AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER [ ], 2001
REGISTRATION NO. [ ]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CORVETTEPORSCHE CORP.
(Exact name of Registrant as specified in its charter)
<Table>
DELAWARE 2911 [ ]
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</Table>
---------------------
600 NORTH DAIRY ASHFORD ROAD
HOUSTON, TEXAS 77079
(281) 293-1000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------------
<Table>
RICK A. HARRINGTON, ESQ. J. BRYAN WHITWORTH, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND
CONOCO INC. CHIEF ADMINISTRATIVE OFFICER
600 NORTH DAIRY ASHFORD ROAD PHILLIPS PETROLEUM COMPANY
HOUSTON, TEXAS 77079 PHILLIPS BUILDING
(281) 293-1000 BARTLESVILLE, OKLAHOMA 74004
(918) 661-6600
</Table>
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES TO:
<Table>
RICHARD HALL, ESQ. ANDREW R. BROWNSTEIN, ESQ.
CRAVATH, SWAINE & MOORE WACHTELL, LIPTON, ROSEN & KATZ
825 EIGHTH AVENUE 51 WEST 52ND STREET
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10019
(212) 474-1000 (212) 403-1000
</Table>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this registration statement becomes
effective and the conditions to the merger described herein have been satisfied
or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<Table>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT( ) PRICE(2) REGISTRATION FEE(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.01 per share...... 737,293,556 Not Applicable $41,877,300,011 $10,008,675
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) The maximum number of shares of common stock of CorvettePorsche Corp., a
Delaware corporation, which will be renamed "ConocoPhillips" upon the
completion of the merger described below and which we refer to as "New
Parent," to be issued in the merger of a wholly owned subsidiary of New
Parent with and into Conoco Inc., a Delaware corporation, and the merger of
a wholly owned subsidiary of New Parent with and into Phillips Petroleum
Company, a Delaware corporation, based on the exchange ratios of one share
of Conoco common stock, par value $0.01 per share, to be exchanged for
0.4677 of a share of New Parent common stock, par value $0.01 per share, and
one share of Phillips common stock, par value $1.25 per share, to be
exchanged for one share of New Parent common stock.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended, and
calculated pursuant to Rule 457(f) under the Securities Act. Pursuant to
Rule 457(f)(1) under the Securities Act, the proposed maximum aggregate
offering price of New Parent common stock was calculated in accordance with
Rule 457(c) under the Securities Act as the sum of (a)(i) $27.28, the
average of the high and low prices per share of Conoco common stock as
reported on the New York Stock Exchange on December 3, 2001, multiplied by
(ii) 668,681,694, the aggregate number of shares of Conoco common stock to
be converted into New Parent common stock in the merger or issuable pursuant
to outstanding options or other equity-based awards prior to the date the
merger is expected to be completed and (b)(i) $55.68, the average of the
high and low prices per share of Phillips common stock as reported on the
New York Stock Exchange on December 3, 2001, multiplied by (ii) 424,551,128,
the aggregate number of shares of Phillips common stock to be exchanged for
New Parent common stock in the merger or issuable pursuant to outstanding
options or other equity-based awards prior to the date the merger is
expected to be completed.
(3) Calculated by multiplying the proposed maximum aggregate offering price by
0.000239.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRELIMINARY DRAFT DATED DECEMBER 7, 2001 -- SUBJECT TO COMPLETION
[LOGO OF CONOCO TO COME] [LOGO OF PHILLIPS TO COME]
To the stockholders of Conoco Inc. and Phillips Petroleum Company:
PROPOSED MERGER OF CONOCO AND PHILLIPS
The Boards of Directors of Conoco Inc. and Phillips Petroleum Company each
have unanimously approved a combination of the two companies to form
ConocoPhillips. ConocoPhillips will be the third largest integrated energy
company in the United States based on market capitalization, oil and gas
reserves and production. It will be the fifth largest refiner and the sixth
largest non-governmentally owned energy company worldwide based on oil and gas
reserves.
Upon completion of the merger, Conoco stockholders will receive 0.4677 of a
share of ConocoPhillips common stock, par value $0.01 per share, for each share
of Conoco common stock and Phillips stockholders will receive one share of
ConocoPhillips common stock for each share of Phillips common stock. As a
result, former Conoco stockholders will hold approximately 43.4%, and former
Phillips stockholders will hold approximately 56.6%, of the outstanding shares
of ConocoPhillips common stock. We expect that ConocoPhillips common stock will
be listed on the New York Stock Exchange under the symbol "COP."
Conoco and Phillips each will hold a special meeting of stockholders to
consider and vote on this proposal. Whether or not you plan to attend your
company's special meeting, please take the time to submit a proxy by following
the instructions on your proxy card.
The places, dates and times of the special meetings are as follows:
<Table>
FOR CONOCO STOCKHOLDERS: FOR PHILLIPS STOCKHOLDERS:
[ ], 2002, at [ ] [a.m.] [p.m.] [ ], 2002, at [ ] [a.m.] [p.m.]
[address] The Adams Building
4th Street and Keeler Avenue
Bartlesville, Oklahoma 74004
</Table>
WE ENTHUSIASTICALLY SUPPORT THIS COMBINATION OF OUR COMPANIES AND JOIN WITH
OUR BOARDS OF DIRECTORS IN RECOMMENDING THAT YOU VOTE FOR THE ADOPTION OF THE
MERGER AGREEMENT.
<Table>
Sincerely, Sincerely,
Archie W. Dunham J.J. Mulva
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
Conoco Inc. Phillips Petroleum Company
</Table>
FOR A DISCUSSION OF RISK FACTORS THAT YOU SHOULD CONSIDER IN EVALUATING THE
MERGER, SEE "RISK FACTORS RELATING TO THE MERGER" BEGINNING ON PAGE [12].
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved the merger and other transactions
described in this joint proxy statement/prospectus or the ConocoPhillips common
stock to be issued in connection with the merger, or determined if this joint
proxy statement/prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
This joint proxy statement/prospectus is dated [ ]
and is first being mailed to stockholders on or about [ ].
REFERENCES TO ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates important business and
financial information about Conoco and Phillips from other documents that are
not included in or delivered with this joint proxy statement/prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain the documents incorporated by reference in this joint
proxy statement/prospectus by requesting them in writing or by telephone or over
the Internet from the appropriate company at the following addresses:
<Table>
CONOCO INC. PHILLIPS PETROLEUM COMPANY
600 NORTH DAIRY ASHFORD ROAD 1234 ADAMS BUILDING
HOUSTON, TEXAS 77079 BARTLESVILLE, OKLAHOMA 74004
(281) 293-6800 (918) 661-[ ]
ATTENTION: SHAREHOLDER RELATIONS ATTENTION: DALE J. BILLAM, SECRETARY
E-MAIL: SHAREHOLDER.RELATIONS@CONOCO.COM AND SENIOR COUNSEL
[E-MAIL: ]
OR OR
INNISFREE M&A INCORPORATED GEORGESON SHAREHOLDER COMMUNICATIONS, INC.
501 MADISON AVENUE 17 STATE STREET
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10004
TOLL FREE: (800) [ ] TOLL FREE: (800) [ ]
[E-MAIL: ] [E-MAIL: ]
</Table>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY [ ],
2002, IN ORDER TO RECEIVE THEM BEFORE YOUR SPECIAL MEETING.
See "Where You Can Find More Information" on page [ ].
[LOGO OF CONOCO TO COME]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD [DATE], 2002
To the Stockholders of Conoco Inc.:
We will hold a special meeting of the stockholders of Conoco Inc. on
[date], 2002, at [time], local time, at [address] to consider and vote on the
following proposal:
Adopt the Agreement and Plan of Merger, dated as of November 18, 2001, by
and among Conoco, Phillips Petroleum Company, a Delaware corporation,
CorvettePorsche Corp., a Delaware corporation, which will be renamed
"ConocoPhillips" upon completion of the merger and which we refer to as
"New Parent," Corvette Merger Corp., a Delaware corporation and a wholly
owned subsidiary of New Parent, and Porsche Merger Corp., a Delaware
corporation and a wholly owned subsidiary of New Parent.
Pursuant to the merger agreement, Porsche Merger Corp. will merge with and
into Phillips and Corvette Merger Corp. will merge with and into Conoco, with
each of Phillips and Conoco becoming wholly owned subsidiaries of New Parent. At
the time of the merger, each outstanding share of Conoco common stock, par value
$0.01 per share, will be converted into the right to receive 0.4677 of a share
of New Parent common stock, par value $0.01 per share, and each outstanding
share of Phillips common stock, par value $1.25 per share, will be converted
into the right to receive one share of New Parent common stock.
We will transact no other business at the special meeting, except for
business properly brought before the special meeting or any adjournment or
postponement of it by the Conoco Board of Directors.
Only Conoco stockholders of record at the close of business on
[ ], the record date for the special meeting, may vote at the special
meeting and any adjournments or postponements of it. A complete list of Conoco
stockholders of record entitled to vote at the special meeting will be available
for the 10 days before the special meeting at our executive offices for
inspection by Conoco stockholders during ordinary business hours for proper
purposes.
Your vote is very important. Please submit your proxy as soon as possible
to make sure that your shares are represented at the special meeting. To do so,
you may complete and return the enclosed proxy card or you may be able to submit
your proxy or voting instructions by telephone or over the Internet. If you are
a stockholder of record of Conoco common stock, you also may cast your vote in
person at the special meeting. If your shares are held in an account at a
brokerage firm or bank, you must instruct it on how to vote your shares. If you
do not vote or do not instruct your broker or bank how to vote, it will have the
same effect as voting against the merger.
FOR MORE INFORMATION ABOUT THE MERGER DESCRIBED ABOVE AND THE OTHER
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, PLEASE REVIEW THE
ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AND THE MERGER AGREEMENT ATTACHED
TO IT AS ANNEX A.
THE CONOCO BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
ADOPTION OF THE MERGER AGREEMENT.
By Order of the Conoco Board of
Directors,
E. Julia Lambeth
Corporate Secretary
[ ]
Houston, Texas
[LOGO OF PHILLIPS TO COME]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD [DATE], 2002
To the Stockholders of Phillips Petroleum Company:
We will hold a special meeting of the stockholders of Phillips Petroleum
Company on [date], 2002, at [time], local time, at the Adams Building, 4th
Street and Keeler Avenue, Bartlesville, Oklahoma to consider and vote on the
following proposal:
Adopt the Agreement and Plan of Merger dated as of November 18, 2001, by
and among Phillips, Conoco Inc., a Delaware corporation, CorvettePorsche
Corp., a Delaware corporation, which will be renamed "ConocoPhillips" upon
completion of the merger and which we refer to as "New Parent," Corvette
Merger Corp., a Delaware corporation and a wholly owned subsidiary of New
Parent, and Porsche Merger Corp., a Delaware corporation and a wholly owned
subsidiary of New Parent.
Pursuant to the merger agreement, Porsche Merger Corp. will merge with and
into Phillips and Corvette Merger Corp. will merge with and into Conoco, with
each of Phillips and Conoco becoming wholly owned subsidiaries of New Parent. At
the time of the merger, each outstanding share of Phillips common stock, par
value $1.25 per share, will be converted into the right to receive one share of
New Parent common stock, par value $0.01 per share, and each outstanding share
of Conoco common stock, par value $.01 per share, will be converted into the
right to receive 0.4677 of a share of New Parent common stock.
We will transact no other business at the special meeting, except for
business properly brought before the special meeting or any adjournment or
postponement of it by the Phillips Board of Directors.
Only Phillips stockholders of record at the close of business on [
], the record date for the special meeting, may vote at the special meeting
and any adjournments or postponements of it. A complete list of Phillips
stockholders of record entitled to vote at the special meeting will be available
for the 10 days before the special meeting at the office of the Secretary for
inspection by Phillips stockholders during ordinary business hours for proper
purposes.
Your vote is very important. Please submit your proxy as soon as possible
to make sure that your shares are represented at the special meeting. To do so,
you may complete and return the enclosed proxy card or you may be able to submit
your proxy or voting instructions by telephone [or over the Internet]. If you
are a stockholder of record of Phillips common stock, you also may cast your
vote in person at the special meeting. If your shares are held in an account at
a brokerage firm or bank, you must instruct them on how to vote your shares. If
you do not vote or do not instruct your broker or bank how to vote, it will have
the same effect as voting against the merger.
FOR MORE INFORMATION ABOUT THE MERGER DESCRIBED ABOVE AND THE OTHER
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, PLEASE REVIEW THE
ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AND THE MERGER AGREEMENT ATTACHED
TO IT AS ANNEX A.
THE PHILLIPS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE ADOPTION OF THE MERGER AGREEMENT.
By Order of the Phillips Board of
Directors,
Dale J. Billam
Secretary
[ ]
Bartlesville, Oklahoma
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 4
Selected Historical Financial Data..................... 8
Selected Unaudited Pro Forma Combined Financial Data... 10
Comparative Per Share Data............................. 11
RISK FACTORS RELATING TO THE MERGER......................... 12
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... 14
THE CONOCO SPECIAL MEETING.................................. 16
Date, Time and Place................................... 16
Purpose of Conoco Special Meeting...................... 16
Conoco Record Date; Shares Entitled To Vote; Quorum.... 16
Vote Required.......................................... 16
Voting by Conoco Directors and Executive Officers...... 16
Voting of Proxies...................................... 16
Revocability of Proxies................................ 17
Solicitation of Proxies................................ 17
Proxies for Participants in Conoco Plans............... 18
THE PHILLIPS SPECIAL MEETING................................ 19
Date, Time and Place................................... 19
Purpose of Phillips Special Meeting.................... 19
Phillips Record Date; Shares Entitled To Vote;
Quorum................................................ 19
Vote Required.......................................... 19
Voting by Phillips Directors and Executive Officers.... 19
Voting of Proxies...................................... 19
Revocability of Proxies................................ 20
Solicitation of Proxies................................ 20
Proxies for Participants in Phillips Savings Plans..... 21
Attending the Special Meeting.......................... 21
THE MERGER.................................................. 22
General Description of the Merger...................... 22
Background to the Merger............................... 22
Reasons for the Merger................................. 25
Recommendation of the Conoco Board of Directors........ 27
Recommendation of the Phillips Board of Directors...... 28
Opinions of Conoco's Financial Advisors................ 30
Opinions of Phillips' Financial Advisors............... 38
Interests of Conoco Directors and Management in the
Merger................................................ 46
Interests of Phillips Directors and Management in the
Merger................................................ 51
Listing of New Parent Capital Stock.................... 54
Dividends.............................................. 54
Material U.S. Federal Income Tax Consequences of the
Merger................................................ 54
Accounting Treatment................................... 56
Regulatory Matters..................................... 57
Appraisal Rights....................................... 58
Resale of New Parent Common Stock...................... 58
Legal Proceedings Related to the Merger................ 59
</Table>
i
<Table>
<Caption>
PAGE
----
THE MERGER AGREEMENT........................................ 59
The Merger............................................. 59
Merger Consideration................................... 59
Procedures for Exchange of Share Certificates;
Fractional Shares..................................... 59
Representations and Warranties......................... 60
Interim Operations of Conoco and Phillips.............. 61
Employee Benefit Matters............................... 62
Effect on Awards Outstanding Under Stock Plans......... 63
"No Solicitation" Covenant............................. 64
Timing of Closing...................................... 65
Conditions to the Completion of the Merger............. 65
Termination of the Merger Agreement.................... 66
Termination Fees....................................... 67
Other Expenses......................................... 68
Indemnification and Insurance.......................... 68
Additional Agreements.................................. 68
Amendment; Extension and Waiver........................ 69
DIRECTORS AND MANAGEMENT FOLLOWING THE MERGER............... 70
Directors.............................................. 70
Committees of the Board of Directors................... 70
Compensation of Directors.............................. 70
Management............................................. 71
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 72
Security Ownership of Certain Beneficial Owners and
Management of Conoco.................................. 72
Security Ownership of Certain Beneficial Owners and
Management of Phillips................................ 73
COMPARATIVE STOCK PRICES AND DIVIDENDS...................... 75
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION............................................... 77
Notes to Unaudited Pro Forma Financial Statements...... 81
DESCRIPTION OF NEW PARENT CAPITAL STOCK..................... 84
Authorized Capital Stock............................... 84
Common Stock........................................... 84
Preferred Stock........................................ 84
Rights Plan............................................ 85
COMPARISON OF STOCKHOLDER RIGHTS............................ 87
LEGAL MATTERS............................................... 97
EXPERTS..................................................... 97
INDEPENDENT AUDITORS........................................ 97
STOCKHOLDER PROPOSALS....................................... 97
Conoco................................................. 97
Phillips............................................... 97
OTHER MATTERS............................................... 97
WHERE YOU CAN FIND MORE INFORMATION......................... 98
REPORT OF INDEPENDENT AUDITORS.............................. F-1
CORVETTEPORSCHE CORP. CONSOLIDATED BALANCE SHEET............ F-2
CORVETTEPORSCHE CORP. NOTE TO CONSOLIDATED BALANCE SHEET.... F-3
</Table>
ii
ANNEXES
Annex A Agreement and Plan of Merger
Annex B Form of Restated Certificate of Incorporation of New Parent
Annex C Form of By-laws of New Parent
Annex D Opinion of Morgan Stanley & Co. Incorporated
Annex E Opinion of Salomon Smith Barney Inc.
Annex F Opinion of Goldman, Sachs & Co.
Annex G Opinion of J.P. Morgan Securities Inc.
Annex H Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
iii
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHEN AND WHERE ARE THE SPECIAL MEETINGS OF STOCKHOLDERS?
A: The special meeting of Conoco stockholders will take place on [date], 2002,
at [address]. The special meeting of Phillips stockholders will take place
on [date], 2002, at the Adams Building, 4th Street and Keeler Avenue,
Bartlesville, Oklahoma.
Q: WHAT STOCKHOLDER APPROVALS ARE REQUIRED TO APPROVE THE MERGER?
A: For both Conoco and Phillips, the affirmative vote of a majority of the
shares outstanding and entitled to vote as of the respective record dates is
required to adopt the merger agreement.
As of the Conoco record date, Conoco directors and officers held and were
entitled to vote less than [ ]% of the Conoco common stock outstanding.
As of the Phillips record date, Phillips directors and officers held and
were entitled to vote less than [ ]% of the Phillips common stock
outstanding.
Q: WHY ARE CONOCO AND PHILLIPS GOING TO MERGE?
A: We believe that the merger will provide substantial strategic and financial
benefits to Conoco and Phillips and their stockholders, including:
- expanded scope and scale to succeed as a major integrated oil company in
the changing marketplace,
- strategic fit and compatibility,
- strong financial position, and
- cost savings.
To review the reasons for the merger in greater detail, see pages [ ]
through [ ].
Q: WHAT WILL HAPPEN IN THE MERGER?
A: Prior to entering into the merger agreement, Conoco and Phillips formed
CorvettePorsche Corp. which will be renamed "ConocoPhillips" upon the
completion of the merger and which we refer to as "New Parent." New Parent,
in turn, formed two merger subsidiaries, Corvette Merger Corp. and Porsche
Merger Corp. Corvette Merger Corp. will merge with and into Conoco and
Porsche Merger Corp. will merge with and into Phillips. As a result:
- Conoco and Phillips will become wholly owned subsidiaries of New Parent,
and
- former Conoco stockholders will hold approximately 43.4%, and former
Phillips stockholders will hold approximately 56.6%, of the outstanding
shares of New Parent common stock.
Q: WHAT WILL BE THE NAME OF THE COMBINED COMPANY AFTER THE MERGER?
A: After the completion of the merger, the name of the new public company will
be "ConocoPhillips."
Q: WHAT WILL I RECEIVE FOR MY SHARES?
A: A Conoco stockholder will receive 0.4677 of a share of New Parent common
stock for each share of Conoco common stock that the stockholder owns, with
cash instead of any fractional shares of New Parent common stock.
A Phillips stockholder will receive one share of New Parent common stock for
each share of Phillips common stock that the stockholder owns.
Example: If a Conoco stockholder currently owns 100 shares of Conoco common
stock, after the merger, the stockholder will be entitled to receive 46
shares of New Parent common stock and an amount in cash equal to the value
of 0.77 of a share of New Parent common stock, based on the closing price
per share of New Parent common stock on the first trading day following the
date on which the merger is completed.
1
Example: If a Phillips stockholder currently owns 100 shares of Phillips
common stock, after the merger, the stockholder will be entitled to receive
100 shares of New Parent common stock.
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: Pursuant to the merger agreement, Conoco and Phillips each are prohibited
from making any changes to their dividend policies prior to the completion
of the merger without the consent of the other. We expect that, after the
completion of the merger, New Parent will adopt a competitive dividend
policy.
Q: WHAT ARE MY U.S. FEDERAL TAX CONSEQUENCES AS A RESULT OF THE MERGER?
A: We have structured the transaction so that it is anticipated that the merger
of Corvette Merger Corp. with and into Conoco and the merger of Porsche
Merger Corp. with and into Phillips each will be a reorganization for U.S.
federal income tax purposes and/or that the mergers, taken together, will
constitute an exchange described in Section 351 of the Internal Revenue Code
of 1986, as amended. Conoco and Phillips will not be obligated to complete
the merger unless they receive legal opinions to this effect. If each of the
merger of Corvette Merger Corp. with and into Conoco and the merger of
Porsche Merger Corp. with and into Phillips is a reorganization for U.S.
federal income tax purposes and/or the mergers, taken together, constitute
an exchange described in Section 351 of the Internal Revenue Code, Conoco
stockholders and Phillips stockholders will not recognize gain or loss for
U.S. federal income tax purposes in the transaction (except with respect to
any cash received instead of fractional shares of New Parent common stock).
You are strongly urged to consult with a tax advisor to determine the
particular U.S. federal, state or local or foreign income or other tax
consequences as of the merger to you.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
document, please complete and sign your proxy card and return it in the
enclosed postage-paid envelope as soon as possible so that your shares may
be represented at your special meeting. You also may submit your proxy by
telephone or over the Internet by following the instructions on your proxy
card.
If you sign, date and send your proxy and do not indicate how you want to
vote, your proxy will be voted for the approval of the proposal.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: Send a later-dated, signed proxy card to your company's Secretary prior to
the date of your special meeting or attend your company's special meeting in
person and vote. You also may revoke your proxy by sending a notice of
revocation to your company's Secretary at the address under "Summary -- The
Companies" on page [ ]. You may also change or revoke your proxy by
telephone or over the Internet, regardless of the procedure used to deliver
your previous proxy.
Q: IF MY BROKER HOLDS MY SHARES IN "STREET NAME," WILL MY BROKER VOTE MY
SHARES?
A: If you do not provide your broker with instructions on how to vote your
street name shares, your broker will not be permitted to vote them on the
merger proposal. You should, therefore, be sure to provide your broker with
instructions on how to vote your shares. Stockholders should check the
voting form provided by their brokers to see if they offer telephone or
Internet voting.
If you do not give voting instructions to your broker, your votes will not
be counted as voting for the merger unless you appear and vote in person at
your special meeting. If your broker holds your shares and you attend the
special meeting, please bring a letter from your broker identifying you as
the beneficial owner of the shares and authorizing you to vote.
Q: WHAT WILL HAPPEN IF I ABSTAIN FROM VOTING OR FAIL TO VOTE?
A: An abstention or failure to vote will have the same effect as a vote against
the merger.
2
Q: WHO ELSE MUST APPROVE THE MERGER?
A: Under the Hart-Scott-Rodino Act of 1976, as amended, Conoco and Phillips may
not complete the merger until they have furnished certain information and
materials to the Antitrust Division of the U.S. Department of Justice and
the U.S. Federal Trade Commission and the applicable waiting period has
expired or been terminated.
Completion of the merger is also subject to approval under the competition
laws of the European Union, Canada and those other regulatory authorities
where the failure to obtain those approvals would have a material adverse
effect on New Parent after completion of the merger.
We have made or intend to make the relevant filings as soon as practicable.
See "The Merger -- Regulatory Matters" on page [ ].
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We expect to complete the merger in the second half of 2002.
Q: SHOULD I SEND IN MY SHARE CERTIFICATES NOW?
A: No. After the merger is completed, we will send Conoco stockholders written
instructions for exchanging their share certificates. The share certificates
of Phillips stockholders immediately prior to the completion of the merger
will be deemed to represent New Parent common stock following the merger.
Phillips stockholders, however, may elect to exchange their Phillips share
certificates for New Parent share certificates at their option.
Q: DO I HAVE APPRAISAL RIGHTS?
A: No. Neither the Conoco stockholders nor the Phillips stockholders will have
appraisal rights under Delaware law as a result of the merger.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the merger or if you need additional copies
of this document or the enclosed proxy card, you should contact:
Conoco stockholders:
Conoco Inc.
600 North Dairy Ashford
Houston, Texas 77079
(281) 293-6800
Attention: Shareholder Relations
e-mail: shareholder.relations@conoco.com
or
Innisfree M&A Incorporated
501 Madison Avenue
New York, New York 10022
Toll free: (800) [ ]
[email: ]
Phillips stockholders:
Phillips Petroleum Company
1234 Adams Building
Bartlesville, Oklahoma 74004
(918) 661-[ ]
Attention: Dale J. Billam, Secretary and Senior Counsel
[e-mail: ]
or
Georgeson Shareholder Communications, Inc.
17 State Street
New York, New York 10004
Toll free: (800) [ ]
[email: ]
Q: WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANIES?
A: You can find more information about Conoco and Phillips from various sources
described under "Where You Can Find More Information" on page [ ].
3
SUMMARY
This summary highlights selected information from this document and may not
contain all the information that is important to you. To understand the merger
fully and for a more complete description of the legal terms of the merger, you
should read carefully this entire document, including the annexes, and the other
documents to which we have referred you. For information on how to obtain the
documents that we have filed with the Securities and Exchange Commission, see
"Additional Information" on the inside front cover of this document and "Where
You Can Find More Information" on page [ ].
Throughout this document when we use the term "New Parent," we are
referring to the newly formed holding company CorvettePorsche Corp., which will
be renamed "ConocoPhillips" upon the completion of the merger. Unless the
context requires otherwise, when we use the term "merger," we are referring to
(1) the merger of Corvette Merger Corp. with and into Conoco, with Conoco being
the surviving corporation, and (2) the merger of Porsche Merger Corp. with and
into Phillips, with Phillips being the surviving corporation, collectively.
THE COMPANIES
CONOCO INC.
600 North Dairy Ashford Road
Houston, Texas 77079
(281) 293-1000
Conoco is an integrated, international energy company with operations in
more than 40 countries. Headquartered in Houston, Texas, Conoco and its wholly
owned subsidiaries had approximately 20,000 employees and $27.7 billion in
assets at September 30, 2001. For additional information about Conoco and its
business, see "Where You Can Find More Information" on page [ ].
PHILLIPS PETROLEUM COMPANY
Phillips Building
4th Street and Keeler Avenue
Bartlesville, Oklahoma 74004
(918) 661-6600
Phillips is an integrated petroleum company with interests around the
world. Headquartered in Bartlesville, Oklahoma, Phillips and its wholly owned
subsidiaries had approximately 38,600 employees and $35.4 billion in assets at
September 30, 2001. For additional information about Phillips and its business,
see "Where You Can Find More Information" on page [ ].
CORVETTEPORSCHE CORP.
600 North Dairy Ashford Road
Houston, Texas 77079
[(281) 293-1000]
Conoco and Phillips formed New Parent solely for the purpose of effecting
the merger and to date New Parent has not conducted any activities other than
those incident to its formation, the execution of the merger agreement and the
preparation of this document. Upon completion of the merger, Conoco and Phillips
will become wholly owned subsidiaries of New Parent and the business of New
Parent will be the businesses currently conducted by Conoco and Phillips.
4
THE MERGER
The merger agreement is attached as Annex A to this document. We encourage
you to read the merger agreement carefully and in its entirety. It is the
principal document governing the merger.
WHAT YOU WILL RECEIVE IN THE MERGER
CONOCO STOCKHOLDERS (PAGE [ ]). In the merger, each share of Conoco
common stock will be converted into the right to receive 0.4677 of a share of
New Parent common stock.
PHILLIPS STOCKHOLDERS (PAGE [ ]). In the merger, each share of Phillips
common stock will be converted into the right to receive one share of New Parent
common stock.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
CONOCO (PAGE [ ]). At its meeting on November 18, 2001, after due
consideration, the Conoco Board of Directors unanimously:
- determined that the merger agreement and the transactions contemplated by
the merger agreement are advisable, fair to and in the best interests of
Conoco stockholders,
- approved the merger agreement, and
- recommended that Conoco stockholders vote for the adoption of the merger
agreement.
PHILLIPS (PAGE [ ]). At its meeting on November 17, 2001, after due
consideration, the Phillips Board of Directors unanimously:
- determined that the merger agreement and the transactions contemplated by
the merger agreement are advisable, fair to and in the best interests of
Phillips stockholders,
- approved the merger agreement, and
- recommended that Phillips stockholders vote for the adoption of the
merger agreement.
TO REVIEW THE BACKGROUND AND REASONS FOR THE MERGER IN GREATER DETAIL, SEE PAGES
[ ] THROUGH [ ].
FAIRNESS OPINIONS OF FINANCIAL ADVISORS
CONOCO (PAGE [ ]). In deciding to approve the merger, the Conoco Board of
Directors considered the oral opinion of Morgan Stanley & Co. Incorporated
delivered on November 18, 2001, and subsequently confirmed in writing, and the
written opinion of Salomon Smith Barney Inc. dated November 18, 2001, that, as
of the date of each opinion and subject to and based on the considerations in
each opinion, the exchange ratio of 0.4677 shares of New Parent common stock for
each share of Conoco common stock in the merger is fair from a financial point
of view to the holders of Conoco common stock. In its analysis of the fairness
of the Conoco exchange ratio, each of Morgan Stanley and Salomon Smith Barney
took into account, among other considerations set forth in its opinion, the
exchange ratio of one share of New Parent common stock for each share of
Phillips common stock in the merger. The written opinions of Morgan Stanley and
Salomon Smith Barney are attached as Annexes D and E, respectively, to this
document. WE ENCOURAGE CONOCO STOCKHOLDERS TO READ EACH OF THESE OPINIONS
CAREFULLY AND IN ITS ENTIRETY.
PHILLIPS (PAGE [ ]). In deciding to approve the merger, the Phillips
Board of Directors considered the oral opinions of Goldman, Sachs & Co., J.P.
Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated,
each delivered on November 17, 2001 and each subsequently confirmed in writing
on November 18, 2001, as to the fairness, from a financial point of view, as of
the date of each opinion, to the holders of Phillips common stock of the
exchange ratio of one share of New Parent common stock for each share of
Phillips common stock relative to the exchange ratio of 0.4677 of a share of New
Parent common stock for each share of Conoco common stock pursuant to the merger
agreement. The written opinions of Goldman Sachs, JPMorgan and Merrill Lynch are
attached as Annexes F, G and H,
5
respectively, to this document. WE ENCOURAGE PHILLIPS STOCKHOLDERS TO READ EACH
OF THESE OPINIONS CAREFULLY AND IN ITS ENTIRETY.
INTERESTS OF DIRECTORS AND MANAGEMENT IN THE MERGER
CONOCO (PAGE [ ]). Conoco stockholders should note that some Conoco
directors and officers have interests in the merger that are different in
certain respects from the interests of other Conoco stockholders. As provided in
the merger agreement, upon the completion of the merger, eight Conoco designees
(including Archie W. Dunham, Chairman and Chief Executive Officer of Conoco) and
eight Phillips designees will become members of the New Parent Board of
Directors. The merger agreement also provides that Mr. Dunham will become
Chairman of New Parent. Conoco, New Parent and Mr. Dunham have entered into an
employment agreement that will become effective upon completion of the merger.
PHILLIPS (PAGE [ ]). Phillips stockholders should note that some Phillips
directors and officers have interests in the merger that are different in
certain respects from the interests of other Phillips stockholders. As provided
in the merger agreement, upon the completion of the merger, eight Phillips
designees (including J. J. Mulva, Chairman and Chief Executive Officer of
Phillips) and eight Conoco designees will become members of the New Parent Board
of Directors. The merger agreement also provides that Mr. Mulva will become
Chief Executive Officer and President of New Parent. Phillips, New Parent and
Mr. Mulva have entered into an employment agreement that will become effective
upon completion of the merger.
CONDITIONS TO THE COMPLETION OF THE MERGER (PAGE [ ])
Each of Conoco's and Phillips' obligation to complete the merger is subject
to the satisfaction or waiver of a number of conditions, including the
following:
- the merger agreement is adopted by the majority of the outstanding Conoco
shares and the majority of the outstanding Phillips shares entitled to
vote on the adoption of the merger agreement,
- no legal prohibition on consummation of the merger is in effect,
- the applicable waiting period under U.S. antitrust laws has expired or
been terminated,
- approvals have been obtained from the relevant foreign antitrust
entities,
- the shares of New Parent common stock have been approved for listing on
the New York Stock Exchange,
- our respective representations and warranties in the merger agreement are
true and correct, to the extent set forth in the merger agreement,
- we have complied with our respective covenants and agreements in the
merger agreement, to the extent set forth in the merger agreement, and
- we each receive an opinion of tax counsel to the effect that for U.S.
federal income tax purposes the merger of Corvette Merger Corp. with and
into Conoco, in the case of the opinion received by Conoco, and the
merger of Porsche Merger Corp. with and into Phillips, in the case of the
opinion received by Phillips, will constitute a reorganization and/or the
mergers, taken together, will constitute an exchange described in Section
351 of the Internal Revenue Code.
6
TERMINATION OF THE MERGER AGREEMENT (PAGE [ ])
Conoco and Phillips can jointly agree to terminate the merger agreement at
any time. Either company may also terminate the merger agreement if:
- the merger is not completed on or before May 18, 2003, so long as the
failure to complete the merger before that date is not the result of the
failure by the terminating company to fulfill any of its obligations
under the merger agreement,
- government actions do not permit the completion of the merger, so long as
the terminating company has used its reasonable best efforts to obtain
all necessary governmental approvals and lift any injunctions,
- either Conoco stockholders or Phillips stockholders fail to adopt the
merger agreement at a duly held special meeting of those stockholders,
- the other company's board of directors fails to recommend that its
stockholders adopt the merger agreement, or changes its recommendation,
or fails to call its special meeting of stockholders,
- the other company breaches or fails to perform any of its
representations, warranties, covenants or other agreements contained in
the merger agreement and the breach or failure cannot be cured on or
before May 18, 2003, or
- prior to the receipt of the approval of its stockholders, it terminates
the merger agreement in connection with a superior proposal as provided
in the merger agreement.
TERMINATION FEES (PAGE [ ])
Conoco and Phillips have each agreed to pay a termination fee of $550
million to the other company if the merger agreement is terminated in the
circumstances described on pages [ ] through [ ].
"NO SOLICITATION" COVENANT (PAGE [ ])
The merger agreement contains detailed provisions prohibiting Conoco and
Phillips from seeking an alternative transaction. The no solicitation covenant
generally prohibits Conoco and Phillips, as well as their officers, directors,
subsidiaries, employees, agents and representatives, from taking any action to
solicit an acquisition proposal as described on page [ ]. The merger agreement
does not, however, prohibit either Conoco or Phillips or its respective Board of
Directors from considering, and potentially recommending, an unsolicited bona
fide written superior proposal from a third party in the circumstances described
on pages [ ] through [ ].
COMPARATIVE MARKET PRICE INFORMATION (PAGE [ ])
Shares of Conoco common stock are listed on the New York Stock Exchange,
and shares of Phillips common stock are listed on the New York Stock Exchange,
the Pacific Exchange and the Toronto Stock Exchange. The following table
presents the last reported sale price per share of Conoco common stock and
Phillips common stock, as reported on the New York Stock Exchange Composite
Transaction reporting system on November 16, 2001, the last full trading day
prior to the public announcement of the merger, and on [ ], the last
trading day for which this information could be obtained prior to the date of
this document.
<Table>
<Caption>
CONOCO PHILLIPS
COMMON COMMON
DATE STOCK STOCK
- ---- ------ ------------
November 16, 2001........................................... $24.30 $51.82
[ ].............................................. [ ] [ ]
</Table>
7
SELECTED HISTORICAL FINANCIAL DATA
Conoco and Phillips are providing the following financial information to
aid you in your analysis of the financial aspects of the merger. The selected
financial data of Conoco has been derived from the audited consolidated
financial statements and related notes of Conoco for each of the years in the
five-year period ended December 31, 2000, and the unaudited consolidated
financial statements for the nine months ended September 30, 2001, and September
30, 2000. The selected financial data of Phillips has been derived from the
audited consolidated financial statements and related notes of Phillips for each
of the years in the five-year period ended December 31, 2000, and the unaudited
consolidated financial statements for the nine months ended September 30, 2001,
and September 30, 2000. This information is only a summary and you should read
it in conjunction with the historical consolidated financial statements of
Conoco and Phillips and the related notes contained in the annual reports and
other information that Conoco and Phillips have previously filed with the
Securities and Exchange Commission. See "Where You Can Find More Information" on
page [ ].
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CONOCO
<Table>
<Caption>
NINE MONTHS ENDED
SEPTEMBER 30 YEARS ENDED DECEMBER 31
----------------- ------------------------------------------
2001 2000 2000 1999 1998 1997 1996
------- ------- ------ ------ ------ ------ ------
MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS
Sales and other operating revenues....... $30,345 28,468 38,737 27,039 22,796 25,796 24,230
Income before extraordinary item and
cumulative effect of change in
accounting principle................... 1,449 1,352 1,902 744 450 1,097 863
Per common share:
Basic................................ 2.32 2.16 3.05 1.19 .95 2.51 1.98
Diluted.............................. 2.28 2.14 3.00 1.17 .95 2.51 1.98
Net Income............................... 1,462 1,352 1,902 744 450 1,097 863
Per common share:
Basic................................ 2.34 2.16 3.05 1.19 .95 2.51 1.98
Diluted.............................. 2.30 2.14 3.00 1.17 .95 2.51 1.98
Total assets............................. 27,683 18,043 18,127 16,375 16,075 17,062 15,226
Long-term debt........................... 8,040 4,266 4,138 4,080 4,689 1,556 2,388
Cash dividends declared per common
share*................................. 0.57 0.57 0.76 0.71 -- -- --
</Table>
- ---------------
* Dividends were declared on a quarterly basis throughout 2001, 2000 and 1999.
The first quarter dividend of 1999 of $0.14 per share was determined on a pro
rata basis covering the period from October 27, 1998, the date of Conoco's
initial public offering, to December 31, 1998, and is equivalent to $0.19 per
share for a full quarter.
8
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PHILLIPS
<Table>
<Caption>
NINE MONTHS ENDED
SEPTEMBER 30 YEARS ENDED DECEMBER 31
------------------ ------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- ------- ------ ------ ------ ------ ------
MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS
Sales and other operating revenues........ $16,741 16,578 22,690* 15,396* 13,208* 16,545* 16,991*
Income before extraordinary item and
cumulative effect of change in
accounting principle.................... 1,481 1,118 1,862 609 237 959 1,303
Per common share:
Basic................................. 5.63 4.40 7.32 2.41 .92 3.64 4.96
Diluted............................... 5.59 4.37 7.26 2.39 .91 3.61 4.91
Net Income................................ 1,499 1,118 1,862 609 237 959 1,303
Per common share:
Basic................................. 5.70 4.40 7.32 2.41 .92 3.64 4.96
Diluted............................... 5.66 4.37 7.26 2.39 .91 3.61 4.91
Pro forma income before extraordinary item
assuming the new turnaround accounting
method is applied retroactively**....... 1,481 1,106 1,851 609 242 971 1,307
Per common share:
Basic................................. 5.63 4.35 7.27 2.41 .94 3.69 4.97
Diluted............................... 5.59 4.32 7.22 2.39 .93 3.66 4.93
Pro forma net income assuming the new
turnaround accounting method is applied
retroactively**......................... 1,471 1,106 1,851 609 242 971 1,307
Per common share:
Basic................................. 5.59 4.35 7.27 2.41 .94 3.69 4.97
Diluted............................... 5.55 4.32 7.22 2.39 .93 3.66 4.93
Total assets.............................. 35,350 20,580 20,509 15,201 14,216 13,860 13,548
Long-term debt............................ 7,838 7,509 6,622 4,271 4,106 2,775 2,555
Mandatorily redeemable preferred
securities of Phillips 66 Capital Trusts
I and II................................ 650 650 650 650 650 650 300
Cash dividends declared per common
share................................... 1.04 1.02 1.36 1.36 1.36 1.34 1.25
</Table>
- ---------------
* Restated to include excise taxes on the sale of petroleum products.
** Reflects the pro forma effects of retroactive application of the change in
accounting method for major maintenance turnarounds from the
accrue-in-advance method to the expense-as-incurred method.
9
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following selected unaudited pro forma combined financial data has been
derived from and should be read together with the unaudited pro forma combined
financial statements and related notes on pages [ ] through [ ]. This
information is based on the historical consolidated balance sheets and related
adjusted historical consolidated statements of income of Conoco and Phillips,
and gives effect to the merger using the purchase method of accounting for
business combinations. Conoco's historical income statements have been adjusted
for the pro forma impact of the acquisition of Gulf Canada Resources Limited
effective July 1, 2001, and Phillips' historical income statements have been
adjusted to reflect the pro forma impact of the acquisition of Tosco Corporation
on September 14, 2001. In addition, Phillips' historical income statement for
2000 has been adjusted to reflect the pro forma impact of the acquisition of
ARCO's Alaska businesses and the formation of the Duke Energy Field Services and
Chevron Phillips Chemical Company joint ventures during 2000.
The companies may have performed differently had they always been combined.
You should not rely on the selected unaudited pro forma combined financial data
as being indicative of the historical results that would have been achieved had
the companies always been combined or the future results that New Parent will
experience after the merger.
<Table>
<Caption>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2001 DECEMBER 31, 2000
------------------ -----------------
MILLIONS OF DOLLARS EXCEPT
PER SHARE AMOUNTS
INCOME STATEMENT DATA
Sales and other operating revenues.......................... $68,966 89,570
Income before extraordinary item and cumulative effect of
change in accounting principle............................ 3,581 4,535
Income before extraordinary item and cumulative effect of
change in accounting principle per common share
Basic.................................................. 5.32 6.76
Diluted................................................ 5.26 6.67
</Table>
<Table>
<Caption>
AT SEPTEMBER 30, 2001
---------------------
BALANCE SHEET DATA
Total assets.............................................. $73,990
Long-term debt............................................ 15,878
</Table>
10
COMPARATIVE PER SHARE DATA
Set forth below are net income, cash dividends and book value per common
share amounts for Conoco and Phillips on a historical basis, Conoco and Phillips
on a pro forma combined basis per Phillips common share, and Conoco and Phillips
on a pro forma combined basis per Conoco-equivalent common share.
The pro forma combined data were derived by combining the adjusted
historical consolidated financial information of Conoco and Phillips using the
purchase method of accounting for business combinations as described under
"Unaudited Pro Forma Combined Financial Information." Conoco's historical income
statements have been adjusted for the pro forma impact of the acquisition of
Gulf Canada effective July 1, 2001, and Phillips' historical income statements
have been adjusted to reflect the pro forma impact of the acquisition of Tosco
on September 14, 2001. In addition, Phillips' historical income statement for
2000 has been adjusted to reflect the pro forma impact of the acquisition of
ARCO's Alaska businesses and the formation of the Duke Energy Field Services and
Chevron Phillips Chemical Company joint ventures during 2000.
The Conoco-equivalent common share pro forma information shows the effect
of the merger from the perspective of an owner of Conoco common stock. The
information was computed by multiplying the New Parent pro forma information by
the exchange ratio of 0.4677.
You should read the information below together with our historical
financial statements and related notes contained in the annual reports and other
information that we have filed with the Securities and Exchange Commission and
that we have incorporated by reference in this document. See "Where You Can Find
More Information" on page [ ]. The unaudited pro forma combined data below are
for illustrative purposes only. The financial results may have been different
had the companies always been combined. You should not rely on this information
to be indicative of the historical results that would have been achieved had the
companies always been combined or the future results that New Parent will
experience after the merger.
<Table>
<Caption>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2001 DECEMBER 31, 2000
------------------ -----------------
Conoco historical data, per common share
Net income -- basic....................................... $ 2.34 3.05
Net income -- diluted..................................... 2.30 3.00
Cash dividends............................................ 0.57 0.76
Book value at end of period............................... 10.61 9.03
Phillips historical data, per common share
Net income -- basic....................................... 5.70 7.32
Net income -- diluted..................................... 5.66 7.26
Cash dividends............................................ 1.04 1.36
Book value at end of period............................... 37.87 23.86
Conoco and Phillips combined pro forma data per Phillips
common share
Income before extraordinary item and cumulative effect of
accounting change -- basic............................. 5.32 6.76
Income before extraordinary item and cumulative effect of
accounting change -- diluted........................... 5.26 6.67
Book value at end of period............................... 44.97 --
Phillips and Conoco combined pro forma data, per Conoco-
equivalent common share
Income before extraordinary item and cumulative effect of
accounting change -- basic............................. 2.49 3.16
Income before extraordinary item and cumulative effect of
accounting change -- diluted........................... 2.46 3.12
Book value at end of period............................... 21.03 --
</Table>
11
RISK FACTORS RELATING TO THE MERGER
In addition to the other information included or incorporated by reference
in this document (including the matters addressed in "Cautionary Statement
Concerning Forward-Looking Statements" on page [ ]), Conoco stockholders and
Phillips stockholders should consider carefully the matters described below in
determining whether to vote in favor of the adoption of the merger agreement.
THE VALUE OF THE SHARES OF NEW PARENT COMMON STOCK THAT YOU RECEIVE UPON THE
COMPLETION OF THE MERGER MAY BE LESS THAN THE VALUE OF YOUR SHARES OF CONOCO
COMMON STOCK OR PHILLIPS COMMON STOCK AS OF THE DATE OF THE MERGER AGREEMENT OR
ON THE DATES OF THE SPECIAL MEETINGS.
Upon completion of the merger, all shares of Conoco common stock and
Phillips common stock will be converted into the right to receive shares of New
Parent common stock. The ratios at which the shares will be converted are fixed,
and there will be no adjustment for changes in the market price of either Conoco
common stock or Phillips common stock. Neither company is permitted to walk away
from the merger or resolicit the vote of its stockholders solely because of
changes in the market price of either company's common stock.
There may be a significant amount of time between the dates when the Conoco
stockholders and Phillips stockholders vote on the merger agreement at their
special meetings and the date when the merger is completed. As a result, the
relative or absolute prices of shares of Conoco common stock and Phillips common
stock may vary significantly between the dates of the merger agreement, this
document, the special meetings and the completion of the merger. These
variations may be caused by, among other factors, changes in the businesses,
operations, results and prospects of our companies, market expectations of the
likelihood that the merger will be completed and the timing of its completion,
the prospects for our post-merger operations, the effect of any conditions or
restrictions imposed on or proposed with respect to the combined company by
regulators, and general market and economic conditions.
In addition, it is impossible to predict accurately the market price of the
New Parent common stock to be received by Conoco stockholders and Phillips
stockholders after the completion of the merger. Accordingly, the prices of
Conoco common stock and Phillips common stock on the dates of the special
meetings may not be indicative of their prices immediately prior to the
completion of the merger or the price of New Parent common stock after the
merger is completed.
THE INTEGRATION OF CONOCO AND PHILLIPS FOLLOWING THE MERGER WILL PRESENT
SIGNIFICANT CHALLENGES THAT MAY RESULT IN THE COMBINED COMPANY NOT OPERATING AS
EFFECTIVELY AS EXPECTED OR IN A FAILURE TO ACHIEVE THE ANTICIPATED POTENTIAL
BENEFITS OF THE MERGER.
Conoco and Phillips will face significant challenges in consolidating
functions, integrating their organizations, procedures and operations in a
timely and efficient manner and retaining key Conoco and Phillips personnel. The
integration of Conoco and Phillips will be complex and time-consuming, and the
managements of Conoco and Phillips will have to dedicate substantial effort to
it. These efforts could divert management's focus and resources from other
strategic opportunities and from operational matters during the integration
process.
THE MERGER IS SUBJECT TO THE RECEIPT OF CONSENTS AND APPROVALS FROM GOVERNMENT
ENTITIES THAT COULD DELAY COMPLETION OF THE MERGER OR IMPOSE CONDITIONS THAT
COULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMBINED COMPANY OR CAUSE
ABANDONMENT OF THE MERGER.
Completion of the merger is conditioned upon the expiration or termination
of the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, which we refer to as the HSR Act, and the
receipt of consents, orders, approvals or clearances, as required, under the
antitrust laws of the European Commission, Canada and those other regulatory
authorities where the failure to obtain those approvals would have a material
adverse effect on New Parent after completion of the merger. A substantial delay
in obtaining satisfactory approvals or the imposition of unfavorable terms
12
or conditions in the approvals could have an adverse effect on the business,
financial condition or results of operations of Conoco or Phillips, or may cause
the abandonment of the merger.
ESTIMATES OF COST SAVINGS AND COST SAVING COMPONENTS ARE INHERENTLY UNCERTAIN,
AND THERE CAN BE NO ASSURANCE AS TO THE ACCURACY OF THESE ESTIMATES.
The cost savings estimates are based on a number of assumptions, including
that the combined company will be able to implement necessary cost saving
programs such as headcount reductions, consolidation of geographically proximate
facilities and elimination of duplicative administrative programs within a
defined period. In addition, the cost savings estimates assume that the combined
company will be able to realize merger efficiencies such as procurement
economies resulting from the increased size of the combined company.
13
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus, including information incorporated
by reference in this joint proxy statement/prospectus (see "Where You Can Find
More Information" on page [ ]), contains certain forward-looking statements
with respect to the financial condition, results of operations, plans,
objectives, future performance and businesses of each of Conoco, Phillips and
New Parent, as well as certain information relating to the merger, including,
without limitation:
- statements relating to the synergies and accretion to reported earnings
estimated to result from the merger;
- statements relating to revenue, income and operations of the combined
company after the merger; and
- statements preceded by, followed by or that include the words "believes,"
"expects," "anticipates," "estimates," "intends," "plans," "projects" or
similar expressions.
The managements of Conoco and Phillips believe that these forward-looking
statements are reasonable; however, you should not place undue reliance on these
statements, as they are based on our managements' current expectations and
beliefs and are subject to a number of factors and uncertainties that could
cause actual results to differ materially from those described in the
forward-looking statements. The following factors, among others, could cause
actual results to differ materially from those described in the forward-looking
statements:
- the risk factors described under "Risk Factors Relating to the Merger;"
- changes in the businesses, operations, results and prospects of our
companies;
- worldwide crude oil or natural gas prices, which are outside the control
of Conoco and Phillips, may be lower than expected;
- revenues following the merger may be lower than expected;
- expected cost savings from the merger may not be fully realized or
realized within the expected time frame;
- market expectations of the likelihood that the merger will be completed
and the timing of its completion;
- the effect of any conditions or restrictions imposed on or proposed with
respect to the combined company by regulators;
- the prospects of post-merger operations;
- costs or difficulties related to the integration of the businesses of
Conoco and Phillips may be greater than expected;
- general economic conditions, either internationally or nationally or in
the jurisdictions in which Conoco and Phillips are doing business, may be
less favorable than expected;
- legislative or regulatory changes may adversely affect the businesses in
which Conoco and Phillips are engaged;
- there may be environmental risks and liability under U.S. federal and
state and foreign environmental laws and regulations;
- changes may occur in the securities markets; and
- other economic, business, competitive and/or regulatory factors may
affect Conoco's and Phillips' businesses generally as described in
Conoco's and Phillips' filings with the Securities and Exchange
Commission.
14
Except for their ongoing obligations to disclose material information under
U.S. federal securities laws, none of New Parent, Conoco and Phillips undertakes
any obligation to release publicly any revisions to any forward-looking
statements, to report events or circumstances after the date of this document,
or to report the occurrence of unanticipated events.
15
THE CONOCO SPECIAL MEETING
We are furnishing this joint proxy statement/prospectus to Conoco
stockholders as part of the solicitation of proxies by the Conoco Board of
Directors for use at the Conoco special meeting.
DATE, TIME AND PLACE
Conoco will hold the Conoco special meeting on [Day], [Date], at [Time],
local time, at [Address].
PURPOSE OF CONOCO SPECIAL MEETING
At the Conoco special meeting, we are asking holders of record of Conoco
common stock to consider and vote on a proposal to adopt the merger agreement by
and among Conoco, Phillips, New Parent, Corvette Merger Corp. and Porsche Merger
Corp. See "The Merger" and "The Merger Agreement."
The Conoco Board of Directors has unanimously determined that the merger
agreement and the transactions contemplated by the merger agreement are
advisable, fair to, and in the best interests of Conoco stockholders and has
approved the merger agreement.
THE CONOCO BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CONOCO
STOCKHOLDERS VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.
CONOCO RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
Only holders of record of Conoco common stock at the close of business on
[ ], the Conoco record date, are entitled to notice of and to vote at the
Conoco special meeting. On the Conoco record date approximately [ ] shares of
Conoco common stock were issued and outstanding and held by approximately [ ]
holders of record. A quorum will be present at the Conoco special meeting if the
holders of a majority of the shares of Conoco common stock outstanding and
entitled to vote on the Conoco record date are present, in person or by proxy.
If a quorum is not present at the Conoco special meeting, we expect that the
Conoco special meeting will be adjourned to solicit additional proxies. Holders
of record of Conoco common stock on the Conoco record date are entitled to one
vote per share at the Conoco special meeting on the proposal to adopt the merger
agreement.
VOTE REQUIRED
The adoption of the merger agreement by Conoco stockholders requires the
affirmative vote of the holders of a majority of the shares outstanding and
entitled to vote at the Conoco special meeting as of the Conoco record date,
either in person or by proxy, voting as a single class.
VOTING BY CONOCO DIRECTORS AND EXECUTIVE OFFICERS
At the close of business on the Conoco record date, Conoco directors and
executive officers owned and were entitled to vote less than [ ]% of the Conoco
common stock outstanding on that date. Each Conoco director and executive
officer has indicated his or her present intention to vote, or cause to be
voted, the Conoco common stock owned by him or her for the adoption of the
merger agreement.
VOTING OF PROXIES
All shares represented by properly executed proxies received in time for
the Conoco special meeting will be voted at the Conoco special meeting in the
manner specified by the stockholders giving those proxies. Properly executed
proxies that do not contain voting instructions will be voted for the adoption
of the merger agreement.
In addition to manually executing and returning a proxy by mail, Conoco
stockholders may submit a proxy by telephone or over the Internet. If submitting
a proxy by telephone or over the Internet, the stockholder should dial the
toll-free number or access the Internet address, in each case, as indicated on
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the stockholder's proxy card. The stockholder will then be prompted to enter the
control number printed on his or her proxy card and to follow the subsequent
instructions.
Conoco common stock represented at the Conoco special meeting but not
voting, including Conoco common stock for which proxies have been received but
for which holders of shares have abstained, will be treated as present at the
Conoco special meeting for purposes of determining the presence or absence of a
quorum for the transaction of all business.
Only shares affirmatively voted for the adoption of the merger agreement,
including properly executed proxies that do not contain voting instructions,
will be counted as favorable votes for the proposal. AN ABSTENTION OR FAILURE TO
VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE ADOPTION OF THE MERGER
AGREEMENT. Also, under New York Stock Exchange rules, brokers that hold shares
of Conoco common stock in street name for customers that are the beneficial
owners of those shares may not give a proxy to vote those shares without
specific instructions from those customers. If a Conoco stockholder owns shares
through a broker and attends the Conoco special meeting, the stockholder should
bring a letter from that stockholder's broker identifying that stockholder as
the beneficial owner of the shares and authorizing the stockholder to vote.
The persons named as proxies by a Conoco stockholder may vote for one or
more adjournments of the Conoco special meeting, including adjournments to
permit further solicitations of proxies. No proxy voted against the proposal to
adopt the merger agreement will be voted in favor of any adjournment.
Conoco does not expect that any matter other than the proposal to adopt the
merger agreement will be brought before the Conoco special meeting. If, however,
other matters are properly presented at the Conoco special meeting, the persons
named as proxies will vote in accordance with the recommendation of the Conoco
Board of Directors.
REVOCABILITY OF PROXIES
Submitting a proxy on the enclosed form, by telephone or over the Internet
does not preclude a Conoco stockholder from voting in person at the Conoco
special meeting. A Conoco stockholder may revoke a proxy at any time before it
is voted by filing with Conoco a duly executed revocation of proxy, by
submitting a duly executed proxy or telephone or Internet proxy to Conoco with a
later date or by appearing at the Conoco special meeting and voting in person.
Conoco stockholders may revoke a proxy by any of these methods, regardless of
the method used to deliver a stockholder's previous proxy. Attendance at the
Conoco special meeting without voting will not itself revoke a proxy.
SOLICITATION OF PROXIES
Conoco and Phillips will share equally the expenses incurred in connection
with the printing and mailing of this joint proxy statement/prospectus. In
addition to solicitation by mail, the directors, officers and employees of
Conoco and its subsidiaries, who will not be specially compensated, may solicit
proxies from Conoco stockholders by telephone or other electronic means or in
person. Arrangements will also be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of shares held of record by these persons,
and Conoco will reimburse them for their reasonable out-of-pocket expenses.
Conoco will mail a copy of this joint proxy statement/prospectus to each
holder of record of Conoco common stock on the Conoco record date.
You should not send in any Conoco share certificates with your proxy card.
A letter of transmittal with instructions for the surrender of your Conoco share
certificates will be mailed to you as soon as practicable after completion of
the merger.
Conoco has retained Innisfree M&A Incorporated to assist in the
solicitation of proxies from banks, brokerage firms, nominees, institutional
holders and individual investors for a fee of $50,000 plus reimbursement for
expenses.
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PROXIES FOR PARTICIPANTS IN CONOCO PLANS
If you are a participant or eligible beneficiary in the Thrift Plan for
Employees of Conoco or the Thrift Plan for Retail Employees of Conoco, you will
receive combined voting instructions for those holdings in addition to the
voting instructions you will receive for your individual holdings. If you are a
record holder of Conoco common stock or a participant in any eligible stock
plans for employees outside the United States, you will receive a separate proxy
card for each of these holdings. Please complete, sign and mail all proxy cards
you receive, or submit a proxy for all of your holdings by telephone or over the
Internet, to ensure that all of your shares are represented at the Conoco
special meeting. An independent fiduciary for the thrift plans will direct the
voting, in its discretion, of all shares held in the thrift plans for which no
voting instructions are received by [ ], 2002.
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THE PHILLIPS SPECIAL MEETING
We are furnishing this joint proxy statement/prospectus to Phillips
stockholders as part of the solicitation of proxies by the Phillips Board of
Directors for use at the Phillips special meeting.
DATE, TIME AND PLACE
Phillips will hold its special meeting on [Day], [Date], 2002, at [Time],
local time, at the Adams Building, 4th Street and Keeler Avenue, Bartlesville,
Oklahoma.
PURPOSE OF PHILLIPS SPECIAL MEETING
At the Phillips special meeting, we are asking holders of record of
Phillips common stock to consider and vote on a proposal to adopt the merger
agreement by and among Conoco, Phillips, New Parent, Corvette Merger Corp. and
Porsche Merger Corp. See "The Merger" and "The Merger Agreement."
The Phillips Board of Directors has unanimously determined that the merger
agreement and the transactions contemplated by the merger agreement are
advisable, fair to, and in the best interests of Phillips stockholders and has
approved the merger agreement.
THE PHILLIPS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PHILLIPS
STOCKHOLDERS VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.
PHILLIPS RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
Only holders of record of Phillips common stock at the close of business on
[ ], the Phillips record date, are entitled to notice of and to vote at the
Phillips special meeting. On the Phillips record date, approximately [ ] shares
of Phillips common stock were issued and outstanding and held by approximately
[ ] holders of record. A quorum will be present at the Phillips special meeting
if holders of a majority of the shares of Phillips common stock outstanding and
entitled to vote on the Phillips record date are present, in person or by proxy.
If a quorum is not present at the Phillips special meeting, we expect that the
Phillips special meeting will be adjourned to solicit additional proxies.
Holders of record of Phillips common stock on the Phillips record date are
entitled to one vote per share at the Phillips special meeting on the proposal
to adopt the merger agreement.
VOTE REQUIRED
The adoption of the merger agreement by Phillips stockholders requires the
affirmative vote of the holders of a majority of the shares outstanding and
entitled to vote at the Phillips special meeting as of the Phillips record date,
either in person or by proxy, voting as a single class.
VOTING BY PHILLIPS DIRECTORS AND EXECUTIVE OFFICERS
At the close of business on the Phillips record date, Phillips directors
and executive officers owned and were entitled to vote less than [ ]% of the
Phillips common stock outstanding on that date. Each Phillips director and
executive officer has indicated his or her present intention to vote, or cause
to be voted, the Phillips common stock owned by him or her for the adoption of
the merger agreement.
VOTING OF PROXIES
All shares represented by properly executed proxies received in time for
the Phillips special meeting will be voted at the Phillips special meeting in
the manner specified by the stockholders giving those proxies. Properly executed
proxies that do not contain voting instructions will be voted for the adoption
of the merger agreement.
In addition to manually executing and returning a proxy by mail, Phillips
stockholders may submit a proxy vote by telephone [or over the Internet]. If
submitting a proxy by telephone [or over the Internet], the stockholder should
dial the toll-free number [or access the Internet address, in each case] as
indicated
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on the stockholder's proxy card. The stockholder will then be prompted to enter
the control number printed on his or her proxy card and to follow the subsequent
instructions.
Phillips common stock represented at the Phillips special meeting but not
voting, including Phillips common stock for which proxies have been received but
for which holders of shares have abstained, will be treated as present at the
Phillips special meeting for purposes of determining the presence or absence of
a quorum for the transaction of all business.
Only shares affirmatively voted for the adoption of the merger agreement,
including properly executed proxies that do not contain voting instructions,
will be counted as favorable votes for the proposals. AN ABSTENTION OR FAILURE
TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE ADOPTION OF THE MERGER
AGREEMENT. Also, under New York Stock Exchange rules, brokers that hold Phillips
common stock in street name for customers that are the beneficial owners of
those shares may not give a proxy to vote those shares without specific
instructions from those customers. If a Phillips stockholder owns shares through
a broker and attends the Phillips special meeting, the stockholder should bring
a letter from that stockholder's broker identifying that stockholder as the
beneficial owner of the shares and authorizing the stockholder to vote.
The persons named as proxies by a Phillips stockholder may vote for one or
more adjournments of the Phillips special meeting, including adjournments to
permit further solicitations of proxies. No proxy voted against the proposal to
adopt the merger agreement will be voted in favor of any adjournment.
Phillips does not expect that any matter other than the proposal to adopt
the merger agreement will be brought before the Phillips special meeting. If,
however, other matters are properly presented at the Phillips special meeting,
the persons named as proxies will vote in accordance with the recommendation of
the Phillips Board of Directors.
REVOCABILITY OF PROXIES
Submitting a proxy on the enclosed form, by telephone [or over the
Internet] does not preclude a Phillips stockholder from voting in person at the
Phillips special meeting. A Phillips stockholder may revoke a proxy at any time
before it is voted by filing with Phillips a duly executed revocation of proxy,
by submitting a duly executed proxy or telephone [or Internet] proxy to Phillips
with a later date or by appearing at the Phillips special meeting and voting in
person. Phillips stockholders may revoke a proxy by any of these methods,
regardless of the method used to deliver a stockholder's previous proxy.
Attendance at the Phillips special meeting without voting will not itself revoke
a proxy.
SOLICITATION OF PROXIES
Conoco and Phillips will share equally the expenses incurred in connection
with the printing and mailing of this joint proxy statement/prospectus. In
addition to solicitation by mail, the directors, officers and employees of
Phillips and its subsidiaries, who will not be specially compensated, may
solicit proxies from Phillips stockholders by telephone or other electronic
means or in person. Arrangements will also be made with brokerage houses and
other custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of shares held of record by these persons,
and Phillips will reimburse them for their reasonable out-of-pocket expenses.
Phillips will mail a copy of this joint proxy statement/prospectus to each
holder of record of Phillips common stock on the Phillips record date.
You should not send in any Phillips share certificates with your proxy
card. Phillips share certificates immediately prior to the completion of merger
will be deemed to represent New Parent common stock following the merger.
Phillips stockholders, however, may elect to exchange their Phillips share
certificates for New Parent share certificates, at their option.
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Phillips has retained Georgeson Shareholder Communications, Inc. to assist
in the solicitation of proxies from banks, brokerage firms, nominees,
institutional holders and individual investors for a fee of $40,000 plus
reimbursement for expenses.
PROXIES FOR PARTICIPANTS IN PHILLIPS SAVINGS PLANS
If you are a participant or eligible beneficiary in a Phillips savings
plan, you will receive a voting instruction card from the trustee of that
Phillips savings plan with respect to shares attributable to your account.
Shares of Phillips common stock held by the trustees of the Phillips savings
plans will be voted by the respective trustees in accordance with instructions
from participants and eligible beneficiaries. Shares held in Phillips' domestic
savings plans other than the Retirement Savings Plan, or RSP, for which no
instructions are received, including unallocated shares in the Long-Term Stock
Savings Plan, will be voted by the respective trustees in the same manner and
proportion as instructed by eligible employee participants. Shares held in
Phillips' international savings plans for which no instructions are received
will be voted by the respective trustees in the same manner and proportion as
the shares for which instructions are received. Shares held in the RSP for which
no instructions are received are voted by the trustee in its discretion.
Trustees of the Phillips international savings plans, other than the Irish
plan, will receive a voting instruction card to instruct the trustee of the
Phillips Compensation and Benefits Trust, which we refer to as the "CBT", to
vote the shares of Phillips common stock held by the CBT for which the
international savings plan trustees are authorized to give voting instructions
in the same manner and proportion as shares held in the plan for which Phillips
international savings plan trustees receive instructions from plan participants.
If you are a regular employee eligible to give voting instructions under the
CBT, you will receive a voting instruction card from the trustee of the CBT.
Shares of Phillips common stock held by the CBT, other than those for which the
trustees of the international savings plans are authorized to give instructions,
will be voted by the CBT trustee in accordance with instructions from Phillips
employees in the same manner and proportion as instructed by eligible employee
participants. Voting instructions to the trustees of the Phillips international
savings plans and the CBT may be either in writing or by means of the respective
plan's or trust's telephone [or Internet] voting procedures.
ATTENDING THE SPECIAL MEETING
If you are a holder of record and plan to attend the Phillips special
meeting, please indicate this when you vote. The lower portion of the proxy card
will be your admission ticket. IF YOU ARE A BENEFICIAL OWNER OF PHILLIPS COMMON
STOCK HELD BY A BROKER, BANK, OR OTHER NOMINEE, YOU WILL NEED PROOF OF OWNERSHIP
TO BE ADMITTED TO THE PHILLIPS SPECIAL MEETING. A recent brokerage or benefit
plan statement or a letter from a bank or broker are examples of proof of
ownership. If you want to vote your Phillips common stock held in nominee name
in person, you must get a written proxy in your name from the broker, bank, or
other nominee that holds your shares. If you are an employee, your employee I.D.
badge will serve as your admission ticket.
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THE MERGER
The discussion in this joint proxy statement/prospectus of the merger and
the principal terms of the merger agreement dated as of November 18, 2001, by
and among Conoco, Phillips, New Parent, Corvette Merger Corp. and Porsche Merger
Corp., is subject to, and is qualified in its entirety by reference to, the
merger agreement, a copy of which is attached as Annex A to this joint proxy
statement/prospectus and is incorporated in this joint proxy
statement/prospectus by reference.
