AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 2001
REGISTRATION NO. 333-55932
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PHILLIPS PETROLEUM COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2911 73-0400345
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
PHILLIPS BUILDING
BARTLESVILLE, OKLAHOMA 74004
(918) 661-6600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
JOHN A. CARRIG
SENIOR VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND TREASURER
PHILLIPS PETROLEUM COMPANY
PHILLIPS BUILDING
BARTLESVILLE, OKLAHOMA 74004
(918) 661-6600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
ANDREW R. BROWNSTEIN, ESQ. MARTIN H. NEIDELL, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ STROOCK & STROOCK & LAVAN LLP
51 WEST 52ND STREET 180 MAIDEN LANE
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10038
(212) 403-1000 (212) 806-5400
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effectiveness of this Registration Statement and the
satisfaction or waiver of all other conditions to the merger of Ping
Acquisition Corp., a wholly owned subsidiary of the Registrant, with and into
Tosco Corporation pursuant to the Agreement and Plan of Merger, dated as of
February 4, 2001, described in the enclosed joint proxy statement/prospectus.
If the securities being registered on this form are to be 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. [_]
---------------
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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[LOGO] PHILLIPS PETROLEUM COMPANY
BARTLESVILLE, OKLAHOMA 74004 918 661-6600
March 6, 2001
Dear Phillips Stockholder:
The Board of Directors of Phillips Petroleum Company has approved and
adopted an agreement and plan of merger with Tosco Corporation that will
transform Phillips into a stronger major integrated oil company. The new
Phillips will have the balanced assets, scale, and financial flexibility
necessary for continued profitable growth and will be a premier competitor in
the domestic refining, marketing and transportation business. Under the terms
of the merger agreement, a wholly owned subsidiary of Phillips will merge with
and into Tosco, and Phillips will issue 0.80 of a share of Phillips common
stock for each share of Tosco common stock.
You are cordially invited to attend a special meeting of the stockholders of
Phillips Petroleum Company to be held at the Adams Building, 4th Street and
Keeler Avenue, Bartlesville, Oklahoma, on Wednesday, April 11, 2001, at 10:00
a.m., local time. At the special meeting, we will ask you to approve the
issuance of shares of Phillips common stock under the merger agreement, as
described in the accompanying joint proxy statement/prospectus, and to approve
an amendment to Phillips' Restated Certificate of Incorporation to increase the
number of authorized shares of Phillips common stock. Approval of the amendment
to Phillips' Restated Certificate of Incorporation is not a condition to the
merger.
In order to complete the merger, we must obtain necessary regulatory
approvals and the approvals of the stockholders of Phillips and Tosco. More
information about the merger is contained in the materials that accompany this
letter.
The Board of Directors of Phillips has approved and adopted the merger
agreement and the merger, and recommends that you vote "FOR" approval of the
issuance of Phillips common stock in the merger and "FOR" approval of the
amendment to Phillips' Restated Certificate of Incorporation.
Your vote is important, regardless of the number of shares you own. Please
vote as soon as possible to make sure that your shares are represented at the
special meeting. To vote your shares, please complete and return the enclosed
proxy card. You also may cast your vote in person at the special meeting.
Very truly yours,
/S/ J. J. Mulva
J. J. Mulva
Chairman of the Board and
Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Phillips common stock to be
issued under this joint proxy statement/prospectus or determined if this joint
proxy statement/prospectus is accurate or complete. Any representation to the
contrary is a criminal offense.
This joint proxy statement/prospectus is dated March 6, 2001, and is first
being mailed to stockholders on or about March 7, 2001.
Tosco Corporation
1700 East Putnam Avenue
Suite 500
Old Greenwich, Connecticut 06870
Telephone: 203-698-7500
Facsimile: 203-698-7901
[LOGO]
TOSCO
March 6, 2001
Dear Tosco Stockholder:
The Board of Directors of Tosco Corporation has unanimously adopted an
agreement and plan of merger whereby a wholly owned subsidiary of Phillips
Petroleum Company will be merged with and into Tosco. As the result of the
merger, Tosco will become a wholly owned subsidiary of Phillips. Under the
terms of the merger agreement, Tosco stockholders will receive 0.80 of a share
of Phillips common stock for each share of Tosco common stock they own
following the completion of the merger. After the merger, former Tosco
stockholders will own approximately 30% of the outstanding Phillips common
stock.
This transaction presents Tosco with a unique opportunity to enhance
stockholder value, while allowing Tosco stockholders the opportunity to
participate in a larger and more diversified company as a platform for
continued growth. The Board of Directors of Tosco has determined that the
merger is fair to and in the best interests of Tosco and Tosco stockholders.
You are cordially invited to attend a special meeting of stockholders of
Tosco Corporation to be held at The Hyatt Regency Greenwich, 1800 East Putnam
Avenue, Old Greenwich, Connecticut, on Wednesday, April 11, 2001, at 10:00 a.m.
local time. At the special meeting, we will ask you to approve the merger
agreement as described in the accompanying joint proxy statement/prospectus.
In order to complete the merger, we must obtain necessary regulatory
approvals and the approvals of the stockholders of Tosco and Phillips. The
affirmative vote of the holders of a majority of the outstanding shares of
Tosco common stock entitled to vote on the merger is required to approve the
merger agreement and the merger. More information about the merger is contained
in the materials that accompany this letter.
The Board of Directors of Tosco has unanimously adopted the merger agreement
and the merger, and recommends that you vote "FOR" approval of the merger
agreement.
Your vote is important, regardless of the number of shares you own. Please
vote as soon as possible to make sure that your shares are represented at the
special meeting. To vote your shares, please complete and return the enclosed
proxy card. You may also cast your vote in person at the special meeting.
Very truly yours,
/S/ Thomas D. O'Malley
Thomas D. O'Malley
Chairman of the Board and
Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Phillips common stock to be
issued under this joint proxy statement/prospectus or determined if this joint
proxy statement/prospectus is accurate or complete. Any representation to the
contrary is a criminal offense.
This joint proxy statement/prospectus is dated March 6, 2001, and is first
being mailed to stockholders on or about March 7, 2001.
[LOGO OF PHILLIPS]
PHILLIPS PETROLEUM COMPANY
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
----------------
TO BE HELD ON APRIL 11, 2001
To the Stockholders of Phillips Petroleum Company:
We will hold a special meeting of stockholders of Phillips Petroleum
Company, a Delaware corporation, at the Adams Building, 4th Street and Keeler
Avenue, Bartlesville, Oklahoma, on Wednesday, April 11, 2001, at 10:00 a.m.,
local time, for the purposes of considering and voting on the following
matters, as described in the accompanying joint proxy statement/prospectus:
1. To consider and vote upon a proposal to approve the issuance of
shares of common stock, par value $1.25 per share, of Phillips pursuant to
the Agreement and Plan of Merger, dated as of February 4, 2001, by and
among Phillips, Ping Acquisition Corp., a Nevada corporation and a wholly
owned subsidiary of Phillips, and Tosco Corporation, a Nevada corporation,
and the merger contemplated thereby. Pursuant to the merger agreement,
among other things, (a) Ping Acquisition Corp. will merge with and into
Tosco and (b) each outstanding share of common stock, par value $0.75 per
share, of Tosco will be converted into the right to receive 0.80 of a share
of Phillips common stock, in each case, subject to the terms and conditions
of the merger agreement. This proposal is more fully described in the
accompanying joint proxy statement/prospectus.
2. To consider and vote upon a proposal to amend Phillips' Restated
Certificate of Incorporation to increase the number of authorized shares of
common stock from 500 million shares to one billion shares. Approval of
this proposal is not a condition to completion of the merger. This proposal
is also more fully described in the accompanying joint proxy
statement/prospectus.
3. To transact any other business as may properly come before the
special meeting or any adjournments or postponements thereof.
Holders of record of Phillips common stock at the close of business on March
5, 2001, will be entitled to notice of and to vote at the special meeting and
any adjournments or postponements thereof.
By Order of the Board of Directors,
/s/ Dale J. Billam
Dale J. Billam
Secretary
Bartlesville, Oklahoma
March 6, 2001
The Board of Directors of Phillips recommends that you vote "FOR" approval
of the issuance of Phillips common stock pursuant to the merger agreement and
"FOR" approval of the amendment to Phillips' Restated Certificate of
Incorporation.
The affirmative vote of a majority of the shares of Phillips common stock
represented at the special meeting, provided that holders of a majority of the
shares of Phillips common stock entitled to vote on the proposal do in fact
vote, or abstain from voting, on the proposal, is required to approve proposal
number 1 above. The affirmative vote of holders of a majority of the
outstanding shares of Phillips common stock entitled to vote on proposal number
2 above is required to approve the proposal.
Whether or not you plan to attend the special meeting in person, please
complete, date, sign and return the enclosed proxy card in the enclosed
envelope promptly or authorize the individuals named on your proxy card to vote
your shares by calling toll-free 1-800-840-1208. Please note that, if your
shares are not registered in your own name, your bank, broker or other
institution holding your shares may not offer telephone voting. The enclosed
envelope requires no postage if mailed in the United States. If you attend the
special meeting, you may vote in person if you wish, even if you have
previously returned your proxy card or submitted your proxy instructions by
telephone. However, if you hold shares through a bank or broker and wish to
vote in person at the special meeting, you may not do so unless you receive a
valid proxy from your bank or broker.
[LOGO OF TOSCO]
TOSCO CORPORATION
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 11, 2001
----------------
To the Stockholders of Tosco Corporation:
We will hold a special meeting of the stockholders of Tosco Corporation, a
Nevada corporation, on Wednesday, April 11, 2001, at 10:00 a.m., local time, at
The Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich,
Connecticut, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and
Plan of Merger, dated as of February 4, 2001, by and among Phillips
Petroleum Company, a Delaware corporation, Ping Acquisition Corp., a Nevada
corporation and a wholly owned subsidiary of Phillips, and Tosco, and the
merger contemplated thereby. Pursuant to the merger agreement, among other
things, (a) Ping Acquisition Corp. will merge with and into Tosco and (b)
each outstanding share of common stock, par value $0.75 per share, of Tosco
will be converted into the right to receive 0.80 of a share of Phillips
common stock, par value $1.25 per share, in each case, subject to the terms
and conditions of the merger agreement. This proposal is more fully
described in the accompanying joint proxy statement/prospectus.
2. To transact any other business as may properly come before the
special meeting or any adjournments or postponements thereof.
Holders of record of Tosco common stock at the close of business on March 5,
2001, will be entitled to notice of and to vote at the special meeting and any
adjournments or postponements thereof.
By Order of the Board of Directors,
Wilkes McClave III
Secretary
Old Greenwich, Connecticut
March 6, 2001
The Board of Directors of Tosco unanimously recommends that you vote "FOR"
approval of the merger agreement and the merger.
The affirmative vote of holders of a majority of the outstanding shares of
Tosco common stock is required to approve the merger agreement and the merger.
Whether or not you plan to attend the special meeting in person, please
complete, date, sign and return the enclosed proxy card in the enclosed
envelope promptly. The enclosed envelope requires no postage if mailed in the
United States. If you attend the special meeting, you may vote in person if you
wish, even if you have previously returned your proxy card. However, if you
hold your shares through a bank or broker and wish to vote in person at the
special meeting, you may not do so unless you receive a valid proxy from your
bank or broker.
ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates important business and
financial information about Phillips and Tosco 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 from
the appropriate company at one of the following addresses:
PHILLIPS TOSCO
Phillips Petroleum Company Tosco Corporation
Phillips Building 1700 East Putnam Road
Bartlesville, Oklahoma 74004 Old Greenwich, Connecticut 06870
Attention: Dale J. Billam, Attention: Colm McDermott
Senior Counsel and Corporate Secretary (203) 698-7508
(918) 661-5638
or or
Georgeson Shareholder The Altman Group, Inc.
Communications, Inc. 60 East 42nd Street
17 State Street New York, New York 10165
New York, New York 10004 Attention: Kenneth L. Altman
Toll free: (800) 223-2064 (212) 681-9600
IF YOU WOULD LIKE TO REQUEST ANY DOCUMENTS, PLEASE DO SO BY APRIL 4, 2001,
IN ORDER TO RECEIVE THEM BEFORE YOUR SPECIAL MEETING.
See "Where You Can Find More Information" on page 80.
TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS ABOUT THE MERGER.................................... 1
SUMMARY................................................................... 4
SELECTED HISTORICAL FINANCIAL DATA........................................ 9
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA...................... 10
COMPARATIVE PER SHARE DATA................................................ 11
RISK FACTORS.............................................................. 12
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS................ 13
PHILLIPS SPECIAL MEETING.................................................. 14
General................................................................. 14
Matters to be Considered................................................ 14
Proxies................................................................. 14
Solicitation of Proxies................................................. 15
Record Date and Voting Rights........................................... 15
Recommendation of the Phillips Board of Directors....................... 17
TOSCO SPECIAL MEETING..................................................... 18
General................................................................. 18
Matters to be Considered................................................ 18
Proxies................................................................. 18
Solicitation of Proxies................................................. 19
Record Date and Voting Rights........................................... 19
Recommendation of the Tosco Board of Directors.......................... 20
THE MERGER................................................................ 21
General................................................................. 21
Background of the Merger................................................ 21
Recommendation of the Phillips Board of Directors; Phillips' Reasons for
the Merger............................................................. 23
Recommendation of the Tosco Board of Directors; Tosco's Reasons for the
Merger................................................................. 25
Opinion of Phillips' Financial Advisor.................................. 27
Opinion of Tosco's Financial Advisor.................................... 32
Regulatory Approvals Required for the Merger............................ 36
Material U.S. Federal Income Tax Consequences........................... 37
Accounting Treatment.................................................... 38
Interests of Certain Persons in the Merger.............................. 38
Management and Operations Following the Merger.......................... 41
THE MERGER AGREEMENT...................................................... 43
Merger Consideration.................................................... 43
Treatment of Options.................................................... 43
Exchange of Certificates................................................ 43
Completion of the Merger................................................ 45
Representations and Warranties.......................................... 45
Interim Operations...................................................... 46
Additional Covenants.................................................... 48
Conditions.............................................................. 52
Termination of the Merger Agreement..................................... 52
Amendments, Extensions and Waivers...................................... 56
i
PROPOSED AMENDMENT TO THE PHILLIPS RESTATED CERTIFICATE OF INCORPORATION... 57
PRICE RANGE OF COMMON STOCK AND DIVIDENDS.................................. 58
Phillips................................................................. 58
Tosco.................................................................... 59
INFORMATION ABOUT PHILLIPS................................................. 60
General.................................................................. 60
Management and Additional Information.................................... 60
Beneficial Ownership of Directors and Management of Phillips............. 61
Beneficial Ownership of Certain Phillips Stockholders.................... 62
INFORMATION ABOUT TOSCO.................................................... 63
General.................................................................. 63
Management and Additional Information.................................... 63
Beneficial Ownership of Directors and Management of Tosco................ 64
Beneficial Ownership of Certain Tosco Stockholders....................... 64
DESCRIPTION OF PHILLIPS CAPITAL STOCK...................................... 65
Phillips Common Stock.................................................... 65
Phillips Rights Plan..................................................... 65
COMPARISON OF STOCKHOLDER RIGHTS........................................... 66
Authorized Capital Stock................................................. 66
Size of Board of Directors............................................... 66
Cumulative Voting........................................................ 66
Classes of Directors..................................................... 67
Qualifications of Directors.............................................. 67
Filling Vacancies on the Board........................................... 67
Removal of Directors..................................................... 68
Nomination of Directors for Election..................................... 68
Anti-Takeover Provisions................................................. 68
Stockholder Rights Plan.................................................. 71
Stockholder Action Without a Meeting..................................... 72
Calling Special Meetings of Stockholders................................. 72
Submission of Stockholder Proposals...................................... 72
Notice of Stockholders Meetings.......................................... 73
Stockholder Vote Required for Mergers.................................... 73
Dividends................................................................ 73
Rights of Preferred Stockholders......................................... 74
Appraisal Rights......................................................... 74
Stockholder Preemptive Rights............................................ 75
Inspection of Stockholder Lists.......................................... 75
Stockholder Class Voting Rights.......................................... 75
Indemnification.......................................................... 76
Limitations on Directors' and Officers' Liability........................ 77
Charter Amendments....................................................... 78
Amendment of Bylaws...................................................... 78
RIGHTS OF DISSENTING STOCKHOLDERS.......................................... 79
LEGAL MATTERS.............................................................. 79
ii
EXPERTS................................................................... 79
STOCKHOLDER PROPOSALS..................................................... 79
OTHER MATTERS............................................................. 79
INDEPENDENT AUDITORS...................................................... 79
WHERE YOU CAN FIND MORE INFORMATION....................................... 80
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION........................ 82
Appendix A Agreement and Plan of Merger................................... A-1
Appendix B Opinion of Morgan Stanley & Co. Incorporated................... B-1
Appendix C Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated.. C-1
Appendix D Amendment to the Phillips Petroleum Company Restated
Certificate of Incorporation............................................. D-1
iii
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY ARE PHILLIPS AND TOSCO PROPOSING THIS TRANSACTION?
A: The merger presents a unique opportunity for us to create a stronger major
integrated oil company. Following the merger, we will have the balanced
assets, scale and financial flexibility necessary for continued profitable
growth. We will be a premier competitor in the domestic refining, marketing
and transportation, or RM&T, business, and will benefit from the competitive
advantages of integration through our role as a major participant in the
global exploration and production, or E&P, business, and our gas gathering and
chemicals joint ventures.
Q: WHAT WILL HAPPEN IN THE MERGER?
A: As a result of the merger, Tosco will become a wholly owned subsidiary of
Phillips. Tosco stockholders will have their shares of Tosco common stock
converted into shares of Phillips common stock at a rate of 0.80 of a share of
Phillips common stock for each share of Tosco common stock they own. Tosco
stockholders, in the aggregate, will own approximately 30% of the outstanding
Phillips common stock following the merger.
Q: WHERE AND WHEN ARE THE SPECIAL MEETINGS?
A: The Phillips special meeting will take place at the Adams Building, 4th
Street and Keeler Avenue, Bartlesville, Oklahoma, on Wednesday, April 11,
2001, at 10:00 a.m., local time. The Tosco special meeting will take place at
The Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich,
Connecticut, on Wednesday, April 11, 2001, at 10:00 a.m., local time.
Q: WHAT ARE STOCKHOLDERS BEING ASKED TO VOTE ON AT THE SPECIAL MEETINGS?
A: Phillips stockholders will vote on a proposal to approve the issuance of
shares of Phillips common stock in exchange for outstanding shares of Tosco
common stock, in accordance with the merger agreement. Phillips stockholders
also will vote on an amendment to Phillips' Restated Certificate of
Incorporation to increase the number of authorized shares of Phillips common
stock from 500 million shares to one billion shares. Approval of the issuance
of Phillips common stock in the merger is a condition to completion of the
merger, but approval of the amendment to Phillips' restated certificate of
incorporation is not a condition to completion of the merger.
Tosco stockholders will vote on a proposal to approve the merger agreement.
Approval of the merger agreement by Tosco stockholders is a condition of the
merger. Phillips and Tosco stockholders also may be asked to consider other
matters as may properly come before the special meetings; however, Phillips
and Tosco know of no other matters that will be presented for consideration at
the special meetings.
Q: WHAT STOCKHOLDER APPROVALS ARE NEEDED?
A: For Phillips, assuming that holders of a majority of the outstanding
Phillips common stock entitled to vote on the proposal do in fact vote or
abstain from voting on the proposal, the affirmative vote of a majority of the
shares of Phillips common stock represented at the Phillips special meeting is
required to approve the issuance of Phillips common stock in connection with
the merger. The affirmative vote of the holders of a majority of the
outstanding Phillips common stock entitled to vote on the amendment to
Phillips' Restated Certificate of Incorporation is required to approve the
amendment. However, as stated above, approval of the amendment to Phillips'
Restated Certificate of Incorporation is not a condition to completion of the
merger.
For Tosco, the affirmative vote of the holders of a majority of the
outstanding shares of Tosco common stock entitled to vote on the merger is
required to approve the merger agreement and the merger.
The Phillips Board of Directors recommends that you vote "FOR" approval of
the issuance of Phillips common stock in the merger and "FOR" approval of the
amendment to Phillips' Restated Certificate of Incorporation.
The Tosco Board of Directors unanimously recommends that you vote "FOR" the
proposal to approve the merger agreement and the merger.
1
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
joint proxy statement/prospectus, please respond by completing, signing and
dating your proxy card or voting instructions and returning it in the
enclosed, postage-paid envelope, or, if available, by submitting your proxy or
voting instructions by telephone, as soon as possible so that your shares may
be represented at your special meeting.
Q: WHAT IF I DON'T VOTE?
A: If you fail to respond, it will have the same effect as a vote against the
merger, in the case of Tosco stockholders, or a vote against the amendment to
Phillips' Restated Certificate of Incorporation, in the case of Phillips
stockholders. In addition, if you are a Phillips stockholder of record and you
do not vote or attend the Phillips special meeting, provided that holders of a
majority of the outstanding shares of Phillips common stock do in fact vote or
abstain from voting, your shares will not count for or against the proposal to
issue shares of Phillips common stock in the merger.
If you respond and do not indicate how you want to vote, your proxy will be
counted as a vote in favor of all proposals, unless your shares are held in
"street name," as described below.
If you respond and abstain from voting, your proxy will have the same
effect as a vote against the merger, in the case of Tosco stockholders, or a
vote against the amendment to Phillips' Restated Certificate of Incorporation
and a vote against the issuance of shares of Phillips common stock in the
merger, in the case of Phillips stockholders.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: If you do not provide your broker with instructions on how to vote your
street name shares, your broker will not be permitted to vote them. You should
therefore be sure to provide your broker with instructions on how to vote your
shares. Please check the voting form used by your broker to see if it offers
telephone or Internet voting.
If you are a Tosco stockholder, and you do not give voting instructions to
your broker with respect to the merger proposal, you will, in effect, be
voting against the merger, unless you appear in person at the Tosco special
meeting with a valid proxy from your broker and vote in favor of the merger.
In the case of Phillips stockholders, if you do not give voting instructions
to your broker with respect to the proposal to issue shares of Phillips common
stock, you will, in effect, be voting against the share issuance, unless you
appear in person at the Phillips special meeting with a valid proxy from your
broker and vote in favor of the issuance of shares of Phillips common stock.
In addition, if you are a Phillips stockholder, and you do not give voting
instructions to your broker with respect to the proposal to amend Phillips'
Restated Certificate of Incorporation, you will, in effect, be voting against
the amendment, unless you appear in person at the Phillips special meeting
with a valid proxy from your broker and vote in favor of the amendment.
Q: CAN I CHANGE MY VOTE AFTER I HAVE DELIVERED MY PROXY?
A: Yes. You can change your vote at any time before your proxy is voted at
your special meeting. You can do this in one of three ways. First, you can
revoke your proxy. Second, you can submit a new proxy. If you choose either of
these two methods and you are a holder of record, you must submit your notice
of revocation or your new proxy to the Secretary of Phillips or Tosco, as
appropriate, before the applicable special meeting. However, if your shares
are held in a street name account at a brokerage firm or bank, you should
contact your brokerage firm or bank to change your vote. Third, if you are a
holder of record, or if your shares are held in street name and you receive a
valid proxy from your broker, you can attend your special meeting and vote in
person. If submission by telephone is available, and you choose to submit your
proxy or voting instructions by telephone, you can change your vote by
submitting a proxy at a later date, using the same procedures, in which case
your later submitted proxy will be recorded and your earlier proxy revoked.
2
Q: SHOULD I SEND IN MY TOSCO STOCK CERTIFICATES NOW?
A: No. After the merger is completed, you will receive written instructions
from the exchange agent on how to exchange your Tosco stock certificates for
shares of Phillips common stock. PLEASE DO NOT SEND IN YOUR TOSCO STOCK
CERTIFICATES WITH YOUR PROXY.
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: Phillips' current regular quarterly dividend is $0.34 per share of Phillips
common stock, or $1.36 per share on an annual basis. Tosco's current regular
quarterly dividend is $0.08 per share of Tosco common stock, or $0.32 per share
on an annual basis. Subject to the determination of the Phillips Board of
Directors, Phillips expects to continue its current dividend policy following
the completion of the merger.
Q: WHAT ARE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO TOSCO
STOCKHOLDERS?
A: In general, holders of Tosco common stock are not expected to be required to
pay any U.S. federal income tax as a result of the merger, except for tax, if
any, imposed on cash Tosco stockholders receive instead of fractional shares of
Phillips common stock.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger as quickly as practicable. We expect
to complete the merger in the third quarter of 2001.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the merger or how to submit your proxy, or
if you need additional copies of this joint proxy statement/prospectus or the
enclosed proxy card or voting instructions, you should contact:
.If you are a Phillips stockholder:
Georgeson Shareholder Communications, Inc.
17 State Street
New York, New York 10004
Toll free: (800) 223-2064
.If you are a Tosco stockholder:
The Altman Group, Inc.
60 E. 42nd Street
New York, New York 10165
Attention: Kenneth L. Altman
(212) 681-9600
3
SUMMARY
This brief summary does not contain all of the information that is important
to you. To fully understand the merger, you should carefully read this entire
document and the other documents to which this document refers you. See "Where
You Can Find More Information" on page 80.
THE COMPANIES (PAGES 60 AND 63)
Phillips Petroleum Company
Phillips Petroleum Company
Phillips Building
Bartlesville, Oklahoma 74004
(918) 661-6600
Phillips is an integrated oil company with interests around the world.
Headquartered in Bartlesville, Oklahoma, Phillips has 12,400 employees and
$20.5 billion of assets, and had $21.2 billion of revenues in 2000.
For additional information about Phillips and its business, see "Information
About Phillips" on page 60 and "Where You Can Find More Information" on page
80.
Tosco Corporation
Tosco Corporation
1700 East Putnam Avenue, Suite 500
Old Greenwich, Connecticut 06870
(203) 698-7500
Tosco, which currently has $28 billion in annualized revenues, is one of the
largest independent refiners and marketers of petroleum products in the United
States, and is one of the nation's largest operators of company-controlled
convenience stores. Tosco has 26,400 employees.
For additional information about Tosco and its business, see "Information
About Tosco" on page 63 and "Where You Can Find More Information" on page 80.
THE MERGER (PAGE 21)
We propose that Phillips acquire Tosco through the merger of Ping
Acquisition Corp., a wholly owned subsidiary of Phillips, with and into Tosco,
with Tosco surviving the merger as a wholly owned subsidiary of Phillips. We
refer to this transaction throughout this document as the merger.
We have attached the merger agreement as Appendix A to this document. We
urge you to read the merger agreement. It is the legal document that governs
the merger.
WHAT YOU WILL RECEIVE IN THE MERGER (PAGE 43)
If you are a Tosco stockholder, upon completion of the merger, each of your
shares of Tosco common stock automatically will become the right to receive
0.80 of a share of Phillips common stock. We refer to this 0.80-for-one
exchange throughout this document as the exchange ratio. In addition, Tosco
stockholders will be paid cash instead of any fractional share of Phillips
common stock to which they are otherwise entitled.
Promptly after completion of the merger, a form of transmittal letter will
be mailed by the exchange agent to Tosco stockholders that hold Tosco stock
certificates. The transmittal letter will contain instructions with respect to
the surrender of Tosco stock certificates.
TOSCO STOCKHOLDERS WILL RECEIVE SHARES OF PHILLIPS COMMON STOCK IN BOOK-
ENTRY FORM, UNLESS A PHYSICAL PHILLIPS STOCK CERTIFICATE IS REQUESTED. IF YOU
HOLD TOSCO STOCK CERTIFICATES, YOU SHOULD NOT RETURN THE CERTIFICATES WITH THE
ENCLOSED PROXY AND SHOULD NOT FORWARD THEM TO THE EXCHANGE AGENT UNTIL YOU
RECEIVE A LETTER OF TRANSMITTAL FOLLOWING THE COMPLETION OF THE MERGER.
REASONS FOR THE MERGER (PAGES 23 AND 25)
We are proposing the merger because we believe it presents a unique
opportunity to create a stronger major integrated oil company with the benefits
of increased size and scale. We believe that the merger will have strategic and
other benefits, including the opportunity for significant synergies. Each of
the Phillips Board of Directors and the Tosco Board of Directors also
considered a number of other factors, including, among other things, the
opinion of its respective financial advisor. See "The Merger-Opinion of
Phillips' Financial Advisor" on page 27 and "The Merger-Opinion of Tosco's
Financial Advisor" on page 32.
4
RECOMMENDATIONS TO STOCKHOLDERS (PAGES 23 AND 25)
Phillips stockholders
The Phillips Board of Directors believes that the issuance of Phillips
common stock in the merger is fair to and in the best interests of Phillips
and Phillips stockholders, and recommends that Phillips stockholders vote
"FOR" approval of the issuance of Phillips common stock in the merger. The
Phillips Board of Directors believes that the amendment to Phillips' Restated
Certificate of Incorporation is fair to and in the best interests of Phillips
and Phillips stockholders, and recommends that Phillips stockholders vote
"FOR" approval of the amendment to Phillips' Restated Certificate of
Incorporation.
Tosco stockholders
The Tosco Board of Directors believes that the merger is fair to Tosco
stockholders and in the best interests of Tosco stockholders, and unanimously
recommends that Tosco stockholders vote "FOR" the proposal to approve the
merger agreement and the merger.
OPINIONS OF FINANCIAL ADVISORS (PAGES 27 AND 32)
Phillips
Among other factors considered in deciding to approve and adopt the merger
agreement and the merger, the Phillips Board of Directors received a written
opinion from Phillips' financial advisor, Morgan Stanley & Co. Incorporated,
that, as of the date of the opinion, the exchange ratio was fair from a
financial point of view to Phillips. We have attached the full text of Morgan
Stanley's written opinion, dated February 4, 2001, as Appendix B to this
document. You should read this opinion completely to understand the
assumptions made, matters considered and limitations on the review undertaken
by Morgan Stanley in providing its opinion. MORGAN STANLEY'S OPINION IS
DIRECTED TO THE PHILLIPS BOARD OF DIRECTORS AND DOES NOT CONSTITUTE A
RECOMMENDATION AS TO HOW ANY STOCKHOLDER SHOULD VOTE WITH RESPECT TO ANY
MATTER RELATING TO THE MERGER.
Tosco
Among other factors considered in deciding to adopt the merger agreement
and the merger, the Tosco Board of Directors received a written opinion from
Tosco's financial advisor, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
that, as of the date of the opinion, the exchange ratio was fair from a
financial point of view to the holders of Tosco common stock. We have attached
the full text of Merrill Lynch's written opinion, dated February 4, 2001, as
Appendix C to this document. You should read this opinion completely to
understand the assumptions made, matters considered and limitations on the
review undertaken by Merrill Lynch in providing its opinion. MERRILL LYNCH'S
OPINION IS DIRECTED TO THE TOSCO BOARD OF DIRECTORS AND DOES NOT CONSTITUTE A
RECOMMENDATION AS TO HOW ANY STOCKHOLDER SHOULD VOTE WITH RESPECT TO ANY
MATTER RELATING TO THE MERGER.
OWNERSHIP OF THE COMBINED COMPANY AFTER THE MERGER
Phillips expects to issue approximately 123 million shares of Phillips
common stock in the merger. Based on the current number of shares of Phillips
common stock outstanding, after completion of the merger, current Tosco
stockholders will own approximately 30% of the then-outstanding shares of
Phillips common stock.
RECORD DATE; VOTE REQUIRED (PAGES 14 AND 18)
Phillips stockholders
You can vote at the Phillips special meeting if you owned Phillips common
stock at the close of business on March 5, 2001. On that date, there were
283,561,070 shares (including 27,856,573 shares held in the Phillips
Compensation and Benefits Trust) of Phillips common stock outstanding and
entitled to vote. You can cast one vote for each share of Phillips common
stock that you owned on that date. In order to approve the issuance of shares
of Phillips common stock in connection with the merger, a majority of the
votes cast on the proposal must vote in favor of doing so and holders of a
majority of the outstanding Phillips common stock entitled to vote on the
share issuance must cast a vote for or against the share issuance. In order to
approve the amendment to Phillips' Restated Certificate of Incorporation, the
holders of a majority of the outstanding shares of Phillips common stock
entitled to vote must vote in favor of doing so.
5
Tosco stockholders
You can vote at the Tosco special meeting if you owned Tosco common stock
at the close of business on March 5, 2001. On that date, there were
154,225,788 shares of Tosco common stock outstanding and entitled to vote. You
can cast one vote for each share of Tosco common stock that you owned on that
date. In order to approve the merger agreement and the merger, the holders of
a majority of the outstanding shares of Tosco common stock entitled to vote
must vote in favor of doing so.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (PAGE 37)
We have structured the merger so that it is anticipated that the merger
will be a reorganization for U.S. federal income tax purposes. The parties
will not be obligated to complete the merger unless they receive legal
opinions to that effect. If the merger is a reorganization, Tosco stockholders
will not recognize gain or loss for U.S. federal income tax purposes in the
merger (except for gain or loss recognized because of cash received instead of
fractional shares of Phillips common stock).
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
Stockholders can obtain quotes for shares of Phillips common stock and
Tosco common stock in newspapers, over the Internet or from their brokers. On
February 2, 2001, the last trading day before we announced the merger,
Phillips common stock closed at $58.13 per share and Tosco common stock closed
at $34.61 per share. On March 5, 2001, Phillips common stock closed at $55.38
per share and Tosco common stock closed at $42.00 per share.
The market value of the shares of Phillips common stock that will be issued
in exchange for shares of Tosco common stock upon the completion of the merger
will not be known at the time Tosco stockholders vote on the approval of the
merger agreement and the merger, or at the time Phillips stockholders vote on
the approval of the issuance of shares of Phillips common stock, because the
merger will not be completed by then. The market prices of Phillips common
stock and Tosco common stock will likely fluctuate prior to the merger, while
the exchange ratio will remain fixed. You should obtain current stock price
quotations for Phillips common stock and Tosco common stock.
LISTING OF PHILLIPS COMMON STOCK
Application will be made to have the Phillips common stock issued in the
merger approved for listing on the New York Stock Exchange, Inc., where
Phillips common stock currently is traded under the symbol "P." If the merger
is completed, Tosco common stock will no longer be listed on the New York
Stock Exchange or any other exchange.
DISSENTERS' RIGHTS OF APPRAISAL (PAGE 74)
Phillips stockholders
Under Delaware law, which applies to Phillips, Phillips stockholders will
not have dissenters' rights of appraisal in connection with the merger, the
issuance of Phillips common stock in the merger or the amendment to Phillips'
Restated Certificate of Incorporation.
Tosco stockholders
Under Nevada law, which applies to Tosco, Tosco stockholders will not have
dissenters' rights of appraisal in connection with the merger.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE 52)
Completion of the merger depends on a number of conditions being met,
including the approval of the merger agreement by Tosco stockholders, the
approval of the share issuance by Phillips stockholders, the accuracy of the
representations and warranties made by each company, the performance of each
party's obligations under the merger agreement, and the receipt of regulatory
approvals, including the expiration or termination of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Where the law permits, a party to the merger agreement could elect to waive
a condition to its obligation to complete the merger although that condition
has not been satisfied. We cannot be certain when (or if) the conditions to
the merger will be satisfied or waived or that the merger will be completed.
6
TERMINATION OF THE MERGER AGREEMENT; TERMINATION FEES (PAGE 52)
We can mutually agree at any time to terminate the merger agreement without
completing the merger, even if Tosco stockholders have approved the merger
agreement and Phillips stockholders have approved the share issuance. In
addition, either of us can decide, without the consent of the other, to
terminate the merger agreement in a number of situations, including:
. the final denial of a required regulatory approval,
. failure to obtain stockholder approval,
. specified circumstances relating to a withdrawal or modification by the
other party's Board of Directors of its recommendation to its
stockholders,
. the entering into of another transaction that is financially superior to
the merger in response to an unsolicited acquisition proposal (provided
that the terminating party complies with the "no solicitation"
provisions of the merger agreement and pays the termination fee, and the
non-terminating party is given an opportunity to respond to the
alternative offer), or
. failure to complete the merger on or before February 4, 2002.
Each of Phillips and Tosco has agreed to pay a termination fee of $250
million to the other party in the event that the merger is terminated under
specified circumstances relating to an acquisition proposal or a breach by the
other party of certain of its obligations under the merger agreement.
TOSCO EMPLOYEE STOCK OPTIONS (PAGE 43)
Upon completion of the merger, each outstanding Tosco employee stock option
will be converted into a stock option to purchase a number of shares of
Phillips common stock that is equal to the product of 0.80 multiplied by the
number of shares of Tosco common stock that would have been obtained upon the
exercise of the Tosco stock option before the merger, rounded to the nearest
whole share. The exercise price per share will be equal to the exercise price
per share of Tosco common stock subject to the Tosco stock option before the
conversion divided by 0.80, rounded to the nearest whole cent. All Tosco stock
options that have not vested under the Tosco stock option plans will vest upon
completion of the merger. In addition, an employee of Tosco whose employment
is terminated before the completion of the merger, or within six months after
the completion of the merger, may, with the employee's consent, have his or
her Tosco stock options canceled in exchange for a cash payment by Tosco, if
before the merger, or by Phillips, if after the merger. The other terms of
each Tosco stock option will continue to apply.
WAIVER AND AMENDMENT (PAGE 56)
We may jointly amend the merger agreement, and each of us may waive our
right to require the other party to adhere to the terms and conditions of the
merger agreement, to the extent legally permissible.
ACCOUNTING TREATMENT (PAGE 38)
The merger will be accounted for using the "purchase method" of accounting
for business combinations under U.S. generally accepted accounting principles.
REGULATORY APPROVALS (PAGE 36)
Under the HSR Act, we cannot complete the merger until we furnish specified
materials and information to the Antitrust Division of the U.S. Department of
Justice and the U.S. Federal Trade Commission and satisfy the waiting period
requirements. Phillips and Tosco expect to submit the required filings
shortly.
We are also required to obtain regulatory approvals from various state and
foreign authorities. We expect that we will be able to obtain all required
regulatory approvals, but we cannot assure you that these regulatory approvals
will be obtained.
7
INTERESTS OF CERTAIN PERSONS IN THE MERGER THAT ARE DIFFERENT FROM YOUR
INTERESTS (PAGE 38)
In addition to their interests as Tosco stockholders, certain of Tosco's
officers and directors have interests in the merger that are different from,
or in addition to, those of other Tosco stockholders. For many years, three
officers have had agreements with Tosco that will provide these officers with
enhanced severance benefits if their employment with the combined company is
terminated in conjunction with, or after, a change of control, including the
approval of the merger by Tosco stockholders. Several of the executive
officers of Tosco are parties to agreements that would provide them with
severance benefits if their employment is terminated under specified
circumstances, including in specified cases in connection with a change of
control. In addition, several of Tosco's officers will be entitled to
accelerated payments under the Tosco long-term incentive plan upon a change of
control, which includes approval of the merger by Tosco stockholders.
When the merger is completed, Phillips will expand the Phillips Board of
Directors by one member and cause Thomas D. O'Malley, the Chairman and Chief
Executive Officer of Tosco, to be appointed to the Phillips Board of
Directors. Also following completion of the merger, Phillips will appoint Mr.
O'Malley to serve, at the discretion of the Phillips Board of Directors and
the Chief Executive Officer of Phillips, as Vice Chairman of Phillips and head
of Phillips' RM&T division, which will then include Tosco's RM&T operations.
Also, following completion of the merger, Phillips will indemnify and
provide directors' and officers' insurance for the directors and officers of
Tosco for events occurring before the merger, including events that are
related to the merger agreement.
The members of our respective Boards of Directors knew about these
additional interests, and considered them, among other matters, when they
approved and adopted the merger agreement and the merger.
PROPOSED AMENDMENT TO PHILLIPS' RESTATED CERTIFICATE OF INCORPORATION (PAGE
57)
Phillips stockholders also will vote on a proposal to approve an amendment
to Phillips' Restated Certificate of Incorporation to increase the number of
shares of authorized Phillips common stock from 500 million shares to one
billion shares. Approval of the amendment is not a condition to completion of
the merger.
8
SELECTED HISTORICAL FINANCIAL DATA
HOW WE PREPARED THE FINANCIAL STATEMENTS
We are providing the following information to aid you in your analysis of
the financial aspects of the merger. We derived this information from the
audited financial statements of Phillips and Tosco for the years 1995 through
1999 and the unaudited financial statements of Phillips and Tosco for the nine
months ended September 30, 2000 and 1999. This information is only a summary,
and you should read it 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, or SEC, and
incorporated by reference in this document. See "Where You Can Find More
Information."
PHILLIPS PETROLEUM COMPANY
MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS
-------------------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30 YEARS ENDED DECEMBER 31
-------------- ----------------------------------
2000 1999 1999 1998 1997 1996 1995
------- ------ ------ ------ ------ ------ ------
Sales and other operating
revenues ................... $15,175 9,332 13,571 11,545 15,210 15,731 13,368
Net income................... 1,118 359 609 237 959 1,303 469
Per common share
Basic...................... 4.40 1.42 2.41 .92 3.64 4.96 1.79
Diluted.................... 4.37 1.41 2.39 .91 3.61 4.91 1.78
Total assets................. 20,580 15,191 15,201 14,216 13,860 13,548 11,978
Long-term debt............... 7,509 4,443 4,271 4,106 2,775 2,555 3,097
Company-obligated mandatorily
redeemable preferred
securities of Phillips 66
Capital Trusts I and II..... 650 650 650 650 650 300 --
Cash dividends declared per
common share................ 1.02 1.02 1.36 1.36 1.34 1.25 1.195
TOSCO CORPORATION
NINE MONTHS
ENDED
SEPTEMBER 30 YEARS ENDED DECEMBER 31
-------------- ----------------------------------
2000 1999 1999 1998 1997 1996 1995
------- ------ ------ ------ ------ ------ ------
Sales and other operating
revenues.................... $17,101 10,176 14,362 12,022 13,282 9,923 7,284
Net income................... 365 226 442 106 213 146 77
Per common share
Basic...................... 2.53 1.50 2.97 0.69 1.43 1.19 0.69
Diluted.................... 2.40 l.45 2.83 0.67 1.37 1.16 0.69
Total assets................. 8,701 6,013 6,212 5,843 5,975 3,555 2,003
Long-term debt............... 2,144 1,560 1,459 1,555 1,581 827 624
Company-obligated mandatorily
redeemable preferred
securities of Tosco
Financing Trust............. 300 300 300 300 300 300 --
Cash dividends declared per
share....................... 0.21 0.20 0.27 0.24 0.24 0.22 0.21
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 page 82 through page 87. This
information is based on the historical consolidated balance sheets and related
adjusted historical consolidated statements of income of Phillips and Tosco--
giving effect to the merger using the purchase method of accounting for
business combinations. Phillips' historical income statements have been
adjusted to reflect the pro forma impact of the acquisition of Atlantic
Richfield Company's, or ARCO's, Alaskan businesses and the formation of Duke
Energy Field Services, LLC and Chevron Phillips Chemical Company LLC during the
first nine months of 2000. Tosco's historical income statements have been
adjusted for the pro forma impact of the sale of the Avon refinery on August
31, 2000. This information is for illustrative purposes only.
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 Phillips will
experience after the merger.
MILLIONS OF DOLLARS
EXCEPT PER SHARE AMOUNTS
-----------------------------------
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
2000 DECEMBER 31, 1999
----------------- -----------------
Sales and other operating revenues.......... $30,380 26,103
Net income.................................. 1,645 1,115
Net income per common share
Basic..................................... 4.36 2.97
Diluted................................... 4.30 2.93
Cash dividends per common share............. 1.02 1.36
AT SEPTEMBER 30, 2000
-----------------------------------
Total assets................................ $35,007
Long-term debt.............................. 9,653
10
COMPARATIVE PER SHARE DATA
Set forth below are net income, cash dividends and book value per common
share amounts for Phillips and Tosco on a historical basis, for Phillips on a
pro forma combined basis, and on a pro forma combined basis per Tosco-
equivalent-common-share. The exchange ratio is 0.80 of a share of Phillips
common stock for each share of Tosco common stock.
The Phillips pro forma combined data was derived by combining the adjusted
historical consolidated financial information of Phillips and Tosco using the
purchase method of accounting for business combinations as described under
"Unaudited Pro Forma Combined Financial Information." Phillips' historical
income statements have been adjusted to reflect the pro forma impact of the
acquisition of ARCO's Alaskan businesses and the formation of Duke Energy Field
Services and Chevron Phillips Chemical Company during the first nine months of
2000. Tosco's historical income statements have been adjusted for the pro forma
impact of the sale of the Avon refinery on August 31, 2000.
The Tosco-equivalent-common-share pro forma information shows the effect of
the merger from the perspective of an owner of Tosco common stock. The
information was computed by multiplying the Phillips pro forma information by
the exchange ratio of 0.80.
