Option, and the Exercise Price therefor, shall be adjusted appropriately,
and proper provision shall be made in the agreements governing such
transaction, so that the Grantee shall receive upon exercise of the Option the
same class and number of outstanding shares or other securities or property
that Grantee would have received in respect of the Company Common Stock if the
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable. If any additional shares of Company Common Stock are
issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 6(a)), the number of shares of
Company Common Stock then remaining subject to the Option shall be adjusted so
that, after such issuance of additional shares, such number of shares then
remaining subject to the Option, together with shares theretofore issued
pursuant to the Option, equals 15.0% of the number of shares of the Company
Common Stock then issued and outstanding shares of Company Common Stock;
provided, however, that the number of shares of the Company Common Stock
subject to the Option shall only be increased to the extent the Company then
has available authorized but unissued and unreserved shares of the Company
Common Stock.
(b) If the Company shall enter into an agreement (i) to consolidate,
exchange shares or merge with any Person, other than the Grantee or one of its
subsidiaries, and, in the case of a merger, shall not be the continuing or
surviving corporation, (ii) to permit any Person, other than the Grantee or
one of its Subsidiaries, to merge into the Company and the Company shall be
the continuing or surviving corporation, but, in connection with such merger,
the then outstanding shares of Company Common Stock shall be changed into or
exchanged for stock or other securities of the Company or any other Person or
cash or any other property, or the shares of Company Common stock outstanding
immediately before such merger shall after such merger represent less than 50%
of the common shares and common share equivalents of the Company outstanding
immediately after the merger or (iii) to sell, lease or otherwise transfer all
or substantially all of its assets to any Person, other than the Grantee or
one of its Subsidiaries, then, and in each such case, the proper provisions
shall be made in the agreement governing such transaction so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, become exercisable for the stock, securities,
cash or other property that would have been received by the Grantee if the
Grantee had exercised this Option immediately prior to such transaction or the
record date for determining stockholders entitled to participate therein, as
appropriate.
(c) The provisions of Sections 7, 8, 9, 10 and 11 shall apply with
appropriate adjustments to any securities for which the Option becomes
exercisable pursuant to this Section 6.
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7. Repurchase at the Option of Grantee.
(a) At any time during the Option Term, at the request of the Grantee made
at any time after the first Repurchase Event (as hereinafter defined) and
ending on the first anniversary thereof (the "Put Period"), the Company (or
any successor thereto) shall repurchase from the Grantee (i) that portion of
the Option that then remains unexercised and (ii) all (but not less than all)
the shares of Company Common Stock purchased by the Grantee pursuant hereto
and with respect to which the Grantee then has beneficial ownership. The date
on which the Grantee exercises its rights under this Section 7 is referred to
as the "Grantee Request Date." Such repurchase shall be at an aggregate price
(the "Section 7 Repurchase Consideration") equal to the sum of:
(i) the aggregate exercise price paid (or, in the case of Option Shares
with respect to which the Option has been exercised but the Closing Date
has not occurred, payable) by the Grantee for any Option Shares as to which
the Option has theretofore been exercised and with respect to which the
Grantee then has beneficial ownership;
(ii) the excess, if any, of the Applicable Price (as defined below), over
the Exercise Price (subject to adjustment pursuant to Section 6) paid (or,
in the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by the Grantee
for each Option Share as to which the Option has been exercised and with
respect to which the Grantee then has beneficial ownership, multiplied by
the number of such shares; and
(iii) the excess, if any, of (x) the Applicable Price for each share of
Company Common Stock over (y) the Exercise Price (subject to adjustment
pursuant to Section 6), multiplied by the number of Option Shares as to
which the Option has not been exercised.
(b) If the Grantee exercises its rights under this Section 7, the Company
shall, within five Business Days after the Grantee Request Date, pay the
Section 7 Repurchase Consideration to the Grantee in immediately available
funds, and the Grantee shall surrender to the Company the Option and the
certificates evidencing the shares of Company Common Stock purchased
thereunder with respect to which the Grantee then has beneficial ownership,
and the Grantee shall warrant to the Company that, immediately prior to the
repurchase thereof pursuant to this Section 7, the Grantee had sole record and
beneficial ownership of such shares and that such shares were then held free
and clear of all Liens.
(c) For purposes of this Agreement, the "Applicable Price" means the highest
of (i) the highest purchase price per share paid pursuant a tender or exchange
offer made for shares of Company Common Stock after the date hereof and on or
prior to the Grantee Request Date, (ii) the price per share to be paid by any
third Person for shares of Company Common Stock, in each case pursuant to an
agreement for a merger or other business combination transaction with the
Company entered into on or prior to the Grantee Request Date, or (iii) the
highest bid price per share of Company Common Stock as quoted on The Nasdaq
National Market (or if Company Common Stock is not quoted on The Nasdaq
National Market, the highest bid price per share as quoted on any other market
comprising a part of The Nasdaq Stock Market or, if the shares of Company
Common Stock are not quoted thereon, on the principal trading market (as
defined in Regulation M under the Exchange Act) on which such shares are
traded as reported by a recognized source) during the 60 Business Days
preceding the Grantee Request Date. If the consideration to be offered, paid
or received pursuant to either of the foregoing clauses (i) or (ii) shall be
other than in cash, the value of such consideration shall be determined in
good faith by an independent nationally recognized investment banking firm
selected by the Grantee and reasonably acceptable to the Company, which
determination shall be conclusive for all purposes of this Agreement.
