-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qnlwzj73GLN4ixUIBJ1zYFRywjSZ3qwFMHfPmrv2fLVSWa3k3JwyH++m5n/jjQhv ER7xucDO7mNxLmHd7hhoWQ== 0000912057-96-014954.txt : 19960719 0000912057-96-014954.hdr.sgml : 19960719 ACCESSION NUMBER: 0000912057-96-014954 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19960718 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SUMMIT PETROLEUM CORP CENTRAL INDEX KEY: 0000353196 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 840838160 STATE OF INCORPORATION: CO FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-46445 FILM NUMBER: 96596388 BUSINESS ADDRESS: STREET 1: 16701 GREENPOINT PARK DR. STREET 2: SUITE 200 CITY: HOUSTON STATE: TX ZIP: 77060 BUSINESS PHONE: 7138734828 MAIL ADDRESS: STREET 1: 16701 GREENPOINT PARK DR STREET 2: SUITE 200 CITY: HOUSTON STATE: TX ZIP: 77060 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MIDLAND RESOURCES INC /TX/ CENTRAL INDEX KEY: 0000868424 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 752286814 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 16701 GREENSPOINT PARK DR STREET 2: SUITE 200 CITY: HOUSTON STATE: TX ZIP: 77060 BUSINESS PHONE: 9156857051 SC 14D1 1 SCHEDULE 14D-1 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ SUMMIT PETROLEUM CORPORATION (Name of Subject Company) MRI ACQUISITION CORP. MIDLAND RESOURCES, INC. --------------- (BIDDERS) COMMON STOCK, $.01 PAR VALUE (TITLE OF CLASS OF SECURITIES) 866228 307 (CUSIP NUMBER OF COMMON STOCK) DEAS H. WARLEY III, PRESIDENT MRI ACQUISITION CORP. 16701 GREENSPOINT PARK DRIVE, SUITE 200 HOUSTON, TEXAS 77060 713-873-4828 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS) COPY: WAYNE M. WHITAKER MICHENER, LARIMORE, SWINDLE, WHITAKER, FLOWERS, REYNOLDS, SAWYER & CHALK, L.L.P. 301 COMMERCE STREET 3500 CITY CENTER TOWER II FORT WORTH, TEXAS 76102 817-878-0530 ------------------------ CALCULATION OF FILING FEE TRANSACTION VALUATION* AMOUNT OF FILING FEE $1,890,129 $378 *For the purpose of calculating the fee assumes the purchase of 2,700,184 shares of Common Stock of Summit Petroleum Corporation at $0.70 per share. Such number of shares includes all outstanding shares as of July 15, 1996, and assumes the exercise of all stock options to purchase 300,000 shares of Common Stock outstanding as of such date. / / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. AMOUNT PREVIOUSLY PAID: N/A FILING PARTY: N/A FORM OR REGISTRATION NO.: N/A DATE FILED: N/A - -------------------------------------------------------------------------------- The Index to Exhibits begins on page 7 This Statement relates to a tender offer by MRI Acquisition Corp., a Texas corporation (the "Purchaser") and a wholly owned subsidiary of Midland Resources, Inc., a Texas corporation ("Parent"), to purchase all outstanding shares of Common Stock, par value $.01 per share (the "Common Stock"or the "Shares"), of Summit Petroleum Corporation, a Colorado corporation (the "Company"), at a purchase price of $0.70 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 17, 1996 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), copies of which are filed as Exhibits (a)(1) and (a)(2) hereto, respectively, and which are incorporated herein by reference. The Purchaser has been formed by Parent in connection with the Offer and the transactions contemplated thereby. ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Summit Petroleum Corporation, Inc. The address of the principal executive offices of the Company is set forth in Section 8 ("Certain Information Concerning the Company") of the Offer to Purchase and is incorporated herein by reference. (b) The information set forth in the Introduction to the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a) through (d), (g) This Schedule 14D-1 is filed by MRI Acquisition Corp., a Texas corporation, , the Purchaser, and Midland Resources, Inc., a Texas corporation, the Parent. The information set forth in the Introduction and Section 9 ("Certain Information Concerning Parent and the Purchaser") of the Offer to Purchase and in Schedules I and II thereto is incorporated herein by reference. (e) and (f) None of the Purchaser, Parent, or, to the best of their knowledge, any of the persons listed in Schedule I of the Offer to Purchase, has during the last five years (i)been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) PRIOR TRANSACTIONS. Effective December 17, 1993, the Company entered into a Stock Redemption and Purchase Agreement, whereby the Company redeemed, and certain individuals acquired, an aggregate 1,169,549 shares (adjusted for a 1-for-20 reverse stock split) of common stock of the Company at $0.30 per share (adjusted for the stock split) from unrelated shareholders and former directors of the Company. At the time of the purchase, there was no established market price for the Company's common stock. Of the 1,169,549 shares involved in the transaction, the Company redeemed 924,816 shares, which the Company currently holds as treasury stock, and the remaining 244,733 shares were purchased by individual purchasers including Mr. Warley (1,000 shares), two officers, Ms. Disch (6,700 shares) and Ms. Crass (500 shares), two trusts created by Mr. Warley for the benefit of his children, Sharon N. Warley (15,000 shares) and Christopher B. Warley (15,000 shares) and Mr. Whitaker, a director nominee (25,000 shares). Mr. Warley does not serve as trustee of the two trusts and disclaims beneficial ownership of those 30,000 shares. The purpose for the Stock Redemption and Purchase transaction was for investment. Since 1989 the firm of Michener, Larimore, Swindle, Whitaker, Flowers, Sawyer, Reynolds & Chalk, L.L.P. (or its predecessors) have represented the Company. Mr. Whitaker, a director of the Company is a partner in this firm. In 1993, 1994, 1995 and through July 1, 1996 the firm received $2,116.54, $12,964.74, $10,163.63, and $2,876.45 2 respectively as legal fees and reimbursable expenses (which did not amount to 5% of such firm's total fees during such years). The firm continues to provide routine legal representation for the Company. For the fiscal years 1990 through 1993 the Company's auditor was Darrell M. Dillard. For fiscal year 1993 the Company paid Mr. Dillard $14,000 for accounting and auditing services. Mr. Dillard was elected to the Board in 1995. The Company and MRO entered into a Management Agreement on August 28, 1989, which was extended and amended by agreement on December 31, 1993, which provides that MRO will provide day-to-day management, administrative, bookkeeping and accounting services to the Company. Under the Management Agreement as extended and amended, in exchange for MRO providing such administrative services and management of the Company's operations, the Company paid MRO a fee equal to $10,000 per month during 1993, $9,000 per month during 1994, and $8,500 per month during 1995. This agreement was amended effective January 1, 1996, whereby the Company pays a fee equal to $5,000 per month during 1996 and will pay $4,500 per month during 1997. As a result of the Management Agreement the Company does not maintain offices separate from those of MRO or Parent. Management fees incurred under this agreement for the years ended July 31, 1993, 1994, 1995 and through April 30, 1996 were $120,000, $113,000, $104,500, and $62,500, respectively. This agreement may be terminated by either party at any time. MRO acts as operator of a substantial portion of the Company's oil and gas properties. For all services performed as operator of those properties, MRO is entitled to receive the compensation and reimbursements provided the operator under the applicable operating agreement. However, any charges by MRO under an operating agreement in such a situation for the use of its personnel, properties and equipment, as well as the prices of materials sold by it, must be at rates equal to the competitive charges of unaffiliated third parties for comparable services or materials in the same geographic area. Further, those services can be provided only pursuant to a written agreement which precisely describes the services to be rendered and the compensation to be paid. The Company's share of operation and supervision charges incurred on these properties for the years ended July 31, 1993, 1994, 1995 and through April 30, 1996 was $13,854, $18,852, $28,106, and $16,699, respectively. Until May, 1995, the Company leased a truck for use by its field personnel, and at times prior thereto, the Company had leased two trucks for such purpose, from MRO. In May, 1995 the Company purchased, at trade in value, the two trucks formerly being leased. Lease expenses incurred under these agreements for the years ended July 31, 1993, 1994 and 1995 were $13,326, $8,283, and $4,200 respectively. Terms of the lease agreement were determined from and are less than competitive market leases in the area. MRO had a similar management agreement with Parent until it was acquired by Parent on December 31, 1993. Mr. Warley is President and Chairman of Parent, owns approximately 36.2% of its common stock and formerly owned 80% of MRO prior to its acquisition by Parent. Ms. Disch is Secretary of Parent and Ms. Crass was Assistant Secretary and Controller of Parent until June, 1996. Although Parent is unaware of similar management arrangements with other companies, the services provided to the Company by Parent are those the Company provided for itself prior to the management agreement . The services provided by the management agreement are reflected as general and administrative costs. Following the execution of the management agreement, general and administrative costs were reduced from historical levels. As of April 30, 1996 the Company owed MRO $130,537 for management, operating and development costs. On January 22, 1991, MRO acquired the Company's debt from Texas Commerce Bank-Midland, the successor to United Bank of Midland for a cash payment equal to the outstanding principal balance plus accrued interest for a total of $100,080. The final installment on this note was made to MRO in February, 1992. During 1992, the Company participated with MRO and Parent in one acquisition of oil and gas properties. The Company purchased 5%, MRO purchased 10%, and Parent purchased 85% of that acquisition upon the same price basis, 3 terms and conditions. For its interest, the Company paid approximately $223,400; MRO became operator of the property. Effective January 1, 1994 the Company purchased a 10% working interest with an approximate 8.75% revenue interest in certain oil and gas properties in Ward County, Texas from Parent for $85,696, Parent's actual cost adjusted for revenues and expenses through December 31, 1993. Effective August 1, 1994 the Company acquired 10% of Parent's working interest in certain oil and gas properties in Coke and Howard Counties, Texas for $201,596, Parent's actual cost adjusted for revenues and expenses from August 1, 1994 through August 15, 1994, the closing date, and transaction costs. Effective May 26, 1995, the Company, in participation with Parent, acquired a five percent working interest in certain oil and gas leases and seismic options in the Sunburst Project, Terry County, Texas, and the Latigo Project, Hockley County, Texas in exchange for a commitment to expend certain monies in connection with certain oil and gas leases, seismic options, conducting 3-D geophysical surveys, interpretation of 3-D seismic data and the drilling of two or more test wells. MRO will operate the projects. Closing occurred on July 14, 1995. Effective July 11, 1995, the Company acquired a five percent working interest in certain oil and gas leases and seismic options in the Lakota Project, Hockley County, Texas in exchange for a commitment to expend certain monies in connection with certain oil and gas leases, seismic options, conducting 3-D geophysical surveys, interpretation of 3-D seismic data and the drilling of one or more test wells. As of April 30, 1996 the cost to the Company for these projects was approximately $70,000. MRO will operate the project. Effective September 1, 1995, the Company, in participation with Parent, acquired a four percent working interest in certain Redfish Bay Field properties in Nuecess County, Texas at a cost of approximately $82,000, which was at the same cost basis per working interest percent as Parent. (b) The information set forth in the Introduction and Section 11("Background of the Offer"), Section 8 ("Certain Information Concerning the Company") and Section 9 ("Certain Information Concerning the Purchaser") of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) and (b) The information set forth in Section 10 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a) through (g) The information set forth in the Introduction, Section 7 ("Effect of the Offer on Exchange Act Registration") and Section 12 ("Purpose of the Offer and the Merger; Plans for the Company; The Merger Agreement") of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) The information set forth in the Introduction and Section 9 ("Certain Information Concerning Parent and the Purchaser") of the Offer to Purchase and in Schedules I and II thereto is incorporated herein by reference. (b) Not applicable. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. 4 The information set forth in the Introduction, Section 9 ("Certain Information Concerning Parent and the Purchaser"), Section 10 ("Source and Amount of Funds") and Section 12 ("Purpose of the Offer and the Merger; Plans for the Company; The Merger Agreement") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the Introduction and in Section 16 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. Not applicable. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in The Offer to Purchase, the Introduction, Section 9 ("Certain information Concerning Parent and the Purchaser") and Section 12 ("Purpose of the Offer and the Merger"; Plans for the Company"; "The Merger Agreement") is incorporated herein by reference. (b),(c),(d),(e) Not applicable ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) The "Offer to Purchase" (a)(2) Letter of Transmittal (a)(3) Agreement and Plan of Merger among Midland Resources, Inc., MRI Acquisition Corp. and the Company (b)(1)* Loan Agreement with First Union National Bank of North Carolina (Filed as Exhibit 10.1 to the Company's Form 10-KSB dated December 31, 1995.) (c)* 10.1 Pike Petroleum Corporation Management Agreement between Miresco, Inc. and Pike Petroleum Corporation, The Company and Deas H. Warley III dated August 28, 1989 (Filed as Exhibit 10.4 to the Company's Form 8-K dated August 28, 1989.) * 10.2 Assignment and Bill of Sale between the Company and Midland Resources, Inc. dated August 15, 1994 (Filed as Exhibit 10.11 to the Company's Form 8- K/A dated August 15, 1994.) * 10.5 Partial Assignment of Oil and Gas Leases and Bill of Sale between the Company and Midland Resources, Inc. dated January 11, 1994 (Filed as Exhibit 10.14 to the Company's Form 10-KSB dated July 31, 1994.) * 10.6 Assignment between the Company and Midland Resources, Inc. dated August 1, 1995 (Filed as Exhibit 10.6 to the Company's Form 10-KSB dated July 31, 1995.) * 10.7 Assignment between the Company and Midland Resources, Inc. dated August 1, 1995 (Filed as Exhibit 10.7 to the Company's Form 10-KSB dated July 31, 1995.) * 10.8 Purchase and Sale Agreement, Stipulation of Interest and Exploration and Development Agreement between the Company, Midland Resources, Inc., Midland Resources Operating Company, Inc., AXEM - Blackbird L.L.C. and Pathfinder Oil & Gas, Inc.(Filed as Exhibit 10.8 to the Company's Form 10-KSB 5 dated July 31, 1995.) * 99.1 Stock Redemption and Purchase Agreement dated December 17, 1993 (Filed as an Exhibit of the same number to the Company's Form 8-K dated December 17, 1993.) ____________________________________ * Incorporated by reference as indicated. (d),(e),(f) Not applicable SIGNATURE. After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. MRI ACQUISITION CORP. July 18, 1996 /s/ Deas H. Warley III, President - --------------- ------------------------------------------ Date Signature, Name and Title MIDLAND RESOURCES, INC. July 18, 1996 /s/ Deas H. Warley III, President - --------------- ------------------------------------------ Date Signature, Name and Title 6 INDEX TO EXHIBITS EXHIBIT NO. PAGE NO. - ----------- -------- (a)(1) The "Offer to Purchase" (a)(2) Letter of Transmittal (a)(3) Agreement and Plan of Merger among Midland Resources, Inc., MRI Acquisition Corp. and the Company (b)(1)* Loan Agreement with First Union National Bank of North Carolina (Filed as Exhibit 10.1 to the Company's Form 10-KSB dated December 31, 1995.) (c)* 10.1 Pike Petroleum Corporation Management Agreement between Miresco, Inc. and Pike Petroleum Corporation, The Company and Deas H. Warley III dated August 28, 1989 (Filed as Exhibit 10.4 to the Company's Form 8-K dated August 28, 1989.) * 10.2 Assignment and Bill of Sale between the Company and Midland Resources, Inc. dated August 15, 1994 (Filed as Exhibit 10.11 to the Company's Form 8-K/A dated August 15, 1994.) * 10.5 Partial Assignment of Oil and Gas Leases and Bill of Sale between the Company and Midland Resources, Inc. dated January 11, 1994 (Filed as Exhibit 10.14 to the Company's Form 10-KSB dated July 31, 1994.) * 10.6 Assignment between the Company and Midland Resources, Inc. dated August 1, 1995 (Filed as Exhibit 10.6 to the Company's Form 10-KSB dated July 31, 1995.) * 10.7 Assignment between the Company and Midland Resources, Inc. dated August 1, 1995 (Filed as Exhibit 10.7 to the Company's Form 10-KSB dated July 31, 1995.) * 10.8 Purchase and Sale Agreement, Stipulation of Interest and Exploration and Development Agreement between the Company, Midland Resources, Inc., Midland Resources Operating Company, Inc., AXEM - Blackbird L.L.C. and Pathfinder Oil & Gas, Inc.(Filed as Exhibit 10.8 to the Company's Form 10-KSB dated July 31, 1995.) * 99.1 Stock Redemption and Purchase Agreement dated December 17, 1993 (Filed as an Exhibit of the same number to the Company's Form 8-K dated December 17, 1993.) ____________________________________ * Incorporated by reference as indicated. 7 EX-99.(A)(1) 2 EXHIBIT 99(A)(1) EXHIBIT 99(a)(1) OFFER TO PURCHASE By MRI Acquisition Corp. For All Common Stock of Summit Petroleum Corporation THIS OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER THAT NUMBER OF SHARES WHICH WOULD REPRESENT AT LEAST A MAJORITY OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS (SUCH CONDITION THE "MINIMUM CONDITION", AND SUCH SHARES THE "MINIMUM SHARES"). SEE SECTIONS 12 AND 14. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of July 17, 1996 (the "Merger Agreement"), among Parent, the Purchaser and the Company, pursuant to which, as promptly as practicable following the later of the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company. Following the consummation of the Merger, the Company will be the surviving corporation (the "Surviving Corporation"). Under the Merger Agreement, with the mutual agreement of the Parent and the Company, the Merger may be restructured to be a merger of the Company into the Purchaser, in which case the Purchaser would be the Surviving Corporation. The Purchaser also has the right to assign its rights under the Merger Agreement to an affiliate of the Purchaser. In the Merger, each outstanding Share (other than Shares held by the Company or owned by Parent or the Purchaser or any other subsidiary of either Parent or the Purchaser and other than Shares held by stockholders, if any, who perfect their appraisal rights under Colorado law) will be converted into the right to receive $0.70, without interest thereon, in cash (the "Merger Consideration") and the Company will become a wholly owned subsidiary of Parent. See Section 12. Subject to the terms of the Merger Agreement and the applicable rules and regulations of the Securities and Exchange Commission (the "Commission"), the Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events set forth in Section 14 hereof shall have occurred or shall have been determined by the purchaser to have occurred, (i) to extend the period of time during which the offer is open, and thereby delay acceptance for payment of and the payment for any Shares, by giving oral or written notice of such extension to the Depositary and (ii) to amend the Offer in any other respect by giving oral or written notice of such amendment to the Depositary. If by 12:00 Midnight, Houston, Texas time, on Wednesday, August 14, 1996 (or any other date or time then set as the Expiration Date), any or all conditions to the Offer have not been satisfied or waived, the Purchaser reserves the right (but shall not be obligated), subject to the terms and conditions contained in the Merger Agreement and to the applicable rules and regulations of the Commission, to (i) terminate the Offer and not accept for payment any Shares and return all tendered Shares to tendering stockholders, (ii) waive all the unsatisfied conditions and, subject to complying with the terms of the Merger Agreement and the applicable rules and regulations of the Commission, accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn, (iii) extend the Offer and, subject to the right of stockholders to withdraw Shares until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is extended or (iv) amend the Offer. The Merger Agreement provides that, so long as the Merger Agreement is in effect and the Offer conditions have not been satisfied or waived, at the request of the Company, the Purchaser will, and Parent will cause the Purchaser to, extend the Offer for an aggregate period of not more than 20 business days (for all such extensions) beyond the originally scheduled expiration date of the Offer. There can be no assurance that the Purchaser will exercise its right to extend the Offer. Any extension, waiver, amendment or termination will be followed as promptly as practicable by public announcement thereof. In the case of an extension, Rule 14e-1(d) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires that the announcement be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act, subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information 8 published, sent or given to stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform stockholders of such change). Without limiting the obligation of the Purchaser under such rules or the manner in which the Purchaser may choose to make any public announcement, the Purchaser will not have any obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to the Dow Jones News Service. In the Merger Agreement, the Purchaser has agreed that, except as otherwise required by law, it will not, without the prior consent of the Company, extend the Offer if all of the Offer conditions are satisfied or waived, except that the Purchaser may, in its sole discretion, extend the Offer at any time and from time to time (i) if at the then scheduled expiration date of the Offer any of the conditions to the Purchaser's obligation to accept for payment and pay for Shares shall not have been satisfied or waived, (ii) for any period required by any rule, regulation, interpretation or position of the Commission or its staff applicable to the Offer, (iii) for any period required by applicable law in connection with an increase in the consideration to be paid pursuant to the offer, and (iv) if all Offer conditions are satisfied or waived but the number of Shares tendered is 85% or more, but less than 90%, of the then outstanding number of Shares, for an aggregate period of not more than 5 business days (for all such extensions under this clause (iv)) beyond the latest expiration date that would be permitted under clause (i), (ii) or (iii) of this sentence. In addition, the Purchaser has agreed that, without the prior written consent of the Company it will not (i) waive the Minimum Condition, (ii) reduce the number of Shares subject to the Offer, (iii) reduce the price per Share to be paid pursuant to the Offer, (iv) change the form of consideration payable in the Offer, or (v)amend or modify any term or condition of the Offer (including the conditions described in Section 14) in any manner adverse to the holders of Shares. If the Purchaser extends the Offer, or if the Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its acceptance for payment of, or payment for, Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described in Section 4. However, the ability of the Purchaser to delay the payment for Shares that the Purchaser has accepted for payment is limited by Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of such bidder's offer. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer (including, with the consent of the Company, the Minimum Condition), the Purchaser will disseminate additional tender offer materials and extend the offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer, other than a change in price or a change in the percentage of securities sought, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. With respect to a change in price or a change in the percentage of securities sought, a minimum period of 10 business days is generally required to allow for adequate dissemination to stockholders. As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1 under the Exchange Act. Based on the representations and warranties of the Company contained in the merger Agreement and information provided by the Company, as of July 15, 1996, (i) 2,400,184 Shares were outstanding and (ii) 300,000 Shares were reserved for issuance upon the exercise of outstanding employee stock options. Based on the foregoing, the Minimum Condition will be satisfied if 1,377,094 Shares are validly tendered and not withdrawn prior to the Expiration Date. The number of Shares required to be validly tendered and not withdrawn in order to satisfy the Minimum Condition will increase to the extent more than 2,700,184 Shares are deemed to be outstanding on a fully diluted basis under the Merger agreement. For purposes of the Merger Agreement, "on a fully diluted basis"means, as of any date, the number of Shares outstanding, together with Shares the Company is then required to issue pursuant to obligations outstanding at that date under employee stock option or other benefit plans or otherwise (assuming all options and other rights to acquire Shares are fully vested and exercisable and all Shares issuable at any time have been issued), including without limitation, pursuant to the Company's stock option plans (the "Stock Option Plans"). 9 The consummation of the Merger is subject to the satisfaction or waiver of a number of conditions, including, if required, the approval of the Merger by the requisite vote or consent of the stockholders of the Company. Under the Colorado Business Corporation Act, as amended, of the State of Colorado ("Colorado Law") and the Company's Amended Certificate of Incorporation, the stockholder vote necessary to approve the Merger will be the affirmative vote of the holders of at least a majority of the outstanding Shares, including Shares held by the Purchaser and its affiliates. The officers and directors of the Company own directly and beneficially 1,144,600 Shares (42.4%) and have indicated their intention to tender all of such shares pursuant to the terms of the Offer. Accordingly, the Purchaser is likely to acquire a majority of the outstanding Shares and will have the voting power required to approve the Merger without the affirmative vote of any other stockholders of the Company. Furthermore, if the Purchaser acquires at least 90% of the outstanding Shares pursuant to the Offer or otherwise, the Purchaser would be able to effect the Merger pursuant to the "short-form" merger provisions of Colorado Law, without prior notice to, or any action by, any other stockholder of the Company. In such event, the Purchaser intends to effect the Merger as promptly as practicable following the purchase of Shares in the Offer. The Merger Agreement is fully described in Section 12. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not withdrawn in accordance with Section 4. The term "Expiration Date" means 12:00 Midnight, Houston, Texas time, on Wednesday, August 14, 1996, unless and until the Purchaser (subject to the terms of the Merger Agreement) shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. Consummation of the Offer is conditioned upon satisfaction of the Minimum Condition and the other conditions set forth in Section 14. Subject to the terms and conditions contained in the Merger Agreement, the Purchaser reserves the right (but shall not be obligated) to waive any or all such conditions. The Company is providing the Purchaser with its list of stockholders and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed by the Purchaser to record holders of Shares and will be furnished by the Purchaser to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and will pay for all Shares validly tendered prior to the Expiration Date, and not properly withdrawn in accordance with Section 4, promptly after the Expiration Date. Any determination concerning the satisfaction or waiver of such terms and conditions will be within the sole discretion of the Purchaser, and such determination will be final and binding on all tendering stockholders. See Sections 1 and 14. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of, or payment for, Shares in order to comply in whole or in part with any applicable law. Any such delays will be effected in compliance with Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer). In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (ii) a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, with any required signature guarantees and (iii) any other documents required by the Letter of Transmittal. The per Share consideration paid to any stockholder pursuant to the Offer will be the highest per Share consideration paid to any other stockholder pursuant to the Offer. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, 10 Shares properly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. If the Purchaser is delayed in its acceptance for payment of, or payment for, Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after the termination or withdrawal of a tender offer), the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and any such Shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 4. If any tendered Shares are not purchased pursuant to the Offer because of an invalid tender or otherwise, certificates for any such Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3, such Shares will be credited to an account maintained at the appropriate Book-Entry Transfer Facility), as promptly as practicable after the expiration or termination of the Offer. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to any of its affiliates (including Parent), the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURE FOR TENDERING SHARES. VALID TENDER. For Shares to be validly tendered pursuant to the Offer, a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), together with any required signature guarantees, and any other documents required by the Letter of Transmittal, must be received by the Depositary at its address set forth on the back cover of this Offer to Purchase prior to the Expiration Date. In addition, either (i) certificates for tendered Shares must be received by the Depositary along with the Letter of Transmittal at one of such addresses, in each case prior to the Expiration Date, or (ii) the tendering stockholder must comply with the guaranteed delivery procedure set forth below. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of Transmittal if (i) the Letter of Transmittal is signed by the registered holder of Shares tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) such Shares are tendered for the account of a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of a recognized Medallion Program approved by The Securities 11 Transfer Association, Inc. (an "Eligible Institution"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the certificates for Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made or certificates for Shares not tendered or not accepted for payment are to be issued to a person other than the registered holder of the certificates surrendered, the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as described above. See Instruction 5 to the Letter of Transmittal. GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates for Shares are not immediately available or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such stockholder's tender may be effected if all the following conditions are met: (1) such tender is made by or through an Eligible Institution; (2) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser herewith, is received by the Depositary as provided below, prior to the Expiration Date; and (3) the certificates for all tendered Shares, in proper form for transfer, together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees and any other documents required by the Letter of Transmittal, are received by the Depositary within three New York Stock Exchange, Inc. ("NYSE") trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a signature guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates for the Shares, (ii) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), and (iii) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when certificates for Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. The valid tender of Shares pursuant to one of the procedures described above will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. BACKUP WITHHOLDING. Payments in connection with the Offer or the Merger maybe subject to "backup withholding" at a rate of 31%. Backup withholding generally applies if the stockholder (a) fails to furnish his social security number, (b) furnishes an incorrect taxpayer identification number ("TIN"), (c) fails to properly include a reportable interest or dividend payment on his federal income tax return, or (d) under certain circumstances, fails to provided a certified statement, signed under penalties of perjury, that the TIN provided is his correct number and that he is not subject to backup withholding. Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results in an overpayment of tax. Certain persons generally are entitled to exemption from backup withholding, including corporations and financial institutions. Certain penalties apply for failure to furnish correct information and for failure to include reportable payments in income. Each stockholder should consult with his own tax advisor as to his qualification for exemption from backup withholding and the procedure for obtaining such exemption. Tendering stockholders may be able to prevent backup withholding by completing the Substitute Form W-9 included in the appropriate Letter of Transmittal. All stockholders surrendering Shares pursuant to the Offer should complete and sign the main signature form and the Substitute Form W-9 included as part of the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Purchaser and the Depositary). Noncorporate foreign stockholders should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 10 to the 12 Letter of Transmittal. APPOINTMENT. By executing the Letter of Transmittal, the tendering stockholder will irrevocably appoint designees of the Purchaser as such stockholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after July 18, 1996. All such proxies shall be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts for payment Shares tendered by such stockholder as provided herein. Upon such acceptance for payment, all prior powers of attorney and proxies given by such stockholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent powers of attorney and proxies may be given (and, if given, will not be deemed effective). The designees of the Purchaser will thereby be empowered to exercise all voting and other rights with respect to such Shares or other securities or rights in respect of any annual, special or adjourned meeting of the Company's stockholders, or otherwise, as they in their sole discretion deem proper. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting and other rights with respect to such Shares and other securities or rights, including voting at any meeting of stockholders then scheduled. DETERMINATION OF VALIDITY. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Purchaser, in its sole discretion, which determination will be final and binding. The Purchaser reserves the absolute right to reject any or all tenders determined by it not to be in proper form or the acceptance for payment of or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right, in its sole discretion, subject to the terms and conditions of the Merger Agreement, to waive any of the conditions of the Offer or any defect or irregularity in any tender with respect to any particular Shares, whether or not similar defects or irregularities are waived in the case of other Shares. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of Parent, the Purchaser, the Depositary, or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after August 14, 1996. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in Section 3, the notice of withdrawal must specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for any purposes of the Offer. However, withdrawn Shares may be re-tendered by again following one of the procedures described in Section 3 at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser in its sole discretion, which determination will 13 be final and binding. None of the Purchaser, Parent, the Depositary, or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. THE FOLLOWING IS A SUMMARY OF THE PRINCIPAL FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO HOLDERS WHOSE SHARES ARE PURCHASED PURSUANT TO THE OFFER OR WHOSE SHARES ARE CONVERTED INTO THE RIGHT TO RECEIVE CASH IN THE MERGER (INCLUDING PURSUANT TO THE EXERCISE OF APPRAISAL RIGHTS). THE DISCUSSION APPLIES ONLY TO HOLDERS OF SHARES IN WHOSE HANDS SHARES ARE CAPITAL ASSETS, AND MAY NOT APPLY TO SHARES RECEIVED UPON CONVERSION OF SECURITIES OR EXERCISE OF WARRANTS OR OTHER RIGHTS TO ACQUIRE SHARES OR PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, OR TO HOLDERS OF SHARES WHO ARE IN SPECIAL TAX SITUATIONS (SUCH AS INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS OR NON-U.S. PERSONS). THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER INCOME TAX LAWS. The receipt of cash for Shares pursuant to the Offer or the Merger (including pursuant to the exercise of appraisal rights) will be a taxable transaction for federal income tax purposes under the Internal Revenue Code of 1986, as amended (and also may be a taxable transaction under applicable state, local and other income tax laws). In general, for federal income tax purposes, a holder of Shares will recognize gain or loss equal to the difference between his adjusted tax basis in the Shares sold pursuant to the Offer or converted into the right to receive cash in the Merger and the amount of cash received therefor. Gain or loss must be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) sold pursuant to the Offer or converted to cash in the Merger. Such gain or loss will be capital gain or loss (other than, with respect to the exercise of appraisal rights, amounts, if any, which are or are deemed to be interest for federal income tax purposes, which amounts will be taxed as ordinary income) and will be long-term gain or loss if, on the date of sale (or, if applicable, the date of the Merger), the Shares were held for more than one year. In the case of an individual, net long-term capital gain may be subject to a reduced rate of tax and net capital losses may be subject to limits on deductibility. Payments in connection with the Offer or the Merger may be subject to"backup withholding". 6. PRICE RANGE OF SHARES; DIVIDENDS. According to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995 (the "Company Form 10-KSB") and information supplied to the Purchaser by the Company, there is no established public trading market for the Shares. There is only limited, sporadic and infrequent trades of the Shares in the over-the-counter market, consequently there are no reliable quotations of trading prices during the fiscal years ended July 31,1994 and 1995 and the period from August 1, 1995 to the date hereof. For at least the past five years, the Company has not paid or declared cash or other dividends on the Shares. 7. EFFECT OF THE OFFER ON THE MARKET FOR SHARES; STOCK QUOTATION; EXCHANGE ACT REGISTRATION AND MARGIN SECURITIES. The purchase of Shares pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Shares, if any, held by the public. As of July 15,1996 the Company indicated there were 1073 shareholders of record. The Shares are not currently listed for trading on any registered stock exchange nor are they listed for trading on NASDAQ. 14 The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the Commission if the Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its stockholders and to the Commission and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in connection with stockholders' meetings and the related requirement of furnishing an annual report to stockholders, and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or 144A promulgated under the Securities Act of 1933, as amended (the "Securities Act"), may be impaired or eliminated. The Purchaser intends to apply for termination of registration of the Shares under the Exchange Act as soon after the completion of the Offer as the requirements for such termination are met. If registration of the Shares is not terminated prior to the Merger, then the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. The Shares are not currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of not allowing brokers to extend credit on the collateral of the Shares. 8. CERTAIN INFORMATION CONCERNING THE COMPANY. The historical information concerning the Company contained in this Offer to Purchase, including financial information, has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. None of Parent, the Purchaser or the Depositary assumes any responsibility for the accuracy or completeness of the information concerning the Company contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information to Parent or the Purchaser. The Company is a Colorado corporation with its principal place of business located at 16701 Greenspoint Park Drive, Suite 200, Houston, Texas 77060. According to the Company's Form 10-KSB for its fiscal year ended July 31, 1995, the Company is engaged in the production and sale of oil and gas. Principal products are crude oil and natural gas which are sold to various purchasers, including pipeline companies which service the areas in which the producing wells are located. The Company also serves as operator for most of the oil and gas properties in which it owns an interest. The Company has no operations in foreign countries and no portion of its sales or revenues is derived from sales to customers in foreign countries. Set forth below is certain selected historical consolidated financial information with respect to the Company excerpted or derived from the audited consolidated financial statements included in the Company Form 10-KSB and from the unaudited financial statements included in the Company's Quarterly Report on Form 10-QSB for the quarter ended April 30, 1996. More comprehensive financial information is included in such reports and other documents filed by the Company with the Commission, and the following summary is qualified in its entirety by reference to such reports and such other documents and all the financial information (including any related notes) contained therein. The reports and other documents filed with the Commission should be available for inspection and copies thereof should be obtainable in the manner set forth below under "Available Information". 15 SUMMIT PETROLEUM CORPORATION SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
------------------------------------------ --------------- Year Ended Nine Months June 30, Ended April 30, ------------------------------------------ --------------- 1993 1994 1995 1996 ---- ---- ---- ---- Operating Revenues $ 691,022 $ 643,360 $ 627,930 $ 481,938 Total Revenues $ 704,081 $ 652,938 $ 652,938 $ 483,122 Income (loss) before cumulative effect and extraordinary items $ 187,640 $ 85,417 $ 36,014 $ 49,700 Income (loss) per share before cumulative effect and extraordinary items $ 0.056 $ 0.032 $ 0.015 $ 0.021 Weighted average number of commons shares outstanding, adjusted for subsequent stock splits 3,325,000 2,708,456 2,400,184 2,400,185 Total Assets $ 792,266 $ 916,882 $1,013,170 $1,190,116 Net Working Capital (deficit) $ 238,329 $ 65,613 $ 15,891 $ 17,670 Term Debt, including current position $ 168,400 $ 202,854 $ 302,872 $ 299,790 Stockholders' Equity $ 486,662 $ 596,820 $ 632,834 $ 682,534
COMPANY PROJECTIONS. To the knowledge of Parent and the Purchaser, the Company does not as a matter of course make public forecasts as to its future financial performance. The Company is subject to the reporting requirements of the Exchange Act and, in accordance therewith, is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interests of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located in the Northwestern Atrium Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies should be obtainable, by mail, upon payment of the Commission's customary charges, by writing to the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such information should also be available for inspection at the offices of the NYSE, 20 Broad Street, New York, New York 10005. 9. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER. Parent is an independent oil and gas company engaged primarily in the exploration and development of domestic oil and gas. Parent is subject to the reporting requirements of the Exchange Act and, in accordance therewith, is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning Parent's directors and officers, their remuneration, options granted to them, the principal holders of Parent's securities and any material interests of such persons in transactions with Parent is required to be disclosed in proxy statements distributed to the Parent's stockholders and filed with the Commission. Parent owns all the outstanding capital stock of the Purchaser. It is not anticipated that, prior to the consummation of the Offer and the Merger, the Purchaser will have any significant assets or liabilities or will engage in any activities other than those incident to the Offer and the Merger and the financing thereof. For certain information concerning the directors and executive officers of the Purchaser, see Schedule to this Offer to Purchase. Except as set forth in this Offer to Purchase, including the Schedule: (i) none of Parent and the 16 Purchaser nor, to the best knowledge of any of the foregoing, any of the persons listed in Schedule I to this Offer to Purchase or any associate or majority owned subsidiary of any of the foregoing, beneficially owns or has a right to acquire any Shares or any other equity securities of the Company; (ii) to the best knowledge of Purchaser, neither the Purchaser nor any of the persons or entities referred to in clause (i) above or any of their executive officers, directors, or subsidiaries has effected any transaction in the Shares or any other equity securities of the Company during the past 60 days; (iii) none of the Parent and the Purchaser nor, to the best knowledge of any of the foregoing, any of the persons listed in Schedule I to this Offer to Purchase has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including but not limited to, contracts, arrangements, understandings or relationships concerning the transfer or voting thereof, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies, consents or authorizations; (iv) since January 1, 1993, all transactions and business relationships which would be required to be disclosed under the rules and regulations of the Commission between any of Parent and the Purchaser or any of their respective subsidiaries or, to the best knowledge of any of the Parent and the Purchaser, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and the Company or any of its executive officers, directors or affiliates, on the other hand, are disclosed in Schedule I to this Offer; and (v) since January 1, 1993, there have been no contracts, negotiations or transactions between any of the Parent and the Purchaser or any of their respective subsidiaries or, to the best knowledge of any of the Parent and the Purchaser, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and the Company or its subsidiaries or affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets of the Company or any of its subsidiaries. Except as set forth in this Offer to Purchase and Schedule I to this Offer, none of the Parent and the Purchaser had any relationship with the Company prior to the commencement of the discussions which led to the execution of the Merger Agreement. See Section 11. Each of the Parent and the Purchaser disclaims that it is an "affiliate" of the Company within the meaning of Rule 13e-3 under the Exchange Act, although such status may be deemed to exist by reason of (a) there being common members to the board of directors of Parent, Purchaser and the Company, (b) the president of Parent is also the president of the Company, (c) a wholly owned subsidiary of Parent manages certain of the operations of the Company and (d) certain beneficial owners of a significant amount of the Company's Shares also own a significant amount of the Parent's common stock. 10. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the Purchaser to purchase all of the Shares pursuant to the Offer and the Merger and to pay related fees and expenses is expected to be approximately $1,900,000. Of this amount approximately $669,000 will be paid to Mr. Warley and $453,641 (plus accrued interest at 7% per annum) of such amount will be paid in the form a cancellation of a note from Mr. Warley to Parent. Mr. Warley originally borrowed $582,805 under an eighteen month term note to Parent and Mr. Warley has agreed in the Merger Agreement to offset the current balance plus accrued interest from the total amount due him for tendering the Company's shares and cancellation of his Company stock options. In addition, the total amount of funds required by the Company to repurchase or refinance certain of its existing indebtedness is expected to be approximately $200,000. The Offer is not conditioned on the obtaining of financing. The Parent and the Purchaser expect to obtain the funds required to purchase the tendered Shares and the payment of the consideration payable in the Merger to the holders of Shares from its existing working capital, the sale of existing marketable securities, the cancellation of Mr. Warley's note and the balance will be obtained from the Parents existing bank facility. The Parent's current bank facility is a $20,000,000 credit facility with First Union National Bank of North Carolina, expiring October, 1997 and secured by oil and gas properties, requiring the Parent to maintain certain financial and profitability ratios and restricting the Parent's ability to incur debt, sell assets, substantially change the ownership or management of Parent or pay dividends. This facility provides for an $8,000,000 borrowing base with principal payments of $100,000 per month and interest payable monthly at that banks prime rate plus 0.75%. As of June 1, 1996 the Parent had $6,480,000 outstanding under this facility. 11. BACKGROUND OF THE OFFER. Each of Messrs. Warley, Whitaker and Dillard are members of both the Board of Directors of the Company and the Parent. At a Board of Directors meeting of Parent held on May 31,1996 17 an agenda item was the discussion of an acquisition of an unrelated publicly held oil and gas company. During this meeting, which was attended by the full board of the Parent, Mr. Warley brought up for discussion whether or not Parent should consider the acquisition of the Company in light of the Parent's prior public announcement of its intention to consider acquisitions of oil and gas companies. Mr. Warley indicated that acquiring the Company would be beneficial to the Parent for several reasons. First, it would remove a concern that had been expressed to him by members of the investment community regarding the appearance of a conflict of interest and dealings among related parties between the Parent and the Company. Second, given the nature of the Parent's involvement in the Company's overall operations resulting from the management contract, as well as the overlapping members on the boards of directors, the Parent was familiar with the Company, its properties and operations. After a general discussion among the board, the Parent's board agreed that an acquisition of the Company might be beneficial. The Parent's board acknowledged the fact that the members of the Company's entire board were also members of the Parent's board and any potential offer to the Company would require a fairness opinion that would independently arrive at a fair price. Further at this meeting the Parent's board discussed whether or not to consider an offer that included Parent's stock or cash or some combination of stock and cash. After a discussion of the relative cost and length of time to pursue an offer using Parent stock, the board concluded a cash offer was more appropriate. The Parent's board then agreed to pursue the matter by authorizing the Parent to engage an investment banking firm to arrive at a fair price to offer for the Company. Messrs. Warley, Whitaker and Dillard informed the Parent's board at that meeting that, given the fact of their being the entire board of directors of the Company they would entertain a proposal for the Parent to acquire the Company, provided Parent would share the fairness opinion with the Company and make the investment banking firm available to meet with them separately to discuss their opinion. The Parent's board agreed to this request. On June 3, 1996 Parent engaged Southwest Merchant Group to analyze the Company and provide an opinion as to a fair price to offer. On July 3,1996, a representative of Southwest Merchant Group met with the entire board of Parent and presented their opinion that a cash price of $0.70 per share for all of the Company's common stock, including outstanding options, was fair from a financial point of view. The Parent's board inquired regarding the nature of certain of the assumptions regarding oil and gas prices, oil and gas reserve estimates, as well as the availability of comparable transactions involving entire companies, and transactions that involved only the purchase of oil and gas properties both with and without related well operations. The members of Parent' board, other than Messrs. Warley, Whitaker and Dillard, then discussed whether or not Parent should request certain lock up provisions with the Company such as an option to acquire Company shares, a termination fee if the Merger did not occur due to a competing offer, and reimbursement of transaction costs. Messrs. Warley, Whitaker and Dillard, in their capacity as Company board members indicated that the Company would only consider reimbursing Parent for transaction costs in the event a competing offer resulted in the proposed transaction not being consummated. Following this discussion the Parent's board unanimously agreed to proceed to make the offer to the Company acquire for cash all of the Company's outstanding common stock, including stock options, at $0.70 per share pursuant to a merger agreement.. Also on July 3, 1996, and following the meeting of the Parent's board, the board of the Company met. At this meeting Mr. Warley informed the board that he has made prior attempts to locate potential purchasers for the Company, but that he was unsuccessful in locating anyone who would agree to acquire the entire Company. The Company' board then met with the representative of Southwest Merchant Group and further inquired as to certain of their assumptions, including the value of the Company's net operating loss carry forward for income tax purposes. After these discussions, the Company's board agreed to recommend acceptance of the Parent's offer and to proceed with the necessary documentation.. On July 3, 1996 the boards of Parent, Purchaser and the Company approved the Merger Agreements and the immediate commencing of the Offer. Following the meetings on July 3, 1996, the Parent began preparing the documentation to make the offer, including the Merger Agreement. 