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 SEC and that we have incorporated by
reference in this document. See "Where You Can Find More Information." The
unaudited pro forma combined data below is 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 Phillips will experience after the merger.
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2000 DECEMBER 31,1999
------------------ ----------------
Phillips historical data, per common share
Net income--basic....................... $ 4.40 2.41
Net income--diluted..................... 4.37 2.39
Cash dividends.......................... 1.02 1.36
Book value at end of period............. 21.29 17.94
Phillips pro forma combined data, per
Phillips common share
Net income--basic....................... 4.36 2.97
Net income--diluted..................... 4.30 2.93
Cash dividends.......................... 1.02 1.36
Book value at end of period............. 32.93 --
Tosco historical data, per common share
Net income--basic....................... 2.53 2.97
Net income--diluted..................... 2.40 2.83
Cash dividends.......................... 0.21 0.27
Book value at end of period............. 16.96 14.65
Phillips pro forma combined data, per
Tosco-equivalent-common-share
Net income--basic....................... 3.49 2.38
Net income--diluted..................... 3.44 2.34
Cash dividends.......................... 0.82 1.09
Book value at end of period............. 26.34 --
11
RISK FACTORS
In addition to the other information contained in or incorporated by
reference in this document, you should carefully consider the following risk
factors in deciding whether to vote for approval of the merger agreement and
the merger, in the case of Tosco stockholders, or for approval of the issuance
of shares of Phillips common stock in the merger, in the case of Phillips
stockholders.
THE VALUE OF THE PHILLIPS COMMON STOCK THAT TOSCO STOCKHOLDERS RECEIVE IN
EXCHANGE FOR EACH SHARE OF TOSCO COMMON STOCK MAY FLUCTUATE.
When the merger is completed, each share of Tosco common stock will be
converted into 0.80 of a share of Phillips common stock. The merger agreement
does not contain any provision that would adjust this exchange ratio based on
fluctuations in the price of Phillips common stock or Tosco common stock. The
value of the consideration you receive will depend on the market price of
Phillips common stock at the time the merger is completed, which could be
different from the current price of Phillips common stock. While the parties
intend to work promptly toward completion of the merger, they cannot predict
with certainty whether delays will be encountered or the possible effects of
such delay.
PHILLIPS MAY BE UNABLE TO SUCCESSFULLY INTEGRATE TOSCO'S OPERATIONS.
The merger involves the integration of two companies that previously have
operated independently. The difficulties of combining the operations of the
companies include:
. the necessity of coordinating geographically separate organizations; and
. integrating personnel with diverse business backgrounds.
The process of integrating operations could cause an interruption of, or
loss of momentum in, the activities of one or more of the combined company's
businesses and the loss of key personnel. The diversion of management's
attention and any delays or difficulties encountered in connection with the
merger and the integration of the two companies' operations could have an
adverse effect on the business, results of operations or financial condition of
the combined company.
Among the factors considered by the Phillips Board of Directors and the
Tosco Board of Directors in connection with their respective approval and/or
adoption of the merger agreement and the merger were the opportunities for
economies of scale and operating efficiencies that could result from the
merger. See "The Merger--Recommendation of the Phillips Board of Directors;
Phillips' Reasons for the Merger" and "The Merger--Recommendation of the Tosco
Board of Directors; Tosco's Reasons for the Merger." There can be no assurance
that these synergies will be realized within the time periods contemplated or
realized at all.
THE TRADING PRICE OF PHILLIPS COMMON STOCK MAY BE AFFECTED BY FACTORS DIFFERENT
FROM THOSE THAT AFFECT THE PRICE OF TOSCO COMMON STOCK.
Upon completion of the merger, Tosco stockholders will become Phillips
stockholders. Phillips' business differs from that of Tosco, and Phillips'
results of operations, as well as the price of Phillips common stock, may be
affected by factors different from those affecting Tosco's results of
operations and the value of Tosco common stock. In particular, Phillips is
subject to fluctuations in the price of crude oil. For a discussion of
Phillips' business and various factors to consider in connection with its
business, see Phillips' Annual Report on Form 10-K for the year ended December
31, 1999, as amended, which is incorporated by reference in this document. See
"Where You Can Find More Information."
12
CAUTIONARY STATEMENT CONCERNING
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"), contains certain forward-looking statements with respect to
the financial condition, results of operations, plans, objectives, future
performance and business of each of Phillips and Tosco, 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" or similar expressions.
Phillips' and Tosco's managements believe that these forward-looking
statements are reasonable; however, you should not place undue reliance on
these statements, as they are based on management's 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:
. expected cost savings from the merger may not be fully realized or
realized within the expected time frame;
. revenues following the merger may be lower than expected;
. changes may occur in supply and demand for and the price of crude oil and
petroleum products;
. costs or difficulties related to the integration of the businesses of
Phillips and Tosco may be greater than expected;
. general economic conditions, either internationally or nationally or in
the jurisdictions in which Phillips and Tosco are doing business, may be
less favorable than expected;
. legislative or regulatory changes may adversely affect the businesses in
which Phillips and Tosco are engaged;
. there may be environmental risks and liability under federal, 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 Phillips' and Tosco's businesses generally as described in
Phillips' and Tosco's filings with the SEC.
13
PHILLIPS SPECIAL MEETING
GENERAL
This joint proxy statement/prospectus is first being mailed by Phillips to
the holders of Phillips common stock, on or about March 7, 2001, and is
accompanied by the notice of the Phillips special meeting and a form of proxy
that is solicited by the Phillips Board of Directors for use at the Phillips
special meeting, to be held at the Adams Building, 4th Street and Keeler
Avenue, Bartlesville, Oklahoma, on Wednesday, April 11, 2001, at 10:00 a.m.,
local time, and at any adjournments or postponements of the Phillips special
meeting.
MATTERS TO BE CONSIDERED
The purpose of the Phillips special meeting is:
(1) to approve the issuance of Phillips common stock in connection
with the merger agreement;
(2) to approve an amendment to Phillips' Restated Certificate of
Incorporation to increase the number of shares of authorized
Phillips common stock from 500 million shares to one billion
shares; and
(3) to consider any other matters that may properly come before the
Phillips special meeting.
Phillips stockholders also may be asked to vote upon a proposal to adjourn
or postpone the Phillips special meeting. Phillips could use any adjournment or
postponement of the Phillips special meeting for the purpose, among others, of
allowing additional time for soliciting additional votes to approve the
issuance of shares of Phillips common stock in the merger or to approve the
amendment to Phillips' Restated Certificate of Incorporation.
PROXIES
The Phillips Board of Directors is soliciting your proxy to give you the
opportunity to vote at the Phillips special meeting. When you deliver a valid
proxy, the shares represented by that proxy will be voted in accordance with
your instructions.
You may grant a proxy by:
(1) signing and mailing your proxy card; or
(2) calling a toll-free telephone number and following the recorded
instructions.
Delaware law permits a stockholder to grant a proxy in each of these ways.
However, if your shares are not registered in your own name, your bank, broker
or other institution holding your shares may not offer telephone proxy voting.
If your proxy card does not include telephone voting instructions, please
complete and return your proxy card by mail. If you are a holder of record, or
if your shares are held in street name and you have a valid proxy from your
broker, you also may cast your vote in person at the meeting.
Mail
To grant your proxy by mail, please complete your proxy card, and sign, date
and return it in the enclosed, postage-paid envelope. To be valid, a returned
proxy card must be signed and dated.
Telephone
You may use a toll-free telephone number listed on your proxy card to grant
your proxy. You must have your proxy card ready and:
(1) dial the toll-free number,
(2) enter the Control Number located on your proxy card, and
(3) follow the recorded instructions.
14
In Person
If you attend the Phillips special meeting in person, you may vote your
shares by ballot at the Phillips special meeting if you are a holder of record,
or if your shares are held in street name and you have a valid proxy from your
broker.
You may revoke your proxy at any time prior to the closing of the polls at
the Phillips special meeting by delivering to the Secretary of Phillips a
signed notice of revocation or a later-dated signed proxy or by attending the
Phillips special meeting and voting in person. Attendance at the Phillips
special meeting will not in itself constitute the revocation of a proxy.
Written notices of revocation and other communications with respect to the
revocation of Phillips proxies should be addressed to Phillips Petroleum
Company, Phillips Building, Bartlesville, Oklahoma 74004, Attention: Corporate
Secretary. All shares represented by valid proxies received pursuant to this
solicitation, and not revoked before they are exercised, will be voted in the
manner specified in the proxies.
IF YOU MAKE NO SPECIFICATION ON YOUR PROXY, YOUR PROXY WILL BE VOTED IN
FAVOR OF THE APPROVAL OF THE ISSUANCE OF SHARES OF PHILLIPS COMMON STOCK IN
CONNECTION WITH THE MERGER AND IN FAVOR OF THE APPROVAL OF THE AMENDMENT TO
PHILLIPS' RESTATED CERTIFICATE OF INCORPORATION.
The Phillips Board of Directors currently is unaware of any other matters
that may be presented for action at the Phillips special meeting. If other
matters do properly come before the Phillips special meeting, however, it is
intended that shares represented by proxies will be voted, or not voted, by the
individuals named in the proxies in their discretion. No proxy that is voted
against approval of the issuance of shares of Phillips common stock in the
merger will be voted in favor of any adjournment or postponement of the
Phillips special meeting for the purpose of soliciting additional proxies.
SOLICITATION OF PROXIES
Phillips will bear the entire cost of soliciting proxies from Phillips
stockholders, except that Phillips and Tosco each has agreed to pay one-half
the costs of filing, printing and mailing this joint proxy statement/prospectus
and related proxy materials. In addition to the solicitation of proxies by
mail, Phillips will request that banks, brokers and other record holders send
proxies and proxy materials to the beneficial owners of Phillips common stock
held by them and secure their voting instructions if necessary. Phillips will
reimburse those record holders for their reasonable expenses in so doing.
Phillips has also made arrangements with Georgeson Shareholder Communications,
Inc. to assist it in soliciting proxies, and has agreed to pay customary fees
plus expenses for those services. Phillips also may use several of its regular
employees, who will not be specially compensated, to solicit proxies from
Phillips stockholders, either personally or by telephone, telegram, facsimile
or special delivery letter.
RECORD DATE AND VOTING RIGHTS
In accordance with the provisions of Delaware law, Phillips' Bylaws and the
rules of the New York Stock Exchange, Phillips has fixed March 5, 2001, as the
record date for determining those Phillips stockholders entitled to notice of
and to vote at the Phillips special meeting. Accordingly, only Phillips
stockholders of record at the close of business on the Phillips record date
will be entitled to notice of and to vote at the Phillips special meeting. At
the close of business on the Phillips record date, there were 283,561,070
shares of Phillips common stock outstanding held by 48,184 holders of record.
The presence, in person or by proxy, of shares of Phillips common stock
representing a majority of shares of Phillips common stock outstanding and
entitled to vote on the Phillips record date is necessary to constitute a
quorum at the Phillips special meeting. Each share of Phillips common stock
outstanding on the Phillips record date entitles its holder to one vote.
Shares of Phillips common stock held by persons attending the Phillips
special meeting but not voting, and shares of Phillips common stock for which
Phillips has received proxies but with respect to which holders of
15
those shares have abstained from voting, will be counted as present at the
Phillips special meeting for purposes of determining the presence or absence of
a quorum for the transaction of business at the Phillips special meeting, but
will have the same effect as votes cast at the Phillips special meeting against
approval of the issuance of shares of Phillips common stock in the merger.
Brokers that hold shares of Phillips common stock in nominee or street name for
customers who are the beneficial owners of those shares are prohibited from
giving a proxy to vote shares held for those customers on the matters to be
considered and voted upon at the Phillips special meeting without specific
instructions from those customers. These so-called "broker non-votes" will be
counted for purposes of determining whether a quorum exists, but, assuming a
quorum exists, have the same effect as votes cast at the Phillips special
meeting against approval of the issuance of shares of Phillips common stock in
the merger.
Under applicable Delaware law, Phillips' Restated Certificate of
Incorporation, Phillips' Bylaws and the rules of the New York Stock Exchange,
(1) approval of the issuance of shares of Phillips common stock in connection
with the merger requires the affirmative vote of the majority of the shares of
Phillips common stock represented at the Phillips special meeting, provided
that holders of a majority of the shares of Phillips common stock entitled to
vote at the Phillips special meeting do in fact vote, or abstain from voting,
on the proposal, and (2) approval of the amendment to Phillips' Restated
Certificate of Incorporation requires the affirmative vote of holders of a
majority of the shares of Phillips common stock outstanding and entitled to
vote on the amendment. Because approval of the issuance of Phillips common
stock in the merger requires the affirmative vote of the majority of the shares
of Phillips common stock represented at the Phillips special meeting,
abstentions and broker non-votes will count against the share issuance.
Because approval of the amendment to Phillips' Restated Certificate of
Incorporation requires the affirmative vote of holders of a majority of the
shares of Phillips common stock outstanding and entitled to vote on the
amendment, abstentions and broker non-votes will have the same effect as votes
against the proposal.
THE PHILLIPS BOARD OF DIRECTORS URGES PHILLIPS STOCKHOLDERS TO COMPLETE,
DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE OR AUTHORIZE THE INDIVIDUALS NAMED ON YOUR PROXY CARD TO
VOTE YOUR SHARES BY TELEPHONE.
As of the Phillips record date, directors and executive officers of Phillips
beneficially owned 1,602,855 shares of Phillips common stock (including shares
held in Phillips savings plans and 757,336 shares subject to Phillips stock
options exercisable within 60 days). As of the Phillips record date, shares
held by directors and executive officers of Phillips entitle them to exercise
less than one percent of the voting power of the Phillips common stock entitled
to vote at the Phillips special meeting. As of the Phillips record date,
directors and executive officers of Tosco owned no shares of Phillips common
stock. See "Information About Phillips--Beneficial Ownership of Directors and
Management of Phillips."
Additional information with respect to beneficial ownership of Phillips
common stock by directors and executive officers of Phillips is incorporated by
reference to Phillips' Annual Report on Form 10-K for the year ended December
31, 1999, as amended. See "Information About Phillips--Beneficial Ownership of
Certain Phillips Stockholders" and "Where You Can Find More Information."
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 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 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 who
instruct the trustees to vote a pro rata portion of these shares. 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.
16
Trustees of the Phillips international savings plans other than the Canadian
plan will receive a voting instruction card to instruct the trustee of the
Phillips Compensation and Benefits Trust, or 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 the trustees receive
instructions from plan participants. If you are a regular employee, 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 trustee in accordance with instructions from Phillips employees in
the same manner and proportion as instructed by eligible employee participants
who instruct the trustee to vote a pro rata portion of these shares. Voting
instructions to the trustees of the Phillips savings plans and the CBT may be
either in writing or by means of the respective plan's or trust's telephone
voting procedures.
RECOMMENDATION OF THE PHILLIPS BOARD OF DIRECTORS
The Phillips Board of Directors has approved and adopted the merger
agreement and the merger. The Phillips Board of Directors believes that the
issuance of shares of Phillips common stock in connection with the merger is in
the best interests of Phillips and Phillips stockholders, and recommends that
Phillips stockholders vote "FOR" approval of the issuance of Phillips common
stock in the merger and "FOR" approval of the amendment to Phillips' Restated
Certificate of Incorporation. See "The Merger--Recommendation of the Phillips
Board of Directors; Phillips' Reasons for the Merger."
17
TOSCO SPECIAL MEETING
GENERAL
This joint proxy statement/prospectus is first being mailed by Tosco to the
holders of Tosco common stock, on or about March 7, 2001, and is accompanied by
the notice of the Tosco special meeting and a form of proxy that is solicited
by the Tosco Board of Directors for use at the Tosco special meeting, to be
held on Wednesday, April 11, 2001, at 10:00 a.m., local time, at The Hyatt
Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich, Connecticut, and at
any adjournments or postponements of the Tosco special meeting.
MATTERS TO BE CONSIDERED
The purpose of the Tosco special meeting is to approve the merger agreement
and the merger, and to consider any other matters that may properly come before
the Tosco special meeting.
Tosco stockholders also may be asked to vote upon a proposal to adjourn or
postpone the Tosco special meeting. Tosco could use any adjournment or
postponement of the Tosco special meeting for the purpose, among others, of
allowing additional time for soliciting additional votes to approve and adopt
the merger agreement and the merger.
PROXIES
The Tosco Board of Directors is soliciting your proxy to give you the
opportunity to vote at the Tosco special meeting. When you deliver a valid
proxy, the shares represented by that proxy will be voted in accordance with
your instructions.
You may grant a proxy by signing and mailing your proxy card. If you are a
holder of record, or if your shares are held in street name and you have a
valid proxy from your broker, you may also cast your vote in person at the
meeting.
Mail
To grant your proxy by mail, please complete your proxy card, and sign, date
and return it in the enclosed, postage-paid envelope. To be valid, a returned
proxy card must be signed and dated.
In Person
If you attend the Tosco special meeting in person, you may vote your shares
by ballot at the Tosco special meeting if you are a holder of record, or if
your shares are held in street name and you have a valid proxy from your
broker.
You may revoke your proxy at any time prior to the closing of the polls at
the Tosco special meeting by delivering to the Secretary of Tosco a signed
notice of revocation or a later-dated signed proxy or by attending the Tosco
special meeting and voting in person. Attendance at the Tosco special meeting
will not in itself constitute the revocation of a proxy.
Written notices of revocation and other communications with respect to the
revocation of Tosco proxies should be addressed to Tosco Corporation, 1700 East
Putnam Road, Old Greenwich, Connecticut 06870, Attention: Corporate Secretary.
All shares represented by valid proxies received pursuant to this solicitation,
and not revoked before they are exercised, will be voted in the manner
specified in the proxies.
IF YOU MAKE NO SPECIFICATION ON YOUR PROXY CARD, YOUR PROXY WILL BE VOTED IN
FAVOR OF THE APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
18
The Tosco Board of Directors currently is unaware of any other matters that
may be presented for action at the Tosco special meeting. If other matters do
properly come before the Tosco special meeting, however, it is intended that
the shares represented by proxies will be voted, or not voted, by the
individuals named in the proxies in their discretion. No proxy that is voted
against approval of the merger agreement and the merger will be voted in favor
of any adjournment or postponement of the Tosco special meeting for the purpose
of soliciting additional proxies.
SOLICITATION OF PROXIES
Tosco will bear the entire cost of soliciting proxies from Tosco
stockholders, except that Phillips and Tosco each has agreed to pay one-half
the costs of filing, printing and mailing this joint proxy statement/prospectus
and related proxy materials. In addition to the solicitation of proxies by
mail, Tosco will request that banks, brokers and other record holders send
proxies and proxy materials to the beneficial owners of Tosco common stock held
by them and secure their voting instructions if necessary. Tosco will reimburse
those record holders for their reasonable expenses in so doing. Tosco has also
made arrangements with The Altman Group to assist it in soliciting proxies, and
has agreed to pay customary fees plus expenses for those services. Tosco also
may use several of its regular employees, who will not be specially
compensated, to solicit proxies from Tosco stockholders, either personally or
by telephone, telegram, facsimile, Internet or special delivery letter.
RECORD DATE AND VOTING RIGHTS
In accordance with the provisions of Nevada law, Tosco's Bylaws and the
rules of the New York Stock Exchange, Tosco has fixed March 5, 2001, as the
record date for determining those Tosco stockholders entitled to notice of and
to vote at the Tosco special meeting. Accordingly, only Tosco stockholders of
record at the close of business on the Tosco record date will be entitled to
notice of and to vote at the Tosco special meeting. At the close of business on
the Tosco record date, there were 154,225,788 shares of Tosco common stock
outstanding held by 7,953 holders of record. The presence, in person or by
proxy, of shares of Tosco common stock representing a majority of Tosco shares
outstanding and entitled to vote on the Tosco record date is necessary to
constitute a quorum at the Tosco special meeting. Each share of Tosco common
stock outstanding on the Tosco record date entitles its holder to one vote.
Shares of Tosco common stock held by persons attending the Tosco special
meeting but not voting, and shares of Tosco common stock for which Tosco has
received proxies but with respect to which holders of those shares have
abstained from voting, will be counted as present at the Tosco special meeting
for purposes of determining the presence or absence of a quorum for the
transaction of business at the Tosco special meeting, but will have the same
effect as votes against the merger agreement and the merger. Brokers that hold
shares of Tosco common stock in nominee or street name for customers who are
the beneficial owners of those shares are prohibited from giving a proxy to
vote shares held for those customers on the matters to be considered and voted
upon at the Tosco special meeting without specific instructions from those
customers. These so-called broker non-votes will not be counted for purposes of
determining whether a quorum exists and will not be voted at the Tosco special
meeting.
Under applicable Nevada law and Tosco's Amended and Restated Articles of
Incorporation and Tosco's Bylaws, the approval of the merger agreement and the
merger requires the affirmative vote of the holders of a majority of the
outstanding shares of Tosco common stock entitled to vote at the Tosco special
meeting.
Because approval of the merger agreement and the merger requires the
affirmative vote of the holders of a majority of the outstanding shares of
Tosco common stock entitled to vote at the Tosco special meeting, abstentions
and broker non-votes will have the same effect as votes against approval of the
merger agreement and the merger.
19
THE TOSCO BOARD OF DIRECTORS URGES TOSCO STOCKHOLDERS TO COMPLETE, DATE AND
SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-
PAID ENVELOPE
As of the Tosco record date, directors and executive officers of Tosco
beneficially owned 7,293,404 shares of Tosco common stock (including shares
held in Tosco savings plans and 3,375,050 shares subject to Tosco stock options
exercisable within 60 days). As of the Tosco record date, shares held by
directors and executive officers of Tosco entitle them to exercise
approximately 2.4% of the voting power of Tosco common stock entitled to vote
at the Tosco special meeting. As of the Tosco record date, directors and
executive officers of Phillips owned no shares of Tosco common stock. See
"Information About Tosco--Beneficial Ownership of Directors and Management of
Tosco."
Additional information with respect to beneficial ownership of Tosco common
stock by directors and executive officers of Tosco is incorporated by reference
to Tosco's Annual Report on Form 10-K for the year ended December 31, 1999. See
"Information About Tosco--Beneficial Ownership of Certain Tosco Stockholders"
and "Where You Can Find More Information."
If you are a participant in a Tosco savings plan, your proxy card also will
serve as a voting instruction card for the trustee of that Tosco savings plan
with respect to the shares held in your account. The trustee will vote
unallocated and uninstructed shares of Tosco common stock in the same
proportion as the trustee votes the shares with respect to which the trustee
has received instructions. The trustee will act as provided above as long as it
is consistent with applicable law.
RECOMMENDATION OF THE TOSCO BOARD OF DIRECTORS
The Tosco Board of Directors has unanimously adopted the merger agreement
and the merger. The Tosco Board of Directors believes that the merger agreement
and the merger are in the best interests of Tosco and Tosco stockholders, and
recommends that Tosco stockholders vote "FOR" approval of the merger agreement
and the merger. See "The Merger--Recommendation of the Tosco Board of
Directors; Tosco's Reasons for the Merger."
20
THE MERGER
GENERAL
Each of the Phillips Board of Directors and the Tosco Board of Directors has
approved and/or adopted the merger agreement and the merger. As a result of the
merger, Tosco will become a wholly owned subsidiary of Phillips, and Tosco
stockholders will have their shares of Tosco common stock converted into newly
issued shares of Phillips common stock at a rate of 0.80 of a share of Phillips
common stock for each share of Tosco common stock.
BACKGROUND OF THE MERGER
Phillips and Tosco have had a business relationship for a number of years,
as Phillips sells crude oil to Tosco's refineries. During the past few years,
Phillips has studied and reviewed a variety of strategic options with regard to
its RM&T business, including seeking a possible joint venture partner, because
Phillips believed that its RM&T business lacked the size and scale to compete
and grow. By late 2000, Phillips' management had begun to conclude that no
acceptable joint venture partner existed and that Phillips would be better
served to explore other options with regard to its RM&T business. Tosco had
made a number of acquisitions of RM&T assets over the past few years, but by
late 2000, Tosco's management had begun to conclude that it would be difficult
to continue to acquire quality RM&T assets in the United States as many, if not
most, of such assets were spoken for and that further growth would likely need
to come from outside the RM&T realm.
In late December 2000, Thomas D. O'Malley, Chairman of the Board and Chief
Executive Officer of Tosco, called James J. Mulva, Chairman of the Board and
Chief Executive Officer of Phillips. Mr. O'Malley stated that he was aware that
Phillips had been attempting to do a joint venture with its RM&T assets, which
had not been completed, and that Tosco might be interested in acquiring those
assets. They agreed to meet after the holidays. On January 3, 2001, Mr.
O'Malley and Mr. Mulva met in New York City and discussed the RM&T business and
strategic matters. Mr. O'Malley stated his belief that it would be more
difficult for Tosco to expand its domestic RM&T business and that Tosco might
need to integrate by acquiring E&P assets or aligning itself with a company
with such assets. Mr. Mulva and Mr. O'Malley agreed that exploratory
discussions between the two companies regarding a combination might be
productive.
On January 10, 2001, John E. Lowe, then Senior Vice President--Planning and
Strategic Transactions of Phillips, and Jefferson F. Allen, President and Chief
Financial Officer of Tosco, met in New York City and generally discussed the
respective assets, operations and historical financial results of the two
companies and the potential benefits of a combination between Phillips and
Tosco.
On January 17, 2001, Mr. Lowe and Steve Percy, then Senior Vice President--
Refining, Marketing and Transportation of Phillips, met with Mr. Allen in New
York City and discussed Tosco's operations, prospects and potential synergies
and Phillips' existing RM&T assets.
On January 19, 2001, Mr. Mulva and Mr. O'Malley met in New York City to
discuss the possibility of a combination between Phillips and Tosco. Among the
matters discussed were the complementary operations of the two RM&T businesses,
the location of the headquarters of a combined RM&T business, Mr. O'Malley's
role in the management of a combined RM&T business and the possibility that Mr.
O'Malley might join the Phillips Board of Directors should a combination occur.
Mr. Mulva and Mr. O'Malley agreed that none of these matters would be
controversial if an agreement on price could be reached. At this meeting, Mr.
Mulva indicated that Phillips would be willing to offer 0.74 of a share of
Phillips common stock for each share of Tosco common stock, subject to due
diligence, which he believed could be completed quickly (on January 18, 2001,
Phillips common stock closed at $55.125). Mr. O'Malley stated his belief that a
40% premium over Tosco's stock price of approximately $33.00 per share would be
fair and appropriate. No agreement on price was reached but Mr. Mulva and Mr.
O'Malley agreed to continue studying the matter and to meet again the following
week.
Between January 19 and January 25, 2001, Mr. Mulva contacted each of the
members of the Phillips Board of Directors and briefed each of them on the
discussions with Tosco. Mr. O'Malley briefed all of the
21
members of the Tosco Board of Directors on the discussions with Phillips. The
entire Tosco Board of Directors met on January 25, 2001, and had extensive
discussions on the proposed transaction, including detailed discussions with
senior management of Tosco. The Tosco Board of Directors authorized Mr.
O'Malley to continue discussions with Phillips.
On January 26, 2001, Mr. Mulva and Mr. O'Malley met in Phoenix, Arizona and
further discussed a possible combination between Phillips and Tosco. Mr.
O'Malley requested an exchange ratio of 0.80 of a share of Phillips common
stock per share of Tosco common stock and this would be subject to a "collar"
based on Phillips stock price. Mr. Mulva stated that Phillips would be willing
to offer a fixed exchange ratio of 0.77 of a share of Phillips common stock for
each share of Tosco common stock. Mr. Mulva indicated that he would be willing
to ask Mr. O'Malley to join the Phillips Board of Directors after the merger
and to have the headquarters of the combined RM&T operations located in the
Phoenix area. Mr. O'Malley requested time to consider this proposal and agreed
to call Mr. Mulva on Monday, January 29th. Mr. O'Malley reviewed Phillips'
proposal with the Tosco directors and senior management. They determined that
Phillips' proposal was not sufficient.
On January 29, 2001, Mr. O'Malley telephoned Mr. Mulva to advise him of
Tosco's position. Mr. O'Malley and Mr. Mulva agreed to pursue a transaction at
an exchange ratio of 0.80 of a share of Phillips stock per share of Tosco
common stock, subject to resolution of the collar issue, due diligence,
negotiation of a definitive agreement and approval of the Boards of Directors
of both companies. During the period from January 29, 2001 through February 3,
2001, Mr. Mulva and Mr. O'Malley had telephone conversations with the members
of the Phillips Board of Directors and the Tosco Board of Directors,
respectively, advising them of the status of the merger negotiations.
On January 30, 2001, Phillips' outside legal counsel sent a draft merger
agreement to Tosco's outside legal counsel. Phillips and Tosco and their
respective outside legal counsel began negotiating the agreement on February 1,
2001 and negotiations continued through February 3rd. From January 31 through
February 4, 2001, the parties conducted due diligence reviews of each other.
Tosco retained Merrill Lynch as its financial advisor, and Phillips retained
Morgan Stanley as its financial advisor. On February 2, 2001, Phillips and
Tosco entered into a formal written mutual confidentiality agreement in order
to facilitate the exchange of information in connection with their due
diligence. At these meetings, there were discussions regarding each company's
financial, accounting and tax issues, environmental issues, litigation,
employee benefits, and operations and management philosophies.
On the evening of February 2, 2001, Mr. Mulva and Mr. Lowe met with Mr.
O'Malley and Mr. Allen in New York City to discuss the status of the
negotiations. Mr. O'Malley advised Mr. Mulva that he believed Tosco could
proceed without a collar, pending a final decision by the Tosco Board of
Directors.
On the afternoon of February 3, 2001, the Phillips Board of Directors held a
special meeting by teleconference at which senior management and advisors of
Phillips reviewed their discussions and negotiations with Tosco regarding a
merger, as well as the results of their due diligence investigation of Tosco.
All members of the Phillips Board of Directors except one were present at the
meeting. Senior management reviewed with the Phillips Board of Directors
detailed information with respect to Tosco, Phillips and the proposed
transaction. Morgan Stanley made a presentation to the Phillips Board of
Directors about financial matters with respect to the proposed transaction.
Phillips' outside legal counsel reviewed with the Phillips Board of Directors
the terms of the proposed merger agreement and employment letter with Mr.
O'Malley and the actions necessary to approve the transaction. The Phillips
Board of Directors, by unanimous vote of those directors present, resolved to
approve and adopt the merger agreement and the merger, subject to it being
approved by the Tosco Board of Directors and to Phillips' management's
continued satisfaction with ongoing due diligence.
On the afternoon of February 4, 2001, the Tosco Board of Directors held a
special meeting at which senior management and advisors of Tosco reviewed their
discussions and negotiations with Phillips regarding a merger, as well as the
results of their due diligence investigation of Phillips. Senior management and
Merrill Lynch reviewed with the Tosco Board of Directors detailed financial
information with respect to Phillips,
22
Tosco and the potential transaction. Tosco's outside legal counsel also
reviewed with the Tosco Board of Directors their obligations under Nevada law,
the terms of the proposed merger agreement and employment letter with Mr.
O'Malley and the actions necessary to approve the transaction. The Tosco Board
of Directors unanimously resolved to approve and adopt the merger agreement and
the merger.
Thereafter, the merger agreement and employment letter were executed and the
transaction was publicly announced on the afternoon of February 4, 2001.
RECOMMENDATION OF THE PHILLIPS BOARD OF DIRECTORS; PHILLIPS' REASONS FOR THE
MERGER
The Phillips Board of Directors believes that the merger is fair to and in
the best interests of Phillips and Phillips stockholders, has approved and
adopted the merger agreement and recommends that Phillips stockholders vote
"FOR" approval of the issuance of Phillips common stock in the merger.
In reaching its decision, the Phillips Board of Directors consulted with
Phillips' management and its financial and legal advisors, and considered a
variety of factors, including the following material factors:
. Business, Operations and Financial Condition. The Phillips Board of
Directors considered the current and historical financial condition and
results of operations of both Phillips and Tosco and the assets,
earnings and prospects of each company, including the results of
Phillips' due diligence review. The Phillips Board of Directors reviewed
the combined company's anticipated future financial performance. The
Phillips Board of Directors considered the fact that the combined
company would have a stronger balance sheet, improving its access to
capital in the future. The Phillips Board of Directors also took into
account the effects of a potential stock buyback by Phillips.
. Strengthened Strategic Position. The Phillips Board of Directors
considered that the merger would transform Phillips into a stronger
major integrated oil company with the benefits of increased size and
scale. The Phillips Board of Directors considered that the expanded size
and financial strength of the combined company, together with its
strengthened RM&T operations, would improve stability of the combined
company's businesses and earnings in varying economic and market
climates.
. Positioned for Further Growth. The Phillips Board of Directors believed
that the merger would improve Phillips' positioning for further growth
by creating a larger, stronger integrated oil company with greater
financial capacity. The Phillips Board of Directors considered that the
increased cash flow and access to capital resulting from the Tosco
acquisition would allow Phillips to aggressively pursue other
opportunities in the future, particularly with regard to acquisition of
E&P assets. The combined company's ability to achieve these goals will
depend on various factors, a number of which will be beyond its control,
including economic conditions, commodity prices and unanticipated
changes in business conditions, and, therefore, there can be no
assurance that these results will be achieved. See "Cautionary Statement
Concerning Forward-Looking Statements."
. Alternatives with Respect to the RM&T Business. The Phillips Board of
Directors reviewed other possible alternatives to the acquisition of
Tosco, in particular the possibility of a joint venture of Phillips'
RM&T business. The Phillips Board of Directors considered Phillips'
management's belief that Phillips' current RM&T business lacked the
size, scale and resources to compete and grow. The Phillips Board of
Directors also considered the fact that prior attempts at a joint
venture of Phillips' RM&T business had been unsuccessful and noted the
difficulty of finding a suitable joint venture partner for the RM&T
business. Past negotiations and discussions on a RM&T joint venture had
not succeeded due primarily to disagreements with regard to problems
with control over the joint venture, financial flexibility and the
strategic vision for the joint venture. The Phillips Board of Directors
noted that the acquisition of Tosco presented a unique opportunity to
expand Phillips' RM&T business and give it the size and scale to
effectively compete.
. Synergies. The Phillips Board of Directors reviewed the potential
strategic and other benefits of the merger, including the complementary
nature of the Tosco and Phillips' RM&T businesses and the
23
opportunity for significant cost savings. The Phillips Board of Directors
noted that, although no assurances can be given that any particular level
of synergies will be achieved, Phillips' management had identified annual
net pre-tax synergies of approximately $250 million, of which about one-
half would be realized in fiscal year 2001 and the full amount in fiscal
year 2002. The Phillips Board of Directors also considered that combining
the complementary skills and assets of the two companies--combining
Tosco's refining and convenience store experience and Phillips' branded
wholesale skills, as well as applying Phillips' technology to Tosco's
system--could result in additional synergistic benefits. See "--Management
and Operations Following the Merger" and "Cautionary Statement Concerning
Forward-Looking Statements."
. Terms of the Merger Agreement. The Phillips Board of Directors, with the
assistance of counsel, considered the general terms of the merger
agreement:
--Fixed Exchange Ratio. The Phillips Board of Directors considered the
fact that the fixed exchange ratio provides certainty as to the
number of shares of Phillips common stock to be issued to Tosco
stockholders and the percentage of Phillips common stock that current
Tosco stockholders will own after the merger. The Phillips Board of
Directors also considered the premium that the exchange ratio
implied.
--No Solicitation; Termination Fee. The Phillips Board of Directors
reviewed the provisions of the merger agreement that limit Phillips'
and Tosco's ability to solicit other offers and the requirement that
Tosco pay Phillips a termination fee of $250 million if the merger
agreement is terminated due to a superior proposal to acquire Tosco.
The Phillips Board of Directors also noted that the payment of the
$250 million termination fee is reciprocal if the merger agreement is
terminated as a result of a superior proposal to acquire Phillips by
a third party. The Phillips Board of Directors recognized that these
provisions could somewhat reduce the flexibility of Phillips in
connection with an alternative transaction, but the Phillips Board of
Directors believed that such provisions were likely to help ensure
the successful consummation of the transaction and were reasonable
under the circumstances.
--Conditions to Consummation. The Phillips Board of Directors reviewed
with counsel the conditions to consummation of the merger, in
particular the likelihood of obtaining the necessary antitrust
approvals. While the Phillips Board of Directors believes that all
such approvals will be obtained in a timely fashion, the Phillips
Board of Directors also noted that Phillips is not required to agree
to any divestitures or other actions that could reasonably be
expected to have a material adverse effect on Phillips or Tosco or to
substantially impair the expected benefits of the merger to Phillips.
. Opinion of Financial Advisor. The Phillips Board of Directors considered
the opinion of Morgan Stanley that, as of the date of the opinion and
based on and subject to the matters described in its opinion, the
exchange ratio was fair from a financial point of view to Phillips. See
"--Opinion of Phillips' Financial Advisor."
The foregoing discussion of the information and factors considered by the
Phillips Board of Directors is not exhaustive but does include the material
factors considered by the Phillips Board of Directors. The Phillips Board of
Directors did not quantify or assign any relative or specific weights to the
various factors that it considered. Rather, the Phillips Board of Directors
based its recommendation on the totality of the information presented to and
considered by it. In addition, individual members of the Phillips Board of
Directors may have given differing weights to different factors.
THE PHILLIPS BOARD OF DIRECTORS RECOMMENDS THAT PHILLIPS STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE ISSUANCE OF PHILLIPS COMMON STOCK IN THE MERGER.
24
RECOMMENDATION OF THE TOSCO BOARD OF DIRECTORS; TOSCO'S REASONS FOR THE MERGER
The Tosco Board of Directors believes that the terms of the merger are
advisable, fair to and in the best interests of Tosco and Tosco stockholders,
has adopted the merger agreement and recommends that Tosco stockholders vote
"FOR" approval of the merger agreement.
In reaching its decision, the Tosco Board of Directors consulted with
Tosco's management and its financial and legal advisors, and considered a
variety of factors, including the following material factors:
. Premium. The Tosco Board of Directors considered that the exchange ratio
provided for in the merger agreement represents a premium of
approximately 34% for the Tosco common stock based upon the respective
closing sale prices for the shares of Tosco and Phillips common stock on
February 2, 2001, the last trading day prior to the issuance of the
joint press release by Phillips and Tosco announcing the signing of the
merger agreement. The Tosco Board of Directors also considered the
historical trading prices of Tosco common stock and Phillips common
stock.
. Opportunity to Participate in the Combined Company. The Tosco Board of
Directors considered the fact that a stock-for-stock transaction would
allow Tosco stockholders to participate in the growth and opportunities
of the combined company, and to continue to have an investment in the
petroleum industry through a larger and more diversified enterprise. The
Tosco Board of Directors also considered its knowledge of Phillips and
its belief that Phillips is a growing and well-managed enterprise. In
addition, the Tosco Board of Directors considered the fact that the
market capitalization of the combined company will be significantly
increased, allowing the combined company to have increased access to
debt and equity markets.
. Synergies. The Tosco Board of Directors reviewed the potential strategic
and other benefits of the merger, including the complementary nature and
related expansion of various Tosco and Phillips businesses and the
opportunity for significant cost savings. The Tosco Board of Directors
believes that these cost savings are a potential benefit that Tosco
stockholders may realize as holders of shares of Phillips common stock.
The Tosco Board of Directors noted that, although no assurances can be
given that any particular level of synergies will be achieved, Tosco
management had identified annual net pre-tax synergies of approximately
$250 million, of which about one-half would be realized in fiscal year
2001 and the full amount in fiscal year 2002. See "--Management and
Operations Following the Merger" and "Cautionary Statement Concerning
Forward-Looking Statements."
. Alternatives. The Tosco Board of Directors reviewed possible
alternatives to a negotiated merger with Phillips, including the
possibility of an alternative transaction with a third party with
respect to all or part of Tosco's businesses, the possibility of
acquiring another company to expand Tosco's markets, and the possibility
of continuing to operate Tosco as an independent company. In this
regard, the Tosco Board of Directors took into account other likely
combination candidates and other potential buyers or targets. The Tosco
Board of Directors, with its financial advisors, considered the identity
of potential parties to a possible alternative transaction, but no other
transaction as timely or as favorable seemed likely, given the recent
alignments in the industry, or presented as favorable a strategic
combination of upstream and downstream assets as the combination of
Phillips and Tosco. The Tosco Board of Directors considered the value to
Tosco stockholders of the potential alternatives, including remaining an
independent company, and the timing and likelihood of achieving
additional value from these alternatives. The Tosco Board of Directors
also considered the probability that Tosco stockholders would prefer an
immediate favorable transaction rather than have Tosco implement a long-
term strategic plan for profitable growth, which would be impacted by
the typical risks associated with implementation, as well as general
market and economic risks. After considering the above matters and the
advice of its financial advisors, the Tosco Board of Directors concluded
that the merger with Phillips was superior to any currently available
alternatives and was the best fit of any likely alternative.
. Timing of Sale. The Tosco Board of Directors noted Tosco's management's
belief that industry fundamentals were improving and would continue to
improve over the near term, but that the long-term was filled with
uncertainty. The Tosco Board of Directors considered the time required
to execute
25
Tosco's long-range business and growth plans. The Tosco Board of Directors
also considered that an immediate sale of Tosco in exchange for shares of
Phillips stock was an opportunity for stockholders to participate in the
benefits of Tosco's long-range business and growth opportunities after the
merger by continuing to hold shares of Phillips.
. Trend of Consolidation. The Tosco Board of Directors considered the
recent trend of consolidation in the petroleum industry, including the
likelihood of continuing consolidation, and the corresponding decrease
in the number of available strategic partners for Tosco. The Tosco Board
of Directors determined that participation in the industry-wide
consolidation was important to Tosco's future prospects. The Tosco Board
of Directors concluded that the combined company, with large petroleum
E&P assets, together with the combined refining and marketing assets and
greater financial strength, would likely be better able to compete in
this environment.
. Terms of Merger Agreement. The Tosco Board of Directors, with the
assistance of counsel, considered the general terms of the merger
agreement, which it found to be balanced and reciprocal in nature. In
addition, the Tosco Board of Directors considered the likelihood of
satisfaction of all conditions to the consummation of the merger. See
"The Merger Agreement." The Tosco Board of Directors, with the
assistance of counsel, also considered in detail several specific
provisions of the merger agreement, including the following:
--Fixed Exchange Ratio. The Tosco Board of Directors considered the
fact that the fixed exchange ratio provides certainty as to the
number of shares of Phillips common stock that will be issued to
Tosco stockholders, but does not provide any value protection for
Tosco stockholders in the event that the price of Phillips common
stock falls prior to the consummation of the merger. On the other
hand, the Tosco Board of Directors noted that in the event the value
of the shares of common stock of Phillips rises prior to the
consummation of the merger, the Tosco stockholders will get the
benefit of that rise in value.
--No Solicitation; Termination Fee. The Tosco Board of Directors
reviewed the provisions of the merger agreement that limit Tosco's
ability to solicit other offers and the requirement that Tosco pay
Phillips a termination fee of $250 million if the merger agreement is
terminated due to a superior proposal to acquire Tosco. The Tosco
Board of Directors also noted that the payment of the $250 million
termination fee is reciprocal if the merger agreement is terminated
as a result of a superior proposal to acquire Phillips by a third
party. While the Tosco Board of Directors recognized that these
provisions would somewhat reduce the flexibility of Tosco in
connection with proposals for alternative transactions, it concluded,
together with its advisors, that collectively these provisions were
reasonable under the circumstances.
--Treatment of Tosco Employees. The Tosco Board of Directors considered
that Phillips agreed in the merger agreement to honor all Tosco
employee benefit plans and, for a period of not less than one year
following the consummation of the merger, Phillips agreed to provide
to all the employees of Tosco who continue to be employed by Phillips
and its subsidiaries after the merger compensation and employee
benefits that are, in the aggregate, not less favorable to the Tosco
employees as the benefits currently provided by Tosco.
. Tax Consequences. The Tosco Board of Directors considered the fact that
the merger was expected to be tax-free to Tosco stockholders for U.S.
federal income tax purposes.
. Opinion of Financial Advisor. The Tosco Board of Directors considered
the opinion of Merrill Lynch, Tosco's financial advisor, that, as of the
date of such opinion, and based upon and subject to the factors and
assumptions set forth in the opinion, the exchange ratio was fair from a
financial point of view to the stockholders of Tosco. See "--Opinion of
Tosco's Financial Advisor."
The foregoing discussion of the information and factors discussed by the
Tosco Board of Directors is not exhaustive but does include the material
factors considered by the Tosco Board of Directors. The Tosco Board of
Directors did not quantify or assign any relative or specific weight to the
various factors that it considered.
26
Rather, the Tosco Board of Directors based its recommendation on the totality
of the information presented to and considered by it. In addition, individual
members of the Tosco Board of Directors may have given different weights to
different factors.
