Exhibit 2.2
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STOCK OPTION AGREEMENT
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THIS STOCK OPTION AGREEMENT (this "Agreement"), dated as of October 15,
2000, between Chevron Corporation, a Delaware corporation ("Parent"), and Texaco
Inc., a Delaware corporation (the "Company").
W I T N E S S E T H :
WHEREAS, Parent and the Company are concurrently with the execution and
delivery of this Agreement entering into an Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which, among other things, Merger Subsidiary
will merge with and into the Company on the terms and subject to the conditions
stated therein; and
WHEREAS, in order to induce Parent to enter into the Merger Agreement
and as a condition for Parent's agreeing so to do, the Company has granted to
Parent the Stock Option (as hereinafter defined), on the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and in the Merger Agreement, and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
Section 1. Definitions. Capitalized terms used and not defined herein
have the respective meanings assigned to them in the Merger Agreement.
Section 2. Grant of Stock Option.
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(a) The Company hereby grants to Parent an irrevocable option (the
"Stock Option") to purchase, on the terms and subject to the conditions hereof,
for $53.71 per share (the "Exercise Price") in cash, up to 107,000,000 fully
paid and non-assessable shares (the "Option Shares") of the Company's common
stock, par value $3.125 per share (the "Common Stock"). The Exercise Price and
number of Option Shares shall be subject to adjustment as provided in Sections
2(b) and 6 below.
(b) In the event that any (i) additional shares of Common Stock are
issued or otherwise become outstanding after the date of the Agreement (other
than pursuant to this Agreement) or (ii) shares of Common Stock are redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of the
Agreement, the number of shares of Common Stock subject to the Stock Option
shall be increased or decreased, as appropriate, so that after such issuance or
redemption, such number equals 19.9% of the number of shares of Common Stock
then issued and outstanding (without giving effect to any shares subject or
issued pursuant to the Stock Option). Nothing contained in this Section 2(b) or
elsewhere in this Agreement shall be deemed to authorize Parent or the Company
to breach any provision of the Merger Agreement.
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Section 3. Exercise of Stock Option.
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(a) Parent may, subject to the provisions of this Section, exercise the
Stock Option, in whole or in part, at any time or from time to time, after the
occurrence of a Company Trigger Event (defined below) and prior to the
Termination Date. "Termination Date" shall mean the earliest of (i) the
Effective Time of the Merger, (ii) 90 days after the date full payment
contemplated by Section 10.5 of the Merger Agreement is made by the Company to
Parent thereunder or (iii) one day after the date of the termination of the
Merger Agreement so long as, in the case of this clause (iii), no Company
Trigger Event has occurred or could still occur pursuant to Section 10.5 of the
Merger Agreement. Notwithstanding the occurrence of the Termination Date, Parent
shall be entitled to purchase Option Shares pursuant to any exercise of the
Stock Option, on the terms and subject to the conditions hereof, to the extent
Parent exercised the Stock Option prior to the occurrence of the Termination
Date. A "Company Trigger Event" shall mean an event the result of which is that
the Company becomes obligated to pay a fee to Parent pursuant to Section 10.5 of
the Merger Agreement.
(b) Parent may purchase Option Shares pursuant to the Stock Option only
if all of the following conditions are satisfied: (i) no preliminary or
permanent injunction or other order issued by any federal or state court of
competent jurisdiction in the United States shall be in effect prohibiting
delivery of the Option Shares, (ii) any applicable waiting period under the HSR
Act shall have expired or been terminated, and (iii) any prior notification to
or approval of any other regulatory authority in the United States or elsewhere
required in connection with such purchase shall have been made or obtained,
other than those which if not made or obtained would not reasonably be expected
to result in a Material Adverse Effect on the Company and its Subsidiaries,
taken as a whole.