12. PURPOSE OF THE OFFER AND THE MERGER The purpose of the Offer is to enable Parent to acquire control of, and the entire equity interest in, the Company. The 18 purpose of the Merger is to acquire all outstanding Shares not purchased pursuant to the Offer. The purchase of Shares pursuant to the Offer will increase the likelihood that the Merger will be effected. Following the completion of the Offer, Parent intends to acquire any remaining Shares not then owned by it by consummating the Merger. In the Merger, each outstanding Share (other than Shares held by the Company as treasury stock, or owned by Parent, the Purchaser or any other subsidiary of either Parent or the Purchaser and other than Shares held by stockholders who perfect appraisal rights, if any, under Colorado Law), will be converted into the right to receive the Merger Consideration, without interest, and the Company will become a wholly owned subsidiary of Parent. The acquisition of the entire interest in the Company is structured as a cash tender offer followed by a merger in order to expedite the opportunity for Parent to obtain a controlling interest in the Company. Under Colorado Law and the Company's Certificate of Incorporation, the affirmative vote of the holders of a majority of the outstanding Shares is required to approve the Merger. If the Minimum Condition is satisfied, Parent would have sufficient voting power to approve the Merger without the affirmative vote of any other stockholder of the Company. PLANS FOR THE COMPANY. If and to the extent that the Purchaser acquires control of the Company, the Parent intends to conduct a detailed review of the Company assets, corporate structure, capitalization, operations and properties and consider and determine what, if any, changes would be desirable in light of the circumstances which then exist. The Purchaser and Parent have no present plans nor proposals that would result in an extraordinary corporate transaction, such as a merger, reorganization, liquidation, or sale or transfer of a material amount of assets, involving the Company. The Company is in the same business as the Parent and the Parent in its normal course buys and sells properties and may do so with respect to properties owned by the Company. THE MERGER AGREEMENT. The following is a summary of the material terms of the Merger Agreement. This summary is not a complete description of the terms and conditions thereof and is qualified in its entirety by reference to the full text thereof, which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Merger Agreement may be examined, and copies thereof may be obtained, as set forth in Section 8. THE OFFER. The Merger Agreement provides for the commencement of the Offer, in connection with which Parent and the Purchaser have expressly reserved the right to waive certain conditions of the Offer, but without the prior written consent of the Company, the Purchaser has agreed not to (i) waive the Minimum Condition, (ii) reduce the number of Shares subject to the Offer, (iii) reduce the price per Share to be paid pursuant to the Offer, (iv) extend the Offer if all of the Offer conditions are satisfied or waived, (v) change the form of consideration payable in the Offer, or (vi) amend or modify any term or condition of the Offer (including the conditions described in Section 14) in any manner adverse to the holders of Shares. Notwithstanding the foregoing, the Purchaser may, in its sole discretion without the consent of the Company, extend the Offer at any time and from time to time (A) if at the then scheduled expiration date of the Offer any of the conditions to the Purchaser's obligation to accept for payment and pay for Shares shall not have been satisfied or waived; (B) for any period required by any rule, regulation, interpretation or position of the Commission or its staff applicable to the Offer; (C) for any period required by applicable law in connection with an increase in the consideration to be paid pursuant to the Offer; and (D) if all Offer conditions are satisfied or waived but the number of Shares tendered is 85% or more, but less than 90%, of the then outstanding number of Shares, for an aggregate period of not more than 5 business days (for all such extensions under this clause (D)) beyond the latest expiration date that would be permitted under clause (A), (B) or (C) of this sentence. So long as the Merger Agreement is in effect and the offer conditions have not been satisfied or waived, at the request of the Company, the Purchaser will, and Parent will cause the Purchaser to, extend the Offer for an aggregate period of not more than 20 business days (for all such extensions) beyond the originally scheduled expiration date of the Offer. CONSIDERATION TO BE PAID IN THE MERGER. The Merger Agreement provides that upon the terms (but subject to the conditions) set forth in the Merger Agreement, the Purchaser will be merged with and into the Company and the separate existence of the Purchaser will cease, and the Company shall be the Surviving Corporation and shall be a wholly owned subsidiary of the Parent. In the Merger, each share of common stock, $.01 par value per share, of the Purchaser outstanding immediately prior to the time of filing of a certificate of merger relating to the Merger with the 19 Secretary of State of the State of Colorado, or such later time as is agreed by the parties (the "Effective Time"),shall be converted into and exchanged for one validly issued, fully paid and non-assessable share of Common Stock, $.01 par value per share, of the Surviving Corporation. In the Merger, each Share issued and outstanding immediately prior to the Effective Time (other than Shares owned by Parent or the Purchaser or held by the Company, all of which shall be canceled, and Shares held by stockholders who perfect appraisal rights under Colorado law) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive the Merger Consideration, without interest. The Merger Agreement provides that (subject to the provisions of the Merger Agreement) the closing of the Merger shall occur as soon as practicable following the satisfaction or, to the extent permitted under the Merger Agreement, waiver of, the conditions to the Merger set forth in Article 9 of the Merger Agreement. The Merger Agreement permits Parent and Purchaser, in their sole discretion, to defer the closing of the Merger for a period of 90 days following consummation of the Offer if, in Parent's and Purchaser's sole judgment, the deferral is necessary to enable the Company to meet a condition to the Merger. TREATMENT OF STOCK OPTIONS. The Merger Agreement provides that all options (individually, an "Option" and collectively, the "Options") outstanding immediately prior to the Effective Time under any of the Stock Option Plans, whether or not then exercisable, shall be canceled and each holder of an Option will be entitled to receive from the Surviving Corporation, for each Share subject to an Option, an amount in cash equal to the excess, if any, of the Merger Consideration over the per share exercise price of such Option, without interest. The amounts payable pursuant to the Merger Agreement shall be paid with respect to Shares subject to Options at the Effective Time. All amounts payable in respect of Options shall be subject to all applicable withholding of taxes. BOARD REPRESENTATION. The Merger Agreement provides that, promptly upon the purchase of Shares pursuant to the Offer, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, as will give Parent representation on the Board of Directors equal to the product of (i) the number of directors on the Board of Directors and (ii) the percentage that the number of Shares purchased by the Purchaser or Parent or any affiliate bears to the number of Shares outstanding, and the Company will, upon request by Parent, promptly increase the size of the Board of Directors and/or exercise its best efforts to secure the resignations of such number of directors as is necessary to enable Parent's designees to be elected to the Board of Directors and will cause Parent's designees to be so elected. The Company's obligations to appoint designees to the Board of Directors are subject to Section 14(f) of the Exchange Act. The parties have agreed to use their respective best efforts to ensure that at least two of the members of the Board of Directors shall at all times prior to the Effective Time be Continuing Directors (as defined in the Merger Agreement). STOCKHOLDER MEETING. The Merger Agreement provides that, if required by applicable law, the Company, acting through the Board of Directors, shall (i) call a meeting of its stockholders (the "Stockholder Meeting") for the purpose of voting on the Merger, (ii) hold the Stockholder Meeting as soon as practicable after the purchase of Shares pursuant to the Offer and (iii) subject to its fiduciary duties under applicable law as advised by outside counsel, recommend to its stockholders the approval of the Merger. At the Stockholder Meeting, Parent shall cause all the Shares then owned by Parent, the Purchaser and any of their subsidiaries or affiliates to be voted in favor of the Merger. The Merger Agreement provides that, notwithstanding the foregoing, if the Purchaser, or any other direct or indirect subsidiary of Parent, shall acquire at least 90% of the outstanding Shares, the parties thereto shall take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without a meeting of stockholders of the Company, in accordance with Colorado Law. However, the Merger Agreement permits Parent and Purchaser, in their sole discretion, to defer the closing of the Merger for a period of 90 days following consummation of the Offer if, in Parent's and Purchaser's sole judgment, the deferral is necessary to enable the Company to comply with a covenant. REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various representations and warranties of the parties thereto. These include representations and warranties by the Company with respect to (i) the due incorporation, existence and, subject to certain limitations, the qualification, good standing, corporate power and authority of the Company and certain significant subsidiaries; (ii) the due authorization, execution, and delivery of the Merger Agreement and certain ancillary documents executed in connection therewith and the consummation of 20 transactions contemplated thereby, and the validity and enforceability thereof; (iii) subject to certain exceptions and limitations, the compliance by the Company with all applicable foreign, federal, state or local laws, statutes, ordinances, rules, regulations, orders, judgments, rulings and decrees ("Laws") of any foreign, federal, state or local judicial, legislative, executive, administrative or regulatory body or authority, or any court, arbitration, board or tribunal ("Governmental Entity"); (iv) the capitalization of the Company, including the number of shares of capital stock of the Company outstanding, the number of shares reserved for issuance on the exercise of options and similar rights to purchase shares; (v) the identity, ownership (subject to certain exceptions and limitations) by the Company of interests or investments in entities other than subsidiaries of the Company; (vi) subject to certain exceptions and limitations, the absence of consents and approvals necessary for consummation by the Company of the Merger and the absence of any violations, breaches or defaults which would result from compliance by the Company with any provision of the Merger Agreement; (vii) compliance with the Securities Act and the Exchange Act, in connection with each registration statement, report, proxy statement or information statement (as defined under the Exchange Act) prepared by it since January 1, 1993, each in the form (including exhibits and any amendments thereto) filed with the SEC (collectively, the "Company Reports") and the financial statements included therein filed by the Company with the Commission, the Schedule 14D-9 information statement, if any, filed by the Company in connection with the Offer pursuant to Rule 14f-1 under the Exchange Act; (viii) subject to certain exceptions and limitations, the absence of pending or (to the knowledge of the Company through receipt of written notice) threatened claims, actions, suits, proceedings, arbitrations, investigations or audits (collectively, "Litigation") or violation of any law by the Company which would have a material adverse effect on the business, results of operations, assets, or financial condition of the Company ("Material Adverse Effect"); (ix) the absence of certain changes or effects; (x) certain tax matters; (xi) certain employee benefit and ERISA matters; (xii) certain labor and employment matters; (xiii) certain fees in connection with the transactions contemplated by the Merger Agreement; (xiv) subject to certain exceptions and limitations, the possession by the Company; (xv) subject to certain exceptions and limitations, title to assets; (xvi) material contracts of the Company; and (xvii) the required vote of stockholders of the Company with respect to the transactions contemplated by the Merger Agreement. Parent and the Purchaser and have also made certain representations and warranties, including with respect to (i) the due incorporation, existence, good standing and, subject to certain limitations, corporate power and authority of Parent and the Purchaser; (ii) the due authorization, execution and delivery of the Merger Agreement and certain ancillary documents executed in connection therewith and the consummation of the transactions contemplated thereby, and the validity and enforceability thereof; (iii) the accuracy and the adequacy of the information contained in the Schedule 14D-1 and the documents therein pursuant to which the Offer is being made, any Schedule required to be filed with the Commission, and any amendment or supplement to any of the foregoing and the accuracy of the information provided by Parent and the Purchaser for inclusion in the Schedule 14D-9; (iv) subject to certain exceptions and limitations, the absence of consents and approvals necessary for consummation by Parent and the Purchaser, and the absence of any violations, breaches or defaults which would result from compliance by Parent and the Purchaser with any provision of the Merger Agreement; and (v) the sufficiency of funds available to Parent and the Purchaser for the consummation of the Offer and the Merger. CONDUCT OF BUSINESS PENDING MERGER. The Company has agreed that from the date of the Merger Agreement to the Effective Time, with certain exceptions, unless Parent has consented in writing thereto, the Company will (i) conduct its operations according to its usual, regular and ordinary course of business consistent with past practice; (ii) use its reasonable best efforts to preserve intact its business organization and goodwill, maintain in effect all existing qualifications, licenses, permits, approvals and other authorizations, keep available the services of its officers and employees and maintain satisfactory relationships with those persons having business relationships with them; (iii) promptly upon the discovery thereof notify Parent of the existence of any breach of any representation or warranty contained in the Merger Agreement (or, in the case of any representation and warranty that makes no reference to Material Adverse Effect, any breach of such representation and warranty in any material respect) or the occurrence of any event that would cause any representation or warranty contained in the Merger Agreement no longer to be true and correct (or in the case of any representation and warranty that makes no reference to Material Adverse Effect, to no longer be true and correct in any material respect); and (iv) promptly deliver to the Purchaser true and correct copies of any report, statement or schedule filed with the Commission subsequent to the date of the Merger Agreement, any internal monthly reports prepared for or delivered to the Board of Directors after the date of the Merger Agreement and 21 monthly financial statements for the Company and its subsidiaries for and as of each month end subsequent to the date of the Merger Agreement. The Company has agreed that from the date of the Merger Agreement to the Effective Time, with certain exceptions, unless the Parent has consented in writing thereto, the Company shall not, and shall not permit any of its Subsidiaries to (i) amend its Certificate of Incorporation or Bylaws or comparable governing instruments; (ii) issue, sell or pledge any shares of its capital stock or other ownership interest in the Company (other than issuances of shares of Common Stock in respect of any exercise of Options outstanding on the date of the Merger Agreement and disclosed to Parent) or any of the subsidiaries, or any securities convertible into or exchangeable for any such shares or ownership interest, or any rights, warrants or options to acquire or with respect to any such shares of capital stock, ownership interest, or convertible or exchangeable securities; or accelerate any right to convert or exchange or acquire any securities of the Company or any of its subsidiaries for any such shares or ownership interest; (iii) effect any stock split or otherwise change its capitalization as it exists on the date of the Merger Agreement; (iv) grant, confer or award any option, warrant, convertible security or other right to acquire any shares of its capital stock or take any action to cause to be exercisable any otherwise unexercisable option under any existing stock option plan; (v) declare, set aside or pay any dividend or make any other distribution or payment with respect to any shares of its capital stock or other ownership interests (other than such payments by a wholly owned subsidiary); (vi) sell, lease or otherwise dispose of any of its assets, except in the ordinary course of business, none of which dispositions individually or in the aggregate will be material; (vii) settle or compromise any pending or threatened litigation, other than settlements which involve solely the payment of money (without admission of liability) not to exceed $5,000 in any one case; (viii) acquire by merger, purchase or any other manner, any business or entity or otherwise acquire any assets that are material, individually or in the aggregate, to the Company except for purchases of inventory, supplies or capital equipment in the ordinary course of business consistent with past practice; (ix) incur or assume any long-term or short-term debt, except for working capital purposes in the ordinary course of business under the Company's existing credit agreement; (x) assume, guarantee or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person; (xi) with certain exceptions, make or forgive any loans, advances or capital continuations to, or investments in, any other person; (xii) make any tax election or settle any tax liability other than settlements involving solely the payment of money which would be permitted by clause (vii); (xiii) except in certain circumstances, grant any stock related or performance awards; (xiv) enter into any new employment, severance, consulting or salary continuation agreements with any officers, directors or employees or grant any increases in compensation or benefits to employees other than increases permitted under certain circumstances; (xv) adopt, amend in any material respect or terminate any employee benefit plan or arrangement; (xvi) amend, change or waive (or exempt any person or entity from the effect of) the Rights Agreement, except in connection with the exercise of its fiduciary duties by the Board of Directors or as set forth in the Merger Agreement; (xvii) permit any insurance policy naming the Company or a loss payee to be canceled or terminated other than in the ordinary course of business, or (xiii) agree in writing or otherwise to take any of the foregoing actions. CONDITIONS TO THE MERGER. The respective obligations of each party to effect the Merger are subject to the satisfaction or waiver, where permissible, prior to the Effective Time, of the following conditions: (i) if approval of the Merger Agreement and the Merger by the holders of Shares is required by applicable law, the Merger Agreement and the Merger shall have been approved by the requisite vote of such holders; and (ii) there shall not have been issued any injunction or issued or enacted any Law which prohibits or has the effect of prohibiting the consummation of the Merger or making such consummation illegal. The obligations of Parent and the Purchaser to effect the Merger shall be further subject to the satisfaction or waiver on or prior to the Effective Time of the condition that the Purchaser shall have accepted for payment and paid for Shares tendered pursuant to the Offer, provided the condition will be deemed satisfied if Purchaser's failure to accept for payment and pay for such shares is a breach of the Merger Agreement or violates the terms and conditions of the Offer. ACCESS TO INFORMATION. Under the Merger Agreement, from the date of the Merger Agreement to the Merger Closing Date, the Company shall (i) give the Parent and its authorized representatives and lender banks full access to all books, records, personnel, offices and other facilities and properties of the Company and its accountants and accountants' work papers, (ii) permit the Parent to make such copies and inspections thereof as the Parent may reasonably request and (iii) furnish the Parent with such financial and operating data and other information with respect 22 to the business and properties of the Company as the Parent may from time to time reasonably request; provided that no investigation or information furnished pursuant to the Merger Agreement shall affect any representations or warranties made by the Company therein or the conditions to the obligations of the Parent to consummate the transactions contemplated thereby. NO SOLICITATION. The Company has agreed in the Merger Agreement that neither it nor any of its subsidiaries, nor any of their respective officers, directors, employees, representatives, agents or affiliates, shall, directly or indirectly, encourage, solicit, initiate or, except as is required in the exercise of the fiduciary duties of the Company's directors to the Company or its stockholders after consultation with outside counsel to the Company, participate in any way in any discussions or negotiations with, or provide any information to, or afford any access to the properties, books or records of the Company or any of its subsidiaries to, or otherwise assist, facilitate or encourage, any corporation, partnership, person or other entity or group (other than the Parent or any affiliate or associate of Parent) concerning any merger, consolidation, business combination, liquidation, reorganization, sale of substantial assets, sale of shares of capital stock or similar transactions involving the Company (an "Alternative Proposal"), and shall immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted theretofore with respect to any of the foregoing; provided, however, that nothing contained in the Merger Agreement shall prohibit the Company or the Board of Directors from complying with Rule 14e-2(a) under the Exchange Act or taking such action promulgated thereunder or from making such disclosure to the Company's stockholders or taking such action which, in the judgment of the Board of Directors with the advice of outside counsel, may be required under applicable law. The Company has agreed promptly to notify Parent if any such information is requested from it or any such negotiations or discussions are sought to be initiated with the Company. FEES AND EXPENSES. Except as provided in the Merger Agreement, whether or not the Offer or the Merger is consummated, all costs and expenses incurred in connection with the transactions contemplated by the Merger Agreement shall be paid by the party incurring such expenses. The Merger Agreement provides that, under certain circumstances, the Company will pay to Parent, in such manner as is designated by Parent, the amount of the costs and expenses related to the Offer and the Merger and for their foregoing of the opportunity to invest in the Company. The Company is obligated to pay the costs and expenses of Parent under the following circumstances: (i) the Company terminates the Merger Agreement because of an Alternative Proposal which the Board of Directors in good faith determines is more favorable from a financial point of view to the stockholders of the Company as compared to the Offer and the Merger and the Board of Directors determines, after consultation with its counsel that failure to terminate the Merger Agreement would be inconsistent with the compliance by the Board of Directors with its fiduciary duties, subject to certain provisos that would render such termination right unavailable; (ii) Parent terminates the Merger Agreement (x) because the Board of Directors failed to recommend, or withdraws, modifies or amends in any material respect, its approval or recommendation of the Offer or the Merger, or recommended acceptance of any Alternative Proposal, or resolved to do any of the foregoing (unless the foregoing occurred solely as a result of the Parent's willful breach in any material respect of its representations, warranties or obligations under the Merger Agreement) or (y) after December 31, 1996 if Purchaser has not purchased any Shares by that date because of the Company's willful breach or willful failure to comply in any material respect with any of its material obligations under the Merger Agreement; (iii) Parent or the Company terminate the Merger Agreement after December 31, 1996 because of the failure of any condition to the Offer (which failure was not caused by Parent's failure to fulfill its obligations under the Merger Agreement) at a time when the Minimum Condition shall not have been satisfied and (x) during the term of the Merger Agreement or within 12 months after the termination of the Merger Agreement, the Board of Directors recommends an Alternative Proposal or the Company enters into an agreement providing for an Alternative Proposal or a majority of the outstanding Shares is acquired by a third party (including a "group" as defined in the Exchange Act) (a "Stock Acquisition") which Alternative Proposal (or another Alternative Proposal by the same or a related person or entity) was made prior to the termination of the Merger Agreement or (y) during the term of the Merger Agreement or within two months after the termination of the Merger Agreement, the Board of Directors recommends an Alternative Proposal or the Company enters into an agreement providing for an Alternative Proposal or a Stock Acquisition occurs. 23 OTHER AGREEMENTS. The Merger Agreement provides that, subject to the terms and conditions provided in the Merger Agreement, the Company, Parent, and the Purchaser shall: (a) use their best efforts to cooperate with one another in (i) determining which filings are required to be made prior to the Effective Time with, and which consents, approvals, permits, authorizations or waivers are required to be obtained prior to the Effective Time from, Governmental Entities or other third parties in connection with the execution and delivery of the Merger Agreement and certain other ancillary documents and the consummation of the transactions contemplated thereby and (ii) timely making all such filings and timely seeking all such consents, approvals, permits, authorizations and waivers; and (b) use their best efforts to take, or cause to be taken, all other action and do, or cause to be done, all other things necessary, proper or appropriate to consummate and make effective the transactions contemplated by the Merger Agreement. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purpose of the Merger Agreement, the proper officers and directors of Parent and the Surviving Corporation shall take all such necessary action. CONDITIONS TO THE MERGER. The respective obligations of each party to effect the Merger are subject to the satisfaction or waiver, where permissible, prior to the Effective Time, of the following conditions: (a) if approval of the Merger Agreement and the Merger by the holders of Shares is required by applicable law, the Merger Agreement and the Merger shall have been approved by the requisite vote of such holders; and (b) there shall not have been issued any injunction or issued or enacted any Law which prohibits or has the effect of prohibiting the consummation of the Merger or makes such consummation illegal. The obligations of Parent and the Purchaser to effect the Merger shall be further subject to the satisfaction or waiver on or prior to the Effective Time of the condition that the Purchaser shall have accepted for payment and paid for Shares tendered pursuant to the Offer. TERMINATION. The Merger Agreement may be terminated and the Merger contemplated thereby may be abandoned at any time notwithstanding approval thereof by the stockholders of the Company, but prior to the Effective Time: (a) by mutual written consent of the Board of Directors of Parent and the Company (which consent will require the approval of a majority of the Continuing Directors if such termination occurs following the election or appointment of Parent's designees, if applicable); (b) by the Parent or the Company: (i) if the Effective Time shall not have occurred on or before December 31, 1996 (provided that the right to terminate the Merger Agreement pursuant to this clause (i) shall not be available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of or resulted in the failure of the Effective Time to occur on or before such date); (ii) if there shall be any statute, law, rule or regulation that makes consummation of the Offer or the Merger illegal or prohibited or if any court of competent jurisdiction in the United States or other Governmental Entity shall have issued an order, judgment, decree or ruling, or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, judgment, decree, ruling or other action shall have become final and non-appealable; (iii) after December 31, 1996 if, on account of the failure of any condition specified in Section 14, the Purchaser has not purchased any Shares thereunder by that date (provided that the right to terminate the Merger Agreement pursuant to this clause (iii) shall not be available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of or resulted in the failure of any such condition); or (iv) upon a vote at a duly held meeting or upon any adjournment thereof, the stockholders of the Company shall have failed to give any approval required by applicable law; (c) by the Company if there is an Alternative Proposal which the Board of Directors in good faith determines is more favorable from a financial point of view to the stockholders of the Company as compared to the Offer and the Merger, and the Board of Directors determines, after consultation with its counsel that failure to terminate the Merger Agreement would be inconsistent with the compliance by the Board of Directors with its fiduciary duties to 24 stockholders imposed by law; provided, however, that the right to terminate the Merger Agreement in such event shall not be available (i) if the Company has breached in any material respect its obligations not to solicit Alternative Proposals, or (ii) if the Alternative Proposal (x) is subject to a financing condition or (y) involves consideration that is not entirely cash or does not permit stockholders to receive the payment of the offered consideration in respect of all Shares at the same time, unless the Board of Directors has been furnished with a written opinion of an investment banking firm to the effect that (in the case of clause (x)) the Alternative Proposal is readily financeable and (in the case of clause (y)) that such offer provides a higher value per share than the consideration per share pursuant to the Offer or the Merger, or (iii) if, prior to or concurrently with any purported termination pursuant to this clause (c), the Company shall not have paid the Commitment Fee and the Expenses, if applicable, or (iv) if the Company has not provided Parent and the Purchaser with prior written notice of its intent to so terminate the Merger