In considering the recommendation of the Tosco Board of Directors to approve
the merger agreement and the merger, Tosco stockholders should be aware that
certain officers and directors of Tosco have certain interests in the proposed
merger, including substantial severance benefits and Mr. O'Malley's employment
with Phillips as Chief Executive Officer of the combined company's RM&T
business, that are different from and in addition to the interests of Tosco
stockholders generally. The Tosco Board of Directors was aware of these
interests and considered them in approving the merger agreement and the merger.
See "--Interests of Certain Persons in the Merger."
THE TOSCO BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT TOSCO STOCKHOLDERS
VOTE "FOR" THE APPROVAL OF THE MERGER AND THE MERGER AGREEMENT.
OPINION OF PHILLIPS' FINANCIAL ADVISOR
Pursuant to an engagement letter dated February 1, 2001, Phillips retained
Morgan Stanley to act as its financial advisor in connection with a possible
acquisition of Tosco. Morgan Stanley was selected by the Phillips Board of
Directors to act as Phillips' financial advisor based on Morgan Stanley's
qualifications, expertise and reputation and its knowledge of the business and
affairs of Phillips and of Tosco. At the February 3, 2001 meeting of the
Phillips Board of Directors, Morgan Stanley rendered to the Phillips Board of
Directors an oral opinion, which was confirmed in writing as of February 4,
2001, to the effect that as of such date and based upon and subject to the
various considerations set forth in its opinion, the exchange ratio in the
merger agreement is fair from a financial point of view to Phillips.
The full text of the written opinion of Morgan Stanley, dated February 4,
2001, describes among other things, the assumptions made, procedures followed,
matters considered and limitations on the scope of the review undertaken by
Morgan Stanley in rendering its opinion. The opinion is attached to this joint
proxy statement/prospectus as Appendix B and is incorporated herein by
reference. This opinion should be read carefully and in its entirety. Morgan
Stanley's opinion is directed to the Phillips Board of Directors and addresses
only the fairness of the exchange ratio from a financial point of view to
Phillips as of the date of this opinion. The opinion does not address any other
aspect of the merger and does not constitute a recommendation to any person as
to how to vote with respect to the merger. The summary of the opinion of Morgan
Stanley described in this joint proxy statement/prospectus 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
information of Tosco and Phillips;
. reviewed certain internal financial statements and other financial and
operating data concerning Tosco provided by the management of Phillips;
. reviewed certain internal financial statements and other financial and
operating data concerning Phillips prepared by the management of
Phillips;
. reviewed certain financial projections with respect to the operations of
Phillips and Tosco prepared by the management of Phillips;
. discussed the past and current operations and financial condition and
the prospects of Phillips, including information relating to certain
strategic, financial and operational benefits anticipated from the
merger, with senior executives of Phillips;
. reviewed the pro forma impact of the merger on Phillips' earnings per
share, consolidated capitalization and financial ratios;
27
. reviewed the reported prices and trading activity for Tosco common stock
and Phillips common stock;
. compared the financial performance of Tosco and the prices and trading
activity of Tosco common stock with that of certain other comparable
publicly traded companies and their securities;
. reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
. participated in discussions and negotiations among representatives of
Tosco and Phillips and their financial and legal advisors;
. reviewed a draft of the merger agreement and certain related documents;
and
. performed such other analyses and considered such other factors as
Morgan Stanley deemed appropriate.
In rendering its opinion Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by it for the purposes of its opinion. Morgan Stanley did not receive
financial forecasts or internal financial information for Tosco from Tosco, and
instead relied on the publicly available estimates of selected analysts who
report on Tosco and on certain financial information on Tosco provided by
Phillips. With respect to the financial projections of Tosco and Phillips,
including information relating to certain strategic, financial and operational
benefits anticipated from the merger, Morgan Stanley assumed that they were
reasonably prepared by management of Phillips on bases reflecting the best
currently available estimates and judgments of the future financial performance
of Phillips and Tosco. In addition, Morgan Stanley assumed that the merger will
be consummated in accordance with the terms set forth in the merger agreement,
including among other things, that the merger will be treated as a tax-free
reorganization and/or exchange, each pursuant to the Internal Revenue Code of
1986, as amended. Morgan Stanley did not make any independent valuation or
appraisal of the assets or liabilities of Tosco, nor was it furnished with any
such appraisals. Morgan Stanley's opinion is 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.
The following is a brief summary of all material analyses performed by
Morgan Stanley in connection with rendering its oral opinion to the Phillips
Board of Directors and its written opinion letter, dated February 4, 2001. The
information used by Morgan Stanley in its analyses was as of February 1, 2001.
Some of these summaries of financial analyses include information presented in
tabular format. In order to understand fully the financial analyses used by
Morgan Stanley, the tables must be read together with the text of each summary.
The tables alone do not constitute a complete description of the financial
analyses.
Historical Exchange Ratio Analysis
Morgan Stanley compared the daily closing share price of Tosco common stock
to the corresponding price of Phillips common stock over various periods during
an eighteen-month period beginning August 1, 1999, and ending February 1, 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 February 1, 2001. The table also presents, for
each implied exchange ratio, the premium implied by the actual exchange ratio
for the merger over the corresponding implied historical exchange ratios.
IMPLIED PREMIUM
OF MERGER
IMPLIED EXCHANGE RATIO
EXCHANGE OVER IMPLIED
PERIOD RATIO EXCHANGE RATIO
------ -------- ----------------
February 1, 2001.................................... 0.586 36.6%
Last 5 Days prior to February 1, 2001............... 0.586 36.4%
Last 10 Days prior to February 1, 2001.............. 0.578 38.5%
Last 20 Days prior to February 1, 2001.............. 0.580 37.9%
Last 30 Days prior to February 1, 2001.............. 0.587 36.4%
Last 60 Days prior to February 1, 2001.............. 0.552 45.0%
Last 18 Months prior to February 1, 2001............ 0.564 41.8%
28
Morgan Stanley observed that, based on the actual 0.80-for-one exchange
ratio, the implied merger consideration as of February 1, 2001 (Phillips common
stock price closed at $58.04 per share), for Tosco common stock was $46.43 per
share.
Public Market Trading Multiples Valuation
Morgan Stanley compared various publicly available information of Tosco with
publicly traded companies that share similar characteristics with Tosco. These
companies included Sunoco Inc., Ultramar Diamond Shamrock Corp. and Valero
Energy Corp.
Morgan Stanley determined the market capitalization for the comparable
companies based on the closing share price of each company on February 1, 2001.
Morgan Stanley arrived at a range of comparable company multiples by (1)
dividing the market capitalizations by projected earnings and cash flow and (2)
dividing the market capitalization, plus net debt, by earnings before interest,
taxes, depreciation and amortization, or EBITDA, in each case, for each of the
comparable companies for the years 2000, 2001 and 2002 based upon estimates
compiled by First Call Corp. and publicly available Morgan Stanley equity
research.
Morgan Stanley then applied these comparable company multiples (ranging
between 7.0-9.0x Tosco's projected earnings for 2001 and 2002, and 4.5-6.0x
Tosco's EBITDA for 2000 and 2001) to the corresponding Tosco statistic estimate
based on publicly available Morgan Stanley equity research. The resulting
average of these implied valuation ranges was then adjusted for anticipated pro
forma synergies to be realized by Phillips following the merger, as estimated
by Phillips' management. The resulting valuation range computed by Morgan
Stanley implied an exchange ratio between 0.53 and 0.84 and a premium to the
February 1, 2001 Tosco stock price between (10.3)% and 42.7%.
No company utilized in the peer group comparison analysis is identical to
Tosco. In evaluating the peer group, Morgan Stanley made judgments and
assumptions with regard to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of Tosco. These other matters include the impact of competition on the
business of Tosco and the industry generally, industry growth and the absence
of any adverse material change in the financial condition and prospects of
Tosco or in the industry or financial markets in general. Mathematical
analysis, such as determining the average or median, is not in itself a
meaningful method of using peer group data.
Equity Research Analyst Price Targets Analysis
Morgan Stanley reviewed the present value of the twelve-month price target
estimates for Tosco of several published equity research analysts. The range of
these present values was then adjusted for anticipated pro forma synergies to
be realized by Phillips following the merger, as estimated by Phillips'
management. The resulting valuation range computed by Morgan Stanley implied an
exchange ratio between 0.60 and 0.93 and a premium to the February 1, 2001
Tosco stock price between 3.0% and 59.6%.
Precedent Transactions Analysis
Morgan Stanley used publicly available information to calculate multiples of
selected financial data paid in several precedent transactions and applied
these multiples to comparable financial data of Tosco. The transactions
reviewed included, among others, Diamond Shamrock Inc./Ultramar Corp., Total
Petroleum (North America) Ltd./Ultramar Diamond Shamrock Corp. and Basis
Petroleum Inc. (Salomon Inc.)/Valero Energy Corp. For the acquired corporation
in each of these transactions, Morgan Stanley calculated (1) EBITDA, (2) cash
flow and (3) earnings, in each case realized or projected during the applicable
transaction year and following year, without giving effect to the impact of the
transaction. Morgan Stanley then calculated the multiples of the amounts paid
by the acquiror applicable in each precedent transaction and applied these
multiples (ranging from 6.5x to 7.5x realized EBITDA, 6.0x to 7.0x projected
EBITDA , 5.5x to 6.5x projected cash flows and 10.0x to 13.0x projected
earnings) to the corresponding Tosco statistic estimate based on publicly
available Morgan Stanley equity research. The resulting valuation range
computed by Morgan Stanley implied an exchange ratio between 0.72 and 0.90 and
an implied premium to the February 1, 2001 Tosco stock price between 23.6% and
53.0%.
29
No transaction utilized as a comparison in the precedent transactions
analysis is identical to the merger. In evaluating the precedent transactions,
Morgan Stanley made judgments and assumptions with regard to industry
performance, general business, economic, market, and financial conditions and
other matters, many of which are beyond the control of Tosco. These other
matters include the impact of competition on Tosco and the industry generally,
industry growth and the absence of any adverse material change in the financial
condition and prospects of Tosco or in the industry or financial markets in
general. Mathematical analysis, such as determining the average or median, is
not in itself a meaningful method of using precedent transaction data.
Component Asset Purchase Analysis
Morgan Stanley analyzed financial information for each of Tosco's
substantial assets to arrive at an equity valuation for the entire Tosco
business. The valuations for each of Tosco's refining and marketing assets
(which constitute substantially all of Tosco's non-cash assets) was implied
from several different methodologies, depending on the type of asset.
For the refining assets, Morgan Stanley used a complexity valuation
methodology (which takes into consideration the relative degree of processing
required to produce various output products from a given barrel of crude oil
input) based on publicly available information on Tosco's refinery capacity and
complexity. Morgan Stanley applied multiples of cost per daily complexity
barrel implied from precedent refinery asset sales that share similar
characteristics with various Tosco refineries to the product of the
corresponding Tosco refinery's daily crude capacity and its complexity. The
multiples used in this analysis ranged from $150-350 per daily complexity
barrel. As an additional reference, Morgan Stanley also calculated the value of
Tosco's refining assets using a replacement cost valuation methodology. In this
method, Morgan Stanley multiplied the product of each Tosco refinery's daily
crude capacity and complexity by a publicly available offsite factor and a
replacement cost per barrel. A valuation multiple was then applied to this
resulting replacement cost estimate based on precedent refinery asset sales
that shared similar characteristics with the various Tosco refineries. The
multiples used in this analysis ranged from 0.15x-0.40x replacement cost.
For the marketing segment, Morgan Stanley used a valuation methodology based
on publicly available information on precedent sales involving service
stations. Morgan Stanley applied the average price per service station (which
based on such precedent sales ranged between $300,000-$600,000 per service
station) to the various categories of Tosco owned service stations.
The sum of these asset valuations implied an equity value, post adjustment
of net debt, for the entire Tosco business. This resulting equity value was
then adjusted for a portion of the anticipated pro forma synergies to be
realized by Phillips following the merger, as estimated by Phillips'
management. The resulting valuation range computed by Morgan Stanley implied an
exchange ratio between 0.44 and 0.75 and an implied premium to the February 1,
2001 Tosco stock price between (24.2)% and 28.0%.
Premiums Paid for Public Targets
Morgan Stanley reviewed the associated premiums to unaffected stock price
(the stock price four weeks prior to the earliest of the deal announcement,
announcement of a competing bid and market rumors) as prepared by Thomson
Financial Securities Data with respect to transactions in which the acquisition
consideration was all stock, all cash or a mix of stock and cash. The
transactions examined included a number of public acquisitions announced during
the period commencing January 1, 1990 through January 4, 2001. Based on the
foregoing data, the average premium to unaffected stock price offered in all
stock acquisitions was 41.8% and for all deals, regardless of consideration
type, was 45.6%. These averages implied an exchange ratio of 0.83 and 0.85,
respectively.
Contribution Analysis
Morgan Stanley reviewed the pro forma contributions of each of Tosco and
Phillips, based on publicly available Morgan Stanley equity research estimates,
to the resulting combined company assuming completion
30
of the merger and realization of anticipated synergies. Morgan Stanley reviewed
pro forma estimates of earnings, cash flow and EBITDA, for the years 2000, 2001
and 2002. The contribution analysis reveals that the relative contributions
made by Tosco and Phillips are consistent with the exchange ratio 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 enterprise's projected earnings
per share, cash earnings per share and cash flow per share during 2001 and
2002, based on the exchange ratio. Such computations used (1) earnings
projections for both Phillips and Tosco based on publicly available Morgan
Stanley equity research estimates and I/B/E/S estimates, (2) synergy estimates
provided by Phillips' management and (3) cash flow projections for both
Phillips and Tosco provided by Phillips' management and publicly available
Morgan Stanley equity research. The analysis indicated that under some oil
price scenarios the merger would be dilutive (or represent a reduction) to
Phillips' estimated earnings per share in 2001 and would be accretive (or
represent an addition) to Phillips' estimated earnings per share in 2002, in
each case as compared to estimates for Phillips on a stand-alone basis. On a
cash earnings per share basis (in which the transaction-related goodwill
amortization is excluded) the transaction would be dilutive to cash earnings in
2001 and accretive to cash earnings in 2002. On a cash flow per share basis the
transaction would be dilutive to Phillips' cash flow both in 2001 and 2002.
In connection with the review of the merger by the Phillips Board of
Directors, Morgan Stanley performed a variety of financial and comparative
analyses for purposes of 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 selecting any portion of its analyses, without considering all
analyses, would create an incomplete view of the process underlying its
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
Phillips or Tosco.
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 Tosco 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 of the
exchange ratio in the merger agreement to Phillips. The analyses do not purport
to be appraisals or to reflect the prices at which Phillips common stock or
Tosco common stock might actually trade. The exchange ratio and other terms of
the merger agreement were determined through arm's length negotiations between
Phillips and Tosco and were approved by the Phillips Board of Directors. Morgan
Stanley provided advice to Phillips during such negotiations. However, Morgan
Stanley did not recommend any specific consideration to Phillips or that any
specific consideration constituted the only appropriate consideration for the
merger.
Morgan Stanley's opinion was one of the many factors taken into
consideration by the Phillips Board of Directors in making its determination to
approve the merger. Morgan Stanley's analyses summarized above should not be
viewed as determinative of the opinion of the Phillips Board of Directors with
respect to the value of Tosco or of whether the Phillips Board of Directors
would have been willing to agree to a different exchange ratio or form of
consideration.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking and financial
advisory business, is continuously engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for
31
corporate and other purposes. In addition, Morgan Stanley is a full-service
securities firm engaged in securities trading, brokerage and financing
activities. In the ordinary course of Morgan Stanley's trading and brokerage
activities, Morgan Stanley or its affiliates may at any time hold long or short
positions, and may trade or otherwise effect transactions for its own account
or the accounts of customers, in debt or equity securities or senior loans of
Phillips or Tosco.
Pursuant to an engagement letter, Phillips agreed to pay Morgan Stanley a
customary fee, which is contingent upon the closing of the merger and in part
subject to the discretion of Phillips, and to reimburse Morgan Stanley for any
reasonable expenses incurred in connection with Morgan Stanley's engagement.
Phillips also agreed to indemnify Morgan Stanley and its affiliates, their
respective directors, officers, agents and employees and each person, if any,
controlling Morgan Stanley or any of its affiliates, against certain
liabilities and expenses, including certain liabilities under the federal
securities laws, arising out of Morgan Stanley's engagement. In the past,
Morgan Stanley and its affiliates have provided financial advisory services to
Tosco and Phillips and have received fees for the rendering of these services.
OPINION OF TOSCO'S FINANCIAL ADVISOR
On February 4, 2001, Merrill Lynch delivered its written opinion to the
Tosco Board of Directors that as of that date, and based on and subject to the
limitations and considerations stated therein, the exchange ratio was fair from
a financial point of view to holders of Tosco common stock, other than Phillips
and its affiliates.
THE FULL TEXT OF MERRILL LYNCH'S OPINION, WHICH DESCRIBES THE ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN, IS ATTACHED AS APPENDIX C TO THIS JOINT PROXY STATEMENT/PROSPECTUS.
HOLDERS OF TOSCO COMMON STOCK SHOULD READ THE OPINION IN ITS ENTIRETY.
REFERENCES TO THE OPINION OF MERRILL LYNCH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND THE SUMMARY OF MERRILL LYNCH'S OPINION IN THIS SECTION
OF THE JOINT PROXY STATEMENT/PROSPECTUS ARE QUALIFIED BY REFERENCE TO THE FULL
TEXT OF THE OPINION.
The opinion of Merrill Lynch was addressed to the Tosco Board of Directors
and evaluated only whether the exchange ratio was fair from a financial point
of view to holders of Tosco common stock, other than Phillips and its
affiliates. The opinion of Merrill Lynch did not address any other aspect of
the merger. The terms of the merger, including the exchange ratio, were
determined through negotiations between Tosco and Phillips and were not
determined by Merrill Lynch. Specifically, the opinion of Merrill Lynch did not
address the following:
. the merits of the underlying decision of Tosco to engage in the merger;
or
. the prices at which Tosco common stock or Phillips common stock will
trade following the announcement or consummation of the merger.
In addition, the opinion of Merrill Lynch did not and does not constitute a
recommendation to any holder of Tosco common stock as to how to vote at the
Tosco special meeting.
In arriving at its opinion, Merrill Lynch, among other things:
. reviewed certain publicly available business and financial information
relating to Tosco and Phillips 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
Tosco and Phillips, 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 Tosco and Phillips, respectively;
. conducted discussions with members of senior management and
representatives of Tosco and Phillips concerning the financial
information and forecasts, expected synergies and their respective
businesses and prospects before and after giving effect to the merger
and the expected synergies;
32
. reviewed the market prices and valuation multiples for Tosco common
stock and Phillips common stock and compared them with certain publicly
traded companies that Merrill Lynch deemed to be relevant;
. reviewed the results of operations of Tosco and Phillips 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 that Merrill Lynch deemed to be
relevant;
. reviewed the potential pro forma impact of the merger;
. reviewed a draft of the merger agreement dated February 2, 2001; and
. reviewed such other financial studies and analyses and took into account
such other matters as Merrill Lynch deemed necessary, including an
assessment of general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch has assumed and relied on the
accuracy and completeness of all information supplied or otherwise made
available to it, discussed with or reviewed by it, or that was publicly
available, and Merrill Lynch has not assumed any responsibility for
independently verifying such information or undertaken an independent
evaluation or appraisal of any of the assets or liabilities of Tosco or
Phillips or been furnished with any such evaluation or appraisal. In addition,
Merrill Lynch has not assumed any obligation to conduct, nor has it conducted,
any physical inspection of the properties or facilities of Tosco or Phillips.
With respect to financial forecast information concerning Tosco and Phillips,
Merrill Lynch relied on information provided by management of Tosco or
Phillips, as the case may be. With respect to the expected synergies, Merrill
Lynch relied on information provided by management of Tosco.
In addition, Merrill Lynch assumed, among other things, the following:
. the financial forecasts concerning Tosco and Phillips and the expected
synergies have been reasonably prepared and reflect the best currently
available estimates and judgments of management of Tosco or Phillips, as
the case may be;
. the merger would qualify as a tax-free reorganization for U.S. federal
income tax purposes and would be accounted for as a purchase under U.S.
generally accepted accounting principles;
. in the course of obtaining the necessary regulatory or other consents or
approvals (contractual or otherwise) for the merger, no restrictions,
including any divestiture requirements or modifications will be imposed
that will have a material adverse effect on the benefits of the merger;
and
. the merger agreement would be substantially similar to the last draft of
such document reviewed by Merrill Lynch.
The Merrill Lynch opinion was necessarily based upon market, economic and
other conditions as they existed and could be evaluated, and on the information
made available to Merrill Lynch, as of the date of its opinion. The matters
considered by Merrill Lynch in arriving at its opinion are based on numerous
macroeconomic, operating and financial assumptions with respect to industry
performance, general business and economic conditions, many of which are beyond
the control of Tosco and Phillips, and involve the application of complex
methodologies and educated judgment. Any estimates incorporated in the analyses
performed by Merrill Lynch are not necessarily indicative of actual past or
future results or values, which may be significantly more or less favorable
than these estimates. Estimated values do not purport to be appraisals and do
not necessarily reflect the price at which businesses or companies may be sold
in the future, and these estimates are inherently subject to uncertainty.
In connection with the preparation of its opinion, Merrill Lynch has not
been authorized by Tosco or the Tosco Board of Directors to solicit, nor has
Merrill Lynch solicited, third-party indications of interest for the
acquisition of all or any part of Tosco.
33
The following is a summary of the principal financial and comparative
analyses presented to the Tosco Board of Directors by Merrill Lynch in
connection with the delivery of its opinion on February 4, 2001. In preparing
its opinion, Merrill Lynch did not perform a standalone valuation of either
Tosco or Phillips due to the extreme sensitivity such an analysis would have on
assumptions regarding market prices of oil and gas.
Historical Stock Trading Analysis
Merrill Lynch reviewed the per share daily closing market prices of Tosco
common stock and Phillips common stock for each of the one and three-year
periods ending February 2, 2001. In constructing this analysis, Merrill Lynch
divided the daily closing market price for Tosco common stock by the daily
closing market price for Phillips common stock for each of the one and three-
year periods to determine a range of implied exchange ratios. This analysis
yielded a range of implied exchange ratios of 0.45 to 0.75 for the one-year
trading period and 0.43 to 0.80 for the three-year trading period.
Relative Contribution Analysis
Utilizing projections provided by the managements of Tosco and Phillips,
referred to as the management estimates, and selected Wall Street research
analysts' estimates, referred to as the street estimates, Merrill Lynch
reviewed Tosco's and Phillips' estimated relative contribution to pro forma
EBITDA and net income of the combined company for the years 2000, 2001 and
2002. The analysis yielded a range of implied exchange ratios of 0.48 to 0.64
and 0.44 to 0.82 for the EBITDA and net income contributions, respectively,
based on the management estimates. The analysis yielded a range of implied
exchange ratios of 0.48 to 0.69 and 0.44 to 0.72 for the EBITDA and net income
contributions, respectively, based on the street estimates.
Relative Discounted Cash Flow Analysis
Utilizing the management estimates and the street estimates, Merrill Lynch
compared the discounted cash flow of Tosco and Phillips to calculate a range of
implied exchange ratios. For purposes of this analysis, Merrill Lynch applied
discount rates ranging from 10.0% to 12.0% and terminal multiples of projected
2005 EBITDA ranging from 5.0x to 6.0x for Tosco, and discount rates ranging
from 9.0% to 11.0% and terminal multiples of projected 2005 earnings before
interest, taxes, depreciation, amortization and exploration expense, or EBITDE,
ranging from 4.5x to 5.5x for Phillips. Without giving effect to any expected
synergies, this analysis yielded a range of implied exchange ratios of 0.67 to
0.74 based on the management estimates and a range of implied exchange ratios
of 0.60 to 0.66 based on the street estimates.
Pro Forma Merger Consequences Analysis
Merrill Lynch analyzed the impact of the merger on the projected earnings
per share of Phillips for each of the years 2001 and 2002. Such analysis was
conducted using both the management estimates and the street estimates,
assuming in each case a 100% stock-for-stock purchase accounting transaction at
a fixed exchange ratio of 0.80. The analysis also assumed the elimination of
systematic amortization of goodwill as proposed by the Financial Accounting
Standards Board and the realization of expected synergies of $125 million in
2001 and $250 million in 2002. The analysis contemplated two scenarios, one
involving a stock repurchase by Phillips for approximately $930 million of
Phillips common stock and the other involving no stock repurchase. Under the
first scenario, assuming the stock repurchase by Phillips, the analysis
indicated that the merger would be dilutive to Phillips' earnings per share by
1.3%, based on the management estimates, and 9.3%, based on the street
estimates, in 2001, and accretive to Phillips' earnings per share by 9.4%,
based on the management estimates, and 5.0%, based on the street estimates, in
2002. Under the second scenario, assuming no stock repurchase by Phillips, the
analysis indicated that the merger would be dilutive to Phillips' earnings per
share by 2.4%, based on the management estimates, and 10.4%, based on the
street estimates, in 2001, and accretive to Phillips' earnings per share by
6.9%, based on the management estimates, and 3.0%, based on the street
estimates, in 2002. There can be no assurance that the combined company will be
able to realize the expected synergies in the amounts estimated by management,
or at all, following the merger. The actual results achieved by Phillips may
vary from projected results and the variations may be material.
34
Analysis of Selected Comparable Public Companies of Tosco
Merrill Lynch reviewed and compared selected historical and projected
financial, operating and stock market performance data of Tosco to the
corresponding data of each of Sunoco, Inc., Tesoro Petroleum Corporation,
Ultramar Diamond Shamrock Corporation and Valero Energy Corporation. These
comparable companies were chosen because they are publicly traded companies
with operations that for purposes of this analysis may be considered reasonably
similar to the operations of Tosco. For each of the comparable companies,
Merrill Lynch calculated multiples of equity value to actual net income and
cash flow for the year ended December 31, 2000 and estimated net income and
cash flow for the years ended December 31, 2001 and 2002. Merrill Lynch also
calculated multiples of enterprise value to actual EBITDA for the year ended
December 31, 2000 and estimated EBITDA for the years ended December 31, 2001
and 2002. Merrill Lynch then compared the multiples of each of the comparable
companies to the corresponding multiples of Tosco using financial data based on
each of the management estimates and the street estimates.
Analysis of Selected Comparable Public Companies of Phillips
Merrill Lynch reviewed and compared selected historical and projected
financial, operating and stock market performance data of Phillips to the
corresponding data of each of Amerada Hess Corporation, Conoco Inc., Murphy Oil
Corporation and Occidental Petroleum Corporation. These comparable companies
were chosen because they are publicly traded companies with operations that for
purposes of this analysis may be considered reasonably similar to the
operations of Phillips. For each of the comparable companies, Merrill Lynch
calculated multiples of equity value to actual net income and cash flow for the
year ended December 31, 2000 and estimated net income and cash flow for the
years ended December 31, 2001 and 2002. Merrill Lynch also calculated multiples
of enterprise value to actual EBITDE for the year ended December 31, 2000 and
estimated EBITDE for the years ended December 31, 2001 and 2002. Merrill Lynch
then compared the multiples of each of the comparable companies to the
corresponding multiples of Phillips using financial data based on each of the
management estimates and the street estimates.
Selected Comparable Transactions Analysis
Using publicly available information, Merrill Lynch reviewed information
relating to the following selected comparable acquisition transactions in the
petroleum refining, marketing and transportation industry:
DATE ANNOUNCED ACQUIROR TARGET
-------------- -------- ------
August 2000 Apex Oil Crown Central
July 2000 Ultramar Diamond Shamrock Tosco--Avon
May 2000 Alon Israel PetroFina--Southwest Division
March 2000 Valero Energy Corp. ExxonMobil
November 1999 Frontier Oil Equilon--El Dorado
July 1998 Clark U.S.A.--Lima, Ohio British Petroleum
May 1998 Tesoro Petroleum Corp. Shell--Anacortes
May 1998 Valero Energy Corp. Mobil--Paulsboro
March 1998 Tesoro Petroleum Corp. BHP--Hawaii
February 1998 PDVSA Amerada Hess--St. Croix
November 1997 Blackstone Clark USA
April 1997 Ultramar Diamond Total Petroleum
March 1997 Valero Energy Corp. Basis Petroleum
November 1996 Tosco Corp. 76 Products (Unocal)
September 1996 Ultramar Corp. Diamond Shamrock
February 1996 Tosco Corp. Circle K Corp.
November 1995 Diamond Shamrock Nat'l Convenience Stores
For the selected comparable transactions, Merrill Lynch calculated multiples
of transaction value to latest twelve months EBITDA both with and without pro
forma synergies and compared those multiples with the comparable multiples
implied by the exchange ratio at a range of trading prices for Phillips common
stock.
35
No transaction utilized in the comparable transaction analysis is identical
to the merger in both timing and size, and, accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
Tosco and other factors that would affect the acquisition value of the
companies to which it is being compared.
The summary of analyses performed by Merrill Lynch described above does not
purport to be a complete description of the analyses performed by Merrill Lynch
in arriving at its opinion. The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial or summary description.
Accordingly, Merrill Lynch believes that its analysis must be considered as a
whole and that selecting portions of its analyses and the factors considered by
Merrill Lynch, without considering all factors and analyses, could create an
incomplete view of the processes underlying the opinion of Merrill Lynch.
Merrill Lynch did not assign relative weight to any of its analyses in
preparing its opinion.
No transaction utilized as a comparison in any of the analysis described
earlier is identical to the merger. An analysis of publicly traded comparable
companies and comparable acquisition transactions is not mathematical; rather
it involves complex considerations and judgments concerning differences in
financial and operating characteristics of the comparable companies involved
and other factors that could affect the public trading value of the comparable
companies or the company to which they are being compared.
The Tosco Board of Directors retained Merrill Lynch to act as its financial
advisor based upon Merrill Lynch's reputation as an internationally recognized
investment banking firm with substantial experience in mergers and acquisitions
transactions. As part of Merrill Lynch's investment banking businesses, Merrill
Lynch is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, leveraged buyouts,
negotiated underwritings, secondary distributions of listed and unlisted
securities and private placements.
Pursuant to the engagement letter, dated as of January 31, 2001, between
Tosco and Merrill Lynch, Tosco agreed to pay Merrill Lynch a fee of $1.0
million upon execution of the merger agreement. Merrill Lynch will be entitled
to a fee of $5.0 million to $12.0 million upon completion of the merger, with
the exact amount to be determined at the discretion of Tosco based on the
quality and extent of the service provided by Merrill Lynch.
Any fees previously paid to Merrill Lynch upon execution of the merger
agreement will be deducted from any fee to which Merrill Lynch becomes entitled
upon completion of the merger. Tosco has also agreed to reimburse Merrill Lynch
for the expenses reasonably incurred by it in connection with its engagement
(including reasonable fees and disbursements of its legal counsel) and to
indemnify Merrill Lynch and its affiliates from and against specified
liabilities, including liabilities under the federal securities laws, arising
out of its engagement.
Merrill Lynch has, in the past, provided financial advisory services to
Tosco and Phillips and/or their respective affiliates and may continue to do so
and has received, and may receive, fees for the rendering of such services. In
addition, in the ordinary course of its business, Merrill Lynch and its
affiliates may actively trade Tosco common stock, as well as Phillips common
stock, for their own accounts and for the accounts of their customers.
Accordingly, Merrill Lynch and its affiliates may at any time hold a long or
short position in these securities.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
Phillips and Tosco cannot complete the merger until they have filed
notifications with the Antitrust Division and the Federal Trade Commission
under the HSR Act, and the applicable rules of the Federal Trade Commission,
and specified waiting periods have expired or terminated. Each of Phillips and
Tosco expects to file a Premerger Notification and Report Form in connection
with the merger shortly.
Phillips and Tosco believe that the proposed merger is compatible with U.S.
antitrust laws. However, at any time before or after consummation of the
merger, the Antitrust Division, the Federal Trade Commission,
36
other governmental authorities or private persons could take action against the
merger under the antitrust laws, including seeking to enjoin consummation of
the merger, rescind the merger, cause Phillips or Tosco to divest, in whole or
in part, any of their assets or businesses, and/or recover monetary damages. We
can give no assurance that a challenge to the merger on antitrust grounds will
not be made or, if such challenge is made, that it would not be successful.
Phillips and Tosco have filed an application with the California Public
Utilities Commission for an order approving the change of control of a common
carrier petroleum pipeline in California that is part of the system acquired by
Tosco from Unocal Corporation. Phillips and Tosco will file a notification
regarding the merger with the Italian Antitrust Authority pursuant to Italian
merger control legislation. We also may be required to obtain regulatory
approvals from various other state and foreign authorities. See "The Merger
Agreement--Additional Covenants--Reasonable Best Efforts" and "The Merger
Agreement--Conditions."
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes the anticipated material U.S.
federal income tax consequences of the merger to holders of Tosco common stock
that exchange their Tosco common stock for Phillips common stock in the merger.
This discussion addresses only those Tosco stockholders that hold their Tosco
common stock as a capital asset, and does not address all the U.S. federal
income tax consequences that may be relevant to particular Tosco stockholders
in light of their individual circumstances or to Tosco stockholders that are
subject to special rules, such as:
. financial institutions;
. mutual funds;
. tax-exempt organizations;
. insurance companies;
. dealers in securities or foreign currencies;
. traders in securities that elect to apply a mark-to-market method of
accounting;
. foreign holders;
. persons that hold their shares as a hedge against currency risk or as
part of a straddle, constructive sale or conversion transaction; or
. holders that acquired their shares upon the exercise of Tosco stock
options or otherwise as compensation.
The following discussion is not binding on the Internal Revenue Service. It
is based upon the Internal Revenue Code, laws, regulations, rulings and
decisions in effect as of the date of this joint proxy statement/prospectus,
all of which are subject to change, possibly with retroactive effect. Tax
consequences under state, local and foreign laws and U.S. federal laws other
than U.S. federal income tax laws, are not addressed.
Holders of Tosco common stock are strongly urged to consult their tax
advisors as to the specific tax consequences to them of the merger, including
the applicability and effect of U.S. federal, state and local and foreign
income and other tax laws in their particular circumstances.
The parties have structured the merger so that it is anticipated that the
merger will be a reorganization for U.S. federal income tax purposes. It is a
condition to the consummation of the merger that (1) Tosco receive a written
opinion from Stroock & Stroock & Lavan LLP, counsel to Tosco, dated the closing
date of the merger, to the effect that for U.S. federal income tax purposes the
merger will constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code and (2) Phillips receive a written opinion from
Wachtell, Lipton, Rosen & Katz, counsel to Phillips, dated the closing date of
the merger, to the effect that for
37
U.S. federal income tax purposes the merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code. The opinions
will be based on customary assumptions and customary representations made by,
among others, Tosco and Phillips. An opinion of counsel represents counsel's
best legal judgment and is not binding on the Internal Revenue Service or any
court. No ruling has been, or will be, sought from the Internal Revenue Service
as to the U.S. federal income tax consequences of the merger.
Assuming the merger qualifies as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, holders of Tosco common stock that
exchange their Tosco common stock solely for Phillips common stock in the
merger will not recognize gain or loss for U.S. federal income tax purposes,
except with respect to cash, if any, they receive in lieu of a fractional share
of Phillips common stock. Each holder's aggregate tax basis in the Phillips
common stock received in the merger will be the same as that holder's aggregate
tax basis in the Tosco common stock surrendered in the merger, decreased by the
amount of any tax basis allocable to any fractional share interest for which
cash is received. The holding period of the Phillips common stock received in
the merger by a holder of Tosco common stock will include the holding period of
Tosco common stock that the holder surrendered in the merger.
A holder of Tosco common stock that receives cash in lieu of a fractional
share of Phillips common stock will recognize gain or loss equal to the
difference between the amount of cash received and that holder's tax basis in
the Phillips common stock that is allocable to the fractional share of Phillips
common stock. That gain or loss generally will constitute capital gain or loss.
In the case of an individual stockholder, any such capital gain generally will
be subject to a maximum U.S. federal income tax rate of 20% if the individual
has held his or her Tosco common stock for more than 12 months on the date of
the merger. The deductibility of capital losses is subject to limitations for
both individuals and corporations.
ACCOUNTING TREATMENT
The merger is expected to be accounted for using purchase accounting. The
purchase price (based on the price of Phillips common stock on and about
February 5, 2001) will be allocated to Tosco'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 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.
Under present U.S. generally accepted accounting principles, goodwill is
amortized over its useful life, not to exceed 40 years. The Financial
Accounting Standards Board is expected to issue a proposal in the near term to
replace amortization of goodwill with a periodic assessment for impairment.
The unaudited pro forma combined financial information contained in this
joint proxy statement/prospectus has been prepared using the purchase method to
account for the merger, without taking into account the potential benefits of
any changes in accounting rules for goodwill. See "Unaudited Pro Forma Combined
Financial Information."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Tosco's management and the Tosco Board of Directors may
have interests in the merger that are in addition to their interests as Tosco
stockholders generally. The Phillips Board of Directors and the Tosco Board of
Directors were aware of these interests and considered them, among other
matters, in approving and/or adopting the merger agreement and the merger.
Agreements
For several years, Tosco has had agreements with Thomas D. O'Malley,
Jefferson F. Allen, and Wilkes McClave. Pursuant to these agreements, each of
these executives is entitled, upon his termination of employment with Tosco in
conjunction with, or after, a change of control, including the approval of the
merger
38
by Tosco stockholders, to receive a lump sum severance payment equal to three
times the sum of his base salary and of the average of his bonuses for each of
the two years immediately preceding the year of stockholder approval of the
merger. For purposes of these agreements, all three of these executives plan to
terminate their employment in connection with the merger. The severance amounts
that would be due Messrs. O'Malley, Allen, and McClave upon a termination in
2001 following stockholder approval of the merger would be $27,197,000,
$14,754,000 and $10,892,000, respectively. In addition, each of these
executives will be entitled under his agreement to receive a gross-up payment
for any excise taxes that are triggered by payments that he receives in
connection with the merger.
Under an agreement between Robert Lavinia and Tosco, Tosco must inform Mr.
Lavinia, within ten days of stockholder approval of the merger, whether it
wishes to extend his employment for another six months. If Tosco declines to do
so, it must pay him severance equal to two years of base salary. If Tosco does
wish to extend Mr. Lavinia's employment for six months, Mr. Lavinia forfeits
all severance if he declines the extension. If Mr. Lavinia accepts the
extension, Mr. Lavinia and Tosco are to work during the six-month period to
agree on terms of a new agreement. If Tosco and Mr. Lavinia fail to reach
agreement, Mr. Lavinia is entitled to 18 months' base salary as severance at
the end of the six-month period. Mr. Lavinia's base salary is currently
$500,000, so he could receive up to $1,000,000 in the aggregate in connection
with a termination following stockholder approval of the merger.
Under an agreement between Peter A. Sutton and Tosco, Tosco must inform Mr.
Sutton, within ten days of stockholder approval of the merger, whether it
wishes to extend his employment for another three months. If Tosco declines to
do so, it must pay Mr. Sutton severance equal to two years of base salary. If
Tosco does wish to extend his employment for three months, Mr. Sutton forfeits
all severance if he declines the extension. If Mr. Sutton accepts the
extension, Mr. Sutton and Tosco are to work during the three-month period to
agree on terms of a new agreement. If Tosco and Mr. Sutton fail to reach
agreement, Mr. Sutton is entitled to 18 months' base salary as severance at the
end of the three-month period. Mr. Sutton's base salary is currently $400,000,
so he could receive up to $800,000 in the aggregate in connection with a
termination following stockholder approval of the merger.
In addition, Tosco has entered into agreements with the following officers
(which are not affected by a change of control), pursuant to which the officers
would receive severance in a multiple of base annual salary upon a termination
by Tosco without cause, as defined in each of their agreements, or upon a
voluntary termination by the officer for good reason, as defined in each of
their agreements: Craig R. Deasy, William E. Hantke, Ann Farner Miller, Richard
W. Reinken, Robert I. Santo, Wanda Williams and Dwight L. Wiggins. Upon a
termination in 2001, these executive officers would receive $600,000, $525,000,
$600,000, $500,000, $350,000, $400,000 and $1,000,000 respectively.
O'Malley Employment Letter
In connection with the merger, Phillips and Mr. O'Malley entered into a
letter agreement, dated February 4, 2001, and will enter into an employment
agreement upon completion of the merger on substantially the same terms as the
letter agreement. The merger agreement, together with the letter agreement,
provide that Mr. O'Malley serve as a director of Phillips and, at the
discretion of the Phillips Board of Directors and the Chief Executive Officer
of Phillips, Vice Chairman of the Phillips Board of Directors and Chief
Executive Officer of Phillips' RM&T operations commencing upon the completion
of the merger. In exchange for his services, Mr. O'Malley will receive, among
other things, an annual base salary of $800,000, and benefits and bonus
normally associated with a Phillips senior executive position. Phillips will
have the right to terminate Mr. O'Malley's position as Chief Executive Officer
of Phillips' RM&T division upon payment of three months' salary, plus any
accrued benefits and bonus. Through the end of 2001, Mr. O'Malley will maintain
his current office in Old Greenwich, Connecticut, after which his main office
will be at Tosco's offices in Tempe, Arizona. The executive area of Tosco's
current offices in Old Greenwich will be maintained for the duration of Mr.
O'Malley's employment. Thereafter, Mr. O'Malley will have the option to
sublease that space at the existing terms. Mr. O'Malley will remain entitled to
the severance benefits under his employment agreement upon his termination of
employment with Tosco in conjunction with the merger.
39
Accelerated Payment of LTIP Awards
Pursuant to Tosco's 1996 long term incentive plan, as long as Tosco common
stock achieves a minimum threshold during a measurement period, each
participant earns a deemed vested amount per performance unit granted under the
plan equal to the difference between the highest 15-day rolling average price
of Tosco common stock for that measurement period and a baseline specified in
the grant document (typically, the fair market value of Tosco common stock on
the date of grant, subject to adjustment). Every year, the baseline is raised
to an escalating specified amount or the highest 15-day rolling average that
was used in calculation of the previous measurement period's deemed vested
amounts, whichever is higher. Ordinarily, 50% of accumulated deemed vested
amounts is paid out at the end of each measurement period, and the remaining
50% is held in the deemed vested amount account subject to forfeiture under
specified circumstances. At the end of the entire grant cycle (typically five
years), all unpaid deemed vested amounts are distributed. However, upon a
change of control, including approval of the merger by Tosco stockholders, each
participant will be entitled to receive an immediate payout of all unpaid
deemed vested amounts (as defined in the plan), or, if greater, an amount equal
to (1) the product of the number of shares of Tosco common stock underlying the
participant's performance units multiplied by the excess of the fair market
value of shares of Tosco common stock on the date of the change of control over
the initial baseline (not adjusted to reflect increases based on highest
rolling averages) minus (2) any already paid deemed vested amounts. Messrs.
O'Malley, Allen, McClave, Lavinia, Wiggins, Sutton and Reinken hold outstanding
performance units. Assuming that the average of the high and low trading prices
of Tosco common stock is $45 per share on the date of the change of control,
these individuals will be entitled upon the change of control to payments of
$13,559,790, $9,440,494, $8,235,676, $4,642,504, $4,642,504, $1,287,500 and
$321,875, respectively. The awards under this plan will continue in effect
after the merger, with the price of Phillips common stock used as the barometer
for achievement and with the baseline after the change of control raised to
reflect the per share value of Phillips common stock that corresponds (based on
the exchange ratio) to the value of Tosco common stock on the date of the
change of control.
Bonuses
Under Tosco's corporate incentive plan, annual bonus amounts are tied to the
operating earnings per share of Tosco common stock. For the year in which
stockholder approval of the merger occurs, bonuses will be computed for all
participants, consisting of Messrs. O'Malley, Allen, McClave, Lavinia, Wiggins,
Sutton and Reinken, based on the higher of annualized earnings for that year
prior to the stockholder approval of the merger, or the actual full-year
company performance. If, during the year of stockholder approval of the merger,
a participant is terminated without cause or voluntarily terminates employment
for good reason after approval of the merger by Tosco stockholders, or in
connection with the merger, he or she is entitled to an estimated bonus payment
within five days of the termination based upon Tosco's annualized earnings for
that year prior to the stockholder approval of the merger, and then a final
payment if necessary at the end of the plan year. In the absence of a
stockholder approval of the merger, the bonus would be pro-rated upon a
termination of the employee's employment during a plan year. All other officers
of Tosco participate in a cash incentive plan that pays a percentage of salary
based on the attainment of certain levels of operating earnings.
Stock Option Plans
Under Tosco's stock option plans and under Tosco's directors stock plan, all
options or shares which have been granted or issued but not yet vested will
become vested upon completion of the merger. As of May 1, 2001, Messrs. Duane
B. Bordvick, Deasy, Hantke, Reinken, Santo and Sutton and Mmes. Farner Miller
and Williams will hold unvested options on 15,500, 17,000, 15,000, 17,000,
13,000, 66,000, 15,000 and 17,000 shares of Tosco common stock, respectively.