GENERAL DESCRIPTION OF THE MERGER
Pursuant to the merger agreement, Porsche Merger Corp. will merge with and
into Phillips and Corvette Merger Corp. will merge with and into Conoco, with
each of Phillips and Conoco surviving as wholly owned subsidiaries of New
Parent. In the merger, each outstanding share of Conoco common stock, par value
$0.01 per share, will be converted into the right to receive 0.4677 of a share
of New Parent common stock, par value $0.01 per share, and each outstanding
share of Phillips common stock, par value $1.25 per share, will be converted
into the right to receive one share of New Parent common stock. As a result,
- Conoco and Phillips will become wholly owned subsidiaries of New Parent,
and
- former Conoco stockholders will hold approximately 43.4%, and former
Phillips stockholders will hold approximately 56.6%, of the outstanding
shares of New Parent common stock.
BACKGROUND TO THE MERGER
The oil and gas industry has experienced significant consolidation in
recent years. Beginning with the merger of British Petroleum and Amoco Corp. in
1998, the consolidation continued with the merger of Exxon Corp. and Mobil Oil
Corp. in 1999, the merger of Total Fina S.A. with Elf Aquitaine in 2000, the
acquisition of Atlantic Richfield Co. by BP Amoco p.l.c. in 2000, the merger of
Chevron Corporation and Texaco Inc. in 2001 and many smaller transactions.
In June 2000, Archie W. Dunham, Chairman of the Board, President and Chief
Executive Officer of Conoco, contacted J.J. Mulva, Chairman of the Board and
Chief Executive Officer of Phillips, regarding a possible merger of equals of
the two companies. Several meetings and discussions ensued during the summer of
2000. In October 2000, Mr. Dunham proposed terms with respect to valuation,
board size and composition, headquarters' location, company name and transaction
structure. Mr. Dunham also proposed that he would serve as Chairman of the
Board, and that Mr. Mulva would serve as President and Chief Executive Officer,
of the combined company and that the two of them would be jointly responsible
for the selection, responsibilities, compensation and removal of the executive
officers, management structure, long-range plans, major acquisitions and
divestitures and major capital structure changes. However, Conoco and Phillips
could not reach agreement on key terms and discussions were terminated in late
October.
Following the termination of talks between Conoco and Phillips, each of
Conoco and Phillips pursued alternative strategies to grow and increase
shareholder value. Conoco acquired Gulf Canada Resources Limited in July 2001,
and Phillips integrated Atlantic Richfield Co.'s Alaska production assets that
Phillips had acquired in April 2000 and acquired Tosco Corporation in September
2001.
Following its acquisition of Tosco, Phillips again examined a number of
potential strategic business opportunities in the upstream sector. Based on
management analyses, the Phillips Board of Directors concluded that a business
combination with Conoco presented the best strategic opportunity for Phillips
and its stockholders.
On September 10, 2001, at its regular meeting, the Phillips Board of
Directors authorized Mr. Mulva to contact Mr. Dunham to initiate a discussion
about a possible business combination between Phillips and Conoco.
Later in the week of September 10, 2001, Mr. Mulva's office contacted Mr.
Dunham's office and a meeting between Messrs. Dunham and Mulva was scheduled for
September 28, 2001.
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On September 28, Mr. Dunham and Mr. Mulva met in Oklahoma City. At that
meeting Mr. Mulva outlined his proposal for a business combination. Mr. Mulva
also proposed that the selection of other executive officers for the combined
company be from the existing executives of Conoco and Phillips on the basis of
merit and that the name of the combined company be determined later. Mr. Dunham
and Mr. Mulva also discussed possible headquarters and other significant
locations for the combined company.
On October 8, 2001, at the regular meeting of the Phillips Board of
Directors, Mr. Mulva reported on his meeting with Mr. Dunham. The Phillips Board
of Directors authorized Mr. Mulva to continue to negotiate the terms of a
possible merger of equals with Mr. Dunham. Throughout the period from October 3
through November 17, Mr. Mulva had regular telephone conversations with the
members of the Phillips Board of Directors, advising them of the status of the
merger discussions.
On October 8, 2001, Mr. Dunham met with the Conoco Executive Committee and
discussed the possibility of a combination with Phillips on terms comparable to
those proposed by Mr. Dunham in October of 2000. The Executive Committee was
supportive of continued discussions.
On October 11, 2001, Mr. Dunham and Mr. Mulva had a follow-up conversation
by telephone in which they further discussed the proposals made by Mr. Mulva at
their meeting on September 28, 2001, and agreed to meet in Houston on October
16, 2001.
On October 16, 2001, Mr. Dunham and Mr. Mulva met in Houston to discuss
each company's vision, strategies, long-range objectives, values and culture. At
the conclusion of that meeting, Messrs. Dunham and Mulva agreed that the general
counsels of each company should meet to discuss certain matters relating to
Phillips' recent acquisition of Tosco about which Mr. Dunham and his management
team wished to be better informed before proceeding further with the merger
discussions.
On October 19, 2001, Rick A. Harrington, Senior Vice President and General
Counsel of Conoco, and J. Bryan Whitworth, Executive Vice President, General
Counsel and Chief Administrative Officer of Phillips met in New York. At that
meeting Messrs. Harrington and Whitworth, assisted by other members of the
management of each company, discussed Phillips' recent acquisition of Tosco. In
addition, Messrs. Harrington and Whitworth, together with Conoco's and Phillips'
respective legal advisors, also discussed Conoco's recent acquisition of Gulf
Canada and various structuring and timetable issues with respect to a potential
transaction.
On October 24, 2001, Mr. Dunham and Mr. Mulva spoke again by telephone and
determined that they were satisfied with the reports received on the meeting
between their general counsels. Mr. Dunham informed Mr. Mulva that he would
discuss the proposed combination of Conoco and Phillips at the upcoming meeting
of the Conoco Board of Directors on October 30 and agreed to meet again with Mr.
Mulva on November 1, 2001, if the Conoco Board of Directors was favorably
disposed toward proceeding to negotiate a transaction.
During the meeting of the Conoco Board of Directors on October 30, 2001,
Mr. Dunham reported on his discussions with Mr. Mulva regarding the merger. The
Conoco Board of Directors authorized Conoco's management to continue to
negotiate the terms of a possible merger of equals with Phillips.
On November 1, 2001, Mr. Dunham and Mr. Mulva met again in Houston. At that
meeting Mr. Dunham made a proposal for valuing the two companies and proposed
naming the combined company "ConocoPhillips." Mr. Dunham agreed that he would
delay his retirement in order to serve as Chairman, and that Mr. Mulva would
serve as President and Chief Executive Officer, of the combined company. Messrs.
Dunham and Mulva further discussed the appropriate division of their roles and
responsibilities as Chairman and President and Chief Executive Officer,
respectively, of the combined company.
On November 2, 2001, at the instruction of Mr. Whitworth, Phillips' legal
advisors sent a draft of a merger agreement to Conoco's legal advisors. Conoco
and Phillips and their respective legal advisors began negotiating the merger
agreement and other documents related to the proposed transaction on November 5,
2001 and negotiations continued through November 17, 2001.
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On November 4, 2001, Mr. Dunham and Mr. Mulva again spoke by telephone.
They agreed that the valuation of the two companies should be based on the
average trading price of each company's common stock for the 20 trading days
prior to signing the merger agreement. They also further discussed the
governance arrangements for the combined company and agreed that Messrs.
Harrington and Whitworth should propose language on this subject to be
incorporated in the by-laws of the combined company and in the employment
agreements to be entered into in connection with the proposed transaction. Mr.
Dunham and Mr. Mulva agreed that the headquarters of the combined company would
be in Houston but that the company would maintain a significant and continuing
presence in Oklahoma. They also discussed procedural matters, including a
timetable for the proposed transaction.
On November 6, 2001, Conoco and Phillips entered into a mutual
confidentiality agreement governing the exchange of confidential information
during each company's due diligence review of the other.
Beginning November 7, 2001, a team of Conoco managers led by Philip L.
Frederickson, Conoco's Senior Vice President for Corporate Strategy and Business
Development, and a team of Phillips' managers led by John E. Lowe, Phillips'
Senior Vice President, Planning and Strategic Transactions, and John A. Carrig,
Phillips' Senior Vice President and Chief Financial Officer, met in New York to
discuss financial and accounting issues and potential synergies arising from
combining the two companies.
On November 9, 2001, Conoco retained Morgan Stanley & Co. Incorporated and
Phillips retained Goldman, Sachs & Co., as their respective financial advisors.
On November 14, 2001, Conoco also retained Salomon Smith Barney Inc. and Credit
Suisse First Boston Corporation as its financial advisors and Phillips also
retained J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated as its financial advisors.
On November 11 and 12, 2001, teams of Conoco and Phillips management held a
series of meetings in New York to discuss the operations of the various business
units of their respective companies and to exchange due diligence materials
covering the major business units of each company. Management representatives
from each company's human resources, legal, finance and accounting, and health,
safety and environmental organizations also met to exchange due diligence
materials. Following these meetings, the companies continued to discuss
financial and accounting issues and to perform further due diligence on each
other.
On November 11 and 12, 2001, Mr. Mulva and Mr. Dunham again spoke by
telephone. In these conversations, each expressed satisfaction with the progress
of the meetings between their respective management teams and each agreed that
they would present the final terms of the transaction for consideration by their
respective boards at special meetings to be scheduled for the coming weekend.
On November 13, 2001, as contemplated by the Tax Sharing Agreement, dated
as of October 27, 1998, by and among E. I. Du Pont de Nemours and Company and
Conoco, entered into at the time of Du Pont's divestiture of Conoco, Conoco
delivered to Du Pont tax opinions of its and Phillips' legal advisors regarding
the effect of the proposed business combination between Conoco and Phillips on
the tax treatment of the split-off by Du Pont of its investment in Conoco in
August 1999 under Section 355 of the Code. On November 16, 2001, Du Pont advised
Conoco that the foregoing opinions were acceptable to it. As a result of Du
Pont's acceptance of the tax opinions, Conoco complied with the conditions
precedent in the Tax Sharing Agreement to its entry into the merger agreement
with Phillips.
On November 16, 2001 the Conoco Board of Directors held a special meeting
in Houston at which Conoco's senior management and its financial and legal
advisors were present. Senior management made presentations on the background
and strategic rationale for the proposed combination with Phillips. Morgan
Stanley made a presentation on the financial aspects of the transaction, and
Conoco's legal advisors reviewed the terms of the proposed merger agreement and
the proposed governance of the combined company and discussed various legal and
regulatory issues relating to the proposed combination. Members of the Conoco
compensation committee shared the highlights of their discussions regarding, and
stated their support for, the new employment agreement and compensation
arrangements that Conoco and New Parent would enter into with Mr. Dunham.
Following further discussion, the Conoco Board of
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Directors agreed to meet again on November 18 for further deliberation by the
directors, pending the outcome of the special meeting of the Phillips Board of
Directors scheduled for November 17, 2001.
On November 17, 2001, the Phillips Board of Directors held a special
meeting in New York at which Phillips' senior management and its financial and
legal advisors were present. Senior management made presentations on the
background and strategic rationale for the proposed combination with Conoco. On
behalf of all three financial advisors, Goldman Sachs made a presentation on the
financial aspects of the transaction. Each of the three financial advisors
delivered its oral opinion, subsequently confirmed in writing on November 18,
2001, that the exchange ratio of one share of New Parent common stock for each
share of Phillips common stock relative to the exchange ratio of 0.4677 of a
share of New Parent common stock for each share of Conoco common stock, was fair
from a financial point of view to the holders of Phillips common stock.
Phillips' legal advisor reviewed with the Phillips Board of Directors the terms
of the proposed merger agreement and the fiduciary duties of the Phillips Board
of Directors. The Phillips Board of Directors also discussed the employment
agreement and compensation arrangements that Conoco and New Parent would enter
into with Mr. Dunham and discussed and approved the employment agreement and
other compensation arrangements that Phillips and New Parent would enter into
with Mr. Mulva. Following further discussion, the Phillips Board of Directors
unanimously determined that the terms of the merger agreement and the
transactions contemplated by that agreement are advisable, fair to and in the
best interests of Phillips and its stockholders, unanimously approved the merger
agreement and the transactions contemplated by that agreement and unanimously
recommended that the merger agreement be adopted by the holders of Phillips
common stock.
On the evening of November 17, 2001, Phillips and Conoco and their
respective legal advisors finalized the merger agreement and related documents.
On November 18, a special meeting of the Conoco Board of Directors was
held. At that meeting, Morgan Stanley and Conoco's legal advisors updated the
Conoco Board of Directors on developments regarding the exchange ratio, the
terms of the merger agreement and other matters. In addition, Morgan Stanley
delivered its oral opinion, subsequently confirmed in writing, and Salomon Smith
Barney delivered its written opinion that the exchange ratio of 0.4677 shares of
New Parent common stock for each share of Conoco common stock was fair from a
financial point of view to the holders of Conoco common stock. The Conoco Board
of Directors also discussed the employment agreement and compensation
arrangements that Conoco and New Parent would enter into with Mr. Dunham.
Following further discussion, the Conoco Board of Directors unanimously
determined that the terms of the merger agreement and the transactions
contemplated by that agreement are advisable, fair to and in the best interests
of Conoco and its stockholders, approved the merger agreement and the
transactions contemplated by that agreement and recommended that the merger
agreement be adopted by the holders of Conoco common stock and unanimously
approved the terms of the employment agreement and compensation arrangements
that Conoco and New Parent would enter into with Mr. Dunham.
On November 18, 2001, the definitive agreements providing for the merger
were executed. That afternoon Conoco and Phillips issued a joint press release
announcing the transaction.
REASONS FOR THE MERGER
The Conoco Board of Directors and the Phillips Board of Directors believe
that the complementary strategies of Conoco and Phillips, in combination with
their management, personnel, technical expertise and financial strength, will
create a company with capabilities and resources better positioned to succeed
and grow in the new competitive energy marketplace.
We believe the merger joins two well-managed companies, providing
substantial strategic and financial benefits to Conoco stockholders and Phillips
stockholders. The benefits are expected to include:
- Expanded Scope and Scale to Succeed as a Major Integrated Oil Company in
the Changing Marketplace. We believe that the combined company should
create significant additional value for our stockholders and accelerate
our growth from a strong financial and operational position.
25
In the upstream segment, the combined company's global scale and presence
will allow for increased efficiency in core areas and delivery of legacy
growth projects. The combined company will have pro forma hydrocarbon
reserves at December 31, 2000 of 8.7 billion barrels of oil equivalent, or
BOE, and daily production of 1.7 million BOE, based on Conoco's and
Phillips' estimates for 2001 year-end production. The combined company
will have numerous assets capable of long-term production, including those
in Alaska, Canada, the Lower 48, the North Sea, Venezuela, Indonesia,
Vietnam, China, the Timor Sea, the Middle East, Russia and the Caspian
area.
In the refining and marketing segment, the combined company will operate
or have equity interests in 19 refineries in the United States, the United
Kingdom, Ireland, Germany, the Czech Republic and Malaysia, with a
refining capacity of 2.6 million barrels a day. It will also have a strong
marketing presence in the United States.
In addition to maintaining Conoco's midstream natural gas business in the
United States, Canada and Trinidad, the combined company will continue
Phillips' equity participation in the natural gas gathering and processing
joint venture, Duke Energy Field Services. The combined company will also
continue Phillips' equity participation in the chemicals and plastics
joint venture, Chevron Phillips Chemical Company.
- Strategic Fit and Compatibility. We believe that the combination creates
an extraordinary set of complementary capabilities, drawing on the
talented management and core competencies of both Conoco and Phillips.
Conoco and Phillips bring together a long history of technological
innovation and leadership. The merger creates the opportunity to further
apply our capabilities across a much broader asset base. As a result of
the merger, the combined company will have numerous legacy asset positions
in upstream areas, including those in Alaska, Canada, the lower 48 states,
the North Sea, Venezuela, China, the Timor Sea, Indonesia, Vietnam, the
Middle East, Russia and the Caspian area, and will become a global player
in refining and marketing with operations in North America, Europe and
Southeast Asia. We also will have a much broader platform for future
growth in the Middle East, the Caspian Sea, West Africa and Russia. In
addition, the combined company will inherit Conoco's and Phillips' shared
core values and our commitment to safety, environmental responsibility,
maintenance of the highest ethical standards and valuing our employees.
- Strong Financial Position. We believe that the combined company will
have strong and stable earnings and cash flow as a result of its
outstanding portfolio diversification and a larger relative presence in
more politically stable regions of the world. The diversified portfolio
base also will allow the combined company to optimize and high grade our
portfolio assets to enhance the future returns from our capital
investments. In addition, the combined company will have a strong balance
sheet, with an expected debt-to-capitalization ratio of approximately 35
percent.
- Cost Savings. We expect the combined company to achieve annual cost
savings of at least $750 million within the first full year after the
completion of the merger. These savings are expected to result from more
efficient exploration, production and downstream activities, and the
elimination of duplicate corporate and administrative positions, programs
and operating offices. A transition team led by Philip L. Frederickson,
Conoco's Senior Vice President, Corporate Strategy and Business
Development, and John E. Lowe, Phillips' Senior Vice President, Corporate
Strategy and Development, is already at work to ensure that integration
and synergy realization occurs quickly and smoothly.
26
RECOMMENDATION OF THE CONOCO BOARD OF DIRECTORS
At its meeting on November 18, 2001, after due consideration, the Conoco
Board of Directors unanimously:
- determined that it was advisable for Conoco to enter into the merger
agreement and that the merger agreement and the transactions contemplated
by the merger agreement are advisable, fair to and in the best interests
of Conoco stockholders;
- approved the merger agreement; and
- recommended that Conoco stockholders vote for the adoption of the merger
agreement.
In approving the merger agreement and making these determinations and
recommendations, the Conoco Board of Directors consulted with Conoco management
as well as its outside legal counsel and financial advisors, and considered a
number of factors.
The Conoco Board of Directors considered the following positive factors
relating to the merger:
- the benefits of the merger described above;
- the expectation that the merger would be immediately accretive to Conoco
stockholders based on consensus security analyst earnings estimates and
the achievement of anticipated synergies;
- the expectation that the merger would be a tax-free transaction for U.S.
federal income tax purposes and the conversion of the Conoco common stock
would be tax free to Conoco stockholders;
- anticipated synergies from the transaction of $750 million per year
resulting in cost savings and other benefits over time;
- the effect of the merger on the capital structure and financial ratios of
Conoco;
- the terms and conditions of the merger agreement, one of which provides
the Conoco Board of Directors the right to terminate the merger agreement
prior to its approval by Conoco stockholders in the exercise of its
fiduciary duty in connection with a superior proposal, subject to the
termination fees payable by Conoco in that event;
- the proposed composition of the New Parent Board of Directors, that
Archie W. Dunham, Chairman and Chief Executive Officer of Conoco, would
be the Chairman of the New Parent Board of Directors and that J. J.
Mulva, Chairman and Chief Executive Officer of Phillips, would be
President and Chief Executive Officer of New Parent;
- the provisions included in the New Parent organizational documents that
ensure that the chairman and chief executive officer positions cannot be
changed for a certain period of time without a supermajority vote of the
New Parent Board of Directors, and that the "ConocoPhillips" name cannot
be changed without a supermajority vote of New Parent stockholders and
the unanimous approval of the New Parent Board of Directors;
- the analysis and presentation of Morgan Stanley, and the opinion of
Morgan Stanley delivered orally on November 18, 2001, and subsequently
confirmed in writing, and the written opinion of Salomon Smith Barney
dated November 18, 2001, to the effect that, as of the date of each
opinion, and subject to and based on the considerations set forth in each
opinion, the exchange ratio applicable to Conoco stockholders in the
merger is fair from a financial point of view to the holders of Conoco
common stock (the written opinions of Morgan Stanley and Salomon Smith
Barney are attached as Annexes D and E, respectively, to this joint proxy
statement/prospectus); and
- the potential benefits to Conoco's employees from the expanded
opportunities available as part of a larger organization.
27
The Conoco Board of Directors considered the following negative factors
relating to the merger:
- the problems inherent in merging the operations of two large companies,
including the possibility that management may be distracted from regular
business concerns by the need to integrate operations, unforeseen
difficulties in integrating operations and systems, problems assimilating
and retaining employees, and potential adverse short-term effects on
operating results of the combined company; and
- the timing of receipt and the terms of approvals from appropriate
government entities, including the possibility of delay in obtaining
satisfactory approvals or the imposition of unfavorable terms or
conditions in the approvals.
The Conoco Board of Directors also considered the following factors
relating to the merger:
- the fact that the headquarters of New Parent will be in Houston, Texas,
and that New Parent would have a significant and continuing presence in
Oklahoma;
- the review and analysis of each of Conoco's and Phillips' business,
financial condition, earnings, risks and prospects;
- the historical market prices and trading information with respect to the
shares of Conoco common stock and Phillips common stock;
- the comparisons of historical financial measures for Conoco and Phillips,
including earnings, return on capital and cash flow, and comparisons of
historical operational measures for Conoco and Phillips;
- current industry, economic and market conditions, and the prospects of
further restructuring and consolidation in the oil and gas industry;
- the interests that certain Conoco executive officers and directors may
have with respect to the merger in addition to their interests as Conoco
stockholders; and
- the feasibility and desirability of pursuing alternative strategies,
including pursuing growth and increased stockholder value through
acquisitions, such as the acquisition of Gulf Canada.
The Conoco Board of Directors believed that, overall, the potential
benefits of the merger to Conoco and Conoco stockholders outweighed the risks.
This discussion of the information and factors considered by the Conoco
Board of Directors in making its decision is not intended to be exhaustive but
includes all material factors considered by the Conoco Board of Directors. In
view of the wide variety of factors considered in connection with its evaluation
of the merger and the complexity of these matters, the Conoco Board of Directors
did not find it useful to, and did not attempt to, quantify, rank or otherwise
assign relative weights to these factors. In addition, individual members of the
Conoco Board of Directors may have given different weight to different factors.
THE CONOCO BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF CONOCO
COMMON STOCK VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.
RECOMMENDATION OF THE PHILLIPS BOARD OF DIRECTORS
At its meeting on November 17, 2001, after due consideration, the Phillips
Board of Directors unanimously:
- determined that it was advisable for Phillips to enter into the merger
agreement, and that the merger agreement and the transactions
contemplated by the merger agreement are advisable, fair to and in the
best interests of Phillips stockholders;
28
- approved the merger agreement; and
- recommended that Phillips stockholders vote for the adoption of the
merger agreement.
In approving the merger agreement and making these determinations and
recommendations, the Phillips Board of Directors consulted with Phillips
management as well as its outside legal counsel and financial advisors, and
considered a number of factors.
The Phillips Board of Directors considered the following positive factors
relating to the merger:
- the benefits of the merger described above;
- the expectation that the merger would be immediately accretive to
Phillips stockholders based on consensus security analyst earnings
estimates and the achievement of anticipated synergies;
- the expectation that the merger would be a tax-free transaction for U.S.
federal income tax purposes and the conversion of the Phillips common
stock would be tax free to Phillips stockholders;
- anticipated synergies from the transaction of $750 million per year
resulting in cost savings and other benefits over time;
- the effect of the merger on the capital structure and financial ratios of
Phillips;
- the terms and conditions of the merger agreement, one of which provides
the Phillips Board of Directors the right to terminate the merger
agreement prior to its approval by Phillips stockholders in the exercise
of its fiduciary duty in connection with a superior proposal, subject to
the termination fees payable by Phillips in that event;
- the proposed composition of the New Parent Board of Directors, including
that J. J. Mulva, Chairman and Chief Executive Officer of Phillips, would
be President and Chief Executive Officer of New Parent and Archie W.
Dunham, Chairman and Chief Executive Officer of Conoco, would be the
Chairman of the New Parent Board of Directors;
- the provisions included in the New Parent organizational documents that
ensure that the chairman and chief executive officer positions cannot be
changed for a certain period of time without a supermajority vote of the
New Parent Board of Directors, and that the "ConocoPhillips" name cannot
be changed without a supermajority vote of New Parent stockholders and
the unanimous approval of the New Parent Board of Directors;
- the analysis and presentation of Goldman Sachs on behalf of Goldman
Sachs, JPMorgan and Merrill Lynch and the oral opinions of Goldman Sachs,
JPMorgan and Merrill Lynch, each delivered on November 17, 2001, and each
subsequently confirmed in writing on November 18, 2001, to the effect
that, as of the date of each opinion, and based upon and subject to the
various considerations, assumptions and limitations set forth in those
opinions, the exchange ratio of one share of New Parent common stock for
each share of Phillips common stock relative to the exchange ratio of
0.4677 of a share of New Parent common stock for each share of Conoco
common stock pursuant to the merger agreement is fair from a financial
point of view to the holders of Phillips common stock (the written
opinions of Goldman Sachs, JPMorgan and Merrill Lynch are attached as
Annexes F, G and H, respectively, to this joint proxy
statement/prospectus); and
- the potential benefits to Phillips' employees from the expanded
opportunities available as part of a larger organization.
The Phillips Board of Directors considered the following negative factors
relating to the merger:
- the problems inherent in merging the operations of two large companies,
including the possibility that management may be distracted from regular
business concerns by the need to integrate operations, unforeseen
difficulties in integrating operations and systems, problems assimilating
and
29
retaining employees, and potential adverse short-term effects on
operating results of the combined company; and
- the timing of receipt and the terms of approvals from appropriate
government entities, including the possibility of delay in obtaining
satisfactory approvals or the imposition of unfavorable terms or
conditions in the approvals.
The Phillips Board of Directors also considered the following factors
relating to the merger:
- the fact that the headquarters of New Parent will be in Houston, Texas,
and that New Parent would have a significant and continuing presence in
Oklahoma;
- the fact that New Parent would have a staggered board of directors;
- the review and analysis of each of Conoco's and Phillips' business,
financial condition, earnings, risks and prospects;
- the historical market prices and trading information with respect to the
shares of Phillips common stock and Conoco common stock;
- the comparisons of historical financial measures for Phillips and Conoco,
including earnings, return on capital and cash flow, and comparisons of
historical operational measures for Phillips and Conoco;
- current industry, economic and market conditions, and the prospects of
further restructuring and consolidation in the oil and gas industry;
- the interests that certain Phillips executive officers and directors may
have with respect to the merger in addition to their interests as
Phillips stockholders; and
- the feasibility and desirability of pursuing alternative strategies, such
as pursuing growth and increased stockholder value through acquisitions,
such as the acquisition of ARCO's Alaska assets and the acquisition of
Tosco.
The Phillips Board of Directors believed that, overall, the potential
benefits of the merger to Phillips and Phillips stockholders outweighed the
risks.
This discussion of the information and factors considered by the Phillips
Board of Directors in making its decision is not intended to be exhaustive but
includes all material factors considered by the Phillips Board of Directors. In
view of the wide variety of factors considered in connection with its evaluation
of the merger and the complexity of these matters, the Phillips Board of
Directors did not find it useful to, and did not attempt to, quantify, rank or
otherwise assign relative weights to these factors. In addition, individual
members of the Phillips Board of Directors may have given different weight to
different factors.
THE PHILLIPS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF
PHILLIPS COMMON STOCK VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.
OPINIONS OF CONOCO'S FINANCIAL ADVISORS
Pursuant to separate letter agreements, Conoco retained Morgan Stanley,
Salomon Smith Barney and Credit Suisse First Boston to act as its financial
advisors in connection with the merger. Conoco did not request that a fairness
opinion be provided by Credit Suisse First Boston Corporation in connection with
the merger.
OPINION OF MORGAN STANLEY
At the meeting of the Conoco Board of Directors on November 18, 2001,
Morgan Stanley rendered its oral opinion, subsequently confirmed in writing,
that as of November 18, 2001, and subject to and based on the considerations in
its opinion, the exchange ratio pursuant to the merger agreement is fair
30
from a financial point of view to the holders of Conoco common stock. In its
analysis of the fairness of the Conoco exchange ratio, Morgan Stanley took into
account, among other considerations set forth in its opinion, the exchange ratio
of one share of New Parent common stock for each share of Phillips common stock
in the merger.
THE FULL TEXT OF MORGAN STANLEY'S OPINION, DATED AS OF NOVEMBER 18, 2001,
WHICH SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED,
MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY MORGAN STANLEY IS
ATTACHED AS ANNEX D TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED
INTO THIS JOINT PROXY/PROSPECTUS BY REFERENCE. WE URGE YOU TO READ THIS OPINION
CAREFULLY AND IN ITS ENTIRETY. MORGAN STANLEY'S OPINION IS DIRECTED TO THE BOARD
OF DIRECTORS OF CONOCO, ADDRESSES ONLY THE FAIRNESS FROM A FINANCIAL POINT OF
VIEW OF THE EXCHANGE RATIO PURSUANT TO THE MERGER AGREEMENT TO THE HOLDERS OF
CONOCO COMMON STOCK, AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR
CONSTITUTE A RECOMMENDATION TO ANY CONOCO STOCKHOLDER AS TO HOW TO VOTE AT THE
SPECIAL MEETING. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE OPINION.
In connection with rendering its opinion, Morgan Stanley, among other
things:
- reviewed certain publicly available financial statements and other
business and financial information of Conoco and Phillips, respectively;
- reviewed certain internal financial statements and other financial and
operating data concerning Conoco and Phillips prepared by the respective
managements of Conoco and Phillips;
- reviewed certain financial forecasts prepared by the respective
managements of Conoco and Phillips;
- discussed with senior executives of Conoco and Phillips certain
strategic, financial and operational benefits they expect to derive from
the merger;
- discussed the past and current operations and financial condition and the
prospects of Conoco and Phillips with senior executives of Conoco and
Phillips;
- reviewed the pro forma impact of the merger on, among other things,
Conoco's earnings per share, cash flow, consolidated capitalization and
financial ratios;
- reviewed and considered in the analysis, information prepared by the
members of the respective senior managements of Conoco and Phillips
relating to the relative contributions of Conoco and Phillips to the
combined company;
- reviewed the reported prices and trading activity for the Conoco common
stock and the Phillips common stock;
- compared the prices and trading activity of the Conoco common stock and
the Phillips common stock with that of the securities of certain other
publicly traded companies comparable with Conoco and Phillips;
- reviewed the financial terms, to the extent publicly available, of
certain comparable merger transactions;
- participated in certain discussions and negotiations among
representatives of Conoco and Phillips and their financial and legal
advisors;
- reviewed the merger agreement and certain related documents; and
- performed such other analyses and considered such other factors as deemed
appropriate.
Morgan Stanley assumed and relied upon, without independent verification,
the accuracy and completeness of the information supplied or otherwise made
available to it for the purposes of its opinion. With respect to the financial
forecasts that Morgan Stanley received from the respective managements of Conoco
and Phillips, as well as information relating to certain strategic, financial
and operational benefits of the merger, Morgan Stanley assumed that the
information provided has been reasonably prepared on the bases reflecting the
best currently available estimates and judgments of the future financial and
31
operational performance of Conoco and Phillips, and New Parent, respectively.
Morgan Stanley did not make any independent valuation or appraisal of the assets
or liabilities of Conoco or Phillips, nor was Morgan Stanley furnished with any
such appraisals. Morgan Stanley assumed that the merger will be consummated in
accordance with the terms set forth in the merger agreement without material
modification or waiver including, among other things, that the merger will be a
tax-free transaction for U.S. federal income tax purposes. The opinion of Morgan
Stanley is necessarily based on financial, economic, market and other conditions
as in effect on, the information made available to Morgan Stanley as of, and the
financial condition of Conoco and Phillips on, November 18, 2001.
FINANCIAL ANALYSIS OF MORGAN STANLEY
The following is a summary of the material financial analyses performed by
Morgan Stanley in connection with its oral opinion and the preparation of its
written opinion. These summaries of financial analyses include information
presented in tabular format. In order to fully understand the financial analyses
used by Morgan Stanley, the tables must be read together with the text of each
summary. The tables alone do not constitute a complete description of the
financial analyses.
Historical Exchange Ratio Analysis. Morgan Stanley compared the daily
closing share price of Conoco common stock to the daily closing price of
Phillips common stock during the period beginning from July 13, 1999 and ending
November 14, 2001, and reviewed and analyzed the historical exchange ratios
implied by these comparisons.
Morgan Stanley also compared both the daily closing share price of Conoco
common stock to the corresponding price of Phillips common stock and the daily
last twenty-day average of Conoco common stock to the corresponding average of
Phillips common stock over various periods beginning from November 14, 2000 and
ending November 14, 2001, and reviewed and analyzed the historical exchange
ratios implied by these comparisons. The following table presents the implied
exchange ratios during the periods covered and as of November 14, 2001.
<Table>
<Caption>
PHILLIPS SHARES PER CONOCO SHARE
- ---------------------------------------------------------------------------------------
PERIOD AVERAGE EXCHANGE RATIO(1)
- ------ -------------------------
At November 14, 2001........................................ 0.475x
Last twenty-day average..................................... 0.468
Last month average.......................................... 0.467
Last 3 months average....................................... 0.488
Last 6 months average....................................... 0.498
Last 12 months average...................................... 0.501
</Table>
- ---------------
(1) Averages of exchange ratios based on daily closing prices.
As the agreed-upon exchange ratio was implied from the last twenty-day
average of Conoco and Phillips common stock as of November 16, 2001, and Morgan
Stanley, for purposes of its opinion, reviewed Conoco's and Phillips' stock
prices until November 14, 2001, Morgan Stanley also analyzed the sensitivity to
the actual exchange ratio on November 16, 2001, by examining independently both
Conoco's and Phillips' stock price movements for November 15 and 16, 2001.
Historical Share Price Performance. Morgan Stanley reviewed the price
performance of Conoco common stock and Phillips common stock from July 13, 1999
through November 14, 2001. Morgan Stanley also reviewed the price performance of
Conoco common stock and Phillips common stock from January 1, 2001 through
November 14, 2001.
Morgan Stanley compared the price performance of Conoco common stock and
Phillips common stock from July 13, 1999 through November 14, 2001, with that of
the S&P 500 Index. This analysis
32
showed that the closing market prices during the period from July 13, 1999
through November 14, 2001, appreciated as follows:
<Table>
<Caption>
APPRECIATION
------------
Conoco...................................................... (6.8)%
Phillips.................................................... 3.2
S&P 500..................................................... (18.1)
</Table>
Morgan Stanley then compared the price performance of Conoco common stock
and Phillips common stock from January 1, 2001 through November 14, 2001, with
that of the S&P 500 Index. This analysis showed that the closing market prices
during the period from January 1, 2001 through November 14, 2001, appreciated as
follows:
<Table>
<Caption>
APPRECIATION
------------
Conoco...................................................... (12.3)%
Phillips.................................................... (6.1)
S&P 500..................................................... (13.6)
</Table>
Last Twelve Months Trading Analysis. Morgan Stanley reviewed the daily
closing share prices of Conoco common stock and Phillips common stock over the
last twelve months. The table below shows the twelve-month high and low closing
prices during that period, compared with a closing price on November 14, 2001,
of $25.39 per share for Conoco common stock and $53.42 per share for Phillips
common stock:
<Table>
<Caption>
NOVEMBER 14, 2000
THROUGH
NOVEMBER 14, 2001
-----------------
HIGH LOW
------- -------
Conoco...................................................... $33.15 $24.13
Phillips.................................................... 67.52 50.40
</Table>
The range of exchange ratios implied by this range of values for Conoco common
stock and Phillips common stock is between 0.357x and 0.658x.
Research Analysts' Future Price Targets Analysis. Morgan Stanley reviewed
the 12-month price targets for the shares of common stock of each of Conoco and
Phillips as projected by analysts from various financial institutions in recent
reports. These targets reflected each analyst's estimate of the future public
market trading price of Conoco common stock and Phillips common stock at the end
of the particular period considered for each estimate. Morgan Stanley then
arrived at the present value for these targets using an estimated equity
discount rate of 10.0%.
This analysis showed the following range of values for Conoco common stock
and Phillips common stock:
<Table>
<Caption>
12-MONTH ANALYSTS' PRICE TARGET
-------------------------------
NOMINAL PRESENT VALUE
-------------- --------------
Conoco................................................. $28.00 - 39.00 $25.45 - 35.45
Phillips............................................... 55.00 - 72.00 50.00 - 65.45
</Table>
The range of exchange ratios implied by this range of values for Conoco common
stock and Phillips common stock is 0.389x to 0.709x.
Comparable Companies Analysis. Morgan Stanley calculated aggregate value,
as equity value adjusted for capital structure, to earnings before interest,
taxes, depreciation, amortization and exploration cost, which is referred to as
EBITDAX, multiples for Conoco and Phillips for the fiscal year 2002 based on
First Call consensus estimates. Morgan Stanley then compared the EBITDAX
multiples obtained for Conoco and Phillips with multiples obtained for a group
of selected oil and gas companies.
33
The selected oil and gas companies forming such group were ExxonMobil, BP,
ChevronTexaco, Royal Dutch Shell, Occidental, Amerada Hess and Marathon, which
is referred to as the Selected Companies. Morgan Stanley selected these
companies because they are publicly traded companies with integrated oil and gas
operations that for purposes of this analysis may be considered similar to those
of Conoco and Phillips.
The analysis showed the following multiples:
<Table>
<Caption>
AGGREGATE VALUE/
ESTIMATED EBITDAX
-----------------
2002
-----------------
Conoco...................................................... 5.6x
Phillips.................................................... 4.8
Selected Companies Mean..................................... 5.4
</Table>
Morgan Stanley then applied comparable company multiples (ranging between
4.0x and 5.0x for 2001 Aggregate Value/EBITDAX and between 4.5x and 5.5x for
2002 Aggregate Value/EBITDAX) to the corresponding Conoco and Phillips
statistics based on publicly available estimates. The following table presents
the range of exchange ratios implied by the resulting valuation ranges as
computed by Morgan Stanley.
<Table>
<Caption>
EXCHANGE RATIO RANGE
--------------------
Aggregate Value/2001 EBITDAX................................ 0.249x - 0.490x
Aggregate Value/2002 EBITDAX................................ 0.265 - 0.499
</Table>
Morgan Stanley calculated price to earnings per share and price to cash
flow per share multiples for Conoco and Phillips for the fiscal year ended 2002
based on First Call consensus estimates. Morgan Stanley then compared the price
to earnings per share and price to cash flow per share multiples obtained for
Conoco and Phillips with multiples obtained for the Selected Companies.
The analysis showed the following multiples:
<Table>
<Caption>
PRICE/ESTIMATED PRICE/ESTIMATED
EPS CFPS
--------------- ---------------
2002 2002
--------------- ---------------
Conoco.................................................. 11.4x 4.9x
Phillips................................................ 11.6 4.9
Selected Companies Mean................................. 13.2 6.3
</Table>
Morgan Stanley then applied comparable company multiples (ranging between
4.0x and 5.0x for 2001 Price/Cash Flow per share, between 4.5x and 5.5x for 2002
Price/Cash Flow per share, between 8.0x and 10.0x for 2001 Price/Earnings per
share: and between 11.0x and 13.0x for 2002 Price/Earnings per share) to the
corresponding Conoco and Phillips statistics based on publicly available
estimates. The following table presents the range of exchange ratios implied by
the resulting valuation ranges as computed by Morgan Stanley.
<Table>
<Caption>
EXCHANGE RATIO RANGE
--------------------
Price/2001 Cash Flow per Share.............................. 0.356x - 0.557x
Price/2002 Cash Flow per Share.............................. 0.393 - 0.567
Price/2001 Earnings per Share............................... 0.383 - 0.599
Price/2002 Earnings per Share............................... 0.407 - 0.568
</Table>
34
Morgan Stanley also calculated price to book value multiples for Conoco and
Phillips. Morgan Stanley then compared the price to book value multiples
obtained for Conoco and Phillips with multiples obtained for the Selected
Companies.
<Table>
<Caption>
PRICE/BOOK VALUE
----------------
Conoco...................................................... 2.4x
Phillips.................................................... 1.4
Selected Companies Mean..................................... 2.2
</Table>
Pro Forma Contribution Analysis. Morgan Stanley compared the pro forma
contributions of each of Conoco and Phillips, based on First Call consensus
estimates, to the resulting combined company. Morgan Stanley reviewed pro forma
estimates of earnings, cash flow and EBITDAX for the years 2001 and 2002. The
contributions made by Conoco and Phillips are consistent with the relative
exchange ratios offered in the merger.
Morgan Stanley also reviewed the contributions of the pre-transaction
aggregate value, the pre-transaction equity value, and proved reserves based on
2000 reported figures. The contributions made by Conoco and Phillips are
consistent with the relative exchange ratios offered in the merger.
Pro Forma Earnings and Cash Flow Impact Analysis. Morgan Stanley analyzed
the pro forma effects of the merger and computed the resulting
accretion/dilution to the combined company's projected earnings per share and
cash flow per share during 2002 and 2003, based on the relative exchange ratios
offered in the merger. Such computations used earnings and cash flow projections
for both Conoco and Phillips based on First Call consensus estimates, synergy
estimates provided by Conoco's and Phillips' management, and certain purchase
accounting adjustments.
The analysis indicated that, based on First Call estimates, the merger
would be accretive to estimated earnings per share in 2002 and 2003 of both
Conoco and Phillips, in each case as compared to the same estimates for Conoco
and Phillips on a stand-alone basis. Based on First Call estimates, the merger
would also be accretive to cashflow per share for Conoco and Phillips in 2002,
and for Conoco in 2003, in each case as compared to the same estimates for
Conoco and Phillips on a stand-alone basis.
Morgan Stanley also analyzed the directional impact on pro forma
accretion/dilution to EPS in 2002, 2003 and 2004, for Conoco and Phillips, based
on movements in crude oil prices, natural gas prices and light-oil spreads.
Relative to First Call crude oil price estimates, an increase in the estimated
price of crude oil reduces the accretion to EPS of both Conoco and Phillips in
2002. Any such increase would reduce accretion to EPS of Conoco to a greater
degree than it would reduce accretion to EPS of Phillips. Under certain higher
crude oil price scenarios, the transaction could be dilutive to Conoco's
stand-alone estimated 2002 EPS. Relative to First Call crude oil price
estimates, an increase in the expected crude oil price slightly increases the
level of accretion to EPS for Phillips in 2003 and 2004, and reduces the level
of accretion to EPS for Conoco in 2003 and 2004.
Relative to First Call natural gas price estimates, an increase in the
expected natural gas price increases the accretion to Phillips stand-alone
estimated EPS and decreases the accretion to Conoco's estimated stand-alone EPS
for 2002, 2003 and 2004. Under certain higher natural gas price scenarios, the
transaction could be dilutive in 2002 to Conoco's estimated stand-alone EPS and,
under certain lower natural gas price scenarios, the transaction could be
dilutive in 2003 to Phillips' estimated stand-alone EPS.
Relative to First Call light-oil spread estimates, an increase in the
expected light-oil spread reduces the accretion to Phillips stand-alone
estimated EPS and increases the accretion to Conoco's estimated stand-alone EPS
for 2002, 2003 and 2004. Under certain lower light-oil spread scenarios, the
transaction could be dilutive to Conoco's estimated stand-alone EPS in 2002 and,
under certain higher light-oil spread scenarios, the transaction could be
dilutive to Phillips estimated stand-alone EPS in 2003.
Potential Synergy Analysis. Morgan Stanley compared the potential
synergies of this transaction to seven other recent business combinations in the
oil and gas industry. These transactions are: the Chevron/
35
Texaco transaction, the TOTALFina/Elf transaction, the Repsol/YPF transaction,
the BP Amoco/ARCO transaction, the Total/Petrofina transaction, the Exxon/Mobil
transaction and the BP/Amoco transaction. The following table presents the
potential synergies of these transactions relative to various statistics.
<Table>
<Caption>
POTENTIAL PRE-TAX SYNERGIES RELATIVE TO SMALLER ENTITY
-----------------------------------------------------------------------
PRE-TAX OPERATING S, G&A OP. EX. & PRODUCED
LARGER ENTITY/SMALLER ENTITY SYNERGIES REVENUES EXPENSES EXPENSES S, G&A EMPLOYEES BOE
- ---------------------------- -------------- -------- --------- -------- --------- -------------- --------
(IN THOUSANDS) (IN THOUSANDS)
Chevron/Texaco.............. $1,200,000 2.8% 3.3% 102.9% 3.2% $63,121 $2.57
TOTALFina/Elf............... 1,500,000 4.1 5.2 44.7 4.7 17,647 4.10
Repsol/YPF.................. 325,000 5.9 12.9 54.3 10.4 34,211 1.18
BP Amoco/ARCO............... 1,000,000 9.4 14.3 135.0 12.9 54,348 2.63
Total/Petrofina............. 370,000 2.0 2.3 41.9 2.2 25,519 4.60
Exxon/Mobil................. 2,800,000 5.0 6.3 68.5 5.7 67,470 4.60
BP/Amoco.................... 2,000,000 6.0 7.9 87.9 7.2 46,029 4.24
High........................ 9.4 14.3 135.0 12.9 67,470 4.60
Median...................... 5.0 6.3 68.5 5.7 46,029 4.10
Low......................... 2.0 2.3 41.9 2.2 17,647 1.18
Phillips/Conoco(1).......... 700,000 2.4 3.9 90.5 3.7 27,997 2.48
</Table>
- ---------------
(1) Based on average of preliminary estimates provided by Conoco and Phillips
prior to the finalization of their synergy review.
In connection with the review of the merger by the Conoco Board of
Directors, Morgan Stanley performed a variety of financial and comparative
analyses for purposes of rendering its opinion. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. In arriving at its opinion, Morgan Stanley
considered the results of all of its analyses as a whole and did not attribute
any particular weight to any analysis or factor considered by it. Furthermore,
Morgan Stanley believes that the summary provided and the analyses described
above must be considered as a whole and that selecting any portion of its
analyses, without considering all of them, would create an incomplete view of
the process underlying its analyses and opinion. In addition, Morgan Stanley may
have given various analyses and factors more or less weight than other analyses
and factors, and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be Morgan Stanley's
view of the actual value of Conoco or Phillips.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic condition and
other matters, many of which are beyond the control of Conoco or Phillips. Any
estimates contained in Morgan Stanley's analyses are not necessarily indicative
of future results or actual values, which may be significantly more or less
favorable than those suggested by such estimates. The analyses performed were
prepared solely as part of Morgan Stanley's analysis of the fairness from a
financial point of view to the Conoco stockholders, of the relative exchange
ratios pursuant to the merger agreement, and were prepared in connection with
the delivery by Morgan Stanley of its opinion dated November 18, 2001 to the
Conoco Board of Directors. The analyses do not purport to be appraisals or to
reflect the prices at which Conoco common stock or Phillips common stock might
actually trade. The exchange ratio and other terms of the merger agreement were
determined through arm's length negotiations between Conoco and Phillips and
were unanimously approved by the Conoco Board of Directors. Morgan Stanley
provided advice to Conoco during such negotiations. However, Morgan Stanley did
not recommend any specific exchange ratio or form of consideration to Conoco or
that any specific exchange ratio or form of consideration constituted the only
appropriate consideration for the merger.
Morgan Stanley's opinion was one of the many factors taken into
consideration by the Conoco Board of Directors in making its unanimous
determination to approve the merger. Morgan Stanley's analyses summarized above
should not be viewed as determinative of the opinion of the Conoco Board of
Directors
36
with respect to the value of Conoco or Phillips or of whether the Conoco Board
of Directors would have been willing to agree to a different exchange ratio or
form of consideration.
OPINION OF SALOMON SMITH BARNEY
Salomon Smith Barney delivered its written opinion dated November 18, 2001,
to the Conoco Board of Directors to the effect that, as of such date, based upon
and subject to the considerations and limitations set forth in its opinion, the
exchange ratio under the merger agreement applicable to each share of Conoco
common stock is fair from a financial point of view to the holders of Conoco
common stock. In its analysis of this exchange ratio, Salomon Smith Barney took
into account, among other considerations set forth in its opinion, the exchange
ratio of one share of New Parent common stock for each share of Phillips common
stock in the merger.
THE FULL TEXT OF THE SALOMON SMITH BARNEY FAIRNESS OPINION, WHICH SETS
FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, THE GENERAL PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN BY SALOMON
SMITH BARNEY IS ATTACHED AS ANNEX E TO THIS JOINT PROXY STATEMENT/PROSPECTUS.
THE SUMMARY OF SALOMON SMITH BARNEY'S OPINION SET FORTH BELOW IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION. CONOCO STOCKHOLDERS
ARE URGED TO READ THIS OPINION CAREFULLY AND IN ITS ENTIRETY. THE FAIRNESS
OPINION WAS PROVIDED TO THE CONOCO BOARD OF DIRECTORS FOR ITS INFORMATION AND IS
DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE EXCHANGE
RATIO PURSUANT TO THE MERGER AGREEMENT TO THE HOLDERS OF CONOCO COMMON STOCK.
In connection with its opinion, Salomon Smith Barney, among other things:
- reviewed a draft of the merger agreement dated November 16, 2001;
- discussed with certain senior officers, directors and other
representatives and advisors of both Conoco and Phillips the business,
operations and prospects of Conoco, Phillips and New Parent;
- examined certain publicly available business and financial information
relating to Conoco and Phillips;
- examined certain financial forecasts and other information and data
concerning Conoco, Phillips and New Parent provided to or discussed with
Salomon Smith Barney the respective management of Conoco and Phillips;
- reviewed and discussed with the managements of Conoco and Phillips
certain strategic, operational and financial benefits that they
anticipate will result from the merger;
- conducted such other analyses and considered such other information and
financial, economic and market criteria as deemed appropriate.
In rendering its opinion, Salomon Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or reviewed by
or discussed with it for the purposes of its opinion and it further relied upon
the assurances of managements of Conoco and Phillips that they are not aware of
any facts that would make any of that information inaccurate or misleading. With
respect to financial forecasts and other information and data provided to or
otherwise reviewed by it, Salomon Smith Barney relied on the advice of the
managements of Conoco and Phillips that such forecasts and other information and
data were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the respective management of Conoco and Phillips as
to the future performance of Conoco, Phillips and New Parent and the strategic
implications and operational and financial benefits anticipated to result from
the merger. Salomon Smith Barney expressed no view with respect to such
forecasts and other information and data or the assumptions on which they were
based. Salomon Smith Barney did not make, nor was Salomon Smith Barney furnished
with, any independent evaluation or appraisal of the assets or liabilities of
Conoco, Phillips or New Parent. Salomon Smith Barney's opinion relates to the
relative value of Conoco and Phillips. Salomon Smith Barney did not express any
opinion as to what the value of New Parent common stock will be when issued
pursuant to the merger or the price at which the New Parent
37
common stock will trade or otherwise be transferable subsequent to the merger.
Salomon Smith Barney was not asked to consider, and its opinion does not
address, the relative merits of the merger as compared to any alternative
business strategies that might exist for the company or the effect of any other
transaction in which Conoco might engage. Salomon Smith Barney assumed that the
merger will be treated as a tax-free reorganization for federal income tax
purposes and that the final terms of the merger agreement will not vary
materially from those set forth in the draft merger agreement delivered to it
and that the merger will be consummated in accordance with the terms of the
merger agreement, without waiver of any material conditions contained in the
merger agreement. The opinion of Salomon Smith Barney is necessarily based on
information available to it and financial, stock market and other conditions and
circumstances existing and disclosed to it as of November 18, 2001. Salomon
Smith Barney did not make a presentation to the Conoco Board of Directors in
connection with rendering its fairness opinion. Salomon Smith Barney did not
make a presentation to the Conoco Board of Directors in connection with
rendering its fairness opinion.
SALOMON SMITH BARNEY'S ADVISORY SERVICES AND ITS OPINION EXPRESSED HEREIN
WERE PROVIDED FOR THE INFORMATION OF THE CONOCO BOARD OF DIRECTORS IN ITS
EVALUATION OF THE MERGER AND SALOMON SMITH BARNEY'S OPINION IS NOT INTENDED TO
BE AND DOES NOT CONSTITUTE A RECOMMENDATION OF THE MERGER TO THE BOARD OF
DIRECTORS, CONOCO OR TO ANYONE ELSE OR A RECOMMENDATION TO ANY CONOCO
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE ON ANY MATTERS RELATING TO
THE MERGER.
GENERAL
The Conoco Board of Directors selected each of Morgan Stanley, Salomon
Smith Barney and Credit Suisse First Boston as its financial advisor because of
their respective reputations as internationally recognized investment banking
and advisory firms with substantial experience in transactions similar to the
merger and because each of Morgan Stanley, Salomon Smith Barney and Credit
Suisse First Boston is familiar with Conoco and its business. As part of its
investment banking and financial advisory business, each of Morgan Stanley,
Salomon Smith Barney and Credit Suisse First Boston is engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes.
Each of Morgan Stanley, Salomon Smith Barney and Credit Suisse First Boston
provides a full range of financial advisory, financing, and brokerage services
and, in the course of its normal trading and brokerage activities, may from time
to time effect transactions and hold positions in securities, including
derivative securities, or loans of Conoco or Phillips for its own accounts and
for the accounts of its customers. Each of Morgan Stanley, Salomon Smith Barney
and Credit Suisse First Boston also may provide investment banking services to
New Parent and its subsidiaries in the future.
Under the terms of separate letter agreements dated November 16, 2001,
November 14, 2001 and November 14, 2001, Conoco has agreed to pay each of Morgan
Stanley, Salomon Smith Barney and Credit Suisse First Boston a customary fee
upon consummation of the merger. Conoco has also agreed to reimburse each of
Morgan Stanley, Salomon Smith Barney and Credit Suisse First Boston for its
reasonable out-of-pocket expenses incurred in connection with the engagement,
including attorney's fees, and to indemnify each of Morgan Stanley, Salomon
Smith Barney and Credit Suisse First Boston and their respective related parties
from and against certain liabilities, including liabilities under the federal
securities laws.
OPINIONS OF PHILLIPS' FINANCIAL ADVISORS
On November 17, 2001, each of Goldman Sachs, JPMorgan and Merrill Lynch
delivered its oral opinion to the Phillips Board of Directors, which opinions
were subsequently confirmed in writing on November 18, 2001, that, as of the
date of each opinion, the exchange ratio of one share of New Parent common stock
for each share of Phillips common stock relative to the exchange ratio of 0.4677
of a share
38
of New Parent common stock for each share of Conoco common stock pursuant to the
merger agreement was fair from a financial point of view to the holders of
Phillips common stock.
THE FULL TEXT OF THE WRITTEN OPINIONS OF GOLDMAN SACHS, JPMORGAN AND
MERRILL LYNCH, EACH DATED NOVEMBER 18, 2001, WHICH SET FORTH ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH
EACH SUCH OPINION, ARE ATTACHED AS ANNEX F, ANNEX G AND ANNEX H, RESPECTIVELY,
AND ARE INCORPORATED HEREIN BY REFERENCE. EACH OF GOLDMAN SACHS, JPMORGAN AND
MERRILL LYNCH PROVIDED ITS OPINION FOR THE INFORMATION AND ASSISTANCE OF THE
PHILLIPS BOARD OF DIRECTORS IN CONNECTION WITH ITS CONSIDERATION OF THE
TRANSACTION. NONE OF THE GOLDMAN SACHS, JPMORGAN OR MERRILL LYNCH OPINIONS IS A
RECOMMENDATION AS TO HOW ANY PHILLIPS STOCKHOLDER SHOULD VOTE WITH RESPECT TO
THE ADOPTION OF THE MERGER AGREEMENT. WE URGE YOU TO READ EACH OPINION IN ITS
ENTIRETY.
OPINION OF GOLDMAN SACHS
In connection with its opinion, Goldman Sachs reviewed, among other things:
- the merger agreement;
- Annual Reports to Stockholders and Annual Reports on Form 10-K of
Phillips for the five years ended December 31, 2000;
- Annual Reports to Stockholders and Annual Reports on Form 10-K of Conoco
for the three years ended December 31, 2000;
- certain interim reports to stockholders and Quarterly Reports on Form
10-Q of Phillips and Conoco;
- certain other communications from Phillips and Conoco to their respective
stockholders; and
- certain internal financial analyses and forecasts for Phillips and Conoco
prepared by their respective managements, including certain cost savings
and operating synergies projected by the managements of Phillips and
Conoco to result from the transaction contemplated by the merger
agreement.
Goldman Sachs also held discussions with members of the senior managements
of Phillips and Conoco regarding their assessment of the strategic rationale
for, and the potential benefits of, the transaction contemplated by the merger
agreement and the past and current business operations, financial condition, and
future prospects of their respective companies. In addition, Goldman Sachs:
- reviewed the reported price and trading activity for Phillips common
stock and Conoco common stock;
- compared certain financial and stock market information for Phillips and
Conoco with similar information for certain other companies, the
securities of which are publicly traded; and
- reviewed the financial terms of certain recent business combinations in
the oil and gas industry specifically and in other industries generally,
and performed such other studies and analyses as it considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial, accounting and other information discussed with or reviewed by it and
assumed such accuracy and completeness for purposes of rendering its opinion. In
that regard, Goldman Sachs assumed with the consent of the Phillips Board of
Directors that the internal financial forecasts prepared by the managements of
Phillips and Conoco, including certain cost savings and operating synergies
projected by the managements of Phillips and Conoco to result from the
transaction contemplated by the merger agreement, were reasonably prepared on a
basis reflecting the best currently available estimates and judgments of
Phillips and Conoco. In addition, Goldman Sachs did not make an independent
evaluation or appraisal of the assets and liabilities of Phillips or Conoco or
any of their subsidiaries, and Goldman Sachs was not furnished with any such
evaluation or appraisal. Goldman Sachs also assumed that all governmental,
regulatory or other consents and approvals necessary for the consummation of the
transaction contemplated by the merger
39
agreement will be obtained without any adverse effect on Phillips or Conoco or
their respective subsidiaries or on the contemplated benefits of the transaction
contemplated by the merger agreement in any respect material to Goldman Sachs'
analysis. Goldman Sachs did not express any opinion as to the price at which New
Parent common stock will trade if and when such New Parent common stock is
issued.
OPINION OF JPMORGAN
In arriving at its opinion, JPMorgan:
- reviewed the merger agreement;
- reviewed certain publicly available business and financial information
concerning Phillips and Conoco and the industries in which they operate;
- compared the proposed financial terms of the merger with the publicly
available financial terms of certain transactions involving companies
JPMorgan deemed relevant and the consideration received for such
companies;
- compared the financial and operating performance of Phillips and Conoco
with publicly available information concerning certain other companies
JPMorgan deemed relevant and reviewed the current and historical market
prices of Phillips common stock and Conoco common stock and certain
publicly traded securities of such other companies;
- reviewed certain internal financial analyses and forecasts prepared by
the managements of Phillips and Conoco relating to their respective
businesses, as well as the estimated amount and timing of the cost
savings and related expenses and synergies expected to result from the
merger; and
- performed such other financial studies and analyses and considered such
other information as JPMorgan deemed appropriate for the purposes of its
opinion.
In addition, JPMorgan held discussions with certain members of the
managements of Phillips and Conoco with respect to certain aspects of the
merger, and the past and current business operations of Phillips and Conoco, the
financial condition and future prospects and operations of Phillips and Conoco,
the effects of the merger, including the cost savings and related expenses and
synergies expected to result from the merger, on the financial condition and
future prospects of Phillips and Conoco, and certain other matters JPMorgan
believed necessary or appropriate to its inquiry.
In giving its opinion, JPMorgan relied upon and assumed, without any
obligation of independent verification, the accuracy and completeness of all
information that was publicly available or was furnished to it by Phillips and
Conoco or otherwise reviewed by it, and JPMorgan did not assume any
responsibility or liability for such information. JPMorgan did not conduct any
valuation or appraisal of any assets or liabilities, nor were any such
valuations or appraisals provided to it. In relying on financial analyses and
forecasts provided to it, including the cost savings and related expenses and
synergies expected to result from the merger, JPMorgan assumed that they were
reasonably prepared based on assumptions reflecting the best currently available
estimates and judgments by management as to the expected future results of
operations and financial condition of Conoco and Phillips to which such analyses
or forecasts relate. JPMorgan also assumed that the merger will qualify as a
tax-free reorganization for United States federal income tax purposes and that
the merger will be consummated as described in the merger agreement. JPMorgan
relied as to all legal matters relevant to rendering its opinion upon the advice
of its counsel. JPMorgan further assumed that all governmental, regulatory or
other consents and approvals necessary for the consummation of the merger will
be obtained without any adverse effect on Phillips or Conoco or their respective
subsidiaries or on the contemplated benefits of the transaction contemplated by
the merger agreement in any respect material to its analysis and that all
conditions to the merger will be satisfied in all respects material to its
analysis.
JPMorgan's opinion was necessarily based on economic, market and other
conditions as in effect on, and the information made available to it as of, the
date of its opinion. Subsequent developments may affect its opinion, and
JPMorgan does not have any obligation to update, revise, or reaffirm its
opinion.
40
JPMorgan's opinion is limited to the fairness from a financial point of view to
the holders of Phillips common stock of the exchange ratio of one share of New
Parent common stock for each share of Phillips common stock relative to the
exchange ratio of 0.4677 of a share of New Parent common stock for each share of
Conoco common stock pursuant to the merger agreement, and JPMorgan expressed no
opinion as to the underlying decision by Phillips to engage in the transaction.
JPMorgan expressed no opinion as to the price at which Phillips common stock or
New Parent common stock will trade at any future time.
OPINION OF MERRILL LYNCH
In arriving at its opinion, Merrill Lynch, among other things:
- reviewed certain publicly available business and financial information
relating to Phillips and Conoco that Merrill Lynch deemed to be relevant;
- reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
Phillips and Conoco, as well as the amount and timing of the cost savings
and related expenses and synergies expected to result from the merger,
furnished to Merrill Lynch by Phillips and Conoco;
- conducted discussions with members of senior management and
representatives of Phillips and Conoco concerning the matters described
above, as well as their respective businesses and prospects before and
after giving effect to the merger and the cost savings and related
expenses and synergies expected to result from the merger;
- reviewed the market prices and valuation multiples for the shares of
Phillips common stock and Conoco common stock and compared them with
those of certain publicly traded companies that Merrill Lynch deemed to
be relevant;
- reviewed the results of operations of Phillips and Conoco and compared
them with those of certain publicly traded companies that Merrill Lynch
deemed to be relevant;
- compared the proposed financial terms of the merger with the financial
terms of certain other transactions which Merrill Lynch deemed to be
relevant;
- participated in certain discussions among representatives of Phillips and
Conoco and their financial and legal advisors;
- reviewed the potential pro forma impact of the merger;
- reviewed the merger agreement; and
- reviewed such other financial studies and analyses and took into account
such other matters as Merrill Lynch deemed necessary, including Merrill
Lynch's assessment of general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to it,
discussed with or reviewed by or for it, or publicly available, and Merrill
Lynch did not assume any responsibility for independently verifying such
information or undertake an independent evaluation or appraisal of any of the
assets or liabilities of Phillips or Conoco and was not furnished with any such
evaluation or appraisal. In addition, Merrill Lynch did not assume any
obligation to conduct any physical inspection of the properties or facilities of
Phillips or Conoco. With respect to the financial forecast information and the
cost savings and related expenses and synergies expected to result from the
merger furnished to or discussed with it by Phillips or Conoco, Merrill Lynch
was advised by management of Phillips and Conoco, respectively, that they have
been reasonably prepared and reflect the best currently available estimates and
judgment of Phillips or Conoco's management as to the expected future financial
performance of Phillips or Conoco, as the case may be, and the cost savings and
related expenses and synergies expected to result from the merger. Merrill Lynch
made no independent investigation of any legal matters and accounting advice
given to Phillips, Conoco and their
41
respective boards of directors, including, without limitation, advice as to the
accounting and tax consequences of the merger.
Merrill Lynch's opinion was necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and on the
information made available to it as of, the date of its opinion. Merrill Lynch
assumed that all governmental, regulatory or other consents and approvals
necessary for the consummation of the merger will be obtained without any
adverse effect on Phillips or Conoco or their respective subsidiaries or on the
contemplated benefits of the transaction contemplated by the merger agreement in
any respect material to its analysis, and Merrill Lynch further assumed that all
conditions to the merger will be satisfied in all respects material to its
analysis. Merrill Lynch expressed no opinion as to the price at which Phillips
common stock or New Parent common stock will trade following the announcement or
consummation of the merger, as the case may be.
JOINT FINANCIAL ANALYSES OF PHILLIPS' FINANCIAL ADVISORS
The following is a summary of the material financial analyses jointly used
by Goldman Sachs, JPMorgan and Merrill Lynch in connection with providing their
opinions to the Phillips Board of Directors. Some of the summaries of the
financial analyses include information presented in tabular format. In order to
more fully understand the financial analyses used by Goldman Sachs, JPMorgan and
Merrill Lynch, the tables must be read together with the full text of each
summary. The tables alone are not a complete description of the financial
analyses performed by Goldman Sachs, JPMorgan and Merrill Lynch. Goldman Sachs,
JPMorgan and Merrill Lynch jointly prepared the presentation made to the
Phillips Board of Directors.
Historical Exchange Ratio Analysis. Goldman Sachs, JPMorgan and Merrill
Lynch reviewed the closing prices of Conoco common stock divided by the
corresponding closing price of Phillips common stock over the period beginning
with Conoco's initial public offering in October 1998 and ending on November 16,
2001. In addition, Goldman Sachs, JPMorgan and Merrill Lynch calculated the
average of these historical daily exchange ratios for the twenty-day, six-month,
one-year and three-year periods ended November 16, 2001. The following table
presents the results of these calculations:
<Table>
<Caption>
AVERAGE
PERIOD EXCHANGE RATIO
- ------ --------------
Transaction................................................. 0.4677
20-Day Average.............................................. 0.4677
6-Month Average............................................. 0.4983
1-Year Average.............................................. 0.5014
3-Year Average.............................................. 0.5066
</Table>
The transaction exchange ratio of 0.4677 would result in the holders of
Phillips common stock owning approximately 57% of the outstanding common stock
of the pro forma combined company following the merger.
Contribution Analysis. Goldman Sachs, JPMorgan and Merrill Lynch reviewed
specific historical and future operating and financial information, including,
among other things, equity market value, net income and cash flow for Phillips,
Conoco and the pro forma combined company resulting from the merger based on
financial data provided by the managements of Phillips and Conoco and
Institutional Brokers Estimate System, or I/B/E/S, estimates. Cash flow was
defined as net income adjusted for the non-cash impact of depreciation,
depletion, amortization, deferred taxes, dry-hole write offs and other non-
cash/non-recurring items. Goldman Sachs, JPMorgan and Merrill Lynch also
analyzed the relative income statement contribution of Phillips and Conoco to
the combined company on a pro forma basis before taking into account any of the
possible benefits that may be realized following the merger based on actual
1998, 1999, 2000 and estimated 2001, 2002 and 2003 results, based on financial
data provided by the
42
managements of Phillips and Conoco and I/B/E/S estimates. The following table
presents the results of this analysis:
<Table>
<Caption>
PHILLIPS CONTRIBUTION TO COMBINED COMPANY
--------------------------------------------------
LAST 3 YEARS NEXT 3 YEARS
2000 2001E 2002E AGGREGATE AGGREGATE
---- ----- ----- ------------ ------------
Net Income............................... 50% 53% 56% 47% 58%
Cash Flow................................ 54 52 56 49 57
</Table>
The analysis further indicated that Phillips would contribute approximately
57% of the equity market value of the pro forma combined company as compared to
the approximately 57% of the outstanding common equity of the pro forma combined
company that holders of Phillips common stock would receive after the merger
based on the exchange ratio of 0.4677.
Pro Forma Merger Analysis. Goldman Sachs, JPMorgan and Merrill Lynch
prepared pro forma analyses of the financial impact of the transaction using
I/B/E/S estimates and synergy estimates prepared by the managements of Phillips
and Conoco. For each of the years 2002 and 2003, Goldman Sachs, JPMorgan and
Merrill Lynch compared the earnings per share and cash flow per share of
Phillips common stock, on a stand-alone basis, to the earnings per share and
cash flow per share of the common stock of the combined company on a pro forma
basis assuming pre-tax synergies of $750 million per year. These analyses were
performed based on the closing price of Phillips and Conoco common stock on
November 16, 2001. Based on these analyses, the proposed transaction would
result in an increase in earnings on a per share basis when compared to
Phillips' earnings per share on a stand-alone basis in the years 2002 and 2003.
