-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BaTKbfB5lhlXdUqP4KgQbDmAukmCXSfL5mTlBksZK40zr51oCTPJa0R68S5iDAwX Zv/ON/7PUQ1/vrOkQQyyXg== 0000950129-98-001485.txt : 19980407 0000950129-98-001485.hdr.sgml : 19980407 ACCESSION NUMBER: 0000950129-98-001485 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19980406 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: HARCOR ENERGY INC CENTRAL INDEX KEY: 0000315272 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 330234380 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-32045 FILM NUMBER: 98588201 BUSINESS ADDRESS: STREET 1: FIVE POST OAK PARK STREET 2: STE 2220 CITY: HOUSTON STATE: TX ZIP: 77027-3413 BUSINESS PHONE: 7139611804 FORMER COMPANY: FORMER CONFORMED NAME: PANGEA PETROLEUM CO DATE OF NAME CHANGE: 19880120 FORMER COMPANY: FORMER CONFORMED NAME: POLLOCK PETROLEUM INC DATE OF NAME CHANGE: 19840807 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SENECA WEST CORP CENTRAL INDEX KEY: 0001059151 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 1201 LOUISIANA ST STREET 2: STE 400 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7136542600 MAIL ADDRESS: STREET 1: 1201 LOUISIANA ST STREET 2: STE 400 CITY: HOUSTON STATE: TX ZIP: 77002 SC 14D1 1 SENECA WEST CORP. FOR HARCOR ENERGY, INC. 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 --------------------- HARCOR ENERGY, INC. (Name of Subject Company) SENECA WEST CORP. A WHOLLY OWNED SUBSIDIARY OF SENECA RESOURCES CORPORATION WHICH IS A WHOLLY OWNED SUBSIDIARY OF NATIONAL FUEL GAS COMPANY (BIDDERS) COMMON STOCK, $.10 PAR VALUE (Title of Class of Securities) 411 628 209 (CUSIP Number of Class of Securities) --------------------- JOHN F. MCKNIGHT VICE PRESIDENT -- LAND AND LEGAL SENECA RESOURCES CORPORATION 1201 LOUISIANA, SUITE 400 HOUSTON, TX 77002 (713) 654-2643 FAX: (713) 654-2659 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidders) With a Copy To: GARY W. ORLOFF BRACEWELL & PATTERSON, L.L.P. SOUTH TOWER PENNZOIL PLACE 711 LOUISIANA STREET, SUITE 2900 HOUSTON, TX 77002 (713) 221-1306 FAX: (713) 221-1212 --------------------- CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE** $32,536,774 $6,508.00
--------------------- * For purposes of calculating the filing fee only. This calculation assumes the purchase of 16,268,387 shares of Common Stock, par value $.10 per share (the "Shares"), of HarCor Energy, Inc. at $2.00 net per share in cash. Such number of Shares represents all the Shares outstanding as of March 31, 1998. ** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of the Securities Exchange Act of 1934, as amended, equals 1/50th of 1% of the aggregate value of cash offered by Seneca West Corp. for such number of shares. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: Not applicable. Filing Party: Not applicable. Form or Registration No.: Not applicable. Dated Filed: Not applicable. ================================================================================ 2 SCHEDULE 14D-1 CUSIP NO.: 411 628 209 - --------------------------------------------------------------------------- (1) Name of Reporting Persons IRS Identification No. of above person Seneca West Corp. - --------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (a)[ ] N/A (b)[ ] - --------------------------------------------------------------------------- (3) SEC use only - --------------------------------------------------------------------------- (4) Source of Funds - --------------------------------------------------------------------------- (5) Check if Disclosure of Legal Proceedings is Required Pursuant to Item 2(d) or 2(e) [ ] - --------------------------------------------------------------------------- (6) Citizenship or Place of Organization Delaware - --------------------------------------------------------------------------- (7) Aggregate Amount Beneficially Owned by Each Reporting Person 0 - --------------------------------------------------------------------------- (8) Check if the Aggregate Amount in Row (7) Excludes Certain Shares [ ] - --------------------------------------------------------------------------- (9) Percent of Class Represented by Amount in Row (7) 0% - --------------------------------------------------------------------------- (10) Type of Reporting Person CO - ---------------------------------------------------------------------------
1 3 SCHEDULE 14D-1 CUSIP NO. 411 628 209 - -------------------------------------------------------------------------------- (1) Name of Reporting Persons IRS Identification No. of above person Seneca Resources Corporation - -------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (a) [ ] N/A (b) [ ] - -------------------------------------------------------------------------------- (3) SEC use only - -------------------------------------------------------------------------------- (4) Source of Funds - -------------------------------------------------------------------------------- (5) Check if Disclosure of Legal Proceedings is Required Pursuant to Item 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- (6) Citizenship or Place of Organization Pennsylvania - -------------------------------------------------------------------------------- (7) Aggregate Amount Beneficially Owned by Each Reporting Person 0 - -------------------------------------------------------------------------------- (8) Check if the Aggregate Amount in Row (7) Excludes Certain Shares [ ] - -------------------------------------------------------------------------------- (9) Percent of Class Represented by Amount in Row (7) 0% - -------------------------------------------------------------------------------- (10) Type of Reporting Person CO - -------------------------------------------------------------------------------- 2 4 SCHEDULE 14D-1 CUSIP NO.: 411 628 209 - -------------------------------------------------------------------------------- (1) Name of Reporting Persons IRS Identification No. of above person National Fuel Gas Company - -------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (a) [ ] N/A (b) [ ] - -------------------------------------------------------------------------------- (3) SEC use only - -------------------------------------------------------------------------------- (4) Source of funds - -------------------------------------------------------------------------------- (5) Check if Disclosure of Legal Proceedings is Required Pursuant to Item 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- (6) Citizenship or Place of Organization New Jersey - -------------------------------------------------------------------------------- (7) Aggregate Amount Beneficially Owned by Each Reporting Person 0 - -------------------------------------------------------------------------------- (8) Check if the Aggregate Amount in Row (7) Excludes Certain Shares [ ] - -------------------------------------------------------------------------------- (9) Percent of Class Represented by Amount in Row (7) 0% - -------------------------------------------------------------------------------- (10) Type of Reporting Person CO - -------------------------------------------------------------------------------- 3 5 This statement relates to a tender offer by Seneca West Corp., a Delaware corporation (the "Purchaser") and wholly owned subsidiary of Seneca Resources Corporation, a Pennsylvania corporation (the "Parent"), to purchase all outstanding shares (the "Shares") of Common Stock, par value $.10 per share (the "Common Stock") of HarCor Energy, Inc. at $2.00 per Share net to the seller in cash and without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase (the "Offer to Purchase"), a copy of which is attached hereto as Exhibit (a)(1), and in the related Letter of Transmittal, a copy of which is attached hereto as Exhibit (a)(2) (which together constitute the "Offer"). The Parent is a wholly owned subsidiary of National Fuel Gas Company, a New Jersey corporation ("National Fuel"). ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is HarCor Energy, Inc., a Delaware corporation (the "Company"). The principal executive offices of the Company are located at Five Post Oak Park, Suite 2220, Houston, Texas 77027. (b) The information set forth in the Introduction to, and in Section 1, "Terms of the Offer," of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 6, "Price Range of Shares; Dividends," of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. This Statement is being filed by the Purchaser, the Parent and National Fuel. The information set forth in the Introduction to, and in Section 9, "Certain Information Concerning the Purchaser, the Parent and National Fuel," and Schedule I, "Information Concerning the Directors and Executive Officers of National Fuel, the Parent and the Purchaser," of the Offer to Purchase is incorporated herein by reference. (a)-(d) and (g) The name, residence or business address, citizenship, present principal occupation or employment and material occupations during the last 5 years of each executive officer and director of National Fuel, the Parent and the Purchaser is set forth in Schedule I of the Offer to Purchase. (e) and (f) During the last five years, neither National Fuel, the Parent, the Purchaser nor any of the persons listed in Schedule I of the Offer to Purchase has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which any such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, or finding any violation of federal or state securities laws. ITEM 3. PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) and (b) The information set forth in the Introduction to, and in Section 9, "Certain Information Concerning the Purchaser, the Parent and National Fuel," and Section 10, "Background of the Offer; Contacts with the Company," of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) and (b) The information set forth in Section 13, "Source and Amount of Funds," of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. 4 6 ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth in the Introduction to, and in Section 11, "Purpose of the Offer and the Merger; Plans for the Company," and Section 13, "Source and Amount of Funds," of the Offer to Purchase is incorporated herein by reference. (f) and (g) The information set forth in Section 7, "Effect of the Offer on the Market for the Shares; Exchange Listing and Exchange Act Registration; Margin Regulations," of the Offer to Purchase is incorporated herein by reference. Other than as set forth in the Introduction to, or the above-referenced sections of, the Offer to Purchase, the Purchaser has no plans or proposals that relate to, or would result in, any transaction, change or other occurrence with respect to the Company or the Shares that is not set forth in any of paragraphs (a) through (g) of Item 5 of the Schedule 14D-1. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) and (b) The information set forth in the Introduction to, and in Section 9, "Certain Information Concerning the Purchaser, the Parent and National Fuel," and Section 12, "The Merger Agreement; Confidentiality Agreement," of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the Introduction to, and in Section 9, "Certain Information Concerning the Purchaser, the Parent and National Fuel," Section 10, "Background of the Offer; Contacts with the Company," and Section 12, "The Merger Agreement; Confidentiality Agreement," of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in Section 16, "Fees and Expenses," of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in Section 9, "Certain Information Concerning the Purchaser, the Parent and National Fuel," including the financial statements and the notes thereto incorporated by reference in Section 9, is incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in the Introduction to, and in Section 11, "Purpose of the Offer and the Merger; Plans for the Company," of the Offer to Purchase is incorporated herein by reference. (b) and (c) The information set forth in the Introduction to, and in Section 15, "Certain Legal Matters," of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 7, "Effect of the Offer on the Market for the Shares; Exchange Listing and Exchange Act Registration; Margin Regulations," of the Offer to Purchase is incorporated herein by reference. (e) None. (f) Reference is hereby made to the Offer to Purchase and the Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively, and which are incorporated herein by reference in their entirety. 5 7 ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase, dated April 6, 1998. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Text of Press Release, dated January 23, 1998, issued by the Company. (a)(8) Text of Joint Press Release, dated March 31, 1998, issued by the Company and the Parent. (a)(9) Form of Summary Advertisement, dated April 6, 1998. (c)(1) Agreement and Plan of Merger, dated as of March 31, 1998 among the Company, the Purchaser and the Parent. (c)(2) Confidentiality Agreement, dated as of March 17, 1997 between Dillon, Read & Co. Inc. and the Parent. 6 8 SIGNATURE AFTER DUE INQUIRY AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, I CERTIFY THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE, COMPLETE AND CORRECT. SENECA WEST CORP. By: /s/ WILLIAM M. PETMECKY ---------------------------------- Name: William M. Petmecky Title: President Dated: April 6, 1998 7 9 SIGNATURE AFTER DUE INQUIRY AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, I CERTIFY THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE, COMPLETE AND CORRECT. SENECA RESOURCES CORPORATION By: /s/ JAMES A. BECK ---------------------------------------- Name: James A. Beck Title: President Dated: April 6, 1998 8 10 SIGNATURE AFTER DUE INQUIRY AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, I CERTIFY THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE, COMPLETE AND CORRECT. NATIONAL FUEL GAS COMPANY By: /s/ JOSEPH PAWLOWSKI ---------------------------------- Name: Joseph Pawlowski Title: Treasurer Dated: April 6, 1998 9 11 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION ------- ----------- (a)(1) Offer to Purchase, dated April 6, 1998. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Text of Press Release, dated January 23, 1998, issued by the Company. (a)(8) Text of Joint Press Release, dated March 31, 1998, issued by the Company and the Parent. (a)(9) Form of Summary Advertisement, dated April 6, 1998. (c)(1) Agreement and Plan of Merger, dated as of March 31, 1998 among the Company, the Purchaser and the Parent. (c)(2) Confidentiality Agreement, dated as of March 17, 1997 between Dillon, Read & Co. Inc. and the Parent.
10 EX-99.A1 2 OFFER TO PURCHASE DATED APRIL 6, 1998 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF HARCOR ENERGY, INC. AT $2.00 NET PER SHARE BY SENECA WEST CORP., A WHOLLY OWNED SUBSIDIARY OF SENECA RESOURCES CORPORATION WHICH IS A WHOLLY OWNED SUBSIDIARY OF NATIONAL FUEL GAS COMPANY THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MAY 4, 1998, UNLESS THE OFFER IS EXTENDED. THE BOARD OF DIRECTORS OF HARCOR ENERGY, INC. (THE "COMPANY") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER (EACH AS DEFINED HEREIN), HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER AND THE MERGER AGREEMENT ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, A NUMBER OF SHARES (AS DEFINED HEREIN), WHICH, TOGETHER WITH ANY SHARES BENEFICIALLY OWNED BY THE PARENT OR THE PURCHASER, REPRESENT AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTION 14. 2 TABLE OF CONTENTS INTRODUCTION........................................................ 1 THE TENDER OFFER.................................................... 3 1. Terms of the Offer.......................................... 3 2. Acceptance for Payment and Payment for Shares............... 4 3. Procedures for Tendering Shares............................. 5 4. Withdrawal Rights........................................... 8 5. Certain Federal Income Tax Consequences..................... 9 6. Price Range of Shares; Dividends............................ 10 7. Effect of the Offer on the Market for the Shares; Stock Quotation; Margin Regulations and Exchange Act Registration.............................................. 10 8. Certain Information Concerning the Company.................. 11 9. Certain Information Concerning the Purchaser, the Parent and National Fuel............................................. 15 10. Background of the Offer; Contacts with the Company.......... 18 11. The Purpose of the Offer and the Merger; Plans for the Company................................................... 19 12. The Merger Agreement; Confidentiality Agreement............. 21 13. Source and Amount of Funds.................................. 26 14. Certain Conditions of the Offer............................. 26 15. Certain Legal Matters....................................... 28 16. Fees and Expenses........................................... 29 17. Miscellaneous............................................... 30 SCHEDULE I Information Concerning the Directors and Executive Officers of National Fuel, the Parent and the Purchaser........... 31
i 3 IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's Shares should either (a) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver the Letter of Transmittal (or such facsimile), together with the certificate(s) representing tendered Shares and any other required documents to the Depositary or, in lieu of delivering certificates representing such Shares, tender such Shares pursuant to the procedures for book-entry transfer set forth in Section 3, or (b) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such stockholder. A stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such stockholder desires to tender such Shares. A stockholder who desires to tender Shares and whose certificates representing such Shares are not immediately available or who cannot comply with the procedures for book-entry transfer on a timely basis may tender such Shares by following the procedures for guaranteed delivery set forth in Section 3. Questions and requests for assistance may be directed to the Information Agent at the addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other related materials may be obtained from the Information Agent or from brokers, dealers, commercial banks and trust companies. A stockholder may also contact brokers, dealers, commercial banks and trust companies for assistance concerning the Offer. --------------------- The Information Agent for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, LLC 450 West 33rd Street, 14th Floor New York, New York 10001 (800) 684-8823 4 To the Holders of Shares of Common Stock HarCor Energy, Inc.: INTRODUCTION Seneca West Corp. (the "Purchaser"), a Delaware corporation and a wholly owned subsidiary of Seneca Resources Corporation, a Pennsylvania corporation (the "Parent"), hereby offers to purchase all outstanding shares (the "Shares") of the Common Stock, par value $.10 per share (the "Common Stock"), of HarCor Energy, Inc, a Delaware corporation (the "Company"), at a price of $2.00 per Share, net to the seller in cash, without interest (the "Offer Price"), upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer"). The Parent is a wholly owned subsidiary of National Fuel Gas Company ("National Fuel"). Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The Parent will pay all fees and expenses of ChaseMellon Shareholder Services, LLC, as Depositary (the "Depositary"), and as Information Agent (the "Information Agent"), incurred in connection with the Offer. See Section 16. THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AND THE MERGER AGREEMENT (EACH AS DEFINED BELOW), HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES. SBC Warburg Dillon Read Inc. ("SBC Warburg Dillon Read"), the Company's financial advisor, has delivered to the Company Board its written opinion that the consideration to be received by the stockholders of the Company pursuant to each of the Offer and the Merger is fair to such stockholders from a financial point of view. A copy of the opinion of SBC Warburg Dillon Read is contained in the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to stockholders herewith. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES WHICH, TOGETHER WITH ANY SHARES BENEFICIALLY OWNED BY PARENT OR PURCHASER, REPRESENT AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"). The Company has represented and warranted to the Purchaser and the Parent in the Merger Agreement that, as of March 31, 1998, there were 16,268,387 Shares issued and outstanding, and 1,871,440 Shares were issuable pursuant to warrants granted to third parties and 783,000 Shares were issuable pursuant to options granted under the Company's option plans (as defined in Section 12). However, all (i) outstanding warrants to purchase shares of Common Stock are exerciseable at prices in excess of $2.00 per share, and therefore are not expected to be exercised, and (ii) the Company has represented and warranted to the Purchaser and the Parent that it has taken all action necessary so that all outstanding options and other rights to acquire Shares granted to directors, employees or others under any stock option or purchase plan, program or similar arrangement of the Company, whether or not then exercisable or vested, will be canceled by the Company upon consummation of the Offer. Since all such options are exerciseable at prices in excess of $2.00 per share, none are expected to be exercised. Further, the Company has represented and warranted to the Purchaser and the Parent that all outstanding warrants to purchase Shares will be converted into the right to receive $2.00 cash instead of each Share which would otherwise be purchasable upon the exercise thereof and payment of the exercise price thereunder. Since all warrants have exercise prices in excess of $2.00 per share, none are expected to be exercised. Based on the foregoing and assuming no additional Shares (or options, warrants or rights exercisable for, or convertible securities convertible into Shares) have been issued since March 31, 1998, if 5 8,134,194 Shares were validly tendered and not withdrawn prior to the Expiration Date (as hereinafter defined) pursuant to the terms of the Offer, the Minimum Condition would be satisfied. Certain other conditions to consummation of the Offer are described in Section 14. The Purchaser expressly reserves the right to waive any one or more of the conditions to the Offer (except that the Minimum Condition may not be waived without the Company's consent). See Section 14. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of March 31, 1998 (the "Merger Agreement"), among the Parent, the Purchaser and the Company. The Merger Agreement provides that, among other things, as soon as practicable after the purchase of Shares pursuant to the Offer and the satisfaction of the other conditions set forth in the Merger Agreement and in accordance with the relevant provisions of the Delaware General Corporation Law (the "DGCL"), the Purchaser will be merged with and into the Company (the "Merger"). Following consummation of the Merger, the Company will continue as the surviving corporation (the "Surviving Corporation") and as a wholly owned subsidiary of the Parent. At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior to the Effective Time (other than Shares owned by National Fuel, the Purchaser, the Parent, the Company or any wholly owned subsidiary of National Fuel, the Parent or the Company and Shares held by stockholders who perfect their dissenters' rights under Delaware law) will be canceled and converted automatically into the right to receive $2.00 in cash, or any higher price that may be paid per Share in the Offer, without interest (the "Merger Consideration"). The Merger Agreement is more fully described in Section 12. The Merger Agreement provides that, upon the purchase by the Purchaser of a majority of the Shares pursuant to the Offer and from time to time thereafter, the Parent shall be entitled to designate all members of the Company Board. The current directors of the Company have indicated to the Parent that they intend to resign as directors of the Company as soon as reasonably practicable upon the Purchaser purchasing at least a majority of the outstanding Shares pursuant to the Offer, and the Company shall exercise reasonable efforts to secure the resignations of all directors to enable such Parent designees to be so elected or appointed. Such designees will abstain from any action proposed to be taken by the Company to amend or terminate the Merger Agreement or waive any action by the Parent or the Purchaser. The Company's obligations to appoint designees to the Board of Directors shall be subject to Section 14(f) of the Exchange Act, which provides, among other things, for dissemination of information to a company's stockholders. Under the DGCL, if the Purchaser acquires, pursuant to the Offer or otherwise, at least 90% of the outstanding Shares, the Purchaser will be able to approve the Merger Agreement and the transactions contemplated thereby without a vote of the stockholders. In such event, the Parent, the Purchaser and the Company have agreed in the Merger Agreement to take, at the request of the Parent and subject to the satisfaction of the conditions set forth in the Merger Agreement, all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after such acquisition, without a meeting of the stockholders, in accordance with Section 253 of the DGCL. If, however, the Purchaser does not acquire at least 90% of the outstanding Shares pursuant to the Offer or otherwise and a vote of the stockholders is required under the DGCL, a significantly longer period of time would be required to effect the Merger. In the Merger Agreement, the Parent, the Purchaser and the Company have agreed that, notwithstanding that all conditions to the Offer are satisfied or waived as of the scheduled Expiration Date, the Purchaser may extend the Offer for a period of time not to exceed 10 business days, subject to certain conditions, if the Shares tendered pursuant to the Offer are less than 90% of the outstanding Shares. THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 2 6 THE TENDER OFFER 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not properly withdrawn in accordance with the procedures set forth in Section 4. The term "Expiration Date" means 12:00 Midnight, New York City time, on Monday, May 4, 1998, unless and until the Purchaser shall have extended the period of time during which the Offer is open, subject to the terms of the Merger Agreement, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. Consummation of the Offer is conditioned upon satisfaction of the Minimum Condition and the other conditions set forth in Section 14. If such conditions are not satisfied prior to the Expiration Date, the Purchaser reserves the right, but shall not be obligated, to decline to purchase any of the Shares tendered, delay the acceptance for payment of any Shares or terminate or amend the Offer, subject to the terms of the Merger Agreement. Subject to the terms and conditions contained in the Merger Agreement, the Purchaser reserves the right, but shall not be obligated, to waive in whole or in part, at any time and from time to time, any or all of such conditions, provided that the Minimum Condition cannot be waived by the Purchaser without the written consent of the Company. In the Merger Agreement, the Parent, the Purchaser and the Company have agreed that, notwithstanding that all conditions to the Offer are satisfied or waived as of the scheduled Expiration Date, the Purchaser may extend the Offer, subject to certain conditions as set forth in the Merger Agreement, for a period not to exceed 10 business days if the Shares tendered pursuant to the Offer are less than 90% of the outstanding Shares. See Section 12. Pursuant to the Merger Agreement, the Purchaser may not, without the written consent of the Company, (i) decrease or change the form of consideration to be paid in the Offer, (ii) reduce the maximum number of Shares to be purchased in the Offer or the Minimum Condition, (iii) impose additional conditions to the Offer, (iv) change the conditions to the Offer (except that the Parent in its sole discretion may waive any of the conditions to the Offer other than the Minimum Condition), or (v) amend any other term or condition of the Offer in a manner adverse to the holders of the Shares. Subject to the terms and conditions of the Offer and the Merger, the Purchaser shall, and the Parent shall cause the Purchaser to, pay for all Shares validly tendered and not withdrawn pursuant to the Offer that the Purchaser becomes obligated to purchase pursuant to the Offer as soon as practicable after the expiration of the Offer. There can be no assurance that either the Purchaser will, or that the Company will exercise its rights to cause the Purchaser to, extend the Offer (other than as required by the Merger Agreement or applicable law). Any extension, amendment or termination of the Offer, or any waiver of any condition of the Offer, will be followed as promptly as practicable by a public announcement. In the case of an extension, Rule 14e-l(d) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires that the announcement be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act. As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1 under the Exchange Act; namely, any day other than Saturday, Sunday or a Federal holiday, and consisting of the period of time from 12:01 a.m. through 12:00 midnight Eastern time. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform stockholders of such change), and without limiting the manner in which the Purchaser may choose to make any public announcement, neither National Fuel, the Parent nor the Purchaser will have any obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. During any extension of the Offer, all Shares previously tendered and not properly withdrawn will remain subject to the Offer, subject to the rights of a tendering stockholder to withdraw such stockholder's Shares in accordance with the procedures set forth in Section 4. THE PURCHASER SHALL NOT HAVE ANY OBLIGATION TO PAY INTEREST ON THE PURCHASE PRICE FOR TEN- 3 7 DERED SHARES, WHETHER OR NOT THE PURCHASER EXERCISES ITS RIGHT TO EXTEND THE OFFER. If the Purchaser extends the Offer or if the Purchaser is delayed in its acceptance for payment of or payment for Shares (whether before or after its acceptance for payment of Shares) or it is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described in Section 4. However, the ability of the Purchaser to delay the payment for Shares that the Purchaser has accepted for payment is limited by Rule 14e-l(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of such bidder's offer. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer (including, subject to the Merger Agreement, the Minimum Condition), the Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following a material change in the terms of the offer or information concerning the offer, other than a change in price or a change in the percentage of securities sought, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. In a public release, the Securities and Exchange Commission (the "Commission") has stated that in its view an offer must remain open for a minimum period of time following a material change in the terms of the Offer and that waiver of a material condition, such as the Minimum Condition, is a material change in the terms of the Offer. The release states that an offer should remain open for a minimum of five business days from the date a material change is first published, sent or given to security holders and that, if material changes are made with respect to information not materially less significant than the offer price and the number of shares being sought, a minimum of ten business days may be required to allow adequate dissemination and investor response. The requirement to extend the Offer will not apply to the extent that the number of business days remaining between the occurrence of the change and the then-scheduled Expiration Date equals or exceeds the minimum extension period that would be required because of such amendment. If, prior to the Expiration Date, the Purchaser increases the consideration offered to holders of Shares pursuant to the Offer, such increased consideration will be paid to all holders whose Shares are purchased in the Offer whether or not such Shares were tendered prior to such increase in consideration. The Company has provided the Purchaser with the Company's stockholder list and security position listing for the purpose of disseminating the Offer to holders of the Shares. This Offer to Purchase, the related Letter of Transmittal and other relevant materials are being mailed by the Purchaser to record holders of Shares and will be furnished by the Purchaser to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will purchase, by accepting for payment, and will pay for, as soon as it is permitted to do so under applicable law, all Shares validly tendered prior to the Expiration Date and not properly withdrawn in accordance with the procedures set forth in Section 4. All determinations concerning the satisfaction of such terms and conditions will be within the Purchaser's reasonable discretion, which determinations will be final and binding. See Sections 1 and 14. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of or payment for Shares in order to comply in whole or in part with any applicable law. Any such delays will be effected in compliance with Rule 14e-l(c) promulgated under the Exchange Act (relating to a bidder's obligation to pay for or return tendered securities promptly after the termination or 4 8 withdrawal of such bidder's offer). In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares (the "Share Certificates") or timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 3, (ii) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message (as defined below) and (iii) any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares which are the subject of such Book-Entry Confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against the participant. For purposes of the Offer, the Purchaser shall be deemed to have accepted for payment, and thereby purchased, Shares validly tendered prior to the Expiration Date and not properly withdrawn if, as and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance of such Shares for payment pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted pursuant to the Offer will be made by deposit of the aggregate purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to such tendering stockholders. Under no circumstances will interest on the purchase price for Shares be paid regardless of any extension of the Offer or any delay in making such payment. Upon the deposit of funds with the Depositary for the purpose of making payments to tendering stockholders, the Purchaser's obligation to make such payment shall be satisfied and tendering stockholders must thereafter look solely to the Depositary for payment of amounts owed to them by reason of the acceptance for payment of Shares pursuant to the Offer. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The Purchaser will pay all charges and expenses of the Depositary and the Information Agent. If any tendered Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer, or if Share Certificates are submitted evidencing more Shares than are tendered, Share Certificates evidencing such unpurchased Shares or untendered Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3, such Shares will be credited to an account maintained at such Book-Entry Transfer Facility) as promptly as practicable following the expiration, termination or withdrawal of the Offer. The Purchaser reserves the right to transfer or assign, in whole at any time, or in part from time to time, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer or prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURES FOR TENDERING SHARES. Valid Tender of Shares. In order for Shares to be validly tendered pursuant to the Offer, the Letter of Transmittal or a facsimile thereof, properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other required documents, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date and either (i) the Share Certificates evidencing tendered Shares must be received by the Depositary along with the Letter of Transmittal, or (ii) Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be 5 9 received by the Depositary, or (iii) the tendering stockholder must comply with the guaranteed delivery procedures described below, in each case prior to the Expiration Date. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY THEREOF WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Book-Entry Transfer. The Depositary will establish an account with respect to the Shares at the Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in any of the Book-Entry Transfer Facilities' systems may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Shares may be effected through book-entry transfer at a Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed and with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other required documents, must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date or the tendering stockholder must comply with the guaranteed delivery procedures described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signature Guarantees. Signatures on all Letters of Transmittal must be guaranteed by a firm which is a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program (each of the foregoing being referred to as an "Eligible Institution"), unless the Shares tendered thereby are tendered (i) by a registered holder of Shares who has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If a Share Certificate is registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or a Share Certificate not accepted for payment or not tendered is to be returned to a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the Share Certificate, with the signature(s) on such Share Certificate or stock powers guaranteed as described above. See Instructions 1 and 5 of the Letter of Transmittal. Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's Share Certificates are not immediately available or time will not permit all required documents to reach the Depositary prior to the Expiration Date or the procedure for book-entry transfer cannot be completed on a timely basis, such Shares may nevertheless be tendered if all the following conditions are satisfied: (i) the tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser herewith, is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the Share Certificates for all tendered Shares, in proper form for transfer, or a Book-Entry Confirmation, together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signature guarantee (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by such Letter of Transmittal, are received by 6 10 the Depositary within three trading days after the date of execution of the Notice of Guaranteed Delivery. A "trading day" is any day on which the National Association of Securities Dealers, Inc. Automated Quotation ("Nasdaq") National Market System is open for business. Any Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares purchased pursuant to the Offer will, in all cases, be made only after timely receipt by the Depositary of (i) the Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the delivery of such Shares, (ii) a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) (or, in the case of a book-entry transfer, an Agent's Message) and (iii) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times, depending upon when the foregoing materials are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. Backup Federal Withholding Tax. To prevent backup federal income tax withholding with respect to payment to certain stockholders of the purchase price of Shares purchased pursuant to the Offer, each such stockholder must, unless an exemption applies, provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") and certify, under penalty or perjury, that such TIN is correct and that such stockholder is not subject to backup federal income tax withholding by completing the Substitute Form W-9 included in the Letter of Transmittal. If a stockholder does not provide such stockholder's correct TIN or fails to provide the certifications described above, the Internal Revenue Service (the "IRS") may impose a penalty on such stockholder and payment of cash to such stockholder pursuant to the Offer may be subject to backup withholding of 31%. All stockholders surrendering Shares pursuant to the Offer should complete and sign the main signature form and the Substitute Form W-9 included as part of the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Purchaser and the Depositary). Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Foreign stockholders, if exempt, should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 9 of the Letter of Transmittal. Appointment as Proxy; Distributions. By executing a Letter of Transmittal as set forth above, a tendering stockholder irrevocably appoints designees of the Purchaser as such stockholder's attorneys-in-fact and proxies, in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser (and any and all non-cash dividends, distributions, rights, other Shares, or other securities issued or issuable in respect of such Shares on or after the date of the Merger Agreement). All such powers of attorney and proxies shall be considered coupled with an interest in the tendered Shares. This appointment will be effective if, when, and only to the extent that, the Purchaser accepts such Shares for payment pursuant to the Offer. Upon such acceptance for payment, all prior powers of attorney and proxies given by such stockholder with respect to such Shares and other securities will, without further action, be revoked, and no subsequent powers of attorney or proxies may be given (and, if given, will not be deemed effective). The designees of the Purchaser will, with respect to the Shares and other securities for which the appointment is effective, be empowered to exercise all voting and other rights of such stockholder as they in their sole discretion may deem proper at any annual, special, adjourned or postponed meeting of the Company's stockholders, by written consent or otherwise, and the Purchaser reserves the right to require that, in order for Shares or other securities to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares the Purchaser must be able to exercise full voting, consent and other rights with respect to such Shares and other securities, including voting at any meeting of stockholders then 7 11 scheduled. Such powers of attorney and proxies will be irrevocable and will be granted in consideration of the purchase of the Shares by the Purchaser in accordance with the terms of the Offer. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tendered Shares pursuant to any of the procedures described above will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding on all parties. The Purchaser reserves the absolute right to reject any or all tenders of any Shares determined by it not to be in proper form or if the acceptance for payment of, or payment for, such Shares may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right, in its sole discretion, subject to the Merger Agreement, to waive any of the conditions of the Offer or any defect or irregularity in any tender with respect to Shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding on all parties. None of National Fuel, the Parent, the Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or will incur any liability for failure to give any such notification. Binding Agreement. A tender of Shares pursuant to any of the procedures described above will constitute the tendering stockholder's acceptance of the terms and conditions of the Offer. The Purchaser's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after June 8, 1998. If the Purchaser extends the Offer, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as described in this Section 4. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3, any notice of withdrawal must also specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding on all parties. None of National Fuel, the Parent, the Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or will incur any liability for failure to give any such notification. 8 12 Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. Withdrawals of tenders of Shares may not be rescinded. However, withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in Section 3 on or prior to the Expiration Date. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a summary of certain United States federal income tax consequences of the Offer and the Merger to stockholders whose Shares are purchased pursuant to the Offer or whose Shares are converted to cash in the Merger (including pursuant to the exercise of perfected dissenter rights under the DGCL). The discussion applies only to stockholders in whose hands Shares are capital assets, and may not apply to Shares received pursuant to the exercise of employee stock options or otherwise as compensation, or to stockholders who are in special tax situations (such as insurance companies, tax-exempt organizations or dealers in securities). This discussion does not discuss the federal income tax consequences to a stockholder who, for United States federal income tax purposes, is a nonresident alien individual, a foreign corporation, a foreign partnership or a foreign estate or trust. THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH STOCKHOLDER SHOULD CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS TO SUCH STOCKHOLDER OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER INCOME TAX LAWS. The receipt of cash for Shares pursuant to the Offer or the Merger will be a taxable transaction for federal income tax purposes (and also may be a taxable transaction under applicable state, local and other income tax laws). In general, for federal income tax purposes, a stockholder will recognize gain or loss in an amount equal to the difference between such stockholder's adjusted tax basis in the Shares sold pursuant to the Offer or converted into cash in the Merger and the amount of cash received therefor. Generally, gain or loss must be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) sold pursuant to the Offer or converted into cash in the Merger, although if the identity of the separate blocks cannot be determined, the Shares sold or converted must ordinarily be charged first against the earliest purchases. Such gain or loss will be capital gain or loss if the Shares are held as a capital asset by the stockholder, and will be long-term gain or loss if the Shares were held by the stockholder for more than one year on the date of sale (in the case of the Offer) or the Effective Time of the Merger (in the case of the Merger). For this purpose, a stockholder's holding period will be computed beginning on the day following the date of purchase of the Shares and ending on the date of sale or the Effective Time of the Merger. Pursuant to the Taxpayer Relief Act of 1997, the maximum rate of federal income tax on long-term capital gains now varies. Capital assets held for at least 12 months but less than 18 months are subject to various tax rates, while capital assets held more than 18 months are subject to a reduced maximum rate, in each instance, subject to a maximum rate of 28%. 9 13 6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are quoted and traded on the Nasdaq National Market under the symbol "HARC." The following table sets forth, for the fiscal quarters indicated, the high and low reported sales prices per Share on the Nasdaq National Market as reported by the Dow Jones News Service.