(c) If Parent shall be entitled to and wishes to exercise the Stock
Option, it shall do so by giving the Company written notice (the "Stock Exercise
Notice") to such effect, specifying the number of Option Shares to be purchased
and a place and closing date not earlier than three business days nor later than
10 business days from the date of such Stock Exercise Notice. If the closing
cannot be consummated on such date because any condition to the purchase of
Option Shares set forth in Section 3(b) has not been satisfied or as a result of
any restriction arising under any applicable law or regulation, the closing
shall occur five days (or such earlier time as Parent may specify) after
satisfaction of all such conditions and the cessation of all such restrictions;
provided that in no event shall the closing of the purchase be postponed by more
than nine months after the Termination Date as a result of this clause (c).
(d) So long as the Stock Option is exercisable pursuant to the terms of
Section 3(a) Parent may elect to send a written notice to the Company (the "Cash
Exercise Notice") specifying a date not later than 20 business days and not
earlier than 10 business days following the date such notice is given on which
date the Company shall pay to Parent in exchange for the cancellation of the
relevant portion of the Stock Option an amount in cash equal to the Spread (as
hereinafter defined) multiplied by all or such portion of the Option Shares
subject to the Stock Option as Parent shall specify. As used herein, "Spread"
shall mean the excess, if any, over the Exercise Price of the higher of (x) if
applicable, the highest price per share of Common Stock
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paid or proposed to be paid by any Person pursuant to any Acquisition Proposal
relating to the Company (the "Alternative Exercise Price") or (y) the average of
the closing price of the shares of Common Stock on the NYSE at the end of the
regular session, as reported on the Consolidated Tape, Network A for the five
consecutive trading days ending on and including the trading date immediately
preceding the date on which the Cash Exercise Notice is given (the "Average
Market Price"). If the Alternative Exercise Price includes any property other
than cash, the Alternative Exercise Price shall be the sum of (i) the fixed cash
amount, if any, included in the Alternative Exercise Price plus (ii) the fair
market value of such other property. If such other property consists of
securities with an existing public trading market, the average of the closing
prices (or the average of the closing bid and asked prices if closing prices are
unavailable) for such securities in their principal public trading market on the
five trading days ending five days prior to the date on which the Cash Exercise
Notice is given shall be deemed to equal the fair market value of such property.
If such other property includes anything other than cash or securities with an
existing public trading market, the Alternative Exercise Price shall be deemed
to equal the Average Market Price. Upon exercise of its right pursuant to this
Section 3(d) and the receipt by Parent of the applicable cash amount with
respect to the Option Shares or the applicable portion thereof, the obligations
of the Company to deliver Option Shares pursuant to Section 3(e) shall be
terminated with respect to the number of Option Shares specified in the Cash
Exercise Notice. The Spread shall be appropriately adjusted, if applicable, to
give effect to Section 6.
(e) (i) At any closing pursuant to Section 3(c) hereof, Parent shall
make payment to the Company of the aggregate purchase price for the Option
Shares to be purchased and the Company shall deliver to Parent a certificate
representing the purchased Option Shares, registered in the name of Parent or
its designee and (ii) at any closing pursuant to Section 3(d) hereof, the
Company will deliver to Parent cash in an amount determined pursuant to Section
3(d) hereof. Any payment made by Parent to the Company, or by the Company to
Parent, pursuant to this Agreement shall be made by wire transfer of immediately
available funds to a bank designated by the party receiving such funds, provided
that the failure or refusal by the Company to designate such a bank account
shall not preclude Parent from exercising the Stock Option. If at the time of
the issuance of Option Shares pursuant to the exercise of the Stock Option,
Company Rights or any similar securities are outstanding, then the Option Shares
issued pursuant to such exercise shall be accompanied by corresponding Company
Rights or such similar securities.
(f) Certificates for Common Stock delivered at the closing described in
Section 3(c) hereof shall be endorsed with a restrictive legend which shall read
substantially as follows:
"The transfer of the shares represented by this certificate is subject
to resale restrictions arising under the Securities Act of 1933, as
amended. The shares represented by this certificate are also subject to
repurchase by the Issuer pursuant to the Stock Option Agreement dated
as of October 15, 2000, a copy of which agreement may be obtained upon
request from the Issuer."