In addition, based on these analyses, the proposed transaction would result in
an increase in cash flow on a per share basis, when compared to Phillips' cash
flow per share on a stand-alone basis, in the years 2002 and 2003.
Selected Transactions Analysis. Goldman Sachs, JPMorgan and Merrill Lynch
analyzed certain information relating to the proposed transaction in relation to
certain publicly available information for the following five stock-for-stock
transactions in the oil and gas industry:
- The British Petroleum Company p.l.c.'s combination with Amoco
Corporation, completed in December 1998;
- Exxon Corporation's combination with Mobil Corporation, completed in
November 1999;
- BP Amoco p.l.c.'s combination with Atlantic Richfield Company, completed
in April 2000;
- Total Fina S.A.'s combination with Elf Aquitaine, completed in February
2000; and
- Chevron Corporation's combination with Texaco Inc., completed in October
2001.
Goldman Sachs, JPMorgan and Merrill Lynch calculated and compared for each
of the five selected oil and gas industry transactions the synergy value split
between the respective shareholders of the larger and smaller company, as
compared to the corresponding synergy value split for the proposed transaction.
The synergy values were determined based on both (1) the estimated dollar value
of synergies publicly announced by the companies at the time of announcement of
the transaction and (2) to the extent subsequently revised, the revised
estimated dollar value of synergies publicly announced by the companies, other
than for the Chevron/Texaco transaction for which the revised synergy value was
based on then-available market estimates. The synergy value for the proposed
transaction was based on estimates
43
prepared by the managements of Phillips and Conoco. The following table presents
the results of this analysis:
<Table>
<Caption>
SYNERGY VALUE SPLIT(2)
SYNERGIES POTENTIAL VALUE EQUITY -----------------------
(ANNOUNCED/ CREATION FROM SPLIT BIGGER SMALLER
TRANSACTION REVISED) SYNERGIES(1) (%) COMPANY COMPANY
- ----------- ----------- --------------- ------ ---------- ----------
(DOLLAR AMOUNTS IN BILLIONS OF DOLLARS)
BP/Amoco....................................... $ 2.0 $12.0 60/40 16% 84%
Revised...................................... 4.0 24.0 60/40 38 62
Exxon/Mobil.................................... 2.8 16.5 70/30 (8) 108
Revised...................................... 7.0 42.0 70/30 40 60
BP/ARCO........................................ 1.0 6.0 80/20 5 95
Total/Elf...................................... 1.3 7.8 68/32 25 75
Revised...................................... 2.3 13.8 68/32 44 56
Chevron/Texaco................................. 1.2 7.2 61/39 6 94
Revised...................................... 2.1 12.6 61/39 30 70
Mean................................................................................. 9 91
Mean revised......................................................................... 38 62
Phillips/Conoco................................ 0.75 4.5 57/43 57 43
</Table>
- ---------------
(1) The potential value created from the synergies was calculated at six times
the pre-tax synergy estimate, based upon discounted cash flow analyses of
the estimated cash flows of the synergies as provided by the managements of
Phillips and Conoco and assuming a range of discount rates and perpetuity
growth rates.
(2) The synergy value split calculation took into account that, when analyzing
the estimated proportion of the synergy value that the shareholders of the
larger company would enjoy, any premium paid by the larger company to the
shareholders of the smaller company would erode the synergy value available
to the larger company's shareholders.
Selected Companies Analyses. Goldman Sachs, JPMorgan and Merrill Lynch
reviewed and compared certain financial information as described below for
Phillips and Conoco to corresponding financial information, ratios and public
market multiples for the following publicly traded corporations in the oil and
gas industry, which were divided into two tiers reflecting their relative market
capitalization:
<Table>
<Caption>
SUPER MAJORS INTEGRATEDS
------------ -----------
- - Exxon Mobil Corporation - Amerada Hess Corporation
- - Royal Dutch Petroleum Company/ - USX-Marathon Group
Shell Transportation and Trading - ENI SpA
Company p.l.c.
- - BP p.l.c.
- - ChevronTexaco Corporation
- - TotalFinaElf S.A.
</Table>
Goldman Sachs, JPMorgan and Merrill Lynch also calculated and compared
various financial multiples and ratios based on publicly available financial
data as of November 16, 2001, information it obtained from Securities and
Exchange Commission filings, Goldman Sachs Equity Research Estimates and I/B/E/S
estimates. The multiples for Phillips were calculated using Phillips' closing
price on November 16, 2001, and the multiples for Conoco were calculated using
Conoco's closing price on November 16, 2001. The multiples for each of the
selected companies were based on the most recent publicly available information.
44
The results of these analyses are as summarized as follows:
<Table>
<Caption>
MARKET
CAPITALIZATION PRICE/EARNINGS
(IN BILLIONS) RATIO (2002E)
-------------- --------------------
Exxon Mobil........................................... $264 21.0x
Royal Dutch/Shell..................................... 172 15.7
BP plc................................................ 172 16.1
TotalFinaElf.......................................... 103 14.4
ChevronTexaco......................................... 93 16.4
ENI................................................... 49 10.4
USX-Marathon.......................................... 8 13.2
Amerada Hess.......................................... 5 8.9
Phillips.............................................. 20 11.2
Conoco................................................ 15 10.8
</Table>
GENERAL
The preparation of a fairness opinion is a complex process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstance, and therefore is not readily susceptible to partial analysis.
Goldman Sachs, JPMorgan and Merrill Lynch believe that selecting portions of
their analyses or the summary set forth above, without considering the analyses
as a whole, could create an incomplete view of the processes underlying their
opinions. In arriving at their fairness determinations, Goldman Sachs, JPMorgan
and Merrill Lynch considered the results of each of these analyses in their
totality and did not isolate or reach separate conclusions with respect to any
particular analysis. No company or transaction used in the above analyses as a
comparison is directly comparable to Phillips or Conoco or the merger.
The analyses were prepared solely for the purposes of Goldman Sachs,
JPMorgan and Merrill Lynch providing their opinions to the Phillips Board of
Directors as to the fairness from a financial point of view to the holders of
Phillips common stock as of the date of such opinions of the exchange ratio of
one share of New Parent common stock for each share of Phillips common stock
relative to the exchange ratio of 0.4677 of a share of New Parent common stock
for each share of Conoco common stock pursuant to the merger agreement. These
analyses do not purport to be appraisals or necessarily reflect the prices at
which businesses or securities actually may be sold. Analyses based upon
forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based on numerous factors or events beyond the control of the parties or
their respective advisors, none of Phillips, Conoco, Goldman Sachs, JPMorgan,
Merrill Lynch or any other person assumes responsibility if future results are
materially different from those forecast. As described above, the opinions of
Goldman Sachs, JPMorgan and Merrill Lynch to the Phillips Board of Directors
were one of many factors taken into consideration by the Phillips Board of
Directors in making its determination to approve the merger agreement. The
foregoing summary does not purport to be a complete description of the analyses
performed by Goldman Sachs, JPMorgan and Merrill Lynch.
Goldman Sachs, JPMorgan and Merrill Lynch, as part of their investment
banking businesses, are continually engaged in performing financial analyses
with respect to businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements, and
financial analyses for estate, corporate and other purposes. Phillips selected
Goldman Sachs, JPMorgan and Merrill Lynch as financial advisors because each is
an internationally recognized investment banking firm that has substantial
experience in transactions similar to the merger.
45
Goldman Sachs is familiar with Phillips having provided certain investment
banking services to Phillips from time to time, including having acted as
financial advisor to Phillips in connection with its acquisition of assets from
Atlantic Richfield Company in April 2000, having acted as co-arranger in
connection with the public offering of $200 million aggregate principal amount
of Phillips' 7% Debentures due 2029 in March 1999 and the public offering of
$300 million aggregate principal amount of Phillips' 6 3/8% Notes due 2009 in
March 1999, and having acted as its financial advisor in connection with, and
having participated in certain of the negotiations leading to, the merger
agreement. Goldman Sachs has also provided certain investment banking services
to Conoco from time to time, including having acted as co-manager in connection
with the public offering of 191.5 million shares of Conoco's Class A Common
Stock in October 1998, as co-arranger in connection with the public offering of
$1.35 billion aggregate principal amount of Conoco's 5.90% Notes due 2004, $1.9
billion aggregate principal amount of Conoco's 6.95% Notes due 2029 and $750
million aggregate principal amount of Conoco's 6.35% Notes due 2009 in April
1999, and as agent for Conoco's commercial paper program.
JPMorgan is familiar with Phillips and Conoco having provided financial
advisory and financing services from time to time to Phillips and Conoco,
including acting as co-lead on Conoco's $4.5 billion high grade bond offering,
advising and arranging the financing for Conoco's acquisition of Gulf Canada
Resources Limited, advising Phillips on its joint venture with Chevron Corp. and
financing Phillips' acquisition of ARCO's Alaskan assets. In addition, one of
JPMorgan's commercial bank affiliates is the agent bank for certain outstanding
credit facilities for Phillips and Conoco.
Merrill Lynch is familiar with Phillips and Conoco having provided
financial advisory and financing services from time to time to Phillips and
Conoco, including acting as financial advisor to Phillips in connection with the
formation of a gathering, processing and marketing joint venture (called Duke
Energy Field Services, L.L.C.) with Duke Energy Corporation, acting as
co-arranger for Phillips' $6.5 billion interim credit facility in connection
with the acquisition of ARCO's Alaskan assets and acting as joint book-running
manager on Phillips' public offering of $1.15 billion 8.5% Notes due 2005 and
$1.35 billion 8.75% Notes due 2010.
Each of Goldman Sachs, JPMorgan and Merrill Lynch provides a full range of
financial advisory and securities services and, in the course of its normal
trading activities, may from time to time effect transactions and hold positions
in securities, including derivative securities, of Phillips or Conoco for its
own accounts and for the accounts of its customers. Each of Goldman Sachs,
JPMorgan and Merrill Lynch also may provide investment banking services to New
Parent and its subsidiaries in the future.
Pursuant to separate letter agreements dated November 15, 2001, November
16, 2001 and November 16, 2001, Phillips engaged each of Goldman Sachs, JPMorgan
and Merrill Lynch, respectively, to act as financial advisor in connection with
the contemplated transaction. Pursuant to the terms of these letters, Phillips
has agreed to pay each of Goldman Sachs, JPMorgan and Merrill Lynch a customary
fee upon consummation of the transaction.
Phillips has agreed to reimburse each of Goldman Sachs, JPMorgan and
Merrill Lynch for their reasonable out-of-pocket expenses, including attorneys'
fees, and to indemnify each of Goldman Sachs, JPMorgan and Merrill Lynch against
certain liabilities, including liabilities under the federal securities laws.
INTERESTS OF CONOCO DIRECTORS AND MANAGEMENT IN THE MERGER
In considering the recommendation of the Conoco Board of Directors to vote
for the proposal to adopt the merger agreement, Conoco stockholders should be
aware that members of the Conoco Board of Directors and members of Conoco
management team have agreements or arrangements that provide them with interests
in the merger that differ from those of other Conoco stockholders. The Conoco
Board of Directors was aware of these agreements and arrangements during its
deliberations of the merits of the merger and in determining to recommend to
Conoco stockholders that they vote for the proposal to adopt the merger
agreement.
46
GOVERNANCE STRUCTURE AND MANAGEMENT POSITIONS
The merger agreement provides for the initial composition of the New Parent
Board of Directors, certain committees of the New Parent Board of Directors and
selected New Parent executive officer positions. See "Directors and Management
Following the Merger."
TREATMENT OF STOCK OPTIONS AND OTHER STOCK-BASED AWARDS
Upon Conoco stockholder approval of the merger agreement, outstanding
Conoco stock options and other stock-based awards granted under Conoco employee
and director stock plans that were not previously vested or exercisable will
become fully vested and exercisable and generally will remain exercisable for
the remainder of their term. As of [ ] 2002, the number of shares of
Conoco common stock subject to unvested options held by Archie W. Dunham, Robert
E. McKee III, Jimmy W. Nokes, Robert W. Goldman and all other Conoco executive
officers and all Conoco directors (including Mr. Dunham) were [ ], [ ], [ ], [
], and [ ], respectively. The weighted average exercise price of the unvested
options held by Messrs. Dunham, McKee, Nokes, Goldman and all other Conoco
executive officers and all Conoco directors (including Mr. Dunham) is $[ ], $[
], $[ ], $[ ], and $[ ], respectively. As of [ ] 2002, the number of
shares of Conoco common stock subject to other unvested stock-based awards held
by Messrs. Dunham, McKee, Nokes and Goldman, all other Conoco executive officers
of Conoco and all Conoco directors (including Mr. Dunham) are [ ], [ ], [ ], [
], and [ ], respectively.
EMPLOYMENT AGREEMENT WITH ARCHIE W. DUNHAM
Conoco and Mr. Dunham are parties to an existing employment agreement. In
connection with entering into the merger agreement, New Parent, Conoco and Mr.
Dunham entered into a new employment agreement that contains substantially the
same terms and conditions as Mr. Dunham's current employment agreement, with
modifications to reflect Mr. Dunham's new responsibilities with New Parent and
to provide Mr. Dunham with appropriate incentives to continue his employment
with New Parent following the completion of the merger. Upon the completion of
the merger, Mr. Dunham's new employment agreement will become effective and will
supersede Mr. Dunham's current employment agreement. The term of Mr. Dunham's
new employment agreement will commence upon the date of the completion of the
merger and end on the later of October 1, 2004 and the second anniversary of the
date of the completion of the merger.
During the term of Mr. Dunham's employment, Mr. Dunham will be a senior
executive employee of New Parent, a member and Chairman of the New Parent Board
of Directors and Chairman of the Executive Committee of the New Parent Board of
Directors, and Mr. Dunham's services will be performed at New Parent's
headquarters in Houston, Texas. During the term of his employment, Mr. Dunham
will preside at meetings of the New Parent Board of Directors and of New Parent
stockholders, will work with the Chief Executive Officer of New Parent on
external stakeholder relations (community, state, federal and foreign
governments), business development (growth) initiatives, and the creation of an
outstanding and cohesive New Parent Board of Directors, and will have other
executive responsibilities as may be agreed between Mr. Dunham and the Chief
Executive Officer of New Parent.
While Mr. Dunham is Chairman of the New Parent Board of Directors, he and
the Chief Executive Officer of New Parent will jointly recommend to the New
Parent Board of Directors the long-range strategic plan for New Parent, major
acquisitions and divestitures, and major changes to New Parent's capital
structure, and, with respect to all other matters, the Chief Executive Officer
will, in consultation with Mr. Dunham, arrange the agenda for meetings of, and
shall report to, the New Parent Board of Directors. At the conclusion of the
term of Mr. Dunham's employment, Mr. Dunham will retire from employment with New
Parent and as Chairman, but shall remain a member of the New Parent Board of
Directors and a member of the Executive Committee and Chairman of the Committee
on Directors' Affairs of the New Parent Board of Directors until his 70th
birthday (or earlier retirement from such positions), subject to being
periodically re-elected to the New Parent Board of Directors by New Parent
stockholders. New Parent will propose Mr. Dunham for re-election whenever his
then current term as a
47
member of the New Parent Board of Directors is set to expire before his 70th
birthday. See also "Directors and Management Following the Merger". Pursuant to
Mr. Dunham's new employment agreement, Mr. Dunham's duties and responsibilities
may not be terminated or diminished during the term of his employment other than
pursuant to the affirmative vote of at least two-thirds of the members of the
New Parent Board of Directors.
Stockholder approval of the merger will constitute a "change of control"
under Mr. Dunham's current employment agreement, and the election of another
individual as Chief Executive Officer will constitute "good reason" under Mr.
Dunham's current employment agreement. As a result, Mr. Dunham would be
permitted under the terms of Mr. Dunham's current employment agreement to
terminate his employment with Conoco and receive certain compensation and
benefits. In consideration for Mr. Dunham's entering into a new employment
agreement, which results in substantial modifications of the terms and
conditions of Mr. Dunham's continuing relationship with Conoco, in lieu of the
compensation and benefits that would have been payable to Mr. Dunham under his
current employment agreement had he voluntarily terminated his employment at
such time, Mr. Dunham will receive, promptly following the completion of the
merger, a lump sum severance payment equal to (1) the sum of his salary,
deferred compensation and vacation accrued to the date of completion of the
merger, (2) the salary and bonus that would have been payable to him under his
current employment agreement for three years following the date of completion of
the merger, based on his then current salary and an assumed annual bonus equal
to the average of the two highest annual bonus awards to Mr. Dunham in the three
fiscal years preceding the completion of the merger, and (3) an amount equal to
the additional retirement benefit he would have accrued if he had remained
employed for three years following the date of completion of the merger. In
addition, Mr. Dunham will receive grants of options, restricted stock and other
compensatory awards he would have received had his employment continued for
three years following the date of completion of the merger, based upon grants of
options and restricted stock and other compensatory awards received by Mr.
Dunham in the preceding three years, and to the vesting of, and termination of
restrictions on, any unvested equity or performance-based awards, and extension
of the term during which these awards may be exercised by Mr. Dunham until the
earlier of (x) the first anniversary of the date of completion of the merger or
(y) the date upon which the right to exercise any such award would have expired
if Mr. Dunham had continued to be employed by Conoco under the terms of his
current employment agreement for three years following the date of completion of
the merger; provided, however, that any option grants described above will not
vest until the second anniversary of the completion of the merger, subject to
earlier vesting upon the occurrence of certain events as contemplated by Mr.
Dunham's new employment agreement as described below and/or Conoco's customary
stock option grants. Mr. Dunham will receive welfare and other benefits
continuation for three years following the date of completion of the merger, and
will also continue to receive at no cost to him, until the earlier of Mr.
Dunham's death or the expiration or exercise of all his company stock options,
the financial and tax planning and life insurance benefits afforded during
employment. The foregoing payments and benefits are substantially the same as
those that Mr. Dunham would have been entitled to receive under his current
employment agreement except that, had he voluntarily terminated his employment
at the completion of the merger, Mr. Dunham would have been entitled to receive
under his current employment agreement an additional $3 million cash payment,
and the new grants of options described above would have been fully vested under
his current employment agreement, and not subject to a two-year cliff vesting
schedule.
Mr. Dunham's new employment agreement provides that Mr. Dunham will also be
entitled to receive an additional payment sufficient to compensate him for the
amount of any excise tax imposed on the payments described above or otherwise
pursuant to Section 4999 of the Internal Revenue Code and for any taxes imposed
on that additional payment. Mr. Dunham's new employment agreement also provides
that Mr. Dunham may elect, on or before March 31, 2002 (but in no event later
than the date 30 days prior to the date of completion of the merger), to defer
any of the payments described above under the terms of Conoco's Global Variable
Compensation Deferral Plan. Assuming that the merger is completed in [July]
2002, and excluding any gross-up payments for excise taxes that may be payable
under Section 4999 of the Internal Revenue Code, the estimated amount of the
cash portion of the payments described above payable to Mr. Dunham at the
completion of the merger is $[ ], the estimated
48
number of shares subject to New Parent options that will be granted to Mr.
Dunham at the completion of the merger is [ ] and the estimated number
of shares of New Parent common stock that will be granted to Mr. Dunham at the
completion of the merger is [ ].
In general, during the term of Mr. Dunham's employment, Mr. Dunham's
compensation and benefits will be, both in the aggregate and with respect to
each element of compensation and benefits, the same as that provided to the
Chief Executive Officer of New Parent.
Pursuant to Mr. Dunham's new employment agreement, Mr. Dunham will receive
an annual base salary of not less than his annual base salary in effect
immediately prior to the completion of the merger, subject to annual reviews and
increases, bonuses and long-term equity-based compensation that are competitive
with industry practices, and participation in the most favorable incentive,
retirement, welfare and other benefits New Parent offers to New Parent senior
executives, including term life insurance in an amount equal to four times Mr.
Dunham's annual base salary. In no event will the annual base salary or annual
bonuses (in respect of each applicable fiscal year) provided to Mr. Dunham be
less than that provided to the Chief Executive Officer of New Parent. In
addition, the long-term equity-based compensation provided to Mr. Dunham will be
substantially the same, both in amount, exercise or strike or base price, and
other terms and conditions, as those awarded to the Chief Executive Officer of
New Parent.
During the term of Mr. Dunham's new employment agreement, Mr. Dunham has
agreed not to terminate his employment within six months following a subsequent
change of control of New Parent (as defined in Mr. Dunham's new employment
agreement), other than as a result of retirement at the end of the term of Mr.
Dunham's employment, for good reason (as defined in Mr. Dunham's new employment
agreement) or disability. If, during the term of Mr. Dunham's employment, Mr.
Dunham's employment is terminated by Mr. Dunham at any time for good reason or
by New Parent at any time other than for cause (as defined in Mr. Dunham's new
employment agreement) or by reason of Mr. Dunham's death or disability, then Mr.
Dunham will be entitled to payments and benefits comparable to those provided to
him at the completion of the merger as described above, replacing references to
the completion of the merger with references to the termination of Mr. Dunham's
employment; provided, that (1) the lump-sum severance payment of salary and
bonus plus the additional retirement benefit accruals as described above will be
based on the salary and bonus and retirement benefit accruals that Mr. Dunham
would have received through the end of the term of his employment, (2) Mr.
Dunham will receive a pro rata annual bonus for the year in which his
termination of employment occurs, based on the annual bonus paid or awarded in
respect of the fiscal year immediately preceding the date of termination of
employment, (3) the grants of options, restricted stock and other compensatory
awards described above will be based on those that Mr. Dunham would have
received through the end of the term of his employment and (4) welfare and other
benefits will be continued through the later of three years following the date
of termination of his employment and the date Mr. Dunham attains age 70, which
we refer to as the "benefits continuation period;" provided, that New Parent's
obligation to provide these welfare benefits will cease upon Mr. Dunham's
refusal to serve as a member of the New Parent Board of Directors.
If Mr. Dunham's employment is terminated under circumstances described
above, Mr. Dunham will receive the following additional benefits, which we refer
to as "post-employment compensation," during the benefits continuation period:
(1) continued participation in the Director's Charitable Gift Program, (2)
continued participation in welfare benefit plans and fringe benefits
arrangements applicable as if Mr. Dunham had remained employed, (3) continued
coverage under the comprehensive security program applicable during employment
(in the same manner and providing the same level of security protection as in
effect on the date of the merger agreement, and in any event on a basis no less
favorable than the coverage provided to the Chief Executive Officer of New
Parent) and (4) continued participation in the Conoco domestic relocation policy
with respect to a single relocation.
If Mr. Dunham remains employed through the expiration of the term of his
employment, upon any termination of his employment thereafter, he is entitled to
vesting of, and termination of restrictions on, any unvested equity or
performance-based awards. In addition, upon such a termination, Mr. Dunham will
49
receive his post-employment compensation; provided that New Parent's obligation
to provide these benefits will cease upon Mr. Dunham's refusal to serve as a
member of the New Parent Board of Directors. It is contemplated that Mr. Dunham
will serve as a member of the New Parent Board during the benefits continuation
period.
SEVERANCE ARRANGEMENTS
Conoco's executive officers (other than Mr. Dunham) participate in the
Conoco Key Employee Severance Plan. The plan provides that if the employment of
a participant in the plan is terminated (i) within two years of a "Change in
Control" of Conoco or (ii) after a "Potential Change in Control" of Conoco but
prior to a Change in Control (whether or not a Change in Control ever occurs),
in either case by Conoco other than for "cause" or by the participant for "good
reason" (as such terms are defined in the plan), the participant will be
entitled to:
- a lump-sum severance payment equal to one-and-one-half, two, or three
times the sum of the employee's base salary, previous year's bonus, and
economic equivalent of the previous year's stock option award;
- the present value of the increase in retirement benefits resulting from
the crediting of an additional one-and-one-half, two, or three times the
employee's number of years of age and service under the applicable
retirement plan;
- 36 months of welfare benefits continuation;
- a pro rata portion of the annual bonus for which the employee is eligible
in the year of termination; and
- if necessary, a gross-up payment sufficient to compensate the participant
for the amount of any excise tax imposed on payments made under the plan
or otherwise pursuant to Section 4999 of the Internal Revenue Code and
for any taxes imposed on this additional payment.
Prior to October 19, 2005, the Key Employee Severance Plan may not be
amended or terminated if such amendment would be adverse to the interests of any
eligible employee, without the employee's written consent. Amounts payable under
the plan will be in lieu of any payments or benefits that may be payable to the
severed employee under any other plan, policy or program of Conoco relating to
severance.
Stockholder approval of the merger will constitute a "Change of Control"
under the Key Employee Severance Plan. Assuming that the merger is completed in
[July] 2002, and excluding any gross-up payments for excise taxes that may be
payable under Section 4999 of the Internal Revenue Code, the estimated maximum
amount of the cash severance payments that would be payable to Messrs. McKee,
Nokes and Goldman and all other executive officers of Conoco, upon a termination
of their employment by New Parent without cause, is $[ ], $[ ], $[ ], and $[ ],
respectively.
DIRECTOR DEFERRED COMPENSATION
Pursuant to the Conoco Deferred Compensation Plan for Non-Employee
Directors, participants may elect that, upon a change in control of Conoco, at
the director's election, all deferred amounts (including deferred restricted
stock units) may be paid in full in a lump-sum payment within 60 days of the
Change in Control. Stockholder approval of the merger will constitute a Change
of Control under the Conoco Deferred Compensation Plan for Non-Employee
Directors. Assuming that the merger is completed in [July] 2002, the estimated
aggregate maximum amount of payments that would be payable to all of Conoco
directors within 60 days following the Conoco stockholder approval of the merger
is $[ ].
DIRECTOR SUPPLEMENTAL COMPENSATION
Pursuant to the merger agreement, Conoco may, but is not obligated to, pay
to any Conoco non-employee director immediately prior to the completion of the
merger who does not become a New Parent director, an amount per Conoco
non-employee director not in excess of three times the then-annual
50
compensation for that Conoco non-employee director. Based on the current annual
compensation provided by Conoco to Conoco non-employee director, the estimated
maximum amount that could be payable to each applicable Conoco non-employee
director is approximately $[ ].
INDEMNIFICATION AND INSURANCE
The merger agreement includes provisions relating to indemnification and
insurance for directors, officers and employees of Conoco and Phillips. See "The
Merger Agreement -- Indemnification and Insurance."
INTERESTS OF PHILLIPS DIRECTORS AND MANAGEMENT IN THE MERGER
In considering the recommendation of the Phillips Board of Directors to
vote for the adoption of the merger agreement, Phillips stockholders should be
aware that members of the Phillips Board of Directors and members of the
Phillips management team have agreements or arrangements that provide them with
interests in the merger that differ from those of Phillips stockholders. The
Phillips Board of Directors was aware of these agreements and arrangements
during its deliberations on the merits of the merger and in determining to
recommend to the Phillips stockholders that they vote for the adoption of the
merger agreement.
GOVERNANCE STRUCTURE AND MANAGEMENT POSITIONS
The merger agreement provides for the initial composition of the New Parent
Board of Directors, certain committees of the New Parent Board of Directors and
selected New Parent executive officer positions. See "Directors and Management
Following the Merger."
PHILLIPS STOCK OPTIONS, SARS AND STOCK-BASED COMPENSATION AWARDS
All unvested Phillips employee stock options, SARs, restricted stock and
restricted stock units that were outstanding on November 18, 2001, other than
certain stock options and restricted stock units granted to James J. Mulva
described below, will vest upon stockholder approval of the merger, which is
considered a "change of control" for purposes of those awards. As of
[ ], 2002, the number of unvested stock options and SARs held by Mr.
Mulva, J.A. Carrig, B.Z. Parker, J.B. Whitworth, and all other Phillips
executive officers and all Phillips directors are expected to be [ ],
[ ], [ ], [ ] and [ ], respectively. The weighted average price
of unvested stock options and SARs held by Mr. Mulva, J.A. Carrig, B.Z. Parker,
J.B. Whitworth, all other Phillips executive officers and all Phillips directors
are expected to be [ ], [ ], [ ], [ ], and [ ],
respectively. As of [ ], 2002, the number of shares underlying other
unvested stock-based awards held by Messrs. Mulva, Carrig, Parker, Whitworth,
all other Phillips executive officers and all Phillips directors are expected to
be [ ], [ ], [ ], [ ], [ ] and [ ], respectively.
EMPLOYMENT AGREEMENT WITH JAMES J. MULVA
As of November 18, 2001, Phillips and New Parent entered into an employment
agreement with James J. Mulva under which Mr. Mulva will serve as Chief
Executive Officer and President of New Parent beginning upon completion of the
merger, and as Chairman of the New Parent Board of Directors, beginning when Mr.
Dunham ceases to hold that position. Unless either party gives a notice of
nonrenewal, the initial three-year term of the agreement will be automatically
extended by one year on each anniversary of the completion of the merger, but
not beyond the end of the month in which Mr. Mulva attains age 65.
During his employment under this new agreement, Mr. Mulva will have general
responsibility for the management of New Parent as provided in the by-laws of
New Parent, reporting directly to the New Parent Board of Directors, and he will
be a member of the New Parent Board of Directors. His services will be performed
at New Parent's headquarters in the Houston, Texas metropolitan area. He will
have all the customary duties and responsibilities of a chief executive officer
and president, and all of New Parent's
51
executive officers will report directly to him or indirectly to him through
another such executive officer who reports to him. While Mr. Dunham is serving
as Chairman of the New Parent Board of Directors, Mr. Mulva will work with Mr.
Dunham on external stakeholder relations (community, state, federal and foreign
governments), business development (growth) initiatives, and the creation of an
outstanding and cohesive New Parent Board of Directors. Furthermore, while Mr.
Dunham is Chairman of the New Parent Board of Directors, Messrs. Mulva and
Dunham will jointly recommend to the New Parent Board of Directors the
long-range strategic plan for New Parent, major acquisitions and divestitures,
and major changes to New Parent's capital structure and with respect to all
other matters, Mr. Mulva will, in consultation with Mr. Dunham, arrange the
agenda for meetings of the New Parent Board of Directors, and will report to the
New Parent Board of Directors and arrange for other executives and advisors to
report to the New Parent Board of Directors. Until the later of October 1, 2004
and the second anniversary of completion of the merger, Mr. Mulva's duties and
responsibilities may not be terminated or diminished, except by the affirmative
vote of two-thirds of the members of the New Parent Board of Directors.
While Mr. Dunham is Chairman, Mr. Mulva's compensation and benefits will be
the same as Mr. Dunham's. Mr. Mulva's base salary will be not less than his
annual base salary as in effect immediately before completion of the merger,
subject to annual review, and increased as necessary to be substantially
consistent with competitive industry practice. In addition, Mr. Mulva will be
awarded annual bonus opportunities substantially consistent with competitive
industry practice. Mr. Mulva will also be entitled to other compensation,
benefits and perquisites to the extent applicable generally to other executives
of New Parent. In connection with Mr. Mulva's relocation to Houston, Texas,
Phillips will provide Mr. Mulva with the home sale assistance that he would have
received, had he been eligible for such assistance under the Phillips Work Force
Stabilization Plan.
If New Parent terminates Mr. Mulva's employment other than for death,
disability or cause, or Mr. Mulva resigns for good reason, Mr. Mulva will
receive a lump sum payment equal to three times the sum of his annual base
salary and the average of the two highest annual bonuses paid or awarded to him
for the last three full fiscal years, a pro-rata bonus for the year in which the
termination occurs, and the value of the additional pension benefits he would
have received, had he continued to be employed by New Parent for an additional
three years. In addition, he will be granted the stock options and other equity-
based awards to which he would have been entitled, had his employment continued
for three additional years, all of his then-outstanding unvested equity-based
awards will vest and the remaining term for exercise of his stock options will
be not less than one year or, if shorter, until the date they would have
expired, had his employment continued for three years. His welfare benefits will
continue for three years after the termination date or, if longer, until age 70,
and he will receive tax and financial planning benefits with related income tax
gross-ups so long as he or his family hold New Parent stock options. In
addition, if a future change of control of New Parent precedes or occurs within
one year following the termination date, Mr. Mulva will have the right to cash
out his equity-based compensation awards at the most favorable price paid in the
context of the change of control. Mr. Mulva's stock options and other equity-
based awards will also vest upon termination of his employment at or after the
expiration of the agreement.
New Parent will pay Mr. Mulva's legal fees and expenses incurred in any
contest involving the employment agreement. If any payments or benefits that Mr.
Mulva receives are subject to the excise tax imposed under Section 4999 of the
Internal Revenue Code, he will receive an additional payment to restore him to
the after-tax position that he would have been in, if the excise tax had not
been imposed. However, it is not expected that any such excise tax will be owed.
If the merger were completed on July 1, 2002 and the employment of Mr.
Mulva were terminated without "cause" immediately thereafter, the estimated cash
severance that would be payable to Mr. Mulva under the agreement, based on
certain assumptions and currently available information, would be $[ ].
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GRANTS OF STOCK OPTIONS AND RESTRICTED STOCK UNITS TO JAMES J. MULVA
On November 17, 2001, Mr. Mulva was granted options to purchase 750,000
shares of Phillips common stock for $51.31 per share, which is the average of
the high and low trading prices of Phillips common stock on November 16, 2001,
and options to purchase 750,000 shares of Phillips common stock for $64.13 per
share, which is 125% of the average of the high and low trading prices of
Phillips common stock on November 16, 2001. These options will be converted into
options for New Parent common stock when the merger is completed. Generally, the
options will vest one-third on completion of the merger, one-third on the first
anniversary thereof, and one-third on the second anniversary thereof. If the
merger is not completed, they will vest on November 17, 2007. The options will
also vest upon a future change of control other than the merger, and as required
by his employment agreement in the case of certain terminations of employment.
Mr. Mulva was also granted, on November 17, 2001, 250,000 restricted stock
units based on shares of Phillips common stock, which will be converted into
units based on New Parent common stock when the merger is completed. Additional
restricted stock units representing a number of shares having a fair market
value equal to the value of the dividends that would have been paid on the units
if they had been actual shares will be credited to Mr. Mulva under the award
when dividends are paid on the Phillips common stock or, after the merger, New
Parent common stock.
The restricted stock units will be forfeited if the merger is not
completed. If the merger is completed, the restricted stock units will vest on
June 19, 2006. The units will also vest upon a future change of control other
than the merger, upon his death or disability, and as required by his employment
agreement in the case of certain terminations of employment. When the units
vest, Mr. Mulva will be paid the value of the units, unless he has previously
elected to defer the payments under the Phillips Key Employee Deferred
Compensation Plan.
EXECUTIVE SEVERANCE PLAN
Phillips maintains an Executive Severance Plan that provides for the
payment of certain severance benefits to participants, including Phillips'
executive officers, in the event of a termination of a participant's employment
within two years after a change in control of Phillips either (1) by Phillips,
other than for death, disability, transfer to another employer, retirement,
cause, as a result of certain sales of subsidiaries or divisions, or (2) by the
participant, within 90 days of an event constituting good reason. Stockholder
approval of the merger will constitute a change in control of Phillips for
purposes of this severance plan. Upon completion of the merger, the plan will be
assumed by New Parent.
"Group one" participants in the plan, which include Phillips' Executive
Vice Presidents and Senior Vice Presidents and, until completion of the merger,
Mr. Mulva, receive severance benefits based on three years' pay, and "group two"
participants, including Phillips' Vice Presidents, receive benefits based on two
years' pay. The severance benefits under the severance plan consist of:
- a lump-sum payment of three or two times the sum of the participant's
base salary and the greater of (1) the bonus earned by the participant
for the last fiscal year before the termination date or (2) the highest
target award for the calendar year of the termination date; and
- continuation of medical, dental and prescription drug coverage for 18
months after the termination date.
The participant will also be credited with additional years of service
under Phillips' retirement plans based upon the number of years represented by
the above lump-sum payment, and up to one year's worth of such lump-sum payment
will be treated as pensionable earnings.
In addition, in the event that a participant institutes any legal action
seeking to obtain or enforce any right or benefit provided by the severance
plan, the participant is entitled to be reimbursed for all reasonable costs and
expenses relating to such legal action, including any legal fees and expenses
incurred by the participant, unless a court makes a determination that the
participant's position was frivolous.
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Finally, if the participant relocates in order to secure new employment, he or
she will be entitled to the home sale assistance benefits provided under the
Phillips Work Force Stabilization Plan.
If any payments or benefits that a participant receives are subject to the
excise tax imposed under Section 4999 of the Internal Revenue Code, the
participant will generally receive an additional payment to restore such
participant to the after-tax position that the participant would have been in if
the excise tax had not been imposed, except that, if the payments or benefits
that the participant receives do not exceed 110% of the maximum amount that the
participant is permitted to receive without being subjected to the golden
parachute excise taxes, no such additional payment will be made, and the amounts
payable under the severance plan will be reduced to the maximum amount
permissible to avoid imposition of the tax. However, it is not expected that any
such excise tax will be owed.
If the merger were completed on July 1, 2002 and the employment of Phillips
executive officers other than Mr. Mulva were terminated without cause
immediately thereafter, the estimated cash severance that would be payable under
the severance plan, plus the value of the additional retirement benefits
described above, based on certain assumptions and currently available
information, to Messrs. Carrig, Parker, Whitworth, and all other Phillips
executive officers would be $[ ], $[ ], $[ ], and $[ ],
respectively. After the completion of the merger, Mr. Mulva will not be eligible
to receive any severance benefits under the severance plan because it will be
superseded by his new employment agreement with Phillips and New Parent,
described above.
INDEMNIFICATION AND INSURANCE
The merger agreement includes provisions relating to indemnification and
insurance for directors, officers and employees of Conoco and Phillips. See "The
Merger Agreement -- Indemnification and Insurance."
LISTING OF NEW PARENT CAPITAL STOCK
It is a condition to the completion of the merger that New Parent common
stock issuable to Conoco and Phillips stockholders pursuant to the merger
agreement be approved for listing on the New York Stock Exchange.
DIVIDENDS
Pursuant to the merger agreement, each of Conoco and Phillips are
prohibited from making any changes to their dividend policies prior to the
completion of the merger without the other's consent. The most recent quarterly
dividend declared by Conoco was $0.19 per share payable on December 10, 2001.
Conoco's current dividend is $0.76 per share of Conoco common stock on an annual
basis. The most recent quarterly dividend declared by Phillips was $0.36 per
share payable on December 3, 2001. Phillips' current dividend is $1.44 per share
of Phillips common stock on an annual basis.
We expect that, after the completion of the merger, New Parent will adopt a
competitive dividend policy. The payment of dividends by New Parent, however,
will be subject to approval and declaration by the New Parent Board of
Directors, and will depend on a variety of factors, including business,
financial and regulatory considerations.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following general discussion summarizes the anticipated material U.S.
federal income tax consequences of the merger to holders of Conoco common stock
and holders of Phillips common stock. This summary applies only to holders of
Conoco common stock or Phillips common stock that are U.S. holders.
54
For purposes of this discussion, a U.S. holder means:
- a citizen or resident of the United States,
- a corporation or other entity taxable as a corporation created or
organized under the laws of the United States or any of its political
subdivisions,
- a trust, if a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. fiduciaries have the
authority to control all substantial decisions of the trust, or
- an estate that is subject to U.S. federal income tax on its income,
regardless of its source.
This discussion is based upon the Internal Revenue Code, Treasury
regulations, administrative rulings and judicial decisions currently in effect,
all of which are subject to change, possibly with retroactive effect. The
discussion applies only to Conoco stockholders that hold their Conoco common
stock and Phillips stockholders that hold their Phillips common stock as a
capital asset within the meaning of Section 1221 of the Internal Revenue Code.
Further, the discussion does not address all aspects of U.S. federal income
taxation that may be relevant to a particular stockholder in light of his, her
or its personal investment circumstances or to stockholders subject to special
treatment under the U.S. federal income tax laws, including:
- insurance companies,
- tax-exempt organizations,
- dealers in securities or foreign currency,
- banks or trusts,
- financial institutions,
- mutual funds,
- persons that hold their Conoco common stock or Phillips common stock as
part of a straddle, a hedge against currency risk or a constructive sale
or conversion transaction,
- persons that have a functional currency other than the U.S. dollar,
- investors in pass-through entities,
- stockholders who acquired their Conoco common stock or Phillips common
stock through the exercise of options, or otherwise as compensation or
through a tax-qualified retirement plan, or
- holders of options granted under any Conoco or Phillips benefit plan.
THE SUMMARY DOES NOT ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN, STATE OR
LOCAL TAX CONSEQUENCES OF THE MERGER. THE SUMMARY DOES NOT ADDRESS THE TAX
CONSEQUENCES OF ANY TRANSACTION OTHER THAN THE MERGER. ACCORDINGLY, EACH CONOCO
STOCKHOLDER AND PHILLIPS STOCKHOLDER IS STRONGLY URGED TO CONSULT WITH A TAX
ADVISOR TO DETERMINE THE PARTICULAR FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR
OTHER TAX CONSEQUENCES OF THE MERGER TO THE HOLDER.
The following discussion is not binding on the Internal Revenue Service.
None of Conoco, Phillips or New Parent has requested a ruling from the Internal
Revenue Service with respect to any of the U.S. federal income tax consequences
of the merger and, as a result, there can be no assurance that the Internal
Revenue Service will not disagree with or challenge any of the conclusions
described below.
We have structured the transaction so that it is anticipated that the
merger of Corvette Merger Corp. with and into Conoco and the merger of Porsche
Merger Corp. with and into Phillips will each be a reorganization for U.S.
federal income tax purposes, and that the merger will constitute an exchange
described in Section 351 of the Internal Revenue Code. Completion of the merger
is conditioned upon, among other things, (1) the receipt by Conoco of a written
opinion dated the closing date of Cravath,
55
Swaine & Moore, counsel to Conoco, to the effect that for U.S. federal income
tax purposes, the merger of Corvette Merger Corp. with and into Conoco will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code and/or the mergers, taken together, will constitute an exchange
described in Section 351 of the Internal Revenue Code and (2) the receipt by
Phillips of a written opinion dated the closing date of Wachtell, Lipton, Rosen
& Katz, counsel to Phillips, to the effect that for U.S. federal income tax
purposes, the merger of Porsche Merger Corp. with and into Phillips will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code and/or the mergers, taken together, will constitute an exchange
described in Section 351 of the Internal Revenue Code. Those opinions will be
based upon customary assumptions and representations, including representations
made by Conoco and Phillips.
Assuming the merger of Corvette Merger Corp. with and into Conoco and the
merger of Porsche Merger Corp. with and into Phillips each constitutes a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
and/or the mergers, taken together, constitute an exchange described in Section
351 of the Internal Revenue Code:
- no gain or loss will be recognized by Conoco stockholders or Phillips
stockholders on the exchange of Conoco common stock or Phillips common
stock, respectively, for New Parent common stock in the transaction,
except with respect to cash received by Conoco stockholders in lieu of
fractional shares of New Parent common stock,
- the aggregate adjusted basis of the New Parent common stock received in
the transaction by Conoco stockholders or Phillips stockholders will be
equal to the aggregate adjusted basis of those stockholders' Conoco
common stock or Phillips common stock, as the case may be, exchanged for
the New Parent common stock reduced, in the case of a Conoco stockholder
that receives cash in lieu of fractional shares of New Parent common
stock, by any amount allocable to the fractional share interests in New
Parent common stock for which cash is received, and
- the holding period of New Parent common stock received in the merger by a
Conoco stockholder or Phillips stockholder, including, in the case of a
Conoco stockholder, any New Parent fractional interest deemed received in
the merger, will include the holding period of the stockholder's Conoco
common stock or Phillips common stock, as the case may be, exchanged for
that New Parent common stock.
The receipt of cash instead of a fractional share of New Parent common
stock by a holder of Conoco common stock will result in taxable gain or loss to
that Conoco stockholder for U.S. federal income tax purposes equal to the
difference between the amount of cash received by the Conoco stockholder and the
Conoco stockholder's adjusted tax basis in its Conoco common stock allocable to
the fractional share as set forth above. The gain or loss will generally
constitute capital gain or loss and will constitute long-term capital gain or
loss if the holder's holding period is greater than 12 months as of the date of
the merger. For non-corporate holders, this long-term capital gain generally
will be taxed at a maximum U.S. federal income tax rate of 20%. The
deductibility of capital losses is subject to limitation. Certain non-corporate
Conoco stockholders and Phillips stockholders, as the case may be, may be
subject to backup withholding at a rate not to exceed 30% on cash payments
received instead of fractional shares of New Parent common stock unless they
comply with certain certification requirements.
ACCOUNTING TREATMENT
The merger will be accounted for using purchase accounting. Although the
business combination of Conoco and Phillips is a merger of equals, generally
accepted accounting principles require that one of the two companies in the
transaction be designated as the acquiror for accounting purposes. Phillips has
been designated as the acquiror based on the fact that its stockholders are
expected to hold more than 50% of the New Parent stock after the merger. The
purchase price (based on the price of Phillips common stock two days before and
after November 19, 2001) will be allocated to Conoco's identifiable assets and
liabilities based on their estimated fair market values at the date of the
completion of the merger, and any excess of the purchase price over those fair
market values will be accounted for as goodwill. The results of
56
final valuations of property, plant and equipment, and intangible and other
assets and the finalization of any potential plans of restructuring have not yet
been completed. We may revise the allocation of the purchase price when
additional information becomes available.
REGULATORY MATTERS
Certain regulatory requirements imposed by U.S. and foreign regulatory
authorities must be complied with before the merger is completed. Conoco and
Phillips are not aware of any material governmental consents or approvals that
are required prior to the completion of the merger other than those described
below. We have agreed that, if any additional governmental consents and
approvals are required, we shall each use our reasonable best efforts to obtain
these consents and approvals.
Under the HSR Act and the rules promulgated under it by the U.S. Federal
Trade Commission, which we refer to as the FTC, the merger cannot be completed
until notifications have been given and certain information has been furnished
to the FTC and the Antitrust Division of the U.S. Department of Justice, which
we refer to as the Antitrust Division, and the specified waiting periods have
expired or been terminated. Conoco and Phillips intend to file notification and
report forms under the HSR Act with the FTC and the Antitrust Division on
[ ], in which case the waiting period under the HSR Act will
expire at 11:59 p.m., Eastern Time, on [ ] unless the FTC or
Antitrust Division makes a request for additional information or documentary
material before that time or the waiting period is terminated earlier.
At any time before or after completion of the merger, the Antitrust
Division or the FTC or any state could take such action under the antitrust laws
as it deems necessary or desirable in the public interest, including seeking to
enjoin the completion of the merger, to rescind the merger or to seek
divestiture of particular assets of Conoco or Phillips. Private parties also may
seek to take legal action under the antitrust laws under certain circumstances.
A challenge to the merger on antitrust grounds may be made, and, if such a
challenge is made, it is possible that Conoco and Phillips will not prevail.
Completion of the merger may also require other regulatory approvals of
foreign regulatory authorities. Under the laws of certain jurisdictions, the
merger may not be completed unless certain filings are made with the antitrust
regulatory authorities of these jurisdictions and these authorities approve or
clear the merger. Conoco and Phillips each conducts business in member states of
the European Union. Council Regulation (EEC) 4064/89, as amended, requires
notification to and approval by the European Commission of mergers or
acquisitions involving parties with aggregate worldwide sales and individual
European Union sales exceeding specific thresholds before these mergers or
acquisitions are implemented. Conoco and Phillips intend to file a merger
notification with the European Union antitrust authorities as soon as
practicable.
The European Commission must review the merger to determine whether or not
it is compatible with the common market, and, accordingly, whether or not to
permit it to proceed. A merger or acquisition that does not create or strengthen
a dominant position that would significantly impede effective competition in the
common market or in a substantial part of it shall be declared compatible with
the common market and must be allowed to proceed. If, following a preliminary
one-month Phase I investigation, the European Commission determines that it
needs to examine the merger more closely because the merger raises serious
doubts as to its compatibility with the common market, it must initiate a Phase
II investigation. If it initiates a Phase II investigation, the European
Commission must issue a final decision as to whether or not the merger is
compatible with the common market no later than four months after the initiation
of the Phase II investigation.
Conoco and Phillips intend to make a short-form pre-merger notification
filing with the Commissioner of Competition under the Competition Act (Canada)
as soon as practicable. Verification by the Competition Bureau of receipt of a
complete notification will begin the running of a 14-day statutory waiting
period. The Commissioner has the ability to require a long-form pre-merger
notification to be made where he believes one is justified, in which case
receipt of a complete long-form notification will begin the running of a further
42-day statutory waiting period. Conoco and Phillips may implement the
57
merger at the conclusion of the relevant waiting period, unless the Commissioner
obtains an order from the Canadian Competition Tribunal preventing or delaying
the completion of the transaction. In addition to a Canadian competition filing,
Phillips and Conoco may also be required to file a notification or application
for review under the Investment Canada Act, which is a foreign investment,
rather than competition, law.
Conoco and Phillips conduct operations in a number of jurisdictions where
other regulatory filings or approvals may be required or advisable in connection
with the completion of the merger. Under the merger agreement, we are required
to obtain these approvals prior to completing the merger, unless the failure to
obtain the approvals would not have a material adverse effect on New Parent
after completion of the merger. Conoco and Phillips are currently reviewing
whether filings or approvals may be required or advisable in those jurisdictions
that may be material to Conoco and Phillips. These jurisdictions include, but
are not limited to, Australia, Brazil, Czech Republic and Poland.
It is possible that any of the regulatory authorities with which filings
are made may seek regulatory concessions as conditions for granting approval of
the merger. Under the merger agreement, each of Conoco and Phillips has agreed
to use its reasonable best efforts to complete the merger, including to gain
clearance from antitrust and competition authorities and to obtain other
required approvals. However, neither Conoco nor Phillips nor any of their
respective subsidiaries is required to hold separate or divest any of their
businesses or assets, or to take, or to agree to take, any action or agree to
any limitation that could reasonably be expected to have a material adverse
effect on New Parent after giving effect to the merger or to impair
substantially the benefits that Conoco and Phillips expected to realize from the
merger at the time they entered into the merger agreement. Also, neither Conoco
nor Phillips is required to agree to any divestiture, to hold separate any
business or to take any other action that is not conditional on the consummation
of the merger.
Prior to completing the merger, the applicable waiting period under the HSR
Act must expire or be terminated, and Conoco and Phillips are required to obtain
antitrust approvals from the European Commission and any other regulatory
authorities if the failure to obtain antitrust approvals of those regulatory
authorities would have a material adverse effect on New Parent after the
completion of the merger.
Although we do not expect regulatory authorities to raise any significant
objections in connection with their review of the merger, we cannot assure you
that we will obtain all required regulatory approvals or that these regulatory
approvals will not contain terms, conditions or restrictions that would be
detrimental to New Parent after the completion of the merger.
APPRAISAL RIGHTS
Under the Delaware General Corporation Law, neither Conoco stockholders nor
Phillips stockholders will have any appraisal rights as a result of the merger.
RESALE OF NEW PARENT COMMON STOCK
New Parent common stock issued in the merger will not be subject to any
restrictions on transfer arising under the Securities Act of 1933, as amended,
except for shares of New Parent common stock issued to any Conoco stockholder or
Phillips stockholder that is, or is expected to be, an "affiliate" of Conoco or
Phillips, as applicable, for purposes of Rule 145 under the Securities Act.
Persons that may be deemed to be "affiliates" of Conoco or Phillips for such
purposes generally include individuals or entities that control, are controlled
by, or are under common control with, Conoco or Phillips, respectively, and
include the directors of Conoco and Phillips, respectively. The merger agreement
requires each of Conoco and Phillips to use its reasonable best efforts to cause
each of its affiliates to execute a written agreement with New Parent to the
effect that they will not transfer any New Parent common stock received in the
merger, except pursuant to an effective registration statement under the
Securities Act or in a transaction not required to be registered under the
Securities Act.
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This joint proxy statement/prospectus does not cover resales of New Parent
common stock received by any person upon completion of the merger, and no person
is authorized to make any use of this joint proxy statement/prospectus in
connection with any resale.
LEGAL PROCEEDINGS RELATED TO THE MERGER
Several complaints have been filed and remain pending in the Delaware Court
of Chancery naming as defendants one or more of Conoco, the directors of Conoco
and Phillips. The complaints purport to be filed on behalf of holders of Conoco
common stock and allege breaches of fiduciary duty by Conoco directors and, in
certain complaints, aiding and abetting these breaches of fiduciary duty by
Phillips, in connection with the merger of Conoco and Phillips. The plaintiffs
in each case seek to enjoin completion of the merger and/or damages. No answers
have been filed and no applications for preliminary relief have been made. Each
of Conoco and Phillips intends to defend against these lawsuits vigorously.
THE MERGER AGREEMENT
The following summary of the merger agreement is qualified by reference to
the complete text of the merger agreement, which is attached as Annex A to this
joint proxy statement/prospectus and is incorporated in this joint proxy
statement/prospectus by reference and attached as Annex A.
THE MERGER
Pursuant to the merger agreement, Corvette Merger Corp. will merge with and
into Conoco and Porsche Merger Corp. will merge with and into Phillips, with
each of Conoco and Phillips surviving as wholly owned subsidiaries of New
Parent. In the merger, each outstanding share of Conoco common stock will be
converted into the right to receive 0.4677 of a share of New Parent common
stock, and each outstanding share of Phillips common stock will be converted
into the right to receive one share of New Parent common stock.
MERGER CONSIDERATION
The merger agreement provides that each share of Conoco common stock
outstanding immediately prior to the effectiveness of the merger will be
converted into the right to receive 0.4677 of a share of New Parent common stock
upon the effectiveness of the merger. Any shares of Conoco capital stock held by
Conoco as treasury shares or owned by Conoco, New Parent, Corvette Merger Corp.
or Porsche Merger Corp. will be canceled without any payment for those shares.
The merger agreement provides that each share of Phillips common stock
outstanding immediately prior to the effectiveness of the merger will be
converted into the right to receive one share of New Parent common stock upon
the effectiveness of the merger. Any shares of Phillips capital stock held by
Phillips as treasury shares or owned by Phillips, New Parent, Corvette Merger
Corp. or Porsche Merger Corp. will be canceled without any payment for those
shares.
PROCEDURES FOR EXCHANGE OF SHARE CERTIFICATES; FRACTIONAL SHARES
Conoco stockholders and Phillips stockholders should not return share
certificates with the enclosed proxy card.
As soon as reasonably practicable after the completion of the merger,
[ ], the exchange agent, will mail the following materials to each
holder of record of Conoco common stock whose shares were converted into the
right to receive shares of New Parent common stock:
- a letter of transmittal for use in submitting their shares to the
exchange agent for exchange, and
- instructions explaining what Conoco stockholders must do to effect the
surrender of Conoco share certificates in exchange for the consideration
to be issued in the merger.
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Conoco stockholders should complete and sign the letter of transmittal and
return it to the exchange agent together with the Conoco stockholders' share
certificates in accordance with the instructions.
Upon completion of the merger, each Conoco share certificate will represent
only the right to receive 0.4677 of a share of New Parent common stock, with
cash instead of any fractional shares of New Parent common stock. New Parent
will not issue any fractional shares of New Parent common stock upon the
conversion of Conoco common stock.
Phillips share certificates of Phillips stockholders immediately prior to
the completion of the merger will be deemed to represent New Parent common stock
upon completion of the merger. Phillips stockholders, however, may elect to
exchange their Phillips share certificates for New Parent share certificates, at
their option.
At or prior to the completion of the merger, New Parent will deposit with
the exchange agent, in trust for the benefit of the former Conoco stockholders,
New Parent share certificates and will make available to the exchange agent cash
sufficient to pay to each former Conoco stockholder after the completion of the
merger an amount in cash equal to the product of any fractional share interest
to which the former Conoco stockholder would otherwise be entitled and the
closing price for a share of New Parent common stock as reported on the New York
Stock Exchange on the first trading day following the date of the completion of
the merger.
No dividends or distributions with a record date after the merger will be
paid to the holders of any unsurrendered Conoco share certificate, nor will
those holders be paid cash for any fractional shares of New Parent common stock
until their Conoco share certificates are surrendered to the exchange agent for
exchange. When their Conoco share certificates are surrendered, any unpaid
dividends and any cash instead of fractional shares will be paid without
interest.
All shares of New Parent common stock issued upon surrender of Conoco share
certificates, including any cash paid instead of any fractional shares of New
Parent common stock, will be deemed to have been issued in full satisfaction of
all rights relating to those shares of Conoco common stock. Each of Conoco and
Phillips will remain obligated, however, to pay any dividends or make any other
distributions declared or made by Conoco or Phillips on Conoco common stock or
Phillips common stock, as appropriate, with a record date before the completion
of the merger and that remain unpaid at the completion of the merger. If Conoco
share certificates or Phillips share certificates are presented to New Parent,
Conoco, Phillips or the exchange agent after the completion of the merger, they
will be canceled and exchanged as described above.
REPRESENTATIONS AND WARRANTIES
Conoco and Phillips have each made a number of representations and
warranties to the other regarding aspects of our respective businesses,
financial condition, capitalization, corporate structure and other facts
pertinent to the merger. The topics covered by these representations and
warranties include the following:
- corporate organization, existence, good standing, power and authority;
- subsidiaries;
- capitalization;
- authorization, execution, delivery and performance and the enforceability
of the merger agreement and the absence of conflicts or violations under
organizational documents, certain agreements and applicable laws or
decrees, as a result of the contemplated transactions;
- receipt of all required consents and approvals;
- filings with the Securities and Exchange Commission and the accuracy and
completeness of the information contained in those filings, including the
financial statements;
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- the absence of undisclosed material liabilities;
- the absence of certain changes or events since September 30, 2001;
- legal proceedings;
- compliance with applicable law;
- environmental matters;
- employee benefit plans and labor matters;
- taxes;
- reorganization within the meaning of Section 368(a) of the Internal
Revenue Code and/or exchange under Section 351 of the Internal Revenue
Code;
- the accuracy of the information contained in this joint proxy statement
and prospectus, and the compliance of this joint proxy statement and
prospectus with the applicable U.S. securities laws;
- state takeover laws, rights plans;
- the receipt of fairness opinions from our respective financial advisors;
- approval by the Conoco Board of Directors and the Phillips Board of
Directors;
- brokers' fees; and
- ownership of the other company's capital stock.
Many of the representations and warranties are qualified by a material
adverse effect standard. A material adverse effect, with respect to either
Conoco or Phillips, means a material adverse effect on (1) the business,
operations, results of operations or financial condition of Conoco or Phillips,
as the case may be, and its respective subsidiaries taken as a whole, or (2) the
ability of Conoco or Phillips to timely consummate the transactions contemplated
by the merger agreement, except, in each case, for any effect reasonably
attributable to:
- general political and economic conditions (including prevailing interest
rate and stock market levels) in the United States or the other countries
in which it operates;
- the general state of the industries in which it operates; or
- the negotiation, announcement, execution or delivery of the merger
agreement or the consummation of the transactions contemplated by the
merger agreement.
INTERIM OPERATIONS OF CONOCO AND PHILLIPS
Under the merger agreement, each of Conoco and Phillips and their
respective subsidiaries has agreed that, prior to completion of the merger,
except as expressly contemplated or permitted by the merger agreement, it will
carry on its respective business in the usual, regular and ordinary course in
all material respects, substantially in the same manner as previously conducted,
and will use its reasonable best efforts, among other things, to retain its key
employees and to preserve intact its present lines of business and its
relationships with third parties so that its ongoing businesses will not be
impaired in any material respect at the completion of the merger. Each of Conoco
and Phillips has also agreed that it will not, and it will not permit any of its
subsidiaries to, enter into any new material line of business or incur or commit
any capital expenditures or any obligations or liabilities in connection with
such capital expenditures, other than as previously disclosed to the other party
or in the ordinary course of business consistent with past practice.
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In addition to these agreements regarding the conduct of business
generally, subject to specified exceptions, each of Conoco and Phillips has
agreed to specific restrictions relating to the following:
- the declaration or payment of dividends;
- the alteration of share capital, including, among other things, stock
splits, combinations or reclassifications;
- the repurchase or redemption of capital stock;
- the issuance or sale of capital stock, any voting debt, stock options or
other equity interests;
- the amendment of its certificate of incorporation or by-laws;
- the acquisition of material assets or other entities;
- the disposition of material assets;
- the extension of loans, advances, capital contributions or investments;
- the incurrence or guarantee of debt;
- the issuance or sale of debt securities, warrants or other rights to
acquire debt securities;
- the taking of actions that would prevent or impede the merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code or from qualifying as an exchange within the
meaning of Section 351 of the Internal Revenue Code;
- changes in compensation of directors or executive officers of the company
and its significant subsidiaries;
- changes to employee benefits;
- changes in accounting policies and procedures;
- the amendment or waiver of any standstill agreements; and
- any actions for the purpose of preventing, delaying or impeding the
completion of the merger or any other transaction contemplated by the
merger agreement.
EMPLOYEE BENEFIT MATTERS
After the completion of the merger, New Parent and its subsidiaries will
honor the obligations under employment agreements, severance arrangements and
employee and director stock plans of Conoco and Phillips and their respective
subsidiaries existing as of the date of the merger agreement in accordance with
their terms.
New Parent will also adopt and assume the employee and director stock plans
of Conoco and Phillips effective upon completion of the merger.
Subject to obligations under applicable law, it is the intention of Conoco
and Phillips to develop new benefit plans, as soon as reasonably practicable
following the completion of the merger, which, among other things, (1) treat
similarly situated employees on a substantially equivalent basis, taking into
account all relevant factors, including duties, geographic location, tenure,
qualifications and abilities, and (2) do not discriminate between employees who
were covered by Conoco benefit plans, on the one hand, or Phillips benefit
plans, on the other hand. It is the current intention of Conoco and Phillips
that, for one year following the completion of the merger, New Parent will
provide employee benefits to employees and former employees of Conoco or
Phillips and their subsidiaries that are comparable in the aggregate to those
provided to those employees pursuant to the benefit plans of Conoco or Phillips
or their subsidiaries, respectively, in effect on the date of the merger
agreement and the date of the completion of the merger.
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With respect to benefit plans in which employees and former employees of
Conoco or Phillips become eligible to participate after the completion of the
merger, and in which such employees and former employees did not participate
prior to the completion of the merger, New Parent will:
- waive all pre-existing conditions, exclusions and waiting periods under
the new benefit plan with respect to applicable participation and
coverage requirements, except to the extent those conditions, exclusions
and waiting periods would apply under the analogous benefit plan of
Conoco or Phillips, as the case may be;
- provide each employee and his or her eligible dependents with credit for
any co-payments and deductibles paid prior to the completion of the
merger under a benefit plan of Conoco or Phillips to the same extent that
such credit was given prior to the completion of the merger under the
analogous benefit plan of Conoco or Phillips, as the case may be, in
satisfying any applicable deductible or out-of-pocket requirements under
any new benefit plan; and
- recognize all service with Conoco and Phillips, and their respective
affiliates, for all purposes (including purposes of eligibility to
participate, vesting credit, entitlement to benefits, and, except with
respect to defined benefit pension plans, benefit accrual) to the extent
that service is taken into account under the new benefit plan, but not if
such credit would result in the duplication of benefits.
EFFECT ON AWARDS OUTSTANDING UNDER STOCK PLANS
Pursuant to the merger agreement, each stock option and other stock-based
award of Conoco and Phillips will be converted into a stock option to acquire,
or right in respect of, the same number of shares of New Parent common stock as
the holder of that stock option or stock-based award would have been entitled to
receive pursuant to the merger had the holder exercised that stock option or
stock-based award immediately prior to the completion of the merger. The
exercise price or base price of each Conoco stock option and Conoco stock-based
award that is converted into a New Parent stock option and New Parent
stock-based award will be equal to the exercise price or base price of the
applicable Conoco stock option or Conoco stock-based award divided by 0.4677.
The exercise price or base price of each Phillips stock option and Phillips
stock-based award that is converted into a New Parent stock option and New
Parent stock-based award will be equal to the exercise price or base price of
the applicable Phillips stock option or Phillips stock-based award. The terms
and conditions of the New Parent options and stock-based awards will otherwise
be the same as were applicable under the stock option or stock-based award of
Conoco or Phillips, as the case may be, but taking into account any changes,
including acceleration, provided for in the applicable stock plan of Conoco or
Phillips, as the case may be, in any applicable award agreement or as a result
of the merger agreement or the transactions contemplated by the merger
agreement. All dividend equivalents credited to the account of each holder of a
stock-based award of Conoco or Phillips as of the completion of the merger will
remain credited to that holder's account immediately following the completion of
the merger, subject to adjustment in the same manner as provided above for the
adjustment of stock-based awards of Conoco and Phillips.
All Conoco stock options, Phillips stock options and other stock-based
awards, granted, or committed to be granted, after the merger agreement was
signed shall be on terms consistent with past practice, except that no reload
rights may be granted, and the vesting, exercisability or lapse of restrictions
with respect to any Conoco stock option, Phillips stock option or other
stock-based award will not accelerate as a result of the approval or
consummation of any transaction contemplated by the merger agreement.
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"NO SOLICITATION" COVENANT
Conoco, Phillips, their respective subsidiaries, and the directors and
officers of Conoco, Phillips and their respective subsidiaries, will not, and
Conoco and Phillips must use their reasonable best efforts to cause their and
their subsidiaries' employees, agents and representatives not to:
- initiate, solicit, encourage or knowingly facilitate any inquiries or the
making of any proposal or offer with respect to an acquisition proposal,
- have any discussions with or provide any confidential information or data
to a third party relating to an acquisition proposal, or engage in any
negotiations regarding any acquisition proposal, or knowingly facilitate
any effort or attempt to make or implement an acquisition proposal,
- approve or recommend, or propose publicly to approve or recommend, any
acquisition proposal or
- approve or recommend, or propose to approve or recommend, or execute or
enter into, any letter of intent, agreement in principle, merger
agreement, acquisition agreement or other similar agreement related to
any acquisition proposal.
Notwithstanding the foregoing, each of the Conoco Board of Directors and
the Phillips Board of Directors is permitted to: (1) change its recommendation
to its stockholders or (2) engage in discussions or negotiations with, or
provide any information to, a third party in response to an unsolicited bona
fide written acquisition proposal for the company, if:
- the vote of the company's stockholders on the adoption of the merger
agreement has not been taken;
- in the case of clause (1) above, the company's board of directors, in
good faith, concludes that the acquisition proposal is a superior
proposal, and, in the case of clause (2) above, the company's board of
directors concludes in good faith that there is a reasonable likelihood
that an acquisition proposal would lead to a superior proposal;
- the company's board of directors, after consultation with outside
counsel, determines in good faith that there is a reasonable probability
that failure to take this action would violate its fiduciary obligations;
- prior to providing any information or data to the third party, the
company executes a confidentiality agreement with the third party having
provisions that are at least as restrictive as the confidentiality
agreement, dated as of November 6, 2001, between Conoco and Phillips; and
- prior to taking any action in relation to the acquisition proposal, the
company promptly notifies the other of the existence and the terms of
such proposal or inquiry, including the name of the third party.
Additionally, notwithstanding the no solicitation covenant, the Conoco
Board of Directors and the Phillips Board of Directors are permitted to comply
with applicable law (including Rule 14d-9 and Rule 14e-2 of the Securities
Exchange Act of 1934, as amended).
"Acquisition proposal" means, with respect to Conoco and Phillips, any
inquiry, proposal or offer with respect to (1) a merger, reorganization, share
exchange, consolidation, business combination, liquidation, or similar
transaction, (2) any purchase or sale of 20% or more of the consolidated assets
(including stock of its subsidiaries) of such company and its subsidiaries,
taken as a whole, or (3) any purchase or sale of, or tender or exchange offer
for, its equity securities that, if consummated, would result in a third party
beneficially owning securities representing 20% or more of its total voting
power (or of the surviving parent entity in the transaction).