HIGH LOW ----- ----- Fiscal Year Ended December 31, 1995: First Quarter............................................. $4.38 $2.88 Second Quarter............................................ $4.38 $2.75 Third Quarter............................................. $3.50 $2.50 Fourth Quarter............................................ $3.38 $1.88 Fiscal Year Ended December 31, 1996: First Quarter............................................. $5.38 $2.31 Second Quarter............................................ $5.13 $4.06 Third Quarter............................................. $6.25 $4.17 Fourth Quarter............................................ $6.11 $4.38 Fiscal Year Ended December 31, 1997: First Quarter............................................. $6.88 $4.25 Second Quarter............................................ $6.56 $5.63 Third Quarter............................................. $6.13 $4.56 Fourth Quarter............................................ $5.25 $1.38 Fiscal Year Ending December 31, 1998: First Quarter............................................. $2.31 $1.28
On January 22, 1998, the last full trading day prior to the public announcement of the execution by the Parent and the Company of a letter of intent to acquire the Company for consideration of $2 per share, and on March 30, 1998, the last full trading day prior to the public announcement of the execution of the Merger Agreement and of Purchaser's intention to commence the Offer, the closing price per Share as reported on the Nasdaq was $1.63 and $1.78, respectively. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. The Company has never paid any cash dividends on the Shares. The Merger Agreement provides that, without the prior written consent of the Parent, the Company will not declare, set aside or pay any dividend on or make any other distribution in respect of any of its capital stock. See Section 12. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION; MARGIN REGULATIONS AND EXCHANGE ACT REGISTRATION. Market for the Shares. The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and could reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. Stock Quotation. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements for continued inclusion in the Nasdaq National Market and may be deregistered under Section 12(g) of the Exchange Act. The Parent and the Purchaser intend to cause the removal from quotation and deregistration of the Shares following consummation of the Offer. According to Nasdaq's published guidelines, in order for the shares to be eligible for continued inclusion in the Nasdaq National Market, there must continue to be, among other things, at least 750,000 publicly held Shares, held by at least 400 stockholders of round lots, with a market value of at least $5 million. The Company has advised the Purchaser that, as of March 31, 1998, there were 16,268,387 Shares outstanding, held by approximately 1,610 holders of record. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares are no longer eligible for inclusion in the Nasdaq National Market, the market for the Shares could be adversely affected. 10 14 If the Shares were no longer eligible for inclusion in the Nasdaq National Market, they may nevertheless continue to be included in the Nasdaq SmallCap Market, unless, among other things, the number of publicly held Shares (excluding Shares held by officers, directors and beneficial owners of more than 10% of the Shares) was less than 500,000, or there were fewer than 300 shareholders of round lots in total. If the Shares are no longer eligible for inclusion in the Nasdaq National Market or the Nasdaq SmallCap Market, the Shares may still be quoted on the OTC Bulletin Board. The extent of the public market therefor and the availability of such quotations would depend, however, upon such factors as the number of stockholders and/or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act as described below, and other factors. The Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future market prices to be greater or less than the Merger Consideration. Margin Regulations. The Shares are currently "margin securities," as such term is defined under the rules of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing banks to extend credit on the collateral of such securities. Depending upon factors similar to those described above regarding listing and market quotations, following the Offer it is possible that the Shares might no longer constitute "margin securities" for purposes of the margin regulations of the Federal Reserve Board, in which event such Shares might no longer be eligible as collateral for loans made by banks. Exchange Act Registration. The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the Commission if the Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act would, subject to Section 15(d) of the Exchange Act, substantially reduce the information required to be furnished by the Company to its stockholders and to the Commission and would make certain provisions of the Exchange Act no longer applicable to the Company, such as (i) the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, (ii) the requirement of furnishing a proxy or information statement pursuant to Section 14(a) or (c) of the Exchange Act in connection with stockholders' meetings and the related requirement of furnishing an annual report to stockholders and, (iii) the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or 144A promulgated under the Securities Act of 1933, as amended, may be impaired or eliminated. THE PURCHASER INTENDS TO SEEK TO CAUSE THE COMPANY TO APPLY FOR REMOVAL OF THE SHARES FROM QUOTATION ON THE NASDAQ NATIONAL MARKET AND FOR TERMINATION OF REGISTRATION OF THE SHARES UNDER THE EXCHANGE ACT AS SOON AFTER THE COMPLETION OF THE OFFER AS THE REQUIREMENTS FOR SUCH DELISTING AND/OR TERMINATION ARE MET. IF EXCHANGE ACT REGISTRATION OF THE SHARES IS NOT TERMINATED PRIOR TO THE MERGER, THEN THE REGISTRATION OF THE SHARES UNDER THE EXCHANGE ACT WILL BE TERMINATED FOLLOWING THE CONSUMMATION OF THE MERGER. 8. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning the Company contained in this Offer to Purchase, including financial information, has been furnished by the Company or been taken from or based upon publicly available documents and records on file with the Commission and other public sources. Neither National Fuel, the Parent nor the Purchaser assumes any responsibility for the accuracy or completeness of the information concerning the Company contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information, but which are unknown to National Fuel, the Parent or the Purchaser. 11 15 The Company is a Delaware corporation and its principal executive offices are located at Five Post Oak Park, Suite 2220, Houston, Texas 77027. The Company is an independent oil and gas company engaged in the acquisition, exploitation and exploration of onshore oil and gas properties located in the United States. Formerly named Pangea Petroleum Company, the Company was organized as a California corporation in 1976, but did not conduct significant operations until after May 1980. In 1987, control was shifted to a group including its current chairman, the jurisdiction of incorporation was changed from California to Delaware, and the Company changed its name from Pangea Petroleum Company to its present name. The Company's proved reserves have grown from approximately 0.5 million barrels of oil equivalent ("MMBOE") at January 1, 1987 to approximately 25.6 MMBOE at January 1, 1998. Following the Company's sale of its non-California properties in February 1998 for approximately $12.8 million in cash (plus an additional cash amount of approximately $700,000, to be based upon the determination of reserves for a recently completed well), the Company's principal reserves and producing properties are now located in the San Joaquin Basin of California. Based on the estimates of independent petroleum engineers as of January 1, 1998, the Company had total proved reserves of approximately 25.6 MMBOE consisting of 11.5 million barrels of crude oil and natural gas liquids and 84.4 billion cubic feet of natural gas, including 1.6 million barrels of crude oil and 9.7 billion cubic feet of natural gas attributable to the non-California properties. The Company's estimate at that time of future net cash flows before income taxes from its total proved reserves, or the pre-tax SEC 10% present value at January 1, 1998, was approximately $95.4 million, approximately $13.8 million of which was attributable to net proved reserves attributable to the non-California properties. The above net cash flows include the Company's ownership of a 75% interest in a 22 million cubic feet per day gas processing and fractionation plant in the San Joaquin Basin which processes the natural gas produced in the San Joaquin Basin by the Company and certain third parties. Set forth below is certain selected consolidated financial information with respect to the Company, excerpted or derived from the Company's 1997 Annual Report on Form 10-K, filed with the Commission pursuant to the Exchange Act. More comprehensive information concerning the Company is included in such report and in other documents filed by the Company with the Commission. The following summary is qualified in its entirety by reference to such report and other documents and all of the financial information (including any related notes) contained therein. Such report and other documents may be inspected and copies may be obtained from the Commission and the Nasdaq in the manner set forth below. 12 16 HARCOR ENERGY COMPANY SELECTED CONSOLIDATED STATEMENT OF OPERATIONS DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
AT DECEMBER 31, ----------------------------- 1997 1996 1995 ------- ------- ------- Total Revenues:............................................. $21,946 $31,622 $22,595 Total Costs and Expenses:................................... 26,680 31,285 25,325 Income (loss) before provision for income taxes and extraordinary item.................................... (4,733) 337 (2,730) Net operating income (loss) before extraordinary item........................................ (4,733) 337 (2,730) Extraordinary Item Loss on early extinguishment of debt...................... -- (2,135) (1,888) Net Loss.................................................. (4,733) (1,798) (4,618) Net Loss Applicable to Common Stockholders.................. (4,793) (2,259) (7,765) Net Loss Per Common Share Before Extraordinary Item......... n/a (.01) (.74) Net Loss Per Common Share After Development Costs Extraordinary Item........................................ (.30) (.20) (.98)
13 17 HARCOR ENERGY COMPANY SELECTED CONSOLIDATED BALANCE SHEET DATA (IN THOUSANDS) ASSETS
AT DECEMBER 31, ------------------------------ 1997 1996 1995 ------- -------- ------- CURRENT ASSETS Cash and Cash Investments................................. $ 1,144 $ 1,593 $12,204 Accounts Receivable....................................... 4,111 8,894 3,830 Prepaids and Others....................................... 169 186 283 ------- -------- ------- Total Current Assets...................................... 5,424 10,673 16,317 ======= ======== ======= PROPERTY AND EQUIPMENT Unproved oil and gas properties........................... 4,403 4,080 5,040 Proved oil and gas properties: Leasehold Costs........................................ 57,875 56,935 54,794 Plant, lease and well.................................. 22,262 19,195 16,858 Intangible Development................................. 34,659 28,918 18,547 Furniture and Equipment................................... 397 374 256 Less -- accumulated depletion, depreciation and amortization........................................... (34,121) (28,876) (22,648) Net property, plant and equipment......................... 85,475 80,626 72,847 OTHER ASSETS................................................ 2,629 3,328 5,067 ------- -------- ------- Total Assets...................................... $93,528 $ 94,627 $94,231 ======= ======== ======= LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Total Current Liabilities................................. $10,008 $ 10,734 $14,992 LONG-TERM DEBT: Long-Term Bank Debt....................................... 4,505 1,700 5,600 14 7/8% Senior Secured Notes.............................. 52,638 52,400 63,109 STOCKHOLDERS' EQUITY: Total Stockholders' Equity................................ 26,377 29,793 10,215
14 18 The Company is subject to the informational and reporting requirements of the Exchange Act and is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities, any material interests of such persons in transactions with the Company and other matters is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the Commission. These reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be available for inspection and copying at prescribed rates at the following regional offices of the Commission: 7 World Trade Center, 13th Floor, New York, New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of this material may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's public reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a World Wide Web site on the internet at http://www.sec.gov that contains reports and certain other information regarding registrants, including the Company, that file electronically with the Commission. Reports, proxy statements and other information concerning the Company should also be on file at the offices of the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006. 9. CERTAIN INFORMATION CONCERNING THE PURCHASER, THE PARENT AND NATIONAL FUEL. The Purchaser. The Purchaser is a newly formed Delaware corporation organized in connection with the Offer and the Merger and has not carried on any activities other than in connection with its formation and capitalization and the transactions contemplated by the Offer and the Merger. The principal executive offices of the Purchaser are located at 1201 Louisiana, Suite 400, Houston, Texas 77002. The Purchaser is a wholly owned subsidiary of the Parent, which in turn is a wholly owned subsidiary of National Fuel. The Parent. The Parent is a corporation organized under the laws of Pennsylvania, and its principal executive offices are located at 1201 Louisiana, Suite 400, Houston, Texas 77002. The Parent is engaged in the exploration for and the development and purchase of, natural gas and oil reserves in the Gulf Coast of Texas and Louisiana, in California and in the Appalachian Region of the United States. National Fuel. National Fuel is a registered holding company under the Public Utility Holding Company Act of 1935, as amended, organized under the laws of the state of New Jersey, and its principal executive offices are located at 10 Lafayette Square, Buffalo, New York 14203. National Fuel's $2.1 billion in assets is distributed among four business segments: utility, pipeline and storage, exploration and production and other nonregulated activities. Utility operations sell or transport natural gas to nearly 732,500 customers in western New York and northwestern Pennsylvania. Major areas served include Buffalo, Niagara Falls and Jamestown in New York and Erie and Sharon in Pennsylvania. These operations are regulated by a state Commission in each state. Pipeline and storage operations transport and store natural gas for National Fuel's local distribution areas, as well as for utilities, pipelines and other companies in the growing markets of the northeastern United States. These operations own and operate a 3,241 mile pipeline network that extends from southwestern Pennsylvania to the Canadian gateway at Niagara Falls. The subsidiary operating in this segment also owns and operates 30 underground natural gas storage areas and is co-owner and operator of four others. Most of its operations are regulated by the Federal Energy Regulatory Commission. Exploration and production operations of National Fuels are conducted principally through the Parent. Other nonregulated activities include the marketing and brokering of natural gas for utilities and retail customers; foreign and domestic energy related investment opportunities, including wholesale generation of electricity; the operation of a sawmill and kiln at Kane, Pennsylvania where timber is processed from north central Pennsylvania; and a subsidiary which, with other unaffiliated companies, operates market center hubs and electronic trading platforms throughout North America, involving the transportation, storage, purchase, sale, exchange, borrowing or lending of natural gas. Set forth below is certain selected consolidated financial information with respect to National Fuel and its subsidiaries for the three month periods ended December 31, 1997 and 1996 and the fiscal years ended 15 19 September 30, 1997, 1996 and 1995. Such financial information has been taken from the periodic reports and other documents filed by National Fuel with the Commission. More comprehensive information concerning National Fuel is included in such reports and other documents filed by National Fuel with the Commission. The following summary is qualified in its entirety by reference to such reports and other documents and all of the financial information (including any related notes) contained therein. Such reports and other documents may be inspected and copies may be obtained from the offices of the Commission and the New York Stock Exchange in the manner set forth below. 16 20 NATIONAL FUEL GAS COMPANY SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT OUTSTANDING SHARES AND PER SHARE AMOUNTS)
THREE MONTHS ENDED DECEMBER 31, YEAR ENDED SEPTEMBER 30, ------------------------- --------------------------------------- 1997 1996 1997 1996 1995 ----------- ----------- ----------- ----------- ----------- (UNAUDITED) INCOME STATEMENT DATA: Operating Revenues............ $ 371,021 $ 363,492 $ 1,265,812 $ 1,208,017 $ 975,496 Operating Income.............. 51,573 52,153 168,303 157,446 124,399 Net Income Available for Common Stock............... 36,827 38,590 114,688 104,671 75,894 Earnings Per Common Share..... .96 1.02 3.01 2.78 2.03 Weighted Average Common Shares Outstanding................ 38,197,757 37,952,194 38,083,514 37,613,305 37,396,875
AT DECEMBER 31, AT SEPTEMBER 30, -------------------- ----------------------- 1997 1996 (UNAUDITED) ---------- ---------- BALANCE SHEET DATA: Property Plant and Equipment...................... $2,775,126 $2,688,478 $2,471,063 Current Assets.................................... 327,250 208,667 220,981 Total Assets...................................... 2,427,695 2,267,331 2,149,772 Long-Term Debt, Net of Current Portion............ 586,273 581,640 574,000 Total Common Stock Equity......................... 934,639 913,704 855,998
National Fuel is subject to the informational and reporting requirements of the Exchange Act and is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning National Fuel's directors and officers, their remuneration, stock options granted to them, the principal holders of National Fuel's securities, any material interests of such persons in transactions with National Fuel and other matters is required to be disclosed in proxy statements distributed to National Fuel's stockholders and filed with the Commission. These reports, proxy statements and other information should be available for inspection and copies may be obtained in the same manner as set forth for the Company in Section 8, except that National Fuel's common stock is traded on the New York Stock Exchange, and reports, proxy statements and other information concerning National Fuel should also be on file at the New York Stock Exchange, 20 Broad Street, New York, New York 10005. The name, citizenship, business address, principal occupation or employment and five-year employment history for each of the directors and executive officers of National Fuel, the Purchaser and the Parent are set forth in Schedule I hereto. None of National Fuel, the Parent or the Purchaser, or, to the knowledge of National Fuel, the Parent or the Purchaser, any of the persons listed in Schedule I hereto, or any associate or majority-owned subsidiary of such persons, beneficially owns any equity security of the Company, and neither National Fuel, the Parent nor the Purchaser, nor, to the knowledge of National Fuel, the Parent and the Purchaser, any of the other persons referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any equity security of the Company during the past 60 days. Except as set forth in this Offer to Purchase, none of National Fuel, the Parent or the Purchaser, or, to the knowledge of National Fuel, the Parent and the Purchaser, any of the persons listed in Schedule I hereto or any associate or majority-owned subsidiary of any of the foregoing, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, without limitation, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, none of National Fuel, the Parent or the Purchaser, or, to the knowledge of National Fuel, the 17 21 Parent and the Purchaser, any of the persons listed in Schedule I hereto nor any associate or majority-owned subsidiary of any of the foregoing has had any transactions with the Company, or any of its executive officers, directors or affiliates that would require reporting under the rules of the Commission. Except as set forth in this Offer to Purchase, there have been no contacts, negotiations or transactions between National Fuel, the Parent or the Purchaser, or their respective subsidiaries, or, to the knowledge of National Fuel, the Parent or the Purchaser, any of the persons listed in Schedule I hereto, on the one hand, and the Company or its executive officers, directors or affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors, or a sale or other transfer of a material amount of assets. 10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. In March 1997, the Parent was contacted by a representative of SBC Warburg Dillon Read Inc. ("SBC Warburg Dillon Read") to determine the Parent's interest in acquiring the Company. Following the execution of a confidentiality agreement dated March 17, 1997, the Parent received an information memorandum concerning the business and operations of the Company. The Parent subsequently learned that the Company's non-California properties would be sold as a separate package. On May 8, 1997, six of the Parent's personnel visited the Company's data room in Bakersfield, California to learn more about the Company's California properties. Francis Roth, the Company's President and Chief Operating Officer, made a joint presentation with Robert Shore, the Chief Executive Officer of Bakersfield Energy Resources ("Bakersfield"), the operator of the Company's California properties. Following the first day of data room presentations and initial due diligence review, a field tour of the Company's properties was conducted on the second day. Throughout the last week of May, 1997, representatives of SBC Warburg Dillon Read and the Parent discussed broad aspects of a possible transaction for the California properties, but on June 2, 1997, the Parent advised SBC Warburg Dillon Read that it would not make a cash offer. On July 25, 1997, the Parent made an offer to acquire only the 25% interest in the California properties held by Bakersfield. A condition of such offer was that the Company consent to the appointment of the Parent as operator of the property. This consent was a material part of the Parent's offer, as the joint operating agreement between the Company and Bakersfield required operatorship of the California properties to automatically revert to the Company in the event that Bakersfield sold its interest. The Parent indicated to SBC Warburg Dillon Read that it had no intention at that time to make a separate offer for all the shares of the Company. Ultimately, Bakersfield did not accept the Parent offer for its 25% interest in the California properties. Representatives of SBC Warburg Dillon Read continued to contact the Parent through the summer. Apparently in response to numerous investor inquiries, on October 23, 1997, the Company issued a press release confirming the status of the ongoing sales process. On November 14, 1997, as part of its third quarter earnings press release, the Company announced that it had bifurcated the sales process during the second quarter for its California properties and non-California properties as separate packages and provided an update on its waterflood program and recent successful drilling on its California properties. Shortly thereafter, representatives of SBC Warburg Dillon Read encouraged the Parent to make an offer. On December 4, 1997, the Parent verbally indicated an interest in the Company to SBC Warburg Dillon Read. A meeting was held in Houston at the Company's office on December 5, 1997, attended by James Beck, President of the Parent, and John McKnight, Vice President-Land and Legal of the Parent, two representatives of SBC Warburg Dillon Read and Mark Harrington, Francis Roth and Gary Peck of the Company. At that meeting, Mr. Beck expressed the Parent's desire to purchase the Company, without its non-California properties, but contingent upon a simultaneous purchase of Bakersfield's 25% interest in the California properties. A valuation in a range from 700,000 to 800,000 shares of stock in National Fuel was discussed as consideration for the Company's interest. (National Fuel common stock is listed on The New York Stock Exchange and traded at approximately $46.00 per share during this time period.) Such consideration would be 18 22 further increased by the retention by the Company of the net proceeds from the sale of the Company's non-California properties. Without accepting the valuation range, the Parent's representatives indicated a desire to structure any acquisition as a pooling-of-interests. On December 12, 1997, Mr. Beck and Mr. McKnight again met with Messrs. Harrington, Roth and Peck. Philip Ackerman, Senior Vice President of National Fuel, also participated in the meeting. Separately, the Parent delivered a written proposal to purchase all the shares of the Company in exchange for 550,000 shares of National Fuel common stock, after the sale of the non-California properties was closed and the proceeds were distributed to the Company's stockholders. The proposal provided, among other things, for a concurrent acquisition of the Bakersfield 25% interest in the California properties. The Parent subsequently withdrew that proposal, and on December 17, 1997, delivered a second proposal that removed the Bakersfield acquisition contingency and adjusted for the Company's net debt levels. The number of shares of National Fuel stock being offered under this proposal, however, was decreased to 200,000 shares, with the proviso that if the proceeds of the non-California properties sale were not distributed to the Company's stockholders, additional National Fuel shares would be issued. Upon learning that the December 17 proposal was unacceptable, on December 19, 1997, the Parent delivered a revised proposal which increased the proposed purchase price to 550,000 shares of National Fuel stock, plus additional shares to be issued for the proceeds from the Company's non-California properties sales; however, this proposal still contained a requirement of a pooling-of-interests, which the Company advised was unattainable. Several of the other previous contingencies found unacceptable to the Company, however, had been removed. On December 29, 1997, following extensive discussions among the parties, a fourth proposal was delivered for $5.0 million in cash plus 200,000 shares of National Fuel stock, with additional shares to be issued for the proceeds of the sale of the Company's non-California properties. Following intensive negotiations between the parties, on January 22, 1998, the Parent submitted a written letter of intent to the Company proposing to acquire all of the shares at a price $2.00 per share, (total cash consideration of $32,536,000) subject to execution of a definitive agreement, the delivery to the Parent of an audit of the Company's financial statements for the year ending December 31, 1997 to be performed by Arthur Andersen L.L.P. that revealed no previously undisclosed material adverse information, that the Company must be free of debt and other liabilities except disclosed and scheduled amounts, that $13.2 million in proceeds be received from the sale of the Company's non-California properties, that there shall be no material adverse change in the Company's business, and satisfactory completion of a due diligence review of the Company and other conditions. The Company executed the Parent's letter of intent on January 23, 1998, and issued a press release announcing such development. During the weeks following execution of the letter of intent, various due diligence meetings and conference calls were conducted between the Parent, the Company and their respective advisors, and representatives of the Parent conducted on-site reviews of the Company's operations in Bakersfield, California. Extensive negotiations were also conducted during this period with respect to the Merger Agreement and several revised drafts were exchanged. On March 31, 1998, the respective boards of directors of the Parent and the Purchaser, aware that the board of directors of the Company had approved the Merger Agreement and the transactions contemplated thereby, likewise approved the Merger Agreement and the transactions contemplated thereby. The parties executed the Merger Agreement and issued a joint press release announcing the transaction immediately thereafter. A copy of the press release has been filed with the Commission as an exhibit to the Schedule 14D-1 of the Parent and the Purchaser (the "Schedule 14D-1"). On April 6, 1998, the Purchaser and the Parent commenced the Offer. 11. THE PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY. General. The purpose of the Offer is to acquire control of, and the entire equity interest in, the Company. The purpose of the Merger is to acquire all Shares not beneficially owned by the Purchaser following consummation of the Offer. Upon the consummation of the Merger, the Company will become a wholly owned subsidiary of the Parent. 19 23 The DGCL requires, among other things, that the adoption of any plan of merger or consolidation of the Company must be approved by the Company Board and generally by the holders of a majority of the Company's outstanding voting securities. The Company Board has approved the Offer, the Merger and the Merger Agreement and the transactions contemplated thereby; consequently, the only additional action of the Company that may be necessary to effect the merger is approval by such stockholders if the "short-form" merger procedure described below is not available. Plans for the Company. It is currently expected that, following consummation of the Offer, initially the business and the operations of the Company will, except as set forth in this Offer to Purchase, be continued by the Company, at the discretion of the Company Board which will consist of the Parent's representatives, substantially as they are currently being conducted with such changes as deemed appropriate by such Board. The Parent will continue to evaluate the business and operations of the Company during the pendency of the Offer and after the consummation of the Offer and the Merger, and will take such actions as it deems appropriate under the circumstances then existing. The Parent intends to seek additional information about the Company during this period. Thereafter, the Parent intends to review such information as part of a comprehensive review of the Company's business, operations, capitalization and management with a view to maximizing the Company's potential in conjunction with the Parent's businesses. It is expected that the business and operations of the Company would form an important part of the Parent's future business plans. Except as indicated in this Offer to Purchase, neither the Parent nor the Purchaser has any present plans or proposals which relate to or would result in an extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company, a sale or transfer of a material amount of assets of the Company or any material change in the Company's capitalization or dividend policy or any other material changes in the Company's corporate structure or business, or the composition of the Company Board or management. The Parent and the Purchaser reserve the right to acquire additional Shares following the expiration of the Offer through private purchases, market transactions, tender or exchange offers or otherwise on terms and at prices that may be more or less favorable than those of the Offer or, subject to any applicable legal restrictions, to dispose of any or all Shares beneficially acquired by the Parent and the Purchaser. The Merger. In general, under the DGCL and the Company's certificate of incorporation, the Merger requires the approval of the Company Board and the approval by the holders of a majority of all outstanding Shares. If the Purchaser acquires, through the Offer or otherwise, voting power with respect to at least a majority of the outstanding Shares (which would be the case if the Minimum Condition is satisfied and the Purchaser were to accept for payment Shares tendered pursuant to the Offer), the Purchaser would have sufficient voting power to effect the Merger without the vote of any other stockholders. Further, the DGCL provides that if the parent corporation owns 90% or more of each class of outstanding shares of a Delaware subsidiary, the Delaware subsidiary may be the surviving corporation of a merger with its parent corporation upon a majority vote of each corporation's entire board of directors, without action or vote by the stockholders of either corporation. Accordingly, if the Purchaser acquires at least 90% or more of the outstanding Shares pursuant to the Offer or otherwise, the Purchaser will be able to approve the Merger without a vote of the Company's stockholders. In such event, the Purchaser has agreed that it will take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition. If the Purchaser does not acquire at least 90% of the outstanding Shares pursuant to the Offer or otherwise, a significantly longer time may be required to effect the Merger because a vote or the consent of the Company' s stockholders would be required under the DGCL. Appraisal Rights. No appraisal rights are available in connection with the Offer. However, if the Merger is consummated, stockholders of the Company at the time of the Merger will have certain rights under the DGCL to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Shares. Such rights to dissent, if the statutory procedures are complied with, could lead to a judicial determination of the fair value of the Shares (excluding any element of value arising from the accomplishment or expectation 20 24 of the Merger), required to be paid in cash to such dissenting holders for their Shares. In addition, such dissenting stockholders would be entitled to receive payment of a fair rate of interest from the date of consummation of the Merger on the amount determined to be the fair value of their Shares. In determining the fair value of the Shares, a Delaware court would be required to take into account all relevant factors. Accordingly, such determination could be based upon considerations other than, or in addition to, the market value of the Shares, including among other things, asset values and earning capacity of the Company. In Weinberger v. UOP, Inc., the Delaware Supreme Court stated, among other things, that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in an appraisal proceeding. Therefore, the value so determined in any appraisal proceeding could be different from the price being paid in the Offer. The Delaware Supreme Court stated in Weinberger and Rabkin v. Philip A. Hunt Chemical Corp. that although the remedy ordinarily available to minority stockholders in a cash-out merger is the right to appraisal described above, a damages remedy or injunctive relief may be available if a merger is found to be the product of procedural unfairness, including fraud, misrepresentation or other misconduct. Rule 13e-3. The Merger would have to comply with any applicable Federal law operative at the time. Rule 13e-3 under the Exchange Act is applicable to certain "going private" transactions. The Purchaser does not believe that Rule 13e-3 will be applicable to the Merger. Rule 13e-3 requires, among other things, that certain financial information concerning the Company, and certain information relating to the fairness of the proposed transaction and the consideration offered to minority stockholders in such a transaction, be filed with the Commission and disclosed to minority stockholders prior to consummation of the transaction. 12. THE MERGER AGREEMENT; CONFIDENTIALITY AGREEMENT. THE MERGER AGREEMENT. The following is a summary of certain provisions of the Merger Agreement. The summary is qualified in its entirety by reference to the Merger Agreement, which is incorporated herein by reference. Capitalized terms used but not defined herein shall have the meaning given to them in the Merger Agreement. The Offer. The Merger Agreement provides that the Purchaser will commence the Offer and that, upon the terms and subject to prior satisfaction or waiver of the conditions of the Offer, the Purchaser will purchase all Shares validly tendered and not properly withdrawn pursuant to the Offer. The Offer is conditioned upon, among other things, there being tendered and not withdrawn prior to the Expiration Date, a number of Shares which, together with any Shares beneficially owned by the Parent and the Purchaser, represent a majority of the outstanding Shares, and the Parent not having received notice from holders of more than 5% of the Shares that such holders have exercised or intend to exercise their appraisal rights under the DGCL. The Merger Agreement provides that, without the written consent of the Company, the Purchaser will not decrease or change the form of consideration to be paid in the Offer, reduce the maximum number of Shares to be purchased in the Offer or the Minimum Condition, impose additional conditions to the Offer, change the conditions of the Offer (except that the Parent in its sole discretion may waive any of the conditions to the Offer other than the Minimum Condition), or amend any other term or condition of the Offer in a manner adverse to the holders of Shares. In the event that all conditions of the Offer have not been satisfied or waived by the Expiration Date, May 4, 1998, the Purchaser may terminate the Offer and the Merger Agreement. Notwithstanding that all conditions are satisfied or waived prior to the scheduled Expiration Date, the Purchaser may extend the Offer, subject to certain conditions, if the Shares tendered pursuant to the Offer are less than 90% of the outstanding Shares. The Purchaser will, on the terms and subject to the prior satisfaction or waiver of the conditions of the Offer, accept for payment and pay for Shares validly tendered and not properly withdrawn as soon as practicable after expiration of the Offer. The Merger. Following the consummation of the Offer, the Merger Agreement provides that, subject to the terms and conditions thereof, and in accordance with Delaware law, as soon as practicable, the Purchaser will be merged with and into the Company. As a result of the Merger, the separate corporate existence of the Purchaser will cease and the Company will continue as the Surviving Corporation and a wholly owned subsidiary of the Parent. 