Agreement and delivered to Parent and the Purchaser a copy of the written agreement embodying the Alternative Proposal in its then most definitive form concurrently with the earlier of (x) the public announcement of, or (y) filing with the Commission of any documents relating to, the Alternative Proposal; and (d) by Parent if the Board of Directors shall have failed to recommend, or shall have withdrawn, modified or amended in any material respect, its approval or recommendation of the Offer or the Merger or shall have recommended acceptance of any Alternative Proposal, or shall have resolved to do any of the foregoing. INDEMNIFICATION. The Purchaser has agreed to cause the Surviving Corporation to keep in effect in its By-Laws a provision for a period of not less than three years from the Effective Time (or, in the case of matters occurring prior to the Effective Time which have not been resolved prior to the third anniversary of the Effective Time, until such matters are finally resolved) which provides for indemnification of the past and present officers and directors of the Company to the fullest extent permitted by Colorado Law. The Merger Agreement provides that from and after the Effective Time, Parent shall indemnify and hold harmless, to the fullest extent permitted under applicable law, each person who is, or has been at any time prior to the date of the Merger Agreement or who becomes prior to the Effective Time, an officer or director of the Company or any subsidiary against all losses, claims, damages, liabilities, costs or expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in settlement (collectively, "Losses") in connection with any Litigation arising out of or pertaining to acts or omissions, or alleged acts or omissions, by them in their capacities as such, which acts or omissions existed or occurred prior to the Effective Time, whether commenced, asserted or claimed before or after the Effective Time, including, without limitation, liabilities arising under the Securities Act, the Exchange Act and state corporation laws in connection with the transactions contemplated hereby. The Company and, after the Effective Time, the Parent shall periodically advance expenses as incurred with respect to the foregoing to the fullest extent permitted under applicable law provided that the person to whom the expenses are advanced provides an undertaking to repay such advance if it is ultimately determined that such person is not entitled to indemnification. If the Merger is consummated, the Surviving Corporation shall, to the fullest extent permitted under applicable law, indemnify and hold harmless Parent and any person or entity who was a stockholder, officer, director or affiliate of Parent prior to the Effective Time against any losses in connection with any Litigation arising out of or pertaining to any of the transactions contemplated by the Merger Agreement or certain ancillary documents relating thereto. Parent is required to periodically advance expenses as incurred with respect to the foregoing to the fullest extent permitted under applicable law provided that the person to whom the expenses are advanced provides an undertaking to repay such advance if it is ultimately determined that such person is not entitled to indemnification. The Surviving Corporation will control the defense, through its counsel, of any action brought against any person seeking indemnification pursuant to the preceding two paragraphs (an "Indemnified Party"). Counsel for the Indemnified Party shall be selected by the Indemnified Party and will be permitted to participate in the defense of such action at the Surviving Corporation's expense. CERTAIN EMPLOYEE MATTERS. The Merger Agreement provides that, from and after the Effective Time, the Surviving Corporation will honor and assume, and Parent will cause the Surviving Corporation to honor and assume, in accordance with their terms all existing employment and severance agreements between the Company or any of its 25 subsidiaries and any officer, director, or employee of the Company or any of its subsidiaries and all benefits or other amounts earned or accrued to the extent vested or which becomes vested in the ordinary course, through the Effective Time under all employee benefit plans of the Company. AMENDMENT. To the extent permitted by applicable law, the Merger Agreement may be amended by action taken by or on behalf of the Board of Directors of the Company (by action of a majority of the Continuing Directors if such amendment occurs following the election or appointment of Parent's designees, if applicable) and the Purchaser at any time before or after adoption of the Merger Agreement by the stockholders of the Company but, after any such stockholder approval, no amendment shall be made which decreases the Merger Consideration or which adversely affects the rights of the Company's stockholders hereunder without the approval of such stockholders. The Merger Agreement may not be amended except by an instrument in writing signed on behalf of all of the parties. TIMING. The exact timing and details of the Merger will depend upon legal requirements and a variety of other factors, including the number of Shares acquired by the Purchaser pursuant to the Offer. Although Parent has agreed to cause the Merger to be consummated on the terms contained in the Merger Agreement, there can be no assurance as to the timing of the Merger. OTHER MATTERS.--APPRAISAL RIGHTS. No appraisal rights are available to holders of Shares in connection with the Offer. However, if the Merger is consummated, holders of Shares will have certain rights under Colorado Law to dissent and demand appraisal of, and payment in cash for the fair value of, their Shares. Such rights, if the statutory procedures are complied with, could lead to a judicial determination of the fair value (excluding any element of value arising from accomplishment or expectation of the Merger) required to be paid in cash to such dissenting holders for their Shares. Any such judicial determination of the fair value of Shares could be based upon considerations other than the Offer Price and the market value of the Shares, including asset values and the investment value of the Shares. The value so determined could be more or less than the Offer Price or the Merger Consideration. If any holder of Shares who demands appraisal under Colorado Law fails to perfect, or effectively withdraws or losses his right to appraisal, as provided in Colorado Law, the shares of such holder will be converted into the Merger Consideration in accordance with the Merger Agreement. A stockholder may withdraw his demand for appraisal by delivery to Parent of a written withdrawal of his demand for appraisal and acceptance of the Merger. Failure to follow the steps required by Colorado Law for perfecting appraisal rights may result in the loss of such rights. - --RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act("Rule 13e-3"), which is applicable to certain "going private" transactions. Rule 13e-3 requires, among other things, that certain financial information concerning the company and certain information relating to the fairness of the proposed transaction and the consideration offered to minority stockholders in such transaction be filed with the Commission and disclosed to stockholders prior to consummation of the transaction. Parent has filed Schedule 13e-3. There can be no assurance that the Merger will take place, even though each party has agreed in the Merger Agreement to use its best efforts to cause the Merger to occur, because the Merger is subject to certain conditions, some of which are beyond the control of either the Purchaser or the Company. Since the Purchaser's ultimate objective is to acquire ownership of all the Shares, if the Merger does not take place, the Purchaser would consider the acquisition, whether directly or through an affiliate of Shares through private or open market purchases, or subsequent tender offers or a different type of merger or other combination of the Company with the Purchaser or an affiliate or subsidiary thereof, or by any other permissible means deemed advisable by it. Except as described in the section captioned "The Merger Agreement", any of these possible transactions might be on terms the same as, or more or less favorable than, those of the Offer or the Merger. - --RULE 13E-4. The Commission has adopted Rule 13e-4 under the Exchange Act("Rule 13e-4"), which is applicable to certain "issuer tender offers". Rule 13e-4 requires, among other things, that certain financial information concerning the company and certain other information relating to the proposed transaction be filed with the Commission and disclosed to stockholders prior to consummation of the transaction. Parent has filed Schedule 13e-4. 13. DIVIDENDS AND DISTRIBUTIONS. Pursuant to the terms of the Merger Agreement, the Company is 26 prohibited from taking any of the actions described in the two following paragraphs, and nothing herein shall constitute a waiver by the Purchaser or Parent of any of its rights under the Merger Agreement or a limitation of remedies available to the Purchaser or Parent for any breach of the Merger Agreement, including termination thereof. If on or after the date of the Merger Agreement the Company should (a) split, combine or otherwise change the Shares or its capitalization, (b) acquire currently outstanding Shares or otherwise cause a reduction in the number of outstanding Shares or (c) issue or sell additional Shares, shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, other than Shares issued pursuant to the exercise of outstanding employee stock options, then subject to the provisions of Section 14 below, the Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the Offer Price and other terms of the Offer, including, without limitation, the number or type of securities offered to be purchased. If on or after the date of the Merger Agreement the Company should declare or pay any cash dividend on the Shares or other distribution on the Shares, or issue with respect to the Shares any additional Shares, shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, payable or distributable to stockholders of record on a date prior to the transfer of the Shares purchased pursuant to the Offer to the Purchaser or its nominee or transferee on the Company's stock transfer records, then, subject to the provisions of Section 14 below, (a) the Offer Price may, in the sole discretion of the Purchaser, be reduced by the amount of any such cash dividend or cash distribution and (b) the whole of any such noncash dividend, distribution or issuance to be received by the tendering stockholders will (i) be received and held by the tendering stockholders for the account of the Purchaser and will be required to be promptly remitted and transferred by each tendering stockholder to the Depositary for the account of the Purchaser, accompanied by appropriate documentation of transfer, or (ii) at the direction of the Purchaser, be exercised for the benefit of the Purchaser, in which case the proceeds of such exercise will promptly be remitted to the Purchaser. Pending such remittance and subject to applicable law, the Purchaser will be entitled to all rights and privileges as owner of any such noncash dividend, distribution, issuance or proceeds and may withhold the entire Offer Price or deduct from the Offer Price the amount or value thereof, as determined by the Purchaser in its sole discretion. 14. CERTAIN CONDITIONS TO THE OFFER. Notwithstanding any other term of the Offer, the Purchaser shall not be required to accept for payment or pay for, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) of the Exchange Act, any Shares not theretofore accepted for payment or paid for and may terminate or amend the Offer as to such Shares unless there shall have been validly tendered and not withdrawn prior to the expiration of the Offer that number of Shares which would represent at least a majority of the outstanding Shares on a fully diluted basis. Furthermore, notwithstanding any other term of the Offer or the Merger Agreement, the Purchaser shall not be required to accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may terminate or amend the Offer if at any time on or after the date of the Merger Agreement and before the acceptance of such Shares for payment or the payment therefor, any of the following conditions exist or shall occur and remain in effect: (a) there shall have been instituted or pending any litigation by the Government of the United States of America or any agency or instrumentality thereof (i) which seeks to challenge the acquisition by Parent or the Purchaser (or any of its affiliates) of Shares pursuant to the Offer or restrain, prohibit or delay the making or consummation of the Offer or the Merger, (ii) which seeks to make the purchase of or payment for some or all of the Shares pursuant to the Offer or the Merger illegal, (iii) which seeks to impose limitations on the ability of Parent or the Purchaser (or any of their affiliates) effectively to acquire or hold, or to require Parent, the Purchaser or the Company or any of their respective affiliates or subsidiaries to dispose of or hold separate, any material portion of their assets or business, (iv) which seeks to impose limitations on the ability of Parent, the Purchaser or their affiliates to exercise full rights of ownership of the Shares purchased by it, including, without limitation, the right to vote the Shares purchased by it on all matters properly presented to the stockholders of the 27 Company, or (v) which seeks to limit or prohibit any future business activity by Parent, the Purchaser or any of their affiliates, including, without limitation, requiring the prior consent of any person or entity (including the Government of the United States of America or any agency or instrumentality thereof) to future transactions by Parent, the Purchaser or any of their affiliates; or (b) there shall have been promulgated, enacted, entered, enforced or deemed applicable to the Offer or the Merger, by any Governmental Entity, any Law or there shall have been issued any injunction that results in any of the consequences referred to in subsection (a) above; or (c) the Merger Agreement shall have been terminated in accordance with its terms; or (d) (i) any of the representations and warranties made by the Company in the Merger Agreement shall not have been true and correct in all material respects when made, or shall thereafter have ceased to be true and correct in all material respects as if made as of such later date (other than representations and warranties made as of a specified date) or (ii) the Company shall have breached or failed to comply in any material respect with any of its obligations under the Merger Agreement; or (e) any corporation, entity, "group" or "person" (as defined in the Exchange Act), other than Parent or the Purchaser, shall have acquired beneficial ownership of more than 49% of the outstanding Shares; or (f) except as set forth in the Company Reports thereto or the schedules to the Merger Agreement, any change shall have occurred or be threatened which individually or in the aggregate has had or is continuing to have a material adverse effect on the prospects of the Company and its Subsidiaries taken as a whole; or (g) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on any national securities exchange or in the over the counter market in the United States, (ii) a declaration of any banking moratorium by federal or state authorities or any suspension of payments in respect of banks or any limitation (whether or not mandatory) imposed by federal or state authorities on the extension of credit by lending institutions in the United States, (iii) a commencement of a war, armed hostilities or any other international or national calamity directly or indirectly involving the United States, other than any war, armed hostilities or other other international calamity involving the former Yugoslavia, (iv) any mandatory limitation by the federal government on the extension of credit by banks or other financial institutions generally, (v) any increase of 500 or more basis points in the prime rate as announced by Chemical Bank, measured from the date of the Merger Agreement, or (vi) in the case of the foregoing clause (iii), if existing at the time of the commencement of the Offer, in the reasonable judgment of Parent, a material acceleration or worsening thereof. The foregoing conditions are for the sole benefit of Parent and the Purchaser and may be asserted by Parent or the Purchaser regardless of the circumstances (including any action or inaction by Parent or the Company) giving rise to any such condition and may be waived by Parent or the Purchaser, in whole or in part, at any time and from time to time, in the sole discretion of Parent. The failure by Parent or the Purchaser at any time to exercise any of the foregoing rights will not be deemed a waiver of any right, the waiver of such right with respect to any particular facts or circumstances shall not be deemed a waiver with respect to any other facts or circumstances, and each right will be deemed an ongoing right which may be asserted at any time and from time to time. Should the Offer be terminated pursuant to the foregoing provisions, all tendered Shares not theretofore accepted for payment shall forthwith be returned by the depositary to the tendering stockholders. 28 15. CERTAIN REGULATORY AND LEGAL MATTERS. Except as described in this Section 15, based on a review of publicly available filings made by the Company with the Commission and other publicly available information concerning the Company, as well as certain representations made to the Purchaser and Parent in the Merger Agreement by the Company, neither the Purchaser nor Parent is aware of any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the Purchaser's acquisition of Shares as contemplated herein or of any approval or other action by any Governmental Entity that would be required for the acquisition or ownership of Shares by the Purchaser as contemplated herein. Should any such approval or other action be required, the Purchaser and Parent currently contemplate that such approval or other action will be sought, except as described below under "State Takeover Laws". While, except as otherwise expressly described in this Section 15, the Purchaser does not presently intend to delay the acceptance for payment of, or payment for, Shares tendered pursuant to the Offer, pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business, or that certain parts of the Company's business might not have to be disposed of if such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could decline to accept for payment or pay for any Shares tendered. See Section 14 for certain conditions to the Offer. STATE TAKEOVER LAWS. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, stockholders, executive offices or places of business in such states. In EDGAR V. MITE CORP., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS CORP. V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining stockholders, provided that such laws were applicable only under certain conditions. The Board of Directors has unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Offer. Neither the Purchaser nor Parent has currently complied with any state takeover statute or regulation. The Purchaser reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer or the Merger and nothing in this Offer to Purchase or any action taken in connection with the Offer or the Merger is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the Offer or the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, the Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities, and the Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer or be delayed in consummating the Offer or the Merger. In such case, the Purchaser may not be obliged to accept for payment or pay for any Shares tendered pursuant to the Offer. ANTITRUST. There are exemptions from requirements for filing under the antitrust laws with the Federal Trade Commission (the "FTC") or the Antitrust Division of the United States Department of Justice. OTHER REGULATORY APPROVAL. The Company will seek to obtain all necessary licenses or certifications as expeditiously as possible. 16. FEES AND EXPENSES. The Purchaser has retained Stock Transfer Company of America, Inc. to serve as the Depositary in connection with the Offer. The Depositary will receive reasonable and customary compensation for its services, be reimbursed for certain reasonable out-of-pocket expenses and be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the federal securities laws. Neither the Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person in connection with the solicitation of tenders of Shares pursuant to the Offer, except as may be required to reimburse for forwarding information to the 29 beneficial owners by nominee holders. 17. MISCELLANEOUS. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. Neither the Purchaser nor Parent is aware of any jurisdiction in which the making of the Offer or the tender of Shares in connection therewith would not be in compliance with the laws of such jurisdiction. If the Purchaser or Parent becomes aware of any state law prohibiting the making of the Offer or the acceptance of Shares pursuant thereto in such state, the Purchaser will make a good faith effort to comply with any such state statute or seek to have such state statute declared inapplicable to the Offer. If, after such good faith effort, the Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THE DELIVERY OF THIS OFFER TO PURCHASE NOR ANY PURCHASE PURSUANT TO THE OFFER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF PARENT, THE PURCHASER OR THE COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS FURNISHED OR THE DATE OF THIS OFFER TO PURCHASE. The Purchaser or Parent has filed with the Commission the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional information with respect to the Offer. In addition, the Company has filed with the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act, setting forth its recommendation with respect to the Offer and the reasons for such recommendation and furnishing certain additional related information. Such Schedules and any amendments thereto, including exhibits, should be available for inspection and copies should be obtainable in the manner set forth in Sections 8 and 9 (except that they will not be available at the regional offices of the Commission). FORWARDING COSTS. Parent will reimburse any nominee holder of Company Shares its reasonable out of pocket costs in forwarding the offer to beneficial owners of the Shares 30 SCHEDULE I CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth below is the name, business address, age, position with Parent, present principal occupation or employment and five-year employment history of each director and executive officer of Parent. All persons listed below are citizens of the United States of America. PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME OFFICE HELD IN PARENT FIVE-YEAR EMPLOYMENT HISTORY AGE Name Age Position and Occupation DEAS H. WARLEY III 53 President and Chairman of the Board of 16701 Greenspoint Directors of Parent has been employed in the Park Drive, Suite 200 oil and gas industry since 1979. Mr. Warley has Houston, TX 77060 been Chairman and President of Midland Resources Operating Company, Inc. ("MRO"), an oil and gas operating company, since its inception in 1988. Mr. Warley has been Chairman and President of Summit Petroleum, Inc. (the "Company"), a public oil and gas production and operating corporation with properties in Texas, Colorado, Oklahoma and Wyoming, since 1989 and owns approximately 37.5 percent of the Company. From May, 1984 until its sale and dissolution in October, 1988, Mr. Warley was the founder, Chairman, and co-owner of another entity also then known as Midland Resources, Inc., also an oil and gas company. Mr. Warley received a Bachelor of Science Degree in Engineering from Arizona State University in 1971 and Master of Science Degree in Engineering from the Air Force Institute of Technology in 1973. Mr. Warley is a member of the National Petroleum Council, the Texas representative to the Strategic Technological Council, and a member of the Review Panel for the Department of Energy Natural Gas and Oil Technology Partnership. Mr. Warley is a registered Professional Engineer in the state of Texas. He is a member of the Independent Petroleum Association of America, the Permian Basin Petroleum Association, the North Texas Oil and Gas Association, and the Society of Petroleum Engineers. DARRELL M. DILLARD 48 Darrell M. Dillard was elected as a director of 415 West Wall Parent in July 1994, Vice President in April Suite 1510 1995 and Chief Financial Officer in December, Midland, TX 79701 1995. He is an independent Certified Public Accountant who has been engaged in public and industry accounting for the oil and gas industry in Midland, Texas since 1980. Prior to 1980, Mr. Dillard worked for the U.S. Department of Treasury. He served from 1981 to 1982 on the board of directors and as treasurer for a large independent oil and gas exploration and production company with operations in various states. He is a member of the American Institute of Certified Public Accountants, the Texas Society of Certified Public Accountants, the Petroleum Accountants Society, and the Independent Petroleum Association of America. Mr. Dillard graduated from Midwestern State University with a Bachelors degree in Business Administration in Accounting in 1975. Mr. Dillard has been a director of the Company, a public oil and gas corporation since 1995. ROBERT R. DONNELLY 47 Robert R. Donnelly was elected a director of 415 West Wall Parent in July 1990. Mr. Donnelly has been the Suite 1510 Corporate Vice President and Treasurer of Midland, TX 79701 Eastland Oil Company since 1988, responsible for gas contracts, land department, accounting and administration; from 1985 until 1988 Vice President in charge of land management; and from 1983 until 1985 he was land manager and in charge of partnership relations. Mr. Donnelly has 18 years of experience in various domestic and international land and land management positions with major and independent oil and gas companies. He graduated from the University of Texas in 1973 with a Bachelor of Arts Degree in Economics and is a Certified Professional Landman. He has served as Director of the Independent Petroleum Association of America, the Permian Basin Association of Petroleum Landsmen, and the West Texas Producers Forum. SAM R. BROCK 50 Sam R. Brock was elected as a director of 16701 Greenspoint Parent on April 10, 1995. He has been active in Park Drive, Suite 200 the oil and gas industry since 1974. From Houston, TX 77060 February 1994 until the present he has owned and operated NRG Consultants, Inc., a commercial crude oil trading and transportation consulting company. From 1987 until 1994 he was Vice President-Gathering Division of Phibro Energy USA, Inc., a subsidiary of Solomon Brothers, Inc. From 1980 until 1986 he was President and majority shareholder of NRG Gathering Company a private oil and gas gathering company that was sold in 1986 to Tesoro Petroleum Corporation. Mr. Brock graduated from Texas Tech University with a Bachelor's degree in marketing in 1969. WAYNE M. WHITAKER 48 Mr. Whitaker has been a partner in the firm 301 Commerce St. Michener, Larimore, Swindle, Whitaker, Flowers, Suite 3500 Sawyer, Reynolds & Chalk, L.L.P. (and its Ft. Worth, TX 76102 predecessor firms) since 1978. He received his business and law degrees from Baylor University in 1971, and his Master of Laws from Southern Methodist University in 1972. From 1972 until 1978 he worked for the Securities and Exchange Commission in Fort Worth, Texas. Mr. Whitaker has been a director of the Company, a public oil and gas corporation since 1995. 2. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER. Unless otherwise indicated below, all information concerning each person listed below is the same as shown above. NAME OFFICE HELD IN PURCHASER DEAS H. WARLEY III DIRECTOR, PRESIDENT, SECRETARY, TREASURER EX-99.