"Superior proposal" means, with respect to Conoco and Phillips, a bona fide
proposal made by a third party that is (1) for an acquisition proposal (except
that the references to 20% shall be 50%) involving such company and (2) is on
terms which the Conoco Board of Directors or the Phillips Board of Directors, as
the case may be, in good faith concludes (following advice of its financial
advisors and
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outside counsel) would result in a more favorable transaction to Conoco
stockholders or Phillips stockholders, as the case may be, from a financial
point of view and is reasonably capable of being completed.
TIMING OF CLOSING
The closing will occur on the first business day following the satisfaction
or waiver of the conditions set forth in the merger agreement, unless Conoco and
Phillips agree to a different date or time.
We expect to complete the merger in the second half of 2002.
CONDITIONS TO THE COMPLETION OF THE MERGER
Each of Conoco's and Phillips' obligations to complete the merger is
subject to the satisfaction or waiver of specified conditions before completion
of the merger, including the following:
- the adoption of the merger agreement by the affirmative vote of the
holders of a majority of the voting power of the outstanding shares of
Conoco common stock and Phillips common stock;
- the absence of any law, order or injunction prohibiting completion of the
merger;
- the expiration or termination of the applicable waiting periods under the
HSR Act;
- the approval of the merger by the European Commission and Canadian
governmental entities;
- the receipt of all other governmental and regulatory consents, approvals
and authorizations required to complete the merger, unless not obtaining
those consents or approvals would not reasonably be expected to have a
material adverse effect on New Parent after giving effect to the merger;
- the approval for listing, by the New York Stock Exchange, of the shares
of New Parent common stock to be issued, or to be reserved for issuance,
in connection with the merger, subject to official notice of issuance;
and
- the declaration of effectiveness of the registration statement on Form
S-4, of which this joint proxy statement/prospectus forms a part, by the
Securities and Exchange Commission, and the absence of any stop order or
threatened or pending proceedings seeking a stop order.
Conoco's obligation to complete the merger is subject to the satisfaction
or waiver of the following additional conditions before completion of the
merger:
- Phillips' representations and warranties contained in the merger
agreement that are qualified as to materiality or material adverse effect
must be true and correct and those material representations and
warranties not so qualified must be true and correct in all material
respects, as of the date of completion of the merger, except for
representations and warranties that address matters as of another date,
which must be true and correct as of that other date,
- Phillips must have:
- performed or complied with all agreements and covenants required to
be performed by it under the merger agreement that are qualified as
to materiality or material adverse effect, and
- performed or complied in all material respects with all other
material agreements and covenants required to be performed by it
under the merger agreement that are not so qualified, and
- Conoco must have received from Cravath, Swaine & Moore, counsel to
Conoco, a written opinion, dated the closing date, to the effect that,
for U.S. federal income tax purposes, the merger of Corvette Merger Corp.
with and into Conoco will constitute a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code and/or the mergers, taken
together, will constitute an exchange described in Section 351 of the
Internal Revenue Code.
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Phillips' obligation to complete the merger is subject to the satisfaction
or waiver of the following additional conditions before completion of the
merger:
- Conoco's representations and warranties contained in the merger agreement
that are qualified as to materiality or material adverse effect must be
true and correct and those material representations and warranties not so
qualified must be true and correct in all material respects, as of the
date of completion of the merger, except for representations and
warranties that address matters as of another date, which must be true
and correct as of that other date,
- Conoco must have:
- performed or complied with all agreements and covenants required to be
performed by it under the merger agreement that are qualified as to
materiality of material adverse effect, and
- performed or complied in all material respects with all other material
agreements and covenants required to be performed by it under the
merger agreement that are not so qualified, and
- Phillips must have received from Wachtell, Lipton, Rosen & Katz, counsel
to Phillips, a written opinion dated the closing date to the effect that,
for U.S. federal income tax purposes, the merger of Porsche Merger Corp.
with and into Phillips will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code and/or the
mergers, taken together, will constitute an exchange described in Section
351 of the Internal Revenue Code.
TERMINATION OF THE MERGER AGREEMENT
Either Conoco or Phillips may terminate the merger agreement:
- by mutual written consent of both companies;
- if the merger is not completed on or before May 18, 2003, so long as the
failure to complete the merger before that date is not the result of the
failure by the terminating company to fulfill any of its obligations
under the merger agreement;
- if a governmental entity takes any action permanently prohibiting the
transactions contemplated by the merger agreement or fails to take any
other action that is necessary to satisfy the conditions regarding the
antitrust laws, the New York Stock Exchange listing, the effectiveness of
the registration statement on Form S-4, of which this joint proxy
statement/prospectus forms a part, and that act has become final and
nonappealable;
- if either Conoco stockholders or Phillips stockholders fail to adopt the
merger agreement at a duly held meeting of stockholders;
- if the other company fails to recommend that its stockholders adopt the
merger agreement or changes its recommendation or fails to call its
special meeting;
- if the other company breaches or fails to perform any of its
representations, warranties, covenants or other agreements contained in
the merger agreement and the breach or failure cannot be cured on or
before May 18, 2003; or
- prior to the receipt of the approval of its stockholders, if:
- its board of directors has received a superior proposal,
- in light of the superior proposal, its board of directors has
determined in good faith, after consultation with outside counsel,
that it is necessary for it to withdraw or modify its approval or
recommendation of the merger agreement or the merger in order to
comply with its fiduciary duty,
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- it has given the other company at least five business days' written
notice and then reconfirmed its board of directors' determination
under the immediately preceding sub-bullet after taking into account
any revised proposal by the other company,
- it is not in breach of its no solicitation covenant, and
- it is not in breach of its material representations, warranties,
covenants or other agreements contained in the merger agreement.
TERMINATION FEES
Conoco has agreed to pay a termination fee of $550 million to Phillips in
the event that:
- (1)(a) either Conoco or Phillips terminates the merger agreement because
Conoco stockholders fail to adopt the merger agreement or Conoco fails to
hold the Conoco special meeting on or before May 18, 2003, or (b)
Phillips terminates the merger agreement because Conoco breaches or fails
to perform any of its representations, warranties, covenants or other
agreements contained in the merger agreement and the breach or failure
cannot be cured on or before May 18, 2003, (2) an acquisition proposal
with respect to Conoco is publicly announced or otherwise communicated to
Conoco management, the Conoco Board of Directors or Conoco stockholders
after the date of the merger agreement and is not publicly withdrawn more
than 30 days prior to the termination of the merger agreement, and (3)
within 12 months of the termination, Conoco enters into a definitive
agreement with respect to or completes any acquisition proposal; or
- Phillips terminates the merger agreement because the Conoco Board of
Directors fails to recommend the adoption of the merger agreement to
Conoco stockholders or changes its recommendation or fails to call the
Conoco special meeting as required by the merger agreement; or
- prior to receipt of the approval of Conoco stockholders, Conoco
terminates the merger agreement in connection with a superior proposal as
described under "-- Termination of the Merger Agreement;" or
- (1) either Conoco or Phillips terminates the merger agreement because
Conoco stockholders fail to adopt the merger agreement or Conoco fails to
hold the Conoco special meeting on or before May 18, 2003, (2) an
acquisition proposal with respect to Conoco is publicly announced or
otherwise communicated to Conoco management, the Conoco Board of
Directors or Conoco stockholders after the date of the merger agreement,
and (3) within 12 months of the termination, Conoco enters into a
definitive agreement with respect to or completes an acquisition proposal
with the person who made the acquisition proposal referred to in clause
(2).
Phillips has agreed to pay a termination fee of $550 million to Conoco in
the event that:
- (1)(a) either Conoco or Phillips terminates the merger agreement because
Phillips stockholders fail to adopt the merger agreement or Phillips
fails to hold the Phillips special meeting on or before May 18, 2003, or
(b) Conoco terminates the merger agreement because Phillips breaches or
fails to perform any of its representations, warranties, covenants or
other agreements contained in the merger agreement and the breach or
failure cannot be cured on or before May 18, 2003, (2) an acquisition
proposal with respect to Phillips is publicly announced or otherwise
communicated to Phillips management, the Phillips Board of Directors or
Phillips stockholders after the date of the merger agreement and is not
publicly withdrawn more than 30 days prior to the termination of the
merger agreement, and (3) within 12 months of the termination, Phillips
enters into a definitive agreement with respect to or completes any
acquisition proposal; or
- Conoco terminates the merger agreement because the Phillips Board of
Directors fails to recommend the adoption of the merger agreement to
Phillips stockholders or changes such recommendation or fails to call the
Phillips special meeting as required by the merger agreement; or
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- prior to receipt of the approval of Phillips stockholders, Phillips
terminates the merger agreement in connection with a superior proposal as
described under "-- Termination of the Merger Agreement;" or
- (1) either Conoco or Phillips terminates the merger agreement because
Phillips stockholders fail to adopt the merger agreement or Phillips
fails to hold the Phillips special meeting on or before May 18, 2003, (2)
an acquisition proposal with respect to Phillips is publicly announced or
otherwise communicated to Phillips management, the Phillips Board of
Directors or Phillips stockholders after the date of the merger
agreement, and (3) within 12 months of such termination, Phillips enters
into a definitive agreement with respect to or completes an acquisition
proposal with the person that made the acquisition proposal referred to
in clause (2).
OTHER EXPENSES
Whether or not the merger is completed, and except as provided under
"-- Termination Fees," all expenses and fees incurred in connection with the
merger agreement and the merger will be paid by the party incurring the expenses
or fees, except that all expenses and fees incurred in connection with the
filing, printing and mailing of this joint proxy statement/prospectus and the
registration statement on Form S-4, of which this joint proxy
statement/prospectus forms a part and all expenses and fees incurred in
connection with any consultants that Conoco and Phillips shall have retained to
assist in obtaining the approvals and clearances under the antitrust laws, will,
in each case, be shared equally by Conoco and Phillips.
INDEMNIFICATION AND INSURANCE
The merger agreement provides that New Parent (1) will indemnify and hold
harmless, and provide advancement of expenses to, all past and present
directors, officers and employees of Conoco and Phillips and their subsidiaries
to the same extent as such individuals are indemnified or have the right to
advancement of expenses as of the date of the merger agreement and (2) will not
take any action to amend, modify or repeal the provisions for indemnification of
directors, officers and employees contained in Conoco's restated certificate of
incorporation or by-laws or the indemnification provisions contained in
Phillips' restated certificate of incorporation or by-laws for acts or omissions
occurring at or prior to the completion of the merger. In addition, the merger
agreement requires New Parent to maintain the current (or, in the aggregate, no
less advantageous) provisions in Conoco's restated certificate of incorporation
or by-laws and Phillips' restated certificate of incorporation or by-laws
regarding directors', officers' and employees' liability and indemnification and
directors and officers' liability (and fiduciary) insurance policies of Conoco
and its subsidiaries, and Phillips and its subsidiaries, in each case, for six
years following the completion of the merger.
ADDITIONAL AGREEMENTS
Each of Conoco and Phillips has agreed to cooperate with each other and to
use its reasonable best efforts to take all actions and do all things necessary,
proper and advisable under the merger agreement and applicable laws to complete
the merger as soon as practicable. Accordingly, each has agreed to use its
reasonable best efforts to:
- as promptly as practicable, prepare and file all applications, notices,
petitions, filings, tax ruling requests and other documents, and to
obtain all consents, waivers, licenses, orders, registrations, approvals,
permits, rulings, authorizations and clearances from any third party or
any domestic or foreign governmental entity necessary to complete the
merger; and
- take all reasonable steps to obtain all necessary consents and required
approvals, including those required under applicable antitrust laws.
Conoco and Phillips have also agreed to use their reasonable best efforts,
including (1) selling, holding separate or otherwise disposing of or conducting
their respective businesses in a specified manner,
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or (2) agreeing to sell, hold separate or otherwise dispose of or conduct their
business in a specified manner, or (3) permitting the sale, holding separate or
other disposition of their assets or the conduct of their respective businesses
in a specified manner, to contest and resist actions challenging the merger as
illegal and laws or orders making the merger illegal or prohibiting or
materially impairing or delaying the merger. However, neither Conoco nor
Phillips shall be required to take any action that could reasonably be expected
to have a material adverse effect on New Parent after giving effect to the
merger or to impair substantially the benefits that Conoco and Phillips expected
to realize from the merger at the time they entered into the merger agreement.
Also, neither Phillips nor Conoco shall be required to agree to, or effect any
divestiture, hold separate any business or take any other action that is not
conditional on the completion of the merger.
The merger agreement provides that the executive headquarters for New
Parent will be located in the Houston, Texas area and also provides for other
governance related matters. See "Directors and Management Following the Merger."
AMENDMENT; EXTENSION AND WAIVER
The merger agreement may be amended by Conoco and Phillips, by action taken
or authorized by their respective boards of directors at any time before or
after the adoption of the merger agreement by Conoco stockholders or Phillips
stockholders. After the adoption of the merger agreement, no amendment may be
made that by law or in accordance with the rules of the New York Stock Exchange
requires further approval by Conoco stockholders or Phillips stockholders, as
the case may be, without this further approval. All amendments to the merger
agreement must be in writing signed by each party.
At any time prior to the completion of the merger, Conoco and Phillips, by
action taken or authorized by their respective boards of directors may, to the
extent legally allowed, extend the time for performance of any obligations and
waive any inaccuracies in representations and warranties or compliance with any
agreements or conditions contained in the merger agreement. Any agreement to any
of these extensions or waivers must be in writing.
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DIRECTORS AND MANAGEMENT FOLLOWING THE MERGER
DIRECTORS
The merger agreement provides that, at the completion of the merger, the
New Parent Board of Directors will consist of 16 members divided into three
classes with each class serving a staggered three-year term. Initially:
- Class I will consist of five directors, two directors nominated by Conoco
and three directors nominated by Phillips, who will hold office until the
first annual meeting following the completion of the merger;
- Class II will consist of five directors, three directors nominated by
Conoco and two directors nominated by Phillips, who will hold office
until the second annual meeting following the completion of the merger;
and
- Class III will consist of six directors, three directors nominated by
Conoco (including Archie W. Dunham, Chairman and Chief Executive Officer
of Conoco) and three directors nominated by Phillips (including J. J.
Mulva, Chairman and Chief Executive Officer of Phillips), who will hold
office until the third annual meeting following the completion of the
merger. Conoco and Phillips will select their designees from the current
members of the Conoco Board of Directors and the Phillips Board of
Directors, respectively.
Messrs. Dunham and Mulva will serve as directors of New Parent. Mr. Dunham
will serve as Chairman of the New Parent Board, subject to the terms of Mr.
Dunham's new employment agreement, and Mr. Mulva will become the Chairman of the
New Parent Board of Directors following the retirement of Mr. Dunham. For
further details on the roles and responsibilities of Mr. Dunham and Mr. Mulva
see "The Merger Interests of Conoco Directors and Management in the
Merger -- Employment Agreement with Archie W. Dunham" and "The Merger Interests
of Phillips Directors and Management in the Merger -- Employment Agreement with
James J. Mulva." Conoco and Phillips have not yet selected any other directors
who will be designated to serve on the New Parent Board of Directors. See also
"The Merger -- Interest of Conoco Directors and Management in the Merger."
COMMITTEES OF THE BOARD OF DIRECTORS
Each of the committees of the New Parent Board of Directors initially will
consist of an equal number of the directors designated by Conoco and Phillips.
The New Parent Board of Directors shall have
- an Executive Committee,
- an Audit and Compliance Committee,
- a Compensation Committee,
- a Committee on Directors' Affairs, and
- a Public Policy Committee,
each consisting of at least three directors, to perform the functions
traditionally performed by these committees. In addition, the New Parent Board
of Directors may designate other committees, each consisting of one or more of
the directors of New Parent.
COMPENSATION OF DIRECTORS
The directors may be paid their expenses, if any, of attendance at each
meeting of the New Parent Board of Directors and will receive compensation for
their services as directors as shall be determined by the New Parent Board of
Directors. Members of the committees of the New Parent Board of Directors may be
allowed like compensation for attending committee meetings.
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MANAGEMENT
Upon completion of the merger, Mr. Dunham will serve as Chairman of the New
Parent Board of Directors and Mr. Mulva will serve as President and Chief
Executive Officer of New Parent. As described in "The Merger -- Interests of
Conoco Directors and Management in the Merger" and "The Merger -- Interests of
Phillips Directors and Management in the Merger," New Parent has entered into an
employment agreement with each of Mr. Dunham and Mr. Mulva that will become
effective upon completion of the merger. Under Mr. Dunham's new employment
agreement, Mr. Dunham will serve as the Chairman of the New Parent Board of
Directors until the later of (1) October 1, 2004, and (2) the second anniversary
of the completion of the merger. Upon Mr. Dunham's retirement, Mr. Mulva will,
in accordance with his employment agreement, succeed Mr. Dunham as Chairman of
the New Parent Board of Directors.
As Chairman of the New Parent Board of Directors, Mr. Dunham will preside
at meetings of the New Parent Board of Directors and of New Parent stockholders.
Mr. Dunham will work with Mr. Mulva on external stakeholder relations
(community, state, U.S. federal government and foreign government), business
development (growth) initiatives, and the creation of an outstanding and
cohesive New Parent Board of Directors; and will have other executive
responsibilities as he and Mr. Mulva may agree. Mr. Dunham and Mr. Mulva will
jointly recommend to the New Parent Board of Directors the long-range strategic
plan for New Parent, major acquisitions and divestitures and major changes to
New Parent's capital structure. With respect to all other matters, Mr. Mulva
will, in consultation with Mr. Dunham, arrange the agenda for meetings of the
New Parent Board of Directors, and will report to the New Parent Board of
Directors and arrange for other executives and advisors to report to the New
Parent Board of Directors.
Mr. Mulva, as President and Chief Executive Officer of New Parent, will
have general responsibility for the management of New Parent, reporting directly
to the New Parent Board of Directors. Mr. Mulva will have all the customary
duties and responsibilities of a chief executive officer, and all of the New
Parent executive officers will report directly to him or indirectly to him
through another New Parent executive officer who reports to him.
71
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF CONOCO
The following table provides, as of November 30, 2001, information with
respect to (1) persons that are known to Conoco to beneficially own more than
five percent of Conoco common stock and (2) the beneficial ownership of Conoco
common stock by the following directors, nominees and executive officers of
Conoco.
<Table>
<Caption>
COMMON STOCK
-----------------------
NUMBER OF PERCENT
NAME AND ADDRESS SHARES(1)(2) OF CLASS
- ---------------- ------------ --------
FMR Corp.(3)................................................ [ ] [ ]%
82 Devonshire Street
New York, New York 10004
Richard A. Auchinleck....................................... 8,338 *
Archie W. Dunham(4)......................................... 5,899,267 *
Kenneth M. Duberstein....................................... 11,173 *
Charles C. Krulak........................................... 10,072 *
Ruth R. Harkin(5)........................................... 18,908 *
Frank A. McPherson.......................................... 20,779 *
William K. Reilly........................................... 21,246 *
William R. Rhodes........................................... 60,858 *
A.R. Sanchez, Jr. .......................................... 7,570 *
Franklin A. Thomas.......................................... 18,371 *
Robert E. McKee III(4)...................................... 1,742,610 *
Jimmy W. Nokes(6)........................................... 912,589 *
Robert W. Goldman(8)........................................ 576,722 *
Directors and executive officers as a group (19 persons).... 11,283,630 2.5
</Table>
- ---------------
* Less than one percent.
(1) Includes restricted or deferred stock units credit under the 1998 Stock and
Performance Incentive Plan and the Deferred Compensation Plan for
Non-employee Directors, the following number of which may be voted or sold
only upon passage of time: Mr. Dunham -- [397,938]; Mr. Duberstein --
[3,414]; Mr. Krulak -- [2,313]; Mr. Auchinleck -- [568]; Mr.
McPherson -- [1,194]; Mr. Reilly -- [5,387]; Mr. Thomas -- [2,513]; and Mr.
Nokes -- [11,555].
(2) Includes beneficial ownership of the following number of shares of common
stock which may be acquired within 60 days of October 31, 2001 through stock
options awarded under compensation plans: Mr. Dunham -- [5,191,924]; Mr.
Duberstein -- [1,430]; Mr. Krulak -- [1,430]; Ms. Harkin -- [8,264]; Mr.
McPherson -- [8,264]; Mr. Reilly -- [8,264]; Mr. Rhodes -- [8,264]; Mr.
Sanchez -- [1,430]; Mr. Thomas -- [8,264]; Mr. McKee -- [1,604,682]; Mr.
Nokes -- [824,189]; and Mr. Goldman -- [545,605].
(3) Based on schedule 13G/A filed with the Securities and Exchange Commission on
May 10, 2001 by FMR Corp. on behalf of itself, Mr. Edward C. Johnson,
Chairman of FMR Corp., Ms. Abigail P. Johnson, a director of FMR Corp. and
Fidelity Management and Research Company, a wholly owned subsidiary of FMR
Corp., FMR Corp. beneficially owned approximately 70,809,603 shares, which
represented 16.2%, of Class B common stock as of that date. On October 5,
2001, Conoco eliminated its dual capital structure and, as a result, as of
November 30, 2001, FMR Corp. beneficially owned more than five percent of
Conoco common stock.
(4) Includes 50,556 shares of Conoco common stock held in Dunham Management
Trust, a revocable grantor trust.
72
(5) Includes 50 shares of common stock owned by Ms. Harkin's daughter.
(6) Includes 80,022 shares of common stock owned by the McKee Family Trust and
1,182 shares of Class B common stock owned by Mr. McKee's son.
(7) Includes 413 shares of common stock owned by Mr. Nokes's daughter.
(8) Includes 1,471 shares of common stock owned by Mr. Goldman's wife and 245
shares of common stock owned by Mr. Goldman's son.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF PHILLIPS
The following tables provide, as of October 31, 2001, information with
respect to (1) persons who are known to Phillips to beneficially own more than
five percent of Phillips common stock and (2) the beneficial ownership of
Phillips common stock by the following current directors, nominees and
executives officers of Phillips.
<Table>
<Caption>
SHARES OF COMMON STOCK PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- ------------------------------------ ---------------------- ----------
Vanguard Fiduciary Trust Company(1)................... 35,992,898 8.8%
AXA Financial, Inc.(2)................................ 26,380,491 6.5
</Table>
- ---------------
(1) As of October 31, 2001, Vanguard as Trustee held 35,992,898 shares under the
Phillips' Thrift Plan, Long-Term Stock Savings Plan ("LTSSP"), Retirement
Savings Plan and Tosco Corporation's Capital Accumulation Plan ("Tosco CAP")
(together the "Plans") with shared voting power. Vanguard and the Plans have
disclaimed beneficial ownership of the shares held by Vanguard as Trustee of
the Plans. Vanguard votes shares held by the Plans which represent the
allocated interests of participants in the manner directed by individual
participants. Employee participants in the Thrift Plan, LTSSP and Tosco CAP
are appointed by Phillips and Tosco as fiduciaries entitled to direct the
Trustee as to how to vote allocated shares which are not directed in these
plans and unallocated shares held by the Thrift Plan, LTSSP and Tosco CAP.
Such shares are allocated pro rata among employee participants accepting
their fiduciary appointment and are voted by the Trustee as directed by the
employee fiduciaries. The Trustee votes non-directed shares of the
Retirement Savings Plan at its discretion. The Trustee will vote other
shares held by the Plans at its discretion only if required to do so by
ERISA.
Vanguard is also the Trustee and record holder of the 27,556,573 shares in
the Compensation and Benefits Trust ("CBT"), without any voting power.
Vanguard has disclaimed beneficial ownership of such shares. As Trustee of
the CBT, Vanguard will vote shares in the CBT only in accordance with the
pro rata directions of eligible domestic employees and the trustees of
certain international stock plans of Phillips. Trust agreements for the
Plans and CBT each provide that all voting directions of individual
employees received by the Trustee will be held in confidence and not be
disclosed to any person, including Phillips.
(2) On April 10, 2001, AXA Financial, Inc. ("Alliance"), the parent of Alliance
Capital Management L.P. which acquired the investment advisory assets of
Sanford C. Bernstein & Co., Inc., reported that it exercised sole voting
power over 13,583,791 shares, shared voting power over 3,115,065 shares,
sole dispositive power over 26,273,291 shares and shared dispositive power
over 107,200 shares, as of March 31, 2001. According to the Schedule 13G
filed by Alliance with the Securities and Exchange Commission, such shares
equal 10.3% of the outstanding shares of Phillips common stock. However,
when shares held as of [October 31, 2001], by the CBT and shares issued in
the Tosco merger are included, shares held by Alliance equal only 6.5% of
Phillips' outstanding shares.
73
Beneficial Ownership of Directors and Management of Phillips
<Table>
<Caption>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
-----------------------
NAME OF BENEFICIAL OWNER DIRECT (1) INDIRECT PERCENT OF CLASS
- ------------------------ ----------- --------- ----------------
DIRECTORS (2)
Norman R. Augustine................................... 24,913 *
David L. Boren........................................ 13,404 *
Robert E. Chappell, Jr................................ 22,073 *
Robert M. Devlin...................................... 3,049 *
Larry D. Horner....................................... 21,977 *
J.J. Mulva............................................ 744,311 *
Thomas D. O'Malley.................................... 2,725,282 160,000 *
J. Stapleton Roy...................................... 0 *
Randall L. Tobias..................................... 19,726 *
Victoria J. Tschinkel................................. 19,090 *
Kathryn C. Turner..................................... 12,239 *
EXECUTIVE OFFICERS
E.L. Batchelder....................................... 36,209 *
Rand C. Berney........................................ 46,426 *
John A. Carrig........................................ 140,316 *
Dodd W. DeCamp........................................ 4,982 *
John E. Lowe.......................................... 54,563 *
Kevin O. Meyers....................................... 32,209 *
J.C. Mihm............................................. 155,720 1,959 *
M.J. Panatier......................................... 120,775 *
B.Z. Parker........................................... 209,011 *
R.A. Ridge............................................ 86,245 *
J. Bryan Whitworth.................................... 152,985 *
All directors and executive officers as a group (22 in
group).............................................. [4,645,505] [161,959] 1.07%
</Table>
- ---------------
* Less than 1%
(1) Direct ownership includes shares that may be acquired under Phillips stock
options within 60 days of the record date.
(2) The shares stated as being beneficially owned by each director do not
include shares beneficially owned by the other companies on whose boards of
directors the directors serve. Each director disclaims beneficial ownership
of all such shares.
74
COMPARATIVE STOCK PRICES AND DIVIDENDS
Conoco common stock is listed for trading on the New York Stock Exchange
under the symbol "COC" and Phillips common stock is listed for trading on the
New York Stock Exchange under the symbol "P." The following table sets forth,
for the periods indicated, dividends and the high and low sales prices per share
of Conoco common stock and Phillips common stock on the New York Stock Exchange
Composite Transaction reporting system. From Conoco's initial public offering on
October 27, 1998 until October 5, 2001, when Conoco eliminated its dual capital
structure, Conoco had outstanding shares of Conoco Class A and Class B common
stock, which were listed on the New York Stock Exchange under the symbols
"COC.A" and "COC.B," respectively. For the periods before October 5, 2001, the
following table sets forth the data for the Conoco Class B common stock, which
represented over 70% of the dual-class common stock then outstanding and over
90% of its voting power and Conoco Class A common stock. For current price
information, you should consult publicly available sources.
<Table>
<Caption>
CONOCO CLASS A CONOCO CLASS B
COMMON STOCK COMMON STOCK
--------------------------- ---------------------------
DIVIDENDS DIVIDENDS
CALENDAR PERIOD HIGH LOW PAID HIGH LOW PAID
- --------------- ------ ------ --------- ------ ------ ---------
1998
Fourth Quarter...................... $25.75 19.38
1999
First Quarter....................... 25.44 19.38 0.14
Second Quarter...................... 31.25 22.94 0.19
Third Quarter....................... 29.25 25.31 0.19 29.38 24.50 0.19
Fourth Quarter...................... 29.06 20.94 0.19 28.94 20.75 0.19
2000
First Quarter....................... 27.88 18.81 0.19 28.75 19.00 0.19
Second Quarter...................... 27.06 22.00 0.19 29.00 23.25 0.19
Third Quarter....................... 27.63 21.38 0.19 28.75 22.31 0.19
Fourth Quarter...................... 29.56 24.00 0.19 29.69 24.69 0.19
2001
First Quarter....................... 30.79 25.75 0.19 31.10 26.00 0.19
Second Quarter...................... 32.99 26.30 0.19 33.35 26.75 0.19
Third Quarter....................... 31.60 23.65 0.19 32.00 23.77 0.19
Fourth Quarter(1)
To October 5..................... [ ] [ ] [ ] [ ] [ ] [ ]
From October 6 to December [ ]... [ ] [ ] [ ] -- -- --
</Table>
- ---------------
(1) Conoco eliminated its dual capital structures on October 5, 2001.
75
<Table>
<Caption>
PHILLIPS COMMON STOCK
---------------------------
DIVIDENDS
CALENDAR PERIOD HIGH LOW PAID
- --------------- ------ ------ ---------
1998
First Quarter............................................. $53.25 42.75 0.34
Second Quarter............................................ 52.00 47.13 0.34
Third Quarter............................................. 49.50 40.19 0.34
Fourth Quarter............................................ 48.31 40.63 0.34
1999
First Quarter............................................. 48.44 37.69 0.34
Second Quarter............................................ 54.69 46.44 0.34
Third Quarter............................................. 57.25 45.81 0.34
Fourth Quarter............................................ 51.88 44.56 0.34
2000
First Quarter............................................. 47.13 35.94 0.34
Second Quarter............................................ 57.69 45.50 0.34
Third Quarter............................................. 70.00 46.81 0.34
Fourth Quarter............................................ 68.25 51.50 0.34
2001
First Quarter............................................. 59.00 51.70 0.34
Second Quarter............................................ 68.00 52.78 0.34
Third Quarter............................................. 59.86 50.00 0.36
Fourth Quarter (through December [ ], 2001).............. 0.36
</Table>
The following table sets forth the high and low sales prices per share of
Conoco common stock and Phillips common stock on the New York Stock Exchange
Composite Transaction reporting system on November 16, 2001, the last full
trading day prior to the public announcement of the merger, and on [ ],
2002, the last trading day for which this information could be calculated prior
to the date of this joint proxy statement/prospectus:
<Table>
<Caption>
CONOCO COMMON PHILLIPS COMMON
STOCK STOCK
-------------- ---------------
HIGH LOW HIGH LOW
------ ----- ------ ------
November 16, 2001..................................... $25.10 23.95 51.95 50.66
[ ], 2002....................................
</Table>
76
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION
The following unaudited pro forma financial statements combine the
historical consolidated balance sheets and statements of income of Conoco and
Phillips, giving effect to the merger using the purchase method of accounting.
The business combination of Conoco and Phillips is a merger of equals. Neither
company paid a premium in the stock-for-stock exchange ratio and neither company
anticipates dominating the New Parent Board of Directors. However, generally
accepted accounting principles require that one of the two companies in the
transaction be designated as the acquiror for accounting purposes. Phillips has
been designated as the acquiror based on the fact that its stockholders are
expected to hold more than 50% of the New Parent stock after the merger.
Conoco's historical income statements have been adjusted for the pro forma
impact of the acquisition of Gulf Canada effective July 1, 2001, and Phillips'
historical income statements have been adjusted to reflect the pro forma impact
of the acquisition of Tosco Corporation on September 14, 2001. In addition,
Phillips' historical income statement for 2000 has been adjusted to reflect the
pro forma impact of the acquisition of ARCO's Alaska businesses and the
formation of the Duke Energy Field Services and Chevron Phillips Chemical
Company joint ventures during 2000.
We are providing the following information to aid you in your analysis of
the financial aspects of the merger. We derived this information for the year
ended December 31, 2000, from the audited financial statements of Conoco and
Phillips for that year. The income statement information for the nine-month
period ended September 30, 2001, and the balance sheet information at September
30, 2001, were derived from the unaudited financial information of the
companies. Conoco has provided all the information set forth herein regarding
Conoco and its subsidiaries. Phillips has provided all the information set forth
herein regarding Phillips and its subsidiaries. Neither Conoco nor Phillips
assumes any responsibility for the accuracy or completeness of the information
provided by the other party. THIS INFORMATION SHOULD BE READ TOGETHER WITH OUR
HISTORICAL FINANCIAL STATEMENTS AND RELATED NOTES CONTAINED IN THE ANNUAL
REPORTS AND OTHER INFORMATION THAT WE HAVE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION AND INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE [ ].
The unaudited pro forma combined statements of income assume the merger was
effected on January 1, 2000. The unaudited pro forma combined balance sheet
gives effect to the merger as if it had occurred on September 30, 2001. Except
for planned major maintenance expenditures, the accounting policies of Conoco
and Phillips are substantially comparable.
The unaudited pro forma combined information is for illustrative purposes
only. The financial results may have been different had the companies always
been combined. Further, the unaudited pro forma combined financial statements do
not reflect the effect of asset dispositions, if any, that may be required by
order of regulatory authorities, restructuring charges that will be incurred to
fully integrate and operate the combined organization more efficiently, or
anticipated synergies resulting from the merger. You should not rely on the pro
forma combined financial information as being indicative of the historical
results that would have been achieved had the companies always been combined or
the future results that New Parent will experience.
77
NEW PARENT
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2000
------------------------------------------------------
PHILLIPS AND
PHILLIPS CONOCO CONOCO
AS AS PRO FORMA PRO FORMA
ADJUSTED(A) ADJUSTED(B) ADJUSTMENTS COMBINED
----------- ----------- ----------- ------------
MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA
REVENUES
Sales and other operating revenues............. $48,896 40,674 -- 89,570
Equity in earnings of affiliated companies..... 231 252 (51)(c) 432
Other revenues................................. 275 317 -- 592
------- ------- ---- -------
Total Revenues....................... 49,402 41,243 (51) 90,594
------- ------- ---- -------
COSTS AND EXPENSES
Purchased crude oil and products............... 30,969 24,267 -- 55,236
Production and operating expenses.............. 3,817 2,624 (9)(d) 6,432
Exploration expenses........................... 319 367 -- 686
Selling, general and administrative expenses... 852 849 -- 1,701
Depreciation, depletion and amortization....... 1,550 1,847 (98)(c)(e) 3,299
Property impairments........................... 100 5 -- 105
Taxes other than income taxes.................. 6,122 6,986 -- 13,108
Accretion on discounted liabilities............ 13 -- 7(f) 20
Interest expense............................... 596 776 (96)(g) 1,276
Foreign currency transaction losses (gains).... 57 (22) -- 35
Preferred dividend requirements of capital
trusts....................................... 53 -- -- 53
------- ------- ---- -------
Total Costs and Expenses............. 44,448 37,699 (196) 81,951
------- ------- ---- -------
Income before income taxes..................... 4,954 3,544 145 8,643
Provision for income taxes..................... 2,385 1,654 69(h) 4,108
------- ------- ---- -------
INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE..... $ 2,569 1,890 76 4,535
======= ======= ==== =======
INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE PER
SHARE OF COMMON STOCK
Basic........................................ $ 6.79 3.03 6.76(k)
Diluted...................................... 6.70 2.99 6.67(k)
------- ------- -------
AVERAGE COMMON SHARES OUTSTANDING
(IN THOUSANDS)
Basic........................................ 378,549 624,354 670,559(k)
Diluted...................................... 383,211 632,760 679,813(k)
------- ------- -------
</Table>
See Notes to Unaudited Pro Forma Financial Statements.
78
NEW PARENT
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
<Table>
<Caption>
NINE MONTHS ENDED SEPTEMBER 30, 2001
------------------------------------------------------
PHILLIPS AND
CONOCO
PHILLIPS AS CONOCO AS PRO FORMA PRO FORMA
ADJUSTED(A) ADJUSTED(B) ADJUSTMENTS COMBINED
----------- ----------- ----------- ------------
MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS
REVENUES
Sales and other operating revenues............. $ 37,445 31,521 -- 68,966
Equity in earnings of affiliated companies..... 106 156 (39)(c) 223
Other revenues................................. 61 353 -- 414
-------- -------- ---- -------
Total Revenues....................... 37,612 32,030 (39) 69,603
-------- -------- ---- -------
COSTS AND EXPENSES
Purchased crude oil and products............... 23,736 18,614 -- 42,350
Production and operating expenses.............. 3,160 2,385 11(d) 5,556
Exploration expenses........................... 202 261 -- 463
Selling, general and administrative expenses... 913 627 -- 1,540
Depreciation, depletion and amortization....... 1,153 1,398 (102)(c)(e) 2,449
Property impairments........................... 23 69 -- 92
Taxes other than income taxes.................. 4,272 5,143 -- 9,415
Accretion on discounted liabilities............ 16 -- 5(f) 21
Interest expense............................... 350 455 (72)(g) 733
Foreign currency transaction losses............ 10 69 -- 79
Preferred dividend requirements of capital
trusts....................................... 40 -- -- 40
-------- -------- ---- -------
Total Costs and Expenses............. 33,875 29,021 (158) 62,738
-------- -------- ---- -------
Income before income taxes, extraordinary item
and cumulative effect of change in accounting
principle.................................... 3,737 3,009 119 6,865
Provision for income taxes..................... 1,782 1,445 57(h) 3,284
-------- -------- ---- -------
INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE..... $ 1,955 1,564 62 3,581
======== ======== ==== =======
INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE PER
SHARE OF COMMON STOCK
Basic........................................ $ 5.14 2.50 5.32(k)
Diluted...................................... 5.09 2.46 5.26(k)
-------- -------- -------
AVERAGE COMMON SHARES OUTSTANDING
(IN THOUSANDS)
Basic........................................ 380,540 625,332 673,008(k)
Diluted...................................... 384,068 635,345 681,127(k)
-------- -------- -------
</Table>
See Notes to Unaudited Pro Forma Financial Statements.
79
NEW PARENT
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
<Table>
<Caption>
AT SEPTEMBER 30, 2001
---------------------------------------------------
PHILLIPS AND
CONOCO
PRO FORMA PRO FORMA
PHILLIPS CONOCO ADJUSTMENTS COMBINED
-------- -------- ----------- ------------
MILLIONS OF DOLLARS
ASSETS
Cash and cash equivalents...................... $ 199 214 -- 413
Accounts and notes receivable.................. 1,568 2,061 -- 3,629
Inventories.................................... 2,617 1,127 538(c) 4,282
Deferred income taxes.......................... 85 41 -- 126
Prepaid expenses and other current assets...... 319 900 -- 1,219
------- -------- ------ ------
Total Current Assets................. 4,788 4,343 538 9,669
Investments and long-term receivables.......... 3,306 1,950 978(c) 6,234
Properties, plants and equipment (net)......... 23,443 17,760 1,967(c) 43,170
Goodwill....................................... 2,366 2,982 6,327(c) 11,675
Intangibles.................................... 1,313 3 1,147(c) 2,463
Deferred income taxes.......................... 7 20 -- 27
Deferred charges and other assets.............. 127 625 -- 752
------- -------- ------ ------
Total.......................................... $35,350 27,683 10,957 73,990
======= ======== ====== ======
LIABILITIES
Accounts payable............................... $ 3,417 2,019 -- 5,436
Notes payable and long-term debt due within one
year......................................... 43 1,611 -- 1,654
Accrued income and other taxes................. 1,406 788 194(c) 2,388
Other accruals................................. 839 1,660 (53)(d) 2,446
------- -------- ------ ------
Total Current Liabilities............ 5,705 6,078 141 11,924
Long-term debt................................. 7,838 8,040 -- 15,878
Accrued dismantlement, removal and
environmental costs.......................... 1,150 558 (415)(e)(f) 1,293
Deferred income taxes.......................... 4,027 4,047 1,733(c) 9,807
Employee benefit obligations................... 614 594 276(i) 1,484
Other liabilities and deferred credits......... 938 1,020 -- 1,958
------- -------- ------ ------
Total Liabilities.............................. 20,272 20,337 1,735 42,344
COMPANY-OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES AND MINORITY
INTERESTS.................................... 656 709 -- 1,365
TOTAL COMMON STOCKHOLDERS' EQUITY.............. 14,422 6,637 9,222(j)(k) 30,281
------- -------- ------ ------
Total.......................................... $35,350 27,683 10,957 73,990
======= ======== ====== ======
</Table>
See Notes to Unaudited Pro Forma Financial Statements.
80
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(a) Phillips' historical income statements for the year ended December 31,
2000, and the nine months ended September 30, 2001, have been adjusted on a
pro forma basis to reflect the acquisition of Tosco on September 14, 2001,
as if it had occurred on January 1, 2000. During the third quarter of 2001,
Phillips began including excise taxes on the sales of petroleum products in
operating revenues, with the corresponding expense included in taxes other
than income taxes. Prior periods have been restated to reflect this change
in presentation.
The significant pro forma adjustments that were made for the acquisition of
Tosco were:
- Estimated income statement impacts resulting from the purchase price
allocation to the Tosco assets and liabilities -- for example increased
depreciation due to the step-up of the property, plant and equipment to
fair value. These preliminary purchase price allocations have not yet
been finalized;
- The conforming of Tosco's accounting policies to Phillips'; and
- An increase in average common shares outstanding for stock and stock
options issued in the acquisition.
For additional information on this transaction, including pro forma
financial presentations, see Phillips' Current Report on Form 8-K filed on
September 28, 2001, as amended by filings on Form 8-K/A on October 31, and
November 13, 2001.
Phillips' income statement information for the year ended December 31,
2000, has been further adjusted on a pro forma basis to reflect four
significant transactions that were consummated during 2000:
- The disposition of Phillips' gas gathering, processing and marketing
business, and the simultaneous acquisition of a 30.3% equity interest in
Duke Energy Field Services on March 31, 2000;
- The acquisition of ARCO's Alaska businesses, completed in two phases on
April 26 and August 1, 2000;
- The disposition of Phillips' chemicals business, and the simultaneous
acquisition of a 50% equity interest in Chevron Phillips Chemical
Company on July 1, 2000; and
- The disposition of Tosco's Avon refinery on August 31, 2000;
as if they had occurred January 1, 2000.
The significant pro forma adjustments that were made for the Duke Energy
Field Services and Chevron Phillips Chemical Company transactions were:
- The removal of Phillips' chemical and gas gathering, processing, and
marketing businesses from consolidation;
- The inclusion of Phillips' estimated 50% and 30.3% equity interest
earnings from Chevron Phillips Chemical Company and Duke Energy Field
Services, respectively, based on the pro forma financial results of
those two entities prior to their inception; and
- The amortization of the basis difference between the book value of
Phillips' contributions to Duke Energy Field Services and Chevron
Phillips Chemical Company, and its equity in the two entities.
For additional information about these two transactions, including pro
forma financial presentations, see Phillips' Current Report on Form 8-K
filed on April 13, 2000, related to the Duke Energy Field Services
transaction; and Phillips' Current Report on Form 8-K filed on July 14,
2000, related to the Chevron Phillips Chemical Company transaction.
81
The significant pro forma adjustments that were made for the acquisition
of ARCO's Alaska businesses were:
- Estimated income statement impacts resulting from the purchase price
allocation to the Alaska assets and liabilities -- for example,
increased depreciation due to the step-up of the property, plant and
equipment to fair-market value. These preliminary purchase price
allocations continued to be refined during 2000 and into 2001;
- The conforming of ARCO's accounting policies to Phillips'; and
- An increase in interest expense due to the debt incurred to partially
fund the acquisition.
For additional information on this transaction, including pro forma
financial presentations, see Phillips' Current Report on Form 8-K filed on
May 18, 2000.
(b) Conoco's historical income statements for the year ended December 31, 2000,
and the nine months ended September 30, 2001, have been adjusted on a pro
forma basis to reflect the July 1, 2001, acquisition of Gulf Canada, as if
it occurred on January 1, 2000.
The as-adjusted income for the year ended December 31, 2000, of $1,890
million is the total of Conoco's historical income of $1,902 million, Gulf
Canada's as-adjusted income of $183 million (which includes the November
2000 Crestar acquisition), and net purchase price adjustments related to
Gulf Canada of $(195) million (see Conoco's Current Report on Form 8-K
filed on July 31, 2001, as amended by Form 8-K/A filed September 10, 2001,
and Current Report on Form 8-K filed October 22, 2001).
The as-adjusted income for the nine months ended September 30, 2001, of
$1,564 million is the total of Conoco's historical income of $1,449
million (see Form 10-Q filed on November 7, 2001), Gulf Canada's
historical income of $185 million for the six months ended June 30, 2001,
and net purchase price adjustments related to Gulf Canada of $(70) million
(see Conoco's Current Report on Form 8-K filed on July 31, 2001, as
amended by Form 8-K/A filed September 10, 2001, and Current Report on Form
8-K filed October 22, 2001).
(c) The following is a preliminary estimate of the deemed purchase price for
Conoco on a purchase accounting basis:
<Table>
Number of shares of New Parent common stock
expected to be issued in the exchange....... 292.5 million
Multiplied by Phillips' average stock price
two days before and after the announcement
date........................................ X $ 53.15
-------
$15,546 million
Estimated fair value of Conoco stock options
expected to be exchanged for New Parent
stock options............................... 327 million
Estimated transaction-related costs........... 50 million
-------
Total......................................... $15,923 million
=======
</Table>
For purposes of this pro forma analysis, the above deemed purchase price
has been allocated based on a preliminary assessment of the fair value of
the assets and liabilities of Conoco at September 30, 2001. The pro forma
income statement adjustments reflect the estimated effects of depreciating
and amortizing these purchase accounting adjusted balances in properties,
plants and equipment, equity method investments, and identifiable
intangible assets over their estimated useful lives. The preliminary
assessment of fair value resulted in $950 million of tradename assets with
indefinite lives and $9,309 million of goodwill, both of which will be
subject to periodic impairment testing instead of amortization.
82
Due to the non-taxable nature of this transaction, Conoco's tax basis in
its assets would carry over to the New Parent. The difference between the
financial and tax bases is estimated to result in approximately $6,067
million of net deferred tax liabilities and an increase in goodwill in the
purchase price allocation.
(d) Conforms Conoco's accounting policy on planned major maintenance to
Phillips', expensing the costs of such maintenance as incurred.
(e) Under Phillips' current accounting policy and current prevalent industry
accounting practice for the acquisition of oil and gas businesses, the New
Parent will not record an initial liability for the estimated costs of
removing Conoco's properties, plants and equipment at the end of their
useful lives. Instead, a preliminary estimate of $1,100 million of such
removal costs will be accrued as an additional component of future
depreciation, building the liability for removal over the remaining lives
of the properties, plants and equipment on a unit-of-production basis.
(f) Includes the impact of discounting Conoco's estimated environmental
liabilities and recording the related accretion.
(g) Capitalization of interest based on the estimated fair value of Conoco's
qualifying assets.
(h) Reflects the estimated income tax effects of the pro forma adjustments to
Conoco's pretax income.
(i) Adjustment to increase Conoco's pension and other post-retirement benefit
obligations to the estimated difference between projected benefit
obligations and plan assets.
(j) Included in the preliminary assessment of fair value of Conoco was an
estimated $100 million for the value of in-process research and
development projects. Under generally accepted accounting principles, this
value, net of its related deferred tax liability, would be charged against
earnings immediately after consummation of the merger. Due to the
non-recurring nature of this one-time charge, the pro forma income
statements do not include this charge. The after-tax effect of the charge
is reflected in the pro forma balance sheet as a reduction of common
stockholders' equity.
(k) Reflects the exchange of outstanding Conoco stock, the issuance of 292.5
million shares of New Parent common stock, and the effect of New Parent's
stock options issued in the exchange to Conoco stock option holders.
83
DESCRIPTION OF NEW PARENT CAPITAL STOCK
The following description of the material terms of the capital stock of New
Parent includes a summary of specified provisions of New Parent's restated
certificate of incorporation and by-laws that will be in effect upon completion
of the merger. This description is subject to the relevant provisions of
Delaware law and is qualified by reference to New Parent's restated certificate
of incorporation and by-laws, copies of which are attached as Annex B and C,
respectively, to this joint proxy statement/prospectus and are incorporated in
this joint proxy statement/prospectus by reference.
AUTHORIZED CAPITAL STOCK
New Parent will be authorized to issue 2.5 billion shares of common stock,
par value $0.01 per share, and 500 million shares of preferred stock, par value
$0.01 per share.
COMMON STOCK
The shares of New Parent common stock to be issued in the merger will be
duly authorized, validly issued, fully paid and nonassessable. Each holder of
New Parent common stock will be entitled to one vote per share in the election
of directors and on all other matters submitted to the vote of stockholders;
provided, however, that, except as otherwise required by law, holders of New
Parent common stock will not be entitled to vote on any amendment to New
Parent's restated certificate of incorporation that relates solely to the terms
of any series of New Parent preferred stock if holders of the New Parent
preferred stock are entitled to vote on the amendment under New Parent's
restated certificate of incorporation or Delaware law. No holder of New Parent
common stock may cumulate votes in voting for New Parent directors.
Subject to the rights of the holders of any New Parent preferred stock that
may be outstanding from time to time, each share of New Parent common stock will
have an equal and ratable right to receive dividends as may be declared by the
New Parent Board of Directors out of funds legally available for the payment of
dividends, and, in the event of the liquidation, dissolution or winding up of
New Parent, will be entitled to share equally and ratably in the assets
available for distribution to New Parent stockholders. No holder of New Parent
common stock will have any preemptive right to subscribe for any securities of
New Parent.
Application will be made to list New Parent common stock on the New York
Stock Exchange under the trading symbol "COP." [ ] will be the transfer agent
and registrar for New Parent common stock.
PREFERRED STOCK
New Parent's restated certificate of incorporation permits New Parent to
issue up to 500 million shares of New Parent preferred stock in one or more
series with designations and powers, preferences, and rights, and such
qualifications, limitations and restrictions thereof, as may be fixed by the New
Parent Board of Directors without any further action by New Parent stockholders.
In connection with New Parent's adoption of a rights plan (as described
below), [10] million shares of New Parent preferred stock will be designated
Series A Junior Participating Preferred Stock. New Parent Series A preferred
stock will be issuable only in connection with the exercise of rights under the
rights plan.
Each share of New Parent Series A preferred stock will be entitled to a
minimum preferential quarterly dividend payment per share of the greater of $1
or 100 times the dividend declared per share of New Parent common stock. In the
event of the liquidation, dissolution or winding up of New Parent, the holders
of New Parent Series A preferred stock will be entitled to a minimum
preferential liquidation payment per share equal to the greater of $100 (plus
all accrued and unpaid dividends) or 100 times the liquidation payment made per
share of New Parent common stock. Each share of New Parent Series A preferred
stock will have 100 votes on all matters submitted to a vote of New Parent
stockholders, voting together with the New Parent common stock. In the event of
any merger, consolidation or other
84
transaction in which shares of New Parent common stock are exchanged for
securities, cash and/or any other property, each share of New Parent Series A
preferred stock will be entitled to receive 100 times the amount of securities,
cash and/or other properties received per share of New Parent common stock.
These rights will be protected by customary antidilution provisions.
RIGHTS PLAN
Before the effective time of the merger, New Parent will enter into a
rights agreement. As with most rights agreements, the terms of the New Parent
rights agreement are complex and not easily summarized, particularly as they
relate to the acquisition of New Parent common stock and to the exercisability
of the rights. Accordingly, this summary may not contain all of the information
that is important to you, and is qualified in its entirety by reference to the
form of the New Parent rights agreement which we have filed as an exhibit to the
registration statement on Form S-4 of which this joint proxy
statement/prospectus is a part.
Under the terms of the New Parent rights agreement, each share of New
Parent common stock issued will have attached to it a right to purchase one
one-hundredth of a share of New Parent Series A preferred stock. The purchase
price per one-hundredth of a share of New Parent Series A preferred stock under
our rights agreement will be determined prior to the effective time of the
merger.
Initially, the rights under the New Parent rights agreement will be
attached to certificates representing New Parent common stock and no separate
certificates representing the rights will be distributed. The rights will
separate from the New Parent common stock and be represented by separate
certificates at the earlier of (1) the first date of a public announcement that
a person has acquired 15% or more of the outstanding New Parent common stock or
(2) the date as may be determined by the New Parent Board of Directors after the
commencement by a person of a tender offer or exchange offer for 15% or more of
the outstanding New Parent common stock.
After the rights separate from the New Parent common stock, certificates
representing the rights will be mailed to record holders of New Parent common
stock. Once distributed, the rights certificates alone will represent the
rights.
The rights will not be exercisable until the date the rights separate from
the New Parent common stock. The rights will expire on the tenth anniversary of
the date of the rights agreement unless earlier redeemed or exchanged by New
Parent.
If an acquiror obtains beneficial ownership of 15% or more of New Parent
common stock, then each right will be adjusted so that it will entitle the
holder (other than the acquiror, whose rights will become void) to purchase a
number of shares of New Parent common stock equal to two times the exercise
price of the right.
If an acquiror obtains beneficial ownership of 15% or more of New Parent
common stock and any of the following occurs:
- New Parent merges into or consolidates with another entity,
- an acquiring entity merges into New Parent with New Parent as the
surviving entity and the outstanding shares of New Parent common stock
are converted into cash, property or securities, or
- New Parent sells more than 50% of its assets or earning power;
then each right will entitle the holder to purchase a number of shares of common
stock of the acquiror having a then-current market value of twice the exercise
price of the right.
In the event of a public announcement of an acquiror obtaining beneficial
ownership of 15% or more of the outstanding shares of New Parent common stock
(but only if the beneficial ownership of the acquiror is less than 50%), the New
Parent Board of Directors may, at its option, exchange all or a part of the
outstanding rights for New Parent common stock at an exchange ratio of one share
of New Parent common stock per right, adjusted to reflect stock splits, stock
dividends or similar transactions.
85
The New Parent Board of Directors may, at its option, redeem the rights, in
whole but not in part, at any time prior to the time an acquiror obtains
beneficial ownership of 15% or more of the outstanding shares of New Parent
common stock. The redemption price will be $.01 per right, adjusted to reflect
stock splits, stock dividends or similar transactions. New Parent may, at its
option, pay the redemption price in cash, common stock or other consideration as
deemed appropriate by the New Parent Board of Directors.
The terms of the rights may be amended by the New Parent Board of Directors
without the consent of the holders of the rights, except that, after an acquiror
obtains 15% or more of New Parent common stock, the New Parent rights agreement
may not be amended in any manner that would adversely affect the interests of
the rights holders.
The New Parent rights agreement will contain rights that will have certain
anti-takeover effects. The rights will cause substantial dilution to a person or
group that attempts to acquire New Parent on terms not approved by the New
Parent Board of Directors. However, since the rights may either be redeemed or
otherwise made inapplicable by New Parent prior to an acquiror obtaining
beneficial ownership of 15% or more of New Parent common stock, the rights
should not interfere with any merger or business combination approved by the New
Parent Board of Directors prior to that occurrence. In addition, the rights
should not interfere with a proxy contest.
86
COMPARISON OF STOCKHOLDER RIGHTS
Conoco, Phillips and New Parent are incorporated under the laws of the
State of Delaware. In accordance with the merger agreement, at the effective
time of the merger, the holders of Conoco common stock and Phillips common stock
will exchange their respective shares of common stock for New Parent common
stock. Your rights as a New Parent stockholder will be governed by Delaware law
and New Parent's restated certificate of incorporation and by-laws of New
Parent. The following is a comparison of the material rights of Conoco
stockholders, Phillips stockholders and New Parent stockholders under each
company's organizational documents and the statutory framework in Delaware.
The forms of the New Parent restated certificate of incorporation and
by-laws are included in this joint proxy statement/prospectus as Annex B and
Annex C, respectively, and are incorporated herein by reference. Copies of the
restated certificates of incorporation and by-laws of Conoco and Phillips were
previously filed with the Securities and Exchange Commission. See "References to
Additional Information" and "Where You Can Find More Information" on page [ ].
The following description does not purport to be complete and is qualified by
reference to Delaware law, and the restated certificates of incorporation and
by-laws of Conoco, Phillips and New Parent.
COMPARISON OF CERTAIN CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
<Table>
<Caption>
PROVISION CONOCO PHILLIPS NEW PARENT
- --------- ------ -------- ----------
AUTHORIZED CAPITAL 4,850 million, of 1,300 million, of 3,000 million, of
STOCK which (1) 4,600 which (1) 1,000 which (1) 2,500
million are shares of million are shares of million, are shares
common stock, par common stock, par of common stock, par
value $0.01 per value $1.25 per value $0.01 per
share, and (2) 250 share, and (2) 300 share, and (2) 500
million are shares of million are shares of million are shares of
preferred stock, par preferred stock, par preferred stock, par
value $0.01 per value $1.00 per value $0.01 per
share. share. share.
BOARD OF DIRECTORS
SIZE OF BOARD The board of The board of The board of
directors must have directors must have directors must have
at least 6 and not at least 9 and not at least 6 and not
more than 15 more than 21 more than 20
directors. The exact directors. The exact directors. The exact
number is determined number is fixed from number is determined
from time to time by time to time by from time to time by
resolution adopted by resolution of the resolution adopted by
a majority of the board of directors. a majority of the
entire board of Phillips currently entire board of
directors. Conoco has 11 directors. directors. Initially,
currently has 10 New Parent will have
directors. 16 directors.
QUALIFICATION OF Directors need not be Directors need not be Directors need not be
DIRECTORS stockholders. stockholders. Any stockholders. Any
individual is individual is
eligible for election eligible for election
as a director, as a director,
provided that the provided that (1) a
individual is less director who is also
than 70 years old. an employee of New
Any employee who is Parent (a) is not
also a director, eligible for
including the appointment as a
Chairman of the director after
Board, must resign as attaining the age of
a director upon 65 and (b)
retiring as an automatically ceases
employee. A majority to be a director on
of the board termination of
</Table>
87
<Table>
<Caption>
PROVISION CONOCO PHILLIPS NEW PARENT
- --------- ------ -------- ----------
must be "independent employment with New
outside directors." Parent and (2) no
individual is
eligible for
appointment as a
director after
attaining the age of
70. These
restrictions do not
apply to Archie W.
Dunham, who may
continue to be
reelected as a
director until he is
70.
New Parent's restated
certificate of
incorporation
prohibits any other
limitation on the
qualification of
directors, other than
as required by
applicable law or as
set forth in New
Parent's restated
certificate of
incorporation or as
set forth in a by-law
adopted by the board
with respect to age
and cessation of
employment by the
company.
REMOVAL OF DIRECTORS A director may only Delaware law provides Same as Conoco.
be removed for cause that a director or
upon the affirmative the entire board of
vote of the shares directors of a
representing a Delaware corporation
majority of the votes may be removed, with
entitled to be cast or without cause, by
by the Company's the holders of a
voting stock majority of the
(excluding any shares then entitled
preferred stock to vote at an
entitled to vote only election of
in the event of directors.
dividend arrearages).
In general, unless
the board of
directors determines
that the removal of
the director is in
the best interests of
the company (in which
case the following
definition does not
apply), "cause" is
defined to mean (1) a
felony conviction, no
longer subject to
direct appeal, (2)
willful misconduct in
performance of duties
to
</Table>
88
<Table>
<Caption>
PROVISION CONOCO PHILLIPS NEW PARENT
- --------- ------ -------- ----------
the Company, or (3)
mental incompetence.
Notwithstanding the
foregoing, directors
elected by preferred
stockholders,
pursuant to
provisions applicable
in the case of
arrearages in
dividend payments or
other defaults
contained in the
board of directors'
resolutions
establishing such
series of preferred
stock, may be removed
by the preferred
stockholders in
accordance with the
provisions of the
resolutions.
CUMULATIVE VOTING None. None. None.
CLASSES OF DIRECTORS The board of All directors serve Same as Conoco.
directors is one-year terms and Initially Class I,
classified into three are elected at each Class II and Class
classes of annual meeting. III directors will
directors -- hold office until the
designated Class I, first, second and
Class II and Class third, respectively,
III. Each class annual meeting
consists, as nearly following the
as possible, of completion of the
one-third of the merger. See
total number of "Directors and
directors Management Following
constituting the the Merger."
entire board of
directors. Each
director serves for a
three-year term.
VACANCIES ON THE Vacancies (unless Vacancies and newly- Same as Conoco.
BOARD they are the result created directorships
of the action of are filled by an
stockholders) and individual elected by
newly-created a majority vote of
directorships are the remaining
filled by the directors, even
majority vote of the though less than a
remaining directors quorum.
in office, even
though less than a
quorum, or by a sole
remaining director.
Vacancies that result
from the action of
stockholders are
filled by the
stockholders.
BOARD QUORUM AND VOTE A majority of the A majority of the Same as Conoco.
REQUIREMENTS entire board of total number of
directors constitutes directors then in Additionally, the New
a quorum. office constitutes a Parent's restated
quorum.
</Table>
89
<Table>
<Caption>
PROVISION CONOCO PHILLIPS NEW PARENT
- --------- ------ -------- ----------
certificate of
The affirmative vote The affirmative vote incorporation
of a majority of of a majority of the prohibits any special
directors present at total directors then quorum requirements
a meeting at which in office constitutes or any supermajority
there is a quorum action by the board voting requirements
constitutes action by of directors. for action by the New
the board of Parent Board of
directors. Directors other than
those required by law
or set forth in the
certificate of
incorporation, which
is attached as Annex
B to this joint proxy
statement/prospectus.
STOCKHOLDER MEETINGS
ANNUAL MEETINGS Date, time and place Date, time and place Same as Conoco.
of the annual meeting of the annual meeting
is determined by the is determined by the
board of directors. board of directors.
Notice must be mailed
to stockholders no
less than 10 and no
more than 60 days
prior to the meeting.
SPECIAL MEETINGS Special meetings may Special meetings may Same as Conoco.
only be called by only be called by a
resolution of the resolution approved
board of directors or by a majority of the
by the Chairman of entire board of
the Board. The power directors or by the
of stockholders to Chairman or Vice
call a special Chairman of the Board
meeting is or by the President.
specifically denied.
QUORUM REQUIREMENTS The presence, in The holders of a Same as Conoco.
person or by proxy, majority of the
of the holders of issued and
shares of capital outstanding shares of
stock entitled to common stock, present
cast a majority of in person or by
the votes that could proxy, constitute a
be cast at the quorum for all
meeting by the purposes at any
holders of all of the meeting of
outstanding shares of stockholders.
capital stock
entitled to vote at
the meeting
constitutes a quorum.
ACTION BY WRITTEN None permitted. None permitted. None permitted.
CONSENT
NOTICE REQUIREMENTS In general, to bring In general, to bring See Conoco first
FOR STOCKHOLDER a matter before an a matter before an paragraph.
NOMINATIONS AND OTHER annual meeting or to annual meeting or to
PROPOSALS nominate nominate
</Table>
90
<Table>
<Caption>
PROVISION CONOCO PHILLIPS NEW PARENT
- --------- ------ -------- ----------
a candidate for a candidate for If the annual meeting
director, a director, a is not within 30 days
stockholder must give stockholder must give before or after the
notice of the notice of the anniversary date of
proposed matter or proposed matter or the preceding annual
nomination not less nomination not less meeting, the
than 90 and not more than 60 and not more stockholder notice
than 120 days prior than 90 days prior to must be received no
to the first the first anniversary later than the later
anniversary date of date of the of (1) 90 days prior
the immediately immediately preceding to the anniversary
preceding annual annual meeting. date and (2) close of
meeting. business on the 10th
If the annual meeting day following the day
If the annual meeting is not within 30 days on which notice of
is not within 30 days before or 60 days the annual meeting
before or after the after the anniversary was mailed or first
anniversary date of date of the preceding publicly disclosed,
the preceding annual annual meeting, the whichever first
meeting, the stockholder notice occurs.
stockholder notice must be received no
must be received no earlier than the 90th
later than the close day prior to the
of business on the annual meeting and no
10th day following later than the close
the day on which of business the later
notice of the annual of (1) the 60th day
meeting was mailed or prior to the
first publicly anniversary date and
disclosed, whichever (2) close of business
first occurs. on the 10th day
following the day on
which notice of the
annual meeting was
announced publicly.
CERTIFICATE TAKEOVER Conoco's restated Phillips' restated Same as Conoco.
RESTRICTIONS certificate of certificate of
incorporation incorporation
requires that certain requires the
business combinations affirmative vote of
(including mergers 75% of the
and consolidations outstanding shares
and sales, leases and entitled to vote for
exchanges of a merger,
substantially all of consolidation, sale
Conoco's assets) or lease of all or
involving a person or any substantial part
entity that of the assets of
beneficially owns 15% Phillips, or
or more of the liquidation,
outstanding shares of spin-off, split-off,
Conoco voting stock split-up or any
or is an affiliate of similar transaction
that person, which we involving an
refer to as a related interested person
person, must be that beneficially
approved by (1) at owns 10% or more of
least 80% of the the outstanding
votes entitled to be shares of Phillips
cast by the voting common stock or is an
stock and (2) at affiliate of that
least 66 2/3% of the person. This
votes entitled to be supermajority
requirement does not
apply if:
</Table>
91
<Table>
<Caption>
PROVISION CONOCO PHILLIPS NEW PARENT
- --------- ------ -------- ----------
cast by the voting - directors who are
stock other than unaffiliated with
voting stock owned by the interested
the related person. person and were in
These supermajority office before the
requirements do not interested person
apply if: became an
interested person
- a majority of the or were
directors who are subsequently
unaffiliated with approved by 75% of
the related person the unaffiliated
and who were in directors to become
office before the a director, which
interested person we refer to as the
became an continuing
interested person directors,
approve the constitute a
transaction, or majority of the
- certain fair price entire board of
conditions are met directors, and a
that in general majority of such
provide that the continuing
payment received by directors approve
the stockholders in the transaction
the business with the interested
combination is not person, or
less than the - a number of other
amount the related conditions are met,
person paid or including that the
agreed to pay for payment received by
any shares of the stockholders must
company's voting be at least equal
stock acquired to the highest
within one year of price paid by the
the business person for shares
combination. prior to the
transaction.
AMENDMENTS TO
ORGANIZATIONAL
DOCUMENTS
CERTIFICATE OF Amendments generally See Conoco first See Conoco first
INCORPORATION must be approved by paragraph. paragraph.
the board of
directors and by a
majority of the
outstanding stock
entitled to vote on
the amendment, and,
if applicable, by a
majority of the
outstanding stock of
each class or series
entitled to vote on
the amendment as a
class or series.
The affirmative vote The affirmative vote The affirmative vote
of shares of at least 80% of of shares
representing not less the voting power of representing not less
than 80% of the votes all outstanding than 80% of the votes
entitled to be cast shares entitled to entitled to be cast
by the voting stock vote by the voting stock
</Table>
92
<Table>
<Caption>
PROVISION CONOCO PHILLIPS NEW PARENT
- --------- ------ -------- ----------
(excluding any generally for (excluding any
preferred stock directors is required preferred stock
entitled to vote only to amend the entitled to vote only
in the event of provisions that (1) in the event of
dividend arrearages) deny stockholders the dividend arrearages)
is required to alter, right to call a is required to alter,
amend or adopt any special meeting or to amend or adopt any
provision act by written provision
inconsistent with or consent and (2) inconsistent with or
repeal the provisions require repeal the provisions
that (1) control the super-majority that (1) control the
constitution of the approval of certain constitution of the
board and (2) deny business transactions board of directors,
stockholders the with interested (2) deny stockholders
right to call a persons, as described the right to call a
special meeting or to under "-- Certificate special meeting or to
act by written Takeover act by written
consent. Restrictions." consent, (3) limit or
eliminate the
Additionally, the liability of
affirmative vote of directors to the
shares representing corporation, (4)
(1) not less than 80% establish the name of
of the votes entitled the corporation as
to be cast by the "New Parent" (and, in
voting stock the case of this
(excluding any clause (4), any such
preferred stock amendment or
entitled to vote only alteration must also
in the event of be recommended
dividend arrearages) unanimously by the
voting together as a entire board of
single class and (2) directors), and (5)
not less than 66 2/3% set the 80%
of the votes entitled supermajority
to be cast by the threshold applicable
voting stock with respect to the
(excluding any provisions above.
preferred stock
entitled to vote only Additionally, the
in the event of affirmative vote of
dividend arrearages) shares representing
not beneficially (1) not less than 80%
owned, directly or of the votes entitled
indirectly, by any to be cast by the
related person is voting stock
required to amend, (excluding any
repeal, or adopt any preferred stock
provisions entitled to vote only
inconsistent with the in the event of
provisions dividend arrearages)
restricting certain voting together as a
business combinations single class and (2)
with related persons, not less than 66 2/3%
as described above of the votes entitled
under "-- Certificate to be cast by the
Takeover voting stock not
Restrictions." beneficially owned,
directly or
indirectly, by any
related person is
required to amend,
repeal, or adopt any
provisions
inconsistent
</Table>
93
<Table>
<Caption>
PROVISION CONOCO PHILLIPS NEW PARENT
- --------- ------ -------- ----------
with, the provisions
restricting certain
business combinations
with related persons,
as described under
"-- Certificate
Takeover
Restrictions."