(d) As used herein, a "Repurchase Event" means the occurrence of any
Exercise Event specified in Section 4(b)(ii), (iii) or (iv).
(e) Notwithstanding any provision to the contrary in this Agreement, the
Grantee may not exercise its rights pursuant to this Section 7 in a manner
that would result in the cash payment to the Grantee of an aggregate amount
under this Section 7 of more than $12 million, including the amount, if any,
paid to the Grantee pursuant
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to Section 9.05(b) of the Plan; provided, however, that nothing in this
sentence shall limit the Grantee's ability to exercise the Option in
accordance with its terms.
8. Repurchase at the Option of the Company.
(a) Unless the Grantee shall have previously exercised its rights under
Section 7, at the request made by the Company at any time during the six-month
period commencing at the expiration of the Put Period (the "Call Period"), the
Company may repurchase from the Grantee, and the Grantee shall sell to the
Company, all (but not less than all) the shares of Company Common Stock
acquired by the Grantee pursuant hereto and with respect to which the Grantee
has beneficial ownership at the time of such repurchase at a price per share
equal to the greater of (A) the Current Market Price (as hereinafter defined)
or (B) the Exercise Price per share in respect of the shares so acquired (such
price per share multiplied by the number of shares of Company Common Stock to
be repurchased pursuant to this Section 8 being herein called the "Section 8
Repurchase Consideration"). The date on which the Company exercises its rights
under this Section 8 is referred to as the "Company Request Date."
Notwithstanding the first sentence of this Section 8(a), the Grantee, within
30 days following the Company Request Date, may deliver an Offeror's Notice
pursuant to Section 10, in which case the provisions of Section 10 and not
those of this Section 8 shall control (unless the sale to a third Person
contemplated thereby is not consummated). The Company's rights under this
Section 8 shall be suspended (and the Call Period shall be extended
accordingly) during any period when the exercise of such rights would subject
the Grantee to liability pursuant to Section 16(b) of the Exchange Act by
reason of the issuance of the Option, any adjustment pursuant to Section 6
hereof, the Grantee's purchase of shares of Company Common Stock hereunder or
the Grantee's sale of shares pursuant to Section 7, 8 or 10.
(b) If the Company exercises its rights under this Section 8 and the Grantee
does not deliver an Offeror's Notice or, having delivered an Offeror's Notice,
the Grantee does not sell the shares to a third Person pursuant thereto, the
Company shall, within five Business Days after the expiration of the Grantee's
right to deliver an Offeror's Notice or to sell the shares subject to an
Offeror's Notice to a third Person, pay the Section 8 Repurchase Consideration
in immediately available funds, and the Grantee shall surrender to the Company
certificates evidencing the shares of Company Common Stock purchased
hereunder, and the Grantee shall warrant to the Company that, immediately
prior to the repurchase thereof pursuant to this Section 8, the Grantee had
sole record and beneficial ownership of such shares and that such shares were
then held free and clear of all Liens.
(c) As used herein, "Current Market Price" means the average closing sales
price per share of Company Common Stock quoted on The Nasdaq National Market
(or if Company Common Stock is not quoted on The Nasdaq National Market, on
any other market comprising a part of The Nasdaq Stock Market or, if the
shares of Company Common Stock are not quoted thereon, on the principal
trading market (as defined in Regulation M under the Exchange Act) on which
such shares are traded as reported by a recognized source) for the ten
Business Days preceding the date of the Company's request for repurchase
pursuant to this Section 8.
9. Registration Rights.
(a) The Company shall, if requested by the Grantee at any time and from time
to time within two years of the first exercise of the Option (the
"Registration Period"), as expeditiously as practicable, prepare, file and
cause to be made effective up to two registration statements under the
Securities Act if such registration is necessary or desirable in order to
permit the offering, sale and delivery of any or all shares of Company Common
Stock or other securities that have been acquired by or are issuable to the
Grantee upon exercise of the Option in accordance with the intended method of
sale or other disposition stated by the Grantee, including, at the sole
discretion of the Company, a "shelf" registration statement under Rule 415
under the Securities Act or any successor provision, and the Company shall use
all reasonable efforts to qualify such shares or other securities under any
applicable state securities laws. Without the Grantee's prior written consent,
no other securities may be included in any such registration. The Company
shall use all reasonable efforts to cause each such registration statement to
become effective, to obtain all consents or waivers of other parties that are
required therefor and to
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keep such registration statement effective for such period not in excess of
180 days from the day such registration statement first becomes effective as
may be reasonably necessary to effect such sale or other disposition. The
obligations of the Company hereunder to file a registration statement and to
maintain its effectiveness may be suspended for one or more periods of time
not exceeding 60 days in the aggregate if the Board of Directors of the
Company shall have determined in good faith that the filing of such
registration or the maintenance of its effectiveness would require disclosure
of nonpublic information that would materially and adversely affect the
Company. For purposes of determining whether two requests have been made under
this Section 9, only requests relating to a registration statement that has
become effective under the Securities Act and pursuant to which the Grantee
has disposed of all shares covered thereby in the manner contemplated therein
shall be counted.