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It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without this reference (i) if Parent shall
have delivered to the Company a copy of a no-action letter from the staff of the
Securities and Exchange Commission, or a written opinion of counsel, in form and
substance reasonably satisfactory to the Company, to the effect that such legend
is not required for purposes of, or resale may be effected pursuant to an
exemption from registration under, the Securities Act or (ii) in connection with
any sale registered under the Securities Act. In addition, these certificates
shall bear any other legend as may be required by applicable law.
(g) At any time following the exercise by Parent of the Stock Option,
the Company shall have the right, within 5 business days after written notice to
Parent, to purchase for cash all of the Option Shares received by Parent
pursuant to this Agreement at a purchase price per share equal to the higher of
(x) the Alternative Exercise Price or (y) the Average Market Price. At any
closing pursuant to this Section 3(g), the Company shall make payment to Parent
of the aggregate purchase price for the Option Shares to be purchased and Parent
shall deliver to the Company a certificate representing the purchased Option
Shares.
Section 4. Representations and Warranties of the Company. The Company
hereby represents and warrants to Parent as follows:
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware. The execution,
delivery and performance by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby (i) are within the
Company's corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) require no action by or in respect of, or filing with,
any governmental body, agency or official, except for compliance with any
applicable requirements of the HSR Act, the Exchange Act, the Securities Act,
and laws, rules and regulations in foreign jurisdictions governing antitrust or
merger control matters (iv) assuming compliance with the matters referred to in
clause (iii), do not contravene, or constitute a violation of, any provision of
applicable law or regulation or of the certificate of incorporation or by-laws
of the Company or of any judgment, injunction, order or decree binding upon the
Company or any of its Subsidiaries, (v) do not and will not constitute a default
under or give rise to a right of termination, cancellation or acceleration of
any right or obligation of the Company or any of its Subsidiaries or to a loss
of any benefit to which the Company or any of its Subsidiaries is entitled under
any provision of any agreement, contract or other instrument binding upon the
Company or any of its Subsidiaries or any license, franchise, permit or other
similar authorization held by the Company or any of its Subsidiaries, and (vi)
do not and will not result in the creation or imposition of any Lien on any
asset of the Company or any of its Subsidiaries, except for such contraventions,
conflicts or violations referred to in clause (iv) or defaults, rights of
termination, cancellation or acceleration, or losses or Liens referred to in
clauses (v) and (vi) that would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. This Agreement has been duly executed
and delivered by the Company and constitutes a valid and binding agreement of
the Company.
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(b) The Company has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from the date hereof
until such time as the obligation to deliver Option Shares upon the exercise of
the Stock Option terminates, will have reserved for issuance upon any exercise
of the Stock Option, the number of Option Shares subject to the Stock Option
(less the number of Option Shares previously issued upon any partial exercise of
the Stock Option). All of the Option Shares to be issued pursuant to the Stock
Option have been duly authorized and, upon issuance and delivery thereof
pursuant to this Agreement, will be duly authorized, validly issued, fully paid
and nonassessable, and will be delivered free and clear of all claims, liens,
charges, encumbrances and security interests (other than those created by this
Agreement). Option Shares issued upon exercise of the Stock Option will not be
subject to any preemptive or similar rights. The Board of Directors of the
Company has resolved to, and the Company promptly after execution of this
Agreement will, take all necessary action to render the Company Rights Agreement
inapplicable to the grant or exercise of the Stock Option and the transactions
contemplated hereby. The Board of Directors of the Company has taken all
necessary action to render section 203 of the Delaware Law, or any other
antitakeover statute or similar statute or regulation, and the supermajority
voting provisions of Article XIII of the Company's certificate of incorporation
and Article VII of the Company's by-laws inapplicable to the acquisition of the
Option Shares pursuant to this Agreement.