BY-LAWS In general, Conoco's Phillips' by-laws may In general, New
by-laws may be be altered, amended Parent's by-laws may
altered, amended or or repealed by the be altered, amended
repealed by (1) affirmative vote of a or repealed by (1)
action of the board majority of action of the board
of directors or (2) stockholders present of directors or (2)
by the affirmative in person or by by the affirmative
vote of a majority of proxy, at any annual vote of a majority of
votes entitled to be meeting (or a special votes entitled to be
cast by the voting meeting called for cast by the voting
stock at a meeting of this purpose) at stock (excluding any
stockholders, which a quorum is preferred stock
provided that the present. Except for entitled to vote only
proposed alteration, those by- laws in the event of
amendment or repeal adopted by the dividend arrearages)
was contained in the stockholders and at a meeting of
notice of that those by-laws as to stockholders,
meeting. which the power to provided that the
make, alter, repeal proposed alteration,
or amend is reserved amendment or repeal
to the stockholders, was contained in the
the board of notice of that
directors may also meeting.
make, alter, repeal
or amend the by-laws.
However, the However, the
alteration, amendment alteration, amendment
or repeal of, or the or repeal of, or the
adoption of a by-law adoption of a by- law
inconsistent with any inconsistent with any
of the following of the following
provisions by provisions by
stockholder action stockholder action
requires (a) an requires an
affirmative vote of affirmative vote of
80% of the votes 80% of the votes
entitled to be cast entitled to be cast
by the voting stock by the voting stock
(excluding any (excluding any
preferred stock preferred stock
entitled to vote only entitled to vote only
in the event of in the event of
dividend arrearages) dividend arrearages):
and (b) if there are
multiple classes of - provisions
common stock, a regarding special
majority of the votes meetings of
entitled to be cast stockholders,
by each class, voting - provisions
separately: regarding prohibition
on action by
- provisions written consent of
regarding special stockholders,
meetings of - provisions
stockholders, regarding procedures
for nomination of
</Table>
94
<Table>
<Caption>
PROVISION CONOCO PHILLIPS NEW PARENT
- --------- ------ -------- ----------
- provisions directors,
regarding prohibition - provisions
on action by regarding business
written consent of properly brought
stockholders, before the annual
- provisions meeting of
regarding procedures stockholders,
for nomination of - provisions
directors, regarding the number,
- provisions classification and
regarding business qualification of
properly brought directors,
before the annual - procedures for
meeting of filling vacancies on
stockholders, the board of
- provisions directors,
regarding the number - provisions
and classification regarding procedures
of directors, for removing
- provisions directors,
regarding procedures - provisions setting
for filling forth the roles and
vacancies on the responsibility of
board of directors, the Chairman of the
and Board of Directors,
- provisions the Chief Executive
regarding procedures Officer and
for removing President,
directors. - provisions
regarding the
succession
arrangements and
modification of Mr.
Dunham's and Mr.
Mulva's employment
contracts.
EXCULPATION AND
INDEMNIFICATION OF
DIRECTORS, OFFICERS
AND EMPLOYEES
EXCULPATION A director shall not Same as Conoco. No director shall be
be personally liable liable to the company
to the company for or its stockholders
monetary damages for for breach of
breach of fiduciary fiduciary duty as a
duty as a director, director to the
except for liability: fullest extent that
the Delaware General
- for any breach of Corporation Law or
the director's duty other law of the
of loyalty to the state of Delaware
company or its permits the
stockholders, limitation or
- for acts or elimination of
omissions not in good liability of
faith or that directors.
involve intentional
misconduct or
knowing violation
of law,
</Table>
95
<Table>
<Caption>
PROVISION CONOCO PHILLIPS NEW PARENT
- --------- ------ -------- ----------
- for unlawful
payment of dividends
under Section 174
of the Delaware
General Corporation
Law, or
- for any transaction
from which the
directors derived
an improper
personal benefit.
Each of the above provisions protects Conoco, Phillips and New Parent
directors, as the case may be, against personal liability for
monetary damages related to breaches of their fiduciary duty of care.
None of the above provisions eliminates the director's duty of care
nor has any effect on the availability of equitable remedies, such as
an injunction or rescission, based upon a director's breach of his or
her duty of care.
INDEMNIFICATION In general, the In general, the Same as Conoco.
by-laws provide for by-laws provide for
the indemnification indemnification, to
of any director or the fullest extent
officer who was or is authorized by
a party to any Delaware law, for
threatened, pending each individual who
or completed action is a party to, or
by reason of his or otherwise involved
her status as a in, any proceeding
director or officer because of his or her
against any expenses, status as a director,
judgments, fines or officer or employee
settlements actually of Phillips.
and reasonably
incurred by the Indemnification in
director or officer, connection with a
if the individual: proceeding brought by
the director, officer
- acted in good faith or employee is
and in a manner permitted only if the
reasonably believed proceeding was
to be in, or not authorized by the
opposed to, the board of directors.
best interests of
the company; and The company must
- with respect to any advance expenses to a
criminal action, director, officer or
had no reasonable employee upon receipt
cause to believe of an undertaking to
the conduct was repay the advanced
unlawful. amount if it is
ultimately determined
The company will that the individual
advance expenses to a is not entitled to
director or officer indemnification.
upon receipt of an
undertaking to repay
the advanced amount
if it is ultimately
determined that the
individual is not
entitled to
indemnification.
</Table>
96
LEGAL MATTERS
The validity of the New Parent common stock offered by this joint proxy
statement/prospectus will be passed upon for New Parent by [ ].
EXPERTS
The historical financial statements of Conoco as of December 31, 2000 and
1999, and for each of the three years in the period ended December 31, 2000,
incorporated in this prospectus by reference to the Current Report on Form 8-K/A
of Conoco filed with the SEC on September 10, 2001, and the financial statement
schedule incorporated in this prospectus by reference to the Annual Report on
Form 10-K of Conoco for the year ended December 31, 2000, have been so
incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements and schedule of Phillips included in Phillips' Annual
Report on Form 10-K for the year ended December 31, 2000, as amended, as set
forth in their report, which is incorporated by reference in this joint proxy
statement/prospectus. Phillips' financial statements and schedule are
incorporated by reference in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
Ernst & Young LLP have also audited the consolidated balance sheet of
CorvettePorsche Corp. at December 4, 2001, as set forth in their report. We have
included the CorvettePorsche Corp. balance sheet in this joint proxy
statement/prospectus in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
INDEPENDENT AUDITORS
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Conoco special meeting, and representatives of Ernst & Young LLP are
expected to be present at the Phillips special meeting. The representatives of
the independent auditors will have the opportunity to make a statement regarding
the merger if they desire to do so, and they are expected to be available to
respond to appropriate questions from the stockholders at their respective
meetings.
STOCKHOLDER PROPOSALS
CONOCO
For a stockholder proposal to be included in the proxy statement for the
2002 Conoco annual meeting, including a proposal for the election of a director,
the proposal must be received by Conoco at its principal offices no later than
November 26, 2001. Also, under Conoco's by-laws, Conoco stockholders must give
advance notice of nominations for director or other business to be addressed at
the annual meeting not later than the close of business on February 7, 2002 and
not earlier than January 8, 2002.
PHILLIPS
For a stockholder proposal to be included in the proxy statement for the
2002 Phillips annual meeting, including a proposal for the election of a
director, the proposal must be received by Phillips at its principal offices no
later than December 4, 2001. Also, under Phillips' by-laws, Phillips
stockholders must give advance notice of nominations for director or other
business to be addressed at the annual meeting not later than the close of
business on March 8, 2002 and not earlier than February 6, 2002.
OTHER MATTERS
As of the date of this joint proxy statement/prospectus, neither the Conoco
Board of Directors nor the Phillips Board of Directors knows of any matter that
will be presented for consideration at the Conoco special meeting or the
Phillips special meeting, respectively, other than as described in this joint
proxy statement/prospectus.
97
WHERE YOU CAN FIND MORE INFORMATION
New Parent filed a registration statement on Form S-4 on [ ],
2001, to register with the Securities and Exchange Commission the New Parent
common stock to be issued to Conoco stockholders and Phillips stockholders in
the merger. This joint proxy statement/prospectus is a part of that registration
statement and constitutes a prospectus of New Parent in addition to being a
joint proxy statement of Conoco and Phillips. As allowed by Securities and
Exchange Commission rules, this joint proxy statement/prospectus does not
contain all the information you can find in New Parent's registration statement
or the exhibits to the registration statement. Conoco and Phillips file annual,
quarterly and special reports, proxy statements and other information with the
Securities and Exchange Commission. You may read and copy any reports,
statements or other information that Conoco and Phillips file with the
Securities and Exchange Commission at the Securities and Exchange Commission's
public reference rooms at Public Reference Room, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. These Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the Internet worldwide web site maintained by the
Securities and Exchange Commission at http://www.sec.gov. Reports, proxy
statements and other information concerning Conoco and Phillips may also be
inspected at the offices of the New York Stock Exchange, which is located at 20
Broad Street, New York, New York 10005.
The Securities and Exchange Commission allows Conoco, Phillips and New
Parent to "incorporate by reference" information in this joint proxy
statement/prospectus, which means that Conoco, Phillips and New Parent can
disclose important information to you by referring you to other documents filed
separately with the Securities and Exchange Commission. The information
incorporated by reference is considered part of this joint proxy
statement/prospectus, except for any information superseded by information
contained directly in this joint proxy statement/prospectus or in later filed
documents incorporated by reference in this joint proxy statement/prospectus.
This joint proxy statement/prospectus incorporates by reference the
documents set forth below that Conoco and Phillips have previously filed with
the Securities and Exchange Commission. These documents contain important
business and financial information about Conoco and Phillips that is not
included in or delivered with this joint proxy statement/prospectus.
<Table>
<Caption>
CONOCO FILINGS (FILE NO. 1-14521) PERIOD/FILING DATE
- --------------------------------- ------------------
Annual Report on Form 10-K................... Year ended December 31, 2000
Quarterly Reports on Form 10-Q............... Quarters ended March 31, June 30, and
September 30, 2001
Current Reports on Form 8-K.................. November 19, 2001
November 16, 2001
October 22, 2001
October 9, 2001
October 5, 2001
September 24, 2001
September 20, 2001
September 17, 2001
September 10, 2001 (amended)
July 31, 2001
July 17, 2001
May 30, 2001
March 29, 2001
March 29, 2001 (amended)
February 23, 2001
February 22, 2001
</Table>
98
<Table>
<Caption>
PHILLIPS FILINGS (FILE NO. 1-00720) PERIOD/FILING DATE
- ----------------------------------- ------------------
Annual Report on Form 10-K, as amended....... Year ended December 31, 2000
Quarterly Reports on Form 10-Q............... Quarters ended March 31, June 30, and
September 30, 2001
Current Reports on Form 8-K.................. November 19, 2001
November 13, 2001
October 31, 2001
September 28, 2001
September 18, 2001
April 11, 2001
February 21, 2001
February 5, 2001
</Table>
This joint proxy statement/prospectus also incorporates by reference all
additional documents that may be filed by Conoco and Phillips with the
Securities and Exchange Commission under Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act between the date of this joint proxy statement/prospectus and
the date of the Conoco special meeting and the date of the Phillips special
meeting, as applicable. These include periodic reports, such as Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
Conoco has supplied all information contained or incorporated by reference
in this joint proxy statement/prospectus relating to Conoco, and Phillips has
supplied all information contained in or incorporated by reference in this joint
proxy statement/prospectus relating to Phillips. Conoco and Phillips have
jointly supplied all information contained or incorporated by reference in this
joint proxy statement/ prospectus relating to New Parent, Corvette Merger Corp.
and Porsche Merger Corp.
If you are a Conoco stockholder or a Phillips stockholder, we may have sent
you some of the documents incorporated by reference, but you can also obtain any
of them through Conoco or Phillips, the Securities and Exchange Commission or
the Securities and Exchange Commission's Internet web site as described above.
Documents incorporated by reference are available from Conoco or Phillips
without charge, excluding all exhibits, except that, if Conoco or Phillips have
specifically incorporated by reference an exhibit in this joint proxy
statement/prospectus, the exhibit will also be provided without charge. You may
obtain documents incorporated by reference in this joint proxy
statement/prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses:
<Table>
Conoco Inc. Phillips Petroleum Company
600 North Dairy Ashford Road 1234 Adams Building
Houston, Texas 77079 4th Street and Keeler Avenue
(281) 293-6800 Bartlesville, Oklahoma 74004
Attention: Shareholder Relations (918) 661-[ ]
Attention: Secretary
</Table>
If you would like to request documents, please do so by [ ], in
order to receive them before your special meeting.
You should rely only on the information contained or incorporated by
reference in this joint proxy statement/prospectus. We have not authorized
anyone to provide you with information that is different from what is contained
in this joint proxy statement/prospectus. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are in a
jurisdiction where offers to exchange or sell, or solicitations of offers to
exchange or purchase, the securities offered by this document or the
solicitation of proxies is unlawful, or if you are a person to whom it is
unlawful to direct these types of activities, then the offer presented in this
document does not extend to you. This joint proxy statement/ prospectus is dated
[ ]. You should not assume that the information contained in this joint
proxy statement/prospectus is accurate as of any date other than that date.
Neither the mailing of this joint proxy statement/prospectus to Conoco
stockholders and Phillips stockholders nor the issuance of New Parent common
stock in the merger creates any implication to the contrary.
99
REPORT OF INDEPENDENT AUDITORS
CorvettePorsche Corp.
The Board of Directors and Stockholders
We have audited the accompanying consolidated balance sheet of
CorvettePorsche Corp. as of December 4, 2001. This balance sheet is the
responsibility of the company's management. Our responsibility is to express an
opinion on this balance sheet based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the balance sheet is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the consolidated financial position of CorvettePorsche Corp.
at December 4, 2001, in conformity with accounting principles generally accepted
in the United States.
ERNST & YOUNG LLP
Tulsa, Oklahoma
December 7, 2001
F-1
CORVETTEPORSCHE CORP.
CONSOLIDATED BALANCE SHEET
<Table>
<Caption>
AT DECEMBER 4,
2001
---------------
ASSETS
Cash $200
- -----------------------------------------------------------------------------
Total Assets $200
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock -- 100 shares authorized at $.01 par value;
none issued or outstanding $--
Common stock -- 100 shares authorized at $.01 par value
Issued (2 shares)
Par value --
Additional paid-in capital 200
- -----------------------------------------------------------------------------
Total Stockholders' Equity $200
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</Table>
See accompanying Note to Consolidated Balance Sheet
F-2
CORVETTEPORSCHE CORP.
NOTE TO CONSOLIDATED BALANCE SHEET
BASIS OF PRESENTATION
CorvettePorsche Corp. (the company) was incorporated in the state of
Delaware on November 16, 2001. CorvettePorsche Corp. has two stockholders,
Conoco Inc. (Conoco) and Phillips Petroleum Company (Phillips), each holding one
share of the company's common stock, par value $.01. Phillips contributed $100
for its share on November 30, 2001, while Conoco contributed $100 for its share
on December 4, 2001. The company was formed in connection with the anticipated
merger of Conoco and Phillips.
The company has two wholly owned subsidiaries -- Corvette Merger Corp. and
Porsche Merger Corp. At the effective date of the merger, Corvette Merger Corp.
would merge with and into Conoco, and Porsche Merger Corp. would merge with and
into Phillips, at which point Corvette Merger Corp. and Porsche Merger Corp.
would no longer exist as separate corporate entities, and the company's only two
wholly owned subsidiaries would be Conoco and Phillips. Upon completion of the
merger, the name of the company will change to ConocoPhillips. Also at that
time, each outstanding share of Conoco common stock would be converted into
0.4677 of a share of the company's common stock, and each outstanding share of
Phillips common stock would be converted into one share of the company's common
stock. This action will necessitate the authorization of additional common
shares of the company before the merger takes place.
The consolidated balance sheet includes the accounts of the company and its
two wholly owned subsidiaries, Corvette Merger Corp. and Porsche Merger Corp.
Intercompany accounts have been eliminated. Other than its formation, the
company and its subsidiaries have not conducted any activities.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
balance sheet.
F-3
ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 18, 2001
BY AND AMONG
PHILLIPS PETROLEUM COMPANY,
CORVETTEPORSCHE CORP.,
PORSCHE MERGER CORP.,
CORVETTE MERGER CORP.
AND
CONOCO INC.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
ARTICLE I CERTAIN DEFINITIONS.............................................. A-1
ARTICLE II FORMATION OF NEW PARENT; THE MERGERS............................. A-7
2.1 Formation of New Parent; Merger Subs............................. A-7
2.2 The Mergers...................................................... A-7
2.3 Effective Time of the Mergers.................................... A-7
2.4 Effects of the Mergers........................................... A-8
2.5 Closing.......................................................... A-8
2.6 Certificates of Incorporation.................................... A-8
2.7 By-Laws.......................................................... A-8
2.8 Directors and Officers........................................... A-8
2.9 Actions of Phillips and Conoco................................... A-8
2.10 Actions of New Parent............................................ A-8
ARTICLE III CONVERSION OF SECURITIES......................................... A-9
3.1 Effect on Capital Stock of Phillips and Merger Sub One........... A-9
3.2 Effect on Capital Stock of Conoco and Merger Sub Two............. A-9
3.3 Effect on New Parent Common Stock................................ A-10
3.4 Conoco Stock Options and Other Equity-Based Awards............... A-10
3.5 Phillips Stock Options and Other Equity-Based Awards............. A-11
3.6 Exchange Fund.................................................... A-12
3.7 Exchange Procedures.............................................. A-12
3.8 Distributions with Respect to Unexchanged Shares................. A-13
3.9 No Further Ownership Rights in Conoco Common Stock or Phillips
Common Stock..................................................... A-13
3.10 No Fractional Shares of New Parent Common Stock.................. A-13
3.11 Termination of Exchange Fund..................................... A-14
3.12 No Liability..................................................... A-14
3.13 Investment of the Exchange Fund.................................. A-14
3.14 Lost Certificates................................................ A-14
3.15 Withholding Rights............................................... A-14
3.16 Further Assurances............................................... A-15
3.17 Stock Transfer Books............................................. A-15
ARTICLE IV REPRESENTATIONS AND WARRANTIES................................... A-15
4.1 Representations and Warranties of Conoco......................... A-15
(a) Corporate Organization...................................... A-15
(b) Capitalization.............................................. A-15
(c) Authority; No Violation..................................... A-16
(d) Consents and Approvals...................................... A-17
(e) Financial Reports and SEC Documents......................... A-17
(f) Absence of Undisclosed Liabilities.......................... A-18
(g) Absence of Certain Changes or Events........................ A-18
(h) Legal Proceedings........................................... A-18
(i) Compliance with Applicable Law.............................. A-18
(j) Environmental Liability..................................... A-19
</Table>
i
<Table>
<Caption>
PAGE
----
(k) Employee Benefit Plans; Labor Matters....................... A-19
(l) Taxes....................................................... A-19
(m) Reorganization under the Code............................... A-20
(n) Form S-4; Joint Proxy Statement/Prospectus.................. A-20
(o) State Takeover Laws; Rights Plan............................ A-20
(p) Opinion of Financial Advisors............................... A-21
(q) Board Approval.............................................. A-21
(r) Brokers' Fees............................................... A-21
(s) Ownership of Phillips Capital Stock......................... A-21
4.2 Representations and Warranties of Phillips....................... A-21
(a) Corporate Organization...................................... A-21
(b) Capitalization.............................................. A-21
(c) Authority; No Violation..................................... A-22
(d) Consents and Approvals...................................... A-23
(e) Financial Reports and SEC Documents......................... A-23
(f) Absence of Undisclosed Liabilities.......................... A-23
(g) Absence of Certain Changes or Events........................ A-24
(h) Legal Proceedings........................................... A-24
(i) Compliance with Applicable Law.............................. A-24
(j) Environmental Liability..................................... A-24
(k) Employee Benefit Plans; Labor Matters....................... A-25
(l) Taxes....................................................... A-25
(m) Reorganization under the Code............................... A-26
(n) Form S-4; Joint Proxy Statement/Prospectus.................. A-26
(o) State Takeover Laws; Rights Plan............................ A-26
(p) Opinion of Financial Advisors............................... A-27
(q) Board Approval.............................................. A-27
(r) Brokers' Fees............................................... A-27
(s) Ownership of Conoco Capital Stock........................... A-27
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS........................ A-27
5.1 Covenants of Conoco.............................................. A-27
(a) Ordinary Course............................................. A-27
(b) Dividends; Changes in Share Capital......................... A-27
(c) Issuance of Securities...................................... A-28
(d) Governing Documents......................................... A-28
(e) No Acquisitions............................................. A-28
(f) No Dispositions............................................. A-28
(g) Investments; Indebtedness................................... A-28
(h) Tax-Free Qualification...................................... A-29
(i) Compensation................................................ A-29
(j) Financial Accounting Methods................................ A-29
(k) Standstill.................................................. A-29
(l) Certain Actions............................................. A-29
</Table>
ii
<Table>
<Caption>
PAGE
----
5.2 Covenants of Phillips............................................ A-29
(a) Ordinary Course............................................. A-29
(b) Dividends, Changes in Share Capital......................... A-30
(c) Issuance of Securities...................................... A-30
(d) Governing Documents......................................... A-30
(e) No Acquisitions............................................. A-30
(f) No Dispositions............................................. A-31
(g) Investments; Indebtedness................................... A-31
(h) Tax-Free Qualification...................................... A-31
(i) Compensation................................................ A-31
(j) Financial Accounting Methods................................ A-31
(k) Standstill.................................................. A-31
(l) Certain Actions............................................. A-32
5.3 Governmental Filings............................................. A-32
5.4 Control of Other Party's Business................................ A-32
ARTICLE VI ADDITIONAL AGREEMENTS............................................ A-32
6.1 Preparation of Proxy Statement; Stockholders Meetings............ A-32
6.2 Governance Matters; Headquarters; Company Name................... A-33
6.3 Access to Information............................................ A-34
6.4 Reasonable Best Efforts.......................................... A-34
6.5 Acquisition Proposals............................................ A-36
6.6 Fees and Expenses................................................ A-37
6.7 Directors' and Officers' Indemnification and Insurance........... A-37
6.8 Employee Benefits................................................ A-38
6.9 Public Announcements............................................. A-40
6.10 Listing of Shares of New Parent Common Stock..................... A-40
6.11 Rights Agreements................................................ A-40
6.12 Affiliates....................................................... A-40
6.13 Section 16 Matters............................................... A-41
6.14 Dividends........................................................ A-41
ARTICLE VII CONDITIONS PRECEDENT............................................. A-41
7.1 Conditions to Each Party's Obligation to Effect the Mergers...... A-41
(a) Stockholder Approval........................................ A-41
(b) No Injunctions or Restraints; Illegality.................... A-41
(c) HSR Act; Other Approvals.................................... A-41
(d) NYSE Listing................................................ A-41
(e) Effectiveness of the Form S-4............................... A-41
7.2 Additional Conditions to Obligations of Phillips................. A-42
(a) Representations and Warranties.............................. A-42
(b) Performance of Obligations of Conoco........................ A-42
(c) Tax Opinion................................................. A-42
</Table>
iii
<Table>
<Caption>
PAGE
----
7.3 Additional Conditions to Obligations of Conoco................... A-42
(a) Representations and Warranties.............................. A-42
(b) Performance of Obligations of Phillips...................... A-42
(c) Tax Opinion................................................. A-42
ARTICLE VIII TERMINATION AND AMENDMENT........................................ A-43
8.1 Termination...................................................... A-43
8.2 Effect of Termination............................................ A-44
8.3 Amendment........................................................ A-45
8.4 Extension; Waiver................................................ A-45
8.5 Procedure for Termination........................................ A-45
ARTICLE IX GENERAL PROVISIONS............................................... A-45
9.1 Non-Survival of Representations, Warranties and Agreements....... A-45
9.2 Notices.......................................................... A-46
9.3 Interpretation................................................... A-46
9.4 Counterparts..................................................... A-46
9.5 Entire Agreement; No Third Party Beneficiaries................... A-46
9.6 Governing Law.................................................... A-47
9.7 Severability..................................................... A-47
9.8 Assignment....................................................... A-47
9.9 Submission to Jurisdiction; Waivers.............................. A-47
9.10 Enforcement...................................................... A-47
</Table>
LIST OF EXHIBITS
<Table>
<Caption>
EXHIBIT TITLE
- ------- -----
Exhibit A Form of Certificate of Incorporation of New Parent
Exhibit B Form of By-Laws of New Parent
Exhibit C Form of Certificate of Incorporation of Phillips Surviving
Corporation
Exhibit D Form of Certificate of Incorporation of Conoco Surviving
Corporation
Exhibit E Form of New Parent Rights Agreement
Exhibit F Form of Affiliate Agreement
</Table>
iv
AGREEMENT AND PLAN OF MERGER, dated as of November 18, 2001 (this
"Agreement"), by and among PHILLIPS PETROLEUM COMPANY, a Delaware corporation
("Phillips"), CORVETTEPORSCHE CORP., a Delaware corporation ("New Parent"),
PORSCHE MERGER CORP., a Delaware corporation and direct wholly owned subsidiary
of New Parent ("Merger Sub One"), CORVETTE MERGER CORP., a Delaware corporation
and direct wholly owned subsidiary of New Parent ("Merger Sub Two"), and CONOCO
INC., a Delaware corporation ("Conoco").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Phillips, New Parent, Merger Sub One,
Merger Sub Two and Conoco deem it advisable and in the best interests of their
respective corporations and stockholders that Phillips and Conoco engage in a
business combination in a merger of equals in order to advance the long-term
strategic business interests of Phillips and Conoco;
WHEREAS, to effect such merger of equals, upon the terms and subject to the
conditions set forth herein, (i) Merger Sub One will merge with and into
Phillips with Phillips continuing as the surviving corporation (the "Phillips
Merger") and (ii) Merger Sub Two will merge with and into Conoco with Conoco
continuing as the surviving corporation (the "Conoco Merger" and together with
the Phillips Merger, the "Mergers");
WHEREAS, upon consummation of the Mergers, (i) each of Phillips and Conoco
will become a wholly owned subsidiary of New Parent, which has been formed by
Phillips and Conoco solely for the purpose of the transactions contemplated by
this Agreement and (ii) New Parent will change its name to ConocoPhillips; and
WHEREAS, for U.S. federal income tax purposes, it is intended that the
Phillips Merger and the Conoco Merger shall each qualify as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code") and that the Mergers, taken together, shall qualify as an
exchange described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the respective
meanings set forth below:
"Acquisition Proposal" shall have the meaning set forth in Section
6.5(a)(i).
"Affiliate Agreement" shall have the meaning set forth in Section 6.12(a).
"Agreement" shall have the meaning set forth in the preamble.
"Antitrust Laws" means the HSR Act, the EC Merger Regulation, the Canadian
Investment Regulations or other antitrust, competition or premerger
notification, trade regulation law, regulation or order.
"beneficial ownership" or "beneficially own" shall have the meaning
ascribed to such terms under Section 13(d) of the Exchange Act.
"Benefit Plan" means, with respect to any entity, any employee benefit
plan, program, policy, practice, agreement, contract or other arrangement
providing benefits to any current or former employee, officer or director of
such entity or any of its affiliates or any beneficiary or dependent thereof
that is sponsored or maintained by such entity or any of its affiliates or to
which such entity or any of its affiliates contributes or is obligated to
contribute, whether or not written, including any "employee welfare benefit
plan" within
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the meaning of Section 3(1) of ERISA, any "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA (whether or not such plan is subject to
ERISA), any employment or severance agreement, and any bonus, incentive,
deferred compensation, vacation, stock purchase, stock option, severance, change
of control or fringe benefit plan, program or policy.
"Business Day" means any day on which banks are not required or authorized
to close in the City of New York.
"Canadian Investment Regulations" means the Competition Act (Canada) and
the Investment Canada Act of 1984 (Canada).
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and the rules and regulations promulgated
thereunder.
"Certificates of Merger" shall have the meaning set forth in Section 2.3.
"Change in the Conoco Recommendation" shall have the meaning set forth in
Section 6.1(b).
"Change in the Phillips Recommendation" shall have the meaning set forth in
Section 6.1(c).
"Closing" shall have the meaning set forth in Section 2.5.
"Closing Date" shall have the meaning set forth in Section 2.5.
"Code" shall have the meaning set forth in the recitals.
"Confidentiality Agreement" shall have the meaning set forth in Section
6.3.
"Conoco" shall have the meaning set forth in the preamble.
"Conoco 2000 10-K" means Conoco's Annual Report on Form 10-K for the fiscal
year ended December 31, 2000, as filed with the SEC.
"Conoco 10-Q" means Conoco's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2001, as filed with the SEC.
"Conoco Benefit Plan" means a Benefit Plan maintained or contributed to by
Conoco or any of its Subsidiaries, or to which Conoco or any of its Subsidiaries
is required to contribute.
"Conoco Capital Stock" means the Conoco Common Stock together with the
Conoco Preferred Stock.
"Conoco Certificate" shall have the meaning set forth in Section 3.2(b).
"Conoco Certificate of Merger" shall have the meaning set forth in Section
2.3.
"Conoco Common Stock" means common stock, par value $.01 per share, of
Conoco.
"Conoco Disclosure Schedule" means the disclosure schedule delivered by
Conoco to Phillips concurrently herewith.
"Conoco Merger" shall have the meaning set forth in the recitals.
"Conoco Merger Consideration" shall have the meaning set forth in Section
3.2(b).
"Conoco Necessary Consents" shall have the meaning set forth in Section
4.1(d).
"Conoco Preferred Stock" means the preferred stock, par value $.01, of
Conoco.
"Conoco Recommendation" shall have the meaning set forth in Section 6.1(b).
"Conoco Right" means a preferred share purchase right issuable pursuant to
the Conoco Rights Agreement.
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"Conoco Rights Agreement" means the Rights Agreement, dated as of July 29,
1999, between Conoco and Equiserve Trust Company, N.A., as successor to First
Chicago Trust Company of New York, as rights agent, as amended.
"Conoco SAR" shall have the meaning set forth in Section 3.4(a).
"Conoco SEC Documents" shall have the meaning set forth in Section 4.1(e).
"Conoco Stock-Based Award" shall have the meaning set forth in Section
3.4(b).
"Conoco Stock Option" shall have the meaning set forth in Section 3.4(a).
"Conoco Stock Plans" shall have the meaning set forth in Section 3.4(a).
"Conoco Stockholder Approval" shall have the meaning set forth in Section
4.1(c)(i).
"Conoco Stockholders Meeting" shall have the meaning set forth in Section
4.1(c)(i).
"Conoco Surviving Corporation" shall have the meaning set forth in Section
2.2(b).
"Conoco Termination Fee" means $550 million.
"Controlled Group Liability" means any and all liabilities (a) under Title
IV of ERISA, other than for payment of premiums to the Pension Benefit Guaranty
Corporation, (b) under Section 302 of ERISA, (c) under Sections 412 and 4971 of
the Code, (d) for violation of the continuation coverage requirements of Section
601 et seq. of ERISA and Section 4980B of the Code or the group health
requirements of Sections 9801 et seq. of the Code and Sections 701 et seq. of
ERISA, and (e) under corresponding or similar provisions of foreign laws or
regulations.
"Delaware Secretary" shall have the meaning set forth in Section 2.3.
"DGCL" means the General Corporation Law of the State of Delaware.
"DOJ" means the Antitrust Division of the U.S. Department of Justice.
"EC Merger Regulation" shall have the meaning set forth in Section 4.1(d).
"Effective Time" shall have the meaning set forth in Section 2.3.
"Environmental Claims" means, in respect of any person, (i) any and all
administrative, regulatory or judicial actions, suits, orders, decrees, suits,
demands, directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation by any person, alleging potential presence or Release
of, or exposure to, any Hazardous Materials at any location, whether or not
owned, operated, leased or managed by such person, (ii) circumstances forming
the basis of any actual or alleged violation of, or liability under, any
Environmental Law or (iii) any and all indemnification, cost recovery,
compensation or injunctive relief resulting from the presence or Release of, or
exposure to, any Hazardous Materials.
"Environmental Laws" means all applicable federal, state, local and foreign
laws (including international conventions, protocols and treaties), common law,
rules, regulations, orders, decrees, judgments, binding agreements or
Environmental Permits issued, promulgated or entered into, by or with any
Governmental Entity, relating to pollution, Hazardous Materials, natural
resources or the protection, investigation or restoration of the environment.
"Environmental Permits" means all permits, licenses, registrations and
other governmental authorizations required under applicable Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Exchange Agent" shall have the meaning set forth in Section 3.6.
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"Exchange Fund" shall have the meaning set forth in Section 3.6.
"Exchange Ratio" shall have the meaning set forth in Section 3.2(b).
"Expenses" means all out-of-pocket expenses (including all fees and
expenses of counsel, accountants, investment bankers, experts and consultants to
a party hereto and its affiliates) incurred by a party hereto or on its behalf
in connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and the transactions contemplated
hereby, including the preparation, printing, filing and mailing of the Joint
Proxy Statement/Prospectus and the Form S-4 and the solicitation of stockholder
approvals and all other matters related to the transactions contemplated hereby
and thereby.
"Form S-4" shall have the meaning set forth in Section 4.1(d)(iv).
"FTC" means the U.S. Federal Trade Commission.
"GAAP" means U.S. generally accepted accounting principles.
"Governmental Entity" means any supranational, national, state, municipal
or local government, foreign or domestic, any instrumentality, subdivision,
court, administrative agency or commission or other authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing, importing
or other governmental or quasi-governmental authority.
"GIRL" means Gulf Indonesia Resources Limited, a corporation formed in
Canada.
"Gulf" means Conoco Canada Resources Limited, a corporation formed in
Canada.
"Hazardous Materials" means any petroleum or petroleum products,
radioactive materials or wastes, asbestos, polychlorinated biphenyls and any
chemical, material, substance or waste, in each case that is prohibited, limited
or regulated pursuant to any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"IRS" means the Internal Revenue Service.
"Joint Proxy Statement/Prospectus" shall have the meaning set forth in
Section 4.1(d)(iv).
"knowledge" or "known" means, with respect to any entity, the knowledge of
such entity's executive officers after reasonable inquiry.
"Liens" shall have the meaning set forth in Section 2.1(b).
"Material Adverse Effect" means, with respect to any entity, a material
adverse effect on (a) the business, operations, results of operations or
financial condition of such entity and its Subsidiaries taken as a whole or (b)
the ability of such entity to timely consummate the transactions contemplated by
this Agreement, except, in each case, for any such effect reasonably
attributable to (i) general political and economic conditions (including
prevailing interest rate and stock market levels) in the United States or the
other countries in which such entity operates, (ii) the general state of the
industries in which such entity operates or (iii) other than with respect to
Sections 4.1(c)(ii), 4.1(d), 4.2(c)(ii), 4.2(d), 6.4(a) or 7.1(c), the
negotiation, announcement, execution, delivery or consummation of the
transactions contemplated by, or in compliance with, this Agreement.
"Merger Sub One" shall have the meaning set forth in the preamble.
"Merger Sub One Common Stock" shall have the meaning set forth in Section
2.1(b).
"Merger Sub Two" shall have the meaning set forth in the preamble.
"Merger Sub Two Common Stock" shall have the meaning set forth in Section
2.1(b).
"Mergers" shall have the meaning set forth in the recitals.
"New Parent" shall have the meaning set forth in the preamble.
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"New Parent Common Stock" shall have the meaning set forth in Section
2.1(a).
"New Parent Rights Agreement" shall have the meaning set forth in Section
6.11(c).
"New Parent SAR" shall have the meaning set forth in Section 3.4(a).
"New Parent Stock Option" shall have the meaning set forth in Section
3.4(a).
"New Parent Stock-Based Award" shall have the meaning set forth in Section
3.4(b).
"New Plans" shall have the meaning set forth in Section 6.8(b).
"Newco Employees" shall have the meaning set forth in Section 6.8(a).
"NYSE" means the New York Stock Exchange, Inc.
"other party" means, with respect to Phillips, Conoco, and with respect to
Conoco, Phillips.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).
"Phillips" shall have the meaning set forth in the preamble.
"Phillips 2000 10-K" means Phillips's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, as filed with the SEC.
"Phillips 10-Q" means Phillips's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2001, as filed with the SEC.
"Phillips Benefit Plan" means a Benefit Plan maintained or contributed to
by Phillips or a Subsidiary of Phillips, or to which Phillips or any Subsidiary
of Phillips is required to contribute.
"Phillips Capital Stock" means the Phillips Common Stock together with the
Phillips Preferred Stock.
"Phillips Certificate" shall have the meaning set forth in Section 3.7(b).
"Phillips Certificate of Merger" shall have the meaning set forth in
Section 2.3.
"Phillips Common Stock" means common stock, par value $1.25 per share, of
Phillips.
"Phillips Disclosure Schedule" means the disclosure schedule delivered by
Phillips to Conoco concurrently herewith.
"Phillips Merger" shall have the meaning set forth in the recitals.
"Phillips Merger Consideration" shall have the meaning set forth in Section
3.1(b).
"Phillips Necessary Consents" shall have the meaning set forth in Section
4.2(d).
"Phillips Preferred Stock" means the preferred stock, par value $1.00 per
share, of Phillips.
"Phillips Recommendation" shall have the meaning set forth in Section
6.1(c).
"Phillips Right" means a preferred share purchase right issuable pursuant
to the Phillips Rights Agreement.
"Phillips Rights Agreement" means the Rights Agreement, dated as of August
1, 1999, between Phillips and ChaseMellon Shareholder Services, L.L.C., as
rights agent.
"Phillips SAR" shall have the meaning set forth in Section 3.5(a).
"Phillips SEC Documents" shall have the meaning set forth in Section
4.2(e).
"Phillips Stock Option" shall have the meaning set forth in Section 3.5(a).
"Phillips Stock Plans" shall have the meaning set forth in Section 3.5(a).
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"Phillips Stock-Based Award" shall have the meaning set forth in Section
3.5(b).
"Phillips Stockholder Approval" shall have the meaning set forth in Section
4.2(c)(i).
"Phillips Stockholders Meeting" shall have the meaning set forth in Section
4.2(c)(i).
"Phillips Surviving Corporation" shall have the meaning set forth in
Section 2.2(a).
"Phillips Termination Fee" means $550 million dollars.
"Qualifying Amendment" means an amendment or supplement to the Joint Proxy
Statement/ Prospectus or Form S-4 (including by incorporation by reference) to
the extent it contains (i) a Change in the Phillips Recommendation or a Change
in the Conoco Recommendation (as the case may be), (ii) a statement of the
reasons of the Board of Directors of Phillips or Conoco (as the case may be) for
making such Change in the Phillips Recommendation or Change in the Conoco
Recommendation (as the case may be) and (iii) additional information reasonably
related to the foregoing.
"Regulatory Law" means the HSR Act, and all other U.S. federal and state
and foreign, if any, statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to prohibit, restrict or regulate (a) mergers, acquisitions or other
business combinations, (b) foreign investment, or (c) actions having the purpose
or effect of monopolization or restraint of trade or lessening of competition.
"Release" means any actual or threatened release, spill, emission, leaking,
dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching
or migration into the environment.
"Required Approvals" shall have the meaning set forth in Section 6.4(a)(i).
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Significant Subsidiary" shall have the meaning ascribed to such term in
Rule 1-02 of Regulation S-X of the SEC.
"Subsidiary" shall have the meaning ascribed to such term in Rule 1-02 of
Regulation S-X of the SEC.
"Superior Proposal" means, with respect to Phillips or Conoco, as the case
may be, a bona fide written proposal made by a Person other than a party hereto
that is (a) for an Acquisition Proposal (except that references in the
definition of "Acquisition Proposal" to "20%" shall be "50%") involving such
party and (b) is on terms which its Board of Directors in good faith concludes
(following receipt of the advice of its financial advisors and outside counsel),
taking into account, among other things, all legal, financial, regulatory and
other aspects of the proposal and the Person making the proposal, (i) would, if
consummated, result in a transaction that is more favorable to its stockholders
(in their capacities as stockholders), from a financial point of view, than the
transactions contemplated by this Agreement and (ii) is reasonably capable of
being completed.
"Tosco" means Tosco Corporation, a Nevada corporation and a wholly owned
subsidiary of Phillips.
"Tosco Merger Agreement" shall have the meaning set forth in Section
6.8(a).
"Tax Return" means any return, report or similar statement (including any
attached schedules) required to be filed with respect to any Tax, including any
information return, claim for refund, amended return or declaration of estimated
Tax.
"Taxes" means any and all U.S. federal, state or local, foreign or other
taxes of any kind (together with any and all interest, penalties, additions to
tax and additional amounts imposed with respect thereto) imposed by any taxing
authority, including taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social
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security, workers' compensation, unemployment compensation, or net worth, and
taxes or other charges in the nature of excise, withholding, ad valorem or value
added.
"Termination Date" shall have the meaning set forth in Section 8.1(b).
"Voting Debt" means any bonds, debentures, notes or other indebtedness
having the right to vote on any matters on which holders of capital stock of the
same issuer may vote.
ARTICLE II
FORMATION OF NEW PARENT; THE MERGERS
2.1 Formation of New Parent; Merger Subs. (a) Phillips and Conoco have
caused New Parent to be organized under the laws of the State of Delaware and
each owns 50% of the capital stock of New Parent. The authorized capital stock
of New Parent consists of 100 shares of common stock, par value $.01 per share
(the "New Parent Common Stock"), of which one share has been issued to Phillips
and one share has been issued to Conoco. Phillips and Conoco shall take, and
shall cause New Parent to take, all requisite action to cause the certificate of
incorporation of New Parent to be in the form of Exhibit A (the "New Parent
Charter") and the by-laws of the New Parent to be in the form of Exhibit B (the
"New Parent By-Laws"), in each case, at the Effective Time.
(b) Merger Subs. Phillips and Conoco have caused New Parent to organize,
and New Parent has organized, Merger Sub One and Merger Sub Two under the laws
of the State of Delaware. The authorized capital stock of Merger Sub One
consists of 100 shares of common stock, par value $.01 per share (the "Merger
Sub One Common Stock"), all of which are validly issued, fully paid and
nonassessable, and are owned by New Parent free and clear of any liens, pledges,
charges, encumbrances and security interests whatsoever ("Liens"). The
authorized capital stock of Merger Sub Two consists of 100 shares of common
stock, par value $.01 per share (the "Merger Sub Two Common Stock"), all of
which are validly issued, fully paid and nonassessable, and are owned by New
Parent free and clear of any Liens.
2.2 The Mergers. Upon the terms and subject to the conditions hereof, in
accordance with the DGCL, at the Effective Time:
(a) The Phillips Merger. Merger Sub One shall merge with and into
Phillips, with Phillips continuing as the surviving corporation in the
Phillips Merger (the "Phillips Surviving Corporation") and the separate
corporate existence of Merger Sub One shall cease. As a result of the
Phillips Merger, Phillips will become a wholly owned subsidiary of New
Parent.
(b) The Conoco Merger. Merger Sub Two shall merge with and into
Conoco, with Conoco continuing as the surviving corporation in the Conoco
Merger (the "Conoco Surviving Corporation") and the separate corporate
existence of Merger Sub Two shall cease.
As a result of the Conoco Merger, Conoco will become a wholly owned subsidiary
of New Parent.
2.3 Effective Time of the Mergers. As soon as practicable on the Closing
Date, Phillips shall file with the Secretary of State of the State of Delaware
(the "Delaware Secretary") a certificate of merger with respect to the Phillips
Merger (the "Phillips Certificate of Merger") and Conoco shall file with the
Delaware Secretary a certificate of merger with respect to the Conoco Merger
(the "Conoco Certificate of Merger," together with the Phillips Certificate of
Merger, the "Certificates of Merger"), which Certificates of Merger shall be in
such form as is required by, and executed and acknowledged in accordance with,
the DGCL. The Mergers shall become effective at such date and time as Phillips
and Conoco shall agree and shall be specified in the Certificates of Merger;
provided that (i) such date and time shall be after the time of filing of the
Certificates of Merger and (ii) both Mergers shall become effective at the same
date and time. As used in this Agreement, the term "Effective Time" shall mean
the date and time when the Mergers become effective.
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2.4 Effects of the Mergers. The Mergers shall have the effects set forth
in the applicable provisions of the DGCL.
2.5 Closing. Upon the terms and subject to the conditions set forth in
Article VII and the termination rights set forth in Article VIII, the closing of
the transactions contemplated by this Agreement (the "Closing") will take place
at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York,
New York, 10019 at 10:00 A.M. on the first Business Day following the
satisfaction or waiver (subject to applicable law) of the conditions (excluding
conditions that, by their nature, cannot be satisfied until the Closing Date)
set forth in Article VII, unless this Agreement has been theretofore terminated
pursuant to its terms or unless another place, time or date is agreed to in
writing by Phillips and Conoco (the date of the Closing, the "Closing Date").
2.6 Certificates of Incorporation. (a) At the Effective Time, the
certificate of incorporation of the Phillips Surviving Corporation shall be
amended in its entirety to read as set forth in Exhibit C, until thereafter
changed or amended as provided therein or by applicable law.
(b) At the Effective Time, the certificate of incorporation of the Conoco
Surviving Corporation shall be amended in its entirety to read as set forth in
Exhibit D, until thereafter changed or amended as provided therein or by
applicable law.
2.7 By-Laws. At the Effective Time, the by-laws of Merger Sub One shall be
the by-laws of the Phillips Surviving Corporation and the by-laws of Merger Sub
Two shall be the by-laws of the Conoco Surviving Corporation.
2.8 Directors and Officers. (a) The directors and officers of New Parent
at the Effective Time shall be as Phillips and Conoco shall hereafter agree
subject to the covenants and agreements set forth in Section 6.2.
(b) The directors of Merger Sub One immediately prior to the Effective Time
shall be the directors of the Phillips Surviving Corporation and the officers of
Phillips immediately prior to the Effective Time shall be the officers of the
Phillips Surviving Corporation, in each case, until their respective successors
are duly elected and qualified.
(c) The directors of Merger Sub Two immediately prior to the Effective Time
shall be the directors of the Conoco Surviving Corporation and the officers of
Conoco immediately prior to the Effective Time shall be the officers of the
Conoco Surviving Corporation, in each case, until their respective successors
are duly elected and qualified.
(d) Phillips and Conoco shall cause such persons as shall be mutually
agreed upon by Phillips and Conoco to be appointed directors of Merger Sub One
and Merger Sub Two, respectively, effective as of immediately prior to the
Effective Time.
2.9 Actions of Phillips and Conoco. Phillips and Conoco, as the holders of
all the outstanding shares of New Parent Common Stock, have approved this
Agreement and the transactions contemplated hereby and shall cause New Parent,
as the sole stockholder of each of Merger Sub One and Merger Sub Two, to adopt
this Agreement. Each of Phillips and Conoco shall take all actions necessary to
cause New Parent, Merger Sub One and Merger Sub Two to take any actions
necessary in order to consummate the Mergers and the other transactions
contemplated hereby.
2.10 Actions of New Parent. New Parent shall honor, and shall cause the
Phillips Surviving Corporation and the Conoco Surviving Corporation, as
applicable, to honor, in accordance with their respective terms, the obligations
under the employment agreements and severance plans and arrangements listed in
the Phillips Disclosure Schedule and the Conoco Disclosure Schedule, as
applicable, and under the Phillips Stock Plans and the Conoco Stock Plans, as
applicable, for rights and benefits arising as a result of this Agreement and
the transactions contemplated hereby.
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ARTICLE III
CONVERSION OF SECURITIES
3.1 Effect on Capital Stock of Phillips and Merger Sub One. At the
Effective Time, by virtue of the Phillips Merger and without any action on the
part of Phillips, New Parent, Merger Sub One or any holder of any shares of
Phillips Common Stock:
(a) All shares of Phillips Capital Stock that are held by Phillips as
treasury stock or that are owned by New Parent, Phillips, Merger Sub One or
Merger Sub Two immediately prior to the Effective Time shall cease to be
outstanding and shall be cancelled and retired and shall cease to exist and
no consideration shall be delivered in exchange therefor.
(b) Subject to Section 3.1(a), each outstanding share of Phillips
Common Stock issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive one fully paid and
nonassessable share of New Parent Common Stock (the "Phillips Merger
Consideration"). All shares of New Parent Common Stock issued pursuant to
this Section 3.1(b) shall be duly authorized and validly issued and free of
preemptive rights, with no personal liability attaching to the ownership
thereof.
(c) All of the shares of Phillips Common Stock converted into the
right to receive New Parent Common Stock pursuant to this Section 3.1 shall
cease to be outstanding and shall be cancelled and retired and shall cease
to exist and, as of the Effective Time, the holders of Phillips Common
Stock shall be deemed to have received shares of New Parent Common Stock
(without the requirement for the surrender of any certificate previously
representing any such shares of Phillips Common Stock or issuance of new
certificates representing New Parent Common Stock), with each certificate
representing shares of Phillips Common Stock prior to the Effective Time
being deemed to represent automatically an equivalent number of shares of
New Parent Common Stock.
(d) Each share of Merger Sub One Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into one share
of common stock of the Phillips Surviving Corporation.
3.2 Effect on Capital Stock of Conoco and Merger Sub Two. At the Effective
Time, by virtue of the Mergers and without any action on the part of Conoco, New
Parent, Merger Sub Two or any holder of any shares of Conoco Common Stock:
(a) All shares of Conoco Capital Stock that are held by Conoco as
treasury stock or that are owned by New Parent, Conoco, Merger Sub One or
Merger Sub Two immediately prior to the Effective Time shall cease to be
outstanding and shall be cancelled and retired and shall cease to exist.
(b) Subject to Sections 3.2(a) and 3.10, each outstanding share of
Conoco Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive 0.4677 (the
"Exchange Ratio") of a fully paid and nonassessable share of New Parent
Common Stock (the "Conoco Merger Consideration"). All of such shares of New
Parent Common Stock shall be duly authorized and validly issued and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. All shares of Conoco Common Stock shall cease to be outstanding
and shall be cancelled and retired and shall cease to exist, and each
holder of a certificate that immediately prior to the Effective Time
represented any such shares of Conoco Common Stock (a "Conoco Certificate")
shall thereafter cease to have any rights with respect to such shares of
Conoco Common Stock, except the right to receive the Conoco Merger
Consideration to be issued in consideration therefor, any cash in lieu of
fractional shares of applicable New Parent Common Stock with respect
thereto to be issued in consideration therefor and any dividends or other
distributions to which holders of Conoco Common Stock become entitled all
in accordance with this Article III upon the surrender of such Conoco
Certificate.
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(c) If, between the date of this Agreement and the Effective Time,
there is a reclassification, recapitalization, stock split, split-up, stock
dividend, combination or exchange of shares with respect to, or rights
issued in respect of, Conoco Common Stock or Phillips Common Stock, the
Exchange Ratio shall be adjusted accordingly to provide to the holders of
Conoco Common Stock and Phillips Common Stock the same economic effect as
contemplated by this Agreement prior to such event.
(d) Each share of Merger Sub Two Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into one share
of common stock of the Conoco Surviving Corporation.
3.3 Effect on New Parent Common Stock. At the Effective Time, each share
of the capital stock of New Parent issued and outstanding immediately prior to
the Effective Time shall remain outstanding. Immediately following the Effective
Time, shares of the capital stock of New Parent owned by the Phillips Surviving
Corporation or the Conoco Surviving Corporation shall be cancelled by New Parent
without payment therefor.
3.4 Conoco Stock Options and Other Equity-Based Awards. (a) Each option to
purchase shares of Conoco Common Stock (a "Conoco Stock Option") and each stock
appreciation right with respect to shares of Conoco Common Stock (a "Conoco
SAR") granted under the employee and director stock plans of Conoco (the "Conoco
Stock Plans"), whether vested or unvested, that is outstanding immediately prior
to the Effective Time shall cease to represent respectively a right to acquire
shares of Conoco Common Stock or a stock appreciation right with respect to
shares of Conoco Common Stock and shall be converted, at the Effective Time,
into respectively an option to purchase shares of New Parent Common Stock (a
"New Parent Stock Option") and a stock appreciation right with respect to shares
of New Parent Common Stock (a "New Parent SAR"), on the same terms and
conditions as were applicable under such Conoco Stock Option or Conoco SAR (but
taking into account any changes thereto, including the acceleration thereof,
provided for in the Conoco Stock Plans, in any award agreement or in such Conoco
Stock Option or Conoco SAR by reason of this Agreement or the transactions
contemplated hereby). The number of shares of New Parent Common Stock subject to
each such New Parent Stock Option or New Parent SAR shall be the number of
shares of Conoco Common Stock subject to each such Conoco Stock Option or Conoco
SAR multiplied by the Exchange Ratio, rounded, if necessary, to the nearest
whole share of New Parent Common Stock, and such New Parent Stock Option or New
Parent SAR shall have an exercise price (or base price) per share (rounded to
the nearest one-hundredth of a cent) equal to the per share exercise price (or
base price) specified in such Conoco Stock Option or Conoco SAR divided by the
Exchange Ratio; provided, however, that, in the case of any Conoco Stock Option
to which Section 421 of the Code as of the Effective Time (after taking into
account the effect of any accelerated vesting thereof) applies by reason of its
qualification under Section 422 of the Code, the exercise price, the number of
shares of New Parent Common Stock subject to such option and the terms and
conditions of exercise of such option and any related SAR shall be determined in
a manner consistent with the requirements of Section 424(a) of the Code.
(b) At the Effective Time, each right of any kind, contingent or accrued,
to receive shares of Conoco Common Stock or benefits measured by the value of a
number of shares of Conoco Common Stock, and each award of any kind consisting
of shares of Conoco Common Stock, granted under the Conoco Stock Plans
(including restricted stock, restricted stock units, deferred stock units and
dividend equivalents), other than Conoco Stock Options or Conoco SARs (each, a
"Conoco Stock-Based Award"), whether vested or unvested, which is outstanding
immediately prior to the Effective Time shall cease to represent a right or
award with respect to shares of Conoco Common Stock and shall be converted, at
the Effective Time, into a right or award with respect to New Parent Common
Stock (a "New Parent Stock-Based Award"), on the same terms and conditions as
were applicable under the Conoco Stock-Based Awards (but taking into account any
changes thereto, including the acceleration thereof, provided for in the Conoco
Stock Plans, in any award agreement or in such Conoco Stock-Based Award by
reason of this Agreement or the transactions contemplated hereby). The number of
shares of New Parent Common Stock subject to each such New Parent Stock-Based
Award shall be equal to the number of shares of Conoco Common Stock subject to
the Conoco Stock-Based Award, multiplied by the Exchange Ratio,
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rounded if necessary to the nearest whole share of New Parent Common Stock. All
dividend equivalents credited to the account of each holder of a Conoco
Stock-Based Award as of the Effective Time shall remain credited to such
holder's account immediately following the Effective Time, subject to adjustment
in accordance with the foregoing.
(c) As soon as practicable after the Effective Time, New Parent shall
deliver to the holders of Conoco Stock Options, Conoco SARs and Conoco
Stock-Based Awards appropriate notices setting forth such holders' rights
pursuant to the respective Conoco Stock Plans and agreements evidencing the
grants of such Conoco Stock Options, Conoco SARs and Conoco Stock-Based Awards,
and stating that such Conoco Stock Options, Conoco SARs and Conoco Stock-Based
Awards and agreements have been assumed by New Parent and shall continue in
effect on the same terms and conditions (subject to the adjustments required by
this Section 3.4 after giving effect to the Mergers and the terms of the Conoco
Stock Plans).
(d) Prior to the Effective Time, Conoco shall take all necessary action for
the adjustment of Conoco Stock Options, Conoco SARs and Conoco Stock-Based
Awards under this Section 3.4. New Parent shall reserve for issuance a number of
shares of New Parent Common Stock at least equal to the number of shares of New
Parent Common Stock that will be subject to New Parent Stock Options, New Parent
SARs and New Parent Stock-Based Awards as a result of the actions contemplated
by this Section 3.4. As soon as practicable following the Effective Time, New
Parent shall file a registration statement on Form S-8 (or any successor form,
or if Form S-8 is not available, other appropriate forms) with respect to the
shares of New Parent Common Stock subject to such New Parent Stock Options, New
Parent SARs and New Parent Stock-Based Awards and shall maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such New Parent Stock Options, New Parent SARs or New Parent
Stock-Based Awards remain outstanding.
3.5 Phillips Stock Options and Other Equity-Based Awards. (a) Each option
to purchase shares of Phillips Common Stock (a "Phillips Stock Option") and each
stock appreciation right with respect to shares of Phillips Common Stock (a
"Phillips SAR") granted under the employee and director stock plans of Phillips
(the "Phillips Stock Plans"), whether vested or unvested, that is outstanding
immediately prior to the Effective Time shall cease to represent respectively a
right to acquire shares of Phillips Common Stock and shall be converted, at the
Effective Time, into a New Parent Stock Option and a New Parent SAR, on the same
terms and conditions as were applicable under such Phillips Stock Option or
Phillips SAR (but taking into account any changes thereto, including the
acceleration thereof, provided for in the Phillips Stock Plans, in any award
agreement or in such Phillips Stock Option or Phillips SAR by reason of this
Agreement or the transactions contemplated hereby). The number of shares of New
Parent Common Stock subject to each such New Parent Stock Option or New Parent
SAR shall be equal to the number of shares of Phillips Common Stock subject to
each such Phillips Stock Option or Phillips SAR and such New Parent Stock Option
or New Parent SAR shall have an exercise price (or base price) per share equal
to the per share exercise price (or base price) specified in such Phillips Stock
Option or Phillips SAR.
(b) At the Effective Time, each right of any kind, contingent or accrued,
to receive shares of Phillips Common Stock or benefits measured by the value of
a number of shares of Phillips Common Stock, and each award of any kind
consisting of shares of Phillips Common Stock, granted under the Phillips Stock
Plans (including restricted stock, restricted stock units, deferred stock units
and dividend equivalents), other than Phillips Stock Options or Phillips SARs
(each, a "Phillips Stock-Based Award"), whether vested or unvested, which is
outstanding immediately prior to the Effective Time shall cease to represent a
right or award with respect to shares of Phillips Common Stock and shall be
converted, at the Effective Time, into a New Parent Stock-Based Award, on the
same terms and conditions as were applicable under the Phillips Stock-Based
Awards (but taking into account any changes thereto, including the acceleration
thereof, provided for in the Phillips Stock Plans, in any award agreement or in
such Phillips Stock-Based Award by reason of this Agreement or the transactions
contemplated hereby). The number of shares of New Parent Common Stock subject to
each such New Parent Stock-Based Award shall be equal to the
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number of shares of Phillips Common Stock subject to the Phillips Stock-Based
Award. All dividend equivalents credited to the account of each holder of a
Phillips Stock-Based Award as of the Effective Time shall remain credited to
such holder's account immediately following the Effective Time, subject to
adjustment in accordance with the foregoing.
(c) As soon as practicable after the Effective Time, New Parent shall
deliver to the holders of Phillips Stock Options, Phillips SARs and Phillips
Stock-Based Awards appropriate notices setting forth such holders' rights
pursuant to the respective Phillips Stock Plans and agreements evidencing the
grants of such Phillips Stock Options, Phillips SARs and Phillips Stock-Based
Awards and stating that such Phillips Stock Options, Phillips SARs and Phillips
Stock-Based Awards and agreements have been assumed by New Parent and shall
continue in effect on the same terms and conditions (subject to the adjustments
required by this Section 3.5 after giving effect to the Mergers and the terms of
the Phillips Stock Plans).
(d) Prior to the Effective Time, Phillips shall take all necessary action
for the adjustment of Phillips Stock Options, Phillips SARs and Phillips
Stock-Based Awards under this Section 3.5. New Parent shall reserve for issuance
a number of shares of New Parent Common Stock at least equal to the number of
shares of New Parent Common Stock that will be subject to New Parent Stock
Options, New Parent SARs and New Parent Stock-Based Awards as a result of the
actions contemplated by this Section 3.5. As soon as practicable following the
Effective Time, New Parent shall file a registration statement on Form S-8 (or
any successor form, or if Form S-8 is not available, other appropriate forms)
with respect to the shares of New Parent Common Stock subject to such New Parent
Stock Options, New Parent SARs and New Parent Stock-Based Awards and shall
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such New Parent Stock Options, New Parent SARs
and New Parent Stock-Based Awards remain outstanding.
3.6 Exchange Fund. Prior to the Effective Time, Phillips and New Parent
shall appoint Mellon Investor Services LLC, or a commercial bank or trust
company, or a subsidiary thereof, reasonably acceptable to Conoco, to act as
exchange agent hereunder for the purpose of exchanging Conoco Certificates for
the Conoco Merger Consideration (the "Exchange Agent"). At or prior to the
Effective Time, New Parent shall deposit with the Exchange Agent, in trust for
the benefit of holders of shares of Conoco Common Stock, certificates
representing the shares of New Parent Common Stock issuable pursuant to Section
3.2 in exchange for outstanding shares of Conoco Common Stock. Following the
Effective Time, New Parent agrees to make available to the Exchange Agent from
time to time as needed, cash sufficient to pay any amounts required under
Sections 3.8 and 3.10. Any cash and certificates representing New Parent Common
Stock deposited with the Exchange Agent shall hereinafter be referred to as the
"Exchange Fund."
3.7 Exchange Procedures. (a) Promptly after the Effective Time, New Parent
shall cause the Exchange Agent to mail to each holder of a Conoco Certificate
(i) a letter of transmittal that shall specify that delivery shall be effected,
and risk of loss and title to the Conoco Certificates shall pass, only upon
proper delivery of the Conoco Certificates to the Exchange Agent, and which
letter shall be in customary form and have such other provisions as Phillips or
Conoco may reasonably specify (such letter to be reasonably acceptable to
Phillips and Conoco prior to the Effective Time) and (ii) instructions for
effecting the surrender of such Conoco Certificates in exchange for the Conoco
Merger Consideration, together with any dividends and other distributions with
respect thereto and any cash in lieu of fractional shares of New Parent Common
Stock. Upon surrender of a Conoco Certificate to the Exchange Agent together
with such letter of transmittal, duly executed and completed in accordance with
the instructions thereto, and such other documents as may reasonably be required
by the Exchange Agent, the holder of such Conoco Certificate shall be entitled
to receive in exchange therefor (A) certificates representing shares of New
Parent Common Stock representing, in the aggregate, the whole number of shares
of New Parent Common Stock that such holder has the right to receive pursuant to
Section 3.2 (after taking into account all shares of Conoco Common Stock then
held by such holder) and (B) a check in the amount equal to the cash that such
holder has the right to receive pursuant to the provisions of this Article III,
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including cash in lieu of any fractional shares of New Parent Common Stock
pursuant to Section 3.10 and dividends and other distributions pursuant to
Section 3.8. Any uncertificated shares of Conoco Common Stock in book-entry form
shall be deemed surrendered to the Exchange Agent at the Effective Time, and
each holder thereof shall be entitled to receive (A) certificates representing
shares of New Parent Common Stock representing, in the aggregate, the whole
number of shares of New Parent Common Stock that such holder has the right to
receive pursuant to Section 3.2 (after taking into account all shares of Conoco
Common Stock then held by such holder) and (B) a check in the amount equal to
the cash that such holder has the right to receive pursuant to the provisions of
this Article III, including cash in lieu of any fractional shares of New Parent
Common Stock pursuant to Section 3.10 and dividends and other distributions
pursuant to Section 3.8. Until such time as a certificate representing New
Parent Common Stock is issued to or at the direction of the holder of a
surrendered Conoco Certificate, such New Parent Common Stock shall be deemed not
outstanding and shall not be entitled to vote on any matter. No interest will be
paid or will accrue on any cash payable pursuant to Section 3.8 or Section 3.10.
In the event of a transfer of ownership of Conoco Common Stock that is not
registered in the transfer records of Conoco, one or more shares of New Parent
Common Stock evidencing, in the aggregate, the proper number of shares of New
Parent Common Stock, a check in the proper amount of cash that such holder has
the right to receive pursuant to the provisions of this Article III, including
cash in lieu of any fractional shares of New Parent Common Stock pursuant to
Section 3.10 and any dividends or other distributions to which such holder is
entitled pursuant to Section 3.8, may be issued with respect to such Conoco
Common Stock to such a transferee if the Conoco Certificate is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have been
paid.
(b) Each certificate representing shares of Phillips Common Stock prior to
the Effective Time (a "Phillips Certificate") (and each uncertificated share of
Phillips Common Stock in book-entry form, if any, prior to the Effective Time)
shall be deemed to represent an equivalent number of shares of New Parent Common
Stock without any action on the part of the holder thereof provided, however,
that if an exchange of Phillips Certificates for new certificates is required by
law or applicable rule or regulation, or is requested by any holder thereof, the
parties will cause New Parent to arrange for such exchange on a
one-share-for-one-share basis.
3.8 Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Conoco Certificate with respect to the shares of
New Parent Common Stock that such holder would be entitled to receive upon
surrender of such Conoco Certificate, and no cash payment in lieu of fractional
shares of New Parent Common Stock shall be paid to any such holder pursuant to
Section 3.10 until such holder shall surrender such Conoco Certificate in
accordance with Section 3.7. Subject to the effect of applicable law, following
surrender of any such Conoco Certificate, there shall be paid to the record
holder thereof without interest, (a) promptly after the time of such surrender,
the amount of any cash payable in lieu of fractional shares of New Parent Common
Stock to which such holder is entitled pursuant to Section 3.10 and the amount
of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of New Parent Common Stock
and (b) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time and a payment date
subsequent to such surrender payable with respect to such shares of New Parent
Common Stock.
3.9 No Further Ownership Rights in Conoco Common Stock or Phillips Common
Stock. All shares of New Parent Common Stock issued and cash paid upon
conversion of shares of Conoco Common Stock or Phillips Common Stock in
accordance with the terms of this Article III (including any cash paid pursuant
to Section 3.8 or 3.10) shall be deemed to have been issued or paid in full
satisfaction of all rights pertaining to the shares of Conoco Common Stock or
Phillips Common Stock.