(b) The expenses associated with the preparation and filing of any such
registration statement pursuant to this Section 9 and any sale covered thereby
(including any fees related to blue sky qualifications and filing fees in
respect of the National Association of Securities Dealers, Inc.)
("Registration Expenses") shall be for the account of the Company except for
underwriting discounts or commissions or brokers' fees in respect to shares to
be sold by the Grantee and the fees and disbursements of the Grantee's
counsel; provided, however, that the Company shall not be required to pay for
any Registration Expenses with respect to such registration if the
registration request is subsequently withdrawn at the request of the Grantee
unless the Grantee agrees to forfeit its right to request one registration;
and provided further that, if at the time of such withdrawal the Grantee has
learned of a material adverse change in the results of operations, condition
(financial or other), business or prospects of the Company from that known to
the Grantee at the time of its request and has withdrawn the request with
reasonable promptness following disclosure by the Company of such material
adverse change, then the Grantee shall not be required to pay any of such
expenses and shall retain all remaining rights to request registration.
(c) The Grantee shall provide all information reasonably requested by the
Company for inclusion in any registration statement to be filed hereunder. If
during the Registration Period the Company shall propose to register under the
Securities Act the offering, sale and delivery of Company Common Stock for
cash for its own account or for any other stockholder of the Company pursuant
to a firm underwriting, it shall, in addition to the Company's other
obligations under this Section 9, allow the Grantee the right to participate
in such registration provided that the Grantee participates in the
underwriting; provided, however, that, if the managing underwriter of such
offering advises the Company in writing that in its opinion the number of
shares of Company Common Stock requested to be included in such registration
exceeds the number that can be sold in such offering, the Company shall, after
fully including therein all securities to be sold by the Company, include the
shares requested to be included therein by Grantee pro rata (based on the
number of shares intended to be included therein) with the shares intended to
be included therein by Persons other than the Company. In connection with any
offering, sale and delivery of Company Common Stock pursuant to a registration
statement effected pursuant to this Section 9, the Company and the Grantee
shall provide each other and each underwriter of the offering with customary
representations, warranties and covenants, including covenants of
indemnification and contribution.
10. First Refusal. At any time after the first occurrence of an Exercise
Event and prior to the second anniversary of the first purchase of shares of
Company Common Stock pursuant to the Option, if the Grantee shall desire to
sell, assign, transfer or otherwise dispose of all or any of the Option Shares
or other securities acquired by it pursuant to the Option, it shall give the
Company written notice of the proposed transaction (an "Offeror's Notice"),
identifying the proposed transferee, accompanied by a copy of a binding offer
to purchase such shares or other securities signed by such transferee and
setting forth the terms of the proposed transaction. An Offeror's Notice shall
be deemed an offer by the Grantee to the Company, which may be accepted, in
whole but not in part, within ten Business Days of the receipt of such
Offeror's Notice, on the same terms and conditions and at the same price at
which the Grantee is proposing to transfer such shares or other securities to
such transferee. The purchase of any such shares or other securities by the
Company shall be settled within ten Business Days of the date of the
acceptance of the offer and the purchase price shall be paid to the Grantee in
immediately available funds. If the Company shall fail or refuse to purchase
all the shares or other securities covered by an Offeror's Notice, the Grantee
may, within sixty days from the date of the Offeror's Notice, sell
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all, but not less than all, of such shares or other securities to the proposed
transferee at no less than the price specified and on terms no more favorable
than those set forth in the Offeror's Notice; provided, however, that the
provisions of this sentence shall not limit the rights the Grantee may
otherwise have if the Company has accepted the offer contained in the
Offeror's Notice and wrongfully refuses to purchase the shares or other
securities subject thereto. The requirements of this Section 10 shall not
apply to (a) any disposition as a result of which the proposed transferee
would own beneficially not more than 2% of the outstanding voting power of the
Company, (b) any disposition of Company Common Stock or other securities by a
Person to whom the Grantee has assigned its rights under the Option with the
consent of the Company, (c) any sale by means of a public offering registered
under the Securities Act or (d) any transfer to a wholly owned Subsidiary of
the Grantee which agrees in writing to be bound by the terms hereof.
11. Listing. If the Company Common Stock or any other securities then
subject to the Option are then listed on The Nasdaq National Market (or if
Company Common Stock is not quoted on The Nasdaq National Market, on any other
market comprising a part of The Nasdaq Stock Market or, if the shares of
Company Common Stock are not quoted thereon, on another trading market or
exchange), the Company, upon the occurrence of an Exercise Event, shall
promptly file an application to list on The Nasdaq National Market, such other
market comprising a part of The Nasdaq Stock Market or such other trading
market or exchange, as applicable, the shares of the Company Common Stock or
other securities then subject to the Option and will use all reasonable
efforts to cause such listing application to be approved as promptly as
practicable.
12. Replacement of Agreement. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, the Company will execute and deliver a new Agreement
of like tenor and date. Any such new Agreement shall constitute an additional
contractual obligation of the Company, whether or not the Agreement so lost,
stolen, destroyed or mutilated shall at any time be enforceable by anyone.
13. Miscellaneous.
(a) Expenses. Except as otherwise provided in the Plan or in Sections 7, 8
or 9 hereof, each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(c) Entire Agreement; No Third Party Beneficiary; Severability. Except as
otherwise set forth in the Plan, this Agreement (including the Plan and the
other documents and instruments referred to herein and therein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.