Section 5. Representations and Warranties of Parent. Parent hereby
represents and warrants to the Company as follows: Parent is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. The execution, delivery and performance by Parent of this Agreement
and the consummation of the transactions contemplated hereby (i) are within
Parent's corporate powers and (ii) have been duly authorized by all necessary
corporate action. The Option Shares acquired by Parent upon the exercise of the
Stock Option will not be, and the Stock Option is not being, acquired by Parent
with the intention of making a public distribution thereof. Neither the Stock
Option nor the Option Shares acquired upon exercise of the Stock Option will be
sold or otherwise disposed of by Parent except in compliance with the Securities
Act. This agreement has been duly executed and delivered by Parent and
constitutes a valid and binding agreement of Parent.
Section 6. Adjustment upon Changes in Capitalization or Merger.
(a) In the event of any change in the outstanding shares of Common
Stock by reason of a stock dividend, stock split, reverse stock split, split-up,
merger, consolidation, recapitalization, combination, conversion, exchange of
shares, extraordinary or liquidating dividend or similar transaction which would
affect Parent's rights hereunder, the type and number of shares or securities
purchasable upon the exercise of the Stock Option and the Exercise Price shall
be adjusted appropriately, and proper provision will be made in the agreements
governing such transaction, as shall fully preserve the economic benefits
provided hereunder to Parent and the full satisfaction of the Company's
obligations hereunder. In no event shall the number of shares of Common Stock
subject to the Stock Option exceed 19.9% of the number of shares of Common Stock
issued and outstanding at the time of exercise (without giving effect to any
shares subject or issued pursuant to the Stock Option).
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(b) Without limiting the foregoing, whenever the number of Option
Shares purchasable upon exercise of the Stock Option is adjusted as provided in
this Section 6, the Exercise Price shall be adjusted by multiplying the Exercise
Price by a fraction, the numerator of which is equal to the number of Option
Shares purchasable prior to the adjustment and the denominator of which is equal
to the number of Option Shares purchasable after the adjustment.
(c) Without limiting or altering the parties' rights and obligations
under the Merger Agreement, in the event that the Company enters into an
agreement (i) to consolidate with or merge into any Person, other than Parent or
one of its Subsidiaries, and the Company will not be the continuing or surviving
corporation in such consolidation or merger, (ii) to permit any Person, other
than Parent or one of its Subsidiaries, to merge into the Company and the
Company will be the continuing or surviving corporation, but in connection with
such merger, the shares of Common Stock outstanding immediately prior to the
consummation of such merger will be changed into or exchanged for stock or other
securities of the Company or any other Person or cash or any other property, or
the shares of Common Stock outstanding immediately prior to the consummation of
such merger will, after such merger, represent less than 50% of the outstanding
voting securities of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any Person, other than Parent or one
of its Subsidiaries, then, and in each such case, the agreement governing such
transaction will make proper provision so that the Stock Option will, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities or property that Parent would have received in respect of Option
Shares had the Stock Option been exercised immediately prior to such
consolidation, merger, sale or transfer or the record date therefor, as
applicable, and shall make any other necessary adjustments. The Company shall
take such steps in connection with such consolidation, merger, liquidation or
other such transaction as may be reasonably necessary to assure that the
provisions hereof shall thereafter apply as nearly as possible to any securities
or property thereafter deliverable upon exercise of the Stock Option.
Section 7. Further Assurances; Remedies.
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(a) The Company agrees to maintain, free from preemptive rights,
sufficient authorized but unissued or treasury shares of Common Stock so that
the Stock Option may be fully exercised without additional authorization of
Common Stock after giving effect to all other options, warrants, convertible
securities and other rights of third parties to purchase shares of Common Stock
from the Company, and to issue the appropriate number of shares of Common Stock
pursuant to the terms of this Agreement. All of the Option Shares to be issued
pursuant to the Stock Option, upon issuance and delivery thereof pursuant to
this Agreement, will be duly authorized, validly issued, fully paid and
non-assessable, and will be delivered free and clear of all claims, liens,
charges, encumbrances and security interests (other than those created by this
Agreement).