3.10 No Fractional Shares of New Parent Common Stock. No certificates or
scrip or shares of New Parent Common Stock representing fractional shares of New
Parent Common Stock or book-entry credit of the same shall be issued upon the
surrender for exchange of Conoco Certificates, and such fractional share
interests will not entitle the owner thereof to vote or to have any rights of a
stockholder of New
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Parent or a holder of shares of New Parent Common Stock. For purposes of this
Section 3.10, all fractional shares to which a single record holder would be
entitled shall be aggregated and calculations shall be rounded to three decimal
places. Notwithstanding any other provision of this Agreement, each holder of
Conoco Certificates who would otherwise have been entitled to receive a fraction
of a share of New Parent Common Stock (determined after taking into account all
Conoco Certificates delivered by such holder) shall receive, in lieu thereof,
cash (without interest) in an amount equal to the product of (a) such fractional
part of a share of New Parent Common Stock multiplied by (b) the closing price
for a share of New Parent Common Stock as reported on the NYSE on the first
trading day following the date on which the Effective Time occurs. As soon as
practicable after the determination of the amount of cash to be paid to such
former holders of Conoco Common Stock in lieu of any fractional interests, the
Exchange Agent shall notify New Parent, and New Parent shall ensure that there
is deposited with the Exchange Agent and shall cause the Exchange Agent to make
available in accordance with this Agreement such amounts to such former holders
of Conoco Common Stock.
3.11 Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the holders of Conoco Certificates one year after the
Effective Time shall, at New Parent's request, be delivered to New Parent or
otherwise on the instruction of New Parent, and any holders of Conoco
Certificates who have not theretofore complied with this Article III shall after
such delivery look only to New Parent for the Conoco Merger Consideration with
respect to the shares of Conoco Common Stock formerly represented thereby to
which such holders are entitled pursuant to Sections 3.2 and 3.7, any cash in
lieu of fractional shares of New Parent Common Stock to which such holders are
entitled pursuant to Section 3.10 and any dividends or distributions with
respect to shares of New Parent Common Stock to which such holders are entitled
pursuant to Section 3.8. Any such portion of the Exchange Fund remaining
unclaimed by holders of shares of Conoco Common Stock immediately prior to such
time as such amounts would otherwise escheat to or become property of any
Governmental Entity shall, to the extent permitted by law, become the property
of New Parent free and clear of any claims or interest of any Person previously
entitled thereto.
3.12 No Liability. None of Phillips, New Parent, Merger Sub One, Merger
Sub Two, Conoco or the Exchange Agent shall be liable to any Person in respect
of any Conoco Merger Consideration from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
3.13 Investment of the Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by New Parent, on a daily basis,
provided that no such investment or loss thereon shall affect the amounts
payable or the timing of the amounts payable to Conoco stockholders pursuant to
Article II and the other provisions of this Article III. Any interest and other
income resulting from such investments shall promptly be paid to New Parent.
3.14 Lost Certificates. If any Conoco Certificate or Phillips Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Conoco Certificate or Phillips Certificate
to be lost, stolen or destroyed and, if required by New Parent, the posting by
such Person of a bond in such reasonable amount as New Parent may direct as
indemnity against any claim that may be made against it with respect to such
Conoco Certificate or Phillips Certificate, the Exchange Agent will deliver in
exchange for such lost, stolen or destroyed Conoco Certificate or Phillips
Certificate, the Conoco Merger Consideration or Phillips Merger Consideration,
as applicable, with respect to the shares of Conoco Common Stock or Phillips
Common Stock formerly represented thereby, any cash in lieu of fractional shares
of New Parent Common Stock, and unpaid dividends and distributions on shares of
New Parent Common Stock deliverable in respect thereof, pursuant to this
Agreement.
3.15 Withholding Rights. New Parent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement
such amounts as it is required to deduct and withhold with respect to the making
of such payment under the Code, or any provision of state, local or foreign Tax
law. To the extent that amounts are so withheld or paid over to or deposited
with the relevant Governmental Entity by New Parent, such withheld amounts shall
be treated for all purposes of this
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Agreement as having been paid to the Person in respect of which such deduction
and withholding was made by New Parent.
3.16 Further Assurances. At and after the Effective Time, the officers and
directors of New Parent, the Phillips Surviving Corporation or the Conoco
Surviving Corporation, as applicable, shall be authorized to execute and
deliver, in the name and on behalf of the Phillips Surviving Corporation, Merger
Sub One or Phillips, or the Conoco Surviving Corporation, Merger Sub Two or
Conoco, any deeds, bills of sale, assignments or assurances and to take and do,
in the name and on behalf of the Phillips Surviving Corporation, Merger Sub One
or Phillips, or the Conoco Surviving Corporation, Merger Sub Two or Conoco, any
other actions and things necessary to vest, perfect or confirm of record or
otherwise in New Parent, the Phillips Surviving Corporation or the Conoco
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets acquired or to be acquired by New Parent,
the Phillips Surviving Corporation or the Conoco Surviving Corporation, as
applicable, as a result of, or in connection with, the Mergers.
3.17 Stock Transfer Books. The stock transfer books of Phillips and Conoco
shall be closed immediately upon the Effective Time, and there shall be no
further registration of transfers of shares of Conoco Common Stock or Phillips
Common Stock thereafter on the records of Conoco or Phillips. On or after the
Effective Time, any Conoco Certificates or Phillips Certificates presented to
the Exchange Agent, New Parent, the Phillips Surviving Corporation or the Conoco
Surviving Corporation for any reason shall be converted into the right to
receive the Conoco Merger Consideration or Phillips Merger Consideration, as
applicable, with respect to the shares of Conoco Common Stock or Phillips Common
Stock formerly represented thereby (including any cash in lieu of fractional
shares of New Parent Common Stock to which the holders thereof are entitled
pursuant to Section 3.10 and any dividends or other distributions to which the
holders thereof are entitled pursuant to Section 3.8).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Conoco. Except as disclosed in the
Conoco Disclosure Schedule or in the Conoco SEC Documents filed with the SEC
prior to the date of this Agreement, Conoco hereby represents and warrants to
Phillips as follows:
(a) Corporate Organization. (i) Conoco is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Conoco has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it
is now being conducted, and is duly licensed or qualified to do business in
each jurisdiction in which the nature of the business conducted by it or
the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified would not, either individually or in
the aggregate, have a Material Adverse Effect on Conoco. True and complete
copies of the Restated Certificate of Incorporation and By-Laws of Conoco,
as in effect as of the date of this Agreement, have previously been made
available by Conoco to Phillips.
(ii) Each Subsidiary of Conoco (A) is duly organized and validly
existing under the laws of its jurisdiction of organization, (B) is duly
qualified to do business and in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing of
property or the conduct of its business requires it to be so qualified and
(C) has all requisite corporate power and authority to own or lease its
properties and assets and to carry on its business as now conducted, in
each case, except as would not have a Material Adverse Effect on Conoco.
(b) Capitalization. (i) The authorized capital stock of Conoco
consists of (A) 4,600,000,000 shares of Conoco Common Stock, of which, as
of November 15, 2001, 625,486,343 shares were issued and outstanding and
3,451,703 shares were held in treasury and (B) 250,000,000 shares of Conoco
Preferred Stock, of which no shares are issued and outstanding. From
November 16, 2001 to the date
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of this Agreement, no shares of Conoco Capital Stock have been issued
except pursuant to the Conoco Stock Plans. All issued and outstanding
shares of Conoco Common Stock have been duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. As of the date of
this Agreement, except pursuant to the terms of stock options and stock
issued pursuant to Conoco Stock Plans and pursuant to the Conoco Rights,
Conoco does not have and is not bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character
calling for the purchase or issuance of any shares of Conoco Capital Stock
or any other equity securities of Conoco or any securities of Conoco
representing the right to purchase or otherwise receive any shares of
Conoco Capital Stock. As of November 15, 2001, no shares of Conoco Capital
Stock were reserved for issuance, except for 45,000,000 shares of Conoco
Common Stock reserved for issuance upon the exercise of stock options
pursuant to the Conoco Stock Plans and in respect of the employee and
director savings, compensation and deferred compensation plans described in
the Conoco 2000 10-K, and 1,000,000 shares of Series A Junior Participating
Preferred Stock reserved for issuance in connection with the Conoco Rights
Agreement. Conoco has no Voting Debt issued or outstanding. As of November
15, 2001, 43,195,351 shares of Conoco Common Stock are subject to Conoco
Stock Options. Since November 16, 2001, except as permitted by this
Agreement, (i) no Conoco Common Stock has been issued except in connection
with the exercise of issued and outstanding Conoco Stock Options and (ii)
no options, warrants, securities convertible into, or commitments with
respect to the issuance of, shares of Conoco Common Stock have been issued,
granted or made.
(ii) Except for immaterial amounts of directors' qualifying shares in
foreign Subsidiaries of Conoco, as of the date hereof Conoco owns, directly
or indirectly, all of the issued and outstanding shares of capital stock or
other equity ownership interests of each Significant Subsidiary of Conoco,
free and clear of any Liens, and all of such shares or equity ownership
interests are duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. No Significant Subsidiary of Conoco has
or is bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or
issuance of any shares of capital stock or any other equity security of
such Subsidiary or any securities representing the right to purchase or
otherwise receive any shares of capital stock or any other equity security
of such Subsidiary.
(c) Authority; No Violation. (i) Conoco has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly approved by the Board of Directors of Conoco. The
Board of Directors of Conoco has directed that this Agreement be submitted
to Conoco stockholders at a meeting of Conoco stockholders for the purpose
of adopting this Agreement (the "Conoco Stockholders Meeting"), and, except
for the adoption of this Agreement by the affirmative vote of the holders
of a majority of the outstanding shares of Conoco Common Stock (the "Conoco
Stockholder Approval"), no other corporate proceedings on the part of
Conoco are necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Conoco and (assuming due authorization, execution
and delivery by Phillips, New Parent, Merger Sub One and Merger Sub Two)
constitutes a valid and binding obligation of Conoco, enforceable against
Conoco in accordance with its terms.
(ii) Neither the execution and delivery of this Agreement by Conoco,
nor the consummation by Conoco of the transactions contemplated hereby, nor
compliance by Conoco with any of the terms or provisions hereof, will (A)
violate any provision of the Restated Certificate of Incorporation or By-
Laws of Conoco, or (B) assuming that the consents and approvals referred to
in Section 4.1(d) are duly obtained, (I) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Conoco or any of its Subsidiaries or any of their respective
properties or assets or (II) violate, conflict with, result in a breach of
any provision of or the loss of any benefit under, constitute a default (or
an event that, with notice or lapse of time, or both, would constitute a
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default) under, result in the termination of or a right of termination or
cancellation under, accelerate the performance required by, accelerate any
right or benefit provided by, or result in the creation of any Lien upon
any of the respective properties or assets of Conoco or any of its
Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Conoco or any of its Subsidiaries
is a party, or by which they or any of their respective properties or
assets may be bound or affected, except (in the case of clause (B) above)
for such violations, conflicts, breaches, losses, defaults, terminations,
cancellations, accelerations or Liens that, either individually or in the
aggregate, would not have a Material Adverse Effect on Conoco, the Conoco
Surviving Corporation or New Parent.
(d) Consents and Approvals. Except for (i) the filing of a
notification and report form under the HSR Act and the termination or
expiration of the waiting period under the HSR Act, (ii) the filings under
Council Regulation No. 4064/89 of the European Community, as amended (the
"EC Merger Regulation"), (iii) the filings under the Canadian Investment
Regulations, (iv) the filing with the SEC of a joint proxy
statement/prospectus relating to the matters to be submitted to Phillips
stockholders at the Phillips Stockholders Meeting and the matters to be
submitted to Conoco stockholders at the Conoco Stockholders Meeting (such
joint proxy statement/prospectus, and any amendments or supplements
thereto, the "Joint Proxy Statement/Prospectus") and a registration
statement on Form S-4 with respect to the issuance of New Parent Common
Stock in the Mergers (such Form S-4, and any amendments or supplements
thereto, the "Form S-4"), (v) the filing of the Certificates of Merger
pursuant to the DGCL, (vi) any consents, authorizations, approvals, filings
or exemptions in connection with compliance with the rules of the NYSE,
(vii) such filings and approvals as are required to be made or obtained
under the securities or "Blue Sky" laws of various states in connection
with the issuance of the shares of New Parent Common Stock pursuant to this
Agreement (the consents, approvals, filings and registration required under
or in relation to clauses (ii) through (vii) above, "Conoco Necessary
Consents") and (viii) such other consents, approvals, filings and
registrations the failure of which to obtain or make would not reasonably
be expected to have a Material Adverse Effect on Conoco, no consents or
approvals of or filings or registrations with any Governmental Entity are
necessary in connection with (A) the execution and delivery by Conoco of
this Agreement and (B) the consummation by Conoco of the transactions
contemplated by this Agreement.
(e) Financial Reports and SEC Documents. The Conoco 2000 10-K and all
other reports, registration statements, definitive proxy statements or
information statements filed or to be filed by Conoco or any of its
Subsidiaries subsequent to December 31, 1999 under the Securities Act or
under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act in the form
filed, or to be filed, with the SEC (collectively, the "Conoco SEC
Documents"), (i) complied or will comply in all material respects as to
form with the applicable requirements under the Securities Act or the
Exchange Act, as the case may be, and (ii) as of its filing date (except as
amended or supplemented prior to the date of this Agreement), (A) did not
or will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they
were made, not misleading; and (B) each of the balance sheets contained in
or incorporated by reference into any such Conoco SEC Document (including
the related notes and schedules thereto) fairly presents or will fairly
present the financial position of the entity or entities to which it
relates as of its date, and each of the statements of income and changes in
stockholders' equity and cash flows or equivalent statements in such Conoco
SEC Documents (including any related notes and schedules thereto) fairly
presents or will fairly present the results of operations, changes in
stockholders' equity and changes in cash flows, as the case may be, of the
entity or entities to which it relates for the periods to which it relates,
in each case in accordance with GAAP consistently applied during the
periods involved, except, in each case, as may be noted therein, subject to
normal year-end audit adjustments in the case of unaudited statements;
provided that, with respect to Gulf or GIRL only, in no event shall any
non-compliance as to form, untrue statements, omissions or failures of the
balance sheets or financial statements to fairly present the financial
position be deemed material unless such non-compliance, untrue
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statements, omissions or failures would, in the aggregate, be material with
respect to Conoco and its Subsidiaries taken as a whole.
(f) Absence of Undisclosed Liabilities. Neither Conoco nor any of its
Subsidiaries had at September 30, 2001, or has incurred since that date
through the date hereof, any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature, except (i) liabilities,
obligations or contingencies that (A) are accrued or reserved against in
the financial statements in the Conoco 10-Q or reflected in the notes
thereto or (B) were incurred in the ordinary course of business, (ii)
liabilities, obligations or contingencies that (A) would not reasonably be
expected to have a Material Adverse Effect on Conoco, or (B) have been
discharged or paid in full prior to the date hereof, and (iii) liabilities,
obligations and contingencies that are of a nature not required to be
reflected in the consolidated financial statements of Conoco and its
Subsidiaries prepared in accordance with GAAP consistently applied.
(g) Absence of Certain Changes or Events. Since September 30, 2001,
Conoco has conducted its business only in the ordinary course, and since
such date there has not been:
(i) any event, change, effect or development that, individually or
in the aggregate, has had or would reasonably be expected to have a
Material Adverse Effect on Conoco;
(ii) prior to the date of this Agreement, any declaration, setting
aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any Conoco Capital Stock or any
repurchase for value by Conoco of any Conoco Capital Stock;
(iii) prior to the date of this Agreement, any split, combination
or reclassification of any Conoco Capital Stock or any issuance or the
authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of Conoco Capital Stock;
(iv) prior to the date of this Agreement, (A) any granting by
Conoco to any director or executive officer of Conoco of any increase in
compensation, except in the ordinary course of business consistent with
prior practice or as was required under employment agreements included
in the Conoco SEC Documents, (B) any granting by Conoco to any such
director or executive officer of any increase in severance or
termination pay, except as was required under any employment, severance
or termination agreements included in the Conoco SEC Documents, or (C)
any entry by Conoco into, or any amendment of, any employment, severance
or termination agreement with any such director or executive officer; or
(v) prior to the date of this Agreement, any change in financial
accounting methods, principles or practices by Conoco or any of its
Subsidiaries materially affecting the consolidated assets, liabilities
or results of operations of Conoco, except insofar as may have been
required by a change in GAAP.
(h) Legal Proceedings. There is no suit, action or proceeding or
investigation pending or, to the knowledge of Conoco, threatened, against
or affecting Conoco or any of its Subsidiaries or, to the knowledge of
Conoco, any basis for any such suit, action, proceeding or investigation
that would, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Conoco, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Conoco or its Subsidiaries having, or which would
reasonably be expected to have, any such effect.
(i) Compliance with Applicable Law. Conoco and each of its
Subsidiaries hold all licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses under and
pursuant to each, and have complied in all respects with and are not in
default in any material respect under any, applicable law, statute, order,
rule, regulation, policy and/or guideline of any Governmental Entity
relating to Conoco or any of its Subsidiaries, except where the failure to
hold such license, franchise, permit or authorization or such noncompliance
or default would not,
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either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Conoco.
(j) Environmental Liability. Except for matters that individually or
in the aggregate, would not have a Material Adverse Effect on Conoco, (i)
Conoco and each of its Subsidiaries are and have been in compliance with
all applicable Environmental Laws and have obtained or applied for all
Environmental Permits necessary for their operations as currently
conducted; (ii) there have been no Releases of any Hazardous Materials that
could be reasonably likely to form the basis of any Environmental Claim
against Conoco or any of its Subsidiaries; (iii) there are no Environmental
Claims pending or, to the knowledge of Conoco, threatened against Conoco or
any of its Subsidiaries; (iv) none of Conoco and its Subsidiaries is
subject to any agreement, order, judgment, decree, letter or memorandum by
or with any Governmental Entity or third party imposing any liability or
obligation under any Environmental Law; and (v) none of Conoco and its
Subsidiaries has retained or assumed, either contractually or by operation
of law, any liability or obligation that could reasonably be expected to
have formed the basis of any Environmental Claim against Conoco or any of
its Subsidiaries.
(k) Employee Benefit Plans; Labor Matters. (i) There do not now
exist, and to the knowledge of Conoco, there are no existing, circumstances
that could reasonably be expected to result in, any Controlled Group
Liability to Conoco or any of its Subsidiaries that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect
on Conoco. No Conoco Benefit Plan is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA.
(ii) Except as would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on Conoco, (A) each of the
Conoco Benefit Plans has been operated and administered in all material
respects in accordance with applicable law and administrative rules and
regulations of any Governmental Entity, including, but not limited to,
ERISA and the Code, and (B) there are no pending or threatened claims
(other than claims for benefits in the ordinary course), lawsuits or
arbitrations that have been asserted or instituted, and, to the knowledge
of Conoco, no set of circumstances exists that may reasonably give rise to
a claim or lawsuit, against the Conoco Benefit Plans, any fiduciaries
thereof with respect to their duties to the Conoco Benefit Plans or the
assets of any of the trusts under any of the Conoco Benefit Plans that
could reasonably be expected to result in any material liability of Conoco
or any of its Subsidiaries to the Pension Benefit Guaranty Corporation, the
U.S. Department of the Treasury, the U.S. Department of Labor, any Conoco
Benefit Plan, any participant in a Conoco Benefit Plan, or any other party.
(iii) As of the date of this Agreement, neither Conoco nor any of its
Subsidiaries is a party to any material collective bargaining or other
labor union contract applicable to individuals employed by Conoco or any of
its Subsidiaries, and no such collective bargaining agreement or other
labor union contract is being negotiated by Conoco or any of its
Subsidiaries. Except as would not reasonably be expected to have a Material
Adverse Effect on Conoco, (A) there is no labor dispute, strike, slowdown
or work stoppage against Conoco or any of its Subsidiaries pending or, to
the knowledge of Conoco, threatened against Conoco or any of its
Subsidiaries and (B) no unfair labor practice or labor charge or complaint
has occurred with respect to Conoco or any of its Subsidiaries.
(iv) Section 4.1(k)(iv) of the Conoco Disclosure Schedule sets forth
an accurate and complete list of each Benefit Plan under which the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby could (either alone or in conjunction with
any other event), result in, cause the accelerated vesting, funding or
delivery of, or increase the amount or value of, any payment or benefit to
any employee, officer or director of Conoco or any of its Subsidiaries, or
could limit the right of Conoco or any of its Subsidiaries to amend, merge,
terminate or receive a reversion of assets from any Conoco Benefit Plan or
related trust or any material employment agreement or related trust.
(l) Taxes. (i) Each of Conoco and its Subsidiaries has duly and
timely filed all Tax Returns required to be filed by it, and all such Tax
Returns are true, complete and accurate in all respects,
A-19
except to the extent that any failure to have filed or any inaccuracies in
such Tax Returns would not reasonably be expected to have a Material
Adverse Effect on Conoco. Conoco and each of its Subsidiaries has paid all
Taxes required to be paid by it, and has paid all Taxes that it was
required to withhold from amounts owing to any employee, creditor or third
party, except to the extent that any failure to pay such Taxes would not
reasonably be expected to have a Material Adverse Effect on Conoco. There
are no pending or, to the knowledge of Conoco, threatened audits,
examinations, investigations, deficiencies, claims or other proceedings in
respect of Taxes relating to Conoco or any of its Subsidiaries, except for
those that would not reasonably be expected to have a Material Adverse
Effect on Conoco. There are no Liens for Taxes upon the assets of Conoco or
any of its Subsidiaries, other than Liens for current Taxes not yet due,
Liens for Taxes that are being contested in good faith by appropriate
proceedings, and Liens for Taxes that would not reasonably be expected to
have a Material Adverse Effect on Conoco. Neither Conoco nor any of its
Subsidiaries has requested any extension of time within which to file any
Tax Returns in respect of any taxable year that have not since been filed,
nor made any request for waivers of the time to assess any Taxes that are
pending or outstanding, except where such request or waiver would not
reasonably be expected to have a Material Adverse Effect on Conoco. The
consolidated U.S. federal income Tax Returns of Conoco have been examined,
or the statute of limitations has closed, with respect to all taxable years
through and including 1995. Neither Conoco nor any of its Subsidiaries has
any liability for Taxes of any Person (other than Conoco and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any comparable
provision of U.S. state or local or foreign law), except as would not
reasonably be expected to have a Material Adverse Effect on Conoco. Neither
Conoco nor any of its Subsidiaries is a party to any agreement (with any
Person other than Conoco and/or any of its Subsidiaries), other than the
Tax Sharing Agreement, dated as of October 27, 1998, by and among E. I. du
Pont de Nemours and Company and Conoco (a copy of which has been delivered
to Phillips), relating to the allocation or sharing of Taxes, except as
would not reasonably be expected to have a Material Adverse Effect on
Conoco.
(ii) To Conoco's knowledge, Conoco has not constituted either a
"distributing corporation" or a "controlled corporation" within the meaning
of Section 355(a)(1)(A) of the Code in a distribution of stock intended to
qualify for tax-free treatment under Section 355 of the Code (A) in the two
years prior to the date of this Agreement (or will constitute such a
corporation in the two years prior to the Closing Date) or (B) in a
distribution that otherwise constitutes part of a "plan" or "series of
related transactions" within the meaning of Section 355(e) of the Code in
conjunction with the Mergers.
(m) Reorganization under the Code. As of the date of this Agreement,
neither Conoco nor any of its Subsidiaries has taken any action or knows of
any fact that is reasonably likely to prevent the Conoco Merger or the
Phillips Merger from qualifying as a "reorganization" within the meaning of
Section 368(a) of the Code or the Mergers, taken together, from qualifying
as an exchange described in Section 351 of the Code.
(n) Form S-4; Joint Proxy Statement/Prospectus. None of the
information to be supplied by Conoco or its Subsidiaries in the Form S-4 or
the Joint Proxy Statement/Prospectus will, at the time of the mailing of
the Joint Proxy Statement/Prospectus and any amendments or supplements
thereto, and at the time of each of the Phillips Stockholders Meeting and
the Conoco 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 the light of the
circumstances under which they are made, not misleading. The Joint Proxy
Statement/Prospectus will comply, as of its mailing date, as to form in all
material respects with all applicable law, including the provisions of the
Securities Act and the Exchange Act, except that no representation is made
by Conoco with respect to information supplied by Phillips for inclusion
therein.
(o) State Takeover Laws; Rights Plan. (i) The Board of Directors of
Conoco has approved this Agreement and the transactions contemplated by
this Agreement as required under any applicable state takeover laws so that
any such state takeover laws will not apply to this Agreement or any of the
transactions contemplated hereby.
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(ii) Conoco has taken all action, if any, necessary or appropriate so
that the entering into of this Agreement, and the consummation of the
transactions contemplated hereby, do not and will not result in the ability
of any Person to exercise any Conoco Rights under the Conoco Rights
Agreement or enable or require the Conoco Rights to separate from the
shares of Conoco Common Stock to which they are attached or to be triggered
or become exercisable. No "Distribution Date" or "Stock Acquisition Date"
(as such terms are defined in the Conoco Rights Agreement) has occurred.
(p) Opinion of Financial Advisors. Conoco has received the opinions
of Morgan Stanley & Co. Incorporated and Salomon Smith Barney Inc., dated
the date hereof, to the effect that the Conoco Merger Consideration to be
received by holders of Conoco Common Stock in the Conoco Merger is fair to
such stockholders from a financial point of view.
(q) Board Approval. The Board of Directors of Conoco, at a meeting
duly called and held, has by unanimous vote of those directors present (i)
determined that this Agreement and the transactions contemplated hereby are
advisable, fair to and in the best interests of Conoco stockholders, (ii)
approved this Agreement and (iii) recommended that this Agreement be
adopted by the holders of Conoco Common Stock.
(r) Brokers' Fees. Neither Conoco nor any of its Subsidiaries nor any
of their respective officers or directors has employed any broker or finder
or incurred any liability for any brokers' fees, commissions or finders'
fees in connection with the transactions contemplated by this Agreement,
excluding fees to be paid to Morgan Stanley & Co. Incorporated, Salomon
Smith Barney Inc. and Credit Suisse First Boston Corporation.
(s) Ownership of Phillips Capital Stock. As of the date of this
Agreement, Conoco does not beneficially own any shares of Phillips Capital
Stock.
4.2 Representations and Warranties of Phillips. Except as disclosed in the
Phillips Disclosure Schedule or in the Phillips SEC Documents filed with the SEC
prior to the date of this Agreement, Phillips hereby represents and warrants to
Conoco as follows:
(a) Corporate Organization. (i) Phillips is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Phillips has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it
is now being conducted, and is duly licensed or qualified to do business in
each jurisdiction in which the nature of the business conducted by it or
the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified would not, either individually or in
the aggregate, have a Material Adverse Effect on Phillips. True and
complete copies of the Restated Certificate of Incorporation and By-Laws of
Phillips, as in effect as of the date of this Agreement, have previously
been made available by Phillips to Conoco.
(ii) Each Subsidiary of Phillips (A) is duly organized and validly
existing under the laws of its jurisdiction of organization, (B) is duly
qualified to do business and in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing of
property or the conduct of its business requires it to be so qualified and
(C) has all requisite corporate power and authority to own or lease its
properties and assets and to carry on its business as now conducted, in
each case, except as would not have a Material Adverse Effect on Phillips.
(b) Capitalization. (i) The authorized capital stock of Phillips
consists of (A) 1,000,000,000 shares of Phillips Common Stock, of which, as
of November 15, 2001, 408,879,521 shares were issued and outstanding and
21,560,222 shares were held in treasury and (B) 300,000,000 shares of
Phillips Preferred Stock, of which no shares are issued and outstanding.
From November 16, 2001 to the date of this Agreement, no shares of Phillips
Capital Stock have been issued except pursuant to the Phillips Stock Plans.
All issued and outstanding shares of Phillips Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except pursuant to the terms of
stock options and stock issued pursuant to Phillips Stock Plans and
pursuant
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to the Phillips Rights, Phillips does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any
shares of Phillips Capital Stock or any other equity securities of Phillips
or any securities of Phillips representing the right to purchase or
otherwise receive any shares of Phillips Capital Stock. As of November 15,
2001, no shares of Phillips Capital Stock were reserved for issuance,
except for 15,671,607 shares of Phillips Common Stock reserved for issuance
upon the exercise of stock options pursuant to the Phillips Stock Plans and
in respect of the employee and director savings, compensation and deferred
compensation plans described in the Phillips 2000 10-K and 5,000,000 shares
of Series B Junior Participating Preferred Stock reserved for issuance in
connection with the Phillips Rights Agreement. Phillips has no Voting Debt
issued or outstanding. As of November 15, 2001, 15,671,607 shares of
Phillips Common Stock are subject to Phillips Stock Options. Since November
16, 2001, except as permitted by this Agreement, (i) no Phillips Common
Stock has been issued except in connection with the exercise of issued and
outstanding Phillips Stock Options and (ii) no options, warrants,
securities convertible into, or commitments made with respect to the
issuance of, shares of Phillips Common Stock have been issued, granted or
made.
(ii) Except for immaterial amounts of directors' qualifying shares in
foreign Subsidiaries of Phillips, Phillips as of the date hereof owns,
directly or indirectly, all of the issued and outstanding shares of capital
stock or other equity ownership interests of each Significant Subsidiary of
Phillips, free and clear of any Liens, and all of such shares or equity
ownership interests are duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. No Significant Subsidiary of
Phillips has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any other
equity security of such Subsidiary.
(c) Authority; No Violation. (i) Phillips has full corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly approved by the Board of Directors of Phillips. The
Board of Directors of Phillips has directed that this Agreement be
submitted to Phillips's stockholders at a meeting of Phillips stockholders
for the purpose of adopting this Agreement (the "Phillips Stockholders
Meeting") and, except for the adoption of this Agreement by the affirmative
vote of the holders of a majority of the outstanding shares of Phillips
Common Stock (the "Phillips Stockholder Approval"), no other corporate
proceedings on the part of Phillips are necessary to approve this Agreement
and to consummate the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by Phillips and (assuming due
authorization, execution and delivery by Conoco, New Parent, Merger Sub One
and Merger Sub Two) constitutes a valid and binding obligation of Phillips,
enforceable against Phillips in accordance with its terms.
(ii) Neither the execution and delivery of this Agreement by Phillips
nor the consummation by Phillips of the transactions contemplated hereby,
nor compliance by Phillips with any of the terms or provisions hereof, will
(A) violate any provision of the Restated Certificate of Incorporation or
By-Laws of Phillips, or (B) assuming that the consents and approvals
referred to in Section 4.2(d) are duly obtained, (I) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Phillips or any of its Subsidiaries or any of
their respective properties or assets or (II) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event that, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a
right of termination or cancellation under, accelerate the performance
required by, accelerate any right or benefit provided by, or result in the
creation of any Lien upon any of the respective properties or assets of
Phillips or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Phillips or any
of its Subsidiaries
A-22
is a party, or by which they or any of their respective properties or
assets may be bound or affected, except (in the case of clause (B) above)
for such violations, conflicts, breaches, losses, defaults, terminations,
cancellations, accelerations or Liens that, either individually or in the
aggregate, would not have a Material Adverse Effect on Phillips, the
Phillips Surviving Corporation or New Parent.
(d) Consents and Approvals. Except for (i) the filing of a
notification and report form under the HSR Act and the termination or
expiration of the waiting period under the HSR Act, (ii) the filings under
the EC Merger Regulation, (iii) the filings under the Canadian Investment
Regulations, (iv) the filing with the SEC of the Joint Proxy
Statement/Prospectus and the Form S-4, (v) the filing of the Certificates
of Merger pursuant to the DGCL, (vi) any consents, authorizations,
approvals, filings or exemptions in connection with compliance with the
rules of the NYSE, (vii) such filings and approvals as are required to be
made or obtained under the securities or "Blue Sky" laws of various states
in connection with the issuance of the shares of New Parent Common Stock
pursuant to this Agreement (the consents, approvals, filings and
registration required under or in relation to clauses (ii) through (vii)
above, "Phillips Necessary Consents") and (viii) such other consents,
approvals, filings and registrations the failure of which to obtain or make
would not reasonably be expected to have a Material Adverse Effect on
Phillips, no consents or approvals of or filings or registrations with any
Governmental Entity are necessary in connection with (A) the execution and
delivery by Phillips of this Agreement and (B) the consummation by Phillips
of the transactions contemplated by this Agreement.
(e) Financial Reports and SEC Documents. The Phillips 2000 10-K and
all other reports, registration statements, definitive proxy statements or
information statements filed or to be filed by Phillips or any of its
Subsidiaries subsequent to December 31, 1999 under the Securities Act or
under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, in the form
filed, or to be filed, with the SEC (collectively, the "Phillips SEC
Documents") (i) complied or will comply in all material respects as to form
with the applicable requirements under the Securities Act or the Exchange
Act, as the case may be, and (ii) as of its filing date (except as amended
or supplemented prior to the date of this Agreement), (A) did not or will
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they
were made, not misleading; and (B) each of the balance sheets contained in
or incorporated by reference into any such Phillips SEC Document (including
the related notes and schedules thereto) fairly presents or will fairly
present the financial position of the entity or entities to which it
relates as of its date, and each of the statements of income and changes in
stockholders' equity and cash flows or equivalent statements in such
Phillips SEC Documents (including any related notes and schedules thereto)
fairly presents or will fairly present the results of operations, changes
in stockholders' equity and changes in cash flows, as the case may be, of
the entity or entities to which it relates for the periods to which it
relates, in each case in accordance with GAAP consistently applied during
the periods involved, except, in each case, as may be noted therein,
subject to normal year-end audit adjustments in the case of unaudited
statements; provided that, with respect to Tosco only, in no event shall
any non-compliance as to form, untrue statements, omissions or failures of
the balance sheets or financial statements to fairly present the financial
position be deemed material unless such non-compliance, untrue statements,
omissions or failures would, in the aggregate, be material with respect to
Phillips and its Subsidiaries taken as a whole.
(f) Absence of Undisclosed Liabilities. Neither Phillips nor any of
its Subsidiaries had at September 30, 2001, or has incurred since that date
through the date hereof, any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature, except (i) liabilities,
obligations or contingencies that (A) are accrued or reserved against in
the financial statements in the Phillips 10-Q or reflected in the notes
thereto or (B) were incurred in the ordinary course of business, (ii)
liabilities, obligations or contingencies that (A) would not reasonably be
expected to have a Material Adverse Effect on Phillips, or (B) have been
discharged or paid in full prior to the date hereof, and (iii) liabilities,
obligations and contingencies that are of a nature not required to be
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reflected in the consolidated financial statements of Phillips and its
Subsidiaries prepared in accordance with GAAP consistently applied.
(g) Absence of Certain Changes or Events. Since September 30, 2001,
Phillips has conducted its business only in the ordinary course, and since
such date there has not been:
(i) any event, change, effect or development that, individually or
in the aggregate, has had or would reasonably be expected to have a
Material Adverse Effect on Phillips;
(ii) prior to the date of this Agreement, any declaration, setting
aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any Phillips Capital Stock or any
repurchase for value by Phillips of any Phillips Capital Stock;
(iii) prior to the date of this Agreement, any split, combination
or reclassification of any Phillips Capital Stock or any issuance or the
authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of Phillips Capital Stock;
(iv) prior to the date of this Agreement, (A) any granting by
Phillips to any director or executive officer of Phillips of any
increase in compensation, except in the ordinary course of business
consistent with prior practice or as was required under employment
agreements included in the Phillips SEC Documents, (B) any granting by
Phillips to any such director or executive officer of any increase in
severance or termination pay, except as was required under any
employment, severance or termination agreements included in the Phillips
SEC Documents, or (C) any entry by Phillips into, or any amendment of,
any employment, severance or termination agreement with any such
director or executive officer; or
(v) prior to the date of this Agreement, any change in financial
accounting methods, principles or practices by Phillips or any of its
Subsidiaries materially affecting the consolidated assets, liabilities
or results of operations of Phillips, except insofar as may have been
required by a change in GAAP.
(h) Legal Proceedings. There is no suit, action or proceeding or
investigation pending or, to the knowledge of Phillips, threatened, against
or affecting Phillips or any of its Subsidiaries or, to the knowledge of
Phillips, any basis for any such suit, action, proceeding or investigation
that would, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Phillips, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Phillips or its Subsidiaries having, or which would
reasonably be expected to have, any such effect.
(i) Compliance with Applicable Law. Phillips and each of its
Subsidiaries hold all licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses under and
pursuant to each, and have complied in all respects with and are not in
default in any material respect under any, applicable law, statute, order,
rule, regulation, policy and/or guideline of any Governmental Entity
relating to Phillips or any of its Subsidiaries, except where the failure
to hold such license, franchise, permit or authorization or such
noncompliance or default would not, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
Phillips.
(j) Environmental Liability. Except for matters that individually or
in the aggregate, would not have a Material Adverse Effect on Phillips, (i)
Phillips and each of its Subsidiaries are and have been in compliance with
all applicable Environmental Laws and have obtained or applied for all
Environmental Permits necessary for their operations as currently
conducted; (ii) there have been no Releases of any Hazardous Materials that
could be reasonably likely to form the basis of any Environmental Claim
against Phillips or any of its Subsidiaries; (iii) there are no
Environmental Claims pending or, to the knowledge of Phillips, threatened
against Phillips or any of its Subsidiaries; (iv) none of Phillips and its
Subsidiaries is subject to any agreement, order, judgment, decree, letter
or memorandum by or with any Governmental Entity or third party imposing
any liability or
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obligation under any Environmental Law; and (v) none of Phillips and its
Subsidiaries has retained or assumed, either contractually or by operation
of law, any liability or obligation that could reasonably be expected to
have formed the basis of any Environmental Claim against Phillips or any of
its Subsidiaries.
(k) Employee Benefit Plans; Labor Matters. (i) There do not now
exist, and to the knowledge of Phillips, there are no existing
circumstances that could reasonably be expected to result in, any
Controlled Group Liability to Phillips or any of its Subsidiaries that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Phillips. No Phillips Benefit Plan is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA.
(ii) Except as would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on Phillips, (A) each of
the Phillips Benefit Plans has been operated and administered in all
material respects in accordance with applicable law and administrative
rules and regulations of any Governmental Entity, including, but not
limited to, ERISA and the Code, and (B) there are no pending or threatened
claims (other than claims for benefits in the ordinary course), lawsuits or
arbitrations that have been asserted or instituted, and, to the knowledge
of Phillips, no set of circumstances exists that may reasonably give rise
to a claim or lawsuit, against the Phillips Benefit Plans, any fiduciaries
thereof with respect to their duties to the Phillips Benefit Plans or the
assets of any of the trusts under any of the Phillips Benefit Plans that
could reasonably be expected to result in any material liability of
Phillips or any of its Subsidiaries to the Pension Benefit Guaranty
Corporation, the U.S. Department of the Treasury, the U.S. Department of
Labor, any Phillips Benefit Plan, any participant in a Phillips Benefit
Plan, or any other party.
(iii) As of the date of this Agreement, neither Phillips nor any of
its Subsidiaries is a party to any material collective bargaining or other
labor union contract applicable to individuals employed by Phillips or any
of its Subsidiaries, and no such collective bargaining agreement or other
labor union contract is being negotiated by Phillips or any of its
Subsidiaries. Except as would not reasonably be expected to have a Material
Adverse Effect on Phillips, (A) there is no labor dispute, strike, slowdown
or work stoppage against Phillips or any of its Subsidiaries pending or, to
the knowledge of Phillips, threatened against Phillips or any of its
Subsidiaries and (B) no unfair labor practice or labor charge or complaint
has occurred with respect to Phillips or any of its Subsidiaries.
(iv) Section 4.2(k)(iv) of the Phillips Disclosure Schedule sets forth
an accurate and complete list of each Benefit Plan under which the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby could (either alone or in conjunction with
any other event), result in, cause the accelerated vesting, funding or
delivery of, or increase the amount or value of, any payment or benefit to
any employee, officer or director of Phillips or any of its Subsidiaries,
or could limit the right of Phillips or any of its Subsidiaries to amend,
merge, terminate or receive a reversion of assets from any Phillips Benefit
Plan or related trust or any material employment agreement or related
trust.
(l) Taxes. (i) Each of Phillips and its Subsidiaries has duly and
timely filed all Tax Returns required to be filed by it, and all such Tax
Returns are true, complete and accurate in all respects, except to the
extent that any failure to have filed or any inaccuracies in such Tax
Returns would not reasonably be expected to have a Material Adverse Effect
on Phillips. Phillips and each of its Subsidiaries has paid all Taxes
required to be paid by it, and has paid all Taxes that it was required to
withhold from amounts owing to any employee, creditor or third party,
except to the extent that any failure to pay such Taxes would not
reasonably be expected to have a Material Adverse Effect on Phillips. There
are no pending or, to the knowledge of Phillips, threatened audits,
examinations, investigations, deficiencies, claims or other proceedings in
respect of Taxes relating to Phillips or any of its Subsidiaries, except
for those that would not reasonably be expected to have a Material Adverse
Effect on Phillips. There are no Liens for Taxes upon the assets of
Phillips or any of its Subsidiaries, other than Liens for current Taxes not
yet due, Liens for Taxes that are being contested in good faith by
appropriate proceedings, and Liens for Taxes that would not reasonably be
expected to have a
A-25
Material Adverse Effect on Phillips. Neither Phillips nor any of its
Subsidiaries has requested any extension of time within which to file any
Tax Returns in respect of any taxable year that have not since been filed,
nor made any request for waivers of the time to assess any Taxes that are
pending or outstanding, except where such request or waiver would not
reasonably be expected to have a Material Adverse Effect on Phillips. The
consolidated U.S. federal income Tax Returns of Phillips have been
examined, or the statute of limitations has closed, with respect to all
taxable years through and including 1995. Neither Phillips nor any of its
Subsidiaries has any liability for Taxes of any Person (other than Phillips
and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any
comparable provision of U.S. state or local or foreign law), except as
would not reasonably be expected to have a Material Adverse Effect on
Phillips. Neither Phillips nor any of its Subsidiaries is a party to any
agreement (with any Person other than Phillips and/or any of its
Subsidiaries) relating to the allocation or sharing of Taxes, except as
would not reasonably be expected to have a Material Adverse Effect on
Phillips.
(ii) Phillips has not constituted either a "distributing corporation"
or a "controlled corporation" within the meaning of Section 355(a)(1)(A) of
the Code in a distribution of stock intended to qualify for tax-free
treatment under Section 355 of the Code (A) in the two years prior to the
date of this Agreement (or will constitute such a corporation in the two
years prior to the Closing Date) or (B) in a distribution that otherwise
constitutes part of a "plan" or "series of related transactions" within the
meaning of Section 355(e) of the Code in conjunction with the Mergers.
(iii) To Phillips's knowledge, Conoco has not constituted either a
"distributing corporation" or a "controlled corporation" within the meaning
of Section 355(a)(1)(A) of the Code in a distribution of stock intended to
qualify for tax-free treatment under Section 355 of the Code (A) in the two
years prior to the date of this Agreement (or will constitute such a
corporation in the two years prior to the Closing Date) or (B) in a
distribution that otherwise constitutes a "plan" or "series of related
transactions" within the meaning of Section 355(e) of the Code in
conjunction with the Mergers.
(m) Reorganization under the Code. As of the date of this Agreement,
neither Phillips nor any of its Subsidiaries has taken any action or knows
of any fact that is reasonably likely to prevent the Conoco Merger or the
Phillips Merger from qualifying as a "reorganization" within the meaning of
Section 368(a) of the Code or the Mergers, taken together, from qualifying
as an exchange described in Section 351 of the Code.
(n) Form S-4; Joint Proxy Statement/Prospectus. None of the
information to be supplied by Phillips or its Subsidiaries in the Form S-4
or the Joint Proxy Statement/Prospectus will, at the time of the mailing of
the Joint Proxy Statement/Prospectus and any amendments or supplements
thereto, and at the time of each of the Phillips Stockholders Meeting and
the Conoco 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 the light of the
circumstances under which they are made, not misleading. The Joint Proxy
Statement/Prospectus will comply, as of its mailing date, as to form in all
material respects with all applicable law, including the provisions of the
Securities Act and the Exchange Act, except that no representation is made
by Phillips with respect to information supplied by Conoco for inclusion
therein.
(o) State Takeover Laws; Rights Plan. (i) The Board of Directors of
Phillips has approved this Agreement and the transactions contemplated by
this Agreement as required under any applicable state takeover laws so that
any such state takeover laws will not apply to this Agreement or any of the
transactions contemplated hereby.
(ii) Phillips has taken all action, if any, necessary or appropriate
so that the entering into of this Agreement, and the consummation of the
transactions contemplated hereby, do not and will not result in the ability
of any Person to exercise any Phillips Rights under the Phillips Rights
Agreement or enable or require the Phillips Rights to separate from the
shares of Phillips Common Stock to which they are attached or to be
triggered or become exercisable. No "Distribution Date" or "Shares
Acquisition Date" (as such terms are defined in the Phillips Rights
Agreement) has occurred.
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(p) Opinion of Financial Advisors. Phillips has received the opinions
of Goldman, Sachs & Co., J.P. Morgan Securities Inc. and Merrill Lynch &
Co., dated the date hereof, to the effect that the Phillips Merger
Consideration relative to the Exchange Ratio pursuant to this Agreement is
fair from a financial point of view to holders of Phillips Common Stock.
(q) Board Approval. The Board of Directors of Phillips, at a meeting
duly called and held, has by unanimous vote of those directors present (i)
determined that this Agreement and the transactions contemplated hereby are
advisable, fair to and in the best interests of Phillips stockholders, (ii)
approved this Agreement and (iii) recommended that this Agreement be
adopted by the holders of Phillips Common Stock.
(r) Brokers' Fees. Neither Phillips nor any of its Subsidiaries nor
any of their respective officers or directors has employed any broker or
finder or incurred any liability for any brokers' fees, commissions or
finders' fees in connection with the transactions contemplated by this
Agreement, excluding fees to be paid to Goldman, Sachs & Co., J.P. Morgan
Securities Inc. and Merrill Lynch & Co.
(s) Ownership of Conoco Capital Stock. As of the date of this
Agreement, Phillips does not beneficially own any shares of Conoco Capital
Stock.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of Conoco. During the period from the date of this Agreement
and continuing until the Effective Time, Conoco agrees as to itself and its
Subsidiaries that (except (i) as expressly contemplated or permitted by this
Agreement or disclosed in the Conoco Disclosure Schedule, (ii) subject to
Section 5.1(a)(iii), for transactions by GIRL and (iii) for transactions between
and among Conoco and its wholly owned Subsidiaries):
(a) Ordinary Course. (i) Conoco and its Subsidiaries shall carry on
their respective businesses in the usual, regular and ordinary course in
all material respects, in substantially the same manner as heretofore
conducted, and shall use their reasonable best efforts to keep available
the services of their respective present officers and key employees,
preserve intact their present lines of business, maintain their rights and
franchises and preserve their relationships with customers, suppliers and
others having business dealings with them to the end that their ongoing
businesses shall not be impaired in any material respect at the Effective
Time.
(ii) Conoco shall not, and shall not permit any of its Subsidiaries
to, (A) enter into any new material line of business or (B) incur or commit
to any capital expenditures or any obligations or liabilities in connection
therewith other than capital expenditures and obligations or liabilities in
connection therewith incurred or committed to in the ordinary course of
business or contemplated by the 2001 capital budget of Conoco and
previously disclosed to Phillips or by future capital budgets of Conoco
approved by the Board of Directors of Conoco consistent with past practice.
(iii) Notwithstanding anything to the contrary in this Section 5.1,
subject to the fiduciary duties of Conoco or its officers serving as
directors of GIRL, Conoco shall cause GIRL to carry on its business in the
usual, regular and ordinary course in all material respects, in
substantially the same manner as heretofore conducted, and shall cause GIRL
to use its reasonable best efforts to keep available the services of its
present officers and key employees, preserve intact its present lines of
business, maintain its rights and franchises and preserve its relationships
with customers, suppliers and others having business dealings with it to
the end that its ongoing businesses shall not be impaired in any material
respect at the Effective Time.
(b) Dividends; Changes in Share Capital. Conoco shall not, and shall
not permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in respect of
any of its capital stock, except (A) the declaration and payment of regular
A-27
quarterly cash dividends not in excess of $0.19 per share of Conoco Common
Stock with usual record and payment dates for such dividends in accordance
with past dividend practice and (B) the declaration and payment of regular
dividends from a Subsidiary of Conoco to Conoco or to another Subsidiary of
Conoco in accordance with past dividend practice, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, except for any such
transaction by a wholly owned Subsidiary of Conoco that remains a wholly
owned Subsidiary after consummation of such transaction, or (iii)
repurchase, redeem or otherwise acquire any shares of its capital stock or
any securities convertible into or exercisable for any shares of its
capital stock, except for the purchase from time to time by Conoco of
Conoco Common Stock (and the associated Conoco Rights) in connection with
the Conoco Benefit Plans in the ordinary course of business.
(c) Issuance of Securities. Conoco shall not, and shall not permit
any of its Subsidiaries to, issue, deliver, sell, pledge or dispose of, or
authorize or propose the issuance, delivery, sale, pledge or disposition
of, any shares of its capital stock of any class, any Voting Debt or any
securities convertible into or exercisable for, or any rights, warrants,
calls or options to acquire, any such shares or Voting Debt, or enter into
any commitment, arrangement, undertaking or agreement with respect to any
of the foregoing, other than (i) the issuance of Conoco Common Stock (and
the associated Conoco Rights) upon the exercise of Conoco Stock Options or
Conoco SARs or the settlement of Conoco Stock-Based Awards, in each case in
accordance with their present terms or pursuant to Conoco Stock Options,
Conoco SARs or Conoco Stock-Based Awards granted in accordance with Section
5.1(c) of the Conoco Disclosure Schedule, (ii) issuances, sales or
deliveries by a wholly owned Subsidiary of Conoco of capital stock to such
Subsidiary's parent or another wholly owned Subsidiary of Conoco, (iii)
pursuant to acquisitions and investments as disclosed in Section 5.1(e) or
5.1(g) of the Conoco Disclosure Schedule or the financings therefor, (iv)
issuances or deliveries in accordance with the Conoco Rights Agreement, (v)
sales or dispositions of capital stock of a Subsidiary of Conoco in
connection with a disposition permitted pursuant to Section 5.1(f), (vi)
issuances or deliveries of capital stock of Subsidiaries of Conoco in the
ordinary course of business in connection with joint venture agreements
existing as of the date hereof or (vii) issuances of Conoco Stock Options
to the extent required pursuant to reload options that are outstanding on
the date hereof.
(d) Governing Documents. Except to the extent required to comply with
its obligations hereunder or with applicable law, Conoco shall not amend or
propose to so amend its Restated Certificate of Incorporation or By-Laws.
(e) No Acquisitions. Other than acquisitions in the ordinary course
of business that do not present a material risk of making it materially
more difficult to obtain any approval or authorization required in
connection with the Mergers under Regulatory Law, Conoco shall not, and
shall not permit any of its Subsidiaries to, acquire or agree to acquire by
merger or consolidation, or by purchasing a substantial equity interest in
or a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire
any assets (excluding the acquisition of assets used in the operations of
the business of Conoco and its Subsidiaries in the ordinary course, which
assets do not constitute a business unit, division or all or substantially
all of the assets of the transferor).
(f) No Dispositions. Other than dispositions referred to in the
Conoco SEC Documents filed prior to the date of this Agreement, Conoco
shall not, and shall not permit any of its Subsidiaries to, sell, lease or
otherwise dispose of, or agree to sell, lease or otherwise dispose of, any
of its assets (including capital stock of Subsidiaries of Conoco), other
than in the ordinary course of business and dispositions in the aggregate
amount of up to $700 million per year in fair market value.
(g) Investments; Indebtedness. Conoco shall not, and shall not permit
any of its Subsidiaries to (i) make any loans, advances or capital
contributions to, or investments in, any other Person, other
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than (A) loans or investments by Conoco or a Subsidiary of Conoco to or in
Conoco or any Subsidiary of Conoco, (B) in the ordinary course of business
(provided that none of such transactions referred to in this clause (B)
presents a material risk of making it more difficult to obtain any approval
or authorization required in connection with the Mergers under Regulatory
Law) and (C) any capital contributions to or other obligations in respect
of any joint ventures of Conoco or any of its Subsidiaries pursuant to an
agreement in existence on or prior to the date of this Agreement, or (ii)
except in the ordinary course, incur any indebtedness for borrowed money or
guarantee any such indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of
Conoco or any of its Subsidiaries, guarantee any debt securities of another
Person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another Person (other than any wholly
owned Subsidiary) or enter into any arrangement having the economic effect
of any of the foregoing, other than refinancings of pre-existing
indebtedness.
(h) Tax-Free Qualification. Conoco shall use its reasonable best
efforts to, and to cause each of its Subsidiaries to, (i) cause the Conoco
Merger to qualify as a "reorganization" within the meaning of Section
368(a) of the Code and the Mergers, taken together, to qualify as an
exchange described in Section 351 of the Code and (ii) obtain the opinions
of counsel referred to in Sections 7.2(c) and 7.3(c), including the
execution of the officers' certificates referred to therein. Conoco shall
use its reasonable best efforts not to, and shall use its reasonable best
efforts not to permit any of its Subsidiaries to, take any action
(including any action otherwise permitted by this Section 5.1) that would
prevent or impede the Conoco Merger or the Phillips Merger from qualifying
as a "reorganization" within the meaning of Section 368(a) of the Code or
the Mergers, taken together, from qualifying as an exchange described in
Section 351 of the Code.
(i) Compensation. Except as required by applicable law or by the
terms of any collective bargaining agreement or other binding agreement
currently in effect, Conoco and its Significant Subsidiaries shall not: (A)
increase the amount of compensation of, or pay any severance to, any
director or officer of Conoco or any Significant Subsidiary of Conoco,
except in the ordinary course of business consistent with past practice; or
(B) adopt or amend or make any commitment to adopt or amend any Benefit
Plan or fund or make any contribution to any Conoco Benefit Plan or any
related trust or other funding vehicles, except for amendments in the
ordinary course of business consistent with past practice and regularly
scheduled contributions to trusts funding qualified plans.
(j) Financial Accounting Methods. Except as disclosed in Conoco SEC
Documents filed prior to the date of this Agreement, or as required by a
Governmental Entity, Conoco shall not change in any material respect its
methods of financial accounting in effect at September 30, 2001, except as
required by changes in GAAP as concurred in by Conoco's independent public
accountants.
(k) Standstill. Conoco shall not, and shall not permit any of its
Subsidiaries to, waive the benefits of, or commit or agree to modify in any
manner, any standstill or similar covenant or agreement for the benefit of
Conoco or any Subsidiary.
(l) Certain Actions. Conoco and its Subsidiaries shall not take any
action or omit to take any action for the purpose of preventing, delaying
or impeding the consummation of the Mergers or the other transactions
contemplated by this Agreement.
5.2 Covenants of Phillips. During the period from the date of this
Agreement and continuing until the Effective Time, Phillips agrees as to itself
and its Subsidiaries that (except (i) as expressly contemplated or permitted by
this Agreement or disclosed in the Phillips Disclosure Schedule and (ii) for
transactions between and among Phillips and its wholly owned Subsidiaries):
(a) Ordinary Course. (i) Phillips and its Subsidiaries shall carry on
their respective businesses in the usual, regular and ordinary course in
all material respects, in substantially the same manner as heretofore
conducted, and shall use their reasonable best efforts to keep available
the services of their respective present officers and key employees,
preserve intact their present lines of business, maintain their rights and
franchises and preserve their relationships with customers, suppliers and
others having
A-29
business dealings with them to the end that their ongoing businesses shall
not be impaired in any material respect at the Effective Time.
(ii) Phillips shall not, and shall not permit any of its Subsidiaries
to, (A) enter into any new material line of business or (B) incur or commit
to any capital expenditures or any obligations or liabilities in connection
therewith other than capital expenditures and obligations or liabilities in
connection therewith incurred or committed to in the ordinary course of
business or contemplated by the 2001 capital budget of Phillips and
previously disclosed to Conoco or by future capital budgets of Phillips
approved by the Board of Directors of Phillips consistent with past
practice.
(b) Dividends; Changes in Share Capital. Phillips shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in respect of
any of its capital stock, except (A) the declaration and payment of regular
quarterly cash dividends not in excess of $0.36 per share of Phillips
Common Stock with usual record and payment dates for such dividends in
accordance with past dividend practice and (B) the declaration and payment
of regular dividends from a Subsidiary of Phillips to Phillips or to
another Subsidiary of Phillips in accordance with past dividend practice,
(ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for, shares of its capital stock, except for any
such transaction by a wholly owned Subsidiary of Phillips that remains a
wholly owned Subsidiary after consummation of such transaction or (iii)
repurchase, redeem or otherwise acquire any shares of its capital stock or
any securities convertible into or exercisable for any shares of its
capital stock, except for the purchase from time to time by Phillips of
Phillips Common Stock (and the associated Phillips Rights) in connection
with the Phillips Benefit Plans in the ordinary course of business.
(c) Issuance of Securities. Phillips shall not, and shall not permit
any of its Subsidiaries to, issue, deliver, sell, pledge or dispose of, or
authorize or propose the issuance, delivery, sale, pledge or disposition
of, any shares of its capital stock of any class, any Voting Debt or any
securities convertible into or exercisable for, or any rights, warrants,
calls or options to acquire, any such shares or Voting Debt, or enter into
any commitment, arrangement, undertaking or agreement with respect to any
of the foregoing, other than (i) the issuance of Phillips Common Stock (and
the associated Phillips Rights) upon the exercise of Phillips Stock Options
or Phillips SARs, or the settlement of Phillips Stock-Based Awards, in each
case in accordance with their present terms or pursuant to Phillips Stock
Options, Phillips SARs or Phillips Stock-Based Awards granted in accordance
with Section 5.2(c) of the Phillips Disclosure Schedule, (ii) issuances,
sales or deliveries by a wholly owned Subsidiary of Phillips of capital
stock to such Subsidiary's parent or another wholly owned Subsidiary of
Phillips, (iii) pursuant to acquisitions and investments as disclosed in
Section 5.2(e) or 5.2(g) of the Phillips Disclosure Schedule or the
financings therefor, (iv) issuances or deliveries in accordance with the
Phillips Rights Agreement, (v) sales or dispositions of capital stock of a
Subsidiary of Conoco in connection with a disposition permitted pursuant to
Section 5.2(f), (vi) issuances of capital stock of Subsidiaries of Phillips
in the ordinary course of business in connection with joint venture
agreements existing as of the date hereof or (vii) issuances of Phillips
Stock Options to the extent required pursuant to reload options that are
outstanding on the date hereof.
(d) Governing Documents. Except to the extent required to comply with
its obligations hereunder or with applicable law, Phillips shall not amend
or propose to so amend its Restated Certificate of Incorporation or
By-Laws.
(e) No Acquisitions. Other than acquisitions in the ordinary course
of business that do not present a material risk of making it materially
more difficult to obtain any approval or authorization required in
connection with the Mergers under Regulatory Law, Phillips shall not, and
shall not permit any of its Subsidiaries to, acquire or agree to acquire by
merger or consolidation, or by purchasing a substantial equity interest in
or a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or
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division thereof or otherwise acquire or agree to acquire any assets
(excluding the acquisition of assets used in the operations of the business
of Phillips and its Subsidiaries in the ordinary course, which assets do
not constitute a business unit, division or all or substantially all of the
assets of the transferor).
(f) No Dispositions. Other than dispositions referred to in the
Phillips SEC Documents filed prior to the date of this Agreement, Phillips
shall not, and shall not permit any of its Subsidiaries to, sell, lease or
otherwise dispose of, or agree to sell, lease or otherwise dispose of, any
of its assets (including capital stock of Subsidiaries of Phillips), other
than in the ordinary course of business and dispositions in the aggregate
amount of up to $1,000 million per year in fair market value.
(g) Investments; Indebtedness. Phillips shall not, and shall not
permit any of its Subsidiaries to (i) make any loans, advances or capital
contributions to, or investments in, any other Person, other than (A) loans
or investments by Phillips or a Subsidiary of Phillips to or in Phillips or
any Subsidiary of Phillips, (B) in the ordinary course of business
(provided that none of such transactions referred to in this clause (B)
presents a material risk of making it more difficult to obtain any approval
or authorization required in connection with the Mergers under Regulatory
Law) and (C) any capital contributions to or other obligations in respect
of any joint ventures of Conoco or any of its Subsidiaries pursuant to an
agreement in existence on or prior to the date of this Agreement, or (ii)
except in the ordinary course, incur any indebtedness for borrowed money or
guarantee any such indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of
Phillips or any of its Subsidiaries, guarantee any debt securities of
another Person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another Person (other than any wholly
owned Subsidiary) or enter into any arrangement having the economic effect
of any of the foregoing, other than refinancings of pre-existing
indebtedness.
(h) Tax-Free Qualification. Phillips shall use its reasonable best
efforts to, and to cause each of its Subsidiaries to, (i) cause the
Phillips Merger to qualify as a "reorganization" within the meaning of
Section 368(a) of the Code and the Mergers, taken together, to qualify as
an exchange described in Section 351 of the Code and (ii) obtain the
opinions of counsel referred to in Sections 7.2(c) and 7.3(c), including
the execution of the officers' certificates referred to therein. Phillips
shall use its reasonable best efforts not to, and shall use its reasonable
best efforts not to permit any of its Subsidiaries to, take any action
(including any action otherwise permitted by this Section 5.2) that would
prevent or impede the Conoco Merger or the Phillips Merger from qualifying
as a "reorganization" within the meaning of Section 368(a) of the Code or
the Mergers, taken together, from qualifying as an exchange described in
Section 351 of the Code.
(i) Compensation. Except as required by applicable law or by the
terms of any collective bargaining agreement or other binding agreement
currently in effect, Phillips and its Significant Subsidiaries shall not:
(A) increase the amount of compensation of, or pay any severance to, any
director or officer of Phillips or any Significant Subsidiary of Phillips,
except in the ordinary course of business consistent with past practice; or
(B) adopt or amend or make any commitment to adopt or amend any Benefit
Plan or fund or make any contribution to any Phillips Benefit Plan or any
related trust or other funding vehicles, except for amendments in the
ordinary course of business consistent with past practice and regularly
scheduled contributions to trusts funding qualified plans.
(j) Financial Accounting Methods. Except as disclosed in Phillips SEC
Documents filed prior to the date of this Agreement, or as required by a
Governmental Entity, Phillips shall not change in any material respect its
methods of financial accounting in effect at September 30, 2001, except as
required by changes in GAAP as concurred in by Phillips's independent
public accountants.
(k) Standstill. Phillips shall not, and shall not permit any of its
Subsidiaries to, waive the benefits of, or commit or agree to modify in any
manner, any standstill or similar covenant or agreement for the benefit of
Phillips or any Subsidiary.
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(l) Certain Actions. Phillips and its Subsidiaries shall not take any
action or omit to take any action for the purpose of preventing, delaying
or impeding the consummation of the Mergers or the other transactions
contemplated by this Agreement.
5.3 Governmental Filings. Phillips and Conoco shall (a) confer on a
reasonable basis with each other and (b) report to each other (to the extent
permitted by applicable law or regulation or any applicable confidentiality
agreement) on operational matters. Phillips and Conoco shall file all reports
required to be filed by each of them with the SEC (and all other Governmental
Entities) between the date of this Agreement and the Effective Time and shall,
if requested by the other party and (to the extent permitted by applicable law
or regulation or any applicable confidentiality agreement) deliver to the other
party copies of all such reports, announcements and publications promptly upon
request.
5.4 Control of Other Party's Business. Nothing contained in this Agreement
shall give Conoco, directly or indirectly, the right to control or direct
Phillips's operations or give Phillips, directly or indirectly, the right to
control or direct Conoco's operations prior to the Effective Time. Prior to the
Effective Time, each of Phillips and Conoco shall exercise, consistent with the
terms and conditions of this Agreement, complete control and supervision over
its respective operations.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of Proxy Statement; Stockholders Meetings. (a) As promptly
as reasonably practicable following the date hereof, Phillips and Conoco shall
cooperate in preparing and each shall cause to be filed with the SEC mutually
acceptable proxy materials that shall constitute the Joint Proxy
Statement/Prospectus and Phillips and Conoco shall prepare, and New Parent shall
file with the SEC, the Form S-4. The Joint Proxy Statement/Prospectus will be
included as a prospectus in and will constitute a part of the Form S-4 as New
Parent's prospectus. Each of Phillips, Conoco and New Parent shall use
reasonable best efforts to have the Joint Proxy Statement/Prospectus cleared by
the SEC and the Form S-4 declared effective by the SEC and to keep the Form S-4
effective as long as is necessary to consummate the Mergers and the transactions
contemplated hereby. Each of Phillips, Conoco and New Parent shall, as promptly
as practicable after receipt thereof, provide the other parties with copies of
any written comments, and advise each other of any oral comments, with respect
to the Joint Proxy Statement/Prospectus or Form S-4 received from the SEC.
Phillips, Conoco and New Parent shall cooperate and provide the other parties
with a reasonable opportunity to review and comment on any amendment or
supplement to the Joint Proxy Statement/Prospectus and the Form S-4 prior to
filing such with the SEC, and each will provide each other parties with a copy
of all such filings made with the SEC. Notwithstanding any other provision
herein to the contrary, no amendment or supplement (including by incorporation
by reference) to the Joint Proxy Statement/Prospectus or the Form S-4 shall be
made without the approval of both Phillips and Conoco, which approval shall not
be unreasonably withheld or delayed; provided that, with respect to documents
filed by a party hereto that are incorporated by reference in the Form S-4 or
Joint Proxy Statement/Prospectus, this right of approval shall apply only with
respect to information relating to the other party or its business, financial
condition or results of operations; and provided, further, that Phillips, in
connection with a Change in the Phillips Recommendation, and Conoco, in
connection with a Change in the Conoco Recommendation, may amend or supplement
the Joint Proxy Statement/Prospectus or Form S-4 (including by incorporation by
reference) pursuant to a Qualifying Amendment to effect such a Change, and in
such event, this right of approval shall apply only with respect to information
relating to the other party or its business, financial condition or results of
operations, and shall be subject to the right of each party to have its Board of
Directors' deliberations and conclusions to be accurately described. Phillips
will use reasonable best efforts to cause the Joint Proxy Statement/ Prospectus
to be mailed to Phillips stockholders, and Conoco will use reasonable best
efforts to cause the Joint Proxy Statement/Prospectus to be mailed to Conoco
stockholders, in each case, as promptly as practicable after the Form S-4 is
declared effective under the Securities Act. Each of Phillips, Conoco and New
Parent will advise the other parties, promptly after it receives notice thereof,
of the time when the
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Form S-4 has become effective, the issuance of any stop order, the suspension of
the qualification of the New Parent Common Stock issuable in connection with the
Mergers for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Joint Proxy Statement/Prospectus or the Form S-4. If, at any
time prior to the Effective Time, any information relating to Phillips or
Conoco, or any of their respective affiliates, officers or directors, is
discovered by Phillips or Conoco and such information should be set forth in an
amendment or supplement to any of the Form S-4 or the Joint Proxy
Statement/Prospectus so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party hereto discovering such information shall
promptly notify the other parties and, to the extent required by law, rules or
regulations, an appropriate amendment or supplement describing such information
shall be promptly filed with the SEC and disseminated to the stockholders of
Phillips and Conoco.
(b) Conoco shall duly take all lawful action to call, give notice of,
convene and hold the Conoco Stockholders Meeting as soon as practicable on a
date determined in accordance with the mutual agreement of Phillips and Conoco
for the purpose of obtaining the Conoco Stockholder Approval and, subject to
Section 6.5 and Section 8.5, shall take all lawful action to solicit the Conoco
Stockholder Approval. The Board of Directors of Conoco shall recommend the
adoption of the plan of merger contained in this Agreement by the Conoco
stockholders to the effect as set forth in Section 4.1(q) (the "Conoco
Recommendation"), and shall not, unless Phillips makes a Change in the Phillips
Recommendation, (i) withdraw, modify or qualify (or propose to withdraw, modify
or qualify) in any manner adverse to Phillips the Conoco Recommendation or (ii)
take any action or make any statement in connection with the Conoco Stockholders
Meeting inconsistent with the Conoco Recommendation (collectively, a "Change in
the Conoco Recommendation"); provided, however, that Conoco and the Board of
Directors of Conoco may take any action permitted under Section 6.5, 8.1(i) or
8.5. Notwithstanding any Change in the Conoco Recommendation pursuant to Section
6.5, this Agreement shall be submitted to the Conoco stockholders at the Conoco
Stockholders Meeting for the purpose of obtaining the Conoco Stockholder
Approval, and nothing contained herein shall be deemed to relieve Conoco of such
obligation.