(A)(2) 3 EXHIBIT 99(A)(2) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF SUMMIT PETROLEUM CORPORATION PURSUANT TO THE OFFER TO PURCHASE DATED JULY 17, 1996 BY MRI ACQUISITION CORP. A CORPORATION FORMED BY MIDLAND RESOURCES, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, HOUSTON, TEXAS TIME, ON WEDNESDAY AUGUST 14, 1996, UNLESS THE OFFER IS EXTENDED. THE DEPOSITARY FOR THE OFFER IS STOCK TRANSFER COMPANY OF AMERICA, INC. BY MAIL: BY HAND/OVERNIGHT: P.O. BOX 796277 2415 MIDWAY ROAD, NO. 125 DALLAS, TEXAS 75379 DALLAS, TEXAS 75006 TELEPHONE (214)733-3060 FOR INFORMATION:(713) 873-4828 BY FACSIMILE TRANSMISSION:(713) 873-5058 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN THAT SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by holders of Shares (as defined below) (the "Tendering Stockholders") for the certificates evidencing Shares ("Certificates") to be forwarded herewith.. Tendering Stockholders whose Certificates for Shares are not immediately available or who cannot deliver their Certificates for their Shares and all other required documents to the Depositary prior to the expiration Date (as defined in Section 1 of the Offer to Purchase) may tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2 hereof. DESCRIPTION OF SHARES TENDERED: NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) ----------------------------- (PLEASE FILL IN EXACTLY AS NAME(S) APPEARS ----------------------------- ON THE CERTIFICATE(S)) ----------------------------- ----------------------------- TOTAL NUMBER OF SHARES* ----------------------------- (*) UNLESS OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL SHARES REPRESENTED BY CERTIFICATES DELIVERED TO THE DEPOSITARY ARE BEING TENDERED. SEE INSTRUCTION 4. /___/ CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY. NAME(S) OF REGISTERED HOLDER(S): ------------------------------ WINDOW TICKET NUMBER (IF ANY): ------------------------------ DATE OF EXECUTION OF NOTICE OF GUARANTEED ------------------------------ DELIVERY: ------------------------------ NAME OF INSTITUTION WHICH GUARANTEED DELIVERY: ------------------------------ ------------------------------ NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: The undersigned hereby tenders to MRI Acquisition Corp. ("Purchaser"), a Texas corporation and a wholly owned subsidiary of Midland Resources, Inc., Texas corporation ("Parent"), the above-described shares of Common Stock, par value $.01 per share (the "Common Stock" or the"Shares"), of Summit Petroleum Corporation, a Colorado corporation ("Company"), at a purchase price of $0.70 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 17, 1996 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with any amendments or supplements thereto, collectively, constitute the "Offer"). The Purchaser has been formed by Parent in connection with the Offer and the transactions contemplated thereby. The Offer is being made in connection with the Agreement and Plan of Merger dated as of July 17 ,1996, among Parent, the Purchaser and the Company. The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its or Parent's affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the purchaser of its obligations under the Offer or prejudice the rights of tendering Stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. Subject to, and effective upon, acceptance for payment of, or payment for, Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms or conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all of the Shares that are being tendered hereby and any and all other Shares or other securities issued or issuable in respect of such Shares on or after July 17, 1996 (a "Distribution") and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to (i) deliver Certificates evidencing such Shares (and Distributions)with all accompanying evidences of transfer and authenticity to, or upon the order of, the Purchaser, upon receipt by the Depositary as the undersigned's agent, of the purchase price with respect to such Shares, (ii) present such Shares (and all Distributions)for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any distributions), all in accordance with the terms and subject to the conditions of the Offer. The undersigned hereby irrevocably appoints each of Deas H. Warley, Wayne M. Whitaker and Marilyn Wade (each a "Purchaser Designee") as the attorney-in-fact and proxy of the undersigned, each with full power of substitution, to the full extent of the undersigned's rights with respect to all Shares tendered hereby and accepted for payment and paid for by the Purchaser(and any Distributions), including, without limitation, the right to vote such Shares (and any Distributions) in such manner as each such attorney and proxy or his substitute shall, in his ole discretion, deem proper. All such powers of attorney and proxies, being deemed to be irrevocable, shall be considered coupled with an interest in the Shares tendered herewith. Such appointment will be effective when, and only to the extent that, the Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior powers of attorney and proxies given by the undersigned with respect to such Shares (and any distributions)will be revoked, without further action, and no subsequent powers of attorney and proxies may be given with respect thereto (and, if given, will be deemed ineffective). The Purchaser Designees will, with respect to the Shares(and any Distributions), for which such appointment is effective, be empowered to exercise all voting and other rights of the undersigned with respect to such Shares (and any Distributions) as they in their sole discretion may deem proper. The Purchaser reserves the absolute right to require that, in order for Shares to be deemed validly tendered, immediately upon the acceptance for payment of such Shares, the Purchaser or the Purchaser Designees are able to exercise full voting rights and all other rights which inure to a record and beneficial holder with respect to such Shares (and any Distributions), including voting at any meeting of stockholders then scheduled. All authority conferred or agreed to be conferred in this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators, trustee in bankruptcy, personal and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable, provided that the Shares tendered pursuant to the Offer may be withdrawn prior to their acceptance for payment. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and any Distributions) and that, when the same are accepted for payment and paid for by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances, and that the Shares tendered hereby (and any Distributions)will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver any additional documents deemed by the Depositary or the purchaser to be necessary or desirable to complete the sale, assignment and transfer of Shares tendered hereby (and any Distributions). In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any and all Distributions issued to the undersigned on or after July 17, 1996 in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transferor appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of any such Distributions and may withhold the entire purchase price or deduct from the purchase price the amount of value thereof, as determined by the Purchaser in its sole discretion. The undersigned understands that the valid tender of Shares pursuant to anyone of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and the Purchaser with respect to such Shares upon the terms and subject to the conditions of the Offer. The undersigned recognizes that, under certain circumstances set forth in the Offer to Purchase, the Purchaser may not be required to accept for payment any of the Shares tendered hereby or may accept for payment fewer than all of the Shares tendered hereby. Unless otherwise indicated herein under "Special Payment Instructions,"please issue a check for the purchase price and/or return any Certificates evidencing Shares not tendered or not accepted for payment in the names(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price and/or return any Certificates evidencing Shares not tendered or not accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s)appearing under "Description of Shares Tendered." In the event that both the"Special Payment Instructions" and the "Special Delivery Instructions" are completed, please issue the check for the purchase price and/or return any such Certificates evidencing Shares not tendered or not accepted for payment (and accompanying documents, as appropriate) in the name(s) of, and deliver such check and/or return such Certificates (and accompanying documents, as appropriate) to, the person(s) so indicated. The undersigned recognizes that the Purchaser has no obligations pursuant to the"Special Payment Instructions" to transfer any Shares from the name of the registered holder thereof if the Purchaser does not accept for payment any of the Shares tendered hereby. SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed only if Certificates for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be issued in the name of someone other than the undersigned. ISSUE (check appropriate box(es) / / Check to: / / Certificates to: Name - ------------------------------- Address ----------------------- - ------------------------------- - ------------------------------- (include Zip Code) - ------------------------------- Tax Identification No. /or/ Social Security Number See Form W-9 SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be Completed only if Certificates for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be sent to someone other than the undersigned or to the undersigned at an address other than that shown above. MAIL (check appropriate box(es) / / Check to / / Certificate to: Name - ------------------------------- Address ----------------------- - ------------------------------- - ------------------------------- (include Zip Code) - ------------------------------- Tax identification No. /or/ Social Security Number See Form W-9 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures on this Letter of Transmittal must be guaranteed by a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of a recognized Medallion Program approved by The Securities Transfer Association, Inc. (an "Eligible Institution"), unless the Shares tendered hereby are tendered (i) by the registered holder of such Shares who has completed neither the box labeled "Special Payment Instructions" nor the box labeled "Special Delivery Instructions" herein or (ii) for the account of an Eligible Institution. See Instruction 5. If the Certificates are registered in the name of a person other than the signer of this Letter of Transmittal, or if payment is to be made or delivered to, or Certificates evidencing unpurchased Shares are to be issued or returned to, a person other than the registered owner, then the tendered Certificates must be endorsed or accompanied by duly executed stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the Certificates or stock powers guaranteed by an Eligible Institution as provided herein. See Instruction 5. 2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by Tendering Stockholders if Certificates evidencing Shares are to be forwarded herewith. For a Tendering Stockholder to validly tender Shares pursuant to the Offer, either (a) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Depositary at its address set forth herein on or prior to the Expiration Date or (b) the Tendering Stockholder must comply with the guaranteed delivery procedures set forth below and in Section 3 of the Offer to Purchase. Tendering Stockholders whose Certificates are not immediately available or who cannot deliver their Certificates and all other required documents to the Depositary on or prior to the expiration Date may tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Purchaser, must be received by the Depositary prior to the Expiration Date, and (iii) the Certificates representing all tendered Shares in proper form for transfer together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Depositary within three NYSE trading days after the date of such Notice of Guaranteed Delivery. If Certificates are forwarded separately to the Depositary, a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) must accompany each such delivery. THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering Stockholders, by execution of this Letter of Transmittal (or a facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the information required under "Description of Shares Tendered" should be listed on a separate signed schedule attached hereto. 4. PARTIAL TENDERS. If fewer than all the Shares represented by any Certificates delivered to the Depositary herewith are to be tendered hereby, fill in the number of Shares which are to be tendered in the box entitled"Number of Shares Tendered." In such case, a new Certificate for the remainder of the Shares that were evidenced by your old certificate(s) will be sent, without expense, to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" or this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by Certificate(s) delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, INSTRUMENTS OF TRANSFER AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the Certificates without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the tendered Shares are registered in different names on several Certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of Certificates. If this Letter of Transmittal or any Certificates or instruments of transfer are signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Purchaser of such person's authority to so act must be submitted. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of Certificates or separate instruments of transfer are required unless payment is to be made, or Certificates not tendered or not purchased are to be issued or returned, to a person other than the registered holder(s). Signatures on such Certificates or instruments of transfer must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares evidenced by the certificate(s) listed and transmitted hereby, the Certificate(s) must be endorsed or accompanied by appropriate instruments of transfer, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the Certificate(s). Signatures on any such Certificates or instruments of transfer must be guaranteed by an Eligible Institution. 6. TRANSFER TAXES. Except as set forth in this Instruction 6, the purchaser will pay or cause to be paid any transfer taxes with respect to the transfer and sale of Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or (in the circumstances permitted hereby) if Certificates for Shares not tendered or not purchased are to be registered in the name of, any person other than the registered holder(s), or if tendered Certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any transfer taxes (whether imposed on the registered holder(s) or such persons) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Certificate(s) listed in this Letter of Transmittal. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or Certificates for unpurchased Shares are to be issued in the name of a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such Certificates are to be returned to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal must be completed. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance may be directed to the Depositary at its respective address or telephone number set forth above and requests for additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Purchaser or Depositary and such materials will be furnished at the Purchaser's expense. 9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the purchaser, in whole or in part, at any time or from time to time, in the purchaser's sole discretion. 10. BACKUP WITHHOLDING. Each Tendering Stockholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on Form W-9, which is provided under "Important Tax Information" below and to certify that the stockholder is not subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the Tendering Stockholder to 31% federal income tax backup withholding on the payment of the purchase price for the Shares. The Tendering Stockholder should indicate in the box in Part III of the Substitute Form W-9 if the TENDERING STOCKHOLDER has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the Tendering Stockholder has indicated in the box in Part III that a TIN has been applied for and the Depositary is not provided with a TIN by the time of payment, the Depositary will withhold 31% of all payments of the purchase price, if any, made thereafter pursuant to the Offer until a TIN is provided by the Depositary. 11. LOST OR DESTROYED CERTIFICATES. If any Certificate representing Shares has been lost or destroyed, the holder(s) should promptly notify the Company's transfer agent and registrar, Stock Transfer Company of America, Inc., (if by delivery) 2415 Midway Road, Suite 125, Carrollton, Texas 75006, (if by mail) P.O. Box 796277, Dallas, Texas 75379, telephone (214) 733-3060. The holders will then be instructed as to the procedure to be followed in order to replace such Certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed Certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE THEREOF (TOGETHER WITH CERTIFICATES AND ANY OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY, OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE. IMPORTANT TAX INFORMATION Under federal income tax law, a Tendering Stockholder whose tendered Shares are accepted for payment is required to provide the Depositary (as payor) with such Tendering Stockholder's correct TIN on Form W-9 below. If such Tendering Stockholder is an individual, the TIN is his social security number. If the Tendering Stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, such TENDERING STOCKHOLDER should so indicate on the Form W-9. If the Depositary is not provided with the correct TIN, the Tendering Stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such Tendering Stockholders with respect to Shares purchased pursuant to the Offer may be subject to backup federal income tax withholding. Certain Tendering Stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that Tendering Stockholder must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status. Forms for such statements may be obtained from the Depositary. See the enclosed Form W-9 for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the Tendering Stockholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF FORM W-9 To prevent backup federal income tax withholding on payments of the purchase price for Shares purchased pursuant to the Offer, a Tendering Stockholder must provide the depositary with his or her correct TIN by completing the Form W-9 below, certifying that the TIN provided on Form W-9 is correct (or that such Tendering Stockholder is awaiting a TIN) and that (1) such Tendering Stockholder has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of failure to report all interest or dividends or (2) the Internal Revenue Service has notified the Tendering Stockholder that he or she is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The Tendering Stockholder is required to give the Depositary the social security number or employer identification number of the record owner of the Shares tendered hereby. If the Shares are registered in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Form W-9 for additional guidelines on which number to report. If the Tendering Stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should write "Applied For" in the space provided for in the TIN in Part III, and sign and date the Form W-9. If "Applied For" is written in Part III and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% on all payments of the purchase price made thereafter until a TIN is provided to the Depositary. IMPORTANT TENDERING SHAREHOLDER: SIGN HERE AND COMPLETE FORM W-9 ON REVERSE Dated: , 1996 - ------------------------------------------ ---------- SIGNATURE(S) OF TENDERING STOCKHOLDERS(S)) (Must be signed by registered holder(s) exactly as name(s) appear(s) on stock Certificate(s) or on a security position listing or by the person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5). NAME(S): (PLEASE PRINT) ---------------------------------------------- CAPACITY (FULL TITLE): -------------------------------------- (SEE INSTRUCTION 5) ADDRESS: ---------------------------------------------------------- - ------------------------------------------------------------------ - ------------------------------------------------------------------ - ------------------------------------------------------------------ (INCLUDE ZIP CODE) AREA CODE AND TELEPHONE NO.: (HOME) ------------------------------------------------------- (BUSINESS) --------------------------------------------------- TAX IDENTIFICATION NO. OR SOCIAL SECURITY NO.: -------------------- (COMPLETE ATTACHED FORM W-9) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) FOR USE BY FINANCIAL INSTITUTIONS ONLY FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE BELOW - -------------------------------------------------------------------------------- FOR INFORMATION MIDLAND RESOURCES, INC. 16701 GREENSPOINT PARK DRIVE, SUITE 200 HOUSTON, TEXAS 77060 CALL (713)873-4828 FAX (713) 873-5058 [OFFICIAL INTERNAL REVENUE SERVICE FORM W-9] LOST STOCK CERTIFICATE INSTRUCTIONS: If you cannot locate your Stock Certificate then you MUST COMPLETE WITH AN ORIGINAL SIGNATURE AND NOTARY, the affidavit below AND submit it to the Depositary PRIOR to the Expiration Date as follows: If by Mail: Stock Transfer Company of America, Inc. If by deliveryservice: Stock Transfer Company of America, Inc. P.O. Box 796277 2415 Midway Road, Suite 125 Dallas, Texas 75379 Carrollton, Texas 75006 Tele. (214) 733-3060
AFFIDAVIT AND AGREEMENT OF INDEMNITY: "THE UNDERSIGNED, for the purpose of inducing MRI Acquisition Corp. ("Purchaser") to pay for my Shares in accordance with the terms of the Offer without my delivering the stock certificate representing my Shares being submitted for tender and without the reissuance of a replacement stock certificate, does hereby certify and agree: That the following original stock certificate has been mislaid, lost, stolen, or destroyed: Certificate No.: -------------------------------------------------------------- No. of Shares: -------------------------------------------------------------- In name of: -------------------------------------------------------------- That I have made or caused to be made a diligent search for said original stock certificate and have been unable to find or recover it; that none of said stock nor any interest therein has been sold, assigned, endorsed, transferred, deposited under any agreement, hypothecated, pawned, pledged for any loan, or disposed of in any manner by me or on my behalf; that neither I nor anyone on my behalf has signed any power of attorney, any stock power, or other assignment or authorization respecting said original stock certificate which now is outstanding and in force; and that no other person, firm or corporation has any right, title, claim, equity, or interest in, to, or respecting said original stock certificate and the shares of the Company represented thereby; and That if said original stock certificate comes into my hands, custody, or control, I will deliver or cause said stock certificate to be delivered to the Depositary, in order that same be canceled. I hereby agree that I, will indemnify forever and fully and save harmless the Purchaser, Parent and the Company, its shareholders, directors, officers, employees, attorneys, representatives and agents from any loss, liability, and damage to which they or any or either of them may be subjected by reason of said original stock Certificate. I further agree that in consideration of SEABOARD SURETY COMPANY assuming liability or liability attaching under its indemnity Bond in favor of the Company and its agents, the undersigned (jointly and severally, if more than one) hereby agrees at all times to indemnify and save harmless SEABOARD SURETY COMPANY from and against any and all liabilities, losses, damages, judgments, costs, charges, counsel fees and expenses of every nature and character which they may sustain or incur by reason or on account of assuming liability or liability attaching under its indemnity Bond." EXECUTED under oath this day of ,1996. ----------- ------------------ / - -------------------------------------------------- ------------------------ Signature of Registered Holder(s) NOTICE: The signature of the registered holder must correspond in every way with the name appearing on the face of the Stock Certificate. Subscribed and sworn to before me this day of , 1996. -------- ---------------- Notary Public for -------------------------------------------------------- [Notary Seal] Notary Signature --------------------------------------------------------- Notary Name --------------------------------------------------------- EX-99.(A)(3) 4 EXHIBIT 99(A)(3) Exhibit 99(a)(3) AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of July 17, 1996, between Midland Resources, Inc., a Texas corporation ("PURCHASER"), MRI Acquisition Corp., a Texas corporation and a wholly owned subsidiary of Purchaser ("MERGER SUB"), and Summit Petroleum Corporation., a Colorado corporation (the "COMPANY"). RECITALS WHEREAS, the Boards of Directors of Purchaser and the Company each have determined that it is in the best interests of their respective companies and stockholders for Purchaser to acquire the Company upon the terms and subject to the conditions set forth herein. WHEREAS, the parties hereto desire to make certain representations, warranties, covenants and agreements in connection herewith. NOW, THEREFORE, in consideration of the foregoing, and of the representations, warranties, covenants and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE 1: THE OFFER 1.1 THE OFFER. (a) Subject to the provisions of this Agreement and this Agreement not having been terminated, as promptly as practicable but in no event later than July 31, 1996, Merger Sub shall, and Purchaser shall cause Merger Sub to commence, within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "EXCHANGE ACT"), an offer to purchase all of the outstanding shares of Common Stock, par value $.01 per share (the "COMMON STOCK") of the Company, at a price of $0.70 (seventy cents) per share of Common Stock net to the seller in cash (the "OFFER"). The obligation of Merger Sub to, and of Purchaser to cause Merger Sub to, commence the Offer and accept for payment, and pay for, any shares of Common Stock tendered pursuant to the Offer shall be subject to the conditions set forth in EXHIBIT A and to the terms and conditions of this Agreement. Subject to the provisions of this Agreement, the Offer shall expire 20 business days after the date of its commencement, unless this Agreement is terminated in accordance with ARTICLE 10, in which case the Offer (whether or not previously extended in accordance with the terms hereof) shall expire on such date of termination. (b) Without the prior written consent of the Company, Merger Sub shall not (i) waive the Minimum Condition (as defined in EXHIBIT A), (ii) reduce the number of shares of Common Stock subject to the Offer, (iii) reduce the price per share of Common Stock to be paid pursuant to the Offer, (iv) extend the Offer if all of the Offer conditions are satisfied or waived, (v) change the form of consideration payable in the Offer, or (vi) amend or modify any term or condition of the Offer (including the conditions set forth on EXHIBIT A) in any manner adverse to the holders of Common Stock. Notwithstanding anything here into the contrary, Merger Sub may, in its sole discretion without the consent of the Company, extend the Offer at any time and from time to time (i) if at the then scheduled expiration date of the Offer any of the conditions to Merger Sub's obligation to accept for payment and pay for shares of Common Stock shall not have been satisfied or waived; (ii) for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or its staff applicable to the Offer; (iii) for any period required by applicable law in connection with an increase in the consideration to be paid pursuant to the Offer; and (iv) if all Offer conditions are satisfied or waived but the number of shares of Common Stock tendered is 85% or more, but less than 90%, of the then outstanding number of shares of Common Stock, for an aggregate period of not more than 5 business days (for all such extensions under this clause (iv)) beyond the latest expiration date that would be permitted under clause (i), (ii) or (iii) of this sentence. So long as this Agreement is in effect and the Offer conditions have not been satisfied or waived, at the request of the Company, Merger Sub shall, and Purchaser shall cause Merger Sub to, extend the Offer for an aggregate period of not more than 20 business days (for all such extensions) beyond the originally scheduled expiration date of the Offer. Subject to the terms and conditions of the Offer and this Agreement (but subject to the right of termination in 1 accordance with ARTICLE 10), Merger Sub shall, and Purchaser shall cause Merger Sub to, accept for payment, in accordance with the terms of the Offer, all shares of Common Stock validly tendered and not withdrawn pursuant to the Offer as soon as practicable after the expiration of the Offer. 1.2. ACTIONS BY PURCHASER AND MERGER SUB. (a) As soon as reasonably practicable following execution of this Agreement, but in no event later than five business days from the date hereof, Purchaser and Merger Sub shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the Offer, which shall contain an offer to purchase and a related letter of transmittal and any other ancillary documents pursuant to which the Offer shall be made (such Schedule 14D-1 and the documents therein pursuant to which the Offer will be made, together with any supplements or amendments thereto, the "OFFER DOCUMENTS"). The Company and its counsel shall be given an opportunity to review and comment upon the Offer Documents prior to the filing thereof with the SEC. The Offer Documents shall comply as to form in all material respects with the requirements of the Exchange Act, and on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, the Offer Documents shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by Purchaser or Merger Sub with respect to information supplied by the Company for inclusion in the Offer Documents. Each of Purchaser, Merger Sub and the Company agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect, and each of Purchaser, Merger Sub and the Company further agrees to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of shares of Common Stock, in each case as and to the extent required by applicable federal securities laws. Purchaser and Merger Sub agree to provide the Company and its counsel in writing with any comments Purchaser, Merger Sub or their counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after receipt of such comments and with copies of any written responses and telephonic notification of any verbal responses by Purchaser, Merger Sub or their counsel. (b) Purchaser shall provide or cause to be provided to Merger Sub all of the funds necessary to purchase any shares of Common Stock that Merger Sub becomes obligated to purchase pursuant to the Offer. 