Senior Executive Retirement Plan
In 1990, Tosco adopted a senior executive retirement plan to provide
retirement pension and medical benefits to selected senior executives and their
beneficiaries. Messrs. Allen, Lavinia, McClave, O'Malley, Sutton and Wiggins
are eligible for benefits under the Tosco senior executive retirement plan.
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Generally, normal retirement age is 65 with early retirement benefits
(reduced by 1% for each year preceding age 65) commencing at age 55 and three
years of credited service. Messrs. Allen, McClave and O'Malley each has 11
years of credited service, Mr. Sutton has nine years of credited service and
each of Messrs. Lavinia and Wiggins has seven years and seven months of
credited service, under the Tosco senior executive retirement plan as of
December 31, 2000. Each of the above-named participants is eligible to receive
retirement benefits under the Tosco senior executive retirement plan since they
are all at least age 55 or deemed to be age 55.
McClave Retirement Enhancement
Pursuant to a previous agreement between Mr. McClave and Tosco, Mr. McClave
has agreed to assist Tosco in any transaction that may result in a change of
control. If a change of control occurs before Mr. McClave reaches the age of 55
(at the anticipated time of completion of the merger he will be approximately
54.3), for purposes of any termination or retirement in connection with or
following a change of control, he will be treated as if he were 55. As a
result, Mr. McClave will receive benefit enhancements under the Tosco senior
executive retirement plan, as described above.
Indemnification; Directors and Officers Liability Insurance
The merger agreement provides that, for a period of six years following
completion of the merger, Phillips will indemnify and hold harmless, and
provide advancement of expenses to, all past and present directors, officers or
employees of Tosco or any of its subsidiaries, to the same extent these
individuals were indemnified or had the right to advancement of expenses as of
the date of the merger agreement pursuant to their respective charters, by-laws
or indemnification agreements, if any, in existence on the date of the merger
agreement with any of these directors, officers or employees of Tosco or any of
its subsidiaries for acts or omissions occurring at or prior to the completion
of the merger. The merger agreement further provides that Phillips also will
cause current Tosco policies of directors' and officers' liability insurance
and fiduciary liability insurance to be maintained for a period of six years
after completion of the merger (provided that Phillips may substitute 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 completion of
the merger. However, Phillips will not be required to expend more than 200% of
the current amounts expended by Tosco for its policies. If the annual premiums
exceed this amount, then Phillips is obligated to obtain a policy with the
greatest coverage available for the above-mentioned amount. See "The Merger
Agreement--Additional Covenants--Insurance and Indemnification."
Since 1987, Tosco has entered into indemnity agreements with its directors
and some of its officers which provide for Tosco to indemnify these individuals
against expenses incurred by them in any proceedings which may be maintained
against them by reason of any action or omission to act by these individuals in
their capacity as directors, officers, employees, agents or fiduciaries of
Tosco. Tosco's obligations are subject to specified limitations, including the
limitation that no payment will be made that is prohibited by applicable law.
The indemnity agreements provide for the advancement of expenses incurred in
advance of the final disposition of any proceedings and require Tosco to
establish a trust for the benefit of the indemnified persons. In the event of a
change of control, Tosco will, from time to time upon written request, fund the
trust in an amount sufficient to satisfy any and all expenses reasonably
anticipated to be incurred in connection with any proceedings. In addition,
after a change of control, determinations of whether directors are entitled to
indemnification are to be made by independent legal counsel selected by the
indemnitee, or, at the option of the indemnitee, by the disinterested directors
of the Tosco Board of Directors. Prior to change of control, these
determinations are made by the disinterested members of the Tosco Board of
Directors, or, if there is no quorum of disinterested directors, by independent
legal counsel selected by the directors. The merger constitutes a change in
control under these indemnity agreements.
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
Phillips expects that, initially following completion of the merger, the
businesses and operations of Tosco will, except as described in this joint
proxy statement/prospectus, be continued substantially as they are
41
currently being conducted. Phillips will continue to evaluate the business and
operations of Tosco while the merger is pending and after the merger is
completed, and will take those actions it deems appropriate under the
circumstances that then exist. Phillips intends to undertake a comprehensive
review of Tosco's business, operations, capitalization and management with a
view to optimizing development of Tosco's potential in conjunction with
Phillips' business.
As described above, at the time the merger is completed, Phillips will
appoint Mr. O'Malley to serve as a director of Phillips and, at the discretion
of the Phillips Board of Directors and the Chief Executive Officer of Phillips,
as Vice Chairman of Phillips and head of Phillips' RM&T operations (which then
will include Tosco's RM&T operations). Mr. O'Malley will have primary
responsibility for assisting in the orderly integration of Tosco's operations
with Phillips' RM&T operations during the transition period and the
establishment of a management team for the integrated RM&T operations drawing
from the best employees of each of Phillips and Tosco. Immediately following
the completion of the merger, Phillips will enter into an employment agreement
with Mr. O'Malley on substantially the terms described in the letter agreement
between Phillips and Mr. O'Malley.
Phillips has agreed that, as soon as practicable following completion of the
merger, the executive headquarters for the combined RM&T operations of both
Tosco and Phillips will be in the Phoenix, Arizona area.
42
THE MERGER AGREEMENT
The following is a summary of the material terms and provisions of the
merger agreement. The merger agreement is attached as Appendix A to this joint
proxy statement/prospectus and incorporated by reference in this joint proxy
statement/prospectus. We encourage you to carefully read the complete merger
agreement for the precise legal terms of the merger agreement and other
information that may be important to you.
MERGER CONSIDERATION
The merger agreement provides that each share of Tosco common stock
outstanding immediately prior to the completion of the merger will be
converted into the right to receive 0.80 of a share of Phillips common stock.
Tosco stockholders will be paid cash in lieu of any fractional share of
Phillips common stock to which they would otherwise be entitled.
TREATMENT OF OPTIONS
Upon completion of the merger, each outstanding Tosco stock option will be
converted into a stock option to purchase a number of shares of Phillips
common stock that is equal to the product of 0.80 multiplied by the number of
shares of Tosco common stock that would have been obtained before the merger
upon the exercise of the Tosco stock option, rounded to the nearest whole
share. The exercise price per share will be equal to the exercise price per
share of Tosco common stock subject to the Tosco stock option before the
conversion divided by 0.80, rounded to the nearest whole cent. All Tosco stock
options that have not vested under the Tosco stock option plans will vest upon
completion of the merger. The other terms of each Tosco stock option will
continue to apply. The conversion of Tosco stock options that qualify as
"incentive stock options" under the Internal Revenue Code will be effected in
a manner that is consistent with Section 424(a) of the Internal Revenue Code.
In the event that the employment of a Tosco employee is terminated before
the completion of the merger, Tosco may elect, in its sole discretion and with
the consent of the employee, to cancel that employee's Tosco stock options for
an amount in cash equal to the product of the excess, if any, of:
(1) the closing price of Tosco common stock on the date of the
termination of employment over
(2) the per share exercise price of the Tosco stock option
times the number of shares of Tosco common stock subject to the Tosco stock
option immediately following the employee's termination, less required tax
withholdings.
Similarly, in the event that the employment of a Tosco employee is
terminated after the completion of the merger but within six months after the
completion of the merger, Phillips may elect, in its sole discretion and with
the consent of the employee, to cancel the Phillips stock options into which
that employee's Tosco stock options were converted in exchange for cash. For
each Phillips stock option so canceled, the option holder will be paid an
amount in cash equal to the product of the excess, if any, of:
(1) the closing price of Phillips common stock on the date of the
termination of employment over
(2) the per share exercise price of the Phillips stock option
times the number of shares of Phillips common stock subject to the Phillips
stock option immediately following the employee's termination, less required
tax withholdings.
Phillips stock options are not affected by the merger.
EXCHANGE OF CERTIFICATES
Exchange Agent
Phillips has appointed Mellon Investor Services LLC to be the exchange
agent under the merger agreement. The exchange agent will accept your Tosco
stock certificates and arrange for creation of a book-entry account reflecting
your holdings of Phillips common stock. You also will be able to elect to
obtain a physical Phillips stock certificate at no extra charge.
43
Exchange Procedures
At or before completion of the merger, Phillips will deposit with the
exchange agent Phillips stock certificates representing the shares of Phillips
common stock to be issued in exchange for the outstanding shares of Tosco
common stock. Promptly after completion of the merger, a form of transmittal
letter will be mailed by the exchange agent to Tosco stockholders that hold
Tosco stock certificates. The transmittal letter will contain instructions with
respect to the surrender of Tosco stock certificates.
YOU WILL RECEIVE SHARES OF PHILLIPS COMMON STOCK IN BOOK-ENTRY FORM, UNLESS
A PHYSICAL PHILLIPS STOCK CERTIFICATE IS REQUESTED. IF YOU HOLD TOSCO STOCK
CERTIFICATES, YOU SHOULD NOT RETURN THE TOSCO STOCK CERTIFICATES WITH THE
ENCLOSED PROXY AND SHOULD NOT FORWARD THEM TO THE EXCHANGE AGENT UNTIL YOU
RECEIVE A LETTER OF TRANSMITTAL FOLLOWING COMPLETION OF THE MERGER.
Dividends
Holders of Tosco common stock will not be entitled to receive any dividends
or other distributions payable by Phillips in respect of Phillips common stock
until they exchange their Tosco stock certificates for shares of Phillips
common stock. After they deliver their Tosco stock certificates to the exchange
agent, those stockholders will receive, subject to applicable law, accumulated
dividends and distributions, and cash in lieu of any fractional shares of
Phillips common stock, without interest.
Fractional Shares
No fractional shares of Phillips common stock will be issued upon the
surrender of Tosco stock certificates. No dividend or other distribution of
Phillips will relate to any fractional share of Phillips common stock that
would otherwise be issuable in the merger, and those fractional shares of
Phillips common stock will not entitle the owner thereof to any voting or other
rights of a Phillips stockholder.
Holders of Tosco common stock otherwise entitled to fractional shares of
Phillips common stock, if any, will receive a cash payment instead of the
fractional shares of Phillips common stock they would otherwise be entitled to
upon surrender of all of their Tosco common stock certificates. Following
completion of the merger, the exchange agent will determine the excess of the
number of whole shares of Phillips common stock delivered to the exchange agent
by Phillips for distribution to Tosco stockholders over the aggregate number of
whole shares of Phillips common stock to be distributed to Tosco stockholders.
The exchange agent will then, on behalf of the former Tosco stockholders, sell
the excess shares of Phillips common stock at then-prevailing prices on the New
York Stock Exchange, in the manner provided in the merger agreement, and make
the proceeds available for distribution to the former holders of Tosco common
stock otherwise entitled to fractional shares of Phillips common stock upon
surrender of their Tosco stock certificates.
Antidilution Adjustments
If, before the merger is completed, there is a reclassification, stock
split, split-up, stock dividend, combination or exchange of shares with respect
to, or rights issued in respect of, Tosco common stock or Phillips common
stock, the exchange ratio will be adjusted to provide the holders of Tosco
common stock the same economic effect of the exchange ratio in effect
immediately before the relevant event.
Additional Exchange Related Matters
None of Phillips, Tosco, Ping Acquisition Corp. or the exchange agent will
be liable to any holder of Phillips common stock or Tosco common stock for any
amount delivered to a public official pursuant to any applicable abandoned
property, escheat or similar laws.
If a Tosco stock certificate has been lost, stolen or destroyed, the
exchange agent will issue the Phillips common stock, cash in lieu of fractional
shares of Phillips common stock and unpaid dividends and distributions on
Phillips common stock payable under the merger agreement upon receipt of
appropriate evidence as to that loss, theft or destruction, appropriate
evidence as to the ownership of that Tosco stock certificate by the claimant,
and appropriate and customary indemnification.
44
If shares of Phillips common stock are to be issued in a name other than the
name in which the surrendered shares of Tosco common stock, as the case may be,
are registered, the surrendered Tosco stock certificates must be accompanied by
an appropriate instrument of transfer and documents to evidence that any
applicable stock transfer taxes have been paid.
For a description of the differences between the rights of holders of
Phillips common stock and holders of Tosco common stock, see "Comparison of
Stockholder Rights."
COMPLETION OF THE MERGER
The merger will be completed at the time and date stated in the articles of
merger that will be filed with the Secretary of State of the State of Nevada
(the state of incorporation of Tosco and Ping Acquisition Corp.). Under the
merger agreement, this will occur on the second business day following the
satisfaction or waiver of all conditions to the merger, unless otherwise agreed
to by the parties. Each of Phillips and Tosco currently anticipates that the
merger will be completed in the third quarter of 2001.
Completion of the merger could be delayed if there is a delay in obtaining
the required regulatory approvals or in satisfying other conditions to the
merger. There can be no assurances as to whether, and on what date, Phillips
and Tosco will obtain those approvals or that Phillips and Tosco will complete
the merger. If the merger is not completed on or before February 4, 2002,
either Phillips or Tosco may terminate the agreement, with the exception that a
party may not terminate the merger agreement if that party's failure to perform
its obligations under the merger agreement is the primary cause of the merger
not being completed by that date. See "--Conditions."
REPRESENTATIONS AND WARRANTIES
In the merger agreement, Phillips and Tosco make representations and
warranties to each other about their respective companies related to, among
other things:
. corporate existence, qualification to conduct business and corporate
power;
. ownership of subsidiaries;
. capital structure;
. corporate authority to enter into, and carry out the obligations under,
the merger agreement, and enforceability of the merger agreement;
. absence of a breach of Charter documents, Bylaws, laws or material
agreements as a result of the merger;
. required governmental consents and approvals;
. filings with the SEC;
. financial statements;
. absence of undisclosed liabilities;
. absence of specified changes or events since September 30, 2000;
. legal proceedings;
. compliance with laws;
. environmental liability;
. employee benefit plans;
. labor relations;
45
. inapplicability to the merger of state anti-takeover laws;
. receipt of an opinion from its financial advisor;
. Board of Directors approval;
. payment of fees to finders or brokers in connection with the merger;
. tax matters;
. qualification of the merger as a reorganization under U.S. federal tax
laws; and
. information supplied for use in this joint proxy statement/prospectus.
Tosco also made additional representations and warranties to Phillips
pertaining to, among other things:
. specified material contracts and restrictive contracts;
. intellectual property matters; and
. inapplicability to the merger of Tosco's rights plan.
The representations and warranties contained in the merger agreement are
subject to materiality and knowledge qualifications in many respects, and do
not survive the completion of the merger.
INTERIM OPERATIONS
Restrictions on Phillips' and Tosco's Interim Operations
In the merger agreement Phillips and Tosco have agreed to specified
restrictions on their respective activities until either the completion of the
merger or the termination of the merger agreement. In general, they are
required to conduct their respective businesses in the usual, regular and
ordinary course, in substantially the same manner as previously conducted, and
to use their reasonable best efforts to keep available the services of their
current officers and other 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, with the intention that their ongoing businesses are not impaired.
Additional Restrictions on Phillips' Interim Operations
Subject to specified exceptions, Phillips has agreed to specific
restrictions that prohibit it from:
. entering into any new material lines of business or disposing of any
material line of business;
. declaring or paying dividends other than regular quarterly dividends
consistent with past dividend practice;
. splitting, combining or reclassifying its capital stock, or issuing
securities in respect of, in lieu of or in substitution for its capital
stock;
. amending Phillips' Restated Certificate of Incorporation, Bylaws or other
governing documents (other than to increase the number of shares of
Phillips common stock authorized by Phillips' Restated Certificate of
Incorporation or as otherwise permitted by the merger agreement);
. making any acquisitions that could reasonably be expected to prevent or
materially delay or impede completion of the merger, other than
acquisitions in the ordinary course of business consistent with past
practice;
. taking any action that would prevent or impede the merger from qualifying
as a reorganization under U.S. federal tax laws; and
. taking any action for the purpose of preventing, delaying or impeding the
completion of the merger.
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Additional Restrictions on Tosco's Interim Operations
Subject to specified exceptions, Tosco has agreed to specific restrictions
that prohibit it from:
. entering into any new material lines of business;
. incurring or committing to any capital expenditures or obligations or
liabilities in connection with any capital expenditures, other than in
the ordinary course of business consistent with past practice or as
contemplated by the 2001 capital budget approved by the Tosco Board of
Directors and disclosed to Phillips before February 4, 2001;
. declaring or paying dividends in excess of $0.08 per share of Tosco
common stock per quarter, subject to increase of up to $0.01 per share in
accordance with past practice;
. splitting, combining or reclassifying its capital stock or issuing
securities in respect of, in lieu of or in substitution for its capital
stock;
. repurchasing, redeeming or otherwise acquiring its capital stock;
. issuing, delivering, selling or encumbering, or entering into any
agreement to issue, deliver, sell or encumber, any shares of its capital
stock or other voting securities, or any securities convertible into or
exercisable for, or any right to acquire, capital stock or other voting
securities, other than in connection with Tosco benefit plans (subject to
specified limitations), in connection with the exercise of Tosco stock
options or other stock-based awards, in connection with Tosco's rights
plan, in connection with certain issuances by its subsidiaries, or in
connection with permitted acquisitions or investments disclosed to
Phillips before February 4, 2001;
. amending Tosco's Amended and Restated Articles of Incorporation, Bylaws
or other governing documents (other than pursuant to the merger
agreement);
. making any acquisitions, other than acquisitions in the ordinary course
of business consistent with past practice;
. disposing of assets (including the capital stock of its subsidiaries),
other than in the ordinary course of business consistent with past
practice, or dispositions referred to in Tosco's SEC documents filed by
Tosco prior to February 4, 2001;
. making loans, advances, capital contributions or investments in any other
person other than specified intercompany loans or immaterial loans made
in the ordinary course of business consistent with past practice, and
only if those otherwise permitted loans do not present a material risk of
making it more difficult to obtain any regulatory approval that is
required in connection with the merger;
. incurring debt, other than in the ordinary course of business consistent
with past practice;
. taking any action that would prevent or impede the merger from qualifying
as a reorganization under U.S. federal tax laws;
. increasing the compensation or paying any severance to any director,
officer or key employee, or increasing any employee benefits, granting
any options to purchase Tosco common stock, amending or adopting any
Tosco benefit plan, other than in the ordinary course consistent with
past practice or as required by applicable law or an agreement existing
on February 4, 2001;
. granting an option that accelerates as a result of the approval or
completion of the merger;
. changing its accounting methods, except as disclosed in Tosco's SEC
documents filed prior to February 4, 2001 or except as may be required by
a governmental authority or by changes in U.S. generally accepted
accounting principles;
. changing its fiscal year;
. making any material tax election; and
. taking any action for the purpose of preventing, delaying or impeding
completion of the merger.
47
ADDITIONAL COVENANTS
In addition to the covenants relating to the conduct of the parties'
businesses before completion of the merger, each of Phillips and Tosco has
agreed to perform additional specified covenants in the merger agreement. The
principal additional covenants are as follows.
Phillips Board of Directors and Officers; RM&T Headquarters
Phillips has agreed to expand its Board of Directors by one member at the
completion of the merger and cause Mr. O'Malley to be appointed to its Board of
Directors.
Phillips has agreed to appoint Mr. O'Malley to serve, at the discretion of
the Phillips Board of Directors and the Chief Executive Officer of Phillips, as
Vice Chairman of Phillips and head of Phillips' RM&T operations (which then
will include Tosco's RM&T operations). Mr. O'Malley will have primary
responsibility for assisting in the orderly integration of Tosco's operations
with Phillips' RM&T operations during the transition period and the
establishment of a management team for the integrated RM&T operations drawing
from the best employees of each of Phillips and Tosco. Phillips has agreed to
enter into an employment agreement with Mr. O'Malley immediately following the
completion of the merger on substantially the terms described in the letter
agreement between Phillips and Mr. O'Malley.
Phillips has agreed that, as soon as practicable following completion of the
merger, the executive headquarters for the combined RM&T operations of both
Tosco and Phillips will be in the Phoenix, Arizona area.
No Solicitation
The merger agreement contains detailed provisions prohibiting each of
Phillips and Tosco from seeking an alternative transaction. Under these no
solicitation provisions, each of Phillips and Tosco has agreed that neither it
nor any of its subsidiaries, officers or directors will, and that it will use
reasonable best efforts to ensure that its and its subsidiaries' employees,
agents and representatives do not, directly or indirectly:
. initiate, solicit, encourage or knowingly facilitate any inquiries or the
making of an acquisition proposal;
. 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;
. approve or recommend, or propose publicly to approve or recommend, an
acquisition proposal; or
. approve or recommend, or propose to approve or recommend, 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 an
acquisition proposal.
In relation to either Phillips or Tosco, an "acquisition proposal" means any
proposal or offer relating to, or a transaction to effect:
. a merger, reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving the party or any of its significant subsidiaries;
. any purchase or sale of 20% or more of the consolidated assets of the
party, including stock of its subsidiaries, taken as a whole; or
. any purchase or sale of, or tender or exchange offer for, the equity
securities of the party that, if completed, would result in any other
person (or stockholders of such other person) beneficially owning
securities representing 20% or more of the total voting power of the
party (or of the surviving parent entity in the transaction) or any of
its significant subsidiaries.
48
The merger agreement permits each of Phillips and Tosco, prior to its
respective special meeting, to:
. engage in discussions with, or provide information to, a person who
submits an unsolicited bona fide written acquisition proposal that the
party's Board of Directors concludes in good faith is reasonably likely
to constitute a "superior proposal;" and/or
. make a change in board recommendation, if it has received an unsolicited
bona fide written acquisition proposal and its Board of Directors
concludes in good faith that the acquisition proposal constitutes a
"superior proposal."
A "superior proposal" means a bona fide written acquisition proposal (except
that references to 20% become references to 50%) that is on terms that the
party's Board of Directors in good faith concludes:
. would, if consummated, result in a transaction more favorable to its
stockholders from a financial point of view; and
. is reasonably capable of being consummated.
A "change in board recommendation" means, in relation to either Phillips or
Tosco, withdrawing, modifying or qualifying, or proposing to withdraw, modify
or qualify, in any manner adverse to the other party, the recommendation of
that party's Board of Directors that its stockholders vote in favor of the
approval of the merger agreement and the merger, in the case of Tosco, or the
issuance of shares of Phillips common stock in the merger, in the case of
Phillips. Each of the Phillips Board of Directors and the Tosco Board of
Directors may make a change in board recommendation only as provided in the no
solicitation provisions of the merger agreement.
However, Phillips or Tosco may take the actions described immediately above
only if, and only to the extent that:
. the special meeting of its stockholders to vote on the approval of the
merger agreement and the merger, in the case of Tosco stockholders, or
the issuance of shares of Phillips common stock in the merger, in the
case of Phillips stockholders, has not occurred;
. the Board of Directors of the party that desires to take the action
described above determines in good faith, after consultation with outside
counsel, that there is a reasonable probability that the failure to take
that action would be inconsistent with its fiduciary duties under law;
. before providing any information or data to any person in connection with
an acquisition proposal by that person, the person making the proposal
enters into a customary confidentiality agreement (provided that, if the
confidentiality agreement contains terms that are less restrictive than
the confidentiality agreement between Phillips and Tosco, the
confidentiality agreement between Phillips and Tosco automatically will
be changed to reflect those less restrictive terms); and
. before providing any information or data to any person or entering into
discussions with any person, it promptly:
-- notifies the other party of inquiries, proposals or offers received
by, any information requested from, or any discussions sought to be
initiated or continued with, any of its representatives, and
-- notifies the other party of the name of the person and the material
terms and conditions of any inquiries, proposals or offers.
In addition, the merger agreement permits Phillips and Tosco to disclose to
their respective stockholders a position with respect to a tender offer, as
required by law.
Each of Phillips and Tosco has agreed in the merger agreement that:
. it will promptly keep the other party reasonably informed of the status
and terms of any inquiries, proposals, offers, discussions or
negotiations, including the identity of the person making the inquiry,
proposal or offer;
49
. it will, and its officers, directors and representatives will,
immediately cease and terminate any activities, discussions or
negotiations existing as of February 4, 2001, the date of the merger
agreement, with any persons conducted before that date in relation to any
acquisition proposal; and
. it will use reasonable best efforts to promptly inform its directors,
officers, key employees, agents and representatives of the obligations
under the no solicitation provisions of the merger agreement.
Nothing contained in the no solicitation provisions of the merger agreement
will:
. permit Phillips or Tosco to terminate the merger agreement, except as
otherwise specifically provided in the merger agreement; or
. affect or limit any other obligation of Phillips or Tosco under the
merger agreement.
Special Meetings
Each of Phillips and Tosco has agreed to hold special meetings of their
respective stockholders to consider and vote upon approval of the merger
agreement and the merger, in the case of Tosco, and the issuance of shares of
Phillips common stock in the merger, in the case of Phillips.
Reasonable Best Efforts
Each of Phillips and Tosco has agreed to use their reasonable best efforts
to take all actions and do all things necessary or advisable under the merger
agreement or applicable law to complete the merger and the other transactions
contemplated by the merger agreement as soon as practicable. This cooperation
may include selling, holding separate or otherwise disposing of assets, or
conducting business in a specified manner, in response to the requirements
imposed by antitrust authorities. However, neither Tosco nor Phillips is
required for any reason to sell, hold separate or otherwise dispose of assets,
or to conduct its business in a specified manner, if such action is not
conditioned on completion of the merger or could reasonably be expected to have
a material adverse effect on Phillips or Tosco or to substantially impair the
benefits to Phillips expected, as of February 4, 2001, to be realized from the
merger.
Employee Matters
Phillips has agreed that, following the completion of the merger, it and its
subsidiaries will assume and honor all Tosco benefit plans in accordance with
the terms of those Tosco benefit plans in effect immediately before the merger
is completed. For a period of not less than one year after completion of the
merger, Phillips will maintain compensation and employee benefits that are no
less favorable in the aggregate than those in effect immediately before the
merger, as disclosed by Tosco to Phillips before February 4, 2001.
Specifically, Phillips has agreed that it will:
. credit each Tosco employee for his or her years of service with Tosco and
its subsidiaries and predecessor employers before the completion of the
merger, to the same extent as the Tosco employee was entitled, before the
merger, to credit for that service under any similar Tosco benefit plans,
except to the extent that credit would result in a duplication of
benefits;
. waive any limitations regarding preexisting conditions and actively-at-
work requirements under any benefit plan Tosco employees may be eligible
for after completion of the merger; and
. provide Tosco employees with credit for any eligible expenses paid before
completion of the merger.
Tosco, before completion of the merger, or Phillips, following completion of
the merger, may terminate any Tosco employee and/or amend or terminate any
Tosco benefit plan to the extent permitted by the terms of the governing
agreement or plan in effect immediately before the completion of the merger.
However, at the option of an affected Tosco employee (up to a total of 15 Tosco
employees), any split-dollar life insurance policies will be continued
following the termination of that employees' employment.
50
Insurance and Indemnification
For a period of six years after the merger, Phillips is obligated to:
. indemnify and hold harmless, and provide advancement of expenses to, all
past and present directors, officers and employees of Tosco and its
subsidiaries, to the same extent those individuals were indemnified or
had a right to advancement of expenses on February 4, 2001, under Tosco's
Amended and Restated Articles of Incorporation, Bylaws and
indemnification agreements, for acts or omissions occurring on or before
the completion of the merger; and
. cause to be maintained the current policies of directors' and officers'
liability insurance and fiduciary liability insurance maintained by
Tosco, or 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 completion of the merger. Phillips will not be
required to expend in any one year an amount in excess of 200% of the
current annual premiums for this insurance, and if the annual premiums
exceed this limit, Phillips will obtain a policy with the greatest
coverage available for such amount.
Expenses
Each of Tosco and Phillips has agreed to pay its own costs and expenses
incurred in connection with the merger and the merger agreement. Tosco and
Phillips will, however, share equally the costs associated with printing and
mailing this joint proxy statement/prospectus and the expenses incurred in
connection with filing with the SEC the registration statement of which this
joint proxy statement/prospectus is a part.
Section 16 Matters
Each of Phillips and Tosco has agreed to take, before completion of the
merger, all required steps to exempt under SEC Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, or the Exchange Act, any dispositions of
Tosco common stock or acquisitions of Phillips common stock in connection with
the merger, including any derivative securities, by each individual that is
subject to the reporting requirements of Section 16(a) of the Exchange Act with
respect to Tosco, or that will become subject to those reporting requirements
with respect to Phillips.
New York Stock Exchange
Phillips has agreed to use its reasonable best efforts to cause the Phillips
common stock to be issued in the merger to be approved for listing on the New
York Stock Exchange.
Affiliates
Tosco has agreed to identify all persons who may be deemed "affiliates" of
Tosco at the time of the Tosco special meeting for purposes of Rule 145 under
the Securities Act of 1933, as amended, or the Securities Act, and to use its
reasonable best efforts to cause each of those affiliates to enter into a
written agreement providing that they will not offer, sell or otherwise dispose
of any of the shares of Phillips common stock issued to them in the merger in
violation of the Securities Act or the related SEC rules.
Rights Plans
Tosco has agreed to take all necessary action, including amending Tosco's
rights plan, to render the Tosco rights inapplicable to the merger. Tosco has
further agreed not to take any action relating to Tosco's rights plan, without
the prior written consent of Phillips, in order to facilitate an acquisition
proposal.
51
Indebtedness
Upon completion of the merger, Phillips has agreed to assume, by
supplemental indenture or other instrument, any Tosco indebtedness issued under
indentures qualified under the Trust Indenture Act of 1939, as amended, and any
other Tosco indebtedness that by its terms Phillips is required to assume in
order to prevent a default under the applicable debt instrument.
CONDITIONS
Each of our respective obligations to complete the merger is subject to the
satisfaction or waiver of various conditions, including:
. the approval of the merger agreement and the merger by Tosco stockholders
and the approval of the issuance of shares of Phillips common stock in
the merger by Phillips stockholders;
. the absence of any law, order or injunction having the effect of making
the merger illegal or otherwise prohibiting completion of the merger;
. the expiration or termination of the applicable waiting period under the
HSR Act;
. 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 Phillips or Tosco;
. the approval for listing on the New York Stock Exchange of the Phillips
common stock to be issued in the merger, subject to official notice of
issuance;
. the absence of any stop order issued by the SEC suspending the
effectiveness of this joint proxy statement/prospectus and the absence of
any proceedings initiated or threatened by the SEC for that purpose;
. the representations and warranties of the other party in the merger
agreement, disregarding all qualifications and exceptions relating to
materiality, being true and correct on the date of the merger agreement
and the date the merger is completed as if they were made on that date
(except to the extent that the representations and warranties speak as of
another date), except where the failure of such representations and
warranties to be true and correct would not reasonably be expected to
have a material adverse effect on the representing party, and the receipt
of a certificate of an executive officer of the other party to that
effect;
. the other party having performed or complied with its agreements and
covenants in the merger agreement that are qualified as to materiality
and the other party having performed or complied in all material respects
with all other material agreements and covenants in the merger agreement,
and the receipt of a certificate of an executive officer of the other
party to that effect; and
. the receipt of an opinion from the party's counsel that the merger will
qualify as a reorganization for U.S. federal income tax purposes.
TERMINATION OF THE MERGER AGREEMENT
Termination by Phillips or Tosco
Either Tosco or Phillips, by action of our respective Boards of Directors,
may terminate the merger agreement and abandon the merger at any time prior to
completion of the merger if:
. Tosco and Phillips agree to terminate by mutual written consent;
. the merger has not been completed on or before February 4, 2002, with the
exception that a party may not terminate the merger agreement if that
party's failure to perform its obligations under the merger agreement is
the primary cause of the merger not being completed by that date;
. a court or another governmental authority has issued a final and
nonappealable order, decree or ruling or taken other action permanently
restraining, enjoining or otherwise prohibiting the merger, but only if
the
52
terminating party has used its reasonable best efforts to avoid or remove
the prohibition and the terminating party's failure, if any, to comply
with the reasonable best efforts provisions in the merger agreement has
not been the primary cause of the action of the court or other
governmental authority;
. a court or another governmental authority has failed to issue an order or
ruling that is necessary to satisfy the conditions to the merger, and the
denial of a request to issue this order or ruling has become final and
nonappealable, but only if the terminating party has used its reasonable
best efforts to obtain the order or ruling and the terminating party's
failure, if any, to comply with the reasonable best efforts provisions in
the merger agreement has not been the primary cause of the inaction of
the court or other governmental authority; or
. Tosco stockholders have failed to approve the merger agreement, or
Phillips stockholders have failed to approve the issuance of shares of
Phillips common stock in the merger, at the applicable special meeting.
Termination by Phillips
Phillips, by action of the Phillips Board of Directors, may terminate the
merger agreement and abandon the merger at any time prior to completion of the
merger if:
. the Tosco Board of Directors:
-- fails to recommend to Tosco stockholders the approval of the merger
agreement and the merger;
-- withdraws (or proposes to withdraw) its recommendation to Tosco
stockholders to approve the merger agreement and the merger; or
-- modifies or qualifies (or proposes to modify or qualify), in any
manner adverse to Phillips, its recommendation to Tosco stockholders
to approve the merger agreement and the merger;
. Tosco breaches its obligation to call the Tosco special meeting;
. Tosco breaches its representations, warranties or covenants contained in
the merger agreement so that the conditions described above relating to
the absence of a breach of representation, warranty, or covenant by Tosco
are not capable of being satisfied on or before February 4, 2002; or
. the Phillips Board of Directors gives written notice to Tosco that it
intends to enter into a binding written agreement for a superior
proposal, but only if:
-- Phillips has complied with the no solicitation provisions of the
merger agreement in all material respects;
-- Phillips has notified Tosco in writing that it has received a superior
proposal and that it intends to enter into a binding agreement with
respect to that superior proposal, and has attached the most current
version (or a summary of material terms) of the superior proposal to
that notice;
-- Tosco does not make, within three calendar days after receipt of
Phillips' written notice, an offer that the Phillips Board of
Directors reasonably concludes in good faith (following consultation
with its financial advisor and legal counsel) to be as favorable to
Phillips stockholders as the superior proposal; and
-- Phillips pays the termination fee described below upon entering into a
binding written agreement for the superior proposal.
Termination by Tosco
Tosco, by action of the Tosco Board of Directors, may terminate the merger
agreement and abandon the merger at any time prior to completion of the merger
if:
. the Phillips Board of Directors:
-- fails to recommend to Phillips stockholders the approval of the
issuance of shares of Phillips common stock in the merger;
53
-- withdraws (or proposes to withdraw) its recommendation to Phillips
stockholders to approve the issuance of shares of Phillips common
stock in the merger; or
-- modifies or qualifies (or proposes to modify or qualify), in any
manner adverse to Tosco, its recommendation to Phillips stockholders
to approve the issuance of shares of Phillips common stock in the
merger;
. Phillips breaches its obligation to call the Phillips special meeting;
. Phillips breaches its representations, warranties or covenants contained
in the merger agreement so that the conditions described above relating
to the absence of a breach of representation, warranty or covenant by
Phillips are not capable of being satisfied on or before February 4,
2002; or
. the Tosco Board of Directors gives written notice to Phillips that it
intends to enter into a binding written agreement for a superior
proposal, but only if:
-- Tosco has complied with the no solicitation provisions of the merger
agreement in all material respects;
-- Tosco has notified Phillips in writing that it has received a superior
proposal and that it intends to enter into a binding agreement with
respect to that superior proposal, and has attached the most current
version (or a summary of material terms) of the superior proposal to
that notice;
-- Phillips does not make, within three calendar days after receipt of
Tosco's written notice, an offer that the Tosco Board of Directors
reasonably concludes in good faith (following consultation with its
financial advisor and legal counsel) to be as favorable to Tosco
stockholders as the superior proposal; and
-- Tosco pays the termination fee described below upon entering into a
binding written agreement for the superior proposal.
Termination Fee to be Paid by Phillips
Phillips has agreed to pay Tosco a termination fee of $250 million if:
. Tosco terminates the merger agreement as the result of the Phillips Board
of Directors:
-- failing to recommend that Phillips stockholders approve the issuance
of shares of Phillips common stock in the merger;
-- withdrawing its recommendation to Phillips stockholders to approve the
share issuance; or
-- modifying or qualifying, in any manner adverse to Tosco, its
recommendation to Phillips stockholders to approve the share issuance;
. Tosco terminates the merger agreement because Phillips has breached its
obligation to call the Phillips special meeting;
. either party terminates the merger agreement because Phillips
stockholders have failed to approve the issuance of shares of Phillips
common stock in connection with the merger at the Phillips special
meeting, or because the merger has not been completed on or before
February 4, 2002 and the Phillips special meeting has not occurred, and
-- at any time after February 4, 2001, and before the termination of the
merger agreement, an acquisition proposal with respect to Phillips has
been publicly announced or otherwise communicated to the senior
management, Board of Directors or Phillips stockholders; and
-- within 12 months of the termination of the merger agreement, Phillips
or any of its subsidiaries enters into a definitive agreement with
respect to or completes an acquisition proposal;
54
. Tosco terminates the merger agreement after Phillips has breached its
representations, warranties or covenants contained in the merger
agreement so that the condition described above relating to the absence
of a breach of representation, warranty or covenant by Phillips is not
capable of being satisfied on or before February 4, 2002, and
-- at any time after February 4, 2001, and before the termination of the
merger agreement, an acquisition proposal with respect to Phillips has
been publicly announced or otherwise communicated to the senior
management, Board of Directors or Phillips stockholders, and
-- within 12 months of the termination of the merger agreement, Phillips
or any of its subsidiaries enters into a definitive agreement with
respect to or completes an acquisition proposal; or
. Phillips terminates the merger agreement upon entering into a definitive
agreement in response to an unsolicited superior proposal (provided that
Phillips has complied with the applicable restrictions in the merger
agreement relating to a termination for this reason).
Termination Fee to be Paid by Tosco
Tosco has agreed to pay Phillips a termination fee of $250 million if:
. Phillips terminates the merger agreement as the result of the Tosco Board
of Directors:
-- failing to recommend that Tosco stockholders approve the merger
agreement and the merger,
-- withdrawing its recommendation to Tosco stockholders to approve the
merger agreement and the merger, or
-- modifying or qualifying, in any manner adverse to Phillips, its
recommendation to Tosco stockholders to approve the merger agreement
and the merger;
. Phillips terminates the merger agreement because Tosco has breached its
obligation to call the Tosco special meeting;
. either party terminates the merger agreement because Tosco stockholders
have failed to approve the merger agreement and the merger at the Tosco
special meeting, or because the merger has not been completed on or
February 4, 2002 and the Tosco special meeting has not occurred, and
-- at any time after February 4, 2001, and before the termination of the
merger agreement, an acquisition proposal with respect to Tosco has
been publicly announced or otherwise communicated to the senior
management, Board of Directors or Tosco stockholders, and
-- within 12 months of the termination of the merger agreement, Tosco or
any of its subsidiaries enters into a definitive agreement in response
to or completes an acquisition proposal;
. Phillips terminates the merger agreement after Tosco has breached its
representations, warranties or covenants contained in the merger
agreement so that the condition described above relating to the absence
of a breach of representation, warranty or covenant by Tosco is not
capable of being satisfied on or before February 4, 2002, and
-- at any time after February 4, 2001, and before the termination of the
merger agreement, an acquisition proposal with respect to Tosco has
been publicly announced or otherwise communicated to the senior
management, Board of Directors or Tosco stockholders, and
-- within 12 months of the termination of the merger agreement, Tosco or
any of its subsidiaries enters into a definitive agreement with
respect to or completes an acquisition proposal; or
. Tosco terminates the merger agreement upon entering into a definitive
agreement in response to an unsolicited superior proposal (provided that
Tosco has complied with the applicable restrictions in the merger
agreement relating to a termination for this reason).
55
AMENDMENTS, EXTENSIONS AND WAIVERS
Amendments
The merger agreement may be amended by action of the Phillips Board of
Directors and the Tosco Board of Directors at any time before or after the
special meetings to the extent legally permissible. However, after Phillips
stockholders approve the issuance of shares of Phillips common stock in the
merger or Tosco stockholders approve the merger agreement and the merger, no
amendment may be made that requires further approval by stockholders under
applicable law or the rules of any relevant stock exchange. All amendments to
the merger agreement must be in writing signed by each party.
Extensions and Waivers
At any time prior to completion of the merger, any party to the merger
agreement may, to the extent legally allowed:
. extend the time for the performance of any of the obligations or other
acts of the other parties to the merger agreement;
. waive any inaccuracies in the representations and warranties of the other
parties contained in the merger agreement; and
. waive compliance by the other parties with any of the agreements or
conditions contained in the merger agreement.
All extensions and waivers must be in writing and signed by the party
against whom the waiver is to be effective.
56
PROPOSED AMENDMENT TO THE PHILLIPS
RESTATED CERTIFICATE OF INCORPORATION
Phillips presently is authorized to issue 800 million shares of capital
stock, divided into 500 million shares of Phillips common stock, and 300
million shares of preferred stock, par value $1.00 per share. As of March 5,
2001, 306,380,511 shares of Phillips common stock were issued, including
22,819,441 treasury shares, and 283,561,070 shares of Phillips common stock
were outstanding (including 27,856,573 shares of Phillips common stock held by
the Phillips Compensation and Benefits Trust). As of March 5, 2001, a total of
22,123,993 shares of Phillips common stock were available for delivery in the
future in respect of awards that have been or are authorized to be made under
the Company's stock-based compensation plans, which amount includes an
estimated 5,760,000 shares that would become issuable upon conversion of
existing Tosco stock options under the merger agreement. As of March 5, 2001,
no shares of preferred stock of Phillips were issued and no other class of
capital stock of Phillips was authorized. Also, as of March 5, 2001, the total
number of shares of Phillips common stock authorized but not issued was
193,619,489 shares. Following the issuance of approximately 123 million shares
of Phillips common stock to Tosco stockholders in the merger, Phillips will
have only approximately 70 million authorized and unissued shares of Phillips
common stock.
The Phillips Board of Directors has approved an amendment to Phillips'
Restated Certificate of Incorporation to increase the number of authorized
shares of Phillips common stock from 500 million to one billion. The Phillips
Board of Directors believes this is necessary in order to provide sufficient
shares to complete future acquisitions, or to effect any future stock split or
stock dividend.
PHILLIPS HAS A SUFFICIENT NUMBER OF AUTHORIZED SHARES UNDER PHILLIPS'
RESTATED CERTIFICATE OF INCORPORATION TO COMPLETE THE MERGER. THEREFORE,
APPROVAL OF THE AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK IS NOT A CONDITION TO THE MERGER.
Although an increase in the number of authorized shares of Phillips common
stock is not necessary to complete the merger, the Phillips Board of Directors
believes that an increase is advisable and in the best interests of Phillips
and Phillips stockholders. Following the merger, Phillips will have only
approximately 70 million authorized and unissued shares of Phillips common
stock. The Phillips Board of Directors believes that an increase in authorized
shares of Phillips common stock to one billion will give Phillips greater
flexibility in the future by allowing Phillips the latitude to declare stock
dividends or stock splits and to use its common stock to acquire other assets
(for example, the merger).
All shares of Phillips common stock, including those now authorized and
those that would be authorized by the proposed amendment to Phillips' Restated
Certificate of Incorporation, are equal in rank and have the same voting,
dividend and liquidation rights. Holders of Phillips common stock do not have
preemptive rights.
THE PHILLIPS BOARD OF DIRECTORS RECOMMENDS THAT PHILLIPS STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE AMENDMENT TO PHILLIPS' RESTATED CERTIFICATE OF
INCORPORATION.
To effect the increase in authorized shares of Phillips common stock, it is
proposed that the first paragraph of Article FOURTH of Phillips' Restated
Certificate of Incorporation be amended to read in its entirety as follows:
"(a) Capital Stock. The corporation shall have the authority to issue
one billion (1,000,000,000) shares of common stock, par value $1.25 per
share, and 300 million (300,000,000) shares of preferred stock, par value
$1.00 per share."
The affirmative vote of the holders of a majority of the outstanding shares
of Phillips common stock is required to approve the amendment to Phillips'
Restated Certificate of Incorporation.
The Phillips Board of Directors recommends that Phillips stockholders vote
"FOR" the amendment to Phillips' Restated Certificate of Incorporation. Unless
a contrary choice is specified, proxies solicited by the Phillips Board of
Directors will be voted for the amendment.
57
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
PHILLIPS
Phillips common stock is listed on the New York Stock Exchange and traded
under the symbol "P." It also is listed on the Pacific Exchange and the Toronto
Stock Exchange. The following table sets forth, for the calendar quarters
indicated, the high and low reported prices per share of Phillips common stock
on The New York Stock Exchange Composite Transactions reporting system, and
cash dividends declared per share of Phillips common stock.