(c) Phillips shall duly take all lawful action to call, give notice of,
convene and hold the Phillips Stockholders Meeting as soon as practicable on a
date determined in accordance with the mutual agreement of Phillips and Conoco
for the purpose of obtaining the Phillips Stockholder Approval and, subject to
Section 6.5 and Section 8.5, shall take all lawful action to solicit the
Phillips Stockholder Approval. The Board of Directors of Phillips shall
recommend the adoption of the plan of merger contained in this Agreement by the
Phillips stockholders to the effect as set forth in Section 4.2(q) (the
"Phillips Recommendation"), and shall not, unless Conoco makes a Change in the
Conoco Recommendation, (i) withdraw, modify or qualify (or propose to withdraw,
modify or qualify) in any manner adverse to Conoco the Phillips Recommendation
or (ii) take any action or make any statement in connection with the Phillips
Stockholders Meeting inconsistent with the Phillips Recommendation
(collectively, a "Change in the Phillips Recommendation"); provided, however,
that Phillips and the Board of Directors of Phillips may take any action
permitted under Section 6.5, 8.1(i) or 8.5. Notwithstanding any Change in the
Phillips Recommendation pursuant to Section 6.5, this Agreement shall be
submitted to the Phillips stockholders at the Phillips Stockholders Meeting for
the purpose of obtaining the Phillips Stockholder Approval, and nothing
contained herein shall be deemed to relieve Phillips of such obligation.
6.2 Governance Matters; Headquarters; Company Name. (a) Phillips and
Conoco shall take, and shall cause New Parent to take, all requisite action to,
effective as of the Effective Time, (i) expand the New Parent Board of Directors
such that it consists of 16 members, (ii) cause the New Parent Board of
Directors to consist of eight current Phillips directors nominated by Phillips
and eight current Conoco directors nominated by Conoco, (iii) cause each
committee of the New Parent Board of Directors to consist of an equal number of
directors nominated by Conoco and Phillips and (iv) cause Archie Dunham to be
appointed Chairman of the New Parent Board, subject to the terms of his
employment agreement entered into pursuant to Section 6.2(c). Immediately
following the Effective Time, James J. Mulva shall become Chief Executive
Officer of New Parent, and, subject to the terms of his employment agreement
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entered into pursuant to Section 6.2(c), James J. Mulva shall become the
Chairman of the Board following the retirement of Archie Dunham.
(b) The New Parent Board of Directors shall be divided into three classes,
Class I, Class II and Class III. Two directors nominated by Conoco and three
directors nominated by Phillips shall comprise Class I and shall hold office
until the first annual meeting of the New Parent Board following the Closing
Date. Three directors nominated by Conoco and two directors nominated by
Phillips shall comprise Class II and shall hold office until the second annual
meeting of the New Parent Board following the Closing Date. Three directors
nominated by Conoco (one of whom shall be Archie Dunham) and three directors
nominated by Phillips (one of whom shall be James J. Mulva) shall comprise Class
III and shall hold office until the third annual meeting of the New Parent Board
following the Closing Date.
(c) Concurrently with entering into this Agreement, Phillips and Conoco
shall cause New Parent to enter into employment agreements, effective as of the
Effective Time, with the executives of Phillips and Conoco in the forms mutually
satisfactory to both parties. All other officers of New Parent shall be elected
by the Board of Directors of New Parent.
(d) As soon as reasonably practicable following the Effective Time, the
executive headquarters for Phillips and New Parent shall be moved to the
Houston, Texas area.
(e) Immediately upon consummation of the Mergers, New Parent shall change
its name to ConocoPhillips.
6.3 Access to Information. Upon reasonable notice, each of Phillips and
Conoco shall (and shall cause its Subsidiaries to) afford to the officers,
employees, accountants, counsel, financial advisors and other representatives of
the other party reasonable access during normal business hours, during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments, records, officers and employees and, during such period, each of
Phillips and Conoco shall (and shall cause its Subsidiaries to) furnish promptly
to the other party (a) a copy of each report, schedule, registration statement
and other document filed, published, announced or received by it during such
period pursuant to the requirements of U.S. federal or state securities laws or
the HSR Act, as applicable (other than documents that such party hereto is not
permitted to disclose under applicable law), and (b) all other information
concerning it and its business, properties and personnel as such other party may
reasonably request; provided, however, that any party hereto may restrict the
foregoing access to the extent that (i) any law, treaty, rule or regulation of
any Governmental Entity applicable to such party or any contract requires such
party or its Subsidiaries to restrict or prohibit access to any such properties
or information, (ii) counsel for such party advises that such information should
not be disclosed in order to ensure compliance with the Antitrust Laws, (iii)
the information is subject to the attorney-client privilege, work product
doctrine or any other applicable privilege concerning pending or legal
proceedings or government investigations, or (iv) the information is subject to
confidentiality obligations to a third party. The parties hereto shall hold any
information obtained pursuant to this Section 6.3 in confidence in accordance
with, and shall otherwise be subject to, the provisions of the confidentiality
agreement dated November 6, 2001, between Phillips and Conoco (the
"Confidentiality Agreement"), which Confidentiality Agreement shall continue in
full force and effect. Any investigation by either Phillips or Conoco shall not
affect the representations and warranties of the other party.
6.4 Reasonable Best Efforts. (a) Subject to the terms and conditions of
this Agreement, each party hereto will use its reasonable best efforts to take,
or cause to be taken, all actions, and do, or cause to be done, all things
necessary, proper or advisable under this Agreement and applicable laws and
regulations to consummate the Mergers and the other transactions contemplated by
this Agreement as soon as practicable after the date hereof, including (i)
preparing and filing as promptly as practicable all documentation to effect all
necessary applications, notices, petitions, filings, ruling requests, and other
documents and to obtain as promptly as practicable all Conoco Necessary Consents
or Phillips Necessary Consents, as appropriate, and all other consents, waivers,
licenses, orders, registrations, approvals, permits, rulings, authorizations and
clearances necessary or advisable to be obtained from any third party and/or any
Governmental Entity in order to consummate the Mergers or any of the other
transactions
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contemplated by this Agreement (collectively, the "Required Approvals") and (ii)
taking all reasonable steps as may be necessary to obtain all such Necessary
Consents and the Required Approvals. In furtherance and not in limitation of the
foregoing, each of Phillips and Conoco agrees (i) to make, as promptly as
practicable, (A) an appropriate filing of a Notification and Report Form
pursuant to the HSR Act with respect to the transactions contemplated hereby,
(B) appropriate filings with the European Commission, if required, in accordance
with applicable Regulatory Laws, and (C) all other necessary filings with other
Governmental Entities relating to the Mergers, and, to supply as promptly as
practicable any additional information or documentation that may be requested
pursuant to such laws or by such Governmental Entities and to use reasonable
best efforts to cause the expiration or termination of the applicable waiting
periods under the HSR Act and the receipt of Required Approvals under such other
laws or from such authorities as soon as practicable and (ii) not to extend any
waiting period under the HSR Act or enter into any agreement with the FTC or the
DOJ not to consummate the transactions contemplated by this Agreement, except
with the prior written consent of the other parties hereto (which shall not be
unreasonably withheld or delayed). Notwithstanding anything to the contrary in
this Agreement, neither Phillips nor Conoco nor any of their respective
Subsidiaries shall be required to hold separate (including by trust or
otherwise) or to divest any of their respective businesses or assets, or to take
or agree to take any action or agree to any limitation, in any such case, that
could reasonably be expected to have a Material Adverse Effect on New Parent
after giving effect to the Mergers or to substantially impair the benefits to
Phillips and Conoco expected, as of the date hereof, to be realized from
consummation of the Mergers, and neither Phillips or Conoco shall be required to
agree to or effect any divestiture, hold separate any business or take any other
action that is not conditional on the consummation of the Mergers.
(b) Each of Phillips and Conoco shall, in connection with the efforts
referenced in Section 6.4(a) to obtain all Required Approvals, use its
reasonable best efforts to (i) cooperate in all respects with each other in
connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party, (ii) subject to applicable law, permit the other party to review in
advance any proposed written communication between it and any Governmental
Entity, (iii) promptly inform each other of (and, at the other party's
reasonable request, supply to such other party) any communication (or other
correspondence or memoranda) received by such party from, or given by such party
to, the DOJ, the FTC or any other Governmental Entity and of any material
communication received or given in connection with any proceeding by a private
party, in each case regarding any of the transactions contemplated hereby, and
(iv) consult with each other in advance to the extent practicable of any meeting
or conference with the DOJ, the FTC or any other Governmental Entity or, in
connection with any proceeding by a private party, with any other Person, and to
the extent permitted by the DOJ, the FTC or such other applicable Governmental
Entity or other Person, and to the extent (i) such party has not been advised by
its counsel that such information should not be disclosed in order to ensure
compliance with the Antitrust Laws and (ii) the relevant document or information
is not subject to the attorney-client privilege, work product doctrine or any
other applicable privilege concerning pending or legal proceedings or government
investigations, give the other party the opportunity to attend and participate
in such meetings and conferences.
(c) In furtherance and not in limitation of the covenants of the parties
contained in Sections 6.4(a) and 6.4(b), if any administrative or judicial
action or proceeding, including any proceeding by a private party, is instituted
(or threatened to be instituted) challenging any transaction contemplated by
this Agreement as violative of any Regulatory Law, or if any statute, rule,
regulation, executive order, decree, injunction or administrative order is
enacted, entered, promulgated or enforced by a Governmental Entity that would
make the Mergers or the other transactions contemplated hereby illegal or would
otherwise prohibit or materially impair or delay the consummation of the Mergers
or the other transactions contemplated hereby, each of Phillips and Conoco shall
cooperate in all respects with each other and use its respective reasonable best
efforts, including, subject to Section 6.4(a), selling, holding separate or
otherwise disposing of or conducting their business in a specified manner, or
agreeing to sell, hold separate or otherwise dispose of or conduct their
business in a specified manner or permitting the sale, holding separate or other
disposition of, any assets of Phillips, Conoco or their respective Subsidiaries
or the
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conducting of their business in a specified manner, to contest and resist any
such action or proceeding and to have vacated, lifted, reversed or overturned
any decree, judgment, injunction or other order, whether temporary, preliminary
or permanent, that is in effect and that prohibits, prevents or restricts
consummation of the Mergers or the other transactions contemplated by this
Agreement and to have such statute, rule, regulation, executive order, decree,
injunction or administrative order repealed, rescinded or made inapplicable so
as to permit consummation of the transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, nothing
in this Section 6.4 shall limit either Phillips's or Conoco's right to terminate
this Agreement pursuant to Section 8.1(b), 8.1(c), 8.1(i) or 8.5 so long as such
party hereto has up to then complied with its obligations under this Section
6.4.
(d) Each party hereto and its respective Board of Directors shall, if any
state takeover statute or similar statute becomes applicable to this Agreement,
the Mergers or any other transactions contemplated hereby, take all action
reasonably necessary to ensure that the Mergers and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated hereby and otherwise to minimize the effect of such
statute or regulation on this Agreement, the Mergers and the other transactions
contemplated hereby.
6.5 Acquisition Proposals. (a) Each of Phillips and Conoco agrees that
neither it nor any of its Subsidiaries nor any of the officers and directors of
it or its Subsidiaries shall, and that it shall use its reasonable best efforts
to cause its and such Subsidiaries' employees, agents and representatives
(including any investment banker, attorney or accountant retained by it or any
of its Subsidiaries) not to, directly or indirectly, (i) initiate, solicit,
encourage or knowingly facilitate any inquiries or the making of any proposal or
offer with respect to, or a transaction to effect, a merger, reorganization,
share exchange, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving it, or any purchase or
sale of 20% or more of the consolidated assets (including stock of its
Subsidiaries) of it and its Subsidiaries, taken as a whole, or any purchase or
sale of, or tender or exchange offer for, its equity securities that, if
consummated, would result in any Person (or the stockholders of such Person)
beneficially owning securities representing 20% or more of its total voting
power (or of the surviving parent entity in such transaction) (any such
proposal, offer or transaction (other than a proposal or offer made by the other
party or an affiliate thereof), an "Acquisition Proposal"), (ii) have any
discussion with or provide any confidential information or data to any Person
relating to an Acquisition Proposal, or engage in any negotiations concerning an
Acquisition Proposal, or knowingly facilitate any effort or attempt to make or
implement an Acquisition Proposal, (iii) approve or recommend, or propose
publicly to approve or recommend, any Acquisition Proposal or (iv) approve or
recommend, or propose to approve or recommend, or execute or enter into, any
letter of intent, agreement in principle, merger agreement, acquisition
agreement, option agreement or other similar agreement or propose publicly or
agree to do any of the foregoing related to any Acquisition Proposal.
(b) Notwithstanding anything in this Agreement to the contrary, each of
Phillips and Conoco (and its respective Board of Directors) shall be permitted
to (i) comply with applicable law (including Rule 14d-9 and Rule 14e-2
promulgated under the Exchange Act), (ii) effect a Change in the Phillips
Recommendation or a Change in the Conoco Recommendation, as the case may be, or
(iii) engage in discussions or negotiations with, or provide any information to,
any Person in response to an unsolicited bona fide written Acquisition Proposal
by any such Person, if and only to the extent that, in any such case referred to
in clause (ii) or (iii) above, (A) in the case of Phillips, the vote at the
Phillips Stockholders Meeting on the adoption of this Agreement shall not have
been taken, or in the case of Conoco, the vote at the Conoco Stockholders
Meeting on the adoption of this Agreement shall not have been taken, (B) (I) in
the case of clause (ii) above, it has received an unsolicited bona fide written
Acquisition Proposal from a third party and its Board of Directors concludes in
good faith that such Acquisition Proposal constitutes a Superior Proposal and
(II) in the case of clause (iii) above, its Board of Directors concludes in good
faith that there is a reasonable likelihood that such Acquisition Proposal would
lead to a Superior Proposal, (C) its Board of Directors, after consultation with
outside counsel, determines in good faith that there is a reasonable probability
that the failure to take such action would be inconsistent with its fiduciary
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duties under applicable law, (D) prior to providing any information or data to
any Person in connection with an Acquisition Proposal by any such Person, its
Board of Directors receives from such Person an executed confidentiality
agreement having provisions that are at least as restrictive as the
Confidentiality Agreement, and (E) prior to providing any information or data to
any Person or entering into discussions or negotiations with any Person, it
notifies the other party promptly of such inquiries, proposals or offers
received by, any such information requested from, or any such discussions or
negotiations sought to be initiated or continued with, any of its
representatives indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any inquiries, proposals or
offers. Each of Phillips and Conoco agrees that it will promptly keep the other
party reasonably informed of the status and terms of any inquiries, proposals or
offers and the status and terms of any discussions or negotiations, including
the identity of the Person making such inquiry, proposal or offer. Each of
Phillips and Conoco agrees that it will, and will cause its officers, directors
and representatives to, immediately cease and cause to be terminated any
activities, discussions or negotiations existing as of the date of this
Agreement with any Person (other than the parties hereto) conducted heretofore
with respect to any Acquisition Proposal. Each of Phillips and Conoco agrees
that it will use reasonable best efforts to promptly inform its directors,
officers, key employees, agents and representatives of the obligations
undertaken in this Section 6.5. Nothing in this Section 6.5 shall (x) permit
Phillips or Conoco to terminate this Agreement (except as specifically provided
in Article VIII) or (y) affect or limit any other obligation of Phillips or
Conoco under this Agreement (including the provisions of Sections 6.1(b) and
6.1(c)). Except as required by law or its certificate of incorporation or
by-laws, neither Phillips nor Conoco shall submit any Acquisition Proposal other
than the Mergers and the transactions contemplated by this Agreement to a vote
of its stockholders.
6.6 Fees and Expenses. Subject to Section 8.2, whether or not the Mergers
are consummated, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party hereto incurring
such Expenses, except (i) Expenses incurred in connection with the filing,
printing and mailing of the Joint Proxy Statement/Prospectus and Form S-4 and
(ii) Expenses incurred in connection with any consultants that Phillips and
Conoco shall have agreed to retain to assist in obtaining the approvals and
clearances under the Antitrust Laws, which, in each case, shall be shared
equally by Phillips and Conoco. The parties hereto shall cooperate with each
other in preparing, executing and filing any Tax Returns.
6.7 Directors' and Officers' Indemnification and Insurance. (a) Following
the Effective Time, New Parent and the Conoco Surviving Corporation shall (i)
jointly and severally indemnify and hold harmless, and provide advancement of
expenses to, all past and present directors, officers and employees of Conoco
and its Subsidiaries (in all of their capacities) (A) to the same extent such
individuals are indemnified or have the right to advancement of expenses as of
the date of this Agreement by Conoco pursuant to the Restated Certificate of
Incorporation and By-Laws of Conoco and indemnification agreements, if any, in
existence on the date hereof with, or for the benefit of, any directors,
officers and employees of Conoco and its Subsidiaries and (B) without limitation
to subclause (A) above, to the fullest extent permitted by law, in each case for
acts or omissions occurring at or prior to the Effective Time (including for
acts or omissions occurring in connection with the approval of this Agreement
and the consummation of the transactions contemplated hereby), (ii) include and
cause to be maintained in effect in the Certificate of Incorporation and By-Laws
of the Conoco Surviving Corporation (or any successor to the Conoco Surviving
Corporation) for a period of six years after the Effective Time, provisions
regarding elimination of liability of directors, indemnification of officers,
directors and employees and advancement of expenses that are, in the aggregate,
no less advantageous to the intended beneficiaries than the corresponding
provisions contained in the current Restated Certificate of Incorporation and
By-Laws of Conoco and (iii) cause to be maintained for a period of six years
after the Effective Time the current policies of directors' and officers'
liability insurance and fiduciary liability insurance maintained by Conoco
(provided that New Parent (or any successor thereto) may substitute therefor one
or more policies of at least the same coverage and amounts containing terms and
conditions that are, in the aggregate, no less advantageous to the insured) with
respect to claims arising from facts or events that occurred on or before the
Effective Time; provided, however, that in no event shall the Conoco Surviving
Corporation be
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required to expend in any one year an amount in excess of 200% of the annual
premiums currently paid by Conoco for such insurance; and, provided further that
if the annual premiums of such insurance coverage exceed such amount, the Conoco
Surviving Corporation shall obtain a policy with the greatest coverage available
for a cost not exceeding such amount. Notwithstanding any foregoing provision to
the contrary, the treatment of past and present directors, officers, and
employees of Conoco and its Subsidiaries with respect to elimination of
liability, indemnification, advancement of expenses and liability insurance
under this Section 6.7(a) shall be, in the aggregate, no less advantageous to
the intended beneficiaries thereof than the corresponding treatment of the past
and present directors, officers and employees of Phillips and its Subsidiaries
under Section 6.7(b).
(b) Following the Effective Time, New Parent and the Phillips Surviving
Corporation shall (i) jointly and severally indemnify and hold harmless, and
provide advancement of expenses to, all past and present directors, officers and
employees of Phillips and its Subsidiaries (in all of their capacities) (A) to
the same extent such individuals are indemnified or have the right to
advancement of expenses as of the date of this Agreement by Phillips pursuant to
the Restated Certificate of Incorporation and By-Laws of Phillips and
indemnification agreements, if any, in existence on the date hereof with, or for
the benefit of, any directors, officers and employees of Phillips and its
Subsidiaries and (B) without limitation to subclause (A) above, to the fullest
extent permitted by law, in each case for acts or omissions occurring at or
prior to the Effective Time (including for acts or omissions occurring in
connection with the approval of this Agreement and the consummation of the
transactions contemplated hereby), (ii) include and cause to be maintained in
effect in the Certificate of Incorporation and By-Laws of the Phillips Surviving
Corporation (or any successor to the Phillips Surviving Corporation) for a
period of six years after the Effective Time, provisions regarding elimination
of liability of directors, indemnification of officers, directors and employees
and advancement of expenses that are, in the aggregate, no less advantageous to
the intended beneficiaries than the corresponding provisions contained in the
current Restated Certificate of Incorporation and By-Laws of Phillips and (iii)
cause to be maintained for a period of six years after the Effective Time the
current policies of directors' and officers' liability insurance and fiduciary
liability insurance maintained by Phillips (provided that New Parent (or any
successor thereto) may substitute therefor one or more policies of at least the
same coverage and amounts containing terms and conditions that are, in the
aggregate, no less advantageous to the insured) with respect to claims arising
from facts or events that occurred on or before the Effective Time; provided,
however, that in no event shall the Phillips Surviving Corporation be required
to expend in any one year an amount in excess of 200% of the annual premiums
currently paid by Phillips for such insurance; and, provided further that if the
annual premiums of such insurance coverage exceed such amount, the Phillips
Surviving Corporation shall obtain a policy with the greatest coverage available
for a cost not exceeding such amount. Notwithstanding any foregoing provision to
the contrary, the treatment of past and present directors, officers, and
employees of Phillips and its Subsidiaries with respect to elimination of
liability, indemnification, advancement of expenses and liability insurance
under this Section 6.7(b) shall be, in the aggregate, no less advantageous to
the intended beneficiaries thereof than the corresponding treatment of the past
and present directors, officers and employees of Conoco and its Subsidiaries
under Section 6.7(a).
(c) The obligations of New Parent, the Conoco Surviving Corporation and the
Phillips Surviving Corporation under this Section 6.7 shall not be terminated or
modified in such a manner as to adversely affect any indemnitee to whom this
Section 6.7 applies without the consent of such affected indemnitee (it being
expressly agreed that the indemnitees to whom this Section 6.7 applies shall be
third-party beneficiaries of this Section 6.7).
6.8 Employee Benefits. (a) From and after the Effective Time, the Conoco
Benefit Plans and the Phillips Benefit Plans in effect as of the date of this
Agreement and at the Effective Time shall remain in effect with respect to
employees and former employees of Conoco or Phillips and their Subsidiaries (the
"Newco Employees"), respectively, covered by such plans at the Effective Time,
until such time as New Parent shall otherwise determine, subject to applicable
laws and the terms of such plans. Prior to the Closing Date, Phillips and Conoco
shall cooperate in reviewing, evaluating and analyzing the Conoco Benefit Plans
and the Phillips Benefit Plans with a view towards developing appropriate new
Benefit Plans
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for Newco Employees. It is the intention of Phillips and Conoco, to the extent
permitted by applicable laws, to develop new Benefit Plans, as soon as
reasonably practicable after the Effective Time, which, among other things, (i)
treat similarly situated employees on a substantially equivalent basis, taking
into account all relevant factors, including duties, geographic location,
tenure, qualifications and abilities and (ii) do not discriminate between Newco
Employees who were covered by Conoco Benefit Plans, on the one hand, and those
covered by Phillips Benefit Plans on the other, at the Effective Time. It is the
current intention of Phillips and Conoco that, for one year following the
Effective Time, New Parent shall provide employee benefits under Benefit Plans
to Newco Employees that are substantially comparable in the aggregate to those
provided to such persons pursuant to the Benefit Plans of Conoco or Phillips (or
their Subsidiaries), respectively, in effect on the date hereof and at the
Effective Time; provided, that the foregoing shall not be interpreted to prevent
the harmonization of benefits provided to Tosco Employees (as that term is
defined in the Agreement and Plan of Merger, dated as of February 4, 2001, among
Phillips, Ping Acquisition Corp. and Tosco Corporation (the "Tosco Merger
Agreement") with the benefits provided to other Phillips employees as and when
permitted by Section 6.8 of the Tosco Merger Agreement. Nothing herein shall
prohibit any changes to the Conoco Benefit Plans or the Phillips Benefit Plans
that may be (i) required by applicable laws (including any applicable
qualification requirements of Section 401(a) of the Code), (ii) necessary as a
technical matter to reflect the transactions contemplated hereby or (iii)
required for New Parent to provide for or permit investment in its securities.
Nothing in this Section 6.8 shall be interpreted as preventing New Parent from
amending, modifying or terminating any Conoco Benefit Plan or Phillips Benefit
Plan or other contract, arrangement, commitment or understanding, in accordance
with its terms and applicable laws.
(b) With respect to any Benefit Plans in which any Newco Employees who are
employees of Conoco or Phillips (or their Subsidiaries) prior to the Effective
Time first become eligible to participate on or after the Effective Time, and in
which such Newco Employees did not participate prior to the Effective Time (the
"New Plans"), New Parent shall: (A) waive all pre-existing conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Newco Employees and their eligible dependents
under any New Plans in which such employees may be eligible to participate after
the Effective Time, except to the extent such pre-existing conditions,
exclusions or waiting periods would apply under the analogous Conoco Benefit
Plan or Phillips Benefit Plan, as the case may be; (B) provide each Newco
Employee and their eligible dependents with credit for any co-payments and
deductibles paid prior to the Effective Time under a Conoco Benefit Plan or
Phillips Benefit Plan (to the same extent that such credit was given under the
analogous Benefit Plan prior to the Effective Time) in satisfying any applicable
deductible or out-of-pocket requirements under any New Plans in which such
employees may be eligible to participate after the Effective Time; and (C)
recognize all service of the Newco Employees with Phillips and Conoco, and their
respective affiliates, for all purposes (including, purposes of eligibility to
participate, vesting credit, entitlement to benefits, and, except with respect
to defined benefit pension plans, benefit accrual) in any New Plan in which such
employees may be eligible to participate after the Effective Time, to the extent
such service is taken into account under the applicable New Plan; provided that
the foregoing shall not apply to the extent it would result in duplication of
benefits.
(c) The provisions in any Phillips Benefit Plan or Conoco Benefit Plan
providing for the issuance, transfer or grant of any capital stock of Phillips
or Conoco (including any stock-based compensation awards) shall be amended,
effective as of the Effective Time, to provide for, respectively, the issuance,
transfer or grant of capital stock of New Parent, and each of Phillips and
Conoco shall ensure that, following the Effective Time, no holder of a Phillips
Stock Option, Phillips SAR or Phillips Stock-Based Award and no holder of a
Conoco Stock Option, Conoco SAR or Conoco Stock-Based Award, or any participant
in any Phillips Stock Plan or Conoco Stock Plan or any other Phillips Benefit
Plan or Conoco Benefit Plan shall have any right thereunder to acquire any
capital stock (including any stock-based compensation awards) of Phillips or
Conoco. Without limitation of the generality of the foregoing, New Parent shall
adopt and assume each of the Phillips Stock Plans and the Conoco Stock Plans
effective as of the Effective Time.
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(d) Phillips shall take all steps necessary to amend the trust established
under the Grantor Trust Agreement, dated as of June 1, 1998, between Phillips
and Wachovia Bank, N.A. so that neither the execution of this Agreement nor the
consummation of any of the transactions contemplated hereby will be considered a
"Change of Control" as defined in such trust agreement.
(e) Conoco shall take all steps necessary to amend the trust established
under the Rabbi Trust Agreement, dated December 17, 1999, between Conoco and
U.S. Trust Company, National Association so that neither the execution of this
Agreement nor the consummation of any of the transactions contemplated hereby
will be considered a "Change of Control" as defined in such trust agreement.
6.9 Public Announcements. Phillips and Conoco shall, unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, consult with the other party before
issuing, and provide the other party the opportunity to review and comment upon,
any press release or, to the extent practical, otherwise making any public
statement with respect to this Agreement or the transactions contemplated
hereby. In addition to the foregoing, except as required by applicable law and
to the extent disclosed in or consistent with the Joint Proxy
Statement/Prospectus in accordance with the provisions of Section 6.1, neither
Phillips nor Conoco shall issue any press release or otherwise make any public
statement or disclosure concerning the other party or the other party's
business, financial condition or results of operations without the consent of
the other party, which consent shall not be unreasonably withheld or delayed.
6.10 Listing of Shares of New Parent Common Stock. New Parent shall use
its reasonable best efforts to cause the shares of New Parent Common Stock to be
issued in the Mergers and the shares of New Parent Common Stock to be reserved
for issuance upon exercise of the Conoco Stock Options, Conoco Converted
Options, Phillips Stock Options or Phillips Converted Options to be approved for
listing on the NYSE, subject to official notice of issuance, prior to the
Closing Date.
6.11 Rights Agreements. (a) The Board of Directors of Phillips shall take
all action to the extent necessary (including amending the Phillips Rights
Agreement) in order to render the Phillips Rights inapplicable to the Mergers
and the other transactions contemplated by this Agreement. Except in connection
with the foregoing sentence and to effect its obligations under this Agreement,
the Board of Directors of Phillips shall not, without the prior written consent
of Conoco, (i) amend the Phillips Rights Agreement or (ii) take any action with
respect to, or make any determination under, the Phillips Rights Agreement,
including a redemption of the Phillips Rights, in each case in order to
facilitate any Acquisition Proposal with respect to Phillips.
(b) The Board of Directors of Conoco shall take all action to the extent
necessary (including amending the Conoco Rights Agreement) in order to render
the Conoco Rights inapplicable to the Mergers and the other transactions
contemplated by this Agreement. Except in connection with the foregoing
sentence, the Board of Directors of Conoco shall not, without the prior written
consent of Phillips, (i) amend the Conoco Rights Agreement or (ii) take any
action with respect to, or make any determination under, the Conoco Rights
Agreement, including a redemption of the Conoco Rights, in each case in order to
facilitate any Acquisition Proposal with respect to Conoco.
(c) Prior to the Effective Time, New Parent shall adopt a stockholder
rights plan, in substantially the form set forth in Exhibit E (the "New Parent
Rights Agreement") with a Record Date (as defined in the New Parent Rights
Agreement) prior to the Effective Time.
6.12 Affiliates. (a) Promptly following the date of mailing of Joint Proxy
Statement/Prospectus, Conoco shall deliver to Phillips a letter identifying all
Persons who, in the judgment of Conoco, may be deemed at the time this Agreement
is submitted for Conoco Stockholders Approval, "affiliates" of Conoco for
purposes of Rule 145 under the Securities Act and applicable SEC rules and
regulations, and such list shall be updated as necessary to reflect changes from
the date thereof. Conoco shall use reasonable best efforts to cause each Person
identified on such list to deliver to New Parent not later than ten days prior
to the Effective Time, a written agreement substantially in the form attached as
Exhibit F hereto (an "Affiliate Agreement").
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(b) Promptly following the date of mailing of Joint Proxy
Statement/Prospectus, Phillips shall deliver to Conoco a letter identifying all
Persons who, in the judgment of Phillips, may be deemed at the time this
Agreement is submitted for Phillips Stockholders Approval, "affiliates" of
Phillips for purposes of Rule 145 under the Securities Act and applicable SEC
rules and regulations, and such list shall be updated as necessary to reflect
changes from the date thereof. Phillips shall use reasonable best efforts to
cause each Person identified on such list to deliver to New Parent not later
than ten days prior to the Effective Time, an Affiliate Agreement.
6.13 Section 16 Matters. Prior to the Effective Time, Phillips and Conoco
shall take all such steps as may be required to cause any dispositions of Conoco
Common Stock or Phillips Common Stock (including derivative securities with
respect to Conoco Common Stock or Phillips Common Stock) or acquisitions of New
Parent Common Stock (including derivative securities with respect to New Parent
Common Stock) resulting from the transactions contemplated by Article II or
Article III by each individual who is subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to Phillips and Conoco or will
become subject to such reporting requirements with respect to New Parent, to be
exempt under Rule 16b-3 promulgated under the Exchange Act.
6.14 Dividends. After the date of this Agreement, each of Phillips and
Conoco shall coordinate with the other the declaration of any dividends in
respect of Phillips Common Stock and Conoco Common Stock and the record dates
and payment dates relating thereto, it being the intention of the parties hereto
that holders of Conoco Common Stock or Phillips Common Stock shall not receive
two dividends, or fail to receive one dividend, for any quarter, including the
quarter in which the Effective Time occurs, with respect to their shares of
Conoco Common Stock and/or shares of Phillips Common Stock and any shares of New
Parent Common Stock any such holder receives in exchange therefor in the
Mergers.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Mergers. The
obligations of each of Phillips and Conoco to effect the Mergers are subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. (i) Conoco shall have obtained the Conoco
Stockholder Approval and (ii) Phillips shall have obtained the Phillips
Stockholder Approval.
(b) No Injunctions or Restraints; Illegality. No law shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other Governmental
Entity of competent jurisdiction shall be in effect, having the effect of
making the Mergers illegal or otherwise prohibiting consummation of the
Mergers.
(c) HSR Act; Other Approvals. (i) The waiting period (and any
extension thereof) applicable to the Mergers under the HSR Act shall have
been terminated or shall have expired, (ii) all approvals in connection
with the EC Merger Regulation and the Canadian Investment Regulations
(other than approvals under the Canadian Investment Regulations which by
their terms cannot be satisfied until after the Closing) shall have been
obtained and (iii) all other approvals required under the Antitrust Laws
shall have been obtained, except where the failure to obtain such other
approvals would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on New Parent after giving
effect to the Mergers.
(d) NYSE Listing. The shares of New Parent Common Stock to be issued
in the Mergers and such other shares of New Parent Common Stock to be
reserved for issuance in connection with the Mergers shall have been
approved for listing on the NYSE, subject to official notice of issuance.
(e) Effectiveness of the Form S-4. The Form S-4 shall have been
declared effective by the SEC under the Securities Act and no stop order
suspending the effectiveness of the Form S-4 shall
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have been issued by the SEC and no proceedings for that purpose shall have
been initiated or threatened by the SEC.
7.2 Additional Conditions to Obligations of Phillips. The obligations of
Phillips to effect the Mergers are subject to the satisfaction, or waiver by
Phillips, on or prior to the Closing Date, of the following additional
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Conoco set forth in this Agreement that are qualified as to
materiality or Material Adverse Effect shall be true and correct and those
material representations and warranties not so qualified shall be true and
correct in all material respects, as of the Closing Date as though made on
and as of the Closing Date (except to the extent that such representations
and warranties speak as of another date, in which case such representations
and warranties shall be true and correct as of such other date); and
Phillips shall have received a certificate of an executive officer of
Conoco to such effect.
(b) Performance of Obligations of Conoco. Conoco shall have performed
or complied with all agreements and covenants required to be performed by
it under this Agreement at or prior to the Closing Date that are qualified
as to materiality or Material Adverse Effect and shall have performed or
complied in all material respects with all other material agreements and
covenants required to be performed by it under this Agreement at or prior
to the Closing Date that are not so qualified; and Phillips shall have
received a certificate of an executive officer of Conoco to such effect.
(c) Tax Opinion. Phillips shall have received from Wachtell, Lipton,
Rosen & Katz, counsel to Phillips, a written opinion dated the Closing Date
to the effect that for U.S. federal income tax purposes the Phillips Merger
will constitute a "reorganization" within the meaning of Section 368(a) of
the Code and/or the Mergers, taken together, will constitute an exchange
described in Section 351 of the Code. In rendering such opinion, counsel to
Phillips shall be entitled to rely upon customary assumptions and
representations reasonably satisfactory to such counsel, including
representations set forth in certificates of officers of Phillips and
Conoco.
7.3 Additional Conditions to Obligations of Conoco. The obligations of
Conoco to effect the Mergers are subject to the satisfaction, or waiver by
Conoco, on or prior to the Closing Date, of the following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Phillips set forth in this Agreement that are qualified as to
materiality or Material Adverse Effect shall be true and correct and those
material representations and warranties not so qualified shall be true and
correct in all material respects, as of the Closing Date as though made on
and as of the Closing Date (except to the extent that such representations
and warranties speak as of another date, in which case such representations
and warranties shall be true and correct as of such other date); and Conoco
shall have received a certificate of an executive officer of Phillips to
such effect.
(b) Performance of Obligations of Phillips. Phillips shall have
performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that
are qualified as to materiality or Material Adverse Effect and shall have
performed or complied in all material respects with all other material
agreements and covenants required to be performed by it under this
Agreement at or prior to the Closing Date that are not so qualified; and
Conoco shall have received a certificate of an executive officer of
Phillips to such effect.
(c) Tax Opinion. Conoco shall have received from Cravath, Swaine &
Moore, counsel to Conoco, a written opinion dated the Closing Date to the
effect that for U.S. federal income tax purposes the Conoco Merger will
constitute a "reorganization" within the meaning of Section 368(a) of the
Code and/or the Mergers, taken together, will constitute an exchange
described in Section 351 of the Code. In rendering such opinion, counsel to
Conoco shall be entitled to rely upon customary assumptions and
representations reasonably satisfactory to such counsel, including
representations set forth in certificates of officers of Phillips and
Conoco.
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ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time and, except as specifically provided below, whether before or
after the Phillips Stockholders Meeting or the Conoco Stockholders Meeting:
(a) by mutual written consent of Phillips and Conoco;
(b) by either Phillips or Conoco, if the Effective Time shall not have
occurred on or before the date 18 months from the date of this Agreement
(the "Termination Date"); provided, however, that the right to terminate
this Agreement under this Section 8.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement
(including such party's obligations set forth in Section 6.4) has been the
primary cause of, or resulted in, the failure of the Effective Time to
occur on or before the Termination Date;
(c) by either Phillips or Conoco, if any Governmental Entity (i) shall
have issued an order, decree or ruling or taken any other action (which the
parties hereto shall have used their reasonable best efforts to resist,
resolve or lift, as applicable, in accordance with Section 6.4) permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and nonappealable or (ii) shall have failed
to issue an order, decree or ruling or to take any other action that is
necessary to fulfill the conditions set forth in Sections 7.1(c), 7.1(d) or
7.1(e), as applicable, and such denial of a request to issue such order,
decree, ruling or the failure to take such other action shall have become
final and nonappealable (which order, decree, ruling or other action the
parties hereto shall have used their reasonable best efforts to obtain, in
accordance with Section 6.4); provided, however, that the right to
terminate this Agreement under this Section 8.1(c) shall not be available
to any party hereto whose failure to comply with Section 6.4 has been the
primary cause of, or resulted in, such action or inaction;
(d) by either Phillips or Conoco, if either the Phillips Stockholder
Approval or the Conoco Stockholder Approval has not been obtained by reason
of the failure to obtain the required vote at the Phillips Stockholders
Meeting or the Conoco Stockholders Meeting, as applicable;
(e) by Phillips, if Conoco shall have (i) failed to make the Conoco
Recommendation or effected a Change in the Conoco Recommendation, whether
or not permitted by the terms hereof, or (ii) materially breached its
obligations under this Agreement by reason of a failure to call the Conoco
Stockholders Meeting in accordance with Section 6.1;
(f) by Conoco, if Phillips shall have (i) failed to make the Phillips
Recommendation or effected a Change in the Phillips Recommendation, whether
or not permitted by the terms hereof, or (ii) materially breached its
obligations under this Agreement by reason of a failure to call the
Phillips Stockholders Meeting in accordance with Section 6.1;
(g) by Phillips, if Conoco shall have breached or failed to perform
any of its representations, warranties, covenants or other agreements
contained in this Agreement, such that the conditions set forth in Sections
7.2(a) or 7.2(b) are not capable of being satisfied on or before the
Termination Date;
(h) by Conoco, if Phillips shall have breached or failed to perform
any of its representations, warranties, covenants or other agreements
contained in this Agreement, such that the conditions set forth in Section
7.3(a) or 7.3(b) are not capable of being satisfied on or before the
Termination Date; or
(i) by Phillips or Conoco, prior to receipt of Phillips Stockholder
Approval or Conoco Stockholder Approval, as appropriate, in accordance with
Section 8.5; provided, however, that it shall have complied with all
provisions thereof, including the notice provisions.
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8.2 Effect of Termination. (a) In the event of termination of this
Agreement by either Conoco or Phillips as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of any party hereto or their respective officers or
directors, except with respect to Section 4.1(r), Section 4.2(r), the second
sentence of Section 6.3, Section 6.6, this Section 8.2 and Article IX, which
provisions shall survive such termination; provided that, notwithstanding
anything to the contrary contained in this Agreement, neither Phillips nor
Conoco shall be relieved or released from any liabilities or damages arising out
of its willful and material breach of this Agreement.
(b) If (i) (A) (I) either Conoco or Phillips terminates this Agreement
pursuant to Section 8.1(d) (provided that the basis for such termination is the
failure to obtain the Conoco Stockholder Approval) or pursuant to Section 8.1(b)
without the vote at the Conoco Stockholders Meeting on the adoption of this
Agreement being taken or (II) Phillips terminates this Agreement pursuant to
Section 8.1(g), (B) at any time after the date of this Agreement an Acquisition
Proposal with respect to Conoco shall have been publicly announced or otherwise
communicated to the senior management, Board of Directors or stockholders of
Conoco and such Acquisition Proposal shall not have been publicly withdrawn more
than 30 days prior to the termination of this Agreement and (C) within twelve
months of such termination Conoco or any of its Subsidiaries enters into any
definitive agreement with respect to, or consummates, any Acquisition Proposal,
(ii) Phillips shall terminate this Agreement pursuant to Section 8.1(e), (iii)
Conoco shall terminate this Agreement pursuant to Section 8.1(i) or (iv) (A) (I)
either Conoco or Phillips terminates this Agreement pursuant to Section 8.1(d)
(provided that the basis for such termination is the failure to obtain the
Conoco Stockholder Approval) or pursuant to Section 8.1(b) without the vote at
the Conoco Stockholders Meeting on the adoption of this Agreement being taken or
(II) Phillips terminates this Agreement pursuant to Section 8.1(g), (B) at any
time after the date of this Agreement an Acquisition Proposal with respect to
Conoco shall have been publicly announced or otherwise communicated to the
senior management, Board of Directors or stockholders of Conoco and (C) within
twelve months of the termination of this Agreement, Conoco or any of its
Subsidiaries enters into a definitive agreement with respect to, or consummates,
an Acquisition Proposal with the Person (or an affiliate thereof) that publicly
announced or otherwise communicated the Acquisition Proposal referred to in
clause (B), then Conoco shall promptly, but in no event later than one Business
Day after the date of such termination (or in the case of clause (i) or (iv)
above, if later, the date Conoco or its Subsidiary enters into such agreement
with respect to, or consummates, such Acquisition Proposal), pay Phillips an
amount equal to the Conoco Termination Fee, by wire transfer of immediately
available funds.
(c) If (i) (A) (I) either Conoco or Phillips terminates this Agreement
pursuant to Section 8.1(d) (provided that the basis for such termination is the
failure to obtain the Phillips Stockholder Approval) or pursuant to Section
8.1(b) without the vote at the Phillips Stockholders Meeting on the adoption of
this Agreement being taken or (II) Conoco terminates this Agreement pursuant to
Section 8.1(h), (B) at any time after the date of this Agreement an Acquisition
Proposal with respect to Phillips shall have been publicly announced or
otherwise communicated to the senior management, Board of Directors or
stockholders of Phillips and such Acquisition Proposal shall not have been
publicly withdrawn more than 30 days prior to the termination of this Agreement
and (C) within twelve months of such termination Phillips or any of its
Subsidiaries enters into any definitive agreement with respect to, or
consummates, any Acquisition Proposal, (ii) Conoco shall terminate this
Agreement pursuant to Section 8.1(f), (iii) Phillips shall terminate this
Agreement pursuant to Section 8.1(i) or (iv) (A) (I) either Conoco or Phillips
terminates this Agreement pursuant to Section 8.1(d) (provided that the basis
for such termination is the failure to obtain the Phillips Stockholder Approval)
or pursuant to Section 8.1(b) without the vote at the Phillips Stockholders
Meeting on the adoption of this Agreement being taken or (II) Conoco terminates
this Agreement pursuant to Section 8.1(h), (B) at any time after the date of
this Agreement an Acquisition Proposal with respect to Phillips shall have been
publicly announced or otherwise communicated to the senior management, Board of
Directors or stockholders of Phillips and (C) within twelve months of the
termination of this Agreement, Phillips or any of its Subsidiaries enters into a
definitive agreement with respect to, or consummates, an Acquisition Proposal
with the Person (or an affiliate thereof) that publicly announced or otherwise
communicated the Acquisition Proposal referred to in clause (B), then Phillips
shall promptly, but in no event later than one Business Day after the date of
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such termination (or in the case of clause (i) or (iv) above, if later, the date
Phillips or its Subsidiary enters into such agreement with respect to, or
consummates, such Acquisition Proposal), pay Conoco an amount equal to the
Phillips Termination Fee, by wire transfer of immediately available funds.
(d) The parties hereto acknowledge that the agreements contained in this
Section 8.2 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, neither Phillips or Conoco would
enter into this Agreement; accordingly, if any party fails promptly to pay any
amount due pursuant to this Section 8.2, and, in order to obtain such payment,
the other party commences a suit that results in a judgment against such party
for the fee set forth in this Section 8.2, such party shall pay to the other
party its costs and expenses (including attorneys' fees and expenses) in
connection with such suit, together with interest on the amount of the fee at
the prime rate of Citibank, N.A. in effect on the date such payment was required
to be made, notwithstanding the provisions of Section 6.6. The parties hereto
agree that any remedy or amount payable pursuant to this Section 8.2 shall not
preclude any other remedy or amount payable hereunder, and shall not be an
exclusive remedy, for any willful and material breach of any representation,
warranty, covenant or agreement contained in this Agreement.
8.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after the Phillips Stockholder Approval or the Conoco Stockholder
Approval, but, after any such approval, no amendment shall be made which by law
or in accordance with the rules of any relevant stock exchange requires further
approval by such stockholders without such further approval. This Agreement may
not be amended, except by an instrument in writing signed on behalf of each of
the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party hereto. The
failure of any party hereto to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
8.5 Procedure for Termination. Each of Conoco or Phillips may terminate
this Agreement pursuant to Section 8.1(i) only if (i) the Conoco Board or
Phillips Board, as appropriate, has received a Superior Proposal, (ii) in light
of such Superior Proposal a majority of the disinterested directors of Conoco or
Phillips, as appropriate, has determined in good faith, after consultation with
outside counsel, that it is necessary for it to withdraw or modify its approval
or recommendation of this Agreement or the Mergers in order to comply with its
fiduciary duty under applicable law, (iii) Conoco or Phillips, as appropriate,
has notified the other party in writing of the determinations described in
clause (ii) above, (iv) at least five business days following receipt by the
other party of the notice referred to in clause (iii) above, and taking into
account any revised proposal made by Conoco or Phillips, as appropriate, since
receipt of the notice referred to in clause (iii) above, such Superior Proposal
remains a Superior Proposal and a majority of the disinterested directors of
Conoco or Phillips, as appropriate, has again made the determinations referred
to in clause (ii) above, (v) Conoco or Phillips, as appropriate, is in
compliance with Section 6.5 and (vi) Conoco or Phillips, as appropriate, is not
at such time entitled to terminate this Agreement pursuant to Section 8.1(h) or
(g), as appropriate.
ARTICLE IX
GENERAL PROVISIONS
9.1 Non-Survival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants, agreements and other provisions, shall survive the Effective Time,
except for those covenants,
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agreements and other provisions contained herein that by their terms apply or
are to be performed in whole or in part after the Effective Time and this
Article IX.
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given when received. All notices hereunder
shall be delivered as set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice:
(i) if to Phillips:
Phillips Petroleum Company
Phillips Building
Fourth and Keeler
Bartlesville, Oklahoma 74004
Attention: General Counsel
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
(ii) if to Conoco to:
Conoco Inc.
600 North Dairy Ashford Road
Houston, Texas 77079
Attention: General Counsel
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attention: Richard Hall, Esq.
9.3 Interpretation. When a reference is made in this Agreement to
Articles, Sections, Exhibits or Schedules, such reference shall be to an Article
or Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. 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. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". In addition, each Section of this Agreement is
qualified by the matters set forth in the related Section of the Phillips
Disclosure Schedule and the Conoco Disclosure Schedule, as the case may be, and
by such matters set forth any place else in this Agreement or in the Phillips
Disclosure Schedule or the Conoco Disclosure Schedule the applicability of such
qualification to the Section of this Agreement is reasonably apparent.
9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties hereto need not sign the same counterpart.
9.5 Entire Agreement; No Third Party Beneficiaries. (a) This Agreement,
the Confidentiality Agreement and the Exhibits and disclosure schedules and the
other agreements and instruments of the parties hereto delivered in connection
herewith constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties hereto with respect to
the subject matter hereof.
A-46
(b) This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, other than
Section 6.7 (which is intended to be for the benefit of the Persons covered
thereby) and Sections 3.4 and 3.5 (which are intended to be for the benefit of
the holders of Conoco Stock Options, Conoco SARs and Conoco Stock-Based Awards
and Phillips Stock Options, Phillips SARs and Phillips Stock-Based Awards).
9.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware (without giving effect to
choice of law principles thereof).
9.7 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party hereto. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties hereto as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
9.8 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other parties hereto, and any attempt to make any such assignment
without such consent shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties hereto and their respective successors and assigns.
9.9 Submission to Jurisdiction; Waivers. Each of Phillips and Conoco
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by the other party hereto or its successors or assigns may be brought
and determined in the Chancery or other Courts of the State of Delaware, and
each of Phillips and Conoco hereby irrevocably submits with regard to any such
action or proceeding for itself and in respect to its property, generally and
unconditionally, to the exclusive jurisdiction of the aforesaid courts and to
accept service of process in any manner permitted by such courts. Each of
Phillips and Conoco hereby irrevocably waives, and agrees not to assert, by way
of motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, (a) any claim that it is not personally subject
to the jurisdiction of the above-named courts for any reason other than the
failure to lawfully serve process, (b) that it or its property is exempt or
immune from jurisdiction of any such court or from any legal process commenced
in such courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
(c) to the fullest extent permitted by applicable law, that (i) the suit, action
or proceeding in any such court is brought in an inconvenient forum, (ii) the
venue of such suit, action or proceeding is improper and (iii) this Agreement,
or the subject matter hereof, may not be enforced in or by such courts and (d)
any right to a trial by jury.
9.10 Enforcement. The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties hereto shall be entitled to specific performance of the terms
hereof, this being in addition to any other remedy to which they are entitled at
law or in equity.
A-47
IN WITNESS WHEREOF, Phillips Petroleum Company, CorvettePorsche Corp.,
Porsche Merger Corp., Corvette Merger Corp. and Conoco Inc. have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
PHILLIPS PETROLEUM COMPANY
By: /s/ J.J. MULVA
------------------------------------
Name: J. J. Mulva
Title: Chairman and Chief
Executive Officer
CORVETTEPORSCHE CORP.
By: /s/ RICK A. HARRINGTON
------------------------------------
Name: Rick A. Harrington
Title: Chairman
PORSCHE MERGER CORP.
By: /s/ J. BRYAN WHITWORTH
------------------------------------
Name: J. Bryan Whitworth
Title: Chairman
CORVETTE MERGER CORP.
By: /s/ RICK A. HARRINGTON
------------------------------------
Name: Rick A. Harrington
Title: Chairman
CONOCO INC.
By: /s/ ARCHIE W. DUNHAM
------------------------------------
Name: Archie W. Dunham
Title: Chairman, President and
Chief Executive Officer
A-48
ANNEX B
FORM OF
RESTATED CERTIFICATE OF INCORPORATION
OF
NEW PARENT
FIRST: The name of the Corporation is ConocoPhillips (hereinafter the
"Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the
"DGCL").
FOURTH: A. Authorized Shares. The total number of shares of stock that the
Corporation shall have authority to issue is 3,000,000,000 (three billion) of
which (i) 2,500,000,000 (two billion, five hundred million) shares shall be
shares of Common Stock, par value $.01 per share (the "Common Stock"), and (ii)
500,000,000 (five hundred million) shares shall be shares of Preferred Stock,
par value $.01 per share (the "Preferred Stock"). The number of authorized
shares of any of the Preferred Stock or the Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority in voting power of the stock of
the Corporation entitled to vote thereon irrespective of the provisions of
Section 242(b)(2) of the DGCL (or any successor provision thereto), and no vote
of the holders of any of the Preferred Stock or the Common Stock voting
separately as a class shall be required therefor.
B. Preferred Stock. The Board of Directors is hereby expressly authorized,
by resolution or resolutions, to provide, out of the unissued shares of
Preferred Stock, for series of Preferred Stock and, with respect to each such
series, to fix the number of shares constituting such series and the designation
of such series, and the voting powers, preferences and relative, participating,
optional or other special rights, if any, and any qualifications, limitations or
restrictions thereof, of the shares of such series. The voting powers,
preferences and relative, participating, optional and other special rights, if
any, of each series of Preferred Stock, and any qualifications, limitations or
restrictions thereof, if any, may differ from those of any and all other series
at any time outstanding.
C. Common Stock.
(1) Subject to the rights of the holders of Preferred Stock, and subject to
any other provisions of this Restated Certificate of Incorporation ("Certificate
of Incorporation"), holders of Common Stock shall be entitled to receive such
dividends and other distributions in cash, stock of any corporation or property
of the Corporation as may be declared thereon by the Board of Directors from
time to time out of assets or funds of the Corporation legally available
therefor and shall share equally on a per share basis in all such dividends and
other distributions.
(2)(a) At every meeting of the stockholders of the Corporation every holder
of Common Stock shall be entitled to one vote in person or by proxy for each
share of Common Stock standing in his or her name on the transfer books of the
Corporation in connection with the election of directors and all other matters
submitted to a vote of stockholders; provided, however, that, except as
otherwise required by law, holders of Common Stock, as such, shall not be
entitled to vote on any amendment to this Certificate of Incorporation
(including any Certificate of Designation relating to any series of Preferred
Stock) that relates solely to the terms of one or more outstanding series of
Preferred Stock if the holders of such affected series are entitled, either
separately or together with the holders of one or more other such series,
B-1
to vote thereon pursuant to this Certificate of Incorporation (including any
Certificate of Designation relating to any series of Preferred Stock) or
pursuant to the DGCL.
(b) The affirmative vote of shares representing not less than 80% of the
votes entitled to be cast by the Voting Stock shall be required to alter, amend
or adopt any provision inconsistent with or repeal Article FIFTH, Article
SEVENTH or Article NINTH or any provision of this paragraph (C)(2)(b), and the
affirmative vote of shares representing not less than 80% of the votes entitled
to be cast by the Voting Stock, acting on the unanimous recommendation of the
entire Board of Directors, shall be required to alter, amend or adopt any
provision inconsistent with or repeal Article FIRST. "Voting Stock" shall mean
the then outstanding shares of capital stock entitled to vote generally on the
election of directors and shall exclude any class or series of capital stock
only entitled to vote in the event of dividend arrearages thereon, whether or
not at the time of determination there are any such dividend arrearages.
(c) Every reference in this Certificate of Incorporation to a majority or
other proportion of shares, or a majority or other proportion of the votes of
shares, of Voting Stock shall refer to such majority or other proportion of the
votes to which such shares of Voting Stock are entitled.
(d) At any meeting of stockholders, the presence in person or by proxy of
the holders of shares of capital stock entitled to cast a majority of all the
votes which could be cast at such meeting by the holders of all of the
outstanding shares of capital stock of the Corporation entitled to vote at such
meeting shall constitute a quorum.
(3) In the event of any dissolution, liquidation or winding up of the
affairs of the Corporation, whether voluntary or involuntary, after payment in
full of the amounts required to be paid to the holders of Preferred Stock, the
remaining assets and funds of the Corporation shall be distributed pro rata to
the holders of Common Stock. For purposes of this paragraph (C)(3), the
voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
assets of the Corporation or a consolidation or merger of the Corporation with
one or more other corporations or other entities (whether or not the Corporation
is the corporation surviving such consolidation or merger) shall not be deemed
to be a liquidation, dissolution or winding up, voluntary or involuntary.
(4)(a) All rights to vote and all voting power (including, without
limitation thereto, the right to elect directors) shall be vested exclusively in
the holders of Common Stock, except as otherwise expressly provided in this
Certificate of Incorporation, in a Certificate of Designation with respect to
any Preferred Stock or as otherwise expressly required by applicable law.
(b) No stockholder shall be entitled to exercise any right of cumulative
voting.
FIFTH: A. The business and affairs of the Corporation shall be managed by
or under the direction of a Board of Directors. The total number of directors
constituting the entire Board shall be not less than six nor more than twenty as
determined from time to time by resolution adopted by affirmative vote of a
majority of the entire Board of Directors. The directors shall be divided into
three classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board of Directors. Each director shall serve
for a term ending on the date of the third annual meeting following the annual
meeting at which such director was elected and until his successor shall be
elected and shall qualify, subject however, to prior death, resignation or
removal from office. Notwithstanding the immediately preceding sentence: the
Class I directors in office immediately following the Merger Effective Time
shall have an initial term ending on the date of the first annual meeting held
after the date on which the mergers provided for in the Agreement and Plan of
Merger dated as of November 18, 2001, by and among Phillips Petroleum Company,
the Corporation, Porsche Merger Corp., Corvette Merger Corp. and Conoco Inc.
became effective (the "Merger Effective Time"); the Class II directors in office
immediately following the Merger Effective Time shall have an initial term
ending on the date of the second annual meeting held after the Merger Effective
Time; and the Class III directors in office immediately following the Merger
Effective Time shall have an initial term ending on the date of the third annual
meeting held after the Merger
B-2
Effective Time. If the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible, and any additional director of any
class elected to fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of directors shorten the
term of any incumbent director. A director shall hold office until the annual
meeting at which his term expires and until his successor shall be elected and
shall qualify, subject, however, to prior death, resignation or removal from
office. Unless otherwise required by law, any vacancy on the Board of Directors
may be filled only by a majority of the directors then in office, though less
than a quorum, or by a sole remaining director, or by stockholders if such
vacancy was caused by the action of stockholders (in which event such vacancy
may not be filled by the directors or a majority thereof).
Any director elected to fill a vacancy not resulting from an increase in
the number of directors shall have the same remaining term as that of his
predecessor.
Notwithstanding the foregoing, whenever the holders of outstanding shares
of one or more series of Preferred Stock are entitled to elect a director or
directors of the Corporation separately as a series or together with one or more
other series pursuant to a resolution of the Board of Directors providing for
the establishment of such series, such director or directors shall not be
classified pursuant to or be subject to the foregoing provisions of this Article
FIFTH, and the election, term of office, removal and filling of vacancies in
respect of such director or directors shall be governed by the resolution of the
Board of Directors so providing for the establishment of such series and by
applicable law.
B. Any director or the entire Board of Directors may only be removed for
cause, such removal to be by the affirmative vote of the shares representing at
least a majority of the votes entitled to be cast by the Voting Stock. Unless
the Board of Directors has made a determination that removal is in the best
interests of the Corporation (in which case the following definition shall not
apply), "cause" for removal of a director shall be deemed to exist only if (i)
the director whose removal is proposed has been convicted, or when a director is
granted immunity to testify when another has been convicted, of a felony by a
court of competent jurisdiction and such conviction is no longer subject to
direct appeal; (ii) such director has been found by the affirmative vote of a
majority of the Directors then in office at any regular or special meeting of
the Board of Directors called for that purpose, or by a court of competent
jurisdiction to have been guilty of willful misconduct in the performance of his
duties to the Corporation in a matter of substantial importance to the
Corporation; or (iii) such director has been adjudicated by a court of competent
jurisdiction to be mentally incompetent, which mental incompetency directly
affects his ability as a director of the Corporation. Notwithstanding the
foregoing, whenever holders of outstanding shares of one or more series of
Preferred Stock are entitled to elect directors of the Corporation pursuant to
the provisions applicable in the case of arrearages in the payment of dividends
or other defaults contained in the resolution or resolutions of the Board of
Directors providing for the establishment of any such series, any such director
of the Corporation so elected may be removed in accordance with the provisions
of such resolution or resolutions.
C. There shall be no limitation on the qualification of any person to be a
director or on the ability of any director to vote on any matter brought before
the Board or any Board committee, except (i) as required by applicable law, (ii)
as set forth in this Certificate of Incorporation or (iii) any By-Law adopted by
the Board of Directors with respect to the eligibility for election as a
director upon reaching a specified age or, in the case of employee directors,
with respect to the qualification for continuing service of directors upon
ceasing employment from the Corporation.
D. Except as (i) required by applicable law or (ii) set forth in this
Certificate of Incorporation, at all meetings of the Board of Directors, a
majority of the entire Board of Directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors.
B-3
E. The following provisions are inserted for further definition, limitation
and regulation of the powers of the Corporation and of its directors and
stockholders:
(1) The By-Laws of the Corporation may be adopted, altered, amended or
repealed (i) by the affirmative vote of the shares representing a majority
of the votes entitled to be cast by the Voting Stock; provided, however,
that any proposed alteration, amendment or repeal of, or the adoption of
any By-Law inconsistent with, Section 3, 7, 10 or 11 of Article II of the
By-Laws or Section 1, 2 or 11 of Article III of the By-Laws or Section 4, 5
or 12 of Article IV of the By-Laws (in each case, as in effect on the date
hereof), or the alteration, amendment or the repeal of, or the adoption of
any provision inconsistent with this sentence, by the stockholders shall
require the affirmative vote of shares representing not less than 80% of
the votes entitled to be cast by the Voting Stock; and provided, further,
however, that in the case of any such stockholder action at a special
meeting of stockholders, notice of the proposed alteration, amendment,
repeal or adoption of the new By-Law or By-Laws must be contained in the
notice of such special meeting, or (ii) by action of the Board of Directors
of the Corporation except as otherwise specified in Section 12 of Article
IV of the By-Laws.
(2) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the DGCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the directors
which would have been valid if such By-Laws had not been adopted.
SIXTH: Meetings of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the DGCL) outside the State of Delaware
at such place or places as may be designated from time to time by the Board of
Directors or in the By-Laws of the Corporation.
SEVENTH: Any action required or permitted to be taken by the stockholders
of the Corporation may be effected only at a duly called annual or special
meeting of such holders and may not be effected by a consent in writing by such
holders in lieu of such a meeting. Except as otherwise required by law, special
meetings of stockholders of the Corporation for any purpose or purposes may be
called only by the Board of Directors pursuant to a resolution stating the
purpose or purposes thereof or by the Chairman of the Board of Directors of the
Corporation and any power of stockholders to call a special meeting is
specifically denied. No business other than that stated in the notice of such
meeting shall be transacted at any special meeting.
EIGHTH: A. Subject to Section 253 of the DGCL, in addition to any
affirmative vote that may be required by law, this Certificate of Incorporation
or the By-Laws of the Corporation, and except as otherwise expressly provided in
paragraph (B) of this Article EIGHTH:
(i) any merger or consolidation of the Corporation or any subsidiary
of the Corporation with or into (A) any Related Person or (B) any Person
that is an Affiliate of a Related Person; or
(ii) any sale, lease, exchange, transfer or other disposition by the
Corporation to any Related Person or any Affiliate of any Related Person of
all or substantially all of the assets of the Corporation; or
(iii) Any reclassification of securities (including any reverse stock
split) or recapitalization of the Corporation for which the approval of
shareholders of the Corporation is otherwise required, or any merger,
consolidation or share exchange of the Corporation with any of its
subsidiaries for which the approval of shareholders of the Corporation is
otherwise required, which has the effect, either directly or indirectly, of
increasing by more than 1% the proportionate share of the Common Stock or
Voting Stock Beneficially Owned by any Related Person or any Affiliate of
any Related Person; or
(iv) any dissolution of the Corporation voluntarily caused or proposed
by or on behalf of a Related Person or any Affiliate of any Related Person,
shall require the affirmative vote of shares
B-4
representing (x) not less than 80% of the votes entitled to be cast by the
Voting Stock and (y) not less than 66 2/3% of the votes entitled to be cast
by the Voting Stock not Beneficially Owned, directly or indirectly, by any
Related Person, with respect to such Business Combination. Such affirmative
vote shall be required, notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law, elsewhere
in this Certificate of Incorporation, in the By-Laws of the Corporation or
in any agreement with any national securities exchange or otherwise.
B. The provisions of paragraph (A) shall not be applicable to any
particular Business Combination, and such Business Combination shall require
only such affirmative vote as is required by law, the By-Laws of the Corporation
and any other provision of the Certificate of Incorporation, if all of the
conditions specified in either of the following paragraphs (B)(i) and (B)(ii)
are met:
(i) the cash, property, securities or other consideration to be
received per share by each holder of any outstanding class or series of
Voting Stock in the Business Combination is, with respect to each such
class or series, either (A) the same in form and amount per share as the
highest consideration paid by the Related Person in a tender or exchange
offer in which such Related Person acquired at least 50% of the outstanding
stock of such class or series of Voting Stock and which was consummated not
more than one year prior to the date of such Business Combination, or if
earlier, the entering into of a definitive agreement providing therefor or
(B) not less in amount (as to cash) or Fair Market Value (as to
consideration other than cash) as of the date of the determination of the
Highest Per Share Price (as to property, securities or other consideration)
than the Highest Per Share Price applicable to such class or series of
shares of Voting Stock; provided that, in the event of any Business
Combination in which the Corporation survives, any shares retained by the
holders thereof shall constitute consideration other than cash for purposes
of this paragraph (B)(i); or
(ii) a majority of the Continuing Directors shall have expressly
approved such Business Combination either in advance of or subsequent to
such Related Person's having become a Related Person.
In the case of any Business Combination with a Related Person to which
paragraph (B)(ii) above does not apply, a majority of the Continuing Directors,
promptly following the request of a Related Person, shall determine the Highest
Per Share Price for each class or series of stock of the Corporation. Such
determination shall be announced not less than five days prior to the meeting at
which holders of shares vote on the Business Combination. Such determination
shall be final, unless the Related Person becomes the Beneficial Owner of
additional shares of Common Stock after the date of the earlier determination,
in which case the Continuing Directors shall make a new determination as to the
Highest Per Share Price for each class or series of shares prior to the
consummation of the Business Combination.
A Related Person shall be deemed to have acquired a share at the time that
such Related Person became the Beneficial Owner thereof. With respect to shares
owned by Affiliates, Associates and other Persons whose ownership is
attributable to a Related Person, if the price paid by such Related Person for
such shares is not determinable by a majority of the Continuing Directors, the
price so paid shall be deemed to be the higher of (i) the price paid upon the
acquisition thereof by the Affiliate, Associate or other Person or (ii) the
Share Price of the shares in question at the time when the Related Person became
the Beneficial Owner thereof.
C. For purposes of this Article EIGHTH and notwithstanding anything to the
contrary set forth in this Certificate of Incorporation:
(i) The term "Affiliate," used to indicate a relationship to a
specified Person, shall mean a Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with, such specified Person.
(ii) The term "Associate," used to indicate a relationship with a
specified Person, shall mean (A) any corporation, partnership, limited
liability company, association, joint venture or other organization (other
than the Corporation or any wholly owned subsidiary of the Corporation) of
which such specified Person is an officer or partner or is, directly or
indirectly, the Beneficial Owner of 10%
B-5
or more of any class of equity securities; (B) any trust or other estate in
which such specified Person has a beneficial interest of 10% or more or as
to which such specified Person serves as trustee or in a similar fiduciary
capacity; (C) any Person who is a director or officer of such specified
Person or any of its parents or subsidiaries (other than the Corporation or
any wholly owned subsidiary of the Corporation); and (D) any relative or
spouse of such specified Person or of any of its Associates, or any
relative of any such spouse, who has the same home as such specified Person
or such Associate.
(iii) A Person shall be a "Beneficial Owner" of any stock (A) which
such Person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; or (B) which such Person or any of its Affiliates
or Associates has, directly or indirectly, (1) the right to acquire
(whether such right is exercisable immediately or only after the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (2) the right to vote pursuant to any agreement, arrangement
or understanding; or (C) which is beneficially owned, directly or
indirectly, by any other Person, with which such Person or any of its
Affiliates or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of such stock;
or (D) of which such Person would be the Beneficial Owner pursuant to the
terms of Rule 13d-3 of the Exchange Act, as in effect on September 30,
1998. Stock shall be deemed "Beneficially Owned" by the Beneficial Owner or
Owners thereof.