1.3. ACTIONS BY THE COMPANY. (a) The Company hereby approves of and consents to the Offer and represents and warrants that the Board of Directors of the Company (the "BOARD OF DIRECTORS" or the "BOARD") at a meeting duly called and held has duly adopted, by unanimous vote, resolutions approving this Agreement, the Offer and the Merger (as hereinafter defined), determining that the Merger is advisable and that the terms of the Offer and Merger are fair to, and in the best interests of, the Company's stockholders and recommending that the Company's stockholders accept the Offer and approve the Merger and this Agreement inapplicable to the Offer, the Merger and this Agreement or any of the transactions contemplated hereby or thereby. The Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Board of Directors described in the first sentence of this SECTION 1.3(a). (b) On the date the Offer Documents are filed with the SEC, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from time to time, the "SCHEDULE 14D-9") containing the recommendations described in paragraph (a) above and shall mail the Schedule 14D-9 to the stockholders of the Company. To the extent practicable, the Company shall cooperate with Purchaser in mailing or otherwise disseminating the Schedule 14D-9 with the appropriate Offer Documents to the Company's stockholders. Purchaser and its counsel shall be given an opportunity to review and comment upon the Schedule 14D-9 prior to the filing thereof with the SEC. The Schedule 14D-9 shall comply as to form in all material respects with the requirements of the Exchange Act and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstance sunder which they were made, not misleading, except that no representation is made by the Company with respect to information supplied by Purchaser or Merger Sub for inclusion in the Schedule 14D-9. Each of the Company, Purchaser and Merger Sub 2 agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to the holders of shares of Common Stock, in each case as and to the extent required by applicable federal securities laws. The Company agrees to provide Purchaser and Merger Sub and their counsel in writing with any comments the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments and with copies of any written responses and telephonic notification of any verbal responses by the Company or its counsel. (c) In connection with the Offer, the Company shall cause its transfer agent to furnish Merger Sub with mailing labels containing the names and addresses of the record holders of Common Stock as of a recent date and of those persons becoming record holders subsequent to such date, together with copies of all lists of stockholders, security position listings and computer files and all other information in the Company's possession or control regarding the beneficial owners of Common Stock, and shall furnish to Merger Sub such information and assistance (including updated lists of stockholders, security position listings and computer files) as Merger Sub may reasonably request in communicating the Offer to the Company's stockholders. Subject to the requirements of law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer and the Merger, Purchaser and Merger Sub and each of their affiliates and associates shall hold in confidence the information contained in any of such labels, lists and files, shall use such information only in connection with the Offer and the Merger, and, if this Agreement is terminated, shall promptly deliver to the Company all copies of such information then in their possession. (d) Subject to the terms and conditions of this Agreement, if there shall occur a change in law or in a binding judicial interpretation of existing law which would, in the absence of action by the Company or the Board, prevent the merger Sub, were it to acquire a specified percentage of the shares of Common Stock then outstanding, from approving and adopting this Agreement by its affirmative vote as the holder of a majority of shares of Common Stock and without the affirmative vote of any other stockholder, the Company will use its best efforts to promptly take or cause such action to be taken. 1.4. DIRECTORS. (a) Promptly upon the purchase of shares of Common Stock pursuant to the Offer, Purchaser shall be entitled to designate such number of directors, rounded up to the next whole number, as will give Purchaser representation on the Board of Directors equal to the product of (i) the number of directors on the Board of Directors and (ii) the percentage that the number of shares of Common Stock purchased by Merger Sub or Purchaser or any affiliate bears to the number of shares of Common Stock outstanding (the "PERCENTAGE"), and the Company shall, upon request by Purchaser, promptly increase the size of the Board of Directors and/or exercise its best efforts to secure the resignations of such number of directors as is necessary to enable Purchaser's designees to be elected to the Board of Directors and shall cause the Purchaser's designees to be so elected. At the request of Purchaser, the Company will use its best efforts to cause such individuals designated by Purchaser to constitute the same Percentage of (i) each committee of the Board. The Company's obligations to appoint designees to the Board of Directors shall be subject to Section 14(f) of the Exchange Act. The Company shall, at Purchaser's request, take, at the Company's expense, all action necessary to effect any such election, and shall include in the Schedule 14D-9 the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Purchaser will supply to Company in writing and be solely responsible for any information with respect to itself and its nominees, directors and affiliates required by Section 14(f) and Rule 14f-1. Notwithstanding the foregoing, the parties hereto shall use their respective best efforts to ensure that at least two of the members of the Board of Directors shall at all times prior to the Effective Time (as hereinafter defined) be Continuing Directors (as hereinafter defined). (b) If Purchaser shall exercise its right to designate members to the Board of Directors as permitted in this SECTION 1.4, then following the election or appointment of Purchaser's designees pursuant to this SECTION 1.4 and prior to the Effective Time, the approval of a majority of the directors of the Company then in office who are not designated by Purchaser (the "CONTINUING DIRECTORS") shall be required to authorize (and such authorization shall constitute the authorization of the Board of Directors and no other action on the part of the Company, including any action by any other director of the Company, shall be required to authorize) any 3 termination of this Agreement by the Company, any amendment of this Agreement requiring action by the Board of Directors, any extension of time for the performance of any of the obligations or other acts of Purchaser or Merger Sub, and any waiver of compliance with any of the agreements or conditions contained herein for the benefit of the Company. ARTICLE 2: THE MERGER 2.1. THE MERGER. Subject to the terms and conditions of this Agreement, at the Effective Time (as defined in SECTION 2.3), Merger Sub shall be merged with and into the Company in accordance with this Agreement and the applicable provisions of the CBCA, and the separate corporate existence of Merger Sub shall thereupon cease (the "MERGER"). The Company shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the "SURVIVING CORPORATION"). The Merger shall have the effects specified in the CBCA. 2.2. THE CLOSING. Subject to the terms and conditions of this Agreement, the closing of the Merger (the "CLOSING") shall take place at the offices of Michener, Larimore, Swindle, Whitaker, Flowers, Sawyer, Reynolds & Chalk, L.L.P., 301 Commerce Street, Suite 3500, Fort Worth, Texas 76102 at 10:00 a.m., local time, as soon as practicable following the satisfaction (or waiver if permissible) of the conditions set forth in ARTICLE 9. The date on which the Closing occurs is hereinafter referred to as the "CLOSING DATE." 2.3. EFFECTIVE TIME. If all the conditions to the Merger set forth in ARTICLE 9 shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated as provided in ARTICLE 10, the parties hereto shall cause a Certificate of Merger meeting the requirements of the CBCA to be properly executed and filed in accordance with such Section on the Closing Date. The Merger shall become effective at the time of filing of the Certificate of Merger with the Secretary of State of the State of Colorado in accordance with the CBCA or at such later time which the parties hereto shall have agreed upon and designated in such filing as the effective time of the Merger (the "EFFECTIVE TIME") ARTICLE 3 CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION 3.1. CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of the Surviving Corporation shall be in the form attached hereto as EXHIBIT B, until duly amended in accordance with applicable law. 3.2. BYLAWS. The Bylaws of Merger Sub in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation, until duly amended in accordance with applicable law. ARTICLE 4 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION 4.1. DIRECTORS. The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation as of the Effective Time and until their successors are duly appointed or elected in accordance with applicable law. 4.2. OFFICERS. The Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation as of the Effective Time and until their successors are duly appointed or elected in accordance with applicable law. ARTICLE 5 EFFECT OF THE MERGER ON SECURITIES OF MERGER SUB AND THE COMPANY 5.1. MERGER SUB STOCK. At the Effective Time, each share of Common Stock, $.01 Par value per share, of Merger Sub outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and non-assessable share of common stock, $.01 Par value per share, of the Surviving 4 Corporation. 5.2. COMPANY SECURITIES. (a) At the Effective Time, each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of Common Stock owned by Purchaser or Merger Sub or held by the Company, all of which shall be canceled, and other than shares of Dissenting Common Stock (as hereinafter defined)) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive the per share consideration in the Offer, without interest (the "MERGER CONSIDERATION"). (b) As a result of the Merger and without any action on the part of the holder thereof, at the Effective Time all shares of Common Stock shall cease to be outstanding and shall be canceled and retired and shall cease to exist, and each holder of shares of Common Stock (other than Merger Sub, Purchaser and the Company) shall thereafter cease to have any rights with respect to such shares of Common Stock, except the right to receive, without interest, the merger Consideration in accordance with SECTION 5.3 upon the surrender of a certificate or certificates (a "CERTIFICATE") representing such shares of Common Stock. (c) Each share of Common Stock issued and held in the Company's treasury at the Effective Time shall, by virtue of the Merger, cease to be outstanding and shall be canceled and retired without payment of any consideration therefor. (d) All options (individually, an "OPTION" and collectively, the "OPTIONS") outstanding immediately prior to the Effective Time under any Company stock option plan (the "STOCK OPTION PLANS"), whether or not then exercisable, shall be canceled and each holder of an Option will be entitled to receive from the Surviving Corporation, for each share of Common Stock subject to an Option, an amount in cash equal to the excess, if any, of the Merger Consideration over the per share exercise price of such Option, without interest. All amounts payable pursuant to this SECTION 5.2(d) shall be subject to all applicable withholding of taxes. The Company shall use its reasonable best efforts to obtain all necessary consents of the holders of Options, provided, however, that the failure of the Company to obtain any one or more of such consents shall have no effect on the Purchaser's and Merger Sub's obligation to consummate the Offer and the Merger and shall not afford any basis for them to assert the condition set forth in clause (ii) of paragraph (d) of Exhibit A. 5.3. EXCHANGE OF CERTIFICATES REPRESENTING COMMON STOCK. (a) Promptly after the Effective Time, Purchaser shall mail to each holder of record of shares of Common Stock (i) a letter of transmittal which shall specify that delivery shall be effected, and risk of loss and title to such Certificates shall pass, only upon delivery of the Certificates to the Depositary and which letter shall be in such form and have such other provisions as Purchaser may reasonably specify and (ii) instructions for effecting the surrender of such Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate to the Depositary 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 Depositary, the holder of such Certificate shall promptly receive in exchange therefor the amount of cash into which shares of Common Stock theretofore represented by such Certificate shall have been converted pursuant to SECTION 5.2, and the shares represented by the Certificate so surrendered shall forthwith be canceled. No interest will be paid or will accrue on the cash payable upon surrender of any Certificate. In the event of a transfer of ownership of Common Stock which is not registered in the transfer records of the Company, payment may be made with respect to such Common Stock to such a transferee if the Certificate representing such shares of Common Stock is presented to the Depositary, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. (c) At or after the Effective Time, there shall be no transfers on the stock transfer books of the company of the shares of Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation, they shall be canceled and exchanged as provided in this ARTICLE 5. (d) Any portion of the consideration that remains unclaimed by the former stockholders of the Company six months after the Effective Time shall be delivered to the Surviving Corporation. Any former stockholders of the Company who have not theretofore complied with this ARTICLE 5 shall thereafter look only to the Surviving Corporation for payment of any Merger Consideration that may be payable in respect of each share of Common 5 Stock such stockholder holds as determined pursuant to this Agreement, without any interest thereon. (e) None of Purchaser, the Company, the Surviving Corporation, the Depositary or any other person shall be liable to any former holder of shares of Common Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. (f) If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the SURVIVING CORPORATION, the posting by such person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Depositary will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable in respect thereof pursuant to this Agreement. 5.4. ADJUSTMENT OF MERGER CONSIDERATION. If, subsequent to the date of this Agreement but prior to the Effective Time, the outstanding shares of Common Stock shall have been changed into a different number of shares or a different class as a result of a stock split, reverse stock split, stock dividend, subdivision, reclassification, split, combination, exchange, recapitalization or other similar transaction, the Merger Consideration shall be appropriately adjusted. 5.5. DISSENTING COMPANY STOCKHOLDERS. Notwithstanding any provision of this Agreement to the contrary, if required by the CBCA but only to the extent required thereby, shares of Common Stock which are issued and outstanding immediately prior to the Effective Time and which are held by holders of such shares of Common Stock who have properly exercised appraisal rights with respect thereto in accordance with the CBCA (the "DISSENTING COMMON STOCK") will not be exchangeable for the right to receive the Merger Consideration, and holders of such shares of Dissenting Common Stock will be entitled to receive payment of the appraised value of such shares of Common Stock in accordance with the provisions of CBCA unless and until such holders fail to perfect or effectively withdraw or lose their rights to appraisal and payment under the CBCA. If, after the Effective Time, any such holder fails to perfect or effectively withdraws or loses such right, such shares of Common Stock will thereupon be treated as if they had been converted into and to have become exchangeable for, at the Effective Time, the right to receive the Merger Consideration, without any interest thereon. The Company will give Purchaser prompt notice of any demands received by the Company for appraisals of shares of Common Stock. The Company shall not, except with the prior written consent of Purchaser, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands. 5.6. MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding the foregoing but subject to the provisions of Section 8.3(f), if Merger Sub, or any other direct or indirect subsidiary of Purchaser, shall acquire at least 90% of the outstanding shares of Common Stock, the parties hereto shall take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without a meeting of stockholders of the Company, in accordance with the CBCA. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Purchaser and Merger Sub as follows: 6.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. The Company is (i) a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and (ii) is duly licensed or qualified to do business as a foreign corporation and is in good standing under the laws of any other state of the United States in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except where the failure to be so qualified or to be in good standing, individually or in the aggregate, would not have a Material Adverse Effect (as hereinafter defined). The Company has all requisite corporate power and authority to own, operate and lease its properties and carry on its business as now conducted, except where the failure to have such power and authority, individually or in the 6 aggregate, would not have a Material Adverse Effect. The Company has heretofore delivered to Purchaser true and correct copies of the Company's Certificate of Incorporation and Bylaws as currently in effect. 6.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. The Company has the requisite corporate power and authority to execute and deliver this Agreement and all agreements and documents contemplated hereby or executed in connection herewith (the "ANCILLARY DOCUMENTS") and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby have been duly and validly authorized by the Board of Directors, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement and the Ancillary Documents or to consummate the transactions contemplated hereby and thereby (other than the approval of this Agreement by the holders of a majority of the shares of Common Stock if required by applicable law). This Agreement has been, and any Ancillary Document at the time of execution will have been, duly and validly executed and delivered by the Company, and (assuming this Agreement and such Ancillary Documents each constitutes a valid and binding obligation of the Purchaser and Merger Sub) constitutes and will constitute the valid and binding obligations of the Company, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. 6.3. COMPLIANCE WITH LAWS. Except as set forth in the Company Reports (as hereinafter defined), each of the Company and its Subsidiaries is incompliance with all applicable foreign, federal, state or local laws, statutes, ordinances, rules, regulations, orders, judgments, rulings and decrees ("LAWS") of any foreign, federal, state or local judicial, legislative, executive, administrative or regulatory body or authority or any court, arbitration, board or tribunal ("GOVERNMENTAL ENTITY"), except where the failure to be incompliance, individually or in the aggregate, would not have a Material Adverse Effect. 6.4. CAPITALIZATION. The authorized capital stock of the Company consists of 80,000,000 shares of Common Stock and 20,000,000 shares of preferred stock, $.01 par value. As of July 15, 1996, (a) 2,400,184 shares of Common Stock were issued and outstanding, (b) No shares of Preferred Stock were issued and outstanding, (c) Options to purchase an aggregate of 300,000 shares of Common Stock were outstanding and there are no stock appreciation rights or limited stock appreciation rights outstanding other than those attached to such Options, and (d) no shares of Common Stock were held by the Company in its treasury. The Company has no outstanding bonds, debentures, notes or other obligations entitling the holders thereof to vote (or which are convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter. Since July 15, 1996, the Company (i) has not issued any shares of Common Stock, (ii) has granted no Options to purchase shares of Common Stock under the Stock Option Plans, and (iii) has not split, combined or reclassified any of its shares of capital stock. All issued and outstanding shares of Common Stock are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. There are no other shares of capital stock or voting securities of the Company, and no existing options, warrants, calls, subscriptions, convertible securities, or other rights, agreements or commitments which obligate the Company to issue, transfer or sell any shares of capital stock of, or equity interests in, the Company. There are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any shares of capital stock of the Company and there are no performance awards outstanding under the Stock Option Plan or any other outstanding stock related awards. After the Effective Time, the Surviving Corporation will have no obligation to issue, transfer or sell any shares of capital stock of the Company or the SURVIVING CORPORATION pursuant to any Company Benefit Plan (as defined in SECTION 6.11). There are no voting trusts or other agreements or understandings to which the Company is a party with respect to the voting of capital stock of the Company. 6.5. SUBSIDIARIES. The Company has no subsidiaries. 6.6. NO VIOLATION. Except as set forth in SCHEDULE 6.6, neither the execution and delivery by the Company of this Agreement or any of the Ancillary Documents nor the consummation by the Company of the 7 transactions contemplated hereby or thereby will: (i) violate, conflict with or result in a breach of any provisions of the Certificate of Incorporation or Bylaws of the Company; (ii) violate, conflict with, result in a breach of any provision of, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in the termination or in a right of termination of, accelerate the performance required by or benefit obtainable under, result in the triggering of any payment or other obligations pursuant to, result in the creation of any Encumbrance upon any of the properties of the Company under, or result in there being declared void, voidable, or without further binding effect, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust or any license, franchise, permit, lease, contract, agreement or other instrument, commitment or obligation to which the Company is a party, or by which the Company or any of its properties is bound (each, a "CONTRACT" and collectively, "CONTRACTS"), Except for any of the foregoing matters which individually or in the aggregate would not have a Material Adverse Effect; (iii) other than the filings provided for in SECTION 2.3 and the filings required under the Exchange Act and the Securities Act of 1933, as amended (the "SECURITIES ACT"), require any consent, approval or authorization of, or declaration, filing or registration with, any Governmental Entity, the lack of which individually or in the aggregate would have a Material Adverse Effect or by Law prevent the consummation of the transactions contemplated hereby; and (iv) violate any Laws applicable to the Company, or any of its respective assets, except for violations which individually or in the aggregate would not have a Material Adverse Effect or materially adversely affect the ability of the Company to consummate the transactions contemplated hereby. 6.7. COMPANY REPORTS; OFFER DOCUMENTS. (a) The Company has delivered to Purchaser each registration statement, report, proxy statement or information statement (as defined under the Exchange Act) prepared by it since January 1, 1993, each in the form (including exhibits and any amendments thereto) filed with the SEC (collectively, the "COMPANY REPORTS"). As of their respective dates, (i) the Company Reports filed since December 31, 1994 complied as to form in all material respects with the applicable requirements of the Securities Act, the Exchange Act, and the rules and regulations thereunder and (ii) the Company Reports did 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 the light of the circumstances under which they were made, not misleading. Each of the balance sheets of the Company included in or incorporated by reference into the Company Reports (including the related notes and schedules) fairly presents the financial position of the Company as of its date, and each of the statements of income, retained earnings and cash flows of the Company included in or incorporated by reference into the Company Reports (including any related notes and schedules) fairly presents the results of operations, retained earnings or cash flows, as the case may be, of the Company for the periods set forth therein, in each case in accordance with generally accepted accounting principles consistently applied during the periods involved, except as may be noted therein. Except as set forth in SCHEDULE 6.7, the Company has no liabilities or obligations, contingent or otherwise, except (i) liabilities and obligations in the respective amounts reflected or reserved against in the Company's balance sheet as of April 30, 1996 included in the Company Reports or (ii) liabilities and obligations incurred in the ordinary course of business since April 30, 1996 which individually or in the aggregate would not have a Material Adverse Effect. (b) None of the Schedule 14D-9, the information statement, if any, filed by the Company in connection with the Offer pursuant to Rule 14f-1 under the Exchange Act (the "INFORMATION STATEMENT"), any schedule required to be filed by the Company with the SEC or any amendment or supplement thereto, at the respective times such documents are filed with the SEC or first published, sent or given to the Company's stockholders, will contain any untrue statement of a material fact or will 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 except that no representation is made by the Company with respect to information supplied by the Purchaser or Merger Sub specifically for inclusion in the Schedule 14D-9 or information Statement or any amendment or supplement. None of the information supplied or to be supplied by the Company in writing specifically for inclusion or incorporation by reference in the Offer Documents will, at the date of filing with the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If at any time prior to the Effective Time the Company shall obtain knowledge of any facts with respect 8 to itself, any of its officers and directors that would require the supplement or amendment to any of the foregoing documents in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or to comply with applicable Laws, such amendment or supplement shall be promptly filed with the SEC and, as required by Law, disseminated to the stockholders of the Company, and in the event Purchaser shall advise the Company as to its obtaining knowledge of any facts that would make it necessary to supplement or amend any of the foregoing documents, the Company shall promptly amend or supplement such document as required and distribute the same to its stockholders. 6.8. LITIGATION. Except as set forth in SCHEDULE 6.8 or in the Company Reports, (i) there are no claims, actions, suits, proceedings, arbitrations, investigations or audits (collectively, "LITIGATION") by a Governmental Entity pending or, to the knowledge of the Company through receipt of written notice, threatened against the Company, at law or in equity, other than those in the ordinary course of business which individually or in the aggregate would not have a Material Adverse Effect, and (ii) there are no claims, actions, suits, proceedings, or arbitrations by a non-Governmental Entity third party pending or, to the knowledge of the Company, threatened against the Company, at law or at equity, other than those in the ordinary course of business which individually or in the aggregate would not have a Material Adverse Effect. Except as set forth in the Company Reports, no Governmental Entity has indicated in writing an intention to conduct any audit, investigation or other review with respect to the Company which investigation or review, if adversely determined, individually or in the aggregate would have a Material Adverse Effect. 