STOCK PRICE
------------
CALENDAR YEAR HIGH LOW DIVIDENDS
- ------------- ------ ----- ---------
2001
First Quarter (through March 5, 2001)................... $59.00 51.70 .34
2000
Fourth Quarter.......................................... $68.25 51.50 .34
Third Quarter........................................... 70.00 46.81 .34
Second Quarter.......................................... 57.69 45.50 .34
First Quarter........................................... 47.13 35.94 .34
1999
Fourth Quarter.......................................... $51.88 44.56 .34
Third Quarter........................................... 57.25 45.81 .34
Second Quarter.......................................... 54.69 46.44 .34
First Quarter........................................... 48.44 37.69 .34
1998
Fourth Quarter.......................................... $48.31 40.63 .34
Third Quarter........................................... 49.50 40.19 .34
Second Quarter.......................................... 52.00 47.13 .34
First Quarter........................................... 53.25 42.75 .34
Number of Stockholders of Record at March 5, 2001....... 48,184
On February 2, 2001, the last full trading day before the public
announcement of the proposed merger, the high and low sale prices per share for
Phillips common stock as reported on The New York Stock Exchange Composite
Transactions reporting system were $58.71 and $57.96, respectively. On March 5,
2001, the last full trading day before the printing of this joint proxy
statement/prospectus, the high and low sale prices per share for Phillips
common stock as reported on The New York Stock Exchange Composite Transactions
reporting system were $55.60 and $54.87, respectively.
58
TOSCO
Tosco common stock is listed on the New York Stock Exchange and traded under
the symbol "TOS" and also is listed on the Pacific Exchange. The following
table sets forth, for the calendar quarters indicated, the high and low
reported prices per share of Tosco common stock on The New York Stock Exchange
Composite Transactions reporting system, and cash dividends declared per share
of Tosco common stock.
STOCK PRICE
------------
CALENDAR YEAR HIGH LOW DIVIDENDS
- ------------- ------ ----- ---------
2001
First Quarter (through March 5, 2001)................... $43.24 31.38 --
2000
Fourth Quarter.......................................... $34.69 27.25 .08
Third Quarter........................................... 33.69 25.88 .07
Second Quarter.......................................... 33.81 26.88 .07
First Quarter........................................... 32.00 24.06 .07
1999
Fourth Quarter.......................................... $30.38 23.81 .07
Third Quarter........................................... 29.56 24.38 .07
Second Quarter.......................................... 28.13 22.38 .07
First Quarter........................................... 27.75 18.81 .06
1998
Fourth Quarter.......................................... $29.00 19.75 .06
Third Quarter........................................... 31.06 20.88 .06
Second Quarter.......................................... 36.63 26.38 .06
First Quarter........................................... 37.88 31.63 .06
Number of Stockholders of Record at March 5, 2001....... 7,953
On February 2, 2001, the last full trading day before the public
announcement of the proposed merger, the high and low sale prices per share for
Tosco common stock as reported on The New York Stock Exchange Composite
Transactions reporting system were $34.69 and $34.18, respectively. On March 5,
2001, the last full trading day before the printing of this joint proxy
statement/prospectus, the high and low sale prices per share for Tosco common
stock as reported on The New York Stock Exchange Composite Transactions
reporting system were $42.25 and $41.37, respectively.
59
INFORMATION ABOUT PHILLIPS
GENERAL
Phillips was incorporated in Delaware on June 13, 1917. Phillips is
headquartered in Bartlesville, Oklahoma, where it was founded. Phillips'
business is organized into four business segments:
. E&P--This segment explores for and produces crude oil, natural gas and
natural gas liquids on a worldwide basis.
. Gas Gathering, Processing and Marketing, or GPM--This segment gathers and
processes both natural gas produced by Phillips and others. On March 31,
2000, Phillips combined its GPM business with the GPM business of Duke
Energy Corporation into a new company, Duke Energy Field Services, LLC,
or DEFS. Effective at the close of business on March 31, 2000, Phillips'
GPM segment consisted primarily of its equity investment in DEFS.
. RM&T--This segment refines, markets and transports crude oil and
petroleum products, primarily in the United States. This segment also
fractionates and markets natural gas liquids.
. Chemicals--This segment manufactures and markets petrochemicals and
plastics on a worldwide basis. On July 1, 2000, Phillips and Chevron
Corporation combined the two companies' worldwide chemicals businesses,
excluding Chevron's Oronite business, into a new company, Chevron
Phillips Chemical Company LLC, or CPC. Effective on July 1, 2000,
Phillips' Chemicals segment consisted primarily of its equity investment
in CPC.
Support staffs provide technical, professional and other services to the
business segments. At December 31, 2000, Phillips employed 12,400 people,
excluding 3,400 employees who were working under service contracts with CPC.
The employees working under service contracts with CPC became employees of CPC
on January 1, 2001.
Phillips' principal executive offices are located at the Phillips Building,
Bartlesville, Oklahoma 74004 and its telephone number is (918) 661-6600.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to executive compensation, various Phillips
compensation plans (including the Phillips stock option plans), voting
securities, including information regarding the principal holders of those
securities, certain relationships and related transactions and other matters
regarding Phillips is incorporated by reference or set forth in Phillips'
Annual Report on Form 10-K for the year ended December 31, 1999, as amended,
which is incorporated in this joint proxy statement/prospectus by reference.
Stockholders desiring copies of this joint proxy statement/prospectus and the
other documents may contact Phillips at its address or telephone number
indicated under "Where You Can Find More Information."
60
BENEFICIAL OWNERSHIP OF DIRECTORS AND MANAGEMENT OF PHILLIPS
(AS OF MARCH 5, 2001)
AMOUNT AND NATURE
OF
BENEFICIAL OWNERSHIP
--------------------
TITLE
OF NAME OF BENEFICIAL
CLASS OWNER DIRECT(/1/) INDIRECT PERCENT OF CLASS
- ----- ------------------- ----------- -------- ----------------
DIRECTORS(/2/)
Common Norman R. Augustine 24,656 -- *
Common David L. Boren 13,264 -- *
Common Robert E. Chappell, Jr. 21,393 -- *
Common Robert M. Devlin 2,412 -- *
Common Lawrence S. Eagleburger 10,869 6,000 *
Common Larry D. Horner 21,714 -- *
Common J. J. Mulva 608,587 -- *
Common Randall L. Tobias 19,521 -- *
Common Victoria J. Tschinkel 18,450 -- *
Common Kathryn C. Turner 12,097 -- *
EXECUTIVE OFFICERS
Common E. L. Batchelder 30,563 -- *
Common J. A. Carrig 124,879 -- *
Common D. W. DeCamp 1,601 -- *
Common E. K. Grigsby 65,007 -- *
Common J. E. Lowe 42,326 -- *
Common K.O. Meyers 35,951 -- *
Common J. C. Mihm 156,876 1,947 *
Common B. Z. Parker 171,788 -- *
Common R.A. Ridge 78,593 -- *
Common J. B. Whitworth 142,308 -- *
All directors and executive
officers as a group (20 in
group) 1,602,855 7,947 *
- --------
* 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.
61
BENEFICIAL OWNERSHIP OF CERTAIN PHILLIPS STOCKHOLDERS
As of February 28, 2001, to the knowledge of Phillips, from Statements on
Schedule 13G provided to Phillips, beneficial owners of more than 5% of any
class of the outstanding voting securities of Phillips were as follows:
AMOUNT AND NATURE
OF
BENEFICIAL OWNERSHIP
------------------------
TITLE
OF
CLASS NAME AND ADDRESS OF BENEFICIAL OWNER DIRECT INDIRECT PERCENT OF CLASS
- ----- ------------------------------------ --------------- -------- ----------------
Common Vanguard Fiduciary Trust Company 35,243,354(/1/) -- 12.43%
P.O. Box 2900
Valley Forge, Pennsylvania 19482
Common Capital Research and Management Company 23,263,200(/2/) -- 8.20%
333 South Hope Street
Los Angeles, California 90071
Common AXA Financial, Inc. 23,459,658(/2/) -- 8.27%
767 Fifth Avenue
New York, NY 10153
- --------
(/1/) As of February 28, 2001, Vanguard as trustee held 35,243,354 shares under
the Phillips thrift plan, long-term stock savings plan and the Phillips
retirement savings plan with shared voting power. The trustee and these
plans have disclaimed beneficial ownership of the shares held by Vanguard
as trustee of these plans. The trustee votes shares held by these plans
that represent the allocated interests of participants in the manner
directed by individual participants. Employee participants in these plans
are appointed by Phillips as fiduciaries entitled to direct the trustee
as to how to vote allocated shares that are not directed in these plans
and unallocated shares held by the Phillips long-term stock savings plan.
These 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
Phillips' retirement savings plan at its discretion. The trustee will
vote other shares held by these plans at its discretion only if required
to do so by the Employee Retirement Income Security Act of 1974.
Vanguard is also the trustee and record holder of the 27,856,573 shares
in the Phillips Compensation and Benefits Trust, without any voting
power. Vanguard has disclaimed beneficial ownership of these shares.
Vanguard, as trustee of the Phillips Compensation and Benefits Trust,
will vote shares in the Phillips Compensation and Benefits Trust only in
accordance with the pro rata directions of eligible domestic employees
and the trustees of certain of the Phillips international stock plans.
The trust agreements for the plans described in this footnote 1 and for
the Phillips Compensation and Benefits Trust each provide that all
individual employee voting directions received by the trustee will be
held in confidence and not be disclosed to any person, including
Phillips.
(/2/) On February 12, 2001, Capital Research and Management Company reported
that it exercised sole dispositive power with respect to 23,263,200
shares as of December 31, 2000, in which shares Capital Research has
disclaimed beneficial ownership. On February 12, 2001, AXA Financial,
Inc. the parent of Alliance Capital Management L.P. that acquired the
investment advisory assets of Sanford C. Bernstein & Co., Inc., reported
that it exercised sole voting power over 12,725,579 shares, shared voting
power over 2,704,789 shares, and sole dispositive power over 23,459,658
shares as of December 31, 2000. According to the Schedule 13Gs filed by
Capital and AXA with the SEC, these shares equal 9.10% and 9.20% of the
outstanding Phillips common stock, respectively. However, when shares
held as of February 28, 2001, by the Phillips Compensation and Benefits
Trust are included, shares held by Capital Research equal only 8.20% and
by AXA, 8.27% of the outstanding Phillips common stock.
62
INFORMATION ABOUT TOSCO
GENERAL
Tosco is one of the largest independent refiners and marketers of petroleum
products in the United States. Tosco operates seven major refinery systems with
the capacity to process approximately 1,355,000 barrels per day of crude oil,
feedstocks, and blendstocks into various petroleum products. Through its retail
distribution network, Tosco currently sells approximately 6.7 billion gallons
of fuel annually. Tosco became one of the nation's largest operators of
company-controlled convenience stores in 1996 when it purchased the Circle K
Corporation. In 1997, Tosco expanded its network by acquiring Union Oil Company
of California's West Coast retail, terminal and pipeline distribution system.
On February 29, 2000, Tosco further expanded its retail distribution through
the acquisition of approximately 1,740 additional retail gasoline and
convenience outlets from Exxon Corporation and Mobil Oil Corporation. On June
1, 2000, and September 8, 2000, Tosco acquired the Wood River refinery in
Illinois and the Alliance refinery in Louisiana, respectively. On August 31,
2000, Tosco sold its Avon refinery. Tosco's refining and marketing business is
managed and operated through two divisions, Tosco Refining Company, based in
Linden, New Jersey, and Tosco Marketing Company, based in Tempe, Arizona.
Tosco was incorporated under the laws of the State of Nevada in 1955. Its
principal executive offices are located at 1700 East Putnam Road, Suite 500,
Old Greenwich, Connecticut 06870 and its telephone number is (203) 698-7500.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to executive compensation, various of Tosco's
benefit plans (including Tosco's stock option plans), voting securities,
including information regarding the principal holders of those securities,
certain relationships and related transactions and other matters regarding
Tosco is incorporated by reference or set forth in Tosco's Annual Report on
Form 10-K for the year ended December 31, 1999, which is incorporated in this
joint proxy statement/prospectus by reference. Stockholders desiring copies of
this joint proxy statement/prospectus and the other documents may contact Tosco
at its address or telephone number indicated under "Where You Can Find More
Information."
63
BENEFICIAL OWNERSHIP OF DIRECTORS AND MANAGEMENT OF TOSCO
(AS OF MARCH 5, 2001)
AMOUNT AND NATURE
OF
BENEFICIAL OWNERSHIP
---------------------
TITLE
OF
CLASS NAME OF BENEFICIAL OWNER DIRECT(/1/) INDIRECT PERCENT OF CLASS
- ----- ------------------------- ----------- --------- ----------------
DIRECTORS(/2/)
Common Jefferson F. Allen 568,145 *
Common Patrick M. de Barros(/3/) 73,436 649,662 *
Common Wayne A. Budd 72,100 *
Common Houston I. Flournoy 1,579 *
Common Edmund A. Hajim 2,000 *
Common Charles J. Luellen 75,000 *
Common Eija Malmivirta 72,000 *
Common Mark R. Mulvoy 74,045 *
Common Kathryn L. Munro 24,000 *
Common Thomas D. O'Malley(/4/) 3,139,357 542,245 2.38%
EXECUTIVE OFFICERS
Common Duane B. Bordvick 69,465 *
Common Craig R. Deasy 109,500 *
Common Ann Farner Miller 55,693 *
Common William E. Hantke 29,002 *
Common Robert J. Lavinia 447,500 *
Common Wilkes McClave 323,499 *
Common Richard W. Reinken 78,000 *
Common Robert I. Santo 69,791 *
Common Peter A. Sutton 337,860 *
Common Dwight L. Wiggins 430,000 *
Common Wanda M. Williams 49,525 *
All directors and executive
officers as a group (21 in
group) 6,101,497 1,191,907 4.63%
- --------
* Less than 1%
(/1/) Direct ownership includes shares that may be acquired under Tosco stock
options within 60 days of the record date. The table excludes stock
options that will vest more than 60 days after 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 they serve. Each director disclaims beneficial ownership of
all such shares.
(/3/) The shares indirectly owned are owned by a family trust of which Mr. de
Barros is a beneficiary.
(/4/) The shares indirectly owned are owned by entities that Mr. O'Malley is
the sole stockholder. Also includes 25,597 shares held by Mr. O'Malley's
wife of which he disclaims beneficial ownership.
BENEFICIAL OWNERSHIP OF CERTAIN TOSCO STOCKHOLDERS
As of March 5, 2001, to the knowledge of Tosco, from Statements on Schedule
13G provided to Tosco, there were no beneficial owners of more than 5% of any
class of the outstanding voting securities of Tosco.
64
DESCRIPTION OF PHILLIPS CAPITAL STOCK
As a result of the merger, Tosco stockholders will become Phillips
stockholders. Your rights as a Phillips stockholder will be governed by
Delaware law, Phillips' Restated Certificate of Incorporation and Phillips'
Bylaws. The following description of Phillips' capital stock, including the
Phillips common stock to be issued in the merger, reflects the anticipated
state of affairs at the completion of the merger.
The description summarizes the material terms of Phillips' capital stock but
does not purport to be complete, and is qualified in its entirety by reference
to the applicable provisions of Delaware law, Phillips' Restated Certificate of
Incorporation, Bylaws and the Phillips rights agreement, dated as of August 1,
1999, between Phillips and ChaseMellon Shareholder Services, as rights agent,
relating to rights to purchase shares of Phillips Series B junior participating
preferred stock.
PHILLIPS COMMON STOCK
Phillips is authorized to issue 500 million shares of common stock, par
value $1.25 per share, and, if the amendment to Phillips' Restated Certificate
of Incorporation is approved, Phillips will be authorized to issue one billion
shares of Phillips common stock. As of March 5, 2001, there were 283,561,070
shares of Phillips common stock outstanding (including 27,856,573 shares of
Phillips common stock held by the Phillips Compensation and Benefits Trust).
All of the issued and outstanding shares of Phillips common stock are, and upon
the issuance of shares of Phillips common stock in connection with the merger
will be, validly issued, fully paid and nonassessable. Holders of Phillips
common stock are not entitled to any preemptive rights.
Dividend Rights
Holders of Phillips common stock may receive dividends when declared by the
Phillips Board of Directors as permitted by Delaware law. Subject to the terms
of any outstanding preferred stock, holders of Phillips common stock may not
receive dividends until Phillips has satisfied its obligations to any holders
of its preferred stock.
Voting Rights
The holders of Phillips common stock are entitled to one vote per share of
Phillips common stock.
Liquidation Rights
In the event of liquidation, holders of Phillips common stock would be
entitled to receive proportionately any assets legally available for
distribution to Phillips stockholders with respect to shares held by them,
subject to any prior rights of the holders of any Phillips preferred stock then
outstanding.
Preemptive or Other Subscription Rights
Holders of Phillips common stock do not have any preemptive rights to
subscribe for any securities of Phillips.
Conversion and Other Rights
No conversion, redemption or sinking fund provisions apply to the Phillips
common stock, and the holders of Phillips common stock are not liable to
further calls or assessments by Phillips.
PHILLIPS RIGHTS PLAN
On August 1, 1999, the Phillips Board of Directors declared a dividend of
one series B junior participating preferred stock purchase right for each
outstanding share of Phillips common stock. The dividend was paid on August 1,
1999 to Phillips stockholders of record on that date. Each right entitles the
registered holder to purchase from Phillips one one-hundredth of a share of
Phillips series B junior participating preferred stock, subject to adjustment,
at a price of $180 per one-hundredth of a share of series B junior
participating preferred stock. The description and terms of the rights are set
forth in Phillips' rights plan attached as an exhibit to Phillips' Registration
Statement on Form 8-A, dated as of July 12, 1999, and incorporated by reference
in this joint proxy statement/prospectus. See "Where You Can Find More
Information."
65
COMPARISON OF STOCKHOLDER RIGHTS
The rights of Phillips stockholders are currently governed by Delaware law,
Phillips' Restated Certificate of Incorporation, Phillips' Bylaws and Phillips'
rights plan. The rights of Tosco stockholders are currently governed by Nevada
law, Tosco's Amended and Restated Articles of Incorporation, Tosco's Bylaws and
Tosco's rights plan, dated as of November 19, 1998, between Tosco and Fleet
National Bank, as rights agent, relating to rights to purchase shares of Tosco
series A junior participating preferred stock. Upon completion of the merger,
Tosco stockholders will automatically become Phillips stockholders, and their
rights as Phillips stockholders will be governed by Delaware law, Phillips'
Restated Certificate of Incorporation, Phillips' Bylaws and Phillips' rights
plan.
The following is a summary of material differences between the rights of
Tosco stockholders and the rights of Phillips stockholders. It is not a
complete statement of the provisions affecting, and the differences between,
the rights of Tosco stockholders and Phillips stockholders. The summary is
qualified in its entirety by reference to Delaware law, Nevada law, Phillips'
Restated Certificate of Incorporation, Phillips' Bylaws, Phillips' rights plan,
Tosco's Amended and Restated Articles of Incorporation, Tosco's Bylaws and
Tosco's rights plan.
AUTHORIZED CAPITAL STOCK
Tosco
. 250 million shares of Tosco common stock
. 12 million shares of Tosco preferred stock
Phillips
. 500 million shares of Phillips common stock (to be increased to one billion
if the amendment to Phillips' Restated Certificate of Incorporation is ap-
proved)
. 300 million shares of Phillips preferred stock
SIZE OF BOARD OF DIRECTORS
Tosco
Nevada law provides that the board of directors of a Nevada corporation shall
consist of one or more directors and may provide in its articles of incorpora-
tion or bylaws for a fixed number of directors or for a variable number of di-
rectors within a fixed range. Tosco's Amended and Restated Articles of Incorpo-
ration and Bylaws provide that the authorized number of directors shall not be
fewer than three or greater than 16 persons. The number of directors of Tosco
currently is fixed at ten.
Phillips
Delaware law provides that the board of directors of a Delaware corporation
shall consist of one or more directors as fixed by the corporation's certifi-
cate of incorporation or bylaws. Phillips' Bylaws provide for a board of direc-
tors consisting of not fewer than nine or greater than 21 persons. The number
of directors of Phillips currently is fixed at ten.
CUMULATIVE VOTING
Tosco
Under Nevada law, stockholders of a Nevada corporation do not have the right to
cumulate their votes in the election of directors, unless such right is granted
in the articles of incorporation of the corporation. Tosco's Amended and Re-
stated Articles of Incorporation does not provide for cumulative voting by
Tosco stockholders.
Phillips
Under Delaware law, stockholders of a Delaware corporation do not have the
right to cumulate their votes in the election of directors, unless such right
is granted in the certificate of incorporation of the corporation. Phillips'
Restated Certificate of Incorporation does not provide for cumulative voting by
Phillips stockholders.
66
CLASSES OF DIRECTORS
Tosco
Nevada law permits, but does not require, a Nevada corporation to provide in
the articles of incorporation or bylaws of the corporation for a classified
board of directors, provided that at least one-fourth of the directors are
elected annually. Tosco's Amended and Restated Articles of Incorporation does
not provide for a classified board of directors.
Phillips
Delaware law permits, but does not require, a Delaware corporation to provide
in its certificate of incorporation for a classified board of directors, di-
viding the board of directors into up to three classes of directors with stag-
gered terms of office, with only one class of directors to be elected each
year for a maximum term of three years. Phillips' Restated Certificate of In-
corporation does not provide for a classified board of directors.
QUALIFICATIONS OF DIRECTORS
Tosco
Under Nevada law, a director of a Nevada corporation need not be a stockholder
of the corporation, unless the articles of incorporation of the corporation so
requires. Tosco's Amended and Restated Articles of Incorporation does not con-
tain this requirement and Tosco's Bylaws specifically provide that directors
need not be Tosco stockholders.
Phillips
Under Delaware law, a director of a Delaware corporation need not be a stock-
holder of the corporation, unless the certificate of incorporation or bylaws
of the corporation so requires. Phillips' Restated Certificate of Incorpora-
tion provides that a director need not be a Phillips stockholder. Phillips'
Bylaws provide that any individual is eligible for election as a Phillips di-
rector, provided that the individual is less than 70 years of age. Addition-
ally, any employee who is also a director, including the Chairman of the Board
of Directors, must resign as a director upon retiring as an employee.
FILLING VACANCIES ON THE BOARD
Tosco
Nevada law provides that all vacancies, including those vacancies caused by an
increase in the number of directors of a Nevada corporation, may be filled by
a majority of the remaining directors, even though less than a quorum, unless
otherwise provided in the articles of incorporation of the corporation.
Tosco's Amended and Restated Articles of Incorporation provides that the Tosco
Board of Directors may fill vacancies or newly-created directorships in accor-
dance with its Bylaws. Tosco's Bylaws provide that vacancies shall be filled
by a majority of the directors then in office, even though less than a quorum.
Phillips
Delaware law provides that, unless the governing documents of a Delaware cor-
poration provide otherwise, vacancies and newly-created directorships result-
ing from a resignation or an increase in the authorized number of directors
elected by all of the stockholders having the right to vote as a single class
may be filled by a majority of the directors then in office.
Vacancies on Phillips' Board of Directors may be filled by majority vote of
the remaining directors, even though less than a quorum.
67
REMOVAL OF DIRECTORS
Tosco
Under Nevada law, a director of a Nevada corporation may be removed by the
vote of the holders of not less than two-thirds of the voting power of the is-
sued and outstanding stock entitled to vote at an election of directors, un-
less the articles of incorporation of the corporation provide for a greater
percentage. Tosco's Bylaws provide that any director may be removed with cause
only by the affirmative vote of two-thirds of common stock then outstanding.
Nevada law does not distinguish between removal for cause and without cause.
Phillips
Delaware law provides that a director or the entire board of directors of a
Delaware corporation may be removed, with or without cause, by the holders of
a majority of the shares then entitled to vote at an election of directors.
NOMINATION OF DIRECTORS FOR ELECTION
Tosco
Under Tosco's Bylaws, nominations for the Tosco Board of Directors may be made
by the Tosco Board of Directors or by any stockholder entitled to vote that
complies with the notice procedures described in Tosco's Bylaws. These proce-
dures require the written notice to be received by Tosco
. not less than the 14 days prior to nor
. more than 50 days prior to any meeting called for the election of direc-
tors.
The notice must include information on the nominee required by the proxy rules
of the SEC.
Phillips
Phillips' Bylaws require that stockholders provide advance notice of nomina-
tion of directors and stockholder proposals. Notice for an annual meeting
would have to be received by Phillips
. not earlier than 90 days prior to the anniversary of last year's annual
meeting, and
. not later than 60 days prior to that anniversary date.
If the date of the annual meeting is more than 30 days before or 60 days after
that anniversary date, then notice must be received by Phillips
. not earlier than 90 days prior to the date of the annual meeting, and
. not later than 60 days prior to the date of the annual meeting, or ten days
after public announcement of that date, if later.
The notice must include information on the nominee required by the proxy rules
of the SEC.
ANTI-TAKEOVER PROVISIONS
Tosco
Nevada law contains provisions that restrict the ability of a Nevada corpora-
tion to engage in any combination with an interested stockholder for three
years after the interested stockholder's date of acquiring the shares that
cause the stockholder to become an inter-
Phillips
Delaware law contains a business combination statute that protects Delaware
corporations from hostile takeovers, and from actions following the takeover,
by prohibiting some transactions once an acquiror has gained a significant
holding in the corporation.
68
(Tosco Continued)
ested stockholder, unless the combination or the purchase of shares by the in-
terested stockholder is approved by the board of directors of the corporation
before that date. If the combination was not previously approved, the inter-
ested stockholder may effect the combination after the three-year period only
if that stockholder receives approval from a majority of the disinterested
shares or the offer meets various fair price criteria. An "interested stock-
holder" means any person who is:
. the beneficial owner, directly or indirectly, of 10% or more of the voting
power of the corporation; or
. an affiliate or associate of the corporation that at any time within three
years immediately before the date in question was the beneficial owner, di-
rectly or indirectly, of 10% or more of the voting power of the corpora-
tion.
A Nevada corporation may elect not to be subject to the foregoing restric-
tions, and Tosco has elected not to be subject to these restrictions.
Under Nevada law, a person that acquires or offers to acquire ownership of
"control shares" of a corporation (defined as shares obtained pursuant to a
transaction in which an acquiring person reaches the 20%, 33% or majority own-
ership levels) has the right to vote those shares, and shares acquired within
the previous 90 days, only to the extent granted by a resolution of the stock-
holders approved at a special or annual meeting, unless otherwise provided in
the articles of incorporation or bylaws in effect on the tenth day following
the control acquisition.
The corporation must, within 50 days after delivery by the acquiring person of
certain disclosures, hold a special meeting to consider a resolution authoriz-
ing voting rights for the control shares, unless the acquiring person consents
in writing to a meeting to be had after 50 days. Unless the corporation's ar-
ticles of incorporation otherwise provide (and Tosco's Amended and Restated
Articles of Incorporation does not otherwise provide), a resolution granting
voting rights must be approved by a majority vote.
The corporation may adopt a provision in its articles of incorporation or by-
laws allowing mandatory redemption of the control shares if
. the acquiring party fails to make certain disclosures within ten days of
acquiring the control shares, or
(Phillips Continued)
Section 203 of the Delaware General Corporation Law prohibits "business combi-
nations," including mergers, sales and leases of assets, issuances of securi-
ties and similar transactions by a corporation or a subsidiary with an inter-
ested stockholder that beneficially owns 15% or more of a corporation's voting
stock, within three years after the person becomes an interested stockholder,
unless:
. the transaction that will cause the person to become an interested stock-
holder is approved by the board of directors of the target prior to the
transaction;
. after the completion of the transaction in which the person becomes an in-
terested stockholder, the interested stockholder holds at least 85% of the
voting stock of the corporation not including:
-- shares held by officers and directors of interested stockholders, and
-- shares held by specified employee benefit plans; or
. after the person becomes an interested stockholder, the business combina-
tion is approved by the board of directors of the corporation and holders
of at least 66-2/3% of the outstanding voting stock, excluding shares held
by the interested stockholder.
A Delaware corporation may elect not to be governed by Section 203 by a provi-
sion contained in the original certificate of incorporation of the corporation
or an amendment thereto or to the bylaws of the corporation, which amendment
must be approved by a majority of the shares entitled to vote and may not be
further amended by the board of directors of the corporation. This amendment
is not effective until 12 months following its adoption. Phillips has not made
this election.
Phillips' Restated Certificate of Incorporation requires the affirmative vote
of 75% of the outstanding shares entitled to vote for a merger, consolidation,
sale or lease of all or any substantial part of the assets of Phillips, or
liquidation, spin-off, split-off, split-up or any similar transaction involv-
ing a person that beneficially owns 10% or more of the outstanding shares of
Phillips common stock or is an affiliate of that person. The provision does
not apply if:
. a majority of the directors in place prior to the transaction are in place
after the transaction and approve the transaction, or
69
(Tosco Continued)
. the control shares are not accorded full voting rights at the meeting at
which the issue is considered.
Tosco has not adopted a provision in Tosco's Amended and Restated Articles of
Incorporation or Tosco's Bylaws relating to mandatory redemption of control
shares.
Unless the articles of incorporation or bylaws of the corporation otherwise
provide (and Tosco's Amended and Restated Articles of Incorporation and Bylaws
do not otherwise provide), if the acquiring party has
. acquired a majority (or larger) stake and
. been accorded full voting rights,
any holder that did not vote in favor of granting voting rights is entitled to
put his or her shares to the corporation for "fair value" (defined as the high-
est price paid by the acquiring party for control shares).
A corporation may impose stricter requirements than those established by this
statute through a charter or bylaw amendment or by resolution. Tosco has not
adopted a provision in Tosco's Amended and Restated Articles of Incorporation
or Tosco's Bylaws, or otherwise adopted a resolution, imposing stricter re-
quirements than those established by this statute.
The provisions of Nevada law relating to the acquisition of control shares of a
Nevada corporation do not apply to an acquisition of stock in good faith, with-
out an intention to avoid the statutory requirements, including acquisitions:
. by an acquiring person to the extent that the new acquisition does not re-
sult in the acquiring person obtaining a controlling interest greater than
that previously authorized;
. pursuant to the laws of descent and distribution, the enforcement of a
judgment or the satisfaction of a pledge or other security interest; or
. pursuant to a merger or reorganization to which the corporation is a party
that is effected in compliance with the provisions of Nevada law.
Nevada law provides that the board of directors of a Nevada corporation may
take action to protect the interests of the corporation and its stockholders,
including adopting or executing a rights plan. Tosco has adopted the Tosco
rights plan.
(Phillips Continued)
. a number of other conditions are met, including a condition requiring the
payment received by the stockholders to be at least equal to the highest
price paid by the person for shares prior to the transaction.
70
(Tosco Continued)
Under Nevada law, when evaluating a change in control opportunity, the board
of directors of a Nevada corporation may consider a number of constituencies,
including the interests of employees, suppliers, creditors and customers, the
economy of the state and nation, the interests of the community and of socie-
ty, and the long-term and short-term interests of the corporation and its
stockholders and is not required to consider the effect of a change of control
on any particular group having an interest in the corporation as a dominant
factor.
Tosco has not adopted a supermajority voting provision for mergers, consolida-
tions, sales or leases of substantially all of Tosco's assets or any similar
transactions.
Tosco's Amended and Restated Articles of Incorporation provides that Tosco may
not repurchase Tosco common stock from any five percent or greater Tosco
stockholder at a price in excess of the then-current market price for Tosco
common stock unless the repurchase is approved by the holders of a majority of
the outstanding Tosco common stock.
STOCKHOLDER RIGHTS PLAN
Tosco
Tosco has implemented the Tosco rights plan, under which a group of persons
becomes an acquiring person upon a public announcement that they have acquired
or intend to acquire 15% or more of Tosco's voting stock.
Tosco's rights may not be redeemed for 180 days following any stockholder ac-
tion if after that stockholder action a majority of Tosco's directors then
serving were not nominated by the Tosco Board of Directors immediately preced-
ing that stockholder action if the redemption would be likely to facilitate
any person becoming an acquiring person.
In connection with the proposed merger, Tosco amended the Tosco rights plan to
exempt Phillips and its affiliates from triggering the Tosco rights plan.
Phillips
Phillips has implemented the Phillips rights plan, under which a group of per-
sons becomes an acquiring person upon a public announcement that they have ac-
quired or intend to acquire 15% or more of Phillips' voting stock. This
threshold can be reduced by amendment of the Phillips rights plan. Each share
of Phillips common stock issued in the merger will be issued with an attached
right.
71
STOCKHOLDER ACTION WITHOUT A MEETING
Tosco
In accordance with Nevada law, Tosco's Bylaws provide that any action required
or permitted to be taken at a stockholders meeting may be taken without a
meeting pursuant to the written consent of the holders of the number of shares
of Tosco common stock that would have been required to effect the action at an
actual meeting of Tosco stockholders.
Phillips
As permitted under Delaware law, Phillips' Restated Certificate of Incorpora-
tion and Bylaws prohibit stockholder action by written consent and mandate
that any action required or permitted to be taken by Phillips stockholders
must be effected at a duly called annual or special meeting.
CALLING SPECIAL MEETINGS OF STOCKHOLDERS
Tosco
Nevada law does not specifically address who may call special meetings of
stockholders of a Nevada corporation. Tosco's Bylaws provide that a special
meeting of stockholders may be called by resolution of the Tosco Board of Di-
rectors.
Phillips
Under Delaware law, a special meeting of stockholders of a Delaware corpora-
tion may be called by the board of directors of the corporation or by any
other person authorized to do so in the certificate of incorporation or the
bylaws of the corporation. Phillips' Restated Certificate of Incorporation
provides that a special meeting of stockholders may be called only by the
President, the Chairman of the Board or a majority of Phillips' Board of Di-
rectors. Phillips stockholders do not have the ability to call a special meet-
ing of stockholders.
SUBMISSION OF STOCKHOLDER PROPOSALS
Tosco
Tosco's Amended and Restated Articles of Incorporation and Bylaws do not spec-
ify advance notice requirements for the submission of stockholder proposals by
Tosco stockholders.
Phillips
Phillips' Bylaws specify advance notice requirements that conform to the re-
quirements of Delaware law. Notice for an annual meeting would have to be re-
ceived by Phillips
. not earlier than 90 days prior to the anniversary of last year's annual
meeting, and
. not later than 60 days prior to such anniversary date.
If the date of the annual meeting is more than 30 days before or 60 days after
such anniversary date, then notice must be received by Phillips
. not earlier than 90 days prior to the date of the annual meeting, and
. not later than 60 days prior to the date of the annual meeting or 10 days
after public announcement of such date, if later.
The notice must include a description of the stockholder proposal, the reasons
for conducting the business desired to be brought before the meeting and other
information.
72
NOTICE OF STOCKHOLDERS MEETINGS
Tosco
In accordance with Nevada law, Tosco's Bylaws provide for written notice to
stockholders of record not less than 10 nor more than 60 days prior to an an-
nual or special meeting.
Phillips
In accordance with Delaware law, Phillips' Bylaws provide for written notice
to stockholders of record not less than 10 nor more than 60 days prior to an
annual or special meeting.
STOCKHOLDER VOTE REQUIRED FOR MERGERS
Tosco
Under Nevada law, a merger, share exchange or sale of all of a Nevada corpora-
tion's assets must be adopted by the board of directors of the corporation and
approved by a majority of the corporation's voting power, unless stockholders
of a class of stock are entitled to vote as a class, in which case the ap-
proval of each class is also required. However, no vote of stockholders of a
constituent corporation surviving a merger is required if:
. the merger agreement does not amend the articles of incorporation of the
surviving corporation;
. each share of stock of the surviving corporation outstanding before the
merger is an identical outstanding or treasury share after the merger; and
. either no shares of common stock of the surviving corporation are to be is-
sued or delivered pursuant to the merger, or, if common stock will be is-
sued or delivered, it will not increase the number of shares of common
stock outstanding immediately prior to the merger by more than 20%.
Phillips
Under Delaware law, a merger, consolidation or sale of all or substantially
all of a Delaware corporation's assets must be approved by the board of direc-
tors of the corporation and by a majority of the outstanding stock of the cor-
poration entitled to vote thereon. However, no vote of stockholders of a con-
stituent corporation surviving a merger is required, unless the corporation
provides otherwise in its certificate of incorporation of the corporation, if:
. the merger agreement does not amend the certificate of incorporation of the
surviving corporation;
. each share of stock of the surviving corporation outstanding before the
merger is an identical outstanding or treasury share after the merger; and
. either no shares of common stock of the surviving corporation are to be is-
sued or delivered pursuant to the merger, or, if common stock will be is-
sued or delivered, it will not increase the number of shares of common
stock outstanding immediately prior to the merger by more than 20%.
DIVIDENDS
Tosco
Except as otherwise provided in the articles of incorporation of a Nevada cor-
poration, Nevada law authorizes the corporation to make distributions to its
stockholders, unless:
. the corporation would not be able to pay its debts as they become due in
the usual course of business, or
. the corporation's total assets would be less than the sum of its total lia-
bilities plus any amount owed to stockholders with preferential rights su-
perior to those receiving the distribution, if the corporation were dis-
solved at the time of distri-
Phillips
Under Delaware law, a Delaware corporation may pay dividends out of surplus
or, if there is no surplus, out of net profits for the fiscal year in which
declared and for the preceding fiscal year. Delaware law also provides that
dividends may not be paid out of net profits if, after the payment of the div-
idend, capital is less than the capital represented by the outstanding stock
of all classes having a preference upon the distribution of assets. Phillips'
Bylaws provide that the directors have the right to declare dividends to the
full extent permitted by law.
73
(Tosco Continued)
bution, unless such distribution is specifically allowed by the corpora-
tion's articles of incorporation.
Tosco's Amended and Restated Articles of Incorporation contains no restrictions
on the declaration or payment of dividends.
RIGHTS OF PREFERRED STOCKHOLDERS
Neither Phillips nor Tosco has any preferred stock outstanding.
APPRAISAL RIGHTS
Tosco
Nevada law provides stockholders of a Nevada corporation involved in a merger
the right to demand and receive payment of the fair value of their stock in
certain mergers. However, unless otherwise provided in the articles of incorpo-
ration of the corporation (and Tosco's Amended and Restated Articles of Incor-
poration does not otherwise provide), appraisal rights are not available to
holders of shares:
. listed on a national securities exchange,
. included in the national market system by the National Association of Secu-
rities Dealers, Inc., or
. held of record by at least 2,000 stockholders,
unless holders of stock are required to accept in the merger anything other
than any combination of:
. cash, owner's interests or owner's interests and cash in lieu of fractional
shares of:
--the surviving or acquiring entity in the merger, or
--another entity that, at the effective date of the merger, will be:
(right arrow) listed on a national securities exchange,
(right arrow) included in the national market system by the National
Association of Securities Dealers, or
(right arrow) held of record by at least 2,000 stockholders.
Dissenters' appraisal rights are not available to Tosco stockholders with re-
spect to the merger.
Phillips
Delaware law provides stockholders of a Delaware corporation involved in a
merger the right to demand and receive payment of the fair value of their stock
in certain mergers. However, appraisal rights are not available to holders of
shares:
. listed on a national securities exchange,
. designated as a national market system security on an interdealer quotation
system operated by the National Association of Securities Dealers, or
. held of record by more than 2,000 stockholders,
unless holders of stock are required to accept in the merger anything other
than any combination of:
. shares of stock or depository receipts of the surviving corporation in the
merger,
. shares of stock or depository receipts of another corporation that, at the
effective date of the merger, will be:
--listed on a national securities exchange,
--designated as a national market system security on an interdealer quo-
tation system operated by the National Association of Securities Deal-
ers, or
--held of record by more than 2,000 holders; and
. cash instead of fractional shares of the stock or depository receipts re-
ceived.
Dissenters' appraisal rights are not available to Phillips stockholders with
respect to the merger.
74
STOCKHOLDER PREEMPTIVE RIGHTS
Tosco
Nevada law provides that stockholders have a preemptive right to acquire
unissued shares of a Nevada corporation, treasury shares of the corporation or
securities convertible into these shares upon such terms as the board of di-
rectors of the corporation fixes for the purpose of providing a fair and rea-
sonable opportunity for the exercise of this right, except to the extent oth-
erwise limited by the corporation's articles of incorporation.
Tosco's Amended and Restated Articles of Incorporation provides that no Tosco
stockholder shall have preemptive rights.
Phillips
Delaware law provides that no stockholder shall have any preemptive rights to
purchase additional securities of the corporation unless the certificate of
incorporation expressly grants these rights. Phillips' Restated Certificate of
Incorporation does not provide for preemptive rights for Phillips stockhold-
ers.
INSPECTION OF STOCKHOLDER LISTS
Tosco
Under Nevada law any person that has been a stockholder of record of a Nevada
corporation for at least six months, or any person holding or representing at
least 5% of its outstanding shares, upon at least five days' written demand,
may inspect its stock ledger and make copies from it. A corporation must allow
stockholders of record that own or represent at least 15% of a corporation's
shares the right, upon at least five days' written demand, to inspect the
books of accounting and financial records of the corporation, to make copies
from them and to conduct an audit of those records, except that any corpora-
tion listed and traded on any recognized stock exchange or any corporation
that furnishes to its stockholders a detailed, annual financial statement is
exempt from this requirement.
Phillips
Delaware law allows any stockholder to inspect the stock ledger and the other
books and records of a Delaware corporation for a purpose reasonably related
to that person's interest as a stockholder. Phillips' Restated Certificate of
Incorporation provides that all other inspection rights must be specifically
granted by resolution of the Phillips Board of Directors.
STOCKHOLDER CLASS VOTING RIGHTS
Tosco
With respect to mergers, Nevada law requires voting by separate classes and
series of shares if the plan of merger contains a provision that if contained
in an amendment to the articles of incorporation of the corporation would en-
title the particular class of stockholders to vote as a class on the proposed
amendment.
With respect to share exchanges, Nevada law requires voting by each separate
class or series of shares included in the exchange, with each class
constituting a separate voting class.
Phillips
Delaware law requires voting by separate classes of shares only with respect
to amendments to a Delaware corporation's certificate of incorporation that
adversely affect the holders of those classes or that increase or decrease the
aggregate number of authorized shares or the par value of the shares of any of
those classes.
Phillips only has one class of shares outstanding.
75
(Tosco Continued)
Nevada law also requires, in addition to the affirmative vote otherwise re-
quired, voting and approval by the separate classes of shares for any amend-
ment to the articles of incorporation if the amendment would alter or change
any preference or relative or other right given to any such class or series of
outstanding shares.
Tosco only has one class of shares outstanding.
INDEMNIFICATION
Tosco
Nevada law provides that, subject to certain limitations in the case of deriv-
ative suits brought by a corporation's stockholders in its name, a corporation
may indemnify any individual who is made a party to any third-party suit or
proceeding on account of being a director, officer, employee or agent of the
corporation against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement reasonably and actually incurred by him or her in
connection with the action, through, among other things, a majority vote of a
quorum consisting of directors who were not parties to the suit or proceeding,
if the individual:
. 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, in some circum-
stances, at least not opposed to its best interests, provided that the ter-
mination of any action or suit by judgment, order, settlement, conviction
or on a plea of nolo contendere does not create a presumption by itself
that the individual did not act in good faith, and
. in a criminal proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
To the extent a director, officer, employee or agent is successful on the
merits or otherwise in the defense of this action, suit or proceeding, the
corporation is required by Nevada law to indemnify the individual for reason-
able and actual expenses incurred thereby.
Tosco's Amended and Restated Articles of Incorporation provides for indemnifi-
cation, to the fullest extent of the law, for each individual authorized to be
indemnified under the law.
Any of the following may make the required determination:
. the stockholders,
Phillips
Delaware law provides that, subject to certain limitations in the case of de-
rivative suits brought by a corporation's stockholders in its name, a corpora-
tion may indemnify any individual who is made a party to any third-party suit
or proceeding on account of being a director, officer, employee or agent of
the corporation against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement reasonably incurred by him or her in connection
with the action, through, among other things, a majority vote of a quorum con-
sisting of directors who were not parties to the suit or proceeding, if the
individual:
. 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, in some circum-
stances, at least not opposed to its best interests; and
. in a criminal proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
To the extent a director, officer, employee or agent is successful in the de-
fense of the action, suit or proceeding, the corporation is required by Dela-
ware law to indemnify such individual for reasonable expenses incurred there-
by.
Phillips' Restated Certificate of Incorporation and Bylaws provide for indem-
nification, to the fullest extent authorized by Delaware law, for each indi-
vidual who was or is made a party to, is threatened to be made a party to or
is involved in any action, suit or proceeding because he or she is or was a
director, officer or employee of Phillips (or was serving at the request of
Phillips as a director, trustee, officer, employee, or agent of another enti-
ty) while serving in that capacity against all expenses, liabilities, or loss
incurred by that individual in connection therewith, provided that indemnifi-
cation in connection with a
76
(Tosco Continued)
. a majority vote of a quorum of the board of directors consisting of direc-
tors not parties to such action, or
. special legal counsel.
The right to indemnification is not exclusive of any other right that any in-
dividual may have or acquire under any statute, provision of Tosco's Amended
and Restated Articles of Incorporation or Bylaws, agreement, vote of stock-
holders or disinterested directors or otherwise.