(d) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the Laws of the State of Texas, regardless of the Laws that
might otherwise govern under applicable principles of conflicts of law;
provided, however, that any matter involving the internal corporate affairs of
any party hereto shall be governed by the provisions of the PBCL.
(e) Descriptive Headings. The descriptive headings contained herein are for
convenience or reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
B-7
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to the Company to:
NUMAR Corporation
508 Lapp Road
Malvern, Pennsylvania 19355
Attention:Edward P. Delson
Senior Vice President and Chief Financial Officer
Telecopier No.: (610) 644-8131
with a copy to:
Drinker Biddle & Reath LLP
1000 Westlakes Drive
Suite 300
Berwyn, Pennsylvania 19312
Attention: Walter Mostek, Jr.
Telecopier No.: (610) 993-8585
If to Grantee to:
Halliburton Company
3600 Lincoln Plaza
500 North Akard
Dallas, Texas 75201-3391
Attention:Lester L. Coleman
Executive Vice President and General Counsel
Telecopier No.: (214) 978-2658
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002-6760
Attention: William E. Joor III, Esq.
Telecopier No.: (713) 615-5282
(g) Counterparts. This Agreement and any amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed
by each of the parties and delivered to the other party, it being understood
that both parties need not execute the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Option shall be assigned by either of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that the Grantee may assign this
Agreement to a wholly owned Subsidiary of the Grantee; provided, however, that
no such assignment shall have the effect of releasing the Grantee from its
obligations hereunder. Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
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(i) Further Assurances. In the event of any exercise of the Option by the
Grantee, the Company and the Grantee shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
(j) Specific Performance. The parties hereto hereby acknowledge and agree
that the failure of any party to this Agreement to perform its agreements and
covenants hereunder will cause irreparable injury to the other party to this
Agreement for which damages, even if available, will not be an adequate
remedy. Accordingly, each of the parties hereto hereby consents to the
granting of equitable relief (including specific performance and injunctive
relief) by any court of competent jurisdiction to enforce any party's
obligations hereunder. The parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without prejudice to any
other rights that the parties hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, the Company and the Grantee have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the day and year first written above.
NUMAR CORPORATION
/s/ Melvin M. Miller
By: _________________________________
Melvin M. Miller
Chairman of the Board, President
and Chief Executive Officer
HALLIBURTON COMPANY
/s/ Lester L. Coleman
By: _________________________________
Lester L. Coleman
Executive Vice President and
General Counsel
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APPENDIX C
FORM OF
VOTING AGREEMENT
BY AND BETWEEN
CERTAIN SHAREHOLDERS OF NUMAR CORPORATION
AND
HALLIBURTON COMPANY
VOTING AGREEMENT
VOTING AGREEMENT ("Agreement") dated as of June 9, 1997, between Halliburton
Company, a Delaware corporation (the "Acquiror"), and (the
"Shareholder"), a holder of common shares, par value $0.01 per share, of NUMAR
Corporation, a Pennsylvania corporation (the "Company").
RECITALS:
The Shareholder beneficially owns an aggregate of common shares
(together with any additional common shares as to which beneficial ownership
is acquired by any member of the Shareholder Group described below, the
"Company Shares"), par value $0.01 per share ("Company Common Shares"), of the
Company.
The Acquiror is prepared to enter into an Agreement and Plan of Merger with
the Company (the "Plan") providing for the merger of a wholly owned subsidiary
of Acquiror with and into the Company and the conversion in such merger of
each Company Common Share into the number of shares of the Common Stock, par
value $2.50 per share, of the Acquiror set forth in the Plan (the "Merger").
To facilitate the Merger, the Shareholder is willing to enter into certain
arrangements with respect to the Company Shares.
NOW, THEREFORE, in consideration of the premises set forth above, the mutual
promises set forth below, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Shareholder's Support of the Merger. From the date hereof until December
31, 1997, or, if earlier, termination of the Plan:
(a) Except as contemplated by the Plan or hereby, neither the Shareholder
nor any Person controlled by the Shareholder, other than the Company and
its subsidiaries (collectively, the "Shareholder Group"), will, directly or
indirectly, sell, transfer, pledge or otherwise dispose of, or grant a
proxy with respect to, any Company Shares to any Person other than any
member of the Shareholder Group or the Acquiror or its designee, or grant
an option with respect to any of the Company Shares or enter into any other
agreement or arrangement with respect to any of the Company Shares.
(b) The Shareholder agrees that the Shareholder will vote, and will cause
each member of the Shareholder Group to vote, all Company Shares entitled
to vote and beneficially owned by such Persons (i) in favor of the Merger
and (ii), subject to the provisions of paragraph (c) below, against any
combination proposal or other matter that may (in the reasonable opinion of
the Acquiror) interfere or be inconsistent with the Merger (including
without limitation a Competing Transaction).
(c) The Shareholder agrees that, if requested by the Acquiror in writing
in order to facilitate the Merger, the Shareholder will not, and will cause
each member of the Shareholder Group not to, attend or vote any Company
Shares beneficially owned by any such Person at any annual or special
meeting of shareholders or execute any written consent of shareholders.