21 25 The respective obligations of the Parent and the Purchaser, on the one hand, and the Company, on the other hand, to effect the Merger are subject to the satisfaction on or prior to the Closing Date (as defined in the Merger Agreement) of each of the following conditions: (i) the Merger Agreement shall have been approved and adopted by the requisite vote of the holders of Shares, if required by applicable law, in order to consummate the Merger; (ii) no federal or state governmental or regulatory body or court of competent jurisdiction shall have enacted, issued, promulgated or enforced any statute, rule, regulation, executive order, decree, judgment, preliminary or permanent injunction or other order that is in effect and that prohibits, enjoins or otherwise restrains the consummation of the Merger; (iii) all material filings required to be made prior to the Effective Time with, and all material consents, approvals, permits and authorizations required to be obtained prior to the Effective Time from, governmental and regulatory authorities or third parties in connection with the Merger and the consummation of the other transactions contemplated by the Merger Agreement shall have been made or obtained, as the case may be; and (iv) the Purchaser shall have purchased Shares pursuant to the Offer. At the Effective Time of the Merger (i) each issued and outstanding Share (other than Shares that are owned by the Company, any Shares owned by the Parent or any wholly owned subsidiary of the Parent or any of their respective affiliates, or any Shares which are held by stockholders exercising dissenters' rights, if any, under Delaware law) will be converted into the right to receive the Merger Consideration, and (ii) each issued and outstanding share of capital stock of the Purchaser will be converted into one share of common stock of the Surviving Corporation. The Company Board. The Merger Agreement provides that upon the purchase and payment by the Parent or the Purchaser of Shares representing at least a majority of the outstanding Shares, the Parent shall be entitled to designate all members of the Company Board. The current directors of the Company have indicated to the Parent that they intend to resign as directors of the Company as soon as reasonably practicable upon the Purchaser purchasing at least a majority of the outstanding Shares pursuant to the Offer, and the Company shall exercise reasonable efforts to secure the resignations of all directors to enable such Parent designees to be so elected or appointed. Such designees will abstain from any action proposed to be taken by the Company to amend or terminate the Merger Agreement or waive any action by the Parent or the Purchaser. The Company's obligations to appoint designees to the Board of Directors shall be subject to Section 14(f) of the Exchange Act, which provides, among other things, for dissemination of information to a company's stockholders. Stockholders' Meeting. Pursuant to the Merger Agreement, the Company will, if required by applicable law in order to consummate the Merger: (i) duly call, give notice of, convene and hold a special meeting of its stockholders (the "Special Meeting"') as soon as reasonably practicable following the purchase of Shares by the Purchaser pursuant to the Offer for the purpose of considering and taking action upon the Merger and the adoption of the Merger Agreement; (ii) prepare and file with the Commission a preliminary proxy or information statement relating to the Merger and the Merger Agreement and include in any preliminary or definitive proxy statement or information statement with respect to the Special Meeting (the "Proxy Statement"), the recommendation of the Company Board that stockholders of the Company vote in favor of the approval of the Merger Agreement and the transactions contemplated thereby; and (iii) use all reasonable efforts (A) to obtain and furnish the information required to be included by it in the Proxy Statement and, after consultation with the Parent and the Purchaser, respond promptly to any comments made by the Commission with respect to the Proxy Statement and any preliminary version thereof and cause the Proxy Statement to be mailed to its stockholders at the earliest practicable time following the expiration or termination of the Offer and (B) obtain the necessary approvals by its stockholders of the Merger Agreement and the transactions contemplated thereby. The Parent has agreed that it will vote, or cause to be voted, all of the Shares then owned by it, the Purchaser or any of its other subsidiaries and affiliates in favor of the approval of the Merger and the adoption of the Merger Agreement. If the Purchaser acquires, through the Offer or otherwise, at least a majority of the outstanding Shares, the Purchaser will have sufficient voting power to approve the Merger, even if no other stockholders vote in favor of the Merger. The Merger Agreement provides that in the event that the Purchaser shall acquire at least 90% of the then outstanding Shares, the parties agree to take all necessary and appropriate action to cause the Merger to 22 26 become effective, in accordance with Section 253 of the DGCL, as soon as practicable after such acquisition, without a meeting of the stockholders of the Company. See Section 11. Options and Warrants. The Company has represented and warranted to the Purchaser and the Parent in the Merger Agreement that it has taken all action necessary so that all outstanding options and other rights to acquire Shares granted to directors, employees or others under any stock option or purchase plan, program or similar arrangement of the Company, whether or not then exercisable or vested, will be canceled by the Company upon consummation of the Offer. The holders thereof shall be entitled to receive, for each Share, in settlement and cancellation thereof, an amount in cash equal to the positive difference, if any, between the per Share Merger Consideration and the exercise price per share of such option. Since all such options have exercise prices in excess of $2.00 per share, none are expected be exercised. The Company has represented and warranted to the Purchaser and the Parent that all outstanding warrants to purchase Shares will be converted into the right to receive $2.00 cash instead of each Share which would otherwise be purchasable by the holder of the warrant upon the exercise thereof and payment of the warrant exercise price thereunder. Since all warrants have exercise prices in excess of $2.00 per share, none are expected to be exercised. Interim Operations. Pursuant to the Merger Agreement, the Company has agreed that, except as expressly contemplated by the Merger Agreement or agreed to in writing by the Parent, prior to the Effective Time, the Company shall (a) use all commercially reasonable efforts to conduct its business in all material respects only in the ordinary course of business and consistent with past practice; (b) not amend its certificate of incorporation or bylaws or declare, set aside or pay any dividend or other distribution or payment in cash, stock or property in respect to its capital stock; or acquire, directly or indirectly, any of its capital stock; (c) not issue, grant, sell or pledge or agree or authorize the issuance, grant, sale or pledge of any shares of, or rights of any kind to acquire any shares of, its capital stock other than Shares issuable upon the exercise of stock options; (d) not acquire, sell, transfer or lease any assets except in the ordinary course of business and consistent with past practice or encumber any assets of the Company; (e) use all commercially reasonable efforts to preserve intact its business organizations and to keep available the services of its present key officers and employees; provided, however, that to satisfy the foregoing obligation, the Company shall not be required to make any payments other than those agreed to with the Parent or enter into or amend any contractual arrangements or understandings, except in the ordinary course of business and consistent with past practice; (f) not adopt a plan of complete or partial liquidation or adopt resolutions provided for the complete or partial liquidation, consolidation, merger, restructuring or recapitalization of the Company; (g) not grant any severance or termination pay (otherwise than pursuant to policies or contracts in effect on the date of the Merger Agreement) to, or enter into any employment agreement with, any of its executive officers or directors; (h) not increase the compensation payable or to become payable to its officers or employees, enter into any contract or other binding commitment in respect of any such increase with any of its directors, or officers or other employees, and not establish, adopt, enter into, make any new grants or awards under or amend, any collective bargaining agreement or Company Benefit Plan (as defined in the Merger Agreement), except as required by applicable law, including any obligation to engage in good faith collective bargaining, to maintain tax-qualified status or as may be required by any Company Benefit Plan as of the date of the Merger Agreement; (i) not settle or compromise any material claims or litigation or, except in the ordinary course of business, modify, amend or terminate any of its material contracts or waive, release or assign any material rights or claims, or make any payment, direct or indirect, of any material liability before the same becomes due and payable in accordance with its terms; (j) not take any action, other than reasonable and usual actions in the ordinary course of business and consistent with past practice with respect to accounting policies or procedures (including tax accounting policies and procedures), except as may be required by the Commission or the Financial Accounting Standards Board; (k) not make any material tax election or permit any material insurance policy naming it as a beneficiary or a loss payable payee to be canceled or terminated without notice to the Parent, except in the ordinary course of business; (l) confer at such times as the Parent may reasonably request with one or more representatives of the Parent to report material operational matters and the general status of ongoing operations (in each case to the extent the Parent reasonably requires such information) and to consult with the Parent regarding material operational decisions; (m) not (i) enter into any loan or credit agreement, or incur any indebtedness (other than borrowings under its existing credit agreement for the purpose of paying fees and severance payments disclosed pursuant to the Merger Agreement and expenses 23 27 incurred in connection with the transactions contemplated thereunder) or guarantee any indebtedness or amend any existing loan or credit agreement, (ii) make or enter into any agreement or contract for capital expenditures, except for capital expenditures required to be made under the Company's joint operating agreements and other expenditures on the Company's existing properties up to $25,000 per expenditure or $100,000 in the aggregate or (iii) enter into any agreement or contract outside the ordinary course of business of the Company; (n) not adjust, split, combine or reclassify its capital stock; (o) not enter into any agreement, understanding or arrangement with respect to the sale or voting of its capital stock; (p) not enter into any derivative instruments; and (q) not authorize or enter into any agreement to do any of the foregoing. No Solicitation. Pursuant to the Merger Agreement, the Company shall not, and shall use its best efforts to cause its officers, directors, employees, attorneys, accountants, financial advisors, agents or other representatives not to, directly or indirectly, 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 relating to, or that may reasonably be expected to lead to, the acquisition of all or a significant part of the business and properties or capital stock of the Company, whether by merger, purchase of assets, tender offer or otherwise with a third party other than the Parent (an "Acquisition Proposal"), or enter into discussions or negotiate with any person or entity in furtherance of such inquiries or to obtain an Acquisition Proposal, or agree to or endorse any Acquisition Proposal, or authorize or permit any of the officers, directors, employees or agents or representatives of the Company or any investment banker, financial advisor, attorney, accountant or other representative retained by the Company to take any such action. The Company shall as promptly as practicable notify the Parent of all relevant terms of any such inquiries or proposals received by the Company and, if such inquiry or proposal is in writing, the Company shall as promptly as practicable deliver or cause to be delivered to the Parent a copy of such inquiry or proposal. The foregoing is not intended to prohibit the Company Board from (a) furnishing information to, or entering into discussions or negotiations with, any persons or entities in connection with an unsolicited bona fide proposal in connection with an Acquisition Proposal if, and only to the extent that (i) such unsolicited bona fide proposal is on terms that the Company Board determines it cannot reject, based on applicable fiduciary duties and the advice of outside counsel (except with respect to furnishing information) and for which financing to the extent required is then committed, and (ii) prior to furnishing such information to or entering into discussions or negotiations with, such person or entity the Company provides written notice to the Parent to the effect that it is furnishing information to or entering into discussions or negotiations with, such person or entity; or (b) complying with Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal. Termination; Fees. The Merger Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time, whether before or after approval of the stockholders of the Company, (a) by mutual written consent of the Company and the Parent; (b) by either the Company or the Parent, if the Effective Time shall not have occurred on or before 120 days from the date of the Merger Agreement; provided, that the right to terminate the Merger Agreement under this clause (b) shall not be available to any party whose misrepresentation in the Merger Agreement or whose failure to perform any of the covenants and agreements or to satisfy an obligation under the Merger Agreement has been the cause of or resulted in the failure of the Merger to occur on or before such date; (c) by either the Company or the Parent, if any federal or state court of competent jurisdiction or other federal or state governmental or regulatory body shall have issued any judgment, injunction, order or decree prohibiting, enjoining or otherwise restraining the transactions contemplated by the Merger Agreement and such judgment, injunction, order or decree shall have become final and nonappealable (provided, however, that the party seeking to terminate the Merger Agreement pursuant to this clause (c) shall have used commercially reasonable efforts to remove such judgment, injunction, order or decree) or if any statute, rule, regulation or executive order promulgated or enacted by any federal or state governmental authority after the date of the Merger Agreement which prohibits the consummation of the Offer or the Merger shall be in effect; (d) by the Company, if (i) the Parent fails to commence the Offer within five business days of the public announcement of the execution of the Merger Agreement, (ii) the Offer expires or is terminated without any Shares being purchased thereunder or (iii) the Parent fails to purchase validly tendered Shares in violation of the terms and conditions of the Offer or the Merger Agreement; (e) by the Parent, if (i) the Offer is not commenced within five business days of the public announcement of the execution of the Merger Agreement directly as a result of actions or 24 28 inaction by the Company or (ii) the Offer is terminated or expires as a result of the failure of a condition specified in Section 14 of this Offer to Purchase or on the expiration of the Offer without the purchase of any Shares thereunder, unless such termination or expiration has been caused by or resulted from the failure of the Parent or the Purchaser to perform any covenants and agreements of the Parent or the Purchaser contained in the Merger Agreement; (f) prior to the consummation of the Offer, by the Parent, if the Company Board withdraws or modifies in a manner materially adverse to the Parent or the Purchaser its favorable recommendation of the Offer or the Merger or shall have recommended any Acquisition Proposal with a party other than the Parent or any of its affiliates; (g) by the Company, if the Merger Agreement is not adopted or, unless the Merger is consummated without a meeting of stockholders, the Merger is not approved at the Company's stockholders meeting by the holders of a majority of the outstanding Shares; (h) by the Parent, if there shall have been a material breach of any representation, warranty or material covenant or agreement on the part of the Company, which is incurable or which is not cured after 30 days' written notice by the Parent to the Company; (i) by the Company, if there shall have been a material breach of any representation, warranty or material covenant or agreement on the part of either of the Parent or the Purchaser, which is incurable or which is not cured after 30 days' written notice by the Company to the Parent; or (j) by the Company, if (i) as provided in the Merger Agreement, an unsolicited bona fide proposal is received from any Person and is on terms that the Company Board determines it cannot reject, based on applicable fiduciary duties and the advice of outside counsel and for which financing to the extent required is then committed, the Company Board shall withdraw, modify or change its approval or recommendation of the Offer or the Merger or shall have resolved to do any of the foregoing or (ii) any Person or group of Persons shall have made an Acquisition Proposal the acceptance of which the Company Board determines, after consultation with outside counsel and after the Company Board has satisfied itself that the financing for the Acquisition Proposal has been committed, is required to comply with its fiduciary duties under applicable law. In the event that (i) prior to the consummation of the Offer, the Company Board terminates the Merger Agreement pursuant to clause (j) of the preceding paragraph or the Parent terminates the Merger Agreement pursuant to clause (f) of the preceding paragraph and (ii) as a result thereof, the Parent shall have terminated the Offer, allowed the Offer to expire without purchasing any Shares thereunder or failed to commence the Offer in accordance with the terms thereof and (iii) the Company enters into a definitive agreement relating to an Acquisition Proposal or a business combination or other transaction contemplated by such Acquisition Proposal shall have been consummated within 12 months following such termination, then the Company shall thereupon pay to the Parent a fee of $1,000,000 in cash, payable in same day funds. Indemnification. Pursuant to the Merger Agreement, for six years after the Effective Time, the Parent and the Surviving Corporation will indemnify the present and former officers and directors of the Company with respect to matters occurring at or prior to the Effective Time to the full extent permitted under Delaware law, the terms of the Company's charter, by-laws and indemnification agreements, each as in effect as of the date of the Merger Agreement. Representations and Warranties. Pursuant to the Merger Agreement, the Company has made customary representations and warranties to the Parent and the Purchaser with respect to, among other things, its organization, capitalization, authority, financial statements, need for consents or approvals, public filings, conduct of business, employee benefit plans, employment matters, compliance with laws, tax matters, insurance, litigation, title to properties, environmental matters, vote required to approve the Merger Agreement, undisclosed liabilities, information to be contained in the Proxy Statement and the opinion of its financial advisor. Pursuant to the Merger Agreement, the Parent and the Purchaser have made substantially similar representations and warranties as to their organization, authority, need for consents or approvals and information to be contained in the Proxy Statement. CONFIDENTIALITY AGREEMENT. Pursuant to the Confidentiality Agreement entered into as of March 17, 1997 by the Parent and the Company's financial advisor, on behalf of the Company (the "Confidentiality Agreement"), the Company and the Parent agreed to provide, among other things, for the confidential treatment of their discussions regarding a possible transaction and for the delivery of certain confidential 25 29 information concerning the Company. The Confidentiality Agreement is incorporated herein by reference and a copy of it has been filed with the Commission as an exhibit to the Schedule 14D-1. The Parent further agreed that, for a period of two years from the date of the Confidentiality Agreement, the Parent would not, as a result of knowledge or information obtained from the Confidential Information (as defined therein) employ or attempt to employ any employee of the Company. 13. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required to purchase all Shares validly tendered pursuant to the Offer, consummate the Merger, repay outstanding indebtedness and pay the costs and expenses related to the Offer and the Merger is estimated to be approximately $90 million. The Parent and the Purchaser intend to obtain all funds required in connection with the Offer and the Merger from National Fuel in accordance with existing cash management and intercompany loan procedures established by National Fuel. 14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer, and in addition to (and not in limitation of) the Purchaser's rights to extend the Offer under certain circumstances (subject to the provisions of the Merger Agreement), the Purchaser shall not be required to accept for payment or, subject to the applicable rules and regulations of the Commission, purchase or pay for, and may delay the acceptance for payment of or, subject to the applicable rules and regulations of the Commission, payment for, any Shares tendered pursuant to the Offer, may amend the Offer as to any Shares not then accepted for payment and may terminate the Offer and not accept for payment any Shares, if (i) the Minimum Condition has not been satisfied or (ii) at any time on or after the date of execution of the Merger Agreement and before the time of acceptance of Shares pursuant to the Offer, any of the following events shall have occurred: (a) there shall have been any action or proceeding brought by any governmental authority before any federal or state court, or any order or preliminary or permanent injunction entered in any action or proceeding before any federal or state court or governmental, administrative or regulatory authority or agency, located or having jurisdiction within the United States, or any other action taken, proposed or threatened, or statute, rule, regulation, legislation, interpretation, judgment or other proposed, sought, enacted, entered, enforced, promulgated, amended, issued or deemed applicable to the Purchaser, the Company or any subsidiary or affiliate of the Purchaser or the Company or the Offer or the Merger, by any legislative body, court, government or governmental, administrative or regulatory authority or agency located or having jurisdiction with the United States, which would reasonably be expected to have the effect of: (i) making illegal, materially delaying or otherwise restraining or prohibiting the Offer or the Merger or the acquisition by the Parent or the Purchaser of any Shares; (ii) prohibiting or materially limiting the ownership or operation by the Parent, the Purchaser or their respective affiliates of any material portion of their business or assets or those of the Company or compelling the Parent or the Purchaser to dispose of or hold separate all or any material portion of their business or assets or those of the Company, in each case as a result of the transactions contemplated by the Merger Agreement; (iii) imposing material limitations on the ability of the Parent or any of its affiliates to exercise full rights of ownership of the Shares, including, without limitation, the right to vote any Shares purchased by them on all matters properly presented to the stockholders of the Company; or (iv) preventing the Parent or any of its affiliates from acquiring, or to require divestiture by the Parent or any of its affiliates of, any Shares; or (b) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on any national securities exchange or in the over-the-counter market in the United States, (ii) the declaration of any banking moratorium or any suspension of payments in respect of banks or any limitation (whether or not mandatory) on the extension of credit by lending institutions in the United States, (iii) the commencement or any escalation of a war, material armed hostilities or any other material international or national calamity involving the United States, or (iv) in the case of any of the foregoing existing at the time of the commencement of the Offer; a material acceleration or worsening thereof; or 26 30 (c) any Person, entity or "group" (as such term is used in Section 13(d)(3) of the Exchange Act) other than the Parent or any of its affiliates shall have become the beneficial owner (as that term is used in Rule 13d-3 under the Exchange Act) of more than 50% of the outstanding Shares; or (d) the Company shall have breached or failed to comply in any material respect with any of its obligations under the Merger Agreement (which breach, if curable, has not been cured within 30 days following receipt of written notice thereof by the Parent specifying in detail the basis of such alleged breach), or any representation or warranty of the Company contained in the Merger Agreement that is qualified as to materiality shall not have been true and correct and any such representation and warranty that is not so qualified shall not have been true and correct in any material respect, except (i) for changes specifically permitted or contemplated by the Merger Agreement and (ii) those representations and warranties that address matters only as to a particular date which are true and correct as of such date; or (e) the Merger Agreement shall have been terminated pursuant to its terms or amended pursuant to its terms to provide for such termination or amendment of the Offer; or (f) the Company Board shall have modified or amended in any manner materially adverse to the Parent or the Purchaser or shall have withdrawn its recommendation of the Offer or the Merger, or shall have resolved to do any of the foregoing; or (g) the Parent shall not have received notice from the holder or holders of more than 5%, on a fully diluted basis of the Shares issued and outstanding on the record date for the determination of stockholders entitled to vote on the Merger, that such holders have exercised or intend to exercise their appraisal rights under the DGCL; or (h) the Company shall not have received at least $12,789,000 (including all material purchase price adjustments) in immediately available funds from the sale of the Company's non-California oil and gas assets and shall be entitled to receive an additional amount in immediately available funds determined under the Company's agreement with Penroc Oil Company ("Penroc") dated January 15, 1998 for the sale of the Beaurline No. 9 well, Beaurline/McAllen Ranch Area, South Texas and its pooled or allocated producing unit (the "Well") as follows: if the Well is restored by sidetrack or redrill or associated operations, an agreed amount equal to the present value of the future production from the Well discounted at 10%, as determined by Ryder Scott Company (the "New Reserve Evaluation"), with payment to be made ten business days after Penroc's receipt of the New Reserve Evaluation; or (i) the Company shall have completed and delivered to the Parent an audit of the Company's financial statements for the fiscal year ended December 31, 1997, to be performed by the accounting firm of Arthur Anderson LLP, which reveals material adverse information not previously disclosed in writing to the Parent, or a material variance from the written or printed disclosures furnished by the Company or its representatives and used by the Parent in its economic models; or (j) there shall have occurred any event, change, effect or development having a Material Adverse Effect on the Company; which, in the good faith judgment or Parent makes it inadvisable to proceed with the Offer or with acceptance for payment or payment for Shares. The foregoing conditions (other than the Minimum Condition) are for the sole benefit of the Parent and the Purchaser and, subject to the Merger Agreement, may be asserted by the Parent or the Purchaser regardless of the circumstances giving rise to such condition or may be waived by the Parent or the Purchaser in whole or in part at any time and from time to time in its sole discretion. The failure by the Parent or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. 27 31 15. CERTAIN LEGAL MATTERS. Except as described in this Section 15, based on information provided by the Company, none of the Company, the Purchaser or the Parent is aware of any license or regulatory permit that appears to be material to the business of the Company that might be adversely affected by the Purchaser's acquisition of Shares as contemplated herein or of any approval or other action by a domestic or foreign governmental, administrative or regulatory agency or authority that would be required or desirable for the acquisition and ownership of the Shares by the Purchaser as contemplated herein. Should any such approval or other action be required or desirable, the Purchaser and the Parent presently contemplate that such approval or other action will be sought, except as described below under "State Takeover Laws." While, except as otherwise described in this Offer to Purchase, the Purchaser does not presently intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained, or would be obtained without substantial conditions, or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of or other substantial conditions complied with in the event that such approvals were not obtained or such other actions were not taken in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could decline to accept for payment or pay for any Shares tendered. See Section 14 for certain conditions to the Offer, including conditions with respect to governmental actions. State Takeover Laws. The Company is incorporated under the laws of the State of Delaware. In general, Section 203 of the DGCL prevents an "interested stockholder" (e.g., a person who owns or has the right to acquire 15% or more of a corporation's outstanding voting stock) from engaging in a "business combination" (defined to include mergers and certain other transactions) with a Delaware corporation for a period of three years following the time such person became an interested stockholder unless, among other things, the corporation's board of directors approves such business combination or the transaction in which the interested stockholder becomes such prior to the time the interested stockholder becomes such. The Company Board has unanimously approved the Offer, the Merger and the Merger Agreement for the purposes of Section 203 of the DGCL. A number of other states have adopted laws and regulations applicable to attempts to acquire securities of corporations which are incorporated, or have substantial assets, stockholders, principal executive offices or principal places of business, or whose business operations otherwise have substantial economic effects in such states. In Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover statute, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana may, as a matter of corporate law and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining stockholders. The state law before the Supreme Court was by its terms applicable only to corporations that had a substantial number of stockholders in the state and were incorporated there. Except as described above with respect to Section 203 of the DGCL, the Purchaser has not attempted to comply with the takeover laws of any other state. Should any person seek to apply any state takeover law, the Purchaser will take such action as then appears desirable, which may include challenging the validity or applicability of any such statute in appropriate court proceedings. In the event it is asserted that one or more state takeover laws is applicable to the Offer or the Merger, and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer, the Purchaser might be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, the Purchaser might be unable to accept for payment any Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer and the Merger. In such case, the Purchaser may not be obligated to accept for payment any Shares tendered. See Section 14. The Company currently conducts business in California. Neither the Parent nor the Purchaser knows whether any California takeover laws and regulations will by their terms apply to the Offer, and, except as set 28 32 forth above, neither the Parent nor the Purchaser has currently complied with any other state takeover statute or regulation. The Purchaser reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer and nothing in this Offer to Purchase or any action taken in connection with the Offer is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the Offer and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer, the Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities, and the Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or may be delayed in consummating the Offer. In such case, the Purchaser may not be obligated to accept for payment or pay for any Shares tendered pursuant to the Offer. See Section 14. Antitrust. The Federal Trade Commission (the "FTC") and the Antitrust Division of the Department of Justice (the "Antitrust Division") frequently scrutinize the legality under the antitrust laws of transactions such as the Purchaser's acquisition of Shares pursuant to the Offer and the Merger. At any time before or after the Purchaser's acquisition of Shares, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition of Shares pursuant to the Offer or otherwise or seeking divestiture of Shares acquired by the Purchaser or divestiture of substantial assets of the Parent or its subsidiaries. Private parties, as well as state governments, may also bring legal action under the antitrust laws under certain circumstances. Based upon an examination of information provided by the Company relating to the businesses in which the Parent and the Company are engaged, the Parent and the Purchaser believe that the acquisition of Shares by the Purchaser will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer or other acquisition of Shares by the Purchaser on antitrust grounds will not be made or, if such a challenge is made, of the result. See Section 14 for certain conditions to the Offer, including conditions with respect to injunctions and certain governmental actions. Federal Reserve Board Regulations. Regulations G, U and X (the "Margin Regulations") of the Federal Reserve Board restrict the extension or maintenance of credit for the purpose of buying or carrying margin stock, including the Shares, if the credit is secured directly or indirectly by margin stock. Such secured credit may not be extended or maintained in an amount that exceeds the maximum loan value of all the direct and indirect collateral securing the credit, including margin stock and other collateral. As described in Section 13 of this Offer to Purchase, the financing of the Offer will not be directly or indirectly secured by the Shares or other securities which constitute margin stock. Accordingly, all financing for the Offer will be in full compliance with the Margin Regulations. 16. FEES AND EXPENSES. Except as set forth below, neither National Fuel, the Parent nor the Purchaser will pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer. The Purchaser has retained ChaseMellon Shareholder Services, LLC to act as the Information Agent in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, facsimile, telegraph and personal interviews and may request brokers, dealers and other nominee stockholders to forward materials relating to the Offer to beneficial owners of Shares. The Information Agent will receive reasonable and customary compensation for its services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the federal securities laws. In addition, ChaseMellon Shareholder Services, LLC, which acts as transfer agent and registrar for the Company, has been retained by the Purchaser as the Depositary. The Depositary has not been retained to make solicitations or recommendations in its role as Depositary. The Depositary will receive reasonable and customary compensation for its services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the federal securities laws. Brokers, dealers, commercial banks and trust companies will be reimbursed by the Purchaser for customary mailing and handling expenses incurred by them in forwarding offering material to their customers. 29 33 17. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by any administrative or judicial action pursuant to any valid state statute. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of the Shares pursuant thereto, the Purchaser may (except as described in Section 15 with respect to state takeover laws), in its sole discretion, make a good faith effort to comply with such state statute. If, after such good faith effort, the Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by one or more registered brokers or dealers which are licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF NATIONAL FUEL, THE PARENT, THE PURCHASER OR THE COMPANY NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THE DELIVERY OF THIS OFFER TO PURCHASE NOR ANY PURCHASE PURSUANT TO THE OFFER, SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF NATIONAL FUEL, THE PARENT, THE PURCHASER OR THE COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS FURNISHED OR THE DATE OF THIS OFFER TO PURCHASE. National Fuel, the Parent and the Purchaser have filed with the Commission a Schedule 14D-l, together with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, furnishing certain additional information with respect to the Offer, and may file amendments thereto. In addition, the Company has filed with the Commission a Solicitation/Recommendation Statement on Schedule 14D-9 (including exhibits) pursuant to Rule 14d-9 under the Exchange Act. Such statements and any amendments thereto, including exhibits, may be inspected at, and copies may be obtained from, the same places and in the same manner as set forth in Section 8 (except that they will not be available at the regional offices of the Commission). SENECA WEST CORP. April 6, 1998 30 34 SCHEDULE I INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF NATIONAL FUEL, THE PARENT AND THE PURCHASER 1. Directors and Executive Officers of National Fuel. Set forth below is the name, current business address, citizenship and the present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each director and executive officer of the National Fuel. Unless otherwise indicated, each person identified below is a U.S. citizen employed by the National Fuel. The principal address of the National Fuel and, unless otherwise indicated below, the current business address for each individual listed below is 10 Lafayette Square, Buffalo, New York 14203. Directors are identified by an asterisk.