(Phillips Continued)
proceeding brought by that individual will be permitted only if the proceeding
was authorized by the Phillips Board of Directors.
Phillips' Bylaws also provide that Phillips must pay expenses incurred in de-
fending the proceedings specified above in advance of their final disposition,
provided that, if so required by Delaware law, the advance payments for ex-
penses incurred by a director or officer may be made only if he or she under-
takes to repay all amounts so advanced if it is ultimately determined that the
individual receiving the advance payments is not entitled to be indemnified.
The right to indemnification is not exclusive of any other right that any in-
dividual may have or acquire under any statute, provision of Phillips' Re-
stated Certificate of Incorporation or Bylaws, agreement, vote of stockholders
or disinterested directors or otherwise.
LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY
Tosco
Tosco's Amended and Restated Articles of Incorporation provides that, to the
fullest extent permitted by Nevada law, a director or officer of Tosco shall
not be personally liable to Tosco or any of Tosco's stockholders for damages
or for breach of fiduciary duty as a director or officer, except for liability
arising out of:
. acts or omissions that involve intentional misconduct, fraud or a knowing
violation of law; or
. payment of a dividend in violation of Nevada law.
Phillips
Phillips' Restated Certificate of Incorporation provides that a director of
Phillips shall not be liable personally to Phillips or Phillips stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability arising out of:
. any breach of the director's duty of loyalty to Phillips or Phillips stock-
holders;
. acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law;
. payment of a dividend or approval of a stock repurchase in violation of
Delaware law; or
. any transaction from which the director derived an improper personal bene-
fit.
This provision protects Phillips' directors against personal liability for
monetary damages related to breaches of their duty of care. It does not elimi-
nate the director's duty of care and has no effect on the availability of eq-
uitable remedies, such as an injunction or rescission, based upon a director's
breach of his or her duty of care.
77
CHARTER AMENDMENTS
Tosco
Under Nevada law, amendments to the articles of incorporation may be adopted
if recommended by the board of directors of the corporation and approved by a
majority of the outstanding shares entitled to vote.
Tosco's Amended and Restated Articles of Incorporation may be amended in ac-
cordance with Nevada law.
Shares of Tosco preferred stock currently authorized in Tosco's Amended and
Restated Articles of Incorporation may be issued by the Tosco Board of Direc-
tors without amending Tosco's Amended and Restated Articles of Incorporation
or otherwise obtaining the approval of Tosco stockholders.
Phillips
Under Delaware law, amendments to a certificate of incorporation of the corpo-
ration require the approval of the board of directors of the corporation and
stockholders holding a majority of the outstanding stock of the class entitled
to vote on the amendment as a class, unless a different proportion is speci-
fied in the certificate of incorporation or by other provisions of Delaware
law.
Phillips' Restated Certificate of Incorporation may be amended only if the
proposed amendment is approved by the Phillips Board of Directors and thereaf-
ter approved by a majority of the outstanding stock entitled to vote thereon
and by a majority of the outstanding stock of each class entitled to vote
thereon as a class. Amendment of the super-majority provisions of Phillips'
Restated Certificate of Incorporation described under "--Anti-Takeover Provi-
sions" and amendments to the provisions restricting the ability of stockhold-
ers to call a special meeting or act without a meeting require the affirmative
vote of at least 80% of the voting power of all outstanding shares of the cor-
poration entitled to vote generally in the election of directors.
Shares of Phillips preferred stock currently authorized in Phillips' Restated
Certificate of Incorporation may be issued by the Phillips Board of Directors
without amending Phillips' Restated Certificate of Incorporation or otherwise
obtaining the approval of Phillips stockholders.
AMENDMENT OF BYLAWS
Tosco
Under Nevada law, the board of directors of the corporation may adopt, amend
and repeal the bylaws of the corporation, subject to any bylaws adopted by the
stockholders.
Tosco's Bylaws provide that the Tosco Board of Directors has the power to
make, alter or amend Tosco's Bylaws by majority vote of the whole Board.
Tosco's Bylaws also may be adopted, amended or repealed by the affirmative
vote of more than 60% of the outstanding voting shares of Tosco.
Phillips
Under Delaware law, holders of a majority of the voting power of a corpora-
tion, and, when provided in the certificate of incorporation, the directors of
the corporation, have the power to adopt, amend and repeal the bylaws of a
corporation.
Phillips' Bylaws generally provide for amendment by a majority of the out-
standing stock entitled to vote on the matter, or, if the stockholders did not
enact the bylaw, by a majority of Phillips' Board of Directors.
78
RIGHTS OF DISSENTING STOCKHOLDERS
Under applicable Delaware and Nevada law, holders of Phillips common stock
and holders of Tosco common stock do not have any dissenters' rights of
appraisal in connection with the merger.
LEGAL MATTERS
The validity of the Phillips common stock to be issued in the merger will
be passed upon by J. Bryan Whitworth, Esq., Executive Vice President, General
Counsel and Chief Administrative Officer of Phillips. As of the date of this
joint proxy statement/prospectus, Mr. Whitworth beneficially owns 142,308
shares of Phillips common stock and currently unexercisable options to
purchase 76,025 additional shares of Phillips common stock.
EXPERTS
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, 1999, 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.
The financial statements incorporated in this joint proxy
statement/prospectus by reference to Tosco's Annual Report on Form 10-K for
the year ended December 31, 1999, have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
STOCKHOLDER PROPOSALS
As the result of the merger, Tosco does not anticipate holding its 2001
annual meeting of stockholders.
Stockholder proposals for Phillips' 2001 annual meeting of stockholders
must have been received on or before December 6, 2000, at the Office of the
Secretary at Phillips' executive officers located at the Phillips Building,
Bartlesville, Oklahoma 74004, in order to be eligible for inclusion in
Phillips' proxy materials for the 2001 annual meeting of stockholders.
Stockholder proposals intended to be presented at Tosco's 2001 annual
meeting of stockholders, if the 2001 annual meeting of stockholders is held,
must have been received on or before December 9, 2000 at Tosco's executive
offices located at 1700 East Putnam Road, Old Greenwich, Connecticut 06870, to
be considered for inclusion in Tosco's proxy materials for the 2001 annual
meeting of stockholders.
OTHER MATTERS
As of the date of this joint proxy statement/prospectus, the Phillips Board
of Directors and the Tosco Board of Directors know of no matters that will be
presented for consideration at the Phillips special meeting or the Tosco
special meeting, respectively, other than as described in this joint proxy
statement/prospectus. If any other matters do properly come before either
special meeting or any adjournments or postponements of those special meetings
and are voted upon, the enclosed proxies will be deemed to confer
discretionary authority on the individuals named as proxies to vote the shares
represented by those proxies as to any of those other matters.
INDEPENDENT AUDITORS
Representatives of Ernst & Young LLP will be present at the Phillips
special meeting and representatives of PricewaterhouseCoopers LLP will be
present at the Tosco special meeting. In each case, those representatives will
have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
79
WHERE YOU CAN FIND MORE INFORMATION
Phillips and Tosco file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any such
reports, statements or other information filed by either Phillips or Tosco at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. The SEC filings of Phillips and Tosco are also
available to the public from commercial document retrieval services and at the
Web site maintained by the SEC at http://www.sec.gov. You can also inspect
reports, proxy statements and other information about Phillips and Tosco at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
Phillips has filed a Registration Statement on Form S-4 to register with the
SEC the Phillips common stock to be issued to Tosco stockholders in the merger.
This joint proxy statement/prospectus is a part of that Registration Statement
and constitutes a proxy statement and a prospectus of Phillips, in addition to
being a proxy statement of Tosco for the Tosco special meeting. The
Registration Statement, including the attached exhibits and schedules, contains
additional relevant information about Phillips and Tosco and Phillips common
stock. As allowed by SEC rules, this joint proxy statement/prospectus does not
contain all the information you can find in the registration statement or the
exhibits to the registration statement. Summaries contained in this joint proxy
statement/prospectus of the contents of any agreement or other document
referred to in this joint proxy statement/prospectus are not necessarily
complete and we refer you to the complete copy of that agreement or other
document for its precise legal terms and other information that may be
important to you.
The SEC allows Phillips and Tosco to "incorporate by reference" information
into this joint proxy statement/prospectus. This means that Phillips and Tosco
can disclose important information to you by referring you to another document
filed separately with the SEC. The information incorporated by reference is
considered to be a part of this joint proxy statement/prospectus, except for
any information that is superseded by information that is included directly in
this joint proxy statement/prospectus or incorporated by reference subsequent
to the date of this joint proxy statement/prospectus.
This joint proxy statement/prospectus incorporates by reference the
documents listed below that Phillips and Tosco have previously filed with the
SEC. They contain important information about Phillips and Tosco and their
financial condition.
PHILLIPS SEC FILINGS PERIOD/FILING DATE
Annual Report on Form 10-K, as amended Year ended December 31, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, June 30,
and September 30, 2000
Current Reports on Form 8-K February 21, 2001
February 5, 2001
August 10, 2000
July 14, 2000
June 1, 2000
May 18, 2000
May 11, 2000
May 8, 2000
April 18, 2000
April 13, 2000
February 15, 2000
February 10, 2000
The description of Phillips common stock
contained in Phillips' Registration
Statement on Form 8-A and any amendments
thereto filed for the purpose of updating
such description
The description of Phillips' preferred
share purchase rights contained in
Phillips' Registration Statement on Form 8-
A, filed December 16, 1999, and any
amendments thereto filed for the purpose of
updating such description
80
TOSCO SEC FILINGS PERIOD/FILING DATE
Annual Report on Form 10-K Year ended December 31, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, June 30,
and September 30, 2000
Current Reports on Form 8-K February 6, 2001
October 25, 2000
September 21, 2000
September 15, 2000
June 14, 2000
The description of Tosco common stock
contained in Tosco's Registration Statement
on Form 8-A, filed June 29, 1989, and any
amendments thereto filed for the purpose of
updating such description
The description of Tosco's rights to
acquire shares of Tosco series A junior
participating preferred stock contained in
Tosco's Registration Statement on Form 8-A,
filed November 24, 1998, and any amendments
thereto filed for the purpose of updating
such description
In addition, Phillips and Tosco incorporate by reference additional
documents that either may file with the SEC pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act between the date of this joint proxy
statement/prospectus and the dates of the Phillips special meeting and the
Tosco special meeting, respectively. These documents 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.
Phillips has supplied all information contained or incorporated by reference
in this joint proxy statement/prospectus relating to Phillips, and Tosco has
supplied all the information relating to Tosco.
You can obtain any of the documents incorporated by reference in this joint
proxy statement/prospectus through Phillips or Tosco, as the case may be, or
from the SEC through the SEC's Internet Web site at the address described
above. Documents incorporated by reference are available from Phillips and
Tosco without charge, excluding any exhibits to those documents, unless the
exhibit is specifically incorporated by reference as an exhibit in this joint
proxy statement/prospectus. You can obtain these documents by requesting them
in writing (including by e-mail request) or by telephone from the appropriate
company at the following addresses:
PHILLIPS TOSCO
Investor Relations Investor Relations
Phillips Petroleum Company Tosco Corporation
Phillips Building 1700 East Putnam Road
Bartlesville, Oklahoma 74004 Old Greenwich, Connecticut 06870
(918) 661-3700 (203) 698-7508
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY APRIL 4, 2001, TO
RECEIVE THEM BEFORE THE SPECIAL MEETINGS. If you request any incorporated
documents from us, we will mail them to you by first class mail, or another
equally prompt means, within one business day after we receive your request.
We have not authorized anyone to give any information or make any
representation about the merger or our companies that is different from, or in
addition to, that contained in this joint proxy statement/prospectus or in any
of the materials that we have incorporated into 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 joint proxy statement/prospectus 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 joint proxy
statement/prospectus does not extend to you. The information contained in this
joint proxy statement/prospectus speaks only as of the date of this document
unless the information specifically indicates that another date applies.
81
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements combine the
historical consolidated balance sheets and statements of income of Phillips and
Tosco, giving effect to the merger using the purchase method of accounting.
Phillips' historical income statements have been adjusted to reflect the pro
forma impact of the acquisition of ARCO's Alaskan businesses and the formation
of Duke Energy Field Services and Chevron Phillips Chemical Company during the
first nine months of 2000. Tosco's historical income statements have been
adjusted for the pro forma impact of the sale of the Avon refinery on August
31, 2000.
We are providing the following information to aid you in your analysis of
the financial aspects of the merger. We derived this information from the
audited financial statements of Phillips and Tosco for the year ended December
31, 1999. The income statement information for the nine-month period ended
September 30, 2000, and the balance sheet information at September 30, 2000,
were derived from the unaudited financial information of the companies. The
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 SEC and incorporated herein by reference. See "Where You
Can Find More Information."
The unaudited pro forma combined statements of income assume the merger was
effected on January 1, 1999. The unaudited pro forma combined balance sheet
gives effect to the merger as if it had occurred on September 30, 2000. The
accounting policies of Phillips and Tosco are substantially comparable. The
only conforming accounting policy adjustment reflected in the unaudited pro
forma combined financial statements relates to accounting for turnaround costs.
The unaudited pro forma combined financial 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, 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
Phillips will experience.
82
PHILLIPS PETROLEUM COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
MILLIONS OF DOLLARS
---------------------------------------
PHILLIPS
PHILLIPS TOSCO AND
AS AS PRO FORMA TOSCO
Year Ended December 31, 1999 ADJUSTED ADJUSTED ADJUSTMENTS COMBINED
- ---------------------------- -------- -------- ----------- --------
(A) (B)
REVENUES
Sales and other operating revenues...... $12,444 13,659 26,103
Equity in earnings of affiliated
companies.............................. 340 -- 340
Other revenues.......................... 196 46 242
------- -------- -------
Total Revenues...................... 12,980 13,705 26,685
------- -------- -------
COSTS AND EXPENSES
Purchased crude oil and products........ 6,437 10,768 240(d) 17,445
Production and operating expenses....... 2,037 1,312 85(c) 3,434
Exploration expenses.................... 280 -- 280
Selling, general and administrative
expenses............................... 443 296 739
Depreciation, depletion and
amortization........................... 1,154 256 64(c) 1,474
Property impairments.................... 69 -- 69
Taxes other than income taxes........... 416 126 542
Interest expense........................ 468 105 573
Foreign currency transaction losses..... 32 -- 32
Preferred dividend requirements of
capital trusts......................... 53 17 (17)(e) 53
------- -------- ---- -------
Total Costs and Expenses............ 11,389 12,880 372 24,641
------- -------- ---- -------
Income before income taxes.............. 1,591 825 (372) 2,044
Provision for income taxes.............. 716 337 (124)(f) 929
------- -------- ---- -------
NET INCOME.............................. $ 875 488 (248) 1,115
======= ======== ==== =======
NET INCOME PER SHARE OF COMMON STOCK
Basic................................. $ 3.46 3.28 2.97
Diluted............................... 3.44 3.12 2.93
AVERAGE COMMON SHARES OUTSTANDING
(in thousands)
Basic................................. 252,827 148,886 376,027(g)
Diluted............................... 254,433 159,856 381,068(g)
See Notes to Unaudited Pro Forma Financial Statements.
83
PHILLIPS PETROLEUM COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
MILLIONS OF DOLLARS
--------------------------------------
PHILLIPS
PHILLIPS TOSCO AND
AS AS PRO FORMA TOSCO
Nine Months Ended September 30, 2000 ADJUSTED ADJUSTED ADJUSTMENTS COMBINED
- ------------------------------------ -------- -------- ----------- --------
(A) (B)
REVENUES
Sales and other operating revenues...... $14,226 16,154 30,380
Equity in earnings of affiliated
companies.............................. 302 -- 302
Other revenues.......................... 54 26 80
------- -------- -------
Total Revenues...................... 14,582 16,180 30,762
------- -------- -------
COSTS AND EXPENSES
Purchased crude oil and products........ 7,915 13,750 21,665
Production and operating expenses....... 1,484 1,141 57(c) 2,682
Exploration expenses.................... 213 -- 213
Selling, general and administrative
expenses............................... 375 243 618
Depreciation, depletion and
amortization........................... 936 226 15(c) 1,177
Property impairments.................... 97 -- 97
Taxes other than income taxes........... 400 112 512
Interest expense........................ 320 111 431
Foreign currency transaction losses..... 47 -- 47
Preferred dividend requirements of
capital trusts......................... 40 13 (13)(e) 40
------- -------- --- -------
Total Costs and Expenses............ 11,827 15,596 59 27,482
------- -------- --- -------
Income before income taxes.............. 2,755 584 (59) 3,280
Provision for income taxes.............. 1,404 237 (6)(f) 1,635
------- -------- --- -------
NET INCOME.............................. $ 1,351 347 (53) 1,645
======= ======== === =======
NET INCOME PER SHARE OF COMMON STOCK
Basic................................. $ 5.31 2.40 4.36
Diluted............................... 5.28 2.29 4.30
AVERAGE COMMON SHARES OUTSTANDING
(in thousands)
Basic................................. 254,217 144,462 377,417(g)
Diluted............................... 255,769 155,356 382,404(g)
See Notes to Unaudited Pro Forma Financial Statements.
84
PHILLIPS PETROLEUM COMPANY
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MILLIONS OF DOLLARS
---------------------------------------
PHILLIPS
AND
PRO FORMA TOSCO
At September 30, 2000 PHILLIPS TOSCO ADJUSTMENTS COMBINED
- --------------------- -------- ----- ----------- --------
ASSETS
Cash and cash equivalents............. $ 88 18 (15)(c) 91
Accounts and notes receivable (less
allowances: Phillips--$18; Tosco--
$18)................................. 1,567 968 2,535
Inventories........................... 439 1,827 690 (h) 2,956
Deferred income taxes................. 195 -- 195
Prepaid expenses and other current
assets............................... 165 163 328
------- ----- ------ ------
Total Current Assets............... 2,454 2,976 675 6,105
Investments and long-term
receivables.......................... 2,897 78 2,975
Properties, plants and equipment
(net)................................ 15,040 4,817 2,433 (c) 22,290
Identifiable intangible assets (net).. -- 587 413 (c) 1,000
Goodwill.............................. -- -- 2,349 (c) 2,349
Deferred turnarounds (net)............ -- 144 (144)(c) --
Deferred income taxes................. 2 -- 2
Deferred charges and other assets..... 187 99 286
------- ----- ------ ------
Total.............................. $20,580 8,701 5,726 35,007
======= ===== ====== ======
LIABILITIES
Accounts payable...................... $ 1,754 1,643 3,397
Notes payable and long-term debt due
within one year...................... 410 152 562
Accrued income and other taxes........ 892 377 1,269
Deferred taxes........................ -- 84 (84)(c) --
Other accruals........................ 461 602 150 (i) 1,213
------- ----- ------ ------
Total Current Liabilities.......... 3,517 2,858 66 6,441
Long-term debt........................ 7,509 2,144 9,653
Accrued dismantlement, removal and
environmental costs.................. 719 229 948
Deferred income taxes................. 1,677 266 1,624 (c) 3,567
Other liabilities and deferred
credits.............................. 1,072 449 (237)(j) 1,284
------- ----- ------ ------
Total Liabilities.................. 14,494 5,946 1,453 21,893
------- ----- ------ ------
COMPANY-OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES...... 650 300 (300)(e) 650
------- ----- ------ ------
COMMON STOCKHOLDERS' EQUITY
Common stock
Issued...............................
Par value........................... 383 134 20 (c) 537
Capital in excess of par............ 2,147 2,040 4,834 (c) 9,021
Treasury stock (at cost)............. (1,158) (779) 779 (c) (1,158)
Compensation and Benefits Trust (at
cost)............................... (944) -- (944)
Accumulated other comprehensive
income............................... (90) -- (90)
Unearned employee compensation........ (270) -- (270)
Retained earnings..................... 5,368 1,060 (1,060)(c) 5,368
------- ----- ------ ------
Total Common Stockholders' Equity.. 5,436 2,455 4,573 12,464
------- ----- ------ ------
Total.............................. $20,580 8,701 5,726 35,007
======= ===== ====== ======
See Notes to Unaudited Pro Forma Financial Statements.
85
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(a) Phillips' historical income statements for the year ended December 31,
1999, and the nine months ended September 30, 2000, have been adjusted on
a pro forma basis to reflect three significant transactions consummated in
2000 as if they had occurred on January 1, 1999.
. The disposition of Phillips' GPM business, and the simultaneous
acquisition of a 30.3 percent equity interest in DEFS on March 31, 2000.
. The disposition of Phillips' chemicals business, and the simultaneous
acquisition of a 50 percent equity interest in CPC on July 1, 2000.
. The acquisition of ARCO's Alaskan businesses, completed in two phases on
April 26, and August 1, 2000.
The significant pro forma adjustments that were made to Phillips'
historical income statements for the DEFS and CPC transactions were:
. The removal of Phillips' GPM and its chemicals businesses from
consolidation.
. The inclusion of Phillips' estimated 30.3 percent equity interest
earnings from DEFS and its estimated 50 percent equity earnings from
CPC, based on pro forma financial results of these two entities prior to
their inception.
. The amortization of the basis difference between the book value of
Phillips' contributions to DEFS and CPC, and its equity in the two
entities.
For additional information on these two transactions, including pro forma
financial presentations, see Phillips' Current Report on Form 8-K filed on
April 13, 2000, related to the DEFS transaction; and the Current Report on
Form 8-K filed on July 14, 2000, related to the CPC transaction.
The significant pro forma adjustments that were made to Phillips'
historical income statements for the ARCO Alaska transaction were:
. Estimated income statement impacts resulting from the preliminary
purchase price allocation to the Alaskan 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'.
. 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) Tosco's historical income statements for the year ended December 31, 1999,
and the nine months ended September 30, 2000, have been adjusted on a pro
forma basis to reflect the disposition of its Avon refinery on August 31,
2000, as if it had occurred on January 1, 1999.
The significant pro forma adjustments that were made to Tosco's historical
income statements for this transaction were:
. The removal of Tosco's ownership of the Avon refinery from
consolidation.
. The reduction of interest expense as a result of reducing long-term debt
collateralized by the Avon refinery.
For additional information on this transaction, including pro forma
financial presentations, see Tosco's Current Report on Form 8-K filed on
September 15, 2000.
86
(c) The following is a preliminary estimate of the purchase price for Tosco:
Number of shares of Phillips common stock expected to be
issued in the exchange.................................... 123.2 million
Multiplied by Phillips' average stock price two days before
and after the
announcement date......................................... x $55.50
--------
$ 6,838 million
Estimated fair value of Tosco stock options expected to be
exchanged for Phillips stock options...................... 190 million
Estimated transaction-related costs........................ 15 million
---------------
Estimated purchase price................................... $7,043 million
===============
For purposes of this pro forma analysis, the above estimated purchase price
has been allocated based on a preliminary assessment of the fair value of
the assets and liabilities to be acquired and was based on Tosco's balance
sheet at September 30, 2000. Based on this pro forma analysis, the
allocation of the purchase price would result in recording $7,250 million
of property, plant and equipment; $1,000 million of identifiable intangible
assets; and $2,349 million of goodwill. The pro forma income statement
adjustments reflect the estimated effects of depreciating and amortizing
these amounts over their estimated useful lives and the presentation of
turnaround costs as production and operating expense. Goodwill is estimated
to have a useful life of 40 years.
Due to the non-taxable nature of this transaction, Tosco's tax basis in its
assets would carry over to Phillips. The difference between the financial
and tax bases is estimated to result in approximately $2,000 million of net
deferred tax liabilities in the purchase price allocation.
(d) During 1999, Tosco recognized a $240 million reversal of a lower-of-cost-
or-market write-down reserve that had been recognized against last-in,
first-out inventories prior to 1999. If purchase accounting had been
applied to these inventories at January 1, 1999, this reversal to income
would not have been recognized during 1999.
(e) The company-obligated, mandatorily redeemable, convertible preferred
securities of Tosco Financing Trust were converted into 9.1 million shares
of Tosco common stock in February 2001. This pro forma analysis has
incorporated this conversion since it is an integral part of the stock
exchange being proposed to stockholders.
(f) The pro forma adjustment to income taxes reflects the statutory federal
and state income tax effects of the pro forma adjustments to Tosco's
pretax income. Goodwill recorded in the acquisition will not have deferred
tax effects, so the amortization of goodwill does not result in a
corresponding deferred income tax benefit.
(g) Reflects the retirement of outstanding Tosco common stock and the issuance
of 123.2 million shares of Phillips common stock and the effect of
Phillips' stock options issued in the exchange.
(h) This adjustment reflects the excess of inventory replacement cost over
last-in, first-out carrying values at September 30, 2000.
(i) This adjustment reflects estimated payments under termination and change
of control provisions in executive compensation and employment agreements.
(j) This adjustment reverses a deferred gain on Tosco's balance sheet that is
not subject to any future performance requirement.
87
APPENDIX A
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 4, 2001
BY AND AMONG
PHILLIPS PETROLEUM COMPANY,
PING ACQUISITION CORP.
AND
TOSCO CORPORATION
TABLE OF CONTENTS
PAGE
----
ARTICLE I CERTAIN DEFINITIONS............................................. A-1
ARTICLE II THE MERGER..................................................... A-5
2.1 The Merger....................................................... A-5
2.2 Effective Time of the Merger..................................... A-5
2.3 Effects of the Merger............................................ A-6
2.4 Closing.......................................................... A-6
2.5 Articles of Incorporation........................................ A-6
2.5 By-Laws.......................................................... A-6
2.6 Directors and Officers........................................... A-6
ARTICLE III CONVERSION OF SECURITIES...................................... A-6
3.1 Exchange Ratio................................................... A-6
3.2 Stock Options and Other Equity-Based Awards...................... A-7
3.3 Exchange Fund.................................................... A-8
3.4 Exchange Procedures.............................................. A-8
3.5 Distributions with Respect to Unexchanged Shares................. A-9
3.6 No Further Ownership Rights in Tosco Common Stock................ A-9
3.7 No Fractional Shares of Phillips Common Stock.................... A-9
3.8 Termination of Exchange Fund..................................... A-9
3.9 No Liability..................................................... A-10
3.10 Investment of the Exchange Fund.................................. A-10
3.11 Lost Certificates................................................ A-10
3.12 Withholding Rights............................................... A-10
3.13 Further Assurances............................................... A-10
3.14 Stock Transfer Books............................................. A-10
ARTICLE IV REPRESENTATIONS AND WARRANTIES................................. A-11
4.1 Representations and Warranties of Tosco.......................... A-11
(a)Corporate Organization........................................ A-11
(b)Capitalization................................................ A-11
(c)Authority; No Violation....................................... A-12
(d)Consents and Approvals........................................ A-12
(e)Financial Reports and SEC Documents........................... A-13
(f)Absence of Undisclosed Liabilities............................ A-13
(g)Absence of Certain Changes or Events.......................... A-13
(h)Legal Proceedings............................................. A-14
(i)Compliance with Applicable Law................................ A-14
(j)Contracts..................................................... A-14
(k)Environmental Liability....................................... A-14
(l)Employee Benefit Plans; Labor Matters......................... A-15
(m)Intellectual Property......................................... A-15
(n)State Takeover Laws; Rights Plan.............................. A-16
(o)Opinion of Financial Advisor.................................. A-16
(p)Board Approval................................................ A-16
(q)Broker's Fees................................................. A-16
(r)Taxes......................................................... A-16
(s)Reorganization under the Code................................. A-17
(t)Form S-4; Joint Proxy Statement/Prospectus.................... A-17
A-i
PAGE
----
4.2 Representations and Warranties of Phillips...................... A-17
(a)Corporate Organization....................................... A-17
(b)Capitalization............................................... A-18
(c)Authority; No Violation...................................... A-18
(d)Consents and Approvals....................................... A-19
(e)Financial Reports and SEC Documents.......................... A-19
(f)Absence of Undisclosed Liabilities........................... A-20
(g)Absence of Certain Changes or Events......................... A-20
(h)Legal Proceedings............................................ A-20
(i)Compliance with Applicable Law............................... A-20
(j)Environmental Liability...................................... A-20
(k)Employee Benefit Plans; Labor Matters........................ A-21
(l)State Takeover Laws.......................................... A-21
(m)Opinion of Financial Advisor................................. A-21
(n)Board Approval............................................... A-21
(o)Broker's Fees................................................ A-21
(p)Taxes........................................................ A-21
(q)Reorganization under the Code................................ A-22
(r)Form S-4; Joint Proxy Statement/Prospectus................... A-22
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS..................... A-22
5.1 Covenants of Tosco.............................................. A-22
(a)Ordinary Course.............................................. A-22
(b)Dividends; Changes in Share Capital.......................... A-23
(c)Issuance of Securities....................................... A-23
(d)Governing Documents.......................................... A-23
(e)No Acquisitions.............................................. A-23
(f)No Dispositions.............................................. A-24
(g)Investments; Indebtedness.................................... A-24
(h)Tax-Free Qualification....................................... A-24
(i)Compensation................................................. A-24
(j)Accounting Methods; Tax Elections............................ A-24
(k)Certain Actions.............................................. A-24
(l)No Related Actions........................................... A-24
5.2 Covenants of Phillips........................................... A-24
(a)Ordinary Course.............................................. A-24
(b)Dividends, Changes in Share Capital.......................... A-25
(c)Governing Documents.......................................... A-25
(d)No Acquisitions.............................................. A-25
(e)Tax-Free Qualification....................................... A-25
(f)Certain Actions.............................................. A-25
(g)No Related Actions........................................... A-25
5.3 Governmental Filings............................................ A-25
5.4 Control of Other Party's Business............................... A-25
ARTICLE VI ADDITIONAL AGREEMENTS........................................ A-26
6.1 Preparation of Proxy Statement; Stockholders Meetings........... A-26
6.2 Phillips Board of Directors and Officers; RM&T Headquarters..... A-27
6.3 Access to Information........................................... A-27
6.4 Reasonable Best Efforts......................................... A-28
6.5 Acquisition Proposals........................................... A-29
6.6 Fees and Expenses............................................... A-30
A-ii
PAGE
----
6.7 Directors' and Officers' Indemnification and Insurance......... A-30
6.8 Employee Benefits.............................................. A-31
6.9 Public Announcements........................................... A-31
6.10 Listing of Shares of Phillips Common Stock..................... A-32
6.11 Rights Agreements.............................................. A-32
6.12 Affiliates..................................................... A-32
6.13 Section 16 Matters............................................. A-32
6.14 Phillips Indebtedness and Tosco Indebtedness................... A-32
6.15 Accountants' Letters........................................... A-32
ARTICLE VII CONDITIONS PRECEDENT........................................ A-33
7.1 Conditions to Each Party's Obligation to Effect the Merger..... A-33
(a)Stockholder Approval........................................ A-33
(b)No Injunctions or Restraints; Illegality.................... A-33
(c)HSR Act; Other Approvals.................................... A-33
(d)NYSE Listing................................................ A-33
(e)Effectiveness of the Form S-4............................... A-33
7.2 Additional Conditions to Obligations of Phillips............... A-33
(a)Representations and Warranties.............................. A-33
(b)Performance of Obligations of Tosco......................... A-33
(c)Tax Opinion................................................. A-33
7.3 Additional Conditions to Obligations of Tosco.................. A-34
(a)Representations and Warranties.............................. A-34
(b)Performance of Obligations of Phillips...................... A-34
(c)Tax Opinion................................................. A-34
ARTICLE VIII TERMINATION AND AMENDMENT.................................. A-34
8.1 Termination.................................................... A-34
8.2 Effect of Termination.......................................... A-36
8.3 Amendment...................................................... A-37
8.4 Extension; Waiver.............................................. A-37
ARTICLE IX GENERAL PROVISIONS........................................... A-37
9.1 Non-Survival of Representations, Warranties and Agreements..... A-37
9.2 Notices........................................................ A-37
9.3 Interpretation................................................. A-38
9.4 Counterparts................................................... A-38
9.5 Entire Agreement; No Third Party Beneficiaries................. A-38
9.6 Governing Law.................................................. A-38
9.7 Severability................................................... A-38
9.8 Assignment..................................................... A-38
9.9 Submission to Jurisdiction; Waivers............................ A-39
9.10 Enforcement.................................................... A-39
LIST OF EXHIBITS
EXHIBIT TITLE
------- -----
Exhibit A Form of Affiliate Agreement
A-iii
AGREEMENT AND PLAN OF MERGER, dated as of February 4, 2001 (this
"Agreement"), by and among PHILLIPS PETROLEUM COMPANY, a Delaware corporation
("Phillips"), PING ACQUISITION CORP., a Nevada corporation and wholly owned
subsidiary of Phillips ("Merger Sub"), and TOSCO CORPORATION, a Nevada
corporation ("Tosco").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Phillips, Merger Sub and Tosco have
approved the acquisition of Tosco by Phillips;
WHEREAS, the Boards of Directors of Phillips, Merger Sub and Tosco have
approved the merger of Merger Sub with and into Tosco (the "Merger"), upon the
terms and subject to the conditions set forth herein; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
promulgated thereunder.
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.
"Agreement" shall have the meaning set forth in the preamble.
"Assumed Indentures" shall have the meaning set forth in Section 6.14.
"beneficial ownership" or "beneficially own" shall have the meaning
ascribed to such terms under Section 13(d) of the Exchange Act and the
rules and regulations thereunder.
"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 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.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Change in the Phillips Recommendation" shall have the meaning set forth
in Section 6.1(c).
"Change in the Tosco Recommendation" shall have the meaning set forth in
Section 6.1(b).
"Closing" shall have the meaning set forth in Section 2.4.
"Closing Date" shall have the meaning set forth in Section 2.4.
"Code" shall have the meaning set forth in the recitals.
"Confidentiality Agreement" shall have the meaning set forth in Section
6.3.
"Controlled Group Liability" means any and all liabilities (i) under
Title IV of ERISA, other than for payment of premiums to the Pension
Benefit Guaranty Corporation, (ii) under Section 302 of ERISA, (iii) under
Sections 412 and 4971 of the Code, (iv) 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 701 et seq. of the
Code and Sections 701 et seq. of ERISA, and (v) under corresponding or
similar provisions of foreign laws or regulations.
"DOJ" means the Antitrust Division of the U.S. Department of Justice.
"Effective Time" shall have the meaning set forth in Section 2.2.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Shares" shall have the meaning set forth in Section 3.7.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" shall have the meaning set forth in Section 3.3.
"Exchange Fund" shall have the meaning set forth in Section 3.3.
"Exchange Ratio" shall have the meaning set forth in Section 3.1(b).
"Expenses" means all out-of-pocket expenses (including all fees and
expenses of counsel, accountants, investment bankers, experts and
consultants to a party and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this 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)(iii).
"FTC" means the U.S. Federal Trade Commission.
"GAAP" means U.S. generally accepted accounting principles.
"Governmental Entity" shall have the meaning set forth in Section
4.1(d).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Intellectual Property" means all patents, trademarks, trade names,
service marks, copyrights, and any applications therefor, technology, know-
how, computer software programs or applications, and tangible or intangible
proprietary information or materials.
"Joint Proxy Statement/Prospectus" shall have the meaning set forth in
Section 4.1(d)(iii).
"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 4.1(b)(ii).
"Material Adverse Effect" means, with respect to any entity, a material
adverse effect on (i) the business, operations, results of operations or
financial condition of such entity and its Subsidiaries taken as a whole or
(ii) the ability of such entity to timely consummate the transactions
contemplated by this
A-2
Agreement, except, in each case, for any such effect reasonably
attributable to (x) general economic conditions in the United States
(including prevailing interest rate and stock market levels), (y) the
general state of the industries in which such entity operates or (z) the
negotiation, announcement, execution, delivery or consummation of the
transactions contemplated by, or in compliance with, this Agreement.
"Merger" shall have the meaning set forth in the recitals.
"Merger Consideration" shall have the meaning set forth in Section
3.1(b).
"Merger Sub" shall have the meaning set forth in the preamble.
"Necessary Consents" shall have the meaning set forth in Section
4.1(d)(vi).
"Nevada Articles of Merger" shall have the meaning set forth in Section
2.2(y).
"New Plans" shall have the meaning set forth in Section 6.8(b).
"NGCL" means the Nevada General Corporation Law.
"Non-Subsidiary Affiliate" shall have the meaning set forth in Section
4.1(b)(ii).
"NYSE" means the New York Stock Exchange, Inc.
"Old Plans" shall have the meaning set forth in Section 6.8(b)(i).
"Other Approvals" shall have the meaning set forth in Section
4.1(d)(ii).
"other party" means, with respect to Phillips, Tosco, and with respect
to Tosco, 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 1999 10-K" means Phillips's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, as filed with the SEC.
"Phillips 10-Q" means Phillips's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000, 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" shall have the meaning set forth in Section
4.2(b)(i)(B).
"Phillips Common Stock" means common stock, par value $1.25 per share,
of Phillips.
"Phillips Disclosure Schedule" shall have the meaning set forth in
Section 4.2.
"Phillips Preferred Stock" shall have the meaning set forth in Section
4.2(b)(i)(B).
"Phillips Recommendation" shall have the meaning set forth in Section
6.1(c).
"Phillips Rights" shall have the meaning set forth in Section 3.1(b).
"Phillips Rights Agreement" shall have the meaning set forth in Section
3.1(b).
"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
3.2(a).
"Phillips Stock Plans" shall have the meaning set forth in Section
4.2(b)(i).
"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).
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"Phillips Termination Fee" means $250,000,000.
"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 Tosco Recommendation (as the case may
be), (ii) a statement of the reasons of the Board of Directors of Phillips
or Tosco (as the case may be) for making such Change in the Phillips
Recommendation or Change in the Tosco Recommendation (as the case may be)
and (iii) additional information reasonably related to the foregoing.
"Regulatory Law" means the HSR Act, and all other federal, 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 (i) mergers, acquisitions or
other business combinations, (ii) foreign investment, or (iii) actions
having the purpose or effect of monopolization or restraint of trade or
lessening of competition.
"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.
"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 Tosco, as the
case may be, a bona fide written proposal made by a Person other than a
party to this Agreement which is (i) for an Acquisition Proposal (except
that references in the definition of "Acquisition Proposal" to "20%" shall
be "50%") involving such party and (ii) 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, (x) 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 (y) is reasonably capable of being
completed.
"Surviving Corporation" shall have the meaning set forth in Section 2.1.
"Taxes" means any and all federal, state, 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 security, workers'
compensation, unemployment compensation, or net worth, and taxes or other
charges in the nature of excise, withholding, ad valorem or value added.
"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.
"Termination Date" shall have the meaning set forth in Section 8.1(b).
"Tosco" shall have the meaning set forth in the preamble.
"Tosco 1999 10-K" means Tosco's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, as filed with the SEC.
"Tosco 10-Q" means Tosco's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000, as filed with the SEC.
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"Tosco Benefit Plan" means a Benefit Plan maintained or contributed to
by Tosco or a Subsidiary of Tosco, or to which Tosco or any Subsidiary of
Tosco is required to contribute.
"Tosco Capital Stock" shall have the meaning set forth in Section
4.1(b)(i)(B).
"Tosco Certificate" shall have the meaning set forth in Section 3.1(b).
"Tosco Common Stock" means common stock, par value $0.75 per share, of
Tosco.
"Tosco Contract" shall have the meaning set forth in Section 4.1(j)(i).
"Tosco Converted Option" shall have the meaning set forth in Section
3.2(a).
"Tosco Disclosure Schedule" shall have the meaning set forth in Section
4.1.
"Tosco Employees" shall have the meaning set forth in Section 6.8(a).
"Tosco Indebtedness" shall have the meaning set forth in Section
5.1(g)(ii).
"Tosco Preferred Stock" shall have the meaning set forth in Section
4.1(b)(i).
"Tosco Recommendation" shall have the meaning set forth in Section
6.1(b).
"Tosco Right" means a preferred share purchase right issuable pursuant
to the Tosco Rights Agreement.
"Tosco Rights Agreement" means the Rights Agreement, dated as of
November 19, 1998, between Tosco and BankBoston, N.A., as rights agent.
"Tosco SEC Documents" shall have the meaning set forth in Section
4.1(e).
"Tosco Stock Option" shall have the meaning set forth in Section 3.2(a).
"Tosco Stock Plans" shall have the meaning set forth in Section
4.1(b)(i).
"Tosco Stockholder Approval" shall have the meaning set forth in Section
4.1(c)(i).
"Tosco Stockholders Meeting" shall have the meaning set forth in Section
4.1(c)(i).
"Tosco Toprs" shall have the meaning set forth in Section 4.1(b)(i).
"Tosco Termination Fee" means $250,000,000.
"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
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions hereof, at the
Effective Time, Merger Sub shall be merged with and into Tosco, with Tosco as
the surviving corporation in the Merger (the "Surviving Corporation"), and the
separate existence of Merger Sub shall thereupon cease. As a result of the
Merger, Tosco will become a wholly owned subsidiary of Phillips.
2.2 Effective Time of the Merger. The Merger shall become effective as set
forth in properly executed articles of merger duly filed with the Secretary of
State of the State of Nevada (the "Nevada Articles of Merger"), which filing
shall be made as soon as practicable after the closing of the transactions
contemplated by this Agreement in accordance with Section 2.4. As used in this
Agreement, the term "Effective Time" shall mean the date and time when the
Merger becomes effective, as set forth in the Nevada Articles of Merger.
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2.3 Effects of the Merger. The Merger shall have the effects set forth in
the applicable provisions of the NGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, except as otherwise
provided herein, all of the property, rights, privileges, powers and franchises
of Merger Sub and Tosco shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Merger Sub and Tosco shall become the debts,
liabilities and duties of the Surviving Corporation.
2.4 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 second 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 the parties hereto (the date of the Closing
being referred to herein as the "Closing Date").
2.5 Articles of Incorporation. At the Effective Time, the Articles of
Incorporation of the Surviving Corporation shall be amended in their entirety
to read as the Articles of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, until thereafter changed or amended as
provided therein or by applicable law; provided, however, that the Articles of
Incorporation of the Surviving Corporation shall provide that the Surviving
Corporation shall be named "Tosco Corporation".
2.6 By-Laws. The by-laws of Merger Sub as in effect immediately prior to the
Effective Time shall be the by-laws of the Surviving Corporation.
2.7 Directors and Officers. The directors of Merger Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation and the
officers of Tosco immediately prior to the Effective Time shall be the officers
of the Surviving Corporation, in each case, until their respective successors
are duly elected and qualified.
ARTICLE III
CONVERSION OF SECURITIES
3.1 Exchange Ratio. At the Effective Time, by virtue of the Merger and
without any action on the part of any holder of any capital stock of Tosco:
(a) All shares of capital stock of Tosco that are held by Tosco as
treasury stock or that are owned by Phillips 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 3.1(a) and 3.7, each outstanding share of Tosco
Common Stock (together with any associated Tosco Rights) issued and
outstanding immediately prior to the Effective Time shall be converted into
the right to receive 0.8 (the "Exchange Ratio") fully paid and
nonassessable shares of Phillips Common Stock (the "Merger Consideration").
All of such shares of Phillips Common Stock shall be duly authorized and
validly issued and free of preemptive rights, with no personal liability
attaching to the ownership thereof. One preferred share purchase right
issuable pursuant to the Rights Agreement, dated as of August 1, 1999,
between Phillips and ChaseMellon Shareholder Services, L.L.C., as rights
agent (the "Phillips Rights Agreement"), or any other purchase right issued
in substitution thereof (the "Phillips Rights"), shall be issued together
with and shall attach to each share of Phillips Common Stock issued
pursuant to this Section 3.1(b), unless the Phillips Rights have been
redeemed prior to the Effective Time. All shares of Tosco Common Stock
shall cease to be outstanding and shall be canceled 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 Tosco Common Stock (a
"Tosco Certificate") shall
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thereafter cease to have any rights with respect to such shares of Tosco
Common Stock, except the right to receive the Merger Consideration to be
issued in consideration therefor and any dividends or other distributions
to which holders of Tosco Common Stock become entitled all in accordance
with this Article III upon the surrender of such Tosco Certificate.
(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, Tosco Common Stock or Phillips Common Stock, the
Exchange Ratio shall be adjusted accordingly to provide to the holders of
Tosco Common Stock the same economic effect as contemplated by this
Agreement prior to such event.
(d) Each issued and outstanding share of capital stock of Merger Sub
shall be converted into and become one fully paid and nonassessable share
of common stock, par value $.01 per share, of the Surviving Corporation.