(d) Neither the Shareholder nor any other member of the Shareholder Group
will initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or that may
reasonably be expected to lead to, any merger, consolidation, share
exchange, business combination or similar transaction involving the Company
or any of its Significant Subsidiaries, a sale, lease, exchange, transfer
or other disposition of 50% or more of the assets of the Company and its
subsidiaries, taken as a whole, in a single transaction or series of
transactions, the acquisition by a Person or Group of beneficial ownership
or the right to acquire beneficial ownership of 50% or more of the
outstanding Company Common Shares, whether by tender offer,
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exchange offer or otherwise, or the acquisition in any manner, directly or
indirectly, of a material equity interest in any voting securities of, or a
substantial portion of the assets of, the Company or any of its Significant
Subsidiaries, other than the transactions contemplated by the Plan (a
"Competing Transaction"), or enter into discussions or negotiate with any
Person in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or authorize
or permit any of the officers, directors or employees of the Shareholder or
any member of the Shareholder Group or any investment banker, financial
advisor, attorney, accountant or other representative retained by the
Shareholder or any other member of the Shareholder Group to take any such
action. The Shareholder shall promptly notify the Acquiror of all relevant
terms of any such inquiries or proposals received by such Shareholder or
any other member of the Shareholder Group or by any such officer, director,
employee, investment banker, financial advisor, attorney, accountant or
other representative relating to any of such matters and, if such inquiry
or proposal is in writing, such Shareholder shall deliver or cause to be
delivered to the Acquiror a copy of such inquiry or proposal.
(e) The Shareholder hereby consents to the Acquiror's announcement in any
press release, public filing, advertisement or other document, that the
Shareholder has entered into this Agreement.
(f) To the extent inconsistent with the provisions of this Section 1, the
Shareholder hereby revokes, and will cause each member of the Shareholder
Group to revoke, any and all proxies with respect to such member's Company
Common Shares or any other voting securities of the Company.
2. Miscellaneous
(a) The Shareholder, on the one hand, and the Acquiror, on the other,
acknowledge and agree that irreparable damage would occur if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof in any court of the United States or any state
thereof having jurisdiction, in addition to any other remedies to which they
may be entitled at law or equity.
(b) Descriptive headings are for convenience only and shall not control or
affect the meaning or construction of any provision of this Agreement.
(c) All notices, consents, requests, instructions, approvals and other
communications provided for herein shall be validly given, made or served, if
in writing and delivered personally, by telecopier (subject to receipt of
electronic confirmation) or sent by registered mail, postage prepaid:
If to the Acquiror:
Halliburton Company
3600 Lincoln Plaza
500 N. Akard Street
Dallas, Texas 75201-3391
Attention:Lester L. Coleman
Executive Vice President and General Counsel
Telecopier No.: (214) 978-2658
with a copy to:
Vinson & Elkins L.L.P.
First City Tower
1001 Fannin
Houston, Texas 77002-6760
Attention: William E. Joor III
Telecopier No.: (713) 758-2346
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If to the Shareholder:
or to such other address or telecopier number as any party may, from time to
time, designate in a written notice given in a like manner. Notice given by
telecopier shall be deemed delivered on the day the sender receives telecopier
confirmation that such notice was received at the telecopier number of the
addressee. Notice given by mail as set out above shall be deemed delivered
three days after the date the same is postmarked.
(d) From and after the termination of this Agreement, the covenants of the
parties set forth herein shall be of no further force or effect and the
parties shall be under no further obligation with respect thereto.
(e) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) Affiliate. "Affiliate" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the Exchange Act, as in
effect on the date hereof.
(ii) Associate. "Associate" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the Exchange Act, as in
effect on the date hereof.
(iii) Beneficial Owner. A person shall be deemed a "beneficial owner" of
or to have "beneficial ownership" of Company Shares in accordance with the
interpretations of the term "beneficial ownership" as defined in Rule 13-
d(3) under the Exchange Act, as in effect on the date hereof, provided that
a person shall be deemed to be the beneficial owner of, and to have
beneficial ownership of, Company Shares that such Person or any Affiliate
of such Person has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights, warrant, options or otherwise.
(iv) Exchange Act. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(v) Person. A "Person" shall mean any individual, firm, corporation,
partnership, trust, limited liability company or other entity.
(vi) Significant Subsidiary. "Significant Subsidiary" shall have the
meaning ascribed to it in Rule 1-02 of SEC Regulation S-X as in effect on
the date hereof.
(g) The Shareholder hereby represents and warrants to the Acquiror as
follows: The Shareholder has full power and authority to enter into this
Agreement; neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated herein will (i) conflict with or
result in a breach, default or violation of (A) any of the terms, provisions
or conditions of the certificate of incorporation or bylaws of any member of
the Shareholder Group or (B) any agreement, proxy, document, instrument,
judgment, decree, order, governmental permit, certificate, license, law,
statute, rule or regulation to which any member of the Shareholder Group is a
party or to which it is subject, (ii) result in the creation of any lien,
charge or other encumbrance on any Company Common Shares or (iii) require any
member of the Shareholder Group to obtain the consent of any private
nongovernmental third party; and no consent, action, approval or authorization
of, or registration, declaration or filing with, any governmental department,
commission, agency or other instrumentality or any other person or entity is
required to authorize, or is otherwise required in connection with, the
execution and delivery of this Agreement (with the exception of an amended
Schedule 13D to be filed by the Shareholder pursuant to the Exchange Act) or
the Shareholder's performance of the terms of this Agreement or the validity
or enforceability of this Agreement.