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS ---------------- -------------------------------------------------- *Philip C. Ackerman.................. Director since 1994, Senior Vice President; since 1995, Mr. Ackerman has served as President of National Fuel Gas Distribution Corporation and is also President of certain subsidiaries of National Fuel. Mr. Ackerman has been employed by National Fuel since 1968. *Robert T. Brady..................... Director since March, 1995; Member of Executive Committee and Compensation Committee. Mr. Brady has been the President, Chief Executive Officer and a director of Moog, Inc., a manufacturer of motion control systems and components, for more than five years. He was appointed Chairman of Moog, Inc. in February 1996. Anna Marie Cellino.................. Secretary since 1995. Ms. Cellino was Assistant Secretary from 1994 to 1995 and has been a Vice President of National Fuel Gas Distribution Corporation since June 1994. Prior to June 1994, she was an Assistant Vice President of National Fuel Gas Distribution Corporation. She has been employed by National Fuel or one of its affiliates since 1981. *James V. Glynn...................... Director since December 1997; Member of the Audit Committee. Mr. Glynn has been the President of Maid of the Mist Corporation for more than five years. *William J. Hill..................... Prior to his retirement in October, 1995, Mr. Hill served as President of National Fuel Gas Distribution Corporation; Director since September 1995; Member of Executive Committee and Audit Committee. Mr. Hill was first employed by National Fuel or one of its affiliated companies in October, 1949. *Bernard J. Kennedy.................. Director since 1978, President since 1987, Chief Executive Officer since 1988, and Chairman since 1989; Chairman of the Executive Committee. Mr. Kennedy joined the National Fuel in 1958. *Bernard S. Lee, Ph.D................ Director since June 1994; Member of Audit Committee. Mr. Lee has been the President of the Institute of Gas Technology, a not-for-profit research and educational institution in Des Plaines, Illinois, for more than five years. *Eugene T. Mann...................... Director since 1993; Member of Executive Committee and Compensation Committee. Mr. Mann was the Executive Vice President of Fleet Financial Group, a financial services company where he was employed until his retirement more than five years ago.
31 35
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS ---------------- -------------------------------------------------- *George L. Mazanec................... Director since October 1996; Chairman of the Compensation Committee and Member of the Executive Committee. Mr. Mazanec has been the Advisor to the Chief Operating Officer of Duke Energy Corporation since August 1997. Mr. Mazanec was the Executive Vice President of PanEnergy Corp. and President and C.E.O. of Texas Eastern Transmission Corporation from 1991 to 1993. From 1993 to 1996, he served as Vice Chairman of PanEnergy Corp., and from 1996 to August 1997, he was an Advisor to the C.E.O. of PanEnergy Corp. Joseph Pawlowski.................... Treasurer for more than five years. Mr. Pawlowski is also Senior Vice President and Treasurer of National Fuel Gas Distribution Corporation and Secretary and Treasurer of certain other subsidiaries of National Fuel. *George H. Schofield................. Director since 1990; Chairman of the Audit Committee. Mr. Schofield retired as Chairman of the Board of Zurn Industries in March 1995 and, until October, 1994, he also served as Chief Executive Officer of Zurn Industries, Inc. Gerald T. Wehrlin................... Controller for more than five years. Mr. Wehrlin has also been a Senior Vice President of National Fuel Gas Distribution Corporation for more than five years. He has been employed by National Fuel or one or more of its affiliates since 1976. He has served as Controller of the Parent for more than five years.
2. Directors and Executive Officers of the Parent. Set forth below is the name, current business address, citizenship and the present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each director and executive officer of the Parent. Unless otherwise indicated, each person identified below is a U.S. citizen employed by the Parent. The principal address of the Parent and, unless otherwise indicated below, the current business address for each individual listed below is 1201 Louisiana Street, Suite 400, Houston, Texas 77002. Directors are identified by an asterisk.
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS ---------------- -------------------------------------------------- *Philip C. Ackerman.................. Director since 1994. Mr. Ackerman serves as Director and Senior Vice President of National Fuel and has served as President of National Fuel Gas Distribution Corporation and is the President of certain subsidiaries of the Parent. He has been employed by National Fuel or one or more of its affiliates since 1968. Mr. Ackerman's business address is 10 Lafayette Square, Buffalo, New York 14203. *James A. Beck....................... Director since February 1997; President since October 1996. Prior to becoming President of the Parent, Mr. Beck served as the Executive Vice President from May 1995 to September 1996, and as Vice President from January 1994 to April 1995. Mr. Beck has been employed by the Parent since 1989. Don A. Brown........................ Vice President since May 1995. Mr. Brown has been employed by the Parent since 1991. *Bernard J. Kennedy.................. Chairman of the Board since February 1997. Mr. Kennedy also serves as Director, President, Chief Executive Officer, Chairman; and Chairman of the Executive Committee of National Fuel. Mr. Kennedy's business address is 10 Lafayette Square, Buffalo, New York 14203. Calvin H. Friedrich................. Treasurer since May 1995. Mr. Friedrich has been employed by the Parent since 1981.
32 36
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS ---------------- -------------------------------------------------- Gil E. Klefstad..................... Vice President since June 1997. Mr. Klefstad has been employed by the Parent since 1995. Before that, Mr. Klefstad served as General Manager of Transco Exploration from 1984 to 1995. John F. McKnight.................... Vice President since May 1995. Mr. McKnight has been employed by the Parent since 1991. William M. Petmecky................. Senior Vice President and Secretary since 1995. Mr. Petmecky has been employed by the Parent since 1979. He is also Secretary and Treasurer of National Fuel Resources, Inc. *David F. Smith...................... Director since November 1990. Mr. Smith has been the Senior Vice President and Secretary of National Fuel Gas Distribution Corporation for more than five years. He has been employed by National Fuel or one or more of its affiliates since 1978. Emmett E. Wassell................... Vice President since 1995. Mr. Wassell has been with the Parent since 1987. Gerald T. Wehrlin................... Controller for over five years. Mr. Wehrlin has also served as the Controller of National Fuel and as Senior Vice President of National Fuel Gas Distribution Corporation for more than five years. He has been employed by National Fuel or one or more of its affiliated companies since 1976.
3. Directors and Executive Officers of the Purchaser. Set forth below is the name, current business address, citizenship and the present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each director and officer of the Purchaser. Unless otherwise indicated, each person identified below is a U.S. citizen employed by the Purchaser. The principal address of the Purchaser and, unless otherwise indicated below, the current business address for each individual listed below is 1201 Louisiana Street, Suite 400, Houston, Texas 77002. Directors are identified by an asterisk.
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS ---------------- -------------------------------------------------- Calvin H. Friedrich................. Vice President and Treasurer since the incorporation and organization of the Purchaser in 1998. *John McKnight....................... Director since the incorporation and organization of the Purchaser in 1998; Vice President and Secretary since the incorporation and organization of the Purchaser in 1998. William M. Petmecky................. President since the incorporation and organization of the Purchaser in 1998.
33 37 Facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for the Shares and any other required documents should be sent by each stockholder of the Company or such stockholder's broker-dealer, commercial bank, trust company or other nominee to the Depositary as follows: The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, LLC By Mail: Facsimile Transmission: By Hand: Reorganization Department (201) 329-8936 Reorganization Department Post Office Box 3301 120 Broadway, 13th Floor South Hackensack, NJ 07606 New York, NY 10271
Confirmation of Receipt of Facsimile by Telephone: (201) 296-4860 By Overnight Courier: Reorganization Department 85 Challenger Road, Mail Drop -- Reorg Ridgefield Park, NJ 07660 Any questions or requests for assistance or additional copies of the Offer to Purchase and the Letter of Transmittal may be directed to the Information Agent at its telephone numbers and locations listed below. You may also contact your broker, dealer, commercial bank or trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, LLC 450 West 33rd Street, 14th Floor New York, New York 10001 BANKS AND BROKERS CALL COLLECT: (212) 273-8070 ALL OTHERS CALL TOLL-FREE: (800) 684-8823 34 EX-99.A2 3 LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF HARCOR ENERGY, INC. PURSUANT TO THE OFFER TO PURCHASE DATED APRIL 6, 1998 BY SENECA WEST CORP., A WHOLLY OWNED SUBSIDIARY OF SENECA RESOURCES CORPORATION WHICH IS A WHOLLY OWNED SUBSIDIARY OF NATIONAL FUEL GAS COMPANY THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MAY 4, 1998, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, LLC By Mail: Facsimile Transmission: By Hand: Reorganization Department (201) 329-8936 Reorganization Department Post Office Box 3301 120 Broadway, 13th Floor South Hackensack, NJ 07606 New York, NY 10271
Confirmation of Receipt of Facsimile by Telephone: (201) 296-4860 By Overnight Courier: Reorganization Department 85 Challenger Road, Mail Drop -- Reorg Ridgefield Park, NJ 07660 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THAT LISTED ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. 2 THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by stockholders if certificates for Shares (as defined below) are to be forwarded herewith or if delivery of Shares is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC") (each, a "Book-Entry Transfer-Facility" and collectively, the "Book-Entry Transfer Facilities") pursuant to the book-entry transfer procedure described in Section 3 of the Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Stockholders whose certificates are not immediately available or who cannot deliver their certificates and all other documents required hereby to the Depositary so that they are received prior to 12:00 Midnight, New York City time, on Monday, May 4, 1998 (or if the Offer is extended as provided in the Offer to Purchase, prior to the time specified in such extension) must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2 of this Letter of Transmittal. DELIVERY OF DOCUMENTS TO THE PURCHASER OR THE PARENT (AS BOTH ARE DEFINED BELOW) DOES NOT CONSTITUTE A DELIVERY TO THE DEPOSITARY. [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name(s) of Tendering Institution: - -------------------------------------------------------------------------------- Check Box of Applicable Book-Entry Transfer Facility: (CHECK ONE) [ ] DTC [ ] PDTC Account Number ________ Transaction Code Number ________ [ ] CHECK HERE IF THE TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY PRIOR TO THE DATE HEREOF AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) - -------------------------------------------------------------------------------- Window Ticket Number (if any) - -------------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery - --------------------------------------------------------------------- Name of Eligible Institution that Guaranteed Delivery - ------------------------------------------------------------------- Check Box of Applicable Book-Entry Transfer Facility, if Delivered by Book-Entry Transfer: [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account Number - -------------------------------------------------------------------------------- Transaction Code Number - -------------------------------------------------------------------------------- BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY 2 3 - ---------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - ---------------------------------------------------------------------------------------------------------------------- PRINT NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) CERTIFICATE(S) TENDERED ON THE SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - ---------------------------------------------------------------------------------------------------------------------- NUMBER OF SHARES NUMBER CERTIFICATE REPRESENTED BY OF SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ TOTAL SHARES - ---------------------------------------------------------------------------------------------------------------------- * Need not be completed by stockholders delivering shares by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the Depositary are tendered. See Instruction 4. - ----------------------------------------------------------------------------------------------------------------------
[ ] CHECK HERE IF YOU CANNOT LOCATE YOUR CERTIFICATE(S) AND REQUIRE ASSISTANCE IN REPLACING THEM. UPON RECEIPT OF NOTIFICATION BY THIS LETTER OF TRANSMITTAL, THE COMPANY'S STOCK TRANSFER AGENT WILL CONTACT YOU DIRECTLY WITH REPLACEMENT INSTRUCTIONS. 3 4 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. STOCKHOLDER'S AGREEMENT Ladies and Gentlemen: The undersigned hereby tenders to Seneca West Corp., a Delaware corporation (the "Purchaser"), the above-described shares (the "Shares") of common stock, par value $.10 per share (the "Common Stock"), of HarCor Energy, Inc., a Delaware corporation (the "Company"), at $2.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase, dated April 6, 1998 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with the Offer to Purchase, each as amended or supplemented from time to time, constitute the "Offer"). The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole or in part from time to time, to one or more direct or indirect wholly owned subsidiaries of the Parent (as defined in the Offer to Purchase), the right to purchase Shares tendered pursuant to the Offer. Accordingly, the undersigned hereby deposits with you the above-described certificates representing the Shares. Subject to, and effective upon, acceptance for payment of and payment for the Shares validly tendered herewith in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser, all right, title and interest in and to all Shares tendered hereby that are purchased pursuant to the Offer (and any and all other distributions, rights, Shares or other securities issued or issuable in respect thereof on or after March 31, 1998) and hereby irrevocably constitutes and appoints the Depositary as the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any such other distributions, rights, Shares or other securities), with full power of substitution and resubstitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver certificates for such Shares (and any such other distributions, rights, Shares, or other securities), together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Purchaser, (b) present such certificates (and any such other distributions, rights, Shares or other securities) for cancellation and transfer of such Shares on the Company's books, and (c) receive all benefits (including all dividends or distributions resulting from any stock split, combination or exchange of Shares) and otherwise exercise all rights of beneficial ownership of such Shares (and all such distributions, rights, Shares or other securities), all in accordance with the terms of the Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and any other distributions, rights, Shares or other securities issued or issuable in respect thereof on or after March 31, 1998 ("Distributions")) and that the Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges, encumbrances, conditional sales agreements or other obligations relating to the sale or transfer thereof, and the same will not be subject to any adverse claim, when and to the extent the same are purchased by the Purchaser. Upon request, the undersigned will execute and deliver any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby. In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any such Distributions issued to the undersigned, in respect of the tendered Shares, accompanied by documentation of transfer, and pending such remittance or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of any such Distributions and, subject to the terms of the Merger Agreement (as defined in the Offer to Purchase), may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. The undersigned hereby irrevocably appoints William M. Petmecky and John F. McKnight and each of them, and any other designee of the Purchaser, and each of them, the attorneys and proxies of the undersigned, each with full power of substitution, to vote in such manner as such attorney and proxy or his substitute shall in his sole discretion deem proper, and otherwise to act (including pursuant to written consent) with respect to all the Shares tendered hereby which have been accepted for payment by the Purchaser prior to the time of such vote or other action (whether at an annual, special, adjourned or postponed meeting or by means of written consent in lieu of such meetings or otherwise) of the Company's stockholders or otherwise and any and all other shares of capital stock or other securities issued or issuable in respect of such Shares on or after March 31, 1998. This appointment is effective upon the purchase of such Shares by the Purchaser 4 5 as provided in the Offer to Purchase. This proxy is irrevocable and coupled with an interest and is granted in consideration of the purchase of such Shares. Such purchase shall revoke all prior proxies given by the undersigned at any time with respect to such Shares (and such other distributions, rights, Shares or other securities issued by the undersigned at any time with respect to such Shares (and such other distributions, rights, Shares or other securities issued in respect thereof) and no subsequent proxies will be given with respect thereto by the undersigned, and if given shall not be valid. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting and other rights with respect to such Shares, including voting at any meeting of stockholders then scheduled. The undersigned understands that the valid tender of Shares pursuant to one of the procedures described in Section 3 of the Offer to Purchase and in the Instructions hereto will constitute an agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Purchaser may not be required to accept for payment any of the tendered Shares. The Purchaser's acceptance for payment of Shares pursuant to the Offer will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, trustees in bankruptcy and legal representatives, successors and assigns of the undersigned. Except as stated in the Offer, this tender is irrevocable. Unless otherwise indicated herein in the box entitled "Special Payment Instructions," please issue the check for the purchase price of any Shares purchased and/or return any certificates for Shares not tendered or not accepted for payment in the name(s) of the registered holder(s) appearing above under "Description of Shares Tendered." Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions," please mail the check for the purchase price for any Shares purchased and return any certificates for Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Descriptions of Shares Tendered." In the event that the boxes entitled "Special Payment Instructions" and "Special Delivery Instructions" are both completed, please issue the check for the purchase price of all Shares purchased and return all certificates representing Shares not purchased or not tendered in the name(s) of, and mail such check and certificates to, the person(s) so indicated. Unless otherwise indicated herein in the box entitled "Special Payment Instructions," please credit any Shares tendered hereby and delivered by book-entry transfer, but which are not purchased, by crediting the account at the Book-Entry Transfer Facility designated above. The undersigned recognizes that the Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name of the registered holder(s) thereof if the Purchaser does not purchase any of the Shares tendered hereby. 5 6 SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares purchased or Certificates evidencing Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned, or if Shares tendered hereby and delivered by book-entry transfer which are not purchased are to be returned by credit to an account at one of the Book-Entry Transfer Facilities other than that designated above. Issue [ ] check [ ] Certificate(s) to: Name: ----------------------------------------------------- (PRINT) Address: ------------------------------------------------------- (INCLUDE ZIP CODE) - ------------------------------------------------------ TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) [ ] Credit Shares delivered by book-entry transfer and not purchased to the account set forth below: Check appropriate box: [ ] DTC [ ] PDTC Account Number ------------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares purchased or Certificates evidencing Shares not tendered or not purchased are to be mailed to someone other than that shown under "Description of Shares Tendered." Mail [ ] check [ ] Certificate(s) to: Name: ----------------------------------------------------- (PRINT) Address: ------------------------------------------------------- (INCLUDE ZIP CODE) - ------------------------------------------------------ TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) 6 7 STOCKHOLDERS SIGN HERE (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (SIGNATURE(S) OF OWNER(S)) - -------------------------------------------------------------------------------- (Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificate(s) or on security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by an officer of a corporation, trustee, executor, administrator, guardian, attorney or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 5. For information concerning signature guarantees, see Instruction 1.) Dated: - --------------------------------------- , 1998 Name(s): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (Full Title): - -------------------------------------------------------------------------------- (SEE INSTRUCTIONS) Address(es): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number: - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security Number: - ---------------------------------------------------------------- GUARANTEE OF SIGNATURES (IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5) FOR USE BY FINANCIAL INSTITUTIONS ONLY, PLACE MEDALLION GUARANTEE IN SPACE BELOW. Authorized Signature: - -------------------------------------------------------------------------------- Name: - -------------------------------------------------------------------------------- (PLEASE PRINT) Title: - -------------------------------------------------------------------------------- Name of Firm: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- Area Code and Telephone Number: - -------------------------------------------------------------------------------- Dated: - --------------------------------------- , 1998 7 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a financial institution which is a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing in the Security Transfer Agents Medallion Program (each an "Eligible Institution"). No signature guarantee is required on this Letter of Transmittal (a) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) of Shares tendered herewith, unless such holder(s) has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" above, or (b) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery Procedures. This Letter of Transmittal is to be completed by stockholders either if certificates for Shares are to be forwarded herewith or if a tender of Shares is to be made pursuant to the procedures for delivery by book-entry transfer set forth in Section 3 of the Offer to Purchase. For Shares to be validly tendered pursuant to the Offer, (i) a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of the Depositary's addresses set forth herein and either certificates or a timely Book-Entry Confirmation for tendered Shares must be received by the Depositary at one of such addresses, in each case prior to the Expiration Date (as defined in the Offer to Purchase), or (ii) the tendering stockholder must comply with the guaranteed delivery procedure set forth below. Stockholders whose certificates for Shares are not immediately available or who cannot deliver their certificates and all other required documents to the Depositary or complete the procedures for book-entry transfer prior to the Expiration Date may tender their Shares by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedures, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed Notice of Guaranteed Delivery provided by the Purchaser (or facsimile thereof) must be duly executed and received by the Depositary prior to the Expiration Date and (iii) the certificates for all physically tendered Shares, or a Book-Entry Confirmation with respect to all tendered Shares, together with this Letter of Transmittal (or facsimile thereof) properly completed and duly executed with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase. A "trading day" is any day on which the National Association of Securities Dealers, Inc. Automated Quotation National Market System is open for business. The stockholder understands that tenders of Shares pursuant to any one of the procedures described in "Procedures for Tendering Shares" -- Section 3 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the stockholder and the Purchaser upon the terms and conditions of the Offer. THE METHOD OF DELIVERY OF STOCK CERTIFICATES AND OTHER DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OF THE DEPOSITARY. IF SENT BY MAIL, REGISTERED MAIL RETURN RECEIPT REQUIRED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractions of Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal, waive any right to receive any notice of the acceptance of their Shares for payment. 3. Inadequate Space. If the space provided is inadequate, the certificate numbers and number of Shares should be listed on a separate signed schedule and attached hereto. 4. Partial Tenders. If fewer than all of the Shares evidenced by any certificate are to be tendered, fill in the number of Shares which are to be tendered in the column entitled "Number of Shares Tendered." A new certificate for the remainder of the Shares evidenced by your old certificate(s) will be sent to you as soon as practicable after the Expiration 8 9 Date. All Shares represented by certificates delivered to the Depositary are deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. (a) If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond exactly with the names as written on the face of the certificate(s) without any change whatsoever. (b) If the Shares tendered are held of record by two or more joint holders, all such holders must sign this Letter of Transmittal. (c) If any Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. (d) If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of certificates or separate stock powers are required. If, however, payment is to be made to, or the certificates for Shares not tendered or accepted for payment are to be issued to, a person other than the registered holder(s), then the certificates transmitted hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appears on the certificates. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. (e) If this Letter of Transmittal is signed by a person other than the registered holder of the certificates tendered, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the certificates. Signatures on such certificates or stock powers required by Instruction 1 above must be guaranteed by an Eligible Institution. (f) If this Letter of Transmittal or any certificates or stock powers are signed by officers of corporations, trustees, executors, administrators, guardians, attorneys-in-fact or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and must submit proper evidence satisfactory to the Purchaser of their authority so to act. 6. Stock Transfer Taxes. Except as set forth in this Instruction 6, the Purchaser will pay, or cause to be paid, any stock transfer taxes with respect to the transfer and sale of Shares to it or its assignee pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificates for Shares not tendered or accepted for payment are to be registered in the name of, any persons other than the registered holder(s), or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder or such person) payable on the account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificates listed in this Letter of Transmittal. 7. Special Payment and Delivery Instructions. If a check for the purchase price of any Shares tendered hereby is to be issued, or certificate(s) representing Shares not tendered or not purchased are to be issued, in the name of a person other than the person(s) signing this Letter of Transmittal or if such check or any such certificate is to be sent to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal but at an address other than that shown in the box entitled "Description of Shares Tendered", the appropriate boxes in this Letter of Transmittal must be completed. Stockholders delivering Shares tendered hereby by book entry transfer may request that Shares not purchased be credited to such account maintained at a Book-Entry Transfer Facility as such stockholder may designate in the box entitled "Special Payment Instructions". If no such instructions are given, all such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated herein as the account from which such Shares were delivered. 8. Irregularities. All questions as to the validity, form, eligibility (including timeliness of receipt) and acceptance for payment, of any tender of Shares will be determined by the Purchaser, in its sole discretion, which determination shall be final and binding on all parties. The Purchaser reserves the absolute right to reject any or all tenders of any Shares 9 10 determined by it to be not in appropriate form or the acceptance of or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right to waive any of the conditions of the Offer or any defect or irregularity in any tender with respect to any particular Shares or any particular stockholder, and the Purchaser's interpretations of the terms and conditions of the Offer (including these instructions) shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders must be cured within such time as the Purchaser shall determine. None of the Purchaser, the Depositary, the Information Agent or any of their respective affiliates or any other person will be under any duty to give notification of any defects or irregularities in tenders, or incur any liability for failure to give such notification. Tenders will not be deemed to have been validly made until all defects and irregularities have been cured or waived. 9. Substitute Form W-9. The tendering stockholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on Substitute Form W-9. Failure to provide the information on the form may subject the tendering stockholder to 31% federal income tax withholding on any amount otherwise payable to the stockholder. The box in Part 2 of the form may be checked if the tendering stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future. If the box in Part 2 is checked and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% on all payments of the purchase price thereafter until a TIN is provided to the Depositary. See "Important Tax Information" below. 10. Requests for Assistance or Additional Copies. Requests for assistance or additional copies of the Offer to Purchase and this Letter of Transmittal may be directed to the Information Agent at the address set forth or to your broker, dealer, commercial bank or trust company. 11. Lost or Destroyed Certificates. If any certificate(s) representing Shares has been lost or destroyed, the stockholder should check the appropriate box on the third page of the Letter of Transmittal. The Company's stock transfer agent will then instruct such stockholder as to the procedure to be followed in order to replace the certificate(s). The stockholder may have to post a surety bond of approximately 2% of the current market value of the stock. This Letter of Transmittal and related documents cannot be processed until procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF) TOGETHER WITH CERTIFICATES OR A BOOK-ENTRY CONFIRMATION FOR SHARES AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY (OR A FACSIMILE COPY THEREOF) MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE). IMPORTANT TAX INFORMATION Under the federal income tax law, a stockholder whose tendered Shares are accepted for payment is required by law to provide the Depositary (as payer) with such stockholder's correct taxpayer identification number on Substitute Form W-9. If such a stockholder is an individual, the taxpayer identification number is such stockholder's Social Security number. For businesses and other entities, the taxpayer identification number is its Employer Identification Number. If the Depositary is not provided with the correct taxpayer identification number, the stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service, and payments made to such stockholder with respect to Shares purchased pursuant to the Offer may be subject to federal income tax backup withholding. To prevent federal income tax backup withholding on payments made to a stockholder with respect to Shares purchased pursuant to the Offer, each stockholder is required to notify the Depositary with such stockholder's correct taxpayer identification number by completing the form certifying that the taxpayer identification number provided on Substitute Form W-9 is correct (or that such stockholder is awaiting a taxpayer identification number) and that (1) the stockholder has not been notified by the Internal Revenue Service that such stockholder is subject to federal income tax backup withholding as a result of failure to report all interest or dividends or (2) the Internal Revenue Service has notified the stockholder that such stockholder is no longer subject to federal income tax backup withholding. Exempt stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these federal income tax backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that stockholder must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status. Such statements can be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number of Substitute Form W-9 for additional instructions. 10 11 If federal income tax backup withholding applies, the Depositary is required to withhold 31% of the payments made to a stockholder. Backup withholding is not an additional tax. Rather, the tax liability of person subject to federal income tax backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund generally may be obtained. WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the Social Security number or Employer Identification Number of the registered holder of the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guideline for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN A $50 PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 11 12 - -------------------------------------------------------------------------------- PAYOR: [ ] - ------------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE ENTER YOUR TIN IN THE BOX AT RIGHT AND TIN: ------------------ CERTIFY BY SIGNING AND DATING BELOW. Social Security Number or Employer Identification Number ----------------------------------------------------------------------------------- Form W-9 Name (Please Print) PART 2 -------------------------------------------------------- Awaiting [ ] DEPARTMENT OF THE TREASURY, Address TIN INTERNAL REVENUE SERVICE -------------------------------------------------------- City State Zip Code -------------------------------------------------------- ----------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION PART 3 -- CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT: (1) the NUMBER ("TIN") number shown on this form is my correct taxpayer identification number (or a TIN AND CERTIFICATION has not been issued to me, I have mailed or delivered an application to receive a TIN or intend to do so in the near future), (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends or the IRS has notified me that I am no longer subject to backup withholding, and (3) all other information provided on this form is true, correct and complete. ----------------------------------------------------------------------------------- SIGNATURE-------------------------------------- DATE------------------------- You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of under reporting interest or dividends on your tax return. - -------------------------------------------------------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I CERTIFY UNDER PENALTIES OF PERJURY THAT a taxpayer identification number has been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable cash payments made to me will be withheld until I provide a taxpayer identification number. Signature - ------------------------------------------------------------ Date - ------------------------ Questions and requests for assistance or additional copies of the Offer to Purchase, Letter of Transmittal and other tender offer materials may be directed to the Information Agent as set forth below: The Information Agent for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, LLC 450 West 33rd Street, 14th Floor New York, New York 10001 BANKS AND BROKERS CALL COLLECT: (212) 273-8070 ALL OTHERS CALL TOLL-FREE: (800) 684-8823 12 EX-99.A3 4 NOTICE OF GUARANTEED DELIVERY 1 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF HARCOR ENERGY, INC. As set forth in Section 3 of the Offer to Purchase (as defined below), this form or one substantially equivalent hereto must be used to accept the Offer (as defined below) if certificates for shares (the "Shares") of Common Stock, par value $.10 per share (the "Common Stock"), of HarCor Energy, Inc., a Delaware corporation (the "Company"), are not immediately available, or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary at the address set forth below prior to the Expiration Date (as defined in the Offer to Purchase). This form may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution (as defined in the Offer to Purchase). See Section 3 of the Offer to Purchase. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, LLC By Mail: Facsimile Transmission: By Hand: Reorganization Department (201) 329-8936 Reorganization Department Post Office Box 3301 120 Broadway, 13th Floor South Hackensack, NJ 07606 Confirmation of Receipt of New York, NY 10271 Facsimile by Telephone: (201) 296-4860