3.2 Stock Options and Other Equity-Based Awards. (a) Each option to purchase
Tosco Common Stock (a "Tosco Stock Option") granted under Tosco Stock Plans
which is outstanding immediately prior to the Effective Time shall cease to
represent a right to acquire shares of Tosco Common Stock and shall be
converted (as so converted, a "Tosco Converted Option"), at the Effective Time,
into an option to purchase Phillips Common Stock (a "Phillips Stock Option"),
on the same terms and conditions as were applicable under the Tosco Stock
Option (but taking into account any changes thereto, including the acceleration
thereof, provided for in the Tosco Stock Plans, in any award agreement or in
such option by reason of this Agreement or the transactions contemplated
hereby). The number of shares of Phillips Common Stock subject to each such
Phillips Stock Option shall be the number of shares of Tosco Common Stock
subject to the Tosco Stock Option multiplied by the Exchange Ratio, rounded, if
necessary, to the nearest whole share of Phillips Common Stock, and such
Phillips Stock Option shall have an exercise price per share (rounded to the
nearest one-hundredth of a cent) equal to the per share exercise price
specified in such Tosco Stock Option divided by the Exchange Ratio; provided,
however, that in the case of any Tosco 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 subject to
such option and the terms and conditions of exercise of such option shall be
determined in a manner consistent with the requirements of Section 424(a) of
the Code. Notwithstanding the foregoing, (i) with respect to each holder of a
Tosco Stock Option whose employment with Tosco is terminated for any reason
following the date hereof and prior to the Effective Time, Tosco may, in its
sole discretion with the consent of such holder, elect to pay such holder in
cancellation of such Tosco Stock Option, an amount of cash equal to (A) the
excess (if any) of (x) the closing price of Tosco Common Stock on the NYSE (as
reported on the NYSE Composite Tape) on the date of such termination (or if
there is no such trading on the date of termination, on the most recent trading
day prior to the date of termination) over (y) the per-share exercise price of
such Tosco Stock Option times (B) the number of shares of Tosco Common Stock
subject to such Tosco Stock Option immediately following such termination,
subject to all required Tax withholding, and (ii) with respect to each holder
of a Tosco Stock Option that is converted into a Phillips Stock Option in
accordance with this Section 3.2 and whose employment with Tosco is terminated
for any reason following the Effective Time and prior to the date six months
after the Closing Date, Phillips may, in its sole discretion with the consent
of such holder, elect to pay such holder in cancellation of such Phillips Stock
Option, an amount of cash equal to (A) the excess (if any) of (x) the closing
price of Phillips Common Stock on the NYSE (as reported on the NYSE Composite
Tape) on the date of such termination (or if there is no such trading on the
date of termination, on the most recent trading day prior to the date of
termination) over (y) the per-share exercise price of such Phillips Stock
Option times (B) the number of shares of Phillips Common Stock subject to such
Phillips Stock Option immediately following such termination, subject to all
required Tax withholding.
(b) As soon as practicable after the Effective Time, Phillips shall deliver
to the holders of Tosco Stock Options appropriate notices setting forth such
holders' rights pursuant to the respective Tosco Stock Plans and agreements
evidencing the grants of such Tosco Stock Options and stating that such Tosco
Stock Options and
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agreements have been assumed by Phillips and shall continue in effect on the
same terms and conditions (subject to the adjustments required by this Section
3.2 after giving effect to the Merger and the terms of the Tosco Stock Plans).
(c) Prior to the Effective Time, Tosco shall take all necessary action for
the adjustment of Tosco Converted Options under this Section 3.2. Phillips
shall reserve for issuance a number of shares of Phillips Common Stock at least
equal to the number of shares of Phillips Common Stock that will be subject to
Tosco Converted Options. As soon as practicable following the Effective Time,
Phillips shall file a registration statement on Form S-8 (or any successor, or
if Form S-8 is not available, other appropriate, forms) with respect to the
shares of Phillips Common Stock subject to Tosco Converted Options 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 options remain outstanding.
3.3 Exchange Fund. Prior to the Effective Time, Phillips shall appoint
Mellon Investor Services LLC, or a commercial bank or trust company, or a
subsidiary thereof, reasonably acceptable to Tosco, to act as exchange agent
hereunder for the purpose of exchanging Tosco Certificates for the Merger
Consideration (the "Exchange Agent"). At or prior to the Effective Time,
Phillips shall deposit with the Exchange Agent, in trust for the benefit of
holders of shares of Tosco Common Stock, certificates representing the shares
of Phillips Common Stock issuable pursuant to Section 3.1 in exchange for
outstanding shares of Tosco Common Stock. Following the Effective Time,
Phillips agrees to make available to the Exchange Agent from time to time as
needed, cash sufficient to pay any dividends and other distributions pursuant
to Section 3.5. Any cash and certificates representing Phillips Common Stock
deposited with the Exchange Agent (including the proceeds from sales of Excess
Shares in accordance with Section 3.7) shall hereinafter be referred to as the
"Exchange Fund."
3.4 Exchange Procedures. Promptly after the Effective Time, Phillips shall
cause the Exchange Agent to mail to each holder of a Tosco Certificate (a) a
letter of transmittal that shall specify that delivery shall be effected, and
risk of loss and title to the Tosco Certificates shall pass, only upon proper
delivery of the Tosco Certificates to the Exchange Agent, and which letter
shall be in customary form and have such other provisions as Phillips or Tosco
may reasonably specify (such letter to be reasonably acceptable to Tosco and
Phillips prior to the Effective Time) and (b) instructions for effecting the
surrender of such Tosco Certificates in exchange for the Merger Consideration,
together with any dividends and other distributions with respect thereto and
any cash in lieu of fractional shares. Upon surrender of a Tosco 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 Tosco
Certificate shall be entitled to receive in exchange therefor (i) shares of
Phillips Common Stock (which shall be in uncertificated book-entry form, unless
a physical certificate is requested by such holder or is otherwise required by
applicable law or regulation) representing, in the aggregate, the whole number
of shares that such holder has the right to receive pursuant to Section 3.1
(after taking into account all shares of Tosco Common Stock then held by such
holder) and (ii) 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 Phillips Common Stock pursuant to
Section 3.7 and dividends and other distributions pursuant to Section 3.5. No
interest will be paid or will accrue on any cash payable pursuant to Section
3.5 or Section 3.7. In the event of a transfer of ownership of Tosco Common
Stock that is not registered in the transfer records of Tosco, one or more
shares of Phillips Common Stock evidencing, in the aggregate, the proper number
of shares of Phillips Common Stock, a check in the proper amount of cash in
lieu of any fractional shares of Phillips Common Stock pursuant to Section 3.7
and any dividends or other distributions to which such holder is entitled
pursuant to Section 3.5, may be issued with respect to such Tosco Common Stock
to such a transferee if the Tosco Certificate representing such shares of Tosco
Common Stock 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.
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3.5 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 Tosco Certificate with respect to the shares of
Phillips Common Stock that such holder would be entitled to receive upon
surrender of such Tosco Certificate, and no cash payment in lieu of fractional
shares of Phillips Common Stock shall be paid to any such holder pursuant to
Section 3.7 until such holder shall surrender such Tosco Certificate in
accordance with Section 3.4. Subject to the effect of applicable laws,
following surrender of any such Tosco 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
Phillips Common Stock to which such holder is entitled pursuant to Section 3.7
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 Phillips
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 Phillips Common Stock.
3.6 No Further Ownership Rights in Tosco Common Stock. All shares of
Phillips Common Stock issued and cash paid upon conversion of shares of Tosco
Common Stock in accordance with the terms of this Article III (including any
cash paid pursuant to Section 3.5 or 3.7) shall be deemed to have been issued
or paid in full satisfaction of all rights pertaining to the shares of Tosco
Common Stock.
3.7 No Fractional Shares of Phillips Common Stock. No certificates or scrip
or shares of Phillips Common Stock representing fractional shares of Phillips
Common Stock or book-entry credit of the same shall be issued upon the
surrender for exchange of Tosco Certificates, and such fractional share
interests will not entitle the owner thereof to vote or to have any rights of a
stockholder of Phillips or a holder of shares of Phillips Common Stock. In lieu
of any such fractional share, each holder of shares of Tosco Common Stock who
would otherwise have been entitled to a fraction of a share of Phillips Common
Stock upon surrender of Tosco Certificates (determined after taking into
account all Tosco Certificates delivered by such holder) shall be paid upon
such surrender cash (without interest) in an amount equal to such holder's
proportionate interest in the net proceeds from the sale or sales in the open
market by the Exchange Agent, on behalf of all such holders, of the aggregate
fractional Phillips Common Stock issued pursuant to this Section 3.7. As soon
as practicable following the Effective Date, the Exchange Agent shall determine
the excess of (i) the number of full shares of Phillips Common Stock delivered
to the Exchange Agent by Phillips over (ii) the aggregate number of full shares
of Phillips Common Stock to be distributed to holders of Tosco Common Stock
(such excess, the "Excess Shares"), and the Exchange Agent, as agent for the
former holders of Tosco Common Stock, shall sell the Excess Shares at the
prevailing prices on the NYSE. The sale of the Excess Shares by the Exchange
Agent shall be executed on the NYSE through one or more member firms of the
NYSE and shall be executed in round lots to the extent practicable. All
commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Exchange Agent, incurred in
connection with such sale of Excess Shares shall reduce, but not below zero,
the amount of cash paid to holders in respect of fractional shares. Until the
net proceeds of such sale have been distributed to the former holders of Tosco
Common Stock, the Exchange Agent will hold such proceeds in trust for such
former holders. As soon as practicable after the determination of the amount of
cash to be paid to such former holders of Tosco Common Stock in lieu of any
fractional interests, the Exchange Agent shall make available in accordance
with this Agreement such amounts to such former holders of Tosco Common Stock.
3.8 Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the holders of Tosco Certificates one year after the
Effective Time shall, at Phillips's request, be delivered to Phillips or
otherwise on the instruction of Phillips, and any holders of Tosco Certificates
who have not theretofore complied with this Article III shall after such
delivery look only to Phillips for the Merger Consideration with respect to the
shares of Tosco Common Stock formerly represented thereby to which such holders
are entitled pursuant to Sections 3.1 and 3.4, any cash in lieu of fractional
shares of Phillips Common Stock to which such holders are entitled pursuant to
Section 3.7 and any dividends or distributions with respect to shares of
Phillips Common Stock to which such holders are entitled pursuant to Section
3.5. Any such
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portion of the Exchange Fund remaining unclaimed by holders of shares of Tosco
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 Phillips free and clear of any claims
or interest of any Person previously entitled thereto.
3.9 No Liability. None of Phillips, Merger Sub, Tosco or the Exchange Agent
shall be liable to any Person in respect of any Merger Consideration from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
3.10 Investment of the Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by Phillips 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 Tosco stockholders pursuant to
the other provisions of this Article III. Any interest and other income
resulting from such investments shall promptly be paid to Phillips.
3.11 Lost Certificates. If any Tosco Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Tosco Certificate to be lost, stolen or destroyed and, if
required by Phillips, the posting by such Person of a bond in such reasonable
amount as Phillips may direct as indemnity against any claim that may be made
against it with respect to such Tosco Certificate, the Exchange Agent will
deliver in exchange for such lost, stolen or destroyed Tosco Certificate the
Merger Consideration with respect to the shares of Tosco Common Stock formerly
represented thereby, any cash in lieu of fractional shares of Phillips Common
Stock, and unpaid dividends and distributions on shares of Phillips Common
Stock deliverable in respect thereof, pursuant to this Agreement.
3.12 Withholding Rights. Phillips 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 and the rules and regulations promulgated
thereunder, 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 Phillips, such amounts shall be treated for all purposes
of this Agreement as having been paid to the Person in respect of which such
deduction and withholding was made by Phillips.
3.13 Further Assurances. At and after the Effective Time, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of the Surviving Corporation, Merger Sub or
Tosco, any deeds, bills of sale, assignments or assurances and to take and do,
in the name and on behalf of the Surviving Corporation, Merger Sub or Tosco,
any other actions and things necessary to vest, perfect or confirm of record or
otherwise in Phillips or the 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 the Surviving Corporation as a result of, or in connection
with, the Merger.
3.14 Stock Transfer Books. The stock transfer books of Tosco shall be closed
immediately upon the Effective Time, and there shall be no further registration
of transfers of shares of Tosco Common Stock thereafter on the records of
Tosco. On or after the Effective Time, any Tosco Certificates presented to the
Exchange Agent, Phillips or the Surviving Corporation for any reason shall be
converted into the right to receive the Tosco Merger Consideration with respect
to the shares of Tosco Common Stock formerly represented thereby (including any
cash in lieu of fractional shares of Phillips Common Stock to which the holders
thereof are entitled pursuant to Section 3.7 and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section
3.5).
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Tosco. Except as disclosed in the
Tosco disclosure schedule delivered to Phillips concurrently herewith (the
"Tosco Disclosure Schedule") or in the Tosco SEC Documents, Tosco hereby
represents and warrants to Phillips as follows:
(a) Corporate Organization. (i) Tosco is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Nevada. Tosco 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 Tosco. True and complete
copies of the Amended and Restated Articles of Incorporation and By-Laws of
Tosco, as in effect as of the date of this Agreement, have previously been
made available by Tosco to Phillips.
(ii) Each Subsidiary of Tosco (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 in which the failure to be so qualified would have a
Material Adverse Effect on Tosco, 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.
(b) Capitalization. (i) The authorized capital stock of Tosco consists
of (A) 250,000,000 shares of Tosco Common Stock (each of which includes one
Tosco Right), of which, as of January 31, 2001, 144,896,342 shares were
issued and outstanding and 32,927,172 shares were held in treasury and (B)
12,000,000 shares of preferred stock, par value $.01 per share, of Tosco
("Tosco Preferred Stock," together with the Tosco Common Stock, the "Tosco
Capital Stock"), of which no shares are issued and outstanding. From
January 31, 2001 to the date of this Agreement, no shares of Tosco Capital
Stock have been issued except pursuant to employee and director stock plans
of Tosco in effect as of the date hereof (the "Tosco Stock Plans"). As of
the date of this Agreement, except pursuant to the terms of options, stock
and restricted units issued pursuant to Tosco Stock Plans, pursuant to the
5 3/4% convertible junior subordinated debentures of Tosco and the 5 3/4%
convertible preferred securities of Tosco Financing Trust (together, the
"Tosco Toprs") and pursuant to the Tosco Rights, Tosco 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 Tosco Capital Stock or any other equity
securities of Tosco or any securities of Tosco representing the right to
purchase or otherwise receive any shares of Tosco Capital Stock. As of
January 31, 2001, no shares of Tosco Capital Stock were reserved for
issuance, except for 9,010,474 shares of Tosco Common Stock reserved for
issuance upon the exercise of stock options pursuant to the Tosco Stock
Plans and in respect of the employee and director savings, compensation and
deferred compensation plans described in the Tosco 1999 10-K, 9,113,940
shares of Tosco Common Stock reserved for issuance upon conversion of the
Tosco Toprs and 2,500,000 shares of Series A Junior Participating Preferred
Stock reserved for issuance in connection with the Tosco Rights Agreement.
Tosco has no Voting Debt issued or outstanding.
(ii) Except for immaterial amounts of directors' qualifying shares
in foreign Subsidiaries of Tosco, Tosco owns, directly or indirectly,
all of the issued and outstanding shares of capital stock or other
equity ownership interests of each Subsidiary of Tosco, free and clear
of any liens, pledges, charges, encumbrances and security interests
whatsoever ("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 Subsidiary of Tosco has or is
bound by any outstanding subscriptions, options, warrants, calls,
commitments or
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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. Section 4.2(b)(ii) of the Tosco Disclosure Schedule
sets forth a list of each material investment of Tosco in any
corporation, joint venture, partnership, limited liability company or
other entity other than its Subsidiaries, which would be considered a
Significant Subsidiary if such investment constituted control of such
entity (each a "Non-Subsidiary Affiliate").
(c) Authority; No Violation. (i) Tosco 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 Tosco. The
Board of Directors of Tosco has directed that this Agreement be submitted
to Tosco stockholders for approval at a meeting of Tosco stockholders for
the purpose of approving the Merger and this Agreement (the "Tosco
Stockholders Meeting"), and, except for the approval of the Merger and of
this Agreement by the affirmative vote of the holders of a majority of the
outstanding shares of Tosco Common Stock (the "Tosco Stockholder
Approval"), no other corporate proceedings on the part of Tosco are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Tosco and (assuming due authorization, execution and delivery
by Phillips and Merger Sub) constitutes a valid and binding obligation of
Tosco, enforceable against Tosco in accordance with its terms.
(ii) Neither the execution and delivery of this Agreement by Tosco,
nor the consummation by Tosco of the transactions contemplated hereby,
nor compliance by Tosco with any of the terms or provisions hereof,
will (A) violate any provision of the Amended and Restated Articles of
Incorporation or By-Laws of Tosco, or (B) assuming that the consents
and approvals referred to in Section 4.1(d) are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Tosco, any of its
Subsidiaries or Non-Subsidiary Affiliates or any of their respective
properties or assets or (y) violate, conflict with, result in a breach
of any provision of or the loss of any benefit under, constitute a
default (or an event which, 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 Tosco, any of its Subsidiaries or its Non-Subsidiary
Affiliates 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 Tosco, any of its
Subsidiaries or Non-Subsidiary Affiliates 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 (y) above) for such violations,
conflicts, breaches or defaults which either individually or in the
aggregate will not have a Material Adverse Effect on Tosco or the
Surviving Corporation.
(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 filing of any other required
applications or notices with any state or foreign agencies and approval of
such applications and notices (the "Other Approvals"), (iii) the filing
with the SEC of a joint proxy statement/prospectus relating to the matters
to be submitted to Phillips's stockholders at the Phillips Stockholders
Meeting and the matters to be submitted to Tosco's stockholders at the
Tosco 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
Phillips Common Stock in the Merger (such Form S-4, and any amendments or
supplements thereto, the "Form S-4"), (iv) the filing of the Nevada
Articles of Merger, (v) any consents, authorizations, approvals, filings or
exemptions in connection with compliance with the rules of the NYSE, (vi)
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 Phillips Common Stock pursuant to this Agreement (the consents,
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approvals, filings and registration required under or in relation to the
foregoing clauses (ii) though (vi) being referred to as "Necessary
Consents") and (vii) 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 Tosco, no consents or
approvals of or filings or registrations with any supranational, national,
state, municipal, local or foreign government, 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 (each, a "Governmental Entity") are necessary in connection with
(A) the execution and delivery by Tosco of this Agreement and (B) the
consummation by Tosco of the transactions contemplated by this Agreement.
(e) Financial Reports and SEC Documents. The Tosco 1999 10-K and all
other reports, registration statements, definitive proxy statements or
information statements filed or to be filed by Tosco or any of its
Subsidiaries subsequent to December 31, 1997 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 (collectively, the "Tosco SEC Documents"), with the
SEC, (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, 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 each of the balance sheets contained in or incorporated by
reference into any such Tosco 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 Tosco 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.
(f) Absence of Undisclosed Liabilities. Except as disclosed in the
unaudited financial statements (or notes thereto) included in the Tosco
10-Q, neither Tosco nor any of its Subsidiaries had at September 30, 2000,
or has incurred since that date through the date hereof, any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any
nature, except (a) liabilities, obligations or contingencies which (i) are
accrued or reserved against in the financial statements in the Tosco 10-Q
or reflected in the notes thereto or (ii) were incurred in the ordinary
course of business and consistent with past practices, (b) liabilities,
obligations or contingencies which (i) would not reasonably be expected to
have a Material Adverse Effect on Tosco, or (ii) have been discharged or
paid in full prior to the date hereof, and (c) liabilities, obligations and
contingencies which are of a nature not required to be reflected in the
consolidated financial statements of Tosco and its Subsidiaries prepared in
accordance with GAAP consistently applied.
(g) Absence of Certain Changes or Events. (i) Since September 30, 2000,
no event or events have occurred that would reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect on
Tosco.
(ii) Since September 30, 2000, Tosco and its Subsidiaries have
carried on their respective businesses in all material respects in the
ordinary course.
(iii) Since September 30, 2000, neither Tosco nor any of its
Subsidiaries has (A) except for such actions as were in the ordinary
course of business or except as required by applicable law, (I)
increased the wages, salaries, compensation, pension, or other fringe
benefits or perquisites payable to any executive officer or director
from the amount thereof in effect as of December 31, 1999, or (II)
granted any severance or termination pay, entered into any contract to
make or grant any severance or termination pay, or paid any bonuses, to
any executive officer or director or (B) suffered any strike,
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work stoppage, slowdown, or other labor disturbance which would be
reasonably be expected to have, (in the case of clause (A) or (B)
above) either individually or in the aggregate, a Material Adverse
Effect on Tosco.
(iv) Since September 30, 2000, Tosco has not declared any dividends
on Tosco Common Stock other than its regular quarterly dividends.
(h) Legal Proceedings. There is no suit, action or proceeding or
investigation pending or, to the knowledge of Tosco, threatened, against or
affecting Tosco or any of its Subsidiaries or, to the knowledge of Tosco,
any basis for any such suit, action, proceeding or investigation that
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Tosco, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Tosco or its Subsidiaries having, or which would
reasonably be expected to have, any such effect.
(i) Compliance with Applicable Law. Tosco 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 or
regulation of any Governmental Entity relating to Tosco 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 Tosco.
(j) Contracts. (i) Neither Tosco nor any of its Subsidiaries is a party
to or bound by any contract, arrangement, commitment or understanding
(whether written or oral) (A) with respect to the employment of any
directors, officers or employees other than in the ordinary course of
business consistent with past practice, (B) which, upon the consummation or
stockholder approval of the transactions contemplated by this Agreement,
will (either alone or upon the occurrence of any additional acts or events)
result in any payment (whether of severance pay or otherwise) becoming due
from Phillips, Tosco, the Surviving Corporation or any of their respective
Subsidiaries to any officer or employee thereof, (C) which is a "material
contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of
the SEC) to be performed after the date of this Agreement that has not been
filed or incorporated by reference in the Tosco SEC Documents, or (D) which
materially restricts the conduct of any line of business by Tosco or upon
consummation of the Merger will materially restrict the ability of Phillips
or the Surviving Corporation to engage in any line of business. Each
contract, arrangement, commitment or understanding of the type described in
this Section 4.1(j), whether or not set forth in the Tosco Disclosure
Schedule or in the Tosco SEC Documents, is referred to herein as a "Tosco
Contract" (for purposes of clarification, each "material contract" (as such
term is defined in Item 601(b)(10) of Regulation S-K of the SEC) to be
performed after the date of this Agreement, whether or not filed with the
SEC, is a Tosco Contract).
(ii) (A) Each Tosco Contract is valid and binding on Tosco and any
of its Subsidiaries that is a party thereto, as applicable, and in full
force and effect, (B) Tosco and each of its Subsidiaries has in all
material respects performed all obligations required to be performed by
it to date under each Tosco Contract, except where such noncompliance,
either individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Tosco, and (C) neither
Tosco nor any of its Subsidiaries knows of, or has received notice of,
the existence of any event or condition which constitutes, or, after
notice or lapse of time or both, will constitute, a material default on
the part of Tosco or any of its Subsidiaries under any such Tosco
Contract, except where such default, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect on Tosco.
(k) Environmental Liability. There are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that could reasonably
result in the imposition of, on Tosco, any liability or obligation arising
under common law or under any local, state or federal environmental
statute, regulation or ordinance including CERCLA, pending or, to the
knowledge
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of Tosco, threatened against Tosco, which liability or obligation, either
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Tosco. To the knowledge of Tosco, there is no
reasonable basis for any such proceeding, claim, action or governmental
investigation that would impose any liability or obligation that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Tosco. Tosco is not subject to any agreement,
order, judgment, decree, letter or memorandum by or with any court,
governmental authority, regulatory agency or third party imposing any
liability or obligation with respect to the foregoing that, either
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Tosco.
(l) Employee Benefit Plans; Labor Matters. (i) There does not now exist,
and to the knowledge of Tosco, there are no existing circumstances that
could reasonably be expected to result in, any Controlled Group Liability
to Tosco or any of its Subsidiaries that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on Tosco. No
Tosco 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 Tosco, (A) each of
the Tosco 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 which have been asserted or
instituted, and, to the knowledge of Tosco, no set of circumstances
exists which may reasonably give rise to a claim or lawsuit, against
the Tosco Benefit Plans, any fiduciaries thereof with respect to their
duties to the Tosco Benefit Plans or the assets of any of the trusts
under any of the Tosco Benefit Plans which could reasonably be expected
to result in any material liability of Tosco 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 Tosco Benefit Plan, any
participant in a Tosco Benefit Plan, or any other party.
(iii) Neither Tosco nor any Subsidiary of Tosco is a party to any
collective bargaining or other labor union contract applicable to
persons employed by Tosco or any Subsidiary of Tosco, and no collective
bargaining agreement or other labor union contract is being negotiated
by Tosco or any Subsidiary of Tosco. Except as would not reasonably be
expected to have a Material Adverse Effect on Tosco, (x) there is no
labor dispute, strike, slowdown or work stoppage against Tosco or any
Subsidiary of Tosco pending or, to the knowledge of Tosco, threatened
against Tosco or any Subsidiary of Tosco and (y) no unfair labor
practice or labor charge or complaint has occurred with respect to
Tosco or any Subsidiary of Tosco.
(iv) Section 4.1(l)(iv) of the Tosco Disclosure Schedule sets forth
(x) 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 Tosco or any of its
Subsidiaries, or could limit the right of Tosco or any of its
subsidiaries to amend, merge, terminate or receive a reversion of
assets from any Benefit Plan or related trust or any material
employment agreement or related trust, (y) a reasonable good faith
estimate of the maximum amount of the severance benefits that could
become payable to officers of Tosco if their employment were terminated
at the Effective Time, and (z) a reasonable good faith estimate of the
maximum amount of the "excess parachute payments" within the meaning of
Section 280G of the Code that could become payable by Tosco and its
Subsidiaries in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(m) Intellectual Property. Except as would not reasonably be expected to
have a Material Adverse Effect on Tosco, (i) Tosco and its Subsidiaries
own, or are licensed to use, all Intellectual Property used in and
necessary for the conduct of their business as it is currently conducted,
(ii) to the knowledge of Tosco,
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the use of Intellectual Property by Tosco and its Subsidiaries does not
infringe on or otherwise violate the rights of any third party, and, to the
extent such Intellectual Property is licensed, its use is in accordance in
all material respects with the applicable license pursuant to which Tosco
acquired the right to use such Intellectual Property, (iii) to the
knowledge of Tosco, no third party is challenging, infringing on or
otherwise violating any right of Tosco in the Intellectual Property, (iv)
neither Tosco nor any of its Subsidiaries has received any written notice
of any pending claim, order or proceeding with respect to any Intellectual
Property used in and necessary for the conduct of Tosco's and its
Subsidiaries' business as it is currently conducted, and (v) to the
knowledge of Tosco, no Intellectual Property is being used or enforced by
Tosco or its Subsidiaries in a manner that would reasonably be expected to
result in the abandonment, cancellation or unenforceability of any
Intellectual Property used in and necessary for the conduct of Tosco's and
its Subsidiaries' business as it is currently conducted.
(n) State Takeover Laws; Rights Plan. (i) The Board of Directors of
Tosco 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) Tosco 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 Tosco Rights under the Tosco
Rights Agreement or enable or require the Tosco Rights to separate from
the shares of Tosco 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 Tosco Rights
Agreement) has occurred.
(o) Opinion of Financial Advisor. Tosco has received the opinion of
Merrill Lynch & Co., dated the date hereof, to the effect that the Merger
Consideration to be received by holders of Tosco Common Stock in the Merger
is fair to such stockholders from a financial point of view.
(p) Board Approval. The Board of Directors of Tosco, 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 the stockholders of Tosco,
(ii) adopted this Agreement and (iii) recommended that the plan of merger
contained in this Agreement and the transactions contemplated hereby be
approved by the holders of Tosco Common Stock.
(q) Broker's Fees. Neither Tosco 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 broker's fees, commissions or finder's fees
in connection with the transactions contemplated by this Agreement,
excluding fees to be paid to Merrill Lynch & Co.
(r) Taxes. (i) Each of Tosco 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 Tosco. Tosco
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 Tosco. There are no pending or, to the knowledge
of Tosco, threatened audits, examinations, investigations, deficiencies,
claims or other proceedings in respect of Taxes relating to Tosco or any
Subsidiary of Tosco, except for those which would not reasonably be
expected to have a Material Adverse Effect on Tosco. There are no liens for
Taxes upon the assets of Tosco or any Subsidiary of Tosco, 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 which would not
reasonably be expected to have a Material Adverse Effect on Tosco. Neither
Tosco nor any of its Subsidiaries has requested any extension of time
within which to file any Tax Returns in respect of any taxable year which
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
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reasonably be expected to have a Material Adverse Effect on Tosco. The
consolidated federal income Tax Returns of Tosco have been examined, or the
statute of limitations has closed, with respect to all taxable years
through and including 1992. Neither Tosco nor any of its Subsidiaries has
any liability for Taxes of any Person (other than Tosco and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any comparable
provision of state, local or foreign law), except as would not reasonably
be expected to have a Material Adverse Effect on Tosco. Neither Tosco nor
any Subsidiary of Tosco is a party to any agreement (with any Person other
than Tosco 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 Tosco.
(ii) Tosco 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 (i) 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 (ii) in a
distribution which 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 Merger.
(s) Reorganization under the Code. As of the date of this Agreement,
neither Tosco nor any of its Subsidiaries has taken any action or knows of
any fact that is reasonably likely to prevent the Merger from qualifying as
a "reorganization" within the meaning of Section 368(a) of the Code.
(t) Form S-4; Joint Proxy Statement/Prospectus. None of the information
to be supplied by Tosco 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 Tosco
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 laws, including the provisions of the
Exchange Act and the rules and regulations promulgated thereunder, except
that no representation is made by Tosco with respect to information
supplied by Phillips or Merger Sub for inclusion therein.
4.2 Representations and Warranties of Phillips. Except as disclosed in the
Phillips disclosure schedule delivered to Tosco concurrently herewith (the
"Phillips Disclosure Schedule") or in the Phillips SEC Documents, Phillips
hereby represents and warrants to Tosco 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 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 Tosco.
(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 in which the failure to be so qualified would have a
Material Adverse Effect on Phillips 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.
(iii) Merger Sub was formed by Phillips solely for the purpose of
engaging in the transactions contemplated hereby and has engaged in no
business and has incurred no liabilities other than in connection with
the transactions contemplated by this Agreement.
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(b) Capitalization. (i) The authorized capital stock of Phillips
consists of (A) 500,000,000 shares of Phillips Common Stock (each of which
includes one Phillips Right), of which, as of January 31, 2001, 283,273,912
shares were issued and outstanding and 23,106,599 shares were held in
treasury and (B) 300,000,000 shares of preferred stock, par value $1.00 per
share, of Phillips (the "Phillips Preferred Stock," together with the
Phillips Common Stock, the "Phillips Capital Stock"), of which no shares
are issued and outstanding. From January 31, 2001 to the date of this
Agreement, no shares of Phillips Capital Stock have been issued except
pursuant to employee and director stock plans of Phillips in effect as of
the date hereof (the "Phillips Stock Plans"). All of the 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 options and
stock issued pursuant to Phillips Stock Plans and pursuant 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
representing the right to purchase or otherwise receive any shares of
Phillips Capital Stock. As of January 31, 2001, no shares of Phillips
Capital Stock were reserved for issuance, except for 15,783,456 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 1999 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.
(ii) The authorized capital stock of Merger Sub consists of 100
shares of common stock, par value $.01 per share, all of which are
validly issued, fully paid and nonassessable, and are owned by Phillips
free and clear of any Liens.
(iii) Except for immaterial amounts of directors' qualifying shares
in foreign Subsidiaries of Phillips, Phillips owns, directly or
indirectly, all of the issued and outstanding shares of capital stock
or other equity ownership interests of each 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 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. Section 4.2(b)(iii) of the Phillips
Disclosure Schedule sets forth a list of each material investment of
Phillips in any Non-Subsidiary Affiliate.
(c) Authority; No Violation. (i) Each of Phillips and Merger Sub 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 each of Phillips and Merger Sub. Phillips, as sole stockholder
of Merger Sub, has approved this Agreement and the transactions
contemplated hereby. The Board of Directors of Phillips has directed that
the issuance of Phillips Common Stock pursuant to this Agreement be
submitted to Phillips stockholders for approval at a meeting of Phillips
stockholders (the "Phillips Stockholders Meeting"), and, except for the
approval of the issuance of Phillips Common Stock in the Merger by majority
vote at a meeting of Phillips's stockholders at which a quorum is present
(the "Phillips Stockholder Approval"), no other corporate proceedings on
the part of Phillips or Merger Sub are necessary to approve this Agreement
and to consummate the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by each of Phillips and Merger
Sub and (assuming due authorization, execution and delivery by Tosco)
constitutes a valid and binding obligation of Phillips and Merger Sub,
enforceable against Phillips and Merger Sub in accordance with its terms.
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(ii) Neither the execution and delivery of this Agreement by
Phillips and Merger Sub, nor the consummation by Phillips and Merger
Sub of the transactions contemplated hereby, nor compliance by Phillips
and Merger Sub with any of the terms or provisions hereof, will (A)
violate any provision of the Certificate of Incorporation or By-Laws of
Phillips or the Articles of Incorporation or By-Laws of Merger Sub or
(B) assuming that the consents and approvals referred to in Section
4.2(d) are duly obtained, (x) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction
applicable to Phillips or Merger Sub, any of their Subsidiaries or Non-
Subsidiary Affiliates or any of their respective properties or assets
or (y) violate, conflict with, result in a breach of any provision of
or the loss of any benefit under, constitute a default (or an event
which, 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 Merger Sub, any of their Subsidiaries or Non-Subsidiary Affiliates
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 Merger Sub, any of their
Subsidiaries or their Non-Subsidiary Affiliates 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 (y) above) for such violations,
conflicts, breaches or defaults which, either individually or in the
aggregate, will not have a Material Adverse Effect on Phillips.
(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 Other Approvals, (iii) the
filing with the SEC of the Joint Proxy Statement/Prospectus and the Form S-
4, (iv) the filing of the Nevada Articles of Merger, (v) any consents,
authorizations, approvals, filings or exemptions in connection with
compliance with the rules of the NYSE, (vi) 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 Phillips
Common Stock pursuant to this Agreement and (vii) 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 each of Phillips and Merger Sub of this Agreement and (B) the
consummation by each of Phillips and Merger Sub of the transactions
contemplated by this Agreement.
(e) Financial Reports and SEC Documents. The Phillips 1999 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, 1998 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 (collectively, the "Phillips SEC Documents"), with
the SEC (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, 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 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.
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(f) Absence of Undisclosed Liabilities. Except as disclosed in the
unaudited financial statements (or notes thereto) included in the Phillips
10-Q, neither Phillips nor any of its Subsidiaries had at September 30,
2000, or has incurred since that date through the date hereof, any
liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature, except (a) liabilities, obligations or
contingencies which (i) are accrued or reserved against in the financial
statements in the Phillips 10-Q or reflected in the notes thereto or (ii)
were incurred in the ordinary course of business and consistent with past
practices, (b) liabilities, obligations or contingencies which (i) would
not reasonably be expected to have a Material Adverse Effect on Phillips,
or (ii) have been discharged or paid in full prior to the date hereof, and
(c) liabilities, obligations and contingencies which are of a nature not
required to be 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. (i) Since September 30, 2000,
no event or events have occurred that would reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect on
Phillips.
(i) Since September 30, 2000, Phillips and its Subsidiaries have
carried on their respective businesses in all material respects in the
ordinary course.
(ii) Since September 30, 2000, neither Phillips nor any of its
Subsidiaries has (A) except for such actions as were in the ordinary
course of business or except as required by applicable law, (I)
increased the wages, salaries, compensation, pension, or other fringe
benefits or perquisites payable to any executive officer or director
from the amount thereof in effect as of December 31, 1999, or (II)
granted any severance or termination pay, entered into any contract to
make or grant any severance or termination pay, or paid any bonuses, to
any executive officer or director or (B) suffered any strike, work
stoppage, slowdown, or other labor disturbance which would be
reasonably be expected to have, (in the case of clause (A) or (B)
above) either individually or in the aggregate, a Material Adverse
Effect on Phillips.
(iii) Since September 30, 2000, Phillips has not declared any
dividends on Phillips Common Stock other than its regular quarterly
dividends.
(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 or regulation 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. There are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that could reasonably
result in the imposition of, on Phillips, any liability or obligation
arising under common law or under any local, state or federal environmental
statute, regulation or ordinance including CERCLA, pending or threatened
against Phillips, which liability or obligation, either individually or in
the aggregate, would reasonably be expected to have a Material Adverse
Effect on Phillips. To the knowledge of Phillips, there is no reasonable
basis for any
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such proceeding, claim, action or governmental investigation that would
impose any liability or obligation that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on Phillips.
Phillips is not subject to any agreement, order, judgment, decree, letter
or memorandum by or with any court, governmental authority, regulatory
agency or third party imposing any liability or obligation with respect to
the foregoing that, either individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on Phillips.
(k) Employee Benefit Plans; Labor Matters. (i) There does 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.
(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 which have been asserted or
instituted, and, to the knowledge of Phillips, no set of circumstances
exists which 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 which 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) Except as would not reasonably be expected to have a Material
Adverse Effect on Phillips, (x) there is no labor dispute, strike,
slowdown or work stoppage against Phillips or any Subsidiary of
Phillips pending or, to the knowledge of Phillips, threatened against
Phillips or any Subsidiary of Phillips and (y) no unfair labor practice
or labor charge or complaint has occurred with respect to Phillips or
any Subsidiary of Phillips.
(l) State Takeover Laws. (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.
(m) Opinion of Financial Advisor. Phillips has received the opinion of
Morgan Stanley & Co. Incorporated, dated the date hereof, to the effect
that the Exchange Ratio is fair to Phillips from a financial point of view.
(n) 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 the stockholders of
Phillips, (ii) approved and adopted this Agreement and (iii) recommended
that the issuance of Phillips Common Stock pursuant to this Agreement be
approved by the holders of Phillips Common Stock.
(o) Broker's Fees. Neither Phillips, Merger Sub nor any of their
Subsidiaries nor any of their respective officers or directors has employed
any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with the transactions
contemplated by this Agreement, excluding fees to be paid to Morgan Stanley
& Co. Incorporated.
(p) Taxes. 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
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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 Subsidiary of Phillips, except for those which 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 Subsidiary of
Phillips, 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 which would not reasonably be expected to have a 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 which 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
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 state, local or foreign law), except as would not reasonably
be expected to have a Material Adverse Effect on Phillips. Neither Phillips
nor any Subsidiary of Phillips 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.
(q) 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 Merger from qualifying
as a "reorganization" within the meaning of Section 368(a) of the Code.
(r) 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 Tosco
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 laws, including the provisions of the
Exchange Act and the rules and regulations promulgated thereunder, except
that no representation is made by Phillips or Merger Sub with respect to
information supplied by Tosco for inclusion therein.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of Tosco. During the period from the date of this Agreement
and continuing until the Effective Time, Tosco agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or Section 5.1 (including its subsections) of the Tosco Disclosure
Schedule):
(a) Ordinary Course. (i) Tosco 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 its 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.
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(ii) Tosco 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 consistent with past practice or
contemplated by the 2001 capital budget approved by the Tosco Board of
Directors and previously disclosed to Phillips.
(b) Dividends; Changes in Share Capital. Tosco 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 (x) the declaration and payment of regular quarterly
cash dividends not in excess of $0.08 per share of Tosco Common Stock
(subject to increase of up to $0.01 per share per year in accordance with
past practices) with usual record and payment dates for such dividends in
accordance with past dividend practice, (y) the payment of accrued amounts
on any Tosco Toprs pursuant to the terms of, and in connection with the
redemption of, such Tosco Toprs and (z) the declaration and payment of
regular dividends from a Subsidiary of Tosco to Tosco or to another
Subsidiary of Tosco 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 Tosco which 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 redemption of the Tosco Toprs or the purchase
from time to time by Tosco of Tosco Common Stock (and the associated Tosco
Rights) in connection with the Tosco Benefit Plans in the ordinary course
of business consistent with past practice.
(c) Issuance of Securities. Tosco 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 Tosco Common Stock (and
the associated Tosco Rights) upon the exercise of Tosco Stock Options in
accordance with their present terms or pursuant to Tosco Stock Options or
other stock-based awards granted pursuant to clause (ii) below or the
issuance of Tosco Common Stock on conversion of Tosco Toprs, (ii) the
granting of Tosco Stock Options or other stock-based awards of or to
acquire shares of Tosco Common Stock granted under Tosco Benefit Plans
outstanding on the date hereof in the ordinary course of business
consistent with past practice, (iii) issuances, sales or deliveries by a
wholly-owned Subsidiary of Tosco of capital stock to such Subsidiary's
parent or another wholly-owned Subsidiary of Tosco, (iv) pursuant to
acquisitions and investments as disclosed in Section 5.1(e) or 5.1(g) of
the Tosco Disclosure Schedule or the financings therefor or (v) issuances
in accordance with the Tosco Rights Agreement.
(d) Governing Documents. Except to the extent required to comply with
its obligations hereunder or with applicable law, Tosco shall not amend or
propose to so amend its articles of incorporation or by-laws.
(e) No Acquisitions. Other than acquisitions in the ordinary course of
business consistent with past practice, Tosco 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 Tosco 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).
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(f) No Dispositions. Other than dispositions referred to in the Tosco
SEC Documents filed prior to the date of this Agreement, Tosco 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 Tosco) other than in the
ordinary course of business consistent with past practice.
(g) Investments; Indebtedness. Tosco 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 (x) loans
or investments by Tosco or a Subsidiary of Tosco to or in Tosco or any
Subsidiary of Tosco, (y) in the ordinary course of business consistent with
past practice which are not, individually or in the aggregate, material to
Tosco and its Subsidiaries taken as a whole (provided that none of such
transactions referred to in this clause (y) presents a material risk of
making it more difficult to obtain any approval or authorization required
in connection with the Merger under Regulatory Law) or (ii) except in the
ordinary course consistent with past practice, 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 Tosco 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 (collectively, "Tosco
Indebtedness").
(h) Tax-Free Qualification. Tosco 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 Merger from
qualifying as a "reorganization" within the meaning of Section 368(a) of
the Code.
(i) Compensation. Except (x) as required by law or by the terms of any
collective bargaining agreement or other agreement currently in effect
between Tosco or any Subsidiary of Tosco and any director, officer or
employee thereof or (y) in the ordinary course of business consistent with
past practice, Tosco shall not increase the amount of compensation of, or
pay any severance to, any director, officer or key employee of Tosco or any
material Subsidiary or business unit of Tosco, or make any increase in or
commitment to increase any employee benefits, grant any additional Tosco
Stock Options, adopt or amend or make any commitment to adopt or amend any
Benefit Plan or fund or make any contribution to any Tosco Benefit Plan or
any related trust or other funding vehicles, other than regularly scheduled
contributions to trusts funding qualified plans. Any option granted or
committed to be granted after the date hereof shall not accelerate as a
result of the approval or consummation of any transaction contemplated by
this Agreement.
(j) Accounting Methods; Tax Elections. Except as disclosed in Tosco SEC
Documents filed prior to the date of this Agreement, or as required by a
Governmental Entity, Tosco shall not change in any material respect its
methods of accounting in effect at September 30, 2000, except as required
by changes in GAAP as concurred in by Tosco's independent public
accountants. Tosco shall not (i) change its fiscal year or (ii) make any
Tax election that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on Tosco.
(k) Certain Actions. Tosco 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 Merger or the other transactions
contemplated by this Agreement.
(l) No Related Actions. Tosco shall not, and shall not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing.
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 as expressly contemplated or permitted by this
Agreement or Section 5.2 (including its subsections) of the Phillips Disclosure
Schedule):
(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
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heretofore conducted, and shall use their reasonable best efforts to
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) Phillips shall not, and shall not permit any of its
Subsidiaries to, enter into any new material line of business or
dispose of any material line of business.
(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 (x) the declaration and payment of regular
quarterly cash dividends with usual record and payment dates for such
dividends in accordance with past dividend practice and (y) 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 or (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
which remains a wholly owned Subsidiary after consummation of such
transaction.
(c) Governing Documents. Except (i) to the extent required to comply
with their respective obligations hereunder or with applicable law or (ii)
to increase the number of shares of common stock authorized by its
certificate of incorporation, Phillips and Merger Sub shall not amend or
propose to so amend their respective certificate or articles of
incorporation or by-laws.
(d) No Acquisitions. Other than acquisitions in the ordinary course of
business consistent with past practice, 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 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), unless such transaction could not reasonably be
expected to prevent or materially delay or impede the consummation of the
transactions contemplated by this Agreement.
(e) Tax-Free Qualification. 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 Merger from
qualifying as a "reorganization" within the meaning of Section 368(a) of
the Code.
(f) 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 Merger or the other transactions
contemplated by this Agreement.
(g) No Related Actions. Phillips shall not, and shall not permit any of
its Subsidiaries to, agree or commit to do any of the foregoing.