(b) The Company agrees not to avoid or seek to avoid (whether by
charter amendment or through reorganization, consolidation, merger, issuance of
rights, dissolution or
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sale of assets, or by any other voluntary act) the observance or performance of
any of the covenants, agreements or conditions to be observed or performed
hereunder by the Company.
(c) The Company agrees that promptly after the occurrence of a Company
Trigger Event it shall take all actions as may from time to time be required
(including (i) complying with all applicable premerger notification, reporting
and waiting period requirements under the HSR Act and (ii) in the event that
prior notification to or approval of any other regulatory authority in the
United States or elsewhere is necessary before the Stock Option may be
exercised, complying with its obligations thereunder and cooperating with Parent
in preparing and processing the required notices or applications) in order to
permit Parent to exercise the Stock Option and purchase Option Shares pursuant
to such exercise.
(d) The parties agree that Parent would be irreparably damaged if for
any reason the Company failed to issue any of the Option Shares (or other
securities or property deliverable pursuant to Section 6 hereof) upon exercise
of the Stock Option or to perform any of its other obligations under this
Agreement, and that Parent would not have an adequate remedy at law for money
damages in such event. Accordingly, Parent shall be entitled to specific
performance and injunctive and other equitable relief to enforce the performance
of this Agreement by the Company. Accordingly, if Parent should institute an
action or proceeding seeking specific enforcement of the provisions hereof, the
Company hereby waives the claim or defense that Parent has an adequate remedy at
law and hereby agrees not to assert in any such action or proceeding the claim
or defense that such a remedy at law exists. The Company further agrees to waive
any requirements for the securing or posting of any bond in connection with
obtaining any such equitable relief. This provision is without prejudice to any
other rights that Parent may have against the Company for any failure to perform
its obligations under this Agreement.
Section 8. Listing of Option Shares. Promptly after the occurrence of a
Company Trigger Event and from time to time thereafter if necessary, the Company
will apply to list all of the Option Shares subject to the Stock Option on the
NYSE and will use its reasonable best efforts to obtain approval of such listing
as soon as practicable.
Section 9. Registration of the Option Shares.
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(a) If, within two years of the exercise of the Stock Option, Parent
requests the Company in writing to register under the Securities Act any of the
Option Shares received by Parent hereunder, the Company will use its reasonable
best efforts to cause the offering of the Option Shares so specified in such
request to be registered as soon as practicable so as to permit the sale or
other distribution by Parent of the Option Shares specified in its request (and
to keep such registration in effect for a period of at least 90 days), and in
connection therewith the Company shall prepare and file as promptly as
reasonably possible (but in no event later than 60 days from receipt of Parent's
request) a registration statement under the Securities Act to effect such
registration on an appropriate form, which would permit the sale of the Option
Shares by Parent in accordance with the plan of disposition specified by Parent
in its request. The Company shall not be obligated to make effective more than
two registration statements pursuant to the foregoing sentence; provided,
however, that the Company may postpone the filing of a
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registration statement relating to a registration request by Parent under this
Section 9 for a period of time (not in excess of 90 days) if in the Company's
reasonable, good faith judgment (i) such filing would require the disclosure of
material information that the Company has a bona fide business purpose for
preserving as confidential or (ii) the sale of Option Shares by Parent would
materially interfere with any pending or anticipated acquisition, financing or
transaction involving the Company or its Subsidiaries (but in no event shall the
Company exercise such postponement right more than once in any twelve-month
period).
(b) The Company shall notify Parent in writing not less than 10 days
prior to filing a registration statement under the Securities Act (other than a
filing on Form S-4 or S-8 or any successor form) with respect to any shares of
Common Stock. If Parent wishes to have any portion of its Option Shares included
in such registration, it shall advise the Company in writing to that effect
within two business days following receipt of such notice, and the Company will
thereupon include the number of Option Shares indicated by Parent in such
registration; provided that if the managing underwriter(s) of the offering
pursuant to such registration statement advise the Company that in their opinion
the number of shares of Common Stock requested to be included in such
registration exceeds the number which can be sold in such offering, the Company
shall only include in such registration such number or dollar amount of Option
Shares which, in the good faith opinion of the managing underwriter(s), can be
sold without materially and adversely affecting such offering.