By Overnight Courier: Reorganization Department 85 Challenger Road, Mail Drop -- Reorg Ridgefield Park, NJ 07660 --------------------- DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. 2 LADIES AND GENTLEMEN: The undersigned hereby tenders to Seneca West Corp., a Delaware corporation which is a wholly owned subsidiary of Seneca Resources Corporation, a Pennsylvania corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase dated April 6, 1998 (the "Offer to Purchase") and the related Letter of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged, the number of Shares (as such term is defined in the Offer to Purchase), set forth below, pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Number of Shares: - --------------------------------- Certificate No(s). (if available): - ------------------------------------------------------ Check ONE box if Shares will be tendered by book-entry transfer. [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account Number - ---------------------------------- Dated - ------------------------------------ , 1998 Name(s) of Record Holder(s): - ------------------------------------------------------ - ------------------------------------------------------ Please Type or Print Address(es) - ---------------------------------------- - ------------------------------------------------------ Zip Code Area Code and Tel. No. - --------------------------- Signature(s) - --------------------------------------- Dated - ------------------------------------ , 1998 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a participant in the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program, hereby guarantees to deliver to the Depositary either the certificates representing the Shares tendered hereby, in proper form for transfer, or a Book-Entry Confirmation with respect to such Shares, in any such case together with a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, with any required signature guarantees, or an Agent's Message, and any other required documents within three trading days (as defined in the Offer to Purchase) after the date hereof. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal and certificates for Shares to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. All capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Offer to Purchase. - ------------------------------------------------------ Name of Firm - ------------------------------------------------------ Address - ------------------------------------------------------ Zip Code Area Code and Tel. No. - --------------------------- - ------------------------------------------------------ Authorized Signature - ------------------------------------------------------ Title - ------------------------------------------------------ Please Type or Print Date - ------------------------------------ , 1998 NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.A4 5 LETTER TO BROKERS, DEALERS, COMMERCIAL BANKS 1 OFFER TO PURCHASE ALL OUTSTANDING SHARES OF COMMON STOCK OF HARCOR ENERGY, INC. BY SENECA WEST CORP. A WHOLLY OWNED SUBSIDIARY OF SENECA RESOURCES CORPORATION WHICH IS A WHOLLY OWNED SUBSIDIARY OF NATIONAL FUEL GAS COMPANY AT $2.00 NET PER SHARE THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MAY 4, 1998, UNLESS THE OFFER IS EXTENDED. April 6, 1998 To Brokers, Dealers, Banks, Trust Companies and Other Nominees: We have been engaged by Seneca West Corp., a Delaware corporation (the "Purchaser"), which is a wholly owned subsidiary of Seneca Resources Corporation, a Pennsylvania corporation, (the "Parent"), to act as Dealer Manager in connection with the Purchaser's offer to purchase all outstanding shares (the "Shares") of Common Stock, $.10 par value per share (the "Common Stock"), of HarCor Energy, Inc., a Delaware corporation (the "Company"), at a purchase price of $2.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase dated April 6, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments and supplements thereto, collectively constitute the "Offer") enclosed herewith. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of March 31, 1998 (the "Merger Agreement"), among the Parent, the Purchaser and the Company. All capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Offer to Purchase. Please furnish copies of the enclosed materials to those of your clients for whom you hold Shares registered in your name or in the name of your nominee. Enclosed herewith are copies of the following documents: 1. Offer to Purchase dated April 6, 1998; 2. Letter of Transmittal to be used by stockholders of the Company in accepting the Offer; 3. A printed form of letter that may be sent to your clients for whose account you hold Shares in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 4. The Notice of Guaranteed Delivery; 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. A return envelope addressed to the Depositary. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer a number of shares which, together with any shares beneficially owned by the Parent or the Purchaser, represent at least a majority of the Shares outstanding on a fully diluted basis. 2 The Offer is also subject to other terms and conditions contained in the Offer to Purchase. See Section 14 of the Offer to Purchase. The Board of Directors of the Company has unanimously approved the Offer and the Merger and the Merger Agreement, has determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the Company and its stockholders, and recommends that stockholders accept the Offer and tender their Shares. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and will pay promptly after the Expiration Date (as defined in the Offer to Purchase) for all Shares validly tendered prior to the Expiration Date and not properly withdrawn as, if and when the Purchaser gives written notice to the Depositary of the Purchaser's acceptance of such Shares. Payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares or a timely Book-Entry Confirmation (as defined in the Offer to Purchase), (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase) and (iii) any other documents required by the Letter of Transmittal. If holders of Shares wish to tender their Shares, but it is impracticable for them to deliver their certificates prior to the Expiration Date or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures specified in Section 3 of the Offer to Purchase. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MAY 4, 1998, UNLESS THE OFFER IS EXTENDED. Neither the Purchaser nor the Parent will pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager, the Depositary and the Information Agent, as described in the Offer to Purchase) in connection with the solicitation of tenders of Shares pursuant to the Offer. The Purchaser will, however, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary expenses incurred by them in forwarding the enclosed offering materials to their customers. The Purchaser will pay all stock transfer taxes applicable to its purchase of shares pursuant to the Offer, subject to Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed material may be obtained from, the Information Agent, ChaseMellon Shareholder Services, LLC, 450 West 33rd Street, 14th Floor, New York, New York 10001; Banks and Brokers Call Collect: (212) 273-8070; All Others Call Toll-Free: (800) 684-8823. Very truly yours, ChaseMellon Shareholder Services, LLC, as Information Agent NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE PARENT, THE DEPOSITARY, THE INFORMATION AGENT OR ANY AFFILIATE THEREOF OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. EX-99.A5 6 LETTER TO CLIENTS FOR USE BY BROKERS, DEALERS 1 OFFER TO PURCHASE ALL OUTSTANDING SHARES OF COMMON STOCK OF HARCOR ENERGY, INC. PURSUANT TO THE OFFER TO PURCHASE DATED APRIL 6, 1998 BY SENECA WEST CORP., A WHOLLY OWNED SUBSIDIARY OF SENECA RESOURCES CORPORATION WHICH IS A WHOLLY OWNED SUBSIDIARY OF NATIONAL FUEL GAS COMPANY THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MAY 4, 1998, UNLESS THE OFFER IS EXTENDED. To Our Clients: Enclosed for your consideration is an Offer to Purchase, dated April 6, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") relating to the offer by Seneca West Corp., a Delaware corporation (the "Purchaser"), which is a wholly owned subsidiary of Seneca Resources Corporation, a Pennsylvania corporation (the "Parent"), to purchase for cash all outstanding shares (the "Shares") of Common Stock, $.10 par value per share (the "Common Stock"), of HarCor Energy, Inc., a Delaware corporation (the "Company"). We are the holder of record of Shares held by us for your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USE TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Offer to Purchase. Accordingly, we request your instructions as to whether you wish to tender any of or all the Shares held by us for your account upon the terms and subject to the conditions set forth in the Offer. Your attention is directed to the following: 1. The tender price is $2.00 per Share, net to the seller in cash, without interest thereon. 2. The Offer is being made for all outstanding Shares. 3. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER, HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER AND THE MERGER AGREEMENT ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES. 4. The Offer and withdrawal rights will expire at 12:00 Midnight, New York City time, on Monday, May 4, 1998, unless the Offer is extended by the Purchaser. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the Share Certificates or timely Book-Entry Confirmation of such Shares, if such procedure is available, into the Depositary's account at the Book-Entry Transfer Facilities pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message and (iii) any other documents required by the Letter of Transmittal. 2 5. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares which, together with any Shares beneficially owned by the Parent or the Purchaser, represent at least a majority of the Shares outstanding on a fully diluted basis. 6. The Offer is being made pursuant to an Agreement and Plan of Merger dated as of March 31, 1998 (the "Merger Agreement"), among the Parent, the Purchaser and the Company. The Merger Agreement provides that the Purchaser will be merged (the "Merger") with and into the Company after the completion of the Offer and the satisfaction of certain conditions. As a result of the Merger, each Share issued and outstanding immediately prior to the Effective Time (as defined in the Merger Agreement) (other than Dissenting Shares (as defined in the Merger Agreement) and Shares then owned by the Company, the Parent, the Purchaser, or any of their respective affiliates) will be converted into the right to receive the price paid in the Offer in cash, without interest. 7. Any stock transfer taxes applicable to a sale of Shares to the Purchaser pursuant to the Offer will be borne by the Purchaser, except as otherwise provided in Instruction 6 of the Letter of Transmittal. If you wish to have us tender any of or all your Shares held by us for your account, please so instruct us by completing, executing, detaching and returning to us the instruction form set forth on the reverse side of this letter. An envelope to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified below in this letter. Your instructions to us should be forwarded in ample time to permit us to submit a tender on your behalf prior to the expiration of the Offer. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal. The Offer is not being made to, nor will tenders be accepted from, or on behalf of, holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. If the securities laws of any jurisdiction require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdiction. 3 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE ALL OUTSTANDING SHARES OF COMMON STOCK OF HARCOR ENERGY, INC. The undersigned acknowledge(s) receipt of your letter, the enclosed Offer to Purchase, dated April 6, 1998, of Seneca West Corp., a Delaware corporation and wholly owned subsidiary of Seneca Resources Corporation, a Pennsylvania corporation, and the related Letter of Transmittal, relating to shares (the "Shares") of Common Stock, $.01 par value per share (the "Common Stock"), of HarCor Energy, Inc., a Delaware corporation. This will instruct you to tender the number of Shares indicated below (or if no number is indicated below, all Shares) held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in such Offer to Purchase and related Letter of Transmittal. Dated: , 1998 NUMBER OF SHARES TO BE TENDERED* --------------- SHARES I (we) understand that if I (we) sign this instruction form without indicating a lesser number of Shares in the space above, all Shares held by you for my (our) account will be tendered. SIGN HERE - -------------------------------------------------------------------------------- Signature(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Print Name(s) - -------------------------------------------------------------------------------- Print Address(es) - -------------------------------------------------------------------------------- Area Code and Telephone Number(s) - -------------------------------------------------------------------------------- Tax ID or Social Security Number(s) - --------------- * Unless otherwise indicated, it will be assumed that all Shares held by your firm for my (our) account are to be tendered. EX-99.A6 7 GUIDELINES FOR CERTIFICATION OF TAXPAYER ID. NO. 1 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. -- Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. - --------------------------------------------------------- ---------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY NUMBER OF -- - --------------------------------------------------------- FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER IDENTIFICATION NUMBER OF -- - --------------------------------------------------------- 1. An individual's account. The individual 2. Two or more individuals The actual owner of (joint account) the account or, if combined funds, the first individual on the account(1) 3. Husband and wife (joint The actual owner of account) the account or, if joint funds, the first individual on the account(1) 4. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 5. Adult and minor (joint The adult or, if the account) minor is the only contributor, the minor(1) 6. Account in the name of The ward, minor, or guardian or committee for a incompetent person(3) designated ward, minor, or incompetent person 7. a The usual revocable The grantor- savings trust account trustee(1) (grantor is also trustee) b So-called trust account The actual owner(1) that is not a legal or valid trust under State law 8. Sole proprietorship account The owner(4) 9. A valid trust, estate, or The legal entity (Do pension trust not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable, or The organization educational organization account 12. Partnership account held in The partnership the name of the business 13. Association, club, or other The organization tax-exempt organization 14. A broker or registered The broker or nominee nominee 15. Account with the Department The public entity of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments
- --------------------------------------------------------- --------------------------------------------------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE:If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under section 501(a), or an individual retirement plan, or a custodial account under section 403(b)(7). - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency, or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a) - An exempt charitable remainder trust under section 664, or a non-exempt trust described in section 4947. - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. - A futures commission merchant registered with the Commodity Futures Trading Commission. - A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Secretaries, Inc. Nominee List. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to non-resident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. - Mortgage interest paid to the payer. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see section 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A, and 6050N and their regulations. PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. IRS uses the numbers for identification purposes and to help verify the accuracy of your return. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-99.A7 8 TEXT OF PRESS RELEASE DATED JANUARY 23, 1998 1 EXHIBIT (a)(7) NEWS RELEASE January 23, 1998 Contact: Mark Harrington, Chairman and Chief Executive Officer Gary S. Peck, V.P. Finance and Chief Financial Officer Fran Reeder, Investor Relations 713-961-1804 HARCOR ENERGY ANNOUNCES PROPOSED SALE OF COMPANY. Houston, Texas, January 23, 1998 -- HarCor Energy, Inc. (NASDAQ NMS: HARC) today reported reaching an agreement in principle with Seneca Resources Corporation for the sale of HarCor to Seneca for a total cash price of $32,536,000, or $2.00 per share of HarCor Common Stock. The sale is subject to the preparation and execution of a definitive agreement, satisfactory completion of the audit of HarCor's financial statements for the year ended December 31, 1997, receipt of all required approvals, including approval of HarCor's stockholders, satisfactory completion of the previously announced sale of HarCor's non-California assets for $13.2 million (the proceeds of which would be effectively acquired by Seneca in connection with its purchase of HarCor), and completion by Seneca of a satisfactory due diligence review of HarCor's assets, liabilities and business. Closing of the proposed sale is expected to occur by June. HarCor and Seneca are energy companies headquartered in Houston. Seneca is a wholly-owned subsidiary of National Fuel Gas Co. HarCor Energy, Inc. is a Houston-based independent energy company engaged in the acquisition, exploitation and exploration of onshore crude oil and natural gas properties in the United States. EX-99.A8 9 TEST OF JOINT PRESS RELEASE DATED MARCH 31, 1998 1 EXHIBIT (a)(8) NEWS RELEASE MARCH 31, 1998 CONTACT: MARK HARRINGTON, CHAIRMAN FRANCIS ROTH, PRESIDENT FRAN REEDER, INVESTOR RELATIONS SENECA RESOURCES CORPORATION AND HARCOR ENERGY, INC. ANNOUNCE EXECUTION OF MERGER AGREEMENT Houston, Texas, March 31, 1998 -- Seneca Resources Corporation, the exploration and production subsidiary of National Fuel Gas Company (NYSE: NGF), and HarCor Energy, Inc. (NASDAQ NMS: HARC) today jointly announced that the two companies have signed a definitive merger agreement for the acquisition of HarCor by Seneca for a total price of approximately $32.5 million in cash. Under the terms of the agreement, a subsidiary of Seneca will commence a tender offer no later than April 6, 1998, to acquire all of the outstanding shares of HarCor's Common Stock for $2.00 per share in cash. Following completion of the tender offer, the Seneca subsidiary will merge with HarCor, pursuant to which the remaining HarCor stockholders will also receive $2.00 per share in cash. Chase Mellon Shareholder Services, LLC will act as Information Agent for the tender offer. SBC Warburg Dillon Read Inc. served as financial advisor to HarCor and has provided a fairness opinion in connection with the transaction. HarCor is a Houston-based independent oil and gas company with properties located primarily on the west side of the San Joaquin Basin in Kern County, California. The properties produce gas and high gravity oil and provide for additional drilling and development over the next four years. According to James Beck, President of Seneca Resources, "The acquisition of HarCor will establish Seneca as a significant independent producer in California. These reserves, combined with our activity in the Gulf of Mexico and Appalachian Basin, provide the groundwork for our future growth." National Fuel Gas Company is an integrated energy company with operations in all segments of the natural gas industry, including utility, pipeline and storage, exploration and production, and marketing operations. Seneca is headquartered in Houston and explores for and produces natural gas and oil in the lower 48 States and the Gulf of Mexico. The tender offer and merger are subject to customary conditions, including the tender of a majority of HarCor's shares and the occurrence of no material adverse change in HarCor prior to the closing. The tender offer will be made pursuant to definitive documents to be filed with the Securities and Exchange Commission. Statements contained in this press release which are not historical facts are forward-looking statements. Such forward-looking statements are necessary estimates reflecting the best judgment of the party making such statements based upon current information and involve a number of risk and uncertainties. Forward-looking statements contained in this press release or in other public statements of the parties should be considered in light of those factors. There can be no assurance that such factors or other factors will not affect the accuracy of such forward-looking statements. EX-99.A9 10 FORM OF SUMMARY ADVERTISEMENT DATED APRIL 6, 1998 1 EXHIBIT (a)(9) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer (as defined below) is made solely by the Offer to Purchase dated April 6, 1998 and the related Letter of Transmittal and is being made to all holders of Shares. The Purchaser (as defined below) is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, the Purchaser may, in its sole discretion, make a good faith effort to comply with that state statute. If, after that good faith effort, Purchaser cannot comply with that state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in that state. In any jurisdiction, the securities, blue sky or other laws of which require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed made on behalf of Purchaser by one or more registered brokers or dealers licensed under the laws of that jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF HARCOR ENERGY, INC. AT $2.00 NET PER SHARE BY SENECA WEST CORP., A WHOLLY OWNED SUBSIDIARY OF SENECA RESOURCES CORPORATION WHICH IS A WHOLLY OWNED SUBSIDIARY OF NATIONAL FUEL GAS COMPANY 2 Seneca West Corp. (the "Purchaser"), a Delaware corporation and a wholly owned subsidiary of Seneca Resources Corporation (the "Parent"), a Pennsylvania corporation is offering to purchase all outstanding shares (the "Shares") of common stock, par value $.10 per share, of HarCor Energy, Inc. (the "Company"), a Delaware corporation, at $2.00 per Share, net to the seller in cash, upon the terms, and subject to the conditions set forth in the Offer to Purchase dated April 6, 1998 and in the related Letter of Transmittal (which together constitute the "Offer"). Following the Offer, the Purchaser intends to effect the Merger described below. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK TIME, ON MONDAY, MAY 4, 1998, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, A NUMBER OF SHARES WHICH, TOGETHER WITH ANY SHARES BENEFICIALLY OWNED BY NATIONAL FUEL GAS COMPANY, THE PARENT OR THE PURCHASER, REPRESENT AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THE OFFER TO PURCHASE. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of March 31, 1998 (the "Merger Agreement"), among the Parent, the Purchaser and the Company pursuant to which, among other things, following consummation of the Offer or the expiration or termination of the Offer under certain circumstances and the satisfaction or waiver of certain conditions and in accordance with relevant provision of the Delaware General Corporation Law, the Purchaser will be merged with and into the Company (the "Merger"). Following consummation of the Merger, the Company will continue as the surviving corporation (the "Surviving Corporation") and will become a wholly owned subsidiary of the Parent. At the effective time of the Merger, each outstanding Share (other than Shares owned by National Fuel Gas Company, the Parent, the Purchaser and Shares held by stockholders who perfect their dissenters' rights under Delaware law) will be converted into the right to receive in cash the amount per Share paid pursuant to the Offer, without interest. Under the Company's Certificate of Incorporation and Delaware law, the affirmative vote of the holders of a majority of the outstanding Shares is required to approve and adopt the Merger Agreement and the Merger. If at least 90% of the outstanding Shares are tendered in the Offer and accepted for payment by the Purchaser, the Purchaser will have sufficient voting power to cause the approval and adoption of the Merger Agreement and the transactions contemplated thereby without the affirmative vote of any other stockholder. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AND THE MERGER AGREEMENT AND DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES. For purposes of the Offer, the Purchaser shall be deemed to have accepted for payment, and thereby purchased, Shares validly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives oral or written notice to ChaseMellon Shareholder Services, LLC (the "Depositary") of the Purchaser's acceptance for payment of those Shares pursuant to the Offer. Payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment -2- 3 from the Purchaser and transmitting payment to tendering stockholders whose Shares have been accepted for payment. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (a) certificates evidencing those Shares pursuant to the procedure set forth in Section 2 of the Offer to Purchase or timely confirmation of book-entry transfer of those Shares into the Depositary's account at the Book-Entry Transfer Facilities (as defined in Section 2 of the Offer to Purchase), pursuant to the procedure set forth in Section 3 of the Offer to Purchase, (b) a Letter of Transmittal (or facsimile thereof) properly completed and duly executed with any required signature guarantees or an Agent's Message (as defined in Section 2 of the Offer to Purchase) in connection with a book-entry transfer, and (c) any other documents required by the Letter of Transmittal. Under no circumstances will interest be paid by the Purchaser on the purchase price of Shares, regardless of any delay in making that payment. The Purchaser expressly reserves the right, in its sole discretion (subject to the terms of the Merger Agreement), at any time or from time to time, and regardless of whether or not any of the events set forth in Section 14 of the Offer to Purchase shall have occurred or shall have been determined by the Purchaser to have occurred, to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and payment for, and Shares, by giving oral or written notice of that extension to the Depositary. The Purchaser shall not have any obligation to pay interest on the purchase price for tendered Shares in the event the Purchaser exercises the right to extend the period of time during which the Offer is open. There can be no assurance that the Purchaser will exercise its right to extend the Offer. Any such extension will be followed by a public announcement thereof no later than 9:00 a.m. New York City time, on the next business day after the previously scheduled expiration date. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the right of each tendering stockholder to withdraw that stockholder's Shares. Except as otherwise provided below, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to 12:00 midnight, New York City time, on May 4, 1998 (or, if the Purchaser shall have extended the period of time during which the Offer is open, the latest time and date at which the Offer, as so extended by the Purchaser shall expire), and unless theretofore accepted for payment, may also be withdrawn at any time after June 8, 1998. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at its address set forth on the back cover of the Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates evidencing Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of those certificates, the serial numbers shown on those certificates must be submitted to the Depositary and, unless those Shares have been tendered by an Eligible Institution (as defined in Section 2 of the Offer to Purchase), the signature on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedure for book-entry transfer set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 3 of the Offer to Purchase at any time prior to the Expiration Date. All questions as to the form and validity (including the time of receipt) of any notice of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination shall be final and binding on all parties. The Company has provided Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares and furnished to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder lists of the -3- 4 Company or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. The information required to be disclosed by Rule 14d-6(e)(1)(vii) promulgated under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. THE OFFER TO PURCHASE AND LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Questions and requests for assistance or for additional copies of the Offer to Purchase and the related Letter of Transmittal and other tender offer materials may be directed to the Information Agent as set forth below, and copies will be furnished promptly at the Purchaser's expense. No fees or commissions will be paid to brokers, dealers or other persons for soliciting tenders of Shares pursuant to the Offer. The Information Agent of the Offer is: [LOGO] CHASEMELLON SHAREHOLDER SERVICES, LLC 450 West 33rd Street, 14th Floor New York, New York 10001 BANKS AND BROKERS CALL COLLECT: (212) 273-8070 ALL OTHERS CALL TOLL-FREE: (800) 684-8823 April 6, 1998 -4- EX-99.C1 11 AGREEMENT AND PLAN OF MERGER DATED 3/31/98 1 EXHIBIT (c)(1) AGREEMENT AND PLAN OF MERGER among HARCOR ENERGY, INC. and SENECA WEST CORP. and SENECA RESOURCES CORPORATION Dated as of March 31, 1998 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I THE OFFER 1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Company Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 Stockholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.4 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE II THE MERGER 2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.4 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.5 Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.6 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.7 Consideration; Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.8 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.9 Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.10 Options and Other Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.11 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.12 Company Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.13 Merger Without Meeting of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.14 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 3.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.2 Capitalization of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.3 Authorization and Validity of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 SEC Reports; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 Schedule 14D9; Offer Documents and Company Proxy Statement . . . . . . . . . . . . . . . . . . . . . 11 3.8 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.9 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.11 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3.14 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3.15 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3.16 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3.17 Certain Business Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3.18 Permits; Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3.19 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3.20 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3.21 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER 4.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.2 Authorization and Validity of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 4.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 4.6 Offer Documents; Company Proxy Statement; Schedule 14D9 . . . . . . . . . . . . . . . . . . . . . . 23 4.7 Financing; Sufficient Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.8 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.9 Operations of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE V COVENANTS 5.1 Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 5.2 Access; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 5.3 Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 5.4 Notice of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 5.5 Company Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 5.6 State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 5.7 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 5.8 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 5.9 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 5.10 D&O Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 5.11 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 ARTICLE VI CLOSING CONDITIONS 6.1 Conditions to Obligations of Each Party to Effect the Merger . . . . . . . . . . . . . . . . . . . . 31 6.2 Conditions Precedent to the Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . 31 6.3 Conditions Precedent to the Obligations of Parent and Purchaser . . . . . . . . . . . . . . . . . . 32 ARTICLE VII TERMINATION 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 7.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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ARTICLE VIII MISCELLANEOUS 8.1 No Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 8.3 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 8.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 8.5 Assignment; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 8.6 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 8.7 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 8.8 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8.10 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
-iii- 5 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER dated as of March 31, 1998 by and among HarCor Energy, Inc., a Delaware corporation (the "Company"), Seneca Resources Corporation, a Pennsylvania corporation ("Parent"), and Seneca West Corp., a Delaware corporation and wholly owned indirect subsidiary of Parent ("Purchaser"). RECITALS WHEREAS, the respective Boards of Directors of the Company, Parent and Purchaser have unanimously approved the acquisition of the Company by Parent, upon the terms and subject to the conditions set forth herein; WHEREAS, it is intended that the acquisition be accomplished by Purchaser commencing a cash tender offer for Shares (as defined in Section 1.1) to be followed by a merger of Purchaser with and into the Company; and NOW, THEREFORE, in consideration of the foregoing and of the respective representations, warranties, covenants and agreements set forth in this Agreement, the parties hereto hereby agree as follows: ARTICLE I THE OFFER 1.1 The Offer. (a) As promptly as practicable (but in no event later than five business days following the public announcement of the execution hereof), Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), an offer to purchase all of the Company's outstanding shares of common stock, par value $0.10 per share (the "Shares"), at a price of $2.00 per Share, net to the seller in cash (as such offer may be amended in accordance with the terms of this Agreement, the "Offer"), subject to the conditions set forth in Annex A hereto. Purchaser will not, without the prior written consent of the Company, (i) decrease or change the form of the consideration payable in the Offer, (ii) decrease the number of Shares sought pursuant to the Offer, (iii) impose additional conditions to the Offer, (iv) change the conditions to the Offer, except that Parent in its sole discretion may waive any of the conditions to the Offer other than the condition set forth in clause (1) of Annex A, which may not be waived without the Company's prior written consent, or (v) make any other change in the terms or conditions of the Offer that is adverse to the holders of Shares. Purchaser will, on the terms and subject to the prior satisfaction or waiver of the conditions to the Offer, accept for payment and pay for all Shares validly tendered and not withdrawn pursuant to the Offer promptly after expiration of the Offer; provided that, Purchaser may extend the Offer up to the tenth business day after the later of (i) the initial expiration date of the Offer and (ii) the date on which all such conditions shall first have been satisfied or waived. The Company agrees that no Shares held by the Company will be tendered to Parent pursuant to the Offer; provided, that Shares held beneficially or of record by any 6 plan, program or arrangement sponsored or maintained for the benefit of employees of the Company shall not be deemed to be held by the Company, regardless of whether the Company has, directly or indirectly, the power to vote or control the disposition of such Shares. The obligations of Purchaser to commence the Offer and to accept for payment and to pay for Shares validly tendered on or prior to the expiration of the Offer and not withdrawn shall be subject only to the conditions set forth in Annex A hereto. (b) On the date of commencement of the Offer, Parent and Purchaser shall file or cause to be filed with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with all amendments thereto, the "Schedule 14D-1") with respect to the Offer, which shall contain the offer to purchase and related letter of transmittal and other ancillary offer documents and instruments pursuant to which the Offer will be made (collectively, together with any supplements or amendments thereto, the "Offer Documents"). Parent and Purchaser will disseminate the Offer Documents to holders of Shares. Each of Parent, Purchaser and the Company will promptly correct any information provided by it for use in the Offer Documents that becomes false or misleading in any material respect and Parent and Purchaser will take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of Shares, in each case as and to the extent required by applicable law. The Company and its counsel shall be given a reasonable opportunity to review and comment on the Offer Documents prior to their filing with the SEC. Parent and Purchaser agree to provide the Company with any comments that may be received from the SEC or its staff with respect to the Offer Documents promptly after receipt thereof and to further provide the Company with a reasonable opportunity to participate in all substantive communications with the SEC and its staff relating to the Offer Documents, the Offer or the transactions contemplated thereby. 1.2 Company Actions. The Company hereby consents to the Offer and represents and warrants (i) that its Board of Directors (at meetings duly called and held) (a) has unanimously determined as of the date hereof that the Offer and the Merger are fair to and in the best interests of the stockholders of the Company, (b) has unanimously approved this Agreement and resolved to recommend acceptance of the Offer and approval and adoption of this Agreement and the Merger by the stockholders of the Company, (ii) that such approval constitutes approval of this Agreement and the transactions contemplated hereby for purposes of Section 203 of the DGCL and (iii) that the Board of Directors will not withdraw, amend or modify such recommendation unless it determines in good faith, on the advice of outside counsel, that such action is necessary for the Board of Directors to comply with its duties to the Company's stockholders under applicable law. On the date of the commencement of the Offer, the Company shall file or cause to be filed with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") containing the unanimous recommendation of the Board of Directors in favor of the Offer and the Merger and shall permit the inclusion in the Schedule 14D-1 of such recommendation, in each case subject to the fiduciary duties of the Board of Directors of the Company. Each of the Company, Parent and Purchaser will promptly correct any information provided by it for use in the Schedule 14D-9 that becomes false or misleading in any material respect and the Company will take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of Shares, in each case as and to the extent required by applicable law. Parent and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 prior to its filing with the SEC. The Company agrees to provide Parent with any comments that may be -2- 7 received from the SEC or its staff with respect to the Schedule 14D-9 promptly after receipt thereof and to further provide Parent with a reasonable opportunity to participate in all substantive communications with the SEC and its staff relating to the Schedule 14D-9, the Offer or the transactions contemplated thereby. 1.3 Stockholder Lists. In connection with the Offer, the Company shall promptly furnish or cause to be furnished to Purchaser mailing labels and security position listings and any available listing or computer file containing the names and addresses of the record holders of Shares as of a recent date and shall furnish Purchaser with such information (including, without limitation, updated lists of stockholders, mailing labels and lists of securities positions) reasonably available to the Company and such assistance as Parent or its agents may reasonably request in communicating the Offer to the record and beneficial holders of Shares. Subject to the requirements of applicable law and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer and the Merger, Parent, Purchaser and their respective affiliates will hold in confidence such listings and other information, shall use such information only in connection with the Offer and the Merger and, if this Agreement is terminated, shall, and shall cause their respective agents or other representatives to, promptly deliver to the Company all copies of all such information (and extracts or summaries thereof) then in their possession. 1.4 Directors. Promptly upon the purchase by Purchaser pursuant to the Offer of such number of Shares as represents at least a majority of the outstanding Shares and from time to time thereafter, Parent shall be entitled to designate all members of the Board of Directors of the Company. The current directors of the Company have indicated to the Parent that they intend to resign as directors of the Company as soon as reasonably practicable upon the Purchaser purchasing at least a majority of the outstanding Shares pursuant to the Offer, and the Company shall exercise reasonable efforts to secure the resignations of all directors to enable such Parent designees to be so elected or appointed. Such designees will abstain from any action proposed to be taken by the Company to amend or terminate this Agreement or waive any action by Parent or Purchaser. The Company's obligations to appoint designees to the Board of Directors shall be subject to Section 14(f) of the Exchange Act. At the request of Parent, the Company shall take all action reasonably necessary to effect any such election or appointment, including mailing to its stockholders the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, unless such information previously has been provided to the Company's stockholders in the Schedule 14D-9. Parent and Purchaser will supply to the Company, and will be solely responsible for, all information with respect to themselves and their officers, directors and affiliates required by such Section and Rule. ARTICLE II THE MERGER 2.1 The Merger. Upon the terms and subject to the conditions of this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the "DGCL"), at the Effective Time (as defined below), Purchaser shall be merged with and into the Company (the "Merger"). As a result of the Merger, the separate corporate existence of Purchaser shall cease and the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation"). -3- 8 2.2 Closing. Unless this Agreement shall have been terminated pursuant to Article VII and subject to the satisfaction or, if permissible, waiver of the conditions set forth in Article VI, the consummation of the Merger and the other transactions contemplated hereby (the "Closing") shall take place at the offices of Vinson & Elkins, L.L.P., 1001 Fannin St., Houston, Texas 77002-6760 as promptly as practicable (and in any event within two business days) following the satisfaction or, if permissible, waiver of the conditions set forth in Article VI, unless another place, date or time is agreed to in writing by Parent and the Company. 