5.3 Governmental Filings. Tosco and Phillips shall (A) confer on a
reasonable basis with each other and (B) report to each other (to the extent
permitted by law or regulation or any applicable confidentiality agreement) on
operational matters. Tosco and Phillips 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 and (to the extent permitted by 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 Tosco, directly or indirectly, the right to control or direct
Phillips's operations or give Phillips, directly or indirectly, the right
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to control or direct Tosco's operations prior to the Effective Time. Prior to
the Effective Time, each of Tosco and Phillips 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 Tosco shall
cooperate in preparing and each shall cause to be filed with the SEC mutually
acceptable proxy materials which shall constitute the Joint Proxy
Statement/Prospectus and Phillips shall prepare and 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 Phillips's prospectus. Each of
Phillips and Tosco 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 Merger and the transactions contemplated hereby. Phillips and
Tosco shall, as promptly as practicable after receipt thereof, provide each
other 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. The parties shall cooperate and provide the other party
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 will provide each other 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 Tosco, which approval shall not be
unreasonably withheld or delayed; provided that, with respect to documents
filed by a party which 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 Tosco, in
connection with a Change in the Tosco 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 Tosco will use
reasonable best efforts to cause the Joint Proxy Statement/Prospectus to be
mailed to Tosco stockholders, in each case, as promptly as practicable after
the Form S-4 is declared effective under the Securities Act. Each party will
advise the other party, promptly after it receives notice thereof, of the time
when the Form S-4 has become effective, the issuance of any stop order, the
suspension of the qualification of the Phillips Common Stock issuable in
connection with the Merger 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 Tosco, or any of their respective affiliates, officers or
directors, is discovered by Phillips or Tosco 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 discovering such information shall
promptly notify the other party hereto 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 Tosco.
(b) Tosco shall duly take all lawful action to call, give notice of, convene
and hold the Tosco Stockholders Meeting as soon as practicable on a date
determined in accordance with the mutual agreement of Phillips and Tosco for
the purpose of obtaining the Tosco Stockholder Approval and shall take all
lawful action
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to solicit the Tosco Stockholder Approval. The Board of Directors of Tosco
shall recommend the approval of the plan of merger contained in this Agreement
by the stockholders of Tosco to the effect as set forth in Section 4.1(p) (the
"Tosco Recommendation"), and shall not, unless Phillips makes a Change in the
Phillips Recommendation, (x) withdraw, modify or qualify (or propose to
withdraw, modify or qualify) in any manner adverse to Phillips such
recommendation or (y) take any action or make any statement in connection with
the Tosco Stockholders Meeting inconsistent with such recommendation
(collectively, a "Change in the Tosco Recommendation"); provided, however, that
the Board of Directors of Tosco may make a Change in the Tosco Recommendation
pursuant to Section 6.5 hereof.
(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 Tosco
for the purpose of obtaining the Phillips Stockholder Approval and shall take
all lawful action to solicit the Phillips Stockholder Approval. The Board of
Directors of Phillips shall recommend the approval of issuance of Phillips
Common Stock in the Merger by the stockholders of Phillips (the "Phillips
Recommendation"), and shall not, unless Tosco makes a Change in the Tosco
Recommendation, (x) withdraw, modify or qualify (or propose to withdraw, modify
or qualify) in any manner adverse to Tosco such recommendation or (y) take any
action or make any statement in connection with the Phillips Stockholders
Meeting inconsistent with such recommendation (collectively, a "Change in the
Phillips Recommendation"); provided, however, that the Board of Directors of
Phillips may make a Change in the Phillips Recommendation pursuant to Section
6.5 hereof.
6.2 Phillips Board of Directors and Officers; RM&T Headquarters. (a) At the
Effective Time, Phillips shall take all requisite action to (i) expand its
Board of Directors by one member and (ii) cause Thomas D. O'Malley to be
appointed to its Board of Directors.
(b) Immediately following the Effective Time, Phillips shall take all
requisite action to appoint Thomas D. O'Malley to serve, at the discretion of
the Board of Directors and the Chief Executive Officer of Phillips, as Vice
Chairman of Phillips and head of Phillips's refining, marketing and
transportation division, with primary responsibility for assisting in (x) the
orderly integration of Tosco's operations with Phillips's refining, marketing
and transportation operations during the transition period and (y) the
establishment of a management team for the integrated refining, marketing and
transportation operations drawing from the best employees of each of Phillips
and Tosco. Immediately following the Effective Time, Phillips shall enter into
an employment agreement with Thomas D. O'Malley substantially on the terms set
forth in the letter dated February 4, 2001 from Mr. O'Malley to Phillips.
(c) As soon as practicable following the Effective Time, the executive
headquarters for the combined refining, marketing and transportation operations
of both the Surviving Corporation and Phillips shall be in the Phoenix, Arizona
area.
6.3 Access to Information. Upon reasonable notice, each party 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, such party 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 Federal or state securities laws or the HSR Act, as applicable
(other than documents which such party 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 either party 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 or (ii) the
information is subject to confidentiality obligations to a third party. The
parties will 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
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confidentiality agreement dated February 2, 2001, between Tosco and Phillips
(the "Confidentiality Agreement"), which Confidentiality Agreement shall
continue in full force and effect. Any investigation by either Phillips or
Tosco shall not affect the representations and warranties of the other.
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 Merger 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, and other documents and to
obtain as promptly as practicable all Necessary Consents 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
Merger or any of the other transactions 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 Tosco 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
competition, merger control, antitrust, investment or similar laws, and (C) all
other necessary filings with other Governmental Entities relating to the
Merger, and, to supply as promptly as practicable any additional information or
documentation that may be requested pursuant to such laws or by such
authorities 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 Tosco 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 that could reasonably be expected to have a Material
Adverse Effect on Phillips or Tosco or to substantially impair the benefits to
Phillips expected, as of the date hereof, to be realized from consummation of
the Merger, and neither Phillips or Tosco 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 Merger.
(b) Each of Tosco and Phillips 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, 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 Section 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 which would make
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the Merger or the other transactions contemplated hereby illegal or would
otherwise prohibit or materially impair or delay the consummation of the Merger
or the other transactions contemplated hereby, each of Tosco and Phillips 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, Tosco or their respective
Subsidiaries or the 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 Merger 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 a party's
right to terminate this Agreement pursuant to Section 8.1(b) or 8.1(c) so long
as such party has up to then complied with its obligations under this Section
6.4.
(d) Each of Phillips and Tosco and their respective Boards of Directors
shall, if any state takeover statute or similar statute becomes applicable to
this Agreement, the Merger or any other transactions contemplated hereby, take
all action reasonably necessary to ensure that the Merger 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 Merger and the
other transactions contemplated hereby.
6.5 Acquisition Proposals. (a) Each of Phillips and Tosco 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 its 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 of its
Significant Subsidiaries, 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) or the voting power of any of its Significant
Subsidiaries (any such proposal, offer or transaction (other than a proposal or
offer made by any other party to this Agreement or an Affiliate thereof) being
hereinafter referred to as 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 Tosco (and their respective Boards of Directors) shall be
permitted to (A) comply with Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal (to the extent applicable),
(B) effect a Change in the Phillips Recommendation or a Change in the Tosco
Recommendation, as the case may be, or (C) 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 (B) or (C), (I)
in the case of Phillips, the Phillips Stockholders Meeting shall not have
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occurred, or in the case of Tosco, the Tosco Stockholders Meeting shall not
have occurred, (II) (x) in the case of clause (B) 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 (y) in the case of clause (C) above, its
Board of Directors concludes in good faith that there is a reasonable
likelihood that such Acquisition Proposal could constitute a Superior Proposal,
(III) in the case of clause (B) or (C) above, 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 duties under applicable law, (IV) 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
customary in such agreements, as advised by counsel, provided that if such
confidentiality agreement contains provisions that are less restrictive than
the comparable provision, or omits restrictive provisions, contained in the
Confidentiality Agreement, then the Confidentiality Agreement will be deemed to
be amended to contain only such less restrictive provisions or to omit such
restrictive provisions, as the case may be, and (V) 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 Tosco agrees that it will promptly keep each
other 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 party making such inquiry, proposal or offer.
Each of Phillips and Tosco 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 parties (other than the parties to this Agreement) conducted
heretofore with respect to any Acquisition Proposal. Each of Phillips and Tosco
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 Tosco to terminate this Agreement (except as
specifically provided in Article VIII hereof) or (y) affect or limit any other
obligation of Phillips or Tosco under this Agreement.
6.6 Fees and Expenses. Subject to Section 8.2, whether or not the Merger is
consummated, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
Expenses, except Expenses incurred in connection with the filing, printing and
mailing of the Joint Proxy Statement/Prospectus and Form S-4, which shall be
shared equally by Phillips and Tosco. The parties hereto shall cooperate with
each other in preparing, executing and filing any Tax Returns.
6.7 Directors' and Officers' Indemnification and Insurance. Following the
Effective Time, Phillips shall (i) indemnify and hold harmless, and provide
advancement of expenses to, all past and present directors, officers and
employees of Tosco and its Subsidiaries (in all of their capacities) (A) to the
same extent such persons are indemnified or have the right to advancement of
expenses as of the date of this Agreement by Tosco pursuant to Tosco's Amended
and Restated Articles of Incorporation, By-laws and indemnification agreements,
if any, in existence on the date hereof with, or for the benefit of, any
directors, officers and employees of Tosco and its Subsidiaries and (B) without
limitation to clause (A), 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 Surviving Corporation's (or
any successor's) articles of incorporation and by-laws 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 which are, in the aggregate, no less advantageous to
the intended beneficiaries than the corresponding provisions contained in the
current Amended and Restated Articles of Incorporation and By-laws of Tosco 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 Tosco (provided that Phillips (or
any successor) may substitute therefor one or more policies of
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at least the same coverage and amounts containing terms and conditions which
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 Phillips be required to expend
in any one year an amount in excess of 200% of the annual premiums currently
paid by Tosco for such insurance; and, provided further that if the annual
premiums of such insurance coverage exceed such amount, Phillips shall obtain a
policy with the greatest coverage available for a cost not exceeding such
amount. The obligations of Phillips 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) Phillips agrees that, from and after the
Effective Time, Phillips and its Subsidiaries shall assume and honor all Tosco
Benefit Plans in accordance with their terms as in effect immediately before
the Effective Time, subject to any amendment or termination thereof that may be
permitted by such terms. For a period of not less than one year following the
Effective Time, Phillips shall provide, or shall cause to be provided, to
individuals who are employees of the Tosco and its Subsidiaries immediately
before the Effective Time and who continue to be employed by Phillips and its
Subsidiaries after the Effective Time (the "Tosco Employees") compensation and
employee benefits that are, in the aggregate, not less favorable than those
provided to Tosco Employees immediately before the Effective Time, as disclosed
by Tosco to Phillips before the date of this Agreement. The foregoing shall not
be construed to prevent the termination of employment of any Tosco Employee or
the amendment or termination of any particular Tosco Benefit Plan to the extent
permitted by its terms as in effect immediately before the Effective Time;
provided, however, that at the option of an affected Tosco Employee (up to a
total of fifteen Tosco Employees), any split dollar life insurance policies
shall be continued.
(b) For all purposes under the employee benefit plans of Phillips and its
Subsidiaries providing benefits to any Tosco Employees after the Effective Time
(the "New Plans"), each Tosco Employee shall be credited with his or her years
of service with Tosco and its Subsidiaries and predecessor employers before the
Effective Time, to the same extent as such Tosco Employee was entitled, before
the Effective Time, to credit for such service under any similar Tosco Benefit
Plans, except to the extent such credit would result in a duplication of
benefits. In addition, and without limiting the generality of the foregoing:
(i) each Tosco Employee shall be immediately eligible to participate, without
any waiting time, in any and all New Plans to the extent coverage under such
New Plan replaces coverage under a Tosco Benefit Plan in which such Tosco
Employee participated immediately before the Effective Time (such plans,
collectively, the "Old Plans"); and (ii) for purposes of each New Plan
providing medical, dental, pharmaceutical and/or vision benefits to any Tosco
Employee, Phillips shall cause all pre-existing condition exclusions and
actively-at-work requirements of such New Plan to be waived for such employee
and his or her covered dependents, and Phillips shall cause any eligible
expenses incurred by such employee and his or her covered dependents during the
portion of the plan year of the Old Plan ending on the date such employee's
participation in the corresponding New Plan begins to be taken into account
under such New Plan for purposes of satisfying all deductible, coinsurance and
maximum out-of-pocket requirements applicable to such employee and his or her
covered dependents for the applicable plan year as if such amounts had been
paid in accordance with such New Plan.
6.9 Public Announcements. Phillips and Tosco shall use reasonable best
efforts to develop a joint communications plan and each shall use reasonable
best efforts (i) to ensure that all press releases and other public statements
with respect to the transactions contemplated hereby shall be consistent with
such joint communications plan and (ii) unless otherwise required by applicable
law or by obligations pursuant to any listing agreement with or rules of any
securities exchange, to consult with each other before issuing 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 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 Tosco shall issue any press release or otherwise make
any public statement or disclosure concerning the other
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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 Phillips Common Stock. Phillips shall use its
reasonable best efforts to cause the shares of Phillips Common Stock to be
issued in the Merger and the shares of Phillips Common Stock to be reserved for
issuance upon exercise of the Tosco Stock 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 Merger
and the other transactions contemplated by this Agreement.
(b) The Board of Directors of Tosco shall take all action to the extent
necessary (including amending the Tosco Rights Agreement) in order to render
the Tosco Rights inapplicable to the Merger and the other transactions
contemplated by this Agreement. Except in connection with the foregoing
sentence, the Board of Directors of Tosco shall not, without the prior written
consent of Phillips, (i) amend the Tosco Rights Agreement or (ii) take any
action with respect to, or make any determination under, the Tosco Rights
Agreement, including a redemption of the Tosco Rights, in each case in order to
facilitate any Acquisition Proposal with respect to Tosco.
6.12 Affiliates. Not less than 45 days prior to the date of the Tosco
Stockholders Meeting, Tosco shall deliver to Phillips a letter identifying all
persons who, in the judgment of Tosco, may be deemed at the time this Agreement
is submitted for adoption by the stockholders of Tosco, "affiliates" of Tosco
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. Tosco shall use reasonable best efforts to cause each
person identified on such list to deliver to Phillips not later than ten days
prior to the Effective Time, a written agreement substantially in the form
attached as Exhibit A hereto (an "Affiliate Agreement").
6.13 Section 16 Matters. Prior to the Effective Time, Phillips and Tosco
shall take all such steps as may be required to cause any dispositions of Tosco
Common Stock (including derivative securities with respect to Tosco Common
Stock) or acquisitions of Phillips Common Stock (including derivative
securities with respect to Phillips Common Stock) resulting from the
transactions contemplated by Article II or Article III of this Agreement by
each individual who is subject to the reporting requirements of Section 16(a)
of the Exchange Act with respect to Tosco or will become subject to such
reporting requirements with respect to Phillips, to be exempt under Rule 16b-3
promulgated under the Exchange Act.
6.14 Phillips Indebtedness and Tosco Indebtedness. With respect to Tosco
Indebtedness issued under indentures qualified under the Trust Indenture Act of
1939, and any other Tosco Indebtedness the terms of which require Phillips to
assume such debt in order to avoid default thereunder (collectively, the
"Assumed Indentures"), Phillips shall execute and deliver to the trustees or
other representatives in accordance with the terms of the respective Assumed
Indentures, supplemental indentures or other instruments, in form satisfactory
to the respective trustees or other representatives, expressly assuming the
obligations of Tosco with respect to the due and punctual payment of the
principal of (and premium, if any) and interest, if any, on, and conversion
obligations under, all debt securities issued by Tosco under the Assumed
Indentures and the due and punctual performance of all the terms, covenants and
conditions of the Assumed Indentures to be kept or performed by Tosco and shall
deliver such supplemental indentures or other instruments to the respective
trustees or other representatives under the Assumed Indentures.
6.15 Accountants' Letter. Tosco shall use its reasonable best efforts to
cause to be delivered to Phillips a letter from its independent public
accountants addressed to Phillips, dated a date within two Business Days before
the date on which the Form S-4 shall become effective, in form and substance
reasonably satisfactory to Phillips and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of Tosco and Phillips to effect the Merger are subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. (i) Tosco shall have obtained the Tosco
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 Merger illegal or otherwise prohibiting consummation of the
Merger.
(c) HSR Act; Other Approvals. (i) The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have been
terminated or shall have expired, and (ii) all Other Approvals shall have
been obtained, except those Other Approvals the failure of which to obtain
would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Phillips or Tosco.
(d) NYSE Listing. The shares of Phillips Common Stock to be issued in
the Merger and such other shares of Phillips Common Stock to be reserved
for issuance in connection with the Merger 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 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 Merger are subject to the satisfaction, or waiver by
Phillips, on or prior to the Closing Date, of the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Tosco set forth in this Agreement, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect, shall be true and correct as of the date of this
Agreement and 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), except where the failure
of such representations and warranties to be true and correct would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Tosco; and Phillips shall have received a certificate of
an executive officer of Tosco to such effect.
(b) Performance of Obligations of Tosco. Tosco 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 Tosco 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 federal income tax purposes the Merger will
constitute a "reorganization" within the meaning of Section 368(a) 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 Tosco.
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7.3 Additional Conditions to Obligations of Tosco. The obligations of Tosco
to effect the Merger are subject to the satisfaction, or waiver by Tosco, 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, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect, shall be true and correct as of the date of this
Agreement and 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), except where the failure
of such representations and warranties to be true and correct would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Phillips; and Tosco 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
Tosco shall have received a certificate of an executive officer of Phillips
to such effect.
(c) Tax Opinion. Tosco shall have received from Stroock & Stroock &
Lavan LLP, counsel to Tosco, a written opinion dated the Closing Date to
the effect that for federal income tax purposes the Merger will constitute
a "reorganization" within the meaning of Section 368(a) of the Code. In
rendering such opinion, counsel to Tosco 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 Tosco.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, and except as specifically provided below,
whether before or after the Phillips Stockholders Meeting or the Tosco
Stockholders Meeting:
(a) By mutual written consent of Phillips and Tosco;
(b) By either Phillips or Tosco, if the Effective Time shall not have
occurred on or before the date one year 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 Tosco, if any Governmental Entity (i) shall
have issued an order, decree or ruling or taken any other action (which the
parties 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 which is
necessary to fulfill the conditions set forth in Sections 7.1(c), (d) or
(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 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
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available to any party whose failure to comply with Section 6.4 has been
the primary cause of such action or inaction;
(d) By either Phillips or Tosco, if either the Phillips Stockholder
Approval or the Tosco Stockholder Approval has not been obtained by reason
of the failure to obtain the required vote at the Phillips Stockholders
Meeting or the Tosco Stockholders Meeting, as applicable;
(e) By Phillips, if Tosco shall have (i) failed to make the Tosco
Recommendation or effected a Change in the Tosco Recommendation (or
resolved to take any such action), 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 Tosco Stockholders Meeting in accordance
with Section 6.1(b) or a failure to prepare and mail to its stockholders
the Joint Proxy Statement/Prospectus in accordance with Section 6.1(a);
(f) By Tosco, if Phillips shall have (i) failed to make the Phillips
Recommendation or effected a Change in the Phillips Recommendation (or
resolved to take any such action), 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(c) or a failure to prepare and mail to its stockholders
the Joint Proxy Statement/Prospectus in accordance with Section 6.1(a);
(g) By Phillips, if Tosco 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 7.2(a) or
(b) are not capable of being satisfied on or before the Termination Date;
or
(h) By Tosco, 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
(b) are not capable of being satisfied on or before the Termination Date.
(i) By Tosco, if the Board of Directors of Tosco has provided written
notice to Phillips that Tosco intends to enter into a binding written
agreement for a Superior Proposal (with such termination becoming effective
upon Tosco entering into such binding written agreement); provided,
however, that (i) Tosco shall have complied with Section 6.5 hereof in all
material respects; (ii) Tosco shall have (A) notified Phillips in writing
of its receipt of such Superior Proposal, (B) further notified Phillips in
such writing that Tosco intends to enter into a binding agreement with
respect to such Superior Proposal subject to clause (iii) below and (C)
attached the most current written version of such Superior Proposal (or a
summary containing all material terms and conditions of such Superior
Proposal) to such notice, (iii) Phillips does not make, within three
calendar days after receipt of Tosco's written notice pursuant to clause
(ii) above, an offer that the Board of Directors of Tosco shall have
reasonably concluded in good faith (following consultation with its
financial advisor and outside counsel) is as favorable to the stockholders
of Tosco as such Superior Proposal and (iv) Tosco pays the Tosco
Termination Fee in accordance with Section 8.2(d) concurrently with
entering into such binding written agreement.
(j) By Phillips, if the Board of Directors of Phillips has provided
written notice to Tosco that Phillips intends to enter into a binding
written agreement for a Superior Proposal (with such termination becoming
effective upon Phillips entering into such binding written agreement);
provided, however, that (i) Phillips shall have complied with Section 6.5
hereof in all material respects; (ii) Phillips shall have (A) notified
Tosco in writing of its receipt of such Superior Proposal, (B) further
notified Tosco in such writing that Phillips intends to enter into a
binding agreement with respect to such Superior Proposal subject to clause
(iii) below and (C) attached the most current written version of such
Superior Proposal (or a summary containing all material terms and
conditions of such Superior Proposal) to such notice; (iii) Tosco does not
make, within three calendar days after receipt of Phillips's written notice
pursuant to clause (ii) above, an offer that the Board of Directors of
Phillips shall have reasonably concluded in good faith (following
consultation with its financial advisor and outside counsel) is as
favorable to the stockholders of Phillips as such Superior Proposal and
(iv) Phillips pays the Phillips Termination Fee in accordance with
Section 8.2(e) concurrently with entering into such binding written
agreement.
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8.2 Effect of Termination. (a) In the event of termination of this Agreement
by either Tosco 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 to this Agreement or their respective officers or directors except
with respect to Section 4.1(q), Section 4.2(o), 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 Tosco shall be
relieved or released from any liabilities or damages arising out of its willful
and material breach of this Agreement.
(b) If (A) (I) (x) either Tosco or Phillips terminates this Agreement
pursuant to Section 8.1(d) (provided that the basis for such termination is the
failure to obtain the Tosco Stockholder Approval) or pursuant to Section 8.1(b)
without the Tosco Stockholders Meeting having occurred or (y) Phillips
terminates this Agreement pursuant to Section 8.1(g), (II) at any time after
the date of this Agreement and before such termination an Acquisition Proposal
with respect to Tosco shall have been publicly announced or otherwise
communicated to the senior management, Board of Directors or stockholders of
Tosco and (III) within twelve months of such termination Tosco or any of its
Subsidiaries enters into any definitive agreement with respect to, or
consummates, any Acquisition Proposal or (B) Phillips shall terminate this
Agreement pursuant to Section 8.1(e), then Tosco shall promptly, but in no
event later than one Business Day after the date of such termination (or in the
case of clause (A), if later, the date Tosco or its Subsidiary enters into such
agreement with respect to or consummates such Acquisition Proposal), pay
Phillips an amount equal to the Tosco Termination Fee, by wire transfer of
immediately available funds.
(c) If (A) (I) (x) either Tosco 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 Phillips Stockholders Meeting having occurred or (y) Tosco
terminates this Agreement pursuant to Section 8.1(h), (II) at any time after
the date of this Agreement and before such termination 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 (III) 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 or (B) Tosco shall terminate this
Agreement pursuant to Section 8.1(f), then Phillips shall promptly, but in no
event later than one Business Day after the date of such termination (or in the
case of clause (A), if later, the date Phillips or its Subsidiary enters into
such agreement with respect to or consummates such Acquisition Proposal), pay
Tosco an amount equal to the Phillips Termination Fee, by wire transfer of
immediately available funds.
(d) If Tosco terminates this Agreement pursuant to Section 8.1(i), Tosco
shall pay Phillips an amount equal to the Phillips Termination Fee, by wire
transfer of immediately available funds, concurrently with entering into the
binding written agreement for a Superior Proposal.
(e) If Phillips terminates this Agreement pursuant to Section 8.1(j),
Phillips shall pay Tosco an amount equal to the Tosco Termination Fee, by wire
transfer of immediately available funds, concurrently with entering into the
binding written agreement for a Superior Proposal.
(f) 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 party would enter into
this Agreement; accordingly, if either 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 which 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.
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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 Tosco 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, (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (iii) 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. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
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, 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 (a) on the date of delivery if delivered
personally, or by telecopy or facsimile, upon verbal confirmation of receipt,
(b) on the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the fifth Business Day following
the date of mailing if delivered by registered or certified mail, return
receipt requested, postage prepaid. 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 to:
Phillips Petroleum Company
Phillips Building
Fourth & 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.
A-37
(ii) if to Tosco to:
Tosco Corporation
1700 East Putnam Avenue
Old Greenwich, Connecticut 06870
Attention: General Counsel
with a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attention: Martin H. Neidell, 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 with respect to such Section on the Phillips
Disclosure Schedule, the Tosco Disclosure Schedule and the other Schedules to
this Agreement, and such other Sections of this Agreement to the extent that
the matter in such Section of such Schedule is disclosed in such a way as to
make its relevance called for by such other Section of this Agreement readily
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 party, it being understood that both
parties need not sign the same counterpart.
9.5 Entire Agreement; No Third Party Beneficiaries. (a) This Agreement, the
Confidentiality Agreement and the exhibits and schedules hereto and the other
agreements and instruments of the parties delivered in connection herewith
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(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).
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. 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 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 party, and any attempt to make any such assignment
without such
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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 and their respective successors and assigns.
9.9 Submission to Jurisdiction; Waivers. Each of Phillips and Tosco
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 Tosco hereby irrevocably submits with regard to any such
action or proceeding for itself and in respect to its property, generally and
unconditionally, to the nonexclusive jurisdiction of the aforesaid courts. Each
of Phillips and Tosco 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.
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IN WITNESS WHEREOF, Phillips, Merger Sub and Tosco 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
/s/ J. J. Mulva
By: _________________________________
Ping Acquisition Corp.
/s/ J. B. Whitworth
By: _________________________________
Tosco Corporation
/s/ Thomas D. O'Malley
By: _________________________________
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EXHIBIT A
FORM OF AFFILIATE AGREEMENT
Phillips Petroleum Company
Phillips Building
Fourth & Keeler
Bartlesville, Oklahoma 74004
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of Tosco Corporation, a Nevada corporation ("Tosco"), as the
term "affiliate" is defined for purposes of paragraphs (c) and (d) of Rule 145
of the rules and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"). I have been further advised that pursuant to the terms of
the Agreement and Plan of Merger dated as of February 4, 2001 (the "Merger
Agreement") by and among Phillips Petroleum Company ("Phillips"), a Delaware
corporation, Ping Acquisition Corp., a Nevada corporation and wholly-owned
subsidiary of Phillips ("Merger Sub"), and Tosco, Merger Sub will be merged
with and into Tosco (the "Merger") and that as a result of the Merger, I may
receive shares of Phillips Common Stock (as defined in the Merger Agreement) in
exchange for shares of Tosco Common Stock (as defined in the Merger Agreement)
owned by me.
I hereby represent, warrant and covenant to Phillips that in the event I
receive any Phillips Common Stock as a result of the Merger:
a. I shall not make any sale, transfer or other disposition of Phillips
Common Stock in violation of the Act or the Rules and Regulations.
b. I have carefully read this letter and the Merger Agreement and
discussed its requirements and other applicable limitations upon my ability
to sell, transfer or otherwise dispose of Phillips Common Stock to the
extent I believed necessary with my counsel or counsel for Tosco.
c. I have been advised that the issuance of Phillips Common Stock to me
pursuant to the Merger will be registered with the Commission under the Act
on a Registration Statement on Form S-4. However, I have also been advised
that, since at the time the Merger will be submitted for a vote of the
stockholders of Tosco, I may be deemed to have been an affiliate of Tosco
and the distribution by me of the Phillips Common Stock has not been
registered under the Act, I may not sell, transfer or otherwise dispose of
Phillips Common Stock issued to me in the Merger unless (i) such sale,
transfer or other disposition has been registered under the Act, (ii) such
sale, transfer or other disposition is made in conformity with the volume
and other limitations of Rule 145 promulgated by the Commission under the
Act, or (iii) in the opinion of counsel reasonably acceptable to Phillips,
such sale, transfer or other disposition is otherwise exempt from
registration under the Act.
d. I understand that Phillips is under no obligation to register the
sale, transfer or other disposition of Phillips Common Stock by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
e. I also understand that stop transfer instructions will be given to
Phillips's transfer agent with respect to shares of Phillips Common Stock
issued to me and that there will be placed on the certificates for such
shares of Phillips Common Stock issued to me, or any substitutions
therefor, a legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
SOLD OR OTHERWISE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
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AGREEMENT DATED [ ], 2001 BETWEEN THE REGISTERED HOLDER HEREOF AND
PHILLIPS PETROLEUM COMPANY, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF PHILLIPS PETROLEUM COMPANY."
f. I also understand that unless the transfer by me of my Phillips
Common Stock has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145, Phillips reserves the right to
put the following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED
BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs (e) and
(f) above shall be removed by delivery of substitute certificates without such
legend if the undersigned shall have delivered to Phillips a copy of a letter
from the staff of the Commission, or an opinion of counsel in form and
substance reasonably satisfactory to Phillips, to the effect that such legend
is not required for purposes of the Act.
Very truly yours,
_____________________________________
[Name]
Accepted this day of
, 2001 by
PHILLIPS PETROLEUM COMPANY
By: _________________________________
Name:
Title:
A-42
APPENDIX B
MORGAN STANLEY DEAN WITTER
1585 BROADWAY
NEW YORK, NEW YORK
10036
February 4, 2001
Board of Directors
Phillips Petroleum Company
Phillips Building, Fourth and Keeler
Bartlesville, OK 74004
We understand that Tosco Corporation (the "Company"), Phillips Petroleum
Company ("Buyer") and Ping Acquisition Corp., a wholly owned subsidiary of
Phillips Petroleum Company ("Acquisition Sub"), propose to enter into an
Agreement and Plan of Merger, substantially in the form of the draft dated as
of February 3, 2001 (the "Merger Agreement"), which provides, among other
things, for the merger (the "Merger") of the Acquisition Sub with and into the
Company. Pursuant to the Merger, the Company will become a wholly owned
subsidiary of the Buyer and each outstanding share of common stock of the
Company, par value $0.75 per share (the "Company Common Stock") other than
shares held in treasury or held by the Buyer, will be converted into the right
to receive 0.8 shares (the "Exchange Ratio") of common stock of the Buyer, par
value $1.25 per share (the "Buyer Common Stock"). The terms and conditions of
the merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Merger Agreement is fair from a financial point of view to the Buyer.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and the Buyer;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company provided by the
management of the Buyer;
(iii) reviewed certain internal financial statements and other financial
and operating data concerning the Buyer prepared by the management
of the Buyer;
(iv) reviewed certain financial projections with respect to the
operations of the Buyer and the Company prepared by the management
of the Buyer;
(v) discussed the past and current operations and financial condition
and the prospects of the Buyer, including information relating to
certain strategic, financial and operational benefits anticipated
from the Merger, with senior executives of the Buyer;
(vi) reviewed the pro forma impact of the Merger on the Buyer's earnings
per share, consolidated capitalization and financial ratios;
(vii) reviewed the reported prices and trading activity for the Company
Common Stock and Buyer Common Stock;
(viii) compared the financial performance of the Company and the prices
and trading activity of the Company Common Stock with that of
certain other comparable publicly-traded companies and their
securities;
(ix) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
MORGAN STANLEY DEAN WITTER
(x) participated in discussions and negotiations among representatives
of the Company and the Buyer and their financial and legal advisors;
(xi) reviewed a draft of the Merger Agreement and certain related
documents; and
(xii) 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 reviewed by us for the purposes
of this opinion. Morgan Stanley did not receive financial forecasts or
internal financial information for the Company from the Company, and instead
relied on the publicly available estimates of selected analysts who report on
the Company and on certain financial information on the Company provided by
the Buyer. With respect to the financial projections of the Company and the
Buyer, including information relating to certain strategic, financial and
operational benefits anticipated from the Merger, we have assumed that they
have been reasonably prepared by management of the Buyer on bases reflecting
the best currently available estimates and judgments of the future financial
performance of the Company and the Buyer. In addition, we have assumed that
the Merger will be consummated in accordance with the terms set forth in the
Merger Agreement, including among other things, that the Merger will be
treated as a tax-free reorganization and/or exchange, each pursuant to the
Internal Revenue Code of 1986. We have not made any independent valuation or
appraisal of the assets or liabilities of the Company, nor have we been
furnished with any such appraisals. 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.
We have acted as financial advisor to the Board of Directors of the Buyer
in connection with this transaction and will receive a fee for our services.
In the past, Morgan Stanley & Co. Incorporated and its affiliates have
provided financial advisory and financing services for the Buyer and the
Company and have received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Buyer and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its
entirety in any filing made by the Buyer in respect of the transaction with
the Securities and Exchange Commission. In addition, this opinion does not in
any manner address the prices at which the Buyer Common Stock will trade
following consummation of the Merger, and Morgan Stanley expresses no opinion
or recommendation as to how the shareholders of the Buyer should vote at the
shareholders' meeting held in connection with the Merger.
Based on and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to the Buyer.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
/s/ Michael J. Dickman
By: _________________________________
MICHAEL J. DICKMAN
MANAGING DIRECTOR
APPENDIX C
Investment Banking
Corporate and Institutional
Client Group
World Financial Center
North Tower
New York, New York 10281-1330
[LOGO] Merrill Lynch
February 4, 2001
Board of Directors
Tosco Corporation
1700 East Putnam Road, Suite 500
Old Greenwich, CT 06870
Members of the Board of Directors:
Tosco Corporation (the "Company"), Phillips Petroleum Company (the
"Acquiror") and Ping Acquisition Corp., a newly formed, wholly owned
subsidiary of the Acquiror (the "Acquisition Sub"), propose to enter into an
Agreement and Plan of Merger (the "Agreement") pursuant to which Acquisition
Sub will be merged with the Company in a transaction (the "Merger") in which
each outstanding share of the Company's common stock, par value $.75 per share
(the "Company Shares"), will be converted into the right to receive 0.8 shares
(the "Exchange Ratio") of the common stock of the Acquiror, par value $1.25
per share (the "Acquiror Shares").
You have asked us whether, in our opinion, the Exchange Ratio is fair from
a financial point of view to the holders of the Company Shares, other than the
Acquiror and its affiliates.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company and the Acquiror 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 the Company and the Acquiror, as well as the amount and timing of
the cost savings and related expenses and synergies expected to result
from the Merger (the "Expected Synergies") furnished to us by the
Company and the Acquiror, respectively;
(3) Conducted discussions with members of senior management and
representatives of the Company and the Acquiror concerning the matters
described in clauses 1 and 2 above, as well as their respective
businesses and prospects before and after giving effect to the Merger
and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and the Acquiror Shares and compared them with those of certain
publicly traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and the Acquiror and
compared them with those of certain publicly traded companies that we
deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions that we deemed to be relevant;
(7) Reviewed the potential pro forma impact of the Merger;
(8) Reviewed a draft dated February 2, 2001 of the Agreement; and
(9) Reviewed such other financial studies and analyses and taken 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 the Company or the Acquiror or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct, nor have we conducted, any physical inspection of the properties or
facilities of the Company or the Acquiror. With respect to the financial
forecast information and the Expected Synergies furnished to or discussed with
us by the Company or the Acquiror, we have assumed that they have been
reasonably prepared and reflect the best currently available estimates and
judgment of the Company's or the Acquiror's management as to the expected
future financial performance of the Company or the Acquiror, as the case may
be, and the Expected Synergies. We have further assumed that the Merger will
qualify as a tax-free reorganization for U.S. federal income tax purposes. We
have also assumed that the final form of the Agreement will be substantially
similar to the last draft reviewed by us.
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 in the course of obtaining
the necessary regulatory or other consents or approvals (contractual or
otherwise) for the Merger, no restrictions, including any divestiture
requirements or amendments or modifications, will be imposed that will have a
material adverse effect on the contemplated benefits of the Merger.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or
any part of the Company.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services, a significant
portion of which is contingent upon the consummation of the Merger. In
addition, the Company 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 the Company and the Acquiror and/or its
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 Company Shares and other securities of the
Company, as well as the Acquiror Shares and other securities of the Acquiror,
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 the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Merger and does not constitute a recommendation
to any shareholder as to how such shareholder should vote on the proposed
Merger. We are not expressing any opinion herein as to the prices at which the
Company Shares or the Acquiror Shares will trade following the announcement or
consummation of the Merger.
On the basis of and subject to the foregoing, 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 the Company Shares, other than the Acquiror and its
affiliates.
Very truly yours,
/s/ Merrill Lynch, Pierce, Fenner & Smith
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
APPENDIX D
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
PHILLIPS PETROLEUM COMPANY
A DELAWARE CORPORATION
Phillips Petroleum Company, a corporation organized and existing under the
laws of the State of Delaware (the "Company"), does hereby certify as follows:
FIRST: That, in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware (the "DGCL"), the Board of
Directors of the Company duly adopted resolutions setting forth an
amendment to the Restated Certificate of Incorporation of the Company (this
"Amendment") and deeming this Amendment advisable.
SECOND: That written notice of this Amendment was duly given in
accordance with Section 222 of the DGCL to stockholders of the Company.
THIRD: That this Amendment was approved by stockholders of the Company
pursuant to Section 242 of the DGCL.
FOURTH: That the Restated Certificate of Incorporation of the Company is
hereby amended as follows:
Section (a) of Article Fourth of the Restated Certificate of
Incorporation of the Corporation is hereby amended and restated in its
entirety to read as follows:
"(a) Capital Stock. The corporation shall have the authority to
issue one billion (1,000,000,000) shares of common stock, par value
$1.25 per share, and 300 million (300,000,000) shares of preferred
stock, par value $1.00 per share."
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
its and attested to by its this day of , 2001.
_____________________________________
Name:
Title:
Attest:
_____________________________________
Name:
Title:
D-1
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Phillips Petroleum Company (the "Company" or the "Registrant") is
incorporated under the laws of the state of Delaware. Section 102 of the
Delaware General Corporation Law (the "DGCL") allows a corporation to eliminate
the personal liability of directors of a corporation to the corporation or to
any of its stockholders for monetary damages for a breach of fiduciary duty as
a director, except (i) for breach of the director's duty of loyalty, (ii) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) for certain unlawful dividends and stock
repurchases or (iv) for any transaction from which the director derived an
improper personal benefit. Article TENTH of the Company's Restated Certificate
of Incorporation (the "Certificate"), provides that no director shall be
personally liable to the Company or its stockholders for monetary damages for
any breach of his fiduciary duty as a director, except as provided in Section
102 of the DGCL.
Section 145 of the DGCL provides that in the case of any action other than
one by or in the right of the corporation, a corporation may indemnify any
person who was or is a party, or is threatened to be made a party to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation in such capacity on behalf of another corporation or
enterprise, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action if he acted in good faith and in a manner he
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 his conduct was unlawful.
Section 145 of the DGCL provides that in the case of an action by or in the
right of a corporation to procure a judgment in its favor, a corporation may
indemnify any person who was or is a party, or is threatened to be made a party
to any action or suit by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation in such capacity on behalf of another
corporation or enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted under standards similar to those
set forth in the preceding paragraph, except that no indemnification may be
made in respect of any action or claim as to which such person shall have been
adjudged to be liable to the corporation, unless a court determines that such
person is fairly and reasonably entitled to indemnification.
Article III of the Company's Bylaws provides for indemnification of any
person who was, is or is threatened to be made, a party to any action, suit or
proceeding by reason of the fact that he is or was a director, officer or
employee of the Company, or was serving at the request of the Company in that
capacity for another entity, to the fullest extent permitted by the DGCL.
Directors and officers of the Company are insured, at the expense of the
Company, against certain liabilities which might arise out of their employment
and which might not be subject to indemnification under the bylaws.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. See Exhibit Index.
II-1
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), 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 (the "SEC") such indemnification is
against public policy as expressed in the Securities Act 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 of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) 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) 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.
(d) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
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, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offering
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 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 the
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.
(g) 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;
(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
II-2
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 SEC 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 such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, 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.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bartlesville, State of Oklahoma, on March 6, 2001.
Phillips Petroleum Company
/s/ J. Bryan Whitworth
By: _________________________________
NAME: J. BRYAN WHITWORTH, ESQ.
TITLE:EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND CHIEF
ADMINISTRATIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on March 6, 2001.
J. J. Mulva* Chairman of the
---------------------------------------- Board of
J. J. MULVA Directors and
Chief Executive
Officer
(Principal
Executive
Officer)
/s/ John A. Carrig Senior Vice
---------------------------------------- President, Chief
JOHN A. CARRIG Financial
Officer and
Treasurer
(Principal
Financial
Officer)
Rand C. Berney* Vice President
---------------------------------------- and Controller
RAND C. BERNEY (Principal
Accounting
Officer)
Director
Norman R. Augustine*
----------------------------------------
NORMAN R. AUGUSTINE
David L. Boren* Director
----------------------------------------
DAVID L. BOREN
Robert E. Chappell, Jr.* Director
----------------------------------------
ROBERT E. CHAPPELL, JR.
Robert M. Devlin* Director
----------------------------------------
ROBERT M. DEVLIN
Director
Lawrence S. Eagleburger*
----------------------------------------
LAWRENCE S. EAGLEBURGER
II-4
Larry D. Horner* Director
----------------------------------------
LARRY D. HORNER
Randall L. Tobias* Director
----------------------------------------
RANDALL L. TOBIAS
Victoria J. Tschinkel* Director
----------------------------------------
VICTORIA J. TSCHINKEL
Kathryn C. Turner* Director
----------------------------------------
KATHRYN C. TURNER
/s/ John A. Carrig
*By: ___________________________________
JOHN A. CARRIG
ATTORNEY-IN-FACT
II-5
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.01 Agreement and Plan of Merger, dated as of February 4, 2001, by and
among the Registrant, Ping Acquisition Corp. and Tosco Corporation,
attached as Appendix A to the joint proxy statement/prospectus, which
is part of this Registration Statement.
3.01 Restated Certificate of Incorporation of the Registrant, as filed with
the Secretary of State of the State of Delaware July 17, 1989
(incorporated by reference to Exhibit 3(i) to Annual Report on Form
10-K for the year ended December 31, 1995).
3.02 Bylaws of the Registrant, as amended effective September 13, 1999
(incorporated by reference to Exhibit 3(ii) to the Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended September
30, 1999).
3.03 Amendment to the Registrant's Restated Certificate of Incorporation,
attached as Appendix D to the joint proxy statement/prospectus, which
is part of this Registration Statement.
4.01 Preferred Share Purchase Rights, as described in the Rights Agreement,
dated as of August 1, 1999, between the Registrant and ChaseMellon
Shareholder Services, L.L.C. (incorporated by reference to Exhibit 4.1
to the Registrant's Current Report on Form 8-K filed July 12, 1999).
4.02 Indenture, dated as of September 15, 1990, between the Registrant and
U.S. Bank Trust National Association (incorporated by reference to
Exhibit 4(a) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1996).
4.03 Indenture, dated as of September 15, 1990, as supplemented by
Supplemental Indenture No. 1, dated May 23, 1991, between the
Registrant and U.S. Bank Trust National Association (incorporated by
reference to Exhibit 4(b) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1997).
5.01 Opinion of J. Bryan Whitworth, Esq., Executive Vice President, General
Counsel and Chief Administrative Officer of the Registrant, as to the
legality of the shares being issued.
8.01 Opinion of Wachtell, Lipton, Rosen & Katz as to certain tax matters.
8.02 Opinion of Stroock & Stroock & Lavan LLP as to certain tax matters.
23.01 Consent of Ernst & Young LLP.
23.02 Consent of PricewaterhouseCoopers LLP.
23.03 Consent of PricewaterhouseCoopers LLP.
23.04 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.01).
23.05 Consent of Stroock & Stroock & Lavan LLP (included in Exhibit 8.02).
23.06 Consent of J. Bryan Whitworth, Esq. (included in Exhibit 5.01).
24.01 Powers of Attorney authorizing certain persons to sign this
Registration Statement on behalf of certain officers and directors of
the Registrant.
99.01 Form of Proxy to be used by the Registrant.
99.02 Form of Proxy to be used by Tosco Corporation.
99.03 Consent of Morgan Stanley & Co. Incorporated (included in Exhibit
99.07).
99.04 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
99.05 Letter agreement, dated February 4, 2001, between the Registrant and
Thomas D. O'Malley (incorporated by reference to Exhibit 99.1 to the
Registrant's Current Report on Form 8-K filed February 5, 2001).
99.06 Consent of Thomas D. O'Malley to be named as a prospective director of
the Registrant.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
99.07 Opinion of Morgan Stanley & Co. Incorporated, attached as Appendix B
to the joint proxy statement/prospectus, which is part of this
Registration Statement.
99.08 Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated,
attached as Appendix C to the joint proxy statement/prospectus, which
is part of this Registration Statement.
99.09 Additional solicitation materials to be used by the Registrant.
2