(c) All expenses relating to or in connection with any registration
contemplated under this Section 9 and the transactions contemplated thereby
(including all filing, printing, reasonable professional, roadshow and other
fees and expenses relating thereto) will be at the Company's expense except for
underwriting discounts or commissions and brokers' fees. The Company and Parent
agree to enter into a customary underwriting agreement with underwriters upon
such terms and conditions as are customarily contained in underwriting
agreements with respect to secondary distributions. The Company shall indemnify
Parent, its officers, directors, agents, other controlling persons and any
underwriters retained by Parent in connection with such sale of such Option
Shares in the customary way, and shall agree to customary contribution
provisions with such persons, with respect to claims, damages, losses and
liabilities (and any expenses relating thereto) arising (or to which Parent, its
officers, directors, agents, other controlling persons or underwriters may be
subject) in connection with any such offer or sale under the federal securities
laws or otherwise, except for information furnished in writing by Parent or its
underwriters to the Company. Parent and its underwriters, respectively, shall
indemnify the Company to the same extent with respect to information furnished
in writing to the Company by Parent and such underwriters, respectively.
Section 10. Miscellaneous.
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(a) Extension of Exercise Periods. The periods during which Parent may
exercise its rights under Sections 2 and 3 hereof, or the Company may exercise
its rights under Section 2(g), shall be extended in each such case at the
request of Parent to the extent necessary to avoid liability by Parent under
Section 16(b) of the Exchange Act by reason of such exercise.
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(b) Amendments; Entire Agreement. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto. This Agreement, together with
the Merger Agreement (including any exhibits and schedules thereto), contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions.
(c) Notices. All notices, requests and other communications to either
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party hereunder shall be inwriting (including facsimile or similar writing) and
shall be given,
if to Parent, to:
Harvey D. Hinman, Esq.
Vice President and General Counsel
Chevron Corporation
575 Market Street
San Francisco, California 94105
Facsimile No.: (415) 894-6017
with copies to:
Alfred L. Pepin, Esq.
1156 Mee Lane
St. Helena, California 94574
Facsimile No.: (707) 967-0551
and
Arthur Fleischer, Jr., Esq.
Gary P. Cooperstein, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004-1980
Facsimile No.: (212) 859-4000
and
Terry M. Kee, Esq.
Rodney R. Peck, Esq.
Pillsbury Madison & Sutro LLP
50 Fremont Street
San Francisco, California 94105
Facsimile No.: (415) 983-1200
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if to the Company, to:
William M. Wicker
Senior Vice President
Texaco Inc.
2000 Westchester Avenue
White Plains, New York 10650
Facsimile No.: (914) 253-4280
with copies to:
Deval Patrick, Esq.
General Counsel and Vice President
Texaco Inc.
2000 Westchester Avenue
White Plains, New York 10650
Facsimile No.: (914) 253-4477
and
Dennis S. Hersch, Esq.
Ulrika Ekman, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Facsimile No.: (212) 450-4800
or to such other address or facsimile number as either party may hereafter
specify for the purpose by notice to the other party hereto. Each such notice,
request or other communication shall be effective (i) if given by facsimile,
when such facsimile is transmitted to the facsimile number specified in this
Section and the appropriate facsimile confirmation is received or (ii) if given
by any other means, when delivered at the address specified in this Section.
(d) Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided herein
and without limiting anything contained in the Merger Agreement.
(e) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
(f) Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
regard to principles of conflicts of law. Any suit, action or proceeding seeking
to enforce any provision of, or based on
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any matter arising out of or in connection with, this Agreement or the
transactions contemplated hereby may be brought in any federal or state court
located in the State of Delaware, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 10(c)
hereof shall be deemed effective service of process on such party.