2.3 Effective Time. As promptly as practicable after the Closing, the parties hereto will cause a certificate of merger (the "Certificate of Merger") to be executed, acknowledged and filed with the Delaware Secretary of State in accordance with the DGCL. The Merger shall become effective at such time as the Certificate of Merger is filed with the Delaware Secretary of State in accordance with the DGCL, or at such later time as may be agreed to by Parent and the Company and specified in the Certificate of Merger in accordance with applicable law. The date and time when the Merger shall become effective is referred to herein as the "Effective Time." 2.4 Effect of the Merger. The Merger shall have the effects set forth in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all properties, rights, privileges, powers and franchises of the Company and Purchaser shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Purchaser shall become the debts, liabilities and duties of the Surviving Corporation. 2.5 Certificate of Incorporation and Bylaws. At the Effective Time, the Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation") and the Amended and Restated Bylaws (the "Bylaws") of the Company, in each case as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation and the Bylaws of the Surviving Corporation until thereafter amended as provided by law. 2.6 Directors and Officers. At the Effective Time, the officers and directors of Purchaser immediately prior to the Effective Time shall become the officers and directors of the Surviving Corporation, each to hold office from the Effective Time until their respective successors are duly elected or appointed and qualified in the manner provided in the Certificate of Incorporation and Bylaws of the Surviving Corporation and applicable law. The Company shall use commercially reasonable efforts to cause each executive officer and director of the Company to tender his or her resignation effective at or before the Effective Time. 2.7 Consideration; Conversion of Shares. At the Effective Time, by virtue of the Merger and without any action on the part of any of the parties hereto or the holders of any of the following securities: (a) Each Share that is issued and outstanding immediately prior to the Effective Time (other than any Shares to be canceled pursuant to Section 2.7(b) and any Dissenting Shares, as defined in Section 2.11) shall be changed and converted into and represent the right to receive $2.00 in cash, or any higher price paid per Share in the Offer (the "Per Share Merger Consideration"). All such Shares shall no longer be outstanding and shall automatically be cancelled and extinguished and shall cease to exist, and each certificate which immediately prior to the Effective Time -4- 9 evidenced any such Shares (other than Shares to be cancelled pursuant to Section 2.7(b) and any Dissenting Shares) shall thereafter represent the right to receive (without interest and less any applicable withholding of taxes), upon surrender of such certificate in accordance with the provisions of Section 2.8, the Per Share Merger Consideration multiplied by the number of Shares evidenced by such certificate (the "Merger Consideration"). The holders of certificates previously evidencing Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect thereto (including, without limitation, any rights to vote or to receive dividends and distributions in respect of such Shares), except as otherwise provided herein or by law. (b) All Shares, which immediately prior to the Effective Time are owned by Parent, Purchaser or their respective affiliates or held by the Company in its treasury, shall be cancelled and extinguished and shall cease to exist and no consideration shall be delivered with respect thereto. (c) Each share of capital stock of Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation. 2.8 Exchange of Certificates. (a) Paying Agent. As of the Effective Time, Parent shall, pursuant to an agreement with its paying agent (the "Paying Agent"), deposit, or cause to be deposited, with or for the account of the Paying Agent in trust for the benefit of the holders of Shares (other than Shares to be cancelled pursuant to Section 2.7(b) and any Dissenting Shares) for exchange through the Paying Agent in accordance with this Article II, cash in the aggregate amount required to be exchanged for Shares pursuant to Section 2.7 (the "Payment Fund"). The Paying Agent shall, pursuant to irrevocable instructions, deliver the Merger Consideration out of the Payment Fund to holders of Shares. The Payment Fund shall not be used for any other purpose. The Paying Agent shall invest funds in the Payment Fund only in short-term securities issued or guaranteed by the United States government or certificates of deposit of commercial banks that have consolidated total assets of not less than $5,000,000,000 and are "well capitalized" within the meaning of the applicable federal bank regulations. Any interest or other income earned on the investment of funds in the Payment Fund shall be for the account of and payable to the Surviving Corporation. Parent shall replace any monies lost through any investment made pursuant to this Section 2.8. (b) Payment Procedure. Promptly after the Effective Time, Parent will cause the Paying Agent to mail to each holder of record of a certificate or certificates that immediately prior to the Effective Time evidenced outstanding Shares (other than Shares to be cancelled pursuant to Section 2.7(b) and any Dissenting Shares) ("Certificates"), (i) a notice of the effectiveness of the Merger, (ii) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent and shall be in such customary form and have such other provisions as Parent may reasonably specify in accordance with the terms of this Agreement) and (iii) instructions to effect the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent together with such letter of transmittal, duly executed, and such other customary documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration and the -5- 10 Certificate so surrendered shall forthwith be cancelled. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, the Merger Consideration may be paid or issued to the transferee if the Certificate representing such Shares is presented to the Paying Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. In the event that any Certificate shall have been lost, stolen or destroyed, the Paying Agent shall issue in exchange therefor, upon the making of an affidavit of that fact by the holder thereof and such bond, security or indemnity as Parent may reasonably require, the Merger Consideration that such holder has the right to receive pursuant to the provisions of this Article II. Until surrendered as contemplated by this Section 2.8, each Certificate shall be deemed at any time after the Effective Time to evidence only the right to receive upon such surrender the Merger Consideration applicable to the Shares evidenced by such Certificate. (c) Termination of Payment Fund. Any portion of the Payment Fund that remains undistributed to the holders of Shares for six months after the Effective Time shall be delivered to Parent upon demand, and any holders of Shares who have not theretofore complied with this Article II shall thereafter look, subject to Section 2.8(d), only to Parent or the Surviving Corporation for the Merger Consideration to which they are entitled pursuant to this Article II. (d) Abandoned Property Laws. Neither the Surviving Corporation nor the Paying Agent nor the Company, the Parent or any of their respective affiliates shall be liable to any holder of a Certificate for any cash from the Payment Fund properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (e) Transfer Taxes. Except as provided in paragraph (b) above, Parent shall pay or cause to be paid any real property transfer, gains or similar real property taxes imposed in connection with or as a result of the Merger. 2.9 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 thereafter on the records of the Company other than to reflect transfers of Shares effected on or prior to the date on which and the time at which the Effective Time occurs. At and after the Effective Time, any Certificates presented to the Paying Agent or the Surviving Corporation for any reason shall be converted into the Merger Consideration applicable to the Shares evidenced thereby. 2.10 Options and Other Purchase Rights. (a) The Company represents and warrants to the Purchaser and Parent that it has taken all action necessary so that all outstanding options and other rights to acquire Shares granted to directors, employees or others under any stock option or purchase plan, program or similar arrangement of the Company (each, as amended, an "Option Plan" and, such options and other rights, "Stock Options"), whether or not then exercisable or vested, will be cancelled by the Company upon consummation of the Offer. The holders thereof shall be entitled to receive, for each Share subject to such Stock Option, in settlement and cancellation thereof, an amount in cash equal to the positive difference, if any, between the Per Share Merger Consideration and the exercise price per share of such Stock Option, which amount shall be paid at the time the Stock Option or is -6- 11 cancelled; provided, that, with respect to any person subject to Section 16 of the Exchange Act, any such amount shall be paid as soon as practicable after the first date payment can be made without liability to such person under Section 16(b) of the Exchange Act. All applicable withholding taxes attributable to the payments made hereunder or to distributions contemplated hereby shall be deducted from the amounts payable under this Section 2.10 and all such taxes attributable to the cancellation of Stock Options shall be withheld from the proceeds received in connection with the cancellation thereof. (b) Except as provided herein or as otherwise agreed to by the parties and to the extent permitted by the Option Plans, the Option Plans shall terminate as of or prior to the Effective Time and any rights under the Stock Options granted under the Stock Option Plans shall be cancelled as of or prior to the Effective Time. (c) The Company represents and warrants to the Purchaser and Parent that all outstanding warrants to purchase Shares will, upon the Effective Time, be converted into the right to receive $2.00 cash instead of each Share which would otherwise be purchasable by the holder of the warrant upon the exercise thereof and payment of the warrant exercise price thereunder (which in each case is greater than $2.00 per Share). The Company will provide Purchaser with evidence of the foregoing or, with respect to any specific warrant, evidence of cancellation of such warrant satisfactory to Purchaser prior to the acceptance by Purchaser for payment of any Shares tendered under the Offer. 2.11 Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, Shares that are outstanding immediately prior to the Effective Time and that are held by stockholders who shall have perfected dissenters' rights in accordance with Section 262 of the DGCL (the "Dissenting Shares") shall not be converted into or represent the right to receive the Merger Consideration (but instead shall be converted into the right to receive payment from the Surviving Corporation with respect to such Dissenting Shares in accordance with the DGCL), unless and until such holder shall have failed to perfect or shall have effectively withdrawn or lost such holder's rights to appraisal under the DGCL. If any such holder shall have failed to perfect or shall have effectively withdrawn or lost such holder's rights to appraisal of such Shares under the DGCL, such holder's shares shall thereupon be deemed to have been converted into and to have become exchangeable for, at the Effective Time, the right to receive, upon surrender as provided above, the Merger Consideration for the Certificate or Certificates that formerly evidenced such Shares. 2.12 Company Stockholders' Meeting. Unless the Merger is consummated in accordance with Section 253 of the DGCL as contemplated by Section 2.13 hereof, and subject to applicable law, the Company, acting through its Board of Directors, shall, in accordance with the DGCL, its Certificate of Incorporation and its Bylaws, (a) duly call, give notice of, convene and hold a special meeting of its stockholders as soon as reasonably practicable following the consummation of the Offer for the purpose of considering and taking action upon this Agreement and the approval of the Merger Agreement (the "Company Stockholders' Meeting"), (b) include in the proxy statement or information statement prepared by the Company for distribution to stockholders of the Company in advance of the Company Stockholders' Meeting in accordance with Regulation 14A or Regulation 14C promulgated under the Exchange Act (the "Company Proxy Statement") the recommendation of its Board of Directors referred to in Section 1.2 hereof and (c) use all reasonable -7- 12 efforts (A) to obtain and furnish the information required to be included by it in the Company Proxy Statement and, after consultation with the Parent and the Purchaser, respond promptly to any comments made by the Commission with respect to the Company Proxy Statement and any preliminary version thereof and cause the Company Proxy Statement to be mailed to its stockholders at the earliest practicable time following the expiration or termination of the Offer and (B) to obtain the necessary approvals by its stockholders of the Merger Agreement and the transactions contemplated thereby. Parent will provide the Company with the information concerning Parent and Purchaser required to be included in the Company Proxy Statement, and will vote, or cause to be voted, all Shares owned by it or its affiliates in favor of approval and adoption of this Agreement and the Merger. 2.13 Merger Without Meeting of Stockholders. Notwithstanding anything to the contrary in this Agreement, if Parent, Purchaser or their respective affiliates shall acquire at least 90% of the outstanding Shares, each of Parent, Purchaser and the Company shall take all necessary and appropriate action to cause the Merger to become effective, as soon as practicable after the consummation of the Offer, without a meeting of stockholders of the Company, in accordance with Section 253 of the DGCL. 2.14 Withholding Taxes. Except as otherwise provided in Section 2.8(e), Parent and Purchaser shall be entitled to deduct and withhold, or cause the Paying Agent to deduct and withhold, from the consideration otherwise payable to a holder of Shares pursuant to the Offer or the Merger any stock transfer taxes and such amounts as are required under the Internal Revenue Code of 1986, as amended (the "Code"), or any applicable provision of state, local or foreign tax law, as specified in the Offer Documents. To the extent that amounts are so withheld by Parent or Purchaser, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding was made by Parent or Purchaser, in the circumstances described in the Offer Documents, and Parent shall provide, or cause the Paying Agent to provide, to the holders of such Certificates written notice of the amounts so deducted or withheld. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Parent as follows: 3.1 Organization and Qualification. The Company (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (b) has all requisite corporate power to carry on its business as it is now being conducted, and (c) is in good standing and duly qualified to do business in each jurisdiction in which the transaction of its business makes such qualification necessary, except where the failure to be in good standing or so qualified would not have a Material Adverse Effect (as defined in Section 8.3(c) below) on the Company. True and complete copies of the Certificate of Incorporation and the Bylaws, as amended to date, of the Company have been made available to Parent. The Company does not own any subsidiaries or have any equity or partnership or joint venture interests other than as reflected on Section 3.1 of the Company Disclosure Schedule. -8- 13 3.2 Capitalization of the Company. The authorized capital stock of the Company consists of 25,000,000 Shares and 1,500,000 shares of preferred stock, $0.01 par value (the "Company Preferred Stock"). As of the date hereof, 16,268,387 Shares are issued and outstanding and no shares of Company Preferred Stock are outstanding. All outstanding Shares are validly issued and are fully paid and nonassessable. Except as disclosed in the Company SEC Documents (as defined in Section 3.6) or in Section 3.2 of the Company's disclosure schedule delivered to Parent in connection with this Agreement (the "Company Disclosure Schedule") there are no outstanding subscriptions, options, warrants, calls, rights, commitments or any other agreement to which the Company is a party or by which the Company is bound that, directly or indirectly, obligate the Company to issue, deliver or sell or cause to be issued, delivered or sold any additional Shares or any other capital stock of the Company or any other securities convertible into, or exercisable or exchangeable for, or evidencing the right to subscribe for any such Shares or other capital stock of the Company. As reflected on Section 3.2 of the Company Disclosure Schedule, the exercise prices for all outstanding options, warrants or other rights to acquire capital stock of the Company are at prices in excess of the Offer price. 3.3 Authorization and Validity of Agreement. The Company has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby in accordance with the terms hereof (subject to the approval and adoption of this Agreement and the Merger by the holders of a majority of the outstanding Shares, if required by applicable law). All members of the Company's Board of Directors (the "Company Board") have duly authorized the execution, delivery and performance of this Agreement by the Company, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or the transactions contemplated hereby (other than the approval and adoption of this Agreement and the Merger by the holders of a majority of the outstanding Shares, if required by applicable law). This Agreement has been duly executed and delivered by the Company and, assuming this Agreement constitutes the legal, valid and binding obligation of Parent and Purchaser, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as may be limited by any bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors' rights generally or by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 3.4 Consents and Approvals. (a) Neither the execution and delivery of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby will require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority by reason of the Company's status or operations, except (i) pursuant to the applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations promulgated thereunder, and the Exchange Act, and the rules and regulations promulgated thereunder, and state securities or "blue sky" laws and state takeover laws, (ii) the filing and recordation of the Certificate of Merger pursuant to the DGCL and appropriate documents with the relevant authorities of other states in which the Company is authorized to do business, (iii) as set forth in Section 3.4 of the Company Disclosure Schedule or (iv) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not in the aggregate have a Material Adverse Effect on the Company. -9- 14 (b) Each member of the Company Board has approved this Agreement and the transactions contemplated hereby for purposes of Section 203 of the DGCL so that Section 203 of the DGCL is not applicable to the transactions provided for in this Agreement. Unless the Merger is otherwise consummated as contemplated by Section 2.13 hereof, the affirmative vote of the holders of a majority of the outstanding Shares is the only vote of the holders of capital stock of the Company necessary to approve the Merger. 3.5 No Violation. Except as set forth in Section 3.5 of the Company Disclosure Schedule, assuming the Merger has been duly approved by the holders of a majority of the outstanding Shares or the Merger is consummated as contemplated by Section 2.13 hereof, neither the execution and delivery of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby will conflict with or violate the Certificate of Incorporation or Bylaws of the Company, result in a violation or breach of, constitute a default under, give rise to any right of termination, cancellation or acceleration of, or result in the imposition of any lien, charge or other encumbrance on any material assets or property of the Company pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license or other instrument or obligation to which the Company is a party or by which the Company or any of its assets or properties may be bound, except for such violations, breaches and defaults (or rights of termination, cancellation or acceleration or lien or other charge or encumbrance) as to which requisite waivers or consents have been obtained or which in the aggregate would not have a Material Adverse Effect on the Company or assuming the consents, approvals, authorizations or permits and filings or notifications referred to in Section 3.4 and this Section 3.5 are duly and timely obtained or made and the approval of the Merger by the holders of a majority of the outstanding Shares has been obtained or the Merger is consummated as contemplated by Section 2.13 hereof, violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any of its assets and properties, except for such violations which would not in the aggregate have a Material Adverse Effect on the Company. 3.6 SEC Reports; Financial Statements. (a) Except as set forth in Section 3.6 of the Company Disclosure Schedule, since January 1, 1997, the Company has filed with the SEC all forms, reports, schedules, statements and other documents required to be filed by it with the SEC pursuant to the Exchange Act, the Securities Act and the SEC's rules and regulations thereunder (all such forms, reports and other documents, including any such reports filed prior to the Effective Time, collectively, the "Company SEC Documents"). The Company SEC Documents, including, without limitation, any financial statements or schedules included therein, at the time filed (or, if amended, at the time of such amended filing), or in the case of registration statements on their respective effective dates, complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder and did not at the time they were filed (or, if amended, at the time of such amended filing and, in the case of registration statements, at the time of effectiveness), 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 made therein, in light of the circumstances under which they were made, not misleading. -10- 15 (b) Each of the consolidated financial statements of the Company (including any related notes thereto) included in the Company SEC Documents (excluding the Company SEC Documents described in Section 3.7 hereof) comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the period involved (except as may be indicated in such financial statements or in the notes thereto or, in the case of unaudited financial statements, as permitted by the requirements of Form 10-Q) and fairly present (subject, in the case of the unaudited statements, to normal year-end adjustments and the absence of footnotes) the consolidated financial position of the Company as of the dates thereof and the consolidated results of the Company's operations and cash flows for the periods presented therein. 3.7 Schedule 14D-9; Offer Documents and Company Proxy Statement. None of the Schedule 14D-9, the Company Proxy Statement nor any information supplied by the Company specifically for inclusion in the Offer Documents will, at the respective times filed with the SEC or first published, sent or given to stockholders, as the case may be, or, in the case of the Company Proxy Statement, at the date mailed to the Company stockholders and at the time of the Company Stockholders' 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 light of the circumstances under which they were made, not misleading. The Schedule 14D-9 and the Company Proxy Statement will, when filed by the Company with the SEC, comply as to form in all material respects with the applicable provisions of the Exchange Act and the rules and regulations thereunder. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to the statements made in any of the foregoing documents based on information supplied by or on behalf of Parent or Purchaser or any of their respective affiliates specifically for inclusion therein. 3.8 Compliance with Law. The Company is not in violation of any applicable law, rule, regulation, decree or order of any governmental or regulatory authority applicable to the Company, except for violations which in the aggregate do not have a Material Adverse Effect on the Company. The Company holds all permits, licenses, exemptions, orders and approvals of all governmental and regulatory authorities necessary for the lawful conduct of its businesses, except where the failures to hold permits, licenses, exemptions, orders and approvals do not in the aggregate have a Material Adverse Effect on the Company. 3.9 Absence of Certain Changes. Except as disclosed in the Company SEC Documents filed with the SEC prior to the date hereof or in Section 3.9 of the Company Disclosure Schedule, since December 31, 1996, the Company has conducted its business only in the ordinary course of such business and there has not been (a) any Material Adverse Effect on the Company; (b) any declaration, setting aside or payment of any dividend or other distribution with respect to the Company's capital stock; or (c) any material change in the Company's accounting principles, practices or methods. 3.10 Litigation. Except as disclosed in the Company SEC Documents or in Section 3.10 of the Company Disclosure Schedule, there are no claims, actions, proceedings or governmental investigations pending or, to the knowledge of the Company, threatened against the Company, by or before any court or other governmental or regulatory body, which, if adversely determined, would -11- 16 have a Material Adverse Effect on the Company. As of the date hereof, to the knowledge of the executive officers of the Company, no action or proceeding has been instituted or threatened before any court or other governmental or regulatory body by any Person (as defined in Section 8.3) seeking to restrain or prohibit the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby. 3.11 Employee Benefit Matters. All employee benefit plans and other benefit and compensation arrangements covering employees of the Company are listed in Section 3.11 of the Company Disclosure Schedule (the "Company Benefit Plans"). True and complete copies of the Company Benefit Plans, their related trust and summary plan descriptions, and any reports, forms and documents required to be filed or distributed for the preceding three years relating to the Company Benefit Plans have been delivered to Parent. To the extent applicable, the Company Benefit Plans comply, in all material respects, with the requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code, and any Company Benefit Plan and its related trust intended to be qualified under Sections 401(a) and 501(a) of the Code comply in form and in operation with Sections 401(a) and 501(a) of the Code. No Company Benefit Plan is covered by Title IV of ERISA or Section 412 of the Code. There has been no transaction involving any Company Benefit Plan that has resulted or would result in any liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA. Each Company Benefit Plan has been maintained and administered in all material respects in compliance with its terms and with ERISA and the Code to the extent applicable thereto. There are no pending or anticipated material claims against or otherwise involving any of the Company Benefit Plans and no suit, action or other litigation (excluding claims for benefits incurred in the ordinary course of Company Benefit Plan activities) has been brought against or with respect to any such Company Benefit Plan, except for any of the foregoing that would not have a Material Adverse Effect on the Company. All contributions required to be made as of the date hereof to the Company Benefit Plans have been made or provided for. Neither the Company nor any entity under "common control" with the Company within the meaning of Section 4001 of ERISA has contributed to or ever maintained, or been required to contribute to or maintain, any employee pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA or Section 412 of the Code or to any "multi-employer plan" (as defined in Sections 3(37) and 4001(a)(3) of ERISA). Except as disclosed in Section 3.11 of the Company Disclosure Schedule, the Company does not maintain or contribute to any plan or arrangement that provides or has any liability to provide life insurance, medical or other employee welfare benefits to any employee or former employee upon his retirement or termination of employment, except as required by Section 4980B of the Code, and the Company has never represented, promised or contracted (whether in oral or written form) to any employee or former employee that such benefits would be provided. All insurance premiums have been paid in full, subject only to normal retrospective adjustments in the ordinary course, with regard to Company Benefit Plans for policy years or other applicable policy periods ending before the closing and have been paid as required under the policies for policy years or other applicable policy periods beginning on or before the closing. All expenses and liabilities relating to all of Company Benefit Plans have been, and will on the Closing Date be, fully and properly accrued on the Company's books and records and disclosed in accordance with generally accepted accounting principles and in the Employee Benefit Plan financial statements. The Company does not have any agreement, arrangement, commitments or understanding to create any additional plan which would constitute an Employee Benefit Plan or to increase the rate of benefit accrual or contribution requirements under any of the Employee -12- 17 Benefit Plans or to modify, change or terminate in any respect any existing Employee Benefit Plan. None of the Employee Benefit Plans is currently under investigation, audit, or review by the Department of Labor, the Internal Revenue Service or any other federal or state agency, and no violations of the Code or ERISA have been alleged by any such agency with respect to such Employee Benefit Plans. The Employee Benefit Plans may be amended or terminated at any time. Except as disclosed in Section 3.11 of the Company Disclosure Schedule, the execution of, and performance of the transactions contemplated in, this Agreement will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any benefit plan, policy, arrangement or agreement or any trust or loan that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligations to fund benefits with respect to any employee. The consummation of the transactions contemplated by this Agreement, either alone or in combination with another event, has not resulted in and will not result in payments to "disqualified individuals" (as defined in Section 280G(c) of the Code) of the Company which, individually or in the aggregate, will constitute "excess parachute payments" (as defined in Section 280G(b) of the Code) resulting in the imposition of excise tax under Section 4999 of the Code or will result in the disallowance of deductions under Sections 162 (m) or 280G of the Code. 3.12 Taxes. (a) Each of the Company and any affiliated, combined, or unitary group of which any such corporation is or was a member (collectively, the "Tax Affiliates") has timely filed all Tax Returns that are required to be filed by it. The Company does not currently have any Tax Affiliate. All such Tax Returns were accurate and complete and correctly reflected the facts regarding the income, business, assets, operations, activities and stocks of the Company. (b) Except as set forth in Section 3.12 of the Company Disclosure Schedule, the Company and each Tax Affiliate has timely paid all Taxes that are due and payable (except for taxes that are being contested in good faith by appropriate proceedings and for which reserves, which are adequate under generally accepted accounting principles, have been established). (c) Each Tax Affiliate has properly accrued or made provision, which are adequate under generally accepted accounting principles, for all Taxes for any periods subsequent to the periods covered by the Tax Returns described in Section 3.12, above. (d) Each Tax Affiliate has complied with all applicable laws, rules and regulations relating to the withholding and payment of Taxes and has timely withheld and paid to the proper governmental authorities all amounts required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor or stockholder. (e) Except as set forth in Section 3.12 of the Company Disclosure Schedule: (i) no audits or other administrative or court proceedings are presently pending with regard to any Taxes for which a Tax Affiliate could be liable, -13- 18 (ii) no dispute or claim concerning any Taxes for which a Tax Affiliate could be liable has been either: (A) claimed or raised by any authority in writing, or (B) as to which employees responsible for Tax matters, directors and officers of a Tax Affiliate after due inquiry have knowledge; (iii) with respect to each Tax Affiliate, there are no pending requests for rulings from any taxing authority with respect to any Taxes. If a Tax Affiliate has filed for a ruling request from any taxing authority with respect to any Taxes within the previous three years, copies of the ruling requests and related correspondence have been delivered to the Purchaser; (iv) with respect to each Tax Affiliate, there are no proposed reassessments by any taxing authority of any property owned or leased; (v) with respect to each Tax Affiliate there are no agreements in effect to extend the time to file any Tax Return or to extend or waive the period of limitations for the assessment or collection of any Taxes for which a Tax Affiliate may be liable; (vi) to the knowledge of each Tax Affiliate, no claim has been made by any authority in a jurisdiction where the Company does not file Tax Returns that it is or may be, subject to taxation by that jurisdiction; and (f) None of the Tax Affiliates has made any payments, is obligated to make any payments or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Code Section 280G or under Code Section 162(m). (g) Each of the Tax Affiliates has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662; (h) No Tax Affiliate (a) has been a member of an Affiliated Group filing a consolidated federal income Tax Return other than the groups of which the Company is the parent and (b) has liability for the Taxes of any person (other than members of the groups described in (a) above) under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise. (i) All elections with respect to Taxes affecting the Tax Affiliates as of the date hereof are set forth in the Company Disclosure Schedules and after the date hereof, no election with respect to Taxes will be made without the written consent of the Purchaser other than those elections which would have no material adverse effect and which are consistent with past practices of the Company; -14- 19 (j) None of the Tax Affiliates has filed a consent pursuant to the collapsible corporation provisions of Section 341(f) of the Code (or any corresponding provisions of state, local or foreign income tax law) or agreed to have Section 341(f)(2) of the Code (or any corresponding provision of state, local, or foreign income tax law) apply to any disposition of any asset owned by it: (k) None of the assets of the Tax Affiliates is property that the Tax Affiliates are required to treat as being owned by any other person pursuant to the "safe harbor lease" provisions of former Section 168(f)(8) of the Code; (l) The Tax Affiliates do not have, and have not had, a permanent establishment in any foreign country, as defined in any applicable tax treaty or convention between the United States ad such foreign country; (m) Except as set forth in Section 3.12 of the Company Disclosure Schedule, none of the Tax Affiliates were a party to any Tax allocation or Tax sharing agreement. The Tax Affiliates have delivered an accurate and complete copy of any Tax sharing or allocation agreement or arrangement involving a Tax Affiliate and an accurate and complete description of any such unwritten or informal agreement or arrangement; (n) None of the Tax Affiliates: (i) has or is projected to have any amount includible in its income for the current taxable year under Section 951 of the Code, (ii) has been a passive foreign investment company within the meaning of Section 1296 of the Code, or (iii) has an unrecaptured overall foreign loss within the meaning of Section 904(f) of the Code. (o) None of the Tax Affiliates has any: (i) income reportable for a period ending after the Closing Date but attributable to a transaction (e.g., installment sale) or a change in accounting method occurring in or made for a period ending on or prior to the Closing Date which resulted in a deferred reporting on income from such transaction or from such change in accounting method (other than a deferred intercompany transaction), or (ii) a deferred gain or loss rising out of any deferred intercompany transaction. (p) The Company's tax net operating loss carry forwards and a schedule of their expirations are set forth on the Company Disclosure Schedules. (q) For purposes of this Agreement: -15- 20 "Tax" (including, with correlative meaning, the terms "Taxes" and "Taxable") means (i) any net income, gross income, gross receipts, sales, use, ad valorem, transfer, transfer gains, franchise, profits, license, withholding, payroll, employment, social security (or similar), unemployment, disability, excise, severance, stamp, rent, recording, registration, occupation, premium, real or personal property, intangibles, environmental (including taxes under Code Section 59A) or windfall profits tax, alternative or add-on minimum tax, capital stock, customs duty or other tax, fee, duty, levy, impost, assessment or charge of any kind whatsoever (including but not limited to taxes assessed to real property and water and sewer rents relating thereto), together with any interest and any fine, penalty, addition to tax or additional amount or deductions imposed by any governmental body (domestic or foreign) (a "Tax Authority") responsible for the imposition of any such tax, whether disputed or not, including any liability arising under any tax sharing agreement, with respect to a Tax Affiliate; (ii) any liability for the payment of any amount of the type described in the immediately preceding clause (i) as a result of the Tax Affiliate being a member of an affiliated or combined group with any other corporation at any time on or prior to the Closing Date; and (iii) any liability of the Tax Affiliate for the payment of any amounts of the type described in the immediately preceding clause (i) as a result of a contractual obligation to indemnify any other person; and "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. 3.13 Insurance. True and complete copies of all existing insurance policies purchased by the Company have been delivered to Parent. Such policies provide coverage for the operations of the Company in amounts and covering such risks as the Company believes is necessary to conduct its business. The Company has not received notice that any such policy is invalid or unenforceable. 3.14 Employment Agreements. Except as disclosed in the Company SEC Documents or as set forth in Section 3.14 of the Company Disclosure Schedule, there are no (a) employment, consulting, noncompetition, severance or indemnification agreements between the Company and any current or former officer or director of the Company, (b) employment, consulting or severance agreements between the Company and any other Person providing for payments in excess of $50,000 in the aggregate and (c) noncompetition or indemnification agreements between the Company and any other Person. 3.15 Brokers and Finders. No broker, finder or investment bank has acted directly or indirectly for the Company, nor has the Company incurred any obligation to pay any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby, other than SBC Warburg Dillon Read Inc. ("Dillon Read"), Rauscher Pierce Refsnes, Inc. ("RPR"), Jefferies & Company, Inc. ("Jefferies") and Griffiths McBurney ("GMB"), the fees and expenses of which shall be borne by the Company. Section 3.15 of the Company Disclosure Schedule sets forth the fees payable to Dillon Read, RPR, Jefferies and GMB pursuant to the Company's engagement letters with Dillon Read, RPR, Jefferies and GMB (copies of which have been provided to Parent). -16- 21 3.16 Opinion of Financial Advisor. Dillon Read has delivered its opinion, dated the date of this Agreement, to the Board of Directors of the Company for the benefit of its stockholders to the effect that, as of the date of this Agreement, the cash consideration to be received by the holders of Shares (other than Parent and its affiliates) in the Offer and the Merger is fair, from a financial point of view, to such holders. 