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(h) This Agreement shall be binding upon, and inure to the benefit of, the
parties hereto and their respective heirs, personal representatives,
successors, assigns and Affiliates, but shall not be assignable by either
party hereto without the prior written consent of the other party hereto.
(i) No party may waive any of the terms or conditions of this Agreement
except by a duly signed writing referring to the specific provision to be
waived.
(j) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Texas, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law; provided, however,
that any matter involving the internal corporate affairs of any party hereto
shall be governed by the provisions of the Business Corporation Law of the
Commonwealth of Pennsylvania.
(k) This Agreement constitutes the entire agreement, and supersedes all
other and prior agreements and understandings, both written and oral, among
the parties hereto and their Affiliates.
(l) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the Shareholder and the Acquiror have each caused this
Agreement to be duly executed by an officer or other Person, thereunto duly
authorized, all as of the day and year first above written.
HALLIBURTON COMPANY
By: _________________________________
Lester L. Coleman
Executive Vice President and
General Counsel
[Shareholder]
By: _________________________________
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APPENDIX D
August 29, 1997
The Board of Directors
NUMAR Corporation
508 Lapp Road
Malvern, Pennsylvania 19355
Members of the Board of Directors:
You have asked us to advise you with respect to the fairness from a
financial point of view to the shareholders of NUMAR Corporation ("NUMAR" or
the "Company") of the Exchange Ratio (as defined below) in the proposed merger
(the "Merger") of a wholly-owned subsidiary of Halliburton Company
("Halliburton") with and into NUMAR pursuant to the Agreement and Plan of
Merger (the "Merger" Agreement") dated June 9, 1997, among the Company,
Halliburton and Halliburton M. S. Corp. ("Newco"). Pursuant to the Merger each
outstanding common share, par value $.01 per share, of the Company ("Company
Common Stock"), other than shares held in treasury or held by Halliburton or
any direct or indirect wholly-owned subsidiary of NUMAR or Halliburton or as
to which dissenters' rights have been perfected, will be converted into the
right to receive 0.48322 shares (the "Exchange Ratio") of Halliburton common
stock, par value $2.50 per share ("Halliburton Common Stock"). The terms and
conditions of the Merger are more fully set forth in the Merger Agreement.
Schroder Wertheim & Co. Incorporated ("Schroder Wertheim"), as part of its
investment banking business, is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. Schroder Wertheim has acted as financial advisor to NUMAR with
respect to the Merger, for which we will receive fees, a portion of which is
contingent upon consummation of the Merger. Since 1994, Schroder Wertheim has
also worked with NUMAR on several corporate transactions for which we have
received fees.
In arriving at our opinion, we have:
i. reviewed the Merger Agreement and certain related documents;
ii reviewed certain publicly available financial and other information of
the Company and Halliburton, respectively;
iii. considered certain prospective financial information provided by
NUMAR management;
iv. held discussions with senior NUMAR and Halliburton management
regarding the business, operations, financial condition and prospects of
the Company and Halliburton, respectively (independently and combined);
v. reviewed the valuations of publicly traded companies that we deemed
comparable to the Company;
vi. compared the financial terms of the Merger to the financial terms of
other transactions which we deemed relevant;
vii. prepared discounted cash flow analyses of NUMAR's operations;
viii. reviewed the historical trading prices and volumes of the Company
and Halliburton Common Stock; and
ix. performed such other financial studies, analyses, inquiries and
investigations as we deemed appropriate.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all information supplied or
otherwise made available to or obtained by us. We have not attempted to
independently verify any of such information. We have not undertaken an
independent appraisal of
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the assets or liabilities (contingent or otherwise) of NUMAR or Halliburton,
nor have we been furnished with any such appraisals. With respect to financial
forecasts and projections for NUMAR, we have been advised by NUMAR, and we
have assumed, without independent investigation, that they have been
reasonably prepared and reflect NUMAR management's most currently available
estimates and judgments as to the expected future financial performance of
NUMAR.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any other party with respect to the acquisition of
NUMAR or any of its assets.
Our opinion is necessarily based upon financial, economic, market and other
conditions as they exist and can be evaluated by us on the date hereof. We
disclaim any undertaking or obligation to advise any person of any change in
any fact or matter affecting our opinion which may come or be brought to our
attention after the date of the opinion unless specifically requested to do
so.
This opinion is for the information of the Board of Directors of NUMAR for
its use in evaluating the Merger Agreement. Our opinion does not address the
merits of the underlying decision by NUMAR to engage in the Merger, and does
not constitute a recommendation to any shareholder as to how such shareholder
should vote on the proposed Merger and may not be reproduced, disseminated,
quoted or referred to in any manner or for any purpose without our prior
written consent.
Based upon and subject to the foregoing considerations, we are of the
opinion, as investment bankers, that as of the date hereof, the Exchange Ratio
is fair from a financial point of view to the shareholders of NUMAR.