(iv) The term "Business Combination" shall mean any transaction which
is referred to in any one or more of clauses (i) through (iv) of paragraph
(A) of this Article EIGHTH.
(v) The term "Continuing Director" shall mean, with respect to a
Business Combination with a Related Person, any director of the Corporation
who is unaffiliated with the Related Person and was a director prior to the
time that the Related Person became a Related Person, and any successor of
a Continuing Director who is unaffiliated with the Related Person and is
recommended or nominated to succeed a Continuing Director by a majority of
the Continuing Directors. Without limiting the generality of the foregoing,
a director shall be deemed to be affiliated with a Related Person if such
director (A) is an officer, director, employee or general partner of such
Related Person; (B) is an Affiliate or Associate of such Related Person;
(C) is a relative or spouse of such Related Person or of any such officer,
director, general partner, Affiliate or Associate; (D) performs services,
or is a member, employee, greater than 5% stockholder or other equity owner
of any organization (other than the Corporation and its subsidiaries) which
performs services for such Related Person or any Affiliate of such Related
Person, or is a relative or spouse of any such Person; or (E) was nominated
for election as a director by such Related Person.
(vi) The term "Fair Market Value" shall mean, in the case of
securities, the average of the closing sales prices during the 30-day
period immediately preceding the date in question of such security on the
principal United States securities exchange registered under the Exchange
Act on which such security is listed (or the composite tape therefor) or,
if such securities are not listed on any such exchange, the average of the
last reported sales price (if so reported) or the closing bid quotations
with respect to such security during the 30-day period preceding the date
in question on the New York Stock Exchange or, if no such quotations are
available, the fair market value on the date in question of such security
as determined in good faith by a majority of the Continuing Directors; and
in the case of property other than cash or securities, the fair market
value of such property on the date in question as determined in good faith
by a majority of the Continuing Directors.
(vii) The term "Highest Per Share Price" shall mean, with respect to a
Related Person, the highest price that can be determined to have been paid
or agreed to be paid for any share or shares of any class or series of
Voting Stock by such Related Person in a transaction that either (1)
resulted in such Related Person's Beneficially Owning 15% or more of such
class or series of Voting Stock outstanding or (2) was effected at a time
when such Related Person Beneficially Owned 15% or more of such class or
series of Voting Stock outstanding, in either case occurring not more than
one year
B-6
prior to the date of the Business Combination. In determining the Highest
Per Share Price, appropriate adjustment will be made to take into account
(w) distributions paid or payable in stock, (x) subdivisions of outstanding
stock, (y) combinations of shares of stock into a smaller number of shares
and (z) similar events.
(viii) The term "Person" shall mean any individual, corporation,
limited liability company, association, partnership, joint venture, trust,
estate or other entity or organization.
(ix) The term "Related Person" shall mean any Person (other than the
Corporation or any subsidiary of the Corporation and other than any profit
sharing, employee ownership or other employee benefit plan of the
Corporation or any subsidiary of the corporation or any trustee of or
fiduciary with respect to any such plan when acting in such capacity) who
or which (A) is the Beneficial Owner of 15% or more of any class or series
of Voting Stock outstanding; or (B) is an Affiliate of the Corporation and
at any time within the two-year period immediately prior to the date in
question was the Beneficial Owner of 15% or more of any class or series of
Voting Stock outstanding. For the purposes of determining whether a Person
is a Related Person, the number of shares of any class or series deemed to
be outstanding shall include shares of such class or series of which the
Person is deemed the Beneficial Owner, but shall not include any other
shares which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options,
otherwise.
D. Nothing contained in this Article EIGHTH shall be construed to relieve
any Related Person from any fiduciary obligation imposed by law.
E. Notwithstanding any other provision of this Certificate of
Incorporation (and notwithstanding that a lesser percentage may be specified by
law), the affirmative vote of shares representing (x) not less than 80% of the
votes entitled to be cast by the Voting Stock voting together as a single class
and (y) not less than 66 2/3% of the votes entitled to be cast by the Voting
Stock not Beneficially Owned, directly or indirectly, by any Related Person
shall be required to amend or repeal, or adopt any provisions inconsistent with,
this Article EIGHTH.
NINTH: To the fullest extent that the DGCL or any other law of the State of
Delaware as it exists or as it may hereafter be amended permits the limitation
or elimination of the liability of directors, no director of the Corporation
shall be liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director. No amendment to or repeal of this
Article NINTH shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal.
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ANNEX C
FORM OF
BY-LAWS
OF
NEW PARENT
(HEREINAFTER CALLED THE "CORPORATION")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. Meetings of the stockholders for
the election of directors or for any other purpose shall be held at such time
and place, either within or without the State of Delaware, as shall be
designated from time to time by the Board of Directors. Subject to applicable
law, the Board of Directors may elect to postpone any previously scheduled
meeting of stockholders.
Section 2. Annual Meetings. The annual meetings of stockholders for the
election of directors shall be held on such date and at such time as shall be
designated from time to time by the Board of Directors. Any other proper
business may be transacted at the annual meeting of stockholders.
Section 3. Special Meetings. Unless otherwise required by law or by the
certificate of incorporation of the Corporation, as amended and restated from
time to time (including any certificates of designation with respect to any
Preferred Stock, the "Certificate of Incorporation"), special meetings of
stockholders, for any purpose or purposes, may only be called by the Board of
Directors pursuant to a resolution stating the purpose or purposes thereof or by
the Chairman, if there be one, and any power of stockholders to call a special
meeting is specifically denied. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called shall be given not less than ten (10) nor more than sixty (60)
days before the date of the meeting to each stockholder entitled to vote at such
meeting. Only such business shall be conducted at a special meeting as shall be
specified in the notice of meeting (or any supplement thereto).
Section 4. Adjournments. Any meeting of the stockholders may be adjourned
by the chairman of the meeting or by the stockholders or their proxies in
attendance, from time to time, to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty (30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 5. Quorum. Unless otherwise required by law or the Certificate of
Incorporation, the presence in person or by proxy of the holders of shares of
capital stock entitled to cast a majority of the votes which could be cast at
such meeting by the holders of all the outstanding shares of capital stock
entitled to vote at such meeting shall constitute a quorum at all meetings of
the stockholders for the
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transaction of business. A quorum, once established, shall not be broken by the
withdrawal of enough votes to leave less than a quorum. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, in the manner
provided in Section 4, until a quorum shall be present or represented.
Section 6. Voting. Unless otherwise provided by law, the Certificate of
Incorporation or these By-Laws or any rule or regulation of any stock exchange
or regulatory body applicable to the Corporation, any question brought before
any meeting of stockholders, other than the election of directors, shall be
decided by the affirmative vote of the holders of a majority of the votes of
shares of capital stock present in person or represented by proxy at the meeting
and entitled to vote on the question, voting as a single class. Every reference
in these By-Laws to a majority or other proportion of shares, or a majority or
other proportion of the votes of shares, of capital stock shall refer to such
majority or other proportion of the votes to which such shares of capital stock
are entitled as provided in the Certificate of Incorporation. Votes of
stockholders entitled to vote at a meeting of stockholders may be cast in person
or by proxy but no proxy shall be voted on or after three years from its date,
unless such proxy provides for a longer period. The Board of Directors, in its
discretion, or the officer of the Corporation presiding at a meeting of
stockholders, in such officer's discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
Section 7. No Action by Consent of Stockholders in Lieu of Meeting. Any
action required or permitted to be taken by the stockholders of the Corporation
may be effected only at a duly called annual or special meeting of such holders
and may not be effected by a consent in writing by such holders in lieu of such
a meeting.
Section 8. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder for any purpose germane to the meeting for a
period of at least ten (10) days prior to the meeting, as required by applicable
law. Subject to applicable law, the list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present.
Section 9. Stock Ledger. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 8 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 10. Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors of the Corporation, except as may be otherwise provided in the
Certificate of Incorporation of the Corporation with respect to the right of
holders of Preferred Stock of the Corporation to nominate and elect a specified
number of directors in certain circumstances. Nominations of persons for
election to the Board of Directors may be made at any annual meeting of
stockholders (a) by or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (b) by any stockholder of the Corporation (i)
who is a stockholder of record on the date of the giving of the notice provided
for in this Section 10 and on the record date for the determination of
stockholders entitled to vote at such annual meeting and (ii) who complies with
the notice procedures set forth in this Section 10.
In addition to any other applicable requirements, for a nomination to be
made by a stockholder, such stockholder must have given timely notice thereof in
proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than ninety (90) days nor more than one hundred and twenty (120) days prior
to the anniversary date of the immediately preceding annual meeting
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of stockholders; provided, however, that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the later of (i) ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of stockholders and
(ii) the close of business on the tenth (10th) day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth (a) as to each person whom the stockholder proposes to nominate for
election as a director (i) the name, age, business address and residence address
of the person, (ii) the principal occupation or employment of the person, (iii)
the class or series and number of shares of capital stock of the Corporation
which are owned beneficially or of record by the person that would be required
to be disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such
stockholder, (iv) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to nominate the persons named in its
notice and (v) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of
each proposed nominee to being named as a nominee and to serve as a director if
elected.
No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth in this Section 10.
If the chairman of the annual meeting determines that a nomination was not made
in accordance with the foregoing procedures, the chairman shall declare to the
meeting that the nomination was defective and such defective nomination shall be
disregarded.
Section 11. Business at Annual Meetings. No business may be transacted at
an annual meeting of stockholders, other than business that is either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors (or any duly authorized committee
thereof), (b) otherwise properly brought before the annual meeting by or at the
direction of the Board of Directors (or any duly authorized committee thereof)
or (c) otherwise properly brought before the annual meeting by any stockholder
of the Corporation (i) who is a stockholder of record on the date of the giving
of the notice provided for in this Section 11 and on the record date for the
determination of stockholders entitled to vote at such annual meeting and (ii)
who complies with the notice procedures set forth in this Section 11.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than ninety (90) days nor more than one hundred and twenty (120) days prior
to the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the later of (i) ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of stockholders and
(ii) the close of business on the tenth
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(10th) day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure of the date of the annual meeting
was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth as to each matter such stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of such stockholder, (iii) the class
or series and number of shares of capital stock of the Corporation which are
owned beneficially or of record by such stockholder, (iv) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such business
by such stockholder and any material interest of such stockholder in such
business and (v) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of stockholders except
business brought before the annual meeting in accordance with the procedures set
forth in this Section 11; provided, however, that, once business has been
properly brought before the annual meeting in accordance with such procedures,
nothing in this Section 11 shall be deemed to preclude discussion by any
stockholder of any such business. If the chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
Section 12. Conduct of Meetings. The Board of Directors of the Corporation
may adopt by resolution such rules and regulations for the conduct of the
meetings of the stockholders as it shall deem appropriate. Except to the extent
inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of the stockholders shall have the right
and authority to prescribe such rules, regulations and procedures and to do all
such acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) the determination of when the polls
shall open and close for any given matter to be voted on at the meeting; (iii)
rules and procedures for maintaining order at the meeting and the safety of
those present; (iv) limitations on attendance at or participation in the meeting
to stockholders of record of the corporation, their duly authorized and
constituted proxies or such other persons as the chairman of the meeting shall
determine; (v) restrictions on entry to the meeting after the time fixed for the
commencement thereof; (vi) limitations on the time allotted to questions or
comments by participants; and (vii) policies and procedures with respect to the
adjournment of such meeting.
ARTICLE III
DIRECTORS
Section 1. Number, Classification and Qualification of Directors. (a) The
Board of Directors shall consist initially of 16 members with the exact number
of directors to be determined from time to time by the Board of Directors. The
directors shall be divided into three (3) classes, designated Class I, Class II
and Class III, as provided in the Certificate of Incorporation. Any director may
resign at any time upon written notice to the Corporation. Directors need not be
stockholders. Subject to applicable law, any person shall be eligible for
election as a director; provided that (i) in the case of a director who is also
an employee of the Corporation, subject to Section 12 of Article IV and the
employment agreements referred to therein, any person (A) who shall have
attained the age of 65 shall be ineligible for election or appointment as a
director and (B) who ceases to be an employee of the Corporation shall be
disqualified from continued service as a director and such person's term of
office as a director shall automatically terminate and (ii) otherwise, any
person who shall have attained the age of 70 shall be ineligible for election or
appointment as a director.
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(b) There shall be no limitation on the qualification of any person to be a
director or on the ability of any director to vote on any matter brought before
the Board or any Board committee, except (i) as required by applicable law, (ii)
as set forth in the Certificate of Incorporation or (iii) as set forth in the
foregoing Section 1(a) of this Article III or (iv) in any By-Law adopted by the
Board of Directors with respect to the eligibility for election as a director
upon reaching a specified age or, in the case of employee directors, with
respect to the qualification for continuing service of directors upon cessation
of employment with the Corporation.
Section 2. Vacancies. Unless otherwise required by law or the Certificate
of Incorporation, vacancies arising through death, resignation, removal, an
increase in the number of directors or otherwise may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, or by the stockholders if such vacancy resulted from the action of
stockholders (in which event such vacancy may not be filled by the directors or
a majority thereof), and the directors so chosen shall hold office until the
next election for such class and until their successors are duly elected and
qualified, or until their earlier death, resignation or removal.
Section 3. Duties and Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors may hold meetings, both
regular and special, either within or without the State of Delaware. Regular
meetings of the Board of Directors may be held without notice at such time and
at such place as may from time to time be determined by the Board of Directors.
Special meetings of the Board of Directors may be called by the Chairman, if
there be one, the President, or by any director. Notice thereof stating the
place, date and hour of the meeting shall be given to each director either by
mail not less than forty-eight (48) hours before the time of the meeting, by
telephone, telegram, facsimile transmission or other electronic transmission not
less than twenty-four (24) hours before the time of the meeting, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
Section 5. Quorum. Except as otherwise required by law or the Certificate
of Incorporation, at all meetings of the Board of Directors, a majority of the
entire Board of Directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting of the time and place of the adjourned meeting,
until a quorum shall be present.
Section 6. Actions by Written Consent of the Board. Unless otherwise
provided in the Certificate of Incorporation or these By-Laws, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in writing
or by electronic transmission, and the writing or writings or electronic
transmission or transmissions as are filed with the minutes of proceedings of
the Board of Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless otherwise
provided in the Certificate of Incorporation, members of the Board of Directors
of the Corporation, or any committee thereof, may participate in a meeting of
the Board of Directors or such committee by means of a conference telephone or
other communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
Section 7 shall constitute presence in person at such meeting.
Section 8. Standing Committees. (a) The Board of Directors, by resolution
adopted by a majority of the entire Board, shall appoint from among its members
(i) an Executive Committee, (ii) an Audit and Compliance Committee, (iii) a
Compensation Committee, (iv) a Committee on Directors' Affairs and
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(v) a Public Policy Committee (together, the "Standing Committees") each
consisting of three (3) (or such greater number as the Board of Directors may
designate) directors, to perform the functions traditionally performed by such
Board committees.
(b) The Executive Committee shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the Corporation to be
affixed to all papers which may require it, in each case, to the fullest extent
permitted by applicable law.
(c) The Committee on Directors' Affairs shall meet at the discretion of the
Committee Chairman and have the following powers and duties: (i) evaluating and
recommending director candidates to the Board of Directors, (ii) recommending
committee assignments to the Board of Directors, (iii) assessing the performance
of the Board of Directors, (iv) recommending director compensation and benefits
policy for the Corporation, and (v) periodically reviewing the Corporation's
corporate governance profile. Only persons recommended by the Committee on
Directors' Affairs shall be eligible for nomination by the Board of Directors
for election as directors or to fill a vacancy, but if the Board of Directors
does not approve of one or more of the persons recommended by the Committee on
Directors' Affairs, the Committee shall submit a recommendation of other persons
by the date specified by the Board of Directors.
Section 9. Committees. The Board of Directors may designate one or more
other committees (in addition to the Standing Committees), each such other
committee to consist of one or more of the directors of the Corporation. With
respect to all Board committees, the Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of any such committee. With respect to all
Board committees, in the absence or disqualification of a member of a committee,
and in the absence of a designation by the Board of Directors of an alternate
member to replace the absent or disqualified member, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
such member or members constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any
absent or disqualified member. Any Board committee, to the extent permitted by
law and provided in the resolution establishing such committee, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it. Each
Board committee shall keep regular minutes and report to the Board of Directors
when required.
Section 10. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and shall receive
such compensation for their services as directors as shall be determined by the
Board of Directors. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of Board committees may be allowed like compensation for attending committee
meetings.
Section 11. Removal. A director may only be removed for cause, such
removal to be by the affirmative vote of the shares representing a majority of
the votes entitled to be cast by the Voting Stock. For purposes of these
By-Laws, Voting Stock shall mean the then outstanding shares of capital stock
entitled to vote generally in the election of directors and shall exclude any
class or series of capital stock only entitled to vote in the event of dividend
arrearages thereon, whether or not at the time of determination there are any
dividend arrearages. Unless the Board of Directors has made a determination that
removal is in the best interests of the Corporation (in which case the following
definition shall not apply), "cause" for removal of a director shall be deemed
to exist only if (i) the director whose removal is proposed has been convicted,
or when a director is granted immunity to testify when another has been
convicted, of a felony by a court of competent jurisdiction and such conviction
is no longer subject to direct appeal; (ii) such director has been found by the
affirmative vote of a majority of the directors then in office at any regular or
special meeting of the Board of Directors called for that purpose, or by a court
of competent jurisdiction to have been guilty of willful misconduct in the
performance of his duties to the Corporation in a matter of substantial
importance to the Corporation; or (iii) such director has been
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adjudicated by a court of competent jurisdiction to be mentally incompetent,
which mental incompetency directly affects his ability as a director of the
Corporation. Notwithstanding the foregoing, whenever holders of outstanding
shares of one or more series of Preferred Stock are entitled to elect directors
of the Corporation pursuant to the provisions applicable in the case of
arrearages in the payment of dividends or other defaults contained in the
resolution or resolutions of the Board of Directors providing for the
establishment of any such series, any such director of the Corporation so
elected may be removed in accordance with the provisions of such resolution or
resolutions.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a Chief Executive Officer; President, a
Secretary and a Treasurer. The Board of Directors, in its discretion, also may
choose a Chairman of the Board (who must be a director) and one or more Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers;
provided that for so long as the Employment Agreements are in effect, the Board
of Directors, subject to their fiduciary duties, shall elect the Chairman of the
Board as specified therein. Any number of offices may be held by the same
person, unless otherwise prohibited by law or the Certificate of Incorporation.
The officers of the Corporation need not be stockholders of the Corporation nor,
except in the case of the Chairman of the Board, need such officers be directors
of the Corporation.
Section 2. Election. The Board of Directors, at its first meeting held
after each annual meeting of stockholders, shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier death,
resignation or removal. Subject to Section 12 of this Article IV, any officer
elected by the Board of Directors may be removed at any time by the affirmative
vote of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the President or any Vice President or any other
officer authorized to do so by the Board of Directors and any such officer may,
in the name of and on behalf of the Corporation, take all such action as any
such officer may deem advisable to vote in person or by proxy at any meeting of
security holders of any corporation in which the Corporation may own securities
and at any such meeting shall possess and may exercise any and all rights and
power incident to the ownership of such securities and which, as the owner
thereof, the Corporation might have exercised and possessed if present. The
Board of Directors may, by resolution, from time to time confer like powers upon
any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the Board
of Directors shall preside at meetings of the Board and of the Corporation's
stockholders. The Chairman shall work with the Chief Executive Officer on
external stakeholder relations (community, state, federal and foreign
governments), business development (growth) initiatives, and the creation of an
outstanding and cohesive Board of Directors; and shall have such other executive
responsibilities as the Chairman and the Chief Executive Officer may agree. The
Chairman and the Chief Executive Officer shall jointly recommend to the Board of
Directors the long-range strategic plan for the Corporation, major acquisitions
and divestitures, and major changes to the Corporation's capital structure. With
respect to all other matters, the Chief Executive Officer shall, in consultation
with the Chairman, arrange the agenda for meetings of the Board, and shall
report to the Board and arrange for other executives and advisors to report to
the Board.
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Section 5. Chief Executive Officer; President. The Chief Executive Officer
shall have general responsibility for the management of the Corporation as
provided in these By-laws, reporting directly to the Board of Directors. The
Chief Executive Officer shall have all the customary duties and responsibilities
of such office, and all of the Corporation's executive officers shall report
directly to him or indirectly to him through another such executive officer who
reports to him. The Chief Executive Officer shall also be the President. While
Archie Dunham is serving as Chairman of the Board, the Chief Executive Officer
shall work with the Chairman on external stakeholder relations (community,
state, federal and foreign governments), business development (growth)
initiatives, and the creation of an outstanding and cohesive Board of Directors.
Furthermore, while Archie Dunham is Chairman of the Board, the Chief Executive
Officer and the Chairman shall jointly recommend to the Board of Directors the
long-range strategic plan for the Corporation, major acquisitions and
divestitures, and major changes to the Corporation's capital structure. With
respect to all other matters, the Chief Executive Officer shall, in consultation
with the Chairman, arrange the agenda for meetings of the Board, and shall
report to the Board and arrange for other executives and advisors to report to
the Board.
Section 6. Vice Presidents. At the request of the Chief Executive Officer
or in the Chief Executive Officer's absence or in the event of the Chief
Executive Officer's inability or refusal to act (and if there be no Chairman of
the Board), the Vice President, or the Vice Presidents if there is more than one
(in the order designated by the Board of Directors), shall perform the duties of
the Chief Executive Officer, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the Chief Executive Officer. Each
Vice President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there be no Chairman of
the Board and no Vice President, the Board of Directors shall designate the
officer of the Corporation who, in the absence of the Chief Executive Officer or
in the event of the inability or refusal of the Chief Executive Officer to act,
shall perform the duties of the Chief Executive Officer, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
Chief Executive Officer.
Section 7. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose; the Secretary shall also
perform like duties for committees of the Board of Directors when required. The
Secretary shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors, the Chairman
of the Board or the Chief Executive Officer, under whose supervision the
Secretary shall be. If the Secretary shall be unable or shall refuse to cause to
be given notice of all meetings of the stockholders and special meetings of the
Board of Directors, and if there be no Assistant Secretary, then either the
Board of Directors or the President may choose another officer to cause such
notice to be given. The Secretary shall have custody of the seal of the
Corporation and the Secretary or any Assistant Secretary, if there be one, shall
have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest to the affixing by such officer's signature. The Secretary shall see
that all books, reports, statements, certificates and other documents and
records required by law to be kept or filed are properly kept or filed, as the
case may be.
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the Treasurer shall give the Corporation
a bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of the office
of the Treasurer and for the restoration to
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the Corporation, in case of the Treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the Treasurer's possession or under the Treasurer's control
belonging to the Corporation.
Section 9. Assistant Secretaries. Assistant Secretaries, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Secretary, and in the absence of the Secretary or in the
event of the Secretary's disability or refusal to act, shall perform the duties
of the Secretary, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of the Treasurer's disability or refusal to act, shall perform the duties
of the Treasurer, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Treasurer. If required by the Board of
Directors, an Assistant Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of the office of Assistant
Treasurer and for the restoration to the Corporation, in case of the Assistant
Treasurer's death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in the Assistant
Treasurer's possession or under the Assistant Treasurer's control belonging to
the Corporation.
Section 11. Other Officers. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
Section 12. Succession Arrangements.
(a) Notwithstanding any other provision of these By-Laws, the election of
individuals to the positions of Chairman of the Board and Chief Executive
Officer shall be as specifically provided for in the Employment Agreements
between the Corporation and Archie Dunham and James J. Mulva, dated as of
November 18, 2001 (the "Employment Agreements"), and (1) the election of any
other individual to such positions, or (2) the removal or replacement of Archie
Dunham or James J. Mulva from one or more of those positions, shall require a
two-thirds vote of the entire Board of Directors.
(b) Any amendment to, modification or termination by the Company of, either
of the Employment Agreements by the Corporation and any amendment, alteration or
repeal of, or the adoption of any provision inconsistent with, Section 4, 5 or
12 of this Article IV by the Board of Directors, shall require a two-thirds vote
of the entire Board of Directors.
(c) This Section 12 will terminate at the earlier of (1) the first date on
which neither Archie Dunham nor James J. Mulva remains employed under the
relevant Employment Agreement and (2) the later of (A) the second anniversary of
the closing date of the merger contemplated by the Agreement and Plan of Merger
dated as of November 18, 2001, by and among Phillips Petroleum Company,
CorvettePorsche Corp., Porsche Merger Corp., Corvette Merger Corp. and Conoco
Inc. and (B) October 1, 2004.
ARTICLE V
STOCK
Section 1. Uncertificated and Certificated Shares; Form of
Certificates. Effective at such time as the President or any Vice President or
the Treasurer of the Corporation, if so authorized by resolution of the Board of
Directors, designates in writing to the Corporate Secretary and any transfer
agents of the Corporation with respect to any class of stock of the Corporation,
the shares of such class shall be uncertificated shares, provided that the
foregoing shall not apply to shares represented by a certificate until
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such certificate is surrendered to the Corporation, and provided further that
upon request every holder of uncertificated shares shall be entitled, to the
extent provided in Section 158 of the Delaware General Corporation Law, to have
a certificate signed, in the name of the Corporation by the Chairman of the
Board of Directors, President or a Vice President and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares owned by such stockholder in the
Corporation.
Section 2. Signatures. Any or all of the signatures on a certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or the owner's legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed or the issuance of such new certificate.
Section 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these By-Laws. Transfers of stock shall be
made on the books of the Corporation only by the person named as the holder
thereof on the stock records of the Corporation by such person's attorney
lawfully constituted in writing, and in the case of shares represented by a
certificate upon the surrender of the certificate therefor, which shall be
canceled before a new certificate shall be issued. No transfer of stock shall be
valid as against the Corporation for any purpose until it shall have been
entered in the stock records of the Corporation by an entry showing from and to
whom transferred. To the extent designated by the President or any Vice
President or the Treasurer of the Corporation, the Corporation may recognize the
transfer of fractional uncertificated shares, but shall not otherwise be
required to recognize the transfer of fractional shares.
Section 5. Record Date.
(a) In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which record date shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
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Section 6. Record Owners. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold liable for calls
and assessments a person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise required by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Notice may also be given
personally, or by telegram, telex, cable or electronic transmission to the
extent permitted by applicable law.
Section 2. Waivers of Notice. Whenever any notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed by the
person or persons entitled to said notice or by electronic transmission, whether
before or after the time stated therein, shall be deemed equivalent thereto.
Attendance of a person at a meeting, present in person or represented by proxy,
shall constitute a waiver of notice of such meeting, except where the person
attends the meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the requirements of the Delaware General Corporation Law and the
provisions of the Certificate of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting of the Board of Directors
(or any action by written consent in lieu thereof in accordance with Section 6
of Article III hereof), and may be paid in cash, in property, or in shares of
the Corporation's capital stock. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors from time to time, in its absolute discretion,
deems proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for any proper purpose, and the Board of Directors may modify or abolish any
such reserve.
Section 2. Disbursements. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
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ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings other than
Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director or officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the
Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director or officer of the Corporation, or is
or was a director or officer of the Corporation serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation;
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (i) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) by a committee of such directors designated by a
majority vote of such directors, even though less than a quorum, or (iii) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion or (iv) by the stockholders. Such
determination shall be made, with respect to former directors and officers, by
any person or persons having the authority to act on the matter on behalf of the
Corporation. To the extent, however, that a present or former director or
officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith, without the necessity of authorization in the
specific case.
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Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, or, with respect to any criminal action
or proceeding, to have had no reasonable cause to believe such person's conduct
was unlawful, if such person's action is based on good faith reliance on the
records or books of account of the Corporation or another enterprise, or on
information supplied to such person by the officers of the Corporation or
another enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or records
given or reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 4 shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise of
which such person is or was serving at the request of the Corporation as a
director, officer, employee or agent. The provisions of this Section 4 shall not
be deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth in
Section 1 or 2 of this Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to the Court of Chancery in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1 and 2 of
this Article VIII. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable standards
of conduct set forth in Section 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII nor the absence of any determination thereunder shall be a defense
to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a director or
officer in defending any civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation, any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article VIII shall be made to the
fullest extent permitted by law. The provisions of this Article VIII shall not
be deemed to preclude the indemnification of any person who is not specified in
Section 1 or 2 of this Article VIII but whom the Corporation has the power or
obligation to indemnify under the provisions of the Delaware General Corporation
Law, or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director or officer of the Corporation,
or is or was a director or officer of the Corporation serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such person's status as
such, whether or not the Corporation would have the power or the obligation to
indemnify such person against such liability under the provisions of this
Article VIII.
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Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued. For
purposes of this Article VIII, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VIII shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 of this
Article VIII), the Corporation shall not be obligated to indemnify any director
or officer in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The Corporation may,
to the extent authorized from time to time by the Board of Directors, provide
rights to indemnification and to the advancement of expenses to employees and
agents of the Corporation similar to those conferred in this Article VIII to
directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. Amendments. These By-Laws may be altered, amended or repealed,
in whole or in part, and new By-Laws may be adopted (i) by the affirmative vote
of the shares representing a majority of the votes entitled to be cast by the
Voting Stock; provided, however, that any proposed alteration, amendment or
repeal of, or the adoption of any By-Law inconsistent with, Section 3, 7, 10 or
11 of Article II of these By-Laws or Section 1, 2 or 11 of Article III of these
By-Laws or Section 4, 5 or 12 of Article IV of these By-Laws or this sentence,
by the stockholders shall require the affirmative vote of shares representing
not less than 80% of the votes entitled to be cast by the Voting Stock; and
provided further, however, that in the case of any such stockholder action at a
meeting of stockholders, notice of the proposed alteration, amendment, repeal or
adoption of the new By-Law or By-Laws must be contained in the notice of such
meeting, or (ii) by action of the Board of Directors of the Corporation. The
provisions of this Section 1 are subject to any contrary provisions and any
provisions requiring a greater vote that are set forth in the Certificate of
Incorporation and in Section 12 of Article IV of these By-Laws.
Section 2. Entire Board of Directors. As used in these By-Laws generally,
the term "entire Board of Directors" means the total number of directors which
the Corporation would have if there were no vacancies.
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[MORGAN STANLEY LETTERHEAD]
ANNEX D
NOVEMBER 18, 2001
Board of Directors
Conoco Inc.
600 North Dairy Ashford Road
Houston, TX 77079
Members of the Board:
We understand that Phillips Company ("Phillips"), Conoco Inc. ("Conoco"),
ConocoPhillips Corp., a Delaware corporation ("New Parent"), Phillips Merger
Corp., a direct wholly owned subsidiary of New Parent ("Merger Sub One"), and
Conoco Merger Corp., a direct wholly owned subsidiary of New Parent ("Merger Sub
Two"), propose to enter into an Agreement and Plan of Merger, substantially in
the form of the draft dated November 16, 2001 (the "Merger Agreement"), which
provides, among other things, for the merger of Merger Sub One with and into
Phillips (the "Phillips Merger") and the merger of Merger Sub Two with and into
Conoco (the "Conoco Merger", and together with the Phillips Merger, the
"Mergers"). Pursuant to the Mergers, Phillips and Conoco will become wholly
owned subsidiaries of New Parent. We understand that pursuant to the Phillips
Merger, each issued and outstanding share of common stock, par value $1.25 per
share, of Phillips ("Phillips Common Stock"), other than shares of Phillips
Common Stock owned by Phillips, New Parent, Merger Sub One or Merger Sub Two,
will be converted into the right to receive one fully paid and nonassessable
share of common stock, par value $.01 per share, of New Parent ("New Parent
Common Stock"), and that pursuant to the Conoco Merger, each issued and
outstanding share of common stock, par value $.01 per share, of Conoco ("Conoco
Common Stock"), other than shares of Conoco Common Stock owned by Conoco, New
Parent, Merger Sub One or Merger Sub Two, will be converted into the right to
receive 0.4677 (the "Exchange Ratio") fully paid and nonassessable shares of New
Parent Common Stock. The terms and conditions of the Mergers are more fully set
forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio is fair
from a financial point of view to holders of the Conoco Common Stock.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and
other business and financial information of Porsche and Conoco,
respectively;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning Porsche and Conoco prepared by the
respective managements of Phillips and Conoco;
(iii) reviewed certain financial forecasts prepared by the respective
managements of Phillips and Conoco;
(iv) discussed with senior executives of Phillips and Conoco certain
strategic, financial and operational benefits they expect to derive from
the Mergers;
(v) discussed the past and current operations and financial condition
and the prospects of Phillips and Conoco with senior executives of Phillips
and Conoco;
(vi) reviewed the pro forma impact of the Mergers on, among other
things, Conoco's earnings per share, cash flow, consolidated capitalization
and financial ratios;
(vii) reviewed and considered in the analysis, information prepared
by the members of the respective senior managements of Phillips and Conoco
relating to the relative contributions of Phillips and Conoco to the
combined company.
(viii) reviewed the reported prices and trading activity for the
Phillips Common Stock and the Conoco Common Stock;
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(ix) compared the prices and trading activity of the Phillips Common
Stock and the Conoco Common Stock with that of the securities of certain
other publicly-traded companies comparable with Phillips and Conoco;
(x) reviewed the financial terms, to the extent publicly available,
of certain comparable merger transactions;
(xi) participated in certain discussions and negotiations among
representatives of Phillips and Conoco and their financial and legal
advisors;
(xii) reviewed the Merger Agreement and certain related documents;
and
(xiii) performed such other analyses and considered such other
factors as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information supplied or otherwise made
available to us by Phillips and Conoco for the purposes of this opinion. With
respect to the financial forecasts that we received from the respective
managements of Phillips and Conoco, as well as information relating to certain
strategic, financial and operational benefits anticipated from the Mergers, we
have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the future financial
performance of Phillips and Conoco, and New Parent, respectively. In addition,
we have assumed that the Mergers will be consummated in accordance with the
terms set forth in the Merger Agreement without material modification or waiver,
including, among other things, that the Mergers will be treated as tax-free
reorganizations and/or exchanges, each pursuant to the Internal Revenue Code of
1986. We have not made any independent valuation or appraisal of the assets or
liabilities of Phillips and Conoco, nor have we been furnished with any such
appraisals. Our opinion is necessarily based on financial, economic, market and
other conditions as in effect on, and the information made available to us as
of, and the financial condition of Phillips and Conoco on, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to a business combination or other
extraordinary transaction, involving Conoco, nor did we negotiate with any
party, other than Phillips in connection with such a business combination or
other extraordinary transaction.
We have acted as financial advisor to the Board of Directors of Conoco in
connection with this transaction and will receive a fee for our services,
including a transaction fee, which is contingent upon the consummation of the
Mergers. In the past, Morgan Stanley & Co. Incorporated and its affiliates have
provided financial advisory and financing services for Phillips and Conoco and
have received fees for the rendering of these services. In addition, Morgan
Stanley maintains commodity trading relationships with both Phillips and Conoco.
It is understood that this letter is for the information of the Board of
Directors of Conoco and may not be used for any other purpose without our prior
written consent. In addition, this opinion does not in any manner address the
merits of the underlying decision by Conoco to engage in the Mergers or the
prices at which the New Parent Common Stock will trade following consummation of
the Mergers, and Morgan Stanley expresses no opinion or recommendation as to how
the stockholders of Conoco should vote at the stockholders' meeting held in
connection with the Mergers.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio is fair from a financial point of view to holders
of the Conoco Common Stock.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
D-2
By: /s/ MICHAEL DICKMAN
----------------------------------
Michael Dickman
Managing Director
D-3
[SALOMON SMITH BARNEY LETTERHEAD]
ANNEX E
November 18, 2001
The Board of Directors
Conoco Inc.
600 North Dairy Ashford Road
Houston, Texas 77079
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of shares of common stock, par value $.01 per share of
Conoco Inc. (the "Company") (the "Company Common Stock") of the Exchange Ratio
(as defined below) in connection with the proposed Company Merger (as defined
below) contemplated by the Agreement and Plan of Merger (including the Exhibits
thereto, the "Agreement") to be entered into by and among the Company, Phillips
Petroleum Company ("Phillips"), CorvettePorsche Corp., a newly formed
corporation equally owned by Phillips and the Company ("New Parent"), Porsche
Merger Corp., a direct wholly owned subsidiary of New Parent ("Merger Sub One")
and Corvette Merger Corp., a direct wholly owned subsidiary of New Parent
("Merger Sub Two").
As more specifically set forth in the Agreement, and subject to the terms
and conditions thereof, Merger Sub One will merge with and into Phillips with
Phillips continuing as the surviving corporation (the "Phillips Merger") and
Merger Sub Two will merge with and into the Company with the Company continuing
as the surviving corporation (the "Company Merger" and together with the
Phillips Merger the "Mergers") and upon consummation of the Mergers each of
Phillips and the Company will become wholly owned subsidiaries of New Parent. In
the Phillips Merger, each outstanding share of common stock, par value $1.25 per
share of Phillips ("Phillips Common Stock") (other than Phillips Common Stock
held by Phillips as treasury stock or that is owned by New Parent, Phillips,
Merger Sub One or Merger Sub Two) will be converted into the right to receive
one share of common stock, par value $.01 per share of New Parent ("New Parent
Common Stock"). In the Company Merger, each outstanding share of Company Common
Stock (other than Company Common Stock held by the Company as treasury stock or
that is owned by New Parent, the Company, Merger Sub One or Merger Sub Two) will
be converted into the right to receive 0.4677 shares (the "Exchange Ratio") of
New Parent Common Stock.
In arriving at our opinion, we reviewed a draft of the Agreement dated
November 16, 2001 and held discussions with certain senior officers, directors
and other representatives and advisors of the Company and certain senior
officers and other representatives and advisors of Phillips concerning the
businesses, operations and prospects of the Company, Phillips and New Parent. We
examined certain publicly available business and financial information relating
to the Company and Phillips as well as certain financial forecasts and other
information and data for the Company, Phillips and New Parent which were
provided to or otherwise discussed with us by the managements of the Company and
Phillips, including information relating to certain strategic implications and
operational and financial benefits anticipated to result from the Mergers. In
addition to the foregoing, we conducted such other analyses and examinations and
considered such other information and financial, economic and market criteria as
we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us and have further relied upon the assurances of managements
of the Company and Phillips that they are not aware of any facts that would make
any of such information inaccurate or misleading. With respect to financial
forecasts and other information and data provided to or otherwise reviewed by or
discussed with us, we have been advised by the managements of the Company and
Phillips that such forecasts and other information and data were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the respective managements of
E-1
The Board of Directors November 18, 2001
Conoco Inc.
the Company and Phillips as to the future financial performance of the Company,
Phillips and New Parent and the strategic implications and operational and
financial benefits anticipated to result from the Mergers. We express no view
with respect to such forecasts and other information and data or the assumptions
on which they were based. We have assumed, with your consent, that the Mergers
will be treated as a tax-free reorganization for federal income tax purposes. We
have not made or been provided with an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of the Company, Phillips or
New Parent nor have we made any physical inspection of the properties or assets
of the Company, Phillips or New Parent. Representatives of the Company have
advised us, and we have assumed, that the final terms of the Agreement will not
vary materially from those set forth in the draft reviewed by us. We have
further assumed that the Mergers will be consummated in accordance with the
terms of the Agreement, without waiver of any of the material conditions
precedent to the Mergers contained in the Agreement.
Our opinion, as set forth herein, relates to the relative values of the
Company and Phillips. We are not expressing any opinion as to what the value of
the New Parent Common Stock will be when issued in the Mergers or the price at
which the New Parent Common Stock will trade or otherwise be transferable
subsequent to the Mergers. We were not requested to consider, and our opinion
does not address, the relative merits of the Company Merger as compared to any
alternative business strategies that might exist for the Company or the effect
of any other transaction in which the Company might engage. Our opinion
necessarily is based upon information available to us and financial, stock
market and other conditions and circumstances existing and disclosed to us as of
the date hereof.
Salomon Smith Barney Inc. will receive a fee for its services in connection
with the Mergers, all of which is contingent upon the consummation of the
Mergers. We have in the past provided and are currently providing investment
banking services to the Company and Phillips unrelated to the Mergers, for which
services we have received and may receive compensation. In the ordinary course
of our business, we and our affiliates may actively trade or hold the securities
of the Company and Phillips for our own account or for the account of our
customers and, accordingly, may at any time hold a long or short position in
such securities. Salomon Smith Barney Inc. and its affiliates (including
Citigroup Inc. and its affiliates) may maintain relationships with the Company,
Phillips and New Parent and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of the Company in its evaluation of the
Company Merger and our opinion is not intended to be and does not constitute a
recommendation of the Company Merger to the Board of Directors, the Company or
to anyone else or a recommendation to any stockholder as to how such stockholder
should vote on any matters relating to the Company Merger.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Exchange Ratio is fair, from
a financial point of view, to the holders of Company Common Stock.
Very truly yours,
SALOMON SMITH BARNEY INC.
E-2
[GOLDMAN SACHS LETTERHEAD]
ANNEX F
PERSONAL AND CONFIDENTIAL
November 18, 2001
Board of Directors
Phillips Petroleum Company
4th & Keeler
Bartlesville, OK 74004
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding Common Shares, par value $1.25 per share
(the "Phillips Common Stock"), of Phillips Petroleum Company ("Phillips") of the
Phillips Exchange Ratio (as defined below) relative to the Conoco Exchange Ratio
(as defined below) pursuant to the Agreement and Plan of Merger, dated as of
November 18, 2001 (the "Agreement"), by and among CorvettePorsche Corp.
("Parent"), Phillips, Conoco Inc. ("Conoco"), Porsche Merger Corp. ("Phillips
Merger Sub") and Corvette Merger Corp. ("Conoco Merger Sub"). Pursuant to the
Agreement, (i) Phillips Merger Sub will merge with and into Phillips and
Phillips shall remain as the surviving corporation, (ii) Conoco Merger Sub will
merge with and into Conoco and Conoco shall remain as the surviving corporation
and (iii) Phillips and Conoco shall become wholly owned subsidiaries of Parent.
The holder of each issued and outstanding share of Phillips Common Stock will be
entitled to receive one share of Common Stock, par value $0.01 per share
("Parent Common Stock"), of Parent (the "Phillips Exchange Ratio"), and the
holder of each issued and outstanding share of Common Stock, par value $0.01 per
share (the "Conoco Common Stock"), of Conoco will be entitled to receive 0.4677
shares of Parent Common Stock (the "Conoco Exchange Ratio").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in performing financial analyses with respect to businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and financial analyses for estate,
corporate and other purposes. We are familiar with Phillips having provided
certain investment banking services to Phillips from time to time, including
having acted as financial advisor to Phillips in connection with its acquisition
of assets from Atlantic Richfield Company in April 2000; having acted as
co-arranger in connection with the public offering of $200 million aggregate
principal amount of Phillips' 7% Debentures due 2029 in March 1999 and the
public offering of $300 million aggregate principal amount of Phillips' 6 3/8%
Notes due 2009 in March 1999; and having acted as its financial advisor in
connection with, and having participated in certain of the negotiations leading
to, the Agreement. We also have provided certain investment banking services to
Conoco from time to time, including having acted as co-manager in connection
with the public offering of 191.5 million shares of Conoco's Class A Common
Stock in October 1998; as co-manager in connection with the public offering of
$1.35 billion aggregate principal amount of Conoco's 5.90% Notes due 2004, $1.9
billion aggregate principal amount of Conoco's 6.95% Notes due 2029 and $750
million aggregate principal amount of Conoco's 6.35% Notes due 2009 in April
1999; and as agent for Conoco's commercial paper program. Goldman, Sachs & Co.
provides a full range of financial advisory and securities services and, in the
course of its normal trading activities, may from time to time effect
transactions and hold positions in securities, including derivative securities,
of Phillips or Conoco for its own account and for the accounts of customers.
Goldman, Sachs & Co. also may provide investment banking services to Parent and
its subsidiaries in the future.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Shareholders and Annual Reports on Form 10-K of
Phillips for the five years ended
F-1
Board of Directors
Phillips Petroleum Company
November 18, 2001
Page Two
December 31, 2000; Annual Reports to Stockholders and Annual Reports on Form
10-K of Conoco for the three years ended December 31, 2000; certain interim
reports to stockholders and shareholders and Quarterly Reports on Form 10-Q of
Phillips and Conoco; certain other communications from Phillips and Conoco to
their respective stockholders or shareholders; and certain internal financial
analyses and forecasts for Phillips and Conoco prepared by their respective
managements, including certain cost savings and operating synergies projected by
the managements of Phillips and Conoco to result from the transaction
contemplated by the Agreement (the "Synergies"). We also have held discussions
with members of the senior management of Phillips and Conoco regarding their
assessment of the strategic rationale for, and the potential benefits of, the
transaction contemplated by the Agreement and the past and current business
operations, financial condition and future prospects of their respective
companies. In addition, we have reviewed the reported price and trading activity
for the Phillips Common Stock and the Conoco Common Stock, compared certain
financial and stock market information for Phillips and Conoco with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations in
the oil and gas industry specifically and in other industries generally and
performed such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial,
accounting and other information discussed with or reviewed by us and have
assumed such accuracy and completeness for purposes of rendering this opinion.
In that regard, we have assumed with your consent that the internal financial
forecasts prepared by the managements of Phillips and Conoco, including the
Synergies, have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of Phillips and Conoco. In addition,
we have not made an independent evaluation or appraisal of the assets and
liabilities of Phillips or Conoco or any of their subsidiaries and we have not
been furnished with any such evaluation or appraisal. We also have assumed that
all governmental, regulatory or other consents and approvals necessary for the
consummation of the transaction contemplated by the Agreement will be obtained
without any adverse effect on Phillips or Conoco or their respective
subsidiaries or on the contemplated benefits of the transaction contemplated by
the Agreement in any respect material to our analysis. We are expressing no
opinion herein as to the price at which the Parent Common Stock will trade if
and when such Parent Common Stock is issued. Our advisory services and the
opinion expressed herein are provided for the information and assistance of the
Board of Directors of Phillips in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not constitute a
recommendation as to how any holder of Phillips Common Stock should vote with
respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
Phillips Exchange Ratio relative to the Conoco Exchange Ratio pursuant to the
Agreement is fair from a financial point of view to the holders of Phillips
Common Stock.
Very truly yours,
F-2
Annex G
[JP Morgan Logo]
November 18, 2001
The Board of Directors
Phillips Petroleum Company
3A4 Phillips Building
4th & Keeler
Bartlesville, Oklahoma 74004
Members of the Board of Directors:
You have requested our opinion as to the fairness from a financial point of
view to the holders of common stock, par value $1.25 per share (the "Phillips
Common Stock"), of Phillips Petroleum Company ("Phillips") of the Phillips
Exchange Ratio (as defined below) relative to the Conoco Exchange Ratio (as
defined below) pursuant to the Agreement (as defined below). Phillips, Conoco
Inc. ("Conoco"), CorvettePorsche Corp., a newly formed holding company
("Parent"), and two wholly-owned subsidiaries of Parent, Porsche Merger Corp.
("Phillips Merger Sub") and Corvette Merger Corp. ("Conoco Merger Sub"), propose
to enter into an Agreement and Plan of Merger, dated as of November 18, 2001
(the "Agreement"), which provides, among other things, that (i) Phillips Merger
Sub will merge (the "Phillips Merger") with and into Phillips in a transaction
in which each outstanding share of Phillips Common Stock, other than any shares
of Phillips Common Stock owned by Phillips, Parent, Phillips Merger Sub or
Conoco Merger Sub, all of which shall be canceled, will be converted into the
right to receive one (the "Phillips Exchange Ratio") share of common stock, par
value $0.01 per share, of Parent (the "Parent Common Stock") and (ii) Conoco
Merger Sub will merge (the "Conoco Merger" and, together with the Phillips
Merger, the "Transaction") with and into Conoco in a transaction in which each
outstanding share of common stock, par value $0.01 per share, of Conoco (the
"Conoco Common Stock"), other than any shares of Conoco Common Stock owned by
Conoco, Parent, Phillips Merger Sub or Conoco Merger Sub, all of which shall be
canceled, will be converted into the right to receive 0.4677 (the "Conoco
Exchange Ratio") shares of Parent Common Stock.
In arriving at our opinion we have (i) reviewed the Agreement; (ii)
reviewed certain publicly available business and financial information
concerning Phillips and Conoco and the industries in which they operate; (iii)
compared the proposed financial terms of the Transaction with the publicly
available financial terms of certain transactions involving companies we deemed
relevant and the consideration received for such companies; (iv) compared the
financial and operating performance of Phillips and Conoco with publicly
available information concerning certain other companies we deemed relevant and
reviewed the current and historical market prices of the Phillips Common Stock
and Conoco Common Stock and certain publicly traded securities of such other
companies; (v) reviewed certain internal financial analyses and forecasts
prepared by the managements of Phillips and Conoco relating to their respective
businesses, as well as the estimated amount and timing of the cost savings and
related expenses and synergies expected to result from the Transaction (the
"Synergies"); and (vi) performed such other financial studies and analyses and
considered such other information as we deemed appropriate for the purpose of
this opinion.
In addition, we have held discussions with certain members of the
management of Phillips and Conoco with respect to certain aspects of the
Transaction, and the past and current business operations of Phillips and
Conoco, the financial condition and future prospects and operations of Phillips
and Conoco, the effects of the Transaction, including the Synergies, on the
financial condition and future prospects of Phillips and Conoco, and certain
other matters we believed necessary or appropriate to our inquiry.
In giving our opinion, we have relied upon and assumed, without any
obligation of independent verification, the accuracy and completeness of all
information that was publicly available or was furnished
G-1
to us by Phillips and Conoco or otherwise reviewed by us, and we have not
assumed any responsibility or liability therefor. We have not conducted any
valuation or appraisal of any assets or liabilities, nor have any such
valuations or appraisals been provided to us. In relying on financial analyses
and forecasts provided to us, including the Synergies, we have assumed that they
have been reasonably prepared based on assumptions reflecting the best currently
available estimates and judgements by management as to the expected future
results of operations and financial condition of Conoco and Phillips to which
such analyses or forecasts relate. We have also assumed that the Transaction
will qualify as a tax-free reorganization for United States federal income tax
purposes and that the transactions contemplated by the Agreement will be
consummated as described in the Agreement. We have relied as to all legal
matters relevant to rendering our opinion upon the advice of our counsel. We
have further assumed that all governmental, regulatory or other consents and
approvals necessary for the consummation of the Transaction will be obtained
without any adverse effect on Phillips or Conoco or their respective
subsidiaries or on the contemplated benefits of the transactions contemplated by
the Agreement in any respect material to our analysis and that all conditions to
the Transaction will be satisfied in all respects material to our analysis.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect this
opinion and that we do not have any obligation to update, revise, or reaffirm
this opinion. Our opinion is limited to the fairness from a financial point of
view to the holders of Phillips Common Stock of the Phillips Exchange Ratio
relative to the Conoco Exchange Ratio pursuant to the Agreement and we express
no opinion as to the underlying decision by Phillips to engage in the
Transaction. We are expressing no opinion herein as to the price at which
Phillips Common Stock or Parent Common Stock will trade at any future time.
We have acted as financial adviser to Phillips with respect to the proposed
Transaction and will receive a fee from Phillips for our services, which is
contingent upon the consummation of the Transaction. We have also provided
financial advisory and financing services from time to time to Phillips and
Conoco, including acting as co-lead on Conoco's $4.5 billion high grade bond
offering, advising and arranging the financing for Conoco's acquisition of Gulf
Canada Resources Limited, advising Phillips on its joint venture with Chevron
Corp. and financing Phillips' acquisition of ARCO's Alaskan assets. One of our
commercial bank affiliates is the Agent bank for certain outstanding credit
facilities for Phillips and Conoco. We may also provide financial advisory and
financing services to Phillips and Conoco and/or affiliates in the future. In
the ordinary course of our businesses, we and our affiliates may actively trade
the debt and equity securities of Phillips or Conoco for our own account or for
the accounts of customers and, accordingly, we may at any time hold long or
short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion that as of
the date hereof the Phillips Exchange Ratio relative to the Conoco Exchange
Ratio pursuant to the Agreement is fair from a financial point of view to the
holders of Phillips Common Stock.
This letter is provided to the Board of Directors of Phillips in connection
with and for the purpose of its evaluation of the Transaction. This opinion does
not constitute a recommendation to any stockholder of Phillips as to how such
stockholder should vote with respect to the Phillips Merger or any other matter.
This opinion may not be disclosed, referred to, or communicated (in whole or in
part) to any third party for any purpose whatsoever except with our prior
written approval. This opinion may be reproduced in full in any proxy or
information statement mailed to shareholders of Phillips but may not otherwise
be disclosed publicly in any manner without our prior written approval.
Very truly yours,
/s/ J.P. MORGAN SECURITIES INC.
G-2
[MERRILL LYNCH LOGO]
INVESTMENT BANKING
CORPORATE AND
INSTITUTIONAL
CLIENT GROUP
ONE HOUSTON CENTER
1221 MCKINNEY
SUITE 2700
HOUSTON, TEXAS 77010
713 759 2500
FAX 713 759 2580
November 18, 2001
Board of Directors
Phillips Petroleum Company
Fourth and Keeler
Bartlesville, OK 74004
Members of the Board of Directors:
Phillips Petroleum Company ("Phillips"), Conoco Inc. ("Conoco"),
CorvettePorsche Corp., a newly formed holding company ("Parent"), and two
wholly-owned subsidiaries of Parent, Porsche Merger Corp. ("Phillips Merger
Sub") and Corvette Merger Corp. ("Conoco Merger Sub"), propose to enter into an
Agreement and Plan of Merger, dated as of November 18, 2001 (the "Agreement"),
which provides, among other things, that (i) Phillips Merger Sub will merge (the
"Phillips Merger") with and into Phillips in a transaction in which each
outstanding share of common stock, par value $1.25 per share, of Phillips (the
"Phillips Common Stock"), other than any shares of Phillips Common Stock owned
by Phillips, Parent, Phillips Merger Sub or Conoco Merger Sub, all of which
shall be canceled, will be converted into the right to receive one (the
"Phillips Exchange Ratio") share of common stock, par value $.01 per share, of
Parent (the "Parent Common Stock") and (ii) Conoco Merger Sub will merge (the
"Conoco Merger" and, together with the Phillips Merger, the "Transaction") with
and into Conoco in a transaction in which each outstanding share of common
stock, par value $.01 per share, of Conoco (the "Conoco Common Stock"), other
than any shares of Conoco Common Stock owned by Conoco, Parent, Phillips Merger
Sub or Conoco Merger Sub, all of which shall be canceled, will be converted into
the right to receive 0.4677 (the "Conoco Exchange Ratio") shares of Parent
Common Stock.
You have asked us whether, in our opinion, the Phillips Exchange Ratio
relative to the Conoco Exchange Ratio pursuant to the Agreement is fair from a
financial point of view to the holders of Phillips Common Stock.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to Phillips and Conoco that we deemed to be
relevant;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and
prospects of Phillips and Conoco, as well as the amount and timing of
the cost savings and related expenses and synergies expected to
result from the Transaction ("Expected Synergies"), furnished to us
by Phillips and Conoco;
(3) Conducted discussions with members of senior management and
representatives of Phillips and Conoco concerning the matters
described in clauses 1 and 2 above, as well as their respective
H-1
[MERRILL LYNCH LOGO]
businesses and prospects before and after giving effect to the
Transaction and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for the shares of
Phillips Common Stock and Conoco Common Stock and compared them with
those of certain publicly traded companies that we deemed to be
relevant;
(5) Reviewed the results of operations of Phillips and Conoco and
compared them with those of certain publicly traded companies that we
deemed to be relevant;
(6) Compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions which we deemed to be
relevant;
(7) Participated in certain discussions among representatives of Phillips
and Conoco and their financial and legal advisors;
(8) Reviewed the potential pro forma impact of the Transaction;
(9) Reviewed the Agreement; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of Phillips or Conoco or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of Phillips or Conoco. With
respect to the financial forecast information and the Expected Synergies
furnished to or discussed with us by Phillips or Conoco, we have been advised by
management of Phillips and Conoco, respectively, that they have been reasonably
prepared and reflect the best currently available estimates and judgment of
Phillips's or Conoco's management as to the expected future financial
performance of Phillips or Conoco, as the case may be, and the Expected
Synergies. We have made no independent investigation of any legal matters and
accounting advice given to such parties and their respective boards of
directors, including, without limitation, advice as to the accounting and tax
consequences of the Transaction.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that all governmental, regulatory or
other consents and approvals necessary for the consummation of the Transaction
will be obtained without any adverse effect on Phillips or Conoco or their
respective subsidiaries or on the contemplated benefits of the transactions
contemplated by the Agreement in any respect material to our analysis, and we
have further assumed that all conditions to the Transaction will be satisfied in
all respects material to our analysis.
We are acting as financial advisor to Phillips in connection with the
Transaction and will receive a fee from Phillips for our services, which is
contingent upon the consummation of the Transaction. In addition, Phillips has
agreed to indemnify us for certain liabilities arising out of our engagement. We
have, in the past, provided financial advisory and financing services to
Phillips and Conoco and/or their affiliates and may continue to do so and have
received, and may receive, fees for the rendering of such services. In addition,
in the ordinary course of our business, we may actively trade the shares of
Phillips Common Stock and other securities of Phillips, as well as the shares of
Conoco Common Stock and other securities
H-2
[MERRILL LYNCH LOGO]
of Conoco, for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of
Phillips. Our opinion does not address the merits of the underlying decision by
Phillips to engage in the Transaction and does not constitute a recommendation
to any stockholder of Phillips as to how such stockholder should vote on the
proposed Phillips Merger or any matter related thereto.
We are not expressing any opinion herein as to the prices at which the
shares of Phillips Common Stock or the Parent Common Stock will trade following
the announcement or consummation of the Transaction, as the case may be.
On the basis of, and subject to the foregoing, we are of the opinion that
as of the date hereof the Phillips Exchange Ratio relative to the Conoco
Exchange Ratio pursuant to the Agreement is fair from a financial point of view
to the holders of Phillips Common Stock.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
H-3
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware law permits a corporation to adopt a provision in its certificate
of incorporation eliminating or limiting the personal liability of a director,
but not an officer in his or her capacity as such, to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except that such provision shall not limit the liability of a director for (1)
any breach of the director's duty of loyalty to the corporation or its
stockholders, (2) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (3) liability under
section 174 of the Delaware General Corporation Law for unlawful payment of
dividends or stock purchases or redemptions, or (4) any transaction from which
the director derived an improper personal benefit. New Parent's restated
certificate of incorporation provides that no New Parent director shall be
personally liable to New Parent or New Parent stockholders for monetary damages
for breach of fiduciary duty as a director, except to the extent such an
exemption from liability or limitation thereof is not permitted under the
Delaware General Corporation Law.
Under Delaware law, a corporation may indemnify any individual made a party
or threatened to be made a party to any type of proceeding, other than action by
or in the right of the corporation, because he or she is or was an officer,
director, employee or agent of the corporation or was serving at the request of
the corporation as an officer, director, employee or agent of another
corporation or entity against expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such proceeding:
(1) if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation; or
(2) in the case of a criminal proceeding, he or she had no reasonable cause to
believe that his or her conduct was unlawful. A corporation may indemnify any
individual made a party or threatened to be made a party to any threatened,
pending or completed action or suit brought by or in the right of the
corporation because he or she was an officer, director, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other entity,
against expenses actually and reasonably incurred in connection with such action
or suit if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation,
provided that such indemnification will be denied if the individual is found
liable to the corporation unless, in such a case, the court determines the
person is nonetheless entitled to indemnification for such expenses. A
corporation must indemnify a present or former director or officer who
successfully defends himself or herself in a proceeding to which he or she was a
party because he or she was a director or officer of the corporation against
expenses actually and reasonably incurred by him or her. Expenses incurred by an
officer or director, or any employees or agents as deemed appropriate by the
board of directors, in defending civil or criminal proceedings may be paid by
the corporation in advance of the final disposition of such proceedings upon
receipt of an undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that he or she is not entitled
to be indemnified by the corporation. The Delaware law regarding indemnification
and expense advancement is not exclusive of any other rights which may be
granted by New Parent's restated certificate of incorporation or by-laws, a vote
of stockholders or disinterested directors, agreement or otherwise.
Under the Delaware General Corporation Law, termination of any proceeding
by conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that such person is prohibited from being
indemnified.
New Parent's by-laws provide for the indemnification and advancement of
expenses to the fullest extent permitted by law of any individual made, or
threatened to be made, a party to an action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was a director or officer of New Parent or is or was a director or officer
of New Parent serving any other enterprise at the request of New Parent.
However, New Parent will not indemnify a director or officer who commences any
proceeding (except for proceedings to enforce rights of indemnification), unless
the commencement of that proceeding was authorized or consented to by the New
Parent Board of Directors.
II-1
After the merger, New Parent has agreed to indemnify each present and
former director and officer of Conoco, Phillips or any of their subsidiaries,
against all costs or expenses, judgments, fines, losses, claims, damages or
liabilities in connection with any claim, action, suit, proceeding or
investigation brought within six years of the closing of the merger for acts or
omissions, existing or occurring before the merger, to the fullest extent
permitted under applicable law.
Subject to a cap on premiums, for a period of [six] years after the merger,
New Parent has agreed to maintain a policy of directors' and officers' liability
insurance for acts and omissions occurring before the merger with coverage in an
amount and scope at least as favorable as Conoco's and Phillips' existing
directors' and officers' liability insurance coverage.
Notwithstanding any other provision, the treatment of past and present
directors, officers and employees of either Conoco or Phillips and their
respective subsidiaries with respect to elimination of liability,
indemnification, advancement of expenses and liability insurance under the
merger agreement shall be, in the aggregate, no less advantageous to intended
beneficiaries thereof then the corresponding treatment of the past and present
directors, officers and employees of the other company and its subsidiaries.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 -- Agreement and Plan of Merger dated as of November 18, 2001
(attached as Annex A to the joint proxy statement/prospectus
which is a part of this registration statement)
3.1 -- Form of Certificate of Incorporation of CorvettePorsche
Corp. to be in effect as of the effective time of the merger
(attached as Annex B to the joint proxy statement/prospectus
which is a part of this registration statement)
3.2 -- Form of By-laws of CorvettePorsche Corp. to be in effect as
of the effective time of the merger (attached as Annex C to
the joint proxy statement/prospectus which is a part of this
registration statement)
4.1 -- Specimen certificate of CorvettePorsche Corp. common stock,
par value $0.01 per share
4.2 -- Form of Rights Agreement to be entered into between
CorvettePorsche Corp. and the Rights Agent
5.1 -- Opinion of [ ], regarding the legality of the
securities being registered
8.1 -- Form of Opinion of Cravath, Swaine & Moore as to tax matters
8.2 -- Form of Opinion of Wachtell, Lipton, Rosen & Katz as to tax
matters
10.1 -- Employment Agreement, dated as of November 18, 2001, by and
among CorvettePorsche Corp., Phillips Petroleum Company, and
J.J. Mulva
10.2 -- Employment Agreement, dated as of November 18, 2001, by and
among CorvettePorsche Corp., Conoco Inc., and Archie W.
Dunham
23.1 -- Consent of PricewaterhouseCoopers LLP
23.2 -- Consent of Ernst & Young LLP
23.3 -- Consent of PricewaterhouseCoopers LLP
23.4 -- Consent of Ernst & Young LLP
23.5 -- Consent of Cravath, Swaine & Moore (included in Exhibit 8.1)
23.6 -- Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 8.2)
24.1 -- Power of Attorney (included on the signature page of this
registration statement)
99.1 -- Consent of Morgan Stanley & Co. Incorporated
99.2 -- Consent of Salomon Smith Barney Inc.
99.3 -- Consent of Goldman, Sachs & Co.
99.4 -- Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
99.5 -- Consent of J.P. Morgan Securities Inc.
99.6 -- Form of Proxy Card of Conoco
99.7 -- Form of Proxy Card of Phillips
</Table>
II-2
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
99.8 -- Consent of Archie W. Dunham to be named as a director
99.9 -- Consent of J.J. Mulva to be named as a director
</Table>
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to the information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (c)(1) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act of 1933
and is used in connection with an offering of securities subject to Rule
415, will be filed a part of an amendment to the registration statement and
will not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
II-3
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, New Parent has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on December 7, 2001.
CORVETTEPORSCHE CORP.
By: /s/ RICK A. HARRINGTON
------------------------------------
Name: Rick A. Harrington
Title: Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Rick A. Harrington and J. Bryan Whitworth and
each of them, his true and lawful attorney-in-fact and agent with full power of
substitution for him and in his name, place and stead, in any and all capacities
to sign any and all amendments (including pre-effective and post-effective
amendments) to this registration statement, and to file the same with all
exhibits thereto and other documents in connection therewith, including any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, with the Securities and Exchange Commission, grants unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all that said attorneys-in-fact and
agents or their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ RICK A. HARRINGTON Chairman of the Board and Director December 7, 2001
- ------------------------------------------
Rick A. Harrington
/s/ J. BRYAN WHITWORTH President and Director December 7, 2001
- ------------------------------------------
J. Bryan Whitworth
/s/ W. DAVID WELCH Vice President -- Finance and December 7, 2001
- ------------------------------------------ Principal Financial Officer
W. David Welch
/s/ RAND C. BERNEY Vice President -- Accounting and December 7, 2001
- ------------------------------------------ Principal Accounting Officer
Rand C. Berney
</Table>
II-5
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 -- Agreement and Plan of Merger dated as of November 18, 2001
(attached as Annex A to the joint proxy statement/prospectus
which is a part of this registration statement)
3.1 -- Form of Certificate of Incorporation of CorvettePorsche
Corp. to be in effect as of the effective time of the merger
(attached as Annex B to the joint proxy statement/prospectus
which is a part of this registration statement)
3.2 -- Form of By-laws of CorvettePorsche Corp. to be in effect as
of the effective time of the merger (attached as Annex C to
the joint proxy statement/prospectus which is a part of this
registration statement)
4.1 -- Specimen certificate of CorvettePorsche Corp. common stock,
par value $0.01 per share
4.2 -- Form of Rights Agreement to be entered into between
CorvettePorsche Corp. and the Rights Agent
5.1 -- Opinion of [ ], regarding the legality of the
securities being registered*
8.1 -- Form of Opinion of Cravath, Swaine & Moore as to tax
matters*
8.2 -- Form of Opinion of Wachtell, Lipton, Rosen & Katz as to tax
matters*
10.1 -- Employment Agreement, dated as of November 18, 2001, by and
among CorvettePorsche Corp., Phillips Petroleum Company, and
J. J. Mulva
10.2 -- Employment Agreement, dated as of November 18, 2001, by and
among CorvettePorsche Corp., Conoco Inc., and Archie W.
Dunham
23.1 -- Consent of PricewaterhouseCoopers LLP
23.2 -- Consent of Ernst & Young LLP
23.3 -- Consent of PricewaterhouseCoopers LLP
23.4 -- Consent of Ernst & Young LLP
23.5 -- Consent of Cravath, Swaine & Moore (included in Exhibit 8.1)
23.6 -- Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 8.2)
24.1 -- Power of Attorney (included on the signature page of this
registration statement)
99.1 -- Consent of Morgan Stanley & Co. Incorporated
99.2 -- Consent of Salomon Smith Barney Inc.
99.3 -- Consent of Goldman, Sachs & Co.
99.4 -- Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
99.5 -- Consent of J.P. Morgan Securities Inc.
99.6 -- Form of Proxy Card of Conoco*
99.7 -- Form of Proxy Card of Phillips*
99.8 -- Consent of Archie W. Dunham to be named as a director*
99.9 -- Consent of J.J. Mulva to be named as a director*
</Table>
- ---------------
* To be filed by amendment