3.17 Certain Business Practices. None of the Company or, to the Company's knowledge, any directors, officers, agents or employees of the Company (in their capacities as such) has (a) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, (b) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (c) made any other unlawful payment, in all cases except where the impact from such contributions, gifts, entertainment, payments, violations, agreements, arrangements, actions or payments would not in the aggregate have a Material Adverse Effect on the Company. 3.18 Permits; Compliance. Except as disclosed in Section 3.18(a) of the Company Disclosure Schedule, the Company is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, identification and registration numbers, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the "Company Permits"), except where the failure to possess such Company Permits could not reasonably be expected to have a Material Adverse Effect on the Company. Section 3.18(a) of the Company Disclosure Schedule sets forth, as of the date of this Agreement, all actions, proceedings or investigations pending or, to the knowledge of the Company, threatened against the Company that could reasonably be expected to result in (i) the loss or revocation of a Company Permit or (ii) the suspension or cancellation of any other Company Permit, except any such Company Permit where such loss, revocation, suspension or cancellation could not reasonably be expected to have a Material Adverse Effect on the Company. Except as set forth in Section 3.18(a) of the Company Disclosure Schedule, the Company is not in conflict with, or in default or violation of (a) any law applicable to the Company or by or to which any of its properties is bound or subject or (b) any of the Company Permits, except for any such conflicts, defaults or violations that could not reasonably be expected to have a Material Adverse Effect on the Company. Except as set forth in Section 3.18(a) of the Company Disclosure Schedule, since December 31, 1996, the Company has not received from any Governmental Entity (as defined in Section 5.7) any written notification with respect to possible conflicts, defaults or violations of laws, except for written notices relating to possible conflicts, defaults or violations of laws that could not reasonably be expected to have a Material Adverse Effect on the Company. 3.19 Certain Agreements. Section 3.19 of the Company Disclosure Schedule sets forth a complete and accurate list in all material respects of all (i) real property leases, (ii) agreements with respect to indebtedness for borrowed money (including capital leases) with a principal amount in excess of $50,000 and (iii) acquisition agreements providing for the payment in the future of contingent consideration in an amount in excess of $50,000, in each case to which the Company is a party on the date hereof. -17- 22 3.20 Environmental Matters. Notwithstanding any other warranty or representation in Article III of this Agreement: (a) Except as set forth in Section 3.20 of the Company Disclosure Schedule, (i) the Company has obtained all Environmental Permits (as hereinafter defined) that are required in connection with the business, operations and properties of the Company, (ii) the Company has been, and the Company is, in compliance in all material respects with all terms and conditions of all applicable requirements of Environmental Law (as hereinafter defined) and Environmental Permits, (iii) the Company has received no written notice from a governmental authority of any violation, alleged violation, or liability arising under any requirements of Environmental Law or Environmental Permits, (iv) no Environmental Claims (as hereinafter defined) have ever been threatened or asserted or are presently pending against the Company attributable to present or past operations on premises owned, leased or operated by the Company, and (v) no condition or set of facts or circumstances exists that could reasonably be expected to give rise to an Environmental Claim against the Company. (b) Except as set forth in Section 3.20 of the Company Disclosure Schedule, the Company has not disposed, treated, or arranged for the disposal or treatment of any toxic or hazardous waste, materials or substances at a site or location, or has leased, used, operated or owned a site or location which (i) has been placed on the National Priorities List or its state equivalent pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act, as amended ("CERCLA"), or similar foreign, territorial or state law, (ii) the Environmental Protection Agency or relevant foreign, territorial or state authority has proposed, or is proposing, to place on the National Priorities List or foreign, territorial or state equivalent, (iii) is subject to a lien, administrative order or other demand either to take response or other action under CERCLA or other Environmental Law, or to develop or implement a "Corrective Action Plan" or "Compliance Plan," as each is defined in regulations promulgated pursuant to the Resource Conservation and Recovery Act, as amended ("RCRA"), or to reimburse any person who has taken response or other action in connection with that site, (iv) is on any Comprehensive Environmental Response Compensation Liability Information System List, or (v) has been the site of any Release (as hereinafter defined) from present or past operations of the Company (or any of its predecessors) which would be either reportable under any requirements of Environmental Law or which has caused at such site or any third party site any condition that has resulted in or could reasonably be expected to result in a claim against the Company under Environmental Law. (c) Except as set forth in Section 3.20 of the Company Disclosure Schedule, (i) the Company has not ever owned or operated any underground storage tanks ("USTs") containing petroleum products or wastes or other substances regulated by 40 CFR Part 280 or other applicable requirements of Environmental Law, and has not owned or operated any real estate having any USTs, (ii) there are no polychlorinated biphenyls or asbestos in or on premises currently owned, leased or operated by the Company, the presence of which would cause a material violation of any Environmental Law, and (iii) no entities or sites owned or operated by third parties have been used by the Company in connection with the treatment, storage, disposal or transportation of Hazardous Substances (as hereinafter defined), except in compliance with applicable Environmental Law and except for such violations that have been remedied. -18- 23 (d) Except as set forth in Section 3.20 of the Company Disclosure Schedule, the plants, structures, equipment and other properties currently owned or used by the Company are adequate and sufficient for the current operations of the Company in substantial conformance with all applicable requirements of Environmental Law. (e) When used in this Agreement, the following terms shall have the following respective meanings: (i) "Environmental Claims," as referred to herein, shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations or other adversarial proceedings relating to any Environmental Law or Environmental Permit including, without limitation (i) any and all claims by governmental, territorial or regulatory authorities for enforcement, cleanup, removal, response, remedial or other similar actions or damages pursuant to any applicable Environmental Law and (ii) any and all claims by a third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Substances or arising from alleged injury or threat of injury to human health, property, or the environment resulting from exposures to or releases of Hazardous Substances. An "Environmental Claim" includes, but is not limited to, a common law action, as well as a proceeding to issue, modify, terminate or enforce the provisions of an Environmental Permit or requirement of Environmental Law, or to adopt or amend a regulation to the extent that such a proceeding attempts to redress violations or alleged violations of the applicable permit, license, or regulation. (ii) "Environmental Law," as referred to herein, shall mean any federal, state, territorial, local or foreign statute, law, rule, regulation, ordinance, code, policy (compliance with which is required by law or if the failure to comply therewith would be reasonably foreseeable to result in adverse administrative action) or rule of common law in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment or Hazardous Substances, including, without limitation to the extent applicable under the circumstances, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Section 9601 et seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 136 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; the Toxic Substance Control Act, 15 U.S.C. Section 2601 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 5101 et seq.; the Atomic Energy Act, as amended, 42 U.S.C. Section 2011 et seq.; any laws regulating the use of biological agents or substances including medical or infectious wastes; and the corresponding foreign, territorial or state laws, regulations and local ordinances, which may be applicable, as any such acts may be amended. -19- 24 (iii) "Environmental Permits" as referred to herein, shall mean all permits, approvals, identification numbers, licenses and other authorizations required under any applicable Environmental Law. (iv) "Hazardous Substances" as referred to herein, shall mean (i) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous wastes," "toxic substances," "toxic pollutants," "hazardous air pollutants," "pollutants," "contaminants," "toxic chemicals," "toxics," "hazardous chemicals," "extremely hazardous substances," "regulated substances" or "pesticides" as defined as such in any applicable Environmental Law, (ii) any radioactive materials, asbestos-containing materials; urea formaldehyde foam insulation, and radon in harmful quantities or concentration that are regulated by any governmental authority having jurisdiction in the location of such materials and (iii) any other chemical, material or substances, exposure to which is prohibited, limited or regulated by any governmental authority having jurisdiction in the location of such substances on the basis of potential hazards. (v) "Release," as referred to herein, shall mean any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of any Hazardous Substance into the environment or into or out of any property, including the movement of any Hazardous Substance through or in the air, soil, surface water, groundwater or property. 3.21 Title. (a) The Company has Marketable Title to all of its Oil and Gas Properties. For the purposes of this subsection 3.21(a), "Marketable Title" shall mean, with respect to any well identified on Schedule 3.21(a) ("Well"), such title as (i) will enable the Company to receive a percentage of the oil and gas produced and saved from such Well (subject to any depth restrictions noted in Schedule 3.21(a)) that is not less than the "Net Revenue Interest" shown for such well on Schedule 3.21(a), without reduction, suspension or termination throughout the productive life of such Well, except for any reduction, suspension or termination (a) caused by the Company, any of its affiliates, successors in title or assigns arising out of transactions or actions occurring after the Closing, (b) caused by orders of the appropriate regulatory agency having jurisdiction over such Well that are promulgated after the date hereof and that concern pooling, unitization, communitization or spacing matters affecting such Well, (c) caused by any Contract containing a sliding-scale royalty clause or other similar clause with respect to a production burden associated with a particular Well, or (d) otherwise set forth in Schedule 3.21(a); (ii) will not obligate the Company to bear and pay a portion of the costs and expenses of operating such Well (subject to any depth restrictions noted in Schedule 3.21(a)) that is not greater than the "Working Interest" shown for such Well on Schedule 3.21(a), without increase throughout the productive life of such Well, except for any increase (a) caused by the Company, any of its affiliates, successors in title or assigns arising out of transactions or actions occurring after the Closing, (b) that also results in the Net Revenue Interest associated with such Well being proportionately increased, (c) caused by contribution requirements provided for under provisions similar to those contained in Article VII.B. of the A.A.P.L. Form 610-1982 Model Form Operating Agreement, (d) caused by orders of the appropriate regulatory agency having jurisdiction over an Oil and Gas Property that are promulgated -20- 25 after the date hereof and that concern pooling, unitization, communitization or spacing matters affecting a particular Oil and Gas Property, or (e) otherwise set forth in Schedule 3.21(a); and with respect to all Oil and Gas Properties (iii) is free and clear of all encumbrances, liens, claims, easements, rights, agreements, instruments, obligations, burdens or defects (collectively "Liens") except for Permitted Encumbrances. No overriding interest or similar burden on any Oil and Gas Property has been granted or has been contracted to be granted by the Company which is not disclosed on Schedule 3.21(a) or accounted for in the Net Revenue Interests indicated on Schedule 3.21(a). (ii) For the purposes of this subsection 3.21(a), "Permitted Encumbrances" shall mean (i) liens for taxes not yet delinquent, (ii) lessors' royalties, overriding royalties, division orders, reversionary interests, and similar burdens that do not operate to reduce the Net Revenue Interest of the Company in any of the Oil and Gas Properties to less than the amount set forth therefor on Schedule 3.21(a), (iii) the consents and rights described in Schedule 3.21(a), and (iv) Contracts insofar as the Contracts do not operate to increase the Working Interest of the Company set forth on Schedule 3.21(a) for any of the Oil and Gas Properties or decrease the Net Revenue Interest of the Company set forth on Schedule 3.21(a) for any of the Oil and Gas Properties. (iii) For purposes of this subsection 3.21(a), "Contracts" means contracts, commitments, agreements, and arrangements that in any way relate to either the Wells or the Oil and Gas Properties, including the production, storage, treatment, transportation, processing, purchase, sale or other disposal of substances therefrom or in connection therewith and any and all amendments, ratifications or extensions of the foregoing, together with (i) all rights, privileges, and benefits of the Company thereunder arising on or after January 1, 1998, (ii) all rights of the Company thereunder to audit the records of any party thereto and receive refunds of any nature thereunder, whether relating to periods before or after January 1, 1998, and (iii) rights of subrogation under any insurance policy held by or on behalf of the Company in connection with the properties described in Section 1.1, inclusive for any claim that arises from January 1, 1998, through the Closing Date in connection with either the Wells or the Oil and Gas Properties. (iv) For purposes of this subsection 3.21(a), "Oil and Gas Properties" means such properties in the nature of fee interests, leasehold interests, working interests, farmout rights, royalty, overriding royalty or other non-working or carried interests, operating rights or other mineral rights of every nature and any rights that arise by operation of law or otherwise in all properties and lands pooled, unitized, communitized or consolidated with such properties. (b) The Company has indefeasible title to all of its properties other than the Oil and Gas Properties. -21- 26 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER Parent and Purchaser hereby represent and warrant, jointly and severally, to the Company as follows: 4.1 Organization and Qualification. Each of Parent and Purchaser (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (b) has all requisite corporate power to carry on its business as it is now being conducted and (c) is in good standing and duly qualified to do business in each jurisdiction in which the transaction of its business makes such qualification necessary, except where the failure to be in good standing or so qualified would not have a Material Adverse Effect on Parent and Purchaser taken as a whole. 4.2 Authorization and Validity of Agreement. Each of Parent and Purchaser has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby in accordance with the terms hereof. The Boards of Directors of Parent and Purchaser, respectively, and Parent, as the sole stockholder of Purchaser, have duly authorized the execution, delivery and performance of this Agreement by each of Parent and Purchaser, and no other corporate proceedings on the part of either Parent or Purchaser are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement has been duly executed and delivered by each of Parent and Purchaser and, assuming this Agreement constitutes the legal, valid and binding obligation of the Company, constitutes the legal, valid and binding obligation of each of Parent and Purchaser, enforceable against each of Parent and Purchaser in accordance with its terms, except as may be limited by any bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors' rights generally or by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 4.3 Consents and Approvals. Neither the execution and delivery of this Agreement by Parent and Purchaser nor the consummation by Parent and Purchaser of the transactions contemplated hereby will require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority by reason of Parent's or Purchaser's status or (as applicable) operations, except (a) pursuant to the applicable requirements of the Securities Act, the Public Utility Holding Company Act of 1935, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and state securities or "blue sky" laws and state takeover laws, (b) the filing and recordation of the Certificate of Merger pursuant to the DGCL, (c) except as may be required in connection with the Financing (as defined in Section 4.7 below), which consents have been duly obtained or (d) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not in the aggregate have a Material Adverse Effect on Parent and Purchaser taken as a whole or prevent the consummation of the transactions contemplated hereby. -22- 27 4.4 No Violation. Neither the execution and delivery of this Agreement by Parent and Purchaser nor the consummation by Parent and Purchaser of the transactions contemplated hereby will conflict with or violate the Certificate of Incorporation or Bylaws of Parent or Purchaser, result in a violation or breach of, constitute (with or without notice or lapse of time or both) a default under, give rise to any right of termination, cancellation or acceleration of, or result in the imposition of any lien, charge or other encumbrance on any material assets or property of either of Parent or Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license or other instrument or obligation to which either of Parent or Purchaser is a party or by which either of Parent or Purchaser or any of their respective assets or properties are bound, except for such violations, breaches and defaults (or rights of termination, cancellation or acceleration or lien or other charge or encumbrance) as to which consents have been obtained or which in the aggregate would not have a Material Adverse Effect on Parent and Purchaser taken as a whole or prevent the consummation of the transactions contemplated hereby or assuming the consents, approvals, authorizations or permits and filings or notifications referred to in Section 4.3 are duly and timely obtained or made, violate any order, writ, injunction, decree, statute, rule or regulation applicable to either of Parent or Purchaser or any of their respective assets or properties, except for such violations which would not in the aggregate have a Material Adverse Effect on Parent and Purchaser taken as a whole or prevent the consummation of the transactions contemplated hereby. 4.5 Litigation. Except as set forth in the Parent SEC Documents, there are no claims, actions, proceedings or governmental investigations pending or, to the knowledge of Parent and Purchaser, threatened against either of Parent or Purchaser or any of their respective subsidiaries before any court or other governmental or regulatory body, which, if adversely determined, would impair, interfere with, or otherwise adversely affect the ability of Parent or Purchaser to consummate the transactions contemplated hereby in any material respect. As of the date hereof, no action or proceeding has been instituted or, to the knowledge of Parent or Purchaser, threatened before any court or other governmental or regulatory body by any Person seeking to restrain or prohibit or to obtain damages with respect to the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby. 4.6 Offer Documents; Company Proxy Statement; Schedule 14D-9. Neither the Offer Documents nor any other document filed or to be filed by or on behalf of Parent or Purchaser with the SEC or any other governmental entity in connection with the transactions contemplated by this Agreement nor any information supplied by or on behalf of Parent or Purchaser specifically for inclusion in the Schedule 14D-9 or Company Proxy Statement will, at the respective times filed with the SEC or other governmental entity, or at any time thereafter when the information included therein is required to be updated pursuant to applicable law, or, in the case of the Company Proxy Statement, at the date mailed to the Company's stockholders and at the time of the Company Stockholders' 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 made therein, in light of the circumstances under which they were made, not misleading. The Offer Documents will, when filed by Parent or Purchaser with the SEC or other governmental entity, comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. Notwithstanding the foregoing, Parent and Purchaser make no representation or warranty with respect to the statements made in the foregoing documents based on information supplied by or on behalf of the Company or any of its affiliates specifically for inclusion therein. -23- 28 4.7 Financing; Sufficient Funds. Parent and Purchaser have no knowledge of any facts or circumstances, nor will Parent or Purchaser take any action or omit to take any action, that could be expected to result in the inability of Parent or Purchaser to obtain and use the funds available to them for consummation of the Offer and the transactions contemplated thereby. Parent and Purchaser will have available to them and will utilize, upon consummation of the Offer and at the Effective Time, all immediately available funds necessary to consummate the transactions contemplated by this Agreement and to pay all related fees and expenses for which Parent or Purchaser will be responsible. 4.8 Brokers and Finders. No broker, finder or investment bank has acted directly or indirectly for either of Parent or Purchaser, nor has either of Parent or Purchaser incurred any obligation to pay any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby. 4.9 Operations of Purchaser. Purchaser has been formed solely for the purpose of engaging in the transactions contemplated hereby and prior to the Effective Time will have engaged in no other business activities, will have incurred no other liabilities or obligations other than as contemplated herein, will have no subsidiaries and will have conducted its operations only as contemplated hereby. ARTICLE V COVENANTS 5.1 Conduct of Business Pending the Merger. From the date hereof until the Effective Time, except as otherwise required or contemplated hereunder or as required by applicable law, without the prior written consent of the Purchaser, the Company shall: (a) use all commercially reasonable efforts to conduct its business in all material respects only in the ordinary course of business and consistent with past practice; (b) not amend its certificate of incorporation or bylaws or declare, set aside or pay any dividend or other distribution or payment in cash, stock or property in respect of its capital stock; or acquire, directly or indirectly, any of its capital stock; (c) not issue, grant, sell or pledge or agree or authorize the issuance, grant, sale or pledge of any shares of, or rights of any kind to acquire any shares of, its capital stock other than Shares issuable upon the exercise of stock options; (d) not acquire, sell, transfer or lease any assets except in the ordinary course of business and consistent with past practice or encumber any assets of the Company; (e) use all commercially reasonable efforts to preserve intact its business organizations and to keep available the services of its present key officers and employees; provided, however, that to satisfy the foregoing obligation, the Company shall not be required to make any payments other than those disclosed in Sections 3.11 or 3.14 of the Company Disclosure Schedule or enter into or amend any contractual arrangements or understandings, except in the ordinary course of business and consistent with past practice; -24- 29 (f) not adopt a plan of complete or partial liquidation or adopt resolutions providing for the complete or partial liquidation, dissolution, consolidation, merger, restructuring or recapitalization of the Company; (g) not grant any severance or termination pay (otherwise than pursuant to policies or contracts in effect on the date hereof, as disclosed in Sections 3.11 and 3.14 of the Company Disclosure Schedule) to, or enter into any employment agreement with, any of its executive officers or directors; (h) not increase the compensation payable or to become payable to its officers or employees, enter into any contract or other binding commitment in respect of any such increase with any of its directors, officers or other employees, and not establish, adopt, enter into, make any new grants or awards under or amend, any collective bargaining agreement or Company Benefit Plan, except as required by applicable law, including any obligation to engage in good faith collective bargaining, to maintain tax-qualified status or as may be required by any Company Benefit Plan as the date hereof; (i) not settle or compromise any material claims or litigation or, except in the ordinary course of business, modify, amend or terminate any of its material contracts or waive, release or assign any material rights or claims, or make any payment, direct or indirect, of any material liability before the same becomes due and payable in accordance with its terms; (j) not take any action, other than reasonable and usual actions in the ordinary course of business and consistent with past practice with respect to accounting policies or procedures (including tax accounting policies and procedures), except as may be required by the SEC or the Financial Accounting Standards Board; (k) not make any material tax election or permit any material insurance policy naming it as a beneficiary or a loss payable payee to be canceled or terminated without notice to Parent, except in the ordinary course of business; (l) confer at such times as Parent may reasonably request with one or more representatives of Parent to report material operational matters and the general status of ongoing operations (in each case to the extent Parent reasonably requires such information) and to consult with Parent regarding material operational decisions; (m) not (i) enter into any loan or credit agreement, or incur any indebtedness (other than borrowings under its existing credit agreement for the purpose of paying fees and severance payments disclosed in Sections 3.11, 3.14 and 3.15 of the Company Disclosure Schedule and expenses incurred in connection with the transactions contemplated hereunder) or guarantee any indebtedness or amend any existing loan or credit agreement, (ii) make or enter into any agreement or contract for capital expenditures, except for (y) capital expenditures in the ordinary course of business required to be made by the Company under the Company's existing joint operating agreements, and (z) other expenditures in the ordinary course of business on the Company's existing properties of up to $25,000 per expenditure or $100,000 in the aggregate or (iii) enter into any agreement or contract outside the ordinary course of business of the Company; -25- 30 (n) not adjust, split, combine or reclassify its capital stock; (o) not enter into any agreement, understanding or arrangement with respect to the sale or voting of its capital stock; (p) not enter into derivative instruments; (q) not create or acquire any subsidiaries; and (r) not authorize or enter into an agreement to do any of the foregoing. 5.2 Access; Confidentiality. (a) From the date of this Agreement until the Effective Time, upon reasonable prior notice to the Company, the Company shall give Parent and its authorized representatives reasonable access during normal business hours to its executive officers and such other officers or other representatives of the Company approved in advance by the Company (which approval shall not be unreasonably withheld or delayed), properties, books and records, and shall furnish Parent and its authorized representatives with such financial and operating data and other information concerning the business and properties of the Company as Parent may from time to time reasonably request. (b) Parent and Purchaser will hold and treat, and will cause their respective affiliates, agents and other representatives to hold and treat, all documents and information concerning the Company furnished to Parent, Purchaser or their respective representatives in connection with the transactions contemplated by this Agreement confidential in accordance with the Confidentiality Agreement dated March 17, 1997, between Dillon Read and Parent, which Confidentiality Agreement shall remain in full force and effect until the termination of this Agreement or otherwise in accordance with its terms. 5.3 Further Actions. Upon the terms and subject to the conditions hereof, each of the parties hereto shall act in good faith toward and use all commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable, and consult and fully cooperate with and provide reasonable assistance to each other party, in order to consummate and make effective the transactions contemplated by this Agreement as soon as practicable hereafter, including, without limitation, (a) using all commercially reasonable efforts to obtain all consents, approvals, authorizations or permits of governmental or regulatory authorities or other Persons as are necessary for the consummation of the transactions contemplated hereby, (b) taking such actions and doing such things as any other party hereto may reasonably request in order to cause any of the conditions specified in Article VI to such other party's obligation to consummate such transactions to be fully satisfied, and (c) in the event and to the extent required, amending this Agreement so that this Agreement and the Merger comply with the DGCL. Prior to making any application to or filing with any governmental or regulatory authority or other Person in connection with this Agreement, the Company, on the one hand, and Parent and Purchaser, on the other hand, shall provide the other with drafts thereof and afford the other a reasonable opportunity to comment on such drafts. -26- 31 5.4 Notice of Certain Matters. The Company shall give prompt notice to Parent, and Parent and Purchaser shall give prompt notice to the Company, of (a) the occurrence or nonoccurrence of any event that would be likely to cause (i) any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect or (ii) any covenant, condition or agreement contained in this Agreement not to be complied with or satisfied in all material respects and (b) any failure of the Company or of Parent or Purchaser, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder in any material respect. The Company shall give prompt notice to Parent of the Company's receipt of any authority for expenditure with respect to the Company's Oil and Gas Properties ("AFE") requiring a payment by the Company in excess of $25,000, and Parent shall advise the Company in writing as promptly as practicable thereafter whether Parent consents to the payment by the Company requested under such AFE. If the Company does not receive a response from Parent by the close of business on the sixth business day immediately preceding the deadline for the Company's response under such AFE, Parent shall be deemed to have consented to such payment by the Company. 5.5 Company Proxy Statement. Unless the Merger is consummated as contemplated in Section 2.13 hereof, the Company shall, as soon as reasonably practicable after the consummation of the Offer, prepare a preliminary form of the Company Proxy Statement (the "Company Preliminary Proxy Statement"). The Company shall (a) file the Company Preliminary Proxy Statement with the SEC promptly after it has been prepared in a form reasonably satisfactory to the Company and Parent and (b) use commercially reasonable efforts to promptly prepare any amendments to the Company Preliminary Proxy Statement required in response to comments of the SEC or its staff or that the Company with the advice of counsel deems necessary or advisable and to cause the Company Proxy Statement to be mailed to the Company's stockholders as soon as reasonably practicable after the Company Preliminary Proxy Statement, as so amended, is cleared by the SEC. 5.6 State Takeover Statutes. The Company, Parent and Purchaser will cooperate to take reasonable steps to (a) exempt the Offer and the Merger from the requirements of any applicable state takeover law and (b) assist in any challenge by any of the parties to the validity or applicability to the Offer or the Merger of any state takeover law. 5.7 Cooperation. Subject to the terms and conditions of this Agreement and applicable law, each of the parties shall act in good faith and use reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement as soon as practicable, including such actions or things as any other party may reasonably request in order to cause any of the conditions to such other party's obligation to consummate the transactions contemplated by this Agreement to be fully satisfied. Without limiting the foregoing, the parties shall (and shall cause their respective subsidiaries, and use reasonable efforts to cause their respective affiliates, directors, officers, employees, agents, attorneys, accountants and representatives, to) consult and fully cooperate with and provide assistance to each other in (a) the preparation and filing with the SEC of the Offer Documents, the Schedule 14D-9, the Company Preliminary Proxy Statement and the Company Proxy Statement, and any necessary amendments or supplements thereto; (b) seeking to have the Company Preliminary Proxy Statement cleared by the SEC as soon as reasonably practicable after filing; (c) obtaining all necessary consents, approvals, waivers, licenses, permits, authorizations, registrations, qualifications, or other permissions or actions by, and giving all -27- 32 necessary notices to and making all necessary filings with and applications and submissions to, any court, administrative agency or commission or other governmental authority or instrumentality, domestic (federal, state or local) or foreign (collectively, "Governmental Entity") or other Person as soon as reasonably practicable after filing; (d) providing all such information concerning such party, its subsidiaries and its officers, directors, partners and affiliates and making all applications and filings as may be necessary or reasonably requested in connection with any of the foregoing; (e) in general, consummating and making effective the transactions contemplated hereby; and (f) in the event and to the extent required, amending this Agreement so that this Agreement and the Offer and the Merger comply with the DGCL. The parties shall (and shall cause their respective affiliates, directors, officers, employees, agents, attorneys, accountants and representatives to) use their reasonable efforts to cause the lifting of any permanent or preliminary injunction or restraining order or other similar order issued or entered by any court or other Governmental Entity preventing or restricting consummation of the transactions contemplated hereby in the manner provided for herein. Prior to making any application to or filing with any Governmental Entity or other Person in connection with this Agreement, each party shall provide the other party with drafts thereof and afford the other party a reasonable opportunity to comment on such drafts. 5.8 Public Announcements. No party hereto shall or shall permit any of its subsidiaries to (and each party shall use commercially reasonable efforts to cause its affiliates, directors, officers, employees, agents or representatives not to) issue any press release or make any public statement concerning this Agreement or any of the transactions contemplated hereby, without the prior written consent of the other parties hereto; provided, however, that a party may, without the prior written consent of the other party hereto, issue such a press release or make such a public statement to the extent required by applicable law or any listing agreement with a national securities exchange by which such party is bound if it has used commercially reasonable efforts to consult with the other parties and to obtain such parties' consent but has been unable to do so in a timely manner. 5.9 Acquisition Proposals. Except as contemplated hereby, the Company shall not (and shall use its best efforts to cause its officers, directors and employees and any investment banker, financial advisor, attorney, accountant, or other agent or representative retained by it not to) directly or indirectly, 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 relating to, or that may reasonably be expected to lead to, the acquisition of all or a significant part of the business and properties or capital stock of the Company, whether by merger, purchase of assets, tender offer or otherwise with a third party other than Parent (an "Acquisition Proposal"), or enter into discussions or negotiate with any person or entity in furtherance of such inquiries or to obtain an Acquisition Proposal, or agree to or endorse any Acquisition Proposal, or authorize or permit any of the officers, directors, employees or agents of the Company or any investment banker, financial advisor, attorney, accountant or other representative retained by the Company to take any such action. The Company shall as promptly as practicable notify Parent of all relevant terms of any such inquiries or proposals received by the Company and, if such inquiry or proposal is in writing, the Company shall as promptly as practicable deliver or cause to be delivered to Parent a copy of such inquiry or proposal. Notwithstanding the foregoing, nothing shall prohibit the Company's Board of Directors from (a) furnishing information to, or entering into discussions or negotiations with, any persons or entity in connection with an unsolicited bona fide proposal in connection with an Acquisition Proposal if, and only to the extent that (i) such unsolicited bona fide proposal is on terms that the Company's -28- 33 Board of Directors determines it cannot reject, based on applicable fiduciary duties and the advice of outside counsel (except with respect to furnishing information) and for which financing, to the extent required, is then committed, and (ii) prior to furnishing such information to or entering into discussions or negotiations with, such person or entity the Company provides written notice to Parent to the effect that it is furnishing information to, or entering into discussions or negotiations with, such person or entity; or (b) complying with Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal. 5.10 D&O Indemnification. (a) From the Effective Time through the later of (i) the sixth anniversary of the date on which the Effective Time occurs and (ii) the expiration of any statute of limitations applicable to any claim, action, suit, proceeding or investigation referred to below, the Surviving Corporation shall indemnify and hold harmless each present and former director and officer of the Company, determined as of the Effective Time (the "Indemnified Parties"), against any claims, losses, liabilities, damages, judgments, fines, fees, costs or expenses, including without limitation attorneys' fees and disbursements (collectively, "Costs"), incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time (including, without limitation, the Merger, the preparation, filing and mailing of the Proxy Statement and the other transactions and actions contemplated by this Agreement), whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that the Company would have been permitted, under applicable law, indemnification agreements existing on the date hereof, the Certificate of Incorporation or Bylaws of the Company in effect on the date hereof, to indemnify such Person (and the Surviving Corporation shall also advance expenses as incurred to the fullest extent permitted under applicable law provided the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification). (b) Any Indemnified Party wishing to claim indemnification under this Section 5.10, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify the Surviving Corporation thereof, but the failure to so notify shall not relieve the Surviving Corporation of any liability or obligation it may have to such Indemnified Party except, and only to the extent, that such failure materially prejudices the Surviving Corporation. In the event of any such claim, action, suit, proceeding or investigation (whether arising before, at or after the Effective Time), the Surviving Corporation shall have the right to assume the defense thereof and the Surviving Corporation shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if the Surviving Corporation elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues that raise conflicts of interest between the Surviving Corporation and the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and the Surviving Corporation shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received. If such indemnity is not available with respect to any Indemnified Party, then the Surviving Corporation and the Indemnified Party shall contribute to the amount payable in such proportion as is appropriate to reflect relative faults and benefits. In the event that any claim or claims are asserted -29- 34 or made within the aforesaid six-year period, all rights to indemnification in respect of any such claim or claims shall continue until the final disposition of any and all such claims. (c) Notwithstanding anything herein to the contrary, if any claim, action, suit, proceeding or investigation (whether arising before, at or after the Effective Time) is made against any present or former director or officer of the Company, on or prior to the sixth anniversary of the Effective Time, the provisions of this Section 5.10 shall continue in effect until the final disposition of such claim, action, suit, proceeding or investigation. (d) This covenant is intended to be for the benefit of, and shall be enforceable by, each of the Indemnified Parties and their respective heirs and legal representatives. The indemnification provided for herein shall not be deemed exclusive of any other rights to which an Indemnified Party is entitled, whether pursuant to law, contract or otherwise. (e) To the extent that the Surviving Corporation fails to perform any of its obligations pursuant to this Section 5.10, Parent shall assume the obligations and rights of the Surviving Corporation under this Section 5.10. 