6.9. ABSENCE OF CERTAIN CHANGES. Except as set forth in SCHEDULE 6.9 or in the Company Reports, since July 31, 1995, the Company has conducted its business only in the ordinary course of such business consistent with past practices, and there has not been (i) any events or states of fact which individually or in the aggregate would have a Material Adverse Effect; (ii) any declaration, setting aside or payment of any dividend or other distribution with respect to its capital stock; (iii) any repurchase, redemption or any other acquisition by the Company of any outstanding shares of capital stock or other securities of, or other ownership interests in, the Company; (iv) any material change in accounting principles, practices or methods; (v) any entry into any employment agreement with, or any increase in the rate or terms (including, without limitation, any acceleration of the right to receive payment) of compensation payable or to become payable by the Company to, its directors, officers or employees, except normal increases of hourly employees; or (vi) any increase in the rate or terms (including, without limitation, any acceleration of the right to receive payment) of any bonus, insurance, pension or other employee benefit plan or arrangement covering any directors, officers or employees. 6.10. TAXES. Except as set forth in SCHEDULE 6.10, the Company has timely filed all material Tax Returns required to be filed by any of them. All such Tax Returns are true, correct and complete, except for such instances which individually or in the aggregate would not have a Material Adverse Effect. All Taxes of the Company which are (i) shown as due on such Returns, (ii) otherwise due and payable or (iii) claimed or asserted by any taxing authority to be due, have been paid, except for those Taxes being contested in good faith and for which adequate reserves have been established in the financial statements included in the Company Reports in accordance with generally accepted accounting principles. The Company does not know of any proposed or threatened Tax claims or assessments which, if upheld, would individually or in the aggregate have a Material Adverse Effect. Except as set forth in SCHEDULE 6.10, the Company has withheld and paid over to the relevant taxing authority all Taxes required to have been withheld and paid in connection with payments to employees, independent contractors, creditors, stockholders or other third parties, except for such Taxes which individually or in the aggregate would not have a Material Adverse Effect. For purposes of this Agreement, (a) "TAX" (and, with correlative meaning, "TAXES") means any federal, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, premium, withholding, alternative or added minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, imposed by any Governmental Entity, and (b) "TAX RETURN" means any return, report or similar statement required to be filed with respect to any Tax (including any attached schedules), including, without limitation, any information return, claim for refund, amended return or declaration of 9 estimated Tax. 6.11. EMPLOYEE BENEFIT PLANS. All employee benefit plans, compensation arrangements and other benefit arrangements covering employees of the Company (the "COMPANY BENEFIT PLANS") and all employee agreements providing compensation, severance or other benefits to any employee or former employee of the Company which are not disclosed in the Company Reports and which exceed $1,000 per annum are set forth in SCHEDULE 6.11. True and complete copies of the Company Benefit Plans have been made available to Purchaser. To the extent applicable, the Company Benefit Plans comply with the requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Internal Revenue Code of 1986, as amended (the "CODE"), and any Company Benefit Plan intended to be qualified under Section 401(a) of the Code has received a determination letter and, to the knowledge of the Company continues to satisfy the requirements for such qualification. Neither the Company nor any ERISA Affiliate of the Company maintains, contributes to or has maintained or contributed in the past six years to any benefit plan which is covered by Title IV of ERISA or Section 412 of the Code. No Company Benefit Plan nor the Company nor any Subsidiary has incurred any liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA or, to the knowledge of the Company, engaged in any transaction that is reasonably likely to result in any such liability or penalty. Except as set forth on SCHEDULE 6.11, each Company Benefit Plan has been maintained and administered in compliance with its terms and with ERISA and the Code to the extent applicable thereto, except for such non-compliance which individually or in the aggregate would not have a Material Adverse Effect. There is no pending or, to the knowledge of the Company, anticipated Litigation against or otherwise involving any of the Company Benefit Plans and no Litigation (excluding claims for benefits incurred in the ordinary course of Company Benefit Plan activities) has been brought against or with respect to any such Company Benefit Plan, except for any of the foregoing which individually or in the aggregate would not have a Material Adverse Effect. All contributions required to be made as of the date hereof to the Company Benefit Plans have been made or provided for. Except as described in the Company Reports or as required by Law, the Company does not maintain or contribute to any plan or arrangement which provides or has any liability to provide life insurance or medical or other employee welfare benefits to any employee or former employee upon his retirement or termination of employment, and the Company has not ever represented, promised or contracted (whether in oral or written form) to any employee or former employee that such benefits would be provided. Except as set forth in SCHEDULE 6.11, the execution of, and performance of the transactions contemplated in, this Agreement will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any benefit plan, policy, arrangement or agreement or any trustor loan that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employee. Except as set forth in SCHEDULE 6.11, no payment or benefit which will or may be made by the Company, any ERISA Affiliate or Purchaser or Merger Sub with respect to any employee will constitute an "excess parachute payment" within the meaning of Section 280G(b)(1) of the Code. For purposes of this Agreement "ERISA AFFILIATE" means any business or entity which is a member of the same "controlled group of corporations," under "common control" or an "affiliated service group" with an entity within the meanings of Sections 414(b), (c) or (m) of the Code, or required to be aggregated with the entity under Section 414(o) of the Code, or is under "common control" with the entity, within the meaning of Section 4001(a)(14) of ERISA, or any regulations promulgated or proposed under any of the foregoing Sections. 6.12. LABOR AND EMPLOYMENT MATTERS. Except as set forth in SCHEDULE 6.12, the Company is not a party to, or bound by, any collective bargaining agreement or other Contracts or understanding with a labor union or labor organization. Except for such matters which, individually or in the aggregate, would not have a Material Adverse Effect, there is no (i) unfair labor practice, labor dispute (other than routine individual grievances) or labor arbitration proceeding pending or, to the knowledge of the Company, threatened against the Company relating to their business, (ii) to the knowledge of the Company, activity or proceeding by a labor union or representative thereof to organize any employees of the Company, or (iii) lockouts, strikes, slowdowns, work stops or threats thereof by or with respect to such employees. 10 6.13. BROKERS. No broker, finder or financial advisor is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company and (ii) the Company's fee arrangements with the Financial Advisor have been disclosed to the Purchaser. 6.14. ENVIRONMENTAL COMPLIANCE AND DISCLOSURE. (a) Except as set forth on SCHEDULE 6.17 or except for any matters which individually or in the aggregate would not have a Material Adverse Effect, (i) the Company is in full compliance with all applicable Laws relating to Environmental Matters (as defined below); (ii) the Company has obtained, and is in full compliance with, all Permits required by applicable Laws for the use, storage, treatment, transportation, release, emission and disposal of raw materials, by-products, wastes and other substances used or produced by or otherwise relating to the operations of any of them; (iii) to the Company's knowledge, there are no past or present events, conditions, activities or practices that would prevent compliance or continued compliance with any Law or give rise to any Environmental Liability (as defined below). (b) As used in this Agreement, the term "ENVIRONMENTAL MATTERS" means any matter arising out of or relating to pollution or protection of the environment, human safety or health, or sanitation, including matters relating to emissions, discharges, releases, exposures, or threatened releases of pollutants, contaminants, or hazardous or toxic materials or wastes including petroleum and its fractions, radiation, biohazards and all toxic agents of whatever type or nature into ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants or hazardous or toxic materials or wastes including petroleum and its fractions, radiation, biohazards and all toxic agents of whatever type or nature. "ENVIRONMENTAL LIABILITY" shall mean any liability or obligation arising under any Law or under any other current theory of law or equity (including, without limitation, any liability for personal injury, property damage or remediation) that results from, or is based upon or related to, the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling, or the emission, discharge, release, exposures or threatened release into the environment, of any pollutant, contaminant, chemical, or industrial, toxic or hazardous substance or waste. 6.15. TITLE TO ASSETS. (a) Except as set forth in the 1995 Balance Sheet, the Company have good and marketable title to all of their real and personal properties and assets reflected on the 1995 Balance Sheet (other than assets disposed of since December 31, 1995 in the ordinary course of business consistent with past practice) or acquired since December 31, 1995, in each case free and clear of all Encumbrances except for (i) Encumbrances which secure indebtedness which is properly reflected in the 1995 Balance Sheet; (ii) liens for Taxes accrued but not yet payable; (iii) liens arising as a matter of law in the ordinary course of business with respect to obligations incurred after the date of the 1995 Balance Sheet, provided that the obligations secured by such liens are not delinquent; and (iv) such imperfections of title and Encumbrances, if any, as individually or in the aggregate would not have a Material Adverse Effect. Except as set forth in SCHEDULE 6.18, the Company either own, or have valid leasehold interests in, all properties and assets used by them in the conduct of their business except where the absence of such ownership or leasehold interest would not individually or in the aggregate have a Material adverse Effect. (b) Except as set forth in SCHEDULE 6.18, neither the Company n has any legal obligation, absolute or contingent, to any other person to sell or otherwise dispose of any interest in any assets, or to sell or dispose of any of its other assets with an individual value of $1,000 or an aggregate value in excess of $5,000. 6.16. MATERIAL CONTRACTS. SCHEDULE 6.19 sets forth a list of all (i) Contracts for borrowed money or guarantees thereof involving a currently outstanding principal amount in excess of $1,000 , (ii) Contracts to acquire or dispose of assets (iii) Contracts containing non-compete covenants by the Company or any Subsidiary and (iv) other Contracts (other than national supply and national purchasing Contracts for the purchase of supplies in the ordinary course of business) which involve the payment or receipt of $100,000 or more per year. All Contracts to which the Company is a party or by which any of their respective assets is bound are valid and binding, in full force and effect and enforceable against the Company, as the case may be, and to the knowledge of the Company, the other parties thereto in accordance with their respective terms, subject to applicable bankruptcy, insolvency or other 11 similar laws relating to creditors' rights and general principles of equity, except where the failure to be so valid and binding, in full force and effect or enforceable would not individually or in the aggregate have a Material Adverse Effect. 6.17. REQUIRED VOTE OF COMPANY STOCKHOLDERS. Unless the Merger maybe consummated in accordance with the CBCA, the only vote of the stockholders of the Company required to adopt this Agreement and approve the Merger is the affirmative vote of the holders of a majority of the outstanding shares of Common Stock. ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB Purchaser and Merger Sub hereby represent and warrant to the Company as follows: 7.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of Purchaser and Merger Sub is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to own, operate and lease its properties and carry on its business as now conducted, except where the failure to have such power and authority individually or in the aggregate would not materially adversely affect the Purchaser and Merger Sub, taken as a whole. 7.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Each of purchaser and Merger Sub has the requisite corporate power and authority to execute and deliver this Agreement and the Ancillary Documents and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Documents and the consummation by Purchaser and Merger Sub of the transactions contemplated hereby and thereby have been duly and validly authorized by the respective Boards of Directors of Purchaser and Merger Sub and by Purchaser as the sole stockholder of Merger Sub and no other corporate proceedings on the part of Purchaser or Merger Sub are necessary to authorize this Agreement and the Ancillary Documents or to consummate the transactions contemplated hereby and thereby. This Agreement has been, and any Ancillary Documents at the time of execution will have been, duly and validly executed and delivered by Purchaser and Merger Sub, and (assuming this Agreement and such Ancillary Documents each constitutes a valid and binding obligation of the Company) constitutes and will constitute the valid and binding obligations of each of Purchaser and Merger Sub, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. 7.3. OFFER DOCUMENTS. None of the Offer Documents, any schedule required to be filed by Purchaser or Merger Sub with the SEC or any amendment or supplement will contain, on the date of filing with the SEC, any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by the Purchaser or Merger Sub with respect to information supplied by the Company specifically for inclusion in the Offer Documents, any schedule required to be filed with the SEC or any amendment or supplement. None of the information supplied by the Purchaser or Merger Sub in writing specifically for inclusion or incorporation by reference in the Schedule 14D-9 will, at the date of filing with the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If at any time prior to the Effective Time either the Purchaser or Merger Sub shall obtain knowledge of any facts with respect to itself, any of its officers and directors that would require the supplement or amendment to any of the foregoing documents in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or to comply with applicable Laws, such amendment or supplement shall be promptly filed with the SEC and, as required by Law, disseminated to the stockholders of the Company, and in the event the Company shall advise the Purchaser or Merger Sub as to its obtaining knowledge of any facts that would make it necessary to supplement or amend any of the foregoing documents, the Purchaser or Merger Sub shall 12 promptly amend or supplement such document as required and distribute the same to the stockholders of the Company. 7.4. NO VIOLATION. Neither the execution and delivery of this Agreement or any of the Ancillary Documents by the Purchaser and Merger Sub nor the consummation by them of the transactions contemplated hereby or thereby will(i) violate, conflict with or result in any breach of any provision of the respective Certificates of Incorporation or By-Laws of the Purchaser or Merger Sub; (ii) other than the filings provided for in SECTION 2.3 and the filings required under the Exchange Act and the Securities Act, require any consent, approval or authorization of, or declaration, filing or registration with, any Governmental entity, the lack of which individually or in the aggregate would have a Material adverse effect on the ability of the Purchaser or Merger Sub to consummate the transactions contemplated hereby, (iii) violate any Laws applicable to the Purchaser or the Merger Sub or any of their respective assets, except for violations which individually or in the aggregate would not have a Material adverse effect on the ability of the Purchaser or Merger Sub to consummate the transactions contemplated hereby, and (iv) violate, conflict with or result in a breach of any provision of, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in the termination or in a right of termination of, accelerate the performance required by or benefit obtainable under, result in the creation of any Encumbrance upon any of the properties of the Purchaser or Merger Sub under, or result in there being declared void, voidable, or without further binding effect, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust or any license, franchise, permit, lease, contract, agreement or other instrument, commitment or obligation to which the Purchaser or Merger Sub is bound, except for any of the foregoing matters which would not individually or in the aggregate have a material adverse effect on the Purchaser and Merger Sub, taken as a whole. ARTICLE 8 COVENANTS 8.1. NO SOLICITATION. Neither the Company, nor any of its respective officers, directors, employees, representatives, agents or affiliates, shall, directly or indirectly, encourage, solicit, initiate or, except as is required in the exercise of the fiduciary duties of the Company's directors to the Company or its stockholders after consultation with outside counsel (as hereinafter defined) to the Company, participate in any way in any discussions or negotiations with, or provide any information to, or afford any access to the properties, books or records of the Company to, or otherwise assist, facilitate or encourage, any corporation, partnership, person or other entity or group (other than the Purchaser or any affiliate or associate of the Purchaser) concerning any merger, consolidation, business combination, liquidation, reorganization, sale of substantial assets, sale of shares of capital stock or similar transactions involving the Company or any Subsidiary or any division of any thereof (an "ALTERNATIVE PROPOSAL"), and shall immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing; provided, however, that nothing contained in this SECTION 8.1 shall prohibit the Company or its Board of Directors from complying with Rule 14e-2(a) promulgated under the Exchange Actor from making such disclosure to the Company's stockholders or from taking such action which, in the judgment of the Board of Directors with the advice of outside counsel, may be required under applicable law. The Company will promptly notify the Purchaser if any such information is requested from it or any such negotiations or discussions are sought to be initiated with the Company. 8.2. INTERIM OPERATIONS. (a) From the date of this Agreement to the Effective Time, except asset forth in SCHEDULE 8.2(a), unless Purchaser has consented in writing thereto, the Company shall, and shall cause each of its Subsidiaries to, (i) conduct its operations according to its usual, regular and ordinary course of business consistent with past practice; (ii) use its reasonable best efforts to preserve intact their business organizations and goodwill, maintain in effect all existing qualifications, licenses, permits, approvals and other authorizations referred to in SECTIONS 6.1 and 6.14, keep available the services of their officers and employees and maintain satisfactory relationships with those persons having business relationships with them; (iii) promptly upon the discovery thereof notify Purchaser of the existence of any breach of any representation or warranty contained herein (or, in the case of any representation or warranty that makes no reference to Material Adverse Effect, any breach of such representation or warranty in any material respect) or the occurrence of any event that would cause any 13 representation or warranty contained herein no longer to be true and correct (or, in the case of any representation or warranty that makes no reference to Material Adverse Effect, to no longer be true and correct in any material respect); and (iv) promptly deliver to Purchaser true and correct copies of any report, statement or schedule filed with the SEC subsequent to the date of this Agreement, any internal monthly reports prepared for or delivered to the Board of Directors after the date hereof and monthly financial statements for the Company for and as of each month end subsequent to the date of this Agreement. (b) From and after the date of this Agreement to the Effective Time, except as set forth on SCHEDULE 8.2(b), unless Purchaser has consented in writing thereto, the Company shall not, and shall not permit to, (i) amend its Certificate of Incorporation or Bylaws or comparable governing instruments; (ii) issue, sell or pledge any shares of its capital stock or other ownership interest in the Company (other than issuances of Common Stock in respect of any exercise of Options outstanding on the date hereof and disclosed in SCHEDULE 6.4) or any of the Subsidiaries, or any securities convertible into or exchangeable for any such shares or ownership interest, or any rights, warrants or options to acquire or with respect to any such shares of capital stock, ownership interest, or convertible or exchangeable securities; or accelerate any right to convert or exchange or acquire any securities of the Company for any such shares or ownership interest; (iii) effect any stock split or otherwise change its capitalization as it exists on the date hereof; (iv) grant, confer or award any option, warrant, convertible security or other right to acquire any shares of its capital stock or take any action to cause to be exercisable any otherwise unexercisable option under any existing stock option plan; (v) declare, set aside or pay any dividend or make any other distribution or payment with respect to any shares of its capital stock or other ownership interests (other than such payments by a wholly-owned Subsidiary); (vi) directly or indirectly redeem, purchase or otherwise acquire any shares of its capital stock or capital stock of; (vii) sell, lease or otherwise dispose of any of its assets (including capital stock of Subsidiaries), except in the ordinary course of business, none of which dispositions individually or in the aggregate will be material; (viii) settle or compromise any pending or threatened Litigation, other than settlements which involve solely the payment of money (without admission of liability) not to exceed $500 in any one case; (ix) acquire by merger, purchase or any other manner, any business or entity or otherwise acquire any assets that are material, individually or in the aggregate, to the Company taken as a whole, except for purchases of inventory, supplies or capital equipment in the ordinary course of business consistent with past practice; (x) incur or assume any long-term or short-term debt, except for working capital purposes in the ordinary course of business under the Company's existing credit agreement set forth in SCHEDULE 6.19; (xi) assume, guarantee or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person except wholly owned Subsidiaries of the Company; (xii) make or forgive any loans, advances or capital continuations to, or investments in, any other person other than loans and advances to employees in the ordinary course of business which do not exceed $5,000 in the aggregate at any one time outstanding; (xiii) make any Tax election or settle any Tax liability other than settlements involving solely the payment of money, which settlement would be permitted by clause (viii); (xiv) grant any stock related or performance awards; (xv) enter into any employment, severance, consulting or salary continuation agreements with any officers, directors or employees or grant any increases incompensation or benefits to employees; (xvi) adopt, amend in any material respect or terminate any employee benefit plan or arrangement; (xvi) permit any insurance policy naming the Company or any Subsidiary as a beneficiary or a loss payee to be canceled or terminated other than in the ordinary course of business; and (xvii) agree in writing or otherwise to take any of the foregoing actions. 8.3. COMPANY STOCKHOLDER APPROVAL; PROXY STATEMENT. (a) If approval or action in respect of the Merger by the stockholders of the Company is required by applicable law, the Company, acting through the Board of Directors, shall (i) call a meeting of its stockholders (the "STOCKHOLDERS MEETING") for the purpose of voting upon the Merger, (ii) hold the Stockholder Meeting as soon as practicable following the purchase of shares of Common Stock pursuant to the Offer, and (iii) subject to its fiduciary duties under applicable law as advised by outside counsel, recommend to its stockholders the approval of the Merger. The record date for the Stockholders meeting shall be a date subsequent to the date Purchaser or Merger Sub becomes a record holder of Common Stock purchased pursuant to the Offer. (b) If required by applicable law, the Company will, as soon as practicable following the expiration of the Offer, prepare and file a preliminary Proxy Statement (such proxy statement, and any amendments or supplements 14 thereto, the "PROXY STATEMENT") or, if applicable, an Information Statement with the SEC with respect to the Stockholders Meeting and will use its best efforts to respond to any comments of the SEC or its staff and to cause the Proxy Statement to be cleared by the SEC. The Company will notify Purchaser of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Proxy Statement or for additional information and will supply Purchaser with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Proxy Statement or the Merger. The Company shall give Purchaser and its counsel the opportunity to review the Proxy Statement prior to its being filed with the SEC and shall give Purchaser and its counsel the opportunity to review all amendments and supplements to the Proxy Statement and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of the Company and Purchaser agrees to use its best efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests by the SEC. As promptly as practicable after the Proxy Statement has been cleared by the SEC, the Company shall mail the Proxy Statement to the stockholders of the Company. If at anytime prior to the approval of this Agreement by the Company's stockholders there shall occur any event that should be set forth in an amendment or supplement to the Proxy Statement, the Company will prepare and mail to its stockholders such an amendment or supplement. (c) The Company represents and warrants that the Proxy Statement will comply as to form in all material respects with the Exchange Act and, at the respective times filed with the SEC and distributed to stockholders of the Company, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, that the Company makes no representation or warranty as to any information included in the Proxy Statement which was provided by Purchaser or Merger Sub. The Purchaser represents and warrants that none of the information supplied by Purchaser or Merger Sub for inclusion in the Proxy Statement will, at the respective times filed with the SEC and distributed to stockholders of the Company, contain any untrue statement of a material factor omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) The Company shall use its best efforts to obtain the necessary approvals by its stockholders of the Merger, this Agreement and the transactions contemplated hereby. (e) Purchaser agrees, subject to applicable law, to cause all shares of Common Stock purchased by Merger Sub pursuant to the Offer and all other shares of Common Stock owned by Purchaser, Merger Sub or any other subsidiary or affiliate of Purchaser to be voted in favor of the approval of the Merger. (f) Notwithstanding anything in this Agreement to the contrary, Purchaser and Merger Sub, in their sole discretion, shall have the right to defer the closing of the Merger for a period of 90 days following the consummation of the Offer if, in Purchaser's and Merger Sub's sole judgment, such deferral is necessary in order to enable the Company to effect a covenant. 8.4. FILINGS; OTHER ACTION. (a) Subject to the terms and conditions herein provided, the Company, Purchaser, and Merger Sub shall: (a) use their best efforts to cooperate with one another in (i) determining which filings are required to be made prior to the Effective Time with, and which consents, approvals, permits, authorizations or waivers are required to be obtained prior to the Effective Time from, Governmental Entities or other third parties in connection with the execution and delivery of this Agreement and any other Ancillary Documents and the consummation of the transactions contemplated hereby and thereby and (ii) timely making all such filings and timely seeking all such consents, approvals, permits, authorizations and waivers; and (b) use their best efforts to take, or cause to be taken, all other action and do, or cause to be done, all other things necessary, proper or appropriate to consummate and make effective the transactions contemplated by this Agreement. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purpose of this Agreement, the proper officers and directors of Purchaser and the Surviving Corporation shall take all such necessary action. 8.5. ACCESS TO INFORMATION. (a) From the date of this Agreement to the Closing, the Company shall, and shall cause its Subsidiaries to, (i) give Purchaser and its authorized representatives and lender banks full access 15 to all books, records, personnel, offices and other facilities and properties of the Company and their accountants and accountants' work papers, (ii) permit Purchaser to make such copies and inspections thereof as Purchaser may reasonably request and(iii) furnish Purchaser with such financial and operating data and other information with respect to the business and properties of the Company as Purchaser may from time to time reasonably request; provided that no investigation or information furnished pursuant to this SECTION 8.5 shall affect any representations or warranties made by the Company herein or the conditions to the obligations of the Purchaser to consummate the transactions contemplated hereby. 8.6. PUBLICITY. The initial press release relating to this Agreement shall be a joint press release and thereafter the Company and Purchaser shall, subject to their respective legal obligations, consult with each other before issuing any such press release or otherwise making public statements with respect to the transactions contemplated hereby and in making any filings with any Governmental Entity or with any national securities exchange with respect thereto. 8.7. FURTHER ACTION. Each party hereto shall, subject to the fulfillment at or before the Effective Time of each of the conditions of performance set forth herein or the waiver thereof, perform such further acts and execute such documents as may be reasonably required to effect the Merger. 8.8. INSURANCE; INDEMNITY. (a) The Purchaser shall cause the Surviving Corporation to keep in effect in its By-Laws a provision for a period of not less than three years from the Effective Time (or, in the case of matters occurring prior to the Effective Time which have not been resolved prior to the third anniversary of the Effective Time, until such matters are finally resolved) which provides for indemnification of the past and present officers and directors of the Company to the fullest extent permitted by the CBCA. From and after the Effective Time, the Purchaser shall indemnify and hold harmless, to the fullest extent permitted under applicable law, each person who is, or has been at any time prior to the date hereof or who becomes prior to the Effective Time, an officer or director of the Company or any Subsidiary against all losses, claims, damages, liabilities, costs or expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in settlement (collectively, "LOSSES") in connection with any Litigation arising out of or pertaining to acts or omissions, or alleged acts or omissions, by them in their capacities as such, which acts or omissions existed or occurred at or prior to the Effective Time, whether commenced, asserted or claimed before or after the Effective Time, including, without limitation, liabilities arising under the Securities Act, the Exchange Act and state corporation laws in connection with the transactions contemplated hereby. (b) Without limiting the foregoing, the Company and after the Effective Time the Purchaser shall periodically advance expenses as incurred with respect to the foregoing to the fullest extent permitted under applicable law provided that the person to whom the expenses are advanced provides an undertaking to repay such advance if it is ultimately determined that such person is not entitled to indemnification. (c) If the Merger shall have been consummated, the Surviving Corporation shall, to the fullest extent permitted under applicable law, indemnify and hold harmless the Purchaser and any person or entity who was a stockholder, officer, director or affiliate of Purchaser prior to the Effective Time against any Losses in connection with any Litigation arising out of or pertaining to any of the transactions contemplated by this Agreement or the Ancillary Documents. The Purchaser shall periodically advance expenses as incurred with respect to the foregoing to the fullest extent permitted under applicable law provided that the person to whom the expenses are advanced provides an undertaking to repay such advance if it is ultimately determined that such person is not entitled to indemnification. (d) If any Litigation described in paragraph (b) or (c) of this SECTION 8.8 (each, an "ACTION") arises or occurs, the Surviving Corporation shall control the defense of such Action through its counsel, but counsel for the party seeking indemnification pursuant to paragraph (b) or (c) of this SECTION 8.8 (each, an "INDEMNIFIED PARTY") shall be selected by the Indemnified Party, which counsel shall be reasonably acceptable to the Surviving Corporation, and the Indemnified Parties 16 shall be permitted to participate in the defense of such Action through such counsel at the Corporation's expense. If there is any conflict between the Surviving Corporation and any Indemnified Parties or there are additional defenses available to any Indemnified Parties, the Indemnified Parties shall be permitted to participate in the defense of such Action with counsel selected by the Indemnified Parties, which counsel shall be reasonably acceptable to the Surviving Corporation; provided that the Surviving Corporation shall not be obligated to pay the reasonable fees and expenses of more than one counsel for all Indemnified Parties in any single Action except to the extent that, in the opinion of counsel for the Indemnified Parties, two or more of such Indemnified Parties have conflicting interests in the outcome of such Action. The Surviving Corporation shall not be liable for any settlement effected without its written consent, which consent shall not unreasonably be withheld. The Purchaser shall cause the Surviving Corporation to cooperate in the defense of any Action. (e) This Section 8.8 is intended to benefit each of the persons referred to herein and shall be binding on all successors and assigns of the Company and the Purchaser. 8.9. RESTRUCTURING OF MERGER. Upon the mutual agreement of Purchaser and the Company, the Merger shall be restructured in the form of a forward subsidiary merger of the Company into Merger Sub, with Merger Sub being the Surviving corporation, or as a merger of the Company into Purchaser, with Purchaser being the surviving corporation. In such event, this Agreement shall be deemed appropriately modified to reflect such form of merger. 8.10. EMPLOYEE BENEFIT PLANS. (a) From and after the Effective Time, the Surviving Corporation and their respective subsidiaries will honor and assume, and Purchaser will cause the Surviving Corporation to honor and assume, in accordance with their terms, all existing employment and severance agreements between the Company and any officer, director, or employee of the Company and all benefits or other amounts earned or accrued to the extent vested or which becomes vested in the ordinary course, through the Effective Time under all employee benefit plans of the Company. (b) The Purchaser confirms that it is the Purchaser's intention that, until the first anniversary of the Effective Time, the Surviving Corporation will provide benefits to their employees (excluding employees covered by collective bargaining agreements, if any) which benefits will, in the aggregate, be substantially equivalent to those currently provided by the Company to such employees (other than pursuant to stock option, stock purchase or other stock based plans). The Purchaser intends that, after the first anniversary of the Effective Time, the Surviving Corporation audits Subsidiaries will provide benefits to their employees (excluding employees covered by collective bargaining agreements, if any) which benefits are appropriate in the judgment of the Surviving Corporation, taking into account all relevant factors, including, without limitation, the businesses in which the Surviving Corporation are engaged. 8.11. NO LIABILITY FOR FAILURE TO OBTAIN CONSENT OF LENDERS. The Purchaser and Merger Sub hereby agree that neither the Company nor any of its Affiliates (as defined below) will incur any liability to Purchaser or Merger Sub if the transactions contemplated hereby are not consummated because of the failure or inability to obtain any consent, approval or waiver by the Company's Lenders. ARTICLE 9 CONDITIONS 9.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective obligation of each party to effect the Merger shall be subject to the satisfaction or waiver, where permissible, prior to the Effective Time, of the following conditions: (a) If approval of this Agreement and the Merger by the holders of Common Stock is required by applicable law, this Agreement and the Merger shall have been approved by the requisite vote of such holders. (b) There shall not have been issued any injunction or issued or enacted any Law which prohibits or has the effect of prohibiting the consummation of the Merger or makes such consummation illegal. 9.2. CONDITIONS TO OBLIGATION OF PURCHASER AND MERGER SUB TO EFFECT THE MERGER. The obligations of Purchaser and Merger Sub to effect the Merger shall be further subject to the satisfaction or waiver on or prior to the Effective Time of the condition that Purchaser shall have accepted for payment and paid for shares of Common Stock tendered pursuant to the Offer; provided that this condition shall be 17 deemed satisfied if the Purchaser's failure to accept for payment and pay for such shares breaches this Agreement or violates the terms and conditions of the Offer. ARTICLE 10 TERMINATION; AMENDMENT; WAIVER 10.1. TERMINATION. This Agreement may be terminated and the Merger contemplated hereby may be abandoned at any time notwithstanding approval thereof by the stockholders of the Company, but prior to the Effective Time: (a) by mutual written consent of the Board of Directors of the Company (subject to SECTION 1.4) and the Purchaser; (b) by the Purchaser or the Company: (i) if the Effective Time shall not have occurred on or before December 31, 1996 (provided that the right to terminate this Agreement pursuant to this clause (i) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of or resulted in the failure of the Effective Time to occur on or before such date); (ii) if there shall be any statute, law, rule or regulation that makes consummation of the Offer or the Merger illegal or prohibited or if any court of competent jurisdiction in the United States or other Governmental Entity shall have issued an order, judgment, decree or ruling, or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, judgment, decree, ruling or other action shall have become final and non-appealable; (iii) after December 31, 1996 if, on account of the failure of any condition specified in EXHIBIT A, the Merger Sub has not purchased any shares of Common Stock in the Offer by that date (provided that the right to terminate this Agreement pursuant to this clause (iii) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of or resulted in the failure of any such condition); or (iv) upon a vote at a duly held meeting or upon any adjournment thereof, the stockholders of the Company shall have failed to give any approval required by applicable law; (c) by the Company if there is an Alternative Proposal which the Board of Directors in good faith determines is more favorable from a financial point of view to the stockholders of the Company as compared to the Offer and the Merger, and the Board of Directors determines, after consultation with counsel ("COUNSEL"), that failure to terminate this Agreement would be inconsistent with the compliance by the Board of Directors with its fiduciary duties to stockholders imposed by law; provided, however, that the right to terminate this Agreement pursuant to this SECTION 10.1(c)shall not be available (i) if the Company has breached in any material respect its obligations under SECTION 8.1, or (ii) if the Alternative Proposal (x) is subject to a financing condition or (y) involves consideration that is not entirely cash or does not permit stockholders to receive the payment of the offered consideration in respect of all shares at the same time, unless the Board of Directors has been furnished with a written opinion of the Financial Advisor or other nationally recognized investment banking firm to the effect that (in the case of clause (x)) the Alternative Proposal is readily financeable and (in the case of clause (y)) that such offer provides a higher value per share than the consideration per share pursuant to the Offer or the Merger, or(iii) if, prior to or concurrently with any purported termination pursuant to this SECTION 10.1(c), the Company shall not have paid the fees and expenses contemplated by SECTION 11.5, or (iv) if the Company has not provided Purchaser and Merger Sub with prior written notice of its intent to so terminate this Agreement and delivered to the Purchaser and Merger Sub a copy of the written agreement embodying the Alternative Proposal in its then most definitive form concurrently with the earlier of (x) the public announcement of, or (y) filing with the SEC of any documents relating to, the Alternative Proposal; and (d) by the Purchaser if the Board of Directors shall have failed to recommend, or shall have withdrawn, modified or amended in any material respect, its approval or recommendation of the Offer or the Merger, or shall have recommended acceptance of any Alternative Proposal, or shall have resolved to do any of the foregoing. 10.2. EFFECT OF TERMINATION. If this Agreement is terminated and the Merger is abandoned pursuant to SECTION 10.1 hereof, this Agreement, except for the provisions of SECTIONS 1.3(c), 8.5(b), 8.6 and ARTICLE 11, shall terminate, without any liability on the part of any party or its directors, officers or stockholders. Nothing herein shall relieve any party to this Agreement of liability for breach of this Agreement or prejudice the ability of the non-breaching party to seek damages from any other party for any breach of this Agreement, including without 18 limitation, attorneys' fees and the right to pursue any remedy at law or in equity. 10.3. AMENDMENT. To the extent permitted by applicable law, this Agreement may be amended by action taken by or on behalf of the Board of Directors of the Company (subject to SECTION 1.4) and the Purchaser at any time before or after adoption of this Agreement by the stockholders of the Company but, after any such stockholder approval, no amendment shall be made which decreases the Merger Consideration or which adversely affects the rights of the Company's stockholders hereunder without the approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of all of the parties. 10.4. EXTENSION; WAIVER. At any time prior to the Effective Time, the parties hereto, by action taken by or on behalf of the Board of Directors of the Company (subject to SECTION 1.4) and the Purchaser, may (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 by any other applicable party or in any document, certificate or writing delivered pursuant hereto by any other applicable party or (iii)waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. ARTICLE 11 GENERAL PROVISIONS 11.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. 11.2. NOTICES. Any notice required to be given hereunder shall be sufficient if in writing, and sent by facsimile transmission (with a confirmatory copy sent by overnight courier), by courier service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as reflected on the signature page hereto 11.3. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties; provided, however, that either Purchaser or Merger Sub (or both) may assign its rights hereunder (including without limitation the right to make the Offer and/or to purchase shares of Common Stock in the Offer) to an affiliate but nothing shall relieve the assignor from its obligations hereunder. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and the irrespective successors and assigns. Notwithstanding anything contained in this Agreement to the contrary, except for the provisions of SECTION 8.8, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective heirs, successors, executors, administrators and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement. 11.4. ENTIRE AGREEMENT. This Agreement, the Confidentiality Agreement, the Schedules, the Exhibits, the Ancillary Documents and any other documents delivered by the parties in connection herewith constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings among the parties with respect thereto. 11.5. FEES AND EXPENSES. (a) Except as provided in SECTION 11.5(b), whether or not the Offer or the Merger is consummated, all costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such expenses. (b)(1) The Company shall reimburse the Purchaser and its affiliates for the documented reasonable out-of-pocket expenses of the Purchaser and its affiliates, incurred in connection with or arising out of the Offer, the Merger, this Agreement and the Ancillary Documents and the transactions contemplated hereby (including, without limitation, amounts paid or payable to banks and investment bankers, fees and expenses of counsel, accountants and 19 consultants, and printing expenses),regardless of when those expenses are incurred, if this Agreement is terminated(i) by the Company pursuant to SECTION 10.1(c); (ii) by the Purchaser (x)pursuant to SECTION 10.1(d) (unless the event described therein occurs solely as a result of the Purchaser's willful breach in any material respect of its representations, warranties or obligations contained herein) or (y) pursuant to SECTION 10.1(b)(iii) because of the failure of the condition set forth in paragraph (d) of EXHIBIT A, or (iii) pursuant to SECTION 10.1(b)(iii) at a time when the Minimum Condition shall not have been satisfied and, either (x) during the term of this Agreement or within 12 months after the termination of this Agreement, the Board of Directors recommends an Alternative Proposal or the Company enters into an agreement providing for an Alternative Proposal or a Stock Acquisition occurs which Alternative Proposal (or another Alternative Proposal by the same or a related person or entity) was made prior to the termination of this Agreement, or (y) during the term of this Agreement or within two months after the termination of this Agreement, the Board of Directors recommends an Alternative proposal or the Company enters into an agreement providing for an Alternative proposal or a Stock Acquisition occurs. No amounts in reimbursement of expenses shall be payable pursuant to this paragraph (1) if the Commitment Amount has been paid. If the Company shall have reimbursed the Purchaser for expenses incurred by the Purchaser and its affiliates pursuant to this paragraph (1) and thereafter the Commitment Amount shall become payable pursuant to paragraph (1)of this Section 11.5(b), then the Commitment Amount shall be reduced by the amount of any reimbursed expenses. (2) The Company acknowledges that the agreements contained in this SECTION 11.5(b) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, the Purchaser would not enter into this Agreement. Accordingly, if the Company fails to promptly pay any amounts owing pursuant to this SECTION 11.5(b) when due, the Company shall in addition thereto pay to the Purchaser and its affiliates all costs and expenses(including fees and disbursements of counsel) incurred in collecting such amounts, together with interest on such amounts (or any unpaid portion thereof)from the date such payment was required to be made until the date such payment is received by the Purchaser at the prime rate of Chemical Bank as in effect from time to time during such period. 11.6. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas without regard to its rules of conflict of laws. Each of the Company, Purchaser and Merger Sub hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of Texas and of the United States of America located in the State of Texas (the "TEXAS COURTS") for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby (and agrees not to commence any litigation relating thereto except in such courts), waives any objection to the laying of venue of any such litigation in the Texas Courts and agrees not to plead or claim in any Texas Court that such litigation brought therein has been brought in an inconvenient forum. 11.7. HEADINGS. Headings of the Articles and Sections of this Agreement are for the convenience of the parties only, and shall be given no substantive or interpretive effect whatsoever. 11.8. INTERPRETATION. In this Agreement, unless the context otherwise requires, words describing the singular number shall include the plural and vice versa, and words denoting any gender shall include all genders and words denoting natural persons shall include corporations and partnerships and vice versa. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." As used in this Agreement, "Subsidiary" shall mean, when used with respect to any party, any corporation or other organization, whether incorporated or unincorporated, of which such party directly or indirectly owns or controls at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization. "Significant Subsidiaries" shall refer to Subsidiaries (as defined above) which constitute "significant subsidiaries" under Rule 12b2 under the Exchange Act. As used in this Agreement, "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the business, results of operations, assets or financial condition of the Company taken as a whole. 20 11.9. INVESTIGATIONS. No action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained in this Agreement. 11.10. SEVERABILITY. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. 11.11. ENFORCEMENT OF AGREEMENT. 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 its specific terms or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any Delaware Court, this being in addition to any other remedy to which they are entitled at law or in equity. 11.12. COUNTERPARTS. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, of the parties hereto. IN WITNESS WHEREOF, the parties have executed this Agreement and caused the same to be duly delivered on their behalf on the day and year first written above. SUMMIT PETROLEUM CORPORATION 16701 Greenspoint Park Drive, Suite 200 Houston, Texas 77060 By: ----------------------------------------------------- Name: Deas H. Warley III Title : President MRI ACQUISITION CORP 16701 Greenspoint Park Drive, Suite 200 Houston, Texas 77060 By: ----------------------------------------------------- Name: Deas H. Warley III Title: President MIDLAND RESOURCES, INC. 16701 Greenspoint Park Drive, Suite 200 Houston, Texas 77060 By: ----------------------------------------------------- Name: Deas H. Warley III Title: President 21 EXHIBIT A CONDITIONS OF THE OFFER Notwithstanding any other term of the Offer, Merger Sub shall not be required to accept for payment or pay for, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) of the Exchange Act, any shares of Common Stock not theretofore accepted for payment or paid for and may terminate or amend the Offer as to such shares of Common Stock unless there shall have been validly tendered and not withdrawn prior to the expiration of the Offer that number of shares of Common Stock which would represent at least a majority of the outstanding shares of Common Stock on a fully diluted basis (the "MINIMUM CONDITION"). Furthermore, notwithstanding any other term of the Offeror this Agreement, Merger Sub shall not be required to accept for payment or, subject as aforesaid, to pay for any shares of Common Stock not theretofore accepted for payment or paid for, and may terminate or amend the Offer if at anytime on or after the date of this Agreement and before the acceptance of such shares of Common Stock for payment or the payment therefor, any of the following conditions exist or shall occur and remain in effect: (a) there shall have been instituted or pending any litigation by the Government of the United States of America or any agency or instrumentality thereof (i) which seeks to challenge the acquisition by Purchaser or Merger Sub (or any of its affiliates) of shares of Common Stock pursuant to the Offer or restrain, prohibit or delay the making or consummation of the Offer or the Merger, (ii) which seeks to make the purchase of or payment for some or all of the shares of Common Stock pursuant to the Offer or the Merger illegal, (iii) which seeks to impose limitations on the ability of Purchaser or Merger Sub (or any of their affiliates) effectively to acquire or hold, or to require the Purchaser, Merger Sub or the Company or any of their respective affiliates or subsidiaries to dispose of or hold separate, any material portion of their assets or business, (iv) which seeks to impose limitations on the ability of Purchaser, Merger Sub or their affiliates to exercise full rights of ownership of the shares of Common Stock purchased by it, including, without limitation, the right to vote the shares purchased by it on all matters properly presented to the stockholders of the Company, or (v) which seeks to limit or prohibit any future business activity by Purchaser, Merger Sub or any of their affiliates, including, without limitation, requiring the prior consent of any person or entity (including the Government of the United States of America or any agency or instrumentality thereof) to future transactions by Purchaser, Merger Sub or any of their affiliates; or (b) there shall have been promulgated, enacted, entered, enforced or deemed applicable to the Offer or the Merger, by any Governmental Entity, any Law or there shall have been issued any injunction that results in any of the consequences referred to in subsection (a) above; or (c) this Agreement shall have been terminated in accordance with its terms; or (d) (i) any of the representations and warranties made by the Company in this Agreement shall not have been true and correct in all material respects when made, or shall thereafter have ceased to be true and correct in all material respects as if made as of such later date (other than representations and warranties made as of a specified date) or (ii) the Company shall have breached or failed to comply in any material respect with any of its obligations under this Agreement; or (e) any corporation, entity, "group" or "person" (as defined in the Exchange Act), other than Purchaser or Merger Sub, shall have acquired beneficial ownership of more than 49% of the outstanding shares of Common Stock; or (f) except as set forth in the Company Reports or the Schedules to the Agreement, any change shall have occurred or be threatened which individually or in the aggregate has had or is continuing to have a material adverse effect on the prospects of the Company, taken as a whole; or (g) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on any national securities exchange or in the over the counter market in the United States, (ii) a declaration of any banking moratorium by federal or state authorities or any suspension of payments in respect of banks or any limitation (whether or not mandatory) imposed by federal or state authorities on the extension of credit by lending institutions in the United States, (iii) a commencement of a war, armed hostilities or any other international or national calamity directly or indirectly involving the United States, other than any war, armed hostilities or other international calamity involving the former Yugoslavia, (iv) any mandatory limitation by the federal government on the extension of credit by banks or other financial institutions generally, (v) any increase of 500 or more basis points in the prime rate as announced by Chemical Bank, measured from the date of this Agreement, or (vi) in the case of the foregoing clause (iii), if existing at the time of the commencement of the Offer, in the reasonable judgment of the Purchaser, a material 22 acceleration or worsening thereof. The foregoing conditions are for the sole benefit of Purchaser and Merger Sub and may be asserted by Purchaser or Merger Sub regardless of the circumstances (including any action or inaction by the Purchaser or the Company)giving rise to any such condition and may be waived by Purchaser or Merger sub in whole or in part, at any time and from time to time, in the sole discretion of Purchaser. The failure by Purchaser or Merger Sub at any time to exercise any of the foregoing rights will not be deemed a waiver of any right, the waiver of such right with respect to any particular facts or circumstances shall not be deemed a waiver with respect to any other facts or circumstances, and each right will be deemed an ongoing right which may be asserted at any time and from time to time. Should the Offer be terminated pursuant to the foregoing provisions, all tendered shares of Common Stock not theretofore accepted for payment shall forthwith be returned by the depositary to the tendering stockholders. 23 -----END PRIVACY-ENHANCED MESSAGE-----