Very truly yours,
Schroder Wertheim & Co. Incorporated
By:__________________________________
Robert I. Israel
Managing Director
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APPENDIX E
PENNSYLVANIA BUSINESS CORPORATION LAW
SUBCHAPTER D. DISSENTERS RIGHTS
1571 APPLICATION AND EFFECT OF SUBCHAPTER.--(a) General rule.--Except as
otherwise provided in subsection (b), any shareholder of a business
corporation shall have the right to dissent from, and to obtain payment of the
fair value of his shares in the event of, any corporate action, or to
otherwise obtain fair value for his shares, where this part expressly provides
that a shareholder shall have the rights and remedies provided in this
subchapter. See:
Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of election).
Section 2907(a) (relating to proceedings to terminate breach of
qualifying conditions).
Section 7104(b)(3) (relating to procedure).
(b) Exceptions.--(1) Except as otherwise provided in paragraph (2), the
holders of the shares of any class or series of shares that, at the record
date fixed to determine the shareholders entitled to notice of and to vote at
the meeting at which a plan specified in any of section 1930, 1931(d), 1932(c)
or 1952(d) is to be voted on, are either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders;
shall not have the right to obtain payment of the fair value of any such
shares under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the
case of:
(i) Shares converted by a plan if the shares are not converted solely
into shares of the acquiring, surviving, new or other corporation or solely
into such shares and money in lieu of fractional shares.
(ii) Shares of any preferred or special class unless the articles, the
plan or the terms of the transaction entitle all shareholders of the class
to vote thereon and require for the adoption of the plan or the
effectuation of the transaction the affirmative vote of a majority of the
votes cast by all shareholders of the class.
(iii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
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(3) The shareholders of a corporation that acquires by purchase, lease,
exchange or other disposition all or substantially all of the shares, property
or assets of another corporation by the issuance of shares, obligations or
otherwise, with or without assuming the liabilities of the other corporation
and with or without the intervention of another corporation or other person,
shall not be entitled to the rights and remedies of dissenting shareholders
provided in this subchapter regardless of the fact, if it be the case, that
the acquisition was accomplished by the issuance of voting shares of the
corporation to be outstanding immediately after the acquisition sufficient to
elect a majority or more of the directors of the corporation.
(c) Grant of optional dissenters rights.--The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall
have dissenters rights in connection with any corporate action or other
transaction that would otherwise not entitle such shareholder to dissenters
rights.
(d) Notice of dissenters rights.--Unless otherwise provided by statute, if a
proposed corporate action that would give rise to dissenters rights under this
subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) A statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value
of their shares by complying with the terms of this subchapter; and
(2) A copy of this subchapter.
(e) Other statutes.--The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part
that makes reference to this subchapter for the purpose of granting dissenters
rights.
(f) Certain provisions of articles ineffective.--This subchapter may not be
relaxed by any provision of the articles.
(g) Cross references.--See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).
1572 DEFINITIONS.--The following words and phrases when used in this
subchapter shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Corporation." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation,
division, conversion or otherwise of that issuer. A plan of division may
designate which of the resulting corporations is the successor corporation for
the purposes of this subchapter. The successor corporation in a division shall
have sole responsibility for payments to dissenters and other liabilities
under this subchapter except as otherwise provided in the plan of division.
"Dissenter." A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights.
"Fair value." The fair value of shares immediately before the effectuation
of the corporate action to which the dissenter objects taking into account all
relevant factors, but excluding any appreciation or depreciation in
anticipation of the corporate action.
"Interest." Interest from the effective date of the corporate action until
the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors including the average
rate currently paid by the corporation on its principal bank loans.
1573 RECORD AND BENEFICIAL HOLDERS AND OWNERS.--(a) Record holders of
shares.--A record holder of shares of a business corporation may assert
dissenters rights as to fewer than all of the shares registered in his name
only if he dissents with respect to all the shares of the same class or series
beneficially
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owned by any one person and discloses the name and address of the person or
persons on whose behalf he dissents. In that event, his rights shall be
determined as if the shares as to which he has dissented and his other shares
were registered in the names of different shareholders.
(b) Beneficial owners of shares.--A beneficial owner of shares of a business
corporation who is not the record holder may assert dissenters rights with
respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the
corporation not later than the time of the assertion of dissenters rights a
written consent of the record holder. A beneficial owner may not dissent with
respect to some but less than all shares of the same class or series owned by
the owner, whether or not the shares so owned by him are registered in his
name.
1574 NOTICE OF INTENTION TO DISSENT.--If the proposed corporate action is
submitted to a vote at a meeting of shareholders of a business corporation,
any person who wishes to dissent and obtain payment of the fair value of his
shares must file with the corporation, prior to the vote, a written notice of
intention to demand that he be paid the fair value for his shares if the
proposed action is effectuated, must effect no change in the beneficial
ownership of his shares from the date of such filing continuously through the
effective date of the proposed action and must refrain from voting his shares
in approval of such action. A dissenter who fails in any respect shall not
acquire any right to payment of the fair value of his shares under this
subchapter. Neither a proxy nor a vote against the proposed corporate action
shall constitute the written notice required by this section.