5.11 Employee Matters. (a) The Company will terminate all of its employees effective immediately prior to the Closing Date, and the Company and the Surviving Corporation shall pay all such terminated employees any and all benefits earned under the Company Benefit Plans in accordance with their terms including any amounts owing under any employment agreement or severance agreement, as described in Section 3.11 of the Company Disclosure Schedule. (b) Prior to the Closing Date, the Company shall take any and all action necessary to terminate the HarCor Energy 401(k) Savings Plan ("HarCor Savings Plan") with such termination to be effective immediately prior to the Closing Date, and upon the termination of the HarCor Savings Plan, the Company and the Surviving Corporation shall distribute to all HarCor Savings Plan participants their account balances thereunder as soon as administratively possible. (c) Except for those Company Benefit Plans which the Parent advises the Company in writing within 30 days following the date of this Agreement that the Parent wishes to remain in effect following the Closing Date, the Company shall take any and all action necessary to terminate all Company Benefit Plans on or before the Closing Date. (d) Notwithstanding the above, Parent shall be freely able to contract with or employ, as the case may be, any terminated employee of the Company without restriction or interference by the Company. -30- 35 ARTICLE VI CLOSING CONDITIONS 6.1 Conditions to Obligations of Each Party to Effect the Merger. The respective obligations of each party hereto to effect the Merger 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, in whole or in part, to the extent permitted by applicable law: (a) Purchase of Shares. Parent will have accepted for payment and purchased all Shares validly tendered and not withdrawn pursuant to the Offer. (b) Stockholder Approval. Unless the Merger is consummated as contemplated in Section 2.13 hereof, this Agreement shall have been adopted, and the Merger shall have been approved, by a vote of the holders of a majority of the outstanding Shares. (c) No Injunction. No federal or state governmental or regulatory body or court of competent jurisdiction shall have enacted, issued, promulgated or enforced any statute, rule, regulation, executive order, decree, judgment, preliminary or permanent injunction or other order that is in effect and that prohibits, enjoins or otherwise restrains the consummation of the Merger; provided, however, that the parties shall use all commercially reasonable efforts to cause any such decree, judgment, injunction or order to be vacated or lifted. (d) Governmental and Regulatory Consents. All material filings required to be made prior to the Effective Time with, and all material consents, approvals, permits and authorizations required to be obtained prior to the Effective Time from, governmental and regulatory authorities or third parties in connection with the Merger and the consummation of the other transactions contemplated hereby which are listed in Section 3.4 of the Company Disclosure Schedule shall have been made or obtained, as the case may be. 6.2 Conditions Precedent to the Obligations of the Company. The obligation of the Company to effect the Merger is also subject to the satisfaction at or prior to the Effective Time of each of the following additional conditions, unless waived by the Company: (a) Accuracy of Representations and Warranties. All representations and warranties made by Parent and Purchaser herein shall be true and correct in all material respects on and as of the Effective Time, with the same force and effect as though such representations and warranties had been made on and as of the Effective Time, except for changes permitted or contemplated by this Agreement and except for representations and warranties that are made as of a specific date or time, which shall be true and correct in all material respects only as of such specific date or time. (b) Compliance with Covenants. Each of Parent and Purchaser shall have performed in all material respects all obligations and agreements, and complied in all material respects with all covenants, contained in this Agreement to be performed or complied with by it prior to or on the Effective Time. -31- 36 6.3 Conditions Precedent to the Obligations of Parent and Purchaser. The obligation of Parent and Purchaser to effect the Merger is also subject to the satisfaction at or prior to the Effective Time of each of the following additional conditions, unless waived by either of Parent or Purchaser: (a) Accuracy of Representations and Warranties. All representations and warranties made by the Company herein shall be true and correct in all material respects on and as of the Effective Time, with the same force and effect as though such representations and warranties had been made on and as of the Effective Time, except for changes permitted or contemplated by this Agreement and except for representations and warranties that are made as of a specific date or time, which shall be true and correct in all material respects only as of such specific date or time. (b) Compliance with Covenants. The Company shall have performed in all material respects all obligations and agreements, and complied in all material respects with all covenants, contained in this Agreement to be performed or complied with by it prior to or on the Effective Time. ARTICLE VII TERMINATION 7.1 Termination. This Agreement may be terminated and the Offer and the Merger may be abandoned at any time (notwithstanding approval of the Merger by the stockholders of the Company, if required by applicable provisions of the DGCL), prior to the Effective Time: (a) by mutual written consent of the Company and Parent; (b) by either the Company or Parent, if the Effective Time shall not have occurred on or before 120 days from the date hereof; provided, that the right to terminate this Agreement under this clause (b) shall not be available to any party whose misrepresentation in this Agreement or whose failure to perform any of its covenants and agreements or to satisfy any obligation under this Agreement has been the cause of or resulted in the failure of the Merger to occur on or before such date; (c) by either the Company or Parent, if any federal or state court of competent jurisdiction or other federal or state governmental or regulatory body shall have issued any judgment, injunction, order or decree prohibiting, enjoining or otherwise restraining the transactions contemplated by this Agreement and such judgment, injunction, order or decree shall have become final and nonappealable (provided, however, that the party seeking to terminate this Agreement pursuant to this clause (c) shall have used commercially reasonable efforts to remove such judgment, injunction, order or decree) or if any statute, rule, regulation or executive order promulgated or enacted by any federal or state governmental authority after the date of this Agreement which prohibits the consummation of the Offer or the Merger shall be in effect; (d) by the Company, if (i) Purchaser fails to commence the Offer as provided in Section 1.1, (ii) the Offer expires or is terminated without any Shares being purchased thereunder or (iii) Parent fails to purchase validly tendered Shares in violation of the terms and conditions of the Offer or this Agreement; -32- 37 (e) by Parent, if (i) the Offer is not commenced as provided in Section 1.1 directly as a result of actions or inaction by the Company or (ii) the Offer is terminated or expires as a result of the failure of a condition specified in Annex A hereto or on the expiration of the Offer without the purchase of any Shares thereunder, unless such termination or expiration has been caused by or resulted from the failure of Parent or Purchaser to perform any covenants and agreements of Parent or Purchaser contained in this Agreement; (f) prior to the consummation of the Offer, by Parent, if the Company Board withdraws or modifies in a manner materially adverse to Parent or Purchaser its favorable recommendation of the Offer or the Merger or shall have recommended any Acquisition Proposal with a party other than Parent or any of its affiliates; (g) by the Company, if this Agreement is not adopted or, unless the Merger is consummated as contemplated in Section 2.13 hereof, the Merger is not approved at the Company Stockholders' Meeting by the holders of a majority of the outstanding Shares; (h) by Parent, if there shall have been a material breach of any representation, warranty or material covenant or agreement on the part of the Company, which is incurable or which is not cured after thirty (30) days' written notice by Parent to the Company; (i) by the Company, if there shall have been a material breach of any representation, warranty or material covenant or agreement on the part of either of Parent or Purchaser, which is incurable or which is not cured after thirty (30) days' written notice by the Company to Parent; or (j) by the Company, if (i) pursuant to Section 5.9 hereof the Company Board shall withdraw, modify or change its approval or recommendation of the Offer or the Merger or shall have resolved to do any of the foregoing or (ii) any Person or group of Persons shall have made an Acquisition Proposal the acceptance of which the Company Board determines, after consultation with legal counsel and after the Company Board has satisfied itself that the financing for the Acquisition Proposal has been committed, is required to comply with its fiduciary duties under applicable law. 7.2 Effect of Termination. In the event of any termination of this Agreement pursuant to Section 7.1, this Agreement forthwith shall become void and of no further force or effect, and no party hereto (or any of its affiliates, directors, officers, agents or representatives) shall have any liability or obligation hereunder, except in any such case (a) as provided in Sections 5.2(b) (Confidentiality), 5.8 (Public Announcements), and 7.3 (Fees and Expenses), which shall survive any such termination and (b) to the extent such termination results from the breach by such party of any of its representations, warranties, covenants or agreements contained in this Agreement. 7.3 Fees and Expenses. (a) Whether or not the Offer or the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby (including, without limitation, fees and disbursements of counsel, financial advisors and accountants) shall be -33- 38 borne by the party which incurs such cost or expense; provided, that if this Agreement is terminated pursuant to Section 7.1 as a result of a material misrepresentation by a party or a material breach by a party of any of its covenants or arrangements set forth herein, such party shall pay the costs and expenses incurred by the other party in connection with this Agreement; and provided, further, that all costs and expenses related to the preparation, printing, filing and mailing (as applicable) of the Company Proxy Statement and all SEC and other regulatory filing fees incurred in connection with the Company Proxy Statement shall be borne equally by the Company, on the one hand, and Parent and Purchaser, on the other hand. (b) Notwithstanding the foregoing, provided that neither Parent nor Purchaser shall be in breach of their respective obligations under this Agreement, if (i) prior to the consummation of the Offer, the Company Board terminates this Agreement pursuant to Section 7.1(j) or Parent terminates this Agreement pursuant to Section 7.1(f) and (ii) as a result thereof, Parent shall have terminated the Offer, allowed the Offer to expire without purchasing any Shares thereunder or failed to commence the Offer in accordance with the terms hereof and (iii) the Company enters into a definitive agreement relating to an Acquisition Proposal or a business combination or other transaction contemplated by such Acquisition Proposal shall have been consummated within 12 months following such termination, then the Company shall thereupon pay to Parent, as liquidated damages, a fee of $1,000,000 in cash, payable in same day funds. The Company acknowledges that the provisions of this Section 7.3(b) are an integral part of the transactions contemplated in this Agreement and that, without such provisions, Parent and Purchaser would not enter into this Agreement. ARTICLE VIII MISCELLANEOUS 8.1 No Survival. None of the representations, warranties, covenants or agreements contained in this Agreement or in any certificate or other instrument delivered pursuant to this Agreement shall survive the Effective Time, except for the covenants and agreements contained in Sections 5.10 (D&O Indemnification and Insurance), 5.11 (Company Plans) and 5.12 (Severance Agreements). 8.2 Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made as of the date delivered, mailed or transmitted, and shall be effective upon receipt, if delivered personally, mailed by registered or certified mail (postage prepaid, return receipt requested) or sent by facsimile (with immediate confirmation) or nationally recognized overnight courier service, as follows: (a) if to Parent or Purchaser, to: Seneca Resources Corporation 1201 Louisiana, Suite 400 Houston, Texas 77002 Attn: John F. McKnight Fax: (713) 654-2659 -34- 39 with a copy (not required as notice) to: Bracewell & Patterson, L.L.P. South Tower Pennzoil Place, Suite 711 Louisiana Houston, Texas 77002-2781 Attn: Gary W. Orloff Fax: (713) 221-1212 (b) if to the Company, to: HarCor Energy, Inc. Five Post Oak Park 4400 Post Oak Parkway Suite 2220 Houston, Texas 77027 Attn: Mark G. Harrington Fax: (713) 961-9773 with a copy (not required as notice) to: Vinson & Elkins L.L.P. 2300 First City Tower 1001 Fannin Houston, Texas 77002 Attn: Michael P. Finch Fax: (713) 615-5282 or to such other Person or address or facsimile number as any party shall specify by like written notice to the other parties hereto (any such notice of a change of address to be effective only upon actual receipt thereof). 8.3 Certain Definitions. The following terms, when used in this Agreement, shall have the following respective meanings: (a) "affiliate" shall have the meaning assigned to such term in Section 12(b)-2 of the Exchange Act. (b) "business day" shall have the meaning set forth in Rule 14d-1(c)(6) under the Exchange Act. -35- 40 (c) "Material Adverse Effect" means, with respect to any Person, any change or effect that is materially adverse to the financial condition or results of operations of such Person and its subsidiaries, taken as a whole, excluding in all cases: (i) events or conditions generally affecting the industry in which such Person and its subsidiaries operate or arising from changes in general business or economic conditions; (ii) out-of-pocket fees and expenses (including without limitation legal, accounting, investigatory, and other fees and expenses) incurred in connection with the transactions contemplated by this Agreement; (iii) in the case of the Company, the payment by the Company of all amounts due to any officers or employees of the Company under employment contracts or other employee benefit plans in effect as of the date hereof and which have been listed in the Company Disclosure Schedule; (iv) any effect resulting from any change in law or generally accepted accounting principles, which affect generally entities such as such Person; and (v) any effect resulting from compliance by such Person with the terms of this Agreement. (d) "Person" means any natural person, corporation, limited liability company, partnership, unincorporated organization or other entity. (e) "subsidiary" of any Person means any other corporation or entity of which such Person owns, directly or indirectly, stock or other equity interests having a majority of the votes entitled to be cast in the election of directors of such corporation or entity under ordinary circumstances or of which such Person owns a majority beneficial interest. 8.4 Entire Agreement. This Agreement (including the schedules, exhibits and other documents referred to herein), together with the Confidentiality Agreement referred to in Section 5.2(b), constitutes the entire agreement between and among the parties hereto and supersedes all prior agreements and understandings, oral and written, between or among any of the parties with respect to the subject matter hereof. 8.5 Assignment; Binding Effect. Neither this Agreement nor any of the rights, benefits or obligations hereunder may be assigned, in whole or in part, by any party (whether by operation of law or otherwise) without the prior written consent of the other parties hereto. 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. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties or their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, other than rights conferred upon Indemnified Parties under Section 5.10. 8.6 Amendments. This Agreement may be amended by the parties at any time prior to the Effective Time; provided, that, after approval of the Merger and this Agreement by the stockholders of the Company if required under applicable law, no amendment shall be made that by law requires further approval by the stockholders of the Company, without such approval. This Agreement may not be amended or modified except by an instrument in writing signed on behalf of each of the parties hereto. 8.7 Waivers. At any time prior to the Effective Time, Parent (for Parent and Purchaser), on the one hand, or the Company, on the other hand, may, to the extent legally allowed, extend the time specified herein for the performance of any of the obligations or other acts of the other, waive any -36- 41 inaccuracies in the representations and warranties of the other contained herein or in any document delivered pursuant hereto, or waive compliance by the other with any of the agreements or covenants of such other party or parties (as the case may be) contained herein. Any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of the party or parties to be bound thereby. No such extension or waiver shall constitute a waiver of, or estoppel with respect to, any subsequent or other breach or failure to strictly comply with the provisions of this Agreement. The failure of any party to insist on strict compliance with this Agreement or to assert any of its rights or remedies hereunder or with respect hereto shall not constitute a waiver of such rights or remedies. 8.8 Captions. The Table of Contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 8.9 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument. 8.10 Validity. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. 8.11 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to any applicable principles of conflicts of law, except to the extent that the DGCL mandatorily applies to the Merger. -37- 42 IN WITNESS WHEREOF, the parties have executed this Agreement and Plan of Merger as of the date first above written. HARCOR ENERGY, INC. By: /s/ MARK G. HARRINGTON ----------------------------------- Mark G. Harrington Chairman of the Board and Chief Executive Officer SENECA WEST CORP. By: /s/ WILLIAM M. PETMECKY ------------------------------------ William M. Petmecky President SENECA RESOURCES CORPORATION By: /s/ JAMES A. BECK ----------------------------------- James A. Beck President -38- 43 ANNEX A CONDITIONS TO THE OFFER Capitalized terms used in this Annex A shall have the meanings assigned to them in the Agreement to which it is attached (the "Merger Agreement"). Parent shall not be required to accept for payment, purchase or pay for any Shares tendered and Parent may terminate or, subject to the terms and conditions of the Merger Agreement, amend the Offer as to any Shares not then accepted for payment, shall not be required to accept for payment or pay for any Shares, or may delay the acceptance for payment of Shares tendered, if (1) at the expiration of the Offer, the number of Shares validly tendered and not withdrawn, together with the Shares beneficially owned by Parent and its affiliates, shall not constitute a majority of the outstanding Shares on a fully diluted basis or (2) at any time after the date of execution of the Merger Agreement and prior to the acceptance for payment of Shares, any of the following events shall occur: (a) there shall have been any action or proceeding brought by any governmental authority before any federal or state court, or any order or preliminary or permanent injunction entered in any action or proceeding before any federal or state court or governmental, administrative or regulatory authority or agency, located or having jurisdiction within the United States, or any other action taken, proposed or threatened, or statute, rule, regulation, legislation, interpretation, judgment or order proposed, sought, enacted, entered, enforced, promulgated, amended, issued or deemed applicable to Purchaser, the Company or affiliate of Purchaser or the Company or the Offer or the Merger, by any legislative body, court, government or governmental, administrative or regulatory authority or agency located or having jurisdiction within the United States, which could reasonably be expected to have the effect of: (i) making illegal, materially delaying or otherwise restraining or prohibiting the Offer or the Merger or the acquisition by Parent or Purchaser of any Shares; (ii) prohibiting or materially limiting the ownership or operation by Parent, Purchaser or their respective affiliates of any material portion of their business or assets or those of the Company or compelling Parent or Purchaser to dispose of or hold separate all or any material portion of their business or assets or those of the Company, in each case as a result of the transactions contemplated by the Merger Agreement; (iii) imposing material limitations on the ability of Parent or any of its affiliates to exercise full rights of ownership of the Shares, including, without limitation, the right to vote any Shares purchased by them on all matters properly presented to the stockholders of the Company; or (iv) preventing Parent or any of its affiliates from acquiring, or to require divestiture by Parent or any of its affiliates of, any Shares; or (b) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on any national securities exchange or in the over-the-counter market in the United States, (ii) the declaration of any banking moratorium or any suspension of payments in respect of banks or any limitation (whether or not mandatory) on the extension of credit by lending institutions in the United States, (iii) the commencement or any escalation of a war, material armed hostilities or any other material international or A-1 44 national calamity involving the United States, or (iv) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (c) any Person, entity or "group" (as such term is used in Section 13(d)(3) of the Exchange Act) other than Parent or any of its affiliates shall have become the beneficial owner (as that term is used in Rule 13d-3 under the Exchange Act) of more than 50% of the outstanding Shares; or (d) the Company shall have breached or failed to comply in any material respect with any of its obligations under the Merger Agreement (which breach, if curable, has not been cured within thirty (30) days following receipt of written notice thereof by Parent specifying in reasonable detail the basis of such alleged breach), or any representation or warranty of the Company contained in the Merger Agreement that is qualified as to materiality shall not have been true and correct and any such representation and warranty that is not so qualified shall not have been true and correct in any material respect, except (i) for changes specifically permitted or contemplated by the Merger Agreement and (ii) those representations and warranties that address matters only as to a particular date which are true and correct as of such date; or (e) the Merger Agreement shall have been terminated pursuant to its terms or amended pursuant to its terms to provide for such termination or amendment of the Offer; or (f) the Board of Directors of the Company shall have modified or amended in any manner materially adverse to Parent or Purchaser or shall have withdrawn its recommendation of the Offer or the Merger, or shall have resolved to do any of the foregoing; or (g) Parent shall not have received notice from the holder or holders of more than 5%, on a fully diluted basis of the Shares issued and outstanding on the record date for the determination of stockholders entitled to vote on the Merger that such holders have exercised or intend to exercise their appraisal rights under the DGCL; or (h) the Company shall not have received at least $12,789,000 (including all material purchase price adjustments) in immediately available funds from the sale of the Company's non-California oil and gas assets and shall be entitled to receive an additional amount in immediately available funds determined under the Company's agreement with Penroc Oil Company ("Penroc") dated January 15, 1998 for the sale of the Beaurline No. 9 well, Beaurline/McAllen Ranch Area, South Texas and its pooled or allocated producing unit (the "Well") as follows: if the Well is restored by sidetrack or redrill or associated operations, an agreed amount equal to the present value of the future production from the Well discounted at 10%, as determined by Ryder Scott Company (the "New Reserve Evaluation"), with payment to be made ten business days after Penroc's receipt of the New Reserve Evaluation; or A-2 45 (i) the Company shall not have retained the proceeds from the sale of its non-California oil and gas assets or used such proceeds to repay Company indebtedness or other liabilities incurred by the Company in the ordinary course of business or pursuant to the transactions contemplated by the Merger Agreement; or (j) the Company shall have completed and delivered to Parent an audit of the Company's financial statements for the fiscal year ended December 31, 1997, to be performed by the accounting firm of Arthur Andersen LLP, which reveals material adverse information not previously disclosed in writing to Parent, or a material variance from the written or printed disclosures furnished by the Company or its representatives and used by Parent in its economic models; or (k) there shall have occurred any event, change, effect or development having a Material Adverse Effect on the Company; which, in the good faith judgment of Parent makes it inadvisable to proceed with the Offer or with acceptance for payment or payment for Shares. The foregoing conditions are for the sole benefit of Parent and Purchaser and may be asserted or waived by Parent or Purchaser in whole or in part at any time or from time to time in its discretion subject to the terms and conditions of the Merger Agreement. The failure of Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. A-3 EX-99.C2 12 CONFIDENTIALITY AGREEMENT DATED 3/17/97 1 EXHIBIT (c)(2) [DILLON, READ & CO. INC. LETTERHEAD] MARCH 17, 1997 STRICTLY PRIVATE AND CONFIDENTIAL Seneca Resources Corporation 1201 Louisiana Street Suite 400 Houston, Texas 77002 Attention: Mr. John F. McKnight Re: CONFIDENTIALITY AGREEMENT Dear Sirs: You have requested information on HarCor Energy, Inc. ("HarCor" or the "Company") directly or through us in connection with your investigation concerning the acquisition by you of certain businesses, assets or stock of HarCor (the "Transaction"). Dillon, Read & Co. Inc. ("Dillon Read"), which for purposes of this letter shall also include all of its officers, directors, employees, agents and controlling persons, has been retained by the Company as a financial advisor to attempt to identify and consummate a Transaction. As a condition of the Company's consent to communicate such information to you, it is required that you agree, on the terms set forth below (the "Agreement"), to treat confidentially all such information that Dillon Read, HarCor or its agents may communicate to you for this purpose, whether communications before or after the date of this letter, orally, in writing, by inspection, or through any other means, regardless of whether specifically identified as "confidential" and regardless of whatever form or medium such information may take during or after its communication (collectively, the "Confidential Information"). For greater certainty, all information communicated to you shall be deemed Confidential Information except information which: (a) as shown by written records, was already known by you at the time of its receipt by you; (b) has been or becomes published or otherwise within the public knowledge as is generally known at the time of its disclosure to you without any breach by you of your obligations hereunder; or (c) as shown by written records, was known or available to you through an independent third party source under no obligation of confidentiality to Dillon Read or HarCor and without breach of your obligations hereunder. 2 You understand and agree that the Confidential Information is being given to you without any liability on the part of HarCor or Dillon Read, or on the part of the Company's directors and officers, whatsoever, and no representation or warranty with respect to the accuracy, completeness or validity of any Confidential Information is hereby made by Dillon Read or HarCor or its directors or officers. You agree that neither Dillon Read, HarCor nor its directors and officers, shall have any liability to you resulting from the selection, or reliance of the Confidential Information by you. In consideration of our communicating the Confidential Information to you, you agree on your own behalf and on behalf of your directors, officers, employees, advisors, agents, consultants, affiliates and other representatives (collectively included in the term "you"), all of whom must agree to be bound by the terms of this Agreement as a condition of receiving the Confidential Information, that: 1. the Confidential Information is strictly confidential and shall be treated in the strictest confidence and privilege and shall be used only for the purpose of evaluating a proposed Transaction and for no other purpose; 2. you shall not disclose or allow disclosure, to any third party individual or corporate entity of whatever nature ("person") that the Confidential Information has been made available to you. Further, without HarCor's prior written consent, you shall not disclose to any person, that discussions or negotiations, are taking place concerning any possible Transaction or any of the terms, conditions or other facts regarding any possible Transaction or its status; This paragraph does not apply as to any person who may join with you in a possible transaction with HarCor. 3. you will not assert or allege the existence of any representation, warranty or agreement by Dillon Read, HarCor or its directors or officers arising from the communication to you of the Confidential Information, it being the intent of this clause that there shall be no liability or obligation except in respect of any representations, warranties and agreements which are in writing and duly executed by HarCor in a definitive agreement with respect to a Transaction; 4. should you be requested or required by oral questions, interrogations, requests for more information, subponea, civil investigatory demand or similar process to disclose any Confidential Information, you shall provide HarCor with prompt written notice thereof so that HarCor may seek an appropriate protective order and/or waive your compliance with provisions of the Agreement. You further agree to provide to HarCor your active assistance and cooperation as may be reasonably required by HarCor to secure protection of the Confidential Information. If, however, you are, in the reasonable opinion of your counsel, compelled to disclose Confidential Information concerning HarCor to any tribunal, legislative authority or government body or else stand liable for contempt or suffer other censure or penalty, you may so disclose that portion of the Confidential Information so compelled without liability hereunder; 5. the Confidential Information is and shall remain at all times the sole, absolute and exclusive property of HarCor. In the event that the Transaction is not effected with HarCor after you have been furnished with the Confidential Information, you will promptly return to HarCor all the Confidential Information and will destroy any and all internal working papers, analysis, documents or materials directly or indirectly derived from or reflecting anything contained in the Confidential Information, without retaining any copy thereof or any notes relating thereto. You shall certify 3 that you have returned all Confidential Information and destroyed all such internal memoranda derived from the Confidential Information; 6. this Agreement shall inure to the benefit of and be binding upon any successors and assigns of the parties hereto, such assignment by you only to be upon HarCor's written consent which may be arbitrarily withheld; 7. in addition to all other remedies available, HarCor shall be entitled to equitable relief, including injunction or specific performance other than being required to enter into a transaction with HarCor, as to any breach of the provisions of this Agreement without any requirement for the securing or posting of any bond in connection with such remedy. You hereby agree to the granting of such injunctive relief in HarCor's favor without proof of mutual damages. You agree that any failure by HarCor in exercising any right, power or privilege herein shall not operate as a waiver thereof, or that any single or partial exercise thereof shall not preclude any other or further exercise thereof by HarCor or the exercise of any right, power or privilege hereunder; 8. except in connection with the negotiation of the terms of a Transaction or in accordance with the terms of a Transaction Agreement or through standard business transactions (such as farming, farmouts, joint ventures or other similar transactions) directly with HarCor, for a period of eighteen months from the date of this Agreement neither you or your representatives nor any person or entity controlled by you shall, directly or indirectly: (i) acquire, or offer or agree to acquire, directly or indirectly, by purchase or otherwise, 5% or more of any securities of the Company (or direct or indirect rights or options to acquire any securities of the Company), except by way of stock dividends or other distributions made on a pro rata basis with respect to securities of the Company acquired by you prior to the date of this Agreement; (ii) solicit proxies or consents or become a "participant" in a "solicitation" (as such terms are defined in Regulation 14A under the Securities Exchange Act of 1934, as amended) of proxies or consents with respect to securities of the Company with regard to seeking control or influence of management of Company; (iii) seek to control or influence the management or Board of Directors of the Company with respect to the policies of the Company, seek to advise, encourage or influence any person with respect to the voting of any securities of the Company or seek to induce or in any manner to assist any other person to initiate any stockholder proposal with respect to the securities of the Company, any change of control of the Company or for the purpose of convening a meeting of stockholders of the Company or to initiate any tender or exchange offer for securities of the Company; (iv) acquire or agree to acquire, by purchase or otherwise, more than 5% of any class of equity securities of any entity which, prior to the time you acquire or agree to acquire more than 5% of such class, has publicly disclosed (by a filing with the Securities and Exchange Commission or otherwise) that it is, or is otherwise known to you to be, the beneficial owner of more than 5% of the outstanding common stock of the Company; (v) without the prior written consent of the Company, make any public announcement (except as required by law or stock exchange policy) or make any written or oral proposal relating to a tender or exchange offer for securities of the Company, a business combination (or other similar transaction which would result in a change of control), sale of assets, liquidation or other extraordinary corporate 4 transaction between the Company or any of its affiliates and you (each such transaction being referred to herein as a "Transaction") or take any action which might require the Company to make a public announcement regarding any Transaction; (vi) deposit any securities of the Company in a voting trust or subject any securities of the Company to any arrangement or agreement with respect to the voting of securities of the Company; or (vii) form, join or in any way participate in a partnership, limited partnership, syndicate or other group (or otherwise act in concert with any other person) for the purpose of acquiring, holding, voting or disposing of more than 5% of the securities of the Company or taking any other actions restricted or prohibited under clauses (i) through (vi) of this Section 8. 9. the parties hereto understand and agree that unless and until a definitive agreement has been executed and delivered, no contract or agreement providing for a transaction between the parties shall be deemed to exist between the parties, and neither party will be under any legal obligation of any kind whatsoever with respect to such Transaction by virtue of this or any written or oral expression thereof, except, in the case of this Agreement, for the matters specifically agreed to herein. For purposes of this Agreement, the term "definitive agreement" does not include an executed letter of intent or any other preliminary written agreement or offer, unless specifically so designated in writing and executed by both parties. Furthermore, this Agreement is not intended to and does not create a partnership, joint venture or any other business combination between the parties. You agree that HarCor reserves the right, in its sole and absolute discretion, to reject any or all proposals, to decline to furnish further information, to deny access to data rooms and to terminate discussions and negotiations with you at any time. The exercise by HarCor of these rights shall not affect the enforceability of any provision of this Agreement; 10. you will not directly or indirectly contact any employee, officer, or representative of HarCor with respect to the Transaction without the prior authorization of Dillon Read; 11. you will not, during the two year period after the date hereof, directly or indirectly, solicit for employment or hire any employee of HarCor with whom you have had contact or who became known to you in connection with the consideration of the Transaction, provided that this restriction is not prohibited by any law or regulation and does not prevent you from employing any person who contacts you on his or her own initiative without encouragement from you; and 12. you acknowledge that this Agreement is for the benefit of HarCor and Dillon Read. You agree that any action, suit or proceeding for the enforcement of the terms of this Agreement may be brought by HarCor without the necessity of any joinder therein by Dillon Read, and you expressly waive any claim that there is a lack of privity of contract between you and HarCor and that, as a consequence thereof, HarCor has no standing to bring any action with respect to this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas applicable to agreements made and to be performed within such State without regard to principles of conflicts of laws. 5 All obligations under this Agreement shall terminate upon the earlier of (a) the successful closing of Transaction; and (b) the second anniversary date of this Agreement. Very truly yours, DILLON, READ & CO. INC. By: /s/ JEFFERY W. MILLER ------------------------------ Name: Jeffery W. Miller Title: Vice President AGREED TO AND ACCEPTED this 20th day of March, 1997. By: /s/ JOHN S. CRON* --------------------------- Name: John S. Cron Title: Offshore Area Landman *THE PARTIES HERETO AGREE THAT ANY DISPUTE THAT ARISES WITH RESPECT TO THIS AGREEMENT SHALL BE ARBITRATED IN ACCORDANCE WITH THE TEXAS GENERAL ARBITRATION ACT ("ACT") AND THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION ("RULES") AND THAT THE DECISION OF THE ARBITRATOR RENDERED PURSUANT TO THE ACT AND RULES SHALL BE BINDING UPON THE PARTIES AND MAY BE ENFORCED IN ANY COURT OF COMPETENT JURISDICTION. ANY ARBITRATION PROCEEDINGS PURSUANT TO THIS AGREEMENT SHALL BE HELD IN HOUSTON, HARRIS COUNTY, TEXAS. THE ARBITRATOR SHALL NOT AWARD PUNITIVE, CONSEQUENTIAL, NOR MULTIPLE DAMAGES IN SETTLEMENT OF ANY DISPUTE. -----END PRIVACY-ENHANCED MESSAGE-----