(g) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(h) Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shallbe an original, but all of which together shall
constitute one and the same agreement.
(i) Headings. The section headings herein are for convenience only and
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shall not affect the construction hereof.
(j) Assignment. This Agreement shall be binding upon each party hereto
and such party's successors and assigns. This Agreement shall not be assignable
by the Company, but may be assigned by Parent in whole or in part to any direct
or indirect wholly-owned subsidiary of Parent, provided that Parent shall remain
liable for any obligations so assigned.
(k) Survival. All representations, warranties and covenants contained
herein shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(l) Time of the Essence. The parties agree that time shall be of the
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essence in the performance of obligations hereunder.
(m) Public Announcement. Parent and the Company will consult with each
other before issuing any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby and shall not
issue any such press release or make any such public statement without the prior
consent of the other party, which shall not be unreasonably withheld.
Notwithstanding the foregoing, any such press release or public statement as may
be required by applicable law or any listing agreement with any national
securities exchange, may be issued prior to such consultation, if the party
making such release or statement has used its reasonable efforts to consult with
the other party.
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Section 11. Profit Limitation.
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(a) Notwithstanding any other provision of this Agreement or the Merger
Agreement, in no event shall Parent's Total Profit (as defined below) exceed
$1,100,000,000 (the "Maximum Amount") and, if it otherwise would exceed such
Maximum Amount, Parent at its sole election may (i) pay cash to the Company,
(ii) deliver to the Company for cancellation Option Shares previously purchased
by Parent, or (iii) any combination thereof, so that Parent's actually realized
Total Profit (as defined below) shall not exceed the Maximum Amount after taking
into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Stock
Option may not be exercised for a number of Option Shares as would, as of the
date of the Stock Exercise Notice or Cash Exercise Notice, as applicable, result
in a Notional Total Profit (as defined below) of more than the Maximum Amount
and, if exercise of the Stock Option otherwise would result in the Notional
Total Profit exceeding such amount, Parent, at its discretion, may (in addition
to any of the actions specified in Section 11(a) above) increase the Exercise
Price for that number of Option Shares set forth in the Stock Exercise Notice or
Cash Exercise Notice, as applicable, so that the Notional Total Profit shall not
exceed the Maximum Amount; provided, that nothing in this sentence shall
restrict any exercise of the Stock Option permitted hereby on any subsequent
date at the Exercise Price set forth in Section 2 hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the cash amount actually received by
Parent pursuant to Section 10.5 of the Merger Agreement less any repayment by
Parent to the Company pursuant to Section 11(a)(i) hereof, (ii) (x) the net cash
amounts or the fair market value of any property received by Parent pursuant to
the sale of Option Shares (or of any other securities into or for which such
Option Shares are converted or exchanged), less (y) Parent's purchase price for
such Option Shares (or other securities) plus (iii) the aggregate amounts
received by Parent pursuant to Section 3(d).
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Option Shares as to which Parent may propose to exercise the Stock
Option shall mean the Total Profit determined as of the date of the Stock
Exercise Notice or Cash Exercise Notice, as applicable, assuming that the Stock
Option was exercised on such date for such number of Option Shares and assuming
that such Option Shares, together with all other Option Shares previously
acquired upon exercise of the Stock Option and held by Parent and its affiliates
as of such date, were sold for cash at the closing price on the NYSE for the
Common Stock as of the close of business on the preceding trading day (less
customary brokerage commissions).
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IN WITNESS WHEREOF, the Company and Parent have caused this Agreement
to be duly executed as of the day and year first above written.
TEXACO INC.
By: /s/ PETER I. BIJUR
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Name: Peter I. Bijur
Title Chairman of the Board and
Chief Executive Officer
CHEVRON CORPORATION
By: /s/ DAVID J. O'REILLY
-------------------------------------------
Name: David J. O'Reilly
Title: Chairman of the Board and
Chief Executive Officer
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