1575 NOTICE TO DEMAND PAYMENT.--(a) General rule.--If the proposed corporate
action is approved by the required vote at a meeting of shareholders of a
business corporation, the corporation shall mail a further notice to all
dissenters who gave due notice of intention to demand payment of the fair
value of their shares and who refrained from voting in favor of the proposed
action. If the proposed corporate action is to be taken without a vote of
shareholders, the corporation shall send to all shareholders who are entitled
to dissent and demand payment of the fair value of their shares a notice of
the adoption of the plan or other corporate action. In either case, the notice
shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is
received.
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.
(4) Be accompanied by a copy of this subchapter.
(b) Time for receipt of demand for payment.--The time set for receipt of the
demand and deposit of certificated shares shall be not less than 30 days from
the mailing of the notice.
1576 FAILURE TO COMPLY WITH NOTICE TO DEMAND PAYMENT, ETC.--(a) Effect of
failure of shareholder to act.--A shareholder who fails to timely demand
payment, or fails (in the case of certificated shares) to timely deposit
certificates, as required by a notice pursuant to section 1575 (relating to
notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.
(b) Restriction on uncertificated shares.--If the shares are not represented
by certificates, the business corporation may restrict their transfer from the
time of receipt of demand for payment until effectuation of the proposed
corporate action or the release of restrictions under the terms of section
1577(a) (relating to failure to effectuate corporate action).
(c) Rights retained by shareholder.--The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
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1577 RELEASE OF RESTRICTIONS OR PAYMENT FOR SHARES.--(a) Failure to
effectuate corporate action.--Within 60 days after the date set for demanding
payment and depositing certificates, if the business corporation has not
effectuated the proposed corporate action, it shall return any certificates
that have been deposited and release uncertificated shares from any transfer
restrictions imposed by reason of the demand for payment.
(b) Renewal of notice to demand payment.--When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming
to the requirements of section 1575 (relating to notice to demand payment),
with like effect.
(c) Payment of fair value of shares.--Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are
certificated) have deposited their certificates the amount that the
corporation estimates to be the fair value of the shares, or give written
notice that no remittance under this section will be made. The remittance or
notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair value of the
shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(d) Failure to make payment.--If the corporation does not remit the amount
of its estimate of the fair value of the shares as provided by subjection (c),
it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such
certificate or on the records of the corporation relating to any such
uncertificated shares that such demand has been made. If shares with respect
to which notation has been so made shall be transferred, each new certificate
issued therefor or the records relating to any transferred uncertificated
shares shall bear a similar notation, together with the name of the original
dissenting holder or owner of such shares. A transferee of such shares shall
not acquire by such transfer any rights in the corporation other than those
that the original dissenters had after making demand for payment of their fair
value.
1578 ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES.--(a) General rule.--If
the business corporation gives notice of its estimate of the fair value of the
shares, without remitting such amount, or remits payment of its estimate of
the fair value of a dissenter's shares as permitted by section 1577(c)
(relating to payment of fair value of shares) and the dissenter believes that
the amount stated or remitted is less than the fair value of his shares, he
may send to the corporation his own estimate of the fair value of the shares,
which shall be deemed a demand for payment of the amount or the deficiency.
(b) Effect of failure to file estimate.--Where the dissenter does not file
his own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the
corporation.
1579 VALUATION PROCEEDINGS GENERALLY.--(a) General rule.--Within 60 days
after the latest of:
(1) Effectuation of the proposed corporate action;
(2) Timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
(3) Timely receipt of any estimates pursuant to section 1578 (relating to
estimate by dissenter of fair value of shares);
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If any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the
shares be determined by the court.
(b) Mandatory joinder of dissenters.--All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served
on each such dissenter. If a dissenter is a nonresident, the copy may be
served on him in the manner provided or prescribed by or pursuant to 42
Pa.C.S. Ch. 53 (relating to bases of jurisdiction and interstate and
international procedure).
(c) Jurisdiction of the court.--The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(d) Measure of recovery.--Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found
to exceed the amount, if any, previously remitted, plus interest.
(e) Effect of corporation's failure to file application.--If the corporation
fails to file an application as provided in subsection (a), any dissenter who
made a demand and who has not already settled his claim against the
corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file
an application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not
previously remitted.
1580 COSTS AND EXPENSES OF VALUATION PROCEEDINGS.--(a) General rule.--The
costs and expenses of any proceeding under section 1579 (relating to valuation
proceedings generally), including the reasonable compensation and expenses of
the appraiser appointed by the court, shall be determined by the court and
assessed against the business corporation except that any part of the costs
and expenses may be apportioned and assessed as the court deems appropriate
against all or some of the dissenters who are parties and whose action in
demanding supplemental payment under section 1578 (relating to estimate by
dissenter of fair value of shares) the court finds to be dilatory, obdurate,
arbitrary, vexatious or in bad faith.
(b) Assessment of counsel fees and expert fees where lack of good faith
appears.--Fees and expenses of counsel and of experts for the respective
parties may be assessed as the court deems appropriate against the corporation
and in favor of any or all dissenters if the corporation failed to comply
substantially with the requirements of this subchapter and may be assessed
against either the corporation or a dissenter, in favor of any other party, if
the court finds that the party against whom the fees and expenses are assessed
acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner
in respect to the rights provided by this subchapter.
(c) Award of fees for benefits to other dissenters.--If the court finds that
the services of counsel for any dissenter were of substantial benefit to other
dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of
the amounts awarded to the dissenters who were benefitted.
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